Author: inavatiq

Bill No. 39; Dated: 19.12.2025

1. Legislative Update

The Haryana Legislative Assembly has passed the Haryana Shops and Commercial Establishments (Amendment) Bill, 2025, amending the Haryana Shops and Commercial Establishments Act, 1958.

The amendments introduce significant changes relating to working hours, overtime, registration requirements, and employer obligations, with the stated objective of improving operational flexibility while retaining statutory safeguards for employees.

2. Increase in Daily Working Hours

• Daily working hours increased from 9 hours to 10 hours
• Weekly cap of 48 hours remains unchanged

This allows establishments to distribute working hours more flexibly across the week without increasing the total weekly workload.

3. Extension of Continuous Working Period

The Bill enhances the permissible span of uninterrupted work:

• Earlier limit: 5 hours without rest
• Revised limit: 6 hours without rest

This provides employers greater scheduling flexibility, especially in high-footfall or service-intensive operations.

4. Enhanced Overtime Limit

To help establishments manage peak business requirements, the Bill increases overtime limits:

• Earlier overtime cap: 50 hours per quarter
• Revised overtime cap: 156 hours per quarter

This substantial enhancement enables shops and commercial establishments to respond more effectively to seasonal demand, sales events, and operational surges—subject to compliance with overtime wage provisions.

5. Rationalisation of Registration Requirements

5.1 Establishments With Fewer Than 20 Workers

• No longer required to obtain a registration certificate
• Required only to intimate the authorities about commencement of business
• Upon intimation, the employer will be issued a Basic Information Performa (BIP) ID Number

This reduces compliance burden for small establishments and promotes ease of doing business.

5.2 Establishments With 20 or More Workers

• Mandatory registration continues
• Application must be submitted online, along with prescribed particulars, including:

1. 1. Name of employer and manager
   2. Name of the establishment
   3. Number of persons employed
   4. Nature of business
   5. Any other prescribed details

6. Verification and Registration Certificate

The Inspector is required to:

• Verify the correctness of the application and supporting documents
• Issue an online registration certificate

6.1 Validity of Registration

• The certificate remains valid indefinitely
• It may be:

1. 1. Amended upon change in particulars
   2. Cancelled upon closure of the establishment
   3. Revoked by the Inspector after verification, if required

7. Mandatory Appointment Letters and Identity Cards

The Bill strengthens documentation and worker identification requirements:

• Every employer must issue:

1. 1. A letter of appointment to each employee, with the employee’s photograph affixed
   2. Obtain an acknowledgement of the appointment letter

• Every employer must also provide an identity card to each worker, containing prescribed particulars

These measures enhance transparency, employment security, and traceability.

8. Regulatory Intent

The amendments seek to:

• Improve operational flexibility for employers
• Support business scalability during peak demand
• Reduce regulatory burden on small establishments
• Strengthen documentation, accountability, and worker protection
• Align labour regulation with contemporary business practices

9. Implications for Employers

Employers in Haryana should:

• Review and update working-hour policies and shift schedules
• Reassess overtime planning and wage compliance
• Determine whether registration or only intimation is required based on workforce size
• Implement robust systems for:

1. 1. Issuing appointment letters
   2. Maintaining employee identity cards

• Update HR and compliance documentation to align with the amended Act

10. Key Takeaway

The Haryana Shops and Commercial Establishments (Amendment) Bill, 2025 introduces greater flexibility in working hours and overtime, simplifies compliance for small establishments, strengthens employment documentation requirements, and modernises the regulatory framework—while preserving the 48-hour weekly cap and core labour protections.

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Case Details: LS Dinamani vs. Management of Canara Bank - [2025] 181 taxmann.com 314 (HC-Karnataka)

Judiciary and Counsel Details

• R. Nataraj, J.
• R. Nagendra Naik, Adv. for the Petitioner.
• J. Pradeep Kumar, Adv. for the Respondent.

Facts of the Case

In the instant case, the petitioner was an employee of Canara Bank. He was convicted for offences punishable under section 120B read with sections 468, 471, 420 of the IPC and was dismissed from service.

The Respondent-bank forfeited gratuity and provident fund payable to the petitioner consequent to his dismissal from service. The petitioner filed writ petition challenging the order of the respondent forfeiting gratuity as well as provident fund.

The petitioner contended that in the order dismissing him from service, there was no ascertainment of loss suffered by the bank and hence, the respondent was not justified in forfeiting the gratuity.

He also contended that the respondent had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and recovered a sum of Rs.1.90 crores and hence, the bank did not suffer any loss.

It was noted that the petitioner was not entitled to any gratuity in view of Section 4(6) of the Payment of Gratuity Act, 1972. Further, in so far as provident fund to which the petitioner was entitled to, Regulation 19 of Canara Bank Staff Provident Fund Regulations enabled the bank to deduct any amount contributed by it to adjust any loss caused by the act of the employee. However, it did not authorize the bank to forfeit the amount contributed by the employee.

High Court Held

The High Court held that the respondent was directed to release the petitioner’s contribution to provident fund along with interest as applicable for delayed payment of provident fund from date of dismissal of the petitioner from service till date of payment.

The post Bank May Forfeit Gratuity for Criminal Misconduct But Not Employee’s Own PF | HC appeared first on Taxmann Blog.

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CA Arpit Gokhroo – [2025] 181 taxmann.com 761 (Article)

1. Introduction and Understanding

1.1 Traditional Internal Audit

Traditional Internal Audit is a method where the auditor primarily verifies compliance—ensuring that the organisation’s rules, procedures, and controls are being correctly followed. The main focus is on adherence to established standards and documented policies. This approach relies heavily on routine checklists and procedural adherence, often with minimal emphasis on anticipating future problems or identifying emerging risks.

1.2 Risk-Based Internal Audit (RBIA)

Risk-Based Internal Audit (RBIA) is a strategic and proactive approach that prioritises areas presenting the highest risk to the organisation’s objectives. Instead of applying uniform checks everywhere, RBIA identifies, assesses, and manages critical risks that could negatively affect the achievement of organisational goals. This framework ensures that audit resources are allocated where they are most critically needed, focuses on comprehensive monitoring of key risks, and provides actionable recommendations to prevent potential problems. By integrating auditing with risk management, RBIA shifts the organization from a purely compliance-focused model to a strategic governance framework.

