May 2025

In this landmark judgment, the Andhra Pradesh High Court definitively ruled that expenses incurred by a company for raising additional capital through share issuance constitute capital expenditure, not deductible as revenue expenditure under the Income Tax Act. The Court reinforced the principle that expenditures altering the capital structure provide enduring benefits, distinguishing them from operational expenses. This decision aligns with precedents from Bombay, Calcutta, and Gujarat High Courts, while carefully distinguishing cases involving regulatory fees or loan arrangements. The judgment provides crucial clarity on the capital-revenue distinction in corporate finance contexts.

In this landmark judgment, the Orissa High Court clarified the taxation of interest on compensation under land acquisition laws. The Court ruled that such interest accrues annually from the date of dispossession, not entirely in the year of receipt. This principle ensures accurate year-wise assessment, preventing the clubbing of multi-year interest into a single assessment year. The decision reinforces the accrual basis of taxation under the Income Tax Act, emphasizing that the right to receive income determines its taxability, not the actual receipt.

In this landmark judgment, the Supreme Court of India ruled that Hindu deities are juristic persons capable of being assessed to income tax under the Income Tax Act, 1922. The Court held that the term ‘individual’ in section 3 includes artificial juridical persons, allowing deities to be treated as taxable entities through their shebaits (managers). This decision clarifies the taxability of religious endowments, emphasizing that legal personality, not spiritual status, determines assessability. The ruling reinforces the principle that entities owning property and engaging in legal activities are subject to taxation, regardless of their non-human nature.

In this landmark judgment, the Agra ITAT quashed a penalty under Section 271(1)(c) of the Income Tax Act, 1961, on grounds of a defective notice under Section 274. The notice failed to specify whether the penalty was for ‘concealment of income’ or ‘furnishing inaccurate particulars of income,’ merely listing both charges. The Tribunal, applying strict interpretation of penal provisions, ruled that such ambiguity violates natural justice, as the assessee must know the precise charge to defend against. This decision reinforces judicial precedents mandating clarity in penalty notices and underscores that procedural lapses in tax enforcement can invalidate penalties, emphasizing taxpayer rights in adversarial proceedings.

In this landmark ITAT Mumbai decision, the Tribunal denied deductions under sections 80HHA and 80-I to a ship-breaking company, ruling that the activity does not constitute ‘manufacture’ or ‘production’ as required under the Income Tax Act. The Court emphasized a strict interpretation of ‘manufacture,’ requiring a transformative process that yields a new and distinct article, which ship-breaking fails to meet. Consequently, the assessee was also held liable for additional tax under section 104. This judgment clarifies the scope of industrial incentives under the Act, distinguishing processing from manufacturing.

In this landmark ITAT decision, the Tribunal reinforced two critical principles: (1) Insurance claim receipts from eligible units qualify for deduction under section 80-IB, following jurisdictional precedent; and (2) The mandatory precondition of AO recording satisfaction about incorrectness of assessee’s section 14A claim before invoking rule 8D methodology. The ruling provides clarity on manufacturing incentives and procedural safeguards against arbitrary disallowances of expenditure related to exempt income.

In a landmark ruling, the Supreme Court overturned the Karnataka High Court’s decision and clarified two critical aspects of tax prosecution: (1) Companies are fully prosecutable under the Income Tax Act for offences like tax evasion and false verification, even when imprisonment is mandatory, as fines remain imposable and corporate criminal liability is established in law. (2) Sanction for prosecution under section 279 is an administrative precondition that does not require a pre-sanction hearing; natural justice is satisfied through the trial process. The Court emphasized that statutory provisions explicitly include companies within the definition of ‘person’ and provide for their prosecution, rejecting arguments based on impossibility of imprisonment.

In this landmark constitutional challenge, the Mysore High Court decisively upheld the validity of the Wealth Tax Act 1957 against multiple attacks. The petitioner, representing a Hindu Undivided Family, contested assessments on non-agricultural properties, arguing ultra vires, lack of authority over HUFs, and discriminatory treatment under Article 14. The Court, through Justices Hegde and Ahmed Ali Khan, affirmed Parliament’s power under entry 86 of List I to tax non-agricultural assets, harmonizing it with State powers under entry 49 of List II. It reinforced that ‘individuals’ in the Constitution includes HUFs, backed by a catena of High Court decisions. Crucially, the Court dismissed the discrimination claim, noting that other undivided families are taxable as ‘individuals’ under the Act, often at steeper rates, thus negating any grievance. This judgment solidifies the legislative framework for wealth taxation, emphasizing a pragmatic and expansive reading of constitutional entries while safeguarding revenue interests.