Bright Line Test (BLT) could not be applied for determining the Arms Length Price (ALP) of Advertisement, Marketing, and Promotion (AMP) expenditure under the transfer pricing provisions.
The issue involved arbitrary estimation of income at 20% and 5% of turnover. The Tribunal reduced it to 4% due to lack of supporting comparables and considering business realities. The key takeaway is that estimation must be reasonable and justified.
Retrospective cancellation of registration was held to be invalid as the scheme of Act did not permit cancellation of registration under Section 12AA(3) with retrospective effect in absence of explicit statutory authority.
ITAT Delhi held that approval from the PCCIT or PDGIT is mandatory, as provided u/s 35(2AB)(iv) of the Act. Since such mandatory approval of R&D facility from the PCCIT or PDGIT was not obtained by the assessee therefore, weighted deduction u/s 35(2AB) of the Act cannot be allowed.
The Tribunal held that unexplained cash credits must be taxed in the year they are recorded in the books, not when allegedly received. Since the ₹80 lakh was credited in AY 1997–98, the addition under Section 68 was upheld despite claims of earlier receipt.
ITAT held that where interest-free funds exceed advances, a presumption arises that such advances are made from own funds. Disallowance under section 36(1)(iii) was deleted as no nexus with borrowed funds was proven.
The Tribunal ruled that section 44ADA applies only to specified professions and cannot be invoked for business income covered under section 44AD. Arbitrary substitution of a higher rate by the AO was held unsustainable.
ITAT held that entire receipts cannot be treated as unexplained when income is already offered to tax. Only unverifiable expenses can be disallowed.
The Tribunal held that the appellate authority cannot go beyond the issue of TDS credit in a section 143(1) appeal. By directing taxation of entire salary, it effectively enhanced income without proper jurisdiction. The matter was remanded for fresh examination.
The tribunal held that Renewable Energy Certificates are distinct from carbon credits under Section 115BBG and must be taxed at normal rates. The ruling emphasizes strict interpretation of concessional tax provisions.
