Issues: (i) Whether the writ petition was maintainable despite the statutory appellate remedy; (ii) Whether reassessment beyond four years and the consequential deemed-dividend addition were valid where all material facts had been disclosed and the assessee was not a registered shareholder of the lender company.

Issue (i): Whether the writ petition was maintainable despite the statutory appellate remedy.

Analysis: The alternative-remedy rule admits exceptions where the statutory authority acts contrary to the enactment or settled legal position. The assessment had disregarded binding legal precedent specifically raised in the objections. The prolonged subsistence of interim protection also supported exercise of writ jurisdiction.

Conclusion: The writ petition was maintainable notwithstanding the alternative appellate remedy, in favour of the assessee.

Issue (ii): Whether reassessment beyond four years and the consequential deemed-dividend addition were valid where all material facts had been disclosed and the assessee was not a registered shareholder of the lender company.

Analysis: A completed scrutiny assessment cannot be reopened after four years absent failure to make full and true disclosure of material facts. The shareholding pattern, transactions and lender-company details had been supplied during the original assessment, and no suppression was established. Further, the deemed-dividend provision did not apply because the assessee was not a registered shareholder of the payer company and the common shareholder held only 4.60% in the assessee, below the prescribed threshold.

Conclusion: The reopening and the deemed-dividend addition were invalid, in favour of the assessee.

Final Conclusion: The reassessment proceedings and all consequential fiscal demands lack legal foundation.

Ratio Decidendi: Reopening after four years of a completed scrutiny assessment requires failure by the assessee to fully and truly disclose material facts; a loan to a non-registered shareholder cannot be taxed as deemed dividend merely through the statutory fiction.

Issues: Whether the Income Tax Appellate Tribunal must comply with the prescribed timeline for pronouncement of orders after conclusion of hearing.

Analysis: Rule 34 requires an order to be pronounced within 60 days where no pronouncement date is given, with a further period not ordinarily exceeding 30 days only where exceptional and extraordinary circumstances make timely pronouncement impracticable. Releasing matters without pronouncing judgment after they have been argued and reserved repeatedly imposes unjustified litigation hardship. The Tribunal must fix a pronouncement date and adhere to the 60-day period, or at the latest the 90-day outer period in exceptional cases.

Conclusion: The Tribunal was directed to deliver the judgment in the petitioner's pending appeal by 13 August 2026, and all Income Tax Appellate Tribunals were directed to scrupulously comply with Rule 34.

Issues: Whether a reassessment completed without first disposing of the assessee's objections to the recorded reopening reasons through a separate speaking order is legally valid.

Analysis: The additional jurisdictional ground was admitted because it arose from the existing record and required no fresh factual inquiry. The record showed that, although objections to reopening were filed, no independent speaking order disposing of them was issued before completion of reassessment. The mandatory procedural safeguard requiring disposal of such objections before proceeding with reassessment was not satisfied; consideration during reassessment or in a show-cause notice could not substitute for a separate speaking order. This failure affected the assumption of reassessment jurisdiction and could not be cured by restoring the matter for fresh assessment.

Conclusion: The reassessment was invalid for want of a prior separate speaking order disposing of the objections and was quashed, in favour of the assessee.

Issues: (i) Whether deduction under sections 80-IB/80-IE is available on interest from staff advances and statutory/bank deposits; (ii) Whether disallowance under section 14A read with Rule 8D was sustainable; (iii) Whether the short-term capital loss on assignment of partnership interest in an LLP was allowable; (iv) Whether deduction under section 80-IE for the Sikkim unit was allowable; (v) Whether deduction under sections 80-IB/80-IE was available on interest on overdue bills; (vi) Whether the Revenue's challenged MAT adjustments relating to section 14A expenditure, intangible-asset amortisation, interest, software and consultancy expenses were sustainable; (vii) Whether the Debenture Redemption Reserve was deductible in computing book profit; (viii) Whether exempt interest on tax-free bonds could be reduced from book profit despite omission to claim it in the return.

Issue (i): Whether deduction under sections 80-IB/80-IE is available on interest from staff advances and statutory/bank deposits.

Analysis: Consistent decisions in the assessee's earlier years had denied deduction for interest on staff advances and fixed/statutory or bank deposits, as such income was not derived from the eligible undertaking.

Conclusion: Deduction on interest from staff advances and statutory/bank deposits is not allowable, against the assessee.

