Author: inavatiq

Case Details: V Ships India (P.) Ltd. vs. Union of India - [2026] 185 taxmann.com 795 (Bombay)

Judiciary and Counsel Details

• G. S. Kulkarni & Aarti Sathe, JJ.
• Bharat Raichandani & Bhagrati Sahu, Advs. for the Petitioner.
• Jyoti Chavan, Addl. G.P, Himanshu Takke & Amar Mishra, AGPs for the Respondent.

Facts of the Case

The petitioner, engaged in ship management services for a UK recipient under a service agreement, challenged the rejection of refund claims. It was stated that in the pre-GST regime, similar services were treated as export of services and refunds were duly granted, whereas under the GST regime the petitioner discharged IGST and claimed refund treating the supplies as zero-rated supply. The Department issued notices alleging that the services constituted intermediary services on a principal–agent basis and accordingly rejected the refund claims. The appellate authority dismissed the appeals. The petitioner contended that entitlement to a refund was intrinsically linked to the interpretation of the agreement, which had not been examined in the appellate proceedings. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the impugned appellate orders were unsustainable as they failed to examine the governing service agreement and the actual nature of services rendered under the contract. It was observed that the determination of whether the supplies constituted intermediary services or zero-rated export services under Section 16 read with Section 13 of the IGST Act necessarily required an assessment of the contractual terms. The Court noted that the agreement was not considered, which vitiated the adjudicatory process, particularly when the entitlement turned on contractual obligations and the factual characterisation of services. It further held that similar matters had been dealt with in earlier decisions, in which failure to examine the contract resulted in remand of the proceedings. Accordingly, the appellate order was quashed, and the matter was remanded for de novo consideration.

List of Cases Referred to

• Sundyne Pumps and Compressors India (P.) Ltd. v. Union of India [2025] 175 taxmann.com 685 (Bombay) (para 7)
• Magna Automotive India (P.) Ltd. v. Union of India [Writ Petition No. 14325 of 2024, dated 8-7-2025] (para 7)
• KC Overseas Education (P.) Ltd. v. Union of India [2025] 178 taxmann.com 35/102 GSTL 66 (Bombay) (para 7)
• Vistex Asia Pacific (P.) Ltd. v. Union of India [2026] 182 taxmann.com 883/106 GSTL 279 (Bombay) (para 7)
• Lubrizol Advance Materials India (P.) Ltd. v. Union of India [2026] 185 taxmann.com 270 (Bombay) (para 8).

The post Refund Denial in Ship Services Set Aside – Contract Review Needed | HC appeared first on Taxmann Blog.

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Editorial Team – [2026] 185 taxmann.com 950 (Article)

World Corporate Law News provides a weekly snapshot of corporate law developments from around the globe. Here’s a glimpse of the key corporate law update this week.

1. Securities Law

1.1 FCA Consults on Changes to IPO Research Rules

On 27 April 2026, the FCA released that it is consulting on removing the requirement for a 7-day delay before connected research on an IPO can be published. It is also consulting on removing rules that require firms to provide independent analysts with the same information as their own research analysts.

These rules were introduced in 2018 to encourage the production of unconnected research, but they have not achieved that aim. However, feedback from the market suggests that they have also added complexity, risk and cost to the IPO process, and have put the UK at a competitive disadvantage compared with other international listing venues.

Removing these requirements would simplify the IPO process and improve the conditions for listing in the UK. This would support the FCA’s work to strengthen the UK’s capital markets and support growth and competitiveness.

Jon Relleen, Director of Infrastructure & Exchanges, Supervision, Policy & Competition Division, said:

“Market feedback has been clear that these rules can introduce additional risk, cost and complexity without delivering the intended benefits. We are committed to reducing friction, supporting growth, and ensuring the UK remains a competitive and trusted place for companies to raise capital.”

No other rule changes are proposed at this stage. However, the paper includes discussion questions on whether further reform of the 2018 IPO information flow rules may be appropriate.

This consultation helps deliver one of the commitments set out in the FCA’s letter to the Prime Minister in December 2025.

Source – Press Release

1.2 FCA spearheads global action to stop illegal finfluencers

On 24 April 2026, the FCA announced that it had led an international initiative to curb illegal finfluencers who put consumers’ money at risk.

