Haryana AAAR allows ITC on services used for raising capital based on end-use of funds

 This Tax Alert summarizes a recent ruling of the Haryana Appellate Authority for Advance Ruling (AAAR) on availability of input tax credit (ITC) on services used directly in relation to raising capital by issuance of shares. Assessee arranged a Qualified Institutional Placement (QIP) to raise funds for restructuring/ repayment of borrowings and for investment in its subsidiary. ITC w.r.t expenses incurred in this regard was treated not eligible by Haryana Authority for Advance Ruling (AAR). Aggrieved, assessee filed an appeal before the AAAR.

Recent Landmark GST Judgments: A Comprehensive Overview

 The Goods and Services Tax (GST) regime continues to evolve through judicial interpretations. From the Supreme Court to various High Courts and the GST Appellate Tribunal, recent rulings have provided much-needed clarity on several contentious issues. This article summarizes the most significant recent GST judgments in simple language.

Supreme Court Rulings

1. No GST on Transfer of Leasehold Rights of MIDC Plots

The Supreme Court dismissed the Revenue's Special Leave Petition and affirmed that assignment of leasehold rights in industrial plots does not attract GST.

In Assistant Commissioner (Anti Evasion) & Anr. v. Aerocom Cushions Private Limited, the assessee had transferred its leasehold rights in a MIDC industrial plot (with a factory building) to a third party with MIDC's consent. The Revenue sought to levy 18% GST on the consideration, treating it as a 'supply of services'.

The Supreme Court agreed with the Bombay High Court that the transaction amounted to a transfer of benefits arising from immovable property, not a supply of service under Section 7 of the CGST Act. The one-time assignment extinguished the assessee's rights in the property and had no nexus with business.

Key takeaway: Transfer of long-term leasehold land rights is exempt from GST as it represents transfer of immovable property rights.

2. 28% GST on Online Gaming, Fantasy Sports & Casinos — Retrospectively from 2017

On May 27, 2026, the Supreme Court upheld the levy of 28% GST on the full face value of stakes in online gaming, fantasy sports, and casinos. The demands at stake are approximately ₹2.5 lakh crore.

The Court ruled that for GST purposes, what matters is not whether a game involves skill or chance, but whether money is staked on an uncertain outcome. Critically, the Court held that the 2023 amendments were "clarificatory and explanatory" and therefore retrospective, reaching back to July 2017.

This aspect has drawn significant criticism, as the GST Council had originally finalised the amendments prospectively from October 1, 2023. Many experts argue this represents an unprecedented case of judicial retrospectivity.

Key takeaway: Online gaming, fantasy sports, and casinos attract 28% GST on full stake value retrospectively from July 2017.

High Court Rulings

3. Bombay High Court: No GST on Corporate Guarantees Without Consideration

The Bombay High Court in D P Jain & Co. Infrastructure Private Limited v. UOI held that GST is not leviable on corporate guarantees issued to group companies without consideration.

Relying on the Supreme Court's Edelweiss decision under the service tax regime, the Court concluded that in the absence of consideration, the transaction does not qualify as a taxable supply.

However, this ruling faces strong criticism. Legal experts argue that unlike the service tax regime, GST law explicitly deems transactions between related persons (including group companies) as taxable supplies even without consideration under Schedule I of the CGST Act. The definition of 'business' under GST is also exceptionally broad.

Key takeaway: While the Bombay High Court held no GST on corporate guarantees without consideration, the ruling may not survive further appeals.

4. Bombay High Court: Multiple GST Refund Applications Allowed

In Valmet Flow Control Pvt. Ltd. v. Union of India, the Bombay High Court held that a second refund application for the same tax period cannot be rejected merely because an earlier application covered that period.

The petitioner had inadvertently missed an invoice worth ₹1.10 crore in their first refund application and filed a second claim within the two-year limitation period. The Court ruled that Section 54(1) of the CGST Act does not impose any restriction on filing multiple refund applications.

Key takeaway: Refund claims cannot be denied on technical grounds when statutory conditions are satisfied and the claim is within the limitation period.

