DIGEST - 2024

Date : 12/08/2025

2024-Digest of case laws (ITR 460 ITR to 471, Taxman 296 to 300, CTR,336 to
341, ITD,204 to 208, ITR(Trib),108 to 116 TTJ,227 to 232, BCAS, Chamber’s
Journal, AIFTPJ, NYTTJ (Judgement not yet published in TTJ)

S. 2(14)(iii) : Capital asset-Agricultural land-Land situated outside the

Municipal limits-As per the last Census i. e., the Census of 2011, Zirakpur had
a population of 95,443-Land situated more than four kilometers away from the
Municipality Limits of Zirakpur-Sale consideration is not taxable. [S. 45]
Assessee sold agricultural land situated in village Chhatt which was outside the municipal
limits as described in Notification No. 9447, dt. 6th Jan. 1994. It was by virtue of the
Notification dt. 4th Dec. 2012, issued by the Department of Rural Development and
Panchayats, Government of Punjab that the Gram Panchayat of village Chhatt was
created. The village Chhatt, at that time, was not comprised within the municipal limits
of Zirakpur. By virtue of Notification No. 10/16/16-3 SS3/2788, dt. 19th Dec. 2016
issued by the Department of Local Bodies, Government of Punjab, that the municipal
limits of Zirakpur were extended and village Chhatt was included therein. The Tribunal
held that the land is situated more than four kilometres away from the municipal limits
of Zirakpur and as per the last Census i. e., the Census of 2011, Zirakpur had a
population of 95,443. Accordingly the land sold by the assessee was agricultural land,
not forming part of capital asset within the meaning of s. 2(14), accordingly the amount
received by the assessee is was not chargeable to tax. (AY. 2017-18)
Avtar Singh v. ITO (2024) 230 TTJ 506 / 239 DTR 113 / 166 taxmann. com
278 (Chd)(Trib)
S. 2(14)(iii): Capital asset-Agricultural land-Sale of agricultural land-Land is
situated beyond 10 Kms. from Municipal limits-And Shown as wet land-
Registration of immovable property by land Registrar-Paid land revenue-
Cannot be assessed as capital gains. [S. 45]
Held that the assessee had paid the land tax to the local Revenue office as agricultural
land and had furnished the certificate issued by the Village Administrative Officer to
prove that the land was situated beyond 10 kms. from the municipal limits as to fall
outside the definition of capital asset per section 2(14) of the Act. The assessee had
also furnished before the Dispute Resolution Panel the land details available in the
records of the Revenue authorities showing it to be wet land for the purpose of valuation
for registration of immovable property by the Land Registrar. Tribunal held that merely
because the Tahsildar had left the columns of crops grown or cultivated blank, that could
not lead to the conclusion that the immovable property is a capital asset. Addition as
capital gain is deleted. (AY. 2015-16)
Nataraj Ramaiah v. ITO (IT) (2024) 115 ITR 31 (SN)(Chennai)(Trib)
S. 2(14)(iii) : Capital asset-Agricultural land-Capital gains-Land is not situated
within jurisdiction of Municipality-Population of village was 907 persons as per
latest published census of 2011-Long term capital gains on sale of agricultural
land cannot be taxed as capital gains. [S. 2(14)(iii)(a), 45, 54F]
Assessee sold agricultural land at Mohali in 2014 and claimed deduction u/s. 54B of the
Act by buying another agricultural land. AO considered agricultural land sold as a capital
asset by rejecting contention of the assessee that land sold was outside the limits of the
municipality and hence, it was exempt income. CIT(A) confirmed addition made by the
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AO. On appeal the Tribunal deleted the addition by accepting the evidence adduced by
the assessee showing the population of the village was mere 907 persons as per
published census and that land was situated outside the limits of the municipality. The
long term capital gains on sale of land can could not be brought to tax. (AY. 2015-16)
Kulwant Singh v. ITO (2024) 112 ITR 719 / 165 taxmann. com 383.
(Chd)(Trib.)
S. 2(14)(iii): Capital asset-Agricultural land –Sale of agricultural land-
Purchaser changed the use for commercial purposes-Not assessable as capital
gains. [Gujarat Tenancy and Agricultural Lands (Amendment) Act, 1997 (GT
& All) S. 63AA,65B]
The assessee sold four pieces of agricultural land to a company Steel Strips Wheels Ltd.
The purchaser received permission for use of the land for bona fide industrial purposes.
Assessee has obtained certificate for change of land use from agricultural to non-
agricultural. The assessee contented that the land sold by him did not qualify as “capital
asset” in terms of section 2(14)(iii) being rural agricultural land. The AO held that the
land sold by the assessee as non agricultural land and concluded that it qualifies capital
asset and therefore capital gained earned is liable to tax. Tribbunal held that, AO has
erred in interpreting S. 63AA of the Gujarat Tenancy and Agricultural land laws Act,1997
and the land did not qualify capital asset in terms of s. 2(14)(iii) of the Act. Accordingly
the capital gains is not liable to tax. (AY. 2016-17)
Hiten Tulshibhai Engineer v. ITO (2024) 204 ITD 98 (Ahd)(Trib)

S. 2(15): Charitable purpose-General public utility-Publishing newspapers-

Receipts more than 10 lakhs-Matter remanded for verification. [S. 11, 12A.]
The Tribunal held that the denial of exemption under section 11 by the Revenue
authorities without examining whether activities were in nature of trade commerce of or
business was not justified merely on the ground that receipts had exceeded the limit of
Rs. 10 lakhs. The matter was is remanded to the Assessing Officer to decide the issue
in accordance with the judgement of apex court in Ahmedabad Urban Development
Authority (2023) 449 ITR 1 (SC), examine the status of charitable entity granted under
section 12A of the Act, examine the plea that the assessee has very nominal profit or
margin from the main activity of selling IRS reports to members and non-members and
also to decide the issue on principle of mutuality in light of the decision earlier years
order of the Tribunal. (AY. 2009-10 to 2013-14)
Media Research Users Council v. ACIT [2024] 205 ITD 170 (Mum)(Trib)

S. 2(22)(e): Deemed dividend-Trade advances-Commercial transactions-

Cannot be assessed as deemed dividend-Order of High Court is affirmed-SLP of
Revenue is dismissed. [Art. 136]
Affirming the order of the Tribunal, the High Court by held that trade advances which
were in nature of commercial transactions would not fall within ambit of word 'advance'
in section 2(22)(e) of the Act. SLP filed by revenue is was dismissed.
PCIT (Central) v. Dwarka Prasad Aggarwal (2024) 299 Taxman 363 /471 ITR
435 (SC)
Editorial : PCIT v. Dwarka Prasad Aggarwal(2022) 140 taxmann. com 32 /(2024)471
ITR 432 (Delhi)(HC)

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S. 2(22)(e): Deemed dividend-Capital contribution by companies in which
assessee Firm’s partners were shareholders-Commercial Transaction-Not loans
and advances-Not assessable as deemed dividend. [S. 260A]
During the year under consideration, the assessee-partnership firm received capital
contributions from two partner-companies in which two other partners held substantial
interest. The assessee was neither a registered shareholder nor a beneficial owner of
shares held in the companies. However, the assessing officer assessed the contributions
as deemed dividend under section 2(22)(e) and taxed the same in the hands of assessee.
The Commissioner of Income-Tax (Appeals) held that the capital contribution could not
be treated as loans or advances extended to the assessee and therefore, the assessing
officer could not have treated the same as deemed dividend in the hands of the assessee
and the same was upheld by the Tribunal . On appeal by the Department, the Delhi
High Court affirmed the decision of the Tribunal .The High Court further held that, if at
all addition could have been made, it could’ve been made in hands of two individual
partners and that too only by their assessing officers after affording them an opportunity
of being heard. (AY. 2006-07), 2010-11)
PCIT v. Wig Investment (2024) 461 ITR 117 / 158 taxmann. com 379 (Delhi
HC)

S. 2(22)(e): Deemed dividend-Business nexus and business exigency of entire

transaction proved-Advance could not be construed as the receipt of dividend.
Held that the Assessee is an investment company holding 15. 47 percent. of equity in
lender company took a loan from the bank for investment in two other companies against
collateral security given by the director of the assesse. The assessee utilized the entire
loan for investment. The company in which the assessee held 15. 47 percent equity lent
money to the assessee for making monthly payments to the bank. Business nexus and
business exigency of the entire transaction were proved, hence advance could not be
construed as the receipt of a dividend. (AY. 2012-13)
Ambey Capital P. Ltd. v. Dy. CIT (2024) 111 ITR 4(SN) (Delhi)(Trib.)

S. 2(22)(e) : Deemed dividend-Loans and advances- Regular business

transactions-Not a share holder-Not taxable as deemed dividend.
Held that neither the assessee was a substantial shareholder of ATL nor ATL was a
shareholder of the assessee. After relying upon various decisions, the TRIBUNAL held
that since the assessee was not a shareholder in ATL, which has given loan/advance to
assessee, therefore, the assessee did not fall under any of the limbs of section 2(22)(e)
of the Act, and the same could not be invoked in the hands of the assessee but only in
the hands of KSWPL. (AY. 2013-14, 2014-15, 2016-17, 2017-18)
Apeejay P. Ltd. v. Dy. CIT (2024) 111 ITR 231 (Kol.) (Trib.)

S. 2(22)(e) : Deemed dividend-Loans and advances-From group company

(APL)-Beneficial shareholder was KSWPL under whose controlling interest and
influence, APL had given loan/advance to assessee-Deeming provisions of
section 2(22)(e) under second limb were attracted on KSWPL and not on
assessee-loan amount was not taxable in hands of assesse. [S. 5 (1)(b)]
The assesseee was not a registered share holder of APL who was lender company.
Assessee received certain sum as loans/advances from its group company (APL).
Assessing Officer treated amount of loans/advances received by assessee from APL as
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deemed dividend under section 2(22)(e) on ground that there was a common
shareholding by KSWPL having substantial interest in both APL and assessee. CIT(A)
affirmed the order of the Assessing Officer. On appeal the Tribunal held that KSWPL was
in a position to control affairs of both APL and assessee. Benefit of transaction between
APL and assessee accrued to KSWPL who was in a controlling position having more than
20 per cent of shareholding in both of them-Assessee and APL were in no way in a
position to compel KSWPL in any way for exercising its voting rights in a particular
manner. Thus, beneficial shareholder was KSWPL under whose controlling interest and
influence, APL had given loan/advance to assessee and, accordingly, deeming provisions
of section 2(22)(e) under second limb were attracted on KSWPL. Further, taking into
consideration provisions contained in section 5(1)(b), income accrues or arises or is
deemed to accrue or arise in hands of KSWPL and not in hands of assessee and same
was not taxable in hands of assessee. Addition was deleted. (AY. 2013-14, 2014-15)
Apeejay Surrendra Management Services (P.) Ltd. v. DCIT (2024) 205 ITD 737
(Kol) (Trib.)
S. 2(24)(xviii) :Income-Assistance in the form of a subsidy or grant or cash
incentive or duty drawback or waiver or concession or reimbursement-
Incentive-Subsidies-Capital or revenue-Constitutional validity of insertion of
sub-clause (xviii) of the Finance Act, 2015 which brought subsidies, all forms
of incentives given by Government under the ambit of taxable income-The
Amendment was constitutionally valid-The mere fact that the institution of tax
by virtue of the impugned sub-clause falls more heavily on petitioner cannot
result in its invalidity-Court Cannot Substitute Legislative Judgment of
Economic Policies. [S. 4, Art. 12, 14, 19, 226, 246, 265, 289]
The Petitioner's sought to challenge the Constitutional Validity of the introduction of
impugned sub-clause (xviii) of section 2(24) introduced by the Finance Act, 2015
whereby all incentives given in whichever form by Government and with whatever
purpose or objective are to be treated as income irrespective of whether they are capital
or revenue in nature. The case of the Petitioner was that by amending section
2(24)(xviii), the legislature has essentially overruled judicial precedents that
distinguished capital receipts from revenue receipts, subsuming both under "income"
and subjecting them to taxation, thereby overriding the established legal principles.
Amendment indiscriminately broadens the definition of income to include subsidies,
without distinguishing between various types of subsidies and the purposes for which
they are granted. Before the amendment through the Finance Act, 2015, the Supreme
Court applied the "purpose test" to determine whether a subsidy was a capital or revenue
receipt. The Petitioner contended that the amendment carried was violative of Articles
12, 14, 19, 246, 265 and 289 of the Constitution of India and is was contrary to the
provisions of sections 4 and 5 of the Income-tax Act, 1961.
Rejecting the contentions of the Petitioner, High Court held that
• Every legislation particularly in economic matters cannot provide for all possible
situations or anticipate all possible abuses.
• There is always a presumption in favour of the constitutionality of a statute and the
burden is upon him who attacks it to show that there has been a clear transgression
of the constitutional principles.
• The imposition of tax on these subsidies under the amended provision does not
constitute "taking away" of a benefit but rather represents a recalibration of
fiscal advantages in line with broader economic and policy considerations.
Profits, by their nature, are subject to fluctuations resulting from various factors,
4
 taxation being but one. It is the duty of the Legislature to ensure that taxation
policy reflects a balance between incentivizing economic activity and ensuring
the equitable distribution of fiscal resources.
• Section 2(24)(xviii) of the Act is an example of this balancing act, and its imposition
is a reflection of a subsidy's life cycle coming to its fiscal fruition. Petitioner's
argument, is ostensibly rooted in concerns over profitability. This does not, in
substance, however, provide a tenable basis to impugn the constitutional validity
of the amended provision. Hence, petitioner's argument of eroded profitability due
to taxation lacks constitutional merit. An extension of this logic could open
floodgates of untenable demands from loss-incurring entities seeking tax
exemptions to improve profitability. This could potentially create a taxing standard
that is inconsistent and prone to manipulations.
• The mere excessiveness of a tax or even the circumstance that its imposition might
tend towards diminution of the earnings or profits of the persons of incidence, like
in the case at hand-savings get reduced resulting in lower profitability, does not,
per se, and without more, constitute violation of the rights under Part III of
Constitution of India.
• The legislative change was not done surreptitiously but was the result of a
transparent legal process, providing ample opportunity for all stakeholders to
acquaint themselves with the new provisions.
• It is permissible for a competent Legislature to overcome the effect of a decision of
a Court setting aside imposition of tax by passing a suitable legislation, by amending
the relevant provisions of the statute concerned with retrospective effect.

• The High Court accepted contentions of the Revenue that

a) the judicial invalidation of this provision would precipTribunale not merely a
legal conundrum but a fiscal catastrophe with far-reaching consequences. A
retrospective annulment of this provision would cause a state of chaotic
disarray. Individuals and entities that have availed of subsidies and
concessions and complied with the tax obligations thereof stand to face an
untenable situation. They have acted in good faith under the existing legislative
policy, and to dismantle this retrospectively would be to penalize compliance
and create an environment of uncertainty and unpredictability in tax matters.
Moreover, such a judicial step would likely instigate a flood of claims and
litigations for refund of taxes paid under the provision, straining the
administrative machinery and judicial resources. This would not only disrupt
the revenue stream but also place an undue burden on the exchequer.
b) It is the duty of the legislature to ensure that taxation policy reflects a balance
between incentivizing economic activity and ensuring the equitable distribution
of fiscal resources.
• The mere fact that the institution of tax by virtue of the impugned sub-clause falls
more heavily on the petitioner cannot result in its invalidity.
the High Court did not down section 2(24)(xviii).
Serum Institute of India (P.) Ltd. v. UOI [2023] 157 taxmann.com 107 / [2024] 463
ITR 582 /336 CTR 6 (Bom)(HC)

S. 2(31) : Person –Association of person-Characterization of consortium-

Agreement-Terms of the agreement will be the deciding factors-Taxable as an
AOP and not as individual members.
5
Held that characterization of consortium as an AOP, has to be determined in terms of
the agreement between parties. Circular No 7/2016 dt. 7-3-2016 (2016) 382 ITR 27
(St.). Accordingly the Tribunal held that Consortium failed to fulfil the relevant
requirement of the circular. Thus the TRIBUNAL upheld the taxability of Consortium as
an AOP and not as individual members. (AY. 2011-12)(ITA No. 518 / Del/2022 dt.
22-12-2023)
Pico Deepali Overlay Consortium v. DCIT (2024) Chamber’s Journal-February-
P. 94 (Delhi)(Trib)

S. 2(42A) : Short-term capital asset-Capital gains-Unlisted shares-Investment

in a residential house-Amended provisions of section 2(42A), which exclude
holding period of unlisted shares being held for 12 months to be treated as
long-term capital gain is applicable from assessment year 2015-16-Shares held
around 31 months-Matter remanded to decide issue afresh as per provisions of
law. [S. 45, 54F]
Assessee sold shares and earned LTCG and claimed deduction under section 54F.
Assessing Officer denied exemption under section 54F on ground that period of holding
of shares was less than 36 months i. e. 31 months. Drawing support from provisions of
section 2(42A), Assessing Officer held that sale of shares gave rise to STCG and taxed
same. CIT(A) affirmed the order of the AO. On appeal the Tribunal held that since
provisions of section 2(42A) has been amended to exclude holding period of unlisted
shares being held for 12 months to be treated as LTCG but said amendment has come
from assessment year 2015-16 and applicable therefrom therefore, amended provisions
is not applicable. Since holding period of impugned shares was around 31 months, capital
gain was to be treated as LTCG and, hence, Assessing Officer should re-consider claim
of exemption under section 54F and decide issue afresh as per provisions of law. (AY.
2013-14)
Ravi Jakhar. v. ACIT (2024) 208 ITD 633 (Mum) (Trib.)

S. 4 : Charge of income-tax-Accrual-Interest on sticky advances credited to

memorandum account is not taxable. [S. 145, Art. 136]
Interest on sticky advances credited to memorandum account is not taxable. Followed
UCO Bank v. CIT (1999) 237 ITR 889 (SC). (AY. 1982-83)
CIT v. Citi Bank N. A. (NO. 3) (2024)469 ITR 403 (SC)
Editorial : CIT v. Citi Bank N. A ITR No. 191 of 1997 dt. 10-4-2003(Bom)(HC)

S. 4 : Charge of income-tax-Accrual-Banks-Interest on bad and doubtful debts

is not taxable. [S. 5, 119, Art. 136]
Held that the interest on bad and doubtful debt was not taxable in view of the Central
Board of Direct Taxes circular dated October 9, 1984. Followed UCO Bank v. CIT (1999)
237 ITR 889 (SC) (AY. 1985-86, 1986-87)
CIT v. Standard Chartered Bank (2024) 469 ITR 408 (SC)
Bank of Rajasthan Ltd v.CIT (2024) 469 ITR 280/ 301 Taxman 463 (SC)

Editorial : CIT v. Standard Chartered Bank,ITR No. 87 of 1996 dt 16-7-2003 (Ker)(HC),

CIT v. Bank of Rajasthan Ltd (2009) 316 ITR 391 ( Raj( HC), reversed , Decision in CIT(
(LTU) v . State Bank of India ( 2020) 428 ITR 316 ( Karn)( HC) , affirmed .
S. 4 : Charge of income-tax-Capital or revenue-Preoperative expenditure
pending capitalization-Interest Earned from fixed deposits of unutilised foreign
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external commercial borrowing loans during period of construction-Interest
capitalised in the books of account-Capital receipt-SLP of revenue is dismissed
due to failure to explain satisfactorily condonation of delay of 699 days in filing
SLP. [S. 28(i), 56, 145,Art. 136]
During this year, the assessee could utilise only part of loan which was borrowed during
period of construction. The assessee had temporarily made fixed deposits of the external
commercial borrowing funds till utilisation for fixed asset or capital expenditure. The
assessee had paid interest of Rs. 13. 38 crores on the borrowings and had earned
interest of Rs. 4. 03 crores on the fixed deposits. The net interest of Rs. 9. 35 crores
was added to the preoperative expenditure pending capitalization. The Tribunal allowed
the capitalisation of interest on fixed deposit receipts earned during the period of
construction. On appeal the Court affirmed the order of Tribunal. SLP of Revenue was
dismissed due to failure to explain satisfactorily condonation of delay of 699 days in
filing SLP (AY. 2012-13), (2013-14)
PCIT v. Triumph Realty Pvt. Ltd. (2024)468 ITR 109 (SC)
Editorial : PCIT v Triumph Realty Pvt. Ltd (2023) 450 ITR 274 (Delhi)(HC),PCIT v.
Triumph Realty Pvt. Ltd. (No. 1) (2023) 450 ITR 271 (Delhi)(HC)

S. 4 : Charge of income-tax –Consideration received for relinquishment of

trustee ship-Not capital in nature-Assessable as income-SLP of Assessee is
dismissed. [S. 45, 132, Art. 136]
On appeal the High Court held that the consideration received by the trustees for
relinquishment of the trusteeship could not be treated as a capital receipt for the
purposes of assessment as capital gains, but would have to be treated as the individual
income of the assessee under the appropriate head of income. On a petition for Special
Leave to Appeal to the Supreme Court,SLP of the assessee is dismissed. (AY. 2009-
10 to 2011-12)
Jose Thomas, Etc. v. PCIT (2024)468 ITR 108 / 301 Taxman 170 (SC)
Editorial : PCIT v. Grancy Babu (2024) 298 Taxman 722 / 471 ITR 377 (Ker)(HC)
S. 4 : Charge of income-tax-Capital or revenue-Sales tax exemption –Notice is
issued in SLP filed by the assessee. [U. P. Trade Tax Act, 1948, S. 4A, Art. 136]
High Court held that the assessee availed exemption from payment of tax under
exemption certificate issued under section 4A of U. P. Trade Tax Act, 1948 on turnover
of sales and claimed amount representing tax exemption component as capital receipt,
since section 4A clearly indicated that exemption from tax on turnover of sales was not
a subsidy granted by Government, aforesaid amount of tax component was a revenue
receipt in hands of assessee and it could not be treated as capital receipt. Whether in
view of fact that issue regarding exemption granted under U. P. Trade Tax, 1948, and
effect thereof was pending consideration before this Court in Tata Steel BSL Ltd. v. CIT
[SLP (C) No(s). 30728–30732 of 2017] notice was to be issued in SLP filed by assessee
against impugned order as well as on application for stay.
Birla Corporation Ltd. v. CIT (2024) 299 Taxman 508 (SC)
Editorial : CIT v. Birla Corporation Ltd(2024) 159 taxmann. com 651 (Cal)(HC)
S. 4: Income-Capital or revenue-Subsidy-Sales tax subsidy to be treated as a
capital receipt-Department’s SLP dismissed.
The Delhi High Court relying on various orders had held that the sales tax subsidy
received by the assessee has to be treated as a capital receipt and not be added to the
income of the assessee. The department filed SLP before the Supreme Court. The Court
while dismissing the SLP held that consequent upon holding that the sales tax subsidy
7
receipt by the Assessee was being treated as a capital receipt, the natural consequences
as a result of the said declaration would follow. (AY. 2007-08-2010-11)
PCIT v. Sunbeam Auto (P.) Ltd (2024) 297 Taxman 375 / 463 ITR 3 /337 CTR
249 (SC)
Editorial : Sunbeam Auto (P.) Ltd v. PCIT (2020) 116 taxmann. com 763/ (2018) 402
ITR 309 (Delhi))(HC)

S. 4: Charge of income-tax-Club-Bank-Interest-Mutuality-Interest on fixed

deposits-Principle of mutuality does not apply to interest income earned on
fixed deposit in the banks-Appeal of Revenue is dismissed on account of
Monetary limits [S. 268A. Art. 136]
Principle of mutuality does not apply to interest income earned on fixed deposit in the
banks. Appeal of Revenue is dismissed on account of monetary limits.
CIT v. Noida Golf Course Society (Regd) (2024) 337 CTR 255 (SC)

S. 4 : Charge of income-tax-Capital or revenue-Amount received under non-

compete agreement is capital receipt. [S. 28(i)]
Dismissing the appeal of the Revenue the Court held that the assessee had been
restrained both directly and indirectly from undertaking any business which would
compete with the business of WSIL. Clearly, for the period in which the non-compete
agreement was to operate, which in this case was ten years, the assessee's source of
income had been clamped and, therefore, the compensation received by him is a capital
receipt. No substantial question of law. (AY. 1999-20
CIT v. Saeed Mustafa Shervani (2024)471 ITR 777 (Delhi) (HC)

S. 4 : Charge of income-tax-Capital or revenue-Income from other sources

Short term deposits-Interest income is set off against expenditure-Deposits
and income were inextricably linked with setting up of project, interest income
on short-term deposits of funds infused by Government is in nature of capital
receipt and not revenue receipt. [S. 56, 145]
Assessee-company is a 100 per cent subsidiary company of H, a wholly owned
Government enterprise. Government sanctioned certain amount to assessee towards
setting up of Integrated Vaccine Complex. Assessee parked certain amounts out of said
funds which were not immediately required for construction, in banks and received
interest from such short-term deposits. Interest income was set off against expenditure
incurred for construction of Integrated Vaccine Complex. Assessing Officer treated
interest received as income from other sources. It was noted that in communication
from Government of India to assessee it is categorically mandated that funds and income
earned out of funds provided by Government was to be utilised only for purpose for
which they were released. It is also clarified that any interest income from said funds
consequent on bank deposits, would also be utilised only for purpose of project. Since
deposits and income were inextricably linked with setting up of project, interest income
on short-term deposits of funds infused by Government was in nature of capital receipt
and not revenue receipt. (AY. 2013-14, 2014-15 and 2015-16)
HLL BIOTECH Ltd. v. CIT (2024) 301 Taxman 604 (Ker.)(HC)

S. 4 : Charge of income-tax-Carbon Credit (CER)-Income from realisation of

carbon credit is capital in nature-Not assessable as business income. [S. 28(i),
260A]
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Following the judgment in case of Pr. CIT v. Gujarat Flurochemicals Ltd. [2023] 155
taxmann. com 135/295 Taxman 200/459 ITR 242 (Guj)(HC) the High Court held that
the income from realisation of carbon credit is capital in nature. Order of Tribunal was
is affirmed.
PCIT v. Kalpataru Power Transmission Ltd. (2024) 301 Taxman 427 (Guj.)(HC)

S. 4 : Charge of income-tax-Rental income-Property owned by Co-Owners-

Association of persons-Maximum marginal rate-Rental income received by co-
owners is to be assessed as income from AOP and not in hands of assessee as
income from house property under section 22-Order of Tribunal is affirmed.
[S. 2(31), 22, 26, 167B(2)(i), 260A]
Assessee and other co-owners purchased property in their names and thereafter
constructed godowns and plinths which were rented out to two companies. Assessee
received rental income from these companies and deposited it in a joint bank account
held by all co-owners. Assessing Officer assessed rental income received by co-owners
as income from AOP under section 4. Tribunal held that the Income was assessable as
income of an AOP. On appeal the Court held that rental income being paid by
Government companies jointly in hands of co-owners treating them as a single land lord
and amount was also being deposited in single account. There was no defined share to
rental income and AOP had jointly received income. Accordingly the rental income
received by co-owners was to be assessed as income from AOP and not in hands of
assessee as income from house property under section 22. (AY. 2005-06)
Y. S. & Co-owners v. ITO [2024] 301 Taxman 647 (P& H)(HC)
S. 4 : Charge of income-tax-Exemption from payment of tax under exemption
certificate issued under section 4A of on turnover of sales-Not subsidy-
Assessable as revenue receipt. [S. U. P. Trade Tax Act, 1948, S. 4A]
Assessee availed exemption from payment of tax under exemption certificate issued
under section 4A of U. P. Trade Tax Act, 1948 on turnover of sales and claimed amount
representing tax exemption component as capital receipt. Assessing Officer treated
aforesaid amount of tax component as revenue receipt. Appellate Authority allowed
claim of assessee. On appeal by the Revenue the Court held that since section 4A of U.
P. Trade Tax Act, 1948 clearly indicated that exemption from tax on turnover of sales
was not a subsidy granted by Government and section 4A had not authorised assessee
either to collect tax component on exempted sales or to retain it, aforesaid amount of
tax component was a revenue receipt in hands of assessee and it could not be treated
as capital receipt. (AY. 2001-02 to 2005-06)
CIT v. Birla Corporation Ltd (2024)159 taxmann. com 632 / 336 CTR 595
(Calcutta) (HC)

S. 4 : Charge of income-tax-Capital or revenue-Subsidy received from

Government-Purpose test-Sales-Tax subsidy received from State Government
as incentive to set up new unit or large-scale investment in fixed capital-Capital
receipt. [S. 28(i), 260A]
The Government of Maharashtra to achieve the dispersal of industries outside the
Mumbai-Thane-Pune belt and to incentivise the setting up of new and expanded units in
underdeveloped and developing areas, had, in 1964, forged a scheme titled “Package
Scheme of Incentives”. The Package Scheme of Incentives introduced in 1964 underwent
changes from time to time. The 1993 Scheme was rooted in the Package Scheme of
Incentives put in place by the Government of Maharashtra, as indicated above, in 1964.
9
The 1993 Scheme was forged to achieve three broad objectives : (i) first, to disperse
industries outside the now Mumbai-Thane-Pune belt and to attract new and expanded
units to developing and underdeveloped areas of the State ; (ii) second, to rationalise
incentives accorded by intensifying and accelerating the dispersal of units from
developed to underdeveloped and developing areas ; and (iii) third, the development of
underdeveloped regions of the State, particularly those which were at some distance
from the Mumbai-Thane-Pune belt. Thus, the central theme, object and purpose of the
1993 Scheme was to industrialise underdeveloped and developing areas which fell
outside the now Mumbai-Thane-Pune belt by incentivising the setting up of new and
expanded units. The common thread running through various incentives provided under
the scheme was the setting up of new units or large-scale investment in fixed capital.
The fact that the eligibility certificate was to be issued by the agency implementing the
scheme after the commencement of commercial production by the eligible unit had been
incorporated in the 1993 Scheme to ensure that the object and the purpose of the 1993
Scheme, which was to industrialise underdeveloped and developing areas was fulfilled.
Dismissing the appeal of the Revenue the Court held that the assessee was entitled to
avail of sales-tax subsidy and incentives under two eligibility certificates dated December
13, 1994 and October 15, 1996 (as amended) for 14 years and 13 years and 11 months,
respectively, subject to a maximum entitlement of 110 per cent. of the capital
investment made in setting up of the industrial units. A perusal of the eligibility certificate
dated December 13, 1994 would show that it was issued for setting up a “new unit”,
while the eligibility certificate dated October 15, 1996 was given to a “pioneer unit” which
had undertaken expansion. The sales tax subsidy or incentive received by the assessee
under 1993 Scheme was a capital receipt. (AY. 1997-98, 2005-06, 2006-07, 2008-09,
2013-14, 2014-15)
CIT v. Indo Rama Textiles Ltd. (2024)465 ITR 562 / 337 CTR 159/158
taxmann. com 685 (Delhi)(HC)
S. 4 : Charge of income-tax-Interest-Capital or revenue-Auction sale-Interest
against principal amount deposited-Auction sale is nullified by court-Interest
is capital receipt and cannot be assessed as income from other sources. [S.
56(2)(viii)]
Assessee deposited principal amount pursuant to auction sale. However, said auction
was eventually nullified by court. High Court directed for refund of whole amount
deposited by assessee along with interest accrued thereon. Assessing Officer made
addition on account of amount of interest received by assessee under section 56(2)(viii)
of the Act. CIT(A) affirmed the order of the Assessing Officer. Assessee contended that
said amount of interest was in nature of capital receipt not chargeable to tax. Tribunal
held that principal amount could not be characterized as compensation granted by Court
on account of cancellation of auction. Rather, such an amount was a bonafide amount
of successful auction bidder, which he had deposited against purchase of land. Amount
so received by assessee was entitlement of successful bidder which was given back to
assessee vide an order of Court. Thus, when amount was not in nature of compensation,
then, as a natural corollary, interest accrued on said amount could not tantamount to
revenue receipts, and hence, same could not be subjected to tax as per section
56(2)(viii) of the Act. On appeal by Revenue High Court affirmed the order of the
Tribunal. (AY. 2012-13)
PCIT v. INS Finance & Investment (P.) Ltd. (2024) 299 Taxman 131 / 340 CTR
602 (Delhi)(HC)

10
S. 4 : Charge of income-tax-Subsidy-Capital or revenue-Bengal Incentive
Scheme, 2004-Linked to establishment of new units-Capital in nature. [S.
28(i)]
Assessee received subsidies from Govt. of West Bengal under West Bengal Incentive
Scheme, 2004 for industrial projects. The Assessing Officer held that subsidy is revenue
receipts. On appeal the Tribunal treated subsidy as capital in nature, intended for
industrialization, and not taxable as revenue receipts. Tribunal also held that as per
provisions of Industrial Promotion Assistance Scheme as framed by State of West
Bengal, receipt of subsidies was clearly linked to a total investment exceeding INR
25,00,00,000 being made and would have become payable on commencement of
commercial production. Affirming the order of the Tribunal the Court held that since,
subsidy being clearly linked to establishment of new units, it would be treated as capital
in nature. As regards the issue of Advertainment, Marketing and Promotion (“ AMP”),
the appeals would be re-notified, since both sides seek an opportunity to address
submissions in greater detail.
PCIT (Central) v. Pepsico India Holding (P.) Ltd. (2024) 299 Taxman 309
(Delhi)(HC)
S. 4 : Charge of income-tax-Income –Redevelopment agreement-Amount paid
to members of society-Members offered the amount for taxation-Not taxable in
the assessee society-Possession not given-Not taxable as capital gain in the
year under consideration. [S. 2(24),5, 45, 56 260A]
The assessee-society owned certain residential flats. The plot of land on which the said
flats were constructed was held by the assessee as a lessee under a long-term lease.
The assessee along with its members decided to redevelop the flats by demolishing the
old flats and constructing new flats. Accordingly it entered into redevelopment
agreement with one developer, whereby it granted rights and entitlements to the
developer for the aforesaid land. The members of the society agreed to transfer their
old flats to the developer. The developer, in turn, agreed to pay a certain amount to
each member of society apart from a certain amount to the corpus fund of assessee.
The payment was in addition to the flats and parking spaces to be constructed and
handed over to the members. The Assessing Officer taxed the amount received by the
members from the developer in the hands of the assessee. The Commissioner (Appeals)
partly allowed the appeal of the assessee. The Tribunal, on appeals filed by both the
assessee and the revenue, held that the facts in the instant case were almost similar to
the facts in the case of CIT v. Raj Ratan Palace Co-operative Housing Society Ltd. [IT
Appeal No. 2292 of 2011, dated 27-2-2013 (Bombay High Court)] and relying on the
said judgment concluded that as the members of the society had offered the amount
received by them from the developer for taxation, the Commissioner (Appeals) was not
justified in taxing the aforesaid amount to some extent in the hands of the assessee, as
the same was the income of the members. It accordingly allowed the appeal of the
assessee and dismissed the appeal of the revenue. Dismissing the appeal the Court held
that the revenue is not even questioning the finding of the Tribunal that the facts in the
case at hand were almost similar to the facts in the case of Raj Ratan Palace
CHS (supra). Further against the above order of the High Court, the revenue had
preferred a Special Leave Petition in the Apex Court, which came to be dismissed.
Followed, CIT v. Raj Ratan Palace Co-Operative Housing Society Ltd, ITA No. 2292 of
2011 dt. 27-2. 2013 (Bom)(HC)) (AY. 2011-12)
PCIT v. MIG Co-op. Hsg. Soc. Group II Ltd. (2024) 298 Taxman 284 / 467 ITR
524 (Bom.)(HC)
11
S. 4 : Charge of income-tax –Consideration received for relinquishment of
trustee ship-Not capital in nature-Assessable as income-Reimbursements of
certain sum for construction expenses-Not taxable in the hands of trustees-Not
taxable in the hands of trustees-Donations were received by trusts-Not
taxable in the hands of the Trustees. [S. 132, 260A]
Assessees were trustees of certain educational trust. Said trust was taken over by certain
church and assessees relinquished trusteeship of said trust in favour of trustees of said
church, and received consideration for same. The Asseessing Officer assessed the receipt
as income. CIT(A) confirmed the addition. Tribunal deleted the addition. On appeal the
Court held that since no power was conferred on trustees to relinquish their position
as trustees en banc, therefore, en banc resignation/relinquishment by assessees, of their
position as trustees of Trust, that too for a consideration, could not get imprimatur of
this Court. Therefore, consideration received for such relinquishment would not qualify
as a capital receipt and would be treated as individual income of assessees. Assessing
Officer held that assessees had received reimbursements of certain sum for construction
expenses and brought same to tax in their individual hands. On appeal, Commissioner
(Appeals) held that evidence obtained in course of search proceedings revealed that no
construction work had actually been undertaken by said assessees or any of trustees,
and hence, payments shown as contractual receipts were nothing but payments received
for voluntary relinquishment of trusteeship. On appeal Tribunal held that there was
construction activity carried out by those two assessees as evidenced by agreements
and construction was reflected in balance sheet of assessees which was subjected to
TDS and it could not be said that payments were not made towards construction of
building which was for establishment of educational institution. On appeal the Court held
that since Tribunal had relied on audited balance sheet of church and TDS payments
made to Department in relation to said payments, the order of Tribunal is affirmed.
Donations were received by certain trust in which assessees were trustees. AO taxed
same in hands of assessees. CIT(A) affirmed the Order of the Assessing Officer. Tribunal
deleted the addition. On appeal the Court held that payments were actually made to
trust and not to trustees in their individual names and therefore, same could not be
taxed in hands of assessees. (AY. 2009-10 to 2011-12)
PCIT v. Gracy Babu (2024) 298 Taxman 722 /471 ITR 377 /341 CTR 630 / 243
DTR 65 (Ker.)(HC)
Editorial : SLP of assessee is dismissed, Jose Thomas, Etc. v. PCIT (2024)468 ITR
108 / 301 Taxman 170 (SC)
S. 4 : Charge of income-tax –Sales tax incentive-Capital receipt-Not chargeable
to tax. [S. 260A]
Held that the sales tax incentive received by the assessee, a manufacturer, from the
Government, as a refund of sales tax paid on goods manufactured is a capital receipt
and not chargeable to tax. (AY. 2009-10)
PCIT v. Shantinath Detergents (P.) Ltd [2023] 151 taxmann. com 68 / [2024]
461 ITR 302 (Cal)(HC)

S. 4 : Charge of income-tax-Diversion of income by overriding title-Amounts

transferred to statutory reserve fund-Amounts received and then transferred-
No diversion of income by overriding title. [S. 145]
Held that the amount transferred to the statutory reserve fund was received and then
reflected as part of the total income, and hence deduction was not permissible. The
authorities below were justified in disallowing the deduction claimed by the assessees
12
for the amount transferred to the reserve fund in compliance with the mandatory
provisions of the Reserve Bank of India Act. (AY. 2003-04 to 2014-15)
Shriram Transport Finance Co. Ltd. v. ITO (OSD) (2024)460 ITR 66 (Mad)(HC)

S. 4 : Charge of income-tax-Notional income-Credited to profit and loss

account-Accounting standard (Ind AS)-Cannot be assessed as real income. [S.
143(1)(a), 154]
Held that tax notional income credited to profit and loss account in compliance of
Indian Accounting standard (Ind AS) cannot be assessed as real income in absence of
contractual obligation of repayment. (AY. 2018-19) (ITA No. 3001 dt. 8-3-2024)
ACIT v. Kesar Terminals and Infrastructure Ltd (2024) BCAS-June-P. 41
(Mum)(Trib)
S. 4 : Charge of income-tax- Pollution Control Board established by State Act-
Controlled financially as well as administratively by the State Government -On
winding up the funds would revert to the State Government-Income is not
taxable. [The Orissa Water (Prevention and Control of Pollution)
(Amendment) Act, 1974, S. 4(1), Art. 12, 289(1)]
Tribunal held that the Assessee Board constituted under sub-s. (1) of S. 4 of the Orissa
Water (Prevention and Control of Pollution) (Amendment) Act, 1974, is completely
controlled financially as well as administratively by the State Government and
consequently, it falls within the definition of ‘State’ under Art. 12 of the Constitution and
its income is not liable for taxation as per the provisions of Art. 289(1). (AY. 2017-18)
State Pollution Control Board v. ITO (2024) 232 TTJ 887 (Cuttack)(Trib)

S. 4 : Charge of income-tax-Interest on deposits of grants received by nodal

agency of Government-Issue is remitted back to the AO to ascertain whether
the interest income has been remitted back; if the entire interest income has
been remitted back to the Central Government/State Government, then no
addition is sustainable on account of the interest income earned on the
deposits. [S. 5]
Held that interest earned by the assessee nodal agency of the Central/State
Government, on bank deposits of grants is immediately returned to the Central
Government. In case of Central Government funds and interest received on State
Government fund is adjusted against subsequent grant, Issue is was remitted back to
the AO to ascertain whether the interest income has been remitted back; if the entire
interest income has been remitted back to the Central Government/State Government,
then no addition is sustainable on account of the interest income earned on the deposits.
(AY. 2017-18, 2018-19)
ITO v. Managing Director, Davanagere Smart City Ltd. (2024) 232 TTJ 64 (UO)
(Bang)(Trib)
S. 4 : Charge of income-tax-Accrual of income-Commission-Service charges
receivable from State Government-Auditors report stating under reporting of
income-Liable to be taxed on accrual basis. [S. 5, 145]
Held that when the assessee's chartered accountant in his audit report dt. 21st Sept.,
2012 has categorically stated that the bank has understated its profit, the commission
due to the assessee on account of service charges is assessable on accrual basis. Order
of CIT (A) deleting the addition is set aside, order of the AO is affirmed. (AY. 2012-13)
ACIT v. Jila Sahakari Kendriya Bank Maryadit (2023) 37 NYPTTJ 962 / (2024)
229 TTJ 415 / 241 DTR 233 / (Raipur)(Trib)
13
S. 4 : Charge of income-tax-Capital or revenue-Interest subsidy-Technology
upgradation fund scheme-Ground raised first time-Issue is restored to the AO
for fresh adjudication as per provisions of law [S. 2(24)(xviii)]
Held that interest subsidy received under Technology Upgradation Fund Scheme is a
capital receipt not chargeable to tax, issue being raised by the assessee by way of
additional ground of appeal is restored to the AO for fresh adjudication as per provisions
of law. Followed, Dy. CIT v. Jindal Worldwide Ltd. (ITA No. 1843/Ahd/2016) (AY. 2014-
15)
Chirpal Industries Ltd. v. Dy. CIT (2024) 229 TTJ 87 (UO) (Ahd)(Trib)

S. 4 : Charge of income-tax-Capital or revenue-Business income-

Compensation-Other payments-Income chargeable to tax-Compensation for
termination (nonrenewal) of professional contract-Profession-Retrenchment-
Freelance journalist-Compensation being capital receipt is not taxable. [S.
4,28(ii)(e),32(1)(iv), 56(2)(xi), Industrial Relations Code, 2020, S. 2(ZA)]
The assessee has received compensation from Spiegel Verlag Spiegel Publishers which
she claimed as exempt under section 4 of the Income tax Act. The AO held that the
compensation is taxable as business income under section 28(ii)(e) of the Act read with
Board Circular No. 8 /2018 dt. 26 December, 2018 (2019) 306 CTR 21 (St). The AO also
held that said compensation is also taxable under section 56(2)(xi) of the Act. CIT(A)
affirmed the order of the AO. On appeal the Tribunal held that as per section 28(ii)(e),
the compensation for termination compensation received by any person on termination
or modification of the terms and conditions of any contract relating to his business is
taxable under the head Profits and gains of business or profession. Wherever the
legislature thought of referring to both business and profession, it has used both the
words in the enactment. This means that wherever the word only business is used, it
does not include profession. The reference to business in S. 28(ii)(e) would not amount
to reference to profession. On the facts of the case the assessee is a freelance journalist.
Relevant clauses of the agreement refer to renewal of the agreement. Since the contract
was not renewed, it came to an end. Compensation was received by the assessee by
way of mutual agreement between Spiegel Verlag Spiegel Publishers and the assessee.
As per S. 2(zh) of the Industrial Relations Code, 2020, non-renewal of any contract
does not amount to retrenchment. Therefore the compensation received by the assessee
is not taxable under S. 28(ii)(e). In S. 56(2)(xi) the reference is to termination of
employment. This section is also not applicable on the facts of the case. Followed G. K.
Choksi & Co. v. CIT (2007) 213 CTR 431 / 295 ITR 376 (SC). Accordingly the
compensation being capital receipt is not taxable. (AY. 2020-21)
Padma Rao (Ms.) v. CIT (2024) 159 taxmann. com 30 /228 TTJ 109 / 235
DTR 193 / 38 NYPTTJ 136 (Delhi) (Trib)

S. 4 : Charge of income-tax-Subscription received by assessee from members

towards holidays membership schemes-Entries in the books of account is not
conclusive-Collective investment schemes(CIS)-Advances for sales-Deposits-
The deposits received from the members cannot be treated as revenue receipt-
Capital receipt. [S. 40(a)(ia), 145, 194A, 195]
The assessee is involved in the business of selling holiday membership plans to its
members. It had certain affiliation with certain hotels which provided accommodation to
14
its members. Securities and Exchange Board of India (SEBI) vide order dt. 21 st August,
2015 held that schemes floated and prescribed by the assssee constitute Collective
Investment Schemes (CIS). Only 2% of the members /investors have availed of the
holiday facilities other 98% investors who have invested money with the sole motive of
receiving the assured returns in the form of interest. The assesee has not deducted the
tax at source. The AO assessed the deposit as income and also disallowed the interest
for failure to deduct tax at source. CIT(A) affirmed the order of the AO. On appeal the
Tribunal held that the schemes floated by the assessee were held to be in the nature of
CIS and therefore, the NAC paid by the assessee to its members was considered as
interest on deposits, such deposits by the members cannot be treated as revenue in the
hands of the assessee. The deposits received from the members cannot be treated as
revenue receipt in the hands of the assessee. Tribunal also held that it is trite law that
entries in the books of account are not decisive or determinative of the true nature of
the entries. Accordingly the amount received by the assessee from its members, to the
extent the same is treated as income in its books of account, is directed to be reduced
while calculating the total income of the assessee. (AY. 2009-10 to 2015-16)
Royal Twinkle Star Club (P) Ltd. v. DCIT (2023) 152 taxmann. com 374 / 37
NYPTTJ 334 / (2024) 228 TTJ 991 (Mum) (Trib)

S. 4 : Charge of income-tax-Capital or revenue-Sale of hotel asset Adjusted

against capital work-in-progress-Not business income-No violation of Rule
46A-Commissioner (Appeals) is justified in deleting addition. [S. 28(1), R. 46A]
Held that as the information was available before the Assessing Officer, there could not
be any violation of rule 46A ; secondly, the sum was received on account of capital
receipt on sale of hotel assets and could not be treated as business asset. Such amount
represented sale consideration as against sale of capital asset and should be adjusted
against capital work-in-progress and not be treated as business income. The Order of
CIT(A) is affirmed. (AY. 2008-09 to 2010-11)
ACIT v. Balaji Hotels and Enterprises Ltd. (2024)114 ITR 213 /229 TTJ 567/239
DTR 189 (Chennai)(Trib)

S. 4 : Charge of income-tax-Capital or revenue-Sales tax subsidy-Additional

ground is admitted-Matter remanded-Exempted income-Disallowance-Matter
remanded. [S. 28(1), 254(1)]
The additional ground whether sales tax subsidy is capital receipt or revenue receipt was
admitted and the matter remanded for verification. As regards disallowance under
section 14A the matter was remanded to the Assessing Officer. (AY. 2007-08 to
2009-10)
ACIT v. Jindal Poly Films Ltd. (2024)114 ITR 72 (SN)(Delhi)(Trib)

S. 4 : Charge of income-tax-Central excise subsidy from Central Government-

Subsidy granted for setting up new unit in Sikkim-Capital receipt-Not liable to
tax. [S. 28(i)]
Central excise subsidy from Central Government. Subsidy granted for setting up new
unit in Sikkim is a capital receipt and is not liable to tax. (AY. 2009-10 to 2012-13,
2014-15)
IPCA Laboratories Ltd. v. Dy. CIT (2024)113 ITR 53/230 TTJ 409 (Mum)(Trib)

15
S. 4 : Charge of income-tax-A Government undertaking, nodal agency for
propagation of non-conventional energy sources-Grants-in-aid from
Government-Unutilised grants-in-aid placed in fixed deposit with banks-
Interest earned is not income as unutilised grant-in-aid was also a part of
grant-in-aid-Precedent-High Court-Fact that judgment of High Court is under
challenge before Supreme Court is cannot be a ground for Tribunal not to
follow it. [S. 260A Art. 136]
Held that the interest earned from the unutilised grant-in-aid is also a part of the grant-
in-aid and was not income under the provisions of the Act, and there being no materials
to take a different view, the order of the Commissioner (Appeals) is affirmed. Fact that
judgment of High Court is under challenge before Supreme Court is cannot be a ground
for Tribunal not to follow it. (AY. 2020-21)
ACIT v. Karnataka Renewable Energy Development Ltd. (2024)113 ITR 9
(SN)(Bang)(Trib)

S. 4 : Charge of income-tax-Doctrine of mutuality-Club-Complete identity

between contributors and participators of funds-Letting out Air-conditioned
hall and lawns to non-members-Member was only a name lender-Usage of Air-
conditioned hall and lawns facility by non-members are not covered by
principle of mutuality-Income from such activity is not exempt. [S. 143(3)]
Held that the facts were that the booking was done in the name of the member clearly
mentioning the fact of the usage of facility by an outsider or non-member, the liability
for payment for the usage of the facility was raised in the account of the member, and
the facility was utilised by non-members or guests, and payment also was made by the
guests or non-members. The fact that the non-members paid for the usage of these
facilities was a clear pointer to the fact that the facility was given to the non-members
not on behalf of the members as their guests but for the benefit of the non-members
alone. Clearly the member was only a name lender, a conduit. His role ended with the
lending of his name, the facility was thereafter utilised by non-member on making
payment. The mere fact that the club held the member liable for making the payment,
did not take away the fact that in every such letting out to non-members, the payment
invariably was made by the non-members. There was no doubt, therefore, that the
letting out of these facilities to non-members was not for the contributors in the common
fund of the assessee club. In other years, before the Tribunal, it was noted that the
facilities had been extended to the non-members on the behest of the members as his
guests and the fact that the payment was being made by non-members was not brought
to the knowledge of the Tribunal ; and, therefore, it proceeded with the belief that the
extension of the facility to non-members was for and on behalf of the members itself.
Since the facility was not being given to the non-members for and on behalf of the
member, but was being exclusively given to the non-members alone, the usage of the
air-conditioned hall and lawns facility by non-members in the facts of the present case
was not covered by the principle of mutuality. (AY. 2008-09, 2012-13, 2013-14, 2015-
16)
Rajpath Club Ltd. v. Asst. CIT (2024)113 ITR 45 (SN)(Ahd)(Trib)

S. 4 : Charge of income-tax-Accrual of income-Bank-Guarantee commission-

Earned for unexpired period of guarantee contract-Offered to tax in succeeding
years over period of guarantee-Interest from non-performing assets-Addition
is deleted. [S. 4, 43D, R,6EA]
16
The Assessing Officer had made an addition of the commission earned on guarantee
issued by the bank relating to the unexpired period of the guarantee contract during the
year but offered to tax by the assessee in succeeding years over the period of the
guarantee. Likewise, an addition was also made on account of interest income on non-
performing assets. The Dispute Resolution Panel, though noting that an identical addition
of commission income made in the preceding years stood deleted by the Tribunal,
directed the Assessing Officer to make the addition for the reason that the Department
had appealed the Tribunal's decision before the High Court. Neither the Dispute
Resolution Panel, nor the assessee, had brought out any distinction in facts from the
preceding years. Therefore, as there was no case made out by the Revenue for not
applying the Tribunal’s decision in favour of the assessee, the addition of commission
income and of interest income from non-performing assets is directed to be deleted.
(AY. 2018-19)
Axis Bank Ltd. v. Asst. CIT (2024)112 ITR 28 (Ahd)(Trib)

S. 4 : Charge of income-tax-Income-Accrual-Interest on non-performing asset-

Deletion of addition is affirmed. [R. 6EA]
The Assessing Officer made additions towards interest accrued, but not due of non-
performing assets on the ground that non-performing assets should be classified
according to rule 6EA of the 1962 Rules, which says that an account could be treated as
non-performing asset only if the interest was overdue for more than six months. The
Commissioner (Appeals) deleted the additions. On appeal the Tribunal affirmed the order
of the CIT(A) (AY. 2015-16 to 2017-18
City Union Bank Ltd. v. Dy. CIT (2024)112 ITR 337 /229 TTJ 139
(Chennai)(Trib)

S. 4 : Charge of income-tax-Interest on fixed deposit-Not commenced its

business-Interest income earned on fixed deposits pertaining to period prior to
commencement of business was in nature of capital receipt. [S. 28(i), 35D]
Held that where assessee-company had not commenced its business activities during
relevant financial year and earned interest income on fixed deposits made by it in earlier
years, interest income earned on fixed deposits pertaining to period prior to
commencement of business was in nature of capital receipt and pre-operative expenses
of assessee had to be adjusted with this “capital receipt” and only balance expense,
needed to be amortized as per provisions of section 35D. (AY. 2015-16)
DCIT v. BTW Atlanta Transformers India (P.) Ltd. (2024) 206 ITD 670 (Ahd)
(Trib.)

S. 4 : Charge of income-tax-Insurance claim-Capital or revenue-Interim order-

Matter remitted back to Assessing Officer to decide a fresh. [S. 28(i)]
Assessee had made a claim with insurance company on basis of insurance cover
purchased by it in respect of its corporate office where fire took place and had received
interim claim of Rs. 2. 75 crores and it had incurred loss. Assessing Officer had treated
payment received by assessee as insurance claim on ad hoc basis and taxed same under
head business or profession. Commissioner (Appeals) held that amount received by
assessee was revenue receipt taxable under head business or profession. On appeal the
Assessee contended that since assessee had ultimately incurred a loss, said receipt could
not be taxed in its hand as revenue receipt. Tribunal held that since assessee did not
produce evidence regarding loss incurred by it due to accidental fire, issue was to be
17
remitted back to Assessing Officer to decide afresh for on verifying actual loss incurred
by assessee. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636 /116 ITR 261 (Mum)
(Trib.)

S. 4 : Charge of income-tax-Capital or revenue-Premature payment of deferred

sales tax at present value of certain amount against total liability and credited
balance amount to its capital reserve account-Amount credited amount is a
capital receipt. [S. 28(i)
Held that payment made premature payment of deferred sales tax at present value of
certain amount against total liability and credited balance amount to its capital reserve
account, said credited amount is a capital receipt not a revenue receipt. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636 / 116 ITR 261 (Mum)
(Trib.)

S. 4 : Charge of income-tax-Capital or revenue-Subsidy-Subsidy received by

assessee from State Government under Package Scheme of Incentives, 2007
to encourage setting up of industries in less developed areas of State and not
for purpose of running business more profitably is capital in nature. [S. 28(i)]
Held that subsidy received by assessee from Government under Package Scheme of
Incentives, 2007 was only to encourage setting up of industries in less developed areas
of State and same is not for purpose of running business more profitably, same is to
be treated as capital in nature. (AY. 2014-15)
Asian Paints Ltd. v. ACIT (2024) 205 ITD 680 (Mum) (Trib)

S. 4 : Charge of income-tax-Capital or revenue-Grant-Electricity grants received

by assessee from State Government under Industrial Policy, 2005 for setting
up a project for manufacturing of paints is capital in nature.
Assessee is engaged in business of manufacturing paints and enamels. Electricity.
Grants received by assessee from State Government under Industrial Policy, 2005 for
setting up a project for manufacturing of paints is capital in nature. (AY. 2014-15)
Asian Paints Ltd. v. ACIT (2024) 205 ITD 680 (Mum) (Trib)
S. 4 : Charge of income-tax-Interest income-Temporarily parked / deposited
with banks on fixed deposits-Prior to commencement of business-Capital
receipt-Required to be set off against pre-operative expenses. [S. 145]
Held that interest income was earned by assessee on fund which was temporarily
parked/deposited with banks as fixed deposits prior to commencement of its business,
it was in nature of a capital receipt and is required to be set off against pre-operative
expenses. (AY. 2013-14)
Chandhok Cold Storage (P.) Ltd. v. ITO (2024) 204 ITD 17 /227 TTJ 744
(SMC)) (Raipur) (Trib.)
S. 4 : Charge of income-tax-Capital or revenue--Income-Member of Society-
Hardship compensation amount received from builder is capital receipt-Not
taxable as income from other sources. [S. 2(24), 56]
The assessee is a tuition teacher by profession. The assessee received hardship
compensation from the developer. The assessee has shown the said receipt as capital
receipts. The Assessing Officer assessed the receipts as income from other sources.
On appeal the CIT(A) affirmed the order of the Assessing Officer. On appeal the Tribunal
held the assessee has received the amount from builder and the same will not come
18
under the purview of the income within the meaning of section 2(24) of the Act. The
hardship compensation is a capital receipt hence not taxable. The Tribunal has relied on
various judgements of the Tribunal and deleted the addition. (AY. 2012-13, 2015-16,
2016-17) (ITA Nos. 1081/ 1082/ 1083 /2024 (Mum) “D” dt. 23-9-2024)
Monica Parmanand Mirchandani v. ITO (Mum)(Trib) www. Tribunalonline. org

S. 5 : Scope of total income-Accrual of income-Termination of lease-Pendency

of dispute before Small Causes Court-Small Causes Court allowing lessor to
deposit lease rent in Court specifying that deposit was allowed without
prejudice to rights of contestants-When the right to receive any sum by the
assessee was in jeopardy and sub-judice before the Small Causes Court, the
Revenue was not justified in bringing to tax-Lease rent did not accrue to
assessee. [S. 4, 5(1)(b), 145]
The tenant deposited the amount as per the sub-lease agreement with the Income-tax
Department Court in spite of after the assessee termination of the agreement. In the
year 1984, the assessee filed a suit for eviction against the tenant and claimed various
reliefs, including compensation for wrongful use and occupation of the flats. On May 3,
1999, on an application made by the tenant an order came to be passed by the Small
Causes Court in the declaratory suit filed by the tenant which stated that the tenant was
to be allowed to deposit the lease rent in court and to go on depositing it till the rights
of the parties were decided. The order of deposit of the rent was without prejudice to
the rights and contentions of the parties. The assessee was at liberty to withdraw the
amount deposited in the court. However, the assessee did not withdraw any amount.
Both suits, namely, the suit filed by the tenant and the suit filed by the assessee were
pending. The assessee did not offer the lease rent as its income in the return of income
filed for the assessment years 1982-83 to 1985-86 in view of the termination of the sub-
lease by the assessee. The proceedings with respect to the assessment year became
final and no addition was made on account of the subject sub-lease rent by the Revenue.
The assessee did not offer the rent for tax in its return of income for the assessment
year 1986-87. Thereafter, the case of the assessee for the assessment year 1986-87
was reopened under section 148 of the Act for assessing the sub-lease rent. An
assessment order under section 143 read with section 148 of the Act for the assessment
year 1986-87 was passed and the rent on account of the sub-lease agreement of the
assessee with tenant amounting to Rs. 3,42,720 was added as income of the assessee.
The order was confirmed by the Tribunal. On appeal to the High Court, held, that it was
not disputed that the cross-suits filed by the assessee and the tenant against each other
were pending before the Small Causes Court. It was also not disputed that the assessee
had not accepted the rent from the tenant post termination of the sub-lease agreement
in the year 1981. The Small Causes Court had permitted the tenant to deposit the lease
rent in the court till the rights of the parties were decided and the order of deposit of the
rent was without prejudice to the rights and contentions of the parties. In the light of
these facts, whether the sub-lease agreement between the tenant and the assessee
subsisted post 1981 termination by the assessee, was itself a subject matter of dispute
between the assessee and the tenant which was pending adjudication. In the light of
these facts, it could not be said that the assessee was entitled to receive a sum of Rs.
3,42,720 under the sub-lease agreement with the tenant or a right was vested in the
assessee to that sum. The determination of the amount payable by the tenant to the
assessee as prayed for by the assessee in its suit was to be determined by the Small
Causes Court and when the court passed a final decree one could say that the right to
19
receive the sum decreed by the Small Causes Court had accrued to the assessee. Till
then, the right to receive any sum by the assessee was in jeopardy and sub-judice before
the Small Causes Court. Therefore the Revenue was not justified in bringing to tax the
sum of Rs. 3,42,720 as accrued income for the assessment year 1986-87 and for the
other years, that is to say, the assessment years 1988-89 to 1991-92 and 1993-94. (AY.
1986-87to1991-92,1993-94)
T. V. Patel Pvt. Ltd. v. Dy. CIT (2024) 464 ITR 409/ 336 CTR 136 (Bom)(HC)
S. 5 : Scope of total income-Accrual of income-Charge of income-tax –Real
income-Redevelopment agreement-Corpus fund received piror to giving
possession of land to developer –Capital gains-Not taxable in the year under
consideration. [S. 2(24), 4, 45, 56, 260A]
Assessee-society owned certain flats, which were constructed on leasehold land-It
entered into redevelopment agreement with a developer to redevelop flats and granted
rights and entitlements to developer for aforesaid land. Developer agreed to pay Rs. 15
crores to corpus fund of assessee and an amount of Rs. 3. 50 crores was paid on
execution of agreement. Assessing Officer held that amount of Rs. 15 crores was just a
receipt of non-recurring nature and taxed entire amount under head income from other
sources during year under consideration. Dismissing the appeal of the Revenue the Court
held that since assessee had not given possession of land to developer during year under
consideration amount of Rs. 3. 50 crores (real income) only could be taxed for year
under consideration. Followed, CIT v. Raj Ratan Palace Co-Operative Housing Society
Ltd, ITA No. 2292 of 2011 dt. 27-2. 2013 (Bom)(HC)) (AY. 2011-12)
PCIT v. MIG Co-op. Hsg. Soc. Group II Ltd. (2024) 298 Taxman 284 /467 ITR
524 (Bom.)(HC)

S. 6(1) : Residence in India-Individual-Indian citizen-Stayed in India more than

183 days-Income derived in USA is chargeable to tax in India-DTAA-India-USA
[S. 5, 9(1)(i),Art. 4(2)(a)]
Assessee had a permanent home in India as well as in USA. Assessee claimed that his
centre of vital interest lay in USA as his family was US national holding US passport, he
was overseas citizen of India, had larger investments in US and one daughter out of
three children was studying in USA. Assessing Officer held that assessee had stayed in
India for more than 183 days and he was staying with his wife and children who had
shown their place of residence as India. He treated assessee as resident of India for tax
purposes and his US income was also taxed in India under section 5. CIT(A) up held the
order of the AO. On appeal the Tribunal held that the assessee had a home in India.
Assessee had come back to India for carrying on business in a private limited company
which was set up by him and his wife. Assessee had an active involvement in running of
this company in India. In India he had operative bank accounts and he had also
investment in mutual funds. From USA, assessee was deriving rental income where his
house property was rented out, he had investments in bank accounts as well as
alternative investments. He did not have any active involvement in USA for earning
wages, remuneration, profit Personal relationship and economic relationship of assessee
and tilt more in favour of being close to India than US and thus, assessee was held as a
resident of India in terms of article 4(2)(a) of Indo-(USA). Consequently, all his income
derived in USA, was chargeable to tax in India by virtue of provisions of section 5. (AY.
2013-14)
Ashok Kumar Pandey. v. ACIT (2024) 209 ITD 274 (Mum) (Trib.)

20
S. 6(1) : Residence in India-Individual-Non-Resident-Once assessee qualifies
as non-Resident salary received by assessee while rendering service abroad
not taxable in India-DTAA-India-United Kingdom. [S. 5(2)(b), Art, 16.]
Held Allowing the appeal, the Tribunal held that the assessee was a non-resident
employee in an Indian company and was sent abroad to the United Kingdom for
rendering services there. Service was rendered in the United Kingdom though the
appointment made in India. The assessee received total salary which the assessee
offered to tax in the United Kingdom. The Income-tax return and certificate of residence
had been placed on record. The assessee claimed relief under the Double Taxation
Avoidance Agreement between India and the United Kingdom which was not allowed for
the want of tax residency certificate by the Assessing Officer. Once the assessee qualified
to be treated as non-resident under section 6 of the Act the scope of income taxable in
the hands of the assessee would be in terms of section 5(2)(b) of the Act. The assessee
was a non-resident and therefore the salary received by the assessee while rendering
service abroad was not taxable in India. The addition was deleted. (AY. 2014-15)
Arindam Dasgupta v. Asst. CIT (IT) (2024)110 ITR 57 (SN)(Kol)(Trib)
S. 6(1) : Residence in India-Individual-Income from employment-Salary
payments outside India-Exercised employment and received remuneration in
US-Salary income is taxable in USA and not in India –India-USA. [S.
9(1)(i),90(4) Art. 4, 16]
Assessee, a tax resident of both India and US, employed with Indian-company was on
an international assignment to US. He stayed and exercised his employment in US and
received salary income. He claimed that as he had stayed in India only for 16 days,
salary income earned by him was not taxable in India but was taxable in USA as per
provisions of article 16 of Indo-US DTAA. Assessing Officer placing reliance on provisions
of section 90(4) rejected assessee's claim of exemption from taxation of salary in India
and made an addition of same. CIT(A) held that the remuneration was paid by the
employer who was is always a resident of India and therefore, the assessee’s salary
was taxable in India. On appeal the Tribunal held that the assessee had not made any
submissions relating to status of assessee of cumulative stay of less than 365 days in
four years preceding year in question, therefore, assessee by virtue of provisions of
section 6(1) had failed to establish his status of non-resident. During year, assessee did
not have permanent home in US, whereas, he had a permanent home in India. The
Assesseee is in permanent employment of Indian-company and bank account of
assessee i also in India, wherein, salary is deposited. Address of wife of assessee
mentioned in income tax return filed in USA for year 2019 is also in India. In view of
provisions of section 6 read with article 4 of Indo-US DTAA, assessee is to be treated
as a resident of India. Since assessee is a resident of India, however he had exercised
employment and received remuneration in US, income of assessee is taxable in USA
and not in India. Therefore, additions made by Assessing Officer is deleted. (AY. 2019-
20)
Somnath Duttagupta. v. ACIT (2024) 111 ITR 385 / 206 ITD 317 /229 TTJ
84 (Kol) (Trib.)

S. 6(1) : Residence in India-Individual-Employment outside India-Business or

profession-Term employment outside India includes doing business' by
assessee-Stayed in India for a period of 176 days-Non-resident-Global income
is not taxable in India-Stayed 176 days during year-Entitled to claim the benefit
of the extended period of 182 days as provided in explanation 1(a) to section
21
6(1) of the Act-Appeal of Revenue is dismissed-DTAA-India-Mauritius [S.
6(1)(a), (6(1)(c), Art. 4]
During the assessment proceedings, on perusal of the return of income filed by the
assessee, it was observed that the assessee had claimed his residential status as non-
resident and had not offered his global income to tax in India. Assessee was asked to
furnish documents in support of his residential status. On the basis of documents it was
observed that the assessee stayed in India for 176 days and went to Mauritius during
the year. The AO assessed the assessee as resident. On appeal the CIT(A) held that the
assessee was away from India for the purpose of employment outside India and is
entitled to take the benefit of Explanation 1(a) to section 6(1)(c). On appeal by the
Revenue, dismissing the appeal the Tribunal held that the assessee was entitled to claim
the benefit of the extended period of 182 days as provided in explanation 1(a) to section
6(1) of the Act. Circular No 346 dt. 30-6-1982 (AY. 2013-14)
ACIT v. Nishant Kanodia [2024] 205 ITD 20/109 ITR 50 (SN)/ 227 TTJ 625
(Mum) (Trib)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Liaison Office-Non-Resident company-Did not finalize and transact a business
deal and activities-Liaison Office could not be said to be preparatory or
auxiliary in nature, LO did not constitute Permanent Establishment of assessee-
MIPL was not performing additional function, in absence of material, it could
not be taken as dependant agency PE to assessee, a non-resident company-
Delay of 395 days-SLP of Revenue is dismissed on account of delay as well as
on merits-DTAA-India-Japan. [art. 5, Art. 136]
High Court held that where Liaison Office (LO) of assessee, a non-resident company,
did not finalize and transact a business deals and activities carried out by LO could not
be said to be preparatory or auxiliary in nature, LO did not constitute a Permanent
Establishment, liable to tax in India.. High Court also held that where MIPL was not
performing additional function, in absence of material, it could not be taken as dependant
agency PE to assessee liable to tax in India. There being gross delay of 395 days in filing
this SLP, instant SLP was to be dismissed on ground of delay as well as on merits.
CIT v. Mitsui & Co. Ltd. (2024) 299 Taxman 365(SC)
Editorial : CIT (IT) v. Mitsui & Co. Ltd (2024) 161 taxmann. com 634 (Delhi) (HC)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-No

conflict between provision of DTAA between India and Netherlands-Non-
discrimination and there was no ambiguity in classification and rates of tax,
assessee, which is not a 'domestic company', is liable to tax at rates prescribed
for a company 'other than a domestic company'-DTAA-India-Netherlands. [S.
2(17), 2(23A), 90, Art. 24(2)]
Assessee is a branch of ABN Amro Bank NV incorporated in Netherlands with limited
liabilities having its original office at Singapore. In India, assessee is registered as a
scheduled bank in terms of Second Schedule to RBI Act, 1934 Since assessee had a PE
in India, it was liable to tax in respect of income attributable to PE. Held that in terms
of Article 24(2) of DTAA between India and Netherlands, containing provision of non-
discrimination, assessee is liable to Income Tax at rate applicable to a domestic
company. It was found that Explanation to section 90 is not in conflict with provisions of
DTAA and that there is no conflict between provisions of DTAA and Income-tax Act, 1961
regarding non-discrimination. Further, section 2(17) defining word 'Company', section
22
2(22A) defining word 'Domestic Company', section 2(23A) defining word 'Foreign
Company', and section 90 of Act, 1961 read with Explanation and section 2(1), section
2(12)(a), Paragraph 'E' of First Schedule to Finance Act are plain, unambiguous and lead
only to one conclusion that two classes of companies, namely, 'domestic company' and
'company other than a domestic company' are liable to tax at prescribed rates.
Therefore, there being no ambiguity in classification and rates of tax, assessee, which
was not a 'domestic company', was liable to tax at rates prescribed for a company 'other
than a domestic company'.
Royal Bank of Scotland N. V. v. CIT (2024) 341 CTR 981 / 162 taxmann. com
780 (Cal)(HC)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Fees charged by foreign branch for providing and extending a credit line to
account holder outside India in respect of credit cards issued by foreign branch
and used in India is not taxable in India-Order of Tribunal is affirmed. [S. 260A]
Held that credit cards had been issued by foreign branch of assessee-bank and credit
was given to customer outside India and debt had also arisen outside India, fees charged
by foreign branch for providing and extending a credit line to account holder outside
India in respect of credit cards issued by foreign branch and used in India would not be
taxable in India. Order of Tribunal is affirmed. (AY. 1992-93, 1994-95, 1995-96)
DIT v. ANZ Grindlays Bank (2024) 301 Taxman 599 (Delhi)(HC)
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection –
Permanent Establishment-Apportionment of income-Where an assessee had a
Permanent Establishment in India, it would be liable to pay tax on income
attributable to that PE notwithstanding that assessee at an entity level had
suffered a loss-DTAA-India-UAE. [Art. 5, 7(1), 7(2)]
The Full Bench was constituted to decide one of the questions arising in the petitions is
whether any taxable income can be attributed to the Permanent Establishment (PE) in
India if the overseas entity has incurred a loss in the relevant assessment year. Assessee
contended that in case an enterprise at an entity level had suffered a loss at an entity
level in relevant assessment year, no profit or income attribution would be warranted
insofar as PE in India would be concerned. Court held that Article 7(1) constructs clear
dichotomy between profits that may be earned by an enterprise on a global scale and
those which are attributable to a PE situate in contracting state. It becomes further
evident from Article 7(2) which stipulates that where an enterprise carries on business
through a PE in other Contracting State, profits would be liable to be attributed to that
PE as if it were a distinct and separate enterprise engaged in similar activities and
independent of enterprise of which it may be a part. Article 7(1) itself excludes profits
of an enterprise from being subjected to tax till such time as such an entity carries on
no business in other Contracting State through a PE. The fact that a PE was conceived
to be an independent taxable entity could not be questioned. Article 7 cannot be viewed
as restricting right of source State to allocate or attribute income to PE based on global
income or loss that may have been earned or incurred by a cross border entity. Thus,
where an assessee had a PE in India, it would be liable to pay tax on income attributable
to that PE notwithstanding that assessee at an entity level had suffered a loss. The
matters are placed before the appropriate Roster Bench for disposal of petitions. (AY.
2009-10 to 2017-18)
Hyatt International Southwest Asia Ltd. v. ADCIT (2024) 340 CTR 633 / 242
DTR 177 / 166 Taxmann. com 466 / (2025) 472 ITR 53 (FB) (Delhi)(HC)
23
Editorial : Refer, Hyatt International-Southwest Asia Ltd v. ADIT(2024) 297 Taxman
497 /464 ITR 508/ 337 CTR 39 (Delhi)(HC)
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-
Strategic Oversight services-Not royalty-Business income-Since hotel premises
were at disposal of assessee in respect of its business activities, Tribunal had
rightly held that assessee had a PE in India in form of fixed place through which
it carried on its business-DTAA-India-UAE. [S. 9(1)(vi), Art. 5(2)(a), 12]
Assessee, a tax resident of UAE, entered into two Strategic Oversight Services
Agreements (SOSA) with an Indian company in respect of hotel located at Delhi. In
terms of SOSA, assessee agreed to provide strategic planning services and know-how
to ensure that hotel was developed and operated as an efficient and high quality
international full-service hotel and received fee (strategic fee as well as incentive fee)
as set out in SOSA. Assessing Officer and Tribunal held that payment received from
owner under SOSA was royalty under DTAA as same related to provisions of know-how,
skill, experience, commercial information and other intangibles. The Court held that the
fee was not a consideration for use of or right to use any process or for information of
commercial or scientific experience but was in consideration of providing services as set
out in SOSA. Therefore, fee revived by assessee was not royalty under article 12 of
DTAA but was in nature of business income. Court also held that in terms of SOSA,
assessee agreed to provide strategic planning services and know-how to ensure Hotel
was developed and operated as an efficient and high quality international full-service
hotel. Order of Tribunal holding that the assessee had a Permanent Establishment (PE)
in terms of article 5(2) of DTAA was affirmed. Court observed that the assessee
exercised control in respect of all activities at hotel, inter alia, by framing policies to be
followed by hotel in respect of each and every activity, and by further exercising apposite
control to ensure that said policies were duly implemented. Admittedly, assessee also
performed an oversight function in respect of hotel which was also carried out, at least
partially if not entirely, at hotel premises. Since hotel premises were at disposal of
assessee in respect of its business activities, Tribunal had rightly held that assessee had
a PE in India in form of fixed place through which it carried on its business. (AY. 2009-
10 to 2017-18)
Hyatt International-Southwest Asia Ltd v. ADIT(2024) 297 Taxman 497 /464
ITR 508/ 337 CTR 39 (Delhi)(HC)
Editorial : Refer, Hyatt International Southwest Asia Ltd. v. ADCIT (2024) 340 CTR 633
242 DTR 177 / 166 Taxmann. com 466 (FB) (Delhi)(HC)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Business profits-Disallowed engineering fees on the ground that time log
sheets were not filed, debit notes furnished provided sufficient information as
to nature of duties and number of hours spent-Order of Tribunal deleting the
disallowance is affirmed-Article 7 of OECD Model Convention. [. 260A]
Dismissing the appeal of the Revenue the Court held that, the involvement of the
assessee in the project which was under execution was not in doubt. The DMRC had
availed the engineering services rendered by the employees of the head office. The
assessee only remitted the engineering fee to the head office. There is no dispute with
regard to the fact that the debit note provided sufficient information not only concerning
the names of the employees but also as to the nature of duties and number of hours
that they spent on the job assigned to them. As the Tribunal was being the final fact-
finding authority, hence no interference was called for, especially when revenue had not
24
proposed any question which was indicative of the fact that any of the findings returned
by the Tribunal was perverse. Therefore Disallowance was correctly deleted. (AY. 2005-
06)
CIT (IT) v. Cobra Instalaciones Y Servicios S. A. (2024) 296 Taxman 287
(Delhi)(HC)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Capital gains-Shares-Not liable to be assessed as capital gains-Explanations 6
and 7 to section 9(1)(i) has to be treated retrospectively as it have to be read
along with Explanation 5 which operates from 1-4-1962-OECD Model
Convention, Art 13. [S. 260A]
The assessee, a Singapore based company, had invested in equity and preference shares
of 'A', a company incorporated in and resident of Singapore. On 27-3-2015, the assessee
sold its entire shareholding in 'A' to 'J' (an Indian company). The Assessing Officer
computed the long-term capital gains arising from the transfer of shares of 'A' and
proposed addition. The assessee submitted that Explanation 7 of section 9(1)(i) ought
to have been given retrospective effect. The DRP up held the addition. Tribunal deleted
the impugned addition holding that Explanations 4 and 5 inserted via the Finance Act,
2012 would operate retrospectively with effect from 1-4-1962. On appeal High Court up
held the order of Tribunal. (AY. 2015-16)
CIT (IT) v. Augustus Capital Pte. Ltd (2024) 296 Taxman 398 / 463 ITR 199
(Delhi)(HC)
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-
Business profits-Composite contract-Service rendered and payment received
outside India-Income earned on account of offshore supplies was not taxable-
DTAA-India-South Korea. [S. 234B,260A, Art. 7]
Dismissing the appeal of the Revenue the Court held that, though assessee had entered
into a contract with MRVC for the supply of equipment and services, offshore as well as
onshore, the terms of the contract distinctly set out the quantum of offshore supplies to
be made by the assessee to MRVC and also the quantum of payment to be received by
the assessee from MRVC outside India. The composite contract specifically records the
quantum of goods to be supplied outside India, the property in the plant and machinery
got transferred to MRVC once they were loaded on the mode of transport from the
country of origin to India and even the payment is made outside India. Therefore the
income arising from offshore supplies is not taxable in India. (AY. 2012-13)
CIT (IT) v. Iljin Electric Co. Ltd (2024) 296 Taxman 516 (Bom)(HC)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-

Income from offshore supply of plants, equipments, spares, etc. -Assessee has
furnished evidence to show that the global profit rate in the paper division is 3
per cent the estimation of profit at 5% by the CIT(A) cannot be accepted-Issue
is restored to the AO for de novo adjudication-DTAA-India-Germany. [Art. 5]
Held that when the assessee has furnished evidence to show that the global profit rate
in the paper division is 3 per cent the estimation of profit at 5% by the CIT(A) cannot
be accepted. Issue is restored to the AO for de novo adjudication. (AY. 2015-16)
J. M. Voith Se & Co. Kg v. DCIT (IT) (2024) 230 TTJ 837 / 241 DTR 137 / 38
NYPTTJ 521 / 161 taxmann. com 734 /(2025) 121 ITR 402 (Delhi)(Trib)

25
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-
Functions as selling and purchasing agent-Because the nature of business of
trading is a continuous flow of the business process, that cannot be a
foundation to conclude a principal-agent relationship for the purpose of art. 5
of the DTAA-There is no PE of assessee in the form of ITPL-DTAA-India-Japan-
[S. 90, Art. 5(6)]
Held that as per art. 1 of memorandum of agency agreement, the appointment of the
Indian subsidiary as agent was for the purpose of performing the functions as selling
and purchasing agent for the export from Japan and the import into Japan of all kinds
of goods. Article 1 itself mentions that the assessee-company as a principal reserves the
right to quote price, place orders of the goods and otherwise deal directly with buyers
and/or sellers located in the territory or visiting Japan from the territory, if all the actions
of the assessee as principal, circumstances make it necessary advisable to do so.
Because the nature of business of trading is a continuous flow of the business process,
that cannot be a foundation to conclude a principal-agent relationship for the purpose of
art. 5 of the DTAA. There was no PE of assessee in the form of ITPL. (AY. 2017-18)
ITOCHU Corporation v. ACIT (IT) (2024) 231 TTJ 744 / 242 DTR 57 / 38
NYPTTJ 995 (Delhi)(Trib)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