Seventeen regulators worldwide participated in this ‘week of action’, which began on 20 April 2026 and included enforcement measures, consumer awareness campaigns, and educational programmes aimed at finfluencers seeking to operate responsibly.

In the UK, the FCA:

• Secured a guilty plea from Geordie Shore’s Aaron Chalmers for unlawful financial promotions on social media. Criminal proceedings have also been initiated against two other individuals for similar offences.
• Issued four targeted warning letters to individuals suspected of engaging in unauthorised financial promotions.
• Published 34 warning alerts against unauthorised firms or individuals and updated a further 14 alerts.
• Requested the takedown of 120 social media accounts hosting illegal finfluencer content. Across these accounts, the FCA identified 1,267 unlawful financial advertisements, which had reached at least 2,338,372 UK users. Notably, 66% of these advertisements originated from firms or individuals already included on the FCA’s Warning List.

The FCA has urged social media platforms to take a more proactive role in preventing illegal financial promotions at the source, noting that current efforts are insufficient to enforce their own content policies.

Source – Press Release

Click Here To Read The Full Article

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Vidya Sunderam – [2026] 185 taxmann.com 947 (Article)

1. Introduction

Over the last decade, proxy advisory firms have assumed an increasingly important role in shareholder decision-making in India. In the mergers and acquisitions landscape, the recommendations of proxy advisors have been shaping shareholder voting outcomes and, consequently, the certainty and timing of M&A transactions.

This development is driven by rising institutional shareholding in Indian listed companies, with investors relying on proxy advisory firms to evaluate complex transactions prior to exercising their voting rights. As a result, proxy advisors have emerged as a key interface between companies and public shareholders.

Their enhanced influence also extends to corporate governance, particularly in shaping how boards evaluate, structure, and justify M&A transactions.

This shift has necessitated more robust transaction planning, including a clear articulation of the impact of the proposed transaction on shareholders.

2. Evaluation of M&A Transactions

Proxy advisory firms evaluate M&A transactions with a primary focus on the fairness and equity of the transaction from the perspective of public shareholders, as well as its long-term implications. While statutory compliance provides the foundation, greater emphasis is placed on shareholder interests and broader corporate governance standards, particularly fairness, transparency, and accountability.

Their evaluation extends to the substantive terms of the transaction, including whether the consideration and overall structure are balanced from a shareholder perspective. In doing so, proxy advisory firms examine whether the structure reflects an equitable allocation of value and is consistent with accepted corporate governance standards.

In addition, proxy advisory firms assess the decision-making process underlying the transaction. This includes the role of the board and its committees, the independence of the evaluation, as well as whether the transaction is supported by a coherent and credible rationale.

3. Emerging Patterns

Key patterns of proxy advisory observed in recent M&A transactions include:

• Heightened scrutiny on transactions involving promoter or related parties M&A transactions involving promoters or related parties have witnessed heightened shareholder opposition where proxy advisory firms have raised concerns regarding fairness or perceived imbalance. Such scrutiny has also extended to assessing whether the transaction structure confers any disproportionate benefit on promoters or related parties and whether adequate safeguards for minority shareholders are in place.
• Enhanced Disclosure Standards – In many listed mergers and restructurings, proxy advisory scrutiny has resulted in enhanced disclosures relating to valuation methodologies, assumptions, and the commercial rationale. Companies have supplemented or clarified their initial disclosures to address the concerns highlighted in proxy advisory reports. This has resulted in enhanced transparency in valuation methodologies, clearer articulation of assumptions, and a reasoned basis for the consideration or exchange ratio.
• Impact on Transaction Timelines and Execution – Proxy advisory scrutiny has resulted in additional disclosures, increased investor engagement, and delays or revisions to transaction terms, particularly where concerns are raised close to the date of shareholder voting. Transactions have faced shareholder resistance where the consideration was perceived to be inadequately justified, even where valuation methodologies were technically sound.
• Implications for Corporate Governance – Proxy advisory recommendations have increasingly considered post-transaction corporate governance arrangements, including board composition, control rights, and minority shareholder protections, which, in turn, have impacted shareholder voting and overall support for the transaction. In this context, fairness opinions are considered as an additional layer of validation but are not treated as determinative.
• Scrutiny of Intra-group Arrangements and Restructurings – In group restructurings, proxy advisory firms have closely examined transparency and fairness to assess whether minority shareholders are adversely impacted, particularly whether value is fairly allocated between promoters or related parties and minority shareholders, which has resulted in changes to the structure.
• Influence on Investor Perception – Even where transactions secure the requisite statutory approvals, adverse or qualified proxy recommendations may influence investor perception of the fairness and legitimacy of such transactions. The commercial rationale is often assessed alongside valuation, and references to strategy or synergy are expected to be supported by a demonstrable linkage to value creation.

