CIT(A) cannot direct reopening of years not under appea

 Recently, the Hon’ble Income-tax Appellate Tribunal, Chennai (‘ITAT’) in the case of Mr. Chandanmal Nagaraj v. Assistant Commissioner of Income-tax held that the appellate authority cannot issue directions for reopening assessments relating to years which are not the subject matter of appeal before it. The ITAT observed that while allowing the assessee’s appeal in relation to addition made on account of alleged unexplained expenditure, the Learned Commissioner of Income Tax (Appeals) [Ld. CIT(A)] had directed the Assessing Officer (A.O) to reopen assessment for earlier years for verification of the genuineness of transaction. The Tribunal held that the jurisdiction of the appellate authority is confined to the year under consideration and that it cannot travel beyond the scope of the appeal to issue directions concerning other years. Accordingly, the ITAT expunged the directions issued by the Ld. CIT(A) for reopening the earlier years.

ITAT: Property Received on Family Trust Dissolution Qualifies as ‘Devolution’, Long-Term Capital Gains Tax Applies

Under income tax law, when a capital asset is acquired by way of succession, inheritance or devolution, the cost of acquisition is deemed to be the cost incurred by the previous owner. Additionally, the previous owner’s holding period is included when determining whether the asset is long-term or short-term.

No GST on Corporate Guarantees to Group Companies? Bombay High Court Says Yes, but Ruling Faces Criticism

Facts of the Case

The petitioner issued Corporate Guarantees (CGs) to banks to secure loans obtained by its group companies. The guarantee deeds explicitly stated that no consideration would be received from the group companies for providing these guarantees. The GST authorities, however, demanded tax on the CGs. In response, the petitioner challenged both the levy of GST and the constitutional validity of an amendment to Rule 28(2) of the CGST Rules, which prescribes the valuation methodology for such guarantees.

Mere execution of JDA with developer does not trigger capital gains tax in real estate transactions

 Recently Bangalore ITAT recently delivered an important ruling clarifying that merely executing a Joint Development Agreement (JDA) does not automatically constitute a "transfer" for capital gains tax purposes. The Tribunal held that for transfer provisions to apply, there must be a conclusive transfer of possession meeting all requirements of the Transfer of Property Act (‘TOPA’) - not merely contractual arrangements that remain contingent.

The assessee and his family jointly owned ancestral land in Bangalore. In September and December 2012, they entered into JDAs with a developer for construction of residential projects. The family also executed an irrevocable General Power of Attorney (GPoA) granting the developer extensive powers and received substantial advances through banking channels. The Assessing Officer computed LTCG, treating the JDA execution coupled with the GPoA and advance payments as a "transfer" under Income Tax Act read with the provisions of the TOPA. The CIT(A) upheld this addition, holding that the family had effectively transferred possession and control of the land to the developer.
The Tribunal deleted the entire addition, making several crucial technical observations - Section 53A of TOPA requirements not satisfied as for transfer provisions to apply, possession must be transferred "in part performance of a contract" under Section 53A. This requires: (a) transferee put in actual possession, (b) contract capable of specific performance, and (c) transferor debarred from denying the contract. These conditions were not conclusively met. The Tribunal also observed that the ownership rights of the land remained disputed as following the JDA execution, family disputes arose and a partition suit was filed. The Civil Court's decree in 2018 allotted substantial portions of the property to other family members, not the assessee. This proved that underlying ownership was never settled when the JDA was executed. If possession had truly been transferred under Section 53A, family members would have been legally debarred from filing partition suits - yet they successfully did so.
A completely new JDA was executed in August 2023 between the developer and the assessee's brother (excluding the assessee). This wasn't a renewal but a fresh arrangement between different parties, proving conclusively that the 2012 JDA never achieved completion. If the 2012 JDA had resulted in effective transfer under Section 53A, no fresh agreement would have been necessary.

