Share sale by Passive Shareholder taxable as Long-Term Capital Gains and not Business Income irrespective of non-compete clause in the SPA

 As per Income Tax Laws, any sum received or receivable in cash or kind under an agreement for not carrying business or profession is treated as profit or gain from business or profession, thereby taxable as business income.

Karnataka HC holds that denial of excess FTC without variation in total income cannot result in levy of penalty

 This Tax Alert summarizes a recent decision of the Karnataka High Court (HC) in the case of Mr. Srinivasa Gandhi Sampath (Taxpayer) v. ACIT, wherein the HC quashed a penalty order and held that penalty for under-reporting or misreporting of income cannot be imposed merely because the Taxpayer made an excess claim of foreign tax credit (FTC).

Bombay High Court Rules DTAA Supremacy Over Dividend Distribution Tax

 In a landmark development that could have far-reaching implications for multinational groups operating in India, the Hon’ble Bombay High Court has recently delivered a transformative ruling in Colorcon Asia Pvt. Ltd. v. JCIT. For nearly two decades, companies paying dividends to foreign shareholders were required to bear a significant tax cost in the form of Dividend Distribution Tax (DDT) at an effective rate of around 20%. This was so even though India’s tax treaties with many countries such as the UK, USA, Singapore, Netherlands, Germany, etc. which capped India’s right to tax dividends at 10% or 15%. This mismatch created a long-standing dispute: Can a domestic tax collection mechanism (DDT) override the lower tax rates promised under a tax treaty? The Colorcon ruling has now brought unprecedented clarity by holding that treaty benefits cannot be denied simply because India chooses to collect the tax from the company instead of the shareholder. In doing so, the Hon’ble Bombay High Court has reaffirmed a fundamental principle - India’s treaty commitments prevail over domestic machinery provisions when they are more beneficial to the taxpayer.

Value of Redeveloped Property (including costs paid for additional area) is eligible as Capital Gains exemption u/s 54, confirms Mumbai ITAT

 The Mumbai Income-tax Appellate Tribunal (‘the Tribunal’) recently held that the cost paid by a taxpayer for obtaining additional area in a redevelopment project constitutes investment in the new residential property. As a result, the amount paid including for the optional extra built-up area qualifies for exemption from capital gains tax.

Reimbursements of Secondee salaries not Fees for Technical Services

 In a recent ruling, the Delhi ITAT held that reimbursements received by Toshiba Corporation from its Indian group companies towards salaries of seconded employees cannot be characterised as Fee for Technical Services (FTS) under the Income-tax Act, 1961 or the India–Japan DTAA. The Tribunal concluded that once the employer–employee relationship with the Indian entities is established, salary payments fall outside the ambit of FTS.

Bangalore ITAT clarifies on allowability of ‘Cost of acquisition’ and ‘Improvement costs’ expenses in a Property sale for computing Capital Gains

 In a recent ruling, the Bangalore ITAT (“Tribunal”) examined the allowability of various capital gains related deductions claimed by a non-resident senior citizen on the sale of a residential villa, specifically addressing the evidentiary requirements for cost of acquisition, classification of personal effects, and the scope of “expenditure incurred in connection with transfer” for the purposes of capital gains taxability.

Navigating Section 79: How Continuity of Beneficial Ownership Preserves Loss Carry-Forward

 A recent ruling by the Income Tax Appellate Tribunal (ITAT) in ACIT vs. Lurgi India International Services Pvt. Ltd. provides crucial clarity on the application of Section 79 of the Income Tax Act, which restricts the carry-forward of losses in closely-held companies upon a change in shareholding. The decision underscores that the provision looks at economic reality over legal form, emphasizing beneficial ownership and the timing of corporate restructuring.

Section 194Q and the Jute Aarth Crisis: When Tax Compliance Clashes with Agency Law

The introduction of Section 194Q into the Income Tax Act, 1961, via the Finance Act, 2021, was designed to widen the tax net and create audit trails for high-value business transactions. However, its mechanical application has inadvertently triggered a systemic crisis for traditional commission-based business models, most notably in the jute industry’s aarth system. This provision mandates buyers with a turnover exceeding ten crore rupees to deduct tax at source (TDS) on purchases over fifty lakh rupees. The resulting conflict between procedural tax compliance and the substantive principles of agency law reveals a critical flaw in legislative design.

MCA Relaxes Small Company Thresholds: Unlocks Compliance Benefits

 The Ministry of Corporate Affairs has recently expanded the eligibility thresholds for classification as a ‘small company’ under the Companies Act, 2013. A company will now qualify as a small company if its paid-up capital does not exceed ₹10 crore and its annual turnover in the preceding financial year does not exceed ₹100 crore.

