JOURNAL JANUARY 2026

Ahmedabad Chartered Accountant Journal January, 2026 895TMJudicial Analysisassessment. Thus, the decision in the caseof Sri Sushanta Kumar Choudhury (supra) isclearly distinguishable. Therefore, the prayerof the ld. CIT DR that the matter be referred toLarger Bench also does not survive insofaras the facts of the present case and in thesaid decision in the case of Sri SushantaKumar Choudhury (supra) is fullydistinguishable.”9. Indeed, the Court finds that the Madras High Courthas while affirming the decision of the ITAT in Smt.Padmavathi (supra) taken the view that whileexercising suomotu revisional power undersection 263 of the Act, the CIT cannot travel beyondthe scope of the issues which form part of the‘limited scrutiny’ in the original Assessment Order.This Court concurs with the above view.10. What persuades this Court to reach this conclusionis the requirement in law that if the AO has to gobeyond the scope of the issues for which ‘limitedscrutiny’ has to be undertaken by him, he has toseek prior permission of the superior officer interms of the CBDT Instruction No. 7/14 dated 26thSeptember, 2014 and Instruction No. 20/15 dated19th December, 2015. Consequently, it was notopen to the Pr. CIT while exercising suomoturevisional power under section 263 of the Act tofind fault with the assessment order of the AO onthe ground of its being erroneous on an issue notcovered by the ‘limited scrutiny’ when the AO couldnot have possibly examined such issue. Toreiterate, in the present case, the limited scrutinywas in respect of excess disallowance undersection 40A(3) of the Act whereas the SCN undersection 263 was regarding the FIFO method ofvaluation of closing stock adopted by theAssessee. These were, as rightly noted by theITAT, unconnected issues and the assessmentorder could not have been held to be “erroneousand prejudicial to the interest of Revenue” whenthe AO could not have travelled beyond the issuesforming subject matter of the ‘limited scrutiny.’11. The Court is unable to find any error having beencommitted by the ITAT in coming to the aboveconclusion. No substantial question of law arises.The appeal is accordingly dismissed.Pr. CIT v. Naga Dhunseri Group Ltd. [2023]146taxmann.com424 (Calcutta)2. The revenue has raised the following substantialquestions of law for consideration:-“(i) Whether on the facts and the circumstancesof case the Learned Income-tax AppellateTribunal is justified in quashing the order undersection 263 of the Act passed by Pr.Commissioner of Income Tax-2, Kolkata ?(ii) Whether on the facts and circumstances ofthe case and in law Learned Income-taxAppellate Tribunal is justified in allowing theappeal of assessee on account of the issueof disallowance under section 14A which wasnot the reason for the selection of the casefor limited scrutiny ?(iii) Whether on the facts and circumstances ofthe case and in law Learned Income-taxAppellate Tribunal is justified in notappreciating the facts that one of the reasonsfor selection of the case for limited scrutinywas to verify the introduction of capital inNBFC/Investment Companies which isconnected with the issue of disallowanceunder section 14A of the Income-tax Act,1961?”xxx…4. The short question involved in this case is whetherthe assumption of jurisdiction by the PrincipalCommissioner of Income-tax under section 263of the Act was justified. The learned Tribunal hasanalysed the factual position and found that thecase of the assessee was selected for limitedscrutiny under CASS and the issue which theCommissioner sought to reopen namely, theissue of disallowance under section 14A of theAct, read with Rule 8D in respect of the exemptincome was not one of the issues which wasselected for scrutiny. The learned Tribunal inparagraph 2 of its order has set out the three itemswhich have been selected for scrutiny namely, (i)Introduction of capital in NBFC/investmentcompany; (ii) large deduction claimed u/s. 57 ofthe Act; and (iii) Mismatch of amount paid to related34

896 Ahmedabad Chartered Accountant Journal January, 2026TMpersons u/s. 40A(2)(b) reported in audit report andITR.5. If that is the undisputed factual position, we findthe reasoning given by the learned Tribunal is fullyjustified. That apart, the learned Tribunal has rightlypointed out that the CBDT has issued instructionsas to the manner in which the limited scrutinyshould be carried out. In CBDT Instruction No. 7of 2014, dated 26th September, 2014, the relevantportion of the said Instruction reads as follows:—“3. The reason(s) for selection of cases underCASS are displayed to the Assessing Officerin AST application and notice u/s 143(2), aftergeneration from AST, is issued to the taxpayerwith the remark “Selected under ComputerAided Scrutiny Selection (CASS)”. Thefunctionality in AST is being modified suitablyto flag the reasons for scrutiny selection inAIR/CIB/26AS cases. This functionality isexpected to be operationalised by 15thOctober, 2014. Further, the Assessing Officerwhile issuing notice under section 142(1) ofthe Act which is enclosed with the firstquestionnaire would proceed to verify onlythe specific aspects requiring examination/verification. In such cases, all efforts wouldbe made to ensure that assessmentproceedings are completed expeditiously inminimum possible number of hearings withoutunnecessarily dragging the case till the timebarring date.”6. A bare reading of the of the above Instructionclearly shows that the PCIT cannot make a rovingenquiry in the guise of a limited scrutiny and assuch the instruction issued by the CBDT is bindingon the Department.7. Thus, we find that on facts the learned Tribunalhas granted relief in favour of the assessee.8. The learned counsel appearing for the respondentpoints out that the PCIT in its order has relied upona decision of the Learned Single Bench of theHigh Court of Kerala in the case of SunriseAcademy of Medical Specialties (India) (P.) Ltd. v.ITO [2018] 94 taxmann.com 181.9. On a reading of the said order, we find that thesaid order supports the case of the assesseerather than the revenue. Thus, we find there is noquestion of law much less substantial question oflaw arising for consideration in this appeal.10. Accordingly, the appeal fails and is dismissed.Pr. CIT v. Rakesh Kumar [2023]152taxmann.com398 (Punjab & Haryana)2. Brief facts of the case is that assessee filed hisreturn of Income for assessment year 2011-12on 24/9/2011 declaring a total Income of Rs.3,01,310/-. The assessee is engaged in thebusiness of retailing of liquor for humanconsumption. The case of the assessee was alsoselected through computer aided scrutiny system(CASS). During the course of assessmentproceedings, the learned assessing officer Issuedquestionnaires which were replied to by theassessee. The net profit earned by assessee wasexamined and the addition on the lump-sum basiswas made to the total income of the assessee, asassessee could not furnish the details of item wisesale of bottle etc. Further only vouchers of totalsales of the day have been prepared and statedthat the wine is sold in cash and the amount ofeach item on sale is meager and also varyingrange. The total income was assessed at Rs.421310/-, vide order dated 30/12/2013.3. On 27/7/2015, a show cause notice under section263 of the income tax act was issued to theassessee by the principal Commissioner ofIncome-tax stating that while perusing theassessment records, it was noticed that assesseehas made purchases in cash totaling Rs.1,31,24,334/- in contravention of the provisions ofsection 40A(3) of the income tax Act 1961. Hence,the expenditure exceeding Rs. 20,000 incurredin cash in contravention of the above section isnot allowable as deduction. It was further noted inthe show cause notice that on perusal of the copyof account of the bank filed by assessee duringthe course of assessment proceedings, itrevealed that assessee has made the cashdeposits of Rs. 54,37,000 in the bank account andthere is no evidence on record to explain thesource of the above cash deposits.Judicial Analysis35

Ahmedabad Chartered Accountant Journal January, 2026 897TM4. The assessee submitted his reply on 18/8/2015explaining the reasons for deposit of cash in thebank account as well as the payment of purchases.However the learned CIT was not satisfied withthe explanation of the assessee and held that Rs.103.94 lakhs deposited in cash in the bankaccount of the assessee remain unexplainedwhich were not properly enquired and examinedby the assessing officer. It was further held thatassessee has made purchases of Rs. 131.24lakhs in violation of the provisions of section 40a(3)of the income tax act which was not properlyexplained before the assessing officer andtherefore that issue was also required to be setaside as the assessment being erroneous andprejudicial to the interest of the revenue. Thus,the assessment order passed in the case ofassessee was set-aside to be made afresh onthe issue of purchase of Rs. 131.24 lakhs in casein violation of section 40A(3) of the income tax Actand for verification of the source of case depositof Rs. 103.94 lakhs in savings bank accountmaintained with the Jammu and Kashmir Bank,Panipat branch which remained unexplained.5. The assessee challenged the order dated 27-10-2015 before ITAT, which was allowed on 20-12-2018 and hence the present appeal has been filedby the revenue.6. Heard.7. While allowing the appeal of the assessee, theTribunal has observed as under:-“The Tribunal has rightly observed that there wasan audit objection by the Internal audit party whichis placed at page number 30 of the paper book.As per the para number two of that audit note it ismentioned that that the case of the assessee wasselected for scrutiny under the CASS with aspecific direction that the AO should examine thesource of cash deposits in his savings bankaccount as per AIR information. The audit partyfurther notes that from the perusal of the printoutsof the screenshots of the AIR Information placedon records, it is transpired that during the year thetotal case deposits have been made by theassessee in his bank account maintained withJammu and Kashmir bank ofRs. 11876000/-. Thus,the selection of the case for scrutiny was withspecific aspect of verification of cash deposits inthe bank account of the assessee. It is requiredto be seen that whether the learned assessingofficer has verified the source of the cash depositsin the bank account of the assessee or not. It isfurther required to be tested whether the dueinquiries have been made by the assessing officeron this aspect or not. The first questionnaireissued by the learned assessing officer on 25/7/2013 to the assessee vide question number 15,the AO asked about the details of the bankaccounts maintained by the assessee along withbank statement for the assessment year. Completebooks of account were also required along withthe bills, vouchers, stock registers, and otherrelevant records maintained by the assessee forthe year. The AO further asked month wise detailsof purchases and sales made during the year. Asper letter placed at page number 18 of the paperbook the assessee submitted the copy of the bankaccount to the assessing officer. Further vide aletter assessee explained regarding sales andcash deposit in bank accounts submitting that theassessee is holding license and selling liquor forhuman consumption to retail customers. Theproducts were delivered as a mint, half bottles/BS etcetera whereas the sale price ranges fromRs. 50 to Rs. 1000 depending upon the quantityof liquor. It was further stated that the cashcollected from retail customers and deposited inthe bank account on the same day or alternatedays. Assessee also produced vide same letterthe cashbook for the relevant period. Assesseealso placed the copy of the bank account withJammu and Kashmir bank at page number 21 ofthe paper book, which was submitted along withthat letter. Therefore assessee gave completeexplanation about the cash deposit in the bankaccount with the Jammu and Kashmir bank andalso demonstrated the cash realized on sale ofgoods. Undisputedly the sale of goods have alsobeen shown. on the credit side of the profit andloss account, the cash has been generated out ofthe sale and same has been deposited in thebank account. The above fact has been verifiedJudicial Analysis

898 Ahmedabad Chartered Accountant Journal January, 2026TMby the learned assessing officer with respect tothe cashbook, sales book and bank account ofthe assessee. On perusal of the order undersection 263 of the income tax act of the learnedprincipal Commissioner of income tax does notshow that what kind of further enquiry the learnedassessing officer should have done on the issueof cash deposit into the bank account of theassessee. the learned principal Commissioner ofincome tax did not say what other enquiry on thisaspect the learned assessing officer should havebeen made. According to us so far as the cashdeposit is concerned in the Jammu and Kashmirbank by the assessee. the learned assessingofficer has made all possible enquiries to verifythe source of cash deposit. According to us onthis account. The order of the learnedCommissioner of Income-tax passed undersection 263 of the Income-tax act is not sustainable.9. On the 2nd Issue the learned CIT has heldthat the AO has failed to verify the cashpayment made for purchase of goods whichare not in conformity with the provisions ofsection 40A(3) of the Income-tax act. It isapparent from the audit objection filed beforeus at page number 30 of the paper book thatthe case of the assessee was selected forthe scrutiny to verify only the cash deposit inthe bank account of the assessee. the issuebefore us is whether assessing officer hasmade any enquiry with respect to the abovepurchases. Though, learned assessing officerhas obtained the explanation of the assesseewith respect to the purchase made by theassessee in cash, whether the learnedassessing officer is required to make anysuch enquiry or not is also an issue. Thisbecause of the reason that the learnedassessing officer was only required to verifythe cash deposit in the bank account of theassessee. In this respect instruction dated29/12/2015 issued by the central board ofdirect taxes is very relevant. Apparently theselection of the scrutiny in case of theassessee was also only on the parametersof AIR information. According to para number2 (il) the scope of enquiry should be limitedonly on that aspect only. In such cases, theassessing officer are also directed to confinethemselves by questionnaire only to thespecific issues pertaining to AIR data andfurther the wider scrutiny in those cases canonly be conducted as per the guidelines andprocedures stated in Instruction number 7/2014. Therefore according to us when thelearned assessing officer was not requiredto enquire on those issues such as purchasesin cash more than specified sum, the learnedCIT was not correct in holding that the learnedassessing officer has not made due inquirieson that ground as the verification of thepurchases exceeding specified limit in cashwas not an issue before the assessing officer.Naturally, he should not have made anyenquiry on that aspect. Even though thelearned assessing officer has raised thespecific questions on that aspect and verifiedthe requisite detail. Therefore, it cannot besaid that the order of the learned assessingofficer is erroneous and prejudicial to theinterest of the revenue on this ground also.”8. Learned counsel for the appellant has not beenable to point out that the findings recorded by theTribunal suffers from any infirmity.9. The order passed by the Tribunal has beenpassed after going through the entire record indetail.10. No substantial question of law arises forconsideration in the present appeal.CIT v. Smt. Padmavathi [2020]120taxmann.com187 (Madras)2. The following Substantial Questions of Law wereraised for consideration:“1. Whether on the facts and in the circumstancesof the case, the Income-tax Appellate Tribunalwas right in coming to conclusion that in alimited scrutiny case, the CIT cannot exercisethe power of revision u/s. 263 of the Incometax Act to look in to any other issue which theAssessing officer himself could not look?36Judicial Analysis

Ahmedabad Chartered Accountant Journal January, 2026 899TM2. Whether on the facts and in the circumstanceof the case the Income-tax Appellate Tribunalwas right in holding that invoking of Section56(2)(vii)(b) of the Income-tax Act 1961 isbeyond the purview of the Assessing officerwhen the reason for limited scrutiny is‘purchase of property’ and the same issue isvery much related to the purchase ofproperty?3. Whether on the facts and in the circumstanceof the case the Income-tax Appellate Tribunalwas right in concluding that while completingthe assessment under limited scrutiny theAssessing Officer cannot look beyond theissue for which the case was selected forscrutiny without noting that the CBD instructionNo. 20/2015 has exception clause in 3(d) toconvert the same into a complete scrutiny?”3. The assessee is an individual and a partner ina firm under the name and style of SriRam Associates. She filed her return of incomeon 27-10-2015 admitting a total income of Rs.2,58,110/-. The return was processed undersection 143(1) of the Act. Subsequently, the casewas selected under Computer Aided ScrutinySelection [for brevity ‘CASS’] ‘Limited Scrutiny’with regard to a purchase of a property by theassessee. The assessing officer after hearing theassessee, verifying the source of funds completedthe assessment by order dated 28-12-2016 undersection 143(3) of the Act and made an addition ofRs. 8,00,000/-.xxx…10. We take up the substantial question of law No. 3for consideration at the first instance. The revenuewould contend that the finding rendered by theTribunal with regard to the scope of limited scrutinyand the role of the assessing officer in a limitedscrutiny is incorrect and such finding has beenrendered by the Tribunal without taking note ofthe instruction issued by Central Board of DirectTaxes, [for brevity ‘CBDT’] in instruction No. 20/2015 dated 29-12-2015. Drawing our attention tothe said instruction, it is submitted that during thecourse of assessment proceedings in limitedscrutiny cases, if it comes to the notice of theassessing officer that there is potentialescapement of income exceeding Rs. 5 Lakhs[for metro charges, the monetary limit shall be Rs.10 Lakhs] requiring substantial verification on anyother issue, then, the case may be taken up for‘complete scrutiny’, with the approval of the PCIT/CIT concern. In such cases, the procedurestipulated in paragraph no. 3.a.b.c. of theinstructions, would not apply. For betterappreciation, the relevant portion of the instructionis quoted herein below:‘3. As far as the returns selected for scrutinythrough CASS-2015 are concerned, two typeof cases have been selected for scrutiny inthe current Financial year - one is ‘LimitedScrutiny’ and other is ‘complete Scrutiny’. Theassessees concerned have duly beenintimated about their cases falling either in‘Limited scrutiny’ or ‘Complete Scrutiny’through notices issued under section 143(2)of the Income-tax Act, 1961 (‘Act’). Theprocedure for handling ‘Limited scrutiny’cases shall be as under:a. In ‘Limited scrutiny’ cases, the reasons/issues shall be forthwith communicatedto the assessee concerned.b. The Questionnaire under section 142(1)of the Act in ‘Limited Scrutiny’ cases shallremain confined only to the specificreasons/issues for which case has beenpicked up for scrutiny. Further, the scopeof enquiry shall be restricted to the‘Limited Scrutiny’ issues.c. These cases shall be completedexpeditiously in a limited number ofhearings.d. During the course of assessmentproceedings in ‘Limited Scrutiny’ cases,if it comes to the notice of the AssessingOfficer that there is potential escapementof income exceeding Rupees Five lakhs(for metro charges, the monetary limitshall be Rupees Ten lakhs) requiringsubstantial verification on any otherJudicial Analysis

