Issues: Whether brought-forward unabsorbed depreciation can be set off against income from house property where there is no positive business income in the relevant year.

Analysis: Under Section 32(2) of the Income-tax Act, 1961, brought-forward unabsorbed depreciation is added to and assumes the character of current-year depreciation. It is consequently available for adjustment against taxable income under other heads, and is not confined to business profits merely because no positive business income exists in the relevant year.

Conclusion: Brought-forward unabsorbed depreciation is eligible for set-off against income from house property. The issue is decided in favour of the assessee.

Ratio Decidendi: Unabsorbed depreciation carried forward under Section 32(2) assumes the character of current depreciation and may be set off against income chargeable under another head.

Issues: Whether a notice for reassessment issued after four years without prior approval of the competent authority under section 151 was valid.

Analysis: For the relevant assessment year, issuance of a notice under section 148 after expiry of four years required the competent authority's prior satisfaction on the recorded reasons. The notice was issued on 25.03.2014, while the Commissioner's approval was recorded only on 27.03.2014. Prior sanction was a jurisdictional condition precedent, not a curable procedural irregularity; subsequent approval could not validate a notice already issued.

Conclusion: The notice under section 148 and the consequential reassessment were invalid and without jurisdiction. The issue was decided in favour of the assessee.

Issues: Whether an addition relating to an escrow adjustment deducted from slump-sale consideration taxable as capital gains could be made by invoking the business-expenditure disallowance provision.

Analysis: The amount was reduced from the consideration for transfer of a division by slump sale and formed part of the capital-gains computation. The statutory scheme confines deductions under the business-income computation provisions to income assessable under the head of profits and gains of business or profession. No expenditure or deduction had been claimed by the assessee under the head of business income in respect of the disputed amount. Accordingly, the business-expenditure provision was inapplicable to the adjustment in the slump-sale consideration.

Conclusion: The addition was unjustified and is deleted in favour of the assessee.

Issues: (i) Whether payments to educational institutions for employees' welfare were deductible notwithstanding Section 40A(9). (ii) Whether club expenditure incurred for employees was allowable as business expenditure. (iii) Whether expenditure on enabling facilities was revenue expenditure rather than capital expenditure. (iv) Whether receipts directly connected with setting up projects were capital receipts reducible from capital work-in-progress. (v) Whether bad debts, bad advances and bad claims written off were allowable. (vi) Whether premium on forward contracts could be amortised as an ascertained business liability. (vii) Whether survey expenditure relating to mineral-oil operations was deductible under Section 42.

Issue (i): Whether payments to educational institutions for employees' welfare were deductible notwithstanding Section 40A(9).

Analysis: The payments were for employee welfare and facilitated the efficient conduct of business. The materially identical claim had been allowed in the assessee's earlier assessment year under Section 37(1), with Section 40A(9) held inapplicable to such business-welfare expenditure. No distinguishing facts, change in law, or reversal of that precedent was shown.

Conclusion: Payments to educational institutions for employees' welfare were allowable business expenditure and were not disallowable under Section 40A(9), in favour of the assessee.

Issue (ii): Whether club expenditure incurred for employees was allowable as business expenditure.

Analysis: The claim was governed by the earlier decision in the assessee's case, which applied the settled position that club membership expenditure for employees constitutes business expenditure. The Revenue identified no distinguishing feature warranting a different treatment.

Conclusion: Club expenditure incurred for employees was allowable as business expenditure, in favour of the assessee.

Issue (iii): Whether expenditure on enabling facilities was revenue expenditure rather than capital expenditure.

Analysis: The expenditure was incurred to obtain facilities enabling effective business operations and did not result in acquisition of a capital asset by the assessee. The identical nature of expenditure had previously been treated as revenue expenditure, and no factual or legal distinction was established.

Conclusion: Expenditure on enabling facilities was revenue expenditure, in favour of the assessee.

Issue (iv): Whether receipts directly connected with setting up projects were capital receipts reducible from capital work-in-progress.

