Category: In the High Courts: Part A-Reported Decisions

5. CIT(TDS) vs. National Highways Authority of India: 2026

TMI 338 – MP:

A. Y. 2009-10: Date of order 06/03/2026:

Ss. 197 and 201 of ITA 1961:

A. TDS — Certificate for deduction at lower rate u/s 197 — Validity — Certificate is valid for the assessment year specified in the certificate unless cancelled earlier — Effective throughout the assessment year and not prospectively from the date of certificate.

B. Assessee in default u/s. 201(1) — Since certificate operates for the entire assessment year the assessee cannot be deemed as assessee in default — Consequent interest u/s. 201(1A) is unjustified.

One SECCL entered into a contract with the assessee for the development of national highways. The assessee made a payment to SECCL after deducting tax at source u/s. 195 of the Income-tax Act, 1961 at marginal rates mentioned in the order of the Assessing Officer passed u/s. 197 for different assessment years.

The assessee was treated as the person responsible for making payments to the foreign contractor, deducting tax at source and filing a return u/s. 206 of the Act. On verification, it was noticed that the assessee had made payment of a contract worth of ₹19,61,36,514/- to the deductee company from 01/04/2008 to 30/06/2008 without proper deduction of tax at source. Upon issuance of notice, the assessee filed an explanation that the payments were made with a lower deduction of tax at source because of the order issued u/s. 195/197 by their Assessing Officer on 30/06/2008 for the F.Y. 2008-09.

The Assessing Officer opined that the payments were made by the assessee for a sum of ₹19,61,36,513/- for the period from 10/04/2008 to 24/06/2008, when no certificate for non-deduction of tax at source was in force, meaning thereby, at the time of making such payment or crediting such payment, there was no certificate. The certificate dated 30/06/2008 came into effect from the date of its issuance. Therefore, the period prior to 30/06/2008 suffered a lower deduction of tax at source than the rate prescribed under the Act. The Assessing Officer, passed an order dated 04/03/2011, assessed ₹31,03,54,504/- as total default of TDS and imposed the interest and directed for initiation of proceedings for penalty, in total of ₹41,89,78,580/-.

The CIT(A) dismissed the appeal filed by the assessee. The Tribunal allowed the appeal and held that the assessee was not an assessee in default as contemplated u/s. 201 of the Act.

The Madhya Pradesh High Court admitted the appeal filed by the Department on the following substantial questions of law:-

“1. Whether on the facts and in the circumstances of the case, the ITAT was justified in law inholding that the assessee could not be held to be assessee in default u/s 201(1)? and 201(1A) of the Act and thereby granting the relief?

2. Whether, on the facts and in the circumstances of the case, the ITAT was justified in law in deleting the interest levied u/s 201(1A) of the Act, while failing to appreciate that the deductor cannot consider the assessment status of the deductee unless and until a certificate u/s 197 of the Act is granted by the Assessing Officer?”

The High Court dismissed the appeal filed by the Department and held as follows:

“i) It is clear from the language of Section 197 that if the Assessing Officer is satisfied that the total income of the recipient justifies the deduction of income tax at any lower rate or no deduction of income tax, as the case may be, the Assessing Officer shall on an application made by the assessee in his behalf, give him such certificate as may be appropriate. Under Sub-section (2), where any such certificate is given, the person responsible for paying the income tax shall deduct the income tax at the rate specified in such certificate unless the same is cancelled by the Assessing Officer throughout the assessment year. As per sub-rule (2) of Rule 28AA, the certificate shall be valid for the assessment year to be specified in the certificate, unless it is cancelled at any time before the expiry of the specified period. The assessment in income tax is always for the entire assessment year. Every provision of the Income Tax Act is liable to be applied for a particular assessment year. Even the tax liabilities are fixed on the assessee for the entire assessment year.

ii) As per the proviso to Section 201, any person, including Principal Officer or Company, shall not be deemed to be an assessee in default in respect of such tax, if he furnishes a certificate to this effect from the accountant in such form. In view of the above, the question of law No.1 is answered against the revenue that the respondent cannot be held as an assessee in default u/s. 201 and Section 201(1A).

iii) And so far as the question of law No.2 is concerned, the ITAT was justified in deleting the interest levied u/s. 201(1A) of the Act because the assessee had certificate u/s. 197 for an entire assessment year.”

4. Sapphire Foods India Ltd. vs. ACIT:

(2026) 183 taxmann.com 506 (Del.):

A.Y.: 2016-17: Date of order 16/02/2026:

Ss. 147, 148, 148A and 149 of ITA 1961:

A. Reassessment — Income escaping assessment — Audit Objections — Relevant details submitted and on record before the AO during original assessment — It amounts to review of assessment — Re-considering of same material to arrive at different conclusion cannot be permitted — Re-opening of assessment bad-in-law.

B. Reassessment — Time limit for issuance of notice for A. Y. 2016-17 — Time limit of four years from the end of the relevant Assessment Year applicable prior to 01/04/2021 — Notice u/s. 148 issued on 31/03/2023 — Beyond a period of four years — First proviso to section 149 — No notice could have been issued under the pre-amended provisions — Notice and subsequent proceedings barred by limitation.

The assessee is a company. In the original assessment for AY 2016-17, an addition of ₹24,80,39,169 was made u/s. 56(2)(viib) of the Income-tax Act, 1961 on account of premium charged in excess of the fair market value of the shares by adopting book value instead of the DCF method adopted by the Assessee. The appeal filed before the CIT(A) was partly allowed and the second appeal before the Tribunal was pending for orders.

Meanwhile, on 22/03/2023, show cause notice u/s. 148A(b) was issued along with scanned copy of the audit objections raised by the local audit party informing that there was information in possession which suggests that income chargeable to tax for A. Y. 2016-17 has escaped assessment and the assessee was called upon to show cause why notice u/s. 148 of the Act should not be issued.

The audit objections provided along with the show cause notice contained two reasons for re-opening of assessment. The first reason being that the total amount of premium was ₹30,23,74,146 and premium disallowed in the original assessment was only ₹24,80,39,16 and the balance premium of ₹5,43,34,977 was not disallowed. Thus, there was escapement of income. The second reason for re-opening of assessment pointed out by the audit party was that there was no justification why huge bonus was paid by the assessee to its MD / shareholders in the first year when the turnover of the company was negligible. The expenses were not allowable as business expense.

