Income Tax Appellate Tribunal judgments

The ITAT Delhi has ruled that revenue from the sale of standard cybersecurity software licenses and incidental support services does not qualify as Fees for Technical Services under Article 12(3)(b) of the India-Ireland DTAA, even without a 'make-available' clause. This clarifies a critical tax treatment for global SaaS providers and reinforces the distinction between licensing and technical service delivery under tax treaties.

The ITAT Dehradun ruled that cash deposits during demonetization cannot be treated as unexplained income through mechanical lumpsum additions, even when the assessee fails to fully discharge its burden of proof. A reduced addition of Rs. 3 lakh was upheld as fair, setting a precedent for nuanced, fact-sensitive application of Section 68 in unorganized sector businesses.

The ITAT Mumbai has ruled that market data charges recovered from Indian associates and employee expense reimbursements received by a U.S.-based financial firm do not constitute royalty or fees for technical services under the India-US DTAA. This clarifies the tax treatment of cross-border cost recoveries for global financial institutions operating through non-PE structures in India, reinforcing the boundary between taxable service income and non-taxable reimbursement.

The ITAT Guwahati set aside the CIT(A)'s order for failing to provide any reasoning, ruling that non-appearance by the assessee does not absolve the appellate authority of its statutory duty to pass a speaking order. This reinforces that procedural fairness under Section 250(6) is non-negotiable - authorities cannot evade substantive adjudication by ignoring submissions or remaining silent.

The ITAT Bangalore has ruled that an Assessing Officer is legally bound to implement Dispute Resolution Panel directions under Section 144C(13) regardless of whether the Transfer Pricing Officer has finalized their order. This clarifies that statutory compliance with DRP mandates cannot be delayed or negated due to procedural lags in transfer pricing assessments, reinforcing taxpayer rights and administrative accountability in complex tax disputes.

The ITAT Delhi has ruled that corporate social responsibility (CSR) expenditures under the Companies Act, 2013 qualify for income tax deduction under Section 80G, provided the recipient institution is duly registered under the Income Tax Act. This clarifies a long-standing ambiguity for businesses and aligns CSR compliance with tax incentives, impacting thousands of corporate donors nationwide.

The ITAT Guwahati has ruled that an addition under Section 69 for unexplained investment cannot rest solely on a statement from a survey that has been formally retracted, even if initially supportive. This sets a vital safeguard for taxpayers, requiring independent corroborative evidence and a fair opportunity to present valuation and source documentation before any adverse inference is drawn.

The ITAT Agra has ruled that arrears of employer contributions to a superannuation fund qualify for relief under Section 89 of the Income Tax Act, even if the employer treats them as perquisites under Section 17(2). This clarifies that the nature of payment as a perquisite does not disqualify it from relief meant to mitigate tax burden on lump-sum arrears, benefiting salaried employees receiving delayed employer-funded benefits.

The ITAT Guwahati struck down a ₹29.14 lakh addition under Section 69C because the Assessing Officer failed to establish any connection between foreign remittances to China and the assessee’s purchases, especially where the funds were routed through a separate legal entity with a distinct PAN. This ruling reinforces that tax authorities cannot treat unrelated PAN-holding entities as a single unit for unexplained expenditure, protecting legitimate business structures from arbitrary aggregation.

The ITAT Delhi quashed a reassessment under Section 147, holding that monies received as trading receipts, already declared and taxed in the original return, cannot be treated as undisclosed income. This reinforces that reopening is not a tool for fishing expeditions where the taxpayer has fully disclosed the nature and source of receipts, safeguarding businesses from arbitrary reassessments.

The ITAT Guwahati ruled that cash deposits in an individual’s account, made solely as a fiduciary agent for a cooperative society and fully accounted for through corresponding business debits, cannot be treated as unexplained income under Section 69A. This sets a critical precedent for cooperative societies and their administrative agents, affirming that functional role and fund tracing override mere possession in tax assessments.

The ITAT Guwahati has ruled that eligibility for tax exemption under Section 10(26) for Scheduled Tribe members does not absolve them from proving the source of cash deposits or complying with mandatory return filing obligations. This sets a critical precedent: tax exemption and procedural compliance are distinct obligations, affecting thousands of tribal assessees who may mistakenly believe exemption removes all tax duties.

