#Direct Tax

The ITAT Kolkata has ruled that a faceless assessment under Section 151A is jurisdictionally void if the statutory notification empowering the National Faceless Assessment Centre was issued only after the assessment order was framed. This sets a critical precedent: procedural compliance with notification timelines is not optional but foundational to the validity of faceless assessments, affecting all taxpayers subject to centralized scrutiny under the Income Tax Act.

The ITAT Delhi has ruled that notional rent under Section 23(1)(c) cannot be imposed on property held as stock-in-trade by a real estate developer; taxation only begins after the asset is converted into a capital asset. This clarifies a critical distinction for developers, ensuring rental income is not artificially inflated before actual leasing or sale intent emerges.

The ITAT Delhi ruled that offshore supply of goods by a UK-based company, with no physical presence or control in India, cannot be taxed under Section 44BB’s presumptive regime. The Revenue failed to prove a permanent establishment under the India-UK Tax Treaty, reinforcing that mere contract execution or remote supervision does not create taxable nexus. This sets a critical precedent for multinational energy and engineering firms operating across borders without local infrastructure.

The ITAT Mumbai has ruled that land classified as agricultural in revenue records and located beyond municipal limits qualifies for capital gains tax exemption under Section 2(14)(iii), regardless of whether the owner reports agricultural income or actively cultivates the land. This affirms that statutory classification, not economic use, governs the exemption - a vital precedent for landowners in peri-urban areas facing development pressure.

The ITAT Dehradun has ruled that a single, mechanical approval covering multiple assessees under Section 153D lacks legal validity, quashing assessments issued without individualized sanction. This sets a critical precedent for tax officers: blanket approvals cannot substitute statutorily mandated personal scrutiny, impacting all pending and future joint assessments under the Income Tax Act.

The ITAT Delhi has ruled that the Commissioner of Income Tax cannot invoke Section 263 to reopen tax issues not raised or considered during reassessment proceedings under Section 147. This clarifies that survey material or unrelated findings cannot serve as a basis for revisional orders, reinforcing procedural boundaries in direct tax administration and protecting assessees from arbitrary expansion of powers.

The ITAT Delhi has ruled that remote technical support for IMAX theatre systems, even when performed over 90 days, does not constitute a Fixed Place Permanent Establishment under the India-Canada DTAA unless there is a physical location at the disposal of the enterprise. This clarifies a critical gap in tax treaty interpretation for global tech and maintenance providers, shielding foreign enterprises from unintended tax liabilities in India solely due to digital access.

ITAT Ahmedabad rules that reassessment notices under Section 148 of the Income Tax Act issued after 01.04.2021 for AY 2015-16 are time-barred and void ab initio, reinforcing the Supreme Court's Rajeev Bansal precedent. The decision shields taxpayers from belated scrutiny and underscores strict adherence to limitation periods in tax reassessment proceedings.

ITAT Kolkata reinforces that assessees must deposit at least 20% of the disputed tax demand to secure a stay under Section 254(2A) of the Income Tax Act, unless they can prove undue financial hardship. The ruling clarifies procedural compliance requirements for taxpayers seeking interim relief during appeals, impacting all direct tax litigation involving stay applications.

ITAT Lucknow rules that disallowance of cash payments under Section 40A(3) of the Income Tax Act is unsustainable without examining Rule 6DD exemptions. The tribunal mandates a fresh assessment, ensuring taxpayers can prove the legitimacy of cash transactions, reinforcing natural justice in tax proceedings.

ITAT Delhi clarifies that only unique solar days of employee presence in India count toward the 90-day threshold for Service Permanent Establishment under Article 5(2)(l) of the India-US DTAA, rejecting the Revenue’s cumulative man-day approach. This ruling impacts foreign companies providing services in India, ensuring tax liability is determined by actual presence rather than aggregated workdays.

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 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 Kolkata ruled that when sales are accepted, corresponding purchases cannot be disallowed based solely on uncorroborated WhatsApp chats or suspicions of shell company links. This sets a critical precedent for taxpayers facing revenue scrutiny, reinforcing that mere association with flagged entities is insufficient without concrete, corroborated evidence of fabrication.

ITAT Delhi rules that assessment proceedings initiated against a merged entity post-merger are void ab initio, as the jurisdictional defect cannot be rectified under Sections 154 or 292BB of the Income Tax Act. The ruling underscores that tax authorities must verify entity existence before initiating assessments, impacting merged companies and tax practitioners.