TaxTonic #26: Question of Law v. Facts - A New Elephant in the Room!

Episode Duration:
70 Minutes

Episode Background:
'TaxTonic', a 'subscriber only' thought leadership series, is Taxsutra's endeavour to consistently deliver top notch technical content to it's readers. The labyrinth of tax rulings on convoluted transactions keeps the world of taxation unpredictable and ever-evolving. This series will feature engrossing presentations, incisive analyses and a deep-dive by the tax experts on burning issues & controversies. So, gear up for a 'tonic' to chisel your tax mind and challenge your wit.

Speaker:

Mr. Sachit Jolly (DMD Advocates)

Moderator:
Mr. Sachin Sastakar (Chartered Accountant)

What shall the episode cover?

Under the Income Tax Act, High Courts enjoy appellate powers against every order of the Tribunal with respect to substantial questions of law. What is a 'substantial question of law' has been debatable and the Supreme Court in several judgments has laid down principles that resolve the conflict between a question of law and a question of fact. Recently the Supreme Court in the case of SAP Labs [TS-225-SC-2023-TP] held that it is always open for the High Courts to examine in each case, whether the statutory transfer pricing guidelines are followed or not, while determining the arm’s length price. The Supreme Court further held that any deviation from the guidelines would constitute perversity and lead to a substantial question of law. A few days later, another bench of the Supreme Court in Travelport Inc. [TS-218-SC-2023] held that the question on portion of income reasonably attributable to the operations carried out in India is a question of fact. Within a month's time, we got two rulings from the Apex Court that makes one wonder as to where a question of fact ends and a question of law kicks in?

In the episode of TaxTonic, we endeavour to understand the nuances between a question of law and a question of fact along with its impact on the ongoing and upcoming litigation. This episode primarily covers:

1. Scope and meaning of Question of Law
2. Ratio decidendi of SAP Labs judgment
3. Ratio decidendi of Travelport judgment
4. The test of “Perversity” of ITAT judgment & its impact on the appeal before the High Court
5. Key takeaways for the Taxpayer and the Revenue