Section 80IC of the Income Tax Act
The decision most relied on for Section 80IC is ACB India Ltd. v. ACIT (374 ITR 108), cited in 364 of the 211 judgments on BharatTax that turn on this section.
Leading authorities on Section 80IC
When computing disallowance under Section 14A of the Income-tax Act using Rule 8D of the Income-tax Rules, only investments that have actually yielded exempt income during the relevant previous year are to be considered for the calculation.
Income eligible for profit-linked deductions under sections like 80-IC or 10B must have a direct nexus to the eligible business activity or be derived from the industrial undertaking itself, and not merely attributable to it or arising from a post-manufacturing event.
Reassessment proceedings initiated mechanically or based solely on existing records without fresh material are invalid. Additions to income, especially for investments, require the Assessing Officer to conduct independent inquiry and establish adverse material beyond mere allegations.
Proceedings become fatal if principles of natural justice are violated, such as when seized material is not provided to the assessee or cross-examination of a person whose statement the Assessing Officer relies upon is denied.
For transfer pricing purposes, functionally dissimilar entities that have significant business differences must be excluded from the list of comparables for benchmarking analysis. It also provides guidance on the non-allocation of advertisement, marketing, and promotion (AMP) expenses to other entities when incurred solely for the assessee's business.
Even with an existing agreement, the deductibility of an amount claimed as an expenditure, such as commission, must be decided based on the specific facts and circumstances of each case, to ascertain if it was laid out wholly and exclusively for business purposes.
Disallowance under Section 14A of the Income-tax Act is not applicable if the assessee has not earned any exempt income during the relevant assessment year.
Reassessment proceedings initiated under Sections 147/148 are invalid if the requisite approval or sanction under Section 151 has been granted in a mechanical manner, without due application of mind by the sanctioning authority.
An adverse inference cannot be drawn against an assessee solely based on uncorroborated loose papers found during a search or on a statement made during the search that is later retracted, unless the Assessing Officer conducts independent enquiry to establish the facts.
To make an addition under Section 69B for undisclosed investment, the Revenue must first prove that an understatement of investment has occurred and that the assessee made the undisclosed investment. The burden of proof lies with the Revenue, and additions cannot be based merely on presumptions or assumptions without corroborative material.
Judgments on Section 80IC
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