This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from May 25th to May 30th 2026, namely:
- Levy on Betting and Gambling Upheld; 2023 Amendment on Online Gaming Held Clarificatory and Retrospective: SC
- Addition Under Section 69A for Unexplained Cash Deposit Deleted as AO Failed to Specify Charging Section: ITAT
- MCA Enables CSR Spending Through Zero Coupon Zero Principal Instruments on Social Stock Exchange
- SEBI Eases Nomination Norms for Demat Accounts & MF Folios; Mandates Nomination for Single-Holder Accounts from Sept. 1, 2026
- Deduction of Prior Payment From Total Compensation Justified to Prevent Double Benefit After Fatal Electrocution: HC
- Education Consultancy Services to Foreign Universities Not Intermediary; IGST Refund Admissible: HC
- Accounting for Deferred Payment Arrangements Under Ind AS 2: Can Extended Credit Terms Inflate Inventory Cost?
1. Levy on Betting and Gambling Upheld; 2023 Amendment on Online Gaming Held Clarificatory and Retrospective: SC
The Hon’ble Supreme Court held that the levy of GST on actionable claims arising from betting and gambling transactions is constitutionally valid under Article 246A of the Constitution. Further, the amendments introduced by the CGST Amendment Act, 2023, including changes to Schedule III and insertion of valuation rules for online gaming, are clarificatory in nature and operate retrospectively.
1.1 Facts
The petitioners, being online gaming operators offering games of skill through online platforms, were issued show-cause notices (SCNs) alleging misclassification of their activities by treating supplies arising from online gaming transactions as services and discharging GST only on platform fees, rather than on the entire stake amount. Aggrieved by the notices, they challenged the validity of the notices and assailed the constitutional validity of Sections 2(31), 2(52), 7, 9 and 15 of the CGST Act, corresponding provisions of State GST Acts, Rules 31A and 31B of the CGST Rules, and related notifications and circulars. Pursuant to orders of the Supreme Court, several writ petitions involving similar issues relating to online gaming, fantasy sports and casino transactions were transferred from different High Courts for adjudication. The petitioners contended that games of skill, including fantasy sports, could not be treated as betting and gambling transactions. The matter was accordingly placed before the Hon’ble Supreme Court.
1.2 Held
The Hon’ble Supreme Court held that the levy of GST on actionable claims arising from betting and gambling transactions is constitutionally valid and falls within the legislative competence conferred by Article 246A of the Constitution. It held that Sections 2(31), 2(52), 7, 9 and 15 of the CGST Act, the corresponding provisions of State GST Acts, Rules 31A and 31B of the CGST Rules, and the related notifications and circulars are constitutionally valid and that the challenge to their validity was liable to be rejected. The Court further held that the amendments introduced by the CGST (Amendment) Act, 2023, including the amendment to Entry 6 of Schedule III and insertion of Rules 31B and 31C, are clarificatory and explanatory in nature and therefore operate retrospectively.
It further held that organised online gaming activities, including fantasy sports and other gaming formats involving pooled stakes, give rise to actionable claim supplies taxable under the statutory framework governing betting and gambling transactions, irrespective of the characterisation of the underlying game as one of skill or chance. In respect of casino transactions, it held that recourse to Rule 31 and best-judgment valuation under the pre-amendment framework could not be regarded as impermissible where complete and reliable records were unavailable, though the ultimate determination of taxable value would be governed by Rule 31C.
The Court also set aside the Karnataka High Court judgment quashing the SCNs and restored the notices for adjudication in accordance with law. Further, it set aside the Bombay High Court ruling to the extent it held that fantasy sports transactions constituted actionable claims other than betting and gambling and therefore fell outside the GST framework. Accordingly, all pending SCNs, adjudication proceedings and consequential demands relating to online gaming, fantasy sports and casino transactions were directed to be decided in accordance with Rules 31B and 31C and the findings recorded in the judgment, and the writ petitions and transferred cases were dismissed.
