Case Details: Asst. Commissioner of Income-tax (TDS) vs. Riya Travel and Tours (India) (P.) Ltd. - [2025] 172 taxmann.com 652 (Mumbai-Trib.)

Judiciary and Counsel Details

• Ms Kavitha Rajagopal, Judicial Member & Om Prakash Kant, Accountant member
• Niraj Sheth for the Appellant.
• R.R. Makwana, Sr. DR for the Respondent.

Facts of the Case

Assessee was an air travel agent accredited by International Air Transport Association (IATA) and used to book airline tickets for international and domestic travel. Assessee was provided with a specific IATA code using which it used to buy airline tickets for its clients. Assessee made payments under the Billing and Settlement (BSP) Mechanism to BSP IATA for air tickets of Full Cost Carrier (FCC) airlines booked through the e-commerce platform, namely CRS System.

The Assessing Officer (AO) observed that the assessee failed to deduct TDS under section 194-O, considering the assessee as an e-commerce operator. In response, the assessee contended that it was not an e-commerce operator for the purpose of section 194-O as it did not own, operate, or manage the CRS system. The AO was not satisfied and held the assessee to be “an assessee in default”.

On appeal, the CIT(A) deleted the additions. Aggrieved by the order, the AO filed the instant appeal before the Tribunal.

ITAT Held

The Mumbai Tribunal held that the CRS system was not owned by the assessee. As per the subscriber agreement entered into by the assessee with Interglobe Technology Quotient Pvt. Ltd. (ITQPL), the assessee shall be provided access to the software system solely to use the Galileo system for obtaining information about the schedules, fares, seat availability, etc. and other services and also for making bookings. It also specifies that the Galileo system is owned and operated by the Travelport Global Distribution System B.V. and ITQPL is merely a distributor of the Galileo system in India and not an agent of Travelport Global Distribution System B.V.

The ITQPL is also entrusted with monitoring or testing the employees of the assessee, and the right to remove or recover the software from the locations in case of any breach is vested with ITQPL. It also narrates the obligation of the assessee. It specifies that the assessee cannot, without prior consent, modify, enhance or make copies of old or part of the software and also categorically states that the ownership of the software is with ITQPL. It also facilitates the calculations of incentives and payments to the assessee. Also, it restricts productivity incentive payments in case the assessee fails to achieve the target segments in any quarter.

The recital of the agreement does not create the ownership right, nor does it let the assessee operate or manage the CSR system. Without any of these, the assessee cannot be held to be an e-commerce operator. Therefore, the provisions of section 194-O were not applicable to the assessee.

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Notification no. 23/2025, 28-03-2025

The Central Board of Direct Taxes (CBDT) released the Income-tax (Eighth Amendment) Rules, 2025, on March 28, 2025, prescribing changes to Form No. 3CD. The changes shall come into force on 01-04-2025.

The changes introduced in Forms are consequential of amendments proposed by the Finance (No. 2) Act 2024, such as the insertion of reference of Section 44BBC in Clause 12, insertion of ‘expenditure to settle proceedings for contravention of notified laws’ in Clause 21, etc. Other changes introduced in the form are as follows:

1. Introduction of Clause 36B for Buyback Receipts

A new Clause 36B has been added to Form 3CD. This addition mandates the disclosure of the buyback receipts of shares under section 2(22)(f) of the Income-tax Act, 1961. It seeks the following details:

(a) Amount received for buyback of shares

(b) Cost of acquisition of shares bought back

2. Introduction of Code in Clause 31

The Board has introduced a new code system for transactions in Clause 31, which deals with loans, deposits and repayments. The code categorises the nature of amounts/receipts/repayments involved in loans, deposits, and specified advances.

Examples of codes include:

• Cash payment (Code A)
• Cash receipt (Code B)
• Payment through non-account payee cheques (Code C)
• Transfer of assets (Code E), etc.

3. Omission of Clauses 28 and 29

Clauses 28 and 29 have been omitted from the Form 3CD. These clauses were used to report disclosures related to the receipt of the unlisted company for inadequate consideration under Section 56(2)(viia) & reporting of the receipt of consideration exceeding the fair market value under Section 56(2)(viib).

4. Modifications to Clause 22 – Inadmissibility under MSMED Act

Clause 22 of Form 3CD requires reporting of the amount of interest inadmissible under Section 23 of MSMED Act, 2006 or any other amount not allowable under section 43B(h) of the Income-tax Act, 1961.

Clause 22 now includes a bifurcation of amounts disallowed under Section 43B(h). It seeks the reporting in the following manner:

(a) Total amount payable to a micro or small enterprise under Section 15 of the MSMED Act.

(b) Amount paid within the time limit under Section 15.

(c) Amount not paid within the time limit and inadmissible for the previous year.

Click Here To Read The Full Notification

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Circular no. 5/2025, 28-03-2025

The Central Board of Direct Taxes (CBDT) has received representations that taxpayers have encountered technical glitches while making payments of taxes deducted at source (TDS) and taxes collected at source (TCS) to the credit of the Central Government. On account of such glitches, while the payment is initiated by the taxpayers, the actual credit to the Central Government is done after the due date.

