The Securities and Exchange Board of India (SEBI) has proposed a new methodology for calculating variable net worth of stock brokers, aligning capital requirements with actual business scale and risk exposure.

1. Background – Limitation of Existing Framework

• Earlier, variable net worth was based on client funds held by brokers
• However, due to regulatory reforms:

1. 1. Client funds are now largely transferred directly to clearing corporations
   2. Brokers no longer hold significant client balances

Result – The existing method no longer reflects true operational risk

2. Proposed New Methodology

SEBI proposes to link variable net worth to:

• 10% of average client balances, and
• Number of active clients

This includes:

• Clients onboarded directly by brokers
• Clients brought through Authorised Persons

3. Shift in Approach

The new framework focuses on:

• Trading activity levels
• Client engagement and scale of operations

Instead of:

• Merely tracking funds held by brokers

4. Objective of the Proposal

The revised approach aims to:

• Ensure brokers maintain capital proportionate to their business size
• Reflect actual operational and systemic risk
• Strengthen risk management practices

5. Expected Impact

• Brokers with:

1. 1. Larger client base
   2. Higher trading volumes

Will be required to maintain higher capital buffers

This will lead to:

• Enhanced investor protection
• Improved market stability
• Better alignment between risk and capital requirements

6. Conclusion

SEBI’s proposal marks a shift towards a more activity-based and risk-sensitive capital framework, ensuring that regulatory requirements remain relevant in a changing market structure.

Click Here To Read The Full Update

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Case Details: Karnataka Vikas Grameena Bank vs. Deputy Commissioner of Commercial Taxes (Enforcement-2) [2026] 185 taxmann.com 418 (Karnataka)[08-04-2026]

Judiciary and Counsel Details

• M. Nagaprasanna, J.
• V. Raghuraman, Sr. Adv., Shashank S. Hegde, C.R. Raghavendra & Bhanu Murthy J.S., Advs. for the Petitioner.
• G.M. Gangadhar, AAG & M.B. Kanavi, Adv. for the Respondent.

Facts of the Case

The petitioner, a Regional Rural Bank, was subjected to inspection, pursuant to which DRC-01A was issued by the jurisdictional officer under CGST proposing the levy of GST under reverse charge on commissions paid to pigmy agents. It was submitted that pigmy agents functioned as employees under its control and were not independent business facilitators. Therefore, commissions paid to them constituted wages under an employer-employee relationship. It was contended that such services fell outside the scope of supply and no GST, including under reverse charge, was payable. The petitioner relied upon the terms of engagement, demonstrating that the bank exercised pervasive control over the agents. The petitioner further submitted that classifying such agents as business facilitators was erroneous, as they did not operate as intermediaries under the RBI model. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the relationship between the petitioner and the pigmy agents constituted that of employer and employee. It held that the commissions paid to such agents were in the nature of wages arising out of employment and not consideration for independent services. The Court interpreted Section 7 read with Schedule III of the CGST Act to conclude that services rendered by an employee to the employer in the course of employment are outside the scope of supply and therefore not exigible to GST. It concluded that classifying such agents as business facilitators was invalid because the factual matrix did not meet the criteria for independent intermediaries and GST, including under the reverse charge mechanism, was not payable on such payments, and the impugned show cause notices were liable to be quashed.

List of Cases Reviewed

• Indian Banks Association v. Workmen of Syndicate Bank 2001 taxmann.com 4526 (SC) (para 11)
• Dharangadhara Chemical Works Limited v. State of Saurashtra 1956 SCC OnLine SC 11 (para 11)
• Hussainbhai v. Alath Factory Tozhilali Union 1978 taxmann.com 278 (SC) (para 11)
• Sushilaben Indravadan Gandhi v. New India Assurance Company Ltd. (2021) 7 SCC 151 (para 11), followed

List of Cases Referred to

• Indian Banks Association v. Workmen of Syndicate Bank 2001 taxmann.com 4526 (SC) (para 7)
• Dharangadhara Chemical Works Limited v. State of Saurashtra 1956 SCC OnLine SC 11 (para 10.1)
• Hussainbhai v. Alath Factory Tozhilali Union 1978 taxmann.com 278 (SC) (para 10.2)
• Sushilaben Indravadan Gandhi v. New India Assurance Company Ltd. (2021) 7 SCC 151 (para 10.3).

