This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Feb 09th to Feb 14th 2026, namely:
- Liability Towards Leave Encashment and Bonus Payment Can’t be Transferred to Another Entity to Claim Section 43B Deduction: ITAT
- SEBI Proposes Key Reforms to Strengthen the Social Stock Exchange (SSE) Framework
- Govt. Notifies the Draft Occupational Safety, Health and Working Conditions (Dock Work) Central Regulations, 2026
- Govt. Invites Public Feedback on Draft Metalliferous Mines Safety Regulations, 2026 under OSH&WC Code, 2020
- Post Circular 173/05/2022 Deleting Restriction, Inverted Duty Refund Allowed Even When Input & Output Tax Rates Same: HC
- On Amalgamation, New Co. Receives Transferred ITC Only; Retained ITC If Refunded to Old Co., Bars Later Refund to New Co.: HC
- ICAI Releases New Practitioner’s Guide on Drafting Modified Opinions in Independent Auditor’s Reports
- AASB of ICAI Issues Guidance on New Labour Codes: Accounting and Auditing Implications
1. Liability Towards Leave Encashment and Bonus Payment Can’t be Transferred to Another Entity to Claim Section 43B Deduction: ITAT
The assessee-company, engaged in providing administrative support services to ”Corteva Group”, pursuant to its business transfer agreement, transferred one of its business undertakings along with certain employees on a slump sale basis to ”P” and filed its return of income claiming deduction towards leave encashment and bonus payment under section 43B on the ground that the liability arising out of provisions made for the financial year 2018-19 had been paid on 1-4-2019, which was on or before the due date for filing the return of income under section 139(1).
The Assessing Officer (AO) disallowed the claim because the assessee had not proved the actual payment of said liabilities on or before the due date prescribed under section 139(1). The CIT(A) deleted the additions made by the AO towards the disallowance of liabilities under Section 43B. Aggrieved by the order, the AO filed an appeal before the Tribunal.
The Tribunal held that there is no concept of deemed payment of liability referred to under section 43B for claiming a deduction towards said liability while computing the income from business or profession. A person cannot, by contract, transfer or shift his statutory obligations to another and claim a deduction under section 43B. In order to claim a deduction under Section 43B, there should be actual payment of liability as stipulated thereon, and such payment, if made on or before the due date for filing the return of income under Section 139(1) in terms of the proviso to Section 43B, is allowable as a deduction.
In the present case, the assessee transferred the liability related to leave encashment, bonus payment of employees to the transferee undertaking and claimed that, upon transfer of said liability, the liability payable to the employees has been discharged by invoking a deeming fiction even though there is no provision under the Act, including section 43B of the Act, for deeming payment.
Whether the transferee entity has paid the employees and claimed deduction towards the said liability while computing income from business or profession is not relevant to decide whether the assessee can claim deduction for the said liability under Section 43B of the Act. The assessee cannot claim a deduction towards the said liability under section 43B of the Act while computing income from business and profession.
2. SEBI Proposes Key Reforms to Strengthen the Social Stock Exchange (SSE) Framework
In a move to strengthen and broaden participation in the Social Stock Exchange ecosystem, the SEBI, on February 09, 2026, released a consultation paper proposing a review of the minimum value of investment by individual investors in Social Impact Funds (SIFs) and a review of requirements relating to minimum subscription and the registration period for Not for Profit Organisations (NPOs) on the Social Stock Exchange under the relevant SEBI Regulations.
2.1 Background and Objective
A ‘social stock exchange’ (SSE) is a platform where social enterprises/organisations can raise funds from the public. The framework for the Social Stock Exchange (SSE) had been operationalised through SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and through issuance of circulars from time to time, with the objective of facilitating fund raising by eligible Social Enterprises on the SSE platform.
To further strengthen the SSE framework, facilitate fundraising, and encourage wider participation by NPOs, the SEBI, in consultation with the Social Stock Exchange Advisory Committee (SSEAC), undertook a review of certain regulatory requirements under the existing SSE framework.
2.2 SEBI’s Proposals
Based on the internal deliberations and discussions with SSEAC, SEBI has proposed the following:
- Reduction in Minimum Value of Investment by Individual Investors in Social Impact Funds – Under the existing provisions of the SEBI (Alternative Investment Funds) Regulations, 2012, an individual investor must invest a minimum of Rs. 2 lakhs in a Social Impact Fund that invests only in securities issued by NPOs registered or listed on the SSE. The SEBI has now proposed reducing this amount to Rs. 1,000.