Delhi ITAT allows write-off of obsolete inventory under AS-2

 The Delhi ITAT held that write-off of slow-moving and non-moving inventory is allowable as deduction where the inventory had lost utility or become obsolete and the write-off was undertaken in accordance with Accounting Standard-2 (‘AS-2’) supported by technical evaluation and documentary evidence. The Tribunal observed that such write-off reflects the true and correct value of inventory.

Mumbai ITAT clarifies: Capital gains exemption under Section 54F cannot be restricted by intra-head capital loss adjustment

 Recently, in a significant taxpayer-friendly ruling, the Hon’ble Mumbai ITAT, in the case of Nikesh Bhagwandas Mehta vs. ITO, has clarified an important issue concerning the interplay between capital gains exemption under section 54F and set-off/carry forward of long-term capital loss under the provisions of the Income-tax Act, 1961 (‘the Act’). The ruling reaffirms that where the conditions of section 54F are duly satisfied, the exemption is to be granted on the entire eligible long-term capital gain, and the assessee cannot be compelled to first adjust long-term capital losses before claiming such exemption.

In the present case, the assessee, an individual taxpayer, had earned long-term capital gains (LTCG) of approximately Rs. 69.84 lakhs from sale of certain equity shares during AY 2022-23. Since the net sale consideration was duly invested in a qualifying residential house property, the assessee claimed full exemption under section 54F on the aforesaid capital gains. During the same year, the assessee had also incurred long-term capital loss (LTCL) of approximately Rs. 37.72 lakhs on sale of another set of equity shares, which was claimed to be carried forward to subsequent years in accordance with the provisions of the Act.

However, while processing the return under section 143(1), the CPC denied the carry forward of such LTCL. In first appeal, the Ld. CIT(A) upheld the CPC’s action and held that the provisions relating to set-off/carry forward of losses under the Act, require the long-term capital loss to be first adjusted against the long-term capital gains earned during the year, and only the net capital gains remaining thereafter would qualify for exemption under section 54F. Accordingly, the Ld. CIT(A) restricted the exemption under section 54F to the net gain and denied the carry forward of LTCL.

Aggrieved by the aforesaid action, the assessee preferred an appeal before the Hon’ble Mumbai ITAT. After examining the statutory scheme and the interplay between the exemption available under section 54F and the provisions governing set-off and carry forward of capital losses, the Hon’ble Tribunal ruled in favour of the assessee and made the following important observations:

ITAT Chandigarh holds leasehold rights cannot to be equated with freehold property for share valuation

 In a recent ruling, the Chandigarh Tribunal held that leasehold rights in land cannot be regarded as “immovable property” for the purposes of valuation of unquoted shares and such rights cannot be equated with freehold property while determining fair market value.

TAX DUE DATE - MAY 2026.

 

Sr No	Due Date	Related to	Compliance to be made
1.	11.05.2026	GST	Filing of GSTR1 for the month of April 2026
2.	13.05.2026	GST	ISD Return

3.	20.05.2026	GST	Payment of GST for the month of April 2026 Filing of GSTR 3B for the month of April 2026
4.	7.05.2026	TDS/TCS (Income Tax)	Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of April 2026. · Deposit TDS from Salaries deducted during the month of April 2026 • Deposit TCS for collections made under section 206C including sale of scrap during the month of April 2026, if any
5	31.05.2026	TDS/TCS (Income Tax)	Furnish quarterly statement of tax deducted at source (TDS) and tax collected at source (TCS) for the quarter ended Jan-March 2026 in Form 24Q / 26Q / 27Q / 27EQ.
6	31.05.2026	Income Tax	Filing of Annual Information Return u/s 285BA(Old Act).

Income from Other Sources – Assessing Section 56(2)(x) to Off-Market Transfers of Quoted Shares

1. Introduction

The taxation of gifts under the Gift Tax Act, 1958 was abolished in 1998. To prevent routing of unaccounted money through bogus gifts, the Finance Act, 2004 introduced provisions that eventually consolidated into Section 56(2)(x) of the Income Tax Act, 1961 via the Finance Act, 2017. This section taxes receipt of money or property without consideration, or for inadequate consideration below Fair Market Value (FMV), where the excess exceeds ₹50,000. FMV is determined under Rule 11U and 11UA.

