# TheLeagle | Eco Law Forum

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## Posts

- [IBC (Amendment), 2026 Series - II | CoC’s Role in the IBC: A Case for Greater Legislative Clarity](https://theleagle.in/?p=1418): The Insolvency and Bankruptcy Code, 2016 (‘IBC’) provides the Committee of Creditors (‘CoC’) a central role in corporate insolvency resolution proceedings (‘CIRP’). The IBC prescribes the CoC’s role in broad terms and specific boundaries are still being delineated through judicial decisions. For example, while courts have consistently endorsed that commercial wisdom of the CoC is non-justiciable, precise extent of judicial oversight over the CoC’s decisions remains uncertain. This article focuses on two aspects of the CoC’s working that have emerged exclusively by judicial innovation and examines whether The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) succeeds in its attempt to ... Read more
- [IBC (Amendment), 2026 Series - I | Streamlining Admission and Withdrawal of a CIRP Application: The IBC Ignites Hope](https://theleagle.in/?p=1408): The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) – inter alia – amends the Insolvency and Bankruptcy Code, 2016 (‘IBC’) in relation to admission and withdrawal of a Corporate Insolvency Resolution Process (‘CIRP’) application. Both changes have the potential to streamline CIRP hampered by sub-par legislative drafting and judicial innovation.  In Vidarbha Industries Power Ltd v Axis Bank Ltd (‘Vidarbha Industries case’), the Supreme Court expanded scope of the National Company Law Tribunal’s (‘NCLT’) powers under Section 7 of the IBC. The Supreme Court held that the NCLT can consider viability and overall financial health of the corporate debtor before ... Read more
- [Amendments to the IT Rules, 2026: Effectuating the Tiger Global Case ](https://theleagle.in/?p=1405): On 31st March 2026, the Central Board of Direct Taxes (‘CBDT’) notified amendment to two sub-rules of Rule 128, The Income Tax Rules, 2026 (‘IT Rules, 2026’). Reactions to the amendments are neatly divided: while a few believe that the amendments are to effectuate the Supreme Court’s decision in The Authority for Advance Rulings (Income Tax) and Others v Tiger Global International II Holdings (‘Tiger Global case’), others have observed that the amendments are to dilute its impact. In this article, I suggest that the CBDT has amended the IT Rules, 2026 to codify the ratio of Tiger Global case. Though before I ... Read more
- [Amendments to the IT Rules, 2026](https://theleagle.in/?p=1403)
- [IT Act, 2025](https://theleagle.in/?p=1389): A timeline of the past decade. As I elaborate in a related post – the IT Act, 2025 has a longer (and opaque) history than widely believed.
- [Income Tax Act, 2025: A ‘Reform’ Comes to Life ](https://theleagle.in/?p=1379): The Income Tax Act, 2025 (IT Act, 2025) – after almost a decade of attempts to redraft income tax law – comes into force on 1 April 2026 and replaces the Income Tax Act, 1961 (IT Act, 1961). It’s a unique legislative achievement for various reasons. Two noteworthy reasons are: (a) there was no widespread or pressing demand for enacting a new income tax law; (b) the IT Act, 2025 does not effectuate any major change in tax policy. No other comparable ‘legislative replacement’ comes to mind where a new law was implemented without intending to change the previous policy. ... Read more
- [Spectrum Licensed to Telecom Companies: Another Frontier for the IBC](https://theleagle.in/?p=1316): Interaction of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) with various sectors of the economy – aviation and real estate – has produced uneven results. Telecom sector brings forth its own set of issues. The Supreme Court in its recent judgment of State Bank of India v Union Bank of India (‘SBI case’) has accorded primacy to the Indian Telegraph Act, 1885 and its attendant regulatory framework, potentially throwing a spanner in the efficacy of IBC for telecom companies. The narrow issue was whether spectrum – held under a license by telecom companies – is an asset that can be subjected to ... Read more
- [Money Displaces Skill-Chance Distinction: Examining Taxation and Regulatory Approaches to Online Gaming](https://theleagle.in/?p=1312): The Central Goods and Services Tax Act, 2017 (‘CGST Act, 2017’) and The Promotion and Regulation of Online Gaming Act, 2025 (‘OGA, 2025’) use money as the criteria to differentiate between various kinds of online gaming. In both legislations online gaming is the omnibus category while online money gaming is its sub-category characterized by players depositing monetary stakes. Section 2(80A), CGST Act, 2017 states that online gaming means a game offered on the internet or an electronic network and includes online money gaming. Section 2(80B), in turn, defines online money gaming as online gaming in which players deposit money in the expectation of ... Read more
- [GST Council | Anatomy of a Constitutional Body | Perspective of a Tax Lawyer](https://theleagle.in/?p=1304)
- [Buyback Tax: An Anti-Abuse Measure Wrapped in a Tax ](https://theleagle.in/?p=1301): Finance Bill, 2026 proposes to amend buyback tax. Yet again. The proposed amendment simultaneously simplifies and complicates buyback tax. Latter because of the proposal to create a separate tax slab for promoters of companies who participate in buyback of shares. Former because shareholders will be liable for capital gains instead of paying tax on the entire amount received on buyback. Too early to say if a separate tax slab for promoters is warranted, but the added layer of complexity neatly ties into chequered history of buyback tax, as depicted here.    A simple conception of buyback tax would be – taxable amount ... Read more
- [DDT and Buyback Tax: Skeletal Timeline](https://theleagle.in/?p=1296): This is a skeletal timeline of the evolution of buyback tax in India. A descriptive analysis can be read here.
