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.

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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.

Click Here To Read The Full Article

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

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Case Details: MCLEOD Russel India Ltd. vs. Union of India - [2025] 181 taxmann.com 322 (Gauhati)

Judiciary and Counsel Details

• Ashutosh Kumar, CJ. & Arun Dev Choudhury, J.
• A. Kanodia, Adv. for the Petitioner.
• S.C. Keyal, Standing Counsel & Ms R. Hussain, Adv. for the Respondent.

Facts of the Case

The petitioner, engaged in the tea business, challenged the validity of Section 16(2)(aa) of the CGST Act. It was contended that the denial of input tax credit (ITC) solely on account of non-reflection of supplier details in Form GSTR-2A/2B and supplier’s non-compliance under Section 37/38 was irrational. It was submitted that purchasers could not ensure supplier compliance in Form GSTR-1 filings. The Department of Revenue maintained that ITC entitlement was subject to statutory conditions designed to curb fraud. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Section 16(2)(aa) must be read down to prevent denial of ITC to bona fide recipients solely due to supplier non-compliance in GSTR-1 and non-reflection in GSTR-2A/2B. The Court interpreted that while ITC entitlement must be established, it must be linked exclusively to supplier compliance. The tax collected by the seller was ultimately borne by the buyer, not included in the sale price. While the buyer must establish entitlement to the credit, it is unfair to deny it solely because the supplier failed to comply. It concluded that authorities under CGST must allow the petitioner to substantiate the bona fide status before denying credit.

List of Cases Referred to

• Suncraft Energy (P.) Ltd. v. Asstt. Commissioner, State Tax [2023] 153 taxmann.com 81/99 GST 400/77 GSTL 55 (Calcutta) (para 10)
• Diya Agencies v. State Tax Officer [2023] 154 taxmann.com 421/[2024] 82 GSTL 169 (Kerala) (para 10)
• Commissioner Trade and Tax Delhi v. Shanti Kiran India (P.) Ltd. [2025] 179 taxmann.com 665 (SC) (para 10)
• Asstt. Commissioner of State Tax v. Suncraft Energy (P.) Ltd. [2023] 157 taxmann.com 352/[2024] 101 GST 308/80 GSTL 225 (SC) (para 10)
• On Quest Merchandising India (P.) Ltd. v. Government of NCT of Delhi [2017] 87 taxmann.com 179/64 GST 623/[2018] 10 GSTL 182 (Delhi) (para 11).

The post ITC Can’t Be Denied Without Hearing Buyer’s Bona Fides | HC appeared first on Taxmann Blog.

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The Digital Personal Data Protection Act, 2023 is India’s data protection law that regulates the processing of digital personal data by individuals, companies, and government entities. It aims to protect the privacy rights of individuals (Data Principals) while permitting the lawful use of personal data for legitimate purposes, by prescribing obligations for data handlers (Data Fiduciaries), defining individual rights and duties, and providing for enforcement through penalties for non-compliance.

Check out Taxmann's FAQs on Digital Personal Data Protection Act 2023 which is authoritative and practical handbook to India's new privacy framework. Built on 150 meticulously crafted FAQs supported by statutory resumes, PIB clarifications, and Expert Committee insights, it offers a comprehensive, structured understanding of the DPDP Act and the DPDP Rules 2025. The book covers commencement timelines, fiduciary obligations, cross-border restrictions, penalties, appeals, and transitional provisions, as well as a dedicated chapter explaining the DPDP–RTI interplay. Updated till 23rd November 2025, it is an indispensable reference for legal, compliance, technology, governance, and regulatory professionals navigating India's evolving data protection regime.

FAQ 1. What is the new Digital Personal Data Protection Act, 2023 all about?

The Digital Personal Data Protection Act, 2023 (‘DPDP Act’) provides for the processing of digital personal data in a manner that recognises both the rights of the individuals to protect their personal data and the need to process such personal data for lawful purposes and for matters connected therewith or incidental thereto.

