Issues: Whether the retrospective amendment to Rule 6 of the CENVAT Credit Rules, 2004 rendered the admitted questions and the remand for verification unsustainable.

Analysis: Section 73 of the Finance Act, 2010 retrospectively amended Rule 6 for the relevant period and removed the requirement of maintaining separate accounts. The Revenue did not dispute the retrospective amendment. As the relevant period was covered by the amended regime, the questions framed under the unamended Rule 6 became academic and the verification remand was no longer required.

Conclusion: The admitted questions were declined as academic; the remand did not survive, and CENVAT credit was available in accordance with the bifurcation of inputs attributable to exempted goods.

Issues: (i) Whether a scrutiny notice issued under Section 143(2) of the Income-tax Act, 1961 is invalid solely because it does not conform to the CBDT-prescribed format; (ii) Whether a 1% arm's length corporate-guarantee commission based on bank-guarantee quotations was sustainable; (iii) Whether the transfer-pricing adjustment for finished-goods sales could be determined at entity level without verifying certified segmental accounts and applying internal TNMM; (iv) Whether a belated return for the subsequent assessment year bars carry forward of earlier-year long-term capital loss and unabsorbed depreciation.

Issue (i): Whether a scrutiny notice issued under Section 143(2) of the Income-tax Act, 1961 is invalid solely because it does not conform to the CBDT-prescribed format.

Analysis: Section 143(2) prescribes no statutory format for a scrutiny notice. Administrative classifications of scrutiny do not affect the Assessing Officer's jurisdiction. Non-observance of the CBDT format does not create a jurisdictional defect where the notice otherwise satisfies statutory requirements and no prejudice is shown.

Conclusion: The notice did not invalidate the assessment; this issue was decided against the assessee.

Issue (ii): Whether a 1% arm's length corporate-guarantee commission based on bank-guarantee quotations was sustainable.

Analysis: A corporate guarantee is required to be benchmarked as an international transaction, and the absence of actual consideration, invocation, or cash outflow does not make its arm's length price nil. However, bank guarantees and parent-company corporate guarantees are materially different transactions for comparability analysis. A bank-guarantee rate cannot be adopted as the starting point and reduced on an ad hoc basis. The guarantees given and received were separate transactions and could not be netted without proof of their close connection and arm's length character.

Conclusion: The 1% rate was unsustainable and the arm's length corporate-guarantee commission was fixed at 0.50%, in favour of the assessee to that extent.

Issue (iii): Whether the transfer-pricing adjustment for finished-goods sales could be determined at entity level without verifying certified segmental accounts and applying internal TNMM.

Analysis: The certified segmental accounts were material additional evidence because the earlier rejection of internal Transactional Net Margin Method rested on the unreliability of management-certified segmental results. Where reliable internal transactions are available from the same business, internal TNMM warrants examination before external comparables. The allocation of common revenues and expenses, reconciliation with books and audited accounts, and functional comparability of the AE and non-AE segments required factual verification.

Conclusion: The finished-goods adjustment was set aside for de novo determination after verification of the certified segmental accounts and the claim for internal TNMM.

Issue (iv): Whether a belated return for the subsequent assessment year bars carry forward of earlier-year long-term capital loss and unabsorbed depreciation.

Analysis: For carry forward of capital loss, the timely-return requirement under Sections 80 and 139(3) attaches to the assessment year in which the loss arose. A subsequently belated return does not extinguish a capital loss that had already become eligible for carry forward, subject to verification that the return for the loss year was timely filed. Unabsorbed depreciation is governed independently by Section 32(2); by statutory fiction, it becomes part of the succeeding year's depreciation and is not subject to the restriction governing specified losses under Sections 80 and 139(3).

Conclusion: The earlier-year long-term capital loss was directed to be carried forward upon verification of timely filing for that year, and the unabsorbed depreciation was directed to be allowed after quantum verification; this issue was decided in favour of the assessee.

Final Conclusion: The assessment remains valid despite the notice-format objection, the corporate-guarantee benchmark stands reduced, the finished-goods transfer-pricing computation requires fresh examination, and the brought-forward capital loss and depreciation claims must be dealt with in accordance with the stated directions.

Issues: Whether income tax/TDS may be withheld from compensation payable for compulsorily acquired land.

