Notification No. 15(12)/Lab/2022/4473-4479; Dated: 03.12.2025

The Government has notified the draft Industrial Relations (Delhi) Rules, 2025. These rules apply to the industrial establishments that fall under the jurisdiction of the Government of the National Capital Territory of Delhi. The draft rules have been issued in the exercise of the powers conferred by Section 99 of the Industrial Relations Code, 2020 (‘Code’).

Section 99 of the Industrial Relations Code, 2020, empowers the appropriate Government to make rules for giving effect to the provisions of the Code. It authorises detailed rule-making on matters such as trade union processes, grievance redressal, standing orders, strikes, lock-outs, retrenchment, closure and powers of authorities. The rules have been published for stakeholder comments. Objections and Suggestions can be submitted within 30 days to the Labour Department.

The key highlights of the draft Industrial Relations (Delhi) Rules, 2025 are as follows:

(a) Constitution of Works Committee – As per the draft rules, employers must constitute a Works Committee, with a maximum of 20 members, ensuring that the number of representatives of workers is not less than the number of representatives of the employer. Registered Trade Unions may choose their representatives as members for the works committee in proportion to their membership.

(b) Formation of Grievance Redressal Committee – The draft rules prescribe the formation of a Grievance Redressal Committee comprising an equal number of members representing the employer and workers, which shall not exceed 10. There must be an adequate representation of women workers in the Committee, and such representation must not be less than the proportion of women workers to the total workers employed in the establishment.

(c) Payment of subscription by Trade Union Member – Section 7 of the Industrial Relations Code, 2020 states that a trade union is not eligible for registration unless the rules provide for payment of a subscription by members of the trade union as may be prescribed. Subscription refers to the annual fee that each member of the trade union must pay to remain a valid member.

Under the draft Rules, the minimum annual subscription payable by each member of a Trade Union must not be less than Rs 100/- per annum. The draft rules also require that the annual audit of the accounts of any registered trade union must be conducted by an auditor authorised to audit the accounts of companies under section 139 of the Companies Act, 2013.

(d) Voluntary Reference of Disputes to Arbitrator – The draft rules specify a formal agreement process for voluntary arbitration, specifying who can sign on behalf of employers and workers and mandating written consent from arbitrators. The agreement must be accompanied by the consent of the arbitrator or arbitrators, either in writing or electronically.

(e) Procedure for selection of Members of Industrial Tribunal – The draft rules outline the procedure for selection, tenure, salary, and service conditions of Judicial Members and Administrative Members of the Industrial Tribunal.

A Judicial Member will be appointed through a Search-cum-Selection Committee headed by the Chief Justice of the Delhi High Court or a Judge nominated by the High Court. The Administrative Member must be appointed by the appropriate Government based on the recommendation of the Search Cum Selection Committee.

(f) Procedure for Strikes and Lockouts – The draft rules formalise the procedures for strikes and lockouts. The notice of strike must be given to the employer of an industrial establishment in a prescribed form, duly signed by the Secretary and five elected representatives of the registered trade union. Employers issuing lockout notices must notify labour authorities and display the notice on a notice board or an electronic board at the main entrance.

(g) Special Provisions relating to Lay-off, Retrenchment and Closure – As per the draft rules, the employer must submit applications for permission in the prescribed form, and a copy of the application must be served electronically or by registered or speed post. The appropriate Government may review its order within 30 days of granting or refusing such permissions.

(h) Worker Re-Skilling Fund – The draft rules require employers who retrench a worker to electronically transfer an amount equivalent to 15 days’ last drawn wages of the retrenched worker to the account of the appropriate Government within 10 days. The Government must transfer the funds received electronically to the worker within 45 days of receipt of funds from the employer. The worker must utilise the amount for his re-skilling.

(i) Protected Workers – The draft rules mandate that every registered Trade Union connected with an industrial establishment, must communicate to the employer before the 30th April of every year, the names and addresses of the officers of the Union who are employed in the establishment and who, in the opinion of the Union, must be recognised as protected workers.