The Assessee filed its response. Based on the response filed by the Assessee, the re-opening of assessment on the first issue regarding share premium was dropped. However, as regards the second issue, the conclusion of the audit party was adopted by the Assessing Officer.

The assessee filed petition before the High Court challenging the order passed u/s. 148A(d) and the notice issued u/s. 148 of the Act. The Delhi High Court allowed the petition and held as follows:

“i) We are of the view that reopening the assessment on the basis of the objections of the Audit Party, shall in the above facts, amount to reviewing the assessment already made, as the relevant material was available with the assessing officer during that assessment. It is necessary to draw a distinction between a case where the assessee failed to provide some material /information during the assessment, which was flagged by the Audit Party, as against a case where all information was provided by the assessee, but was not considered or commented upon by the Assessing Officer in the assessment order, resulting in a subsequent audit objection. The latter cannot be subject matter of reassessment, as it shall have the effect of reconsidering the same material to arrive at a different conclusion, which cannot be permitted. The attempt of the Revenue to now hold that the amounts are chargeable to tax certainly amounts to a change of opinion, which cannot be sustained.

ii) It is trite law that the Revenue can reopen assessments based on audit objections to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of the Act. In fact, Clause (ii) to Explanation 1 of Section 148 of the Act, which was incorporated into the Act by virtue of the Finance Act, 2022 empowers the Assessing Officer to issue notice reopening the assessment when audit objections suggests that income has escaped assessment. However, the first proviso to Section 148 states that no notice shall be issued under the provision, unless the Assessing Officer has information with him which suggests that income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year. The question that arises now is whether notice can be issued u/s. 148, notwithstanding the fact that the issue flagged by the Audit Party was subject matter of examination in the assessment proceedings and a final decision in terms of an assessment order. We are of the view that the mere fact that objections were raised by the Audit Party cannot change or expand the nature of the power vested in the Assessing Officer to assess/reassess the income of the assessee to a power to review an already concluded assessment.

iii) It is clear that the audit objection pointing out that there is no justification available in the file as to why the amounts were paid, cannot be said to be ‘information’ for the respondent to initiate reassessment proceedings, when the Assessing Officer was in possession of the information and necessary documents at the time of the assessment proceedings. As such, the impugned action of the respondents is unsustainable.

iv) In the present case, the assessee had made a return of its income on 18/10/2016 for the relevant assessment year and had provided all necessary material for its assessment. As such, the extended period of six years for reopening the assessment would not be available to the Revenue u/s. 147 of the Act as it existed prior to April 1, 2021. The period of limitation is thus, four years from the end of AY 2016-17. It is a matter of record that the notice u/s. 148 has been issued on 31/03/2023, which is beyond the said period of four years. Therefore, in view of the first proviso to Section 149 of the Act, no notice could have been issued u/s. 148, as no such notice could have been issued under the provisions that were in force prior to April 1, 2021. We hold that the notice dated 31/03/2023 and the subsequent proceedings are barred by limitation.

v) We are of the view that the impugned notice and order, both dated 31/03/2023 need to be set aside. The assessment proceedings initiated pursuant to the same also need to be quashed. We order accordingly.”

3. ARL Infratech Limited vs. DCIT:

2026 (3) TMI 495 – Raj.:

A. Ys. 2021-22 to 2026-27: Date of order 06/03/2026:

S. 281B of ITA 1961:

Provisional attachment of property — Powers u/s. 281B — Power must be exercised cautiously — Before attachment authorities must examine whether assessee is a regular taxpayer — Mere reliance on factors such as bank loans or hypothetical future demand is incorrect — Attachment without objective satisfaction is impermissible.

A search was conducted at the premises of the assessee and assessment order was passed and on the basis of the appraisal report, Investigation Wing made an addition of ₹4.40 lakhs. The assessee filed an appeal before the CIT(A) which is pending.

The Assessing Officer issued notice u/s. 148 of the Act for A. Ys. 2021-22, 2022-23 and 2024-25 and on the basis of apprehension that demand of ₹1.30 crores may be created for A. Ys. 2022-23 and 2024-25, a provisional attachment order was passed by the Assessing Officer exercising powers u/s. 281B of the Income-tax Act, 1961 making a provisional attachment of the industrial plot which was owned by the assessee.

The Assessee challenged the said provisional attachment order before the Rajasthan High Court by way of a petition. The Assessee, inter alia, submitted before the High Court that it had paid ₹45.43 crores for the A. Ys. 2021-22 to 2026-27 and that the attachment was contrary to the guidelines laid down by the CBDT vide Circulars and OM dated 29/02/2016 and 31/07/2017. Further, due to the past record of the assessee, there was no basis to conclude that there was a possibility of non-payment of demand.

The High Court allowed the petition and held as follows:

“i) While Section 281B of the Act of 1961 gives unequivocal power to the authority to put the properties under attachment, the Hon’ble Apex Court has time and again held that such power has to be exercised by taking into consideration all the aspects as noticed in the case of Radha Krishan Industries (supra) and the contentions prescribed in the statute must be strictly fulfilled. Once such provision has to be treated as draconian in nature, in the opinion of this Court, the minimum requirement is to give an opportunity to the concerned assessee to make the payment or part of it as required in the Office Memorandum issued by the CBDT. A presumption cannot be drawn that the assessee would not make the payment. Principles of natural justice to that extent would be inherent as the civil rights are likely to be harmed, if action is taken u/s. 281B of the Act of 1961

ii) Before invoking power u/s. 281B of the Act of 1961, the authorities must examine whether the assessee before it is a person who has been a regular tax payer. Merely because he may have taken loan from the Bank for his business, may not be the only sufficient ground to attach the properties. Such attachment, even if provisional, creates a sense of apprehension and fear in the minds of bankers who are giving loans to the concerned units for their businesses. Their public reputation is seriously hampered. Therefore, invoking of such provision has to be done by exercising great caution and care and so as not to harm the reputation of an honest income tax payer.

iii) Even if a demand is raised, the same can be challenged in appeal and maximum amount to be deposited for settling the remaining demand is 20% of the said demand. In the present case, demand of ₹1,30,11,024/- has been provisionally assessed and as of today even the demand has not been raised. Therefore, issuing of provisional attachment order would be wholly unjustified and would go contrary to the purpose sought to be achieved.

iv) We, therefore, disapprove the approach adopted by the respondents and set aside the order of attachment dated 01/01/2026. However, we direct the petitioner-assessee to deposit 20% of the demand, provisionally assessed, with the authorities within a period of one week.

v) It is made clear that, ultimately, if the demand is found to be unjustified or deserves to be reduced or waived, the amount as directed by us to be deposited, shall be refunded with interest to the assessee.”

