“Section 145(5)”
The decision most relied on for Section 145(5) is CIT v. Woodward Governor India Pvt. Ltd. (312 ITR 254), cited in 968 judgments on BharatTax.
Leading authorities on Section 145(5)
Foreign exchange fluctuations, whether gains or losses, are inextricably linked to the underlying business transaction and must be accounted for under the mercantile system. The Supreme Court also affirmed the standard accounting principle of valuing stock at cost or net realisable value, whichever is lower.
During a search operation, the authorized officer recording a statement under Section 132(4) must fully explain Explanation 5 to Section 271(1)(c) to the assessee, particularly the requirement to specify the manner of earning undisclosed income, for a valid claim of penalty immunity. Income not declared or advance tax not paid proportionately before the search date is treated as undisclosed, thereby disallowing advance tax benefits.
A real estate development business is considered 'set up' when the assessee is in a position to undertake activities for the acquisition, development, and exploitation of real estate. Expenses incurred between the setting up and commencement of such a business are allowable, even if no revenue is generated or land is classified as a non-current investment.
Income from unsold flats in the closing stock of a real estate developer is taxable under the head 'Income from house property' based on their annual letting value, even if the developer is engaged in business.
An interest-free loan provided by one charitable society to another, both registered under Section 12AA and possessing similar objectives, does not contravene Section 13(1)(d) read with Section 11(5) of the Income Tax Act, as such loans are not classified as investments or deposits.
For capital gains computation, the date of allotment of a residential unit under a construction scheme is the date of acquisition, not the date of agreement or possession. This applies even if possession is delivered later, as the allotment letter confers the right to hold the property.
Tax deducted at source (TDS) is a method of collection, not a levy of tax. Credit for TDS can be granted even if the corresponding income is not yet assessable, as long as the assessee follows a consistent method of accounting.
A forward contract entered into to protect against foreign currency fluctuations on consideration receivable for exports is not a speculative transaction, and provisions for losses on such derivative contracts are allowable expenditures.
