Section 143(3B) of the Income Tax Act

A new industrial undertaking is not considered a reconstruction of an existing business for tax deduction purposes if it is a separate, independent production unit manufacturing commercially tangible products that can operate without losing its identity in the old business. The transfer and substantial use of assets and manpower from an old business to a new one may indicate reconstruction.

Incentive provisions in the Income-tax Act, particularly those granting deductions for new industrial undertakings, must be construed liberally to achieve their legislative purpose. This principle guides the interpretation of conditions such as what constitutes a 'new undertaking' versus a 'splitting up or reconstruction' of an existing business for claiming deductions.

Consistency must be maintained in income-tax proceedings when the facts are not different, even though res judicata does not strictly apply. A consistent view taken in a particular year should not be departed from in subsequent years without contrary material.

A right to purchase property under an agreement to sell is a capital asset as defined under Section 2(14) of the Income-tax Act. The relinquishment or extinguishment of such a right constitutes a transfer of a capital asset, the consideration for which is taxable as capital gains.

Expenditure incurred for a purpose prohibited by law or in violation of another statute is not deductible as business expenditure under Section 37(1) as it is against public policy. The Explanation to Section 37 reinforces that such expenditure is deemed not for business.

An assessment order is erroneous and prejudicial to the revenue, justifying revision under Section 263, if the Assessing Officer fails to make necessary inquiries or examine materials provided by the assessee, leading to a routine assessment.

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.

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.

When an assessee has mixed funds from both own sources and borrowings in a cash credit account, the debit balance is presumed to have been met from the company's own funds. This principle is applied to assess the allowability of interest deduction under Section 36(1)(iii) for capital borrowed for business purposes.

Business is considered set up when initial and essential activities for its establishment, such as obtaining necessary licenses, leases, and beginning raw material extraction, commence, even before the main manufacturing plant is fully installed or production has started.