Issue No. 288 / May 03^rd, 2025

Dear Professionals,

We are glad to present to you the 288th 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 131010+ 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

ITR Vol No. 473 PART 1	04th April 2025
ITR Trib Vol NO. 121 Part 5	03rd Feb 2025
CTR Vol No. 342 Issue 6	07th Feb 2025
DTR Vol No. 248 Issue 64	08th April 2025
TAXMAN Vol No.. 302 Part 3	18th Jan 2024
ITD Vol No. 210 Issue 4	22nd Jan 2025
TTJ Vol No. 234 Issue 11	18th March 2025

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Key Takeaways from Handpicked Rulings

1) SC: Issues notice on admissibility of assessee’s delayed cross-objections in revenue appeals. SC issued notice in a case where the HC admitted Revenue's appeals on certain substantial questions of law but declined to condone the delay in filing cross-objections by the assessee (filed 461 days late). SC is now seeking Revenue’s opinion if it has any objection on considering assessee's cross-objections by the HC, given that the Revenue’s appeals were admitted on substantial legal grounds.

Click here to read and download SC order 

2) SC: Affirms HC decision quashing CBDT's search proceedings and consequential actions under section 132(1). SC dismisses the Revenue's Special Leave Petition (SLP), upholding the Bombay HC decision to quash the CBDT-authorized search under Section 132(1), citing that the grounds for the search were irrelevant and the reasons recorded amounted to a mere pretence. While the SC chose not to interfere with the HC judgment, it kept the question of law open; HC observed that the reasons recorded in the file were extremely general in nature (and not disclosed), and that the satisfaction note did not reflect any process of forming a reasonable belief……….. 

Click here to read and download SC order 

3) HC: Admits UK tax resident appeal despite being a non-filer, to address key issues on reclassification of Income as FTS. HC has admitted an appeal by a UK tax resident against the ITAT order, wherein it was held that the Assessee, providing technical services and receiving payments sourced from India, is liable to tax under Section 9(1)(vii) of the Income Tax Act. Despite the Revenue's objection that the appeal is invalid due to the Assessee’s failure to file a return (and the Income Tax Act’s stipulation that a non-filer cannot maintain an appeal), the HC disagreed. The Court ruled that an appeal can be filed under Section 260A of the Income Tax Act if it raises a substantial question of law, irrespective of the Assessee's filing status. The Assessee has raised several legal questions, with the Court focusing on two issues: 1) whether the Appellant's income of Rs. 3.31 crore is taxable under Indian law or the India-UK Double Taxation Avoidance Agreement (DTAA), and 2) whether the ITAT was correct in reclassifying the income as Fees for Technical Services. The next hearing is scheduled for May 13, 2025. 

Click here to read and download HC Order 

4) HC: Interest on delayed compensation forms part of Capital Gains; Section 56 inapplicable unless clearly separated. HC allowed the assessee’s appeal for Assessment Year (AY) 2015–16 and ruled that compensation received for compulsory land acquisition—including interest on delayed payments under Sections 28 and 34 of the Land Acquisition Act, 1894 (LAA)—is to be treated as capital gains under the Income Tax Act (I.T. Act). In cases involving agricultural land, both the compensation and the interest form part of the exempt income under Section 10(37). HC clarified that since the interest awarded under Sections 28 and 34 of the LAA is compensatory in nature and forms an integral part of the compensation, it cannot be classified as standard "interest" under Section 2(28A) of the I.T. Act. Consequently, such interest does not fall under the purview of Section 56, including Section 56(2)(viii). The assessee had challenged two orders of the ITAT. The first, dated 30.03.2023, held that 9% interest was exempt as capital gains under Section 10(37), while 15% interest was taxable under Section 56(2)(viii). The second, dated 19.04.2024, ruled that all interest on delayed compensation (post the 2010 amendment to the LAA) is taxable under Section 56(2)(viii) and not exempt under Section 10(37), even where the land acquired was agricultural. The assessee contended that interest awarded under Section 28 of the LAA is ……..

