C&M E-ALERT: Thinking of settling with the Competition Commission of India? Here are the tax implications
- Karan Singh Chandhiok
- Apr 30
- 2 min read
WHAT HAS HAPPENED? |
TAX IMPLICATIONS FOR SETTLEMENT UNDER THE COMPETITION ACT |
Settlement under the Competition Act, 2002 (Competition Act): Parties can apply for ‘settlement’ with the Competition Commission of India (CCI) in cases where the investigation against them pertains to allegations involving anti-competitive agreements (under Section 3(4)) or abuse of dominance (under section 4). A settlement is not considered as an admission of guilt or construed as a finding of contravention under the Competition Act. Under the settlement scheme the applicant is eligible for a 15% reduction in the penalty that the CCI would have otherwise imposed had it found the applicant to be in contravention of the Act. See C&M’s detailed alert here.
What is the CBDT Notification?: Deductions under Section 37 of the Income Tax Act, 1961 (Income Tax Act) are allowed on any expenditure incurred “wholly and exclusively for the purposes of the business or profession”. However, any expenditure incurred as a result of violating the law, such as penalties or fines imposed for non-compliance with any prevailing legislation, is not allowed as a deduction under the Income Tax Act. On 23 April 2025, CBDT notified that in relation to settlements under Competition Act, “any expenditure incurred to settle proceedings initiated in relation to contravention or defaults …shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made.”
What does this mean for parties thinking of settling with CCI? Settlements do not require an admission of guilt, nor can they be construed as a ‘contravention’ under the Act. As per the CBDT Notification, however, it will receive the same treatment as penalties imposed under law.
Click here to read the notification.
This document is for general information purposes only and is not intended to provide legal or other professional advice. In case of feedback, suggestions, or queries, please reach out to the C&M team on competitionlaw@chandhiok.com
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