JOURNAL JANUARY 2026

Ahmedabad Chartered Accountant Journal January, 2026 847TMVolume : 49 Part : 10 January, 2026E-mail : [email protected] Website : www.caa-ahm.orgAhmedabad Chartered Accountant JournalIn this IssueContents Author's Name Page No.- caaahmedabadJournal CommitteeCA. Tarjani Shah CA. Shreyanshi RakhashiyaChairperson ConvenerCA. Shivang Chokshi CA. Jayesh SharedalalE. C. Representative Past PresidentMembersCA. Ashok Kataria CA. Disha Shah CA. Labdhi ShahCA. Mayur Zanjrukiya CA. Mira Shah CA. Monish ShahCA. Niket Rasania CA. Rajni Shah CA. Yash Shah - Ho'oponopono: A Quiet Practice for Noisy Minds CA. Shivang Chokshi 850 Editorial CA. Tarjani Shah 851From the President CA. Rushabh Shah 852Compliance Tracker CA. Manthan Khokhani 853ArticlesMajor Budget Proposals related to Direct Taxes CA. Dipen Shah & 855CA. Bansari PatelUnion Budget 2026 - Indirect Tax Perspective : Key Changes, Impact and CA. Yash Shah 859Way ForwardNatural Justice Violations in Section 80GGC Scrutiny Assessments : CA. Pradip Modi 861A Legal Framework for DefenceE-way Bill Compliance : Issues, Jurisprudence and Way Forward CA. Labdhi Shah 866Loan License Manufacturing in Indian Pharmaceutical Industry CA. Dhrumi Thakkar 870Direct TaxesGlimpses of Supreme Court Rulings Adv. Samir N. Divatia 878From the Courts CA. Jayesh Sharedalal 880Tribunal News CA. Yogesh G. Shah & 887CA. Aparna ParelkarJudicial Analysis Sr. Advocate Tushar Hemani 894Controversies CA. Kaushik D. Shah 901TM

848 Ahmedabad Chartered Accountant Journal January, 2026TMContents Author's Name Page No. FEMA & International TaxationFEMA & International Taxation CA. Dhinal A. Shah & 905CA. Sunil ManglaniFEMA Updates CA. Dr. Savan R. Godiawala 911GULF Insights CA. Sanskar Jain 913 Indirect TaxesGST and VAT Judgments and Updates CA. Bihari B. Shah & 915CA. Vishrut R. ShahAdvance Ruling under GST CA. Monish S. Shah 918Corporate Law & OthersInd AS Insights CA. Dipen Shah & 921CA. Jaydeep TrivediCorporate Law Update CA. Naveen Mandovara 924GujRERA Corner CA. Manan Doshi 927Capital Markets CA. Karan P. Vora 930From Published Accounts CA. Pamil H. Shah 936From the Government CA. Ashwin H. Shah & 939CA. Kunal A. ShahIT Corner CA. Darshil Surana 943CSR Stories CA. Siddharth Bhatt 947Association News CA. Ashish Sharma & 949CA. Sulabh PadshahACAJ Crossword Contest 950❉ ❉ ❉

Ahmedabad Chartered Accountant Journal January, 2026 849TMAttentionMembers / Subscribers / Authors / Contributors1. Journals are carefully posted. If not received, you are requested to write to the Association's Office within onemonth. A copy of the Journal would be sent, if extra copies are available.2. You are requested to intimate change of address to the Association's Office.3. Subscription for the financial year 2025-26 is ` 1500/-, single copy ` 150/- (if available).4. Please mention your membership number in all your correspondence.5. While sending Articles for this Journal, please confirm that the same are not published / not even meant forpublishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication,nor will they be sent back.6. The opinions, views, statements, results published in this Journal are of the respective authors / contributorsand Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it necessarilyconcur with the authors / contributors.7. Life Membership/Annual Membership and Other Fees F. Y. 2025-26 Amount in `Basic GST Total1. Admission Fees 500 90 5902. Annual Membership Feesa. If Paid Prior to june 30 of each financial year :i. In case of membership (of ICAI) for a period of less than or equal to five years 750 - 750ii. In case of membership of (ICAI) for a period more than five years, 800 - 800b. If paid after june 30 of each financial year :i. In case of membership (of ICAI) for a period of less than or equal to five years, 900 - 900ii. In case of membership of (ICAI) for a period of more than five years 980 - 9803. Life Membership Feesi. In case of membership (of ICAI) for a period of less than or equal to five years 8000 1440 9440ii. In case of membership of (ICAI) for a period more than five years 10000 1800 118004. Brain Trust Membership Feesa. Individual Membership Feesi. In case of membership (of ICAI) for a period of less than or equal to five years 1000 180 1180ii. In case of membership of (ICAI) for a period more than five years 1500 270 1770b. Flexi Firm/Corporate Membership Fees*** 3600 648 4248*** Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting.Additional Representatives can be nominated @1800/- plus GST per participant subject to maximum of 20 participantper firmPublished ByCA. Tarjani A. Shah, on behalf of Chartered Accountants Association, Ahmedabad, 2nd Floor, Darshak, 14/A,Swastik Society, Opp. Shrey Hospital, Navrangpura, Ahmedabad - 380 009 Phone : +91 79 40392596While every effort has been made to ensure accuracy of information contained in this Journal, the Publisheris not responsible for any error that may have arisen.Professional AwardsThe best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and 'AlliedLaws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by experts in theprofession. Articles and reading literatures are invited from members as well as from other professional colleagues.Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]

850 Ahmedabad Chartered Accountant Journal January, 2026TMI first came across Ho‘oponopono on a particularlyordinary yet overwhelming evening. Nothingdramatic had happened - no argument, no crisis -but I felt oddly heavy, irritated by small things,replaying conversations that didn’t matter anymore.Out of habit, I reached for my phone, searching forsomething to “fix” the feeling. That was when Istumbled upon this Hawaiian practice built aroundfour simple phrases:I’m sorry.Please forgive me.Thank you.I love you.To be honest, I dismissed it at first. The words felttoo gentle for the kind of mental clutter I was carrying.Still, that night, while lying awake, I tried repeatingthem quietly - not to anyone in particular, just intothe space of my thoughts. Something subtle shifted.The noise didn’t disappear, but it softened, as if themind had finally exhaled.Ho‘oponopono, in its traditional form, was acommunal process used to restore harmony withinfamilies and villages. In its modern adaptation, thepractice turns inward. It asks us to take responsibilityfor what arises within us—not as self-blame, but asself-awareness. If something disturbs me, I work withmy inner response rather than chasing externalcontrol.What makes this practice compelling is its simplicity.The mind carries countless emotional memories &unfinished conversations, old disappointments,learned reactions that quietly shape how we respondto life. Ho‘oponopono treats these not as problemsHo'oponopono: A Quiet Practicefor Noisy Minds CA. Shivang [email protected] fight, but as data to be gently cleared. Repeatingthe four phrases becomes a form of innerhousekeeping.From a psychological perspective, this makessense. The phrases mirror principles found in selfcompassion and emotional regulation. “I’m sorry”acknowledges discomfort without judgment. “Pleaseforgive me” releases inner harshness. “Thank you”introduces gratitude before resolution. “I love you”reconnects us to ourselves when we feel fragmented.Many time our professional journey is filled withstress due to work deadlines and from personalissues discussed by the clients. Moreover, evenafter following all rules of law, the mechanicalassessment of government software createunnecessary hassles. Work coupled with routineissues from personal life creates an unrest in themind. What I’ve learned is that Ho‘oponopono worksbest when practiced without expectation. It doesn’terase problems or replace action. I’ve still had difficultconversations and made necessary changes. Butthe practice creates a pause—a small spacebetween stimulus and reaction. In that space, clarityoften emerges. Ho‘oponopono is not aboutperfection or positivity. It is about responsibility withoutpunishment and compassion without denial. In aworld constantly asking us to fix, prove, and perform,this quiet act of inner cleaning feels surprisinglyradical. Sometimes, peace doesn’t arrive by solvingeverything. It arrives by learning how to sit gentlywith what already exists. Try it !❉ ❉ ❉

Ahmedabad Chartered Accountant Journal January, 2026 851TMCorporate Mitra in Action : Where Policy Meets ProfessionThe Union Budget 2026–27 has placed renewed emphasis on the role of professional institutions byproposing the creation of a cadre of Corporate Mitras through short-term, modular training programmesdesigned by bodies such as ICAI. This initiative recognises that effective policy implementation does notend with legislative announcements but depends on practical interpretation, structured guidance and ethicalcompliance support at the grassroots level, particularly for MSMEs in Tier-II and Tier-III towns. By anchoringthis responsibility within established professional institutions, the Budget underscores the profession’s evolvingrole as a bridge between regulatory intent and on-ground execution.It is the ninth consecutive Budget presented by the Hon'ble Finance Minister Nirmala Sitharaman and thefirst Budget prepared at Kartavya Bhawan, symbolising accountability and duty in governance. Moreimportantly, it is inspired by the Viksit Bharat Young Leaders Dialogue 2026, making it a truly Yuva Shakti–driven Budget. The ideas and aspirations of young India are clearly reflected in its forward-looking andinclusive approach.The spirit of Kartavya runs through the Budget. The Government’s focus on accelerating and sustainingeconomic growth is backed by continued public investment, emphasis on productivity, and strengtheningcompetitiveness amid global uncertainties. At the same time, there is a conscious effort to ensure thatgrowth reaches farmers, MSMEs, women, youth and the underprivileged. The message is clear: growthmust be meaningful, shared, and sustainable.From a taxation perspective, Budget 2026–27 marks a shift in mindset. The proposal for a new Income TaxAct, 2025, simplification of compliance processes, rationalisation of penalties into graded fees reflect amove towards clarity and certainty. The focus is not merely on collection, but on ease of compliance andvoluntary adherence. Trust, rather than fear, appears to be the cornerstone of the tax framework goingforward.In this issue, we present detailed Budget highlights along with insightful articles and regular columns.Warm regards,CA. Tarjani Shah❉ ❉ ❉CA. Tarjani [email protected]

852 Ahmedabad Chartered Accountant Journal January, 2026TMA new year always brings renewed energy but it is our collective intent that gives it direction.Dear Members,January marks more than the beginning of a calendar year. It represents a fresh chapter - one filled with optimism,reflection, and resolve. As we step into 2026, the Chartered Accountants Association Ahmedabad does so withrenewed momentum, strengthened bonds, and a growing sense of responsibility towards the profession andour community.This month truly reflected the spirit of togetherness that defines CAAA.One of the most memorable highlights was the practice cricket match between the President’s XI and theSecretary’s XI, organised with the simple yet powerful objective of fostering bonding and camaraderie. Whatbegan as a friendly contest became a reminder of how shared experiences outside boardrooms and officesdeepen trust and teamwork within an association.Building on that spirit, the CAAA team travelled to Baroda to play against the Baroda Chartered AccountantsAssociation. The match was competitive, energetic, and marked by great sportsmanship. CAAA emergedvictorious not just on the scoreboard, but in demonstrating what coordinated effort, discipline, and unity canachieve. These moments reflect the true ethos of our fraternity: competitive in spirit, collaborative in approach.January also saw New Year celebrations and informal engagements, reinforcing the cultural and social fabric ofthe Association. These interactions, small and large, play an important role in strengthening personal connectionsthat ultimately translate into stronger professional collaboration.At the same time, this month carried a note of deep sorrow.We lost Ashwin C. Shah Sir, a Past President of CAAA and a towering contributor to the profession and thefraternity at large. His passing was a profound loss for all of us. Ashwin Sir’s leadership, wisdom, and commitmentto the profession have left an enduring legacy. As an Association, we remember him not just for the positions heheld, but for the values he embodied and the guidance he offered to generations of professionals. Our heartfeltcondolences remain with his family and loved ones.Another encouraging aspect of the month has been the continued growth of CAAA, particularly the activeparticipation of young members. Their energy, ideas, and willingness to contribute are strengthening theAssociation and ensuring that our future leadership is already taking shape. This intergenerational engagementis one of our greatest strengths.As we move ahead in this new year, let us carry forward the lessons of January - teamwork, resilience, respectfor legacy, and enthusiasm for growth. With the 75th year of CAAA underway, 2026 offers us the opportunity tobuild thoughtfully, act decisively and lead with purpose.Let us make this year one of meaningful progress - together.Warm regards,CA. Rushabh ShahPresident❉ ❉ ❉From the PresidentCA. Rushabh [email protected]

Ahmedabad Chartered Accountant Journal January, 2026 853TM©e yrïLk þknLku ¼kðÃkqýoþçËktsr÷ YÃku yÃkeoyu Aeyu yuf frðíkk,íkuyku níkk çkÄe MktMÚkkyku {kxu yuf rð[khkuLkk MkkøkhLke Mkrhíkk,ykt¾u Lknkuíke Lksh, Ãký Lkshu níke árü yÃkkh,rð[khLke ËeÃkþe¾kyu «fk~Þku SðLkLkku {køko Mkkh,87 ð»koLke Þwøk{Þ Þkºkk, {qÕÞkuLke níke Ähkunh,MktÞ{, Mkuðk yLku MkíÞÚke håÞku SðLkMðh.f÷{u økrýík çkku÷íkwt, çkwrØ fhíke {køkoËþoLk,[kxozo yufkWLxLx çkLke ykÃÞwt LÞkÞLku rþûký.½ýe MktMÚkkykuLkk rþ¾hu hÌkk ík{u {køkoËþof,Lk{úíkk MkkÚku Lkuík]íð - ík{ku ÚkÞk Mkk[k «uhf.árüneLkíkk fËe çktÄLk Lk çkLke ík{khk MkÃkLkk {kxu,ytíkhLke ykt¾u òuE ÷eÄwt MkíÞ, Mkt½»ko yLku æÞuÞLku MkkÚku.Ëun rðhk{ ¼÷u ÃkkBÞku, Ãký fkÞo MkËk Sðtík hÌkwt,ík{kÁt SðLk Ëeðku çkLke yLkufLkk {Lk{kt ËeÃÞwt.©e yrïLk¼kE þkn, ykÃkLku þík þík Lk{Lk.M{]rík{kt hnuþku MkËk - yk Au Mkk[wt yLku Mkh¤ SðLk.yMíkw yku{ þktríkMkeyu. ysÞ þ{ko ‘y¿kkík’

854 Ahmedabad Chartered Accountant Journal January, 2026TMDate Compliance Applicable To07-Feb-26 TDS/TCS Payment All Deductors07-Feb-26 GSTR - 7 GST TDS Deductors11-Feb-26 GSTR-1 (Monthly) Turnover > Rs. 5 Cr or opted monthly13-Feb-26 GSTR-6 Input Service Distributors (ISD)13-Feb-26 IFF (QRMP Scheme) Quarterly filers (QRMP)13-Feb-26 GSTR-5 (Non-Resident Taxable Person) Filing of GSTR-5 by Non-Resident foreign taxablepersons carrying out transactions in India for November2025.14-Feb-26 TDS Form 16 Sending Form 16A for Third Quarter15-Feb-26 Provident Fund (PF) Filing of Provident Fund (PF) Electronic Challan cumReturn (ECR) and payment of PF contributions forNovember 202515-Feb-26 ESIC Payment Filing of Employees’ State Insurance (ESI) return andpayment of ESI contributions for November 2025.15-Feb-26 Professional Tax Employers in applicable states18-Feb-26 CMP-08 Composition Tax payers20-Feb-26 GSTR-3B (Monthly) All regular GST filers20-Feb-26 GSTR-5A (OIDAR Services) Filing of GSTR-5A by non-resident providers of OnlineInformation and Database Access or Retrieval (OIDAR)services for November 2025.25-Feb-26 PMT-06 (QRMP Scheme) QRMP taxpayers❉ ❉ ❉CA. Manthan [email protected]