The post Pigmy Agents Treated as Employees – No GST on Commission | HC appeared first on Taxmann Blog.

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Case Details: Mytrah Energy India (P.) Ltd. vs. Union of India [2026] 185 taxmann.com 547 (Andhra Pradesh)

Judiciary and Counsel Details

• R Rashunandan Rao & T.C.D. Sekhar, JJ.
• Sai Sundeep Manchikalapudi, Adv. for the Petitioner.
• Suresh Kumar Routhu, Sr. SC for the Respondent.

Facts of the Case

The petitioner, a solar EPC supplier, was assessed in respect of supplies of solar power generating systems, and the assessment order passed during the pendency of the writ petition was challenged. It submitted that its supplies constituted a composite supply and contended that the explanation inserted by Notification No. 24/2018-Central Tax (Rate), dated 31-12-2018 providing for a 70:30 split of goods and services was optional and operative only from 01-01-2019. It was further contended that such split to the pre-01-01-2019 period was erroneous, particularly when the nature of supply had not been examined. It submitted that no determination had been made as to whether the supply resulted in immovable property or involved installation of movable goods, and thus the proper tax treatment was not ascertained. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that Circular No. 163/19/2021-GST, dated 06-10-2021 did not mandate retrospective application of the explanation inserted by the Notification No. 24/2018-Central Tax (Rate), dated 31-12-2018, but merely permitted its application at the option of the taxpayer. It held that the 70:30 split was applied mechanically without examining the nature of the supply or the applicability of Section 8 of the CGST Act. The assessment also ignored pre-01.01.2019 turnover and wrongly assumed retrospective effect of the explanation. Accordingly, the assessment order was held unsustainable and the matter was remanded for fresh determination.

List of Cases Referred to

• Sterling and Wilson (P.) Ltd. v. Joint Commissioner [2025] 170 taxmann.com 539/108 GST 567/95 GSTL 402 (Andhra Pradesh) (para 8)
• Siemens Gamesa Renewable Power (P.) Ltd. v. Asstt. Commissioner ST [Writ Petition No. 4799 of 2022, dated 3-12-2025] (para 8)
• Arka Green Power (P.) Ltd. v. State of Andhra Pradesh [Writ Petition No. 11989 of 2022, dated 24-12-2025] (para 8).

The post Solar EPC 70:30 GST Split Not Retrospective Without Review | HC appeared first on Taxmann Blog.

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The Securities and Exchange Board of India (SEBI), through a clarification dated 20th April 2026, has addressed queries relating to the Mutual Fund Regulations, 2026, specifically concerning Asset Management Companies (AMCs) under Route-2.

1. Net Worth Requirements for AMCs (Route-2)

As per the regulations:

• At the time of registration AMC must have a net worth of ₹150 crore, contributed by the sponsor
• Ongoing requirement:

1. 1. Maintain ₹100 crore net worth
   2. Can be reduced to ₹50 crore after 5 consecutive years of profitability

2. Query 1 – Composition of Net Worth (Equity + Preference Shares)

• The applicant proposed:

1. 1. ₹50 crore in equity shares
   2. ₹100 crore in redeemable preference shares (redeemable after 5 years of profits)

• SEBI’s Response:

1. 1. No clarification provided
   2. Cited policy-related considerations

3. Query 2 – Can a Family Trust Act as Sponsor?

SEBI clarified:

• A sponsor must be a “body corporate”
• A family trust is not a body corporate

Therefore:

• A family trust cannot act as a sponsor of a mutual fund

4. Important Caveat by SEBI

• The clarification:

1. 1. Is based only on the facts presented
   2. Does not constitute a final or binding decision

• Compliance with other applicable laws may still be required

5. Conclusion

The clarification reinforces SEBI’s strict interpretation of sponsor eligibility, ensuring only corporate entities can sponsor mutual funds, while leaving flexibility open on capital structure questions pending policy review.