Analysis: The earlier orders applied by the Court establish that compensation payable for compulsory acquisition, including the component treated as part of enhanced compensation under Section 28 of the Land Acquisition Act, 1894, cannot be subjected to income tax/TDS. The respondents disclosed no lawful basis for withholding any part of the compensation on that account.

Conclusion: Deduction or withholding of income tax/TDS from the compensation was impermissible, and the issue is decided in favour of the landowners.

Issues: (i) Whether penalty could survive on additions deleted in quantum proceedings or remaining pending verification; (ii) Whether an inadvertent claim based on an incorrect acquisition date, with full disclosure of facts, constituted under-reported income under section 270A; and (iii) Whether penalty alleging misreporting was sustainable without a specified statutory circumstance and where calculated at the under-reporting rate.

Issue (i): Whether penalty could survive on additions deleted in quantum proceedings or remaining pending verification.

Analysis: The disallowance relating to payments made to auto dealers had been deleted in the quantum proceedings. The addition concerning foreign taxes on dividend income had been restored for verification and fresh determination, so its basis and quantum had not attained finality when the penalty was imposed.

Conclusion: Penalty was unsustainable on the deleted addition and on the addition pending verification, in favour of the assessee.

Issue (ii): Whether an inadvertent claim based on an incorrect acquisition date, with full disclosure of facts, constituted under-reported income under section 270A.

Analysis: Section 270A(6)(a) excludes an amount from under-reported income where a bona fide explanation is supported by disclosure of all material facts. The incorrect date of acquisition of bonus shares was an inadvertent error, while the acquisition and sale particulars were disclosed and the explanation was not shown to be false. No material established suppression, misrepresentation, or any statutory circumstance of misreporting.

Conclusion: The bona fide and fully disclosed claim did not constitute under-reported or misreported income warranting penalty, in favour of the assessee.

Issue (iii): Whether penalty alleging misreporting was sustainable without a specified statutory circumstance and where calculated at the under-reporting rate.

Analysis: The penalty order did not identify any applicable circumstance under section 270A(9). Although it alleged misreporting, the penalty was computed at 50 per cent, being the rate applicable to under-reporting under section 270A(7), rather than the 200 per cent rate prescribed for misreporting under section 270A(8). The allegation was therefore unsupported and inconsistent with the computation.

Conclusion: The allegation of misreporting could not sustain the penalty, in favour of the assessee.

Final Conclusion: The statutory conditions for imposing the penalty were not established, and the deletion of the penalty was sustained.

Ratio Decidendi: Penalty under section 270A cannot be imposed on an addition deleted or awaiting fresh determination, or on a fully disclosed bona fide error; misreporting requires identification of a statutory circumstance and a penalty computation consistent with that charge.

Issues: Whether salary and rent paid by a charitable trust to specified persons constituted excessive payments conferring prohibited benefit and thereby disentitling the corresponding application of income from exemption.

Analysis: Sections 13(1)(c) and 13(2)(c) prohibit application of trust income for the benefit of specified persons, and payments beyond justified service value may fall outside the exemption under section 11. The material showed substantial salary increases for specified persons, including increases of 38.80% in certain cases, without adequate justification based on services rendered or comparable remuneration. The rent and salary payments were consequently treated as excessive benefits to specified persons; the appellate relief already granted was found justified.

Conclusion: The disputed payments constituted excessive benefit to specified persons and were not eligible for exemption as application of charitable trust income.

Issues: Whether the additional evidence concerning the formation and operation of the special economic zone undertaking, together with the connected procurement and transfer-pricing arrangement, required fresh adjudication of the deduction claim and transfer-pricing adjustment.

Analysis: The additional evidence was admitted because it was material to determining whether the undertaking was newly established or formed by splitting up or reconstruction of an existing business. The foundational facts and the functional and procurement arrangements underlying the arm's-length determination were interconnected with the profit of the eligible undertaking. No finding on the merits of either claim was made.

Outcome: Fresh adjudication was directed after consideration of the additional evidence, relevant material, and a reasonable opportunity of hearing.