Ahmedabad Chartered Accountant Journal January, 2026 855TMOn 1st February 2026, Hon’ble Finance MinisterNirmala Sitharaman presented her ninth consecutiveUnion Budget in Parliament, prepared in KartavyaBhawan with focus on poor, underprivileged and thedisadvantaged. Guided by the three Kartavyas, it aimsto accelerate and sustain economic growth, meet theaspirations of the people, strengthen their capabilities,and realize the vision of Sabka Sath, Sabka Vikas. Thebudget was presented with a total size of Rs.53.47lakh crore. The Budget 2026 outlines the roadmap forachieving “Viksit Bharat by 2047”, setting the directionfor India’s long-term development goals.I. Major Budget Proposals related to Direct Taxes:1. Amendment related to Return Filinga. Return filing due date:Individuals with ITR 1 and ITR 2 returns willcontinue to file till 31st July and non-auditbusiness cases or trusts are proposed to beallowed time till 31st August.b. Revised Returns:Returns can be revised till 31st march insteadof 31st December with nominal fees.c. Updated Returns:i. An Update return can even be filed afterissuance of a reassessment notice, withinMajor Budget Proposalsrelated to Direct Taxesthe period specified in notice, subject topayment of additional income tax plus10%.ii. To allow to file updated return even whena taxpayer reduces the quantum of lossoriginally claimed in a timely filed lossreturn.2. Amendment related to TDS/TCS:a. TAN Requirement Waived for ResidentIndividuals/HUFs Buying Property fromNon-Residents:It is proposed to remove the requirement forresident individuals and HUFs to obtain TANwhen deducting TDS on purchase ofimmovable property from a non-resident sellereffective from 1 October 2026.b. TDS on manpower supply:Manpower supply will be treated as “work”with TDS under contractor provisions (1% forindividual/HUF, 2% otherwise), effective 1April 2026.c. Non-life insurance deduction:Allow deduction in the year TDS is actuallypaid, even if disallowed earlier, effective 1April 2026.CA. Bansari [email protected]. Dipen [email protected]. Rationalization of TCS rates is proposed as follows:Top of FormSl. No. Nature of Receipt Current Rate Proposed Rate1 Sale of alcoholic liquor for human consumption. 1% 2%2 Sale of tendu leaves. 5% 2%3 Sale of scrap. 1% 2%4 Sale of minerals, being coal or lignite or iron ore. 1% 2%

856 Ahmedabad Chartered Accountant Journal January, 2026TMSl. No. Nature of Receipt Current Rate Proposed Rate5 Remittance under the Liberalised Remittance (a) 5% for purposes of (a) 2% forScheme of an amount or aggregate of the education or medical purposes ofamounts exceeding ten lakh rupees treatment; education ormedical treatment;(b) 20% for purposes (b) 20% forother than education purposes otheror medical treatment. than education ormedical treatment.6 Sale of “overseas tour programme package” (a) 5% of amount or 2%including expenses for travel or hotel stay or aggregate of amountsboarding or lodging or any such similar or up to ten lakh rupees;related expenditure. (b) 20% of amount oraggregate of amountsexceeding ten lakhrupees.3. Taxation of Share Buy Backs:It is proposed that consideration from share buy backs be taxed as capitalgains rather than dividend income. Further, promoters will be subject to an effective tax rate of 30% on suchgains, and promoter companies to 22%. These amendments apply from tax year 2026–27.4. Disallowance of Interest Deduction Against Dividend Income: It is proposed to amend to disallow anydeduction for interest expenditure incurred for earning dividend income or income from mutual fund units.5. Increase in Securities Transaction Tax (STT) (Effective Date: 1 April 2026)Transaction Type Basis of Levy Existing STT Rate Proposed STT RateSale of option in securities Option premium 0.10% 0.15%Sale of option (on exercise) Intrinsic value 0.125% 0.15%Sale of futures in securities Traded price 0.02% 0.05%These changes aim to curb disproportionate growth in derivatives speculation.Major Budget Proposals related to Direct Taxes6. Amendment related to Minimum Alternate Tax:a. MAT paid under the old regime is proposedto be treated as final tax, with no further MATcredit allowed.b. The MAT rate will be reduced from 15% to14%.c. Set off of MAT credit in the new regime willbe permitted to the extent of 25% of tax liabilityfor domestic companies and for foreigncompanies to the extent of the differencebetween normal tax and MAT whereapplicable.d. It is Proposed to Exclude cruise shipoperations and services/technology forsetting up electronics manufacturing facilitiesfrom the applicability of MAT for non-residentpresumptive businesses, ensuring parityacross sectors.7. Amendment related to Rationalization of penaltyand Prosecution:a. No penalty for non-disclosure of nonimmovable foreign assets with aggregatevalue less than 20 lakh rupees. This immunityis in effect retrospectively from 1.10.2024.

Ahmedabad Chartered Accountant Journal January, 2026 857TMb. Assessment and penalty proceedings will beintegrated into a single common order.Further, no interest will apply on penalty duringthe first appeal, and pre-deposit for appealis reduced from 20% to 10%, which will becalculated only on the core tax demand.c. The immunity framework from penalty andprosecution will be extended to misreportingcases, subject to payment of an additionaltax equal to 100% of the tax due.d. Tax on unexplained income is proposed tobe reduced from 60% to 30%, with theseparate penalty removed and merged intothe misreporting penalty regime.e. Penalties for specified technical defaults—such as failure to get accounts audited, nonfiling of transfer pricing audit reports, and nonfurnishing of statements of financialtransactions—are proposed to be replacedwith a fee-based mechanism.f. Penalty for delay in filing Form 3CEB hasbeen replaced with a graded fee system,wherein a fee of Rs. 50,000 will be levied fora delay of upto 1 month and Rs. 1,00,000 willbe applicable for a delay beyond one month.g. Non-production of books of account and TDSdefaults where payment is made in kind areproposed to be decriminalized, with minoroffences attracting only monetary fines.h. Other prosecutions will be graded by severity,limited to simple imprisonment with areduced maximum of two years, and courtsmay convert imprisonment into fines.i. Penalties for non-furnishing or furnishinginaccurate information in crypto-assettransaction statements, with Rs. 200 per dayfor non-filing and Rs. 50,000 for inaccurate/uncorrected information.j. The time limit for completion of blockassessment in search cases is proposed tobe extended from 12 months to 18 months,with the date of initiation of search as referencepoint.8. Amendment related to Quoting of DocumentIdentification Number (DIN): The Budgetproposes to clarify that assessments shall not beinvalid merely due to any mistake, defect, oromission in quoting the computer-generatedDocument Identification Number (DIN), providedthe assessment is referenced by such DIN in anymanner. This amendment, aimed at overridingcontrary judicial precedents and reducing litigation,will apply retrospectively from 1 October 2019under the Income-tax Act, 1961, withcorresponding provisions introduced in theIncome-tax Act, 2025 effective 1 April 2026.9. Clarification on Jurisdiction for Issuing Noticeunder Section 148/148A: The Budget proposesto clarify that the jurisdiction to conduct preassessment enquiries and issue notices undersections 148A and 148 rests solely with thejurisdictional Assessing Officer and not with theNational Faceless Assessment Centre (NaFAC)or its assessment units. This clarification, intendedto override divergent judicial views and reducelitigation, will apply retrospectively from 1 April 2021under the Income-tax Act, 1961, withcorresponding amendments in the Income-tax Act,2025 effective from 1 April 2026.10. Proposals to boost Foreign Investments:a. To support electronics manufacturing bycontract manufacturers located in customsbonded areas, Schedule IV is proposed toexempt income of foreign companies arisingfrom the supply of capital goods, equipment,or tooling to such manufacturers, up to thetax year 2030–31.b. A specified data centre must be establishedunder a scheme approved and notified bythe Ministry of Electronics and InformationTechnology (MeitY) and must be owned andoperated by an Indian company. Toencourage investment in data centres andsupport the AI data centre framework, it isproposed to amend Schedule IV to exemptthe income of foreign companies arising fromthe procurement of services from specifiedMajor Budget Proposals related to Direct Taxes

858 Ahmedabad Chartered Accountant Journal January, 2026TMdata centres in India, up to the tax year ending31 March 2047.c. Information technology (IT) services will beconsolidated into a single classification witha uniform 15.5% safe harbour margin, and thesafe harbour threshold will be raised from Rs.300 crore to Rs. 2000 crore with automated,rule based approvals. The provision of Safeharbour can be continued for a period of fiveyears, based on company’s choice.d. The Budget proposes a Safe Harbour of 15%on cost for an Indian captive datacentreservice provider.e. To streamline compliance, it is proposed thatwhere income is modified pursuant to anadvance pricing agreement (APA), theconcerned person—or any associatedenterprise—shall furnish a return or modifiedreturn, limited to the terms of the APA, withinthree months from the end of the month inwhich the agreement is executed. Thisapplies to APAs entered on or after 1 April2026 for tax years beginning on or after thatdate.11. Foreign Asset Disclosure: A one-time six-monthforeign asset disclosure scheme for smalltaxpayers to voluntarily declare undisclosedoverseas assets or income, covering twocategories:a. Category 1 includes taxpayers who neverdisclosed foreign assets or income wherethe aggregate value does not exceed Rs.1crore, They need to pay 30 percent of FairMarket Value of asset or 30 percent ofundisclosed income as tax and 30 percentas additional income tax in lieu of penalty andwould thereby get immunity from prosecution.b. Category 2 includes taxpayers who haddisclosed foreign assets earlier, provided thetotal value does not exceed Rs.5 crore. Here,immunity from both penalty and prosecutionwill be available with the payment of fee of 1lakh rupees.12. Amendment related to Gift City:a. It is Proposed toamend IFSC treasury centrerules to require the counterparty group entityto be located in a notified foreign jurisdictionand the parent/principal entity to be listed ona foreign stock exchange, with jurisdictionsnotified by the Central Government.b. To enhance IFSC competitiveness, thededuction period for IFSC units is proposedto be increased to 20 out of 25 consecutiveyears, and to 20 consecutive years for OBUs.Post deduction business income will be taxedat 15%.13. Rationalisation of Due Date for CreditingEmployee Contributions: It is proposed to amendsection 29(1)(e) to align the due date for creditingemployee contributions with the due date for filingthe return of income under section 263(1).Consequently, provident fund and other employeewelfare contributions may be deposited up to thereturn filing due date.14. Exemption for Sovereign Gold Bonds (SGBs):To ensure uniform application of the exemptionfor capital gains on redemption of SGBs, it isproposed to be amended to restrict the exemptionto bonds subscribed at original issuance and heldcontinuously until maturity. This applies from taxyear 2026–27 onwards.15. Proposals related to ICDS:It was proposed that Income Computation andDisclosure Standards(ICDS) shall be repealedfrom 1 April 2027. It was further proposed that ajoint committee comprising representatives fromthe Ministry of Corporate Affairs and the CentralBoard of Direct Taxes (CBDT) be constituted tofacilitate the integration of ICDS with the IndianAccounting Standards.❉ ❉ ❉Major Budget Proposals related to Direct Taxes

Ahmedabad Chartered Accountant Journal January, 2026 859TMThe Union Budget 2026–27 continues the Government’scalibrated approach towards simplification, certaintyand trust-based taxation. From an indirect taxstandpoint, the focus remains on rationalising GSTprovisions, improving refund mechanisms, easingcustoms procedures, and aligning India’s tradeecosystem with global best practices. These changesare particularly relevant for MSMEs, manufacturingentities, exporters and businesses operating acrosscomplex supply chains.This article analyses the key indirect tax proposalsunder GST and Customs, their impact on businessesand the practical way forward.1. GST Amendments – Aligning Law withCommercial RealityA. Rationalization of Post-Supply Discounts(Section 15 & 34 of CGST Act)The requirement that post-supply discountsmust be pre-agreed in a contract has beenremoved. Post-supply discounts can now beexcluded from the value of supply if:- The supplier issues a credit note; and- The recipient reverses proportionateinput tax credit (ITC).This is a major relief for sectors wherecommercial discounts are dynamic, such asFMCG, automobiles, cement, pharmaceuticalsand consumer goods. Businesses can nowalign GST treatment with actual commercialpractices, reducing disputes on valuation anddenial of ITC. Businesses should strengtheninternal controls to ensure:- Timely issuance of credit notes;- Confirmation of ITC reversal by recipients(using IMS and reconciliations);Union Budget 2026 - Indirect TaxPerspective : Key Changes, Impactand Way Forward- Clear documentation to demonstratecommercial rationale for discounts.While the provision in the law has beenamended not to make mandating on theagreement part, however a clarification is stillawaited on system-driven confirmation of ITCreversal and audit documentationrequirements.B. Provisional Refund for Inverted Duty Structure(IDS)According to the change, 90% provisionalrefund will now be granted for refunds arisingfrom inverted duty structure, similar to exportrefunds. This significantly improves cash flowfor manufacturers operating under inverted taxstructures such as textiles, footwear, renewableenergy components and certain chemicals.MSMEs benefit from reduced working capitalblockage. Eligible taxpayers should:- Reassess refund strategies;- Ensure accurate classification and ITCsegregation;- Use provisional refunds to optimizeliquidity planning.How is amendment is going actually onground solve the problems is to be seen asclarification is much awaited on autoprocessing, timelines and officer discretionmethodologies where this process isadopted, if it remains the same as earlier, nobusinesses are going to benefit from it.C. Refund of Tax on Exports Below INR 1,000The restriction on refund amounts below INR1,000 has been removed for exports madewith payment of tax. Small exporters andCA. Yash [email protected]

860 Ahmedabad Chartered Accountant Journal January, 2026TMMSMEs gain certainty that even small refundclaims will be processed, encouragingcompliance and reducing revenue leakage.Exporters should ensure accurate filing ofrefund claims even for smaller values andmaintain proper export documentation.D. Place of Supply for Intermediary Services(IGST Act)The deeming fiction treating the location ofthe supplier as the place of supply forintermediary services has been omitted.Indian service providers acting asintermediaries for foreign clients can nowqualify their services as exports, eliminatingGST cost and litigation exposure. This boostscompetitiveness of Indian consulting,sourcing and agency service providers.Service providers should:- Re-evaluate contracts and invoicingstructures;- Claim export benefits where eligible;- Review past disputes for possible relief.The biggest and most awaited change is herehowever the clarity is still to emerge on whatwould happen to transitional contracts, refundsof past tax paid and closure of pendinglitigation, applicability retrospectively orprospectively.2. Customs Law Changes – Trade Facilitation andMake in IndiaA. Extension and Rationalisation of CustomsExemptionsMultiple exemptions have been extended,rationalised or sunsetted to clean up the tariffstructure. Reference may be taken fromnotification issued thereto. This bringspredictability and transparency in duty rates,helping manufacturers plan sourcing andcosting more efficiently. Businesses should-- Revisit customs duty impact analysis;- Align procurement strategies withupdated tariff schedules;- Monitor sunset clauses for futureexposure.B. Ease of Doing Business – Advance Rulings &ClearanceValidity of Advance Rulings increased from 3to 5 years. What will happen to past takenAARs where the validity is just gettingexpired.Automatic clearance systems andextended duty deferment (up to 30 days) foreligible importers.Businesses shouldconsider AEO certification to leverage fasterclearances and cash-flow benefits.C. SEZ and EOU Parity – One-Time DTA SaleSEZ units are now permitted one-time DTAsales at concessional customs duty, alignedwith EOUs. This brings flexibility for SEZ unitsto liquidate inventory and improves parity withdomestic manufacturers, withoutcompromising revenue neutrality. SEZ unitsshould plan DTA sales strategically andevaluate compliance conditions carefully.How actually this pans out in clear terms is tobe seen as clarification is awaited on exportbased limits, valuation and GST applicability.D. Sector-Specific Customs ReliefKey sectors benefitting include:- Marine sector (duty-free inputs, treatmentof high-seas fishing);- Leather and footwear exports;- Lithium-ion batteries and energy storagesystems;- Nuclear power projects;- Aircraft and aviation-related imports.ConclusionUnion Budget 2026 strengthens India’s indirect taxframework by simplifying GST provisions, acceleratingrefunds, modernising customs administration andpromoting Make in India and exports. Businesses thatproactively realign processes, documentation andcompliance strategies will be best positioned toconvert these reforms into tangible financial andoperational advantages.❉ ❉ ❉Union Budget 2026 - Indirect Tax Perspective : Key Changes, Impact and Way Forward