In response, the CBDT has exercised its powers under section 119 and directed the Chief Commissioner of Income-tax (CCIT) or Director-General of Income-tax (DGIT) to reduce or waive interest charged under section 201(1A)(ii)/206C(7) if the following conditions are satisfied:

a) The payment is initiated by the taxpayers/deductors/collectors, and the amounts are debited from their bank accounts on or before the due date and

b) The tax could not be credited to the Central Government before the due date because of technical problems beyond the control of the taxpayer/deductor/collector.

Interest under section 201(1A)(ii)/206C(7) can be waived and refunded if already paid, subject to a waiver order. Waiver applications are only acceptd within one year from the end of the relevant financial year.

Click Here To Read The Full Circular

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Notification F. No. 1/4/2019-NS, dated 28-03-2025

The Government has announced the interest rates for Small Savings Schemes for Q1 of FY 2025-26 (April 1, 2025, to June 30, 2025), keeping them unchanged from the rates notified for Q4 of FY 2024-25 (January 1, 2025, to March 31, 2025).

Click Here To Read The Full Notification

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Case Details: Shantiben K Rita vs. Income-tax Officer - [2025] 172 taxmann.com 654 (Mumbai-Trib.)

Judiciary and Counsel Details

• Amarjit Singh, Accountant Member & Sandeep Singh Karhail, Judicial Member
• Surji D. Chheda, CA for the Appellant.
• Bhangepatil Pushkaraj Ramesh, Sr.DR for the Respondent.

Facts of the Case

The assessee was an individual and a partner in two partnership firms. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee had given interest-free loans to family members and related firms. However, the assessee paid interest on the loans taken from others. The interest expenditure was claimed as a deduction under section 57 while computing the income chargeable under the head “income from other sources”.

The AO issued a show-cause notice to the assessee as to why the minimum interest earned by the assessee from loans given be not calculated at the interest rate of 9.04%. In response, the assessee submitted that the actual interest rate differs from the prevailing market rate and is decided upon by various factors like financial ability, negotiable skills, etc.

The AO restricted the interest expenditure to a rate of 5.22% and disallowed the excess interest expenditure. On appeal, CIT(A) upheld the disallowance. Aggrieved-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that there was no dispute regarding the nature of expenditure, and the revenue has only disputed that the interest expenditure claimed under the aforesaid section has no nexus for the purpose of earning the interest income. The Revenue has brought no material on record to show that the loan received by the assessee was utilised for any purpose other than giving the loan to her family members or related firms.

Further, no material was on record to show any impediment on the assessee to give the money as a loan to her family members or related firms. Thus, there is no material to dispute that the assessee utilised the interest-bearing borrowed funds to advance the loans to her family members or related firms.

The Revenue emphasised the aspect of business prudence in advancing the loans to the sister concern at lower rates than the rate at which the assessee borrowed the funds. However, the test of commercial expediency/business prudence is required to be judged from the point of view of the businessman and not the revenue. Therefore, there is no basis for restricting the interest expenditure claimed by the assessee under section 57(iii).

List of Cases Reviewed

• CIT v. Dr. V.P. Gopinathan, reported in (2001) 248 ITR 449 (SC)
• Mathew Joseph v. ACIT, reported in (2017) 87 taxmann.com 317 (Kerala)
• CIT v. United Wire Ropes Ltd. reported in (1980) 121 ITR 762 (Bom)
• Karnataka Forest Plantations Corporation Ltd. v. CIT, reported in (1985) 156 ITR 275 (Karnataka)..[Paras 9, 10, and 11] distinguished.

List of Cases Referred to

• CIT v. Dr. V.P. Gopinathan [2001] 116 Taxman 489/248 ITR 449 (SC) (para 9)
• Mathew Joseph v. Asstt. CIT [2017] 87 taxmann.com 317 (Kerala) (para 10)
• CIT v. United Wire Ropes Ltd. [1980] 121 ITR 762 (Bombay) (para 10)
• Karnataka Forest Plantations Corpn. Ltd. v. CIT [1986] 27 Taxman 431/[1985] 156 ITR 275 (Karnataka) (para 11).

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F. No. 225/53/2024-ITA-II, dated 26-03-2025

The Financial Year 2024-25 concludes on March 31, 2025 (Monday), which is a closed holiday. March 29 and 30 also fall on a Saturday and Sunday, respectively. Thus, to ensure the completion of pending departmental work, the Central Board of Direct Taxes (CBDT) has stated that all Income Tax Offices across India will remain open on March 29, 30, and 31, 2025.

This directive is issued under Section 119 of the Income-tax Act, 1961, for administrative convenience.

Click Here To Read The Full Notification

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Case Details: Vinod Nihalchand Jain Ltd. vs. ITO - [2025] 172 taxmann.com 581 (Mumbai-Trib.)

