LiveLawBiz Direct Tax Weekly Round-Up: November 02 - November 08, 2026

Bombay HC

Income Tax Department Cannot Skip Draft Assessment Order For Eligible Taxpayer: Bombay High Court

Case Title : Orpak Systems India Private Limited v. The Assessment Unit (NFAC) & Ors

Case Number : Writ Petition No. 424 of 2026

CITATION : 2026 LLBiz HC(BOM) 629

The Bombay High Court on 30 October held that the Income Tax Department cannot pass a final assessment order against an eligible taxpayer without first issuing a draft assessment order, as mandated under Sections 144B and 144C of the Income Tax Act, 1961. A Division Bench comprising Justices B.P. Colabawalla and Farhan P. Dubash quashed the final assessment order passed against Orpak Systems India Private Limited, after the Revenue admitted that it had not issued a draft assessment order.

Income Tax Department Cannot Add Entire Second Flat Cost To Capital Gains: Bombay High Court

Case Title : Nilesh Ramesh Modi v. The Income Tax Officer, Ward 16(3)(1), Mumbai & Ors.

Case Number : Writ Petition No. 4898 of 2026

CITATION : 2026 LLBiz HC(BOM) 631

The Bombay High Court, on 2 November, held that the Income Tax Department cannot add the entire purchase cost of a second flat to a taxpayer's income while computing capital gains under Section 54F of the Income Tax Act, 1961, merely because the exemption claimed for that flat is denied. A Division Bench comprising Justices B.P. Colabawalla and Farhan P. Dubash found that the Department had incorrectly computed the taxpayer's capital gains by adding Rs. 4.78 crore, representing the purchase cost of the second flat, to his income.

Bombay High Court Quashes Reassessment Against Defunct Company's PAN After Conversion Into LLP

Case Title : Aavkar Trade Consultants LLP v. Income Tax Officer & Ors.

Case Number : Writ Petition (L) No. 27936 of 2026

CITATION : 2026 LLBiz HC(BOM) 641

The Bombay High Court has quashed income tax reassessment proceedings initiated against the PAN of a company that had ceased to exist after its conversion into a Limited Liability Partnership (LLP). The court held that the continued reporting of dividend income and tax deducted at source (TDS) against the erstwhile company's PAN did not justify reassessment, as the company had ceased to exist and the corresponding income had been disclosed by its successor LLP.

Chhattisgarh HC

Chhattisgarh High Court Orders Refund To UltraTech Cement, Shree Cement After Tax Demand Is Quashed

Case Title : Ultratech Cement Limited v. Union of India & Ors.

Case Number : WPT Nos. 76/2021, 219/2023 and 223/2023

CITATION : 2026 LLBiz HC(CHH) 28

The Chhattisgarh High Court on 28 October held that amounts recovered from UltraTech Cement Limited and Shree Cement Limited towards the tax dues of the State Mining Department must be refunded once the underlying tax demand has been quashed. Justice Narendra Kumar Vyas allowed the petitions filed by the cement companies challenging the State Government's refusal to refund or adjust the amounts recovered towards the Mining Department's tax dues.

Karnataka HC

Karnataka High Court Upholds Exclusion Of Infosys, Wipro, Tata Elxsi As Transfer Pricing Comparables

Case Title : The Commissioner of Income Tax v. M/s Logica Private Limited

Case Number : INCOME TAX APPEAL NO. 338 OF 2013

CITATION : 2026 LLBiz HC(KAR) 210

The Karnataka High Court on 28 October dismissed the Income Tax Department's appeal against the exclusion of Infosys, Wipro and Tata Elxsi from the comparables selected to determine the arm's length price (ALP) of software development services provided by Logica Private Limited. A Bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha held that companies with significant brand value, intellectual property rights and materially different business profiles cannot be treated as comparable for transfer pricing merely because they operate in the software sector.

Assessing Officer's Location Determines Appeal Jurisdiction, Not ITAT Bench: Karnataka High Court

Case Title : Principal Commissioner of Income Tax v. M/s United Spirits Ltd.

Case Number : INCOME TAX APPEAL NO. 84 OF 2021

CITATION : 2026 LLBiz HC(KAR) 212

The Karnataka High Court has held that the jurisdiction to hear an appeal against an Income Tax Appellate Tribunal (ITAT) order under Section 260A of the Income Tax Act, 1961, depends on the territorial jurisdiction of the Assessing Officer who passed the assessment order, and not the location of the Tribunal. A Division Bench of Justices S.G. Pandit and Chillakur Sumalatha dismissed the Income Tax Department's appeal against an ITAT order in the matter of Shaw Wallace Financial Services Ltd., subsequently taken over by United Spirits Ltd., as not maintainable before the Karnataka High Court.