Issues: (i) Whether the 415-day delay in filing the appeal before the appellate authority was liable to be condoned under Section 249(3) of the Income-tax Act, 1961? (ii) Whether adjustments under Section 143(1)(a) of the Income-tax Act, 1961 were valid without prior written or electronic intimation to the assessee?

Issue (i): Whether the 415-day delay in filing the appeal before the appellate authority was liable to be condoned under Section 249(3) of the Income-tax Act, 1961?

Analysis: The assessee remained unaware of the intimation because of non-availability of accounts and absence of statutory notice. The resulting inability to access the impugned order and timely pursue the remedy constituted sufficient cause under Section 249(3).

Conclusion: The delay of 415 days was condoned.

Issue (ii): Whether adjustments under Section 143(1)(a) of the Income-tax Act, 1961 were valid without prior written or electronic intimation to the assessee?

Analysis: The first proviso to Section 143(1)(a) makes prior written or electronic intimation mandatory before making an adjustment, including an adjustment contemplated by Section 143(1)(a)(vii). The record did not disclose issuance of any show-cause notice or intimation before the adjustment was made.

Conclusion: The intimation under Section 143(1) was invalid and was quashed for want of mandatory prior notice.

Final Conclusion: The impugned adjustment and the appellate order sustaining it could not stand.

Ratio Decidendi: An adjustment under Section 143(1)(a) cannot survive where the mandatory prior written or electronic intimation to the assessee has not been issued.

Issues: Whether the difference between the stated consideration and stamp duty value of a proposed redevelopment flat was taxable under section 56(2)(vii)(b) despite non-construction and non-receipt of the flat, where the arrangement also arose from surrender of pre-existing tenancy rights.

Analysis: Section 56(2)(vii)(b) applies upon receipt of immovable property, namely land or building or both. As a deeming provision, it must be construed strictly and cannot be extended to rights in property. An entitlement to alternative accommodation upon surrender of tenancy rights, and a contractual right to obtain a flat proposed to be constructed, cannot mechanically be equated with receipt of land or building. Registration of an agreement is distinct from actual receipt of the immovable property. The monetary consideration for additional area also could not justify treating the entire redevelopment premises as an independent purchase without accounting for the tenancy-rights component.

Conclusion: The addition cannot survive if verification establishes that the building remained unconstructed and no flat or alternative immovable property was received by the assessee; factual verification is confined to those matters.

Issues: (i) Whether penalty for transfer-pricing adjustment on export transactions can be sustained where the benchmarking and comparability particulars were disclosed.
(ii) Whether penalty for adjustment of interest on a loan to an associated enterprise can be sustained where the loan terms and arm's-length computation were disclosed.
(iii) Whether penalty can be sustained on a provision for leave encashment claimed on the basis of prevailing judicial directions.
(iv) Whether penalty can be sustained on legal fees claimed as transfer expenditure in computing capital gains where supporting documents were disclosed.

Issue (i): Whether penalty for transfer-pricing adjustment on export transactions can be sustained where the benchmarking and comparability particulars were disclosed.

Analysis: Section 271(1)(c), read with Explanation 7, requires the assessee to establish that the arm's length price of an international transaction was computed under Section 92C in good faith and with due diligence. The export benchmarking, comparability analysis and material particulars were documented, and the copper-company comparable adopted for the adjustment was excluded while determining the arm's length price for the relevant year. A difference in comparable selection did not establish furnishing of inaccurate particulars.

Conclusion: Penalty on the export transaction adjustment was not sustainable and was deleted, in favour of the assessee.

Issue (ii): Whether penalty for adjustment of interest on a loan to an associated enterprise can be sustained where the loan terms and arm's-length computation were disclosed.

Analysis: The loan terms, interest-rate basis and CUP-based arm's length computation were fully documented. The adjustment concerned determination of an appropriate interest rate, which was recomputed at 9 per cent after accounting for the risks of the subordinated lending. This estimation dispute did not disprove the assessee's good faith, due diligence, or disclosure of material facts under Explanation 7 to Section 271(1)(c).

Conclusion: Penalty on the interest adjustment was not sustainable and was deleted, in favour of the assessee.

Issue (iii): Whether penalty can be sustained on a provision for leave encashment claimed on the basis of prevailing judicial directions.

