Author: inavatiq

Case Details: Principal Commissioner of Income-tax vs. Sunil Devkishan Panwar [2026] 185 taxmann.com 638 (Gujarat)

Judiciary and Counsel Details

• A.S. Supehia & Pranav Trivedi, JJ.
• Karan G Sanghani for the Appellant.

Facts of the Case

The assessee filed his return of income for the relevant assessment year. The Assessing Officer (AO) completed the assessment under section 143(3). Subsequently, based on the information received from the Investigation Wing, a notice under section 148 was issued. The AO made additions to the assessee’s income, contending that the assessee was engaged in bogus purchases and sales of goods.

The matter was carried to the Tribunal, which deleted the additions made by the AO. The Tribunal held that the assessee furnished all the details of purchases and sales. The assessee also furnished the purchase and sale bills, and the VAT was duly paid. The assessee also furnished the sales tax assessment, and the input credit was also allowed in favour of the assessee. There was no adverse material brought on record to substantiate the allegation that the assessee had shown purchases from the impugned party.

The AO made the addition without rejecting the books of account and recasting the trading results. Thus, the assessee had discharged the onus cast upon him. The aggrieved AO filed an appeal to the Gujarat High Court.

High Court Held

The High Court held that the AO made the additions based on the information received from the Investigation Wing. The assessee had contended that the reopening of the assessment was not justified, as it was based on information received from the Investigation Wing. However, no material was supplied to him, and no opportunity for cross-examination was also allowed.

The CIT(A) allowed full relief, accepting the assessee’s contentions. The same was challenged before the Tribunal, and after considering the respective submissions, the Tribunal held that the CIT(A) allowed full relief to the assessee by appreciating the facts in the right perspective. Thus, the High Court held that the CIT(A) deleted the entire addition based on the appreciation of facts and affirmed the order of the Tribunal.

List of Cases Reviewed

• ITO v. Sunil Devkishan Panwar IT Appeal No.61/srt/2024, Dated 28-6-2024 (para 8) Affirmed

The post Bogus Purchase Addition Deleted for Lack of Evidence | HC appeared first on Taxmann Blog.

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Mukesh Kohli – [2026] 185 taxmann.com 726 (Article)

Sometimes we professional face a query whether legal heirs are required to prove source of the source in case of death of the Assessee as Finance Act 2022 has inserted new first proviso in section 68 of Income-tax Act, 1961 wef assessment year 2023-24 and the Section 102 (2) of the Income-tax Act, 2025 retains the same provisions.

Let us see the provisions under the old Act and New Act

Section – 68, Income Tax Act, 1961

68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year:

[Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless:

a. the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and

b. such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless:

a. the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

b. such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

[Provided also] that nothing contained in the first proviso [or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]

Section – 159, Income Tax Act, 1961

159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased.

(2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1):

a. any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased;

b. any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and

c. all the provisions of this Act shall apply accordingly.

(3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee.

(4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with.

(5) The provisions of sub-section (2) of section 161, section 162, and section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative.

(6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.

Click Here To Read The Full Article

The post [Opinion] Whether the Legal Heir is Liable to Prove the Source of the Deceased Assessee? appeared first on Taxmann Blog.

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Editorial Team – [2026] 185 taxmann.com 727 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:

1. ISSB Proposes Guidance on Nature-Related Disclosures through a Practice Statement

The International Sustainability Standards Board (ISSB), at its April meeting in Beijing, has agreed to develop proposed requirements for nature-related disclosures in the form of an IFRS Practice Statement. The initiative aims to provide additional clarity on reporting such risks and opportunities without introducing new mandatory requirements.

The proposed guidance is intended to complement existing standards, particularly IFRS S1 and IFRS S2, which already require companies to disclose material sustainability-related information, including nature-related risks where relevant. The Practice Statement will explain how such disclosures should be made in practice, ensuring consistency while avoiding disruption for entities currently implementing the ISSB framework.

