Section 73 of the Income Tax Act
The decision most relied on for Section 73 is 3. CIT v. ASHOK KUMAR SONI (262 ITR 633), cited in 101 of the 48 judgments on BharatTax that turn on this section.
Leading authorities on Section 73
An item not taxable by law cannot be made taxable merely because the assessee offered it under a misconception of fact or law. Charging provisions must be strictly construed, with any ambiguity favoring the assessee, and tax authorities should assist assessees to levy only legitimate taxes, even allowing new claims on appeal.
Loss incurred by certain types of companies in trading derivatives is considered speculative loss under the Explanation to Section 73, as the value of stock derivatives depends on shares. Such speculative losses are ineligible for set-off or carry forward against business income.
The Income Tax Appellate Tribunal is the final fact-finding authority. A High Court can only interfere with the Tribunal's factual findings if a specific question alleging perversity of such findings, in the sense that they could not have been reasonably arrived at, has been referred to it.
Interest income earned from mandatory investments made as a condition of carrying on a business, such as for a contingency reserve under the Electricity (Supply) Act, is eligible for deduction under Section 80-IA as it is intrinsically linked to the business activity.
Losses arising from the sale of investments made for business purposes are treated as business losses, not capital losses.
A company involved in the purchase and sale of shares is deemed to be carrying on a speculative business to the extent of such transactions, unless it falls under an exception to Section 73 of the Income Tax Act.
Judgments on Section 73
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