Tax News Daily
The latest tax news from around the world, summarised and tagged for tax professionals. Updated twice daily.
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ITAT Restores Unsecured Loan Addition for Fresh Verification by Assessing Officer
India's Income Tax Appellate Tribunal (ITAT) has restored an unsecured loan addition case for fresh verification by the Assessing Officer. The tribunal remanded the matter back to the AO level, requiring a new examination of the unsecured loan transactions that had been added to the taxpayer's income. This decision reflects the ITAT's approach of ensuring proper factual verification rather than adjudicating on incomplete records, allowing the AO to conduct a thorough investigation into the legitimacy and source of the unsecured loans in question.
ITAT Restores Demonetisation Cash Deposit Case for Fresh Rule 46A Examination
India's ITAT has restored a demonetisation-era cash deposit case for fresh examination under Rule 46A of the Income Tax Rules. The case involves cash deposits made during India's 2016 demonetisation period, with the tribunal directing reconsideration of additional evidence under Rule 46A, which governs the admission of evidence not previously presented before lower tax authorities. The decision requires a fresh review of supporting documentation to determine whether the cash deposits during demonetisation were adequately explained by the taxpayer.
Coca-Cola Meets Sympathetic Judges in $20 Billion IRS Case
Coca-Cola's long-running $20 billion tax dispute with the IRS received a potentially favorable reception from appellate judges, signaling possible relief for the beverage giant. The case centers on transfer pricing methodology used by Coca-Cola to allocate income from its foreign licensees. The IRS challenged the company's pricing arrangements, resulting in a massive tax deficiency assessment. The appellate court's apparent sympathy toward Coca-Cola's arguments could have significant implications for how multinational corporations structure intercompany royalty and licensing arrangements and how the IRS applies transfer pricing rules.
The Role of Contractual Arrangements in Transfer Pricing: Insights from Case Law and Practice
This article examines how contractual arrangements function within transfer pricing frameworks, drawing on case law and practical insights. It explores the weight tax authorities and courts give to written contracts versus actual conduct in related-party transactions, highlighting that contracts alone may not determine the transfer pricing outcome if economic substance differs. The piece analyzes key judicial decisions that have shaped how contractual terms are scrutinized, and offers guidance on aligning contractual arrangements with functional analysis and the arm's length principle to reduce dispute risk and withstand audit challenges.
ITAT: Reassessment Beyond Four Years Quashed as AO Reopened Case on Mere Change of Opinion Without Fresh Material
India's ITAT has quashed a reassessment proceeding initiated beyond the four-year limitation period, ruling that the Assessing Officer reopened the case based solely on a change of opinion without any fresh tangible material. The tribunal reaffirmed the established legal principle that reassessment under Section 147 of the Income Tax Act requires new information or material to justify reopening, and that a mere change of opinion by the AO on previously available facts does not constitute valid grounds for reassessment, protecting taxpayers from arbitrary re-examination of settled assessments.
ITAT Upholds Section 80P Deduction for Co-operative Credit Society, Deletes Section 68 Addition on Cash Deposits
India's ITAT has upheld the Section 80P deduction claimed by a co-operative credit society and simultaneously deleted an addition made under Section 68 concerning cash deposits. The tribunal affirmed that co-operative credit societies engaged in providing credit facilities to members are entitled to the Section 80P deduction, which exempts income of co-operative societies from tax. Additionally, the ITAT found the Section 68 addition relating to unexplained cash deposits unjustified, providing relief to the co-operative society on both the deduction claim and the income addition.
Telangana HC Allows GST Appeal Against Unsigned Section 73 Assessment Order
The Telangana High Court has allowed a GST appeal challenging an assessment order issued under Section 73 of the GST Act that lacked a proper signature. The case highlights procedural requirements for valid tax assessments, with the court examining whether an unsigned order holds legal validity. This ruling has significant implications for taxpayers facing similar procedurally defective assessment orders, potentially providing grounds to challenge such orders on technical grounds. The decision underscores the importance of tax authorities adhering strictly to procedural formalities when issuing assessment orders under India's GST framework.
