ITAT Bangalore Judgments — January 2026

The Tribunal held that the software license expenditure is allowable as revenue expenditure. The Court noted that the software licenses were for a limited period, did not provide enduring benefit, and relied on judicial precedents. The disallowance by the AO was deleted.

The Tribunal held that the AO had conducted a proper inquiry and taken a plausible view, which was not unsustainable in law. It distinguished the Supreme Court's Totgars judgment, stating it was specific to retained sale consideration and not idle surplus funds. Relying on various jurisdictional High Court judgments, the Tribunal concluded that interest earned from co-operative and commercial banks, when invested as statutory reserves, is attributable to the business of the co-operative society and eligible for deduction under Section 80P. Therefore, the PCIT's revisionary order u/s 263 was annulled.

The Tribunal held that the PCIT was justified in invoking revisionary jurisdiction under Section 263. The assessment records did not show that the AO conducted any inquiry or verification on the two disputed issues. The Tribunal noted the absence of any questionnaire, reply from the assessee, or report from a Verification Unit regarding these substantial claims, supporting the PCIT's finding of lack of inquiry.

The Tribunal noted that the previous order had set aside the quantum assessment. Therefore, penalty proceedings based on an assessment order that is no longer valid cannot be sustained. The penalty proceedings were also set aside for fresh consideration.

The Tribunal condoned the delay in filing the appeal due to the assessee's bonafide medical reasons and his Chartered Accountant's health issues. The Tribunal found that the CIT(A) had dismissed the appeal for non-prosecution without hearing the assessee on merits. The Tribunal restored the appeal to the file of the CIT(A) for fresh adjudication on merits.

The Tribunal held that software license fees were allowable as revenue expenditure. It allowed depreciation on intangible assets, ruling that the sixth proviso to Section 32(1) was not applicable as there was no succession of business as a whole and the predecessor had not claimed depreciation. For R&D expenses, the entire weighted deduction under Section 35(2AB) was allowed, as the quantification requirement in Rule 6(7A) could not override the substantive provisions of the Act once Form 3CL was produced. The issue of foreign taxes as business expenses was remanded to the Assessing Officer for fresh examination and verification.

The Tribunal held that the deduction under section 80P should be allowed from the Gross Total Income, not restricted to 'Profits and Gains of Business or Profession'. The Tribunal set aside the CIT(A)'s finding on this limited issue and directed the Assessing Officer to recompute the deduction.

The Tribunal held software license fees to be revenue expenditure and allowed depreciation on intangible assets by ruling that the succession provisions and related provisos were inapplicable. It also allowed the weighted deduction for R&D, stating that procedural non-compliance or partial quantification by DSIR should not deny the substantive benefit. The issue of foreign tax as business expenditure was remanded to the AO for factual verification.

The Tribunal held that the AO had taken a plausible view in allowing the deduction claimed by the assessee. The Tribunal noted that the issue of whether interest income earned from co-operative banks/financial institutions is attributable to the business of a co-operative society is debatable and that the AO's conclusion was supported by various judgments. The Tribunal found that the PCIT's invocation of Section 263 was not justified as the AO's order was neither erroneous nor prejudicial to the interest of the revenue. The Tribunal also emphasized that Section 263 does not allow for the substitution of the Commissioner's view for that of the Assessing Officer when a plausible view has been taken.

The Tribunal held that the PCIT's invocation of Section 263 was not justified. The AO had conducted necessary inquiries and arrived at a plausible view by allowing the deduction, supported by various High Court judgments. The Tribunal found that the PCIT could not substitute his own view for that of the AO, especially when the AO had taken a view that was legally sustainable.

The Tribunal held that software license expenditure for application software with a short useful life and requiring frequent renewal is allowable as revenue expenditure. The Tribunal also held that the CIT(A) wrongly remitted the issue back to the AO, as all facts were on record and the CIT(A) should have decided on merits.

