SUPREME COURT
The Supreme Court admitted a Public Interest Petition challenging the Income Tax Act provision that permits political parties to receive tax-exempt, anonymous cash donations below Rs. 2,000.
A Bench of Justices Vikram Nath and Sandeep Mehta heard brief submissions from Senior Advocate Vijay Hansaria, appearing for petitioner Khem Singh Bhati, who argued that Section 13A(d) of the Income Tax Act, 1961 enables political parties to legally shield the identity of donors making small cash contributions, thereby undermining transparency in political funding.
At the outset, the Bench queried why the petitioner had not approached a High Court, but ultimately noted that the challenge raised issues of nationwide importance affecting all recognised political parties.
Emphasising that the ‘test of movability’ is the decisive factor in ascertaining whether an article qualifies as “goods” for the purpose of central excise duty, the Supreme Court ruled that the value of the duty paid on bought-out items, which were delivered directly to the buyer’s site, is not liable to be included in the value of the boiler cleared from the factory in completely knocked down (CKD) condition, for the purpose of assessment of excise duty.
Since the boiler is not distinct from the immovable steam-generating plant, and does not come into existence as a result of the assembling of the CKD parts and bought-out items, the Court held that the Revenue Department is wrong in suggesting that the mere act of assembling the boiler parts cleared in CKD condition from the appellant’s factory, together with the duty paid bought out items delivered directly at the site of erection, simpliciter brings into existence excisable goods in the form of a boiler.
A Two-Judge Bench comprising Justice J.B. Pardiwala and Justice Sandeep Mehta observed that the ‘transaction value’ under Section 4 of the Excise Act, 1944, merely serves as the basis for computing the quantum of excise duty payable, but cannot determine excisability. Essentially, valuation is a consequence of levy, not its determinant.
While clarifying that Section 65(88) of the Finance Act, 1994, which defines a ‘Real Estate Agent’, does not cover a direct transaction of sale and/or purchase inter se between two individuals or entities, the Supreme Court clarified that the transfer of title of land by the real estate developer (Elegant Developers) to Sahara India Commercial Corporation (SICCL) after negotiating the price thereof with the owners and procuring a Power of Attorney to execute the sale deeds, are purely sale/conveyance of immovable property, which falls within the exception as provided under Section 65B(44)(a)(i) of the Finance Act, 1994.
Thus, the Court held that the transactions/activities undertaken by the respondent/Elegant Developer with SICCL did not bring it within the purview of ‘Real Estate Agent’ or ‘Real Estate Consultant’ as defined under Sections 65(88) and 65(89) of the Finance Act, 1994, respectively. Since these transactions were not undertaken for service charges, commission, agency or consultancy but were plain and simple transactions of sale of land, the Commissioner erred in raising the demand of tax and imposing a penalty upon the respondent.
A Two-Judge Bench of Justice J.B. Pardiwala and Justice Sandeep Mehta observed that the terms of the MoU do not indicate the existence of any relationship of principal and agent between SICCL and the respondent. It simply referred to a fixed rate per plot, which SICCL would pay to the respondent for every chunk of the land provided by the respondent to SICCL. There was no element of any service charges or consultancy charges being levied by the respondent on such sale transactions.
ALL HIGH COURTS
The Orissa High Court has held that a person cannot steal a march by taking shelter in the fact that there is no inhibition in the writ court to entertain the petition and pass an order departing from the statutory appeal provision.
The Court clarified that since the forum, i.e., the Goods and Services Tax Appellate Tribunal (GSTAT) has already been provided in the statute, which is now made functional and the period for filing the appeal has been extended in a fragmented manner, it would not be proper for the Writ court to keep such writ petitions pending as the dispute can be adjudicated by the said forum.
Accordingly, the Division Bench comprising the Chief Justice Harish Tandon and Justice Murahari Sri Raman directed the petitioner to deposit the amount if not already deposited, as required under Section 112(8) of the CGST Act, and file an appeal as per the timeline given in the ‘User advisory for the GSTAT e-filing portal’.
The Delhi High Court upheld the views of the CESTAT that ruled that under Rule 9 of the POPS rules, the services provided by the respondent in facilitating the recruitment of students in foreign universities as their education agent, constitute ‘export of services’ and they are not ‘intermediary services’.
The Court noted that the respondent is engaged in giving guidance to prospective students to seek admissions in universities located outside India, and it does not collect any consideration from prospective students. Since the respondent is providing service to universities located in foreign countries who are paying consideration to the respondent, the Court clarified that these services are covered by the provision of ‘export of services’.
The Division Bench comprising Justice Prathiba M. Singh and Justice Renu Bhatnagar observed that after the amendment in place of supply provisions for intermediary services under section 13(8) of the IGST Act, the ‘intermediary services’ are no longer services for which the place of location of the supplier would be deemed as the place of supply.
While holding that the defective detention receipt, which does not contain an email address and mobile number, renders such detention invalid, the Delhi High Court declares the seizure of the gold bar as illegal, and directed for release of the gold, subject to payment of customs duty, redemption fine and warehousing charges.
Though the Court ruled that the gold bar is liable to be released, considering it is not a personal effect, it directed the petitioner to personally appear before the Customs Authorities along with a passport and travel documents.
The Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain observed that the extension of the six months under Section 110 of the Customs Act, 1962, is not tenable as it was issued after the expiry of the initial period and communication to the petitioner is uncertain.
The Delhi High Court imposed a cost of Rs. 25000 on the Revenue Department, while holding that the GST registration of the parent company of the audio and wearable brand ‘boAt’ was cancelled mechanically and without due application of mind, that too, without giving even basic reasoning or allowing personal hearing.
Finding that the impugned orders passed by the GST Adjudicating Authority and Appellate Authority lack basic reasoning and fairness, and were mechanical, templated, and computer-generated without proper application of mind, the Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain quashed the cancellation of GST registration as well as the rejection of revocation.
Hasty and Mechanical Approvals Under Sec. 153A Lack ‘Application of Mind’: Bombay HC
The Bombay High Court strongly asserted that the requirement to obtain prior approval under Section 153D of the Income Tax Act for the draft assessment order is an inbuilt protection against the arbitrary or unjust exercise of power by the Assessing Officer (AO), and therefore, this protection cannot be reduced to some mechanical exercise uninformed by any serious application of mind.
Noticing that the AO regarded the requirement of obtaining prior approval under Section 153D as merely a formality, and the Additional Commissioner who granted the approvals, likewise, was entirely in agreement with such an approach, the Court held that in the absence of valid approvals, the action under Section 153A would be legally vulnerable.
The Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethna observed that the entire approval process and the requirement for approval under section 153D were reduced to mere ritual, meaningless formality, or even a mockery in these matters. Most surprisingly, the draft orders that were supposed to accompany the approval proposals already included the date and number of the approval orders that had yet to be issued.
Finding that there is concealment of material facts, not even a whisper of the DGGI investigation, and the huge amount of the Input Tax Credit (ITC) fraudulently availed of, despite the petitioner having complete knowledge of the same, the Delhi High Court opined that there is more than what meets the eye in the matter. Accordingly, the Court dismissed the petition with costs of Rs. 1 lac to be deposited with the Delhi High Court Staff Welfare Fund, and listed the matter for compliance on December 22, 2025.
The Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain observed that the petition is bereft of facts, as the counsel for the bank has placed on record the freezing order dated October 01, 2024, which records that debit over and above Rs. 1939.66 lacs only shall be allowed.
The Allahabad High Court ruled that when Part-B of the e-way bill could not be filled due to a technical glitch attributable to the Revenue Department, but there was no intention to evade payment of tax, then the manufacturer cannot be saddled with a penalty.
Finding that none of the Revenue authorities had recorded any finding claiming intention to evade payment of tax on the part of the petitioner, nor have they disputed the technical glitch, the Court quashed the order levying penalty under Section 129(3) of the GST Act.
A Single Judge Bench of Justice Piyush Agrawal observed that the short issue involved in the present case concerns the levy of penalty under section 129(3) of the GST Act, based on non-filling of Part-B of the E-way bill.
The Bombay High Court clarified that once the requirements of Section 11(2) of the Income Tax Act stand fulfilled, then ‘such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of income’, and the charitable trust after fulfilling the requirements of section 11(2), as a matter of right, become entitled for the exemption benefit, and the AO has no discretion to disallow the claim for accumulation or setting apart the income under Section 11(2).
The Court held that the proceedings under Section 148 of the Income Tax Act cannot be initiated to review the earlier stand adopted by the AO, and he cannot initiate reassessment proceedings to have a re-look or reexamine the documents that were filed and considered by him in the original assessment proceedings. Since, in the present case, the order initiating the re-assessment was based not only on a change of mind but also on the non-application of the mind, the Court quashed the reopening notices as well as the reassessment order, denying the exemption under Section 11(2).
