Direct Tax

In a recent landmark order in Mon Mohan Kohli v ACIT and others (WP(C) No. 6176/2021) (Order), the Hon’ble Delhi High Court (High Court) has quashed over 1300 (thirteen hundred) reassessment notices issued by the income-tax authorities (IT Authorities) under the old reassessment regime (ie, law existing prior to 1 April 2021) under the Income Tax Act 1961 (IT Act).

Marking a significant step in international tax negotiations, India has issued a press release on 24 November 2021 (Press Release) confirming that India and USA have agreed on a transitional approach on India’s 2% equalization levy on e-commerce supply or services and USA’s trade action against India as a consequence of the said levy.

Traditionally, the taxation of business profits has been linked to a physical presence-based nexus rule. While this was sufficient in the brick-and-mortar economy, the rapid digitalisation of the economy (with growth of digital platforms like Facebook, Amazon, Netflix, Google etc) exposed gaps in such tax rules. Businesses no longer need physical presence to derive economic benefits from a jurisdiction.

In a recent order in Palak Khatuja v Union of India and others (WP(T) No. 149 of 2021) (Order), a single judge bench of the Hon’ble Chhattisgarh High Court (High Court) has upheld the validity of reassessment notice issued under the old law (ie, law existing prior to 1 April 2021).