The development builds on prior work, incorporating elements of the Taskforce on Nature-related Financial Disclosures (TNFD), reflecting growing emphasis on nature-related financial reporting. The ISSB plans to issue an exposure draft in October 2026, inviting stakeholder feedback on both the proposed content and the suitability of using a Practice Statement for this purpose.

Source – IFRS Foundation

2. FRC Invites Stakeholder Feedback on the Audit Standard for Less Complex Entities

The Financial Reporting Council (FRC) has invited stakeholders to participate in roundtable discussions as part of its ongoing engagement on the International Standard for Auditing for Less Complex Entities (ISA for LCE). This initiative aims to gather practical insights to support its contributions to the International Auditing and Assurance Standards Board’s (IAASB) project to develop further and maintain the standard.

The discussions will focus on how audits of less complex entities can be carried out in a more proportionate manner, while still maintaining the same level of assurance and audit quality expected under full auditing standards. The feedback will help the FRC better understand stakeholder perspectives as the IAASB continues its work on the standard through to 2027.

Importantly, the FRC has clarified that this exercise does not relate to the adoption of the current version of the ISA for LCE in the UK. Instead, it is intended to inform future considerations once a revised version of the standard is finalised.

Source – Financial Reporting Council

Click Here To Read The Full Article

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Editorial Team – [2026] 185 taxmann.com 725 (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 ASIC Outlines Roadmap and Guidance for Digital Asset Licensing Regime Under DAF Act from April 2027

On 20 April 2026, Australian Securities and Investments Commission (ASIC) announced its intention to issue new regulatory guidance and prescribe certain operational standards as part of the implementation of new laws bringing digital asset platforms (DAPs) and tokenised custody platforms (TCPs) within the financial services licensing regime from April 2027.

The Corporations Amendment (Digital Assets Framework) Act 2026 (DAF Act) was passed by Parliament on 1 April 2026, received Royal Assent on 8 April 2026, and is scheduled to commence on 9 April 2027. The Act provides for an 18-month implementation period.

Under the new regime, ASIC will be responsible for licensing and supervising DAPs and TCPs, as well as enforcing compliance with the applicable legal framework.

To support industry participants, ASIC has outlined a roadmap for implementation. This includes the expected timeline and its approach to consultation on the proposed standards and guidance, along with early indications of the key areas to be covered.

Source – News

1.2 SEC and CFTC Jointly Propose Amendments to Reduce Private Fund Reporting Burdens

On 20 April 2026, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) jointly proposed amendments aimed at reducing private fund reporting burdens while continuing to ensure the collection of necessary and relevant information.

The proposal seeks to amend Form PF, a confidential reporting form applicable to certain SEC-registered investment advisers to private funds, including those also registered with the CFTC as commodity pool operators or commodity trading advisors. Form PF is designed to assist the Financial Stability Oversight Council (FSOC) in monitoring systemic risk across financial markets. The SEC and CFTC also rely on the data collected through Form PF to support their investor protection mandates.

Commenting on the proposal, Paul S. Atkins stated that a key priority is to restore balance in disclosure obligations and reduce compliance costs. He noted that prior amendments to Form PF had resulted in overly burdensome requirements for advisers, often without a corresponding regulatory benefit, and that the proposed changes seek to better align disclosure requirements with the form’s intended purpose.

Similarly, Michael S. Selig emphasised that increasing filing thresholds and streamlining Form PF would help reduce compliance burdens. He added that public comments would play an important role in ensuring that the final framework effectively eliminates unnecessary costs while maintaining regulatory objectives.

Source – Press Release

Click Here To Read The Full Article

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Case Details: GU Shipping India (P.) Ltd. vs. Assistant Commissioner of CGST and Central Excise [2026] 185 taxmann.com 162 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• Joseph Prabakar for the Petitioner.
• Mrs Revathi Manivannan, Sr. Standing Counsel for the Respondent.

