“Section 25(6)”

Payment of commission to doctors for referring patients to diagnostic centers or providing gifts, freebies, or hospitality to medical practitioners by pharmaceutical companies is against public policy and cannot be allowed as a business expenditure under Section 37(1). Demanding such benefits is unethical on the part of doctors, and paying them is equally unethical on the part of companies.

An addition under Section 68 for cash credits or unexplained share capital cannot be sustained if the assessee substantiates identity and genuineness of transactions, even with partial confirmations from Section 133(6) enquiries. Further, Section 41(1) applies only when a trading liability ceases or is written off, not merely due to lack of creditor confirmation while the liability remains in the books.

If an assessee has applied for approval of a fund or exemption within a reasonable time, the exemption should not be denied due to delays in processing by the tax authorities. The taxing authorities erred in holding that gross receipts are taxable without allowing expenditure when exemption is denied.

Where an Assessing Officer makes additions on account of bogus purchases and the Commissioner (Appeals) and Tribunal find that the assessee yielded huge profits from sales, the Tribunal is justified in restricting additions on account of bogus purchases to a specified percentage (e.g., 25%).

When purchases are found to be genuine, any addition to income on account of such purchases should be restricted, with the Gujarat High Court in one instance reducing an addition from 25% to 5% of the amount in question.