Thus, Traditional audits protect the past, RBIAs guards the future.

1.3 Illustrative Example – Sales Verification

• Traditional IA uses uniform procedures on all sales invoices to ensure compliance, regardless of transaction size. This systematic approach catches procedural lapses but may inefficiently allocate effort to low-risk, routine transactions.
• RBIA strategically targets high-value clients and discount-heavy deals using data analytics. It concentrates resources on areas where the financial impact is most significant, allowing minimal attention to low-risk transactions and preventing major revenue leakage where the impact is highest.

2. Traditional vs Risk-Based Internal Audit – Key Change Drivers

The transition from Traditional Internal Audit to Risk-Based Internal Audit involves fundamental shifts across three critical dimensions:

2.1 Audit Planning

Traditional Internal Audit Planning – In traditional internal audit, planning follows a predefined structure, focusing on routine tasks across all departments without accounting for the risk significance of each area. This rigid approach often results in a one-size-fits-all strategy that overlooks emerging risks and fails to adapt to changing business conditions. Audit resources are distributed equally, leading to an inefficient use of both time and expertise.

Risk-Based Internal Audit Planning – In contrast, the Risk-Based approach tailors the audit plan based on a comprehensive risk assessment, ensuring that attention is focused on the most critical and high-risk areas. Rather than following a fixed procedure, audits are dynamic and adjusted in real-time as new risks arise, allowing organisations to address the most pressing challenges. Resources are allocated based on the risk profile of each area, ensuring a more strategic approach to audit planning.

The planning process becomes more strategic, flexible, and focused on key areas of the organisation.

Practical Scenario – HR Audit Planning

In the traditional model, HR audits are based on a predetermined, annual checklist that covers routine tasks, such as verifying employee files, attendance, and payroll accuracy. This approach offers limited flexibility, as the audit plan is fixed and does not adapt to changing circumstances. Resources are allocated equally across all HR areas, regardless of their risk significance, often leading to inefficient use of audit resources. The primary outcome of this method is basic compliance verification, with little focus on addressing emerging or critical HR challenges.

The Risk-Based Approach (RBIA), however, takes a more strategic and dynamic route. The audit plan is developed based on a detailed risk assessment, in collaboration with HR and management, which prioritises high-risk areas that are likely to have the greatest impact on the organisation. Rather than following a static checklist, the audit hones in on key issues, such as staff turnover, hiring delays, or compliance deficiencies. This approach allows auditors to focus resources where they are most needed and adjust quickly in response to shifting risks. As a result, the RBIA delivers more than just compliance checks; it provides actionable insights that can help the organisation improve HR strategy, reduce risks, and enhance overall workforce management.

2.2 Resource Allocation

Traditional Internal Audit Resource Allocation – In traditional internal audit, resources are allocated uniformly across all organisational areas. Similar time, effort, and auditor expertise are devoted to each department or function, regardless of its actual risk profile or organisational importance. This uniform approach can result in the over-auditing of low-risk, stable areas, under-resourcing high-impact, complex risk zones, inefficient use of experienced auditor expertise, and the missed detection of critical emerging risks.

Risk-Based Internal Audit Resource Allocation – RBIA allocates resources proportionally to risk severity and organisational impact. This approach assigns more time and experienced auditors to high-risk areas and employs deeper testing and specialised expertise where risks are most significant. Conversely, it assigns minimal attention to low-risk areas that have mature, stable controls and uses data analytics tools and advanced techniques in high-complexity risk zones. This risk-proportionate allocation ensures audit efforts generate maximum protective value for the organisation.

Practical Scenario – Finance Audit Resource Allocation

In the Traditional Approach, resources for a finance audit are allocated uniformly. Auditor time is divided equally across functions like payments, receipts, and ledger entries, and the seniority of auditors remains consistent across all areas. Testing involves a standardised checklist for all processes, using only basic audit procedures. The expected outcome is simply uniform compliance verification.

In contrast, the Risk-Based Approach (RBIA)allocates resources proportionally to risk. For example, 60% of auditor time might be directed to high-risk payment systems (like new vendor on boarding), while only 20% goes to receipts and 20% to ledger entries. Senior auditors are assigned to complex payment systems, and junior auditors handle low-risk ledger entries. Testing is intensive in high-error vendor payment areas but uses sampling in low-risk areas. This approach uses specialised tools like data analytics and machine learning for fraud indicators. The goal is targeted assurance in high-impact payment areas and fraud prevention

Click Here To Read The Full Article

The post [Opinion] Transitioning from Traditional Internal Audit to a Risk-Based Internal Audit (RBIA) Framework appeared first on Taxmann Blog.

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CA (Dr.) Suresh Surana – [2025] 181 taxmann.com 716 (Article)

1. Introduction

For the purpose of determining whether a gift is exempt from tax, the Income-tax Act, 1961 (hereinafter referred to as ‘the IT Act’) does not use the term “family”; instead, the relevant exemption under Section 56(2)(x) provides for determining on whether the donor qualifies as a “relative.”

Gifts received from a “relative” are fully exempt from tax, irrespective of the amount or mode of receipt. Explanation to Section 56(2)(x) provides an exhaustive and restrictive definition of “relative” for individuals, which includes:

(i) the spouse of the individual;

(ii) the brother or sister of the individual;

(iii) the brother or sister of the spouse of the individual;

(iv) the brother or sister of either of the parents of the individual;

(v) any lineal ascendant or descendant of the individual;

(vi) any lineal ascendant or descendant of the spouse of the individual; and

(vii) Spouse of the aforementioned persons.

Accordingly, only gifts received from such specified relatives would qualify as tax-exempt. Exemption from tax on gifts is strictly governed by the definition of “relative” under Explanation to Section 56(2)(x).

In-laws – Only those who fall within the specified relative definition such as the lineal ascendants or descendants of the spouse (e.g., father-in-law, mother-in-law etc.) or the brother/sister of the spouse (e.g., brother-in-law, sister-in-law) are treated as “relatives.”

Cousins – Cousins are not included in the statutory definition of “relative.” Therefore, gifts received from cousins are taxable unless covered by another exemption (e.g., marriage occasion).

