Case Details: Som Nath vs. Punjab State Water Resources Management and Development Corporation Ltd. [2025] 181 taxmann.com 785 (HC - Punjab & Haryana)

Judiciary and Counsel Details

• Deepinder Singh Nalwa, J.
• A.S Walia, Adv. for the Petitioner.
• Ms Monika Sharma, Adv. for the Respondent.

Facts of the Case

In the instant case, the petitioner retired from the respondent corporation on 30.9.2019. He claimed gratuity of about Rs. 18.96 lakhs under Bye Law No. 18 of the Employees Service Bye Laws and the Payment of Gratuity Act, 1972, as amended w.e.f. 29.3.2018, enhancing ceiling to Rs. 20 lakhs.

The corporation paid Rs. 10 lakhs and declined the balance of about Rs. 8.96 lakhs. The petitioner submitted a representation for balance, received no decision, and then filed a writ petition in which the High Court directed the corporation to pass a speaking order on his representation and, if any benefit was found due, to release it.

In compliance, the corporation issued an impugned order stating that clarification on gratuity was pending with the Finance Department/Directorate of Public Enterprises and Disinvestment, and that a decision would be taken upon receipt of such clarification.

It was noted that the amendment to the Payment of Gratuity Act, 1972, would automatically apply to the respondent-Corporation and would constitute a statutory obligation for the respondent-Corporation to comply with the provisions of the Payment of Gratuity Act, 1972.

Further, the letter dated 13-9-2019 issued by the Government of Punjab, Department of Finance, did not deny the claim for enhanced payment of gratuity; it only suggested obtaining the Finance Department’s concurrence, and thus it could not contravene the statutory provisions of the Payment of Gratuity Act, 1972.

High Court Held

The High Court held that the petitioner was entitled to the balance amount of gratuity under the amendment to the Payment of Gratuity Act, 1972. Thus, the impugned order was to be quashed, and the respondent was to be directed to recalculate the gratuity in terms of the amendment made in the Payment of Gratuity Act, 1972.

List of Cases Referred to

• Som Nath v. Punjab State Water Resources Management and Development Corporation Ltd. [CWP-9061-2022, dated 11-5-2022] (para 2)
• Yadbinder Pal Singh v. Punjab Water Resource Management and Development Corporation Ltd. [CWP No. 1691 of 2019, dated 29-8-2023] (para 8).

The post Enhanced Gratuity Cannot Be Withheld Pending Clarification | HC appeared first on Taxmann Blog.

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Editorial Team – [2026] 183 taxmann.com 101 (Article)

World Corporate Law News provides a weekly snapshot of corporate law developments from around the globe. Here’s a glimpse of the key corporate law update this week.

1. Securities Law

1.1 OSC Publishes Research on Using Gamification to Improve Investor Outcomes

On February 3, 2026, the Ontario Securities Commission (OSC) published its third behavioural science research report on gamification and retail investing, continuing its extensive work to understand how digital engagement practices influence investor behaviour.

The New Report, Gamification and Retail Investing – Positive Use Cases and Mitigation Techniques, explores how gamification can enhance investor decision-making and outcomes. The report also explores various techniques designed to mitigate the negative influence of gamification on investor behaviour.

As a core component of the research, the OSC conducted an online experiment involving over 4,000 Canadians in a simulated trading environment. Participants invested a hypothetical $10,000 across eight stocks while being exposed to one of four gamification techniques designed to increase the diversification of their portfolios:

(a) Diversification Score – a real-time score (out of 100) based on diversification level

(b) Goal Framing – setting diversification goals and tracking progress in reaching those goals

(c) Leaderboards – comparing diversification scores to other users

(d) Rewards (Badges) – awarding badges for meeting diversification thresholds.

Results showed that all four techniques had a modest yet positive impact, increasing portfolio diversification by 3.5% to 4.5%. Diversification is a strategy to help investors mitigate risk and smooth returns over the long term.

“Understanding the behavioural impact of gamification is critical to ensuring that digital engagement practices support, rather than undermine, investor outcomes,”

said Kevin Fine, Senior Vice President, Thought Leadership at the OSC.

“Gamification techniques can put investors at risk, but when used thoughtfully, they can encourage positive behaviours like portfolio diversification.”

The new report builds on insights found in the OSC’s research report Digital Engagement Practices in Retail Investing: Gamification & Other Behavioural Techniques, followed by two additional research reports: Digital Engagement Practices: Dark Patterns in Retail Investing and Gamification Revisited: New Experimental Findings in Retail Investing.