2. Manjulaben Mafatlal Shah vs. TRO:

(2026) 183 taxmann.com 746 (Bom.):

Date of order 17/02/2026:

Ss. 226 r.w.s. 179 of ITA 1961:

Collection and recovery of tax — Company —Recovery from director of the Company — Attachment of the Bank Account of the wife of the Director — Unjustified — S. 179 is applicable to the Director of the Company — Cannot be extended to the wife of the Director of the Company.

A notice u/s. 226(3) was issued upon the Assessee attaching the bank account of the Assessee in respect of liability of one Shri Ram Tubes Private Limited. The Assessee was the wife of the Director of the said Shri Ram Tubes Private Limited and she had nothing to do with the company. She was neither the Director, nor the Shareholder nor the employee of the said company. In view of the facts, it was the contention of the Assessee that the Department did not have the power to attach the bank account of the Assessee which stood in her sole name.

The Assessee challenged the notice and the action of the Department by way of writ petition filed before the Bombay High Court. The High Court allowed the petition and held as follows:

“i) The factual position has not been disputed by the revenue. It is not the case of the revenue that the petitioner was ever a director of the company, and against whom an income tax liability arises.

ii) Once this is the case, the Income Tax Department cannot attach the bank account of the Petitioner, and which stands in her sole name, only on the basis that she is the wife of a Director of Shri Ram Tubes Private Limited. Though the Income Tax Department may probably be able to proceed against the Petitioner’s husband by invoking provisions of Section 179, the same is wholly inapplicable to the Petitioner.”

1. Tripura State Electricity Corporation Ltd. vs. Principal CIT: (2026) 484 ITR 405 (Tri): 2025 SCC OnLine Tri 552:

A. Y. 2013-14: Date of order 14/08/2025:

Ss. 139(1), (5) and 143(2), (3) of ITA 1961:

Assessment — Validity of assessment order — Revised return filed within time — Revised return filed during pendency of scrutiny proceedings based on an audit objection — Assessment order passed based on the original return — CIT (Appeals) annulled the assessment order — Tribunal, proceeding on the erroneous basis that revised return was filed beyond period of limitation, set aside order of CIT (Appeals) and restored matter to the AO — High Court held that where revised return filed is validly filed, the assessment order cannot be passed on basis of the original return — Once a revised return is filed, original return stands obliterated — Assessment order set aside, order of CIT (Appeals) modified, and matter remitted to the AO — AO directed to determine taxable income on the basis of revised return.

The appellant assessee is the Tripura State Electricity Corporation Ltd. The appellant is engaged in the business of sale and distribution of electricity within the State of Tripura. For the A. Y. 2013-2014, the appellant had filed its return of income-tax on September 26, 2013 disclosing the total income computed at a loss figure of (-) ₹182,05,36,779 as against the loss as per the profit and loss account of (-) ₹13,32,27,00,075. The return of the appellant was taken up for scrutiny under the Computer Assisted Scrutiny Selection (CASS), and accordingly, a notice u/s. 143(2) of the Act was issued on September 4, 2014 to the appellant, and the details were furnished by the appellant on September 23, 2014.

During the pendency of the said proceedings initiated through the notice u/s. 143(2) of the Act issued on September 4, 2014, the appellant, on February 23, 2015, filed a revised return based on an audit objection by the Comptroller and Auditor General. In the meantime, due to a change in the incumbent in the office of the assessing authority, a notice u/s. 142(1) of the Act was issued on June 8, 2015. Subsequent notices were also issued on August 4, 2015 and October 11, 2016. Thereafter, after issuing a show-cause notice on February 26, 2016, the Assistant Commissioner of Income-tax, Agartala Circle, Agartala completed the assessment on March 18, 2016 by disallowing a deduction of ₹40,36,51,685 u/s. 40(a)(ia), 68 and 37 of the Act and determining the income at ₹1,41,68,85,094.

The Commissioner of Income-tax (Appeals) allowed the appeal filed by the assessee. The CIT (Appeals) held as under:

i) The Assessing Officer did not address the filing of the revised return; Though a revised return was filed on February 23, 2015 after the issuance of the notice dated September 4, 2014 under section 143(2) of the Act, and since the revised return was filed within time, the original return did not survive and stood substituted by the revised return; Therefore, it was not open for the Assessing Officer to advert to the original return. Certain decisions of the High Court of Punjab and Haryana, Karnataka and Gujarat were referred to by the Commissioner of Income-tax (Appeals). He held that the Assessing Officer was required to issue a notice u/s. 143(2) on the revised return, and since the assessment order was completely silent about the revised return filed on February 23, 2015, the assessment order could not be sustained and was annulled.

ii) U/s. 139(5) of the Act, revised return may be filed if the assessee discovers any omission or any wrong statement in the return filed under section 139(1) or in response to the notice issued under section 142(1) of the Act; Such revised return must be filed before expiry of one year from the end of the relevant assessment year or before the completion of assessment, whichever is earlier. In the instant case, the revised return could have been filed by March 31, 2016; it was however filed within time on February 23, 2015; Since the revised return was filed due to comments made by the Comptroller and Auditor General, there was sufficient bona fide reason for filing of the revised return. It was also noted by the appellate authority that, in the report of the Assessing Officer, it was stated that there was no violation of provisions of law while filing the revised return.

iii) Once a revised return has been validly filed, an assessment order cannot be passed on the basis of the notice issued u/s. 143(2) on the original return. It was not open for the Assessing Officer to refer to the original return or the statements filed along with the it, and only the revised return has to be taken into account for the purpose of making the assessment.”

In the appeal filed by the Revenue before the Tribunal, the Department contended that the Commissioner of Income-tax (Appeals) could not have annulled the assessment order because the assessee failed to bring to the knowledge of the Assessing Officer during the continuation of the proceeding under section 143(2) on the original return, that the assessee filed a revised return subsequent to the receiving of notice u/s. 143(2) on the original return, and that too at the appellate stage.

The Tribunal allowed the appeal filed by the Revenue and held that, in the cases cited by the assessee, it was observed that when a revised return is filed, the original return stands obliterated, and the determination of the taxable income is to be made on the basis of the revised return; but in those cases it was not held that issuance of notice under section 143(2) on the revised return was mandatory, failing which the entire assessment proceedings would be vitiated.

