This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Mar 09th to Mar 14th 2026, namely:
- CBDT Conducts a Nationwide Verification Exercise on Restaurants Suppressing Turnover
- Rejection of Section 197 Nil-TDS Certificate Citing Proposed SLP Against Binding HC Ruling Held Unsustainable: HC
- SEBI Proposes Simplified Documentation and Higher Thresholds for the Transmission of Securities to Ease Investor Claims
- Maternity Leave During Bond Service Cannot Be Treated as Break in Service or Penalised, as It Is a Fundamental Right Under Article 21: HC
- Renting Residential Dwelling to Educational Body for Student/Staff Accommodation Not Eligible to GST: HC
- As ITC-to-Turnover Ratio Decreased Post-GST, No Additional ITC Benefit Accrued; Anti-Profiteering Allegation Rejected: GSTAT
- MCA Introduces Amendments to AS 22 in Line with the OECD Pillar Two Tax Framework
- Recognition and Depreciation of Standby Assets under Ind AS Framework
1. CBDT Conducts a Nationwide Verification Exercise on Restaurants Suppressing Turnover
The Income Tax Department recently conducted a nationwide verification exercise to detect tax evasion by restaurants. The Department used AI-enabled analytical tools to conduct advanced analytics of transactional data from approximately 1.77 lakh restaurants in the F&B sector.
The data was then compared with the turnover declared in the Income Tax Returns. The analysis revealed large-scale under-reporting of income.
During the exercise, it was found that several restaurants were engaged in deleting bulk bills and other modifications to suppress actual sales. Consequently, a nationwide survey was conducted on 62 restaurants across 46 cities in 22 States. On a preliminary basis, the exercise revealed suppression of sales amounting to around Rs. 408 Crores.
In this regard, the Department has commenced the SAKSHAM NUDGE campaign to guide and advise taxpayers to correct their mistakes. Taxpayers are encouraged to file updated returns under Section 139(8A) of the Income Tax Act. In the first phase, emails and messages will be sent to the 63,000 identified restaurants, requesting that they update their returns before March 31st 2026.
2. Rejection of Section 197 Nil-TDS Certificate Citing Proposed SLP Against Binding HC Ruling Held Unsustainable: HC
The petitioner was engaged in the business of providing domain name services, including domain name registration, web hosting, web designing, SSL certification, etc. It filed an application under section 197 for a certificate of nil rate of tax for the assessment year 2026-27.
The Competent Authority (CA) rejected the petitioner’s application under section 197. The rejection was based on the ground that the Department proposed to file an SLP against an earlier Delhi High Court judgment, which had already held that domain registration charges were not taxable in India under the Act read with the India-USA DTAA.
Aggrieved by the order, the petitioner filed a writ petition to the Delhi High Court.
The High Court held that the CA had an obligation to decide the application in accordance with the Act’s provisions, while taking into account the treaties between the two countries. He should not be driven or swayed by revenue targets or considerations. However, the CA rejected the application only because the Department proposed to file an SLP against an earlier High Court judgment. No other reason was mentioned in the order.
The Court held that the reason mentioned by the CA cannot be said to be a reason in the eyes of the law, much less a plausible or sustainable one. The mindset of the authority, for whom revenue collection appears to be the sole objective, was unraveled by the order.
Since no reason was assigned other than the bald assertion that the Department was proposing to file an SLP against the order of the High Court, and the limitation of filing an SLP had passed, the impugned order could not be sustained. Thus, the impugned order and consequential certificate were quashed, and the authority was directed to issue a certificate at a ‘nil’ rate.
3. SEBI Proposes Simplified Documentation and Higher Thresholds for the Transmission of Securities to Ease Investor Claims
The Securities and Exchange Board of India (SEBI), vide. Consultation Paper dated March 12, 2026, has proposed simplification of documentation requirements for transmission of securities and revision of threshold limits for simplified documentation.
The proposal seeks to streamline the process for the transmission of securities after the death of an investor and to standardise the practices adopted by listed companies, registrars to an issue and share transfer agents (RTAs), depositories and depository participants while processing such claims. The proposed framework aims to enhance ease of investing by reducing procedural delays and bringing uniformity in the documentation requirements across intermediaries.
3.1 Background and Existing Framework
At present, the procedural requirements for transmission of securities are prescribed under Schedule VII of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) and under the SEBI Master Circular for Registrars to an Issue and Share Transfer Agents dated February 06, 2026. These provisions prescribe the documentation requirements and processes to be followed while processing transmission requests.