Case Laws on HUF

 The ITAT Kolkata SMC Bench, has given a strict reading of the deemed tax provisions defining “relatives” for tax purposes and ruled that gift received by an individual member from HUF does not qualify as being from a “relative” for Gift tax provisions, making it taxable in the recipient’s hands.​ However, the matter was remanded back to the tax officer to examine whether the same was an exempt income in the hands of recipient member u/s 10(2) of the Income Tax Act.

The assessee received certain sum as a gift from her husband’s HUF (of which the husband was Karta) and claimed exemption under section 56(2) considering the same as received from 'relative' . The AO and CIT(A) treated it as taxable under section 56(2), relying on ITAT Ahmedabad’s decision, which clarified that post-Finance Act 2012 amendment (retrospective from 01.10.2009), HUF is recognized only as a Donee (not donor) in the relative definition for individual recipients. The ITAT Kolkata upheld this view, emphasizing HUF’s distinct legal entity status from its members, rejecting arguments that HUF equates to a “conglomeration of relatives”.

Navigating the New Dawn: India's M&A Landscape in 2025

The Indian mergers and acquisitions (M&A) arena in 2025 is a narrative of strategic resilience and calculated ambition. Despite global economic crosswinds, the market demonstrates robust health, driven not by reckless exuberance but by a clear focus on consolidation, capability building, and capitalizing on long-term structural growth stories. The latest landscape analysis reveals an ecosystem evolving in sophistication, where regulatory clarity, sector-specific trends, and strategic foresight are shaping deal-making’s future.

Clean scrutiny order u/s 143(3) by Assessing Officer to override Tax Adjustment from intimation order u/s 143(1) by CPC

 In Standard Castings Private Limited v. ITO, the Hon’ble ITAT Delhi allowed the assessee’s appeal and set aside a demand that had continued to stand merely because it was raised in a CPC intimation under section 143(1), despite a complete and clean scrutiny assessment under section 143(3) accepting the returned income. The dispute arose from a typographical error during e-filing, where capital gains were inadvertently entered in the wrong row of Schedule BP. The CPC, while processing the return treated the figure as ‘income from other sources,’ and raised a demand. The assessee filed a rectification application under section 154, but CPC transferred rectification rights to the Jurisdictional Assessing Officer.

Corporate Guarantees Under GST: Navigating Taxability, Valuation, and Legal Precedents

The provision of a corporate guarantee, where one company pledges to cover the financial obligations of another (often a subsidiary or affiliate), is a common business practice. However, under India's Goods and Services Tax (GST) regime, this "costly promise" has evolved into a complex area of taxability, sparking significant litigation and regulatory clarification. Understanding the current landscape is crucial for businesses to ensure compliance and mitigate potential liabilities.

No undervaluation trigger under IT Act (Section 56) when asset acquired from Government undertaking at lower value

 Recently, the Hon’ble Income-tax Appellate Tribunal, Kolkata (‘ITAT’), in the case of Kanha Villa LLP (‘the Appellant’), deleted an addition of Rs. 6.59 crore made under Section 56(2)(x) of the Income-tax act, 1961 (‘the Act’), which was based on an enhanced valuation by the District Valuation Officer (‘DVO’) for a property acquired from West Bengal Infrastructure Development Corporation Ltd. (‘WBIDCO’), a state government undertaking. The Hon’ble ITAT held that since the transaction was directly with the State Government entity, there could be no undervaluation or suppression of the purchase price. Accordingly, the addition made on the grounds of undervaluation or suppression of purchase price was deleted.

Tax Due Date - December 2025.

 

S No	Due Date	Related to	Compliance to be made
1	11.12.2025	GSTR – 1	Filing of GSTR – 1 for the month of November 2025
2	13.12.2025	GST ISD	Filing for the month of Nov 2025
3	20.12.2025	GST	Payment of GST for the month of November, 2025 Filing of GSTR 3B for the month of November, 2025
4	07.12.2025	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 November 2025. · Deposit TDS from Salaries deducted during the month of November 2025 • Deposit TCS for collections made under section 206C including sale of scrap during the month of November 2025, if any • Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of November 2025, if any
5	15.12.2025	Income tax	Payment of Advance tax for the Corporate and Non Corporate assesses –Amount not less than 75% and 60% of advance tax respectively.
6	31.12.2025	GST	Filing of Annual Return -  GSTR 9 & 9C.

HC holds two-year period of limitation for claiming refund of wrongly paid tax is not mandatory

 This Tax Alert summarizes a recent ruling^[1] of the Karnataka High Court (HC) on whether the two-year time limit prescribed under Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) is mandatory or directory.

Tribunal rules that exemption on gifts from relatives does not require a gift deed

 In a recent decision, the Kolkata Tribunal held that where an individual receives cash from his brother-in-law (a specified relative under the tax laws) through banking channels, a gift deed is not required to establish its tax-exempt nature.