Read the Ruling
2. Addition Under Section 69A for Unexplained Cash Deposit Deleted as AO Failed to Specify Charging Section: ITAT
The assessee challenged an addition of Rs. 1 crore for the AY 2017-18 arising from a single cash deposit in its Kotak Mahindra Bank account. The Assessing Officer (AO) held that the assessee did not carry out any business activities during part of the year. The precise source of the single-day cash deposit of Rs. 1 crore in the bank remained unexplained.
He added Rs. 1 crore to the taxable income over and above the returned income of about Rs. 6.60 lakhs (treated by the AO as income from other sources). AO applied section 115BBE to the addition. On appeal, the CIT(A)/NFAC confirmed the addition, essentially reiterating the AO’s order. The aggrieved assessee filed the instant appeal before the Tribunal.
The Tribunal held that, before the application of section 115BBE, the income must fall within the parameters specified in the sections. However, in the instant case, the AO had failed to pinpoint any such charging section under which the proposed addition was made. Section 155BBE falls within Chapter XII of the Income-tax Act, 1961, and is concerned with the determination of tax in special cases. The AO had fallen into a palpable error by jumping to section 115BBE without first fixing the addition under any of the charging provisions.
The legal infirmity in the assessment order was pointed out to the Sr. DR, but she could not elucidate the proper charging provision for bringing to income the sum of Rs. 1 crore. The order of the CIT(A) mainly reiterated the order of the AO, and he glossed over the fact that the absence of a charging provision is fatal to the finality of the assessment order. Accordingly, the entire addition of Rs. 1 crore was directed to be deleted.
Read the Ruling
3. MCA Enables CSR Spending Through Zero Coupon Zero Principal Instruments on Social Stock Exchange
On May 27, 2026, the Ministry of Corporate Affairs (MCA) notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 and amended Schedule VII to the Companies Act, 2013, to enable companies to undertake Corporate Social Responsibility (CSR) activities through subscription to Zero Coupon Zero Principal (ZCZP) Instruments listed on the Social Stock Exchange.
3.1 Definition of Zero Coupon Zero Principal Instrument
The MCA has amended the Companies (Corporate Social Responsibility Policy) Rules, 2014, to introduce the definition of a “Zero Coupon Zero Principal Instrument”. The term refers to a security issued by a Not for Profit Organisation (NPO) registered with the Social Stock Exchange segment of a recognised stock exchange in accordance with the regulations framed by the Securities and Exchange Board of India (SEBI).
The amendment also introduces the definition of “Not for Profit Organisation” by adopting the meaning assigned to it under Regulation 292A of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
3.2 CSR Implementation through ZCZP Instruments
A new Rule 4A has been inserted to permit companies to implement CSR activities through subscription to ZCZP Instruments. However, the expenditure incurred on such instruments shall not exceed 10% of the company’s total CSR expenditure for the relevant financial year.
3.3 Exemption from Impact Assessment
The amendment provides that a company subscribing to a ZCZP Instrument shall not be required to undertake an impact assessment in respect of projects funded through such an instrument.
3.4 Obligations of the Issuing NPO
The NPO issuing the ZCZP Instrument and raising funds therefrom shall undertake projects having a duration not exceeding three succeeding financial years from the date of issuance of the instrument. Further, upon termination of listing of the instrument, any unspent amount shall be transferred to a fund specified under Schedule VII of the Companies Act, 2013, and a compliance report shall be submitted to SEBI.
3.5 Applicability of Existing CSR Provisions
The MCA has clarified that the provisions of Rule 4 of the Companies (CSR Policy) Rules, 2014, except sub-rules (5) and (6), shall apply to CSR implementation through ZCZP Instruments.
3.6 Amendment to Schedule VII
To align Schedule VII with the above framework, the MCA has inserted a new item recognising “Subscription to Zero Coupon Zero Principal Instruments on Social Stock Exchange” as an eligible CSR activity under the Companies Act, 2013.
