Author: inavatiq

Case Details: Bajaj Electricals Ltd. vs. Assistant Commissioner of Income-tax - [2026] 183 taxmann.com 637 (Bombay)

Judiciary and Counsel Details

• B. P. Colabawalla & Firdosh P. Pooniwalla, JJ.
• Nitesh Joshi & Jeet Kamdar for the Petitioner.
• Abhishek R. Mishra for the Respondent.

Facts of the Case

The petitioner filed its original return of income for the relevant assessment year. Subsequently, a revised return of income was filed, and the assessment proceedings were initiated by the issue of notice under Section 143(2). Later, a modified return of income was filed pursuant to Section 170A. During the assessment proceedings, an assessment order was passed.

However, the Assessing Officer (AO) took the income as per the revised return of income, not as per the modified return of income. The assessee filed a rectification application for the same. In addition, the AO issued a notice under section 143(2) seeking to assess the modified return of income filed by the assessee.

The assessee filed a writ petition to the Bombay High Court against the notice issued by the AO under section 143(2).

High Court Held

The High Court held that Section 170A(2)(b) makes a distinction between two scenarios. One is where the assessment is completed on the date of furnishing the modified return of income, and the other is where the assessment is pending on the date of furnishing such return of income.

Where the assessment proceedings are pending on the date of furnishing of the modified return of income, the AO has to pass an order assessing or reassessing the total income of the relevant assessment year in accordance with the order of the business reorganisation and taking into account the modified return so furnished.

In the instant case, the assessment proceedings were pending when the modified return of income was filed. The AO was under an obligation to assess the total income of the relevant assessment year in accordance with the order of the business reorganisation, and taking into account the modified return so furnished. In fact, the AO carried out that exercise, examining the aspects arising from the modified return of income.

Since the modified return of income has already been subjected to scrutiny and an assessment order passed thereon, the issuance of the impugned notices with a view to again scrutinising the said modified return of income is contrary to the express provisions of Section 170A(2)(b) of the IT Act.

The post AO Cannot Reopen Scrutiny After Passing Order on Modified Return u/s 170A | HC appeared first on Taxmann Blog.

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Editorial Team – [2026] 184 taxmann.com 27 (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 Extends Short-Selling Relief for Market Makers in Precious Metal-Backed Exchange-Traded Products

On February 27, 2026, the Australian Securities and Investments Commission (ASIC) extended conditional short-selling relief for appointed market makers to support market liquidity in exchange-traded options (ETOs) listed over Global X Physical Gold Structured and specified structured products referencing precious metals.

The relief extends the existing market maker short-selling relief for similar exchange-traded products where settlement failure risk is low.

With effect from February 3, 2026, the ASIC Corporations (Amendment) Instrument 2026/24 amends the ASIC Corporations (Short Selling) Instrument 2018/745 to:

(a) Allow market makers of specified structured products that reference precious metals to short sell these products during the course of market making on the same conditions that currently apply to ETF market makers.

(b) Include Global X Physical Gold Structured as an approved product that an appointed ETO market maker can short sell to hedge risks arising from making a market in the listed option.

(c) Extend the covered short sale transaction reporting relief for ETF market makers also to include market makers of specified structured products and

(d) Reflect current naming conventions for exchange-traded products and use market-neutral language.

Markets that intend to rely on the conditional exemption should review the amended instrument to understand how it applies to their market-making activities.

Source – Official Guidance

Click Here To Read The Full Article

The post ASIC Extends Short-Selling Relief for Precious Metal ETP Market Makers appeared first on Taxmann Blog.

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Case Details: Seyadu Beedi Company vs. Regional Provident Fund Commissioner - [2026] 183 taxmann.com 731 (HC-Madras)

Judiciary and Counsel Details

• K. Surender, J.
• I. Robert Chandra Kumar, Standing Counsel for the Respondent.

Facts of the Case

In the instant case, the petitioner was a beedi manufacturing company. It procured unbranded beedis from M/s. Rajan Traders affixed its brand and sold them. The petitioner was covered under the Employees’ Provident Funds and Miscellaneous Provisions (EPF) Act.

A complaint by the District Beedi Employees Union alleged that provident fund benefits were not extended to about 800 beedi rollers engaged through M/s. Rajan Traders.

Pursuant to the complaint, the Regional Provident Fund Commissioner conducted an enquiry under Para 26B of the EPF Scheme, read with Section 7A of the Act and held that beedi rollers supplying beedis to M/s. Rajan Traders were employees of the petitioner and had to be enrolled as PF members.

The petitioner challenged the said order before the Appellate Tribunal, which set aside the Regional Provident Fund Commissioner’s order. The Regional Provident Fund Authority and the Beedi Workers Union filed writ petitions challenging the Appellate Tribunal’s order; the High Court dismissed those writ petitions, thereby confirming the Appellate Tribunal’s order.

In writ appeals, the Division Bench held that the Appellate Tribunal lacked jurisdiction to entertain an appeal against an order passed under Para 26B read with Section 7A of the Act. Thereafter, the petitioner filed the instant writ petition.

It was noted that, since the beedi rollers were producing beedis and rendering services to the petitioner company through M/s. Rajan Traders, the presence of M/s. Rajan Traders, as an intermediary, did not alter the relationship between the beedi workers and the petitioner company.

Further, it was noted that sustenance of the beedi rollers was wholly dependent on the petitioner company, and the arrangement adopted by the petitioner company was to project the absence of nexus between the beedi rollers and the Petitioner Company.

