Author: inavatiq

Vijay Gupta – [2026] 182 taxmann.com 496 (Article)

The structure, operation and philosophy of taxation in India draw their authority from a deeply rooted and carefully constructed constitutional framework, within which Parliament exercises broad discretion to design the contours of tax liability, determine the nature of taxable income and identify the person upon whom the legal burden of such taxation shall fall. The power of the Union to levy taxes flows from Entry 82 of List I (the Union List) of the Seventh Schedule to the Constitution of India. The Indian Courts have consistently affirmed that this power extends not only to defining what is to be taxed but also to determining who is to bear the legal incidence of that tax.
This understanding is reinforced by enduring legal principles such as substantial praevaleat formae, which directs that the true character of a levy must prevail over its formal expression, and the maxim lex non cogit ad impossibilia, which recognises that legal obligations must be imposed in a manner that remains administratively workable. Equally significant is the interpretative maxim ratio legis est anima legis, which emphasises that a law can be understood only when examined in the light of its purpose and more importantly the context that sets out its creation and objective Tax.

legislation, perhaps more than any other branch of statutory design, derives coherence from the economic conduct it seeks to regulate, the administrative limitations it is shaped by, and the policy objectives it seeks to fulfil.

It was within this broader constitutional and jurisprudential context that India’s Dividend Distribution Tax (DDT) regime took shape. Under the pre-DDT system, dividends were taxable in the hands of shareholders, but the absence of an effective mechanism to monitor and ensure taxation of such dividend income in the hands of recipient shareholders, despite there being an obligation on the part of dividend distributing companies to undertake deduction of tax at source of such dividend outgo, it resulted in widespread under-reporting and significant revenue loss. Recognising these administrative limitations and the consistent erosion of taxable income, the Government restructured, in 1997, the incidence of dividend taxation by transferring the liability/incidence of tax from the shareholder to the company that distributes the dividends. This approach, on one hand, avoided the need to increase corporate tax rates and yet increasing the tax collection, and at the same time, resulted in creating a more efficient, convenient and uniform method for collecting tax on distributed profits. Under this statutory arrangement, the company was bestowed with the full responsibility for bearing and discharging the tax liability at the time of dividend distribution, without going into the recognition of or differentiation based upon the individual shareholders, while the shareholder receives the dividend entirely free of any further tax burden or tax obligation to be complied with.

The DDT framework represents a deliberate legislative choice, creating a clear demarcation between the person who earns the dividend and the person who bears the legal obligation to pay the tax. The shareholder, whether resident or non-resident, remains outside the tax base for dividend income during the DDT regime, at least from an Indian tax laws perspective. The maxim ubi jus ibi remedium underscores the importance of identifying the true taxpayer, since legal remedies and treaty protections operate in relation to the person actually subjected to a charge under domestic law.

These constitutional principles, jurisprudential doctrines and interpretative maxims collectively provide the analytical foundation for understanding Dividend Distribution Tax. They inform an examination of the nature of DDT, the legislative rationale for its introduction and its position within the wider system of domestic and international tax norms. This article builds upon these foundations to develop an alternative interpretative perspective on the interaction between DDT and treaty provisions, grounded in statutory structure, legal context and established principles of tax jurisprudence.

Evolution of Dividend Distribution Taxation in India:

Before the introduction of Dividend Distribution Tax, the India followed contemporary basis of taxation for dividends by taxing it in the hands of shareholders. Hence, while the company is supposed to pay due taxes on its income, any distribution of such income is dividend in the hands of its shareholders and thus, the shareholders should pay tax on such income. Done in this manner, while economics may gauge at such tax on dividend as sort of double taxation of same income, however, the respect and recognition of concept of ‘corporate veil’ should address the same. However, like any other stream of income, the companies distributing such income in the hands of its shareholders, were required to deduct tax as per the rates and manner as specified in this regard from time to time. Although this structure aligned with conventional international practice, it posed significant compliance difficulties. Dividend income was received by a large and diverse population of shareholders, and the absence of a reliable monitoring mechanism made accurate reporting difficult. As a result, dividend income frequently went unreported, causing substantial erosion of revenue. Such pilferage of income was a matter of worry!

Further, with millions of individual shareholders, it was practically impossible to track and verify each instance of dividend income.

The Government, therefore, introduced Dividend Distribution Tax (DDT) through the Finance Act, 1997 by inserting Section 115-O into the Income-tax Act. This reform shifted the incidence of taxation from the shareholder to the distributing company, centralising the compliance obligation within a single, identifiable taxpayer. Under this mechanism, the company became liable to pay a specified tax at the time of declaring, distributing or paying dividends, and shareholders received such dividends fully exempt from further tax in India. The introduction of DDT marked a significant structural shift aimed at ensuring uniformity in collection, and reducing revenue leakage.

In 2002, the DDT regime was temporarily abolished, and the system reverted to taxing dividends in the hands of shareholders. However, the familiar administrative challenges re-emerged almost immediately, forcing the Government to soon reintroduce the ‘DDT’ regime in 2003. The reinstated system reaffirmed the policy logic underlying the original reform:

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Editorial Team, – [2026] 182 taxmann.com 488 (Article)

Global IDT Insights provides a weekly snippet of tax news specifically related to Indirect Taxes from around the globe.

China issues regulations under the Value-Added Tax Law

China has issued detailed regulations under the Value-Added Tax Law of the People’s Republic of China through a state decree. The regulations were adopted at the 75th Executive Meeting of the State Council and promulgated on 30-12-2025, setting out comprehensive operational rules governing the levy, calculation, deduction, refund, and administration of value-added tax.

The regulations elaborate statutory definitions, clarify the scope of taxable supplies of goods, services, intangible assets, and real estate, and prescribe detailed mechanisms for cross-border transactions, invoicing, input tax deduction, tax incentives, and compliance. They apply to entities and individuals engaged in taxable transactions within the territory of China and provide the core subordinate framework for administering the VAT Law.

Key aspects of these implementing regulations include:

(a) Clarification of taxable scope and core definitions

The Regulations define goods to include tangible movable property and utilities such as electricity, heat, and gas, while services cover transportation, postal, telecommunications, construction, financial services, and various production and living services. Intangible assets are defined as non-physical assets capable of generating economic benefits, including technology, intellectual property, goodwill, and natural resource use rights, while real estate refers to immovable property such as buildings and structures. The State Council’s finance and tax authorities are empowered to propose and promulgate specific scopes for each category with State Council approval.

