Arm's-length-price determination for management support services requires verification of the service agreement, actual rendition, commercial need, taxpayer benefit, costs incurred, allocation keys and benchmarking material. Rule 10AB requires examination of evidence relevant to the need, benefit and rendition tests before a transfer-pricing adjustment can be sustained. Earlier-year treatment may be followed only where the factual matrix, evidentiary record and contractual arrangements are identical, since each assessment year is independently assessable. Where the Transfer Pricing Officer has not examined complete material, the adjustment requires fresh adjudication after evidence review and an opportunity of hearing; the merits remain open.

Absence of exempt income precludes expenditure disallowance under Section 14A read with Rule 8D. Reconciliation of net salary and PF/ESI accounting can establish that welfare-fund contributions remain within the 27% ceiling under Rule 87 despite an apparent excess. Customer deductions from manpower-service bills for canteen and transportation may qualify as business expenditure under Section 37(1) where invoices substantiate that the costs were incurred in connection with the manpower-services business. These principles support deletion of the related disallowances and recomputation of taxable income.

Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 permits a respondent to support an appellate order on a ground decided adversely against it without filing a separate appeal or cross-objection, including a reassessment-validity challenge where the material facts are already on record. For an addition under Section 68 based on alleged fictitious profits from client code modifications, contract notes, broker records, bank statements and transaction details may establish the recorded nature of the profits. General investigation information and allegations concerning a trading platform do not establish unexplained income without independent evidence linking the assessee's transactions to undisclosed income, broker collusion, or false documentation.

For assessment year 2022-23, Explanation 4(ii) to Section 11(1) treated repayment of loans from current-year income as application of income. Qualifying restrictions introduced from 1 April 2023 applied prospectively and could not govern the earlier year. Section 263 revision was therefore unavailable where the assessment adopted this legally plausible interpretation. Limited scrutiny had specifically examined the repayment claim, obtained relevant particulars and supporting material, and accepted the explanation. The absence of detailed reasoning in the assessment order did not establish lack of enquiry; revision cannot rest solely on a view that more extensive enquiry was desirable. The original assessment consequently stood restored.

Section 90(2) allows a Mauritius-resident taxpayer to apply either the Income-tax Act or the India-Mauritius tax treaty, whichever is more beneficial; treaty provisions cannot be imposed compulsorily. Capital gains exempt under Article 13 do not enter total-income computation. Where capital losses on shares acquired before 1 April 2017 are determined or claimed under the Act, they may be set off and carried forward under the Act's computation rules. Previously accepted brought-forward losses remain available, requiring taxable income to be recomputed after allowing current-year and brought-forward long-term capital losses.

Notional rental income from unsold flats held as stock-in-trade was not assessable as income from house property where the units formed part of a real-estate project and were used as scheme offices, material stores and sample flats. Section 22 excludes property occupied for business or profession. Actual rent from let-out units had consistently been offered and accepted as business income. An ad hoc notional-rent addition under Sections 22 and 23 lacked proper enquiry, verification, supporting evidence and comparable treatment in other assessment years; therefore, the addition could not be sustained.

Section 151(ii) requires approval from the higher specified sanctioning authority where a reassessment notice is issued more than three years after the end of the relevant assessment year. Approval by a Principal Commissioner does not meet that requirement. The prescribed sanction is a jurisdictional safeguard, not an internal administrative formality. Deeming an earlier notice as issued under section 148A(b), or applying TOLA, does not remove the requirement for valid approval before the consequential section 148 notice. Defective approval is not substantial compliance and cannot be cured under sections 292B or 292BB; it invalidates the reassessment notice, proceedings and order.

One-time club house charges, non-refundable corpus fund contributions and municipal taxes paid to a builder during construction may form part of a residential property's cost of acquisition for capital-gains computation where they have a direct and proximate nexus with acquiring the property and its appurtenant rights. Cost of acquisition is not limited to the basic sale price; each payment's purpose and commercial context determine its treatment. Contemporaneous receipts, banking evidence and undisputed genuineness support inclusion. Municipal taxes collected before the occupancy certificate, without evidence of recurring post-acquisition liability, are similarly includible. Tax deduction provisions concerning property transfers do not govern this computation.

Interest on borrowed capital is not disallowable under Section 36(1)(iii) merely because an interest-free advance is made to a family member where the taxpayer's own funds exceed that advance. An established connection between borrowed funds and the non-business advance is necessary, particularly where the overdraft was obtained for business purposes in earlier years. In the absence of evidence showing such nexus or proximity, the interest disallowance was deleted.

Section 200A acquired authority to compute and demand the Section 234E late-filing fee only from 01.06.2015, and that enabling amendment operates prospectively. TDS-statement defaults relating to periods before that date cannot attract the fee merely because the statements were filed or processed after the amendment took effect. Consequently, late-filing fees imposed under Section 234E for pre-01.06.2015 periods are unsustainable and require deletion.