The Division Bench comprising Justice Amit Satyavan Jamsandekar and Justice B.P. Colabawalla found that the Petitioner in Form 10 has specifically stated the particular purpose for which the income is being accumulated to meet the requirements of Section 11(2) of the Income Tax Act. Additionally, the Petitioner has also provided a copy of the Resolution, which was already mentioned in Form 10.
Emphasising that the concept of equality cannot be applied in a vacuum, and the financial implications, source of engagement, and the terms of appointment constitute valid bases for classification, the Delhi High Court ruled that the foreign-national medical trainees admitted under the “Foreign” category form a separate and intelligible distinct class, justifying differential emoluments treatment.
The Court went on to explain that the very purpose of creating the “Sponsored/Foreign National” category was to facilitate international academic cooperation, honour foreign-policy commitments, and provide a limited channel for foreign medical graduates to train in India without financial liability to AIIMS. Therefore, when the prospectus has clearly stated in advance that candidates admitted under this category “shall not be entitled to emoluments”, this advance disclosure is not incidental, but rather central to the design of the category.
The Division Bench comprising Justice Anil Khsetarpal and Justice Harish Vaidyanathan Shankar observed that as a publicly funded institution, AIIMS is obligated to prioritise stipendiary payments for domestic students who are beneficiaries of Indian taxpayer funds and expected to contribute to the national healthcare system. Extending such benefits to foreign/sponsored students who neither contribute to the domestic tax base nor form part of the national service pipeline would defeat the very fiscal rationale underlying their separate categorisation.
The Delhi High Court clarified that when the Initiating Officer has written in detail as to the reasons are to believing that the petitioner is a Benamidar, this opinion cannot be tinkered with by the Court, especially when the petitioner has an efficacious remedy before an Adjudicating Officer under Section 26 of the Benami Act.
From the perusal of the Show Cause Notice and the attachment order, the Court found that the identity of the petitioner was revealed not only through the contents in the Pen drive seized by the Benami Prohibition Officer during the course of search by the Income Tax Department, but also in the statement of beneficial owners.
The Division Bench comprising Justice V Kameswar Rao and Justice Vinod Kumar refused to consider the validity of the show cause notice issued by the Initiating Officer, Benami Prohibition Unit, observing that they cannot enter into the question of standard of proof in accordance with Bharatiya Sakshya Adhiniyam, 2023, and it is enough that the Initiating Officer seized of some material and based on such material he formed an opinion.
The Delhi High Court ruled that once the taxpayer discharges his initial onus of proving the identity and creditworthiness of the creditor and also the genuineness of the transaction, it is not incumbent upon him to prove the genuineness of the funds at the hands of its lender, i.e., the “source of the source” of the funds.
Further, the loan transaction having been effected through proper banking channels, i.e., through the bank accounts of the parties, the Court clarified that there cannot be any cavil to the genuineness of the transaction.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar observed that the present case relates to the Assessment Year 2014-15, which is before the amendment brought about by the Finance Act, 2022, requiring the taxpayers to prove the “source of the source” of funds credited as unsecured loans.
The Tripura High Court (Agartala Bench) ruled that a payment of penalty under economic duress cannot be treated as a voluntary payment of penalty, exonerating the Revenue Department from passing an order as mandated under Section 129(3) of the Tripura State Goods and Services Tax Act, 2017, justifying the imposition of a penalty on the taxpayer.
The Court clarified that in the absence of an order passed by Superintendent of State Taxes, confirming the penalty proposed on the taxpayer (with reasons after considering taxpayer’s representation to the show cause notice), the very levy and collection of penalty under Section 129(1) of the Tripura SGST Act on/from the taxpayer, is without authority of law and violates Articles 14, 19(1) (g), 265 and 300-A of the Constitution of India.
The Division Bench comprising the Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha was shocked to found that the Revenue Department did not pass an order under Section 129(3) of the Tripura SGST Act, 2017, in MOV-09, justifying the levy of penalty even after 16 months, in complete defiance of the statutory mandate under Section 129(3) of the Tripura SGST Act, 2017, simply on the premise that the petitioner had paid the penalty voluntarily, and the goods were released.
The Calcutta High Court clarified that by virtue of Rule 22 of the CESTAT (Procedure) Rules, 1982, the CESTAT cannot entertain appeals that have abated. The Court therefore affirmed the action of the CESTAT in not adjudicating the issue as to whether the payments made in relation to the adjudication orders, which formed the subject matter of challenge in the appeals, could constitute a claim by the Revenue Department, especially when the appeals were heard based on orders that waived payment of the pre-deposits.
The Court found that the Revenue Department, as an operational creditor, by reason of the original corporate debtor voluntarily discharging its liability, did not include any claim in relation to the assessment already made, and during the subsistence of the adjudication orders, the appeals before the CESTAT stood abated by operation of law.
A Single Judge Bench of Justice Raja Basu Chowdhury referred to the resolution plan to observe that there was no debt or liability of the petitioner towards the Revenue Department (second respondent), which was an operational creditor for the relevant period. Further, since a claim as per Section 3 of the IBC means a right to payment, whether such right is reduced to a judgment or not.
Finding that the pro-rata apportionment between local sales and branch sales has been done by the AO, and the same was factually decided by the Maharashtra Sales Tax Tribunal, the Bombay High Court clarified that the furnace oil used as a consumable in the manufacture of finished products would constitute a part of the goods which are dispatched to the branches of Borosil. Hence, the Court ruled that Borosil is not entitled to a complete set off or adjustment of sales tax paid under Rule 41D of the Sales Tax Rules, on the purchase of furnace oil without any reduction in relation to branch transfers.
While clarifying that the quantum of raw material, packaging material, and furnace oil to be used would depend upon the quantity of goods to be manufactured, the Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethna observed that set-off is available to Borosil after reducing certain percentage of purchase price under Rule 41D(3)(a) of the Sales Tax Rules on purchase of furnace oil partly transferred to branches of Borosil outside the State.
Finding that the petitioner (Vedanta Ltd.) was subjected to reassessment based on information from DGGI intelligence alleging availment of bogus Input Tax Credit (ITC) from a copper sale & repurchase transaction, but subsequent closure of the main ITC issue by the GST department occurred after the impugned reassessment order, the Delhi High Court quashed the reassessment and remanded the matter for reconsideration in light of GST order.
While clarifying that the closing of proceedings by the GST Department would directly impact the reassessment, the Court refrained from deciding the legality and validity of the reopening notice, as there has to be an independent reasoning by the Income Tax Department.
The Division Bench comprising Justice Prathiba M. Singh and Justice Shail Jain observed that the present case is governed by the provisions of Section 148A of the Income Tax Act, as amended and brought into effect from September 01, 2024, and notably, the impugned order was passed before the GST order regarding availing of wrong ITC. Thus, obviously, the said order of the GST department could not have been taken into consideration by the AO.
The Delhi High Court clarified that if the charitable educational society (petitioner) had failed to upload the audit report in Form 10B while claiming exemption under Section 11 of the Income Tax Act, due to an inadvertent error of the auditor, and it was filed belatedly, then the delay in filing Form 10B has to be condoned if no mala fides were alleged.
Asserting that any mistake on the part of the Auditor should not result in hardship or prejudice to the taxpayer, the Court quashed the order passed by the respondent (Commissioner) under Section 119(2)(b) of the Income Tax Act, and directed him to pass a fresh order on the application filed by the petitioner/applicant under Section 119(2)(b) within a period of eight weeks.
The Division Bench comprising Justice V. Kameswar Rao and Justice Vinod Kumar found that the return was filed within the time stipulated, and a reference to the audit report was made in the ITR. However, after it came to the knowledge of the petitioner that the audit report had not been uploaded, the audit report was filed with a delay of 16 days, which can surely be considered a bona fide mistake.
The Gujarat High Court (Ahmedabad Bench) ruled that a 100% Export Oriented Unit (EOU) is entitled to a refund of accumulated input tax credit (ITC) on zero-rated exports. The ruling came after finding that the petitioners are not “deemed exporters” but are exporters of goods engaged in zero-rated supplies under Section 16(1) of the IGST Act, and all inward supplies received by the petitioners were taxable supplies on which the suppliers had charged GST and had not availed the benefit of any deemed-export notification.
Accordingly, the Division Bench comprising Justice Bhargav D. Karia and Justice Pranav Trivedi held that the zero-rated supplies made by the petitioners cannot be brought within the ambit of “deemed exports,” as the petitioners themselves exported the goods and all inward supplies were treated merely as regular taxable B2B supplies. Since neither the suppliers nor the petitioners followed the deemed-export procedural framework under the GST law, the transaction cannot be reclassified retrospectively as deemed exports.