The Tribunal held that software license fees are allowable as revenue expenditure, as they are for limited periods and do not create an enduring asset. It also held that the sixth proviso to section 32(1) is not applicable to the intangible asset depreciation claim as there was no succession of business as a whole, and the proviso only applies in the year of succession and when there is an aggregate deduction. Regarding R&D expenditure, the Tribunal held that Form 3CL is a procedural requirement and its delay or non-submission does not automatically disqualify the deduction, especially when the substantive conditions of section 35(2AB) are met. The unquantified portion is also eligible for deduction under section 35(1)(i).

The Tribunal noted that while the Assessee could not furnish complete details for the cost of improvement and brokerage, they provided some information. The Assessing Officer had the power to verify these costs, potentially with the help of a valuation officer. The CIT(A) dismissed the appeal without discussing merits. The Tribunal restored the matter to the Assessing Officer for re-evaluation.

The Tribunal observed that the assessee's books of accounts were audited, and no defects were pointed out by revenue authorities. Differences between Form 26AS and the books might arise due to various reasons beyond the assessee's control. The AO should have conducted further inquiries instead of making a straight addition.

The Tribunal found it surprising and unacceptable that the AO disallowed interest without proper reasoning. Although the assessee was given multiple opportunities, they failed to submit evidence. The Tribunal decided to remit the issue back to the AO for fresh adjudication, granting the assessee another opportunity but imposing a cost.

The Tribunal noted that while the CIT(Exemption) issued notices, the assessee had visited the office seeking an extension and subsequently submitted documents. The Tribunal found that the contention of non-response and failure to submit documents was not entirely correct.

The Tribunal held that deductions under Chapter VI-A, including section 80P, are to be calculated with reference to the Gross Total Income, not restricted to business income. The AO's restriction of the deduction solely to business income was incorrect. The Tribunal set aside the CIT(A)'s finding on this limited issue and directed the AO to recompute the deduction.

The Tribunal held that the restriction of Section 80P deduction to income assessed under 'Profits and Gains of Business or Profession' by the CIT(A) was incorrect. Deductions under Chapter VI-A, including Section 80P, are to be allowed from Gross Total Income, irrespective of the head of income, as per the Supreme Court's ruling in CIT v. Reliance Energy Ltd.

The Tribunal referred to the Hon'ble Karnataka High Court's later judgment in the assessee's own case (395 ITR 611) which held that interest income earned from deposits with co-operative banks is not eligible for deduction under section 80P(2)(d), even after considering sub-section (4) of section 80P. The exclusion under section 80P(4) is broad enough to deny such benefit, except for primary agricultural credit societies.

The Tribunal condoned the delay, acknowledging the genuine hardship faced by the assessee. The issue was whether the assessee was entitled to a deduction for the cost of acquisition and improvement of the inherited property. The Tribunal found that the existence of the residential building and renovation could not be dismissed for lack of absolute documentary evidence.

The Tribunal held that passing a reassessment order in the name of a non-existent entity, which has merged with another company, is invalid and deserves to be quashed. This jurisdictional ground, raised for the first time, goes to the root of the matter and is therefore admitted.

The Tribunal held that the assessee had provided evidence of charitable activities through its trust deed and financial statements. It was also found that the Ld.CIT(E) had not provided the assessee with a reasonable opportunity to be heard before rejecting the application.

The Tribunal found that the CIT(A)'s rejection of additional evidence submitted by the assessee was technical and that the assessee's contentions were not considered. The Tribunal decided to restore the appeal to the Assessing Officer for fresh adjudication.

The assessee filed a letter to withdraw the appeals. The Revenue had no objection. The Tribunal permitted the assessee to withdraw the appeals.

The Tribunal noted that the assessee had indeed responded to notices and appeared. However, due to the temporary absence of the authorized representative and the issuance of a show cause notice during this period, a proper reply was not filed. The Tribunal decided to grant one more opportunity to the assessee.

The Tribunal held that deductions under sections 15-17 of the Act, including HRA and perquisites, should be allowed if in accordance with law, irrespective of whether a return was filed. It further clarified that deductions under Sections 80C, 80D, and 80TTA are not prohibited by Section 80AC, even if the return was not filed on time, as these fall under different categories.

