Author: inavatiq

Case Details: S.D. Jayaprakash vs. Union of India - [2025] 181 taxmann.com 182 (SC)

Judiciary and Counsel Details

• Pamidighantam Sri Narasimha & Joymalya Bagchi, JJ.
• Gaurav Dhingra, AOR for the Petitioner.
• K. M. Nataraj, A.S.G., Vatsal Joshi, Sharath Nambiar, Ms Indira Bhakar, Vinayak Sharma, Anuj Srinivas Udupa, Chitransh Sharma, Ms Satvika Thakur, Yogya Rajpurohit, Aayush Saklani, Ms Nikita Capoor, Mohd. Akhil, Raghav Sharma, Prashant Rawat, Kritagya Kait, Advs. & Dr N. Visakamurthy, AOR for the Respondent.

Facts of the Case

In the instant case, the appellants were engaged as Data Entry Operators under the Plan Scheme titled ‘Rationalisation of Data Processing Facilities’ on a temporary and contractual basis between 1996 and 1999. Subsequently, the appellants were regularised with prospective effect.

The appellants filed an application before the Central Administrative Tribunal seeking protection of pay and grant of seniority, service benefits and pension by counting their period of contractual service. The Tribunal allowed the application and directed protection of pay as well as counting of the contractual period towards pensionary benefits.

Aggrieved by the Tribunal’s order, the respondents filed a writ petition before the High Court, which was partly allowed. The High Court set aside the directions relating to counting of the contractual period for seniority, service benefits and pension on the ground that the initial appointments were contractual in nature and not made through the Staff Selection Commission.

Supreme Court Held

The Supreme Court observed that, in view of the clear language of rule 17 and its interpretation in State of H.P. v. Sheela Devi, the contractual service rendered by the appellants prior to their regularisation in 2015 was required to be counted towards their pensionary benefits in accordance with the mechanism prescribed under rule 17.

Accordingly, the Supreme Court directed the respondent Union of India to take immediate steps to indicate the mode and manner in which the appellants could exercise the option provided under rule 17, and to notify the amounts payable by the appellants in the event they opted for grant of pension under the Rules.

List of Cases Reviewed

• Order of the High Court of Karnataka W.P. No. 4712/2016, dated 23.03.2021 (para 10) partly set aside
• State of H.P. v. Sheela Devi 2023 SCC OnLine SC 1272 (para 9) followed

List of Cases Referred to

• State of H.P. v. Sheela Devi 2023 SCC OnLine SC 1272 (para 2).

The post Pre-Regularisation Contract Service Counts for Pension Benefits | SC appeared first on Taxmann Blog.

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FAQs Dated 12.12.2025

1. Background

The International Financial Services Centres Authority (IFSCA) has issued a comprehensive set of Frequently Asked Questions (FAQs) under the IFSCA (TechFin and Ancillary Services) Regulations, 2025.

The FAQs are intended to provide operational clarity and ease of implementation for entities seeking registration or migrating to the new regulatory framework governing Technology-enabled Financial Services (TechFin) and Ancillary Services in IFSCs.

2. Clarification on Eligibility and Scope

The FAQs clarify:

• Who is eligible to apply under the TechFin and Ancillary Services Regulations
• The permitted activities covered under TechFin and Ancillary Services
• Applicability to entities providing technology, data, analytics, support, or infrastructure services to financial institutions operating in IFSC

This helps applicants determine whether their business model falls within the regulatory perimeter of the 2025 Regulations.

3. Permissible Legal Forms of Applicants

The FAQs specify the acceptable legal structures under which applicants may seek registration, such as:

• Companies incorporated under applicable company laws
• Other legal forms permitted by IFSCA, subject to fulfilment of eligibility criteria

This provides clarity on structuring options for applicants planning entry into IFSC.

4. Migration From Earlier Frameworks

The FAQs address the transition from:

• The erstwhile Ancillary Services framework, and
• The earlier FinTech regulatory framework

Key Clarifications

• Eligible existing entities may migrate to the new Regulations
• Migration conditions, documentation, and timelines are clarified
• Transitional arrangements ensure business continuity during migration

5. Certificate of Registration (CoR) – Timelines and Process

The FAQs explain:

• The process and timelines for obtaining a Certificate of Registration (CoR)
• The stages of scrutiny, approval, and grant of registration
• Expectations regarding completeness and accuracy of applications

This reduces uncertainty around onboarding timelines for new applicants.

