When a Subsidiary Investment Becomes a Business Loss

 

Key Takeaways

• Shares in a subsidiary are not automatically capital assets merely because they are shares.
• Three High Courts have recognized that losses arising from investments in subsidiaries can qualify as business losses when the investment is driven by commercial expediency and business objectives

Background

• The 57th GST Council Meeting was held on 8 October 2026 and focused mainly on process reforms relating to registration, assessments, appeals, refunds and enforcement.
• Eight GST Circulars and one Notification were issued on 26 October 2026 to implement part of the Council's recommendations.
• Most major legislative and rate-related changes are still pending and are expected to be effective from 1 April 2027 after necessary amendments.

Big Brother is Counting: How the Taxman Knows About Your Stock Sales and FD Interest

 Let’s start with a small story in this regard.

Mr. A, a mid-level software engineer, felt incredibly confident about his tax return last year. He had uploaded his Form 16, claimed his standard deduction, and proudly hit the submit button on the income tax portal. What he decided not to include was the ₹25,000 interest he earned from a couple of old Fixed Deposits (FDs) and a quick ₹50,000 profit he made selling shares on a popular trading app to fund a quick vacation. In his mind, these were minor, fragmented amounts. Who would possibly notice a few casual stock trades or interest accumulating in a secondary bank account?

CBIC Issues Circulars Pursuant to the Recommendations of the 57th GST Council Meeting

 The Central Board of Indirect Taxes and Customs (CBIC) has issued a series of circulars implementing the recommendations of the 57th GST Council Meeting. These clarifications provide greater certainty on export proceeds, refund eligibility, input tax credit (ITC) treatment, and adjudication-related matters, while addressing several long-standing areas of litigation.

GAAR Not Applicable to Genuine Capital Market Transactions: Telangana High Court

In a significant ruling, the Telangana High Court held that General Anti-Avoidance Rules (GAAR) cannot be invoked merely because a transaction results in a tax benefit. The case involved a taxpayer who invested surplus funds from a business slump sale into listed shares, received bonus shares, and subsequently incurred a short-term capital loss due to the statutory tax treatment of bonus shares and the FIFO method for identifying shares sold. The taxpayer legally set off this loss against long-term capital gains.

The Revenue attempted to invoke GAAR, alleging that the transactions were structured to obtain a tax advantage. However, the Court observed that the shares were purchased and sold through recognized stock exchanges at market prices, without any pre-arranged counterparties or collusive arrangements. The loss arose from the operation of specific provisions of the Income-tax Act and not from any artificial or abusive tax scheme.

The Court emphasized that legitimate tax planning and utilization of statutory computation mechanisms cannot be treated as tax avoidance. It further clarified that the burden of proving an impermissible 

Bombay High Court Clarifies Tax Exemption Eligibility for Venture Capital Funds

 In a significant ruling, the Bombay High Court has reaffirmed that a Venture Capital Fund (VCF) registered with SEBI is entitled to claim exemption under Section 10(23FB) of the Income-tax Act without requiring separate SEBI registration for each individual scheme operated by the fund. 

P&H HC holds exporter eligible for refund of interest paid under Rule 96A on subsequent realisation of export proceeds

 This Tax Alert summarizes a recent ruling of the Punjab & Haryana High Court (HC)¹ on the validity of paragraph 4.6 of Circular No. 197/09/2023-GST dated 17 July 2023, which denies refund of interest paid under Rule 96A of Central Goods and Services Tax Rules, 2017 (CGST Rules) where export proceeds are realized after the prescribed period.

The key observations of the HC are:

57th GST Council Meeting Outcomes

 The 57th GST Council met in New Delhi on 8 October 2026. Its recommendations focus on registration, returns, refunds and disputes: withdrawal of GST arrest powers, a higher prosecution threshold, wider input tax credit (ITC), automated refunds, easier e-commerce registration and fewer low-value proceedings. 

P&H HC provides guidelines for invoking Section 16(2)(c) while upholding its constitutional validity

 This Tax Alert summarizes a recent ruling of the Punjab & Haryana High Court (HC) ^[1] on the constitutionality of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017 (CGST Act), which imposes condition of supplier making payment of tax to the Government for eligibility of input tax credit (ITC) in the hands of recipient.

The key observations of the HC are:

Recent GSTAT and Advance Ruling Developments: Key Takeaways for Taxpayers

 Recent decisions of the GST Appellate Tribunal (GSTAT) and Advance Ruling Authorities provide important guidance on input tax credit (ITC), interest liability, and tax treatment of capital-raising expenses. These rulings clarify several contentious issues while also highlighting areas where litigation is likely to continue.

