Friday’s Mumbai Income Appellate Tax Tribunal (ITAT) ruling against Linklaters makes potentially all overseas professional services and law firms subject to income tax in India for the last six years or more if their staff visit India for 90 days in aggregate per year. The repercussions could be serious, according to Indian tax lawyers.

The Authority for Advance Ruling (AAR) has reiterated that sharing of profits and not income would be the determining factor in finding the existence of an Association of Persons (AOR) for the purpose of taxation, while holding that a consortium cannot be treated as an AOR.

Today’s 2010-11 Union Budget has not directly affected law firms although it could have knock-on effects in several practice areas and save individual junior lawyers almost 30 per cent of tax.

“They say it’s going to be a best-selling political thriller with hero called Recovery and a villain called Deficit” read a Times of India caricature about the ongoing Budget session. Meanwhile, indirect and direct tax practitioners have their eyes firmly on service tax, Goods and Services Tax (GST) and the Direct Tax Code (DTC) as issues that will concern the legal community.

Vaish Associates has opened up a Bangalore office, hiring an ex-Indian Revenue Service (IRS) officer and lawyer to help it grow to 24 lawyers within a year in the city.

Cleary Gottlieb Steen & Hamilton tax partner Nikhil Mehta has resigned and entered into a retainer agreement with Amarchand Mangaldas that could see him spend up to 40 per cent of his time doing non-Indian tax advice for the firm.

Indian law firms are famously enamoured with the letters of the alphabet. But is it rubbing off on the Indian tax office?

The Income Tax Department raided the Mumbai offices of ALMT Legal and AZB & Partners late last week looking for information related to clients and offshore transactions. The raids were not related to either of the law firms’ own tax positions.

Today’s Budget has introduced measures to give greater certainty to advance tax rulings to avoid litigation, which has been cautiously welcomed by Indian tax lawyers as appealing particularly to foreign investors.

This year’s Union Budget has paved the way for law firm partnerships to convert to limited liability partnerships (LLPs).

Khaitan & Co has made up a former PricewaterhouseCoopers (PwC) chartered accountant-cum-lawyer to partner.

Sanjay Sanghvi (pictured) only qualified as a lawyer after joining Khaitan in January 2008 from PwC. He is the third new member to the law firm’s partnership in as many months.

He said that working in a law firm was very satisfying: “In accountancy firms you typically do compliance work and you don’t go deeper into the law and interpretation.