Today's Digest Summary
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📋 Quick Summary
- GST Relief for Exporters: Karnataka HC rules GSTR-2A mismatches from import/SEZ entries cannot justify ITC denial for pre-2022 periods; Delhi HC protects retrospective curtailment of refund rights for unutilised ITC
- Reassessment Under Fire: Multiple tribunals and High Courts quash Section 148/153C notices for jurisdictional defects, omnibus satisfaction notes, and unverified third-party material — reinforcing that due process is non-negotiable
- Capital Market & Corporate Actions: NCLT Mumbai approves NSE Academy's ₹241.32 crore preference share capital reduction; NCLT Ahmedabad orders rectification of fraudulently transferred Ambuja Cements shares
- Startup & Transfer Pricing Clarity: ITAT Pune confirms startups can claim Section 80-IAC deduction from the first eligible year; ITAT Mumbai directs AOs to honour binding APAs on royalty transactions
📂 Category-wise Updates
🟦 Income Tax
1. Orissa High Court Quashes Section 143(2) Notice Issued Without Jurisdiction in KIIT Case
A Section 143(2) notice issued by the ACIT, Corporate Circle-1(2), Bhubaneswar for AY 2014-15 was quashed as jurisdiction lawfully vested with the CIT (OSD) (Exemption). Remarkably, the jurisdictional flaw was established through the Revenue's own affidavit — rendering the notice fatally defective.
⚠️ Action Item: Before responding to any scrutiny notice, verify that the issuing officer holds proper territorial and subject-matter jurisdiction over your entity.
2. Redevelopment Tenancy Rights: ITAT Mumbai Allows FMV as Cost of Acquisition for PAA Shop
Where an assessee surrenders tenancy rights under a redevelopment project and receives a Permanent Alternate Accommodation (PAA) shop, the FMV of surrendered tenancy rights on the allotment date constitutes the cost of acquisition under Section 48. The entire sale consideration cannot be treated as capital gains by applying a Nil cost.
⚠️ Action Item: Assessees involved in redevelopment arrangements should obtain a professional FMV valuation of tenancy rights at the time of surrender/allotment to establish a defensible cost of acquisition.
The approved project area — not the assessee's total landholding — determines eligibility under the one-acre minimum plot requirement of Section 80-IB(10). Personal land cannot be clubbed with project land to meet the threshold, and the Bombay HC's Vandana Properties ruling does not sanction such aggregation.
⚠️ Action Item: Developers claiming Section 80-IB(10) deductions must document that the approved housing project itself occupies at least one acre, keeping project-specific and personal land clearly demarcated.
The ITAT Kolkata held that where the audit report was already on record at the time of CPC processing, the requirement to file Form 10B along with the return is procedural and directory — not mandatory. Denial of Section 11 exemption solely for belated filing is unsustainable, especially in light of CBDT Circular No. 16/2024.
⚠️ Action Item: Charitable trusts facing CPC-level disallowances for late Form 10B must promptly file condonation applications under Section 119(2)(b) and cite CBDT Circular No. 16/2024 in appellate proceedings.
A property labelled "commercial" in the sale deed can qualify for Section 54 relief if municipal records, completion certificates, and electricity bills confirm actual residential use of the relevant floors. Additionally, AOs cannot adopt stamp duty valuation without mandatorily referring the matter to a District Valuation Officer (DVO) when disputed under Section 56(2)(vii).
⚠️ Action Item: When claiming Section 54 on mixed-use properties, compile comprehensive documentary evidence of residential usage — municipal records, house tax receipts, utility bills, and valuation reports — before assessment proceedings commence.
Drawing on the Supreme Court's landmark ruling in T.S. Balram v. Volkart Brothers, the Delhi ITAT held that Section 154 rectification is confined to patent and obvious mistakes. Disallowance of directors' bonus under Section 36(1)(ii) requires factual and legal analysis and therefore cannot be the subject of a rectification order.
⚠️ Action Item: Challenge any rectification order that attempts to revisit debatable deductions already examined during Section 143(3) assessment; the scope of Section 154 is strictly limited to apparent errors on record.
7. Service Tax on Outbound Tour Packages: CESTAT Mumbai Rules No Levy for Tours Performed Outside India
Outbound tour packages entirely executed outside India were not subject to service tax during 01.04.2005 to 31.03.2010. The situs of the "tour operator" service is where it is consumed, and since the core service was rendered abroad, the foundational condition for levy under Section 66 was not met. A demand of ₹15.97 crore was set aside.