Analysis: The receipts were inextricably and directly connected with the setting up of the plant and projects. The earlier decision in the assessee's case had characterised such receipts as capital receipts properly reduced from capital work-in-progress; the Revenue showed no basis to depart from that view.

Conclusion: The project-linked receipts were capital receipts reducible from capital work-in-progress, in favour of the assessee.

Issue (v): Whether bad debts, bad advances and bad claims written off were allowable.

Analysis: In light of the assessee's petroleum-product business and the nature of shortages and claims arising from supplies and stock transfers, the claim was covered by the prior decision for an identical factual setting. No distinguishing factual or legal feature was demonstrated.

Conclusion: The write-offs of bad debts, bad advances and bad claims were allowable, in favour of the assessee.

Issue (vi): Whether premium on forward contracts could be amortised as an ascertained business liability.

Analysis: Forward contracts entered to hedge foreign-currency exposure from crude-oil imports created legally enforceable obligations at predetermined rates. The premium was therefore neither contingent nor notional, and the hedging arrangement was not speculative. The earlier ruling on identical facts remained applicable.

Conclusion: Premium on forward contracts was an ascertained business liability eligible for amortisation and was not speculative, in favour of the assessee.

Issue (vii): Whether survey expenditure relating to mineral-oil operations was deductible under Section 42.

Analysis: Section 42, read with the applicable Production Sharing Contract, permitted deduction of exploration and drilling expenditure, including survey expenditure, in the mineral-oil business. The claim had been accepted in the earlier year and was covered by the prior co-ordinate-bench ruling; no change in facts or law was established.

Conclusion: Survey expenditure relating to mineral-oil operations was deductible under Section 42, in favour of the assessee.

Final Conclusion: The reliefs granted in respect of the substantively adjudicated claims were sustained, including the treatment of employee-welfare payments, project-facility expenditure, project-linked receipts, write-offs, hedging premium and mineral-oil survey expenditure.

Ratio Decidendi: A prior co-ordinate-bench ruling in the same assessee's case must be followed where the facts and governing law remain materially identical and no distinguishing feature or contrary binding authority is shown.

Issues: Whether long-term capital gain from sale of listed shares could be treated as unexplained cash credit solely on the basis of a general investigation report concerning alleged penny-stock transactions.

Analysis: The investigation report neither identified nor implicated the assessee in any illegal or irregular activity. The shares had been purchased and sold through banking channels, were credited to the demat account, and were regularly traded on the stock exchange. The assessee had also undertaken share investments regularly. No independent inquiry was made with the stock exchange or the counterparties through notices under Section 133(6) of the Income-tax Act, 1961. In the absence of adverse material linking the assessee to accommodation entries, the transaction could not be disbelieved on presumption and surmises.

Conclusion: The addition treating the long-term capital gain as unexplained cash credit was unsustainable and was directed to be deleted, in favour of the assessee.

Issues: (i) Whether profits derived by the windmill unit from electricity transferred for captive consumption qualify for deduction, and the applicable rate for computing such profits; (ii) Whether expenditure payments could be disallowed for alleged non-deduction of tax at source.

Issue (i): Whether profits derived by the windmill unit from electricity transferred for captive consumption qualify for deduction, and the applicable rate for computing such profits.

Analysis: Binding precedent recognizes deduction on profits arising from captive transfer of electricity. The appropriate value for computing eligible profits is the rate at which the Electricity Board supplies electricity to consumers, rather than the lower rate at which a generating company supplies electricity to the Board. The earlier Tribunal decision relied upon by the departmental authorities had also been reversed.

Conclusion: Profits from captive consumption of wind-generated electricity qualify for deduction under Section 80IA, computed using the consumer supply rate; decided in favour of the assessee.

Issue (ii): Whether expenditure payments could be disallowed for alleged non-deduction of tax at source.

Analysis: The inability to produce 134 recipients more than two years after the payments did not justify treating the payments as unexplained. The increase in payments over prior years was not sufficient to support disallowance, and several individual payments were below the threshold requiring tax deduction at source.