Click Here To Read The Full Article

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Case Details: K.G. Seshadri vs. Trustees of State Bank Of India [2026] 185 taxmann.com 352 (SC)[08-04-2026]

Judiciary and Counsel Details

• Prashant Kumar Mishra & N.V. Anjaria, JJ.
• Ms N S Nappinai, Sr. Adv., V. Balaji, B. Dhananjay, Atul Sharma, Vinod K. Nair, C. Kannan, Md. Nizamuddin, Anuraj Mishra, Advs. & Rakesh K. Sharma, AOR for the Petitioner
• Sanjay Kapur, AOR, Surya Prakash, Ms Shubhra Kapur, Ms Mahima Kapur, Ms Mansi Kapur, Ms Santha Smruthi, Advs. for the Respondent.

Facts of the Case

In the instant case, the appellant was appointed as a clerk in the respondent bank. He left for abroad and, upon returning, sought to rejoin service, which the respondent bank declined.

On account of his unauthorised absence, the bank issued notices and, finding his response unsatisfactory, treated his services as voluntarily abandoned. The appellant thereafter filed a petition before the Labour Court seeking computation of pension.

The Labour Court dismissed the claim for lack of jurisdiction, holding that there was no pre-existing right under the pension rules. The High Court also dismissed the writ appeal filed by the appellant.

Supreme Court Held

On appeal, the Supreme Court observed that the appellant was never granted voluntary retirement, and his services were instead treated as voluntarily abandoned. Accordingly, his case did not fall within Rule 22(i)(c).

Further, as he had neither attained the age of 50 years nor completed 20 years of service at the relevant time, he was also ineligible under Rule 22(i)(a).

Therefore, since the appellant’s case did not fall under any of the applicable provisions, the Supreme Court held that the appeal was liable to be dismissed.

List of Cases Reviewed

• Order of High Court of Judicature at Madras in W.A No. 1065 of 2022 dated 27.04.2022 (para 32) affirmed

List of Cases Referred to

• Rugmini Ganesh v. State Bank of India 2018 SCC OnLine Bom 3884 (para 11)
• Asstt. General Manager, State Bank of India v. Radhey Shyam Pandey [2020] 6 SCC 438 (para 11)
• Arikaravula Sanyasi Raju v. Branch Manager, State Bank of India [1997] 1996 taxmann.com 1680 (SC) (para 15)
• Municipal Corporation of Delhi v. Ganesh Razak [1995] 1994 taxmann.com 2479 (SC) (para 15).

The post SC Denies Pension for Voluntary Abandonment of Service appeared first on Taxmann Blog.

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Case Details: Gujral Sons vs. Union of India [2026] 185 taxmann.com 871 (Delhi)

Judiciary and Counsel Details

• Nitin Wasudeo Sambre & Ajay Digpaul, JJ.
• Nikhil Gupta, Rochit Abhishek, Prince Nagpal, Devang Dwivedi & Jiten Yadav, Advs. for the Petitioner.
• Kshitij Chhabra, SPC, Madhav Anand, Shikhar Gupta, Shubham Mishra, Gaurav Mani Tripathi, Ankush Bhardwaj, Ms Anushka Mishra, Advs., Atul Tripathi, SSC, Santosh Kumar Rout, SC & Ashish Rawat, GP for the Respondent.

