Income tax - Sections 9(1)(vi) - No Royalty on Live Telecast Rights for Cricket Matches: Delhi High Court Rules in Favor of Sri Lanka Cricket - Based on the facts and the legal framework analyzed above, it is clear that payments made exclusively for the live telecast of cricket matches, where no enduring rights are granted to the licensee, do not constitute royalty under Section 9(1)(vi) of the Income Tax Act. Taxpayers and assessees engaging in similar transactions should ensure that their agreements specify the scope of rights clearly, limiting them to live telecast where royalty implications are to be avoided.
Income Tax - Sections 143(3), 144C(13) - ITAT Delhi Holds Reimbursement of Intranet Charges to German Supplier Taxable as FTS—PE Irrelevant Under India-Germany DTAA - In light of consistent judicial findings and clear legal provisions, the ITAT has reaffirmed that receipts from technical and supervisory services—even when received as reimbursement—are taxable as FTS under both domestic law and the India-Germany DTAA. The existence of a PE in India is irrelevant for taxing such receipts when they fall within the FTS definition. Assessees engaged in cross-border technical services should carefully evaluate the nature of receipts, as nomenclature or reimbursement claims will not alter taxability if the underlying services are technical in character.
Income Tax – Sections 144C(13), 147 - Delhi ITAT Rules No Permanent Establishment for Foreign Online Booking Company Earning Commission from Indian Hotels: 'Disposal Test' Not Met - On the facts and in law, the Delhi ITAT concluded that the earning of commission by a foreign online accommodation platform from Indian sources, without any physical presence, place of business, personnel, or agent at its disposal in India, does not satisfy the “disposal test” or any other condition necessary to establish a Permanent Establishment under Article 5 of the India-Netherlands DTAA. Consequently, the entire addition made by the AO was deleted. The Tribunal’s decision provides a clear, actionable precedent: digital business models without tangible presence in India cannot be taxed as having a PE, even with significant Indian-sourced income.
Income tax – Sections 9(1)(vi) - ITAT Mumbai Rules Non-Exclusive Broadcasting Rights for Cinematographic Films Not Taxable as Royalty under Income Tax Act or India-Mauritius DTAA - The ITAT Mumbai decisively held that payments received by a non-resident for granting non-exclusive broadcasting rights for cinematographic films are not taxable as royalty in India. This is because such consideration is specifically excluded from the definition of royalty under Explanation 2(v) to Section 9(1)(vi) of the Income Tax Act (as applicable at the relevant time), and does not fall within the purview of royalty under Article 12(3) of the India-Mauritius DTAA, in the absence of any transfer of copyright or related rights. Assessees in similar situations should ensure that their agreements limit rights to non-exclusive broadcasting, without any transfer of copyright or rights to modify or exploit the work, to remain outside the ambit of royalty taxation in India.
Income Tax - Sections 143(3), 144C(13), 144(B) - ITAT Bangalore Directs Reconsideration of Warranty Provisions: Disallowance of Rs. 4.51 Crore Set Aside in Heavy Vehicle Dealer’s Case - The ITAT has underscored the need for correct computation of warranty provision deductions, clarifying that such provisions, when based on scientific estimation and properly substantiated, are allowable under Section 37(1) as laid down in Rotork Controls India (P) Ltd. v. CIT. The AO is directed to recompute the deduction on the basis of actual provision created during the year and not simply the closing balance or amount utilized, ensuring proper tax treatment in line with judicial principles.
Income Tax - Sections 90, 90A, 139(1), 128(9) - ITAT Mumbai Rules Denial of Foreign Tax Credit on Technical Grounds Unjust, Orders Fresh Hearing - The ITAT Mumbai decision underscores that the denial of Foreign Tax Credit solely due to the delayed filing of Form 67 is not legally tenable. The procedural requirement under Rule 128(9) should not override the substantive right to claim FTC if the taxpayer is otherwise eligible. The Tribunal’s order to remand the matter for fresh factual verification reaffirms the need for a fair hearing and adherence to the principles of natural justice. Taxpayers should ensure that all procedural requirements are met, but genuine claims should not be rejected merely on technical grounds.
Income Tax - Section 90 - ITAT Bangalore Rules Clerical Error in Form 67 Not a Bar to Foreign Tax Credit for Salary Earned Abroad - The ITAT Bangalore’s decision establishes that a mere clerical and unintentional error in Form 67 does not justify denial of otherwise valid Foreign Tax Credit. The Tribunal ruled that procedural or technical lapses must not override substantive rights where the underlying foreign tax payment and its Indian tax offer are undisputed and supported by evidence. Actionable takeaway: assessees should ensure accurate filing of Form 67, but in cases of genuine error, relief may be sought at appellate forums, with evidence of foreign tax payment and Indian tax offer.
