The ITAT has deleted a ₹75.93 crore addition under the Export Promotion Capital Goods (EPCG) scheme, finding that Ind-AS accounting entries cannot create tax liability.
Case Summary
The Income Tax Appellate Tribunal (ITAT) has granted significant relief by deleting an addition of ₹75.93 crore made under the Export Promotion Capital Goods (EPCG) scheme. The tribunal also extended relief on a related claim regarding ₹40 crore from royalty income based on its finding that Ind-AS accounting entries should not result in taxable income.
Tribunal's Rationale
The ITAT articulated that the principles of Ind-AS do not supersede the statutory requirements outlined in the Income Tax Act. As such, accounting entries alone cannot be a basis for imposing tax liabilities. This decision reinforces the position that there must be a substantive, legal basis for tax assessments that is clearly in accordance with the provisions of law.
Consequences for Tax Practitioners
This ruling is instructive for practitioners dealing with clients who apply Ind-AS standards for their accounting practices. Assesses need to be aware that simply following accounting standards does not equate to tax obligations, and advice should be tailored accordingly to prevent potential liabilities stemming from misunderstandings of accounting versus tax law.
Citations
- ITAT Order (2026) 123 ITR 460