The Tribunal erroneously noted that the revised return had been filed on March 17, 2016 (though it had been filed on February 23, 2015), and that this was not known to the Assessing Officer, as the return had been filed at the receipt counter, making it impossible for the Assessing Officer to take cognizance of such a fact in such a short period of time.

It, therefore, held that it was only an irregularity and not an illegality, and that it could have been cured by the first appellate authority by calling a remand report from the Assessing Officer after redetermination of the income on the basis of the revised return; however, the assessment order could not be declared as null and void.

It therefore set aside the order of the Commissioner of Income-tax (Appeals) and restored the matter to the file of the Assessing Officer, and directed him to redetermine the taxable income of the assessee after taking the details from the revised return of income.

On appeal by the assessee, the Tripura High Court framed the following substantial question of law for consideration:

“i) “Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified and correct in law in holding that non-issuance and/or non-service of notice u/s. 143(2) in respect of a valid return furnished u/s. 139(5) during the continuance of a scrutiny assessment proceeding u/s. 143(3) was a mere irregularity and not an illegality, and therefore, in not annulling the assessment order u/s. 143(3)?

ii) Whether the learned Tribunal acted perversely in not setting aside the order of the assessing authority in spite of noticing that the appellant had filed a revised return and accepting the legal position that such revised return will obliterate the original return ?”

The High Court allowed the appeal and held as under:

“i) Once the revised return is filed, it is well settled that the original return stands obliterated as rightly held by the Commissioner of Income-tax (Appeals) in his order dated July 24, 2018 placing reliance on the judgments in CIT vs. Rana Polycot Ltd., [(2012) 347 ITR 466 (P&H); 2011 SCC OnLine P&H 17591.] and Beco Engineering Co. Ltd. v. CIT, [(1984) 148 ITR 478 (P&H); 1984 SCC OnLine P&H 800.] , etc. So the Assessing Officer can only take into account the revised return for the purpose of making assessment, and he cannot act upon the original return which stood obliterated.

ii) For some reason in the instant case, the Assessing Officer took no notice of the revised return, and continued the proceedings on the basis of the original return and passed an assessment order on March 18, 2016. This is a clear illegality vitiating his order.

iii) The Commissioner of Income-tax (Appeals) noted the correct legal position as set out above, and also gave a finding of fact that there was a bona fide mistake that impelled the assessee to file the revised return on February 23, 2015, i.e., it was necessitated due to comments given by the Comptroller and Auditor General. It also noted that once a valid revised return is filed, the Assessing Officer has to take cognizance of the same, and he had to issue notice u/s. 143(2) on the revised return. The assessment order was totally silent about the revised return which disclosed a loss of (-) ₹194,75,04,007, and that loss had not been considered in the final computation of income. He, therefore, rightly held that the assessment proceeding was vitiated.

iv) Consequently, he ought to have remitted the matter back to the Assessing Officer after setting aside the assessment order passed on March 18, 2016, and directed him to pass an assessment order after taking into consideration the revised return. Instead he merely annulled the assessing authority’s order.

v) In the order passed by the Income-tax Appellate Tribunal, there is a clear error in noting that the revised return was filed on March 17, 2016, just a day prior to the passing of the order on March 18, 2016. The revised return had been filed on February 23, 2015 itself, and the Tribunal, had it noted the correct date of filing of the revised return, because there was at least a one year gap between the filing of the revised return and the passing of the assessment order, would not have come to the conclusion that it was impossible for the Assessing Officer to take cognizance of the revised return. This is because a year’s time is good enough for the Assessing Officer to take note of the revised return, ignore the original return, and then pass the assessment order on the basis of the revised return.

vi) Its view that the step taken at the end by the assessee would frustrate the whole assessment machinery is clearly perverse because once the assessee has a right to file a revised return, and such a revised return was filed within time, the Assessing Officer has no choice, but to act on the revised return only because the original return stood obliterated. Once the statute permits the filing of the revised return by giving such a right to the assessee, the Income-tax Department cannot question the wisdom of Parliament in providing such a right to the assessee, and the Tribunal cannot hold that filing of the revised return would frustrate the assessment machinery.

vii) Its view that it is only an irregularity and not an illegality, is also unsustainable having regard to the judgments cited in the decision of the Commissioner of Income-tax (Appeals) and also more particularly the judgment of the Supreme Court in CIT vs. Mahendra Mills, [(2000) 243 ITR 56 (SC); (2000) 3 SCC 615; 2000 SCC OnLine SC 577.] and other connected matters confirming the judgment in Chief CIT (Administration) vs. Machine Tool Corporation of India Ltd., [(1993) 201 ITR 101 (Karn); 1992 SCC OnLine Kar 202.]

viii) In our view, the Assessing Officer committed a clear illegality by ignoring the revised return, and the Tribunal got misled by noting the date of filing of the revised return incorrectly, and came to the perverse conclusion that it would only be an irregularity, and not an illegality.

ix) Therefore, the Tribunal ought to have modified the order of the Commissioner of Income-tax (Appeals) by setting aside the order of the assessing authority and remitted the matter back to the Assessing Officer for redetermining the taxable income of the appellant after taking the details from the revised return of income. Instead, it set aside the order of the Commissioner of Income-tax (Appeals), but restored the matter to the file of the Assessing Officer without setting aside the assessment order passed on March 18, 2016. This is a clear error of law.

x) Therefore, the second substantial question of law framed by us is held in favour of the appellant, and so we modify the decision of the Income-tax Appellate Tribunal in the following manner:

            (a) The assessment order dated March 18, 2016 is set aside;

            (b) The order of the Commissioner of Income-tax (Appeals) is modified, and the matter is remitted to the Assessing Officer to redetermine the taxable income of the assessee after taking the details from the revised return of income, and this exercise should be carried out after providing due opportunity of hearing to the assessee.

xi) Having regard to this view taken by us, it is not necessary to decide the first substantial question of law, but we hold that the reference to section 139 in sub-section (1) of section 143 would include a revised return filed under sub-section (5) of section 139 also, and section 143 cannot be applied only to original returns, and should be applied to revised returns too. The appeal is partly allowed as above.