(b) Treatment of cross-border services and intangible assets consumption

Consumption of services and intangible assets within the territory includes supplies by overseas entities or individuals to domestic recipients, except for services consumed entirely overseas. It also includes cross-border supplies directly related to goods, real estate, or natural resources located within the territory, as well as other circumstances stipulated by the finance and tax authorities. These provisions establish the domestic VAT nexus for imported services and intangibles.

(c) Taxpayer classification and invoicing requirements

General taxpayers are those applying the general tax calculation method and are subject to a registration system administered by tax authorities. Natural persons are classified as small-scale taxpayers, while certain non-enterprise units may elect small-scale treatment if taxable activities are infrequent. Taxpayers issuing special VAT invoices must separately state the sales amount and VAT amount, and special VAT invoices are restricted in cases involving natural person purchasers, VAT-exempt transactions, or other prescribed circumstances.

(d) Zero-rated exports and cross-border supplies

Exported goods are defined as goods declared to customs, physically leaving the country, and sold to overseas entities or individuals, including goods deemed as exported. Specified cross-border services and intangible assets supplied by domestic entities to overseas recipients and entirely consumed overseas are subject to a zero tax rate, including R&D, design, software, offshore outsourcing services, technology transfers used overseas, and international transportation services.

(e) Determination of composite taxable transactions

Taxable transactions involving multiple supplies subject to different tax rates or levy rates are treated as composite transactions where there is a clear primary and secondary relationship. The primary business must reflect the substance and purpose of the transaction, while the secondary business must be a necessary supplement dependent on the primary supply.

(f) Input tax deduction vouchers and deductible input tax

VAT deduction vouchers include special VAT invoices, customs import VAT payment certificates, tax payment certificates for imported services and intangibles, agricultural product invoices, and other approved vouchers. Deductible input tax includes VAT stated on these vouchers, subject to compliance with the relevant administrative regulations.

(g) Adjustments for discounts, cancellations, and returns

Under the general tax calculation method, VAT refunded due to sales discounts, cancellations, or returns is deducted from current output tax, while recovered VAT is deducted from current input tax. Under the simplified tax calculation method, refunded sales amounts reduce current sales, with any excess refundable or deductible in future periods in accordance with regulations.

(h) Rules on non-deductible input tax and abnormal losses

Input tax related to personal consumption, abnormal losses, non-taxable transactions, and other specified circumstances is not deductible. Abnormal losses include theft, loss, spoilage, mismanagement, or legally mandated confiscation or demolition, with detailed rules covering goods, work-in-process, finished products, and real estate under construction. Fixed assets are defined as assets with a service life exceeding 12 months.

(i) Mixed-use long-term assets and input tax adjustment

General taxpayers acquiring fixed assets, intangible assets, or real estate for mixed use across taxable, exempt, simplified, non-taxable, collective welfare, or personal consumption activities must apply specific input tax rules. Assets with an original value not exceeding RMB 5 million allow full input tax deduction, while assets exceeding this threshold require annual adjustment of non-deductible input tax during the mixed-use period, in accordance with procedures issued by finance and tax authorities.

(j) VAT incentives and scope of exemptions

The Regulations define qualifying agricultural producers and primary agricultural products, eligible medical institutions, old and used books acquired from the public, and specified education, childcare, elderly care, and disability service institutions. They also clarify exempt ticket revenue and require public disclosure, periodic evaluation, and adjustment of VAT preferential policies by the finance and tax authorities.

(k) Collection, withholding, and compliance mechanisms

Taxpayer determination rules apply to contracting, leasing, affiliation, and asset management product operations, with asset managers treated as taxpayers for asset management products. Withholding obligations apply in specified transactions involving natural persons and cross-border real estate leasing.

(l) Anti-avoidance and information powers

Tax authorities are empowered to obtain logistics, customs, and fund settlement information relevant to export VAT administration, subject to confidentiality obligations. Where taxpayers implement arrangements without a reasonable commercial purpose resulting in improper VAT reduction, exemption, deferral, or excessive refunds, tax authorities may make adjustments in accordance with tax collection and administration laws.

Source – Official State Decree

Click Here To Read The Full Article 

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Case Deatsils: TLG India (P.) Ltd. vs. Assistant Commissioner of Income-tax - [2026] 182 taxmann.com 216 (Mumbai - Trib.) 

Judiciary and Counsel Details

• Sandeep Gosain, Judicial Member
•  Girish Agrawal, Accountant Member
• Hiten Thacker for the Appellant.
• Virabhadra Mahajan, Sr. DR for the Respondent.

Facts of the Case

Assessee filed its return of income reporting total income at nil. Transfer pricing adjustment of Rs. 113,11,80,000 were proposed by the ld. Transfer Pricing Officer (TPO) vide order dated 26.10.2023 which was objected to by the assessee before the ld. Disputes Resolution Panel (DRP).

The proposed adjustment was confirmed by the ld. DRP based on which the final assessment order was passed by the ld. Assessing Officer on 23.10.2024, assessing total income at Rs. 113,11,80,000, raising a demand of Rs. 23,30,67,630.

Against this final assessment order, the assessee filed an appeal before the Tribunal. However, during the pendency of the appeal, the assessee filed an application before the Tribunal for the refund of demand already recovered by the Assessing Officer (AO) during the pendency of the appeal.

Assessee contended that post passing of rectification order under section 154 by the learned AO, there remained no demand to be recovered from the assessee. Since there was no tax payable by the assessee, there was nothing to be stayed under the present stay application before the Tribunal.

ITAT Held

The Mumbai Tribunal held that the assessee was seeking direction from the Tribunal for the refund of the money which was recovered unlawfully during the pendency of the rectification application. For the purpose of grant of refund, the Tribunal has the power to ensure that the assessee is not left high and dry only on account of illegal and high-handed action on the part of the revenue and its Assessing Officer.

In the instant case, it was not merely a case of procedural defect adopted for recovery of demand during the pendency of the rectification application. Instead, such a recovery of tax resulted in double jeopardy in the hands of the assessee, well established by the outcome of the rectification order passed under section 154 by the learned AO.

Thus, the prayer for the refund of recovery made by the learned AO leading to double jeopardy carries a heavy force in favour of the assessee. Therefore, the Tribunal exercised powers under section 254 of the Act to direct the AO to grant the refund of recovery of tax made by him to the assessee for the year under consideration.