The proposal seeks to align the minimum investment requirement under the AIF Regulations with the minimum application size prescribed for subscription to Zero Coupon Zero Principal Instruments (ZCZP) under the ICDR Regulations, which was earlier reduced in order to enhance investor participation. The proposed reduction would also enable SIFs to attract small investors to invest in securities of NPOs through the SIF.
- Extension of Registration Period for NPOs on SSE from 2 to 3 Years – Presently, Regulation 292F of the ICDR Regulations permits an NPO to remain registered on the SSE for a maximum period of two years without undertaking fundraising activities. The SEBI has proposed extending this period by one additional year, subject to approval by the Social Stock Exchange.
The proposal recognises practical challenges faced by NPOs, including delays in obtaining statutory registrations, renewing approvals under applicable laws, and other operational considerations that may delay fundraising timelines. The extension is intended to provide greater flexibility to NPOs in preparing for fundraising while continuing to remain within the SSE framework.
- Reduction in Minimum Subscription Requirement for Issuance of Zero Coupon Zero Principal Instruments (ZCZP) from 75% to 50% – Based on the recommendations of SSEAC, the SEBI has proposed reducing the minimum subscription requirement for the issuance of Zero Coupon Zero Principal Instruments from 75% to 50% for projects where the cost of disclosed objects can be proportionately allocated on a ‘per unit’ basis. This would be subject to appropriate due diligence by the SSEs.
The proposal is intended to provide balanced flexibility while ensuring that partial subscription does not adversely affect project implementation and that the funds raised can be meaningfully used towards the disclosed objectives. The Social Stock Exchanges would be required to undertake appropriate due diligence to satisfy themselves of the feasibility of implementation at lower subscription levels before granting approval for such fund raising.
2.3 Conclusion
The proposed measures reflect SEBI’s intent to make the Social Stock Exchange framework more accessible, flexible, and conducive to participation by both investors and Not-for-Profit Organisations. By lowering the minimum investment threshold, extending the registration validity period for NPOs, and easing subscription requirements for ZCZP issuances, the proposals aim to enhance fundraising efficiency, broaden investor participation, and strengthen the effectiveness of the SSE ecosystem while maintaining appropriate regulatory safeguards.
3. Govt. Notifies the Draft Occupational Safety, Health and Working Conditions (Dock Work) Central Regulations, 2026
Section 136 of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH&WC Code), empowers the Central Government to make regulations relating to mines and dock work. Accordingly, the Central Government vide notification dated February 9, 2026, has notified the draft Occupational Safety, Health and Working Conditions (Dock Work) Central Regulations, 2026, prescribed under the OSH&WC Code. The draft regulations apply to all the major ports in India as defined in the Indian Port Act, 2025. Objections and Suggestions can be submitted within 45 days from the date of publication in the Official Gazette. The key highlights of the draft Regulations are as follows:
- Qualifications of Chief Inspector-cum-Facilitator or Inspectors-cum-Facilitators – As per the draft regulations, the central government may, by notification in the official gazette, appoint persons as it thinks fit and possessing a degree in any branch of engineering or science from a recognised university or institute to be Chief inspector-cum-facilitator or inspector-cum-facilitator.
- Safety Measures for Dock Workers Onboard – Every employer of the dock worker must ensure the following safety measures for the dock workers working onboard:
-
- Weather forecasts must be regularly checked and monitored.
- Individuals with compromised health conditions must be forbidden from engaging in work aboard vessels.
- Provision for the rescue from drowning of dock workers must be made and maintained.
- Efficient Lighting Requirements – The draft regulations require the port authority in case of a dock, wharf and master in case of ship to ensure that all areas on a dock and a ship where the dock work is carried out and all approaches to such areas and locations to which dockworkers are required to go during their employment, must be safely and efficiently lighted in an appropriate way.
- Providing and Maintaining Adequate Ventilation and Suitable Temperature in Every Building – As per the draft regulations, the port authority, in case of a dock, wharf, and master in case of ship, must ensure that all areas and buildings where goods are kept must be designed and constructed ensuring effective and suitable arrangements for securing and maintaining adequate ventilation through the circulation of fresh air and comfortable temperature.
- Fire and Explosion Prevention Measures – As per the draft regulations, the port authority must ensure that every place where dock workers are employed is provided with sufficient and suitable fire-extinguishing equipment and an adequate water supply at ample pressure as per national standards. Further, fire-extinguishing equipment must be properly maintained and inspected at regular intervals, and a record must be maintained to that effect.