Click here to read and download HC Judgment

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5. HC: Interest on delayed compensation forms part of Capital Gains; Section 56 inapplicable unless clearly separated. HC allowed the assessee’s appeal for Assessment Year (AY) 2015–16 and ruled that compensation received for compulsory land acquisition—including interest on delayed payments under Sections 28 and 34 of the Land Acquisition Act, 1894 (LAA)—is to be treated as capital gains under the Income Tax Act (I.T. Act). In cases involving agricultural land, both the compensation and the interest form part of the exempt income under Section 10(37). HC clarified that since the interest awarded under Sections 28 and 34 of the LAA is compensatory in nature and forms an integral part of the compensation, it cannot be classified as standard "interest"……..

Click here to read and download HC Judgment

6. ITAT: Successor AO cannot reopen case on same grounds already examined; Reassessment quashed as void. ITAT quashed 23 reassessment orders pertaining to Assessment Years (AYs) 2012–13 and 2013–14, based on a survey conducted on the charitable trust. ITAT held the reassessments to be void ab initio, citing that they were based solely on a change of opinion and lacked any new or tangible material, thereby violating the provisions of Sections 147 and 143(3) of the Income Tax Act. The reassessment proceedings originated from a survey that uncovered unaccounted cash payments related to land acquisitions and college construction. During the course of the survey, trustees admitted to unaccounted payments amounting to Rs. 2.25 crores in AY 2013-14. Taxes were duly paid on this amount, and the original assessments were completed without any further claims or discrepancies. Years later, however, reassessment notices were issued. The Assessing Officer (AO) alleged underreporting of land and construction costs totaling Rs. 4.90 crores across AYs 2012–13 and 2013–14, which were assessed in the hands of individual trustees. The CIT(A) upheld the reassessment proceedings, leading to the current appeals before the ITAT. In the case of Shri S. Aravind’s appeal for AY 2012–13, the assessee contended that the AO had access to the relevant survey material well before the deadline for issuing a scrutiny notice under Section 143(2) but opted not to initiate scrutiny proceedings.……..

Click here to read and download ITAT order

7. ITAT: Allows Section 80P(2)(d) deduction on Interest from Co-op Bank deposits, subject to gross total Income limit. ITAT ruled that a co-operative society earning interest from deposits with a co-operative bank is eligible to claim a deduction under Section 80P(2)(d) of the Income Tax Act, subject to the gross total income limit. The ITAT instructed the Assessing Officer to allow the deduction under Section 80P(2)(d) based on the interest income included in the gross total income. It also clarified that such deductions under Chapter VIA should be limited to the amount of the gross total income.

Click here to read and download ITAT order

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About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 131010+ Income Tax Rulings reported across ITR, CTR, Taxman, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:   

a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;

b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

d) Judicial “forward & backward reference” 

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.  

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Dear Professionals,

On February 1, 2025, Finance Minister Smt. Nirmala Sitharaman presented the Union Budget 2025 in Parliament, along with the Finance Bill 2025, which proposes amendments to tax and corporate laws. The Budget primarily focuses on boosting consumption by reducing income taxes, allowing more money to remain in the hands of average Indians. Starting April 1, individuals earning up to Rs 12 lakh will be exempt from tax, and tax slabs for various income levels have been revised. The new tax regime aims to encourage more people to shift from the old system, which had numerous exemptions. Whether taxes increase or decrease will depend on one's previous tax slab and the number of exemptions claimed. Overall, the Budget intends to leave more income in people's pockets for either spending or investing.

Click here to read and download, "The key policy changes in Direct Tax Laws and the rulings affected by the Finance Bill, 2025."

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About Taxsutra Database! 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 130196+ Income Tax Rulings reported across ITR, CTR, Taxman, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:  

a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;

b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

d) Judicial “forward & backward reference”  

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.  

