Tax News Daily
The latest tax news from around the world, summarised and tagged for tax professionals. Updated twice daily.
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No Recovery From Genuine Buyer First? Karnataka HC Examines GST Authorities’ ITC Demand Approach
The Karnataka High Court is examining whether GST authorities must first attempt recovery from the defaulting supplier before demanding Input Tax Credit (ITC) reversal from a genuine buyer. The case raises a critical procedural question about the sequence of recovery actions under GST law, specifically whether innocent purchasers who acted in good faith should bear the burden of a supplier's non-compliance. The ruling could have significant implications for how tax authorities pursue ITC demands across India, potentially establishing a precedent that protects bona fide buyers from upstream fraud or default.
CBIC Issues Circular on Departmental GSTAT Appeals in DGGI Common Adjudication Matters
India's Central Board of Indirect Taxes and Customs (CBIC) has issued a circular clarifying the process for filing departmental appeals before the GST Appellate Tribunal (GSTAT) in cases involving common adjudication orders passed by the Directorate General of GST Intelligence (DGGI). The circular addresses procedural aspects of how tax department appeals should be coordinated and filed in multi-jurisdictional or centrally adjudicated matters, providing guidance to field formations on maintaining consistency in appellate strategy and avoiding conflicting positions across different GSTAT benches.
Patna HC Imposes ₹25,000 Penalty for Reversing Stand on GST Undertaking After Accepting Relief
The Patna High Court has imposed a ₹25,000 penalty on a party that reversed its position on a GST undertaking after already receiving relief from the court based on that undertaking. The court treated the reversal as an abuse of process, signaling a firm stance against litigants who make representations to obtain judicial relief and subsequently resile from them. The ruling reinforces the binding nature of undertakings given in GST proceedings before Indian courts and serves as a warning to taxpayers and counsel about the consequences of inconsistent positions in tax litigation.
Can the Income Tax Department Make New Additions in Reassessment If the Original Reason for Reopening Fails? Bangalore ITAT Says No
The Bangalore Income Tax Appellate Tribunal ruled that the Income Tax Department cannot make new additions during reassessment proceedings if the original reason for reopening the assessment fails. The case clarifies the scope of reassessment powers under Indian tax law, establishing that reassessment jurisdiction is strictly tied to the original grounds for reopening. If those grounds are not sustained, the entire reassessment proceedings fall, and the department cannot substitute or introduce new issues to justify the reopening. This ruling provides significant protection to taxpayers against broad fishing expeditions by tax authorities during reassessment.
Karnataka HC Grants Interim Relief to Taxpayer in Section 74 Proceedings After GST ITC Reversal
The Karnataka High Court has granted interim relief to a taxpayer facing proceedings under Section 74 of the GST Act, which deals with cases involving fraud, suppression, or misstatement. The relief was granted in the context of a disputed ITC reversal, suggesting the court found prima facie merit in the taxpayer's challenge to the demand. Section 74 proceedings carry higher penalties and a longer limitation period than standard assessments, making this interim stay significant. The case highlights ongoing judicial scrutiny of how GST authorities invoke the fraud provisions against taxpayers disputing ITC eligibility.
Can a Delay in Filing an Income Tax Appeal Be Condoned If Your Auditor Failed to File It? Kerala High Court Says Yes—If the Explanation Is Genuine
The Kerala High Court held that a delay in filing an income tax appeal can be condoned where the taxpayer's auditor failed to file the appeal, provided the explanation offered is genuine and bona fide. The court applied a liberal interpretation of the condonation of delay provisions, emphasising that taxpayers should not be penalised for the negligence of their professional advisors if there is no deliberate default on the taxpayer's part. This ruling offers meaningful relief to Indian taxpayers who miss appeal deadlines due to professional negligence, reinforcing courts' discretion in admitting delayed appeals on genuine grounds.
