March 2025

In this landmark judgment, the Allahabad High Court clarified key tax principles: (i) Salary payments to partners—even those representing HUFs—are strictly non-deductible under s. 40(b), reinforcing the entity theory of partnership. (ii) Cold storage operations do not constitute ‘industrial undertakings’ for deduction purposes under ss. 80HH and 80J, as they lack manufacturing/processing elements. The decision underscores rigorous statutory interpretation and aligns with Supreme Court precedents on partnership law and industrial activity definitions.

In this landmark ruling by the Income Tax Appellate Tribunal, Mumbai, the revenue’s appeal against deletion of a Rs. 2.5 crore addition under Section 68 for share capital and premium was dismissed. The Tribunal reinforced the cardinal principles governing Section 68: the assessee’s onus is limited to proving identity, creditworthiness, and genuineness through documentary evidence. Here, the assessee, M/s. Adhunik Transport Organisation Ltd., meticulously provided PANs, bank statements, financials, confirmations, and IT returns for all eight investing entities, decisively discharging its burden. Critically, the revenue’s reliance on unconfronted third-party statements (from Shri Pravin Kumar Jain and Shri Abhishek Morarka) was struck down as a violation of natural justice, especially since these statements were retracted. The Tribunal affirmed the non-retrospectivity of the 2012 proviso to Section 68 and upheld the Lovely Exports doctrine, directing the department to pursue investors individually if dubious. This judgment is a robust precedent for companies facing Section 68 additions based on mere suspicion without rebuttal of concrete evidence.

In a significant ruling on administrative discipline and statutory interpretation, the Allahabad High Court has held that failure by the Commissioner of Income Tax to decide an application for registration under sections 12A/12AA of the Income Tax Act within the mandatory six-month period under section 12AA(2) results in a deemed grant of registration. The Court rejected the Revenue’s reliance on a Supreme Court precedent concerning municipal sanctions, distinguishing it on grounds of absence of public interest in the tax registration context. Applying a purposive interpretation, the Court prioritized protecting the assessee from indefinite administrative delay over potential revenue loss, noting the availability of prospective cancellation under section 12AA(3) as a safeguard. This judgment reinforces the principle that statutory time limits for administrative actions are substantive and that laches by the tax authorities cannot prejudice the rights of assessees.

Astec Life Sciences Ltd’s appeal against CIT(A)’s dismissal of its belated appeal was rejected by Mumbai ITAT. While condoning a minor 2-day procedural delay before itself, the Tribunal upheld that 285-day delay before CIT(A) – attributed to changing professional advice about appeal merits without new facts – didn’t constitute ‘sufficient cause’ for condonation under IT Act. The decision reinforces that contradictory professional opinions alone, absent material factual changes or demonstrated bonafide filing attempts, won’t justify condoning substantial delays in tax appeals.

In this landmark judgment, the Rajasthan High Court delineates the essential criteria for ‘manufacture’ under section 80HH of the Income Tax Act, 1961. The Court, reversing the Tribunal’s decision, held that the mining and cutting of limestone and marble blocks into slabs does not constitute ‘manufacture or production’ as the processed slabs retain the original identity of the stone. The ruling emphasizes that for eligibility under section 80HH, there must be a transformation yielding a commercially distinct article, thereby setting a significant precedent for industries claiming deductions based on processing activities.

In this landmark ITAT Pune Third Member Bench decision, Sandvik Asia Ltd. and the Revenue contested multiple tax issues for AY 1992-93. The Tribunal ruled in favor of the assessee on excluding excise duty, sales-tax, interest, and scrap sales from turnover for section 80HHC deductions, and on Modvat credit valuation, upholding consistent accounting methods. However, it sided with the Revenue on disallowing depreciation on guest house assets under section 37(4) and denying bad debt deductions due to mere provisioning. The judgment reinforces principles of statutory interpretation, precedent adherence, and accounting consistency in tax computations.

In this landmark ITAT Mumbai ruling, the Tribunal decisively held that service tax collected by non-resident shipping operators must be included in gross receipts for computing presumptive income under section 44B of the Income Tax Act. The Court rejected the assessee’s contention that service tax lacks profit element, emphasizing that the statutory scheme under section 44B encompasses all amounts received for carriage, including similar charges like demurrage. This judgment clarifies the broad scope of ‘aggregate amount’ under section 44B, reinforcing revenue’s stance on inclusive taxation of ancillary receipts. Concurrently, the Tribunal provided relief by deleting interest under section 234B, citing payer’s TDS obligation. The decision balances stringent interpretation of business receipts with taxpayer safeguards on interest levies.

In this landmark prosecution case, the Patna High Court dismissed challenges to criminal proceedings under Section 276CC for willful failure to file income tax returns post-search. The Court clarified that Settlement Commission immunity from penalty does not bar prosecution for procedural defaults like non-filing of returns. Critical legal principles established include: (1) Prosecution under Section 276CC is independent of penalty immunity; (2) Complaint petitions need not quantify tax evasion for initiating prosecution; (3) The Rs. 3,000/- tax threshold defense is inapplicable to search cases governed by Section 276CCC. This judgment reinforces the department’s authority to prosecute procedural non-compliance even when substantive tax disputes are settled.