⚠️ Action Item: Tour operators with legacy service tax demands on outbound packages should re-examine their liability in light of this ruling and file appropriate appeals if the statutory period permits.
A blanket satisfaction note referencing digital data without year-specific particulars or income quantification is incapable of conferring valid jurisdiction under Section 153C. The ITAT relied on the Supreme Court's declining to interfere in ACIT v. Kishore Kumar Sharma to affirm this settled position.
⚠️ Action Item: Assessees facing Section 153C proceedings should immediately audit the satisfaction note for year-wise specificity and challenge any omnibus or vague note at the threshold.
9. Section 115JB and Banking Companies: Calcutta High Court Clarifies Applicability for AY 2011-12
Section 115JB — as extended to banking companies by the Finance Act, 2012 — applies only from AY 2013-14 onwards. For AY 2011-12, there was no legal basis to apply MAT to Royal Bank of Scotland N.V., reinforcing that Finance Act effective dates must be strictly respected.
⚠️ Action Item: Banking entities and foreign companies with legacy MAT demands for periods prior to AY 2013-14 should review their exposure and seek appropriate relief based on this ruling.
Where an assessee's declared income falls within the pecuniary threshold prescribed for an ITO under CBDT Instruction No. 1/2011, a Section 148 notice issued by an ACIT or DCIT is jurisdictionally void. Revenue cannot cure this defect by pointing to concurrent jurisdiction or late-stage objections.
⚠️ Action Item: At the threshold of any reassessment, cross-check the designated officer's pecuniary jurisdiction against income thresholds under CBDT Instruction No. 1/2011 and raise objections immediately if a mismatch exists.
The ITAT Delhi annulled a reassessment for AY 2005-06 because the AO failed to pass a separate, reasoned order disposing of the assessee's objections to reopening — a mandatory procedural step under GKN Driveshafts. Non-compliance constitutes a jurisdictional flaw, not a technicality, and renders the entire reassessment void.
⚠️ Action Item: After filing objections to a reopening notice, track whether the AO issues a separate written order disposing of them. If the AO proceeds without such an order, challenge the reassessment on jurisdictional grounds.
In Trupti Aakash Desai v. ITO, the Gujarat HC quashed a Section 148 notice for AY 2019-20 where the Revenue relied on a loose paper seized from unrelated third parties that did not name the assessee and referenced a land rate applicable three years after the assessee's sale. Courts retain jurisdiction to examine the very existence — not just sufficiency — of prima facie material.
⚠️ Action Item: If a reassessment notice is based on material seized from third parties, assess whether the material has any direct nexus to the assessee; challenge notices premised on vague or non-specific material through a writ petition.
13. Gujarat High Court annuls reassessment initiated on basis of unverified third-party complaint
Reassessment proceedings initiated under Section 148A based on an undated PDF complaint on a third party's phone — without summoning the complaint's author or corroborating evidence — were quashed as conjecture-driven and lacking a direct nexus to the assessee.
⚠️ Action Item: Assessees receiving Section 148A notices based on unverified complaints should insist on disclosure of the source material and challenge the reopening if the author of the complaint has not been verified or examined.
Contributions to insurer-managed leave encashment funds are not "provisions" under Section 43B(f) and qualify as deductible business expenditure under Section 37 once irrevocably transferred. Pre-AY 2015-16 CSR expenditure remains deductible, as Explanation 2 to Section 37(1) operates prospectively.
⚠️ Action Item: Entities that have made irrevocable contributions to insurer-managed leave funds and faced Section 43B(f) disallowances should seek relief based on the CIT v. Hindustan Latex Ltd. precedent affirmed in this ruling.
The "enterprise" under Section 80-IA(4) refers to the project/undertaking, not the assessee company's parent. Reassessment beyond four years based on a mere change of opinion on facts already before the AO is impermissible. The Bombay HC quashed the notice, reinforcing ownership conditions and the change-of-opinion bar.
⚠️ Action Item: Infrastructure entities receiving long-limitation reassessment notices on Section 80-IA deductions must examine whether the AO is attempting to reinterpret the same facts and challenge the notice accordingly.
16. Supreme Court declines to intervene on creamy layer plea for North-East ST income-tax exemption
The Supreme Court declined to judicially introduce a creamy layer framework for Scheduled Tribe income-tax exemptions, holding that modification of this legislative policy is the prerogative of Parliament and the executive. The existing exemption framework remains intact.