List of Cases Referred to

• Maharashtra Housing & Area Development Authority v. ADIT (Exemptions) [2014] 49 taxmann.com 341/66 SOT 66 (Mumbai) (para 5)
• ITO v. M.K. Mohammed Kunhi (1969) 71 ITR 615 (SC) (para 7)
• RPG Enterprises Ltd. v. Dy. CIT [2002] 74 TTJ 391 (Mumbai) (para 7).

The post Tax Recovered Illegally Must Be Refunded | ITAT appeared first on Taxmann Blog.

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This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Jan 12^th  to Jan 17^th 2026, namely:

1. Capital gains from Tiger Global’s Flipkart sale are taxable in India as TRC is not conclusive for DTAA relief and GAAR applies: SC;
2. RBI notifies FEM (Export and Import of Goods and Services) Regulations, 2026;
3. SEBI rolls out mutual funds regulations, 2026, effective April 1, 2026;
4. Initial burden to prove the deceased’s employment, direct or through a contractor, lies on claimants: HC;
5. No GST exemption on premium paid by retired bank employees towards group health insurance policy: HC;
6. In Data management services to US parent co. , place of service is outside India; GST demand quashed: HC; and
7. New Labour Codes and Gratuity Accounting: Actuarial Re-measurement or Past Service Cost?

1. Capital gains from Tiger Global’s Flipkart sale are taxable in India as TRC is not conclusive for DTAA relief and GAAR applies: SC

The assessee, a company incorporated in Mauritius, held shares of a Singapore company (Flipkart), which had investments in multiple Indian companies and derived substantial value from assets located in India. As part of a wider transaction involving the majority acquisition of Flipkart by Walmart, a US company, the assessee transferred its shares in Flipkart to a Luxembourg entity (Fit Holdings S.A.R.L) and claimed that the resulting capital gains were not taxable in India under the India–Mauritius DTAA.

The Authority for Advance Rulings (AAR) rejected this claim, holding that the applications preferred by the assessees relate to a transaction or issue which is prima facie designed for the avoidance of income tax. The assessee filed a writ petition before the High Court.

The High Court set aside the AAR’s order, noting that the transaction was not intended for tax avoidance and was protected by the grandfathering provisions of Article 13(3A) of the DTAA. The matter reached to the Supreme Court.

After further review by the SC, it was decided that following the insertion of section 90(2A), sections 90(4) and 90(5) of the Income-tax Act, the introduction of Chapter X-A (GAAR), and the inclusion of article 27A in the DTAA, merely possessing a Tax Residency Certificate is not sufficient to definitively prove treaty eligibility or prevent the revenue from investigating potential treaty abuse.

It was further held that the grandfathering benefit under article 13(3A) is restricted to direct transfers of shares of an Indian company and does not extend to indirect transfers covered by the residual article 13(4), and that where unlisted equity shares are transferred pursuant to an arrangement impermissible in law, the assessee cannot claim exemption under article 13(4).

Accordingly, upon a consideration of the facts as established on record, the transactions were held to constitute impermissible tax-avoidance arrangements attracting the provisions of Chapter X-A, with the result that the capital gains arising from transfers effected on or after 1 April 2017 were held to be taxable in India.

Read the Ruling

2. RBI notifies FEM (Export and Import of Goods and Services) Regulations, 2026

The RBI has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. These Regulations lay down norms relating to declaration of exports, the manner of receipt and payment, the timelines for realization of exports, and the set-off of export receivables against import payables. Further, it prescribes norms relating to the timelines for making import payments, the import of gold and silver and merchanting trade transactions. These regulations shall come into force w.e.f. October 1, 2026.

Key provisions

The key provisions include:

• Time Period for realisation of export proceeds

Under the extant norms, exporters are required to realise and repatriate the full value of goods/software/services to India within 15 months from the date of export. However, under the new regulations, the export value of goods and services must be realised and repatriated within the following periods:

a) 15 months from the date of shipment in the case of goods (other than goods exported to a warehouse outside India) and from the date of invoice in the case of services;
b) 15 months from the date of sale of goods from the warehouse in case of goods exported to a warehouse outside India;
c) As per the payment terms of the contract, in the case of project exports

• Reduction in the export realization

Under new regulations, an Authorised Dealer may, on request from the exporter citing reasons for under-realisation or non-realisation of the full export value, allow a reduction in realisation of export value, provided that the AD is satisfied with the reasons stated.

However, where the export value is up to Rs. 10 lakh (or its equivalent in foreign currency) per shipping bill (for goods) or per invoice (for services), the reduction of export value, including non-realisation of the full export value, may be permitted based on a declaration from the exporter.

• Set off of export receivables against import payable

An Authorised Dealer (AD) may allow the set-off of export receivables against import payables within the same overseas buyer or supplier, or their overseas group or associate companies, within the stipulated period for realisation of export proceeds or any extended period allowed by the AD.

• Third-party receipts and payments

An Authorised Dealer (AD) may permit third-party (other than the parties undertaking the export or import) receipts and payments for export and import transactions, provided the AD is satisfied about the bona fides of the transactions.

• Time period for making import payments

An authorised dealer must monitor its Import Data Processing and Monitoring System (IDPMS) entries and follow up with the respective importers to make payment for its imports within the period specified in the underlying contract.

However, the authorised dealer may, on a request from the importer citing the reasons for the delay, allow an extension of time for payment beyond the period specified in the contract.

• Reporting Requirements

An authorised dealer must enter the details of:

a) Export Declaration Form (EDF) of its customers as received from non-EDI (Electronic Data Interchange) port in EDPMS within 5 working days of receipt of EDF.
b) EDF of service (of its customers) in EDPMS within 5 working days of receipt of EDF from an exporter.
c) Import (of its customers) as received from non-EDI port in IDPMS within 5 working days of receipt of documents.
d) Import of service in IDPMS, as declared and submitted by the importer within 5 working days of receipt of documents.
e) Inward and outward remittances for all exports, imports and Merchanting Trade Transactions in EDPMS/IDPMS.

Further, an authorised dealer must monitor all transactions in EDPMS and IDPMS for the closure of outstanding entries and follow up with the exporter, importer, and the person undertaking MTT to submit the documents for the same.

Read the Notification

3. SEBI rolls out mutual funds regulations, 2026, effective April 1, 2026

In a move to strengthen and modernise the mutual fund regulatory framework, the SEBI vide. Notification dated January 14, 2026, has notified the SEBI (Mutual Funds) Regulations, 2026, in exercise of powers under the SEBI Act, 1992. The regulations provide a consolidated framework governing registration, eligibility, governance, trustees, asset management companies, mutual fund schemes, disclosures, obligations, and regulatory oversight. The regulations shall come into force with effect from April 1, 2026.

