Section 28(iv)

Section 28(iv) — the law in short

What the courts have decided on section 28(iv), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Additional Commissioner of Income Tax v Bharat V. Patel Supreme CourtHelps taxpayerSuperseded by amendment
  The Assessing Officer wants to tax what my client received on redemption of stock appreciation rights granted by the foreign parent as a perquisite. Is there Supreme Court authority on this?
  There is, but read the year carefully. For a redemption before 1 April 2000 the Supreme Court held the amount was not taxable: it fell within clause (iiia) of s.17(2), which was inserted by the Finance Act 1999 with effect from 1 April 2000 and was not retrospective, and it could not be forced into s.17(2)(iii) or s.28(iv). The Court held that a receipt must be made taxable before it can be treated as income.
• CIT v Mahindra and Mahindra Ltd Supreme CourtHelps taxpayer
  The lender wrote off the principal of a loan I used to buy machinery. Is that taxable?
  No. Section 28(iv) reaches only a benefit in a form other than money, and a waiver puts cash in the debtor's hands. Section 41(1) needs an earlier allowance or deduction in respect of a trading liability; here only depreciation on the assets had been claimed, never a deduction for the loan.
• CIT v Excel Industries Ltd Supreme CourtHelps taxpayer
  The AO has taxed my advance licence and DEPB benefits in the year I exported. Is that the right year?
  No. The benefit accrues only when the imports are actually made, because until then the customs authorities are under no corresponding obligation to give anything up. Income tax is a levy on real income, and until the import happens the entitlement is at best a hypothetical income that may or may not materialise. The Court also declined to let the department reopen a position it had accepted for earlier years without any change in facts or law.
• CIT v Vardhman Overseas Ltd High CourtHelps taxpayerNo later treatment found
  Old sundry creditors are still in my balance sheet. Can the AO tax them as ceased liabilities?
  No. Section 41(1) needs the assessee to obtain a benefit by remission or cessation, and mere non-payment for several years is neither. Carrying the balance in the audited accounts acknowledges the debt under s.18 of the Limitation Act, so the liability remains enforceable.
• Standard Chartered Bank v ACIT (Mumbai Tribunal, 2026) ITATCuts both waysNo later treatment found
  The officer has treated expatriate salaries paid by our London head office as head office expenditure and capped them under s.44C. Is that correct, and does the treaty's non-discrimination article get me out of s.44C altogether?
  On the first question, no. Section 44C restricts only executive and general administrative expenditure incurred outside India in connection with the management of the non-resident's affairs; salary of expatriate employees deputed to and working exclusively for the India branch is not head office expenditure merely because the head office paid it first. On the second, the Tribunal declined to hold that Article 26(2) of the India-UK treaty knocks out s.44C in every case — that has to be decided on the nature of the expenditure and the facts, read with Article 7(4).
• DCIT v AMD India Private Limited ITATHelps taxpayerNo later treatment found
  My associated enterprise sends me equipment free of cost for testing and I return or destroy it. Is that a benefit I have to bring to tax?
  No, on these facts. The Tribunal deleted an addition of Rs.7,73,50,917 made under s.28(iv), holding that where assets are received only for testing, the recipient has no ownership, the value in the invoice is stated only for customs purposes and the assets are returned or destroyed, no specific benefit arises from their use. The Assessing Officer had made the addition on presumption without demonstrating what benefit was received.
• N C Shaw and Co Beverages P Ltd v ITO (TDS) ITATHelps taxpayer
  I manufacture liquor and settle volume-linked scheme discounts with my distributors by credit note. The TDS officer says those credit notes are commission under s.194H and has made me an assessee in default. Is he right?
  No, on these facts. The Kolkata Bench held that a post-sale discount in cash or in kind, given to a buyer with whom the seller deals on a principal-to-principal basis, is a normal sales discount that reduces the sale price and is not commission or brokerage within Explanation (i) to s.194H, so there was no obligation to deduct and no default under s.201(1) or interest under s.201(1A); the consequential s.271C penalty went with it. Note what this order is not: although the assessee argued s.194R and s.194Q at length, the Tribunal decided the case entirely on s.194H and its operative paragraphs say nothing about either provision.
• Samsung R&D Institute India Bangalore P Ltd v JCIT ITATHelps taxpayer
  My foreign group companies ship me handsets, network equipment and other test gear free of cost so that I can test the software I write for them, and I send it back or scrap it when the testing is done. The AO has added the value under s.28(iv) as a benefit arising from my business. Can he?
  No, on these facts. The Bangalore Bench deleted an addition of Rs 7,37,33,056 under s.28(iv) on equipment supplied free of cost by the assessee's associated enterprises for testing software the assessee had developed for them. Two things carried it: the equipment was either returned or destroyed after testing, so nothing irretrievable or of enduring nature was made available to the assessee, and the price for the software development services had already been settled under a Mutual Agreement Procedure resolution between the competent authorities of India and Korea, in which the cost of indirect benefits should have been embedded - so if there were a nexus at all it belongs in a transfer pricing adjustment and not in a second addition under s.28(iv). The same order also deleted a s.40(a)(i) disallowance of depreciation on capitalised software, following the coordinate bench in the assessee's own case. Note what the order does not do: it decides nothing under s.194R.
• CBDT Circular 12/2022 CBDT Circulars & InstructionsCuts both ways
  I'm giving dealers free samples and discounts. Do I have to deduct TDS under s.194R?
  Discounts, cash discounts and rebates allowed to a customer are outside s.194R; free samples and incentives such as sponsored trips and free tickets are not. And you cannot refuse to deduct on the ground that the benefit is not taxable in the recipient's hands — the Board's position is that tax must be deducted in all cases, whatever the nature of the benefit.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.