Analysis: The deduction claim was founded on the judicial view concerning Section 43B(f) and the operative directions permitting the claim on payment of tax. Such a bona fide claim based on prevailing judicial directions did not amount to furnishing inaccurate particulars under Section 271(1)(c).

Conclusion: Penalty on the leave-encashment provision was not sustainable and was deleted, in favour of the assessee.

Issue (iv): Whether penalty can be sustained on legal fees claimed as transfer expenditure in computing capital gains where supporting documents were disclosed.

Analysis: The legal fees and the computation of capital gains under Section 48(i) were supported by documents disclosed to the Assessing Officer. As the underlying quantum addition had also been deleted, there remained no basis to treat the claim as furnishing inaccurate particulars for purposes of Section 271(1)(c).

Conclusion: Penalty on the legal-fee claim was not sustainable and was deleted, in favour of the assessee.

Final Conclusion: The deletion of penalty on all the transfer-pricing adjustments and disallowances remains effective, with no penalty surviving under Section 271(1)(c).

Ratio Decidendi: A bona fide and documented transfer-pricing or deduction claim, accompanied by full disclosure of material particulars, does not constitute furnishing inaccurate particulars merely because an adjustment or disallowance is made.

Issues: (i) Whether Form No. 9A filed before the extended return-filing due date validly exercised the option for deemed application of income under Clause (2) of Explanation 1 to Section 11(1) for Assessment Year 2019-20; and (ii) Whether the claimed accumulation or setting apart of income within 15% was allowable under Section 11(1)(a).

Issue (i): Whether Form No. 9A filed before the extended return-filing due date validly exercised the option for deemed application of income under Clause (2) of Explanation 1 to Section 11(1) for Assessment Year 2019-20.

Analysis: Clause (2) of Explanation 1 to Section 11(1), as applicable for Assessment Year 2019-20, required the option to be exercised before expiry of the time allowed under Section 139(1). The requirement of furnishing the option at least two months before the due date was introduced by the Finance Act, 2023 with effect from Assessment Year 2023-24. Form No. 9A was furnished on 01.10.2019, before the extended due date of 31.10.2019; therefore, the subsequently introduced time limit could not govern the assessment year in question.

Conclusion: The claim for deemed application of Rs. 52,90,000 is allowable, subject to satisfaction of the remaining conditions of Section 11. This issue is decided in favour of the assessee.

Issue (ii): Whether the claimed accumulation or setting apart of income within 15% was allowable under Section 11(1)(a).

Analysis: Section 11(1)(a) permits accumulation or setting apart of income for charitable or religious purposes up to 15% of income. This statutory accumulation is independent of the option in Form No. 9A, which concerns deemed application under Explanation 1 to Section 11(1). No finding established that the claimed amount exceeded the permissible limit.

Conclusion: The claim for accumulation of Rs. 9,34,116 under Section 11(1)(a) is allowable. This issue is decided in favour of the assessee.

Final Conclusion: The assessee is entitled to both the claimed deemed application and the statutory accumulation while computing its exemption under Section 11.

Issues: Whether cost-to-cost reimbursements received from Indian associated enterprises were taxable in India on the basis that the assessee had a service permanent establishment in India under the India-USA Double Taxation Avoidance Agreement.

Analysis: The reimbursements represented expenses initially paid to third-party vendors for the benefit of the Indian entities, including event, legal and professional, employee welfare, and recruitment expenses, and were cross-charged without mark-up. The activities were undertaken remotely, with no physical presence in India by the assessee's employees or personnel. Under Article 5(2)(l), a service permanent establishment requires cumulative satisfaction of furnishing or performance of services in India, through employees or other personnel, for the stipulated duration. Those requirements were not established.

Conclusion: The assessee did not have a service permanent establishment in India, and the cost-to-cost reimbursements did not give rise to income chargeable to tax in India. The addition was directed to be deleted.

Issues: Whether an assessment order confirming the show-cause proposal without a reply could be quashed and restored for fresh adjudication despite expiry of the statutory appellate period.

Analysis: The assessment had confirmed the show-cause proposal in the absence of a reply, and the period for appeal under Section 107 of the GST enactments had expired. The petitioner undertook to make a specified cash pre-deposit after adjustment of amounts already recovered and to submit a reply with supporting documents. Fresh adjudication was directed on compliance with these requirements, with recovery remaining subject to verification.