Click Here To Read The Full Update

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CA Bhawna Grover & CA Prajwal Jha – [2026] 185 taxmann.com 779 (Article)

1. Introduction

Surface mining, commonly referred to as strip mining, involves the removal of layers of soil, rock, and other materials, collectively known as overburden, to access mineral deposits beneath the earth’s surface. Unlike underground mining, this method is typically used where mineral reserves are relatively close to the surface, such as in coal and lignite extraction.

In the course of such operations, entities incur significant costs in removing waste material. These costs, known as stripping costs, arise both during the development phase and the production phase of a mine. While development phase stripping costs are generally capitalised as part of the overall cost of constructing the mine, the accounting treatment becomes more nuanced once production begins.

During the production phase, stripping activities may generate dual benefits. On one hand, they facilitate the extraction of ore that can be processed into inventory in the current period. On the other hand, they may improve access to deeper or higher-quality ore deposits, thereby creating future economic benefits. The challenge lies in appropriately identifying, measuring, and allocating these costs to ensure that financial reporting reflects the economic substance of the mining activity.

2. Nature of Stripping Activity and Its Economic Impact

Stripping activity is an integral part of surface mining operations. It involves removing overburden to expose the ore body, enabling extraction. However, the material removed is often a mix of waste and usable ore, and the proportion between the two can vary significantly.

This relationship is captured through the concept of the stripping ratio, which indicates the quantity of waste material that must be removed to extract a given quantity of ore. A higher ratio implies greater effort and cost to access the same amount of ore, directly influencing operational efficiency and cost management.

Importantly, stripping activity does not merely facilitate current production. In many cases, it enhances access to future reserves, making it a forward-looking activity. This dual nature, current benefit and future benefit, is at the heart of the accounting challenge.

3. Accounting for Stripping Costs in the Production Phase

The accounting treatment of stripping costs during the production phase depends on the nature of the benefit derived. Where the benefit relates to ore extracted and processed in the current period, the associated costs are treated as part of inventory and recognised as an expense in accordance with the principles applicable to inventories.

However, where the stripping activity results in improved access to ore that will be extracted in future periods, the costs may be capitalised as a stripping activity asset, subject to certain conditions. This asset represents the economic benefit arising from enhanced access to the ore body.

In situations where a single stripping activity gives rise to both current and future benefits, the costs must be allocated between the inventory and the stripping activity asset. This allocation is typically based on a systematic and rational method, often linked to production metrics such as volume of waste removed or ore extracted.

Let us understand the concept with an example.

Example 1

Consider a mining company that incurs ₹1,000 lakh in overburden removal costs during a particular year. As a result of this activity, the company is able to extract ore worth ₹600 lakh in the current period. At the same time, the stripping activity exposes deeper layers of high-grade ore that will be mined in future years.

In this case, the stripping activity provides two distinct benefits: immediate extraction of ore (current benefit) and improved access to future reserves (future benefit). Accordingly, ₹600 lakh of cost would be associated with inventory (and expensed as cost of goods sold). In comparison, the remaining ₹400 lakh may qualify for capitalisation as a stripping activity asset, subject to meeting recognition criteria.

Example 2

Assume a company removes 1,000 tonnes of waste to extract 500 tonnes of ore. Based on technical estimates, only 700 tonnes of waste removal was required for current production, while the excess 300 tonnes improves access to future ore.

If total stripping cost incurred is ₹700 lakh, then:

Cost attributable to current production = (700/1,000) × ₹700 lakh = ₹490 lakh

Cost attributable to future benefit = (300/1,000) × ₹700 lakh = ₹210 lakh

Here, ₹490 lakh is treated as inventory cost, while ₹210 lakh is recognised as a stripping activity asset.

4. Recognition of Stripping Activity Asset

Capitalisation of stripping costs as an asset is not automatic. It requires the satisfaction of specific conditions that ensure the existence of a genuine economic benefit.

