Section 28(iiid) of the Income Tax Act
Income-tax Act, 2025: s.26
Section 28(iiid) falls under section 28 of the Income-tax Act, 1961, which corresponds to section 26 (Income under head “Profits and gains of business or profession") of the Income-tax Act, 2025.
Read section 26 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 28(iiid) is Additionally, in CIT v. A. Raman & Co. (67 ITR 11), cited in 321 of the 65 judgments on BharatTax that turn on this section.
Leading authorities on Section 28(iiid)
The mere lawful reorganization of a business transaction does not automatically imply an intent to evade tax, and genuine business adjustments should not be considered suppressive actions without clear evidence of such intent.
Excise duty collected by the assessee as an agent on behalf of the government is not includible in the total turnover for the purpose of computing deduction under section 80HHC.
Expenses incurred for software license purchase, development of miscellaneous software, and maintenance of websites are considered revenue in nature. Such expenses are deductible in the year they are incurred.
Expenditure incurred by an assessee on software license purchases, development of miscellaneous software, website maintenance, distributor incentives, market development, and brand promotion is revenue in nature.
The case distinguishes between legitimate tax planning and transactions that are colourable devices or shams, affirming that while legal arrangements to reduce tax are permissible, transactions lacking legitimacy and designed purely to evade tax are not.
For supporting manufacturers claiming deduction under Section 80HHC(3A), the reduction of export incentives specified in Explanation (baa) of Section 80HHC, which refers to amounts under Section 28(iiia) to (iiie), does not apply.
Proceeds from the sale of scrap packing material are to be included in the total turnover for computing deduction under section 80HHC. However, the turnover should be restricted to receipts that have an element of profit.
The Supreme Court holds that ICAI Guidance Notes and accounting methods prescribed by the Institute of Chartered Accountants of India (ICAI) can be relied upon for computing "turnover," especially for tax audit purposes under Section 44AB and for transactions involving shares and derivatives.
The term 'transfer' under Section 2(47) includes the relinquishment of a right to property that creates an interest in the property. However, the extinguishment of rights in shares, when occurring without a formal conveyance, does not attract capital gains.
Amortization claimed on capitalized leasehold land, which is reported as an asset in the balance sheet, is an allowable deduction for income-tax purposes.