High Court Held

The High Court observed that the Regional Provident Fund Commissioner had given adequate and convincing reasons to establish that beedi rollers were, in fact, employees of the petitioner company.

The High Court held that though the petitioner company adopted a dubious method in engaging the services of beedi rollers, on a scrutiny and reasoning given in the order dated 01.07.2003, it could not be held that beedi rollers were not employees of the petitioner company or that they were not entitled to provident fund benefits.

Accordingly, the order dated 01.07.2003 passed under Para 26B of the EPF Scheme, read with Section 7A of the Act, and the consequential order dated 17.08.2004 was liable to be sustained.

List of Cases Referred to

• Regional Provident Fund Commissioner v. Seyadu Beedi Company [W.A. (MD) No.1089 of 2018, dated 11-9-2025] (para 8).

The post Beedi Rollers Engaged Through Intermediary Held Employees Eligible for PF | HC appeared first on Taxmann Blog.

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Circular no. IFSCA-DTFA/1/2026; Dated: 02.03.2026

The International Financial Services Centres Authority (IFSCA) has specified the fee structure applicable to entities undertaking or intending to undertake permissible activities in the International Financial Services Centre (IFSC). The framework also covers fees payable by persons seeking clarification under the Informal Guidance Scheme.

1. Application Fees for Licences, Registrations and Authorisations

Every application submitted to IFSCA for obtaining a licence, registration, recognition or authorisation will be treated as a separate application. Accordingly:

• Each application will attract separate specified application fees.
• The applicable fee must be remitted to the Authority’s designated bank account.

This ensures that each regulatory request is processed independently.

2. Payment of Fees After Provisional or In-Principle Approval

Where the Authority communicates a decision to grant provisional approval or in-principle approval, the applicant must:

• Pay the applicable licence, registration, recognition or authorisation fee within 15 days from the date of intimation.
• The payment must be completed before the final grant of the licence, registration, recognition or authorisation.

3. Non-Refund of Fees After Approval Stage

If the Authority subsequently decides not to grant the licence, registration, recognition or authorisation after issuing provisional or in-principle approval, the fees already paid by the applicant will not be refunded.

This provision ensures administrative finality and covers the costs incurred during the evaluation process.

4. Consequences of Non-Payment of Fees

If the applicant fails to pay the requisite fee within the specified timeline, it will be presumed that the applicant does not wish to proceed with the licence, registration, recognition or authorisation.

In such cases, the Authority may, at its discretion:

• Discontinue the approval process, and
• Close the application.

5. Conditional Recurring Fees

Once an entity obtains a licence, registration, recognition or authorisation, it will be required to pay conditional recurring fees, which may be based on parameters such as turnover or other prescribed criteria.

These recurring fees must be paid in two instalments as per the prescribed framework.

6. Penalty for Delay in Submission of Regulatory Reports

Where a regulated entity fails to submit complete periodic regulatory or supervisory reports or returns within the specified timeline, it must pay:

• USD 100 for each instance of delay,
• For every month or part thereof during which the report or return remains unsubmitted.

This provision encourages timely regulatory reporting and compliance.

7. Fees Under the Informal Guidance Scheme

Applicants seeking clarification under the IFSCA Informal Guidance Scheme must pay a fee of USD 1,000 per application.

If the Authority determines that the application is not maintainable under the scheme:

• USD 250 (25% of the fee) will be retained as a processing fee, and
• USD 750 (75% of the fee) will be refunded to the applicant.

8. Objective of the Fee Framework

The fee structure aims to:

• Ensure transparency and consistency in regulatory charges
• Streamline the licensing and approval process in IFSC
• Promote timely compliance with regulatory reporting requirements
• Provide a structured mechanism for obtaining regulatory guidance

The framework supports efficient regulatory administration while facilitating the growth and governance of entities operating in IFSC.

Click Here To Read The Full Circular

The post IFSCA Specifies Fee Structure for IFSC Entities appeared first on Taxmann Blog.

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Case Details: Marhabba Overseas (P.) Ltd. vs. Union of India - [2026] 183 taxmann.com 743 (Gujarat)

Judiciary and Counsel Details

• A.S. Supehia & Pranav Trivedi, JJ.
• S N Soparkar, Sr. Adv., Parth H Bhatt, Ms Khyati A Chugh & Sudeep Biswas for the Petitioner.
• Ankit Shah & Pradip D Bhate for the Respondent.

Facts of the Case

The petitioner challenged the show cause notice (SCN) and the impugned order issued by the Commissioner. During the hearing, the petitioner submitted that the Commissioner had rejected four core defences cited, which were either non-existent or unrelated to the issues raised in the defence statement. It was contended that the reasoning and findings recorded by the Commissioner were flawed and deceptive, as they appeared to be based on AI-generated citations without reading the actual judgments. It sought that guidelines be prescribed for quasi-judicial authorities to prevent reliance on non-existent or irrelevant AI-generated judgements. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the reliance placed by the Commissioner on the aforementioned judgements was incorrect, as the cited authorities were either non-existent. It was observed that the findings recorded by the Commissioner under Section 75 of the CGST Act, and the Gujarat GST Act, were flawed due to unverified reliance on AI-generated case law. It was held that quasi-judicial authorities must ensure that the judgements and citations they refer to are factually accurate, directly applicable, and verified before incorporation in orders. The Court directed that appropriate guidelines be prescribed to prevent reliance on AI-generated or irrelevant judgement.