Conclusion: The assessment order was quashed and the matter was restored for de novo adjudication, conditional upon the stipulated pre-deposit and filing of reply.

Issues: Whether the blocking of input tax credit was liable to be interfered with after cancellation of registration and initiation of proceedings concerning credit availed from non-existing taxpayers.

Analysis: The registered person had closed its business and its registration had been cancelled, but disclosed no intended use for the blocked credit. Separate proceedings had also been initiated in relation to input tax credit availed from non-existing taxpayers. These circumstances warranted participation in the statutory proceedings rather than interference with the credit-blocking order.

Conclusion: The blocking of input tax credit was not interfered with and the issue was decided against the assessee.

Issues: Whether absence of a formal written trust deed or memorandum of association permits rejection of renewal of registration where a charitable or religious institution was established otherwise than under an instrument and furnished other documentary evidence of its creation and existence.

Analysis: Section 12AB(1)(b) of the Income-tax Act, 1961 read with Rule 17A(2) of the Income-tax Rules, 1962 distinguishes an institution created or established under an instrument from one created or established otherwise than under an instrument. Rule 17A(2)(b) consequently requires examination of documents evidencing creation or establishment and cannot be construed to make a formal trust deed indispensable in every case. Statutory registration as a public trust, the underlying registration application, longstanding tax registration, and material evidencing continued existence and activities were relevant alternative evidence. No adverse finding existed regarding the charitable or religious objects or the genuineness of activities.

Conclusion: Absence of a separate written trust deed or memorandum of association, by itself, is not a valid ground to reject renewal of registration under Section 12AB where cogent documentary evidence establishes the institution's creation, establishment and continued existence. The issue is decided in favour of the assessee.

Issues: (i) Whether the assessment order was barred by limitation; (ii) Whether the addition based on the difference between rental receipts in Form 26AS and the books could be sustained without verification; (iii) Whether disallowance of interest on inter-corporate deposits claimed as deduction for property income required fresh verification.

Issue (i): Whether the assessment order was barred by limitation.

Analysis: Under Section 153 of the Income-tax Act, 1961, where the requirement is that an order must be "made" within the prescribed period, the material date is the date on which it is made or passed, rather than its dispatch, communication or receipt. Postal dispatch after the stated date does not displace the date borne by the order without material establishing that the order was actually made later.

Conclusion: The assessment order was not barred by limitation, against the assessee.

Issue (ii): Whether the addition based on the difference between rental receipts in Form 26AS and the books could be sustained without verification.

Analysis: The difference was attributed to straight-line recognition of lease rentals in the books and tax deduction by tenants on payment basis. The year-wise reconciliation showed that book rental income had exceeded Form 26AS receipts in preceding years. Form 26AS reconciliation, lease agreements, invoices, ledgers and records for preceding and succeeding years were required to determine whether the receipts had already been offered to tax and whether any income had escaped assessment.

Conclusion: The addition cannot be sustained solely on the Form 26AS figure and requires de novo verification, in favour of the assessee.

Issue (iii): Whether disallowance of interest on inter-corporate deposits claimed as deduction for property income required fresh verification.

Analysis: Interest on a subsequent borrowing used exclusively to repay an earlier loan taken for acquisition or construction of property is deductible under Section 24(b) of the Income-tax Act, 1961 where a direct nexus of borrowing is established. The refinancing trail required verification through original loan records, property and mortgage documents, bank statements, inter-corporate deposit agreements, lender confirmations and fund-flow records. The alternate claim under Section 36(1)(iii) of the Income-tax Act, 1961 was also to be considered if pressed.

Conclusion: The interest-deduction claim requires fresh adjudication after verification of the refinancing nexus, in favour of the assessee.

Final Conclusion: The limitation challenge fails, while the rental-receipt addition and interest-deduction claim are restored for fresh factual examination in accordance with law.

Ratio Decidendi: For an assessment subject to a limitation provision requiring that an order be made within time, the date of making governs; additions based on Form 26AS differences and deductions for refinancing interest require verification of the underlying recognition and borrowing nexus.

