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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Editorial Team – [2025] 172 taxmann.com 767 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

(a) Australia to tax digital assets under existing laws;

(b) Canada drops proposed capital gains tax hike;

(c) Austria revises transfer pricing guidelines; and

(d) Australian Taxation Office highlights upcoming personal income tax cuts.

Click Here To Read The Full Article

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NFRA has released the inspection report for M/s SRBC & Co. LLP, following an audit quality inspection conducted in 2024. The report evaluates the firm’s adherence to auditing standards and regulations, with a particular focus on the firm’s quality control systems and its responses to prior deficiencies. It identifies significant concerns in areas such as auditor independence, leadership structure, audit documentation, and specific audit procedures related to related party transactions, internal financial controls over revenue, and impairment of non-financial assets. Although the firm made attempts to remediate some issues, the report recommends further improvements, particularly in strengthening independence policies and enhancing documentation practices, to ensure full compliance with the applicable laws and standards.

Click Here To Read The Full Story

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The National Financial Reporting Authority (NFRA) released the minutes of its 20th meeting, which took place virtually on February 24, 2025. The meeting included discussions on various key issues, particularly focusing on the proposed amendment to Ind AS 21, The Effects of Changes in Foreign Exchange Rates, to address the issue of “lack of exchangeability.” This proposal, aligned with international standards, was agreed upon with a minor editorial enhancement, and NFRA recommended it to the Ministry of Corporate Affairs (MCA) for approval. NFRA also urged the MCA to expedite the notification of the amendment, as it is set to take effect on April 1, 2025.

Click Here To Read The Full Story

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Circular No. 248/05/2025-GST, Dated 27-03-2025

The CBIC has issued a circular clarifying the procedural aspects for availing the waiver of interest and penalty under Section 128A of the CGST Act. Taxpayers who made payments via GSTR-3B before the notification of Section 128A (1st November 2024) are eligible for the waiver of interest and penalty, provided the payment was intended for the demand. However, after the introduction of Section 128A, future payments must be made using the prescribed modes under Rule 164 of the CGST Rule.

Therefore, the CBIC has clarified that cases where tax payments have been made through FORM GSTR-3B prior to the issuance of the demand notice and/or adjudication order, before 1st November 2024, will also be eligible for the benefit under Section 128A of the CGST Act, subject to verification by the proper officer.

Additionally, if a notice or order pertains to both periods covered under Section 128A (FY 2017-2020) and periods outside this scope, taxpayers can file an application (FORM SPL-01 or FORM SPL-02) to claim the benefit for the applicable period. In such cases, taxpayers must intimate his intent to the appellate authority or Tribunal to that he does not intend to pursue the appeal for the periods outside the scope of Section 128A. The Appellate Authority or Tribunal, upon noting the request, shall pass an order as deemed appropriate.

This clarification ensures uniformity in the implementation of the provisions and provides a clear process for taxpayers to follow in availing the benefits.

Click Here To Read The Full Circular

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Notification No. 11/2025-Central Tax, Dated 27-03-2025

The notification amends Rule 164 of the Central Goods and Services Tax (CGST) Rules, 2017, to facilitate the implementation of Section 128A of the CGST Act. The changes include a provision in sub-rule (4) that requires the payment of tax related to the specified period under Section 128A before filing an appeal.

Additionally, a new explanation clarifies that no refund will be granted for any tax, interest, or penalty already paid for the entire period before the commencement of the Central Goods and Services Tax (Second Amendment) Rules, 2025, in cases where the demand includes both the period covered by Section 128A and another period.

Furthermore, sub-rule (7) has been amended to allow taxpayers, where the notice includes tax demands for both the period under Section 128A (1st July 2017 to 31st March 2020) and a period beyond, to partially withdraw the appeal. Taxpayers can inform the appellate authority of their intent to withdraw the appeal for the specified period, and the authority will then pass an order for the remaining period as deemed appropriate.

These amendments provide clarity on the appeal withdrawal process and help taxpayers avail the benefits under Section 128A.

Click Here To Read The Full Notification

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GST FAQ, Dated, 28-03-2025

The CBIC has issued FAQs to clarify the criteria for designating “specified premises” for restaurant services under GST, effective from 1st April 2025. Key points covered in the FAQs include the following:

Definition of Specified Premises: A “specified premises” is defined as a place providing hotel accommodation services, where the value of any unit of accommodation exceeds ?7,500 per unit per day. Additionally, suppliers may declare their premises as specified, either during the financial year or at the time of registration.