The OSC’s Investor Research and Behavioural Science Team partnered with the Behavioural Insights Team (BIT) on the study. The OSC has resources to help investors understand how digital engagement practices may influence their decision-making.

The mandate of the OSC is to protect investors from unfair, improper, or fraudulent practices; to promote fair, efficient, and competitive capital markets and confidence in them; to boost capital formation; and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or companies offering an investment opportunity and to review the OSC investor materials available at https://www.osc.ca.

Source – Official News

Click Here To Read The Full Article

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Case Details: Li and Fung (India) (P.) Ltd. vs. Union of India [2026] 182 taxmann.com 724 (Karnataka)

Judiciary and Counsel Details

• S.R. Krishna Kumar, J.
• Tarun Gulati, Senior Counsel & Parashuram A. L., Adv. for the Petitioner.
• Smt. Jyoti M. Maradi, HCGP & Aravind V. Chavan, Adv. for the Respondent.

Facts of the Case

The petitioner was engaged in providing business support services to its overseas group entity located outside India. It provided export of services as per the service agreement entered into with its Hong Kong-based group company, contending that it was not an ‘intermediary’ and was entitled to a refund of accumulated/unutilized input tax credit (ITC) available in the electronic credit ledger on account of export of services without payment of IGST. The petitioner’s refund application was rejected by the authorities. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the petitioner was not an ‘intermediary’ and was engaged in the export of services under the service agreement with the Hong Kong-based group company. The Court held that the petitioner was entitled to a refund of the accumulated/unutilized ITC available in the electronic credit ledger under Section 54 of the CGST Act and the Karnataka GST Act. The Court also held that the authorities’ rejection of the refund application was unsustainable. It directed the concerned authorities to grant/sanction the refund of accumulated/unutilized ITC together with applicable interest.

List of Cases Reviewed

• Amazon Development Centre India (P.) Ltd. v. Additional Commissioner of Central Tax, GST Appeals-II [2025] 174 taxmann.com 1249 (Kar) (para 5)
• Columbia Sportswear India Sourcing (P.) Ltd. v. Union of India [2025] 174 taxmann.com 936 (Kar) (para 5)
• Athene Technologies India LLP v. State of Karnataka [2025] 175 taxmann.com 102/99 GSTL 210 (Kar) (para 5)
• Nokia Solutions and Networks India (P.) Ltd. v. Pr. CCT [2025] 170 taxmann.com 65 (Kar) (para 5), followed

List of Cases Referred to

• Amazon Development Centre India (P.) Ltd. v. Additional Commissioner of Central Tax, GST Appeals-II [2025] 174 taxmann.com 1249 (Kar) (para 5)
• Columbia Sportswear India Sourcing (P.) Ltd. v. Union of India [2025] 174 taxmann.com 936 (Kar) (para 5)
• Athene Technologies India LLP v. State of Karnataka [2025] 175 taxmann.com 102/99 GSTL 210 (Kar) (para 5)
• Nokia Solutions and Networks India (P.) Ltd. v. Pr. CCT [2025] 170 taxmann.com 65 (Kar) (para 5).

The post Overseas BSS Not Intermediary – ITC Refund Allowed | HC appeared first on Taxmann Blog.

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Case Details: Muniyappa Prashanth Kumar vs. Income-tax Officer Ward 4(3)(3) [2026] 182 taxmann.com 743 (Bangalore-Trib.)

Judiciary and Counsel Details

• Keshav Dubey, Judicial Member & Waseem Ahmed, Accountant Member
• Vignesh, A.R. for the Appellant.
• Subramanian, D.R. for the Respondent.

Facts of the Case

The assessee, a small milk vendor and having a limited educational background, did not file his return of income for the relevant assessment year under section 139(1) on an honest and bona fide belief that his income did not exceed the maximum amount not chargeable to tax.

During the assessment proceedings, the Assessing Officer (AO) found that the assessee had made huge cash deposits in his savings account. In addition, the assessee made payments to contractors. The AO taxed the entire cash deposits as unexplained money under section 69A and contractor payments as unexplained expenditure under section 69C in the absence of any reply from the assessee.

On appeal, the CIT(A) dismissed the appeal of the assessee by not condoning the delay in filing the appeal before him and not considering the case of the assessee on the merits. Aggrieved by the order, the assessee filed an appeal to the Bangalore Tribunal.

