LKS Direct Tax Amicus, July 2025

Modern agriculture rooted in traditional Income-tax law

While agricultural operations have been modernised, the law for claiming income-tax exemption for agricultural operations has remained constant. The key question which arises in such a situation is how the age-old income-tax exemption apply to modern agriculture. The article in this issue of the newsletter focuses on various aspects of the textbook provisions, their implications on the modern agriculture and the take of Indian judiciary on the same. The authors, for this purpose, delve deeply on questions like what constitutes ‘land’ for agriculture, while also pondering over the question of exemption to income from sale of agricultural produce in cases involving contract farming. According to the authors (Harshit Khurana, Sonali Bansal and Rishabh Bhatia), all agricultural activities as understood in normal parlance may not be eligible for the benefit of the exemption and thus navigating agricultural tax exemptions requires a deep understanding of various discussed nuances.

Read the full article here.

Notifications & Circulars

• Time limit for processing returns of income filed electronically u/s 119(2)(b) of the Income Tax Act, 1961 extended

• Interest waiver when TDS/TCS payment initiated but tax not credited to Government before the due date – CBDT Circular dated 28 March 2025 clarified

• No tax deduction at source on certain payments made to an IFSC Unit

• Effect given to protocol amending India-Oman DTAA

• Cost Inflation Index for AY 2026-27 notified

Ratio decidendi

• One-time voluntary compensation given for loss of ESOPs qualifies as a capital receipt and is not taxable as a perquisite or a capital gain – Karnataka High Court

• Deduction for bad debt shall be allowed on invocation of corporate guarantee given for sister concern as long as the test of commercial expediency is satisfied – Madras High Court

• Proportionate deduction to be allowed to company while paying DDT under Section 115-O, if shareholder receiving dividend is exempt under a law that overrides Income Tax Act – ITAT Mumbai

• Set-off of business loss of PE allowed against interest income of foreign entity under India-UAE DTAA – ITAT Mumbai

• India-UAE DTAA – ‘Gross’ in Article 11(2) – Loss cannot be equated with expenses – ITAT Mumbai

• Loan advanced by one entity to another shall be deemed dividend u/s 2(22)(e) if the assessee is a substantial shareholder in both the entities – ITAT Mumbai

Read the full newsletter LKS Direct Tax Amicus, July 2025 (Complete)...........................................

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