Section 254 of the Income Tax Act

Income-tax Act, 2025: s.363

Section 254 of the Income-tax Act, 1961 corresponds to section 363 (Orders of Appellate Tribunal) of the Income-tax Act, 2025.

Read section 363 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 254 is Asia Satellite Telecommunications Co. Ltd. v. DIT (332 ITR 340), cited in 359 of the 1,576 judgments on BharatTax that turn on this section.

Leading authorities on Section 254

Asia Satellite Telecommunications Co. Ltd. v. DIT
332 ITR 340 · 2011 · High Court
359
citing judgments

Payments for the use of equipment, such as satellite transponders, do not constitute 'royalty' under Section 9(1)(vi) of the Income-tax Act, 1961, or under applicable tax treaties, especially when there is no transfer of the right to use a process or underlying technology.

CIT v. Jai Parabolic Springs Ltd.
306 ITR 42 · 2008 · High Court
349
citing judgments

An assessee can make an additional claim for deduction or file a revised computation of income during assessment proceedings, even if a revised return of income has not been filed. Such additional claims or grounds can also be admitted at the appellate stage.

CIT v. Tasgaon Taluka S.S.K. Ltd.
103 Taxmann.com 57 · 2019 · Supreme Court
306
citing judgments

The Supreme Court holds that the issue of payment of excessive price on purchase of sugarcane by assesses is no longer res integra. The court elaborately dealt with this issue.

CIT v. Krishna Sahakari Sakhar Karkhana Limited
27 Taxmann.com 162 · 2012 · Supreme Court
263
citing judgments

The Supreme Court restores the matter for ascertaining whether the difference between the fair market price and concessional price of sugar supplied by a cooperative sugar factory to its members should be added to its total income, considering relevant factors like state cooperative society directions.

Bangalore Club v. CIT
350 ITR 509 · 2013 · Supreme Court
247
citing judgments

The Supreme Court affirmed the doctrine of mutuality, holding that contributions received from and returned to members for a common purpose do not constitute taxable profits. However, income from transactions with non-members or interest earned from investments in external entities (like cooperative banks) may break the mutuality chain and be taxable under Section 56, falling outside the scope of Section 80P deductions.

CIT v. Madras Auto Service (P) Ltd.
233 ITR 468 · 1998 · Supreme Court
246
citing judgments

Expenditure providing an enduring advantage, such as upfront lease rent for land, is revenue expenditure if no capital asset is acquired or generated, allowing for deduction under Section 37, even when capitalized in the books of account.

Assam Bengal Cement Co. Ltd. v. CIT
27 ITR 34 · 1955 · Supreme Court
174
citing judgments

The Supreme Court established the foundational test for distinguishing between capital and revenue expenditure, holding that the aim and object of the expenditure and whether it brings into existence an asset or an advantage of an enduring nature determines its character, irrespective of the payment method. An advantage lasting five years or more can be considered enduring.

CIT v. Associated Cement Companies Ltd.
172 ITR 257 · 1988 · Supreme Court
126
citing judgments

An expenditure is classified as either capital or revenue; the 'enduring benefit' test is a key criterion for this distinction, and income tax law does not generally recognize deferred revenue expenditure unless specifically provided.

CIT v. Visakhapatnam Port Trust
144 ITR 146 · 1983 · High Court
124
citing judgments

Sections 4 and 5 of the Income Tax Act, which define total income and chargeability, are subject to Section 90, meaning that Double Taxation Avoidance Agreements (DTAAs) override the Act's provisions in case of a conflict.

Sugar Factory & Oils Mills (P) Ltd. v. CIT
125 ITR 293 · 1980 · Supreme Court
110
citing judgments

Expenditure incurred for improving business operations or facilitating business conduct, even if the advantage endures indefinitely, is generally on revenue account if it leaves the fixed capital untouched.

Judgments on Section 254

Asst CIT 28 (1), Mumbai vs. Shri. Gordon Bruce Gaspar Serrao, Navi Mumbai

In the result, the appeal filed by the revenue is hereby dismissed

ITA 6/MUM/2020[2013-14]Status: DisposedITAT Mumbai12 Nov 2021AY 2013-14

Bench: Shri Shamim Yahya, Am & Shri Amarjit Singh, Jm (Hearing Through Video Conferencing Mode) आयकर अपील सं/ I.T.A. No.06/Mum/2020 (निर्धारण वर्ा / Assessment Year: 2013-14) Acit-28(1) बिधम/ Gordon Bruce Gaspar Serrao Room No.306, 3Rd Floor, 6Th Tracy Villa, Plot No.13, Vs. Tower, Vashi Railway Sector-8, Vashi, Navi Station Complex, Vashi, Mumbai-400703. Navi Mumbai-400703. स्थायी लेखा सं./जीआइआर सं./Pan/Gir No. : Alwps8430R (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) Revenue By: Shri T. S. Khalsa (Dr) Assessee By: Shri Kshipra Singhvi सुनवाई की तारीख / Date Of Hearing: 23/09/2021 घोषणा की तारीख /Date Of Pronouncement: 12/11/2021 आदेश / O R D E R Per Amarjit Singh, Jm: The Revenue Has Filed The Present Appeal Against The Order Dated 04.10.2019 Passed By The Commissioner Of Income Tax (Appeals) -26 Mumbai [Hereinafter Referred To As The “Cit(A)”] Relevant To The A.Y.2013- 14. 2. The Revenue Has Raised The Following Grounds: - "1. On The Facts & In The Circumstances Of The Case & In Law, The Ld. Cit(A) Has Erred In Allowing Relief To The Assessee To The Extent Impugned In The Grounds Enumerated Below: (1) "Whether On The Facts & In The Circumstances Of The Case & In Law, The Ld. Cit(A) Has Erred In Directing The A.O. To Treat The A.Y.2013-14 Profits From Sale Of Flats As Long Term Capital Gain Without Appreciating The Fact That Assessee Has Merely Paid Booking Amount To Builder Mis. Platinum Properties But No Purchase Deed Were Executed Or Registered In The Name Of The Assessee & No Stamp Duty Or Registration Charges Were Paid By The Assessee Towards Purchase Of These Flats"?

For Appellant: Shri Kshipra SinghviFor Respondent: Shri T. S. Khalsa (DR)
Section 143(3)Section 263