Supreme Court
The Supreme Court has clarified that a contractual or scheme-based language in amalgamation order cannot substitute for statutory entitlement where governing taxing statute itself does not create such a right. Accordingly, the Court ruled that in the absence of statutory provision similar to Section 72A of Income Tax Act, 1961, losses suffered by amalgamating company cannot automatically be treated as losses of amalgamated company under Kerala Agricultural Income Tax Act, 1991.
A Two-Judge Bench comprising Justice Rajesh Bindal and Justice Vijay Bishnoi observed that Section 72A of the Income Tax Act, expressly provides that in case of amalgamation, the accumulated loss and unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected.
High Courts
The Bombay High Court has held that grant of affiliation by a statutory university under the Maharashtra Public Universities Act, 2016 is a statutory and regulatory function undertaken in discharge of public duties, and the affiliation fees collected for such function do not constitute “consideration” for a “supply” in the course or furtherance of “business” within the meaning of Section 7(1)(a) of the CGST Act; therefore, Section 9 is not attracted and GST cannot be levied on such affiliation fees.
The Court further held that, once Sections 7 and 9 are inapplicable, the proper officer lacks jurisdiction to issue a show cause notice under Section 74 of the CGST Act in respect of such affiliation fees, and any circular inconsistent with the substantive provisions of law cannot stand or be applied.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that Chapter X of the Maharashtra Public Universities Act, 2016 is a complete code regarding affiliation, and that the activities undertaken by the University for granting affiliation, including verification of infrastructure and other educational requirements, are within the statutory framework and not for profit or as any service provided under any business as understood in law.
Uttarakhand High Court Declares Water Tax On Electricity Generation Act, 2012 as Unconstitutional
The Nainital Bench of the Uttarakhand High Court has clarified that the Uttarakhand Water Tax on Electricity Generation Act, 2012, in pith and substance, imposes a tax on generation of electricity because the levy is attracted only when water is drawn for the purpose of generating electricity, and not upon mere drawal of water. Since taxation is a distinct legislative field and no entry in List II relied upon by the State authorizes such a tax, the State Legislature lacked competence to enact the law.
At the same time, the Court held that Article 288 of the Constitution is not an independent source of legislative competence to impose such tax, and Section 17 of the Act is also vitiated by excessive delegation because it authorizes the executive to fix tax rates without any policy guidance or statutory limits. On that basis, the Court concurred with the view that the Act is ultra vires the Constitution.
A Single Judge Bench of Justice Alok Kumar Verma observed that the true nature of the levy had to be determined by applying the doctrine of pith and substance, and that the nomenclature of the levy was not conclusive. On a reading of the Uttarakhand Water Tax on Electricity Generation Act, 2012, as a whole, the Bench found that mere drawing of water did not attract the tax; rather the taxable event arose only when water was drawn for generation of electricity. The Bench therefore accepted the conclusion that the levy, in its real character, was a tax on generation of electricity and not merely on drawing or use of water.
Bombay HC Upholds Nil TDS on Cost-to-Cost Cross-Charges to Sister Concern in Pfizer Case
The Bombay High Court has held that the cross-charge paid by the taxpayer company (respondent) to its sister concern in terms of the cost-sharing agreement on a cost-to-cost basis, did not have any income/profit component embedded with it, and the said transaction was purely in the nature of reimbursement of expenditure incurred without any markup. Hence, the Court clarified that the said payment is not liable to TDS, as mere payment of service tax does not alter the inherent nature of the transaction to make it taxable income.
The Division Bench comprising Justice M. S. Karnik and Justice S. M. Modak observed that the cross charge paid by the respondent to its sister concern, M/s. Pfizer Ltd. was pursuant to a cost-sharing arrangement and a supplementary agreement. This cost-sharing is on a cost-to-cost basis, without any component of income, and the said transaction is purely in the nature of reimbursement. Further, M/s. Pfizer Ltd. had deducted tax at source at appropriate rates on the payments made to third party vendors or employees wherever applicable and had not claimed any deduction for having incurred the expenditure in question.