The SEBI has consistently encouraged investors to register nominations in their securities holdings. Where a nomination has been registered, transmission of securities to the nominee can be processed with minimal documentation and in a relatively shorter time.
However, in cases where nomination has not been registered, simplified documentation is currently permitted only up to specified threshold limits. At present, simplified documentation is allowed up to Rs. 5 lakh per listed entity for securities held in physical form and up to Rs. 15 lakh per beneficial owner for securities held in dematerialised form. Claims exceeding these limits require standard documentation, such as succession certificates, probate of a will, or letters of administration.
3.2 Issues Identified in the Existing Transmission Process
The SEBI has observed that investors and legal heirs often face difficulties in claiming transmission of securities due to documentation complexities and procedural delays. Stakeholders have highlighted issues such as ambiguity regarding the authority competent to issue legal heirship certificates, the time-consuming process of obtaining probate of wills or succession certificates, and divergent practices followed by intermediaries while processing transmission requests.
In certain cases, intermediaries insist on probated wills or additional documentation even in jurisdictions where probate may not be legally mandatory, thereby increasing the compliance burden on claimants. These practices create uncertainty and prolong the settlement of claims for the legal heirs of deceased investors.
3.3 Revision of Threshold Limits and Introduction of Straight-Through Processing
In order to facilitate quicker settlement of small-value claims, the SEBI has proposed introducing a Straight-Through Processing (STP) mechanism for low-value cases. Under this mechanism, claims below specified thresholds may be processed with minimal documentation requirements.
The SEBI has also proposed revisions to the threshold limits for simplified documentation in view of the growth in capital markets and the increase in the value of securities holdings.
Under the proposed framework, straight-through processing is proposed for claims up to Rs. 10,000 for securities held in physical form and Rs. 30,000 for securities held in dematerialised form. Further, the threshold for simplified documentation is proposed to be increased from Rs. 5 lakh to Rs. 10 lakh for securities held in physical mode, and from Rs. 15 lakh to Rs. 30 lakh for securities held in dematerialised mode. These revisions are expected to ease the claims process for a large number of investors and their legal heirs.
3.4 Standardisation of Documentation and Procedure
The consultation paper also proposes standardisation of documentation requirements across different scenarios for the transmission of securities. Where nomination has been registered, the nominee would be required to submit basic documents such as a transmission request form, client master list of the demat account, verifiable death certificate and officially valid identity proof.
In cases where there is no nomination or will, the proposed framework adopts a risk-based approach. Claims falling within the simplified thresholds would require limited documentation, such as indemnity bonds and no-objection certificates from legal heirs, while higher-value claims may require legal heirship certificates, affidavits or other legal documents.
The SEBI has also proposed standardised procedures for submission and acknowledgement of claims and has suggested that entities may provide online facilities for submission and tracking of transmission requests. Further, it has been proposed that intermediaries process transmission claims within 21 calendar days from the date of receipt of all required documents.
3.5 Conclusion
The proposed framework aims to simplify the transmission process and reduce the procedural burden faced by legal heirs and claimants. By revising threshold limits, introducing straight-through processing for small value claims and standardising documentation requirements, the SEBI seeks to improve efficiency and provide greater clarity in the settlement of transmission requests. Public comments on the consultation paper have been invited until April 02, 2026.
4. Maternity Leave During Bond Service Cannot Be Treated as Break in Service or Penalised, as It Is a Fundamental Right Under Article 21: HC
The High Court, in the matter of Dr. Meenakshi Muthiah vs. State of Maharashtra [2026] 184 taxmann.com 160 (HC), ruled that maternity leave during the bond service cannot be treated as a break in service or be penalised by treating it as non-duty or denying salary, as it is a fundamental right under Article 21 of the Constitution of India.
4.1 Brief Facts of the Case
In the instant case, the petitioner, a dentist, completed BDS and an internship, and then an MDS in Conservative Dentistry & Endodontics in 2023. Under the Government’s Social Responsibility Service (bond service), respondent No.2 (i.e. Director of Medical Education and Research) recommended her for appointment as an Assistant Professor (Conservative Dentistry) at respondent No.3 College for a bond period of 365 days. She joined in mid-December 2023, and her bond period was calculated up to mid-December 2024.
In March 2024, she discovered that she was pregnant and applied for maternity leave from May to September 2024. She delivered her child in mid-June 2024. After leaving in October 2024, she requested to complete the bond up to mid-December 2024 and stated that she had not received any salary during the leave period.
On 18 December 2024, the Director, Medical Education and Research, informed respondent No. 3 that the petitioner would be required to complete the 5-month period spent on maternity leave to receive the bond completion certificate, failing which a penalty of about Rs. 22.95 lakhs would be imposed.