6. Principal Officer and Compliance Officer

The FAQs provide guidance on:

• Appointment requirements for the Principal Officer and Compliance Officer
• Roles, responsibilities, and accountability expectations
• Timelines for appointment post-registration, where applicable

This reinforces governance and compliance oversight within registered entities.

7. Fee Structure and Payment

Clarifications have been provided on:

• Applicable fees under the Regulations
• Mode and timing of fee payment
• Treatment of fees during migration from earlier frameworks

8. Treatment of Pending Applications

For applications submitted under previous frameworks but not yet finalised:

• The FAQs clarify how such pending applications will be treated
• Whether re-submission, migration, or additional compliance is required
• Ensures fairness and administrative continuity for applicants in the pipeline

9. Repeal of Earlier Circulars

The FAQs confirm that:

• Earlier circulars, guidelines, and directions governing FinTech and Ancillary Services stand repealed
• The 2025 Regulations and FAQs now serve as the single consolidated regulatory reference

This eliminates regulatory overlap and ambiguity.

10. Regulatory Intent

The issuance of FAQs aims to:

• Provide operational certainty and ease of doing business
• Enable a smooth transition to the new TechFin and Ancillary Services regime
• Strengthen governance, compliance, and regulatory consistency
• Encourage innovation while ensuring regulatory oversight in IFSC

11. Key Compliance Takeaways

Entities should:

• Assess eligibility under the 2025 Regulations
• Review migration options if operating under earlier frameworks
• Plan timely appointment of Principal and Compliance Officers
• Align fee payments, governance structures, and internal policies
• Treat the FAQs as authoritative interpretative guidance

Click Here To Read The Full Updates

The post IFSCA Issues FAQs on TechFin and Ancillary Services Regulations, 2025 appeared first on Taxmann Blog.

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Press Release, dated 13-12-2025

1. Background

The Central Board of Direct Taxes (CBDT) has launched a targeted NUDGE (Non-intrusive Usage of Data to Guide and Encourage) campaign aimed at taxpayers who have claimed deductions for donations to suspicious entities or have not furnished adequate information to establish the genuineness of such entities.

The initiative forms part of CBDT’s broader strategy to encourage voluntary compliance through data-driven nudges, rather than immediate enforcement action.

2. Data-Driven Identification of High-Risk Claims

CBDT has strengthened its advanced data analytics and risk-profiling systems to detect potentially incorrect or abusive claims at an early stage.

Key Findings from Data Analytics

Analysis indicated that:

• Several taxpayers may have claimed deductions for donations made to entities flagged as suspicious, or
• Failed to provide relevant details necessary to verify the genuineness of the donee institutions

These patterns were identified as high-risk behaviour indicators, prompting targeted outreach instead of blanket scrutiny.

3. Targeted NUDGE Campaign – Taxpayer-Friendly Approach

Rather than initiating immediate assessment or penalty proceedings, CBDT has adopted a soft-touch compliance approach.

Key Features of the Campaign

• Personalised SMS and email advisories are being sent to identified taxpayers
• Communication is sent to registered mobile numbers and email IDs
• Taxpayers are given an opportunity to review and voluntarily correct their returns
• The campaign encourages taxpayers to:

1. 1. Update their Income-tax Returns (ITRs), and
   2. Withdraw incorrect or ineligible donation claims, if any

This approach aims to promote self-correction and voluntary disclosure.

4. Importance of Updated Contact Details

CBDT has emphasised that taxpayers must ensure:

• Correct and active mobile numbers
• Valid email IDs

are provided in their filings and on the Income-tax portal.

Accurate contact details are essential to:

• Receive timely advisories and compliance nudges
• Avoid missing important communications that could otherwise lead to subsequent scrutiny or enforcement action

5. Regulatory Intent

The campaign reflects CBDT’s intent to:

• Leverage technology and analytics for preventive compliance
• Reduce litigation and administrative burden
• Distinguish between genuine errors and deliberate tax abuse
• Encourage taxpayers to regularise mistakes without fear of immediate penal consequences

It also serves as a deterrent against misuse of donation-based deductions, particularly where donee entities may not meet statutory conditions.