Facts of the Case

The petitioner was engaged in providing freight and leasing/renting services of vessels with crew members. It initially discharged GST at 18% and later, after amendment and classification as ‘time charter of vessels for transport of goods’, began paying tax at 5% under the concessional entry of the relevant notification. The Department issued a show cause notice (SCN), culminating in an adjudication order confirming tax at 18% along with interest under Section 50 of the CGST Act and 100% penalty on the ground of ineligibility to the concessional benefit. It was contended that the dispute was confined to reversal of wrongly availed ITC with interest and penalty and not denial of concessional rate. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the denial of concessional rate solely on account of alleged wrongful availment of ITC was not sustainable in law. It was observed that the appropriate course, where ITC was wrongly availed, was to direct reversal of such credit along with interest and penalty under Section 74 of the CGST Act rather than imposing a higher tax liability of 18%. The Court further held that authorities could not increase tax liability merely because of inadvertent or technical errors in ITC availment, when statutory mechanisms for correction were available. It was concluded that denial of substantive benefit was unjustified in such circumstances. Accordingly, the impugned order was set aside and the matter was remitted to the jurisdictional officer under CGST for determination of the actual ITC wrongly availed and consequential computation of interest and penalty.

List of Cases Reviewed

• Chandrapur Magnet Wires (P.) Ltd. v. CCE 1996 taxmann.com 736 (SC)
• Unichem Laboratories Ltd. v. CCE 2002 taxmann.com 494/2002 (145) E.L.T. 502 (SC) (Para 39), followed

List of Cases Referred to

• Chandrapur Magnet Wires (P.) Ltd. v. CCE 1996 taxmann.com 736 (SC) (para 8)
• Hello Minerals Water (P.) Ltd. v. Union of India 2004 (174) E.L.T. 422 (All.) (para 9)
• Franco Italian Co. (P.) Ltd. v. CCE 2000 taxmann.com 360 (CEGAT- New Delhi) (para 9)
• Pepsico India Holdings (P.) Ltd. v. CCE [Excise Tax Appeal No. E/41318 of 2015-DB, dated 10-12-2019] (para 10)
• Unichem Laboratories Ltd. v. CCE 2002 taxmann.com 494/2002 (145) E.L.T. 502 (SC) (para 31).

The post Concessional GST Rate Can’t Be Denied for Wrong ITC | HC appeared first on Taxmann Blog.

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1. Query

Aristotle LLP (hereinafter referred to as the “Land Owner”), formed upon conversion from a private limited company, owns a parcel of land which has been contributed for development under a Joint Development Agreement (JDA) entered into with a real estate developer (hereinafter referred to as the “Developer”) for the construction and sale of residential units.

Under the terms of the arrangement, the Land Owner has granted the Developer an irrevocable and exclusive license to enter the land and undertake development activities. However, the legal ownership of the land continues to vest with the Land Owner until the completion of the project and the execution of a conveyance in favour of the ultimate purchasers. A Power of Attorney has also been executed in favour of the Developer, authorising it to obtain regulatory approvals, enter into sale agreements, and carry out all activities necessary for execution of the project. The Developer is responsible for planning, obtaining approvals, construction, marketing, and sale of units, and bears all costs relating to the project.

The revenue from unit sales, including advances and booking amounts, is deposited into a jointly operated escrow account and shared between the Land Owner and the Developer in an agreed ratio. The Land Owner retains involvement in key decisions, such as pricing and terms of sale, and also possesses step-in rights in the event of non-performance by the Developer. Further, conveyance of property in favour of the ultimate buyers is executed by the Land Owner, with the Developer acting as a confirming party, only upon completion of the project and receipt of the entire sale consideration.

The land has been classified as inventory in the LLP’s books. In this context, the LLP is uncertain about the appropriate timing and method of recognising its share of income arising from the JDA, particularly whether such revenue should be recognised during the course of construction, based on collections or receipts, or only upon completion of the project. The LLP has also sought clarification on the accounting treatment in a situation where consideration is receivable for the constructed area that remains unsold.

