Merely Being a Subsidiary Does Not Qualify as 'Agent' under GST: Bombay HC Criticizes Dept for Relying on Unrelated Definitions

The Bombay High Court has criticized the GST department for its interpretation of the term "agent," ruling that a company being a subsidiary of another does not automatically make it an agent under the GST law. The department had relied on unrelated definitions to treat a subsidiary as an agent of its holding company for tax purposes. The High Court held that the relationship between a holding company and its subsidiary is based on control and investment, which is distinct from a principal-agent relationship, where one party acts on behalf of another. The court emphasized that the specific definition and context within the GST law must be considered. By quashing the department's action, the High Court has provided crucial clarity on this issue, preventing the tax authorities from arbitrarily clubbing legally distinct entities based on loose interpretations of their corporate relationship.