RNM Direct Tax Alert December 2025

Important Judicial Precedents

• Non-compete fee paid to restrict competition held allowable as revenue expenditure under sec. 37(1): SC

[2025] 181 taxmann.com 657 (SC) Sharp Business System vs. Commissioner of Income-tax

Where assessee paid a non-compete fee to restrain another party from operating in same business segment, such payment merely protected or enhanced assessee’s business profitability and facilitated more efficient conduct of business, and though it could confer an enduring advantage, same was not in capital field and did not result in creation of any new asset or accretion to profit-earning apparatus; therefore, non-compete fee was allowable as revenue expenditure under section 37(1).

• Revenue cannot detain assessee’s jewellery after dispute is settled under Vivad se Vishwas Act: HC

[2025] 181 taxmann.com 684 (Gujarat-HC) Jigishaben Minesh Patel vs. Assistant Commissioner of Income, Central

Where assessee had discharged entire tax liability relating to unexplained jewellery and declaration under Vivad Se Vishwas Scheme was accepted by issuance of Form-5, continued detention of seized jewellery on ground of tax demand of joint locker holder was illegal and perverse and jewellery was liable to be released.

• No disallowance of sec. 10B deduction in sec. 143(1) intimation if same was upheld in regular assessment: HC

[2025] 181 taxmann.com 685 (Bombay-HC) Halliburton Technology India (P.) Ltd. vs. Assistant Commissioner of Income-tax

Where, due to a technical glitch in the e-filing process, deduction claimed by assessee under section 10B was not allowed in intimation issued under section 143(1), since allowability and correctness of such deduction were examined and accepted by Assessing Officer in regular assessment proceedings, disallowance made in the intimation could not survive.

• 120 days time limit for release of seized assets u/s 132B is directory, not mandatory: HC

[2025] 181 taxmann.com 866 (Delhi-HC) Rajesh Gupta vs. ACIT

Period of 120 days in second proviso to section 132B(1)(i) is not mandatory in nature; and no direction could be given for release of gold/jewellery by High Court in proceedings under article 226 of Constitution particularly, when Assessing Officer was seized of matter.

• JAO can issue sec.148 notice post-1-4-2022; faceless scheme applies only to assessment: HC

[2025] 181 taxmann.com 98 (Gujarat-HC) Snehdham Trust vs. ACIT

Procedure prescribed under section 144B only refers to faceless assessment and it nowhere provides for notice to be issued under section 148 in a faceless manner and, thus, notices issued by Jurisdictional Assessing Officer under section 148 after 01-04-2022 are valid and legal.

• No concealment penalty where section 54F deduction was partly disallowed only for lack of supporting bills: ITAT

[2025] 180 taxmann.com 672 (Chennai – Trib.) Abdul Jabbar Jaheer Husain vs. Income-tax Officer

Where assessee’s claim for deduction under section 54F was partly disallowed due to lack of supporting documents for some expenditure and penalty for concealment was levied solely on basis of such disallowance, making a claim not fully substantiated by bills does not amount to furnishing inaccurate particulars of income, and penalty under section 271(1)(c) was not justified and was to be deleted.

• No sec. 68 addition on loan where assessee proved lender’s identity, creditworthiness & genuineness; ‘source of source’ inapplicable: HC

[2025] 180 taxmann.com 502 (Delhi-HC) PCIT vs. KRBL Infrastructure Ltd

Where assessee received unsecured loan from corporate lender through banking channels, with lender’s director confirming advance and bank records showing availability of funds, assessee established identity, creditworthiness and genuineness of transaction; therefore, addition under section 68 treating loan as bogus was unjustified, particularly as obligation to prove ‘source of source’ did not apply for relevant year.

• Limitation for rectification under section 254 starts from date of receipt of ITAT order by assessee, not date of order: HC

[2025] 181 taxmann.com 298 (Bombay-HC) Accost Media LLP vs. Deputy Commissioner of Income-tax

Where assessee received ITAT’s order on 24-3-2025 and filed rectification application on 16-7-2025, limitation of six months for filing such application commenced from date of communication of order and not date of order itself; accordingly, application was within time and order treating it as time-barred was liable to be quashed.

• Reopening notice quashed as it was sent to assessee’s old email ID instead of registered email ID: HC

[2025] 180 taxmann.com 497 (Jharkhand-HC) General Traders vs. Principal Chief Commissioner of Income-tax

Where Assessing Officer issued reopening notice to assessee on ground that no response was received from assessee in respect of certain notices sent to it, since notice under section 148 was not served upon assessee at its registered e-mail address as mandated under section 282, however, notice was sent on an e-mail address that was no longer operative, impugned reopening notice was to be quashed.