Tribunals and Commissions judgments

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.

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.

CESTAT Hyderabad has ruled that leasing railway premises for advertising hoardings constitutes renting of immovable property under service tax law, not a business support service. This means the reverse charge mechanism does not apply, relieving advertisers from liability to pay tax on behalf of railways and clarifying the tax treatment of infrastructure-based advertising contracts nationwide.

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.

CESTAT Chennai has ruled that rejecting customs appeals solely on limitation grounds without ascertaining the exact date of communication of the original order violates natural justice. This sets a binding precedent for appellate authorities to examine procedural fairness before dismissing appeals, protecting appellants from arbitrary time-bar rejections based on incomplete records.