Tax Concepts

Can legislative amendments redefine constitutional concepts like ‘supply’ and ‘service’ under GST, especially when the principle of mutuality? -->In a landmark decision, the Kerala High Court has ruled that certain amendments to the CGST/SGST Acts, which sought to expand the definition of "supply" to include services provided by clubs and associations to their members, are unconstitutional. -->The key issue revolves around whether Parliament and State Legislatures have the authority to redefine the concept of "supply" and "service" in a way that violates the principle of mutuality. Under GST, "supply" and "service" typically require the involvement of at least two separate entities—provider and recipient. However, these amendments would have allowed clubs (acting as self-help groups) to be taxed for providing services to their own members, an action previously exempt under mutuality principles. --> Court’s Ruling: The Kerala High Court ruled that these amendments violated the constitutional understanding of "supply" and "service". The Court emphasized that mutuality, where the club and its members are considered part of a single entity, has been upheld in past rulings like Ranchi Club v. Chief Commissioner and Calcutta Club Ltd.. The Court highlighted that amendments to the definition of supply cannot override judicial interpretations unless the Constitution itself is amended. -->Retrospective Taxation Issue: Additionally, the Court ruled that the retrospective application of these amendments was unconstitutional. The decision to apply the tax retroactively, without adequate opportunity for businesses to adjust or collect the tax from members, goes against the Rule of Law and the principle of fairness. The absence of a reasonable justification for this retroactivity was also flagged by the Court. -->Impact:It reaffirms that legislative bodies cannot arbitrarily alter the meanings of terms like "supply" and "service" in ways that conflict with constitutional principles. The detailed reading of the 51-page order is included in my reading list.   #gst #caselaw #gstwithtarjani #constitutional #law #legal

🔎Cairn v India (part I post)- one of the largest investor-state tax related arbitration dispute to date - reveals why: ➲ calling changes in tax law as "clarificatory" by the authors of such changes often create a smoke-screen to the illegal retroactive negative tax consequences (cf. para. 3 of ATAD and the OECD and the EC narratives) -focus of this post; ➲ "aggressive tax planning" is a populistic policy term of no or little legal importance altogether (Cf. para. 80 of the Court of Justice of the European Union judgment in X BV case) - focus of the next post post. The attached print screen comes from my latest lectures at BI Norwegian Business School & Universitetet i Oslo. It illustrates that Cairn Energy UK wanted to enter into Bombay Stock Exchange (now: BSE) through a locally established subsidiary (CIL). To ensure a very high entry value of CIL's shares, assets of 27 subsidiaries operating in oil & gas sector in India were consolidated and eventually transferred to CIL (the Indian subsidiary aiming to on on BSE) in a series of incremental stages (CIHL Acquisition). It resulted from offshore indirect transfers (OITs) of shares. Capital gains stemming from such OITs were clearly outside the Indian jurisdiction to tax at the time of CIHL Acquisition. Supreme Court of India confirmed it in 2012 - Vodafone International Holdings BV v Union of India (2012) 6 SCC 613. The Court stated that section 9(1)(i) of Income Tax Act (ITA) does not impose a charge to tax on the sale of shares in foreign incorporated companies since these shares are not "assets situate in India" even though the assets owned by such companies may be so situated. Side note: Peter Hongler during his presentation for IFA Norway on 16 Oct 2024 called taxation of gains from OITs as an example of taxation beyond jurisdiction to tax, which is compatible with international custom, while the UTPR is not. My take: if not an international investment agreement (IIA), or a DTT as the case may be, custom alone is of no or little legal value to prevent such taxation.  📣India decided to overturn its own highest court's judgment in 2012 by adding to the ITA " Explanation 5", calling it only a "clarificatory" change: "For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India." 💡The Tribunal did not buy the "clarificatory" argument at all. It was clearly a substantive and "grossly unfair" change in ITA (para. 1816). P.s.: ➢ Do you agree with the OECD argument that the PPT only mirrors "a guiding principle", e.g. that addition of the PPT to DTTs is only clarificatory in nature? ➢ Do you know other examples of "clarificatory" tax changes in domestic or international tax law?

