Tax News Daily
The latest tax news from around the world, summarised and tagged for tax professionals. Updated twice daily.
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Can Income Tax Additions Be Made Solely on Third-Party Evidence? ITAT Mumbai Says No – A Landmark Judgment Every Taxpayer Must Know
The Income Tax Appellate Tribunal (ITAT) Mumbai has issued a significant ruling clarifying that tax additions cannot be made solely on the basis of third-party evidence without giving the taxpayer an opportunity to cross-examine the source. The judgment reinforces principles of natural justice in Indian tax proceedings, establishing that assessments must be supported by corroborating evidence beyond unverified third-party statements. This landmark decision has broad implications for taxpayers facing scrutiny assessments, limiting the ability of tax authorities to rely exclusively on external evidence when making income additions without proper procedural safeguards.
Partner’s Remuneration Under Section 44ADA: Delhi ITAT Opens the Door, But Is the Debate Really Over?
The Delhi Income Tax Appellate Tribunal has ruled on the deductibility of partner remuneration under Section 44ADA of India's Income Tax Act, which governs presumptive taxation for professionals. The ruling addresses whether a firm can claim partner remuneration as a deduction when its professional income is assessed under the presumptive taxation scheme. While the ITAT has opened the door to allowing such deductions, the article highlights that the legal debate remains unresolved, with conflicting interpretations still possible. This has significant implications for professional partnerships in India operating under the presumptive tax regime.
EU Excise Duty Law: Key Rulings on Direct Delivery, Security Deposits, and Formal Requirements
A series of EU Court of Justice rulings has clarified key aspects of excise duty law, addressing direct delivery arrangements, security deposit requirements, and formal compliance obligations under the EU Excise Duty Directive. The rulings provide important guidance for businesses moving excise goods across EU member states, particularly regarding when and how tax obligations arise, the validity of security guarantees, and the consequences of non-compliance with formal procedural requirements. These decisions have direct implications for manufacturers, importers, and logistics operators managing excise duty suspended movements within the EU single market.
Bloomberg: Amgen Settles Investor Suit Over Tax Liability for $74 Million
Amgen has settled an investor lawsuit for $74 million related to disclosures about its tax liabilities. The case centered on allegations that the biopharmaceutical company misled shareholders regarding the extent of its tax exposure, particularly concerning transfer pricing disputes with the IRS. The settlement highlights the intersection of tax controversy and securities litigation, where large corporate tax positions can carry significant investor disclosure obligations. This case is notable for practitioners advising on tax risk disclosure and the potential downstream liability when transfer pricing or other tax disputes materialize into material financial exposures for publicly traded companies.
Delhi HC Declines Plea Against 18% Tax on Diagnostic Services, Directs Matter to GST AAR
The Delhi High Court has declined to entertain a petition challenging the 18% GST levy on diagnostic services, instead directing the petitioner to approach the GST Authority for Advance Rulings (AAR). The court's decision channels the dispute through the prescribed statutory mechanism rather than allowing direct judicial intervention. This ruling is significant for the diagnostics and healthcare sector, where providers have contested the GST classification and applicable tax rates on their services. Practitioners advising healthcare clients should note that AAR remains the appropriate first forum for resolving GST rate classification disputes before escalating to higher courts.
Punjab & Haryana HC Invalidates GST Show Cause Notice Prepared Using AI Tool
The Punjab & Haryana High Court has invalidated a GST show cause notice on the grounds that it was generated using an AI tool without adequate human review, raising significant concerns about the use of automated systems in tax enforcement proceedings. The ruling has important implications for tax authorities and practitioners, signalling that AI-drafted notices must meet standards of proper application of mind. This decision sits at the intersection of tax controversy and tax technology, potentially reshaping how GST enforcement notices are issued across India.
CBP Protests and Post-Entry Corrections
This article covers the process for filing protests and making post-entry corrections with U.S. Customs and Border Protection (CBP). It explains how importers can challenge CBP decisions on duty assessments, classification, and valuation through formal protest mechanisms under 19 U.S.C. § 1514, as well as post-summary corrections and prior disclosure procedures. The piece outlines deadlines, eligible issues, and strategic considerations for importers seeking duty refunds or contesting adverse customs determinations, making it directly relevant to trade compliance practitioners managing customs duty disputes and entry correction workflows.