⚠️ Action Item: No immediate compliance change required; the blanket ST exemption under the Income-Tax Act, 2025 continues as before.
While upholding the validity of reassessment, the ITAT found a serious breach of natural justice where the AO relied on forensic analysis reports and tally data but failed to share these with the assessee. The matter was restored for fresh assessment with proper disclosure of all relied-upon material.
⚠️ Action Item: Assessees facing search-based assessments must formally demand copies of all forensic reports, electronic data, and tally summaries relied upon by the AO. Non-disclosure is a cognisable ground for appeal.
Section 80-IAC does not mandate a startup to defer deduction claims until three years have elapsed. A DPIIT-recognised startup satisfying turnover limits can claim 100% deduction from the very first eligible assessment year. The AO/CPC was directed to allow a deduction of ₹1.50 crore for AY 2024-25.
⚠️ Action Item: DPIIT-recognised startups that deferred their Section 80-IAC claim under a mistaken reading of the statute should review prior year returns and file rectification/appeals to claim the deduction from the first eligible year.
19. Strategic Defence Against Reassessment Notices Under Section 148 & Section 148A
This analytical guide emphasises that reassessment is a two-stage exercise — jurisdiction first, merits later. Effective defence strategies include demanding full disclosure of underlying "information," obtaining the Section 151 sanction memo, using RTI to expose mechanical approvals, and invoking Andaman Timber Industries when cross-examination of third-party witnesses is denied.
⚠️ Action Item: Tax professionals should implement a standard checklist for every reassessment notice: verify information basis, confirm Section 151 sanction quality, and preserve all objection filings with timestamps.
20. ITAT Mumbai Directs AO to Honour APA on Royalty Transactions: GIA India Laboratory Case Analysis
APAs executed with CBDT are binding instruments and AOs must pass orders in conformity with the APA and modified returns filed under Section 92CD. The ruling also confirms that Section 80G approvals granted on or after 1 October 2009 continue in perpetuity unless specifically withdrawn — periodic renewal is not required.
⚠️ Action Item: Entities with executed APAs should ensure AOs are formally directed to the agreement terms during assessment; entities with pre-2009 Section 80G approvals need not seek fresh approvals absent specific withdrawal notice.
21. ITAT Pune sends back TP adjustment over erroneous AE ALP computation and forex treatment
Under TNMM, ALP must be determined solely on AE transactions — not at entity level. The TPO's entity-level computation was declared erroneous. Additionally, Safe Harbour Rule definitions (including Rule 10TA(k) on forex gains) do not automatically extend to general TP determinations under Rule 10B.
⚠️ Action Item: TP professionals should audit all pending TPO orders for entity-level vs. transaction-level TNMM computation errors and challenge entity-level ALP determinations on the basis of this ruling.
🟩 GST
For FY 2018-19, GSTR-2A was structurally incapable of reflecting import and SEZ transactions, and Section 16(2)(aa) — the matching requirement — was inserted only from 01.01.2022. ITC denial based on such mismatches for pre-2022 periods is legally untenable. A reporting error (wrong table in GSTR-3B) does not constitute wrongful availment if the underlying transaction is valid and supported by Bills of Entry.
⚠️ Action Item: Assessees who received ITC demand notices for FY 2017-18 to FY 2021-22 based on GSTR-2A mismatches attributable to import or SEZ entries should file appeals or writ petitions citing this ruling as primary precedent.
23. GST Jurisdiction Wars: Can State Authorities Adjudicate Centrally Administered GSTINs?
Section 6(2)(b) of the CGST Act, 2017 prohibits parallel proceedings by both Central and State authorities on the same subject matter and period. State authorities assuming adjudicatory control over centrally administered GSTINs without traceable cross-empowerment notifications raise serious jurisdictional challenges and expose subsequent Central proceedings to a "dual and barred" challenge.
⚠️ Action Item: Check your GST portal jurisdiction tag immediately. If State officers are issuing DRC-01 notices for a centrally administered GSTIN without cross-empowerment notification, formally contest jurisdiction before filing any reply on merits.
The February 2019 amendment to Explanation 2(e) of Section 54 operates only prospectively. For pre-amendment periods, the relevant date for computing the two-year limitation for unutilised ITC refund is the end of the financial year. Retroactive curtailment of vested refund rights is constitutionally impermissible.
⚠️ Action Item: Exporters and taxpayers with inverted duty structures whose pre-2019 refund claims were rejected as time-barred under the amended provision should file fresh claims or appeals relying on this Delhi HC ruling.
