CBIC notifies concessional rate of customs duty on goods manufactured by SEZ unit and cleared into DTA

 This Tax Alert summarizes a Notification¹ issued by Central Board of Indirect Taxes and Customs (CBIC) notifying concessional rates of basic customs duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC) on specified goods manufactured by a unit in Special Economic Zone (SEZ) and cleared into Domestic Tariff Area (DTA).

Recent Income Tax Rulings

I. International Taxation & Treaty Jurisprudence

The Tiger Global Ruling: A Watershed Moment

Perhaps the most significant development in India's treaty jurisprudence is the ruling concerning Tiger Global. The decision marks a pivotal shift in how India approaches treaty shopping and beneficial ownership determinations. The ruling reinforces that mere routing of investments through tax-friendly jurisdictions will not automatically confer treaty benefits unless genuine commercial substance and beneficial ownership are established. This judgment is expected to have far-reaching implications for foreign portfolio investors and private equity funds operating in India.

Select amendments to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008

 The Corporate Laws (Amendment) Bill, 2026 has been introduced in the Lok Sabha, proposing various changes to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. The amendments aim to improve ease of doing business, simplify compliance and provide clarifications.

The select proposed changes are as follows:

TAX DUE DATE - APRIL 2026.

 

Sr No	Due Date	Related to	Compliance to be made

IPO expenses allocated to promoter shareholders allowable as deduction - Nexus with share transfer upheld

 Recently, the Hon’ble Income-tax Appellate Tribunal, Mumbai (‘ITAT’) in the case of Zarah Rafique Malik v. Income Tax Officer has held that proportionate Initial Public Offer (‘IPO’) expenses incurred in connection with the sale of shares under an Offer for Sale (‘OFS’) are allowable as deduction while computing capital gains under the provision of the Income-tax Act, 1961 (‘the Act’). The ITAT observed that where a shareholder participates in an IPO and agrees to bear a proportionate share of IPO-related expenses, such expenses, though initially incurred by the company, are effectively borne by the shareholder and have a direct nexus with the transfer of shares. Accordingly, the Tribunal held that these expenses qualify as expenditure incurred wholly and exclusively in connection with such transfer and are deductible while computing capital gains. The ITAT further rejected the Revenue’s contention that the arrangement constituted a colourable device or that IPO expenses are capital in nature in the hands of the company, noting that the shareholder independently benefits from price discovery and sale through the IPO mechanism.

Madras HC holds fulfilment of conditions under section 16(2) necessary before ITC is distributed by ISD

 This Tax Alert summarizes a recent ruling of the Madras High Court (HC), on the validity of Rule 39(1)(a) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) requiring an Input Service Distributor (ISD) to distribute input tax credit (ITC) in the same month in which it is available for distribution.

CESTAT distinguishes SC ruling in NOS and holds expats deputation transaction as not liable to service tax

 This Tax Alert summarizes a recent ruling of Customs, Excise and Service Tax Appellate Tribunal, Hyderabad (CESTAT)  on applicability of service tax on deputation of employees by foreign company to an Indian entity.

Assessee, an Indian entity, entered into employment agreements with certain expatriate employees deputed from a foreign entity. It paid a portion of the salary, covering statutory social security contributions in the home country and other emoluments, to the foreign entity, which in turn remitted the amount into the employees’ foreign bank accounts.

CESTAT held that such payments were not exigible to service tax on the following grounds:

Relief for Private Discretionary Trusts: Kolkata ITAT Rules that Surcharge is not automatic for income below ₹50 Lakh

 Recently, the Kolkata Bench of the ITAT has ruled that surcharge is not leviable on a private discretionary trust taxed at the maximum marginal rate (‘MMR’) where the total income is below ₹50 lakhs. The Tribunal held that the definition of “maximum marginal rate” under section 2(29C) of the Income-tax Act, 1962 requires reference to the Finance Act rates, and surcharge becomes applicable only when the prescribed income threshold is exceeded.

In the present case, the assessee, a private discretionary trust, filed its return declaring total income of ₹4,56,900 and computed tax without surcharge. Subsequently, while processing the return and rectification, the AO levied surcharge at 37%, raising additional demand. The Commissioner of Income Tax (Appeals) upheld the levy, holding that the maximum marginal rate includes surcharge. Aggrieved, the assessee preferred an appeal before the ITAT, contending that surcharge is leviable only when income crosses the statutory threshold specified under the Finance Act.

Upon hearing the matter, the ITAT observed that private discretionary trusts are generally taxed at the maximum marginal rate; however, such rate must be determined with reference to the Finance Act provisions. The Tribunal relied on the Special Bench ruling in Araadhya Jain Trust vs. ITO, wherein it was clarified that surcharge cannot be automatically applied at the highest rate and must instead be computed based on the applicable income slabs specified in the First Schedule to the Finance Act. Since the assessee’s income in all relevant years was below ₹50 lakhs, the statutory threshold for levy of surcharge was not met. The Tribunal further noted that interpreting MMR to always include surcharge at the highest rate would render the surcharge provisions redundant and lead to an absurd interpretation. Accordingly, the Tribunal directed that tax be computed at 30% plus applicable cess, without surcharge, and allowed the assessee’s appeal.

Write-off of loan to overseas WOS denied – treated as colourable device

 In the present case, the assessee, engaged in the business of manufacturing and trading garments, had set up a wholly owned subsidiary (WOS) in Jordan as a special purpose vehicle (SPV) to acquire another entity in the same line of business. The assessee advanced loans aggregating to approximately INR 83 crore over multiple years to the WOS. During the relevant year, following losses in the overseas business and eventual sale of the underlying investment, the assessee wrote off INR 53.24 crore of such loans and claimed it as a deduction.

New TDS Framework For International Payments

 There are certain changes in India's tax rules for TDS on payments made to non-residents. The Income Tax Act, 2025 ('ITA 2025') replaces the Income Tax Act, 1961, introducing new forms and enhanced compliance obligations for all cross-border remittances. We have prepared a detailed Note on the subject which is enclosed for your reference.