Negative liens over an operating subsidiary's participating interests and receivables, furnished to secure associated enterprises' loans, are compensable international transactions where they independently restrict borrowing, expansion, and use of assets as security. Separate corporate identity and the existence or invocation of a corporate guarantee do not eliminate the lien's continuing security value, including during borrower bankruptcy. Arm's-length pricing cannot be based mechanically on bank-guarantee rates or a LIBOR-based approach; it requires a fresh transfer-pricing analysis of the commercial restrictions imposed on the subsidiary's business assets.

Section 68 requires an assessee to establish the creditor's identity and creditworthiness and the genuineness of the transaction. Debits to a partner's capital account were supported by the partnership firm's confirmation, audited financial statements, bank records and evidence that they represented capital withdrawals and expenditure met from the firm's available funds, with no evidence of fund recycling. An individual lender's confirmation, income-tax return, capital position, loan confirmation and bank statements established sufficient funds and liquidity. The evidentiary burden was therefore discharged, rendering the partnership-firm addition unsustainable and supporting deletion of the addition concerning the individual lender.

Transfer-pricing adjustments cannot recharacterise commercially substantiated exclusivity payments, transition-cost reimbursements or upfront discounts as loans merely because of their unconventional form; arm's-length pricing must use a prescribed benchmarking method. Secondary adjustments are unavailable for assessment years commencing before 1 April 2016. Foreign-currency associated-enterprise loans should use a currency-specific benchmark, with LIBOR plus appropriate risk adjustment. Exempt-income disallowance requires objective satisfaction from the accounts; only income-yielding investments count, and sufficient own interest-free funds negate interest disallowance. Export-turnover exclusions cannot include costs never included in that turnover. TDS credit depends on verification of certificates and tax deposit. Education-cess deduction under section 37(1) is unavailable under the retrospective Finance Act, 2022 amendment.

Section 80JJAA deduction applies where the entity retains substantive authority over appointment, remuneration, deployment, discipline and termination of personnel; customer operational supervision does not negate employer status. A one-day delay in filing Form 10DA is condonable, while second- and third-year claims require verification. The first proviso to section 92C(4) bars Chapter VI-A deductions, including section 80JJAA, from income enhanced by an arm's length price adjustment. Transfer-pricing determinations involving KPO characterisation, functional comparables with segmental data, intra-group service charges including Salesforce allocation, and GAP/GSS programme revenue require examination of supporting material and fresh arm's length price determination.

Transfer-pricing comparables for ITES/BPO transactions must be functionally and economically comparable. A consistently accepted comparable may be retained, while entities with materially different outsourcing models, substantially greater scale or brand value, brand and goodwill ownership, unavailable segmental data, or high-end KPO and engineering-design functions should be excluded. Such differences can render an arm's length price adjustment unsustainable. Call-centre, back-office and data-processing services fall within notified computer-software-related services under Section 10A where they involve customised electronic data or similar notified services. Eligibility is reinforced where the activities remain unchanged from prior years in which the deduction was accepted.

Revisionary jurisdiction under Section 263 cannot be invoked merely because the Assessing Officer accepted an explanation for demonetisation-period cash deposits after inquiry. Where the officer considered the explanation, obtained and recorded supporting affidavit evidence, and adopted a plausible view, revision requires material showing that the assessment is both erroneous and prejudicial to Revenue interests. Revision also cannot rest on an incorrect factual premise that penalty proceedings were not initiated when they had been initiated and later dropped following cancellation of the assessment. Neither ground satisfied the statutory conditions for disturbing the assessment.

Interest on borrowed capital is deductible where strategic investments to acquire or retain control in group companies form part of the taxpayer's business and are commercially expedient. Business purpose is not negated by low operational receipts or dividend income being separately classified. Where interest-free funds exceed the relevant investments or advances, those investments may be presumed to have been funded from interest-free sources without requiring a direct fund-wise nexus. Each assessment year remains independently examinable; acceptance of similar claims in other years or for group entities does not prevent scrutiny in the relevant year.

Souharda Sahakaris registered under the Karnataka Souharda Sahakari Act, 1997 qualify as co-operative societies for income-tax purposes where they provide credit facilities exclusively to members. Dealings with members retain the character of mutuality notwithstanding the character or number of associate members permitted under the bye-laws. Profits and gains attributable to member credit facilities, including income connected with that eligible activity, qualify for deduction under section 80P(2)(a)(i). The deduction extends to the entire eligible income derived from providing such credit facilities to members.

Section 263 revision is barred where the revisionary order is passed after the two-year limitation period running from the end of the financial year in which the assessment order was made. The revision also fails where the assessment had examined software arrangements, copyright rights, treaty treatment and relevant Supreme Court precedent before accepting that software-related receipts were not royalty. As no assessment error prejudicial to Revenue was established, the revisionary order was quashed and the original assessment remained undisturbed.

Penalty immunity requires an opportunity of hearing before an application can be rejected, and the rejection must identify the statutory conditions that remain unmet. Where the penalty order does not disclose non-compliance, the immunity application requires fresh consideration, including the taxpayer's compliance with prescribed conditions and any delay in filing Form No. 68. Income disclosed only in response to reassessment notice may constitute under-reported income where no original return was filed and no explanation is provided. If immunity is unavailable, penalty must be determined through a reasoned proceeding after a further hearing.