T: +91 95952 18026 | C:+91 93200 54016 | E: sales@taxsutra.com

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 285 / October 16th, 2024 Dear Professionals, We are glad to present to you the 285th 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 129126+ 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 ITR Vol 467 PART 5 Dated - 30th Sep 2024 ITR Trib Vol 113 Dated – 1st July 2024 CTR Vol. 340 Issue 34 Dated – 06th Sep 2024 DTR Vol 242 Issue 183 Dated – 07th Oct 2024 TAXMAN Vol. 300 Part 5 Dated – 05th Oct 2024 ITD VOL.208 Issue 5 Dated – 02nd Oct 2024 TTJ VOL. 231 Issue 33 Dated –03rd Sep 2024 *********************** *********************** Key Takeaways from Handpicked Rulings 1) ITAT: Confirms addition of coordination & settlement expenses earned by the Assessee under income from other sources. ITAT confirms addition of Rs. 1.75 Cr as commission under the head income from other sources and holds that the said receipts are not deductible under Section 57 as coordination & settlement expenses; Notes that the Assessee claimed the income as deduction towards expenses but no evidence was furnished in support of the expenditure so incurred/claimed, thus the Revenue made addition in the absence of any evidence in support of expenses incurred; Opines that, “the Assessing Officer has not committed any error in accepting the income of Rs.1,75,00,000/- disclosed by the assessee himself in his return of income under the head "income from other sources" for which the assessee has also claimed relevant TDS of Rs.1,75,000/- & therefore considering the totality of the facts, we do not see any infirmity in the order passed by LD CIT(A)/NFAC & therefore does not require any interference from this Tribunal”; Thus dismisses Assessee’s appeal………. Click here to read and download ITAT Order 2. ITAT: Refuses to condone 291 days’ delay in filing Assessee’s appeal absent reasonable cause of delay. ITAT refused to condone the delay of 291 days in filing the appeal and dismisses Assessee’s appeal challenging the CIT(E) order denying permanent registration to the Assessee under Section 12AB on the point of limitation; Opines that, “the appellant has not been able to demonstrate any reasonable cause to allow condonation of delay in the matter”; Notes that the CIT(E) denied the registration on the ground that the Assessee failed to comply with notices issued for hearing and in the absence of verification of financial transactions for the genuineness etc. the said Trust could not be eligible for approval u/s 12A(1)(ac)(iii); Observes that two essential ingredients for condoning delays are: (i) the existence of 'sufficient cause', and (ii) the satisfaction of the competent authority that such sufficient cause was proved as existing; Finds that it is a general principle of law that whenever a Court is vested with a discretionary power, such a discretion must be exercised not in an arbitrary, vague or fanciful manner but on judicial principles; Observes that the fundamental principle, which has been universally recognised as the true rule of guidance for the exercise of discretion to condone delays is to see whether the party claiming indulgence has been reasonably diligent in prosecuting his appeal………. Click here to read and download ITAT Order 3. ITAT: Confirms revision order as AO failed to gather necessary information and verify the same. ITAT confirms the revision order under Section 263 passed by the PCIT; Remarks that, “In the present case, the ld. AO absolutely closed his eyes for the reasons best known to him and accepted the submission of the assessee without verifying the same at the face of it, which necessitated the PCIT to exercise his powers u/s.263”; Observes that the AO having failed to gather necessary information regarding the impugned issue, the PCIT is justified in exercising his power u/s 263 to cause further enquiry on this issue; Further observes that it is incumbent upon the AO to come to an independent conclusion that the expenditure is allowable under Section 37 or taxable under Section 69C; Thus dismisses Assessee’s appeal…….Click here to read and download ITAT Order 4. ITAT: Denies condonation of over 2006 days' delay; No 'sufficient cause' established u/s 253(5) of the IT Act. ITAT dismissed the assessee’s appeal in limine due to a delay of 2006 days in filing the appeal, citing negligence and inaction on the part of the assessee as the reasons for this inordinate delay; Assessee challenged an addition of Rs. 1,34,80,381 made under Section 40(a)(ia) but did not press this ground before the CIT(A), who dismissed the appeal on March 23, 2018. An inquiry into alleged fraud led to a special audit in March 2023, after which the assessee decided to file a new appeal on November 29, 2023, resulting in a 2006-day delay. Assessee requested the delay be condoned, citing reasonable cause. However, the assessee failed to demonstrate that its employee received the assessment order or that the employee informed the assessee regarding the passing of the orders by the learned AO. ITAT held that the assessee must demonstrate that (a) the employee was competent; (b) the employee exercised reasonable care; and (c) any mistakes made were those that a competent person would not make. A written confirmation from the employee was necessary, and if the communication was oral, adequate evidence had to be provided to show that there was no negligence or lack of skill. ITAT found no "sufficient cause" for the delay as defined under Section 253(5) of the I.T. Act, leading to the rejection of the request for condonation. The appeal was dismissed without being admitted…………Click here to read and download ITAT Order *********************** *********************** 5) HC: Condones the delay in filing revised return as genuine hardship was caused to the Assessee. HC sets aside the demand order issued by the Revenue under Section 143(1)(a) based on the original return of income and directs the Revenue to process the revised return of income filed by the Assessee for the relevant AY 2017-18; Concurs with Assessee’s argument that Section 119(2)(b) contemplates that if there is any genuine hardship to the Assessee same could be condoned by the board; Finds that, “In the present facts and circumstances of the case, as there is a genuine undue unjust hardship that would be caused to the petitioner. If delay is not condoned and further proceedings could be assessed by the authorities by making assessment, if any, afresh for calculation of any loss or excess payment of tax for underpayment of tax this is of course at the liberty of respondent”; Thus allows Assessee’s writ petition……….. Click here to read and download HC Judgment  6) HC: Upholds ITAT order quashing revision order; accepts Assessee’s hybrid accounting system. Meghalaya HC upholds ITAT order quashing revisionary order under Section 263 concluding that the assessment order is neither erroneous nor prejudicial to the interest of revenue and allowed Assessee’s appeal following hybrid system of accounting with respect to ―interest on debtors on cash basis; Notes that Revenue passed an order under Section 263 which was set aside by the PCIT and thereafter the reassessment order was passed by the Revenue; Observes that once the order under Section 263 has become final and stood quashed, no question of passing another order will arise in view of the fact that the subsequent order passed by the Revenue is invalid in the eye of law, as the opinion formed by the Revenue, is not sustained on the reasoning that revision under Section 263 is not permissible; Further observes that when the assessment order was found to be erroneous and prejudicial to the interest of Revenue, the right vests with the PCIT to review the order and since the said stipulation has not been satisfied, the order passed under Section 263 cannot stand on its leg; Points out that although the term ‘res judicata’ cannot be blindly applied to the income-tax proceedings as held by..…… Click here to read and download HC Judgment *********************** *********************** About Taxsutra Database!  “Taxsutra Database”, a true Income-tax research tool, is an archive of over 129126+ Income Tax Rulings reported across ITR, CTR, Taxman, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:   a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience; b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation; c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.   d) Judicial “forward & backward reference”   The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.   T: +91 95952 18026 | C:+91 93200 54016 | E: sales@taxsutra.com Copyright © TAXSUTRA. All Rights Reserved