900 Ahmedabad Chartered Accountant Journal January, 2026TMissue(s), then, the case may be takenup for ‘complete Scrutiny’ with theapproval of the Pr.CIT/CIT concerned.However, such an approval shall beaccorded by the Pr.CIT/CIT in writing afterbeing satisfied about merits of theissue(s) necessitating ‘CompleteScrutiny’ in that particular case. Suchcases shall be monitored by the RangeHead concerned. The procedureindicated at points (a), (b) and (c) aboveshall no longer remain binding in suchcases. (For the present purpose, ‘MetroCharges’ would mean Delhi, Mumbai,Chennai, Kolkata, Bengaluru, Hyderabadand Ahmedabad).’xxx…15. The substantial question nos.1 and 2 areinterconnected namely, the power of the PCITunder section 263 of Act and whether he couldhave set aside the assessment on the groundthat the assessing officer did not invoke Section56(2)(vii)b(ii). The reading of the assessment ordershows that the case was selected for limitedscrutiny only on this aspect regarding the saleconsideration paid by the assessee for purchaseof the immovable property and the source of funds.The assessing officer has noted that the saleconsideration paid by the assessee was Rs.41,50,000/- and she has paid stamp duty and otherexpenses of Rs. 5,75,000/-. The source of fundswas verified and the assessing officer was satisfiedwith the same. The PCIT while invoking his powerunder section 263 of Act, faults the assessingofficer on the ground that he did not make properenquiry. It is not clear as to what in the opinion ofthe PCIT is ‘proper enquiry’. By using suchexpression, it presupposes that the assessingofficer did conduct an enquiry. However, in theopinion of the PCIT, the enquiry was not proper inabsence of not clearly stating as to why in theopinion of PCIT, the enquiry was not proper, wehave to necessarily hold that the invocation of thepower under section 263 of the Act was not justified.16. The only reason for setting aside the scrutinyassessment was on the ground that the guide linevalue of the property, at the relevant time, washigher than the sale consideration reflected in theregistered document. The question would be asto what is the effect of the guideline value fixed bythe State Government. There are long line ofdecisions of the Hon’ble Supreme Court holdingthat guideline value is only an indicator and thesame is fixed by the State Government for thepurposes of calculating stamp duty on a deal ofconveyance. Therefore, merely because theguideline was higher than the sale considerationshown in the deed of conveyance, cannot be thesole reason for holding that the assessment iserroneous and prejudicial to the interest ofrevenue.17. The assessing officer in his limited scrutiny, hasverified the source of funds, noted the saleconsideration paid, the expenses incurred forstamp duty and other charges. Furthermore, theassessee in their reply dated 11-1-2019 to theshow cause notice dated 26-10-2018 issued bythe PCIT has specifically stated that theassessment was getting time barred, assessingofficer took upon himself the role of a valuationofficer under section 50(C)(2) and found that theguideline value was not actual fair market value ofthe property and the actual consideration paid wasthe fair market value and therefore, he did notchoose to make any addition under section 50(C)of the Act.18. The PCIT, has not dealt with this specific objection,but, would fault the assessing officer for notinvoking Section 56(2)(vii)(b)(ii) merely on theground that the market value was higher. As pointout earlier, the guideline value is only an indicatorand that will always not represent the fair marketvalue of the property and therefore, the invocationof the power under section 263 of the Act by thePCIT is not sustainable in law.In the result, the present appeal is dismissed and thesubstantial question of law nos.1 and 2 areanswered against the revenue and the substantialquestion of law no. 3 is left open to the revenue toagitate the same in TCA No. 158 of 2020. No costs.❉ ❉ ❉Judicial Analysis

Ahmedabad Chartered Accountant Journal January, 2026 901TMCA. Kaushik D. [email protected] Revenue Expenditure – WhetherDeductible in full in the First year itselfIssue:A Ltd. has incurred following expenditures during theyear which have been treated as deferred revenueexpenditure in the books of account –(1) Brokerage expenses for Fixed Deposit acceptedby the company.(2) Heavy advertisement expenditure incurred inconnection with a New Product.(3) Retrenchment Compensation paid to employees.A Ltd. contends that though the above referred expensesare treated as deferred revenue expenditure in the booksof account they are fully allowable in the year in whichthe same are incurred.Proposition:Section 37(1) reads as under-“Any expenditure (not being expenditure of the naturedescribed in sections 30 to 36 and not being in the natureof capital expenditure or personal expenses of theassessee), laid out or expended wholly and exclusivelyfor the purposes of the business or profession shall beallowed in computing the income chargeable under thehead Profits and gains of business or profession.”In short section 37(1) from the point of view ofallowability of expenses classifies expenditure intoonly two types - Capital expenditure, which is notallowable and other than capital expenditure, whichwould be allowable. The Institute of CharteredAccountants of India in its “Guidance Note on TermsUsed In Financial Statements” defines deferredrevenue expenditure to mean an expenditure for whichpayment has been made or a liability incurred but whichis carried forward on the presumption that it will be ofbenefit over a subsequent period or periods.However, the Income-tax Act does not recognise theconcept of deferred revenue expenditure. Theallowability of expenses depends on the method ofaccounting and not on the accounting entries passedin the books of account. Thus, if the liability has arisenas per the method of accounting adopted by thecompany, the accounting entry cannot be the obstacle.Section 145(1) of the Income-tax Act is also relevant. Itsays that income chargeable under the head Profits &Gains of Business or Profession shall be computed inaccordance with the method of accounting regularlyemployed by the assessee. It must be noted that themethod of accounting cannot affect or alter the scopeof taxation. In other words, the accounting method canonly affect the mode of computing the taxable incomeand not decide whether something is taxable or not.Similarly, the allowability of a deduction cannot dependon the method of accounting. Thus, even if an expenseis treated as a deferred revenue expenditure in thebooks of account under the method of accountingregularly employed by the assessee, if the liability forthe expenses has accrued then the expenditure wouldbe allowable in full in the year in which the liability hasaccrued.View against the PropositionIt has to be noted that Hon’ble Supreme Court in variousjudgments starting from earlier judgment in the caseof Challapalli Sugars v. CIT 98 ITR 167 (SC) and CIT v.British Paints Ltd. 148 ITR 44 has recognised therelevance and importance of the Accounting Standardsand guidelines issued by ICAI and held those to beapplicable for determining various claims for thepurposes of Income-tax Act. Hon’ble Supreme Courtin the case of Madras Investment Corporation Ltd. v.Controversies

902 Ahmedabad Chartered Accountant Journal January, 2026TMCIT 225 ITR 802 while examining the assessee’s claimof spreading over the discount paid at the time of issueof debenture has held as under-“Ordinarily, revenue expenditure, which is incurredwholly and exclusively for the purpose of businessmust be allowed in its entirety in the year in which it isincurred. It cannot be spread over a number of yearseven if the assessee has written it off in his books,over a period of years. However, the facts may justifyas assessee who has incurred expenditure in aparticular year to spread and claim it over a period ofensuing years. In fact, allowing the entire expenditurein one year might give a very distorted picture of theprofits of a particular year, issuing debentures is aninstance where although the assessee has incurredthe liability to pay the discount in the year of issue ofdebentures. There is a continuing benefit to thebusiness of the company over the entire period. Theliability should, therefore, be spread over the period ofthe debentures”.As per section 145 of the Income-tax Act the incomefrom business or profession must be computed inaccordance with either cash or mercantile system ofaccounting regularly employed by assessee. Fromassessment year 1997-98 the provision of section 145is binding on the Assessing Officer. If the assessingofficer is satisfied about the correctness orcompleteness of the accounts of the assessee thenthe assessing officer is duty bound to accept theaccounts as it is.If A Ltd. has accounted the expenditure of Brokerage,Advertisement and Retrenchment Compensation asdeferred revenue expenditure in the books of accountand if the accounting treatment is in accordance withthe Guidance Note of The Institute of CharteredAccountants of India then the assessing officer will bebound to accept the treatment of deferred revenueexpenditure and accordingly, the expenditure whichis actually debited in the books of account can onlybe allowed as deduction while computing the taxableincome.The following observations from Kanga & Palkhiwala’sbook “The Law & Practice of Income Tax” Eighth Editionis worth noting—“Revenue expenditure incurred wholly and exclusivelyfor the purpose of business must be allowed in its entiretyin the year in which it is incurred. The Department cannotclaim to spread it over a number of years and allow onlyan aliquot part of it in each year, even if the assesseehas written it off in his books over a period of years. Buton the facts of a case the assessee who has incurredexpenditure in a particular year may be entitled to spreadand claim it over a period of ensuing years.”The Hon’ble Calcutta High Court in the followingjudgments has accepted the concept of spread overof expenditure:(a) In Hindustan Aluminium Corporation Ltd. v. CIT 159ITR 673 (Cal.) the High Court accepted theassessee’s contention and held that theexpenditure was a revenue expenditure (not of acapital nature) and hence allowable. The assesseehad claimed the expenditure spread over 5 years;hence by allowing the assessee’s appealeffectively the High Court treated the expenditureas allowable spread over 5 years.(b) Similarly in CIT v. Hind Construction &Engg. 147ITR 513 (Cal.) the High Court accepted theassessee’s contention and held that theexpenditure was a revenue expenditure (notcapital in nature) and hence allowable. Theassessee had claimed the expenditure spreadover a number of years; hence effectively the HighCourt treated the expenditure as allowable spreadover a number of years. When the Departmentsought to raise the ground that the expenditureshould not be allowed in the year underconsideration since the expenditure was incurredin an earlier year, (the appeal related to a year,subsequent to the year in which the expenditurewas incurred), the High Court held that the saidissue cannot be raised now since it had not beenraised before the authorities below. Hence,effectively the High Court allowed the expenditurespread over a number of years.In view of the above it is submitted that if theexpenditure is treated as deferred revenueexpenditure in the books of accounts, then theexpenditure will be spread over for deduction incomputing Taxable Income alsoand the entireControversies

Ahmedabad Chartered Accountant Journal January, 2026 903TMexpenditure cannot be allowed in full in the year inwhich the liability is incurred.View in favour of PropositionThe concept of deferred revenue expenditure is totallyforeign to the Income Tax provisions. The expenditurecould be either capital or revenue whether Legislaturewanted the expenditure to be spread over it hasspecifically laid down in the Income-tax Act itself e.g.sections 35A, 35AB, 35ABB, 35D. It is submitted thatthe way section 37(1) is narrated the deferred revenueexpenditure is allowable and not spread over aperiod. The following judgments lay down thesepropositions:(a) In Hindustan Commercial Bank Ltd., In re, 21 ITR353 (All.) the assessee bank had incurredexpenses in connection with opening 46 newbranches. The ITAT had treated it as DeferredRevenue Expenditure and allowed 1/20th (spreadover 20 years). The High Court held that there is“no legal justification for spreading out the sum ofRs. 89,870 over a period of twenty years and thewhole of the amount was deductible in thatparticular year if it was not in the nature of capitalexpenditure.”(b) In CIT v. Gujarat Mineral Development Corporation132 ITR 377 (Guj.) the assessee had a paidcontribution for Electric Transmission Lines andhad in its books written off 1/7th of the expenditure(spread over 7 years). It was held by the HighCourt that the entire expenditure was allowable inthe year in which it was incurred. Further it washeld that the expenditure should be regarded asincurred in the year in which installation wascompleted & supply started (irrespective of theyear of payment).SummationIn order to deal with the above propositions, it wouldbe proper to refer to section 28 read with section 29 ofthe Income tax Act, which deal with the provisionsregarding the computation of Income from profits andgains of business. The relevant section 29 reads asunder—“The income referred to in section 28 shall be computedin accordance with the provisions contained in sections30 to 43D.”Section 37(1) reads as under—“Any expenditure (not being expenditure of the naturedescribed in sections 30 to 36 and not being in the natureof capital expenditure or personal expenses of theassessee) laid out or expended wholly and exclusivelyfor the purposes of the business or profession shall beallowed in computing the income chargeable under thehead “Profits and Gains of Business or Profession”.According to this section, if the following requirementsare satisfied, deduction has to be allowed under section37 of the Act.(1) The expenditure must have been laid out whollyand exclusively for the purpose of business ofthe assessee.(2) The expenditure must not be capital in nature.(3) The expenditure must not be personal in nature.Since these conditions are satisfied on the facts of thecase, impugned expenditure relating to Brokerage,Advertisement expenses and RetrenchmentCompensation must be allowed on revenue account.Secondly, it is submitted that an assessee followingmercantile system of accountancy is entitled to deductfrom the profits or gains of his business, the liability,which arose during the relevant previous year. It issubmitted that the entries in the books of account orabsence of entries in the books of account are neitherdecisive nor conclusive nor determinative as to theallowability of the expenditure or taxing of incomeunder the Income-tax Act. This is a well-settled positionin law in support of which reliance is placed on followingSupreme Court decisions:(1) Kedarnath Jute Mfg. Co. Ltd. v. CIT 82 ITR 363(SC)“Whether the assessee is entitled to a particulardeduction or not will depend on the provision of lawrelating thereto and not on the view which theassessee might take of his rights nor can theexistence or absence of entries in the books ofaccount be decisive or conclusive in the matter.”Controversies

904 Ahmedabad Chartered Accountant Journal January, 2026TM(2) Sutlej Cotton Mills Ltd. v. CIT 116 ITR 1“It is now well settled that the way in which entriesare made by an assessee in his books of accountis not determinative of the question whether theassessee has earned any profit or suffered anyloss.”“what is necessary to be considered is the truenature of the transaction and whether in fact it hasresulted in profit or loss to the assessee.”The same propositions hold good qua receipt ofincome. The mere fact that an entry is posted onthe credit side it does not necessarily representincome chargeable to tax when no real incomehas resulted, such income would be treated ashypothetical income and could not be subjectedto tax. In this connection attention is invited to therecent decision of the Supreme Court in the caseof Godhra Electricity Co. Ltd. v. CIT 225 ITR 746(SC). In this case it is inter alia held as follows—“Income-tax is a levy on income. No doubt, theIncome-tax takes into account two points of timeat which the liability to tax is attracted, viz. theaccrual of the income or its receipt; but thesubstance of the matter is the income. If incomedoes not result at all, there cannot be a tax, eventhough in book-keeping, an entry is made about ahypothetical income, which does not materialise.”Similarly, in the case of CIT v. India Discount Co.Ltd. 75 ITR 191 Supreme Court has held—“Consequently, a receipt which in law cannot beregarded as income, cannot become so merelybecause the assessee erroneously credited it tothe profit and loss account.”Similarly, the Hon’ble Supreme Court in itsdecision in the case of Chandulal v. Mehta andSons. (P.) Ltd. 82 ITR 54 has observed thus:“The way in which entries are made does not affectthe accrual of income in as much as what is relevantis the method of accounting and not the bookentries.”It is submitted that under mercantile method ofaccountancy, the expenditure has to be allowedin toto once it is held to be of revenue nature andprovision of section 145 cannot be brought in torestrict the allowance in the matter in which theyare debited in books of account on deferredrevenue basis.(3) Accounting standard or practice is not relevant indetermining allowability of claim for deduction ofan item of expenditure or taxing any receipt onthe basis of accrual of income. In this connectionattention is invited to the recent decision of theHon’ble Supreme Court in the case of TuticorinAlkali Chemicals and Fertilizers Ltd. v. CIT 227 ITR172 (SC) in which at page 183 it is observed asfollows:“The second reason given by the High Court wasthat the ICAI was a recognised authority onaccounting principles. This fact has been noted bythis court in the case of Challapali Sugars Ltd. v.CIT (1975) 98 ITR 167. Therefore, its view has tobe respected.It is true that this court has very often referred toaccounting practice for ascertainment of profit madeby a company or value of the asset of a company.But when the question is whether a receipt of moneyis taxable or not or whether certain deduction fromthe receipt are permissible in law or not, thequestion has to be decided according to theprinciples of law and not in accordance withaccountancy practice. Accounting practice cannotoverride section 56 or any other provision of theAct, as was pointed out by Lord Russell in the caseof B.S.C. Footwear Ltd. v. Ridgway (Inspector ofTaxes) (1970) 77 ITR 857, 860 (Cal), the incometax law does not march step by step in the footprintsof the accountancy profession.”Their Lordships after analysing the earlier decisionin Challapalli’s case (supra) have further observedat page 185 thus:“The judgment in Challapalli’s case, goes to showthat the court was not in anyway departing fromlegal principles because of any opinion expressedby the ICAI. The phrase “actual cost” was notdefined in the act. Therefore, it had to be understoodin the commercial parlance. To find that out, theControversiesContinued to page 912