- [Supreme Courts Uses Tax Sovereignty to Hunt Tiger Global](https://theleagle.in/?p=1283): The Supreme Court recently handed a significant legal victory to the Income Tax Department (‘Revenue’) in The Authority for Advance Rulings (Income-Tax) & Ors v Tiger Global International III Holdings (‘Tiger Global case’). And in the process created a significant shift in our understanding of income tax jurisprudence and tax treaty obligations. But, before we get to what the Supreme Court held, a short prologue.   Prologue: Underlying Procedural Knot Justice Mahadevan, in his leading opinion, concluded that the Revenue has proved that transactions in ‘the instant case are impermissible tax-avoidance arrangements, and the evidence prima facie establishes that they do not qualify as lawful.’ (para 50) ... Read more
- [Health and National Security Cess: Some Context](https://theleagle.in/?p=1273): The Lok Sabha on 5th December 2025, passed the Health Security se National Security Cess Bill, 2025. The Health se National Security Cess (‘Health and National Security Cess’) is an unusual marriage of public health and national security. And an example that when the State is determined for revenue, even tax law is not alien to creativity.  In the first part of this article, I examine the Union of India’s previous conceptualization – but inability to operationalize – a standalone National Defence Fund. Instead, six years after mooting the idea of a National Defence Fund, the Union seems to have adopted ... Read more
- [Case Study | Chief Commr CGST v Safari Retreats Pvt Ltd | 2018-2025 | Perspective of a Tax Lawyer](https://theleagle.in/?p=1264)
- [In Applause of a Repeal: Place of Supply for Intermediary Services](https://theleagle.in/?p=1260): The Goods and Services Tax Council (‘GST Council’) in its 56th meeting took multiple decisions and made a series of recommendations. The headline, of course, was dominated by the change in tax rates of various goods. An equal, or to my mind, a more substantive reform was the recommendation for omission of Section 13(8)(b) of the Integrated Goods and Services Tax Act of 2017 (‘IGST Act of 2017’).   Section 13 of the IGST Act of 2017 prescribes place of supply rules where location of supplier or location of recipient is outside India. Section 13(2) lays down the general rule and states that ... Read more
- [Time Restraint on Power of Provisional Attachment under GST ](https://theleagle.in/?p=1257): Introduction  The Supreme Court in Kesari Nandan Mobile v Office of Assistant Commissioner of State Tax (‘Kesari Nandan Mobile’) held that an order of provisional attachment under Section 83 of the Central Goods and Services Act, 2017 (‘CGST Act of 2017’) cannot extend beyond one year. A plain reading of Section 83(2) of the CGST Act of 2017 reveals that every provisional attachment shall cease to have effect after expiry of one year. However, Section 83(2) doesn’t expressly prohibit renewal of an attachment order after expiry of one year.   In Kesari Nandan Mobile, the Revenue Department after expiry of one year issued ... Read more
- [Parallel Proceedings under GST: Supreme Court Misses an Opportunity](https://theleagle.in/?p=1255): Introduction  Recently, the Supreme Court in M/S Armour Security (India) Ltd v Commissioner, CGST, Delhi East Commissionerate & Anr (Armour Security case) clarified scope of the terms ‘proceedings’ and ‘same subject matter’ used in Section 6(2)(b) of the Central Goods and Services Act, 2017 (CGST Act of 2017). The need to clarify the import of both phrases was necessary to ensure that taxpayers are not subjected to parallel proceedings by the Union and State GST officers on the same subject matter.  The judgment largely succeeds in earmarking the scope of both phrases but feels like a missed opportunity.  In this article, I ... Read more
- [Taxation of ESOP-Related Compensation: Reviewing the Flipkart Cases](https://theleagle.in/?p=1252): Introduction  In April 2023, the Board of Flipkart Private Limited (‘FPS’), Singapore decided to pay a one-time voluntary compensation – 43.67 US dollars per stock option – to all the option grantees of its Employee Stock Options (‘ESOPs’). FPS paid the compensation because the value of its ESOPs had reduced after divestment of its stake in PhonePe, a digital payments company. Under the Flipkart Stock Option Scheme of 2012, FPS was under no obligation to compensate option grantees for loss in the value of its ESOPs. Nor did the option grantees have a right to compensation for FPS’s failure to ... Read more
- [The Monsoon of Tax ‘Reform’ ](https://theleagle.in/?p=1249): It’s raining tax ‘reform’. Income Tax Bill, 2025 (‘IT Bill, 2025’) will soon replace the six decades old Income Tax Act, 1961. Goods and Services Tax (‘GST’) will ostensibly be simplified by Diwali of 2025. And we will have a two-tier GST consisting of 5% and 12%, with a ‘special’ tax rate of 40% applicable to select goods and services. Income Tax Return forms are being simplified, money limits for filing appeals across all tax domains are being enhanced to reduce tax litigation. Cumulatively, the changes – we are informed – are part of the larger goal of ushering in ‘Next-Generation Reforms’. There is a ... Read more
- [Shelf Drilling Judgment: A Case of Interpretive Disagreements](https://theleagle.in/?p=1246): The Supreme Court in a split judgment left unresolved the long standing issue of interplay between Section 144C-Section 153 of the Income Tax Act, 1961 (‘IT Act, 1961’). The absence of a clear resolution while not ideal, provides an insight into different interpretive attitudes towards procedural issues in tax. In this article, I make a few broad points on the interpretive approaches both the judges adopted when faced with a question that did not have a clear answer, but at the same time, a question seems to have acquired more complexity than  warranted.  Issue  The panoramic question was: whether timelines for ‘specific assessments’ ... Read more
- [Case Study | Vodafone v Union of India | 2007-2021 | Perspective of a Tax Lawyer](https://theleagle.in/?p=1241)
- [GST @8: A Journey Via Eight Amendments](https://theleagle.in/?p=1239): Introduction  Goods and Services Tax (‘GST’) came into force eight years ago on 1 July 2017. Eight long, eventful years that have been full of sound and fury. But, do they signify something? Yes and No. Yes, because GST, at times, operates like a tinkered version of State-VAT laws and not a transformative reform of India’s indirect tax regime. At other times, GST reveals glimpses of its potential as a transformative reform, only to be bogged down by unexplained and reactive changes introduced by a heavy handed tax administration. On average, GST continues to meander between these two versions. As ... Read more
- [Liquidation After Approval of Resolution Plan: The IBC Faces Tough Challenges](https://theleagle.in/?p=1233): The Supreme Court within a span of few months delivered two judgments – State Bank of India & Ors v The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr (Jet Airways) and Kalyani Transco v M/S Bhushan Steel Power and Steel Ltd & Ors (Bhushan Steel) – where it ordered liquidation of the corporate debtors in question. The common theme of both the judgments was that the Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT) had approved a resolution plan, but its implementation failed. The successful resolution applicants in both cases used delay tactics by repeatedly seeking ... Read more
- [Competition Law and the IBC: An Alternate Perspective on the Supreme Court’s Balancing Act](https://theleagle.in/?p=1149): Introduction Recently, the Supreme Court (‘Court’) in Independent Sugar Corporation Ltd v Girish Sriram Juneja & Ors resolved an interpretive uncertainty involving the interface of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) with the Competition Act, 2002. The narrow question before the Court was whether the approval of a resolution plan by the Competition Commission of India (‘CCI’) must mandatorily precede the approval of the Committee of Creditors (‘CoC’) under the proviso to Section 31(4), IBC. The proviso states that:  Provided that where the resolution plan contains a provision for combination as referred to in section 5 of the Competition Act, ... Read more
- [Service Charge, its Similarity with Tax, and a ‘Double Whammy’ for Consumers: Some Thoughts](https://theleagle.in/?p=1072): Introduction  The Delhi High Court (‘High Court’) recently ruled that levy of mandatory service charge by restaurants violates customer rights. The High Court’s reasoning, anchored in consumer protection laws, termed a mandatory service charge as deceptive and misleading for consumers. The High Court also made a few casual references to tax laws. For example, the High Court took umbrage at the nomenclature of ‘service charge’ and its potential to confuse customers with a tax levied by the Government. There is merit to the High Court’s observation, but service charge and tax have a deeper connection that is only superficially referred to in ... Read more
- [Fraudulent Sale is Supply Under GST: Three Errors of the Advance Ruling](https://theleagle.in/?p=1067): A recent advance ruling by Gujarat AAR is a frustrating read. AAR held that sale by a seller constitutes as supply under GST laws even if the seller was defrauded and did not receive any consideration for such goods. In this article, I argue that there are three obvious errors in the advance ruling, which encompass flaw in applicant’s arguments and AAR’s approach. The three errors are:  First, the applicant’s framing of question.  Second, AAR’s reasoning and identification of relevant provision.  Third, applicant’s argument on why a fraudulent sale should not constitute a supply.  The facts involved a peculiar and may I ... Read more
