Income tax â Sections 9(1)(vii) - ITAT Delhi Holds: Sale of Standard Cybersecurity Software under Restricted Licences Not Taxable as FTSâOwnership & IP Rights Key - In light of the comprehensive legal analysis and binding judicial precedents, the ITAT Delhi held that receipts from the sale and licensing of standard cybersecurity software products, accompanied by ancillary support services, under restricted, non-transferable licencesâwith no transfer of copyright or proprietary rightsâare not taxable as Fees for Technical Services in India. This conclusion is actionable for similar cases involving standard software sales under comparable licence structures.
Income tax â Section 80-IA(2A), 47(iii) - ITAT Mumbai Affirms Telecom Tax Benefits: Spectrum Rights Depreciable, Court-Approved Demerger Transfers Are Gifts, and RBI All-in-Cost Endorsed for ECB Benchmarking - The ITAT Mumbaiâs decision reinforces that telecom spectrum rights are intangible assets eligible for depreciation under section 32(1)(ii), and that court-approved transfers without considerationâwhen genuinely structured as giftsâfall under section 47(iii), precluding notional consideration and depreciation denial. Income closely connected to telecom operations, including scrap and ancillary receipts, falls within the wider net of section 80-IA(2A). Automated roaming services do not attract TDS as technical services, and RBI-approved all-in-costs are reliable benchmarks for ECB transfer pricing where TPO comparables are weak. Annual licence fees are to be amortised under section 35ABB, while WPC charges continue as revenue expenses. ALP for brand royalty must be determined on proper benchmarking, not arbitrarily fixed at nil. The ruling provides robust, actionable clarity for similar fact patterns in the telecom sector.
Income Tax - Sections 92CA, 144C - ITAT Delhi Invalidates Assessment Order Passed Beyond Statutory Limitation under Section 144C(13) After DRP Directions in Transfer Pricing Case - The decision reinforces that the AOâs obligation to pass the final assessment order within the period specified under section 144C(13) is absolute and any order passed beyond this limitation is liable to be quashed as non est in law. Taxpayers and tax authorities alike must strictly adhere to statutory timelines post-DRP directions, with no scope for condonation or extension.
ITAT Bangalore Directs Transfer Pricing Reassessment: Persistent Loss and Depreciation Differentials Must Follow TNMM Principles and Reliable Financials - The Tribunalâs ruling emphasizes that, under TNMM, operating profit is the only relevant parameter for applying the persistent loss filter, and any adjustment must be based on robust, reliable, and consistent financial information. Differentials in depreciationâif material and substantiatedâmust be adjusted for, as allowed by Rule 10B(1)(e). Most crucially, transfer pricing adjustments must be strictly limited to international transactions with AEs and cannot be extrapolated to the entire set of transactions. Companies with ambiguous financial statements or RPTs above the accepted threshold cannot be used as comparables. These principles must guide both taxpayers and authorities in future transfer pricing assessments.
Income Tax - Sections 92C, 92CA - ITAT Ahmedabad Quashes âš171 Million TP Adjustment on Intra-Group Services for Lack of Armâs Length Method Application and Upholds Commercial Expediency - The ITAT Ahmedabadâs decision mandates the deletion of the entire transfer pricing adjustment of âš171.1 million, reiterating that revenue authorities cannot disregard substantial documentary evidence of intra-group services or question business decisions without following the prescribed transfer pricing methods. This ruling provides actionable clarity for taxpayers, confirming that, where services are demonstrably rendered and documented, the ALP cannot be arbitrarily set at nil.
Income Tax - Sections 80A, 80IA, 10AA, 194C, 92BA - ITAT Mumbai Quashes Transfer Pricing Adjustment and TDS Disallowance: No Jurisdiction Without Statutory Deduction Claims Under Section 92BA - The Tribunalâs decision reinforces that the mere disclosure of related party transactions in Form 3CEB does not vest jurisdiction to invoke transfer pricing provisions unless all statutory conditions under section 92BA are satisfied. Erroneous or superfluous reporting cannot override the clear mandate of law. Furthermore, where transporters furnish valid declarations and PAN as specified under section 194C(6), no TDS obligation arises on the payer, and reimbursements of export air freight charges, in the absence of any income element, cannot be disallowed under section 40(a)(ia). Taxpayers should ensure robust documentation and statutory compliance to defend against similar additions.