In an interesting interface of fiscal law provisions with constitutional law tenets, a recently reported decision of the Karnataka High Court in context of ‘Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015’ [Black Money law] is the talk of the town. Failure to disclose any foreign asset was made punishable under the Black Money law. Criminal action was initiated against various parties who owned foreign assets but did not report them as such assets did not exist when the law was enacted. Examining the challenge, the High Court has quashed the criminal proceedings holding that Article 20(1) of the Constitution of India – which grants protection from ex post facto criminal prosecution – will apply in its full vigour to injunct application of Black Money law to past cases. In essence, the High Court has declared the criminal law related provisions to be prospective in operation. Following judicial precedents to the effect that “the object of Article 20 of the Constitution is law in force, actually in force and not a law deemed to be in force”, the High Court has declared that the deeming fiction in the Black Money law making it retrospective cannot operate in the wake of constitutional prohibition against conviction for actions which took place before the law came into force. The High Court has summarised the legal position to state; “Non-disclosure of an assessment of the tax return for the year 2007-08 or 2009-10 cannot be used to criminally prosecute these petitioners, for an act that has come into force in the year 2015. The law, as on the date alleged, was not the law of such disclosure of assessment. Therefore, the criminal law cannot be set into motion against the petitioners in the aforesaid facts of the case, as it cannot pass muster of Article 20 of the Constitution of India.”   #ExPostFactoLaws #CriminalAction #TaxLaw #TaxLaws #ConstitutionalProtection #TaxEvasion #TaxEnforcement [Crm.P. 101368/2019 dt. 07.06.2019]

As private wealth advisor you need to stay attentive to changes, even those occurring outside your jurisdiction. France is considering a trailing tax provision based on nationality (https://lnkd.in/g44sRtFZ - approved in first reading) Portugal has a similar mechanism, though less well-known. Let’s break down the proposed French provision ("free translation"): (1) “Subject to tax treaties signed by France” – This means the provision applies unless overridden by existing tax treaties. (2) “Persons of French nationality” – The scope is limited to French nationals, with no mention to the case of dual nationals. (3) “Who have resided in France for at least three years out of the ten years preceding their change of tax residence” – The French link (3 years within the last 10) raises the question of whether this applies only to future changes in tax residence or retrospectively as well. (4) “Change of tax residence to a State with a tax rate more than 50% lower than that of France” – It remains unclear how France would calculate this tax rate comparison. (5) “In terms of taxation on income from work, capital or assets” – This indicates the comparison is determined by income type not overall statutory rate. (6) “Persons subject to the obligations of this paragraph” – This could suggest self-reporting when a person falls within the scope of the provision. (7) “Benefit from a tax credit equal to the tax on this same income that they have already paid in their country of residence” – Essentially, this is a reverse tax credit mechanism (former residence country credits any foreign tax and only taxes the difference). First of all this is not worldwide taxation based on citizenship, like in the case of U.S nationals. This development simply reinforces the trend we have been observing of certain countries trying to extend their tax reach to mitigate the effects of expatriation (via enlarging exit tax, trailing tax, fictional residence, etc.). Unfortunately, based on EU law, particularly after the Van Hilten case (C-513/03), a case of reverse discrimination against nationals through some sort of trailing tax with a reverse tax credit appears to be permissible. This means the first and last line of defense for French nationals (many of whom reside in Portugal) will be tax treaties. In most cases, those tax treaties should limit the application of such trailing taxes. It will require extensive negotiation for France to add such provisions to its existing tax treaty network, so the short-term impact of this measure will likely be limited to migrations to countries without tax treaties. Portugal also has a similar domestic trailing tax provision for Portuguese nationals (deemed tax residence) for those moving residence to blacklisted territories, with an exception for employment-related expatriation. The "catch me if you can" continues...