The Andhra Pradesh High Court (Amaravati Bench) has clarified that an officer, appointed under the APGST Act, would be cross empowered, to exercise jurisdiction under the CGST or IGST Act, in relation to a tax payer, when such tax payer has been administratively allotted to the State and the State officer is the ‘proper officer’, assigned to discharge the said function, by the Chief Commissioner and vice versa for Central officers. A “proper officer” appointed under the APGST Act, and assigned the functions, under section 129 and/or 130, of the APGST Act, can discharge such functions, under the CGST Act also, in relation to intra state sales.
The Division Bench comprising Justice R Raghunandan Rao and Justice T.C.D. Sekhar observed that Section 129 deals with detention/seizure and release of goods and conveyances in transit, and Section 130 deals with confiscation of goods or conveyances and levy of penalty, both of which can only be exercised by a ‘proper officer’. The term ‘proper officer’ is defined in Section 2(91) of the APGST Act as the Chief Commissioner or the officer of the State tax who is assigned that function by the Chief Commissioner. Assignment of a function under the APGST Act would not empower such an officer to act under either the CGST Act or under the IGST Act.
The Delhi High Court has held that proceedings initiated against a person under the second explanation to Section 148 of the Income-tax Act, on the basis of material recovered during a search conducted at the premises of another person do not become void merely because the searched person subsequently obtains an interim order, or even if the search is later declared invalid, since the material recovered during the search can still be relied upon in law and such subsequent event does not divest the Assessing Officer of jurisdiction validly exercised on the date of initiation of proceedings.
The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar observed that although, on first impression, the matter appeared to call for consideration on equity because the searched person was not facing assessment proceedings while the petitioner had already suffered an assessment order, the writ petition lacked merit on a careful consideration of the statutory position. The Bench held that it is well settled that material seized or recovered during a search can be relied upon even if the search is later declared illegal.
The Bombay High Court has held that Notification No. 14/2022 dated July 5, 2022, which amended Rule 89(5) of the CGST Rules to remove anomaly in the refund formula for inverted duty structure, is required to be applied retrospectively to refund or rectification applications filed within the period prescribed under Section 54(1) of the CGST Act, and refund cannot be denied merely because the original applications were filed prior to July 5, 2022.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe noted that the Supreme Court in Union of India v. VKC Footsteps India Pvt Ltd. [2021(52)-GSTL-512 (SC)], had upheld the validity of Rule 89(5), but had also expressly observed that the formula produced anomalies and had urged the GST Council to reconsider it. Pursuant to this, the GST Council deliberated on the anomaly and recommended amendment of the refund formula, which led to Notification No. 14/2022 amending Rule 89(5).
The Bombay High Court has clarified that Section 80-IA(10) read with Section 10B(7) of the Income Tax Act, can be invoked only where there is a categorical finding of close connection, an arrangement between the taxpayer (appellant) and its sister concern, and that such arrangement produced more than ordinary profits. Mere existence of higher profits, common management, or subsequent amalgamation is not sufficient to infer such arrangement.
The Court held that extraordinary profits alone cannot justify restriction of Section 10B deduction, and comparison with a sister concern is not legally sustainable where the taxpayer is a 100% Export Oriented Unit (EOU) in the export market and the sister concern operates in the domestic market, unless material differences in statutory benefits and cost structures are accounted for and reasonable profit is properly ascertained. Accordingly, the ITAT’s order was quashed and the substantial question of law was decided in favour of the appellant.
The Division Bench comprising Justice M. S. Karnik and Justice S. M. Modak observed on a plain reading of Section 80-IA(10), that the provision requires findings on three elements: close connection between the parties, an arrangement between them, and a result whereby such arrangement produces more than ordinary profits.