(j) Manner of Composition of Offence by a Gazetted Officer – Under the draft rules, the officer notified by the appropriate Government for compounding of offences must send a notice electronically/through a web portal to the accused in the prescribed form, consisting of three parts.

In Part I of the Form, the compounding officer must specify the name of the offender, details of the offence and the section in which the offence has been committed. Part II of the Form specifies the consequences if the offence is not compounded, and Part III of the Form must contain the application to be filed by the accused if he desires to compound the offence.

Further, if the offence is compounded before the prosecution, then no complaint for prosecution must be initiated against the accused.

Click Here To Read The Full Notification

The post Govt. Releases the Draft Industrial Relations (Delhi) Rules, 2025 appeared first on Taxmann Blog.

source

Sheetal Bhatia – [2025] 181 taxmann.com 279 (Article)

During the pandemic I advised a mid-sized engineering firm whose overseas project managers started working from their homes abroad. What seemed like a harmless operational tweak quickly raised a tax question – Could those home offices create a permanent establishment (PE) for the foreign enterprise?

The OECD’s 2025 update to the Model Tax Convention directly addresses that modern reality. Paragraph 29 of the Commentary on Article 5, alongwith practical examples now gives clearer guidance on when a home or other remote workplace becomes a fixed place PE.

1. What Does the 2025 OECD Update State?

Simply put, the OECD has clarified that a home or remote workplace becomes a fixed place PE only when it functions as a place of business of the enterprise and is at the enterprise’s disposal in a meaningful way.

Key factors to consider

• Degree of control and availability – Is the location made available by the enterprise (e.g., provided, required, or regularly used for business purposes)? If the enterprise requires the employee to use that place and it is used continuously, the risk of PE increases
• Regularity and continuity of activities – Intermittent or incidental use usually does not create a PE but continuous, core business activities carried out from the home are more likely to do so.
• Nature of activities – Administrative or preparatory tasks are less likely to create a PE than core revenue-generating activities.
• Enterprise’s provision of the space – If the enterprise provides the workspace, equipment, or pays for it, that strengthens the case for a PE.
• Expectation and contractual terms – Written policies, employment contracts, or client arrangements that require or expect work from that location are relevant evidence of intent and control.

2. Practical Illustrations by the OECD

The OECD commentary also provides fact-based scenarios to illustrate how the place of business test applies to homes and other personal spaces. One may use these scenarios as references before forming an opinion.

S. No.	Scenarios	PE Risk	Premises
1	Employee normally works in Country R; post holidaying in Country S, rents a place there and works from that rented place for three straight months.	Low	Three months is temporary and lacks permanence
2	The same employee works from her home in Country S for one or two days per week throughout a twelve-month period (30% of working time)	Low	The home in Country S is a permanent place but the time spent is less than 50% of her total working time.
3	The same employee works from her home in Country S for 80 per cent of her working time in any twelve-month period. She regularly visits her clients in Country S for providing services.	High	The home in Country S is a permanent place and the time spent is also more than 50% of total working time. Further, the client visits show a clear commercial reason for the presence.
4	The same employee works from home in Country S for 60% of her working time in any twelve-month period. Her role is client-facing across multiple countries and works remotely. She meets a client in Country S once a quarter for a day.	Medium to Low	Home use exceeds 50% (which raises risk), but client meetings are intermittent and services are mainly delivered remotely. Thus, the risk of creation of fixed place PE would be medium to low, depending on overall facts and commercial purpose.
5	The same employee normally works from home in Country S. She provides services online to customers in Country R and other countries in different time zones. Because she works from Country S, she can be available in real time or near real time for those customers.	High	Home use exceeds 50% (which raises risk). Further, the employer benefits from the employee being in Country S because her location lets the company serve customers in other time zones effectively. Thus, the home would be considered as a Fixed Place PE.