The provision is an anti-abuse measure, as confirmed by CBDT Circulars and the Finance Minister’s speech. However, it operates as a deeming fiction – taxing notional income. A critical question arises: does Section 56(2)(x) apply where listed shares are transferred off‑market at a price below the exchange‑listed value?

When a Subsidiary Becomes a Permanent Establishment of Its Foreign Parent

 A subsidiary company is not automatically a Permanent Establishment (PE) of its foreign parent under tax treaties. However, depending on the functions it performs, it can cross the threshold and become a PE under Article 5 of the OECD/UN Model Convention.

India Overhauls Corporate Compliance: Key Amendments to Companies Act & LLP Act

 In a landmark move following the Deloitte Haskins & Sells LLP v. Union of India (Feb 2025) case, the National Financial Reporting Authority (NFRA) has been granted corporate status and significantly expanded enforcement powers. The Delhi High Court’s validation of NFRA’s authority to investigate and penalize auditors for misconduct has been codified. NFRA can now issue advisories, censure, mandate additional training, and refer matters for further action. Professional misconduct now explicitly includes contravention of the CA 2013 provisions, with penalties ranging from fines and imprisonment to debarment.

Calcutta High Court clarifies inclusion of electricity duty in valuation of captive power for tax deduction purposes

 Recently, the Hon’ble Calcutta High Court in Graphite India Ltd. v. Commissioner of Income-tax ruled in favour of the taxpayer and put to rest the controversy regarding valuation of captively consumed electricity for tax deduction purposes. The Hon’ble Court clarified that while electricity duty may not be separately payable on power consumed internally, the same would nevertheless form part of the market value of power when computing the eligible deduction on captive power undertakings.

Bombay HC allows filing of refund application for a period already covered under an earlier application

This Tax Alert summarizes a recent judgement of the Bombay High Court (HC) ^[1] on the validity of multiple refund applications filed by the taxpayer under section 54(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) for the same tax period.

Assessee filed a refund application for the tax period of August 2022 which was rejected by the Revenue on the ground that assessee had earlier filed and obtained refund through a consolidated application covering the period July 2022 to September 2022. The petitioner contended that the August 2022 invoice had been inadvertently omitted from the earlier application. The rejection was thus challenged before the HC.

The key observations of the HC are:

India-New Zealand FTA signed in April 2026, enabling zero-duty access for Indian exports to New Zealand

India and New Zealand have signed a landmark India–New Zealand Free Trade Agreement (IN–NZ FTA) on 27 April 2026 in New Delhi. The FTA aims to boost exports, MSMEs, investment flows, skills mobility and broader economic cooperation.

Defining features of the FTA are:

SEBI Applies Substance-over-Form Test While Granting Exemption Under Takeover Code for Share Transfers to Private Trusts

 Succession planning for promoter families has emerged as a critical priority for business-owning families. It necessitates a structured evaluation of legal and regulatory considerations, including compliance with the SEBI framework, particularly the takeover regulations when transferring control of a listed company to the next generation.

The SEBI Takeover Regulations trigger an open offer obligation where an acquisition of shares or control entitles an acquirer to exercise 25% or more of the voting rights in a listed company. This applies to both direct and indirect acquisitions, including transfers of shares in holding entities. While certain bona fide transactions such as inter-se promoter transfers, transfers among immediate relatives, and succession-related transfers are exempt, no blanket exemption is available for transfers to family trusts. However, SEBI Master Circular permits case-specific exemptions upon application to SEBI, subject to conditions, including that the settlor must have been disclosed as a promoter for at least three years.

In the exemption application filed by Tega Industries Limited, the promoter family proposed to transfer shares of NFSPL, which held 49.71% in the company. During its review, SEBI observed that one of the settlors had not been formally disclosed as a promoter of Tega Industries Limited. However, she had held shares in NFSPL since 2006, and NFSPL itself had been disclosed as a promoter of Tega Industries Limited since its listing in 2021. Based on these facts, SEBI concluded that the requirement of being “disclosed as a promoter for three years” was substantively met and accordingly granted the exemption.

