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 355 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.
Subsidies and excise duty refunds that are accounted for in the Profit and Loss account are revenue in nature, form part of business income, and are eligible for deductions under Section 80IB/80IC. Such receipts cannot be reduced from the block of assets for depreciation calculation.
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.
Capital receipts, such as interest and power subsidy, are not includible in book profit under Section 115JB as they do not fall within the definition of income under Section 2(24).
Forfeited advance money received for the transfer of a capital asset is not taxable as revenue receipt. Such forfeiture pertains to a capital receipt directly related to the potential sale of a capital asset.
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).
When claiming an expenditure under section 37(1), the onus is on the assessee to prove the necessary facts, not on the revenue. Mere production of vouchers is insufficient if the genuineness of payment is doubted.
