September 2026

This appeal by Happiest Minds Technologies Limited challenged the CIT(A)’s order dated 01/09/2025, which upheld the AO’s order dated 23/06/2023 rejecting the assessee’s rectification application under section 154 against an intimation under section 143(1) for AY 2019-20. The CPC had added INR 23,39,58,848 to the total income by disallowing diminution in the value of the assessee’s investment in OSS Cube LLC, a wholly-owned subsidiary acquired for business expansion and commercial expediency. The assessee claimed the diminution was a revenue expenditure/business loss, relying on the jurisdictional Karnataka High Court in Ace Designers Ltd. The Tax Audit Report had treated the amount as capital expenditure, prompting the adjustment under clause (ii) and clause (iv) of section 143(1)(a). The ITAT held that: (i) the CPC cannot disregard a binding jurisdictional High Court decision merely based on the Tax Audit Report; (ii) the loss on diminution in value of a wholly-owned subsidiary investment made for business purposes is allowable in view of Ace Designers; (iii) rejection of the rectification was incorrect because non-consideration of a jurisdictional High Court decision is a mistake apparent from the record under section 154. Accordingly, the appeal was allowed.

The assessee, a Singapore tax resident, was engaged in providing support services to group companies including Atos India. For Assessment Year 2018-19, it received Rs.4,42,73,329/- for regional support services under a Regional Support Agreement. The Revenue sought to tax this as royalty/FTS. In an earlier round, the ITAT (ITA No.671/Mum/2022) had restored the issue for fresh adjudication after deleting a similar project support services addition. On remand, the AO again taxed the regional support receipts as royalty/FTS and the DRP affirmed. The ITAT, after a detailed analysis of the RSA and the applicable provisions of the Income-tax Act and India-Singapore DTAA, held that the services were standard support services not involving transfer of technical/commercial knowledge or know-how. The ‘make available’ condition for FTS was not met, as the recipient was not enabled to use the technology independently. The Tribunal also noted that treating the same receipt as both royalty and FTS was contradictory. The receipt was therefore business profits, and with no PE in India, was not taxable. The Tribunal allowed the assessee’s appeal partly, directing verification of TDS credit and treating the interest under Section 234B as consequential. Ground No.1 was not pressed, and Ground No.8 was premature and dismissed.

The assessees challenged the validity of assessments completed under section 143(3) for AY 2023-24 after a search under section 132 was conducted on 15.02.2024. They argued that under Explanation 2 to section 148, once a search is carried out on or after 01.04.2021, the AO is deemed to have information suggesting escapement of income and must initiate proceedings under section 147/148. The Tribunal agreed, following coordinate bench decisions, and held that the assessments ought to have been framed under section 148, not section 143(3). The failure to follow the special procedure was a jurisdictional defect. Both the impugned assessments were quashed and both appeals were allowed.

In JCIT v. RNT Metals Pvt. Ltd. and RNT Metals Pvt. Ltd. v. JCIT, ITA No.970/Del/2026 & CO No.234/Del/2026, the Delhi ITAT ‘H’ Bench held that once a search u/s 132 is conducted on or after 01.04.2021, Explanation 2 to Section 148 creates a deemed escapement of income and the assessment for the relevant AY must follow the Section 147/148 reassessment route. Since the search in the assessee’s case took place on 12.12.2022 for AY 2022-23, the Assessing Officer was not competent to complete the assessment under Section 143(3) without issuing notice under Section 148 and obtaining prior approval. The Tribunal, relying on Montage Enterprises Pvt. Ltd., Homelife Buildcon (P.) Ltd. v. DCIT, Jamna Das Nikkamal Jain Saraf Pvt. Ltd. v. DCIT and the principle in Babu Varghese v. Bar Council of Kerala, quashed the assessment order dated 31.03.2024. Consequently, the assessee’s cross-objection was allowed and the Revenue’s appeal was dismissed as infructuous. The decision reinforces that in the post-01.04.2021 search regime, the special procedure under Section 148 overrides the general scrutiny assessment provisions.

