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“commercial substance”

GAARSection 97Section 97140 judgments

The decision most relied on for commercial substance is 277(D- E) and CIT v. U.P. State Industrial Development Corporation (225 ITR 703), cited in 49 judgments on BharatTax.

Leading authorities on commercial substance

277(D- E) and CIT v. U.P. State Industrial Development Corporation
225 ITR 703 · 1997 · Supreme Court
49
citing judgments

The ordinary principles of commercial accounting should be applied for ascertaining profits and gains, provided they do not contradict the Income-tax Act.

Killick Nixon Ltd. v. Deputy Commissioner of Income-tax
20 Taxmann.com 703 · 2012 · High Court
20
citing judgments

Transactions lacking commercial substance, such as circular share transactions designed to generate artificial capital losses, are not genuine and may be disregarded by tax authorities.

Income Tax Vs. India Discount Co. Ltd. 75 ITR 191 (SC), Commissioner of Income Tax v. Provincial Farmers (P) Ltd.
108 ITR 219 · High Court
16
citing judgments

The true nature of a transaction is determined by the substance of the transaction itself, not merely by the nomenclature used in the books of accounts. Payments made for the expansion of an existing business into new geographical areas before commercial exploitation are not necessarily loans or advances but can be considered trading transactions.

Judgments citing commercial substance

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1456/BANG/2024[2015-16]Status: DisposedITAT Bangalore16 Jul 2025AY 2015-16

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Incomer Tax, Central Circle-1(3), Bangalore

ITA 1455/BANG/2024[2014-15]Status: DisposedITAT Bangalore16 Jul 2025AY 2014-15

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 52 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Ishaan Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1454/BANG/2024[2013-14]Status: DisposedITAT Bangalore16 Jul 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 52 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Amarthya Siddhartha L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1453/BANG/2024[2018-19]Status: DisposedITAT Bangalore16 Jul 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1452/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Jul 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 52 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1451/BANG/2024[2016-17]Status: DisposedITAT Bangalore16 Jul 2025AY 2016-17

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1450/BANG/2024[2015-16]Status: DisposedITAT Bangalore16 Jul 2025AY 2015-16

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

Appeal of the revenue is hereby dismissed

ITA 1449/BANG/2024[2014-15]Status: DisposedITAT Bangalore16 Jul 2025AY 2014-15

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mr. Amarthya Siddhartha L/R of Late Sri. V G . Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1448/BANG/2024[2013-14]Status: DisposedITAT Bangalore16 Jul 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1447/BANG/2024[2018-19]Status: DisposedITAT Bangalore16 Jul 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1446/BANG/2024[2017-18]Status: DisposedITAT Bangalore16 Jul 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1445/BANG/2024[2016-17]Status: DisposedITAT Bangalore16 Jul 2025AY 2016-17

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

In the result the appeal filed by the revenue is hereby dismissed

ITA 1444/BANG/2024[2015-16]Status: DisposedITAT Bangalore16 Jul 2025AY 2015-16

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1443/BANG/2024[2014-15]Status: DisposedITAT Bangalore16 Jul 2025AY 2014-15

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

case of Durga Paras More reported in 82 ITR 540 and the judgment various High Courts concluded that the transaction was devoid of any commercial substance and amounted to a sham intended to evade taxes. Consequently, the loss claimed by the assessee on account of debenture redemption was held ... 1459/Bang/2024 Page 53 of 116 43.4 We also address the argument raised by the department that the transaction lacked “business expediency” or commercial substance. It is a well-settled legal principle that the revenue authorities cannot sit in the chair of the businessman and decide what

Mrs. Malavika Hegde L/R of Late Sri. V G Siddhartha, Bangalore vs. The Deputy Commissioner of Income Tax, Central Circle-1(3), Bangalore

ITA 1442/BANG/2024[2013-14]Status: DisposedITAT Bangalore16 Jul 2025AY 2013-14

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Shri C Ramesh, CAFor Respondent: Ms. Neha Sahay, JCIT (DR)
Section 132Section 143(3)Section 153A

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL

Manish Ranjan, DCIT, Central Circle-1(2), Ahmedabad vs. Rashmin Kantilal Vakta, Ahmedabad

ITA 866/AHD/2024[2014-15]Status: DisposedITAT Ahmedabad15 Jul 2025AY 2014-15

Bench: Ms.Suchitra R. Kamble & Shri Makarand V.Mahadeokar

For Appellant: Shri S.N. Divetia, AR and Shri Samir Vora, ARFor Respondent: Shri Rignesh Das, CIT-DR
Section 143(1)Section 143(3)Section 147Section 148Section 153CSection 68

assessee as customers or suppliers. This dual role of the same parties, as creditors and as trading counterparties, raises serious questions regarding the commercial substance and economic reality of these transactions. There is no discussion in the CIT(A)’s order about whether the funds advanced as loans originated from ... pattern of repeated large cash withdrawals and immediate or proximate redeposits, without identifiable business transactions or necessity, does give rise to doubts regarding the commercial substance of these movements. The nature of the assessee’s business, which otherwise operates largely through banking channels, does not explain the need for such