6. Munchener Ruckversicherungs Gesellshaft Aktiengesellschaft In Munchen vs. CIT (International Taxation)

[2025] 473 ITR 53 (Del.):

A. Y. 2015-16

Date of order: 3^rd September, 2024

S. 155(14) and 264 of ITA 1961

Revision — Non-resident — Application by assessee for revision — Provisions of section 155(14) — Claim for tax deducted at source on amount not taxable in India — Credit not reflected in Form 26AS at time when return originally filed for relevant assessment year but reflected in subsequent assessment year — Commissioner cannot reject application on ground revised return not filed — Department to refund tax deducted at source with statutory interest:

The assessee was a non-resident. For the A.Y. 2015-16, the assessee declared nil income asserting that its receipt of an amount would not be subject to tax in India in terms of the provisions u/s. 90 of the Income-tax Act, 1961 and claimed refund of tax deducted at source on the basis the tax credit statement being form 26AS, which included the tax deducted by an entity BALIC. The assessee submitted that the tax deducted at source pertaining to the last quarter of F. Y. 2014-15 was credited by BALIC on 21^st January, 2016, that consequently, the original tax deducted at source stood increased. In the return for the A. Y. 2016-17 wherein the claim for tax deducted at source credit stood embedded on account of such amount having by then being captured in form 26AS and which amount had remained unclaimed in A. Y. 2015-16.

The Commissioner (International Taxation) was of the view that since the income received from BALIC was offered to tax, the assessee would not be entitled to the grant of tax deducted at source credit. He held that the assessee had failed to file revised return of income and rejected the assessee’s application u/s. 264.

The Delhi High Court allowed the writ petition filed by the assessee and held as under:

“i) Section 155 of the Income-tax Act, 1961 prescribes that where credit for tax has not been given on the ground of either a certificate having not been furnished or filed, but which is subsequently presented before the Assessing Officer, it would be sufficient for the assessment order being amended. Section 155(14) places the Assessing Officer under a statutory obligation to amend the order of assessment once it is established that the contingencies stated in that provision are duly established. Sub-section (14) neither contemplates nor mandates the original return being amended or revised and takes care of contingencies where tax deducted at source is either subsequently credited or is reflected in form 26AS after a time lag. An assessee may face such a spectre on account of a variety of unforeseeable reasons.

ii) Since the tax which was deducted at source by BALIC stood duly embedded in form 26AS which was produced by the assessee and the income earned from that entity had never been held to be subject to tax under the Act, the refusal on the part of the Department to refund that amount was illegal and arbitrary. The factum of tax having been deducted at source by BALIC and pertaining to income transmitted in the A. Y. 2015-16 was not disputed and stood duly fortified from the disclosures which appeared in form 26AS pertaining to that assessment year. It was also not disputed that BALIC had credited the tax deducted at source on 21st January, 2016 and as a consequence of which, the credit was not reflected at the time when the return had been originally filed for the assessment year 2015-16.

iii) The order passed u/s. 264 rejecting the assessee’s application was quashed. The Department was directed to refund the amount of tax deducted at source along with statutory interest.”

5. CIT (International Taxation) vs. Zebra Technologies Asia Pacific Pte. Ltd.

[2025] 472 ITR 745 (Del.):

A. Ys. 2017-18

Date of order: 23^rd October, 2024

S. 263 of ITA 1961

Revision — Revision order — Validity — Non-resident — Claim for benefits under DTAA — Opinion of Commissioner that assessee conduit company used for treaty shopping not stated in notice — Assessee not given an opportunity to satisfy Commissioner regarding his view — Order of Tribunal setting side revision order not erroneous:

The assessee was a non-resident and distributed electronic products and services related to after sales, repairs, and technical support services to the customers across the globe. It held tax residency certificate of Singapore and sought to avail of the benefit of India-Singapore Double Taxation Avoidance Agreement ([1982] 134 ITR (St.) 6). In the A. Y. 2017-18, the assessee received a sum for rendition of technical support, repairs and maintenance services under an agreement with an Indian entity and also an amount in USD from offshore sale of products. According to the assessee, since it did not have a permanent establishment in India and also did not make available technical know-how, knowledge, and skill to the Indian entity under the agreement, the receipts were not chargeable to tax in India under the Act by virtue of the Double Taxation Avoidance Agreement. The Assessing Officer accepted the assessee’s explanation in response to the notices u/ss. 142(1) and 143(2) of the Income-tax Act, 1961 during the assessment proceedings which culminated in an assessment order.

The Commissioner was of the view that the Assessing Officer did not conduct the necessary inquiries and verified the facts for accepting the assessee’s claim that its income was not chargeable to tax under the Act by virtue of India-Singapore Double Taxation Avoidance Agreement, that he did not call for the relevant details or verified whether the assessee had a permanent establishment in India during the relevant period, that he did not carry out any inquiry to ascertain whether any commercial substance existed in Singapore and whether the assessee was merely a conduit company and used with an object to obtain the tax benefit under the Double Taxation Avoidance Agreement. Accordingly, he invoked his power u/s. 263.

The Tribunal faulted the Commissioner for not affording the assessee an opportunity to rebut the allegations that it was merely a conduit without any substance and had entered into an agreement for the purposes of taking an advantage of the Double Taxation Avoidance Agreement and allowed the appeal filed by the assessee.

The Delhi High Court dismissed the appeal filed by the Revenue and held as under:

“i) There was no fault with the order of the Tribunal in setting aside the revision order passed by the Commissioner u/s. 263 on the ground that the assessee was not afforded an opportunity to counter the allegation that it was a conduit company without any substance.

ii) In the show-cause notice the Commissioner had faulted the Assessing Officer for not undertaking certain enquiries including verifying whether, (i) the assessee had a permanent establishment in India, (ii) in terms of section 9(1)(vii) of the Act, the income was chargeable as fees for technical services, (iii) tax at source at the rate of 10 per cent. on all the remittances made to the assessee were deducted, (iv) the condition as set out in article 12 of the India-Singapore Double Taxation Avoidance Agreement in regard to taxation of fees for technical services were satisfied, (v) regarding the commercial substance of the assessee in Singapore and (vi) it was a conduit company formed for obtaining the tax benefits under the Double Taxation Avoidance Agreement.

iii) These observations were made only for the purposes of calling upon the assessee to show cause why the proceedings not be initiated u/s. 263 of the Act but, thereafter, the Commissioner had not put the issue regarding treaty shopping to the assessee. The tentative opinion formed by the Commissioner that the assessee was a conduit company for the reasons as articulated in the revision order was not put to the assessee. Hence, the assessee had not been given an opportunity to satisfy the Commissioner regarding such view for the A. Y. 2017-18.”

4. Sushen Mohan Gupta vs. Principle CIT

[2025] 473 ITR 173 (Del.)