6. Key Takeaways for Taxpayers

Taxpayers should:

• Review donation-related deductions claimed in their ITRs
• Verify the eligibility and genuineness of the donee institutions
• Respond promptly to any SMS or email advisories from CBDT
• File updated returns where incorrect claims have been made
• Ensure contact details are current on the Income-tax portal

Failure to act on such nudges may result in closer scrutiny, reassessment, or penalty proceedings at a later stage.

Click Here To Read The Full Press Release

The post CBDT Nudges Taxpayers on Bogus Donation Claims for AY 2025-26 appeared first on Taxmann Blog.

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Case Details: Director of Income-tax (International Taxation) vs. Niko Resources Ltd - [2025] 180 taxmann.com 816 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & Pranav Trivedi, JJ.
• Varun K. Patel for the Appellant.
• B S Soparkar for the Respondent.

Facts of the Case

The assessee-company, incorporated in Canada and engaged in the exploration of natural gas and oil, had entered into a joint venture with a state corporation and executed production sharing contracts with the Government of India for oil and gas fields in Gujarat. For A.Y. 2004-05, it filed a return declaring Nil income processed under section 143(1).

The case was selected for scrutiny and assessment under section 143(3), which determined the total income of about Rs. 180.28 crores after disallowances and initiated penalty proceedings under section 271(1)(c).

In response, the assessee filed an appeal before the CIT(A), wherein the CIT(A) deleted the penalty. Aggrieved by the order, the AO filed an appeal to the Tribunal. The Tribunal also upheld the deletion of the penalty. The matter reached before the High Court

High Court Held

The High Court held that the AO had not made any addition to the income of the assessee under section 143(1) for furnishing inaccurate particulars of income. The AO had made additions to the assessee’s income during the regular assessment proceedings, which were confirmed by the CIT(A). Thus, the additions to the assessee’s income were made under section 143(3).

The additions to the income of the assessee under section 143(3) would not amount to the furnishing of inaccurate particulars of income. Subsequently, the assessee filed an appeal before the Tribunal, which confirmed the additions to the assessee’s income, and the penalty proceedings were initiated accordingly.

The Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. held that the word ‘particulars’ used in section 271(1)(c) connotes the details of the claim made. The assessee must have furnished inaccurate particulars of his income. Where no information given in the return is found to be incorrect, the assessee cannot be held guilty of furnishing inaccurate particulars.

Since no addition was made under section 143(1) for furnishing inaccurate particulars of income, no penalty could be levied upon the assessee.

List of Cases Reviewed

• Orders passed by Tribunal in ADIT v. Niko Resources Ltd. [ITA No. 1608 (Ahd) of 2009, dated 25-11-2011]
• Asstt. DIT v. Niko Resources Ltd. [ITA Nos. 1605 to 1607 (Ahd) of 2009, dated 31-10-2011] [Para 18] Affirmed

List of Cases Referred to

• CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322 (SC)/[2010] 322 ITR 158 (SC) (para 15)
• Unison Hotels Ltd. v. Dy. CIT [2013] 40 taxmann.com 237 (Delhi) (para 17)
• CIT v. Citi Tiles Ltd [2014] 46 taxmann.com 344 (Gujarat)/[2015] 370 ITR 127 (Gujarat) (para 17)
• Niko Resources Ltd. v. Asstt. CIT [2017] 88 taxmann.com 691 (Gujarat)/[2017] 395 ITR 301 (Gujarat) (para 18).

The post No Penalty for Concealment Without Inaccurate ITR Details | HC appeared first on Taxmann Blog.

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Case Details: Mukul Sharma vs. Commissioner - [2025] 180 taxmann.com 780 (Allahabad)

Judiciary and Counsel Details

• Sameer Jain, J.
• Abhinav Gaur, Ankit Shukla, Arvind Srivastava, Mohd. Rashid Siddiqui & Shodan Singh for the Applicant.
• Dhananjay Awasthi for the Respondent.

Facts of the Case

The applicant, filed a bail application in a complaint case alleging GST evasion through the use of fake firms and fictitious supplies. The investigation into the matter had concluded, and the complaint had been filed, with the prosecution case relying primarily on documentary evidence. At the time of the application, the applicant had been in custody for approximately one and a half years, while the trial in the court below remained pending. It was submitted that continued incarceration for such a prolonged period was unjustified and contended that, given the completion of investigation and the documentary nature of evidence, bail should be granted. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that although the allegations were serious, the offences were cognizable, non-bailable, triable by a Magistrate, and carried a maximum penalty of five years with fine. The court observed that the applicant had already undergone prolonged incarceration, the investigation had concluded, and the case primarily rested on documentary evidence, indicating that trial would take considerable time. It was further held that the presumption of innocence applied, and bail could not be refused. Accordingly, the bail application of the applicant was allowed under Section 69, read with Section 132 of the CGST Act/Uttar Pradesh GST Act.

