DCIT vs. Kohinoor Foods Ltd. (ITAT Delhi): Section 68, Bogus Purchases, and Accommodation Entries — A Critical Legal Analysis

The Expanding Contours of Section 68

The Delhi ITAT ruling in Deputy Commissioner of Income-tax vs. Kohinoor Foods Ltd. marks a pivotal moment in India’s anti-abuse tax jurisprudence.
The case explores a crucial intersection — how bogus purchase transactions and accommodation entries can be recharacterized as unexplained credits under Section 68 of the Income-tax Act, 1961, and how Suspicious Transaction Reports (STRs) and Investigation Wing findings can validly trigger reassessment proceedings.

In an era where digital trails increasingly reveal disguised money flows, this decision strengthens the revenue’s ability to act against layered accommodation arrangements — while still reinforcing the procedural discipline of natural justice.

Case Background — The Factual Matrix

Kohinoor Foods Ltd., a prominent player in the rice and processed food sector with global operations, filed its return for AY 2011–12. The case, initially assessed under scrutiny, later attracted the attention of the Investigation Wing.
The Wing unearthed that an entity “R” had issued bogus purchase bills to the assessee, and corresponding STRs and banking analysis showed an unmistakable pattern: amounts received in “R’s” bank account were withdrawn in cash almost immediately, leaving no trace of genuine trade activity.

The Assessing Officer (AO), relying on this tangible material, reopened the assessment under Section 147, and made additions under Section 68, treating the alleged purchases as accommodation entries designed to route unaccounted income.

Legal Framework and Statutory Architecture

Section 68 — Unexplained Cash Credits

Section 68 deems any unexplained sum credited in the assessee’s books as taxable income, unless the assessee satisfactorily proves:

1. Identity of the creditor,

2. Genuineness of the transaction, and

3. Creditworthiness of the creditor.

Failure on any of these three tests invites taxation of the amount as unexplained income. Courts have repeatedly held that this provision covers not only share capital or loans but also any credit entries that lack commercial substance.

Sections 147–148 — Reassessment Jurisdiction

Under these provisions, an AO can reopen an assessment when there exists reason to believe that income has escaped assessment. Such “reason” must arise from tangible, relevant material, though not conclusive proof (Raymond Woollen Mills Ltd. v. ITO [236 ITR 34, SC]).

In this case, STRs and bank data provided by the Investigation Wing constituted such tangible material.

Tribunal’s Analysis — The Heart of the Ruling

A. Validity of Reassessment

The Tribunal upheld the reassessment, noting that the Investigation Wing’s report was not mere borrowed satisfaction but independent, verifiable evidence demonstrating money circulation inconsistent with genuine trade.

It held that:

• STRs are credible financial intelligence inputs.

• Bank pattern showing immediate cash withdrawal supports accommodation entry inference.

• The AO’s “reason to believe” was based on cogent material, satisfying statutory conditions.

This aligns with NRA Iron & Steel Pvt. Ltd. v. PCIT (412 ITR 161, SC), where the Supreme Court confirmed that once the initial burden of the Revenue is discharged, the onus shifts to the assessee.

B. Application of Section 68 to Bogus Purchases

Traditionally, only the profit element embedded in bogus purchases was added back. However, the Tribunal observed that where such purchases are found to be mere instruments for routing unaccounted money, the entire amount becomes taxable under Section 68 as unexplained credit.

Principle affirmed:
“If the purchase transaction is a sham or merely an accommodation device, the entry represents unexplained credit and squarely falls within Section 68.”

This interpretation extends the anti-abuse reach of Section 68 to cover complex commercial disguises.

C. Evidentiary and Procedural Standards

The ITAT emphasized that once the Revenue establishes a prima facie nexus between suspicious funds and the assessee’s books:

• The burden shifts to the assessee to prove genuine trade intent.

• STRs and bank trails are admissible corroborative evidence.

• Absence of delivery, transport records, or stock linkage indicates absence of real trade.

V. Judicial and Doctrinal Alignment

Judgment	Key Ratio	Applied Principle
CIT v. P. Mohanakala (291 ITR 278, SC)	Unexplained credits taxable when explanation not satisfactory	Burden of proof under s.68
NRA Iron & Steel Pvt. Ltd. (SC)	Creditworthiness and genuineness must be proven	Credible Investigation Wing data valid
Raymond Woollen Mills Ltd. (SC)	“Reason to believe” ≠ conclusive proof	STRs sufficient to reopen
Andaman Timber Industries v. CCE (SC)	Cross-examination right forms part of natural justice	Procedural fairness requirement

Practical and Compliance Implications

For Taxpayers and Practitioners

• Enhanced Vendor Due Diligence: Verify supplier PAN, GST, and financial capability before booking purchases.