Dear Professionals,

We are glad to present to you the 284th 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 127520+ 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’

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Key Takeaways from Handpicked Rulings

1) HC: Holds mere incorrect mention of provisions cannot amount to discarding the addition; Confirms Sec. 68 addition - HC upholds the ITAT order confirming the addition under Section 68 towards unexplained cash deposits in the bank account; Points out that, although, the bank pass book itself cannot be treated as books of accounts, however, in the instant case, as the Assesssee already had submitted documents such as balance-sheet, profit and loss account, computation of income etc. and certainly had also maintained his own books of account in his ledger; Thus  rejects Assessee’s contention that the addition made under Section 68 on the basis of bank account is not sustainable as it was made only on the basis of bank account and not on the basis of books of accounts; Notes that the Assessee failed to  prove the source of income or identity / creditworthiness / genuineness of the creditors, from whom the cash loan was claimed to be obtained; Reiterates the….……. Click here to read and download HC Judgment copy

2. HC: Holds Sec. 153C notice valid, despite the satisfaction being in verbatim with searched entity’s satisfaction. HC dismisses Assessee’s writ petitions challenging Section 153C proceedings for AY 2014-15, and the order rejecting Assessee’s objections; Rejects Assessee’s contention that the satisfaction note in case of the searched person and in case of the Assessee (non-searched person) are verbatim, thus the Revenue did not apply his mind independently and merely proceeded on the satisfaction note recorded by the AO of the searched person, thus, the notice under Section 153C fails to fulfill the legal and jurisdictional requirement under Section 153C(1); Observed that, in light of the amendment in Section 153C with effect from Jun 1, 2015, the requirement is that even an information contained in the documents seized, if pertains to or relates to a person other than the searched person, the requirement of Section 153C(1) can be held to be fulfilled; Opined that, “In view of the categorical statement in the satisfaction note of the searched person forwarded by the Assessing Officer of the searched person to the Assessing Officer of the petitioner assessee, it cannot be assumed that no prima facie satisfaction of the seized material being “pertain to” the petitioner assessee could be recorded”; Thus holds that the satisfaction….……. Click here to read and download HC Judgment copy