Consequently, the petitioners’ exports duly qualify as zero-rated supplies under Section 16 of the IGST Act, entitling them to claim a refund of unutilised input tax credit under Section 54(3) of the GST Act read with Rule 89(4) of the GST Rules.
Wrongly Paid IGST Cannot Be Retained by Centre; Karnataka High Court Orders Refund to Taxpayer
Finding that the payment in excess made by the petitioner to the Central Revenue Authorities was neither contested nor disputed by the Authorities, the Karnataka High Court (Bengaluru Bench) ruled that the payment erroneously made in favour of the Central GST Authorities towards IGST before making a similar payment to the State GST Authorities cannot be retained illegally.
The Court explained that the limitation period for claiming a refund as per Section 54 of the CGST Act and Rule 89(1A) of the CGST Rules, 2017, is directory and not mandatory, and having regard to Article 265 of the Constitution, the Central GST authorities are not entitled to collect IGST from the petitioner, who was not liable to pay the same.
Also, upon the petitioner paying the IGST to the State GST authorities, the Centre was not entitled to retain the IGST. Therefore, applying the principles of restitution and unjust enrichment, the Single Judge Bench of Justice S.R. Krishna Kumar directed the Centre to refund the IGST to the petitioner.
The Madras High Court held that since hostel inmates use the rooms as sleeping spaces, they qualify as “residents” under the statutory definitions, and the premises must therefore be treated as residential units, even if the occupants have another dwelling elsewhere. Consequently, the Court directed the municipal authorities to apply a residential tariff while assessing property tax, water tax, and related charges.
Observing that the activities taking place in the petitioners’ hostels are purely residential and not commercial in nature, the Court ruled that the hostel properties cannot be classified as commercial units, and the commercial tariff does not apply to them.
A Single Judge Bench of Justice Krishnan Ramasamy explained that a property can be classified as a commercial unit only when it is actually used for commercial activities. In the present case, the Bench clarified that even if the owner treats the rental income from the premises as business income for income tax purposes, this classification does not alter the residential nature of the units or justify applying a commercial tariff for property-related taxes.
The Gauhati High Court declared that Clause 8 of the Assam Industries [Tax Reimbursement for Eligible units] Scheme, 2017, runs counter to the Constitutional protection enshrined by Sections 16 & 164 of the CGST Act. Hence, the denial of ITC based on such a scheme is not permitted.
Therefore, finding force in the submissions that framing of such a provision like Clause 8 in the Reimbursement Scheme, 2017 runs against the Constitutional and Statutory provisions, the Court ordered an interim suspension on the operation of the impugned SCNs.
A Single Judge Bench of Justice Manish Choudhury referred to the provisions of Article 246A & Article 279A of the Constitution of India; and Section 16 & Section 164 of the CGST Act read with Section 2[87] vis-a`-vis Clause 8 of the Reimbursement Scheme, to find that the SCNs were issued in derogation of the statutory provisions.
The Allahabad High Court clarified that once the consignor comes forward with the case that due to human error of the labourer, fewer goods were loaded at night, then the evasion of tax cannot be attributed to the transporter.
The Court also held that once the goods have been released to the consignor and in the absence of any adverse material being brought on record against the transporter, the vehicle in question cannot be seized, and no proceeding can be initiated against the transporter.
A Single Judge Bench of Justice Piyush Agrawal observed that the authority had released the goods in favour of the consigner after finding that the said goods belong to the consignor, without recording any adverse finding against the petitioner, who is a transporter.
An interesting question was raised before the High Court as to whether the crane and forklifts purchased by the plywood manufacturer (petitioner) only for the sole use inside the premises of the factory, is a motor vehicle as defined under Section 2(28) of the Motor Vehicles Act, which would require registration as mandated under Section 39 of the Motor Vehicles Act and taxable under Section 3 of the Kerala Motor Vehicle Taxation Act.
Answering in affirmation and applying the determinative test of road-adaptability, the Kerala High Court (Ernakulam Bench) ruled that the machinery, such as forklifts, mobile cranes, dumpers, or similar equipment, if structurally capable of being driven on roads even incidentally or occasionally, squarely falls within the definition of “motor vehicle” under the Motor Vehicles Act.
The Single Judge Bench of Justice Mohammed Nias C.P. clarified that the roadworthiness and adaptability, and not the actual use on roads, are the determinative tests for whether a machine falls within the definition of a motor vehicle; exclusive use inside factory premises does not take such machinery outside the definition if it is capable of being used on public roads.
The Kerala High Court (Ernakulam Bench) held that since the Income Tax Act is an all-India statute, and since what was challenged before the Court was the circular issued by the bank at the instance of the Association of Bank employees, the appellant-bank cannot be faulted for having honoured the stay orders issued by the Madras High Court.
The Court admitted that, as against payments made by the appellant bank to its employees towards Leave Travel Concession (LTC), it was bound to deduct tax at source on such payments. However, the appellant refrained from doing so, acting on the instructions of the Madras High Court. Therefore, the Court held that the appellant cannot be declared ‘in default’ under Section 201 of the Income Tax Act.
The Division Bench comprising Justice A. Muhamed Mustaque and Justice Harishankar V. Menon observed that only when the taxpayer, after having a liability to deduct tax at source, fails to do so, the question of invoking Section 201 of the Income Tax Act and treating the taxpayer as an ‘assessee in default’ arises.
The Bombay High Court, though, admitted that depreciation under Section 32 of the Income Tax Act serves a specific purpose in commercial accounting and indicates the real cost borne by an industry in maintaining its productive assets; however, it strongly ruled that the same cannot be treated as a device to exaggerate losses.
While holding that the law does not permit an employer to place inflated figures under the head of depreciation to project an adverse financial picture, the Court clarified that wage adjudication by the Industrial Tribunal cannot proceed on uncertain or unsupported entries in accounts.
A Single Judge Bench of Justice Amit Borker observed that the petitioner (factory) failed to show any document to prove that the depreciation was claimed in accordance with Section 32 of the Income Tax Act. Therefore, in wage adjudication, the unsupported figures cannot be accepted at their face value.
The Bombay High Court came to the aid of an importer (petitioner), who, despite having duly complied with all statutory obligations and paid the necessary customs duty, neither received the imported goods nor obtained a refund of the duty paid, has been made to run from pillar to post for nearly three years, for the disagreement between two public authorities, each seeking to shift responsibility onto the other.
Aghast at an unfortunate situation in which an innocent importer has suffered and continues to suffer due to administrative inaction and inter-departmental discord between the customs and the port authorities, the Court held that the importer who has acted bona fide, paid the customs duty upfront, and made sustained efforts to trace the missing goods, cannot be subjected to indefinite hardship for refund of the pilfered goods, merely because of an inter-departmental dispute over fixing responsibility for the loss.
The Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethna is shocked to find that the two public authorities utilise taxpayers’ money or public funds, and therefore have no hesitation in raising various issues to delay the refund of customs duty to the Petitioner, even after practically admitting that the Petitioner is not responsible for their situation. Accordingly, the Court ruled that the petitioner (importer) gains the right to a refund if the goods were never delivered and the Bill of Entry never reached final clearance. Neither the pendency of the FIR nor the procedural status of the Bill of Entry can bar the Petitioner’s claim.
The Gujarat High Court (Ahmedabad Bench) asserted that any input or capital goods received in the factory or any input services received by the manufacturer of the final product would be susceptible to CENVAT Credit. Thus, the Court held that when the electricity generated by the windmills is exclusively used in the manufacturing unit for final products, the CENVAT Rules do not stipulate that the windmills shall be situated in the place of manufacture.
Observing that there is no nexus between the process of electricity generation and the manufacture of final products, the Court declared the appellant (manufacturer) to be entitled to the credit of service tax paid on inputs or capital goods or services received for Windmills for goods manufactured in the factory.
The Division Bench comprising Justice Bhargav D. Karia and Justice Pranav Trivedi clarified that the appellant has utilised the electricity supplied by Gujarat Energy Transmission Corporation Limited (GETCO) against the electricity generated by Windmills and therefore, service tax paid by the appellant on the installation, erection and services in connection with maintenance of the windmills are exclusively used in relation to manufacturing activity and therefore, the same would be squarely covered under the definition of “input service”.
Finding that the manufacturer (petitioner) had made a declaration before the tax authority under the Kar Vivad Samadhan Scheme, 1998, and claimed the thickness of the glass to claim a particular tax regime and evaded the tax duty, the Gujarat High Court (Ahmedabad Bench) ruled that prima facie making of a false declaration before the Government authority to claim the tax benefit attracts the definition of ‘forged documents’, as defined under Section 464 of the IPC. Accordingly, the Court dismissed the petition against the petitioner as well as the managing director.
