What the disputes are about
- Eligibility. Whether the unit meets section 147: a valid IFSCA (or RBI or SEBI) permission or registration, the correct 'relevant tax year' from which the 25-year block is counted, an accountant's report in Form No. 35 filed with the return, and, for units starting on or after 1 April 2026, the test in section 147(5) that the unit is not formed by splitting up or reconstructing an existing Indian business. See the section 147 deduction.
- Scope of eligible income. Only income from the unit's approved business activities qualifies (section 147(3)(c)), and Form No. 35 excludes income not received in convertible foreign exchange. Revenue outside the IFSCA permission, or received in rupees, is a common point of challenge. IFSCA has itself directed an entity that served clients outside its permitted categories not to claim tax benefits on those transactions and to repay any already claimed.
- Transfer pricing. Whether prices between the unit and its group are at arm's length under Chapter X, and whether the unit has the functions and people to earn the profit it reports. See transfer pricing.
- Withholding. Whether payers were entitled to pay without deducting tax on the strength of a declaration in Form No. 1(N), and whether the years declared match the years claimed. See TDS relief.
- Minimum tax. Whether the 9 per cent minimum alternate tax rate applies, which turns on the unit deriving its income solely in convertible foreign exchange. See minimum alternate tax.
How a dispute runs under the 2025 Act
| Stage | Provision | Time limit |
|---|---|---|
| Draft order and objections to the Dispute Resolution Panel (eligible assessees: where a Transfer Pricing Officer's order causes the variation, or the assessee is a foreign company or a non-resident that is not a company) | Section 275 | Objections within 30 days of receiving the draft order |
| First appeal to the Joint Commissioner (Appeals) or Commissioner (Appeals) | Sections 356 to 358 | Within 30 days of service of the demand notice or order, extendable for sufficient cause |
| Appeal to the Appellate Tribunal | Section 362 | Within two months from the end of the month in which the order is communicated; cross-objections within 30 days of notice |
| Appeal to the High Court on a substantial question of law | Section 365 | Within 120 days of receiving the Tribunal's order |
| Appeal to the Supreme Court on a certificate of fitness | Section 367 | - |
Assessments made on the directions of the Dispute Resolution Panel go straight to the Tribunal (section 362(1)(d)). Two other routes may suit particular cases: the Dispute Resolution Committee for persons and conditions specified under section 379, and an advance ruling from the Board for Advance Rulings on a proposed or completed transaction (sections 380 onwards).
Earlier years under the 1961 Act
Proceedings for tax years beginning before 1 April 2026, including appeals started after that date, follow the Income-tax Act, 1961, and pending proceedings continue as if the 2025 Act had not been enacted (section 536). A dispute about a section 80LA claim for an earlier year is still argued under section 80LA. See from the 1961 Act to the 2025 Act.
Points of practice
- Document eligibility from day one. Keep the IFSCA registration and its date, the Letter of Approval, the business plan and any changes to permitted activities in one file. The registration year fixes the 25-year block.
- Keep Form No. 35 and its working papers for every year: the revenue mapping to permitted activities, the currency analysis and the reconciliation to the accounts.
- Align the documents. The years in Form No. 1(N), the return and Form No. 35 should match.
- Evidence substance. Board minutes, staff records and decisions taken in GIFT City support both transfer pricing and the regulatory picture. IFSCA's findings on physical presence can be used by the tax authorities, and the reverse. See substance.
- Choose the route early. An eligible assessee should decide promptly between objecting to the Dispute Resolution Panel and taking the first-appeal route, because the 30-day windows are short.