List of Cases Referred to

• Union of India v. Coastal Container Transporters Association [2019] 104 taxmann.com 364/73 GST 211 (SC) (para 2)
• NKAS Service (P) Ltd v. Union of India [2021-VIL 37-MAD] (para 3)
• NKAS Services (P.) Ltd. v. State of Jharkhand [2022] 136 taxmann.com 138/91 GST 736/58 GSTL 257 (Jharkhand) (para 3)
• CCE v. Flock (India) (P.) Ltd 2000 taxmann.com 701/120 ELT 285 (SC) (para 4)
• Union of India v. W.N. Chadha [1993 Supp (4) SCC 260] (para 5)
• CCE v. Rajasthan State Chemical Works 1991 taxmann.com 24/55 ELT 444 (SC) (para 5).

The post HC Warns Authorities Against Blind Reliance on AI-Generated Judgments appeared first on Taxmann Blog.

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Case Details: Manjulaben Mafatlal Shah vs. Tax Recovery Officer-3, Ahmedabad - [2026] 183 taxmann.com 746 (Bombay)

Judiciary and Counsel Details

• B. P. Colabawalla & Firdosh P. Pooniwalla, JJ.
• Shashank A. Mehta & Saukhya Lakade, Advs. for the Petitioner.
• Suresh Kumar & Ms Mamta Omle, Advs. for the Respondent.

Facts of the Case

The petitioner was the spouse of a director of Shri Ram Tubes Private Limited. The Income Tax Department issued a notice under section 226(3) directing the petitioner’s bank to remit the monies lying in her sole bank account towards recovery of the company’s outstanding tax dues. Consequently, the petitioner’s individual bank account was attached.

Aggrieved, the petitioner filed a writ petition before the Bombay High Court, contending that she had no involvement with the company. She was neither a director, shareholder, nor employee of the company and had never held any such position. It was further submitted that the attached bank account stood exclusively in her name and that the attachment was made solely on the ground that she was the wife of a director.

High Court Held

The High Court held that once it was admitted that the petitioner was neither a director nor otherwise connected with the company, the Department could not attach her sole bank account merely because she was the spouse of a director. Although the Department may proceed against the director under section 179 in appropriate cases, such provision was wholly inapplicable to the petitioner.

Accordingly, the notice issued under section 226(3) fastening the company’s liability upon the petitioner was without jurisdiction. The impugned notice was quashed, and the attachment was directed to be vacated. The writ petition was allowed in favour of the petitioner.

The post Director’s Spouse Bank Account Cannot Be Attached for Company Tax Dues | HC appeared first on Taxmann Blog.

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Case Details: Murali Pharmacy, In re - [2026] 183 taxmann.com 703 (AAR - TAMILNADU)

Judiciary and Counsel Details

• C. Thiyagarajan & B. Suseel Kumar, Member

Facts of the Case

The applicant, a proprietorship pharmacy under GST, sought clarity on GST liability. It submitted that it supplied medicines and medical items and continued registration after the threshold for goods was enhanced, claiming exemption. Prior to the application, the Department of Revenue initiated scrutiny of turnover reported in GSTR-1 and issued ASMT-10 seeking an explanation for non-payment of GST. The scrutiny concluded with DRC-07 orders confirming demands for all years. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the first proviso to Section 98(2) of the CGST Act, read with Section 97, bars admission of an application where the same question is pending or has already been adjudicated. It was observed that the scrutiny and assessment proceedings, which culminated in DRC-07 orders confirming GST demands, had already addressed the identical question of liability under the claimed threshold exemption. The AAR noted that, since the proceedings had commenced and were adjudicated before the filing of the advance ruling application, the application was not maintainable.

The post AAR Rejects GST Advance Ruling as Liability Already Adjudicated in Scrutiny appeared first on Taxmann Blog.

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Shruti Khanijow & Bhanu Upadhyay – [2026] 183 taxmann.com 725 (Article)

1. Introduction

The Hon’ble Supreme Court has ruled in favour of the tax authorities in the matter of Authority for Advance Rulings (Income-tax) v. Tiger Global International II Holdings, marking a fundamental shift in the taxing mechanism for cross-border transactions. For decades, the Mauritius Route was anchored by the belief that a Tax Residency Certificate (TRC) was a conclusive pass for obtaining tax benefits under the Double Tax Avoidance Agreement (DTAA) between India and Mauritius. This belief was largely built on precedents such as Union of India v. Azadi Bachao Andolan and Vodafone International Holdings BV v. Union of India, which prioritised legal form and investor certainty.

The core of the dispute lies in the Tiger Global’s 2018 exit from Flipkart Singapore. While the transaction happened offshore, the value was rooted in Indian territory. By upholding the Authority for Advance Ruling’s 2020 rejection of the tax-exemption claim, the apex Court has signalled that a TRC is no longer a veto against investigations into treaty abuse. The ruling clarifies that the Revenue can look behind the corporate veil if an entity appears to be a conduit lacking real commercial Nature or independent decision making.

The apex court also expounded on treatment of the General Anti-Avoidance Rule (GAAR) and its interplay with grandfathered investments. By interpreting Rule 10U(2) to apply to post-2017 arrangements regardless of when the initial investment was made, the judgment has opened a floodgate of risks for private equity and venture capital funds. In an era of global economic uncertainty, the Court has ultimately prioritised tax sovereignty, asserting India’s inherent right to tax income generated within its borders over its traditional reliance on strict treaty finality.