Ahmedabad Chartered Accountant Journal January, 2026 905TMThe Unravelling of the Mauritius Route: A Doctrinaland Economic Analysis of the Supreme Court’sJudgment in Authority for Advance Rulings v. TigerGlobal International Holdings (Civil Appeal No. 262of 2026)1. IntroductionOn January 15, 2026, the Supreme Court of Indiadelivered a judgment that will be recorded in theannals of international taxation as the moment thetectonic plates of India’s fiscal policy shiftedirrevocably. In Authority for Advance Rulings v.Tiger Global International Holdings (Civil AppealNo. 262 of 2026), the Apex Court dismantled thedecades-old form over substance approach thathad characterized foreign investment into India viaMauritius. By setting aside the Delhi High Court’sfavorable ruling and upholding the Authority forAdvance Rulings’ (AAR) rejection of Tiger Global’streaty claim, the Supreme Court effectivelyprioritized the commercial reality of a transactionover its legal structure.The case centered on a capital gains tax disputearising from the 2018 sale of Flipkart Singaporeshares by Mauritius-based special purposevehicles (SPVs) owned by the US investment firmTiger Global. The transaction, part of Walmart’sacquisition of Flipkart, resulted in substantial gainswhich the taxpayer claimed were exempt underthe India-Mauritius Double Taxation AvoidanceAgreement (DTAA). The taxpayer’s defenserested on two pillars: the grandfathering clausefor pre-2017 investments under the amendedtreaty, and the binding nature of the Tax ResidencyCertificate (TRC) as established in Azadi BachaoAndolan (2003).The Supreme Court rejected both defenses. It heldthat section 90(2A) of the Income-tax Act, 1961,allows the General Anti-Avoidance Rules (GAAR)to override treaty provisions if an arrangement isfound to be impermissible. Crucially, in a rigorousinterpretation of Rule 10U of the Income-tax Rules,the Court distinguished between an investment(which is grand fathered) and an arrangement(which is not).Factually, the Court found the Mauritius entities tobe conduit companies lacking independentcommercial substance. The presence of USbased directors and authorized signatories(specifically Mr. Charles P. Coleman) whoexercised real control over the funds, coupledwith negligible local expenditure in Mauritius, ledthe Court to conclude that the head and brain ofthe entities resided in the USA, not Mauritius.This article analyzes the judgment’s legalreasoning, its departure from establishedprecedents, and its profound implications for theglobal investment community.Part I: The Historical and Legislative LandscapeTo fully appreciate the magnitude of the TigerGlobal judgment, one must navigate the complexhistory of India’s engagement with international taxtreaties.1.1. The Genesis of the Mauritius RouteThe India-Mauritius DTAA was signed in 1983. Itsmost critical provision was Article 13(4), a residualclause that allocated the right to tax capital gainssolely to the country of residence of the alienator.Since Mauritius does not levy capital gains tax,this created a unique arbitrage opportunity.1.2. The Azadi Bachao Andolan Shield (2003)The Indian tax authorities attempted to challengethis route in the early 2000s, arguing that manyFEMA & InternationalTaxationCA. Dhinal A. [email protected]. Sunil [email protected]

906 Ahmedabad Chartered Accountant Journal January, 2026TMFEMA & International TaxationMauritius entities were shell companies engagedin treaty shopping. This culminated in the landmarkSupreme Court judgment in Union of India v. AzadiBachao Andolan (2003).In Azadi, the Supreme Court upheld the validity ofCBDT Circular No. 789 (2000), which stated that aTax Residency Certificate (TRC) issued by theMauritius Revenue Authority was conclusiveevidence of residence and beneficial ownership.The Court famously observed that treaty shoppingmight be a necessary evil to attract capital todeveloping nations. This judgment effectively tiedthe hands of the Indian Revenue Service (IRS).As long as an investor had a valid TRC, the formof the transaction was sacrosanct, and thesubstance could not be questioned.1.3. The Vodafone Disruption and the RetrospectiveAmendment (2012)The consensus was shaken by the VodafoneInternational Holdings B.V. case (2012). Vodafone,a Dutch entity, acquired shares of a CaymanIslands company from Hutchison, a Hong Kongentity. The underlying asset was Hutchison’stelecom business in India. The Supreme Courtruled that India did not have the jurisdiction to taxthis indirect transfer of assets between two nonresidents.The Indian government responded with aretrospective amendment to section 9(1)(i) of theIncome-tax Act, clarifying that a share of a foreigncompany shall be deemed to be situated in Indiaif it derives substantial value, directly or indirectly,from assets located in India. This brought indirecttransferslike the Tiger Global-Flipkarttransactionfirmly within the Indian tax net, subjectonly to treaty protection.1.4. The Rise of GAAR and the 2016 ProtocolThe General Anti-Avoidance Rules (GAAR) werelegislated to take effect from April 1,2017.Simultaneously, India renegotiated its treatywith Mauritius. The 2016 Protocol amended theDTAA to give India the right to tax capital gains onshares acquired on or after April 1, 2017. Crucially,strictly for shares acquired before this date, theProtocol provided a grandfathering clause (Article13(3A), protecting them from Indian taxation. Thisgrandfathering was widely interpreted by themarket as an absolute immunity for legacyinvestments.It is against this backdrop of shifting statutes andevolving judicial philosophies that the Tiger Globaldispute emerged.Part II: The Factual Matrix of Tiger GlobalThe Supreme Court’s decision was deeply rootedin the specific facts of the case. The judgmentemphasizes that tax avoidance is a fact-intensivedetermination A granular examination of the TigerGlobal structure reveals why the Court labeled it acolorable device.2.1. The Corporate Structure and Governancea) The dispute involved three specific entities (theTaxpayers):- Tiger Global International II Holdings- Tiger Global International III Holdings- Tiger Global International IV HoldingsThese were private companies limited byshares incorporated in Mauritius, holdingCategory-1 Global Business Licenses (GBL)b) The Ownership Chain:The Taxpayers were subsidiaries of otherMauritius entities (Tiger Global Five PercentHoldings, etc.), which were in turn held byTiger Global PIP Management V Limited andVI Limited. The ultimate management andcontrol were traced back to Tiger GlobalManagement LLC in the United States.c) The Head and Brain Analysis: The Court’sanalysis of the commercial substance focusedheavily on the decision-making hierarchy:- Mr. Charles P. Coleman: A resident ofthe USA and the key figure at Tiger GlobalManagement. The investigation revealedhe was the Beneficial Owner disclosedin filings to the Mauritius FinancialServices Commission (FSC). Moredamningly, he was an authorized

Ahmedabad Chartered Accountant Journal January, 2026 907TMsignatory on the bank accounts of theMauritius entities.- The threshold for decision making: Thethreshold for financial decisions(transactions over USD 250,000) requiredthe approval of the Group A signatories(Coleman). The local directors (Group B)could not independently authorize majorexits or investments.2.2. The Transaction: An Indirect TransferBetween October 2011 and April 2015, theTaxpayers acquired shares in Flipkart PrivateLimited, a company incorporated in Singapore.Flipkart Singapore was the holding company forFlipkart India Pvt Ltd, the operating entity of the ecommerce giant.2.3. Valuation derivation: It is undisputed that theshares of Flipkart Singapore derived substantialvalue from assets in India, triggering section9(1)(i) of the Income-tax Act.- The Exit: In 2018, Walmart Inc. acquired amajority stake in Flipkart. The Taxpayers soldtheir Singapore shares to Fit HoldingsS.A.R.L. (Walmart’s Luxembourg subsidiary).- The Tax Benefit: The Taxpayers sought a NilWith holding Tax certificate under section 197of the Act, claiming that under Article 13(4) ofthe India-Mauritius DTAA, the capital gainswere taxable only in Mauritius (i.e., tax-free).Part III: The Procedural OdysseyThe journey of this case through the judicial hierarchyillustrates the conflict between two distinct judicialphilosophies: the legalistic approach of the HighCourt and the economic substance approach ofthe AAR and Supreme Court.3.1. The Authority for Advance Rulings (AAR): TheThreshold BarThe Taxpayers approached the AAR for certainty.However, the AAR invoked the proviso to section245R(2)(iii) of the Income-Tax Act. This provisionbars the AAR from admitting an application if thetransaction relates to a transaction or issue whichis designed prima facie for the avoidance ofFEMA & International Taxationincome-tax.The AAR ruled that the structure was prima faciedesigned for avoidance. It reasoned that theMauritius entities were mere see-through conduitsinserted to access the treaty. Since the controllay in the USA (with Mr. Coleman), and the ultimatebeneficiaries were not Mauritius residents, thestructure abused the treaty. The AAR refused torule on the merits, rejecting the application at theadmission stage.3.2. The Delhi High Court: A Victory for Rule of LawTiger Global appealed to the Delhi High Court. Inits 2024 judgment, the High Court set aside theAAR’s order, delivering a stinging rebuke to therevenue authorities.3.3. Key Findings of the High Court:1. Sanctity of the TRC: Relying on Azadi BachaoAndolan, the High Court held that the TRC issacrosanct. The Revenue cannot question thecommercial substance if the residencycertificate is valid.2. Grandfathering is Absolute: The Court heldthat the 2016 Protocol explicitly grandfatheredinvestments made before 2017. To apply asubstance test to these investments wouldbe to rewrite the treaty retrospectively.3. Jurisdictional Excess: The Court ruled thatthe AAR had exceeded its jurisdiction byconducting a detailed factual enquiry at theadmission stage to determine prima facieavoidance.The High Court’s judgment was viewed as arestoration of investor confidence, reinforcing theprinciple that the government must honor its treatycommitments, specifically the grandfatheringclause.Part IV: The Supreme Court ProceedingsThe Revenue Department challenged the HighCourt’s decision in the Supreme Court (CivilAppeal Nos. 262-264 of 2026). The argumentspresented during the hearings sharpened theconflict between Treaty Override andGrandfathering.

908 Ahmedabad Chartered Accountant Journal January, 2026TM4.1. Arguments of the Revenue (The Appellant)Represented by the Learned Additional SolicitorGeneral (ASG), Mr. N. Venkataraman, the Revenuemounted a ferocious attack on the High Court’sreliance on Azadi.- The Design Argument: The ASG argued thatthe entire structure was a design to avoid tax.The interposition of the Mauritius entities hadno commercial rationale other than taxarbitrage.- Control and Management: The ASGhighlighted the role of Mr. Charles P. Coleman,pointing out that he was the beneficial ownerin FSC filings but purportedly not in controlfor Indian tax purposes. This contradiction,he argued, proved the sham.- The Statutory Shift: The ASG contended thatAzadi was decided in a pre-GAAR era. Withthe enactment of section 90(2A) in 2013(effective 2017), Parliament had explicitlyauthorized the override of treaties in casesof avoidance. Therefore, Azadi was no longergood law for impermissible avoidancearrangements.- Rule 10U Distinction: The Revenueintroduced a novel interpretation of Rule 10U,arguing that while the investment might beold, the arrangement to use the Mauritius entityfor the exit in 2018 was a current act ofavoidance, unprotected by the grandfatheringclause.4.2. Arguments of the Taxpayers (The Respondents)Senior Counsel for Tiger Global defended the HighCourt’s order on the principles of certainty andsovereign commitment.- Treaty Supremacy: They argued that theDTAA is a sovereign contract. The Protocolof 2016 was a negotiated settlement: Indiagot the right to tax future investments inexchange for giving up the right to tax pastinvestments. Applying GAAR to pastinvestments would be a breach of thissovereign promise.- Rule 10U Protection: They relied on rule10U(1)(d), which states that GAAR shall notapply to income from the transfer ofinvestments made before April 1, 2017. Theyargued this rule was absolute and withoutprejudice to other sections.- Commercial Substance: They argued thatholding companies are a legitimate globalpractice. The board meetings in Mauritiuswere valid, and the delegation of authority tosignatories is a standard corporategovernance practice, not evidence of a sham.Part V: The Supreme Court Judgment – ADoctrinal AnalysisThe Supreme Court’s judgment, delivered by abench led by Justice R. Mahadevan, representsa comprehensive endorsement of the Revenue’sposition. It is a dense, jurisprudential documentthat redefines the hierarchy of tax laws in India.5.1. The Supremacy of section 90(2A): CodifyingTreaty OverrideThe most far-reaching aspect of the judgment isthe validation of section90(2A) of the Income-taxAct.Notwithstanding anything contained in sub-section(2), the provisions of Chapter X-A shall apply to theassessee even if such provisions are not beneficialto him.The Court held that this non-obstante clause is aclear manifestation of Parliamentary intent toprioritize domestic anti-avoidance measures(GAAR) over international treaties (DTAAs) whenabuse is detected.- Legal Implication: The argument that Treatiesoverride domestic law based on section 90(2)is no longer absolute. It is now subject to theAnti-Abuse Override of section 90(2A).- Azadi Distinguished: The Court held thatAzadi Bachao Andolan dealt with a specificcircular (789) in a specific statutory context. Itcannot be used to shackle the operation of asubsequent Parliamentary enactment(GAAR). The Court stated that reliance onAzadi to bypass section 90(2A) is misplaced.FEMA & International Taxation

Ahmedabad Chartered Accountant Journal January, 2026 909TM5.2. Deconstructing the Arrangement vs. InvestmentDichotomy (Rule 10U)The Court’s interpretation of Rule 10U of theIncome-tax Rules is the intellectual pivot of thejudgment.- Rule 10U(1)(d): Excludes GAAR for incomefrom transfer of investments made before 1-4-2017.- Rule 10U(2): States that Without prejudice toclause (d)... GAAR shall apply to anyarrangement, irrespective of the date on whichit has been entered into, in respect of the taxbenefit obtained... on or after 1-4-2017.The Taxpayers viewed Rule 10U(1)(d) as a shield.The Court, however, viewed Rule 10U(2) as a swordthat pierces that shield.The Judicial Reasoning:The Court reasoned that an investment is merelythe asset (the share). An arrangement is the entirestructure and scheme (the holding company, thefunding flow, the decision-making).1. The investment (Flipkart shares) was indeedmade pre-2017.2. However, the arrangement (holding theseshares through a shell company in Mauritiusto avoid tax) yielded a tax benefit in theAssessment Year 2018-19 (post-GAAR).3. Therefore, under rule 10U(2), GAAR appliesto the arrangement.4. If the arrangement is found to be anImpermissible Avoidance Arrangement (IAA),the entire structure can be disregarded. If thestructure is disregarded, the owner of theinvestment is not the Mauritius entity but theUS parent.5. If the US parent is the owner, the IndiaMauritius treaty and its grandfathering clauseis irrelevant. The US parent is liable to tax inIndia under the India-US DTAA which taxescapital gains.This interpretation effectively means thatgrandfathering applies only to genuine commercialinvestments, not to tax avoidance arrangements.If the structure is a sham, the date of investment isirrelevant.5.3. The Look-At Principle and the Death of the TRCThe Court formally adopted the Look-At test,rejecting the TRC is conclusive doctrine.- TRC is Necessary, Not Sufficient: The Courtheld that while a TRC is a statutory requirementto apply for treaty benefits (section 90(4)), itdoes not bar the authorities from examiningwhether the applicant is the beneficial owneror merely a name lender.- Substance Over Form: The Court affirmedthe AAR’s right to look at the board minutes,bank mandates, and email correspondenceto determine where the head and brain of thecompany lies.Part VI: Implications for the InvestmentEcosystemThe Tiger Global judgment is a watershed momentthat will force a structural overhaul of foreigninvestment into India.6.1 The Private Equity Paradox: Exit Strategies inPerilFor the Private Equity (PE) and Venture Capital(VC) industry, this ruling is a Code Red.- Legacy Portfolios: Billions of dollars ofinvestments made between 2004 and 2017sit in Mauritius and Singapore SPVs. Thesewere assumed to be tax-exempt upon exit.The ruling throws this assumption into doubt.If the SPV lacks substance (as many do), thegrandfathering is vulnerable.- The Indemnity Crisis: Future exits willbecome legally complex. Buyers (acquiringshares of Indian companies from PE funds)will be terrified of being held liable asrepresentative assessees if they don’twithhold tax. They will likely insist on:- Withholding tax at 20% (plus surcharge)in escrow.- Full tax indemnities from the PE fund.FEMA & International Taxation