The Madras High Court has clarified that where the taxpayer, following the mercantile system, has credited full sale consideration and claimed estimated construction expenditure representing an accrued liability incidental to its business, such deduction is allowable in view of the principle recognised by the Supreme Court’s decision in Calcutta Company Limited vs. CIT [(1959)37 ITR 1(SC)].
The High Court has held that depreciation on cinematographic films acquired under a sale and leaseback transaction cannot be disallowed merely on suspicion or on the allegation of tax saving motive, where title has passed to the taxpayer, the transaction is supported by contractual documents, and the Revenue has no material to prove that the transaction is sham or illegal. Essentially, the Court ruled that sale and lease back, being a recognised business transaction, cannot be treated as a colourable device merely because it results in tax advantage.
The Division Bench comprising Dr. Justice G. Jayachandran and Justice Shamim Ahmed noted the Revenue’s contention that the respondent had shown a “rosy picture” in its profit and loss account while offering only a small taxable income and had improperly followed receipt basis for income and accrual basis for expenditure, and also that the sale and lease back transaction concerning cinematographic films was a sham because the lease allegedly preceded the purchase.
The Bombay High Court has strongly asserted that under Rule 86A(3) of the CGST Rules, restriction on utilisation of input tax credit (ITC) in the Electronic Credit Ledger (ECL) cannot continue beyond one year from the date on which such restriction is imposed, and upon expiry of that period the blockage ceases automatically by operation of law. The Court also laid down that blocking of ITC in the ECL entails serious civil consequences and, therefore, in the absence of extraordinary reasons or exceptional circumstances, a pre-decisional hearing is required; and failure to grant such hearing renders the action vulnerable on the ground of violation of principles of natural justice.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that there was much substance in the petitioner’s contention that blocking of ITC in the ECL beyond one year is contrary to Rule 86A(3) of the CGST Rules, because the language of Rule 86A(3) itself provides that such restriction shall cease to have effect after expiry of one year from the date of imposing the restriction, thereby contemplating automatic unblocking by operation of law.
he Madras High Court has held that a taxpayer following the mercantile system cannot omit accrued interest on advances to subsidiaries merely on the plea of poor financial condition of the subsidiaries or commercial expediency, particularly where the debt continues to retain its original character and has not been written off in accordance with law.
The Court further held that, after April 1, 1989, deduction for bad debts under Section 36(1)(vii) of the Income Tax is allowable only upon actual write-off as irrecoverable in the accounts, and not on the basis of a mere provision or an inadequately supported consolidated write-off. Acceptance of such claim without examining party-wise details and proper accounting treatment is unsustainable.
The Division Bench comprising Dr Justice G. Jayachandran and Justice Shamim Ahmed observed that a taxpayer following the mercantile system is required to bring accrued income into total income, and deviation from the earlier practice of charging interest on advances to subsidiaries could not be justified merely by asserting poor financial condition of the subsidiaries or commercial expediency, particularly when the debt itself had not been written off in accordance with law.
The Delhi High Court has clarified that where the tender conditions expressly require a bidder to possess and submit a valid GST registration certificate along with the bid, such requirement constitutes an essential eligibility condition, and an Application Reference Number issued under Rule 8(5) of the CGST Rules is neither a temporary GST registration nor equivalent to a valid GST registration certificate.
The Court therefore held that a bidder’s failure to possess a valid GST registration certificate on the bid submission date renders the bid ineligible, and the subsequent grant of GST registration cannot relate back so as to cure the original defect. Judicial review will not interfere with a tendering authority’s strict enforcement of such essential conditions where the decision is lawful, non-arbitrary, and applied uniformly.
The Division Bench comprising Justice V. Kameswar Rao and Justice Manmeet Pritam Singh Arora observed that Clause 10.5.1 of the ITB and Clause 4(j) of the BEC were clear and mandatory, and that possession and submission of a valid GST registration certificate at the bid stage was an essential pre-condition to eligibility. A conjoint reading of these clauses left no ambiguity on this requirement.