2. Relevant Provisions

Accounting Standard 27 – Financial Reporting of Interests in Joint Ventures

Para 3 of AS 27

A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity, which is subject to joint control.

Para 12 of AS 27

In respect of its interests in jointly controlled operations, a venture should recognise in its separate financial statements and consequently in its consolidated financial statements:

(a) the assets that it controls and the liabilities that it incurs; and

(b) the expenses that it incurs and its share of the income that it earns from the joint venture.

Accounting Standard 9 – Revenue Recognition

Para 10 of AS 9

Revenue from sales or service transactions should be recognised when the requirements as to performance set out in paragraphs 11 and 12 are satisfied, provided that at the time of performance it is not unreasonable to expect ultimate collection. If, at the time of raising any claim, it is unreasonable to expect ultimate collection, revenue recognition should be postponed.

Para 11 of AS 9

In a transaction involving the sale of goods, performance should be regarded as being achieved when the following conditions have been fulfilled:

(a) the seller of goods has transferred to the buyer the property in the goods for a price or all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership; and

(b) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods

3. Guidance Note on Accounting for Real Estate Transactions

Para 3 of Guidance Note

Revenue recognition in real estate transactions depends upon transfer of significant risks and rewards of ownership, which is to be determined based on the terms of the agreement and substance of the transaction. It further provides that where the transaction is akin to construction contracts, revenue may be recognised using the percentage of completion method; otherwise, principles of AS 9 apply.

Para 4.2 of Guidance Note

The completion of the revenue recognition process is usually identified when the following conditions are satisfied:

(a) The seller has transferred to the buyer all significant risks and rewards of ownership, and the seller retains no effective control of the real estate to a degree usually associated with ownership

(b) The seller has effectively handed over possession of the real estate unit to the buyer forming part of the transaction;

(c) No significant uncertainty exists regarding the amount of consideration that will be derived from the real estate sales; and

(d) It is not unreasonable to expect ultimate collection of revenue from buyers.

Para 4.3 of Guidance Note

Where transfer of legal title is a condition precedent to the buyer taking on the significant risks and rewards of ownership and accepting significant completion of the seller’s obligation, revenue should not be recognised till such time legal title is validly transferred to the buyer.

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Case Details: Aps Hydro (P.) Ltd. vs. Union of India [2026] 185 taxmann.com 408 (Delhi)

Judiciary and Counsel Details

• Dinesh Mehta & Vinod Kumar, JJ.
• Prabhat Kumar, Adv. for the Petitioner.
• Indruj Singh Rai, SSC, Sanjeev Menon, Rahul Singh, JSCs, Vijay Joshi, CGSC & Shubham Chaturvedi, Adv. for the Respondent.

Facts of the Case

The petitioner filed a writ petition to challenge the notice dated 16.02.2022 and the corresponding order/communication dated 12.05.2022 issued by the Assistant Commissioner of Income Tax holding the petitioner to be an assessee in default under section 220(1) of the Income Tax Act, 1961.

The petitioner contended that none of the orders passed under section 154, section 143(1)(a), and section 271(1)(c) was ever served upon it. The petitioner came to know about the pendency of the demand only when it received the notice dated 16.02.2022.

The Department contended that copies of the intimations were sent to the petitioner via email.

High Court Held

The Court observed that even if the Department’s plea was taken to be correct, that the intimation and orders under section 154 were served upon the petitioner by way of e-mail, it is against natural conduct that an assessee, having been visited with a huge tax liability of lakhs of Rupees, would not take any remedy.

A simple look at the table in the notice reveals that the demands for various years, running into lakhs of Rupees, are due against the petitioner, and the intimation mentioned therein ranges from 09.02.2013 to 09.11.2020. It is difficult, nay impossible, to believe that, despite a huge pending demand against an assessee since 2013, the department will keep quiet and only get up from its slumber after 9 years.

Accordingly, the Delhi High Court quashed the notice and allowed ninety days to the petitioner to file any objection against any demand.