None of the employees came to India for the purpose of either development or
sale of or any activity related to development and sale of RPA software
platform-No permanent establishment-No income attributable on sale of
software licence-Additional ground-Rejected-DTAA-India-USA. [Art. 5, 12]
Tribunal held that there was nothing to demonstrate that the assessee has carried out
any activity, either wholly or partly in relation to sale of software licence through the
alleged PE in India so as to satisfy the conditions of art. 5(1) r/w art. 5(2) of the tax
treaty. The income relating to the sale of software licence was not taxable no part of
such income can be attributed to the PE. Additional ground being mixed question of fact
and law is not a question of law. (AY. 2018-19, 2019-20)
Automation Anywhere Inc. v. Dy. CIT (IT) (2023) 153 taxmann. com 629 /
(2024) 227 TTJ 287 / 234 DTR 295 (Delhi)(Trib)
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-
Non-Resident of Japan-Incurred loss-Only profits earned by Permanent
Establishment in India is liable to tax-Addition is deleted-DTAA-India-Japan.
[Art. 7]
Held that only if profits attributable to the assessee’s permanent establishment in India
can be taxed. The assesseee incurred loss hence the Assessing Officer is directed to
delete the addition. (AY. 2018-19, 2019-20)
Hitachi Ltd. v. ACIT (IT) (2024)116 ITR 393 / [2025] 171 taxmann. com
226 (Delhi)(Trib)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Non-Resident-Dependent agent permanent establishment-Offshore supply of
equipment-No fixed place-Addition under section. 44AB is deleted-Interest is
consequential in nature-DTAA-India-France. [S. 444BBB 234B, Art. 5]
Following the order of Tribunal for earlier year the Tribunal held that section 44BBB per
se could not be made applicable in the case, that the contract is not artificially split for
gaining any tax advantage as alleged by the Revenue, that there is no business
26
connection of the assessee in India, that there did not exist a fixed place permanent
establishment or construction permanent establishment of the assessee in India, and
that, therefore, the addition made by the Assessing Officer was deleted. Levy of interest
under S. 234B was consequential in nature. (AY. 2020-21)
GE Hydro France v. Dy. CIT (IT) (2024)116 ITR 42 (SN) (Delhi)(Trib)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Limited Liability Company (LLC)-Resident of USA State by virtue of US Income-
tax Law-Qualified as a person under Article 4 of Indo-US Tax Treaty-Eligible for
treaty benefit-Liable to tax at 15 % and not 25%-DTAA-India-USA. [S. 90, Art.
4, 12]
Assessee is a Limited Liability Company (LLC) incorporated in USA. Assessee claimed to
be a resident of USA and offered to tax income by way of receipts on account of fees at
rate of 15 per cent, applying rate given in India-USA DTAA. Assessing Officer held that
LLCs were fiscally transparent entities according to US tax law, i. e., their income is not
subject to tax in their own hands in USA and such corporations, therefore, did not qualify
as residents of USA in terms of Article 4 of India-USA DTAA. He, accordingly, proceeded
to bring to tax returned income of assessee at rate of 25 per cent. DRP affirmed the
order of the AO. On appeal the Tribunal held that under US federal income tax law, an
LLC with a single owner was disregarded as separate from its owner unless LLC elected
to be treated as a corporation for US federal income tax purposes-Ability of LLC to elect
its tax classification under US federal income tax law also supported legal situation or
aspect of LLC being liable to tax. Further, where a LLC was disregarded as separate from
its tax owner for US federal income tax purposes, tax owner of LLC paid tax on tax
owner's share of taxable income attributed from LLC. Assessee being a resident under
Article 4 of Indo-US Tax Treaty by virtue of incorporation and its recognition as a
separate existence from its members qualified as a person. Accordingly the assessee
was liable to tax in resident State by virtue of US Income-tax Law hence the tax
authorities had fallen in error in not extending treaty benefit to assessee. (AY. 2014-15,
2015-16)
General Motors Company USA. v. ACIT IT, (2024) 209 ITD 60 (Delhi) (Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Non-Resident-Royalty-Licence to incorporate software belonging to non-
Resident in Indian company’s Vehicles-Receipts from supply of software is not
royalty-Receipts business income not taxable in India in absence of a
Permanent Establishment in India-Delay in filing of return-Extended
notification-Matter remanded for verification-Interest-Income received after
deduction of tax at source-Levy of interest is not valid-DTAA-India-China. [S.
9(1)(vi), 139, 209(1)(d), 234A, 234B, Art. 12(3)]
Held that under the licence agreement no rights were provided to make copies of
software products or to modify, merge or combine with other software ; no right to
change the object code from source code and make any derivative products from that
had been provided and the technical documentation for the software remained the
property of the assessee, the assessee was responsible for any claims of patent
infringement and thus all intellectual property rights in the licensed products belonged
to the assessee and its licensors only. The Indian company was required to get the terms
of the legally binding end user licence agreement agreed by its customer before allowing
use of the licensed products. The Indian company merely purchased the licensed
27
software which was embedded in the head unit and fitted into cars for end use by the
buyer of the car. The end user licence agreement was signed with the end user for use
of the licensed software. The end user had limited right to use the application. The
receipts from supply of software were not royalty income. The expression “imparting of
information concerning industrial, commercial or scientific experience” alludes to the
concept of “know-how” which is defined to mean “undivulged technical knowledge,
information, experience or technique that is necessary for the industrial reproduction of
a product or process”. The licence agreement specifically provided for supply of software
licence only, and the assessee had only supplied a standard, off-the-shelf software to
the Indian company and had not given any “know-how” to the Indian company from
which the Indian company could reproduce it for its perpetual use as the Indian company
had to purchase licences equal to number of cars manufactured by it. The payments
received by the assessee was not for the use of the copyright or imparting information
concerning industrial, commercial or scientific experience and thus would not fall within
the scope of article 12(3) of the DTAA to be taxed as royalty income. The receipts were
business income in the hands of the assessee which was not taxable in India in the
absence of a permanent establishment of the assessee in India. Held that interest under
section 234A of the Income-tax Act, 1961 is levied only in cases where the assessee
does not furnish its return of income or furnishes it after the due date prescribed under
section 139 of the Act. The facts on record revealed that the assessee filed its return of
income within the prescribed (extended) due date applicable to the assessment year.
The Assessing Officer was to verify the date of filing of the return vis-a-vis the due date
of filing of return for the assessment year 2020-21 in the light of the CBDT Notification
No. 93/2020/F. No. 370142/35/2020-TPL dated December 31, 2020 by which the due
date for furnishing of returns for the assessment year 2020-21 was extended to February
15, 2021 and decide it afresh in accordance with law. Tribunal also held that the proviso
inserted in section 209(1)(d) of the Act by the Finance Act, 2012 with effect from April
1, 2012 would apply only where the person responsible for deducting tax has paid or
credited such income without deduction of tax. Since the income had been received by
the assessee after deduction of tax at source the levy of interest under section 234B of
the Act was not called for. (AY. 2020-21)
Saic Motor Overseas Intelligent Mobility Technology Co. Ltd. v Asst. CIT (IT)
(2024)110 ITR 49 (SN)/229 TTJ 801/ 239 DTR 42 (Delhi)(Trib)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection--

Operational staff and the Vessel and the captain of the vessel who originally
belonged to the non-resident company and who had been sent to work under
the complete control and supervision of the Assessee did not constitute a
business connection for the non-resident in India-Article 5 of the OECD Model
Convention.
The Assessee contended that the overseas company did not carry out any dredging
operations in India but only gave dredgers to the Assessee Company in India on a time
charter basis, for which it charged a fixed fee/remuneration irrespective of the actual
usage of such vessel. The Revenue argued that the foreign company had a business
connection in India as the dredgers were continuously operating in Indian territorial
waters. The Hon’ble Tribunal held that the foreign company did not have a business
connection or permanent establishment in India. That the foreign company only provided
dredgers on a lease basis without engaging in any active business operations in India.
Further that the operational staff and the captain worked under the supervision and
28
control of the Assessee, and the payments were for the use of equipment, not for any
business activity conducted by the foreign company in India. (AY 2003 to 2010-11)
Jaisu Shipping Co. v. ADDI (2024) 111 ITR 601 (Rajkot)(Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Changed mode of business operations-Computerized reservation system
services on behalf of Air lines and Hotels to travel agents in India-No agency
permanent establishment-Profits is not liable to tax in India--DTAA-India-USA
[Art. 5, 7]
The Assessee a US-based company, entered into Participating Carrier Distribution and
services agreements with various airlines in India to facilTribunale ticket booking and
related services through its computer reservation system (CRS). The company also had
subscriber agreements with global travel agencies, allowing them access to the CRS.
The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) held that the
Assessee had a fixed place PE and agency PE in India based on earlier assessment years'
findings, despite changes in the business model post-2005. The Assessee contended that
after 2005, there was a significant change in its business model. The company no longer
provided computers, printers, or communication lines to travel agents in India. Instead,
global travel agencies independently sourced these requirements. The Assessee argued
that it did not have any office or employees in India and was not responsible for providing
any equipment to Indian travel agents, thus negating the existence of a fixed place PE
or agency PE in India. The Revenue contended that the Assessee had a fixed place PE
and agency PE in India based on the company's operations and income generated from
India. The AO and DRP relied on earlier assessment years' findings, arguing that the
CRS gateway used by travel agents constituted a fixed place of business in India. They
also maintained that the business model changes post-2005 did not materially alter the
company's operations in India.
The Hon’ble Tribunal ruled in favor of the Assessee holding that the company did not
have a fixed place PE or agency PE in India post-2005 due to changes in its business
model. The Hon’ble Tribunal noted that the Assessee no longer provided equipment or
communication links to Indian travel agents and had no office or employees in India.
That the burden of proving the existence of a PE lies with the Revenue, which failed to
establish this in light of the changed business model. (AY. 2012-13 to 2016-17)
Sabre GLBL Inc. v. ACIT (2024) 111 ITR 446 /230 TTJ 179 /159 taxmann. com
678 (Delhi)(Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

There is no entity which was habitually procuring contracts for non-resident
assessee or to bind assessee for contracts to be entered by that entity
independently-It could not be held that assessee had Dependent Agency
Permanent Establishment in India-Profits are not liable to tax in India. [S.
5(2)]
The assessee, a US based company, entered into Participating Carrier Distribution and
services agreements with various airlines etc. for facilTribunaling booking of airline
tickets and providing related services through computer reservation system (CRS). It
had earned booking fees from various participating Airlines for such services. It had also
entered into the subscriber agreements with global travel agencies in India who had
presence/affiliates in multiple countries including India and had granted them access to
assessee's CRS. The AO following order for AYs 1999-2000 and 2004-05 in case of
29
assessee had held that entire income earned by assessee out of India was taxable on
ground that assessee had fixed place PE and DAPE and assessee had a business
connection in India under section 9(1), without considering the submission of the
assessee that after 2005 there was a change in business model. The Tribunal held that
the assessee had no office or employee in India and assessee was not responsible for
providing any computer, printers, communication lines etc. to travel agents in India. The
AO/DRP had failed to examine participating carrier distribution and services agreements
or service provider agreement with travel agents and had failed in discharging burden
to establish existence of a PE. It was further held that since there was no entity which
was habitually procuring contracts for assessee or bind assessee for contracts to be
entered by that entity independently, thus, there was no Agency PE of assessee in India.
(AY. 2012-13 to 2016-17)
CIT (Asst.) (IT) v. Sabre GLBL Inc. (2024) 111 ITR 446 (Delhi)(Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Interest paid by Indian branch/PE of assessee, a French bank, to its head office
(a foreign company)-Not taxable in India under India France DTAA since
branch had borrowed from overseas head office and debt claim of head office
was connected to PE branch in India-DTAA-India-France. [Art. 7, 12]
Held that interest paid by Indian branch/PE of assessee, a French bank, to its head office
(a foreign company) would not be taxable in India under India France DTAA since branch
had borrowed from overseas head office and debt claim of head office was connected to
PE branch in India. (AY. 2021-22)
BNP Paribas. v. ACIT (2024) 207 ITD 532 (Mum) (Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Business profits-Offshore supplies-Fees for technical services-Supply of goods
and equipments was completed outside India-Transfer of title over goods had
passed from non-resident assessee to Indian PSU’s outside India-Receipts
from such supply could not be made taxable in India-DTAA-India-China. [S.
9(1)(vii), Art. 7]
Assessee, a tax resident of China, received certain amount of consideration on account
of offshore supply made to Indian PSUs. Assessing Officer, allocated 60 per cent of total
receipts towards supply of equipment and 40 per cent towards fee for technical service
(FTS) and made additions. DRP up held the addition. On appeal following the order of
Tribunal in assessee’s own case for earlier assessment years in Jiangdong Fittings
Equipments Co. v. ACIT (International Taxation) [2023] 157 taxmann. com 109 (Delhi
(Trib.) on similar issue had held that supply of goods and equipments was completed
outside India and transfer of title over goods had passed from non-resident assessee to
Indian PSUs outside India in terms with contract, receipts from such supply could not be
made taxable in India. Tribunal directed the Assessing Officer to delete the addition.
Following aforesaid order, Assessing Officer was to be directed to delete impugned
additions. (AY. 2020-21)
Jiangdong Fittings Equipments Co. Ltd. v. ACIT (2024) 206 ITD 344 (Delhi)
(Trib.)
S. 9(1)(i)) : Income deemed to accrue or arise in India-Business connection-
Permanent Establishment-Interest on income tax refund-Not effectively
connected with PE either on basis of asset-test or activity-test-It has to be

30
taxed under article 12 of India-France DTAA at 10 percent and not as business
income-DTAA-India-France. [Art. 7, 12, 15]
The assessee had received income tax refund. In the return of income the assessee
offered the interest at the rate of 10 percent as per Article 12 of DTAA between India
and France. The Assessing Officer assessed the interest as business income in terms of
Article 7 read with Paragraph 5 of Article 12 of the DTAA. DRP affirmed the order of the
Assessing Officer. On appeal the Tribunal held that interest on income-tax refund is not
effectively connected with permanent establishment either on basis of asset-test or
activity-test, it could not be taxed under article 7 but was to be taxed under article 12
of India-France DTAA. (AY. 2018-19)
Corning SAS India. v. ACIT (IT) (2024) 205 ITD 590 (Delhi) (Trib.)
S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-
Permanent establishment-Agency PE-Indian subsidiary-Advertisement sales
agent-Not dependent PE-Not taxable in India-DTAA-India-Mauritius. [Art.
5(4)]
Assessee, a Mauritius based company, was engaged in telecasting sports channel called
'Ten Sports'. It appointed its Indian subsidiary (Taj India) as its advertising sales agent
to sell commercial advertisement time to prospective advertisers in India. It also
appointed Taj India as its distributor to distribute subscription supported television
programming service solely for exhibition to subscribers in India. Later, by addendum
in distribution agreement assessee gave Taj India authority to conclude contracts in its
name. Assessing Officer held that assessee had a dependent agent PE in India within
meaning of article 5(4)(i) of DTAA on ground that Taj India had authority to conclude
contracts in name of assessee hence the income is taxable in India. On appeal the CIT(A)
held that the assessee did not have any PE with respect to its distribution functions. On
cross appeal the Tribunal held that since Assessing Officer failed to establish that Taj
India habitually exercised authority to conclude contracts on behalf of assessee, in such
case Taj India could not be said to be dependent agent PE of assessee under article 5(4)
of DTAA and distribution income of assessee was not be taxable in India. (AY. 2013-14)
Taj TV Ltd. v. DCIT IT (2024) 204 ITD 50 (Mum) (Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Permanent Establishment-Supply and delivery of equipment and supervision,
installation, erection and commissioning activity-Single composite contract-
Assessee had PE in India-Income attributable to Indian PE from said contracts
is taxable in India –Matter remanded to the file of the AO for computation-
DTAA-India-Germany. [Art. 5, 7]
Assessee had entered into various contracts with Indian clients for supply and delivery
of equipment and supervision, installation, erection and commissioning activity.
Assessee did was not involved in any installation activity. Installation, erection and
commissioning of projects was handled by wholly owned subsidiary of Germany
company-Assessing Officer was of view that turnkey contract was a single composite
contract between assessee and clients in India, thus he made an addition towards
income attributable to Indian PE from said contracts and taxed same in hands of
assessee-Whether in view of decision of Tribunal in assessee's own case for subsequent
assessment years, contracts entered into by assessee with Indian clients was single
composite contract and income arising therefrom was to be assessed in hands of the
assessee, because project office of assessee constituted a PE in India. Further since
assessee had failed to provide necessary information to justify that there was an error
31
in computation of profit attribution to PE in India and there was duplication of income in
respect of service contract revenue, matter was remanded to Assessing Officer for
limited purpose of computation of income (AY. 2009-10, 2011-12)
Durr Systems GmbH. v. DCIT IT (2024) 204 ITD 258 (Chennai) (Trib.)

S. 9(1)(i): Income deemed to accrue or arise in India-Business connection-

Permanent Establishment-Off shore supply of goods and equipments-Out side
India-No Permanent Establishment-Not taxable in India-DTAA-India-Thailand.
[Art. 5]
The assessee, a tax resident of Thailand, which is engaged in the business of
manufacturing of train control and signalling systems for mass transit system. In terms
with the contract, the assessee made offshore supply of goods and equipments to DMRC
from outside India and received certain amount of consideration for such supply. The
Assessing Officer held that the assessee had a service PE in India, through which, it
executed the contract. Accordingly, out of the receipts from offshore supplies, the
Assessing Officer attributed 10 per cent of the total receipts as profits of the PE and
accordingly, brought the same to tax same. The DRP upheld the view taken by the
Assessing Officer. On appeal the Tribunal held that, that the assessee did not have any
place of business in India and all business activities with respect to offshore supplies
were carried outside India. Equipment supply had been manufactured at overseas
manufacturing facility of assessee and sale of equipment had occurred outside India and
payment had also been received by assessee outside India. Therefore, addition made by
Assessing Officer was deleted. (AY. 2020-21)
Alstom (Thailand) Ltd v. ACIT (IT)(2024) 204 ITD 455/110 ITR 251
(Delhi)(Trib)

S. 9(1)(ii) : Income deemed to accrue or arise in India-Salaries-Shipping,

Inland waterways Transport and Air Transport-Salary-Salary income received
by assessee-NRI from his foreign employer for working in international waters
is exempt income-DTAA-India-Singapore. [S. 2(25A), 5(2)(b) 6, Art. 8]
Assessee is an Engineer (Under Water Inspector) working at offshore fields. During year
under consideration, it he had received salary income from his Singapore based
employer for work done in oil fields in Bay of Bengal in international water and had
claimed same as exempt income. Assessing Officer held that oil fields in Bay of Bengal
was part of Indian Territory and therefore, work performed by assessee could not be
termed as work outside Indian Territory and also held that co-ordinates of oil fields in
Bay of Bengal were situated within Exclusive Economic Zone of India and same was
within part of "India" as defined in section 2(25A). Accordingly, he had made an addition
of same under section 5(2)(b) read with section 9(1)(ii). CIT(A) affirmed the order of
the AO. On appeal the Tribunal held that sub-section 9 of section 7 of Territorial Waters,
Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 gave
freedom of navigation to foreign ships and therefore employees working on such ships
who were not carrying out activities as specified by said notification were not deemed to
be working in India. On facts, salary income received by assessee from his foreign
employer was exempt income because of his non-residential status as salary was earned
for working in international waters. Addition is deleted. (AY. 2018-19)
Pralay Pradyotkanti Ghosh. v. ITO (IT) (2024) 208 ITD 163 (Ahd) (Trib.)

32
S. 9(1)(ii) : Income deemed to accrue or arise in India-Salaries-Income from
employment-Others-Non-resident for services rendered outside India-
Assessee neither had any rest period nor leave period which was preceded and
succeeded by services rendered outside India-Salary received by assessee from
outside India could not be taxed in India-DTAA-India-UAE-Ireland. [S. 5, 15]
Assessee, a non-resident Indian, received salary for services rendered in UAE and
Ireland. Assessing Officer made addition to income of assessee on account of salary
received by him. On appeal the Tribunal held that since salary was paid for services
rendered outside India and assessee neither had any rest period nor leave period which
was preceded and succeeded by services rendered outside India, it could not be brought
to tax in India. (AY. 2019-20)
Sanjay Kumar. v. ACIT (IT) (2024) 206 ITD 14 (Delhi) (Trib.)

S. 9(1)(ii) : Income deemed to accrue or arise in India-Salaries-Held, the

Assessee, being a non-resident, has rendered services outside India, the salary
cannot be taxable in India-DTAA-India-Austria [S. 5,15, Art. 15]
The Assessee, an employee of an Indian company, was deputed to work in a project
awarded by IAEA, Vienna, Austria and stationed at Vienna and was a non-resident. The
salary and the compensatory allowances were paid to the Assessee at Vienna from the
company in India which were permissible to be utilized through a credit card which was
valid only in Austria. The AO made an addition on account of salary and allowances as
the Assessee did not furnish a TRC. The Tribunal reproduced the provisions of S. 5 and
9 and observed that the Assessee neither had any rest period nor leave period which is
preceded and succeeded by the services rendered outside India. Since, the Assessee,
being a non-resident, has rendered services outside India, the salary can was not be
taxable in India. (AY. 2016-17 2017-18)
Devi Dayal v. Asst. CIT (IT) [2024] 109 ITR 87 (SN) / 205 ITD 299 /228 TTJ
727 (Delhi)(Trib)

S. 9(1)(v) : Income deemed to accrue or arise in India – Interest – Other

income - Guarantee to various banks to extend credit facilities to its Indian
subsidiaries- Guarantee charges were not received by assessee in respect of
any debt owed to it by its Indian subsidiary- Guarantee fee would not fall
within expression 'interest' in article 12 of India UK DTAA –Accrue – Arise -
Income - SLP of assessee is dismissed - DTAA -India -UK -Northern Ireland .
[S. 2(28A), 5(2), 260A, Art. 7, 12(5), 23(3), Art. 136]

Assessee, a tax resident of United Kingdom, is engaged in manufacture of specialty

chemicals. During relevant year, assessee had extended guarantees to various overseas
branches of foreign banks on a global basis in relation to credit facilities extended by
those financial institutions to its Indian subsidiaries. In its return of income, it had
characterized amount of guarantee fee as interest and, thus, taxable under article 12.
Assessing Officer held that said sum would be liable to be taxed under Article 23(3) being
in nature of other income. Tribunal held that guarantee charges were not received by
assessee in respect of any debt owed to it by its Indian subsidiary and guarantee charges
were levied for service of providing parent company guarantees and counter
indemnification of liabilities of Indian subsidiaries. Therefore on facts, guarantee charges
could not be viewed as ‘interest’ under Article 12. Further since guarantee charges
became leviable every quarter at a rate already agreed upon by parties and on
33
outstanding balance, guarantee charges clearly answered to description of income
accruing or arising in India. Tribunal affirmed the order of Tribunal. Appeal of the
assesseee is dismissed by High Court. SLP of assessee is dismissed. (AY. 2011 -12)
Johnson Matthey Public Ltd. Co. v. CIT (IT) (2024) 469 ITR 31/ 301 Taxman
392 (SC)
Editorial: Johnson Matthey Public Ltd. Company v. CIT (2024) 299 Taxman 334 /465
ITR 649 (Delhi)(HC)

S. 9(1)(v) : Income deemed to accrue or arise in India-Interest-Other income-

Guarantee to various banks to extend credit facilities to its Indian subsidiaries-
Guarantee charges were not received by assessee in respect of any debt owed
to it by its Indian subsidiary-Guarantee fee would not fall within expression
'interest' in article 12 of India UK DTAA –Accrue-Arise-Income-DTAA-India-UK-
Northern Ireland [S. 2(28A), 5(2), 260A, art. 7, 12(5), 23(3)]
Assessee, a tax resident of United Kingdom, is engaged in manufacture of specialty
chemicals. During relevant year, assessee had extended guarantees to various overseas
branches of foreign banks on a global basis in relation to credit facilities extended by
those financial institutions to its Indian subsidiaries. In its return of income, it had
characterized amount of guarantee fee as interest and, thus, taxable under article 12.
Assessing Officer held that said sum would be liable to be taxed under Article 23(3) being
in nature of other income. Tribunal held that guarantee charges were not received by
assessee in respect of any debt owed to it by its Indian subsidiary and guarantee charges
were levied for service of providing parent company guarantees and counter
indemnification of liabilities of Indian subsidiaries. Therefore on facts, guarantee charges
could not be viewed as ‘interest’ under Article 12. Further since guarantee charges
became leviable every quarter at a rate already agreed upon by parties and on
outstanding balance, guarantee charges clearly answered to description of income
accruing or arising in India. Tribunal affirmed the order of Tribunal. Appeal of the
assesseee is dismissed. (AY. 2011-12)
Johnson Matthey Public Ltd. Company v. CIT(IT) (2024) 299 Taxman 334 /465
ITR 649 (Delhi)(HC)
Editorial : SLP of assessee is dismissed, Johnson Matthey Public Ltd. Co. v. CIT (IT)
(2024) 469 ITR 31/301 Taxman 392 (SC)

S. 9(1)(v) : Income deemed to accrue or arise in India-Interest-Banking

business-Interest earned by it in India on securities, being beneficially owned
by it-Exempt from tax-DTAA-India-Mauritius. [S. 90, 260A, art. 11(3)(c)]
Assessee-company, a tax resident of Mauritius, earned certain amount as interest
income from securities. Assessee claimed said income would be exempt under clause (c)
of article 11(3) of India-Mauritius DTAA. Assessing Officer disallowed said claim of
assessee. Revenue contended that clause (c) of article 11 of DTAA would not apply to
assessee as it did not have a banking business license from RBI. DRP upheld the findings
of the Tribunal. Tribunal held that interest income from seecurities would be exempt
under clause (c) of article 11(3) of India-Mauritius DTAA. On appeal the Court held that
in draft assessment order Assessing Officer had granted exemption to interest on ECB
by accepting that assessee was carrying on bona fide banking business in Mauritius.
Since assessee was carrying a bona fide banking business in Mauritius, interest that
assessee earned would be exempt in India. (AY. 2011-12)
CIT (IT) v. HSBC Bank (Mauritius) Ltd (2024) 298 Taxman 54 (Bom)(HC)
34
S. 9(1)(v) : Income deemed to accrue or arise in India-Interest- Interest
payment to China Development Bank (CDB)-Financial institution wholly owned
by Government of China-Exemption-Not liable to deduct tax at source-DTAA-
India-China. [S. 195, Art. 11(3)]
Assessee-company made interest payment to China Development Bank (CDB) without
deducting tax at source under section 195 claiming benefit of article 11. AO held that
since as per Financial Statement of CDB only 36. 45% shares in said Bank was held by
Government of China during relevant period, i. e., FY 2015-16, CDB could not claim
benefit of DTAA and, hence, assessee was liable to deduct tax under section 195. CIT(A)
held that the CDBB is a financial institution wholly owned by the Government of China
and is eligible for the beneficial provisions of Article 11(3) of the India-China DTAA. On
appeal the Tribunal held that in protocol to India-China DTAA, paragraph 3 was
simultaneously inserted by deleting erstwhile paragraph 3 which defined term 'any
financial institution wholly owned by Government of other Contracting State' and specific
institutions listed in protocol for both India and China, were always covered as
Government owned financial institution for purpose of article 11. Therefore CDB being
a financial institution wholly owned by Government of China was eligible for benefit of
provisions of Article 11(3) the assessee could not be treated as assessee in default with
respect to non-deduction of tax on interest payments made to CDB. (AY. 2016-17)
ITO v. Tata Teleservices Ltd. (2024) 208 ITD 648 (Delhi) (Trib.)

S. 9(1)(v) : Income deemed to accrue or arise in India-Interest-Right to receive

interest income on compulsorily convertible debentures (CCDs)-Taxed @10 per
cent as per Article 11 of India-Cyprus DTAA-DTAA-India-Cyprus. [Art. 11(2)]
Assessee is a Cyprus based company and was a wholly owned subsidiary of a company
based in Mauritius. It invested in compulsorily convertible debentures (CCDs) of an
Indian company and earned interest. Assessee claimed benefit of tax rate of 10 per cent
as per India-Cyprus DTAA. Assessing Officer denied benefit of said rate on ground that
Mauritius based company was beneficial owner of interest income and not assessee and
taxed same at domestic rate of 40 per cent. Held that investment in CCDs was done by
assessee in its own name through proper banking channels and assessee had complete
right to receive and enjoy interest income earned on CCDs without any obligation to
pass on same to any other person. Assessee had also got complete control over interest
income on investment in CCDs and was free to enjoy same as per its own wish. On
facts, assessee being beneficial owner of interest income on CCDs from Indian entity,
was entitled for taxability at a concessional rate as provided under article 11(2). (AY.
2017-18)
Little Fairy Ltd. v. ACIT. IT (2024) 207 ITD 284 (Delhi) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Deduction of

tax at source-Payment to Non-Resident-Royalty User licence agreement for use
of computer software by Non-Resident supplier to distributor and resold to
resident end-user, or directly supplied to resident end-user-Not royalty for use
of Copyright in computer software-Not liable to deduct tax at source-Review
petition is dismissed on account of delay of 515 days and also on the merits.
[S. 195, Copyright Act, 1957, S. 14(a), 14(b), 30]
Review of the decision in in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT
(2021) 432 ITR 471 (SC) to the effect wherein the Court held that payment to Non-
35
Resident for user licence agreement for use of computer software by Non-Resident
supplier to distributor and resold to resident end-user, or directly supplied to resident
end-user is not royalty for use of Copyright in computer software. Review petition is
dismissed on account of delay of 515 days and also on the merits. (AY. 1999-2000 to
2002-03)
CIT v. GE India Technology Centre Pvt. Ltd. (2024)469 ITR 389 (SC)
Editorial: Engineering Analysis Centre of Excellence Pvt Ltd v. CIT (2021) 432 ITR 471
(SC) is reaffirmed.

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty- Deduction of

tax at source-Payments to Non-Residents-Telecommunications operators for
providing inter-connectivity services and transfer of capacity in foreign
countries-Not chargeable to tax as royalty-SLP of Revenue is dismissed. [S.
195, 201, Art. 136]
High Court, following Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT(2021)
432 ITR 471 (SC) allowed the assessee’s appeals, holding that the Double Taxation
Avoidance Agreement could be considered in proceedings under section 201, that
amendment to the provisions of section 9(1)(vi) inserting the Explanations would not
result in amendment of the Double Taxation Avoidance Agreements, that the
Department had no jurisdiction to bring to tax income that arose from extra-territorial
sources, that the payments made to the non-resident telecommunications operators for
providing inter-connectivity services and transfer of capacity in foreign countries was
not chargeable to tax as royalty under section 9(1)(vi) and that therefore, the assessee
is not liable to deduct tax at source under section 195 thereon. Followed, CIT v. GE
India Technology Centre Pvt Ltd (2024) 469 ITR 389 (SC). SLP of Revenue is dismissed.
(AY. 2008-09 to 2012-13, 2013-14 to 2015-16)
Dy. DIT v. Vodafone Idea Ltd. (2024)469 ITR 391 (SC)
Editorial : Vodafone Idea Ltd v. Dy. CIT (2023) 457 ITR 189(Karn)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for

technical services-Revenue from software sales to Indian clients, said revenue
could not be treated as royalty and subjected to Indian taxation-DTAA-India-
USA [S. 9(1)(vii), 195, art. 12, Art. 136]
Dismissing the appeal of the Revenue the Court held that, revenue from software sales
to Indian clients, said revenue could not be treated as royalty and subjected to Indian
taxation. SLP of Revenue is dismissed. (AY. 2010-11 to 2017-18)
CIT (IT) v. Microsoft Regional Sales Pte. Ltd. (2024) 301 Taxman 402 (SC)
Editorial: CIT (IT) v. Microsoft Regional Sales Pte. Ltd (2024) 159 taxmann. com 278
(Delhi)(HC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Computer
software-Payments for licensing of software products-Resale of computer
software-Not taxable as royalty-DTAA-India-USA-SLP of Revenue is dismissed.
[Art. 12, Art. 136]
Dismissing the appeal of the Revenue the High Court held that payments were made by
Indian-company to non-resident company which was computer software
manufacturer/supplier for resale/use of computer software through distribution
agreements, said payment did not amount to royalty for use of copyright in computer
software, and same did not give rise to any income taxable in India. SLP of Revenue is
dismissed. (AY. 2005-06, 2007-08)
36
CIT (IT) v. Gracemac Corporation Golf View Corporate (2024) 301 Taxman 172
/ 468 ITR 1 (SC)
Editorial : CIT (IT) v. Gracemac Corporation Golf View Corporate (2022] 287 Taxman
197 / (2023) 456 ITR 124 (Delhi)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Payment to

Non-Resident telecommunication operators for provision of bandwidth and
inter-connectivity usage-Not royalty-Not liable to deduct tax at source-
Expansion of definition of royalty inserted later-Assessee cannot be expected
to foresee future amendment at time of payment in earlier assessment years-
Jurisdiction-No jurisdiction to tax income arising from extra-territorial source-
Double Taxation Avoidance Agreement-Sovereign document between two
countries-Applicable in Proceedings under Section 201 of the Act-DTAA-India-
Belgium-SLP of Revenue is dismissed on account of delay of 222 days and also
on merits. [S. 195, Art. 136]
High Court held that a Double Taxation Avoidance Agreement being a sovereign
document between two countries the assessee was entitled to take the benefit
thereunder. Therefore, the Tribunal’s view that the Double Taxation Avoidance
Agreement cannot be considered in proceedings under section 201 was untenable. Held
that amendment to the provisions of section 9(1)(vi) inserting the Explanations would
not result in amendment of the Double Taxation Avoidance Agreements. The Supreme
Court had held that Explanation 4 to section 9(1)(vi) was not clarificatory of the position
as on June 1, 1976 and had expanded that position to include what was stated therein
by the Finance Act, 2012. Explanations 5 and 6 to section 9(1)(vi) had been inserted
with effect from June 1, 1976. Held that the fact that for the subsequent years in the
assessee’s own case, the Tribunal had held that tax was not deductible under section
195 when payment was made to non-resident telecommunications operators was not
refuted. Therefore, the payments made to non-resident telecommunications operators
for providing inter-connectivity services and transfer of capacity in foreign countries was
not chargeable to tax as royalty under section 9(1)(vi). Held that the Department had
no jurisdiction to bring to tax income that arose from extra-territorial sources. The non-
resident telecommunications operators to whom the assessee had made payments had
no presence in India. The assessee’s contract was with B, a Belgium entity which had
made certain arrangement with OMT for utilisation of bandwidth and B had permitted
the assessee to utilise a portion of the bandwidth which it had acquired from OMT. The
facilities were situated outside India and the agreement was with B, a foreign entity
which did not have any permanent establishment in India. Therefore, the assessee was
not liable to deduct tax at source under section 195 on the payments made to the non-
resident telecommunications operators. Held that Deputy Director (International
Transaction) was not right in holding that for the assessment years 2013-14 to 2015-16
the withholding of tax liability could be levied at a higher rate at 20 per cent. Held that
as a deductor, the assessee was not liable for deduction of tax at source for payments
made for the assessment years 2008-09 to 2012-13 on the basis of a subsequent
amendment to section 9(1)(vi) whereby Explanations 5 and 6 were introduced. SLP of
Revenue is dismissed on account of delay of 222 days and also on merits. (AY. 2008-09
to 2012-13, 2013-14 to 2015-16)
DCIT v. Vodafone Idea Ltd. (2024)300 Taxman 364 (SC)
Editorial : Vodafone Idea Ltd. v. DCIT(2023) 152 taxmann. com 575/ 457 ITR 189
/334 CTR 39 (Karn)(HC)
37
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for
technical services-High Court held that if rate of tax applicable under DTAA is
lower than 20 per cent tax rate as prescribed under section 206AA, TDS has to
be deducted at such lower rate even if non-resident deductee fails to furnish
its PAN-DTAA-India-China-Delay of 255 days in filing SLP-Delay is not
satisfactorily explained-SLP is dismissed. [S. 9(1)(vii), 90, 206AA, Art. 12]
Tribunal held that if rate of tax applicable under DTAA is lower than 20 per cent tax rate
as prescribed under section 206AA, TDS has to be deducted at such lower rate even if
non-resident deductee fails to furnish its PAN. Appeal against order of Tribunal filed
after 273 days was dismissed by High Court both on delay and merits. Court held that
since there was delay of 255 days in filing SLP against order of High Court and
explanation offered for delay was not satisfactory, SLP is dismissed on ground of delay.
(AY. 2011-12)
CIT v. Infosys Ltd. (2024) 300 Taxman 113 (SC)
Editorial : CIT (IT) v. Infosys Ltd (2024) 164 taxmann. com 280(Karn)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India -Royalty – Fees for

technical services -Revenue from software sales to Indian clients, said revenue
could not be treated as royalty and subjected to Indian taxation- DTAA – India
-USA [S. 9(1)(vii), 195, art. 12, Art. 136]
Dismissing the appeal of the Revenue the Court held that,revenue from software sales
to Indian clients, said revenue could not be treated as royalty and subjected to Indian
taxation. SLP of Revenue is dismissed. (AY. 2010-11 to 2017 -18)
CIT (IT) v. Microsoft Regional Sales Pte. Ltd (2024) 298 Taxman 3 / 297
Taxman 535 (SC)
Editorial : CIT(IT) v. Microsoft Regional Sales Pte. Ltd (2024) 159 taxmann. com 278
(Delhi)(HC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for
technical services-Sale of software-Subscription fees-Order of High Court is
affirmed-SLP of Revenue is dismissed-DTAA-India-USA [S. 9(1)(vii), art. 12,
Art. 136]
High Court held that where assessee, a US based company, earned revenue from sale
of software to its Indian clients, since grant of right to install and use software did not
include providing copyright of said software to clients, revenue earned from said sale
would not be taxable in hands of assessee as royalty in India.. High Court also held that
where assessee, a US based company, provided cloud computing infrastructure to its
Indian clients through subscription agreement and even though cloud based services
were based on patents/copyright but subscribers did not get any right of reproduction,
thus, subscription fee was merely a consideration for online access of cloud computing
services and would not be taxable as royalty in India. in view of judgment of this Court
in case of Engineering Analysis Centre of Excellence (P.) Ltd. v. CIT [2021] 125 taxmann.
com 42/281 Taxman 19/432 ITR 471 (SC)/[2022] 3 SCC 321 and CIT (International
Taxation) v. MOL Corporation [SLP(C) Diary No. 5669 of 2024, dated 11-3-2024]
CIT v. MOL Corporation (2024) 299 Taxman 506(SC)
Editorial: CIT (IT)) v. MOL Corporation (2024) 162 taxmann. com 197 (Delhi)(HC)

38
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Computer
software-Sale of conditional access systems and middleware products to
Indian customers-Not taxable as royalty-SLP dismissed-DTAA-India-
Switzerland. [Art. 12(3)]
Dismissing the appeal of the Revenue the Court held that the Tribunal was justified in
holding that the income received from supply of conditional access systems and
middleware products to Indian customers did not fall under “royalty” as defined under
section 9(1)(vi) of the Income-tax Act, 1961, and article 12(3) of the Double Taxation
Avoidance Agreement between India and Switzerland. SLP of Revenue is dismissed.
(AY. 2017-18)
CIT (IT) v. Nagravision S. A. (2024)461 ITR 146/ 297 Taxman 65 (SC)
Editorial : CIT (IT) v. Nagravision S. A. (2023) 157 taxmann. com 457/ (2024) 461
ITR 143 (Delhi)(HC).
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Sale of telecom
equipment’s. i. e. mobile handsets-Supply of articles or goods-Not taxable as
royalty-Review petition against SLP is dismissed-DTAA-India-China [S. 9(1)(i),
Art, 12]
Dismissing the appeal of the Revenue, the Court in CIT (IT) v. ZTE Corporation (2021)
130 taxmann. com 128 (Delhi) (HC) held that supply of software was embedded in
supply of telecom equipment resulting in sale of copyrighted article, the said transaction
was to be treated in nature of supply of articles or goods and thus, payment made
towards supply of software was not taxable in India as royalty. SLP was dismissed.
Review petition against SLP is dismissed. (AY. 2013-14)
CIT (IT) v. ZTE Corporation (2024) 296 Taxman 571 (SC)
Editorial : Refer, CIT (IT) v. ZTE Corporation (2021) 282 Taxman 304 (SC)

S 9(1)(vi) : Income deemed to accrue or arise in India -Royalty – Fees for

technical services - High Court held that if rate of tax applicable under DTAA
is lower than 20 per cent tax rate as prescribed under section 206AA, TDS has
to be deducted at such lower rate even if non-resident deductee fails to furnish
its PAN- DTAA -India. [S. 9(1)(vii), 90, 206AA, Art. 12]
Tribunal held that if rate of tax applicable under DTAA is lower than 20 per cent tax rate
as prescribed under section 206AA, TDS has to be deducted at such lower rate even if
non-resident deductee fails to furnish its PAN. Appeal against order of Tribunal filed
after 273 days was dismissed by High Court both on delay and merits. (AY. 2011 -12)
CIT (IT) v. Infosys Ltd (2024) 164 taxmann. com 280(Karn)(HC)
Editorial : SLP of Revenue is dismissed, delay of 255 days was not satisfactorily
explained, CIT v. Infosys Ltd. (2024) 300 Taxman 113 (SC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Amounts paid
by resident Indian end-users/distributors to non-resident computer software
manufacturers/suppliers-Consideration for resale/use of computer software
through EULAs/distribution agreements-Not payment of royalty for use of
copyright in computer software-Not liable to deduct tax at source-DTAA-India-
USA. [S. 9(1)(vii)),195(2), 260A Art. 12]
Assessee, a non-resident company, received consideration for supply of software to
Reliance and claimed same to be business income not taxable in India in absence of any
permanent establishment in India. Assessing Officer held that consideration received
by assessee was towards a license to use software and, thus, taxable as royalty under
39
section 9(1)(vi) hence liable to deduct tax at source. CIT(A) allowed the appeal of the
assessee. On appeal Tribunal affirmed the order of the CIT(A). On appeal the Court held
that the issue is covered by judgment of Supreme Court in case of Engineering Analysis
Centre of Excellence (P.) Ltd. v. CIT(2021) 281 Taxman 19/ 432 ITR 471 (SC) wherein
it was held that amounts paid by resident Indian end-users/distributors to non-resident
computer software manufacturers/suppliers, as consideration for resale/use of computer
software through EULAs/distribution agreements, was not payment of royalty for use of
copyright in computer software and that same did not give rise to any income taxable
India. Order of Tribunal is affirmed. No substantial question. of law. (AY. 2003-04, 2004-
05, 2006-07 2010-11 2010-11)
CIT(IT-3) v. Lucent Technologies GRL LLC (2024) 300 Taxman 311 (Bom)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for

technical services-Non-resident-Computer software manufacturer/supplier for
resale/use of computer software through distribution agreements-Payment did
not amount to royalty for use of copyright in computer software-Not taxable in
India-Not liable to deduct tax at source –No substantial question of law-DTAA-
India-Finland. [S. 9(1)(vii), 195, Art. 12]
Dismissing the appeal of the Revenue the Court held that payments were made by
assessee-company to non-resident-company which was computer software
manufacturer/supplier for resale/use of computer software through distribution
agreements, said payment did not amount to royalty for use of copyright in computer
software, and same did not give rise to any income taxable in India. No substantial
question of law. Followed CIT (LTU) 2024) 164 taxmann. com 10 /299 Taxman 488
(Bom)(HC) (AY. 2008-09, 2009-10)
CIT (LTU) v. Reliance Industries Ltd (2024) 300 Taxman 398 (Bom)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Provision of

connectivity solutions-Services to customers of Indian companies outside
India-Consideration received on basis of agreements from telecommunication
operators for Bandwidth and inter-connectivity usage of their customers-
Provisions of double taxation avoidance agreement override statutory
provisions and amendments thereto-Receipts not assessable as royalty in
India-No alienation of copyrighted articles, patents, trademarks, designs,
models, secret formulae or processes, property or information-Mere advantage
or benefit derived from service provided cannot be countenanced to fall within
meaning of expressions use or right to use-Receipts under agreements for
provision of bandwidth not royalty-Use or right to use-DTAA-India-Singapore.
[S. 90(2),260A, Art. 3(2), 12(3)]
Dismissing the appeal of the Revenue, Court held that consideration received on basis
of agreements from telecommunication operators for Bandwidth and inter-connectivity
usage of their customers. Provisions of double taxation avoidance agreement override
statutory provisions and amendments thereto. Receipts not assessable as royalty in
India. No alienation of copyrighted articles, patents, trademarks, designs, models,
secret formulae or processes, property or information. Mere advantage or benefit
derived from service provided cannot be countenanced to fall within meaning of
expressions use or right to use. Receipts under agreements for provision of bandwidth
not royalty. That even if Explanations 2 and 6 to section 9 applied, the position would
remain unaltered since there was no transfer or conferment of a right in respect of a
40
patent, invention or process. Customers and those availing of the services provided by
the assessee were not accorded a right over the technology possessed or infrastructure
by it. The underlying technology and infrastructure remained under the direct and
exclusive control of the assessee and the parties availing of the assessee’s services were
not provided a corresponding general or effective control over any intellectual property
or equipment. The agreements merely enabled them to avail of the services offered by
the assessee. A person who was provided mobile communication services or access to
the internet did not stand vested with a right over a patent, invention or process. The
consideration that the service recipient paid also could not be recognised as being
intended to acquire a right in respect of a patent, invention, process or equipment. The
word “process” being liable to be construed ejusdem generis was lent added credence
by clause (iii) employing the expression “or similar property” which followed. It was
intended to extend to a host of intellectual properties. Neither the concept of process
nor equipment royalty were attracted and the considerations for the transactions in
question were not taxable under article 12 of the Double Taxation Avoidance Agreement.
(AY. 2011-12, 2012-13, 2014-15 to 2019-20)
CIT (IT) v. Telstra Singapore Pte Ltd. (2024)467 ITR 302/ 165 taxmann. com
85 / 340 CTR 265/ 242 DTR 1 (Delhi)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Domain name-

Amount received for providing domain name registration services-Cannot be
assessed as royalty-Appeal of assessee is allowed-DTAA-India-USA. [Art.
12(3)(a)]
Assessee provides web hosting services, the registration and transfer of generic top-
level domains, such as. com,. net, org. and info-Besides this, the assessee also provides
the same service for country code top-level domains, which includes a mark,
distinguishes the goods and services of one person from those of others. Agreement in
no uncertain terms, establishes that the assessee has given up exclusive ownership or
use of data elements for all registered names submitted by it to the registry database
or sponsored by it. Agreement clearly establishes that the assessee who acts as a
registrar and, in that capacity, provides domain registration services to its customers
does not have any proprietorship rights in the domain name. Therefore, the submission
advanced on behalf of the assessee, i. e., that since it is not the domain name's owner,
it cannot confer the right to use or transfer the right to use the domain name to another
person/entity, is accepted ance. Therefore, the fee received by the assessee for
registration of domain names of third parties, i. e., its customers, cannot be treated as
royalty. Appeal of assessee is allowed. (AY. 2013-14 to 2015-16)
Godaddy. Com LLC v. ACIT [2023] 157 taxmann. com 256 /(2024) 337 CTR 321
(Delhi)(HC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty- Income-Tax-
Transfer of Copyright and right to copyrighted article-Customer relationship
management services by resident of Singapore-Fees received not royalty-Not
taxable in India [DTAA-India-Singapore [Art. 12(4)(b)]
Dismissing the appeal of the Revenue the Court held that since the copyright in the
application was never transferred nor vested in a subscriber, the fees were not
assessable under section 9 of the Act. Court also held that article 12(4)(b) of the Double
Taxation Avoidance Agreement between Singapore and India would have been applicable
provided the Department had been able to establish that the assessee had provided
technical knowledge, experience, skill, know-how or processes enabling the subscriber
41
acquiring the services to apply the technology contained therein. The explanation of the
assessee, which had not been refuted even before the High Court was that the customer
was merely accorded access to the application and it was the subscriber which thereafter
inputs the requisite data and took advantage of the analytical attributes of the software.
This would clearly not fall within the ambit of article 12(4)(b) of the Agreement. (AY.
2011-12 to 2017-18)
CIT (IT) v. Salesforce. Com Singapore Pte. Ltd. (2024)465 ITR 257 (Delhi)(HC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Transferee
authorised to use licensed software-No transfer of Copyright-Amount received
is not royalty-DTAA-India-USA. [S. 90(2) Art. 12]
Dismissing the appeals of the Revenue the Court held that the Tribunal was right in
holding that payments for licensing of software products of the assessee in the territory
of India by it were not taxable in India as royalty under section 9(1)(vi) read with article
12 of the Double Taxation Avoidance Agreement. (AY. 1997-98, 1999-2000)
CIT (IT) v. Microsoft Corporation (2022) 445 ITR 6 / 288 Taxman 32
(Delhi)(HC)
Editorial: SLP of Revenue dismissed, CIT (IT) v. Microsoft Corporation (Ms Corp)
(2023)453 ITR 746 (SC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for
technical services-Consideration received by a company incorporated in Israel,
for sale of software-Not royalty-No transfer of copyright in sale of off shelf
software-Not taxable in India-DTAA-India-Israel. [S. 9(1)(vii) Art. 12]
Dismissing the appeal of the Revenue the Court held that consideration received by
assessee, a company incorporated and based in Israel, for sale of software to Indian
company was not royalty since there was no transfer or use of copyright in sale of 'off
shelf' software that could come within ambit of royalty and, hence, it was not taxable in
India. (AY. 2011-12)
CIT(IT) v. Cognyte Technologies Israel Ltd (2024) 297 Taxman 120
(Delhi)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for

included services-Reviewing risk factor in particular project-Cannot be deemed
to accrue or arise in India-DTAA-India-USA. [S. 9(1)(vii), Art. 12]
Dismissing the appeal of the Revenue the Court held that the services rendered by the
assessee were project specific and terminated with submission of bid by ABB India after
making necessary changes or corrections in the bid based on the evaluation report. If
the agreement permitted the assessee to make available the results for guidance to
other entities in the group, that could not be attributed as services “made available”
which could be used in perpetuity. No income accrued or arose to the assessee in India.
Appeal of Revenue is dismissed. (AY. 2009-10)
CIT (I). v ABB INC. [2023] 152 taxmann. com 101/(2024)461 ITR
297 (Karn)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India -Royalty - Computer

software-Sale of conditional access systems and middleware products to
Indian customers -Not taxable as royalty- DTAA -India– Switzerland. [Art.
12(3)]
Dismissing the appeal of the Revenue the Court held that the Tribunal was justified in
holding that the income received from supply of conditional access systems and
42
middleware products to Indian customers did not fall under “royalty” as defined under
section 9(1)(vi) of the Income-tax Act, 1961, and article 12(3) of the Double Taxation
Avoidance Agreement between India and Switzerland. (AY. 2017 -18)
CIT (IT) v. Nagravision S. A. (2023) 157 taxmann. com 457/ (2024) 461 ITR
143 (Delhi)(HC).
Editorial : SLP of Revenue is dismissed, CIT (IT) v. Nagravision S. A. (2024)461 ITR
146/ 297 Taxman 65 (SC)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for
technical services-Business profits not taxable in India-DTAA-India-Malaysia.
[S. 9(1)(vii), 90(2) art. 5, 7, Copyright Act, 1957, S. 14(a), 14(b)]
Held that since the assessee had no permanent establishment in India, income earned
by it as business profits in India would not be taxable in India by virtue of the provisions
of article 7 of the Double Taxation Avoidance Agreement between India and Malaysia
according to which a tax resident of Malaysia would be taxable in India to the extent of
the profits attributable to the permanent establishment in India only if it carried on
business through a permanent establishment in India. The enterprises would be taxable
only to the extent article 5 of the Double Taxation Avoidance Agreement defined the
permanent establishment as inter alia a place of management, a branch, an office, a
factory, a warehouse and a workshop. (AY. 1999-2000)
CIT (IT) v. Colgate Palmolive Marketing Sdn Bhd(2023) 152 taxmann. com
124/ (2024)460 ITR 284 (Bom)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Payment for

supply of software-The payments received by the assessee is for the supply of
software do not fall within the scope of art. 12(3) of the India-China DTAA. In
the absence of PE the income is not taxable in India. DTAA-India-China. [Art.
12(3)]
Assessee has granted a non transferable, non-exclusive, non-assignable license to
incorporate the software into the vehicles manufactured/sold by MG to the end
customers. No rights have been provided to make copies of software products or to
modify, merge or combine with other software. No right to change the object code from
source code and make any derivative products from that have been provided. Technical
documentation for the software remained the property of the assessee. All intellectual
property rights in the licensed products belong to the assessee and its licensors only.
Assessee has not transferred the copyright/right to use the copyright of the software but
merely the copyrighted software. The payments received by the assessee is for the
supply of software do not fall within the scope of art. 12(3) of the India-China DTAA. In
the absence of PE the income is not taxable in India. (AY. 2020-21)
SAIC Motor Overseas Intelligent Mobility Technology Co. Ltd. v. ACIT (IT)
(2024) 229 TTJ 801 / 239 DTR 42 / 159 taxmann. com 779 (Delhi)(Trib)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Supply of
telecommunication hardware with software-Receipt is not taxable as royalty-
Not liable to pay interest u/s234B-DTAA-India-USA [S. 90,195, 234B, Art. 7,
12]
Held that the assessee supplied telecommunication hardware along with software and
the software embedded in the hardware was provided only for the purpose of operating
the telecommunication equipments and thus, the receipts. are not taxable as royalty
income, either under the domestic law or India USA DTAA. Interest under section 234B
cannot be charged as the assessee being non-resident company is not liable to pay
43
advance tax since the payer in under obligation to withhold tax under section 195 of the
Act. (AY. 2004-05, 2005-06)
DIT v. Ut Starcom Inc. (2023) 155 taxmann. com 117 /37 NYPTTJ 923 (2024)
228 TTJ 479 / 236 DTR 339 (Delhi) (Trib)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Selling

advertising in, and distribution of, television channels in India through Indian
company-No transfer of copyright, title or ownership interest to Indian
company-Receipts taxable as business income and not royalty-DTAA-India-
USA. [S. 9(1)(i), Art 12]
Following the order of the earlier year the Tribunal held that there was no transfer of
copyright, title or ownership interest from the assessee to the Indian company, that
broadcast reproduction right was distinct and separate from copyright, and that,
therefore, the distribution revenue received by the assessee from W towards the grant
of distribution rights of its channels constituted business income, not royalty. The
additions made by the Assessing Officer was deleted. (AY. 2020-21, 2021-22)
Turner Broadcasting System Asia Pacific Inc., USA v. Dy. CIT (2024) 115 ITR
21 (SN) (Delhi)(Trib)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty Deduction at

source-Non-resident--Sponsorship agreement-Payment for right to use and
display event marks-Having non-exclusive right to use footage relating to
events or matches which recipients owned-Not royalty-Allowed refund of
excess tax-DTAA-India-Singapore. [S. 195, Art. 7(1), 12(3)]
The assessee was appointed official sponsor of International Cricket Committee events,
and entered a sponsorship agreement with GCC and WSN. The assessee sought
authorisation for remittances to GCC without tax deduction at source, asserting that the
payment to GCC was not taxable in India in terms of article 7(1) of the Double Taxation
Avoidance Agreement between India and Singapore in the absence of a permanent
establishment. The Assessing Officer rejected this and deemed the amounts to be in the
nature of “royalty” and directed deduction of tax at source at 24 per cent. and education
cess at 2 per cent. The Commissioner (Appeals) granted part relief to the assessee
holding that 50 per cent. of the payment was for usage of trademark, trade name, and
copyright in the nature of “royalty” and taxable under article 12. On appeal claiming
refund of excess tax paid in respect of remittances made to GCC, The Tribunal held that
that the assessee had made payment primarily for the right to use and display event
marks, etc. The other right to use official status, advertising and promotional rights
before and at each event, and right to tickets and corporate hospitality were ancillary
rights which the assessee had been allowed to exploit. The assessee had the non-
exclusive right to use footage relates to the events or matches which IDI and GCC
owned. That the payments made by the assessee to GCC were not in the nature of
royalty as defined under section 9(1)(vi) of the Income-tax Act, 1961 or article 12(3) of
the DTAA. That the State could not charge tax more than what was due from its
subjects. If any tax had been paid by the assessee to the Government exchequer in the
form of tax deducted at source on the payment made in pursuance to the sponsorship
agreement, the assessee may claim refund thereof, in accordance with law.
Indian Oil Corporation Ltd. v. Dy. DIT (IT) (2024)113 ITR 403 (Mum)(Trib)

44
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty- Sale of online
advertisement space to GIPL, India and to direct advertisers-Payment received
from GIPL is not in nature of royalty or FTS-Not liable to tax in India-DTAA-
India-Ireland. [S. 9(1)(vii), Art. 12]
Assessee, Google Ireland, an Ireland based company, which is engaged in business of
sale of online advertisement space to GIPL and to direct advertisers. Assessing Officer
held that assessee had given marketing and distribution rights of Ad words program to
GIPL and income received from sale of online advertisement space was in nature of
royalty. He, thus, issued reopening notice on ground that assessee had not offered
receipts for tax and income had escaped assessment. CIT(A) deleted the addition. On
appeal the Tribunal in assessee's own case for assessment year 2007-08 held that
payment made by GIPL to assessee is not in nature of royalty or FTS and, consequently,
it could not be brought to tax in hands of assessee. Order of the CIT(A) is affirmed. (AY.
2008-09)
DCIT v. Google Ireland Ltd. (2024) 209 ITD 461 (Bang) (Trib.)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Sub-Licence of
designated rights-Not royalty-Addition is deleted-Deduction of tax at source-
Direction is given to Assessing Officer to verify and allow correct credit of
taxes deducted at source. [S. 9(1)(i), Form 26AS.]
Held that sub-licence designated rights is not royalty. Tribunal also directed the AO to
allow correct credit for the taxes deducted at source. (AY. 2014-15)
ESS v. Asst. CIT (IT) (2024)112 ITR 326 (Delhi)(Trib)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Payments
made for hiring dredgers on a time charter basis qualify as royalty for use of
equipment-liable to deduct tax at source. [S. 195]
Hheld that the payments made by the Assessee to the foreign companies for hiring
dredgers on a time charter basis qualify as royalty under Section 9(1)(vi) of the Income-
tax Act. That the Assessee had exclusive control and possession of the dredgers, and
the payments were made for the use of equipment, thus qualifying to be taxed as
Royalty. Liable to deduct tax at source. (AY 2003 to 2010-11)
Jaisu Shipping Co. v. ADIT (2024) 111 ITR 601/160 taxmann. com 128
(Rajkot)(Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty- Subscription

fees received by the assessee from its customers for providing access to
databases and journals were not royalty-DTAA-India-USA [Art. 12(3)
Held that the subscription fees received by the assessee from its customers for providing
access to databases and journals were not royalty as customers did not acquire
copyright, and therefore, such fees were not liable to be taxed in India. (AY. 2021-22)
American Chemical Society v. Dy. CIT (IT) (2024) 111 ITR 38 (SN) /161
taxmann. com 354 (Mum)(Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Licensed

software-Software packages like office 365, etc. -Amount paid to any use or
right to use any copy right-Merely because tax was deducted at source u/s. 195
would not make payment liable to be taxed as royalty. [S. 9(1)(vi), Expln
2(iva), 195]
The assessee, a Danish Company, had entered into a global agreement with Microsoft
for procuring various shrink-wrapped software user licenses such as Microsoft Visual
45
Studios, dynamic 365, remote Desktop, office 365, etc., for entities within the Saxo
group. The assessee received payments against the above licenses from its associated
enterprise, M/s. Saxo Group India P. Ltd. (SGIPL) on which tax was withheld under
section 195 of the Act. The assessee claimed that receipts from, its associated
enterprise, M/s. Saxo Group India P. Ltd., was exempt which the Revenue treated as
taxable as Royalty u/s. 9(1)(vi) of the Act because such receipt was for allowing use of
its information technology infrastructure which consists of various third-party software,
owned/leased/supported platforms including hardware systems. On appeal to the
Tribunal, after going through the documents produced and agreements, it held that the
amount cross charged by the assessee did not pertain to any use or right to use of any
copyright as neither the assessee nor M/s. Saxo Group India P. Ltd., could sub-licence,
transfer, reverse engineer, modify or reproduce the software/user licence. M/s. Saxo
Group India P. Ltd., acknowledged that the Microsoft Software had been granted to the
assessee by Microsoft Denmark ApS under an object code-only, non-exclusive, non-
sublicensable, non-transferable, revocable licence to access and use the object code
version of the proprietary software, solely for the assessee and its group/associate
companies' internal business purposes. Therefore, it held that mere fact that tax has
been deducted does not automatically make the receipt taxable as royalty. (AY. 2020-
21)
Saxo Bank A/S v. Asst. CIT (IT) (2024) 112 ITR 8 (Delhi)(Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty- Offshore sales

of books/journals or providing access to online journals/online library-Not
royalty-Services of providing access to online database/journals did not fall
under FIS as services did not satisfy clause make available as required for
provisions of article 12 of DTAA-India-USA [S. 9(1)(vii), Art. 12]
Assessee, a US based company, was engaged in business of providing access to online
journals/online library. Assessee entered into agreements from outside of India with
customers in India to provide access to online journals/online library available at its
online database maintained outside of India and earned revenue. Assessee claimed that
said receipts from Indian customers were not chargeable to tax as Royalty/FTS/FIS
under provisions of Act, 1961 read with India-US DTAA-DRP affirmed the order of the
AO. On appeal the Tribunal held that since assessee sold compiled, indexed or curated
articles obtained from other authors as copyrighted article/product, for easy access to
customers and limited rights to access online journals granted by assessee to Indian
customers did not amount to granting of any right in copyright in any manner
whatsoever, receipts from Indian customers did not constitute royalties under DTAA.
Accordingly receipts from Indian customers for offshore sales of books/journals or
providing access to online journals/online library did not qualify as royalties under Act
as well as under Treaty. Tribunal also held that services of providing access to online
database/journals did not fall under FIS as services did not satisfy clause 'make
available' as required for provisions of article 12 of DTAA. (AY. 2020-21)
John Wiley and Sons Inc. v. DCIT, IT (2024) 208 ITD 655/114 ITR 52(SN)
(Delhi) (Trib.)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Business of
providing digital transmission of data-Bandwidth charges received from Indian
customers-Not taxable as royalty-DTAA-India-Singapore. [Art. 12(3)]
Assessee, a non-resident corporate entity, which is engaged in business of providing
digital transmission of data through International Private Leased Circuits or Multiprotocol
46
Label Switching to facilitate high speed data connectivity, Bandwidth charges received
from Indian Customers were not taxable as royalty income either under section 9(1)(vi)
or under Article 12(3). (AY. 2021-22)
Telstra Singapore Pte. Ltd. v. DCIT (2024) 207 ITD 73 (Delhi) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for

technical services-Receipts from reservation fee, marketing fee and loyalty
programme-Cannot be assessed as royalty income-DTAA-India-Singapore [S.
9(1)(vii), Art. 12]
Assessee, a Singapore based company, had entered into franchise agreement with
Indian companies to sub-license brand names to third party hotels in India. Assessee
offered amounts received towards franchise, license fee etc. as royalty income. However,
assessee did not offer receipts from reservation services, marketing services and loyalty
programme to tax in India pleading that they were neither in nature of royalty nor fees
for technical services. Assessing Officer held that amount received for services rendered
in connection with use or right to use any trade mark fell within scope of royalty and,
thus, treated said receipts as royalty/fee for technical services under section 9 and under
article 12 of India-Singapore DTAA. DRP affirmed the order of the AO. On appeal the
Tribunal held that since in assessee's own case for earlier assessment year 2015-16, on
similar facts, it was held that there was no transfer of use or right to use any industrial
or commercial or scientific equipments and, thus, amount in dispute would not be qualify
ied as royalty. Addition was deleted. (AY. 2020-21, 2021-22)
AAPC Singapore Pte. Ltd. v. ACIT (2024) 207 ITD 774 (Delhi) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fee for

technical services-Management service-Support services-Not royalty-DTAA-
India-Netherland. [S. 9(1)(vii), Art. 12 (4)]
Assessee, Netherlands based dredging contractor, filed its return of income declaring a
business loss. VOIPL a subsidiary of assessee in India, had entered into a service
agreement with assessee to avail ongoing assistance and support in field of information
technology, operations, quality, health & safety estimating and engineering, marketing,
administration, personnel, etc.. For rendering above services, assessee had recovered
a certain sum from VOIPL, without any mark-up. Assessing Officer had considered said
payments to be for use of information concerning industrial, commercial or scientific
experience in India and had, accordingly, held same to be taxable as royalty in India.
DRP approved the draft assessment order. On appeal the Tribunal held that since for
rendering of these services, there was no element of imparting of any know-how or
transfer of any knowledge, skill or experience, none of services provided by assessee in
terms of 'service agreement' fell within scope and ambit of 'royalty' as defined in article
12(4). Since management services fees charged was on allocation of cost which was
without mark-up, same being in nature of reimbursements did not constitute royalty as
per India-Netherlands DTAA. (AY. 2020-21)
Van Oord Dredging and Marine Contractors BV. v. ACIT (2024) 206 ITD 632
(Mum) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for

technical services-Educational school-Lump sum fees-Discounts –Deduction of
tax at source-Matter is remanded to the file of the Assessing Officer-DTAA-
India-Switzerland-UK. [S. 9(1)(vii), 195, Art. 12, 13]
47
 Assessee, a foundation, which is engaged in running of an educational school. It had
made annual payments under various heads like evaluation fees, authorization fees
workshop/training charges, fees for enrolment/registration fees etc. to various foreign
educational institutions in UK and Switzerland. Assessing Officer held that foreign
educational institutions were providing services related to use and application of
trademarks and hence such payments were taxable in India as royalty as per provisions
of article 13 of India-UK DTAA and article 12 of India-Swiss Confederation DTAA. CIT(A)
up held the order of the AO. On appeal the Tribunal held that the assesee had not
offered explanation regarding basis for raising invoice on assessee and also on what
basis discount was offered to assessee by overseas educational institutions even after
affording several opportunities to assessee both during course of assessment as well as
appellate proceedings. Tribunal held that unless and until nature and basis of raising
invoices by overseas educational institutions was clear to tax authorities, it was not
possible to come to conclusion that no payments were made for use of trade name/brand
of national educational institutions and payment was only for authorizing assessee to act
as a mediator between students and educational institutions outside of India. Accordingly
the matter is remanded to Assessing Officer to understand basis on which lump sum
fee was charged by overseas entities from assessee and also basis for allowing/affording
discount to assessee. (AY. 2017-18, 2018-19)
International Education & Research Foundation. v. DCIT (IT) 2024] 206 ITD
96 (Ahd) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Fees for

technical services-Sale of software-Wrongly offered as income in the return-
Return was not revised-Not chargeable to tax-Matter remanded to the file of
Assessing Officer to verify the facts-DTAA-India-UK [S. 9(1)(vii), 139(5), Art.
13]
Assessee, a UK based company, which is engaged in providing software development
services and sales & marketing support services to its group entities. It had obtained
certain receipts from various customers in India which was sale proceeds of off-the shelf
software and offered same to tax in India as Royalty Income. During assessment
proceedings, assessee claimed that receipts from sale of software had been wrongly
offered to tax as income from royalty. The Assessing Officer assessed same as Royalty
Income. CIT(A) affirmed the order of the Assessing Officer. On appeal the Tribunal held
that the assessee could not be prevented from raising a claim that receipts from sale of
software were not chargeable to Indian Taxation merely because such income was
wrongly offered in ROI and which was not revised. However, since nature and character
of sale proceeds qua underlying evidences did not appear to have been verified by
Assessing Officer at any stage of proceedings, matter was to be remitted back to file of
Assessing Officer for fresh determination. (AY. 2020-21)
AppDynamics International Ltd. v. ACIT (2024) 205 ITD 496 (Delhi) (Trib.)
S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Taxation of
receipts from the sale of software to Indian entities under the India-
agreements merely granted the right to use software without transferring
copyright ownership-Held, not liable to tax-DTAA-India-Singapore. [Art. 12(3)]
The Assessee is a Singapore-based entity which received income from the sale of
software to Indian entities. The AO treated these receipts as taxable u/s 9(1)(vi) of the
Act and Article 12(3) of the India-Singapore DTAA. The Assessee challenged the AO’s
order and submitted that the agreements merely granted the right to use software
48
without transferring copyright ownership. It emphasized that the software was licensed
to Indian entities for specific business purposes, and modifications were limited to
operational needs. The TRIBUNAL scrutinized the clauses of the agreements between
the Assessee and Indian entities and noted the discrepancies in the AO’s interpretation
of the DTA, emphasizing that the contractual terms aligned with the judgment in
Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT CA Nos. 8735-8736 of 2018.
After considering the arguments and contractual clauses, the Tribunal held that the
receipts from software sales to Indian entities were not taxable under the India-
Singapore DTAA. (AY. 2020-21)
Finastra International Financial Systems PTE Ltd. v. Asst. CIT(IT) [2024] 109
ITR 36 (SN) /205 ITD 338 (Delhi) (Trib)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical

services-Non-Resident-Marketing services-No Permanent Establishment in
India-Not taxable-Not liable to deduct tax at source-DTAA-India-USA-SLP of
Revenue is dismissed. [S. 201, art. 12(4), Art. 136]
Dismissing the appeal of the Revenue the Court held that the assessee had made
payments to the U. S. company. The Tribunal had held that the scope of the work was
to generate customer leads using customer database, market research, analysis, and
online research data and rightly held that the service provider had not made available
any technical knowledge, experience, know-how, process or develop and transfer
technical plan or technical design. Accordingly the Tribunal was right in holding that the
payments made by the assessee were not taxable in India. Tax was not deductible at
source on such payment. SLP of Revenue is dismissed.
CIT (IT) v. Ad2pro Media Solutions (P.) Ltd (2024) 297 Taxman 141 (SC)
Editorial : CIT (IT). v. Ad2pro Media Solutions Pvt. Ltd. (2023)455 ITR 648 /148
taxmann. com 226(Karn)(HC), SLP dismissed, CIT v. Ad2pro Media Solutions (P.) Ltd.
(2023) 157 taxmann. com 205/ 296 Taxman 569 (SC)/ CIT v. Ad2pro Media Solutions
(P.) Ltd. (2024) 297 Taxman 226 (SC)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Software-Sub-contracted certain overseas subsidiary-Not liable to
deduct tax at source-Special leave petition filed against said order of High Court
is dismissed was to be dismissed as there is gross delay of 296 days and also
on merits. [S. 195, 201(1), 201(IA), Art. 136]
Assessee is an Indian software development company. Assessee sub-contracted its
onsite overseas work to its subsidiary in China and made payment of sub-contracting
charges to said subsidiary. Assessing Officer held that payments made to subsidiary in
China was liable for tax deduction under section 9(1)(vii) as fees for technical services
(FTS) in view of retrospective amendment to section 9 by Finance Act, 2010 and
substitution of Explanation to said section. High court held that substitution had taken
place in Finance Act, 2010 which was effective from 2011-12, thus, same would not
apply to assessee during relevant years. Accordingly the assessee is not liable to deduct
tax at source on payments made by it to its subsidiary in China. Special leave petition
filed against said order of High Court is dismissed was to be dismissed as there is gross
delay of 296 days and also on merits. (AY. 2009-10, 2010-11)
CIT(IT) v. Infosys Ltd. (2024) 300 Taxman 177 (SC)
Editorial : CIT v. Infosys Ltd (2023) 152 taxmann. com 530 (Karn)(HC)

49
S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical
services-Non-Resident-Marketing services-No Permanent Establishment in
India-Not taxable-Not liable to deduct tax at source-DTAA-India-USA- SLP of
Revenue is dismissed. [S. 201, Art. 12(4), Art. 136]
Dismissing the appeal of the Revenue the Court held that the assessee had made
payments to the U. S. company. The Tribunal had held that the scope of the work was
to generate customer leads using customer database, market research, analysis, and
online research data and rightly held that the service provider had not made available
any technical knowledge, experience, know-how, process or develop and transfer
technical plan or technical design. Accordingly the Tribunal was right in holding that the
payments made by the assessee were not taxable in India. Tax was not deductible at
source on such payment. SLP of revenue is dismissed.
CIT v. Ad2pro Media Solutions (P.) Ltd. (2024) 297 Taxman 226 (SC)
Editorial : CIT (IT). v. Ad2pro Media Solutions Pvt. Ltd. (2023)455 ITR 648 /148
taxmann. com 226(Karn)(HC)/ SLP dismissed, CIT v. Ad2pro Media Solutions (P.) Ltd.
(2023) 157 taxmann. com 205/ 296 Taxman 569 (SC)

S. 9(1)(vii): Income deemed to accrue or arise in India-Fees for technical

services Deduction of tax at source-Payment to non-resident-Foreign company
had not rendered technical services to Indian company-Amount remitted not
taxable-Not liable to deduct tax at source-SLP of Revenue is dismissed-DTAA-
India-United States of America. [S. 195, 201(1), 201(IA), Art. 12(4), Art. 32]
Dismissing the SLP of the Revenue the wherein the High Court held that the U. S.
Company did not have any permanent establishment in India. The assessee had made
payments to the U. S. Company. The scope of the work was to generate customer leads
using customer database, market research, analysis, and online research data and
rightly held that the service provider had not made available any technical knowledge,
experience, know-how, process, or development and transfer technical plan or technical
design. The services were utilized in the U. S. A., and the payments made by the
assessee were not taxable in India. Hence, Tax was not deductible at source on such
payment.
CIT v. Ad2pro Media Solutions (P.) Ltd. (2024) 296 Taxman 569/ 463 ITR 700
(SC)
Editorial : Refer, CIT v. Ad2pro Media Solutions (P.) Ltd (2023) 148 taxmann. com
226/ 455 ITR 648 (Karn)(HC)

S. 9(1)(vii): Income deemed to accrue or arise in India-Fees for technical

services-Business connection-Subscription fee-Access to data base pertaining
to legal and law related information-Business profits-No permanent
establishment in India-Not taxable in India-DTAA-India-USA. [S. 9(1)(1), Art.
5, 7, 12]
Assessee, a tax resident of USA, was engaged in business of maintaining online data
base (Lexis Nexis) pertaining to legal and law related information. It received
subscription fee for providing access to data base-Since assessee had no PE in India, it
filed return of income by treating subscription fee received for providing access to data
base as business income, not taxable in India as per provisions of India-US DTAA.
Assessing Officer, treated receipt of assessee as FIS on ground that same was in nature
of technical consultancy. Tribunal held that subscription fee received by assessee was
in nature of business profit which could not be brought to tax in India in absence of
50
Permanent Establishment (PE). On appeal the Court held that access to data base did
not constitute rendering of any technical or consultancy services and in any case did not
amount to technical knowledge, experience, skill, know-how or processes being made
available to subscriber neither there was any transfer of copyright. Order of Tribunal is
affirmed. (AY. 2018-19, 2019-20)
CIT (IT) v. Relx Inc (2024)470 ITR 611 /160 taxmann. com 109 (Delhi) (HC)
Editorial: Order in Relx Inc v. ACIT (2023) 103 ITR 54(SN) (Delhi)(Trib) is affirmed.
S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical
services-Software-Sub-contracted certain overseas subsidiary-Not liable to
deduct tax at source-No substantial question of law. [S. 195, 201(1), 201(IA),
260A]
Assessee is an Indian software development company. Assessee sub-contracted its
onsite overseas work to its subsidiary in China and made payment of sub-contracting
charges to said subsidiary. Assessing Officer held that payments made to subsidiary in
China was liable for tax deduction under section 9(1)(vii) as fees for technical services
(FTS) in view of retrospective amendment to section 9 by Finance Act, 2010 and
substitution of Explanation to said section. High court held that substitution had taken
place in Finance Act, 2010 which was effective from 2011-12, thus, same would not
apply to assessee during relevant years. Accordingly the assessee is not liable to deduct
tax at source on payments made by it to its subsidiary in China. No substantial question
of law. (AY. 2009-10, 2010-11)
CIT v. Infosys Ltd (2023) 152 taxmann. com 530 (Karn)(HC)
Editorial : SLP of Revenue is dismissed as there is gross delay of 296 days and also on
merits, CIT(IT) v. Infosys Ltd. (2024) 300 Taxman 177 (SC)
S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical
services-Service permanent establishment-Permanent Establishment-Business
income-Fees for technical services-Income attributable to UK office not
qualified for taxation under Article 13 of Double Taxation Avoidance
Agreement since “Make Available” test not satisfied-Services rendered to
Board of Control for cricket in India under agreement-No transfer of skill,
technical knowledge, expertise, process-Mere usage or utilisation of research
material, technical or consultative material in aid of business not sufficient to
attract Article 13 of Double Taxation Avoidance Agreement-Distinction
between utilisation and transmission of technical services-Geographical shift
meant that services rendered by assessee utilised outside India and integral to
earning income from sources outside India DTAA-India-United Kingdom. [S.
9(1)(i), 9(1) (vii) (b), Art. 5(2)(k), 7, 13]
On writ petitions from the order of the Tribunal holding, that the business income of the
assessee was divisible under the Double Taxation Avoidance Agreement between India
and the United Kingdom [1994] 206 ITR (St.) 235, though it arose out of a single
contract, in view of articles 7 and 13 of the Double Taxation Avoidance Agreement, (b)
that the services provided by the assessee to the Board of Control for Cricket in India
under the service agreement qualified as fees for technical services in terms of article
13(4)(c) of the Double Taxation Avoidance Agreement, and in the alternative (c) whether
the income determined as fees for technical services could be deemed to have accrued
or arisen in India in terms of section 9(1)(vii)(b) of the Income-tax Act, 1961, especially
when the services provided by the assessee during two assessment years, were utilized
outside India by the Board of Control for Cricket in India, held, dismissing the petition,
the Court held that the Tribunal founded its decision that the business income of the
51
assessee was divisible under the Double Taxation Avoidance Agreement, having regard
to articles 7 and 13 therein, on an admitted dichotomy between the functions performed
and services rendered by IMG (UK) as distinguished from those discharged by its service
permanent establishment. The Tribunal, while considering the functions performed by
IMG UK, had linked them to the issue of their being “effectively connected” which was
relevant for the purposes of article 13. The assessee alternated between articles 7 and
13 of the Double Taxation Avoidance Agreement. The Department while evaluating the
attribution of income to the service permanent establishment question was necessarily
constrained to bear in consideration the nature of services rendered by IMG UK as
distinguished from those discharged by the service permanent establishment. The
assessee had not questioned the fact that a part of the advisory work was undertaken
by its UK office without the involvement of the service permanent establishment. That
in view of the existence of a service permanent establishment in the assessment years
2010-11 to 2018-19, the income attributable to that entity was correctly offered to tax
under article 7 of the Double Taxation Avoidance Agreement since the Department was
concerned with revenue earned from the rendering of services in India and which
services, concededly, fell outside the ambit of article 13 of the Double Taxation
Avoidance Agreement. In so far as the revenue attributable to the UK office was
concerned, they did not qualify for taxation under article 13 of the Double Taxation
Avoidance Agreement, since the “make available” test was not fulfilled. There was no
justification to interfere with the findings and order of the Tribunal in this regard. That
the expression “fee for technical services” had been defined in article 13 of the Double
Taxation Avoidance Agreement as consideration received for the rendering of any
technical or consultancy services. In terms of paragraph (4) of article 13, the mere
rendition of technical or consultancy service would in itself be insufficient, since
paragraph (4)(c) stated an additional condition of the furnishing of such service,
ultimately leading to technical knowledge, experience, skill, know-how or processes
being made available. The mere rendition of technical or consultancy service would not
lead to revenue, income or profits being placed under the broad head of fees for technical
services unless the taxing authority additionally found that technical knowledge, skill,
know-how or processes were made available, i. e., the imperative of the “make
available” condition being met and the imperative of the knowledge, skill, know-how
being made available to the payer. That the mere usage or utilisation of technical or
consultative material in aid of business would not be sufficient to attract article 13 of the
Double Taxation Avoidance Agreement. Accepting the submission of the Department that
handing over of research or advisory work were sufficient for the purposes of article 13,
would render the “make available” condition comprised in para (4)(c) wholly redundant
and otiose since the mere rendering of service would have sufficed. The tax was not
dependent on the use of technology by the recipient. The “make available” prescription
made a conscious distinction between a mere service provision and the impartation of
lasting expertise. The offer of service or advice did not fundamentally alter the recipient’s
capabilities. These services, while potentially valuable, did not endow the recipient with
new skills or knowledge which could be independently deployed in the future. The kernel
of “make available” must therefore be recognised to be a transfer of technology or skills
rather than a temporary reliance on external support That the mere utilisation of the
service in connection with business would not meet the test of article 13. The contention
that the handing over of research material, processes relating to the league structure
and other services performed by the assessee enabled the Board of Control for Cricket
in India to proceed independently in the future was unsustainable, since the Department
52
had proceeded on the incorrect assumption that know-how relating to commercial rights
exploTribunalion or that pertaining to structuring, organising and management of a
sports league had been transferred. No provision of the memorandum of understanding
or the services agreement would warrant such an assumption being made or conclusion
drawn. Equally fallacious was the submission that by virtue of the services furnished by
the assessee, “experience in conducting and organizing a large-scale sports league” was
made available to the Board of Control for Cricket in India. That the assessee was
engaged by the Board of Control for Cricket in India principally in view of its expertise,
special abilities, experience and capabilities of conceptualising sporting leagues. The
assessee was tasked with creating the Indian Premier League based on the special
knowledge, skill and experience that it possessed in the curation of sporting leagues.
The various obligations that were placed upon the assessee established that all facets of
the Indian Premier League and the entire gamut of activities connected with the
proposed league were not only to be created by it, the assessee was also tasked with
managing and administering all commercial and media rights of the Board of Control for
Cricket in India. In terms of clause 4. 2 of the services agreement, the assessee was to
prepare and execute marketing strategies, management of future tendering processes,
craft the league handbook and discharge various other functions enumerated therein.
The enumeration of functions in clause 4. 2(a) was merely illustrative as that clause
used the expression “including, without limTribunalion”. Under clause 4. 2(r) the
assessee was under an obligation to provide the requisite manpower to carry out
activities connected with the league to ensure successful running of the league and the
matches which were to be held and establish a fully staffed office at its own cost. The
services agreement required the assessee to carry out research each year to ascertain
improvements warranted in various areas pertaining to the management and execution
of the league and the development of the Board of Control for Cricket in India’s brand
framework. The various functions which the assessee discharged was to be aided by
drawing upon its expertise and special knowledge in the creation and conduct of leagues
of the stature of the Indian Premier League. There was no discernible intent on the part
of Board of Control for Cricket in India to absorb or internalise the assessee’s unique
skills and knowledge in the curation of sporting leagues. No part of that knowledge or
skill stood transferred to the Board of Control for Cricket in India. Merely because
research material would have been shared with the Board of Control for Cricket in India
or the service rendered by it had been put to use and utilised could not lead to the
conclusion that the payer stood enabled or equipped with the special knowledge
underlying the technical and consultancy service which was extended. That the retention
to perform the services under the agreement for a period of ten years was yet another
indicator of the Board of Control for Cricket in India having not been enabled or made
available the special knowledge and skill possessed by the assessee. The contractual
arrangement contemplated a continued engagement and ongoing reliance on the
assessee’s expertise without any transfer of know-how or skills to the Board of Control
for Cricket in India.
That paragraph (6) of article 13 stipulated that where the fees for technical services
arose through a permanent establishment which existed and the right, property or
contract in respect of the same were effectively connected with such permanent
establishment, article 13 would cease to apply and the income would then be taxable in
accordance with article 7 or article 15 of the Double Taxation Avoidance Agreement.
That the service permanent establishment was not a separate legal entity which could
be called upon to satisfy the test of economic ownership. While Conventions do accord
53
an independent identity upon a permanent establishment, they do so for the purposes
of taxation alone. A permanent establishment, need not in all circumstances be a juridical
entity as is recognised in law. That though the Indian Premier League in the years 2009
(assessment year 2010-11) and 2014 (assessment year 2015-16) originally were to be
held in India, for exceptional reasons, were shifted and held in South Africa and the
United Arab Emirates, respectively. The services which were rendered by the assessee
in connection with those two events were utilized outside India and availed of for the
purposes of earning income from a source outside India. The geographical shift meant
that the services rendered by the assessee were utilized outside India and were integral
to earning income from sources outside India. The Tribunal had glossed over the
significance of this relocation, which had fundamentally altered the context in which the
assessee’s services were availed of and had erred in failing to appreciate the significance
of the event itself having shifted out of India and the services thus coming to be utilized
in South Africa and the United Arab Emirates and being indelibly connected to the
earning of income from a source outside India. The Explanation incorporated in
section 9 neither erases nor overrides the exception which continues to exist in
clause (vii). The exception forming part of clause (vii) existed on the statute book at the
time when the Finance Act, 2010 ([2010] 323 ITR (St.) 1) was introduced and
clause (vii) was not deleted or restructured. While the Explanation added to
section 9 with retrospective effect from June 1, 1976 did not declare that fees for
technical services earned by a non-resident would be deemed to accrue or arise in India
irrespective of whether it had a place of business or business connection therein or had
rendered services in India, the same would not result in fees for technical services paid
by a resident for services utilized in connection with a business outside India or for the
purposes of earning income from a source outside India liable to tax. The territorial
nexus must imbue the issue of taxability. That the Tribunal had erred in holding that
the advice and consultancy services rendered by the assessee enabled the Board of
Control for Cricket in India “to absorb and apply the information and advice” without
considering the distinction that must be acknowledged to exist between the mere
utilisation of technical or consultancy service in aid of business and the transfer,
transmission and enablement which must occur in order for the twin conditions of article
13 of the Double Taxation Avoidance Agreement being satisfied. Therefore, the
conclusions of the Tribunal on section 9(1)(vii)(b) could not be upheld. In so far as article
13(6) of the Double Taxation Avoidance Agreement and the issue of “effectively
connected” was concerned, in view of the findings on fees for technical services, the
Court desisted from expressing any final opinion and in view of the reservations
expressed, the Court clarified that this decision need not be construed as an affirmation
of the view in law as expressed by the Tribunal. (AY. 2010-11 to 2018-19)
International Management Group (UK) Ltd. v. CIT (IT) (2024)466 ITR 514/164
taxmann. com 225/ 340 CTR 745 (Delhi)(HC)