The Bombay High Court has clarified that limitation to pass any order cannot be a limitation on issuance of a show cause notice, as the limitation for passing an order is not the same as issuance of a show cause notice. The Court therefore made reference to the Larger Bench to decide as to whether the provisions of sub-section (10) of Section 73/74 of the CGST Act per se prohibits the issuance of single consolidated show cause notice for multiple financial years/tax periods?
The High Court also referred the question as to whether the operation of sub-section (1) of Section 73/74 of the CGST Act read with the provisions of sub-section (3) is in any manner controlled by the provisions of sub section (10), so as to create an embargo, on the department to issue a consolidated show cause notice for different years, before the Larger Bench.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe stated that that there was a clear cleavage of judicial opinion on the issue whether a consolidated show cause notice for multiple financial years could be issued under Sections 73 and 74 of the CGST Act. On a prima facie reading of Sections 73 and 74, it observed that the provisions appeared to be a complete code in themselves and that there ought not to be any embargo on the department issuing a consolidated show cause notice covering different periods.
Buyback of Shares Not ‘Asset Purchase’; Delhi HC Rules Out Deemed Profit Under Section 56(2)(viia)
The Delhi High Court has clarified that once the shares are bought back, the purported property extinguishes. Hence, a person cannot be taxed for so-called deemed profit from the property (shares) which accrues to it consequent to destruction of the very same property.
Hence, the very hypothesis that the respondent-company (assessee) had acquired an asset at lesser rate than the fair market value has no legs to stand on, as buy-back of its own shares is antitheses to buying an asset. Accordingly, the action of the AO in treating the buy-back of shares of the company to be a transaction leading to generation of profit/deemed profit is clearly flawed and untenable in the eye of law.
The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar recorded that the company had purchased its own shares pursuant to a buyback offer made in accordance with law, at a rate fixed by the Board of Directors and duly approved by the shareholders, and that the payment was made out of free reserves and securities premium.
The Bombay High Court has clarified that the responsibility post importation of goods in India rests with the importer and the foreign exporter cannot be made liable for the violation in respect thereof. As there was no role played by such exporter, i.e., Petitioner No. 1, with regard to the alleged mis-declaration of the imported machines, therefore, the show-cause notices could not be issued to Petitioner No. 1.
The Court held that once the foreign exporters (petitioners) were held not liable for penalty under Section 112 of the Customs Act, they would also not be liable under Section 114AA, which concerns use of false and incorrect material. Since neither the exporter nor the importer had submitted false information, and the entire importation and related compliance remained the responsibility of the Indian importers, foreign exporter cannot be made liable for wrongs of importer.
The Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe observed that on the factual conspectus, liability was sought to be foisted on the petitioners merely because the importers of goods were situated in India and had allegedly mis-declared the warp knitting machines imported from Petitioner No. 1 as “fully-fashioned high-speed knitting machines” to avail exemption notifications.
The Bench found that such liability had been fastened without attributing any role to the petitioners. It held that this was not the scheme of the Customs Act, and that a foreign exporter could not be made liable for the wrongs of the importer, since the exporter’s privity in relation to the goods exported from a foreign country ended once the goods were shipped to the satisfaction of the Indian importer. Upon arrival at the Indian port, the liability in relation to the goods, including customs duty and classification issues, rested entirely on the importer.
The Orissa High Court (Cuttack Bench) has ruled that a return filed by way of self-assessment under Section 9(1) read with Section 9(2) of the Odisha Entry Tax Act, 1999 (OET Act) cannot trigger a notice for reassessment under Section 10(1) read with Rule 15B of the OET Rules unless it is accepted by the Department by a formal communication to the dealer. The Court explained that in a tax statute, the word ‘substitute’ is to be interpreted strictly as per the legislative intention and amending provisions extending the period of limitation will have prospective effect unless expressly provided or manifest from a bare reading of the provision.