3.7 Effective Date
The Companies (Corporate Social Responsibility Policy) Amendment Rules, 2026 and the corresponding amendment to Schedule VII have come into force with effect from the date of their publication in the Official Gazette.
Read the Notification
4. SEBI Eases Nomination Norms for Demat Accounts & MF Folios; Mandates Nomination for Single-Holder Accounts from Sept. 1, 2026z
On May 30, 2026, the Securities and Exchange Board of India (SEBI) issued a circular revising the nomination framework applicable to demat accounts and mutual fund folios with a view to enhancing ease of investor onboarding, simplifying the nomination process and reducing the incidence of unclaimed investor assets. The revised framework has been introduced after considering stakeholder representations and feedback received through public consultation.
4.1 Mandatory Nomination for Single-Holder Accounts and Folios
SEBI has prescribed that, for all single-holder demat accounts and mutual fund folios opened on or after the effective date of the circular, nomination shall be mandatory unless the investor expressly opts out by submitting the prescribed declaration. However, nomination shall remain optional for jointly held accounts and folios. Further, any nomination or change in nomination in joint holdings shall require the consent of all joint holders, irrespective of the mode of operation.
4.2 Increase in the Number of Permissible Nominees
Investors may nominate up to three persons in respect of a demat account or mutual fund folio. In cases involving multiple nominees, the nominees may either continue to hold the securities jointly in the existing account or folio or may open separate accounts or folios corresponding to their respective entitlements.
4.3 Simplification of Nomination Process
SEBI has simplified the nomination process by permitting the submission of nomination forms through both online and offline modes. Online nominations may be authenticated through a Digital Signature Certificate (DSC), Aadhaar-based e-sign, any other legally recognised e-sign facility, or two-factor authentication (2FA), including OTP verification through registered mobile number and email address.
For physical/offline nominations, the requirement of witness signatures has been dispensed with, where the investor signs the nomination form. Witness details shall be required only where the investor affixes a thumb impression instead of a signature.
4.4 Rationalisation of Information Requirements
Under the revised framework, only the nominee’s name and the nature of the relationship with the investor have been prescribed as mandatory particulars. In the case of a minor nominee, the date of birth is also required to be furnished. Other details, such as contact information, percentage share, identification particulars, and guardian details, have been made optional.
Where multiple nominees are appointed, and their respective shares are not specified, the holdings shall be distributed equally among the nominees. Any fractional or odd-lot entitlement arising from such distribution shall be transferred to the first nominee named in the nomination form.
4.5 Opt-Out Facility
Investors who do not wish to appoint a nominee may opt out by submitting the prescribed declaration form or by selecting the online opt-out option. The declaration expressly states that the investor understands the consequences of failing to make a nomination, including the possibility of delays in transferring securities to legal heirs and the eventual classification of the holdings as unclaimed assets.
4.6 Flexibility to Modify or Cancel Nomination
The circular clarifies that investors can provide, modify or cancel nominations any number of times. The prescribed forms shall also be applicable for subsequent changes or cancellations. Regulated entities have been directed to provide an acknowledgement for every nomination, modification or cancellation request.
4.7 Additional Responsibilities of Regulated Entities
SEBI has mandated regulated entities to disclose nomination status in periodic statements of account or holding statements. Such disclosure may either include the name of the nominee(s) or merely indicate whether nomination has been registered.
Further, for existing and newly opened accounts and folios without a nomination, Depository Participants and Mutual Fund RTAs shall send half-yearly reminders through email and SMS and display informational pop-up messages highlighting the benefits of nomination at the first login of the day. These requirements shall not apply where nomination has already been registered.
4.8 Applicability and Effective Date
The revised norms shall apply mutatis mutandis to both existing and newly opened demat accounts and mutual fund folios. Regulated entities have been directed to suitably upgrade their systems to facilitate compliance with the revised framework. The circular shall come into effect from September 1, 2026.
