Income Tax Act

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

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

AMT: Does It Impose Additional Taxes Under Income Tax Bill, 2025?

Background

The Alternate Minimum Tax (“AMT”) has its genesis in the Minimum Alternate Tax (“MAT”), which was introduced to ensure that taxes were paid by even those companies that intended to avoid payment of taxes by engaging in ingenuous tax planning methods despite having earned significant amount of book profits. These companies, called “zero-tax companies”, while reporting significant book profits, paid minimal or no income tax by leveraging various exemptions and deductions available under the Income Tax Act, 1961 (“IT Act”). Continue Reading AMT: Does It Impose Additional Taxes Under Income Tax Bill, 2025?

Crypto Sales Prior to AY 2022–23: Taxable as Capital Gains?

The Raunaq Prakash Jain v. Income Tax Officer case addresses a significant cryptocurrency transaction-related taxation issue in India, i.e., whether gains arising from cryptocurrency sales should be taxed as “capital gains” or “income from other sources”. This decision is particularly important because it clarifies the tax treatment of cryptocurrency gains before the introduction of the specific tax regime for virtual digital assets (“VDA”) with effect from April 1, 2022.Continue Reading Crypto Sales Prior to AY 2022–23: Taxable as Capital Gains?

Tax reassessment proceedings: Supreme Court puts TOLA controversy to rest

The Supreme Court (“SC”) recently addressed the validity of reassessment notices in Rajeev Bansal[1], issued under Section 148 of the Income Tax Act, 1961 (“IT Act”), from April 1, 2021, to June 30, 2021, even though the reassessment regime had been overhauled with effect from April 1, 2021. The Revenue argued that these notices fell under the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (“TOLA”), which relaxed the time limits for reassessment due to the COVID-19 pandemic (“Pandemic”). However, several High Courts, including the Allahabad and Gujarat High Courts,[2] had ruled that such notices were subject to the new reassessment provisions introduced by the Finance Act, 2021, and hence, without the applicability of TOLA, were time-barred. The SC, in this landmark decision, ruled in favour of the Revenue, by upholding the validity of TOLA and laid down several jurisprudential observations in its judgement.Continue Reading Tax reassessment proceedings: Supreme Court puts TOLA controversy to rest

Union Budget boost to GIFT IFSC: Looking at a golden future

With numerous legislative reforms, the government has demonstrated a sincere commitment towards achieving Viksit Bharat, or ‘Developed India’ by 2047. While presenting the Union Budget for financial year 2024-25, on July 23, 2024, Finance Minister Nirmala Sitharaman introduced significant changes to enhance ease of doing business in the International Financial Services Centre (“IFSC”), Gujarat International Finance Tec-City (“GIFT City”). This Budget promises a supportive environment for growth and development, thus giving a fillip to aspiring entities, desiring to have a presence in GIFT IFSC.Continue Reading Union Budget boost to GIFT IFSC: Looking at a golden future

First judgment on GAAR holds bonus-stripping to be an impermissible tax-avoidance arrangement

The provisions of General Anti-Avoidance Rules (“GAAR”) were implemented into Income Tax Act, 1961 (“IT Act”), for the first time with effect from the financial year 2017–18. The GAAR provisions provide the Indian Revenue Authorities (“IRA”) with wide powers, including even recharacterising a transaction, ignoring a part or the whole of a series of transactions, disallowing expenses incurred, etc., if the main purpose of the transaction was to obtain tax benefits. Considering the aggressive nature in which the IRA generally scrutinises the GAAR cases, the industry is always apprehensive that these GAAR provisions could be invoked in a wide-spread manner. However, much to the relief of the taxpayers, the IRA have rarely invoked these provisions.Continue Reading First judgment on GAAR holds bonus-stripping to be an impermissible tax-avoidance arrangement

Delhi HC delivers an important pronouncement on permanent establishment

In a significant decision delivered recently, the Hon’ble High Court of Delhi (“Hon’ble HC”) has shot down the case of the Income Tax Department (“ITD”) wherein the ITD had alleged three kinds of permanent establishments (“PE”). In Progress Rail Locomotive Inc.[1] (“Assessee”), the ITD intended to target the Assessee by putting it in all three conceivable PE silos i.e., Fixed Place PE, Service PE and dependent agent PE (“DAPE”) and used it as reasons to reopen the case. The Hon’ble HC rejected the contentions of the ITD by holding them to be prima facie unsustainable.Continue Reading Delhi HC delivers an important pronouncement on permanent establishment

Google Adwords program is not taxable as either “royalty” or “Fee for technical services” in India

The Income Tax Appellate Tribunal, Bangalore (“Tribunal”), recently in Google Ireland Ltd. v. DCIT[1] allowed an appeal by Google Ireland Ltd (“Google Ireland”) and held that the payments received from Google India Pvt Ltd (“Google India”) for granting marketing & distribution rights of Google AdWords program were not in the nature of “royalty” or fee for technical services (“FTS”) and consequently it could not be brought to tax in India.Continue Reading Google Adwords program is not taxable as either “royalty” or “Fee for technical services” in India

Are TDS provisions tedious? Opportune time for simplification

The Tax Deducted at Source (“TDS”) provisions under the Indian Income Tax Act of 1961 (“IT Act”) have been the cornerstone of the country’s tax architecture. A payer (or a deductor) is expected to be vigilant at the time of entering into any transaction, so that the required taxes are duly deducted and deposited with the Government where required, to avoid any adverse implications including penal consequences later. TDS mechanism, under Indian tax laws, has been a useful tool to collect taxes, targeting income at source itself. Continue Reading Are TDS provisions tedious? Opportune time for simplification