Income Tax - Sections 14A, 80IA - ITAT Chennai Upholds Deduction u/s 80IA for Captive Power Units at SEB Tariff; Restricts Disallowance u/s 14A to Actual Exempt-Income Yielding Investments - The Tribunalâs decision resolves two important controversies: (a) for captive power generation units, section 80IA deductions should be computed with reference to the rate at which SEBs supply power to industrial consumers, and not with reference to the sale rate to SEBs; (b) under section 14A, only investments that have actually yielded exempt income during the year are relevant for disallowance calculation, and such disallowance must not exceed the exempt income earned. Taxpayers with similar intra-group captive consumption and exempt income scenarios should review their methodologies and ensure compliance in line with this decision.
Tribunal Upholds Civil Penalties for Directors and Company in FEMA Breach Over Delayed FDI Reporting and Allotment; Rejects Retrospective Relief Under Recent RBI Circular - The Tribunal confirmed that the company had breached mandatory reporting and allotment requirements under FEMA by failing to timely report FDI remittances, delaying share allotment, and omitting to file FC-GPR forms. Individual directors, being in charge of the companyâs affairs, were also held liable. Arguments based on the later RBI circular and the lack of mens rea did not succeed in absolving liability, but did result in a reduction of the penalty amounts on grounds of proportionality. The appeals were thus partly allowed, limited to quantum of penalty.
Directors Liable for FEMA Breach on Delayed Import Payments: Appellate Tribunal Affirms Penalty, Reduces Quantum - The Appellate Tribunal sustained the findings of FEMA contravention by the company for failing to settle import dues within the prescribed timeframe, classifying the delayed payments as external commercial borrowing requiring regulatory compliance. Directors were held vicariously liable under Section 42 of FEMA, as they were responsible for the companyâs conduct during the relevant period. The Tribunal rejected arguments based on procedural delay and post-facto RBI permission, but exercised discretion to reduce the penalties imposed. Assessees must ensure timely settlement of import dues to avoid recharacterisation as unauthorised borrowings and consequent regulatory action.
Karnataka High Court Bars Parallel FEMA Proceedings Amidst Operative Status Quo Order on Identical Cause of Action - In summary, the Karnataka High Court allowed the writ petition, holding that fresh proceedings under Section 37A of FEMA, which were based on the same cause of action as an earlier writ petition (in which a status quo order was operating), could not be permitted to continue. The impugned show cause notice and complaint were quashed, with liberty to the authorities to initiate or revive the proceedings subject to the outcome of the earlier writ petition. This decision reaffirms the importance of judicial discipline and the avoidance of conflicting decisions arising from parallel proceedings.
Income tax - Sections 92 - Bombay High Court Clarifies Taxability of Refunded Royalty and PE Status in GIA Case: Only Retained Royalty Taxable, No PE for GIA US - The Bombay High Courtâs decision confirms that only the royalty amount actually retained by a non-resident under an APA, after bona fide refund to the Indian payer, can be taxed under Article 12 of the India-US DTAA. The Court also reaffirmed that APA-governed ALP adjustments protect against double taxation, and that secondary adjustment provisions do not affect the taxability of income in the hands of the foreign associated enterprise. Finally, where facts establish that the Indian entity is fully independent and does not act as an agent, fixed place, or service PE, no PE can be attributed to the foreign AE in India.
Income tax â Sections 164, 165 - Madras High Court Bars Equalisation Levy on Reimbursements to Foreign Subsidiaries in Absence of Statutory Mandate; Declines to Pierce Corporate Veil Without Evidence of Abuse - The Madras High Court conclusively held that the equalisation levy cannot be imposed on reimbursements made by an Indian entity to its foreign subsidiary for digital advertising expenses paid by the subsidiary to a non-resident service provider, unless the statute expressly brings such reimbursements within its purview or compelling evidence of abuse of the corporate form exists. Tax authorities must adhere strictly to statutory language, and cannot invoke substance over form or general anti-avoidance principles without clear evidence of sham or fraud.
Income Tax - Sections 44BB - Madras High Court Disallows Consolidated Reimbursement Deductions to Non-Resident Parent Without Break-Up Details Under Production Sharing Contract; Section 44BB Not Applicable to Substantiated Cost-to-Cost Payments - The Madras High Court decisively held that, unless an assessee provides adequate particulars and documentary evidence substantiating that payments to a non-resident parent under a PSC are genuinely on a cost-to-cost basis, such payments cannot escape the obligation of tax deduction at source under Section 195. Consolidated claims for âreimbursement of expensesâ without break-up or without seeking a Section 195(2) determination are not sustainable and will be subject to Sections 201(1) and 201(1A) consequences. Thus, assessees must ensure full substantiation and compliance with procedural requirements to avoid being treated as an assessee-in-default.