Tax Rate: Restaurant services supplied at specified premises are taxed at 18% with ITC, while services outside specified premises are taxed at 5% without ITC.

Change in Definitions: From 1st April 2025, the definition of “specified premises” will be based on the value of supply from the previous financial year, rather than the “declared tariff,” which will be omitted.

Objectives of Change: The revised definition is aimed at replacing the ‘declared tariff’ with the transaction value (value of supply), giving certainty regarding the status of specified premises based on previous year’s transactions, and allowing suppliers to declare premises as specified.

Filing a Declaration: Suppliers of hotel accommodation services can file a declaration to declare premises as specified for the following financial year between 1st January and 31st March. This applies to both existing and new registrants.

Validity of Declarations: Once a supplier files an ‘opt-in’ declaration (Annexure VII), it remains valid for subsequent financial years unless an ‘opt-out’ declaration is filed between 1st January and 31st March of the preceding year, taking effect from the next financial year.

After opting out, no further opt-in declaration can be filed for that year. If a supplier has opted out and wishes to revert to being a specified premise, they can file an ‘opt-in’ declaration between 1st January and 31st March for the following year.

The revised definition of “specified premises” will come into effect from 1st April 2025, with suppliers wishing to opt-in filing the declaration by 31st March 2025.

For new registrations between 16th January and 31st March 2025, the ‘opt-in’ declaration must be filed within this period. For registrations after 1st April 2025, the declaration is valid for the remainder of the financial year.

Changes for Multiple Premises: Suppliers with multiple premises must file separate declarations for each premise. Only premises where the value of supply exceeds ?7,500 will automatically be considered specified premises.

New Registrants: New applicants for GST registration can declare their premises as specified within 15 days of receiving their registration acknowledgment.

Click Here To Read The Full Updates

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Notification No. F. No. SEBI/LAD-NRO/GN/2025/239; Dated: 27.03.2025

The Securities and Exchange Board of India has introduced significant amendments to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. These changes aim to strengthen corporate governance, enhance transparency, and enforce stricter compliance norms, with a special focus on High-value debt-listed entities (HVDLEs).

Further, the SEBI has significantly expanded the compliance framework for SME-listed entities by making Regulation 23 of the LODR Regulations, which governs “Related Party Transactions,” applicable to them. Regulation 23 shall apply to a listed entity that has listed its specified securities on the SME Exchange and has either a paid-up equity share capital exceeding Rs 10 crore or a net worth exceeding Rs 25 crore, as on the last day of the previous financial year. Once an SME entity crosses either of these thresholds, it is required to adhere to RPT compliance norms within six months.

Further, SEBI has also introduced stricter governance rules for High-Value Debt Listed Entities (HVDLEs). A High-Value Debt Listed Entity (HVDLE) refers to a listed entity that has only non-convertible debt securities listed with an outstanding value of Rs 1000 Crore and above and does not have any listed specified securities.

If the value of outstanding listed non-convertible debt securities equals or exceeds Rs. 1,000 crore during a financial year, the entity must comply with the provisions within six months from the trigger date. Additionally, disclosures regarding such compliance may be included in the corporate governance compliance report. This move aims to enhance governance and transparency for HVDLEs.

Click Here To Read The Full Notification

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SEBI Report; Dated: 27.03.2025

SEBI has proposed limiting the expiries of all equity derivatives contracts on an exchange to one of either Tuesday or Thursday. This is aimed at providing optimal spacing between expiries across exchanges, while avoiding the choice of either the first day of the week or the last day as an expiry day. Further, every exchange will continue to be allowed one weekly benchmark index options contract on their chosen day, i.e. Tuesday or Thursday.

Besides benchmark index options, all other equity derivatives contracts, viz., all benchmark index futures, non-benchmark index futures / options, and all single stock futures / options will be offered with a minimum tenor of 1 month, and the expiry will be in the last week of every month on their chosen day (that is last Tuesday or last Thursday of the month).

SEBI has invited comments and suggestions, supported by rationale, from all stakeholders—including individual investors, market participants, intermediaries, investor associations, and academic institutions.

Click Here To Read The Full Update

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Circular No. RBI/2024-25/133 Ref.No.IDMD.2320/08.01.01/2024-25, Dated 27.03.2025

The Government of India has issued a General Notification (F.No.4(2)-B(W&M)/2018) dated March 26, 2025, for the sale and issue of Government of India Securities, including Treasury Bills and Cash Management Bills. This notification supersedes the previous ones dated March 27, 2018.

Click Here To Read The Full Circular

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