- [Legislative Intent or Error: Puzzle of Indian Tax Policy](https://theleagle.in/?p=1061): Introductory Questions  Let me start with a question: how does one discover legislative intent in a provision of tax statute? Through a plain reading of the provision or through a subsequent statement by the State’s legal counsel stating its intent? Positivist thinking would point us to the former, and rightly so. A statement, even a sworn statement in a court shouldn’t override what is contained in the statute. Deference to the legislature cannot extend to a point where despite what the statute contains, court interprets the provision based on legislature’s statement explaining its intent.  The question in your mind may ... Read more
- [When A Princess Worried About Tax on Alimony](https://theleagle.in/?p=1056): All things in life have a tax angle, including alimony payments. In this article I elaborate on tax treatment of alimony payments under the Income Tax Act, 1961 (‘IT Act, 1961’). Upfront, these are the three takeaways from this article:  first, a lump sum payment of alimony amount is not taxable in the hands of recipient, since it is a capital receipt. second, the monthly payment of alimony amount is taxable in the hands of recipient, since it is an income from a particular source.  third, the payer receives no tax deductions for alimony payments, even if the payments are ... Read more
- [Tax Privacy: To Begin a Conversation … ](https://theleagle.in/?p=1041): Income tax law is based on disclosing information to the State. Personal financial information. Bank account statements, investments, salary receipts, rent paid or received, medical expenses, money transferred to spouse, expenses of children, insurance premiums, political donations, charitable contributions to name a few. Each piece of information is necessary to ascertain the exact tax liability of a taxpayer. And it is statutory duty of a taxpayer to make accurate and timely disclosures.   If income tax administration is based on State compulsorily seeking detailed financial information from taxpayers, is it even possible to expect tax privacy? Yes. In fact, one could ... Read more
- [Powers of Arrest under CGST Act, 2017 and Customs Act, 1962: Constitutionality and their Scope](https://theleagle.in/?p=1034): The Supreme Court in a recent judgment upheld the constitutionality of arrest-related provisions contained in Customs Act, 1962 and CGST Act, 2017. The Court also elaborated on the scope of arrest powers under CGST Act, 2017 and safeguards applicable to an arrestee. The judgment reiterates some well-established principles and clarifies the law on a few uncertain issues. In this article, I examine the judgment in 3 parts: first, the import of Om Prakash judgment and Court’s opinion on arrest powers under Customs Act ,1962; second, the issue of constitutionality of arrest-related provisions contained in CGST Act, 2017, and third, the scope and ... Read more
- [Long Wait for GSTATs: July 2017 … and Counting. ](https://theleagle.in/?p=1028): GSTATs have been envisaged as the first appellate forum under GST laws. And yet, 7.5 years since implementation of GST, not a single GSTAT is functioning. Reason? Many. Some are easy to identify, others are tough to understand. Nonetheless, here is a small story of the ill-fated GSTATs since the implementation of GST laws in July 2017.  Provision is Declared Unconstitutional  CGST Act, 2017, as originally enacted, provided that the no. of technical members in GSTATs would exceed the no. of judicial members. Both the Union and States wanted to ensure their representation on GSTATs via technical members which led ... Read more
- [Income Tax Bill, 2025: In Search of a Big Idea](https://theleagle.in/?p=1021): The Department of Revenue claims that Income Tax Bill, 2025 – tabled in the Parliament on 13 February 2025 – marks a significant step towards simplifying the language and structure of the Income Tax Act, 1961. Does it? Yes. Was it needed? Yes. Is it a major reform? No, and herein lies the rub.   The Press Release accompanying the IT Bill, 2025 makes it clear that the ‘simplification exercise’ did not implement any major tax policy changes to ensure continuity and certainty for taxpayers. This statement presumes two things: first, that there isn’t much uncertainty in the current IT Act, 1961 or certainly not ... Read more
- [Skeletal Timeline of Income Tax Reform in India](https://theleagle.in/?p=1017): 1860-1886:  Income tax was introduced in India for the first time in 1860 to overcome the financial difficulties due to First War of Independence of 1857. The period of 1860-1886 saw the Govt alternating between income tax and license tax as a source of revenue. Income tax became the preferred option when the first systematic form of income tax law was passed in 1886.  1860: Income Tax Act, 1860 enacted in India 1863: Income Tax Act, 1860 ‘expired’  1869: Income tax was reintroduced due to financial difficulties faced by the British Govt  1873: Income Tax Act, 1869 ‘expired’   1878: Income ... Read more
- [Why Should Tax Lawyers Care About the Annual Budget?](https://theleagle.in/?p=1013): Tax law, especially Indian tax law discussions are far too often contained by self-sustaining logic of statutory provisions and case laws. Tax lawyers, including me, feel validated and satisfied having decoded a particular judgment or the meaning of a provision. The satisfaction is often short lived because another judgment or amendment is on the horizon. Else, another Press Release, Circular, Notification, Clarification of the Circular, Amendment to the Notification, Guideline, Order that needs to be read. If we don’t keep abreast, we risk losing clients for missing a deadline of tax return, or failure to obtain tax refunds, or for ... Read more
- [CERC Is Exempt from GST: Delhi HC ](https://theleagle.in/?p=1008): The Delhi High Court in a recent judgment held that the Central Electricity Regulatory Commission and Delhi Electricity Regulatory Commission (‘Commission’) were not liable to pay GST. The Revenue sought to levy on the fees and tariff that Commission received from the power utilities. The Revenue contended that functions performed by the Commission were ‘support services to electricity transmission and distribution services’ under a 2017 Notification issued by CBIC. The Revenue clarified that while no GST was payable on services provided via electricity transmission and distribution services, but support services rendered in the contest of electricity transmission and distribution were subject to ... Read more
- [Shimla HC Decodes Scope of Sec 43-B, IT Act, 1961](https://theleagle.in/?p=1005): In a recent judgment, the Shimla High Court had to adjudicate on the conditions prescribed in Section 43-B, IT Act, 1961 for an assessee to claim deductions. The issue related to Section 43-B(f) which envisages deductions to an employer for payments made to employees on encashment of cash leaves. Facts  For the Assessment Year 2002-03, the assessee inter alia claimed expenses of Rs 45,00,000/-, a sum it paid to LIC on contribution to Credit Leave Encashment Trust. The Assessing Officer disallowed the claim of such expense and added it to the income of the assessee. The assessee was unsuccessful in appeal ... Read more
- [Assignment of Leasehold Rights is Immovable Property under GST: Guj HC ](https://theleagle.in/?p=998): Introduction  In a recent and much discussed judgment, the Gujarat High Court has held that assignment by sale and transfer of leasehold rights of a plot of land amounts to transfer of benefits arising out of immovable property. The High Court concluded that the transfer would not amount to a supply under Section 7, CGST Act, 2017 read with Schedule II of the Act.   My usual lament is about length of judgments. This judgment is 280 pages and could very well have been less than half. But the Judges felt the need to reproduce the entirety of arguments and copiously cite ... Read more
- [Telecommunication Towers are Movable Property under GST: Delhi HC](https://theleagle.in/?p=995): The Delhi High Court in a recent decision held that telecommunication towers are best characterized as movable property under Section 17(5), CGST Act, 2017 and are eligible for input tax credit (‘ITC’).  Facts  Indus Towers filed a writ petition impugning the showcause notice issued under Section 74, CGST Act, 2017. The notice issued a demand for tax along with interest and penalty. Indus Towers was engaged in the business of providing passive infrastructure services to telecommunication service providers. And the notices denied it ITC on inputs and input services used for setting up passive infrastructure on the ground. The Revenue’s argument was ... Read more
- [Issuance of Shares under Amalgamation Scheme is Not Transfer of Property: ITAT](https://theleagle.in/?p=992): The Rajkot Bench of ITAT recently ruled that issuance of shares under a scheme of amalgamation does not amount to transfer of capital assets under IT Act, 1961. The Assessing Officer had applied Sec 56(2)(vii)(c)(ii) of the IT Act, 1961 to assert that a skewed swap ratio was applied for transfer and valuation of shares, but the ITAT held in favor of the assessee.  Facts  The assessee was a public limited company. It filed its revised returns on 07.05.2015 declaring total income of Rs 4,74,48,046/- and book profit of Rs 5,20,68,396/- and it was selected for scrutiny. The Assessing Officer noted that ... Read more
- [test post](https://theleagle.in/?p=985)