ITAT Held

The Tribunal held that the assessee filed the computation of income, along with a copy of the audited financials, and the acknowledgement of filing the audit report under section 44AB. The assessee vehemently argued that the assessee is a small milk vendor, and taxing the entire cash deposit amounting to Rs. 1.05 crores, as well as the payment made to the contractor amounting to Rs. 4.22 lakhs, is highly unjustified.

It is an undisputed fact that the assessee could not represent his case before both the authorities below. The CIT(A) did not even consider the case of the assessee on merits and dismissed the appeal by not condoning the delay of 163 days in filing the appeal before him. It is opined that the assessee, being an illiterate person, on an honest and bona fide belief that the communication received is a mere notice and being unaware that the final appellate order has been passed, is a sufficient cause for filing the appeal belatedly before the CIT(A).

Accordingly, the delay in filing the appeal before the CIT(A) by 163 days is condoned. The entire issue in dispute is remitted to the AO’s file for decision afresh in accordance with the law.

List of Cases Referred to

• Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471 (SC) (para 6.1)
• People Education and Economic Development Society (PEEDS) v. ITO [2006] 100 ITD 87 (Chennai) (TM) (para 6.3)
• CIT v. K.S.P. Shanmugavel Nadar [1987] 30 Taxman 133/[1985] 153 ITR 596 (Madras) (para 6.4).

The post Delay Condoned for Illiterate Assessee – Matter Remanded | ITAT appeared first on Taxmann Blog.

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Kamlesh Chainani, Viraj Kurani, Harshula Khatri & Riya Sanjay Boob – [2026] 183 taxmann.com 102 (Article)

Moving with the meticulous plan of sowing the seeds of financial stability and laying the grounds for businesses to be future ready, the Hon’ble Finance Minister, keeping in mind the overarching theme of a Viksit Bharat, on 1February 2026, presented a blueprint of government’s commitment to long‑term structural reforms, fiscal discipline, and inclusive development. The measures come at a time of global uncertainty around tariff and trade, among others.

Budget 2026 appears to have hit the bullseye with measures to reduce litigation by addressing legislative and procedural lacunae, encouraging voluntary compliance, and easing procedural burdens. Moreover, the Hon’ble Finance Minister also finally dropped anchors to the safe harbours that were awaited for a long time, for the technology sector, while introducing tax holidays for data center services and electronic manufacturing services. This proposal could well turn out to be the ‘Dhurandar’ among all.

In this article, we have discussed the key proposals focused on movement towards compliance and trust-based taxation regime in India:

1. Timelines For Filing Revised Return of Income

Per the current provisions of the Income-tax Act, 1961 (‘the Act’), as well as Income-tax Act, 2025, the revised return of income could be filed only within 9 months from the end of the relevant tax year.

It is proposed to extend the time limit for filing the revised return of income from existing 9 months to 12 months from the end of relevant tax year, subject to payment of a prescribed additional fee, where the return is revised after the completion of 9 months from the end of relevant tax year. This will allow the taxpayers greater flexibility in rectifying omissions or incorrect statements, including that of belated returns.

This proposal is intended to be applicable from tax year 2025-26 onwards – meaning that for even the FY 2025-26, taxpayers would be able to file their revised returns till 31 March 2027, with an additional fee.

2. Reassessment and Expanded Updated Return Provisions

Per the current provisions of the Income-tax Act, 1961 (‘the Act’), as well as Income-tax Act, 2025, filing an update return was not possible for ‘a return of loss’ or ‘where assessment/reassessment is pending or has been completed in respect of the relevant tax year’.

It is proposed that the updated return can now be filed in cases where (a) the updated return has an effect of reducing the loss or (b) reassessment notice is issued.

If an updated return is filed after receiving a reassessment notice, the taxpayer will have to pay an additional income-tax of 10%. This will be over and above the additional tax payable on the aggregate of tax and the interest due on filing the updated return. The additional tax rates will continue to be 25%, 50%, 60% and 70% for the first, second, third and fourth year respectively, as applicable. It is further proposed that the additional income offered to tax would not form a basis for imposition of penalty for under-reporting/misreporting.

The above scope widening in terms of enabling filing of updated return in reassessment cases, would incentivise voluntary disclosures by the taxpayer since payment of such additional tax of 10% should be a clear choice where 200% penalty for under-reporting as a consequence of misreporting, is in question.

Click Here To Read The Full Article

The post [Opinion] Budget 2026 – A Shift from Disputes to Discipline appeared first on Taxmann Blog.

