Section 2(24) of the Income Tax Act
The decision most relied on for Section 2(24) is CIT v. Yokogawa India Ltd. (341 ITR 385), cited in 270 of the 146 judgments on BharatTax that turn on this section.
Leading authorities on Section 2(24)
A provision for doubtful debts cannot be added back while computing book profits under Section 115JB of the Income-tax Act for Minimum Alternate Tax (MAT) purposes.
A liability recognized in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India (ICAI) is an allowable expense for income tax purposes.
The Supreme Court determines the eligibility of subsidies for deduction under industrial incentive sections, specifically 80IB and 80IC of the Income-tax Act, 1961.
Capital receipts, including interest subsidy received under schemes like TUF, are excluded when computing book profits under Section 115JB of the Income Tax Act. This principle also extends to the reduction of provisions written back from book profits for MAT purposes.
Receipts from the sale of carbon credits are capital receipts, not business income, as they arise from environmental concerns and not from business operations. Such receipts are not taxable under Sections 2(24), 28, 45, or 56 of the Act, especially prior to the introduction of Section 115BBG.
Sales tax subsidies and Industrial Promotion Assistance received under the West Bengal Incentive Scheme are capital receipts and therefore not liable to tax. The ruling clarifies the inapplicability of the Sahney Steel judgment to such subsidies.
The Income Tax Appellate Tribunal (ITAT) has the power under Section 254 to entertain a claim for deduction not made in the original return of income or a revised return filed before the Assessing Officer.
Compensation received for the extinction of a source of income, a profit-earning apparatus, or capital assets, or due to a breach of contract, constitutes a capital receipt not liable to tax. The determination depends on the specific facts of each case.
The ITAT Special Bench in Rain Commodities Ltd. held that certain capital receipts, such as forfeited share warrants, if credited to the profit and loss account, are liable for book profits tax under Section 115JB (Minimum Alternate Tax).
The assessee bears the onus of proving the genuineness, identity, and capacity of creditors for cash credits, and must substantiate claims for business expenses and losses with supporting evidence to establish their deductibility under the Income Tax Act.
Judgments on Section 2(24)
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