Ahmedabad Chartered Accountant Journal January, 2026 861TMThe Income Tax Department’s intensified scrutiny ofpolitical contributions under Section 80GGC hasexposed significant natural justice violations inassessment proceedings. This article examines theconstitutional and statutory framework governing suchscrutiny, analyses landmark Supreme Court and HighCourt judgments establishing that assessments violatenatural justice when additions are made withoutproviding investigation material to assesses or denyingcross-examination opportunities and providespractitioners with actionable remedies. Thecornerstone principle is clear: any assessment orderbased on undisclosed third-party evidence withoutcross-examination opportunity is a nullity, notmerely voidable – a position unanimously upheld fromthe Supreme Court’s Andaman Timber Industries rulingthrough recent ITAT decisions.1. The Section 80GGC Scrutiny Landscape HasFundamentally ShiftedIn recent assessment cycles, the Income TaxDepartment has initiated mass scrutinyproceedings against assesses claimingdeductions for political donations under Section80GGC. These proceedings stem fromInvestigation Wing actions against certain politicalparties and related entities, with the Departmentalleging accommodation entry arrangementswhere donations are made through bankingchannels, but equivalent amounts allegedly returnto donors in cash after commission deduction.Approximately 90,000 salaried taxpayers havereceived notices regarding Rs. 1,070 crore indisputed deductions across AY 2022-23 through2024-25. The pattern is troubling: notices are issuedseeking explanations, but the investigation materialforming the basis of proposed disallowances isroutinely withheld from assesses. This systematicprocedural deficiency creates fertile ground fornatural justice challenges.The statutory framework itself is straightforward.Section 80GGC permits 100% deduction forcontributions to political parties registered underSection 29A of the Representation of the PeopleAct, 1951, provided donations are routed throughbanking channels rather than cash. When theseconditions are fulfilled, the initial onus upon theassesses stands discharged – a principlerepeatedly affirmed by appellate tribunals.2. Supreme Court Jurisprudence Makes CrossExamination Denial Fatal to AssessmentsThe Supreme Court has consistently held thatdenial of cross-examination when assessmentsrely on third-party statements renders orders void,not merely voidable. Three landmark judgmentsform the constitutional foundation forchallenging Section 80GGC disallowances.2.1 Andaman Timber Industries Establishes the“Nullity” StandardIn M/s Andaman Timber Industries vs. Commissionerof Central Excise, Kolkata-II (Civil Appeal No. 4228of 2006, decided September 2, 2015), the SupremeCourt addressed a situation directly analogous tocurrent Section 80GGC scrutiny. The Departmentrelied on statements of two dealers to justify dutydemands, but denied the assesses crossexamination request, reasoning it “would not bringout any material.”The Court’s holding was unequivocal: “Not allowingthe assessee to cross-examine the witnesses bythe Adjudicating Authority though the statementsof those witnesses were made the basis of theimpugned order is a serious flaw which makes theorder nullity inasmuch as it amounted to violationNatural Justice Violations in Section80GGC Scrutiny Assessments :A Legal Framework for DefenceCA. Pradip [email protected]

862 Ahmedabad Chartered Accountant Journal January, 2026TMof principles of natural justice because of whichthe assessee was adversely affected.”Critically, the Court rejected the Department’spresumption about cross-examination’s utility: “Itwas not for the Adjudicating Authority to presupposeas to what could be the subject matter of the crossexamination.” This principle directly applies whenAssessing Officers deny cross-examination ofpolitical party officials or intermediaries whosestatements form the disallowance basis.2.2 Kishinchand Chellaram Mandates Disclosureof Third-Party EvidenceKishinchand Chellaram vs. CIT [(1980) 125 ITR 713(SC)] established that evidence collected behindan assessee’s back cannot sustain additions. TheCourt examined a case where the ITO obtainedbank correspondence without showing it to theassessee or producing the bank manager forcross-examination.Justice P.N. Bhagwati held: “Evidence which isused against the assessee must be provided tothe assessee and also an opportunity to confrontthe same should be given permitting crossexamination.” The letters obtained covertly “didnot constitute any material evidence which theTribunal could legitimately take into account.”2.3 Dhakeswari Cotton Mills Articulates the ThreePillars of Natural JusticeThe Constitution Bench decision in DhakeswariCotton Mills Ltd. vs. CIT [(1954) 26 ITR 775 (SC)]established three fundamental requirements:Right to present evidence: Authorities must giveadequate opportunity to place relevant materialRight to know evidence against oneself:”Everyperson has the right to know the evidence to beused against him, and nothing should be usedagainst a person that has not been brought to hisnotice”Right to rebut adverse material: Revenue mustcommunicate the substance of information toenable the assessee to meet the caseThe Court explicitly condemned assessmentsbased on guesswork: “In making the assessment,the Income-tax Officer is not entitled to make a pureguess and make an assessment without referenceto any evidence or any material at all. There mustbe something more than bare suspicion.”3. High Court Rulings Provide AdditionalProcedural SafeguardsRecent High Court decisions have reinforced andexpanded these principles, creating bindingprecedent for challenging natural justice violationsin faceless assessment proceedings.3.1 Bombay High Court Leads on Section 144BComplianceVimal Trading vs. National Faceless AssessmentCentre (Writ Petition No. 12317 of 2022, decided2025) addressed a partnership firm deniedpersonal hearing under Section 144B despitetimely request. The Division Bench held: “Any nonadherence to the mandatory requirement of thestatutory provisions and such principles asrecognized by it, would render the assessment orderpatently illegal.” The Court quashed the assessmentorder, demand notice, and penalty notices.Teerth Developers vs. NFAC (Writ Petition No. 3591of 2022, decided November 18, 2024) went further,declaring: “An order passed in breach of theprinciples of natural justice would be required tobe held to be vitiated, NON-EST and a NULLITY.”The Court emphasized that Section 144Binherently incorporates natural justice principles.3.2 Delhi High Court Confirms Additions RequireConfronted EvidenceCIT vs. Ashwani Gupta [(2010) 322 ITR 396 (Del)]confirmed that when seized material is notprovided and cross-examination not granted,“such deficiencies would amount to a denial ofopportunity” and additions must be deleted. TheTribunal’s order deleting additions was affirmed.3.3 Karnataka High Court Orders ComprehensiveProcedural ComplianceIn Vishal Agarwal vs. DCIT (W.P. No. 30960/2016),the High Court quashed assessment orders whereadditions were based on third-party statements(from Mr. Mukhesh Choksi) without disclosure. TheCourt issued specific directions requiring:Natural Justice Violations in Section 80GGC Scrutiny Assessments : A Legal Framework for Defence

Ahmedabad Chartered Accountant Journal January, 2026 863TM• Supply of all third-party statements• Provision of investigation reports• Cross-examination opportunity for witnesses• Fresh assessment within six months followingproper procedure4. ITAT Decisions Directly Address Section 80GGCNatural Justice ViolationsIncome Tax Appellate Tribunal benches havedeveloped a substantial body of precedentspecifically applicable to political contributioncases.4.1 The Armee Infotech Principle Protects GenuineDonorsITAT Ahmedabad’s decision in ACIT vs. ArmeeInfotech (ITA No. 1778/Ahd/2016 & ITA No. 1900/Ahd/2016-AY 2012-13 and 2014-15) establisheda crucial principle: “The Income Tax Act does notimpose an obligation on donors to verify how therecipient political party utilizes the donation. Aslong as the donation is made through non-cashmeans and recipient political party is dulyregistered, the donor is entitled to deduction underSection 80GGC.”The Tribunal asked rhetorically: “How the donorcould dictate terms after donations are made? Nodonee will be under influence of the donor forarranging its affairs.” Disallowances of Rs. 55 lakhsand Rs. 5.86 crores were deleted.4.2 Vitthaldas Shah Quashes Revision Based onGeneral Third-Party FindingsVitthaldas Nathubhai Shah vs. PCIT (IT Appeal No.823 (Ahd.) of 2025, decided September 24, 2025)provides the most recent and comprehensiveprotection. The ITAT held: “A revision of anassessment isn’t valid without specific adversematerial against the assessee.” General findingsfrom searches on political parties, without materialspecifically linking the assessee’s donation to anyirregularity, cannot sustain Section 263 revision.The Tribunal distinguished cases where sourceanomalies or specific incriminating statementsexisted from cases where AO had conductedproper inquiry, examined evidence, and taken aplausible view.4.3 Pattern Across ITAT Benches ConsistentlyProtects AssesseesRecent ITAT decisions across Delhi, Mumbai,Bangalore, and Jaipur consistently hold that:Violation Type Consequence Representative CasesDenial of cross-examination when statement Order becomes nullity Jyoti Gupta vs. ITO;is sole basis Tanyo Exports vs. DCITReliance on Investigation Wing reports “Borrowed satisfaction” – Tecxpert Software; Sunil Kumarwithout independent verification addition deleted Agarwal vs CIT(Cal HC)Third-party seized material without Addition unsustainable Veda Real Estate P Ltd vs ITO ;confrontation Chartered Motors P Ltd Vs ITOAssumptions without corroboration Bad in law Kundal Raghubir Bhandari vsITO ; Ankit Garg vs ITO5. Compliance Requirements Protect GenuinePolitical ContributorsSection 80GGC deduction requires satisfactionof specific conditions and proper documentationprovides the foundation for defending legitimateclaims.5.1 Mandatory Documentation ChecklistAssessees must maintain:Donation receipt containing political party’s PAN,TAN, address, fund registration number, donorname, amount, date and payment modeBank statement evidence reflecting the non-cashtransactionParty registration verification confirming Section29A registration with Election Commission of IndiaNatural Justice Violations in Section 80GGC Scrutiny Assessments : A Legal Framework for Defence

864 Ahmedabad Chartered Accountant Journal January, 2026TM5.2 Key Compliance SafeguardsRequirement RationalePayment through Cash donationsbanking channels only explicitly prohibitedsince FY 2013-14Verify party registration Only parties registeredstatus under Section 29AqualifyProportionate donation Donations exceedingamounts 50% of income triggerheightened scrutinyClear audit trail Receipts and bankstatements mustcorroborate each otherThe recent Rs. 110 crore Hyderabad investigationinvolving 36 IT companies illustrates scrutinypatterns. The Department identified suspiciousindicators including disproportionate donations,contributions to inactive parties, and commonemail addresses linking fraudulent claims.However, for genuine donors with properdocumentation, the burden shifts to theDepartment to establish specific evidence ofthe assessee’s participation in any allegedaccommodation arrangement.6. Multiple Remedies Exist When Natural JusticeIs ViolatedAssessees facing procedural violations haveseveral remedy pathways, each with distinctstrategic advantages.6.1 Writ Petition Under Article 226 for FundamentalViolationsWrit jurisdiction is appropriate when violations aretotal or jurisdictional. Following CIT vs. ChhabilDass Agarwal [(2014) 1 SCC 603], exceptions tothe alternate remedy rule include:• Orders passed in total violation of naturaljustice principles• Statutory authority acting in defiance offundamental judicial procedure• Orders wholly without jurisdiction- Pure questions of law devoid of disputed facts- Challenge to the vires (validity) of a statute.Recent successful writ petitions include VimalTrading, Teerth Developers, and KMG Wires(Bombay HC, 2025), where the Court condemnedblind reliance on AI-generated case laws withoutverification.6.2 Statutory Appeals Preserve ProceduralChallenge RightsIt is pertinent to make a note of that ground ofcross examination can be raised independentlyas well as part of depriving of natural justice atany stage of appeal before CIT(A) or ITAT andmay make prayer for remand back for such crossexamination action.Appeal to CIT(Appeals) under Section 246A mustbe filed within 30 days. The Form 35 shouldspecifically raise natural justice grounds includingnon-supply of investigation material, denial ofcross-examination, inadequate response time,and non-consideration of submissions.Appeal to ITAT under Section 253 follows within60 days of CIT(A) order. ITAT is the final factfinding authority and has consistently appliedAndaman Timber principles to delete additions.6.3 Stay Applications Require Strategic TimingUnder CBDT Office Memorandum dated July 31,2017, stay is generally granted upon deposit of20% of disputed demand. However, PCIT vs.LG Electronics (Supreme Court, 2018) clarifiedthis is indicative, not mandatory. Strong primafacie cases of natural justice violation supportlower deposit requirements.At ITAT level, stay up to 180 days requires 20%deposit or equivalent security. DCIT vs. PepsiFoods (Supreme Court, 2021) held the thirdproviso to Section 254(2A) unconstitutional to theextent it vacates stay for delays not attributableto assessees.7. Practical Defense Strategy During AssessmentProceedingsEffective defense requires proactivedocumentation and strategic invocation ofprocedural rights during assessment itself.Natural Justice Violations in Section 80GGC Scrutiny Assessments : A Legal Framework for Defence

Ahmedabad Chartered Accountant Journal January, 2026 865TM7.1 Immediate Steps Upon Receiving ScrutinyNotice1. Request all investigation material: Filewritten request seeking copies of allstatements, reports, and documentsproposed to be relied upon2. Document deficiencies: Maintaincorrespondence log noting every instanceof non-compliance by Assessing Officer3. Request cross-examination: Specificallydemand cross-examination opportunity forany witness whose statement is proposed asbasis for disallowance4. Seek speaking order: Request reasonedorder reflecting independent application ofmind rather than mechanical reliance onInvestigation Wing7.2 Key Submissions to Make During AssessmentAssessees should place on record that:• Political party is duly registered under Section29A (verified from ECI website)• Donation routed through banking channels(bank statements attached)• Donation receipt obtained with all prescribedparticulars• Assessee’s name does not appear in anyspecific incriminating statement• No evidence establishes assessee’sknowledge of or participation in allegedarrangement• No corroborative material (cash withdrawals,ledger entries) links assessee to routing-backallegation7.3 Affidavit StrategyWhere negative facts are alleged, an affidavitaffirming donation genuineness assumesimportance. Judicial precedents hold thatuncontroverted affidavits must be accepted asevidence. The affidavit should specifically denyknowledge of any accommodation arrangementand affirm donation was made for bona fidepurposes.8. Conclusion: Constitutional Principles MandateProcedural ComplianceThe systematic natural justice violations in Section80GGC scrutiny proceedings represent afundamental departure from constitutionalrequirements. The jurisprudence is settled andunambiguous:Key Principles Practitioners Must Emphasize:• Assessment orders based on third-partystatements without cross-examinationopportunity are void ab initio (Andaman TimberIndustries)• Evidence obtained behind assessee’s backwithout confrontation cannot sustain additions(Kishinchand Chellaram)• Assessees have an inviolable right to knowevidence used against them (DhakeswariCotton Mills)• Investigation Wing information is merely astarting point; AO must conduct independentinquiry with full procedural compliance• Donors are not obligated to verify how politicalparties utilise funds – compliance with Section80GGC conditions suffices (Armee Infotech)For practitioners representing assessees in theseproceedings, the strategic imperative is clear:invoke procedural safeguards during assessmentitself, document every violation meticulously, andpreserve complete records for appellateproceedings. When fundamental natural justiceviolations occur, writ petition providesexpeditious relief; for partial violations, statutoryappeals before CIT(A) and ITAT offer fact-findingforums that have consistently applied SupremeCourt principles to protect genuine donors.The constitutional guarantee of fair hearingembedded in Articles 14 and 21 cannot besubordinated to administrative convenience ormass scrutiny efficiency. Each assessment mustbe judged on its own merits, with full proceduralcompliance – a standard the judiciary hasuniformly enforced.❉ ❉ ❉Natural Justice Violations in Section 80GGC Scrutiny Assessments : A Legal Framework for Defence

866 Ahmedabad Chartered Accountant Journal January, 2026TMI. Regarding discrepancy in Consignee Addressmentioned in E-way Bill.:A. Issue: While transporting goods having a valueof more than Rs. 50,000 from one Stateto another State or within the same State(intra-State), certain minor mistakesoccurred which were not intended toevade tax. However, this led to thedetention of the goods or vehicle byinvoking Section 129 of the CGST Act,2017 and a demand was raised. Illustrative List of the Errors:o Some wrong/missing Information inTax Invoice.o Typo Error in Vehicle numbero Typo error in Consignee addressdetailsB. Legal Excerpt:Section 129: Provisions for detention, seizureand release of goods and conveyances intransitE-way Bill Compliance:Issues, Jurisprudence andWay ForwardCA. Labdhi [email protected] Taxable Goods Penalty Exempted Goods PenaltyOwner Intervenes 200% of Tax Lower of 2% Value or Rs. 25kOwner Absent Higher of 50% Value or 200% Tax Lower of 5% Value or Rs. 25kC. Judicial Pronouncement:1. M/s Spirare Energy Pvt ltd [2024 (2) TMI62] Hon’ble Allahabad High Court hasheld that apart from an error with regard tothe address of the consignee in the EWay Bill, there were no other issueswith the said consignment. The invoicecontained the address, the goodsmatched the description in the invoiceand all other materials were intact. Theimposition of tax is only on the basis of atechnical error with regard to address of theconsignee that was wrongly written the EWay Bill. The authorities have not beenable to indicate any mens rea on the partof the petitioner for evasion of tax. Theimposition of tax is only on the basis of atechnical error with regard to address of theconsignee that was wrongly written the EWay Bill.In the above case, The Allahabad HighCourt, in a writ petition under Article226, overturned tax penalties imposedon M/s Spirare Energy Pvt Ltd due to atechnical error in an E-Way Bill’sconsignee address. The courtemphasized that the imposition of taxpenalties requires proof of mens rea(intent) for tax evasion, which wasabsent in this case. Citing precedents,the court held that mere technical errorsdo not justify penalty imposition.Consequently, the court quashed theearlier orders and directed the refundof the deposited amount to thepetitioner.2. In the case of M/S Ridhi Sidhi GraniteAnd Tiles [2024 (3) TMI 169] Hon’bleAllahabad High Court has held that“Upon perusal of the record, it appearsthat apart from an error with regard tothe address of the consignee in the E-