Seven Form 990 Red Flags CPAs Should Not Ignore
CPAs reviewing Form 990 filings for tax-exempt organizations should watch for seven key red flags that may signal compliance issues or trigger IRS scrutiny. These include inconsistencies in reported revenue, excessive compensation to officers, related-party transactions, misreported program service expenses, failure to disclose foreign accounts or activities, inaccurate governance disclosures, and misclassification of employees versus independent contractors. Identifying these issues proactively helps nonprofits avoid penalties, potential loss of tax-exempt status, and costly IRS examinations. The guidance is particularly relevant for CPAs advising nonprofit clients on annual filing obligations and internal controls.
D.C. Circuit Affirms Sentence for Trump Tax Return Leaker
The U.S. Court of Appeals for the D.C. Circuit has affirmed the criminal sentence imposed on Charles Littlejohn, the IRS contractor who illegally leaked former President Donald Trump's confidential tax returns, along with tax data of thousands of other wealthy Americans. The ruling upholds the lower court's five-year prison sentence. The case raises significant issues around taxpayer privacy protections, IRS data security, and the safeguarding of confidential tax information held by government agencies, with broader implications for trust in the confidentiality of tax filings submitted to the IRS.
Coffee Co. Says Acquired Biz's Founder Hid Tax Designation
A coffee company has filed suit alleging that the founder of a business it acquired concealed a tax designation during the acquisition process. The case centers on claims that the seller misrepresented or hid material tax status information, potentially affecting the valuation or tax liabilities assumed by the buyer. The dispute highlights risks in M&A due diligence related to undisclosed tax elections or classifications. The outcome could have implications for how tax designations are warranted and disclosed in business purchase agreements, and may expose the founder to liability for fraudulent misrepresentation tied to tax matters.
Feds Ask Wash. Judge To Back Canadian's $700K FBAR Fines
Federal prosecutors are urging a Washington court to uphold approximately $700,000 in FBAR (Foreign Bank Account Report) penalties against a Canadian individual. The case involves alleged failures to report foreign financial accounts as required under U.S. Bank Secrecy Act rules enforced by the IRS. FBAR enforcement actions against non-resident foreign nationals remain a significant area of U.S. international tax compliance. The government's position reinforces the broad extraterritorial reach of U.S. foreign account reporting obligations and the substantial civil penalty exposure for willful or non-willful violations, even for individuals primarily based outside the United States.
Illinois Crypto Tax Unfairly Targets Traders, Suit Says
A lawsuit has been filed challenging Illinois's taxation of cryptocurrency traders, alleging the state's crypto tax rules unfairly discriminate against or disproportionately burden crypto asset traders compared to other investors. The suit questions whether Illinois's application of its income or related tax rules to crypto transactions is constitutionally or statutorily sound. The case is part of a growing wave of legal challenges to state-level crypto taxation across the U.S. A ruling in favor of the plaintiffs could force Illinois to revise how it taxes digital asset trading activity, with potential implications for other states with similar frameworks.
FTO makes online hearings default for tax complaints
Pakistan's Federal Tax Ombudsman (FTO) has made online hearings the default format for handling tax complaints, marking a procedural shift in how taxpayer grievances are processed. This move aims to improve accessibility and efficiency in tax dispute resolution across the country, reducing the need for in-person appearances. The change represents a meaningful update to the tax controversy landscape in Pakistan, leveraging digital tools to streamline the complaints and hearing process for both taxpayers and FTO officials.
Multistate Tax Trends: SALT Litigator Zachary Milliken on Texas Franchise Tax Mistakes, AI Sales Tax Risks, Successful Dispute Resolution, and the Future of State Tax Audits
A SALT litigator discusses common mistakes in Texas franchise tax compliance, the emerging risks of using AI tools for sales tax determinations, and strategies for successful dispute resolution with state tax authorities. The interview covers practical insights on navigating multistate tax audits, including how auditors are evolving their techniques and what businesses should watch for. Key topics include Texas franchise tax apportionment errors, the reliability concerns around AI-generated sales tax advice, and best practices for managing state tax controversies before they escalate to litigation.