A. Y. 2010-11 to 2020-21

Date of order: 22^nd March, 2024

Ss. 156, 220(1), 220(6) and 246A of ITA 1961

Recovery of tax — Grant of stay of demand — Stay of recovery pending appeals before Commissioner (Appeals) — Effect of office memorandum issued by CBDT — Rejection of stay of demand for non-deposit of 20% of disputed demand — Application to the Principal Commissioner — Direction to deposit 40% — Authorities failed to consider prima facie merits of the case — Financial hardship and likelihood of success — Orders rejecting stay of demand unsustainable — Matter remanded to the AO with directions to consider in light of earlier decision:

A search and seizure action was conducted and subsequently notices u/s. 153A of the Act for the A.Ys. 2010-11 to 2019-20 were issued and on culmination of proceedings so drawn, the assessment orders came to be framed on 30^th September, 2021 raising a cumulative demand of ₹ 1,85,62,19,390 for the A.Ys. 2010-11 to 2020-21.

The Assessee filed appeals before the CIT(A) which are pending. Against the enforcement of demand, the Assessee filed application for stay of demand before the Assessing Officer which came to be rejected on the ground that the Assessee had not deposited 20% of the outstanding demand and therefore the application could not be entertained. In rejecting the assessee’s application for stay of demand, the Assessing Officer relied upon the Office Memorandums of the CBDT dated 29-02-2016 and 31-07-2017.

Thereafter, the Assessee filed application for rectification of mistakes which was disposed and the revised demand recoverable from the Assessee was computed at ₹1,81,37,14,107. The Assessee thereafter filed another stay application before the Assessing Officer for the A.Ys. 2010-11 to 2020-21. During the pendency of the said stay application, the Assessee was served with a letter seeking payment of the outstanding demand followed by a demand notice issued u/s. 220(1) of the Act. In response to the aforesaid, the Assessee filed a detailed response stating that the original assessment was wholly arbitrary and rendered unsustainable in the light of the judgment of the Supreme Court in the case of Pr.CIT vs. Abhisar Buildwell Pvt. Ltd. The Assessee also offered to pledge properties owned by an entity in which the Assessee’s family members were directors / shareholders to secure the outstanding demand to the extent of 20%. The Assessee’s prayer was rejected.

Aggrieved, the Assessee approached the Principal Commissioner for grant of interim protection against the outstanding demands. The Principal Commissioner disposed the application by observing that during search operations, various incriminating documents were found and seized and credible evidence were collected. He, thus, disposed of the applications of stay of demand and directed the assessee to deposit demand which was 40 per cent of total outstanding demand within 15 days of receipt of his order.

The Assessee filed a writ petition before the High Court. The Delhi High Court allowed the writ petition and held as follows:

“i) The Central Board of Direct Taxes’ Office Memorandum [F. No. 404/72/93-ITCC], dated 29^th February, 2016 could not be read as mandating a pre-deposit of 20 per cent. of the outstanding demand, without reference to the prima facie merits of a challenge that may be raised by an assessee in respect of an assessment order.

ii) The assessee had approached the Principal Commissioner in terms of the provisions made in the Office Memorandum dated 29^th February, 2016. The view taken by the second respondent, that applications for stay could neither be countenanced nor entertained till the assessee deposited 20 per cent. of the pending demand was untenable and erroneous. The Principal Commissioner had proceeded to cause even greater prejudice to the assessee by requiring him to deposit 40 per cent. of the outstanding demand.

iii) According to para 4(C) of the Office Memorandum [F. No. 404/72/93-ITCC], dated February 29, 2016 stated to the effect that where stay of demand was granted by the Assessing Officer on payment of 15 per cent. of the disputed demand and the assessee was still aggrieved, he could approach the jurisdictional administrative Principal Commissioner or the Commissioner for a review of the decision of the Assessing Officer. The Principal Commissioner could not be recognised to stand empowered to subject the assessee to more onerous conditions. Rather than examining the challenge raised by the assessee to the assessment orders and evaluating the prima facie merits of the challenge had in one sense placed him under a harsher burden of depositing 40 per cent. of the outstanding demand as opposed to the direction of 20 per cent. deposit by the second respondent as a pre-condition for the consideration of application for stay under section 220(6) .

iv) Both the authorities had failed to consider the aspect of prima facie merits, likelihood of success and undue hardship. Therefore, their orders were unsustainable and hence quashed and set aside. The matter was remitted to the Assessing Officer to examine the applications for stay afresh considering the legal position.”

3. Sesa Sterlite Ltd. vs. ACIT

[2025] 472 ITR 591 (Bom.)

A. Y. 2009-10

Date of order: 4^th September, 2024

Ss.10B, 133A, 147 and 148 of ITA 1961

Reassessment — Exemption u/s. 10B — Newly established hundred per cent. export oriented establishments — Reassessment — Notice — Survey — Denial of claim for deduction u/s. 10B in original assessment — Grant of deduction by Tribunal — Fresh survey during pendency of revenue’s appeal before court — Reassessment on ground of availability of new material would tantamount to getting over anomalous situation — Reassessment proceedings to disallow claim for deduction once again impermissible — Notice and order rejecting assessee’s objections quashed and set aside:

The assessee was in the business of manufacturing and production of iron ore and had three units situated at Amona, Chitradurga and at Codli. These units are export-oriented undertakings and for the assessment year 2009-10, the assessee claimed deduction u/s. 10B. A survey u/s. 133A was carried out at the assessee’s premises wherein the authorities sought to ascertain the relevant facts in connection with the claim for deduction u/s. 10B. The Assessing Officer issued a notice dated July 16, 2014 u/s. 148 to reopen the assessment u/s. 147. The Assessees objections were rejected.

