Income Tax Appellate Tribunal judgments

The tribunal held that a section 148 notice dated 12-April-2023 was time-barred under section 149(1)(a) because the income escaping assessment was below Rs 50 lakh, and therefore quashed the assessment disallowing the claimed deduction under 80GGC for a bogus political donation. The ruling underscores that reopening notices beyond three years are invalid when the escaped income does not exceed the Rs 50 lakh threshold.

The Delhi ITAT held that interest payable on compensation under the Land Acquisition Act is exempt under Section 10(37) of the Income-Tax Act, overturning the earlier assessment that taxed it as 'other income'. This relief applies to all individuals and entities receiving acquisition compensation.

The Delhi ITAT set aside assessment orders for AY 2016-17 and 2017-18, ruling that a single omnibus satisfaction note under Sec 153C is invalid without year-wise linkage of seized material to income. It also declared that notices served after the statutory 15-month limitation are void. Taxpayers must ensure separate satisfaction notes for each year and timely notices.

ITAT Delhi held that the discount on employee stock options is a deductible expense under Section 37(1) of the Income Tax Act, treating it as a composite expense under Section 57. Companies can now claim the ESOP discount against taxable income, reducing tax outgo. This benefits firms that grant ESOPs.

Taxpayers whose total income does not exceed Rs 7 lakh can claim the Section 87A rebate even on short-term capital gains that attract the special 15 % rate under Section 111A. The Jaipur ITAT reversed the CIT(A)’s refusal, confirming that the rebate applies to the computed tax liability irrespective of the special-rate provision. This benefits individual investors with modest incomes who realise short-term gains.

The ITAT Surat Bench set aside assessment orders for AY 2011-14 because the Commissioner of Income-Tax (Appeals) failed to obtain the mandatory prior approval of the Joint Commissioner under Section 153D. The ruling makes it clear that any assessment under special provisions is invalid without such approval, impacting both taxpayers and revenue officials.

The Delhi ITAT ruled that export incentives and cash discounts form part of a taxpayer’s operating revenue for the purpose of the Transactional Net Margin Method, requiring comparables to be selected on a fully adjusted basis. This clarifies the treatment of such items in transfer-pricing documentation and impacts exporters relying on TNMM benchmarks. Assessors must now ensure FAR-based comparables reflect these revenue components.

Bank deposits, including current-account balances, are deemed ‘another capital asset’ under Section 11(1A) of the Income-Tax Act. This allows charitable trusts to claim full exemption on capital-gain income reinvested in such deposits, expanding the range of tax-free investment options for trusts.

ITAT held that the limitation clock for a Section 153C assessment begins on the date the assessing officer records the satisfaction note, not on the earlier Section 127 order. This narrows the time-bar for revenue to finalize assessments in multi-entity search cases, affecting taxpayers facing delayed notices.

The ITAT Bangalore ruled that a disallowance of delayed PF/ESI contributions under section 143(1)(a) for AY 2019-20 is invalid, ordering deletion of the addition. Employers cannot be penalised for late employee-share contributions for that year, aligning with the Supreme Court’s Checkmate Services precedent.

The ITAT Bangalore ruled that interest earned on deposits by a credit cooperative is an allowable deduction under Sec 80P(2)(a)(i), interpreting ‘attributable’ to mean income arising from the society’s credit activities. This clarifies that such interest can be claimed as business income, benefiting credit co-operatives seeking tax relief on deposit earnings.

The ITAT ruled that money spent on rebuilding an uninhabitable house can be treated as part of the purchase cost of a new residential property under Section 54F. This expands the pool of deductible expenses, allowing sellers of capital assets to claim a larger exemption on capital gains. Home-buyers and investors reinvesting sale proceeds in residential housing benefit.

An assessment order issued under Section 148 after the assessee’s death is deemed void from the outset, rendering the notice ineffective. This ruling bars revenue authorities from reopening assessments of deceased taxpayers without proper procedural basis, protecting legal heirs from unwarranted tax demands.

The ITAT Delhi ruled that foreign shares held as a nominee are not taxable in the assessee’s hands, and any Section 10(1) notice must expressly state the relevant financial year. This clarifies that undisclosed foreign nominee assets escape tax liability unless properly disclosed, guiding tax practitioners and assessees with such holdings.

ITAT Delhi held that a community pre-school, despite lacking formal affiliation, meets the s.2(15) definition of charitable education under the Income Tax Act. Hence trusts operating such schools can secure registration under sections 12AB and 80G for tax exemptions. The decision expands eligibility for early-childhood NGOs.

The ITAT ruled that a reassessment order issued after a court-ordered stay is lifted falls outside the two-year limitation of Section 153(2), rendering the addition of Rs 18.16 crore invalid. This protects taxpayers from belated reassessments once a stay is removed.

The ITAT Delhi held that commission income from accommodation entries must be taxed at a reasonable rate of 0.15% of total credits, rejecting the arbitrary 3% estimate. It also ruled that a reassessment notice under Section 148 is invalid without prior approval from the specified authority under Section 151(ii), protecting assessees from procedural lapses.

The ITAT Jodhpur set aside the CIT(E)’s refusal to register a charitable trust under Section 12AB, ruling that the absence of a dissolution clause and alleged Section 13(1)(b) violations do not prevent registration. This clarifies that such procedural deficiencies are not fatal at the grant stage, benefitting existing and prospective charitable trusts seeking tax-exempt status.

ITAT Kolkata ruled the Section 148 reassessment notice for AY 2015-16 was barred by Section 149(1)(b) and set aside the ₹20.04 crore share-capital addition treated as unexplained cash credit. The decision protects taxpayers from reassessment notices served outside the statutory limitation period.

The Jaipur ITAT approved condonation of a 1038-day filing delay and granted a complete exemption of Rs 9,95,670 leave encashment under Sec 10(10AA). Taxpayers with delayed appeals can thus retain full leave-encashment benefits when the tribunal condones the delay.

The ITAT held that Arcadis N.V.’s headquarters support fees and IT recharge amounts fail the ‘make-available’ test in Article 12 of the India-Netherlands DTAA, so they are not taxable as royalty. The ruling narrows the treaty’s royalty provision to genuine technical knowledge transfers, affecting multinationals receiving similar support fees from Indian subsidiaries.

The Jaipur ITAT ruled that the word ‘and’ in Section 147 operates conjunctively, so an Assessing Officer can only reopen assessment for income already identified as escaped, not for any other income. This narrows reassessment powers and shields taxpayers from unexpected additions. The ruling applies to all cases invoking Section 147 nationwide.

ITAT Panaji quashed the 29 July 2022 Section 148 notice as time-barred under Section 149(1)(a), setting aside assessments for AY 2016-17 and 2017-18. The tribunal held that reassessment cannot proceed when the three-year limitation expires and the monetary threshold is below Rs 50 lakh, applying the Ganesh Dass Khanna test. Taxpayers gain protection from stale reassessment notices.

The Delhi ITAT partially upheld WSP Consultants’ appeal, directing the assessing officer to incorporate functional comparables and adjust working-capital for AY 2021-22, while striking out firms lacking comparable functions. This refines peer-selection under Rule 10B(2) for similar transfer-pricing cases.