The ITAT Agra holds that a reassessment notice under Section 148 issued against a partnership firm that has been legally dissolved is void ab initio, as the entity no longer exists to be assessed. This ruling protects successors and former partners from post-dissolution tax liability based on non-existent legal persons, reinforcing that tax jurisdiction requires a living legal entity.

The ITAT Delhi has ruled that cash credits arising from non-taxable NRE fixed deposit interest and documented personal savings accumulated over ten years are not unexplained income under Section 68. This sets a critical precedent for NRIs and returning residents who rely on foreign-sourced savings, affirming that credible, traceable sources-even if cash-deposited-do not trigger presumptive taxation.

ITAT Mumbai has ruled that a penalty notice under Section 271(1)(c) is void if it fails to clearly state whether the allegation is for concealment of income or furnishing inaccurate particulars. This failure violates the right to fair hearing and renders the proceedings legally unsustainable, impacting all taxpayers facing penalty proceedings under the Income Tax Act.

The ITAT Mumbai has ruled that income earned by non-resident shipping companies from cargo transported via feeder vessels under slot arrangements constitutes shipping profits under Article 8 of the India-Germany DTAA, exempting it from Indian taxation under Section 44B. This clarifies that ancillary logistics supporting international shipping are integral to the core shipping activity, benefiting global liner operators using feeder networks to access shallow Indian ports.

When an assessee denies a sale transaction, the Income Tax Department cannot rely solely on TDS portal records to justify an addition under reassessment. ITAT Delhi holds that conclusive evidence - such as sale deeds, consideration flow, or third-party verification - is mandatory, reinforcing the principle that mere administrative data does not discharge the Revenue’s burden of proof.

When an income tax assessment's quantum addition is set aside on appeal, the penalty under Section 270A cannot stand - it is inherently dependent on the validity of the added income. This ruling reinforces that penalties are consequential, not independent, and protects taxpayers from punitive measures rooted in legally unsound assessments.

The ITAT Delhi has ruled that denying a charitable institution the opportunity to respond to a tax exemption questionnaire because notices were sent to an incorrect email address violates the fundamental principle of natural justice. This sets a critical precedent: government authorities must use officially registered contact details when issuing procedural notices, ensuring fair hearing rights in tax exemption proceedings under Sections 12A and 80G of the Income Tax Act.

The ITAT Delhi has ruled that tax authorities cannot impute notional interest on loans extended by a company to its subsidiaries if those loans are financed entirely from the company’s own interest-free surplus funds. This clarifies that Section 36(1)(iii) applies only to interest on borrowed capital, not internal fund allocation - a critical relief for corporate groups with strong internal liquidity.

The ITAT Delhi has struck down a 35% ad hoc addition under Section 68, ruling that mere suspicion of unexplained cash deposits during demonetization cannot substitute for concrete evidence of bookkeeping defects. This reinforces that tax authorities must identify specific irregularities in accounts - not rely on broad assumptions - when taxing cash inflows, protecting honest taxpayers in the informal sector from arbitrary assessments.

The ITAT Delhi has ruled that assessments under Section 153C cannot be sustained solely on Departmental Valuation Officer reports when no incriminating material links the assessee to the unexplained investments. This sets a critical precedent for taxpayers facing post-search assessments, requiring the revenue to establish a direct evidentiary connection beyond mere valuation discrepancies.

The ITAT Bangalore ruled that disallowance under Section 40A(3) is invalid when the assessee’s audited books show no excess cash payments and the tax officer fails to substantiate a violation. This reinforces that procedural fairness and evidentiary burden apply even in remote-sector businesses, protecting compliant taxpayers from arbitrary profit estimations.

The ITAT Bangalore has ruled that for bad debt deduction under Section 36(1)(vii), a mere book write-off by the assessee is sufficient - no proof of borrower default, recovery attempts, or debtor identification is mandatory. This clarifies a critical compliance standard for businesses and lenders, shielding them from arbitrary disallowances based on procedural overreach by tax authorities.