ITAT Mumbai Reaffirms Tax Exemption Under Article 8 of India-USA DTAA for Profits from Code-Sharing Arrangements in International Air Traffic - Based on the ITAT’s ruling, it is clear that profits derived from the transportation of passengers by an airline under code-sharing arrangements—where the airline issues tickets under its code and the service is part of its international operations—qualify as profits from the operation of aircraft under Article 8 of the India-USA DTAA. Accordingly, such profits are taxable only in the United States and not in India. Taxpayers operating in similar circumstances should ensure that their code-sharing arrangements and ticketing practices are properly documented to fall within the ambit of Article 8 and secure exemption from Indian taxation.
Appellate Tribunal Confirms FEMA Violation in Use of Overseas Subsidiaries for Round-Tripping; Special Director’s Independent Analysis Upheld - Based on a comprehensive review of the facts, statutory provisions, and regulatory framework, the Tribunal dismissed the appeals and affirmed the penalty imposed by the Special Director. The Tribunal held that the use of the two overseas subsidiaries constituted impermissible round-tripping rather than genuine overseas business activity, thereby violating Section 6(3)(a) of FEMA, 1999, and Regulations 6(2)(ii) and 7 of the 2004 Regulations. Furthermore, the Tribunal concluded that the adjudicating authority had exercised independent judgment, and thus the penalty order was not procedurally infirm.
Tribunal Affirms Continuing Liability of Struck-off Companies and Legal Representatives under FEMA; Reduces Penalties on Grounds of Proportionality - In partial allowance of the appeals, the Tribunal unequivocally affirmed that liabilities of companies struck off under the Companies Act, 2013, remain enforceable, including penalties under FEMA, unless specifically set aside by judicial order. It further held that proceedings and penalties against legal representatives under Section 43 of FEMA are maintainable, but such liability is limited to the estate inherited from the deceased. The Tribunal clarified that for penalties under Section 13(1) of FEMA, no proof of mens rea is required. Applying the proportionality principle, the Tribunal reduced the penalties imposed on the individual appellants and ordered adjustment of pre-deposits. Penalties at the company level remain in force, subject to any appellate or higher judicial intervention.
Tribunal Affirms Abetment in Foreign Exchange Violations: Directors’ Role Proven Despite Retractions, Penalty Reduced to Rs. 10 Lakhs - On the basis of detailed testimonial, documentary, and circumstantial evidence, the Tribunal concluded that the appellant had indeed abetted the contravention of Sections 8(3) and 8(4) of FERA, read with Section 64(2). The legal presumption of culpable mental state under Section 59 stood unrebutted. While the appellant’s arguments regarding the retracted statements were considered, the corroborative evidence was decisive. The penalty was reduced to Rs. 10 lakhs, with the amount already deposited to be set off. Assessees in similar circumstances should ensure that any retraction of statements is promptly supported by credible evidence and that all documentary trails are transparent and justifiable to avoid adverse inferences.
Income Tax - Section 92CA(3) - Delhi High Court Strikes Down TPO Order for Withholding Agreements—Violation of Natural Justice in Transfer Pricing Assessment - The Delhi High Court’s decision clarifies that any quasi-judicial authority, including the TPO, is under a legal obligation to supply copies of all documents it relies upon to the assessee during transfer pricing proceedings. The failure to do so vitiates the entire exercise and constitutes a breach of natural justice, warranting the setting aside of the resultant order. Assessees facing similar refusals should assert their right to disclosure, and authorities must ensure procedural fairness by complying with these requirements.
Income Tax - Section 197 - Delhi High Court Clarifies Deductibility of Full Expenses Against Attributed PE Revenue for UK-based CRS Provider; Directs Proportionate TDS Adjustment Amidst Pending Non-India POS Dispute - The Delhi High Court has reaffirmed that, for non-residents with a PE in India, the entire eligible expenses incurred for generating attributed revenue must be deducted before computing taxable income, as per Supreme Court precedent. Attribution of revenue to the PE does not serve as a ceiling for deductible expenses. Where a dispute remains pending on the taxability of a particular revenue stream (such as non-India POS transactions), courts may grant partial or proportionate relief in withholding tax rates to balance interests of both the taxpayer and the revenue authorities. Tax authorities are required to follow judicial precedent strictly and cannot invent new computational methods contrary to binding Supreme Court rulings.