GST Appellate Tribunal Rulings

5. Three Key Rulings on Taxability, Intermediary Status, and ITC

Healthcare Services Retain Exemption: The High Court held that healthcare services provided by one hospital to another's patients remain exempt from GST. Classification must be based on substance over form — once the substance is healthcare, exemption applies regardless of contractual arrangements.

Overseas Procurement Hub Not an 'Intermediary': The GSTAT held that an overseas group company acting as a central procurement hub (identifying suppliers, negotiating terms, concluding contracts) does not qualify as an intermediary. Such services are principal services, not ancillary facilitation.

GSTR-2A Matching Not Required for ITC on Imports: ITC on import of goods and SEZ procurements cannot be denied merely because it was incorrectly reported in the wrong column of GSTR-3B.

Key takeaway: Substance over form applies to GST exemptions; intermediary status requires genuine facilitation, not full procurement; and ITC claims should not fail for minor reporting errors.

Conclusion

These recent judgments reflect a balanced approach to GST interpretation. While taxpayers have received relief on leasehold transfers and refund claims, the online gaming ruling imposes significant retrospective liability. The corporate guarantee ruling, though taxpayer-friendly, faces an uncertain future. As GST jurisprudence continues to develop, taxpayers must stay informed and ensure compliance while asserting their rights.

Recent Landmark Income Tax Judgments: A Comprehensive Overview

 The Indian tax landscape has witnessed several significant judicial pronouncements in recent months. From the Supreme Court to various High Courts and the Income Tax Appellate Tribunal (ITAT), courts have delivered judgments that clarify long-standing tax issues and provide much-needed relief to taxpayers. This article summarizes the most important recent income tax judgments in simple language.

Supreme Court Rulings

Interest Deduction on Funds Advanced to Sister Concern

The Supreme Court delivered a taxpayer-friendly ruling allowing deduction of interest on borrowed funds that were invested in a sister concern. The Court reaffirmed the "commercial expediency" test — what matters is whether the advance was made for commercial reasons, not whether it directly earned profits.

In this case, the Assessing Officer had disallowed interest deduction because the funds were used to acquire controlling interest in a subsidiary rather than for earning income. However, the Supreme Court held that income tax authorities must put themselves in the shoes of a prudent businessman. The Court observed that no businessman can be compelled to maximize his profits, and what is relevant is whether there was a nexus between the expenditure and the business purpose.

Key takeaway: Interest on borrowings used for investment in sister concerns is allowable if the transaction is driven by commercial expediency.

High Court Rulings

1. Bombay High Court: Genuine Bad Debt Write-offs

The Bombay High Court, in Madhusudan Babubhai Kocha v. ACIT, held that a deduction for bad debts under Section 36(1)(vii) cannot be denied merely because the debtor's individual account was not formally closed.

The assessee had debited the amount to the Profit & Loss Account, made corresponding ledger entries, and even initiated recovery proceedings. The debtor's account was kept open only because litigation was pending. The Court clarified that a genuine write-off need not fail merely because of the accounting method adopted, provided the debt was effectively treated as irrecoverable.

Key takeaway: Substance over form — if a debt is genuinely written off, technical accounting issues should not defeat the claim.

2. Madras High Court: Capital Gains on Unimplemented Joint Development Agreements

In the case of Vijaya Productions, the Madras High Court ruled that signing a Joint Development Agreement (JDA) does not automatically trigger capital gains tax unless the agreement is actually implemented.

The Court observed that a "transfer" occurs only when a transaction genuinely enables a party to enjoy the property as an effective owner. Since key approvals were obtained only after the financial year ended and no consideration was received, no capital gains tax was chargeable.

Key takeaway: Mere execution of a JDA without actual implementation does not attract capital gains tax.

3. Calcutta High Court: Electricity Duty in Captive Power Valuation

The Calcutta High Court held that electricity duty must be included in the market value of electricity for computing deduction under Section 80-IA for captive power generation. Excluding such components would artificially reduce the eligible deduction.

Key takeaway: Market value for captive power must include all tariff components, including electricity duty.

