S. 10(38) : Long-term capital gains from equities-STT is not paid at the time of acquisition of shares-Entitled to exemption. [S. 45, 115U]
Assessee is a trust registered as a Venture Capital Fund. The assessee claimed exemption of long-term capital gains (LTCG) under section 10(38) in respect of the sale of unlisted shares of a company. The Assessing Officer held that the assessee is not eligible for exemption as it had not paid Securities Transaction Tax (STT) at the time of the acquisition of shares. CIT (A) allowed the exemption. On appeal, the Tribunal held that conditions prescribed in clause (a) and (b) of section 10(38) were fulfilled, and the assessee would be covered by the exemption provided in clause (b)(i) of Notification No. SO 1789(E) dated 5-6-2017. Therefore, even if the assessee did not pay STT at the time of the acquisition of shares, it was still eligible for exemption under section 10(38). (AY. 2018-19)
DCIT v. Business Excellence Trust. (2024) 208 ITD 173 (Mum)(Trib.)

S. 11 : Property held for charitable purposes-Exemption cannot be denied due to lack of declaration in Form No. 10.[S.11(2), Form No 10B ]
The absence of Form No. 10 is not fatal, provided the trust genuinely accumulates the income for charitable purposes. The exemption is valid as long as the accumulation is for charitable purposes, even if Form No. 10 is not filed or is incomplete.(AY. 2013-14 )
Shree Sai Baba Sansthan Trust (Shirdi) v. Dy. CIT [2025] 171 taxmann.com 392 (Mum)(Trib.)

S. 32 : Depreciation-Written down value-Retrospective operation of explanation 5 to section 32-Deemed to have been allowed. [S.50]
Held that even for the assessment years for which the assessee did not claim depreciation, it was to be deemed to be allowed and for purposes of s. 50. Capital was to be computed by deducting WDV and not the original cost of the asset from the sale consideration. Explanation 5 to S.32 is clarificatory in nature, and hence it will have retrospective operation.(AY. 2009-10 )
Sri Padmavathi Srinivasa Cotton Ginning & Pressing Factory v. Dy. CIT [2009] 125 TTJ 411 (Visakhapatnam) (Trib.)

S. 32 : Depreciation-Transportation-Higher depreciation rate of 30% is applicable when vehicles are used for commercial hiring purposes.
The assessee company was engaged in road construction contract work and trading in Ingersoll Rand products, which were its primary business activities. The assessee claimed depreciation at a higher rate of 30% on its vehicles. The AO disallowed the claim, arguing that the vehicles were used for the assessee’s core business activities (road construction and trading) rather than for hiring purposes.The Tribunal held that since the financial statements proved that the assessee had earned income primarily from vehicle rentals, a review of the profit and loss account revealed that a significant portion of the assessee’s income comprised rental receipts from the hiring of vehicles. This demonstrated that the vehicles were indeed used for commercial hiring purposes. The assessee was entitled to claim a higher depreciation of 30% as per the provisions of the Income Tax Act.(AY. 2006-07)
Urmila Enterprises (P.) Ltd. v. ACIT [2015] 38 ITR 533 /60 taxmann.com 264 (Chennai)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source- Contractors-Payments made for hiring trucks on a casual or trip-to-trip basis without any formal contract do not attract TDS under section 194C-No disallowance can be made. [S. 194C]
The Assessing Officer disallowed the freight expenses u/s. 40(a)(ia) of the Income Tax Act, 1961, mentioning the assessee’s failure to deduct TDS under section 194C. The Tribunal observed that the AO failed to present any material evidence indicating the existence of an oral or written contract between the assessee and the lorry owners. Since the payments were made on a need-to-need basis, without any contractual obligation, the provisions of section 194C were not applicable. In the absence of a contract, the AO was not justified in invoking s. 40(a)(ia) for disallowing the freight charges. (AY. 2008-09)
Sitaram Dattatrya Waikar v. ITO [2025] 170 taxmann.com 124 (Mum)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Only to outstanding payables at year-end. [S. 139(1), 194C]
If TDS is deducted and deposited before the due date of filing the return, the expenditure is allowable. S.40 (a)(ia) only applies to outstanding expenses as on March 31st of the financial year. Paid expenses without TDS deduction during the year cannot be disallowed .(AY. 2005-06 )
Rajamahendri Shipping & Oil Field Services Ltd. v. Addl. CIT [2012] 19 ITR 616 / 51 SOT 242/ 20 taxmann.com 474 (Visakhapatnam) (Trib.)