Ahmedabad Chartered Accountant Journal January, 2026 867TMWay Bill, there were no other issueswith the said consignment. The invoicecontained the address, the goodsmatched the description in the invoice andall other materials were intact. Theimposition of tax is only on the basis of atechnical error with regard to address ofthe consignee that was wrongly written inthe E-Way Bill. The authorities have notbeen able to indicate any mens rea onthe part of the petitioner for evasion oftax.”The Allahabad High Court’s ruling affirmsa balanced “substance over form”approach, establishing that technical EWay Bill discrepancies do not warrantpenalties when transaction records areotherwise consistent. By mandatingevidence of tax evasion intent, the rulingestablishes a stable framework thatprotects compliant businesses. Thisensures GST enforcement remainsgrounded in objective, merit-basedassessments rather than technicalities.3. M/s Rc Sales And Services 2025 (12)TMI 1237 (ALLAHABAD HIGH COURT),despite the goods being accompaniedby requisite documents including taxinvoice, e-way bill and GR Penaltyproceedings has been initiated undersection 129 of the CGST Act, 2017.Relying on binding HC precedent thatdetention/penalty under s.129 isunwarranted where consignor/consignee address is correct and onlythe PIN code is wrongly stated, the HCheld that such a clerical error does notjustify initiation of s.129 proceedings.The ruling establishes that where primarydocuments - including tax invoices andbilties - accurately reflect the transaction,a solitary PIN code discrepancy in theE-Way Bill constitutes a non-penalclerical error. By reinforcing the bindingnature of CBIC Circular No. 64/38/2018-GST, the High Court has affirmed thatsuch technical lapses lack the requisitemens rea for seizure under Section 129.This creates a reliable judicial shield fortransparent businesses, ensuring thatenforcement remains an objectiveassessment of tax liability rather than apunitive exercise over typographicaloversight.D. Author’s Comment and The Strategic WayForward:1. The judiciary is finally bridging the gapbetween rigid law and business reality.Recent rulings signal a vital shift: a typois a clerical slip, not a criminal intent.2. By championing “substance over form,”the courts are ensuring that honesttaxpayers aren’t penalized for minor dataentry errors when their invoices andtaxes are perfectly in order.3. The Strategic Way Forward:(i) Pre-emptive Accuracy:Treat the E-Way Bill as a high-stakesdocument. Implement a “secondeye” check or automate data syncfrom your GST master to eliminatemanual typing risks.(ii) The “Circular 64” Shield:Ensure your logistics team carriesCircular No. 64/38/2018. It is apowerful tool to de-escalatedetentions by limiting minor errorsto nominal fines rather than full-blownpenalties.(iii) Fact-Based Defense:If challenged, lead with the“Revenue Neutral” argument. If thetax is declared, the error is technical,not tactical.4. The goal is simple: Don’t let a clericaloversight turn into a legal battle.E-way Bill Compliance : Issues, Jurisprudence and Way Forward

868 Ahmedabad Chartered Accountant Journal January, 2026TMII. Error in Updation/ Non-filing of Part-B of the Eway Bill:A. Issue:Sometimes, the vehicle number mentionedin the e-way bill gets interchanged or doesnot match the conveyance number.Alternatively, it is possible that the generationof Part-B of the e-way bill is missed.B. Legal Excerpt:Section 129:Detention, seizure and releaseof goods and conveyances in transit129. (1) Notwithstanding anything contained inthis Act, where any persontransports any goods or stores anygoods while they are in transit incontravention of the provisions ofthis Act or the rules madethereunder, all such goods andconveyance used as a means oftransport for carrying the said goodsand documents relating to such goodsand conveyance shall be liable todetention or seizure and afterdetention or seizure, shall bereleased,C. Judicial Pronouncement:1. In M/s Boron Rubbers India v. Union ofIndia, 2025 (4) TMI 1307 (Gujarat HC),the court held that non-generation of PartB due to omission cannot attract thepenalty under Section 129(1)(a) when allsubstantive documentation includingPart-A and delivery challan was available.The penalty was reduced to Rs. 25,000.This case serves as a reminder thatproportionality is a cornerstone ofjustice. When the “paper trail” clearlyestablishes the movement of goodsand the payment of tax, a technical slipup shouldn’t be treated as a criminaltax evasion scheme.2. In Dynamic Rubbers Pvt. Ltd. v. DeputyCommissioner, 2024 (11) TMI 777(Gujarat HC), The fact remains that thepetitioner had no intention to evade thetax as the petitioner was transporting thegoods in question from the Port afterclearance of the same by the CustomAuthorities to the place of themanufacture. It is also emerging from therecord that the petitioner had generatedPart-A of the e-way bill and only the PartB of the e-way bill was notaccompanying the goods in theconveyance, when the same wereintercepted at 6:05 p.m. on01.03.2022.The court modified thepenalty from Rs. 11.8 lakhs to Rs. 25,000noting the lapse was venial and technical,not justifying harsh punishment.The use of the word “venial” (meaninga minor, excusable sin) is crucial here.It signals that the judiciarydistinguishes between a “proceduralhiccup” and “deliberate fraud.” Thiscase protects small and mediumenterprises from potentiallybankrupting fines caused by simpleclerical errors, ensuring that the “Easeof Doing Business” isn’t sacrificed atthe altar of rigid bureaucracy.3. In FISERV Merchant Solutions Pvt. Ltd.v. State of UP, 2025 (5) TMI 304(Allahabad HC), the court ruled that merenon-filling of Part-B of the e-Way Billwithout any intent to evade tax cannotattract penalty.Even though GST is often seen as astrict liability law, the court is insistingthat the revenue department mustprove a “nefarious motive” beforeslapping on penalties.4. In Tata Hitachi Construction MachineryCo. Pvt. Ltd. v. State of UP, 2025 (5) TMI770 (Allahabad HC), the court reaffirmedthat unless tax evasion intent is shown,E-way Bill Compliance : Issues, Jurisprudence and Way Forward

Ahmedabad Chartered Accountant Journal January, 2026 869TMmere non-filing of Part-B is insufficient forpenalty.This case reinforces judicial consistency.When multiple cases (like Tata Hitachi andFISERV) trend in the same direction, itcreates a “settled law.” For taxpayers, thisprovides a predictable legalenvironment. It suggests that if your intentis honest, the courts will likely shield youfrom the department’s tendency topenalize first and ask questions later.5. In VSL Alloys Pvt. Ltd. v. State of UP,2018 (5) TMI 455 (Allahabad HC), thecourt held that non-filling of Part-B alonecannot justify seizure or penalty if all otherdocuments are in order and no taxevasion is made out.It reminds us that the e-Way Bill systemis an anti-evasion tool, not a “trap” tocatch honest taxpayers in atechnicality. Looking at it holistically,this case established that if the identityof the goods, the supplier, and therecipient are verified, the “vehiclenumber” becomes a secondary detailin the eyes of the law.D. Author’s Comment and Stratergic WayForward1. Transitioned to Substantiveinterpretation:The judiciary has transitioned from a literalto a substantive interpretation of Section129. By categorizing Part-B omissionsas “venial” (e.g., Dynamic Rubbers),courts have re-established that Mens Rea(intent to evade) is a prerequisite forsevere penalties. This 360-degree viewensures that the “procedural handmaid”of GST does not stifle legitimate trade.2. Proportionality Doctrine:Recent rulings underscore that fiscalpunishment must align with the gravity ofthe error. When a valid “paper trail” existsvia Part-A and invoices, the lack of PartB details is viewed as a technicalityrather than a fraudulent act, justifyingnominal penalties (Rs. 25,000) overdepartmental excesses.3. Strategic Way Forward: (Operational): Entities mustimplement Dual-Verification SOPs tocross-match conveyance numbersbefore dispatch. (Legal): During interceptions,immediately document the absenceof “evasion intent” by showcasing anunbroken document chain (TaxInvoices/Customs docs) and provesbefore the authorities.Concluding Notes:The E-way bill system is about moving India toward amore organized and transparent future. While the rulesmay seem rigid, the legal framework and the courtsincreasingly value honesty and intent over simpleclerical mistakes.To stay ahead, businesses should focus on “checktwice, ship once.” By verifying Lorry Receipts againstE-Invoices and E-way Bill and keeping lines ofcommunication open with transporters, to prevent mostissues before they start.Even if a shipment is detained under Section 129 Orsection130 of the CGST Act, 2017, goods andconveyance can be released provisionally byfurnishing a bond in FORM GST MOV-08 [CircularNo. 41/15/2018-GST Dt. 13th April, 2018] along with abank guarantee equal to the amount of demandraised as per applicable provisions. This mechanismis a vital tool to maintain working capital and ensurebusiness operations continue smoothly while the taxdispute is resolved.With a proactive approach and a focus on accuracy,one can navigate the EWB regime with confidenceand ease.❉ ❉ ❉E-way Bill Compliance : Issues, Jurisprudence and Way Forward

870 Ahmedabad Chartered Accountant Journal January, 2026TMEvery fifth pill taken around the world comes from India.When people need affordable, high-quality medicine,they often turn to India. The Indian pharmaceutical industryis worth about US $50 billion in 2023–24, and it isexpected to grow to US $130 billion by 2030 and US$450 billion by 2047. In 2024–25, India exported US $30.5billion worth of medicines, up 9.3% from the previousyear, due to growing demand for generic medicines.Today, India provides 20% of the world’s genericmedicines, earning it the title “Pharmacy of the World”.India also has one of the largest numbers of US FDAapproved plants outside the U.S. and thousands ofWHO-GMP-certified facilities, giving it strongmanufacturing capabilities to keep medicines affordable.ChallengesWhile India continues to solidify its position as the“Pharmacy of the World,” looming U.S. tariffs pose asignificant threat to its pharmaceutical sector. With nearlyone-third of Indian pharma exports destined for the U.S.,even a 25% levy could erode profit margins, disruptsupply chains, and affect long-term investment plans.Major pharma companies could face earnings pressure,while the broader industry may struggle to maintaincompetitiveness. Beyond the financial implications,these tariffs threaten the steady supply of affordablegenerics and vaccines, which account for 20% of theworld’s generic medicines. This effect could pushmedicine prices up in the U.S., potentially creating supplybottlenecks and healthcare challenges. Even if the tariffsultimately remain a negotiating tactic rather than concretepolicy, the uncertainty alone casts a strategic shadowover India’s global pharma ambitions.Contract ManufacturingContract manufacturing is a model where apharmaceutical company outsources production ofdrugs or APIs to another company instead of producingLoan License Manufacturing inIndian Pharmaceutical Industryin-house. This allows companies to focus on R&D,marketing and distribution, while leveraging themanufacturing capabilities of specialized partners.Contract manufacturing is becoming a key growth driverfor India’s pharmaceutical sector. Many global anddomestic companies are increasingly outsourcingproduction to Indian manufacturers due to costefficiency, quality standards, and regulatorycompliance. The market size reached USD 25.81billion in 2025, with projections to nearly double to USD51.18 billion by 2030, reflecting a 14.67% annual growthrate. India offers a well-established manufacturingecosystem, including thousands of WHO-GMP-certifiedplants and one of the largest numbers of US FDAapproved facilities outside the U.S., making it anattractive destination for third-party production.However, to ensure compliance and manage riskseffectively, pharmaceutical companies must put inplace robust governance mechanisms. This brings usto the importance of a detailed Risk and Control Matrix(RCM) for Loan License (LL) parties.Risk and Control Matrix (RCM) for Loan LicenseParties1. Compliance-Related RisksCompliance is the backbone of the pharmaceuticalindustry, especially in a loan license arrangementwhere manufacturing is outsourced to a third-partybut the regulatory accountability rests with thelicensee company. Failure to maintain validlicenses, approvals, or export authorizations canresult in regulatory action, penalties, or suspensionof operations. Effective risk identification andstrong controls are therefore essential tosafeguard business continuity and regulatorystanding. The following RCM table on ComplianceRisks highlights key risk areas and detailedcontrols that the licensee must enforce.CA. Dhrumi [email protected]

Ahmedabad Chartered Accountant Journal January, 2026 871TMLoan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory ReadinessProcess / Area Critical Risk Detailed Control (with Reference)Drug Manufacturing Third-party may operate without • Validity and scope of manufacturing licenseLicense & Product valid/renewed license or produce before production should be verifiedRegistration drugs not approved by CDSCO • License register with expiry tracking andperiodic FDA portal checks should bemaintained.• Each product’s CDSCO (Central Drugs StandardControl Organization) approval needs to beensured.• Licensee QA/Regulatory must review duringaudits and retain copies at its office.GMP / Schedule M Non-compliance with Schedule M • As per Schedule M (Drugs & Cosmetics Rules,Compliance at (premises, equipment, QA/QC 1945), a valid license requires ongoing GMPThird-Party Site systems etc) may lead to quality compliance.lapses and regulatory action on • Licensee QA/Regulatory should confirm thislicensee. through audits and by retaining certified copiesof licenses, approvals, and GMP certificationsat its office.Export Licenses & Export batches may be shipped • As per Drugs & Cosmetics Rules, 1945 (RuleInternational GMP without valid licenses or foreign 94 & related provisions), export of drugsCompliance GMP compliance, risking rejection requires valid export licenses issued by(if applicable) and penalties. CDSCO/State Licensing Authority.• Importing countries (US, EU, WHO-prequalifiedmarkets) mandate compliance with their GMPstandards.• In loan licence arrangement, the contractmanufacturer must hold valid exportauthorization and demonstrate GMPcompliance, while the licensee’s QA/Regulatory team should verify the same2. Non-Financial Risks – Governance under Schedule MNon-financial risks are linked to operational practices, quality systems, and governance at the loan licencesite. To mitigate this, Schedule M of the Drugs & Cosmetics Rules, 1945 prescribes Good ManufacturingPractices (GMP) for the pharma sector. Revision of Schedule M in Dec, 2023 aligned Indian standards withWHO and global benchmarks (USFDA, EMA), raising compliance requirements.In a loan licence model,where manufacturing is outsourced, the licensee remains accountable to regulators (CDSCO, SLAs) for fullcompliance. Hence, identifying and mitigating risks is critical.The following RCM provides structured tool tomap such risks and controls across production, QA/QC, premises, equipment etc.Process / Area Critical Risk Detailed Control (with Clause Reference)Contract / Loan Absence of a robust technical Roles and Responsibilities of loan licensee andLicence agreement may result in non- contract manufacturer must be clearly set out in aManufacturing compliance at the contract site written technical agreement. This agreementand possible misuse of must:confidential technical know-how. • Define GMP responsibilities for Production, QC,deviation handling, complaints and recalls.