910 Ahmedabad Chartered Accountant Journal January, 2026TM- Tax insurance products (which willbecome more expensive).- Cash Flow Impact: If tax is withheld, the PEfund receives 80% of the proceeds. It mustthen file a return in India and litigate for arefund, a process that can take 5–10 years.This drastically reduces the Distributed toPaid-In (DPI) ratio and the Internal Rate ofReturn (IRR) for Limited Partners (LPs).6.2 The Blocker ProblemMany US-based funds use Blocker Corporationsin Mauritius to prevent income from beingclassified as Effectively Connected Income (ECI)or Unrelated Business Taxable Income (UBTI) inthe US. These blockers often have no commercialpurpose other than this tax shielding.- The Supreme Court’s ruling suggests that ifthe main purpose is to obtain a tax benefit(even a US tax benefit via an Indian treaty),the structure can be challenged.- These check-the-box entities are now highrisk targets.6.3 Impact on Public Markets (FPIs)Foreign Portfolio Investors (FPIs) are generallymore protected due to the de minimis thresholdin Rule 10U(1)(a) (tax benefit < INR 3 crores) andspecific carve-outs in Rule 10U(1)(b) for SEBIregistered FIIs that don’t avail treaty benefits.However, FPIs that do rely on the treaty for largeblock deals or strategic stakes will face the samescrutiny as PE funds.Part VII: Strategic Imperatives for InvestorsIn the post-Tiger Global era, the wait and watchstrategy is no longer viable. Investors mustproactively GAAR-proof their structures.7.1. Documentation DefenseThe Main Purpose test in GAAR is subjective.Defending it requires contemporarydocumentation proving that the structure hadcommercial rationale other than tax.- Commercial Rationale Dossiers: Creatememos documenting why Mauritius waschosen (e.g., Bilateral Investment Treatyprotection, time zone overlap, depth offinancial ecosystem, ability to pool diverseLPs).- Beneficial Ownership Consistency: Ensurethat the Beneficial Owner (BO) declared in theTRC application matches the BO declared inIndia (Form 10F/KYC). The discrepancy inTiger Global (Coleman being BO in Mauritiusbut denied in India) was fatal.7.2 Restructuring RisksFor legacy investments where substance is nonexistent, curing the substance now (in 2026) foran investment made in 2014 carries risk. The taxauthorities may argue that the substance is artificialand created just before the exit.However, creatingsubstance now is better than having none.ConclusionThe Supreme Court’s judgment in Tiger Global (2026)is the final nail in the coffin of the Mauritius Route as itwas historically understood. It marks the maturation ofthe Indian tax system from a certainty-based regime(where a certificate was enough) to a fairness-basedregime (where economic reality rules).By upholding the supremacy of GAAR over DTAAsand interpreting the grandfathering rules restrictivelyto exclude avoidance arrangements, the Court hassignaled that India will no longer tolerate double nontaxation. The sanctity of the TRC, once the bedrock offoreign investment, has been replaced by the Headand Brain test.For the global investor, this introduces a new riskpremium to investing in India. The cost of compliancewill rise, as will the cost of litigation. The easy taxarbitrage is gone. However, for those willing to alignwith the new rulesby building real substance in GIFTCity or investing directly the Indian market remains acompelling opportunity. The Tiger has been unleashed,not to devour investment, but to hunt down avoidance.The market must now learn to run with it.❉ ❉ ❉FEMA & International Taxation

Ahmedabad Chartered Accountant Journal January, 2026 911TMCompliance with Know Your Customer (KYC)normsAttention is invited to instructions contained in SectionI and Section VI of ‘Master Direction – Money ChangingActivities’; Para 27(4) of ‘Master Direction – OverseasInvestment’; Para 6.5 of ‘Master Direction – OtherRemittance Facilities’; and Para 3.2.b and 8(i) of ‘MasterDirection – Money Transfer Service Scheme (MTSS)’on compliance with KYC norms.‘Master Direction – Know Your Customer (KYC)Direction, 2016’ has since been substituted withregulatory instructions applicable separately to eachtype of entity regulated by the Department ofRegulation, Reserve Bank of India. Followingdirections are issued:a. Authorised Persons, which are regulated by theDepartment of Regulation, Reserve Bank of India,shall be governed by the respective ‘Know YourCustomer’ directions as applicable to them.b. Authorised Persons, which are not regulated bythe Department of Regulation, Reserve Bank ofIndia, shall be governed by ‘Reserve Bank of India(Non-Banking Financial Companies – Know YourCustomer) Directions, 2025’.c. Authorised Persons shall ensure compliance ofdirections, as applicable to them, by their agents/sub-agents/franchisees.The directions contained in this circular have beenissued under sections 10(4) and 11(1) of the ForeignExchange Management Act (FEMA), 1999 (42 of 1999)and are without prejudice to permissions / approvals,if any, required under any other law.The instructions contained in ‘Master Direction – MoneyChanging Activities’, ‘Master Direction – OverseasInvestment’, ‘Master Direction – Other RemittanceFacilities’, and ‘Master Direction – Money TransferService Scheme (MTSS)’ are being modifiedaccordingly.Source: RBI/2025-26/99, A.P. (DIR Series) Circular No.16 dated November 28, 2025For full text refer:https://rbidocs.rbi.org.in/rdocs/notification/PDFs/99NT2C4DB1D4688E42AC93E9F2F0D7F9BE2F.PDFLiberalised Remittance Scheme (LRS)-Submission of ‘LRS Daily Return’ byAuthorised Dealers- Category -II banks/entities and Full- Fledged Money ChangersAttention is invited to A. P. (DIR Series) Circular No. 16dated September 06, 2024, in terms of which,Authorised Dealer (AD) Category-I banks are requiredto submit ‘LRS daily return’ (return code in CIMS:R010)on Centralised Information Management System(CIMS) (URL: https://cims.rbi.org.in), on the nextworking day. Further, the AD - Category–I banks arealso required to include the details of LRS transactionsundertaken by AD- Category–II banks / entities andFFMCs attached to them / maintaining an account withthem, in their ‘LRS daily return’.It has now been decided to introduce the submissionof ‘LRS daily return’ by AD Category-II banks / entitiesand FFMCs also, by providing them access to CIMS.With this, AD Category-II banks/ entities and FFMCsshall be able to check the cumulative amount remittedby a resident individual (PAN-wise) under LRS duringthe current financial year, before facilitating their nextrequested LRS transaction.Accordingly, all AD Category-II banks / entities andFFMCs are advised to submit the ‘LRS daily return’(including ‘nil’ report, if applicable) with effect fromJanuary 01, 2026. Consequently, AD Category-II banks/CA. Dr. Savan R. [email protected] Updates21

912 Ahmedabad Chartered Accountant Journal January, 2026TMentities and FFMCs may discontinue submitting theLRS transactions through AD category-I banks.All Authorised Persons, including the AD Category-IIbanks/ entities and FFMCs are advised to follow theinstructions provided in the User Manual for submissionof ‘LRS daily return’- under ‘Downloads’ on CIMS portal.It is further advised that AD Category-II banks/entitiesand FFMCs, who have been newly on-boarded ontoCIMS may approach the Foreign Exchange Departmentof the concerned Regional Office of the Reserve Bankof India for resolving any issues in this regard.The Master Direction – Reporting under ForeignExchange Management Act, 1999 is being updated toreflect this change.Source: RBI/2025-26/102, A.P. (DIR Series) CircularNo.17 dated December 03, 2025For full text refer:https://rbidocs.rbi.org.in/rdocs/notification/PDFs/102NTB4DE02C7FB5942A39E8F73640C49097D.PDF❉ ❉ ❉FEMA UpdatesContinued from page 904normal rule of accountancy prevalent in commercialand industrial circles was noted. According to theICAI, actual cost will also include interest paid onborrowed money for the purchase of the asset.Khanna J., however, did not stop there. He pointedout that the principle of capitalising interest was tobe found in section 208 of the Companies Act, 1956itself and was also consistent with the view of theEnglish Court.”It is further submitted that assessee is entitled toclaim for deduction of the entire expenditure, whichhas been incurred on revenue account during theyear under assessment. This is so because theIncome-tax Act does not recognize amortisationof revenue expenditure. It may be added that theIncome-tax Act provides for amortisation of certainexpenditure of capital nature like preliminaryexpenses (section 35D), expenditure incurred foracquiring technical Know-how (35AB), PatentRights (35), and the like. Therefore, in absence ofany provision for amortisation of revenueexpenditure, the said expenditure has to beallowed in full in the year in which the same isincurred. In other words, there is nothing likedeferred revenue expenditure as far as Incometax Law is concerned, especially when theaccepted method is mercantile method ofaccountancy. What it is to be considered is whetherthe expenditure has been incurred or whether theexpenditure has accrued during the year. Thisproposition is supportable by the decision of theHon’ble Bombay High Court in the case of NationalOrganic Chemical Industries Ltd. v. CIT 203 ITR410.❉ ❉ ❉Controversies

Ahmedabad Chartered Accountant Journal January, 2026 913TMFrom AI Ambition to Digital Finance Reality: India’sRole in UAE’s Tech RevolutionDuring my recent visit to Dubai, I experienced firsthand how this city is no longer just a trading or touristdestination, it has become a thriving globaltechnology and finance hub. What struck me mostwas the level of ambition I saw in every corner fromartificial intelligence (AI) initiatives to the rapid evolutionof digital finance, fintech and decentralized finance(DeFi). What makes this even more interesting is howIndian professionals and entrepreneurs are playing asignificant role in this transformation.In this article, I want to explore the UAE’s AI Vision2031 and how fintech/DeFi trends are reshaping itsdigital finance ecosystem, while also sharing practicalinsights from the ground.Why UAE Aims to Lead in AI by 2031The UAE doesn’t shy away from big visions. Its NationalStrategy for Artificial Intelligence 2031 aims to transformthe country into a global leader in AI by focusing onbuilding a strong ecosystem, investing in talent andattracting global innovators. According to the officialstrategy, one of the core objectives is to attract and trainglobal talent for future jobs powered by AI.This isn’t just lofty talk. The government is buildingregulatory sandboxes and creating frameworks wherenew AI innovations can be tested under real-worldconditions, a move that makes the UAE extremelyattractive for both startups and established tech players.What stood out in my conversations with founders andtech leaders was that the focus here isn’t just onautomation, but on responsible AI adoption, balancinginnovation with ethical governance.Indian Talent: Essential to the UAE’s VisionWhat’s fascinating and personally exciting is that Indiantalent has become a key part of this journey. Leadersin the UAE openly recognize India’s strength intechnology development, including AI, fintech, ecommerce, and software services.During my interactions with tech professionals in Dubai,I observed something unique: Indian engineers,finance professionals, and AI practitioners are not justworkforce participants, many are leaders of innovationprojects and founders of startups here. The opennessof opportunities, combined with the city’s pro-businessenvironment, is attracting serious talent fromeverywhere, especially from India.This blend of global talent with local vision is onereason why the UAE is confidently positioning itself tocompete with major AI hubs around the world.UAE FinTech: From Concept to Mainstream RealityWhile AI promises the future, fintech and digital financeare already here and growing fast in the UAE. Accordingto the 2025 Emirates NBD / PwC fintech report, theUAE fintech market has attracted approximately USD265 million in funding in 2024 and is projected to growto nearly USD 5.7 billion by 2029.The country has one of the highest digital bankingadoption rates globally, with around 89% of consumersusing digital-first bank accounts, a clear indicator ofhow deeply fintech has penetrated everyday life here.From mobile wallets and contactless payments to buynow-pay-later services and integrated mobile bankingapps, the fintech landscape in the UAE is boomingand companies here are building for regional and globalreach.DeFi & Crypto: A Growing FrontierOn the digital finance frontier, the momentum aroundcrypto and DeFi can’t be ignored. Data shows thatcrypto app downloads in the UAE nearly tripled andCA. Sanskar [email protected]

914 Ahmedabad Chartered Accountant Journal January, 2026TMthe country is rapidly emerging as a top global cryptofriendly jurisdiction.Government regulators like VARA, DFSA, and othershave created frameworks that allow regulated cryptoactivity to flourish, while also ensuring safety andcompliance. Institutions and investors are increasinglyengaging with stablecoins, tokenized assets, andblockchain-enabled financial services.This combination of institutional confidence and retailadoption is unique & making the UAE a fertile groundfor DeFi innovators who can work within clearregulations and still push boundaries.Real-World Integration of AI & FinTech with MyObservationsOn the ground in Dubai, the integration of AI into fintechisn’t just a theory because it’s visible everywhere:- Banks and fintech firms are using AI for customerservice, fraud monitoring, and credit scoringmoving beyond basic chatbots to real intelligentautomation.- Digital payments are the norm contactlesstransactions account for more than 80% of totalpayments, and local systems even support foreignpayment apps widely.- Discussions I had with founders here oftenrevolved around AI-enabled financial products,from AI risk models and personalized wealthmanagement tools to smart contract-enabled DeFiplatforms.These are not isolated cases but this is how businessis being conducted daily in the UAE today.What This Means for Indian ProfessionalsFor Indian professionals, especially those from finance,AI, tech and advisory roles, the UAE presents a realopportunity:- Career acceleration: jobs with cross-borderexposure, higher earning potential, and taxadvantages.- Entrepreneurial growth: UAE allows globalfounders to launch and scale, particularly in fintech,AI, and Web3.- Advisory demand: Chartered Accountants andfinance advisors are now needed more than everto guide cross-border structuring, compliance,digital asset management, tax planning, and AIrelated risk frameworks.This is not just about jobs migrating, it’s about newkinds of work being created and Indian talent is at theforefront of that.AI Is Not Replacing Jobs in UAE - It Is RedefiningThemA common fear globally is that AI will replace jobs.What I noticed in the UAE is a very different mindset.Here, AI is being positioned as:- A decision-support tool, not a decision-maker- A productivity enhancer, not a job eliminatorBanks, fintech firms and even government departmentsare using AI to:- Reduce turnaround time- Improve compliance accuracy- Enhance customer experienceThis creates new roles like AI auditors, modelvalidators, data governance specialists, AI riskadvisors: areas where finance and tech intersect. Forprofessionals with a CA + tech understanding, thisopens up an entirely new advisory dimension.ConclusionA Region Shaping the Future of FinanceThe evolution of the UAE’s technology and financelandscape reminds me of something I experiencedduring my visit: this country doesn’t just plan big but itexecutes big.From ambitious AI goals set out for 2031 to fintech andDeFi making real economic impact today, the UAE iscreating an ecosystem where innovation, regulation,and talent intersect.Indian professionals and entrepreneurs have a powerfulrole to play in this story and the time to engage is now.❉ ❉ ❉GULF Insights

Ahmedabad Chartered Accountant Journal January, 2026 915TM[I] IMPORTANT CASE LAWS:[1] Issue :Tax due being paid with interest prior to issuanceof notice, demand was to be set aside; matterremanded for fresh consideration: HCCase Law :Chandra Enterprises v. Dy. State Tax Officer [2025]181 taxmann.com355 (Mad.)Facts :The petitioner challenged the demandproceedings initiated by the jurisdictional officer,asserting that the outward supplies were wronglyreported in Form GSTR-3B due to which there wasa difference in the Form GSTR-1 and Form GSTR3B. It was contended that the disputed tax wascredited to the electronic credit ledger andapplicable interest was paid despite suchpayment, a notice in Form DRC- 01 was issuedfor the relevant period, and on account of nonresponse, an order was passed confirming tax,interest, and penalty, while the statutory appealwas dismissed on the ground of limitation. Thematter was accordingly placed before the HighCourt.Held :The High Court held that the return filed prima faciereflected evasion, followed by subsequentremittance of tax along with interest, whichwarranted closer examination under Section 73 ofthe CGST Act and the Tamil Nadu GST Act. TheCourt examined the scope of proceedings wheretax and interest had been paid prior to issuanceof notice and noted that such payment was arelevant factor requiring due consideration by theoriginal authority. It held that confirmation ofCA. Vishrut R. [email protected]. Bihari B. [email protected] and VAT Judgmentsand Updatesdemand without examining the effect of pre-noticepayment and the explanation offered by thepetitioner was unsustainable.[2] Issue :Appellate Authority lacks power to waivemandatory pre-deposit for appeals under GST Act:HCCase Law :Arup Kumar Chatterjee v. Asstt. Commissioner ofState Tax, Bureau of Investigation (South Bengal)[2025] 181 taxmann.com 359 (Cal.)Facts :The petitioner filed a writ petition challenging thedismissal of statutory appeal for failure to complywith the mandatory pre-deposit requirement. It wascontended that the demand was illegal, on whichbasis waiver of the pre-deposit was sought. It wasfurther submitted that the Appellate Authoritydismissed the appeal solely on the ground of nonpayment of pre-deposit, notwithstanding that anamount exceeding 10 per cent of the disputedtax had already been recovered by theDepartment. The matter was accordingly placedbefore the High Court.Held :The High Court held that the Appellate Authorityhas no power to waive the mandatory statutoryrequirement of pre-deposit prescribed underSection 107(6) of the CGST Act and the WestBengal GST Act. The Court held that the statutorypre-deposit is a condition precedent formaintainability of an appeal and cannot be relaxedby the Appellate Authority. It further held that sincean amount exceeding 10 per cent of the disputedtax had already been recovered by the