The Digital Personal Data Protection Act protects digital personal data [that is, the data by which a person (individual) may be identified] by providing for the following:

(a) The obligations of Data Fiduciaries (that is, persons, companies and government entities who process data) for data processing (that is, collection, storage or any other operation on personal data);

(b) The rights and duties of Data Principals (that is, the person to whom the data relates); and

(c) Financial penalties for breach of rights, duties and obligations.

The Digital Personal Data Protection Act also seeks to achieve the following:

(a) Introduce data protection law with minimum disruption while ensuring necessary change in the way Data Fiduciaries process data;

(b) Enhance the Ease of Living and the Ease of Doing Business; and

(c) Enable India’s digital economy and its innovation ecosystem.

FAQ 2. Whether DPDP Act apply to data in non-digital form?

The Digital Personal Data Protection Act applies to digital personal data i.e. personal data in digital form. Therefore, DPDP Act will not apply to data in non-digital form. However, in terms of clause (a) of section 3 of DPDP Act, DPDP Act shall apply to personal data in non-digital form which is digitised subsequently.

FAQ 3. When does the Digital Personal Data Protection Act come into force?

The DPDP Bill received the assent of the President of India on 11.08.2023. However, the DPDP Act does not provide for coming into force of the provisions with effect from the date of the President’s assent. As regards coming into force of the Act. Section 1(2) of the DPDP Act provides as under:

• It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and
• Different dates may be appointed for different provisions of this Act and
• Any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

In exercise of its powers under section 1(2), the  Central Government has, vide Notification G.S.R. 843 (E), dated 13.11.2025,  appointed the dates of coming into force of various provisions of the DPDP Act as per the Table below:

Provision of the DPDP Act	Appointed Date for Coming into Force of the Provision
Sub-section (2) of section 1, section 2, sections 18 to 26 sections 35, 38, 39, 40, 41, 42, 43, and sub-sections (1) and (3) of section 44	The date of publication of  Notification G.S.R. 843(E) in the Official Gazette (13.11.2025) [Clause (a) of the Notification]
Sub-section (9) of  section 6 and clause (d) of sub-section (1) of section 27	One year from the date of publication  of the Notification in the Official Gazette (13.11.2026) [Clause (b) of the Notification read with sections 3(66) and 9 of the General Clauses Act, 1897]
Sections 3 to 5, sub-sections (1) to (8) and (10) of section 6, sections 7 to 10, sections 11 to 17, section 27 except clause (d) of sub-section (1) of the said section, sections 28 to 34, 36, 37 and sub-section (2) of section 44	18 months from the date of publication  of the Notification in the Official Gazette (13.05.2027) [Clause (c) of the Notification read with sections 3(35) and 9 of the General Clauses Act, 1897]

 The date of coming into force is 13.11.2025 for the following provisions:

• sub-section (2) of section 1,
• section 2,
• sections 18 to 26
• sections 35, 38, 39, 40, 41, 42, 43, and
• sub-sections (1) and (3) of section 44.

“Year” is to be reckoned according to the Calendar year as per British Calendar in terms of section 3(66) of the General Clauses Act, 1897. “Month”, according to section 3(35) of the General Clauses Act, 1897, means a month reckoned according to the British calendar.  In terms of section 9(1) of the General Clauses Act, 1897, the word “from” is used to exclude the first in a series of days or any other period of time. In view of the above provisions of the General Clauses Act, the following position emerges:

• “One year from the date of publication”  of the Notification in the Official Gazette is to be reckoned from 13.11.2025 after excluding 13.11.2025. That is to say, one year is to be reckoned as calendar year 14.11.2025 to 13.11.2026. Therefore, 13.11.2026 is the date of coming into force for sub-section (9) of  section 6 and clause (d) of sub-section (1) of section 27.
• 18 months from the date of publication of the Notification is 18 calendar months reckoned as 14.11.2026 to 13.05.2027. Therefore, 13.05.2027 is the date of coming into force for:

1. 1. sections 3 to 5,
   2. sub-sections (1) to (8) and (10) of section 6,
   3. sections 7 to 10,
   4. sections 11 to 17,
   5. section 27 except clause (d) of sub-section (1) of the said section,
   6. sections 28 to 34, 36, 37 and
   7. sub-section (2) of section 44

FAQ 4. Whether Rules have been notified to operationalise the DPDP Act?