Click Here To Read The Full Article

The post [Opinion] The 2025 OECD Update on Fixed Place Permanent Establishment and Work from Home appeared first on Taxmann Blog.

source

Case Details: Mita Ashish Desai vs. Deputy Commissioner of Income-tax [2025] 180 taxmann.com 815 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & Pranav Trivedi, JJ.
• Tushar Hemani & Ms Vaibhavi K Parikh, Advs. for the Petitioner.
• Ms Maithili D Mehta, Senior Standing Counsel for the Respondent.

Facts of the Case

The assessee filed her return of income for the relevant assessment year and declared short-term capital gains on the sale of shares of a company. Subsequently, the Assessing Officer (AO) issued a notice for reassessment based on information from a search under section 132 on that group of companies. The search revealed incriminating documents showing evidence of cash transactions providing bogus entries.

The assessee filed objections to the reassessment notice, contending that all purchase and sale transactions of shares were duly recorded, short-term capital gains were fully disclosed and taxed, and no long-term capital gains were earned during the year. However, the AO rejected the objections and passed an order holding that the short-term capital gains were bogus and reopened the assessment.

The assessee filed a writ petition to the Gujarat High Court against the reassessment order.

High Court Held

The High Court held that the AO failed to provide sufficient details in the reasons recorded to establish a prima facie belief that income had escaped assessment. The reasons recorded only refer to information received from credible sources, indicating that a search was conducted on a group of companies and that incriminating documents were found and seized during the search. Upon reviewing the information available on the Insight Portal, it was found that the assessee was one of the beneficiaries of accommodation entries in various forms of income, such as Long Term Gains/Loss, Short Term Gains/Loss, and also as a beneficiary of unsecured loans, among others, without any proper basis for forming such a belief.

It was clear that the AO recorded the reasons solely based on borrowed satisfaction, without any live link between the information available on the Insight Portal and the assessee’s record. Therefore, the AO cannot be said to have formed an independent satisfaction regarding the reasons recorded for reopening the assessment, in order to reach the prima facie conclusion that there is escapement of income.

Accordingly, the petition was allowed, and the reassessment notice was quashed and set aside.

The post HC Quashes Reassessment Based on Borrowed Satisfaction Without Live Link appeared first on Taxmann Blog.

source

Editorial Team – [2025] 181 taxmann.com 366 (Article)

Global Financial Insights is a weekly feature for Taxmann.com Accounts and Audit Module subscribers. 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. Financial Accounting Standard Board Issues an Accounting Standard Update to Improve Interim Reporting

The Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) to improve the disclosure requirements in Topic 270, Interim Reporting. This update provides the additional guidance on what disclosures should be provided in interim reporting periods. Further, it also provides clarity on the form and content of interim financial statements in accordance with Generally Accepted Accounting Principle (GAAP). However, the user shall hereby note that this update does not expand or reduce current interim disclosure requirements but provides clarity on current interim reporting requirements. The amendments in the aforesaid ASU are discussed herewith:

(a) Clarify that the guidance in Topic 270 is applicable to all entities that prepare interim financial statements and accompanying notes in accordance with GAAP.

(b) Develop a comprehensive listing within FASB detailing all interim disclosure requirements for financial statements and notes prepared in accordance with GAAP.

(c) Introduce a disclosure principle aligned with prior Securities and Exchange Commission guidance, requiring entities to report events and changes occurring after the end of the most recent fiscal year that have a material effect on the entity.

(d) Enhance the guidance regarding the nature, content, and presentation format of information included in interim financial statements.

Effective Date

The amendments in this Update are effective for interim reporting periods within annual periods beginning on or after 15th December 2027, for public business entities, and for interim reporting periods within annual periods beginning on or after 15th December 2028, for all other entities. Early adoption is permitted for all entities.

Source – Financial Accounting Standard Board

2. FASB Issues New Standard Providing Guidance on the Accounting for Government Grants

The Financial Accounting Standard Board (FASB) in its Accounting Standard Update (ASU) has issued a new standard providing guidance on the accounting for government grants received by business entities. This update provides guidance on recognition, measurement, and presentation of government grants. Thus, the board has taken care of areas where stakeholders have consistently highlighted a need. The update is briefly discussed below:

2.1 Definitions

Government Grant – A transfer of a monetary asset or a tangible non-monetary asset, other than in an exchange transaction (including an exchange transaction that may be at a significant discount to fair value), from a government to an entity except for a not-for-profit entity and an employee benefit plan.