Facts of the Case

The petitioner was subjected to provisional attachment of its bank accounts by issuance of Form GST DRC-22 under Section 83 of the CGST Act and the Delhi GST Act during proceedings under the said enactments. The initial attachment remained operative and, upon expiry of the statutory period, lapsed by efflux of time. Subsequently, even after the completion of assessment proceedings by the order-in-original and during the pendency of appellate proceedings, the jurisdictional authorities issued a fresh provisional attachment on the same set of facts without any new material or change in circumstances. The petitioner contended that the successive invocation was impermissible after the expiry of the earlier attachment and the completion of assessment. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that re-imposition of provisional attachment under Section 83 of the CGST Act and Delhi GST Act on an identical factual basis, after expiry of the earlier attachment by statutory efflux of time, was unsustainable. It was observed that once the assessment had concluded by order-in-original, any further exercise of power under Section 83 required fresh material or changed circumstances, which were absent in the present case. It was further held that failure to act within the validity period of the earlier attachment could not justify its revival in the absence of new grounds. Accordingly, the impugned attachment was held to be arbitrary and liable to be quashed, and relief was granted, including the defreezing of the petitioner’s bank accounts.

List of Cases Reviewed

• Kesari Nandan Mobile v. Asstt. CST [2025] 177 taxmann.com 481/111 GST 387/101 GSTL 177 (SC) (para 11)followed

List of Cases Referred to

• Kesari Nandan Mobile v. Asstt. CST [2025] 177 taxmann.com 481/111 GST 387/101 GSTL 177 (SC) (para 6).

The post Fresh GST Bank Attachment Without New Grounds Invalid | HC appeared first on Taxmann Blog.

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1. Query

Omega Energy Limited (hereinafter referred to as “the Company”) owns a power generation plant, including a critical turbine with a carrying amount of Rs. 120 crore as at the end of the reporting period. For tax purposes, the written-down value of the turbine is Rs. 70 crore, resulting in a significant temporary difference.

Under the applicable tax framework, the manner of recovery of the asset gives rise to materially different tax consequences. If the turbine is used over its remaining useful life, the benefits are realised through tax depreciation, and the applicable tax rate is 25%. However, if the turbine is sold, the resulting gain is subject to a capital gains tax rate of 15%, and the tax base is recomputed without allowing certain deductions that are otherwise available under the use model.

Historically, the Company has always intended to recover the asset through use. However, during the current year, the Company entered into a non-binding arrangement with a third party for a potential sale of the turbine as part of a broader restructuring plan. While management believes that the sale is probable, the transaction is contingent upon regulatory approvals and financing arrangements, which are yet to be finalised. At the same time, the turbine continues to be actively used in operations, and no formal plan for its disposal has been approved by the Board.

Given these circumstances, the Company is facing uncertainty in determining the appropriate manner of recovery for the purpose of measuring deferred tax. Specifically, the Company seeks guidance on whether the deferred tax liability should be measured based on recovery through use, recovery through sale, or some form of probability-weighted approach considering both possible outcomes.

2. Relevant Provisions

Ind AS 12 – Income Taxes

Para 51 of Ind AS 12

The measurement of deferred tax liabilities and deferred tax assets shall reflect the tax consequences that would follow from the manner in which the entity expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Para 51A of Ind AS 12

In some jurisdictions, the manner in which an entity recovers (settles) the carrying amount of an asset (liability) may affect either or both of:

(a) the tax rate applicable when the entity recovers (settles) the carrying amount of the asset (liability); and

(b) the tax base of the asset (liability).

In such cases, an entity measures deferred tax liabilities and deferred tax assets using the tax rate and the tax base that are consistent with the expected manner of recovery or settlement.

3. Analysis

The core issue in this case lies in determining the “expected manner of recovery” of the turbine at the end of the reporting period. Paragraph 51 does not permit a mechanical or purely hypothetical assessment; instead, it requires management to exercise judgment based on the facts and circumstances that exist at the reporting date.

Although the Company has initiated discussions for a potential sale, the arrangement remains non-binding and is subject to significant uncertainties, including regulatory approvals and financing. Further, there is no formal commitment or approved plan to dispose of the asset, and the turbine continues to be used in the Company’s operations.

In this context, the expectation of recovery through sale does not yet appear to have sufficient certainty or substance to override the existing pattern of recovery through use. The standard emphasises the manner in which the entity “expects” to recover the asset, implying a realistic and supportable expectation rather thanmere possibility.

