Key legal principles and decisions related to various ...

Onus on Tax Officer to prove cessation of liabilities, disallow only non-business expenses with solid evidence, consider assessee's records.

Case Laws Income Tax

September 7, 2024

Key legal principles and decisions related to various disallowances and additions made by the Assessing Officer (AO) under different sections of the Income Tax Act. The critical points covered are: Cessation of liability u/s 41(1): The onus is on the AO to provide concrete evidence for cessation or remission of liability. Non-payment over time or time-barred debts do not automatically constitute cessation. Clear and specific evidence is required. Disallowance u/s 37(1): Disallowances should be made only when there is clear evidence that the expenditure is not for business purposes. Ad hoc disallowances without substantial evidence are arbitrary and unjustified. Assessee's documentation and audited financial statements demonstrating genuineness of expenses should be considered. Disallowance of personal expenses: Disallowances cannot be based on assumptions or lack of evidence of personal use. Assessee's demonstration of business purpose and tax auditor's acceptance should be considered. Interest disallowance u/s 36(1)(iii): The principle of fungibility of funds should be applied. If the assessee had sufficient interest-free funds to cover the loan, interest deduction should be allowed for loans advanced for commercial expediency. Disallowance u/s 14A read with Rule 8D.

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Key legal principles and decisions related to various ...

Onus on Tax Officer to prove cessation of liabilities, disallow only non-business expenses with solid evidence, consider assessee's records.

Case Laws Income Tax

September 7, 2024

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