The Division Bench comprising the Chief Justice Harish Tandon and Justice Murahari Sri Raman observed that the Assessing Authority is competent to initiate a proceeding for reassessment where for any reason all or any of the scheduled goods brought by a dealer has escaped assessment of tax, within a period of seven years (five years, pre-amendment) from the end of the year to which the tax period relates. As far as a return filed by way of self-assessment under Section 9(1) read with Section 9(2) of the OET Act is concerned, unless it is accepted by the Department by a formal communication to the dealer, it cannot trigger a notice for reassessment under Section 10(1) of the OET Act.
The Karnataka High Court (Dharwad Bench) has held that services rendered by pigmy agents are in the course of their employment with the Bank as pigmy agents, which is clearly exempt from the levy of GST in terms of Sl.No.1 of Schedule III of the CGST Act. The Court clarified that pigmy agents employed by the petitioner bank can never be treated as business facilitators for them to be coming under the GST. Hence, the impugned show cause notices are rendered devoid of jurisdiction and are to be obliterated.
A Single Judge Bench of Justice M. Nagaprasanna observed that the question as to the true nature of engagement of deposit collectors/pigmy agents is settled by the Apex Court in Indian Banks Association v. Workmen of Syndicate Bank, which held that the commission earned by deposit collectors partakes the character of ‘wages’ under Section 2(rr) of the Industrial Disputes Act, 1947. Such collectors were held to be workmen subject to the pervasive control and supervision of the Bank, establishing a relationship imbued with the attributes of a master-servant nexus rather than a detached contractual engagement.
The Delhi High Court has held that interest earned during the pre-commencement period on funds deposited in bank will not be taxable as “income from other sources” if the funds are not surplus but are earmarked and inextricably linked with the setting up of the business, including for meeting committed liabilities toward plant and machinery, land, technical know-how and other project requirements.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar recounted the factual position that the appellant company had been incorporated in March 1992, had entered into the technical know-how agreement in May 1992, had paid USD 50,000 along with TDS in terms of that agreement, had raised unsecured loans of Rs.72,69,500 from its directors, and had partially invested the funds into fixed deposits from which the impugned interest accrued during AYs 1993-94 and 1994-95.
The Delhi High Court has held that the bar under Section 6(2)(b) of the CGST Act applies only where two proceedings concern the same subject matter, meaning the same specific tax liability arising from the same set of facts, the same contravention, and the same assessment period. Where the proceedings relate to different financial years and distinct infractions, one under Section 73 and the other under Section 74, they are not barred as parallel proceedings.
The Division Bench comprising Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul observed that Section 6(2)(b) of the CGST Act is intended to prohibit parallel or duplicative proceedings only in respect of the same subject matter, namely where the proceedings pertain to the same specific tax liability, arise from the same set of facts, and relate to the same contravention for the same time period. The Bench observed that, to determine whether the bar applies, the two show cause notices and the tax deficiencies claimed thereunder must be examined to ascertain whether the specific tax liability and infraction sought to be assessed are identical.
Tribunals (ITAT/ CESTAT/ GSTAT/ AAR)
The Goods & Services Tax Appellate Tribunal (GSTAT), Principal Bench, New Delhi, has clarified that Section 171 of the CGST Act, 2017 applies only in cases involving a reduction in tax rate or an increase in Input Tax Credit (ITC), particularly in projects spanning pre-GST and post-GST periods. Where the entire spectrum of activities from inception to completion takes place during the post-GST period, no comparative ITC benefit arises for passing on, and no benefit of ITC would be available to the complainants as the price of the flat had been fixed after taking into account the incremental ITC that would have become available subsequent to the introduction of GST.