Firstly, it must be reasonably expected that the activity will lead to future economic benefits, typically in the form of easier or more efficient access to ore deposits. Secondly, the entity must be able to clearly identify the specific portion of the ore body for which access has been improved. This “component” forms the basis for linking costs with future benefits. Finally, the costs attributable to the stripping activity must be capable of being measured with sufficient reliability.

Only when all these conditions are met can the stripping activity be recognised as an asset. This ensures that capitalisation is grounded in economic reality rather than mere expectation.

Let us consider that a mining entity incurs ₹300 lakh on stripping activities to access a deeper section of the ore body. The entity has geological data confirming that this section contains economically viable reserves, and the costs incurred can be clearly tracked to this specific area.

Since, future economic benefit is probable, the specific component of the ore body is identifiable, and costs can be reliably measured, the ₹300 lakh qualifies for recognition as a stripping activity asset.

However, if the entity is unable to clearly identify the specific area benefiting from the activity, the same cost would be expensed instead of being capitalised.

Click Here To Read The Full Article

The post [Opinion] Stripping Costs in Mining | Expense or Asset? appeared first on Taxmann Blog.

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Editorial Team – [2026] 185 taxmann.com 754 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:

1. Finland to Introduce Tourist Tax to Boost Local Revenue

The Finland Ministry of Finance has evaluated the feasibility of introducing a tourist tax. Following a preliminary report and stakeholder consultations, the Government has decided to commence legislative drafting.

The proposed tax would allow municipalities in popular tourist destinations to generate additional revenue from tourism, with adoption left to their discretion. It would apply to short-term paid accommodation for both domestic and foreign travellers, ensuring equal treatment across accommodation types. The objective is to offset tourism-related municipal costs through a simple and clear tax model.

As a new levy, it will require enactment through legislation specifying the conditions for adoption. Tax proceeds will remain with the respective municipality. The tax is expected to be a moderate percentage of accommodation charges, with details to be finalised during drafting.

The Ministry has initiated drafting, and a proposal will be released for public consultation via Lausuntopalvelu.fi. If enacted in 2027, municipalities may implement it from 2028. No pilot project is proposed.

2. Australian Tax Office Updates Transfer Pricing Compliance Approach for Inbound Distribution Arrangements

On 23 April 2026, the Australian Taxation Office (ATO) published an updated Practical Compliance Guideline (PCG) setting out its compliance approach to transfer pricing issues arising in inbound distribution arrangements. The updated PCG builds on PCG 2019/1, which the ATO originally issued in 2019 and which introduced a risk-rating framework for assessing the transfer pricing risk profile of foreign-owned entities distributing goods in Australia. The 2026 update reflects evolving market conditions, updated benchmarking data, and operational lessons learned since the original guideline came into effect.

The ATO assesses the transfer pricing risk of inbound distribution arrangements by comparing the profit outcome—measured as earnings before interest and tax (EBIT) relative to sales—against industry-specific profit markers. Arrangements that fall within the designated “green zone” (low risk) are generally not subject to ATO compliance activity. A new “white zone” has been introduced in the updated PCG, providing a safe harbour for certain taxpayers that meet specified criteria, offering an additional tier of certainty for compliant arrangements. Arrangements falling in the higher-risk “red zone” remain subject to priority review and potential audit.

The updated guidance is of significant relevance to the many multinational groups that distribute goods into Australia through related-party arrangements with foreign manufacturers or principals. Transfer pricing in this context is a perennial area of ATO focus, and the refresh of the compliance framework signals continued scrutiny. MNE groups with inbound distribution arrangements in Australia should review their EBIT margins against the updated profit markers, assess their zone classification, and consider whether contemporaneous transfer pricing documentation adequately supports their pricing outcomes in line with the arm’s length standard.

Source – Australian Taxation Office

Click Here To Read The Full Article

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The Reserve Bank of India (RBI), through a circular dated April 20, 2026, has revised norms on risk management and inter-bank foreign exchange dealings, including withdrawal of an earlier circular dated April 1, 2026.