Grant related to an Asset – A government grant, or part of a government grant, that is conditioned on the purchase, construction, or acquisition of an asset.

Grant related to an Income – A government grant, or part of a government grant, other than a grant related to an asset

2.2 Recognition Criteria

An entity shall not recognise a government grant until:

(a) It is probable that both of the following criteria are met:

i. The entity will comply with the conditions attached to the government grant.

ii. The government grant will be received.

(b) An entity meets the recognition guidance for a grant related to an asset or a grant related to income

2.3 Disclosures

This Update also includes disclosure requirements regarding the nature of government grants, accounting policies applied, and significant terms and conditions.

2.4 Effective Date

For public business entities, the amendments in this update are effective for annual reporting periods beginning after 15th December 2028, and interim reporting periods within those annual reporting periods. For entities other than public business entities, the amendments are effective for annual reporting periods beginning after 15th December 2029, and interim reporting periods within those annual reporting periods.

Source – Financial Accounting Standard Board

3. A US Audit Firm Gets Sanctioned By the PCAOB for Its Failure to Reasonably Supervise an Unregistered Firm

A public accounting firm in the United States (US) was engaged in auditing a China-based company. The Public Company Accounting Oversight Board (PCAOB) observed that the US-based firm failed to reasonably supervise the work performed by an unregistered China-based firm, which had a significant role in the audit. Therefore, PCAOB concluded that the US-based firm violated PCAOB rules and standards in connection with its use of the work from an unregistered firm.

The PCAOB identified that the China-based firm significantly exceeded the 20% participation threshold in the audits of the previous 5 years. Thus, the China-based firm provided material services to a US firm in issuing the audit report and therefore violated Section 102(a) of the PCAOB Act and PCAOB Rule 2100 by playing a substantial role in the audits without being registered with the board. The board held that the US based firm registered with PCAOB was responsible to reasonably supervising the registration requirements of the China-based firm as per Section 105(c)(6) of the PCAOB Act.

Further, PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants requires that a registered public accounting firm must file with the Board a report on “Form AP” in accordance with the instructions to that form. This form requires the public accounting firm to state the legal name and the extent of participation of the accounting firm that plays a substantial role in the audit. Since the US-based firm failed to disclose about the participation of china China-based firm in its “Form AP”, it violated the PCAOB rule 3211.

Considering the violations made by the public accounting firm, the PCAOB sanctioned the firm by imposing a civil monetary penalty of $1,00,000. Also, the board requires the firm to undertake certain contingent remedial actions.

Source – Public Company Accounting Oversight Board

Click Here To Read The Full Article

The post [Global Financial Insights] Key FASB | PCAOB | IFRS Updates appeared first on Taxmann Blog.

source

Notification No. No. SEBI/LAD-NRO/GN/2025/287, Dated 09.12.2025

1. Overview

SEBI has notified amendments to both the Infrastructure Investment Trusts (InvIT) Regulations, 2014 and the Real Estate Investment Trusts (REIT) Regulations, 2014, revising key investor classifications to ensure greater consistency, transparency, and suitability standards across investment vehicles.

2. Amendments to InvIT Regulations, 2014

2.1 Revised Definition of “Institutional Investor”

The earlier definition of institutional investor has been substituted. Under the amended framework, an Institutional Investor now includes only:

• A family trust, or
• A SEBI-registered intermediary
• Having a net worth exceeding ₹500 crore

This significantly narrows the eligible category, focusing on high-capacity, sophisticated investors, ensuring that only entities with appropriate financial strength participate at the institutional level.

2.2 Substitution of “Qualified Institutional Buyer” (QIB)

The definition of QIB has been revised to align with updated market classifications and ensure uniformity with other SEBI regulations.