Siblings’ Spouses – The spouse of a sibling (e.g., sister-in-law or brother-in-law) does qualify because the definition includes “the spouse of any of the persons referred to above.” Since a brother or sister is a relative, their spouse is also treated as a relative and gifts from them are exempt.

2. Tax Treatment of Gifts from a Spouse or Spouse’s Family

Section 56(2)(x) provides for a favourable tax treatment to gifts received through marital relationships by recognising the spouse and certain members of the spouse’s family as “relatives” for the purpose of exemption under Section 56(2)(x). Gifts received from a spouse are fully exempt without any monetary limit. Further, Section 56(2)(x) extends this exemption to gifts received from the brother or sister of the spouse, and any lineal ascendant or descendant of the spouse, as well as the spouses of such persons. Accordingly, gifts from the spouse’s parents, grandparents, etc. qualify as tax-exempt.

While such gifts are not taxable in the hands of the recipient, clubbing provisions under Sections 60 to 64 may apply in certain situations for instance Section 64(1)(iv), which mandates that income arising from assets transferred to a spouse without adequate consideration is taxable in the hands of the transferor. Thus, although the gift transaction itself is exempt, the future income generated from the gifted amount or asset may be clubbed back with the income of the spouse who made the gift.

Click Here To Read The Full Article

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Consumer disputes under the Consumer Protection Act refer to legal disagreements arising between a consumer and a trader or service provider concerning unfair trade practices, defective goods, deficiency in services, overcharging, hazardous goods or services, or product liability. Such disputes are adjudicated by Consumer Disputes Redressal Commissions upon the filing of a complaint by an eligible complainant, in accordance with the provisions of the Consumer Protection Act, 2019.

Table of Contents

1. Consumer Disputes Relating to Goods and Services
2. What is ‘Complaint’?
3. Complainant
4. Who is ‘Consumer’?
5. Defect in Goods
6. Deficiency in Services

Check out Taxmann's Consumer Protection Law & Practice which is an authoritative, practitioner-focused reference to the Consumer Protection Act 2019, its Rules and Regulations, and the evolving jurisprudence on consumer rights, product liability, e-commerce, unfair trade practices, and dispute resolution. The 2026 Edition provides clear, structured commentary, comparative analysis with the 1986 Act, and complete statutory coverage for seamless reference. It explains every core element of the framework—from CCPA's regulatory powers to e-commerce and direct selling obligations, and from product liability standards to procedures before Consumer Commissions. With its blend of statutory accuracy and practical insight, this book serves as an essential resource for litigation, compliance, and policy work in consumer law.

1. Consumer Disputes Relating to Goods and Services

The jurisdiction of Consumer Disputes Redressal Commission is invoked when a ‘complaint’ has been filed by ‘complainant’.

Act Applies to All Goods and Services – Save as otherwise expressly provided by the Central Government, by notification, this Act shall apply to all goods and services – Section 1(4) of Consumer Protection Act, 2019.

1.1 Dispute Relating to Land and Immovable Property is Not Covered

Dispute regarding immovable property is not consumer dispute, as there is no sale of ‘goods’ or ‘services’ for consideration. However, dispute can be raised about service in connection with immovable property.

Land is not movable and hence not ‘goods’. Hence disputes regarding sale/allotment of land are outside purview of CPA. (Krishan Baldev Gupta v. Haryana State Development Corpn. (1993) II CPJ 191 (NCDRC).

In Shaila Construction v. Nainital Lake Development III (1996) CPJ 11 (NCDRC), it was held that there is no hire of services when there is outright sale of immovable property. However, there can be deficiency in service and complaint can be lodged.

2. What is ‘Complaint’?

“Complaint” means any allegation in writing, made by a complainant for obtaining any relief provided by or under this Act, that:

(i) an unfair contract or unfair trade practice or a restrictive trade practice has been adopted by any trader or service provider.

(ii) the goods bought by him or agreed to be bought by him suffer from one or more defects.

(iii) the services hired or availed of or agreed to be hired or availed of by him suffer from any deficiency.

(iv) a trader or a service provider, as the case may be, has charged for the goods or for the services mentioned in the complaint, a price in excess of the price:

(a) fixed by or under any law for the time being in force; or

(b) displayed on the goods or any package containing such goods; or

(c) displayed on the price list exhibited by him by or under any law for the time being in force; or

(d) agreed between the parties.

(v) the goods, which are hazardous to life and safety when used, are being offered for sale to the public:

(a) in contravention of standards relating to safety of such goods as required to be complied with, by or under any law for the time being in force

(b) where the trader knows that the goods so offered are unsafe to the public.

(vi) the services which are hazardous or likely to be hazardous to life and safety of the public when used, are being offered by a person who provides any service and who knows it to be injurious to life and safety.

(vii) a claim for product liability action lies against the product manufacturer, product seller or product service provider, as the case may be – Section 2(6) of Consumer Protection Act, 2019.

Unfair Contract, Unfair Practices and Product Liability – Issues relating to clause (i) an unfair contract or unfair trade practice or a restrictive trade practice and clause (vii) claim for product liability.

2.1 No Complaint for Increase in Prices

In a case where manufacturer increased the selling price of car, it was held that complaint is not maintainable as complaint can be lodged only in cases where price is fixed under any law and price is charged above the statutory price. – Maruti Udyog Ltd. v. Kodaikkanal Township (1993) 10 CLA 15 (NCDRC).

In Brig B S Gill v. Maruti Udyog Ltd. (1996) 4 CTJ 105 (NCDRC) also, it was held that no complaint is maintainable in case of increase of price of motor car after booking but before maturity of the booking – same view in Mehsana Agro Auto v. Baldevbhai M Patel I(2001) CPJ 28 (NCDRC).

No Complaint Against Costing or Pricing – Consumer Forums have no jurisdiction to go into question of pricing (of houses and flats in this case) – Gujarat Housing Board v. Akhil Bharatiya Grahak Panchayat – (1996) 2 Comp LJ 378 (NCDRC) * Gujarat Housing Board v. Datania Amritlal (1993) III CPJ 351 (NCDRC) * MP Housing Board v. Prahlad Kumar III (1999) CPJ 37 (NCDRC).

