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    Allocation of shared costs and depreciation: apportionment on reasonable basis and fair proportion affects tonnage tax computations.
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    Tonnage tax regime: clarifies qualifying shipping income, market value inter company valuation, and related party anti avoidance adjustments.
    Tonnage tax applies to qualifying shipping income measured by net tonnage, defined as profits from specified core shipping activities and prescribed incidental activities; incidental income above a prescribed threshold is excluded. Inter business transfers must be computed at market value, with assessing officer power to use reasonable bases in exceptional cases. Related party arrangements producing more than ordinary profits may be adjusted to reasonable levels. The Central Government may exclude activities or set limits by notification subject to parliamentary laying. Losses in tonnage computation are ignored.
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    Allocation of tonnage income: proportional or independent computation affects tax treatment of jointly operated qualifying ships.
    Computation of tonnage income for jointly operated qualifying ships follows a two-step approach: where participating companies' shares are definite and ascertainable, income is allocated proportionately to each company; where shares are not definite and ascertainable, tonnage income for each operator is computed as if it were the sole operator. The rule aligns taxation with economic interest, creates documentary and compliance incentives, functions as an anti-avoidance measure, and may interact with cross-border tax rules, requiring clearer guidance on "definite and ascertainable" shares and documentation standards.
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    Tonnage tax regime: ships' taxable income computed by daily tonnage rates and aggregation, excluding deductions.
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    Place of effective management central to qualifying company status, restricting tonnage tax benefits to genuinely India-managed shipping firms.
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    Tonnage tax definitions: expanded, self-contained eligibility rules broaden coverage and tighten residency and exclusion tests.
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    Pass-through taxation preserves investor-level tax treatment of investment fund income while ring-fencing fund-level losses.
    Clause 224 restates a pass-through regime: income from investments in a regulated fund is taxed in the hands of unit holders as if held directly, while business income remains taxable at the fund level. Business losses are ring fenced at the fund; other losses pass through subject to holding period conditions and transitional attribution of legacy losses to unit holders. Income retained by the fund is deemed credited to unit holders at year end and prescribed statements must be furnished to unit holders and tax authorities to secure transparency and enforcement.
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    Pass-through taxation for business trusts preserves income character and shifts tax consequences to unit holders with reporting duties.
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    Pass-through taxation of venture capital income taxes investors as if invested directly, with reporting and deemed-credit safeguards.
    Pass-through taxation requires that income arising to investors from venture capital companies or funds be taxed in the investor's hands as if invested directly, with the fund and payer furnishing prescribed statements to investors and tax authorities; undistributed income is deemed credited to investors at year-end in proportion to entitlement, while income already included on an accrual basis is not taxed again on actual payment; specified investment funds are excluded and key terms are defined in the schedule.
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    Tax on accreted income: transferees and officers may be deemed assessees in default, with liability limited to asset value.
    Clause 352(8) deems the specified person (NPO) and its principal officer or trustee to be assessee in default for unpaid tax on accreted income and applies all recovery provisions of the Act; it also deems a transferee of assets in specified dissolution cases to be an assessee in default in respect of such tax. Clause 352(9) limits the transferee's liability to the extent the asset received is capable of meeting the liability, ensuring proportionality in recovery.
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    Accreted income interest compels prompt tax payment and creates joint personal liability for trustees and principal officers.
    Clause 352(7) imposes simple interest for delayed payment of tax on accreted income, with joint and several liability on the specified person and the principal officer or trustee; interest is computed monthly (any part-month treated as a full month) using an explicit formula, and liable persons are deemed assessee in default to enable statutory recovery mechanisms.
    Act RulesBills
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    Exit tax on accreted income expands triggers and fixes final levy after prescribed valuation and procedural safeguards.
    A tax on accreted income charges NPOs additional income tax at the maximum marginal rate when specified events occur; accreted income equals aggregate fair market value of assets less total liabilities on a specified date, computed under prescribed valuation methods, with exclusions as prescribed. The Assessing Officer must afford a hearing before ordering tax, the bill sets a detailed table of triggering events and payment timelines, and the tax payment is final with no further credit or deduction allowed.
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    Pass-through taxation for securitisation trust income preserves investor-level taxation while mandating reporting and deemed-accrual rules.
    Clause 221 establishes a pass-through taxation regime for income from securitisation trusts, preserving the character and proportion of underlying income in the hands of investors, deeming unpaid accruals as credited on the last day of the tax year to prevent deferral, requiring prescribed statements to investors and tax authorities, and preventing double taxation by excluding income already taxed on accrual from subsequent inclusion on actual payment.
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    Minimum alternate tax definitions shape MAT/AMT computation and Ind AS transition treatment, narrowing tax arbitrage opportunities.
    Clause 206(19) supplies granular definitions aligning MAT/AMT computation with Ind AS convergence, insolvency law and cross statutory terms. Key terms include adjudicating authority (IBC), convergence date, transition amount with specified exclusions, net worth, company classifications, securities, tribunal, unit (IFSC) and year of convergence. These definitions phase in Ind AS transition impacts, harmonize tax and insolvency treatment, clarify eligibility for concessional AMT rates, and reduce tax arbitrage and interpretive disputes compared with the narrower definitions in Section 115JF.
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    Minimum alternate tax exclusions: narrow MAT/AMT to specified taxpayers including life insurers, alternative regime opters, presumptive and small taxpayers.
    Clause 206(18) narrows MAT/AMT applicability by exempting companies with life insurance income, taxpayers who opt for specified alternative tax regimes, persons taxed under special or presumptive computation sections, specified funds identified in the Schedule, and non corporate persons whose adjusted total income falls below the statutory threshold; the exclusions reflect sectoral accounting differences, aim to promote concessional regimes and financial competitiveness, and reduce compliance burdens while requiring clear definitions and anti abuse safeguards.