- [Safari Retreats: Supreme Court Adopts a ‘Strict’ Stance](https://theleagle.in/?p=980): The Supreme Court pronounced its judgment in the Safari Retreats case a few days ago. The judgment involved interpretation of Section 17(5), CGST Act, 2017, specifically clauses (c) and (d) read with two Explanations contained in the Section. The judgment has been greeted with a mixed response by tax community with some commending the Supreme Court for adhering to strict interpretation of tax statutes while others criticizing it for misreading the provision and by extension legislative intent. While a lot of ink has already been spilled in writing comments on the judgment, I think there is room for one more view.  In ... Read more
- [Much Ado About Demo Vehicles: Ambiguity on ITC Clarified](https://theleagle.in/?p=975): The CBIC recently issued a Circular clarifying availability of ITC in respect of demo vehicles. The Circular, as I briefly mentioned elsewhere, seems like an exercise in law making rather than a mere interpretation of law. But I will keep that view aside for the purpose of this article. In this article, I focus on the ambiguity that emerged on ITC availability for demo vehicles, due to divergent views of AARs/AAARs, the relevant statutory provisions, and then describe how the recent CBIC Circular clarifies the law. I conclude that the confusion regarding availability of ITC on demo vehicles was avoidable if AARs/AAARs had ... Read more
- [Fee for Technical Services: Future Demands Answers](https://theleagle.in/?p=969): Introduction  Tax practitioners tend to refer to Fee for technical services (‘FTS’) and Royalty income in tandem with an intent to highlight the shape shifting nature of both concepts under domestic and international tax law. And in Indian context, the discussion is also about the high volume of litigation that both concepts invite. This article is an attempt to briefly highlight how the term FTS has been interpreted by Indian courts and whether in view of the technological advancements, specifically the ability to offer technical expertise without human intervention – such as with the help of AI bots – presents ... Read more
- [ESOPs-Related Compensation Present an Interesting Dilemma](https://theleagle.in/?p=966): Introduction  Employee Stock Options (ESOPs) are typically taxable under the IT Act, 1961 in the following two instances:  first, at the time of exercise of option by the employee as a perquisite. The rationale is that the employee has received a benefit by obtaining the share at a price below the market price and thereby the difference in the option price and the market price constitutes as a perquisite is taxable under the head ‘salaries.’  second, when the said stocks are sold by the employees, the gains realized are taxed as capital gains.  In above respects, the law regarding taxability of ESOPs ... Read more
- [Short Note from Tax History: Cost of Acquisition and Capital Gains Tax](https://theleagle.in/?p=961): This article aims to examine in detail a judgment on capital gains tax that continues to have enduring relevance. B.C. Srinivasa Shetty case was decided in 1981 by a 3-Judge Bench of the Supreme Court and its observations on chargeability of capital gains tax continue to be cited in various contemporary cases. In the impugned case, Supreme Court clarified the chargeability of capital gains tax on transfer of goodwill of a business. This article tries to underline the observations of Supreme Court and argues that an overlooked contribution of the decision is its adherence to strict interpretation of charging provision of a ... Read more
- [Single Administrative Interface under GST: Identifying Two Rough Patches  ](https://theleagle.in/?p=952): GST is a dual nationwide tax implying that both the Union and States concurrently levy it on supply of goods or services. While a single indirect tax jointly administered by the Union and States is supposed to augur well for ease of doing business and improve other economic efficiencies, it also requires demarcating administrative responsibilities to prevent the taxpayer from being subjected to proceedings by two different authorities. One such issue is demarcating and assigning tax base to tax authorities of the Union on one hand and the States/Union Territories on the other. GST laws anticipated overlap of tax administration ... Read more
- [SAAR v/s GAAR: Inauguration of an Interpretive Dilemma ](https://theleagle.in/?p=948): In a recent decision, the Telangana High Court dismissed petitioner’s contention that General Anti-Avoidance Rule (‘GAAR’) cannot be applied by the Income Tax Department since the impugned fact situation is apparently covered by Specific Anti-Avoidance Rule (‘SAAR’). And that the relevant SAAR provision – Section 94(8) – specifically excludes the impugned situation from its purview thereby obviating the need to apply SAAR as well. In my view, the petitioner adopted a far-fetched argument to circumvent the application of GAAR and the High Court correctly acknowledged the feeble nature of petitioner’s arguments and rejected the same. At the same time, in deciding ... Read more
- [Yin-Yang Nature of ITC and Supplier-Purchaser Obligations](https://theleagle.in/?p=944): In a recent decision, the Kerala High Court upheld constitutionality of Section 16, CGST, 2017, specifically Section 16(2)(c) which restricts the ITC of a purchasing dealer (‘purchaser’) if the supplier has not remitted tax collected from the purchaser to the Government. The decision examines validity of the conditions to claim ITC under Section 16(2)(c) and Section 16(4). In this article, I examine the only the former by headlining two under-examined aspects of ITC: first, nature of ITC as a right/concession; second, the reliance of purchaser on supplier to claim ITC. Both aspects influence each other and in turn the success or ... Read more
- [Section 71(3A), IT Act, 1961 is Constitutional: Delhi HC](https://theleagle.in/?p=941): In a recent judgment, the Delhi High Court held that Section 71(3A), IT Act, 1961 was constitutional and did not violate Art 14 and/or Art 19(1)(g) of the Constitution. The High Court’s primary reasoning was that the introduction of sub-section (3A) to Section 71 did not take away a vested right of the assessee but only introduced a new condition for an assessee to set off the loss.  Section 71, IT Act, 1961 Section 71(1), IT Act, 1961 allows an assessee to set off loss under one head of income against income under another head of income, subject to certain conditions. ... Read more
- [Section 54, IT Act, 1961: A Short Note on its Evolution](https://theleagle.in/?p=937): Section 54, IT Act, 1961 provides exemption from capital gains tax if an assessee sells residential house and reinvests the capital gains in another residential house. While core of the Section 54 has remained unaltered, various amendments to the provision have altered the scope of exemption. For example, the benefit of Section 54 was earlier was only available only to an individual, but the provision was amended via Finance Act, 1987 to extend the benefit of tax exemption to both – an individual and a Hindu Undivided Family (‘HUF’). While Section 54 has been similarly amended multiple times, this article ... Read more
- [Powers of Arrest under GST: Unravelling the Phrase ‘Committed an Offence’](https://theleagle.in/?p=931): CGST Act, 2017 provides the Commissioner power to arrest under specific circumstances. Section 69, CGST Act, 2017 states that:  Where the Commissioner has reasons to believe that a person committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer or central tax to arrest such person. (emphasis added)    There are several aspects of the power to arrest under GST that were and are under scrutiny of ... Read more
- [Tax Treatment of Mandatory CSR: Alignment of CGST Act, 2017 and IT Act, 1961](https://theleagle.in/?p=924): In this article, I elaborate on one of the several changes introduced by Finance Act, 2023 to CGST Act, 2017. Section 17, CGST Act, 2017 was amended via Finance Act, 2023 to clarify that the goods or services or both used to comply with mandatory CSR obligations, i.e., CSR obligations under Section 135, Companies Act, 2013, would not be eligible for Input Tax Credit (‘ITC’). The amendment sought to achieve two objectives: first, it clarified law on a point which attracted contradictory opinions by authorities for advance rulings (‘AARs’); second, it tried to ensure that the tax treatment of mandatory CSR activities ... Read more
- [Dividend Distribution or Reduction of Share Capital: DDT’s Long Shadow on Cognizant](https://theleagle.in/?p=920): Dividend Distribution Tax (‘DDT’) – abolished in April 2020 – was one of the most contested taxes in India as it taxed dividends in hands of companies which distributed dividends. Making companies liable to pay dividend tax was opposite to widely followed classical system of dividend taxation wherein dividends are taxed in the hands of shareholders. The various questionable policy reasons for introduction of DDT aside, DDT also created incentives for companies to find innovative ways to put money in the hands of its shareholders without declaring dividends. One such alternative way was buyback of shares. The alternate means of ... Read more