Paragraph 51A becomes particularly relevant because the tax consequences differ significantly depending on whether the asset is used or sold. This makes it critical to identify a single, most likely manner of recovery, as the standard does not envisage the use of probability-weighted or blended tax rates. Instead, the deferred tax liability must be measured using the tax rate and tax base corresponding to the expected mode of recovery.

Accordingly, unless and until the Company has sufficient evidence to demonstrate that recovery through sale is the expected outcome, such as a binding agreement, Board approval, or a high degree of certainty regarding completion, the deferred tax liability should continue to be measured based on recovery through use.

Click Here To Read The Full Story

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Circular No. HO/(201)2026-DDHS-POD1 I/10421/2026, Dated 28.04.2026

The Securities and Exchange Board of India (SEBI) has granted an additional six months to Debenture Trustees for complying with Regulation 9C, which mandates segregation of non-SEBI regulated activities.

1. Revised Compliance Timeline

• Original Deadline – As per circular dated November 25, 2025
• Revised Deadline – October 27, 2026

2. Requirement under Regulation 9C

Debenture Trustees are required to:

• Segregate non-SEBI regulated activities
• Conduct such activities through separate business units or entities

3. Reason for Extension

The extension has been granted due to:

• Operational and implementation challenges
• Representations made by industry participants

4. Continuity of Existing Framework

• All other provisions of the SEBI circular dated November 25, 2025
• Remain unchanged

5. Regulatory Impact

The extension provides:

• Additional time for structural and operational realignment
• Opportunity to ensure full compliance without disruption
• Continued focus on conflict-of-interest mitigation and governance

6. Conclusion

SEBI’s decision reflects a pragmatic approach, balancing regulatory objectives with industry readiness, while ensuring that segregation norms are implemented effectively.

Click Here To Read The Full Circular

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Case Details: Kunal Housewares (P.) Ltd. vs. Union of India [2026] 185 taxmann.com 541 (Bombay)

Judiciary and Counsel Details

• G. S. Kulkarni & Firdosh P. Pooniwalla, JJ.
• Devashish K. Trivedi & Garvit Khandelwal, Advs. for the Petitioner.
• Jitendra B. Mishra, Ashutosh Mishra, Maya Majumdar & Rupesh Dubey, Advs. for the Respondent.

Facts of the Case

The petitioner engaged in the export of various stainless steel items, effected zero-rated supplies and paid IGST on such exports. The petitioner thereafter sought refund of the IGST so paid under the zero-rated export mechanism. The jurisdictional officers under CGST withheld the refund on the ground that the petitioner had already availed a higher duty drawback by selecting ‘Column A’ in the shipping bills, thereby rendering the claim ineligible for a full IGST refund. The petitioner contended that it was entitled to a refund of IGST notwithstanding the drawback option exercised and disputed the withholding of the amount. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that IGST refund on zero-rated exports cannot be granted in a manner that results in impermissible double benefit when the higher duty drawback has already been availed. It was observed that under Section 54 of the CGST Act and the Maharashtra GST Act, Section 16 of the IGST Act and Rule 96 of the CGST Rules, a refund is admissible only where the rates under Column A and Column B of the shipping bills are identical or where the excess drawback component is neutralised. The Court reasoned that availing higher duty drawback while simultaneously claiming full IGST refund would amount to duplication of export incentives since pre-GST levies stand subsumed under the GST regime. It further held that the petitioner could not be granted the full refund unless the differential drawback was repaid or adjusted, and directed that the refund be allowed only after deducting the differential drawback amount along with 7% interest calculated from the date of the shipping bill.

