Detailed concept notes on CA-Final

Paper-4 : Direct Tax Laws

Direct Tax Laws

Paper-4

Part-A : Income Tax Act, 1961

Part-B : International Taxation

Karthik Kalla
Paper-4 : Direct Tax Laws

TABLE OF CONTENTS
CH-1 : BASIC CONCEPTS......................................................................................................................................................................... 2
Tax ....................................................................................................................................................................................................................... 2
Powers to levy tax ........................................................................................................................................................................................... 2
Taxation in India ............................................................................................................................................................................................... 2
Direct Tax Laws ........................................................................................................................................................................................................ 2
Indirect Tax Laws ............................................................................................................................................................................................. 2
Income Tax Law ................................................................................................................................................................................................ 2
Income Tax Act, 1961 ................................................................................................................................................................................................ 2
Income Tax Rules, 1962 .......................................................................................................................................................................................... 3
Notification ................................................................................................................................................................................................................. 3
Circulars ..................................................................................................................................................................................................................... 3
Judicial Decisions .................................................................................................................................................................................................... 3
Finance Act................................................................................................................................................................................................................. 3
Section-1 : Title, Extent and Commencement of the Act ..................................................................................................................... 3
Section-2 : Definitions .................................................................................................................................................................................... 3
Sec. 2[7] : Assessee................................................................................................................................................................................................. 3
Sec. 2[8] : Assessment ........................................................................................................................................................................................... 3
Sec. 2[9] : Assessment year ................................................................................................................................................................................. 3
Sec. 2[31] : Person .................................................................................................................................................................................................... 4
Section-3 : Previous year ..............................................................................................................................................................................4
Exemption : Income of previous year assessed in previous year itself ................................................................................................ 4
Section-4 : Computation of Total Income .................................................................................................................................................4
Tax on Total income ........................................................................................................................................................................................5
Old Tax regime .......................................................................................................................................................................................................... 5
New tax regime ........................................................................................................................................................................................................ 5
Tax rates : Old Tax regime ............................................................................................................................................................................5
Tax on Casual income ............................................................................................................................................................................................. 5
Tax on special income ............................................................................................................................................................................................ 5
Tax on normal income - Company ..................................................................................................................................................................... 6
Tax on normal income - Co-operative society ............................................................................................................................................... 6
Tax on normal income - Individual, HUF, AOP, BOI, AJP ............................................................................................................................ 6
Surcharge : Old Tax regime .......................................................................................................................................................................... 6
Surcharge rates - Company ................................................................................................................................................................................. 6
Surcharge rates - Co-operative society .......................................................................................................................................................... 6
Surcharge rates - Firm [incl. LLP] [or] Local authority .............................................................................................................................. 6
Surcharge rates - Individual, HUF, AOP, BOI, AJP ........................................................................................................................................ 6
Marginal relief................................................................................................................................................................................................... 7
Section-87A : Rebate ...................................................................................................................................................................................... 7
Old Tax regime .......................................................................................................................................................................................................... 7
New Tax regime : U/Sec. 115BAC......................................................................................................................................................................... 7
Important notes ................................................................................................................................................................................................ 7
Note-I : Availing unutilized Basic Exemption Limit ...................................................................................................................................... 7
Note-II : Restriction of deduction U/Chapter VI-A ........................................................................................................................................ 7
Note-III : Partial Integration ................................................................................................................................................................................. 8
Note-IV : Exemption vs. Deduction..................................................................................................................................................................... 8
Note-V : Health & Education Cess ...................................................................................................................................................................... 8
Note-VI : Concept of income under Income Tax Act, 1961 ........................................................................................................................... 8
Note-VII : Diversion of income vs Application of income ........................................................................................................................... 8
Note-VIII : Maximum Marginal Rate of tax [MMR] ......................................................................................................................................... 8
Note-IX : Average Rate of tax .............................................................................................................................................................................. 8
Note-X : Undisclosed sources of income ......................................................................................................................................................... 8
Case Laws .......................................................................................................................................................................................................... 9
CIT vs Saurashtra Cement Ltd. [2010] 325 ITR 422 [SC] .............................................................................................................................. 9
Honda Siel Cars India Ltd vs. CIT [2017] 395 ITR 713 [SC] ............................................................................................................................ 9
Mahle Anand Filter Systems Pvt. Ltd. v. ACIT [2023] 456 ITR 29 [SC] ..................................................................................................... 9