TDS on Faculty Payments: Salary Under Section 192 or Professional Fees Under Section 194J? ITAT Cochin Clarifies the Law
The Income Tax Appellate Tribunal (ITAT) Cochin has issued a clarifying ruling on the correct Tax Deducted at Source (TDS) treatment for payments made to faculty members. The case examined whether such payments should be classified as salary under Section 192 of the Income Tax Act, attracting employment-based withholding, or as professional fees under Section 194J, which applies to fees for technical or professional services. The ruling provides practical guidance for educational institutions and businesses engaging faculty or trainers, helping determine the appropriate TDS rate and compliance obligations based on the nature of the engagement and contractual relationship.
Roadtrip through ECJ cases: Focus on Promotional activities/Discounts (Art. 79, 87, 90(1))
A detailed review of European Court of Justice case law focusing on VAT treatment of promotional activities and discounts under Articles 79, 87, and 90(1) of the VAT Directive. The analysis covers how taxable amounts are calculated when discounts, rebates, and promotional incentives are involved, drawing on ECJ jurisprudence to clarify when the taxable base must be reduced. Practitioners dealing with complex pricing structures, loyalty schemes, or supply chain discounts will find this synthesis of ECJ rulings particularly relevant for ensuring correct VAT liability calculations and compliance across EU member states.
ECJ Case: VAT default interest rules upheld in Lithuanian case
The European Court of Justice (ECJ) has upheld VAT default interest rules in a Lithuanian case, affirming that member states may impose interest charges on late VAT payments. The ruling confirms the compatibility of Lithuania's default interest provisions with EU VAT law, providing clarity for businesses operating in Lithuania and across the EU. The decision reinforces member states' rights to enforce timely VAT compliance through financial penalties, while ensuring such measures remain proportionate and consistent with the EU VAT Directive. Tax practitioners should review their VAT compliance processes in Lithuania and other EU jurisdictions with similar interest regimes.
GST ITC Reflection in GSTR-2A/2B Alone Cannot Attract Tax or Interest: Madras HC
The Madras High Court has ruled that mere reflection of Input Tax Credit (ITC) in GSTR-2A or GSTR-2B does not automatically attract tax liability or interest on a taxpayer. The court clarified that these auto-populated reconciliation statements serve as informational tools rather than definitive determinants of ITC eligibility. The ruling provides significant relief to GST-registered businesses facing demands based solely on discrepancies in these forms, reinforcing that tax authorities must establish actual wrongful ITC claims before levying tax or interest. This decision has broad implications for how GST compliance and ITC verification proceedings are conducted across India.
European Court – T-361/26 (Sandoz Hungária) – Questions – Reduction of the taxable amount: ex lege payments funding medicine subsidies
A new ECJ VAT case, T-361/26 (Sandoz Hungária), has been referred to the European Court addressing whether ex lege payments made by pharmaceutical companies to fund medicine subsidy schemes qualify for a reduction of the VAT taxable amount. The case raises important questions under EU VAT Directive rules on taxable base adjustments, with significant implications for the pharmaceutical sector across EU member states. Details remain limited at this stage, but the referral signals ongoing uncertainty around how mandatory statutory contributions by pharma companies interact with VAT obligations.
Chattanooga Church Pushes Republican Candidates, Possibly Violating Tax Law
A Chattanooga church is facing scrutiny for allegedly violating the Johnson Amendment, the federal tax law prohibiting 501(c)(3) nonprofit organizations from engaging in political campaign activity. The church reportedly promoted Republican candidates, which could jeopardize its tax-exempt status under IRS rules. This case highlights ongoing tensions around enforcement of political activity restrictions on religious organizations and raises questions about whether the IRS will act. Violations can result in revocation of tax-exempt status, making this a notable development in the intersection of nonprofit tax law and political activity regulation.
Crypto Hedge Fund Manager Gets 3 Years For Tax Evasion
A crypto hedge fund manager has been sentenced to three years in prison for tax evasion related to cryptocurrency investment activities. The case highlights ongoing IRS enforcement efforts targeting digital asset investors who fail to report gains or conceal income through crypto vehicles. The conviction underscores the government's increasing focus on cryptocurrency tax compliance, with prosecutors successfully arguing that the fund manager deliberately concealed taxable income. The case serves as a significant warning to crypto fund operators and investors about the serious criminal consequences of failing to meet tax reporting obligations on digital asset transactions.