The Tribunal noted that the CIT(A) correctly directed the exclusion of certain comparable companies, including Universal Print Systems Ltd., Infosys BPO Ltd., TCS E Serve Ltd., Excel Infoways Ltd., Harton Communications Ltd., and Capgemini Business Services (India) Pvt. Ltd., due to functional dissimilarity and other reasons. The disallowance of relocation expenses was remitted back to the CIT(A) for fresh examination in light of the India-US DTAA.

The Tribunal held that the CIT(A) was correct in directing the exclusion of Universal Print Systems Ltd., Infosys BPO Ltd., TCS E Serve Ltd., and Excel Infoways Ltd. from the list of comparables due to functional dissimilarity, brand value, extraordinary events, and other factors. For AY 2013-14, the disallowance of relocation expenses was remitted back to the CIT(A) for fresh examination.

The Tribunal held that the CIT(E)'s rejection was based on considerations beyond the scope of Section 12AB, such as adequacy of expenditure and donor creditworthiness. It was emphasized that genuineness of activities and charitable nature of objects are the primary criteria at the registration stage, while detailed scrutiny of expenses and donations falls under assessment proceedings. The Tribunal also noted that ownership of assets by a trustee is not a bar to granting registration.

The Tribunal held that the Assessee, being a co-operative credit society earning interest from co-operative banks, should be allowed the deduction under section 80P(2)(a)(i). The Tribunal found that the lower authorities did not establish that the interest income was not attributable to the specified business of the Assessee or that it was from funds not required for business purposes.

The assessee filed a letter to withdraw their appeals. The Ld.DR had no objection to this withdrawal. The Tribunal permitted the assessee to withdraw their appeals.

The Tribunal held that the additional grounds of appeal raised by the assessee were admissible for adjudication. The Tribunal also decided to include certain companies previously excluded by the DRP in the final set of comparables, particularly those rejected solely on the basis of differing accounting years, provided they otherwise meet comparability criteria. Regarding the Section 10A deduction, the Tribunal followed the Supreme Court's decision, holding that expenses excluded from export turnover must also be excluded from total turnover when computing the deduction.

The Tribunal admitted the additional grounds of appeal. It held that companies functionally dissimilar, owning significant intangibles, engaged in diversified or product-based activities, or lacking segmental data are liable to be excluded. Companies accepted by both the assessee and TPO cannot be excluded suo motu by the DRP without compelling reasons. Mere difference in accounting year is not a valid ground for rejection when reliable quarterly data is available. The Tribunal also held that telecommunication expenses excluded from export turnover must also be excluded from total turnover for computing deduction under section 10A.

The Tribunal condoned a delay of 15 days in filing the present appeal, deeming it nominal and unintentional. The Tribunal found that the CIT(A) had not properly considered all the reasons provided by the assessee for the delay in the previous appeal. The Tribunal also noted a potential issue of double taxation of salary income.

The Tribunal ruled that the AO had conducted a proper inquiry and adopted a plausible view in allowing the Section 80P(2)(a)(i) deduction, finding the interest income attributable to the assessee's business. It emphasized that where two plausible views exist after due examination by the AO, the PCIT cannot revise the order under Section 263 simply due to a disagreement, and found the Totagars precedent distinguishable. Consequently, the Tribunal concluded the assessment order was neither erroneous nor prejudicial.

The Tribunal held that Explanation 5A to Section 271(1)(c) is applicable only to searched persons and not to 'other persons' assessed under Section 153C. Furthermore, the penalty under Section 270A was not sustainable as the assessment was completed without any variation and the additional income was offered on an estimated basis, not due to specific incriminating evidence or misreporting.

The Tribunal held that Explanation 5A to section 271(1)(c) is applicable only to a searched person and not to a person assessed under section 153C. Furthermore, in cases where the assessed income matches the returned income, the question of under-reporting does not arise, making section 270A inapplicable. The penalty was levied based on an estimated offer, not on specific incriminating evidence.