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CH-1 : Basic Concepts

Tax
↔ A compulsory payment made by a person under a law
↔ Payment made to government
↠ Government has the authority to levy tax
↔ Purpose to levy tax
↠ Fund various public expenditures
↠ Fulfill developmental needs like infrastructure, education, military etc.,

Powers to levy tax

↔ Government has authority to levy tax given under the Article 265 of The Constitution of India
↔ Article 265 : No tax to levied without authority of law
↔ Authority to make laws : VIIth Schedule of Article 246
↠ List-I : Union list : Central Government has authority to make laws
→ Total entries : 97 entries
↠ List-II : State list : State Government has authority to make laws
→ Total entries : 66 entries
↠ List-III : Concurrent list : Both Central & State Government has authority to make laws
→ Total entries :
↔ Power to levy tax on income
↠ Entry No. 82 of List-I : Tax on income other than agricultural income
↠ Entry No. 46 of List-II : Tax on agricultural income

Taxation in India
↔ Broadly classified into :-
↠ Direct Tax Laws
↠ Indirect Tax Laws

Direct Tax Laws

↔ Imposed directly on the income of the taxpayer
↔ Paid to government directly by the person on whom tax burden is imposed
↠ Burden of tax cannot be shifted to any other person by taxpayer
↔ Progressive in nature
↠ More income - More tax
↔ Ex. : Income tax, Wealth tax etc.,

Indirect Tax Laws

↔ Imposed directly on goods & services
↔ Incidence of tax shifted from supplier to end consumer
↠ Burden of tax shall be borne by the ultimate consumer
→ i.e., person who consumes the goods [or] services
↔ Regressive in nature
↠ Equal impact of tax irrespective of income
↔ Ex. : GST, Customs etc.,

Income Tax Law

↔ Components of Income Tax Law
↠ Income tax Act, 1961
↠ Income tax rules, 1962
↠ Notifications & Circulars
↠ Judicial decisions
↠ Finance Act

Income Tax Act, 1961

↔ Income tax levy shall be governed by the Income Tax Act, 1961
↔ Undergoes changes every year by the Annual Finance act passed by parliament
↔ Contains sections

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Income Tax Rules, 1962

↔ Notifies the procedures, rates, forms etc., that shall be applied in implementation of the Income Tax Act,1961

Notification
↔ Enables the government to
↠ Give effect to provisions of the act during the year
→ Unless waiting for them to be introduced till the next budget
↔ Binds both assessee & department i.e., officers of the department

Circulars
↔ Clarifies the ambiguity between the officers of the income tax department in interpretation of the act
↔ Binds only on the department i.e., officers of the department
↠ Assessee may make advantage of the circulars

Judicial Decisions
↔ Decision given by court on any issue during the implementation of the law
↔ Supreme court being apex court no decision given shall be overridden

Finance Act
↔ Changes in Income Tax Act shall be made by passing finance act
↠ Finance Act : Finance bill [+] passed in both houses of parliament [+] Assent of president
↔ Generally, finance act shall be introduced in
↠ Non-Election year : February
↠ Election year
→ Pre-election budget : February [Not detailed]
→ Post election budget : July [Detailed]
↔ First schedule of Finance Act contains four parts that specify the rates of tax
↠ Part-I : Rates of tax applicable to current assessment year
↠ Part-II : Rates of tax deductible at source for current financial year
↠ Part-III : Rates for calculating income tax for deducting tax & computation of advance tax for CFY
↠ Part-IV : Rules for computing net agricultural income

Section-1 : Title, Extent and Commencement of the Act

↔ Title : Income Tax Act, 1961
↔ Extent : Extends to whole of India, including Jammu & Kashmir [Article 370]
↔ Commencement : Commences from 01-04-1962

Section-2 : Definitions
Sec. 2[7] : Assessee
↔ Any person by whom any tax [or] any other sum of money is payable under this act
↔ Includes
↠ Any proceeding under this act which has been taken for the
→ Assessment of income
→ Determination of the loss
→ Determination of the refund in respect of assessee
⇀ Includes of any other person in respect of which he is assessable i.e., representative
↠ Deemed assessee
↠ Assessee in default

Sec. 2[8] : Assessment

↔ Procedure by which the income of an assessee is determined by the assessing officer.
↔ Includes reassessment

Sec. 2[9] : Assessment year

↔ Year in which the income in the previous year is taxable
↠ A period of 12 months commencing on 1st April every year

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Sec. 2[31] : Person

↔ Includes
↠ Individual, HUF, Association of Person [AOP] [or] Body of Individuals [BOI]
↠ Company
↠ Firm including LLP, Local Authority, Artificial judicial person, trust etc.,

Section-3 : Previous year

↔ Year in which the income is earned
↔ Period of previous year
↠ Generally : Period of 12 months commencing from 01st April
↠ Exemption : Period commencing from the date of business setup etc.,
→ Scenario : Commencement of business, new income being part of assessee.