Background and rationale

On October 10, 2025, the SEBI released a consultation paper proposing a comprehensive review and simplification of the SEBI (Mutual Funds) Regulations, 1996. This initiative formed part of SEBI’s ongoing efforts to modernise regulatory frameworks, simplify compliance requirements and enhance transparency in the functioning of mutual funds. The primary goals of this regulatory review were to facilitate compliance for mutual fund entities and to ensure investor protection through improved disclosure and governance standards.

Key highlights of the new Mutual Funds Regulations

Some of the Key highlights are as follows:

• Eligibility criteria for mutual fund registration – Under the SEBI (Mutual Funds) Regulations, 2026, the SEBI has structured the eligibility criteria for mutual fund sponsors into two distinct eligibility routes to strengthen the asset management industry. These routes include detailed parameters for experience, profitability, net worth, positive liquid net worth, lock-in requirements, and change-in-control. Earlier, only a single eligibility route was available for mutual fund sponsors.
• Changes to total expense ratio (TER) structure – Under the SEBI (Mutual Funds) Regulations, 2026, only specified expenses can be charged to schemes under the Total Expense Ratio (TER). Permissible charges include the base expense ratio, brokerage fees, actual transaction costs, statutory levies and SEBI-approved exit load charges. Earlier, the Total Expense Ratio was designed to include all costs associated with running the mutual fund scheme.
• Expanded responsibilities of trustees and independent directors – The new framework broadens the responsibilities of trustees and independent directors, who will now be required to exercise closer oversight over investment management agreements, compensation paid by schemes, service contracts with related parties and the overall reasonableness of fees charged to investors.
• Introduction of concept of base expense ratio (BER) – the SEBI has introduced the concept of a base expense ratio (BER), which will reflect only the fee charged by the AMC for managing investors’ money. Other costs, such as brokerage, securities transaction tax, stamp duty and exchange fees, will now have to be disclosed separately. Earlier, these expenses were bundled under the total expense ratio.
• Brokerage Caps Rationalised – the SEBI has rationalised brokerage limits across market segments. In the cash market, the brokerage cap has been reduced to 6 basis points (bps) from an effective 8.59 bps earlier. In the derivative segment, the net brokerage ceiling has been lowered to 2 bps from 3.89 bps.

Conclusion

The SEBI (Mutual Funds) Regulations, 2026, mark a significant shift towards a more streamlined, transparent and governance-driven regulatory framework for the mutual fund industry. By rationalising eligibility norms, restructuring the expense framework, strengthening trustee and management accountability and tightening brokerage limits, SEBI has sought to balance ease of compliance with stronger investor protection.

Read the Notification

4) Initial burden to prove the deceased’s employment, direct or through a contractor, lies on claimants: HC

The High Court, in the matter of Maharaja Agrasen Hospital vs. Tulsi Joshi [2025] 181 taxmann.com 261 (Delhi), ruled that the initial burden to prove the foundational facts that the deceased was employed/engaged, either directly or through a contractor, by management lies on the claimants.

Brief facts of the case:

In the instant case, the claimants, the widow and the son of the deceased, filed an application under Section 22 of the Employees’ Compensation Act, 1923, alleging that the deceased was working as a canteen employee engaged in kitchen work and procurement of materials. It was claimed that the deceased was employed through a contractor up to 31-12-2013 and, with effect from 01-01-2014, was directly employed by the appellant-management.

On 09-01-2014, while proceeding on his two-wheeler to procure vegetables, the deceased met with an accident involving a speeding vehicle and died on the spot. It was alleged that the accident occurred out of and in the course of employment. The claimants further contended that despite repeated approaches, the management failed to pay compensation.

The appellant-management filed a written statement disputing the claim and contended that the deceased was neither directly employed by them nor engaged through any contractor, and, therefore, no liability to pay compensation arose.

The Commissioner, after considering oral and documentary evidence, allowed the claim, holding that the management employed the deceased as the principal employer and that the death occurred while he was connected with the business of the appellant. Compensation of Rs. 8.85 lakhs along with interest was awarded, with liberty granted to the management to recover the amount from the contractor. Aggrieved, the management preferred an appeal before the High Court.

High Court Observations:

The High Court observed that in proceedings under the Employees’ Compensation Act, the claimants are required first to establish foundational facts, namely the existence of an employer–employee relationship and that the death occurred during the course of employment.

Further, the High Court observed that the initial burden to prove that the deceased was employed or engaged either directly or through a contractor by the management squarely lay on the claimants. It is only when the said aspect is established that the onus of proof would shift to management to rebut it or discredit the case put forward by the claimants.

The High Court also observed that in the absence of any evidence or material to show that the deceased was employed or engaged by the management, the Commissioner erred in invoking section 106 of the Indian Evidence Act to shift the burden of proof on the management to establish that the deceased was not its employee.

High Court Ruling:

The High Court held that section 106 of the Indian Evidence Act could not be applied to relieve the claimants of their initial burden to prove foundational facts. Since there was no evidence to establish that the deceased was employed or engaged by the appellant-management, the impugned award passed by the Commissioner was unsustainable. Accordingly, the High Court set aside the award of compensation.

Read the Ruling

5. No GST exemption on premium paid by retired bank employees towards group health insurance policy: HC

The High Court held that no GST exemption is available on premiums paid by retired bank employees towards group health insurance policies. The Court held that Notification No. 16/2025-Central Tax (Rate) applies only to individual health insurance services and does not cover group insurance policies arranged through associations.

Facts

The petitioners, who were retired bank employees, challenged the levy of GST on premiums paid towards group health insurance policies arranged through the Indian Banks’ Association. It was contended that the policies were procured to provide welfare benefits to retired bank employees and that collective arrangements should not exclude them from exemption. The Department of Revenue submitted that the exemption under the Notification applied only to health insurance services where the insured is not a group and that group policies with special rates and additional benefits, fall outside the scope of the exemption. The matter was accordingly placed before the High Court.

Held

The High Court held that the exemption under Notification No. 16/2025-Central Tax (Rate) dated 17-9-2025 is intended to apply exclusively to individual health insurance policies and not to group insurance. It was held that the exemption is limited to services of a health insurance business provided to individual insured persons and does not extend to group policies based on arrangements reached between an association and an insurer. Consequently, GST is leviable on premiums paid by retired bank employees for group health insurance policies, affirming the Department’s stance under Sections 11 of the CGST Act and the Kerala GST Act.