The Assessee filed a writ petition and challenged the notice and the order rejecting the objection. The Bombay High Court allowed the writ petition and held as under:

“i) Section 10B(2) provided that section 10B applied to any undertaking which fulfilled all the conditions therein. The assessee had claimed deduction u/s. 10B in respect of the three export-oriented units for the A. Y. 2009-10 and a survey u/a. 133A had been carried out at its premises in connection with the claim for deduction u/s. 10B. The assessment order u/s. 143(3) was passed by the Assessing Officer whereunder the claim for deduction u/s. 10B was disallowed in its entirety for the reasons given by the Assessing Officer. He had held that the assessee’s units were not engaged in the business of manufacture and production of any article or thing, that the assessee had not produced satisfactory evidence with regard to the date of commencement of production, that the approval granted by the Development Commissioner for one unit was not ratified by the Board and that the profits of the units was determined without taking into consideration the cost of the wastage from other units which was utilised in the alleged production that was carried out in the unit under reference, and the units were not new units and the setting up of the units in the old mines which were operated by the assessee could not be regarded as new units and that the assessee had not maintained separate books of account for the export oriented units. The Commissioner (Appeals) had upheld the denial of the claim of deduction under section 10B by the Assessing Officer. The Tribunal had dealt with all the reasons given by the Assessing Officer and had upheld the claim for deduction u/s. 10B. Therefore, entitlement to deduction u/s. 10B had been the subject matter of appeal before the appellate authorities. During the pendency of the tax appeal before this court, a fresh survey was conducted u/s. 133A and on the basis of the materials which were found during the survey in 2014, reassessment u/s. 147 was sought to be justified for the purpose of denying the claim for deduction u/s. 10B. Thus, the reasons of the Assessing Officer in support of his finding could be several but what was relevant was the subject matter of the tax appeal. The third proviso to section 147, which provided that the Assessing Officer could assess or reassess such income, other than the income involving matters which were the subject matters of any appeal, reference or revision, which was chargeable to tax and had escaped assessment, would come into effect.

ii) When the fresh survey u/s. 133A was conducted in the year 2014 during the pendency of the tax appeal before this court, the new materials found by the Assessing Officer were sought to be placed before the Tribunal and this court and the issue under consideration was whether the assessee was entitled to claim deduction u/s. 10B. Assuming that the reassessment proceedings u/s. 147 was allowed to continue on the basis of the new materials a situation could arise to be held that the assessee was entitled to claim deduction u/s. 10B, whereas in the reassessment proceedings, the Assessing Officer on the basis of the new materials could conclude that the assessee was not entitled to claim deduction u/s. 10B.

iii) Reassessment proceedings were obviously to get over such an anomalous situation that the third proviso to section 147 was meant to cover. If the reassessment proceedings were allowed to continue, it would virtually amount to having an effect of sitting in appeal over the orders passed by this court and the Tribunal which could not be countenanced. Though it was the allegation that fresh evidence was unearthed during the course of fresh survey in March 2014, which indicated that the units considered as new units were not new units but an amalgamation of the existing units. The exercise really was to rely on these materials in support of the findings earlier recorded by the Assessing Officer which was already subject matter of challenge before the competent forum. Assumption of jurisdiction to reopen the assessment was without jurisdiction to once again disallow a claim for deduction u/s. 10B. The notice dated 16^th July, 2014 issued u/s. 148 to reopen the assessment u/s. 147 for the A. Y. 2009-10 and the order rejecting the assessee’s objections were quashed and set aside.”

2. Chamber of Tax Consultants & Ors vs. DGIT (Systems)

[2025] 473 ITR 85 (Bom.)

A. Y. . 2024-25

Date of order: 24^th January, 2025

Ss. 87A, 115BAC, 139, 139(5) and 139D of  ITA 1961

Public Interest Litigation — Return of Income — Filing of return in electronic form — Modification of online filing system —Jurisdiction of revenue authorities — Utility not providing for making claim for rebate under section 87A read with proviso to section after 5-7-2024 — Attempt to restrict or prohibit assessee from making particular claim at threshold itself in return of income unconstitutional — No provision under Act which debars assessee to make claim under section 87A qua tax computed at rates specified in provisions of chapter XII other than section 115BAC — Statutory safeguards and remedies in provisions of Act for consequences if claim made in self assessment found to be incorrect or not bona fide — Allowance or disallowance of claim to be deduced by interpretative and adjudicating process — Assessee cannot be debarred from making claim in return of income whether online or manual — Directions issued to modify utility to enable assessees file returns or revised returns of income — NFAC cannot continue assessment proceedings in concluded assessment — Assessment order passed by NFAC set-aside:

The Department releases utility for filing income tax returns online every year. The Department published a change in utility with effect from 05-07-2024. The said change unilaterally disabled the assessees from claiming rebate u/s. 87A. As a result, taxpayers, despite being statutorily eligible, were effectively deprived of their entitlements solely due to technical modifications introduced by the revenue.

The Chamber of Tax Consultants filed a petition seeking direction to modify the system and put in place by the Department for filing income tax returns for AY 2024-25 so as to allow the assessees at large to take benefit of rebate available u/s. 87A. It was contended that this unilateral modification is arbitrary, lacks justification, and deprives eligible taxpayers of statutory benefits. The Respondents’ actions violate the principles of fairness and transparency expected from public authorities and seek judicial intervention to ensure compliance with statutory provisions.

The Bombay High Court allowed the petition and held as follows:

“i) The Department could not restrain or prohibit an assessee from claiming section 87A rebate by modifying their utility by which an assessee was forbidden at the threshold itself from making such a claim in the return of income. The provisions of the Act were not so clear as to arrive at a definite conclusion that a rebate under section 87A could not be granted from the tax computed under the other provisions of Chapter XII. Certainly, such a claim whether eligible or not could be examined in the proceedings under section 143(1) or section 143(3). Merely because few selected cases were picked up for scrutiny would not mean and would not authorise any authority under the Act to prevent an assessee from making the claim on which more than one view was possible. Merely because many returns of income were required to be processed and only a few of them were selected for scrutiny assessment under section 143(3) could not be a ground to tweak the utility to prevent at the very threshold, an opportunity to raise a claim on a debatable issue based upon the interpretation of the provisions in sections 87A and 115BAC. Considering the mandates of articles 265 and 300A, ends, howsoever laudable, cannot justify means.

ii) Assuming that the legal provisions were ambiguous, the Department cannot resolve such ambiguity by adopting an interpretation favouring itself through the device of simply tweaking the utility and preventing the assessee from even raising a claim. Therefore, the main question is not whether the interpretation proposed by the learned counsel for the petitioners or that proposed by the learned Additional Solicitor General is correct, but the main question is whether the Department can insist that its interpretation prevails or triumphs because it has the capacity to and has exercised this capacity to tweak the utility and prevent an assessee to even raise a debatable claim. The provisions of the Income-tax Act do not permit the Department to do this without transgressing the constitutional boundaries

iii) The issue raised on the claim u/s. 87A was, at best, highly debatable and contentious. Therefore, the Department would not be justified in assuming that its interpretation was open and shut, and based upon such a conclusion, shut out bona fide claims for rebate under section 87A and could not be done by exercising administrative powers instead of quasi-judicial powers. Disputed claims, except to the limited extent explicitly permitted by the law, could not ordinarily be disposed of by the executive acting in its executive capacity. This is more so when the executive is itself a party to the lis. One of the foundations of our Constitution is the rule of law. This posits that all three organs of governance, the Legislature, the Executive, and the Judiciary function under and in accordance with the law as enshrined in our Constitution.