A Single Judge Bench of Justice D.C. Doshi observed that the prosecution of the Directors of the Company requires proving their active personal involvement or knowledge in the offence or a statutory provision that imposes liability upon them. Essentially, the criminal liability cannot be based on designation alone, but has to be on the role they played in the company’s affairs.
The Gujarat High Court (Ahmedabad Bench) has upheld the views of the CESTAT that the amount of the counter-veiling duty, which is payable at the time of de-bonding a 100% Export Oriented Unit (EOU), can be paid from the accumulated CENVAT credit by an EOU Unit. Reference was made to the decision in the case of Messrs Dishman Pharmaceuticals and Chemicals vs Union of India.
The Court clarified that insisting on a manufacturer to pay customs duty without utilising CENVAT credit, which is nothing but the duty on various inputs already paid by him, would be a restriction so harsh and out of proportion to the aim sought to be achieved, the same must be held to be wholly arbitrary and unreasonable.
The Division Bench comprising Justice A.S. Supehia and Justice Pranav Trivedi observed that before the 1995-96 Budget, the Central excise/additional duty of customs paid on inputs was allowed as credit for payment of excise duty on the final products, in the manufacture of which such inputs were used. The only condition required for the same was that the credit of duty paid on inputs could have been used for the discharge of duty/liability only in respect of those final products in the manufacture of which such inputs were used.
Technical Glitch in E-Way Bill Won’t Attract Penalty Without Tax Evasion Intent: Allahabad HC
The Allahabad High Court ruled that if a registered manufacturer had goods detained during transit, solely for non-filling of Part B of the e-way bill due to an undisputed technical glitch, and no finding of intent to evade tax existed, then imposition of penalty under section 129(3) of the GST Act is not sustainable in law.
A Single Judge Bench of Justice Piyush Agarwal observed from the record that only due to a technical glitch, Part B of the e-way bill could not be filled, but there was no intention to evade payment of tax. However, none of the I-T authorities had recorded any finding with regard to the intention of tax evasion.
While clarifying that the absence of ownership over an infrastructure asset negates the claim for depreciation, the Madras High Court held that Hinduja Foundries (HFL-appellant) could not claim depreciation under Section 32(1)(ii) of the Income Tax Act, as it was not the owner, wholly or partly, of the infrastructure; and a mere long-term leasehold right in its favour did not confer ownership.
The Court explained that even though the appellant had obtained a long-term right over the infrastructure, the long-term leasehold right cannot substitute the term ‘owner’. Further, the term ‘owner’ implies that a person owns that particular asset, whereas the long-term right to use does not in any manner make the person owner thereon but only allows that person to use that asset for the specified period.
The Division Bench comprising the Chief Justice Manindra Mohan Shrivastava and Justice G Arul Murugan referred to the provision of Section 32(1), which states that to claim depreciation, the taxpayer has to own the intangible asset either wholly or partly, which is used for business or profession.
Delhi HC: Leasehold-to-Freehold Conversion Is Part of Sale Process, Not Liable to GST
While clarifying that no supply of goods or services takes place when the Delhi Development Authority (DDA) converts the property from leasehold to freehold, the Delhi High Court ruled that the conversion of property from leasehold to freehold is nothing but a part of the process of sale of immovable property, and hence, no GST would be liable to be charged on such activity.
The Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain observed that Section 7(2) of the CGST Act clearly exempts immovable property from the domain of supply of goods or services. Thus, the Bench directed that no coercive steps shall be taken against the petitioner-taxpayer to recover any amounts which are mentioned in the demand orders till the next date of hearing, while listing the matter on December 05, 2025.
While considering a petition for grant of bail in economic offences, which by their very nature pose a threat to the State’s financial stability and deserve to be dealt with sternly, the Punjab & Haryana High Court (Chandigarh Bench) clarified that the economic offences cannot be categorised in one group, and the Court should not proceed on the presumption that “Denial of Bail is the Rule and grant being the exception”.
Taking a lenient view that the Court seized of the matter has to go through the gravity of the offence, the object of the concerned Act, and the attending circumstances, the High Court granted bail to the petitioner, subject to furnishing of bail/surety bonds and compliance with conditions including surrender of passport, non-tampering with evidence, non-intimidation of witnesses, regular appearance, and non-commission of similar offences.
A Single Judge Bench of Justice Aaradhna Sawhney observed that the offences alleged under Section 132 of the CGST Act are serious, involving wrongfully availing and passing of ITC amounting to Rs 23.66 crores. At the same time, the Bench noted that the evidence to be rendered by the complainant department is primarily documentary and electronic.
Bombay HC: After Trademark Shifts to UK, Overseas ‘Crocin’ Sales Qualify as Exports, Not Taxable
In a significant ruling with far-reaching implications for cross-border intellectual property transactions, the Bombay High Court ruled that the sale of the famous pain-relief brand ‘Crocin’ to a UK company amounts to an export and is therefore not liable to sales tax under the Indian Sales Tax Regime. Accordingly, the Court overturned the Maharashtra Sales Tax Tribunal order dated May 05, 2010, that had held the overseas sale taxable at 4% under the Bombay Sales Tax Act, 1959.
The Court clarified that registration does not determine where a trademark exists or is located for purposes of taxation, and registration is not even compulsory for a trademark to exist in law. What matters is the legal situs of the asset, which moves with the owner. Thus, the Court asserted that the overseas transfer of the trademark extinguished all rights of the Indian seller and shifted the trademark’s situs (location) to the UK by legal fiction.
The Division Bench comprising Justice M.S. Sonak and Justice Advait M. Sethna observed that since the assignee, SKB, was a UK-incorporated company, the trademark was deemed to have moved to the UK as soon as it was assigned, and this movement of the asset outside India satisfied the legal requirement of an export under Section 5 of the Central Sales Tax Act.
While clarifying that the law does not sanction recovery of tax in the absence of any specific charging statutory provision, the Calcutta High Court ruled that there is no scope for the Income Tax Department to withhold an amount of refund which is duly payable to the taxpayer.
Since in the present case, the respondent Department had released a partial refund after making the petitioner run from pillar to post, and is still holding a substantial sum despite assurances given by them to the petitioner for complete resolution, the Court directed for consequential relief in the form of interest in accordance with law. The Court also directed the respondent to complete the process of refund within a period of ten weeks.
A Single Judge Bench of Justice Raja Basu Chowdhury observed that the petitioner is entitled to the refund as determined by the Income Tax Department, which it has been holding onto without any justification, and that too, when no independent proceeding has been initiated against the petitioner in respect of the withholding of Rs. 22.73 lacs.
Referring to Rule 86A of the CGST Rules, which allows only for the blocking of credit available in the ledger and not for creating a negative balance, the Punjab and Haryana High Court (Chandigarh Bench) ruled that the creation of negative balances in the Electronic Credit Ledger (ECL) is unlawful and without the authority of law.
The Court explained that such a step of creation of negative balances in the ECL goes beyond the powers granted under the law and violates the statutory framework of Section 49 of the CGST Act. Accordingly, the Court directed the GST authorities to restore the petitioners’ ledgers to their original state before the blocking orders.
The Division Bench comprising Justice Lisa Gill and Justice Meenakshi I. Mehta observed that the GST authorities have no power to create a negative balance in a taxpayer’s Electronic Credit Ledger (ECL) under Rule 86A of the CGST Rules, 2017, and that such action is without jurisdiction. Additionally, the Bench pointed out that administrative authorities must act strictly within the limits of the statute and not beyond the same.
The Delhi High Court clarified that renting or leasing of a residential dwelling for use as a residence is exempt from the scope of GST. Accordingly, no GST can be included as part of the rent for the purposes of chargeability of stamp duty. Reference was made to Entry No. 12 of the Central Tax Notification No. 12/2017.
The Court also reiterated that the GST payable by the lessee cannot be treated as part of the rent for the purpose of chargeability of stamp duty, and the lease deed has to be classified under Section 6 and Article 35 of the Indian Stamp Act, 1899. Hence, the view regarding the deficit payment of stamp duty is misconceived, and the Court directed the Stamp Collector (respondent) to refund the amount of Rs. 2.58 lacs (including deficit stamp duty and penalty), within a period of six weeks.
A Single Judge Bench of Justice Sachin Datta refers to the Circular dated May 02, 2018, bearing No. 44/18/2018-CGST issued by the Tax Research Unit, Department of Revenue, Ministry of Finance, where it was stipulated that the activity of transfer of ‘tenancy rights’ is squarely covered under the scope of supply and taxable per se. The Bench explained that the transfer of tenancy rights to a new tenant against consideration in the form of a tenancy premium is taxable. However, renting of residential dwellings for use as a residence is exempt as per Sl. No. 12 of notification No. 12/2017-Central Tax (Rate).
