Case Studies of Landmark Income Tax Judgments | TaxPundit

The assessee appealed against the order of CIT(A) who had upheld the CPC’s denial of rebate u/s 87A on tax attributable to short-term capital gains u/s 111A. The ITAT allowed the appeal, holding that the rebate u/s 87A is available on the total income irrespective of the rate at which income is taxable, in the absence of any express statutory bar. The Tribunal noted that section 112A contains an express restriction but section 111A does not, and the Finance Act 2025 amendment is prospective. Thus, the claim for rebate was valid and the consequential demand was deleted.

The Income Tax Appellate Tribunal allowed the appeal of Marlabs Innovations Private Limited, quashing the final assessment order for AY 2022-23. The AO had passed the order under section 143(3) r.w.s. 144C(13) without giving effect to the specific directions of the DRP, which had granted partial relief on transfer pricing adjustments. The ITAT, relying on binding decisions of the Karnataka High Court in PCIT vs. Flextronics and PCIT vs. VMWARE, held that the order violated section 144C(13) and was unsustainable. The appeal was allowed, and other grounds were kept open.

In ITA No. 1045/Ahd/2025 & CO No. 76/Ahd/2025, the Income Tax Appellate Tribunal, Ahmedabad Bench, comprising Dr. B.R.R. Kumar, Vice-President, and Ms. Suchitra R. Kamble, Judicial Member, heard the appeal by the Revenue against the order of CIT(A) deleting an addition of Rs.80,00,000/- made u/s 68 of the Income Tax Act, 1961 for the Assessment Year 2016-17. The addition pertained to a donation claimed as deduction u/s 80GGC to Rashtriya Samajwadi Party (Secular), which was alleged to be bogus based on search operations revealing a large-scale scam of accommodation entries. The Tribunal allowed the Revenue’s appeal, holding that the donation was not genuine as the political party was part of a fraudulent scheme, and the assessee’s claim was bogus. The Tribunal upheld the addition and dismissed the assessee’s cross-objection. The decision reinforces that mere documentary compliance cannot override overwhelming investigation evidence of fraud in accommodation entry cases.

This case involves two appeals by the Revenue against the CIT(A)’s order restricting addition under section 68 to the profit element from commodity transactions involving client code modification, and deleting the associated penalty. The Tribunal upheld the CIT(A)’s decision, relying on its own earlier order in the assessee’s case for the same assessment year. The key principle established is that in cases of client code modification, where the assessee has not participated in the modification and the transactions are otherwise genuine, only the profit element embedded in the trades is taxable under section 68, not the gross purchase value. The assessee had already offered the profit in its return, so no further addition was warranted. Consequently, the penalty was also deleted.

In this ITAT case, the assessee challenged the addition of Rs.32,15,040 as undisclosed income from cash deposits during a search. The appeal was filed with 422 days delay. The Tribunal condoned the delay due to reasonable cause, citing precedents. On merits, noting the assessee’s non-compliance before the lower authorities, the Tribunal remanded the case to CIT(A) for fresh adjudication, allowing the appeal for statistical purposes.

The ITAT Bangalore dismissed the revenue’s appeals for AYs 2017-18 to 2020-21. It upheld CIT(A)’s order deleting additions under section 153A for lack of incriminating material, following the Supreme Court’s ruling in PCIT v. Abhisar Buildwell. For AY 2020-21, the tribunal held that capital gains from a pre-2018 Joint Development Agreement cannot be taxed under the prospective section 45(5A). The decision was consistent with the coordinate bench’s order in the assessee’s spouse’s case.

The Income Tax Appellate Tribunal, Delhi Bench ‘E’, heard cross appeals regarding assessment year 2018-19 for Health Care at Home India Pvt. Ltd. The assessee challenged the ad-hoc disallowance of 30% (later reduced to 15% by CIT(A)) of sales promotion expenses of Rs.8.04 crore, and the revenue challenged the CIT(A)’s deletion of addition under section 69C for intangible assets. The Tribunal, after considering submissions, found that while the assessee could not fully establish nexus for certain expenditures, a complete disallowance was unwarranted. It reduced the disallowance to 5% of the total sales promotion expenses, to cover any loopholes, with a caveat that it shall not be treated as a precedent. Regarding the intangible assets, the Tribunal upheld the CIT(A)’s deletion, noting that the expenses were duly recorded and supported by evidence, and the AO failed to bring any contrary material. Consequently, the assessee’s appeal was partly allowed and the revenue’s appeal dismissed.

IMAX Theatre Services Ltd., a Canadian resident, appealed against additions for alleged Permanent Establishment (PE) in India. The ITAT allowed the appeal, holding that the assessee did not have a fixed place PE as remote access did not constitute a place of business at disposal, and no service PE existed since services were provided for only 67 days, below the 90-day threshold. The concept of a virtual PE was not recognized under the India-Canada DTAA. The court rejected the Revenue’s reliance on a LinkedIn profile to establish employment, as an affidavit from the actual employer was provided. No profit attribution was warranted.