List of Cases Reviewed

• Awadkrupa Plastomech (P.) Ltd. v. Union of India [2021] 124 taxmann.com 615/46 GSTL 31 (Gujarat) (para 31)
• Union of India v. Awadkrupa Plastomech (P.) Ltd. [2024] 168 taxmann.com 305 (SC) (para 31), followed

List of Cases Referred to

• Kishan Lal Kuria Mal International v. Union of India [2022] 144 taxmann.com 107/[2023] 95 GST 177/[2022] 69 GSTL 51 (Delhi) (para 20)
• TMA International (P.) Ltd. v. Union of India [2020] 113 taxmann.com 22/35 GSTL 22 (Delhi) (para 20)
• R P Exim v. Principal Commissioner of Customs [2022] 145 taxmann.com 256/[2023] 96 GST 55/[2022] 69 GSTL 240 (Gujarat) (para 20)
• Nilamel Exports v. Union of India 2019 (29) G.S.T.L. 692 (Kerala) (para 20)
• Phoenix Contact India (P.) Ltd. v. Commissioner of Customs (Exports), New Delhi [2022] 141 taxmann.com 142/93 GST 293/64 GSTL 163 (Delhi) (para 20)
• Gujarat Nippon International (P.) Ltd. v. Union of India [2022] 143 taxmann.com 85/64 GSTL 438/94 GST 881 (Delhi) (para 20)
• Awadkrupa Plastomech (P.) Ltd. v. Union of India [2021] 124 taxmann.com 615/46 GSTL 31 (Gujarat) (para 20)
• Amit Cotton Industries v. Principal Commissioner of Customs [2019] 107 taxmann.com 167/75 GST 33/29 GSTL 200 (Gujarat) (para 20)
• Gujarat Nippon International (P.) Ltd. v. Union of India [2022] 140 taxmann.com 649/64 GSTL 45/93 GST 289 (Bombay) (para 20)
• Sunlight Cable Industries v. Commissioner of Customs [2023] 152 taxmann.com 247/75 GSTL 574/99 GST 63 (Bombay) (para 20)
• AIM Worldwide (P.) Ltd. v. Union of India [2022] 134 taxmann.com 231 (Gujarat) (para 20)
• Vimla Food Products v. Union of India [Special Civil Application No. 16028 of 2020, dated 22-12-2021] (para 20)
• Jaysons Exports v. Union of India [Special Civil Application No. 13157 of 2022, dated 19-10-2022] (para 20)
• Principal Commissioner of Customs v. Amit Cotton Industries [2022] 136 taxmann.com 328 (SC) (para 20)
• Union of India v. Awadkrupa Plastomech (P.) Ltd. [2024] 168 taxmann.com 305 (SC) (para 20)
• G Nxt Power Corp. v. Union of India [2019] 109 taxmann.com 305/29 GSTL 616 (Kerala) (para 20)
• Precot Meridian Ltd. v. Chief Commissioner of Customs [W. P. (C) No. 27772 of 2019 (V), dated 1-11-2019] (para 20)
• Real Prince Spintex (P.) Ltd. v. Union of India [2020] 115 taxmann.com 314/35 GSTL 369 (Gujarat) (para 23)
• Union of India v. Real Prince Spintex (P.) Ltd. [2024] 168 taxmann.com 307 (SC) (para 23).

The post IGST Refund Subject to Deduction of Higher Drawback | HC appeared first on Taxmann Blog.

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CA Deepak Gunashekar – [2026] 185 taxmann.com 948 (Article)

1. Introduction – The Cooperative Taxation Paradigm

The taxation of cooperative societies in India has historically been guided by the foundational principle of mutuality and a legislative intent to foster grassroots collective enterprises. The cornerstone of this protective fiscal framework has been Section 80P of the Income-tax Act, 1961, which provides comprehensive deductions in respect of the income generated by cooperative societies.

At the heart of an immense judicial dispute is a highly specific, yet ubiquitous, financial transaction. A primary cooperative society (such as a housing or credit society) generates surplus funds and deposits them into a cooperative bank, subsequently earning interest. Under the plain reading of Section 80P(2)(d) of the 1961 Act, any income by way of interest or dividends derived by a cooperative society from its investments in “any other co-operative society” is fully deductible from its gross total income.

However, this harmonious ecosystem was fractured by the insertion of Section 80P(4) through the Finance Act, 2006. This amendment categorically denied Section 80P benefits “in relation to” co-operative banks, recognising that many such banks had grown to function indistinguishably from commercial banks. The critical question that emerged was whether the disqualification of a cooperative bank from claiming deductions under Section 80P(4) inherently strips the bank of its foundational identity as a “co-operative society,” thereby denying the depositing primary society the Section 80P(2)(d) deduction.