While deciding whether the first proviso to Section 153C of the Income Tax Act would have limited application only for the purpose of abatement of pending proceedings or otherwise, the Madars High Court referred to the decision of the Apex Court in the case of CIT Vs Jasjit Singh [(2023) 458 ITR 437], to hold that Section 153C(1) is not only for the purpose of abatement but also for all the other practical purposes, viz., initiation of search for other person in terms of Section 153C(3) of the Income Tax Act.
The Court clarified that the provision of Section 153C will not apply for any search, which is initiated on or after April 01, 2021. Since the date of handing over of seized material to the petitioner’s Jurisdictional AO is on November 25, 2022 and the said date is the date of initiation of search for the petitioner, the Court pointed out that the initiation of search was subsequent to April 01, 2021, for which, the provisions of Section 153C will not apply.
A Single Judge Bench of Justice Krishnan Ramasamy observed from a reading of Section 153C that determination of total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year, in which the search was conducted or requisition was made and for the relevant assessment year or years, referred in sub-Section (1) of Section 153C.
The Delhi High Court held that a bald assertion in the statement of the accused under Section 313 CrPC cannot be considered as a defence proven in terms of Section 278AA of the Income Tax Act, to entitle the accused to an acquittal. The Court noted the statement made under Section 313 CrPC, where the accused company, through its director, took the defence of the bad financial condition of the company, on account of which the TDS could not be deposited in time and was ultimately deposited after the availability of funds and interest.
After considering the statement and the evidence available on record, the Court clarified that the onus to prove the special circumstance of bad financial condition is on the accused to dispel the absolute liability imposed under Section 276B of the Income Tax Act for not depositing the TDS in the government account, which was shown to have been deducted. The best evidence to establish this defence was to produce the documentary evidence to reflect the poor financial condition, which the respondent company has miserably failed to do in this case.
A Single Judge Bench of Justice Neena Bansal Krishna observed that there was a delay of 4-15 months in the deposit of TDS. This shows that the respondent was functioning and had the financial capacity to pay, though delayed by 4 months to 15 months. There is no circumstance brought forth by the respondent to show that there existed any reasonable cause in depositing the TDS with delay.
The Madras High Court strongly ruled that no purchase tax is leviable under Section 7A of the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) on the premise that tax has not been paid/remitted by the seller/vendor. The Court clarified that the levy of purchase tax is impermissible, as the turnover of the petitioner’s vendor is in excess of the threshold under Section 3(2) of the TNGST Act. The Court explained that the purchase tax under Section 7A of the TNGST Act gets attracted only if the sale is made in circumstances in which no tax is payable; however, the sale by the petitioner’s vendor is liable to tax.
Having found that the sale to the petitioner is liable to tax in the hands of the petitioner’s vendor, the levy of purchase tax only on the premise that the petitioner’s vendor had not remitted tax cannot be sustained. If the petitioner’s vendor fails to remit the appropriate tax, the Revenue ought to proceed against the petitioner’s vendor; instead, any levy of purchase tax by the respondent would be bad for want of jurisdiction and cannot be sustained.
The Division Bench comprising Justice S.M. Subramaniam and Justice Mohammed Shaffiq observed that for the levy of purchase tax to get attracted, the purchase must be made “in circumstances where no tax is payable”. The Bench clarified that the expression no tax is payable would not take within its fold a transaction of sale on which tax is payable but not paid by the vendor.
The Bombay High Court ruled that the taxpayer ought not to be put to a considerable disadvantage as a result of belated advice given to it by the Chartered Accountant, especially when the issue that was being grappled with is fairly complex and for which there were no well-settled judicial precedents at the relevant time.
The ruling came after considering the findings of the field authorities that it may be possible that the taxability of certain proceeds was not known to the CA and the taxpayer, and that the CA sought legal opinion about the same, which was beyond its control in filing the ROI within the due date.
The Division Bench comprising Justice B.P. Colabawalla and Justice Amit S. Jamsandekar observed that where a taxpayer takes a course of action based on an opinion of a professional, then, in that case, there is a reasonable cause for the taxpayer to act based on such advice, and that such acts are to be regarded as bona fide.
The Delhi High Court ruled that until and unless there is a policy decision taken by the Central Board of Indirect Taxes and Customs (CBIC) as to whether certain products have to be prohibited, and if so, then in what manner, the consignments of the petitioner cannot be seized or detained selectively. Thus, the Court directed the provisional release of the subject imported products in terms of Section 110A of the Customs Act, 1962.
The Court also directed the CBIC to proceed with conducting the inter-ministerial consultation in respect of the uniform policy permitting or prohibiting the import of products declared as ‘body massagers’ or sex toys, and place its stand by the next date of hearing on December 09, 2025.
The Division Bench comprising Justice Prathiba M Singh and Justice Shail Jain observed that the question as to whether any product is obscene or not cannot, obviously, be left at the discretion of the Commissioner of Customs and other individual officials, in the absence of uniform guidelines for consistent practice in this regard.
The Allahabad High Court ruled that the input tax credit (ITC) cannot be denied to a dealer, solely because the supplier has subsequently cancelled its registration, more so where the supplier had filed returns and paid taxes through GSTR-01 and GSTR-3B. The ruling came after finding that the petitioner was a registered dealer and had purchased goods from a registered supplier whose registration was cancelled only after the transactions.
A Single Judge Bench of Justice Piyush Agrawal observed that the supplier had filed returns and paid taxes through GSTR-01 and GSTR-3B, and thus, no adverse inference could be drawn merely based on the subsequent cancellation of registration.
ITAT/ CESTAT/ AAR/ AAAR
The Customs Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, ruled that as the appellant, an ambulatory care provider, has failed to produce any evidence to show that they are the buyers or owners or the consumers of the vehicles (ambulance) who have borne the incidence of duty and have not passed on to others, they have no locus standi to claim the refund of the excise duty paid by the fabricators of the ambulance.
The Tribunal pointed out that the MOU entered into with the Government of Karnataka did not recognise the appellants as owners of the Vehicles, and it only required the appellant to maintain, upkeep and ply the ambulances as and when required.
Finding that the Government of Karnataka has sanctioned certain amount for the running of the scheme and there is no mention of the reimbursement of taxes, if any, paid by the appellant, the Division Bench comprising S S Garg (Judicial Member) and P Anjani Kumar (Technical Member) strongly asserted that when the appellant has undertaken the activity as per MOU or as part of Corporate Social Responsibility, they cannot enrich themselves at the cost of the Government.
The Income Tax Appellate Tribunal (ITAT), Chandigarh, ruled that the appellant who had served the PSEB being an undertaking of the Punjab Government for a period November 18, 1983 to April 16, 2010 is entitled to the leave encashment of Rs. 13.02 lacs, but, not entitled to any relief when he served with the Punjab State Power Corporation Limited.
The ruling came while explaining that the Electricity Distribution Company, namely Punjab State Power Corporation Limited (PSPCL), cannot be treated as the state government or an undertaking of the state government within the ambit of Section 10(10A) of the Income Tax Act.
A Single Bench of Laliet Kumar (Judicial Member) observed that the provision of Section 10(10A) is a beneficial provision, intended to extend relief to employees who have rendered long service to the Government. Merely because, by operation of a state restructuring scheme, the appellant-taxpayer was compulsorily transferred from PSEB to PSPCL, he cannot be deprived of the benefit accrued or earned during his qualifying government service up to the date of restructuring.
The Income Tax Appellate Tribunal (ITAT), New Delhi, deleted the addition of Rs 52 crore which was imposed by the AO based on the claim that the respondent-taxpayer had undervalued the fair market value (FMV) of the shares he sold. The Tribunal opined that the respondent has followed the prescribed procedure for determining the valuation of unlisted shares and declared the corresponding capital gains in the return of income.
The ruling came in favour of the respondent, after finding that the respondent had adopted a recognized method of valuation and the AO has not brought on record any facts which show that the respondent adopted a demonstrably wrong approach, or that the method of valuation was made on a wholly erroneous basis, or that it committed a mistake which goes to the root of the valuation process.
The Division Bench comprising C.N. Prasad (Judicial Member) and M. Balaganesh (Accountant Member) observed that Rule 11UAA gives the option to a taxpayer to follow either NAV method or DCF method for determining fair market value of unlisted shares as on the date on which the shares of an unlisted company are transferred. Further, when the taxpayer follows either of the method for first sale of unlisted shares during a year, the said rule does not restrict him to use the same method for all the subsequent sale of unlisted shares on different dates.