4. Delhi High Court: Virtual Service Permanent Establishment

In a landmark ruling favouring Clifford Chance, the Delhi High Court rejected the Income Tax Department's theory of a "virtual service permanent establishment". The Court held that the India-Singapore DTAA only contemplates taxation when services are rendered through employees physically present in India.

The Court refused to read into treaties concepts not expressly included, stating that a virtual service PE does not exist under the DTAA or domestic law. The Department's appeals amounting to over ₹23 crore were dismissed.

Key takeaway: Virtual presence alone does not create a taxable presence in India under tax treaties.

5. Calcutta High Court: Unlisted Share Sale Taxable as Capital Gains

In Russel Credit Ltd, the Calcutta High Court held that gains from the sale of unlisted shares must be taxed as capital gains, absent exceptional circumstances like sham transactions. The Court noted that the shares were acquired as investments per board resolution, held for nearly six years, and sold in a one-time transaction.

Key takeaway: Sale of unlisted shares is normally taxable as capital gains, not business income.

6. Calcutta High Court: Suspicion Cannot Replace Evidence

The Calcutta High Court reaffirmed that transactions backed by strong documentary evidence cannot be dismissed on mere suspicion. Tax authorities cannot rely on "human probability" theory to disregard genuine share capital transactions.

Key takeaway: Tax additions must be based on evidence, not suspicion.

7. Delhi High Court: No Deemed Gift Tax on Share Buy-Back

The Delhi High Court held that a company's buy-back of its own shares is a reduction of share capital and not an acquisition of property for the purposes of Section 56(2)(x). Therefore, no deemed gift tax applies.

Key takeaway: Share buy-back at discount does not attract deemed gift tax.

8. Orissa High Court: No Refund Adjustment During Stay

The Orissa High Court ruled that adjusting a tax refund against a disputed demand while a stay order is in operation is illegal and arbitrary. The Court directed the release of the refund with interest.

Key takeaway: Refunds cannot be adjusted against disputed demands during the pendency of a stay.

9. Interest During Project Setup Phase Not Taxable

The High Court held that interest earned during the project setup phase is not taxable as income and should be set off against project cost. This follows the principle that pre-operative income goes to reduce the cost of the project.

10. Andhra Pradesh High Court: Cash Gifts Require Proof of Donor's Creditworthiness

The Andhra Pradesh High Court upheld the addition of unexplained cash gifts where the assessee failed to prove the donor's identity, creditworthiness, and source of funds.

Key takeaway: To avoid tax on cash gifts, taxpayers must fully establish the genuineness of the donor and their financial capacity.

11. Gujarat High Court: Relief for Delay in Opting Concessional Tax Regime

The Gujarat High Court directed the Revenue to condone delays in filing Form 10-IC for opting into the concessional corporate tax regime under Section 115BAA. Procedural lapses should not defeat substantive rights when conditions are otherwise met.

Key takeaway: Technical delays in filing forms should not deny taxpayers the benefit of concessional tax rates.

ITAT Rulings

1. Delay in Form-67 Not Fatal to Foreign Tax Credit

The ITAT held that foreign tax credit cannot be denied merely because Form 67 was filed late — the requirement is directory, not mandatory. The DTAA provisions override the Income Tax Rules.

Key takeaway: Belated filing of Form 67 should not deny foreign tax credit.

2. No TDS on Interchange Fees and Payment Gateway Charges

The ITAT clarified that TDS under Section 194H is not applicable to interchange fees, payment gateway charges, or Merchant Discount Rate (MDR). This is consistent with CBDT notifications and RBI guidelines.

Key takeaway: Payment gateway charges and interchange fees are not subject to TDS.

3. Compensation for Cancellation of Share Sale Agreement Allowable as Deduction

The ITAT held that compensation paid to cancel an earlier share sale agreement to facilitate a higher-priced subsequent transaction is an allowable deduction while computing Long-Term Capital Gains.

Key takeaway: Cancellation compensation paid for commercial reasons reduces the capital gains tax liability.

4. Long-Term Capital Loss Set Off Against Gains from Depreciable Assets

The ITAT Mumbai held that long-term capital losses can be set off against short-term capital gains arising from the sale of depreciable assets under Section 50. Section 50 is only a computation fiction and does not restrict such set-off.