NCLT clarifies IBC applicability: Commercial profit-sharing not a trigger for CIRP

 In a recent ruling, the NCLT, Mumbai Bench (‘Tribunal’) held that a claim arising from a revenue or profit-sharing arrangement under film rights and co-production agreements does not qualify as 'operational debt' within the meaning of Section 5(12) of the IBC. The Tribunal held that the petitioner, being a commercial partner, sharing profits from the exploitation of cinematographic rights, could not be treated as a supplier of goods or services so as to invoke the corporate insolvency resolution process.

Tax Implications of Offshore Liquidation Structures Involving Indian Subsidiaries: A Practical Analysis

Global corporate structures often evolve over time, and simplification through liquidation of intermediate holding entities is a common strategic move. However, when such structures involve Indian subsidiaries, the Indian Income-tax Act introduces complex tax implications—particularly through the indirect transfer provisions. This article examines the tax consequences of liquidating an intermediate holding entity within a multi-tier structure and outlines the associated risks, responsibilities, and litigation considerations.

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.

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).

Recent Income Tax Rulings

I. International Taxation & Treaty Jurisprudence

The Tiger Global Ruling: A Watershed Moment

Perhaps the most significant development in India's treaty jurisprudence is the ruling concerning Tiger Global. The decision marks a pivotal shift in how India approaches treaty shopping and beneficial ownership determinations. The ruling reinforces that mere routing of investments through tax-friendly jurisdictions will not automatically confer treaty benefits unless genuine commercial substance and beneficial ownership are established. This judgment is expected to have far-reaching implications for foreign portfolio investors and private equity funds operating in India.

Select amendments to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008

 The Corporate Laws (Amendment) Bill, 2026 has been introduced in the Lok Sabha, proposing various changes to the Companies Act, 2013 and the Limited Liability Partnership Act, 2008. The amendments aim to improve ease of doing business, simplify compliance and provide clarifications.

The select proposed changes are as follows:

TAX DUE DATE - APRIL 2026.

 

Sr No	Due Date	Related to	Compliance to be made

IPO expenses allocated to promoter shareholders allowable as deduction - Nexus with share transfer upheld

 Recently, the Hon’ble Income-tax Appellate Tribunal, Mumbai (‘ITAT’) in the case of Zarah Rafique Malik v. Income Tax Officer has held that proportionate Initial Public Offer (‘IPO’) expenses incurred in connection with the sale of shares under an Offer for Sale (‘OFS’) are allowable as deduction while computing capital gains under the provision of the Income-tax Act, 1961 (‘the Act’). The ITAT observed that where a shareholder participates in an IPO and agrees to bear a proportionate share of IPO-related expenses, such expenses, though initially incurred by the company, are effectively borne by the shareholder and have a direct nexus with the transfer of shares. Accordingly, the Tribunal held that these expenses qualify as expenditure incurred wholly and exclusively in connection with such transfer and are deductible while computing capital gains. The ITAT further rejected the Revenue’s contention that the arrangement constituted a colourable device or that IPO expenses are capital in nature in the hands of the company, noting that the shareholder independently benefits from price discovery and sale through the IPO mechanism.

Madras HC holds fulfilment of conditions under section 16(2) necessary before ITC is distributed by ISD

 This Tax Alert summarizes a recent ruling of the Madras High Court (HC), on the validity of Rule 39(1)(a) of the Central Goods and Services Tax Rules, 2017 (CGST Rules) requiring an Input Service Distributor (ISD) to distribute input tax credit (ITC) in the same month in which it is available for distribution.

CESTAT distinguishes SC ruling in NOS and holds expats deputation transaction as not liable to service tax

 This Tax Alert summarizes a recent ruling of Customs, Excise and Service Tax Appellate Tribunal, Hyderabad (CESTAT)  on applicability of service tax on deputation of employees by foreign company to an Indian entity.