List of Cases Referred to

• Ratnambar Kaushik v. Union of India (2023) 2 SCC 671 (para 11)
• Vineet Jain v. Union of India [2025] 174 taxmann.com 139/99 GSTL 129 (SC) (para 13).

The post Prolonged Custody Justifies Bail in GST Evasion Case | HC appeared first on Taxmann Blog.

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Case Details: Birds RO System (P.) Ltd. vs. State of U.P. - [2025] 180 taxmann.com 778 (Allahabad)

Judiciary and Counsel Details

• Piyush Agrawal, J.
• Vishnu Kesarwani for the Petitioner.
• Ravi Shankar Pandey for the Respondent.

Facts of the Case

The petitioner, a GST-registered trader in water purifiers and parts, filed a writ petition challenging the detention, seizure, and penalty proceedings. It was contended that multiple tax invoices had been issued for the consignment, which required the generation of an e-way bill, and that the transporter was instructed not to commence movement until the e-way bill was generated. Despite this instruction, the transporter dispatched the goods in transit, which were intercepted only by the invoices and without the e-way bill. It was submitted that the e-way bill was subsequently generated after interception due to a technical glitch and that there was no intent to evade tax. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that it was not in dispute that the e-way bill was not generated before the commencement of the movement of goods. Since the e-way bill was produced only after interception, the detention, seizure, and order under Section 129(3) of the CGST Act/UP GST Act stood legally justified. The court observed that the plea of a technical glitch or absence of intent to evade tax did not negate the statutory requirement of generating the e-way bill before transit. Accordingly, the writ was dismissed, upholding the jurisdictional officer’s actions.

List of Cases Reviewed

• Mohini Traders v. State of U.P. [2025] 178 taxmann.com 37 (Allahabad) (Para 9) followed

List of Cases Referred to

• Aysha Builders & Suppliers v. State of U.P. [WRIT TAX No. 2415 of 2024, dated 24-1-2025] (para 6)
• Mohini Traders v. State of U.P. [2025] 178 taxmann.com 37 (Allahabad) (para 6).

The post E-Way Bill Generated After Interception Justifies Seizure | HC appeared first on Taxmann Blog.

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Circular e-File. No. IFSCA-FMPP0BR/35/2025-Banking, Dated 12.12.2025

1. Background

The International Financial Services Centres Authority (IFSCA) has issued a circular drawing the attention of International Banking Units (IBUs) to a notification issued by the Department of Financial Services (DFS). The notification appoints November 1, 2025 as the date for commencement of certain provisions of the Banking Laws (Amendment) Act, 2025.

The circular emphasises that IBUs operating in IFSCs must ensure full compliance with the newly enforced statutory provisions from the notified date.

2. Provisions Coming Into Force

The DFS notification brings into effect the following sections of the Banking Laws (Amendment) Act, 2025:

• Section 10
• Section 11
• Section 12
• Section 13

These provisions amend aspects of the Banking Regulation Act, 1949 and related banking laws, impacting governance, regulatory oversight, and operational requirements applicable to banking entities.

3. Applicability to International Banking Units

IFSCA has clarified that:

• The enforcement of the above provisions is equally applicable to IBUs
• IBUs must review the amended provisions and align their policies, procedures, and governance frameworks accordingly
• Any operational, compliance, or reporting changes arising from the amendments must be implemented on or before November 1, 2025

4. Legal Authority for the Directions

The circular has been issued under the powers conferred by:

• The IFSCA Act, 2019, read with
• The Banking Regulation Act, 1949

This confirms IFSCA’s supervisory jurisdiction over IBUs in respect of compliance with central banking legislation as amended from time to time.

