Editorial Team – [2026] 183 taxmann.com 539 (Article)

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:-

1. IAASB Initiates Post-Implementation Review of ISA 540 and Seeks Stakeholders Comments

The International Auditing and Assurance Standards Board has launched a public consultation survey as part of its post-implementation review of International Standard on Auditing 540 (Revised). The ISA 540 deals with auditing accounting estimates and related disclosures. Effective for audits of financial statements for periods beginning on or after 15th December 2019, ISA 540 (Revised) introduced more robust requirements and enhanced guidance to strengthen audit quality, particularly in areas involving complex judgments, estimation uncertainty, and management bias.

Through this survey, the IAASB is seeking input from auditors, preparers, regulators, investors, and other stakeholders to evaluate whether the revised standard has achieved its intended objectives and delivered meaningful improvements in audit practices. The consultation specifically seeks views on overall experience with the standard, the usefulness of related non-authoritative guidance and implementation tools, the benefits observed in practice, and any challenges or unintended consequences encountered.

Stakeholders may respond to all questions or only those relevant to their experience, and all responses will be placed on the public record. The survey is open for comments until 15th June 2026.

Source – International Auditing and Assurance Standards Board

2. Financial Reporting Council Seeks Consultation on Temporary Amendment to Third Country Auditor Policy

The Financial Reporting Council has issued a consultation on a proposed temporary amendment to its Third Country Auditor policy that would allow auditors of certain Chinese-registered companies to use Chinese Standards on Auditing for UK listing purposes. The proposal applies to entities listing Global Depositary Receipts in London through the Stock Connect arrangement linked to the London Stock Exchange.

The change is intended to address a perceived barrier for Chinese issuers considering a UK listing and to support broader efforts to enhance London’s competitiveness as a global capital market. The amendment would be time-limited, narrowly scoped, and subject to safeguards, including mandatory registration of auditors with the FRC as Third Country Auditors, ongoing supervisory oversight, and clear disclosure of the auditing standards applied.

The proposal would apply only to companies listed within the designated Stock Connect segment and would not affect other China-registered issuers or the wider Third Country Auditor framework. The FRC is inviting feedback on whether the approach appropriately balances investor protection and audit quality with the objective of supporting economic growth.

Source – Financial Reporting Council

Click Here To Read The Full Article

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RBI/2025-26/223 A.P. (DIR Series) Circular No. 23; Dated: 18.02.2026

On 9 February 2026, the Reserve Bank of India (RBI) issued the FEM (Borrowing and Lending) (First Amendment) Regulations, 2026, introducing revisions to the External Commercial Borrowing (ECB) framework under the foreign exchange regulatory regime.

1. Revision of ECB Reporting Framework

Pursuant to the amendment:

• The reporting framework for External Commercial Borrowings (ECBs) has been updated
• Changes align with the revised ECB regulatory structure
• Reporting requirements under the relevant Master Direction have been modified accordingly

This ensures consistency between regulatory provisions and reporting formats.

2. Update in ECB Return Forms

The RBI has updated:

• Prescribed forms for ECB returns
• As contained in the Master Direction on Reporting

The revised forms now reflect:

• Updated ECB framework provisions
• Revised data capture and disclosure requirements
• Alignment with amended borrowing and lending regulations

Entities raising or servicing ECBs must use the updated forms for reporting.

3. Effective Date

• The amendment directions and revised reporting forms come into force with immediate effect from the date of issuance.

All eligible borrowers, lenders, and authorised dealer banks must comply with the revised reporting framework.

4. Key Takeaway

RBI’s FEM (Borrowing and Lending) (First Amendment) Regulations, 2026 update the ECB framework and corresponding reporting formats, requiring immediate compliance with revised return forms under the Master Direction on Reporting.

Click Here To Read The Full Circular

The post RBI Revises ECB Reporting Forms Under Amended ECB Framework appeared first on Taxmann Blog.