S. 9(1)(vii): Income deemed to accrue or arise in India-Fees for technical

services-Project-specific technical and consultancy services to an Indian
company-Did not satisfy the 'make available' clause, did not warrant tax under
Article 12(4)(b) of the DTAA between India and the US-DTAA-India-USA. [Art.
12(4)(b)]
Held that ABB USA provided project-specific technical and consultancy services to an
Indian company, that did not satisfy the 'make available' clause, did not warrant tax
under Article 12(4)(b) of the DTAA between India and the US. (AY. 2009-10)
54
CIT (IT) v. ABB Inc [2023] 152 taxmann. com 101 /[2024] 461 ITR 297
(Karn)(HC)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Global online learning platform-The receipts of the assessee do not
qualify as fees for included services under art. 12(4) of India-USA tax treaty-
DTAA-India-USA. [S. 144C(13), Art. 12(4)]
Held that merely because the assessee has a customized landing page, it does not mean
that the assessee provides technical services, that too, through human intervention.
Even assuming for argument's sake that the services provided by the assessee are of
technical nature, that by itself would not be enough to bring such receipts within the
purview of art. 12(4) of the DTAA, unless the make available condition is satisfied. The
receipts of the assessee do not qualify as fees for included services under art. 12(4) of
India-USA tax treaty. (AY. 2020-21, 2021-22)
Coursera Inc. v. ACIT (IT) (2024) 231 TTJ 726 / 242 DTR 41 (Delhi)(Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-User of software-Payment received cannot be taxable as fees for
technical services or royalty-DTAA-India-Netherland. [S. 9(1)(vi), 90, Art.
12(5)]
Held that payment received for user of software is neither fees for technical services
nor royalty. Not taxable in India. Appeal of Revenue is dismissed. (AY. 2013-14, 2015-
16 & 2016-17)
ACIT (IT) v. Juniper Networks International B. V (2023) 154 taxmann. com
563 / (2024) 227 TTJ 529 / (2024) 234 DTR 49 (Mum)(Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Interior design services-Payments received by the assessee from
RCITP are fees for technical services falling under cl. (4) of art. 12 of the
DTAA-India-Singapore. [S. 90, 144C(5), 144(13), Art. 12]
The Tribunal held that the payments received by the assessee from RCITP are fees for
technical services falling under cl. (4) of art. 12 of the DTAA, rightly taxed at 10 per
cent. (AY. 2016-17)

Gensler Singapore (P) Ltd. v. JCIT /(2023) 155 taxmann. com 207/ (2024) 227 TTJ
998 / 234 DTR 193 (Delhi)(Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Salary-Expatriate employees-Tax deducted at source-Reimbursed by
Indian subsidiary on cost-to-cost basis-Reimbursement is not taxable--Not
fees for technical services-Not liable for tax deduction at source-DTAA-India-
Japan. [S. 192, 195, Art. 12]
Held that no material or evidence had been brought on record by the Revenue to
substantiate its claim that the assessee rendered any managerial, consultancy or
technical services to the Indian associated enterprises through the expatriates in
furtherance of its business in India. The payment made by the Indian associated
enterprises was purely reimbursement of the expatriates’ salary costs, which the
55
assessee had cross-charged by raising debit notes on the Indian associated enterprises.
It could not be regarded as “fees for technical services” in the hands of the assessee as
it was taxable as salary in the hands of the expatriate employees, who worked under
the direct control and supervision of the Indian associated enterprises, and during the
entire period of secondment, the associated enterprise were the real and economic
employer of these expatriates. The expatriates had offered the entire salary income to
tax in their respective returns of income as supported by form 16. As a result, the
receipts were in the nature of employees’ salary reimbursement cost, not having any
element of income and not taxable in India as fees for technical services under
the Double Taxation Avoidance Agreement between India and Japan. Consequently, the
addition made on account of assessee’s cross-charge raised on its Indian associated
enterprises is deleted. (AY. 2017-18)
Advics Co. Ltd. v. ACIT (2024)113 ITR 147/ 232 TTJ 178 (Delhi) (Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Royalty-Non-Resident-Information technology and systems,
applications and products service agreement with Indian subsidiary-Receipt is
not fees for technical services and not taxable in India-DTAA-India-Portugal.
[S. 9(1)(vi),Art. 12(4)(a), 12(4)(b),13]
Held, that the services rendered under information technology and systems, applications
and products support service agreement were completely different in nature and had no
connection with the services rendered under the technical collaboration agreement.
While the services rendered under the service agreement were for day-to-day office
functioning and maintenance of the information technology infrastructure, the services
rendered under the technical collaboration agreement were purely and strictly in
connection with the drip irrigation system required for agricultural purposes. Therefore,
the services rendered under the services agreement could not be considered ancillary
and subsidiary to the services rendered under technical collaboration agreement.
Further, they did not relate to application or enjoyment of right to property or
information resulting in payment of royalty. Not taxable in India. (AY. 2014-15, 2015-
16)
Netafim Ltd. v. Dy. CIT (IT) (2024)113 ITR 548 (Delhi)(Trib)
S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical
services-Network fees from its Indian AE-Neither royalty nor fees for technical
services-Not taxable in India-DTAA-India-Netherlands. [S. 4,9(1)(vi), Art. 7,
12]

Assessee is engaged in business of logistics and freight forwarding across globe. During
relevant assessment year, assessee earned network fees from its Indian associate
enterprise (AE). Assessee did not offer said fees to tax on ground that it did not have
any permanent establishment (PE) in India and network fees were business income.
Assessing Officer held that network fees were in nature of fees for technical services
(FTS) as per explanation 2 to section 9(1)(vii) and is taxable in India. DRP affirmed the
order of the AO. On appeal the Tribunal held that Tribunal in assessee's own case for
earlier assessment years had held that nothing was brought on record to substantiate
that any technical know how was made available to Indian AE and thus, network fees
received by assessee from its Indian is deleted. (AY. 2021-22)

56
Maersk Logistics & Services International B. V. v. DCIT, IT (2024) 209 ITD 95
(Mum) (Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-commercial information is transferred to end user-Not taxable as fee
for included services-Installation and integration services-Not taxable as fees
for technical services-DTAA-India-USA[Art. 12(4)(b)]
Assessee paid software licensing fee to a US company. Assessing Officer held that
payment is in nature of fee for included services as per article 12(4)(b) of India-US
DTAA and section 9(1)(vii). DRP affirmed the order of the AO. On appeal the Tribunal
held that only commercial information was transferred to end user and not technical
knowledge as required under article 12(4)(b) to constitute fee for included services, said
payment could not be taxed as fee for included services. Tribunal also held that
installation and integration services provided by assessee to US company were merely
support services dealing with installation and integration and when primary services
themselves were not taxable as FTS, these ancillary services qua primary services could
not be taxed as FTS. (AY. 2021-22)
Mixpanel, Inc. v. ACIT (2024) 209 ITD 508 (Delhi) (Trib.)
S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical
services-Marketing services-Commission on sales-Subsidiary of SEPL India-
Performed pure sales function by connecting potential customers from US by
performing pre sales activity of introducing SEPL India-Not taxable in India-
DTAA-India-USA[Art. 12]
Assessee, a US based company is subsidiary of SEPL India. Assessee-company procured
local sales orders in US for its AE for products to be manufactured, executed by SEPL
India, and received payment from customers which was remitted to SEPL India. Assessee
received certain sum as commission on sales and marketing services. Assessing Officer
held that payments received by assessee from SEPL India were in nature of FTS under
section 9(1)(vii) and was chargeable to tax in India under article 12 with Indo-USA DTAA.
On appeal the Tribunal held that the assessee, performed pure sales function with
connecting potential customers from US by performing pre sales activity of introducing
SEPL India to potential customers and rest of activity was predominantly taken care by
SEPL India. The assessee did not render services resulting in provision of FTS or make
available technical knowledge to SEPL India. Accordingly commission on sales and
marketing services cannot be treated as FTS in hands of assessee in terms of section
9(1)(vii). (AY. 2013-14, 2014-15)
Steer America Inc. v. DCIT (IT) (2024) 208 ITD 262 /[2025] 121 ITR 431
(Bang) (Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Deduction of tax at source-Non-Resident-Software development
services rendered to overseas client-No transfer of specialised technical
knowledge-Not fees for technical services-Not liable for tax deduction at
source-DTAA-India-USA [S. 195, Art. 12]
Held that the fact that provision of services may require technical input by the person
providing the service did not mean that technical knowledge, skills, etc., were “made
available” to the person purchasing the service. Therefore, payment made by the
assessee to the non-resident service provider could not be brought under article 12 of

57
the Double Taxation Avoidance Agreement. (AY. 2010-11, 2012-13, 2013-14, 2016-17,
2017-18)
Dy. CIT (OSD) v. Aspire Systems India P. Ltd. (2024) 110 ITR 1 / 232 TTJ
387 (Chennai)(Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Providing hotel related services to hotels worldwide-Revenue is not in
nature of royalty or fees for technical services-No Permanent Establishment in
India-Receipt is not taxable as business income-DTAA-India-USA,[S. 9(1)(i),
9(1)(vii),, Art. 7, 12(4)]
Held, dismissing the appeal of the Revenue the Tribunal held that the included services
were ancillary or auxiliary in nature and being an integral part of the job undertaken by
the assessee, they were neither independent of, nor separable from, the job undertaken
by the assessee in relation to publicity, advertisement and sales promotion of the hotel
business worldwide, which were the main services rendered by the assessee to the
Indian company, keeping the use of trademark, trade name and other enumerated
services incidental to the main service, and that, thus, the payments received were
neither in the nature of royalty under section 9(1)(vi), Explanation 2 nor in the nature
of fees for technical services under section 9(1)(vii), Explanation 2 but in the nature of
business income not taxable in India owing to the absence of a permanent establishment
for the assessee in India. Order of CIT(A)) is affirmed. (AY. 2021-22)
ACIT v. Westin Hotel Management L. P. (2024) 111 ITR 69 (Delhi)(Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Supply of drawings and designs-Plant and equipment supplied from
outside India and sale transaction concluded outside India-Receipts cannot be
taxed in India-Amount not taxable in India-Receipts from supervisory services
for erection and Commissioning of equipment-Amount received falls within
definition of fees for technical services-DTAA-India-Switzerland, Switzerland.
[Art. 12(4)]
Held that the designs and drawings were made outside India in Switzerland and were
supplied to the contractee from Switzerland and the sale transaction was completed in
Switzerland and amounts were received in Switzerland. From the details of designs and
drawings as well as documentation submission, schedule of drawings and designs, it was
clear that the drawings and designs supplied by the assessee were specifically related to
the supply of plant and equipment for the JSW steel project. Though both the contracts,
one for supply of plant and equipment and the other for supply of drawings and designs
had been separately executed, they had been executed on the very same date. The
purchaser was vested with the right to terminate the contract unilaterally, inter alia, due
to the delay in delivery of the equipment in excess of 120 days for the reasons solely
attributable to the seller and if the seller failed to take necessary remedial action. Thus,
failure to supply plant and equipment within the stipulated time period could determine
the contract for supply of drawing and design and the purchaser could terminate the
contract in that eventuality. Therefore, the contract for supply of drawings and designs
was inextricably linked to the contract for supply of plant and equipment. When the
supply of plant and equipment had been treated as sale transaction completed outside
India, and hence, not taxable in India, the sale and supply of drawings and designs being
inextricably linked to sale and supply of plant and equipment had to be considered
58
cumulatively and as a part of sale and supply of plant and equipment. Therefore, the
amount received by the assessee from supply of drawings and designs was not taxable
in India as fees for technical services. Tribunal also held that the assessee had entered
into a contract for supply of electromagnetic stirrer. According to the assessee’s
admission, technical personnel were deputed to supervise the erection and
commissioning of the plant and equipment. Thus, in course of such supervisory activity,
the qualified technical personnel deputed by the assessee must have imparted technical
services for erection and commissioning of the plant and equipment. Therefore, the
amount received fell within the definition of fees for technical services, both under the
domestic law as well as under article 12(4) of the Double Taxation Avoidance Agreement
and it was immaterial whether the assessee had a permanent establishment in India or
not. Therefore, the amount having qualified as fees for technical services, had rightly
been brought to tax in the hands of the assessee. (AY. 2008-09)
SMS Concast AG v. DDIT (IT) (2024) 110 ITR 138 (Delhi)(Trib)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical

services-Reimbursement of expenses-Not fees for technical services –Living
allowance-No employer and employee relation ship-Agency commission-Not
liable to deduct tax at source-Article 12 of OECD Model Convention-Levy of
interest is not barred by limitation. [S. 192, 194J 195, 201]
The Assessee, an Association of Persons (AOP) engaged in providing technical expertise
in oil exploration and refinery, made payments to its member companies for the salary
expenses and other benefits of seconded employees without deducting TDS. The
Assessing Officer held that the reimbursements constituted fees for technical services as
per Explanation 2 to section 9(1)(vii), making TDS deductible under section 194J for
resident secondees and section 195 for non-resident secondees and payments to foreign
agents. CIT(A) deleted the disallowance. On appeal the Tribunal held that,
reimbursements for Indian salary and other benefits to member companies were not
fees for technical services within the meaning of Explanation 2 to section 9(1)(vii), hence
TDS was not deductible. Payments made to resident secondees did not require TDS
under section 194J as there was no employer-employee relationship between the
Assessee and the secondees. Payments made to non-resident secondees were not
chargeable to tax under section 5(2)(b) as the services were rendered outside India,
thus no TDS was required under section 195. Payments to foreign agents did not attract
TDS under section 195 as there was no business connection in India, and the agents did
not perform any operations in India. The Tribunal also held that levy of interest is not
barred by limitation. (AY. 1996-97 to 1998-1999)
ITO (TDS) v. Petroleum India International (2024) 111 ITR 365 (Mum.)
(Trib)

S. 9(1)(vii) :Income deemed to accrue or arise in India-Fees for technical

services-Marketing contribution, priority club receipt and reservation
contribution with Indian hotels for using trade marks and providing support
programs and systems-Fees received from Indian Hotels is not royalty –
Addition is deleted-DTAA-USA. [Art. 12(3)]
The assessee, a tax resident of USA, had entered into licence agreements with various
Indian hotels allowing them the use of trademarks ‘ Holiday Inn’ and ‘Crowne Plaza’ in
the business. The Royalty income earned was offered to tax in India. However, the
marketing contribution and reservation fees received by the assessee from hotels in
59
India were claimed as not taxable on the basis that the same is in the nature of
reimbursement of common expenses. However, while completing the assessment u/s
143(3) rws 144C (3), the AO held it to be part of Royalty and added the same as income
of the assessee. The CIT (A) upheld the addition. On further appeal, it was pleaded that
the money received on account of marketing contribution and reservation fees were with
a corresponding obligation to use it for the agreed purposes. The fund so created was
obligated to expend assessment proceeds on behalf of the hotels and the fund's objective
is to be self-funded each year. The report of independent auditor was filed in support
thereof. Taking into account orders of the coordinate benches in the case of other
assessee as well as assessee’s own case for other assessment years, the Tribunal held
that the marketing contribution and reservation fees received by the assessee was not
royalty and therefore, the impugned addition was deleted. (AY. 2012-13, 2013-14,
2014-15, 2015-16)
Six Continents Hotels, Inc. v. Dy. CIT (IT) (2024) 112 ITR 423 (Mum)(Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Income from providing worldwide marketing, advertising and other
services-Services were provided from outside India-Income is in not fees for
included services and is business income –Not taxable in India-DTAA-India-
USA. [Art. 7, 12 (4)]
The assessee is engaged in providing worldwide Marketing and advertising services to
Indian hotel owners through worldwide system of sales, advertising, promotion, Public
relations, etc. Services are provided from outside India. Assessee does not have any PE
in India. Assessee claimed refund of TDS deducted by Indian hotels and claimed income
received from Indian Hotels to be exempt as per Section 9(1)(vii) and Article 7 of India-
USA DTAA, as the centralized services provided by Sheraton Overseas from outside India
cannot be treated as Fees for Included Services under Article 12(4) of India-USA DTAA
as it were not technical in nature and further ‘make available’ condition of Article 12 of
India-USA DTAA was not satisfied, and, as a natural corollary, the income was held to
be business income as per Article 7 of India-USA DTAA, not taxable in India. The Hon’ble
ITAT relied on the decision of Hon’ble Delhi High Court in the case of Sheraton
International Inc. (group concern of the assessee) (2009) 313 ITR 267 (Delhi)(HC) and
earlier decision of Delhi ITAT in assessee’s own case upheld by the Delhi High Court.
(AY. 2021-22)
ACIT v. Sheraton Overseas Management Corporation (2024) 112 ITR 126
(Delhi)(Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Human resource screening services for clients in India-Reports
provided to clients about candidates proposed to be hired not copyrightable but
bound by confidentiality-Receipts is neither taxable as royalty nor as fees for
technical services-DTAA-India-United Kingdom. [S. 9(1)(vi), Art. 7, 13(4),
Copyright Act, 1957 13(1), 14(a)]
Held that the role of the assessee was restricted to verification of the information
concerning various candidates proposed to be hired by its clients. The information
collected by the assessee was not protected by any copyright, but its circulation was
regulated under the U. K., and other local laws, which cast a duty upon it to ensure the
confidentiality of the reports as they contained details of the applicants. None of the
requisites under article 13(3) of the Double Taxation Avoidance Agreement was satisfied
60
so as to qualify such receipts as “royalty”. The assessee was merely providing a report
summarising its findings with respect to the background check undertaken by it, which
report constituted factual data and could not per se qualify as literary, artistic or scientific
work, patent, trademark, design, model, plan, secret formula or process or information.
It did not fulfil the requirements enlisted under section 13(1)(a) of the Copyright Act,
1957. Moreover, none of the rights mentioned in section 14(a) thereof had been vested
with the client by the assessee. The client did not have any right to publicly display, sell,
distribute, copy, edit, modify or commercially exploit the report. The consideration
received by the assessee was purely towards provision of background screening services
and not for use, or right to use, any copyrightable material. Further, the assessee did
not provide access to any database to its clients but only access to reports requisitioned
by the client, in electronic form. Nothing had been brought on record by the Revenue to
refute the assessee’s claim. Online access to background screening results was not
tantamount to providing access to the database maintained by the assessee. That the
information obtained by the assessee from various sources was in the nature of factual
data about prospective candidates, which did not involve imparting any kind of
commercial experience, skill or expertise. It was a validation report assuring its client
about the authenticity of the information contained therein. It did not involve any
transfer of either commercial experience or the right to use the experience, nor transfer
of any skill or knowledge of the assessee to the customers. As the assessee’s services
did not involve any technical skill, knowledge or consultancy or make available any
technical knowledge, experience, skill, know-how or processes to the clients, the
services should not be considered fees for technical services under article 13(4) of the
Double Taxation Avoidance Agreement. No addition could be made on account of
royalty(AY. 2021-22)
Hireright LLC v. Dy. CIT (IT) (2024) 111 ITR 28 (Delhi)(Trib)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Data processing charges-Data processing charges paid to its
Singapore branch office-Payment could not be taxed as fees for technical
services either under Income-tax Act and India-Singapore DTAA-DTAA-India-
Singapore. [S. 90, Art. 12]
Allowing the appeal the Tribunal held that Indian branches of assessee, a French bank,
paid data processing charges to its Singapore branch office, said payment could not be
taxed as fees for technical services either under Income-tax Act and India-Singapore
DTAA. (AY. 2021-22)
BNP Paribas. v. ACIT (2024) 207 ITD 532 (Mum)(Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical

services-Telecom and transmission services-Reimbursement from its Indian
subsidiary for provision of connectivity services for international
communication-Cannot be treated as fees for technical services-DTAA-India-
Hong kong. [Art. 12]
Assessee, a Hong Kong based company, which is engaged in business of distribution of
telecommunication products. During relevant assessment years, assessee received
reimbursement of connectivity charges from its AE, Indian subsidiary for provision of
connectivity services for international communication. Assessing Officer held that the
assessee provided plethora of services to its AE right from negotiating agreements with
third parties entering into purchase agreement, to issuing inspection certificates
61
certifying products and services-He, thus held that these services would fall within ambit
of technical consultancy’ or managerial services and would qualify as fees for technical
services under section 9(1)(vii). DRP affirmed the order of the AO. On appeal the
Tribunal held that from purchasing service agreement between assessee and AE that
all activities agreed to in writing by and between company and service provider were
considered as steps involved in processing product purchased as per purchasing service
agreement and could not be treated as other technical services. Since assessee was only
paid for connectivity services which were merely ancillary to enabling provision of inter-
connect services and part of processing product, same could not be treated as technical
or managerial or consultancy services. Amount received by assessee could not be
regarded as FTS under section 9(1)(vii) of the Act. (AY. 2018-19, 2019-20)
Huawei International Co. Ltd. v. ACIT (IT) (2024) 207 ITD 497 (Delhi) (Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Make available-Payments made to US company for administrative and
IT services-Can not be treated to be in nature of FTS-Not liable to deduct tax at
source-DTAA-India-USA. [Art. 12(4)(b).]
Assessee, an Indian company, made payments to its US parent company (AE) towards
administrative services, IT services, technical services and royalty without deduction of
tax at source. Assessing Officer held that since foreign party performed all administrative
services as part of group global policies to maintain control over employed staff in India,
services were in nature of managerial service. CIT(A) affirmed the order of the AO..
Tribunal held that though Assessing Officer had observed that AE had made available
technical knowledge to assessee, but had failed to bring on record any relevant material
to support same and, consequently, payments made by assessee could not be treated
to be in nature of FTS. (AY. 2013-14)
Herbalife International India (P.) Ltd. v. DCIT (IT) (2024) 207 ITD 658 (Bang)
(Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Make available-Business of cloud and hosting services, disaster
recovery services, etc-Indian customer-Not taxable in India-DTAA-India-USA.
[Art 12]
Assessee is a foreign firm situated in USA, which is engaged in business of cloud and
hosting services, disaster recovery services, and IT consultancy services. It received
certain amount from its Indian customer and claimed said income to be not taxable in
India. Assessing Officer taxed said receipts as fees for technical services. DRP up held
the addition. On appeal the Tribunal held that very same issue in assessee's own case
was decided in favour of assessee by Tribunal for earlier assessment years 2017-18 to
2019-20 holding that article 12(4)(b) stipulates taxability of income arising therefrom
only if services concerned make available technical knowledge to recipient/payer. Since
condition of make available had not been satisfied, services would not be taxable in
India. (AY. 2020-21)
Sungard Availability Services LP v. ITO (IT) (2024) 206 ITD 10 (Pune) (Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Freight/logistic support services-Cannot be treated as FTS/FIS either
under Act or under India-USA DTAA-Reimbursement of global account
management charges is not in nature of FTS/FIS-DTAA-India-USA-
62
Reimbursement of lease line charges for services rendered outside India could
not be treated as royalty under Act as well as India-USA DTAA. [Art. 12]
Assessee, a US company, which is engaged in business of providing global freight
logistics services worldwide. Assessing Officer made additions to income of assessee on
account of sale of logistic services treating same as Fees for Technical Services ('FTS')
under Act as well as India-USA DTAA. DRP up held the order of the Assessing Officer.
On appeal Tribunal following assessee's own case in earlier year held that amount
received by assessee from freight/logistic support services could not be treated as
FTS/FIS. Consequently, amount received by assessee in question could not be treated
as FTS/FIS or royalty under Act as well as India-USA DTAA. Held that the amount
received by assessee, a non-resident company, for reimbursement of global account
management charges for services rendered outside India could not be treated as royalty
under Act as well as India-USA DTAA. Held that the amount received by assessee, a
non-resident company, for reimbursement of lease line charges for services rendered
outside India could not be treated as royalty under Act as well as India-USA DTAA. (AY.
2021-22)
Expeditors International of Washington Inc. v. ACIT (2024) 206 ITD 267
(Delhi) (Trib.)

S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical

services-Managing diamond factories and facilitating diamantaires to operate
economically for high quality diamond factories across the Globe-FTS income
received by assessee would not be taxable in India-DTAA-India-Mauritius .
[S. 9(1)(i), 115A(1)(b)), Art. 12, 12A]
Assessee, a tax resident of Mauritius, which is engaged in business of managing
diamond factories and facilitating diamantaires to operate economically for high quality
diamond factories across the Globe. It had entered into a technical collaboration with its
Associated Enterprises [AEs] in India viz., for providing technical, process, marketing
and sales assistance services outside India and received fees for technical services
(FTSs). Assessing Officer invoking provisions of section 9(1)(vii) read with section
115A(1)(b) and held that FTS were chargeable to tax in India. CIT(A) up held the order
of the AO. On appeal the Tribunal held that there was no specific clause in DTAA entered
into between India and Mauritius and article 12A was inserted with effect from 1-4-2017
which could not be applied for financial year 2017-18. It is a settled position of law by
various co-ordinate benches and High Courts that in absence of a clause in DTAA not
dealing with a particular item of income, payments are not be regarded as residuary
income but as business income which is not chargeable to tax in India, in absence of
any PE of non-resident assessee in India. Accordingly the FTS income received by
assessee would not be taxable in India. (AY. 2017-18)
Diamond Manufacturing Management and Consultancy Ltd. v. ACIT (IT)
(2024) 112 ITR 301 / 206 ITD 412 (Vishakha) (Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Subscription fee-Fees

for technical services-Subscription payments, training and professional fees-
No transfer of technology-DTAA-India-Netherlands [Art. 12]
Assessee, a non-resident company, had received certain amount of consideration on
account of subscription payments, training and professional fees. Assessing Officer held
that said receipts were taxable as fee for technical services under article 12 of India-
Netherlands DTAA. DRP up held the order of the Assessing Officer. On appeal the
63
Tribunal held that since assessee had merely granted only access to software and there
was no transfer of technology by assessee, services rendered by assessee did not fall
within definition of FTS. (AY. 2020-21, 2011-22)
Service Now Nederland BV. v. ACIT (2024) 204 ITD 775 (Delhi) (Trib.)

S. 10(1) : Agricultural income-Soil placed on trays-Agricultural activity-

Mushroom is an agricultural product-Income from sale of mushrooms
constitutes agricultural income. [S. 2(IA)]
Held that soil is a part of land and, therefore, part of earth. The only part of the land
that is cultivable is the soil, which is the top layer of land. When soil is placed on trays,
it did not cease to be land and operations carried out on that soil would be agricultural
activity. Whether such soil was attached to the land or placed in containers above the
land made no difference. Soil which is placed on a vertical space above the land in trays
is also land. That the word product could not be restricted to plants, fruits, vegetables
or such botanical life only. The only condition was that the product should be raised on
the land by performing some basic operations. Mushroom is a product raised on land or
soil by performing certain basic operation. It drew nourishment from the soil and was
grown by human skill and labour. The product had utility for consumption, trade and
commerce and, hence, would qualify as an agricultural product the sale of which gave
rise to agricultural income. (AY. 2020-21)
Fresh Bowl Horticulture P. Ltd. v. ITO (2024)116 ITR 3 (SN)/ 169 taxmann.
com 49 (Mum)(Trib)

S. 10(1) : Agricultural income-Books of account-Agriculturist-No requirement

to maintain books of account under section 44AA for agriculturists to claim
exemption under section 10(1). [S. 44AA]
Assessee is a director of a seed company and graduate in agricultural science, claimed
exemption on agricultural income under section 10(1). Assessing Officer added
agricultural income to taxable income, citing lack of books of account as required under
section 44AA of the Act. CIT(A) affirmed the order of the AO. On appeal the Tribunal
held that requirement to maintain books of account under section 44AA does not
include agriculturist. Since the assessee submitted copies of sales bills for agricultural
produce, even though to related parties and consistently declared agricultural income
over years addition is deleted. (AY. 2015-16)
Ishwar Chander Pahuja v. ACIT (2024) 209 ITD 52 (Delhi)(Trib.)

S. 10(10AA) : Leave salary-Limit prescribed-Employee of the Central

Government or State Government-State Bank of India-Retired employee of
State Bank of India-Not violative of Article 14 of Constitution of India. [Art. 14,
15, 226, Central Civil Services (Leave)Rules 1972]
Assessee retired from services of State Bank of India and claimed exemption
u/s10(10AA) of the Act. The exemption is denied. The assessee contended that law
discriminating the Central or State services, in case of employees of other
establishments, period of leave was capped at 10 months and maximum amount
exempted from income tax was subject to such limit as Central Government might notify
in Official Gazette, that same being in year 2017 to be Rs. 3 lakhs was discriminatory
and hence be declared ultra vires. On writ the Court held that State has wide discretion
in matter of classification for taxation purposes. Accordingly the differentiation made by
State between employees of Central and State Governments on one hand and employees
64
of other establishments on other in section 10 (10AA) was neither discriminating nor
violative of article 14 of Constitution. Therefore, a retired employee of State Bank of
India could not claim parity with employees of Central and State Government. Writ
petition is dismissed.
Purnendu Shekhar Sinha v. UOI (2024) 471 ITR 186 /159 taxmann. com 746
(Patna) (HC)

S. 10(10AA) : Leave salary-Superannuation benefits-Employee of the Central

Government or State Government-Maharashtra State Electricity Board (MSEB)-
Transferred to power companies –Grand-fathering-Assessees have to be
treated as employees of a State Government and eligible for S.. 10(10A) and
10(10AA) benefits.. [S. 10A, Electricity Act, 2003, 131, 133 (2)]
Assessees had joined the then Maharashtra State Electricity Board (MSEB) in regular
employment. All of them ended up retiring from the re-designated power companies
constituted under the provisions of the Electricity Act, 2003. The AO denied the
exemption which is affirmed by the CIT(A). On appeal the Tribunal held that going by a
conjoint reading of s. 131 r/w s. 133 of Electricity Act, 2003, the services of all officers
and employees of the erstwhile MSEB first stood vested in the State Government of
Maharashtra on Reorganization of the Board, followed by the transfer to various
transferee entities engaged in generation, transmission and distribution of power. All
these assessees had been assigned to their respective new employers after getting
protection of their service conditions in the light of S. 133(2). These assessees have also
undergone the very reorganization finally culminating in their respective superannuation.
Not only these assessees have to be held entitled for exemption under S. 10(10A) and
10(10AA) as employees of MSEB, they are also eligible for the exemption in the newly
set-up transferee entities. Therefore, these assessees have to be treated as employees
of a State Government duly eligible for ss. 10(10A) and 10(10AA) benefits. (AY. 2018-
19, 2019-20)
Mohan Baliramji Thakre. v. ITO (2024) 229 TTJ 678 / 237 DTR 233 / 166
taxmann. com 158 (SMC) (Nagpur)(Trib)

S. 10(10D) : Life insurance policy-Key man insurance policy-If Keyman

Insurance policy was transferred before its maturity then it would lose its
character and thus sums received on surrender of such insurance policy would
be eligible for exemption under section 10(10D) and it could not be taxed under
section 28(vi). [S. 2(14),28(vi)]
Assessee claimed exemption under section 10(10D) in respect of sums received on
maturity of life insurance policy. Assessing Officer deemed it taxable under section
28(vi) as part of a Key man Insurance policy. In appeal, assessee argued that policy's
character changed in 2008 when it was assigned from a proprietorship concern to
assessee, justifying exemption under section 10(10D) as an ordinary policy. The Tribunal
held that there was some merit in contention of assessee that if policy was transferred
before its maturity then it would lose its character. Therefore, it had become ordinary
policy, premium received under this policy, would not be subjected to tax in view of
section 10(10D). Therefore, lower authorities were not justified in denying benefit of
exemption to assessee. (AY. 2016-17)
Mihir Parikh. v. ACIT (2024) 205 ITD 731 (Delhi) (Trib.)

65
S. 10(23C) : Educational institution-Charitable purpose-Order of High Court
affirmed-SLP of Revenue is dismissed-Delay of 247 days-Review petition is
dismissed on account of delay as well as on merits. [S. 2(15), 10(23C)(iv), Art.
136]
The High Court, following its decision in the assessee’s case in India Trade Promotion
Organization v. DGIT (E) [2015] 371 ITR 333 (Delhi)(HC) held that the Tribunal did not
err in granting exemption to the assessee under section 10(23C)(iv) of the Income-tax
Act, 1961 for the AY. 2009-10, 2010-11 and 2011-12. SLP of Revenue was dismissed.
Review petition of Revenue is dismissed on account of delay as well as on merits. (AY.
2009-10 to 2011-12)
CIT (E) v. India Trade Promotion Organization (2024) 299 Taxman 454/338
CTR 875 (SC)
Editorial : CIT (E) v. India Trade Promotion Organisation (2023)454 ITR 799 / 294
taxman 1 (SC)

S. 10 (23C): Educational institution-Commissioner (E) and Tribunal failed to

examine objects and record finding with respect to education or educational
activities of assessee-Matter remanded. [S. 10(23C)(iii), 260A]
The Tribunal held that the assessee was unable to furnish necessary information before
the Commissioner (E) hence dismissed the appeal of the assessee . On appeal
High Court remitted the matter to the file of the CIT(E) to decide a fresh after considering
the ratio in New Noble Educational Society v. CCIT(2022) 448 ITR 594 (SC)
Shaheed Nand Kumar Patel Vishwavidyalaya v. CIT (E) (2024)468 ITR 334 /
167 taxmann. com 138/341 CTR 170/242 DTR 289 (Chhattisgarh)(HC)

S. 10 (23C): Educational institution-Solely for educational purposes and not for

profit-Substantial grant of finance from Government-Order of Tribunal is
affirmed. [S. 10(23C)(iiib), 11, 260A, R. 2BBBB.]
Dismissing the appeal of the Revenue the Court held that since the Assessing Officer
in his order had reached the conclusion that the assessee had claimed exemptions under
section 10(23C)(iiiab) since it was substantially financed by the Government of more
than 20 per cent., and expenditure had been incurred by the assessee towards its aims
and objects in carrying out educational activities alone, the exemptions were rightly
granted. The Tribunal had found that rule 2BBB of the Income-tax Rules, 1962 was not
applicable during the assessment year 2012-13, since it came into force with effect from
December 12, 2014. There was no error in the orders passed by the Tribunal and the
Assessing Officer and, therefore, need not be interfered with. No substantial question of
law. (AY. 2012-13)
CIT (E) v. Swami Ganga Giri Janta Girls College (2024)466 ITR 393 /162
taxmann. com 677 (P&H)(HC)

S. 10(23C) : Charitable institution-Promoting, advancing and protecting trade,

commerce and industry in India--Matter was remanded to Chief Commissioner
for de novo consideration by applying law as laid down by Tribunal. Matter
remanded. [S. 2(15), 10(23C)(iv), Art. 226]
Assessee, an institution formed and established with primary object of promoting,
advancing and protecting trade, commerce and industry in India, applied for grant of
approval under section 10(23C)(iv) for assessment year 2014-15. Chief Commissioner
66
held that assessee was not a charitable institution and by invoking provisions of proviso
to section 2(15) rejected application. On writ, the Assessee submitted before High Court
that Tribunal in its own case for assessment years 2016-17 and 2017-18 by an order
had set aside order of rejection passed by Commissioner (E) and held that assessee was
entitled to exemption under section 10(23C)(iv). Court held that since order of Tribunal
for assessment years 2016-17 and 2017-18 had been passed after impugned order was
passed, matter was to be remanded to Chief Commissioner for de novo consideration by
applying law as laid down by Tribunal. Matter remanded. (AY. 2014-15)
Indian Merchants Chamber v. ACIT (2024) 299 Taxman 62 (Bom.)(HC)

S. 10 (23C): Educational institution-Hospital-Controlled and funded by State

Government-Matter remanded to the file of the AO for de novo adjudication.
[S. 10(23C)(iiiac)]
Held that the assessee-society is created for the purpose of improvement of medical
facilities for the general public as per the direction of the Health and Family Welfare
Department of the State Government; funds are provided by the State Government in
the form of grant-in-aid; since the lower authorities have not considered the claim of the
assessee that it is entitled to benefit of "State" and exemption under s. 10(23C)(iiiac),
the issues are restored to the AO for de novo adjudication. (AY. 2003-04 to 2007-08)
Swasthya Bikash Samity v. ITO (E) (2024) 230 TTJ 526 / 240 DTR 51 / 164
taxmann. com 756 (Cuttack) (Trib)

S. 10 (23C): Educational institution-Proviso to Section 143(3) requiring

withdrawal of approval before denial of exemption on ground of contravention-
Assessing Officer has no jurisdiction to reopen assessment. [S. 10(23C)(vi),
143(3)]
Dismissing the appeal of the Revenue the Tribunal held that the Assessing Officer’s
compliance with clauses (i) and (ii) of the first proviso to section 143(3) inserted by
the Finance Act, 2002 with effect from April 1, 2003, which stated that no order of
assessment shall be made by the Assessing Officer without giving effect to
section 10 unless the Assessing Officer has intimated the Central Government or the
prescribed authority that clause (23C) of section 10 had been contravened by the
assessee. Only after the approval granted had been withdrawn, could he have proceeded
to pass an order, denying the benefit of exemption on the ground of contravention. The
disallowance is deleted. (AY. 2013-14)
Dy. CIT (E) v. Mahindra International School Academy (2024)116 ITR 712
/ 172 taxmann. com 159 (Pune)(Trib)

S. 10 (23C): Educational institution-Merger of three trusts-Multiple objects-Not

solely for purpose of education-Not entitle to exemption. [S. 10(23C)(vi)]
Held that the assessee is not existing solely for the purpose of education. The assessee
did not submit documentary evidence to establish its contention that such scholarships
were in fact been used by those students for the purpose of education. Denial of
exemption is affirmed. (AY. 2018-19)

Parul Arogya Seva Mandal Trust v. CIT (E) (2024)114 ITR 287 (Ahd)(Trib)

67
S. 10 (23C): Educational institution-Accumulation of funds-Disallowance
cannot be made under section 13 of the Act-Entitle to exemption. [S.
10(23C)(iv), 11, 12A, 13(1)(c)]
Dismissing the appeal of the Revenue the Tribunal held that since the assessee is a
charitable society notified under section 10(23C)(iv), the conditions prescribed under
section 13 thereof were not applicable to it per the Central Board of Direct Taxes Circular
No. 557, dated March 19, 1990 (1990) 183 ITR 93 (St) Consequently, the Assessing
Officer can not make any disallowance under section 11. (AY. 2014-15)
ITO (E) v. The Theosophical Society (2024)114 ITR 282 (Chennai)(Trib)

S. 10 (23C): Educational institution-Two separate educational institutions-

Gross receipts of each of educational institutions had to be separately
considered for purpose of allowing claim of exemption. [S. 10(23C))(iiiad)]
Assessee is a society and engaged in running, operating and management of educational
institutions at Bhopal. Assessee filed its return of income and claimed exemption under
section 10(23C)(iiiad). Assessing Officer denied the exemption under section
10(23C)(iiiad) on ground that gross receipt of assessee exceeds Rs. 1 crore as prescribed
monetary limit under section 10(23C)(iiiad). Commissioner (Appeals) up held the order.
On appeal the Tribunal held that since assessee is running two separate educational
institutions, gross receipts of each of educational institutions had to be separately
considered for purpose of allowing claim of exemption under section 10(23C)(iiiad).
Order is set aside and the issue is remanded to Assessing Officer for fresh adjudication.
(AY. 2019-20)
Aarti Mahila Kalyan Samiti. v. ACIT, CPC (2024) 209 ITD 154 (Indore) (Trib.)

S. 10 (23C): Non profit organization-Promoting export of leather items -

Objectives of general public utility-Net surplus was less than 20 per cent of
total receipts-Exemption cannot be rejected under second proviso to section
2(15). [S. 2(15), 10(23C)(iv)]
Assessee is a non-profit organization, which is engaged in promoting export of leather
items . It is facilitating participation of its members in trade fairs and had claimed
exemption under section 10(23C)(iv). Assessing Officer denied the exemption. CIT(A)
affirmed the order of the AO. On appeal the Tribunal held that Apex Court in case of
Asstt. CIT (E) v. Ahmedabad Urban Development Authority (2022) 449 ITR 1 /(2023)
291 Taxman 11(SC) held that while actually carrying out objectives of general public
utility (GPU), if some profit is generated, it can be granted exemption provided
quantitative limit of not exceeding 20 per cent under second proviso to section 2(15) for
receipts from such profits, is adhered to. On facts since net surplus of Rs. 7. 62 crores
was less than 20 per cent of total receipts of assessee exemption under section
10(23C)(iv) could not be rejected under second proviso to section 2(15). (AY. 2016-17)
Council for Leather Exports. v. DCIT (2024) 208 ITD 416/231 TTJ 873/242
DTR 272 (Chennai) (Trib.)

S. 10 (23C): Educational institution-Denied exemption under section 11 due to

lack of registration under section 12A/12AA-Matter is remanded to
Commissioner (Appeals) for fresh adjudication. [S. 10(23C)(iiiad), 11, 12A,
12AA]
Assessee-trust was denied exemption under section 11 due to lack of registration under
section 12A/12AA. Alternatively, it claimed deduction of expenses under section
68
10(23C)(iiiad) citing low turnover and educational engagement. Commissioner (Appeals)
disallowed expenses due to lack of evidence. On appeal the Assessee sought another
chance to provide relevant documents for genuine engagement in educational activities.
It stated that expenses included salaries for staff engaged in educational activities, as
well as seminar, uniform, communication, vehicle, and postage expenses related to
running educational institutions and assured that evidence would be provided to
substantiate genuineness of those expenses for educational purposes. Since department
had no objection to fresh adjudication, in such circumstances, appellate order was to be
set aside, and matter was to be restored to Commissioner (Appeals) for a fresh decision
with a direction to assessee to cooperate and provide necessary documents. Matter
remanded. (AY. 2019 -20)
Vidya Sagar Education Trust. v. ITO (2024) 205 ITD 400 (Ahd) (Trib.)

S. 10 (23C): Educational institution-Unregistered charitable and religious

institutions-Non granting of registration-Income is required to be computed by
applying normal provisions of Act as AOP-Net income only is required to be
taxed-Matter remanded. [S. 28(i)]
Assessee-trust claimed exemption of administrative expenditure under section 10(23C).
Assessing Officer held that assessee had not filed audit report, denied exemption.
Assessee submitted before Commissioner (Appeals) that it was not registered under
section 10(23C) and it had wrongly mentioned in return that it was registered under
section 10(23C) and its real income after reducing expenditure or application of income
be taxed. Commissioner (Appeals) without adjudicating submissions of assessee
dismissed appeal. On appeal the Tribunal held that once assessee had no registration
under section 10(23C) then its income was required to be computed by applying normal
provisions of Act and net income only was required to be taxed as AOP. Since
Commissioner (Appeals) had not adjudicated submissions of assessee, issue was to be
remanded back to him to decide afresh by applying normal provisions of Act. (AY. 2019-
20, 2020-21)
Sri Ramalingeswara Swamy Temple v. ADIT(E) (2024) 205 ITD 206 /109 ITR
79 (SN) (Hyd)(Trib)

S. 10 (23C): Educational institution-No disallowance can be made by applying

provisions of section 11 and 12-Grant in aid -Could not be considered as
assessee's income-Exempt from tax-Depreciation- cost incurred on
acquisition of fixed assets as application of income-Depreciation is allowable.
[S. 10(23C)(vi), 11, 12, 32]
Held that where assessee-educational institution was approved under section
10(23C)(vi), no disallowance could have been made by applying provisions of sections
11 and 12. Grant in aid funds could be spent for specified purposes only on specific
approval of State Government, same were grant-in-aid which could not be considered
as assessee's income and thus, same would be exempt from tax. When assessee-
educational institution had not claimed cost incurred on acquisition of fixed assets as
application of income, order disallowing depreciation as application of income is deleted.
(AY. 2015-16)
Baba Hira Singh Bhattal Institute of Engineering & Technology. v. DCIT (2024)
204 ITD 698 /115 ITR 202/ 228 TTJ 273 (Chd) (Trib.)

69
S. 10 (23C) : Educational institution-Assessee has 12 units-Annual receipts of
each of the institutions of the Assessee was less than the prescribed limit under
the provision-Entitled to the exemption-Directed to give effect to petition filed
under S. 154 of the Act. [S. 10(23C)(iiiad), Form No 10BB]
The Assessee trust was running 12 educational institutions and claimed exemption u/s
10(223C)(iiiad) in its return which was denied on ground that Form 10BB was not filed
by the Assessee. The ITAT observed that the Assessee had filed all the documents along
with the return, which showed that the gross receipts of the Assessee was Rs. 2. 50
crores. Before ITAT, the Assessee submitted that it was covered by the judgment of the
jurisdictional High Court in case of CIT v. Children's Education Society [2013] 358 ITR
373 (Kar.) in which it was held that "the exemption in terms of the provisions of s.
10(23C)(iiiad) was available to the Assessee as annual receipts of each of the institutions
of the Assessee was less than the prescribed limit under the provision. ”. It was held that
the issue is no longer debatable and the AO was directed to give effect to s. 154
application filed by the Assessee. (AY. 2016-17)
D. Banumaiah’s Educational Institutions v. ITO (E) [2024] 109 ITR 94 (SN)
/ 205 ITD 446 (Bang) (Trib.)

S. 10 (23C): Educational institution-Approval by prescribed authority-Object is

not found existed solely for advancing educational purposes-Denial of
exemption is justified. [S. 10(23C)(vi), Art. 226]
Authority has rejected the contention and claim of the assessee-trust on the ground that
as per the aims and objects of the trust, it is apparent that it has not only been formed
for the purpose of advancing education, but is also for other purposes as mentioned in
cl. 5(i), (j), (k), (l), (m), (n) and (o) of the trust deed. On writ, the Court held that
exemption was claimed by the trust itself and not by an individual educational institute
namely, GHG academy, therefore it cannot be conclusively said that the trust was found
and existed solely for advancing education purposes, hence, it was rightly not granted
exemption. (AY. 2012-13)
Shri Guru Hargobind Sahib Charitable Trust v. CBDT (2024) 340 CTR 219 /
240 DTR 441 (P&H)(HC)

S. 10(23D):Mutual Fund-Exemption-Approved by Government and Reserve

Bank of India-Eligible for exemption-Order of CIT(A) is affirmed. [UTI India
Fund Unit Scheme, 1986, Unit Trust of India Act, 1963]
Held that the assessee is registered Mutual Fund approved by Government and Reserve
Bank of India, the observation of the AO that in order to grant exemption under s.
10(23D) has to have a separate registration is uncalled for and the various documents
submitted by the assessee proves that the offshore fund scheme maintained by the
assessee is an approved unit by the SEBI. Order of CIT(A) allowing the exemption is
affirmed. (AY. 2014-15, 2016-17 to 2018-19)
DCIT (E) v. UTI India Fund Unit Scheme 1986 (2024) 228 TTJ 607 / 237 DTR
44 (Mum) (Trib)

S. 10 (23FB): Venture Capital Fund-Exemption-Income from Investment in

Venture Capital Undertaking-Shares of entity not listed on a recognized stock
exchange which carried on business activity in India-Not covered in the
negative list-Dividend income is exempt. [S. 2(31), 10(35), Securities and
Exchange Board of India (Venture Capital Fund) Regulation, 1996, regln. 2(n)]
70
Since no income from the two entities was shown, the issue of s. 10(23FB) was
academic. The financials of S showed that it qualified as a venture capital undertaking
under the Regulations and therefore, it qualified as a venture capital undertaking for
section 10(23FB). Similarly, in so far as investments made in O shares which were not
listed on a recognised stock exchange which also carried on business activity in India,
nowhere had it been pointed out that these activities were covered in the negative list
under Schedule III to the Regulations. Held that investment in this company also
qualified as a venture capital undertaking under the Regulations. Dividend income is
exempt. (AY. 2018-19)
CIT (Dy.) v. Aditya Birla Real Estate Fund (2024) 111 ITR 40 SN)
(Mum)(Trib.)
S. 10 (25) : Approved superannuation fund-Exemption-Only Chief
Commissioner has power to withdraw approval-Approval not withdrawn-Denial
of approval on ground that conditions for approval had not been complied with-
Order of denial is not valid. [S. 10(25)(iii)]
The Assessing Officer passed an order denying exemption. On appeal CIT(A) directed
the Assessing Officer to allow the exemption. On appeal the Tribunal, affirmed the order
of the Assessing Officer. On appeal the Court held that the approval of the assessee-
fund granted by the competent authority, i. e., the Commissioner by order dated
September 29, 1995 continued for the assessment year in question, i. e., the assessment
year 2005-06 and it had neither been withdrawn nor cancelled. Exemption had been
denied on the ground that the assessee-fund did not comply with the conditions of
approval and therefore the fund lost its recognition. The denial of exemption was not
valid. Order of the Tribunal is set aside. (AY. 2005-06)
Assam Frontier Employees Pension Fund v. CIT (2024) 464 ITR 102/ 336 CTR
319/164 taxmann. com 116 (Cal)(HC)

S. 10(26): Schedule Tribes-Partnership firm-Person-Hotel business-A

partnership firm being a separate assessable 'person' under Income-tax Act,
would not be entitled to same exemption under section 10(26) as any or all of
individual partners would be in their individual capacity. [S. 2(23),2(31)(iv),
Art. 366(25)]
Assessee-firm is running a hotel business. It consisted of two partners who were related
to each other (brothers) and belonged to Khasi tribe which was enlisted as Scheduled
Tribe in State of Meghalaya and was covered under article 366(25) of Constitution of
India. They were residents of Khasi Hills Autonomous District and thus were entitled to
exemption under section 10(26) in their individual capacity. Assessee firm claimed
exemption under section 10(26) on plea that since a partnership firm in itself was not a
separate juridical person and it was only a collective or compendious name for all of its
partners having no independent existence without them, and since partners of assessee-
firm were entitled to exemption under section 10(26), therefore, same exemption under
section 10(26) is available to firm. AO rejected the claim. CIT(A) up held the order
of the AO. On appeal the Tribunal held that a partnership firm being a separate
assessable person under Income-tax Act, would not be entitled to same exemption under
section 10(26) as any or all of individual partners would be in their individual capacity.
Advantages and disadvantages conferred under Income-tax Act on separate class of
persons were neither transferable nor inter changeable and, thus, scope of beneficial
provisions could not be extended to a different person under Income-tax Act as it might
defeat mechanism and process provided for assessment of different class/category of
71
persons. Ratio decidendi in judgment of Gauhati High Court in CIT v. Mahari & Sons
(1993) 67 Taxman 449 (Gauhati)(HC) in context of a Khasi family would not be
applicable in case of a partnership firm, though consisting solely of partners, who in their
individual capacity are entitled to exemption under section 10(26). (AY. 2013-14 to
2015-16)
Hotel Centre Point. v. ITO (2024) 111 ITR 502 / 206 ITD 565 /228 TTJ 905
/ 236 DTR 97 (Gauhati) (SB) (Trib.)
Ri-Kynjai Serenity v ITO, (2024) 111 ITR 502 // 206 ITD 565/228 TTJ 905/
236 DTR 97 (Gauhati) (SB) (Trib.)

S. 10(38) : Long term capital gains from equities-STT was not paid at time of
acquisition of shares-Entitled to exemption. [S. 115U]
Assessee is a trust registered as Venture Capital Fund. Assessee claimed exemption of
long-term capital gains (LTCG) under section 10(38) in respect of sale of unlisted shares
of a company. Assessing Officer held that assessee was not eligible for exemption as it
had not paid Securities Transaction Tax (STT) at time of acquisition of shares. CIT(A)
allowed the exemption. On appeal the Tribunal held that condition prescribed in clause
(a) and (b) of section 10(38) were fulfilled and assessee would be covered by exemption
provided in clause (b)(i) of Notification No. SO 1789(E) dated 5-6-2017. Therefore,
even if assessee did not pay STT at time of acquisition of shares, still it was eligible for
exemption under section 10(38). (AY. 2018-19)
DCIT v. Business Excellence Trust. (2024) 208 ITD 173 (Mum) (Trib.)
S. 10(46):Body or Authority-Specified income-Commercial Activity-Granting
loan-Agent of State Government to support development activities-Entitled
to exemption-The order rejecting exemption under section 10(46) was
quashed-The Revenue was directed to process the application for exemption
made by the assessee. [S. 2(15), 10(20A), 119, Art. 226]
The assessee is an entity constituted under the Uttar Pradesh Industrial Area
Development Act, 1976. The Central Board of Direct Taxes rejected its application to
grant exemption under section 10(46) on the ground that the assessee extended loans
to various entities and such activities undertaken were otherwise than for the benefit of
the general public. On a writ petition the Court held that that the assessee had been
constituted under the 1976 Act with the objective of undertaking developmental
activities in an industrial development area. It acted as an arm and an adjunct of the
State charged with undertaking planned development in the industrial development
area. In that connection, the assessee undertook planning and development of the area,
acquired land and property, engaged in construction of housing units or industrial units.
In order to fulfil these objectives, it was provided funds by the State Government and
additionally created a corpus from the revenue and receipts generated and received in
the course of its operations. The assessee primarily was an agent of the Government
obligated to undertake planned development of areas placed under its control. It could
not be viewed as being a corporation intended to have been incorporated for a profit or
commercial motive. The provisions of the 1976 Act and the material on record clearly
dispelled any notion of the assessee being a “hardcore trading corporation”. Statutory
bodies like the assessee, were intended to act as an “architectural agent” of development
and growth. The Revenue had erred in holding that the loans and advances extended by
the assessee would fall within the ambit of commercial activity. The grant of those loans
had also not been established to have been motivated with a view to profit. Some of
those loans were extended to finance activities supportive and supplemental to the
72
development activity that was liable to be undertaken by the assessee. The finding in
the order that the assessee had advanced loans to private entities was factually
incorrect. The assessee did not claim exemption of interest income earned from bonds
and shares for the purposes of section 10(46) and the interest income had been
ploughed back for the purposes of carrying out the statutory functions and duties cast
upon the assessee. Although the assessee was called upon to provide all financial details,
the Revenue did not specifically place on notice to answer or tender any explanation with
respect to the amount of interest income that was earned from bonds, shares and fixed
deposits. The order rejecting exemption under section 10(46) was quashed. The
Revenue was directed to process the application for exemption made by the assessee.
Relied on Greater Noida Industrial Development Authority v. UOI (2018) 406 ITR 418
(Delhi)(HC).
New Okhla Industrial Development Authority v. UOI (2024)468 ITR
195 (Delhi)(HC)
S. 10A : Free trade zone-Rental income-Sub lease of two units-Eligible for
inclusion in profit as they were intimately connected with business of
undertakings-SLP of Revenue is dismissed. [Art. 136]
Assessee had taken on lease certain area in STPI (Software Technology Park Of India).
As assessee could not use entire area for its operation, it sub-leased portion of premises
to two units and was receiving rent for same. It claimed deduction under section 10A.
Assessing Officer disallowed deduction in respect of rental income received from said
two units on ground that lease amounts could not be considered as income derived from
export of any software. Commissioner (Appeals) held that rental income received by
assessee was eligible for inclusion in profit as they were intimately connected with
business of undertakings. Tribunal affirmed the order of the CIT(A). On appeal High
Court held that since conditions such as location of unit in STPI having been complied
with, benefit of section 10A would be available to assessee. Special leave petition filed
against the order of High Court is dismissed. (AY. 2005-06)
PCIT v. Infosys Ltd. (2024) 300 Taxman 592 (SC)
Editorial : PCIT v. Infosys Ltd(2023) 147 taxmann. com 520 (Karn)(HC)
S. 10A : Free trade zone-Profits and gains derived from export oriented
undertaking-Interest income-Short term fixed deposits-Matter remanded to
the file of the Assessing Officer. [S. 28((i), 56, Art. 136]
Court held that in view of the fact that the Tribunal has remanded the same matter in
the case of the assessee to the AO in the subsequent assessment year for giving a finding
bearing in mind the facts of the assessee and its business the matter pertaining to the
relevant assessment year is also remanded to the AO for consideration of the issue by
bearing in mind the nature of business of the assessee and the purpose for which the
short-term fix deposit accounts were opened by the assessee in the bank and the nature
of income and the treatment of interest income as income from other sources or business
income. (AY. 2009-10)
Xl India Business Services (P) Ltd. v. ITO (2024) 340 CTR 939 / 242 DTR 265
/ 167 Taxmann. com 583 (SC)
Editorial : Xl India Business Services (P) Ltd. v. ITO (2018) 94 taxmann. com 720
(Delhi)(HC) is set aside.

S. 10A : Free trade zone-Export turnover-Total sales-Deemed exports-Export

turnover should constitute at least 75 per cent of the total turnover, although

73
in quantitative terms, the export quantity might be less than 75 per cent of the
total sale quantity. [S. 10A(2)(ia), Export-Import Policy 1992-97]
Held that the amendment by introducing sub-s. (ia) to cl. (2) of s. 10A stipulates that
the exports should not be less than 75 per cent of 'the total sales'. The provisions of the
Export Import Policy, 1992-97 provide that 'the entire production of EOU/EPZ units shall
be exported except 25 per cent of the production in value terms may be sold in the
Domestic Tariff Area when the use of indigenous inputs is more than 30 per cent in value
terms'. On the basis of the aforesaid provision, it appears that the section imposes a
value based restriction and not a quantitative restriction. What is required to be satisfied
as per sub-s. (ia) to cl. (2) of s. 10A is that the export turnover should constitute at least
75 per cent of the total turnover, although in quantitative terms, the export quantity
might be less than 75 per cent of the total sale quantity. (AY. 2000-01)
IBM Global Services India (P) Ltd. v. Dy. CIT (2024) 231 TTJ 1 / 240 DTR 321
(Bang)(Trib)

S. 10A : Free trade zone-Foreign currency expenditure from export turnover-

Refund-Interest on refund-Disallowance of expenditure-Exempt income-
Interest -Matter remanded. [S. 14A, 234D]
Held that none of the authorities had considered the facts and dealt with the issue in
proper perspective with regard to the assessee’s claim that deduction under
section 10A was erroneously made due to the exclusion of foreign currency expenditure
from the export turnover. As the issue needed verification, it was restored to the
Assessing Officer for a decision in terms of the principle laid down by the Tribunal in the
assessee’s own case for an earlier assessment year. That the Assessing Officer was
directed to verify whether refund had been issued to the assessee and, if so, the interest
charged thereon under section 234D. Disallowance under section 14A is remanded. (AY.
2009-10)

Virtusa Consulting Services P. Ltd. v. Dy. CIT (2024)114 ITR 386

(Chennai)(Trib)
S. 10A : Free trade zone-Computation-Total turnover-Expenses excluded from
export turnover to be excluded from total turnover.
Held that the expenses excluded from the export turnover had to be excluded from the
total turnover as well while computing the deduction under section 10A of the Income-
tax Act, 1961. The Assessing Officer had not followed the directions of the Dispute
Resolution Panel in granting the benefit to the assessee that the foreign currency
expenses which are excluded from export turnover and not excluded from total turnover.
The Assessing Officer was to exclude the expenses from the total turnover also while
determining the exemption under section 10A of the Act. (AY. 2008-09 to 2012-13)
Crisil Ltd. v. Add. CIT (2024)112 ITR 56 (Mum)(Trib)

S. 10A : Free trade zone-Eligible profits-Interest income-Income from business

eligible for deduction-Foreign exchange gain on exchange earners’ foreign
currency account-Allowable.
Held that the interest income is income from business eligible for deduction under
section 10A of the Act. That deduction under section 10A in respect of foreign exchange
gain on Exchange Earners' Foreign Currency Account is allowable. (AY. 2010-11)
Tech Mahindra Business Services Ltd. v. ACIT (2024)112 ITR 21
(SN)(Mum)(Trib)
74
S. 10A : Free trade zone-Reconciled entire figure and entire reconciliation
matched amount declared in Form 56F-Claim is directed to be allowed. [Form
No 56F]
Held, allowing the appeal, that the assessee had correlated and reconciled the entire
figure and it seemed that the entire reconciliation matched the amount declared in form
56F. Claim is allowed. (AY. 2011-12)
Toppan Merrill Technology Services P. Ltd. v. Dy. CIT (2024)112 ITR 32
(SN)(Chennai)(Trib)

S. 10AA : Special Economic Zones-Constitutional validity-Explanation after sub-

section (1) of section 10AA, inserted by amendment with prospective effect
from 1-4-2018, applicable in respect of assessment year 2018-19 and
subsequent years-Constitutionally valid. [Art. 14, 19(1)(g), 226 265]
The assessee is incorporated on 7-9-2007, which established its unit on May, 2012, at
Kandla Special Economic Zone, Gujarat, for manufacture of specialized refractories and
commenced operations from May, 2012. It became eligible for claiming exemption under
section 10AA, from the assessment year 2013-14 onwards. On 1-4-2018, an Explanation
was inserted after section 10AA(1) by the Finance Act, 2017, with effect from the
aforesaid date prospectively. On writ, the assessee contested the Explanation to section
10AA(1) inserted by the Finance Act, 2017 with prospective effect, as unconstitutional
and allegedly violative of articles 14, 19(1)(g), and 265 of the Constitution of India.
Court held that explanation after sub-section (1) of section 10AA, inserted by
amendment with prospective effect from 1-4-2018, applicable in respect of the
assessment year 2018-19 and subsequent years is constitutional and is a valid piece of
legislation and is not arbitrary, discriminatory and is not violative of articles 14, 19 &
265 of the Constitution of India. Circulars & Notifications : Circular No. 3 of 2008, dated
12-3-2008.
IFGL Refractories Ltd. v. UOI (2024) 296 Taxman 553/463 ITR 649 / 338 CTR
73 (Cal.)(HC)

S. 10AA : Special Economic Zones-Qualifying profits-Computation-Gross total

income-Deduction to be allowed from the total income and shall not exceed
such total income. [S. 80AB]
Held, that section 80AB of the Act states that the amount of income computed in
accordance with the provisions of the Act and included in the gross total income is eligible
for deduction. Hence, section 80AB is concerned with the quantum of income that is
eligible for deduction under the heading “C. Deduction in respect of certain income” in
Chapter VI-A. The Explanation inserted in section 10AA of the Act states that the
deduction to be allowed under section 10AA of the Act shall be allowed from “the total
income” and shall not exceed such total income. Hence, the Explanation specifies “the
stage” at which the deduction under section 10AA of the Act should be allowed (i. e.,
from the total income) and also states that quantum of deduction should be restricted
to the amount of total income. Accordingly, section 80AB and the Explanation inserted
in section 10AA operate in different fields. The decision of the Commissioner (Appeals)
did not require any interference. (AY. 2017-18, 2018-19)
Dy. CIT v. Reliance Industries Ltd. (2024)109 ITR 180 (Mum)(Trib)

75
S. 10(10AA): leave salary-Employee of the central government or state
government-Leave encashment-Directed to allow the exemption. [S. 154]
Assessee has joined as a technician in the central government department of telecom in
the year 1981. The Government of India has corporatized the department of telecom
into BSNL with effect from 1-10-2000. The assessee has credited 280 days of leave at
the time of retirement for the service rendered department of telecom till the date of
corporatization and claimed exemption of 280 days salary. The CPC calculated the
exemption u/s 10(10AA) basing on the present declaration that the assessee was an
employee of BSNL and hence the exemption u/s 10(10AA) was restricted to Rs. 3 lakhs.
Rectification application was rejected. On appeal the Tribunal held that The CIT as well
as the AO has not taken cognizance of these facts and wrongly denied the benefit of
exemption of leave encashment u/s 10(10AA) of the Act. The appeal of the assessee is
allowed. (AY. 2019-20)
Vijay pemmaraju v. ITO [2024] 204 ITD 663 (SMC) (Vishakha) Trib)

S. 10B: Export oriented undertakings-Non-realisation of export proceeds within

six months-CIT(A) has rightly issued directions to allow the assessee's claim
in the year of return after due verification of the facts of return of goods-
Provisions for doubtful debts and advances-Not to be added to book profit. [S.
115JB]
Assessee is not entitled to exemption under s. 10B in respect of the amount of export
turnover which was not received within six months from the end of the relevant financial
year; since the goods were returned back in the succeeding year, CIT(A) has rightly
issued directions to allow the assessee's claim in the year of return after due verification
of the facts of return of goods. Tribunal also held that provisions for doubtful debts and
advances is not to be added to book profit. (AY. 2009-10, 2011-12)
Sun Pharmaceutical Industries Ltd. v. Dy. CIT (2024) 231 TTJ 164 / 38 NYPTTJ
520 (Ahd)(Trib)

S. 10B: Export oriented undertakings-Manufacture or processing-Preparation

and export of pickles-Change in characteristic of raw materials from vegetables
to bottled pickle, with different use-New product Entitled to benefit-Entire sale
proceeds must be received in convertible foreign exchange within stipulated
time-Bank realisation certificates, certified statement of forex receipts and
certificate of auditor establishing realisation of export proceeds-Eligible for
deduction to extent of foreign exchange received during specified period-
Entitled to deduction.. [S. 80IC]
Held that in the manufacture of pickles, there was a change in the characteristic of the
raw materials from that of vegetables to a pickle, whose use was also different.
Moreover, section 80-IC(2) talked of manufacture or production and Schedule XIV to
the Income-tax Act, 1961, gave the list of articles or things or operations under item
I recognising fruit and vegetable processing industry manufacturing or producing
canned or bottled products. Obviously, the assessee was a vegetable processing
industry and, in terms of the Schedule, was manufacturing or producing the bottled
product of pickles. There was no reason to hold that the assessee was not engaged in
manufacturing activities. The process of manufacturing pickles from raw vegetables,
fruits, masala and other ingredients brought about a new and different marketable
commodity than the raw material. Entitled to deduction. Held that the assessee had
produced bank realisation certificates, bank certified statement of forex receipts and
76
 certificate of the auditor to show the realisation of export proceeds. There was no
infirmity in the order of the Commissioner (Appeals) in allowing the assessee’s claim
under section 10B to the extent of foreign exchange received during the specified
period. Both of the assessee’s units had become 100 per cent. export-oriented
units. The Commissioner (Appeals) gave a categorical finding about acquisition of the
machinery in different years after obtaining the remand report. There was no reason
to sustain the disallowance made by the Assessing Officer. (AY. 2001-02 to 2008-09)
ITO v. M. M. Poonjiaji Spices Ltd. (2024)113 ITR 294/230 TTJ 312
(Mum)(Trib)

S. 11 : Property held for charitable purposes-Denial of exemption When the

registration is granted by the CIT(E), further probe by Assessing Officer into
objects of Trust based on such objects is not permissible-Activities of to
identify, enrol, allot work, regulate operation of private workers from time of
inception-Activities for advancement of general public utility-Surplus earned
retained for carrying out activity-Cannot be treated as business activity-
Exemption cannot be denied-Advances to Trustees-Interest recognised on
accrual basis-Loans covered by adequate security and interest-Cannot be
treated as investments in violation of S. 11(5), 11(3) of the Act-No violation of
Section 13(1)(c). 13(2) of the Act. Accumulation of funds-Form 10 filed for
Assessment Year 1999-2000 showing purpose of accumulation-Purpose of
accumulation is not general in nature-Activities carried on in accordance with
approved charitable objects for which assessee was formed and registered-No
violation of Section 11(2)-Delay of 496 days in filing the SLP-SLP of Revenue
is dismissed. [S. 11(2) 11(4A), 11(5), 12A, 13(1)(c), 13(2) Art. 136]
Dismissing the appeal of the Revenue the Court held that when the registration is
granted by the CIT(E), further probe by Assessing Officer into objects of Trust based
on such objects is not permissible. Activities of identify, enrol, allot work, regulate
operation of private workers from time of inception, activities for advancement of
general public utility. Surplus earned retained for carrying out activity cannot be
treated as business activity Exemption cannot be denied. Amount advanced to Trustees,
interest recognised on accrual basis, loans covered by adequate security and interest.
Advance of loan cannot be treated as investments in violation of S. 11(5), 11(3) of the
Act. T here is no violation of Section 13(1)(c). 13(2) of the Act. As regards the
accumulation of funds, form 10 filed for Assessment Year 1999-2000 showing purpose
of accumulation. Purpose of accumulation is not general in nature. Activities carried
on in accordance with approved charitable objects for which assessee was formed and
registered there is no violation of Section 11(2). SLP of Revenue is dismissed as there
was gross delay of 496 days in filing the SLP. (AY. 2003-04)
Asst. CIT v. Cargo Handling Private Workers Pool (2024)467 ITR 32/ 300
Taxman 450 (SC)
Editorial : CIT v. Cargo Handling Private Workers Pool (2024)467 ITR 32 (AP)(HC)

S. 11 : Property held for charitable purposes-Information to charity

commissioner-Remuneration to trustees-Denial of exemption is not justified-
SLP of Revenue is dismissed. [S. 13(1)(c), 260A]

77
Dismissing the appeal of the Revenue the High Court held that the Tribunal had followed
its own decision in which it had granted exemption under section 11 to the assessee for
the assessment years 2008-09 and 2009-10. Since there was nothing on record that
such orders had been set aside or overruled in any manner by the court, the Tribunal
had found no reason to interfere with the order of the Commissioner (Appeals). There
was no infirmity in the order of the Tribunal granting exemption under section 11 to the
assessee for the assessment year 2010-11. SLP of Revenue is dismissed. (AY. 2010-11)
CIT (E) v. Lata Mangeshkar Medical Foundation (2024) 464 ITR 706/300
Taxman 178 (SC)
Editorial : CIT (E) v. Lata Mangeshkar Medical Foundation (2024) 464 ITR 702/162
taxmann. com 118 (Bom)(HC)

S. 11 : Property held for charitable purposes-Construction activities under State

PWD department-2. 5 per cent supervision charges-Matter is remanded to
Assessing Officer for determination of commercial activity and considering the
benefit of section 12A. [S. 2(15), 12A]
Assessee-society was registered under section 12A with main objective to take up
construction work of any nature to establish a chain of retail outlets. It undertook
construction activities under State PWD department in lieu of 2. 5 per cent supervision
charges and accordingly claimed certain amount as applied for charitable purposes.
Assessing Officer held that construction work was an activity of trade, commerce or
business for consideration and assessee could not claim status under section 12A since
activities carried on by it did not fall within the meaning of charitable purpose warranting
exemption from income tax. Order was affirmed by Tribunal. On appeal High Court held
that where assessee executed construction work for benefit of Government and received
certain amount from Government for same, purpose of such construction work could not
be accepted as an activity coming within meaning of advancement of other object of
general public utility. It further held that since assessee was involved in carrying on of
any activity in nature of trade, commerce or business, proviso to section 2(15) would be
attracted and assessee would not be entitled to benefit under section 11 of the Act. On
appeal considering the judgement of Apex Court in ACIT (E) v. Ahmedabad Urban
Development Authority [2022] 143 taxmann. com 278/[2023] 291 Taxman 11/[2022]
449 ITR 1 (SC) matter is remanded to Assessing Authority for determination of
commercial activity and for considering benefit of section 12A and for passing
appropriate orders. (AY. 2009-10, 2013-14)
Nirmithi Kendra v. Dy. CIT (E) (2024) 297 Taxman 382/ 336 CTR 743 (SC)
Editorial : Nirmithi Kendra v. Dy. CIT (E) (2022) 141 taxmann. com 495 (Ker)(HC), set
aside.