This helps standardise eligibility across capital market products and strengthens suitability norms for participation in InvIT issuances.

2.3 Updated Definition of “Strategic Investor”

The definition of Strategic Investor has also been substituted.
Strategic investors typically include:

• Sovereign wealth funds
• Pension funds
• Insurance companies
• Other long-term capital providers

The revised definition aims to:

• Bring clarity on eligibility criteria
• Strengthen governance around cornerstone or anchor investments
• Ensure long-term stability in InvIT ownership structures

3. Amendments to REIT Regulations, 2014

3.1 Introduction of a Definition for “Institutional Investor”

A new definition of institutional investor has been inserted into the REIT Regulations, bringing the REIT framework in line with the revised InvIT norms.

This harmonisation promotes consistency across infrastructure and real-estate investment products.

3.2 Substitution of Related Investor Definitions

Similar to InvIT amendments, the REIT Regulations now contain:

• A revised definition of Qualified Institutional Buyer (QIB)
• A revised definition of Strategic Investor

These changes aim to:

• Provide alignment of investor categories across SEBI’s regulatory ecosystem
• Ensure that investor classifications reflect evolving market sophistication
• Strengthen the regulatory architecture for raising and deploying capital in REITs

4. Regulatory Intent

The amendments collectively seek to:

• Enhance investor quality and suitability for InvITs and REITs
• Promote stability and long-term investment orientation
• Align investor definitions with current market structures and capital depth
• Improve governance and oversight around cornerstone participation
• Ensure harmonisation across SEBI’s alternative fund, listing, and institutional investor frameworks

5. Implications for Market Participants

5.1 For Sponsors and Managers

• Need to reassess investor eligibility when planning issuances
• Updated offering documents and disclosures are required
• Strategic and cornerstone investment arrangements must comply with new definitions

5.2 For Investors

• Higher entry requirements for institutional classification
• Clearer investor categorisation improves risk–return matching

5.3 For Intermediaries

• Must update internal compliance protocols and onboarding standards
• Disclosure templates and marketing materials need alignment with revised definitions

Click Here To Read The Full Notification

The post SEBI Revises Investor Definitions under InvIT and REIT Regulations appeared first on Taxmann Blog.

source

Notification No. G.S.R. 890(E)., Dated 10.12.2025

1. Overview

The Central Government has notified amendments to the Banking Regulation (Companies) Rules, 1949, making changes to several provisions and statutory forms. The amendments streamline reporting requirements, remove obsolete references, and update terminology to reflect the present regulatory and institutional framework of the banking sector.

2. Omission of Provisions in Rule 2 and Rule 2A

2.1 Omitted Clauses in Rule 2

Certain provisions of Rule 2, which deals with definitions and interpretative elements for banking companies, have been omitted.

This removes outdated regulatory references and aligns the Rules with the amended Banking Regulation Act and modern supervisory practices.

2.2 Omission of Rule 2A

Rule 2A, which contained specific operational or reporting requirements, has also been omitted.

The omission reflects changes in statutory reporting models and simplifies compliance for banking companies by eliminating requirements that are no longer relevant under the updated regulatory framework.

3. Omission of Rule 15B

Rule 15B, which previously dealt with reporting or procedural obligations for banks, has been deleted entirely.

This removes antiquated provisions and reduces unnecessary administrative burden.

4. Amendments to Form VIII

Form VIII—used for reporting of certain statutory returns by banking companies—has been significantly revised.

4.1 Key Changes

Replaces references to “alternate Friday” with:

• “15th day of the month”, or
• “last day of the month”

This change aligns the form with modern accounting periods and the broader removal of fortnightly-based calculation systems.

Updates items relating to subsidiary banks and development financial institutions (DFIs)

These updates reflect structural changes in India’s financial sector, including:

• Merger or restructuring of subsidiary banks
• Transformation of DFIs into banks or other financial entities
• Removal of outdated institutional references

The revised Form VIII supports uniform and contemporary reporting formats for banking companies.