Karnataka High Court Allows Write-Off Of Advances To Foreign Subsidiary As Business Expenditure

Case Title : The Pr. Commissioner of Income Tax Central v. M/s NSL Sugars Ltd.

Case Number : INCOME TAX APPEAL NO. 105 OF 2026

CITATION : 2026 LLBiz HC(KAR) 213

The Karnataka High Court on 12 October held that loans advanced to a foreign subsidiary for business purposes and on grounds of commercial expediency are deductible as business expenditure under Section 37(1) of the Income Tax Act, 1961. A Bench comprising Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha upheld NSL Sugars Ltd.'s claim for the Rs. 3.79 crore deduction and the bagasse transfer price of Rs. 1,500 per tonne, but remanded the TDS issue for fresh examination.

ITAT's Findings On Comparable Companies Cannot Be Disturbed Without Perversity: Karnataka High Court

Case Title : Principal Commissioner of Income Tax BMTC Complex v. M/s Trident Microsystems India Pvt. Ltd.

Case Number : INCOME TAX APPEAL NO. 249 OF 2021

CITATION : 2026 LLBiz HC(KAR) 214

The Karnataka High Court on 15 October held that findings of the Income Tax Appellate Tribunal (ITAT) on the selection or exclusion of comparable companies in transfer pricing proceedings cannot be interfered with unless the Revenue establishes perversity. A Bench of Justices S.G. Pandit and Chillakur Sumalatha dismissed the Income Tax Department's appeal against Trident Microsystems India Pvt. Ltd., upholding the ITAT's decision to exclude functionally dissimilar companies from the list of comparables for determining the Arm's Length Price (ALP).

Assessing Officer Cannot Revisit DSIR-Approved R&D Expenses For Tax Deduction: Karnataka High Court

Case Title : The Deputy Commissioner of Income Tax, Circle-12(4) v. M/s Tejas Networks Ltd.

Case Number : WRIT APPEAL NO. 2473 OF 2015 (T-IT)

CITATION : 2026 LLBiz HC(KAR) 217

The Karnataka High Court on 2 November held that an Assessing Officer cannot independently examine the merits of research and development (R&D) expenditure approved by the Department of Scientific and Industrial Research (DSIR), and must restrict scrutiny to verifying whether the approved expenditure was actually incurred. A Bench of Chief Justice Vibhu Bakhru and Justice K.S. Hemalekha dismissed the Revenue's appeal against a Single Judge's order setting aside the disallowance of R&D expenditure claimed by the Tejas Networks Limited for Assessment Year 2009-10.

Madras HC

Madras High Court Upholds TVS Motor's ₹26.90 Crore Dies Replacement and ₹55.77 Crore R&D Deductions

Case Title : The Commissioner of Income Tax, Chennai v. M/s TVS Motor Company Ltd.

Case Number : TC(A).No.351 of 2015

CITATION : 2026 LLBiz HC (MAD) 337

The Madras High Court on 15 October held that TVS Motor Company could claim deductions for replacing dies and moulds as revenue expenditure under Section 31 of the Income Tax Act, 1961, and upheld the company's deductions for research and development, captive power generation and agency commissions. A Division Bench of Justices Anita Sumanth and K. Rajasekar disposed of the Revenue's appeal against an Income Tax Appellate Tribunal (ITAT) order dated 4 October 2012, which had allowed various deductions claimed by TVS Motor for the assessment year 2007-08.

ITAT

Limited Scrutiny Cannot Be Expanded To Examine Other Deductions Under Same Provision: ITAT Chennai

Case Title : Aeon Formulations Pvt. Ltd. vs. The Income Tax Officer, Corporate Ward 2(1), Chennai

Case Number : ITA No. 2481/Chny/2026

CITATION : 2026 LLBiz ITAT(CHE) 304

The Income Tax Appellate Tribunal (ITAT), Chennai, has recently held that an Assessing Officer (AO) cannot expand the scope of a limited scrutiny assessment to examine a separate deduction merely because it falls under the same provision of the Income Tax Act as the issue flagged for scrutiny. A Bench of Judicial Member Aby T. Varkey and Accountant Member S.R. Raghunatha observed that limited scrutiny restricts the AO's enquiry to the specific issues for which a return is selected, unless the conditions prescribed by the Central Board of Direct Taxes (CBDT) for expanding its scope are fulfilled.