916 Ahmedabad Chartered Accountant Journal January, 2026TMGST and VAT - Judgements and UpdatesDepartment of Revenue, the statutory requirementof pre-deposit stood satisfied. The Court thereforequashed the impugned order and remanded thematter to the Appellate Authority with a direction tohear and decide the appeal on merits withoutinsisting on any further pre-deposit.[3] Issue :Interest can’t be levied under rule 133(3)(c)retrospectively on profiteering amount for pre01.04.2020 period:GSTATCase Law :DGAP v. Dange Enterprise [2025] 181 taxmann.com 491 (GSTAT - New Delhi)Facts :The Directorate General of Anti-Profiteering(DGAP)conducted an investigation and issued the firstreport to the New Delhi GST Appellate Authority.The report alleged that the respondent hadprofiteered an amount of Rs. 28,74,577, includingGST on the base profiteered amount. The matterwas remanded to the DGAP for furtherinvestigation.In the subsequent report, the DGAP quantified theprofiteered amount to be Rs. 4,57,683. Therespondent admitted the amount profiteered butdisputed the liability to pay any penalty andinterests thereon.Held :The Delhi GST Appellate Authority held that theenabling provision for interest under Rule 133(3)(c)was inserted in 2020 after the last date of thealleged profiteering. Thus, no interest was leviablefor the period before the amendment. The relevantpenal provision was introduced only in 2020.Therefore, no penalty could be imposed on therespondent. Further, the report submitted by theDGAP was accepted to the extent that therespondent profiteered an amount of Rs. 4,57,683only from recipients who are faceless. Therespondent was directed to deposit the profiteeredamount in the Consumer Welfare Fund createdby the Centre and States equally.[4] Issue :Registration to be restored where reasons for nonfiling of returns were not mala fide, subject topayment of all Dues: HCCase Law :Shriyaa Enterprises v. State Tax Officer [2025] 181taxmann.com 655 (Bom.)Facts :The petitioners challenged the cancellation of theirregistration by the jurisdictional officer under theCGST Act on the ground of non-filing of returns fora continuous period of six months. It wassubmitted that one petitioner had undergone acardiology-related medical procedure. At thesame time, the other faced severe financialconstraints, resulting in the non-filing of returnswithin the prescribed time. It was affirmed that theywere ready and willing to discharge the entire taxdues, along with applicable interest and penalties,for the relevant periods within 15 days from thedate of intimation. The matter was accordinglyplaced before the High Court.Held :The High Court held that the explanations offeredby the petitioners for non-filing of returns did notappear to be mala fide or unreasonable,particularly since the default periods wereproximate to and overlapped with the COVID-19pandemic. The Court submitted that there wereno allegations of unlawful activity or revenue fraudby the petitioners. The Court, upon construingSection 29 of the CGST Act held that registrationmay be restored where sufficient cause exists andcompliance is undertaken. It was directed thecancellation orders shall be quashed.[5] Issue :AAR can’t rule on liability to pay GST if questionraised before it is out of its scope: AAR GujaratCase Law :63 Ideas Infolabs (P.) Ltd., In re /2025|181taxmann.com 431 (AAR - Guj.)

Ahmedabad Chartered Accountant Journal January, 2026 917TMFacts :The applicant engaged in wholesale trading ofagricultural produce and staples across India, haddeveloped a supply chain management platformaccessible through its website. It was submittedthat consideration for such supply of serviceswould be received from foreign clients in the formof non-voting, irredeemable preference sharesissued by the overseas entity. The applicantsought an advance ruling on whether receipt ofconsideration in such form would fulfil therequirement of receipt of consideration inconvertible foreign exchange and, consequently,whether there would be no liability to pay GST onthe supply of services to overseas clients. Thematter was accordingly placed before the Authorityfor Advance Ruling (AAR).Held :The AAR held that the primary issue raised by theapplicant pertained to whether export proceedsreceived in the form of non-voting, irredeemablepreference shares of a foreign entity satisfy thecondition of receipt of consideration in convertibleforeign exchange as per Section 2(6) of the IGSTAct. It was held that this foundational question doesnot fall within the scope of matters on which anadvance ruling can be pronounced under Section97 of the CGST Act. It was further held that unlessthe primary issue relating to convertible foreignexchange is decided, the consequential questionregarding GST liability on the supply of servicescannot be examined.[6] Issue :GST demand on Government enterprise’s leaseproceeds set aside where Finance Ministryclarified no tax due: HCCase Law :NBCC (India) Ltd. v. Addl. Commissioner CGSTDelhi South [2025] 181 taxmann.com604 (Delhi)Facts :The petitioner, a government enterprise, undertookthe redevelopment and executed a memorandumof understanding (MOU) with the Ministry of UrbanDevelopment. An escrow agreement appointedthe petitioner as the agency to manage leaseproceeds, which were credited to escrow foronward transfer to the Ministry or the ConsolidatedFund. The receipts originated from GovernmentDepartments, autonomous bodies, PSUs, andothers. The Directorate General of GST Intelligenceinvestigated the project and the escrowcollections, confirming a GST demand on theescrow receipts. It was contended that the GSTdemand was unsustainable. The matter wasaccordingly placed before the High Court.Held :The High Court held that the GST demand raisedlacked merit in view of the Ministry of Finance’soffice memorandum. The Court observed that thememorandum clarified the treatment of escrowreceipts from redevelopment projects andaddressed the applicability of exemption andreverse charge mechanisms under Section 9 ofthe CGST Act. It was concluded that the petitioner’sclaims were consistent with the memorandum andthat the GST demand could not be sustained.Consequently, the Court set aside the impugnedorder.(SOURCES: CORPORATE PROFESSIONAL TODAY)❉ ❉ ❉GST and VAT - Judgements and Updates

918 Ahmedabad Chartered Accountant Journal January, 2026TMITC NOT ADMISSIBLE ON GST PAID ON GOODSAND SERVICES USED FOR CONSTRUCTION OFWAREHOUSE: GUJARAT AAR – The Case of M/s.Sambhav WarehousingAdvance Ruling No. GUJ/GAA/R/2025/62 dated 23-12-2025 in the case of M/s. Sambhav Warehousing.Brief Facts:• M/s. Sambhav Warehousing (the Applicant),registered under the Goods and Services Tax lawwith GSTIN 24AEJPJ0437K2ZK, is engaged in thebusiness of providing taxable storage andwarehousing services. With a view to expandingits business operations, the Applicant proposed toconstruct a warehouse or shed, which would beused either for providing storage and warehousingservices on its own account or for leasing the sameto third parties for commercial use. For this purpose,the Applicant intended to procure variousconstruction materials such as cement, steel,beams, columns, and other structural inputs, andalso to avail construction and allied services,including works contract services.• The Applicant sought clarity on the admissibilityof Input Tax Credit (ITC) on GST paid on theabove goods and services used for constructionof the warehouse. The Applicant acknowledgedthat, under the existing provisions of Section 17(5)of the CGST Act, 2017, ITC on construction-relatedgoods and services has traditionally been treatedas blocked credit, even when such constructionis undertaken in the course or furtherance ofbusiness. However, reliance was placed on thejudgment of the Supreme Court in ChiefCommissioner of CGST v. Safari Retreats Pvt.Ltd., wherein the Court had applied the principleof functional use to interpret the term “plant” underSection 17(5)(d). The Applicant contended thatsince the warehouse constitutes a core businesstool for providing taxable warehousing servicesor for leasing, it should qualify as “plant”, therebypermitting ITC.Question:The Applicant sought an advance ruling on whetherInput Tax Credit is admissible on goods and servicesutilized for the construction of a warehouse or shed,from which storage and warehousing services areprovided in the course or furtherance of business orwhich is leased to tenants.Findings and Arguments:• The Authority examined the provisions of Section17(5) of the CGST Act, 2017, which override thegeneral entitlement to ITC under Section 16 andspecifically restrict ITC on certain goods andservices. In particular, Section 17(5)(d) blocks ITCon goods or services received for the constructionof an immovable property (other than plant andmachinery) on one’s own account, even when suchgoods or services are used in the course orfurtherance of business.• The Applicant accepted that, prima facie, theconstruction of a warehouse amounts toconstruction of an immovable property. However,it was argued that the functional use of thewarehouse being indispensable for providingtaxable storage and warehousing services or forCA. Monish S. [email protected]

Ahmedabad Chartered Accountant Journal January, 2026 919TMleasing should qualify the structure as “plant”,thereby taking it outside the ambit of blocked credit.Heavy reliance was placed on the Supreme Court’sruling in Safari Retreats Pvt. Ltd., wherein the Courtinterpreted the expression “plant or machinery”used in Section 17(5)(d) and held that, in theabsence of a statutory definition, the term “plant”must be understood by applying the functionalitytest depending on the nature of the business. Inthat case, the Supreme Court had observed that ashopping mall constructed solely for leasingpurposes could, depending on facts, qualify as“plant”, thereby permitting ITC on goods andservices used for its construction.• The Authority, however, observed that the legalposition had undergone a material changesubsequent to the Safari Retreats judgment. TheLegislature, through Section 124 of the FinanceAct, 2025, amended Section 17(5)(d) bysubstituting the words “plant or machinery” with“plant and machinery”, with retrospective effectfrom 01.07.2017. Further, an explanatory provisionwas inserted to clarify that the amendedexpression would apply notwithstandinganything contrary contained in any judgment,decree, or order of any court or tribunal, therebyexpressly nullifying the functional use interpretationlaid down in Safari Retreats for the purposes ofSection 17(5)(d).• The Authority emphasized that the expression “plantand machinery” is specifically defined in theExplanation to Section 17, which categoricallyexcludes land, buildings, and other civilstructures from its scope. Applying the amendedprovision and the statutory definition, the Authorityheld that a warehouse or shed is undeniably abuilding and a civil structure, and therefore cannotbe treated as “plant and machinery” for the purposesof Section 17(5). Consequently, GST paid onconstruction materials such as cement, steel,beams, and columns, as well as GST paid onconstruction and works contract services, squarelyfalls within the ambit of blocked credit.• The Authority further observed that the manner inwhich the warehouse is used whether forproviding warehousing services or for leasingdoes not alter the nature of the immovableproperty, nor does it affect the applicability ofSection 17(5)(d).Ruling:• After considering the facts of the case, thesubmissions made by the Applicant, and theapplicable statutory provisions, the GujaratAuthority for Advance Ruling held that Input TaxCredit is not admissible on goods and servicesused for the construction of a warehouse or shed.The Authority ruled that the procurement ofconstruction materials such as cement, steel,beams, columns, and other structural inputs, aswell as construction and works contract services,is squarely covered by the blocked creditprovisions of Section 17(5)(d) of the CGST Act,2017.• The Authority observed that a warehouse or shedconstitutes an immovable property in the natureof a building or civil structure, which is expresslyexcluded from the definition of “plant andmachinery” as provided in the Explanation toSection 17 of the CGST Act. Accordingly, eventhough the warehouse is used for providing taxablestorage and warehousing services or is leased totenants in the course of business, such usage doesnot alter the essential character of the property asan immovable structure.• The Authority further held that the purpose ormanner of use of the warehouse whether for selfuse in providing warehousing services or forleasing has no bearing on the eligibility of ITC,since Section 17(5)(d) blocks credit based on thenature of the property constructed and not on itssubsequent commercial exploitation. The Authorityalso clarified that the legislative amendmentsintroduced by the Finance Act, 2025, substitutingthe words “plant or machinery” with “plant andmachinery” and overriding judicial precedents,Advance Ruling under GST

920 Ahmedabad Chartered Accountant Journal January, 2026TMleave no scope for applying the functional use testpropounded in the Safari Retreats judgment.• In view of the above, the Authority conclusively ruledthat Input Tax Credit of GST paid on goods andservices used for construction of the warehouseor shed is not available to the Applicant,irrespective of the fact that the constructedwarehouse is used for making taxable outwardsupplies of storage and warehousing services oris given on rent. The question raised by theApplicant was accordingly answered in thenegative.Comments:• This ruling reinforces the strict and literalapplication of Section 17(5)(d) of the CGST Actand confirms that ITC on construction ofimmovable property remains blocked,notwithstanding the business use of such property.A key takeaway from the ruling is the legislativeoverride of the Safari Retreats judgment. Whilethe Supreme Court had introduced flexibilitythrough the functional use test, the Finance Act,2025 has decisively curtailed this interpretationby mandating the application of the statutorydefinition of “plant and machinery”.• The ruling provides important clarity towarehousing, logistics, real estate, and leasingbusinesses, which often incur substantial GST onconstruction costs. Such GST now clearly formsAdvance Ruling under GSTpart of the embedded cost, with no correspondingITC benefit. The decision also highlights the limitedprecedential value of judicial relief onceretrospective legislative amendments areintroduced, reaffirming the supremacy of legislativeintent in GST law.• From a practical standpoint, taxpayers planningwarehouse or infrastructure projects must factor inthe complete non-availability of ITC onconstruction inputs and services while evaluatingproject viability, pricing strategies, and long-termreturns.Conclusion:The Gujarat AAR has unequivocally held that Input TaxCredit is not admissible on goods and services usedfor construction of warehouses, even when suchwarehouses are used for taxable outward supplies.The ruling reflects the post–Finance Act, 2025 positionof law and serves as a critical reference point forbusinesses engaged in construction-linkedcommercial activities.❉ ❉ ❉

Ahmedabad Chartered Accountant Journal January, 2026 921TMIND AS InsightsNote on Major Changes in the Presentation ofFinancial Statements Due to Ind AS 118:Presentation and Disclosure in FinancialStatementsThe National Financial Reporting Authority (“NFRA”),in its 22nd meeting held on 22 December 2025,approved the draft of Ind AS 118, “Presentation andDisclosure in Financial Statements”. This standard isdesigned to enhance the communication of financialinformation, with a particular focus on the statementof profit and loss.NFRA has decided to suggest MCAand SEBI to consider any required changes inSchedule III of Companies Act 2013 and circular orguidance that may be required to be carried out bySEBI in consonance with the notification of Ind As118, as and when required.Ind AS 118 does not alter the measurement of financialperformance but significantly impacts the presentationand disclosure of such performance. The standard aimsto improve financial reporting by mandating:- The presentation of newly defined subtotals in profitor loss;- Disclosures regarding management-definedperformance measures; and- Enhanced requirements for the grouping(aggregation and disaggregation) of information. Ind AS 118 replaces Ind AS 1, Presentation of FinancialStatements. Consequently, the requirements in Ind AS1 have been:- Replaced by new requirements in Ind AS 118;- Transferred to Ind AS 118 with only limited wordingchanges; or- Moved to amended Ind AS 8, Basis of Preparationof Financial Statements, or Ind AS 107, FinancialInstruments: Disclosures, with only limited wordingchanges. There are also consequentialamendments to other Ind ASs. Effective Date:Globally, IFRS 18 is effective for accounting periodsbeginning on or after 1 January 2027. In India, theproposed effective date for Ind AS 118 is for annualreporting periods beginning on or after 1 April 2027. Summary of Key Changes:1. Changes in the Profit or Loss Section of theStatement of Profit and Loss:Entities are required to present two additionalsubtotals in the profit and loss section:- Operating profit or loss; and- Profit or loss before financing and incometaxes (unless prohibited in specificcircumstances).These subtotals provide a consistent structure,improving comparability without affecting themeasurement of financial performance or theoverall profit figure. Categories for Classifying Income and Expenses:Income and expenses in the profit or loss sectionmust be classified into five categories:a) Operating categoryb) Investing categoryc) Financing categoryd) Income taxes categoryCA. Jaydeep [email protected]. Dipen [email protected]