Assessee, an Indian entity, entered into employment agreements with certain expatriate employees deputed from a foreign entity. It paid a portion of the salary, covering statutory social security contributions in the home country and other emoluments, to the foreign entity, which in turn remitted the amount into the employees’ foreign bank accounts.

CESTAT held that such payments were not exigible to service tax on the following grounds:

Relief for Private Discretionary Trusts: Kolkata ITAT Rules that Surcharge is not automatic for income below ₹50 Lakh

 Recently, the Kolkata Bench of the ITAT has ruled that surcharge is not leviable on a private discretionary trust taxed at the maximum marginal rate (‘MMR’) where the total income is below ₹50 lakhs. The Tribunal held that the definition of “maximum marginal rate” under section 2(29C) of the Income-tax Act, 1962 requires reference to the Finance Act rates, and surcharge becomes applicable only when the prescribed income threshold is exceeded.

In the present case, the assessee, a private discretionary trust, filed its return declaring total income of ₹4,56,900 and computed tax without surcharge. Subsequently, while processing the return and rectification, the AO levied surcharge at 37%, raising additional demand. The Commissioner of Income Tax (Appeals) upheld the levy, holding that the maximum marginal rate includes surcharge. Aggrieved, the assessee preferred an appeal before the ITAT, contending that surcharge is leviable only when income crosses the statutory threshold specified under the Finance Act.

Upon hearing the matter, the ITAT observed that private discretionary trusts are generally taxed at the maximum marginal rate; however, such rate must be determined with reference to the Finance Act provisions. The Tribunal relied on the Special Bench ruling in Araadhya Jain Trust vs. ITO, wherein it was clarified that surcharge cannot be automatically applied at the highest rate and must instead be computed based on the applicable income slabs specified in the First Schedule to the Finance Act. Since the assessee’s income in all relevant years was below ₹50 lakhs, the statutory threshold for levy of surcharge was not met. The Tribunal further noted that interpreting MMR to always include surcharge at the highest rate would render the surcharge provisions redundant and lead to an absurd interpretation. Accordingly, the Tribunal directed that tax be computed at 30% plus applicable cess, without surcharge, and allowed the assessee’s appeal.

Write-off of loan to overseas WOS denied – treated as colourable device

 In the present case, the assessee, engaged in the business of manufacturing and trading garments, had set up a wholly owned subsidiary (WOS) in Jordan as a special purpose vehicle (SPV) to acquire another entity in the same line of business. The assessee advanced loans aggregating to approximately INR 83 crore over multiple years to the WOS. During the relevant year, following losses in the overseas business and eventual sale of the underlying investment, the assessee wrote off INR 53.24 crore of such loans and claimed it as a deduction.

New TDS Framework For International Payments

 There are certain changes in India's tax rules for TDS on payments made to non-residents. The Income Tax Act, 2025 ('ITA 2025') replaces the Income Tax Act, 1961, introducing new forms and enhanced compliance obligations for all cross-border remittances. We have prepared a detailed Note on the subject which is enclosed for your reference.

Kerala HC holds bank’s eligibility of 50% ITC cannot be denied where IT depreciation is claimed w.r.t balance ineligible ITC

 This Tax Alert summarizes a recent ruling of the Kerala High Court (HC) ^[1] on the eligibility of banking companies opting for Section 17(4) of the Central Goods and Services Tax Act, 2017 (CGST Act) to avail 50% of input tax credit (ITC), where depreciation has been claimed under the Income tax Act, 1961 (IT Act) on the remaining portion corresponding to the foregone ITC.

ITAT Ruling in Oracle Case Clarifies Taxability of Cross-Border Software Revenue

 Introduction

In the world of cross-border taxation, the structure of a contract often matters more than the nature of the transaction itself. A recent ruling by the Income Tax Appellate Tribunal (ITAT) involving Oracle India serves as a powerful reminder of this principle. What began as a straightforward software support arrangement between an Indian subsidiary and its foreign parent escalated into a significant tax dispute, with the revenue authorities alleging royalty income and the existence of a Permanent Establishment (PE). The Tribunal’s decision provides crucial clarity on when revenue from software deals crosses the line into royalty taxation—and when it does not.