Income Tax - Sections 9(1)(vii), 144C - ITAT Delhi Deletes FTS Taxation on Manpower Support Receipts for Flipkart: No 'Make Available' of Technical Knowledge by US Company - The ITAT Delhi has reaffirmed that, for payments received by a foreign entity for manpower support services, unless there is a transfer or imparting of technical knowledge, skill, or know-how enabling the Indian recipient to use such knowledge independently in the future, the receipts cannot be classified as Fees for Technical Services under section 9(1)(vii) of the Income Tax Act or Article 12(4) of the India-USA DTAA. This decision reinforces the principle that the âmake availableâ test is a substantive requirement under the DTAA, and mere rendering of services is insufficient for FTS taxation.
Income Tax - Sections 92CA, 92F, 143(3), 144C - ITAT Delhi Remands ALP Adjustment Back to TPO Due to Assesseeâs Failure to Furnish Information Under Rule 10D - The Tribunalâs decision underscores the statutory duty imposed on assessees under Rule 10D to maintain and produce complete documentation in support of their transfer pricing positions. Where an assessee defaults in this obligation, the revenue authorities are empowered to proceed with ex parte determinations and make adjustments as warranted. The Tribunalâs remand offers the assessee an opportunity to cure the procedural defect, but also makes clear that non-compliance with statutory notices will not be tolerated. Taxpayers engaged in international transactions must be vigilant in maintaining and furnishing all required documentation in a timely manner to avoid adverse consequences.
Bombay High Court Orders Restoration of Tribunal Appeals Dismissed for Pre-Deposit Non-Compliance Due to Petitionerâs Critical Medical Condition - The Bombay High Courtâs order provides a clear, actionable direction: where appeals have been dismissed solely for non-compliance with the pre-deposit requirement under Section 19, and the appellant can demonstrate exceptional circumstances such as advanced age and serious medical condition, supported by uncontroverted evidence, the dismissal may be set aside. Restoration of the appeal is subject to compliance with the pre-deposit within the time granted, and the merits of the case remain open for adjudication by the Tribunal. The Tribunal is urged to accord priority to such restored cases.
Directorâs Liability Under FEMA Section 42 Requires Concrete Evidence of Responsibility: Penalty Quashed Where Directorâs Role Was Technical, Not Business Conduct - The Tribunal decisively held that mere holding of the office of Director, without evidence that the individual was in charge of or responsible for the companyâs business related to the contravention, cannot attract liability under Section 42 of FEMA. The penalty against the appellant was set aside as the record did not establish the requisite responsibility for export business. For directors, it is imperative that liability for company contraventions is not presumed solely on designation; rather, a clear nexus with the conduct of business must be established by the adjudicating authority.
Income Tax - Section 260A - Delhi High Court Lays Down Dual Filter for Transfer Pricing Comparables: Functional Similarity and Turnover Mismatch Both Critical - The Delhi High Court has made it clear that the process of selecting comparables for transfer pricing analysis under the Income Tax Act must involve a thorough and independent evaluation of both functional similarity and economic scale (including turnover). Mere failure of an objection on export turnover does not automatically qualify a company as a comparable if it is functionally dissimilar or if there is a gross mismatch in turnover that materially affects comparability. Where the line of business of a proposed comparableâsuch as e-publishingâis not recognized under relevant statutory notifications for ITeS, or where the scale of operations is drastically different, such inclusion must be reconsidered and, if necessary, remanded for fresh examination.
Income Tax - Sections 14A, 37, 80G - ITAT Bangalore Permits Section 80G Deduction for Eligible CSR Donations and Quashes Section 14A Disallowance When No Exempt Income Earned - The Tribunal has allowed the assesseeâs claim for deduction under section 80G for eligible donations made as part of CSR expenditure, provided such donations do not fall within the specific exclusions set out in section 80G. Additionally, the Tribunal has reiterated that disallowance under section 14A read with Rule 8D is impermissible where no exempt income has been earned during the previous year, and the subsequent amendment to section 14A is applicable prospectively and not to earlier assessment years.
Income Tax - Sections 10AA, 144C, 271(1)(c) - ITAT Pune Quashes Rs. 4.45 Crore Penalty on Automation Firm: No Penalty under Section 271(1)(c) Where Additions Arise from Timing and APA Adjustments, Mens Rea Absent - The ITAT Puneâs decision underscores that penalties under section 271(1)(c) cannot be sustained merely on the basis of additions or disallowances arising from assessment, especially when such differences result from timing, bona fide accounting practices, or APA-related adjustments. The absence of mens rea and full disclosure of primary facts by the assessee are decisive in quashing penalty proceedings. Tax authorities must establish willful concealment or inaccurate particulars before invoking penalty provisions.