5. Regulatory Intent

The directive aims to:

• Ensure regulatory uniformity between domestic banking entities and IBUs
• Facilitate smooth implementation of the Banking Laws (Amendment) Act, 2025
• Strengthen prudential governance and statutory compliance within IFSC banking operations
• Avoid transitional gaps or non-compliance due to delayed adoption of amended provisions

6. Compliance Takeaways for IBUs

International Banking Units should:

• Conduct a gap analysis of existing practices vis-à-vis sections 10–13 of the amended Act
• Update internal policies, SOPs, and governance documents
• Train compliance and operations teams on the new requirements
• Ensure readiness for IFSCA supervisory review post-implementation

Failure to comply may attract regulatory observations, directions, or enforcement action under the applicable IFSC regulatory framework.

Click Here To Read The Full Circular

The post IFSCA Directs IBUs to Comply With Banking Laws Amendment Act, 2025 appeared first on Taxmann Blog.

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Case Details: Alok Nanda vs. FIIT JEE Ltd. - [2025] 181 taxmann.com 171 (Delhi)

Judiciary and Counsel Details

• Neena Bansal Krishna, J.
• Nidhesh Gupta, Sr. Adv., Sanjeev Kumar Baliyan, Bikram Dwivedi, Ashwani K. Dubey, Nirbhay Sharma & Bikram Dwivedi, Advs. for the Petitioner.
• Pramod Kumar Dubey, Sr. Adv., Rahul Goyal, Ms Amrita Vatsa, Rupraj Banerjee, Satyam Sharma & Raaj Malhotra, Advs. for the Respondent.

Facts of the Case

In the instant case, the complainant filed a complaint before the Trial Court against the accused company and its directors for an offence punishable under section 138 of the Negotiable Instruments Act, 1881. According to the complainant, it had granted a loan to the accused, towards repayment of which a cheque was issued. Upon presentation, the cheque was dishonoured.

Thereafter, the Trial Court took cognisance of the matter and directed issuance of summons to the accused company and all its directors, including the petitioner. The Trial Court observed that whether the cheque was dishonoured due to insufficiency of funds, or whether valid defences were available to the accused such as stop payment instructions or breach of obligations under the loan agreement, were matters to be examined during trial and could not be considered at the summoning stage. It was further observed that, prima facie, it could not be said that the cheque in question was not issued towards a legally enforceable liability.

High Court Held

The High Court held that the complaint under section 138 of the Act was not liable to be quashed on these grounds. It further noted that the complaint satisfied the statutory requirements by arraying all the accused directors and officers, with specific averments that they were in charge of and responsible for the day-to-day affairs and decision-making of the company. Accordingly, the Trial Court was justified in issuing summons to all the directors. The High Court therefore dismissed the petition seeking quashing of the complaint.

List of Cases Reviewed

• National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal [2010] 98 SCL 407 (SC) (Para 65)
• Kamalkishor Shrigopal Taparia v. India Ener-Gen (P.) Ltd. [2025] 171 taxmann.com 715 (Para 66)
• HDFC Bank Ltd. v. State of Maharashtra [2025] 174 taxmann.com 895 (Para 68) followed

List of Cases Referred to

• National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal [2010] 98 SCL 407 (SC) (para 65)
• Kamalkishor Shrigopal Taparia v. India Ener-Gen (P.) Ltd. [2025] 171 taxmann.com 715/188 SCL 312 (SC) (para 66)
• HDFC Bank Ltd. v. State of Maharashtra [2025] 174 taxmann.com 895/189 SCL 1 (SC) (para 68).

The post Cheque Issued for Enforceable Debt – Section 138 Complaint Not Quashed | HC appeared first on Taxmann Blog.

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Case Details: Shangri-La International Hotel Management Pte. Ltd. vs. Commissioner of Income-tax (International Tax) - [2025] 180 taxmann.com 835 (Delhi)

Judiciary and Counsel Details

• V. Kameswar Rao & Vinod Kumar, JJ.
• Manuj Sabharwal, Devvrat Tiwari & Drona Negi, Advs. for the Petitioner.
• Siddhartha Sinha, SSC for the Respondent.

Facts of the Case

The petitioner sought revision of the intimation dated 28-04-2022 issued under section 143(1) for AY 2021-22 by filing an application under section 264, along with a request for a consequential refund and interest under section 244A.

The Revenue agreed that the revision petition was maintainable in light of the Delhi High Court’s rulings in Vijay Gupta v. CIT and EPCOS Electronic Components S.A. v. Union of India. However, it declined to grant relief solely because the jurisdictional High Court’s decision in CIT v. Sheraton International Inc. was still pending before the Supreme Court.