Issue (ii): Whether disallowance under section 14A read with Rule 8D was sustainable.

Analysis: Investments yielding exempt income had been made in earlier years. Where sufficient interest-free own funds are available, investments are presumed to have been made from those funds and no interest disallowance under Rule 8D(2)(ii) arises. Administrative expenditure remains disallowable at 0.5% of the average value of investments yielding exempt income, after credit for the voluntary disallowance.

Conclusion: The issue was restored for verification of own funds; interest disallowance shall not be made if sufficient own funds are established, while administrative disallowance shall be recomputed, in favour of the assessee to that extent.

Issue (iii): Whether the short-term capital loss on assignment of partnership interest in an LLP was allowable.

Analysis: Partnership rights are capital assets and their assignment is a transfer for capital-gains purposes. However, the transaction involved allegedly related entities, neither side had applied a proper valuation mechanism, and no valuation report for the LLP interest as at transfer was available. The financial statements and accounting consequences of the merger, the LLP accounts, and a valuation based on an approved methodology were required to determine the actual gain or loss.

Conclusion: The allowability and quantum of the capital loss were restored to the Assessing Officer for fresh determination in accordance with law.

Issue (iv): Whether deduction under section 80-IE for the Sikkim unit was allowable.

Analysis: The relief granted followed consistent decisions in the assessee's and predecessor entity's earlier years. The Revenue established neither distinguishing facts nor a change in law.

Conclusion: Deduction under section 80-IE for the Sikkim unit is allowable, in favour of the assessee.

Issue (v): Whether deduction under sections 80-IB/80-IE was available on interest on overdue bills.

Analysis: Earlier orders consistently accepted the claim relating to interest on overdue bills, and no basis was shown for departure from that settled factual position.

Conclusion: Deduction on interest on overdue bills is allowable, in favour of the assessee.

Issue (vi): Whether the Revenue's challenged MAT adjustments relating to section 14A expenditure, intangible-asset amortisation, interest, software and consultancy expenses were sustainable.

Analysis: The relief granted for the MAT adjustment concerning section 14A expenditure and amortisation of intangibles, and the deletion of disallowances concerning interest, software upgradation and maintenance, and consultancy expenditure, were covered by consistent prior-year orders. No distinguishing facts or legal change was shown.

Conclusion: The challenged additions and disallowances were rightly deleted, in favour of the assessee.

Issue (vii): Whether the Debenture Redemption Reserve was deductible in computing book profit.

Analysis: The amount was statutorily required for redemption of debentures, charged against profits, and reflected in audited accounts. A provision made for redemption of debentures represents a known and ascertained liability rather than a reserve; a procedural presentation in the return could not alter its substantive character.

Conclusion: The Debenture Redemption Reserve is deductible in computing book profit, in favour of the assessee.

Issue (viii): Whether exempt interest on tax-free bonds could be reduced from book profit despite omission to claim it in the return.

Analysis: Exempt interest credited to the profit and loss account must be reduced under clause (ii) of Explanation 1 to section 115JB(2). The limitation on an Assessing Officer entertaining a fresh claim without a revised return does not curtail appellate powers to allow a lawful claim arising from facts on record.

Conclusion: Exempt interest on tax-free bonds is reducible from book profit notwithstanding its omission from the return, in favour of the assessee.

Final Conclusion: The assessee obtains consequential relief on the section 14A issue and a fresh determination of the LLP-interest loss, while the Revenue's challenges to the relief granted by the first appellate authority fail.

Ratio Decidendi: A statutory tax computation benefit cannot be denied for a procedural omission where its factual and legal prerequisites are established, while a related-party transfer generating capital loss requires proper valuation to ascertain the actual taxable result.

Issues: Whether the assessee was entitled to foreign tax credit for taxes withheld overseas on professional legal services, where the gross foreign receipts were included in taxable income in India and the applicable treaty characterization was contested.

Analysis: The professional receipts from overseas clients, principally Japan, were held to fall within Article 12(4) of the India-Japan DTAA rather than Article 14 governing independent personal services, as Article 14 in that treaty framework applied to individuals. The foreign withholding could therefore not be regarded as unreasonable or incorrectly imposed. The assessee had rendered services abroad, included the gross receipts in its Indian taxable income, furnished Form 67 and authenticated foreign tax-deduction certificates, and claimed credit under the applicable treaty mechanism. No factual dispute existed regarding the foreign receipts or corresponding tax withheld. Rule 128 contained no restriction warranting denial of credit on the stated facts.