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      JAO vs. FAO: Reassessment in the Faceless Era: The Continuing Validity of JAO Jurisdiction Pending Supreme Court Adjudication

      9 December, 2025

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      Deciphering Legal Judgments: A Comprehensive Analysis of Judgment

      Reported as:

      2025 (10) TMI 435 - DELHI HIGH COURT

      Introduction

      The controversy at the heart of these proceedings concerns who has the lawful jurisdiction to initiate reassessment proceedings u/s 148 of the Income-tax Act, 1961 ("the Act") in the post-faceless regime: the traditional Jurisdictional Assessing Officer ("JAO") or the Faceless Assessing Officer ("FAO"). The Delhi High Court's decision dated 26 September 2025, followed by the Supreme Court's interim order dated 6 November 2025 in Yukti Export, together form a significant chapter in the evolving jurisprudence surrounding faceless assessment and reassessment, the effect of Special Leave Petition ("SLP") dismissals, and the operation of Article 141 of the Constitution.

      The High Court's ruling reaffirms, within the Delhi territorial jurisdiction, its earlier position in T.K.S. Builders (P.) Ltd. v. ITO (2024 (10) TMI 1586 - DELHI HIGH COURT) that both JAO and FAO enjoy concurrent jurisdiction to issue notices u/s 148. The petitioners, however, relied heavily on contrary High Court decisions (notably from Bombay, Telangana, Punjab & Haryana) and subsequent Supreme Court orders dismissing SLPs against those judgments to contend that only FAO has jurisdiction. The Supreme Court's later intervention in Yukti Export v. ITO, staying assessment proceedings and tagging the matter with a pending SLP, indicates that the question has now been elevated to a pan-India issue with wider systemic consequences.

      In the broader legal framework, these decisions lie at the intersection of: (i) statutory reconfiguration of assessment jurisdiction u/s 151A (faceless regime); (ii) constitutional principles governing precedential value of SLP orders; and (iii) inter-court comity and the doctrine of per incuriam as applied to conflicting High Court views.

      Key Legal Issues

      1. Who has jurisdiction to issue notices u/s 148: JAO, FAO, or both?

      The primary substantive issue is whether, post Section 151A and the introduction of the faceless scheme, the power to initiate reassessment u/s 148 is vested exclusively in the FAO or whether the JAO continues to retain independent and concurrent jurisdiction. This is mainly a matter of statutory interpretation (Sections 148 and 151A and related scheme notifications), informed by the nature and architecture of the faceless regime.