Subsequently, a calculation sheet was then used to determine the penalty at about Rs. 23.58 lakhs, and on 6 January 2025, respondent No. 3 directed the petitioner to pay the said penalty for failure to complete the bond. This order was challenged in the present writ petition before the High Court.
4.2 High Court Observations
The High Court observed that maternity leave does not constitute a break in service, and a bond cannot be used to penalise a woman for exercising her right to motherhood. Further, no bond can override the right to maternity leave, which is a facet of a fundamental right guaranteed under Article 21 of the Constitution of India.
Any contract, agreement or bond that penalises a woman for taking maternity leave or tries to deny her this right to that extent is found inconsistent according to Section 27 of the Maternity Benefit Act, 1961.
Further, the High Court observed that the petitioner could not be denied this right only because she executed the bond under the Social Responsibility Service Scheme and did not hold permanent status, as she was also entitled to the same protective umbrella as available to regular employees when it comes to maternity-related entitlement.
4.3 High Court Ruling
The High Court held that the maternity leave allows the working women to take time from her job, give birth, recover and care for the new born child without fear of losing her employment. This right is essential for safeguarding the health, dignity and economic security of mothers and their children. Therefore, the right to maternity leave is not just a workplace benefit, a necessary protection that promises health, equality and social progress.
Thus, it is a bounden duty of the employer to be sensitive and responsive to the physical difficulties that she would face in performing her duties at the workplace while bringing up the child after birth.
The respondent No. 2, being Director of Medical Education and Research, was expected to be more sensitive in such matters, as the respondent No. 2 can very well understand the importance of the care to be taken by the mother of herself and the child before and after the birth of the child. However, the impugned action of the respondent Nos. 2 and 3 tantamounts to taking away the dignity of the petitioner by penalising her contrary to the safeguards provided to her relating to the maternity rights.
Further, the High Court held that the period during which the petitioner was on maternity leave needs to be considered as a duty period and the petitioner was entitled to receive salary for that period. Excluding the maternity leave period, the petitioner had shown readiness and willingness to complete her bond period as an Assistant Professor. Therefore, the same was to be permitted if there was no legal impediment.
5. Renting Residential Dwelling to Educational Body for Student/Staff Accommodation Not Eligible to GST: HC
The High Court held that renting of residential dwelling to an educational institution for accommodation of students, staff, and teachers qualifies as residential use and is not exigible to GST. It held that hostel accommodation falls within ‘residential dwelling used as residence’ under Entry 13 of Notification No. 9/2017-Integrated Tax (Rate).
5.1 Facts
The petitioner had leased a residential property to an educational foundation for use as accommodation for students, staff and teachers. It had paid GST on the rent received and subsequently claimed refund on the ground that the transaction was exempt under Entry 13 of ‘Notification No. 9/2017-Integrated Tax (Rate), dated 28-06-2017,’ which provides exemption for renting of residential dwelling for use as residence. During audit proceedings, the exemption was initially accepted; however, it was subsequently reversed and the refund claim was denied. The Petitioner’s objections and appeal were rejected, leading to the filing of a writ petition before the High Court.
5.2 Held
The High Court held that Entry 13 of Notification No. 9/2017-Integrated Tax (Rate), dated 28-06-2017, issued under Section 6 of the IGST Act, exempts the renting of residential dwelling when used as residence. The Court observed that the term ‘residential dwelling’ refers to residential accommodation and is distinct from commercial establishments such as hotels. It further held that the use of such premises as hostel accommodation for students, staff or teachers constitutes residential use. Accordingly, leasing such residential premises was not exigible to GST and the impugned order denying refund was set aside.
6. As ITC-to-Turnover Ratio Decreased Post-GST, No Additional ITC Benefit Accrued; Anti-Profiteering Allegation Rejected: GSTAT
The GSTAT held that where the ITC-to-turnover ratio decreased in the post-GST period, no additional ITC benefit accrued to the developer and no anti-profiteering liability arose. It accepted the DGAP report concluding that the post-GST credit ratio had declined and no benefit was required to be passed on under section 171.
6.1 Facts
The applicant, a homebuyer, submitted that the developer failed to pass on the benefit of additional input tax credit (ITC) in respect of construction services supplied. The Directorate General of Anti-Profiteering (DGAP) conducted a re-investigation and observed that the credit-to-purchase ratio for the respondent was 7.09 percent in the pre-GST period and 6.44 percent in the post-GST period, indicating a decrease of 0.65 percent. It concluded that no additional ITC benefit had accrued to the respondent, and the applicant contended that the benefit should be passed on. The matter was accordingly placed before the Goods and Services Tax Appellate Authority (GSTAT).