Conclusion: The disallowance of expenditure for alleged non-deduction of tax at source is unsustainable and is deleted; decided in favour of the assessee.

Final Conclusion: The assessee is entitled to the claimed deduction on captive power profits and to deletion of the expenditure disallowance.

Issues: (i) Whether penalty for concealment or furnishing inaccurate particulars could be sustained where the additional income offered during survey was included in the returned income and no assessment variation was made; (ii) Whether the enhanced tax rate under Section 115BBE could be applied for assessment year 2015-16 for computing penalty; (iii) Whether penalty proceedings were valid where the notice did not specify the applicable limb of Section 271(1)(c).

Issue (i): Whether penalty for concealment or furnishing inaccurate particulars could be sustained where the additional income offered during survey was included in the returned income and no assessment variation was made.

Analysis: The additional income offered during survey formed part of the returned income, and the assessment accepted that return without variation. There was consequently no concealment or furnishing of inaccurate particulars with reference to the return of income.

Conclusion: The penalty was unsustainable on the charge of concealment or furnishing inaccurate particulars, in favour of the assessee.

Issue (ii): Whether the enhanced tax rate under Section 115BBE could be applied for assessment year 2015-16 for computing penalty.

Analysis: The enhanced rate under Section 115BBE was applicable prospectively from assessment year 2018-19 and could not govern assessment year 2015-16.

Conclusion: Computation of penalty by applying the enhanced rate under Section 115BBE was impermissible, in favour of the assessee.

Issue (iii): Whether penalty proceedings were valid where the notice did not specify the applicable limb of Section 271(1)(c).

Analysis: Although satisfaction in the assessment order referred to furnishing inaccurate particulars, the notice under Section 274 read with Section 271(1)(c) did not identify the precise limb for which penalty was proposed. The omission evidenced non-application of mind and rendered the penalty proceedings vulnerable.

Conclusion: The defective notice invalidated the penalty proceedings, in favour of the assessee.

Final Conclusion: No penalty liability survives on the facts and legal requirements applicable to the assessment year.

Ratio Decidendi: A penalty for concealment or furnishing inaccurate particulars cannot rest on income voluntarily included in the return and accepted without variation; further, a penalty notice must specify the applicable statutory charge, and a subsequently effective enhanced tax rate cannot be applied retrospectively.

Issues: (i) Whether proportionate interest expenditure could be disallowed in respect of interest-free advances; (ii) Whether an ad hoc disallowance for allegedly unverifiable cash expenses was sustainable; (iii) Whether deposits of specified bank notes during demonetisation represented unexplained income.

Issue (i): Whether proportionate interest expenditure could be disallowed in respect of interest-free advances.

Analysis: The interest-free advances were made towards security deposits and Government liabilities for obtaining contracts. The assessee possessed members' capital exceeding the amount advanced. Further, a substantial part of the amount treated as interest expenditure consisted of bank charges that could not be attributed to the advances. The factual findings regarding availability of surplus interest-free funds remained uncontroverted. The presumption of utilisation of interest-free funds for interest-free advances therefore applied.

Conclusion: The disallowance of interest expenditure was not sustainable and was rightly deleted, in favour of the assessee.

Issue (ii): Whether an ad hoc disallowance for allegedly unverifiable cash expenses was sustainable.

Analysis: The disallowance was made solely on general observations concerning low profitability, cash payments and possible revenue leakage. No specific defect was identified in any expenditure head or in the supporting evidence. An ad hoc disallowance without pinpointing a concrete deficiency was unsupported.

Conclusion: The ad hoc disallowance for unverifiable expenses was unsustainable and was rightly deleted, in favour of the assessee.

Issue (iii): Whether deposits of specified bank notes during demonetisation represented unexplained income.

Analysis: The assessee's mining, royalty and toll-plaza business regularly generated cash collections. Cash books, monthly cash-sale summaries and deposit details evidenced substantial cash receipts and deposits in both the relevant and preceding years. The deposits were supported as arising from business receipts, and the audited books maintained in the regular course had not been rejected. No cogent material displaced the accepted explanation of source.