      2. Effect of Supreme Court's dismissal of SLPs on the binding force of contrary High Court judgments

      The petitioners argued that Supreme Court's dismissal of SLPs against Bombay and Telangana High Court judgments (which favoured exclusive FAO jurisdiction) operates as a declaration of law under Article 141 and impliedly overrules or renders per incuriam the Delhi High Court's contrary view in T.K.S. Builders. This raises a procedural and constitutional issue: when, and to what extent, does a speaking order dismissing an SLP amount to "law declared" and affect subsisting High Court precedent?

      3. Per incuriam and intra-High Court precedent

      The petitioners contended that T.K.S. Builders is per incuriam because it allegedly disregarded binding Supreme Court law and the statutory command of Section 151A. The issue here concerns whether, in light of subsequent developments and other High Court decisions, a coordinate bench judgment can be treated as per incuriam and therefore not binding.

      4. Impact of Supreme Court's subsequent interim stay in Yukti Export

      The Supreme Court's order in Yukti Export staying the assessment proceedings and tagging the matter with an earlier SLP raises questions about: (i) whether the High Court's position remains operative; (ii) how far such an interim order indicates that the legal question is open; and (iii) the practical consequences for taxpayers and the Revenue pending final adjudication.

      Detailed Issue-wise Analysis

      1. Jurisdiction u/s 148 in the faceless era

      The petitioners relied on a series of High Court decisions-Hexaware Technologies Ltd. (2024 (5) TMI 302 - BOMBAY HIGH COURT), Prakash Pandurang Patil (2025 (8) TMI 1700 - SC Order), Sri Venkataramana Reddy Patloola (2024 (9) TMI 100 - TELANGANA HIGH COURT), Deepanjan Roy (2024 (8) TMI 1598 - TELANGANA HIGH COURT), Jatinder Singh Bhangu (2024 (7) TMI 1191 - PUNJAB AND HARYANA HIGH COURT), Royal Bitumen (2024 (7) TMI 906 - BOMBAY HIGH COURT), Everest Kanto Cylinder (2024 (7) TMI 589 - BOMBAY HIGH COURT), Sundaram Multi Pap (2024 (7) TMI 1192 - BOMBAY HIGH COURT), Venus Jewel (2024 (7) TMI 971 - BOMBAY HIGH COURT)-which, in substance, hold that after the introduction of Section 151A and the faceless reassessment architecture, only the FAO is competent to issue notices u/s 148. These judgments typically reason that:

      • The statutory and scheme-based restructuring centralizes reassessment in faceless units; and
      • Permitting JAO-initiated reassessments would undermine the policy and text of the faceless regime.

      By contrast, the Delhi High Court in T.K.S. Builders (and consistently thereafter) has taken the view that JAO and FAO enjoy concurrent jurisdiction. The present judgment reiterates this position, holding in para 10 that "both JAO and FAO possess concurrent jurisdiction to initiate reassessment proceedings u/s 148 of the Act." The Court does not reopen the interpretive exercise afresh; instead it treats T.K.S. Builders as binding precedent, thereby converting the petitions into a challenge primarily on the ground of inconsistency with alleged Supreme Court law.

      Although the text of Section 151A is not reproduced, the fault line is clear: whether Section 151A operates as a jurisdiction-shifting provision (exclusive FAO) or as an enabling/administrative provision (permitting faceless reassessment while not extinguishing pre-existing JAO powers). The Delhi High Court implicitly adopts the latter construction.

      2. Article 141 and the effect of SLP dismissals

      The petitioners' core argument was that dismissal of SLPs against Bombay and Telangana decisions-particularly the order in Prakash Pandurang Patil noting "dismissed on the ground of delay as well as merits"-constitutes a declaration of law binding under Article 141 and therefore negates the Delhi High Court's concurrent-jurisdiction view.

      The High Court rejects this for reasons grounded firmly in Supreme Court precedent:

      • Fuljit Kaur v. State of Punjab, 2010 (6) TMI 687 - Supreme Court: Dismissal of SLP in limine does not affirm the High Court's reasoning nor trigger merger; it only reflects that the case was not considered worthy of examination and does not operate as res judicata or a declaration of law (para 13).
      • State of Orissa v. Dhirendra Sundar Das, 2019 (5) TMI 1949 - Supreme Court: reiterates that in limine SLP dismissal, without detailed reasons, is not a binding precedent under Article 141 (para 14).
      • Kunhayammed v. State of Kerala, 2000 (7) TMI 67 - Supreme Court (LB): exhaustively distinguishes between (i) rejection of SLP (speaking or non-speaking), which does not attract merger, and (ii) orders passed after grant of leave, which do (paras 40-41). It clarifies that even a speaking order rejecting SLP declares law only to the limited extent of what is expressly or by necessary implication decided, but it does not amount to affirmance of the lower court judgment itself.
      • Khoday Distilleries Ltd. v. Mahadeshwara Sahakara Sakkare Karkhane, 2019 (3) TMI 232 - Supreme Court : re-states Kunhayammed and confirms that a speaking SLP rejection may declare law, but still does not effect merger (para 16).