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IFSCA Circular IFSCA-FCR/4/2026-Banking; Dated: 03.02.2026

The International Financial Services Centres Authority (IFSCA) has mandated that all Finance Companies and Finance Units operating in the GIFT International Financial Services Centre (GIFT IFSC) and providing services to non-group clients must maintain a dedicated website or webpage.
This move is aimed at strengthening transparency, consumer awareness, and regulatory accountability in the IFSC ecosystem.

1. Applicability of the Requirement

The requirement applies to:

• Finance Companies and Finance Units registered with IFSCA
• Entities operating in GIFT IFSC
• Entities providing financial services to non-group clients

Group-only service providers are outside the scope of this mandate.

2. Objective of the Mandate

The directive seeks to:

• Enhance transparency in operations of IFSC entities
• Enable informed decision-making by customers and stakeholders
• Provide easy access to regulatory and operational information
• Strengthen consumer protection and grievance redressal visibility

3. Mandatory Disclosures on the Website/Webpage

The dedicated website or webpage must clearly and prominently disclose the following information:

3.1 Registration and Regulatory Details

• IFSCA registration details
• Licence or approval number
• Category and type of registration under applicable regulations

3.2 Permitted Activities

• List of activities permitted by IFSCA
• Scope of operations allowed under the regulatory framework

3.3 Products and Services Offered

• Details of financial products and services offered to clients
• Clear description to avoid misrepresentation or ambiguity

3.4 Grievance Redressal Mechanism

• Customer grievance redressal framework
• Contact details for grievance handling
• Timelines and escalation process

3.5 Key Managerial Personnel (KMP) Details

• Names and designations of key managerial personnel
• Governance and leadership disclosures, as applicable

4. Legal and Regulatory Framework

This requirement has been issued under:

• The IFSCA Act, and
• Applicable IFSCA (Finance Company) Regulations

The mandate forms part of IFSCA’s broader effort to align IFSC entities with global best practices in disclosure and consumer protection.

5. Effective Date

• Effective from – 1 April 2026
• Entities must ensure compliance on or before this date to avoid regulatory non-compliance.

Click Here To Read The Full Circular

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Ministry of Finance Notification; Dated: 03.02.2026

The Central Government has notified 5 February 2026 as the date on which the provisions of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 shall come into force.

1. Scope of Enforcement

All provisions of the Act will become effective from the notified date, except Section 25.

2. Section Excluded from Current Enforcement

• Section 25 of the Act has been expressly excluded from the current notification.
• The enforcement of Section 25 will be notified separately by the Central Government at a later date.

3. Legal Authority

The notification has been issued by the Central Government in exercise of the powers conferred under the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025, in accordance with established legislative practice.

4. Effective Date

• Effective date – 5 February 2026
• Exception – Section 25 (to be enforced separately)

Click Here To Read The Full Notification

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Case Details: O K Travels vs. State Tax Officer [2026] 182 taxmann.com 711 (Madras)

Judiciary and Counsel Details

• C. Saravanan, J.
• P.P. Vikram for the Petitioner.
• V. Prashanth Kiran, Govt. Adv. for the Respondent.

Facts of the Case

The petitioner challenged the order, which confirmed a demand arose after the non-reply to the show cause notice issued in GST DRC-01, and it was therefore confirmed against the assessee. Subsequently, it filed an application for rectification of mistake under Section 161 of the CGST Act and the Tamil Nadu GST Act, seeking correction of the order. The rectification application was rejected. The assessee contended that the rejection of the rectification application was arbitrary and contrary to law. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the impugned order demonstrated that the jurisdictional officer under CGST and the jurisdictional officer under the Tamil Nadu GST Act complied with the procedural requirements of the respective GST enactments and the rules made thereunder. It was held that the assessee’s failure to respond to the show cause notice in GST DRC-01 rendered the demand’s confirmation legally sustainable. The High Court held that the rejection of the rectification application under Section 161 did not warrant interference.

The post GST Demand Upheld for Non-Reply to SCN | Appeal Allowed with Deposit appeared first on Taxmann Blog.

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Circular no. RBI/2025-26/204 DoR.CO.SOG(Leg) No.401/09.08.024/2025-26; Dated: 03.02.2026

The Government of India has requested that all bank branches handling Government receipts and payments remain open for public transactions on 31 March 2026 (Tuesday), even though the day is a public holiday.

1. Purpose of Keeping Banks Open

The measure has been taken to ensure that all Government transactions relating to receipts and payments are properly accounted for within the Financial Year 2025–26, which concludes on 31 March 2026.

