“Section 36(1)(iv)”
The decision most relied on for Section 36(1)(iv) is Guj.) (iii) CIT vs. South India Corporation Ltd. (2000) 242 ITR 114 (Ker) (iv) CIT v. GTN Textiles Ltd. (269 ITR 285), cited in 176 judgments on BharatTax.
Leading authorities on Section 36(1)(iv)
Employee contributions towards ESI and PF are allowable as a deduction if paid by the due date for filing the income tax return, even if paid after the statutory due dates prescribed under the respective ESI/PF Acts.
The waiver of a loan taken for acquiring capital assets is considered a capital receipt and is not taxable as income under Section 28(iv) of the Income Tax Act. The ruling distinguishes between the waiver of trading liabilities and capital liabilities for tax purposes.
Employees' contribution to provident fund (PF) and Employees' State Insurance (ESI) deposited by the employer on or before the due date of furnishing the return of income under Section 139(1) cannot be disallowed under Section 36(1)(va) or Section 43B of the Income Tax Act.
The income of a charitable trust, particularly income from property held under trust, for the purpose of claiming exemption under Section 11, must be computed in a normal commercial manner, without strict reference to the computation provisions for different heads of income like Section 14 or Section 24(a). This approach ensures that the income available for application or accumulation is assessed on commercial principles.
The write-back or waiver of a loan obtained for business purposes constitutes taxable business income under Section 28. This applies even if no prior deduction was claimed, thereby not attracting Section 41(1).
The Supreme Court held that discount on the issue of debentures is a deductible expenditure that can be spread proportionately over the period for which the debentures remain outstanding, rather than being claimed entirely in the year of issue. This treatment acknowledges the enduring benefit derived from the funds raised through debentures.
Notional income, such as notional interest on interest-free loans, cannot be brought to tax without a specific statutory provision in the Income Tax Act. Only real income that has accrued or been received by the assessee is subject to income tax.
Interest paid on borrowed funds is not allowable as a deduction under Section 36(1)(iii) of the Income-tax Act to the extent such funds are diverted to provide interest-free advances for non-business purposes, such as to sister concerns or promoter companies.
