Income Tax Appellate Tribunal judgments

ITAT Pune has ruled that delays in filing appeals for leave encashment exemptions under Section 10(10AA) may be condoned when the taxpayer’s claim falls well below the enhanced Rs. 25 lakh limit and the delay stems from genuine hardship, not negligence. This reinforces that procedural rigidity must yield to substantive fairness in tax exemptions, benefiting retired employees navigating complex compliance timelines.

The ITAT Delhi has ruled that payments for satellite bandwidth services do not qualify as royalty under Section 9(1)(vi) of the Income Tax Act, even after the Finance Act 2012’s clarificatory amendments. This affirms that Double Taxation Avoidance Agreements take precedence over domestic tax law changes, protecting foreign service providers from retrospective TDS demands and setting a critical precedent for cross-border digital infrastructure payments.

The ITAT Delhi has ruled that payments made to tenants for vacating a property before sale can be claimed as part of the cost of acquisition under Section 48 of the Income Tax Act, provided they are substantiated by contemporaneous bank records-even without a registered surrender deed. This clarifies a critical path for property sellers to reduce taxable capital gains, especially in high-value urban real estate transactions where tenant rights complicate clear title transfer.

ITAT Kolkata has ruled that domestic advertisement, marketing, and promotion expenses incurred solely for the assessee’s own business, without any agreement or service rendered to associated enterprises, do not qualify as international transactions under Section 92B. This clears the way for companies to claim such expenditures without forced markup adjustments, reinforcing the principle that transfer pricing rules apply only to cross-border dealings with tangible or intangible service transfers.

The ITAT Bangalore has ruled that taxpayers claiming exemption under Section 54 of the Income Tax Act qualify for relief if they reinvest capital gains by the extended due date under Section 139(4), not just the original due date under Section 139(1). This overturns rigid departmental interpretations and provides critical relief to individuals who delay filing due to genuine administrative or procedural delays, aligning the law with practical realities of compliance.

ITAT Jabalpur rules that for capital gains computation under Section 50C, the consideration is deemed received on the date the account payee cheque is deposited into the seller’s account, not on the date of sale deed execution. This clarifies the timing of income recognition for sellers who receive part payment via crossed cheques, impacting how indexed cost and capital gains are calculated in delayed property transactions.

The ITAT Jabalpur ruled that when land is partially sold after conversion, the cost of acquisition for long-term capital gains must be calculated on the entire original parcel, not just the portion sold. This prevents artificial inflation of gains and ensures fair valuation under Section 50C, directly impacting landowners and developers who subdivide and sell plots.

The ITAT Delhi has ruled that airlines may claim tax deductions for provisions made toward repairing unserviceable aircraft spares, provided the estimate is reasonable and grounded in operational data. This overturns blanket disallowances and affirms that contingent liabilities in capital-intensive industries are not automatically non-deductible under Section 37, setting a critical precedent for aviation and manufacturing sectors.

The Delhi ITAT has ruled that a reassessment notice under Section 148 is legally void if the assessing officer fails to obtain mandatory prior approval under Section 151, reinforcing procedural safeguards for taxpayers. This decision impacts all reassessment proceedings initiated after search and survey actions, requiring strict compliance with approval protocols to avoid nullification.

ITAT Delhi has struck down transfer pricing adjustments on management charges, royalty, and receivables interest, holding that the tax authority erred by ignoring the assessee’s aggregation methodology and failing to prove lack of tangible benefit under Section 92C(3)(c), reinforcing Kusum Healthcare’s principle that commercial wisdom must be respected. This ruling empowers MNEs with robust TP documentation to resist arbitrary disallowances based on speculative benefit assessments.

ITAT Delhi ruled that temporary access to client premises solely for installing theatre systems does not create a fixed place permanent establishment under the India-Canada DTAA, even if activities span over 120 days. This clarifies that physical presence alone, without control or disposal rights over the space, is insufficient to trigger taxation in India - a critical guidance for foreign tech and service providers operating in India under tax treaties.