2. Factual Matrix

The issue in the current matter stems from a series of events that took place in the last decade. Between 2011 and 2015, three Mauritius-based entities, Tiger Global International II, III, and IV Holdings, acquired a significant stake in Flipkart Private Limited, a company incorporated under the laws of Singapore. In 2018, as part of a massive global M&A deal, Tiger Global transferred these shares to Fit Holdings S.A.R.L. (a Luxembourg based entity owned by the US Supermarket giant, Walmart) for a total consideration exceeding USD 2 billion.

Seeking to protect their gains, in 2020 the Tiger Global entities applied for a nil withholding tax certificate from Indian authorities. They argued that under the India-Mauritius DTAA, the capital gains accrued to them from the transfer and sale of shares to Fit Holdings, were exempt from Indian capital gains tax because the investments were made before April 1, 2017, and thus were grandfathered under the treaty’s 2016 Protocol. The Revenue Department, however, rejected this, contending that the Mauritius entities were mere conduits or shell companies lacking real economic substance. The tax authorities alleged that the ‘head and brain’ of these companies resided not in Mauritius but in the United States, specifically with Mr. Charles P. Coleman, who exercised ultimate control over bank accounts and major financial decisions. Unsatisfied with the AAR’s decision, Tiger Global filed writ petitions before the Hon’ble Delhi High Court, which initially turned the tide in their favor in August 2024. The Hon’ble High Court quashed the AAR’s order, holding that a TRC should be treated as conclusive evidence of residency and that the Mauritius based board exercised genuine decision-making authority, defying the head and brain argument of the Revenue department. It ruled that establishing investment vehicles in tax-friendly jurisdictions is a legitimate global practice and doesn’t automatically imply a sham transaction.

Aggrieved by this, the Revenue Department appealed against the Hon’ble High Court’s order, in the Supreme Court of India, which, in its judgment, reversed the previous relief-granting order of the Hon’ble Delhi High Court signifying India’s sovereign right to tax gains arising from its soil. The Apex Court upheld the AAR’s original refusal to grant a ruling, finding that the entire structure was prima facie designed for tax avoidance. The Court held that even if investments were made before 2017, the GAAR under Chapter XA of the Income Tax Act could be triggered if the arrangement itself lacked commercial substance and yielded a tax benefit after that date. The Apex Court further held that a TRC is an eligibility document but not a conclusive shield against investigation into actual control of the assessee.

3. Treaty in Question

The core of this dispute originates from the existence of a Double Tax Avoidance Agreement between India and Mauritius, signed in 1982. The DTAA is a bilateral agreement intended to prevent the same income from being taxed in two different jurisdictions, thereby facilitating mutual economic growth and trade. The Mauritius Route emerged as a dominant investment structure following India’s 1991 economic liberalisation and the enactment of the Mauritius Offshore Business Activities Act in 1992, which created a favourable environment for offshore investments. Central to this route was Article 13(4) of the original treaty, which before the 2016 amendment, stood as:

13(4). Gains derived by a resident of a Contracting State from the alienation of any property other than those mentioned in paragraphs (1), (2) and (3) of this article shall be taxable only in that State.

It provided that the capital gains derived by a resident from the alienation of a property, such as shares, would be taxable only in the state of residence, and because Mauritius does not tax capital gains under its domestic law, this provision often resulted in effective non-taxation in both India and Mauritius. For years, this allowed the investors to leverage Mauritius’s domestic tax exemptions to achieve effective non-taxation of capital gains in both the countries.

However, the positions changed when the 2016 Protocol shifted the taxing rights from a residence-based regime to a source-based regime. The protocol amended the DTAA and inserted a new provision as Article 13(3A), which granted India the right to tax gains from the sale of shares acquired on or after 01.04.2917. However, in order to provide safety and entrusting existing investors with security, the operation of Article 13(3A) was kept only to be prospective in nature and any investments made prior to 01.04.2017 were classified as Grandfathered, meaning that they remained exempt from Capital Gains Tax in India under the original Article 13(4), even if the actual transfer takes place after the cutoff date, i.e. 01.04.2017.

Furthermore, it inserted the Anti-abuse measures stipulated in the Limitation of Benefits (LOB) clause under Article 27A to prevent the instances of treaty shopping by shell or Conduit Companies and specifically denied treaty benefits to shell or conduit companies. A shell company is further defined as a legal entity with negligible business operations or no real and continuous business activities in the resident state. To identify a shell company, Article 27A provides an operational expenditure test:

A resident of a Contracting State is deemed to be a shell/conduit company if its expenditure on operations in that Contracting State is less than Mauritian Rs. 1,500,000 or Indian Rs. 2,700,000 in the respective Contracting State as the case may be, in the immediately preceding period of 12 months from the date the gains arise.

The DTAA is further read in conjunction with India’s income tax Act, 1961. Section 90 of the Income tax act, 1961 empowers the central govt. to enter into treaties to grant tax relief, and Section 90 (2A) provides for the GAAR under Chapter X-A, which can override treaty benefits if an arrangement is deemed as an impermissible avoidable arrangement. Rule 10U of the Income Tax rules, 1962 outlines the specific circumstances where GAAR shall not apply, including a provision for grandfathering investments made before April 1, 2017 and Section 9(1)(i), following its retrospective amendment, now includes Explanation 5, which codifies the ‘look-through’ principle for indirect transfers where shares of a foreign company derive substantial value from Indian assets.