Issues: Whether selling commission paid to associated enterprises, having been included in the operating cost of the software development services segment benchmarked under the Transactional Net Margin Method, could be separately benchmarked and assigned a nil arm's length price.

Analysis: The Transactional Net Margin Method had been accepted as the most appropriate method for the software development services segment, including its arm's length outcome. The selling commission was treated as a closely linked segmental operating cost. Once that cost formed part of the operating-cost base for computing the segment margin, it could not be isolated as a separate international transaction for a nil-value adjustment. Verification pursuant to the appellate direction had also resulted in deletion of the adjustment.

Conclusion: No separate adjustment for the selling commission was warranted; the issue was decided in favour of the assessee.

Issues: Whether an assessee can obtain refund of tax legitimately due during assessment or reassessment despite expiry of the six-month period prescribed for claiming refund.

Analysis: The six-month period under Section 35(4)(b) does not absolve the assessing authority, while conducting assessment or reassessment, from rectifying an error that has resulted in the assessee claiming a deduction or exemption lesser than that legally available. The statutory duty to correctly determine tax liability and rectify such mistakes applies even where rectification benefits the assessee; a restrictive interpretation founded on retention of funds by the State is legally impermissible.

Conclusion: Amounts legitimately due to the assessee must be refunded notwithstanding the expiry of the six-month claim period.

Issues: Whether the pending statutory appeal should be directed to be decided within a fixed time and recovery of the outstanding demand restrained until its disposal.

Analysis: The appeal against the demand had remained pending for a considerable period. The respondents accepted that it could be decided within the stipulated period, while interim protection was sought against recovery pending such decision.

Outcome: The Appellate Authority was directed to decide the appeal by 31.12.2026 through a speaking and reasoned order after affording hearing. Recovery of the outstanding demand was restrained until final disposal of the appeal.

Issues: (i) Whether transfer-pricing adjustment under Chapter X may be computed on transactions with non-associated enterprises; (ii) Whether specified marketing and promotional expenses, warranty provision and bad debts written off must be excluded from operating-cost computation; (iii) Whether liability/provision write-backs and export incentives are operating revenue, and whether other operating income could be deducted from total revenue; (iv) Whether the selected companies were functionally comparable for benchmarking the sale of finished goods; (v) Whether delayed associated-enterprise receivables warranted a separate notional-interest adjustment after working-capital adjustment; (vi) Whether brought-forward unabsorbed depreciation could be set off against income from other sources.

Issue (i): Whether transfer-pricing adjustment under Chapter X may be computed on transactions with non-associated enterprises.

Analysis: The statutory arm's-length determination under Chapter X concerns income arising from international transactions. Extending an adjustment to independent-party transactions would enhance profits unrelated to associated-enterprise dealings and falls outside that framework.

Conclusion: Any transfer-pricing adjustment shall be restricted to international transactions with associated enterprises; in favour of the assessee.

Issue (ii): Whether specified marketing and promotional expenses, warranty provision and bad debts written off must be excluded from operating-cost computation.

Analysis: The DRP had directed exclusion of warranty provision and bad debts written off from the margins of both the assessee and comparables, and exclusion of marketing and promotional expenditure where audited segmental records establish that it relates solely to non-associated-enterprise sales. Those directions had not been given effect to in the transfer-pricing computation.

Conclusion: The operating margins shall be recomputed in conformity with the DRP directions; in favour of the assessee.

Issue (iii): Whether liability/provision write-backs and export incentives are operating revenue, and whether other operating income could be deducted from total revenue.

Analysis: Write-backs of liabilities arising from normal business operations retain their operating character. Export incentives directly linked to export sales are also operating income. Since other operating income was separately shown from revenue from operations, its deduction from total revenue resulted in an erroneous exclusion.

Conclusion: Liability/provision write-backs and export incentives shall be included as operating revenue, and total revenue shall be adopted without deducting other operating income; in favour of the assessee.

Issue (iv): Whether the selected companies were functionally comparable for benchmarking the sale of finished goods.

Analysis: Functional comparability depends on the nature of products and business activities. A manufacturer of industrial refrigeration and air-conditioning equipment remained comparable with the assessee's manufacture of air-handling units. Companies manufacturing consumer air-conditioners, refrigerators, freezers, commercial cooling appliances, or mobility-focused HVAC products were materially functionally different from the assessee's intermediate-product business.

