India: Summary of recent tax-related court decisions

The KPMG member firm in India prepared a February 2026 report summarizing the following recent tax-related court decisions in India:

• Software distribution income not fees for technical services (FTS) under treaty: The Mumbai Tribunal held that receipts from Indian sub‑distributors for distribution of software products were not taxable to a Singapore distributor as FTS under the India–Singapore income tax treaty, and the India–Switzerland income tax treaty could not be invoked to tax those receipts as FTS.
• Dependent agent permanent establishment (DAPE) and reinsurance premiums: The Mumbai Tribunal held that an Indian branch was not a DAPE for the taxpayer’s “direct business” premiums because the relevant contracts were negotiated and risks commenced before the India branch existed. Thus, the reinsurance premiums were not attributable to the Indian branch and not taxable in India.
• Payments for flight and navigational data services not royalties under treaty: The Mumbai Tribunal held that payments for flight/navigational data services, restricted‑license Electronic Flight Bag (EFB) software, and ancillary training/services did not constitute “royalties” under the India–Germany income tax treaty because customers received end‑product data or a limited right of use without transfer of proprietary know‑how.
• Provident fund (PF) contribution delay: The Delhi Tribunal held that a one‑day delay in depositing employees’ PF contributions due to technical gateway glitches could be treated as payment within the prescribed due date; deduction was allowed because taxpayer produced evidence of technical error and bona fide intent.
• Salary credited to nonresident external (NRE) account not taxable: The Ahmedabad Tribunal held that salary for services rendered outside India, which accrued and was first received outside India but later credited to the taxpayer’s NRE account in India, did not amount to income “received” in India and therefore was not taxable in India.
• Conversion of preference shares into equity not taxable: The Mumbai Tribunal held that conversion of optionally convertible cumulative redeemable preference shares (OCCRPS) into equity shares did not give rise to taxable income under section 56(2)(x).
• Show‑cause notice (SCN) invalid: The Allahabad High Court held that an SCN that quantified tax and penalty but did not quantify interest was violative of section 75(7) of the CGST Act, 2017, and thus the SCN and the adjudication order were set aside.
• Transfer of business as going concern not subject to goods and services tax (GST): The High Court held that transfer of a business as a going concern does not constitute a taxable supply for GST purposes.