Interest on borrowings for overseas acquisition allowed as business expenditure as it expanded assessee’s steel business: Hon'ble Mumbai ITAT

 Introduction

In a landmark ruling that provides significant clarity on the tax treatment of borrowings for overseas acquisitions, the Mumbai Income Tax Appellate Tribunal (ITAT) has ruled in favour of Tata Steel. The Tribunal allowed a deduction of ₹518 Crore in interest paid on funds borrowed to acquire the UK-based steel giant, Corus. This decision reinforces the principle that borrowings for strategic global expansion—even if resulting in a controlling interest—are for "business purposes" and not merely for "investment purposes."

Payment of Corporate Guarantee Given to Subsidiary – Allowable as Business Expenditure u/s 37(1)

Introduction

In a significant ruling that provides comfort to parent companies supporting their overseas subsidiaries, the Income Tax Appellate Tribunal (ITAT) has held that payments made towards the invocation of a corporate guarantee are allowable as revenue expenditure under Section 37(1) of the Income Tax Act, 1961. The decision, arising from the case of Escorts Limited, reinforces the principle that expenditure incurred to protect global business interests and brand reputation, even if arising from a default by a step-down subsidiary, is guided by commercial expediency and is thus deductible.

Artificial Goodwill from Intra-Group Amalgamation ineligible for depreciation

 In a recent ruling, the Pune ITAT held that goodwill created pursuant to an internal restructuring, in the absence of genuine commercial benefits, constitutes a colourable device and cannot be treated as a genuine commercial asset eligible for depreciation.

Corpus Distribution from Offshore Discretionary Trusts Taxable

 Ahmedabad Tribunal Special Bench has ruled that corpus distributed on dissolution of an offshore discretionary trust to resident Indian beneficiaries constitutes taxable income under the gift tax provisions.

The Taxpayers were resident individuals and sole surviving beneficiaries of an offshore discretionary trust settled by a non-resident settlor and managed by non-resident trustees. On dissolution, the trustees distributed the accumulated corpus equally between the two Taxpayers. Notably, the trust income had never been distributed to the beneficiaries since its inception and undistributed income was instead added to the capital fund of the trust pursuant to its deed. The Taxpayers had no prior knowledge of the trust and no relationship with the settlor or trustees. The Indian tax authorities treated the receipt as taxable under gift tax provisions.

The Tribunal held the following, thereby confirming that the corpus distribution from an offshore trust is taxable under gift tax provisions:

Recent Judicial Developments in Income Tax: Key Rulings from Supreme Court, High Courts and ITAT

Recent judicial pronouncements across different forums have clarified several important aspects of Indian income tax law, particularly relating to permanent establishment, assessment procedures, and the taxation of financial instruments. A brief overview of notable rulings is provided below, beginning with the Supreme Court, followed by the High Court, and finally the Income Tax Appellate Tribunal (ITAT).

Delhi High Court Rejects "Virtual Service PE" Argument in Clifford Chance Case

In a significant ruling delivered today, the Hon’ble Delhi High Court rejected the Income Tax Department’s attempt to introduce the concept of a "Virtual Service Permanent Establishment (PE)" under the India-Singapore Double Taxation Avoidance Agreement (DTAA). The judgment, delivered in the case of *Clifford Chance PTE Ltd*, reinforces the principle that treaty terms must be interpreted strictly and cannot be expanded through judicial fiction.

Are Interchange Fees and Payment Gateway Charges Subject to TDS?

Tax Deducted at Source (TDS) is generally not applicable to interchange fees, payment gateway charges, or the Merchant Discount Rate (MDR).** This stance has been clearly established by the Central Board of Direct Taxes (CBDT) through official notifications and has been consistently reinforced by judicial rulings.

No Permanent Establishment Unless Proven by the Revenue

The Income Tax Appellate Tribunal (Delhi Bench) recently in the case of SAIC clarified an important principle in international taxation: the tax authorities must clearly establish the existence of a Permanent Establishment (PE) before taxing a foreign company’s income in India.