- [Taxation of Perquisites: SC Rules on Constitutionality](https://theleagle.in/?p=917): Challenge  In a recent judgment, the Supreme Court ruled on constitutionality of Section 17(2)(viii), IT Act, 1961 and Rule 3(7)(i), IT Rules, 1962 which include concession loans under perquisites and provided for their valuation respectively.   Section 17(2) defines perquisites to include various perks under different clauses. Section 17(2)(viii) is a residuary clause which empowers the executive to include other perks and uses the phrase: ‘as may be prescribed’. Rule 3, IT Rules, 1962 prescribes the additional amenities and benefits that are taxable as perquisites. Rule 3(7)(i) provides that interest-free/concessional loans provided by a bank to its employees are taxable as fringe ... Read more
- [Tax Exemption v/s Tax Exemption for ‘Beneficial Purpose’: Interpretive Dilemmas ](https://theleagle.in/?p=914): The thumb rule in interpreting a tax statute is that it must be strictly construed and any ambiguities in statutory provisions are resolved in favor of the taxpayer. However, the rule relating to interpretation of ambiguities is only applicable for charging provisions or provisions that provide authority to levy tax. In case of provisions or notifications that provide a tax exemption, the opinion of Courts have swung both ways. In 2018, a 5-Judge Bench of the Supreme Court in Dilip Kumar case authoritatively ruled that any ambiguity in a tax exemption provision is resolved in favor of the State. However, ... Read more
- [Rainbow Papers Case and the Art of Misinterpretation](https://theleagle.in/?p=910): On September 6, 2022, the Supreme Court pronounced its judgment in Rainbow Papers case that unsettled prevailing understanding of the waterfall mechanism under Section 53, Insolvency and Bankruptcy Code, 2016 (‘IBC’). And equally unconvincingly defended the merits of the decision in the review petition further entrenching a position of law that is not aligned with the text of Section 53 of IBC and other provisions of IBC. In this post, I look at the case, its dissatisfactory interpretive approach, and the implications.  Interpretive Question  In the impugned case, the corporate debtor owed VAT and Central Sales Tax to the State tax authorities. ... Read more
- [Intersection of Trusts, DTAAs, and IT Act, 1961: Profile of ADIA Case](https://theleagle.in/?p=906): Abu Dhabi Investment Authority (‘ADIA’) is currently embroiled in a tax dispute in India that involves questions about its eligibility to claim tax benefit under India-UAE DTAA, recognition of foreign trusts in India, and interpretation of provisions of IT Act, 1961 on taxability of revocable trusts and their representative assessees. The Bombay High Court, in October 2021, held that ADIA was entitled to avail the tax exemption under India-UAE DTAA despite ADIA making the investments and earning income through a trust registered in Jersey. The High Court held that AAR’s ruling – against which an appeal was filed before the High Court ... Read more
- [Water Cess: States Run into a Constitutional Hurdle](https://theleagle.in/?p=902): Two States – Himachal Pradesh and Uttarakhand – in their attempts to generate additional sources of revenue have run into constitutional hurdles. Both States attempted to levy a ‘water cess’, a tax on use of water by power generation companies but the Courts declared the same as unconstitutional. Both the Himachal Pradesh High Court and the Uttarakhand High Court have declared the respective levies of both States as unconstitutional. The High Courts of both States held that while the States are terming the levy as a water cess/tax, it was in effect a tax on electricity and States do not have the power to ... Read more
- [Kerala versus Union: Dispute Lingers ](https://theleagle.in/?p=897): The dispute between the State of Kerala and Union of India involving disagreement on the latter’s scope of power to restrict debt levels of the former, was referred to a Constitution Bench by the Supreme Court. Previously, I’ve written about the dispute, likely issues, and interpretive questions that Kerala’s petition is likely to raise. In this article, I comment on the Supreme Court’s latest order where it has summarized the arguments raised by both Kerala and the Union of India and enlisted the issues involved. Summary of Arguments  The overarching issue, to recall briefly, is that under Section 4, Fiscal Responsibility and Budget Management ... Read more
- [‘Simple and Non-Controversial’: Section 13A, IT Act, 1961](https://theleagle.in/?p=892): Section 13A was introduced in the IT Act, 1961 via the Taxation Laws (Amendment) Act, 1978 (‘1978 Act’) to grant income tax exemption to political parties. The then Minister of Finance, Shri H.M. Patel, introduced Taxation Laws (Amendment) Bill, 1978 in the Lok Sabha and remarked that it was ‘a simple and non-controversial bill’ and he trusted that it would receive unanimous support of all the parties. The 1978 Act was solely dedicated to clarifying income tax obligations of political parties and did not contain provisions on any other subject. The Lok Sabha debate that followed reflected anything but a unanimous view, and the ... Read more
- [Including Capital Gains within Scope of Income: A Short Note from Tax History](https://theleagle.in/?p=887): Provisions to tax capital gains in India’s income tax law were first included in 1947. The Act XII(22) of 1947, amended Income Tax Act, 1922 (‘IT Act, 1922’) – predecessor to India’s current income tax statute, IT Act, 1961 – and expanded the definition of income to include capital gains. The expansion of definition of income was subject of a judicial challenge where the Bombay High Court and thereafter the Supreme Court concluded that the term income can encompass capital gains, though Justice Chagla – then at the Bombay High Court – had a different opinion. The different reasonings offer us a small glimpse ... Read more
- [No Service Tax on Carried Interest: GST Applicability Remains an Open Question](https://theleagle.in/?p=883): In a recent decision the Karnataka High Court has held that a Venture Capital Fund (‘VCF’) is not liable for service tax on carried interest. The decision reversed Customs, Excise & Service Tax Appellate Tribunal’s (‘CESAT’) ruling which was under appeal. CESAT had held that service tax was payable by the VCF primarily on the grounds that a VCF constituted as trust can be considered a person and that the doctrine of mutuality was not applicable to it since it further invests the money of its contributors with third parties, breaching the mutuality. The High Court viewed the VCF as a pass-through entity and ... Read more
- [Portuguese Civil Code, Income Tax, and Companies Act: Understanding Beneficial Ownership ](https://theleagle.in/?p=877): The Bombay High Court, in a recent judgment, had to unravel the interplay of Portuguese Civil Code, IT Act, 1961, and the Companies Act, 1956 – among other issues – to ascertain the tax liability of assessees. While the case involved other issues, I will focus on the beneficial ownership aspect and how the assessees understood it and the High Courts’ response to the same.    Introduction   The appellant in the case, along with his two brothers each held around 30-33% of shares in private limited companies which were engaged in the business of construction and hospitality. All the three brothers were ... Read more
- [Unfamiliar Terrain of Loyalty Points and GST](https://theleagle.in/?p=870): Levying GST on atypical forms of consideration is a familiar problem under GST regime. One such problem relates to the levy of GST on vouchers issued by a supplier. While we have a modicum of certainty on the interface of vouchers and GST, on another form of consideration, i.e., loyalty points, applicability of GST remain a source of intrigue. In this article, I elaborate on some of the challenges posed by issuance of loyalty points and the unanswered questions about the levy of GST on their issuance, cancellation, among other aspects.  Identity of Loyalty Points The first challenge is accurately identifying loyalty ... Read more
- [Can Cash be Seized During GST Inspections? ](https://theleagle.in/?p=866): Section 67 of the CGST Act, 2017 deals with powers of inspection, search, and seizure of officers and Section 67(2) specifically empowers the officers carrying out an inspection to seize goods and documents. Courts have arrived at divergent interpretations as to whether the power to seize goods and documents includes the power to seize cash – unaccounted or otherwise. Relying on the interpretive principle of ejusdem generis and the objective of GST laws, some Courts have held that power to seize goods includes power to seize cash while some Courts – relying on similar factors – have concluded otherwise.  Short ... Read more
- [State’s Powers to Secure Loans: Kerala-Union Tussle ](https://theleagle.in/?p=859): The State of Kerala (‘Kerala’) recently filed an original suit against the Union of India (‘Union’) alleging that the latter has interfered with its fiscal autonomy by imposing a ceiling limit on its borrowing powers. The issue has been brewing for a while and Kerala has only recently approached the Supreme Court, which is yet to adjudicate on this issue. Kerala’s suit though brings into focus an important but largely ignored provision of the Constitution, i.e., Article 293. This article is an attempt to understand the provision and the related legal issues in the dispute between Kerala and the Union.  Kerala Alleges Violation of ... Read more
- [Article 293 of the Constitution vis-a-vis Section 163, GOI, 1935](https://theleagle.in/?p=856): The infographic compares Article 293 of the Constitution with its predecessor provision, i.e., Section 163, Government of India Act, 1935. The differences are highlighted via the underlined text in grey. A detailed examination of Article 293 in the backdrop of the Kerala and Union’s pending dispute before the Supreme Court can be read here.