S. 11 : Property held for charitable purposes-The advancement of objects of

general public utility-Entitled to exemption. [S. 2(15), 12, 260A]
Held that the advancement of objects of general public utility, assessee is Entitled to
exemption. Followed CIT (E) v. Ahmedabad Urban Development Authority [2022] 449
ITR 1 (SC).
CIT v. (E) v. Ahmedabad Urban Development Authority (2024)470 ITR 164
(Guj) (HC)
S. 11 : Property held for charitable purposes-Donations to other charitable
institutions-Out of accumulated income-Direction as part of corpus donations-

78
Not hit by Explanation 2 to section 11(1) of the Act. [S. 11(1), 11(2), 11(3),
11(3)(d), 260A]
The assessee-trust had accumulated income under section 11(2) and extended
donations to other charitable trusts. The Assessing Officer held that extending donations
to other charitable trusts would amount to utilization of the funds for a purpose other
than those for which the surplus was accumulated under section 11(2) and thus being
violative of section 11(3)(c) and section 11(3)(d). On appeal, the Commissioner
(Appeals) held in favour of the assessee. On further appeal, the Tribunal affirmed the
view taken by the Commissioner (Appeals). On appeal High Court affirmed the order of
the Tribunal. (AY. 2009-10)
CIT (E) v. Jamnalal Bajaj Foundation (2024) 300 Taxman 36 /468 ITR 723
(Delhi)(H

S. 11 : Property held for charitable purposes-Corpus fund-Corpus Donations-

Securing admission-Tribunal is not justified in holding ineligible for exemption
on corpus Fund. [S. 11(1)(a), S. 11 : Property held for charitable purposes. [S.
11(1)(d), 260A]
Allowing the appeal the Court held that the amounts paid by the parents of the students
admitted to the educational institution of the assessee-trust were payments towards
corpus donation and were not collected by way of capitation fees. The Assessing Officer
had not conducted any inquiry with regard to examination of parents who had admitted
the students in school as to whether the payment was made towards corpus fund or
capitation fee. Though it was true that the donation was bound to have been given for
material gain in securing admission, it could not be characterised as donation towards
charitable purpose and the assessee would not be entitled to have the benefit, but in the
absence of any material on record, such view could not be taken. Therefore, the Tribunal
had committed an error by treating the admission fees charged from the students as not
forming part of the corpus fund of the trust. Therefore, the Tribunal was not justified in
confirming the addition of the corpus fund to the income of the assessee by holding that
the receipts could not be treated as corpus donation and not eligible for exemption under
section 11(1)(d). (AY. 2013-14)
N. H. Kapadia Education Trust v. Asst. CIT (E) (2024)467 ITR 278 (Guj)(HC)

S. 11 : Property held for charitable purposes-Specific purposes and objects

without profit motive-Investment in Joint venture and utilisation of land
allotted by Government for commercial purposes and earning profits in form of
rental Income and sharing of profits-Deviation and contravention of objects,
purposes and mission-Not entitled to exemption-Denial of exemption cannot
be restricted only to extent of sum of investment in joint venture-Assessee is
not entitled to exemption. [S. 11(5), 12, 12A,13(1)(d), 80G, 260A]
The assessee is a society registered under section 12A of the Act, and was approved
under section 80G of the Act. It was established with a specific purpose, object and
mission to promote the quality of construction and bring in international standards, and
undertook activities for the promotion of education, training, research and imparting
professionalism and skill formation at all levels of construction. For this a joint venture
company H was constituted for holding exhibitions and also to promote the object and
mission of the assessee. For the assessment year 2002-03 the Assessing Officer held
that the investment of the assessee in the joint venture was in violation of
section 11(5) and rejected the claim for exemption under section 11. The Commissioner
79
(Appeals) and the Tribunal affirmed his order. On appeal dismissing the appeals, (i) that
the assessee-society had acted contrary to its purpose, objects and mission and could
not claim exemption under section 11. There were concurrent findings by the
Commissioner (Appeals) and the Tribunal based on facts available on record that the
assessee had earned profits in contravention of its mission and objects. In addition to
the establishment of a joint venture, the assessee had also parted with hundred acres
of land allotted by the Government to the joint venture which had utilised the land for
purpose of holding exhibitions of all natures and in the process, had earned income in
the form of rent. The joint venture had also used the land for commercial purposes by
allotting the land to other commercial establishments. These aspects had been duly
considered by the Assessing Officer and the appellate authorities who had rejected the
exemption under section 11. The deviation and contravention disentitled the society
from claiming the benefit of exemption under section 11. That the contention of the
assessee that the Tribunal could have restricted the denial of exemption under
section 11 to the extent of investment made in the joint venture could not be accepted
for the reason that the amount of investment already carried out by the assessee in the
joint venture, coupled with the fact that the assessee had parted with hundred acres of
land to be used by the joint venture company for gaining rental and other income and
the rental income earned by the joint venture having been shared with the assessee to
some extent, in contravention of the object, purpose and mission for which the assessee
was established. That the Government instructions or Government orders on the basis
of which the assessee had received funds were no longer in existence but were struck
down by the court. In view of passing of G. O. Ms. No. 92, dated May 19, 1998, by the
State Government, the corpus amount generated by the assessee was not voluntary
contribution and therefore, the amount invested by the assessee in the joint venture
company could not be treated as group corpus fund. The amount of investment in shares
of the joint venture company and the transfer of hundred acres of land by the assessee
to the joint venture company were covered under section 13(1)(d). Therefore, the
assessee-society rendered itself disentitled to the benefit under section 11 in view of
violation of section 11(5) Finance Act, 1983 ([1983] 142 ITR (St.) 13), (AY. 2002-03)
National Academy of Construction v. ADIT(E) [2023] 156 taxmann. com 532/
(2024)465 ITR 69 / 340 CTR 729 (Telangana) (HC)
S. 11 : Property held for charitable purposes-Information to charity
commissioner-Remuneration to trustees-Denial of exemption is not justified.
[S. 13(1)(c), 260A]
Dismissing the appeal of the Revenue the Court held that the Tribunal had followed its
own decision in which it had granted exemption under section 11 to the assessee for the
assessment years 2008-09 and 2009-10. Since there was nothing on record that such
orders had been set aside or overruled in any manner by the court, the Tribunal had
found no reason to interfere with the order of the Commissioner (Appeals). There was
no infirmity in the order of the Tribunal granting exemption under section 11 to the
assessee for the assessment year 2010-11. (AY. 2010-11)
CIT (E) v. Lata Mangeshkar Medical Foundation (2024) 464 ITR
702 (Bom)(HC)
Editorial : SLP of Revenue is dismissed, CIT (E) v. Lata Mangeshkar Medical Foundation
(2024) 464 ITR 706 (SC)

S. 11 : Property held for charitable purposes-Capital gains-Memorandum of

Understanding (MOU)-Symbolic possession-Permission from the Charity
80
Commissioner-Capital asset is held to be wholly for the purpose of charitable
purpose-Legal possession-Sale proceeds were invested with nationalised bank-
Entitled to claim exemption-Order of Tribunal is affirmed-No substantial
question of law. [S. 11(IA), 260A]
Assessee, a public charitable trust, entered into an agreement in 1994 with a builder,
Buildforce to sell a property and as per MOU, symbolic possession was given to
Buildforce. Certain dispute arose between Buildforce and assessee and a suit came to be
filed which was settled and under which assessee agreed to accept a certain sum in full
and final settlement and transfer property in favour of nominee of Buildforce and sale
proceeds were invested with nationalised bank and assessee claimed that no capital gain
was to be assessed in hands of assessee in view of provisions of section 11(1A).
Assessing Officer did not accept this stand of assessee because, according to him,
assessee entered into an agreement with Buildforce in 1994 and sale deed was executed
in favour of its nominee after a period of almost 12 years and since in this intervening
period of 12 years, possession of property was with Buildforce as per MOU, assessee
was not in possession, it could not be held that property was being held under trust
wholly for charitable or religious purposes and, thus, assessee had not fulfilled
requirement of section 11(1A). CIT(A) allowed the claim. Tribunal affirmed the order of
the CIT(A). On appeal the Court held that once legal possession had been handed over
by assessee only in 2008-09 then it was to be presumed and accepted that said capital
asset was held by assessee trust wholly for charitable purposes till date of its sale and
thus, assessee was entitled to claim benefit under section 11(1A). (AY. 2008-09).
CIT (E) v. Shree Ram Ashram Trust Nashik (2024) 298 Taxman 40 (Bom.)(HC)
S. 11 : Property held for charitable purposes-Reassessment-Accumulation of
income-Filed revised form-Assessee could not be precluded from filing a
revised Form No. 10 during reassessment proceedings. [S. 11(2) 12A,143(1),
147, 148, Form No. 10, Rule 17]
Held that there is no doubt about the fact that a revised Form No. 10 was filed after the
notice under section 148 was issued, albeit, along with the ROI, in response to the said
notice. Therefore, the point of inflection between the respondent/assessee and the
appellant/revenue was whether a revised Form No. 10 could have been filed by the
respondent/assessee during the reassessment proceedings. To claim the benefit of the
provisions of sub-section (2) of section 11, the respondent/assessee had to file a
statement in the prescribed form, i. e., Form No. 10. The Tribunal has noted that there
is no adverse finding by the Assessing Officer concerning the fulfilment of conditions
subject to which the accumulation of income was allowed under section 11(2).
Accordingly the assessee is not precluded from filing a revised Form No. 10 during
reassessment proceedings. (AY. 2008-09)
CIT (E) v. Canara Bank Relief and Welfare Society (2024) 297 Taxman 153 /471
ITR 37 (Delhi)(HC)

S. 11 : Property held for charitable purposes-Form No 10 was filed in the course

of assessment proceedings-Amendments in the Act went unnoticed-Delay in
filing the Form No 10B is condoned. [S. 10(23A),12A, Art. 226]
Assessee filed its return of income claiming exemption under section 10(23A). In course
of assessment proceedings, assessee claimed exemption under section 11 and also filed
Form 10 along with application, seeking condonation of delay in filing same. Assessing
Officer passed assessment order without taking into consideration exemption claimed by
assessee. CIT (E) dismissed condonation of delay application preferred by assessee,
81
holding that assessee had no intention of filing Form 10 within due date and was not
prevented by any reasonable cause from filing same. On writ the Court held the delay
in filing Form 10 occurred because amendments went unnoticed by officials of assessee.
Assessment year 2016-17 was first occasion subsequent to amendments in section 11
and 13 by way of Finance Act, 2015. Therefore, there was no reason to disbelieve
explanation furnished by assessee to explain delay in filing Form 10. Further, mere
failure to claim accumulation could not be read as reasons to believe that assessee did
not intend to file Form 10. Order passed by Commissioner (E) is to be set aside and,
delay in filing Form 10 is condoned. Circular No. 07/2018, dated 20-12-2018, Circular
No. 03/2020 dated 3-1-2020, and Circular No. 17/2022, dated 19-7-2022. (AY. 2016-
17)
Bar Council of India v. CIT (E) (2024) 297 Taxman 247 /466 ITR
780 (Delhi)(HC)

S. 11 : Property held for charitable purposes - Income from property held for
charitable or religious purposes – Reassessment- After the expiry of four years
- Charging capitation fees - Contrary to the objectives of a charitable trust -
Not eligible for exemptions - Term ‘wholly’ under section 11 refers to the
purpose of the trust- Order of Tribunal setting aside reassessment proceedings
is held to be erroneous. [S. 10(23C)(iv), 11, 12, 12A, 12AA, 132, 148, 245D(6),
260A]
The Court ruled that the assessee was not eligible for exemptions under Sections 11 and
12, as charging capitation fees was contrary to the objectives of a charitable trust. The
Tribunal’s decision to uphold the exemption was erroneous. The Court clarified that the
term "wholly" in Section 11 pertains to the purposes of the trust, not the property, and
is akin to "solely," leaving no room for purposes to be only partially charitable or religious
in nature. Additionally, the Tribunal wrongly relied on a Settlement Commission order,
which is final and conclusive only for the specific assessment year of the application, not
for subsequent years. Consequently, the Tribunal’s order was set aside. (AY. 2007-08)
PCIT v. Maharaji Education Trust (2024) 166 taxmann. com 197 (2024)468
ITR 634 (Delhi)(HC)

S. 11 : Property held for charitable purposes-Once exemption is denied and the

registration is with drawn the income of the trust should be assessed an AOP-
Only surplus profit can be assessed-Application before CBDT for condonation
of delay in filing Form No 10BB-The AO is directed to decide the issue of
exemption after the order of the CBDT. [S. 12AA, 119, Form 10BB.]
Held that once exemption is denied and the registration is with drawn the income of the
trust should be assessed an AOP. Only surplus profit can be assessed. The Tribunal
also held that the application before CBDT for condonation of delay in filing Form No
10BB is pending. The AO is directed to decide the issue of exemption after the order of
the CBDT. (AY. 2019-20, 2020-21)
Church Educational Society v. ACIT (2024) 232 TTJ 553 / 244 DTR 193 / 38
NYPTTJ 1419 (Hyd)(Trib)
Aurora Educational Society v. ACIT (2024) 232 TTJ 553 / 244 DTR 193 / 38
NYPTTJ 1419 (Hyd)(Trib)
Karshik Vidya Parishad v.. ACIT (2024) 232 TTJ 553 / 244 DTR 193 / 38
NYPTTJ 1419 (Hyd)(Trib)
82
S. 11 : Property held for charitable purposes-Rental income-Community hall-
No profit motive-Object of general public utility-receipts from such activity do
not exceed 20 per cent of the total receipts, proviso to S. 2(15) is not
applicable-Corpus donations-Direction to building fund-Exemption under
section 11(1)(d) is applicable. [S. 2(15), 11(1)(d), 12, 12AA]
Held that the rent charged by the assessee-society for letting out its community hall to
public at large for organising social, cultural and religious ceremonies is fair and
reasonable and the receipts from the rent is less than 20 per cent of the total receipts
and there is no material on record to hold that the assessee is acting with profit motive,
proviso to S. 2(15) is not attracted. Benefit of sections 11 and 12 is allowable. Held
that corpus donations with specific direction to building fund the exemption under
section 11(1)(d) is applicable. (AY. 2016-17)
CIT (E) v. Shree Assistant Maheshwari Samaj (2024) 232 TTJ 17 (UO)
(Jodhpur) (Trib)

S. 11 : Property held for charitable purposes-Corpus donation-Foreign

donation-Project is struck on account of stay order of High Court-Amount
utilised for repayment of bank loan-Exemption is allowable. [S. 11 (1)(d)]
Held that the corpus donation received from its founder member for the purpose of
construction/running of hospital/dispensary and clinic, there is no violation of s.
11(1)(d) for the reason that the assessee has utilized this donation for repayment of
bank loan which was taken for purchasing the land for the said purpose. Exemption is
allowable. (AY-2014-15 to 2016-17)
ACIT (E) v. Padmavati Institute For Medical Education & Science Trust (2023)
37 NYPTTJ 1675 / (2024) 227 TTJ 470 / 233 DTR 321 (Jodhpur) (Trib)

S. 11 : Property held for charitable purposes-Composite objects-Kalyan

Mandapam on commercial lines for fees and cess like any other persons
carrying business-Receipts from the marriage hall related activities are more
than the specified limit as per proviso to S 2(15)-Rejection of exemption is
justified-Printing a diary of trustees and their family members does not per se
amount to diversion of trust funds for the benefit of trustees-Amounts spent
for the Diwali get-together of the trustees in the course of carrying on activities
of the trust cannot be considered as diversion of trust funds for the benefit of
trustees-No violation under section 13(1)(c)-Depreciation-Commercial
principle-Corpus donations-Exemption denied-Includable in total income-
Expenditure-Expenditure is to be allowed for earning of income including its
activities as deduction-House property for the benefit of the members of one
family-Not allowable as deduction. [S. 2(15), 13(1)(c), 22, 24, 37(1), 133A]
Assessee-trust is running Kalyan Mandapam on commercial lines for fees and cess like
any other persons carrying out business operations. Except a minimum amount of
donations, the assessee has not spent any amount for charitable purpose as per its
objects specified in the deed of trust. Receipts from the marriage hall related activities
are more than the specified limit as per proviso to S 2(15). Rejection of exemption is
justified. Printing a diary of trustees and their family members does not per se amount
to diversion of trust funds for the benefit of trustees. Amounts spent for the Diwali get-
together of the trustees in the course of carrying on activities of the trust cannot be
considered as diversion of trust funds for the benefit of trustees-No violation under
83
section 13(1)(c). The assesseee Trust is denied the exemption hence the depreciation
is directed to be allowed on commercial principle. When exemption is denied corpus
donations is to be includable in total income as per the provisions of the Act. As the
exemption is denied the expenditure is to be allowed for earning of income including its
activities as deduction. As the house property is used for the benefit of the members
of one family the expenditure incurred is not allowable as deduction. (AY. 2013-14 to
2019-20)
Ramsahaimal Sahuwala & Sons Charitable Trust v. ACIT (2023) 37 NYPTTJ
1514 /(2024) 227 TTJ 957 / 238 DTR409 / 163 taxmann. com 175 (Chennai)
(Trib)

S. 11 : Property held for charitable purposes-Advance for purchase of land in

earlier year-Proposal for cancellation of registration is dropped-Addition as
notional interest is deleted-Exemption cannot be denied. [S. 12AA, 13(1)(c),
13(2)(a) 13(3)]
Held that the advances given by the assessee-society for purchase of land for its
educational activities without interest or security have been accepted as genuine
business deal by the CIT(E) and the proceedings for cancellation of registration under s.
12AA were dropped. There is no violation of provisions of s. 13(1)(c), 13(2)(a) and
exemption under S. 11 cannot be denied. (AY. 2016-17)
Rastogi Education Society v. ITO (2024) 227 TTJ 478 / 233 DTR 225 / 161
taxmann. com 220 (Raipur)(Trib)

S. 11 : Property held for charitable purposes-Registered under section 12AA-

Applied once again-Directed to allow the exemption. [S. 12A(2), 12AA]
Held that CIT(E) having granted registration under S 12AA when the appeal was
pending for denial of exemption. Exemption is allowable. Followed, CIT v. Shree Shyam
Mandir Committee [IT No. 234 of 2016, dt. 23rd Oct., 2017 (Raj)(HC) (AY. 2010-11)
Shri Parnami Panchayat v. ITO (E) (2024) 227 TTJ 603 / 234 DTR 313 / 161
taxmann. com 438 / (SMC) (Jaipur)(Trib)

S. 11 : Property held for charitable purposes-Objective of providing low-

interest loans to downtrodden individuals-Interest charged over and above
bank interest-Huge profit-Micro-Finance Activity-Business activity-Not entitled
to exemption. [S. 2(15) 11(4A) 12
Held that as per the report of the Reserve Bank of India the interest charged by the
assessee was very high. The activity being commercial in nature the proviso to
section 2(15) is not available to the assessee (AY. 2016-17, 2018-19)
Sanghamitra Rural Financial Services v. ACIT (E) (2024)116 ITR 539
(Bang)(Trib)

S. 11 : Property held for charitable purposes-Imparting education-Activities in

nature of trade, commerce or business-Separate Books account and balance-
sheet is not maintained-Matter remanded for verification. [S. 2(15), 11(
4A),12, 12A 13(8)]
Tribunal directed the Assessing Officer to examine the matter afresh keeping in mind
that if some profits were generated from such activities, the assessee could be granted
exemption provided the receipts from such profit do not exceed the quantitative limit of
20 per cent. in terms of the second proviso to section 2(15). Further, the prohibition
84
against carrying on business or service of a commercial nature would not be attracted,
if the quantum of such profits did not exceed 20 per cent. of the overall receipts. The
matter is restored to the Assessing Officer to examine these facts. (AY. 2011-12, 2012-
13, 2018-19)
Dy. CIT (E) v. Nehru Centre (2024)116 ITR 40 (SN)(Mum)(Trib)

S. 11 : Property held for charitable purposes-Accumulation of income-Utilised

for capital expenditure-Failure to verify the submission-Section 11(6) which
was introduced in the statute with effect from April 1, 2015, is clarificatory in
nature-Matter remanded to the Assessing Officer to verify the claim. [S. 11(2),
11(6)]
Held, that the assessee is eligible to claim application of income towards acquisition of
fixed assets. Though, section 11(6) was introduced in the statute with effect from April
1, 2015, it was clarificatory in nature and applicable for the year under consideration as
well. The Assessing Officer, without verifying the submissions of the assessee, had held
that no proper system was followed for utilisation of the accumulated income and that
the capital expenditure could not be claimed as an application against accumulation
under section 11(2). The finding of the Assessing Officer is not in accordance with the
provisions of the Act. The matter is set aside to the Assessing Officer to re-examine the
assessee’s claim. (AY. 2014-15, 2016-17, 2017-18)
Gujarat Safety Council v. ITO (2024)114 ITR 70 (SN) (Ahd)(Trib)

S. 11 : Property held for charitable purposes-Donations-Capitation fees-

Assessing Officer had not carried out any independent investigation or
examination of persons-Matter remanded.
Held that the Assessing Officer had not carried out any independent investigation or
examination of persons. Matter remanded. (AY. 2017-18, 2018-19)
MAC Charities v. ACIT (E) (2024)114 ITR 17 (SN)(Chennai)(Trib)

S. 11 : Property held for charitable purposes-Commissioner (Appeals)

condoned the delay in filing Form No 10-Revenue has not challenged the order
of CIT(A)-Accumulation of income-Failure to provide specific purpose for
accumulation of Funds Form 10-Entitled to exemption. [S. 11(2) 12A, Form No
10]
Commissioner (Appeals) had condoned the delay in filing form 10 and the Revenue had
not challenged this issue. Hence, the first reasoning on which the Assessing Officer
disallowed the accumulation under section 11(2) did not survive. Tribunal held that
substantial justice should be preferred to technicalities in deciding the issue. The purpose
for which the amount was claimed to be accumulated was specifically mentioned in form
10 of assessment year 2016-17 as to be applied to promote and support research
scientists for the advancement of research and development in future. The the
Assessing Officer is directed to allow the consequential benefit under section 11(2) for
the relevant year. (AY. 2016-17, 2017-18)
National Childrens Fund v. ITO (E) (2024)114 ITR 78 (SN)(Delhi)(Trib)

S. 11 : Property held for charitable purposes-Promote welfare and causes of

craftsmen-Ex-parte order by CIT(A)-Issue is set aside to Assessing Officer for
de novo assessment as per ratio in ACIT v. Ahmedabad Urban Development
Authority(2022) 449 ITR 1 (SC) [S. 2(15), 12A]
85
Held, that the Commissioner (Appeals) had proceeded ex parte against the assessee in
complete violation of the principles of natural justice. He ought to have remanded the
appeals to the Assessing Officer for fresh adjudication. Therefore, the issue is set aside
to the Assessing Officer for de novo assessment per ratio laid down by the Supreme
Court in Asst. CIT (E) v. Ahmedabad Urban Development Authority(2022) 449 ITR 1
(SC) after affording an adequate opportunity of hearing to the assessee. (AY. 2011-12,
2013-14, 2015-16, 2016-17)
The Crafts Council Of India v. JCIT (E) (2024)114 ITR 58 (SN) (Chennai)(Trib)

S. 11 : Property held for charitable purposes-Charitable trust-Exemption under

section 11-Allowability-Audit Report in Form No. 10B not filed along with
return-AO is directed to verify the Form No. 10B filed by the assessee and allow
the claim of exemption under section 11. [Form No 10B]
Filing of Form No. 10B, would be directory in nature, as such, the AO is not powerless
to allow an assessee to file Audit Report, if not filed along with return, at any time before
completion of assessment. Further, filing of Form No. 10B beyond the due date, could
not disentitle the trust from exemption claimed under section 11. Accordingly, AO is
directed to verify the Form No. 10B filed by the assessee and allow the claim of
exemption under section 11. [AY 2016-17] [ITA No. 903/Chny/2023, dt. 13/12/2023]
Sri Vetri Vinayagar Educational Trust v. ITO (Chennai)(Trib) (UR)
S. 11 : Property held for charitable purposes-Accumulation of income-Filing of
audit report in Form 10B-Before due date of filing of return-Not mandatory-
Filed along with the return-Direction of CIT(A) is affirmed. [S. 11(2), 139(1),
Form,10B]
Held that the return was filed by the assessee on November 29, 2014, and form 10 was
filed one day later on November 30, 2014. The assessee also brought on record evidence
of filing of forms 10 and 10B on November 30, 2014, which was within the due date as
prescribed under the Act and Rules. The audit report was filed in this case on November
30, 2014, which was within the time as admissible under the provisions of
section 139(1) of the Act. Direction of the Commissioner (Appeals) to allow the
deduction under section 11(2) of the Act is affirmed. (AY. 2014-15)
Dy. CIT (E) v. Gujarat State Board of School Text Book (2024)113 ITR 33
(SN)(Ahd) (Trib)

S. 11 : Property held for charitable purposes-Filing of audit report-Form No 10B

was filed before passing of the intimation-Denial of exemption is not valid-Fee
for late filing-Filed return within prescribed time-limit-Late fee is not leviable.
[S. 139(1),143(1),234F, Form No 10B]
Held that that as on the date on which the intimation under section 143(1) of the Act
was passed, the auditor of the assessee-trust had already filed the audit report in form
10B, before such intimation under section 143(1) of the Act was issued. There was no
deliberate or mala fide intention on the part of the assessee or its auditor to file the audit
report in form 10B belatedly. The claim of application of income could not be denied to
the assessee only on the ground that the assessee or the auditor of the assessee omitted
to file form 10B along with return of income, when it was submitted to the tax authorities
before the intimation under section 143(1) of the Act was issued. The assessee-trust
had filed its return of income as on September 26, 2018, within the prescribed time-
limit under section 139(1) of the Act. Section 234F is not applicable. (AY. 2018-19)
Shiksha Foundation v. ITO (E) (2024)113 ITR 14 (SN)(Ahd)(Trib)
86
S. 11 : Property held for charitable purposes-Accumulation of income-
Application of income-Non-corpus fund shown at figure higher than investment
shown-Matter remanded for fresh adjudication. [S. 2(15), 11(2),11(5),
13(1)(d)]
Held that the audited financial statements, statement of income and the return of income
for the assessment year 2013-14 were not filed by the assessee during the proceedings
before the authorities but had been filed along with the return of income, meaning
thereby, that these documents were already available with the authorities below, but
they did not look into them. In the interest of justice and fair play, the matter was to be
remanded for fresh adjudication. That the balance-sheet of the assessee showed that
the capital fund shown by the assessee was utilised in fixed assets, capital work-in-
progress and current assets. Such amount represented the application of income and,
therefore, was to be excluded while calculating the amount to be invested under the
provisions of section 11(2) read with section 11(5) of the Act. Nevertheless, the
assessee had not represented the facts properly, the matter is remanded to the
Assessing Officer for de novo adjudication as per the provisions of law. (AY. 2018-19)
Vaidic Dharma Sansthan v. Dy. CIT (E) (2024)113 ITR 1 (SN) (Bang)(Trib)

S. 11 : Property held for charitable purposes-Audit report-Filing audit report in

Form No. 10B is procedural in nature-For not filing audit report along with
return, exemption cannot be denied-Matter is remanded to the file of CIT(A).
[S. 12A, Form No. 10B]
Assessing Officer denied exemption under section 11 on reasoning that there was a
delay of 235 days in filing Form No. 10B (audit report). CIT(A) dismissed appeal by
stating that neither he nor the Assessing Officer were empowered to condone delay.
On appeal the Tribunal held that requirement of filing audit report in Form No. 10B is
procedural in nature and, therefore, not filing audit report along with return of income
was a procedural omission only and could not be impediment in law in claiming
exemption. Since due to confusion in interpretation of law audit report in Form No. 10B
was filed after specified period, delay in filing audit report in Form No. 10B deserved to
be allowed. Matter is restored to CIT(A) to allow exemption. (AY. 2021-22)
Bhagwant Kishore Memorial Educational Society. v. ITO (2024) 209 ITD 179
(Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Advancement of general public

utility--Sponsorship agreements with few Indian business groups-Neither
sponsor nor assessee could be attributed any profit motive from outcome of
these sponsorship agreements-Eligible for exemption. [S. 2(15) 12]
Assessee, an apex sports body in India representing country, claimed exemption under
sections 11 and 12. During the year, assessee entered into sponsorship agreements
with few Indian business groups and received certain amount as sponsorships. Assessing
Officer held that the nature of activities in respect of sponsorship agreements with
various sponsors is in nature of business and held that assessee was hit by second
proviso to section 2(15) and, hence, not eligible for benefit of exemption under sections
11 and 12. CIT(A) allowed the exemption. On appeal the Tribunal held that the assessee
is representing country under aegis of Government in amateur international sports
events and arranging these sponsorship contracts is in itself a great task for assessee
as sponsors were paying out of their profits for motivating assessee and sportspersons
of country in participating in international events. Therefore neither sponsor nor
87
assessee could be attributed any profit motive from outcome of these sponsorship
agreements. Order of CIT(A) is affirmed. (AY. 2017-18)
DCIT(E) v. Indian Olympic Association. (2024) 209 ITD 209 (Delhi) (Trib.)
S. 11 : Property held for charitable purposes-Audit report Form 10B-Delay of
31 days-Pending before CIT(E)-Matter is remanded. [S. 12A(1)(b), Form 10B]
Assessee-trust was denied benefit of section 11 by Assessing Officer on ground that it
did not furnish audit report in Form 10B within prescribed time. CIT(A) up held the order
of the AO. Tribunal held that since assessee had filed an application for condonation of
delay of 31 days in filing Form 10B before CIT (E), but said application was still pending
for disposal. Tribunal directed the Assessing Officer to restore exemption proceedings
and to decide claim of assessee for exemption under section 11 after taking into
consideration decision of CIT(E) on application of assessee for condonation of delay in
filing Form 10B (AY. 2022-23)
Sha Hurgowan Anandji Desai Charities. v. DIT, (2024) 209 ITD 248 (Mum)
(Trib.)

S. 11 : Property held for charitable purposes-Delay in filing Form No. 10-Matter

remanded to the file of Assessing Officer-Assessee is directed to file exemption
application before CIT(E). [S. 11(2), Form No. 10]
Assessee-trust claimed exemption under section 11(2). Assessing Officer disallowed
claim of exemption on ground that assessee filed Form No. 10 after due date. CIT(A)
confirmed the order of the AO. On appeal the Tribunal held that in view of Circular No.
17/2022, dated 17-7-2022, matter is restored back to Assessing Officer with direction
to assessee for applying to Commissioner (E) and seek condonation of delay in filing
Form No. 10 and after condonation of delay in filing Form No. 10 by Commissioner (E),
Assessing Officer would decide claim of exemption under section 11(2). (AY. 2021-22)
Shree Pushkar Foundation. v. ITO (2024) 209 ITD 219 (Mum) (Trib.)

S. 11 : Property held for charitable purposes-Return was filed within time

allowed under section 139(4)-Assessing Officer is directed to allow assessee's
claim of exemption. [S. 12A, 139(1), 139(4), Form No. 10B]
Assessee-trust had filed e-return of income on 9-2-2019 along with Form No. 10B
declaring total income at nil after claiming exemption under section 11. Assessing Officer
disallowed assessee’s claim on ground that return of income was filed beyond time limit
prescribed under section 139(1). CIT(A) confirmed the action of the AO. On appeal the
Tribunal held that provision of section 139(4) with effect from 1-4-2017 lays down that
any person who has not furnished return of income within time allowed under section
139(1), may furnish return for any previous year at any time before end of relevant
financial year or before completion of assessment whichever is earlier. Since relevant
assessment year ends on 31-3-2019, return filed by assessee on 9-2-2019 was within
provision of section 139(4). The Assessing Officer is directed to allow claim of
exemption under section 11. (AY. 2018-19)
Susila Educational Trust. v. ITO (2024) 209 ITD 253 (Chennai) (Trib.)

S. 11 : Property held for charitable purposes-Development of areas and

infrastructural activities-Autonomous body established by Government of
Gujarat-Matter is set aside to file of Assessing Officer to consider same in
accordance with law as enumerated by Supreme Court in case of Asstt. CIT (E)

88
v. Ahmedabad Urban Development Authority (2022) 291 Taxman 11/ 449 ITR
1 (SC). [S. 2(15) 12AA]
Assessee,is an autonomous body, was established by Government of Gujarat for
development of areas and infrastructural activities. It claimed exemption under section
11 of the Act. The Assessing Officer denied exemption. Commissioner (Appeals) allowed
exemption holding that activities of assessee were not covered by proviso to section
2(15) read with section 13(8). On appeal the Tribunal set aside the matter to file of
Assessing Officer to consider the same in accordance with law as enumerated by
Supreme Court in case of Asstt. CIT (E) v. Ahmedabad Urban Development Authority
(2022) 291 Taxman 11/ 449 ITR 1 (SC). (AY. 2016-17, 2017-18)
DCIT (E) v. Surat Urban Development Authority. (2024) 209 ITD 424 (Ahd)
(Trib.)

S. 11 : Property held for charitable purposes-Accumulation of income-Failure

to file Form 10-Assessing Officer is directed to reconsider issue after disposal
of application filed by assessee for condonation of delay in filing Form 10. [S.
11(2),11(5), Form No. 10]
Assessee-trust earned income from various sources and invested balance amount in
fixed deposits. Assessee neither filed Form 10 explaining purpose of accumulation of
income under section 11(2) nor filed any details of investment in fixed deposits before
Assessing Officer. Assessing Officer made additions. CIT(A) up held the order of the AO.
On appeal the Tribunal held that the assessee submitted that it had not filed Form 10
either with return of income or at assessment/appellate stages, but said Form-10 had
been filed along with resolution of executive committee indicating accumulation of
income for purpose of objects of trust and also filed relevant proof of investment under
section 11(5). Assessee had also filed a petition for condonation of delay in filing Form
10 and said petition was pending for disposal. Since assessee had filed Form 10 along
with resolution of executive committee and petition for condonation of delay was pending
for disposal, matter is remanded back to Assessing Officer to reconsider issue in light
of Form 10 filed by assessee after disposal of application filed by assessee for
condonation of delay. (AY. 2020-21)
Sri Laxmi Narsimha Temple Nalgonda. v. ITO (2024) 209 ITD 474 (Hyd)
(Trib.)

S. 11 : Property held for charitable purposes-Non-profit organization-

Established for welfare of craftsmen-Exemption under section 11 to be decided
in light of judgment of Supreme Court in case of Asstt. CIT (E) v. Ahmedabad
Urban Development Authority(2022) 291 Taxman 11/ 449 ITR 1 (SC) [S.
2(15)]
Assessee was a non profit organization having objects to promote welfare of craftsmen.
During assessment, Assessing Officer invoked proviso to section 2(15) in respect of
certain income which in her view were in nature of trade and commerce and denied
exemption available under section 11. Commissioner (Appeals) by an ex parte order
upheld denial of exemption. On appeal the Tribunal held that Commissioner (Appeals)
should have remanded appeals to Assessing Officer for fresh adjudication in light of
judgment of Supreme Court in case of Asstt. CIT (E) v. Ahmedabad Urban Development
Authority (2022) 291 Taxman 11/ 449 ITR 1 (SC) rather than giving ex-parte decision
as same was in complete violation of principles of natural justice. Accordingly the
Assessing Officer is directed to consider claim of exemption under section 11 in light of
89
Judgment of Supreme Court in case of Ahmedabad Urban Development Authority
(supra). (AY. 2011-12, 2013-14, 2015-16, 2016-17)
Crafts Council of India. v. Jt. CIT (2024) 209 ITD 581 (Chennai) (Trib.)

S. 11 : Property held for charitable purposes-Accumulation of income-

Accumulated certain amount for purpose of building funds-Re development
work-Delay in redevelopment-NOC from Airport Authority-Application filed
under section 11(3A) was pending consideration before Assessing Officer-
Section 11(3)(c) is not applicable-Period of accumulation was ending on 31-
3-2018 vide resolution dated 29-3-2018 and in order to rectify said mistake
revised Form 10 was filed by assessee stating period of accumulation to be till
31-3-2023-Claim was under section 11(2) and not under section 11(1)(a),
revised Form 10 should be considered for determining accumulated funds
available with assessee under section 11(2). [S. 11(2), 11(3A), 11(5), 12A,
13(3)(c), Form No 10]
Assessee is a charitable trust registered under section 12A. Assessee had accumulated
an amount of Rs. 4 crore during year 2012-13 for purpose of building funds. The
assessee did not have surplus money to set apart or accumulate under section 11(2).
Thereafter, assessee filed revised Form 10. Assessing Officer made additions in income
of assessee on ground that income accumulated under section 11(2) did not satisfy
conditions laid out under section 11(3). On appeal the CIT(A) deleted the disallowance.
On appeal the Tribunal held that the assessee has submitted that funds accumulated in
financial year 2012-13 for redevelopment work could not be utilised in year under
consideration as it operated very close to Mumbai Airport and for any
extension/redevelopment work it had to take NOC from Airport Authority of India and
because of said reason redevelopment work of its school building was delayed.
Furthermore assessee had filed an application under section 11(3A) in this regard. Since
assessee’s application filed under section 11(3A) was pending consideration before
Assessing Officer, section 11(3)(c) would not apply to instant case. The Tribunal
affirmed the order of the CIT(A). Assessing Officer also rejected assessee's claim of
accumulation of funds under section 11(2) on ground that period of accumulation was
stated to be ending on 31-3-2018 and, thus, assessee did not have income which it
intended to accumulate or set aside under section 11(2). Amount was decided to be
accumulated for carrying out purposes of trust vide resolution dated 29-3-2018 and in
order to rectify said mistake revised form 10 was filed by assessee stating period of
accumulation to be till 31-3-2023. Further, mode of investment was also as per section
11(5) as amount was deposited in scheduled banks or co-operative societies as per
section 11(5)(iii). CIT (A) deleted the disallowance. On appeal the Tribunal held that
since assessee’s claim was under section 11(2) and not under section 11(1)(a), revised
Form No. 10, which stated period of accumulation till 31-3-2023, should be considered
for determining accumulated funds available with assessee under section 11(2). Order
of CIT(A) deleting the addition is affirmed. (AY. 2018-19)
DCIT v. Vile Parle Mahila Sangh. (2024) 209 ITD 587 (Mum)(Trib.)

S. 11 : Property held for charitable purposes-Donation to another trust with

similar objects-Allowed as deduction in earlier years and latter years-Denial of
exemption is not valid. [S. 12A]

90
Held that the Assessing Officer himself in the subsequent assessment year has allowed
the claim of the assessee under section 11 of the Act and restricted the donation paid to
the Council alone for disallowance. Therefore, there was no merit in denying the benefit
under section 11 of the Act without considering the actual charitable activities of the
assessee-trust. Order of CIT(A) is affirmed. (AY. 2015-16

Dy. CIT v. Sheriff Foundation (2024)112 ITR 72 (SN) (Delhi)(Trib)

S. 11 : Property held for charitable purposes-Corpus donations-Distinct and

separate from income derived from property held under trust-Not entitled to
exemption. [S. 2(24), 11(1(a), 11(1)(d), 12(1)]
Held that Corpus donations are distinct and separate from income derived from property
held under trust hence not entitled to exemption. (AY. 2016-17 )
Dawoodi Bohra Musafirkhana Trust v. ITO (E) (2024)112 ITR 8
(SN)(Ahd)(Trib)

S. 11 : Property held for charitable purposes-Running business school-Payment

to related party-Assessing Officer had not demonstrated how payment for
business support services was not commensurate with market value of services
availed of--Salary expenditure to faculty members-Disallowance for failure to
file qualifications of teachers not sustainable-Disallowance is not warranted-
Payment of commission to Consultants and counsellors is justified-
Disallowance of expenses on computers to students is not reasonable. [S. 12A
13(2)(c), 13(2)(c),13(2)(g), 13(3)]
Held that the Assessing Officer had not demonstrated how the business support
expenses paid to F Ltd. were not commensurate with the market value of the services
availed of from F Ltd. an entity said to be covered under section 13(3) and thus the
assessee violated the conditions under section 13(2)(g) of the Act. The statement of
assessable income, balance-sheet and statement of profit and loss account of F Ltd.
showed income. The disallowance is not sustainable. That salary expenditure to faculty
members was disallowed due to non-filing of qualifications and experience and elaborate
the services rendered by persons. The assessee had engaged highly technical qualified
persons in whole-time management activities of trust as well as regular time teachers
in business school. The details of educational qualification and experience in absence of
any other evidence to the contrary could not be said to be not just fair and reasonable.
That the payment as commission to consultants and counsellors is justified. That
keeping in view the invoices, quotations and student-wise list the disallowance of
expenses on computers to students is not fair and reasonable. Additions confirmed by
the CIT(A) is deleted. (AY. 2012-13)
Shri Balaji Human Resources Development Trust v. ITO (2024)112 ITR 41
(SN)(Delhi)(Trib)

S. 11 : Property held for charitable purposes-Denial of exemption-Exemption

denied due to personal benefit-Interest-free loans to trustees-Trustees using
loans to acquire immovable properties-Expenditure disallowed as capital
expense-Remand for fresh consideration . [S. 12, 13(1)(c)(ii), 250]
The assessee, a charitable trust, had provided interest-free loans to trustees, who used
the funds to acquire immovable properties for construction of nursing college. These
properties were leased back to the trust. The Assessing Officer disallowed a lease deposit
91
of ₹25 lakhs, treating it as capital expenditure, and also disallowed hostel expenses of
₹27,72,490 as unpaid during the year. Further, the AO found that the trustees had
received loans totalling ₹1,70,11,398, which were used to buy properties in their
individual capacities, violating Section 13(1)(c)(ii), leading to denial of exemption under
Sections 11 and 12. The CIT(A) upheld the AO's decision but did not address specific
grounds relating to disallowed expenditures and the use of loans for property
acquisition. The CIT(A), despite the assessee making specific submissions and enclosing
documentary evidence, did not adjudicate specific grounds taken before him. The
Tribunal, noting this, directed the CIT(A) to reconsider these issues. (AY. 2013-14)
M. A. J. Foundation v. ITO (E) (2024) 112 ITR 78 (SN) (Bang)(Trib.)

S. 11 : Property held for charitable purposes-Engaged in upliftment of poor,

providing training and skill development of poor in rural areas in backward
districts-Entitled to exemption. [S. 2(15)]
Held, dismissing the appeals, that the Tribunal having held for the assessment years
2011-12 to 2014-15 that the assessee was not engaged in any trade, commerce or
business and thus the mischief of proviso to section 2(15) was not attracted in the case
of the assessee, and there being no change in facts order of CIT(A) is affirmed. (AY.
2015-16 to 2017-18)
ITO (E) v. Professional Assistance for Development Action (2024)111 ITR 87
(SN)(Delhi) (Trib)
S. 11 : Property held for charitable purposes-Prima facie adjustments-Claim
inadvertently made under Section 10(23C)-Failure to file mandatory form-
Prima facie adjustment is proper-No action can be taken merely on basis of
Form 10B filed in Appellate Proceedings-Direction of Commissioner
(Appeals) to avail of remedy under Section 119 to file revised return is proper
[S. 11, 119, 143(1), 154, Form No 10B]
Held that there was no denial of the fact that the claim for deduction under section 11 of
the Act was not made in the return of income. The assessee had claimed deduction under
section 10(23C) of the Act in the return. As the form essential for claiming exemption
under section 10(23C) was not furnished, the claim had been rightly rejected. Therefore,
the adjustment made while processing the return, could not be faulted. Tribunal also
held that there is no error in the direction of the Commissioner (Appeals) to avail of the
remedy under section 119 of the Act to file a revised return. The assessee was allowed
an opportunity in the intimation to file a rectification application, if so required, which
was not availed of. Accordingly, the remedy of rectification of mistake had to be availed
of before resorting to the alternate remedy under section 119(2)(b), if required. The
assessee may file an application under section 154 of the Act to rectify the mistake in
the intimation, if deemed proper. The assessee was also free to avail of the remedy
under section 119 of the Act, if he so desired. (AY. 2022-23)
Shri R. V. Shah Charitable Trust v. Dy. DIT (2024)111 ITR 83 (SN)(Ahd)(Trib)

S. 11 : Property held for charitable purposes-Accumulation-Not routed through

income and expenditure Account-Addition is deleted-Nodal agency for
rebuilding portions of the State of Uttarakhand affected by floods-Income-
Received funds for rebuilding flood-hit State-Utilised funds as per
requirements of State Government-Balance remaining after work repayable to
payer-Assessee is not owner of funds-Funds not income-Addition is deleted.
[S. 4, 11(2)]
92
The Assessing Officer held that the sums so received and accumulated ought to have
been routed through the income and expenditure account and ought not to have been
transferred directly to the balance-sheet. An addition was made as income. On appeal
the Commissioner (Appeals) deleted the addition. On further appeal the Tribunal held
that since there was a categorical finding that the sum under the Swachh Bharat Abhiyan
Scheme had been routed through the income and expenditure account. Order of CIT(A)
is affirmed. Assessee received funds from public sector undertakings and then disbursed
them as per the requirements of the State Government. It contended that these funds
never formed a part of the income of the assessee as the assessee was not the owner
of those funds but merely facilitated their collection and disbursal. Any balance in the
relevant bank account after the rehabilitation work was complete was to be returned to
the respective public sector undertakings. The AO assessed as income. CIT(A) deleted
the addition. On appeal the Tribunal held that the assessee was not the owner of the
funds received from the public sector undertakings in relation to the relief and
rehabilitation work in Uttarakhand. Order of CIT(A) is affirmed. (AY. 2015-16)

Dy. CIT (E) v. Sewa-THDC (2024) 110 ITR 151 (Delhi)(Trib)

S. 11 : Property held for charitable purposes-Object of general public utility-

Business-Income from organising meetings, conferences and seminars,
membership fee from members, interest on deposits and rentals from
properties-Disseminate knowledge on specialised issues to members and non-
members-Not business purposes-Subscription fee from existing members on
annual basis as well as admission fee from new members is not income by
virtue of principle of mutuality-Advancement of main object is not hit by
proviso to Section 2(15) even post-amendments-Invested in terms of section-
Entitled to exemption in respect of entire receipts-Depreciation-Directed to
allow depreciation as application of income-Capital Gains-Sale of old motor car
and purchase of new car-No opening written down value for year-Even if entire
cost claimed as application of income, assessee is entitled to claim deduction
of written down value from sale consideration for calculating capital gain-
Accumulation of income-Accumulation is to be computed on gross receipts and
not net receipts [S. 2(13), 2(15), 10(23C),(11(1)(a), 11(2), 11(5)(iii),12A,
13(8), 32,251(2)]
The assessee is an association of various industrialists, organisations and other
commercial entities for the development of trade, commerce and industry, was set up
with the sole purpose of promotion and protection of Indian business and industry and
was duly registered under section 12A of the Act as a charitable association with the
main objects to promote and protect the trade, commerce and industries in or with which
Indians were engaged or concerned. The membership of the assessee was comprised of
business houses, corporate houses within the country and abroad. The assessee derived
income from organising meetings, conferences and seminars for members and non-
members on cost-to-cost basis and by way of membership fees from members besides
earning or accruing interest on fixed deposit receipts, rental income and miscellaneous
income from the properties held by the assessee. For the assessment year 2013-14, the
assessee claimed exemption under section 11 of the Act. The Assessing Officer treated
the activities of organising conferences, meetings and seminars as business activities by
invoking the proviso to section 2(15) read with section 13(8) on the ground that the
assessee was charging consideration in the form of sponsorships, that the receipts from
93
these activities exceeded Rs. 25 lakhs in terms of the proviso to section 2(15) and denied
the exemption claimed under section 11 by bifurcating the total receipts into two
components, namely, business income and charitable income under section 11 and
computed the income accordingly and brought to tax the business income whereas the
deduction was allowed in respect of charitable income. Accordingly, he added Rs.
2,00,75,470 as net business income by apportioning the administrative expenditure
proportionately between the business and charitable receipts or income based on the
gross quantum of receipts under these heads. The exemption was allowed to the
assessee only in respect of interest, rental and miscellaneous income. On appeal, the
Commissioner (Appeals), after issuing show-cause notice under section 251(2) of the
Act, enhanced the income treating the entire receipts as business receipts and taxed it
at the rate applicable to companies. On appeal the Tribunal held that the assessee, in
order to protect and promote trade, commerce and industry had been organising the
activities of seminars, meetings and conferences in order to disseminate knowledge on
specialised issues to members and non-members on the subject with specialised
knowledge. During the events experts on the subjects were invited to speak on the
occasion and also participative discussion and interactions were held and members and
non-members were invited to such activities of the assessee. It was not organising any
trading programs to impart skill development courses by specialist and skilled knowledge
and certified courses but general meetings, conferences and seminars were organised
to discuss and debate issues in current topics, amendments of the Income-tax Act, Micro,
Small and Medium Enterprises Development Act, foreign trade policy and other issues
concerning trade, commerce and industries. During the year, the receipts from the
activities of holding and organising meetings, seminars and conferences were Rs.
9,48,14,435 and the profits as computed by the Assessing Officer constituted only 2 per
cent. of such receipts. Thus, the consideration charged by the assessee was just a cost
basis and nominally above the cost. However, if the administrative expenses were
allocated on a rational and scientific basis between the activities of holding meetings,
seminars and conferences on the one hand and other charitable receipts such as interest,
rental and miscellaneous income on the other hand, then there would be a huge loss
from these activities meaning thereby that the assessee had not been even charging
from these sponsors, participants, members or non-members sums enough to cover the
cost of the assessee and therefore it could be reasonably presumed that the assessee
had provided these activities below the cost. In the subsequent assessment year 2014-
15, the Assessing Officer had computed loss of Rs. 77,87,698. Therefore, the assessee
was not carrying on any activity of holding meetings, seminars and conferences for
business purpose but only in support of its main object and it charged from its
participants, members and non-members the amount of fee which did not even covers
the cost of holding such events. That the administrative and other incidental expenses
of holding and organising seminars, conferences and meetings were met out of other
charitable income received from interest on fixed deposit receipts, rental and
miscellaneous income. Hence, the assessee was entitled to exemption under
section 11 as the activities of the advancement of main object was not hit by the proviso
to section 2(15) of the Act even post-amendments. Tribunal directed the AO to allow
depreciation as application of income. As regards capital gains in respect of sale of old
motor car and purchase of new car, there is no opening written down value for the year.
Even if entire cost claimed as application of income, assessee is entitled to claim
deduction of written down value from sale consideration for calculating capital gain. The

94
accumulation of income is to be computed on gross receipts and not net receipts. (AY.
2013-14, 2014-15)
Indian Chamber of Commerce v. Dy. CIT (E) (2024) 110 ITR 30 /230 TTJ 364
/238 DTR 313 (Kol)(Trib)

S. 11 : Property held for charitable purposes-Covid-19-Delay in filing return and

Form No 10B-Supreme Court extending the period of limitation-Entitled to
exemption. [S. 12AA, Form No 10B]
Held that the return was filed in form 7 and form 10B on March 31, 2021 and March 30,
2021 while the extended due date for filing the return in the relevant assessment year
was February 15, 2021. Due to the covid-19 pandemic, the Supreme Court had extended
the period of limitation with respect to judicial or quasi-judicial proceedings. Therefore,
there was no delay in filing the return or form 10B. The order of the Commissioner
(Appeals) was set aside and the Assessing Officer was to allow the exemption claimed
under section 11 of the Act. (AY. 2020-21)
Onkar Society for Engineering and Technological Research v. ITO (2024) 110
ITR 393 (Kol)(Trib)

S. 11 : Property held for charitable purposes-Research work in area of micro

wave electronics-No changes in facts-Denial of exemption is not valid. [S. 2(15)
12A]
Assessee, an association, was engaged in research work in area of micro wave
electronics. It claimed exemption under sections 11 and 12. Assessing Officer held that
activities of assessee were purely research work and did not fall under section 2(15).
CIT(A) held that dominant purpose is charitable and did not carry on business hence
the exemption is allowed. On appeal the Tribunal held that since in earlier years, claim
of assessee was accepted and for current assessment year also, there was no change in
facts and circumstances, order of CIT(A) allowing the claim is affirmed. (AY. 2010-11)
DCIT v. Society for Applied Microwave Electronics Engineering Research
Bombay. (2024) 208 ITD 339 (Mum) (Trib.)

S. 11 : Property held for charitable purposes-Sale of property-Invested in bank

fixed deposit-Converted into capital gain account scheme-Utilised entire
amount of capital gain for purchasing other property in financial years 2022-
23 and 2023-24-Instruction No. 883, dated 24-9-1975-Entitled to exemption.
[S 11(1), 11(5), 11(IA)]
Assessee-trust sold a property on 28-4-2015 at Rs. 75 lakhs and made investment in a
bank in fixed deposits. Fixed deposits were matured on 29-4-2018, which were further
renewed up to 29-4-2021, which were later on converted into capital gain account
scheme. Assessee utilized entire amount of capital gain for purchasing another property
in financial years 2022-23 and 2023-24 and claimed exemption under section 11(1A)
Held that as per Instruction No. 853, dated 24-9-1975, the assessee qualified for
exemption under section 11(1A) in relevant assessment year 2016-17. (AY. 2016-17)
Vaishnav Samaj Trust. v. ITO (2024) 208 ITD 507/ (2025) 233 TTJ 946
(Surat) (Trib.)

S. 11 : Property held for charitable purposes-Loan scholarships to Indian

students in India for education/higher education abroad-Application of
income-Eligible for exemption. [S. 11(1)(c)]
95
Assessee-trust granted loan scholarships to Indian students in India for their higher
education overseas. It filed nil return claiming exemption under section 11. Assessing
Officer held that assessee had given loan/grants to various students who were studying
outside India hence denied claim of exemption on ground that charitable purpose and
its execution should be in India. CIT(A) allowed the claim. On appeal the Tribunal held
that in assessee's own case for assessment year 2012-13 it was held that loan
scholarships given to Indian students in India for education/higher education abroad
would be considered as application of income for charitable purposes in India and, thus,
would qualify for exemption under section 11. Appeal of Revenue is dismissed. (AY.
2011-12)
ITO (E) v. JN Tata Endowment for the Higher Education of Indians. (2024)
208 ITD 573 (Mum) (Trib.)

S. 11 : Property held for charitable purposes-Fresh registration under section

12AB-Original registration under Section 12AA up to Assessment year 2021-
22-Denial of exemption is not valid. [S. 12AA, 12AB, 13]
Assessee-society registered under section 12AA, filed its return claiming exemption
under section 11. Assessing Officer denied the exemption on ground that assessee had
not furnished details of fresh registration under section 12AB obtained by it. On appeal
the CIT(A) affirmed the order of the AO. On further appeal the Tribunal held that the
assessee had applied for fresh registration under section 12AB in prescribed form within
time allowed by statute. Original registration obtained under section 12AA would protect
assessee up to assessment year 2021-22 for claim of exemption under section 11 as
long as other conditions prescribed in section 11 to 13 had been fulfilled by assessee.
Therefore, assessee would be duly entitled for claim of exemption under section 11 for
assessment year 2021-22 (AY. 2021-22)
Shambhu Dayal Modern School. v. ITO (2024) 208 ITD 603 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Application of income-Less than

85 per cent of total receipts-Matter is remanded for de novo adjudication
before NFAC. [S. 12A,250, Form No 10]
Assessee trust was registered under section 12A and was running several educational
institutions. It filed its return of income claiming exemption under section 11. Assessing
Officer made certain additions to assessee's income on ground that assessee had spent
less than mandatory 85 per cent of total receipts. Assessee filed appeal before National
Faceless Appeal Centre (NFAC) and submitted that relevant Form No. 10, which was filed
before department explaining amount of money, which was yet to be spent and how
they planned to spend remaining amount in course of next five years, needed to be
examined and considered by Assessing Officer while framing assessment order, which
was not done by him. NFAC dismissed assessee's appeal holding that there was no
material on record to warrant interference with order of Assessing Officer. Tribunal held
that since NFAC had not adjudicated issue on merits, matter is remanded back to file of
NFAC for de novo adjudication. (AY. 2016-17)
Giridih Carmel Convent School. v. DCIT (2024) 208 ITD 597 (Ranchi) (Trib.)

S. 11 : Property held for charitable purposes-General utility to public--

Acquisition and sale of immovable properties-Issue is remanded to Assessing
Officer to consider afresh strictly in light of observations made by Apex Court

96
in CIT(E) v. Ahmedabad Urban Development Authority (2022) 291 Taxman 11/
449 ITR 1 (SC). [S. 2(15)]
Assessee is engaged dominantly in activity of development and sale of properties. It
filed its return of income declaring profit on total income/gross receipt which was claimed
exempt as per provisions of section 11. Assessing Officer held that assessee is engaged
in activity in nature of trade, commerce or business in as much as one of dominant
activities of authority is acquisition and sale of immovable properties and receipts from
which were in excess of ceiling stipulated in second proviso of section 2(15). He
disallowed exemption under section 11 of the Act. CIT(A) allowed the exemption. On
appeal the Tribunal held that since verification/examination had not been carried out by
authorities below in terms of observations and guidelines framed by Apex Court in case
of CIT(E) v. Ahmedabad Urban Development Authority (2022) 291 Taxman 11/ 449 ITR
1 (SC) issue is to be remanded to file of Assessing Officer to consider same afresh
upon examining nature of assessee's activities and to pass a reasoned order strictly in
light of observations made by Apex Court. (AY. 2014-15 to 2017-18)
DCIT(E) v. Jhansi Development Authority. (2024) 208 ITD 692 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Failure to furnish Form 10/10B

before due date prescribed under Section 139(1)-Directory in nature-
Exemption cannot be denied. [S. 11(2), 139(1), 143(1), Form No 10A, 10B]
Assessee-trust claimed exemption under section 11 in return of Income. CPC, Bengaluru
disallowed claim concluding that assessee failed to e-file Audit Report in form 10B one
month prior to due date of filing return. CIT(A) affirmed the order of the AO. On appeal,
Tribunal held that requirement of filing Form 10/10B is merely directory in nature and
failure to furnish Form 10/10B before due-date prescribed under section 139(1) cannot
be so fatal so as to deny very claim of exemption under section 11(2). Since delay in
filing Form 10B is due to technical issues and was beyond control of assessee, procedural
requirement should not deny substantive claim of exemption under section 11. The AO
is directed to grant exemption under section 11. (AY. 2022-23)
ITO (E) v. Takshshila Foundation (NGO) (2024) 208 ITD 677 (Ahd) (Trib.)

S. 11 : Property held for charitable purposes-Delay in filling Form 10B-Not

mandatory-Issue is remanded back to Assessing Officer to consider claim of
assessee in accordance with law by carrying out necessary verification of Form
10B filed by assessee-Delay of 29 days in filing of appeal before CIT(A) is
condoned. [S. 119, 143(1)(a), 249 Form No 10B]

Tribunal condoned the delay of 29 days in filing the appeal before CIT(A). Assessee-
trust filed its return of income declaring shortfall in application of income. Assessee filed
Form 10B i. e. audit report, before filing return of income. However, there was a delay
of 29 days in filing same. Assessee had made applications to condone delay in filing
Form 10B. However, same was not accepted and assessee's return was processed
wherein exemption claimed by assessee under section 11 was denied. CIT(A) up held
the order of the AO. On appeal the Tribunal held that filing of Form 10B was not
mandatory but directory, when audit report was available while passing intimation under
section 143(1)(a) and requirement of law were complied with, exemption under section
11 could not be denied. It was further noted that circulars issued by CBDT which were
available at time when assessee had made applications to condone delay in filing Form
97
10B had not been considered by authorities. On facts, issue is remanded back to
Assessing Officer to consider claim of assessee in accordance with law by carrying out
necessary verification of Form 10B filed by assessee. (AY. 2022-23)
Sarvadeivatha Education Trust. v. ITO (2024) 208 ITD 759 (Bang) (Trib.)

S. 11 : Property held for charitable purposes-Delay in filing Form 10B-Audit is

completed before due date of filing of return-Procedural delay-CIT(A) is
directed to pass fresh order on merits as per law. [S. 12A, 139(1), Form No.
10B]
Assessee trust claimed exemption under section 11. Assessing Officer disallowed same
on ground that Form 10B is not submitted by auditor within due date i. e. under section
139(1). However, same was filed after delay of 31 days and the audit is completed
well before due date fixed for filing Form 10B. The AO disallowed the claim of exemption.
CIT(A) affirmed the order of the AO. On appeal the Tribunal held that the Assessee
had provided a reasonable cause of lapse on part of auditors in filing Form 10B hence
the Commissioner (Appeals) is supposed to take into consideration that non-filing of
audit report along with return of income was a procedural omission. Therefore the matter
is remanded to the file of Commissioner (Appeals) with the direction that he should take
into consideration Form 10B of assessee and pass an order afresh on merits as per law.
(AY. 2022-23)
Shakuntalam Bal Vikas Society. v. ITO (2024) 208 ITD 772 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Intimation-Form 10B was filed-

Failure to mention 12A registration-Adjustment is bad in law-Entitled to
exemption. [S. 12A,139(1), 143(1)(a), R. 17B, Form 10B]
Assessee-trust claimed exemption under section 11. Assessing Officer by an intimation
order under section 143(1)(a) disallowed claim on grounds that section 12A registration
number was not mentioned and Form No. 10B (audit report) was not furnished one
month prior to due date of filing of return of income under section 139(1). CIT(A)
affirmed the order of the AO. On appeal the Tribunal held that since assessee is granted
registration under section 12A during pendency of assessment proceedings and Form
No. 10B is available with CPC while processing return, assessee is entitled to exemption
under section 11. (AY. 2021-22)
Sirur Shikshan Prasarak Mandal v. ACIT (2024) 208 ITD 739 (Pune) (Trib.)

S. 11 : Property held for charitable purposes-Delay in filing Form No 10B-

COVID-19-Delay is condoned. [S. 119, Form. No 10B, 10BBA]
Assessee-trust filed return of income on 14-3-2022 and also furnished Form No. 10B.
Assessing Officer denied exemption under section 11 holding that Form No. 10B/10BB
was not filed in time. CIT(A) allowed the exemption. On appeal the Tribunal held that
since up to March, 2022, country was passing through COVID-19 Pandemic and due
dates for filing of return of income as well as compliance made by assessee also fells
during that period, in such circumstances, delay caused in filing of Form No. 10B was to
be condoned and the order of CIT(A) allowing the claim is affirmed. (AY. 2021-22)
ITO v. P K Krishnan Educational Trust. (2024) 207 ITD 7 (Mum) (Trib.)

S. 11 : Property held for charitable purposes-Form No 10B-Audit report-Delay

of 28 days-COVID-19-Delay is condoned-Exemption is allowed. [S. 119, Form
No 10B]
98
The assessee-trust was denied exemption under section 11 due to a delay in furnishing
audit report in Form 10B along with return. CIT(A) affirmed the order of the AO. On
appeal the Tribunal held that from March, 2020 to March, 2022, country was passing
through Covid Pandemic which restricted normal activities and it was also an accepted
fact that many changes had been brought into Act regarding procedure of filing of
income-tax return as well as audit reports and certain technical glitches had been faced
time and again. Considering those aspects, CBDT authorized condonation of delays up
to 365 days for assessment year 2018-19 onwards and by Circular No. 16/2022 dated
19-07-2022 extended that to delays up to three years. Since delay was merely of 28
days, the delay is condoned and exemption under Section 11 allowed. (AY. 2020-21)
Kedar Nath Saraf Charity Trust. v. DIT CPC (2024) 207 ITD 16 (Kol) (Trib.)

S. 11 : Property held for charitable purposes-Profit motive-Business activity-

Eligible to exemption-Depreciation-Allowable. [S. 2(15), 12A, 13, 32]
Assessee-society which is registered under section 12A as a charitable society offering
services to the nation as arm of Govt. of India under Software Technology Park of India
(STPI) scheme. Assessing Officer held that assessee is indulged in business activities
and treated all income except interest income as income from business and profession.
Commissioner (Appeals) held that assessee is eligible for benefit of exemption under
sections 11 to 13. On appeal the Tribunal held that assessee’s own case for succeeding
assessment year on identical issue Tribunal had held that assessee is a charitable society
and income had to be computed in accordance with provisions of sections 11 to 13.
Order of CIT(A) is affirmed. Claim of depreciation cannot be treated as double deduction.
(AY. 2011-12)
Software Technology Parks of India. v. DCIT (2024) 207 ITD 63 (Delhi)
(Trib.)

S. 11 : Property held for charitable purposes-Depreciation-Application of

income-Application of income more than 85 percent of total income before
depreciation-Matter remanded to the file of the Assessing Officer for deciding
the issue in accordance with law. [S. 10(23C)(vi), 11(6),12A(a), 32]
Assessee-trust claimed depreciation in its return of income and submitted that there
was application of income of more than 85 per cent of total income. The AO disallowed
depreciation, which was affirmed by the CIT(A). On appeal the assessee submitted that
before depreciation, there would not be any tax liability, even if depreciation was
inadvertently claimed in return. Tribunal held that looking into entire conspectus of
section 11(6), it was necessary to set aside issue to file of Assessing Officer to look into
application of income by assessee afresh. (AY. 2015-16)
Dharma Naidu Educational and Charitable Trust. v. DCIT (2024) 207 ITD 419
(Chennai) (Trib.)

S. 11 : Property held for charitable purposes-Activities for upliftment of poor,

providing training and skill development to poor in rural areas-Denial of
exemption is not justified. [S. 2(15)]
Assessee-trust is engaged in activities for upliftment of poor, providing training and skill
development of poor in rural areas in backward districts of States. Assessee had been
allowed benefit of exemption under section 11 continuously up to assessment year 2010-
11. The Assessing Officer denied exemption to assessee by invoking proviso to section
2(15). CIT(A) allowed the exemption. On appeal the Tribunal held that the Assessing
99
Officer had not brought on record any evidences which would suggest that activities of
assessee had been carried out with profit motive and thus, mischief of proviso of section
2(15) was not attracted in case of assessee. Order of CIT(A) is affirmed. (AY. 2015-16
to 2017-18)
ITO v. Professional Assistance for Development Action. (2024) 207 ITD 446
(Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Specified persons –Adequate

consideration-Rental value adopted by Assessing Officer was less than 10 per
cent rent received by assessee-Denial of exemption is not justified. [S. 12,
12A(a), 13(2)(b), 13(3)]
Assessee filed return of income disclosing nil income on account of it being registered as
a company under section 25 of Companies Act, 1956 as also registered under section
12A(a). Assessing Officer held that assessee had made available building owned by it
to persons referred to in section 13(3) without charging adequate rent or compensation
and had violated provisions of section 13(2)(a) and 13(2)(b) read with section 13(3).
Accordingly, he assessed total income of assessee at certain amount by denying claim
for application of income and exemption under section 11 on account of infringement of
section 13(2)(b) read with section 13(3). On appeal, Commissioner (Appeals) held that
difference between rental value adopted by Assessing Officer and rental value adopted
by assessee being less than 10 per cent, rent received by assessee could not be said to
be not adequate hence allowed benefits of exemption under sections 11 and 12 to
assessee. On appeal the Tribunal held that on facts order of Commissioner (Appeals) is
affirmed. Followed CIT(E) v. Hamdard National Foundation (India) (2022) 286 Taxman
441/ 443 ITR 348 (Delhi)(HC) (AY. 2007-08)
DCIT v. Indian Grameen Services. (2024) 207 ITD 609 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Promotion of education, culture

and philosophy-Return filed in wrong form-Filed return in Form 5 claiming
loss which is meant for business income-The Assessing Officer is directed to
consider return as a rectification petition. [S. 12AA, 139(4A), 139(9), 139C,
143(1), 154, Form No 5, Form No 7,]
Assessee, a charitable trust, filed its return claiming loss for relevant years. Return is
processed under section 143(1) disallowing application of income under section
11(1)(a). Assessee did not act thereon and filed appeal before Commissioner (Appeals)
with a delay of 3 years 2 months and 2 years and 2 months for two years respectively.
CIT(A) dismissed the appeal as not maintainable on finding of gross negligence. On
appeal the Tribunal held that since assessee-trust filed its return in Form 5, which was
meant for business income , processing of returns denying exemption under section
11(1)(a) was a mistake apparent from record and Commissioner (Appeals) should have
directed Assessing Officer to consider assessee’s returns of income as rectification
petitions. Matter remanded. (AY. 2014-15, 2015-16)
Kathikode Charitable Trust. v. ITO (2024) 207 ITD 588 (Cochin) (Trib.)

S. 11 : Property held for charitable purposes-Rent receipt-Receipt from rent by

assessee-society was in course of actual carrying out of objects of general
public utility and same was below 20 per cent of total receipt-Commissioner
(Appeals) is justified in allowing benefit under sections 11 and 12-Corpus
donation-Donation received by assessee-society were with specific direction
100
and also utilized for construction of fixed assets i. e. bhawans only, same was
corpus donation exempted under section 11(1)(d) [S. 2(15), 11(1)(d), 12A]
Assessee-society, registered under section 12A, which is engaged in arrangement,
management and enhancement of immovable property in order to earn rent, to earn
profit after sale , to earn donation etc. -It had claimed exemption under section 11
in respect of its rental income. Assessing Officer, rejected assessee’s claim of exemption
under section 11 holding that assessee-society was advancing object of general public
utility and rent receipt from such activity was more than prescribed limit of Rs. 25 lakhs,
therefore, activities of assessee were not for charitable purpose. Commissioner
(Appeals) allowed the benefit of exemption under sections 11 and 12 to assessee. On
appeal the Tribunal held that there was no material brought on record to support the
fact that assessee was acting with profit motive so far in activities carried out. Receipt
that assessee received was invested or expended for object of society and Assessing
Officer failed to bring on record as to why rental income was treated as commercial
income. Since receipt from rent was in course of actual carrying out of objects of general
public utility and same was below 20 per cent, Commissioner (Appeals) is justified in
allowing benefit under sections 11 and 12 to assessee. Tribunal also held that since
copies of receipts contained direction of donor that money were for construction of fixed
assets i. e. bhawans only and assessee had done that activity, Commissioner (Appeals)
was justified in allowing benefit of section 11 to assessee. (AY. 2016-17)
ACIT v. Shree Maheshwari Samaj. (2024) 207 ITD 701/232 TTJ 17(UO)
(Jodhpur) (Trib.)
S. 11 : Property held for charitable purposes-Grants received from
Government-Spent 85 percent of such income-Balance income is exempt under
section 11 of the Act. [S. 11(5), 13(1)(d)]
Assessee is a Board established by Central Government to act as a nodal agency in
developing activities of fisheries among various states in the country. Major source of
receipt was grants from Central Government, and outflow was utilization of grants for
projects developed by respective State Governments which were supervised by
assessee. Assessee based on stage of completion of project released grants to State
Government. Assessing Officer, held that the assessee did not utilise 85 per cent total
grants-in-aid received during year and funds received back as refunds from various
projects during year. He was of view that assessee had invested in equity shares of
SDMSSL and thereby had contravened provisions of section 13(1)(d) read with section
11(5). Accordingly, he taxed shortfall in application of income below 85 per cent of total
income of trust. Commissioner (Appeals),held that on an incorrect appreciation of
accounting policies followed by assessee, Assessing Officer had rejected books, without
actually bringing on record any defect in audited accounts of assessee and, therefore,
he allowed claim of exemption under section 11. It was observed that assessee had
maintained books of account, bills, vouchers and all other requisite supporting
documents in respect of grants received, spent and other activities. Such books were
audited by independent auditors-Assessee had been following accounting procedure as
defined in GFR 230(5) of Government of India and directions of Integrated Financial
Division of Ministry of Agriculture, Government of India (IFD) over years and treating all
grants as liabilities and only when grants were utilised by implementing agencies they
were treated as income and when utilisation certificates were received, they were treated
as expenditure irrespective of year in which grant was received, as per directions of
Government of India. There was no income element on grant of funds by Central
Government, nor any expenditure incurred merely by allocation. Assessee had spent 85
101
per cent of income for objectives. Further, such an investment was made in SDMSSL,
in financial year 2008-09 and not during current year and never in earlier years any
objection on that aspect was taken. Order of CIT(A) is affirmed. (AY. 2015-16)
DCIT v. National Fisheries Development Board. (2024) 206 ITD 20 (Hyd)
(Trib.)

S. 11 : Property held for charitable purposes-Gross receipt is more than Rs.

10 lakhs-Primary purpose of an institution is advancement of objects of general
public utility-Charitable trust would remain charitable even if an incidental
or ancillary activity or purpose for achieving main purpose, is profitable in
nature. [S. 2(15), 12A]
Assessee is a registered under section 12A and had derived income by way of
contributions from the head office, membership fee, income from publication of Indian
Foundry journal, other grants and donations etc. besides receiving interest on fixed
deposits. It had claimed exemption under section 11. Assessing Officer, rejected claim
of exemption on ground that assessee-society was advancing object of general public
utility and gross receipt of assessee from such activity was more than Rs. 10 lakhs in
previous year and, therefore, activities of assessee were not for charitable purpose.
CIT(A) affirmed the order of the Assessing Officer. On appeal the Tribunal held that on
similar issue in case of Indian Chamber of Commerce v. Dy. CIT [IT Appeal Nos. 933 &
934 (Kol.) of 2023, dated 22-12-2023] had held that if primary purpose of an institution
was advancement of objects of general public utility, it would remain charitable even if
an incidental or ancillary activity or purpose for achieving main purpose, is profitable in
nature. Since profit derived from services rendered as public utility service was very
meagre, Assessing Officer is directed to allow exemption under section 11. (AY. 2014-
15)
Institute of Indian Foundrymen. v. ITO (2024) 206 ITD 203 (Kol) (Trib.)

S. 11 : Property held for charitable purposes-Advertisement expenses –

Specified person-Red Eye Media Pvt Ltd-Billed same amount as news paper
company billed-Justified in deleting-Brokerage and commission-Matter is
restored to Assessing Officer for re-adjudication-Depreciation-Position prior to
1-4-2015-Entitled to claim depreciation under section 32 on assets whose cost
had been allowed as application for charitable purposes under section
11(1)(a). [S. 11(6), 11(1)(a), 12A, 13(3), 32]
Assessee, a charitable institute, had incurred advertisement expenses pertaining to
advertisement work that which handled by Red Eye Media Pvt Ltd (REM)) a related
party and a specified person, falling within the meaning of section 13(3). Assessing
Officer held that REM was charging substantially higher amounts on every bill,
disallowed 15 per cent of total amount of advertisement expenses paid by assessee-
society to REM. CIT(A) deleted the addition. On appeal the Tribunal held that REM
being agent of newspaper company received a discount of 15 per cent from newspaper
company on bill amount. Further, REM had charged assessee-society for advertisements
in newspaper, same rates which were fixed by newspaper company. Since discount of
15 per cent was received by REM from newspaper company on bill amount in its capacity
as that of an agent of newspaper company, same, could not have any bearing on
determining reasonableness of charges that were borne by assessee-society for
advertisements in newspapers carried out through aforesaid specified person. Since REM
had not availed any profit from assessee-society, Commissioner (Appeals) is justified in
102
deleting addition made by Assessing Officer on account of excess payment made to REM.
As regards addition on account of brokerage and commission expenses incurred by
assessee without giving any cogent reason and without examining documentary
evidence supporting assessee's claim of aforesaid expenditure, matter is restored to
Assessing Officer for re-adjudication. Held that prior to section 11(6) made available on
statute with effect from assessment year 2015-16, assessee was entitled to claim
depreciation under section 32 on assets whose cost had been allowed as application for
charitable purposes under section 11(1)(a). (AY. 2013-14 to 2015-16)
ACIT v. Institute for Technology & Management University. (2024) 206 ITD
510/115 ITR 362 (Raipur) (Trib.)

S. 11 : Property held for charitable purposes-Return filed u/s 139(1) and Form
No 10 is also filed manually-Delay in filing Electronically filing Form No 10-
Rectification should have been done and delay if any may be condoned. [S.
11(2), 139(1), 143(1), 154, Form No 10]
Assessee-trust maintained separate accounts for various donations, including corpus
donations, which were earmarked for specific purposes and utilized accordingly.
Assessing Officer added back a sum of Rs. 14 lakhs to disclosed income of assessee,
citing non-compliance with provisions of section 11(2) due to late filing of Form No. 10.
The assessee filed appeal against intimation and also rejection of application under
section 154 of the Act. On appeal the Tribunal held that statutory provisions requiring
filing of Form No. 10 online along with return of income came into effect from assessment
year 2016-17. Since return of income was filed within time provided under section
139(1) and Form No. 10 was also filed manually before filing of return before Territorial
Jurisdictional Assessing Officer, delay caused in electronically filing Form-10 for
rectification, should have been condoned. Therefore, assessee was directed to upload
form electronically within 30 days from receipt of order. (AY. 2016-17)
Bhidbhanjan Parshwnath Jain Derasar. v. DCIT (2024) 206 ITD 615 (Jodhpur)
(Trib.)

S. 11 : Property held for charitable purposes-Surveys and research into

readership of various media-Receipts crossed limit of Rs 10 lakhs-Activities of
publishing could be characterized as in nature of trade, commerce or business
for consideration-Matter remanded. [S. 2(15), 12A]
Assessee is a company, registered under section 12A, was primarily engaged in
conducting surveys/research into readership, viewership and listenership of various
media and dissemination of research to various members and non-members who were
basically industrial business entities. Assessee outsourced research to outside agencies
who prepared Indian Readership Survey (IRS) reports which were sold to
subscribers/members (more than 165) and to non-members. The Assessing Officer
denied the exemption on the ground that since assessee's receipts from its activity even
though it was for general public utility exceeded threshold limit of Rs. 10 lakhs, therefore,
it is not entitled for exemption under section 11. CIT(A) affirmed the order of the
Assessing Officer. On appeal the Tribunal held that it had to be examined that main
activity for which section 12A registration was obtained itself falls within category of
carrying of any activity in nature of trade, commerce or business. Only if it carries out
any other activity which falls in such nature, then only proviso to section 2(15) would
be applicable. Lower authorities did not examine the same and merely rejected claim
under section 11 as receipts exceeded Rs. 10 lakhs. Therefore, matter remanded back
103
to revenue to decide whether nature of receipts of income garnered by assessee in
course of carrying out these activities of publishing newspaper could be characterized as
in nature of trade, commerce or business for consideration. (AY. 2009-10 to 2013-14)
Media Research Users Council. v. ADIT (2024) 205 ITD 170 /114 ITR 160
(Mum) (Trib.)

S. 11 : Property held for charitable purposes-Audit report in Form No 10B was

filed after expiry of time allowed under section 139(1)-Not filed any application
for condonation of delay-Denial of exemption is justified. [S. 12A, 13(2(c),
13(3), 139(1), Form No 1OB]
Assessee-society registered under section 12A filed return of income for relevant
assessment year within due date specified under section 139(1) declaring nil income
after claiming exemption under section 11. Assessing Officer declined claim for
exemption for reason that assessee had filed audit report in Form No. 10B after expiry
of time allowed under section 139(1). CIT(A) up held the order of the Assessing Officer.
On appeal the Tribunal held that since assessee did not cumulatively satisfy set of
conditions specified in Para 4(i) of Circular No. 10, dated 22-5-2019 and also had not
filed any application for condonation of delay under section 119(2)(b) as provided in
Para (ii) of said Circular, there remained no occasion for condonation of delay involved
in filing Form No. 10B beyond stipulated time period. Accordingly the lower authorities
had rightly declined claim for exemption under section 11. As regards salary paid to a
doctor (trustee of assessee-society) and Assessing Officer disallowed claim on ground
that assessee had failed to substantiate its claim and added amount to its income by
invoking provisions of section 13(2)(c) read with section 13(3), since Assessing Officer
in immediately preceding assessment year had accepted assessee's claim for deduction
of salary paid to aforesaid doctor, matter is restored to him to verify authenticity of
assessee's claim. (AY. 2016-17)
Dr. Murli Manohar Dubey Charitable Society. v. ITO (2024) 205 ITD 388/230
TTJ 664 (SMC) (Raipur) (Trib.)
S. 11 : Property held for charitable purposes-Dividend received on the shares
which were received as donation towards corpus fund-Treated as part of
corpus fund-Cannot be treated as income from other sources-Entitled to
exemption. [S. 11(1)(d),11(5), 13(1)(d)]
The issue in dispute is whether the dividend received on the shares, which were received
by the assessee as donation towards corpus fund, could also be treated as part of corpus
fund or to be treated as income of the assessee which was to be applied or invested as
per the provisions of section 11 of the Act. The assessee received 5,00,000 equity shares
of Majesco Ltd. as corpus donation. The donor vide its letter dated 17. 12. 2020 directed
the assessee that said shares, any receipt thereof in the form of dividend/sale proceeds
and receipts on securities /deposits made out of dividend/sale proceeds was to be
treated as corpus donation. According to the assessee the dividend received and interest
received on deposit made out such dividend was to be treated as corpus donation, which
was claimed exempt u/s 11(1)(d) of the Act while filing the return of income. According
to the Assessing Officer, once the asset is donated and transferred, generation of future
income from asset will be governed as per the provisions of the Act only, and not under
any conditions set by the donor. According to the Assessing Officer, the entire
interpretation of section 11(1)(d) of the Act was done wrongly by the assessee and
claimed the dividend as exempt under the corpus fund and therefore, he assessed
income from dividend as income from other sources. CIT(A) deleted the addition. On
104
appeal by the Revenue the assessee contended that the dividend received and interest
received on deposit made out such dividend was to be treated as corpus donation, which
was claimed exempt u/s 11(1)(d) of the Act. The Tribunal affirmed the order of the
CIT(A), relied on CIT(E) v. Mata Amrithanandamayi Math [2017] 85 taxmann. com 261
(Ker)(HC) affirmed by Honourable Supreme Court. (ITA No. 4766/MUM/2023 dt. 30-
5-2024)(AY. 2021-22)
ITO v. Bhavitha Foundation (Mum)(Trib). www. itatonline. org.