Judiciary and Counsel Details

• Sandeep Singh Karhail, Judicial Member & Amarjit Singh, Accountant Member
• Ravi Dasija for the Appellant.
• Pravin Salunkhe, Sr.DR for the Respondent.

Facts of the Case

The assessee is an individual who earns income from salary, capital gains on equity shares, and mutual funds. Since the taxable income was below the basic exemption limit for the year under consideration, he did not file the return of income. Subsequently, the Assessing Officer (AO) issued a notice under section 148 based on the information that the assessee had sold immovable property.

During the assessment proceedings, the assessee submitted that his brother originally purchased the immovable property, and his name was added to the property as a joint owner out of natural love and affection.

AO didn’t accept the assessee’s submissions and held that no family arrangement exists whereby the assessee relinquished the right to the property before the sale. He added Rs. 27 Lakh to the assessee’s total income as Long-Term Capital Gains under section 45 of the Act.

On appeal, CIT(A) upheld the additions made by AO, and the matter reached the Mumbai Tribunal.

ITAT Held

The Tribunal held that the assessee’s name was mentioned in the purchase deed as one of the joint owners, but his brother paid the entire consideration. His brother was in actual possession and had 100% rights over the said property. Even in the subsequent year, the assessee’s brother declared the entire consideration in his return of income and claimed the benefit of exemption under section 54F of the Act.

The assessee also produced an affidavit executed by his brother, admitting that he and his father made the entire payment for the purchase of the said property and that the assessee had not contributed anything to the purchase.

The assessee’s brother paid the entire purchase consideration, was in actual possession, and had 100% rights over the said property. Even though the assessee’s name was mentioned in the purchase deed as one of the joint owners, the consideration received on the sale of the said property cannot be added to the assessee’s income.

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Gopal Nathani – [2025] 172 taxmann.com 679 (Article)

Section 37 of the Indian Income Tax Act, 1961 is goodies-bag magic provision. It begins with the words ‘any expenditure …..’ and ends with the words ‘…….shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession”. This section lists certain conditions such as that the amounts shall not be capital in nature nor personal in nature and most importantly not those that are prohibited by any law or practice.

Interestingly there is no any condition anywhere in this section stating that ‘any expenditure’ therein shall not include any loss or a provision for loss or depreciation. Therefore, for all intents and purposes it shall include not only any kind of losses but also provisions that correspond to an expenditure capable of recording as debit to profit and loss account.

Vide Instruction No.17/2008, dated 26-11-2008 the CBDT seeks strict compliance of certain provisions of the Income tax Act, the Companies Act and RBI guidelines in the context of assessment of banks. Drawing reference to Companies Act it is in particular stated that the banks have to follow the mercantile system of accounting and prepare accounts on accrual basis. The Assessing Officers should ensure that this system is strictly followed by the Banks (in respect of all sources of income). Drawing further reference to RBI guidelines dated 16th October 2000 in the context of the investment/stocks portfolio of the banks it provides that the depreciation/appreciation is to be aggregated scrip wise and only net depreciation, if any, is required to be provided for in the accounts.

In a recent IndusInd bank controversy alleged accounting discrepancies are pointed in the derivative portfolio tor underreporting/unreporting of provisions for marked to market losses despite the 2008 Instruction above said.

Click Here To Read The Full Article

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Notification No. 21/2025, dated 25-03-2025

Section 92CB of the Income-tax Act, 1961, empowers the Central Board of Direct Taxes (CBDT) to prescribe Safe Harbour Rules (SHR) for determining the arm’s length price under Section 92C or Section 92CA. Rules 10TA to 10TG of the Income-tax Rules set out the provisions governing Safe Harbour Rules.

The CBDT has amended Rules 10TA, 10TD, and 10TE to broaden the scope of the Safe Harbour framework. The key amendments are as follows:

1. Increase in threshold limit: Rule 10TD(2A), which specifies threshold limits and conditions for treating certain international and specified domestic transactions as being at arm’s length, has been revised to increase the safe harbour threshold from Rs. 200 crores to Rs. 300 crores.
2. Expansion of eligible transactions: Clause (b) of Rule 10TA, which defines “eligible international transaction” for Safe Harbour Rules, has been amended by inserting sub-clause (iv) to include “lithium-ion batteries for use in electric or hybrid electric vehicles” as core auto components.
3. Applicability of amendments: To ensure tax certainty for taxpayers opting for safe harbour, Rule 10TD(3B) has been amended to extend the applicability of these changes to Assessment Years 2025-26 and 2026-27.

The amendments are effective from 25-03-2025.

Click Here To Read The Full Notification

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FAQs, dated 25-03-2025

The Lok Sabha passed the Finance Bill 2025 on March 25, 2025, incorporating over 30 modifications to the original bill introduced on February 1, 2025. The government has released FAQs on the changes made to the Finance Bill 2025 as passed by the Lok Sabha.

Click Here To Read The Full Updates

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