Conclusion: The demonetisation-period cash deposits were satisfactorily explained from business receipts and could not be assessed as undisclosed income, in favour of the assessee.

Final Conclusion: The deletions of all three additions stand sustained.

Ratio Decidendi: Where an assessee establishes sufficient interest-free funds, no interest disallowance is warranted for interest-free advances; similarly, additions based on ad hoc suspicion or cash deposits cannot survive without identified defects or evidence rebutting a substantiated business source.

Issues: Whether the assessee substantiated the indexed cost of improvement claimed in computing long-term capital gains on sale of flats received under a joint development arrangement.

Analysis: The development agreement provided that construction costs were to be borne by the developer. The record, including the sale deed, showed that the flats received from the developer and sold to purchasers were described as semi-furnished. The material produced for the claimed further improvements comprised quotations and an estimate of proposed works, rather than reliable evidence of actual material purchases, labour payments, or expenditure incurred. The NALA payment claim was likewise not supported by proof of the proportionate expenditure claimed.

Conclusion: The indexed cost of improvement was not substantiated and was rightly disallowed; the issue is decided against the assessee.

Issues: Whether relief against termination of a contract and forfeiture of security deposits should be granted in writ jurisdiction despite an arbitration agreement.

Analysis: The dispute arose from a contractual arrangement containing an arbitration agreement. The petitioner was permitted to pursue commercial remedies regarding the disputed termination and forfeiture, while being allowed to seek release of the admitted amount without prejudice to those remedies.

Conclusion: The petitioner may obtain disbursement of the admitted amount and pursue the available commercial remedy for the remaining contractual dispute.

Issues: (i) Whether plastic twine (sutli) manufactured from polypropylene or polyethylene granules is classifiable under Heading 5607 as twine, cordage, ropes or cables, or under Chapter 39 as an article of plastics; (ii) Whether the product is classifiable under sub-heading 39269099 and liable to GST at 18%.

Issue (i): Whether plastic twine (sutli) manufactured from polypropylene or polyethylene granules is classifiable under Heading 5607 as twine, cordage, ropes or cables, or under Chapter 39 as an article of plastics.

Analysis: Chapter 39 excludes goods of Section XI only where they are textile materials. Although the product is extruded, slit, oriented, twisted and wound, its raw materials are polypropylene or polyethylene granules, which are plastics. The manufacture into twine does not establish that the resultant product is textile material. The product is therefore not covered by Heading 5607, which concerns textile twine, cordage, ropes and cables. Heading 3923 is also inapplicable because plastic twine is neither a container nor another article for conveyance or packing of goods of the kind specified thereunder.

Conclusion: Plastic twine is not classifiable under Heading 5607 or Heading 3923; it is an article of plastics falling under Chapter 39, against the assessee.

Issue (ii): Whether the product is classifiable under sub-heading 39269099 and liable to GST at 18%.

Analysis: No specific heading from 3901 to 3925 covers plastic twine. Heading 3926 is the residuary heading for articles of plastics not elsewhere specified or included. As plastic twine has no more specific entry under that chapter, it falls under sub-heading 39269099. Entry No. 127 of Schedule II to Notification No. 09/2025-Central Tax (Rate) covers Heading 3926 and prescribes central tax at 9%, corresponding to aggregate GST at 18%.

Conclusion: Plastic twine is classifiable under sub-heading 39269099 and is liable to GST at 18% (9% CGST and 9% SGST), against the assessee.

Final Conclusion: The applicant's proposed classification under Heading 5607 and lower-rate treatment are not sustainable; the product remains taxable as an other article of plastics under Chapter 39.

Ratio Decidendi: A product made from polypropylene or polyethylene granules does not become textile material merely because extrusion, orientation and twisting convert it into twine; where no specific plastic heading applies, it is classifiable under the residuary heading for other articles of plastics.

Issues: Whether hotel-booking costs recovered from end customers qualify for exclusion from the value of supply as pure-agent reimbursement under Rule 33 of the Central Goods and Services Tax Rules, 2017.