Exemption : Income of previous year assessed in previous year itself

↔ Exemption situations covered
↠ U/Sec. 172 : Shipping business of non-resident
↠ U/Sec. 174 : Leaving India for permanent purpose
↠ U/Sec. 17A : AOP [or] BOI formed for shorter duration
↠ U/Sec. 175 : Transfer of properties to avoid tax
↠ U/Sec. 176 : Discontinued operations
⇀ At the discretion of AO whether to tax in PY [or] AY

Section-4 : Computation of Total Income

Particulars Section Amount [Rs.]
Income from head Salary Sec. 15 – 17 xxx
Income from head House property Sec. 22 – 27 xxx
Income from head Profit & Gains from business [or] profession Sec. 28 – 44DB xxx
Income from head Capital Gains Sec. 45 – 55A xxx
Income from head other sources Sec. 56 – 59 xxx
Adjustments :
• Clubbing of income Sec. 60 – 69D xxx
• Set-off & carry forward of losses Sec. 70 – 80 xxx
Gross Total Income [GTI] XXX
Less :
• Chapter VI-A deduction Sec. 80C – 80U [xxx]
• SEZ deduction Sec. 10AA [xxx]
Net Total Income [NTI] rounded off U/Sec. 288A XXX
↠ Sec. 288A : Net total income [or] Net taxable income shall be rounded off to nearest multiple of Rs.10
↳ Amount up-to Rs. 4 : Downward rounding
↳ Amount ≥ Rs. 5 : Upward rounding
↠ Taxability of incomes under various head
→ Salary : Income from employer & employee relation
→ House Property : Income from building/land + Ownership + not used by assessee business
→ PGBP : Income from business, profession including vocation
→ Capital Gains : Profit arising out of sale of assets
→ Other sources : Incomes other than covered under any of above four heads
↠ Clubbing of income : Adding back income transferred to another purpose in order to avoid tax
↠ Set-off & C/f of loss : Previous year losses to be adjusted with current year income
↠ Chapter VI-A Deduction
→ Expense based
⇀ Invest : U/Sec. 80C, 80CCC, 80CCD, 80CCE, 80CCH
⇀ Medical : U/Sec. 80D, 80DD, 80DDB, 80U
⇀ Interest : U/Sec. 80E, 80EE, 80EEA, 80EEB
⇀ Donation : U/Sec. 80G, 80GGA, 80GGB, 80GGC
⇀ Other : U/Sec. 80GG, 80JJAA
→ Income based
⇀ Royalty : U/Sec. 80QQB, 80RRB
⇀ Interest : U/Sec. 80TTA, 80TTB
⇀ Industry : U/Sec. 80IA, 80IAB, 80IAC, 80IB, 80IC, 80ID, 80IE
⇀ Others : 80LA, 80M, 80
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Tax on Total income

↔ Tax on total income can be computed under
↠ Old tax regime
↠ New tax regime

Old Tax regime

↔ Old tax regime voluntary regime
↠ Assessee may opt if not willing to be taxed under new regime

New tax regime

↔ Default tax regime for :
↠ Individual
↠ HUF
↠ AOP [other than Co-operative society]
↠ BOI
↠ AJP
↔ If not willing to be taxed under new regime, can opt to be taxed under old regime
↠ Assessee with income chargeable under head PGBP [+] opted old regime
→ Can revoke the option only once [opted old regime & if quitted cannot re-opt for old regime]
⇀ Later will be chargeable under new regime
↠ Assessee not having income chargeable under PGBP
→ Option to be taxed under new regime [or] old regime may be exercised in each year
↔ New tax regime for
↠ Companies
→ U/Sec. 115BA
→ U/Sec. 115BAA
→ U/Sec. 115BAB
↠ Individual, HUF, AOP [other than Co-operative society], BOI, AJP
→ U/Sec. 115BAC
↠ Co-Operative society
→ U/Sec. 115BAD
→ U/Sec. 115BAE

Tax rates : Old Tax regime

↔ Total income classified as
↠ Casual income
↠ Special income
↠ Normal income [i.e., Balancing figure]