🟧 Company Law
25. NCLT Mumbai Dispenses Stakeholder Meetings in News18 Marathi–Network18 Amalgamation Scheme
The NCLT Mumbai dispensed with formal shareholder and creditor meetings for both the Transferor and Transferee companies in CA(CAA)/95/2026, given 93.77% unsecured creditor consent by value and no adverse capital impact on the Transferee. However, the Tribunal directed notices to remaining stakeholders for written representations, balancing procedural efficiency with substantive protection.
⚠️ Action Item: Companies planning amalgamations should proactively secure consent affidavits from as large a proportion of creditors as possible to enable dispensation of formal meetings and expedite NCLT approval.
The NCLT Mumbai authorised NSE Academy's ₹241.32 crore preference share capital reduction, confirming that Section 66 can independently be used to repay preference share capital where Section 55 redemption is commercially unviable. Full statutory compliance — including creditor notices and newspaper publications — was verified before approval.
⚠️ Action Item: Companies with surplus funds and commercially unviable redemption reserves should evaluate the Section 66 capital reduction route, ensuring compliance with creditor notice and publication requirements before filing with NCLT.
The NCLT Ahmedabad ordered rectification of Ambuja Cements' Register of Members after 21,000 shares were fraudulently transferred via forged Form SH-4 deeds. The Transferee's complete non-participation at every stage — before the RTA, police, and Tribunal — proved fatal. Enhanced KYC scrutiny during dematerialisation revealed the fraud.
⚠️ Action Item: Companies and RTAs must deploy rigorous KYC verification at the dematerialisation stage. Original shareholders who discover unauthorised transfers should immediately approach NCLT for register rectification without delay.
28. NCLT Kolkata Affirms SFIO's Authority To Pursue Winding Up Based On Central Government Authorisation
Reading Section 224(2) with Section 272(1)(e) of the Companies Act, 2013, the NCLT Kolkata upheld SFIO's authority to file winding up petitions under express Central Government authorisation. The challenge on grounds of limitation, lack of authorisation, and SFIO's standing were all rejected.
⚠️ Action Item: Companies under SFIO investigation should treat winding up petitions filed by authorised SFIO officers as fully maintainable and prepare substantive responses rather than relying on maintainability challenges alone.
🟪 Corporate Law
29. NCLT Ahmedabad refuses release of DSRA funds due to unresolved issues over vanished fixed deposits
The NCLT declined to release ₹9.15 crore DSRA funds lien-marked in favour of Catalyst Trusteeship Limited (Debenture Trustee) due to unresolved questions over ₹166 crore in fixed deposits that have "disappeared" from Blu-Smart Charge Private Limited's account structure. The DSRA's ring-fenced nature was recognised, but release was deferred pending ICICI Bank's full disclosure.
⚠️ Action Item: Debenture trustees should immediately audit the entire FD/escrow account structure in CIRP matters and seek comprehensive bank disclosures before any DSRA release application is filed before the Tribunal.
The CGPDTM granted India's first olfactory trademark to Sumitomo Rubber Industries Ltd. by accepting an IIIT Allahabad 7D vector space model (built on GC-MS analysis and machine learning) as valid graphical representation under Section 2(1)(zb). The decision confirms that the definition of "mark" under Section 2(1)(m) is inclusive, paving the way for non-conventional sensory marks.
⚠️ Action Item: Businesses with distinctive proprietary scents should explore olfactory trademark registration using scientific models (GC-MS/ML-based) as graphical representation; IP counsel should advise clients on this newly validated registration pathway.
Section 27 of the Indian Contract Act, 1872 creates an effective bar against post-employment non-compete restrictions. Courts independently analyse each clause, assess whether restrictions operate during or after employment, and examine genuine proprietary interest. Recent judgments have refined — but not unsettled — this settled position.
⚠️ Action Item: Employers should restructure post-employment restrictions to focus on protection of confidential information and trade secrets (which remain enforceable) rather than blanket non-compete clauses that courts consistently strike down.
🟥 Customs
EDD collected during SVB provisional assessments is a "deposit," not customs duty under Section 2(15). Where the declared transaction value is accepted on finalisation, EDD is fully refundable. Interest under Section 27A accrues from the expiry of three months after the finalisation order — and cannot be deferred pending appellate proceedings on the underlying order.