𝗖𝗮𝗻 𝗚𝗦𝗧 𝗯𝗲 𝗹𝗲𝘃𝗶𝗲𝗱 𝗼𝗻 𝘀𝗲𝗿𝘃𝗶𝗰𝗲𝘀 𝗽𝗿𝗼𝘃𝗶𝗱𝗲𝗱 𝗯𝘆 𝗮 𝗰𝗹𝘂𝗯 𝗼𝗿 𝗮𝘀𝘀𝗼𝗰𝗶𝗮𝘁𝗶𝗼𝗻 𝘁𝗼 𝗶𝘁𝘀 𝗼𝘄𝗻 𝗺𝗲𝗺𝗯𝗲𝗿𝘀 — 𝗲𝘀𝗽𝗲𝗰𝗶𝗮𝗹𝗹𝘆 𝘄𝗵𝗲𝗻 𝘁𝗵𝗲 𝗹𝗮𝘄 𝘄𝗮𝘀 𝗮𝗺𝗲𝗻𝗱𝗲𝗱 𝗿𝗲𝘁𝗿𝗼𝘀𝗽𝗲𝗰𝘁𝗶𝘃𝗲𝗹𝘆 𝘁𝗼 𝗲𝗻𝗮𝗯𝗹𝗲 𝘁𝗵𝗶𝘀? ☑️ 𝐓𝐡𝐞 𝐅𝐚𝐜𝐭𝐬: • The Indian Medical Association – Kerala State Branch (IMA) runs various welfare schemes (social security, health, legal aid, pensions) for its member-doctors.   • In 2021, an amendment to the GST law (Section 7(1)(aa), CGST Act) retrospectively (from July 1, 2017) deemed clubs and members as separate persons — to tax these services.   • Based on this, IMA was served notices with GST demands, interest, penalties, and personal liability on past office bearers. ☑️𝐓𝐡𝐞 𝐉𝐮𝐝𝐠𝐦𝐞𝐧𝐭: 𝐊𝐞𝐫𝐚𝐥𝐚 𝐇𝐢𝐠𝐡 𝐂𝐨𝐮𝐫𝐭 𝐒𝐚𝐲𝐬 𝐍𝐎 In a significant ruling (W.A. No. 1659/2024, April 2025), the Court: 1. 𝙎𝙩𝙧𝙪𝙘𝙠 𝙙𝙤𝙬𝙣 𝙩𝙝𝙚 𝙙𝙚𝙚𝙢𝙞𝙣𝙜 𝙛𝙞𝙘𝙩𝙞𝙤𝙣 𝙖𝙨 𝙪𝙣𝙘𝙤𝙣𝙨𝙩𝙞𝙩𝙪𝙩𝙞𝙤𝙣𝙖𝙡. ⏺️ Held that Section 7(1)(aa), Section 2(17)(e), and the Explanation violate Article 246A and 366(12A) of the Constitution. ⏺️ Parliament cannot expand its taxing power through legal fiction in a statute. 2. 𝙍𝙚𝙖𝙛𝙛𝙞𝙧𝙢𝙚𝙙 𝙩𝙝𝙚 𝙋𝙧𝙞𝙣𝙘𝙞𝙥𝙡𝙚 𝙤𝙛 𝙈𝙪𝙩𝙪𝙖𝙡𝙞𝙩𝙮. ⏺️ A club and its members are one and the same — there is no “supply” between them. ⏺️ The amendment destroys mutuality, which the Constitution protects. 3. 𝘾𝙖𝙡𝙡𝙚𝙙 𝙩𝙝𝙚 𝙧𝙚𝙩𝙧𝙤𝙨𝙥𝙚𝙘𝙩𝙞𝙫𝙚 𝙡𝙚𝙫𝙮 𝙖𝙧𝙗𝙞𝙩𝙧𝙖𝙧𝙮. ⏺️ Demanding tax from 2017 when the law was introduced in 2021 is unfair. ⏺️ Violates constitutional and fundamental rights of citizens. ☑️𝐁𝐎𝐍𝐔𝐒: 𝐂𝐚𝐥𝐜𝐮𝐭𝐭𝐚 𝐂𝐥𝐮𝐛 𝐂𝐚𝐬𝐞 – 𝐓𝐡𝐞 𝐏𝐫𝐞𝐜𝐞𝐝𝐞𝐧𝐭 𝐓𝐡𝐚𝐭 𝐒𝐭𝐢𝐥𝐥 𝐇𝐨𝐥𝐝𝐬 The 2019 Supreme Court ruling in Calcutta Club v. Union of India held: ✅ Clubs and associations cannot be taxed for services to members — because of mutuality. ✅ Even the 46th Constitutional Amendment only covered goods, not services. ✅ So service tax was invalid, and now, GST can’t override that without a constitutional amendment. The Kerala High Court reinforced that this principle remains unchanged — and unshakeable. ☑️ 𝐖𝐡𝐲 𝐓𝐡𝐢𝐬 𝐌𝐚𝐭𝐭𝐞𝐫𝐬: This is a massive win for hundreds of associations — from professional bodies and chambers to cooperative groups — all of whom exist for the benefit of their members. Do you think laws should go back in time to make retrospective amendments to collect taxes? Or should fairness and intention matter more than revenue? Let’s discuss in comments. #GST #KeralaHighCourt #Mutuality #ClubTaxation