Tax on Casual income

↔ Income by way of crossword, lottery, betting, gambling, horse races etc., [U/Sec. 115BB]
↔ Tax rate
↠ Flat rate @ 30%
↔ No deduction of expenses

Tax on special income

↔ Income by way of
↠ U/Sec. 111A - Short-term capital gain : @ 15%
↠ U/Sec. 112A - Long-term capital gain : @ 10% in excess of Rs. 1,00,000
↠ U/Sec. 112 - Other Long-term capital gain : @ 20%
↔ Taxability conditions
↠ U/Sec. 111A - Short-term capital gain
→ Transfer of Eq. share, Units of Eq. oriented MF, Units of business trust [+] STT paid
→ Period of holding shall be short term
↠ U/Sec. 112A - Long-term capital gain
→ Transfer of Eq. share, Units of Eq. oriented MF, Units of business trust [+] STT paid
→ Period of holding shall be long term
↠ U/Sec. 112 - other Long-term capital gain
→ Not covered under 112A [i.e., LTCG on assets other than covered U/Sec. 112A [or] STT not paid]

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Tax on normal income - Company

↔ Taxable as per applicable flat rates
↔ Tax rates
↠ Domestic company : @ 30%
→ T/o in P.Y. 2021-22 is up-to Rs. 400 crores : @ 25%
↠ Foreign company : @ 40%
↠ Firm [or] Local authority : @ 30%

Tax on normal income - Co-operative society

↔ Taxable under slab rates
↔ Tax slab rates : Total income
↠ Up-to Rs. 10,000 : @ 10%
↠ > Rs 10,000 & up-to Rs.20,000 : @ 20%
↠ > Rs.20,0000 : @ 30%

Tax on normal income - Individual, HUF, AOP, BOI, AJP

↔ Taxable under slab rates
↔ Tax slab rates : Total income
↠ Up-to Basic exemption limit [BEL] : @ Nil i.e., 0%
↠ > BEL & up-to Rs. 5,00,000 : @ 5%
↠ > Rs.5,00,0000 & up-to Rs.10,00,000 : @ 20%
↠ > Rs.10,00,000 : @ 30%
↔ Basic exemption limit
↠ Individual - Age up-to 60yrs, HUF, AOP, BOI, AJP : Rs.2,50,000
↠ Individual - Age > 60yrs & up-to 80yrs : Rs.3,00,000 [Senior Citizen + Resident]
↠ Individual - Age > 80yrs : Rs.5,00,000 [Super Senior Citizen + Resident]

Surcharge : Old Tax regime

↔ Tax on tax levied as a percentage of gross tax payable
↔ Applicable if Net taxable income exceeds specified limits

Surcharge rates - Company

↔ Domestic company : Total income
↠ > Rs.1 Crore & up-to Rs.10 Crore : @ 7%
↠ > Rs.10 Crore : @ 12%
↔ Foreign company : Total income
↠ > Rs.1 Crore & up-to Rs.10 Crore : @ 2%
↠ > Rs.10 Crore : @ 5%

Surcharge rates - Co-operative society

↔ Total income
↠ > Rs.1 Crore & up-to Rs.10 Crore : @ 7%
↠ > Rs.10 Crore : @ 12%

Surcharge rates - Firm [incl. LLP] [or] Local authority

↔ Total income : > Rs.1 Crore : @ 12%

Surcharge rates - Individual, HUF, AOP, BOI, AJP

↔ Total income
↠ > Rs.50,00,000 & up-to Rs.1 Crore : @ 10%
↠ > Rs.1Crore & up-to Rs.2 Crore : @ 15%
↠ > Rs.2 Crore & up-to Rs.5Crore : @ 25%
↠ > Rs.5 Crore : @ 37%
↔ Relief : Total income > Rs.2 Crores contains dividend, U/Sec. 112, 112A & 111A
↠ Special income i.e., dividend [+] U/Sec. 112, 112A & 111A : @ 15% [always]
↠ Balance income
→ Up-to Rs.2 Crore : @ 15%
→ > Rs.2 Crore & up-to Rs.5 Crore : @ 25%
→ > Rs.5 Crore : @ 37%

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Marginal relief
↔ Total income slightly higher than surcharge limit
↠ Increase in tax liability > increase in total income
↔ Computation of marginal relief
↠ Step-I : Tax as per normal provisions [including surcharge & excluding Cess.]
↠ Step-II : Tax up-to surcharge limit [+] Income exceeding surcharge limit
↠ Marginal relief
→ Applicable : Step-I > Step-II
→ Amount : Step-I [-] Step-II
↔ Tax payable
Particulars Amount [Rs.]
Tax as per normal provisions xxx
Less : Marginal relief [xxx]
Gross Tax Payable XXX
Add : Health & Education Cess @ 4% xxx
Net Tax Payable XXX