Justice Mayank Kumar Jain (Judicial Member) observed that the DGAP rightly concluded that the ratio of credit availed to purchase value was 12.26% in the pre-GST era, which declined to 11.02% in the post-GST period. The reduction of 1.24% implies that no benefit accrued to the Respondent, and hence the question of passing on any benefit to the recipient would not arise. The Tribunal observed that the Respondent has, therefore, not contravened the provision of Section 171 of the CGST Act read with Rule 129(6) of the CGST Rules, and the DGAP report dated Aug 21, 2025 deserves to be accepted.
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that the amount of Rs. 3.32 crores credited to the consolidated income and expenditure Account was the balance of the funds accumulated in A.Y. 2012-13 of Rs. 5.60 crores which remained unutilized up to A.Y. 2017-18 i.e. up to the expiry of 5 years from the end of the assessment year in which the funds were so accumulated. Thus, as per the provisions of Section 11(3) of the Income Tax Act, they are deemed to be the income for the year in which they are not utilized for the purposes for which it is accumulated.
The Division Bench comprising Sanjay Garg (Judicial Member) and Annapurna Gupta (Accountant Member) held that the AO was right in holding that the amount of Rs. 3.32 crores needed to be added to the income of the respondent, liable to tax in the impugned year. The order passed by CIT(A) allowing respondent’s claim to exemption Rs. 3.32 crores is set-aside, the order of the Assessing Officer is confirmed, and the appeal of the Revenue is allowed.
Notional Rent on Unsold Stock-in-Trade Not Taxable as House Property Income: Mumbai ITAT
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that the notional rent has to be determined on vacant unsold flats/shops held as stock-in-trade by the taxpayer under the head “income from house property”. The computation of such notional rent cannot be made on an ad hoc estimate of a percentage of the investment; instead, the Annual Letting Value must be determined in accordance with the Municipal Rateable Value. Further, the ITAT explained that the ad hoc disallowance of business promotion expenses is justified when the taxpayer fails to substantiate the expenditure with documentary evidence in the form of bills and vouchers.
The proviso to sub-section (1) of section 43CA of the Income Tax Act, which provides a tolerance band for variations between the stated sale consideration and the stamp duty valuation, is curative in nature and has retrospective application. Consequently, if the difference between the sale consideration and the stamp duty value falls within the permissible tolerance limit, no addition can be made under section 43CA of the Act, held the Tribunal.
The Division Bench comprising Sandeep Singh Karhail (Judicial Member) and Om Prakash Kant (Accountant Member) observed that the issue of notional rental income from the unsold units lying vacant in possession of the taxpayer/appellant as stock-in-trade is squarely covered by the decision of the Delhi High Court in Ansal Housing Finance and Leasing Company Ltd [(2013) 354 ITR 180 (Del.)]. The Tribunal noted that the decision of the Gujarat High Court in CIT vs. Neha Builders Pvt Ltd. [(2008) 296 ITR 661 (Guj.)] was rendered in a different factual matrix, wherein part of the property was given on rent and income derived thereon was computed as ‘business income’ by the taxpayer.
The Chennai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has clarified that treating every procedural lapse alike ignores the purpose of the requirement. The doctrine of substantial compliance prevents undue hardship where obligations are essentially met and any deficiency is only minor and non-essential.
The CESTAT therefore held that once the imported goods have satisfied the requirements of law, they deserve to be granted the benefit of exemption from Basic Customs Duty under Notification No. 046/2011-Cus dated June 01, 2011. Accordingly, the Tribunal allowed the benefit of exemption from Basic Customs Duty on ‘Aluminium Scrap Tread’.
The Division Bench comprising Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) found that that the dispute relates to an alleged procedural defect, relating to non-identification of imported goods in the absence of the country of origin not being mentioned on the goods.
No Refund Without Settled Exemption Claim: CESTAT Rejects Nikon India’s Customs Duty Refund Plea
The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that where the entitlement of a taxpayer to exemption from duty is itself under dispute and has not yet been finally settled in the taxpayer’s own case, a refund application filed before such final adjudication is premature and not maintainable because no cause of action to claim refund has arisen at that stage.