• Document Banking Trails: Maintain clear linkage between goods movement, invoices, and payments.

• Internal Audit Review: Identify repetitive cash-linked suppliers or non-traceable vendors.

• Defensive Documentation: If STR-triggered queries arise, document business rationale and correspondence trail.

For Tax Authorities

• STR Integration: Coordinated use of FIU inputs enhances evidence credibility.

• Reassessment Discipline: Ensure independent application of mind before reopening.

• Natural Justice Adherence: Provide all relied-upon material and cross-examination opportunity.

Analytical Evaluation — The Broader Legal Message

This judgment reflects a paradigm shift in judicial interpretation:

• From form to substance: Courts now evaluate the economic reality of a transaction.

• From profit estimation to full disallowance: When transactions are found to be paper-based, the entire inflow is treated as unexplained.

• From reactive to preventive enforcement: STR-based intelligence gives tax authorities preemptive visibility of evasion networks.

Yet, the ITAT’s insistence on natural justice safeguards ensures that enforcement does not become arbitrary — maintaining the delicate equilibrium between revenue protection and taxpayer rights.

Conclusion — Credibility, Corroboration, and Conscience

DCIT vs. Kohinoor Foods Ltd. is not just another addition case; it’s a judicial template for handling financial opacity with evidentiary precision.
By upholding reassessment founded on credible STR intelligence and recognizing the evidentiary worth of bank flow patterns, the ITAT reinforces that the integrity of the tax system depends on both substance and process.

Late Filing of Income Tax Return (ITR) – Penalty, Interest, and Consequences for FY 2024–25 (AY 2025–26)

Filing your Income Tax Return (ITR) within the prescribed due date is not merely a procedural requirement—it directly affects your ability to claim refunds, carry forward losses, and maintain compliance credibility. For Financial Year 2024–25 (Assessment Year 2025–26), the due date for non-audit individual taxpayers is 31 July 2025, with extended deadlines for entities subject to audit or transfer pricing provisions.

Failure to file the return within the due date triggers statutory consequences under the Income Tax Act, 1961, primarily governed by Sections 234A, 234F, and 139(4). The following guide explains, in full detail, the penalties, interest, and implications of late filing or non-filing of ITR.

Statutory Due Dates for FY 2024–25 (AY 2025–26)

Category of Taxpayer	Section	Due Date
Individual / HUF (non-audit)	139(1)	31 July 2025
Assessee subject to Tax Audit	139(1)	31 October 2025
Assessee subject to Transfer Pricing Audit (Form 3CEB)	139(1)	30 November 2025

Consequences of Filing ITR after the Due Date

(a) Late Filing Fee – Section 234F

Total Income	Date of Filing	Statutory Fee
Up to ₹5,00,000	After due date but before 31 December 2025	₹1,000
Above ₹5,00,000	After due date but before 31 December 2025	₹5,000
Not filed up to 31 December 2025	Return cannot be filed thereafter under Section 139(4)

Key Interpretation:

• The belated return under Section 139(4) must be furnished on or before 31 December 2025.

• Beyond this date, the right to file ITR lapses completely, unless the CBDT issues a specific condonation order under Section 119(2)(b) in exceptional circumstances (e.g., refund or loss cases with genuine hardship).

Interest under Section 234A – For Delay in Filing with Tax Payable

If any self-assessment tax remains unpaid as on the original due date, interest @ 1% per month or part thereof is levied from the due date till the actual date of filing/payment.

Example:
Tax payable after TDS and advance tax = ₹20,000
ITR filed on 30 September 2025 (2 months late)
→ Interest = ₹20,000 × 1% × 2 = ₹400

Note:
Interest is charged only on the unpaid portion of tax as on the due date. If all taxes are paid before 31 July 2025, 234A interest does not apply.