Charges fixed by Banks for providing various services like issuing a cheque book are in the realm of pricing. Forum cannot adjudicate on questions of adequacy or reasonableness of the amount charged for the services rendered or to be rendered – Indian Banks’ Association v. Archana Kamath 1 (1995) CPJ 75 (NCDRC) – view confirmed in Archana Kamath v. Canara Bank 2003(2) SCALE 61.

Consumer forum cannot go into reasonableness of pricing of services. Cost or pricing of services cannot be looked into. – Maharashtra State Electricity Board v. Sheshrao (1995) 5 CTJ 680 (NCDRC). Costing of flat is beyond jurisdiction of FORA – Major Loknath Juggi v. Bhopal Development Authority III (2002) CPJ 154 (NCDRC).

Mere question of pricing a product or service does not fall within the purview of adjudication of Consumer Disputes Redressal Agency – decision of NCDRC confirmed in State of Gujarat v. Rajesh Kumar Chimanlal Barot (1994) 4 Comp LJ 1 (SC) = (1996) 5 SCC 477.

3. Complainant

Complaint can be filed by ‘complainant’.

“Complainant” means:

(i) a consumer; or

(ii) any voluntary consumer association registered under any law for the time being in force; or

(iii) the Central Government or any State Government; or

(iv) the Central Authority; or

(v) one or more consumers, where there are numerous consumers having the same interest; or

(vi) in case of death of a consumer, his legal heir or legal representative; or

(vii) in case of a consumer being a minor, his parent or legal guardian – Section 2(5) of Consumer Protection Act, 2019.

4. Who is ‘Consumer’?

As per Section 2(7) of Consumer Protection Act, 2019, “Consumer” means any person who:

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.

Explanation.—For the purposes of this clause:

(a) the expression “commercial purpose” does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment

(b) the expressions “buys any goods” and “hires or avails any services” includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing – Explanation to Section 2(7) of Consumer Protection Act, 2019.

Direct Selling – “direct selling” means marketing, distribution and sale of goods or provision of services through a network of sellers, other than through a permanent retail location – Section 2(13) of Consumer Protection Act, 2019.

Seller is Not a Consumer – A seller of goods is not a ‘consumer’ as purchaser is not supposed to provide any service to seller – Larsen & Toubro Ltd. v. SCDRC AIR 1998 Cal 313.

Franchise is Not Consumer – Franchise holder who is maintaining STD/PCO office is licensee of the grantor of franchiser. The service is really provided by franchiser and not by franchise to final consumer. The franchisee is not consumer – General Manager, Madras Telephones v. R Kannan I (1994) CPJ 14 (NCDRC). Franchisee of computer training institute is not a consumer. – Softpec Software v. Digital Equipment II (2002) CPJ 5 (NCDRC).

Tenant is Not Consumer – A tenant is not consumer when landlord has not agreed to render any service to tenant in lease agreement. – Laxmiben Laxmichand Shah v. Sakerben Kanji I (2001) CPJ 7 (SC) – confirming Laxmiben Laxmichand Shah v. Sakerben Kanji I(1992) CPR 74 (NCDRC).

4.1 Meaning of ‘Commercial Purpose’

A person who buys goods for resale or commercial purposes or avails services for commercial purposes is specifically excluded from definition of ‘consumer’.

For example, a person buying one truck or tempo or sewing machine or one computer will be eligible under this section. However, if a person buys two typewriters, out of which one is used by a person employed by him, he will not be eligible under CPA as person buying goods for resale or commercial purposes is not a consumer.

A share broker taking bank overdraft is availing services for commercial purpose – Shrikant G Mantri v. Punjab National Bank (2022) 5 SCC 42.

In Laxmi Engineering Works v. P.S.G. Industrial Institute 1995 AIR SCW 2114 = AIR 1995 SC 1428 = (1995) 3 SCC 583 = 84 Comp Cas 121 (SC), has defined the word ‘commercial’ as connected with or engaged in commerce having profit as the main aim. Any person buying goods for purpose of being used in any activity on a large scale for making profit is not a ‘consumer’.

University buying mutual fund for investing provident fund amount for sole benefit of employees is not for ‘commercial purpose’. ‘Commercial purpose’ must be interpreted considering facts and circumstances of each case – Punjab University v. Unit Trust of India (2015) 2 SCC 669.

In Kalpavruksha Charitable Trust v. Toshniwal Brothers 1999 AIR SCW 3732 = AIR 1999 SC 3356 = (1999) 4 Comp LJ 427 (SC), it was held that a charitable trust is not a consumer if it has purchased machinery for its diagnostic centre, when only 10% patients are provided free service and charges are levied on remaining patients. Thus, the use is for ‘commercial purpose’ and hence it is not a ‘consumer’.

A person purchasing truck for self-employment, appointing a driver to ply the said truck is still a ‘consumer’ – Madan Kumar Singh v. District Magistrate (2009) 9 SCC 79.

Person buying goods for manufacture of another product is not ‘consumer’ as the goods were intended for commercial purpose – Rajeev Metal Works v. MMTC  87 Comp Cas 315 = (1996) 2 Comp LJ 193 (SC) = AIR 1996 SC 1083

Contractor buying computer for his profession is not a ‘consumer’ as the computer was not bought for his personal use to earn livelihood – Sterling Computers Ltd. v. P Raman Kutty (1995) 3 CPR 495 = LW 50.3-1996 – CS March 96 (NCDRC).

Purchaser of diesel generating set for installation in factory is not a consumer – Madhu Chawla v. R K Engineering Co. LW 52.3-1996 – CS March 96 (NCDRC)

Buyer of EPBAX for better management of his business is not a ‘consumer’. – Catvision Products Ltd. v. Pragati Computers (P.) Ltd. – LW 53.3-1996 CS March 96 (NCDRC).

Electronic telephone system purchased for nursing home is for commercial purpose – Larsen & Toubro v. Phophale Nursing Home II(1992) CPJ 366 (NCDRC).

In Kores (India) Ltd. v. Samir Purkayastha (1996) 4 CTJ 579 (NCDRC), it was held that if intention is to earn substantial profit (and not mere earning livelihood), the purchase will be for commercial purpose. (Xerox machine in this case). In Sakthi Engineering Works v. Sri Krishna Coir Rope Industry III(2000) CPJ 13 (NCDRC), it was held that purchase of machine when buyer did not have technical knowledge and 10 people were required to operate machine is purchase for ‘commercial purpose’.