S. 40A(2) : Expenses or payments not deductible-Excessive or unreasonable-Foreign tour expenses of directors with family-Supporting material is not provided-Disallowance is justified. [S. 37(1)]
Held that foreign tour expenses of directors accompanied by family members, undertaken frequently and to tourist destinations, without proper business justification or supporting documentation, are liable for disallowance u/s. 40A(2) as excessive or unreasonable payments. (AY. 2008-09, 2009-10 )
ACIT v. M.M. Publications Ltd. [2014] 31 ITR 569 / (2025) 55 taxmann.com 323 (Cochin)(Trib.)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-No double addition u/s. 41(1) for written-off sundry creditors.
Since the written-off amount was already credited to the profit and loss account, the net profit disclosed by the assessee already included the said amount. Thus, making a separate addition u/s. 41(1) would result in double taxation of the same income. Therefore, there is no requirement to make a further addition of the same amount while processing the return.(AY. 2021-22 )
CEAT Ltd. v ADIT [2024] 164 taxmann.com 252 (Mum)(Trib.)

S. 48 : Capital gains-Mode of computation-Cost inflation index-Second proviso to S. 48 does not differentiate between Indian and foreign assets-Entitled to claim indexation benefit through the cost inflation index (CII) even in respect of shares of a foreign company sold by them. [S. 45]
The assessee, a resident company, sold shares of its foreign subsidiary. While computing LTCG, the assessee deducted the indexed cost of acquisition. The Assessing Officer held that the Cost Inflation Index (CII) is based on inflation in India, and therefore, the assessee could not claim indexation on foreign assets. Hence, AO recomputed LTCG by disallowing the indexation benefit. The Tribunal held that the second proviso to S. 48 applies equally to foreign and Indian assets. Therefore, the assessee was entitled to claim the indexation benefit by deducting the indexed cost of acquisition while computing LTCG on the sale of shares of its foreign subsidiary.(AY. 2016-17)
Dy. CIT v. Aarav Fragrances and Flavors (P.) Ltd. [2025] 210 ITD 369 (Mum)(Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence-Construction-Purchase-The Acquisition of a new flat in an apartment under construction should be considered as a case of Construction and not Purchase-The date of commencement of construction is not relevant for the purpose of S. 54-The fact that the construction may have commenced prior to the date of transfer of the old asset is irrelevant. If the construction is completed within 3 years from the date of transfer, the exemption is available. [S. 45]
For the purpose of S. 54 of the Act, to see whether the assessee has completed the construction within three years from the date of transfer of the old asset. In the instant case, there is no dispute that the assessee took possession of the new flat within three years from the date of sale of the old residential flat. Accordingly, we are of the view that the assessee has complied with the time limit prescribed u/s 54 of the Act. Since the amount invested in the new flat before the due date for furnishing return of income was more than the amount of capital gain, the requirement of depositing any money under the capital gains account scheme does not arise in the instant case. Further, the Hon’ble High Court has held in the case of ITO v. K.C. Gopalan (1999) 107 Taxman 591/ (2000) 162 CTR 566( Ker)(HC ) that there is no requirement that the sale proceeds realized on the sale of an old residential house alone should be utilized. (AY. 2013-14)
Mustansir I Tehsildar v. ITO [2018] 61 ITR 465 / 168 ITD 523 / 193 TTJ 400 (Mum)(Trib.)

S. 54F : Capital gains-Investment in a residential house-Can claim exemption u/s. 54F, even if the new residential property was initially purchased jointly with their spouse, provided they subsequently reimburse the spouse’s share and become the sole owner. [S. 45]
The assessee sold land owned by her, resulting in Long-Term Capital Gains. She invested the LTCG in purchasing a new residential house property. The initial agreement for purchasing the property was executed jointly in the names of the assessee and her husband, as her husband had contributed half of the payment. Subsequently, the sale deed was registered solely in the name of the assessee, as she reimbursed her husband for his share of the payment. However, the AO restricted the exemption to 50% of the property’s value, reasoning that the husband relinquished his rights in favour of the assessee only after three years from the sale of the original property. Held that since the assessee had reimbursed her husband’s contribution and effectively bore the entire cost of acquiring the property, she was eligible for the full exemption u/s. 54F. The mere fact that the husband relinquished his rights at a later date did not affect her entitlement to the full exemption.(AY. 2008-09)
Y. Manjula Reddy v. ITO [2022] 140 taxmann.com 441 (Bang)(Trib.)