      Applying these principles, the High Court reasons (paras 12, 17) that the Supreme Court's mere recitation that it sees "no reason to interfere" and dismissal "on delay as well as merits" in Prakash Pandurang Patil:

      • does not amount to a detailed or reasoned adjudication of the FAO-JAO jurisdiction issue; and
      • cannot, by necessary implication, be construed as overturning T.K.S. Builders or affirming Hexaware Technologies as binding nationwide precedent.

      Crucially, the Court distinguishes between (i) any statement of law actually contained in a speaking SLP dismissal (which would bind under Article 141), and (ii) the High Court judgment under challenge. Since the Supreme Court did not articulate reasoning on the jurisdictional question, there is no "law declared" that would disable the Delhi High Court from maintaining its earlier view.

      3. Per incuriam and binding force of T.K.S. Builders

      The petitioners asserted that T.K.S. Builders was per incuriam in light of Section 151A and intervening Supreme Court developments. Reliance was placed on Hyder Consulting (UK) Ltd. v. State of Orissa, 2015 (3) TMI 1452 - Supreme Court, on the doctrine of per incuriam.

      The High Court (paras 9-11, 18-19) rejects this line of attack primarily on institutional grounds:

      • T.K.S. Builders is a coordinate bench decision squarely on the same issue, and has been consistently followed in multiple subsequent Delhi High Court cases, including PC Jeweller Ltd., Mala Petrochemicals and Polymers, Mehak Jagga, All India Kataria Education Society, and Empire Fasteners.
      • The SLP against T.K.S. Builders is pending; there is no stay of the judgment. Therefore it "still holds the fort" within Delhi (para 18).
      • Nothing in the Supreme Court's SLP orders expressly declares the Delhi view contrary to law or incompatible with Section 151A.

      By emphasising that T.K.S. Builders remains binding until set aside or overruled, the Court implicitly constrains the per incuriam doctrine to its narrow, traditionally accepted field: where a decision neglects a binding statute or a clear Supreme Court ratio. Since no such binding contrary ratio existed, the Court refuses to treat a coordinate bench's view as per incuriam purely because other High Courts or SLP dismissals have taken another view.

      The petitioners' further argument that the Supreme Court's interim order in PC Jeweller (permitting proceedings but directing that adverse orders not be given effect) undermines reliance on T.K.S. Builders is also rejected. The High Court reads that order as only an interim protective arrangement, not as a pronouncement on the correctness of its own precedent.

      4. Supreme Court's subsequent order in Yukti Export

      Following the Delhi High Court's dismissal of the writ petitions, Yukti Export approached the Supreme Court by way of SLP (C) Nos. 31818-31822 of 2025. On 6 November 2025 (2025 (11) TMI 1524 - SC ORDER), the Supreme Court:

      • issued notice;
      • permitted dasti service;
      • stayed the assessment proceedings "in the meantime" until the next date of hearing; and
      • tagged the matter with SLP(C) No. 29723/2025.

      This order is brief and does not articulate reasons. Nevertheless, its implications are noteworthy:

      • The Supreme Court has considered the challenge sufficiently arguable to warrant notice, which implicitly indicates that the legal issue is not treated as foreclosed by earlier SLP dismissals.
      • The stay of assessment proceedings, though interim and case-specific, provides immediate relief to the petitioner and signals judicial caution in allowing reassessments to proceed in circumstances where jurisdiction is under serious challenge.
      • Tagging with another SLP suggests that the Court intends to hear and decide the broader jurisdictional question (and perhaps related challenges to T.K.S. Builders and the Delhi line of authority) in a consolidated manner.