Yes, the Digital Personal Data Protection Rules, 2025, have been notified on 14.11.2025.

FAQ 5. What is the conceptual basis of the DPDP Act?

The conceptual basis of the DPDP Act is the report of the Expert Committee set up under the Chairmanship of Justice BN Srikrishna titled

“A Free and Fair Digital Economy Protecting Privacy, Empowering Indians’.

FAQ 6. What are the principles on which the DPDP Act is based on?

The DPDP Act is based on the following seven principles:

(a) The principle of consented, lawful and transparent use of personal data;

(b) The principle of purpose limitation (use of personal data only for the purpose specified at the time of obtaining consent of the Data Principal);

(c) The principle of data minimisation (collection of only as much personal data as is necessary to serve the specified purpose);

(d) The principle of data accuracy (ensuring data is correct and updated);

(e) The principle of storage limitation (storing data only till it is needed for the specified purpose);

(f) The principle of reasonable security safeguards; and

(g) The principle of accountability (through adjudication of data breaches and breaches of the provisions of the DPDP Act and imposition of penalties for the breaches).

The DPDP Act is guided by seven core principles of consent and transparency, purpose limitation, data minimisation, accuracy, storage limitation, security safeguards, and accountability. [PIB Press Release, dated 14-11-2025]

The law rests on seven core principles. These include consent and transparency, purpose limitation, data minimisation, accuracy, storage limitation, security safeguards and accountability. These principles guide every stage of data processing. They also ensure that personal data is used only for lawful and specific purposes. [PIB Press Release, dated 17-11-2025]

FAQ 7. Where can one find elaboration of the above 7 principles which are the basis for the DPDP Act?

One can find elaboration of the above 7 principles in the report of the Expert Committee set up under the Chairmanship of Justice BN Srikrishna titled

“A Free and Fair Digital Economy Protecting Privacy, Empowering Indians”.

FAQ 8. What is the rationale for enacting the DPDP Act?

The report of the Committee of Experts notes the admission by Facebook that the data of 87 million users, including 5 lakh Indian users, was shared with Cambridge Analytica through a third-party application that extracted personal data of Facebook users who had downloaded the application as well as their friends. According to the Report notes that this admission by Facebook is demonstrative of several such harms users did not have effective control over data. Further, they had little knowledge that their activity on Facebook would be shared with third parties for targeted advertisements around the US elections. The incident, unfortunately is neither singular, nor exceptional. Data gathering practices are usually opaque, mired in complex privacy forms that are unintelligible, thus leading to practices that users have little control over. Inadequate information on data flows and consequent spam or worse still, more tangible harms, are an unfortunate reality. The Report notes that

“Currently, the law does little to protect individuals against such harms in India”.

To fill in the vacuum and protect individuals against such harms, a new law was necessary. Hence, the DPDP Act was enacted with the objective of “keeping citizens’ personal data protected while unlocking the digital economy.”

FAQ 9. What are the aims and objects of the DPDP Act?

In Justice K.S. Puttaswamy (Retd.) v. Union of India, the Hon’ble Supreme Court held that the right to privacy is a fundamental right under Article 21 of the Constitution of India. To make this right meaningful, it was necessary to put in place a data protection framework which, while protecting citizens from dangers to informational privacy originating from state and non-state actors, serves the common good. The data protection framework could not focus on right to privacy alone. There had to be a balancing of right to privacy with other considerations and values. In Puttaswamy (supra), the Supreme Court observed that

“Formulation of a regime for data protection is a complex exercise which needs to be undertaken by the State after a careful balancing of the requirements of privacy coupled with other values which the protection of data sub-serves together with the legitimate concerns of the State.”