Read the Ruling

<h2id=”6″>6. In Data management services to US parent co. , place of service is outside India; GST demand quashed: HC

The High Court held that, for data management services provided by an Indian subsidiary to its US parent company, the place of supply is outside India and no GST is payable. Relying on Para 3.2 of Circular No. 209/1/2018-ST, the Court held that the place of supply for data management services is the location of the service recipient situated outside India.

Facts

The petitioner, a data management and clinical trial services provider that is a subsidiary of a US Company, provided data management services to its US parent pursuant to a Master Service Agreement. The issue in the case was whether GST could be imposed on services where the recipient was located outside India, specifically whether the place of supply rule under Para 3.2 of Circular No. 209/1/2018-ST, dated 04-05-2018, exempted the petitioner from GST liability. The matter was accordingly placed before the High Court.

Held

The High Court held that Para 3.2 of Circular No. 209/1/2018-ST, dated 04-05-2018, specifies that the place of supply for software services, including testing, debugging, modification, customization, adaptation, upgrading, enhancement, or implementation, is the recipient’s location. It was found that the petitioner’s services fell within the definition of data management services under the Circular. Consequently, the impugned GST demand was quashed and held that no GST shall be payable on services rendered to the US parent, applying Section 9 of the CGST Act, Section 13 read with Section 16 of the IGST Act and the Karnataka GST Act.

Read the Ruling

7. New Labour Codes and Gratuity Accounting: Actuarial Re-measurement or Past Service Cost?

The implementation of the New Labour Codes in India has significantly altered the definition of “wages”, mandating that at least 50% of total remuneration comprise Basic Pay, Dearness Allowance and Retaining Allowance. This change has direct implications for defined benefit obligations such as gratuity and leave encashment, which are accounted for under Ind AS 19, Employee Benefits. A critical accounting issue is whether the resulting increase in wages should be treated as a change in actuarial assumptions or as a plan amendment giving rise to past service cost.

Under Ind AS 19, actuarial gains or losses arise from experience adjustments or changes in actuarial assumptions (such as salary escalation rates) and are recognised in Other Comprehensive Income (OCI). In contrast, past service cost represents changes in the present value of defined benefit obligations due to plan amendments or curtailments and is recognised immediately in profit or loss.

An increase in wages following the New Labour Codes can stem from two distinct elements. First, if actual salary increases differ from earlier assumed escalation rates, the impact represents a change in actuarial assumptions. Second, if the salary structure itself is modified, such as reallocating remuneration to ensure wages constitute at least 50%, this constitutes a plan amendment.

Consider a case where total remuneration increases from ₹100,000 to ₹1,15,000 due to an actual increment of 15%, compared to an assumed 12%, and the wage component is revised from 35% to 50% in line with the New Labour Codes.

Under the earlier assumption, expected wages were ₹39,200 (₹1,12,000 × 35%). Post-implementation, wages amount to ₹57,500, being 50% of ₹1,15,000, resulting in a total wage increase of ₹18,300.

If the actual 15% increment is applied while retaining the earlier salary structure, wages would be ₹40,250 (₹1,15,000 × 35%). Of the total increase, ₹1,050 (₹40,250 – ₹39,200) arises from the higher-than-assumed salary escalation and is recognised as an actuarial loss in OCI, while the balance ₹17,250 results from the change in wage structure and is recognised as past service cost in profit or loss.

In conclusion, wage increases resulting from the New Labour Codes cannot be viewed purely as actuarial re-measurements. Entities must carefully bifurcate the impact between changes in actuarial assumptions and plan amendments. This approach aligns with Ind AS 19, reflects the economic substance of the changes, and enhances transparency in reporting employee benefit obligations.

Read the Story

The post Weekly Round-up on Tax and Corporate Laws | 12th January 2026 to 17th January 2026 appeared first on Taxmann Blog.

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Case Details: United India Insurance Co. Ltd vs. Fulma Devi - [2025] 181 taxmann.com 451 (HC - Himachal Pradesh)

Judiciary and Counsel Details

• Satyen Vaidya, J.
• Ashwani K. Sharma, Sr. Adv.& Ishan Sharma, Adv. for the Appellant.
• Ms. Monika Singh & Virender Sharma, Advs. for the Respondent.

Facts of the Case

In the instant case, the Respondents’ claimants filed a claim petition for the grant of compensation on account of the death of their son during the course of his employment as a driver with the employer. The claim petition was partly allowed, and the claimants were held entitled to compensation of Rs. 12.57 lakhs, inclusive of interest.

The liability to satisfy the award had been fastened upon the appellant/insurer. Before the High Court, the appellant/insurer contended that the driver of the vehicle was not covered under the policy of insurance purchased by the employer.

It was noted that by virtue of proviso (i) to clause (b) of sub-section (1) of section 147 of the Motor Vehicles Act, the driver of the vehicle is entitled to coverage under the policy of insurance to the extent of compensation as provided under the Employees’ Compensation Act.

High Court Held

The High Court observed that since it had not been found that the driver was not qualified to drive the vehicle in question, he would also be covered under clause (II) (3) of the terms and conditions of the policy.

The High Court further observed that the employer, in her reply, had categorically admitted that she was the employer of the deceased driver, as the driver of the vehicle; thus, the contention that the relationship of employer and employee was not established also deserved rejection. Therefore, no fault could be found with the findings of fact recorded by the Commissioner.
The High Court held that since the age of the deceased at the time of death was 29 years and not 30 years, and by applying the relevant factor of 209.92, the award was modified, and the claimants were entitled to compensation of Rs. 8.39 lakhs along with interest at a rate of 12 per cent.

List of Cases Referred to

• National Insurance Company Ltd. v. Prembai Patel [2005] 6 SCC 172 (para 12).

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CA Mithilesh Reddy & CA Rajesh Vaishnav – [2026] 182 taxmann.com 415 (Article)

Treaty Protection, GAAR, and the Quiet Deep dive of Section 90 of IT Act, 1961

I. Introduction: From form-based comfort to substance-driven scrutiny

The latest Supreme Court’s (SC) judgment in Authority for Advance Rulings (Income Tax) v. Tiger Global International II, Holdings [2026] 182 taxmann.com 375 (SC)represents far more than a ruling on the maintainability of an advance ruling application under Section 245R of the Income-tax Act. 1961 (the Act) . It is part of a discernible and consistent judicial trajectory in recent years one in which the Court has repeatedly reaffirmed that economic substance must prevail over legal form, even where the taxpayer’s position is supported by facially valid documentation such as Tax Residency Certificates (TRC), carefully drafted contracts, or formally compliant structures.

