Section 2(19AA) of the Income Tax Act
The decision most relied on for Section 2(19AA) is 277(D- E) and CIT v. U.P. State Industrial Development Corporation (225 ITR 703), cited in 49 of the 47 judgments on BharatTax that turn on this section.
Leading authorities on Section 2(19AA)
The ordinary principles of commercial accounting should be applied for ascertaining profits and gains, provided they do not contradict the Income-tax Act.
There can be no presumption that an assessee must have incurred expenditure to earn tax-free income. Disallowance under section 14A requires actual expenditure, not notional or estimated amounts.
TDS provisions do not apply if the payee is not identified at the time of making provision for an expense. The scheme of TDS requires the payer to know the identity of the recipient of the income.
Profits and gains from scraps resulting from a manufacturing process are eligible for deduction under Section 80IC of the Income Tax Act.
Addition should not be made when tax authorities fail to conduct inquiries with TDS deductors regarding discrepancies between Form 26AS and books of account, despite having the information and opportunity. Disallowance of expenses is arbitrary and against the rule of law if made without rejecting books of account or identifying specific discrepancies.
A transaction of gift cannot be brought to tax. Corporations can give and accept gifts, and these are considered capital receipts, not taxable under Section 28(iv).
Section 41(1) cannot be invoked if no deduction was granted to the assessee in earlier years. Section 41(1) applies specifically to remission of trading liabilities, and waiver of a loan is a cessation of liability other than a trading liability.
Succession to business requires the successor to take over the whole or substantially the whole of the predecessor's business and continue it. A successor to only a part of the business, resulting from disintegration, is not considered a successor to the original business.
Reserves created under a scheme of amalgamation are capital in nature and do not arise from normal business activity, therefore cannot be taxed as business income. Amounts reflected in 'reserves and surplus' cannot be treated as a benefit or perquisite arising from business.
A transaction between two enterprises constitutes an 'international transaction' under section 92B only if it has a bearing on profits, incomes, losses, or assets of such enterprises. This includes transactions mentioned in the explanation to section 92B, such as giving guarantees, provided they impact the enterprise's financial results.
