Section 28(iv) of the Income Tax Act

Income-tax Act, 2025: s.26

Section 28(iv) 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(iv) is Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT (227 ITR 172), cited in 621 of the 479 judgments on BharatTax that turn on this section.

Leading authorities on Section 28(iv)

Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT
227 ITR 172 · 1997 · Supreme Court
621
citing judgments

Interest income earned on deposits, particularly before the commencement of business operations or as a requirement for business licensing, is taxable as "income from other sources" under Section 56, and cannot be treated as business income or set off against interest on borrowed funds.

CIT v. T.V. Sundaram Iyengar & Sons Ltd.
222 ITR 344 · 1996 · Supreme Court
223
citing judgments

Unclaimed deposits received in the course of trading transactions and sundry credit balances written back are taxable as business income under Section 41(1) of the Income-tax Act, 1961, as they constitute a cessation of trading liability.

CIT v. Mahindra & Mahindra Ltd.
404 ITR 1 · 2018 · Supreme Court
164
citing judgments

The waiver of a loan taken for acquiring capital assets is considered a capital receipt and is not taxable as income under Section 28(iv) of the Income Tax Act. The ruling distinguishes between the waiver of trading liabilities and capital liabilities for tax purposes.

Mahindra & Mahindra Ltd. v. CIT
261 ITR 501 · 2003 · High Court
147
citing judgments

Section 41(1) of the Income-tax Act cannot be invoked if the assessee has not been granted a deduction for the relevant liability in earlier years.

Solid Containers Ltd. v. DCIT
308 ITR 417 · 2009 · High Court
74
citing judgments

The write-back or waiver of a loan obtained for business purposes constitutes taxable business income under Section 28. This applies even if no prior deduction was claimed, thereby not attracting Section 41(1).

CIT v. Subhas Kabini Corporation Ltd.
385 ITR 592 · 2016 · High Court
51
citing judgments

Receipts arising from the sale of Carbon Emission Reduction (CERs) or carbon credits are capital receipts, not revenue receipts, for assessment years preceding the introduction of Section 115BBG.

CIT v. Ramaniyam Homes Pvt. Ltd.
384 ITR 530 · 2016 · High Court
48
citing judgments

Benefits received by a company from its business operations, such as waived loans not used for capital assets, are taxable under section 28(iv) of the Income-tax Act, 1961.

Oberoi Hotel Private Limited v. Commissioner of Income Tax
236 ITR 903 · 1999 · Supreme Court
42
citing judgments

Compensation received for the loss of a capital asset or the loss of a source of income is classified as a capital receipt and is not liable to income tax.

CIT v. Sulzer India Ltd.
369 ITR 717 · 2014 · High Court
38
citing judgments

Where an assessee discharges a future liability at its present value, it does not result in a "benefit" accruing to the assessee, and therefore, Section 41(1) of the Income Tax Act, 1961, is not applicable.

CIT v. Alchemic (P) Ltd.
130 ITR 168 · 1981 · High Court
37
citing judgments

Debt forgiveness constituting a monetary benefit does not attract Section 28(iv) of the Income Tax Act. Such a benefit is not income arising from business or profession.

Judgments on Section 28(iv)

Hoogly Dock & Port Engineers Ltd., Kolkata vs. DCIT, Cir. 1(1), Kolkata

In the result, appeal of the assessee is partly allowed

ITA 1474/KOL/2023[2020-21]Status: DisposedITAT Kolkata17 Apr 2024AY 2020-21

Bench: Shri Sanjay Garg, Hon’Ble & Dr. Manish Borad, Hon’Blei.T.A. No. 1474/Kol/2023 Assessment Year: 2020-21 Hoogly Dock & Port Engineers Ltd. Dcit, Circle-1(1), Kolkata C/O. Syama Prasad Mookerjee Port Vs 15, Strand Road Kolkata - 700001 [Pan : Aaach7473B] अपीलाथ"/ (Appellant) "" यथ"/ (Respondent) Assessee By : Shri K.M. Sundaram, C.A. Revenue By : Shri Rakesh Kumar Das, Cit, D/R सुनवाई क" तारीख/Date Of Hearing : 21/02/2024 घोषणा क" तारीख /Date Of Pronouncement: 17/04/2024 आदेश/O R D E R Per Dr. Manish Borad: This Appeal At The Instance Of The Assessee Is Directed Against The Order Of The National Faceless Appeal Centre, Delhi (In Short ‘Ld. First Appellate Authority’) Dt. 20/11/2023 Which Is Arising Out Of The Assessment Order U/S 143(3)/144B Of The Income-Tax Act, 1961 (Hereinafter ‘The Act’), Dt. 06/09/2022 Relevant To Assessment Year 2020-21 Framed By Assessment Unit, Income Tax Department. 2. Facts In Brief Are That The Assessee Is A Company Fully Owned By The Government Of India & Is A Public Sector Undertaking Carrying On The Business Of Building & Repair Of Ships & Boats. For The Year Under Consideration, E-Return Was Furnished On 27/01/2021 Which Was Subsequently Revised On 01/02/2021 Declaring Income Of Rs.1,53,68,81,820/-. After Serving Of Valid Notice U/S 143(2) & 142 (1)

For Appellant: Shri K.M. Sundaram, C.AFor Respondent: Shri Rakesh Kumar Das, CIT, D/R
Section 143(2)Section 143(3)Section 28Section 35DSection 40