3. ITAT: Refuses to delete Sec. 69 addition solely for erroneously mentioning wrong Section; Remits the issue. ITAT remits the issue of addition under Section 69, to the CIT(A) for consideration of the issue afresh; Opines that, “the addition cannot be deleted for the sole reason that the section under which the addition is made is mentioned erroneously and that it is necessary to look into the merits of the case”; Notes that the Revenue called upon the Assessee to submit various details to establish the source for purchase of immovable property, however as the Assessee did not furnish the requisite details such as loan confirmation, income tax returns and copy of bank account etc., Revenue treated the loan as non-genuine and made the addition under Section 69 towards the entire loan; Further notes that the CIT(A) dismisses Assessee’s appeal on the ground that the Assessee did not appear nor furnish any details to prove the genuineness of the transaction; Observes that the addition is made primarily for the reason that the assessee has not furnished details to substantiate the genuineness of the impugned transactions thereby not discharging the onus; Thus remits the issue in the interest of natural justice and fair play..….……. Click here to read and download ITAT Order

4. ITAT : Remits the issue of capital gains and Sec. 54F exemption over the dispute of quantum of jewellery sold - ITAT sets aside the CIT(A) order granting Assessee the exemption under Section 54F against the long term capital gains on sale of jewellery acquired through inheritance from her late mother-in-law; Notes that the Revenue rejected Assessee’s claim of deduction under Section 54F against the long term capital gains on sale of jewellery acquired through inheritance on the ground that there is a mismatch in the description of jewellery sold as per the wealth tax disclosure and bill of purchase obtained from the purchaser, i.e.  Navarathan Jewellers; Opines that, “CIT(A) is not justified in giving the findings with regard to existence of long term capital assets in the form of jewellery acquired through the Will from Late Kasturi Shoury and consequently granting the relief which is incorrect without reconciling the quantity of jewels mentioned in the Will vis-à-vis Valuation Certificate issued by the Navarathan Jewellers”.; Thus, remits the issue of capital gains on sale of salary and exemption thereon under Section 54F to the file of CIT(A) to decide afresh; Directs the Assessee to reconcile the quantum of jewellery inherited through the will along with valuation report issued by the purchaser jewellers..….……. Click here to read and download ITAT Order

5) ITAT: Compensation received on pre-mature termination to be treated as capital receipt, not liable to tax. Followed SC in the case of Kettlewell Bullen and Delhi HC in Khanna and Annadhanam. ITAT opines that, the pre-mature termination of the assessee's agreements due to Iraq's invasion of Kuwait and the subsequent sanctions on Iraq by the United Nations which resulted in the assessee receiving compensation from the United Nations Compensation Commission cannot be said to have occurred in the normal course of the assessee's business hence considered as capital in nature. ..….……. Click here to read and download ITAT Order 

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Expert Column

The Protocol signed between India and Mauritius on March 7, 2024 to amend the DTAA to include the Principal Purpose Test (PPT) clause and also to amend the preamble which is yet to be ratified and notified. The Protocol has been a subject of heated discussions due to the huge ramifications that emerge and further vindicated by the jurisprudence on treaty abuse, treaty shopping and GAAR.

Mr. Mukund Madhusudhan (Director, Taxation, Harman India) discusses the implications of the said Protocol to India – Mauritius DTAA and the amended preamble especially its interplay with the Blackstone judgment of Delhi HC, which is subjudice before Supreme Court, from a dividend perspective. The amended DTAA strives to eliminate double taxation and prevent non-taxation. Delhi HC held that benefit allowed under India-Singapore DTAA with respect to capital gains based on TRC of Blackstone and held that Revenue cannot go behind TRC to deny treaty benefits as the TRC issued by the other tax jurisdiction is sufficient evidence for claiming eligibility for DTAA benefit, residency and legal ownership. The author discusses the implications under both the scenarios – (i) if SC upholds the Delhi HC judgment (ii) if SC reverses the Delhi HC judgment. The author emphasises the all pervasiveness of PPT as it does not spare any stream of income including dividend income. Author opines that a plain reading of Article 3 of the said Protocol indicates that the amendment could be retroactive.