When a taxpayer in the informal sector declares business income but maintains no books, the ITAT Agra rules that unexplained cash deposits cannot be fully added under Section 69A without applying the peak credit theory. This ensures fair assessment by focusing on the highest balance reached during the year, not total inflows - a critical safeguard for small traders and cash-based businesses.

The ITAT Agra has ruled that reassessment under Section 147 is void if the Assessing Officer relies on cash transaction data without verifying the assessee’s explanation or making any actual addition to income. This establishes that mere suspicion or unverified data cannot sustain jurisdictional belief - a critical safeguard for small traders and cash-based businesses facing arbitrary reassessments.

Estimated income additions cannot trigger penalties under Section 270A(9) of the Income-tax Act, even if the Assessing Officer alleges misreporting. This ruling affirms that statutory immunity for estimated adjustments overrides allegations of under-reporting, protecting traders and small businesses from punitive measures based on speculative profit calculations.

ITAT Agra deleted Rs. 24.01 lakh addition where the assessee proved the seized cash belonged to a third party engaged in legitimate agricultural business with documented sales and tax filings. This reinforces that mere possession of cash does not equate to undisclosed income - taxpayers with verifiable non-taxable sources are protected from speculative additions.

The ITAT Agra ruled that cash deposits made during demonetization in AY 2017-18 cannot be taxed at the 60% enhanced rate under Section 115BBE, as the provision came into force only from AY 2018-19. This protects taxpayers with unexplained cash from retrospective application of punitive rates, clarifying the temporal scope of the law for millions affected by demonetization.

ITAT Agra ruled that cash deposits totaling Rs. 17.74 lakh by a rural insurance agent are satisfactorily explained through documented agricultural income, past savings, and genuine family contributions, rejecting the presumption of unexplained income under Section 68. This sets a vital precedent for small taxpayers in non-urban areas who rely on informal financial networks and non-salaried earnings.

The ITAT Mumbai has ruled that seized financial calculations, without independent corroboration or borrower confirmation, cannot substantiate an addition for undisclosed interest income. This reinforces the burden of proof on the revenue and protects taxpayers from speculative assessments based solely on circumstantial material recovered during searches.

The ITAT Mumbai has affirmed that taxpayers acquiring capital assets before April 1, 2001, have a statutory right to use the fair market value as of that date for indexation, regardless of whether the valuation report is submitted after the assessment is completed. This clarifies procedural flexibility for legacy asset holders and reinforces the intent of Section 55(2)(b) to prevent unfair taxation on pre-reform holdings.

The ITAT Mumbai has ruled that tax authorities cannot invoke Rule 8D to disallow expenses under Section 14A when the taxpayer has not claimed any deduction attributable to exempt income, even if investments exist. This shields taxpayers using presumptive taxation or capitalizing costs from artificial disallowances, reinforcing that disallowance requires actual claimed expenditure - not mere asset holding.

ITAT Delhi has ruled that when an assessee submits credible medical grounds for delay in filing an appeal and the Revenue fails to rebut them, the tribunal must condone the delay to uphold substantive justice. This sets a critical precedent for taxpayers facing health-related procedural setbacks, reinforcing that technical defaults cannot override legitimate humanitarian concerns under the Income Tax Act.

ITAT Bangalore struck down an 8% ad hoc disallowance of transportation expenses, holding that consistent banking records and the commercial reality of the business outweigh the absence of formal vouchers. This sets a critical precedent for transporters and logistics firms relying on digital payment trails to substantiate legitimate operational costs in tax assessments.

The ITAT Delhi has ruled that an addition under Section 69A cannot be made against an individual when the disputed transaction was executed solely by his Hindu Undivided Family (HUF), reinforcing the legal separation between HUF and individual assesses. This sets a critical precedent for tax assessments where family entities are involved, preventing misattribution of liabilities and safeguarding taxpayers from erroneous assessments based on entity confusion.

ITAT Mumbai rules that the lack of an express irrevocability or dissolution clause in a trust deed does not justify rejection of registration under Section 12AB. The tribunal emphasizes substantive compliance over technical omissions, ensuring charitable trusts are not penalized for procedural gaps without statutory backing.