Conclusion: The assessee was entitled to foreign tax credit for overseas taxes withheld against its gross foreign income offered to tax in India; the issue was decided in favour of the assessee.

Issues: (i) Whether website development expenditure qualified for depreciation at 60%; (ii) Whether payment gateway charges paid to banks attracted tax deduction at source as commission or brokerage; (iii) Whether advertisement, marketing and publicity expenditure was capital or revenue expenditure; (iv) Whether payments to a foreign group entity, including ticket-cost reimbursements, attracted disallowance for non-deduction of tax at source.

Issue (i): Whether website development expenditure qualified for depreciation at 60%.

Analysis: The claim was covered by the jurisdictional High Court decision and consistent earlier-year orders allowing depreciation at 60% on software-related website development expenditure.

Conclusion: Depreciation on website development expenditure is allowable at 60%, in favour of the assessee.

Issue (ii): Whether payment gateway charges paid to banks attracted tax deduction at source as commission or brokerage.

Analysis: Payment gateway charges represented fees for banking and secure payment-settlement services. The banks did not act as agents in the underlying sale transaction; the arrangement was on a principal-to-principal basis. The jurisdictional High Court decision for the assessee's preceding year governed the issue.

Conclusion: Payment gateway charges are not commission or brokerage attracting deduction under Section 194H, and no disallowance is permissible, in favour of the assessee.

Issue (iii): Whether advertisement, marketing and publicity expenditure was capital or revenue expenditure.

Analysis: The expenditure was incurred in the ordinary course of promoting the business and competing in the market. Consistent earlier-year orders treated such advertising and promotional expenditure as revenue expenditure, notwithstanding any incidental enduring benefit.

Conclusion: The advertisement, marketing and publicity expenditure is revenue expenditure allowable as a deduction, in favour of the assessee.

Issue (iv): Whether payments to a foreign group entity, including ticket-cost reimbursements, attracted disallowance for non-deduction of tax at source.

Analysis: The ticket-cost amounts reimbursed on a cost-to-cost basis represented proceeds payable to foreign airlines and were neither claimed as business expenditure nor debited to the assessee's profit and loss account. The identical issue had been resolved in the assessee's favour for the preceding year, and the same reasoning applied.

Conclusion: The payments do not warrant disallowance for non-deduction of tax at source, in favour of the assessee.

Final Conclusion: The deletions of all disputed additions and disallowances are sustained.

Ratio Decidendi: Payments for banking services without an agency relationship are not commission or brokerage for tax-deduction purposes, and cost-to-cost reimbursements not claimed as business expenditure cannot be disallowed as such expenditure for non-deduction of tax.

Issues: (i) Whether interest charged on foreign-currency loans advanced to associated enterprises was at arm's length; (ii) Whether transfer-pricing adjustment for corporate and performance guarantees was warranted and, if so, at what rate; (iii) Whether overseas associated enterprises could be selected as tested parties for benchmarking BPO services and whether the BPO adjustment required fresh determination; (iv) Whether separately functioning STPI software development centres under common licences qualified as separate undertakings for deduction under section 10A; (v) Whether foreign-currency expenses and link charges excluded from export turnover had also to be excluded from total turnover; (vi) Whether disallowance under section 14A read with Rule 8D was sustainable; (vii) Whether ESOP expenditure, software licence fees, foreign-exchange hedging losses and mark-to-market losses were allowable; (viii) Whether additions for outstanding creditors, TDS credit on deferred revenue, foreign tax credit and enhanced deductions required verification or relief; (ix) Whether dividend distribution tax on dividends to non-resident shareholders was restricted by the applicable DTAA rate; (x) Whether income from investment of surplus funds of eligible units qualified for deduction under sections 10A, 10AA and 10B.

Issue (i): Whether interest charged on foreign-currency loans advanced to associated enterprises was at arm's length.

Analysis: The loan was denominated in GBP. The appropriate benchmark for an outbound foreign-currency loan is the market rate applicable to the currency of repayment, rather than an Indian domestic prime lending rate. Applying GBP LIBOR plus 400 basis points, consistently with the approach adopted in the assessee's own case, produced a rate lower than the 9.50% interest actually charged.

Conclusion: The interest charged was at arm's length; the transfer-pricing adjustment was deleted in favour of the assessee.

