March 2025

In this landmark judgment, the Allahabad High Court upheld the entitlement of charitable educational trusts to claim depreciation on capital assets, even when the cost of such assets has been allowed as an application of income under Section 11 of the Income Tax Act 1961. The Court decisively rejected the Revenue’s ‘double deduction’ argument, clarifying that Section 11 operates as an exemption mechanism, not a deduction, thereby permitting depreciation to accurately compute the income required to be applied for charitable purposes. The ruling reinforces the distinct fiscal treatment of charitable entities and aligns with a consistent line of High Court authorities. Additionally, the Court affirmed that scholarships for higher education constitute valid charitable expenditure, underscoring the broad interpretation of ‘advancement of education’. This decision provides critical clarity for trusts and institutions navigating pre-2015 tax assessments, emphasizing the prospective nature of the 2014 amendment to Section 11.

In this landmark judgment, the Allahabad High Court clarified a critical aspect of taxation for charitable trusts in India. The Court ruled that charitable trusts registered under Section 12A of the Income Tax Act, 1961, are entitled to claim depreciation on capital assets, even if the entire cost of those assets has been treated as application of income under Section 11. The Court held that this does not constitute ‘double deduction’ because Section 11 operates as an exemption mechanism rather than a deduction provision. Depreciation is necessary to accurately determine the trust’s income available for charitable application. The Court also upheld the allowability of scholarship payments for higher education as valid charitable expenditure. This decision reinforces the distinct tax treatment of charitable entities and provides clarity on the computation of exempt income, aligning with the majority view across Indian High Courts prior to the 2015 amendment.

In this landmark judgment, the Income Tax Appellate Tribunal, Rajkot Bench, allowed the assessee’s appeal, ruling in favor of the legal heir of Mina Parekh for Assessment Year 2015-16. The Tribunal held that the assessee validly claimed exemption under section 10(38) for Long Term Capital Gains from the sale of shares, as all statutory conditions were satisfied with robust documentary evidence, including purchase bills, bank statements, and STT payments. It criticized the Assessing Officer for making additions under section 68 without substantive proof, relying merely on surmises and conjectures. By following binding precedents from the Gujarat High Court and coordinate ITAT benches, the decision reinforces the principle that taxpayers must be given the benefit of exemption when they discharge their initial burden with credible evidence, and authorities cannot reject such evidence without concrete rebuttal. This judgment underscores the importance of jurisdictional discipline and factual substantiation in tax disputes involving capital gains and unexplained credits.

In this landmark ruling, the Income Tax Appellate Tribunal, Indore Bench, decisively held that the levy of late fees under section 234E for delayed TDS statements processed under section 200A is invalid for periods prior to 01.06.2015. The Tribunal emphasized the prospective nature of the 2015 amendment, aligning with Supreme Court precedents on statutory interpretation. By favoring the assessee-friendly Karnataka High Court view over the contrary Gujarat High Court decision, this judgment provides critical relief to taxpayers facing retrospective demands, reinforcing the principle that tax authorities cannot impose fees without explicit statutory authority. This ruling streamlines TDS compliance disputes and sets a precedent for interpreting procedural amendments in tax law.

In this landmark judgment, the Madras High Court reinforced the doctrine of exhaustion of alternative remedies in tax litigation. The Court dismissed writ appeals challenging income tax assessments, firmly establishing that taxpayers must first avail themselves of statutory appeal mechanisms under the Income Tax Act before approaching constitutional courts. The decision underscores judicial restraint in tax matters and prevents circumvention of established statutory procedures, ensuring orderly administration of tax laws.

In a landmark ruling on cross-border taxation of architectural services, the ITAT Pune Bench overturned lower authorities to hold that payments to a US firm for project-specific designs and drawings did not constitute ‘royalty’ or ‘fees for included services’ under the India-US DTAA. The Tribunal meticulously applied the ‘make available’ criterion, concluding that no technology transfer occurred, as the designs were non-replicable and ownership remained with the service provider. This decision reinforces the principle that DTAA provisions, when more beneficial, override domestic tax law, and clarifies the distinction between mere service provision and knowledge transfer in international tax disputes.

SENIOR LEGAL RESEARCH ANALYSIS: The Bombay High Court’s dismissal of the Revenue’s appeal in Principal CIT vs. Sesa Resources Ltd reinforces key taxation principles: (1) Functional integration determines depreciation rates—UPS used with computer networks qualifies as computer equipment; (2) The ‘commercial expediency’ doctrine broadly interprets business expenditure under Sections 36(1)(iii) and 37, presuming inter-corporate loans serve business purposes; (3) ‘Current repairs’ under Section 31(i) are assessed by whether expenditure preserves existing assets versus creating new advantages, irrespective of cost magnitude; (4) Mining operations constitute ‘production’ eligible for additional depreciation under Section 32(iia). The judgment underscores judicial deference to ITAT’s factual findings and binding precedents, limiting Revenue appeals to genuine legal questions.

In this landmark judgment, the Madras High Court established a strict interpretation of section 26A of the Indian Income Tax Act 1922 regarding firm registration. The Court ruled that registration is a statutory privilege, not a common law right, mandating rigid adherence to requirements. The decision clarifies that the Income Tax Authority must verify the genuineness of the partnership, the reality of partners, and the accuracy of specified shares at the registration stage itself. Nominee arrangements, even if legally permissible for guardians managing minors’ interests, cannot satisfy the condition of a ‘genuine firm’ if the deed does not reflect the true partners and their actual shares. The judgment reinforces that procedural compliance is paramount for availing the benefits of firm registration, setting a precedent for scrutinizing partnership deeds beyond their formal terms to ascertain substantive reality.