In Sarat Equipments v. Interuniversity Consortium (1997) 5 CTJ 854 (NCDRC), it was held that equipment bought by an educational institution for use by students cannot be said to be for commercial purpose even where certain amount of fees is charged to students for allowing use of equipment.

Frequent breakdown in power supply of Electricity Board to the factory manufacturing yarn are not covered under CPA, as though ‘electricity’ is ‘goods’, power supply is for commercial purpose only. Shree Mfg. Co. Ltd. v. ADSDRC (1993) II CPJ 874 (APSDRC).

4.2 Buyer of Machinery, Equipment or Goods for Self Employment is a ‘Consumer’

The buyer of machine will be treated as ‘consumer’ only if he operates it directly and not through labour/employees, e.g. person purchasing auto-rickshaw to ply it himself or a person purchasing truck for plying it as public carrier by himself or a person purchasing typewriter to type other’s work for consideration would be a ‘consumer’. (He will be consumer, even if he takes assistance of one or two persons to assist/help him in operating the vehicle or machinery).

In Cheema Engg Services v. Rajan Singh 88 Comp Cas 400 (SC) = (1997) 1 SCC 131 = (1997) 1 Comp LJ 70, it was held that ‘self employment’ means the person or his family alone should use the machinery. Burden is on him to prove the same. Commercial purpose would mean employing on regular basis the employee or workman for trade.

Medical practitioner buying ultrasound scanner for use by using his skill for earning his livelihood is a ‘consumer’ – Kody Elcot Ltd. v. Dr. C P Gupta LW 51.3-1996 – CS March 96 (NCDRC). Eye surgeon purchasing machine for hospital run by him is consumer, as it is required for using his professional skill, when he is not running a big hospital. – Rampion Pharmaceuticals v. Dr. Preetam Shah (1997) I CPJ 23 (NCDRC).

Civil contractor buying truck for self-occupation is a consumer – Telco v. Gajanan Mandrekar III (1996) CPJ 123 (NCDRC).

Purchase of copier machine by partnership firm to earn livelihood by partners by self employment is covered under CP Act – Remington Rand v. Pioneer Typewriter (1996) 2 CTR 112 (NCDRC) * Vijay Narain v. Chougule Industries II(1993) CPJ 231 (NCDRC).

4.3 Insurance Company Can File Complaint in Name of Insured as His Attorney Holder or in Joint Name of Insured and Insurer, but Not if the Goods or Service Was for Commercial Purpose

If insurer pays the compensation to the insured person, it gets a ‘letter of subrogation’ in favour of insurance company. Right to recover compensation (from transporter or any other person) are assigned to Insurance Company.

However, in Oberai Forwarding Agency v. New India Assurance Co. Ltd. 2000 AIR SCW 436 = 2000(2) SCC 407 = 100 Comp Cas 591 = AIR 2000 SC 855 (SC 3 member bench), it was held that Insurance company is not the beneficiary of services (of transporter in this case) and hence is not a ‘consumer’, even if the assignor is made a co-complainant to the complaint.

This decision was considered by Constitution bench in Economic Transport Organisation v. Charan Spinning Mills (2010) 4 SCC 114 (SC 5 member bench). It was held that Insurance company can file complaint in Consumer Court against transporter, in the name of insured (as his attorney holder) or in joint name of insured and insurer, if there is subrogation cum assignment by insured in favour of insurer. Insurer cannot in its own name maintain complaint before Consumer Court. However, if service is for commercial purpose, complaint cannot be filed against the carrier in view of amendment made to the consumer Protection Act w.e.f. 15-3-2003. It was held that subrogation cum assignment is valid. It was observed that section 9 of Carriers Act does lay down that a carrier is liable even if there was no negligence on his part. The carrier can avoid the liability if he established that the loss, damage or non-delivery was due to an act of God or circumstances beyond his control. It was held that section 9 is applicable even when complaint is filed before Consumer Court.

The assignee of insurance policy, when policy was assigned after its validity only to recover loss suffered on short landing of goods, is not a beneficiary of service required to be rendered by insurer. Hence, he is not a consumer. If the policy had been assigned during the course of validity, it could perhaps be said that assignee had beneficial interest. – New India Assurance Co. Ltd. v. Sainani (1997) 92 Comp Cas 426 = 1997 AIR SCW 2956 = AIR 1997 SC 2938 = (1997) 6 SCC 383 = (1997) 3 Comp LJ 380. – followed in Savani Roadlines v. Sundaram Textiles 2001 AIR SCW 2555 = 106 Comp Cas 659 = 38 SCL 738 = (2001) 3 Comp LJ 376 (SC).

4.4 Patients in Government Hospital Not Consumers

Patients availing medical treatment in Government hospital are not consumers and facility offered in Government hospitals cannot be regarded as service hired for consideration. The small charges paid are for general purposes of the State and not for any specific service. Thus, the service is not ‘hired’ by the patient. However, in case of demonstrable negligence, civil suit is possible. Consumer Unity Trust Society v. State of Rajasthan – decided on 15-12-89 (1991) CPR 241 (NCDRC) – confirmed by Supreme Court.

4.5 Who is a ‘Consumer’?

Some decided cases will clarify the legal position.

Land Owner is Consumer in Respect of Agreement With Builder/Promoter/Developer – In Faqir Chand Gulati v. Uppal Agencies (2008) 15 STT 296 (SC), land owner had agreement with builder termed as ‘collaboration agreement’ or ‘joint venture agreement’. However, land owner had absolutely no say in matter of development, construction or sale of flats. It was held that this is not ‘joint venture’. If there is no joint control, it is not a joint venture. Hence, land owner is ‘consumer’ within the meaning of ‘Consumer Protection Act’.

Railway Passenger – It has been held that railway passenger travelling on payment of fare is a ‘consumer’ – GM, South Eastern Railways v. Anand Prasad Sinha (1991) I CPJ 10 (NCDRC). In District Manager, Telephones v. Lalit Kumar Bajlal (1992) 1 CPJ 189 (NCDRC), it was held that subscriber to telephone is ‘consumer’. In Union Bank v. Seppo Rally Oy – II (1996) CPJ 128 (NCDRC), it was held that beneficiary of a bank guarantee is a consumer.