922 Ahmedabad Chartered Accountant Journal January, 2026TMe) Discontinued operations categorya) The operating category is the default andincludes all income and expenses notclassified elsewhere. It provides acomprehensive view of a company’soperations, including both main and additionalbusiness activities, unless they meet criteriafor other categories. Presentation andDisclosure of Expenses in the OperatingCategory:Expenses must be presented in a structuredsummary, classified by:- Nature (e.g., raw materials, salaries,advertising costs); or- Function (e.g., cost of sales, distributioncosts, administrative expenses).Companies must choose the classification thatprovides the most useful information toinvestors, considering what best representsprofitability drivers and internal managementreporting. If expenses are classified byfunction, additional disclosures are requiredfor depreciation, amortisation, employeebenefits, impairment losses, and inventorywrite-downs. b) Investing Category:This category enables separate analysis ofreturns from stand-alone investments,including:- Income and expenses from assetsgenerating returns independently ofbusiness activities (e.g., investmentproperty rentals, dividends fromshares);- Income and expenses from cash, cashequivalents, and investments inassociates and joint ventures. c) Financing Category:This category, along with the subtotal for profitbefore financing and income taxes, allowsInd AS Insightsanalysis of performance before financingeffects. It includes:- Income and expenses on liabilities frompure financing transactions (e.g., bankloans, bonds);- Interest expenses on all liabilities,including leases and pensions. d) and e)Income Taxes and DiscontinuedOperations Categories:- The income taxes category includesincome tax expense or income as perInd AS 12.- The discontinued operations categoryincludes income and expenses fromdiscontinued operations as per Ind AS105. 2. Entities with Specified Main Business Activities:Entities primarily engaged in investing or financing(e.g., insurers, banks) must classify related incomeand expenses in the operating category, even ifthey would otherwise be classified as investingor financing for other companies. 3. Disclosures about Management-DefinedPerformance Measures (MPMs):The standard introduces a definition for MPMs andrequires disclosure of all such measures in asingle note to enhance transparency. MPMs aresubtotals of income and expenses used in publiccommunications outside financial statements toconvey management’s view of financialperformance. Disclosures must include:- Reconciliation to the most comparablesubtotal in Ind AS 118 or other Ind ASs;- Description of the measure’s purpose andcalculation;- Explanation of changes in MPMs or theircalculation;

Ahmedabad Chartered Accountant Journal January, 2026 923TM- Statement on the non-comparability of MPMswith similarly labelled measures by othercompanies. 4. Enhanced Requirements for Aggregation andDisaggregation of Information:Primary financial statements include thestatement of profit and loss, balance sheet,statement of changes in equity, and statement ofcash flows. The standard provides principles fordetermining whether information should be in theprimary statements or notes, and for theappropriate level of detail. Aggregation anddisaggregation must not obscure materialinformation, and items should be grouped orseparated based on shared or distinctcharacteristics. The use of the label ‘other’ isrestricted to cases where no more informativelabel is available. 5. Consequential Amendments to Other Ind ASs:- Ind AS 7 (Statement of Cash Flows): Alignswith global amendments, requiring theoperating profit subtotal as the starting pointfor the indirect method and specificclassification of cash flows for entities withmain business activities in investing orfinancing.- Ind AS 33 (Earnings per Share): Additionalearnings per share disclosures are permittedInd AS Insightsonly if based on totals or subtotals identifiedin Ind AS 118 or an MPM.- Ind AS 34 (Interim Financial Reporting):Requires disclosure of MPMs in interimfinancial statements, with other changesapplicable to condensed statements in interimreports. Conclusion:The introduction of Ind AS 118 marks a significantadvancement in the presentation and disclosure offinancial statements in India. By enhancing thestructure, transparency, and comparability of financialinformation, the standard aims to providestakeholders with clearer insights into a company’sfinancial performance. The changes, effective from 1April 2027, will require companies to adapt theirreporting practices, ensuring that financial statementscontinue to meet the evolving needs of users andalign with global best practices. ❉ ❉ ❉

924 Ahmedabad Chartered Accountant Journal January, 2026TMMCA Updates:1. The Companies (Specification of DefinitionDetails) Amendment Rules, 2025:Vide these amendment rules, the MCA hasamended the financial thresholds for determiningthe status of a company as a “small company” bysubstituting the clause (t) of Rule 2(1) in theCompanies (Specification of Definition Details)Rules, 2014:“(t) For the purposes of sub-clause (i) and subclause (ii) of clause (85) of section 2 of theAct, paid up capital and turnover of the smallcompany shall not exceed rupees ten croresand rupees one hundred croresrespectively.”[F. No. Policy-01/5/2022-CL-V-MCAdated01.12.2025]2. Relaxation of additional fees and extension oftime for filing of Financial Statements andAnnual Returns under the Companies Act, 2013- reg.:The MCA has allowed the companies to completetheir annual filings [e- Forms MGT-7, MGT-7A, ÀÎÑ4, ÀÎC-4 CFS, AOC-4 NBFC (Ind AS), AOC-4 CFSNBFC (Ind AS), AOC4 (XBRL)] pertaining to FY2024-25 up to 31st January, 2026 without paymentof additional fees.[F. No. Policy-17/111/2022-CL-V-MCAdated30.12.2025]IFSC Updates:3. Frequently asked questions (FAQs) under theIFSCA (Techfin And Ancillary Services)Regulations, 2025:The International Financial Services CentresAuthority (IFSCA) has issued detailed FAQs onthe TechFin and Ancillary Services (TAS)Regulations, 2025. These FAQs serve as apractical guide for applicants and existing serviceproviders. These FAQs are not interpretation oflaw. They are intended to provide a simplifiedexplanation of processes, terms, andrequirements under the IFSCA (TechFin andAncillary Services) Regulations, 2025. In case ofany disparity between these FAQs and theprovisions of the relevant Acts, Regulations,Guidelines, Circulars, etc., the latter shall prevail.For official legal reference, stakeholders mustconsult the Acts, Regulations, Guidelines, andCirculars available on the IFSCA websitewww.ifsca.gov.in.[Efile 3346/ IFSCA-TAS/1/2025dated 12.12.2025]4. Computation of liquid net worth under IFSCA(Capital Market Intermediaries) Regulations,2025 - Clarifications:With reference to the Computation of liquid networth under IFSCA (Capital Market Intermediaries)Regulations, 2025, the IFSCA has clarified asunder:a) Base minimum capital and interest freedeposits maintained by the registered brokerdealers and the registered clearing memberswith the recognised stock exchanges andclearing corporations respectively shall beconsidered as part of liquid net worth;b) Margins maintained by the registered brokerdealers / clearing members in relation to theirtrading activities in the IFSC or Global Access,as the case may be, shall be considered aspart of liquid net worth; andCA. Naveen [email protected]

Ahmedabad Chartered Accountant Journal January, 2026 925TM3. If an Insolvency Professional (IP) submitsa Form before the due date andsubsequently modify the same before thedue date, no fee shall be applicable, asthe computation of fee under Regulation40B(4) will commence only after the lastdue date of the Form.II. Commencement of levy of fee for delayedfiling of Forms under Regulation 40B of theCIRP Regulations:In accordance with the provisions ofRegulation 40B of the Insolvency andBankruptcy Board of India (InsolvencyResolution Process for Corporate Persons)Regulations, 2016, it is hereby notified thatfor all forms that were due on or before 31stDecember, 2025, and are submitted after thesaid date, whether by correction, updation,or otherwise, shall be accompanied by a feeof Rs. 500 (Rupees five hundred only)(excluding GST) per Form for each calendarmonth of delay, until the date of submission.[Circular No. IBBI/CIRP/89/2025 dated18.12.2025]7. Format for “Statement of Beneficial Ownership”and Affidavit under Regulation 38(3A) of the CIRPRegulations:Sub-regulation (3A) of regulation 38 of theInsolvency and Bankruptcy Board of India(Insolvency Resolution Process for CorporatePersons) Regulations, 2016, as notified on 23rdDecember, 2025, inter alia mandates that everyresolution plan must contain a statement ofbeneficial ownership and an affidavit declaringwhether the resolution applicant is eligible ornot eligible for the benefit under section 32A ofthe Code, in the specified formats.The IBBI has specified such formats. For detailedtext, please refer:https://ibbi.gov.in//uploads/legalframwork/5c12fc0543280761fec1424710116fc9.pdf[Circular No. IBBI/CIRP/90/2025 dated29.12.2025]c) While computing “net worth” of an entity,liabilities are not considered as per definitionof “net worth” provided in the CMI Regulationsand accordingly any liability shall be excludedfor the purpose of computation of “liquid” networth.[F. No. IFSCA-PLNP/80/2024-Capital Marketsdated 30.12.2025]5. IFSCA (CMI) Regulations, 2025 – Extension ofdeadline for implementing revised norms forPrincipal Officer and Compliance Officer:The IFSCA has extended the deadline forimplementation of sub regulations (2), (3) and (8)of regulation 9 of the CMI Regulations up toJanuary 15, 2026 or till the date of publication ofthe IFSCA (Capital Market Intermediaries)(Amendment) Regulations, 2026 in the OfficialGazette, whichever is earlier.[F. No. IFSCA-PLNP/80/2024-Capital Marketsdated 31.12.2025]IBBI Updates:6. Introduction of Modification Utility &Commencement of levy of fee for delayed filingof Forms under Regulation 40B of the CIRPRegulations:I. Introduction of Modification Utility in CPForms:1. The revised forms have been availableon the IBBI website since 1 June 2025.Subsequently, several InsolvencyProfessionals (IPs) have soughtpermission to modify forms alreadysubmitted, for rectifying errors oromissions, if any. To facilitate suchcorrections and to ensure timely updationof regulatory filings, a utility enablingmodification of forms has now beenintroduced the IBBI electronic platform.2. Where an IP identifies any deficiency ina submitted form, the IP may use themodification utility on the portal to makethe necessary modification, authenticatedthrough the OTP-based process.Corporate Law Update

926 Ahmedabad Chartered Accountant Journal January, 2026TMThe SEBI has reviewed the threshold andsimplified the documentation for issuance ofduplicate securities certificates. The SEBI has:- increased the threshold for simplifieddocumentation from the current Rs. Five Lakhsto Rs. Ten Lakhs;- prescribed a standardised Affidavit-cumIndemnity bond;- rationalised the documentation for securitieshaving value of more than Rs. Ten Lakhs; and- done away with notarisation of the Affidavitcum-Indemnity bond for cases involvingsecurities with value up to Rs. Ten Thousand.For detailed text, please refer to:https://www.sebi.gov.in/legal/circulars/dec-2025/ease-of-doing-investment-review-of-simplificationof-procedure-and-standardization-of-formats-ofd o c u me n t s - f o r - i s s u a n c e - o f - d u p l i c a t e -certificates_98668.html[Circular No. HO/38/13/11(3)2025-MIRSD-POD/I/1102/2025 dated 24.12.2025]❉ ❉ ❉SEBI Updates:8. Relaxation on geo-tagging requirement in Indiafor NRIs while undertaking re-KYC:The requirement of physical location being in Indiahas been relaxed for NRI clients to undertake duediligence through digital mode and Para 51 ofMaster Circular on KYC has been modified asunder:The App shall also have features of random actioninitiation for client response to establish that theinteractions are not pre-recorded along with timestamping and geo-location tagging to ensure therequirement like physical location being in Indiaetc. are also implemented. The requirement ofphysical location of client being in India during digitalon boarding shall be relaxed for undertaking re-KYCfor existing clients.The App shall also ensure that the GPS location(latitude and longitude) captured by the intermediarymatches with the latitude and longitude of countrygiven in Proof of Address given by the client. Theapp shall prevent connections from spoofed IPaddress.[Circular No. HO/38/30/12(1)2025-MIRSD-SECFATF dated 10.12.2025]9. Ease of doing investment - Review ofsimplification of procedure and standardizationof formats of documents for issuance ofduplicate certificates:Corporate Law Update

Ahmedabad Chartered Accountant Journal January, 2026 927TMRERA “Promoter” Definition and Co-op SocietiesThe Real Estate (Regulation and Development) Act,2016 (“RERA”) uses a very broad definition of“promoter”. Under Section 2(zk), a promoter can beany person who builds or causes a building for sale –including land developers, contractors, and even cooperative housing bodies. Notably, RERA explicitlyincludes “primary co-operative housing societies whichconstruct apartments or buildings for their membersor allottees” within “promoter”. In other words, anysociety that undertakes development for sale tomembers or others falls within RERA’s scope bydefinition.However, being named a promoter under RERA is notautomatic. Courts have stressed that a society’s actualrole and agreements must be examined. Keyquestions include: Did the society sell flats or plotsdirectly (or authorize them to be sold)? Was the societynamed as a promoter in the project’s RERAregistration? Did it share in the project’s area orrevenue? Or was it merely a landowner that contracteda developer to build and sell? Answers to thesequestions determine whether a society assumespromoter obligations under RERA.Key Factors: Contractual Role and Registration- Contractual Privity: If the society has no direct salecontract with flat-buyers, it usually escapes promoterliability. For example, the Maharashtra Real EstateAppellate Tribunal recently held that a society whichterminated its development agreement and had nosales contracts with third-party buyers could not betreated as a RERA promoter. Likewise, the BombayHigh Court in Goregaon Pearl found that a society(owner of the land) was not liable for a developer’sobligations under RERA when the society itself hadno privity with flat-purchasers. In short, if third-partybuyers contracted only with the developer (and notwith the society), the society generally avoidsautomatic promoter status.- Registration and Sharing Arrangements: RERArequires promoters to register projects online anddisclose all co-developers or revenue-sharingparties. Maharashtra RERA (MahaRERA) issued acircular clarifying that landowners or investors entitledto a share of a project must be listed as “promoter/co-promoter – area or revenue sharing” whenregistering. Courts have enforced this: in GoregaonPearl, the Bombay High Court noted that only thoseco-owners explicitly declared as promoters in theregistration are treated as such. Since the societythere was not listed at all, it could not be forced intopromoter liabilities by RERA. Bottom line: A societywithout an express area-share declaration at RERAregistration normally will not be deemed a promotermerely by owning land.- Principal-Agent Relationship: Some developmentagreements give the developer a power of attorney(POA) to sell flats. Even where such POAs exist,courts have cautioned that society liability underRERA turns on whether the society itself holds outas a developer to buyers. In Shivneri CHS (aMahaREAT case, 2025), the tribunal found thatalthough the society had granted a POA, it did not infact “sell” to third parties or have contractual ties withthem, so it was not automatically liable as a promoter.MahaREAT drew on earlier Bombay High Courtrulings (e.g. Vaidehi Akash, Goregaon Pearl) to holdthat without privity, a society generally avoidspromoter status – the developer (and its own listingas promoter) remains the point of contact for buyers.- Self-Development by the Society: A different ruleapplies if the society actually builds or sells unitsitself. In that case, RERA’s definition clearly applies.For instance, after terminating a defaulting developer,CA. Manan Doshi [email protected] Corner

928 Ahmedabad Chartered Accountant Journal January, 2026TMif a society completes construction and signs saleagreements with new buyers, the society iseffectively constructing “for sale to the general public”and thus qualifies as promoter. In the Shivneri matter,the tribunal observed that the society had later soldflats and shops on its own and had, in effect, actedas a de facto developer. As a result, thosesubsequent sales did bring the society within Section2(zk) – meaning it should have registered the projectunder RERA when doing so.Recent Case Law (2023–2025)- Maharashtra – Shivneri CHS (MahaREAT, 2025): Asociety on MHADA lease hired a developer, thencancelled the deal due to non-performance. Thirdparty allottees sued the society after it resumedcompletion and sold some units. The MahaRERAAuthority had labeled the society a joint promoter(so it must refund buyers). On appeal, MahaREATdistinguished the society’s two roles. It held that forthe original flat-purchasers (dealing only with theerstwhile developer), the society was not a promoter– it had no sales contracts or obligations to thosebuyers. In line with Goregaon Pearl and VaidehiAkash, MahaREAT said those buyers could notenforce rights against the society once theagreement was terminated. Conversely, for the newsales the society itself made after termination,MahaREAT noted the society effectively became apromoter. Because it built and sold to new buyerswithout registration, the society violated Section 3 ofRERA and could be penalized. **(Takeaway:Societies should carefully distinguish pre- and posttermination sales: existing buyers owe obligationsonly from the developer; but any flats sold by thesociety after should comply with RERA registrationand escrow requirements.)- Bombay High Court – Goregaon Pearl CHSL v.Paryekar (2021): The court reaffirmed that neitherRERA nor MOFA automatically tag the landowner(society) as promoter absent clear role. Itemphasized that Section 2(zk) of RERA must be readwith the explanation: if developer and seller aredifferent, both are promoters. But crucially, it notedthat RERA’s text (and MahaRERA’s circular) makesany promoter status of a landowner contingent onthe registration details. “None of these provisionsmake the owner … of the land … liable for complyingwith the obligations of the developer under RERA,”the court said, unless that owner was explicitly shownas a promoter at registration. Since the society inGoregaon Pearl was not named as a promoter orarea-sharing partner online, it was not subject to thedeveloper’s obligations.- Bombay High Court – Vaidehi Akash (2014): Anearly Bombay HC decision (under the old MOFA law)held similarly that when a society’s developmentagreement is terminated, third-party buyers have noclaim against the society. Relying on Vaidehi, courtshave often said that RERA did not intend to changethis settled principle.- Delhi High Court – Revanta Multi State CGHS Ltd.v. Sunny Sapen (May 2025): This recent caseaddressed a society formed under the Delhi landpooling policy. The society enrolled thousands ofmembers (who paid for flats it promised to build aftersurrender of land to DDA), but then failed to deliver.Delhi RERA ordered the society (as promoter) torefund buyers, and the Appellate Tribunal agreed.The Delhi High Court also upheld that the society fellsquarely within RERA’s definition of promoter. Thecourt noted that here the society’s “membership”drive was really a guise for property sales: it issuedbrochures and allotment letters, promisedpossession dates, and collected money for specificflats (even though it had not yet developed land).These facts persuaded the court that the society wasacting as a real-estate developer, not just a benignland-pooler. Thus the society was “covered by themeaning of ‘Promoter’ in Section 2(zk)” and hadviolated RERA by not registering the project orobtaining a commencement certificate. **(Takeaway:If a society actively markets and sells flats – evenunder the label of membership – it will be treated asa RERA promoter, as Delhi HC confirmed.)- Bombay High Court – Wadhwa Group Housing v.Vijay Choksi (Feb 2024): Though not a society case,Wadhwa is important for co-promoter liability. There,a joint development agreement named twopromoters (one a builder, one a co-promoter society),and buyers paid money to only one. The court heldGujRERA Corner