872 Ahmedabad Chartered Accountant Journal January, 2026TMProcess / Area Critical Risk Detailed Control (with Clause Reference)• Contain confidentiality provisionssafeguarding product formulations, processknow-how, analytical methods and data.• Ensure contract giver retains overallresponsibility for product quality and regulatorycompliance.• Require periodic audits of the contract site bythe loan licensee etc• Establish that any deviations, complaints, orrecalls are reported immediately to the licensee.Batch Manufacturing Incomplete, inaccurate, or back • As per Schedule M, Batch Manufacturing& Processing dated batch records at the Records must be prepared and maintained atRecords (BMR/BPR) contract manufacturer may lead to the time of each activity for every batchundetected deviations, poor processed, duly signed by operators andtraceability and regulatory action supervisors, and reflecting yields, processagainst the licensee. parameters, equipment used, and deviations.• BMRs must be cross-linked with BatchPackaging Records for reconciliation.• Where electronic records are maintained, thereshould be role-based access controls, audittrails for changes or deletions, and securebackup systems. In a loan licence setup, thecontract manufacturer’s QA prepares the BMR/BPR, but the licensee’s QA must:• Independently review records for completenessand accuracy and verify that deviations areproperly investigated and CAPA (Corrective andPreventive Action) closed before release.• Ensure periodic audits of the contract site coverBMR practices.• Retain copies of approved BMRs at thelicensee’s office for regulatory inspections.Quality Assurance Batches manufactured by the • As per Schedule M, QA must be independent(QA) – Batch Release contract site may be released of Production, requires review of batch records,at Third-Party without adequate review by the deviations, and QC results before release.Manufacturer licensee, creating risk of • In a third-party setup, Contract manufacturer’ssubstandard products reaching QA prepares the release file, ensuring recordsthe market, regulatory penalties are complete and deviations closed with CAPA.and reputational damage. • Licensee’s QA must independently review thesedocuments and QC results before authorisingrelease.• The schedule M requires an annual ProductQuality Review (PQR) by both parties, coveringdeviations, complaints, stability studies, andCAPA effectiveness.Loan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory Readiness

Ahmedabad Chartered Accountant Journal January, 2026 873TMProcess / Area Critical Risk Detailed Control (with Clause Reference)Quality Control Manipulated or inaccurate test • As per Schedule M requires that the contract(QC) – Laboratory results at the contractor’s QC manufacturer’s QC must test raw materials, inTesting at lab may lead to release of non- process, finished product, and stability samplesThird-Party Site conforming products and using validated methods, with completeregulatory non-compliance for retention of raw data.the licensee. For outsourced manufacturing, the licensee’s QA/QC team must:• Review and approve test methods,specifications, and validation reports beforeuse.• Independently verify test reports against raw datafrom the contractor’s lab.• Ensure OOS (out-of-specification) results arefully investigated and closed with documentedCAPA.• Conduct periodic audits of the contractor’s QClabs, covering equipment calibration, analysttraining, and data integrity.• Retain certified copies of key QC records atthe licensee’s office for inspection readiness.Pharmaceutical Weak deviation handling, in • As per Schedule M, manufacturers mustQuality System effective CAPA, or poor risk maintain a Pharmaceutical Quality System(PQS) & Quality Risk oversight at the third-party site (PQS) covering deviations, CAPA, complaints,Management (QRM) may compromise product quality change control, self-inspection, andand expose the licensee to management review.regulatory non-compliance. • It also requires a documented Quality RiskManagement (QRM) process, mandates anannual Product Quality Review (PQR).In a loan licence setup, the contract manufacturermust operate a compliant PQS/QRM, while thelicensee’s QA should:• Review contractor’s deviation, CAPA, andchange control.• Ensure major deviations and complaints areescalated and closed.• Participate in annual PQR reviews.• Conduct periodic audits/self-inspections toconfirm PQS effectiveness.• Retain oversight records at the licensee’s officefor regulatory readiness.Premises & Poor upkeep of premises or • As per Schedule M, premises must beEquipment inadequate maintenance/ designed, maintained, and kept in hygienicCompliance at Loan calibration of equipment at the condition to avoid cross-contamination andLicence Site contract site may affect product enable effective cleaning.Loan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory Readiness

874 Ahmedabad Chartered Accountant Journal January, 2026TMProcess / Area Critical Risk Detailed Control (with Clause Reference)quality and lead to regulatory • Equipment needs to be properly designed,non-compliance for the licensee. maintained, calibrated, and qualified, withrecords retained.In a loan licence setup, the contract manufacturermust maintain premises and equipment as perGMP, while the licensee’s QA/engineering teamshould:• Verify segregation of manufacturing zones, pestcontrol, cleaning logs, HVAC monitoring, andwaste disposal records.• Ensure Equipment Qualification (installation,operational, performance qualification) andCalibration• Review schedules, downtime logs, and ensurebreakdowns are promptly escalated andinvestigated with CAPA.• Verify facility hygiene, cleaning validation, andpest control records.• Retain audit findings and certifications at thelicensee’s office for regulatory readiness.3. Financial RisksFinancial risks are equally important because they affect the accuracy of reporting, cost efficiency, and taxcompliance. Weak controls can lead to misstated financials, avoidable disputes, and regulatory disallowances.The following RCM captures these aspects, showing how companies can safeguard financial integrity whilemanaging outsourced manufacturing.Process / Area Critical Risk Detailed Control (with Clause Reference)Conversion cost and LL manufacturer may charge • CCPC fixation should comply with Drug Pricepacking charges unreasonable CCPC, resulting in Control Order (DPCO, 2013) and National(CCPC) inflated product cost or disputes Pharmaceutical Pricing Authority (NPPA)during audit/regulatory reviews. guidelines. Rates must be benchmarked withmarket quotations and supported by costworkings.• Finance & commercial teams of the pharmacompany should jointly review and approveCCPC with documented negotiations to ensurefairness and regulatory complianceInventory ownership Materials lying with LL party may • All raw and packing material sent to LL party& custody not be properly recorded, leading should be recorded under job work inventory.to misstatement of inventory in • Periodic stock confirmations should be obtainedcompany books. from the LL manufacturer and reconciled withERP records. Surprise physical verification mayalso be carried out.Loan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory Readiness

Ahmedabad Chartered Accountant Journal January, 2026 875TMProcess / Area Critical Risk Detailed Control (with Clause Reference)Inventory Valuation – Inventory may be misstated if • As per Ind AS 2 / AS 2 (Valuation ofCCPC & Abnormal CCPC is wrongly allocated or if Inventories), only costs directly attributable toCosts abnormal costs (wastage, idle bringing the inventory to its present conditiontime, rework) are included/ should be included.excluded inappropriately. • CCPC must be allocated to finished goodsbased on actual production and cost records,supported by batch-wise cost sheets.• Abnormal costs (wastage, idle time, rework)should be excluded and charged directly toP&L. Finance and costing teams should reviewcost allocations periodically.Inventory Valuation – Inventory may be misstated if • In line with Ind AS 1 (Presentation of FinancialCut-off / Accrual CCPC is not recorded in the Statements) and accrual principles, CCPC mustcorrect period, or if accruals be recognized in the correct period.are missed/excess. • Reconciliation of production records with vendorinvoices/GRNs, timely expense accruals andreview of open purchase orders should bedone to ensure all costs relating to the reportingperiod are captured.Yield Variance Yield variance may not be • Standard BOM (Bill of Material) should beaccurately tracked, leading to defined and maintained in ERP/SAP.incorrect inventory valuation, • Actual yield should be periodically comparedmisstatement of material with standard yield and significant variances mustconsumption and disputes in be investigated with approvals, correctivecost allocation. actions, proper documentation.Non-moving / Slow- Risk of non-moving, slow-moving • Conduct monthly ageing analysis of inventorymoving / Non- or unusable inventory at LL at LL sites. Identify non-moving/obsolete stockusable Inventory locations not being timely and take timely actions (provision/write-off/identified, leading to incorrect disposal) in line with Ind AS 2.valuation and carrying cost ofobsolete stock.Documentation & Goods sent to Loan Licence (LL)/ • As per Rule 55 of the CGST Rules, 2017, goodsMovement of goods job worker may not be properly must be accompanied with a Delivery Challanto job worker documented, leading to risk of in case of job work. Further, as per Rule 138 ofGST non-compliance. the CGST Rules, generation of E-way Bill ismandatory wherever applicable.• Ensure that each movement of goods to/fromjob worker is backed by a Delivery Challan andvalid E-way Bill.• Regular reconciliation should be carried outbetween challans, e-way bills and job workeracknowledgments to establish compliance.Loan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory Readiness

876 Ahmedabad Chartered Accountant Journal January, 2026TMProcess / Area Critical Risk Detailed Control (with Clause Reference)Filing of GST Non-filing or incorrect filing of • Form GST ITC-04 (details of goods sent/Forms for job work GST forms (e.g., ITC-04) received from job worker) must be filed by theprincipal manufacturer.• Ensure periodic reconciliations between ERPrecords, challans, and ITC-04 filings.Time limit for return If inputs/capital goods are not • As per Section 143 of the CGST Act, 2017, inputsof goods from job received back within prescribed must be received back within 1 year and capitalworker timelines (Inputs – 1 year, Capital goods within 3 years from the date of sending.Goods – 3 years), such Failing this, the movement is treated asmovement may be deemed as deemed supply.supply, resulting in tax liability. • Maintain Job Work Register with dispatch andreturn timelines, generate periodic alerts fornearing expiry of ITC, and ensure goods areeither returned or tax is discharged timely.Input Tax Credit Incorrect availment or loss of ITC • Avail ITC as principal manufacturer even for(ITC) eligibility due to non-compliance in direct dispatch to LL site, provideddocumenting job work movement. documentation complies with CGST Rules.• Conduct internal checks to validate ITC claimed.Taxability of waste/ Waste or scrap generated during • If scrap is cleared by job worker, he must payscrap generated at job work may be sold without GST on it if registered; otherwise, principal mustjob worker’s proper tax compliance, leading pay GST.premises to GST liability on principal. • Ensure contractual clarity and periodic reviewof scrap records.Tax Deduction at Conversion charges/job work • Ensure TDS is deducted at applicable ratesSource (TDS) on payments to LL may be made (u/s 194C for contract payments).Conversion without TDS, leading to • Verify challans, TDS returns (Form 26Q) andCharges / disallowances u/s 40(a)(ia). reconciliation with Form 26AS of the vendor.Processing FeesDelayed Payments If LL party is an MSME and • Obtain MSME registration details from LL party.to MSME Vendors payments are delayed beyond • Track ageing of outstanding balances and45 days (per MSME Act), such ensure timely payment within statutory timelines.expenses may be disallowedu/s 43B(h).The Risk and Control Matrix (RCM) plays a pivotalrole in strengthening governance andaccountability in pharmaceutical companiesoperating through loan license and contractmanufacturing models. By systematicallyaddressing compliance, operational, and financialreporting risks, the RCM ensures thatorganizations not only remain audit-ready but alsomaintain global credibility in quality andtransparency.Contingent Liabilities in the Pharmaceutical IndustryWhile structured risk controls provide a solid defenceagainst operational and regulatory risks,pharmaceutical companies must also account forcontingent liabilities—uncertain obligations that mayLoan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory Readiness

Ahmedabad Chartered Accountant Journal January, 2026 877TMarise depending on the outcome of future events. Inan industry that is highly regulated, innovation-driven,and globally integrated, contingent liabilities carrysignificant weight in financial reporting and corporaterisk management.Key areas of contingent liabilities for pharmacompanies include:- Product Liability Claims –Lawsuits or compensation claims arising fromadverse drug reactions, side effects, or recalls.- Regulatory Penalties –Potential fines or penalties from CDSCO, US FDA,EMA, or other regulators due to non-compliance,failed inspections, or data integrity issues.- Patent Litigations & IPR Disputes –Legal challenges from innovator companies overgeneric launches, biosimilars, or patentinfringements.- Tax Disputes –Pending cases under Income Tax, GST, Customs,or Transfer Pricing, where outcomes depend onjudicial decisions.- Environmental & EHS Liabilities –Claims or penalties related to hazardous wastedisposal, pollution control, and non-compliancewith environmental regulations.- Contractual Disputes –Disagreements with contract manufacturers,suppliers, or distributors, which may result inclaims or arbitration.- Export & Trade Compliance Risks –Penalties or restrictions arising from export licencedisputes, sanctions, or violation of internationaltrade regulations.- Employee & HR-Related Claims –Potential liabilities from labour law disputes,employee benefits, or workplace safety issues.Recognising, disclosing, and monitoring theseliabilities is critical to ensure true and fair presentationof financial statements, while also maintaining the trustof stakeholders, regulators, and investorsThe strength of India’s pharmaceutical industry comesnot only from its size but also from how well it managesrisks and controls. The RCMs outlined above highlighthow companies can prevent compliance gaps,operational lapses, and financial misstatements in aloan licence setup. At the same time, properidentification and disclosure of contingent liabilities—arising from regulatory, tax, or contractual exposures—are essential for reliable financial reporting. A strongframework that integrates risk control with financialoversight ensures compliance, protects credibility, andsustains long-term growth in global markets.❉ ❉ ❉Loan License Manufacturing in Indian Pharmaceutical Industry : Risks, Controls and Regulatory Readiness

878 Ahmedabad Chartered Accountant Journal January, 2026TMProperty Law – GPA and agreement to sellNature of power of attorneyWhile construing a document, a reader should not goby the title to the document or the nomenclature of thedocument. In such a case, the court is endowed with aduty to see the contents of the document and intentionof the parties which can be gathered from the terms ofthe document and/or from circumstances under whichthe document was entered into. The intention of theparties can be ascertained from the language usedby the parties. A document has to be seen as a whole.A POA derives its basic principles from Chapter X ofthe Contract Act which provides for Agency which isfiduciary relationship between two persons where oneexplicitly or impliedly agrees to the other will act ontheir behalf to influence their legal relations with thirdparties and the other similarly agrees to act in thiscapacity or does so based on an agreement.The import of the word “general” in a POA refers to thepower granted concerning the subject-matter. The testto determine the nature of POA is the subject-matterfor which it has been executed. The nomenclature ofthe POA does not determine its nature. Even a POAtermed as a “general power of attorney” may conferpowers that are special in relation to the subject-matter.Likewise, a “special power of attorney” may conferpowers that are general in nature concerning thesubject-matter. The essence lies in the power and notin the subject-matter.A general agent is one who has authority, arising outof and in the ordinary course of his business orprofession, to do some act or acts on behalf of hisprincipal in relation thereto; or one who is authorizedto act on behalf of the principal generally in transactionsof a particular kind or incidental to a particular wordsused in POA must be interpreted in the context of the26Advocate Samir N. [email protected] ofRulingswhole; the purpose of the powers conferred must thenbe examined through the circumstances in which it wasexecuted; and finally, necessary powers must beimplied.Timblo Irmaos Ltd v Jorge Anibal Matos Sequeira, (1977)3 SCC 474, followed.Further, a mere use of the word “irrevocable” in a POAdoes not make the POA irrevocable. If the POA is notcoupled with interest, no extraneous expression canmake it irrevocable. At the same time, even if there isno expression to the effect that the POA is irrevocablebut the reading of the document indicates that it is aPOA coupled with interest, it would be irrevocable.A document has to be construed as a whole. A straysentence here and there cannot be picked out toconstrue a document. To understand the tenor of thedocument and the intention of the parties, it has to beread as a whole. The real intention of the parties hasto be covered not merely from what ex facie is statedin the document, but from the totality of the recitals inthe document.It is evident from the tenor of POA that is not irrevocableas it was not executed to effectuate security or to secureinterest of the agent. The holder of POA could not besaid to have an interest in the subject matter of theagency and mere use of the word “irrevocable” in POAwould not make the POA irrevocable. The High Courtwas right in holding that the holder did not have anyinterest in the POA When the High Court observes thatthe power of attorney does not explicitly state thereason for its execution, it implies that its nature isgeneral rather than special.It is a settled law that a transfer of immovable propertyby way of sale can only be by a deed of conveyance.An agreement to sell is not a conveyance. It is not adocument of title or a deed of transfer of property andSUPREME COURT

Ahmedabad Chartered Accountant Journal January, 2026 879TMdoes not confer ownership right or title. An agreementto sell does not meet the requirements of Sections 54and 55 of the TPA to effectuate a “transfer”.Suraj Lamp & Industries (P) Ltd (2) v. State of Haryana,(2012) 1 SCC 656 : (2012) 1 SCC (Civ) 351 : (2012) 340ITR 1 : (2012) 169 Comp Cas 133, followed.First, the POA is general in nature and does not secureagent’s right in the subject-matter of the agency, andsecondly, an agreement to sell simpliciter does notconfer ownership in the immovable property so as totransfer a better title to anyone else.Even though the GPA and the agreement to sell werecontemporaneous documents executed by the originalowner in favour of the same beneficiary, this cannotbe the sole factor to conclude that she had an interestin the subject-matter. Even if such an argument wereto persuade the Supreme Court, the document musthave been registered as per Section 17(1)(b) of theRegistration Act. In the absence of such registration, itwould not be open for the holder of the POA to contendthat she had a valid right, title and interest in theimmovable property to execute the registered saledeed in favour of Appellant 2.Immovable property can be legally and lawfullytransferred/conveyed only by a registered deed ofconveyance. Transactions of the nature of ‘GPA sales”or ‘SA/GPA/will transfers” do not convey title and donot amount to transfer, nor can they be recognized orvalid mode of transfer of immovable property. Thecourts will not treat such transactions as completed orconcluded transfers or as conveyances as they neitherconvey title nor create any interest in an immovableproperty. Suraj Lamp & Industries (P) Ltd. (2) v. Stateof Haryana, : (2012) (340 ITR 1)M.S. Ananthamurthy v J. Manjula (2025) 10 SCC 596)Tiger Global caseThe power of an independent Republic to levy andcollect tax forms part of its inherent sovereign functions,and such power is circumscribed only by therequirement of being within the authority of law. Article265 of the Constitution of India envisages the same. Ina world where nations must necessarily engage withGlimpses of Rulingseach other for mutual economic growth through trade,commerce and business, and for reasons of economicpolicy, international cooperation, and diplomaticbalance, the power of each nation is often exercisedin tune with such bilateral or multilateral agreements,which do not take away such inherent power but whichnow stand shaped by the legal framework agreed tobetween the parties. Having said this, it is for thelegislatures to employ their discretion to innovatethrough the empirical process and in line with treatyobligations, evolve new ways of tapping revenue andplacing checks on new methods and devices of taxevasion that may have arisen by abuse of beneficialprovisions based on treaties. Here, the Court will haveto tread carefully and cautiously to ascertain whetherthe action of the Revenue is within the contours of law– meaning constitutional, statutory and treaty obligations– in order that fiscal difficulties are addressed by theState in line with its own fiscal wisdom and policy.18. Yet another aspect would be to assert demandand enforce the right share of profits to be taxedin one’s own soil. It is natural and imperative that itis a right of a Nation whose soil or source standsused or exploited for generating or earning anincome to get the right to tax it. The place, locationor the source of earning should also by defaultbecome the place or jurisdiction for taxation. Anyarrangement to the contrary is nothing but acompromise. Past practices and experiencesneed not necessarily be carried forward as alegacy if changing times and geo-economic opticsfavour a Nation towards a more progressiveassertion in the global space.19. Taxing an income arising out of its own country isan inherent Sovereign right to that country. Anyapplication of filters or diffusers to this is a directattack or threat to its sovereignty which can affecta Nation’s long-term interest.22. The distinction between business modelsbecoming part of economic policies or choicesof a country and corridors lobbying for legislativechanges and amendments to suit their businessinterest are totally distinct spheres and it is a27Continued to page 893

