“Section 2(115)”

For deductions under Section 57(iii) relating to "Income from Other Sources," an expenditure is allowable if it is laid out wholly and exclusively for the purpose of making or earning such income, even if no income is actually earned in that previous year.

Genuine trade advances or amounts advanced for bona fide business transactions, driven by commercial expediency, do not fall within the definition of deemed dividend under section 2(22)(e) of the Income-tax Act.

Genuine trade advances made by a company in the ordinary course of business to a shareholder do not fall within the definition of deemed dividend under Section 2(22)(e) of the Income-tax Act.

For Section 2(22)(e) to apply, a payment by a company must be in the nature of a loan or advance, and the company must have accumulated profits. Such payments to a concern in which a shareholder, holding more than 10% voting power, has a substantial interest are deemed dividends if the shareholder ultimately benefits, even if routed through different modes or concerns.

The provisions of Section 2(22)(e) regarding deemed dividends do not apply to transactions between a shareholder and a company that create mutual benefits and obligations, such as trade advances in the nature of commercial transactions.

A loan or advance from a closely held company to a shareholder is a deemed dividend under Section 2(22)(e) upon receipt, unaffected by subsequent repayment or adjustment.

Expenditure incurred for obtaining club membership and its annual subscription is allowable as a deduction if it is for the purpose of business, even if there are incidental personal benefits to directors. The primary purpose must be to promote the company's business interests through networking and enhancing social status.

Notional interest on delayed payments received from an Associated Enterprise (AE) cannot be treated as part of the income for tax purposes, thereby no question of law arises regarding such adjustments by the TPO/AO.