ITC can not be denied, based solely on retrospective cancellation of supplier's GST registration • The Madras High Court held that Input Tax Credit (ITC) cannot be denied solely because the supplier’s GST registration was cancelled retrospectively. Where the supplier was a validly registered taxpayer on the date of the transaction, retrospective cancellation by itself is not sufficient to reject the recipient’s ITC claim. • The Court observed that the impugned orders primarily relied on the retrospective cancellation of the supplier’s registration, without independently examining whether the underlying supplies were genuine and actually received by the recipient. Such an approach was held to be legally unsustainable. • Reaffirming its earlier ruling in Engineering Tools Corporation, the Court emphasized that GST authorities must verify the authenticity of transactions by examining supporting evidence such as tax invoices, e-way bills, lorry receipts, transport documents, and other records demonstrating actual movement and receipt of goods. • While the Revenue argued that certain invoices were issued after the supplier’s cancellation and that adequate proof of receipt of goods had not been furnished, the Court noted that most transactions had occurred before the cancellation order was passed. Therefore, a detailed factual verification of the transactions was necessary before denying ITC. • Accordingly, the High Court set aside the assessment orders relating to the relevant tax periods and remanded the matters for fresh adjudication. The authorities were directed to reconsider the ITC claims on merits, provide the assessee a reasonable opportunity of hearing, and pass fresh orders in accordance with law within the prescribed timeframe. Madras HC - Fathima Traders vs Deputy Commercial Tax Officer [WP Nos. 22419, 22420, &22422 OF 2023] A2Z TAXCORP LLP