Referring to the Amendment brought in by the Finance Act, 2012, the Income Tax Appellate Tribunal (ITAT), Kolkata, ruled that ‘HUF’ can act as a donee only, and certainly not as a donor. Since the definition of “person” as per Section 2(31) of the Income Tax Act recognises the “HUF” as a distinct entity from “an individual”, and the exact source of money, so gifted, was unknown, the Tribunal refused to exempt the receipt of a gift of Rs. 5.84 lacs shown to have received from an HUF.
Regarding the gift from HUF, in which the husband of the appellant is the Karta, the Tribunal clearly opined that an HUF cannot be treated as a “relative” within the meaning of Explanation to Section 56(2)(vii) of the Income Tax Act.
The Division Bench comprising Sonjoy Sarma (Judicial Member) and Sanjay Awasthi (Accountant Member) observed while considering the so-called gifts amounting to Rs. 96,000, that the appellant herself has offered the same to tax as income from other sources. Thus, treating the said amount under Section 68 does not overtly result in any significant revenue gain since the rate of tax prevailing for this assessment year was 30% under Section 115BBE.
The Income Tax Appellate Tribunal (ITAT), New Delhi, clarified that the reopening notice under Section 148 of the Income Tax Act issued on April 22, 2021, for the A.Y.2015-16, falls outside the period of completion prescribed under TOLA [Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act].
The Appellate Tribunal pointed out that the relaxations provided under section 3(1) of TOLA override the time limits for issuing a notice under section 148, read with Section 149 of the Income Tax Act, but do not extend the life of the old regime and merely provide a relaxation for the completion or compliance of actions following the procedure laid down under the new regime of Section 148A of the Income Tax Act.
The Division Bench comprising Sudhir Kumar (Judicial Member) and Manish Agarwal (Accountant Member) referred to the decision in the case of Bhagwan Sahai Sharma vs. Deputy Commissioner of Income Tax, to reiterate that the TOLA provisions do not apply to the reopening notice admittedly issued beyond the period of limitation as prescribed under section 149(1) of the Income Tax Act.
Emphasising that the theory of ‘preponderance of probability’ is applied to weigh the evidence of either side and draw a conclusion in favour of a party which has more favourable factors in his side, the Income Tax Appellate Tribunal (ITAT), New Delhi, held that loans cannot be treated as ‘bogus’ in the absence of any incriminating material unearthed during the course of a search.
The Tribunal noted that the AO has not doubted the expenses claimed by the respondent-taxpayer towards the payment of interest to the loan creditors, though the principal amount of the loan is alleged as bogus. Thus, the Tribunal was shocked to find that, once it is alleged that the principal loan is a bogus accommodation entry, how the interest paid on such an alleged bogus loan could be allowed as genuine expenditure?
The presumption or suspicion, however strong it may appear to be true, needs to be corroborated by some evidence to establish a link that the taxpayer had indulged in accommodation activity, added the Tribunal, while upholding the deletion made by the CIT(A) on the additions under Section 68 of the Income Tax Act.
The Division Bench comprising Sudhir Kumar (Judicial Member) and Manish Agarwal (Accountant Member) observed that the question of getting accommodation entries in the guise of a loan does not survive, once the respondent-taxpayer has established the identity, creditworthiness of the lenders, and genuineness of the loan transactions through every possible evidence like confirmations of the lender companies, their Financial Statements, their Income tax records such as their ITR’s and PAN, bank statements, etc.
Finding that by virtue of the amendment Notification dated July 06, 2019, customs duty would also be leviable on microphones and receivers when imported into India, even if they are imported for the manufacture of PCBA of cellular mobile phones, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, quashed the order passed by the Principal Commissioner rejecting the claim of Oppo Mobiles India (the appellant) seeking exemption from payment of customs duty under the Exemption Notification dated June 30, 2017, as amended from time to time.
The Tribunal found that the two amendment Notifications dated February 02, 2018 and April 02, 2018, do not in any manner alter Serial No. 6 of the Exemption Notification dated 30.06.2017 in so far as microphones and receivers that were imported by the appellant for the manufacture of PCBA. Accordingly, the Tribunal granted relief to the appellant in the form of an exemption from customs duty on the microphones and receivers.
The Division Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) found that the Principal Commissioner has imported his own knowledge to conclude that when the exterior of a phone is removed, there are electronic components inside it which would include receivers and microphones and because “these components need a foundation to sit on and, therefore, these are attached to PCBA or installed correctly on the PCBA to function”.
The New Delhi Income Tax Appellate Tribunal (ITAT) ruled that the Department cannot call for an advantage by citing multiple provisions of the Income Tax Act in the show cause notices, which are not finally invoked for fastening the tax liability. Accordingly, the Tribunal quashed the orders declaring the appellant as ‘assessee-in-default’.
The ruling came after finding that the impugned assessment orders very categorically mentioned about invoking of the provisions of Section 194I of the Income Tax Act, to hold the appellant as ‘assessee-in-default’, which actually does not apply to the External Development Charges (EDC) paid to the Haryana Urban Development Authority (HUDA). Further, presuming that it will not work, the AO simultaneously mentioned the provisions of Section 194C.
The Division Bench comprising Anubhav Sharma (Judicial Member) and Manish Agarwal (Accountant Member) observed from perusal of the assessment orders that while issuing notices calling upon the appellant to show cause, the AO had initially invoked Section 194I of the Income-tax Act, and also, on a non-prejudiced basis, mentioned the provisions of Section 194C.
Finding that the ultimate purpose of the agreement, as seen from the joint intent of the parties, is for the appellant to engage SPIPL in providing a car parking facility to the public on a profit-sharing basis, the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that such an agreement cannot be considered as leasing of space to an entity for providing a parking facility, and the receipts cannot be categorised as rent.
The Division Bench comprising Ajayan T V (Judicial Member) and M Ajit Kumar (Technical Member) observed that the appellant has engaged SPIPL because of its expertise, experience, knowledge and technical know-how in the operation of car parks. Further, in consideration of the appellant engaging the services of SPIPL, they (SPIPL) are required to share the monthly car park revenue after adjusting the direct operating expenses with the appellant.
The Bench further observed that the entire amount collected is first deposited in the bank account maintained by the appellant, after which the share pertaining to the SPIPL is remitted to them. Thus, the amount received is hence in the nature of a sharing of profits, which can vary from month to month and cannot be considered as rent.
Pune ITAT Allows Exemption On Leave Encashment Of Up To 25 Lacs For Retired SBI Bank Employee
Pointing out that the limit of leave encashment to be allowed to a government retiree taxpayer was revised to Rs. 25 lacs vide Gazette Notification No. 31/2023, dated May 24, 2023, the Pune Income Tax Appellate Tribunal (ITAT) ruled that the appellant, as a retired employee of SBI bank, had rightly claimed exemption of leave encashment under Section 10(10AA)(i) of the Income Tax Act, by treating himself as Government employee.
Therefore, while quashing the assessment order passed by the Assessing Officer, whereby he had restricted the exemption to Rs. 3 lacs, the Appellate Tribunal allowed the appeal in favour of the retired taxpayer.
The Division Bench comprising R.K. Panda (Vice President) and Astha Chandra (Judicial Member) observed that the impugned issue is covered in favour of the appellant by the decision of the co-ordinate bench of the Tribunal in the case of Govind Chhatwani v. CIT(A) [IT Appeal No. 385/JP/2023], wherein the taxpayer was held to be entitled to get the exemption under section 10(10AA).
The Income Tax Appellate Tribunal (ITAT), New Delhi, ruled that where the taxpayer, a limited risk distributor, had conducted distribution and after-sales customer services that were inextricably linked, then segmenting trading and service activities with revenue-based allocation for arm’s length price (ALP) was impermissible.
The Tribunal referred to the identification of the performance obligations in the contract, which says that the “Product performance obligations include hardware and software licenses, and service performance obligations include maintenance, software post-contract, training and professional services. Certain software licenses and related post-contract support are combined into a single performance obligation when the maintenance updates are critical to the continued functionality of the software”.
The Division Bench comprising Yogesh Kumar U.S. (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that the trading results have to be benchmarked when the trading is complete, as soon as the products are sold to the Indian customers, whereas it is interconnected with the after-sales customer services as defined in the mutual agreement. Merely because the appellant has the facility to provide customer services, it cannot be segregated without analysing the key functions that are interdependent on each other.
While clarifying that lease rentals paid in case of a finance lease are allowable as revenue expenditure, the New Delhi Income Tax Appellate Tribunal (ITAT) held that for accounting purposes, although the lessee shows the asset in his balance sheet, charges depreciation in accounts and even makes impairment provision, yet the taxpayer is not eligible to claim depreciation under the Income Tax Act, which is allowed to the legal owner of the asset.
