Section 115P of the Income Tax Act
The decision most relied on for Section 115P is Empire Jute Co. Ltd. v. CIT (124 ITR 1), cited in 608 of the 30 judgments on BharatTax that turn on this section.
Leading authorities on Section 115P
Expenditure is classified as revenue or capital based on its practical business effect, necessity, or expediency, rather than solely on the juristic classification of rights; an enduring benefit does not automatically make an expenditure capital if it facilitates trading operations or business efficiency.
When computing deductions under Chapter VI-A, such as Section 80IA, losses from other business undertakings must be set off against the profits of the eligible undertaking before calculating the deduction. No deduction under Section 80IA is permissible if the overall 'Profits & Gains of Business or Profession' results in a loss.
Interest cannot be separately charged on outstanding receivables from an associated enterprise if these receivables are an integral part of the underlying international transaction for which the arm's length price has already been determined. Such outstanding receivables are not considered a distinct international transaction.
If a property is not let out at all, notional income must be computed, and the benefit of section 23(1)(c) (vacancy allowance) cannot be extended. However, section 23(1)(c) can apply to properties let out for two or more years that remain vacant for the entire previous year.
CIT v. Ashok Leyland Ltd. is authority for the proposition that expenditures can be considered revenue expenditures and eligible for deduction.
Courts must interpret taxing statutes strictly based on the literal wording, disregarding considerations of hardship, injustice, or equity. No room exists for implication or intendment when interpreting tax laws.
Assessee companies are eligible for deduction under section 80IAB, even if settlement fees are considered non-allowable expenses, provided that disallowances result in operating profits for which the deduction can be claimed.
Judgments on Section 115P
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