880 Ahmedabad Chartered Accountant Journal January, 2026TMPublic Charitable Trust: Applicability ofsection 13(1)(c).CIT (Exemption) vs. IILM Foundation(2025) 480 ITR 1 (Del)Issue:Whether payment of reasonable remuneration to aTrustee will constitute as a ‘benefit’ under section13(1)(c )?Held: “21.A plain reading of sub-section (1) of Section 13 ofthe Act indicates that exemptions under Section11/12 of the Act would not operate so as to excludefrom the total income of the previous year anyincome, which is directly or indirectly, for the benefitof the person referred to in sub-section (3) ofSection 13 of the Act. It is, thus, clear that if anypart of the income of a trust for charitable orreligious purposes is diverted for the direct orindirect benefit of a person referred to in subsection (3) of that Act, that part of the income wouldnot be excluded from the total income of theAssessee by virtue of Section 11/12 of the Act. Inother words, the exemption under those Sectionswould not be available to the extent that the saidincome of a charitable or religious purposes isapplied for the benefit of a person specified insub-section (3) of Section 13.22. By virtue of clause (c) of sub-section 2 of the Act ifany amount is paid by way of a salary or allowanceto a person, which is specified under sub-section(3) of Section 13 of the Act, it would be deemedthat the income of the property or trust has beenapplied for the benefit of that person for thepurposes of Clause (c) and (d) of sub-section (1)of Section 13. However, if a person specified undersub-section (3) has rendered any service and theamount or allowance paid to such person is such,that is, reasonably paid for such services, the samecannot be deemed to have been applied for thebenefit of the said person for the purposes ofclauses (c) or (d) of Section 13(1) of the Act. Thisis apparent from the plain language of clause (c)of sub-section (2) of Section 13 of the Act. Theopening words of the said clause must be read inconjunction with the last words of the said clause– “If any amount is paid by way of salary, allowanceor otherwise …. in excess of what may bereasonably paid for such services”. Thus, if theamount paid for services is such as is reasonablypayable for such service, the same cannot beconstrued as applied for the benefit of a prohibitedperson notwithstanding that it is paid to such aperson. Consequently, such payment would notfall within the exception of clause (c) of sub- section(1) of Section 13 of the Act.”Amounts paid by Indian hotel company toUSA company for centralized marketing andreservation related services.CIT (International Taxation) vs. SixContinents Hotels INC(2025) 480 ITR 14 (Del)Issue:Whether payments received by a foreign entity froman Indian Hotel company for centralized marketing andreservation services will be Fees for TechnicalServices u/s 9(1)(vii)?Held:“10. As per the HMA, for the system fund supportservices provided by SCHI (a companyincorporated and a tax resident of USA andrecipient of beneficial provisions of the DTAA),IHG India shall pay to SCHI a fee equal to amountCA. Jayesh C. [email protected] the Courts92

Ahmedabad Chartered Accountant Journal January, 2026 881TMpayable by Indian third-party hotel owners to IHGIndia in respect of such services less all theexpenses incurred by IHG India with respect tosuch services. Further, in consideration forreservation system support services, IHG Indiapays to SCHI, a fee equal to 95% of the total feespayable by third-party Indian hotels to IHG India.11. As noted above, the principal question that isrequired to be addressed is whether the paymentsreceived by the Assessee on account of providingcertain centralised services including marketingservices and reservation services can beconstrued as fees for technical services asdefined under Section 9(1)(vii) of the Act or Feesfor Included Services as covered under Article12(4)(a) of the DTAA. Admittedly, the said issue iscovered in favour of the Assessee and againstthe Revenue by several decisions of this courtincluding Director of Income Tax v. SheratonInternational Inc.: (2009) 313 ITR 267; TheCommissioner of Income Tax-International Taxation3 v. Sheraton International LLC: Neutral Citation:2023:DHC:4261-DB; The Commissioner of IncomeTax-International Taxation-3 v. Westin HotelManagement LP: ITA 213 of 2024 decided on10.04.2024 and The Commissioner of Income TaxInternational Taxation- 3 v. Shangri-La InternationalHotel Management Pte Ltd. : ITA 532 of2023 decided on 18.09.2023.12. In the case of The Commissioner of Income TaxInternational Taxation-3 v. Radisson HotelInternational Incorporated: Neutral Citation:2022:DHC:004791, this court had referred to theearlier decisions and dismissed the case holdingthat no substantial questions of law arise forconsideration by this court. The present appealmust bear the same fate.”Law of limitation as would generally apply.Sun Pharmaceutical Industries Ltd. Vs. ITO(2025) 480 ITR 164 (Del)Issue:How does the law of limitation apply when it isconcerning with the extinguishment of right to institutea claim of refund?From the CourtsHeld:“56.Speaking on the law of limitation as wouldgenerally apply, the Supreme Court explained theoperation of such a law as pertaining to claimswhich could not be entertained if not commencedwithin the time prescribed. It was further pertinentlyobserved that unless the statute itself were to fix aperiod within which an action may be initiated orinstituted, there is no general law which governsthe issue of limitation. It proceeded further toobserve that a statute of limitation intends tocompel a person to exercise a right or institute anaction within a reasonable time and thusdiscourage stale claims.57. Speaking of the two basic facets of a rule oflimitation, the Supreme Court explainedthat whileone is concerned with the extinguishment of a rightto institute a claim or commence an action, theother merely bars the remedy without impactingor affecting the right itself. It was thus held thatwhere a statute prescribes a limitation and whichresults in the extinguishment of a right itself, it isclearly substantive in character and not merelyprocedural. However, it was also pertinentlyobserved that the distinction between substantiveand procedural aspects of a statute of limitationmay not really be determinative and it would thusbe prudent to determine the same in individualinstances by pausing the question whether it wasintended to affect a substantive right in the senseof extinguishing the same or whether it wasintended to be merely procedural and confinedto impacting remedies that may be pursued.Proceeding further to rule upon the validity of Rule17, it took note of the fact that the principalenactment had not adopted any provision oflimitation insofar as claims were concerned. It thusheld that Rule 17 was clearly ultra vires Section96.58. Tested on the aforesaid principles, it becomesapparent that paragraph 9 of the Circular No. 07/2007 essentially results in deprivation of a right topetition for refund and thus seeks to extinguishthe claim itself. This the CBDT has chosen to do,not in amplification of a provision contained in the93

882 Ahmedabad Chartered Accountant Journal January, 2026TMAct, but in purported exercise of powers conferredby Section 119. That provision, as was noticedhereinabove, is clearly couched in permissivelanguage and cannot possibly be construed asempowering the Board to extinguish a right or theremedy which otherwise existed in the statute.”Construction and interpretation ofExplanation 1 to section 164.Equity Intelligence AIF Trust vs. CBDT(2025) 480 ITR 278 (Del)Issue:How is the Explanation 1 to section 164 to be construedin reference to Category III AIF?Held:“9. Briefly referring to sections 161 and 164 of theAct, he submitted that if the shares of thebeneficiaries are ascertainable and determinable,their income is taxed at the normal rate, however,if the same shares are neither ascertainable nordeterminable then the said income is taxed at theMaximum Marginal Rate. He submitted that in theassessment made by the AO, it was specificallyheld that the petitioner is a determinate Trust andsuch orders have become final.10. Learned senior counsel submits that contrary tothe said understanding of the AO and the petitioner,the impugned order passed by the respondentno.2/BAR holds that if the names of thebeneficiaries are not set out in the original TrustDeed then such Trust would be treatedas ”indeterminate” and resultantly be subject toMaximum Marginal Rate under the provisions ofsection 164 of the Act. He contended that thisconclusion of the respondent no.2/BAR is not onlyerroneous but also contrary to the understandingof the tax authorities itself and has incorrectlybased itself on the Central Board of Direct Taxes(hereinafter referred to as ”CBDT”) Circular No.13/2014 issued on 28.07.2014. It is the order of therespondent no.2/BAR as also the CBDT Circulardated 28.07.2014 which is impugned in the presentwrit petition.”“32. Broadly, the dispute does not pertain to factualaspects, rather, only to the construction andinterpretation of Explanation 1 to section 164of the Act. The petitioner contended that theprovisions of Regulation 3(1) and Regulation6(3) of the SEBI Regulations read withprovisions of section 12 of the SEBI Act wouldprohibit the petitioner from accepting anyinvestment or mentioning the name of thebeneficiaries in the original Trust Deed unlessthe said provisions were scrupulouslycomplied with and that too, only after obtainingthe certificate of registration from SEBI. Thecertificate of registration to be obtained fromSEBI is contingent upon the Trust Deed beingregistered under the Registration Act, 1908.In other words, the petitioner contended thaton the one hand, the Circular no.13/2014mandated Trusts akin or similar to the petitionerTrust i.e. Category III AIFs, to necessarilymention the name of the beneficiaries on theoriginal Trust Deed whereas, the SEBIRegulations prohibited any investment to beobtained from the beneficiaries beforeobtaining certificate of registration from it,under the aforesaid provisions. Thisprocedure was contended to be contrary tothe doctrine of impossibility.”“42. From a plain reading of the ratio laid down bythe aforesaid judgments, it is manifest that theinterpretation and construction of therequirement of mentioning the names of theinvestors or their beneficial interests in theoriginal Trust Deed was engaging the attentionof the Courts. The said interpretation andconstruction of such a requirement has nobearing in respect of which of the assessmentyears were in question. This opinion is furtherstrengthened by the fact that even beforeCircular no.13/2014 was notified, Explanation1 to section 164 of the Act was on the statutebook with effect from 01.04.1980 havingidentical restrictions. Moreover, the KarnatakaHigh Court has succinctly tested theproposition and set out its opinion in para 10of its judgement extracted above. The Courtwas interpreting the provisions of section 164of the Act and considering whether shares areFrom the Courts94

Ahmedabad Chartered Accountant Journal January, 2026 883TMdeterminable even when even or after the trustis formed or may be in future when the Trust isin existence; and on the facts of that case hadconcluded that once the benefits are to beshared in the proportion to the investmentsmade, any person with reasonable prudencewould reach to the conclusion that the sharesare determinable. Consequently, on suchreasoning, the Karnataka High Courtconcluded that once the shares weredeterminable, it would meet the requirementof law to come out of the applicability ofsection 164 of the Act. We respectfully concurwith such reasoning.”Condonation of a delay of 700 days in filingform number 10B.Manav Seva Samiti vs. PCIT (Exemptions)(2025) 480 ITR 457 (Raj)Issue:Whether delay in uploading Form 10B should havebeen condoned, specially when the assessee was aPublic Charitable Trust?Held:“9. The statute or period of limitation prescribed inprovisions of law meant to attach finality, and inthat sense are statutes of repose; however,wherever the legislature intends relief againsthardship in cases where such statutes lead tohardships, the concerned authorities-includingRevenue Authorities have to construe them in areasonable manner. That was the effect and purportof this court’s decision in Indglonal Investment &Finance Ltd. (supra). This court is of the opinionthat a similar approach is to be adopted in thecircumstances of the case.“31. Having given our due consideration to all therelevant aspects of the matter, we are of theview that the approach in the cases of thepresent type should be equitious, balancingand judicious. Technically, strictly and liberallyspeaking, the respondent no. 2 might bejustified in denying the exemption undersection 12 of the Act by rejecting suchcondonation application, but an assessee, aFrom the Courtspublic charitable trust past 30 years whosubstantially satisfies the condition for availingsuch exemption, should not be denied thesame merely on the bar of limitationespecially when the legislature has conferredwide discretionary powers to condone suchdelay on the authorities concerned.”10. In our view also, it does not appear that assesseepetitioner was lethargic or lacked bona fide inmaking claim beyond the period of limitation. Infact, we do not understand why would any party,who is entitled to claim, would intentionally delayin uploading the required documents.”“12. In our view, therefore, petition has to be allowed.We hereby condone delay.” Effect of inconsistencies in ITAT Orders fortwo assessment years in one of the two.Modi Business Centre Private Limited vs.DCIT (2025) 480 ITR 471 (Bom)Issue:What is the remedy when on same set of facts the ITATorders are contrary specially when the view taken inthe first ITAT order has not been challenged by therevenue in further appeal?Held: Head Notes:(iv) That both the businesses of the assessee, namely,leasing out premises and lending monies hadcommenced in the relevant assessment year. Inrespect of the assessment year 1992-93, theTribunal had referred to the provisions of section57(iii) for holding that the interest earned by theassessee on lending funds must be treated asrevenue receipt for the purpose of taxation withoutany set off or deduction in the absence of anyspecific provision under the Act. In the subsequentyear 1993-94, however, the Tribunal had allowedthe claim of the assessee for similar adjustment.There was inconsistency between the findingsrecorded by the Tribunal in respect of twosucceeding years. In respect of the assessmentyear 1993-94, the Tribunal had held that the activityof lending monies to sister concerns and othershad not only continued but had also intensified9596

884 Ahmedabad Chartered Accountant Journal January, 2026TMand constituted one of the main business activitiesof the assessee. The Tribunal could not treat theincome earned for the assessment year 1992-93as “other sources” while treating the similar incomein the succeeding assessment year 1993-94 underthe head “Business”. It would therefore benecessary to bring the interest incomes in respectof all the years under the same head of “business”.The Department had not challenged the orderspassed by the Tribunal in the subsequentassessment years. Therefore, the contentionraised on behalf of the Department, selectivelyfor the assessment year 1992-93, that the purposeof obtaining loan from the bank and disbursingthe loan to sister concerns being different,deduction was not allowable under section 57(iii)was not acceptable. (paras 32, 33)(v) That though the subsequent years’ findings weresought to be made applicable in respect of theprevious year, the fact still remained was thatinconsistent findings were recorded by theTribunal in orders relating to different assessmentyears based on same material. It would defeatthe ends of justice if the Tribunal was permitted totake one view upon perusal of material on recordqua a particular year and record diagonallyopposite findings after perusing the same materialin the subsequent year. Therefore, the Tribunal’sorder for the assessment year 1992-93 was to bebrought in consonance with its orders passed forsubsequent years, which had attained finality. TheOrder of the Tribunal was to be set aside and thatof the Commissioner (Appeals) to be restored.(Paras 34,35)”Application for Condonation of delay u/s119(2)(b) : Genuine hardship.Sumati Lokendra Patel vs. CIT (IT & TP)(2025) 124 CCH 0172 GujHCIssue:Whether the inability of a Non-Resident to travel toIndia to file an income tax return during the COVID19 pandemic constitutes a genuine hardship and insuch circumstances, whether the Commissioner ofIncome Tax should have condoned the delay infiling the return of income?Held:“5. Mr.Vijay Patel, learned advocate for the petitionerhas submitted that there was genuine hardship onthe part of the petitioner, and therefore, theimpugned order dated 16.06.2025 is perverse. Thecase of the petitioner clearly falls within the ambit offour corners of Sec.119 of the Act. The petitionercould not file her Return of Income due to genuinehardship caused by COVID-19 pandemic. Even thisCourt, in catena of decisions has allowed theapplication preferred by the assessee underSec.119(2)(b) of the Act which were related to filingof Return of Income during the COVID-19 pandemic.In wake of such submissions, Mr.Patel, learnedadvocate for the petitioner, has requested to allowthe present writ petition.6. Per Contra, Mr.Varun Patel learned Senior StandingCounsel for the respondent, would controvert thefact that the issue has arisen during the COVID-19pandemic. However, it was contended that theimpugned order is passed in accordance with thejurisdiction vested under Sec.119(2)(b) of the Act.It was submitted by Mr.Patel, learned SeniorStanding Counsel that the petitioner is not able toprove genuine hardship and that inconveniencecannot be equated with genuine hardship.6.1 It was further submitted that during the pandemic,the government had already provided severalstatutory relaxations and extension of deadlinesduring that period. However, the application underSec.119(2)(b) is only filed by the petitioner in theyear 2024. Therefore, the impugned order passedby the authority is just and proper.7. Having heard the learned advocates appearing forthe respective parties and having perused thematerials on record, it is not in dispute that thepetitioner is a Non Resident Indian staying in Nairobiand was genuinely prevented from filing the returnin COVID-19 pandemic. The respondent ought tohave condoned the delay in filing the Return ofIncome for the Assessment Year 2020-21 as thatwas the period of genuine COVID hardships. It isalso not in dispute that the petitioner has furnishedcomputation of income along with reply. It is alsonot in dispute that the purchaser of the property97From the Courts