Income tax – Sections 144C - Gujarat High Court Upholds Assessee’s Statutory Right: DRP Must Adjudicate Objections Despite Procedural Filing Error - The Gujarat High Court’s decision establishes that an assessee’s statutory right to have objections adjudicated by the DRP under Section 144C cannot be nullified by a genuine procedural error in filing, provided the objections are filed within the prescribed limitation period. Tax authorities, upon receiving documents wrongly addressed due to a bona fide mistake, must guide the assessee appropriately if the limitation period is still running. The order of the DRP dismissing the objections for lack of jurisdiction was set aside, and the matter was remanded for fresh adjudication, ensuring substantive justice prevails over technical lapses.
Income tax – Sections 144C - Punjab & Haryana High Court Voids Final Assessment Passed Before DRP Decision: Upholds Assessee’s Right under Section 144C - In light of the above, the High Court’s decision mandates that, for eligible assessees who have filed objections under Section 144C(2)(b), the Assessing Officer is prohibited from finalizing the assessment and issuing any consequential notices until the DRP has rendered its decision. Any action to the contrary is without jurisdiction and will be set aside, with the matter being remanded to the DRP for proper disposal. Assessees in similar situations should ensure prompt filing of objections and insist that the statutory process under Section 144C is scrupulously followed before any demand or penalty is confirmed.
Income tax –– Sections 197 - Delhi High Court Mandates Strict Adherence to Law and Treaty in Section 197 Withholding Applications; Revenue’s SLP Intent Not Sufficient to Deny Relief - The Delhi High Court’s decision makes it clear that revenue authorities must base Section 197 determinations strictly on applicable law, judicial precedents, and treaty obligations. The mere contemplation or intent to challenge a binding precedent by way of SLP—where neither a petition nor a stay exists—cannot justify denial of relief to an assessee. Authorities must ensure that decisions are supported by legally sustainable reasoning and not revenue targets.
Income tax – Sections 44BB, 197 - Delhi High Court Sets Aside Higher TDS Order for Offshore Seismic Services; Faults Revenue for Ignoring Prior Judgment on Section 44BB vs. 44DA - The Delhi High Court has reaffirmed that, in the absence of a reasoned basis or material change in facts, the Revenue cannot arbitrarily depart from its own earlier determination under Section 44BB for the same assessee and contract. The AO’s order was set aside for failure to provide reasons, for ignoring binding judicial precedent, and for not distinguishing between the mutually exclusive concepts of Royalty and FTS. The matter is remanded for de novo consideration consistent with the Court’s earlier judgment and proper legal analysis.
Income Tax - Sections 14A, 92B - ITAT Kolkata Mandates Cost-Based Valuation for Section 14A Disallowance, Rejects 1% Norm for Corporate Guarantee Fee - The Tribunal’s decision reaffirms that, for the purpose of computing income under the Income Tax Act, the principles laid down in ICDS-I take precedence over Ind-AS, particularly regarding the valuation of investments for Section 14A disallowance. Assessees following Ind-AS for financial reporting must revert to cost-based figures when determining tax disallowances under Rule 8D. Additionally, the Tribunal’s nuanced approach to determining the arm’s length price for corporate guarantee fees signals a shift from a one-size-fits-all flat rate to a more fact-specific, evidence-based methodology.
Income-tax - Sections 143(3), 144C(13), 144B - ITAT Hyderabad Quashes Assessment Order Passed Beyond Statutory Limitation in Transfer Pricing Matter - In this case, the Hyderabad ITAT has categorically held that a final assessment order passed after the expiration of the time limit prescribed under Section 153(1) and extended under Section 153(4) is barred by limitation and must be quashed. The ruling emphasizes that adherence to statutory timelines is mandatory, and any order passed beyond such limitation is void ab initio. Tax authorities must meticulously monitor and comply with the limitation periods, especially in matters involving transfer pricing references.
Appellate Tribunal Upholds FEMA Violations on Unauthorized Remittances and Foreign Currency Confiscation: Penalties Reduced but Contraventions Confirmed - The Tribunal has conclusively determined that both Section 3(d) and Section 7(1)(a) of FEMA were contravened by the Appellants based on a robust evidentiary review applying the civil standard of proof. The confiscation of seized foreign currency was found justified due to the failure to provide satisfactory evidence regarding the period of possession. Penalties were moderated but remain significant, reflecting the Tribunal’s balanced approach between enforcement and proportionality. Importantly, the Tribunal’s order confirms that the absence of proceedings under the Customs Act does not affect the validity of FEMA adjudication.