- [JDAs Not Exempt from GST: Telangana HC](https://theleagle.in/?p=853): The Telangana High Court in a recent judgment clarified that Joint Development Agreements (‘JDA’) between developer and landowner do not transfer ownership rights but only grant development rights to developer. The petitioner’s case, in summary, was that JDA results in transfer of ownership in land and the GST exemption for ‘sale of land’ under Entry 5, Schedule III, CGST Act, 2017 will be applicable to JDAs. The State’s case for bringing JDA within the fold of GST relied on Entry 5(b), Schedule II, CGST Act, 2017 which inter alia makes construction services amenable to GST.  The High Court clarified that transfer of ownership only ... Read more
- [Lessons from NAA: Parameters of a Fair Dispute Resolution Body ](https://theleagle.in/?p=830): The experience of transitioning from retail sales tax to VAT laws in 2002-03 provided a learning that a similar transition to GST may be used as a pretext by suppliers to artificially increase the prices of goods and services and profiteer at the expense of retail consumers. To protect consumer interest, an anti-profiteering provision was included in Section 171 of the CGST Act, 2017 which mandates that any reduction in tax rate or the benefit of ITC shall be passed on to the consumer by way of commensurate reduction in prices. And under the same provision the Central Government was ... Read more
- [Penalties for e-way bills cannot be imposed in absence of Mens Rea: Allahabad HC](https://theleagle.in/?p=825): The Allahabad High Court in a recent judgment took the view that the GST Department cannot impose a penalty on taxpayers – under Section 129(3), CGST Act, 2017  – for not possessing e-way bills in the absence of an intention to evade tax. The High Court held that the essence of any penal imposition is linked to the presence of mens rea which was clearly absent as revealed from the facts and records of the impugned case. In stating so, the High Court aligned with an emerging jurisprudence on Section 129 that requires intent to evade tax as an essential requirement for passing ... Read more
- [Post-Supply Discounts Cannot be Included in Transaction Value: Madras HC](https://theleagle.in/?p=822): The Madras High Court recently observed that post-supply discounts offered by a supplier to the recipient cannot be included in the transaction value/value of supply for levying GST. The High Court distinguished between subsidy offered by a third party and a discount and noted that a discount by itself cannot qualify as subsidy.   Introduction to Taxability of Discounts under GST   Before discussing the case, I think it is important to provide contest of the type of discounts envisaged under CGST Act, 2017 and their manner of inclusion and exclusion from the value of supply.  Section 15, CGST Act, 2017 contains stipulations as ... Read more
- [Supply of Vouchers and GST: Three Decisions and a Defensible Conclusion](https://theleagle.in/?p=819): This article focuses on the issue raised by M/s Kalyan Jewellers Limited (‘Kalyan Jewellers’) as regards the pre-paid instruments (‘PPI’)/vouchers issued by them to their customers. The claim of Kalyan Jewellers before the Advance Authority (‘AAR’), Appellate body for Advance Rulings (‘AAAR’), and thereafter before the Madras High Court was that the PPIs/vouchers issued by them were actionable claims. And due to the exemption of actionable claims under Schedule III of the CGST Act, 2017, the supply of PPIs was not subject to GST. Section 2(1) of CGST Act, 2017 defines actionable claims to have the same meaning as assigned to them under Section 3 of ... Read more
- [NAA is Constitutional, Individual Orders Can be Challenged on Merits: Delhi HC](https://theleagle.in/?p=815): Introduction  This post focuses on the Delhi High Court’s recent judgment upholding the constitutionality of NAA, a statutory body established under Section 171, CGST Act, 2017. I’ve examined the working of NAA in detail here and here, where I’ve highlighted the problematic aspects of NAA’s various orders. In this post, I will summarize the petitioner’s arguments and the State’s response. At the outset, it is important to highlight that NAA’s functions and powers have been transferred to Competition Commission of India w.e.f. 01.12.2022. While the petitions challenging the constitutionality of NAA have been pending before the Delhi High Court for a while now, a decision on ... Read more
- [NCLT Cannot Declare an Assessment Order as Void: Kerala HC](https://theleagle.in/?p=811): The Kerala High Court in a recent judgment used strong words against an order of NCLT, Kochi Bench for declaring an assessment order passed under KVAT Act as void ab initio. The High Court observed that NCLT did not have the power to declare an assessment as void ab initio and quashed its order. I describe the case below and state whether there was a need for Kerala High Court to use harsh words against NCLT.  Before I describe the case, it is important to reiterate, for context, that Section 14, IBC, 2016 imposes a moratorium on initiation of any coercive legal ... Read more
- [Religious Vows and Income Tax Obligations: Harmony to Clash ](https://theleagle.in/?p=808): The Supreme Court is currently seized of a matter which, at its core, involves determining to what extent do the religious beliefs of a person exempt them from withholding tax obligations under the IT Act, 1961. In this article, I will focus on the issues involved and refer to the relevant judgments of the Madras High Court – Single Judge Bench and Division Bench, as well as the judgment of a Single Judge Bench of the Kerala High Court, currently under appeal before a Division Bench. The judgments reveal differing opinions and unravel layers of the central dilemma – should interpretation of tax law accommodate ... Read more
- [Not Providing Opportunity of Being Heard Vitiates Order Imposing Penalty: Raj HC](https://theleagle.in/?p=773): In a recent decision, the Rajasthan High Court held that the petitioner’s representation – filed under Section 270AA, IT Act, 1961 – for waiving the penalty imposed under Section 270A, IT Act, 1961 was wrongly rejected without providing an opportunity of being heard. And since the impugned orders did not specifically state which sub-clause of Section 270A(9) of IT Act, 1961 are attracted in the case, the orders are quashed and set aside. It is pertinent to briefly mention the provisions in question here: under Section 270A an assessee may have to pay penalty for misreporting or under-reporting an income, but under Section 270AA, ... Read more
- [Whose Money is it? Madras HC Says Deposit of Cash Amounts to Payment of GST](https://theleagle.in/?p=770): The Madras High Court, in a recent decision, observed that the money in Electronic Cash Ledger (‘ECL’) of the taxpayer belongs to the exchequer since the money was deposited in the name of the exchequer in the form of GST. The High Court held that it cannot be said that the Government can only utilize the money in the ECL only when the taxpayer files the monthly return, i.e., GSTR-3B. The High Court reasoned that the taxpayer cannot keep the money in ECL forever and deprive the exchequer the right to utilize the amount deposited in the Government’s account on the ... Read more
- [Delhi HC Disallows Disclosure of PM Cares Fund Documents Under RTI Act, 2005](https://theleagle.in/?p=767): The Delhi High Court in a recent judgment allowed the Income Tax Department’s appeal against the Central Information Commission’s (‘CIC’) order directing the respondent be provided copies of all documents submitted by PM Cares Fund to obtain exemption under Section 80G of the IT Act, 1961. The Delhi High Court’s main reason was that the IT Act, 1961 was a special legislation vis-à-vis the RTI Act, 2005 and provisions of former would prevail in matters relating to disclosure of information of an assessee. The High Court concluded that information relating to an assessee can only be disclosed by the authorities prescribed under ... Read more
- [Tax Residency Certificate and Stakes in the Blackstone Case - II](https://theleagle.in/?p=752): In the first part of this Article, I detailed Delhi High Court’s decision in the Blackstone case. This part focuses on the immediate and larger issues that are likely to be considered by the Supreme Court in its decision on the appeal against the Delhi High Court’s decision. The central issue in the appeal is likely to be the eligibility for tax benefits under a DTAA, and as one witnessed in the Azadi Bachao case, any legal opinion on the issue will navigate both domestic and international tax law.      Interpretation of DTAAs To begin with, DTAAs, a legislative instrument agreed to and signed by ... Read more