5. Amendments to Form X

Form X, which governs additional disclosures and reporting obligations, has also been updated.

5.1 Key Modifications

1. Omission of specified sub-items – Obsolete content and data fields that are no longer required under current RBI regulations have been removed.
2. Terminology updates

• • References to “Friday” are substituted with “day” or “last day of a month”
  • This change is consistent with the broader regulatory transition away from fortnightly reporting cycles.

These amendments ensure that reporting timelines in Form X are aligned with monthly or daily compliance frameworks, improving clarity and easing operational compliance.

6. Regulatory Intent

The amendments aim to:

• Modernise outdated statutory language
• Remove references that no longer match today’s supervisory environment
• Rationalise reporting timelines across banking legislation
• Align banking returns with standard monthly accounting practices
• Reduce administrative complexities for banks
• Support the transition away from legacy “alternate Friday” timelines after recent amendments to the Banking Regulation Act and RBI Act

7. Implications for Banking Companies

Banks must:

• Update internal reporting manuals and compliance workflows
• Revise automated reporting systems to reflect new dates (15th / last day of month)
• Ensure staff discontinuation of all “alternate Friday”-based computations
• Review and update documentation formats for Forms VIII and X
• Train compliance and finance teams on the revised procedures

Failure to update reporting processes could lead to incorrect filings or supervisory observations.

Click Here To Read The Full Notification

The post Govt. Amends Banking Regulation (Companies) Rules | Updates Forms VIII & X appeared first on Taxmann Blog.

source

Circular No. HO/38/30/12(1)2025 MIRSD SEC FATF, Dated 10.12.2025

1. Background

SEBI has issued amendments to the Master Circular on Know Your Customer (KYC) to streamline the re-KYC process for Non-Resident Indians (NRIs). The revision responds to industry feedback regarding practical challenges faced by NRIs when undergoing re-KYC due to location-based restrictions in digital onboarding and verification.

2. Relaxation of Physical Location Requirement

Earlier, digital KYC procedures required clients to be physically located in India during certain verification steps. SEBI has now relaxed this requirement for existing NRI clients undergoing re-KYC through digital mode.

2.1 What Changes?

• Existing NRIs can complete re-KYC digitally from outside India.
• The earlier condition that a client must be physically within India at the time of re-KYC will not apply to NRI clients.

This significantly improves convenience and reduces compliance friction for NRIs who cannot travel to India merely for KYC renewal.

3. Revised Para 51 – Geo-Tagging and System Checks Continue

Although the physical-presence requirement is relaxed, risk-mitigation controls remain mandatory.

Under the revised Para 51:

3.1 Geo-Tagging Remains Compulsory

• The system must capture GPS coordinates of the NRI client.
• These coordinates must match the Proof of Address (PoA) submitted.

3.2 Anti-Spoofing and IP-Verification Measures Required

• Regulated entities must ensure no spoofed, masked, or manipulated IP connections are used during re-KYC.
• Systems must be able to detect and prevent VPN masking or fake geo-location attempts.

3.3 Other KYC Validations Remain Unchanged

• Facial verification (where applicable)
• Document authentication
• System-driven checks mandated by SEBI and KRA

The intention is to allow flexibility without compromising security, authenticity, or anti-fraud safeguards.

4. Purpose and Regulatory Intent

SEBI’s modification aims to:

• Facilitate easier compliance for NRIs who face geographical constraints
• Maintain robust KYC integrity and fraud prevention controls
• Align regulatory practice with digital transformation trends
• Ensure that intermediaries can onboard and maintain NRI clients without disruption

This balances user convenience with risk management and supervisory oversight.