Other Legal Consequences of Late or Non-Filing

Particulars	Impact
Loss of Carry Forward Benefit	Business loss, capital loss, or depreciation loss cannot be carried forward unless ITR filed within due date u/s 139(1). Exception – House property loss can still be carried forward.
Refund Claim Denial / Delay	Refunds, if any, are delayed and may result in reduced interest under Section 244A. In some cases, refund claim may be time-barred if return not filed by 31 Dec 2025.
Ineligibility for Certain Deductions / Options	Certain regime switches (Form 10-IEA), deductions, or audit-linked claims may not be valid if return filed after the due date.
Reduced Credibility	Consistent late filing impacts loan processing, visa clearances, and compliance profiling.
Exposure to Penalty Proceedings	Non-filing can invite best judgment assessment u/s 144, and further penalty or prosecution under Sections 271F, 276CC, etc., for deliberate defaults.

Last Date for Filing and Revising Return

Return Type	Section	Last Date for AY 2025–26
Original Return	139(1)	31 July / 31 Oct / 30 Nov 2025
Belated Return	139(4)	31 December 2025
Revised Return	139(5)	31 December 2025

After 31 December 2025, the income tax portal will not accept any return for AY 2025–26 unless specifically condoned by the CBDT.

If ITR is Not Filed Till 31 December 2025

1. You lose the statutory right to file return for that assessment year.

2. Refunds and losses become permanently forfeited.

3. The Assessing Officer may issue notice under Section 142(1) or complete a best judgment assessment u/s 144 based on available data (TDS, AIS, bank transactions, etc.).

4. Additional interest u/s 234A, 234B, 234C and penalty u/s 271F (₹5,000–₹10,000) or even prosecution u/s 276CC may apply in extreme cases.

5. Condonation under Section 119(2)(b) can be sought only by application to the Jurisdictional Principal Commissioner of Income Tax (PCIT), with proof of genuine hardship (for refund or loss carry-forward cases).

Summary Snapshot

Category	Statutory Provision	Monetary Impact
Late filing (till 31 Dec 2025)	Section 234F	₹1,000 / ₹5,000
Interest for unpaid tax	Section 234A	1% per month or part
Loss carry forward restriction	Section 139(3)	Loss benefit denied
Filing beyond 31 Dec 2025	Section 139(4) + 119(2)(b)	Return invalid; only condonation possible
Non-filing consequences	Sections 144, 271F, 276CC	Assessment / penalty / prosecution

Compliance Tip

• File before 31 July 2025 even if documents are pending—revised return can be filed later till 31 Dec 2025.

• Pay self-assessment tax before filing to avoid ongoing interest.

• Avoid the final-day rush—the Income Tax portal often experiences peak load around deadlines.

• If you miss 31 Dec 2025, immediately consult your CA to apply for condonation under Section 119(2)(b) (refund/loss cases only).

Closing Insight

Filing your ITR on time is not only about avoiding a ₹5,000 fee—it preserves your right to claim legitimate benefits, ensures smooth refund processing, and builds long-term financial credibility.

A few days’ delay can cost you a year’s benefit. 

Preliminary vs Preoperative Expenses — Financial Statement & Income Tax Treatment for FY 2024–25 (AY 2025–26)

 The distinction between preliminary and preoperative expenses often determines not only where they appear in the financial statements but also how and when they are allowed for tax purposes.

With enhanced compliance requirements under Section 35D and mandatory Form 3AF e-filing from FY 2024–25, accurate classification of these expenses has become essential for audit integrity and tax efficiency.

Core Distinction at a Glance

Particulars	Preliminary Expenses	Preoperative Expenses
Stage of Incurrence	Before incorporation or before commencement of business	After incorporation but before commencement of commercial operations
Nature	Formation or feasibility costs	Setup or trial-run phase costs
Accounting Standard Reference	AS 26 / Ind AS 38 (Intangible Assets)	AS 10 / Ind AS 16 (Property, Plant & Equipment)
Tax Section	Section 35D	Section 32
Book Treatment	Expensed off or amortized	Capitalized as part of asset cost
Tax Treatment	Deduction in 5 equal installments (5% cap rule)	Depreciation on capitalized amount post-commissioning
Applicable Forms (FY 2024–25)	Form 3AF (mandatory), Form 3AE (for non-corporates)	No specific form—part of asset schedule

Classification Decision Framework

Step 1: Was the expense incurred before the business or entity came into existence?
→ Yes: Treat as Preliminary Expense (Sec. 35D)

Step 2: Was it incurred after incorporation but before commercial operations began?
→ Yes: Treat as Preoperative Expense to be capitalized with the related asset.

Step 3: Was it incurred after business commencement?
→ Yes: Treat as a Revenue Expense deductible under Section 37(1).