Issue (ii): Whether transfer-pricing adjustment for corporate and performance guarantees was warranted and, if so, at what rate.

Analysis: Corporate guarantees issued for subsidiaries constituted indirect long-term financing and fell within the scope of an international transaction under section 92B. The bank-guarantee rates and additional risk mark-up adopted by the Transfer Pricing Officer were inappropriate for corporate guarantees. The accepted benchmark was 0.50% of the outstanding guarantee amount.

Conclusion: Guarantee-fee adjustment was sustained only at 0.50% of the total outstanding guarantees at the end of each relevant year; the issue was partly decided in favour of the assessee.

Issue (iii): Whether overseas associated enterprises could be selected as tested parties for benchmarking BPO services and whether the BPO adjustment required fresh determination.

Analysis: The overseas associated enterprises operated in different economic zones and currencies and reported segmental losses. They could not jointly be treated as tested parties on the facts. However, the Transfer Pricing Officer's adjustment based on the full revenue retained by them was excessive. Certain high-turnover, functionally dissimilar, or restructuring-affected comparables were excluded, while some comparables required segmental information and fresh evaluation. The benchmarking had to account for the actual functions, assets and risks, including that the associated enterprises retained only about 10% of the revenue.

Conclusion: Selection of the overseas associated enterprises as tested parties was rejected, but the BPO transfer-pricing issue was remanded for fresh benchmarking in accordance with the stated directions; the issue was partly in favour of the assessee.

Issue (iv): Whether separately functioning STPI software development centres under common licences qualified as separate undertakings for deduction under section 10A.

Analysis: A prior failure to claim deduction unit-wise does not create an estoppel where the statutory conditions are otherwise fulfilled. Eligibility depends on whether each unit is a separate and viable undertaking, with separate identity, fresh capital, workforce, infrastructure, identifiable output and ascertainable profits; the number or manner of STPI licences is not determinative.

Conclusion: The issue was remanded to verify whether the claimed units constituted separate undertakings eligible for deduction under section 10A; the issue was decided in favour of the assessee for fresh adjudication.

Issue (v): Whether foreign-currency expenses and link charges excluded from export turnover had also to be excluded from total turnover.

Analysis: The issue was governed by binding precedent in the assessee's own case and the principle that identical exclusions must be made from both export turnover and total turnover when computing the deduction.

Conclusion: Corresponding exclusion from total turnover was directed in favour of the assessee.

Issue (vi): Whether disallowance under section 14A read with Rule 8D was sustainable.

Analysis: The Assessing Officer had recorded sufficient dissatisfaction with the suo motu disallowance. Nevertheless, no interest disallowance could be made where sufficient interest-free funds were available for investments. Administrative expenditure under Rule 8D(2)(iii) had to be computed at 0.50% of investments that actually yielded exempt income.

Conclusion: The interest component of disallowance was deleted, while the administrative component was remanded for recomputation on investments yielding exempt income; the issue was partly in favour of the assessee.

Issue (vii): Whether ESOP expenditure, software licence fees, foreign-exchange hedging losses and mark-to-market losses were allowable.

Analysis: ESOP expenditure and enhanced ESOP claims were governed by earlier orders allowing the claim. Software licence fees required factual verification as to whether the software was off-the-shelf software used for business operations. Losses on cancellation or premature unwinding of forward contracts entered into for hedging export receivables were business losses and not speculative losses. Mark-to-market loss on outstanding hedging forward contracts was allowable under the mercantile system where the assessee consistently recognised corresponding gains and losses and the contracts were not speculative.

Conclusion: ESOP expenditure, hedging losses and mark-to-market losses were allowed in favour of the assessee; software licence fee was remanded for factual verification.

Issue (viii): Whether additions for outstanding creditors, TDS credit on deferred revenue, foreign tax credit and enhanced deductions required verification or relief.

Analysis: Whether static creditor balances had been paid or offered to tax on write-back required verification. TDS credit for deferred revenue must be granted proportionately in the years in which the related income is assessed. Foreign tax credit claims and enhanced claims required verification of additional evidence. Claims for deduction relating to investment income of eligible units required verification that the funds represented internal accruals of those units.

Conclusion: These issues were remanded for verification and allowance in accordance with law, in favour of the assessee for fresh consideration.

Issue (ix): Whether dividend distribution tax on dividends to non-resident shareholders was restricted by the applicable DTAA rate.

