India: Issued Tax Appellate Tribunal ruling on application of Equalisation Levy on Intermediaries

On 7 October 2022, the Jaipur bench of the Income Tax Appellate Tribunal (ITAT) issued a ruling on the appellate case DCIT v. Prakash Chandra Mishra (TA No. 305/JPR/2022). This is the first ruling clarifying the scope of the Finance Act of 2016 since the Act does not include any specific exception for intermediaries. The Income Tax Department had originally rejected the defendant's claim that a transaction concerning the sale and purchase of online advertising could be considered business expenditures. The ITAT established that since the principal transaction took place between two non-residents, the Indian Defendant was only acting as an intermediary, and therefore the provisions of Section 165 of the Finance Act of 2016 and the 6% service tax it foresees did not apply in this case.