When read alongside decisions of other recent judgements pronounced by Hon’ble SC such as Hyatt International Southwest Asia Ltd. v. Addl. DIT [2025] 176 taxmann.com 783/306 Taxman 241/478 ITR 238 (SC) and Pride Foramer S.A. v. CIT [2025] 179 taxmann.com 464/307 Taxman 371/481 ITR 1 (SC) Tiger Global reflects a deeper methodological shift: the Court is increasingly unwilling to allow formal compliance to truncate substantive enquiry, particularly where the statutory scheme indicates a legislative intent to prioritise anti-avoidance over certainty. This shift has profound implications for international structuring, treaty interpretation, and the operation of Section 90 of the Act, especially after the advent of General Anti Avoidance Rule (GAAR).

II. The Factual Setting: Structure, Exit, and the AAR Bar

The assesses in Tiger Global were Mauritius-incorporated investment holding companies, each holding a Category I Global Business Licence and TRCs issued by the Mauritius Revenue Authority. Between 2011 and 2015, these entities acquired shares in Flipkart Private Limited (Singapore), an intermediate holding company whose value was substantially derived from Indian assets.

In 2018, pursuant to Walmart Inc.’s global acquisition of Flipkart, the assessees exited their investments by selling the Singapore shares to a Luxembourg purchaser. Before completing the transaction, they sought nil-withholding certificates under Section 197. When these were denied and withholding rate was prescribed, they approached the Authority for Advance Rulings (AAR) under Section 245Q(1) of the Act, seeking a ruling on the taxability of the capital gains under the Act read with the India–Mauritius Double Tax Avoidance Agreement (DTAA).

The AAR in 2020 refused to admit the applications, invoking proviso (iii) to Section 245R(2), holding that the transaction was prima facie designed for avoidance of income-tax. The Delhi High Court (HC) vide the final judgment and common order dated 28-08-2024 overturned this decision.

Hon’ble Delhi HC among various other observations held that TRC certification is to be respected by the Revenue, and any attempt to pierce the corporate veil must be grounded in compelling evidence of tax fraud, sham transactions, or complete absence of economic substance. It also noted that the rulings of the Apex Court in the case of Union of India v. Azadi Bachao Andolan [2003] 132 Taxman 373/263 ITR 706 (SC) and Vodafone International Holdings B.V. v. Union of India [2012] 171 taxmann.com 202/204 Taxman 408 /341 ITR 1 (SC) were before a statutory framework on tax residency and that Circular’s (No. 789 of 2000) position on TRC for both fiscal and beneficial ownership should suffice. Additionally, the Limitation of Benefits (LOB) and the Article 13(3A) read along with Article 13(3B) would be superseding the domestic provisions under Chapter XA of the Act [i.e., phrase “without prejudice” in Rule 10U(2) signified that it would apply only in scenarios not already addressed by Rule 10U(1)(d)].

Hon’ble SC, however, has now restored the AAR’s approach and, in doing so, laid down principles that now resonate far beyond advance rulings. It is start of new era of interpretation, where finer reading of previous judgements while taking note of point in time at which the same were pronounced, the facts on hand and deeper discovery of intent of underlying concepts of international taxation, especially in the context of tax structuring and tax planning takes centre stage.

III. Section 245R(2): Why “Designed for Avoidance” is no longer a narrow gate

Proviso (iii) to Section 245R(2) of the Act bars the AAR from admitting an application where the question raised relates to a transaction prima facie designed for avoidance of income-tax. For years, this proviso was treated as an exceptional exclusion, lest the very purpose of advance rulings certainty be defeated.

Tiger Global decisively alters that balance. The Court holds that the enquiry cannot be confined to the exit transaction viewed in isolation. Instead, where capital gains are concerned, the entire arrangement acquisition, holding pattern, governance, control, and exit constitutes the relevant unit of analysis. A design for avoidance may therefore be long-drawn, and need not be evident from the final step alone. In the instant case, the TRC relied upon is non-decisive, ambiguous and ambulatory, merely recording futuristic assertions without any independent verification. Thus, the TRC lacks the qualities of a binding order issued by an authority.

This reasoning is critical. It allows Revenue authorities to look behind formally compliant exits and examine whether the structure, viewed holistically, reflects a genuine commercial arrangement or one primarily oriented towards tax advantage.

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Press Release Dated 16-01-2026

1. Introduction

Central Board of Indirect Taxes and Customs (CBIC) has extended export incentives under the Duty Drawback, RoDTEP and RoSCTL schemes to goods exported through the postal mode in electronic form, with effect from 15 January 2026.

2. Extension Of Export Incentives To Postal Mode

With this move, exports made through the postal channel will now be eligible for the same incentive benefits as exports routed through other customs channels. The extension covers benefits under Duty Drawback, Remission of Duties and Taxes on Exported Products (RoDTEP), and Rebate of State and Central Taxes and Levies (RoSCTL).

3. Operationalisation Through Regulatory Amendments

The benefit has been operationalised through amendments to the Postal Export (Electronic Declaration and Processing) Regulations, 2022, notified via Notification No. 07/2026–Customs (N.T.). Additionally, Circular No. 01/2026–Customs lays down the procedural and operational framework for claiming such incentives.

4. Coverage Of Dak Niryat Kendras And Foreign Post Offices

Export incentives will now be available for eligible postal exports routed through Dak Niryat Kendras (DNKs) and Foreign Post Offices (FPOs). Exporters using these facilities can electronically declare exports and claim benefits under the respective incentive schemes.

5. Conclusion

The extension of Drawback, RoDTEP and RoSCTL benefits to postal exports is a significant step towards trade facilitation. By placing postal exports at par with other export modes, the measure is expected to provide a major boost to MSMEs and small exporters, particularly those operating from smaller towns and remote regions.

