Case Studies of Landmark Income Tax Judgments | TaxPundit

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.

The appeal by Blazing Star Marketing Private Limited challenged the assessment order for AY 2013-14 passed by the National Faceless Assessment Centre (NFAC) on the ground of lack of jurisdiction. The Tribunal admitted an additional ground that section 151A of the Income Tax Act, enabling faceless assessment of income escaping assessment, was notified only on 29.03.2022, whereas the NFAC had issued notices under section 142(1) on 17.02.2022 and 29.12.2021. The Tribunal held that the assessment proceedings were initiated without valid jurisdiction and quashed the assessment order. Consequently, the appeal was allowed on the preliminary legal issue without going into the merits of the additions.

The Income Tax Appellate Tribunal, Chennai Bench, in ITA Nos.1874 & 1875/CHNY/2026, allowed the appeals of Max academy for Excellence against the orders of the Commissioner of Income Tax (Exemption) rejecting its application for renewal of registration under section 12AB and approval under section 80G(5) of the Income Tax Act, 1961. The Tribunal held that the trust’s activities of providing skill and personality training to students at nominal fees constitute charitable purpose under section 2(15) as general public utility services. The Tribunal relied on several precedents to hold that mere receipt of fee does not make the activity commercial. The Tribunal directed the CIT(E) to grant registration and approval from the date of application.

The Delhi High Court in Shailendra Nath Rai v. ACIT (W.P.(C) 15305/2024) allowed the writ petition challenging the reassessment proceedings for AY 2017-18. The court held that the notice under Section 148A(b) issued on 29.03.2024, though having only 2 days left before the limitation period ended on 31.03.2024, was not invalid per se because the time taken for the assessee to file reply (from 29.03.2024 to 21.04.2024) is to be excluded under the fifth proviso to Section 149. However, under the sixth proviso, the AO had only 7 days from the date of reply (21.04.2024) to pass the order under Section 148A(d) and issue notice under Section 148, i.e., by 28.04.2024. Since the AO issued the notice on 30.04.2024, it was time-barred. The court distinguished BKR Capital Private Limited where the initial notice was issued on 21.03.2024 with sufficient time. The impugned order and notice were quashed.

The Income Tax Appellate Tribunal, Delhi Bench, in ITA No.8431/Del/2025 for AY 2024-25, allowed the appeal of Sanchit Gupta for statistical purposes. The case involved short deduction of TDS under Section 194IA due to the seller’s PAN being inoperative for non-linking with Aadhaar. The Tribunal, while acknowledging the statutory mandate of higher TDS under Section 206AA read with Rule 114AAA(3), held that the department’s failure to flag the inoperative PAN in its system and the subsequent linking of PAN by the deductee warranted a pragmatic approach. Remanding the matter to the AO, the Tribunal directed verification of whether the seller declared the sale income and paid taxes, and if so, no higher TDS liability should be imposed on the assessee. The decision emphasizes the principle of proportionality and the need for departmental systems to support compliance.

The Income Tax Appellate Tribunal (ITAT), Pune Bench, allowed the appeal of the assessee, The Poona District Police Co-operative Credit Society Limited, and dismissed the Revenue’s cross-appeal. The core issue was whether interest income earned from fixed deposits with a cooperative bank qualifies for deduction under Section 80P(2)(d) of the Income Tax Act. The Tribunal, following its earlier decision in Shri Bhairavnath Multisate Cooperative Credit Society, held that such income is eligible for deduction because the cooperative bank is itself a cooperative society. Consequently, the disallowance of Rs. 1,95,17,026/- by the CIT(A) was reversed, and the Assessing Officer was directed to allow the deduction. The Revenue’s appeal challenging the allowance of deduction under Section 80P(2)(a)(i) was dismissed as the Tribunal found the assessee entitled to the deduction.

The Income Tax Appellate Tribunal, Rajkot Bench, allowed the assessee’s appeals against the reassessment order and penalty for AY 2013-14. The Tribunal quashed the reassessment order under section 147 read with section 144 and 144B of the Income Tax Act, 1961, on the ground that the Assessing Officer failed to issue mandatory notice under section 143(2) during reassessment proceedings. Following the Supreme Court’s decision in Hotel Blue Moon and other precedents, the Tribunal held that such omission renders the reassessment void ab initio. Consequently, the penalty under section 271(1)(c) was also deleted. The appeals were allowed.