S. 11: Property held for charitable purposes-Income from property –Revising

the claim with higher deduction-Not filed the return and Form No 10 within due
date prescribed under section 139(1) of the Act-Not justified in not allowing
the deduction for amount accumulated under section 11. [S. 11(2), 139(1),
143(1), Form No. 10]
AO passed order u/s 143(1) whereby exemption u/s 11(2) was restricted as per original
return on the ground that assessee had not filed ITR and form no. 10 within due date
prescribed u/s 139(1). On appeal the CIT(A) allowed the deduction. Tribunal affirmed
the order of the CIT(A) holding that the Assessing Officer was not justified in not allowing
the deduction for amount accumulated under section 11. (AY. 2019-20)
ITO (E) v. Ramji Mandir Religious and Charitable Trust [2024] 205 ITD 150
(Ahd) (Trib)

S. 11 : Property held for charitable purposes-Accumulation of income-

Condonation of delay-Pending for consideration-The Assessing Officer is
directed to take a decision in matter after outcome of condonation petition
filed by assessee. [S. 11(2) 13(9), 139, Form No 10B]
Assessee-trust filed Form 10 beyond due date and had sought accumulation of income
under section 11(2) which was in contravention of section 13(9). Assessing Officer
disallowed benefit of accumulation and made addition to income of assessee-trust.
CIT(A) affirmed the order of the Assessing Officer. On appeal the Tribunal held that the
assessee submitted that there was a delay in filing return of income and assessee had
filed application for condonation, which was pending consideration. Matter is restored
to file of Assessing Officer and he was to be directed to take a decision in accordance
with law after assessee's application for condonation of delay in filing return of income
had been disposed off by relevant authority. (AY. 2017-18)
Lord Venkateshwara Ladies Educational and Welfare Trust. v. ITO (2024) 204
ITD 668 (Bang) (Trib.)
S. 11 : Property held for charitable purposes-Application of income-Expenses
incurred on the repairs or renovation of its assets used for charitable purposes
are also considered as income application towards the charitable aims. [S.
11(1)(a), 12A]
The appellant-society, a charitable trust registered under section 12A of the Act, runs a
school in a building owned by another trust. The appellant-society incurred expenditure
on repairs/renovation of the school building and certain amount towards payment of
property taxes. The AO disallowed the expenditure and the property tax on the ground
that the building does not belong to the appellant-society. The CIT(A) upheld the
disallowance on the ground that the appellant-society did not provide any agreement or
MOU with the owner of the building regarding the maintenance of the building.
The Tribunal allowed the appeal of the appellant-society and set aside the impugned
order of the CIT(A). The Tribunal held that the expenditure incurred by the appellant-
105
society on the repairs of the school building and the property tax paid was for the
purpose of carrying out the objects of the charitable trust, which is to impart education
to the poor and needy children. The Tribunal relied on the decisions of the Gujarat High
Court in Satya Vijay Patel Hindu Dharmashala Trust v. CIT [1972] 86 ITR 683 (Gujarat)
and the Supreme Court in S. R. M. CT. M Triuppani Trust v. CIT [1998] 230 ITR 636
(SC), which held that the purchase or construction of a capital asset for the charitable
purpose is also an application of income for the charitable purpose under section
11(1)(a) of the Act. (AY. 2016-17)
Bombay Society of the Salesian Sister India v. ITO [2024] 109 ITR 44 (SN)
(Mum)(Trib)

S. 12A : Registration –Trust or institution-Form No 10AB could not be up loaded

due technical glitches-Commissioner is directed to accept Form No. 10AB in
physical mode treating same as filed prior to last date of submission-Decide it
on its own merits, considering period of delay and reasons for delay. [Form No.
10AB, Art. 226]
The assessee could not submit application Form No. 10 AB, due to some technical
glitches he could not succeed in submitting his application form through online mode.
On a writ, the petitioner prayed that only to the extent of submission of his application
Form No. 10 AB , in view of the circular dated 17-7-2022, the purpose would be
sub served if the Commissioner is directed to accept the application Form No. 10 AB of
the assessee in physical mode treating the same is filed prior to the last date of
submission of the application i. e. 30-6-2024 and to decide it on its own merits,
considering the period of delay and reasons for delay, as the same has been explained
by the assessee that due to technical glitches he could not succeed in filing the
application form. Court held that although the Commissioner (E) has not been made a
party respondent in the case, yet in the interest of justice, the assessee is directed to
submit his application Form No. 10-AB in physical mode to the Competent
Authority/Commissioner (E) Bhopal along with an application as well as necessary
documents under the circular dated 17-7-2022 within 3 weeks from today, then the
Commissioner (E) is directed to consider the application of the assessee treating it as
filed before the last date of submission of application form i. e. 30-6-2024, and decide
the application on its own merits in accordance with law, and circular dated 17-7-2022.
(AY. 2022-23) (SJ)
Vaishya Welfare Gaushala and Naturopathy Shiksha Society v. UOI (2024) 301
Taxman 496 (Chhattisgarh)(HC)

S. 12A : Registration –Trust or institution-Application for registration

erroneously made while charitable institution continued to be registered-
Assessee is permitted to withdraw application filed inadvertently-
Interpretation-Precedent-Doctrine of merger-Difference between decision of
Supreme Court rejecting appeal by Special Leave and decision decided on
appeal. [S. 12AA, 12AB, Art. 141, 226]
The assessee is a trust engaged in educational activities and was granted registration
under section 12A of the Income-tax Act, 1961. The assessee stated that it could not
trace the certificate and although it availed of the benefits for certain number of years
without any objection from the Department, the authorities called upon the assessee to
produce the registration certificate. Hence, the assessee made an application on October
14, 2019 to obtain a duplicate certificate of registration under section 12A but was not
106
responded. The assessee made a fresh application on April 19, 2022. The assessee
contended that both the applications were not decided and the duplicate certificate was
also not issued. On March 25, 2022, the assessee applied for a fresh provisional
certificate under section 12A(1)(ac)(i) in the prescribed form 10A as per rule 17A of
the Income-tax Rules, 1962, that although the application for provisional registration
was made on April 4, 2022, an order on form 10AC under section 12A(1)(ac)(i) for the
assessment years 2022-23 to 2026-27 was passed by the competent authority thereby
granting registration to the assessee. Thereafter, the assessee inadvertently applied for
registration under the same provision in form 10AB on September 30, 2022. The
Commissioner (E) issued notices requiring the assessee to submit copy of the provisional
registration granted under section 12AB and the assessee furnished the necessary
details. Another notice was received by the assessee on March 9, 2023 to which the
assessee failed to submit a reply. On March 31, 2023, the Commissioner (E) passed an
order rejecting the assessee’s mistaken application on the ground that the assessee did
not possess a copy of the provisional registration granted under section 12AB. On a writ
petition contending that the Commissioner (E) might take further actions to cancel the
registration dated April 4, 2022, of the assessee and seeking to be fully protected under
the decision of the Supreme Court in CIT v. Society For The Promotion of
Education(2016) 382 ITR 6 (SC) and to permit withdrawal of the application
inadvertently filed under section 12A(1)(ac)(i). Court held that the assessee having
already been granted registration under section 12A(1)(ac)(ii) read with
section 12AB(1)(a) of the 1961 Act on April 1, 2022, for a period of five years, i. e., from
the assessment years 2022-23 to 2026-27, there was no need to make a fresh
application on September 30, 2022 under which the order rejecting the application for
registration had been passed. Hence the assessee could withdraw its application filed
under section 12A(1)(ac)(i), dated September 30, 2022 rendering the order dated March
31, 2023 of no consequence. Honourable Court also explained the difference between
decision of Supreme Court rejecting appeal by Special Leave and decision decided on
appeal. Referred, Kunhayammed v. State of Kerala (2000) 245 ITR 360(SC),/(2000)
119 STC 505 (SC)/ (2000) 6 SCC 359, Khoday Distilleries (Now known as Khody India
Ltd v. Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd, Kollegal (Under Liquidation)
represented by the Liquidator (2019) 4 SCC 376/ 2019 SCC 505 (SC) (AY. 2022-23 to
2026-27)
Purandhar Technical Education Society v. CIT (E) (2024)468 ITR 711 / 166
taxmann. com 129/243 DTR 97 (Bom)(HC)

S. 12A : Registration-Trust or institution-Method and manner of service of

notice under statutory provisions-Notice and reminders issued by CIT(E) were
reflected only on portal and not sent to the assessee at its registered email
address-Order passed was set aside holding that before any action is taken, a
communication of notice must be in terms of provisions of section 282 and rules
made thereunder [S. 12A(1)(ac)(ii), 282, Rule 127, Art. 226]
The CIT(E) issued notice u/s. 12A(1)(ac)(ii) and subsequent reminders which were
reflected only on the portal instead of sending the same on the assessee’s email address.
The assessee challenged the same as it was not provided sufficient opportunity. Revenue
contended that as the assessee had submitted his form himself on the said e-portal, a
presumption can be drawn that he was having knowledge of the notice/reminders which
were placed on the e-portal as there was no requirement of submitting notice personally
107
through e-mail or otherwise. However, High Court rejected the contentions of the
Revenue and held that an individual or a Company is not expected to keep the e-portal
of the Department open all the time so as to have knowledge of what the Department is
supposed to be doing with regard to the submissions of forms etc.. The principles of
natural justice are inherent in the income tax provisions and the same are required to
be necessarily followed. Hence, the notices and order passed were set aside with the
direction that the Department would provide an opportunity of hearing to the petitioner
and they will also allow the petitioner to appear personally for the purpose and pass a
speaking order independent of the order passed earlier by them.
Munjal BCU Centre of Innovation and Entrepreneurship v. CIT (E) [2024] 463
ITR 560/ / 160 taxmann. com 629 /338 CTR 479 (P& H) (HC)

S. 12A : Registration –Trust or institution-Lease transactions-Business income-

Lease agreement for 50 Years-Violation of Maharashtra Stamp Act, 1958 and
Maharashtra Public Trust Act, 1950-Denial of registration is affirmed. [S.
12AA(1), Maharashtra Public Trust Act, 1950, S. 36(IA), Maharashtra Stamp
Act, 1958, Registration Act, 1908,S. 17]
The CIT(E) has not granted the registration on the ground that lease agreement was
entered in to by violating the conditions of Maharashtra Stamp Act, 1958 and
Maharashtra Public Trust Act, 1950. On appeal the Tribunal held that the lease
agreement was not registered as per the provisions of section 17 of the Registration
Act,1908, violated the provisions of Maharashtra Stamp Act, 1958 as no stamp duty was
paid. The Tribunal also held that the assessee has not obtained permission of the Charity
Commissioner as per section 36(IA) of the Act. The Tribunal also held that the assessee
has earned lease income which is not incidental to the object of the Trust. Order of
CIT(E) is affirmed. Relied on Commissioner of Customs v. Dilip Kumar & Co(2018)
95 taxmann. com 327 / 69 GST 239 (SC) (dt. 30-7 2018, Bihari Lal Jaiwar & Ors v. CIT
(1996) 217 ITR 746 (SC)
Golden Charitable Trust v. CIT(E) (2024) Chamber’s Journal-June-Pg. 115
(Pune) (Trib)

S. 12A : Registration –Trust or institution--Service of show cause notice under

S. 12A(1)(ac) (iii) by putting on e-portal only-Notice not served on the
registered email id of the assessee as per the provisions of S. 282 of the Act-
Rejecting of application is not valid-Application filed in Form No 10B cannot be
sustained-Application is restored back to CIT(E) to decide on merits. [S.
12A(1)(ac)(iii), 282, Form No 10AB]
Assessee filed an application for registration under s. 12A(1)(ac)(iii) in Form No. 10AB
before the CIT(E). Notices were issued by the CIT(E) on the online portal, which were
not served on the registered email id of the assessee as per the provisions of S. 282.
CIT(E) rejected the application. On appeal the Tribunal held that before any action is
taken, a communication of the notice must be made in terms of the provisions of law.
The assessee cannot be faulted for not responding to the queries raised by the CIT (E).
The order passed by the CIT(E) rejecting the application filed in Form No. 10AB due to
non-compliance of the notices cannot be sustained. Accordingly, the application is
restored back to the CIT(E) with a direction to send notices to the correct registered
email id of the assessee and pass order after giving proper opportunity to the assessee
as per law. Manjal BCU Centre of Innovation & Entrepreneurship v. CIT (E) (2024) 338
CTR 479 / 236 DTR 471 (P& H) (HC)
108
Shamshan Sewa Samiti v. CIT (2024) 220 TTJ 113 (UO) (Amritsar) (Trib)
Shri Shri Maa Sundeshan Ji Mahraj Shri Hari Darbar Society v. CIT (2024) 220
TTJ 113 (UO) (Amritsar) (Trib)

S. 12A : Registration –Trust or institution-Assessment proceedings-Pendency

of application for registration-Registration is granted-Denial of exemption on
ground registration granted was prospective and not applicable for Assessment
year in question is not proper-Only the profit can be taxed and not the entire
receipt if benefit of section 11 is to be denied-Adjustment under section 143(1)
is bad in law. [S. 11, 12A(2), 12AA, 143(1)]
Held that according to section 12A(2) of the Act, if any assessment proceeding was
pending during the pendency of registration under section 12AA of the Act, then the
registration granted shall be applicable to the pending assessment proceedings. The
Central Board of Direct Taxes Circular No. 1 of 2015(2015) 371 ITR 22 (St) explained
section 12A(2) of the Act. The proviso to section 12A(2) was introduced to remove
hardship caused to genuine trusts. It had not been alleged by the Department that the
assessee’s activities or objects were not charitable in nature, rather it was an admitted
fact that the assessee’s objects and activities were charitable in nature. The
Commissioner (Exemptions) after examining the objects and activities of the assessee-
trust, had granted registration under section 12AA of the Act to the assessee-trust. The
order under section 143(1) was issued on January 2, 2018 and registration under
section 12AA of the Act was granted on October 20, 2016, which meant that at the time
of issue of the order under section 143(1), the assessee already had registration under
section 12AA of the Act. Therefore, in terms of the proviso to section 12A(2) of the Act,
the assessee is eligible for deduction under section 11 of the Act for the assessment
year 2016-17 as it had received registration under section 12AA of the Act before the
order under section 143(1) for the assessment year 2016-17 was passed. Tribunal also
held that only the profit can be taxed and not the entire receipt if benefit of section 11 is
to be denied. Therefore, the CPC has erred in taxing entire receipt of the assessee under
section 143(1) of the Act. (AY. 2016-17)
Indian Medical Association v. Jt. CIT (Appeals) (2024)113 ITR 60
(SN)(Pune)(Trib)

S. 12A : Registration –Trust or institution-Donations to charitable institutions-

Purchase of land and financial assistance to improve healthcare education and
services and to uplift standard of living of Tribals-Order of rejection is set
aside-Matter remanded to the CIT(E) to decide a fresh in accordance with law.
[S. 12A(1)(ac)(ii), 80G(5)]
Held that the letter dated September 21, 2023 showed purchase of land and letter dated
July 17, 2023 mentioned that the trust had given financial assistance or donation to
improve the healthcare education and services and to uplift the standard of living of
Tribal. The Commissioner is bound to consider whether the objects of the trust were
genuinely charitable in nature and whether the activities which the trust proposed to
carry on were genuine in the sense that they were in line with the objects of the trust.
The Commissioner (E) is directed to consider the issue afresh exercising powers in
accordance with law. (AY. 2023-24)
Karamshi Jethabhai Somaiya (Delhi) Trust v. CIT (E) (2024)113 ITR 79
(SN)(Delhi)(Trib)

109
S. 12A : Registration –Trust or institution-Denial of exemption-Trust or
institution-Investment restrictions-Trust was established much prior to
commencement of Income-tax Act, 1961-Embargo of section 13(1)(b) is not
applicable-Denial of registration is not valid. [S. 12AB, 13(1)(b)]
Assessee-trust was established in 1953 It applied for registration under section
12A/12AB. Commissioner (E) rejected the application on ground that objects of
assessee were restricted to a particular community and, thus, assessee-trust is
established for benefit of a particular community and not for general public, and
accordingly, provisions of section 13(1)(b) were applicable. On appeal the Tribunal held
that since the assessee trust was established much prior to commencement of Income-
tax Act, 1961, embargo of section 13(1)(b) would not apply and, therefore, matter is
remanded back to Commissioner (E) to reconsider application of assessee on merit.
Bai Navazbai Faramroze D Mehta Charity Blocks. v. CIT (2024) 209 ITD 213
(Surat) (Trib.)

S. 12A : Registration –Trust or institution-Grant of registration under section

12A cannot be denied by invoking provisions of section 13(1)(b). [S.
12A(1)(ac)(iii), 13(1)(b), Form No. 10AB]
Assessee-trust filed an application for registration under section 12A(1)(ac)(iii) in Form
No. 10AB. Commissioner (E) held that since the trust deed explicitly stated that
organization would focus on aiding Jain Community and further specifying that
membership was restricted to individuals from Shri Shwetamber Murtipujak
Tapegachcha Jain Samaj section 13(1)(b) applied to instant case and rejected
application for registration. On appeal the Tribunal held that grant of registration under
section 12A could not be denied by invoking provisions of section 13(1)(b) at the time
of grant of registration. Matter restored to file of Commissioner (E) for de novo
consideration.
Shree Naminath Shwetamber Murtipujak Tapagachh Jain Religious Trust. v.
CIT (2024) 209 ITD 379 (Ahd) (Trib.)
S. 12A : Registration –Trust or institution-Details by questionnaire
communicated through Electronic mode on Department’s Portal--Merely
uploading of information about date of hearing on Income-Tax Portal is not
effective service of notice-Notice is not served-Matter restored to
Commissioner (E) to decide afresh in accordance with law after giving
reasonable opportunity of being heard to assessee. [S. 12A(1)(1)(ac)(iii),
12AB, 282(1), R. 127(1)]
Held that merely uploading of information about the date of hearing on the Income-
tax portal was not an effective service of notice in terms of the provisions of
section 282 of the Act. The notices were uploaded on the e-portal of the assessee but
the assessee stated that he did not receive any notice of hearing. Further, there was
nothing on record to prove that the assessee had been served proper notice of hearing
to furnish the relevant information or documents. Therefore, the issue was restored to
the Commissioner (E) to decide afresh in accordance with law after giving reasonable
opportunity of being heard to the assessee and the assessee shall co-operate in the fresh
proceedings before the Commissioner (E). (AY. 2021-22, 2024-25)
Idream Social Edtech Foundation v. CIT (E) (2024)112 ITR 20(Chd)(Trib)

S. 12A : Registration –Trust or institution-Running Educational Institution-

Denial of registration-Making profits-Matter restored to Commissioner for
110
consideration of assessee’s application for registration de novo on merits-
Delay condoned. [S. 80G, 254(1)]
That considering the model of education, being residential boarding and hostel facility,
followed by the assessee, on the same facts the assessee had been granted provisional
registration from the assessment years 2022-23 to 2024-25. The matter is restored to
the file of the Commissioner for consideration of the assessee’s claim for registration
under section 12A of the Act, de novo on the merits after giving the assessee due
opportunity of hearing. Matter remanded. (AY. 2013-14)
Tapovan Education Trust v. CIT (2024)112 ITR 43 (SN)(Ahd)(Trib)

S. 12A : Registration –Trust or institution-Denial of exemption-Trust or

institution-Investment restriction -Provisions of section 13 can be invoked only
at time of assessment and not at time of grant of registration under section
12A-. Matter is restored to file of CIT (E), for de-novo consideration. [S.
13(1)(b)]
Assessee-trust filed an application for grant of final registration under section 12A.
Commissioner (E) held that objects of trust appeared to be restricted to benefit of a
particular religious community or caste, which was Khoja Shia Ishna Ashari Samaj and
thus, section 13(1)(b) would be applicable and dismissed application for grant of final
registration. On appeal the Tribunal held that provisions of section 13 can be invoked
only at time of assessment and not at time of grant of registration under section 12A.
Matter is restored to file of CIT (E), for de-novo consideration.
Bargahe Husaini Trust-Monpar. v. CIT (2024) 208 ITD 158 (Ahd) (Trib.)

S. 12A : Registration –Trust or institution-Failure to comply with show cause

notice –Cancellation of provisional registration-Matter remanded to
Commissioner (E). [S. 12AB]
Assessee Institute failed to comply with show cause notice (SCN), Commissioner (E)
rejected assessee's application for grant of registration/approval and also cancelled
provisional registration/approval granted under section 12AB of the Act. On appeal the
Tribunal held that the assessee Institute had requested for adjournment due to non-
availability of its authorized representative but there was no whisper of same in order
passed by Commissioner (E); however, uploading of adjournment request on e-portal
was duly acknowledged by e-filing team. Since assessee institute had remained divested
of sufficient opportunity to put forth its case and furnish requisite details in course of
proceedings before Commissioner (E), matter required to be revisited by Commissioner
(E).
Institute of Driving and Traffic Research. v. CIT (2024) 208 ITD 671 /[2025]
121 ITR 368 (Raipur) (Trib)

S. 12A : Registration –Trust or institution-Denial of registration-Application

rejected application on ground that no charitable activity was initiated and no
expenses were incurred on any charitable activity as detailed in section 2(15)-
Assessee submitted documents to show that it had given financial
assistance/donation to improve healthcare, education and services and to
uplift standard of living of Tribals-Matter is remanded back for fresh
consideration. [S. 2(15), 12A(1)(ac)(iii), 80G (5)]
Assessee-trust filed an application for registration under section 12A(1)(ac)(iii) and
under section 80G(5). Commissioner(E) rejected said application on ground that no
111
charitable activity was initiated and no expenses were incurred on any charitable activity
as detailed in section 2(15). Tribunal held that documents to show that it had given
financial assistance/donation to improve healthcare education and services and to uplift
standard of living of Tribals. On facts, order of CIT(E) is set aside and matter is
remanded back for fresh consideration. (AY. 2023-24)
Karamshi Jethabhai Somaiya (Delhi) Trust. v. CIT (2024) 207 ITD 564 (Delhi)
(Trib.)

S. 12A : Registration –Trust or institution-Granted registration under section

12AB for five years-There was no bar in moving application at earliest possible
event, matter is restored to Commissioner (E) to consider application of
assessee for final registration and grant same, if same was otherwise so
admissible to assessee. [S. 12AB,80G(5), Form No. 10AC]
Assessee-trust had been granted provisional registration in Form 10AC for five years.
After grant of provisional registration, assessee applied for final registration-
Commissioner (E) rejected application of assessee being premature and not
maintainable. On appeal the Tribunal held that where trust or institution was
provisionally registered under section 12AB, application for final registration could be
made at least six months prior to expiry of period of provisional registration or within six
months of commencement of its activity, whichever was earlier. There was no bar in
moving application at earliest possible event. Order of Commissioner (E)is set aside
and matter is restored to Commissioner (E) to consider the application of assessee for
final registration and grant same, Matter remanded. Tribunal also held that after grant
of provisional approval, application for final registration could not be rejected on ground
that institution had already commenced its activities even prior to grant of provisional
registration and under such circumstances, date of commencement of activity would be
counted when an activity was undertaken after grant of provisional registration either
under clause (i) or clause (iv) to first proviso to section 80G(5) (AY. 2022-23 to 2026-
27)
Rajbalhat Cultural Circle. v. CIT (2024) 207 ITD 633 (Kol) (Trib.)

S. 12A : Registration –Trust or institution-Failure to furnish details of activity-

Opportunity of hearing was not granted-Restored to file of Commissioner (E)
for de novo adjudication. [S. 12A(1)(ac)(vi)]
Assessee-trust is constituted with sole purpose of servicing Indian cows, providing relief
and aid and a quality lifestyle to Indian cows, shelters and open land areas for their
natural living. Assessee was granted provisional registration under section
12A(1)(ac)(vi)-Subsequently, application filed by assessee under section 12A(1)(ac)(iii)
was rejected by Commissioner (E) on ground that there was no proper walls, cover to
protect animals, residence of caretakers of animals, place where fodder can be stored,
etc. and assessee had not furnished any documentary evidence regarding location of
cowshed, name of place or village. On appeal the Tribunal held that since Commissioner
(E) was not satisfied with details/evidence furnished by assessee but assessee was not
granted with any other opportunity to meet objections of Commissioner (E), matter is
remanded back for de novo adjudication.
Saaksh Foundation. v. CIT (2024) 207 ITD 671/230 TTJ 171/238 DTR 449
(Mum) (Trib.)

112
S. 12A : Registration –Trust or institution-Mistake in filing entry in Form No-
10AB-Rejection of application is not proper-Commissioner (E) is directed to
treat application of assessee under section 12A(1)(ac)(iii) and to consider case
on merits. [S. 12A(1)(ac)(iii), Form No. 10AB]
Assessee-trust filed an application for registration under section 12AB. However, at time
of filing online application, it selected inadvertently section 12A(1)(ac)(iv) instead of
section 12A(1)(ac)(iii). Assessee prayed to treat application as under section
12A(1)(ac)(iii). However, said prayer was not accepted by Commissioner (E) on ground
that he had no power to change or rectify application filed in Form 10AB. On appeal the
Tribunal held that since it was an inadvertent mistake and assessee had already
explained facts and prayed for correction, mistake in filing entry was not fatal and thus
issue could be considered in appropriate sub-clause of section 12A(1). Therefore, the
order of rejection is set aside and Commissioner (E) is directed to treat application of
assessee under section 12A(1)(ac)(iii) and to consider case on merits.
Shree Swaminarayan Gadi Trust. v. CIT (2024) 207 ITD 666 /231 TTJ 595/240
DTR 371 (Surat) (Trib.)

S. 12A : Registration –Trust or institution-Denial of registration-Details of

expenditure on object of trust-Matter is remanded back to file of Commissioner
(E) with a direction to substantiate objects with activities carried on-
Provisional registration-Cancelled on ground that assessee did not furnish note
on activities giving details of activities actually carried out by it-Matter is
remanded back for disposal afresh. [S. 12A(1)(ac)(iii),12AB, 80G(5)]
Assessee-trust filed an application for registration under section 12A(1)(ac)(iii).
Commissioner (E) held that assessee did not furnish note on activities giving details of
activities actually carried out by assessee, details furnished were general in nature
without activity-wise details. He further held that photographs submitted by assessee
did not prove that activities were carried out by trust itself. He also observed that
assessee did not provide details of expenditure on object of trust by producing
bills/vouchers and supportings of expenditure incurred on object of trust. Accordingly,
he rejected application of assessee for registration. On appeal the Tribunal held that
since assessee had not provided necessary supporting evidences of expenditure incurred
shown as spent on object of trust, matter is remanded back to file of Commissioner (E)
with a direction to assessee to substantiate objects with activities carried on and
necessary supporting of expenditure incurred shown as spent on object of trust. Tribunal
also held that provisional registration granted to assessee-trust under section 12AB was
cancelled on ground that assessee did not furnish note on activities giving details of
activities actually carried out by it and matter remanded matter back to Commissioner(E)
in view of fact that registration under section 80G(5) also depended on registration for
disposal afresh. (2024-25)
Child Education and Vision Foundation. v. CIT (2024) 206 ITD 683 (Mum)
(Trib.)
S. 12A : Registration –Trust or institution-Mismatch of name-Registration
application should not be rejected on mere mismatch of name especially when
steps had been taken by assessee to update correct name in PAN database. [S.
12A(1)(ac)(iii)]
Assessee's registration application under section 12A(1)(ac)(iii) was rejected by CIT(E)
due to a name mismatch. On appeal the assessee argued for reconsideration, asserting
correct name as 'Surat Halai Memon Jamat and Halai Memon Jamat Kabrashatn' and
113
refuting any benefit to a particular religious community or caste. Tribunal held that
mismatch in name might be rectified and corrected and it should not be a reason to deny
registration of assessee-trust. Further, since assessee had already taken steps to correct
above name in PAN database, above name should be treated as a correct name and
hence, Commissioner (E) is directed to consider above stated name of assessee-trust
and registration should not be denied only on the ground of mismatch of name.
Surat Halai Memon Jamat v. CIT(E) (2024] 205 ITD 607 (Surat) (Trib.)
S. 12A : Registration –Trust or institution-Trust, corpus contribution-Corpus
specific voluntary contribution-Trust not registered u/s 12A/12AA of the Act-
Capital receipt cannot be assessed as income. [S. 2(24)(iia), 11(1)(d), 12A,
12AA]
Assessing Officer held that assessee-trust had received corpus donation grant from
another trust. Since assessee was not registered under section 12A, he held that it was
not eligible for exemption under section 11(1)(d) in respect of corpus donation received
by it and, accordingly, treated said receipts as income of assessee. CIT(A) deleted the
addition. On appeal the Tribunal held that since corpus specific voluntary contribution
being in nature of capital receipt, was outside scope of income under section 2(24)(iia),
same could not be brought to tax even in case of trust not registered under section
12A/12AA. (AY. 2019-20)
ACIT v. Financial Inclusion Trust. (2024) 204 ITD 211 (Delhi) (Trib.)

S. 12A : Registration-Trust or institution-Insufficient time to respond to notice-

Violation of the fundamental principles of natural justice-The ITAT also set
aside the order rejecting the application u/s 80G (5) and directed the CIT (E)
to decide the application afresh in accordance with law. [S. 12AB 80G(5),
Form No. 10A]
The appellant trust is a charitable trust formed with the objects of Indian Native Breed
Cow cultivation, development, protection and awareness etc. It applied for
registration u/s 12AB r. w. s. 12A of the Act in Form 10A and received a provisional
registration. It also applied for registration u/s 80G (5) of the Act in Form 10AD. The
ld. CIT(E) issued notices to the appellant trust seeking certain details and information
regarding its activities, income and expenditure, and compliance with the conditions
of registration. The appellant trust failed to respond to the notice within the stipulated
time of five days. Consequently, the ld. CIT (E) rejected both the applications and
cancelled the provisional registration by passing separate orders. The appellant trust
challenged the orders before the ITAT on the grounds of violation of principles of
natural justice, insufficient time to respond, and non-consideration of the merits of
the case. The ITAT set aside the order rejecting the application u/s 12AB and remanded
the matter to the ld. CIT (E) for de novo disposal after affording due opportunity of
being heard to the appellant trust. The ITAT also set aside the order rejecting the
application u/s 80G (5) on the same grounds and directed the ld. CIT (E) to decide the
application afresh in accordance with law. (AY. 2023-24)
Chaitanya Goshala Trust v. CIT (E) [2024] 109 ITR 54 (SN) (Pune) (Trib)

S. 12A : Registration –Trust or institution-Rejection of application on the

ground of wrong code selected for provisional registration-and barred by
limitation-Mistakes committed while applying registration could be condoned-

114
Commissioner (E) directed to hear and dispose of request of assessee by
allowing it to apply under Form 10A. [S. 12AB, Form 10A,10AB,]
Held, that the Central Board of Direct Taxes by Circular No. 6 of 2023, dated May 24,
2023, had extended the date up to September 30, 2023, whereas the assessee filed
form 10AB by May 15, 2023. Though the assessee did not plead before the Revenue
authorities by that day about the mistake of selection of wrong section code while
applying in form 10AB and seek rectification, the request of the assessee for regular
registration was pending by that date. Therefore, the mistake committed by the assessee
while applying for registration in form 10AB instead of form 10A and also by making a
selection of the wrong section code, namely, 02-sub-clause (iii) of clause (ac) of sub-
section (1) of section 12A of the Act instead of 02-sub-clause (i) of clause (ac) of sub-
section (1) of section 12A of the Act was condoned. The Commissioner (E) is directed
to hear and dispose of the request of the assessee by allowing it to apply under form
10A. (AY. 2024-25)
Mandava Foundation v. ITO (E) (2024)111 ITR 16 (SN)(Hyd)(Trib)

S. 12A : Registration –Trust or institution-Technical mistake in preparing

application-Typographical error corrected-Remanded back to file of
Commissioner (E) for fresh adjudication by considering amended application.
[S. 12A(1)(ac)(ii), 12(ac)(iii), Form No10AB.]
Assessee had committed a technical mistake in preparing application under section
12A(1)(ac)(ii) instead of section 12A(1)(ac)(iii). Thereafter, assessee had filed revised
Form No. 10AB for seeking registration under correct provisions i. e. section
12A(1)(ac)(iii). Commissioner (E) rejected application of assessee society for grant of
registration on ground that in application made in Form No. 10AB, section 12A(1)(ac)(ii)
was mentioned. On appeal the Tribunal held that since typographical error made by
assessee is corrected, appeal is remanded back to file of Commissioner (E) for fresh
adjudication by considering amended application. (AY. 2024-25)
Vir Sewa Mandir. v. CIT (2024) 208 ITD 629 (Delhi) (Trib.)

S. 12AA : Procedure for registration –Trust or institution-Condonation of delay-

Application was rejected-Denial of exemption is justified-SLP rejected. [S.
260A, Art. 136 ]
The assessee had applied for registration under section 12AA as a charitable institution
only in the year 2011-12 and the applications for condonation of delay, for certification
for the previous years, having been rejected, exemption could not be allowed by the
court exercising jurisdiction under section 260A of the Act, in a year in which such
registration was not available. On petition for special leave to appeal to the Supreme
Court(AY. 2007-08, 2008-093, 2009-10)
Academy of Medical Sciences v. CIT (2024)460 ITR 592/ 297 Taxman 2 (SC)
Editorial :Refer Academy of Medical Sciences v. CIT (2018) 403 ITR 74 (Ker)(HC)

S. 12AA : Procedure for registration –Trust or institution-Cancellation of

registration-Commissioner had no jurisdiction to cancel registration certificate
once granted by him to assessee under section 12A till 1-10-2004. [S. 12A,
260A]
Assessee, an educational trust, claiming to be engaged in charitable activities by
providing financial assistance to poor and needy students by way of fee concession. It
115
had filed an application under section 12A for grant of registration which was allowed.
Commissioner passed an order on 2-3-2010 cancelling registration on ground that
assessee was not carrying out any charitable activities. Tribunal had restored registration
holding that once Commissioner had granted registration to assessee-undertaking, he
had no power to cancel same. Tribunal also held that an express power was conferred
on Commissioner to cancel registration for first time by enacting sub-section (3) in
section 12AA only with effect from 1-10-2004 by Finance (No. 2) Act, 2004, and, hence,
such power could be exercised by Commissioner only on and after 1-10-2004. On appeal
High Court affirmed the order of Tribunal. (AY. 2004-05, 2005-06, 2006-07, 2007-08)
CIT v. Young Scholar’s Educational Society (2024) 299 Taxman 145/341 CTR
52 /242 DTR 252 /471 ITR 164 (P&H)(HC)
CIT v. Baba Banda Singh Bahadur Education Trust (2024) 341 CTR 52 /242
DTR 252 /299 Taxman 145 / 471 ITR 164 / 8 NYPCTR 889 (P&H)(HC)
S. 12AA : Procedure for registration –Trust or institution-Charitable purpose-
Object and genuineness of Trust-Tribunal justified in directing the
Commissioner to grant registration and also approval under section 80G(5)(vi)
of the Act. [S. 11, 80G(5)(vi), 254(1)]
Dismissing the appeal of the Revenue the Court held that the Tribunal had recorded its
satisfaction as the trust fulfilled the following two basic conditions for grant of
registration under section 12AA of the Act : the object of the trust, and the genuineness
of the activities of the trust/institution. The Tribunal had rightly directed the
Commissioner to grant registration under section 12AA and also the approval under
section 80G(5)(vi) of the Act to the assessee. The Commissioner was not to examine
the genuineness of the activities of the trust and whether, if the trust transfers funds to
another charitable society, it can be given exemption under section 11 of the Act. This
power is restricted to the Assessing Officer. Hence, no useful purpose would be served
by remanding the matter to the Commissioner to pass appropriate orders. (AY. 2016-
17)

CIT (E) v. Nanak Chand Jain Charitable Trust (2024)462 ITR 283/ 339 CTR
566 (P&H) (HC)

S. 12AA: Procedure for registration-Trust or institution –Violation of provisions

of section 13(1)(c)-Rejection of application not erroneous. [S. 11, 13(1)(c),
132, 133A]
Held that no error was committed by the authority in scrutinizing the genuineness of
activities of the institution in obtaining satisfaction to grant registration. Before the
amendment of s. 12AA by the Finance Act, 2019 with effect from September 1, 2019,
the requirement for obtaining satisfaction was only about the genuineness of activities
of the trust or institution. The authority had found that the activities were done in such
a way that it had led to surveying under section 133A against the assessee and a search
and seizure operation under section 132 on the premises of its secretary. When the
authority was confronted by the activities requiring survey, search, and seizure, there
was the conclusion that satisfaction had not been obtained to grant registration. This,
the authority had done as required and empowered by the provision existing before the
amendment. The facts that the assessee had suffered survey and search and seizure
operations in the course of conducting its activities under its objects and that there had
been a violation of the provisions of section 13(1)(c) could be considered for satisfaction
on the application for grant of registration under section 12AA. (AY. 1997-98, 2011-12)
116
CIT (E) v. Orissa Cricket Association [2024] 461 ITR 382 (Orissa)(HC)
Editorial : Order in Orissa Cricket Association v. CIT(E) (2018) 61 ITR 675
(Cuttack)(Trib), reversed.

S. 12AA : Procedure for registration –Trust or institution-Contribution for

establishment of a Dam from PHD Rural Development Foundation which is a
social arm of PHD Chamber of Commerce and Industry-Not for profit-Matter is
remanded to CIT(E) to decide whether activity is genuine or not. [S. 2(15),
12AB, 13(3),80G (5)]
Held that the applicability of the provisions of s. 13 is required to be looked into at the
time of assessment of the trust income and if the assessee has given any benefit to the
trustees which is violative of the provisions of s. 13, naturally the assessee will pay the
higher taxes on the above sum as per the provisions of the law. While granting
registration to the CIT(E) is required to make an enquiry about the genuineness of the
activities of the trust and compliance with the requirement of any other law, if those are
material for the purpose of achieving its objects. The issue about the genuineness of the
activity was decided only on the basis of few vouchers made available to the ITO(E).
Assessee was never confronted with the views expressed by the CIT(E) about the
genuineness. The matter is remanded to the file of CIT(E) in accordance with law. (AY.
2023-24)
Foundation for Ecological & Environmental Sustainability Trust v. CIT (E)
(2024) 232 TTJ 210 (Jodhpur)(Trib)

S. 12AA : Procedure for registration –Trust or institution-Hospital-Letting of

shops-Income is used for the objects of the Trust-Cancellation of registration
is not valid. [S. 12A, 12AA(3)]
Held that though the receipts of the assessee-trust from the hospital activities are less,
income from letting of shops are used for the objects of the Trust. Trustees have not
misused the property of the trust. Genuineness of the trust is not in doubt hence the
cancellation of registration is not valid.
Jodhpur Medical Research Centre v. CIT (E) (2024) 229 TTJ 909 / 239 DTR 9
/ 166 taxmann. com 165 (Jodhpur) (Trib)

S. 12AA : Procedure for registration –Trust or institution-Cancellation of

registration-Trust contains a covenant that enables the settlor to utilize the
premises for herself or her family-Cancellation of registration is set aside. [S.
11(5), 12A, 12AA(3), 13 (3)]
Held that mere fact that the trust deed of the assessee-trust contains a covenant that
enables the settlor to utilize the premises for herself or her family cannot empower the
CIT to cancel the registration, as it does not lead to any conclusion that either the
activities of the trust are not genuine or the activities are not being carried out in
accordance with the objects of the trust. Similarly, the fact that huge Investments are
made in mutual funds cannot also lead to the conclusion that the activities of the trust
are not genuine-Since the settlor has died in the year 1965, the relevant clause has
become infructuous and thus there is no question of violation of provisions of s. 13(3).
Investments in mutual funds are only in order to meet the statutory requirements of S.
11(5). Order cancelling the registration is set aside. Followed CIT(E) v. Institute
Management Committee of Industrial Training Institute (2017) 293 CTR 167 / 148 DTR
74/ 393 ITR 161 (Bom) (HC)
117
Mr. & Mrs. S. M. Batha Education Trust v. CIT (2024) 164 taxmann. com 266/
228 TTJ 20 (UO) (Pune) (Trib)

S. 12AA : Procedure for registration –Trust or institution-cancellation of

registration-New Section brought with effect from 1-4-2022 providing for
reference by Assessing Officer to Principal Commissioner or Commissioner
proposing withdrawal of registration in case of Specified violation by trust or
institution-Amendment is prospective-Law inserted with effect from 1-4-2022
would not apply retrospectively-Cancellation of registration is bad in law and
registration is to be restored. [S. 2(15), 11, 12AB(4) 13(2(a) 13(2)(g) 13(3)]
Held that in the case of the assessee, it had been held that doing business or not, did
not warrant the cancellation of registration. The Department could not raise the issue
again and there must be some finality on the issue. The observations or reasons in the
order of the Commissioner (E) under challenge had no validity as the issue had already
become final. That in the absence of specific mention that the amended provisions
operate retrospectively, the cancellation could not operate from a past date, in this case
from the assessment year 2017-18. That the Commissioner (Exemption) had initiated
proceedings of cancellation of registration based on the reference received from the
Deputy Commissioner (E) dated February 6, 2020. There was no such reference after
registration was granted on September 23, 2021. The provision for making the reference
was inserted in law with effect from April 1, 2022 and at the time of reference, there
was no provision for making such reference under the second proviso to
section 143(3) of the Act for trusts and institutions referred to under section 11 of the
Act. Therefore, the reference itself was without the authority of any statutory provisions
and there is no fresh reference by the Assessing Officer. That the cancellation of
registration under section 12AA(3) / 12AB(4) by the Commissioner (E) is bad in law and
the registration already granted to the assessee is to be restored. (AY. 2017-18)
Centre for Development Communication Trust v. CIT (E) (2024)114 ITR 29
(Jaipur)(Trib)

S. 12AA : Procedure for registration –Trust or institution-Failure to establish

activities in consonance to object-Natural justice-Matter remanded to the
CIT(E) to pass a de novo order in accordance with law after providing
reasonable opportunity. [S. 2(15)]
Assessee-trust filed an application for registration under section 12AA. CIT (E) rejected
on ground that assessee-trust had not incurred any expense on actual charitable activity
as mentioned in its Memorandum of Association. On appeal the Tribunal held that, since
assessee had failed to establish carrying out of any of activities in consonance with stated
charitable purposes of trust, in view of natural justice, it is deemed fit that assessee
should be allowed one more opportunity to prove its claim before CIT(E). Accordingly,
CIT(E)is directed to pass a de novo order in accordance with law after providing
reasonable opportunity.
Chardikala Foundation. v. CIT (2024) 209 ITD 197 (Amritsar) (Trib.)
S. 12AA : Procedure for registration –Trust or institution-Cancellation of
registration-Provisions of section 12AA/12AB do not provide for cancellation
of registration with retrospective effect. [S. 12AB]
Assessee trust had been granted registration under section 12A on 21. 5. 2014 w. e. f.
1. 4. 2013. A show cause notice was issued upon assessee on 6-10-2022 to cancel
registration granted to assessee under section 12AA w. e. f. 1. 4. 2014 and passed an
118
order cancelling registration. On appeal the Tribunal held that provisions of section
12AA/12AB do not provide for cancellation of registration with retrospective effect.
Therefore, since show cause notice for cancellation of registration had been issued upon
assessee by Principal Commissioner (E) on 6-10-2022, he could not have cancelled
registration retrospectively with effect from 1-4-2014. (AY. 2023-24)
Maa Jagat Janani Seva Trust. v. CIT (2024) 208 ITD 120 (Cuttack) (Trib.)
S. 12AA : Procedure for registration –Trust or institution-Delay of 840 days is
condoned-On second application registration was granted on same set of facts-
Matter is restored to CIT(E) to consider first application afresh, in accordance
with law. [S. 11, 12A, 254(1)]
Delay in filing of appeal was caused due to bonafide mistake hence the delay of 840 days
is condoned. On merit since subsequently upon filing of second application for
registration, assessee was granted registration on same set of facts which pointed to
fact that assessee had been able to establish that it was carrying on genuine charitable
activities, in interest of justice, matter was to be restored to Commissioner (E) to
consider first application of assessee afresh, in accordance with law. (AY. 2019-20)
Shree Asandas B Murjani Education Trust. v. CIT (2024) 205 ITD 121 (Ahd)
(Trib.)

S. 12AA : Procedure for registration –Trust or institution-Produced numerous

documents under Rule 29 and also produced financials statements for relevant
period-Matter remanded back for consideration afresh.
Assessee-society applied for registration under section 12AA. Commissioner (E) rejected
registration application on ground that genuineness of activity undertaken by society i.
e., selling of medicines or charity activities had not been proved. On appeal the Tribunal
held that the assessee had produced numerous documents under rule 29 of Income-
tax Appellate Tribunal Rules and also produced financials for period ending on 31-3-
2019. Matter remanded back for consideration of documents produced by assessee. (AY.
2019-20)
Radha Madhav Nishkam Seva Samiti. v. CIT (2024) 205 ITD 232 (Delhi)
(Trib.)

S. 12AA : Procedure for registration –Trust or institution-Collusive

arrangement with SRMAMET (a trust formed by same management committee
as that of assessee-society)-Funds were channelized directly/indirectly for
members of management committee, assessee-society-Violation of section
13(1)(c)-Cancellation of registration is justified. [S. 12A, 12AA(4)(a),
13(1)(c)(ii)]
Assessee-society is engaged in imparting education through a school and was granted
registration under section 12A of the Act. Commissioner (E) cancelled registration
granted to assessee on the ground that the assessee-society had not paid tax dues and
it had entered into collusive arrangement with SRMAMET whereby school of assessee
was transferred to SRMAMET; and application for registration under section 12AA was
made by SRMAMET; in order to make assessee lose significance in running of school;
with larger aim of frustrating lawful recovery of tax dues of assessee. In order rejecting
application of SRMAMET seeking registration, it had been stated that entirely new
institution (SRMAMET) was created by way of a trust which was formed by same
management committee as that of assessee-society. Funds of assessee were
channelized directly/indirectly for members of management committee and, thus,
119
assessee-society clearly stood in direct violation of section 13(1)(c). The assessee had
also not filed returns of income under section 139 and the activities of assessee were
not genuine within meaning of section 12AA(3). Accordingly the activities of the Trust is
hit by section 12AA(4)(a) read with section 13(1)(c)(ii) and section 12AA(4)(b). On
appeal Tribunal affirmed the order of the CIT(E) cancelling the registration.
Shri Ram Murti Anchal Memorial Educational Society. v. CIT (2024) 204 ITD
465 (Lucknow) (Trib.)

S. 12AB: Procedure for fresh registration Cancellation of registration with

retrospective effect-On writ filed by the petitioner, the Court granted the
interim stay-SLP of Revenue is dismissed. [S. 12A, 12AA, 12AB(4), Art. 136]
The assessee-trust was granted registration u/s 12A on 28–05–2021 cancelled by the
CIT by the order dt. 30–06–2023 u/s 12A read with section 12AA read with 12AB(4)
with retrospective effect. On Writ Petition, to the Court on the issues concerning the
jurisdiction and also on the merits. The Court observed the balance of convenience is in
favour of the petitioner and would cause irreparable harm, resulting into disabling the
assessee-trust from accepting any contribution from domestic contributors and would
derail its programs in pipeline. The interim stay grated. SLP of Revenue is dismissed.
(AY. 2021-22)
PCIT v. Centre for Policy Research [2024] 297 Taxman 135 / 462 ITR 1 (SC)
Editorial: Centre for Policy Research v. PCIT (Central) (2023) 156 taxmann. com 279 /
(2024) 461 ITR 540 (Delhi)(HC)

S. 12AB: Procedure for fresh registration-Reasonable opportunity-Violation of

principle of natural justice-Alternative remedy-Writ petition is dismissed. [S.
12AB(4), Art. 226]
Dismissing the petition the Court held that the assessee has an alternative remedy,
hence the writ petition is dismissed.
Myadam Kishan Rao Charitable Trust v. CIT (E) (2024) 471 ITR 334
(Telangana) (HC)
S. 12AB : Procedure for fresh registration-Wrong section code in Form 10A-
Rejection of application is set aside-Matter remanded for reconsideration by
Commissioner (Exemption). [S. 11,Form No 10A, Art. 226]
Assessee-trust filed application in wrong section code in Form 10A. The said application
was rejected by CIT(E). On writ the assessee contended that application had not been
considered in its proper prospective by assigning reason and application of assessee for
registration under section 12AB has been rejected. Allowing the petition the Court held
that the order rejecting registration being without reason is set aside and application
for registration under section 12AB is restored for reconsideration by Commissioner
(Exemption). Matter remanded. (AY. 2022-23)
Parmeswari Bai Memorial Trust v. CIT (E) (2024) 298 Taxman 711 (Orissa)(HC)

S. 12AB: Procedure for fresh registration-Cancellation of registration with

retrospective effect-On writ filed by the petitioner, the Court granted the
interim stay. [S. 12A, 12AA, 12AB(4), Art. 226]
The assessee-trust was granted registration u/s 12A on 28–05–2021 cancelled by the
CIT by the order dt. 30–06–2023 u/s 12A read with section 12AA read with 12AB(4)
with retrospective effect. On Writ Petition, to the Court on the issues concerning the
jurisdiction and also on the merits. The Court observed the balance of convenience is in
120
favour of the petitioner and would cause irreparable harm, resulting into disabling the
assessee-trust from accepting any contribution from domestic contributors and would
derail its programs in pipeline. The interim stay grated.
Centre for Policy Research v. PCIT (Central) (2023) 156 taxmann. com 279 /
(2024) 461 ITR 540 (Delhi)(HC)
Editorial : SLP of Revenue is dismissed, PCIT v. Centre for Policy Research [2024] 297
Taxman 135 / 462 ITR 1 (SC)

S. 12AB: Procedure for fresh registration-Denial of registration is justified if

the trust had not complied with the applicable State law. [Form No. 10AB,
Rajasthan Public Trust Act, 1959, S.17 ]
Commissioner (E) rejected assessee's application for registration under section 12AB on
grounds that assessee was not registered under Rajasthan Public Trust Act, 1959,
genuineness of activities of assessee could not be verified due to not submitting sought
details, and assessee had filed incomplete Form No. 10AB. On appeal the Tribunal held
that since Rajasthan Public Trust Act is applicable to assessee-trust but assessee had
not followed provisions of Rajasthan Public Trust Act and assessee had not filed single
document to prove genuineness of activities of trust, assessee is not eligible for
registration under section 12AB of the Act. (AY. 2022-23 to 2024-25)
Gurukul Shikshan Sansthan v. CIT(2024) 165 taxxmann. com 369
(Jaipur)(Trib)
S. 12AB: Procedure for fresh registration-Registration granted cannot be
cancelled without following due process of law-CIT(E) is directed to consider
the assessee's application under S. 12A(1)(ac)(v) in Form 10AB seeking
approval for change in its objects/rules/ regulations as per the new trust deed
and pass an order afresh in accordance with law. [S. 12A(1)(ac)(v), 12AB(4),
Form No. 10AB]
Tribunal held that there is no whisper in the order of the CIT(E) that there is violation of
conditions on the basis of which the registration to the assessee-trust was granted.
Genuineness of the religious activity carried on by the assessee trust cannot be doubted
as it was only after the CIT(E) was satisfied about the genuineness of the religious
activity of the trust that the registration to the trust was granted under s. 12AB. Non-
compliance of any other law/furnishing of incomplete or false or incorrect information
has also not been noticed by the CIT(E). The registration granted to the assessee under
S. 12AB has been cancelled without following the due process of the principles of natural
justice. The CIT(E) is not justified in cancelling the registration already granted to the
assessee-trust.. The CIT(E) is directed to consider the assessee's application under s.
12A(1)(ac)(v) in Form 10AB seeking approval for change in its objects/rules/ regulations
as per the new trust deed and pass order afresh in accordance with law.
Shri Gayatri Sanshodhan Seva Mandal v. CIT (E) (2024) 230 TTJ 777 / 240 DTR
65 (Pune) (Trib)
S. 12AB: Procedure for fresh registration-Not registered under Rajasthan
Public Trust Act, 1959-Fair chance should be given to cure the defect-Both the
appeals relating to registration under S. 12AA and 80G are restored to the
CIT(E) for afresh consideration. [S. 12AA, 80G]
Tribunal held that CIT(E) rejected registration under s. 12AB only for the reason that the
assessee is not registered with the authority prescribed under the Rajasthan Public Trust
Act, 1959 and that the assessee has not fully complied with the notice, the reasons
advanced by the CIT (E) are curable in nature; as the assessee has already applied for
121
registration as per the Rajasthan Public Trust Act, the assessee must be provided
adequate opportunity of being heard and be given a fair chance by the CIT (E) to cure
the defect and submission of certain information; both the appeals of the assessee
relating to registration under ss. 12AA and 80G are restored to the CIT(E) for afresh
consideration. (AY. 2023-24)
Pacific Medicare Academy v. CIT (E) (2024) 229 TTJ 129 (UO) / 166 taxmann.
com 245 (Jodhpur)(Trib)

S. 12AB: Procedure for fresh registration-Cancellation of registration-Search

and seizure –Originally assessed at Chandigarh-Centralised at Gurgaon-Case-
Cancellation of registration by virtue of Jurisdiction under section 127 is not
valid –Order of cancellation passed by Principal CIT, Gurgaon, is without
jurisdiction in the context of territorial powers apart from the fact that it is not
in accordance with law-Order is quashed. [S. 2(7A), 12AA,12AB(4), 127(2),
132(1)]
The assessee Trust is registered under the jurisdiction of Commissioner of Income tax
Faridabad. There was search action in the case of Aggarwal Vidya Prachrani Sabha,
hence the matter is centralized at Gurgaon by passing an order under section 127 of
the Act. The Block assessment was completed from the Asst years 2014-15 to 2020-
21. PCIT (Central) Gurgaon passed an order cancelling the registration by passing an
order under section 12AB (4) of the Act. On appeal the Tribunal held that order passed
under sub-cl. (a) to sub-s. (2) of S. 127 only referred to transfer of jurisdiction of ‘AO’
subordinate to CIT(E), Chandigarh to Dy. CIT, Central Circle-2, Faridabad as AO and not
original jurisdiction of CIT(E), Chandigarh with regard to the subject matter as stands
vested by order of CBDT dt. 22nd Oct., 2014. This delegation of powers by CIT(E),
Chandigarh could have been qua officers subordinate to the CIT(E) only and he had no
power to pass an order under S. 127(2) (b) to transfer powers vested by the Board to
any other tax authority. Notification dt. 22nd Oct., 2014 does not mention specifically
that the powers which can be exercised by the Principal CIT under S. 12AB can be
transferred to other authorities. Accordingly while passing the order under S. 127, the
CIT(E), Chandigarh could have transferred his powers under S. 12AB to any other
authority. Term ‘case’ as defined in Explanation to S. 127 refers to assessment initiated
as a consequence of search or consequential proceedings to such assessments only and
cannot be extended to special powers of CIT(E) Principal CIT at Gurgaon did not have
the power to cancel the registration of the assessee trust under S. 12AB(4) on the basis
of the order under S. 127. Principal CIT has initiated action under s. 12AB(4) on the
basis of a proposal conveyed through a letter dt. 23rd Aug., 2022. Since the assessment
by the said AO was completed in September, 2021, i. e., before the letter dt. 23rd Aug.,
2022, there was no occasion for the concerned AO to invoke reference powers under
second proviso to sub-s. (3) of s. 143. The ‘reference’ by the jurisdictional AO was to
be made not to the Principal CIT or CIT, to whom this AO was subordinate but one
authorised by the Board for the purpose of S. 12AB. Assumption of jurisdiction for
cancellation of registration under S. 12AB(4) by virtue of aforesaid transfer of jurisdiction
order under S. 127 is not valid. The Principal CIT has not mentioned as to which amongst
the various specified violations mentioned in Explanation to sub-s. (4) of S. 12AB were
attracted so as to show-cause the assessee. Accordingly the order passed by Principal
CIT, Gurgaon, without jurisdiction in the context of territorial powers apart from the fact
that it is not in accordance with law, hence quashed.

122
Aggarwal Vidya Pracharni Sabha v. PCIT (2024) 228 TTJ 137 / 236 DTR 33
(Delhi)(Trib)

S. 12AB: Procedure for fresh registration-Company registered under Section 8

of the Companies Act, 2013-Withdrawn application under wrong advice-CIT(E)
is justified in rejecting request for restoration of application under section
12AB of the Act [S. 12A, 12AB, Companies Act, 2013, S. 8]
The assessee withdrawn the application of registration under section 12AB of the Act for
pursuing the Registration under Rajasthan Public Trust Act. The assessee came to know
that State Registration is not required, if the trust is registered under the Companies
Act. The assessee moved an application for restoration which was rejected y the CIT(E).
On appeal the Tribunal also affirmed the order of the CIT(E) on the ground that the
Revenue has not taken any advantages of the ignorance of the assessee. Appeal of
assessee is dismissed.
Dharohar Charitable Foundation v. CIT(E) (2024) 163 taxmann. com 173 / 228
TTJ 13(UO) (Jodhpur) (Trib)

S. 12AB: Procedure for fresh registration-Cancellation of registration-Order of

cancellation of registration is quashed-Document Identification Number-Order
in CIT v. Brandix Mauritius Holdings Ltd (2024)158 taxmann. com 247 (SC) is
suspended till issue decided by Supreme Court. [S. 12A, 12AA, 12AB(4)]
Held that the circular issued by the Central Board of Direct Taxes is binding on the
authorities and the Commissioner (E) being an authority under the Central Board of
Direct Taxes, his order passed without a document identification number, was non est
and liable to be quashed, in view of Circular No. 19 of 2019, dated August 14,
2019(2019) 416 ITR 140 (St) issued by the Central Board of Direct Taxes. However,
as the issue was stayed by the Supreme Court in the case of CIT v. Brandix Mauritius
Holdings Ltd. (2024)158 taxmann. com 247 (SC), the Tribunal’s quashing of the order
of the Commissioner (E) would be suspended till the issue was decided by the Supreme
Court. On merit all the issues on the basis of which, the Commissioner (E) had cancelled
the assessee’s registration had already been settled by various appellate authorities on
earlier occasions and the issues, having reached finality, could not be used for cancelling
the assessee’s registration. Therefore, the order under section 12AB(4) of the
Commissioner (E) cancelling the assessee’s registration is quashed on the merits.
People Forums v. CIT (E) (2024)114 ITR 418/229 TTJ 535/239 DTR 146
(Cuttack)(Trib)

S. 12AB: Procedure for fresh registration-Provisions Of Section 13 can be

invoked only at time of assessment while considering eligibility for exemption
and not at time of grant of registration-Order of CIT(E) is set aside and matter
remanded for de novo consideration. [S. 11, 12, 12A, 13(3)]
Allowing the appeal, the Tribunal held that the provisions of section 13 of the Act can
be invoked only at the time of assessment while considering the applicability of
sections 11 and 12 with respect to the assessee’s set of facts and not at the time of
grant of registration under section 12A of the Act. The matter is restored to the
Commissioner (E) for de novo consideration.
National Real Estate Development Council, Gujarat v. CIT (E) (2024)113 ITR 63
(SN)(Ahd)(Trib)
123
S. 12AB: Procedure for fresh registration-Principle of natural justice-
Cancellation of Registration--Time granted only 10 days to cure defects-
Rejection of application is set aside. [12A(1)(ac)(vi), R. 17A]
Assessee filed an application seeking registration under section 12AB-Commissioner (E)
held that the assessee had failed to annex required documents as contemplated under
rule 17A(2)(k). In absence of compliance from assessee, Commissioner (E) rejected
grant of regular registration and cancelled provisional registration granted to assessee
under section 12AB read with section 12A(1)(ac)(vi). On appeal the Tribunal held that
the assessee was accorded only ten days to cure defects and explain discrepancies.
Accordingly the matter remanded to the file of CIT(E) for de-novo consideration.
Parner Vipassana Samiti. v. CIT (2024) 209 ITD 370 (Pune) (Trib.)

S. 12AB: Procedure for fresh registration-Objects were confined to a particular

community-Rejection of application is not valid-Section 13(1)(b) is not
relevant at stage of registration under section 12AB but rather comes into play
at time of assessment when determining exemption under section 11-Rejection
Order set aside. [S. 11, 13(1)(b)]
Assessee-trust filed an application for registration under section 12AB declaring its aims
and objectives primarily related to educational, social, and economic welfare activities.
Commissioner (E) rejected registration application on ground that objects of trust were
confined to a particular community, thus, attracting provisions of section 13(1)(b). On
appeal the Tribunal held that registration under section 12AB is merely a recognition of
charitable status of trust and that section 13(1)(b) is not relevant at stage of registration
under section 12AB but rather comes into play at time of assessment when determining
exemption under section 11 depending on actual income and activities of trust.
Accordingly the CIT(E) erred in rejecting application for registration under section 12AB.
(AY. 2022-23)
Shree Dandhavya chhasath Prajapati Samaj. v. CIT (2024) 209 ITD 337 (Ahd)
(Trib.)

S. 12AB: Procedure for fresh registration-Construction and maintenance of

crematorium for monks and Saints-Various activities without any
discrimination based on caste, colour, or creed-Entitle to registration. [S.
2(15), 11]
Assessee is a charitable trust established with objects of construction and maintenance
of crematorium for monks and Saints, to maintain and manage temple, gurumandir,
upashraya, construction of canteen, guest house etc.. It filed an application for
registration under section 12AB. Commissioner (E) rejected the application on ground
that objects of trust were for benefit of particular religion, community and that assessee
had failed to substantiate charitable nature of trust as well as genuineness of its
activities. On appeal the Tribunal held that the objects of assessee were for general
public benefit and were not restricted to particular persons or community or caste.
Facilities provided by assessee were intended to serve needs of attendees of various
activities without any discrimination based on caste, colour, or creed. It is open for
benefit for all sections of society and general public. Bhojansala is only for providing
food to poor and needy persons of general public without any discrimination and it was
open only for poor and needy persons to provide them food. Moreover, construction of

124
a crematorium and maintenance thereof was for objects of trust, which was not for
particular caste, or community. CIT(E) is directed to grant the registration.
Akhil Bhartiya Pashwachandra Jain Charitable Trust v. CIT (2024) 209 ITD
385 (Rajkot) (Trib.)
S. 12AB: Procedure for fresh registration-Particular religious community or
caste-Trust is in existence since 1946 i. e., prior to Income-tax Act came into
force-Provisions of section 13(1)(b) is not be applicable. [S. 11, 13(1)(b)
Rule,17A]
Assessee-trust is in existence since 1946. It applied for registration under section 12AB.
Commissioner (E) rejected application for registration on ground that objects of
assessee-trust were restricted to benefit of a particular religious community or caste
and, therefore, provisions of section 13(1)(b) would be applicable and it would not be
eligible for exemption under section 11. Tribunal held that since assessee-trust is in
existence prior to Income-tax Act came into force, provisions of section 13(1)(b) would
not be applicable to it, even if it is created only for a particular community. CIT v.
Palghat Shadi Mahal Trust (2020) 120 Taxman 889/ 254 ITR 212(SC), CIT v. Dawoodi
Bohara Jamat (2014)222 Taxman 228 (Mag) / 364 ITR 31 (SC), distinguished. (AY.
2022-23)
Levva Patel Gnati. v. CIT (2024) 208 ITD 490 (Rajkot) (Trib.)

S. 12AB: Procedure for fresh registration-Trust or institution-Eligibility-

Rajasthan Public Trust Act is applicable to assessee-trust-Trust was not
registered under Rajasthan Public Trust Act-Not eligible for registration under
section 12AB. [S. 12A, Rajasthan Public Trust, 1959, S. 17]
The assessee trust was formed on 26-12-2012. It filed an application for registration
under section 12AB on 15-6-2022. CIT(E) rejected the application under S,12AB on
ground of non-registration with the Rajasthan Public Trust Act, genuineness of activities
could not be ascertained due to non-compliance and in completed Form 10AB filed by
the assessee. On appeal the Tribunal held that since assessee had not followed
provisions of Rajasthan Public Trust Act, as it was applicable to it, assessee would not
be eligible for registration under section 12AB of the Act. Followed Noble Education
Society v. Chief CIT (2022) 290 Taxman 206/ 448 ITR 594 (SC), wherein the Court held
that Charitable Institutions and Societies which may be regulated by State Laws have to
be comply with them.
Lokesh Agarwal Dharmarth Charitable Trust. v. CIT (2024) 207 ITD 796
(Jaipur) (Trib.)
S. 12AB: Procedure for fresh registration-Cancellation of registration-Technical
mistake-Filed fresh Form No. 10AB-Order of CIT(E) is set aside-Matter is
remanded back to his file for fresh adjudication. [S. 12A(1)(ac) (ii), Form No.
10AB]
Assessee is a charitable trust, filed application for registration in Form No. 10A under
section 12A(1)(ac)(ii) and consequently, Form No. 10AC was issued granting provisional
registration under section 12A(1)(ac)(vi). Subsequently, six months prior to expiry of
provisional registration, assessee filed Form No. 10AB seeking registration under section
12A(1)(ac)(ii). Commissioner (E) rejected assessee's application treating it as
infructuous and non-maintainable on ground that assessee ought to have applied under
section 12A(1)(ac)(iii) instead of section 12A(1)(ac)(ii). On appeal the Tribunal held that
since assessee had simpliciter made a technical mistake in applying under section
125
12A(1)(ac)(ii) instead of section 12A(1)(ac)(iii) and even now assessee had filed fresh
Form No. 10AB seeking registration under section 12A(1)(ac)(iii), order of Commissioner
(E) is to be set aside and matter is remanded back to his file for fresh adjudication.
(AY. 2023-24 to AY. 2025-26)
Sri Jeyamkonda Choleeswara Soundaranayaki Amman Kumbhabisheka Malar
kuzhu v. ITO (2024) 206 ITD 7 (Chennai) (Trib.)

S. 12AB: Procedure for fresh registration-Denial of registration-Failure to file

income-tax returns and audit report for previous three preceding financial
years-Under took to file before CIT(E)-Matter is remanded to the file of CIT(E).
[S. 12AA]
Assessee-trust filed application under section 12AB. Commissioner (E) issued notice
requesting assessee to furnish detailed note on activities carried out by trust, as well as
certain details/documents mentioned therein. As there was no response to notice, three
hearing opportunities were given to assessee. However, assessee failed to file income
tax returns and audit report for previous three years. Consequently, application of
assessee was rejected. On appeal before the Tribunal it was contended that since it
was granted provisional registration under section 12AA, final registration under section
12AB could not have been denied. Tribunal restored the matter to the file of CIT(E) with
a direction upon him to provide further opportunity of being heard to assessee and
consider documents, evidences which assessee would file as per notice issued by
Commissioner(E).
Shree Shakuntal Education Trust. v. CIT (2024) 206 ITD 451 (Ahd) (Trib.)

S. 12AB: Procedure for fresh registration-Ex-parte order-Opportunity of

hearing-Rejection of application-Violation of principle of natural justice-Matter
remanded to the CIT(E) to pass the order giving a reasonable opportunity of
hearing. [80G (5)
Assessee-trust filed applications for registration under section 12AB and under section
80G(5). Commissioner (E) by ex parte orders rejected applications for registration under
section 12AB and under section 80G(5). On appeal the Tribunal set aside the order and
directed the CIT(E) to reconsider registration under section 12AB and under section 80G
by providing one opportunity to assessee and pass orders strictly under provisions of
law.
Global Academy for Medical Education & Science Trust. v. CIT (2024) 206 ITD
524 (Ahd) (Trib.)

S. 12AB: Procedure for fresh registration-Cancellation of registration-

Provisions of section 12AB(4)(ii), which had been introduced by Finance Act,
2022 with effect from 1-4-2022 could not be invoked for cancellation of
registration with retrospective effect from assessment year 2018-19 [S. 12A]
Assessee-trusts is registered under section 12AA/12A. During course of search
proceedings, Principal Commissioner cancelled registration granted to assessees under
section 12AA/12AB with effect from previous assessment year 2017-18 and that of
subsequent years as per provisions of section 12AB(4)(ii). On appeal the Tribunal held
that in income-tax matters, law to be applied is law in force in assessment year unless
otherwise stated or implied. Therefore, without a specific mention of amended
provisions to operate retrospectively, no cancellation for earlier years could be made.
Accordingly, invoking of provisions of section 12AB(4)(ii) which had been introduced by
126
Finance Act, 2022 with effect from 1-4-2022 for cancellation of registration with
retrospective effect from relevant assessment year 2018-19, is bad in law as it was not
explicitly provided in amended provisions to operate retrospectively. Cancellation of
registration granted to assessee-trust is quashed. (AY. 2018-19)
Amala Jyothi Vidya Kendra Trust. v. PCIT (2024) 206 ITD 601 (Bang) (Trib.)

S. 12AB: Procedure for fresh registration-Name mismatch-Translating name

from Gujarati to English –Objects-Not any particular community-Matter
remanded with the direction to examine the issue fresh. [S. 12A, 13]
Assessee a charitable trust, applied for regular registration under section 12AB after
receiving provisional registration. However, said application was rejected by
Commissioner (E) due to a name mismatch between official documents-Assessee
clarified that their official name in Gujarati, Parul University Bhutpurva Vidhyarthi Mandal
was translated to Parul University Alumni Association in English, preserving trust's legal
status. On appeal the Tribunal held that the assessee has provided supporting
documents to confirm accuracy of translation. Since the assessee had provided detailed
explanation in support of alleged name mismatch, in such circumstances, rejecting
trust's application based solely on this discrepancy is unwarranted. Accordingly,
Commissioner (E) is directed to examine this issue afresh after taking on record detailed
submissions filed by assessee. As regards the object of assessee-trust showed that it
did not benefit a particular community and moreover, consideration of community
benefit should occur during grant of exemption under section 11, and not during
registration under section 12AA, therefore, is remanded to Commissioner (E) to examine
if trust genuinely carried out activities eligible for registration under section 12AA/12AB.
Parul University Alumni Association. v. CIT (2024) 206 ITD 706/229 TTJ 105
(UO) (Ahd) (Trib.)

S. 12AB: Procedure for fresh registration-Denial of registration Objects of trust

were not restricted to particular religious community or caste sunni muslims-
CIT(E) is directed to reconsider the application and decide according to law. [S.
11, 12A, 13(1)(b)]
Assessee-trust filed an application for registration under section 12AB. Commissioner
(E) held that trust is religious-cum-charitable trust and its objects were in nature of
charitable but same were restricted to benefit of a particular religious community or
caste 'sunni muslims' and, thus, assessee would not be eligible for exemption under
section 11 by virtue of section 13(1)(b). On appeal the Tribunal held that all objects of
trust were not restricted to particular religious community or caste sunni muslims.
Therefore, matter is remanded back to file of Commissioner (E) to reconsider
application of assessee regarding registration under section 12AB.
Sunni Muslim Jamat Aamena Madressa Ebdatgah Waqf Committee. v. CIT
(2024) 206 ITD 691 /231 TTJ 783 (Surat) (Trib.)

S. 12AB: Procedure for fresh registration-Denial of exemption-Religious trust-

Provisions of section 13 can be invoked by Assessing Officer while framing
assessment and not by Commissioner while considering application for
registration under section 12A/12AB. [S. 13, 12A, 13, Form No. 10AB]
Assessee-trust filed application for registration of trust under section 12AB.
Commissioner (E) denied same observing that various objects which were otherwise
charitable in nature, were for benefit of a particular religious community i. e. Muslims
127
only. On appeal the Tribunal held provisions of section 13 can be invoked by Assessing
Officer while framing assessment and not by Commissioner while considering
application for registration under section 12A/12AB. Accordingly the order is set aside
and CIT(E) is directed for de novo consideration with direction not to disentitle assessee
for grant of registration. Followed, CIT(E) Bayath Dasha Oswal Jain Mhajan Trust (2016)
243 Taxman 60 (Guj)(HC). (AY. 2022-23)
Anjuman E Nusratul Muslimin Tankaria. v. CIT (2024) 206 ITD 781 (Ahd)
(Trib.)

S. 12AB: Procedure for fresh registration-Provisionally registered-Registration-

Time limit-Final registration-CIT(E) rejected application as premature-There is
no bar on applicant to move an application before period of six months from
expiry of provisional registration-CIT(E) is directed to reconsider application-
Provisional approval under section 80G(5)(iv) was granted-Application for final
approval could not be rejected on ground that institution had already
commenced its activities even prior to grant of provisional registration. [S.
12A(1)(ac)(iii), 80G]
Assessee-trust applied for final registration under section 12A(1)(ac)(iii) after being
provisionally registered under section 12AB. CIT(E) rejected application as premature,
citing existing provisional registration valid until A. Y. 2026-27. On appeal the Tribunal
held that as per section 12A(1)(ac)(iii) an application for final registration has to be
made at earliest possible event i. e. either within six months of commencement of
activities or at least six months prior to expiry of provisional registration and aforesaid
provision does not mean that there is any bar on applicant to move an application before
period of six months from expiry of provisional registration. Accordingly the order of
CIT(E) is set aside and matter was to be restored to CIT(E) to consider application of
assessee for final registration and grant same if same was otherwise so admissible. The
Tribunal also held that where assessee-trust had been granted provisional approval
under section 80G(5)(iv), application for final approval could not be rejected on ground
that institution had already commenced its activities even prior to grant of provisional
registration. CIT(E) is directed to decide application of assessee for final approval as
expeditiously as possible but not later than two months from receipt of this order. (AY.
2026-27)
Mallarpur Naisuva. v. CIT (E) (2024) 206 ITD 792 (Kol) (Trib.)
S. 12AB: Procedure for fresh registration-Registered under section 12AA-Filed
application in Form No. 10A well within due date for fresh registration under
section 12AB-Entitled for grant of registration from assessment year 2021-22.
[S. 11, 12A(1), 12AA]
Assessee-trust is already registered under section 12AA. It due to amendment in
Income-tax Act, i. e., insertion of clause (ac) to section 12A(1) with effect from 1-4-
2021 filed an application in Form No. 10A well within due date for fresh registration
under section 12AB. Commissioner (E) granted registration in Form No. 10AC only from
assessment year 2022-23 instead of from assessment year 2021-22 for reason that CPC
processed return filed by assessee, wherein CPC had noted that new registration details
were not available in return and denied benefit under section 11 to assessee. On appeal
the Tribunal held that since assessee was not able to file details of registration along
with return for reason that no fresh registration was available with it as per amended
law, the Commissioner (E) by following observations of CPC could not have denied

128
registration to assessee from assessment year 2021-22. Accordingly the assessee is
entitled for grant of registration from assessment year 2021-22.
Cheyyar Virutcham Educational Trust v. ACIT(2024) 205 ITD 370 (Chennai)
(Trib.)

S. 12AB: Procedure for fresh registration-Charitable or religious trust-Objects

of assessee-trust were primarily charitable rather than favouring any specific
religious community, CIT(E) was not justified in denying registration under
section 12A, by invoking section 13(1)(b) as said provisions would be attracted
only at time of assessment and not at time of grant of registration. [S. 11, 12A,
13(1)(b)]
Assessee-trust applied for registration under section 12AB. Commissioner (E) denied
registration, on ground that trust's objectives primarily benefitted a specific religious
community, Muslims. By invoking section 13(1)(b), Commissioner denied registration
under section 12A. Tribunal held that provisions of section 13(1)(b) would apply only at
time of grant of exemption under section 11, and not at time of grant of registration
under section 12A. Since majority of objects of assessee-trust was found to be not
catering to a particular community and there was no finding of assessee actually catering
for benefit of a particular community, there was no case for invoking section 13(1) (b).
Therefore, denial of registration was to be overturned, and Commissioner (E) was to be
directed to grant registration under section 12A to assessee-trust. (AY. 2022-23)
Jamiatul Banaat Tankaria. v. CIT (2024) 205 ITD 673 (Ahd) (Trib.)

S. 12AB: Procedure for fresh registration-Fee concession etc to some students-

Matter is remanded to the CIT(E) to decide a fresh. [S. 12A(1)(ac)(v), 12AA]
Assessee, an educational society, had applied for registration under section 12AA of the
Act. CIT (E) rejected registration application of assessee on ground that assessee-
society favoured some students through fee concession etc. which was held as against
stated objects of society. On appeal, Tribunal had set aside matter back to
Commissioner (E) for one more opportunity to assessee for substantiating its claim. -
Meanwhile, assessee in view of amended provisions of registration under section 12AB
applied before Commissioner (E) invoking section 12A(1)(ac)(v). Commissioner (E)
rejected application of assessee observing that no change or modification in objects of
society was made. Thereafter, in compliance of order of Tribunal, Commissioner (E)
vide his order dated 27-2-2023 allowed registration under section 12AA for period from
assessment years 2017-18 to 2021-22 subject to certain conditions. Tribunal held that
in view of registration under section 12AA granted post facto, since assessee-society had
become eligible for applying for registration under section 12AB by making application
under section 12A(1)(ac)(i), matter is restored to Commissioner (E) for deciding afresh.
Sri Gurutegh Bahadur Education Society. v. CIT (2024) 204 ITD 448
(Jabalpur) (Trib.)

S. 12AB: Procedure for fresh registration-Cancellation of registration-

Provisions of section 12AB(4)(ii), which had been introduced by Finance Act,
2022 with effect from 1-4-2022 could not be invoked for cancellation of
registration with retrospective effect from assessment year 2021-22. [S. 12A,
12AA, 12AB(4)(ii), 132]

129
Assessee-trusts were registered under section 12AA/12A. During course of search
proceedings, Principal Commissioner cancelled registration granted to assessees under
section 12AA/12AB with effect from previous assessment year 2020-21 and that of
subsequent years as per provisions of section 12AB(4)(ii) of the Act. On appeal the
Tribunal held that in income-tax matters, law to be applied is law in force in assessment
year unless otherwise stated or implied. Without a specific mention of amended
provisions to operate retrospectively, no cancellation for earlier years could be made.
Therefore, invoking provisions of section 12AB(4)(ii), which had been introduced by
Finance Act, 2022 with effect from 1-4-2022 for cancellation of registration with
retrospective effect from relevant assessment year 2021-22, was bad in law as it was
not explicitly provided in amended provisions to operate retrospectively. Thus,
cancellation of registration granted to assessee-trusts is quashed. (AY. 2021-22)
Amala Jyothi Vidya Kendra Trust. v. PCIT (2024) 204 ITD 605 /227 TTJ 209
(Bang) (Trib.)
Adarsh Vidya Kendra Trust v.. PCIT (2024) 204 ITD 605 /227 TTJ 209 (Bang)
(Trib.)

S. 12AB: Procedure for fresh registration-Denial of registration-Genuineness of

activities-Commissioner was justified in rejecting application for registration
under section 12AB as not maintainable in law. [S. 12A(1)(ac)(iii), R. 17A(2)]
Assessee trust filed its application for registration under section 12AB. CIT (E) rejected
registration on ground that assessee had failed to file documentary evidences to enable
him to be satisfied about genuineness of activities of assessee and to verify if its activities
were in consonance with its objects. He also rejected application on ground that it was
not filed within due date prescribed under section 12A(1)(ac)(iii). Tribunal held that in
absence of any details filed by assessee before any authority, there was no infirmity in
order passed by Commissioner rejecting application for registration under section 12AB
as not maintainable in law.
Amrut Antimdham Charitable Trust. v. CIT (2024) 204 ITD 625 /231 TTJ 491
(Ahd) (Trib.)
S. 12AB: Procedure for fresh registration-Genuineness of activities-Failure to
file documentary evidences to verify the activities in consonance with its
objects-Rejection of application is held to be justified. [S. 12A(1), R. 17A(2),
Form No. 10AB]
Assessee filed its application for registration u/s 12AB in form no. 10AB. The
Commissioner asked the assessee to furnish the details of activities to be carried out by
assessee and also the details of documents as prescribed under rule 17A(2). The
assessee failed to file the documentary evidences to satisfy the genuineness of its
activities and to verify acitivities were in consonance with its objects. The commissioner
rejected the application. On appeal the ITAT held that the assessee failed to satisfy the
genuineness of the activities carried out by the assessee and the Commissioner is
justified in rejecting the application. Appeal of the assessee is dismissed. (AY. 2023-
24)
Amrut Antimdham Charitable Trust v. CIT (E) (2024) 204 ITD 625 (Ahd) (Trib)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions-

Purchase of luxury vehicle-Registered in name of managing trustee-Not able to
establish that vehicle was utilized for purpose of charitable activities-

130
Exemption under sections 11 and 12 is denied on value of vehicle purchased
[S. 11, 12, 13(1)(c)]
Assessee-trust was conducting its activities in carrying out charitable activities, i. e.,
education, relief to poor, etc.. During year, assessee purchased a luxury vehicle by
utilizing funds of assessee-trust and same was registered in name of managing trustee.
Assessing Officer denied exemption under sections 11 and 12 to extent of value of that
vehicle on ground that objects of assessee trust were carrying out of charitable activities
and fund collected for this charitable purposes was utilized for enjoyment of trustees by
means of purchase of said vehicle in name of managing trustee which was a clear
violation under section 13(1)(c). CIT(A) affirmed the order of the AO. On appeal the
Assessee contended that car was purchased in name of managing trustee for simple
reason that it gave relief by way of lower road/life tax and insurance charges. Tribunal
held the assessee could not prove as to what use this asset was put to by trust in work
of trust and for purposes for which trust had been set up. Since assessee was not able
to establish that said vehicle is utilized for purpose of charitable activities, the order of
lower authorities denying the exemption under sections 11 and 12 is affirmed. (AY.
2016-17)
Sri Karpaga Vinayagar Educational and Charitable Trust. v. ITO (2024) 208
ITD 333 (Chennai) (Trib.)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions-

Payment to specified person-Payment of salaries-Much higher educational
qualification or they were having much experience in service-Exemption is
allowed-Payment of rent-Market rental report prepared by a Government
approved registered Valuer-Provisions under section 13(3)(c), 13(2)(c) read
with section 13(2)(g) were not attracted. [S. 11,12A, 13(2)(c), 13(3),
13(2(g)]
Assessing Officer held that the assessee had made large payment of salaries to certain
specified persons under section 13(3) who were in occupation with educational institutes
run by trust which were not justifiable as compared to payments made to other persons
who had rendered same services. Assessing Officer by invoking provisions under section
13(3)(c), 13(2)(c) read with section 13(2)(g) rejected claim of exemption under section
11. CIT(A) allowed the claim. On appeal the Tribunal held that the persons were either
having much higher educational qualification than other staff members or they were
having much more experience in service, as compared to other staff members having
similar educational qualification. On facts, salaries paid by assessee was not found to be
excessive of what be reasonably paid to specified persons under section 13(3) and, thus,
provisions under section 13(3)(c), 13(2)(c) read with section 13(2)(g) were not
attracted. Exemption is allowed. To justify payment of rent paid, assessee had furnished
Market Rental Report prepared by a Government Approved Registered Valuer who
computed market rent of certain amount. However, Assessing Officer merely on ad hoc
basis considered a small amount as monthly rent and disallowed balance rental
payments made by assessee. On appeal the Tribunal held that rent was not found to
be excessive of what be reasonably paid to specified persons under section 13(3) and
therefore, provisions under section 13(3)(c), 13(2)(c) read with section 13(2)(g) were
not attracted. (AY. 2017-18)
DCIT v. Catholic Education Society. (2024) 207 ITD 226/232 TTJ 221/243 DTR
1 (Mum) (Trib.)

