Happy New Year 2026!
It gives us immense pleasure to present the second edition of Tax Controversy Chronicle - Grant Thornton Bharat’s quarterly publication that spotlights key judicial developments across direct tax, indirect tax, FEMA and transfer pricing.
At Grant Thornton Bharat, our commitment is to deliver #ExceptionalCare through practical guidance and deep insights into tax disputes, enabling clients to navigate complex challenges with clarity.
This publication presents a curated selection of landmark judgements, concise case insights, and a watchlist of key pending matters that are expected to shape the future of tax jurisprudence. Our objective is to empower stakeholders to manage risks proactively, anticipate litigation outcomes, streamline tax controversy management, and stay ahead in India’s dynamic tax and regulatory framework.
Key highlights:
In this edition, we analyse several significant tax rulings, the summary of which is as below:
- Direct tax – The Supreme Court (SC) affirms that a temporary lull in business activity does not amount to cessation, emphasising that continuity must be assessed through intent and conduct rather than the mere absence of contracts. In another landmark ruling in the case of Tiger Global International, the SC holds that the Tax Residency Certificate is not a sufficient condition for claiming treaty benefits and sets aside the Delhi High Court’s (HC’s) ruling related to the matter.
- Indirect tax – The SC upholds the Delhi HC’s view that the input tax credit cannot be denied to bonafide purchasers merely because suppliers failed to deposit VAT, provided the transactions are genuine. Though rooted in the VAT regime, this principle resonates under GST, reinforcing that honest taxpayers should not suffer for supplier defaults.
- Foreign Exchange Management Act - The Appellate Tribunal holds that the LRS is not a blanket permission and that legacy offshore accounts and debt funding pose high FEMA risk that cannot be cured by later repatriation or tax settlement, without express approvals.
- Transfer pricing – The Mumbai ITAT, in a case involving Netflix, decisively rejects the Revenue’s attempt to recharacterise a limited-risk distributor as a full-fledged content provider, emphasising that the TP adjustments must be based on real transactions, thus strengthening the position for OTT and digital businesses using cost plus models.
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