ITAT Bangalore Judgments — January 2026

The Tribunal held that interest income earned from statutory deposits made with co-operative banks, in compliance with the Karnataka Souharda Sahakari Act, 1997, is eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act. The Tribunal found that these deposits are part of the society's business activities.

The Tribunal held that the assessee demonstrated a reasonable cause for the delay in filing the tax audit reports, considering his and his auditor's health issues and lack of computer proficiency. Therefore, the penalty levied under Section 271B was not justified.

The Tribunal held that the assessee had demonstrated a reasonable cause for the delay in filing the tax audit reports, considering his own health issues and those of his auditor, as well as their limited computer knowledge. Therefore, the penalty levied under Section 271B was not justified.

The Tribunal held that the assessee demonstrated a reasonable cause for the delay in filing the tax audit reports, considering his and his auditor's health issues and lack of computer proficiency. Therefore, the penalty levied under Section 271B was not justified.

The Tribunal held that companies with substantially higher turnover than the assessee should be excluded from the comparable list in the software development segment. It reasoned that a wide disparity in turnover impacts economies of scale, brand value, market positioning, and risk profile, materially affecting margins. Following judicial precedents, the Tribunal directed the exclusion of ten specific companies with turnovers far exceeding the assessee's Rs. 7.55 crore, including TCS Ltd. and Infosys Ltd. This resulted in Ground No. 8 being allowed. Regarding functionally dissimilar comparables, the Tribunal agreed that Aptus Software Labs Private Limited, engaged in diversified businesses, was not functionally comparable to the assessee's software development services. The Tribunal also addressed the interest on trade receivables, holding that the SBI PLR was misplaced for foreign currency transactions. It directed the re-computation of the adjustment at LIBOR plus 200 basis points, considering a standard credit period of thirty days or as per agreement/invoice, following the Bombay High Court's decision in Pr. CIT v. Tecnimont (P.) Ltd. The grounds related to interest on receivables were partly allowed.