Click Here To Read The Full Press Release 

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Case Details: Paras Chandreshbhai Koticha vs. Income-tax Officer - [2026] 182 taxmann.com 204 (Gujarat) 

Judiciary and Counsel Details

• A.S. Supehia & Pranav Trivedi, JJ.
• Tushar Hemani, Sr. Adv., S.N. Divatia, B.S. Soparkar, Dhinal Shah, Vijay Patel, Ms. Vaibhavi Parikh, Manish J. Shah, Jimmy Patel & B.S. Soparkar, Advs. for the Petitioner.
• Varun K. Patel, Dev Patel, Aditya Bhatt, Karan Sanghani, Ms. Maithili Mehta & Maunil G Yajnik, Senior Standing Counsels for the Respondent.

Facts of the Case

The core issue before the Gujarat High Court was
“Whether the Assessing Officer can directly reopen assessments under Sections 147/148 of the Income-tax Act on the basis of material found during a search under Sections 132/132A, without first following the special procedure under Sections 153A/153C (including recording the mandatory satisfaction note), particularly in the case of a person other than the searched person.

High Court Held

The Gujarat High Court held as follows:

a) It is mandatory for the Assessing Officer of a “searched person” (Section 153A of the Act) to record satisfaction on the incriminating material found during the search under Sections 132/132A of the Act and communicate the same to the jurisdictional Assessing Officer of the “other/third person”.

b) In the absence of any satisfaction note recorded by the Assessing Officer of the searched person, the jurisdictional Assessing Officer of the other person cannot assume jurisdiction under Section 153C of the Act solely on the basis of material sent to him by the Assessing Officer of the searched person.

c) In other words, the “other person” cannot be subjected to assessment/reassessment under Section 153C of the Act on the material received by him sans a satisfaction note; hence, such an approach would be illegal, without jurisdiction, and liable to be quashed.

d) The jurisdictional Assessing Officer of the “other/searched person” (Section 153C) can invoke the provisions of Sections 147/148 of the Act only on the basis of material available to him from other sources, other than the incriminating material sent to him.

e) In case a satisfaction note is recorded on the incriminating material and transmitted to him/her, then the only recourse available to the jurisdictional Assessing Officer is to proceed under Section 153C of the Act and not under Sections 147/148 of the Act.

f) In the case of assessees who are subjected to reassessment under the provisions of Section 153A of the Act, the Assessing Officer cannot switch over or invoke the provisions of Sections 147/148 of the Act on the basis of incriminating material found during the search and seizure conducted under Sections 132 or 132A of the Act.

g) However, the Revenue cannot be restricted, barred, or left remediless from invoking the provisions of Sections 147/148 of the Act, subject to fulfillment of the conditions mentioned therein, and the assessment can be reopened on the basis of material collected post-search from any other independent source.

List of Cases Reviewed

• Manish Maheshwari v. Asstt.CIT [2007] 159 Taxman 258 (SC)/[2007] 289 ITR 341 (SC) (para 45)
• CIT v. Calcutta Knitwears [2014] 43 taxmann.com 446 (SC)/[2014] 223 Taxman 115 (SC)/[2014] 362 ITR 673 (SC) (para 46)
• Super Malls Private limited v. Pr. CIT (2020) 4 S.C.C. 581 (para 47)
• Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC) (para 53)
• Shyam Sunder Khandelwal v. Asstt. CIT [2024] 161 taxmann.com 255 (Rajasthan) (para 59)
• Sri Dinakara Suvarna v. Dy. CIT [2022] 143 taxmann.com 362 (Karnataka)/[2023] 454 ITR 21 (Karnataka) (para 59)
• Aditi Constructions v. Dy. CIT [2023] 151 taxmann.com 513 (Bombay)/[2023] 293 Taxman 710 (Bombay)/[2023] 454 ITR 456 (Bombay) (para 59)
• Pr. CIT v. Naveen Kumar Gupta [2024] 168 taxmann.com 574 (Delhi)/[2025] 479 ITR 586 (Delhi) (para 61)
• Heval Navinbhai Patel v. ITO [2021] 126 taxmann.com 82 (Gujarat)/[2021] 279 Taxman 24 (Gujarat) (para 65)
• Amar Jewellers Ltd. v. Asstt. CIT [2022] 137 taxmann.com 249 (Gujarat)/[2022] 444 ITR 97 (Gujarat) (para 66) Followed.

List of Cases Referred to

• Khandubhai Vasanji Desai v. Dy. CIT [1999] 103 Taxman 181 (Gujarat)/[1999] 236 ITR 73 (Gujarat) (para 17)
• Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 (SC)/[2023] 293 Taxman 141 (SC)/[2023] 454 ITR 212 (SC) (para 17)
• Shyam Sunder Khandelwal v. Asstt. CIT [2024] 161 taxmann.com 255 (Rajasthan) (para 17)
• Amar Jewellers Ltd. v. Asstt. CIT [2022] 137 taxmann.com 249 (Gujarat)/[2022] 444 ITR 97 (Gujarat) (para 25)
• Pr. CIT v. Naveen Kumar Gupta [2024] 168 taxmann.com 574 (Delhi)/[2025] 479 ITR 586 (Delhi) (para 30)
• Pr. CIT v. Agroha Fincap Ltd. [2025] 179 taxmann.com 185 (Delhi) (para 30)
• Heval Navinbhai Patel v. ITO [2021] 126 taxmann.com 82 (Gujarat)/[2021] 279 Taxman 24 (Gujarat) (para 37)
• Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70 (SC)/[2024] 301 Taxman 238 (SC)/[2024] 469 ITR 46 (SC) (para 37)
• Manish Maheshwari v. Asstt.CIT [2007] 159 Taxman 258 (SC)/[2007] 289 ITR 341 (SC) (para 45)
• CIT v. Calcutta Knitwears [2014] 43 taxmann.com 446 (SC)/[2014] 223 Taxman 115 (SC)/[2014] 362 ITR 673 (SC) (para 46)
• Super Malls Private limited v. Pr. CIT (2020) 4 S.C.C. 581 (para 47)
• Sri Dinakara Suvarna v. Dy. CIT [2022] 143 taxmann.com 362 (Karnataka)/[2023] 454 ITR 21 (Karnataka) (para 59)
• Aditi Constructions v. Dy. CIT [2023] 151 taxmann.com 513 (Bombay)/[2023] 293 Taxman 710 (Bombay)/[2023] 454 ITR 456 (Bombay) (para 59)
• Sejal Jewellary v. Union of India [2025] 171 taxmann.com 846 (Bombay) (para 60).

