Income Tax Appellate Tribunal judgments

ITAT Delhi rules that disallowance under Section 14A read with Rule 8D cannot be invoked if no exempt income is earned in the assessment year. The decision reinforces the 2022 amendment's prospective application, providing relief to taxpayers facing arbitrary disallowances on investments not yielding tax-exempt returns.

ITAT Delhi rules that RERA-mandated compensation for delayed possession constitutes a transfer of capital asset, not interest income, and must be taxed as long-term capital gains. This precedent clarifies tax treatment for homebuyers receiving compensation under RERA, impacting real estate transactions and tax filings.

ITAT Mumbai rules that scholarships granted to Indian students for overseas education qualify as 'application of income' in India under Section 11(1)(c), preserving tax exemption for charitable trusts. The decision clarifies that the beneficiary's nationality, not the location of education, determines compliance with charitable purposes.

ITAT Delhi rules that allegations of income misuse under Section 13 of the Income Tax Act cannot justify rejection of trust registration under Section 12AB. The scope of scrutiny is limited to the genuineness of the trust's objects and activities, not the propriety of its financial transactions. This ruling clarifies the boundaries of tax authorities' powers in charitable trust registrations.

ITAT Mumbai rules that charitable trusts retain the vested right to utilise income accumulated under prior law, even if the sixth year falls after the 2022 amendment. The tribunal held that denying this right would amount to retrospective cancellation of a lawful entitlement, affecting trusts with long-term accumulation plans.

ITAT Delhi rules that forfeiture of earnest money deposit (EMD) in a joint gas tender, incurred to secure fuel for hotel operations, qualifies as a deductible business expenditure under Section 37 of the Income Tax Act. The ruling clarifies that such losses are revenue in nature, directly linked to business operations, and not capital expenditure.

ITAT Bangalore rules that disallowance of interest under Section 36(1)(iii) of the Income Tax Act is unsustainable if the assessee's interest-free funds exceed advances to sister concerns. The ruling reinforces that balance sheet evidence alone can disprove tax avoidance presumptions, impacting corporate tax assessments.

ITAT Mumbai condones a 796-day delay in filing a tax appeal, holding that Covid-related disruptions and non-receipt of the assessment order under Section 144 constitute 'sufficient cause' under Section 249(3). The ruling reinforces that substantial justice prevails over procedural technicalities, particularly where assessees face genuine hardships in compliance.

ITAT Delhi sets aside income tax assessment under Section 144, ruling that estimation of income based on unverified subscriber data violates statutory requirements. The decision reinforces that tax authorities must conduct thorough verification before resorting to best judgment assessment, impacting cable operators and similar service providers facing tax disputes.

ITAT Bangalore rules that GST refunds are not taxable if the assessee follows the exclusive accounting method, bypassing the profit & loss account. The decision reinforces that consistent accounting practices prevail over revenue adjustments, impacting tax assessments for businesses claiming refunds.

ITAT Agra holds that under Section 145(3) of the Income-tax Act, the Assessing Officer cannot partially reject books of accounts; if rejected, net profit must be estimated on the entire turnover. This ruling reinforces the strict interpretation of the provision, impacting taxpayers whose books are scrutinized for defects.

The ITAT Agra has ruled that under Section 69B, unexplained investments must be taxed in the assessment year when the full payment was actually made, not when partial funds were disbursed. This clarifies a critical timing issue for trusts and entities with staggered property purchases, ensuring tax liability aligns with economic reality and prevents arbitrary assessment years.

ITAT Nagpur rules that land held as stock-in-trade in a land development business is not subject to capital gains tax under Section 50C, affirming business income treatment. The decision clarifies tax liability for developers and traders, ensuring consistent application of income tax provisions on trading assets.

The ITAT Ahmedabad ruled that an income tax reassessment initiated solely for unexplained cash deposits cannot be used to disallow deductions under Section 80P that were never raised in the original reason for reopening. This protects cooperative societies from retrospective denial of statutory benefits when the notice of reassessment lacks specificity, reinforcing procedural fairness in tax assessments.

ITAT Nagpur rules that Transferable Development Rights (TDRs) are intangible assets and do not qualify as 'tangible immovable property' under Section 43CA of the Income Tax Act. The tribunal set aside a Rs. 5.56 crore addition, clarifying that the provision applies only to physical property transfers, not development rights.

ITAT Pune rules that penalty under Section 270A of the Income Tax Act cannot be imposed if the assessee voluntarily discloses additional income through a return filed under Section 139(8A) before issuance of a Section 148 notice. This holding reinforces the principle that voluntary compliance prior to reassessment notice precludes penalty, offering critical protection to taxpayers.

The ITAT Ahmedabad quashed a Rs. 59.97 lakh addition under Section 68 because the Assessing Officer failed to produce any statement under Section 132(4) or verifiable transaction records to prove the alleged accommodation entry. This reinforces that mere suspicion or third-party allegations, without procedural compliance, cannot sustain a tax addition - a critical safeguard for taxpayers facing speculative assessments.

ITAT Mumbai rules that payments for voice termination and bandwidth services do not qualify as royalty or fees for technical services under India-Singapore/US DTAA unless the 'make available' clause is satisfied. The ruling clarifies that business profits taxability hinges on the absence of a permanent establishment, shielding foreign telecom providers from double taxation.

ITAT Agra rules that once an assessee establishes the identity of creditors, their creditworthiness, and the genuineness of cash credits under Section 68, the onus shifts to the revenue to disprove these facts. The tribunal deleted the addition of Rs. 2.43 crore, reinforcing the legal standard for unexplained cash credits in tax assessments.

ITAT Agra rules that penalty under Section 271E for cash repayments violating Section 269T is unsustainable once the primary addition (unexplained money) is deleted by appellate authority. The ruling reinforces that penalty jurisdiction is contingent on the existence of a valid quantum addition, impacting tax assessments involving cash transactions.

ITAT Agra rules that revisional powers under Section 263 cannot be invoked merely to substitute the Assessing Officer's reasoned view unless new evidence proves the assessment erroneous or prejudicial to revenue. The ruling protects assessees from arbitrary reopening of settled assessments based on mere differences of opinion.

Delhi ITAT rules that reassessment proceedings beyond three years from the assessment year are void if sanctioned by the Principal Commissioner of Income Tax (PCIT) instead of the Principal Chief Commissioner of Income Tax (PCCIT). The ruling underscores strict compliance with Section 151, invalidating reassessment notices issued without proper authority.

ITAT Pune rules that Rs. 7.84 crore paid as compensation for cancelled share sale agreements qualifies as a deductible business expense under Section 48 of the Income Tax Act, provided the recipients have paid tax on the amount. The ruling clarifies that contractual compensation, even for failed transactions, is not a colourable device if properly taxed, offering relief to taxpayers in similar disputes.

The ITAT Delhi has ruled that Section 14A cannot be invoked to disallow expenses unless there is actual exempt income earned. Notional gains from foreign currency translation or interest on capital loans, even if hypothetically linked to exempt activities, do not trigger disallowance. This shields multinational entities from speculative tax adjustments based on accounting entries rather than real income.