TAX DUE DATE- OCTOBER 2026

 

S. No	Due Date	Related to	Compliance to be made
1	11.10.2026	GST	Filing of GSTR 1 for the month of September, 2026
2	13.10.2026	GST	Filing for the month of Sept 2026
3	20.10.2026	GST	-Payment of GST for the month of September, 2026 -Filing of GSTR 3B for the month of September, 2026
4	25.10.2026	GST	ITC 04 (Job work) for the half year ended Sept 2026
5	07.10.2026	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 September 2026. · Deposit TDS from Salaries deducted during the month of September 2026 Deposit TCS for collections made under section 394 including sale of scrap during the month of Sep 2026 if any Deliver a copy of Form 121(15G/15H), if any to CCIT or CIT for declarations received in the month of Sep 2026, if any
5	31.10.2026	TDS Return	·       Filing of 2nd Quarter (1st July to 30th  September) TDS return.
6	15.10.2026	TCS Return	·       Filing of 2nd Quarter (1st July to 30th  September) TCS return.
7	31.10.2026	Tax Audit	Filing of Audit Reports 3CA, 3CD, 3CEB for the Financial Year 2025-26
8	31.10.2026	Income tax	Filing of income tax return for the Corporate assesses (or) non-corporate assesses (Whose books of accounts are required to be audited U/s 44AB of IT act 1961 (or) working partner (of a firm whose books of accounts required to be audit (in case of Assesses not having international or specified domestic transaction).

Emerging Themes from 2026 GST Litigation

The 2026 GST decisions reveal several consistent judicial trends:

Greater Emphasis on Natural Justice

The courts have repeatedly stressed that tax authorities must strictly adhere to procedural safeguards. Whether in the context of Show Cause Notices, valuation disputes or appellate remedies, the judiciary has emphasized fairness and transparency. [taxbymanis...ogspot.com], [taxbymanis...ogspot.com]

Bonus Preference Shares: A New Route for Unlocking Surplus Reserves

 Introduction

Several prominent listed companies, including Siyaram Silk Mills, TVS Motor Company, and Sundaram-Clayton, have recently adopted an innovative mechanism for rewarding shareholders and optimising capital structure through the issuance of bonus redeemable preference shares under schemes sanctioned by the National Company Law Tribunal (NCLT). 

When the CFO Leaves, Who Owns the Digital Keys?

- CA SAKSHI AGARWAL  

 Let’s start with a small story in this regard. Client B, a rapidly growing mid-sized manufacturing firm, recently faced the sudden and less-than-amicable exit of their CFO, Mr. A. Over his five-year tenure, Mr. A had become the absolute nerve center of the company’s financial and regulatory ecosystem. He handled everything: MCA filings, GST portal access, income tax e-filing, and primary banking authorizations.

 

FAQs issued by the Employees’ Provident Fund Organisation on implementation of the revised Provident Fund wage ceiling

 We are pleased to share our latest EY Alert on the Frequently Asked Questions (FAQs) issued by the Employees’ Provident Fund Organisation (EPFO) regarding the implementation of the revised Provident Fund wage ceiling from INR15,000 to INR25,000 per month, effective 17 September 2026.

5 GST Judgments in 2026 Every Business Should Know

 The year 2026 has already witnessed several landmark GST decisions that are reshaping the contours of tax litigation and compliance in India. These rulings highlight an emerging judicial trend: tax authorities must act strictly within the powers granted by law.  

Supreme Court Ruling on GST SCNs – A Landmark Clarification

In M/s G.R. Infra Projects Ltd. v. State of Madhya Pradesh (Civil Appeal No. 11277/2026), the Supreme Court has delivered a ruling that reshapes GST litigation:

🔑 Key Takeaways:
1️⃣ Fraud / Willful Misstatement / Suppression must be evident in the SCN itself.
Mechanical use of these words is insufficient. Without specific allegations, the SCN is unsustainable. This effectively nullifies the Madras High Court’s view in Fastenex Limited (Section 74 batch matter).
2️⃣ Limitation period extended due to COVID suo moto orders.
For AY 2018‑19, the last date for issuance of notice stood extended till 28.02.2025, partially upholding the Madras High Court’s Tata Play ruling.
3️⃣ Important Note:
The Supreme Court did not consider Notification No. 56/2023 while deciding limitation. Despite this, the Court has categorically held the due date as 28.02.2025.
📌 Impact:
Reinforces taxpayer protection by requiring SCNs to contain clear fraud allegations.
Clarifies the interplay of Sections 73 & 74 of the CGST Act.
Establishes binding precedent on limitation extensions due to extraordinary circumstances.
Leaves open questions on how Notification No. 56/2023 will interplay with this ruling in future disputes.
⚖️ A judgment that will influence GST litigation strategy, compliance, and departmental action for years to come

Full ITC Principle Continues to Strengthen GST Valuation Framework

 One of the most significant developments under GST valuation jurisprudence has been the consistent recognition that where the recipient is eligible for full Input Tax Credit (ITC), disputes regarding valuation become largely revenue neutral. Over the years, advance rulings, CBIC circulars, and judicial pronouncements have progressively reinforced this principle.

Employees Provident Fund wage ceiling increased from INR15,000 to INR25,000 per month

The Ministry of Labour and Employment has notified revised wage ceiling of ₹25,000 per month for the purposes of Chapter III (Provident Fund) of the Code on Social Security, 2020 (“COSS”), replacing the earlier wage ceiling of ₹15,000 per month with effect from 17 September 2026. The change is intended to align the social security framework with prevailing wage levels and expand access to Provident Fund savings, pension benefit and insurance protection.

How AI is Rewriting India’s Permanent Establishment (PE) Rulebook: Key Takeaways

• Traditional PE rules are under pressure. Historically, a foreign company became taxable in India only if it had a physical presence such as an office, branch, factory, or employees performing business activities in India.   
• AI challenges the physical presence test. Modern businesses can serve Indian customers through AI-powered platforms, chatbots, cloud infrastructure, and autonomous systems without maintaining any physical footprint in India.