Ahmedabad Chartered Accountant Journal January, 2026 885TMhas deposited the TDS which is also reflected inForm 26AS. Therefore, the application preferredby the applicant could not have been rejected.”Capital gains in the hands of deceased,Capital gains Scheme Account opened inthe names of legal heirs.Late Kamalbhai Shah Late KamalbhaiRamniklal Shah & Anr. Vs. National FacelessAssessment Centre, & Anr.(2025) 123 CCH 0157 GujHCIssue:Whether amounts deposited by legal heirs into aCapital Gains Account Scheme qualify for exemptionu/s 54F if the account was opened in the names oflegal heirs and the deposits were made after thedeath of the assessee?Held:“5 The brief facts of the case are that the petitionersare the legal heirs of one Kamalbhai RamniklalShah, who expired on 12.03.2013. After the deathof late Shri Kamalbhai Shah, the petitioners filedreturn of income for the Assessment Year 2013-14declaring total income at Rs.15,64,200/- on05.08.2013. In the return of income, capital gainsarising out of the property situated at Plot No.4617Arignar, Anna Nagar, Mullam village, Chennai, TamilNadu, was disclosed after availing the benefit underSec.54F after placing the fixed deposits in name ofthe legal heirs under the Capital Gain AccountsScheme with the IDBI Bank amounting to Rs.90 lakhson 03.1.2013 and Rs.95 lakhs on 08.1.2013.”“8.3 Even otherwise, the reasons recorded by theAssessing Officer which are reflected in theimpugned assessment order only refers to thedisallowance of Rs.3,43,00,000/- as it was on theground that the same was not disclosed in thereturn of income and the entire amount of saleconsideration would be liable to be taxed underthe head of capital gain. Thereafter, it appears thatthe respondent- Assessing Officer without therebeing any tangible information, that income hadescaped assessment and without considering thefact that the petitioners have filed the return ofincome after the sad demise of the late KamalbhaiRamniklal Shah, wherein the petitioners havedisclosed the fact of sale of the immovableproperty and deposit of such sale considerationto claim the deduction under sec.54 amounting toRs.3 crores as against the amount liable for capitalgains of Rs.2,95,75,000/- and as such no capitaltax was payable by the petitioners in view of theinvestments made as required under Sec.54 ofthe Act, has passed the impugned AssessmentOrder by disallowing the capital gains ofRs.85,75,000/- only on the ground that the amountof Rs.90 lakhs was deposited after the sad demiseof Kamalbhai Ramniklal Shah in the name of thepetitioners as legal heirs and therefore the samecould not have been considered as an amountinvested as required under Sec.54 of the Act. Suchan hypertechnical approach adopted by therespondent-Assessing Officer can never be saidto provide ground for assumption of jurisdictionto reopen the assessment.”Old is GoldInterpretation of statutes.CIT vs. Shahzada Nand & Sons & Ors.(1966) 60 ITR 0392 (SC)Issue:How is the Fiscal statute to be interpreted in case of areasonable doubt?Held:11. Before we advert to the said arguments, it will beconvenient to notice the relevant rules ofconstruction. The classic statement of Rowlatt, J.in Cape Brandy Syndicate vs. IRCs (1921) 1 KB64 still holds the field. It reads:“. . . In a taxing Act one has to look merely at whatis clearly said. There is no room for anyintendment. There is no equity about a tax. Thereis no presumption as to a tax. Nothing is to beread in, nothing is to be implied. One can onlylook fairly at the language used.”12. To this may be added a rider: in a case ofreasonable doubt, the construction most beneficialto the subject is to be adopted. But even so, thefundamental rule of construction is the same for allstatutes, whether fiscal or otherwise. “The underlyingprinciple is that the meaning and intention of a statute9899From the Courts

886 Ahmedabad Chartered Accountant Journal January, 2026TMmust be collected from the plain and unambiguousexpression used therein rather than from any notionswhich may be entertained by the Court as to what isjust or expedient.” The expressed intention mustguide the Court. Another rule of construction whichis relevant to the present enquiry is expressed inthe maxim, generalias pecialibus non derogant,which means that when there is a conflict betweena general and a special provision, the latter shallprevail. The said principle has been stated in Craieson Statute Law, 5th edition, at page 205, thus:“The rule is, that whenever there is a particularenactment and a general enactment in the samestatute, and the latter, taken in its mostcomprehensive sense, would overrule the former,the particular enactment must be operative, andthe general enactment must be taken to affect onlythe other parts of the statute to which it may properlyapply.”13. But this rule of construction is not of universalapplication. It is subject to the condition that thereis nothing in the general provision, expressed orimplied, indicating an intention to the contrary: seeMaxwell on the Interpretation of Statutes, 11thedition, at pages 168-169. When the words of asection are clear, but its scope is sought to becurtailed by construction, the approach suggestedby Lord Coke in Heydon’s case (1954) 3 Ref. 76,yields better results:“To arrive at the real meaning, it is alwaysnecessary to get an exact conception of the aim,scope and object of the whole Act; to consider,according to Lord, Coke: 1. What was the lawbefore the Act was passed; 2. What was themischief or defect for which the law had notprovided; 3. What remedy Parliament hasappointed; and 4. The reason of the remedy.”Assessment of HUF consisting of singlesurviving male member and femalemembers.Gowli Buddanna vs. CIT(1966) 60 ITR 0293 (SC)Issue:Whether the sole male surviving coparcener of theHindu joint family, his widowed mother and sistersconstitute an HUF within the meaning of the IT Act ?Held:“3. Counsel for the appellant urged that theexpression “HUF” used in s. 3 of the IT Act meansa Hindu coparcenary and when on the death ofone out of two coparceners the entire propertydevolves upon a single coparcener, assessmentcannot be made on the surviving coparcener inthe status of an HUF. Alternatively, it was contendedthat even if the entity HUF in the charging sectionof the IT Act is intended to mean a Hindu jointfamily, there must be at least two male membersin the family and where there are not two suchmembers the sole surviving male member of thefamily, even if there be widows entitled tomaintenance out of the estate, may be assessedin the status of an individual, and not of an HUF,unless the widows of deceased male membersare entitled to the benefit of the Hindu Women’sRights to Property Act, 1937, or the HinduSuccession Act, 1956.”“5. The plea that there must be at least two malemembers to form an HUF as a taxable entity alsohas no force. The expression “HUF” in the IT Actis used in the sense in which a Hindu joint familyis understood under the personal law of Hindus.Under the Hindu system of law a joint family mayconsist of a single male member and widows ofdeceased male members, and apparently the ITAct does not indicate that an HUF as an assessableentity must consist of at least two male members.”“16.Property of a joint family, therefore, does not ceaseto belong to the family merely because the familyis represented by a single coparcener whopossesses rights which an owner of property maypossess. In the case in hand the property whichyielded the income originally belonged to an HUF.On the death of Buddappa, the family whichincluded a widow and females born in the familywas represented by Buddanna alone, but theproperty still continued to belong to that undividedfamily and income received therefrom was taxableas income of the HUF.”❉ ❉ ❉100From the Courts

Ahmedabad Chartered Accountant Journal January, 2026 887TMRajen Jayantilal Merchant v. AssessmentUnit, Juris. AO 180 Taxmann.com 568 (Ahd)Order dated 13th November 2025,Assessment Year 2019-20 Basic FactsThe assessee an individual filed his return of incomeclaiming deduction under section 80GGC for donationgiven to a political party. The AO reopened theassessment on ground that the assessee had givendonation to a registered unrecognized political partyand was claiming bogus deduction under section80GGC. He held that the donation made to suchregistered unrecognized political parties was in the natureof a scam claiming bogus deduction under section80GGC and was intended to defraud the legitimate taxof the assessee. The amounts were returned to the donorafter deducting a certain percentage from it. As it wasproved to be non-genuine and bogus, the same wasdisallowed and tax was demanded thereon. On appeal,the CIT(A) confirmed the addition. The assessee is inappeal before the Tribunal:Issue: Whether the National Faceless Appeal Centre erredin confirming the disallowance of claim for deductionunder section 80GGC of the Act.Held:The Tribunal noted that identical issue was consideredby Co-ordinate Bench of this Tribunal in SaurabhPravinbhai Patel and Brijesh Pravinbhai Patel AOP v.Assessment Unit, Income Tax Department [ITA No. 1017/Ahd/2023, dated 30-4-2025] wherein it was held thatwhere assessee made donation to a political party andclaimed deduction under section 80GGC, since AOclearly brought out facts that bank accounts of abovepolitical party have been used by the accommodationentry provider where the donation received by chequeswere layered through various bank accounts andultimately cash was returned back, donation claimedunder section 80GGC is merely accommodation entry.In the absence of any evidence from the assessee, thegrounds raised by the assessee are untenable andtherefore the same is rejected. Following the abovedecision of the Co-ordinate Bench, the grounds raisedby the assessee were held to be devoid of merits andthe same were dismissed. Subbalakshmamma Pinnama v. ITO 180Taxmann.com 820 (Hdy) Order dated 19th November 2025, AY 2017-18 Basic Facts:The assessee, an individual, did not file her return ofincome for AY 2017-18 under section 139(1). The AOreceived information that the assessee had beenallotted 27 flats in ‘Sri Sai Residency Apartment’,Tirupati, in lieu of land given to the developer, but theassessee had not offered any income relating to thistransaction. Based on this information, the assessmentwas reopened under section 147. In response, theassessee filed her return of income. The AO completedthe assessment under section 143(3) accepting thereturned income. Since the assessee had not filedthe return voluntarily under section 139(1) despitehaving taxable income, the AO held that the incomedeclared in the return constituted under-reportedincome and initiated penalty proceedings under section270A by issuing notice under section 274 read withsection 270A. During the penalty proceedings, theassessee submitted explanations and stated that thedelay in filing the return was due to disputes with thedeveloper, uncertainty regarding her share of property,applicability of section 45(5A), and other personalcircumstances. The AO did not accept theseexplanations and held that the assessee admitted the59CA. Yogesh G. [email protected]. Aparna [email protected] News60

888 Ahmedabad Chartered Accountant Journal January, 2026TMincome only after issuance of notice under section 148,and that, had the case not been reopened, the incomewould have escaped assessment. Accordingly, theAO levied penalty under section 270A for underreporting of income. On appeal, the CIT(A) upheld thepenalty levied by the AO. The assessee is in appealbefore the tribunal. Issue:Whether the assessee was liable to penalty undersection 270A of the Act when he has declared theincome while filing return u/s 148 of I T Act.Held:The Tribunal noted that although the assessee had notfurnished return of income under section 139 but hadpaid substantial amount of taxes applicable on the saidincome via self-assessment tax in the AY 2018-19,much before the AO issued notice under section 148.The assessee had also furnished a return of incomein response to notice under section 148. As per thetribunal from the conduct of the assessee and thesequence of dates and events, it was undisputedlyclear that, the explanation of the assessee with regardto non-filing of return of income appeared to be bonafide and genuine without any intention of under-reportingof income, arising on account of transfer of property inpursuant to the Joint Development Agreement. As theassessee had already paid a substantial amount oftax and also filed return of income disclosing thecomplete income in respect of transfer of property,and the same has been accepted by the AO, the caseof the assessee would fall under sub-section (6) ofsection 270A. The tribunal noted from the assessmentorder passed by the AO under section 143(3) readwith section 147, that there is no dispute regarding theexplanation offered by the assessee for the incomeoffered towards capital gains derived from the transferof property. Therefore, tribunal held that the AO oughtnot to have levied the penalty under section 270A, forunder-reporting of income. The CIT(A), withoutappreciating relevant facts, simply sustained thepenalty levied by the AO. Thus, the order passed bythe CIT(A) was set aside and the AO was directed todelete the penalty levied under section 270A. In theresult, the appeal filed by the assessee was allowed.Tribunal NewsNunhems Netherlands B.V. v. ACIT TS-1639-ITAT-2025 (Del) Order dated 8th December 2025, AssessmentYear 2021-22 Basic Facts:The assessee is registered under the law ofNetherlands. The assessee’s purpose, bycollaboration with partners, is to improve vegetablevarieties and solutions for customers, the vegetablevalue chain and consumers worldwide. The assessee,during the subject year, received an amount for testingservices rendered to Nunhems India Private Limited(‘Nunhems India’) to improve plant varieties. Theassessee also received reimbursement of informationtechnology (‘IT’) support services from Nunhems India.The Assessee filed its return of income declaring NILtaxable income and claimed the above receipts asnon-taxable. In the assessment order dated passedunder section 143(3) read with section 144C(13) of theAct, the claim of exempt income was denied. Theassessee was aggrieved and went in appeal beforethe DRP which after considering the facts andsubmissions, with a 2-1 majority, held that the receipton account of testing services rendered should betreated as royalty taxable as per applicable rates asprescribed under India-Netherland DTAA read withSection 9(1)(vi) of the IT Act. With respect to thereimbursement of information technology (‘IT’) supportservices, the DRP held that it partakes the nature ofFTS liable to tax as per application rate under the IndiaNetherland DTAA u/s 9(1)(vii) of the Act. Aggrievedassessee is in appeal before the tribunal.Issue:(i) Whether the Testing charges were in the natureof royalty. (ii) Whether the reimbursement of the IT supportservices was in nature of FTS Held:(i) The tribunal considering the nature of serviceprovided by the assessee agreed with the AOthat the assessee is supplying information in theform of scientific experience which has commercialramification to the Indian AE in breeding plant61

Ahmedabad Chartered Accountant Journal January, 2026 889TMvariety. The assessee is mandated and boundby the ‘Ágreement’ with Nunhems India, tomandatorily support the breeding programme inIndia as it is equipped with all the technology andresources. The Indian AE doesn’t have thetechnology & resources and hence the samplesof leaves and seeds are sent to the assessee fortesting and analysis. The assessee tests andconducts analysis of the Leaves and Seeds atAssessee’s Research and Development Centre(“R&D”) centre with the use of required chemicalsand technologies. The whole process takesapprox. 20-25 days (approx.) and the results areshared with Nunhems India. The other type oftesting which takes 1.5 years (i.e., 18 months) i.e.,Double Haploid (‘DH’), the process of testing ofseeds is more technical. The Doubled-haploidtesting imparts technology and knowledge toNunhems India to “forward breeding” by allowinghybrids to be bred with new traits wherein it getsequipped with knowledge to create new lines andgreater knowledge about their environmentaladaptability before they are fully tested,developed and marketed. The aforesaid activitiesundertaken by the assessee, demonstrates thescientific and technical knowledge of theassessee which is not available with the IndianAE. The assessee’s knowledge and scientificexperience has a direct link in converting anaverage seed, sent by the Indian AE, into a healthydouble Haploid seeds. Accordingly, the tribunalwas of the view that the report the assesses endto the India AE, encapsulate all the scientificexperience and knowledge of the assessee,gleaned in the process of converting the seedfrom ordinary to double Haploid seeds, preparedover a time period spanning over 18 months. Thereports sent to the Indian AE are nothing but abank of scientific experience and adviceemanating from technological and scientificmethod undertaken by the assessee as mandatedin the “Agreement” itself. In respect of assessee’scontention that the use of “Nautilus” softwaredoesn’t tantamount to Royalty as no copyright ofthe software is given to the Nunhems India, thetribunal was of the view that consideration paid tothe assessee is not merely for the access toNautilus software, but more specifically for theinformation contained in the marker analysis andreport of production of double haploid which isuploaded in the Nautilus portal. As per tribunal theconsideration was not for use/right to use ofcopyright contained in the software whose accessis given by the assessee to Nunhems India, butfor the information and knowledge developed outof technology and scientific experience impartedby the assessee to Nunhems India. Accordingly,it was tribunal’s view that the assessee was notsimply providing testing services. It providedspecific information of the leaves and seeds tothe Indian AE which were soaked in assessee’sscientific experience where the assessee carriesout experiments on the seeds sent to it, involvingextraction of tissue or cell to create a new plant.On the issue of “make available”, the tribunal wasof the view that Article 12(4) of the Indo-NetherlandsDTAA, nowhere provides the condition of “makeavailable” be satisfied for determining aconsideration, fall under “Royalty”. The provisionsof Article 12(4) of the Treaty requires that theconsideration be for information concerningindustrial, commercial or scientific experience. TheTest Reports were not simply a certificate or bloodreport, but sharing and partaking of informationconcerning commercial and scientific experiencewith Nunhems India which enabled the Indian AEto improve the “plant variety, and achievebreeding progress. The entire information ofscientific experience from conversion of seed intoDH plant and extraction of seed from that DH plant,is captured in the Test Report which is shared withthe Indian AE. This imparting of scientificexperience and knowledge to the Indian AE,through Test reports, for a consideration, isindependent of the “make available” clause beingsatisfied for the purposes of treating the saidconsideration fall under the definition of “Royalty”under Article 12(4) of the Treaty. (ii) The tribunal noted from the perusal of MasterService Agreement (“MSA”), regarding routine ITsupport services, between the assessee and TataConsultancy Services Netherlands BV (“TCSNetherlands”), that TCS Netherlands along with itsTribunal News