Thus, the (‘DPDP Act’) aims to provide for the processing of digital personal data in a manner that recognises both the rights of the individuals to protect their personal data and the need to process such personal data for lawful purposes (needs of digital economy).

FAQ 10. Till the date DPDP Act comes into force on date notified by Central Government, are there no existing legal provisions protecting digital personal data of individuals from unauthorised use?

No. That is not the case. Till the date the DPDP Act comes into force, the existing legal provisions to protect digital personal data of individuals are contained in section 43A of the Information Technology Act, 2000 which provides for Compensation for failure to protect data.

Section 43A of the IT Act, 2000 provides that where a body corporate, possessing, dealing or handling any sensitive personal data or information in a computer resource which it owns, controls or operates, is negligent in implementing and maintaining reasonable security practices and procedures and thereby causes wrongful loss or wrongful gain to any person, such body corporate shall be liable to pay damages by way of compensation to the person so affected.

Explanation in section 43A defines the terms “body corporate”, “reasonable security practices and procedures” and “sensitive personal data or information” for the purposes of section 43A as under:

(i) “body corporate” means any company and includes a firm, sole proprietorship or other association of individuals engaged in commercial or professional activities;

(ii) “reasonable security practices and procedures” means security practices and procedures designed to protect such information from unauthorised access, damage, use, modification, disclosure or impairment, as may be specified in an agreement between the parties or as may be specified in any law for the time being in force and in the absence of such agreement or any law, such reasonable security practices and procedures, as may be prescribed by the Central Government in consultation with such professional bodies or associations as it may deem fit;

(iii) “sensitive personal data or information” means such personal information as may be prescribed by the Central Government in consultation with such professional bodies or associations as it may deem fit.

The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (hereinafter referred to as the SPDI rules) were notified by Central Government to define “sensitive personal data or information” and specify “reasonable security practices and procedures”. The SPDI Rules were notified by the Central Government under powers conferred on it by sections 43A and 87(2)(ob) of the IT Act, 2000.

FAQ 11. Whether the existing protection to individuals under section 43A of IT Act and SPDI Rules will continue to be available once the DPDP Act comes into force?

In terms of section 44(2) of the DPDP Act, sections 43A and 87(2)(ob) of IT Act, 2000 and SPDI Rules shall stand repealed from the date notified by Central Government under section 1(2) of DPDP Act for coming into force of section 44(2) of DPDP Act. Sub-section (2) of section 44 has been notified to come into force with effect from 13.05.2027. Therefore, Sections 43A and 87(2)(ob) of IT Act and SPDI Rules shall stand omitted with effect from 13.05.2027.

FAQ 12. Whether the DPDP Act provides for compensation to affected individuals in case of personal data breach like section 43A of IT Act?

No. There are no provisions for compensation in DPDP Act along the lines of section 43A.

FAQ 13. What protections are available to individuals under existing provisions of section 43A of IT Act and SPDI Rules against unauthorised use/breach of privacy of their personal data?

Rule 2(1)(i) of the SPDI Rules defines “Personal Information” to mean “any information that relates to a natural person, which, either directly or indirectly, in combination with other information available or likely to be available with a body corporate, is capable of identifying such person.”

Rule 3 of the SPDI Rules defines the term “Sensitive personal data or information” to mean such personal information which consists of information relating to:

(i) password;

(ii) financial information such as Bank account or credit card or debit card or other payment instrument details ;

(iii) physical, physiological and mental health condition;

(iv) sexual orientation;

(v) medical records and history;

(vi) Biometric information;

(vii) any detail relating to the above clauses as provided to body corporate for providing service; and

(viii) any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise.

Proviso to Rule 3 clarifies that any information that is freely available or accessible in public domain or furnished under the Right to Information Act, 2005 or any other law for the time being in force shall not be regarded as sensitive personal data or information for the purposes of these rules.

Rule 4 of SPDI Rules provides for Body corporate to provide policy for privacy and disclosure of information as under:

(a) The body corporate or any person who on behalf of body corporate collects, receives, possess, stores, deals or handle information of provider of information, shall provide a privacy policy for handling of or dealing in personal information including sensitive personal data or information and ensure that the same are available for view by such providers of information who has provided such information under lawful contract.