The timing of incurrence—not merely the type of expense—defines its classification.

Preliminary Expenses — Legal, Accounting, and Tax Perspective

Definition & Scope

Preliminary expenses are incurred before the commencement of business for purposes such as:

• Feasibility studies and project reports

• Market surveys and engineering evaluations

• Legal drafting and contract formation

• Company incorporation costs, MoA/AoA preparation

• Public issue or share listing expenses

Accounting Treatment (AS 26 / Ind AS 38)

• Preliminary expenses are not intangible assets.

• Ideally, written off in the year of incorporation.

• If amortized, the unamortized balance is shown under Other Non-Current Assets.

Income Tax Treatment — Section 35D

Under Section 35D, specified preliminary expenses are allowed as a deduction over 5 years, starting from the year of commencement of business or production.

(a) For Non-Corporate Assessees

• Deduction capped at 5% of the project cost.
  Example: Project cost ₹50 lakh → Max. eligible = ₹2.5 lakh.

(b) For Indian Companies

• Deduction capped at 5% of the higher of:

  • Project cost, or

  • Capital employed (paid-up share capital + reserves + long-term borrowings).
    Example: Project cost ₹50 lakh, capital employed ₹60 lakh → Max. eligible = ₹3 lakh.

Allowed Deduction:
→ Lower of actual expenses or statutory cap, amortized equally over 5 years (1/5th per year).

Compliance Framework for FY 2024–25

Particular	Requirement
Form 3AF	Mandatory e-filing (digitally signed or via EVC) one month before ITR due date
Authority	Principal Director General of Income Tax (Systems)
Details Required	Full expenditure breakup, vendor/TDS details, and project particulars
Form 3AE (CA Certificate)	Required for non-corporates to certify claim accuracy
Consultant Approval	Finance Act, 2023 removed the CBDT-approved consultant requirement—self or external professional permitted

Practical Note:
Omission or delayed filing of Form 3AF renders the claim invalid, even if expenses qualify substantively.

Preoperative Expenses — Financial and Tax Treatment

Definition & Nature

Preoperative expenses are incurred after incorporation but before the start of commercial operations. These relate to the setup or construction phase of a project.

Typical Examples:

• Trial run and testing costs

• Employee salaries during setup

• Interest during construction period

• Rent, utilities, and administrative costs prior to operations

• Equipment installation and training expenditure

Accounting Treatment (AS 10 / Ind AS 16)

• Directly attributable preoperative expenses are capitalized to the cost of the asset.

• Indirect expenses allocable to multiple assets should be apportioned on a rational basis.

• Capitalization ceases when the asset is ready for its intended use, even if not operational.

• Depreciation begins once the asset is put to use.

Income Tax Treatment

Aspect	Treatment
Eligibility u/s 35D	Not applicable
Capitalization	Mandatory addition to cost of the fixed asset
Deduction Mechanism	Depreciation u/s 32 from year of “put to use”
Cap or Ceiling	None — full capitalization permitted
Judicial Support	ACIT v. Food Specialties Ltd (ITAT) — Preoperative expenses of revenue nature are capitalized proportionately when not directly identifiable with specific assets.

Key Developments for FY 2024–25 (AY 2025–26)

Update	Impact
Mandatory Form 3AF e-filing	Now required for every Section 35D claim; non-filing invalidates deduction
Form 3AE (CA certification)	Still applicable for non-corporate entities
Consultant approval abolished	Self or any external professional may prepare the claim
Proposed Income Tax Bill, 2025	Section 35D to be renumbered as Section 44 — no change in substance

Documentation Blueprint

Category	Essential Records
Preliminary Expenses	- Original invoices & proof of payment - Vendor & TDS details - Form 3AF acknowledgment - CA Certificate (Form 3AE) - Proof of commencement date
Preoperative Expenses	- Asset-wise expense linkage - Commissioning/trial-run certificates - Capitalization schedule approved by auditors - Depreciation workings with date of “put to use”

Strategic Tax Planning for FY 2024–25

Timing Optimization: Expenses incurred after incorporation may yield better outcomes if capitalized (no 5% limit) rather than claimed as preliminary.
Entity Structuring: Companies often benefit from a higher cap owing to inclusion of “capital employed.”
Synchronize Compliance: Align Form 3AF preparation with the ITR filing calendar to avoid deadline breaches.
Cross-functional Coordination: Ensure the accounting team’s capitalization schedule matches the tax computation schedule.
Audit Preparedness: Maintain real-time documentation to withstand scrutiny under tax and statutory audit.