131
S. 13: Denial of exemption-Trust or institution-Investment restrictions-The
transaction for purchase of land was a genuine and commercial transaction
therefore, the provisions outlined in section 13(2)(a) do not apply to it. [S. 11,
12A, 13(1)(c), 13(2)(a)]
The appellant society is a charitable institution registered u/s 12A of the Income Tax
Act, 1961 (the Act), engaged in the promotion of education. It claimed exemption u/s
11 of the Act for the surplus of income over expenditure for the assessment year. The
Assessing Officer (AO) denied the exemption on the ground that the appellant society
had violated the provisions of section 13(1)(c) and 13(2)(a) of the Act by diverting funds
to a specified person, who is the son of the founder and the managing trustee of the
society. The AO also added notional interest on the advance paid by the society to the
individual in question, for the purchase of land, which remained in his name for more
than 10 years. The Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the
additions made by the AO. The appellant society challenged the order of the CIT(A)
before the Tribunal.
The Tribunal allowed the appeal of the appellant society and deleted the additions made
by the AO and confirmed by the CIT(A). The Tribunal held that:
The advance paid by the appellant society to the individual for the purchase of land was
a genuine and commercial transaction and not a diversion of funds to a specified person.
The transaction was accepted by the department in the earlier and subsequent years
and no adverse inference was drawn. The transaction was also examined and approved
by the CIT(E) who dropped the proceedings for withdrawal of registration u/s 12AA of
the Act. The provisions of section 13(1)(c) and 13(2)(a) of the Act were not applicable
to the transaction as it was not a case of money lent to a specified person. The appellant
society was entitled to the exemption u/s 11 of the Act for the surplus of income over
expenditure.
The addition of notional interest on the advance paid by the appellant society to the
individual for the purchase of land was not justified as there was no income accrued or
received by the society. The interest income on notional basis cannot be subjected to
tax as per the settled law. The provisions of section 13(1)(d) of the Act were not
applicable to the transaction as it was not a case of investment in the name of a specified
person. The appellant society had notorized the agreement to sale and recorded the
land in its balance sheet as an asset. (AY. 2016-17)
Rastogi Education Society v. ITO (E) [2024] 109 ITR 63 (SN.)/ 161 taxmann.
com 220 (Raipur)(Trib)

S. 13A : Political parties-Denial of exemption-Stay-Pendency of matter before

Supreme court-Concession made by Revenue, no coercive action of any nature
shall be taken against assessee till next date of hearing on 24-7-2024 [S. 11,
Art. 136]
Assessee, a political party, claimed exemption under section 13A. Assessing Officer
disallowed assessee’s claim for exemption under section 13A and raised demand. During
pendency of matter, several demands were made during month of March, 2024,
therefore, assessee sought for an urgent hearing of application. Revenue submitted that
issues which arose in these appeals were yet to be adjudicated upon but having regard
to impending elections, revenue did not wish to precipitate matter inasmuch as no
coercive steps shall be taken with regard to total demand of Rs. 3,500 crores
approximately. Revenue also submitted that a date may be notified for hearing these
appeals in second week of July, 2024 and till then, assessee herein could have no
132
apprehension regarding any coercive step being taken with regard to aforesaid demand.
In view of submission by way of a concession made by revenue, no coercive action of
any nature shall be taken against assessee till next date of hearing on 24-7-2024. (AY.
2018-19)
Indian National Congress (I) / All India Congress Committee v. CIT (2024) 298
Taxman 749 / 337 CTR 998 (SC)
Editorial: Indian National Congress v. Dy. CIT(2024) 160 taxmann. com 359
(Delhi)(HC)

S. 13A : Political parties-Income of political parties-Electoral Bond-

Constitutional validity-Right to information of the voter includes the right to
information of financial contributions to a political party because of the
influence of money in electoral politics (through electoral outcomes) and
Governmental decisions (through a seat at the table and quid pro quo
arrangements between the contributor and the political party)-Plea of
infringement of the right to privacy has no application at all if the donor makes
the contribution, that too through a banking channel, to a political party-
Amendment to S. 182 of the Companies Act is manifestly arbitrary for (a)
treating political contributions by companies and individuals alike; (b)
permitting the unregulated influence of companies in the governance and
political process violating the principle of free and fair elections; and (c)
treating contributions made by profit-making and loss-making companies to
political parties alike-Electoral Bond Scheme, the proviso to S. 29C(1) of the
Representation of the People Act, 1951 (as amended by S. 137 of Finance Act,
2017), S. 182(3) of the Companies Act (as amended by S. 154 of the Finance
Act, 2017), and s. 13A(b) of the IT Act (as amended by s. 11 of Finance Act,
2017) are violative of Art. 19(1)(a) and unconstitutional-Deletion of the
proviso to S. 182(1) of the Companies Act permitting unlimited corporate
contributions to political parties is arbitrary and violative of Art. 14 [S. 11,
13(A)(b), Companies Act, S. 182, Representation of the People Act, 1951 (as
amended by s. 137 of Finance Act, 2017, Finance Act, 2017, S. 11, 135, 137 &
154, Companies Act, 2013, S. 182, Money Laundering Act, 2002, Reserve Bank
of India Act, 1934, S. 31, Representation of the People Act, 1951, S. 29C(1),
Art. 14, 19, 21, 32, Electoral Bond, Scheme,2018, 7(4)]
The petitioners have instituted proceedings under Art. 32 of the Constitution challenging
the constitutional validity of the Electoral Bond Scheme, which introduced anonymous
financial contributions to political parties. The petitioners have also challenged the
provisions of the Finance Act, 2017 which among other things, amended the provisions
of the Reserve Bank of India Act, 1934, (S. 135 of the Finance Act, 2017 “RBI Act “),
the Representation of the People Act, 1951 (S. 137 of the Finance Act, 2017 ; “RPA”)
the IT Act, 1961 (S. 11 of the Finance Act, 2017 ; IT Act “) and the Companies Act,
2013)(S. 154 of the Finance Act, 2017 ; “ Companies Act “). Court held that, Electoral
Bond Scheme does not fulfil the least restrictive means test. The Electoral Bond Scheme
is not the only means for curbing black money in electoral finance. There are other
alternatives which substantially fulfil the purpose and impact the right to information
minimally when compared to the impact of electoral bonds on the right to information.
Financial contributions to political parties are usually made for two reasons. First they
may constitute an expression of support to the political party and second, the
contribution may be based on a quid pro quo. The law as it currently stands permits
133
contributions to political parties by both corporations and individuals. The huge political
contributions made by corporations and companies should not be allowed to conceal the
reason for financial contributions made by another section of the population: a student,
a daily wage worker, an artist, or a teacher. When the law permits political contributions
and such contributions could be made as an expression of political support which would
indicate the political affiliation of a person, it is the duty of the Constitution to protect
them. Not all political contributions are made with the intent of attempting to alter public
policy. Contributions are also made to political parties which are not substantially
represented in the legislatures. Contributions to such political parties are made purely
with the intent of expressing support. At this juncture, the close association of money
and politics needs to be recounted. Money is not only essential for electoral outcomes
and for influencing policies. It is also necessary for true democratic participation. It is
necessary for enhancing the number of political parties and candidates contesting the
elections which would in-turn impact the demographics of representatives in the
assembly. It is true that contributions made as quid pro quo transactions are not an
expression of political support. However, to not grant the umbrella of informational
privacy to political contributions only because a portion of the contributions is made for
other reasons would be impermissible. The Constitution does not turn a blind eye merely
because of the possibilities of misuse. Accordingly the Court held that Electoral Bond
Scheme, the proviso to section 29C(1) of the Representation of the People Act, 19951
(as amended by S. 137 of the Finance Act, 2017, S. 182 (3) of the Companies Act (as
amended by S. 154 of the Finance Act, 2017) and S. 13A(b) of the IT Act (as amended
by S. 11 of the Finance Act, 2017) are violative of Art. 19(1)(a) and unconstitutional ;
deletion of the proviso to S. 182(1) of the Companies Act permitting unlimited corporate
contributions to political parties is arbitrary and violative of Art. 14.
Association for Democratic Reforms. v. UOI (2024) 337 CTR 389 /159
taxmann. com 383 (SC) / [2024] 183 SCL 147 (SC)/[2024] 243 COMP CASE
115 (SC)
Editorial : Refer, State Bank of India v. Association for Democratic Reforms [2024] 298
Taxman 352 (SC)

S. 13A : Political parties-Electoral Bond Scheme-Declared unconstitutional-

Direction to submit details of Electoral Bonds purchased-Time to extend the
publication of details of purchasers of Bonds-The miscellaneous Application
filed by SBI seeking an extension of time for disclosure of details of purchase
and redemption of Electoral Bonds until 30-6-2024 was dismissed and SBI was
directed to disclose details by close of business hours on 12-3-2024. [Art.
19(1)(g)]
Electoral Bond Scheme was declared unconstitutional by Supreme Court on ground that
non-disclosure of information regarding funding of political parties was violative of right
to information of citizens under article 19(1)(a) of Constitution. To give full effect to said
judgment, State Bank of India (SBI), which was authorized Bank to deal with Electoral
Bonds under Electoral Bond Scheme, was directed to submit details of Electoral Bonds
purchased by contributors and redeemed by political parties between 12-4-2019 (date
on which an interim order was passed by Supreme Court directing Election Commission
of India to collect details of contributions) till 15-2-2024 (date of said judgment). SBI
filed a miscellaneous application seeking extension of time until 30-6-2024 for complying
with said directions on ground that process of 'decoding Electoral Bonds and matching
donor to donations' was a complex and time-consuming exercise. Since details of
134
Electoral Bonds which had been purchased and which had been directed to be disclosed
were readily available, SBI was not justified in seeking extension of time. Accordingly
the miscellaneous Application filed by SBI seeking an extension of time for disclosure
of details of purchase and redemption of Electoral Bonds until 30-6-2024 is dismissed
and SBI is directed to disclose details by close of business hours on 12-3-2024.
State Bank of India v. Association for Democratic Reforms (2024) 298 Taxman
352 (SC)
Editorial : Association of Democratic Reforms v. UOI (2024) 159 taxmann. com 383/
[2024] 183 SCL 147 (SC)/[2024] 243 COMP CASE 115 (SC)

S. 14A : Disallowance of expenditure-Exempt income-Borrowed capitals-

Investing in shares to earn income from dividend-Expenditure incurred on
interest paid on borrowed funds is not allowable as deduction-SLP of assessee
is dismissed [S. 10(33), 36(1)(iii), Art. 136]
Assessee claimed deduction on interest paid on borrowed capitals for investing in shares
of his two companies. Assessing Officer disallowed interest, by holding that purpose of
investment was to earn income in form of dividend from two companies and same being
not taxable, therefore, deductions were not permissible for expenses related to income
not forming part of total income under Act. CIT(A) and Tribunal affirmed the
disallowance. On appeal the Tribunal held that since dividend income from two
companies was not taxable, in that scenario expenditure incurred on interest paid on
funds borrowed in respect of investment in shares of two operating companies was hit
by section 14A inasmuch as dividend received on such shares did not form part of total
income. Therefore, interest paid on borrowings is not allowable as deduction. Followed
Maxopp Investment Ltd v. CIT (2018) 254 Taxman 325 / 402 ITR 640 (SC). High Court
affirmed the order of Tribunal. SLP of assessee is dismissed. (AY. 1998-99)
Mahesh K. Mehta v. Dy. CIT (2024) 300 Taxman 600/ 469 ITR 397 (SC)
Editorial : Mahesh K. Mehta v. Dy. CIT (2024) 298 Taxman 238 /471 ITR 237
(Bom.)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Interest free funds-

Presumed that investments were made out of interest-free fund-Disallowance
cannot be made-Order of High Court is affirmed-SLP of Revenue is dismissed.
[R. 8D, Art. 136 ]
Dismissing the SLP of the Revenue the Court held that High Court held that where both
interest-free and interest bearing funds were available with assessee, it was to be
presumed that investments were made out of interest-free fund and, thus, disallowance
made under section 14A was to be deleted. (AY. 2011-12)
PCIT, Central v. Shapoorji Pallonji and Co. Ltd. (2024) 300 Taxman 182 (SC)
Editorial : PCIT, Central v. Shapoorji Pallonji and Co. Ltd. (2024) 164 taxman. com
707 (Bom)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance made

voluntarily was more than exempt income-No further disallowance can be
made-Delay of 340 days-SLP of Revenue is dismissed on account of delay in
filing of SLP-Question of law, if any is kept open. [R. 8D, Art. 136]
High Court held that where amount of disallowance made voluntarily by assessee was
more than exempt income, same would meet requirements as set out in section 14A.

135
SLP filed by Revenue is dismissed on ground of delay of 340 days. Question of law, if
any is kept open. (AY. 2014-15)
PCIT v. Coffee Day Enterprises Ltd. (2024) 300 Taxman 357 (SC)

Editorial : PCIT v. Coffee Day Enterprises Ltd. (2024) 165 taxxmann. com 328
(Karn)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Shares held as stock in

trade-Dividend income earned-Order of Tribunal deleting the addition is
affirmed by High Court-SLP of Revenue is dismissed. [Art. 136]
The assessee, a housing finance company earned exempt income from shares held as
stock in trade. The Supreme Court has in Maxopp’s case conclusively held that in cases
where shares are held by assessee as stock-in-trade, the dividend earned on the said
shares is incidental and would not attract the provisions of section 14A of the Act.
(Followed: Maxopp Investment Ltd. vs. CIT (2018) 91 taxmann. com 154/ 254 Taxman
325 / 402 ITR 640 / (2018) 15 SCC 523 and South Indian Bank Ltd. vs. CIT (2021) 130
taxmann. com 178 / 283 Taxman 178 / 438 ITR 1 (SC) High Court affirmed the order of
Tribunal. SLP of Revenue is dismissed. (AY. 2010-11)
PCIT v. PNB Housing Finance Ltd. (2024) 297 Taxman 229 /461 ITR 481 (SC)
Editorial : PCIT v. PNB Housing Finance Ltd (2023) 146 taxmann. com 445 / (2024)
461 ITR 476 (Delhi) (HC)

S. 14A : Disallowance of expenditure-Exempt income-Amendment to section

14A by inserting explanation (Amended vide Finance Act, 2022) is applicable
prospectively from AY. 2022-23 and not applicable to AY. 2013-14. [R. 8D]
Dismissing the appeal of the Revenue the Court held that amendment brought in section
14A of the Act, inserted by Finance Act, 2022 vide explanation is clarificatory in nature
has prospective effect. The said amendment clarified and brought the exempt income,
even when not earned during the year, under the ambit of section 14A effective from 1-
4 2022. Accordingly the amendment will apply in relation to AY. 2022-23 and subsequent
assessment years. (AY. 2013-14)
PCIT v. Keti Construction Limited (2024) 162 taxmann. com 278 (MP)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot

exceed the exempt income-No substantial question of law. [S. 260A]
Dismissing the appeal of the Revenue the Court held that, disallowance cannot exceed
the exempt income. No substantial question of law. (AY. 2015-16)
PCIT (Central) v. Affluence Commodities (P.) Ltd. (2024) 471 ITR 252 /161
taxmann. com 476 (Guj) (HC)
S. 14A : Disallowance of expenditure-Exempt income-Interest-No exempt
income –Income of an assessee has both taxable and non-taxable elements, it
would be principle of apportionment of expenditure relating to non-taxable
income which would have to be identified for purpose of making disallowance
under section 14A-No disallowance can me made-Explanation in S. 14A came
to be inserted by virtue of the 2022 Act, w. e. f. 1st April, 2022 will apply in
relation to the asst. years. 2022-23 and subsequent assessment years. [S.
260A, R. 8D]
Hed that on a plain textual reading of S. 14A, it is found that the provision mandates
that no deduction would be allowed in respect of expenditure that may be incurred for
136
the purposes of earning income which would ultimately not form part of total income
under the Act. The expenditure which is thus identified is that which may have been
expended for the purposes of earning income which is otherwise not liable to be included
in total income and is thus viewed as exempt. The expenditure which is spoken of is thus
in respect of income which is specified in S. 10 and which stands placed in Chapter III.
S. 14A, on the other hand, is placed in Chapter IV and which contains various provisions
relating to computation of total income. Both sub-ss. (1) and (2) of s. 14A, use the
expression "income which does not form part of the total income" in conjunction with
the expenditure that may be incurred by an assessee in relation thereto. The two
expressions noted above are coupled together by the phrase "in relation to". Explanation
in S. 14A came to be inserted by virtue of the 2022 Act, w. e. f. 1st April, 2022 will
apply in relation to the asst. years. 2022-23 and subsequent assessment years. Income
of an assessee has both taxable and non-taxable elements, it would be principle of
apportionment of expenditure relating to non-taxable income which would have to be
identified for purpose of making disallowance under section 14A.
PCIT v. Alchemist Ltd. (2024) 167 taxmann. com 284 /341 CTR 668 / 242 DTR
489 (Delhi)(HC)
PCIT v. Uno Minda Ltd (2024) 167 taxmann. com 284 / 341 CTR 668 / 242
DTR 489 (Delhi)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Binding precedent-

Tribunal is not justified in holding that the judgment of Delhi High Court is not
binding upon it-Said conduct of the members of the Tribunal is liable to be
condemned-Explanation inserted to section 14A vide Finance Act, 2022 is
prospective in nature. [S. 254(1), R. 8D]
Court held that in view of the Memorandum Explaining the Provisions in the Finance Bill,
2022 and various decisions rendered by the different High Courts, it is clear that the
Explanation inserted to s. 14A vide Finance Act, 2022 is applicable prospectively. Order
passed by the Tribunal holding that insertion of Explanation to s. 14A is clarificatory and
thereby retrospective in nature, is erroneous in law. Tribunal having held in one case
that decision of Delhi High Court is binding on it, same Bench of the Tribunal was not
justified in holding that the judgment of Delhi High Court is not binding upon it-Said
conduct of the members of the Tribunal is liable to be condemned. (AY. 2009-10, 2012-
13 to 2014-15)
Williamson Financial Services Ltd. v. CIT (2024) 341 CTR 359 / 242 DTR 537
/ 301 Taxman 102 (Gauhati)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Own interest free funds-

Investment in its subsidiaries-No disallowance of interest expenditure can be
made. [R. 8D]
The High Court in case of CIT v. Suzlon Energy Ltd. [2013] 33 taxmann. com
151/215 Taxman 272/354 ITR 630 (Guj)(HC) has held that where the assessee had
own interest free funds many times over the investment made in its subsidiaries and
further, there was no direct nexus between the interest bearing borrowed funds and
such investment, no disallowance of interest expenditure could be made under section
14A. Order of Tribunal is affirmed. (AY. 2015-16)
PCIT v. Kalpataru Power Transmission Ltd. (2024) 301 Taxman 427 (Guj.)(HC)

137
S. 14A : Disallowance of expenditure-Exempt income –Interest free funds-
Presumed that investments were made out of interest-free fund-Disallowance
cannot be made. [S. 260A, R. 8D]
Dismissing the appeal of the Revenue the High Court held that where both interest-free
and interest bearing funds were available with assessee, it was to be presumed that
investments were made out of interest-free fund. Order of Tribunal deleting the addition.
is affirmed. (AY. 2011-12)
PCIT, Central v. Shapoorji Pallonji and Co. Ltd. (2024) 164 taxman. com 707
(Bom)(HC)
Editorial : SLP of Revenue is dismissed, PCIT, Central v. Shapoorji Pallonji and Co. Ltd.
(2024) 300 Taxman 182 (SC)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance made

voluntarily was more than exempt income-No further disallowance can be
made. [S. 260A, R. 8D]
Dismissing the appeal of the Revenue the Court held that where amount of disallowance
made voluntarily by assessee was more than exempt income, No further disallowance
can be made. Order of Tribunal is affirmed. (AY. 2014-15)
PCIT v. Coffee Day Enterprises Ltd. (2024) 165 taxxmann. com 328 (Karn)(HC)
Editorial : SLP of Revenue is dismissed on account of delay in filing of SLP. PCIT v.
Coffee Day Enterprises Ltd. (2024) 300 Taxman 357 (SC)

S. 14A : Disallowance of expenditure-Exempt income-Shares held as stock in

trade-No disallowance can be made. [R. 8D]
Court held that the Tribunal had correctly appreciated the fact that the assessee was a
nationalised bank and deleted the disallowance holding that the shares were held as
stock-in-trade and that the provisions of section 14A had no applicability. (AY. 2013-14
to 2015-16)
PCIT v. Oriental Bank Of Commerce Ltd. (2024) 464 ITR 563 (Delhi)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Not recording of

satisfaction-Order of Tribunal deleting the addition is affirmed. [S. 10(34), 45,
260A, R. 8D]
Dismissing the appeal of the Revenue the Court held that most fundamental requirement
under section 14A and rule 8D is that Assessing Officer should record his dissatisfaction
with correctness of claim of assessee in respect of expenditure and to arrive at such
dissatisfaction, he should give cogent reasons. On the facts the Assessing Officer had
not recorded his satisfaction as to why he was not satisfied with claim of assessee in
respect of expenditure in relation to exempt income in form of dividend and long-term
capital gain, impugned disallowance made under section 14A by applying rule 8D was to
be deleted. Order of Tribunal is affirmed. (AY. 2008-09)
PCIT v. Tata Capital Ltd. (2024) 298 Taxman 714 (Bom.)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Borrowed capitals-

Investing in shares to earn income from dividend-Expenditure incurred on
interest paid on borrowed funds is not allowable as deduction. [S. 10(33),
36(1)(iii), 260A]
Assessee claimed deduction on interest paid on borrowed capitals for investing in shares
of his two companies. Assessing Officer disallowed interest, by holding that purpose of
138
investment was to earn income in form of dividend from two companies and same being
not taxable, therefore, deductions were not permissible for expenses related to income
not forming part of total income under Act. CIT(A) and Tribunal affirmed the
disallowance. On appeal the Tribunal held that since dividend income from two
companies was not taxable, in that scenario expenditure incurred on interest paid on
funds borrowed in respect of investment in shares of two operating companies was hit
by section 14A inasmuch as dividend received on such shares did not form part of total
income. Therefore, interest paid on borrowings is not allowable as deduction. Followed
Maxopp Investment Ltd v. CIT (2018) 254 Taxman 325 / 402 ITR 640 (SC). (AY. 1998-
99)
Mahesh K. Mehta v. Dy. CIT (2024) 298 Taxman 238 / 471 ITR 237 (Bom.)(HC)
Editorial : SLP is dismissed, Mahesh K. Mehta v. Dy. CIT (2024) 300 Taxman 600/469
ITR 397 (SC)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot

exceed exempt income. [R. 8D]
Dismissing the appeal of the Revenue the Court held that Disallowance cannot exceed
exempt income. (AY. 2008-09)
PCIT v. Devata Tradelink Ltd. (2024) 297 Taxman 86 (Delhi) (HC)
Dy. CIT v. Jite Shipyard Ltd. (2024) 297 Taxman 476 (Delhi)(HC)

S. 14A : Disallowance of expenditure-Exempt income-No reasons recorded-

Order of Tribunal is affirmed. [R. 8D]
Held that the Assessing Officer made disallowances under section 14A read with rule
8D, but there was no reason recorded by him, as to why he was not satisfied with the
claim made by the assessees. Further, there was no examination by the Assessing Officer
about the nature of investment by the assessees in their subsidiary companies and
expenditure incurred by them. The Commissioner (Appeals) and the Tribunal had pointed
out certain errors committed by the Assessing Officer, accepted the contentions raised
by the assessees and directed the Assessing Officer to modify the disallowances under
section 14A. Such course adopted by the appellate authorities was justified.. (AY. 2003-
04 to 2014-15)
Shriram Transport Finance Co. Ltd. v. ITO (OSD) (2024)460 ITR 66 (Mad)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Depreciation-Rule of

consistency followed-Appeal of Revenue is dismissed. [S. 32, R. 8D]
On appeal by revenue, the Delhi High Court considered four issues: A. whether the
disallowance calculated under rule 8D should only take into account investments made
by the assessee in order to earn exempt income, B. whether the addition made by the
Assessing Officer was to be deleted in cases where the Assessing Officer had disallowed
a portion of an expense because it was unrelated to the assessee's business but failed
to specify which expenses were not incurred for that purpose. C. Whether computer
software that is essential to the operation of hardware can be depreciated at a rate of
sixty percent and D) Is the money spent developing a website considered a revenue
expenditure. The Hon’ble Delhi High Court observed that with respect to question ‘A’,
the issue is covered by Cargo Motors (P.) Ltd. v. Dy. CIT [2023] 291 Taxman 208/453
ITR 554 (Delhi) wherein the coordinate bench has ruled that the disallowance calculated
under Rule 8D of 1962 Rules should factor in only investments made by an assessee to
139
earn exempt income. With respect to the second issue, the same was covered by the
decision of a coordinate bench in same as also covered by Pr. CIT v. Times Internet Ltd.
[2023] 156 taxmann. com 577 (Delhi)(HC). With respect to question ‘C’ and ‘D’, the
same were covered by decisions of the CIT(A) taken in previous assessment years, and
the disallowance was deleted. Hence, it was held that rule of consistency should apply
and accordingly appeal of Revenue is dismissed. (AY. 2012-13)
P CIT v. Times Internet Ltd [2023] 156 taxmann. com 577 / (2024)) 296
Taxman 547 (Delhi)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Shares held as stock in

trade-Dividend income earned-Order of Tribunal deleting the addition is
affirmed. [S. 260A]
The assessee, a housing finance company earned exempt income from shares held as
stock in trade. The Supreme Court has in Maxopp’s case conclusively held that in cases
where shares are held by assessee as stock-in-trade, the dividend earned on the said
shares is incidental and would not attract the provisions of section 14A of the Act.
(Followed: Maxopp Investment Ltd. vs. CIT (2018) 91 taxmann. com 154/ 254 Taxman
325 / 402 ITR 640 / (2018) 15 SCC 523 and South Indian Bank Ltd. vs. CIT (2021) 130
taxmann. com 178 / 283 Taxman 178 / 438 ITR 1 (SC) (AY. 2010-11)
PCIT v. PNB Housing Finance Ltd. (2023) 146 taxmann. com 445 / (2024) 461
ITR 476 (Delhi) (HC)
Editorial : SLP dismissed PCIT v. PNB Housing Finance Ltd., (2024) 297 Taxman 229
(SC)/[2024] 461 ITR 481 (SC)

S. 14A : Disallowance of expenditure-Exempt income-Interest free funds-Not

recorded dissatisfaction-Addition is deleted. [R. 8D]
Held that interest-free funds of the assessee being in excess of the investments made
by it which are generating tax-free income, and the AO having not recorded his
dissatisfaction under S. 14A(2) before invoking R. 8D, the disallowance made by the AO
under s. 14A is not sustainable in law. (AY. 2018-19, 2020-21)
Urmin Products (P) Ltd. v. Dy. CIT (2024) 231 TTJ 100 (UO) (Ahd)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Not possible to maintain

separate books of account-The AO is directed to restrict the disallowance on a
reasonable basis. [R. 8D(2)(iii)]
Tribunal held that on the facts of the matter it is not possible to maintain separate books
of account. The AO is directed to restrict the disallowance on a reasonable basis. (AY.
2010-11,2011-12)
ITC Ltd v. ACIT (2024) 230 TTJ 921 (Kol)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Apportionment of

expenses-Demat charges-Interest expenses-Disallowance under R. 8D(2)(iii)
is to be restricted to 0. 5 per cent of the average value of investment which
yielded exempt income in terms of statutory formula-The suo motu
disallowance, no basis has been given by the assessee for making such ad hoc
disallowance-AO shall be guided by the statutory formula. [R. 8D(2)(ii)]
Held that the Demat charges which are in the nature of direct expenses, same are
disallowable under r. 8D(2)(i). As regards interest disallowance is concerned since
assessee's own funds (share capital plus reserves) exceed the investment which yielded
140
dividend income, disallowance of interest expenditure under r. 8D(2)(ii) is not
warranted. Disallowance under R. 8D(2)(iii) is to be restricted to 0. 5 per cent of the
average value of investment which yielded exempt income. (AY. 2012-13)
Modi Rubber Ltd. v. DCIT (2024) 228 TTJ 848 / 236 DTR 145 (Delhi)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Suo motu disallowance-

Disallowance is restricted to amount of exempt income. [R. 8D]
Held that disallowance cannot exceed the exempt income. (AY. 2008-09, 2009-10)
Cadila Pharmaceuticals Ltd. v. ACIT (2024)115 ITR 428/ 162 taxmann. com
229 (Ahd)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-No exempt income-

Disallowance cannot be made. [R. 8D
Held that the assessee had not earned any exempt income. Therefore, no disallowance
under section 14A read with rule 8D of the Income-tax Rules, 1962, could be made in
absence of any exempt income earned during the year. (AY. 2010-11)
ACIT v. Uniparts India Ltd(2023) 150 taxmann. com 142 / (2024)115 ITR 473
(Delhi)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot

exceed exempt income-Addition to book profit is deleted. [S. 115JB, R. 8D]
Held that disallowance cannot exceed exempt income. Addition to book profit is deleted.
(AY. 2010-11)
Cadila Pharmaceuticals Ltd. v. ACIT (2024) 115 ITR 51 ((SN)/ 164 taxmann.
com 52 (Ahd)(Trib)

S. 14A: Disallowance of expenditure-Exempt income-Investment in

subsidiaries not yielding dividends-Own interest-free funds-No disallowance of
expenditure. [R. 8D]
That the Commissioner (Appeals) had given a categorical finding that the assessee’s own
interest-free funds were far in excess of the investments made in the firm, yielding
exempt income and, accordingly, no disallowance was called for, and that since no
exempt income was earned by the assessee during the year under consideration, there
was no question of disallowance under section 14A. The order of the Commissioner
(Appeals) was upheld (AY. 2009-10, 2010-11, 2011-12)
Intas Pharmaceuticals Ltd. v. ACIT (2024)114 ITR 434 (Ahd)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-No exempt income during

year-Suo motu disallowance-No disallowance can be made. [R. 8D]
Held no exempt income, no disallowance can be made. (AY. 2012-13)
Intas Pharmaceuticals Ltd. v. ACIT (2024)114 ITR 546 (Ahd)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Book profit-No

disallowance can be made-Amendment disallowance of expenditure
irrespective of receipt of exempt income-Not Retrospective-Order of CIT(A) is
affirmed. [S. 115JB, R. 8D]
Held that no addition can be made while computing book profit in respect of disallowance
under S. 14A. The Tribunal also held that Amendment disallowance of expenditure

141
irrespective of receipt of exempt income is not retrospective. Order of CIT(A) is affirmed.
(AY. 2017-18)

DyCIT v. Welspun Steel Ltd. (2024)114 ITR 107 /229 TTJ 485(Mum)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot

exceed amount of exempt income. [S. 10(34), R. 8D]
Held that the disallowance under section 14A of the Act cannot exceed the exempt
income. (AY. 2011-12)
Dy. CIT v. Laxmi Energy and Foods Ltd. (2024)114 ITR 88 (SN)(Chd)(Trib)
Plaza Agencies P. Ltd. v. Dy. CIT (2024)113 ITR 71 (SN)(Bang)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Profits earned from firm-

Recording dissatisfaction-CIT(A) is not justified in disallowing the
disallowance-Company-Book profits-Disallowance is not required to be made.
[S. 10(2A),10(34), 115JB(2), R. 8D]
Held that the assessee had earned profit from the two firms which was exempt from
tax under section 10(2A) of the Act. The Assessing Officer had rightly invoked
section 14A of the Act and computed the expenditure on the assessee’s exempt income
by resorting to rule 8D of the Rules after recording his dissatisfaction, which was the
“sine qua non” before invoking rule 8D(2). The Commissioner (Appeals) had erred in
deleting the disallowance. The Tribunal also held the Commissioner (Appeals) was right
in holding that the adjustment of disallowance under section 14A of the Act read with
rule 8D of the Rules was not required to be made in the book profits for minimum
alternate tax liability by resorting to section 115JB of the Act. (AY. 2017-18)
Dy. CIT v. Radha Madhav Investments P. Ltd. (2024)113 ITR 76
(SN)(Mum)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Interest-Surplus fund-

Order of CIT(A) deleting the disallowance is affirmed. [R. 8D]
Held that assessee made investment in shares of company out of interest free surplus
funds available with assessee and no exempt income was earned, disallowance made
under section14A read with rule 8D was rightly deleted by Commissioner (Appeals). (AY.
2013-14)
DCIT v. Stylam Industries Ltd. (2024) 209 ITD 75 (Chd) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Sufficient interest free

funds-Disallowance is not justified. [R. 8D]
Held that the assessee had sufficient interest free funds. The formula provided in
R. 8D was to be applied only when the assessee’s calculation of disallowance appeared
to the Assessing Officer to be incorrect with regard to the assessee’s books of account.
As a result, the disallowance made by the Assessing Officer under section 14A in
accordance with Rule 8D is not sustainable hence deleted. (AY. 2018-19)
Axis Bank Ltd. v. Asst. CIT (2024)112 ITR 28 (Ahd)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Voluntary disallowance

is exceeding actual exempt income-Disallowance is deleted. [R. 8D]

142
Held that the voluntary disallowance surpasses the actual exempt income, no further
disallowance under section 14A read with rule 8D of the Income-tax Rules, 1962.
Disallowance is deleted. (AY. 2017-18)
Bhartiya International Ltd. v. Dy. CIT (2024)112 ITR 207/ 227 TTJ 897/158
taxmann. com 239 (Delhi)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Suo motu disallowance-

Deletion of disallowance is justified. [R.8D]

Order of CIT(A) deleting the disallowance is affirmed. (AY. 2015-16 to 2017-18)

City Union Bank Ltd. v. Dy. CIT (2024)112 ITR 337 /229 TTJ 139
(Chennai)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance is to be

restricted to exempt income earned and only investments which had actually
earned dividend to be considered for disallowance. [R. 8D(2)(iii)]
Held, that the Assessing Officer has to make disallowances based on the settled position
of law that the disallowance under section 14A is to be restricted only to the extent of
exempt income earned and the investments to be considered for making disallowances
were only on those investments which had actually earned the dividend. The Assessing
Officer was directed to re-work disallowance under section 14A under rule 8D(2)(iii) by
adopting only those investments which had yielded exempt income. (AY. 2008-09 to
2012-13)
Crisil Ltd. v. Add. CIT (2024)112 ITR 56 (Mum)(Trib)
S. 14A : Disallowance of expenditure-Exempt income-Administrative expenses-
Investment made from assessee’s own Funds-Matter remanded. [S. 115J, R.
8D]
The Tribunal held that the Assessing Officer to verify whether current liabilities and
provisions not reduced from opening and closing stock of current assets to extent
borrowings used for business and whether investment made from assessee’s own Funds.
Matter remanded. (AY. 2011-12)
Gujarat State Fertilizers and Chemicals Ltd. v. Dy. CIT (2024) 110 ITR 641
(Ahd)(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Sufficient interest

bearing funds-Suo moto made disallowance-Addition is deleted. [R. 8D(2)(ii),
8D(2)) (iii)]
Tribunal held that interest disallowance is concerned the ITAT observed that sufficient
interest free funds were available with the Assessee to make the investments. Also there
was no finding of the department that interest bearing funds have been applied for the
purpose of making investments. Therefore, following the decision in case of Reliance
Utilities & Power Ltd. reported in [2009] 313 ITR 340 (Bombay), disallowance under Rule
8D(2)(ii) was deleted. Insofar as disallowance under Rule 8D(2)(iii) is concerned, in one
of the AYs where the assessee has suo moto made a disallowance and mentioned it in
the audit report, the same was deleted by the ITAT. (CIT v. Reliance Utilities & Power
Ltd. [2009] 313 ITR 340 (Bom)(HC) followed) (AY. 2013-14, 2014-15, 2016-17, 2017-
18)
Apeejay P. Ltd. v. Dy. CIT (2024) 111 ITR 231 (Kol.) (Trib.)

143
S. 14A : Disallowance of expenditure-Exempt income-No dividend income
earned from investments-No disallowance can be made-The amendment by
the Finance Act, 2022 is prospective in nature. [R. 8D]
Held that the amendment by the Finance Act, 2022, by which a non obstante clause and
Explanation were inserted in section 14A of the Act to the effect that the section shall
apply even if no exempt income has accrued or arisen or has been received during the
year, was prospective and will apply in relation to the assessment year 2022-23 and
subsequent assessment years. When no dividend income is earned from investments,
no disallowance can be made. (AY. 2013-14)
Lakozy Motors P. Ltd. v. Dy. CIT (2024)110 ITR 19 (SN)(Mum)(Trib)
Xchanging Technology Services India P. Ltd. v. ACIT (2024)110 ITR 52
(SN)(Delhi)(Trib)
Unilever Industries (P.) Ltd v. Dy. CIT (2024) 205 ITD 212 (Mum)(Trib)
S. 14A : Disallowance of expenditure-Exempt income-Interest-Own fund were
much higher than investments that yield exempt income-Order of CIT(A)
deleting the addition is affirmed. [R. 8D(2)(ii)]
Dismissing the appeal of the Revenue the Tribunal held that assessee’s own fund were
much higher than investments that yield exempt income, Commissioner (A) had rightly
deleted addition made by Assessing Officer on account of interest expenditure. (AY.
2012-13)
ACIT v. Doshion Veolia Water Solution (P.) Ltd. (2024) 207 ITD 801 (Mum)
(Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Failure to record

objective dissatisfaction-Not examined the working submitted by assessee-
Disallowance is deleted. [R. 8D]
Held, that the Assessing Officer can resort to the provisions of section 14A(2) and
rule 8D only if he is not satisfied with the correctness of claim of expenditure made by
the assessee ; or the claim made by the assessee that no expenditure has been incurred.
Hence, arriving at a satisfaction as to the correctness of the claim of expenditure was
sine qua non for resorting to the provisions of rule 8D. The Assessing Officer did not
refer to the workings furnished by the assessee in this regard. For arriving at the
dissatisfaction over the correctness of the expenditure claimed by the assessee, the
Assessing Officer had to examine the workings furnished by the assessee vis-a-vis the
accounts, find fault therein. Addition is deleted (AY. 2017-18, 2018-19)
Dy. CIT v. Reliance Industries Ltd. (2024)109 ITR 180 (Mum)(Trib)
Asian Paints Ltd. v. ACIT (2024) 205 ITD 680 (Mum) (Trib)
Leela Devi Sankhlecha (Smt.) v. ITO [2024] 109 ITR 260 (Jodhpur) (Trib)
S. 14A : Disallowance of expenditure-Exempt income-Suo motu disallowance-
Additional disallowance cannot be made by general remarks without satisfying
himself as to correctness of disallowance-Addition is deleted. [R. 8D]
Held that the Assessing Officer had made general remarks, such as how investments
could not be managed without monitoring and research. This approach of the Assessing
Officer completely overlooking the detailed analysis and allocation of the assessee and
without examining them could not be upheld. It is imperative that the Assessing Officer
record his satisfaction on the claim made by the assessee having regard to the accounts.
It was also seen that about ninety-seven per cent. of the investments were made in
group companies as strategic investments. Thus, the remarks of the Assessing Officer

144
that expenses are incurred on market research were not applicable on the facts of the
case. The disallowance was deleted. (AY. 2019-20)
Tata Steel Ltd. v. Dy. CIT (2024)109 ITR 18 (Mum) (Trib)

S. 14A : Disallowance of expenditure-Exempt income-No exempt income-No

disallowance can be made. [R. 8D]
Held that when no exempt income during the year, no disallowance can be made. (AY.
2012-13)
Indowind Energy Ltd. v. Dy. CIT (2024)109 ITR 68 (SN)(Chennai)(Trib)
DCIT v. Adani Mining (P.) Ltd. (2024) 204 ITD 269 (Ahd) (Trib.)
ACIT v. Gold Rush Sales and Service Ltd. (2024) 204 ITD 421 (Kol) (Trib.)
Asst. CIT v. Sahara India Financial Corpn. Ltd. [2024] 109 ITR 33 (SN) (Delhi)
(Trib)

S. 14A : Disallowance of expenditure-Exempt income-Rule 8D can be applied

only in respect of investment which actually yielded dividend income during
year. [R. 8D]
Held that rule 8D, could be applied only in respect of investment which actually yielded
dividend income during year. Therefore, Commissioner (Appeals) rightly directed
Assessing Officer to recompute disallowance under section 14A in accordance with Rule
8D only with reference to investments which actually yielded dividend income during
year. (AY. 2008-09)
Himatsingka Seide Ltd. v. DCIT (2024) 206 ITD 371 (Kol) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Interest free funds-

Investment in Securities and Joint ventures-Owned interest free funds were
much higher than investments made by assesse. [R. 8D(2)(b)]
Held that the assessee had invested own interest free funds in securities/Joint Ventures
which yield exempt income, no disallowance under section 14A read with rule 8D(2)(b)
is warranted, as available owned interest free funds with assessee were much higher
than investments made by assessee which yield exempt income. (AY. 2007-08, 2008-
09)
ACIT (OSD) v. M. S. Khurana Engineering Ltd. (2024) 206 ITD 741 (Ahd)
(Trib.)
S. 14A : Disallowance of expenditure-Exempt income-Not earned any exempt
income, no disallowance can be made-Employee's contributions (PF/ESI)-
Payment was made within the period of grace period of five days-No
disallowance can be made-Matter remanded. [S. 36(1)(va), R. 8D]
Where assessee had not earned any exempt income, no disallowance under section 14A
was required to be made. Employee's contributions (PF/ESI). Payment was made within
the period of grace period of five days. No disallowance can be made. Matter remanded.
(AY. 2013-14)
Strides Pharma Science Ltd. v. DCIT (2024) 205 ITD 421 (Mum) (Trib.)

S. 17(2) :Salary-Perquisite-Employer's grant of interest-free loans or loans at

concessional rate would qualify as a 'fringe benefit' and 'perquisite' as
understood through its natural usage in common parlance-Enactment of
subordinate legislation for levying tax on interest-free/concessional loans as a
fringe benefit is within rule making power under section 17(2)(viii) and
145
enactment of rule 3(7)(i) is not a case of excessive delegation and falls within
parameters of permissible delegation. Rule 3(7)(i) is intra vires section
17(2)(viii) and therefore, section 17(2)(viii) does not lead to an excessive
delegation of 'essential legislative function' to CBDT-Fixation of SBI's rate of
interest, i. e., PLR, as benchmark to determine value of benefit to assessee in
comparison to rate of interest charged by other individual banks under rule
3(7)(i) is neither an arbitrary nor unequal exercise of power and is intra vires
article 14 of constitution of India. [S. 17(2)(viii), Rule 3(7)(i), Art. 14, 136]
The employees-association before the High Court challenged the constitutional validity
of rule 3(7)(i) which prescribed the method of valuation for interest-free/concessional
loan made available to employee by employer by taking the interest charged by the SBI
for the loans advanced for the same purpose, as the basis for determining whether the
grant of interest-free or concessional loan to an employee is a perquisite or not. The
employers contend that the Rule Making Authority had deprived the individual employees
of their rights to contest a jurisdictional fact namely that what was granted to them was
not a concession or benefit or amenity.
The High Court held that rule 3(7)(i) provides definite method to find out value of fringe
benefit, instead of leaving it to individual wisdom of Assessing Officers to find out
whether something is a concession or not. Furthermore, impact of rule 3(7)(i) will not
be same on all categories of employees but would differ from person to person depending
upon income bracket, to which, he belongs and rate of interest, at which, he is granted
a loan by his employer and, consequently, said rule does not seek to treat unequals as
equals. High Court, further held that rule does not impose hardship upon assessees as
what is taxed at hands of employee, at maximum, is about 30 per cent of privilege given
to an employee by an employer, which he enjoys as an extra benefit and therefore,
challenge to constitutional validity of said rule is invalid. On appeal to the Supreme
Court, Court held that in terms of the power conferred under section 17(2)(viii), CBDT
has enacted rule 3(7)(i). Rule 3(7)(i) states that interest-free/concessional loan made
available to an employee or a member of his household by the employer or any person
on his behalf, for any purpose, shall be determined as the sum equal to interest
computed at the rate charged per annum by SBI, as on the first date of the relevant
previous year in respect of loans for the same purpose advanced by it on the maximum
outstanding monthly balance as reduced by interest, if any, actually paid. The effect of
the rule is twofold. First, the value of interest-free or concessional loans is to be treated
as 'other fringe benefit or amenity' for the purpose of section 17(2)(viii) and, therefore,
taxable as a 'perquisite'. Secondly, it prescribes the method of valuation of the interest-
free/concessional loan for the purposes of taxation. In the present case, section
17(2)(viii) is a residuary clause, enacted to provide flexibility. Since it is enacted as an
enabling catch-within-domain provision, the residuary clause is not iron-cast and
exacting. A more pragmatic and commonsensical approach can be adopted by locating
the prevalent meaning of 'perquisites' in common parlance and commercial usage. Thus,
'perquisite' is a fringe benefit attached to the post held by the employee unlike 'profit in
lieu of salary', which is a reward or recompense for past or future service. It is incidental
to employment and in excess of or in addition to the salary. It is an advantage or benefit
given because of employment, which otherwise would not be available. From this
perspective, the employer's grant of interest-free loans or loans at a concessional rate
will certainly qualify as a 'fringe benefit' and 'perquisite', as understood through its
natural usage in common parlance. The universal test in the present case is pragmatic,
fair and just. Therefore, rule 3(7) is held to be intra vires article 14 of the Constitution
146
of India. The appeals are to be dismissed and the impugned judgments of the High
Courts of Madras and Madhya Pradesh are upheld.
All India Bank Officers’ Confederation v. Regional Manager, Central Bank of
India (2024) 299 Taxman 93 / 464 ITR 286/338 CTR 505 (SC)
Federal Bank Staff Union v. UOI (2024) 299 Taxman 93 / 464 ITR 286/338 CTR
505 (SC)
Editorial : All India Punjab National Bank Officer’s Association v. Chairman-cum-
Managing Director Punjab National Bank (2010) 190 Taxman 221/ 321 ITR 324
(MP)(HC)/ All India Union Bank Officers Federation v. UOI (2016) 240 Taxman 92/ 385
ITR 114 (Mad)(HC), affirmed.

S. 17(2) : Salary-Perquisite-Employees stock purchase scheme-Lock in period-

Shares which are subject to a lock-in stipulation and could not be sold in the
open market owing to a complete embargo on the sale of those shares-The FMV
could not have been recognized to exceed the face value of the shares. [S.
2(22B), 15, 17(2)(iiia), 260A]
Dismissing the appeal of the Revenue the Court held that the AO is not justified in
holding that although the assessee had been allotted shares at a concessional rate of
Rs. 15 per share, the market price as quoted at the relevant time stood at Rs. 49. 45
and therefore the difference between the two figures, namely Rs. 34. 45 per share, is
liable to be taxed as perquisite in terms of s. 17(2)(iiia); in light of the restriction with
respect to marketability and tradability of the stock in question, the FMV could not have
been recognized to exceed the face value of the shares
CIT v. Ravi Kumar Sinha (2024)165 Taxmann. com 472 / 341 CTR 185 / 243
DTR 145 (Delhi)(HC)

S. 17(2) : Salary-Perquisite-Stock options were merely held by assessee and

same had not been exercised till date, same would not constitute income
chargeable to tax in hands of assessee as none of contingencies specified in
section 17(2)(vi) had occurred-Payment in question was not linked to
employment, rather it was a onetime voluntary payment to all option holders
of ESOP, compensation would not tantamount to perquisite under section
17(2)(vi) of the Act. [S. 17(2)(vi), 197, Art. 226]
Assessee, an ex-employee of a company, FIPL which was wholly owned subsidiary of
Flipkart (FPS), was granted certain stock options by FPS under Employee Stock Option
Plan (ESOP)). Thereafter, FPS announced disinvestment of its wholly owned subsidiary.
Pursuant to said disinvestment value of stock options fell. Assessee received
compensation towards loss in value of options. Assessee filed an application under
section 197 seeking 'Nil' deduction at source certificate on deduction of TDS on said
compensation by FPS. Assessing Officer rejected said application on ground that amount
received was linked to ESOPs and would be in nature of perquisite under section
17(2)(vi). The Assessing Officer rejected the application under section 197 of the Act.
On writ allowing the petition the court held that the assessee had not exercised his
vested right with respect to stock option under ESOP. Since stock options were merely
held by assessee and same had not been exercised till date, same would not constitute
income chargeable to tax in hands of assessee as none of contingencies specified in
section 17(2)(vi) had occurred. On facts since payment in question was not linked to
147
employment, rather it was a onetime voluntary payment to all option holders of ESOP,
compensation would not tantamount to perquisite under section 17(2)(vi) of the Act.
(AY. 2023-24)
Sanjay Baweja v. Dy. CIT (2024) 299 Taxman 313 /341 CTR 376 / 241 DTR
145 (Delhi)(HC)

S. 17(3) :Salary-Profits in lieu of salary-Ex-gratia compensation-After

termination-Not taxable as profits in lieu of salary-Appellate Tribunal-Powers-
Departmental representative is not permitted to set up an altogether a new
case [S. 15, 254(1)]
Held that as the payment of ex gratia compensation was voluntary in nature without
there being any obligation on the part of employer to pay further amount to the assessee
in terms of any service rules, the payment would not amount to compensation in terms
of section 17(3)(i) of the Act. There was no agreement between the assessee and his
employer under which the payment was made. Order of CIT(A) deleting the addition is
affirmed. The Tribunal also held that the Departmental representative is not permitted
to set up an altogether a new case with respect to the applicability of section. 17(3)(iii)
of the Act. Referred, Mahindra and Mahindra Ltd v. Dy. CIT(2009) 313 ITR 263 (A.
T)(Trib)(SB) (AY. 2009-10)

ITO v. Avirook Sen (2024)111 ITR 78 (SN)/ 230 TTJ 132 (Delhi)(Trib)

S. 18 : Interest on securities-Banks-Interest received at time of sale of

securities-Assessable as interest on securities and not as income from
business. [S. 28(i), 136]
Held that interest received at time of sale of securities is assessable as interest on
securities and not as income from business. (AY. 1983-84, 1984-85, 1987-88)
CIT v. Citi Bank N. A. (No. 7) (2024)469 ITR 417 (SC)
Editorial: CIT v. Citi Bank N. A (ITR. No. 265 of 1997 dt. 10-4-2003)

S. 22 : Income from house property-Income from business-Letting out property

–Business of letting or subletting of properties-Income assessable as income
from house property-Rule of consistency should be applicable to tax
proceedings. [S. 24, 28(i)]

Assessee is engaged in business of hiring and leasing of properties. It declared an

income from a self-owned property as income from house property. The assessee also
declared rental income received from sub-letting of four other properties not owned by
assessee, as income from business. Assessing Officer assessed the entire rental income
as income from business. CIT(A) affirmed the view of the AO. On appeal Tribunal held
that in respect of properties owned by the assessee, the assessee has correctly has
offered the income as income from house property. On appeal by the Revenue the
court held that even if assessee was to be in business of letting or subletting of
properties and deriving income therefrom, there was no embargo on assessee from
accounting income received by it, from property owned by assessee as Income from
house property and at same time, categorizing rental income from other properties not
of assessee’s ownership under the head Income from business. Court applied the Rule
of constancy and affirmed the order of the Tribunal. (AY. 2008-09, 2009-10, 2010-11)
PCIT v. Banzai Estates (P.) Ltd [2024] 165 taxmann. com 412 (Bom)(HC)
148
S. 22 : Income from house property-Notional income-Constitutional validity-
Notice is issued to Attorney General of India. [S. 23(5)(1), Art. 226]
Writ petition is filed challenging constitutional validity of section 22 read with sub-
section (1) and sub-section (5) of section 23 of the Act. Notice is issued to Attorney
General of India. ( WP (L) No.31328 of 2023 dt. 30-1 -2024 )
Rabbani S. Khan v. Dy. CIT (2024) 297 Taxman 295 (Bom.)(HC)

S. 22 : Income from house property-Annual value-Stock in trade-Construction

business-Operation of sub-section (5) of section 23 inserted by Finance Act,
2017 is not made retrospective and, thus, annual value/deemed rental income
of property held as stock-in-trade can be calculated and shall be chargeable to
income tax only with effect from assessment year 2018-19 and not prior to
that. [S. 23(4), 23(5)]
Assessee is a firm engaged in construction activities as a promoter and builder. The
assessee is holding closing stock of 9 units/flats at end of assessment year and out of
these 9 flats, rental income was shown for 1 flat only. The Assessing Officer did not
accept reply of assessee and determined deemed rental income as per provisions of
section 22 read with section 23(4) and added income of assessee. CIT(A) up held the
order of the AO. On appeal the Tribunal held that it is only from assessment year 2018-
19 that a new section 23(5) was inserted which permits Assessing Officer to calculate
deemed rental income of property held as stock-in-trade even if such property was not
let during whole or any part of previous year. Tribunal held that when operation of sub-
section (5)of section 23 is not made retrospective, annual value/deemed rental income
of property held as stock in trade can be calculated and shall be chargeable to income
tax only with effect from assessment year 2018-19 and not prior to that. (AY. 2016-17)
Varun Developers. v. ACIT (2024) 209 ITD 299 (Pune) (Trib.)

S. 22 : Income from house property-Business of all kinds of engineering

products including financing, manufacturing, selling-Rental income assessable
as income from house property and not as business income. [S. 28(i), 263]
Assessment of assessee was completed and Assessing Officer accepted stand of assessee
that rental income was to be assessed as a house property Commissioner passed the
revision order adjudicate the issue whether the rental income be assessed as busineess
income. The AO assessed the income as income from business. CIT(A) affirmed the
order of the AO. On appeal the Tribunal held that main objective of the assessee-
company is to carry on business of all kinds of engineering products including financing,
manufacturing, selling or in any other form. Since assessee had not declared any income
for providing additional facilities to occupiers of premises and those aspects had not been
considered by Assessing Officer in impugned assessment order therefore, rental income
declared by assessee deserved to be assessed as a house property income and not as a
business income. Rule of consistency is followed. (AY. 2014-15)
EMC Projects (P.) Ltd. v. DCIT (2024) 115 ITR 24 / 209 ITD 411 (Kol) (Trib.)
S. 22 : Income from house property-Form No 26AS-Revised by the deductor-
Matter is remanded to verify factual claim. [Form No 26AS]
Assessing Officer having found that as per Form No. 26AS assessee had received much
more rental income made addition of difference amount to its income. CIT(A) affirmed
the addition. On appeal the Tribunal held that since entire basis of addition was
erroneous facts reported in Form No. 26AS which assessee claimed to have revised and
149
corrected, Assessing Officer was to be directed to verify factual claim of assessee and
pass a speaking order. AY. 2017-18)
Agilent Technologies (International) (P.) Ltd. v. NFAC (2024) 205 ITD 551
(Delhi) (Trib.)

S. 23 : Income from house property-Annual value-Stock in trade-Notional

value-Amendment is prospective. [S. 22, 23(5)]-
Dismissing the appeal of the Revenue the Tribunal held that insertion of section 23(5) by
the Finance Act, 2017 with effect from April 1, 2018, it is clear that for the computation
of annual value of property held as stock-in-trade certain moratorium period had been
given. However, the newly inserted provisions in section 23(5) were to be applicable
only with effect from assessment year 2018-19 and not for the year under consideration.
Order of CIT(A) is affirmed (AY. 2017-18)
Dy. CIT v. Neepa Real Estates P. Ltd. (2024)116 ITR 247 / 171 taxmann. com
56 (Mum) (Trib)

S. 23 : Income from house property-Annual value-Higher rent and lower

security deposit-Matter remanded to Assessing Officer to determine annual
lettable value and after giving an opportunity to assessee. [S. 22]
Held, that for the assessment year 2007-08 the Tribunal had restored the matter to the
Assessing Officer. The Commissioner (Appeals) followed that order but instead of
restoring the matter to the Assessing Officer, deleted the addition. The Commissioner
(Appeals) does not have any power to remand the matter to the file of the Assessing
Officer. The Assessing Officer had compared the rent received from D and then made
the addition. According to section 23 of the Income-tax Act, 1961, the annual value of
let out property is to be determined on the basis of the sum for which the property is
expected to be let out from year-to-year. Therefore, it had to be the market rate of the
rent. As in the assessee’s own case for earlier years the Tribunal had resorted the matter
to the Assessing Officer to determine the annual lettable value, the matter was to be
restored to the Assessing Officer for this year also, because he had compared the rent
of the financial year 2010-11. (AY. 2014-15
ACIT v. NRB Bearings Ltd. (2024)112 ITR 17 (SN)(Mum) (Trib)
S. 23 : Income from house property-Annual value-Deemed let out-Two houses
are occupied for self purposes-No notional rent is to be added. [S. 22]
Assessee had 3 properties out of which 2 were claimed to be self-occupied and no
actual/deemed rent was shown. Assessing Officer held that all premises were spacious
and located in posh and active locality with reasonable annual rent values. Assessing
Officer added deemed rent even though no actual rent was received. CIT(A) affirmed
the order of the AO. On appeal the Tribunal held that since assessee had been using
these houses for self-purposes, no notional rent had arisen and, thus, no addition could
be made. (AY. 2017-18)
Jasmatbhai Nanubhai Vidiya. v. DCIT (2024) 206 ITD 44 (Surat) (Trib.)

S. 24 : Income from house property-Deductions-Interest on borrowed capital-

Interest on housing loan-Let-out property-When the property is let out there is
no maximum deduction on interest on borrowed capital Interest on housing
loan allowable as deduction under section 24 for let-out property, based on
bank certificate and consistent claims in previous years. [S. 22]

150
The assessee claimed interest as deduction on housing loan for let out property,
supported by bank certificate. CIT(A) disallowed the claim incorrectly stating loan was
for renewal of already rented property. Interest on housing loan for let-out property
fully deductible under section 24 without maximum limit. Tribunal held that interest on
housing loan is deductible under section 24 when property is let out, supported by bank
certificate and consistent claims in previous years. (AY. 2021-22)
Syeda Bibi Sadiqa. (Smt.) v. DCIT (2024) 207 ITD 543 (Bang) (Trib.)

S. 24 : Income from house property-Deductions-Rental income-Let out portion

of its house property-Assessable as income from house property and not as
income from other sources-Entitle to statutory deduction @30% under section
24(a) of the Act. [S. 22, 24(a), 56]
Assessing Officer treated rental income earned by assessee from let out portion of its
house property as income from other sources. On appeal the Tribunal held that since
ownership of house vested with assessee and hence assessee continued to be owner of
part premises of House, rental income should be assessed only under head income from
house property and assessee would be entitled for statutory deduction @30% under
section 24(a) of the Act. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636/116 ITR 261 (Mum)
(Trib.)

S. 28(i) : Business income-Income from house property-Object of developing

commercial properties-Rental income assessable as business income-SLP of
Revenue is dismissed. [S. 22, Art. 136].
Dismissing the appeal of the Revenue the High Court held that the main object of the
assessee is business of constructing, owning, acquiring, developing, managing,
running, hiring, letting out, selling out or leasing multiplexes, cineplexes, cinema halls,
theatres, shops, shopping malls, etc., according to its memorandum and articles of
association. The income was liable to be categorized as income derived from the
shopping mall under the head of Income from business under section 28 of the Income-
tax Act, 1961. Order of Tribunal is affirmed. In determining whether a particular income
is income from house property or business income, in the case of Sultan Brothers Pvt. L
td. v. CIT (1964) 51 ITR 353 (SC) the Supreme Court held that each case has to be
looked at from the businessman’s point of view to find out whether the letting was the
doing of business or exploitation of the property of the owner. SLP of Revenue is
dismissed. (AY. 2011-12,to 2014-15)
PCIT v. M. P. Entertainment and Developers Pvt. Ltd. (2024)469 ITR 428 /
(2025) 302 Taxman 361 (SC)
Editorial : PCIT v. M. P. Entertainment and Developers Pvt. Ltd. (2024)469 ITR
421 (MP)(HC)

S. 28(i) : Business income-Accrual of income-Banks-Interest on doubtful

loans-Determined in accordance with Central Board of Direct Taxes Circular. [S.
21, 40A(5), 119]
Held, affirming the decision of the High Court, the Court held that salary and perquisites
paid by the assessee-bank to its employees are to be apportioned under section 21 of
the Income-tax Act, 1961 and the provisions of section 40A(5) would be made
applicable only in respect of that portion of the salary and perquisite as is considered
under section 28 of the Act. (AY. 1982-83)
151
CIT v. Bank of America (2024)469 ITR 406 (SC)
Editorial: Decision of Bombay High Court in CIT v. Bank of America (Bom)(HC)(ITR
No. 81 of 1994 dt. 22-7-2023, Followed, CIT v. Citi Bank N. A. (No. 2 (2024) 469 ITR
398 (SC)

S. 28(i): Business income-Interest on securities-Business income-Business

expenditure-Salaries and perquisites-Disallowance is to be restricted to
expenditure apportioned under profits and gains of business or profession and
not under head interest on securities-Precedent-Appeal of Revenue is
dismissed. [S. 18, 20(1(i), 36, 37(1), 40A(5), Art. 136]
The High Court, following its earlier order in the case of the same assessee, which in
turn followed in the case of British Bank of the Middle East v. CIT (1998) 233 ITR 251
(Bom)(HC) held that the interest received by the assessee on the sale of securities held
by it, was assessable to tax under the head Interest on securities and not under the
head Income from business on appeal, Court held that since admittedly the Department
had neither filed any appeal against those judgments, nor raised or pleaded any of the
reasons spelt out by the court in C. K. Gangadharan v. CIT (2008) 304 ITR 61 (SC) nor
made out just cause the appeals are dismissed. (AY. 1981-82)
CIT v Citi Bank N. A. (No. 2) (2024)469 ITR 398 (SC)
Editorial : Citi Bank N. A. v. CIT (2003) 262 ITR 47 (Bom)(HC)

S. 28(i): Business income-Interest on securities-Business income-Business

expenditure-Salaries and perquisites-Disallowance is to be restricted to
expenditure apportioned under profits and gains of business or profession and
not under head interest on securities. [S. 18, 20(1(i), 36, 37(1), 40A(5),44C,
Art. 136]

Held that apportioning the deductible expenditure under section 20(1)(i), under the head
Interest on securities in the case of banking companies, expenses admissible under
sections 30, 31, 36 and 37 are not subject to restrictions imposed under
sections 40A(3), 40A(5) and 44C of the Income-tax Act, 1961. CIT v. Citi Bank N. A.
(NO. 2) (2024) 469 ITR 398 (SC). (AY. 1985-86, 1986-87) (AY. 1983-84, 1984-85,
1987-88) (AY. 1983-84, 1984-85, 1987-88)
CIT v. Citi Bank N. A. (NO. 3) (2024)469 ITR 403 (SC)
Editorial : CIT v. Citi Bank N. A ITR No. 191 of 1997 dt. 10-4-2003(Bom)(HC)
CIT v. Citi Bank N. A. (No. 4) (2024)469 ITR 410 (SC)
Editorial : CIT v. Citi Bank N. A (ITR No. 349 of 1995 dt. 5-3 2003 (Bom)(HC)
CIT v. Citi Bank N. A. (No. 5) (2024)469 ITR 414 (SC)
Editorial : CIT v. Citi Bank N. A. (ITA. No. 426 of 1998 dt. 10-4-2003
CIT v. Citi Bank N. A. (No. 6) (2024)469 ITR 416 (SC)
Editorial : CIT v. Citi Bank N. A (ITA No. 1 of 1988 dt. 5-3-2003, ITR No. 232 of 1996
dt. 22-7-2003)
CIT v. Citi Bank N. A. (No. 7) (2024)469 ITR 417 (SC)
Editorial: CIT v. Citi Bank N. A (ITR. No. 265 of 1997 dt. 10-4-2003)

S. 28(i) : Business income-Income from house property-Object of developing

commercial properties-Rental income assessable as business income. [S. 22,
260A].

152
Dismissing the appeal of the Revenue the Court held that the main object of the
assessee is business of constructing, owning, acquiring, developing, managing,
running, hiring, letting out, selling out or leasing multiplexes, cineplexes, cinema halls,
theatres, shops, shopping malls, etc., according to its memorandum and articles of
association. The income was liable to be categorized as income derived from the
shopping mall under the head of Income from business under section 28 of the Income-
tax Act, 1961. Order of Tribunal is affirmed. In determining whether a particular income
is income from house property or business income, in the case of Sultan Brothers Pvt. L
td. v. CIT (1964) 51 ITR 353 (SC) the Supreme Court held that each case has to be
looked at from the businessman’s point of view to find out whether the letting was the
doing of business or exploitation of the property of the owner (AY. 2011-12 to 2014-
15)
PCIT v. M. P. Entertainment and Developers Pvt. Ltd. (2024)469 ITR
421 (MP)(HC)
Editorial : PCIT v. M. P. Entertainment and Developers Pvt. Ltd(2024) 469 ITR 428
(SC), SLP of Revenue is dismissed.

S. 28(i):Business income-Capital or Revenue-Capital asset-Relinquishment in

settlement agreement-Receipt on Arbitral Award-Difference between lease and
licence-Trading and service agreement-No rights conferred except running
hotel-Termination of agreement as result of settlement or compromise of all
claims, counter-claims and disputes-Receipt on Arbitral Award on termination
of agreement-Revenue receipt and not capital receipt. [S. 2(14), 4, 45,
260A,Indian Easement Act, 1882 S. 52]
Allowing the appeal the Revenue the Court held that under the operating agreement
the assessee was authorised to run and operate hotel with all the employees, staff
including managerial staff of ELEL Hotels and Investments Ltd. No right, title or interest
of any kind was created by ELEL in favour of the assessee in any of the assets or
properties of Hotels and Investment Ltd to carry on the commercial activity of operating
the hotel Hotel SeaRock, ELEL was to get 23 per cent. of the gross turnover as licence
fees, subject to some variations as provided in the agreement. Considering the terms of
the licence operating agreement in its entirety, it was a trading contract. Accordingly the
the sum received by the assessee by way of arbitral award from ELEL for relinquishment
of right to operate its hotel SeaRock under the operating licence as mentioned in clause
3(n)(iv) of the consent terms was in terms of a trading contract to settle all disputes,
claims and counter claims, and was not the transfer of any capital asset. The amount
was part of the arbitral award received by the assessee to finally adjust, compromise
and settle all disputes, allegations, claims, counter claims and case pending in courts
arising out of or relating to operating licence agreement to run the hotel SeaRock. Held
that from Classical Economists distinction point of view also, the receipts on arbitral
award from ELEL being not for transfer or loss of any capital asset but at best was in lieu
of circulating capital introduced to operate the hotel SeaRock and was a revenue receipt
which arose from the trading contract of operating licence agreement. The assessee had
no fixed capital investment to run the hotel SeaRock under the operating licence
agreement and according to the agreement, the assessee had introduced some
circulating capital to run it. Mere use of the word “relinquishment” in the settlement
agreement and in the consent terms, without disclosing any rights in any capital asset
or relinquishment of any rights in any capital assets, was not decisive rather established
that the receipt was not capital receipt. Therefore, the receipt is revenue in nature
153
consequently forming part of assessee’s income. Order of Tribunal is set aside. (AY.
2006-07)
PCIT v. ITC LTD. (2024)467 ITR 465 (Cal)(HC)

S. 28(i) : Business income-Income from house property-Main object of

company acquiring and holding property-Business of leasing and renting of
property-Lease or rental income to be taxed as business income. [S. 22]
Held that according to the objects and memorandum of association of the assessees,
HRP and CMDP, they were capable of being engaged in the business of land developing
and were also builders, but the test was as to the actual business carried on by the
assessees. According to the Department the buildings were handed over to the company
in a finished mode and the company had also received advance for their buildings from
the prospective purchasers, which the sale had not fructified by transfer of ownership
since the full consideration had not been rescinded, that the assessees had therefore let
the building out for rent and that the rental income was not a business income under
section 28 but income from house property under section 22. The Assessing Officer had
found the specific object from the memorandum of association, that the assessees had
held the buildings as stock-in-trade for more than 20 years. That though there were
many objects in the memorandum of association, the Assessing Officer had found that
the assessee HRP did not have any other business but lease of the properties and that
no construction project had been carried out by it since its incorporation in the year 1975
nor it had made any sale since the financial year 2000-01. The presumption of the
Assessing Officer that no prudent person would wait for more than 10 to 20 years even
after payment of twice the cost of the building could not be countenanced. If the building
had not been conveyed to the purchaser and had remained with the developer there was
nothing wrong in the developer leasing out the premises. The absence of legal
proceedings by the intending purchasers could have no impact on the tax levy of the
assessee. The fact remained that the Assessing Officer had clearly found that but for the
lease of properties the assessee was not engaged in any other business. That
irrespective of whether they were held as stock-in-trade or fixed assets, it was admitted
by the assessee CMDP and accepted by the Assessing Officer, that the lease of buildings
was the only business carried on by it and it had been receiving rental income from these
buildings. The Commissioner (Appeals) had rightly held that the income was from
business and not income from house property, especially since the assessees had only
the business of renting out buildings in the assessment years 2002-03 to 2007-08. The
order of the Tribunal reversing his order and affirming the order of the Assessing Officer
was therefore, set aside. (AY. 2002-03 to 2007-08)
H. R. Properties Pvt. Ltd v. ACIT (2024)466 ITR 339 (Pat)(HC)
Chero Medico and Developers Pvt Ltd v. ACIT (2024)466 ITR 339 (Pat)(HC)
S. 28(i) : Business income-Rental income-Sub-letting of mall could not be
assessed as income from house property and same was to be assessed as
income from business. [S. 22]
Assessee-company's main object was business of constructing, owning, acquiring,
developing, managing, running, hiring, letting out, selling out or leasing shopping mall.
It derived rental income by letting out properties in mall. Rental income received by
assessee from sub-letting of mall could not be assessed as income from house property
and same was to be assessed as income from business. (AY. 2011-12)
PCIT v. M. P. Entertainment and Developers (P.) Ltd. (2024) 299 Taxman 211
(MP)(HC)
154
S. 28(i): Business income-income from other sources-Prize money from unsold
lottery tickets-Winnings from unsold lottery tickets are assessable as business
income. [S. 2(24)(ix), 56(2)(ib)]
Held that winnings from unsold lottery tickets are assessable as business Income.
Followed Pooja Marketing v. PCIT (2021) 212 TTJ 306 (Mum)(Trib) Distinguished CIT
v. Dr. M. A. M. Ramaswamy (2015) 128 DTR 265 (Mad) (HC). (AY. 2015-16, 2016-17)
Dy. CIT v. Pooja Marketing (2024) 232 TTJ 4 (UO) (Chennai) (Trib)

S. 28(i) : Business income-Income from other sources-Leasing and finance-

Interest-Non-Banking finance-Rule of consistency-Assessable as business
income. [S. 56]
Held that the business of assessee is leasing and finance. Rule of consistency is
followed. Assessable as business income and not assessable as income from other
sources. (AY. 2013-14)
Malbros Holdings P. Ltd. v. ITO (2024)114 ITR 25 (SN)(Delhi)(Trib)

S. 28(i) : Business income-Prize winnings from unsold lottery tickets-Income

from other sources-Reseller of Government paper lottery tickets-Prize
winnings from unsold lottery tickets would part of business income-Eligible to
set off its losses. [S. 2(24)(ix), 56(2)(ib), 70, 71, 74A, 115BB, 194B]
Assessee is a partnership firm and acted as reseller of government paper lottery tickets.
It credited certain sum under head prize money from unsold lottery tickets in profit and
loss account and reflected net profit which was offered as business income. Assessing
Officer held that winnings from lottery would be chargeable to tax as income from other
sources and assessee is not entitled to claim any expenditure against same. CIT(A)
allowed the claim. On appeal the Tribunal held that view of decision of Tribunal in
assessee’s own case in earlier year, prize winnings from unsold lottery tickets would be
part of business income and assessee would be eligible to set-off its losses against this
income. Followed, Pooja Marketing v. PCIT (ITA. No. 2596 (Mum) of 2019 dt. 24-5-2-
2021. (AY. 2015-16, 2016-17)
DCIT v. Pooja Marketing (2024) 209 ITD 450 (Chennai) (Trib.)
S. 28(i): Business income-Survey-Surrendered excess stock, cash and
receivables-Offered as business income-Surrendered income cannot be
assessed under deeming provisions of section. 69A, 69B, 115BBE. [S. 69A, 69B
115BBE, 133A]
During course of survey under section 133A, assessee surrendered excess stock, cash
and receivables, stating that same was to be taxed as business income. Assessing Officer
treated said surrendered amount as unexplained investment under sections 69A and
69B and charged same to tax as per provisions of section 115BBE. CIT(A) affirmed the
addition. On appeal the Tribunal held that since during survey proceedings, assesse was
confronted not only with discrepancies found but also with nature and source thereof
and it had emerged that source of income of assessee was from its business operations,
income surrendered by assessee during survey could not be brought to tax under
deeming provisions of section 69A and 69B and same had been rightly offered to tax by
assessee under head of business income. Accordingly deeming provisions cannot be
applied to tax under section 115BBE of the Act. (AY. 2015-16, 2016-17, &2019-20)
Veer Enterprises. v. DCIT (2024) 206 ITD 289/114 ITR 566 (Chd) (Trib.)

155
S. 28(i) : Business income-Survey-Unaccounted receipts-Disclosed in the
revised return-Assessable as business income and not as cash credits applying
the provision of S. 115BBE of the Act. [S. 68, 115BBE, 139(5)]
Assessee-company ran a hospital. In the course of survey loose sheets were found. The
asessee filed the revised return and offered the alleged profits as business receipts.
Assessing Officer held that unaccounted receipts were an unaccounted income of
assessee and added same to assessee's income by invoking provisions of section 68 and
taxed same under section 115BBE. CIT(A) deleted the addition. On appeal the Tribunal
held that since assessee had already disclosed unaccounted receipts offered during
course of survey in revised return filed, there was no reason to add same again in
assessee's income invoking provisions of section 68 and brought them to tax under
section 115BBE. As unaccounted receipts were relating to business operations of
assessee's hospital, they were taxable as business income under section 28; section 68
read with section 115BBE is not applicable. (AY. 2013-14)
ACIT v. Surat Life Care (P.) Ltd. (2024) 205 ITD 538 (Surat) (Trib.)
S. 28(i) : Business income-Capital gains-Purchase of land-Co-owners-
Partnership firm with-Co-owners-Development agreement with firm-Intention
was doing real estate business-Profit is to be assessed as business income and
not as capital gains-Denial of exemption under section 54F is justified. [S. 45,
54F]
Assessee along with seven co-owners had purchased a land in 2006. Assessee along
with very same seven co-owners established a partnership firm. Thereafter, co-owners
entered into a development agreement with their own partnership firm to develop said
land and construct 18 bungalows. Assessee had shown long-term capital gain (LTCG)
on sale of said land. Assessing Officer held that land was purchased for business
purpose for developing a commercial project, therefore, he treated said profits arose on
transfer of land as business income and also denied claim of exemption under section
54F made by assessee. CIT(A) up held the addition. On appeal the Tribunal held that
the assessee along with seven co-owners had purchased another parcel of land in 2014
and constituted another partnership firm with same set of co-owners and engaged in
business of land development. This clearly established motive, intention and interest of
assessee in doing real estate business. It was further noted that moment when assessee
had entered into development agreement, value of land increased. Assessee was liable
to file wealth tax return but assessee never filed wealth tax return. The said piece of
land was treated by assessee as stock-in-trade and no question of capital gain arose in
said set of facts. On facts, impugned order treating LTCG shown by assessee as business
income and denying claim of deduction under section 54F to assessee is upheld. (AY.
2015-16)
Bhanuprasad Maganlal Patel. v. DCIT (2024) 205 ITD 429/228 TTJ 393 (Ahd)
(Trib.)
S. 28(i) : Business income-Unregistered agreement-Deemed owner-Capital
gains-Sale of land-Assessing Officer is justified in making addition on account
of entire sale consideration received from ultimate buyer in hands of assessee.
[S. 2(47), 4]
Assessee is a partnership firm engaged in business of civil construction, sold a land to
Shri Govind Reality Pvt Ltd for a sum of Rs. 1. 20 crores through an unregistered
agreement and received an advance of Rs. 10 lakhs. Shri Govind Reality Pvt Ltd further
sold said land for consideration of Rs. 4. 70 crores to Swami Vivekanand Institute of
Neurology Neurosurgery & Spine and M/s Swami Mediservices Pvt Ltd. Sale
156
consideration amount of Rs. 4. 70 crores was received by assessee from Swami
Vivekanand Institute of Neurology Neurosurgery & Spine and M/s Swami Mediservices
Pvt Ltd. Assessee retained balance due of Rs. 1. 10 crores from Shri Govind Reality Pvt
Ltd and passed excess amount to Shri Govind Reality Pvt Ltd. Assessee offered to tax
sale consideration of Rs 1. 20 crores received from Shri Govind Reality Pvt Ltd as its
business turnover. Assessing Officer held that Shri Govind Reality Pvt Ltd was not at
all owner of assessee's land and assessee was trying to swindle amount of Rs. 3. 50
crores as income of Shri Govind Reality Pvt Ltd and eventually trying to evade tax by
presenting an unrealistic picture of financial accounting. Therefore, he made additions
on account of entire sale consideration of Rs. 4. 70 crores as business income of
assessee. On appeal the CIT(A) deleted the addition of Rs. 3. 50 crores made by the
Assessing Officer. CIT(A) enhanced the income under section 251 for failure to charge
the interest as per the terms of the agreement. Accordingly addition of an amount of
Rs. 6. 40 lakhs was made on account of notional interest. On cross appeal the Tribunal
held that in view of law laid down in case of CIT v. Balbir Singh Maini (2017)86 taxmann.
com 94 (SC) an unregistered agreement 'has no efficacy in eyes of law, therefore, Shri
Govind Reality Pvt Ltd. could not be treated as owner of land on basis of impugned
unregistered agreement, and accordingly, there was no transfer or sale of immovable
property by Shri Govind Reality Pvt Ltd. to Swami Vivekanand Institute of Neurology
Neurosurgery & Spine and M/s Swami Mediservices Pvt Ltd. Accordingly, addition made
to income of assessee was justified. Tribunal deleted the enhancement made by the
CIT(A). (AY. 2015-16)
ITO v. Rishi Construction. (2024) 204 ITD 159 (Indore) (Trib.)

S. 28(i) : Business income-Capital gains-Own capital-Share dealings-

Assessable as business income. [S. 45]
Assessee-company traded in shares and had showed short term capital gain from some
transactions. Assessing Officer held that purchase of shares is about 65 per cent of
total income. Out of total assets, assessee also made investment in shares which was
76 per cent of total assets, therefore, Assessing Officer held that assessee is dealing in
shares and treated income under head business income. CIT(A) affirmed the order of
the AO. On appeal the Tribunal held that one of objects of the assessee is to carry on
the business as shares and stock brokers and to buy, sell and deal in all kind of shares,
stocks, securities, bonds, debentures, units and such other instruments of all types. The
claim of assessee that it is investing its own funds which were lying idle was not in itself
sufficient to establish that trading in shares is done as investments to earn capital gain.
Order of the AO is affirmed in taxing said income as business income. (AY. 2010-11)
Madura Biotech (P.) Ltd. v. DCIT (2024) 208 ITD 699 (Delhi) (Trib.)