Key takeaway: Long-term capital losses can be set off against deemed short-term capital gains from depreciable assets.

5. Compensation for Settling Litigation — Non-Taxable

The ITAT Delhi held that compensation received for settling disputes and surrendering the "right to sue" is a non-taxable capital receipt. A right to sue is not transferable under Section 6(e) of the Transfer of Property Act and does not qualify as a capital asset.

Key takeaway: Compensation for giving up the right to sue is not taxable.

6. Tax Neutrality for Genuine Intra-Group Restructurings

The ITAT Chennai reaffirmed that genuine intra-group restructurings undertaken for commercial reasons cannot be disregarded merely because they result in tax benefits. The Revenue cannot compel an assessee to adopt an alternative restructuring mode.

Key takeaway: Genuine business restructurings within a group are tax-neutral.

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Conclusion

The recent spate of judicial pronouncements reflects a progressive approach to tax interpretation. Courts have consistently emphasized substance over form, commercial expediency, and the need for evidence over suspicion. Taxpayers have received clarity on issues ranging from interest deductibility and bad debts to international taxation and restructuring.

These rulings reinforce the principle that tax laws should be interpreted reasonably and that procedural technicalities should not defeat substantive rights. For taxpayers and practitioners alike, these judgments provide valuable guidance for future tax planning and compliance.

The Greenwashing Trap: Deciphering SEBI's BRSR Core Assurance Mandate

Let’s start with a small story in this regard. Client B runs a rapidly growing, mid-cap manufacturing entity that recently broke into the top 500 listed companies by market capitalization. Proud of his brand’s modern image, he heavily marketed his company as a "Net-Zero" and "Zero Waste to Landfill" champion. For years, his annual reports featured glossy photographs of tree-plantation drives and broad sustainability pledges. This year, however, SEBI’s Business Responsibility and Sustainability Reporting (BRSR) Core mandate caught up with him.

Compensation Paid for Cancellation of Share Sale Agreements Allowable as Deduction Against Capital Gains

 Recently, the Pune ITAT held that compensation paid for cancelling an earlier share sale arrangement can be allowed as a deduction while computing capital gains, provided the payment arises from genuine contractual obligations and is directly linked to the eventual transfer of shares.

Revenue Expenditure on MLD/NCD Issuance by NBFC – Held as Revenue in Nature

 Mumbai ITAT held that expenditure incurred by a Non-Banking Financial Company (NBFC) on issuance of Market Linked Debentures (MLD) and Non-Convertible Debentures (NCD) is allowable as revenue expenditure and cannot be amortised over five years, as the debentures were issued for onward lending, a core business activity, and not for extension of an undertaking or setting up a new unit.

Long-term capital losses available against gains from transfer of depreciable assets

 Recently, the Mumbai ITAT in ACIT v. Reliance Infrastructure Limited ruled in favour of the taxpayer and reaffirmed that the special computational treatment applicable to gains arising from transfer of depreciable assets does not alter the inherent character of the underlying asset. Accordingly, where the asset transferred is a long-term capital asset, the taxpayer remains entitled to utilise available long-term capital losses against such gains.

Bombay HC Clarifies That Genuine Bad Debt Write-offs Need Not Fail for Accounting Technicalities

 Businesses often find themselves in a peculiar position when a customer default turns into a prolonged dispute. Even where recovery proceedings are actively being pursued, companies may commercially conclude that the amount is doubtful and provide for it in their books. The tax department has traditionally taken a view that unless each debtor account is formally written off, the deduction for bad debts should not be available. The Bombay High Court has held that the allowability of a bad debt claim must turn on the substance of the accounting treatment and not merely on the form of the entries passed.

Navigating the Complexities of GST Pre-deposit Requirements Before GSTAT

 The introduction of the Goods and Services Tax Appellate Tribunal (GSTAT) has brought significant changes to the pre-deposit framework for taxpayers appealing adverse orders. Understanding these nuanced requirements is essential for ensuring seamless appellate proceedings and avoiding procedural pitfalls.