Analysis: The issue was covered by the Tribunal's earlier orders in the assessee's case applying the relevant treaty rate to dividend payments to non-resident shareholders.

Conclusion: The DTAA-based claim was allowed in favour of the assessee.

Issue (x): Whether income from investment of surplus funds of eligible units qualified for deduction under sections 10A, 10AA and 10B.

Analysis: The additional claim was covered by prior orders, subject to verification that interest and similar income from deposits, mutual funds and comparable investments arose from internal accruals of the eligible undertakings.

Conclusion: The claim was allowed subject to verification, in favour of the assessee.

Final Conclusion: The principal transfer-pricing and deduction claims were substantially granted or restored for fresh verification, with the corporate-guarantee adjustment restricted and the tested-party contention for BPO services rejected.

Ratio Decidendi: Foreign-currency intra-group loans must be benchmarked by reference to the lending currency; corporate guarantees are international transactions but require an appropriate corporate-guarantee benchmark; and eligibility for unit-based tax holidays depends on the independent factual identity of each undertaking rather than the form or number of regulatory licences.

Issues: Whether depreciation is allowable on goodwill arising from a court-approved amalgamation, where the excess purchase consideration over net assets acquired is supported by an independent valuation.

Analysis: Goodwill arose from the excess of independently determined purchase consideration over the net assets acquired under an amalgamation approved by the NCLT. The valuation report and audited financial statements established that the goodwill was acquired through a genuine commercial transaction, rather than being self-generated, fictitious, or a mere accounting adjustment. Goodwill falling within business or commercial rights is a depreciable intangible asset, and mere excess consideration over net assets does not displace the claim absent material showing that the amalgamation or valuation was a sham or legally untenable.

Conclusion: Depreciation on the goodwill arising from the amalgamation is allowable; the finding is in favour of the assessee.

Issues: Validity of penalty for delayed filing of TDS returns where the penalty proceedings were initiated after a prolonged delay and without an order determining default.

Analysis: The penalty was imposed nine years after the belated TDS returns were filed. Applying the coordinate-bench precedent on materially similar facts, the Tribunal found that penalty proceedings initiated without an order under section 201(1) or section 201(1A), coupled with the inordinate delay, rendered the penalty unsustainable.

Conclusion: The penalty was illegal and was set aside, in favour of the assessee.

Issues: (i) Whether financial assistance received for development and setting-up of a water infrastructure project was a capital receipt or taxable revenue receipt; (ii) Whether the excess project cost over financial assistance could be claimed as deferred revenue expenditure by amortisation over the concession period.

Issue (i): Whether financial assistance received for development and setting-up of a water infrastructure project was a capital receipt or taxable revenue receipt.

Analysis: The assistance was granted under the concession arrangement for construction and development of the water infrastructure project. Applying the purpose test and following the consistent decisions in the assessee's own earlier assessment years, assistance intended to set up or complete a project retained capital character rather than constituting operational revenue.

Conclusion: The financial assistance was a capital receipt and not taxable as revenue; the addition was deleted, in favour of the assessee.

Issue (ii): Whether the excess project cost over financial assistance could be claimed as deferred revenue expenditure by amortisation over the concession period.

Analysis: The accounting treatment of amortising net expenditure incurred in developing the infrastructure facility over the concession period was consistent with Circular No. 9/2014 dated 23.04.2014 and the prior decision concerning the assessee. The contrary adjustment was therefore unsustainable.

Conclusion: The amortised deferred revenue expenditure was allowable and the related addition was deleted, in favour of the assessee.

Final Conclusion: The project assistance and the corresponding amortised net project expenditure were required to receive capital and deferred-revenue treatment respectively.

Ratio Decidendi: Financial assistance granted for setting up or completing an infrastructure project is capital in character, and net infrastructure-development expenditure may be amortised over the concession period where the applicable circular and accounting treatment so permit.

Issues: Whether penalty for misreporting of income could be sustained under Section 270A where deduction claimed under Section 80GGC was disallowed in reassessment proceedings.

Analysis: The deduction claim and donation were disclosed in the return. A disallowance based on doubts regarding the genuineness or eligibility of the donation did not, without material showing false evidence, suppression of facts, fabricated documents, or deliberate misrepresentation, establish misreporting. Penalty proceedings are independent of assessment proceedings, and non-challenge to the quantum addition does not amount to an admission of misreporting. The specified conditions for misreporting were not established.

Conclusion: The penalty levied for misreporting of income under Section 270A was deleted in favour of the assessee.

