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

Nagar Urban Co-Operative Bank Limited, Ahmednagar vs. Deputy Commissioner of Income-Tax, Ahmednagar Circle, Ahmednagar

In the result, the appeal of the assessee stands partly allowed for statistical purposes

ITA 2555/PUN/2017[2012-13]Status: DisposedITAT Pune24 Mar 2021AY 2012-13

Bench: Shri Inturi Rama Rao, Am & Shri Partha Sarathi Chaudhury, Jm आयकर अपील सं. / Ita No.2555/Pun/2017 िनधा"रण वष" / Assessment Year : 2012-13 Nagar Urban Co-Operative Bank Ltd., Post Box No.7, Central Bank Road, Ahmednagar-414001. .......अपीलाथ" / Appellant Pan : Aaaan0509L बनाम / V/S. Dcit, Ahmednagar Circle, ……""यथ" / Respondent Ahmednagar. Assessee By : None Revenue By : Shri Vitthal Bhosale सुनवाई क" तारीख / Date Of Hearing : 23.03.2021 घोषणा क" तारीख / Date Of Pronouncement : 24.03.2021 आदेश / Order Per Inturi Rama Rao, Am: This Is An Appeal Filed By The Assessee Directed Against The Order Of The Learned Commissioner Of Income Tax (Appeals)- 2, Pune (‘Cit(A)’ For Short) Dated 20.07.2017 For The Assessment Year 2012-13. 2. The Appellant Raised The Following Grounds Of Appeal :- “1. That The Learned Acit Ahmednagar Has Erred On The Facts & In The Circumstances In Not Allowing Claims Made During The Course Of Hearing For Exempted Income Of Dividend Of Rs. 1487135/- & Expenses Debited To P & L A/C On Account Of Depreciation On Govt. Securities Rs. 11200000/- To Be Allowed As Exempted Income As Well As Allowable Expenses & The Same Were Also Dismissed By The Commissioner Of Income Tax (Appeals) Ii Pune. 2. That Your Appellant Prays That He May Be Allowed To Add, To Alter Or Amend The Above Grounds Of Appeal.”

For Appellant: NoneFor Respondent: Shri Vitthal Bhosale
Section 41(1)

M/S. Altair Engineering India (Private) Limited, Bangalore vs. The Deputy Commissioner of Income Tax, Circle- 1(1)(1), Bangalore

In the result, appeal by the assessee is allowed

ITA 1307/BANG/2019[2009-10]Status: DisposedITAT Bangalore19 Mar 2021AY 2009-10

Bench: Shri N.V. Vasudevan & Shri B R Baskaranassessment Year: 2009-10 M/S. Altair Engineering India Pvt. Ltd., Vs. The Dcit, Prestige Trade Tower, Circle – 1(1)(1), Municipal No.46, First Floor, Bengaluru. Palace Road, Municipal Ward No.77, Sampangiramanagar, Bengaluru – 560 001. Pan: Aabca 1860 A Appellant Respondent Assessee By : Shri. M. V. Gowtham, Ca Revenue By : Shri. Pradeep Kumar, Cit(Dr)(Itat), Bengaluru. Date Of Hearing : 09.03.2021 Date Of Pronouncement : 19.03.2021 O R D E R Per N.V. Vasudevanthis Is An Appeal By The Assessee Against The Order Dated 15.05.2019 Of Cit(A)-1, Bangalore, Relating To Ay 2009-10. 2. The Facts Arising To This Aforesaid Appeal Are That The Assessee Is A Company Engaged In Software Product Development & Related Services. In The Assessment Proceedings, The Ao Noticed That The Assessee Debited A Sum Of Rs.17,11,41,734/- Towards Software Purchases. The Assessee Submitted Before The Ao That It Was Trading In Software Owned By Altair Inc., Which Owns The Intellectual Property (Ip) Rights As Well The Remarketing Rights Of The Computer Software & Related Materials. Altair India Has Been Granted Page 2 Of 6 Distribution Rights Under A Specific Distribution Agreement For Marketing & Distributing This Software In India & A Few Other Countries. These Software Procurements Were Against Back To Back Orders From End Customers. In Short, It Was Submitted That The Income Of The Assessee Was Only In The Nature Of A Trading Profit Obtained By The Assessee & Not Any Revenue In Nature Of Fee. Some Of The Software Was Also In Nature Of Maintenance Renewal. The Assessee Submitted That It Followed The Accounting Treatment As Per India Gaap. The Assessee Also Maintained That There Was No Need To Deduct Tax On Such Software Purchases.

For Appellant: Shri. M. V. Gowtham, CAFor Respondent: Shri. Pradeep Kumar, CIT(DR)(ITAT), Bengaluru
Section 143(3)Section 195Section 40