Section 253 of the Income Tax Act
The decision most relied on for Section 253 is Shivsagar Veg Restaurant v. ACIT (317 ITR 433), cited in 202 of the 504 judgments on BharatTax that turn on this section.
Leading authorities on Section 253
An inordinately delayed order, especially one passed without proper notice, is vitiated and liable to be recalled and heard afresh. Such orders, passed with unwarranted delay or without due notice, constitute a violation of natural justice, rendering them invalid.
When the valuation of closing stock is adjusted to include CENVAT or Modvat credit under Section 145A, a corresponding adjustment must also be made to the opening stock.
The tax authorities can look beyond the legal form of a transaction and disregard the corporate entity if it is used for tax evasion or to create a smoke screen. The assessee bears the burden of proving the identity, creditworthiness, and genuineness of transactions, and the true nature of a transaction is determined based on surrounding circumstances and human probabilities, not requiring proof beyond reasonable doubt.
The Revenue cannot change the complexion of the case for the first time before the Appellate Tribunal. The Tribunal is not vested with the power to enhance an assessment or withdraw relief granted by the assessing authority.
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.
A judicial decision is authority only for what it actually decides, which is its ratio decidendi, and not for every observation or what logically follows from general expressions. A decision must be read as applicable to the facts proved, with general expressions qualified by the specific context in which they are found.
Gains from the indirect transfer of shares in a foreign company holding Indian shares are not taxable in India under the relevant tax treaty, which is considered a self-contained code to be interpreted plainly. Creating corporate structures or special purpose vehicles for investment to secure tax benefits is a legitimate business activity.
Interest income earned from mandatory investments made as a condition of carrying on a business, such as for a contingency reserve under the Electricity (Supply) Act, is eligible for deduction under Section 80-IA as it is intrinsically linked to the business activity.
The power to impose penalty under section 271 of the Income-tax Act depends on the Assessing Officer's satisfaction, which must be recorded during the proceedings. If the officer is not satisfied and has not recorded this satisfaction, the penalty cannot be exercised.
Judgments on Section 253
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