The post Section 220(1) Notice Quashed for Non-Service & Delay | HC appeared first on Taxmann Blog.

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Case Details: Toyota Mobility Solution and Services India (P.) Ltd., In re [2026] 185 taxmann.com 609 (AAR-KARNATAKA)

Judiciary and Counsel Details

• SivaKumar S Itagi & Kalyanam Rajesh Rama Rao, Member
• R.K Suchindra, CA for the Respondent.

Facts of the Case

The applicant was a GST-registered dealer in old and used passenger motor vehicles operating under the margin scheme. It purchased used vehicles, undertook minor refurbishment, and sold or transferred them through branches after discharging GST on margin. It incurred various inward supplies including refurbishment services, marketing, professional services, housekeeping/security, rent, software, staffing, administrative expenses, and capital goods such as laptops and furniture, and sought clarity on eligibility of Input Tax Credit (ITC) on such inputs. The issue arose whether ITC was barred under the margin scheme restrictions applicable to used motor vehicles. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the restriction on ITC under the margin scheme applied only to old and used motor vehicles themselves and not to ancillary inputs, input services, or capital goods used in business operations. It held that the expression ‘such goods’ in the Notification No. 08/2018-CGST (Rate) dated 25-01-2018 referred exclusively to the vehicles covered under the scheme and did not extend to refurbishment, administrative, or operational inputs. It further held that the general scheme of Section 16 read with Section 17 of the CGST Act permits ITC on inputs used in the course or furtherance of business unless specifically blocked. Accordingly, none of the blocked credit provisions were attracted in respect of the inward supplies in question. The applicant was therefore held eligible to avail ITC on listed services and capital goods, subject to statutory conditions.

List of Cases Referred to

• Sri Jeyaram Educational Trust v. A.G. Syed Mohideen 2010 CIJ 273 SC (1) (para 7.5)
• Government of Andhra Pradesh v. Road Rollers Owners Welfare Association (2004) 6 SCC 210 (para 7.7)
• Swedish Match AB v. SEBI AIR 2004 SC 4219 (para 7.7)
• Gurudevantt VKSSS Maryadit v. State of Maharashtra AIR 2001 SC 1980 (para 7.7)
• Royal Drive Pre-Owned Cars LLP, In re [Kerala AAR No. KER/48/2024, dated 14-6-2024] (para 7.9)
• Attica Gold (P.) Ltd., In re [Karnataka AAR No. 40/2022, dated 27-10-2022] (para 7.10).

The post ITC Allowed on Refurbishment for Used Car Dealers | AAR appeared first on Taxmann Blog.

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Amresh Kumar Sood – [2026] 185 taxmann.com 723 (Article)

1. Synopsis

The introduction of the Income-tax Act, 2025, effective 01.04.2026, together with the Finance Bill 2026, recasts India’s Minimum Alternate Tax (MAT) framework for companies. Section 206 of the 2025 Act replaces the earlier Section 115JB of the 1961 Act while largely preserving the computational architecture of “book profit” and the “lower of loss or unabsorbed depreciation” rule. At the same time, two structural changes fundamentally alter MAT’s role in corporate tax planning: MAT under the old regime becomes a final tax (no further credit generation), and the rate on book profits is reduced from 15% to 14%.

For companies contemplating or compelled to move to the new concessional regime, the transition year (FY 2025-26) becomes critical. Existing MAT credit, unabsorbed depreciation and brought forward business losses must be carefully evaluated, as the new regime generally preserves only a capped, time-bound utilisation of historic MAT credit while forcing forfeiture of most other tax attributes. The cumulative, “like from like” set off methodology, affirmed in decisions such as Sungroup Enterprises Pvt. Ltd. v. Dy. CIT, continues to be directly relevant in the new statutory setting.