Potential Consumer is Also a Consumer – In Tele-Communication Dept. v. Shanmugham Chemical Industries LW 149.9-1995 – CS Sept. 95, (NCDRC), it was held that a potential consumer is as good as consumer, within the scope of CPA.

Parent Who Bring the Child to Hospital and the Child Both Are Consumers – Parent who brings the child to hospital is ‘consumer’. The child, who is beneficiary of the services is also a consumer—Spring Meadows Hospital v. Harjot Ahluwalia (1998) 4 SCC 39 = AIR 1998 SC 1801 = 1998 AIR SCW 1590 = 92 Comp Cas 797 = (1998) 2 Comp LJ 228 (SC).

Allottees of House – Allottees of house by Housing Board are ‘consumers’ – UP Avas Gram Vikas Parishad v. Garima Shukla (1991) 1 CPJ 1 (NCDRC) – also in Gujarat Housing Board v. Akhil Bharatiya Grahak Panchayat – (1996) 2 Comp LJ 378 (NCDRC).

Person Obtaining Water from Water Supply Authority – A person obtaining water from a Government agency and paying water bills for the water supplied (and not ‘water tax’) is a consumer – Nagrik Parishad v. Garhwal Jal Sansthan 1998 AIR SCW 3944. [However, if water tax is levied, the person availing service will not be a ‘consumer’].

4.6 Forum Can Decide Whether a Person is Consumer

In Laxmi Engineering Works v. P.S.G. Industrial Institute 1995 AIR SCW 2114 = (1995) 3 CTJ 289 = AIR 1995 SC 1428 = (1995) 3 SCC 583 = 84 Comp. Cas. 121 (SC), it has been held that Consumer Forums have power to decide whether a person is a consumer and whether he has made grounds for relief.

5. Defect in Goods

Complaint can be filed if the goods bought by him or agreed to be bought by him suffer from one or more defects [clause (ii) of definition of ‘complaint’].

“Goods” means every kind of movable property and includes “food” as defined in section 3(1)(j) of the Food Safety and Standards Act, 2006 – Section 2(21) of Consumer Protection Act, 2019.

Defect – “Defect” means any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods or product and the expression “defective” shall be construed accordingly – Section 2(10) of Consumer Protection Act, 2019.

5.1 Shares Before Allotment and Debentures Are Not ‘Goods’

In Morgan Stanley Mutual Fund v. Kartik Das (1994) 74 Taxman 409 = (1994) 1 SCL 19 = (1994) 2 CTJ 385 = 81 Comp. Cas. 318 (SC) = (1994) 4 SCC 225 = 1994 AIR SCW 2801 (SC 3 member bench), Hon. Supreme Court have held that shares before allotment are not goods, as shares do not exist before allotment is made. To constitute a ‘consumer’, there must be transaction of goods. Hence, a prospective investor cannot be regarded as a ‘consumer’ under CPA.

In R D Goyal v. Reliance Industries (2003) 1 SCC 81 = 40 SCL 503 = 113 Comp Cas 1 (SC), it was held that debenture is not ‘goods’. Similarly, shares before allotment are not goods.

6. Deficiency in Services

Complaint can be lodged if the services hired or availed of or agreed to be hired or availed of by him suffer from any deficiency [clause (iii) of definition of ‘complaint’].

Service – “Service” means service of any description which is made available to potential users and includes, but not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, telecom, boarding or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service – Section 2(42) of Consumer Protection Act, 2019.

Deficiency – “deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service and includes:

(i) any act of negligence or omission or commission by such person which causes loss or injury to the consumer; and

(ii) deliberate withholding of relevant information by such person to the consumer – Section 2(11) of Consumer Protection Act, 2019.

Injury – “injury” means any harm whatever illegally caused to any person, in body, mind or property – Section 2(23) of Consumer Protection Act, 2019.

6.1 What is ‘Service’

In Lucknow Development Authority v. M K Gupta (1994) 1 SCC 243= 1994 AIR SCW 97 = AIR 1994 SC 787 = 80 Comp. Cas. 714 (SC) = (1994) 1 Comp LJ 1 (SC), it has been held that any service which is for consideration and is not a contract of personal service is ‘service’ for purposes of the Act. In this case, it was held that housing construction is service, although related to immovable property. It was held that ‘potential users’ mean those who are capable of using the service. – followed in Gujarat Housing Board v. Akhil Bharatiya Grahak Panchayat – (1996) 2 Comp LJ 378 (NCDRC), where it was held that providing houses is a ‘service’.

Assurance of development of infrastructure/amenities etc. to customers of plots is a service. Housing construction or building activity carried out of a private or statutory body is service – Narne Construction v. UOI (2012) 5 SCC 359.

6.2 Contract of Service and Contract for Service

Contract of personal services are excluded from definition of ‘service’.

NCDRC in Cosmopolitan Hospitals v. Vasantha P Nair I (1992) CPJ 302 (NCDRC) had held that medical services are covered under CPA. The reason is there is difference between ‘contract for service’ and ‘contract of service’. In contract of service, the master can order or require what is to be done and how it is to be done. This is a ‘contract of personal service’ and hence is out of purview of CPA as the master can always dispense with service of servant and hence no occasion would arise for him to complain about service of the servant. However, in ‘contract for service’, the person cannot order what is to be done or how it is to be done e.g. lawyer-client relationship will fall in this category. Services rendered in professional category would fall in this category, e.g. when a person gives cloth to a tailor for stitching a suit, the service rendered is in the course of his profession and not under contract of personal service. Thus, service of doctor is covered under the definition of service, as it is ‘contract for service’ and not ‘contract of service’.

The distinction between ‘contract of service’ and ‘contract for service’ has been fully upheld by Supreme Court in Indian Medical Association v. V P Shantha (1995) 6 SCC 651 = (1996) 1 Comp LJ 15 = 1995 AIR SCW 4463 = AIR 1996 SC 550 = (1995) 3 CTJ 969 = 86 Comp Cas 806 (SC 3 member bench). In this case, it was held that ‘contract for services’ implies a contract whereby one party undertakes to render services e.g. professional or technical services to or for other in the performance of which he is not subject to detailed direction and control but exercises professional or technical skill and uses his own knowledge and discretion. However, a ‘contract of service’ implies a relationship of master and servant and involves an obligation to obey orders in the work to be performed and as to its mode and manner of performance – similar views in Shivnandan Sharma v. Punjab National Bank Ltd. AIR 1955 SC 404 * Chandi Prasad Singh v. State of Uttar Pradesh AIR 1956 SC 149 * Dhrangadhra Chemical Works v. State of Saurashtra AIR 1957 SC 264.