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Case Details: Hemlata Eknath Pise vs. Shubham Bahu-uddeshiya Sanstha Waddhamna [2026] 183 taxmann.com 399 (SC)

Judiciary and Counsel Details

• Dipankar Datta & Satish Chandra Sharma, JJ.
• Amol B. Karande, AOR, B Lakshmi Pallesh, Ms Akshda, Ashutosh Shrivastava and Manoj Ramkrushna Shete, Advs. for the Appellant.
• Satyajit A. Desai, Sachin Patil, Parth Johri, Sachin Singh, Pratik Kumar Singh, Shashank Upadhyay, Madhur Duggal, Sanchit Agrahari, Narendar Rao Taneer, Ms M. Harshini, Naman Tandon, Siddharth Dharmadhikari, Shrirang B. Varma, Advs., Ms Anagha S. Desai, Sravan Kumar Karanam and Aaditya Aniruddha Pande, AORs for the Respondent.

Facts of the Case

In the instant case, the appellant was dismissed from service by the first respondent-employer. The Tribunal set aside the dismissal and directed reinstatement with consequential benefits. The First respondent filed a writ petition before the High Court challenging the Tribunal’s order.

The High Court allowed the writ petition, quashed the Tribunal’s order, and remanded the matter to the Tribunal for fresh consideration only on the point that the Tribunal had not examined all records, particularly the resolution authorising the Secretary to initiate proceedings against the appellant.

The appellant sought review before the High Court, contending that the disciplinary inquiry suffered from a gross breach of natural justice, including the denial of the opportunity to complete cross-examination of the main management witness and other witnesses, and asserting that the Tribunal had found the charges not proved.

The High Court dismissed the review petition. Thereafter, an appeal was made before the Supreme Court.

Supreme Court Held

The Supreme Court held that the High Court erred in remanding the matter to the Tribunal based on only a single point without addressing other issues arising in the case, thereby vitiating its order. Accordingly, impugned orders were to be set aside, and the writ petition was to be remanded to the High Court for fresh consideration in light of the claims and defences of the parties.

List of Cases Reviewed

• Order of High Court of Judicature at Bombay, Nagpur bench, in Writ Petition No.5899 of 2019 dated 05-09-2024 (para 10) set aside

The post Remand on Single Issue Improper – HC Must Consider All Grounds | SC appeared first on Taxmann Blog.

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Case Details: DG Anti Profiteering, Director General of Anti-Profiteering, DGAP vs. C.G. Foods [2026] 183 taxmann.com 241 (GSTAT-NEW DELHI)

Judiciary and Counsel Details

• Anil Kumar Gupta, Technical Member

Facts of the Case

The Director General of Anti-Profiteering (DGAP) filed a complaint, alleging that the assessee had not passed on the GST rate reduction from 18% to 12% on instant noodles supplied. The DGAP report showed that the assessee had increased base prices for several SKUs after the rate cut, effectively denying customers the benefit. It also submitted documents showing higher costs for raw materials, packaging, fuel, and freight, but these mostly related to periods before the rate reduction and did not justify withholding the benefit. The matter was accordingly placed before the Goods and Services Tax Appellate Authority (GSTAT).

GSTAT Held

The GSTAT held that the assessee had contravened the provisions of Section 171(1) of the CGST Act and the Delhi GST Act by denying customers the benefit of tax reduction. The Authority observed that the DGAP report demonstrated that the assessee had profiteered. It held that increases in cost prior to the rate reduction did not excuse non-passing of the statutory benefit. Consequently, the Authority directed the assessee to deposit the profiteered amount in the Consumer Welfare Fund created by the Central and State Governments equally, confirming the applicability of Section 171 of the CGST Act and the Delhi GST Act.

List of Cases Referred to

• Reckitt Benckiser India (P.) Ltd. v. Union of India [2024] 158 taxmann.com 675/102 GST 495/82 GSTL 344 (Delhi) (para 3)
• CIT (Central)-I v. Vatika Township (P.) Ltd. [2014] 49 taxmann.com 249/227 Taxman 121/367 ITR 466 (SC) (para 17).

The post GSTAT Finds Profiteering in Instant Noodles | Deposit to CWF Ordered appeared first on Taxmann Blog.

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Case Details: Pedda Masthan Enterprises vs. Assistant Commissioner ST, Chittoor [2026] 183 taxmann.com 108 (Andhra Pradesh)

Judiciary and Counsel Details

• R Raghunandan Rao & T.C.D. Sekhar, JJ.
• Srinivasa Rao Kudupudi for the Petitioner.

