ITAT Hyderabad Judgments — May 2025

The Tribunal confirmed that 'lease rental income' and 'interest on others' were not eligible for Section 80IC deduction due to a lack of direct nexus with the manufacturing activity. 'Product Development Income' and 'Liabilities written back' were remanded to the AO for fresh verification and adjudication based on specific criteria. 'Capital subsidy amortization' and 'Miscellaneous income' were also held not eligible for deduction under Section 80IC.

The Tribunal held that the AO's jurisdiction was not limited to the specified reasons for scrutiny and could examine all aspects of the ROI. It was also held that the entire amount collected as development charges is liable to be treated as revenue receipts, and there was no restriction on the assessee's utilization of 85% of these charges for specified objects. The issue regarding TDS deduction and GST/ST claims were remanded to the AO for verification.

The Tribunal held that the interest on FCCDs should be benchmarked using the domestic PLR and directed the AO/TPO to recompute the ALP accordingly. Regarding the income from letting out property, the Tribunal held it should be assessed as business income, not income from house property.

The Tribunal dismissed the assessee's grounds challenging the AO's jurisdiction for complete scrutiny and the treatment of 85% of development charges as revenue receipts. However, the Tribunal remanded several other issues for factual verification by the AO, including the claim of TDS as application of income, repayment of a HUDCO loan as application of income, set-off of brought forward deficits (clarifying Explanation 5 to Section 11(1) is prospective), discrepancies in total expenditure, and the treatment of GST/Service Tax paid as application of income. These grounds were partly allowed for statistical purposes, requiring the AO to re-examine the records and allow claims as per law.

The Tribunal held that the compensation paid to OXEECO was a penal in nature for the failure to transfer shares, and not an expenditure incurred wholly and exclusively in connection with the transfer of shares to Harsco Investments Europe BV. Therefore, it is not allowable as a deduction under Section 48 of the Income Tax Act.

The Tribunal affirmed the DRP's decision, concluding that the services rendered by the US Head Office (including identifying projects, technical analysis, and supervision) were technical in nature and qualified as FTS that were "made available" to the Indian PE, thus taxable in India under Article 12 of the Indo-US DTAA. Since the assessee failed to deduct TDS under Section 195 on these payments, the disallowance under Section 40(a)(i) was justified. A previous remand on Section 44C issues was deemed not relevant to the current disallowance.

The Tribunal upheld the CIT(A)'s decision to delete additions for unexplained investments in two land purchases (Rs. 42.62 lacs and Rs. 45.79 lacs), agreeing that the AO's reliance on seized documents was unsubstantiated and lacked independent inquiry. Regarding the Rs. 3.33 Crores addition for undisclosed income, the Tribunal noted issues with the assessee's revised return but acknowledged the evidentiary value of the MD's disclosure under Section 132(4). The issue of the Rs. 3.33 Crores addition was remanded to the AO for re-adjudication, requiring clear observations on the cash book explanation and the alleged suppression of sale proceeds.

The Tribunal held that a statement recorded under Section 132(4) alone, without corroborating evidence, cannot justify an addition. The Tribunal also noted that the AO had not properly substantiated the grounds for making additions regarding land investments and suppressed sale proceeds.

The Tribunal held that the CIT's order was non-speaking and lacked application of mind, as it did not refer to the submitted documents or provide cogent reasons for rejection. The Tribunal set aside the CIT's order and restored the matter for fresh adjudication.

The Tribunal observed that while the TPO's role is to determine ALP and not necessarily the benefit accrued, the appellant failed to provide sufficient evidence to prove the nature and rendering of services by its AEs. However, the Tribunal also noted inconsistencies in the TPO's approach, particularly accepting similar payments in a subsequent assessment year and deeming financials of AEs as un-audited. Thus, the matter was remanded for reconsideration.

The Tribunal condoned the delay in filing the appeal before the CIT(A), citing the assessee's NRI status and the circumstances surrounding the pandemic and international travel restrictions. The matter was remanded to the Assessing Officer for fresh adjudication.

The Tribunal held that the provisions of Section 56(2)(vii)(c) are not applicable to the fresh allotment of shares under a Rights Issue, affirming that for this section to apply, the 'property' must pre-exist to be 'received from any person'. Since the shares are created upon allotment, they cannot be considered as 'received from any person'. Furthermore, the Tribunal found that the AO had taken a plausible view after conducting due inquiry, and thus the PCIT could not invoke Section 263 merely based on a disagreement with the AO's view without providing conclusive findings.