The Division Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) noted that the appellant had, from March 2014 onwards, consistently disputed the denial of exemption, sought provisional assessment, requested a speaking order under section 17(5) of the Customs Act, paid duty under protest on future Bills of Entry, and eventually filed the refund application on July 21, 2015 because no speaking order had been issued despite repeated reminders.
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that mere delay in filing Form No. 67 as per Rule 128(9) of the Income Tax Rules, as applicable for the year under consideration, does not disentitle a taxpayer from claiming foreign tax credit in respect of tax paid outside India, particularly where Form No. 67 and related documents were filed before the Assessing Officer during rectification proceedings and the denial was made only on a technical ground. Accordingly, the Tribunal directed the jurisdictional Assessing Officer to decide the assessee’s claim for foreign tax credit on merits after accepting Form No. 67 and the related documents filed by the assessee.
The Division Bench comprising Sandeep Singh Karhail (Judicial Member) and Bijayananda Pruseth (Accountant Member) noted that the assessee had filed the return and had claimed credit of foreign tax paid under Section 90 in that return. It further noted that the CPC, Bengaluru denied the foreign tax credit while processing the return under Section 143(1), after which the assessee filed Form No. 67 and a rectification application under Section 154 seeking the foreign tax credit.
ITAT: AO Cannot Question WDV Post-Amalgamation Where Trademark Depreciation Is Undisputed
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that where depreciation on an intangible asset, namely trademark, arising pursuant to an amalgamation has been specifically examined and allowed by the Assessing Officer in the first year of claim under Section 143(3), and no proceedings have been initiated to disturb that assessment, then in a subsequent year, in the absence of any change in facts and circumstances, the Revenue is not justified in disallowing depreciation on that asset, because in the subsequent year depreciation is to be computed on the opening Written Down Value of the block.
The ITAT laid down, in application of the rule of consistency and block of assets principle, that once the Revenue has itself allowed depreciation in the very first year after verification/examination of the necessary facts, and has not availed the statutory remedies to disturb that position, it cannot, in a later year, dispute the opening Written Down Value or re-examine the correctness of that opening Written Down Value for the purpose of denying depreciation.
The Division Bench comprising Sandeep Singh Karhail (Judicial Member) and Om Prakash Kant (Accountant Member) examined the factual position that the amalgamation had been approved by the NCLT with effect from April 01, 2015 and that, pursuant to the scheme, the entire business and all assets and liabilities of the transferor company stood vested in the assessee. It noted that because the assessee’s shares were valued at Rs. 231 per share and the transferor company’s shares at Rs. 23 per share, the excess cost incurred by the assessee in issuing shares to the transferor company’s shareholders was assigned to the trademark transferred under the amalgamation and valued at about Rs. 15.90 crore.
The Jodhpur Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that where a trust (appellant) had applied for registration under section 12AB of the Income Tax Act and approval under section 80G of the Act with objects of providing medical relief by establishing a hospital, and such objects were charitable in nature, then non-commencement of activities at application stage could not justify rejection of registration. Consequently, the ITAT accorded approval under section 80G of the Act to the appellant.
The Division Bench comprising Sudhir Pareek (Judicial Member) and Dr. Mitha Lal Meena (Accountant Member) found that the appellant society’s objects are charitable in nature and there was no adverse finding given by the Commissioner (Exemption) on the charitable object of the appellant trust. It is also undisputed on record that the activities proposed to be undertaken are directly aligned with the stated charitable objects of the appellant trust.
The New Delhi, Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that services such as hedging/forex advisory, insurance covering raw materials, finished/semi-finished goods and capital goods used in business, and employee training-related travel/services, when used directly or indirectly in relation to the manufacturing business of the appellant/taxpayer, qualify as “input service” for the purposes of Cenvat credit under the Cenvat Credit Rules, 2004.
