Section 30 of the Income Tax Act
The decision most relied on for Section 30 is ACG Associated Capsules (P) Ltd. v. CIT (343 ITR 89), cited in 144 of the 112 judgments on BharatTax that turn on this section.
Leading authorities on Section 30
For calculation of deduction under Section 80HHC, if total interest is netted off after adjusting interest paid and received, the 90% reduction specified in Explanation (baa) is not applicable.
Interest paid on borrowed funds advanced to group concerns is an allowable expense under section 36(1)(iii) if the advances are made for commercial expediency. Revenue authorities cannot question a businessman's commercial judgment or disallow such expenses on that basis.
Rule 5(a) of the First Schedule to the Income Tax Act applies to add back an amount only if it is an expenditure or allowance contemplated in sections 30 to 43A and is specifically disallowed. Without such a specific prohibition, amounts like provisions for preference share redemption or amortization cannot be added back to an insurance company's profits.
Expenditure qualifies as 'current repairs' if it maintains existing machinery without replacement, creates no new asset, restores functional efficiency without increasing capacity, and is not an independent unit. Conversely, the cost of replacing machinery, especially independent units, constitutes capital expenditure.
Expenditure incurred wholly and exclusively for the purpose of business is deductible, even if it is unremunerative or does not yield an immediate profit. The absence of a corresponding receipt does not negate the deductibility of such an expense.
Expenditure incurred on improvements like flooring, partition, wiring, and false ceiling in existing premises is treated as revenue expenditure, not capital expenditure, even if it provides some lasting benefit. Such expenses are deductible if made for efficiently carrying on the business.
If the actual cost of an asset was wrongly assessed in earlier years, it can be recomputed and corrected in subsequent assessment years. Interest incurred before production on borrowed money for plant construction can be capitalized and added to the cost of fixed assets.
Judgments on Section 30
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