1. Withdrawal of Earlier Relaxation

• RBI has withdrawn the relaxation granted earlier
• The revised framework introduces stricter controls on FX derivative transactions

2. Prohibition on Related Party Transactions

• Authorised Dealers (ADs) are now restricted from entering into INR-based FX derivative contracts with related parties

3. Permitted Exceptions

Two limited exceptions have been allowed:

• Cancellation or Rollover of Existing Contracts – Existing derivative contracts may be cancelled or rolled over
• Back-to-Back Transactions

1. 1. Permitted with non-related, non-resident users
   2. Must comply with existing RBI guidelines

4. Definition of ‘Related Party’

• The term shall be interpreted as per Ind AS 24 / IAS 24 (Accounting Standards)

5. Legal Framework

• The directions have been issued under Foreign Exchange Management Act (FEMA), 1999
• Applicable with immediate effect
• Subject to any other approvals or permissions required under applicable laws

6. Objective of the Circular

The measure aims to:

• Strengthen prudential risk management
• Prevent conflicts of interest and misuse of derivatives
• Ensure arm’s length transactions in FX markets

7. Conclusion

The revised directions reinforce RBI’s focus on market integrity and risk containment, ensuring that FX derivative transactions remain transparent, compliant, and free from related-party influence.

Click Here To Read The Full Circular

The post RBI Bars INR Forex Derivatives with Related Parties appeared first on Taxmann Blog.

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Case Details: Commissioner vs. Uttam Kumar [2026] 185 taxmann.com 221 (SC)[02-04-2026]

Judiciary and Counsel Details

• Dipankar Datta & Satish Chandra Sharma, JJ.
• Ms Archana Pathak Dave, A.S.G., Mukesh Kumar Maroria, AOR, Garvil Singh, Kamal Digpaul, Ms Harshita Choubey & Padmesh Mishra, Advs. for the Appellant.
• Ms Jagrati Singh, AOR, Shivanshu Bhardwaj, Rajpal, Surendar Kumar, Himanshu Bhardwaj & Raghuvansh Misra, Advs. for the Respondent.

Facts of the Case

In a Constable recruitment, the advertisement clearly stated that the date for the Physical Efficiency & Measurement Test (PE&MT) was final and could not be changed. The candidate, Uttam Kumar, passed the first stage but did not appear on the scheduled PE&MT date, citing illness (fever, cough, body pain, etc.). He later sent representations requesting another chance, but there was no clear evidence that these requests were properly submitted or received.

The Tribunal and High Court earlier allowed him another chance, mainly because his requests were not answered. However, the Supreme Court of India disagreed. It noted that the candidate himself admitted he could move around the day before the test. So, at the very least, he should have gone to the test centre, informed authorities about his condition, and requested rescheduling there. Simply not showing up was not justified.

Supreme Court Held

The Court held that not replying to his representations does not give him a legal right to get a new date. His illness was not serious enough to be treated as an exceptional case. Also, belonging to a backward community cannot be the only reason to give special treatment. Therefore, the Supreme Court cancelled the orders of the Tribunal and High Court and upheld that marking him “ABSENT” was correct.

List of Cases Reviewed

• Order of High Court of delhi in WPC-13553-2025, dated 03-09-2025 (para 12) set aside

The post SC Denies PE&MT Reschedule for Unjustified Absence appeared first on Taxmann Blog.

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Case Details: Jivanbhai Somabhai Patel vs. Deputy Commissioner of Income-tax, CPC, Bengaluru [2026] 185 taxmann.com 517 (Ahmedabad-Trib.)

Judiciary and Counsel Details

• Ms Suchitra Kamble, Judicial Member
• P F Jain, AR for the Appellant.
• Umesh Kumar Agarwal, Sr. D.R. for the Respondent.