Section-87A : Rebate
↔ Provides rebate from the tax payable by an assessee
↠ Rebate reduced before Cess.
↠ Eligible assessee : Resident Individual
↔ Restriction : No rebate on income taxable U/Sec. 112A

Old Tax regime

↔ Condition - Total income : Does not exceed Rs.5,00,000
↔ Amount of rebate : Lower of
→ Actual tax payable on total income for A.Y.
→ Rs.12,500

New Tax regime : U/Sec. 115BAC

↔ Scenario-I - Total income : Does not exceed Rs.7,00,000
↠ Amount of rebate : Lower of
→ Actual tax payable on total income for A.Y.
→ Rs.25,000
↔ Scenario-II - Total income : Exceeds Rs.7,00,000
↠ Condition : Tax payable on total income > Total income in excess of Rs.7,00,000
↠ Computation of rebate
→ Step-I : Total income [-] Rs.7,00,000
→ Step-II : Compute tax liability on total income
→ Rebate
⇀ Applicable : Step-II > Step-I
⇀ Amount : Step-II [-] Step-I

Important notes
Note-I : Availing unutilized Basic Exemption Limit
↔ Applicable : Normal income < Basic Exemption limit
↔ Benefit : Normal income falling short of BEL shall be adjusted against special income
↔ Order of utilization : Set-off against income with highest rate of tax
↠ First : Against income U/Sec. 112
↠ Second : Against income U/Sec. 111A
↠ Last : Against income U/Sec. 112A

Note-II : Restriction of deduction U/Chapter VI-A

↔ Maximum amount of deduction under Chapter VI-A shall not exceed normal income
↔ i.e., Deduction U/Sec. 80C to 80U available only on normal income & not on special [or] casual income

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Note-III : Partial Integration

↔ Partial integration : Taxing agricultural income, where assessee has both Non-agricultural & agricultural income
↔ Applicable assessee : Individual, HUF, AOP, BOI & AJP
↔ Conditions
↠ Agricultural income : > Rs.5,000
↠ Other income : > Basic exemption limit
↔ Computation of Tax payable
↠ Step-I : Compute tax on total income i.e., Tax on Other income + Agricultural income
↠ Step-II : Compute tax on [Agricultural income + Basic Exemption Limit]
↠ Tax payable : Step-I [-] Step-II

Note-IV : Exemption vs. Deduction

↔ Exemption will not be part of gross total income
↔ Deduction will be part of gross total income and will be reduced from such gross total income ?

Note-V : Health & Education Cess

↔ Health & Education Cess levied on all assessee
↔ Levied to fulfill the commitment of government to provide & finance quality health & education
↔ Health & Education Cess : @ 4%
↠ Health Cess : @ 1%
↠ Primary education Cess : @ 2%
↠ Secondary education Cess : @ 1%

Note-VI : Concept of income under Income Tax Act, 1961

↔ Casual incomes i.e., incomes which do not raise regularly are treated as income
↔ Capital receipts other than Capital gains shall not deemed to be income
↔ Income means net income
↠ i.e., Gross income - Expenditure incurred in connection with earning such receipts

Note-VII : Diversion of income vs Application of income

↔ Diversion of income : Diverting of income before earned by assessee - Not chargeable to tax in hands of assessee
↔ Application of income : Spending of income after earned by assessee - chargeable to tax in hands of assessee

Note-VIII : Maximum Marginal Rate of tax [MMR]

↔ U/Sec. 2[29C] : Maximum Marginal Rate of tax means rate of tax applicable in relation to the highest slab of income
↔ Applicable in case of Individual, AOP, BOI
↔ Maximum Marginal Rate of Tax for A.Y.2024-25 : 42.744%

Note-IX : Average Rate of tax

↔ U/Sec. 2[10] : Average rate of tax means the rate of tax arrived by dividing the amount of tax on total income by such total income
↔ Average rate of tax : [Tax on total income / Total income] x 100

