Section 74 of the Income Tax Act
The decision most relied on for Section 74 is CIT v. Hariprasad & Company Pvt. Ltd. (99 ITR 118), cited in 78 of the 60 judgments on BharatTax that turn on this section.
Leading authorities on Section 74
The terms 'income' or 'profits and gains' are inclusive of losses, signifying that losses are 'minus income' to be factored into the computation of taxable income. Therefore, set-off and carry forward provisions for losses apply exclusively to taxable income or gains and cannot be pressed into service against non-taxable gains, such as those exempt under a DTAA or other specific provisions.
The eligibility for an assessee to carry forward and set off losses, including capital losses, against future income is determined by the Assessing Officer in the year the set-off is claimed, not in the year the loss was incurred.
A coordinate bench decision in the assessee's own case for earlier assessment years is relevant to the current issue.
Expenditure incurred for the transfer of the use of licenses, without acquiring ownership rights or an enduring benefit, constitutes revenue expenditure. Such payments are allowable as a deduction if they are directly relatable to services in the revenue field.
Capital gains arising from the transfer of equity shares and equity-oriented mutual funds are exempt if the shares are long-term capital assets, transferred on the stock exchange, and the sale transaction is subject to levy. The case also relates to the application of beneficial provisions and the rejection of claims under Double Taxation Avoidance Agreements (DTAA).
Judgments on Section 74
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