Facts of the Case

The assessee, a commission agent registered with the APMC, facilitated the sale of farmers’ agricultural produce to traders at an auction held in the APMC’s open market. While filing the return, the assessee claimed TDS of Rs. 1.48 lakhs, including Rs. 53,000 under Section 194Q. During the processing of the return, the Assessing Officer (AO) allowed TDS of only Rs. 5,777. AO contended that the income corresponding to TDS reflected in Form 26AS in the assessee’s PAN was not included in the assessee’s returned income.

On appeal, the CIT(A) held that the TDS in dispute was deducted by purchasers on the sale of agricultural produce belonging to farmers. The assessee acted only as an APMC commission agent. Since the corresponding income was not assessable in the assessee’s hands despite TDS appearing in his PAN, credit could not be allowed under section 199 read with Rule 37BA(2). The assessee was required to get the TDS corrected in the names of the actual beneficiaries. The matter reached the Ahmedabad Tribunal.

ITAT Held

The Tribunal held that the assessee himself had accepted that the TDS made by the purchasers was not his sales, but those of the agriculturist/farmer. Hence, the TDS had been made wrongly in the PAN of the assessee, and the credit thereof ought not to have been claimed by the assessee in the return.

Therefore, the CIT(A) had rightly concluded that the assessee was at liberty to seek an appropriate remedy in respect of any mismatch in TDS as per the return filed by the deductor. The same cannot be rectified by getting an appropriate correction statement filed by the deductor. On the issue of granting credit for TDS under section 194Q, there was no infirmity in the action of the AO, CPC, and therefore, no interference was needed.

As a result, the assessee’s appeal is dismissed.

The post TDS u/s 194Q Not Creditable if Income Not Assessee’s | ITAT appeared first on Taxmann Blog.

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Case Details: Smt. Zaverben Popatlal Premji Arrogyadham vs. Employees State Insurance Corporation [2026] 185 taxmann.com 227 (Bombay)

Judiciary and Counsel Details

• Jitendra Jain, J.
• S. C. Naidu, Manoj Gujar, T. R. Yadav & Pradeep Kumar for the Appellant.
• Ms Seema Chopda for the Respondent.

Facts of the Case

In the instant case, the appellant trust ran a sanatorium for patients requiring isolation. It provided one-BHK apartments with individual kitchens for occupants, and did not operate any central kitchen or supply food.

A leave and license agreement was executed between KVO Sthanakwasi Jain Mahajan, Mumbai (licensor) and M/s. Manisha Caterers (licensee), permitting the latter to use the premises for its independent catering business. There was no arrangement appointing M/s. Manisha Caterers as a contractor or agent of the appellant, nor was the appellant a party to the catering operations for sanatorium occupants.

A Corporation Inspector surveyed M/s. Manisha Caterers and concluded that it was independently coverable under the ESI Act; accordingly, a separate ESI code was allotted. Subsequently, another Inspector visited the appellant’s premises, noted that a canteen employing seven persons was functioning, and that M/s. Manisha Caterers was complying under its own ESI code. Despite this, he recommended coverage of the appellant under Section 2(12).

Pursuant thereto, an order under Section 45A was passed, clubbing the appellant with M/s. Manisha Caterers on the ground that the canteen was located in the same premises, was incidental or complementary to the sanatorium, and that there existed a nexus between the two.

High Court Held

The High Court observed that the order under Section 45A merely recorded conclusions without furnishing reasons. It reiterated that clubbing of entities requires satisfaction of established tests such as unity of ownership, control and supervision, financial integrality, management, employment, geographical proximity, and functional integrity.

Since neither the Employees’ Insurance Court, Pune nor the respondent had examined or satisfied these parameters, the finding that the appellant and M/s. Manisha Caterers constituted a single establishment was unsustainable.

The Court further noted that M/s. Manisha Caterers had vacated the premises prior to the adjudication by the trial court, indicating lack of due application of mind and that the proceedings were based on mere suspicion. Accordingly, the impugned order passed under Section 45A was quashed and set aside.

List of Cases Referred to

• Saurashtra Trust Karmachari Sangh v. States People (P.) Ltd. 1995 (71) FLR 1034 (para 9).

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