Keeping bank branches operational on this day will facilitate:

• Timely accounting of Government receipts
• Settlement of Government payments
• Smooth closure of accounts for the financial year

2. RBI Direction to Agency Banks

Pursuant to the Government’s request, the Reserve Bank of India has issued directions to all agency banks to keep their designated branches open on Tuesday, 31 March 2026.

Agency banks are required to ensure that branches dealing with Government business are fully functional for the purpose of processing Government-related transactions.

3. Applicability

This directive applies to:

• All agency banks
• Bank branches authorised to handle Government receipts and payments

The instruction is limited to Government transactions and does not necessarily extend to all regular banking services unless otherwise specified by the respective banks.

4. Date to Note

• Operational Date – Tuesday, 31 March 2026
• Occasion – Public Holiday
• Purpose – Closure and accounting of Government transactions for FY 2025–26

Click Here To Read The Full Circular

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1. Introduction

The Auditing and Assurance Standards Board (AASB) of the Institute of Chartered Accountants of India (ICAI) has issued an Exposure Draft on the “Standard on Auditing for Audits of Financial Statements of Less Complex Entities (SA for LCE)”, with the objective of introducing a simplified yet robust auditing standard tailored to entities with lower levels of complexity.

2. Exposure Draft on LCE

The proposed SA for LCE is designed to enable auditors to obtain reasonable assurance that the financial statements of Less Complex Entities are free from material misstatement, whether arising from fraud or error, while ensuring that audit procedures remain proportionate to the size, nature, and risk profile of such entities. The standard is premised on firms being subject to Standard on Quality Management (SQM) 1, thereby reinforcing that audit quality remains central even in a simplified framework.

3. Optional Use of SA for LCE

Despite the entity satisfying the criteria of a Less Complex Entity (LCE) as prescribed in the standard, the application of this Standard remains optional. The auditor may, based on professional judgment, elect to conduct the audit in accordance with the full set of Standards on Auditing (SAs) instead of the SA for LCE. In such cases, the audit shall be planned, performed, and reported strictly in compliance with the applicable Standards on Auditing, and no reference to compliance with the SA for LCE shall be made in the auditor’s report.

4. Criteria for Classification as a Less Complex Entity

A key feature of the exposure draft is the clear articulation of eligibility criteria for classifying an entity as an LCE. These criteria encompass:

4.1 Specific Prohibitions

An entity may be considered for audit under the “SA for LCE” only where no law or regulation restricts its application or mandates the use of any other auditing framework.

The entity must be unlisted in nature and should not operate as a banking or insurance entity, nor should its principal activities involve providing insurance services to the public. The framework is also not applicable in circumstances involving group audits, including situations where the principal auditor relies on the work of other auditors in respect of components of the entity.

Further, the entity should not be governed by any special statute and must operate as a standalone entity, i.e., it should neither be a holding, subsidiary, nor an associate of another entity. These conditions collectively ensure that the SA for LCE is applied only to entities with limited regulatory complexity and straightforward ownership and reporting structures.

4.2 Quantitative Criteria

From a quantitative perspective, an entity qualifies as a Less Complex Entity only if it remains within prescribed size thresholds. Specifically, its paid-up share capital does not exceed ₹10 crore, and its turnover, as reported in the profit and loss account for the immediately preceding financial year, is limited to ₹50 crore.

In addition, the entity should not have borrowings, including public deposits, exceeding ₹25 crore at any point during the accounting year. Where applicable, such as in the case of Section 8 companies or similar entities, cumulative grants and donations should also not exceed ₹25 crore at any time during the year.

Further, the entity’s employee strength must remain within 100 employees throughout the accounting year, ensuring that the scale of operations remains consistent with the characteristics of a less complex entity.

4.3 Qualitative Criteria

From a qualitative standpoint, an entity may be regarded as a “Less Complex Entity” only where it is exempt from the requirements of Section 143(3)(i) of the Companies Act, 2013, which mandates reporting on the adequacy and operating effectiveness of internal financial controls with reference to financial statements.

In addition, the entity’s business activities, operations, and related transactions should be straightforward in nature, with no complex matters or circumstances that could significantly affect the preparation of the financial statements.

Further, there should be no indicators of heightened complexity arising from the entity’s ownership structure, corporate governance arrangements, or the policies, procedures, and processes established by the entity. Collectively, these conditions ensure that the entity’s financial reporting environment remains simple and transparent, consistent with the objectives of the SA for LCE framework.

Click Here To Read The Full Story

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