Common Pitfalls and Corrective Practices

Frequent Error	Correct Approach
Claiming depreciation on preliminary expenses	Not permissible — only 35D amortization allowed
Treating preoperative expenses under Section 35D	Must be capitalized under Section 32
Late or missing Form 3AF filing	Disqualifies deduction entirely
Using incorrect 5% base	Verify definition of “project cost” or “capital employed”
Not linking preoperative expenses to assets	Maintain allocation sheet with audit evidence

Key Takeaways for FY 2024–25

• Preliminary expenses: Governed by Section 35D, restricted by a 5% cap, amortized over 5 years, and require Form 3AF e-filing.

• Preoperative expenses: Treated as capital expenditure, added to the cost of assets, and eligible for depreciation u/s 32.

• Accurate classification ensures not only correct tax computation but also alignment between financial reporting and tax audit disclosures.

• Enhanced compliance from FY 2024–25 (AY 2025–26) demands robust documentation, precise timing, and inter-departmental coordination.

Conclusion

The distinction between preliminary and preoperative expenses goes far beyond terminology — it determines when deductions are allowed, how assets are valued, and whether compliance withstands audit scrutiny.

For FY 2024–25, with the mandatory e-filing of Form 3AF, strengthened documentation norms, and the proposed renumbering of Section 35D, businesses must combine accounting rigor with procedural discipline.

A correctly classified expense today safeguards both financial transparency and tax efficiency tomorrow — ensuring smooth transition from project stage to profitable operations in AY 2025–26.

Guide to Post-Sale Discount ITC Compliance: Law, Impact, and Best Practices After CBIC’s Withdrawal Circular

Effective 1 October 2025, the CBIC, through Circular No. 253/10/2025-GST, has withdrawn Circular No. 212/6/2024-GST. This removes the earlier mandatory evidence submission procedure for suppliers under Section 15(3)(b)(ii) of the CGST Act, 2017.

• Suppliers: Relief from procedural compliance.

• Recipients: Statutory duty to proportionately reverse ITC on post-sale discounts continues.

• Industry: Streamlined compliance, reduced documentation burden, lower risk of procedural defaults.

Statutory Framework – Section 15(3)(b)(ii) and Legal Interpretation

Section 15(3)(b)(ii), CGST Act:
Where post-invoice discounts are granted, taxable value is reduced only if such discount is established in terms of agreement and linked to relevant invoices, and recipient proportionately reverses ITC.

Interpretation:

• “Price actually paid or payable” = Net consideration after adjusting post-sale discounts.

• “Any discount” includes rebates, volume-linked incentives, promotional rebates, etc.

• ITC reversal is recipient’s statutory duty — automatic, proportionate, and independent of supplier’s evidence.

Withdrawal of Circular 212/6/2024-GST

• Circular 212/6/2024-GST (26 June 2024): Mandated suppliers to furnish compliance evidence for ITC reversals.

• Circular 253/10/2025-GST (1 Oct 2025): Withdrawn under Section 168(1) → uniformity across field formations.

Impact:

• No evidence/proof procedure required from suppliers.

• Recipients retain ITC reversal duty when discounts reduce taxable value.

• Transition: Businesses must retrospectively align credit notes & reversals for June 2024 – Sept 2025.

ITC Reversal – When Required vs Not Required

ITC Reversal Required

✔ Supplier issues tax credit note under Section 34 reducing GST liability.
✔ Discounts linked to specific invoices, agreed pre-supply.
✔ Expired/damaged/destroyed goods where ITC is not eligible (general rule).

ITC Reversal Not Required

✘ Financial / commercial credit notes (payment concessions, no GST reduction).
✘ Discounts already shown in original invoice.
✘ Secondary discounts (manufacturer → dealer, not invoice-linked).

Distinction: Only tax credit notes reduce GST liability → trigger ITC reversal. Purely financial/commercial notes do not.

Supplier Best Practices

• Credit Note Management

  • Issue with clear invoice reference & rationale.

  • Report in GSTR-1 (Credit Notes) promptly.

• Internal Controls

  • Maintain Discount Master Register (invoice, type, approval, communication).

  • Segregate discount approval & credit note issuance functions.

• Trade Communication

  • Notify dealers/distributors: “ITC reversal obligation lies with recipient where GST liability is reduced.”