A Single Judicial Member Dr. Rachna Gupta noted that in the earlier remand order it had already recorded the appellant’s submission that it had sufficient proof to segregate insurance-related credit pertaining to its own factories, and had also observed that service tax paid on employee air travel undertaken for the business of the appellant would be eligible for Cenvat credit. Similar observations had also been made with respect to professional fee/consultancy fee.
The Chennai Bench of the Income Tax Appellate Tribunal has held that where the taxpayer proves sale of the original asset and purchase of a new residential flat through registered documents, shows that stamp duty and registration charges were paid through bank, establishes availability of sufficient bank balance for issuance of cheques, and the vendor confirms later encashment of those cheques, the investment cannot be treated as unexplained money under Section 69A of the Income Tax Act merely because the cheques were encashed after registration or because an ancillary explanation for delayed encashment is viewed with suspicion. In such circumstances, the taxpayer is to be regarded as having discharged the burden of proving reinvestment for purposes of Section 54 of the Income Tax Act.
The Division Bench comprising Aby T. Varkey (Judicial Member) and S.R. Raghunatha (Accountant Member) discarded the Revenue’s case that the purchase consideration was paid in January 2017 out of unexplained sources. It found that the vendor had confirmed that the aggregate sale consideration of Rs. 47 lakhs were received only in August 2017, the stamp duty and registration payments were traceable to the appellant’s bank account, and the appellant had sufficient bank balance on January 04, 2017 to issue the cheques on January 05, 2017. The Tribunal therefore held that the addition of Rs. 49.80 lakhs under Section 69A were made without basis and on incorrect appreciation of facts.
ITAT: AO Cannot Replace Actual Consideration with Stamp Duty Value for Entire Land in JDA Taxation
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that the power of enhancement under Section 251(1) of the Income Tax Act is restricted to an issue or source of income considered by the Assessing Officer, expressly or by clear implication, during assessment proceedings; and the CIT(A) cannot introduce and assess a new issue not dealt with by the Assessing Officer, and such matters, if otherwise permissible, must be examined through Sections 263, 147 or 154 of the Income Tax Act.
The ITAT also affirmed that amounts received by the taxpayer under the joint development agreement as security deposits were business receipts, and since the taxpayer was neither a registered shareholder nor a beneficial shareholder of the payer company, Section 2(22)(e) of the Income Tax Act could not be invoked in its hands.
The Division Bench comprising Saktijit Dey (Vice President) and Arun Khodpia (Accountant Member) observed that where the taxpayer’s entitlement under the Joint Development Agreement (JDA) was only to receive 16,500 sq. mtrs. of constructed area, the Assessing Officer could not substitute the ready reckoner or stamp duty value of the entire plot of land as the consideration for taxing business income. The taxable consideration had to be derived from the terms of the JDA and not from the market value of the whole land parcel.
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that receipts derived by the appellant (Reliance Jio Infocomm USA – taxpayer) from provision of voice termination services could not be brought to tax in India as royalty or FTS under the Income-tax Act or under Article 12 of the India-US DTAA. The ITAT said that the receipts in the hands of the appellant were taxable only as business profits under the applicable law of the U.S. and, in the absence of a Permanent Establishment (PE) in India, could not be taxed in India.
The ITAT accepted that the services constituted standard telecom facilities, that there was no transfer of any intellectual property, equipment, or secret process to the Indian payer, and that the domestic law expansion of the term “process” through Explanations 5 and 6 to section 9(1)(vi) of the Income Tax Act could not be read into the treaty definition of royalty.
The Division Bench comprising Beena Pillai (Judicial Member) and Bijayananda Pruseth (Accountant Member) noted that the issue was covered by earlier decisions, including DDIT v. Vodafone Idea Ltd. [2024] 469 ITR 391 (SC), where it was highlighted that what was received was a standard facility, the payer had access only to services and not to the equipment or process deployed by the service provider, and the infrastructure and process always remained under the control of the service provider.