The Tribunal held that Section 56(2)(vii)(c) is not applicable to fresh allotment of shares under a Right Issue, as shares come into existence on allotment and are not 'received from any person,' which is a fundamental requirement of the section. Citing the Gujarat High Court in PCIT Vs. Jigar Jashwant Lal Shah, it was affirmed that 'property' must pre-exist for the section to apply. As the AO had conducted an inquiry and adopted a plausible view, the PCIT's invocation of Section 263 was not justified.

The Tribunal observed that the sale deed did not specify the mode of payment, and the lower authorities incorrectly presumed cash payment based on this absence and the assessee's lack of explanation. The Tribunal ruled that this presumption was incorrect and set aside the CIT(A)'s order, remanding the issue to the Assessing Officer for fresh examination to ascertain the actual mode of payment after providing the assessee an opportunity to be heard.

The Tribunal held that the assessee, having possession, control, and dominion over the building, is considered its owner for depreciation purposes, even without a registered sale deed. Regarding demonetized currency deposits, the Tribunal found that the assessee provided a genuine explanation of cash sales, and merely violating RBI guidelines did not automatically make the deposit unexplained income.

The Tribunal held that the CIT(A) erred in deleting the addition of Rs. 1.43 crores as the assessee failed to provide sufficient evidence regarding the source of funds from scrap sales, including TCS details. The Tribunal also noted that the deletion of Rs. 43 lakhs by the CIT(A) on technical grounds was contrary to the material on record, and remanded this issue for further verification.

The Tribunal held that the delay in filing the appeal before the CIT(A) was condonable due to sufficient and reasonable cause. It was also held that the assessment order passed under the old PAN could not survive if the transactions were already accounted for under the new PAN.

The Tribunal held that the delay in filing the appeal before the CIT(A) was due to sufficient and reasonable cause. The assessment order passed under the old PAN was set aside, and the matter was restored to the Assessing Officer for verification of transactions.

The Tribunal held that the delay in filing the appeal before the CIT(A) was to be condoned due to sufficient and reasonable cause. It was also held that the assessment orders passed under the old PAN for the impugned assessment years cannot survive if the transactions were already accounted for under the new PAN. The matter was restored to the Assessing Officer for verification.

The Tribunal held that the delay in filing the appeal before the CIT(A) was condoned due to sufficient and reasonable cause. The Tribunal set aside the CIT(A)'s order and restored the issue to the AO for verification of transactions reported under the old PAN to ascertain if they were already accounted for in the company's books. The penalty levied was also set aside.

The Tribunal held that no transfer under Section 2(47)(v) occurred in the year under consideration as no consideration was received by the assessee and no development activity commenced due to lack of municipal approvals. Relying on judicial precedents and the legislative intent behind Section 45(5A), it concluded that capital gains cannot be taxed when no consideration has been received. The AO was directed to delete the addition made towards Short Term Capital Gain.

The Tribunal held that the assessment order passed under the old PAN cannot survive if the transactions were already accounted for under the new PAN. It was also found that the delay in filing the appeal before the CIT(A) was due to sufficient and reasonable cause, as the appellant was not aware of the reassessment proceedings. Consequently, the delay was condoned, and the appeals were allowed.

The Tribunal held that the re-assessment order passed under the old PAN for the assessment years 2015-2016 and 2017-2018 cannot survive if the transactions were already accounted for under the new PAN. The delay in filing the appeal before the CIT(A) was condoned due to sufficient cause. The matter was restored to the Assessing Officer for verification of transactions and to set aside the CIT(A)'s order.

The Tribunal noted that the assessee had provided multiple explanations for the source of the cash, including personal savings and professional receipts, and a withdrawal of Rs. 3 lakhs from his wife's bank account. However, documentary evidence for professional receipts and confirmation from the wife were lacking. Considering the principle of natural justice and the assessee's readiness to produce evidence, the Tribunal set aside the order and restored the issue to the Assessing Officer for a fresh decision.

The ITAT condoned a 175-day delay in filing the appeal, citing bona fide reasons. For A.Y 2016-17, it restored the issues of cash deposits (Rs. 8.40 Crores), contractor payments (Rs. 4.52 Crores), and interest income (Rs. 14.79 lacs) to the A.O. for re-adjudication. For A.Y 2017-18, it similarly restored the cash deposit issue (Rs. 94.86 lacs) and the 10% ad hoc disallowance of expenses, while dismissing the disallowance under Section 40(a)(ia) as not pressed. The A.O. was directed to re-work interest liabilities under Sections 234A and 234B following the de novo assessments.

The Tribunal noted that the Assessing Officer levied interest under Section 234A on the premise that no return was filed, which was contradicted by the record. The assessee claimed adjustment of seized cash against tax liability, which also needed verification.