Conclusion: Frick India Limited shall remain a comparable, while Voltas Limited, Daikin Airconditioning India Private Limited, Rockwell Industries Limited, Western Refrigeration Private Limited and Sidwal Refrigeration Industries Private Limited shall be excluded; partly in favour of the assessee.

Issue (v): Whether delayed associated-enterprise receivables warranted a separate notional-interest adjustment after working-capital adjustment.

Analysis: Deferred payment or receivables fall within the definition of an international transaction. However, the receivables arose from the sale-of-finished-goods transaction and were closely linked to it. Under TNMM, reasonably accurate working-capital adjustment accounts for the profitability effect of receivables; once such adjustment is granted, a separate interest adjustment duplicates that effect.

Conclusion: Working-capital adjustment shall be granted for the sale-of-finished-goods transaction and no separate notional-interest adjustment on delayed receivables shall be made thereafter; in favour of the assessee.

Issue (vi): Whether brought-forward unabsorbed depreciation could be set off against income from other sources.

Analysis: Section 32(2) was applied as permitting set-off of brought-forward unabsorbed depreciation only against profits and gains of business.

Conclusion: Set-off of unabsorbed depreciation against income from other sources is not allowable; against the assessee.

Final Conclusion: The transfer-pricing computation requires revision by restricting adjustments to associated-enterprise transactions, revising operating margins and revenue treatment, modifying the comparable set, and granting working-capital adjustment, while the depreciation set-off claim fails.

Ratio Decidendi: An arm's-length adjustment under Chapter X cannot be made in respect of transactions with independent third parties.

Issues: (i) Whether rental receipts of Block C1, declared by the partnership firm, could be assessed as undisclosed income from house property in the hands of the landowners; (ii) Whether long-term capital gains under a joint development agreement accrued in the assessment year in which the registered joint development agreement and power of attorney were executed or in the year when constructed area was handed over; (iii) Whether an addition for underreported rental income could rest solely on an uncorroborated loose sheet containing rough notings.

Issue (i): Whether rental receipts of Block C1, declared by the partnership firm, could be assessed as undisclosed income from house property in the hands of the landowners.

Analysis: The partnership firm was a registered legal entity, had obtained statutory approvals as an SEZ co-developer, received rents directly in its bank account, recorded such receipts in its audited accounts, and was assessed on that income. Withdrawals by partners from their capital accounts constituted capital-account debits and did not establish receipt of rental income or transfer of title to the landowners. The rough notings and subsequently clarified statements lacked corroboration against the documentary evidence establishing the firm's ownership and taxation of the rental income.

Conclusion: The rental income was assessable in the hands of the partnership firm and no undisclosed rental-income addition could be made in the hands of the landowners; this issue is decided in favour of the assessee.

Issue (ii): Whether long-term capital gains under a joint development agreement accrued in the assessment year in which the registered joint development agreement and power of attorney were executed or in the year when constructed area was handed over.

Analysis: The registered joint development agreement and irrevocable power of attorney granted the developer effective possession, dominion, and comprehensive authority to develop, mortgage, market, and deal with the property from 25.03.2005. These rights constituted a transfer under section 2(47)(v). The provision introduced by section 45(5A), effective from 01.04.2018, was not retrospective and could not govern the pre-amendment transaction. The decision relied on by the Revenue concerned merely permissive development rights and did not apply where effective possession and control had been transferred.

Conclusion: Capital gains, if any, accrued in assessment year 2005-06 upon execution of the joint development agreement and could not be assessed in assessment year 2016-17; this issue is decided in favour of the assessee.

Issue (iii): Whether an addition for underreported rental income could rest solely on an uncorroborated loose sheet containing rough notings.

Analysis: The loose sheet did not identify the payer or recipient and was unsupported by independent evidence. It was therefore a dumb document incapable, by itself, of supporting estimation of undisclosed rental income.

Conclusion: The addition for underreported rental income based solely on the uncorroborated loose sheet was unsustainable; this issue is decided in favour of the assessee.

Final Conclusion: The additions for alleged undisclosed rental income, long-term capital gains in assessment year 2016-17, and underreported rental income are unsustainable and stand deleted.