Issues: Whether income receivable under the sole trust declared by will was taxable at the maximum marginal rate notwithstanding the proviso to section 164(1).

Analysis: The trust was created under the deceased's only will. Proviso (ii) to section 164(1) applies where relevant income is receivable under a trust declared by will and that trust is the only trust so declared. This statutory exception, read with section 167B and the applicable CBDT clarification, excludes maximum marginal-rate taxation of such testamentary family trust income.

Conclusion: The trust income is not taxable at the maximum marginal rate; it is taxable as the total income of an association of persons under proviso (ii) to section 164(1).

Issues: (i) Whether the purchaser was liable to deduct tax under section 194-IA on acquisition of agricultural land and could consequently be treated as an assessee in default for short deduction under section 201(1) read with section 206AA; (ii) Whether interest under section 201(1A) could be sustained.

Issue (i): Whether the purchaser was liable to deduct tax under section 194-IA on acquisition of agricultural land and could consequently be treated as an assessee in default for short deduction under section 201(1) read with section 206AA.

Analysis: Section 194-IA applies only to transfers of immovable property other than agricultural land. The registered sale deed consistently described the transferred property as agricultural land, and no material established that it fell within an excluded category of agricultural land. Section 206AA prescribes an enhanced deduction rate only where tax is otherwise deductible and does not independently create a deduction obligation. The cancellation of the sale deed and non-encashment of the payment cheques further supported the unsustainability of the demand, though the inapplicability of section 194-IA was dispositive.

Conclusion: Section 194-IA did not apply to the transfer of agricultural land; consequently, section 206AA could not be invoked and the assessee could not be treated as an assessee in default under section 201(1). The conclusion is in favour of the assessee.

Issue (ii): Whether interest under section 201(1A) could be sustained.

Analysis: Interest under section 201(1A) was consequential to the principal demand for failure or shortfall in deduction under section 201(1). As no statutory obligation to deduct tax arose under section 194-IA, the principal demand failed.

Conclusion: The consequential interest under section 201(1A) was unsustainable and was deleted. The conclusion is in favour of the assessee.

Final Conclusion: The demand for alleged short deduction and the consequential interest cannot be maintained where the transferred property is agricultural land outside the scope of section 194-IA.

Ratio Decidendi: An enhanced withholding rate for non-furnishing of PAN operates only where an independent statutory obligation to deduct tax exists; it cannot apply where the underlying transfer is outside the charging provision for tax deduction at source.

Issues: (i) Whether land consumed for non-saleable roads and gardens was required to be included in closing stock; (ii) Whether rent claimed as agricultural income was substantiated; (iii) Whether disallowance under section 14A was sustainable where no exempt income was earned.

Issue (i): Whether land consumed for non-saleable roads and gardens was required to be included in closing stock.

Analysis: The land used for roads and gardens was not capable of sale and had nil net realisable value. The assessee had consistently excluded such non-saleable land from closing stock, and the opening stock and assessments for other years had not been disturbed. Under section 145A, inventory is to be valued at lower of cost or net realisable value.

Conclusion: The addition towards alleged undervaluation of closing stock was deleted in favour of the assessee.

Issue (ii): Whether rent claimed as agricultural income was substantiated.

Analysis: No evidence supporting the claim that agricultural land had been leased to farmers and that the rent constituted agricultural income was produced before the assessing or appellate authorities.

Conclusion: The addition on account of the claimed agricultural income was confirmed against the assessee.

Issue (iii): Whether disallowance under section 14A was sustainable where no exempt income was earned.

Analysis: It was admitted that the assessee earned no exempt income during the relevant year. In the absence of exempt income, no disallowance under section 14A could be made.

Conclusion: The disallowance under section 14A was deleted in favour of the assessee.

Final Conclusion: The assessment stands modified by deletion of the closing-stock and section 14A additions, while the agricultural-income addition remains sustained.

Ratio Decidendi: Non-saleable land having nil net realisable value need not be included in closing stock, and disallowance for expenditure relating to exempt income cannot be made where no exempt income is earned.

Issues: (i) Whether diamond grading and certification charges paid to non-residents constitute fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961; (ii) Whether the payments satisfy the fees for included services test under Article 12(4) of the India-USA and India-UK Double Taxation Avoidance Agreements; (iii) Whether payments to entities situated in Thailand and Hong Kong were chargeable to tax in India.

