Issue No. 290 / June 13^th, 2025 

Dear Professionals, 

We are glad to present to you the 290^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena! 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 131340+  Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’ 

 Journals Current Status

1) SC: Dismisses Revenue’s SLP on 295-day delay; Legal question on share application money left open. SC dismissed the Revenue’s Special Leave Petition (SLP) due to a delay of 295 days, leaving the legal issue unresolved and the question of law open. Bombay HC upheld the earlier decisions of the CIT(A) and ITAT, allowing the related interest deductions under Section 36(1)(iii). The Court cited commercial expediency and relied on the Supreme Court’s ruling in S.A. Builders and Bombay HC rulings in Srishti Securities and Reliance Communications., which support the deductibility of interest on borrowed funds used for business-related investments. The HC agreed with the CIT(A) and ITAT, affirming that the transaction occurred in the ordinary course of business and had Board approval. Consequently, the interest expense was deemed deductible under Section 36(1)(iii). As no substantial question of law arose, the Revenue’s appeal was dismissed……………Click here to read and download SC order

2) ITAT: Payments to US entity taxable as FTS; ‘Make Available’ clause triggered under Article 12 of India-US DTAA. ITAT upheld the AO's decision to treat payments made by the assessee to its US head office as Fees for Technical Services (FTS) under Section 9(1)(vii) and Article 12 of the India-US DTAA. The ITAT held that the services rendered involved comprehensive technical and managerial functions, thereby triggering the 'make available' clause under the DTAA. Consequently, the payments were held to be taxable on a gross basis, rejecting the assessee’s contention that they constituted mere reimbursements. The ITAT also dismissed the assessee’s reliance on prior ITAT rulings, stating that the facts in the present case are materially distinguishable. Accordingly, the ITAT found……………. Click here to read and download ITAT Order

3) ITAT: Upholds non-taxability of interest from NPA, denies TDS credit without income. ITAT upheld the decision of the CIT(A), holding that no interest income accrued to the assessee from a debtor classified as a Non-Performing Asset (NPA), and therefore, the notional interest of Rs. 3.60 crores was not taxable. The ITAT emphasized that only real income is subject to taxation. However, the assessee's claim for TDS credit of Rs. 36 lakhs was rejected, as the corresponding income was not declared……………Click here to read and download ITAT Order

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4) ITAT: Validates addition on unaccounted mandapam receipts, directs AO to allow 25% as deductible expenses. ITAT held that while the addition of unaccounted Mandapam receipts was justified, the corresponding unrecorded expenses should also be taken into account. A search of the Sithanathan Mahal group uncovered unaccounted receipts from Mandapam operations documented on loose sheets. The Assessing Officer (AO) added the entire amount to the income without considering any related expenses, effectively assuming a 100% profit margin. The assessee claimed 30% of the receipts as deductible expenses, but the CIT(A) allowed only 15%, deeming the claimed expenses insufficient. The ITAT observed that although the loose sheets were incomplete, some business-related expenditures must be allowed. Considering industry standards, where profit margins generally range between 15% and 25%, the ITAT increased the allowable expenses to 25% and directed the AO to recompute the income accordingly. Consequently, the ITAT allowed all eight appeals filed by the assessee for statistical purposes………………Click here to read and download ITAT Order

5) HC: Quashes reassessment notice; Rules AE remittances already examined under TP, threshold not breached. HC rejected Revenue’s argument that all the remitted funds should be considered while determining if the Rs. 50 lakh threshold under Section 149(1)(b) was crossed, implying an intent to move funds out of India. HC observed that the remittances were regular payments made to overseas associated enterprises (AEs) for services, which had already been scrutinized in previous assessment and transfer pricing proceedings. As the case did not fall within the exception provided under Section 149(1A), the Court quashed the impugned notice and the related proceedings………………..Click here to read and download HC Judgment

6) ITAT: Rejects arbitrary GP estimation; Deletes additions due to lack of evidence. ITAT ruled in favour of the assessee, stating that the AO was not justified in rejecting the books of account or arbitrarily estimating a higher gross profit rate. The AO's estimation lacked supporting evidence and also disregarded previously accepted assessments. Since there were no defects in the accounting records or any indication of income suppression, the additions made on the basis of gross profit estimation were deleted. Accordingly, the appeal was partly allowed………………Click here to read and download ITAT Order

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