The Four-Day CA Firm: Automating the Non-Busy Season

Let’s start with a small story in this regard. CA X was the managing partner of a rapidly growing, mid-sized tax and audit practice in Pune. It was the second week of June historically the one brief window of calm between the grueling March year-end closing and the impending avalanche of July income tax filings. Yet, as CA X walked through the office on a Saturday afternoon, the atmosphere felt as tense as the final week of September. His brightest senior associate, Mr. A, walked into his cabin and handed in his resignation, citing extreme burnout and a desire to move to a corporate job for a better work-life balance.

Major Overhaul of Companies Act & LLP Act: Key Amendments Explained

 Recent legislative amendments have brought sweeping changes to India’s corporate compliance landscape, strengthening regulatory oversight while introducing targeted relaxations for small companies and IFSC entities.

Big Relief: Delay in Form-67 Not Fatal to Foreign Tax Credit (FTC)

In a taxpayer-friendly ruling, the ITAT Hyderabad (ITA No. 1705/Hyd/2025) -  Amit Vishnav H  held that delay in filing Form-67 cannot be the sole ground to deny Foreign Tax Credit under a DTAA.

TDS on Interchange Fees & Payment Gateway Charges: Not Applicable

A key question in digital payments is whether TDS applies to interchange fees, payment gateway charges, or Merchant Discount Rate (MDR). The settled position—backed by CBDT clarifications and judicial rulings—is that TDS is generally not required.

Delhi High Court Rejects ‘Virtual Service PE’ in Clifford Chance Ruling

In a significant ruling today, the Delhi High Court in Clifford Chance PTE Ltd rejected the Revenue’s theory of a “Virtual Service Permanent Establishment” under the India-Singapore DTAA.

The Department argued that physical employee presence is no longer essential for a Service PE, citing Hyatt, Verizon, and ABB FZ LLC. The Court, however, held that Article 5(6)(a) explicitly requires services to be furnished “within a Contracting State… through employees or other personnel.” The words “within” and “through personnel” mandate a physical footprint in India.

Observing that the DTAA must be interpreted strictly, the Court refused to read in a virtual PE concept where the treaty conspicuously omits it. The cited precedents were held factually distinguishable. Consequently, the argument for a virtual service PE was dismissed

Calcutta High Court: Unlisted Share Sale Taxable as Capital Gains Absent Exceptional Circumstances

 In a significant ruling, the Calcutta High Court held in the case of Russel Credit Ltd that gains from the sale of unlisted shares must be taxed as capital gains, consistent with CBDT Instruction dated May 2, 2016. The court emphasized that only exceptional circumstances—such as sham transactions or lack of genuineness—can warrant a different treatment.

Calcutta High Court Reaffirms: Suspicion Cannot Replace Evidence in Share Capital Cases

In PCIT v. Shipra Enclave (P.) Ltd., the Calcutta High Court dismissed the Revenue’s appeal, holding that share capital additions cannot be based on mere suspicion or non-appearance of directors when documentary evidence exists.

The assessee raised ₹6.22 crore from 15 corporate investors. The AO treated the amount as unexplained cash credit, citing non-appearance of directors and branding the investors as “shell entities”. However, the assessee furnished PAN, ITRs, audited financials, and banking confirmations.

The High Court ruled that credible documentation, banking channels, and investor confirmations prevail over subjective assumptions. Non-appearance of directors alone does not vitiate genuine transactions. Suspicion, however strong, cannot replace concrete evidence.

The decision reinforces an evidence-driven approach, offering clarity and reassurance to taxpayers facing similar scrutiny under section 68

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.