890 Ahmedabad Chartered Accountant Journal January, 2026TMlocal supplier, would provide IT support servicesto the Assessee and Nunhems India whereinNunhems India may request for end to end ITsupport services to be rendered by TCSNetherlands / local supplier on behalf of TCSNetherlands. In this arrangement, wheneverNunhems India face any technical issues/requireany technical support in relation to IT, it raises aticket by way of e-mail (describing the issue beingfaced) to IT helpdesk. Subsequently, TCS withinthe stipulated time period resolves the technicalissue. In relation to such services, TCSNetherlands raises invoices on the Assessee andAssessee raises corresponding invoices (on costto-cost basis without any markup) on groupaffiliates of other countries to recover IT supportservice cost attributable to such countries.Admittedly, the said receipts are merelyreimbursement of IT support services, wherewhatever the third party, TCS Netherlands, chargesthe assessee, the same is recouped from theIndian AE. We find that the reliance on the decisionof DIT vs. A.P. Moller Maersk AS [2015] 63taxmann.com 303 (SC) wherein it was held thatpayments received by taxpayer towardsreimbursement of costs incurred for globaltelecommunication facility provided to Indianagents could not be termed as FTS is apt andapplies on the facts of the instant case. TheTribunal noted from the Agreement that theAssessee and its group entities had to seeksupport from TCS and the technology used inrendering the IT support services are not beingtransferred for further use of Nunhems group.Therefore the Tribunal agreed with the assesseethat the services rendered by the Assessee areroutine in nature and are provided on recurringbasis and the Assessee never ‘makes available’any skills, know-how, knowledge, experience, etc.known to the recipient of the service so as to equiphim to independently perform the technical functionhimself in future, without the help of the serviceprovider and hence, the same is not taxable asfees for technical services. The Tribunal wastherefore of the view that when the “make available”clause is not satisfied, the receipts for IT supportservices cannot be brought under the ambit ofFTS under the Article 12(5) of the Indo-NetherlandsTreaty. Accordingly, Tribunal allowed the groundsNos. 4 to 9 raised by the assessee.Daiwa Capital Markets India Private Limitedv ACIT TS-1657-ITAT-2025 (Mum) Order dated 20th November 2025,Assessment Year 2013-14 Basic Facts:The assessee filed its original return of income claimingTDS as reflected in Form 26AS at that point in time.Subsequently, the assessee filed a revised return. Inthe interim period between original return of incomeand revised return of income, a party had deductedand deposited tax but did not inform the assesseeabout the same. Thus, at the time of filing of revisedreturn, the assessee was unaware of the additionalTDS and inadvertently missed to claim the genuineTDS credit. . However, the assessee had offered the corresponding income at the first instance itself i.e.original return followed with revised return of income.Further, the case was selected for scrutiny andassessment proceedings were completed undersection 143(3) of the Act whereby the AO made atransfer pricing adjustment which was subsequentlydeleted by the CIT(A). During the proceedings, theassessee was not aware of the genuine TDS creditand accordingly, the same was not claimed by theassessee. However, at the time of preparing anapplication to be filed before the AO to give effect tothe order passed by the CIT(A), the assessee cameto know from the revised Form No. 26AS, that furtherTDS and therefore, the assessee in the said applicationrequested the AO to grant TDS credit while passingthe order giving effect (‘OGE’) pursuant to CIT(A)’sdirection. The AO while passing the order giving effectrejected the assessee's plea of granting TDS crediton the ground that the same was not claimed in thereturn of income by ignoring the fact that the said creditwas genuine in nature. Aggrieved by the order of AO,assessee preferred the appeal before the CIT(A).However, CIT(A) rejected the plea of the assesseevide impugned order. Aggrieved by the impugnedorder, assessee preferred the appeal before theTribunal. Tribunal News62

Ahmedabad Chartered Accountant Journal January, 2026 891TMIssue:Whether the assessee was entitled to credit of theTDS though not claimed in original & revised returnof income as well as in the assessment/appellateproceedings. Held:The tribunal noted that both the lower authorities hasproceeded on the premise that procedural rule of 37BAof Income Tax Rules for claiming TDS credit for taxdeducted at source has not been followed and theclaim was not made in ITR and also not within thereasonable period as the same has been made aftera period of 9 years and as per the settled legalprecedents and legal provision, the claim of theassessee had been denied. The assessee had madea claim for getting tax credit of TDS at the time of ordergiving effect by the AO which is nothing but thefinalization of the original assessment proceedings.Therefore, as per tribunal the assessee had made theclaim during the assessment proceedings which AOwas duty bound to consider and allow the TDS amountcredit. For the above reasons, the tribunal held that the AO had unjustifiably denied credit of the TDS amountand the same should have been refunded at the earliestby the AO as the same has been reflected in Form26AS from the beginning at the time of completion ofassessment proceedings. Therefore, the tribunal setaside the order passed by the AO and directed AO togive is to credit of TDS in case the said amount was tobe refunded, considering the same as depositingadvance tax, the consequential interest u/s 244A ofthe Act may also be credited to the account of theassessee. The AO was directed to verify the necessaryrequirement regarding entitlement of assesseeincluding the corresponding income. In the result,appeal filed by the assessee was allowed in aboveterms.LM Wind Power AS v. ACIT 180taxmann.com 758 (Del) Order dated 21sr November 2025,Assessment Year 2020-21 Basic Facts I:The assessee, a Denmark based company, wasengaged in manufacturing rotor blades for wind turbineTribunal Newsgenerators. It entered into global frameworkagreements with global customers outside India andafter finalizing global framework, forwarded relevantagreements to its other group companies. LM India,having manufacturing capacity, based on globalframework agreements, supplied directly tosubsidiaries of global customers in India. Theassessee provided sales support services to LM Indiaand received commission at rate of 6% of sales madeby LM India to Indian subsidiaries of global customersand claimed that said commission was not taxable inIndia as it had no business connection/PE in India andall activities were performed outside India. However,the AO held that LM India constituted the assessee’sFixed Place PE in India, treated the sales commissionas attributable to such PE, computed a 35% net profitrate on the commission with 70% attribution to India,and made an addition relying on inter-companyagreements and global framework arrangements. Theassessee filed objections before the DRP, whichadmitted additional agreements and directed the AOto consider them but sustained the AO/TPO’s findings.The AO passed a final order under section 143(3) r.w.s.144C(13), maintaining the PE attribution. On theassessee’s appeal to the Tribunal.Issue I:Whether commission income was taxable in IndiaHeld I: After considering the facts on record, the tribunal notedthat this type of inter-group services are common inthe MNC set up and MNCs having global presence.The main entity involved in the marketing functions forthe group will finalize the framework for execution ofcontracts/sales by the rest of the group entities. In thegiven case, the assessee has finalized the broadframework for execution of the contracts entered by itwith the other customers who had global presence. Inthis case, the assessee had entered into a contractwith Siemens and places order directly to the Indianentity, LM India and the same are executed directlywithout involving the assessee. Now the questionraised by the revenue that this type of transactionsfalls under business connection for the simple reasonthat the assessee had represented the Indian entityand finalized the framework based on the manufacturing63

892 Ahmedabad Chartered Accountant Journal January, 2026TMcapacity or facility available in India. The purchaseorders were placed by Siemens India to LM India.Further, the global framework agreements werefinalized outside India with the Global customer outsideIndia. There is no material brought on record by therevenue that the relevant agreement was finalized inIndia. The TPO had reviewed the Article 1 of the globalagreement and merely because the assesseerepresented the LM India to finalize the framework andvolume commitment, he presumed that the assesseehas complete control over the LM India, further, LMIndia has not signed the global agreement in itsindependent capacity. It is clear from the above thatthe assessee had exhibited that it has carried on thefunctions of sales support services to the LM India asa service provider and accordingly claimed thecommission for the services rendered outside India.The revenue had not brought on record how theassessee is treated as having PE or Businessconnection in India, merely observing certain clauseof global agreement. There is no record brought onrecord with regard to fixed place of business or servicePE or any employee of the assessee company hadvisited in India to execute any of the contracts or utilizethe place of business in India. In absence of anymaterial, the findings of revenue authorities, could notbe accepted. Therefore, the commission income isnot taxable in India.Basic Facts II: The assessee and LM India had entered into a KnowHow Transfer Agreement dated 01-01-2017 under whichthe assessee was to receive royalty at 5% of LM India’sturnover for license of patented and non-patentedtechnology and production rights for LM 60.0P rotorblades, and license of LM trademark and distributionrights; during the year the assessee received royaltywhich was offered it to tax in India under section 115A,asserting absence of PE/effective connection. Inassessment, the AO invoked section 44DA on the basisthat LM India constituted the assessee’s Fixed PlacePE in India and that the royalty was effectivelyconnected with such PE, referring to a Master ServiceAgreement dated 01-04-2015 (R&D, engineering,product design, testing, and related activities by LMIndia) as playing a substantial role in generating theknow-how, and taxed the royalty as business incomeTribunal Newsunder section 44DA. The assessee objected beforethe DRP, which sustained the AO/TPO’s findings; theAO passed the final order under section 143(3) r.w.s.144C(13), continuing to apply section 44DA to theroyalty receipts. On the assessee’s appeal to theTribunal.Issue II:Whether Royalty was taxable as per section 44DA orsection 115AHeld II:The Tribunal had already held that the assessee doesnot have any PE in India. Therefore, Section 44DA ofthe Income Tax Act, 1961 is applicable only when thetransfer of rights over the license of patented and nonpatented technologies, production rights, Trademarksand distribution rights is attributable to the PE in India.There is no material to demonstrate that the assesseehas a fixed place of business in India or place is at thedisposal of the assessee nor was any service PEestablished by the revenue authorities, except certainobservations from the global framework agreementsand MOU entered by the assessee and LM India. Sincethere is no PE and particularly there is no connectionfor granting the patented license for technology andproduction rights or trade mark connected to the PE inIndia, there is no avenue to apply provisions of section44DA of the Act. It is observed that the Indian entityhad deducted the tax and also offered to tax basedon Section 115A. Therefore, the AO/TPO is directedto delete the adjustment or attributions applied. In theresult, grounds raised in this regard are allowed. HI-Lex India (P.) Ltd. v. AUITD 181Taxmann.com 102 (Del) Order dated 28th November 2025,Assessment Year 2020-21 Basic Facts:The assessee was engaged in the business ofmanufacturing mechanical control cables and windowregulators for automobile industries. It had entered intointernational transactions, including payment of royaltyto its associated enterprise (AE). The assesseeadopted a combined transaction approach usingTNMM as the most appropriate method for64

Ahmedabad Chartered Accountant Journal January, 2026 893TMbenchmarking these transactions. The Transfer PricingOfficer (TPO) rejected the assessee’s approach andapplied the CUP method for benchmarking thepayment of royalty. The TPO proposed an upwardadjustment in the royalty rate and made a transferpricing addition to the assessee’s income. On appeal,the Dispute Resolution Panel (DRP) directed the TPOto reconsider the comparables and allow workingcapital adjustment. Pursuant to the DRP directions, theTPO deleted the proposed addition related tomanufacturing operations but upheld the adjustment inrespect of payment of royalty. On appeal to the Tribunal:Issue: Whether the TPO was right in making adjustment inrespect of payment of royalty when he had acceptedthe entry level profit margin included payment ofroyalty to be at arms length.Held:It is not in dispute that the entry level operating profitmargin of 4.19 per cent earned by the assessee hasalready been held to be at arm’s length by the TPOTribunal Newswhile giving effect to the directions of the DRP. Theaforesaid entry level operating margin of 4.19 per centincludes payment of royalty as on operating expenses.Once the combined benchmarking approach, whosePLI includes payment of royalty is accepted by theTPO to be at arm’s length, a separate adjustmentpertaining to the concerned international transactionought not to be made to income of the assessee.While holding so, the tribunal relied on the decisionin case of Magneti Marelli Powertrain India (P.) Limitedv. DCIT (2016) 75 taxmann.com 213 (Delhi).Considering the above facts and circumstances, thereis merit in the ground of the assessee and accordinglythe addition made by the Assessing Officer is deleted.❉ ❉ ❉Continued from page 879 Glimpses of RulingsNation’s duty to protect and shield itself from anysuch influence in the case of the latter.31. If tax evasion and tax abuse happen under theumbrella or shield or in the guise of moneylaundering or trafficking or round tripping, it notonly weakens a Nation, it makes it less powerfulor even powerless in given circumstances tearingapart the social fabric and texture of a Nation andits people. Every anti abuse law must not onlyappear to be a deterrent but should beimplemented to achieve the underlying goal ofpreventing an abuse by anyone against one’sNation and its people. Any lenience is yet anotherform of compromising tax sovereignty.AAR v TIGER GLOBAL INTERNATIONAL IIHOLDINGS [CIVIL APPEAL NO. 262 OF 2026 dt15.01.2026]❉ ❉ ❉

894 Ahmedabad Chartered Accountant Journal January, 2026TMSr. Advocate Tushar [email protected] Analysisunder section 40A(3) of the Act.” The contentionof the Revenue was that the ITAT was liable tofollow the judgment of a Co-ordinate Bench of theITAT dated 5th October, 2020 in Sushanta KumarChoudhury v. Pr. CIT [IT Appeal No. 226 (CTK) of2019, dated 5-10-2020] where it was held that therevisional powers under section 263 of the Actcould be exercised even in relation to the issueswhich were not part of the limited scrutiny.7. Conscious that there was another decision of theCo-ordinate Bench of Chennai Bench of the ITATdated 2nd December, 2019 in ITA No. 1306/Chny/2019 Smt. Padmavathi v. ITO, which had beenupheld by the Madras High Court in CIT v. Smt.Padmavathi [2020] 120 taxmann.com 187, it wascontended by the Revenue before the ITAT that ifit is not inclined to follow the decision in SushantaKumar Choudhury (supra), it should refer the matterto the Larger Bench of the ITAT.8. In the impugned order, the ITAT distinguished itsown decision in Sri Sushanta Kumar Choudhury(supra) as under:“12. Coming to the issue of the decision of Coordinate Bench of this Tribunal in the case ofSri Sushant Kumar Choudhury (supra) the factsin the said case were that the Pr. CITmentioned that the order of the AO iserroneous insofar as he did not ask forpermission for complete scrutiny and to thatextent, the assessment order was erroneousand prejudicial to the interest of the Revenue.In the present case, there is no suchaverment by the Pr. CIT. Even assuming suchaverment is there, the order of revision wouldbe unsustainable insofar as the issue raisedby Pr. CIT is in no way connected to the issuesthat have been raised in the limited scrutinyRevision u/s 263 is not maintainable on the issuebeyond the scope of ‘Limited Scrutiny’Pr. CIT v. Shark Mines and Minerals (P.) Ltd.[2023] 151taxmann.com71 (Orissa)xxx…3. The background facts are that the originalassessment in the case of the Assessee came tobe completed under section 143(3) of the Act bythe AO by the Assessment Order dated 23rdNovember, 2016 in the ‘limited scrutiny’ categorywhere the issue was “excess liability shown anddisallowance under section 40A(3) of the Act.”4. When the Pr. CIT decided to invoke the revisionaljurisdiction under section 263 of the Act, he issueda Show Cause Notice (SCN) to the Assesseeseeking to revisit the Assessment Order on thequestion of “under valuation of closing stock”, whichwas beyond the scope of the ‘limited scrutiny’undertaken by the AO.5. By the order dated 29th March 2019, the Pr. CITwhile concluding that the Assessment Order waserroneous and prejudicial to the interest ofRevenue, directed the AO “to modify hisAssessment Order dated 23-11-2016 by makingfurther addition of Rs. 15,53,849/- under the headundervaluation to closing stock.”6. Before the ITAT it was argued on behalf of theAssessee inter alia that the Pr. CIT was not justifiedin giving the above direction under section 263 ofthe Act since the issue of “valuation of closingstock” was not part of the ‘limited scrutiny’undertaken by the AO while completing theassessment under section 143(3) of the Act. It waspointed out that the said ‘limited scrutiny’ was inrelation “to excess liability shown and disallowance33