ITAT Allows Broken Period Interest, Rules MAT Inapplicable to Foreign Banks
India's Income Tax Appellate Tribunal (ITAT) has ruled on two significant issues affecting foreign banks operating in India. First, the tribunal allowed the deduction of broken period interest — the interest accrued on bonds between the last coupon date and the purchase date — as a revenue expense rather than capitalizing it. Second, the ITAT ruled that Minimum Alternate Tax (MAT) is not applicable to foreign banks, providing relief from this alternative tax computation mechanism. These rulings have notable implications for foreign banking institutions regarding their tax liabilities and accounting treatment of debt instrument transactions in India.
Can the Income Tax Department Tax You for a Transaction That Never Happened? ITAT Says No
India's Income Tax Appellate Tribunal (ITAT) ruled that the Income Tax Department cannot levy tax on a transaction that never actually occurred. The case highlights a significant taxpayer protection principle: tax liability must be grounded in real, substantiated transactions rather than presumed or fictitious ones. The ITAT's decision reinforces that tax assessments cannot be based on assumptions or fabricated transactions, providing relief to taxpayers facing arbitrary additions to income. This ruling has important implications for how tax authorities conduct assessments and the evidentiary standards required before taxing alleged transactions.
ITAT Quashes Section 263 Revision Where AO Conducted Detailed Enquiry
India's Income Tax Appellate Tribunal (ITAT) has quashed a Section 263 revision order issued by the Commissioner of Income Tax, ruling that the Assessing Officer (AO) had already conducted a detailed and thorough enquiry during the original assessment. The tribunal held that where the AO has applied mind and examined the relevant issues in depth, the revisionary authority cannot invoke Section 263 merely because a different view is possible. The decision reinforces the principle that Section 263 cannot be used to substitute the CIT's judgment for that of the AO when the original assessment is neither erroneous nor prejudicial to revenue interests.
ITAT Quashes Reassessment Based Solely on Pre-2021 Third-Party Search Material
India's ITAT has quashed a reassessment proceeding that was initiated solely on the basis of third-party search material predating the 2021 amendments to the Income Tax Act. The tribunal ruled that reassessment cannot be validly triggered using pre-2021 search material under the new reassessment framework introduced by the Finance Act 2021. The decision highlights critical procedural and temporal limitations on the tax department's power to reopen assessments, reinforcing taxpayer protections against reassessments that rely on stale or procedurally incompatible information gathered under the old statutory regime.
Orissa HC: No GST Demand After Pre-Proceeding Reversal of Wrongly Availed ITC
The Orissa High Court ruled that GST authorities cannot raise a demand for wrongly availed Input Tax Credit (ITC) if the taxpayer has already reversed the ITC before the initiation of proceedings. The court held that once the reversal is made voluntarily prior to any show cause notice or formal proceeding, the demand becomes unsustainable. This judgment provides significant relief to taxpayers who self-correct ITC errors proactively, reinforcing that penal action under GST law should not apply where the tax liability has already been rectified before the department initiates action.
Section 115BBE Controversy Nearing Closure: Rajasthan High Court Joins the Taxpayer Camp
The Rajasthan High Court has sided with taxpayers in a dispute over Section 115BBE of India's Income Tax Act, which imposes a higher tax rate on unexplained income. The court's ruling adds to a growing body of judicial opinion challenging the retrospective or broad application of this provision, particularly regarding the levy of surcharge and penalty alongside the elevated tax rate. With multiple High Courts now aligning with taxpayers, legal experts suggest the controversy surrounding Section 115BBE is approaching resolution in favor of taxpayers, potentially limiting aggressive tax department assessments under this provision.