- [Tax Residency Certificate and Stakes in Blackstone Case - I](https://theleagle.in/?p=749): In BlackStone case framed the following as the main issue for consideration: whether the Income Tax Department can go behind the tax residency certificate (‘TRC’) issued by another jurisdiction and issue a re-assessment notice under Section 147, IT Act, 1961 to determine the residence status, treaty eligibility and legal ownership. In this article, I will focus only on the issue of TRC. In the first part of this article, I provide a detailed explanation of the case and in the second part I highlight the stakes involved in the case given that the Supreme Court has decided to hear an appeal against ... Read more
- [Leg History of Sec 90(4) & 90(5), IT Act, 1961](https://theleagle.in/?p=744): The infographic below is a snapshot of the legislative history of Section 90(4) and 90(5) of IT Act, 1961. It provides a summary view of the Income Tax Department’s attempt to include a stringent condition for a non-resident assessee to claim DTAA benefits. The condition, simply stated, was that a TRC issued by a contracting state is a necessary but not a sufficient condition to claim DTAA benefits. It was supposed to allow the Indian income tax authorities to go behind the TRC issued by another state. The importance and relevance of the legislative history of the aforesaid provisions can ... Read more
- [Fee Attributable to Transmission of Non-Live Feed Not Royalty: Delhi HC](https://theleagle.in/?p=730): The Delhi High Court in a recent decision[1] held that the fee attributable to ‘non-live’ feed cannot be categorized as royalty under Section 9(1)(vi) of the IT Act, 1961. The High Court relied on the observations in Delhi Race Club case to support its conclusions.  Facts  The assessee entered into a tripartite agreement – titled as the ‘Novation Agreement’ – with ESS Singapore and Star India Private Limited by way of which various existing agreements regulating distribution of channels, ads, etc. came to be novated. For the Assessment Year 2015-16, the assessee offered an amount of Rs 65,44,67,199/- as royalty income subject to ... Read more
- [Section 16, CGST Act is Constitutional: Kerala HC](https://theleagle.in/?p=727): The Kerala High Court recently[1] dismissed a taxpayer’s challenge that Section 16(2)(c) and Rule 36(4) of CGST Rules, 2017 were violative of Article 14 and unconstitutional. The High Court ruled that the taxpayer’s challenge was vague, and the impugned provisions did not suffer from the vice of manifest arbitrariness and were not unconstitutional.    Facts  The brief facts of the case are: taxpayer was denied ITC under the CGST and SGST Acts on the ground of difference in GSTR 2A and GSTR 3B returns. The Assessing authority levied interest, penalty, and initiated recovery proceedings against the taxpayer. The taxpayer challenged the assessment order and the constitutional validity ... Read more
- [Jharkhand HC Allows State Authorities to Continue Proceedings, Rejects DGGI’S Arguments on Nationwide Fake ITC Fraud](https://theleagle.in/?p=724): The Jharkhand High Court recently adjudicated a writ petition where the petitioner had argued that only the authority which had initiated the entire process of investigation can complete the modalities and any subsequent actions by other authorities need to be quashed. The High Court interpreted Section 6, CGST Act, 2017 and the relevant notifications to adjudicate in favor of the petitioner.  Facts  The petitioner was the proprietor of M/s Manish Trading, Ranchi carrying on the business of iron, steel and cement. An inspection was carried out by the Intelligence Branch of the Jharkkhand State GST Dept and subsequently the petitioner was made ... Read more
- [Section 194N of IT Act, 1961 is Constitutional: Madras HC](https://theleagle.in/?p=721): The Madras High Court recently[1] upheld constitutionality of Section 194N of the IT Act, 1961. Section 194N inserted via Finance Act, 2019 was argued by the petitioners to be unconstitutional on the grounds of it being illegal, arbitrary, and violative of their fundamental rights under Article 14 and 19(1)(g) of the Constitution. Section 194N imposes an obligation on the banks including co-operative societies carrying on banking – when paying any sum exceeding one crore rupees, increased to three crores in 2023 – to withhold a tax of 2% of the amount. The petitioner’s main argument that the amount withdrawn by co-operative societies was ... Read more
- [An Ambiguous Circular: Is Electricity Indirectly under GST?](https://theleagle.in/?p=717): On 31.10.2023, CBIC issued a Circular clarifying the applicability of GST on certain services. The Circular, inter alia, clarified one issue which is the focus of this article. The issue, as framed by the Circular, was: Whether GST is applicable on reimbursement of electricity charges received by real estate companies, malls, airport operators etc. from their lessees/occupants? The Circular instead of clarifying the issue has raised further questions about the immediate GST implications on the transactions and is an example of the larger issue afflicting Indian tax policy: making rather than clarifying law through Circulars.   Separate Invoices Are Immaterial  The first transaction that the Circular mentions is ... Read more
- [Employment Includes Self-Employment: ITAT Interprets Section 6, IT Act, 1961](https://theleagle.in/?p=714): ITAT, Mumbai recently[1] interpreted the term ‘employment’ used in Explanation 1(a), Section 6, IT Act, 1961 and held that the term includes within its remit self-employment such as business or profession. ITAT relied on CBDT’s Circular and the Kerala High Court’s decision on a similar issue which also held that the term employment includes self-employment.   Facts  In the impugned case, assessee filed his return on 28.01.2020 and claimed his status as ‘non-resident’ for the assessment year and did not offer his global income for taxation. The Assessing Officer (‘AO’) observed that the assessee had left for Mauritius as an investor on a business visa and ... Read more
- [ITC Can be Denied if Delay in Filing Returns: Cal HC](https://theleagle.in/?p=711): The Calcutta High Court recently decided the question whether an assessee filing its tax returns after the stipulated time – prescribed under Section 16(4), CGST Act, 2017 – is entitled to claim ITC. The High Court answered in the negative and upheld the GST Department’s order denying ITC to the assessee on the ground of belated filing of returns.   Facts and Arguments  Assessee in the impugned case submitted the returns in GSTR-3B for the period from November 2018 to March 2019 on 20.10.2019 which was beyond the due date of submission, i.e., September 2019. The assessee was asked to show cause as ... Read more
- [Allahabad HC Clarifies Govt’s Scope of Power under Section 3 and 5, CGST Act, 2017](https://theleagle.in/?p=704): In a recent decision[1], the Allahabad High Court interpreted Sections 3 and 5 of the CGST Act, 2017 and clarified the scope of power of the Central Govt and the CBIC under these provisions. Section 3 confers the Central Govt with the power to appoint classes of officers for the purposes of CGST Act, 2017. Section 5 provides that officer of central tax may exercise powers and discharge duties subject to such conditions as the CBIC may impose. The High Court rejected petitioner’s argument that the Central Govt does not have the authority to confer powers on the officers under ... Read more
- [Appellate Authority Ignored CBIC’s Circular: Bombay HC](https://theleagle.in/?p=701): In a recent decision[1] the Bombay High Court expressed surprise that the appellate authority ignored CBIC’s Circular while ordering the assessee to pay back the Input Tax Credit (‘ITC’) refund granted to it along with interest. The High Court set aside the order by appellate authority.   Facts  The assessee had filed an application on 29.08.2018 seeking refund of ITC under Section 54(3), CGST Act, 2017 on export of goods made under a Letter of Undertaking. The assessee was granted a 90% refund of ITC via the first order and via a subsequent order, after scrutiny, the entire amount claimed as refund ... Read more