Analysis: Rule 33 permits exclusion only where every prescribed condition is fulfilled, including a contractual authorisation from the recipient to incur the expenditure as pure agent, absence of title in the procured service, non-use of that service for the supplier's own interest, and recovery of actual expenditure separately from the supplier's own consideration. No agreement with the end customer authorising procurement of the third-party booking-agent service was produced. The third-party agent's invoice was issued in the applicant's name, making the applicant the recipient of that service and conferring title to the procured service. The service was also used for the applicant's own hotel-booking supply; further, the recovered amount included the third-party agent's intermediary charges without prior customer authorisation.

Conclusion: The applicant does not qualify as a pure agent, and the hotel-booking reimbursement cannot be excluded from the value of supply. GST at 9% CGST and 9% SGST is payable on the entire consideration received from the end customer for reservation services under SAC 998552.

Issues: Whether revisionary jurisdiction could be exercised to set aside the assessment for a deeper enquiry into share capital received from an existing non-resident shareholder.

Analysis: Revision under Section 263 requires the assessment order to be both erroneous and prejudicial to the interests of the Revenue. The assessment record showed that the Assessing Officer had specifically sought and received details concerning the shareholder's identity, financial capacity, audited financial statements, tax returns, remittance records and contemporaneous correspondence. Similar share-capital transactions involving the same shareholder had also been accepted in earlier assessment years. Absence of a detailed discussion in the assessment order did not establish lack of inquiry; adequacy of inquiry had to be determined from the assessment record as a whole. Where inquiry was conducted and one permissible view was adopted, revision could not rest on a different view regarding the extent of inquiry. Further, a direction for fresh examination on the ground of inadequate inquiry required a clear finding, based on at least minimal independent inquiry, that the assessment order was erroneous and unsustainable in law. No such finding or inquiry established error in the acceptance of the share-capital transaction.

Conclusion: The assumption of revisionary jurisdiction was invalid, and the revision order directing re-examination of the share capital was quashed.

Issues: Whether denial of exemption for a charitable trust under Section 11 while processing a return was a permissible adjustment, and whether the claim could be rejected despite the trust's existing registration and provisional registration under the revised regime.

Analysis: Denial of the Section 11 claim was outside the scope of permissible adjustment during return processing, particularly where no opportunity was afforded before making the disallowance. The trust was registered under the earlier regime and had also received provisional registration under the revised registration regime; therefore, rejection of its exemption claim was unjustified on merits as well.

Conclusion: The disallowance of exemption under Section 11 was deleted, in favour of the assessee.

Issues: Whether the entire disputed sales of a commission agent could be assessed as unexplained income, or only the commission income embedded in the corresponding unsubstantiated purchases could be brought to tax.

Analysis: The assessee's regular books, audited accounts, quantitative stock records, sales bills, ledger accounts and bank receipts were available and had not been disbelieved. The corresponding trading activity and sales were not otherwise rejected. The addition rested substantially on investigation findings concerning a third party, without an opportunity to cross-examine material witnesses, while no finding demonstrated why the assessee's documentary evidence was unacceptable. In these circumstances, taxing the entire sales would be inconsistent with the accepted financial records; only the profit or commission element attributable to the impugned transactions was taxable.

Conclusion: Only commission income at 0.5% of the impugned purchases is taxable; the additions of the entire disputed sales are modified accordingly, in favour of the assessee.

Issues: Whether reassessment jurisdiction could be assumed where the recorded reasons proceeded on an incorrect and unverified figure of alleged escaped income despite the assessee's specific objection.

Analysis: The information underlying the reopening contained two figures, but they were incorrectly aggregated to treat Rs. 2.48 crore as escaped income. The assessee's response established that this figure did not arise from the underlying material. Although the proceedings had initially been dropped after examining that response, a notice under Section 148 was subsequently issued on the same erroneous premise. The eventual addition was only Rs. 1.07 crore, further demonstrating that the stated basis for reopening was neither verified nor connected with the amount assessed. Reassessment founded on factually incorrect material without independent verification reflects non-application of mind and invalid assumption of jurisdiction.