- General Requirements Relating to Construction, Equipping and Maintenance for Safety of Working Places – The general requirements relating to construction, equipping and maintenance for the safety of working places on shore, ship, dock, structure and other places at which any dock work is carried on are as follows:
-
- The port authority, in the case of shore, and the master, in the case of a ship, must ensure that the maximum loads are not exceeded.
- Staircases in a warehouse or storage must be provided with a substantial handrail of 1 metre height and maintained. The protective handrail must be provided on the open sides of the staircase.
- Safe access to the deck cargo, hold ladders and any place of work must be ensured by securely installed steps or ladders.
- Cargo platforms must not be overloaded.
- Filing of Annual Returns by Establishments – As per the draft regulations, every employer of an establishment must send annually a return relating to such establishment in Form IX to the Inspector-cum-facilitator having jurisdiction by 31st January following the end of each calendar year.
4. Govt. Invites Public Feedback on Draft Metalliferous Mines Safety Regulations, 2026 under OSH&WC Code, 2020
Section 136 of the Occupational Safety, Health and Working Conditions Code, 2020 (OSH&WC Code), empowers the Central Government to make regulations relating to mines and dock work. Accordingly, the Central Government vide notification dated February 4, 2026, has notified the draft Occupational Safety, Health and Working Conditions (Metalliferous Mines) Regulations, 2026, prescribed under the OSH&WC Code. The draft regulations apply to all mines except coal or oil mines. Objections and Suggestions can be submitted within 45 days from the date of publication in the Official Gazette. The key highlights of the draft Regulations are as follows:
- Constitution of the Board of Mining Examination – The draft regulations provide for the constitution of a Board of Mining Examination, consisting of the Chief Inspector-cum-Facilitator as the Chairperson (ex-officio) and five members possessing a degree in mining engineering. Each member of the Board other than its Chairperson must hold office for 3 years from the date of appointment or until their successor is appointed, whichever is later.
- Qualifications of Chief Inspector-cum-Facilitator or Inspectors-cum-Facilitators – As per the draft regulations, no person must be appointed as the Chief Inspector cum facilitator or Inspector-cum-Facilitator unless such person holds a degree in mining engineering from an educational institution approved by the Central Government.
- Safety Management Plan – Under the draft regulations, the owner, agent and manager of every mine must:
-
- identify hazards to the health and safety of the persons employed at the mine to which they may be exposed while at work,
- assess the risks to health and safety to which employees may be exposed while they are at work,
- follow an appropriate process for identification of the hazards and assessment of risks
- record the list of hazards identified and risks assessed, and
- make those records available for inspection by the employees.
- Maintenance of Reports, Records and Registers – As per the draft regulations, all reports, records and registers required to be maintained must be kept in interleaved bound paged registers and signed by the concerned competent persons or officials and countersigned by the manager.
- Payment of Fees – The draft regulations provide that any fees payable must be paid through an electronic mode or any other means as specified from time to time by the Chief Inspector-cum-Facilitator.
- Standing Orders – As per the draft regulations, the manager of every mine in which a mechanical ventilator other than an auxiliary fan is installed must submit standing orders specifying the action that must be taken with respect to the withdrawal of persons from the mine or part thereof in the event of a stoppage of the ventilator. The standing orders must be submitted within 30 days of installation to the Regional Inspector-cum-Facilitator.
- Appeal to the Chief Inspector-cum-Facilitator – As per the draft regulations, an appeal against an order made by the Regional Inspector-cum-Facilitator may be preferred before the Chief Inspector-cum-Facilitator, who may confirm, modify or cancel the order. The appeal must be made within 15 days of receipt of the order by the aggrieved person.
5. Post Circular 173/05/2022 Deleting Restriction, Inverted Duty Refund Allowed Even When Input & Output Tax Rates Same: HC
The High Court held that a refund of accumulated ITC under Section 54(3)(ii) cannot be denied merely because the principal input and output supplies attract the same tax rate, in view of Circular 173/05/2022 removing the earlier restriction. It held that Circular 135/05/2020 was inapplicable and that, after removal of the restriction, refund in same-rate cases was legally permissible.
5.1 Facts
The petitioner was engaged in the procurement of edible oils on payment of GST at the rate of 5 per cent, which were purchased in bulk and thereafter packed into retail containers of varying quantities and supplied as output under the same HSN Code at the same rate. Due to a higher rate of tax suffered on certain inputs used in the packing process, accumulated and unutilised input tax credit (ITC) arose, and the petitioner filed refund applications claiming a refund of the accumulated credit on account of the inverted duty structure. The officer rejected the refund claiming inverted duty structure was not available where input and output tax rates were the same. The matter was accordingly placed before the High Court.