The Tribunal held that Explanation 5A to Section 271(1)(c) is applicable only to searched persons and not to persons assessed under Section 153C. Furthermore, the assessment was completed without independent quantification of undisclosed income, and the offer of 1% of turnover was an estimated amount to buy peace, not based on specific incriminating evidence. For AY 2017-18 onwards, the Tribunal found that penalty under Section 270A cannot be invoked when the assessed income is the same as the returned income, as there is no under-reporting.

The Tribunal held that Explanation 5A to Section 271(1)(c) is applicable only to searched persons and not to persons assessed under Section 153C. The Tribunal also found that the assessment was completed without independent quantification of undisclosed income, and the additional income offered was estimated rather than based on specific evidence, thus not justifying the penalty. The penalty under Section 270A was also held to be not sustainable as the assessed income was the same as the returned income, and there was no evidence of misreporting.

The Tribunal held that Explanation 5A to section 271(1)(c) is applicable only to searched persons and not to persons assessed under section 153C. Furthermore, for penalty under section 270A, under-reporting of income is a prerequisite, which was not established as the assessment was accepted without variation. The voluntary offer of income was considered an estimation to buy peace and not a direct result of specific incriminating evidence.

The Tribunal held that Explanation 5A to Section 271(1)(c) is applicable only to the searched person, not to an 'other person' assessed under Section 153C. Moreover, the additional income was offered on an estimated basis to buy peace, not based on specific incriminating evidence. The assessment itself did not have any additions or disallowances.

The Tribunal noted that both the assessment order and the CIT(A) order were ex parte, and the assessee did not get an adequate opportunity to present its case. Considering the submissions and the lack of objection from the revenue, the Tribunal restored the matter to the AO for fresh adjudication.

The Tribunal held that revenue recognition under PCM requires legally enforceable agreements, not just booking advances or booked areas. The 10% realization condition from the Guidance Note must also be met. The AO's approach was not in line with accounting standards.

The Tribunal held that revenue recognition under POCM must be based on legally enforceable agreements and not merely on booking advances or booked areas. The requirement of realizing at least 10% of the agreement value was also emphasized. The Tribunal noted that the same revenue was offered to tax in a subsequent year, preventing double taxation.

The Tribunal noted that the delay was not inordinate and not intentional. The Tribunal held that disputes should be decided on merits and the assessee should be given an opportunity to contest the additions. Therefore, the delay deserves to be condoned.

The Tribunal held that the cancellation of registration was valid and that the assessee's activities, including promoting political articles, biased promotion of selected content, supporting polarized content, and providing grants to profit-making entities without clear evidence of services rendered, were not in consonance with its charitable objects. The Tribunal also addressed arguments regarding the PCIT's jurisdiction and the retrospective effect of the cancellation.

The Tribunal held that AMP expenditure adjustments require a separate international transaction analysis and that previous decisions in the assessee's own case favor them. Regarding interest on delayed receivables, a 30-day credit period was deemed reasonable, and the interest rate was adjusted to LIBOR + 200 basis points. Seminar and convention expenses were restored to the assessing officer for verification in light of Supreme Court decisions.

The Tribunal held that additions made solely on the basis of statements recorded during a survey and loose sheets, without any corroborative evidence, are not sustainable. The Supreme Court and High Courts have consistently held that such materials lack evidentiary value on their own.

The Tribunal held that the estimation of income by the AO was based on surmise and conjecture, lacking corroborative evidence. Statements recorded during a survey under Section 133A have limited evidentiary value unless supported by other evidence. The loose sheet found was considered a 'dumb document' without specific details or correlation to the assessee's business. The audit report of the assessee's books of accounts did not reveal any discrepancies.

The Tribunal held that the addition made by the AO was based on surmise and conjecture, not supported by any corroborative evidence. The statements recorded were not voluntary, and the loose sheets were considered 'dumb documents' without any evidentiary value. The audit reports did not point out any mistakes in the maintenance of books of accounts, suggesting correct income declaration.