⚠️ Action Item: Importers with pending EDD refund claims after SVB finalisation — particularly those delayed by Revenue on grounds of appellate pendency — should file Section 27A interest claims with the date of the finalisation order as the trigger.
The Bombay HC affirmed CESTAT's finding that no breach of Regulation 10(d) or 10(e) of CBLR 2018 was established against Sky Shipping. Licence revocation — being the most severe regulatory consequence — must rest on substantive proof of misconduct, not merely technical or procedural infractions. Revenue's appeal was dismissed.
⚠️ Action Item: Customs Brokers facing revocation proceedings under CBLR 2018 should ensure that the show cause notice specifically identifies the alleged misconduct; proportionality of penalty and quality of evidence are strong grounds for challenge before CESTAT.
⏰ Key Deadlines & Action Items
| # | Compliance Item | Trigger / Authority | Immediate Action |
|---|---|---|---|
| 1 | GST Refund Claims (Pre-Feb 2019) | Delhi HC in Kanika Exports | File/revive refund claims for unutilised ITC using end-of-FY as relevant date |
| 2 | Section 119(2)(b) Condonation | ITAT Kolkata in Srimanta Sankaradeva & CBDT Circular 16/2024 | File/track condonation applications for delayed Form 10B before CPC processes returns |
| 3 | APA Compliance (Section 92CD) | ITAT Mumbai in GIA India Laboratory | File modified returns under Section 92CD and formally communicate APA terms to AO |
| 4 | Section 80-IAC Deduction (Startups) | ITAT Pune in Alifcloud IT | DPIIT-recognised startups should claim deduction from first eligible AY without waiting 3 years |
| 5 | EDD Refund Interest (SVB Cases) | CESTAT Mumbai in Vardhman Acrylics | Compute interest from 3 months post-finalisation order date and file claims immediately |
| 6 | GST Jurisdiction Tag Verification | CGST Act Section 6(2)(b) analysis | Log in to GST portal and confirm whether GSTIN is centrally or state administered |
| 7 | ITC Denial Appeals (FY 2017-22) | Karnataka HC in Biocon | File appeals/writ petitions challenging GSTR-2A mismatch-based ITC denials for pre-2022 periods |
| 8 | Section 148 Notice Response | Multiple HC/ITAT rulings above | Before responding on merits, complete jurisdictional audit: pecuniary limits, Section 151 sanction, information basis |
💡 Professional Takeaways
1. Jurisdictional Compliance Is a Substantive Requirement, Not a Technicality
Today's digest features an exceptional concentration of cases where assessments, notices, and orders were struck down purely on jurisdictional grounds — wrong officer, wrong pecuniary level, omnibus satisfaction notes, mechanical sanctions, and ignored objections. The consistent message from ITAT Delhi, Gujarat HC, Orissa HC, and Bombay HC is unambiguous: jurisdiction is the foundation; merits are secondary. Tax professionals must build a standard pre-response jurisdictional checklist for every notice under Section 143(2), 148, 148A, and 153C. Failure to raise jurisdictional objections early can be construed as waiver in certain contexts.
2. The GST Litigation Landscape Is Shifting Toward Structural and Procedural Defences
The Karnataka HC (Biocon) and Delhi HC (Kanika Exports) rulings signal that courts are willing to provide substantial relief where GST demands are premised on structural limitations of early-era return mechanisms (GSTR-2A incapability) or retrospective curtailment of vested rights. Combined with the jurisdiction analysis under Section 6(2)(b), practitioners should advise clients to build dual-track defences — substantive (transaction documentation) and procedural (officer competence, return architecture, legislative timelines) — in all pending GST litigation.
3. Scientific and Technological Evidence Is Reshaping Indian IP and Tax Law
Two seemingly unrelated developments — India's first olfactory trademark (accepted via 7D vector space ML modelling) and the ITAT's endorsement of forensic tally analysis in accommodation entry cases — share a common thread: courts and tribunals are increasingly comfortable with technology-driven evidentiary frameworks. This cuts both ways. Taxpayers should use professional forensic and scientific evidence offensively (to establish FMV, document structures, and transaction integrity) while simultaneously ensuring that Revenue-sourced digital evidence is disclosed and made challengeable. The natural justice ruling in Kailash Kumar Patwari makes clear that forensic evidence withheld from the assessee is legally vulnerable, however compelling its content.
© TaxCorp India | This digest is prepared for informational purposes only and does not constitute legal or tax advice. Always consult a qualified professional before acting on any information contained herein.
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