Tax News Daily
The latest tax news from around the world, summarised and tagged for tax professionals. Updated twice daily.
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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.
Allahabad High Court Sets Aside IT Reassessment Notice Issued After Assessee’s Death
The Allahabad High Court has set aside an income tax reassessment notice issued to a deceased assessee, ruling the notice legally invalid. The court held that tax authorities cannot issue reassessment proceedings against a person who has already died, as such notices have no legal standing. The ruling reinforces procedural safeguards in Indian tax law, requiring authorities to direct reassessment notices to the legal heirs or representatives of a deceased taxpayer rather than the deceased individual. This decision has significant implications for tax administration and compliance procedures in reassessment cases involving deceased persons.
New ITR-BN Form for Block Assessment in Search and Seizure Cases
India's tax authorities have introduced a new ITR-BN form specifically designed for block assessments arising from search and seizure operations. The form standardises income tax return filing for cases where undisclosed income is discovered during searches conducted by the Income Tax Department. This development streamlines the compliance process for taxpayers subject to block assessment proceedings, covering multiple years of undisclosed income in a single return. The new form represents a regulatory update with direct procedural impact on taxpayers and practitioners handling search and seizure tax matters in India.
Gujarat HC Allows GST Refund Interest from Original Application Date After Illegal Rejection
The Gujarat High Court has ruled that GST refund interest must be calculated from the date of the original refund application, not from any subsequent reapplication date, when the initial rejection was found to be illegal. The court held that taxpayers should not be penalized for delays caused by unlawful administrative rejections. This decision reinforces taxpayer rights under Indian GST law, ensuring that interest entitlements are preserved from the original filing date irrespective of procedural errors made by tax authorities in wrongfully denying refund claims.
Gauhati HC Directs Authorities to Restore Registration After Filing Pending GST Returns and Clearing Dues
The Gauhati High Court has directed tax authorities to restore GST registration for a taxpayer after they filed all pending GST returns and cleared outstanding dues. The ruling reinforces that authorities must reinstate cancelled registrations once a taxpayer fulfils compliance obligations, providing relief to businesses facing registration cancellation. This decision has practical implications for GST-registered entities in India seeking restoration of cancelled registrations, clarifying the procedural pathway through return filing and payment of dues as sufficient grounds for reinstatement.
Legal Heir Is Not Always the Legal Representative: ITAT Agra Quashes Assessment Passed Without Proper Compliance Under Section 159
The Income Tax Appellate Tribunal (ITAT) Agra has quashed a tax assessment made against a legal heir, ruling that a legal heir does not automatically qualify as a legal representative under Section 159 of the Income Tax Act. The tribunal found that proper procedural compliance was not followed before treating the legal heir as the deceased taxpayer's representative for assessment purposes. This ruling has significant implications for tax authorities and practitioners handling assessments involving deceased taxpayers, clarifying the distinction between heirship and legal representation in Indian income tax proceedings.
Section 56(2)(x): Can Stamp Duty Value on Registration Date Trigger Tax Even When the Property Deal Was Finalised Years Earlier? ITAT Ahmedabad Says No
The ITAT Ahmedabad has ruled that stamp duty value at the date of property registration cannot trigger tax liability under Section 56(2)(x) when the underlying property deal was finalised years earlier. The tribunal held that the relevant valuation date should be when the agreement to sell was executed, not the registration date. This decision provides important relief to taxpayers where property prices rise between agreement and registration, preventing taxation of notional gains arising purely from timing differences in a transaction's completion.
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