Latest Updates on Income Tax, GST & Corporate Law: 1 February 2025
Income Tax
Update-1: Tax on income from house property to be levied basis who derived benefit from property: Delhi High Court
The High Court overturned the ITAT’s decision, ruling that the Income Tax Act does not assume equal ownership solely based on a person’s name in the property deed. It emphasized that taxation under Section 22 should be focused on identifying the person entitled to receive income from the property rather than just the legal owner.
The Bench referenced a Supreme Court ruling, stating: “The focus for taxation purposes is to determine who actually receives the income.”
The court also highlighted the distinction in the Income Tax Act between income derived from house property and an interest in property. Consequently, the appeal was allowed, with the court noting: “The Tribunal and authorities below proceeded on the incorrect assumption that since the appellant was a signatory to the sale deed, the income should be deemed to arise in her hands to the extent of 50%.”
Update-2: TDS credit should be granted if the related income has been reported for taxation, subject to verification.
In a recent update, in the case of DCIT (Exemptions) Vs Deendayal Port Authority Administrative Officer, the Income Tax Appellate Tribunal (ITAT) Ahmedabad upheld the Commissioner of Income Tax (Appeals) [CIT(A)]’s decision to allow ₹168.61 crore as TDS credit to Deendayal Port Authority Administrative Officer for AY 2019-20. The Revenue had contested this, arguing that the credit should be limited to ₹165.66 crore, as originally claimed in the ITR. However, the assessee cited an updated Form 26AS, reflecting a higher credit due to delayed payments and revised TDS filings by Port users.
The CIT(A) accepted this explanation and instructed the Assessing Officer (AO) to verify and allow the correct credit. During the ITAT proceedings, the Departmental Representative (DR) admitted that the Revenue did not dispute the correctness of the TDS credit per Form 26AS. The ITAT found no fault in the CIT(A)’s order and reaffirmed that TDS credit should be granted if the related income has been reported for taxation, subject to verification. Consequently, the tribunal dismissed the Revenue’s appeal and advised tax authorities to exercise discretion in filing appeals to prevent unnecessary litigation and judicial delays.
Goods & Services Tax (GST)
Update-1: The Jharkhand high court emphasized procedural fairness in tax assessment and remitted the matter back to the Tax department
In the case of VE Commercial Vehicles Ltd. vs Union of India, the Jharkhand High Court reviewed a writ petition challenging an order issued under Section 73 of the JGST Act, 2017, for the financial year 2019-20.
The petitioner objected to the assessment order passed by the 5th respondent following ASMT-10 notices under Rule 99, arguing that it was unclear how tax liabilities in GSTR-3B returns were compared with e-way bill data, as both datasets originate from different sources and serve different purposes. The petitioner also raised concerns about the technical feasibility of such a comparison.
Despite submitting a detailed response on May 24, 2024, the respondent dismissed the objections without proper consideration, merely stating that the reply was “not satisfactory.” The court noted that ASMT-10 serves to engage taxpayers and allow their concerns to be addressed, which was not done appropriately in this case. Consequently, the court quashed the assessment order and directed the respondent to furnish a clear breakdown of the tax discrepancies within two weeks. The petitioner was granted four weeks to respond, after which a personal hearing was to be conducted.
Also Read: Key Updates on Tax & Corporate Law- 29 January 2025
Update-2: Delhi High Court quashes show cause notices issued by the Directorate General of GST Intelligence (DGGI) against statutory bodies
The Delhi High Court, in its judgment dated January 15, ruled that regulatory fees collected by statutory bodies do not qualify as ‘consideration’ for a service and are therefore not subject to GST. The court firmly dismissed the tax authorities’ argument that regulators engage in ‘business’ under GST law, deeming the imposition of GST unlawful.
Judicial precedents have consistently affirmed that regulatory bodies carry out public functions rather than commercial activities. However, despite these clear legal interpretations, tax authorities continue to ignore court rulings and impose unjustified tax demands.
If such taxation practices persist, they will lead to prolonged litigation, delays in regulatory decision-making, and increased financial strain on businesses, ultimately disrupting industrial operations.
Corporate Law
Update-1: Share application money advanced not in compliance with the statutory norms would not qualify as deposit or financial debt- NCLAT
In Murlidhar Vincom Private Limited v. Skoda (India) Private Limited (Company Appeal (AT) (Insolvency) No. 1334 of 2024), the issue before the NCLAT was, whether share application money can be treated as financial debt, where such money had not been refunded within the period prescribed under Section 42 of the Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules, 2014.
To answer the question, the NCLAT took note of the specific facts and went on to observe that in the instant case, the share application money was not advanced in compliance with the private placement mechanism specified under the Companies Act. These facts led NCLAT to observe that such money, advanced not in compliance with the statutory norms would not qualify as deposit or, accordingly, as financial debt.
Also Read: Key updates on Tax & Corporate Law- 31 January 2025
Update-2: The bar contained u/s. 10A of IBC continues to apply to the subject debt even if such liability has been acknowledged subsequently post the Section 10A period.
In the case of Decor Paper Mills Limited v. Mahashakti Plasto Private Limited (Company Appeal (AT) (Insolvency) No. 2022 of 2024 & I.A. No. 7591 of 2024), the National Company Law Appellate Tribunal (NCLAT) ruled that the restriction imposed under Section 10A of the Insolvency and Bankruptcy Code (IBC), 2016, remains applicable to the concerned debt, even if the liability has been acknowledged after the Section 10A period.
Additionally, the NCLAT clarified that any interest accrued under the Micro, Small and Medium Enterprises Development (MSME) Act may be considered in proceedings initiated under that Act. However, such interest cannot be categorized as an operational debt under the IBC.
Note: Section 10A of the IBC was introduced to prevent the initiation of corporate insolvency resolution process (CIRP) for defaults occurring within a specified timeframe. This provision was enacted as a protective measure for corporate debtors during the COVID-19 pandemic.
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