Click Here To Read The Full Article

The post [Opinion] Sovereignty Over Sanctity | Reassessing the Tiger Global Ruling and Tax Sovereignty in India 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 Feb 23^rd  to Feb 28^th 2026, namely:

1. India–France Sign Protocol to Amend DTAA; Full Taxing Rights Over Capital Gains to Vest With Country of Residence
2. IBBI Amends CIRP Regulations; Substitutes ‘Fair Value’ Definition and Revises Valuation Process
3. Insurer Not Liable for Penalty Under Sec. 4A(3)(b) of Employees’ Compensation Act; Liability Rests Solely on Employer: SC
4. Taxpayers Can Utilise CGST or SGST ITC in Any Order for IGST Liability in GSTR-3B From Feb 2026: Advisory
5. GSTN Enables Facility for Withdrawal From Rule 14A (Simplified Registration Scheme): Advisory
6. GST Exemption Under Notification 12/2017 Not Available on University Affiliation Fees as Services Are Not Related to Admission or Examinations: HC
7. Applying the Portfolio Approach under Ind AS 115 — Practical Guidance with Illustrations and Collectability Insights

1. India–France Sign Protocol to Amend DTAA; Full Taxing Rights Over Capital Gains to Vest With Country of Residence

The Central Board of Direct Taxes (CBDT) has released a press release on the India-France Double Taxation Avoidance Convention (DTAC). During the recent visit of the President of France to India, the Government of the Republic of India and the Government of the French Republic signed a Protocol amending the India-France DTAC.

The Amending Protocol provides full taxing rights in respect of capital gains arising from the sale of shares in a company to the jurisdiction in which that company is a resident. The Amending Protocol also deletes the so-called Most-Favoured-Nation (MFN) Clause from the Protocol to the DTAC, thereby resolving all issues relating to it. The Amending Protocol also modifies the taxation of dividends by replacing a single 10% tax rate with a split rate of 5% for those holding at least 10% of capital and 15% for all other cases.

It also modifies the definition of ‘Fees for Technical Services’ to align it with the definition in the India-US Double Taxation Avoidance Agreement. It expands the scope of ‘Permanent Establishment’ by adding Service PE.

The Amending Protocol also updates the provisions on Exchange of Information and introduces a new Article on Assistance in the Collection of Taxes, in line with international standards. This would enable and facilitate the seamless exchange of information and strengthen mutual tax cooperation between India and France.

The Amending Protocol also incorporates within the DTAC, the applicable provisions of the BEPS Multilateral Instrument (MLI), which had already become applicable consequent to the signing and ratification of MLI by India and France.

Read the Press Release

2. IBBI Amends CIRP Regulations; Substitutes ‘Fair Value’ Definition and Revises Valuation Process

On February 25, 2026, the IBBI notified the IBBI (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2026. These amendments represent a significant step forward in addressing longstanding challenges within the CIRP, particularly in the areas of asset valuation, professional accountability, stakeholder protection and transparency in information disclosure. The amendments substitute the definition of ‘fair value’ under Regulation 2(hb) and revise the manner of determination of fair value and liquidation value. They also provide for the treatment of allottees who have not filed claims in respect of real estate projects.

The IBBI’s key amendments are as follows:

(a) Protection of allottees’ interests in real estate projects

Earlier, there was no specific statutory mechanism under the IBC to safeguard the interests of allottees who had not filed their claims. While such allottees could invoke Section 60(5) of the Code to approach the Adjudicating Authority in relation to claims arising out of the insolvency resolution process, their inclusion in the resolution framework was not expressly guaranteed under the regulations.

The amendments now introduce specific provisions addressing the treatment of allottees in real estate projects via the insertion of new Regulation 38A and enhanced disclosure requirements under Regulation 36(2)(ja).

Regulation 38A specifies mandatory treatment for allottees who have not filed their claims. It states that, in respect of a real estate project where the information memorandum includes the details of allottees who have not submitted their claims, the resolution plan must provide for the treatment of such allottees.

This protection mechanism acknowledges that individual homebuyers may not have timely knowledge of insolvency proceedings or may lack the resources to engage professional assistance for claim preparation and submission.

Further, the disclosure requirements under Regulation 36(2)(ja) mandate the inclusion of all allottee details, including their names, amounts due, and units allotted, whose claims are either reflecting in the books of accounts of the corporate debtor or in the records of the Real Estate Regulatory Authority, but who have not submitted their claims to resolution professionals.

This requirement ensures that resolution plans address the interests of allottees in a transparent and structured manner, thereby strengthening stakeholder protection and reducing the risk of their exclusion from the resolution process.

(b) Substitution of the definition of ‘fair value’

The amendment substitutes the definition of ‘fair value’ under Regulation 2(1)(hb). The amended definition establishes fair value as the estimated realizable value of the corporate debtor or the assets of the corporate debtor, as the case may be, if they were to be exchanged on the insolvency commencement date between a willing buyer and willing seller in an arm’s length transaction, after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion.

The amendment expands the scope of valuation from only the assets of the corporate debtor to the corporate debtor as a whole, thereby enabling enterprise-level valuation in addition to asset-level assessment.

