Delhi HC: No Deemed Gift Tax on Share Buy-Back at Discount

The Delhi High Court in the case of Globe Capital market has ruled that a company’s buy-back of its own shares cannot be taxed under Section 56(2)(x) of the Income Tax Act merely because the buy-back price is below fair market value. Dismissing the tax department’s appeal, the Court held that buy-back results in reduction of share capital, not acquisition of property.

Since bought-back shares are extinguished, the company does not acquire any capital asset capable of generating income. Thus, the deemed gift provisions do not apply.

While this ruling offers clarity for unlisted companies, the evolving buy-back tax framework and the new Income Tax Act, 2025 now require case-specific evaluation of applicable provisions.

Big Relief for Taxpayers: Delay in Form-67 Not Fatal for Foreign Tax Credit

In a landmark ruling, the ITAT, Hyderabad Bench, in the case of Amith Vishnaw Gudimela, held that a delay in filing Form-67 cannot be the sole ground to deny Foreign Tax Credit (FTC). The tribunal allowed FTC to an assessee employed in the USA with Cognizant US Corp, even though Form-67 was filed after the due date.

The CPC had disallowed the claim under Section 143(1), citing Rule 128(9), which requires filing before the return due date. However, the ITAT observed that FTC prevents double taxation under Section 90 of the Income-tax Act and the India-USA DTAA. Procedural rules like Rule 128(9) are directory, not mandatory. Denying credit for a mere delay would violate treaty obligations.

The tribunal directed the department to grant FTC, reinforcing that substantive relief under DTAA overrides procedural lapses. This ruling is a key precedent for international tax professionals.

Orissa High Court Rules Against Adjustment of Refund During Stay

In a significant ruling, the Orissa High Court has held that adjusting an income tax refund against a disputed demand while a stay order is in force is illegal and arbitrary. The court directed the tax department to release a refund along with interest, declaring the adjustment as perfunctory and in violation of principles of natural justice.

Taxation of Capital Gains on Property: The Allotment vs Transfer Debate

Capital gains taxation on immovable property under the Income-tax Act, 1961 often turns on a deceptively simple question: when is a property “acquired” or “transferred”? In modern real estate transactions—especially under construction properties—this issue becomes complex due to multiple milestones such as allotment, agreement, possession, and registration.

Interest During Project Setup Phase Not Taxable and Set Off Against Project Cost

 The Delhi High Court held that interest earned on funds temporarily parked in bank deposits during the project setup phase is capital in nature and not taxable as income, where such funds are not surplus / idle funds but are inextricably linked to project. The Court further clarified that such interest is required to be adjusted against (i.e., set off against) project / pre-operative expenditure, thereby reducing the overall cost of project.

Background:

Chennai NCLAT Rules Composite Schemes Must Stand as One - Strikes Down NCLT Order Splitting Amalgamation and Demerger in Separate Scheme

 In a significant ruling, the Chennai NCLAT has held that where a Composite Scheme of Arrangement envisages amalgamation followed by an immediate demerger, the Tribunal cannot sanction only the amalgamation portion and direct the parties to file a separate application for the demerger.

High Court of Andhra Pradesh: Failure to prove donor’s creditworthiness and source renders cash gifts unexplained income

 Recently, the Hon’ble High Court of Andhra Pradesh in the case of Bathina Srilakshmi v. Income-tax Officer held that where the assessee fails to substantiate the identity, creditworthiness, and source of funds of the donor with credible evidence, the claim of receipt of cash gifts cannot be accepted. The Court emphasised that mere assertions or unsupported explanations are insufficient to discharge the onus cast upon the assessee, and in the absence of proper documentation establishing the genuineness of the transaction, such amounts are liable to be treated as unexplained income.

Navigating the New Foreign Remittance Compliance Regime under ITA 2025

 The transition to the Income-tax Act, 2025 (ITA 2025) and the accompanying Income-tax Rules, 2026 introduces a significantly overhauled compliance framework for foreign remittances and treaty benefit claims. The familiar forms—10F, 15CA, and 15CB—have been succeeded by Forms 41, 145, and 146 respectively. This rewrite outlines the key structural shifts, enhanced disclosure requirements, and a critical interpretational issue regarding treaty eligibility.

Asset' vs ‘Undertaking’: NCLAT provides clarity

 The scope of shareholder approval for asset sales has long been a contested area, particularly where high-value assets are involved. A recent ruling by the National Company Law Appellate Tribunal (‘NCLAT’) provides useful clarity on when such approval is actually required.

When Buy-Back Becomes a Restructuring Activity

 Not all share buy-backs are mere return of capital. Under certain conditions, a buy-back can be recharacterised as a restructuring activity – with significant tax and legal implications.

TDS Critical Takeaway from the Pfizer Case

A recent ruling in the Pfizer case has delivered an important lesson for taxpayers deducting TDS on cross-border payments.

Major Shift in LDC Framework: Act Now

A significant change under Section 395(1) of the Income-tax Act, 2025 is reshaping how Lower Deduction Certificates (LDCs) operate via TRACES.

⚠️ Critical Update: Starting April 1, 2026, a Master LDC Certificate will no longer be valid for quoting in TDS returns.