Facts of the Case

The petitioner challenged the validity of an assessment order and a subsequent summary order in DRC-07 relating to the period from August 2022 to February 2023. It submitted that its registration had been cancelled and that it could not focus on the assessment proceedings as it was pursuing appeals against earlier assessment orders. It further contended that the assessment order did not contain the signature of the assessing authority and that the summary of the order did not include a Document Identification Number (DIN), and therefore the orders could not be treated as valid in law. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the absence of a DIN in the summary order did not affect its validity because the summary contained a reference number, which is generated only after the assessing authority affixes a signature to the order. The Court noted that the petitioner had offered no explanation for the delay. Accordingly, the Court found that none of the grounds raised by the petitioner was tenable and dismissed the writ petition, holding that the assessment and summary orders passed under Section 64 read with Section 74 of the CGST Act.

List of Cases Referred to

• Sahiti Agencies v. Asstt. Commissioner of Central Tax and Central Excise [2025] 180 taxmann.com 547 (Andhra Pradesh) (para 11).

The post Portal Reference Number Confirms Valid GST Assessment Order | HC appeared first on Taxmann Blog.

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Case Details: LICHFL Fund vs. ITO Ward 23(2)(1) [2026] 183 taxmann.com 420 (Mumbai-Trib.)

Judiciary and Counsel Details

• Amit Shukla, Judicial Member & Makarand Vasant Mahadeokar, Accountant Member
• Dhanesh Bafna, Hardik Nirmal & Ms Hinal Shah, ARs for the Applicant.

  Surendra Mohan, DR for the Respondent.

Facts of the Case

The assessee was a trust registered with the Securities and Exchange Board of India (SEBI) as a Venture Capital Fund (VCF) under the SEBI (Venture Capital Funds) Regulations, 1996. For the relevant assessment year, the assessee filed its returns of income, declaring nominal taxable income after claiming exemption under section 10 (23FB) of the Income-tax Act, 1961, in respect of income earned from investments in portfolio companies treated as Venture Capital Undertakings (VCUs).

The cases were selected for scrutiny, and notices under section 143(2) and section 142(1) were issued. During the assessment proceedings, the assessee furnished details of investments made in portfolio companies, the nature of income earned therefrom and the basis for claiming exemption under section 10(23FB).

The Assessing Officer (AO), however, did not accept the assessee’s claim of exemption in respect of interest income earned from certain portfolio companies, holding that the investee entities did not qualify as eligible Venture Capital Undertakings in terms of SEBI Regulations and that the income was in the nature of fixed return akin to interest. Aggrieved by the order, the assessee preferred an appeal to the CIT(A).

The CIT(A) deleted the additions made by the AO. Aggrieved by the order, the AO preferred an appeal to the Tribunal.

ITAT Held

The Mumbai Tribunal held that section 10(23FB) is a special provision intended to accord a pass-through exemption to a Venture Capital Company or Venture Capital Fund registered with SEBI, in respect of income arising from investment in a Venture Capital Undertaking, subject to fulfilment of the prescribed conditions. The object is to facilitate venture capital funding by avoiding tax friction at the fund level, while the tax incidence, if any, is ordinarily intended to arise at the level of investors or at the appropriate stage as contemplated by the scheme of the law.

However, the exemption is not an unfettered blanket immunity for all receipts. The statute, on its plain language, links exemption to the income of an SEBI-registered VCF/VCC from investment in a Venture Capital Undertaking, and therefore, the character and eligibility of the investee as a “venture capital undertaking” remains a jurisdictional fact that must be satisfied.

The assessee contended that Explanation 1 clause (c), as substituted w.e.f. 01.04.2013, aligns the meaning of “venture capital undertaking” to the SEBI (Venture Capital Funds) Regulations, 1996 framed under the SEBI Act, 1992. On this aspect, the Tribunal agreed with the proposition that, post-substitution, the enquiry into whether an investee qualifies as a “venture capital undertaking” must be tested against the SEBI regulatory framework.

Accordingly, to the extent the lower authorities may have proceeded on a pre-amended understanding or an incorrect statutory benchmark, the same would require correction. SEBI registration is a necessary foundational requirement, but it does not dispense with the assessee’s obligation to demonstrate, on facts and evidence, that the income claimed as exempt is of the kind contemplated by section 10(23FB).