(c) Revision in the manner of determination of ‘fair value’ and ‘liquidation value’

The fair value and liquidation value must be determined in the following manner:

• Each set of registered valuers must comprise one registered valuer for each asset class of the corporate debtor, with one designated as the coordinating valuer for fair value computation.
• The resolution professional must facilitate a meeting where the registered valuers, including coordinating valuers, explain the methodology adopted to arrive at the valuation to the members of the committee, before the computation of estimates.
• Each registered valuer must, after physical verification of the inventory and fixed assets of the corporate debtor, submit to the resolution professional and the coordinating valuer a report on the fair value of the assets of the corporate debtor and the liquidation value computed in accordance with the valuation standards notified by the Board.
• The coordinating valuer must compute the fair value of the corporate debtor after considering the fair value of assets as computed by registered valuers within that set and submit the same to the resolution professional.
• The resolution professional may appoint a third set of registered valuers where the estimates of fair value or liquidation value are ‘significantly different’ (i.e. a difference of 25% or more in the fair value of the corporate debtor submitted by the coordinating valuer or in the liquidation value)

(d) Establishment of documentation requirements for registered valuers

The introduction of Regulation 35(1A) establishes comprehensive documentation requirements for registered valuers. It mandates the preparation of valuation reports and the maintenance of supporting documentation in the formats notified by the Board through circulars. This initiative addresses previous inconsistencies in valuation reporting and creates uniform benchmarks for professional documentation across all insolvency proceedings.

(e) Enhanced Information Disclosure Requirements

The amendments substantially expand information disclosure requirements under Regulation 36, introducing new categories of information to be included in the Information Memorandum. The inclusion of detailed receivables, including trade receivables, inter-corporate receivables, and receivables arising under any contract, provides stakeholders with clearer pictures of the corporate debtors’ working capital position.

The requirement to disclose joint development agreements and other similar collaboration or co-development arrangements, including the rights, obligations, and interests of the corporate debtor, addresses information gaps relating to contractual and contingent business arrangements.

Additionally, the mandatory disclosure of assets under attachment by enforcement agencies, including particulars of the assets attached, the authority that has ordered the attachment, and the status of such proceedings, provides greater transparency regarding legal encumbrances affecting the corporate debtor’s asset base.

Read the Notification

3. Insurer Not Liable for Penalty Under Sec. 4A(3)(b) of Employees’ Compensation Act; Liability Rests Solely on Employer: SC

The Supreme Court, in the matter of New India Assurance Co. Ltd. vs. Rekha Chaudhary [2026] 183 taxmann.com 680 (SC), ruled that the liability to pay penalty under Section 4A(3)(b) of the Employees’ Compensation Act rests solely on the employer and cannot be fastened upon the insurer.

3.1 Brief Facts of the Case

In the instant case, the deceased employee was a commercial driver employed by respondent no. 4 (employer). The deceased collapsed and died while driving the employer’s insured vehicle. Respondents 1-3, legal heirs of the deceased, filed a claim petition before the Commissioner under the Employees’ Compensation Act, 1923.

The Commissioner found an employer-employee relationship, held that death occurred during and in the course of employment, and fixed compensation at about Rs. 7.37 lakhs along with 12% interest from the date of the incident.

Observing that the vehicle was covered by a valid commercial vehicle insurance policy issued by the appellant-insurance company, the Commissioner allowed respondent no. 4 to secure indemnification of the compensation from the insurer and issued a show-cause notice to respondent no. 4 proposing penalty under Section 4A(3)(b) of the Act, for default in payment within one month of the amount falling due.

As the employer neither appeared nor replied, the Commissioner imposed a 35% penalty, about Rs. 2.58 lakhs, on the employer for the delay without justification.

The claimants appealed to the High Court, seeking an enhancement of compensation and challenging the fixation of primary liability on the employer rather than on the insurer. The High Court declined enhancement, however, set aside the Commissioner’s orders to the extent they placed primary liability on the employer, and fastened liability for compensation, interest and penalty on the appellant–insurer.

Thereafter, an appeal was made before the Supreme Court. On appeal, the appellant–insurer accepted liability for compensation and interest but challenged only the direction to pay the statutory penalty under Section 4A(3)(b) of the Act.

3.2 Supreme Court Observations

It was noted that the appellant had undeniably admitted its liability to pay the compensation and interest component under Section 4A(3)(b) of the Act, which is to the tune of Rs. 7,36,680/- with 12% p.a. simple interest from the date of death till payment, and there is no dispute on the same. Therefore, the scope of the present appeal was confined to determining the liability for paying the penalty component under Section 4A(3)(b) of the Act.

Further, the present form of Section 4A(3)(b) is the result of a substitution brought into the principal section by way of the Workmen’s Compensation (Amendment) Act, 1995, which came into force on 15th September 1995.

After the substitution of Section 4A, the three components have been severed to form part of two different clauses within the same sub-section (3), i.e., clause (a) including compensation and interest, and clause (b) solely including the penalty.

The legislative intent behind severing the penalty component was to ease the burden on indemnifiers who were otherwise obliged to pay a penalty arising from the employer’s personal default to pay compensation within one month from the date it fell due, a burden not consequent to any failure on the part of the indemnifier. Earlier, the penalty formed part of the compensation and interest; therefore, the indemnifier was compelled to pay the penalty as well, leaving no deterrent for employers to deposit compensation within one month.