Recipient Best Practices

• ITC Reversal Calculation

  $$\text{Reversible ITC} = \text{ITC Claimed} \times \frac{\text{Discount Amount}}{\text{Original Invoice Value}}$$

  • Report in GSTR-3B, Table 4B.

• Audit-Readiness

  • Maintain ITC Reversal Register linked to credit notes.

  • Preserve vendor communications, workpapers, reconciliations.

• Retroactive Corrections

  • Identify missed reversals (June 2024–Sept 2025).

  • Correct in earliest permissible GSTR-3B or annual return (GSTR-9C).

Special Case: Expired or Damaged Goods

• Maintain expiry/damage reports, disposal certificates, board resolutions.

• Record write-off with ITC reversal in books.

• Reverse ITC in month of write-off.

Risk Mitigation and Penalty Prevention

• Delayed Credit Notes → Interest under Sec. 50 → Issue promptly.

• Incomplete Documentation → Sec. 73 Notices → Archive digitally.

• Under / Over-reversal → Use ERP-driven workflows.

• Past non-compliance → Forensic audit + consider voluntary disclosure under Sec. 74.

Who Benefits Most

• Suppliers: Freed from compliance-heavy proof requirement.

• Recipients: Clear distinction on reversal vs retention of ITC, preventing unnecessary reversals.

• Industry: Simplified law → lower compliance costs, reduced disputes, ease of doing business.

The withdrawal of Circular 212/6/2024 marks a pro-business move by CBIC — reducing procedural friction while preserving the core principle that ITC must always mirror the actual taxable value.

By aligning internal controls, credit note workflows, and audit documentation, businesses can not only ensure compliance but also reduce exposure to GST litigation.

Reference: Circular No. 253/10/2025–GST, F. No. CBIC-20001/3/2025-GST, dated 1st October 2025.

Electric Vehicles Depreciation under the Income Tax Act, 1961 — The Ultimate Analytical Guide

The classification of electric vehicles (EVs) for depreciation under Section 32 of the Income Tax Act, 1961, is a critical consideration for businesses and tax practitioners. While conventional motor vehicles attract 15% depreciation, pure EVs enjoy an enhanced 40% rate, reflecting India’s clean energy policy. Correct classification, documentation, and compliance are essential to optimize tax benefits and avoid disputes.

Legal Framework and Depreciation Rates

Section 32: Depreciation is computed on the Written Down Value (WDV) basis.

Appendix I, Income Tax Rules: Specifies depreciation rates:

Asset Category	Depreciation Rate	Applicability Notes
Conventional Motor Cars (IC Engine)	15%	Business use; post 01.04.1990; excludes hire vehicles
Electric Vehicles (EVs)	40%	Classified as renewable energy devices (Entry 8(xiii))
Renewable Energy Devices	40%	Includes solar systems, wind energy devices, other clean technologies

Key Insight: EVs fall under “renewable energy devices” due to policy, environmental benefits, and technological characteristics.

CBDT Circular Clarifications

CBDT Circular No. 04/2022 (15th March 2022)

• Defines EV as:

“A vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by a traction battery installed in the vehicle.”

• Confirms 40% depreciation for EVs used for business purposes.

CBDT Circular No. 10/2022 (07th December 2022)

• Reinforces Circular 04/2022, ensuring consistent classification for depreciation, business-use determination, and compliance.

Implication: Only pure EVs meet the criteria for enhanced depreciation; hybrids or mixed-fuel vehicles are excluded unless clarified.

Vehicle Classification & Depreciation Logic

Vehicle Type	Depreciation Rate	Classification Criteria
Pure Electric Vehicles	40%	Exclusively electric motor; battery traction only
Conventional Hybrids	15%	Combines IC engine + electric motor; fails “exclusively electric” test
Plug-in Hybrid EVs (PHEVs)	15% (conservative)	Partial fossil fuel usage; not fully electric
IC Engine Vehicles	15%	Standard business motor cars

Analytical Insight: Classification hinges on energy source exclusivity and intended business use, aligning with CBDT circulars.

Mixed-Use Vehicles: Apportionment Principles

Depreciation & running expenses apply only to the business-use proportion:

Parameter	Guidance
Business vs Personal Use	Maintain logbooks or electronic mileage records
Running Expenses	Electricity, maintenance, insurance claimable in proportion to business use (Sec. 37(1))
Documentation	Purchase invoices, battery specifications, registration, and business justification must be preserved
Thresholds	No monetary threshold, but records must substantiate exact percentage of business use

Example: If an EV is used 70% business / 30% personal:

• Depreciation = 40% × 70% WDV

• Electricity/maintenance = total × 70%

Additional Depreciation for Manufacturing Units (Section 32(1)(iia))

• Manufacturing businesses can claim additional 20% depreciation on plant/machinery including EVs used exclusively for business.