(b) Such policy shall be published on website of body corporate or any person on its behalf and shall provide for:

(i) Clear and easily accessible statements of its practices and policies;

(ii) Type of personal or sensitive personal data or information collected under rule 3;

(iii) Purpose of collection and usage of such information;

(iv) Disclosure of information including sensitive personal data or information as provided in rule 6;

(v) Reasonable security practices and procedures as provided under rule 8.

Rule 5 of SPDI Rules provides for Collection of information as under:

(1) Body corporate or any person on its behalf shall obtain consent in writing through letter or Fax or email from the provider of the sensitive personal data or information regarding purpose of usage before collection of such information.

(2) Body corporate or any person on its behalf shall not collect sensitive personal data or information unless:

(a) the information is collected for a lawful purpose connected with a function or activity of the body corporate or any person on its behalf; and

(b) the collection of sensitive personal data or information is considered necessary for that purpose.

The post Digital Personal Data Protection Act, 2023 – FAQs | Key Provisions appeared first on Taxmann Blog.

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Act No. 40 of 2025, Dated: 20.12.2025

1. Legislative Milestone

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 received the President’s assent on December 20, 2025, marking a significant reform in India’s insurance regulatory framework. The Act represents a major step towards liberalisation, expansion of insurance coverage, and strengthening of the insurance ecosystem.

2. Statutes Amended

The Act amends the following key legislations governing the insurance sector in India:

• Insurance Act, 1938
• Life Insurance Corporation Act, 1956
• Insurance Regulatory and Development Authority Act, 1999

By amending these foundational laws, the Act creates a unified and modernised legal framework to support the evolving needs of the insurance market.

3. Foreign Investment Liberalisation

3.1 Increase in FDI Limit

A central feature of the Act is the liberalisation of foreign investment norms in the insurance sector.

• Foreign investment, including Foreign Direct Investment (FDI), is permitted up to 100%
• The limit applies to the paid-up equity capital of Indian insurance companies
• The enhanced cap is subject to prescribed conditions, safeguards, and regulatory oversight

This marks a departure from the earlier capped regime and places India among jurisdictions with fully open insurance markets, subject to regulatory controls.

4. Regulatory Safeguards

While allowing 100% foreign investment, the Act envisages that:

• Conditions relating to ownership, control, governance, and management will be prescribed
• Regulatory oversight will continue to ensure:

1. 1. Protection of policyholders’ interests
   2. Financial stability and solvency of insurers
   3. Compliance with prudential and conduct norms

This ensures that liberalisation does not dilute consumer protection or systemic stability.

5. Policy Objectives

The amendments seek to:

• Attract long-term foreign capital into the insurance sector
• Enhance insurance penetration and density
• Improve competition, product innovation, and service quality
• Strengthen the financial capacity and solvency of insurers
• Support the vision of “Sabka Bima, Sabki Raksha” by expanding access to insurance across all sections of society

6. Implications for the Insurance Sector

6.1 For Insurers

• Greater flexibility in capital structuring
• Access to global expertise, technology, and best practices
• Opportunities for consolidation, expansion, and innovation

6.2 For Investors

• Entry into a large and under-penetrated insurance market
• Full ownership possibilities, subject to regulatory conditions

6.3 For Policyholders

Potential benefits from:

• Wider product offerings
• Improved service standards
• Stronger and better-capitalised insurers

7. Next Steps

The operational impact of the Act will unfold through:

• Rules, regulations, and guidelines prescribing conditions for 100% foreign investment
• Transitional provisions for existing insurers and shareholders
• Regulatory clarifications on governance and control requirements

8. Key Takeaway

The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 ushers in a transformative phase for India’s insurance sector by permitting up to 100% foreign investment, modernising core insurance laws, and strengthening the foundation for wider coverage, deeper capital markets, and enhanced policyholder protection.

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