3.3 Supreme Court Ruling

The Supreme Court held that the submission that the insurance policy covered all components, including penalty, cannot be accepted for two reasons. First, the respondent has not produced the extant insurance policy in effect at the time of the incident. Second, more significantly, Section 4A(3) of the Act statutorily obligates the employer to pay compensation determined under Section 4 within one month from the date it fell due.

Further, when the statute itself obligates the employer to make the payment within one month, such obligation cannot be subordinated to any contractual obligation, as that would disregard legislative intent.

Therefore, the High Court erred in directing the appellant-insurer to bear a penalty in addition to compensation and interest. Thus, the impugned order was to be set aside to the extent it imposed liability to pay a penalty on the appellant-insurer, and that liability was to be fastened upon the employer.

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4. Taxpayers Can Utilise CGST or SGST ITC in Any Order for IGST Liability in GSTR-3B From Feb 2026: Advisory

The GSTN has issued an advisory allowing taxpayers to utilise CGST or SGST ITC in any order for payment of IGST liability in GSTR-3B after exhausting IGST ITC. It clarifies operational implementation and refers to the earlier advisory, with the functionality applicable from the February 2026 return period. This was stated in GSTN Advisory, Dated 19-02-2026.

4.1 About the Update

The GSTN issued an advisory clarifying the utilization of Input Tax Credit (ITC) for payment of IGST liability in GSTR-3B. Taxpayers are allowed apply CGST or SGST ITC in any order for discharging IGST liability after complete exhaustion of IGST ITC.

The advisory refers to point 3 of the earlier advisory dated 30-01-2026 and is intended to provide operational. It further specifies that this functionality will be effective from the February 2026 return period.

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5. GSTN Enables Facility for Withdrawal From Rule 14A (Simplified Registration Scheme): Advisory

The GSTN has issued an advisory enabling an online facility for withdrawal from Rule 14A (Simplified Registration Scheme) through filing Form GST REG-32 on the GST Portal. It prescribes submission timelines, authentication requirements, and restrictions during processing of the application and post-approval compliance through Form GST REG-33. This was stated in GSTN Advisory, Dated 21-02-2026.

5.1 About the Update

The GSTN has introduced an online facility for taxpayers registered under Rule 14A of the CGST Rules to apply for withdrawal from the simplified registration scheme by filing Form GST REG-32 on the GST Portal. Draft applications must be submitted within 15 days, and Aadhaar or biometric authentication of the Primary Authorised Signatory and at least one Promoter/Partner (if applicable) is required.

During the processing of Form GST REG-32, taxpayers cannot file core or non-core amendments or self-cancellation applications. After approval through Form GST REG-33, taxpayers are required to report output tax liability exceeding Rs. 2.5 lakhs on supplies to registered persons from the first day of the succeeding month.

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6. GST Exemption Under Notification 12/2017 Not Available on University Affiliation Fees as Services Are Not Related to Admission or Examinations: HC

The High Court held that the GST exemption under Notification 12/2017 was not available on university affiliation fees, as such services were not related to the admission of students or the conduct of examinations. It held that affiliation services fall outside the scope of the exemption. This was held in Bharathidasan University vs. Joint Commissioner of GST (ST-Intelligence) [2026].

6.1 Facts

The petitioner filed a writ petition challenging the applicability of GST on affiliation fees received from affiliated colleges. It was submitted that the fees were exempt under Notification No. 12/2017, as services relating to student admission or conduct of examinations. The respondents, including the Joint Commissioner of GST contended that affiliation fees were not services provided to students for admission or for conducting examinations, and accordingly issued intimations of liability with interest and penalty. The petitioner relied on its claim that affiliation was essential for colleges to admit students. The matter was accordingly placed before the High Court.

6.2 Held

The High Court held that the affiliation fees collected by the university did not constitute services relating to the admission of students or the conduct of examinations, and were therefore not eligible for exemption under Notification No. 12/2017, dated 28-6-2017. The Court observed that while affiliation was a prerequisite for colleges to admit students, it fell outside the definition of services directly relating to admission or examination conduct, which formed the limited scope of the exemption. Relying on Section 11, read with Section 9, of the CGST Act and Tamil Nadu GST Act. The Court dismissed the petition, and upheld the university’s liability to pay GST on affiliation fees.

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7. Applying the Portfolio Approach under Ind AS 115 — Practical Guidance with Illustrations and Collectability Insights

Revenue recognition significantly impacts an entity’s financial performance, and Ind AS 115 establishes a principle-based framework requiring revenue to be recognised when control of goods or services transfers to customers. While the standard is designed for individual contracts, businesses dealing with large volumes of similar transactions often face practical implementation challenges. To address this, Ind AS 115 permits the portfolio approach as a practical expedient.

Under the portfolio approach, entities may apply the revenue recognition model to a group of contracts or performance obligations with similar characteristics instead of accounting for each contract separately, provided the outcome is not materially different from individual contract accounting. Although individual contract accounting remains the default rule, portfolio accounting is allowed based on reasonable judgment supported by appropriate estimates, assumptions, and documentation.

When forming portfolios, entities consider factors such as customer type, pricing structure, nature and timing of services, contract duration, and historical behavioural patterns like renewals or cancellations. The approach is particularly useful in high-volume environments such as subscription services, financial products, or standardised customer arrangements, where operational efficiency can be achieved without compromising financial reporting reliability.

Importantly, the portfolio approach can be applied selectively, for example, in amortising contract acquisition costs, assessing contract assets, or performing impairment evaluations rather than across the entire revenue model.