Conclusion: The reassessment proceedings were invalid for want of a lawful assumption of jurisdiction, in favour of the assessee.

Issues: (i) Whether interest-free or concessional advances to the specified entities attracted Section 13 and justified disallowance under Section 40A(2)(a) and denial of exemption under Sections 11 and 12; (ii) Whether donations and scholarships paid to registered charitable entities were allowable as application of charitable income.

Issue (i): Whether interest-free or concessional advances to the specified entities attracted Section 13 and justified disallowance under Section 40A(2)(a) and denial of exemption under Sections 11 and 12.

Analysis: The construction advance was given in the ordinary course under a construction contract, with no material showing that a specified person derived personal benefit or that the contract was overpriced or not at arm's length. The other recipient entities were registered charitable institutions, and no direct or indirect diversion of charitable funds for private benefit was established. Section 40A(2)(a) concerns excessive or unreasonable expenditure paid to related parties; the interest expenditure here was paid to unrelated banks, whereas the impugned adjustment concerned interest allegedly not charged on advances.

Conclusion: The advances did not establish a violation of Section 13, and disallowance under Section 40A(2)(a) and denial of exemption under Sections 11 and 12 were unsustainable, in favour of the assessee.

Issue (ii): Whether donations and scholarships paid to registered charitable entities were allowable as application of charitable income.

Analysis: Documentary material supported the recipient entities' charitable registrations and the donation payments. Scholarships constituted charitable application of income, and donations to duly registered charitable institutions engaged in charitable activities were not prohibited.

Conclusion: The donations and scholarships were allowable as charitable application of income, in favour of the assessee.

Final Conclusion: The impugned additions were deleted and the assessee became entitled to exemption under Sections 11 and 12.

Issues: Whether reassessment notice issued beyond three years for alleged escaped income exceeding Rs. 50 lakh was validly sanctioned by the competent authority.

Analysis: For reassessment initiated beyond three years from the end of the relevant assessment year, Section 151(ii) requires sanction from the higher specified authority. The alleged escaped income exceeded Rs. 50 lakh, but approval for issuance of notice under Section 148 was obtained from the Principal Commissioner of Income-tax rather than the Principal Chief Commissioner of Income-tax. The statutory precondition for assumption of reassessment jurisdiction was therefore not fulfilled.

Conclusion: The reassessment notice and consequential assessment were without jurisdiction and were quashed, in favour of the assessee.

Issues: Whether penalty for failure to obtain tax audit can be imposed where the assessment proceeds on the basis that no books of account were maintained or produced and turnover is estimated from bank deposits.

Analysis: Section 271B penalises failure to get accounts audited as required by Section 44AB, and therefore presupposes the existence of books of account capable of audit. The assessment was made by estimating turnover from bank deposits and profit thereon because no books were available. Failure to maintain books and failure to obtain audit of existing books constitute distinct defaults with separate statutory consequences. Estimated turnover exceeding the audit threshold does not itself establish a default punishable under Section 271B when the Revenue proceeds on the premise that books do not exist.

Conclusion: Penalty under Section 271B was not leviable and was directed to be deleted.

Issues: (i) Whether idle-capacity and customs-duty adjustments in the manufacturing segments required fresh transfer-pricing examination; (ii) Whether reversals of provisions, miscellaneous receipts and business-support-service income were to be treated as operating items for transfer-pricing purposes; (iii) Whether the selection of comparables, filters, marketing-support-service characterisation, and AE/non-AE segmentation required reconsideration; (iv) Whether an opening-inventory adjustment was allowable consequent to prior-year disallowance of provision for obsolescence; (v) Whether foreign-exchange loss on restatement of ECB loans used for domestic assets was allowable; (vi) Whether software licences were eligible for depreciation at 60%; (vii) Whether reimbursement of seconded-employee costs attracted disallowance for failure to withhold tax under section 195.