Power of Commissioner to Reduce or Waive Income Tax Penalty

Overview of Penalties Under the New Act

Before looking at the waiver provisions, it's helpful to know what penalties exist. The 2025 Act, under Chapter XXI, continues to impose penalties for various defaults, including:

• Under-reporting and misreporting of income (Section 439)

• Failure to keep, maintain, or retain books of account (Section 441)

• Failure to get accounts audited (Section 442)

• Failure to deduct TDS (Sections 448 & 449)

Cross border 'fast track' merger permitted under automatic route

On 6 June 2026, the Reserve Bank of India (RBI) issued a notification ^[1] amending the rules governing cross-border mergers under the Foreign Exchange Management Act, 1999 (FEMA), as part of India’s ongoing efforts to simplify the regulatory framework and enhance ease of doing business.

Inbound Merger of a U.S. Company into an Indian Company: Regulatory Framework, Benefits and Key Compliance Requirements

Introduction

India has emerged as a preferred jurisdiction for multinational groups and technology startups seeking to simplify global structures, access Indian capital markets, and align their corporate domicile with business operations. One of the most effective mechanisms for achieving this objective is an inbound merger, wherein a foreign company merges into an Indian company, and the Indian company becomes the surviving entity.

A common scenario involves a U.S. holding company being merged into its Indian subsidiary or affiliate, resulting in the Indian company absorbing the U.S. entity. This structure has gained significant momentum due to the increasing trend of "reverse flipping," where overseas holding companies relocate their corporate headquarters to India in anticipation of domestic fundraising or public listing opportunities. Recent regulatory reforms have also streamlined the approval process for eligible inbound mergers, making India a more attractive destination for corporate reorganizations.

GST Insights: Three Key Rulings on Taxability, Intermediary Status, and ITC

1. Healthcare Services Retain Exemption Even When Provided Through Another Hospital

Valuation vs Demerger: Kolkata ITAT Clarifies the Boundaries

 Recently, the Kolkata ITAT held that no addition under section 56(2)(x) can be made in respect of assets received pursuant to a qualifying demerger, where the prescribed conditions under the Income-tax Act are duly satisfied. The Tribunal further clarified that valuation principles as prescribed under Rule 11UA of Income-tax Rules (ordinarily applicable for determining fair market value of shares) cannot be imported to challenge a demerger that otherwise complies with the statutory framework.

India Grants Full Tax Exemption to FIIs and BIS on Government Securities via Ordinance

 In a significant policy move, the Government of India has promulgated the Income-tax (Amendment) Ordinance, 2026, granting complete tax exemption to Foreign Institutional Investors (FIIs) and the Bank for International Settlements (BIS) on interest and capital gains arising from investments in government securities (G-Secs).

The ordinance, which took effect retrospectively from April 1, 2026, was promulgated by President Droupadi Murmu as Parliament was not in session.

Single Show Cause Notice for Multiple Financial Years Under GST: Why Courts Are Striking It Down

 A single show cause notice (SCN) issued for multiple financial years has become a common flashpoint under the Goods and Services Tax (GST) regime. While the tax department often adopts this practice for administrative convenience, it is now consistently being struck down by various High Courts across India. This article examines why such consolidated proceedings are legally untenable.

CBDT guidelines for compulsory scrutiny selection for FY 2026-27

 Recently, the Central Board of Direct Taxes (“CBDT”) has issued guidelines prescribing the parameters for compulsory selection of income-tax returns filed in FY 2025-26 for complete scrutiny during FY 2026-27. The guidelines identify specific categories of cases that will be mandatorily selected for scrutiny and set out the procedure to be followed by the tax authorities for such selection.

Mumbai ITAT Rejects LIFO and Upholds FIFO Approach for Capital Gains Computation

 In a recent ruling of Megasolis renewable , the Mumbai ITAT upheld the application of the First-In-First-Out ("FIFO") method for computing capital gains on the sale of shares held in physical form, rejecting the taxpayer's attempt to compute gains based on LIFO method. Significantly, the Tribunal invoked the doctrine of substance over form and characterised the taxpayer's approach as a colourable device aimed at reducing its tax liability.