- [The Din Surrounding 'DIN'](https://theleagle.in/?p=698): The Supreme Court recently granted an interim stay on the Delhi High Court’s judgment wherein it was held that a communication issued by an income tax authority without citing the computer-generated Document Identification Number (‘DIN’) does not have any standing in law. While the one line stay order of the Supreme Court does not mention the reasons, it is worth examining how the Income Tax Department is trying to circumvent the mandate of a Circular issued by its own apex administrative body, i.e., the Central Board of Direct Taxes.  Contents of the CBDT Circular Before I elaborate the legal issue involved, it is apposite ... Read more
- [Madras HC Holds Prescribed Time Period for Filing Returns as ‘Directory’: Interprets Section 62, CGST Act](https://theleagle.in/?p=695): In a recent decision[1], the Madras High Court had to decide if an assessee loses the right to file tax returns after expiry of 30 days under Section 62(2), CGST Act, 2017. Section 62(2) provides an assessee 30 days to file returns after the proper officer passes a ‘best judgment’ assessment order. The High Court held that the assessee does not lose its right to file returns, but its interpretation of the provision is not founded on cogent reasoning.  Facts  In the impugned case, the asssessee failed to file its tax returns for the months of December 2022, January 2023 and February ... Read more
- [Supreme Court Reduces Penalty under Section 129, CGST Act: Clarifies that Decision is Not a Precedent](https://theleagle.in/?p=692): Supreme Court in a recent case[1], directed that the penalty imposed on the assessee for transporting goods without a valid e-way bill should be reduced by 50%. While the Calcutta High Court had upheld the levy of penalty, the Supreme Court to serve ‘ the ends of justice’ reduced the penalty amount by half, without articulating any convincing reason for its conclusion and stated that its order in the impugned case should not be treated as a precedent.    Facts  The brief facts of the case are: the assessee was in the business of horizontal drilling in underground utilities and availed ... Read more
- [Pre-Deposit Under CGST Act Does not Include Penalty and Fee: Kar HC](https://theleagle.in/?p=689): The Karnataka High Court in a recent decision[1] interpreted Section 107, CGST Act, 2017 and adopted a literal interpretation of Section 107(6)(b) to hold that it only mentions that the remaining amount of tax in dispute needs to be deposited before filing an appeal excluding fee, penalty and fee. Since the provision does not mention interest, fine or fee, the same cannot be read into the provision to create an onerous burden on the assessee before admitting its appeal.  Facts and Arguments  The facts of the case are brief: the petitioner’s appeal before the appellate authority was rejected on the ground ... Read more
- [SEZ Unit Not Entitled to Exemption from GST Compensation Cess: Andhra High Court](https://theleagle.in/?p=686): In a recent decision[1], the Andhra Pradesh High Court decided two similar writ petitions and held that the SEZ unit was not eligible for exemption from GST Compensation Cess. The High Court noted that there were three specific provisions under the SEZ Act, 2005 which provided a tax exemption and interpreted the said provisions strictly to conclude that the petitioner’s claim for exemption from GST Compensation Cess did not have merit and dismissed both the writ petitions.  Facts  The petitioner was a company engaged in the business of ferro alloys manufacturing and was established as a SEZ unit under the ... Read more
- [Issuance of Share Capital Not Taxable: Delhi High Court cites Precedents](https://theleagle.in/?p=681): The Delhi High Court recently pronounced a decision[1] wherein it adhered to the ratio of Vodafone and Nestlecases that investment by a foreign company via shares in its Indian subsidiary company is not income of the latter and not taxable under IT Act, 1961. The High Court relied on the Press Release by the Union of India indicating its approval of the former case and set aside the notices and subsequent orders issued in the impugned case under Section 148, IT Act, 1961.  Facts  The Delhi High Court was deciding a bunch of appeals together, and briefly elaborated on facts of one of the cases. The ... Read more
- [Empty Liquor Bottles Are Not Scrap: Madras High Court](https://theleagle.in/?p=678): The Madras High Court in a recent decision[1] held that empty liquor bottles do not constitute scrap under Section 206C, IT Act, 1961. Accordingly, it held that the petitioner, M/s Tamil Nadu State Marketing Corporation Ltd (‘TASMAC’), was not obliged to deduct tax at source when collecting licence fee from bar licencees who were authorized to sell empty bottles left behind by customers.  Facts  The petitioner, TASMAC, challenged the orders of the Income Tax Department wherein it was treated as an ‘assessee in default’ for failure to deduct tax at source under Section 206C, IT Act, 1961. The Income Tax Department ... Read more
- [Citing DIN in Communication is Necessary: ITAT, Chandigarh](https://theleagle.in/?p=648): Income Tax Appellate Tribunal, Chandigarh (ITAT) in its recent decision[1] followed the decisions pronounced by the Delhi High Court and the Bombay High Court which had held that quoting DIN in the body of communication issued by the Income Tax Department is mandatory by strictly interpreting CBIC’s Circular. ITAT held that the Income Tax Department cannot take recourse to Section 293B, IT Act, 1961 and argue that the error of not quoting the DIN does not affect the validity of the communication.  Facts  The brief facts of case are: the assessee filed its return of income and the relevant assessment proceedings were completed. But subsequently after ... Read more
- [CSR Expenses Can be Claimed under Section 80G: ITAT Mumbai](https://theleagle.in/?p=644): The ITAT Mumbai in a recent decision[1] clearly enunciated the tax treatment to CSR expenses under the IT Act, 1961. The ITAT held that while Explanation 2 to Section 37 disallows CSR expenses by way of business expenditure, but the import of the provision cannot be imported to CSR contributions which are otherwise eligible for deduction. Section 37 disallows mandatory CSR expenses referred to in Section 135, Companies Act, 2013 and not voluntary CSR expenses. The impugned case dealt with the former.   Facts  Principal Commissioner of Income Tax passed an order under Section 263 stating that the Assessing Officer’s assessment order ... Read more
- [Adjudicating Officer Bound to Consider Assessee’s Defence: Calcutta High Court](https://theleagle.in/?p=638): In a recent decision[1], a Division Bench of the Calcutta High Court has held that the adjudicating officer should consider the assessee’s explanation or defence before passing the adjudicating order that imposes penalty under Section 129, CGST Act, 2019. If an adjudicating order is passed in complete ignorance of such explanation, then it would amount to violation of principles of natural justice and the order is liable to be set aside.    Facts  The assessee was transporting electrical switches manufactured as per the requirements of the Government of Arunachal Pradesh. The assessee generated e-way bill for the vehicle on which the ... Read more

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- [Amicus Prof](https://theleagle.in/?page_id=1322): Hi, This is intended to be a forum for law school students who need help and counsel. I, sometimes, get queries from students on how to plan a career in law. Specifically, I receive multiple questions on what is the best way to plan a career trajectory in economic laws. But my responses to student queries are erratic. Through this forum I intend to provide guidance to students formally and professionally. If your queries fall in any of the following categories: (i) Planning a career in economic laws: choosing the right internships, how to focus on specialisation and the possible ... Read more
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- [Direct Tax](https://theleagle.in/?page_id=123): This is an example page. It’s different from a blog post because it will stay in one place and will show up in your site navigation (in most themes). Most people start with an About page that introduces them to potential site visitors. It might say something like this: Hi there! I’m a bike messenger by day, aspiring actor by night, and this is my website. I live in Los Angeles, have a great dog named Jack, and I like piña coladas. (And gettin’ caught in the rain.) …or something like this: The XYZ Doohickey Company was founded in 1971, ... Read more


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