High Court Held

The Delhi High Court held that the Commissioner was not justified in refusing relief. A binding precedent of the jurisdictional High Court cannot be ignored merely because a special leave petition is pending before the Supreme Court. Since the issue had already been conclusively decided in favour of the assessee in Sheraton International and reaffirmed in subsequent judgments, including the assessee’s own earlier cases, the Court set aside the Commissioner’s order.

Accordingly, the assessee’s revision application under section 264 was allowed, and the Commissioner was directed to grant the consequential relief in accordance with law.

List of Cases Reviewed

• CIT v. Sheraton International Inc. [2009] 178 Taxmann 84 (Del)
• CIT v. Sheraton International Inc. [decided by this court on ITA 271 of 2023, dated 11-5-2023]
• CIT v. Starwood Hotels & Resorts Worldwide Inc. 2022:DHC:004730
• Commissioner of Income Tax – International Taxation v. Shangri-LA International Hotel Management Pte Ltd. [ITAs 532 & 535 of 2023. dated 18-09-2023] (para 6) followed

List of Cases Referred to

• EPCOS Electronic Components S.A v. Union of India [2019] 107 taxmann.com 227/[2019] 266 Taxman 23 (Delhi) (para 4)
• Vijay Gupta v. CIT [2016] 68 taxmann.com 131/[2016] 238 Taxman 505/[2016] 386 ITR 643 (Delhi) (para 4)
• DIT v. Sheraton International Inc. [2009] 313 ITR 267/178 Taxman 84 (Delhi) (para 4)
• CIT v. Starwood Hotels & Resorts Worldwide Inc. 2022:DHC:004730 (para 6)
• CIT– International Taxation-3 v. Shangri-LA International Hotel Management Pte Ltd. [IT Appeal No. 532 of 2023, dated 18-9-2023] (para 6)
• CIT v. Sheraton International Inc. [ITAppeal No. 271 of 2023, dated 11-5-2023] (para 6).

The post Commissioner Cannot Deny Section 264 Relief by Citing SC Pendency | HC appeared first on Taxmann Blog.

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1. Introduction

In the course of audits of companies that maintain their books of account in electronic form, auditors frequently identify certain recurring areas of non-compliance with the requirements prescribed under the Companies Act, 2013 and the Companies (Accounts) Rules, 2014. These non-compliances generally relate to system configurations, data retention practices, audit trail maintenance and accessibility of electronic records in India. Some of the commonly observed non-compliances by the auditor in relation to maintenance of books of accounts in electronic form are discussed herewith:

2. Failure to Maintain Backup of Books of Account on Server Present in India

2.1 Facts

Nova India Private Limited, hereinafter referred to as “the company” is a wholly owned subsidiary of Nova Systems Inc., a tech solutions provider based in the United States. The Company maintains its books of account entirely in electronic form through an enterprise level accounting software that operates on cloud infrastructure managed by the parent company. Although, the company had its own servers installed at its facility in Bengaluru, the financial data was not being backed up or stored on these India based servers. Instead, the accounting system was configured to sync exclusively with the parent company’s servers located in the United States. As a result, no daily backup of the electronic books of account was maintained on any server physically located in India.

2.2 Relevant Provision

Rule 3(5) Companies (Accounts) Rules 2014

There shall be a proper system for storage, retrieval, display or printout of the electronic records as the Audit Committee, if any, or the Board may deem appropriate and such records shall not be disposed of or rendered unusable, unless permitted by law.

Provided that the back-up of the books of account and other books and papers of the company maintained in electronic mode, including at a place outside India, if any, shall be kept in servers physically located in India on a daily basis.

2.3 Auditor’s Observation

As per Rule 3(5) of the Companies (Accounts) Rules, 2014, where a company maintains its books of account in electronic mode, it is required to maintain a daily backup of such electronic records on servers physically located in India, even if the primary books are maintained outside India.

During the audit, it was noted that the company maintains its books of account electronically on cloud servers managed by its parent company in the United States. Although servers are installed in India, no daily backup of the electronic books of account is being stored on these India based servers. Accordingly, the company has not complied with the requirement of maintaining a daily backup of electronic books of account on servers physically located in India, resulting in a non-compliance of statutory requirements.

Click Here To Read The Full Story

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