S. 28(i) : Business loss-Penny stock-Share trading-Information from

investigation wing-VAS Insfracture Ltd (VASIL)-Not black listed by SEBI-Order
of Tribunal allowing the loss is affirmed by High Court-Delay of 224 days-SLP
of Revenue is dismissed on account of delay. [S. 10(38), 45, Art. 136]
On the basis of the information received from the Investigation Wing that the assessee
made transaction with penny stock scrip VAS Insfratcture Ltd (VASIL) to launder money
to grab long-term capital gain and claimed exemption under section 10(38). Scrip of the
VAS were manipulated by the assessee to generate bogus losses. Additions were made
to income of assessee on account of bogus loss incurred in penny stock. The Tribunal
deleted the additions. On appeal to the High Court, the Revenue submitted the order of
157
the Tribunal was ex-facie erroneous, illegal and perverse because Tribunal deleted the
additions on account of disallowance of bogus loss in penny stock incurred, without
appreciating that the transaction was pre-arranged as well as sham and was carried out
through penny scrip company/paper Company. High Court held that the Tribunal held
that the assessee was continuously dealing in share trading of various shares/scrips and
said fact was not disputed. Further the Tribunal had observed that scrip of VAS was not
black listed by SEBI at relevant point of time. Tribunal had also considered order passed
by SEBI and nowhere in said order, scrip of VAS was blacklisted or was penny stock or
sham and bogus scrips/shares. Tribunal had also observed that entire transaction of
purchase and sale of scrips was through Stock Exchanges, through authorized brokers
and payments made to brokers were reflected in bank account. Tribunal had therefore
opined that merely on conjecture and surmises, Assessing Officer could not make
disallowance. Court affirmed the order of the Tribunal. SLP of Revenue is dismissed on
account of delay of 224 days in filing of SLP. (AY. 2012-13)
PCIT v. Genuine Finance P. Ltd(2024) 464 ITR 588 /162 taxmann. com 700
(SC)
Editorial : PCIT v. Genuine Finance P. Ltd. (2023) 294 Taxman 303 /(2024) 462 ITR
492 (Guj.)(HC)

S. 28(i): Business loss-Penny stocks-Bogus purchases-Genuineness of

transactions are proved-No control over on share prices-Losses are deleted.
and moreover assessee had no control whatsoever on share prices-No
substantial question of law. [S. 260A]
(Assessee is engaged in trading penny stocks, specifically shares of Alang Industrial
Gases Ltd (AIGL) and Kappac Pharma Ltd (KPL). AO disallowed the loss. On appeal
the CIT(A) and Tribunal allowed the loss on the ground that the assessee had no control
over share prices and had genuinely incurred losses, particularly with AIGL shares where
only a portion were sold, and rest were held into subsequent assessment year. Regarding
shares of KPL, Tribunal reasoned that market rate being lower, justified business loss,
even though shares were not sold. High Court affirmed the order of the Tribunal. (AY.
2015-16)
PCIT(Central) v. Affluence Commodities (P.) Ltd. (2024) 471 ITR 252 /161
taxmann. com 476 (Guj) (HC)

S. 28(i): Business loss-Derivative contracts-Foreign Exchange fluctuations-

Allowable as business loss. [S. 37(1)]
Held that the appellate authorities rendered concurrent findings in favour of the
assessees, to the effect that the derivative contracts, foreign exchange transactions
against fluctuations in interest rates were hedging transactions and the loss arising out
of them was allowable as business loss. This was justified.. (AY. 2003-04 to 2014-15)
Shriram Transport Finance Co. Ltd. v. ITO (OSD) (2024)460 ITR 66 (Mad)(HC)

S. 28(i) : Business loss-Market to market loss-Allowable as business

expenditure. [S. 37(1)
Held that market to market loss is allowable as business expenditure.
(AY. 2010-11,2011-12)
ITC Ltd v. ACIT (2024) 230 TTJ 921 / 38 NYPTTJ 626 (Kol)(Trib)

158
S. 28(i):Business loss-Loan to employees-Sundry advances written off is
allowable as business loss. [S. 37(1)]
Held that the assessee had advanced loan to its employee on account of business
interest, and due to shutdown of the operations of the entity the loan became
irrecoverable and was written off along with the imprest lying with the employee who
was looking after the day-to-day business, the same is allowable as business loss.
Advances to various parties for entering into a new business which did not materialize,
said advances having become irrecoverable are allowable as business loss. (AY. 2010-
11)
ACIT v. Daawat Foods Ltd. (2024) 231 TTJ 30 (UO) (Delhi)(Trib)

S. 28(1): Business loss-Transfer of inter-corporate deposits and liabilities to a

sister concern for a lesser consideration-Loss is not allowable as deduction. [S.
37(1)]
Held that though lending is mentioned under the head objects incidental or ancillary to
the attainment of the main object, it only supports the main object. It is not the business
of the assessee to make investment in inter-corporate deposits. The loss incurred by
the assessee is on capital account and not on revenue account and not a business loss.
Order of the AO is affirmed. (AY. 2017-18)
Nayara Energy Ltd. v. ACIT (2024) 232 TTJ 353 / 244 DTR 89/ 38 NYPTTJ 1162
(Mum)(Trib)

S. 28(1): Business loss-Speculation loss-High seas sales not speculation loss-

Allowable as business loss. [S43(5)]
Held that loss arising from the sale of goods and high seas sales could not be said to be
a speculation loss. The order of the Commissioner (Appeals) holding it to be a regular
trading loss was upheld. (AY. 2001-02 to 2008-09)
ITO v. M. M. Poonjiaji Spices Ltd. (2024)113 ITR 294 /230 TTJ 312/166
taxmann. com 412 (Mum)(Trib)
S. 28(i) : Business loss-Shortage and excess of stocks on physical verification
of inventory-Ordinary loss in case of a manufacturer-Allowable as deduction.
[S. 37(1)]
Held that loss is normal occurrence in the case of an engineering producing company
having multi-State operations. The Commissioner (Appeals) looking to the totality of the
facts had deleted the addition. There was no infirmity in the order. Even otherwise in
the absence of any adverse material if on physical verification shortage of stock was
found, it was an ordinary loss in case of a manufacturer, and could not have been
disallowed by the Assessing Officer. (AY. 2014-15
ACIT v. NRB Bearings Ltd. (2024)112 ITR 17 (SN)(Mum) (Trib)

S. 28(i) : Business loss-Bad debt-Non-recovery of part of an amount advanced

towards purchase of property-Written off in profit and loss account and claimed
as deduction while computing income –business loss. [S. 36 (1)(vii), 37(1)]
Part of the amount advanced by the Assessee towards purchase of immovable property,
being stock-in-trade, had subsequently become irrecoverable. The same was written-off
by the Assessee from its profit & loss account and therefore, claimed as deduction while
computing income. Held, although the AO was correct in holding the said amount cannot
be allowed as a bad debt since it was not offered as income on any earlier occasion by
the Assessee, however, the facts that the same is in nature of loss incidental to carrying
159
of its business was allowable as deduction for arriving at its true income. CIT v. Mysore
Sugar Co. Ltd. [(1962) 46 ITR 649 (SC)] followed. (AY. 2015-16)
Biltech Engineers P. Ltd. v. Asst. CIT [2024] 109 ITR 9(SN) (Raipur)(Trib)

S. 28(i) : Business loss-Embezzlement of stock by an employee-FIR is filed-

Loss is allowable as business loss. [S. 37(1), 145]
Assessee carrying on business of gold and diamond jewellery claimed loss in respect of
embezzlement of stock by an employee and others. Lower authorities disallowed claim
of embezzlement. Tribunal held that since FIR had been filed by assessee quantifying
details of embezzlement of theft and police had confirmed said FIR and assessee had
also filed all relevant documents to prove that there was an actual embezzlement, loss
claimed by assessee deserved to be allowed (AY. 2012-13)
Heena Gems. v. ACIT (2024) 208 ITD 481 /114 ITR 30 (SN) (Mum) (Trib.)
S. 28(ii) (c) : Business income-Termination of agency –Neither capital structure
of assessee had been affected nor it had affected trading structure of business-
Compensation received by the assessee from German company was business
income under section 28(ii)(c) read with section 28(va)(a) and not capital
gains. [S. 28(va), 45, 55]
Assessee-company had entered into an Agreement for Distribution, Manufacturing and
Agency of products (ADMA 1997) with one BM Germany in 1997. In 2004 RDG had
acquired BM group all over world and in same year RDG unilaterally terminated certain
obligations under 1997 agreement, which was challenged by assessee in UK court and
thereafter assessee and RDG entered into out of court settlement as per which assessee
and RDG mutually agreed to terminate (ADMA 1997) and RDG paid compensation to
assessee. Assessing Officer proceeded to hold that proceeds received by assessee-
company from RDG on account of termination of agency and distribution of products in
India fell under provisions of section 28(ii)(c) read with section 28(va)(a) and made
addition thereof to business income of assessee. CIT(A) confirmed the addition. On
appeal the Assessee submitted that since it had transferred entire business and its rights
under agreement had been terminated, amount received in consideration thereof was
assessable as capital gain. Tribunal held that the assessee-company by virtue of
agreement got non-transferable, non-assignable license to manufacture, market,
distribute and sell products for a satisfied commission as agent and entire intellectual
property qua distribution and manufacturing of product would remain with BM and
assessee would not be entitled for any such ownership or title to same and there was no
loss of business. Further, neither capital structure of assessee had been affected nor it
had affected trading structure of business of assessee rather after settlement agreement
assessee's sales had enhanced. Therefore, compensation received by assessee from RDG
in out of court settlement was a business income and not an income assessed to capital
gains as claimed by the assessee and as such provisions contained under section
28(ii)(c) read with section 28(va)(a) were attracted. Order of Assessing Officer is
affirmed. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636/116 ITR 261 (Mum)
(Trib.)

S. 28(iiib) : Business income-Cash assistance-Capital or revenue-Subsidy or

grant or cash incentives or duty drawback or waiver or concession or
reimbursement Incentive received from Government for exploring new export
market-MEIS Scheme under Foreign Trade Policy, 2015-Though the said
160
amounts are brought into P&L a/c and claimed as exempt in the return of
income, the said treatment in the books of accounts by itself cannot be
determinative of its taxability-Benefit under Foreign Trade Policy, 2015 being
MEIS scrips does not fall within the meaning of cash assistance under s.
28(iiib)-Capital receipt, not chargeable to tax. [S. 2(24)(xviii), 4]
Held that sub-cl. (iiia) of s. 28 which explains profits on sale of a license granted under
the Import (Control) Order, is not applicable in the facts and circumstances of the case.
Further, sub-cl. (iiib) of s. 28 provides cash assistance (by whatever name called)
received or receivable by any person against exports under any scheme of the
Government of India. There was no cash assistance granted to the assessee in the
present case, thus, it is not applicable. Further, sub-cl. (iiic), which explains any duty of
customs or excise repaid or repayable as drawback to any person against exports under
the Customs and Central Excise Duties Drawback Rules, is not applicable. Further, sub-
cls. (iiid) and (iiie) which explain any profit on the transfer of the Duty Entitlement Pass
Book scheme and any profit on the transfer of the Duty Free Replenishment Certificate,
respectively, admittedly, do not cover the facts and circumstances of the case, and so,
is not applicable. Capital receipt not chargeable to tax. (AY. 2017-18, 2018-19, 2020-
21)

ACIT v. Eastman Exports Global Clothing (P) Ltd. (2024) 232 TTJ 121 / 38
NYPTTJ 1190 (Chennai)(Trib)

S. 28(iv) : Business income-Value of any benefit or perquisites-Converted in to

money or not-Assets received free of cost from AEs located outside India-MAP-
Price is already agreed under MAP-Therefore, the AO was not justified in
making addition under S. 28(iv).
Held that the equipments received by the assessee from its AEs free of cost for testing
purposes are either returned or destroyed and the pricing towards the software
development services rendered by the assessee to the said AEs are agreed under MAP,
no benefit or perquisite is chargeable under s. 28(iv). (AY. 2015-16)
Samsung R&D Institute India-Bangalore (P) Ltd. v. JCIT (2024) 232 TTJ 522
/ 38 NYPTTJ 1392 (Bang)(Trib)
S. 28(iv) : Business income-Value of any benefit or perquisites-Converted in to
money or not-Capital Gains-Loss-Conversion of loan given to subsidiary to
optionally convertible preference shares at face value-Merchant Banker’s
valuation report-Not tax avoidance-Cost of acquisition tenable. [S. 41(1)]
Held that the facts on record did not suggest that the sale price of the optionally
convertible preference shares was artificially deflated as supported by an independent
report of a merchant banker and later on, the same investment was sold at a lower price
to a third party. There was no infirmity in the sale consideration of the optionally
convertible preference shares. The Assessing Officer had mixed up both the transactions
in arriving at the conclusion that the investment made by WEP in the optionally
convertible preference shares issued by WEC was also sham even though it was an
independent transaction. The Assessing Officer was not justified in disallowing the claims
of both long-term and short-term capital loss. The order of the Commissioner (Appeals)
deleting the disallowance is affirmed. (AY. 2017-18)
Dy. CIT v. Welspun Steel Ltd. (2024)114 ITR 107 (Mum)(Trib)

161
S. 28(va) : Business income-Cash or kind-Under an agreement-Non-compete
fee-Joint venture company-Negative covenant-Loss of source of income-Capital
receipt-Finance Act, 2002, with effect from 1-4-2003 applicable only after the
assessment year 2003-04. [S. 4]
Assessee-company is engaged in manufacture of pharmaceutical products. It entered
into an agreement with its joint venture company on 12-3-2002 to effect that it will not
engage in marketing, distribution and sale of its products for a certain period. Assessee
received non compete fee from its joint venture company and claimed same as capital
receipt. Assessing Officer treated non compete fee as being revenue receipt. CIT(A)
deleted the addition. On appeal the Tribunal held that since agreement entered into by
assessee with joint venture company was a negative covenant restricting assessee from
carrying out its certain activities, which nevertheless was a loss of source of business to
assessee, non compete fee received by assessee is in nature of capital receipt for year
under consideration and it is not liable to tax. Amendment introduced by, Finance Act,
2002, with effect from 1-4-2003 is applicable only after the assessment year 2003-04.
(AY. 2002-03)
ACIT v. Lyka Labs Ltd. (2024) 208 ITD 532 (Mum) (Trib.)

S. 31 : Repairs-Current repairs-Capital or revenue-Treated capital in nature in

books-Allowable as deduction-Matter is remanded to the Assessing Officer.
[S. 37(1), 145]
Held that what is required to be seen was the nature of repair and maintenance, which
neither the Assessing Officer nor the Commissioner (Appeals) did. A perusal of the details
showed that the repairs and replacement of parts of plant and machinery were small
and to be allowed under section 31 irrespective of the nature of the expenditure. The
Assessing Officer is directed to examine the details in line with the Supreme Court
decision in CIT v. Saravana Spinning Mills P. Ltd. (2007) 293 ITR 201/ (2007) 7SCC 298/
(2007) SCC Online SC 1000. (AY. 2003-04)
Hindalco Industries Ltd. v. Dy. CIT (2024)114 ITR 502 (Mum)(Trib)

S. 31 : Repairs-Capital or revenue-Expenditure for spare parts-Allowable as

revenue expenditure.
Held that the replaced machinery and equipment were part of the plant and not separate
entities capable of independent functioning. The assessee, an ISO 14001 certified
company, had to maintain its plant in good condition to comply with environmental
standards, which necessitated these repairs. The replacements did not result in an
increase in production capacity. Allowable as revenue expenditure. Order of CIT(A) is
affirmed. (AY. 2015-16)
ACIT v. Gujarat Insecticides Ltd. (2024)114 ITR 12 (SN)(Ahd)(Trib)

S. 31:Repairs-Current repairs-Manufacture Of Fertilisers and chemicals-

Expenditure on pipelines and fuel burner-Parts of plant and machinery-Parts
incapable of independent use-Replacement of parts of machine is current
repairs-Expenses allowable as revenue expenditure. [S. 37(1)]
Held that the expenditure on repairs and maintenance was on replacement of parts of
machinery and plant, which could not be treated at par with repairs and maintenance of
the entire plant and machinery. The pipelines and dual fuel burner system formed a part
of the entire plant and machinery, and these parts did not function independently.
Allowable as expenses were of revenue nature. (AY. 2011-12)
162
Gujarat State Fertilizers and Chemicals Ltd. v. Dy. CIT (2024) 110 ITR 641
(Ahd)(Trib)
S. 32 : Depreciation-Carry forward and set off of unabsorbed depreciation-
Amendment of Section 32(2) by Finance Act, 2001-Unabsorbed depreciation
or part thereof not set off till Assessment year 2002-03-Carry forward and set
off permitted without limit-High Court affirmed the order of the Tribunal-SLP
of Revenue is dismissed [S. 32(2) Art. 136]
Held, dismissing the appeal, that the Tribunal was justified in confirming the order of the
Commissioner (Appeals) allowing carry forward and set off of unabsorbed depreciation
of the assessment years 1996-97 to 1998-99 and the amount on account of increase in
written down value for the assessment years 2004-05 and 2005-06, in the assessment
year 2007-08, without any limitation of period. Circular No. 14 of 2001 dated November
9, 2001 ([2001] 252 ITR (St.) 65), Finance Act, 2001 [2001] 249 ITR (St.) 37. General
Motors India (P.) Ltd. v. Dy. CIT (2013) 354 ITR 244 (Guj)(HC) SLP of Revenue is
dismissed. (AY. 2007-08)
PCIT v. Vishaldeep Spinning Mills Ltd. (2024)465 ITR 530/299 Taxman
368 (SC)
Editorial : PCIT v. Vishaldeep Spinning Mills Ltd [2023] 153 taxmann. com 372/ (2024)
465 ITR 524 (Guj)(HC)

S. 32 : Depreciation-Revaluation –Actual cost-Taken over assets and liabilities

of the firm-Actual cost of assets will be actual cost which assessee paid to
predecessor after revaluing assets-Entitled to claim depreciation for
subsequent years on basis of actual cost paid-SLP of Revenue is dismissed. [S.
43(1), Proviso, R. 5, Art. 136]
Dismissing the appeal of the Revenue the High Court held that when the assets and
liabilities are taken over from the partnership firm the assessee will be entitled to claim
depreciation in respect of any assets on actual cost of said assets. The actual cost of said
assets will be actual cost which assessee paid to predecessor after revaluing assets and
the assessee will be entitle to depreciation for subsequent years on basis of actual cost
paid. SLP of Revenue is dismissed. (AY. 2009-10)
PCIT v. Dharmanandan Diamonds Pvt. Ltd. (2024)467 ITR 31/ 64 300 Taxman
95 (SC)
Editorial : PCIT v. Dharmanandan Diamonds (P.) Ltd. (2023) 294 Taxman
29/(2024)467 ITR 26 (Bom.)(HC)

S. 32 : Depreciation - Amalgamation - Intangible assets - Goodwill is valuable

asset - Entitlement to depreciation - SLP of Revenue is dismissed. [S. 32(1),
Art. 136]
Assessee had taken over a company and claimed depreciation on acquired intangible
assets. AO observed that in agreement no particulars were furnished related to
intangible assets which were acquired. AO held that assessee was not entitled to
depreciation on intangible assets u/s 32(1)(ii). Tribunal allowed the claim. High Court
held that from perusal of order passed by AO it was clear that he had himself found
that goodwill had been calculated and allotted as acquired intangible assets thus,
assessee would be entitled to claim depreciation u/s 32(1)(ii) in respect of intangible
assets. SLP filed by revenue is dismissed. (AY. 2001-02)
CIT v. Hewlett Packard India Sales (P.) Ltd. (2024) 298 Taxman 448 / 463 ITR
334 (SC)
163
Editorial : CIT v. Hewlett Packard India Sales (P.) Ltd(2021) 279 Taxman 355(2024)463
ITR 329 (Karn)(HC) upheld

S. 32 : Depreciation- Carry forward and set off - Unabsorbed depreciation

pertaining to AY 1997 - 98 could be allowed to be carried forward and set off
after a period of eight years without any limit whatsoever in accordance with
S. 32(2) as amended by Finance Act, 2001 - SLP of Revenue is dismissed.
[S. 32(2), Art. 136]
High Court held that unabsorbed depreciation pertaining to AY 1997-98 could be
allowed to be carried forward and set off after a period of eight years without any limit
whatsoever in accordance with S. 32(2) as amended by Finance Act, 2001. SLP filed
by the Revenue is dismissed. (AY. 2007-08)
PCIT v. Vishaldeep Spinning Mills Ltd. (2024) 299 Taxman 368 / 465 ITR 530
(SC)
Editorial : PCIT v. Vishaldeep Spinning Mills Ltd(2023) 153 taxmann. com 372 / (2024)
465 ITR 524 (Guj)(HC)

S. 32 : Depreciation - Block of assets - Ready for use - Entitlement to full

depreciation. [S. 2(11), R. 5(1)]
Held that the block of assets on which depreciation u/s 32 had been claimed by the
assessee were old and none of them were acquired during the previous year relevant to
the AY in question. Therefore, the second and third proviso to sub-section (1) of S.
32 would not apply. The assets in question on which the depreciation had been claimed
were being used for the purpose of business or profession from earlier years. The block
of assets on which the depreciation for the whole year had been claimed were ready for
use during the entire year. The assessee is entitled to full depreciation for the AY s
1999-2000 and 2000-01. (AY. 1999-2000, 2000-01)
Khar Hospitality India Ltd. v. CIT (2024)471 ITR 200 (Cal) (HC)
S. 32 : Depreciation - Unabsorbed depreciation - Carried forward - Deemed to
be a business loss - Can be set off only against profits or gains of any business
or profession - Cannot be set off against income from other source. [S. 28(i),
32(2), 56, 71, 72(2),72(3), 143(1),154, Art. 226]
The assessee filed an application for rectification u/s 154, claiming that full set off of
the unabsorbed depreciation had to be granted and the denial of that benefit to the
assessee was illegal. The petition filed by the assessee was rejected with a finding that
there was no ground for rectification. On writ, the assessee contended that a reading of
S. 72 would indicate that where such loss in the form of depreciation was carried
forward to the next year, the same could be set- off against income arising from
heads other than ‘profits or gains of business or profession. Dismissing the writ petition,
the court held that the right u/s 32(2) is specifically made subject to the provisions
of sections 72(2) and 72(3). It is clear from the reading of the provisions of S. 72
that even if the depreciation allowance u/s 32, which was carried forward in terms of
sub-section (2) of S. 32, is deemed to be a business loss for the purposes of sections
71 and 72, it can be set off only against profits or gains of any business or profession
and it cannot be set off against income from any other sources. Though the P etitioner
took considerable efforts to establish that S. 72 is always subject to the provisions
of S. 71 going by the express provisions in sub-section (2) of S. 32 permitting
the carry forward of depreciation allowance subject to the provisions of S. 72, there

164
is no merit in the said contention taken by the petitioner. Writ petition is dismissed.
(AY. 2023-24)(SJ)
Alapatt Jewellers v. Dy. CIT (2024) 301 Taxman 447 (Ker.)(HC)

S. 32 : Depreciation - Godowns - Plinths - plinth constructed could not be

treated as building - Not entitled to depreciation - Order of Tribunal is affirmed.
[S. 22, 26, 260A]
Assessee purchased property and thereafter constructed godowns and plinths. Assessee
claimed depreciation on the cost of plinths which was disallowed by the AO.
CIT(Appeals) allowed the appeal by holding that plinths constructed by assessee
were building within meaning of S. 26. On appeal, the Tribunal affimed the order of
the AO. On appeal, the Court held that the plinth constructed by assessee could not
be treated as building within meaning of S. 26. Order of the Tribunal is affirmed.
(AY. 2005-06)
Y. S. & Co-owners v. ITO [2024] 301 Taxman 647 (P& H)(HC)

S. 32 : Depreciation - Hotel - Temporary closure - Block of assets - Put to

use less than 180 days - Second proviso - Acquired in earlier years - Second
and third proviso is not applicable - Depreciation is allowable. [S. 32(1), 260A]
The question before the High Court was whether depreciation allowed in respect of
hotel assets used for the purpose of business can be reduced in any manner because of
temporary closure of the hotel for part of the year and if the Tribunal is justified in
restricting the allowance to 50%. Allowing the appeal, the High Court held that block of
assets on which the depreciation has been claimed by the assessee are old and none of
it were acquired during the previous year relevant to AY , therefore, the second and
third proviso to S. 32 (1) shall apply. Appeal of the assessee is allowed. Followed,
CIT v. Wallfort Shares & Stock Brokers (P)(Ltd (2010) 233 CTR 42/ 41DTR 233 (SC)/
(2010) 8 SCC 137. (AY. 1999-2000, 2000-01)
KHR Hospitality India Ltd. v. CIT (2024) 338 CTR 761 (Cal) (HC)
S. 32 : Depreciation - Carry forward and set-off of unabsorbed depreciation -
Amendment of S. 32(2) by Finance Act, 2001 - Unabsorbed depreciation or
part thereof not set off till AY 2002-03 - Carry forward and set-off permitted
without limit. [S. 32(2) 260A]
Held, dismissing the appeal, that the Tribunal was justified in confirming the order of the
CIT (Appeals) allowing carry forward and set-off of unabsorbed depreciation of the
AY s 1996-97 to 1998-99 and the amount on account of increase in written-down
value for the AY s 2004-05 and 2005-06, in the AY 2007-08, without any limitation
of period. Circular No. 14 of 2001 dated November 9, 2001 ([2001] 252 ITR (St.) 65),
Finance Act, 2001 [2001] 249 ITR (St.) 37. General Motors India (P.) Ltd. v. Dy. CIT
(2013) 354 ITR 244 (Guj)(HC) (AY. 2007-08)
PCIT v. Vishaldeep Spinning Mills Ltd [2023] 153 taxmann. com 372
/ (2024) 465 ITR 524 (Guj)(HC)
Editorial : SLP of Revenue is dismissed, PCIT v. Vishaldeep Spinning Mills Ltd.
(2024)465 ITR 530/299 Taxman 368 (SC)
S. 32 : Depreciation - Temporary erections - wooden structures - 100%
Depreciation allowable.
Court held that the Tribunal was correct in deleting the disallowance of depreciation on
temporary wooden structure at 100% in the form of wooden furniture, cabins and wiring
which were temporary in nature, on the ground that the issue was covered in favour of
165
the assessee by the order of the Tribunal for the AY 2007-08. The Department had not
raised any ground in the appeal with regard to the allowance of depreciation on
temporary wooden structures against such decision. Therefore, applying the principle of
consistency, for the AYs 2013-14, 2014-15 and 2015-16, the assessee should have been
allowed depreciation on the temporary wooden structures. (AY. 2013-14 to 2015-16)
PCIT v. Oriental Bank Of Commerce Ltd. (2024) 464 ITR 563 (Delhi) (HC)
S. 32: Depreciation - Intangible Assets - Goodwill - Amalgamation - The order
of the Tribunal allowing the depreciation claim of the assessee was upheld by
the High Court. [S. 32(1)(ii)]
Digital Equipment Corporation, United States of America was taken over by the assessee
for an amount of Rs. 83. 99 Crores and the details of net assets taken over and the
particulars of liability, loans, etc. were furnished in the agreement. However, no
particulars concerning depreciation claims on intangible assets of Rs. 9,07,25,000/-were
furnished. The AO held that the assessee was not entitled to depreciation on intangible
assets u/s 32(l)(ii) of the Act. However, the CIT (A) allowed the claim of the assessee
by following the previous decision of the Delhi Bench of the Tribunal, which has been
upheld by the High Court of Delhi in CIT v. Hindustan Coca-Cola Beverages (P.) Ltd.
[2011]198 Taxman 104/331 ITR 192/ 238 CTR 1 ( Delhi)( HC). The Tribunal upheld the
order passed by the CIT (Appeals). On further appeal by Revenue, the High Court by
following the judgment of the Supreme Court in the case of SMIFS Securities Ltd. (328
ITR 302) upheld the order passed by the Tribunal and held that the AO himself had found
that goodwill was calculated on which depreciation u/s. 32 of the Act was allowable. (AY.
2000-01)
CIT v. Hewlett Packard India Sales (P) Ltd. [2024] 463 ITR 329 / [2021] 124
taxmann. com 431 (Karn) (HC)
Editorial: SLP of the Revenue is dismissed, CIT v. Hewlett Packard India Sales Pvt. Ltd
(2024) 463 ITR 334 / 161 taxmann. com 46 (SC)

S. 32 : Depreciation - Claimed in accordance with Appendix I - No substantial

question of law. [ITR. 5(1) 5(1) (IA)
The assessee claimed depreciation on the written down value which the AO disallowed
on the ground that the assessee had not opted therefore in terms of the proviso to
rule 5(1A) of the Income-tax Rules, 1962. The CIT (Appeals) upheld this. The Tribunal
accepted the assessee’s appeal on the question of permission to claim depreciation on
written down value basis holding that no particular format or procedure had been laid
down in the second proviso in relation to exercise of option by an assessee and that for
the AY 1999-2000, the assessee had claimed depreciation in accordance with sub-rule
(1) read with appendix I and this was in proper compliance with the requirements of the
second proviso to rule 5(1A) of the Rules. High Court dismissed the appeal of the
Revenue as no substantial question of law. (AY. 2000-01)
CIT v. Jindal Steel and Power Ltd. [2009] 180 Taxman 543/ (2024) 460 ITR
159 (P&H) (HC)

S. 32: Depreciation- Actual cost - Grant in aid received from Government -

Grant-in-aid basis the scheme is directly attributable to the cost of plant and
machinery and technical civil works- Grant-in-aid is therefore, required to be
reduced from the value/cost of the assets eligible for depreciation. [S.
32(1)(ii),43(1), Expln 10.]

166
Tribunal held that the nature of grant-in-aid is in the form of financial assistance subject
to maximum of Rs. 10 crores for setting up of cold chain value addition and preservation
infrastructure so that India usher's into a new dawn. However the nature of such grant-
in-aid is restricted to technical civil work and plant and machinery. Broadly the financial
assistance i. e., grant-in-aid are for technical civil work and plant and machinery and
nothing else in the broad scheme of Government of India, MFPI which was called
"Scheme for Cold Chain Value Addition and Preservation Infrastructure". Grant-in-aid is
therefore required to be reduced from the value/cost of the assets eligible for
depreciation. (AY. 2014-15)
Pagro Frozen Foods (P) Ltd. v. ITO (2024) 231 TTJ 413 / 38 NYPTTJ 988
(Chd)(Trib)

S. 32: Depreciation - Written down value - Non-receipt of insurance claim of

amalgamating company - Mere claim - Claim actually allowed only to be
considered - Depreciation is directed to be allowed on enhanced amount - State
capital investment subsidy - Not required to be deducted from the WDV for
computing the depreciation. [S. 43(6)(c, 43(1), Explanation 10.]
Held that the expression moneys payable should refer to the amount over which the
assessee got a right to receive. When the assessee made insurance claim of Rs. 22. 44
crores, it was merely a claim only and the assessee did not acquire any right to receive
the same. Hence, the assessee was not right in reducing the amount of Rs. 22. 44 crores
from the WDV in AY 2001-02. The assessee should have reduced the moneys payable
for destruction of asset as finally determined as payable by the insurance company. The
insurance claim of Rs. 22. 44 crores was rejected, but a claim of Rs. 8 crores was granted
to the then parent company by the insurance company. Said amount of Rs. 8 crores
would be the moneys payable for destruction of asset and the same is required to be
reduced from the WDV in AY 2001-02. WDV of AY 2005-06 should be recomputed
accordingly from AY 2001-02 onwards. Depreciation for AY 2005-06 should accordingly
be allowed on the enhanced WDV. The net result is that the WDV of the block should be
increased by Rs. 14. 44 crores in AY 2001-02 and the WDV of AY 2005-06 should be
arrived at accordingly. Tribunal also held that amount of State Capital investment
subsidy received from the State Government under West Bengal Incentive Scheme, 2000
is not required to be deducted from the WDV for the purpose of computing depreciation.
(AY. 2005-06)
Hindustan Unilever Ltd. v. Dy. CIT (2024) 232 TTJ 861 / 38 NYPTTJ 1420
(Mum)(Trib)

S. 32 : Depreciation - User for business - Entitled to full depreciation on the

aircraft for the whole year. [S. 32 (1) (ii)]
Held that Aircraft certainly was not allowed to fly to carry passengers or cargo in the
absence of this certification by the competent authority, but that did not stop the
assessee from holding it in its own name for the purpose of its business. Phrase used for
the purpose of business in S. 32 does not mean that the use should be by way of
generating revenue only. Use here is in the context of the direct connection of the asset
with the purpose of business which is initiated in the relevant year. Expenses which were
incurred for making the aircraft functional and ready to use during the year from India,
when stand allowed, the same also establish that the certificate of airworthiness issued
by the DGCA was only for the statutory compliances and to avoid legal liability, which is
167
part of the business activity. Entitled to full depreciation on the aircraft for the whole
year. (AY. 2013-14)
India Flysafe Aviation Ltd. v. DCIT (2024) 159 taxmann. com 1219 /228 TTJ
982 / 236 DTR 185 (Delhi)(Trib)
S. 32 : Depreciation - Trial runs - Aircraft put to use in subsequent year for
training purposes - Depreciation and maintenance is allowable. [S. 37(1)]
Held that the trial run of the aircraft was obviously for the purpose of business and
nothing else. As the statute did not prescribe a minimum time-limit for “use” of the
machinery, the assessee could not be denied the benefit of depreciation on the ground
that the aircraft was used for a very short duration for trial run. Consequently,
depreciation and maintenance expenses of the aircraft were held to be allowed as a
deduction. (AY. 2003-04)
Hindalco Industries Ltd. v. Dy. CIT (2024)114 ITR 502 (Mum)(Trib)

S. 32 : Depreciation-Plant and machinery-Depreciation is allowable.

Following the order of earlier year. Lakshmi Energy And Foods Ltd. v. ACIT 2014 SCC
OnLine ITAT 11168, disallowance of depreciation is deleted.
(AY. 2011-12)
Dy. CIT v. Laxmi Energy and Foods Ltd. (2024)114 ITR 88 (SN)(Chd)(Trib)
S. 32 : Depreciation - Business premises on lease - Improvement of leased
premises by interior decoration, like false ceiling, painting etc. - Write off total
expenses at 20% ascertaining the life of expenditure incurred between 3 to 5
years - Claim of depreciation is justified.
Assessee is a company engaged in the business of sale of high-end branded readymade
garments in reasonably decorated showrooms which were obtained on lease basis for 3-
5 years. Assessee improved said leased premises by interior decoration like false-ceiling,
racks, electrical light fittings, painting, partitions and change of flooring, etc. and since
expected life of said items were from 1 to 5 years, assessee wrote off total expenditure
at 20 % ascertaining life of expenditure incurred between 3 to 5 years. AO disallowed
depreciation and completed assessment under scrutiny determining income of assessee
which was confirmed by CIT (Appeals). On appeal the Tribunal held that since there
was no dispute regarding method of write-off and claiming by way of depreciation claim
of depreciation is justified. (AY. 2014-15)
Hi-Style India (P.) Ltd. v. DCIT (2024) 209 ITD 175 (Chennai) (Trib.)

S. 32 : Depreciation - Toll roads - Constructing a road on BOT basis on

Government land - Not owner of road - Toll bridge and toll roads are not
tangible assets of assessee in terms of Explanation-3(a) to S. 32(1)(ii) [S.
32(1)(ii)]
Held that toll bridge and toll roads are not tangible assets of assessee in terms of
Explanation-3(a) to S. 32(1)(ii), hence not entitled to depreciation. (AY. 2013-14,
2014-15)
Hazaribagh Ranchi Expressway Ltd. v. ACIT (2024) 209 ITD 522 /115 ITR 46
(SN) (Mum) (Trib.)

S. 32 : Depreciation - A Non-Banking Finance Company - Investments -

Different method of accounting - Securities as per Reserve Bank of India norms
- Disallowance of depreciation is deleted - Automated Teller Machine - Akin To
Computer and computer software - Depreciation allowable at 60% [S. 145]
168
Held that the assessee had followed a different method of accounting for the purpose of
the Act and claimed that it had investments under one category and followed cost or
market price whichever was lower, which was different from valuation of securities for
the purpose of books which was as per the Reserve Bank of India guidelines.
Disallowance is deleted. Followed, CIT v. City Union Bank L td (2007) 291 ITR
144(Mad)(HC). Held that automated teller machine is akin to computer and computer
software depreciation allowable at 60%. (AY. 2015-16 to 2017-18)
City Union Bank Ltd. v. Dy. CIT (2024)112 ITR 337 /229 TTJ 139
(Chennai)(Trib)
S. 32 : Depreciation - Windmill - Expenditure incurred on preparation of land
for installation of windmill - Matter remanded .
Held that the records showed that the expenditure on lease of land for 20 years was for
the purpose of preparation of the land and to make it suitable for installation of windmill.
Therefore, the matter was remanded to the AO for proper verification and adjudication
and, if the expenditure appeared to be towards the cost of plant and machinery, that is,
the windmill, the AO was directed to allow depreciation in respect of the lease. (AY.
2011-12)
Gujarat State Fertilizers and Chemicals Ltd. v. Dy. CIT (2024) 110 ITR 641
(Ahd)(Trib)

S. 32: Depreciation - Car registered in name of director - Funds utilized of the

company - Depreciation is allowable to the company.
Assessee company claimed depreciation on a vehicle purchased in the name of the
Director of the assessee company. AO disallowed the depreciation claimed @15%.
CIT(A) confirmed the disallowance. Revenue submitted that interest on the car loan and
insurance expenses were allowed to the assessee. Therefore, the disallowance of
depreciation on the car was deemed unwarranted. It was undisputed that purchase of a
car was made by assessee company, of matter following Supreme Court's decision in
Mysore Minerals Ltd v. CIT [1999] 239 ITR 775 (SC) which was also reflected in
books of account of the assessee company. Therefore, it could be asserted that the car
was commercially used for the purpose of business. Consequently, depreciation thereon
could not be denied. Moreover, interest on car loan and car insurance was allowed by
AO. Thus, on facts and circumstance the depreciation was allowed in accordance with
law. [ITA No. 828/Ahd/2023 dt. 23/02/2024)(AY. 2017-18)
Mukesh Trends Lifestyle Limited v. DCIT (Ahd)(Trib)(UR)

S. 32 : Depreciation - Rate of depreciation - Computer software - Depreciation

allowable at 60%.
The AO disallowed the assessee’s claim to depreciation on computer software stating
that the assessee had only purchased a licence to use the software and therefore was
not entitled to claim depreciation at 60%. The CIT (Appeals) allowed the claim. That
the CIT (Appeals) was right in allowing depreciation on software licence at 60%.
Followed Dy. CIT v. Datacraft India L td(2011) 9 ITR 712 / (2010) 133 TTJ 377 (SB)
(Mum)(Trib) (AY. 2013-14)
Gujarat Infrapipes P. Ltd. v. Dy. CIT (2024)111 ITR 47 (SN)(Ahd)(Trib)

S. 32 : Depreciation - Machine put to use before March 31 - Depreciation is

allowable.

169
Held that the invoices of purchase of slurry machine and other related cost, bill of entry
regarding import of slurry machine, user manual of slurry machine and log book of slurry
machine for the periods March 27, 2014 to March 31, 2014 showed that the observations
of the CIT (Appeals) that the personnel from Germany stayed till March 30th could
not be ground to derive the conclusion that the machine had been put to use only after
that date. The employees may have every reason to stay a day or more after completion
of the work in India. Hence, keeping in view the documentary evidence, the machine
was to be held to have been put to use even before March 31, 2014 and hence, the
depreciation is directed to be allowed (AY. 2014-15)
Yala Construction Co. P. Ltd. v. Add. CIT (2024)110 ITR 1 (SN) (Delhi)(Trib)

S. 32 : Depreciation - Computer software - Depreciation is allowable at a rate

of 60% .
Assessee purchased two software and charged depreciation at 60% . AO reduced the
claim of depreciation from 60% to 25% on the ground that 60% depreciation
would be applicable only in case of computers with software. CIT(A) up held the order
of the AO. On appeal, the Tribunal held that since software was guiding hardware
and also an integral part of hardware, assessee was rightly claiming depreciation at the
rate of 60% . (AY. 2016-17)
PRL Developers (P.) Ltd. v. ACIT (2024) 207 ITD 753 (Mum) (Trib.)

S. 32 : Depreciation - Purchase of assets treated as bogus - Proportionate

disallowance of depreciation each year is proper.
Held that when the purchase of assets are treated as bogus, proportionate
disallowance of depreciation each year is proper. (AY. 2017-18, 2018-19)
Dy. CIT v. Reliance Industries Ltd. (2024)109 ITR 180 (Mum)(Trib)

S. 32 : Depreciation - Written down value - Optional - Depreciation was not

claimed when it was optional - Assessee cannot be thrust upon to reduce
written down value of assets.
Held that since the depreciation was not claimed by the assessee in the earlier
years when the claim was optional in nature, the depreciation could not be thrust upon
the assessee so as to reduce the written down value of ssets, the order of CIT (Appeal)
is affirmed. (AY. 2017-18, 2018-19)
Dy. CIT v. Reliance Industries Ltd. (2024)109 ITR 180 (Mum)(Trib)

S. 32 : Depreciation - Rate of depreciation - Plant and machinery - Additional

depreciation - Exploration of crude Oil - Production of articles or things -
Depreciation allowable at 60% . [S. 32(1)(iia), ITR, 1962, Appx. I, Entry
Iii(8)(xii).]
Held that since in assessee’s own case the Tribunal had allowed depreciation
on oil field equipment in the AY 2006-07, the assessee was eligible to claim depreciation
on oil field equipment at 60% . That for the AY 2006-07, the Tribunal having held
that extraction of mineral oil which would amount to “production of articles or things”,
the assessee was eligible to claim additional depreciation u/s 32(1)(iia) of the Act. (AY.
2007-08, 2008-09)
Joshi Technologies International Inc. v. Asst. CIT (IT) (2024)109 ITR 70
(Ahd)(Trib)
170
S. 32 : Depreciation - Goodwill - Claim of depreciation not examined in detail
by AO - Matter restored to examine,whether depreciation is allowable under
which category was depreciation claimed as goodwill or any other commercial
right or Intangible assets u/s 32 . [S. 2(11), 32(1(ii)]
Held that the eligibility of the assessee’s claim of depreciation had not been examined
in detail by the AO during the course of assessment proceedings, i. e., whether the
assessee was eligible to claim depreciation on “goodwill” as per assessee’s books as
“intangible assets” u/s 32 of the Act, as per assessee’s submissions before the
Department. Accordingly, in the interest of justice, this issue was restored to the AO
to examine firstly, whether or not depreciation was allowable on the asset and under
which category the assessee was claiming depreciation, i. e., as depreciation on goodwill
or as depreciation of “any other commercial right” or “intangible asset” u/s 32 of the
Act. The AO may also examine the necessary supporting documents in justification for
the assessee’s claim of depreciation. (AY. 2007-08, 2008-09)
Joshi Technologies International Inc. v. Asst. CIT (IT) (2024)109 ITR 70
(Ahd)(Trib)

S. 32 : Depreciation - Computer software - Block of assets - Software and

computer as one block, issue was remitted back to AO to decide as per
findings returned by Tribunal. [S. 2(11)]
AO had disallowed depreciation claimed by assessee on opening WDV of computer
software by following his own order passed in AY 2004-05 and had restricted claim of
depreciation to 25% as against 60% . Tribunal held that since finding of AO on
this issue for AY 2004-05 had been overturned by Tribunal by directing AO to consider
software and computer as one block, the present issue was also remitted back
to AO to decide as per findings returned by Tribunal. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636 /116 ITR 261 (Mum)
(Trib.)

S. 32: Depreciation - Merger - AO should allow depreciation on basis of

computation made by assessee and not to reduce WDV on basis of notional
amount of depreciation.
Assessee claimed depreciation on assets of BMIL which got merged with assessee
company, calculated on WDV of assets without adjusting for depreciation which was
foregone for AYs 1995-96 & 1996-97 by BMIL. However, AO recomputed allowable
depreciation on basis of such adjustment. On appeal the Tribunal held that the AO
should allow depreciation on basis of computation made by assessee and not to reduce
WDV on the basis of notional amount of depreciation. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636/ 116 ITR 261 (Mum)
(Trib.)

S. 32 : Depreciation - Carry forward of depreciation - New plant and machinery

- Used for less than 180 days - Entire additional depreciation cannot be allowed
- Balance unclaimed amount can be claimed in subsequent Assessment year.
Assessee claimed additional depreciation on new plant and machinery acquired in
preceding AY, which was eligible for additional depreciation at rate of 20% . However,
since new assets were put to use for less than 180 days, claim of additional depreciation
171
allowable at 20% was restricted to 10% . Tribunal held that assessee is to be
allowed additional depreciation of 10% for asset purchased in preceding year. I f
the new plant and machinery is used for a period of less than 180 days, the entire
amount of additional depreciation cannot be claimed in subject AY, balance unclaimed
amount can be claimed in subsequent AY. (AY. 2014-15)
Asian Paints Ltd. v. ACIT (2024) 205 ITD 680 (Mum) (Trib)
S. 32 : Depreciation - Additional depreciation - Business is commenced in earlier
year - Depreciation and additional depreciation cannot be disallowed. [S.
32(1)(ii)]
Assessee had claimed depreciation allowance. AO disallowed the same on ground that
business of assessee had not commenced. CIT (Appeals) deleted disallowance made
by AO. Tribunal held that since AO while framing assessment order u/s 143(3) for
AY 2011-12 had accepted that business of assessee had already been started in the
previous year, CIT (Appeals) had rightly deleted impugned addition. (AY. 2013-14)
DCIT v. Adani Mining (P.) Ltd. (2024) 204 ITD 269 (Ahd) (Trib.)
S. 32 : Depreciation - Goodwill - an intangible asset, qualifies for depreciation
under the section, in acknowledgment of its value and impact on a company's
financial performance.
The assessee, a private limited company engaged in providing financial information and
analytics services, claimed depreciation on goodwill arising out of amalgamation with
another company in the previous year relevant to the AY under consideration. The AO
disallowed the claim on the ground that goodwill is not a depreciable asset under the
Act . The assessee challenged the disallowance before the DRP, which upheld the AO's
order and also rejected the assessee's alternative claim for additional depreciation on
goodwill.
The assessee appealed to the Tribunal against the final assessment order . The
Tribunal allowed the assessee's appeal and held that goodwill is an intangible asset
eligible for depreciation u/s 32 of the Act, following the decision of the Supreme Court
in the case of Smifs Securities Ltd. The Tribunal affirmed the principle that goodwill of a
business or profession is a depreciable asset under the Act, irrespective of the mode of
its acquisition, and rejected the Revenue's attempt to distinguish the Supreme Court's
ruling in Smifs Securities Ltd. based on the facts of the case. (AY. 2018-19)
S & P Capital IQ (India) P. Ltd. v. Asst. CIT [2024] 109 ITR 56 (SN)/ 205 ITD
217 (Hyd) Trib)

S. 32AB : Investment deposit account – Eligible business - Profits and gains of

business - in books of accounts rental income was shown as business income -
Entitlement to deduction - Order of Tribunal is set aside. [S. 22,28(1),
32AB(1)(ii), 32AB(3) 260A]
The question before the High Court was whether the rental income earned by the
appellant and assessed as income from house property will qualify for deduction u/s
32AB of the Act. Allowing the appeal the Court held that it was not the case of the
Revenue or the finding of the Tribunal that the assessee had in its accounts not shown
rental income as part of the business income. In fact as per the assessment order, these
charges had been considered as part of business income but the AO had excluded them
for the purpose of profits to arrive at the eligible business income for the purpose of S.
32AB of the Act. Therefore, so long as the rental income was part of the business income,
it would be included in the term “eligible business” because rental income was not
172
excluded in the definition of eligible business. The rental income earned by the assessee
and assessed under the head Income from house property would qualify for deduction
u/s 32AB of the Act. Accordingly the Court held that the rental income assessed
under head income from house property will qualify for deduction u/s 32AB of the
Act. (AY. 1987-88)
Indian Express Newspapers (Bombay) Ltd. v CIT (2024)468 ITR
778 (Bom)(HC)

S. 32AC: Investment in new plant or machinery - Installation of machinery -

Blending of lube oil tantamounts to manufacture or production - Entitlement to
deduction.
Assessee is engaged in the business of manufacture and production of lube oil. During
relevant AY it commissioned a lubricants blending plant and claimed investment
allowance u/s 32AC of the Act. AO disallowed the claim by holding that the blending
process undertaken by assessee-company did not amount to manufacture or production
of an article or thing and that threshold limit of investment of INR 100 crores as
prescribed u/s 32AC was not met. CIT(A) allowed the claim. On appeal, the Tribunal
held that blending of lube oil tantamounts to manufacture or production as contemplated
u/s 32AC. Since revenue could not controvert claim of assessee that it had made
investment exceeding threshold limit and fact that installation of plant & machinery had
been completed during year under consideration was not in dispute at all, assessee was
entitled to investment allowance as claimed. (AY. 2014-15)
ACIT v. Idemitsu Lube (P.) Ltd. (2024) 207 ITD 173 /111 ITR 59 (SN) (Delhi)
(Trib.)

S. 32AD: Investment in new plant or machinery in notified backward areas in

certain States - Effective date of commencement of provisions of S. 32AD and
Notification No. 61/2016/F. No. 142/13/2015, dt. 20th July, 2016 - reference
to Memorandum Explaining the Provisions in the Finance Bill, 2015 - held,
the provisions of S. 32AD are applicable for the investment made in FY 2015-
16 i. e. AY. 2016-17.
The assessee had set up an undertaking for manufacture or production of an article
or thing after 1st April, 2015 and the new asset was acquired and installed during the
period beginning from 1st April, 2015 from which the date S. 32AD was introduced. The
assessee claimed deduction u/s 32AD of the Act. The AO rejected the claim which was
affirmed by the CIT (Appeals). On appeal, due to difference of opinion, the point of
reference wa s made to the third member to decide the issue i. e. whether the
assesee is entitled to deduction u/s 32AD(1), in respect of investment made in FY
2015-16. The third member held that the assessee is entitled for allowance under S.
32AD. Neither the S. 32AD nor Notification No. 61/2016/F. No. 142/13/2015, dt.
20th July, 2016 states that the deduction under S. 32AD is allowable only for the period
starting from the date of notification. If the contention of the Revenue that the assessee
is entitled to claim the benefit of S. 32AD only from the date of notification is accepted,
then the condition of getting the benefit for a period five years from 1st April, 2016 is
not fulfilled and this cannot be the mandate of the legislation. Once the notification was
issued under S. 32AD specifying the area to be a backward area, it relates back to 1st
April, 2015 onwards. Therefore, the provisions of S. 32AD are applicable for the
investment made in financial year 2015-16 i. e., AY. 2016-17. (AY. 20016-17)

173
Maheswari Mining & Energy (P) Ltd. v. DCIT (2024) 229 TTJ 121 / 236 DTR
321 / 38 NYPTTJ 402/ 162 taxmann. com 574 (TM) (Hyd) (Trib)
S. 32AD: Investment in new plant or machinery in notified backward areas
in certain States - Additional investment allowance - Notification specifying
backward area relates back to 1-4-2015 - Entitlement to additional investment
allowance - The notification is neither taxing nor exempting the tax either in
full or in part to any class of assessees but it only specifies the details requisite
for implementation of the section - Issuance of notification by the CBDT is only
pursuant to the delegated legislation, but not a conditional legislation - Circular
No. 19 of 2015, dt. 27-11-2015 (2015) 379 ITR 19 (St), Notification dated 20-
7-2016(2016) 386 ITR 6 (St))
On appeal by the assessee, the Judicial Member held in favour of the assessee, while
the Accountant Member affirmed the disallowance. On a reference to a Third Member
allowing the appeal the Tribunal held that the undertaking was set up subsequent to
01. 04. 2015 and the new asset was acquired and installed during the period between
01. 04. 2015 and 31. 03. 2016. A combined reading of the Memorandum Explaining
the provisions in the Finance Bill, 2015 as well as the CBDT Circular No. 19 of
2015 clearly mentioned that the provisions of S. 32AD were applicable from AY
2016-17 for a period of 5 years. Therefore, the provisions of S. 32AD of the Act,
were applicable for the investment made in FY 2015-16, i. e., AY 2016-17. That the
notification issued by the CBDT on 20. 07 2016 did not keep the operation of the
provisions of S. 32AD of the Act in abeyance till 20. 07. 2016. The notification
stating that it shall come into force as on the date of its publication in the Official Gazette
cannot override the provisions of S. 32AD(1) of the Act. That since S. 32AD is a
beneficial provision and the assessee fell in the beneficial provision, the provision as well
as the notification needs to be interpreted liberally, i. e., in favour of the assessee and
the assessee is entitled to deduction u/s 32AD. Held that S. 32AD(1) requires
the executive to notify the areas constituting backward areas in the relevant States and
to that extent it cannot be said that S. 32AD(1) is complete on its own. Even
according to the Revenue, Parliament required the executive to issue the notification
specifying what areas constitute the backward areas in the relevant States, but not in
respect of the future date of promulgation or the provision nor with applicability or
withdrawal of the provision to any class of persons, areas or properties. The provision
itself is in the nature of beneficial legislation favourable to the assessee, and the
notification neither brings the provision into force on any later day nor does it extend or
exempt the operation of the provision to any class of persons, properties or areas. It
only specifies details regarding the backward areas in the relevant States for
implementation of the provision. The notification is neither taxing nor exempting the tax
either in full or in part to any class of assessees but it only specifies the details requisite
for implementation of the section. Issuance of notification by the CBDT is only pursuant
to the delegated legislation, but not a conditional legislation(AY. 2016-17)
Maheswari Mining and Energy P. Ltd. v. ACIT (2024)116 ITR 75 / 162 taxmann.
com 574 ( TM) (Hyd)(Trib)

S. 35 : Expenditure on scientific research - Weighted deduction - In-house

scientific research - Expenditure on clinical trials conducted outside approved
- Clinical research outside facility would also be eligible for weighted deduction
under S. 35(2AB). [S. 35(2AB)]
174
Held that prior to 1st July, 2016 there was no requirement by DSIR to certify the amount
eligible for weighted deduction and therefore, assessee cannot be denied weighted
deduction for the reason that the amount claimed is more than what is mentioned in
Form 3CL. Accordingly, the amount as mentioned in Form 3CL as expenses incurred
towards clinical research outside the facility would also be eligible for weighted deduction
under S. 35(2AB). (AY. 2010-11)
Micro Labs Ltd v. ACIT (2023) 37 NYPTTJ 46/ (2024) 230 TTJ 625 (Bang)(Trib)

S. 35 : Expenditure on scientific research - Purchase of capital equipment for

research facility - Clinical trial expenditure allowed by Tribunal in earlier years
which is upheld by High Court - Order of CIT(A) deleting the addition is affirmed
- CBDT Circular No. 14(Xl-35), Dated 11-4-1955. [S. 35(2AB)]
Held that the CIT (Appeals) correctly appreciated the fact and found the capital items
were used in the research facility only and that the impugned capital expenditure was
approved by the DSIR as evidenced by the certificate issued by it in form 3CL. When
the specified authority itself had approved the incurrence of the capital expenditure for
the purpose of in-house research, there was no question of the AO doubting it or arriving
at a finding that the capital expenditure was not incurred in the assessee’s research and
development facility. Order of CIT(A) is affirmed (AY. 2008-09, 2009-10)
Cadila Pharmaceuticals Ltd. v. ACIT (2024)115 ITR 428 / 162 taxmann. com
229 (Ahd)(Trib)

S. 35: Expenditure on scientific research - DSIR approved only part of

expenditure claimed - Prior to 1-4-2016 there is no requirement of
quantification of eligible expenditure incurred on in-house research and
development facility that has to be approved by prescribed authority - Entitled
to 200% . of actual expenditure incurred on Scientific Research. [S. 35(2AB]
Held that S. 35(2AB) is amended on April 1, 2016 whereby the quantum of eligible
expenditure incurred on in-house research and development facility is required to be
quantified by the prescribed authority. Prior to April 1, 2016, there was no such
requirement for claiming the deduction. Merely because the DSIR had quantified such
expenditure in the current year, which was prior to April 1, 2016. Disallowance is deleted.
The AO is directed to allow at 200%. of the actual expenditure incurred on scientific
research in its in-house research and development facility. (AY. 2013-14, 2017-18)
Pharmanza Herbal P. Ltd. v Dy. CIT (2024)115 ITR 612 / 164 taxmann. com
1297 (Ahd)(Trib)

S. 35 : Expenditure on scientific research- In-house scientific research and

development - Weighted deduction - Expenditure attributable to income earned
from contract research is also entitled to weighted deduction - Matter
remanded. [S. 35(2AB)]
Held that in-house scientific research and development is entitled to weighted deduction.
Expenditure attributable to income earned from contract research is also entitled to
weighted deduction. Matter remanded. (AY. 2010-11)
Cadila Pharmaceuticals Ltd. v. ACIT (2024) 115 ITR 51 (SN)/ 162 taxmann.
com 229 (Ahd)(Trib)

175
S. 35 : Expenditure on scientific research - Weighted deduction - Deduction
allowed to extent certified by DSIR-Matter remanded for verification. [S.
35(2AB)]
Followed earlier year order of Tribunal and expenditure u/s 35(2AB) in the nature of
exhibit batches was not allowed. In terms of this decision, the claim of the expenses was
rejected. the addition to the extent the research and development expenses were
recognised by the DSIR for the year in question was deleted. (AY. 2012-13)
Intas Pharmaceuticals Ltd. v. ACIT (2024)114 ITR 546 (Ahd)(Trib)

S. 35 : Expenditure on scientific research-Weighted deduction-Allowable as

deduction. [S. 35(2AB]
Held that the assessee had undertaken the research work and had spent certain amount
during the relevant AYs on scientific research, not being the capital expenditure in the
nature of land and building. The AO's reliance solely on the DSIR report, without
considering the detailed books of account and certification by a chartered accountant, is
not justified. Deduction is allowed. (AY. 2016-17)
AMI Life Sciences P. Ltd. v. ACIT (2024)114 ITR 7 (SN)(Ahd)(Trib)

S. 35 : Expenditure on scientific research - Capital expenditure allowable as

deduction - Disallowance of balance amount is affirmed as per order of CIT(A).
[S. 35(2AB]
Held that the matter regarding the assessee’s claim of weighted deduction
u/s 35(2AB) was decided by the Tribunal in the assessee’s favour in its own case for
earlier AYs. The CIT (Appeals) had not erred in facts and in law in making any
disallowance thereto. As for the other items of expenditure under this section, weighted
deduction in respect of foreign patent filing expenses to the extent it was of capital
nature was allowed and the balance amount was disallowed in terms of the order of the
CIT (Appeals). Disallowance of balance amount is affirmed as per order of CIT(A). (AY.
2009-10, 2010-11, 2011-12)
Intas Pharmaceuticals Ltd. v. ACIT (2024)114 ITR 434 (Ahd)(Trib)

S. 35 : Expenditure on scientific research - Capital gains - Business discontinued

- Deduction u/s 35(1)(ii) can be claimed only from income falling under head
Profits and gains of business or profession u/s 28- Not entitled to claim
deduction from capital gain. [S. 28(i), 35(1(ii), 45]
Assessee-company earned LTCG on sale of factory land. During relevant AY, assessee
made a donation to a trust and claimed weighted deduction u/s 35(1)(ii) on said
donation. AO disallowed deduction on ground that there was discontinuation of business
after sale of factory land. Assessee claimed that it continued its operation even after the
sale of factory land. CIT(A) affirmed the order of the AO. On appeal the Tribunal held
that no lease agreement or confirmation from the buyer of factory land, had been
submitted to substantiate the claim of carrying on business at the same premises. Since
there was loss under head income from business or profession and assessee had
discontinued its business after selling factory land, assessee could not claim deduction
u/s 35(1)(ii) from such business loss. Since assessee earned huge capital gains on sale
of factory land and there was immediate and proximate nexus between impugned
donation and capital gain, assessee was not entitled to claim deduction u/s 35(1)(ii)
from capital gain chargeable to tax u/s 45. (AY. 2015-16)
Sarvoday Ply Industries. v. DCIT (2024) 209 ITD 42 (Surat) (Trib.)
176
S. 35 : Expenditure on scientific research - Weighted deduction - DSIR not
certified part of expenses and did not furnish reason-AO is directed to examine
issue a fresh thereafter. [S. 35(2AB), R. 6(7A)]
Held, that on a combined reading of S. 35(2AB), (3) read with rule 6(7A), the reports
mentioned therein would cover the report to be furnished by the DSIR, even though the
reports are forwarded directly to the CIT. The amendment made in sub-section (3) may
be considered as enabling provision which triggered inserting of rule 6(7A), which was
amended enabling DSIR to quantify the expenditure incurred. If any question arises
u/s 35 of the Act as to whether and if so, to what extent any activity constitutes or
constituted scientific research, S. 35(3) provides for making a representation to the
prescribed authority. Since, the DSIR had not certified part of the expenses incurred by
the assessee and since it did not furnish any reason for doing so, there was violation of
principles of natural justice. Unless the prescribed authority furnishes the reason for not
certifying the expenses, it would not be possible for the Tribunal to adjudicate this issue.
Accordingly, the assessee as well as the AO were to take appropriate action to ascertain
the reasons for non-certification. After ascertaining them, the AO may examine this issue
afresh and take appropriate decision in accordance with law, after affording adequate
opportunity of being heard to the assessee.). (AY. 2017-18, 2018-19)
Dy. CIT v. Reliance Industries Ltd. (2024)109 ITR 180 (Mum)(Trib)

S. 35 : Expenditure on scientific research - Approval was pending -Issue was

restored to AO. [S. 35(2AB), Form No 3CM]
Assessee had claimed research and development expenses incurred during the year
under consideration for its units. AO disallowed said expenses on ground that no
approval in prescribed Form no. 3CM had been enclosed before AO. On appeal the ITAT
held that since, assessee had applied for approval in Form No. 3CM which was still
pending, issue was to be restored to AO for providing an opportunity to assessee to
furnish approval of competent authority in prescribed manner for claiming deduction u/s
35(2AB). (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636/116 ITR 261 (Mum)
(Trib.)

S. 35A : Acquisition - Patent rights - Copy rights - Trade mark - Merger -

Eligible to claim deduction.
Assessee-company had claimed deduction u/s 35A qua acquisition of trademark by SPPL
which had been merged with assessee. AO disallowed the same. On appeal the Tribunal
held that in view of decision of Tribunal in assessee's own case that trademark is not
alien to patent right as there is direct link between patent right and trademark, assessee
was eligible to claim deduction u/s 35A. (AY. 2005-06)
Piramal Enterprises Ltd. v. DCIT (2024) 205 ITD 636/116 ITR 261 (Mum)
(Trib.)

S. 35ABB: Licence to operate telecommunication services - Classification of

royalty payment as revenue expenditure - Appeal de-tagged for specific
consideration. [S. 37(1)]
The assessee sought recall of the Supreme Court’s judgment in CIT v. Bharti Hexacom
Ltd (2023) 155 taxmann. com 322/ 458 ITR 593 (SC) and requested de-linking of
177
its appeal from the batch of cases disposed of on 16-10-2023. While the allowability of
varied license fees as capital expenditure was finalized in the earlier judgment, the issue
of whether royalty payments to the Wireless Planning Commission (WPC) should be
treated as revenue expenditure was neither argued nor decided in that judgment. The
Supreme Court de-tagged the appeal from the batch and restored it to be adjudicated
separately on the merits of the case for the treatment of royalty payments as revenue
or capital expenditure.
PCIT v. Vodafone Idea Ltd. (2024) 301 Taxman 316 (SC)
Editorial: CIT v. Bharti Hexacom Ltd. (2023) 155 taxmann. com 322 / 458 ITR 593
(SC)

S. 35AD: Deduction in respect of expenditure on specified business-Star rating-

Granted four star rating by Ministry of Tourism after close of assessment
proceedings-Certificate furnished during the appellate proceedings before CIT
(Appeals)-Qualified as a specified business and eligible for deduction.
Held that the hotel run by the assessee was not granted any star rating for the FY s
relevant to the AYs 2017-18 to 2019-20, and subsequent to the close of the assessment
proceedings, the assessee got the four star rating certificate on 14. 12. 2021 valid
for the period starting 14. 12. 2021 to 13. 12. 2026 which was furnished
during the course of appellate proceedings before the CIT (Appeals). The hotel being run
by the assessee has been duly granted a four star rating certificate by the Ministry of
Tourism, Government of India and thus, it qualified as a specified business for the
purposes of claim of deduction u/s 35AD of the Act. Compliance with other conditions
was not in dispute. The AO is directed to allow the deduction as so claimed by the
assessee u/s 35AD of the Act. (AY. 2017-18 to 2019-20)
Khanna Infrabuild P. Ltd. v. Dy. CIT (2024)113 ITR 595/231 TTJ 530
(Chd)(Trib)
S. 35AD: Deduction in respect of expenditure on specified business-Hospital-
Survey-Revised return-Deduction claimed in revised return is allowable. [S.
35AD(2), 133A, 139(5)]
Assessee-company ran a hospital. Subsequent to survey action u/s 133A, assessee filed
revised return u/s 139(5) claiming deduction u/s 35AD for first time. AO held that
benefit of S. 139(5) could not be claimed by a person who had filed fraudulent returns.
He rejected claim of deduction u/s 35AD for reason that assessee failed to furnish any
documentary evidence to prove that it satisfied all conditions laid down in S. 35AD(2).
CIT(A) allowed the claim. On appeal, the Tribunal held that since assessee during
appellate proceedings submitted all details of capital expenditure incurred before date
of commencement of hospital which showed that it had more than hundred beds at
relevant time and as it had filed original return in time as per provisions of S. 139(1),
deduction u/s 35AD claimed for first time in revised return filed as per provisions of S.
139(5) is allowable. (AY. 2013-14)
ACIT v. Surat Life Care (P.) Ltd. (2024) 205 ITD 538 (Surat) (Trib.)

S. 35D: Amortization of Preliminary expenses (General)-Claim of was granted

by AO-Claim could not be disallowed in subsequent year by Commissioner
through his revisionary powers without disturbing decision in initial year-No
challenge is made against the rectification. order passed by revenue-SLP
disposed as infructuous. [S. 154,263, Art. 136]

178
The assessee claimed amortization of preliminary expenses u/s 35D in AY 2007-08 which
was allowed by the AO. However, for AY 2008-09, the Commissioner invoked revisionary
powers u/s 263 to disallow the claim on the ground that the assessee had wrongly
claimed the deduction u/s 35D as it was not an industrial undertaking within the meaning
of such expression as envisaged u/s 35D. The Hon’ble High Court held that once a claim
u/s 35D is granted in the first year, it cannot be disallowed in subsequent years without
disturbing the initial year’s assessment. This action by the Commissioner was deemed
invalid. The Revenue filed an SLP against the High Court's decision. The Hon’ble Supreme
Court disposed of the SLP as infructuous as the rectification order passed u/s 154 of the
Act which is against the Revenue for the AY 2008-09 has been made to the relied upon
judgement. (AY. 2008-09)
CIT v. Subex Ltd. (2024) 301 Taxman 404 (SC)
Editorial: Subex Ltd. v. CIT-III (2021) 132 taxmann. com 96 /285 Taxman
350(Karn)(HC)

S. 35D : Amortisation of preliminary expenses-Initial public offer of shares

expenses-Direct expenses incurred in connection with initial public offer of
shares, it could not claim deduction of indirect expenses incurred in connection
with same object as revenue expenses. [S. 37(1)]
Assessee-company incurred certain expenditure in relation to initial public offer of shares
such as advertising, travelling, postage, market research, etc. and claimed deduction of
same as revenue expenditure AO invoking provisions of S. 35D disallowed expenditure.
Tribunal affirmed the order of the AO. On appeal the Court held that since S. 35D
permitted only certain capital expenses as deductible and not others and assessee had
already been granted benefit of deduction of direct expenses incurred in connection with
initial public offer of shares, it could not claim deduction of indirect expenses incurred in
connection with same object as revenue expenses. (AY. 2008-09)
Inditrade Capital Ltd. v. CIT (2024) 301 Taxman 638 (Ker.)(HC)

S. 35DD:Amortisation of expenditure-Amalgamation-Merger expenses-The

year in which the High Court order was received can be treated as the 1st year
from which the merger expenses can be claimed u/s 35DD and allow to claim
the said expenses in next 4 AYs.
The Assessee had undergone amalgamation by order of the Calcutta High Court dated
26. 10. 2006 and the Bombay High Court dated 01. 12. 2006, which was to be effective
from 01. 04. 2005. The Assessee claimed 2/5th of the expenses incurred during the
present AY 2007-08 u/s 35DD in the computation of income by stating that since the
Assessee could not claim the deduction in AY 2006-07, the Assessee has claimed 2/5th
i. e. 1/5th for A. Y. 2006-07 & 2/5th A. Y. 2007-08. The Tribunal observed that S. 35DD
is unambiguous and there is no provision u/s 35DD to claim 2/5th of the expenditure
incurred towards amalgamation / demerger. The Assessee had also raised an additional
ground to treat AY 2007-08 as the first year from which the merger expenses are claimed
u/s 35DD and allow the Assessee to claim the expenses in next 4 AYs subsequent to AY
2007-08. The Tribunal found merit in this contention and allowed the same. (AY. 2007-
08)
United Spirits Ltd. v. Jt. CIT [2024] 109 ITR 37 (SN) (Mum)(Trib)

S. 36(1)(ii):Bonus or commission-Commission paid to director-Services

rendered-Allowable as business expenditure.
179
Held that commission paid to director for services rendered, allowable as business
expenditure.
AMI Life Sciences P. Ltd. v. ACIT (2024)114 ITR 7 (SN)(Ahd)(Trib)

S. 36(1)(ii):Bonus or commission-Directors had declared salary and bonus-

Entitled to claim deduction in respect of payment of bonus to its directors.
Held that in the line of business of the assessee, wherein it was engaged in dealing in
computers, networking solutions, and providing maintenance and facility management
services, it could not be denied that without the dedicated efforts the turnover from sales
and services could not have increased. Thus, the bonus was a reward for the work of the
promoter directors, who were actively involved in the day-to-day affairs of the company,
in addition to the salary paid to them. Accordingly, the assessee is entitled to claim
deduction u/s 36(1)(ii) of the Act in respect of payment of bonus to its directors. Central
Board Of Direct Taxes Instruction No. 20 Of 2015, Dated 29-12-2015 (2016) 380 ITR 36
(St). Relied on Loyal Motor Services Co. Ltd v. CIT (1946) 14 ITR 647 (Bom(HC),
Distinguished Dalal Broacha Stock Broking P. Ltd v. Addl. CIT(2011)10 ITR 357 /11
taxmann. com 426 (SB) (Mum) (Trib) (AY. 2015-16)
Micropoint Computers P. Ltd. v. Dy. CIT (2024)111 ITR 89 (SN)/232 TTJ 1049
(Mum) (Trib)
S. 36(1)(iii) : Interest on borrowed capital-Own interest free funds-Order of
High Court affirming the order of the Tribunal is up held-SLP of Revenue is
dismissed. [Art. 136]

AO disallowed interest paid on borrowed capital on ground that assessee had advanced
interest free funds. Tribunal deleted the disallowance. On appeal High Court held that
where assessee had not utilized interest bearing borrowed funds for making interest-
free advances as assessee had its own interest-free fund far in excess of interest-free
advance, disallowance of interest on borrowed capital was to be deleted. SLP filed by
the Revenue is dismissed. (AY. 2011-12)
PCIT, Central v. Shapoorji Pallonji and Co. Ltd. (2024) 300 Taxman 182 (SC)
Editorial : PCIT, Central v. Shapoorji Pallonji and Co. Ltd. (2024) 164 taxman. com
707 (Bom)(HC)

S. 36(1)(iii) : Interest on borrowed capital –Own interest free funds-Order of

Tribunal deleting the disallowance is affirmed. [S. 260A]
AO disallowed interest paid on borrowed capital on ground that assessee had advanced
interest free funds. Tribunal deleted the disallowance. On appeal High Court held that
where assessee had not utilized interest bearing borrowed funds for making interest-
free advances as assessee had its own interest-free fund far in excess of interest-free
advance, disallowance of interest on borrowed capital is not justified. Order of Tribunal
is affirmed. (AY. 2011-12)
PCIT, Central v. Shapoorji Pallonji and Co. Ltd. (2024) 164 taxman. com 707
(Bom)(HC)
Editorial : SLP of Revenue is dismissed, PCIT, Central v. Shapoorji Pallonji and Co. Ltd.
(2024) 300 Taxman 182 (SC)

S. 36(1)(iii) : Interest on borrowed capital –Loan to subsidiary-Subsidiary was

incurring losses-Loan from banks at rate 14 to 16 %-Advance to subsidiary at

180
rate of 6%-No disallowance was made in earlier years-Rule of consistency-
Order of Tribunal is affirmed-No substantial question of law. [S. 260A]

Assessee had taken loan from banks at interest at rate of 14 to 16% per annum. It
advanced loan to its wholly owned subsidiary company at rate of 6% only. When
assessee was asked to explain why commercial interest rate was charged from subsidiary
company, assessee stated that since subsidiary company was incurring losses,
management decided to charge lesser rate of interest. AO made the addition being
shortage in interest recovered from subsidiary. Tribunal held that loan was given in
earlier financial year and assessee had sufficient own funds to give loan and further no
disallowance was made in earlier AY. Disallowance was deleted by following the rule of
consistency as there was no change in law and facts. High Court affirmed the order of
the Tribunal. (AY. 2010-11)
PCIT v. Uniparts India Ltd. (2024) 298 Taxman 212 (Delhi)(HC)

S. 36(1)(iii) :Interest on borrowed capital-Business of retail lending as well as

Long Term finance for construction of homes-Deduction claimed on interest on
Long Term housing loan, which has been recalculated by the AO based on total
receipt of the business-Rule of consistency is followed-Order of Tribunal
deleting the addition is affirmed. [S. 260A]
The assessee is a subsidiary of PNB. The deduction has been claimed u/s 36(1)(viii)
taking into account percentage of total interest received on Long Term housing loan has
been upheld by the Tribunal stating that the said methodology has been adopted by the
assessee consistently and the same was accepted by the Revenue without any objection.
The Revenue had not filed appeal challenging the deduction allowed in the preceding
years. Following the judgment of the Supreme Court in Pr. CIT v. Maruti Suzuki India
Ltd. (2019) 107 taxmann. com 375 / 265 Taxman 215 / 416 ITR 613, Revenue’s appeal
dismissed. (AY. 2010-11)
PCIT v. PNB Housing Finance Ltd. (2023) 146 taxmann. com 445 / (2024) 461
ITR 476 (Delhi)(HC)
Editorial : SLP of Revenue dismissed, PCIT v. PNB Housing Finance Ltd [2024] 297
Taxman 229 /] 461 ITR 481 (SC)

S. 36(1)(iii) :Interest on borrowed capital-Interest free advance to subsidiary-

Allowable as deduction on commercial expediency. [S. 37(1), 260A]
Dismissing the appeal of the Revenue the Court held that interest free advance to
subsidiary for the purpose of business. Interest is allowable as deduction. (AY. 2006-
07). (ITA No. 927 of 2018 dt. 31-1-2024)
PCIT v. ESSEL Infra Projects Ltd (Former PAN India Paryatn Ltd (2024) BCAJ-
March-P. 47 (Bom)(HC)
S. 36(1)(iii): Interest on borrowed capital - Interest is not charged on inter-
corporate deposits made with group companies - No evidence of commercial
expediency - Disallowance is justified.
Held that the assessee has advanced borrowed funds to its sister concerns without
charging any interest, hence AO was justified in disallowing the interest paid by it on
inter corporate deposits in excess of the interest received on inter-corporate deposits
made with group entities. (AY. 2017-18)
Nayara Energy Ltd. v. ACIT (2024) 232 TTJ 353 / 244 DTR 89/ 38 NYPTTJ 1162
(Mum)(Trib)
181
S. 36(1)(iii): Interest on borrowed capital – Capital work in progress - Out of
own funds - No disallowance of interest can be made on borrowed amount. [S.
37(1)]
Held that the assessee has invested own funds on capital work in progress, hence, no
disallowance of interest can be made on borrowed amount. (AY. 2012-13)
ACIT v. Vizag Seaport (P) Ltd. (2024) 229 TTJ 73) (UO) (Visakha (Trib)
S. 36(1)(iii) :Interest on borrowed capital-Order of CIT(A) is affirmed.
Held that that as the facts were identical with earlier year. The order of CIT(A) is
affirmed. (AY. 2008-09, 2009-10)
Cadila Pharmaceuticals Ltd. v. ACIT (2024)115 ITR 428 / 162 taxmann. com
229 (Ahd)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Higher rate of interest 16% to bank

on loans-Rate charged to subsidiaries lesser rate of 6%-Disallowance is
deleted.
Tribunal following the order of earlier year disallowance is deleted. Followed, Uniparts
India L td. v. Dy. CIT 2021 SCC OnLine ITAT 580 (Delhi)(Trib) (AY. 2010-11)
ACIT v. Uniparts India Ltd(2023) 150 taxmann. com 142 / (2024)115 ITR 473
(Delhi)(Trib)
Editorial : Affirmed in PCIT v. Uniparts India Ltd(2024) 298 Taxman 212 (Delhi)(HC)

S. 36(1)(iii) :Interest on borrowed capital-Sufficient interest free funds-

Disallowance is deleted.
Held that the assessee had sufficient interest free funds. Disallowance is deleted. (AY.
2010-11)
Cadila Pharmaceuticals Ltd. v. ACIT (2024) 115 ITR 51 ((SN)/ 162 taxmann.
com 229 (Ahd)(Trib)
S. 36(1)(iii): Interest on borrowed capital - Interest free funds - Capital
withdrawn - Addition is deleted.
Held that if there is sufficient interest-free funds available with the assessee and such
funds were advanced without charging any interest, the disallowance u/s 36(1)(iii) on
account of notional interest was unjustifiable. As the assessee’s interest-free funds were
adequate to cover the amounts overdrawn by the partners, the addition made by the AO
u/s 36(1)(iii) is not valid. (AY. 2018-19)
Dy. CIT v. Avinash Builders (2024)114 ITR 324 (Raipur)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Interest paid on cash credit account-

Investments in immovable properties and shares of other companies-Business
expenditure. [S. 37(1)]
Held that the funds remained invested in immovable properties and shares of other
companies and the investment under the head “debtors” would not debar the assessee
from the claim of interest expenses thereon since the investment was in productive
assets related to the assessee’s business. As a result, the addition made by the AO for
the year in question was to be deleted. (AY. 2015-16)
Dy. CIT v. Guru Nanak Milk Products (2024)114 ITR 344 /232 TTJ 325
(Amritsar)(Trib)

182
S. 36(1)(iii) :Interest on borrowed capital-Capital expenditure on plant and
machinery, electrical installation and other fixed assets-Accounted s capital
work-in-progress-Disallowance of interest is not warranted.
Held that where huge funds were available with the assessee without any interest liability
and there was no evidence to hold that borrowed money was utilised for the purpose of
making capital work-in-progress advances, no disallowance of interest was warranted.
There was no infirmity in the order of the CIT (Appeals). (AY. 2009-10, 2010-11, 2011-
12)
Intas Pharmaceuticals Ltd. v. ACIT (2024)114 ITR 434 (Ahd)(Trib)

S. 36(1)(iii) : Interest on borrowed capital-Trade receivable-Borrowed fund is

used for the purpose of business-Notional interest cannot be charged.

Held that the assessee had demonstrated that the borrowed funds were used for
business purposes, and the conditions laid out in S. 36(1)(iii) were met. The outstanding
amounts with the holding company and other customers were part of normal business
transactions, with no interest charged in alignment with industry practices. Given the
regular business transactions and fluctuating balances, the question of notional interest
did not arise. Order of CIT(A) is affirmed. (AY. 2015-16)
ACIT v. Gujarat Insecticides Ltd. (2024)114 ITR 12 (SN)(Ahd)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Advance paid to director-Matter

remanded to ascertain availability of sufficient interest-free funds.
Held that the assessee submitted its balance-sheet to confirm the availability of
interest-free funds with the assessee for the year under consideration. These documents
were not made available to the authorities and were very relevant for adjudicating the
matter. Accordingly, the matter is remanded to the AO to ascertain availability of
sufficient interest-free funds. (AY. 2014-15)
Moonlight Properties P. Ltd. v. ACIT (2024)113 ITR 705 (Chd)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Interest free advances-Sufficient

own capital and free reserves-Disallowance of interest is deleted.
Assessee-company had advanced interest free loan to its sister concern. AO disallowed
proportionate interest expenditure. CIT(A) up held the order of the AO. On appeal the
ITAT held that since assessee had sufficient own capital and free reserves and
surpluses which far exceeded the amount of interest free advance given to sister
concern, disallowance is deleted. (AY. 2021-22)
Capricorn Lifestyle (P.) Ltd. v. DCIT (2024) 209 ITD 14 (Pune) (Trib.)
S. 36(1)(iii) :Interest on borrowed capital-Interest free loan-Share capital and
reserves and surplus far exceeding interest-free advances-No disallowance can
be made-Matter remanded.
During year, assessee had given loans and advances to various parties. AO had
disallowed interest on borrowed capital on the ground that borrowed funds were utilized
for non-business purposes CIT (Appeals) confirmed disallowance. Held that assessee is
having share capital and reserves and surplus fa r exceeding the advances given, and
that so, since assessee had sufficient own funds, no disallowance was called for. Matter
remanded. (AY. 2013-14, 2014-15)
DCIT v. Stylam Industries Ltd. (2024) 209 ITD 75 (Chd) (Trib.)
183
S. 36(1)(iii) :Interest on borrowed capital-Loans given to related parties
interest-free-Having sufficient funds to meet investment-Disallowance is
deleted. [S. 37(1)]
Held that the assessee had sufficient funds to meet the investment, therefore, the
presumption would arise that the investment was made out of funds so available with
the assessee. No disallowance can be made in respect of the amount advanced to
related parties. (AY. 2013-14)
Lakozy Motors P. Ltd. v. Dy. CIT (2024)110 ITR 19 (SN)(Mum)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Interest paid to related parties

higher than interest paid to banks-Disallowance is deleted. [S. 37(1)]
Held that interest had to related parties cannot be disallowed only on the ground that
the interest paid was higher than the bank interest. Addition is deleted. (AY. 2013-14,
2014-15)
Il and Fs Energy Development Ltd. v. Asst. CIT (2024)110 ITR 23 (SN)
(Delhi)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Consistent methodology Interest-

free advance given to an individual for the purpose of business was held to be
genuine and allowable.
The Hon’ble Tribunal held that the advance was indeed for business purposes and
that the assessee had successfully recovered the amount through legal means and ably
supported substantial evidence. Deletion of disallowance is affirmed. (AY. 2012-13,
2013-14)
ITO v. Jamna Auto Industries(2024) 111 ITR 569 /229 TTJ 209/239 DTR 57
(Chd)(Trib.)

