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A Tale of Two Secondments: Search for the Real Employer

Summary: Two recent rulings, by the Delhi ITAT and the Delhi High Court, reached opposite conclusions on the same question: Who is the real employer of seconded personnel? Although arising in different contexts, both referred to factors established in the OECD Commentary on Article 15 for determining the true employer but differed in their emphasis on those factors. While the Tribunal focused more on local control and secondees’ integration into the Indian entity, the High Court prioritised the secondees’ continuing relationship with the foreign employer. These contradictory outcomes highlight that the taxability of secondments hinges on case-specific facts, making the alignment of contractual arrangements, operational reality, and documentation extremely critical.

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Summary: The Income-tax Appellate Tribunal has clarified that consideration received on the buy-back of vested but unexercised stock options is taxable as long-term capital gains, and not as a salary perquisite, providing significant relief to employees participating in the ESOP liquidity programme.

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Reassessing the sanctity of CA certificates: Evidentiary standards in quasi-judicial proceedings

Summary: CA certificates are governed by the relevant statutory provisions. CAs must issue them in accordance with the professionalism outlined in the ICAI’s code of conduct. Across tax frameworks, such certificates substantiate positions and claims. However, a certificate cannot, on its own, discharge the burden of proof, where the underlying records are not produced. Strict evidentiary rules do not govern tax proceedings, foundational principles do. In this environment, a certificate that is adequately documented, and issued in strict conformity with ICAI standards shall withstand scrutiny from the revenue and will be preferred compared to one that is devoid of such safeguards.

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Mumbai ITAT holds that commercial and charitable activities can co-exist

Summary: Mumbai ITAT in Reliance Foundation Hospital Trust has held that a charitable organisation’s registration cannot be denied merely because of the scale of its operations, sophisticated infrastructure, or substantial receipts. The ITAT examined the scope of enquiry and emphasised that renewal of charitable registration should be decided as per the law and evidence available on record.

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Buy-Back within Group is not a Taxable Exit: The Huntsman Verdict

Summary: The Delhi ITAT in the Huntsman Investment case ruled that intra-group share buy-backs can qualify as “corporate reorganisation” under Article 13(5) of the India-Netherlands DTAA, shielding capital gains from Indian taxation. The Tribunal emphasized substance over technicality, noting that Huntsman BV’s ownership percentage in its Indian subsidiary remained unchanged despite the buy-back. It relied on professional guidance and comparable treaty protocols to interpret “reorganisation.”

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Same Roar, Different Den: The Shadow of Tiger Global on Hareon Solar

Summary: India’s tax landscape has dramatically shifted after the Supreme Court’s Tiger Global ruling, and the ITAT’s decision in Hareon Solar Singapore shows just how far the ripple travels. As a result, only structures with genuine substance, clear commercial purpose, and documented on‑ground activity will withstand India’s evolving anti‑avoidance scrutiny.

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Tax implications of the new labour codes

Summary: The implementation of the labour codes necessitates a comprehensive review of compensation paid to employees. The compensation structure of employees will also see an impact from an income tax perspective, which cannot be ignored easily. Through this blog, we have analysed some of the positive as well as negative consequences that would need to be understood and analysed by employers as well as employees at the earliest.

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As you sow, so you reap: ITAT holds MLI provisions adopted in DTAAs inapplicable without specific notification

Summary: The Multilateral Instrument (MLI), which had originated from the OECD’s BEPS project, was meant to fast-track adoption of anti-avoidance measures without lengthy bilateral negotiations between multiple countries. India ratified the MLI in 2019 and the Revenue argued vociferously before the Supreme Court in the case of Nestle that every change to the DTAA shall have to be notified separately to give effect to such change and succeeded. Following the aforesaid SC decision, a few recent ITAT judgments have thrown a curveball by holding that MLI provisions cannot apply automatically to the DTAAs unless a specific notification is issued. Through this blog, we analyse the impact of these ITAT decisions, which may reshape ongoing tax litigation strategies.

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Telangana High Court clarifies GAAR in relation to market-based transactions

Summary: In a recent case, the Telangana High Court has frowned upon the Revenue’s attempt to invoke GAAR in respect of a transaction that was carried out by the taxpayer through the stock exchange. By rejecting the stance adopted by the Revenue, the High Court categorically held that not every tax planning is bad, and it cannot be brought within the purview of GAAR. Only if a taxpayer colludes or connives to bypass statutory provisions, by entering into transactions that defy commercial logic, can it be examined.

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A subsequent SC decision is not ground for rectification u/s 254(2)

Summary: Section 254(2) of the Income Tax Act, 1961, provides power to the Income Tax Appellate Tribunal to amend its order to rectify any mistake apparent on record to ensure fairness without re-visiting the entire case and prolonging litigation. This blog analyses a recent decision of the Hon’ble Bombay High Court where the extent of exercise of rectification powers was discussed. It held that a subsequent Supreme Court decision on the issue cannot be grounds for rectification of orders.

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