India: Tax-related tribunal and court decisions
Concerning permanent establishments, treaty exemptions, GST refunds, and more
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january 30, 2026
The KPMG member firm in India has prepared a January 2026 report summarizing tax developments in India, reflecting decisions from various tribunals and courts on matters ranging from permanent establishments to goods and services tax (GST) refunds.
- Permanent establishments (PEs): The Delhi Tribunal ruled that seconded employees carrying on business for an Indian company do not create a PE for a foreign company. The tribunal found that offshore sales were genuine and that the Indian company operated independently.
- Agency PE: The Delhi Tribunal ruled that a principal-to-principal distribution arrangement does not constitute an agency PE in India, as the subsidiary operated independently and did not habitually secure orders for the taxpayer.
- Capital loss set off: The Mumbai Tribunal allowed the setoff of securities transactions tax (STT)-paid short-term capital loss against non-STT-paid short-term capital gains, as section 70(2) of the Income-tax Act does not distinguish between STT-paid and non-STT-paid transactions.
- Treaty exemption: The Visakhapatnam Tribunal granted a treaty exemption for independent personal services, even if the significant economic presence threshold was exceeded, under the India-UAE tax treaty.
- Section 56(2)(viib): The Chennai Tribunal ruled that section 56(2)(viib) cannot be invoked when a subsidiary becomes a widely held company due to acquisition of its shares by a publicly listed company.
- GST refund: The Supreme Court held that the refund of pre-deposit is not subject to the limitation under section 54 of the Jharkhand GST Act, directing a refund with interest.
- Input tax credit distribution: The Telangana High Court held that rule 39(1)(a) of the Central Goods and Services Tax (CGST) Rules, 2017 is ultra vires section 20 of the CGST Act, 2017, quashing the audit report and show cause notice (SCN).
- Advance ruling: The Kerala High Court decided that the Authority for Advance Ruling cannot reject applications when prior proceedings were not decided on merits.
- Rectification: The Allahabad High Court held that non-consideration of reply/submission is an “error apparent on the face of record” requiring rectification under section 161 of the CGST Act, 2017.