Kansas City Tax Preparer Sentenced to Prison for Two Financial Fraud Schemes
A Kansas City tax preparer has been sentenced to prison for two financial fraud schemes. The case involves fraudulent tax preparation activities, representing a tax compliance enforcement action by federal authorities. The sentencing underscores IRS and DOJ efforts to prosecute tax preparers who exploit clients or manipulate returns for personal gain. This serves as a reminder of criminal penalties available under U.S. tax law for preparers who engage in fraudulent conduct, including filing false returns or misappropriating client funds. The case highlights ongoing enforcement priorities targeting unscrupulous tax professionals operating in the personal income tax space.
Supreme Court Upholds Allahabad HC Decision Describing GST Registration Cancellation as ‘Economic Death’ of Business
The Supreme Court of India has upheld an Allahabad High Court decision characterizing GST registration cancellation as the 'economic death' of a business. The ruling reinforces judicial protection for taxpayers facing arbitrary or disproportionate GST registration cancellations by tax authorities. The decision sets a significant precedent emphasizing that cancellation of GST registration effectively renders a business non-operational, preventing it from conducting lawful trade. Tax authorities must therefore exercise this power judiciously and with proper justification, strengthening the rights of registered taxpayers against undue administrative action under India's GST framework.
Tax Court Says CRA Must Honour Stale-Dated Input Tax Credits — The Ontario Tire Stewardship Win
Canada's Tax Court ruled in favour of Ontario Tire Stewardship, holding that the Canada Revenue Agency must honour input tax credits (ITCs) even where the claims were considered stale-dated. The CRA had sought to deny the ITCs on timing grounds, but the court found the credits were validly claimed within the applicable rules. The decision is significant for GST/HST registrants managing retroactive or delayed ITC claims, clarifying that procedural limitations cannot override substantive entitlements where the statutory conditions are met. The ruling reinforces taxpayer rights in ITC disputes with the CRA.
Rajasthan Government Issues New Guidelines for GST Return Scrutiny
The Rajasthan state government has issued new guidelines governing the scrutiny of GST returns filed by taxpayers within the state. The guidelines establish structured procedures for tax officers to examine return discrepancies, mismatches between GSTR-1 and GSTR-3B filings, and input tax credit anomalies. The update aims to standardize enforcement and improve compliance monitoring across Rajasthan's GST administration. Practitioners and businesses operating in Rajasthan should review their return filing practices to ensure alignment with the enhanced scrutiny framework, as the guidelines signal increased administrative focus on identifying underreported liabilities and incorrect credit claims.
Suspicion Alone Cannot Justify Income Tax Additions: Supreme Court Upholds Deletion of ₹16.61 Crore Alleged Unaccounted Sales
India's Supreme Court upheld the deletion of a ₹16.61 crore income tax addition related to alleged unaccounted sales, ruling that mere suspicion without corroborating evidence cannot justify tax additions. The court reaffirmed that tax authorities must base assessments on concrete material rather than conjecture. This ruling reinforces evidentiary standards in income tax proceedings and limits the ability of assessing officers to make additions solely on the basis of suspicion, providing significant protection to taxpayers facing unsubstantiated assessments of undisclosed income.
Refund Cannot Be Denied for Mere Technical Lapse: ITAT Invokes Article 265 to Protect Taxpayer’s Rights
India's Income Tax Appellate Tribunal ruled that tax refunds cannot be denied solely due to technical lapses by the taxpayer, invoking Article 265 of the Indian Constitution, which prohibits collection of taxes without authority of law. The ITAT held that procedural non-compliance should not override substantive rights to refund where tax has been validly paid and the refund claim is legitimate. This decision strengthens taxpayer protections against arbitrary denial of refunds on technical grounds and has broad implications for refund proceedings across Indian income tax administration.
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