Section 40A(2)(a) of the Income Tax Act

The Supreme Court in CIT v. Krishna SSK establishes principles for de novo assessment of co-operative sugar factories concerning the tax implications of sugar sales to members, acknowledging that such sales are regulated under Section 79(A) of the Maharashtra Co-operative Societies Act, 1960. These principles guide the computation of total income from these regulated transactions.

Expenses incurred for obtaining a project report, legal opinion, or conducting due diligence to explore the feasibility of expanding an existing business or setting up a new factory in the same line are considered revenue expenditures, not capital.

Expenditure incurred for starting a new business is capital in nature, irrespective of whether the project materializes. The essential purpose for which an expenditure is incurred determines its character as capital or revenue under Section 37(1).

Donations eligible for deduction under Section 80G can be remitted back to the Assessing Officer for verification of receipts and eligibility.

Disallowance under Section 40A(2)(b) is not maintainable when both the payer and payee are assessed at the maximum marginal rate, as it results in a revenue-neutral situation.