Furthermore, the Tribunal explained that not only the interest/finance/ other charges component in the lease payments, but the entire lease payments are treated as a deductible expense, and no deduction is allowed for the impairment provision. Thus, in the hands of the lessor, the entire ‘lease rentals’ and not merely the finance charges component thereof is taxed as income, and the lessor, who is the legal owner of the asset, is entitled to claim depreciation under the provisions of the Income Tax Act, added the Tribunal, while allowing the benefit of lease rentals to be treated as revenue expenditure in the hands of Vodafone Idea Ltd.
The Division Bench comprising Yogesh Kumar U.S. (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that when the Vodafone (appellant) has paid lease rent as a finance lease and accordingly capitalised the same by following the AS 19, then as far as the Income Tax Act is concerned, those lease payments are to be considered as revenue expenditure, irrespective of the fact whether they are operating or finance lease.
Finding that royalty payments by Xiaomi Technology for the use of technologies include the parts and components as a single composite payment, includable in the transaction value of the imported goods, and also includes payment for the right to distribute or resell the imported goods, the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that Royalties and License Fees paid by Xiaomi India are addable to the assessable value of the impugned goods as per Rule 10(1)(c) of the Customs Valuation Rules, 2007 and the differential duty is payable by Xiaomi India for the extended period.
The Tribunal noted that the payment of royalty to Qualcomm Inc. and Beijing Xiaomi was for the Xiaomi brand Mobile Phones manufactured by their contract manufacturers in India, as well as for the complete Xiaomi brand mobile phones imported by Xiaomi India from Xiaomi China, and such royalty is paid on account of bundled licensed software technologies and licensed hardware technologies, embedded in the imported parts and components used for making, using in the manufacture and selling of finished mobile phones.
Finding that all costs incurred by the Contract Manufacturers (CMs) are reimbursed to them as per the ring-fencing clause of the Agreement between Xiaomi India and the CMs, the Division Bench comprising P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) observed that the ‘buyer’ of the imported goods is Xiaomi India and not the CMs. In this context, including the ring fencing of the CMs from government-related demands and making it reimbursable to the CMs, the Bench observed that the customs duty can be demanded from the beneficial owners, i.e., Xiaomi India.
The New Delhi Income Tax Appellate Tribunal (ITAT) ruled that if a taxpayer company situated in India has earned export income from Japan and taxes were already withheld there, then the taxpayer shall be granted complete credit of foreign taxes (FTC) paid under section 90 of the Income Tax Act, read with India-Japan Double Taxation Avoidance Agreement (DTAA), even if such income was exempt under section 10A or neutralized by brought-forward losses.
At the same time, the Appellate Tribunal clarified that the said taxpayer cannot seek interest under section 244A of the Income Tax Act, on refund arising from allowance of FTC, since there was no excess payment to the Indian exchequer by way of advance tax, TDS, or TCS, after taking into account FTC.
The Division Bench comprising Challa Nagendra Prasad (Judicial Member) and Naveen Chandra (Accountant Member) observed that Canon India (the appellant) be granted complete credit of taxes paid by it in Japan on export revenues from the sale of software and not restricted owing to nil tax liability on account of business losses or 10A deduction under the Income Tax Act.
The Gujarat Electricity Regulatory Commission (Gandhinagar) reaffirmed that the imposition of new or increased statutory duties and taxes on all inputs costs necessary for generation and sale of electricity after the bid submission date constitutes a Change in Law event under the Power Purchase Agreement (PPA) in line with principles of business efficacy, and that affected generators are entitled to compensatory relief to preserve the financial equilibrium of their projects.
To reinforce the investor confidence in India’s renewable energy sector, particularly in the context of cost pass-through and tariff stability for long-term PPAs, the Commission emphasised that if the deviation in bidding documents is accepted after issuance of the letter of award to the successful bidder, then it would inevitably create pragmatic difficulties. In such cases, by the time of tariff approval, the bidding process would have already been concluded, and bids would have been submitted based on unapproved deviated provisions. The Commission pointed out that approving such deviations during the tariff proceedings would undermine the entire purpose of Section 63 of the Electricity Act, 2003.
Therefore, the Commission held that the Customs Notifications imposing Basic Customs Duty (BCD) on solar inverters constitute Change in Law events under Article 9 of the PPA and allowed the claim of Juniper Green Three (petitioner/ renewable energy developer) in full, while observing that the increase in GST on solar modules and inverters also qualifies as a Change in Law event since the same are essential inputs for generation and sale of electricity. The Commission thus granted a restitutionary relief of Rs. 41.84 crores while disallowing Rs. 2.26 crores claimed towards other balance-of-system equipment.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, upheld the customs demand, interest and penalties for using a fraudulently registered Focus Product Scheme (FPS) licence, since forged licences/ Telegraphic Release Advice (TRA) render imports void ab initio and due diligence is not exercised.
Reference was made to Section 114A of the Customs Act, which provides for a penalty for short levy or non-levy of duties in certain cases. Since, in the instant case, it is not in dispute that the impugned order has confirmed the demand of duty for the reason that it was not paid, the Tribunal held that the penalty under section 114A of the Customs Act was correctly imposed.
The Division Bench comprising Rachna Gupta (Judicial Member) and P V Subba Rao (Technical Member) observed that after the purchase of a license, the importers did not apply for the issue of Telegraphic Release Advice (TRA) from the port of Registration (POR), as was required to obtain the TRAs from the brokers. Not only that, they also failed to ascertain the veracity of such TRAs from the Port of Registration. Thus, the due diligence that was required to be exhibited by the importer was not carried out.
CESTAT Larger Bench: Abolished Education and Krishi Kalyan Cess Cannot Be Carried Forward Into GST
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has ruled that with the Education Cess and Krishi Kalyan Cess (KKC), getting subsumed within Excise Duty and Service Tax way back in 2015, with no similar Cess imposed under the CGST Act, there is no scope that the Cesses would be treated as being eligible as Input Tax Credit [ITC] under the GST regime.
The Appellate Tribunal, therefore, clarified that the Education Cess and KKC could not have been transitioned to the GST regime. Reference was made to Rule 3(7) of the CENVAT Credit Rules, 2004, which stated that the Education Cess, while being eligible to be taken as CENVAT Credit, was specifically to be used for the discharge of the Education Cess only for the finished goods cleared / service provided.
Hence, when the Education Cess on goods became fully exempt in view of the Notifications issued under Section 5A of the CEA, 1944, the utilisation of the existing Education Cess left as the closing balance as of March 01, 2015, also got fully blocked. Similar is the situation with respect to services being fully exempt from the payment of Education Cess and KKC, whereafter the closing balance as of June 01, 2015, was fully blocked.
The Larger Bench comprising R Muralidhar (Judicial Member), Binu Tamta (Judicial Member) and P Anjani Kumar (Technical Member) observed that the ‘Vested Right’, if any, was conferred on the appellants on March 01, 2015 and June 01, 2015, the notified date after which they could not utilise the available balance of Education Cess. But the appellants did not press for the refund of such blocked credits. Rather, they were simply carrying forward the balance for more than 2 years in the returns filed by them.
While refusing any relief over refund of service tax claimed by the Mahindra Holidays and Resorts, the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the refund claims under Section 11B(2) of the Central Excise Act, 1944, filed beyond one year from the date of payment of service tax are barred by limitation, notwithstanding the transitional provision contained in Section 142(5) of the CGST Act.
Essentially, the Tribunal clarified that the non-obstante clause in Section 142(5) of the CGST Act cannot override the limitation period prescribed under Section 11B of the Central Excise Act.
The Division Bench comprising Ajayan T.V. (Judicial Member) and Ajit Kumar (Technical Member) considered the clash between the time limit prescribed under Section 11B of the Central Excise Act, 1944, vis-à-vis the non-obstante clause in Section 142(5) of the CGST Act, to decide the applicability of the limitation period over refund claims.
In an appeal relating to the import of duty-free gold by HDFC, as a nominated agency and the subsequent diversion of such gold by the jeweller, the New Delhi Customs Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the appellants, being nominated agencies, are liable to pay customs duty, which has been appropriated from the security deposited by the jeweller. At the same time, the Tribunal set aside the confiscation of duty-free gold, nullified the redemption fine, and quashed the penalty imposed under Section 112(a) of the Customs Act.
The Division Bench comprising Binu Tamta (Judicial Member) and Sanjiv Srivastava (Technical Member) observed that importation of gold falls within the purview of prohibited items under Section 2(33) of the Customs Act as it is classified in the ‘restricted’ category of goods, and the Government of India, through RBI, has introduced a policy permitting duty free import of gold through nominated agencies and authorized banks, regulated under the Customs Act, Notifications, FTP, and HBP, to streamline supply of precious metals for exports and prevent divergent practices.