2026 CIT Filing: New Tax Act or Old Rules? The Retroactivity Battle Unfolds The Nigeria Tax Act (NTA) 2025, which repealed and replaced the Companies Income Tax Act (CITA) among other laws, took effect on January 1, 2026. This major tax reform aims to consolidate and modernize Nigeria's tax framework, but its application to Companies Income Tax (CIT) filings has sparked debate over retrospective versus prospective implementation. In Nigeria's tax system, the year of assessment (YOA) for most companies (non-upstream petroleum) follows a preceding-year basis: the 2026 YOA covers profits earned in the 2025 financial year, when the old CITA regime was still in force. Recent guidance from the Nigeria Revenue Service (NRS), formerly FIRS, indicates that CIT returns for the 2026 YOA should be prepared, filed, and assessed under the provisions of the NTA and the related Nigeria Tax Administration Act (NTAA), regardless of the filing date. This approach effectively applies the new rules to income earned before the NTA's commencement, raising concerns about retroactive taxation. Critics, including business groups like the Nigeria Employers' Consultative Association (NECA) and legal analyses, argue this conflicts with the principle of non-retroactivity in taxation. Nigerian courts (e.g., in cases involving prior Finance Acts) have ruled against retrospective application unless explicitly stated in the law. Since the NTA does not clearly mandate retroactive effect for CIT on pre-2026 income, it is therefore contend that the repealed CITA provisions should govern the 2026 YOA (i.e., 2025 profits). I think it is essential that major stakeholders proactively engage with the relevant regulatory authorities in reconciling tgis before companies will commence filing. What are your thoughts? Do you think the NRS’ guideline is in order or should be reviewed? Olamide Olaniran ACA Tomi Akinwale Disclaimer: This article is intended solely for educational purposes and should not be quoted out of context. The opinions expressed herein are strictly those of BBM (the author) and do not represent the views or positions of the author’s employer or any other affiliated institutions. The content provided is based on the author's personal analysis and research and should not be construed as professional advice. Readers are encouraged to seek professional guidance for specific concerns. The author disclaims any liability for any actions taken based on the information presented in this article.

Sri Lanka's Supreme Court handed tax practitioners something we've needed for a long time. A single determination that tells us exactly where the constitutional limits of fiscal legislation sit. In SC(SD) Nos. 12–16/2026, the Court pulled together ten principles that now form the definitive reference point for anyone who works in or around Sri Lankan tax law. Whether you're a CFO, a finance director, a tax advisor, or a business owner, this matters to you. The principles are ; 1) Parliament holds the cards on taxation. Courts know it, respect it, and are reluctant to second-guess it. A tax that feels unfair, heavy, or even punishing is not automatically unconstitutional. That's not how the Constitution works. 2) The bar for judicial intervention is genuinely high. A fiscal measure has to be “manifestly unreasonable or manifestly discriminatory” before a court will step in. Harsh doesn't cut it. Burdensome doesn't cut it. Even retrospective taxation, yes, Parliament can do that, won't be struck down unless it crosses into something clearly prohibitive. 3) What the Constitution does protect against is a tax that operates “unequally within its own chosen group” , where the discrimination has no rational justification whatsoever. That's the line. And it's a narrow one. Knowing where that line sits isn't just useful for constitutional lawyers. It tells every taxpayer and advisor when a legal challenge is worth pursuing , and when it simply isn't. - SC(SD) Nos. 12–16/2026 | Inland Revenue (Amendment) Bill | Supreme Court of Sri Lanka | April 2026

The Tax Appeal Tribunal (Patel v Commissioner, TAT E628/2025) has held that KRA cannot lawfully disallow carried-forward losses as far as the 5-year cap is concerned. The Tribunal’s ruling adopted the Appellant’s argument on legitimate-expectation and finality principles. It held that the 2025 Finance Act amendment on tax losses carry-forward is prospective and cannot be read to erase loss entitlements accrued under the earlier indefinite regime in the absence of clear transitional language — a result driven by the presumption against retrospectivity and other authorities the Tribunal cited. On legacy migration, the Tribunal also found KRA failed to discharge the high evidential burden required to show fraud, willful or gross neglect; the missing decade-old documents and system migrations did not satisfy that threshold. Accordingly, disallowance of the carried losses was unjustified. Practical implications for taxpayers (from this ruling) 1. Finance Act 2025’s five-year cap should not, on its face, extinguish loss entitlements already accrued under the prior indefinite regime where no clear transitional clause exists. 2. Tax attributes already relied upon in planning and used in returns have protection from retroactive legislative claw-back, absent explicit statutory language. 3. KRA retains power to reassess outside limitation periods only where cogent, positive evidence of fraud or wilful neglect is proven — mere absence of old records or ledger migration anomalies is ordinarily insufficient.