5. Implications for Market Intermediaries

REs (brokers, depositories, RTAs, RIAs, etc.) must:

• Update internal KYC workflows to remove the “must be in India” check for NRI re-KYC
• Continue geo-tagging and ensure GPS data matches PoA
• Implement tools to detect IP spoofing or VPN-based masking
• Train staff on revised requirements and update customer communication templates
• Modify backend KYC logic and reporting formats in line with changes to Para 51

6. Implications for NRI Clients

• Re-KYC can now be completed seamlessly from abroad
• No need for travel to India solely for verification
• Must ensure GPS-based address matches documentation during digital re-KYC
• Should avoid using VPNs during verification to prevent rejection

Click Here To Read The Full Circular

The post SEBI Eases Re-KYC for NRIs | Updates Geo-Tagging and KYC Controls appeared first on Taxmann Blog.

source

Deepak Kakkar, Sushil Sharma & Ayush Rawat – [2025] 181 taxmann.com 276 (Article)

Real Estate or Equity—Same Asset, Different Tax Fate. Why Classification Matters?

1. Introduction

The world of finance is full of complex interpretations and debatable classifications, and few issues are as enduring and contentious as distinguishing a business asset from a capital asset. This classification has significant implications across taxation, accounting, financial reporting, and business valuations. A misclassification can result in incorrect tax treatment, disallowance of deductions, or unintended capital gains, making it both practically important and technically complex.

At its core, the challenge arises because many assets possess dual characteristics—an asset used in business may also appreciate in value, while a capital asset may occasionally be deployed for business purposes. This overlap creates room for interpretation, dispute, and litigation. An asset may be purchased for business purposes, held like an investment, and later sold for a profit, making classification far from straightforward.

The tax implications of classification are significant. Business assets allow the assessee to claim expenses such as depreciation, repairs, and maintenance, reducing taxable income, whereas capital assets do not permit such deductions, with only capital gains taxed upon sale. As a result, assessee may prefer to treat assets as business assets to maximise deductions and reduce immediate tax liability. However, such preferences often trigger disputes with tax authorities, as aggressive classification without clear justification on intention, usage, and transaction characteristics can lead to scrutiny, reassessment, and litigation.

This ambiguity is further compounded by the Income Tax Act, which defines capital assets under Section 2(14) but does not formally define business assets. Business assets, on the other hand, are generally understood as assets used for carrying on a business or profession, such as stock-in-trade, machinery, or other operational assets.

This is where legal principles intersect commercial realities. Before examining the broader guidelines and judicial tests that help resolve classification disputes, it is essential to ground the discussion in two foundational statutory concepts:

• What qualifies as a “capital asset”, and
• How the term “business” is defined under the Act.

These statutory definitions form the starting point for any analysis, as they help differentiate between assets held with an intention to earn long-term appreciation and activities carried out with a profit-making motive in the ordinary course of trade.

2. Legal Framework

2.1 Capital Asset

As per the Section 2(14) of Income Tax Act,1961,”capital asset” means—

(a) property of any kind held by an assessee, whether or not connected with his business or profession.

(b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992).

However, some assets are excluded from the definition. These exceptions include: stock-in-trade, consumable stores, or raw materials held for business purposes; personal effects used by the taxpayer or their family for personal use (other than jewellery, archaeological collections, drawings, paintings, sculptures, or any work of art); agricultural land located in rural areas (i.e., land outside specified municipal limits or population criteria); and certain bonds issued by the Central Government, such as Gold Bonds or Special Bearer Bonds. These exclusions ensure that assets held for business trading, daily personal use, or located in non-urban agricultural regions are not subjected to capital gains taxation under the Act.

2.2 Business

As per the Section 2(14) of Income Tax Act,1961,”business” includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture.

Therefore, the definition of the term “capital asset” is very wide and any kind of property except those falling in the excluded category is a capital asset.

Click Here To Read The Full Article

The post Capital Asset vs Business Asset – Why Classification Matters in Taxation appeared first on Taxmann Blog.

source

Working Paper No. P-24029/34/2025-IPR-VII, Dated: 08.12.2025

1. Background

The Department for Promotion of Industry and Internal Trade (DPIIT) has constituted a Committee to examine the interface between Generative Artificial Intelligence (GenAI) and copyright law in India. Rapid adoption of AI models—particularly those trained using large datasets containing copyrighted material—has raised questions on legality, ownership, consent, liability, and compensation mechanisms.