6.2 Held
The GSTAT held that since the credit-to-purchase ratio had decreased in the post-GST period, no additional ITC benefit had accrued to the respondent and, therefore, no benefit was required to be passed on to the applicant. It was noted that the DGAP report had correctly applied the methodology to assess the ITC benefit, with no errors in calculation or approach. The report was accepted, recording no contravention of Section 171 of the CGST Act and the Delhi GST Act, and the applicant’s contentions were rejected, upholding the respondent’s compliance with anti-profiteering provisions.
7. MCA Introduces Amendments to AS 22 in Line with the OECD Pillar Two Tax Framework
The Ministry of Corporate Affairs (MCA), vide Notification G.S.R. 169(E) dated 10 March 2026, has amended the Companies (Accounting Standards) Rules, 2021 to incorporate provisions relating to the OECD’s Pillar Two global minimum tax framework in Accounting Standard (AS) 22 , Accounting for Taxes on Income.
A new paragraph 2A has been inserted to clarify that the standard applies to taxes arising from tax laws enacted to implement the Pillar Two model rules, including qualified domestic minimum top-up taxes. The amendment provides a specific exception whereby enterprises are not required to recognise or disclose deferred tax assets and liabilities related to Pillar Two income taxes. In addition, new disclosure requirements have been introduced requiring enterprises to disclose that the exception has been applied and to present separately the current tax expense or income relating to Pillar Two income taxes.
Where Pillar Two legislation has been enacted or substantively enacted but is not yet effective, enterprises are required to disclose known or reasonably estimable information that helps users understand the entity’s exposure to such taxes, including qualitative and quantitative information where available. Small and Medium-sized Companies are exempt from the detailed exposure disclosure requirements. The exception relating to deferred tax recognition is to be applied immediately and retrospectively, while the disclosure requirements relating to Pillar Two income taxes apply for annual reporting periods beginning on or after 1 April 2025, with no requirement to provide such disclosures for interim periods ending on or before 31 March 2026.
8. Recognition and Depreciation of Standby Assets under Ind AS Framework
In capital-intensive manufacturing operations, entities often install standby equipment to ensure continuity of critical processes. A common accounting question arises regarding the treatment of such equipment when it is expected to remain idle for most of its life and be used only in exceptional circumstances. Specifically, the issue is whether the cost of standby equipment should be recognised as Property, Plant and Equipment (PPE) and depreciated under Ind AS 16, Property, Plant and Equipment, even when its actual usage is infrequent.
Consider a situation where a manufacturing entity operating a large metal processing facility is highly dependent on a continuous and stable electricity supply. To meet its energy requirements, the entity operates a primary generator that supplies electricity for daily production activities. Given that any interruption in power could halt production and lead to significant financial losses, the entity also installs a backup generator within its premises. This generator is intended to operate only when the primary generator fails, undergoes repairs, or is taken offline for maintenance. Under normal conditions, the standby generator is expected to remain idle for most of the time, though management considers it essential to ensure operational continuity.
Under Ind AS 16, an item of property, plant and equipment is recognised as an asset when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. The standard further clarifies that spare parts, standby equipment and servicing equipment are recognised as PPE when they meet this definition and are expected to be used during more than one accounting period. In the present scenario, the backup generator forms an integral part of the power generation system supporting the production process and is expected to provide economic benefits by preventing operational disruptions. Although it may be used only occasionally, it constitutes major standby equipment that enables the entity to maintain uninterrupted operations. Therefore, it satisfies the recognition criteria for PPE and should not be classified as inventory.
Once the standby generator is installed and ready to operate as a backup power source, it is considered available for use in the manner intended by management. Ind AS 16 requires depreciation of an asset to commence when the asset is available for use, that is, when it is in the location and condition necessary for it to operate as intended. Importantly, the standard also states that depreciation does not cease merely because the asset becomes idle or is not actively used during a period. Consequently, the fact that the backup generator may remain unused for extended periods does not defer the commencement of depreciation.
Accordingly, the standby generator should be recognised as Property, Plant and Equipment and depreciated from the date it becomes available for use, i.e., when it is installed and ready to function as a backup unit within the power system. The infrequent use of the generator does not alter its classification or the requirement to depreciate it, since its economic benefit lies in ensuring operational reliability rather than in continuous operation.
The post Weekly Round-up on Tax and Corporate Laws | 9th to 14th March 2026 appeared first on Taxmann Blog.
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