The author concludes, “one could ponder if the Blackstone ruling would lend any support to the taxability of dividend income at the lower rates in the hands of Mauritius entities as per the treaty, if the taxman decides to invoke the PPT (amended preamble would support this as well). In other words, is the SC’s verdict as to whether TRC is conclusive for beneficial ownership, only theoretical? Not only from a Mauritius perspective, but in the case of all treaties where a PPT has been included?"

Click here to read the article, “Blackstone Decision and Mauritius PPT – Dividend Perspective!”

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About Taxsutra Database! 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 127520+  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’. It is a completely integrated service with the following features:  

a) Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;

b) Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

c) Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

d) Judicial “forward & backward reference”  

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.  

T: +91 95952 18026 | C:+91 93200 54016 | E: sales@taxsutra.com

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 281 / Feb. 08th, 2024 Dear Professionals, We are glad to present to you the 281st 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 126230+  Income Tax Rulings reported across ITR, CTR, Taxman, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’ Journals Current Status ITR Vol. 458 Part 5 Dated: 13th Nov 2023 ITR-Trib Vol. 107 Issue 2 Dated: 09th Oct 2023 CTR Vol. 334 Issue 41 Dated: 27th Oct 2023 DTR Vol 224 Issue 78 Dated: 28th April 2023 TAXMAN Vol. 295 Part 2 Dated: 11th Nov 2023 ITD Vol.203 Issue 4 Dated: 22nd Nov 2023 TTJ Vol. 225 Issue 41 Dated: 24th Oct 2023 *********************** Key Takeaways from Handpicked Rulings 1) ITAT: Upholds revision over notional rent on builder’s unsold flats kept as stock-in-trade.  ITAT upholds revisionary order under Section 263 wherein addition under Section 23 of deemed rental income in the hands of Assessee in respect of certain unsold flats for AY 2018-19 was made; Relies on SC judgment in Chennai Properties wherein it was held that the charging provision of Section 22 specifically gives exemption from determination of actual value of the property which is used for the purpose of any business or provision carried on by the Assessee; Observes that there is no dispute that the Assessee had retained the unsold stock of flats as stock-in-trade in the capacity of builder and the said unsold stock of flats were used only for the purpose of business; Relies on coordinate bench ruling in Pegasus properties and observes that Section 22 carves an exception wherein the stock-in-trade was indirectly taxed under relevant AY after providing moratorium period of 2 years, accordingly, up to AY 2017-18, no addition could be made in respect of deemed rental income on unsold stocks lying as stock in trade since they are used for business purpose; Observes that the availability of moratorium of 2 years commences from the date of completion of flats and the in the present case, benefit under Section 22/23 cannot be claimed as it is applicable with effect from AY 2018-19 only i.e., completion certificates received AY 2018-19 onwards only and in the case of Assessee stock of real estate lying completed much before and Assessee must not have shown income on the same ……………Click here to read and download ITAT Order 2) HC: Expenditure for road-development by State Agricultural Marketing Board exempt under Sec.11 - HC holds that the expenditure incurred on construction of rural road and development of Mandis for achievement of objects prescribed under the Punjab Agricultural Product Market Act (‘Market Act’) is allowable for application of income under Section 11 and cannot be considered as repayment of loan taken from Haryana State Agricultural Marketing Board (‘Board’); HC observes that perusal of relevant provisions of Market Act clearly shows that it is not disputed that Assessee is applying its funds as per the statutory provision; Opines that on perusal of the payment details to Marketing Board by the Assessee shows that the excess payment of Rs.2.81 Cr was made towards development work which was also reflected in the balance sheet duly attested by CA; Notes that marketing committee is vested with the responsibility of effecting improvements besides ensuring that there is repair and maintenance of the existing infrastructure and the whole purpose is to provide better facilities in the rural areas and for the safety, health and convenience of persons who visit the market area for the sale of agricultural produce and for the general interest of the persons associated with the activities connected therewith; Holds that CIT(A) order was correct to the extent that the payment was made by the Assessee to the marketing board towards the statutory functions of application of money for the objects provided in the statute and