The Chandigarh Customs, Excise and Service Tax Appellate Tribunal (CESTAT) clarified that the service tax in the case of Sponsorship Service is to be paid by the recipient of the service in terms of Notification No.16/2006-ST dated July 25, 2006. As the appellants did not render any Business Auxiliary Service, no service tax liability can be attached to it.
The Division Bench comprising S. S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) observed that the Revenue Department has not shown any evidence to the effect that the appellants have rendered any service to M/s Procam International, from whom they received the tournament subsidy, and no contract was placed on record to such effect.
The Bench referred to the only argument raised by the Department that Procam International is paying the respective District Cricket Associations as the sponsorship fee on behalf of Parle G and Boost, to found that the appellants have no agreement either with Procam International or with Parle G and Boost; and they have just transferred the amount, received from Procam International on behalf of Parle G and Boost, to the District Cricket Associations towards the sponsoring of inter-school tournament.
The Kolkata Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that importing food products intentionally through Changrabandha LCS, knowing very well that it was not an authorised port to import such goods, amounts to a clear violation of the provisions of the Notification issued by the Department of Animal Husbandry, Dairying and Fisheries in the Ministry of Agriculture under S.O. 2666(E) dated October 16, 2014.
The Tribunal explained that food products need to comply with certain standards at the time of imports, and thus need to be checked by the authorities having expertise to examine the said goods. Such expert authorities are not available at all the Ports, and hence, importation of these items has been restricted only through the designated ports where such experts are available for examination of the said goods.
The Division Bench comprising R. Muralidhar (Judicial Member) and K. Anpazhakan (Technical Member) observed that since the Changrabandha LCS is not one of the authorised ports to import the livestock products as per the Notification issued by the Department of Animal Husbandry, Dairying and Fisheries in the Ministry of Agriculture under S.O. 2666(E), the importer-appellant failed to comply with the provisions of the Department of Animal Husbandry Dairying and Fisheries, in importing products from the said unauthorised LCS.
The Chennai Income Tax Appellate Tribunal (ITAT) held that voluntary donations received by an educational charitable trust cannot be added as income in its hands. Accordingly, the Tribunal deleted the additions made in the hands of the appellant educational trust under Section 115BBC of the Income Tax Act.
The Tribunal further found that the total donations of Rs. 31.60 lacs were received from 808 students/parents, which works out to an average of Rs. 3,911 per person, which is a too-small amount to be categorised as a capitation fee or a mandatory contribution linked to admission.
A Single Bench of George George K (Vice President) observed from the declaration appearing in the application form for admission, that the same is of a general nature and cannot be interpreted as forming part of the admission procedure or as a condition precedent for securing admission in the school.
The Chennai Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that intellectual property rights should be registered under Indian law, for the purpose of their taxation under the Indian Fiscal Statutes. Since the permission granted to Real Image Media Technologies (appellant-sound production company) for the use of the imported equipment of DTS to create soundtracks does not amount to a transfer of technology, no service tax is liable on a reverse charge basis.
Finding that the intellectual property in question was not registered in India, the Tribunal held that they do not constitute ‘intellectual property rights’ within the meaning of Section 65 (55a) of the Finance Act, 1994. Since the related services are not ‘intellectual property services’ within the meaning of Section 65 (55b) of the Finance Act, 1994, the Tribunal ruled that there is no import of services which were liable to tax on a reverse charge basis under Section 66A of the Finance Act, 1994, read with Rule 2(1) (d) (iv) of the Service Tax Rules, 1994.
The Division Bench comprising P. Dinesha (Judicial Member) and Vasa Seshagiri Rao (Technical Member) negated the opinion of the Revenue Department that the IPRs in question are very much covered under the Indian law in force, claimed on the basis that the use/transfer of technology is covered under ‘the Patent Act, 1971’ and the trademarks are covered under the ‘Trade Marks Act, 1999”.
The Mumbai Income Tax Appellate Tribunal (ITAT) came to the aid of Aishwarya Rai Bachchan (appellant-taxpayer) and granted relief from investment expenditure disallowances of Rs. 4.11 Crores under Section 14A of the Income Tax Act, read with Rule 8D, which was made without segregating the investments from which exempt income was derived by the appellant.
The Tribunal held that the AO cannot simply reject the computation submitted by the actress-taxpayer as per Section 14A read with Rule 8D after considering only those investments from which exempt income was earned during the year, without assigning any reason.
The Division Bench comprising Pawan Singh (Judicial Member) and Renu Jauhri (Accountant Member) observed that the AO had to record his satisfaction as to why the suo-moto disallowance made by the appellant was not acceptable. Reference was made to the decision of the Apex Court in the case of Maxopp Investments Ltd. vs. CIT [(2018) 402 ITR 640].
While quashing the demand for differential excise duty imposed against Wipro (appellant), the Chennai Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that when the laptops were purchased by the government undertaking for its free distribution among the school children in the respective State, no MRP was required to be declared, and only transaction value at Retail Sale Price (RSP) would sustain.
The Tribunal clarified that ‘service’ referred in the definition of “Institutional Consumer” under Section 4A of the central Excise Act, 1944, is the service industry like airlines, railways and other similar services and as such the activity of free distribution of laptops among weaker section of school children in the State, on behalf of the State, cannot be called service industry as it is not a commercial activity.
The Division Bench comprising P. Dinesha (Judicial Member) and M. Ajit Kumar (Technical Member) observed that the appellant company had cleared the laptops in dispute to ELCOT, which is a government undertaking, and which was later to be issued to the school students free of cost.
The Mumbai Income Tax Appellate Tribunal (ITAT) allowed the exemption claimed by the Tata Education Trust (appellant) under Section 10(34) and 10(35) of the Income Tax Act, clarifying that the order of cancellation of registration granted to the trust under Section 12A must be held to be effective from the date on which the hearing on first show-cause notice was concluded and was formally acquiesced by the trust.
The Tribunal emphasised that without disposing of a previous matter, the Commissioner, or his successors, could not have started other parallel proceedings for cancellation of registration obtained under section 12A. The registration, having been ‘obtained’ under section 12A, was in the nature of a benefit to a trust, and it was, therefore, entirely at the option of the trust.
The Division Bench comprising Saktijit Dey (Vice President) and Narendra Kumar Billaiya (Accountant Member) reiterated that a charitable trust unwilling to avail the ‘benefit’ of registration obtained under section 12A of the Income Tax Act cannot be, directly or indirectly, and by actions or by inactions, compelled by the Revenue Authorities, to continue with the said registration, particularly when it pertained to the registration obtained in a period before the insertion of section 12AA.
While holding recharacterization of Netflix Entertainment Services India (appellant) as a full-fledged entrepreneur or content provider contrary to law, the Mumbai Income Tax Appellate Tribunal (ITAT) accepted the arm’s length price determined by the appellant under the Transactional Net Margin Method (TNMM) and deleted the entire transfer pricing (TP) adjustment of Rs. 444.93 crores made in the hands of the appellant by treating it as a licensee of intellectual property owned by Netflix US.
Expressing concern over the increasing tendency of transfer-pricing officers (TPO) to conflate technological presence with economic ownership, the Tribunal held that the mere existence of servers, caches, or support personnel in a jurisdiction cannot by itself confer value-creation status. Unless an Indian entity controls, develops, or exploits the underlying intangible assets, its remuneration cannot exceed a routine distributor’s return.
The Division Bench comprising Amit Shukla (Judicial Member) and Renu Jauhri (Accountant Member) observed that Netflix India’s FAR profile, asset composition, risk insulation, and contractual obligations unequivocally categorise it as a limited-risk distributor. Hence, attributing nearly half of Netflix’s global subscription revenue to its Indian subsidiary, which neither owns nor develops the underlying content or technology, violates the arm’s length principle enshrined in transfer pricing law.
The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), New Delhi, saved Ericsson India from the rigours of penalty and held that the coordination and advice provided post-importation activities cannot lead to a conclusion that technical services are a precondition for the sale of imported goods. The Tribunal explained that royalty paid for technical know-how is not a ‘condition of sale’ merely because it is included in the value of imported goods.
Accordingly, the Tribunal quashed the order passed by the Additional Director General where it was held that the royalty paid by the Ericsson India (appellant) to its foreign related party LM Ericsson Sweden would be includible in the transaction value of the components imported by Ericsson India from Ericsson Sweden in terms rule 10(1)(c) of the 2007 Valuation Rules, 2007. Resultantly, the Tribunal also quashed the penalty imposed upon Ericsson India under section 114A of the Customs Act.
The Division Bench comprising Justice Dilip Gupta (President) and Hemembika R. Priya (Technical Member) observed from a perusal of the Technical Cooperation Agreement that Ericsson India (appellant) shall purchase “components of GSM Mobile Telephone System” which are basically finished goods. However, the Agreement does not extend to the imported goods, i.e., components used in the manufacture of finished goods.