“Section 194(1)”
The decision most relied on for Section 194(1) is CIT v. Devi Prasad Vishwanath Prasad (72 ITR 194), cited in 272 judgments on BharatTax.
Leading authorities on Section 194(1)
If there is an unexplained cash credit, the Assessing Officer can treat it as the assessee's income, even when the income is finalized on an estimation basis, without proving its specific source. The onus then shifts to the assessee to prove that the income represented by the cash credit has already been taxed.
The expression "for the purpose of business" is wider in scope than "for the purpose of earning profits" and encompasses expenditures made for commercial expediency, business preservation, administration, and modernization.
Section 14A(2) and (3) read with Rule 8D are constitutionally valid. Rule 8D applies prospectively from Assessment Year 2008-09, and for prior assessment years, the Assessing Officer must determine the expenditure related to exempt income under Section 14A(1) using a reasonable basis.
Income from sources not falling under any other head of income under Section 14 of the Income Tax Act is taxed under the residuary head 'income from other sources'. If income cannot be taxed under Section 45 (capital gains), it cannot be taxed at all.
The Calcutta High Court held that a lump sum revenue expenditure, which is of a significant amount and provides benefits spread over several years, can be allowed as a deduction proportionately over the period of benefit. This approach prevents distortion of the profits of a single assessment year.
An assessment framed by the Assessing Officer in the name of a defunct transferor company is valid if the assessee failed to intimate the AO about the merger or amalgamation.
If an assessee company's main business object is to acquire and rent out properties, the rental income derived is taxable as 'Profits and gains of business or profession', rather than 'Income from house property', as the nature of the activity constitutes a business.
An Assessing Officer cannot make an addition under section 68 without conducting further inquiries to disprove the assessee's explanation of the source of cash credits. The assessee is not required to prove the 'source of source'.