it was not for repayment of any loan and accordingly, holds that both AO as well as ITAT wrongly came to the said conclusion regarding this aspect……………… Click here to read and download HC Judgment copy *********************** *********************** 3) HC: Allows Sec.10A deduction on deputation of technical manpower for onsite ‘software development’ -  HC holds reassessment initiated over allowability of deduction under Section 10A on income from deputation at the client’s place for software development which was already subject matter of assessment, thus, was mere change of opinion and liable to be set aside; Also holds that initiation of reassessment proceedings on the basis of assessment order for subsequent AY would amount to borrowed satisfaction which is impermissible; Notes that profits derived from export of computer software is eligible for deduction under Section 10A which was claimed by the Assessee and at the same time profit derived from business of tendering technical services outside India are eligible for deduction under Section 80HHE; Observes that there has been declaration in Form 56F including the expenditure relating to providing technical services and once the said primary fact was disclosed, there was no further obligation on the assessee; Observes that initiation of reassessment proceedings on the basis of assessment order for AY 2008-09 would amount to borrowed satisfaction which is impermissible; Observes that Revenue’s reliance on Master Service Agreement, work contract and SCWs and Invoices cannot be sufficient itself to initiate proceedings for deduction under Section 10A in absence of reasonable nexus between technical services rendered and the STP which is necessary for an allowable deduction under Section 10A…………… Click here to read and download HC Judgment copy 4) HC: Absent third-party sales, Sec.80-IA deduction allowable on captive power unit.  HC holds that the benefit of Section 80-IA cannot be denied to eligible Assessee merely because power generated by its power undertaking was consumed by its other business and not sold to outsiders; Also holds that an eligible undertaking entitled to claim benefit under Section 80-IA shall equally be eligible to claim benefit under Section 80-IC even in case of captive undertaking; Relies on coordinate bench judgement in Assessee’s own case for AY 2002-03 wherein it was held that the benefit under Section 80IA cannot be denied merely because the power generated was consumed at home or other business since it is well settled that a statute granting incentives for promoting growth and development should be construed liberally so as to advance the objective of the provision and not to frustrate it; Notes that Section 80IA is a special provision conferring certain benefits on undertakings in certain special category states; Relies on SC judgement in Bajaj Tempo wherein in context of Section 15C of the 1922 Act it was held that claim of deduction under Section 15C is allowable on profits and gains derived from an industrial undertaking established in a building taken on lease which was previously used for other business; During AY 2007-08, Assessee, an industrial undertaking claimed deduction of Rs.57.83 Lac under Section 80-IA in respect of its two captive power under takings which was denied by Revenue on the premise that the claim of deduction under Section 80-IA cannot be allowed since it had supplied power only to the paper undertakings belonging to the assessee itself and not to any outsider; CIT(A) allowed Assessee’s appeal which was also affirmed by ITAT..…………… Click here to read and download HC Judgment copy *********************** *********************** 5) HC: Treats final order violative of Sec.144C procedure as draft assessment order. HC sets aside assessment order passed without following the procedure under Section 144C in case of ‘eligible Assessee’; However, HC considers it as ‘draft assessment order’ in terms of Section 144C(5) on the premise that assessment order was passed within the extended timeline prescribed by notification under TOLA; Observes that merely because there is a procedural infraction in formatting the assessment order under Section 143(3) and demand notice will not ipso facto mean that assessment will have to abate on account of wrong formatting; Observes that the assessment order treated as draft assessment order under Section 144C(1) will not abate assessment until it is passed beyond the limitation prescribed under Section 153; Observes that on treating the final assessment order as draft assessment order, the Assessee have an option to approach DRP and assessment will have to be completed within one month under Section 144C(13)...………… Click here to read and download HC Judgment copy *********************** About Taxsutra Database!  “Taxsutra Database”, a true Income-tax research tool, is an archive of over 125660+  Income Tax Rulings reported across ITR, CTR, Taxman, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. 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