Issue (i): Whether idle-capacity and customs-duty adjustments in the manufacturing segments required fresh transfer-pricing examination.

Analysis: Consistent with earlier years, the claims required verification against substantiated capacity-utilisation evidence, cost-audit material, comparable-company data, contractual terms and the relevant factors affecting the assessee's operations. The customs-duty claim also required examination in light of the disparity in import intensity and the applicable coordinate-bench principle.

Conclusion: The issues were remanded to the TPO for fresh examination. This is in favour of the assessee.

Issue (ii): Whether reversals of provisions, miscellaneous receipts and business-support-service income were to be treated as operating items for transfer-pricing purposes.

Analysis: Provisions created for maintenance, repair and return obligations had been treated as operating expenses and disallowed for tax in the years of creation. Their reversal could not be treated as non-operating so as to produce a double adjustment, subject to verification of their nature and amount. Business-support-service income was non-operating under the earlier-year approach, requiring exclusion of the corresponding expenses. The same verification-based treatment applied to miscellaneous receipts.

Conclusion: The provision reversals were to receive corresponding operating treatment, subject to verification; the business-support income was non-operating with matching expenses to be excluded. The matters were remanded. This is in favour of the assessee.

Issue (iii): Whether the selection of comparables, filters, marketing-support-service characterisation, and AE/non-AE segmentation required reconsideration.

Analysis: Material issues concerning the comparability analysis, the available information, the assessee's marketing-support-service model and allocation between AE and non-AE segments had not been appropriately addressed. Since the manufacturing-segment margin was itself being redetermined, the segmentation and related transfer-pricing matters required re-examination on supporting evidence.

Conclusion: The transfer-pricing issues were restored to the TPO for fresh adjudication after opportunity to the assessee. This is in favour of the assessee.

Issue (iv): Whether an opening-inventory adjustment was allowable consequent to prior-year disallowance of provision for obsolescence.

Analysis: Where provision for obsolescence had been disallowed in an earlier year, the corresponding effect on opening inventory required verification to avoid distortion of taxable income.

Conclusion: The Assessing Officer was directed to allow the corresponding opening-inventory adjustment after verification. This is in favour of the assessee.

Issue (v): Whether foreign-exchange loss on restatement of ECB loans used for domestic assets was allowable.

Analysis: Section 43A applies to exchange differences connected with assets acquired from outside India and does not govern domestic assets acquired from ECB proceeds. Exchange loss arising from the borrowing transaction after the assets are put to use is revenue in character and deductible under section 37(1), subject to verification of the factual conditions. The earlier-year direction for fresh adjudication on these facts governed the issue.

Conclusion: The Revenue's challenge to deletion of the foreign-exchange-loss disallowance was dismissed. This is in favour of the assessee.

Issue (vi): Whether software licences were eligible for depreciation at 60%.

Analysis: The issue was covered by binding and coordinate-bench decisions treating software application licences as eligible for depreciation at the rate applicable to computers.

Conclusion: The Revenue's challenge to depreciation at 60% was dismissed. This is in favour of the assessee.

Issue (vii): Whether reimbursement of seconded-employee costs attracted disallowance for failure to withhold tax under section 195.

Analysis: The seconded employees worked under the assessee's control and supervision, and tax had been deducted under section 192 on their salaries. The payments to associated enterprises were reimbursements of actual salary without an income element and were not fees for technical services requiring separate withholding under section 195.

Conclusion: No disallowance under section 40(a)(i) was warranted; the Revenue's challenge was dismissed. This is in favour of the assessee.

Final Conclusion: The transfer-pricing and inventory matters require fresh verification and determination, while the relief granted on foreign-exchange loss, software depreciation and secondment reimbursements remains undisturbed.

Ratio Decidendi: Exchange loss on foreign-currency borrowings used for domestic assets, after the assets are put to use, is revenue expenditure where section 43A is inapplicable; reimbursements of seconded employees' salaries already subjected to withholding under section 192 do not separately attract withholding as fees for technical services.