2. Evolution of MAT and the New Statutory Framework

MAT was originally enacted to address “zero tax companies” that reported significant book profits, distributed dividends and yet paid little or no tax under normal provisions. The basic mechanism has remained consistent over time: the company’s tax liability is the higher of (a) tax on total income under normal provisions and (b) a specified percentage of “book profit” as per its financial statements prepared under the Companies Act.

Under the former regime, this was codified in Section 115JB of the Income-tax Act, 1961. Book profit was defined by starting from net profit in the profit and loss account and making a closed list of additions and deductions, including a deduction for the lower of brought forward business loss (excluding depreciation) or unabsorbed depreciation, as per the books. Judicial pronouncements repeatedly emphasised that the Assessing Officer (AO) could not travel beyond the audited accounts or beyond the explicit statutory adjustments.

The new Income-tax Act, 2025 recasts these provisions in Section 206. Sub-section (1) retains the “higher of normal tax or MAT on book profit” principle, while sub-section (2) modernises the book profit definition, aligning it with Ind AS and current Companies Act requirements. The familiar “lower of loss or unabsorbed depreciation” deduction is now housed in Section 206(2)(iii), conceptually corresponding to the earlier Explanation 1(iii) to Section 115JB. Sub section (3) codifies the AO’s limited jurisdiction—book profit is to be taken from audited accounts, subject only to the adjustments expressly listed in Section 206(2).

The Finance Bill 2026 then overlays three key policy shifts for companies under the old regime:

• MAT on book profit becomes a final tax; no new MAT credit will be generated after the transition.
• The MAT rate is reduced from 15% to 14%, offering partial rate relief.
• For companies that opt into the new regime, historic MAT credit as on 31.03.2026 remains usable but subject to an annual cap (e.g., 25% of regular tax), while other carry forwards are typically lost.

3. Judicial Principles: Cumulative Aggregation and “Like-from-Like” Set off

The doctrinal backbone of MAT computations continues to be supplied by earlier jurisprudence, which the new Act effectively incorporates by design rather than displacing.

3.1 Sanctity of Audited Accounts

The Supreme Court decisions in Apollo Tyres v. CIT and Jt. CIT v. Rolta India Ltd. establish three important propositions:

• The AO cannot re cast the profit and loss account that has been prepared in accordance with the Companies Act and audited.
• Book profit for MAT purposes must be derived strictly by making the additions and deductions specified in the statute; there is no residual discretion.
• MAT provisions operate as a self contained code for book profit computations; interest and other consequences apply accordingly.

These principles are now mirrored in Section 206(2)–(3), which confine the AO to checking statutory adjustments rather than re evaluating commercial accounts.

3.2 Loss vs. Depreciation under the “Lower of” Rule

A large body of decisions has converged on a consistent interpretation of the “loss brought forward or unabsorbed depreciation, whichever is less” formulation:

• “Loss” for this purpose means business loss excluding depreciation; depreciation is tracked separately.
• The comparison is between cumulative brought forward business loss and cumulative unabsorbed depreciation, as reflected in the books on the first day of the previous year.
• Only the lower of these two cumulative balances is deductible from book profit, and only from its own component (“like from like”).

Cases such as Milan Intermediates LLP v. ITO8, Amline Textiles (P) Ltd. v. ITO, Rashtriya Ispat Nigam Ltd., In re PVR Pictures Ltd. v. Dy. CIT have rejected year wise or discretionary sequencing. The taxpayer cannot choose to exhaust business loss first if the lower cumulative figure is unabsorbed depreciation; similarly, the AO cannot impose a methodology that departs from the statute.

