Taxation: Direct and Indirect Tax

The new income-tax law

The Income-tax Act, 2025 received assent on 21.08.2025 and came into force on 01.04.2026, repealing the Income-tax Act, 1961. It is intended to simplify rather than to change the substance of the tax: the number of sections is cut from over 800 to 536, the language is plainer, and the old pair of terms 'previous year' and 'assessment year' is replaced by a single 'tax year'.

The change is being managed through transitional provisions. Matters relating to years before 01.04.2026, completed assessments and pending proceedings, continue under the 1961 Act, so for some time advisers and the department work in both. Identifying which Act and which year govern a given matter is the first practical step in any current tax dispute.

GST and indirect tax

Indirect tax is governed by the Goods and Services Tax, levied under the Central and State GST Acts and, on inter-State supplies and imports, the Integrated GST Act, all of 2017. The recurring disputes are over classification of goods and services, the rate, eligibility for input tax credit, the place and time of supply, and refunds. The firm advises on compliance and represents businesses in GST adjudication and appeals.

The constitutional architecture of GST is still being worked out by the courts. In Union of India v. Mohit Minerals the Supreme Court held that the recommendations of the GST Council are not binding on Parliament and the State legislatures but are persuasive, and struck down a separate levy of IGST on ocean freight on imports as contrary to the scheme of the law. Decisions of this kind shape how the GST statutes are read and applied.

Assessment, limitation and appeals

A direct-tax dispute usually begins with an assessment or reassessment order, which is challenged first by a first appeal to the Commissioner (Appeals), then to the Income Tax Appellate Tribunal, and from there, on a substantial question of law, to the High Court and the Supreme Court. Each stage has its own limitation period and its own scope, and a great deal turns on framing the right grounds at the right stage.

Limitation and procedure are not technicalities in tax; they are often decisive. In M/s Shiv Steels v. State of Assam the Supreme Court set aside a reassessment because the original assessment had already become time-barred, holding that administrative approval cannot revive an expired limitation period and that, as a matter of principle, no tax can be imposed by inference. The firm tests every demand against the statute, the figures and the limitation position before it is contested.

Cross-border tax and permanent establishment

For businesses operating across borders, the questions are whether income is taxable in India at all and, if so, at what rate under the relevant Double Taxation Avoidance Agreement. Much of this turns on whether the foreign enterprise has a 'permanent establishment' or a business connection in India.

That concept continues to be refined. In Hyatt International Southwest Asia Ltd v. Additional Director of Income Tax the Supreme Court held that a permanent establishment can exist even without premises exclusively at the enterprise's disposal, where there is continuous operational presence and control. The firm advises foreign and Indian businesses on the tax exposure of cross-border arrangements with this developing law in view.

Planning within the law

There is a clear line between arranging affairs tax-efficiently within the law and using artificial devices to escape tax. The principle stated in McDowell & Co. v. Commercial Tax Officer still holds: tax planning is legitimate so long as it is within the framework of the law, but colourable devices are not part of legitimate planning. That line, now reinforced by the General Anti-Avoidance Rules, guides the advice the firm gives on structuring and on defending arrangements that the department seeks to disregard.

The legal framework

The principal statutes and the provisions that most often decide these matters. Statute text can be read in the firm's Legal Library; always check the current version at the official source.

Key judgments

Grouped by issue. Each case is cited from the court's own record; open a heading to read it.

How we work on these matters

One advocate stays responsible for the matter across the assessment, the appeals and the higher courts, so the position taken at the first stage is carried through consistently.

Every demand is tested against the statute, the figures and the limitation position before it is contested, and the grounds are framed for the stage they are argued at.

Advice is candid about what the law allows and about the realistic prospects of an appeal, and the firm does not encourage arrangements that depend on artificial devices.

Frequently asked questions