The ITAT condoned the 175-day delay in filing the appeal, accepting the bona fide reasons for the assessee's unawareness of the CIT(A) order, and admitted additional evidence. For both assessment years, the ITAT restored the issues of unexplained cash deposits (Section 69A), nature of payments to contractors (unexplained money vs. actual receipts), and interest income back to the AO for re-adjudication with directions to verify claims and provide a reasonable opportunity of being heard. Additionally, the ad-hoc disallowance of expenses for AY 2017-18 was also remitted back for verification under Section 37(1), and consequential interest levies were to be re-determined.

The Tribunal held that the CIT(E)'s cancellation order was based on incomplete facts, unverified allegations, and premature reliance on pending proceedings. It set aside the order and remanded the case back to the CIT(E) for fresh examination of the grounds for cancellation, requiring a fresh speaking order after providing the assessee adequate opportunity to present evidence.

The Tribunal condoned the delay in filing the appeal, noting the transitional phase of management as a reasonable cause. The Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication, allowing the assessee an opportunity to be heard.

The Tribunal held that the assessee had disclosed the full commission income and claimed the expenses incurred to earn it in the original return of income. Therefore, the addition made by the AO was deleted. For AY 2016-17, the Tribunal found that the claim for deduction u/s 54F was based on bonafide belief and correct facts, and the disallowance did not constitute concealment of income, thus deleting the penalty.

The Tribunal held that the addition made by the AO on account of commission income for AY 2013-14 was not based on correct facts, as the assessee had disclosed the gross commission and expenses in the original return. For AY 2016-17, the penalty levied under Section 271(1)(c) was deleted as the assessee's claim for deduction under Section 54F, though partly disallowed, was based on bonafide belief and disclosed facts.

The Tribunal held that the penalty under Section 271AA is leviable for failure to maintain and furnish information as required under Section 92D. The assessee had submitted the transfer pricing study documents to the TPO, and failure to file Form 3CEB attracts a separate penalty under Section 271AB, not Section 271AA.

The Tribunal condoned the delay of 49 days, subject to a cost of Rs. 5000/-, considering the circumstances and in the interest of justice. The ex-parte order of the CIT(A) was set aside and the matter was remanded to the Assessing Officer for fresh adjudication.

The Tribunal held that the assessee's explanation for the cash deposit as accumulated rental income was plausible and supported by consistent rental receipts. The addition made by the AO and confirmed by the CIT(A) was based on suspicion rather than concrete evidence.

The Tribunal held that certain companies like Tata Elxsi, Persistent Systems, Aspire Systems, Infosys, Thirdware Solutions, Cybage Software, and Infobeans Technologies should be excluded from the comparable list based on functional dissimilarity, turnover, size, or other specific reasons. However, it directed further examination for some comparables based on the search matrix issue. Regarding the provision for bad debt, it was held to be non-operating in nature.

The Tribunal held that the services provided by the assessee were indeed technical engineering design services and not KPO services. It also excluded certain comparable companies based on functional dissimilarity and turnover mismatch, while upholding the inclusion of others after re-evaluating RPT filters. The Tribunal also decided on the treatment of exceptional items, management fees, and amortization of goodwill.

The Tribunal upheld the additions made by the AO and confirmed by the CIT(A). Regarding the cash deposits, the Tribunal rejected the assessee's claim of a higher opening cash balance, noting that the Schedule AL in the filed return showed a lower amount and the balance sheet relied upon had no evidentiary value as it was not filed with the return. For the rental income, the Tribunal affirmed that the income from allowing the erection of a hoarding on the terrace, as per the agreement, was rightly taxable under 'income from other sources' and not 'income from house property', distinguishing the judicial pronouncements relied upon by the assessee.

The Tribunal largely upheld the CIT(A)'s decisions. It deleted the additions for unexplained cash credits/advances, finding that transactions were through banking channels and the inability to provide some confirmations was due to criminal cases against the parties or that sales were adjusted in subsequent years. The additions for unaccounted sale consideration, based on retracted statements and without incriminating material, were also deleted. The disallowance under Section 40(a)(ia) was deleted, applying the proviso that if the payee has paid the tax, the deductor is not deemed in default, even if TDS was not remitted. The legal grounds challenging the validity of the Section 153A assessment were deemed academic.

The Tribunal held that the assessee had cumulatively satisfied the conditions laid down in CBDT Circular No. 6/2022 for condonation of delay in filing Form 10-IC. Therefore, the assessee is entitled to the concessional tax rate under Section 115BAA.

The Tribunal held that the initiation of proceedings under Section 153A was bad in law as no valid search under Section 132 was conducted. The Tribunal also dealt with additions related to unexplained credits and unaccounted sales, deleting or partly allowing certain additions based on the evidence presented. The disallowance under Section 40(a)(ia) for non-remittance of TDS was deleted based on a harmonious interpretation of statutory provisions and evidence of the payee having paid the tax.