In the instant case, the assessee has produced the relevant documents, including NCLT records, SEBI quarterly and sector-wise filings, and investment deployment details, which establish that the investee entity was incorporated and structured for the acquisition and operation of hospital and healthcare assets. These materials further show that the sectoral deployment of funds was in healthcare and real estate, which do not fall within the negative list prescribed under the Third Schedule to the SEBI (Venture Capital Funds) Regulations, 1996. Accordingly, the assessee qualified for exemption under section 10(23FB) in respect of the income earned from its investment in the Venture Capital Undertaking.

The post Investee Not Pass-Through Entity – Section 10(23FB) Exemption Allowed | ITAT appeared first on Taxmann Blog.

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Case Details: Malabar Plaza Residency & Restaurant vs. Assistant State Tax Officer [2026] 183 taxmann.com 313 (Kerala)

Judiciary and Counsel Details

• Ziyad Rahman A.A., J.
• Lijo Varghese, K.N. Sreekumaran & P.J. Anilkumar, Advs. for the Petitioner.
• Smt. Reshmitha R Chandran, SR GP for the Respondent.

Facts of the Case

The petitioner challenged the rejection of its input tax credit (ITC) claims. It had submitted all relevant returns. The ITC claims were rejected on the ground that the returns were filed beyond the statutory time limit prescribed under Section 16(4) of the CGST Act. It was contended that Section 16(5), introduced with effect from 16-08-2024, provided that where returns were filed on or before 30-11-2021, ITC could be claimed. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that even if there were lapses by the petitioner in filing returns, the claim for ITC could not be denied solely for that reason. The Court observed that Section 16(5) begins with the words “Notwithstanding anything contained in Sub-Section (4),” and therefore, the cut-off date prescribed in Section 16(4) was not relevant where the return was filed within the extended period under Section 16(5). It was further noted that the dates of filing of returns, as discernible from the impugned order, confirmed compliance within the statutory extension. Accordingly, the petitioner was entitled to claim the ITC.

The post ITC Not Denied for Late Returns Filed Within Sec 16(5) Cut-Off | HC appeared first on Taxmann Blog.

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Notification no. G.S.R 114(E); Dated: 03.02.2026

The Central Government of India has notified the Special Economic Zones Rules, 2026, introducing updated procedural and regulatory provisions governing Special Economic Zones (SEZs), including those relating to International Financial Services Centres (IFSCs).

1. Amendment to Rule 19 – Letter of Approval to a Unit

An amendment has been made to Rule 19, which deals with the “Letter of Approval to a Unit.”

Under the revised provision:

• The Administrator of the IFSC, i.e., the International Financial Services Centres Authority (IFSCA)
• Shall issue a Letter of Approval (LoA)
• In Form GA
• For the setting up of a Unit in an International Financial Services Centre (IFSC)

2. Significance of the Amendment

The amendment:

• Clarifies the authority responsible for issuing Letters of Approval in IFSCs
• Formalises the process through a prescribed Form GA
• Aligns SEZ regulatory provisions with the specialised governance structure of IFSC

This ensures a streamlined approval mechanism within the IFSC framework.

3. Regulatory Objective

The updated rule aims to:

• Enhance clarity in administrative processes
• Ensure uniform documentation standards
• Strengthen regulatory coordination between SEZ framework and IFSC governance

4. Key Takeaway

Under the Special Economic Zones Rules, 2026, the IFSCA, acting as Administrator of the IFSC, is now expressly empowered to issue the Letter of Approval in Form GA for setting up units within the IFSC, reinforcing regulatory clarity and procedural uniformity.

Click Here To Read The Full Notification

The post Govt. Notifies the Special Economic Zones Rules, 2026 appeared first on Taxmann Blog.

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Press Release no. 2025-2026/2130; Dated: 17.02.2026

The RBI has released draft directions on foreign exchange dealings of Authorised Persons. As per the directions, an authorised dealer (AD) may undertake certain foreign exchange transactions with other ADs and with its overseas branches/entities/IFSC banking units (IBUs)/Offshore Banking Units (OBUs) in Special Economic Zones for the purpose of hedging its exposures, balance sheet management, market making and proprietary positions.