S. 56 : Income from other sources-Re development-Alternative accommodation of New flat of bigger size allotted from the builder in extinguishment of the old flat as per the redevelopment agreement-Cannot be assessed under section 56(2)(x) of the Act-A the most the said transaction may attract capital gains in which case the assessee should be entitle for deduction of cost of new flat u/s. 54, resulting in no tax liability-Addition is deleted. [S. 45, 54]
he assessee, Anil Dattaram Pitale, owned a flat in Co-op Housing Society, which was purchased in FY 1997-98. The society underwent redevelopment as per the agreement with the developer. As per the terms and conditions of the agreement, the assessee was allotted a new flat of a bigger size. The AO assessed the difference between the stamp duty value of the new flat and the indexed cost of the old flat as income from other sources u/s. 56(2)(x) of the Income-tax Act based on the stamp valuation. The order of the AO is affirmed by the CIT (A). On appeal, the Tribunal held that the transaction is part of a redevelopment agreement, resulting in the extinguishment of the old flat and acquisition of the new flat; this is not a receipt of immovable property for inadequate consideration. Therefore provisions of section 56(2)(x) are not applicable. The tribunal also held that at the most, the said transaction may attract capital gains, in which case the assessee should be entitled to a deduction of the cost of the new flat u/s. 54, resulting in no tax liability. The Tribunal directed to delete the addition made u/s. 56(2)(x). (AY.2018-19)ITA No. 465/Mum/2025 dt. 17-3-2025)
Anil Dattaram Pitale v. ITO, (Mum)(Trib.) www.itatonline.org

S. 56 : Income from other sources letter of allotment or letter of intent is considered a valid agreement-The stamp duty value as on the date of allotment and not the date of registration is to be considered for determining any addition u/s. 56(2)(vii)(b)(ii). [S. 45, 56(2)(vii)(b)(ii).]
The Assessing Officer observed that the stamp duty value of the flat on the date of registration was higher than the purchase consideration. Consequently, the AO proposed to add the difference between the stamp duty value and the purchase consideration as income under Section 56(2)(vii)(b)(ii). Even the AO rejected the allotment letter could not be considered an agreement under the proviso. The Tribunal held that where a flat is allotted before the date of registration and the assessee pays an advance, the stamp duty value on the allotment date is to be considered for determining any addition u/s. 56(2)(vii)(b)(ii). Since the stamp duty value in this case was lower than the purchase consideration, no addition under Section 56(2)(vii)(b) is justified.(AY. 2017-18)
Dharmesh Ramesh Jhaveri v. ACIT [2024] 169 taxmann.com 662 (Mum.)(Trib.)

S. 56 : Income from other sources-Buy back of shares-The asset gifted should become a capital asset and property in the hands of the recipient-If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital assets of the assessee-company and hence s. 56(2)(viia) cannot be invoked in the hands of the assessee company. [S. 56(2)(viia)]
The provisions of sec. 56(2)(viia) should be applicable only in cases where the receipt of shares becomes property in the hands of the recipient, and the shares shall become the property of the recipient only if it is “shares of any other company”. In the instant case, the assessee herein has purchased its own shares under a buyback scheme, and the same has been extinguished by reducing the capital, and hence the tests of “becoming property” and also “shares of any other company” fail in this case. Accordingly, we are of the view that the tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares. (AY. 2014-15 )
Vora Financial Services (P.) Ltd. v. ACIT [2018] 171 ITD 646 (Mum.)(Trib.)

S. 68 : Cash credits-long-term capital gain Sale of shares-Penny stock-Accommodation entries-Information from investigation Wing-Purchase in physical form-Purchase is made through Banking channels-Deletion of addition by CIT(A) is affirmed. [S. 10(38), 45, 147, 148]
The assessing Officer reopened the assessment on the grounds that the long-term capital gain declared by the assessee was bogus in nature on basis of report of Investigation Wing that person named Giriraj Kishore Agarwal has provided bogus entries in respect of sale of shares of Moryo Industries Ltd which was purchased in physical form, got it transferred in his name and later dematerialized. The AO made addition u/s. 68 of the Act. On appeal, the CIT ( A) deleted the addition. On appeal, the Tribunal held that payment for the purchase of shares was made through banking channels, and the assessee had furnished a copy of the demat statement, which showed the entry and exit of shares. The Assessing Officer had not found fault with any of the documents furnished by the assessee evidencing the purchase and sale of shares and had also not carried out any independent enquiry concerning transactions carried on by the assessee. On facts order of the CIT (A) is affirmed. (AY. 2014-15)
ITO v. Prakashmal Malraj Jain. (2024) 208 ITD 403 (Mum)(Trib.)