The Ahmedabad Bench of ITAT, in ITA No.2343/AHD/2025, partly allowed the appeal of Anilkumar Bhikhabhai Virani for A.Y. 2011-12. The issue was taxability of Rs.1,37,70,000 received by the assessee on retirement from a partnership firm as his share of revaluation surplus of land. The Tribunal held that Section 10(2A) exemption is unavailable as the receipt was not a share in total income of the firm. However, applying the Supreme Court’s decision in Mansukh Dyeing & Printing Mills and Section 45(4) of the Act, the revaluation surplus was taxable as capital gains in the hands of the firm and not in the hands of the partner. Consequently, the addition made by the Assessing Officer in the assessee’s hands was deleted. The Tribunal also relied on CBDT Circular No.8 of 2014. Effectively, the ground on merits was allowed in part, while other grounds challenging reassessment were dismissed as academic.

Assessment year 2025-26: The assessee’s return was processed u/s 143(1) by the CPC declaring income of Rs.6,95,720, which included Rs.1,54,411 STCG chargeable u/s 111A. Tax was computed at Rs.35,857 and the Section 87A rebate was restricted from Rs.25,000 to Rs.12,066 by excluding the tax on the STCG component. The Addl. CIT(A) dismissed the assessee’s appeal relying on CBDT Circular No.13/2025. The Tribunal held that: (i) Section 87A, as applicable to A.Y. 2025-26, allowed the rebate against income-tax on total income up to Rs.7,00,000 without excluding income taxable at special rates; (ii) Section 111A only fixes the rate of tax and contains no prohibition against the rebate; (iii) the restrictive amendment to Section 87A by the Finance Act, 2025 was expressly prospective from A.Y. 2026-27 and could not be applied retrospectively to A.Y. 2025-26; (iv) a CBDT circular cannot impose a substantive restriction absent from the statute; and (v) the judicial precedents cited support the view that a statutory rebate cannot be denied merely because of the return-processing utility. The appeal was allowed and the CPC was directed to recompute the tax liability and allow full rebate u/s 87A, subject to verification of eligibility; the demand raised in the CPC intimation was deleted.

This judgment concerns the tax exemption of a statutory improvement trust established under the Punjab Town Improvement Act, 1922. The revenue disallowed exemption under Section 11 of the Income-tax Act, 1961 on the ground that the trust was engaged in lease and sale of land and was therefore doing business as a colonizer/developer, which falls outside ‘charitable purpose’ after the proviso to Section 2(15). The Income Tax Appellate Tribunal allowed the assessee’s claim for exemption. The High Court affirmed the Tribunal’s view. The core ruling is that a statutory body undertaking planned town improvement, development, housing and expansion schemes is pursuing ‘advancement of an object of general public utility’. Receipts from land disposal, the absence of State funding/subsidy, and the fact that some statutory powers permit sale or lease of land do not convert the trust into a non-charitable business entity. The predominant purpose and activity of the trust is statutory public development, and therefore the assessee-trust remains entitled to exemption under Section 11. The Assessing Officer was directed to delete the disallowance of exemption.

In the case of IKKI Saree Centre vs. DCIT, the Delhi Bench of the ITAT (C Bench) comprising Judicial Member Vikas Awasthy and Accountant Member S. Rifaur Rahman, allowed the assessee’s appeals for AYs 2018-19, 2019-20 and 2020-21. The Tribunal quashed the assessments passed under section 153C of the Income Tax Act, 1961, holding that after the insertion of sub-section (3) to section 153C by the Finance Act, 2021, w.e.f. 01.04.2021, the section no longer applies to searches initiated on or after that date. For an unsearched person, the date of search is deemed to be the date on which the seized material is received by the Assessing Officer, or where that date is unavailable, the date of the satisfaction note. Here, the satisfaction was recorded on 20.06.2022, after the cutoff, making the 153C proceedings void ab initio. The correct course is to undertake reassessment under sections 147/148. The decision follows the principles laid down in PCIT vs. Ojjus Medicare (P.) Ltd. and the coordinate Bench rulings in Lekh Raj vs. DCIT and Shivdham Buildtech Pvt. Ltd.