ITAT: Assessment Quashed as AO Exceeded Scope of Limited Scrutiny Without Mandatory Approval
India's ITAT has quashed an assessment order where the Assessing Officer exceeded the permissible scope of a limited scrutiny without obtaining mandatory prior approval from higher authorities. The tribunal held that limited scrutiny cases are restricted to the specific issues for which the case was selected, and any expansion of scope requires explicit approval under prescribed procedures. By acting beyond this boundary without authorization, the AO rendered the assessment invalid. The ruling underscores procedural safeguards that protect taxpayers from arbitrary or unauthorized expansion of tax scrutiny beyond its originally sanctioned parameters.
ITAT Quashes Reassessment Notice Issued After 31 March 2022 for AY 2015-16 as Time-Barred
India's ITAT has quashed a reassessment notice issued after 31 March 2022 for Assessment Year 2015-16, ruling it time-barred under the amended reassessment provisions of the Income Tax Act. The tribunal applied the Supreme Court's guidance on the transitional provisions introduced by the Finance Act 2021, finding that the extended timelines allowed under pandemic-related relaxations did not permit reassessment notices for AY 2015-16 to be issued beyond the stipulated cutoff date. The decision provides important clarity on the temporal limits of reassessment jurisdiction under the post-2021 statutory framework.
ITAT Allows Deduction of Interest on Delayed Radio Migration Fees, Grants Depreciation on Acquired Workforce Intangibles
India's ITAT has allowed a taxpayer's deduction for interest paid on delayed radio migration fees, treating it as a revenue expenditure deductible under the Income Tax Act. Additionally, the tribunal granted depreciation on workforce intangibles acquired as part of a business acquisition, recognizing them as qualifying assets under the depreciation provisions. The rulings address nuanced questions around the deductibility of financing costs linked to regulatory fees and the tax treatment of intangible assets such as assembled workforces, providing useful precedent for businesses involved in telecom operations and corporate acquisitions in India.
Comments on T-184/25 (A) – Management of Securitised Mortgages is Taxable
A case comment on T-184/25 examines a court ruling that the management of securitised mortgages constitutes a taxable supply for VAT purposes. The decision challenges the common assumption that such financial management services might qualify for VAT exemption under financial services provisions. The ruling has significant implications for securitisation vehicles and their VAT treatment, potentially affecting how mortgage servicers and special purpose vehicles structure their arrangements and recover input tax. Businesses involved in securitisation transactions will need to reassess their VAT positions in light of this judgment.
ITAT Allows Foreign Tax Credit Despite Delay in Filing Form 67, Calls Requirement Procedural
India's Income Tax Appellate Tribunal (ITAT) ruled in favor of a taxpayer seeking foreign tax credit, holding that the late filing of Form 67 is merely a procedural requirement and should not result in denial of the credit. The tribunal emphasized that substantive rights to claim foreign tax credit under the Income Tax Act and applicable tax treaties cannot be defeated by procedural delays. This decision provides relief to taxpayers who miss filing deadlines for Form 67 while still being entitled to relief from double taxation on foreign income.
ITAT Quashes Reassessment Against Investor Over Kyra Landscapes Shares, Cites Borrowed Satisfaction by AO
India's ITAT quashed a reassessment order against an investor in Kyra Landscapes shares, ruling that the Assessing Officer (AO) had relied on 'borrowed satisfaction' rather than forming an independent opinion. The tribunal held that reassessment proceedings under the Income Tax Act require the AO to independently apply their mind to the information received, rather than mechanically acting on inputs from investigation wings or other authorities. This ruling reinforces procedural safeguards against arbitrary reassessment actions by tax authorities in India.
ITAT Deletes Section 14A Disallowance for Failure to Record Mandatory Satisfaction Before Invoking Rule 8D
India's ITAT deleted a disallowance made under Section 14A of the Income Tax Act, which relates to expenditure incurred to earn exempt income. The tribunal found that the AO failed to record mandatory satisfaction that the taxpayer's own disallowance was incorrect before invoking Rule 8D for computing disallowance. This decision reinforces the settled legal position that mechanical application of Rule 8D without the AO first recording dissatisfaction with the assessee's computation is procedurally invalid and renders the disallowance unsustainable.
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