“Section 58(1)”
The decision most relied on for Section 58(1) is Vijay Proteins Ltd. v. Asst. CIT (58 ITD 428), cited in 430 judgments on BharatTax.
Leading authorities on Section 58(1)
Where purchases are found to be non-genuine or fictitious, a reasonable disallowance of 25% of such purchases or the peak credit, whichever is higher, can be made. This is applied to address unexplained expenditure under Section 69C when actual goods are likely procured from the grey market.
The test of enduring benefit for classifying expenditure as capital or revenue is not absolute; expenditure incurred for an enduring advantage may nonetheless be on revenue account, as the test can break down depending on the facts.
An assessee is eligible to claim depreciation on a road constructed and operated on a Build-Operate-Transfer (BOT) basis, treating it as an intangible asset under section 32(1)(ii) of the Income-tax Act.
Expenditure is deductible under section 37 only if it is incurred wholly and exclusively for the purpose of business. The mere fact that a payment is made under a contract does not conclusively establish it as a business expense.
The annual letting value (ALV) of a property occupied by the owner or close relatives, in the absence of a better method, can be reasonably determined by applying a rate of interest on the cost of the building and land. An 8% return on cost may be considered fair and reasonable given the property's size, construction quality, and capital invested.
Interest earned by a cooperative society from deposits with cooperative banks and nationalized banks is eligible for deduction under Section 80P(2)(a) of the Income Tax Act. Such interest is considered attributable to the business of the cooperative society, especially when deposits are statutorily required.
Expenditure incurred for the purpose of making or earning income from 'other sources' is deductible if there is a nexus between the expenditure and the income earned. The expenditure must be linked to the income earned, not just the activity that generates the income.
Section 41(1) of the Income Tax Act, 1961, which deals with the remission or cessation of trading liabilities, is not applicable if the liability continues to subsist and has not been waived off by the creditors. Similarly, provisions for gratuity made on actuarial valuation constitute an ascertained liability and are not to be added to net profits.