Further, an authorised dealer may undertake non-deliverable derivative contracts (NDDCs) involving INR with other Authorised Dealers and with overseas entities/IBUs/OBUs in Special Economic Zones either directly or on a back-to-back basis through their overseas branches (in case of foreign banks operating in India, through any branch of the parent bank), IBUs, overseas wholly owned subsidiaries and overseas joint ventures, subject to the following conditions:

(a) NDDCs involving INR can be undertaken by an Authorised Dealer Category-I bank, subject to the condition that the Authorised Dealer Category-I bank (or its non-resident parent bank) has an operating IBU;

(b) Such transactions may be undertaken by the wholly owned subsidiary/joint venture of Authorised Dealers incorporated in India, provided the wholly owned subsidiary/joint venture is a banking entity; and

(c) Such transactions may be cash-settled in INR or any foreign currency.

Also, the draft directions cover norms relating to exchange-traded transactions, hedging of gold prices, foreign currency accounts and investments in overseas markets, governance and risk management and market timings.

Click Here To Read The Full Press Release

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Anand Shrivastava, Ankit Bhandari & Mudassir – [2026] 183 taxmann.com 502 (Article)

In the past decade, India’s approach to clean energy transition has been shaped by a simple but compelling logic to prioritize renewable energy capacity deployment at scale over resolution of systemic challenges, with the intent that increasing capacity will force their resolution with time. Solar parks and wind corridors became the primary indicators of India’s ambition for clean energy transition. At the same time, discussions on structural issues such as grid stability, industrial emissions, and intermittency management were largely deferred. Nevertheless, the Union Budget 2026 suggests that the Government is beginning to re-evaluate this approach. By explicitly elevating energy storage, Carbon Capture, Utilisation and Storage (“CCUS”), and allied emerging technologies, the Budget signals a pragmatic shift away from a narrow renewables deployment centric framework towards a more integrated and cohesive energy transition strategy.

This recalibration is significant because India’s energy challenges have evolved. The main concern is no longer the pace of clean power deployment alone. As renewable penetration increases, the focus has moved to system integration ensuring reliability, managing peak demand, and addressing emissions from energy-intensive industries. The Budget 2026 reflects a growing policy awareness that decarbonisation is not driven by brute technology, but by a coordinated ecosystem that must balance environmental objectives along with structured growth and development.

1. From Installed Capacity to System Performance

One of the most significant aspects in the Budget is promotion of energy storage as a strategic priority. Through customs duty exemptions for battery energy storage systems, the Government has implicitly acknowledged their central role to renewable capacity enhancement, which without storage are not ideally placed for ensuring system stability. This represents a departure from earlier Budgets, where storage was treated largely as a pilot intervention rather than essential infrastructure.

By reducing costs for grid-scale storage and associated supply chains, the Budget seeks to address a persistent mismatch between renewable generation patterns and electricity demand. However, this transition remains only partially realised. While fiscal incentives are meaningful, public investment in transmission expansion and grid modernisation has not kept pace with the scale of integration required. Without faster upgrades to grid infrastructure, storage risks remaining under-deployed, limiting its potential as a system-wide enabler.

2. CCUS Gains Policy Legitimacy

The significant development in Budget 2026 is the recognition of CCUS. Dedicated, multi-year funding has brought CCUS firmly into India’s mainstream climate policy discourse for the first time. This inclusion is not simply about technology adoption; it reflects a strategic reassessment of how India intends to decarbonise while continuing to industrialise.

India’s emissions profile is heavily influenced by sectors such as steel, cement, refining, and chemicals, where renewable substitution and electrification offer only partial solutions in the short to medium term. CCUS provides a pathway to mitigate emissions from these industries without dismantling productive capacity that supports employment, exports, and economic resilience. The inclusion of CCUS signals a more dynamic climate strategy, one that recognises the limits of a renewables-only transition for an industrialising economy. Further, this also aligns India more closely with global decarbonisation pathways.

That said, the gap between ambition and readiness remains wide. India lacks a comprehensive regulatory framework governing carbon storage, long-term liability, and monitoring. CCUS projects are capital-intensive and difficult to commercialise without strong market signals, such as carbon pricing or long-term offtake mechanisms. While the budget establishes policy intent, its success will depend on regulatory clarity and implementation at the administrative level.

Click Here To Read The Full Article

The post [Opinion] Union Budget 2026 and India’s Energy Transition | Moving Past The Renewables Only Lens appeared first on Taxmann Blog.

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