Tax Reassessment Beyond 4 Years Invalid Without Failure To Disclose Material Facts: Bombay High Court

On 16 June, the Bombay High Court held that the Income Tax Department cannot reopen an assessment after four years when the taxpayer has already disclosed all material facts fully and truly and allowed a writ petition filed by Chennai Container Terminal Private Limited.A Division Bench of Justices B.P. Colabawalla and Firdosh P. Pooniwalla set aside the notice issued under Section 148 of the Income Tax Act, the order rejecting objections, and the consequential show cause notice and draft...

Excess Royalty Refunded To Indian Subsidiary Under APA Cannot Be Taxed As Income Of GIA US: Bombay High Court

The Bombay High Court has upheld relief granted to Gemological Institute of America Inc. (GIA US) in a dispute over royalty payments received from its Indian subsidiary. The court ruled that royalty amounts bona fide refunded pursuant to a CBDT-approved Advance Pricing Agreement (APA) could not be brought to tax in the hands of the US entity because the amounts did not ultimately belong to it. A Division Bench of Justice B.P. Colabawalla and Justice Firdosh P. Pooniwalla dismissed a batch of...

Gujarat HC Quashes Reassessment, Holds No Escaped Income Exists Where MAT Liability Is Unchanged

The Gujarat High Court has quashed reassessment proceedings initiated against Pandesara Infrastructure Limited for Assessment Year 2020-21. The court found that the proposed recomputation of depreciation would not result in any income chargeable to tax escaping assessment. It also noted that the company's liability under the Minimum Alternate Tax (MAT) regime would remain unchanged. A Division Bench of Justice A.S. Supehia and Justice Vaibhavi D. Nanavati allowed the writ petition challenging...

Kerala HC Directs CIT To Reconsider Registration Of Trust From 2021, Examines CBDT Circular 7/2024

On 4 June, the Kerala High Court directed the Commissioner of Income Tax (Exemptions) to reconsider a Atma Bodhodaya Sangham Sree Subhananda Trust's claim for registration under Section 12A of the Income Tax Act with effect from 1 April 2021, after examining the applicability of CBDT Circular No. 7/2024 on rectification of defective exemption applications. A Division Bench of Justices Devan Ramachandran and Basant Balaji set aside the orders of the Income Tax Appellate Tribunal (ITAT) and the...

No Relief For Reimbursement Claims Made To Foreign Parent Without Expense Break-Up: Madras High Court

The Madras High Court has recently dismissed appeals filed by Cairn India Limited, now Vedanta Limited, and upheld tax demands over its failure to deduct tax at source (TDS) on payments remitted to its Australian parent company. While dismissing Cairn's plea, the court made it clear that a taxpayer cannot obtain relief merely by describing a lump-sum payment as a reimbursement. If the claim is that the payment represents reimbursement of expenses, the taxpayer must disclose what those expenses...

60% Tax Rate Under Section 115BBE Cannot Apply To Pre-1 April 2017 Income: Rajasthan High Court

The Rajasthan High Court on 27 May held that the enhanced tax rate of 60% introduced under Section 115BBE of the Income-tax Act through the Taxation Laws (Second Amendment) Act, 2016, cannot be applied retrospectively to income pertaining to Financial Year 2016–17, as the amendment was expressly made effective from 1 April 2017. The Division Bench of Justices Arun Monga and Sunil Beniwal held that the higher rate could operate only prospectively and could not govern income earned prior to its...

Partner Cannot Claim Deduction On Interest Paid For Capital Invested In Firm: Kerala High Court

The Kerala High Court on 20 May held that a partner cannot claim deduction under Section 36(1)(iii) of the Income Tax Act for interest paid on funds borrowed and contributed as capital to a partnership firm, since the borrowed capital was not used for the partner's own business. A Division Bench of Justices Devan Ramachandran and Basant Balaji dismissed the appeal filed by Alice Arun Thomas and upheld the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. It held: "The provisions...

ITAT Ahmedabad Deletes ₹74.64 Lakh Addition After Waste Stock Discrepancy Was Adequately Explained

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) deleted a ₹74.64 lakh addition made against Shakti Polyweave Private Limited towards estimated gross profit. The tribunal held that the company had adequately explained the alleged discrepancy in wastage stock reported in its tax audit report and that rejection of its books of account was unjustified. The bench of Judicial Member Siddhartha Nautiyal and Accountant Member Annapurna Gupta partly allowed the assessee's appeals for...

'Left No Stone Unturned To Harass': Delhi HC On IT Dept's Delay In Releasing KVPs, IVPs

The Delhi High Court has pulled up the Income Tax Department for delaying the release of seized Kisan Vikas Patras (KVPs) and Indira Vikas Patras (IVPs) even after the assessee deposited the settlement amount, observing that the authorities had “left no stone unturned to harass” the petitioner.A division bench of Justices Dinesh Mehta and Om Prakash Shukla directed the tax authorities to compensate the petitioners for loss of interest caused due to wrongful retention of the instruments.The case...

Company's Car, Telephone Costs Not 'Personal' Despite Being Separate Legal Entity: Delhi High Court

The Delhi High Court has held that telephone and car expenses incurred by a company cannot be disallowed as “personal” expenses merely because a company is treated as a separate legal person.A division bench of Justices Dinesh Mehta and Vinod Kumar allowed the company's appeal and set aside an order of the Income Tax Appellate Tribunal (ITAT), which had upheld disallowance of one-sixth of the company's telephone and car expenses on the ground of possible personal use.The company argued that...

Huge Turnover Difference Between Taxpayer, Comparable Warrants Exclusion In Transfer Pricing Analysis: Delhi HC

The Delhi High Court has held that a company with a vastly different turnover and scale of operations may not be a proper comparable for transfer pricing analysis.A division bench of Justices V. Kameswar Rao and Vinod Kumar observed that huge differences between the tested entity and the comparable would necessarily require the exclusion of the comparable.The court made the observation while dealing with an appeal filed by the Income Tax Department against an order of the Income Tax Appellate...

Delhi High Court Quashes IT Order After Dept. Failed To Intimate Decision On Taxpayer's Adjournment Request

The Delhi High Court has quashed an income tax assessment order and demand notice after finding that a taxpayer was denied a fair hearing. The tax department failed to communicate whether his adjournment request had been accepted or rejected. It also passed the order without considering the reply he had filed. A Bench of Justice Dinesh Mehta and Justice Vinod Kumar observed, “It is clear that the petitioner's right of being heard has been infracted and the violation of petitioner's Fundamental...