ITAT Mumbai Upholds Tax Certainty for Category III AIFs

In a significant ruling delivered in the case of 360 One Core Aggressive, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has reinforced crucial tax principles for Category III Alternative Investment Funds (AIFs).

Independent Director Eligibility – Cousin of Promoter/Promoter Group Member is Eligible

 In a recent informal guidance letter, SEBI clarified whether a cousin of a Promoter Group member qualifies as a person ‘related to promoters or directors’ for the purposes of Independent Director eligibility under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR Regulations’) and concluded that such a relationship, standing alone, does not trigger disqualification.

Background

olkata ITAT reaffirms that suspicion alone cannot justify additions under Section 68 (Unexplained Cash Credits)

 Recently, the Kolkata ITAT in Action Tie-up Pvt. Ltd. v. DCIT ruled in favour of the taxpayer and reiterated that additions towards alleged bogus sale transactions cannot be sustained merely on the basis of suspicion, third-party statements, or general allegations of accommodation entries, especially where the taxpayer has furnished complete documentary evidence supporting the transactions.

In the present case, the assessee company had sold investments in unlisted shares during the relevant assessment years. The tax authorities alleged that the transactions were accommodation entries and treated the sale proceeds as unexplained cash credits. The allegation was primarily based on statements recorded from certain third parties during search proceedings and the observation that some purchaser entities were subsequently struck off by the Registrar of Companies. The Assessing Officer further alleged that the assessee and related entities were merely “pass-through” or “shell” entities facilitating accommodation entries.

However, the assessee submitted detailed documentary evidence to substantiate the genuineness of the transactions, including audited financial statements, bank statements, confirmations, income tax records, details of investments held over multiple years, and responses received directly from purchasers in compliance with notices issued by the department. It was also highlighted that the investments had been acquired in earlier years and accepted by the department in scrutiny assessments.

The Hon’ble Tribunal, after examining the facts and legal position, ruled in favour of the assessee and made the following key observations:

SC holds GST is leviable on supply of actionable claim in online gaming, fantasy sports and casinos, retrospectively from July 2017

This Tax Alert summarizes a recent ruling  of the Supreme Court (SC) addressing the GST implications on online gaming, fantasy sports and casino transactions, including constitutional validity of levy on actionable claims and the valuation mechanism prescribed under the Central Goods and Services Tax Act, 2017 (CGST Act) and the Rules framed thereunder.

The key observations of the SC are:

Gains from Derivatives based trading income not taxable in India but only in Mauritius

 Under Article 13(3A) of the India-Mauritius DTAA capital gains from the transfer of shares of an Indian company acquired by a Mauritius resident on or after 1 April 2017 are taxable only in India. Article 13(4) provides that capital gains from transfer of any other property not covered specifically under any other Para of the said article, are taxable in the country of residence of the transferor, i.e., Mauritius.

GST Not Leviable on Transfer of Leasehold Rights of MIDC Plots: SC Dismisses Revenue’s SLP

 In a significant development, the Supreme Court has dismissed the Revenue’s Special Leave Petition (SLP) challenging a Bombay High Court (Nagpur Bench) ruling in the case of Aerocom Cushions Private Limited v. Assistant Commissioner. The High Court had previously held that the assignment of leasehold rights in an industrial plot allotted by the Maharashtra Industrial Development Corporation (MIDC) does not constitute a “supply of services” under Section 7 of the CGST Act, and therefore is not subject to GST.

Tax Due Date - June 2026.

 

Sr No	Due Date	Related to	Compliance to be made
1.	11.06.2026	GST	Filing of GSTR1 for the month of May 2026
2.	13.06.2026	GST	ISD Return

3.	20.06.2026	GST	Payment of GST for the month of May 2026 Filing of GSTR 3B for the month of May 2026
4.	7.06.2026	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 May 2026. · Deposit TDS from Salaries deducted during the month of May 2026 • Deposit TCS for collections made under section 394 including sale of scrap during the month of May 2026, if any
5	15.06.2026	Income tax	Payment of Advance tax for the Corporate assesses –Amount not less than 15% of advance tax.