• Timing: Vehicle must be put to use within 180 days of acquisition.

• Impact: First-year effective depreciation for pure EVs = 40% + 20% = 60%.

Analytical Insight: Strategic deployment can maximize tax benefit in the acquisition year.

Compliance & Documentation Requirements

Requirement	Detail
Exclusive Electric Nature	Must meet CBDT Circular 04/2022 definition
Business Use	Only vehicles used exclusively for business qualify for 40% rate
Mixed Use	Apportion depreciation & expenses proportionally; maintain logs
Documentation	Keep invoices, registration, battery specs, loan papers, usage justification
Audit & Tax Filing	Depreciation must align with books of accounts; verify for tax audit (Sec. 44AB) compliance
180-Day Rule	Vehicle must be put to use within 180 days to claim first-year depreciation

Caution Points to Avoid Defaults

1. Misclassification: Avoid claiming 40% for hybrids or partial-fuel vehicles.

2. Insufficient Documentation: Ensure logbooks, invoices, battery specs, and trip records are maintained.

3. Improper Apportionment: Mixed-use vehicles without documented business use may be disallowed.

4. Non-compliance with 180-Day Rule: Accelerated depreciation requires vehicle deployment within the first 180 days of purchase.

5. Overclaiming Running Expenses: Electricity, maintenance, insurance should reflect only business-use proportion.

6. Ignoring CBDT Circulars: Follow 04/2022 and 10/2022 for authoritative guidance.

7. Loan Interest Deduction: For personal/business EV loans, Section 80EEB allows ₹1.5 lakh deduction, but only if conditions are satisfied.

Decision-Making Flow: Analytical Logic for Depreciation

Step 1: Is the vehicle exclusively electric?

• ✅ Yes → 40% depreciation

• ❌ No → 15% (standard motor car rate)

Step 2: Is the vehicle used for business purposes?

• ✅ Yes → Claim proportion of depreciation & expenses

• ❌ No → No depreciation; personal use only

Step 3: Is the vehicle used in manufacturing business?

• ✅ Yes → Additional 20% under Section 32(1)(iia)

• ❌ No → Only 40% applicable

Step 4: Is it mixed-use?

• ✅ Yes → Apportion depreciation/expenses according to logs

• ❌ No → Full depreciation for business use

Step 5: Compliance Check

• CBDT Circulars 04/2022 & 10/2022

• 180-day deployment rule

• Logbooks, invoices, battery specs

• Section 37 running expenses documentation

Practical Recommendations

Businesses:

• Deploy pure EVs exclusively for business → claim 40% depreciation

• Maintain detailed logbooks for mixed-use EVs

• Plan first-year deployment to leverage 180-day rule

• Manufacturing units → leverage additional 20% depreciation

Individual Taxpayers:

• Business-use EVs → depreciation applies

• Personal-use EVs → Section 80EEB interest deduction (max ₹1.5 lakh)

• Mixed-use → maintain apportionment logs

Key Takeaways

• 40% depreciation is available only for pure EVs.

• Hybrids or PHEVs → 15% (conservative treatment)

• Mixed-use vehicles require meticulous apportionment and documentation.

• CBDT Circulars 04/2022 and 10/2022 provide legal clarity.

• Section 32(1)(iia) + Section 37 compliance allows optimization of depreciation and running expenses.

Conclusion:
The Income Tax framework, reinforced by CBDT Circulars, incentivizes electric mobility through accelerated depreciation, aligning taxation with India’s environmental and energy objectives. Businesses and taxpayers must adopt a strategic, well-documented approach to maximize benefits and remain fully compliant. Pure EVs used for business are clearly eligible for 40% depreciation, with additional allowances for manufacturing units, while hybrids and mixed-use vehicles must be treated conservatively to avoid defaults.

RBI Directions on Settlement of Claims of Deceased Bank Customers (2025)

 The loss of a family member is already a heavy emotional burden. What often adds to the distress is the long, uncertain process of accessing the deceased’s bank deposits, locker contents, or safe-kept articles.