This singular question has profoundly fractured the Indian judicial landscape, resulting in an alarming geographical anomaly. In the State of Karnataka, this deduction is categorically denied. Conversely, in virtually every other state, backed by the High Courts of Gujarat, Madras, Kerala, and Sikkim, the deduction is wholly allowed. As India transitions to the Income-tax Act, 2025, where Section 80P is reborn as Section 149, a subtle but vital alteration in the statutory phrasing promises to either fix this anomaly or perpetuate the confusion.

2. The Statutory Architecture – A Subtle but Crucial Shift

To comprehend the ongoing litigation, one must dissect the statutory architecture. Section 80P(2)(d) governs inter-cooperative investments, allowing a deduction of the “whole of such income” in respect of interest derived from investments with “any other co-operative society.” Sub-section (4) explicitly states:

“The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society…”

In the newly enacted Income-tax Act, 2025, Section 80P corresponds directly to Section 149. The inter-cooperative investment deduction is perfectly preserved in Section 149(2)(d). However, the exclusionary clause regarding cooperative banks in Section 149(5) features a subtle, yet potentially paradigm-shifting, alteration in its phrasing compared to its predecessor:

This deletion of the phrase “in relation to” from the 2025 Act strikes directly at the heart of the restrictive jurisprudence that has plagued Karnataka taxpayers.

3. The Supreme Court’s Foundational Matrix

The debate has been heavily influenced by landmark Supreme Court decisions. In Totgars Co-operative Sale Society Ltd. v. ITO [2010] 188 Taxman 282 (SC)/[2010] 322 ITR 283 (SC), the Apex Court while expressly stating that their judgement was confined to the facts of the instant case, ruled that interest earned on surplus funds from marketing of the members’ agricultural produce invested in short-term deposits with scheduled banks was not operational business income deductible under Section 80P(2)(a)(i), but rather “Income from other sources” under Section 56 of the 1961 Act. Crucially, the Court was never asked to evaluate Section 80P(2)(d), which grants a deduction based purely on the status of the investee entity. Despite this caveat, the Revenue routinely utilises Totgars (2010) to argue universally that all passive interest is ineligible for any Section 80P deduction.

Later, in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161 (SC)/[2021] 279 Taxman 75 (SC)/[2021] 431 ITR 1 (SC) and Kerala State Cooperative Agricultural and Rural Development Bank Ltd. v. Assessing Officer [2023] 154 taxmann.com 305 (SC)/[2023] 295 Taxman 675 (SC)/[2023] 458 ITR 384 (SC), the Supreme Court clarified that the exclusion is strictly a proviso meant to exclude cooperative entities that function precisely on par with commercial banks holding RBI licenses. While these cases protected primary societies, they did not directly resolve whether a depositing society is barred from claiming 80P(2)(d) deductions on interest paid by a licensed cooperative bank.

Click Here To Read The Full Article

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Circular No. RBI/2026-27/38 A.P. (DIR Series) Circular No. 08 dated 27.04.2026

The Reserve Bank of India (RBI) has mandated Authorised Dealer (AD) Category-I banks to report all INR-based over-the-counter (OTC) derivative transactions to the Clearing Corporation of India Ltd. (CCIL) to enhance market transparency and oversight.

1. Scope of Reporting

Covers:

• All INR-based OTC derivative deals
• Transactions undertaken:

1. 1. Domestically, and
   2. Abroad by group entities of AD banks

• Includes both:

1. 1. Deliverable contracts
   2. Non-deliverable contracts

2. Exemption for Small Transactions

• Transactions with value Up to USD 1 million
• Are exempt from reporting requirements

3. Reporting Timeline

Banks must:

• Submit key transaction details within 2 working days
• From the date of the transaction

4. Phased Implementation

The reporting framework will be:

• Implemented in phases
• Fully operational by 2028

5. Objective of the Framework

The mandate aims to:

• Improve transparency in OTC derivatives market
• Enable better risk monitoring and data aggregation
• Strengthen regulatory oversight and financial stability

6. Conclusion

This initiative marks a significant step towards centralised reporting and enhanced supervision of INR-based derivatives, ensuring a more transparent and resilient financial market ecosystem.

Click Here To Read The Full Circular

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