iv) The Department did not show any provision under the Act which expressly debarred an assessee to raise or make the claim u/s. 87A qua the tax computed at the rates specified in the provisions of Chapter XII other than section 115BAC. There was no rebuttal to the petitioner’s contention that a provision like section 112A(6) had been expressly enacted wherever the Legislature intended to deny such a benefit. Therefore, in so far as the prayers of the petitioners were concerned that the utility should permit an assessee to at least make a claim under section 87A, it could not be rejected at the threshold.

v) Whether rebate u/s. 87A was to be allowed only on the tax calculated in accordance with the provisions of section 115BAC or also on taxes calculated under other provisions of Chapter XII would require interpretation of the interplay of section 87A and section 115BAC To what extent the overriding provisions contained in section 115BAC(1A) would result in allowability or denial of rebate under section 87A would have to be examined by interpretative process. The impact of the phrase “subject to the provisions of this Chapter” would also have to be examined along with other provisions for adjudicating the claim under section 87A. What was the purport of the proviso to section 87A on the claim proposed to be made would have to be interpreted in conjunction with the provisions of section 115BAC(1A) and other connected sections. How the phrase “total income” should be construed for section 87A and section 115BAC along with the definition sections, charging sections and scope of total income and the scheme of the Act, would have to be examined. Whether the provisions of section 115BAC restricted itself only to tax rates or computation of total income would also have to be examined. If such exercise was required to be undertaken before coming to a definite conclusion as to whether the rebate under section 87A was to be granted or denied on the tax computed under the provisions of Chapter XII other than section 115BAC, had to be deduced by interpretative and adjudicating process. Therefore, the Department was not justified in modifying the utility from 5th July, 2024, by which an assessee was debarred at the threshold from making the claim, which claim was contentious or debatable.

vi) A combined reading of section 87 and section 87A would mean an assessee has to make a claim, the entitlement of which is to be examined by processing the return under section 143(1) or section 143(3) and the same should be allowed as a deduction. Section 87 which provides for rebate under section 87A uses the phrase “there shall be allowed from the amount of income tax . . .”. The proviso to section 87A uses the phrase “. assessee shall be entitled to a deduction . . .”. If a claim was not made, the Department could contend that the claim could not be allowed.

vii) In the absence of any concrete case, the petitioner’s prayer to direct the Department to make the utilities for filing the return of income online flexible so as to allow an assessee to self compute the income and there should not be any restriction on making of any claim whatsoever and to not release any utilities or make any changes in the utilities for filing of the return of income under section 139 which would not allow any assessee to raise any claim, could not be granted unless there was a demand for justice which had been rejected or a failure on the part of the Department to exercise its duty under the Act. The court should grant no relief in such broad and general terms because the ramifications would be unclear.

viii) The Department was directed to modify the utilities for filing of the return of income u/s. 139 of the Act immediately, thereby allowing the assessees to make a claim of rebate under section 87A of the Act read with the proviso to section 87A , in their return of income for the assessment year 2024-25 and subsequent years including revised returns to be filed u/s. 139(5).”

1. Principle CIT vs. Hespera Reality Pvt. Ltd

[2025] 472 ITR 630 (Del.)

A. Y. 2015-16

Date of order: 24^th December

Ss.10(38) and 115JB of ITA 1961

Exemption u/s. 10(38) — Long-term capital gains — Book profits — Minimum alternate tax — Amendments in provisions of sections 10 and 115JB — Commissioner (Appeals) and Tribunal not erroneous in allowing exemption u/s. 10(38) on long-term capital gains from sale of shares of amalgamating companies with assessee:

During the F.Y. 2014-15 relevant to the A.Y. 2015-16, five companies which held shares of the entity IBHFL merged with the assessee and three of these companies sold their shares. Since the said amalgamating companies were merged with the assessee with effect from August 1, 2014, the income earned from the transaction of sale of IBHFL shares were assessed in the hands of the assessee. The Assessing Officer was of the view that the amount of long-term capital gains was required to be added to the book profits u/s. 115JB and that the amount was not entitled to exemption u/s. 10(38).

The Commissioner (Appeals) held that the entire amount of long-term capital gains was not liable to be included as income chargeable to tax u/s. 10(38) and accordingly, deleted the disallowance but upheld the Assessing Officer’s decision regarding the computation of book profits for the purpose of determination of minimum alternate tax u/s. 115JB. On the question, whether the long-term capital gains that arose from the sale of investments were exempted u/s. 10(38), the Tribunal concurred with the decision of the Commissioner (Appeals) and rejected the appeal of the Department.

Delhi High Court dismissed the further appeal by the Department and held as under:

“i) The proviso to section 10(38) of the Income-tax Act, 1961 was introduced by virtue of the Finance Act, 2006 ([2006] 282 ITR (St.) 14). The inclusion of the proviso was corresponding to the amendments to Explanation 1 of section 115JB. By virtue of the Finance Act, 2006, the Explanation to section 115JB was amended and expenditure incurred in respect of the income exempt u/s. 10, with the exceptions of section 10(38) was excluded for the purposes of calculation of book profits and minimum alternate tax under section 115JB. In other words, the expenditure incurred for earning such income as was exempt from taxation by virtue of section 10(38) was required to be accounted for as expenditure for determining the book profits. Correspondingly, income u/s. 10(38) was also included as a part of the book profits but other incomes covered u/s. 10 were excluded.

ii) The proviso to section 10(38) was added by virtue of the Finance Act, 2006 to abundantly clarify that the income from capital gains on certain assets, which are excluded from the income u/s. 10(38) would be included in computing book profits u/s. 115JB. The proviso to section 10(38) cannot be read in the reverse to mean that if the gains are not included as book profits u/s. 115JB they are liable to be included as income for the purposes of assessment to tax under the normal provisions, notwithstanding that the gains are required to be excluded from income chargeable to tax u/s. 10(38).

iii) There was no fault with the decision of the Commissioner (Appeals) and the Tribunal, in rejecting the Department’s contention and holding that the assessee was entitled to exemption u/s. 10(38) of the long-term capital gains on account of sale of shares by the amalgamating companies, which was denied by the Assessing Officer.”