AIF Scheme Eligible for Pass-Through Exemption Despite Separate PAN

 In a recent ruling, the Mumbai Tribunal held that a scheme floated under a SEBI-registered Category II AIF trust can claim pass-through exemption, and such benefit cannot be denied merely because the scheme has a separate PAN while the SEBI registration stands in the name of the parent trust.

Withdrawn IPO Expenses treated as Revenue Expenditure

 The Delhi Bench of the Income-tax Appellate Tribunal ('Tribunal'), in a recent decision, held that expenses incurred on withdrawn IPO are revenue in nature and that income arising from foreign exchange differences and write-back of provisions qualifies for export-linked deductions.

Background

Gujarat HC – Relief for delay in opting concessional tax regime

 Gujarat High Court has granted relief to a taxpayer by allowing condonation of delay in opting for the new tax regime, holding that genuine and bona fide procedural delays may not result in denial of tax benefits.

Background

Indirect Transfer on Liquidation of a Foreign Holding Company

1. Introduction

Cross-border investment structures often employ intermediate holding companies in jurisdictions like the Cayman Islands. A common corporate restructuring step involves liquidating such a holding entity, which results in the upstream shareholder (for example, a Singapore company) acquiring direct ownership of the underlying subsidiaries—including, potentially, an Indian company.

ITAT Delhi – Cross border Buy-back may Qualify as Corporate Reorganisation whereby Capital Gains Not Taxable in India

 Recently, the Delhi Bench of the ITAT has held that a buy-back of shares within a corporate group can qualify as a “corporate reorganisation” under Article 13(5) of the India–Netherlands DTAA, thereby rendering the resultant capital gains taxable only in the Netherlands and not in India.

Recent Policy Changes Impacting Indian Manufacturing and Exports

 In a series of recent policy and regulatory interventions, the Government has introduced a set of measures aimed at strengthening export competitiveness, easing compliance, and enhancing domestic manufacturing resilience. Together, these measures spanning customs facilitation, import policy, sustainability regulation, and trade support reflect a calibrated policy response balancing trade facilitation, cost competitiveness, domestic industry protection, and sustainability alignment.

Deferred Customs Duty for Manufacturers: EMI Scheme Takes Effect from 1 April 2026

 In a significant move to ease working capital pressures for manufacturers, the Central Board of Indirect Taxes and Customs (CBIC), vide Circular No. 08/2026-Customs dated 28.02.2026, has extended the facility of deferred payment of Customs import duty to a new category of importers termed Eligible Manufacturer Importers (EMI), effective from 1^st April 2026. Under this framework, eligible importers can clear goods without upfront payment of Customs duty and instead discharge the duty liability on a consolidated monthly basis, thereby enabling more efficient cash flow management. This reform announced as part of the Union Budget 2026–27, is governed by the Deferred Payment of Import Duty Rules, 2016, is also aimed at expediting Customs clearance of imported goods at ports, airports, and inland container depots.

Interest on Foreign Currency Loan & Corresponding Forex Loss for Strategic Share Acquisition Held Deductible as Revenue Expenditure

 The tax treatment of interest on funds borrowed to acquire shares hinges on a single, crucial distinction: the purpose behind the acquisition.

Landmark ITAT Delhi Ruling: Share Buy-Backs Qualify as "Corporate Reorganization" under India-Netherlands DTAA

 In a significant victory for multinational enterprises and foreign portfolio investors, the Delhi bench of the Income Tax Appellate Tribunal (ITAT), via a Third Member ruling, has held that a share buy-back by an Indian subsidiary from its Netherlands-based parent constitutes a “corporate reorganization” under the India-Netherlands Double Taxation Avoidance Agreement (DTAA). The decision, pronounced on March 25, 2026, in the case of Huntsman Investment [Netherlands] BV vs. ADIT (Assessment Year 2009-10), sets a powerful precedent on treaty interpretation.

CBDT amends Income Tax Rules to clarify GAAR grandfathering provisions

 On 31 March 2026, the Central Board of Direct Taxes (CBDT) issued two Notifications^[1] amending General Anti Avoidance Rules (GAAR) providing grandfathering benefit for income derived from transfer of investments which were made prior to 1 April 2017. The first Notification amends Rule 10U under Income Tax Rules (ITR), 1962 applicable to the erstwhile Income Tax Act (ITA), 1961, whereas the second Notification amends comparable Rule 128 under ITR 2026 applicable to the new ITA 2025 effective from 1 April 2026.

The Notifications state that GAAR provisions shall not apply with respect to any income derived from transfer of investments which were made before 1 April 2017 even though the arrangement, irrespective of the date on which it had been entered into, is not grandfathered.

The amendments to ITR 1962 are effective from 31 March 2026, while those relating to ITR 2026 apply from 1 April 2026.

CBIC notifies concessional rate of customs duty on goods manufactured by SEZ unit and cleared into DTA

 This Tax Alert summarizes a Notification¹ issued by Central Board of Indirect Taxes and Customs (CBIC) notifying concessional rates of basic customs duty (BCD) and Agriculture Infrastructure and Development Cess (AIDC) on specified goods manufactured by a unit in Special Economic Zone (SEZ) and cleared into Domestic Tariff Area (DTA).