Manish Ranjan, DCIT, Central Circle-1(2), Ahmedabad, Aaykar Bhawan Ashram Road vs. Rashmin Kantilal Vakta, Ellisbridge Ahmedabad Gujarat

ITA 865/AHD/2024[2013-14]Status: DisposedITAT Ahmedabad15 Jul 2025AY 2013-14

Bench: Ms.Suchitra R. Kamble & Shri Makarand V.Mahadeokar

For Appellant: Shri S.N. Divetia, AR and Shri Samir Vora, ARFor Respondent: Shri Rignesh Das, CIT-DR
Section 143(1)Section 143(3)Section 147Section 148Section 153CSection 68

assessee as customers or suppliers. This dual role of the same parties, as creditors and as trading counterparties, raises serious questions regarding the commercial substance and economic reality of these transactions. There is no discussion in the CIT(A)’s order about whether the funds advanced as loans originated from ... pattern of repeated large cash withdrawals and immediate or proximate redeposits, without identifiable business transactions or necessity, does give rise to doubts regarding the commercial substance of these movements. The nature of the assessee’s business, which otherwise operates largely through banking channels, does not explain the need for such

Rashmin Kantilal Vakta, Ahmedabad vs. The DCIT, Central Circle-1(2), Ahmedabad

ITA 830/AHD/2024[2014-15]Status: DisposedITAT Ahmedabad15 Jul 2025AY 2014-15

Bench: Ms.Suchitra R. Kamble & Shri Makarand V.Mahadeokar

For Appellant: Shri S.N. Divetia, AR and Shri Samir Vora, ARFor Respondent: Shri Rignesh Das, CIT-DR
Section 143(1)Section 143(3)Section 147Section 148Section 153CSection 68

assessee as customers or suppliers. This dual role of the same parties, as creditors and as trading counterparties, raises serious questions regarding the commercial substance and economic reality of these transactions. There is no discussion in the CIT(A)’s order about whether the funds advanced as loans originated from ... pattern of repeated large cash withdrawals and immediate or proximate redeposits, without identifiable business transactions or necessity, does give rise to doubts regarding the commercial substance of these movements. The nature of the assessee’s business, which otherwise operates largely through banking channels, does not explain the need for such

Rashmin Kantilal Vakta, Ahmedabad vs. The DCIT, Central Circle-1(2), Ahmedabad

ITA 829/AHD/2024[2013-14]Status: DisposedITAT Ahmedabad15 Jul 2025AY 2013-14

Bench: Ms.Suchitra R. Kamble & Shri Makarand V.Mahadeokar

For Appellant: Shri S.N. Divetia, AR and Shri Samir Vora, ARFor Respondent: Shri Rignesh Das, CIT-DR
Section 143(1)Section 143(3)Section 147Section 148Section 153CSection 68

assessee as customers or suppliers. This dual role of the same parties, as creditors and as trading counterparties, raises serious questions regarding the commercial substance and economic reality of these transactions. There is no discussion in the CIT(A)’s order about whether the funds advanced as loans originated from ... pattern of repeated large cash withdrawals and immediate or proximate redeposits, without identifiable business transactions or necessity, does give rise to doubts regarding the commercial substance of these movements. The nature of the assessee’s business, which otherwise operates largely through banking channels, does not explain the need for such

Essar Communications Limited, Mauritius vs. ACIT, Circle-1 (2)(2), New Delhi

ITA 340/DEL/2022[2012-13]Status: DisposedITAT Delhi30 Jun 2025AY 2012-13

Bench: SHRI SATBEER SINGH GODARA (Judicial Member), SHRI S. RIFAUR RAHMAN (Accountant Member)

For Appellant: Shri Percy Pardiwala, Sr. AdvocateFor Respondent: Shri N. Venkatraman, ASG
Section 250Section 253Section 6(3)

ECOM deciding the application of the impugned shares 6.13 Infographics of Frequent changes in holding Para 30 (page 86-88) ECL structure devoid of commercial substance Para 30 (page 82-85) ECOM 6.14 Settlement of tax dispute before the AAR on Para 31 (page 89-90) ECL 01.07.2011 through deed ... management of affairs wholly in India 15. CIT(A) finding that the factual matrix prove Para 90-92 (page 205-213) complete lack of commercial substance and is a clear ECL case of treaty abuse Para 90-92 (page 201-209) ECOM 16. CIT(A) testing the factual matrix