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Direct Taxation Income Tax Act

“Court Rules in Favor of Mobile Providers: Prepaid Sales Not Subject to TDS”

Bysclaw

Mar 8, 2024

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Direct Taxation Income Tax Act

Income Tax Act, 1961 — Section 37(1) — Revenue Expenditure vs. Capital Expenditure — Non-compete fee — Whether payment of non-compete fee constitutes allowable revenue expenditure or capital expenditure — Non-compete fee is paid to restrain a competitor, which protects or enhances the business profitability and facilitates carrying on the business more efficiently — Such payment neither creates a new asset nor increases the profit-earning apparatus for the payer, meaning the enduring advantage, if any, is not in the capital field — The length of time of the advantage is not determinative if the advantage merely facilitates business operations, leaving fixed assets untouched — Payment of non-compete fee made by the appellant (formed as a joint venture) to L&T (previous partner) to restrain L&T from competing for 7 years was essentially to keep a potential competitor out and ensure the appellant operated more efficiently and profitably, without creating a new capital asset or monopoly — Held: Payment of non-compete fee is an allowable revenue expenditure under Section 37(1) of the Act. (Paras 16, 25-29)

Jan 4, 2026 sclaw

Direct Taxation Income Tax Act

Income Tax Act, 1961 — Sections 37(1), 44C — Deduction of Head Office Expenditure in case of Non-Residents — Interpretation of Section 44C and ‘Head Office Expenditure’ — Distinction between ‘Common’ and ‘Exclusive’ Expenditure — Section 44C, being a special provision with a non-obstante clause, governs the quantum of allowable deduction for any expenditure incurred by a non-resident assessee that qualifies as ‘head office expenditure’ — The definition of ‘head office expenditure’ in the Explanation to Section 44C does not distinguish between common expenditure (shared among branches) and exclusive expenditure (incurred solely for Indian branches) — The term ‘attributable to’ in Section 44C(c) is broad enough to include both common and exclusive head office expenditure; exclusivity is a form of strong attribution — Therefore, Section 44C applies to head office expenditure regardless of whether it is common or exclusive, subjecting the deduction to the statutory ceiling. (Paras 2, 26, 43-45, 47-49, 59-63, 71, 86, 88)

Dec 17, 2025 sclaw

Direct Taxation Income Tax Act

Income Tax Act, 1961 — Section 36(1)(viii) — Interpretation of “derived from” vs. “attributable to” — The phrase “derived from” connotes a requirement of a direct, first-degree nexus between the income and the specified business activity (providing long-term finance) — It is judicially settled that “derived from” is narrower than “attributable to,” thus excluding ancillary, incidental, or second-degree sources of income — If income is even a “step removed” from the core business, the nexus is broken (Paras 14, 15, 20, 33).

Dec 11, 2025 sclaw

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Direct Taxation Income Tax Act

Income Tax Act, 1961 — Section 37(1) — Revenue Expenditure vs. Capital Expenditure — Non-compete fee — Whether payment of non-compete fee constitutes allowable revenue expenditure or capital expenditure — Non-compete fee is paid to restrain a competitor, which protects or enhances the business profitability and facilitates carrying on the business more efficiently — Such payment neither creates a new asset nor increases the profit-earning apparatus for the payer, meaning the enduring advantage, if any, is not in the capital field — The length of time of the advantage is not determinative if the advantage merely facilitates business operations, leaving fixed assets untouched — Payment of non-compete fee made by the appellant (formed as a joint venture) to L&T (previous partner) to restrain L&T from competing for 7 years was essentially to keep a potential competitor out and ensure the appellant operated more efficiently and profitably, without creating a new capital asset or monopoly — Held: Payment of non-compete fee is an allowable revenue expenditure under Section 37(1) of the Act. (Paras 16, 25-29)

Jan 4, 2026 sclaw

Evidence Act, 1872 — Section 118 — Competency of child witness — Effect of delay and tutoring — Although a minor child is competent to testify, the reliability and evidentiary value of testimony given many years after the event, especially when the child has been residing with the complainant’s family (maternal grandparents), is significantly affected by the high possibility of memory distortion and tutoring. (Paras 5, 7, 10.2)

Jan 4, 2026 sclaw