Background of the Case

Supreme Court Clarifies Refund of GST Pre-Deposits

The Supreme Court of India recently provided important clarity on the legal framework governing refunds of GST pre-deposits in the case of State of Jharkhand v. BLA Infrastructure Pvt. Ltd., decided on 9 January 2026. The ruling addresses a recurring dispute in GST litigation: whether the refund of a statutory pre-deposit should follow the general refund provisions under Goods and Services Tax Act, 2017 or the specific provisions related to appeals.

Mumbai Tribunal Upholds Interest Deduction on Borrowings for Overseas Acquisition

 Mumbai Tribunal has deleted the interest disallowance in respect of borrowed funds deployed for the acquisition of an overseas company through step-down wholly owned subsidiaries, holding that the interest expenditure claimed as a deduction under Section 36(1)(iii) of the Income-tax Act, 1961 (‘the Act’)was incurred wholly and exclusively for the purposes of business and was therefore fully allowable.

Mumbai Tribunal Allows Loss due to Fair Valuation under Mark-To-Market Principle on Market-Linked Debentures as Business Deduction

The Mumbai Bench of the Income Tax Appellate Tribunal (‘Tribunal’) held that loss arising on fair valuation of Benchmark Linked Debentures (BLDs), market linked securities, cannot be disallowed merely because it represents a mark-to-market adjustment. The Tribunal observed that where financial instruments are valued in accordance with recognised accounting standards and the method is consistently applied, the resulting loss represents a legitimate business loss and cannot be treated as merely notional.

Background

Section 122(1A) penalty not imposable on employees

Facts: The adjudicating authority held that the Company wrongfully availed and passed ITC by issuing fake invoices. The authority also imposed personal penalty under Section 122(1A) of the CGST Act on Petitioners (CFO, CEO and Joint MD of the Company).

Modified Return under Section 170A Must Be Considered in Pending Assessment

 Introduction: A Landmark Ruling for Tax Certainty

In a significant and taxpayer-friendly ruling, the Hon’ble Bombay High Court in Bajaj Electricals Ltd. vs. ACIT has clarified an important issue relating to modified returns filed after business reorganization (such as amalgamation or demerger) under section 170A of the Income-tax Act (‘the Act’). The core issue before the Hon’ble High Court was whether, in a case where assessment proceedings were pending on the date of filing of a modified return pursuant to a business reorganization, the Assessing Officer (AO) could initiate a fresh scrutiny of the modified return after passing the assessment order.

ITAT Mumbai Provides Safe Harbor for Convertible Instruments: Conversion Not Taxable Under Section 56(2)(x)

 In a ruling that brings significant relief to foreign portfolio investors and venture capital firms, the Income Tax Appellate Tribunal (ITAT) in Mumbai has clarified that the conversion of optionally convertible preference shares into equity shares does not trigger taxation under the income from other sources.

Not all payments made by Company on behalf of the promoter shareholder to be treated as 'deemed dividend' under Income Tax Act

 The Ahmedabad Bench of ITAT has ruled that a payment made by a closely-held company on behalf of a shareholder, by debiting his existing credit balance in a deposit account maintained with the company, does not constitute “deemed dividend”, as no money flowed from the company to the shareholder.

 

TAX DUE DATE - MARCH 2026.

Sr No	Due Date	Related to	Compliance to be made
1	11.03.2026	GST	Filing of GSTR 1 for the month of February, 2026

2

20.03.2026

GST

Payment of GST for the month of February, 2026 Filing of GSTR 3B for the month of February, 2026

3	07.03.2026	TDS/TCS (Income Tax)	· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of February 2026 · Deposit TDS from Salaries deducted during the month of February 2026 • Deposit TCS for collections made under section 206C including sale of scrap during the month of February 2026, if any
4	15.03.2026	Income Tax	Payment of Advance Tax
5	31.03.2026	GST LUT	Filing of LUT for the FY 25-26