In Dhrangadhra Chemical Works v. State of Saurashtra AIR 1957 SC 264, it was observed, the principles according to which the relationship as between employer and employee or master and servant has got to be determined are well settled. The test which is uniformly applied in order to determine the relationship is the existence of a right of control in respect of the manner in which the work is to be done. A distinction is also drawn between a contract for services and a contract of service and the distinction is put in this way ‘In the one case, the master can order or require what is to be done, while in other case, he can not only order or require what is to be done but how itself it shall be done. Prima facie test for the determination of the relationship between master and servant is the existence of the right of master to supervise and control the work done by the servant not only in the matter of directing what work the servant is to do but also the manner in which he shall do his work. Test of control is not one of universal application. There are many contracts in which the master could not control the manner in which the work was done’.

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Case Details: Damroo Enterprise vs. State of West Bengal - [2025] 181 taxmann.com 490 (Calcutta)

Judiciary and Counsel Details

• Om Narayan Rai, J.
• Rajdeep Mazumder, Mayukh Mukherjee, Supriyo Dutta & Ms Sagnika Banerjee for the Petitioner.
• Tanoy Chakraborty & Saptak Sanyal for the Respondent.

Facts of the Case

The petitioner, a trader engaged in the sale of areca nuts, challenged detention and penalty imposed on its consignment during interstate transit. It contended that the consignment was perishable, that multiple e-way bills and alleged discrepancies in consignor identity and invoices did not justify penalty. It was submitted that weighment evidence did not conclusively establish irregularity. The Department of Revenue maintained that e-way bills were generated 36 minutes apart for locations 266 km apart, the documents were dubious, the movement was continuous, and the penalty was justified. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that exceptional writ grounds were absent and factual disputes regarding penalty and document irregularities required appellate scrutiny under Section 107 of the CGST Act. The Court interpreted that Section 129 applied only where documents were genuine and could not protect dubious transactions. It concluded that penalty under Section 129(1)(b) was justified. Considering the perishability and short shelf life of the areca nuts, the Court directed the release of both goods and conveyance on payment and on furnishing a bank guarantee securing the balance, to be completed within three working days.

List of Cases Reviewed

• Shekhar Kumar @ Shekhar Bagaria v. State of West Bengal [2025] 174 taxmann.com 233 (Calcutta) (para 23)
• Goutam Bhowmik v. State of West Bengal [2024] 158 taxmann.com 399/83 GSTL 155 (Calcutta) (para 24)
• Ashok Sharma v. State of West Bengal [2025] 171 taxmann.com 682/108 GST 538/95 GSTL 354 (Calcutta)/(FMA 136 of 2025) decided on February 11, 2025 (para 25)
• Jagannath Trading v. State of West Bengal [2025] 173 taxmann.com 900/98 GSTL 569 (Calcutta) (para 26) distinguished

List of Cases Referred to

• Shekhar Kumar @ Shekhar Bagaria v. State of West Bengal [2025] 174 taxmann.com 233 (Calcutta) (para 6)
• Goutam Bhowmik v. State of West Bengal [2024] 158 taxmann.com 399/83 GSTL 155 (Calcutta) (para 7)
• Ashok Sharma v. State of West Bengal [2025] 171 taxmann.com 682/108 GST 538/95 GSTL 354 (Calcutta) (para 8)
• Jagannath Trading v. State of West Bengal [2025] 173 taxmann.com 900/98 GSTL 569 (Calcutta) (para 13)
• Ashish Kumar Sharma v. Deputy Commissioner, State Tax, South Bengal, Howrah [2024] 162 taxmann.com 137/104 GST 358/86 GSTL 414 (Calcutta) (para 14)
• S N Trading Co. v. UOI [2025] 175 taxmann.com 942 (Calcutta) (para 16).

The post Perishable Areca Nuts Released Despite GST Irregularities | HC appeared first on Taxmann Blog.

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Case Details: Income Tax officer (International Taxation) vs. Shapoorji Pallonji Mistry Sterlin Bay - [2025] 180 taxmann.com 870 (Mumbai-Trib.)

Judiciary and Counsel Details

• Amit Shukla, Judicial Member & Girish Agrawal, Accountant Member
• Satya Pal Kumar, CIT DR for the Appellant.
• Porus Kaka, Sr. Adv. & Divesh Chawla, Adv. for the Respondent.

Facts of the Case

The assessee, a non-resident individual, filed returns of income for A.Ys. 2015-16 and 2016-17. The Assessing Officer initiated reassessment proceedings by issuing notices under section 148 of the old regime. Pursuant to the amendments introduced by the Finance Act, 2021 and directions of the Supreme Court in Ashish Agarwal, fresh proceedings were initiated, and notices under section 148 were issued on 30-07-2022 under the new regime.

For A.Y. 2016-17, the assessee challenged the validity of reassessment on the ground that approval under section 151(ii) was obtained from the CIT (International Taxation) instead of the specified authority, i.e., the Principal Chief Commissioner/Chief Commissioner, as required where more than three years had elapsed.

The Commissioner (Appeals) quashed the reassessment proceedings on the same ground. Aggrieved, the Revenue filed appeals before the Tribunal.

ITAT Held

The Tribunal held that, for A.Y. 2016-17, the notice was issued beyond three years from the end of the assessment year, and the alleged escaped income exceeded Rs. 50 lakhs. Therefore, prior approval from the specified authority under section 151(ii) was mandatorily required. As approval had been obtained only from the CIT (IT) and not from the specified higher authority, the notice and consequent reassessment were held to be invalid.

Accordingly, the Tribunal upheld the orders of the CIT(A), quashed the notice issued under section 148 and the consequential reassessment orders for the assessment year, and dismissed the appeals filed by the Revenue.