S. 36(1)(iii) :Interest on borrowed capital-Work-in-progress-Out of own funds

and borrowed funds-Disallowance is deleted.
Held that the AO had worked out the disallowance based on the closing balance of
the capital work-in-progress at the rate of 12%. While doing so, the AO had ignored the
availability of the assessee’s own funds and had wrongly assumed that the addition to
the capital work-in-progress was entirely out of borrowed funds. Addition is deleted. (AY.
2013-14)
Gujarat Infrapipes P. Ltd. v. Dy. CIT (2024)111 ITR 47 (SN)(Ahd)(Trib)

S. 36(1)(iii) :Interest on borrowed capital-Advanced funds for commercial

purposes without charging interest-Advanced from interest free funds-Order of
CIT(A) confirming the disallowance is deleted.
Assessee advanced funds to three parties for commercial purposes without charging
interest. Since no interest was charged by assessee on such advances made to above
parties, AO added back an amount u/s 36(1)(iii). CIT(A) affirmed the order of the AO.
On appeal the assessee contended that advances were for business dealings and
were funded by interest-free loans, as shown in the audited balance sheet. Tribunal held
that there was neither any reason nor any material to disbelieve figures contained in
audited balance sheet, particularly availability of unsecured loans (free of interest) duly

184
reflected in balance sheet under unsecured long-term borrowings, which was sufficient
to meet advances given to parties in question. Addition is deleted. (AY. 2015-16)
DCIT v. Apex Fibre India Ltd. (2024) 207 ITD 504 (Amritsar)(Trib.)
S. 36(1)(iii) :Interest on borrowed capital-Perpetual non-convertible
debentures-Debentures as appropriation out of profits in financial statements-
Debentures repaid in exercise of call option-Interest allowable as deduction.
Held that the debentures were actually repaid and the interest on debentures was
allowable as an expenditure u/s 36(1)(iii) of the Act. (AY. 2019-20)
Tata Steel Ltd. v. Dy. CIT (2024)109 ITR 18 (Mum) (Trib)
S. 36(1)(iii) :Interest on borrowed capital-Loans and advances-Own funds are
more than interest bearing funds-No disallowance can be made.
Assessee had advanced interest-free loans/advances to outside parties. AO held that
since 55. 05% of all funds were from interest-bearing sources, hence it was fair and
reasonable to hold that 55. 05% of claimed interest-free advances had been sourced
from interest-bearing funds and to that extent, interest-bearing funds had been shifted
to cost-free advances. AO disallowed interest paid to extent of Rs. 52. 30 lakhs out of
total interest paid of Rs. 66. 05 lakhs. CIT(A) affirmed the order of the AO. On appeal
the Tribunal held that since assessee's own funds were more than interest-free
advances, disallowance is deleted. (AY. 2017-18) AY. 2017-18)
Jasmatbhai Nanubhai Vidiya. v. DCIT (2024) 206 ITD 44 (Surat)(Trib.)
S. 36(1)(iii) :Interest on borrowed capital-Loan raised from bank for
repayment of capital-Allowable as deduction.
Assessee-firm had borrowed a loan from the bank and raised fresh capital from the
incoming partner to settle a debt/capital account of retiring/outgoing partners. AO
characterized settlement as a family arrangement and disallowed interest paid by
assessee-firm to capital account of partners and loan borrowed from Punjab National
Bank u/s 36(1)(iii). CIT(A) affirmed the disallowance. On appeal, the ITAT held that
when asset was owned by partnership firm, any settlement out of assets belonging to
firm to outgoing partners, could not be considered as settlement of family property and
just because, partners were family members and merely because assets were revalued
before reconstitution of partnership firm, could not be a reason for AO to treat settlement
of firm properties among partners as settlement of family property. Settlement of capital
account of outgoing partners became debt of partnership firm and discharge of said debt
out of borrowed funds assumed character of loans/funds borrowed for purpose of
business of assessee. Since, loan borrowed from bank and capital raised from incoming
partner was for purpose of business of assessee, any interest paid on said loan and
capital account was nothing but interest paid on loan borrowed for purpose of business
of assessee and allowable u/s 36(1)(iii). (AY. 2007-08)
Ariff & Co. v. ACIT (2024) 205 ITD 84/229 TTJ 434 (Chennai) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital –Interest-Banks and Public

Financial institutions-Treatment in books of account-Allowable as deduction in
the year in which the payment is made irrespective of its treatment in books
of account. [S. 43B, 145]
Held that when the borrowed amounts from Banks and Public Financial institutions
which are used for the purpose of business, the interest paid would be allowable as
deduction as per provisions of S. 36(1)(iii) read with provisions of S. 43B in year in which
payment was made irrespective of its treatment in books of account. (AY. 2016-17)
DCIT v. BPTP Ltd. (2024) 204 ITD 41 (Delhi)(Trib.)
185
S. 36(1)(iii) :Interest on borrowed capital-Interest free advances-Sufficient
funds-No disallowance can be made.
Assessee-company had given a security deposit to its subsidiary company. AO held
that there was possibility of assessee having utilised interest bearing funds for the
purpose of giving interest free deposit. CIT(A) confirmed the disallowance on pro rata
basis . On appeal the Tribunal held that the assessee had share capital and reserves
and surplus of Rs. 119. 03 crores which was more than interest free advance of Rs. 100.
12 crores given by assessee. Since the assessee had sufficient own funds for giving
interest free deposit, disallowance is deleted. (AY. 2016-17)
PNP Maritime Services (P.) Ltd. v. DCIT (2024)204 ITD 810 /231 TTJ 31 (Mum)
(Trib.)
S. 36(1)(iii) :Interest on borrowed capital-Addition made are unjustified as
the balances reflect business transactions, & not loans and advances. [S.
37(1)]
The Revenue contended that the assessee has not shown interest income on loans and
advances given to related parties. The Revenue argues that interest @ 12% should be
imputed on the average of opening and closing balances of the loans and advances. The
assessee, however, contends that the payments are made in congruence to the terms
and conditions of the agreements and that no interest income was accrued or received.
The ld. CIT(A) verified the assessee's contention and deleted the addition. The Hon’ble
Tribunal observed that the outstanding balances are outcome of the business
transactions and not loans and advances and further held that the AO has erred in
imputing an imaginary income which is neither accrued nor has arisen to the Assessee.
(AY. 2016-17)
Asst. CIT v. Sahara India Financial Corpn. Ltd. [2024] 109 ITR 33 (SN) (Delhi)
(Trib)

S. 36(1)(va) : Any sum received from employees-Payment was made after due
date prescribed under respective Acts-Order of Tribunal disallowing the
expenses is affirmed. [S. 260A]
AO disallowed payments made by assessee towards employees’ contribution to PF and
ESI after the due date as prescribed under Explanation (1) to S. 36(1)(va) but before
the due date of filing of return of income. Tribunal confirmed the disallowance. On appeal
the Court held that the Tribunal is justified in confirming disallowance made by AO. (AY.
2008-09)
Inditrade Capital Ltd. v. CIT (2024) 301 Taxman 638 (Ker.)(HC)
S. 36(1)(va) : Any sum received from employees-Late deposit of employee's
contribution to PF and ESI-Disallowance is justified-Assessment order u/s
143(1)(a) would make no difference. [S. 143(1)(a), 260A]
Assessee filed its return of income. AO made disallowance u/s 36(1)(va) towards late
deposit of employee's contribution to PF and ESI by assessee. CIT(A) and Tribunal upheld
the disallowance. On appeal the court held that since assessee had not deposited such
sum within stipulated time as prescribed in respective Acts, in view of decision in case
of Checkmate Services (P.) Ltd. v. CIT [2022] 143 taxmann. com
178/290 Taxman 19/448 ITR 518 (SC) disallowance on account of employees

186
contribution to ESI and PF u/s 36(1)(va) was justified and fact that assessment order
was made u/s 143(1)(a) would make no difference. (AY. 2019-20)
Rohan Korgaonkar v. Dy. CIT (2024) 298 Taxman 159 (Bom.)(HC)

S. 36(1)(va): Any sum received from employees-Delayed payment of

employees contribution to Employees’ State Insurance Corporation-
Disallowance is affirmed. [S. 43B]
Held that Delayed payment of employees contribution to Employees’ State Insurance
Corporation, disallowance is affirmed. (AY. 2010-11)
ACIT v. Uniparts India Ltd. (2023) 150 taxmann. com 142 / (2024)115 ITR
473 (Delhi)(Trib)

S. 36(1)(va): Any sum received from employees-COVID-19-Delay in depositing

the amount-EPF Organisation had waived levy of penal damages for delayed
payment during lockdown-Disallowance is deleted. [S. 43B]
Held that the delayed deposit of employees' contributions towards PF and ESI for months
of April and May 2020 during peak period of COVID-19 pandemic when lockdown was
imposed by government, in view of fact that EPF Organisation had waived levy of penal
damages for delayed payment during lockdown. Accordingly the delay would not be
treated detrimental to assessee. H ence, the addition is deleted. (AY. 2021-22)
Diamour Jewels (P.) Ltd v. CPC (2024) 208 ITD 189/232 TTJ 389 (Mum)
(Trib.)

S. 36(1)(va): Any sum received from employees-Deduction only on actual

payment-Contribution to provident fund and Employees’ State Insurance-
Payment made beyond due date-Not deductible. [S. 2(24(x) 43B]
Held that the payments to employees’ contribution to provident fund and employees’
State insurance not made on or before the due date for filing return of income
u/s 139(1) were not eligible for deduction u/s 36(1)(va) read with S. 2(24)(x). The CIT
(Appeals), without appreciating the relevant facts, simply deleted the AO’s additions.
Therefore, the findings of the CIT (Appeals) were reversed, and the additions made by
the AO were upheld. (AY. 2010-11, 2012-13, 2013-14, 2016-17, 2017-18)
Dy. CIT (OSD) v. Aspire Systems India P. Ltd. (2024) 110 ITR 1 / 232 TTJ
387 (Chennnai)(Trib)
S. 36(1)(vii) :Bad debt-Amounts should be actually written off in profit and loss
account-Allowable as deduction.
Held that once the bad debts were written off by debiting the sum in the profit and loss
account and by giving a corresponding credit in the loans and advances/debtors on the
assets side of the balance-sheet, the requirement under law was satisfied. It was not
necessary to make a corresponding entry towards each individual account separately to
qualify as a valid write off. The Department had not disputed the entries in the profit
and loss account and balance-sheet. Once the sums were written off in the books
maintained for the purpose of the Act and debited in the profit and loss account and
satisfied the other requirement, it was sufficient to hold that the assessees were entitled
to the allowance. (AY. 2003-04 to 2014-15)
Shriram Transport Finance Co. Ltd. v. ITO (OSD) (2024)460 ITR 66 (Mad)(HC)

S. 36(1)(vii) :Bad debt-Provision for bad debts-Bad debts written Off-Bad debts
written off relating to non-rural advances is not required to be adjusted
187
against provision for bad and doubtful debts allowed u/s 36(1)(viia)-Excess
provision matter remanded. [S. 36(1)viia)]
Held that the bad debts written off relating to non-rural advances was not required to
be adjusted against provision for bad and doubtful debts allowed u/s 36(1)(viia) of the
Act and thus, the AO was to recompute the deduction in respect of write off of non-rural
debts without any adjustment to credit balance in the provision for bad and doubtful
debts account in respect of rural advances. As regards excess provision the matter is
remanded for verification. (AY. 2015-16 to 2017-18)
City Union Bank Ltd. v. Dy. CIT (2024)112 ITR 337 /229 TTJ 139
(Chennai)(Trib)

S. 36(1)(vii) : Bad debt-Income pertaining to bad debts written off offered to

tax in earlier years-Order of CIT(A) remanding the matter to AO is affirmed.
Held that The CIT (Appeals) had rightly directed the AO to verify whether the amounts
claimed as bad debts were included in the income for the earlier AYs. (AY. 2010-11,
2012-13, 2013-14, 2016-17, 2017-18)
Dy. CIT (OSD) v. Aspire Systems India P. Ltd. (2024) 110 ITR 1 / 232 TTJ
387 (Chennnai)(Trib)
S. 36(1)(viia) :Bad debt-Provision for bad and doubtful debts-Banks-Schedule
bank –Average advances of rural branches-Advances outstanding as well as
fresh advances are to be considered.
Held that while calculating average aggregate advances of rural branches not only
fresh advances made during the year, but also the amount of advances outstanding are
to be considered. (AY. 2016-17, 2017-18)
Canara Bank v. DCIT (2024) 204 ITD 358 (Bang)(Trib)

S. 36 (1)(viii): Eligible business-Special reserve-Rule of consistency-

Methodology consistently adopted-deduction allowed for earlier AYs attaining
finality-Deletion of disallowance is affirmed-SLP of Revenue dismissed. [S.
145]
Held that the same methodology had been adopted consistently with respect to the
deletion of disallowance made u/s 36(1)(viii) for the previous eight years and had been
accepted by the Department without any objection. Therefore, the Tribunal did not error
in deleting the disallowance made u/s. 36(1)(viii) for the AY 2010-11. SLP of revenue
dismissed. (AY. 2010-11)
PCIT v. PNB Housing Finance Ltd [2024] 297 Taxman 229 / 461 ITR 481 (SC)
Editorial : PCIT v. PNB Housing Finance Ltd [2023] 146 taxmann. com 445 / [2024]
461 ITR 476 (Delhi)(HC)

S. 37(1): Business expenditure-Banks-Government Securities-Interest paid for

broken period-Allowable as revenue expenditure
The High Court held that the interest paid for the broken period should not be considered
as part of the purchase price, but should be allowed as revenue expenditure in the year
of purchase of the securities u/s 37 of the Act .D ismissing the appeal,
the Court held that since the tax effect was neutral, the method of computation adopted
by the assessee and accepted by the Revenue could not be interfered with. On the facts

188
of the case, the judgment in Vijaya Bank Ltd. v. Add. CIT(1991) 187 ITR 541 (SC) would
have no application. (AY. 1978-79) (AY. 1983-84, 1984-85, 1987-88)
CIT v. Citi Bank N. A. (No. 1) (2024)469 ITR 273 (SC)
Editorial : CIT v. Citi Bank N. A. (2003) 264 ITR 18 (Bom)(HC)
CIT v. Citi Bank N. A. (No. 7) (2024)469 ITR 417 (SC)
Editorial: CIT v. Citi Bank N. A (ITR. No. 265 of 1997 dt. 10-4-2003)

S. 37(1): Business expenditure-Banks-Government Securities-Interest paid for

broken period-Allowable as revenue expenditure. [Art. 136]
Held that interest paid to the sellers for the broken period on purchase of securities
should not be considered as part of purchase price, but should be allowed as revenue
expenditure in the year of purchase of securities. Followed CIT v. CIT Bank N. A (No.
1) (2024) 469 ITR 273 (SC) (AY. 1982-83) (AY. 1983-84, 1984-85, 1987-88)
CIT v. Citi Bank N. A. (NO. 3) (2024)469 ITR 403 (SC)
Editorial : CIT v. Citi Bank N. A ITR No. 191 of 1997 dt. 10-4-2003(Bom)(HC)
CIT v. Citi Bank N. A. (No. 5) (2024)469 ITR 414 (SC)
Editorial : CIT v. Citi Bank N. A. (ITA. No. 426 of 1998 dt. 10-4-2003
CIT v. Citi Bank N. A. (No. 7) (2024)469 ITR 417 (SC)
Editorial: CIT v. Citi Bank N. A (ITR. No. 265 of 1997 dt. 10-4-2003)

S. 37(1): Business expenditure-Banks-Government Securities-Purchased after

interest date-Interest paid for broken period is not part of purchase price-
Allowable as revenue expenditure.
Held that interest paid for the broken period on purchase of Government securities is
allowable as deduction. Followed CIT v. Citi Bank N. A (No. 1 (2024) 469 ITR 273 (SC)
(AY. 1985-86, 1986-87)
CIT v. Standard Chartered Bank (2024)469 ITR 408 (SC)
Editorial : CIT v. Standard Chartered Bank,ITR No. 87 of 1996 dt 16-7-2003 (Ker)(HC)

S. 37(1): Business expenditure-Bank-Interest-Capital or revenue-Broken

period interest paid on purchase of securities-Allowable as revenue
expenditure-SLP of Revenue is dismissed. [Art. 136]
Dismissing the appeal of the Revenue the High Court held that broken period interest
paid on purchase of securities is allowable as revenue expenditure. Followed, CIT v.
State Bank of Hyderabad (No. 1) (2024) 469 ITR 316 (Telengana)(HC). SLP of Revenue
is dismissed. (AY. 1997-98)
CIT v. State Bank Of Hyderabad (2024)469 ITR 332 (SC)
Editorial : CIT v. State Bank of Hyderabad (No. 2) (2024)469 ITR 325 (Telangana)(HC)

S. 37(1): Business expenditure-Capital or revenue-Broken period Interest –

Stock in trade-Allowable as revenue expenditure. [S. 28(i)]
Government securities purchased by banks to meet the statutory liquidity ratio (SLR)
requirements are held as stock-in-trade. The securities were treated as stock-in-trade
in the hands of the bank, in compliance with RBI guidelines and CBDT circulars. The RBI
Circular of 21. 04. 1998 clarified that Banks should not capitalise broken period interest
paid to the seller as a part of the cost but treat it as an item of expenditure under the
profit and loss account. The Court emphasized that whether a particular security is held
as an investment or stock-in-trade is a factual determination within the knowledge of
the assessee. If securities are held as investments, the benefit of broken period interest
189
deduction would not apply. However, for securities held as trading assets, the deduction
is permissible. Considering that the assessee held the securities as stock-in-trade, the
broken period interest is treated as revenue expenditure and is deductible u/s 37(1).
Further, Interest income on these securities was taxed as business income u/s 28(i)
(AY. 1990-91 to 1992-93)
Bank of Rajasthan Ltd. v. CIT [2024) 301 Taxman 463/ 469 ITR 280/ 341 CTR
65/243 DTR 1 (SC)
Editorial: Decision of the Jaipur Bench of the Rajasthan High Court in CIT v. Bank of
Rajasthan Ltd (2008) 218 CTR 417/ 5 DTR 239 / (2019) 316 ITR 391 (Raj)(HC), is
reversed. Decision in CIT ( LTU ) v .State Bank of India ( 2020) 428 ITR 316 ( Karn)(
High Court , Bombay , Rajasthan and Telegana High Courts , affirmed .

S. 37(1) : Business expenditure-Civil contractor-Widening and strengthening

of existing road-Purchase of marble for construction of High way Authority-
Parties whose name cheques were alleged to be issued had deposed on oath
that they had neither encashed cheque nor received amount-Order of Tribunal
affirming the disallowance is affirmed-SLP of assessee is dismissed. [Art. 136]
Assessee, a civil work contractor, had undertaken civil contracts for widening and
strengthening of existing roads, repairing widening of road side shoulders etc.. He
claimed to have spent a certain amount on the purchase of marble for construction of
the office of the Highway Authority. AO disallowed expenses claimed for purchase of
marble. On appeal the Tribunal held that parties in whose names cheques were alleged
to be issued had deposed on oath that they had neither encashed cheques nor received
amount from assessee. Furthermore, no document was found on record, which showed
that contract of construction of such office was also given to assessee. The ITAT held
that since expenses were not connected to work undertaken by assessee, expenses
incurred were bogus expenses. On appeal the High Court affirmed the order of Tribunal.
No substantial question of law. SLP of assessee is dismissed. (AY. 2010-11)
Ramesh Harbibhau Gawli v. ITO (2024) 301 Taxman 407 (SC)
Editorial : Ramesh Harbibhau Gawli v. ITO (2024) 167 taxmann. com 323 (Bom)(HC)

S. 37(1) : Business expenditure-Capital or revenue-Software development-

Allowable as revenue expenditure-SLP of Revenue expenditure. [Art. 136]
Assessee-company is engaged in the business of rendering customized internet
advertising services for advertisers which could be used on desktop. In order to develop
its software, the assessee had incurred certain expenditure. AO treated said expenditure
as capital in nature. Tribunal held allowable as revenue expenditure. High Court held
that since product developed by assessee had become obsolete due to rapid change in
technology and assessee had abandoned further development of the same, expenditure
incurred by assessee was to be treated as revenue in nature. SLP of Revenue is
dismissed. (AY. 2015-16, 2016-17)
PCIT v. Adadyn Technologies (P.) Ltd. (2024) 300 Taxman 112 (SC)
Editorial : PCIT v. Adadyn Technologies (P.) Ltd. (2024) 162 taxmann. com 666
(Karn)(HC)

S. 37(1) : Business expenditure-Compensation-Subsidiaries-Captive use-Delay

of 526 days-SLP of Revenue is dismissed. [Art. 136]
Assessee owned two mines which were used by its subsidiaries for captive use. However,
ores available in said mines were not suitable for production and were sold in open
190
market. Later, subsidiaries purchased ores of desired grade from outside parties
which resulted in substantial financial loss. Assessee paid compensation to its
subsidiaries for financial loss incurred and claimed the same as expenditure. AO denied
said claim on ground that it was not incurred wholly and exclusively for the purpose of
business of assessee. High Court held that it could not be said that there was no
intimate connection between assessee and two subsidiaries as far as business activities
were concerned and since compensation paid by assessee was to recoup business losses
of subsidiaries which was irrecoverable as far as assessee was concerned, expenditure
claimed by assessee was to be allowed. On SLP filed by revenue, it was found that
there was a gross delay of 526 days in filing SLP and explanation offered for condonation
of delay was not satisfactory. SLP of Revenue is dismissed. (AY. 2006-07 to 2009-10)
PCIT v. Industrial Development Corporation of Orissa Ltd. (2024) 300 Taxman
603/ 469 ITR 395 (SC)
Editorial : PCIT v. Industrial Development Corporation of Orissa Ltd(2023) 147
taxmann. com 298 / (2023) 22 ITR-OL 167 (Orissa)(HC), 2022 SCC Online. Orissa 3940
S. 37(1) : Business expenditure-Capital or revenue-Corporate Social
Responsibility (CSR)-Amendment is not retrospective-Explanation 2 was
inserted by the Finance Act, 2014 with effect from April 1, 2015 to S. 37(1)
of the Act and is prospective-SLP of Revenue is dismissed. [Art. 136]
Dismissing the appeal of the Revenue, the High Court held that the assessee had
provided funds in discharge of its obligation as mandated by law on the advice of the
Department of Public Enterprises and therefore, it could not be said that the obligation
placed on the assessee by law was not connected wholly and exclusively to its business.
There is nothing on record which would show that the assessee had directed investment
of funds which were offered in fulfilment of discharge of its legal obligation in a capital
asset. The Tribunal had concluded that the corporate social responsibility expenses
incurred by the assessee were allowable u/s 37. Explanation 2 appended to S.
37(1) was not retrospective in nature. Followed, PCIT v. PEC LTD. (2023) 451 ITR 436
(Delhi)(HC). SLP of Revenue is dismissed.
PCIT v. Steel Authority of India Ltd. (2024) 300 Taxman 593 (SC)
Editorial : PCIT v. Steel Authority of India Ltd(2023) 148 taxmann. com 132/ 455 ITR
139 (Delhi)(HC)

S. 37(1): Business expenditure-Provision for contingent liabilities-High Court

affirmed the order of Tribunal-SLP of Revenue is dismissed for failure to
condone delay of 289 days. [Art. 136]
High Court dismissing the appeal of the Revenue on the ground that the Tribunal was
right in deleting the disallowance made by the assessing authority in respect of future
expenses claimed as deduction u/s 37 holding that the provision claimed by the
assessee was an allowable deduction. SLP of Revenue is dismissed for failure to condone
delay of 289 days. (AY. 2014-15)
PCIT v. Century Real Estate Holdings Pvt. Ltd. (2024)467 ITR 16 / 301 Taxman
235 (SC)
Editorial : PCIT v. Century Real Estate Holdings Pvt. Ltd. (2024)467 ITR 13 /167
taxmann. com 220 (Karn)(HC)

S. 37(1): Business expenditure-Bogus expenses-Construction business-

Payments made to Sub-contractors-TDS is deducted-Order of Tribunal

191
confirming the disallowance is affirmed-No substantial question of law-SLP of
assessee is rejected. [Art. 136]
Court held that expenses were not connected to the work undertaken by the assessee
and were bogus expenses. As regards the additional ground that was raised, by a
reasoned order, the ITAT had considered it to a certain extent which covered the
partly allowed claim by the CIT (Appeals) and taking into consideration the tax
deducted at source deposited by the assessee. A reasoned order had been passed
disallowing the claim of the assessee. No substantial question of law. SLP of assessee is
rejected. (AY. 2010-11)
Ramesh Harbibhau Gawli v. ITO (2024) 467 ITR 161 (SC)
Editorial : Ramesh Harbibhau Gawli v. ITO (2024)467 ITR 9 (Bom)(HC)

S. 37(1): Business expenditure-Capital or revenue-Software Development

expenses-Product abandoned on becoming obsolete due to development in
technology-No enduring benefit-Allowable as revenue expenditure-SLP of
Revenue is dismissed. [Art. 136]
Dismissing the appeals of the Revenue, the High Court held that the assessee’s
investment to develop a software platform for desktops had become obsolete due to
rapid change in the technology and the assessee had abandoned further development
as a result of which it had abandoned the product and incurred a loss. The project having
been abandoned, the assessee would not get any enduring benefit. The ITAT , on a
correct analysis of the facts, had held that the expenditure was revenue and not capital
in nature. SLP of Revenue is dismissed. (AY. 2015-16, 2016-17)
PCIT v. Adadyn Technologies Pvt. Ltd. (2024)465 ITR 409/162 taxmann. com
667 (SC)
Editorial : PCIT v. Adadyn Technologies Pvt. Ltd. (2024)465 ITR 353 /162 taxmann.
com 666 (Karn)(HC)

S. 37(1) : Business expenditure-Expansion of existing business-Revenue

expenditure-Tax effect is below threshold limits-SLP of Revenue is dismissed.
[S. 268A, Art. 136]
High Court held that expenditure in connection with expansion of existing business
would be allowed as revenue expenditure. Court held that since tax effect was below
threshold limits, Special Leave Petition is dismissed. (AY. 1998-99)
CIT v. Nirma Ltd. (2024) 299 Taxman 180 (SC)
Editorial : CIT v. Nirma Ltd (2015) 229 Taxman 535 (Guj)(HC)

S. 37(1) : Business expenditure-Software development solution and

management-Capital or revenue-Software abandoned-Work in progress-SLP of
Revenue is dismissed. [Art. 136]
Assessee is engaged in business of software development solution and management. It
incurred expenditure in connection with development of a new software product and
treated expenditure as a part of capital work-in-progress for AYs 2004-05 to 2007-08.
However, new product never came into existence and development of this software was
abandoned and assessee then claimed whole capital work in progress as revenue
expenditure in AYs 2006-07 and 2007-08. AO held that expenditure incurred was capital
in nature and disallowed same. High Court held that since no new asset came into
existence which would be of an enduring benefit to assessee, expenditure could only be
said to be revenue in nature. SLP of Revenue is dismissed. (AY. 2006-07, 2007-08)
192
PCIT v. Trigent Software Ltd. (2024) 299 Taxman 453 / 464 ITR 770 (SC)
Editorial : PCIT v. Trigent Software Ltd(2023) 147 taxmann. com 52/ 457 ITR 765
(Bom)(HC)

S. 37(1) : Business expenditure-Capital or revenue-Purchase of software-Not

necessary that income must be earned because of such expenditure-SLP of
Revenue is dismissed. [S. 28(i), Art. 136]
Assessee claimed expenditure incurred for purchase of software as revenue expenditure.
AO held that assessee had not started any effort to earn income and it was just in
process of making a brand for future utilization and when there was no income
chargeable u/s 28, no expenses under sections 30 to 37 could be claimed in this
regard and noted that assessee had not earned any revenue from its business and
treated expenditure as capital expenditure. Tribunal relying upon its order passed in
assessee's own case for previous AY reversed view taken by AO and allowed claim. High
Court held that proposition put forth by AO that when there was no income chargeable
u/s 28, no expenses could be claimed by an assessee under sections 30 to 37 was
completely unsustainable and since issue that revenue sought to raise before Court was
very same issue which Tribunal grappled with in previous AY, no substantial question of
law arose for consideration. SLP filed by revenue is dismissed. (AY. 2013-14, 2014-15)
PCIT v. Hike (P.) Ltd. (2024) 299 Taxman 178 / 299 Taxman 447/ 464 ITR 394
(SC)
Editorial : PCIT v. Hike (P.) Ltd. (2024) 158 taxmann. com 162/ 462 ITR 183
(Delhi)(HC)
S. 37(1) : Business expenditure-Diversion by overriding title-Sharing of profit-
The AO has to take into account the manner in which the business works, the
modalities and manner in which SAP/additional purchase price/final price are
decided and determine what amount forms part of the profit-Whatever is the
profit component is sharing of profit/distribution of profit and the rest is
deductible as expenditure –question of law is answered partly in favour of the
revenue and partly in favour of the assessee-Matter is remitted to the AO to
undertake the exercise as stated in the judgement after giving an opportunity
to the respective assesses-Review petition is dismissed [S. 40A(2),Sugarcane
(Control) Order 1966 clauses, 3, 5A]
AO held that the difference between the price paid as per Clause 3 of the Control Order,
1966, determined by the Central Government, and the price determined by the State
Government under Clause 5A of the Control Order, 1966 (and consequently paid by the
assessee to the cane growers) can be said to be a distribution of profit, as in the price
determination under Clause 5A of the Control Order, 1966, there is an element of profit
and therefore the price paid to the cane growers determined by the State Government
is excessive and therefore it is not deductible as expenditure, and is required to be
included in the income of the assessee. AO also held that cane price paid to the cane
growers over the SMP is disallowable as per S. 40A(2)(a) of the Act by observing
that purchase price paid is excessive and unreasonable. On appeal CIT(A) allowed the
appeal following SB in Dy. CIT v. Manjara Shetkari Sakhar Karkhana Ltd (2004) 91
ITD 361 (SB) (Mum) (Trib)(dt. 19. 08. 2004). Order of CIT(A) was affirmed by
Tribunal. High Court dismissed the appeal of the revenue following the decision in CIT
v. Manjara Shetkari Sahakari Sakar Karkhana Ltd (2008) 301 ITR 191 (Bom) (HC). On
appeal by the revenue the Supreme Court considering the decision in Maharashtra Rajya
Sahkari Sakkar Karkhana Sangh Ltd v State of Maharashtra (1995) Supp. (3) SCC 475
193
held that the AO has to take into account the manner in which the business works, the
modalities and manner in which SAP/additional purchase price/final price are decided
and determine what amount forms part of the profit. Whatever is the profit component
is sharing of profit/distribution of profit and the rest is deductible as expenditure.
Question of law is answered partly in favour of the revenue and partly in favour of the
assessee. Matter is remitted to the AO to undertake the exercise as stated in the
judgement after giving an opportunity to the respective assesses. Review petition is
dismissed. (AY. 1998-99)
Sharad Sahakari Sakhar Karkhana Ltd. v. CIT (2024) 298 Taxman 191/339 CTR
345 (SC)
Editorial : CIT v. Tasgaon Taluka S. S. K Ltd (2019) 262 Taxman 176 // 412 ITR 420
/ 307 CTR 473/ 175 DTR 345 (SC)

S. 37(1) : Business expenditure –Compensation-340 days delay-SLP is

dismissed. [Art. 136]
Assessee owned two mines which were used by its subsidiaries for captive use. However,
ores available in said mines were not suitable for production and were sold in open
market. Later, subsidiaries purchased ores of desired grade from outside parties which
resulted in substantial financial loss. Assessee paid compensation to its subsidiaries for
financial loss incurred and claimed same as expenditure. AO denied said claim on ground
that it was not incurred wholly and exclusively for purpose of business of assessee. High
Court held that it could not be said that there was no intimate connection between
assessee and two subsidiaries as far as business activities were concerned and since
compensation paid by assessee was to recoup business losses of subsidiaries which was
irrecoverable as far as assessee was concerned, expenditure claimed by assessee was
to be allowed. On SLP filed by revenue, it was found that there was a gross delay of 340
days in filing SLP and explanation offered for condonation of delay was not satisfactory.
SLP of Revenue is dismissed. (AY. 2006-07 to 2009-10)
PCIT v. Industrial Development Corporation of Orissa Ltd. (2024) 298 Taxman
743 (SC)
Editorial: PCIT v. Industrial Development Corporation of Orissa Ltd (2023) 147
taxmann. com 298 (Orissa)(HC)

S. 37(1): Business expenditure-Corporate Social Responsibility-Special Leave

Petition Dismissed on facts-Leaving Question Of Law Open. [Art. 136]
High Court held that the Tribunal had not erred in allowing the deduction claimed by the
assessees u/s 37 of the Income-tax Act, 1961, of the expenses incurred for the
assessee’s corporate social responsibility endeavours. On a petition for special leave to
appeal to the Supreme Court
The Supreme Court dismissed the petition in the peculiar facts of the case, leaving the
question of law open. (AY. 2013-14, 2014-15)
PCIT v. Rites Ltd. (2024)460 ITR 593/297 Taxman 5 (SC)
Editorial: Refer, PCIT v. PEC Ltd (2023) 451 ITR 436 /221 DTR 481/ 330 CTR 593/ 291
Taxman 281 (Delhi)(HC) / PCIT v. Rites Ltd. (2023) 451 ITR 436 / 221 DTR 481/ 330
CTR 593 (Delhi)(HC)

S. 37(1) : Business expenditure-Loss on account of fluctuation in rate of

foreign exchange-Derivative contracts-Hedge against exchange risk in respect

194
of export proceeds receivable in foreign exchange-Loss is allowable-Special
leave petition dismissed. [S. 28(i) Art. 136]
Held that the forward contracts entered into by the assessee were not by way of trading
per se in foreign exchange derivatives but derivative contracts to hedge its exchange
risk in respect of export proceeds receivable by it in foreign exchange, and consequently,
the Central Board of Direct Taxes Circular No. 3 of 2010 dated March 23, 2010 had no
application. On a petition for special leave to appeal to the Supreme Court dismissed
(AY. 2012-13)
PCIT v. Emmsons International Ltd. (2024)460 ITR 718/ 297 Taxman 4 (SC)
Editorial : PCIT v Emmsons International Ltd. (2024)460 ITR 715 /158 taxmann. com
10 (Delhi)(HC)

S. 37(1) : Business expenditure-Capital or revenue-Licence-Capital asset-

Amortisation of expenditure-Licence to operate telecommunication services-
One-time entry fee and licence fee based on percentage of annual gross
revenue earned-Both payments capital in nature and to be amortised-
Intangible asset capital in nature-Review petition is dismissed. [S. 35ABB, The
Telegraph Act, 1885, S, 4(1), 8, 20, 20A and 21]
Assessee is engaged in business of telecommunication services, procured licenses in
different telecom circles initially under 1994 agreement which was subsequently
governed by New Telecom Policy, 1999. In terms of licence agreement, assessee had to
pay entry fee payable up to 31-7-1999 and, thereupon, licence fee was payable as a
percentage of gross revenue under licence effective from 1-8-1999. Assessee claimed
license fee paid on revenue sharing basis as revenue expenditure. AO held that licence
fee paid ought to be treated as capital expenditure and amortised over remainder of
twelve years licence period. Held that licence granted under Policy of 1999 was non-
transferable and non-assignable and if there was a default in payment of licence fee,
entire licence could be revoked after sixty days' notice. Supreme Court by impugned
order held that since license fees paid to Department of Telecommunications (DoT) under
New Telecom Policy, 1999 was non-transferable and non-assignable and furthermore
said payment was intrinsic to existence of licence as well as trade itself, entry fee as well
as variable annual licence fee paid would be capital in nature and was to be amortised
in accordance with S. 35ABB. Assessee filed a review petition seeking reconsideration
of impugned order. Held that there was no error apparent on face of record or any merit
in review petition, warranting reconsideration of impugned order. Review petition was
dismissed. (AY. 1999-2000 to 2007-08)
Bharti Hexacom Ltd. v. CIT (2024) 297 Taxman 368/337 CTR 254 (SC)
Editorial : Review petition dismissed, CIT v. Bharti Hexacom Ltd(2023) 155 taxmann.
com 322/ 458 ITR 593 /335 CTR 1 (SC)

S. 37(1) : Business expenditure-Corporate social responsibility-Expenses

towards contribution/donation to educational institutions, trust, local bodies
for discharging its corporate social responsibility-Order of High Court is
affirmed-SLP is granted to the Revenue. [Art. 136]
High Court held that as long as expenses are incurred wholly and exclusively for purpose
of earning income from business or profession, merely because some of these expenses
are incurred voluntarily, i. e. without there being any legal or contractual obligation to
incur same, those expenses do not cease to be deductible in nature-Further, concept of
business is not static and it has evolved over a period of time to include within its fold
195
concrete expression of care and concern for society at large and people of locality in
which business is located in particular-Thus, where assessee-company, a State
Government undertaking, engaged in business of manufacturing, sale and trading of
chemical fertilizers and chemical industrial products, incurred expenses towards
contribution/donation to educational institutions, trust, local bodies for discharging its
corporate social responsibility, impugned expenses were to be allowed as deduction. SLP
is granted to the Revenue. (AY. 2010-11)

PCIT v. Gujarat Narmada Valley Fertilizers & Chemicals Ltd. (2024) 297 Taxman
400 (SC)
Editorial: PCIT v. Gujarat Narmada Valley Fertilizers & Chemicals Ltd (2020) 121
taxmann. com 82/ 422 ITR 164 (Guj)(HC)

S. 37(1) : Business expenditure-Interest-Directed to file paper book-Failure to

file the paper book within specified time of 15 days, High Court dismissed the
appeal-On SLP delay in filing of paper book is condoned-Directed the High Court
to decide the appeal on merits along with other connected appeals. [S. 260A,
Art. 136]
Assessee filed an appeal before High Court against order passed by Tribunal upholding
disallowance of interest. High Court directed assessee to file paper books within a
specified time period. Since assessee failed to file paper books within specified time,
High Court dismissed appeal and application for restoration of appeal was also dismissed
by High Court. Meanwhile, in other connected appeal which arose from similar
proceedings but related to different AY, High Court by its order dismissed said appeal on
ground that assessee's Appeal No. 817 as well review was dismissed. On SLP the Court
held that since High Court had not considered issue on merits, High Court ought to have
condoned delay in filing paper books in appeal and should have heard appeal on merits
and consequently, delay in filing paper book in said appeal was to be condoned and said
appeal was to be restored along with connected appeal. Matter remanded. (AY. 2001-
02)
Herbicides India Ltd. v. ACIT (2024) 297 Taxman 389 /338 CTR 755 (SC)
Editorial : Herbicides India Ltd. v. ACIT (Raj)(HC) (DBMRA 303-2014 dt. 25-2-2015,
DBCR 25-2015, DBMRA dt. 26-4 2017)

S. 37(1) : Business expenditure-Interest on securities-Securities held as stock

in trade-Order of High Court is affirmed-SLP of Revenue is dismissed. [S. 28(i),
Art. 136]
Assessee, a banking company, claimed deduction for broken period interest paid on
securities purchased during previous year. AO disallowed same by treating same as
capital in nature. High Court held that the assessee had been holding securities as stock-
in-trade hence interest paid on such securities would be an allowable deduction. SLP
filed by revenue is dismissed. (AY. 1998-99)
CIT v. State Bank of India (2024) 297 Taxman 6/ 463 ITR 701 (SC)
Editorial: CIT v. State Bank of India(2023) 292 Taxman 38/ 445 ITR 122
(Telangana)(HC)

S. 37(1): Business expenditure-Provision for pit filling expenses-Tribunal

remanding the matter to the AO-No substantial question of law. [S. 260A]

196
Dismissing the appeal of the Revenue the Court held that the Revenue had not alleged
or pleaded that the finding recorded by the Tribunal was perverse. The order of the
Tribunal remanding the matter to the AO for reconsideration of the deduction of provision
for pit filling expenses u/s 37, after granting an opportunity of hearing to the assessee
was without expressing any opinion on the merits. The order of remand would not
prejudice the interests of the Revenue or the assessee. (AY. 2014-15)
PCIT v. Gogte Minerals (2024) 471 ITR 410 (Karn) (HC)

S. 37(1): Business expenditure-Capital or revenue-Expenditure on capital

stores and spares-replacement of spares of machinery-Allowable as revenue
expenditure-Expenses incurred on software for facilitating trading operation
is revenue expenditure. [S. 32, 260A]
Dismissing the appeal of the Revenue the Court held expenditure incurred on capital
stores and spares and the expenditure on account of replacement of spares of machinery
as revenue expenditure. Court also held that Tribunal was justified in deleting the
addition of net of depreciation being expenses incurred on software as revenue
expenditure. (AY. 2005-06)
PCIT v. Gujarat Industries Power Co. Ltd. (2024) 471 ITR 525 (Guj) (HC)

S. 37(1): Business expenditure-Provision for warranty-Under contract of sale-

Liquidated damages-Allowable as expenditure-Leave travel allowance as per
rule and consistency practice-Allowable deduction-Provision of 43B(f) is not
applicable. [S. 10(15), 43B(f), 260A,]
Dismissing the appeal of the Revenue, the Court held that the Tribunal is justified in
allowing the provision for warranty and liquidated damages as allowable expenditure.
Leave travel allowance as per rule and consistency practice allowable deduction.
Provision of 43B(f) is not applicable. (AY, 2007-08, 2011-12, 2012-13)
PCIT v. Heavy Engineering Corporation Ltd. (2024) 471 ITR 481 (Jharkhand)
(HC)

S. 37(1): Business expenditure-Iron ore mining was illegal-Transport charges-

allowable as revenue expenditure-Allegation that part of expenditure utilised
by director-No disallowance can be made in the assessment of company-No
substantial question of law. [S. 37(1), Explanation, 260A]
Dismissing the appeal of the Revenue the Court held that even if the allegation of the
AO were accepted that the assessee was doing some illegal mining and the production
of the assessee to the extent of 40%. of production was out of illegal mining, the
expenses incurred for such production did not attract the disallowance under Explanation
1 to S. 37(1) of the Act because the expenses incurred for mining could not be
considered as for an offence or prohibited by law in itself. It was not the case of the AO
that any deduction had been claimed by the assessee for facilitating the carrying out of
illegal mining or for any penalty in respect of such illegal mining. The assessee had
produced evidence to show that the expenditure claimed had been for purposes of
transportation. The oral statements of the transporters recorded behind the assessee's
back could not be used in evidence in the present proceedings. That was opposed to
principles of natural justice contrary to law and therefore vitiated. Court also held that
if a director of the company had been benefited by the expenses in respect of repairs
and maintenance and depreciation on helicopter, the AO of the director was at liberty to

197
make additions as per law in the hands of such director. No disallowance could be made
in the hands of the assessee-company. (AY. 2010-11)
PCIT v. Obulapuram Mining Company Pvt. Ltd. (2024) 471 ITR 1 (Karn) (HC)

S. 37(1): Business expenditure-Capital or revenue-Construction of school and

temples situated in the villages sur-rounding the mining area-business
exigencies-Allowable as revenue expenditure-No substantial question of law.
[S. 260A]
Dismissing the appeal of the Revenue the Court held that village areas, the assessee
needed to maintain healthy relations and create cordial relations with the villagers
residing in the surrounding locality of the mining and business area, so that smooth
business and mining activity could be undertaken. Order of Tribunal is affirmed. No
substantial question of law (AY. 2010-11)
ACIT v. Sociedade De Fomento Industrial Pvt. Ltd. (2024) 471 ITR 273 (Bom)
(HC)

S. 37(1): Business expenditure-Capital or revenue-Renovation of hotel-

Repairs--Expenditure on pressurisation of lift silafts-fees paid to interior
decorator-Allowable as revenue expenditure-Additional ground-Matter
remanded to the AO-Entries in the books of account cannot be the basis for
determining whether the expenditure are capital or revenue. [S. 30(a)(ii)),
145]
Allowing the appeal the Court held that expenditure incurred on renovation of hotel
Repairs,expenditure on pressurisation of lift silafts-fees paid to interior decorator are
allowable as revenue expenditure. As regards additional ground the matter is remanded
to the AO. Court also held that entries in the books of account cannot be the basis for
determining whether the expenditure are capital or revenue. (AY. 1991-92 to 1997-98)
Asian Hotels Ltd. v. CIT (2024) 470 ITR 1 (Delhi)(HC)

S. 37(1): Business expenditure-Solid waste disposal-Not contingent-Allowable

as deduction. [S. 145, 260A]
Held that expenditure incurred in the past and as per the future activities as against the
receipt of income of corresponding obligation and liability. The Tribunal was justified in
allowing the expenditure. No question of law. (AY. 2015-16)
PCIT v. Green Environment Services Co-Operative Services Ltd. (2024)470 ITR
249 (Guj) (HC)

S. 37(1): Business expenditure-Expenses incurred on repairs and maintenance

of stores-Allowable as revenue expenditure-Donation to Trust –Sardar-
Allowable as deduction-Amount written off of new project, the question of law
is admitted. [S. 80G, 260A]
Held that the Tribunal is justified in deleting addition on account of disallowance of
expenses on repairs and maintenance of stores and spares and contribution/ donation
to trust, is allowable as revenue expenditure. However the amount written off of new
project, the question of law is admitted. (AY. 2011-12)
PCIT v. Gujarat State Fertilizers And Chemicals Ltd. (2024)470 ITR 363 (Guj)
(HC)

198
S. 37(1): Business expenditure-Bank-Interest-Capital or revenue-Broken
period interest paid on purchase of securities-Allowable as revenue
expenditure. [S. 260A]
Dismissing the appeal of the Revenue the Court held that broken period interest paid on
purchase of securities is allowable as revenue expenditure. Followed, CIT v. State
Bank of Hyderabad (No. 1) (2024) 469 ITR 316 (Telengana)(HC). (AY. 1997-98)
CIT v. State Bank of Hyderabad (No. 2) (2024)469 ITR 325 (Telangana)(HC)
Editorial : SLP of Revenue is dismissed, CIT v. State Bank of Hyderabad (2024) 469
ITR 332 (SC)

S. 37(1): Business expenditure-Community development expenditure-Street

lights on the road, ambulance for meeting medical emergencies, developing
public garden-The concept of business is not static and over a period of time, it
would include within its fold the care and concern for the society at large which
would result in a good will being created in its favour leading to better
business-Allowable as business expenditure.
The Respondent assessee had claimed deduction under the head community
development expenditure for providing street lights on the road, ambulance for
meeting medical emergencies, developing public garden for residence of the village
where the factory is situated. The AO disallowed the expenditure on the ground that the
same are not incurred wholly and exclusively for the purpose of Respondents’ business.
The CIT(A) up held the order the AO. On appeal Tribunal following the decision in CIT
v. Madras Refineries Ltd (2004) 266 ITR 70 (Mad)(HC) allowed the appeal on the ground
that the concept of business is not static and over a period of time, it would include
within its fold the care and concern for the society at large which would result in a good
will being created in its favour leading to better business. Accordingly the expenditure
is allowed as allowable business expenditure. On appeal by the Revenue the High Court
affirmed the order of the Tribunal. (ITA No. 1686 of 2013 dt. 10-7 2015)(AY. 1996-97)
CIT v. Nicholas Piramil (India)(Ltd (Bom)(HC) www. itatonline. org

S. 37(1): Business expenditure-Division of expenditure-Sales return-Provision

for sales return-No substantial question of law. [S. 10(1), 145, 260A]
Held that view of the Tribunal is a reasonable one and could not be termed perverse.
This was especially in view of the seasonal nature of the business carried out by the
assessee and the short shelf life of the seeds. The Tribunal held that it was imperative
for the assessee to take into account the quantity of unsold seeds at the end of the year
and the need to revalidate their further utility and to take them into stock for the next
season. Therefore, it could not be said that the provision for sales return was
unascertained or unreasonable. There was no error or infirmity in the view taken by the
Tribunal. No substantial question of law. (AY. 2013-14)
PCIT v. Prabhat Agri Biotech Ltd. (2024)469 ITR 552 (Telangana)(HC)

S. 37(1): Business expenditure-Capital or revenue-Advertisement expenses-

Payments made under voluntary retirement scheme-Advance paid to project
later shelved-Allowable as revenue expenditure-Allowance of workmen and
staff welfare fund-Matter remanded by the Tribunal-No question of law. [S.
36(1), 40A(9), 260A]

199
Dismissing the appeal of the Revenue the Court held that, advertisement expenses,
payments made under voluntary retirement scheme, advance paid to project later
shelved, allowable as revenue expenditure. Allowance of workmen and staff welfare
fund Matter remanded by the Tribunal. Followed PCIT v. v. Tata Chemicals L td. (No.
1) (2024)469 ITR 250 (Bom)(HC). Order of Tribunal is affirmed. (AY. 2000-01)
PCIT v. Tata Chemicals Ltd. (No. 2) (2024)469 ITR 256 (Bom)(HC)

S. 37(1) : Business expenditure-Expenses for inviting NRIs to open deposits in

its Indian branches-Allowable as business expenditure. [S. 260A]
Assessee, a foreign bank, incurred expenses for inviting NRIs to open deposits in its
Indian branches. Such expenses were incurred in accordance with a Reserve Bank of
India circular dated 16-10-1991. Tribunal held that since said expenditure was incurred
solely for purpose of business of assessee in India, same is to be allowed. Order of
Tribunal is affirmed by High Court. (AY. 1992-93, 1994-95, 1995-96)
DIT v. ANZ Grindlays Bank (2024) 301 Taxman 599 (Delhi)(HC)

S. 37(1) : Business expenditure-CIT (Appeals) directed to decide the issue

on disallowance of deduction claimed on debenture resumption within 3
months as matter pertains to year 1997-98-Revenue has accepted the finding
of Tribunal in assessee’s own case in previous years regarding disallowance of
expenses on entertainment expenditure and expenses related to school the
same question of law cannot be raised in a subsequent year. [S. 40A (9), S.
246A, 260A].
The Hon’ble Bombay High Court in an appeal filed by the Revenue had to decide on
questions of law arising out of the order passed by the Tribunal, relating to disallowance
of certain expenses. The Hon’ble Court as regards the first question held that the
question was covered by the decision of Supreme Court in T. R. F. Ltd. v. CIT [2010]
323 ITR 397 (SC). The second question became a non-issue and as regards the third
question, as the matter had been remanded to the CIT(A) for admission of additional
ground, the Hon’ble Court directed the CIT(A) to decide the same on merits within 3
months. As regards question nos. 4, 5 and 6, the Hon’ble Court observed that the same
had attained finality as the Revenue had not contested the findings of Tribunal in
assessee’s own case in previous years on the same question of law. Accordingly, the
appeal was dismissed. (AY. 1997-98)
PCIT v. Tata Chemical Ltd (No. 1) [2024] 469 ITR 250 / 162 taxmann. com 11
(Bom)(HC)
S. 37(1) :Business expenditure-Foreign Exchange losses towards loan in nature
of external commercial borrowings for acquisition of assets from outside India
and from within India-The Tribunal failed to look at substance of expenditure
and erroneously interpreted the provisions of S. 43A-Matter remanded back
to the Tribunal for an effective adjudication of specific issue. [S. 43A, 254(1),
260A]
The assessee Company had availed foreign currency loan in the nature of external
commercial borrowings towards capital expenditure. As per Accounting Standard (AS)
11, the assessee claimed foreign exchange losses owing to change in exchange rate
between the Indian Rupee and foreign currency. The assessee broke up such loss
amounts in proportion of the value of capital goods imported into India and value of
capital goods acquired within India. The proportionate amount of loss on the
value of capital goods imported into India was capitalized as the cost of assets, while
200
the proportionate amount of loss on the value of capital goods acquired within India
claimed as revenue expenditure u/s 37(1) of the Act. The AO, while applying the
amended provisions of S. 43A, disallowed the entire loss treating it as capital. The
CIT (Appeals) upheld the order of the AO with the extended view that foreign currency
loss would be treated as revenue expenditure only if foreign exchange loan utilized for
trading activity. On further appeal, the Tribunal held that S. 43A could have no
relevance and deleted the disallowance made by the AO and confirm the order of CIT
(Appeals). On further appeal, the Hon’ble Court observed that it was important for the
Tribunal to examine whether, on its own merit, such expenditure would qualify as
revenue expenditure for purposes of S. 37(1) and towards that end, whether it can
be stated conclusively that such expenditure cannot be regarded as capital expenditure
and since such analysis is missing, the order of the Tribunal is set aside and remanded
back to the Tribunal for an effective adjudication. (AY. 2009-10)
PCIT v. Galaxy Surfactants Ltd. (2024) 301 Taxman 173 / 341 CTR 919 / 244
DTR 209 / 469 ITR 181 (Bom)(HC)

S. 37(1): Business expenditure-Banking business –Capital or revenue-Stock in

trade-Broken period interest paid on the purchase of securities is revenue
expenditure since securities constitute stock-in-trade. [S. 145, 260A]
In an appeal preferred by the Revenue against an order of the Tribunal, the Hon’ble
Telangana High Court had to decide whether the broken period interest which is paid on
purchase of securities is revenue expenditure, more so when such securities constitute
the stock-in-trade of the assessee. The Hon’ble Court observed that the assessee had
been holding its securities all along as stock-in-trade which is not in dispute. For
successive AYs, the Revenue has accepted the fact that the assessee had been holding
the securities as stock-in-trade. In this backdrop, the Hon’ble Court placed further
reliance on Circular No. 665 dated October 5, 1993 ([1993] 204 ITR (St.) 39) which
clarified that where the banks are holding securities as stock-in-trade and not as
investments, principles of law enunciated in Vijaya Bank Ltd. v. Addl. CIT would not be
applicable. Therefore, the CBDT has clarified that the AO should determine on the facts
and circumstances of each case as to whether any particular security constitutes stock-
in-trade or investment considering the guidelines issued by the Reserve Bank of India
from time to time. In light of this, the Hon’ble Court found no infirmity with decision of
the Tribunal and accordingly, the appeals were dismissed. (AY. 1996-97)
CIT v. State of Hyderabad (No. 1) [2024] 469 ITR 316 (Telangana)(HC)

S. 37(1): Business expenditure-Compensation-Breach of contract-Real estate

and land development-Agreement entered into by managing partner in his
individual capacity-Terms and Conditions of the agreement relevant-Arbitral
Award-Not allowable as business expenditure. [S. 145, 260A, Indian
Partnership Act, 1932, S. 14]
The assessee firm was engaged in the business of real estate and land development.
One of the partners, Dayanand Pai entered into an agreement with MIPL in his
individual capacity wherein he has agreed to transfer his part of the interest in the built
up area of four properties which were proposed to be developed by various builders
under JDA and as per the terms of the agreement, Dayanand Pai shall be responsible
for all the losses and consequential damages. As per another agreement, Dayanand Pai
undertook to deliver the built up area within a certain time frame, but did not hand it
over. The arbitration proceedings were initiated. Based on the arbitration award, the
201
assessee shall refund a sum of Rs. 22 Crores and Rs. 64 Crores as compensation and
accordingly, the assessee claimed a sum of Rs. 64. 75 Crores as compensation paid in
its return of income. However, the AO disallowed the claim on the ground that on the
date of agreement with MIPL, the assessee was not the owner of the properties. The
CIT (Appeals) confirmed the order of the AO. However, on further appeal by the
assessee, the Tribunal allowed the claim of the assessee u/s 37(1) of the Act. On further
appeal by the Revenue, the Hon’ble Court observed that as per the provisions of S. 14
of the Indian Partnership Act, 1932, subject to contract between the partners, the
property of the firm includes all properties originally brought into the stock of the firm
or acquired for the firm in the course of business, that the claim for deduction of
compensation was for the Asstt. Year: 2005–06, whereas the date of appointment as
the arbitrator was 27-06-2005, the compromise petition was filed on 05-08-2005 and
the arbitral award was passed on 30-08-2005 and accordingly held that there is no
material to prove that the liability was crystalized or provided during the relevant AY and
there is no mention in the agreement that the said Dayanand Pai was acting as the
partner of the firm or that the properties which were the subject matter of the agreement
were the properties of the firm. Held the reasoning adopted by the Tribunal is clearly
erroneous and contrary to law and hence, the substantial questions of the law are
answered in favour of the Revenue and against the assessee. (AY. 2005-06)
PCIT v. Canara Housing Development Company (2024) 301 Taxman 377
(Karn)(HC)
Editorial : Canara Housing Development Company v. JCIT (2017) 165 ITD 76
(Bang)(Trib) is reversed.

S. 37(1) : Business expenditure-Capital or revenue-Professional and

consultancy charges-Enduring nature, expenditure is capital in nature-Order
of Tribunal is affirmed. [S. 260A]
Assessee-company incurred certain expenditure in relation to professional and
consultancy charges and claimed deduction of the same as revenue expenditure. AO
treated expenditure as capital expenditure and disallowed same. Tribunal affirmed the
order of the AO. On appeal the Tribunal held that since nature of services that were
provided by consultant showed that expenses were incurred in connection with obtaining
benefits that were of an enduring nature, expenditure is capital in nature. (AY. 2008-
09)
Inditrade Capital Ltd. v. CIT (2024) 301 Taxman 638 (Ker.)(HC)

S. 37(1) : Business expenditure –Capital or revenue-Pre operative expenditure-

purchase and erection of plant and machinery-Allowable as revenue
expenditure –Allowed earlier years and latter years-Rule of consistency is
followed. [S. 145, 260A]
Assessee increased cement manufacturing capacity at its Bilaspur plant, involving
purchase and erection of plant and machinery in previous year relevant to AY 1984-85.
It filed income-tax returns claiming deductions for pre-operative expenses (power, fuel,
and lease rent for machinery) for AY 1986-87. AO disallowed pre-operative expenses.
CIT (Appeals) partly allowed appeal, accepting assessee’s contention that pre-
operative expenses for expansion should be allowed as revenue expenditure. On appeal,
Tribunal reversed the order, treating expenses as capital expenditure. On appeal the
Court held that from records that in earlier years (AY 1984-85 and AY 1985-86), Tribunal
had treated similar expenses as revenue expenditure and the High Court upheld that
202
treatment. Further, for subsequent years (AY 1990-91, AY 1994-95, and AY 1997-98),
High Court consistently maintained that position. Accordingly the Tribunal was not
justified in reaching a conclusion contrary to view expressed by it in its order for AYs
1984-85 and 1985-86 without there being any change in factual or legal situation and
without giving any reasons for taking a different view. Followed CIT v. Raymond Ltd.
[2012] 23 taxmann. com 427/208 Taxman 454 (Bom)(HC), CIT v. Raymond Ltd. [2012]
21 taxmann. com 60/209 Taxman 65 (Bom)(HC), Dy. CIT v. Raymond Woollen Mills
Ltd. [IT Appeal No. 4088 (Bom.) of 1991], (AY. 1986-87)
Raymond Ltd. v. CIT (2024) 300 Taxman 323 (Bom.)(HC)

S. 37(1) : Business expenditure-Civil contractor-Widening and strengthening

of existing road-Purchase of marble for construction of High way Authority-
Parties whose name cheques were alleged to be issued had deposed on oath
that they had neither encashed cheque nor received amount-Order of Tribunal
affirming the disallowance is affirmed. [S. 260A]
Assessee, a civil work contractor, had undertaken civil contract for widening and
strengthening of existing road, repairing widening of road side shoulders etc.. He claimed
to have spent certain amount on purchase of marble for construction of office of Highway
Authority. AO disallowed expenses claimed for purchase of marble. On appeal the
Tribunal held that parties in whose names cheques were alleged to be issued had
deposed on oath that they had neither encashed cheques nor received amount from
assessee. Furthermore, no document was found on record, which showed that contract
of construction of such office was also given to assessee. Tribunal held that since
expenses were not connected to work undertaken by assessee, expenses incurred were
bogus expenses. On appeal the High Court affirmed the order of Tribunal. No substantial
question of law. (AY. 2010-11)

Ramesh Harbibhau Gawli v. ITO [2024] 167 taxmann. com 323(Bom)(HC)

Editorial : SLP of assesse is dismissed, Ramesh Harbibhau Gawli v. ITO (2024) 301
Taxman 407 (SC)
S. 37(1) : Business expenditure-Compensation-Subsidiaries-Captive use –
Allowable as revenue expenditure. [S. 260A]
Assessee owned two mines which were used by its subsidiaries for captive use. However,
ores available in said mines were not suitable for production and were sold in open
market. Later, subsidiaries purchased ores of desired grade from outside parties which
resulted in substantial financial loss. Assessee paid compensation to its subsidiaries for
financial loss incurred and claimed same as expenditure. AO denied said claim on ground
that it was not incurred wholly and exclusively for purpose of business of assessee.
Tribunal allowed the claim. On appeal the High Court held that it could not be said that
there was no intimate connection between assessee and two subsidiaries as far as
business activities were concerned and since compensation paid by assessee was to
recoup business losses of subsidiaries which was irrecoverable as far as assessee was
concerned, expenditure claimed by assessee was to be allowed. (AY. 2006-07 to 2009-
10)
PCIT v. Industrial Development Corporation of Orissa Ltd(2023) 147 taxmann.
com 298 (Orissa)(HC)
Editorial : SLP of Revenue is dismissed, as there was delay of 526 days, delay was not
properly explained, PCIT v. Industrial Development Corporation of Orissa Ltd. (2024)
300 Taxman 603 (SC)
203
S. 37(1) : Business expenditure-Capital or Revenue-Lease hold building-Failure
to produce any material-Capital expenditure-Depreciation is allowed. [S. 32(1),
Explanation.]
Assessee incurred certain expenditure on a leasehold building and claimed same as
revenue expenditure. AO disallowed assessee's claim and held that expenditure was in
nature of capital expenditure and invoking Explanation 1 to S. 32(1) held that capital
expenditure incurred on leasehold building was to be capitalized and depreciation is
allowed. Order of AO is affirmed by CIT (Appeals) and Tribunal. On appeal High
Court affirmed the order of the Tribunal.
(AY. 2009-10)
Hotel Allied Trades (P.) Ltd. v. Addl. CIT (2024) 300 Taxman 61 (Ker)(HC)

S. 37(1): Business expenditure-Provision for contingent liabilities-Order of

Tribunal is affirmed-No substantial question of law. [S. 260A]
Dismissing the appeal of the Revenue the Court held that the Tribunal was right in
deleting the disallowance made by the assessing authority in respect of future expenses
claimed as deduction u/s 37 holding that the provision claimed by the assessee was
an allowable deduction. Followed,Bharat Earth Movers v. CIT(2000) 245 ITR 428 (SC)
(AY. 2014-15)
PCIT v. Century Real Estate Holdings Pvt. Ltd. (2024)467 ITR 13 /167
taxmann. com 220 (Karn)(HC)
Editorial : Delay of 289 days in filing the SLP is not condoned, SLP is dismissed, PCIT
v. Century Real Estate Holdings Pvt. Ltd. (2024)467 ITR 16 (SC)

S. 37(1): Business expenditure-Bogus expenses-Construction business-

Payments made to Sub-contractors-TDS is deducted-Order of Tribunal
confirming the disallowance is affirmed-No substantial question of law. [S.
260A]
Court held that expense were not connected to the work undertaken by the assessee
and was bogus expense. As regards the additional ground that was raised, by a reasoned
order, the Tribunal had considered it to a certain extent which covered the partly allowed
claim by the CIT (Appeals) and taking into consideration the tax deducted at source
deposited by the assessee. A reasoned order had been passed disallowing the claim of
the assessee. No substantial question of law. (AY. 2010-11)
Ramesh Harbibhau Gawli v. ITO (2024)467 ITR 9 (Bom)(HC)
Editorial : SLP of Revenue is dismissed, Ramesh Harbibhau Gawli v. ITO (2024)467
ITR 161 (SC)

S.37(1): Business expenditure - Capital or revenue - Software Development

expenses — Product abandoned on becoming obsolete due to development in
technology — No enduring benefit – Allowable as revenue expenditure .[ S.
260A ]
Dismissing the appeals of the Revenue the Court held that the assessee’s investment
to develop a software platform for desktops had become obsolete due to rapid change
in the technology and the assessee had abandoned further development as a result of
which it had abandoned the product and incurred a loss. The project having been
abandoned, the assessee would not get any enduring benefit. The Tribunal, on a correct
204
analysis of the facts, had held that the expenditure was revenue and not capital in
nature. There was no ground to interfere with the findings recorded by the Tribunal.
(AY.2015-16, 2016-17)

PCIT v. Adadyn Technologies Pvt. Ltd. (2024)465 ITR 353 /162 taxmann.com
666 (Karn)(HC)
Editorial: SLP of Revenue is dismissed , PCIT v. Adadyn Technologies Pvt. Ltd.
(2024)465 ITR 409/162 taxmann.com 667 /300 Taxman 112 (SC)

S. 37(1) : Business expenditure-Interest on overdue deposits-Ascertained

liability-Provision for bad and doubtful debts allowable as deduction. [S.
36(1)(vii), 145]
High Court affirmed the order of Tribunal deleting the disallowance and provision for bad
and doubtful debts. (AY. 2013-14 to 2015-16)

PCIT v. Oriental Bank Of Commerce Ltd. (2024) 464 ITR 563 (Delhi)(HC)

S. 37(1) : Business expenditure-Payment to Haryana State Agricultural Board-

Statutory functioning-Application of income-Allowable as deduction-Penalty
order is quashed as the quantum disallowance is deleted. [S. 260A, 271(1(c)]
Assessee (Market Committee) paid a certain amount to Haryana State Agricultural Board
(Board) and stated that payment had been made to the Board on account of
development works on its behalf and claimed deduction of the same as application of
income. AO held that payment as repayment of loan taken by assessee from Board for
construction of rural roads and held that payment of liability of old loan was not allowable
as application of income. CIT (Appeals) held that amount had been paid to Board for
expenditure which Board had incurred on behalf of assessee and same is allowable as
application of income. ITAT set aside the order of CIT (Appeals) and restored order
of AO. On appeal the Court held that since receipt issued by Board for aforesaid
payment showed that amount was paid for development works and Board had incurred
expenditure on development works on account of assessee, payment is made to Board
towards statutory functions and it is not for repayment of any loan. Accordingly, held
as allowable as application of income. As the quantum addition is deleted. Penalty
order is quashed. (AY. 2007-08)
Market Committee v. ACIT (2024) 298 Taxman 473 /467 ITR 118 (P&H)(HC)

S. 37(1) : Business expenditure –Provision for salary and wages-Justice

Palekar Award-Ex-gratia bonus-Allowable as expenditure. [S. 36(1)(ii), 260A,
Payment of Bonus Act, 1965]

Assessee debited a certain amount representing provision for salary and wages arising
out of Justice Palekar Award for period 1-1-1986 to 30-6-1986 on the basis of a
memorandum of settlement between management and employees signed on 8-5-1987
and claimed deduction of same as expenditure in AY 1987-88. AO disallowed the
assessee's claim. Tribunal held that liability for salary and wages arising out of Justice
Palekar Award is not allowable as expenditure in AY in question but only in year in which
agreement between management and employees was entered into. On appeal the Court
205
held that since services were rendered by employees during relevant previous year,
Tribunal is not right in its view. Accordingly the liability for salary and wages was
allowable as expenditure in AY in question. Court also held that ex-gratia bonus paid to
employees over and above eligible bonus under Payment of Bonus Act, 1965 was
allowable as expenditure. (AY. 1987-88)
Indian Express Newspapers (Bombay) Ltd. v. CIT (2024) 298 Taxman
507(Bom.)(HC)

S. 37(1) : Business expenditure-Capital or revenue-Purchase of software-Not

necessary that income must be earned because of such expenditure. [S. 28(i)]
Dismissing the appeal of the Revenue the Court held, that the AO’s approach was that
the assessee was not earning revenue. This approach was completely misdirected. The
disallowance of the expenditure was not justified. (AY. 2013-14, 2014-15)
PCIT v. Hike Pvt. Ltd. (2024)462 ITR 183 /158 taxmann. com 162 (Delhi)(HC)
Editorial : SLP dismissed, PCIT v. Hike (P.) Ltd. (2024) 299 Taxman 447 / 299 Taxman
178 / 464 ITR 394 (SC)

S. 37(1) : Business expenditure-Insurance broker-Supervisory and risk

management charges paid to its sister concerns-Allowable as revenue
expenditure.
AO disallowed supervisory and risk management charges paid to its sister concerns on
ground that amount was vis-à-vis prospective clients. CIT(A) deleted the disallowance.
Tribunal affirmed the disallowance. On appeal the Court held that the fact that expenses
were incurred for prospective clients should be good enough for assessee to claim
deduction qua same, as every expense does not necessarily translate into corresponding
income. (AY. 2011-12)
PCIT v. Trinity Insurance Brokers (P.) Ltd. (2024) 297 Taxman 38 (Delhi)(HC)

S. 37(1) : Business expenditure-Management fees-Onus discharged-No

substantial question of law. [S. 260A]
Dismissing the appeal of the Revenue the Court held that since there was no doubt that,
given material placed on record, onus cast on assessee was infact discharged, no
substantial question of law. (AY. 2013-14, 2014-15)
PCIT v. Anand Divine Developers (P.) Ltd. (2024) 297 Taxman 353 (Delhi)(HC)
S. 37(1): Business expenditure-Commission-Reasonableness to be considered
from point of view of businessman-Revenue cannot rewrite the agreement-
Appeal is allowed. [S. 260A]
Held that the AO and the Tribunal were unjustified in disallowing part of the commission
payment, given the assessee's provision of detailed payment records and confirmation
by commission agents via proper banking channels. Reasonableness to be considered
from point of view of businessman. The revenue cannot bifurcate the commission
payment between assistance in securing tenders and follow-up for payment recovery,
as it amounted to rewriting the agency agreements, which were clear and genuine.
Appeal is allowed. (AY. 1986-87 to 1988-89)
Indian Hume Pipe Co. Ltd v. CIT [2023] 155 taxmann. com 415 / [2024] 461
ITR 341 (Bom) (HC)

S. 37(1) : Business expenditure-Capital or revenue-Amounts paid as royalty to

parent company for use of its trademark-Allowable as revenue expenditure-
206
Employees stock option-Allowable as revenue expenditure-Interest on excess
refund is not deductible. [S. 143(1)
Held that the assessee-companies had paid royalty to the parent company for using its
logo, based on the turnover and claimed deduction treating the expenses as revenue in
nature. The royalty payment made by the assessee, for use of logo or trademark for a
particular period, for improvement and expansion of business, would qualify as revenue
expenditure. Held that the Tribunal was correct in holding that the employees’ stock
option plan expenditure was revenue in nature and the assessee was entitled to
deduction thereof. Held that the interest charged on the excess amount refunded to the
assessees, while processing returns u/s 143(1) of the Act could not be treated as
expenditure for earning the income or for business purpose. The interest was levied on
the amount refunded to the assessees, which they were holding and hence, it was not
eligible for deduction. (AY. 2003-04 to 2014-15)
Shriram Transport Finance Co. Ltd. v. ITO (OSD) (2024)460 ITR 66 (Mad)(HC)

S. 37(1) : Business expenditure-Derivative contracts-Forward contracts-

Foreign Exchange fluctuation loss-Loss is allowable. [S. 28(i)]
Held that the assessee had entered into derivative contracts in order to hedge its
exchange risk in respect of export proceeds receivable by it in foreign exchange. Forward
contracts were not entered into by the assessee by way of trading per se in foreign
exchange derivatives. Consequently, the Central Board of Direct Taxes Circular No. 3 of
2010 dated March 23, 2010 had no application. Loss allowable as deduction. (AY. 2012-
13)
PCIT v Emmsons International Ltd. (2024)460 ITR 715 /158 taxmann. com 10
(Delhi)(HC)
Editorial : SLP rejected, PCIT v. Emmsons International Ltd. (2024)297 Taxman 4/460
ITR 718 (SC)

S. 37(1): Business expenditure-Capital or revenue-Royalty for use of logo of

company-Expenses on employees stock option plan-Revenue expenditure.
[Companies Act, 1956,2(15A) 2((37)]
Tribunal held that the royalty paid by the assessee towards the use of logo of a company
was to be treated as revenue expenditure and the expenditure incurred on employees’
stock option plan was allowable as revenue expenditure. High Court affirmed the order
of the Tribunal. (AY. 2010-11, 2011-12)
CIT v. Shriram City Union Finance Ltd. (2024)460 ITR 232/161 taxmann. com
218 (Mad)(HC)

S. 37(1): Business expenditure-Non-Compete fees paid to retiring partner-

Allowable as revenue expenditure.
Held that Non-Compete fees paid to retiring partner is allowable as revenue expenditure.
(AY. 2018-19) (ITA No. 249/ Ahd/ 2024 dt 16-7 2024)
Samkeet Arya Homes LLP v. ITO (2024) Chamber’s Journal-August-P. 170
(Amritsar)(Trib)
S. 37(1): Business expenditure-Capital or revenue-Project cost-Pending
capitalisation-Written off-Allowable as revenue expenditure.
Held that project cost pending for capitalization is written off is allowable as revenue
expenditure. (AY. 2014-15)(ITA No. 3109/ Del/ 2018 dt-30-5-2024)

207
IHHR Hospitality Pvt Ltd v. Add. CIT(2024) Chamber’s Journal-July-P. 122
(Delhi)(Trib)
S. 37(1): Business expenditure-Capital or revenue-Registration charges of new
and existing patents-Allowable as revenue expenditure.
Tribunal held that registration expenses incurred on the existing as well as new patents
are wholly and exclusively incurred for the purpose of business and are revenue in
nature. (AY. 2010-11,2011-12)
ITC Ltd v. ACIT (2024) 230 TTJ 921 / 38 NYPTTJ 626 (Kol)(Trib)

S. 37(1): Business expenditure-Relief material given to Tsunami victims-Not

allowable as business expenditure.
Held that the assessee having voluntarily distributed relief materials to the victims of
Tsunami, it is only an act of genuine philanthropy; expenditure incurred thereon cannot
be said to have been laid out wholly and exclusively for the purposes of business and,
therefore, the cost of said relief materials is not allowable as business expenditure. (AY.
2005-06)
Hindustan Unilever Ltd. v. Dy. CIT (2024) 232 TTJ 861 / 38 NYPTTJ 1420
(Mum)(Trib)

S. 37(1): Business expenditure-Finance charges-Treated as deferred revenue

expenditure or prepaid expenditure in the books of accounts over the period of
loan-Allowable as deduction-Bad debt-matter remanded. [S. 36(1)(viia), 145]
Held that expenditure towards finance charges including prepaid finance charges, if any,
is allowable in the year of payment itself, even though the said expenditure has been
treated as deferred revenue expenditure or prepaid expenditure in the books of accounts
over the period of loan. Tribunal also held that limit of 5% of total income specified in
S. 36(1)(viia)(d) is the upper limit. Matter is remanded back to the AO. (AY. 2012-13,
2017-18)
Cholamandalam Investment & Finance Co. Ltd. v. Dy. CIT (2024) 231 TTJ 840
/ 38 NYPTTJ 1060 (Chennai)(Trib)
S. 37(1): Business expenditure-Advertisement and sales promotion-Order of
CIT(A) deleting ad-hoc disallowance of 20% is affirmed.
Held that the CIT(A) is justified in deleting ad-hoc disallowance of 20% of advertisement
and sales promotion expenses. (AY. 2016-17, 2018-19)
Cleartrip (P) Ltd v. DCIT (2023) 156 taxmann. com 552/37 NYPTTJ 1373 /
(2024) 228 TTJ 178 / 235 DTR 129 / (Mum) (Trib)

S. 37(1): Business expenditure-Interest on tax deduction at source-Not

allowable as business expenditure.
Held that interest on tax deduction at source is not allowable as business expenditure.
(AY. 2013-14)
India Flysafe Aviation Ltd. v. DCIT (2024) 159 taxmann. com 1219 /228 TTJ
982 / 236 DTR 185 / 38 NYPTTJ 307 (Delhi)(Trib)

S. 37(1): Business expenditure-Cash payments –Distributor of milk products-

The AO is directed to disallow 4 %of cash expenses.
Tribunal held that considering the nature of business being Distributor of milk products,
profit margin being very less, the AO is directed to disallow 4 %of cash expenses. (AY.
2008-09 2010-11 to 2013-14)
208
ITO v. K. Murugan (2023) 37 NYPTTJ 861 / (2024) 227 TTJ 121 / 233 DTR
72 (Chennai)(Trib)

S. 37(1): Business expenditure-Professional fees-Negotiating debt funding-Tax

deducted-Payment through banking channels-, Recipients did not file return is
not sufficient to disallow payment
Held that the assessee could not be penalised for the failure, if any, of the recipients. If
the recipients of professional fees are able to arrange loan funds for the assessee, then
a businessman would necessarily pay fees. The loan of Rs. 43 crores was obtained by
the assessee from PNB and the professional fees had been paid for negotiating the loan.
Therefore, the AO, is not justified in disallowing the claim of payment of professional
fees, when the payment was through banking channel and tax is deducted at source
merely because the recipient has not filed the return of income. (AY. 2018-19)
BKS Galaxy Realtors LLP v. Dy. CIT (2024)116 ITR 175 (Mum)(Trib)

S. 37(1): Business expenditure-Capital or revenue-Remove defect in title of

immoveable property-One time final payment of disputed amount of impact
fees to Municipal Corporation-Damages or penalty or interest-Allowable as
revenue expenditure. [S. 32, Municipal Corporation Act]
The AO treated the one time final payment of disputed amount of impact fees to
Municipal Corporation as capital expenditure and allowed depreciation at 10 %. On
appeal the CIT(A) affirmed the order of the AO. On appeal the Tribunal held that the
payment is allowable as revenue expenditure. Followed Prakash Cotton Mills Pvt Ltd v.
CIT(1993)201ITR 684 (SC) (AY. 2015-16)
Asiatic Colour Chem Ind. Ltd. v. Jt. CIT (2024)116 ITR 7 (SN)(Ahd)(Trib)

S. 37(1): Business expenditure-Transport and hiring charges –Deletion of ad-

hoc disallowance of 10% is affirmed and disallowance of 2% on account of
wage and labour charge is affirmed.
Held that the order of CIT(A) Deletion of ad-hoc disallowance of 10% is affirmed
and disallowance of 2% on account of wage and labour charge is affirmed. (AY. 2014-
15)
Dy. CIT v. Rajendra Gulabchand Shah (2024)116 ITR 21 (SN)(Mum)(Trib)

S. 37(1): Business expenditure-Method of accounting-Completed-contract

method-Books of account not rejected-Expenditure on completed project for
defects and finishing allowable. [S. 145(3)]
Held that though the project was complete and handed over, the expenditure incurred
on defects and finishing touches of the building was an allowable expenditure. The AO
did not dispute the expenditure except for the cost of lift, which was an allowable
expenditure as no builder would purchase the lift till the structure was complete, and
the address on the invoice showed purchase of the lift for the completed project.
Moreover, no incriminating material was found against the assessee and the expenditure
in the books was examined during survey. Neither S. 145(3) was invoked nor were
the books of account rejected. Expenditure on the lift for the completed project is
allowable as deduction. (AY. 2016-17)
Royal Mahanagar Developers v. Dy. CIT (2024)116 ITR 48 (SN) (Cuttack)(Trib)

209
S. 37(1): Business expenditure-Ad-hoc disallowance-Salary-business
promotion expenses, commission,miscellaneous expenses, service and
maintenance expenses, telephone,-Repair to building-Books of account not
rejected-Disallowance is deleted. [S. 143(3)]
Held that the ad hoc disallowances made without pointing out any specific instance with
respect to any of the disallowance and for the general reason of preventing any possible
revenue leakage, could not be upheld. The assessee could not be subjected to increased
tax demand only on the presumption that there could have been revenue leakage, when
the assessee had duly explained each and every expenditure. Disallowance is deleted.
(AY. 2013-14)
Sadana Electric Store v. Dy. CIT (2024)116 ITR 33 (SN)(Lucknow)(Trib)

S. 37(1): Business expenditure-Capital or revenue-Hotel-renovation,

refurbishment and repairs-Consultancy payments-Allowable as revenue
expenditure. [S. 28((i)]
On appeal the court held that expenses incurred by assessee-hotel on renovation,
refurbishment and repairs, were in nature of revenue expenditure and allowable as
deduction. Court also held that the payment made by assessee to an interior architect,
for consultancy and supervision of interior décor of existing hotel of assessee under
'renovation and refurbishment' is allowable as revenue expenditure. (AY. 1993-94)
Asian Hotels Ltd. v. CIT (2024) 296 Taxman 69 (Delhi)(HC)

S. 37(1): Business expenditure-Capital or revenue-Stock brokerage-

Expenditure on broadband, lease rent, software customisation, facility
management, repair and maintenance-Allowable as revenue expenditure. [S.
32, 40(a)(ia)]
Held that stock brokerage, Expenditure on broadband, lease rent, software
customisation, facility management, repair and maintenance is allowable as revenue
expenditure. No change in facts and circumstances from earlier years. Order of Tribunal
is followed (AY. 2012-13)
HDFC Securities Ltd. v. CIT (Appeals) (2024)115 ITR 179/ 169 taxmann. com
365 (Mum)(Trib)

S. 37(1): Business expenditure-Huge expenses of purchases, job-work

payment, petrol and transport expenses Compared to preceding year-Failure to
discharge the onus-Addition is affirmed.
Held that the assessee failed to discharge the onus of substantial huge expense of
purchases, job-work payment, petrol and transport expenses compared to preceding
year. Disallowance is affirmed. (AY. 2018-19)
Aerotech Enterprise v. ITO (2024) 115 ITR 78 (SN)/ 168 taxmann. com 557
(Ahd)(Trib)

S. 37(1): Business expenditure-Capital or revenue-Product registration

expenditure-Revenue expenditure.
Held that product registration expenditure is allowable as revenue expenditure. (AY.
2010-11)
Cadila Pharmaceuticals Ltd. v. ACIT (2024) 115 ITR 51 ((SN)/ 162 taxmann.
com 229 (Ahd)(Trib)

210
S. 37(1): Business expenditure-Foreign exchange fluctuation losses-Hedging-
Foreign exchange risks in respect of exports and imports-Loss is not
speculative-Allowable as business loss. [S. 28(i)]
Held that the currency settlement took time after lodgement to be realised resulting in
fluctuation loss. Losses arising from such foreign exchange contracts are business losses
not speculative. Allowable as business loss. (AY. 2010-11)
Cadila Pharmaceuticals Ltd. v. ACIT (2024) 115 ITR 51 ((SN)/ 162 taxmann.
com 229 (Ahd)(Trib)

S. 37(1): Business expenditure-Commission payments-Non-service of notice

u/s 133(6)-Evidence and details furnished in remand report-Denial of
expenditure for mere return of summons unserved is improper. [S. 133(6)]
That deduction claimed for the amount paid as commission could not be disallowed
merely on the ground that the summons served on the parties came back unserved,
when the assessee had produced all evidence and details before the CIT (Appeals)
as additional evidence on which a remand report had also been sought. Accordingly, no
addition could be made on the amount paid as commission. (AY. 2003-04)
Hindalco Industries Ltd. v. Dy. CIT (2024)114 ITR 502 (Mum)(Trib)

S. 37(1): Business expenditure-Community development-Operation of

aluminium mines causing pollution in neighbourhood-Assistance with respect
to drinking water, education, women and children welfare, etc., for villagers-
Commercial exigency to ensure smooth running of factories-Allowable as
deduction.

That the Tribunal decision was set aside by the Calcutta High Court as the assessee,
being in the business of manufacturing aluminium products that caused pollution in the
surrounding areas, incurred expenses for drinking water supply, women and children
welfare, medical services and educational support, which were backed by commercial
exigency to foster harmony with the villagers in the areas surrounding the mines and
necessary to ensure smooth running of the factories and to avoid industrial problems.
The expenditure incurred on sundry development was wholly and exclusively for the
purpose of the business. CIT v. Nicholas Piramal (India) Ltd. (I. T. A. No. 1586 of 2013,
dated June 10, 2015 (Bom)(HC) (AY. 2003-04)
Hindalco Industries Ltd.