Read the Circular
5. Deduction of Prior Payment From Total Compensation Justified to Prevent Double Benefit After Fatal Electrocution: HC
The High Court, in Additional Assistant Engineer v. Ailineni Swapna@Gokaveni Sabhitha [2026] 186 taxmann.com 489 (Telangana), held that where a sum had already been paid to the deceased employee’s family on account of his death, such amount could be deducted from the compensation payable under the Employees’ Compensation Act, 1923, to prevent double recovery for the same cause of action. Further, Section 8 of the Act does not prohibit such a deduction when the earlier payment is directly attributable to the same death.
5.1 Brief facts of the case:
In the instant case, the deceased suffered fatal electrocution while carrying out electrical work on an electric pole. His dependents filed a claim under the Employees’ Compensation Act, 1923.
The Commissioner held that the deceased was engaged as a casual employee under the Electricity Department officials and that death occurred during and in the course of such employment. The Commissioner determined the total compensation at about Rs. 4.24 lakhs under the statutory formula and deducted Rs. 1.15 lakhs paid by OP1 to the deceased’s mother (through fixed deposits, with reference to a settlement deed), treating the amount as adjustable. Aggrieved by the deduction, the claimants filed an appeal before the High Court.
5.2 Questions that arose for consideration:
The primary question that arose for consideration was whether the Commissioner was justified in holding that the deceased was an “employee” within the meaning of the Employees’ Compensation Act, 1923, and that his death arose out of and in the course of employment.
Secondly, whether the Commissioner was legally justified in deducting a sum of Rs.1,15,000/- from the total compensation determined.
5.3 High Court Observations:
It was noted that the finding of the Commissioner rests on a proper appreciation of the oral evidence on record. PW-2, an independent witness and owner of the agricultural field where the accident occurred, deposed that the deceased was taken to the spot and instructed to climb the electric pole for carrying out electrical work, during which he suffered fatal electrocution.
Further, it was noted that the Employees’ Compensation Act, 1923, is a beneficial legislation and must receive a liberal construction. The absence of a formal contract of employment or regular appointment is not determinative; even a casual or temporary engagement would fall within the ambit of the Act, provided the accident arises out of and in the course of employment.
The High Court observed that there was no perversity, illegality or jurisdictional error in the finding recorded by the Commissioner with regard to the existence of an employer-employee relationship and consequent liability.
5.4 High Court Ruling:
The High Court held that although the Employees’ Compensation Act is beneficial legislation, it is not meant to enrich claimants unjustly. Since the amount of Rs. 1,15,000/- was specifically paid towards the loss suffered by the family due to the death of the deceased, granting the entire compensation of Rs. 4,23,580/- without deducting the said amount would amount to double payment for the same cause of action, contrary to the principles of justice and equity.
Further, the High Court held that Section 8 of the Employees’ Compensation Act, 1923, deals with the mode of payment of compensation and does not bar a deduction of this nature, where the payment is directly attributable to the same death and is in the nature of an advance or settlement of a part of the compensation. Accordingly, the deduction of Rs. 1.15 lakhs made by the Commissioner was a just and proper exercise of his discretion to avoid double benefit.
Read the Ruling
6. Education Consultancy Services to Foreign Universities Not Intermediary; IGST Refund Admissible: HC
The High Court held that education consultancy services provided to foreign universities on their own account do not qualify as intermediary services and are eligible for IGST refund as export of services. The Court noted that contractual privity with foreign universities, receipt of consideration, and the lack of authority to bind universities or collect fees from students were decisive factors, negating intermediary status.