5.2 Held
The High Court held that accumulation of credit arose due to the rate structure and not due to change in rates at different points of time. The restriction denying refund of accumulated credit in cases where the rate of tax on input and output supplies was the same stood deleted by way of substitution through Circular No. 173/05/2022-GST, dated 06-07-2022. The Court further held that the Department of Revenue was not justified in rejecting the petitioner’s refund claims. It was accordingly held that the petitioner was eligible to claim refund of accumulated ITC on account of inverted duty structure even where the tax rate on input and output supplies was the same, and the refund claim deserved to be allowed under Section 54 of the CGST Act and the Karnataka GST Act.
6. On Amalgamation, New Co. Receives Transferred ITC Only; Retained ITC If Refunded to Old Co., Bars Later Refund to New Co.: HC
The High Court held that upon amalgamation, the transferee company is entitled only to such unutilized ITC as is actually transferred through FORM GST ITC-02, and where the transferor retained part of the ITC, and itself claimed refund, the statute does not permit the transferee to subsequently seek refund of such retained credit.
Facts
The petitioner was formed by the amalgamation of three entities, including an erstwhile company. The erstwhile company transferred nearly 80% of unutilized input tax credit (ITC) to the petitioner through FORM GST ITC-02, retaining the remainder. A refund application under the category ‘ITC accumulated due to Exports of Goods/Services without payment of Tax’, which was allowed by the competent authority. The petitioner later claimed refund of the remaining unutilized ITC of the erstwhile company, asserting that since the amalgamation transferred all rights and liabilities to the petitioner, it was entitled to refund under Section 54(3). The matter was accordingly placed before the High Court.
Held
The High Court held that on amalgamation, the business and adventure of the transferor company would transfer to the new company as per the sanctioned scheme, and the transferor was not restricted from transferring the entire unutilized ITC. The Court interpreted Section 18(3) and Rule 41(1) in their fundamental sense, emphasising that the enabling mechanism for transfer of unutilized ITC cannot be used in a way. Since the transferor company continued to file GSTR-3B returns and availed ITC after the effective date, the ITC rights and liabilities were crystallised in its electronic credit ledger, and the transferee could claim the ITC only if it was transferred as prescribed. Consequently, the petitioner could not claim refund of the retained unutilized ITC.
7. ICAI Releases New Practitioner’s Guide on Drafting Modified Opinions in Independent Auditor’s Reports
The Auditing and Assurance Standards Board (AASB) of ICAI has issued the Practitioner’s Guide on drafting of Modified Opinions in Independent Auditor’s Reports to help auditors prepare clear, consistent, and standards-compliant modified opinions under SA 705.
The Guide provides practical guidance, illustrative report formats, and suggested wording for qualified opinions, adverse opinions, and disclaimers of opinion, supporting auditors in effectively communicating modifications in audit reports. It builds on earlier ICAI publications on reporting standards and modified opinions, offering enhanced practical support for applying auditing requirements in real-world situations.
The examples included are purely illustrative and do not replace professional judgment or the mandatory requirements of the Standards on Auditing.
8. AASB of ICAI Issues Guidance on New Labour Codes – Accounting and Auditing Implications
The Government of India introduced four consolidated Labour Codes, replacing twenty-nine labour laws and significantly altering India’s labour compliance framework with effect from 21st November 2025. In response, the Auditing and Assurance Standards Board (AASB) of ICAI issued guidance to help auditors address the resulting accounting and auditing implications.
The revised wage definition and expanded employee coverage are expected to increase employee benefit obligations, particularly gratuity and leave liabilities. ICAI has clarified that such increases represent plan amendments, requiring recognition as past service cost under Ind AS 19, Employee Benefits and AS 15, Employee Benefits with impacts recognised immediately (or amortised where applicable) and reflected in interim financial statements. Periods prior to the effective date require disclosure as a non-adjusting event.
From an audit perspective, the changes fall within SA 250, Consideration of Laws and Regulations in an Audit of Financial Statements, increasing risks of material misstatement in payroll, statutory dues, and actuarial estimates. Auditors must evaluate payroll systems, internal controls, actuarial valuations, and management judgments with heightened professional scepticism. Material non-compliance may require modified opinions under SA 705, Modifications to the Opinion in the Independent Auditor’s Report, while significant disclosures may be highlighted through Emphasis of Matter under SA 706, Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report.
Overall, the Labour Codes have significant implications for employee benefit accounting and audit risk assessment, requiring careful recognition, robust documentation, and enhanced audit procedures.
The post Weekly Round-up on Tax and Corporate Laws | 9th to 14th February 2026 appeared first on Taxmann Blog.
source