Clean-Energy Projects Face Scrutiny After Tax Credit Rush
Clean-energy projects that rushed to claim Inflation Reduction Act tax credits are now facing increased IRS and Treasury scrutiny over compliance. Regulators are examining whether projects genuinely meet eligibility requirements, including domestic content rules, prevailing wage standards, and apprenticeship mandates that affect credit amounts. The heightened scrutiny follows a surge in credit claims and concerns about abuse. Tax practitioners advising renewable energy developers must ensure robust documentation and compliance frameworks are in place, as audits and potential clawbacks could significantly impact project economics and investor returns in the clean energy sector.
Claims Court OKs $49.4M In Cash Grants For Calif. Wind Farm
The U.S. Court of Federal Claims has approved $49.4 million in Section 1603 cash grants for a California wind farm, ruling in favor of the project developer against a government challenge. Section 1603 of the American Recovery and Reinvestment Act allowed renewable energy developers to elect cash payments in lieu of investment tax credits. The court's decision clarifies the valuation and eligibility rules applicable to wind energy assets under the program. The ruling is significant for renewable energy developers who participated in the Section 1603 program and may still have pending or disputed grant claims with the Treasury Department.
Cryptocurrency Trade Group Sues Illinois Over Digital Asset Tax
A cryptocurrency trade group has filed a lawsuit against the state of Illinois challenging a digital asset tax. The legal action raises significant questions about the taxation of cryptocurrency and digital assets at the state level, with potential implications for how jurisdictions across the US can impose taxes on crypto transactions and holdings. The case could set important precedents for digital asset tax policy and the rights of crypto businesses to contest state-level tax measures, making it a key development for practitioners advising clients in the digital asset space.
NC Contractor Pushes For Employee Retention Credit Refund
A North Carolina contractor is pursuing a refund claim in court related to the Employee Retention Credit (ERC), a pandemic-era payroll tax relief program. The case involves disputed eligibility and the IRS's denial of the contractor's ERC claim, reflecting broader tensions around the agency's aggressive review and moratorium on processing ERC refunds. With thousands of ERC claims still pending and the IRS scrutinizing eligibility, this litigation highlights the contested landscape around ERC qualifications for contractors and businesses that experienced operational disruptions, and could have implications for similarly situated employers awaiting resolution of their own claims.
Toy Manufacturer Sues Trump Administration Again Over New Round of Tariffs
An Illinois toy manufacturer has filed a second lawsuit against the Trump administration challenging a new round of tariffs. The case continues a pattern of industry legal challenges to executive-imposed trade levies, raising questions about the administration's authority to impose tariffs and their economic impact on importers. The litigation highlights ongoing tensions between U.S. businesses reliant on foreign-manufactured goods and the administration's trade policy agenda. A prior suit by the same company signals escalating legal pressure on tariff measures that directly affect import costs and customs compliance for manufacturers.
NYC Limits Options for Owners of Second Homes to Appeal New Tax
New York City has introduced restrictions limiting the ability of second home owners to appeal a newly enacted tax targeting such properties. The move reduces procedural options for affected property owners seeking to contest their tax liability, raising concerns about taxpayer rights and due process in the appeals process. The development is significant for owners of secondary residences in NYC and their advisers, as it narrows the avenues available to challenge assessments under the new tax regime, which was designed to generate revenue from non-primary residential properties.
FTO declares higher tax deduction on teachers’ examination duty unlawful
Pakistan's Federal Tax Ombudsman (FTO) has ruled that higher tax deductions applied to teachers performing examination duties are unlawful. The ruling addresses an apparent overreach by tax authorities who were deducting tax at elevated rates on remuneration paid to teachers for examination-related work, which falls outside their regular employment income. The FTO's decision provides relief to affected teachers and directs authorities to correct the deductions. This ruling clarifies the applicable personal income tax treatment for such supplementary professional duties and sets a precedent for similar cases involving examination honoraria across Pakistan's education sector.
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