Given the global debate on whether AI training constitutes fair use, infringement, or permitted data mining, the Committee has been tasked with reviewing the adequacy of India’s current copyright regime.

2. Scope of Examination

The Committee will assess:

• Whether the existing Copyright Act and related jurisprudence adequately address the use of copyrighted works in AI training
• The implications of:

1. 1. Text and data mining (TDM)
   2. Replicative output
   3. Derivative content generated by AI
   4. Attribution and authorship

• The need for new carve-outs, exceptions, or licensing mechanisms that can balance:

1. 1. Innovation incentives
   2. Copyright protection
   3. Commercial exploitation safeguards

The objective is to examine whether India’s legal framework provides sufficient clarity for creators, platform developers, dataset curators, and AI enterprises.

3. Need for Possible Legislative Amendments

The Committee has been asked to determine whether:

• Existing copyright exceptions, including those relating to research, transient storage, or fair dealing, are sufficient in the context of AI training
  or
• Legislative amendments, regulatory guidance, or model licensing frameworks are required to:

1. 1. Protect rights holders
   2. Enable lawful and scalable AI innovation
   3. Provide certainty to market participants

The review also covers ownership of AI-generated works, originality thresholds, and attribution responsibilities.

4. Working Paper Released for Consultation

As part of its consultative process, Part I of the Working Paper has been released for public and stakeholder feedback.

Stakeholders such as:

• Technology companies
• AI developers and research institutions
• Publishers, authors, and content creators
• IP lawyers, civil society bodies, and policy experts

are invited to submit comments to help shape the future regulatory and legislative position around generative AI and copyright compliance.

5. Policy Significance

The initiative aims to:

• Reduce uncertainty surrounding use of copyrighted material in large-scale dataset training
• Provide predictable legal norms for AI development and monetisation
• Strengthen creator rights and attribution safeguards
• Enable a balanced ecosystem that protects innovation without undermining original copyright

India’s approach may influence market models, licensing practices, and global data-sharing norms, given the increasing scale of AI development and cross-border technology operations.

Click Here To Read The Full Update

The post DPIIT Reviews Copyright Rules for Generative AI Training appeared first on Taxmann Blog.

source

Case Details: Pristine Industries Ltd., In re [2022] 142 taxmann.com 583 (AAR–RAJASTHAN)

Judiciary and Counsel Details

• J.P. Meena, Member (Central Tax) & M. S. Kavia, Member (State Tax)
• Rohit Jain, CA for the Applicant.

Facts of the Case

The applicant, a registered manufacturer of PP/HDPE woven sacks, initiated installation of a rooftop solar power generating plant of more than 620 kW on the roof of its factory for captive consumption through a work order covering design, supply, storage, civil work, erection, testing, and commissioning. It procured solar panels, transformers, meters, wiring, and related items, and treated the plant as plant and machinery to be capitalised. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the rooftop solar power generating plant, though immovable as it is fastened to structures attached to the earth, falls within ‘plant and machinery’ as defined in the explanation to Section 17(5) of the CGST Act/Rajasthan GST Act, which includes apparatus, equipment, and machinery fixed to earth by foundation or structural support while excluding land, building, telecom towers, and pipelines outside the factory premises. The authority held that Section 16 of the CGST Act/Rajasthan GST Act permits input tax credit subject to prescribed conditions and that the restriction in Section 17(5)(d) of the CGST Act/Rajasthan GST Act concerning construction of immovable property on own account does not apply to plant and machinery. It further held that the solar plant was used for captive generation in the manufacturing process and therefore the bar on blocked credit was not attracted. The authority concluded that input tax credit on inputs, capital goods, and input services used for setting up the plant is admissible subject to compliance with Section 16 and capitalisation requirements.

The post ITC Allowed on Rooftop Solar Plant Used for Captive Consumption | AAR appeared first on Taxmann Blog.

source