S. 68 : Cash credit-Gift-Gift from a son cannot be disbelieved without evidence-Addition is deleted.
Held that since the confirmation letter included the PAN details of the donor son and the transaction was properly declared as a gift, there was no reason to disbelieve the genuineness of the gift. The AO’s rejection of the gift was unjustified in the absence of any evidence proving the transaction to be non-genuine. The addition made by the AO was deleted. (AY. 2011-12, to 2015 16, 2016-17)
Rashida Shakil Bhati v. ITO [2024] 168 taxmann.com 274 (Mum)(Trib.)

S. 92C : Transfer pricing-Arm’s length price-Avoidance of tax-International transaction-Comparable-Turnover filter-Turnover of more than Rs.200 crores was excluded-Market support services-Operating cost Matter remanded. [S. 92]
The Tribunal remanded the entire issue to be restored to the Assessing Officer/Transfer Pricing Officer for undertaking the exercise afresh selecting a fresh set of comparable companies in respect of the software research and development segment. Accordingly, the order passed by the Assessing Officer/Transfer Pricing Officer was to be set aside. (AY. 2011-12, 2013-14)
Trident Microsystems India P. Ltd. v. Dy. CIT (2020) 83 ITR 449 (Bang.)(Trib.)

S. 92C : Transfer pricing-Arm’s length price-Avoidance of tax-International transaction-Comparable-Companies with diversified service portfolios and substantial brand support cannot be treated as comparable to entities providing low-value, low-risk back-end processing services, as it leads to an unfair comparison due to significant differences in functions, risks, and assets.
During the Transfer Pricing (TP) assessment, the Transfer Pricing Officer (TPO) included certain companies as comparable, which were engaged in providing a variety of services and were supported by their parent companies with significant brand value. Issue was whether companies providing diversified services and backed by parent companies with huge brand value could be considered as comparable to the assessee, which was engaged in low-risk back-office operations. Held that the assessee was performing low-value, low-risk back-end support services. Comparable companies offering a variety of services or benefiting from their parent companies’ brand value could not be considered as valid comparable. The inclusion of such companies would distort the profit margin benchmarking due to significant functional and risk differences. Therefore, the said companies were excluded from the final set of comparable. (AY. 2012-13)
Global E-Business Operations Pvt. Ltd. v. ACIT [2021] 124 taxmann.com 244 (Bang)(Trib.)

S. 143 : Assessment-CBDT Circular No. 549, dated 31-10-1989, the assessed income cannot be less than the returned income, and any deviation from this principle by the AO is not permissible-Directed to accept the capital account filed by the assessee. [S. 119, 154]
During the assessment, the AO made adjustments but ultimately determined the assessed income as nil. This action was contrary to CBDT Circular No. 549, which mandates that the assessed income should not be lower than the returned income. The Tribunal held that the AO’s action was invalid as it violated the binding nature of the CBDT circular. The CBDT Circular No. 549 clearly states that assessed income should not be less than returned income, and the AO must adhere to this directive. The assessment was directed to be rectified in line with the circular and accept the capital account filed by the assessee. (AY. 2011-12, 2015-16, 2016-17)
Rashida Shakil Bhati v. ITO [2024] 168 taxmann.com 274 (Mum)(Trib.)

S. 147 : Reassessment-Anonymous donations-Change of opinion-No tangible material-Reassessment is quashed. [S. 80G, 115BBC, 148]
The Assessing Officer issued a reopening notice, alleging that the anonymous donations received by the trust should have been taxed u/s. 115BBC. The AO’s belief for reopening was based on the view taken in AY 2015-16, which the High Court had ruled as merely the opinion of the AO on legal provisions. Held that since this did not constitute tangible material for reopening, the reopening of the assessment for the year under consideration was held to be invalid. The assessee-trust’s charitable and religious nature brought it under the exceptions of Section 115BBC (2). Thus, the anonymous donations were not taxable. (AY. 2013-14 )
Shree Sai Baba Sansthan Trust (Shirdi) v. Dy. CIT [2025] 171 taxmann.com 392 (Mum)(Trib.)

S. 149 : Reassessment-Time limit for notice-Notice issued on 29-7-2022 for assessment year 2015-16-Last date for issuing notice under old provision was 31-3-2022-Notice is barred by limitation. [S. 147, 148]
The tribunal held that the reopening notice issued on 29-7-2022 for the assessment year 2015-16 is barred by limitation since the last date for issuing such notice under the old provision of section 149 was 31-3-2022. In fact, the notice issued on 29-7-2022 is barred by limitation. (AY. 2015-16)
Purohit Food Products (P.) Ltd. v. ITO (2024) 208 ITD 407 (Mum.) (Trib.)