Ahmedabad Chartered Accountant Journal January, 2026 929TMthat both promoters are jointly and severallyresponsible under RERA for refunding buyers if theproject fails. It stressed that the RERA Act does notcarve out different duties for each promoter basedon the share of built-up area – the promoter liabilityis overall, with joint-and-several responsibility forcompletion and returns. In practice, this means thatif a society is identified as a promoter or co-promoterin registration, it cannot hide behind internalagreements; it must answer to allottees as copromoter.Nationwide ImplicationsAlthough many leading cases have arisen inMaharashtra, the principles apply across India. RERAis a central law, so any state RERA authority or tribunalwill look at the Act’s text and these reported rulings.Co-operative societies nationwide that engage inredevelopment or land-pooling should note:- Clarity of Status: Societies must be clear abouttheir contractual role. If engaging a developer, thesociety should ensure that development agreementsand sale agreements explicitly limit the society’sobligations (e.g. no liability beyond handing overland). Importantly, only those landowners who requestto be named as promoter (and have a sharingarrangement) should be listed at registration.- Registration Compliance: If a society (or itsmembers) will take an area/revenue share, the societyneeds to be declared as promoter/co-promoterunder RERA at the outset. Failure to do so can forfeitpromoter status – but this is a one-sided “defense”for society. Conversely, if a society does selfdevelop or sell units, it must register the project withRERA, open the required bank account, and abideby all RERA norms (including 70% escrow deposits,disclosure of plans, etc.), just like any developer.- Risk of RERA Action: If a society wrongly assumesit is not a promoter and sells units without RERAcompliance, it can face penalties (Section 59) andorders to refund buyers. Even if not a promoter,society officers should be prepared to defend anyconsumer complaint under RERA or consumerforums.- Delegated Authority: Societies often givedevelopers a POA. But even with a POA, courts willlook at the reality of who “did what”. Giving a blanketpower to collect payments does not automaticallymake the society a promoter, unless it also activelysold or built.Key Takeaways for Co-operative Societies- Seek Legal Clarity: Treat the question of “promoterstatus” as a crucial legal review duringredevelopment. Get expert advice on agreementsand RERA compliance.- Privity Matters: Ensure that third-party buyers signagreements only with the developer (not the society)if the society wants to avoid liability. Conversely, ifthe society will sell any flats, handle those as a distinctRERA project.- Registration Vigilance: Always register the projectwith the RERA authority before marketing or sellingany units – whether the society or a developer is thepromoter. If the society expects any share, insist onbeing named properly in registration.- Financial Compliance: If acting as promoter,maintain separate RERA accounts and follow escrowrules. This is especially important for CAs advisingsocieties on cash flows. Non-compliance can leadto hardship orders (refunds, interest) which coulddestabilize society finances.- Monitor Appellate Trends: New judgments areemerging (as above). Societies should stay updated– for example, the Shivneri and Revanta rulings signalthat courts will enforce promoter obligations basedon actual conduct, not just labels.In summary, co-op housing societies engaging inredevelopment must carefully navigate RERA’s broadpromoter definition. By structuring agreementsproperly and complying when required, societies canprotect themselves and fulfill their financial obligationswithout unexpected liability. (All cited cases and RERAprovisions make clear that the society’s precise role– not merely its status as land-owner – determinespromoter liability.)❉ ❉ ❉GujRERA Corner

930 Ahmedabad Chartered Accountant Journal January, 2026TMSummary:Key M&A deal includes Gujarat Kidney & SuperSpeciality Hospital acquiring 100% Stake in Parekh’sHospital Pvt Ltd in Ahmedabad for Rs.79 Crores. Thisis one of the earliest hospital M&A deal of Gujarat andwe are happy to share that Vora Corporate Financeacted as exclusive financial advisor to Parekhs HospitalPvt. Ltd. in this deal. There is also a note on recentdeal activity in Hospital sector with breakdown of recentdeals by Hospital chains and private equity funds.India’s economy continues to demonstrate strongresilience, with real GDP growth at 7.4% in FY26,investment sustained at 30% of GDP, and a containedcurrent account deficit of 0.8% of GDP, reinforcing itsposition as the fastest-growing major economy amidglobal uncertainties. In December 2025, Indian equitymarkets reached a significant milestone as the Sensexand Nifty 50 touched fresh record highs early in themonth following a landmark 25-basis-point rate cut bythe RBI. The Sensex ultimately settled at 85,221 andthe Nifty 50 at 26,130, driven by a surprise upgrade inIndia’s GDP growth forecast to 7.3% and a “goldilocks”economic outlook.Mergers and Acquisitions (M&A) Key Deal:M&A: Gujarat Kidney & Super Specialty Hospitalacquires 100% Stake in Parekh’s Hospital Pvt Ltd inAhmedabad for Rs.79 CroresTransaction:- GKHSL acquired 100% of the equity share capitalof Parekhs Hospital Private Limited, based inAhmedabad, for a consideration of Rs.79 crore,comprising 2,55,000 equity shares of Rs. 10 each,making it a wholly owned subsidiary of theCompany.- The acquisition was funded through proceeds fromthe company’s successful Rs. 250.80 crore IPO inCA. Karan [email protected] 2025 and was undertaken pursuant tothe objects of the issue as disclosed in the IPOprospectus.About Parekhs Hospital:- Founded in 1967 by Dr. Ramesh Parekh, is adistinguished multi-speciality healthcare institutionheadquartered in Ahmedabad, Gujarat, with morethan 55+ years of clinical excellence and patientcentric care.- It offers a comprehensive range of healthcareservices spanning orthopaedics (joint, knee, hip,shoulder and elbow replacement), arthroscopy andsports injury treatment, trauma care, spine treatment,urology, gastroenterology, gynaecology, ENT,general surgery and more, all delivered with anemphasis on quality, accessibility and ethical patientcare.About Gujarat Kidney & Super Specialty Hospital(GKSSH):- Incorporated in 2019 and renamed Gujarat Kidney& Super Speciality Hospital Limited in 2023, GKSSHis a Vadodara-based super speciality provider with355 approved beds (250 operational) andadvanced ICUs, operating theatres, diagnostics,and 24×7 emergency services.

Ahmedabad Chartered Accountant Journal January, 2026 931TMCapital Market- The Company runs a network of seven multispeciality hospitals and four in-house pharmaciesacross Gujarat, offering secondary and tertiary careincluding surgery, orthopaedics, trauma,cardiology, nephrology, urology, gastroenterology,obstetrics and minimally invasive procedures.About Advisors:- Sale side advisor, Vora Corporate Finance, is thelargest Mid-Market Investment Bank based out ofGujarat specialising in Mergers & Acquisitions,Private Equity and debt fund raising.- The firm has concluded over 60+ transactionsincluding Acquisition of Atlas Life Sciences Pvt. Ltd.by Asahi Songwon Ltd., Restructuring of RubberKing Tyre Pvt. Ltd., M&A deal of Midas SanitarywarePvt. Ltd., valuation advisory to EzDIInc. in itsacquisition by AGS Health, Private Equity fundraising in Shree Orthocare Pvt. Ltd., fund raisingby Monosteel India Ltd. amongst others.Rationale:- The transaction aligns with the GKSL’s strategy toexpand its presence in Gujarat and strengthen itsportfolio of specialised healthcare services with aimto invest in established healthcare facilities,leveraging their existing patient base, staff,infrastructure and line of specialization/ operations,which is synergistic and complements its existingline of operations.- Parekhs Hospital Pvt. Ltd. has performed severalcomplex surgeries, won several awards and isoperational since more than 5 decades and will beimmediately value accretive to top line.- This acquisition gives GKSL an immediate footprintin the metropolitan city of Ahmedabad positioningthe company at the heart of the region’s medicaltourism and industrial growth bypassing the multiyear gestation period required for greenfielddevelopments. GKSL can leverage its experienceof integrating multiple hospitals and offer newerspeciality like robotics knee surgery.- This acquisition aligns with GKSL’s growth strategyof inorganic growth and complements its existingportfolio made up of several strategic acquisitionsacross central Gujarat including GujaratMultispecialty Hospital (Godhra) & amp; GujaratKidney Hospital (Vadodara) via business transferin FY24 and acquisitions of Surya Hospital; GujaratSurgical Hospital (Sept 2024) and AshwiniHealthcare (March 2025).

932 Ahmedabad Chartered Accountant Journal January, 2026TMCapital MarketRecent Deal Updates in the Hospital Sector:- Investment activity in the healthcare sector remainsstrong with focus on health tech, wellness andpharma services, with a clear shift towards earlyand mid-stage deals and scalable digital healthbusiness models.- India’s hospital market is registering strong growthon account of enhanced healthcare investments,government initiatives and rising demand for highclass healthcare facilities.- Hospital chains are increasingly focusing expansionstrategies on tier-two and tier-three cities to capturegrowing healthcare demand in these emergingmarkets. Rising income levels, improving healthawareness, and increasing health insurancepenetration in smaller cities are creating attractiveopportunities for organized healthcare delivery.• Some notable deals in Hospital sector include,Narayana Health acquiring 100% equity of UK-basedPractice Plus Group Hospitals from Bridgepoint for£188.78 million (Rs. 2,200 crore). In October 2025.(Link to the detailed article:https://vorafin.com/insights/ma-narayana-health-acquires-uks-practiceplus-group-hospitals-for-rs-2200-crore/)• In September 2025, Aster DM Healthcare acquiredan initial 5% stake in Quality Care India Ltd. (QCIL)from Blackstone and TPG, involving the acquisitionof 19 million QCIL shares for approximately Rs. 849/crore in exchange for 18.6 million Aster shares.(Link to the entire article: https://vorafin.com/insights/ma-blackstone-backed-care-hospitals-signeddefinitive-agreement-for-merger-with-dm-asterhealthcare/)• In August 2025, Rainbow Children’s Hospital Limitedacquired a 76% controlling stake in PratikshaWomen & Child Care Hospital, Guwahati, at anenterprise value of Rs. 171 crore. (Link to the entirearticle: https://vorafin.com/insights/ma-rainbowchildrens-medicare-acquires-76-stake-in-pratikshahospital-for-rs-171-crore/)

Ahmedabad Chartered Accountant Journal January, 2026 933TM• In July 2025, Manipal Hospitals entered into adefinitive agreement to acquire a controlling stakein Sahyadri Hospitals from Canada’s OntarioTeachers’ Pension Plan Board (OTPP) in atransaction valued at around Rs. 6,000 crore. (Linkto the entire article: https://vorafin.com/insights/mamanipal-hospitals-acquires-sahyadri-hospitals-atan-enterprise-value-of-rs-6000-crore/)• In April 2025, Ujala Cygnus, backed by PE firmGeneral Atlantic, announced a strategic partnershipto acquire a 60% controlling stake in AmandeepHospitals, marking its entry into Punjab with anestimated deal value of Rs. 400 to Rs. 500 crore.(Link to the entire article: https://vorafin.com/insights/ma-ujala-cygnus-acquires-controlling-stake-inpunjab-based-amandeep-hospitals/)· In February 2025, Fortis Healthcare Limited signeddefinitive agreements to acquire the 228-bedShrimann Superspeciality Hospital in Jalandhar,Punjab for Rs. 462 crore through slump sale. (Linkto the entire article: https://vorafin.com/insights/maf o r t i s - t o - a c q u i r e - j a l a n d h a r s - s h r i m a n n -superspeciality-hospital-for-53m/)• Private equity firms are also showing increasedinterest in large hospital chains and well as singlespeciality segments such as eye care and IVFwhich now attract about 30% of private equityinvestments in healthcare.• In September 2025, KKR completed its acquisitionof a 54% controlling stake in Healthcare GlobalEnterprises (HCG) from CVC Capital Partners forRs. 3,465 crore• In July 2024, KKR acquired a 70% controlling stakein Baby Memorial Hospital (a multi-specialty hospitalchain in Kerala) in a deal reported at Rs2,000–2,500crore. (Link to the entire article: https://vorafin.com/insights/pe-kkr-acquires-controlling-stake-in-babymemorial-hospital/)• In May 2023, global private equity firm Blackstonesigned a definitive agreement to acquire a 72.5%controlling stake in CARE Hospitals from TPG’sEvercare Health Fundat approximately Rs. 4,800crore, valuing the hospital chain at an enterprisevalue of approximately Rs. 6,600 croreCapital Market• The rapid deal making including high-valueacquisitions by global giants like Blackstone andKKR signals a fundamental shift from a fragmentedhospital market toa “platform-led” ecosystem.Looking ahead, the Indian hospital sector isprojected to maintain a robust 11–12% CAGR, withincreasing consolidation with large multi-specialitiesand super specialty hospital ruling the markets.Economic Update:Economic Survey- State of the EconomyThe Economic Survey 2025–26, tabled ahead of theUnion Budget, highlights the resilience and sustainedmomentum of the Indian economy despite heightenedglobal uncertainties fuelled by Tariff wars, US-India tradetensions and military conflicts across the world. RealGDP growth is estimated at 7.4% in FY26 and projectedin the range of 6.8–7.2% in FY27, reaffirming India’sposition as the fastest-growing major economy for thefourth consecutive year. Continued structural reformshave raised India’s potential growth rate to around 7%,up from approximately 6.5% three years ago.Domestic demand remains the primary growth driver.Private consumption has grown by around 7% andaccounts for over 61% of GDP, while investment activityremains robust with gross fixed capital formation risingnearly 8%. Overall investment has been sustained atabout 30% of GDP, supported by strong public capitalexpenditure and a gradual revival in private sectorcapex.Public investment and fiscal consolidation continue toanchor macroeconomic stability. The Centre’s effectivecapital expenditure has increased significantly, risingfrom a pre-pandemic average of 2.7% of GDP toaround 4%, while states have maintained capitalspending at approximately 2.4% of GDP. Revenuebuoyancy has improved, with gross tax revenue ataround 11.5% of GDP and a rising share of direct taxes,enabling a steady reduction in fiscal deficits. Thegovernment has reiterated its medium-term objectiveof reducing central government debt to around 50% ofGDP by FY31, from 56.1% of GDP budgeted for FY26.On the external front, India’s position remainscomfortable. The current account deficit moderated toabout 0.8% of GDP in H1 FY26, aided by strongservices exports and stable remittance inflows. India

934 Ahmedabad Chartered Accountant Journal January, 2026TMalso emerged as the world’s largest destination forgreenfield digital investments, attracting USD 114 billionbetween 2020 and 2024, reflecting investor confidencein its macroeconomic stability and long-term growthprospects.Secondary Market:• The BSE Sensex closed the year at 85,221 and theNifty 50 at 26,130, ending 2025 on a positive notewith a monthly gain of approximately 0.64% and0.74% respectively. Sentiment was bolstered bythe RBI’s 25 bps rate cut, strong Q2 GDP growth,and the announcement that India has officiallysurpassed Japan to become the world’s fourthlargest economy.• Market momentum was characterized by selectivebuying and sector rotation throughout December.While the indices maintained record levels, investorsremained watchful of US-India trade negotiations andpotential tariff uncertainties, leading to a consolidationphase after the initial mid-month volatility.• Inflation data remained highly favorable, with CPImoderating to 0.71% and WPI remaining in thedeflationary zone at –0.32%. This “goldilocks”scenario of low inflation provided the necessaryroom for the RBI to cut the repo rate to 5.25%, furthersupporting corporate margins and domesticconsumption.• Global macro conditions remained easing yetcautious, as the US Federal Reserve delivered itsthird consecutive rate cut of 25 bps, bringing thepolicy range to 3.50%–3.75%. Brent crude oil pricescooled further to an average of $61–$63 per barrel,the lowest since early 2021, amid expectations ofa potential supply glut and ongoing peace talks.• Foreign Portfolio Investors (FPIs) acceleratedtheir exit, with net equity outflows deepening toapproximately Rs. 22,611 crores during December.This was driven by a combination of global riskaversion, a stronger US dollar (reaching ~Rs. 90),and a tactical shift as FIIs reallocated capital fromsecondary markets to primary IPO markets.• The Nifty’s forward P/E remains steady atapproximately 20x FY27E earnings, which iscomfortably aligned with its long-term average. Astrong 12–13% earnings CAGR is still projected forthe FY25–27 period, maintaining a constructiveoutlook as India heads into the 2026 calendar year.Capital MarketEquity Markets Nov-25 Dec-25 % Change BSE Sensex 85,706.67 85,220.60 -0.57% Nifty 50 26,202.95 26,129.60 -0.28% BSE 500 37,535.84 37,443.41 -0.25% BSE Healthcare 44,883.80 43,801.94 -2.41% BSE IT 36,305.54 36,735.18 1.18% BSE FMCG 20,407.47 20,345.14 -0.31% BSE Metal 34,112.07 36,811.73 7.91%