      However, applying the same principles discussed by the Delhi High Court (Kunhayammed, Fuljit Kaur, Khoday Distilleries), this interim order:

      • does not, at this stage, constitute "law declared" within Article 141; and
      • does not nullify or stay the Delhi High Court's judgment as such-its operation is confined to the specific assessment proceedings of the petitioner before the Supreme Court.

      Practically, though, the Supreme Court's stay will likely encourage similarly situated assessees to seek protective relief, and may persuade lower fora to adopt a cautious approach pending final resolution by the Apex Court.

      Key Holdings and Reasoning

      1. Operative holdings (ratio)

      The Delhi High Court's ratio decidendi can be distilled as follows:

      1. Concurrent jurisdiction remains the law in Delhi: Until set aside by the Supreme Court or a larger bench, the decision in T.K.S. Builders (P.) Ltd. v. ITO governs; both JAO and FAO have concurrent jurisdiction to issue notices u/s 148 within the territorial jurisdiction of the Delhi High Court (paras 9-11, 18).
      2. SLP dismissals do not, on these facts, displace that position: The Supreme Court's dismissals of SLPs against Bombay and Telangana decisions-whether non-speaking or in the form used in Prakash Pandurang Patil-do not amount to a declaration of law that invalidates the Delhi view or renders T.K.S. Builders per incuriam (paras 12-17).
      3. Per incuriam challenge fails: The petitioners' attempt to characterise T.K.S. Builders as per incuriam is rejected; the Court is bound by that coordinate bench decision, especially in the absence of any contrary binding Supreme Court ratio (paras 18-19).
      4. Petitions dismissed: On this basis, the writ petitions assailing JAO-initiated reassessment notices are dismissed (para 20).

      2. Obiter dicta and significant observations

      The judgment also contains important observations, which, though not strictly ratio, are influential:

      • The Court underscores the limited precedential effect of SLP dismissals and stresses that even a speaking order rejecting SLP does not necessarily affirm the High Court judgment (paras 13-17), reinforcing judicial discipline on the use of Article 141.
      • It reiterates that until the Supreme Court grants leave and decides the matter in appeal, the High Court's own precedents remain binding, notwithstanding conflicting decisions of other High Courts.

      The Supreme Court's interim order in Yukti Export does not yet contain a discernible ratio; it is a protective order pending fuller hearing.

      Conclusion

      The Delhi High Court's decision of 26 September 2025 consolidates, within its jurisdiction, a firm stance that both JAO and FAO possess concurrent authority to initiate reassessment u/s 148, notwithstanding a rising body of contrary High Court authority and SLP dismissals. Its careful reliance on Fuljit Kaur, Kunhayammed, Dhirendra Sundar Das and Khoday Distilleries fortifies the doctrinal clarity on the effect of SLP dismissals and resists the temptation to treat cryptic Supreme Court orders as implied overrulings.

      The Supreme Court's subsequent order in Yukti Export, however, indicates that the controversy has reached a critical juncture. By staying the assessment proceedings and tagging the matter with an earlier SLP, the Court has signalled its intention to examine-and possibly harmonise-competing interpretations of the faceless regime and Section 151A. Until a definitive pronouncement is rendered, the Delhi view technically remains operative within its jurisdiction, but is now under active reconsideration at the highest level.

      Practically, this unsettled state of the law implies:

      • Assessees facing JAO-initiated reassessment notices have a credible basis to seek interim protection, especially where the issue is already sub judice before the Supreme Court;
      • The Revenue must anticipate the possibility that reassessments founded solely on JAO action may be invalidated if the Supreme Court ultimately endorses the exclusive FAO jurisdiction line; and
      • Uniform national clarity on the allocation of reassessment powers under the faceless regime is urgently needed to avoid forum shopping, inconsistent outcomes, and administrative uncertainty.

      Future reforms-whether legislative or through detailed CBDT instructions-may also be warranted to explicitly delineate roles of JAO and FAO in reassessment, and to ensure that the statutory text, scheme notifications, and technological architecture are in full harmony with the constitutional demands of certainty, fairness, and non-arbitrariness in tax administration. The forthcoming Supreme Court judgment in the tagged SLPs will be pivotal in setting the interpretive baseline upon which such reforms, and future litigation strategy for both taxpayers and the Revenue, will rest.

       


      Full Text:

      2025 (10) TMI 435 - DELHI HIGH COURT

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