Regarding collectability, Ind AS 115 still requires assessment at contract inception; however, entities may rely on historical portfolio-level data to support their judgment. If collection is probable, revenue is recognised in full and expected defaults are treated separately under credit loss provisions. Conversely, where historical patterns indicate inability or unwillingness to pay, revenue recognition may be restricted.

In essence, the portfolio approach balances conceptual accuracy with operational practicality. It enables efficient accounting for high-volume, similar contracts while ensuring that financial statements continue to faithfully represent the economic substance of transactions through sound judgment and consistent application.

Let us understand the portfolio approach through an example of “Digital Subscription Business”.

A streaming platform provides monthly subscription services to millions of users who pay a fixed fee for identical access to content. Analysing each subscription individually would be operationally impractical. Instead, the company groups customers into portfolios based on subscription tiers and billing cycles. Using historical data on renewals, cancellations, and refunds, the entity recognises revenue at the portfolio level. Because customer behaviour is highly consistent, the results closely approximate individual contract accounting while significantly reducing complexity.

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The post Weekly Round-up on Tax and Corporate Laws | 23rd to 28th February 2026 appeared first on Taxmann Blog.

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CS Neha Sharma – [2026] 184 taxmann.com 1 (Article)

Introduction

Every business has a life cycle. There are periods of growth and stability, but there may also be phases of financial strain. A company that has been operating successfully for years but suddenly faces financial pressure due to market changes and rising competition. To avoid collapse, it negotiates with its creditors and agrees on revised repayment terms. This mutual settlement is known as a compromise.

At the same time, a company may also require to restructure internal capital reorganisation without involving another company. For example, a company may decide to convert its preference shares into equity shares, or consolidate multiple classes of shares into a single class or rearrange voting rights among different classes of shareholders to better reflect commercial realities.

Additionally, two companies may combine their assets and operations to function as a single entity for better growth, resulting in an arrangement or amalgamation.

To regulate such restructuring, the Companies Act, 2013 under Sections 230–240, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, provides a formal and binding legal framework that ensures transparency, fairness and protection of stakeholder interests.

1. Legal Background and Framework

Corporate restructuring was earlier governed by Sections 391 to 394 of the Companies Act, 1956, under the supervision of the High Courts. With the enactment of the Companies Act, 2013, jurisdiction shifted to the NCLT, creating a specialised forum for corporate matters.

Sections 230 to 240 of the Companies Act, 2013, read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, now govern the entire process. The law ensures that any restructuring is approved by the required majority of members and creditors and is scrutinised by the Tribunal to confirm fairness and legality.

2. Understanding the Core Concepts of Compromise, Arrangement and Amalgamation

A compromise involves the settlement of a dispute between a company and its creditors or members through mutual concessions. It is typically used in situations of financial stress.

An arrangement is broader and may involve restructuring of share capital, reclassification of shares, or internal reorganization without necessarily having a dispute.

A merger or amalgamation involves combination of two or more companies into one entity. Assets and liabilities of the transferor company are transferred to the transferee company, and shareholders of the transferor become shareholders in the transferee company.

The Supreme Court in Saraswati Industrial Syndicate Ltd. v. CIT observed that reorganisation of shareholders’ rights may amount to arrangement or reconstruction depending upon the scheme’s structure. Similarly, in Singer India Ltd. v. Chander Mohan Chadha, the Court clarified that amalgamation involves genuine blending of undertakings and not merely acquisition of shares.

2.1 Meaning of Compromise

Compromise means an amicable settlement of a dispute by mutual adjustments and concessions. Thus, in a Compromise, each party has to yield and make concessions.

2.2 Meaning of Arrangement

An arrangement does not require the existence of a dispute, but it involves modification or readjustment of rights of members or creditors, including any class of them. The term is broad and covers various forms of corporate restructuring.

An Arrangement is a broader term that includes a reorganisation of the company’s share capital by consolidating shares of different classes, dividing shares into different classes, or by both methods.

Where only one company is involved in a change and the rights of the shareholders and creditors are varied, it amounts to reconstruction, reorganisation, scheme or arrangement. – Saraswati Industrial Syndicate Ltd. v. CIT AIR 1991 SC 70 = 186 ITR 278 = 53 Taxman 92 = 70 Comp Cas 184 = 1990 (Supp) SCC 675 (SC 3 member)

Generally, where only one company is involved in a change and the rights of the shareholders and creditors are varied, it amounts to reconstruction, reorganisation, scheme or arrangement. – Saraswati Industrial Syndicate Ltd. v. CIT AIR 1991 SC 70 = 186 ITR 278 = 53 Taxman 92 = 70 Comp Cas 184 = 1990 (Supp) SCC 675

2.3 Meaning of Amalgamation

Amalgamation is the blending of two or more existing undertakings into one undertaking, the shareholders of each blending company becoming substantially the shareholders in the company that is to carry on the blended undertakings.

There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company.

Strictly, ‘amalgamation’ does not, it seems, cover the mere acquisition by a company of the share capital of other companies which remain in existence and continue their undertakings, but the context to which the term is used Halsbury’s Laws of England- quoted in Singer India v. Chander Mohan Chadha 2004 AIR SCW 5039 = AIR 2004 SC 4368 (SC 3 member bench).

2.3.1 Definition of Amalgamation

“Amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that:

(i) all the property of the amalgamating company or compa­nies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation;

(ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgama­tion;

(iii) shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,

Otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first-mentioned company.

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