List of Cases Reviewed

• Praful Arjun Rane v. ITO, IT [IT Appeal No.1046 (MUM) of 2025, dated 30-9-2025] [Para 6.2] Followed
• Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC)
• Union of India & Ors. v. Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) (para 13.5) followed

List of Cases Referred to

• Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC) (para 5)
• Union of India v. Rajeev Bansal [2024] 167 taxmann.com 70/301 Taxman 238/469 ITR 46 (SC) (para 5)
• Praful Arjun Rane v. ITO, IT [IT Appeal No.1046 (MUM) of 2025, dated 30-9-2025] (para 6.2).

The post Section 148 Notice Invalid Without Approval Under Section 151(ii) | ITAT appeared first on Taxmann Blog.

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Case Details: TATA Consultancy Services Ltd. vs. Vinit Jain - [2025] 181 taxmann.com 284 (HC-Bombay)

Judiciary and Counsel Details

• Sandeep V. Marne, J.
• B.D. Birajdar & Ms Komal Deshmukh, Advs. for the Petitioner.
• Avinash Belge, Adv. & Ms Priyanka B. Chavan, AGP for the Respondent.

Facts of the Case

In the instant case, the Respondent-employee was dismissed from the service of the petitioner-employer on charges of insubordination, late reporting for duty, etc. Since no disciplinary inquiry was held by the petitioner-employer while dismissing the respondent, the petitioner chose to justify its action by leading evidence before the Labour Court.

The Labour Court held that charges relating to insubordination and late reporting for duty were proved, whereas the balance of charges were not proved against the respondent. The Labour Court, however, found that the punishment of dismissal from service was not proportionate to the proved misconduct and, accordingly, directed the reinstatement of the respondent with 50% back wages and continuity with effect from the date of dismissal.

Before the High Court, the petitioner submitted that once serious charges of insubordination were proved, the Labour Court could not have interfered in the quantum of punishment.

It was noted that the Labour Court could not wear the employer’s glasses and decide whether the employee’s conduct was grave or not. Further, the Labour Court had committed a jurisdictional error by addressing the quantum and proportionality of the penalty.

High Court Held

The High Court held that the Labour Court had grossly erred in recording a casual finding of punishment being disproportionate to prove misconduct by substituting itself in place of the employer, as if it was exercising appellate jurisdiction over the wisdom of the employer in choosing the exact nature of the penalty. Thus, the impugned award passed by the Labour Court was indefensible and liable to be set aside.

List of Cases Reviewed

• Order of Labour Court, Mumbai in Reference (IDA) No.40 of 2015 Award dated 23 March 2017 (para 16) set aside
• Sarabhai M. Chemicals v. M. S. Ajmere 1979 taxmann.com 480 (Bom.) (para 12) followed

List of Cases Referred to

• Sarabhai M. Chemicals v. M. S. Ajmere 1979 taxmann.com 480 (Bom.) (para 3).

The post Labour Court Can’t Reduce Dismissal After Proven Misconduct | HC appeared first on Taxmann Blog.

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CA Naveen Wadhwa & CA Ankur Kamra – [2025] 181 taxmann.com 717 (Article)

In the financial year 2024-25, two co-founders transferred their holdings in a start-up to a big corporation. One co-founder received the total consideration of Rs. 75 lakhs, while the other got Rs. 45 lakhs. Both filed their return of income on time in ITR-2 and declared the capital gains. When December began, the former co-founder received an automated message from CPC about a significant mismatch in his tax return. To his surprise, the other co-founder got no such communication, and his ITR was processed smoothly. Automated Tax Matching Systems used by the CPC are the core reason for this asymmetry in how the same transaction is treated.

The Automated Tax Matching Systems use machine-learning-based algorithms to reconcile the income and tax details reported by a taxpayer in their Income Tax Return (ITR) with a vast array of financial data and the AIS. In case of any mismatch, an automated notice is sent to the taxpayers. The mismatch could be due to many reasons, such as non-reporting of income or improper disclosure.

In the last few weeks, thousands of taxpayers have been confronted with sharply worded emails and SMS alerts from the Income Tax Department warning of a “significant mismatch” between their income tax returns and the data available with the Department. The communication is often accompanied by a firm deadline of 31st December to revise the return or respond online. For many recipients, the notice has created a troubling and confusing situation, as a return that is fully compliant with the law is still flagged as erroneous.

Despite complete and accurate disclosures, an automated notice is being triggered for a share sale transaction in which tax is deducted under Section 194Q. The systems are misreading capital gains from unlisted share sales as business receipts, triggering widespread compliance alerts for FY 2024–25.

At the heart of the issue is Section 194Q, a withholding provision that requires buyers to deduct tax at source on the purchase of goods exceeding a specified threshold. This provision requires a buyer to deduct tax if he carries on a business and pays a resident seller for goods where the value or aggregate value exceeds INR 50 lakh in any previous year. Though the IT Act does not explicitly define “goods” for this section, it is understood that “securities” (including shares, whether listed or unlisted) are not treated as “goods” in the broader tax context.

However, the CBDT has clarified that, as transactions in listed securities carried out through exchanges do not involve direct contact between buyers and sellers, the provisions of Section 194Q shall not apply to transactions in securities (and commodities) traded through recognised stock exchanges or settled by recognised clearing corporations. Since unlisted shares are not traded through recognised stock exchanges or cleared by recognised clearing corporations, the specific exemption mentioned in the circular would not directly apply to them. Nonetheless, based on the general interpretation of “goods” in Indian tax laws and the specific nature of Section 194Q, TDS under Section 194Q is generally not required on the purchase of unlisted shares, as shares are typically not considered “goods”. Still, in several unlisted share transactions, buyers deduct TDS under this section either as a conservative compliance measure or due to internal interpretations of its scope.

When the buyer reports this deduction, it appears on the seller’s Annual Information Statement (AIS). The system’s logic treats the receipt as business turnover, even though the seller may have correctly disclosed the transaction as capital gains in the income tax return form. This treatment is in accordance with the CBDT’s Circular, which clarified that income arising from the transfer of unlisted shares would be considered under the head ‘Capital Gain’, irrespective of the period of holding, except where the taxpayer himself treats the same as stock-in-trade.

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The post [Opinion] Getting ITR Mismatch Messages? Your Tax Return May Still Be Correct appeared first on Taxmann Blog.

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