Click Here To Read The Full Article

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Case Details: State of Kerala vs. M. Vijayakumar [2026] 185 taxmann.com 444 (SC)

Judiciary and Counsel Details

• Manoj Misra & Prasanna B. Varale, JJ.
• Jaideep Gupta, Sr. Adv., C. K. Sasi, Deepak Prakash, Aors, Ms Meena K Poulose, Riddhi Bose, Ms Racheeta Chawla, Ms Sampriti Bakshi, Siddharth Banerjee, Sriram P., Ms Jyoti Pandey, Ms Divyangna Malik, Rahul Suresh, Ms Shivangi Rajawat, Rahul Rajeev, Ms Manshi Sinha, Ms Ridhika Singh, Sankalp Tewari, Daksh Rathi, Ms Snehil Singh, Advs. V. Chitambaresh, Sr. Adv., Vipin Nair, Aor, Aditya Narendranath, P B Sashaankh, Haresh Nair, Ms M.B. Ramya, Ms Deeksha Gupta & Ms Puspita Basak, Advs. for the Appearing Parties.

Facts of the Case

In the instant case, the Respondents were retired employees of the Kerala State Road Transport Corporation (KSRTC) who filed writ petitions challenging a Government Order. Under the said Order, to address inflationary pressures, Dearness Allowance (DA) payable to serving KSRTC employees was enhanced to 112% (an increase of 14%), while Dearness Relief (DR) payable to pensioners was enhanced to 109% (an increase of 11%) with effect from March 2021.

The grievance of the Respondents was that DR, like DA, is linked to inflation and serves the same purpose; therefore, it ought not to be enhanced at a lower rate. They contended that such differential treatment violated Article 14 of the Constitution.

The Single Judge dismissed the writ petitions, holding that serving employees and pensioners do not constitute a single class and that prescribing different rates of enhancement was permissible.

However, the Division Bench set aside this decision, holding that granting a lower rate of enhancement of DR (109%) as compared to DA (112%) was discriminatory and violative of Article 14.

Supreme Court Held

The Supreme Court observed that since both DA and DR are linked to inflation and share a common objective, prescribing a lower rate of enhancement for DR payable to pensioners than DA payable to serving employees is arbitrary and discriminatory.

Accordingly, the Court upheld the judgment of the Division Bench and held that such differential treatment violates Article 14.

List of Cases Reviewed

• Order of High Court of Kerala at Ernakulam in Writ Appeal Nos. 131 and 202 of 2022, Dated 22-11-2022 (para 26) affirmed

List of Cases Referred to

• M. Vijayakumar v. State of Kerala [W.P. (C) Nos. 6411 & 12062 of 2021, dated 14-12-2021] (para 1)
• Himachal Road Transport Corporation v. Himachal Road Transport Corporation Retired Employees Union [2021] 2 taxmann.com 2141 (SC) (para 13)
• T.N. Electricity Board v. R. Veerasamy (1999) 3 SCC 414 (para 13)
• State of Punjab v. Amar Nath Goyal 2005 taxmann.com 2143 (SC) (para 13)
• State of Rajasthan v. Amrit Lal Gandhi (1997) 2 SCC 342 (para 13)
• Chairman & MD, Kerala SRTC v. K. O. Varghese (2007) 8 SCC 231 (para 13)
• Kallakkurichi Taluk Retired Officials Association, Tamil Nadu v. State of Tamil Nadu [2013] 1 taxmann.com 8455 (SC) (para 16)
• M. Venugopalan Nair v. Chairman and Managing Director, KSRTC [Writ Petition (C) No. 13798 of 2012, dated 3-7-2013] (para 16)
• Managing Director of KSRTC v. M. Venugopalan Nair [W.A. No. 176 of 2014, dated 9-2-2017] (para 16)
• State of West Bengal v. Anwar Ali Sarkar (1952) 1 SCC 1 (para 22)
• Bhudhan Choudhary v. State of Bihar (1954) 2 SCC 791 (para 22)
• D. S. Nakara v. Union of India (1983) 1 SCC 305 (para 22)
• E.P. Royappa v. State of Tamil Nadu (1974) 4 SCC 3 (para 22)
• Ajay Hasia v. Khalid Mujib Sehravardi (1981) 1 SCC 722 (para 23)
• State of Punjab v. Davinder Singh (2025) 1 SCC 1 (para 24).

The post Lower DR Than DA Is Arbitrary – Violates Article 14 | SC appeared first on Taxmann Blog.

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