Case Studies of Landmark Income Tax Judgments | TaxPundit

In a decisive ruling for foreign cruise operators, the Supreme Court dismissed the Revenue’s appeals and held that the presumptive taxation regime under Section 44B of the Income Tax Act, 1961 applies to non-resident cruise ship operators even when the cruise is a round trip from Mumbai and includes on-board hospitality and entertainment. The Court approved the concurrent findings of the CIT(A), ITAT, and Bombay High Court that the primary fee collected is for carriage of passengers, and ancillary amenities are incidental. Consequently, the deemed income is 7.5% of gross cruise fare receipts and tax deduction under Section 195 must be made on that basis, not 25% as determined by the Assessing Officer. The companion appeal for a different assessment year was dismissed on the same reasoning.

This case involves cross appeals by Sun Pharmaceutical Industries Ltd. and the Revenue against the order of the CIT(A) for AY 2014-15. The assessee’s appeal (ITA No.885/Ahd/2019) challenges the transfer pricing adjustment on transfer of electricity from its captive power plant, disallowance under section 14A, disallowance of Rs.602.39 crores compensation paid to Pfizer Inc, disallowance of software expenses, and other claims. The Revenue’s appeal (ITA No.969/Ahd/2019) challenges the CIT(A)’s deletions relating to transfer pricing on interest on loans, price difference on sales to AEs, bad debts, weighted deduction under section 35(2AB), and other issues. The Tribunal heard both appeals together. However, the present excerpt does not include the Tribunal’s decision.

The assessee appealed against penalty order under Section 270A for A.Y. 2019-20, confirming penalty of Rs.1,87,200 for misreporting of income. The Tribunal, following Hiro Mulchand Tanwani, held that the penalty could not be sustained as the deduction under Section 80GGC was disclosed in the return and there was no evidence of deliberate misreporting. The Assessing Officer also failed to specify the limb of Section 270A(9). Consequently, the penalty was deleted. The appeal was partly allowed.

In Chandana Mereddy vs. ITO, ITAT Hyderabad condoned a 258-day delay in filing appeal before CIT(A) with costs of Rs.5,000, but allowed the appeal on the legal ground that the reassessment notice under section 148 was issued beyond the statutory limitation period. The Tribunal applied the unamended provisions of section 149, as the amended provisions could not retrospectively revive a time-barred case. Consequently, the reassessment order under section 147 was quashed, rendering other grounds academic.

In the case of Global Medikit Limited vs. Deputy Commissioner of Income Tax, the ITAT Delhi Bench H allowed the assessee’s twin appeals for assessment years 2013-14 and 2014-15. The core issue was the validity of proceedings under section 153C of the Income Tax Act, 1961, initiated based on a search. The assessee contended that the Assessing Officer had not recorded a proper satisfaction that the seized material had a bearing on the determination of its total taxable income. The ITAT, after hearing both parties and perusing the records, observed that the satisfaction note dated 14.02.2022 failed to explicitly state such a bearing. Citing the jurisdictional High Court decision in Saksham Commodities Ltd. vs. ITO (2024) 464 ITR 1 (Delhi), the Tribunal concluded that this deficiency was fatal to the validity of the assessment. Consequently, the assessments framed on 25.03.2003 were held to be non-est. All other grounds raised by the parties became academic. The appeals were allowed, and the order was pronounced in open court on 10.07.2026.

Writ petitions allowed by Delhi High Court quashing penalty order of Rs. 9,30,24,492 under Section 270A of the Income Tax Act, 1961. The penalty was imposed for alleged misreporting of income, but the underlying assessment order had been set aside by the ITAT before the penalty order was passed. The court held that once the assessment basis is gone, the penalty cannot survive. The court also noted that Section 275(1A) mandates that penalty proceedings should not be finalized while appeal proceedings are pending. Since the appeal was allowed, the penalty order was invalid. The court emphasized that the AO should have given effect to the ITAT order and dropped the penalty. The writ petitions were allowed, and the penalty order along with demand notice was set aside, with liberty to the department to revive penalty if the appeal against the ITAT order is allowed.

The assessee’s appeal challenged the validity of reassessment proceedings for AY 2015-16 on the ground that the notice under section 148 issued on 07.04.2022 was barred by limitation. The Tribunal, after hearing both sides, analyzed the relevant provisions of section 149(1) as amended from 01.04.2021 and the first proviso which preserves the old six-year limit for past assessment years. It observed that for AY 2015-16, the six-year period from the end of the assessment year expired on 31.03.2022. The notice issued on 07.04.2022 was therefore beyond the permissible time. The Revenue’s argument that the period for response to show-cause notice should be excluded under the third proviso was rejected because the notice did not pass the initial test under the first proviso. Relying on the coordinate bench decision in Ms. Thirumoorthy Revathy and the Supreme Court’s ruling in Rajiv Bansal (469 ITR 430), the Tribunal quashed the reassessment proceedings and deleted the additions. The appeal was partly allowed, with merits left open.

This appeal by the assessee against the order of the CIT(A) sustaining the disallowance of deduction under section 80P(2)(d) on interest income from fixed deposits was allowed by the ITAT Rajkot Bench. The Tribunal found that the fixed deposits were maintained as collateral security for business overdraft facilities, thus the interest had a direct nexus with business income. The Revenue’s consistent acceptance of similar claims in prior and subsequent years further supported the assessee’s case. Following the precedent in Moodbidri Co-operative Service Bank Ltd., the Tribunal held the interest to be business income and directed the Assessing Officer to allow the deduction.