India: Retrospective application of amendment to fees for technical services limited (court decision); other direct and indirect tax developments
Monthly report covering recent direct and indirect tax and regulatory developments in India
The Karnataka High Court held that a 2010 amendment to India's fees for technical services (FTS) provisions, although enacted as a clarificatory amendment with retrospective effect from June 1, 1976, substantially widened the scope of taxation and therefore must be applied prospectively rather than retrospectively.
The court concluded that a retrospective expansion of a charging provision cannot be sustained under the guise of a clarificatory amendment. The decision also noted that the amendment conflicted with the more beneficial provisions of the India-United States income tax treaty and that settled matters generally should not be reopened solely because of a subsequent change in law.
The case is: ITA No. 3025/2005; Writ Petition No. 192 of 2011 (T-IT) (Karnataka High Court).
Read an August 2026 report prepared by the KPMG member firm in India, which also includes summaries of the following developments:
- Supreme Court holds that foreign cruise operator eligible for presumptive taxation under the shipping provisions
- Delhi Tribunal applies treaty non-discrimination provisions to limit tax withholding (TDS)-related disallowances on payments to nonresidents
- Mumbai Tribunal holds gains from hedging-related foreign exchange contracts are capital gains, not income from other sources
- Ahmedabad Tribunal holds that LLP partnership interests are capital assets and remands valuation-related issues
- Bangalore Tribunal holds that real estate investment trusts (REITs) cannot claim amortization deductions for IPO-related expenses available only to companies
- Bangalore Tribunal grants relief from tax withholding-related disallowance when the recipient had no tax liability due to losses
- Chennai Tribunal allows full capital gains exemption based on reinvestment of actual sale proceeds despite higher stamp duty valuation
- Visakhapatnam Tribunal holds that fresh allotment of shares below fair market value is not taxable as income from other sources
- Supreme Court upholds goods and services tax (GST) input tax credit condition requiring tax payment by the supplier
- Gujarat High Court upholds GST on corporate guarantees but limits application of the deemed valuation rule
- Government introduces a new cross-border e-commerce export framework under the Foreign Trade Policy
- Reserve Bank of India updates FAQs relating to Special Rupee Vostro Accounts