December 2024

In Hind Samachar Ltd. vs. Union of India & Ors., the Punjab & Haryana High Court ruled that income tax returns filed by a company need not be signed exclusively by the managing director under section 140(c); an authorized signatory appointed via board resolution is permissible, especially under unavoidable circumstances like board deadlock. The Court emphasized that defects in signing are curable under section 292B, mandating the AO to provide rectification opportunity under section 139(9) rather than invalidating returns. The use of section 154 for rectification was unjustified as no mistake apparent from record existed. Refunds are automatically payable under section 240 upon assessment, and section 239’s time limit for refund claims is inapplicable here. The decision reinforces a liberal interpretation of procedural requirements to ensure substantive justice.

In this landmark judgment by the Income Tax Appellate Tribunal, Mumbai Bench ‘G’, the Tribunal decisively ruled in favor of M/s Patel Engineering Ltd., affirming its status as a developer eligible for substantial deductions under section 80IA(4) of the Income Tax Act for multiple infrastructure projects. The Tribunal meticulously analyzed contractual obligations, financial risks, and technical expertise, distinguishing the assessee from mere contractors. It further rejected the Revenue’s disallowance under section 14A, clarifying that no expenditure was incurred for tax-exempt income. This ruling reinforces judicial consistency in infrastructure tax benefits and provides critical guidance for developers navigating deduction claims under Indian tax law.

In this landmark ITAT decision, Rajasthan Petro Synthetics Ltd. successfully defended its claim that Unit-II constitutes a separate industrial undertaking, entitling it to deductions under sections 80HH and 80-I of the Income Tax Act, 1961. The Tribunal reinforced key principles: a new unit with independent machinery and production capacity qualifies as separate, even with common management; deductions are unit-specific, not offset by losses in other units; depreciation under section 43A covers exchange fluctuation liabilities on both paid and outstanding amounts; and expense allocation based on installed capacity is valid. This ruling provides clarity for businesses expanding in notified backward areas, emphasizing substance over form in tax benefits.

In this landmark constitutional challenge, the Calcutta High Court upheld the validity of the West Bengal State Tax on Professions, Trades, Callings and Employments Act, 1979. The Court decisively rejected arguments by practicing advocates that the Act exceeded State legislative power, ruling that Entry 60 of List II of the Seventh Schedule empowers States to tax professions, subject to the Rs. 250 annual cap under Article 276(2). Crucially, the Court established that this express taxing power necessarily encompasses implied and ancillary powers for tax collection, recovery mechanisms, penalty provisions, and appellate procedures—all essential for effective implementation. The judgment clarified that penalty and interest are enforcement tools, not additional taxes, and thus don’t violate the constitutional limit. Additionally, the Court validated the proviso imposing higher tax on income-tax paying professionals as a permissible measure of tax, not an impermissible tax on income. This precedent reinforces State authority in professional taxation while delineating the scope of ancillary powers.

In Golden Tobacco Ltd. vs. JCIT, the Mumbai ITAT quashed reassessment proceedings for AY 2005-06, ruling them invalid due to absence of fresh tangible material and non-compliance with statutory conditions under section 147. The Tribunal reinforced that reassessment after four years requires specific allegations of non-disclosure by the assessee, and mere re-examination of records without new information is impermissible. This decision underscores strict adherence to jurisdictional prerequisites in reassessment cases.

In Baberwad Shiksha Samiti vs. CIT, the Jaipur ITAT allowed the assessee’s appeal, quashing the revision order u/s 263 passed by the CIT (Exemptions). The Tribunal ruled that the original assessment order was neither erroneous nor prejudicial to revenue. Key holdings: (1) Scholarship funds received from the government for student disbursement do not constitute ‘aggregate annual receipts’ for the purpose of the Rs. 1 crore threshold under section 10(23C)(iiiad). (2) The Assessing Officer’s acceptance of exemption claims under sections 11/12, considering the subsequent registration under section 12AA and the legislative intent of the proviso to section 12A(2), represented a permissible view taken after due enquiry. (3) Depreciation is a legitimate deduction for a charitable trust computing income under section 11, even if the capital asset was previously treated as an application of income, as it reflects the true income. The CIT’s revision attempted to substitute his view for the AO’s on debatable issues where the AO had conducted a proper scrutiny, which does not meet the high threshold for intervention under section 263 as established by the Supreme Court in Malabar Industrial Co. Ltd.

In this landmark ruling, the Mumbai ITAT dismissed the Revenue’s appeal, reinforcing key principles in business taxation. The Tribunal affirmed that mark-to-market losses on derivatives, as stock-in-trade, are deductible business expenses when valued per accepted accounting standards. It clarified that Section 14A disallowances under Rule 8D(2)(ii) must be based on net interest, not gross interest, aligning with judicial consensus. Additionally, it upheld that book profit adjustments under Section 115JB cannot mechanically incorporate Section 14A disallowances, emphasizing the distinct computational mechanisms. This decision provides critical guidance for commodities and financial services entities on derivative trading losses and interest expenditure attribution.

In this landmark ruling by the Income Tax Appellate Tribunal, Delhi, the core issue revolved around the procedural sanctity of section 144C of the Income Tax Act 1961 in transfer pricing assessments. The Tribunal held that the Assessing Officer’s action of issuing a demand notice and penalty initiation within the draft assessment order dated 27.12.2018 effectively concluded the assessment, contravening the mandatory sequential process under section 144C. This decision reinforces that assessment is an integrated process where demand notice is integral, and non-compliance with statutory procedures renders subsequent orders void. The ruling underscores that taxpayers cannot be estopped from challenging jurisdictional defects merely by participation, and internal revenue procedures cannot override substantive legal requirements. This judgment provides critical precedent for disputes involving draft assessment orders and emphasizes strict adherence to procedural mandates in international tax matters.