6.1 Facts
The petitioner was engaged in education consultancy providing marketing and recruitment support services to foreign universities and received consideration directly from them under contractual arrangements. It filed refund claims of IGST treating the services as export of services, supported by agreements, invoices, and e-BRCs/FIRCs. A show cause notice (SCN) was issued seeking clarification that the services did not constitute intermediary services. After the submission of the reply and the personal hearing, the refund was rejected by the jurisdictional officer under CGST on the ground that the petitioner acted as an agent for universities by promoting courses, identifying students, assisting with admissions, and receiving commissions linked to tuition fees. The petitioner challenged the rejection by filing a writ petition. The matter was accordingly placed before the High Court.
6.2 Held
The High Court held that the classification of services as intermediary must be determined strictly on the basis of contractual privity, nature of supply, and recipient of consideration under Section 2(13), read with Sections 13 and 16 of IGST Act. It observed that where services are rendered on own account directly to foreign universities and consideration is received from them, the mere incidental assistance to students does not alter the character of the supply into intermediary services. It further noted that absence of authority to bind universities, absence of any fee collection from students, and existence of direct contractual relationship with universities are determinative factors negating intermediary status. Accordingly, it held that the impugned order rejecting refund was unsustainable and directed that IGST refund be processed along with applicable statutory interest.
Read the Ruling
7. Accounting for Deferred Payment Arrangements Under Ind AS 2: Can Extended Credit Terms Inflate Inventory Cost?
The cost of inventories under Ind AS 2, Inventories is intended to reflect the expenditure incurred to bring inventories to their present location and condition. However, practical complexities arise when inventories are acquired under extended credit arrangements, in which the supplier charges a higher price in exchange for deferred payment terms. However, where inventories are acquired under extended credit arrangements at a price higher than the normal cash purchase price, it becomes necessary to determine whether the additional amount constitutes part of the cost of inventories or represents a separate financing component requiring independent accounting treatment.
Ind AS 2 addresses this issue, which recognises that deferred settlement arrangements may contain a financing element. Where inventories are purchased on credit terms that extend significantly beyond normal credit periods, the difference between the cash purchase price and the deferred payment amount does not represent the cost of acquiring inventory. Instead, it represents compensation to the supplier for providing financing.
For Example, where a manufacturing company purchases raw materials that are available for immediate payment at ₹50 lakh. Due to liquidity constraints, the company opts for an alternative arrangement under which payment of ₹58 lakh will be made after 24 months. Although the contractual liability amounts to ₹58 lakh, the supplier’s quoted cash price clearly indicates that the materials themselves are worth ₹50 lakh, while the additional ₹8 lakh arises solely because payment has been deferred. In such circumstances, Ind AS 2 requires the entity to separate the financing element from the inventory cost. The inventory should be recognised at the cash equivalent price of ₹50 lakh, being the amount attributable to acquisition of the materials. The excess ₹8 lakh does not contribute to bringing the inventory to its present location or condition and therefore does not satisfy the criteria for inclusion in inventory cost.
Economically, the additional amount represents interest for the extended credit period. If the entire deferred settlement amount of ₹58 lakh is capitalised as inventory cost, the financial statements may not faithfully represent the substance of the transaction. Inventory would be measured based on financing arrangements rather than acquisition cost, resulting in an overstatement of inventory and an understatement of finance costs. Such treatment would also distort gross profit margins by embedding borrowing costs within inventory valuation.
The principle applies irrespective of whether the supplier separately invoices interest or incorporates the financing charge within a single contractual amount. The accounting treatment depends on the substance of the arrangement rather than its legal form. Where the deferred payment amount exceeds the normal cash purchase price because of extended credit terms, the excess represents a financing component that must be recognised separately over the financing period.
Accordingly, when inventories are purchased under deferred settlement terms containing a financing element, Ind AS 2 requires inventory to be measured at the cash purchase price, while the excess amount payable due to delayed settlement is recognised as interest expense over the credit period. Therefore, in the above case, only ₹50 lakh qualifies as inventory cost, whereas the additional ₹8 lakh represents finance cost arising from supplier financing.
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