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Case Details: Mandava Ashapriya vs. State - [2025] 181 taxmann.com 105 (HC - Delhi)

Judiciary and Counsel Details

• Neena Bansal Krishna, J.
• Pramod Kumar Dubey, Sr. Adv., Abhishek Saket, Abhigyan, Ms. Amrita Vatsa, Manish Madhukar, Nishaank Maitoo, Rupraj Banerjee, Rama Chanduin B. Siddhartha, Devrishi Tyagi & Manish Madhukar, Advs. for the Petitioner.
• Shoaib Haider, APP, Siddharth Agarwal, Sr. Adv., Sidharth Sethi, Ms. Shreya Sircar & Kunal Saini, Advs. for the Respondent.

Facts of the Case

In the instant case, the complainant-lender sanctioned a bridge loan to the borrower company, intended to be converted into a term loan on achievement of milestones. The arrangement was amended to require post-dated cheques from the accused group company to secure the borrower’s quarterly principal and interest repayments.

The borrower sought conversion of the outstanding bridge loan into a regular project finance term loan. The complainant stated it would consider the request, subject to the clearance of outstanding dues and approval of its competent authority. The borrower paid outstanding dues. The complainant withdrew its Loan Recall Notice and began withdrawing proceedings under section 138 for dishonoured cheques up to 31-8-2016.

Further, two cheques issued by the accused group company as security for instalments due after 31-8-2016 were presented and dishonoured for insufficiency of funds. Thereafter, the complainant filed criminal complaints under Section 138 of the Negotiable Instruments Act, 1881. The Metropolitan Magistrate passed summoning orders for offences under section 138 of the Act.

It was noted that there was only a proposal to convert a bridge loan into a term loan, and no final agreement. Further, since no novation of contract occurred, the original agreement remained in force, and the security cheques represented a legally enforceable debt.

High Court Held

The High Court observed that the cheques issued as security for the original bridge loan agreement remained valid instruments for that debt and, consequently, their subsequent presentation for encashment was towards a liability that was legally enforceable at the time of their presentation. Thus, complaints under section 138 of the Act were maintainable.

The High Court held that since the complainant had pleaded facts showing individuals’ involvement as directors responsible for the company’s business, which led to the issuance and dishonour of cheques, such averments were legally sufficient to summon the directors to face trial.

Further, the High Court held that, in the absence of any averments defining the role of accused no. 2 in the complaint, it could not be said that he was in charge or responsible for the day-to-day working of the accused company, and he was entitled to be discharged.

List of Cases Reviewed

• Order of Metropolitan Magistrate (Summoning Orders) Dated 31-1-2017 and 1-3-2017 in Complaint Case Nos. 1659/2017, 1660/2017 and 3474/2017 (para 89) partly affirmed

List of Cases Referred to

• National Small Industries Corporation Limited v. Harmeet Singh Paintal [2010] 98 SCL 407 (SC) (para 81)
• Kamalkishor Shrigopal Taparia v. India Ener-Gen (P.) Ltd. [2025] 171 taxmann.com 715/188 SCL 312 (SC) (para 82)
• Pooja Ravinder Devidasani v. State of Maharashtra [2015] 53 taxmann.com 434/129 SCL 393 (SC) (para 85)
• Chitalapati Srinivasa Raju v. SEBI AIR 2018 SC 241 (para 86).

The post S.138 Complaints Maintainable; Security Cheques Enforceable | HC appeared first on Taxmann Blog.

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Introduction

Under Ind AS, correcting past errors isn’t just a bookkeeping fix – it can reshape reported profits, trigger fresh CSR obligations, clash with ICDS rules, and even change the final tax bill. This article shows how a single adjustment to prior-period income can open the door to multiple financial and compliance consequences.

The mercantile system of accounting requires that any expenditure be claimed or accounted for in the year in which it accrues.
Prior Period Items refer to income or expense items that belong to previous accounting periods but were omitted or recorded incorrectly in those periods due to mathematical mistakes, misapplication of accounting policies, oversights or misuse of information.

The term prior period does not include other adjustments necessitated by circumstances, which, though related to prior periods, are determined in the current period.

To understand this definition, let us see some examples of prior period items:

• Mathematical errors

While finalising FY 2023-24 accounts, depreciation on machinery was calculated as Rs.5,00,000 instead of Rs.50,000 due to a mathematical error.

• Misapplication of accounting policies

The company capitalised routine repair expenses of Rs.3,00,000 in FY 2021-22, although as per its accounting policy and Ind AS 16, such expenses should have been charged to the Statement of Profit and Loss.

• Oversights or misuse of information

An electricity bill for March 2023, amounting to ?1,20,000, was received before finalisation of accounts, but was overlooked and not recorded.

1. Concept of Crystallization in Prior Period Items:

Crystallization is the point at which a possible or unknown obligation becomes a definite and actual liability. It is the moment when the company can no longer avoid recognising the liability in its accounts.

1.1. Crystallized Liability – When to Treat as Prior Period Item

Crystallization only means “the liability becomes definite now.” Whether it becomes a prior period item depends on whether an error occurred in earlier financial statements.

For example: During the current accounting period, the company entered into a wage settlement with its workers, resulting in a revision of wages with retrospective effect. Consequently, arrear wages amounting to Rs.5,00,000 became payable to workers.

In this example, the liability crystallised during the current period when the wage agreement was concluded. The entire arrears of Rs.5,00,000 is charged to the current period’s Statement of Profit and Loss, and this is not treated as a prior period item, because the obligation arose and became determinable only in the current period.

Prior period items are important in accounting because they ensure accuracy, transparency, and fairness in financial reporting. Correcting past errors helps present financial statements reflect the actual financial performance and position of the business. This helps users make better decisions, avoids misleading comparisons and builds trust among investors and stakeholders.

2. Presentation of Prior Period Items in Financials as per AS- 5 & Ind AS- 8

As per AS–5, prior period items are not considered part of the current period’s ordinary profit or loss and must be shown separately in the statement of profit and loss in a manner that their impact on current profit or loss can be perceived. Typically, prior period items are presented after the net profit from ordinary activities of the current period, so that users can clearly distinguish the effect of past errors on the current profit.

As per Ind AS – 8, Prior Period items have a retrospective effect, which means that the entity must correct prior period items retrospectively in the financial statement of the current year by restating the comparative amounts for the prior period(s) presented in which the error or omission occurred. This can result in a change of net profit, reserves and surplus, ratios, EPS, etc.
If the error or omission occurred before the earliest prior period presented, then the opening balances of assets, liabilities, and equity for the earliest prior period presented must be restated.

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