GIA India Laboratory Private Limited Vs ACIT (International Taxation) (Bombay High Court)
Summary: The Bombay High Court quashed an order dated 20.03.2026 passed under Section 201 of the Income-tax Act, 1961 for AY 2020-21, which treated GIA India Laboratory Private Limited as an assessee in default and raised a demand of Rs.67.56 crore for failure to deduct tax from payments made to its parent company, Gemological Institute of America, Inc. (GIA US). The Department alleged that GIA India constituted a Permanent Establishment of GIA US in India and that the grading and management fees received by GIA US were taxable in India. However, the Tribunal had consistently rejected the existence of a fixed place, service or agency PE, and the Bombay High Court had upheld those findings in CIT Vs Gemological Institute of America Inc. The Court held that the TDS officer acted without authority of law by disregarding binding Tribunal orders merely because the Department had filed appeals. Applying the principle of judicial discipline recognised in Union of India Vs Kamalakshi Finance Corporation Ltd., it reiterated that an appellate order remains binding unless stayed. Relying on GE India Technology Centre (P.) Ltd. Vs CIT, the Court also held that no application under Section 195(2) was required because the income was not chargeable to tax in India. The Section 201 order was accordingly set aside.