S. 158B : Block assessment-Computation-Undisclosed income-Capital gains declared before the search, not taxable under block assessment-Departmental communications cannot be reassessed as undisclosed income merely due to the occurrence of a search operation. [S. 132]
Held that the long-term capital gains were part of the regular income disclosed in the filed returns before the search. As a result, they could not be treated as ‘undisclosed income’ during block assessment proceedings. [BP. 1-1996 to January , 2003 ]
ACIT v. Arun Kumar Haridas Dattani [2012] 148 TTJ 763 / [2013] 33 taxmann.com 573 (Cochin)(Trib.)

S. 249 : Appeal-Commissioner (Appeals)-Form of appeal and limitation-Procedure-Mandates compulsory e-filing of appeals before the CIT (A) w.e.f. 01.04.2016 is a procedural and technical requirement-It cannot defeat the statutory right of an assessee to file an appeal-An assessee who has filed the appeal in paper format should be permitted to make good the default and to file an appeal electronically.[S. 246A, 250, R. 45]
The assessee had already filed the appeal in paper form, however, only the e-filing of the appeal has not been done by the assessee, and according to us, the same is only a technical consideration. The Supreme Court has reiterated that if in a given circumstance, the technical consideration and substantial Justice are pitted against each other, then in that eventuality, the cause of substantial Justice deserves to be preferred and cannot be overshadowed or negative by such technical considerations.(AY.2013-14)
All India Federation of Tax Practitioners v. ITO ( 2018) 166 DTR 276/ 64 ITR 704/ 194 TTJ 122 Mum)( Trib ) itatonline.org.

S. 271D : Penalty-Takes or accepts any loan or deposit-Loan by cash-Reasonable cause not proved-Penalty is up held. [S. 68, 269SS , 273B]
There is no dispute between the parties that the bonafide nature of transactions alone would not be sufficient to escape the clutches of sec. 271D of the Act. As per the decision rendered by the Hon’ble Supreme Court in the case of Kum. A.B. Shanthi it is required to be established that there were some bonafide reasons for the assessee for not taking or accepting a loan or deposit by account payee cheque or account payee bank draft, so that the provisions of sec.273B of the Act will come to the help of the assessee. Only in such cases, the AO precluded from levying a penalty u/s 271D of the Act. On facts there was no urgent business necessity for the assessee on both the occasions to accept the loan in cash, hence the penalty is affirmed. (AY. 2008-09)
Deepak Sales & Properties Pvt. Ltd. v. ACIT [2018] 65 ITR ) 726 / 172 ITD 33 (SB) (Mum.)(Trib.)

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015.
S. 10 : Assessment-Charge of tax-Assessing Officer has no jurisdiction for assessing undisclosed assets and income in assessment year 2018-19-Order is quashed. [S. 3, 10(1), 72(c), 81, IT Act. 292B]
The Assessing Officer initiated proceedings under BMIT Act by issuing notice dated 27-4-2018 under section 10(1). The Assessing Officer held that the entire amount was assessable under BMA Act in the hands of both the assessees. The Assessing Officer assessed 50 per cent of the above said amount on substantive basis and remaining 50 per cent on protective basis in the hands of both the assessees in assessment year 2018-19. On appeal, the assessee raised a legal issue contending that the assessment order had been passed without a valid notice. CIT( A) up held the order. On appeal the Tribunal held that the notice dated 27-4-2018 is issued for assessment year 2018-19 and the same is contrary to the provisions of section 72(c) of the BMIT Act. It is noticed that section 72(c) is a deeming provision as per which the undisclosed assets are deemed to have been acquired during the previous year in which such notice is issued. Since the second notice is issued on 27-4-2018, the impugned undisclosed assets are deemed to have been acquired during the previous year 2018-19 and accordingly they have to be assessed in assessment year 2019-20 only. Hence the Assessing Officer could not have passed the assessment order for assessment year 2018-19 on the strength of notice dated 27-4-2018. Accordingly, the said notice would not also validate the assessment order passed for assessment year 2018-19. Order is quashed. Circular No.13/2015, dated 6-7-2015. (AY.2018-19)
Anandi Kaushik Laijawala (Smt.) v. Dy. CIT [2025] 172 taxmann.com 121 (Mum.)(Trib.)

Posted on: March 26th, 2025