Note-X : Undisclosed sources of income

↔ Tax on Undisclosed source of income : @ 60%
↠ Effective rate of tax : @ 78% [60% + 25% + 4%]
↔ Restriction :
↠ No benefit of basic exemption limit shall apply in computing such deemed income
↠ No set-off of any loss shall be allowed against such undisclosed source of income.
↔ U/Sec. 68 : Cash Credits
↠ Sum found credited in the books of assessee & assessee offers no explanation [or] unsatisfactory explanation
→ Such sum deemed to be income of the assessee of the previous year
↠ Sum found credited if recorded as loan [or] borrowing : Explanation by assessee shall not be satisfactory unless
→ Person on whose name credited provide explanation of nature & source of such sum
⇀ And such explanation shall be satisfactory to Assessing officer
⇀ These conditions shall not apply if person in whose name credited is venture cap fund [or] venture cap Co
↠ Sum found credited if provided explanation as share capital etc., : Explanation by assessee shall not be satisfactory unless :
→ Person on whose name credited is resident, offers explanation of nature & source of such sum
⇀ And such explanation shall be satisfactory to Assessing officer
⇀ These conditions shall not apply if person in whose name credited is venture cap fund [or] venture cap Co

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↔ U/Sec. 69 : Unexplained investments

↠ Investments made by assessee that are not recorded in books of accounts
↠ Explanation of nature & source of investments not offered [or] not satisfactory in opinion of AO
→ Deemed to be income of the assessee
↔ U/Sec. 69A : Unexplained money
↠ Assessee found to be the owner of any money, bullion etc., and the same not recorded in books of account
→ Possession is not enough, ownership shall be important
↠ Explanation of nature & source of investments not offered [or] not satisfactory in opinion of AO
→ Deemed to be income of the assessee
↔ U/Sec. 69B : Amount of investments etc., not fully disclosed in books of account
↠ Assessee found to be the owner of any money, bullion etc., and the same not fully recorded in books of account
→ i.e., Amount spent on making such investments etc., exceeds the amount recorded in books of assessee
↠ Explanation of nature & source of investments not offered [or] not satisfactory in opinion of AO
→ Such excess amount deemed to be income of the assessee
↔ U/Sec. 69C : Unexplained expenditure
↠ Assessee incurred expenditure & no explanation for such has been offered [or] explanation not satisfactory
→ Such amount shall not be allowed as deduction under any head of income
↔ U/Sec. 69D : Amount borrowed [or] repaid on hundi
↠ Situations where deemed to be income of the assessee
→ Amount borrowed on a hundi
→ Amount due is repaid other than through account-payee cheque
↠ Amount deemed to be income at the time of borrowing shall not be liable to be assessed at the time of repayment
↠ Amount repaid shall include interest paid on the amount borrowed

Case Laws
CIT vs Saurashtra Cement Ltd. [2010] 325 ITR 422 [SC]
↔ Issue : Nature of receipt i.e., Capital receipt [or] Revenue receipt
↠ Scenario : Liquidated damages received from supplier for failure to supply machinery within stipulated time
↔ Analysis : Damages directly & intimately linked with procurement of capital asset
↳ Not a receipt in the course of profit earning process
↔ Decision : Amount received by assessee towards compensation for sterilization of the profit earning source
↳ Not in ordinary course of business
↳ Deemed to be capital receipt in hands of assessee

Honda Siel Cars India Ltd vs. CIT [2017] 395 ITR 713 [SC]
↔ Issue : Nature of receipt i.e., Capital receipt [or] Revenue receipt
↠ Scenario : Technical fee paid under a technical collaboration agreement for setting up a joint venture company in India
upon termination of the agreement, the joint venture would come to an end
↔ Analysis : The very purpose of the technical collaboration agreement, in this case, was to set up the Joint Venture.
↳ The collaboration included not only transfer of technical information, but, complete assistance,
actual, factual and on the spot, for establishment of plant, machinery, etc. so as to set up a
manufacturing unit.
↳ Upon termination of agreement, the joint venture itself would come to an end
↔ Decision : Technical fee is capital in nature
↳ Since upon termination of agreement, joint venture itself would come to an end

Mahle Anand Filter Systems Pvt. Ltd. v. ACIT [2023] 456 ITR 29 [SC]
↔ Issue : Nature of receipt i.e., Revenue expenditure [or] Capital expenditure
↠ Scenario : Foregoing of security deposit to settle a dispute
↳ Assessee sought to vacate certain leased premises, disputes arose
↳ To the end of disputes, assessee agreed not to claim security deposit of Rs.5.8 Crores
↔ Decision : Foregoing of security deposit to settle a dispute is in capital nature
↳ Not to be treated as revenue expenditure merely because paid in course of dispute

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