Recognising this, the Reserve Bank of India (RBI) issued comprehensive Directions on September 26, 2025, applicable to all commercial and co-operative banks, effective March 31, 2026. These Directions standardise and simplify procedures, fix clear timelines, and ensure fair compensation for delay.

This post is a practical yet analytical guide to help families, nominees, and legal heirs understand and claim what is rightfully theirs.

Why These Directions Matter

• Earlier issues: Every bank had its own claim process. Some insisted on succession certificates even when a nominee existed. Claims dragged on for months.

• Now: RBI has made the system uniform, time-bound, and transparent, with a 15-day deadline and penalties on banks for non-compliance.

Applicability

Covered: All banks regulated by RBI, including scheduled commercial banks, RRBs, and co-operative banks.
Assets covered:

• Deposit accounts (savings, current, fixed deposits, etc.)

• Lockers

• Safe custody articles

Core Principles of the RBI Directions

1. Nominee first: If a valid nominee exists, settlement must be simple and quick.

2. Small claims simplified: For claims up to ₹15 lakh (commercial banks) and ₹5 lakh (co-operative banks) without nomination, banks must settle on the basis of simplified documents—no need for court orders.

3. Strict timeline: Settlement within 15 calendar days of receipt of complete documents.

4. Compensation for delay:

   • Deposits: Bank Rate + 4% p.a. interest

   • Lockers/articles: ₹5,000 per day

5. Transparency: Banks must publish claim forms, checklists, and procedures on their website and in branches.

Procedure for Deposit Accounts

A. If Nominee Exists (or Joint Holder with Survivorship Clause)

• Submit:  Claim form, Death certificate,  ID proof of claimant

• Bank must release funds within 15 days.

B. If No Nominee, Claim ≤ Threshold (₹15 lakh / ₹5 lakh)

• Submit: Claim form + Death certificate + ID proof,  Indemnity bond, Legal heir certificate or declaration by an independent person

• Bank cannot insist on surety.

C. If Claim Above Threshold / Multiple Heirs / Dispute

• Legal representation required: Succession Certificate, Probate, or Letter of Administration.

• In case of disputes among heirs, the bank must wait for a court order.

Settlement of Locker / Safe Custody Contents

• Nominee present: Nominee gets access after due verification.

• Joint hirers: Surviving hirer + nominee together.

• Minor nominee: Guardian mentioned in nomination form receives contents.

Inventory requirement: Bank must prepare an inventory within 15 days in the presence of nominee/legal heir and two independent witnesses.

Special Cases

• Death abroad: Foreign death certificate valid if authenticated by: Indian bank overseas branch, or Correspondent bank, or Judge/Notary abroad, or Indian Embassy/Consulate, or Apostilled as per Hague Convention.

• Missing person cases:

  • Normally require court order declaring civil death.

  • Exception: For small claims (≤ ₹1 lakh, or higher if bank policy permits) → FIR + police “non-traceable” report accepted.

Bank’s Obligations

• Provide claim forms online and in branches free of cost.

• Accept and acknowledge claim applications with date-stamp.

• If documents are incomplete, issue a written list of pending documents.

• Ensure settlement within 15 days, or else pay compensation.

• Maintain internal monitoring and reporting to ensure compliance.

Compensation for Delay

• Deposits: Bank Rate + 4% p.a. interest for the delay period.

• Lockers/Articles: ₹5,000 per day of delay.

• Responsibility: Payment is mandatory; claimant need not prove loss.

Family Checklist

✔ Death certificate
✔ Claim form (downloadable from bank’s site)
✔ ID proof of nominee/heir
✔ Nomination details (if applicable)
✔ Indemnity bond (where required)
✔ Legal heir certificate or declaration (if no nominee, ≤ threshold)
✔ Succession certificate/probate (if above threshold or in dispute)
✔ FIR + police report (if missing person case)

Escalation Route

If bank delays or refuses without valid reasons:

1. Write to the Branch Manager quoting RBI Directions.

2. Escalate to the Bank’s Grievance Redressal Officer.

3. If unresolved within 30 days → File a complaint with the Banking Ombudsman under RBI’s Integrated Ombudsman Scheme.

Key Takeaways

• Simple for nominees: Minimal documents, 15-day deadline.

• Simplified for small claims without nomination.

• Strict compensation for delays.

• Clear procedures for lockers, safe custody, foreign deaths, and missing persons.

 Families now have a clear, uniform, and enforceable path to claim deposits and locker contents without unnecessary hardship.