Issue (i): Whether diamond grading and certification charges paid to non-residents constitute fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961.

Analysis: Grading involved examination of diamonds and issuance of reports recording their cut, colour, clarity and carat weight. The service was an independent evaluation and certification of an existing product; it involved no managerial function, technical advice, consultancy, manufacturing assistance, technical solution, or transfer of grading methodology and know-how. Use of specialised personnel or scientific equipment by the service provider did not by itself make the service a technical service rendered to the recipient.

Conclusion: Diamond grading and certification charges are not fees for technical services under section 9(1)(vii) of the Income-tax Act, 1961, in favour of the assessee.

Issue (ii): Whether the payments satisfy the fees for included services test under Article 12(4) of the India-USA and India-UK Double Taxation Avoidance Agreements.

Analysis: Article 12(4) requires that technical knowledge, experience, skill, know-how or processes be made available so as to enable the recipient to apply them independently in future. A grading report does not impart the provider's methodology, scientific standards, processes or specialised expertise. The assessee would have to obtain fresh certification for each subsequent diamond.

Conclusion: The grading and certification payments do not satisfy the make available requirement and are not fees for included services or fees for technical services under Article 12(4), in favour of the assessee.

Issue (iii): Whether payments to entities situated in Thailand and Hong Kong were chargeable to tax in India.

Analysis: Once the grading and certification activity was found not to be managerial, technical or consultancy service, the identity or location of the non-resident recipient could not change the character of the consideration. No other charging provision, business connection, or taxable nexus in India was established. In respect of treaty recipients, the receipts were business profits not taxable in India absent a permanent establishment; consequently, the prerequisite of chargeability for deduction under section 195 was absent.

Conclusion: Payments to the Thailand and Hong Kong entities were not sums chargeable to tax in India, and no tax-deduction obligation arose, in favour of the assessee.

Final Conclusion: The assessee could not be treated as an assessee in default, and consequential interest was not exigible, for non-deduction of tax on diamond grading and certification remittances.

Ratio Decidendi: Consideration for independent product grading and certification is not fees for technical services where it supplies only a factual certification and neither renders managerial, technical or consultancy services nor makes technical knowledge or capability available to the payer.

Issues: (i) Whether depreciation was allowable on goodwill arising from a slump sale transaction; (ii) Whether depreciation was allowable on non-compete fees.

Issue (i): Whether depreciation was allowable on goodwill arising from a slump sale transaction.

Analysis: Goodwill representing the excess of consideration over the net value of assets and liabilities acquired arose upon the slump sale and was not an asset transferred from, or forming part of the depreciable block of, the predecessor concern. The restrictions in the sixth proviso to section 32(1), Explanation 7 to section 43(1), and Explanation 2 to section 43(6) apply where a depreciable asset or block existing with the predecessor is transferred to the successor; they did not govern goodwill newly arising from the transaction. Goodwill qualified as a business or commercial right of similar nature. The Finance Act, 2021 exclusion of goodwill from depreciation applied prospectively from assessment year 2021-22 and did not apply to assessment year 2018-19.

Conclusion: Depreciation on goodwill arising from the slump sale was allowable; this issue was decided in favour of the assessee.

Issue (ii): Whether depreciation was allowable on non-compete fees.

Analysis: Non-compete fees were treated as revenue expenditure allowable under section 37(1), rather than as a depreciable capital intangible asset. The claim for depreciation was therefore unsustainable.

Conclusion: Depreciation on non-compete fees was not allowable; this issue was decided against the assessee.

Final Conclusion: The goodwill component of the intangible-asset claim was restored as eligible for depreciation, while the non-compete-fee component was denied.

Ratio Decidendi: Restrictions governing depreciation on assets transferred in an amalgamation or succession do not apply to goodwill newly generated as the excess of consideration over net assets in a slump sale; such goodwill was depreciable for periods before the prospective statutory exclusion of goodwill.

Issues: Whether additions made by enhancement through a rectification order without prior notice and opportunity of hearing were valid.

Analysis: Section 154(3) requires prior notice and a reasonable opportunity of hearing before any rectification that enhances an assessment or increases liability. The record did not establish that a notice proposing rectification or enhancement had been issued, or that an opportunity of hearing had been afforded. An order made in breach of this mandatory requirement and of principles of natural justice is unsustainable.

Conclusion: The enhanced additions made through the rectification order were invalid and were directed to be deleted, in favour of the assessee.