As you say James died 26th March 1926, the following is unlikely to be him, given it was reported about a month later, but adding here anyhow, just in case, as you mentioned Downshire Court was on Water Street, and given my previous post re a Maggie/Margaret.
In the Frontier Sentinel 24 April 1926, there is mention that the remains of a James Magee of Lower Water Street, Newry, were removed for internment in the Old Chapel cemetery. Chief mourners being a Margt Magee (widow) and an Elizabeth C Magee (daughter). No dates given for death or removal.
The Sentinel was published weekly, on a Saturday.
Might be worth a quick check for other records of Magee on Lower Water Street, to see if this can definitely be ruled out.
Would have a look, but need to be somewhere shortly. I have sent a PM re the reports in Sentinel.