Ahmedabad Chartered Accountant Journal January, 2026 935TMPrimary Market Update:There were 10 main board IPOs in December 2025including Meesho Limited, Aequs Limited, Vidya WiresLimited, Corona Remedies Limited, Wakefit InnovationsLimited, Nephrocare Health Services Limited, ParkMedi World Limited, ICICI Prudential AssetManagement Company Limited, KSH InternationalLimited and Gujarat Kidney & Super Speciality Limited,against 12 main board IPOs in November 2025. Therewere 15 SME IPOs in December 2025 as comparedto 6 SME IPOs in November 2025.Meesho Limited:About the Incorporated in 2015, Meesho LimitedCompany is a Bengaluru-based online commercemarketplace that enables small andmedium businesses to sell productsdirectly to consumers across India. Thecompany focuses on value-led fashion,lifestyle, home and everyday products,with a strong presence in Tier-2 and Tier3 markets. Meesho operates an assetlight, technology-driven platform and doesnot charge seller commissions,differentiating it from peers. The companyleverages proprietary logistics and cloudinfrastructure through its subsidiary,Meesho Tech Private Limited (MTPL). InFY25, Meesho reported operatingrevenue of approximately Rs. 9,390 croreand continues to invest in technology, useracquisition and platform scale.Funds The IPO proceeds from the fresh issueUtilization will be utilized towards strengtheningcloud and technology infrastructure,expanding AI and data sciencecapabilities, enhancing marketing andbrand-building initiatives, pursuinginorganic growth opportunities andmeeting general corporate purposes.Anchor The company raised approximately Rs.Investors 2,439 crore from anchor investors prior& Selling to the IPO. Anchor investors included SBIShare- Mutual Fund, Fidelity Funds, Black Rock,holders GIC, ADIA, Tiger Global, Goldman SachsAsset Management, UTI Mutual Fund,Axis Mutual Fund, Tata Mutual Fund andMotilal Oswal Mutual Fund, amongothers. Selling shareholders in the offerfor sale comprised early investors suchas Elevation Capital, Peak XV Partners,Venture Highway and Y CombinatorIPO Per- The Rs. 5,421.20 crore IPO comprisedformance a fresh issue of Rs. 4,250 crore and anoffer for sale of Rs. 1,171.20 crore. Theissue was priced at Rs. 111 per share.The IPO witnessed strong investordemand across categories. Shares ofMeesho Limited debuted strongly on theexchanges, listing at approximately Rs.162.05 on NSE and Rs. 161.20 on BSE,representing a premium of around 46%over the issue price.Funds Mobilization by Corporates (Rs. In Crore)Particulars Oct-25 Nov-25I. Equity Issues 51,336 57,873a. IPOs (i+ii) 41,783 33,507 i. Main Board 40,402 33,014 ii. SME Platform 1,381 493b. FPOs 0 0c. Equity Rights Issues 1,050 1,368d. QIPs/IPPs 1,100 1,200e. Preferential Allotments 7,403 21,798II. Debt Issues 78,540 59,009a. Debt Public Issues 834 391b. Private Placement of Debt 77,706 58,618III. REITs/ InvITs 3,248 3,545a. REITs 0 0b. InvITs 3,248 3,545Total Funds Mobilized (I+II+III) 1,33,124 1,20,427Acknowledgements: RBI Bulletin(www.bulletin.rbi.org.in), SEBI (www.sebi.gov.in), NSE(www.nseindia.com), BSE (www.bseindia.com), IBEF(https://www.ibef.org)❉ ❉ ❉Capital Market

936 Ahmedabad Chartered Accountant Journal January, 2026TMLEASE - [ IND-AS 116 ] - ANNUAL REPORT 2024-25INDIAN OIL CORPORATIONS LTD.NOTE-1A: MATERIAL ACCOUNTING POLICIES(Contd..)2.4.5 The residual values, useful lives and methodsof depreciation of PPE are reviewed at eachfinancial year end and adjusted prospectively,if appropriate.The Company assesses at contract inceptionwhether a contract is, or contains, a lease. Thatis, if the contract conveys the right to control theuse of an identified asset for a period of time inexchange for consideration.3.1 Leases as Lessee (Assets taken on lease)The Company applies a single recognition andmeasurement approach for all leases, exceptfor short-term leases and leases of low-valueassets. The Company recognizes leaseliabilities to make lease payments and right-ofuse assets representing the right to use theunderlying assets.3.1.1 Lease LiabilitiesAt the commencement date of the lease, theCompany recognizes lease liabilities measuredat the present value of lease payments to bemade over the contractual lease term, for whichenforceable rights is available. In calculating thepresent value of lease payments, the Companyuses the incremental borrowing rate at the leasecommencement date, if the interest rate implicitin the lease is not readily determinable. Afterthe commencement date, the amount of leaseliabilities is increased to reflect the accretion ofinterest and reduced for the lease paymentsmade.3.1.2 Right-of-use AssetsThe Company recognizes right-of-use (ROU)assets at the commencement date of the lease(i.e., the date the underlying asset is availablefor use). Right-of-use assets are measured atcost, less any accumulated depreciation andimpairment losses, and adjusted for anyremeasurement of lease liabilities. PerpetualRight of use (ROU) assets related to land arenot depreciated but tested for Impairment loss,if any.3.1.3 Short-term leases and leases of low-valueassetsThe Company applies the short-term leaserecognition exemption to its short-term leasesof Property, Plant and Equipment (i.e., thoseleases that have a lease term of 12 months orless from the commencement date and do notcontain a purchase option). It also applies thelease of low-value assets recognition exemptionto leases that are considered of low value andis not intended for sublease. Lease paymentson short-term leases and leases of low-valueassets are recognized as expense on a straightline basis over the lease term or anothersystematic basis if that basis is morerepresentative of the pattern of the lessee’sbenefit.3.2 Leases as Lessor (assets given on lease)3.2.1 When the Company acts as lessor, it determinesat the commencement of the lease whether it isa finance lease or an operating lease. Rentalincome from operating lease is recognized ona straight-line basis over the term of the relevantlease except where another systematic basisis more representative of the time pattern of theCA. Pamil H. [email protected] PublishedAccounts

Ahmedabad Chartered Accountant Journal January, 2026 937TMbenefit derived from the asset given on lease.All assets given on finance lease are shown asreceivables at an amount equal to net investmentin the lease. Principal component of the leasereceipts is adjusted against outstandingreceivables and interest income is accountedby applying the interest rate implicit in the leaseto the net investment.3.2.2 When the Company is an intermediate lessor itaccounts for its interests in the head lease andthe sub-lease separately. It assesses the leaseclassification of a sub-lease with reference tothe ROU asset arising from the head lease, notwith reference to the underlying asset. If a headlease is a short-term lease to which the Companyapplies the short-term lease exemptiondescribed above, then it classifies the sub-leaseas an operating lease.RELIANCE INDUSTRIES LTDThe Company, as a lessee, recognises a right of-useasset and a lease liability for its leasing arrangements,if the contract conveys the right to control the use of anidentified asset. Initially the right-of-use assetsmeasured at cost which comprises initial cost of thelease liability adjusted for any lease payments madeat or before the commencement date plus any initialdirect costs incurred. Subsequently measured at costless any accumulated depreciation/ amortisation,accumulated impairment losses, if any and adjustedfor any re-measurement of the lease liability.The right-of-use assets is depreciated/ amortised usingthe straight-line method from the commencement dateover the shorter of lease term or useful life of right-ofuse asset.The Company measures the lease liability at thepresent value of the lease payments that are not paidat the commencement date of the lease. The leasepayments are discounted using the interest rate implicitin the lease, if that rate can be readily determined. Ifthat rate cannot be readily determined, the Companyuses incremental borrowing rate. For short-term andlow value leases, the Company recognises the leasepayments as an operating expense on a straight-linebasis over the lease term.Tata Motors LimitedAt inception of a contract, the Company assesseswhether a contract is, or contain a lease. A contract is,or contains, a lease if the contract conveys the right tocontrol the use of an identified asset for a period oftime in exchange for consideration. To assess whethera contract conveys the right to control the use of anidentified asset, the Company assesses whether:• The contract involves the use of an identified asset– this may be specified explicitly or implicitly andshould be physically distinct or representsubstantially all of the capacity of a physically distinctasset. If the supplier has a substantive substationright, then the asset is not identified;• The Company has the right to substantially all ofthe economic benefits from the use of the assetthroughout the period of use; and• The Company has the right to direct the use of theasset. The Company has this right when it has thedecision making rights that are most relevant tochanging how and for what purposes the asset isused. In rare cases where the decision about howand for what purpose the asset is used ispredetermined, the Company has the right to directthe use of the asset if either:• The Company has the right to operate the asset;or• The Company designed the asset in a way thatpredetermines how and for what purposes it willbe used. As a practical expedient, accountingstandards permit a lessee not to separate nonlease components, and instead account for anylease and associated non-lease componentsas a single arrangement. The Company has notused this practical expedient. At inception oron reassessment of a contract that contains alease component, the Company allocates theconsideration in the contract to each leasecomponent on the basis of their relative standalone prices. The Company recognises a rightof-use asset and a lease liability at the leasecommencement date.The right-of-use asset is initially measured at cost, whichcomprises of the initial amount of the lease liabilityFrom Published Accounts

938 Ahmedabad Chartered Accountant Journal January, 2026TMadjusted for any lease payments made at or beforethe commencement date, plus any initial direct costsincurred and estimated dilapidation costs, less anylease incentives received.The right-of-use asset is subsequently amortised usingthe straight-line method over the shorter of the usefullife of the leased asset or the period of lease. Ifownership of the leased asset is automaticallytransferred at the end of the lease term or the exerciseof a purchase option is reflected in the lease payments,the right-of-use asset is amortised on a straightline basisover the expected useful life of the leased asset. Thelease liability is initially measured at the present valueof the lease payments that are not paid atcommencement date, discounted using the interestrate implicit in the lease or, if that rate cannot be readilydetermined, the Company’s incremental borrowingrate.The lease liability is measured at amortised cost usingthe effective interest method. It is re-measured whenthere is a change in future lease payments. Leasepayments include fixed payments, including insubstance fixed payments, amounts expected to bepayable under a residual value guarantee, the exerciseprice of a purchase option if the Company is reasonablycertain to exercise that option and payment of penaltiesfor terminating the lease if the lease term consideredreflects that the Company shall exercise terminationoption.The Company also recognises a right of use assetwhich comprises of amount of initial measurement ofthe lease liability, any initial direct cost incurred by theCompany and estimated dilapidation costs. Paymentmade towards short term leases (leases for which noncancellable term is 12 months or lesser) and low valueassets (lease of assets worth less than Rs. 0.03 crores)are recognised in the statement of Profit and Loss asrental expenses over the tenor of such leases.Lessor:At the inception of a lease, the lease arrangement isclassified as either a finance lease or an operatinglease, based on contractual terms and substance ofthe lease arrangement. Whenever the terms of thelease transfer substantially all the risks and rewards ofownership to the lessee, the contract is classified as afinance lease. All other leases are classified asoperating leases.Amounts due from lessees under finance leases arerecognised as receivables at the amount of theCompany’s net investment in the leases. Financeincome is allocated to accounting periods so as toreflect a constant periodic rate of return on theCompany’s net investment outstanding in respect ofthe leases. Rental income from operating leases isrecognised on a straight-line basis over the term ofthe relevant lease. Initial direct costs incurred innegotiating and arranging an operating lease are addedto the carrying amount of the leased asset andrecognised on a straight-line basis over the lease term.(b) The Company leases a number of buildings, plantand equipment, IT hardware and software assets,certain of which have a renewal and/or purchase optionin the normal course of the business. Extension andtermination options are included in a number of leasesacross the Company. The majority of extension andtermination options held are exercisable only by theCompany and not by the respective lessor. TheCompany assesses at lease commencement whetherit is reasonably certain to exercise the extension ortermination option. The Company re-assesses whetherit is reasonably certain to exercise options if there is asignificant event or significant change in circumstanceswithin its control.It is recognised that there is potential for lease termassumptions to change in the future and this willcontinue to be monitored by the Company whererelevant. The Company’s leases mature between 2026and 2037. The weighted average rate applied is 8.37%(2024: 8.57%).(C) There are certain vehicles which are being givento the customers along with operations andmaintenance of the same. These are accounted asfinance lease as the material risks and rewards aretransferred to the lessee. The average effective interestrate contracted approximates 3.67% to 9.32% (2024:3.67% to 9.32% ) per annum.❉ ❉ ❉From Published Accounts

Ahmedabad Chartered Accountant Journal January, 2026 939TMCA. Kunal A. [email protected] the Government CA. Ashwin H. [email protected] as specified premises for asucceeding financial year.2. Annexure VIII: Opt-In Declaration forPerson Applying for Registration – Forpersons applying for new registration, todeclare premises as specified premisesfrom the effective date of registration.(Annexure IX – Opt-Out Declaration willbe made available separately in duecourse of time.)3. Timeline for Filing Declarations(A) Existing Registered Taxpayers –Annexure VII• Can be filed for the subsequentfinancial year during the specifiedwindow: 1st January to 31st Marchof the preceding financial year.• For FY 2026-27, Annexure VII canbe filed from 01.01.2026 to31.03.2026.(B) New Registration Applicants – AnnexureVIII• Can be filed within 15 days from thedate of generation of ARN of theregistration application.• Filing is allowed irrespective ofwhether GSTIN has been allotted,provided the application is notrejected.• After the lapse of 15 days, the optin declaration can be filed only whenthe window for Annexure VII isavailable, i.e., 1st January to 31stMarch.GOODS AND SERVICE TAX1) Advisory on Filing Opt-In Declaration forSpecified Premises, 2025 (GST updates 04/01/2026)The relevant declarations issued vide NotificationNo. 05/2025 – Central Tax (Rate), dated 16thJanuary 2025, are now made availableelectronically on the GST Portal. Thesedeclarations may be opted for and filed bypersons who are applying for registration or arealready registered and supplying hotelaccommodation services by declaring thepremises as “specified premises”.Kindly take note of the following key points:1. Who may opt and file the declaration• Regular taxpayers (active andsuspended) supplying hotelaccommodation service who want todeclare their premises to be a “specifiedpremises”• Applicants for new GST registration whowant to declare their premises to be a“Specified Premises”The facility is not applicable to compositiontaxpayers, TDS/TCS taxpayers, SEZ units/developers, casual taxpayers, or cancelledregistrations.2. Types of DeclarationsThe following declarations are made availableon the portal:1. Annexure VII: Opt-In Declaration forRegistered Person – For existingregistered taxpayers opting to declare

940 Ahmedabad Chartered Accountant Journal January, 2026TM• Taxpayers will not be able to fileAnnexure VIII if the registrationapplication is rejected, irrespectiveof the fact that the 15 days havelapsed or not.4. How to File the Declaration on GST Portal1. Log in to the GST Portal2. Navigate to: Services -> Registration ->Declaration for Specified Premises3. Select the appropriate option:o Opt-In Declaration for SpecifiedPremises, oro Download Annexure Filed4. Select eligible premises, fill in thedeclaration, and submit using EVC.On successful submission, an ARN will begenerated.5. Important Points to Note• A maximum of 10 premises can beselected in one declaration. Additionaldeclarations may be filed for remainingpremises, if any. However, separatePDFs with reference numbers will begenerated for each premise.• If any premises are left for opt-in, thetaxpayer may again file Annexure VII forthat premise for the same financial yearduring the eligible window period.• Suspended taxpayers are allowed to filethe declaration. However, cancelledtaxpayers are barred from filing suchdeclarations.• The option exercised will continue forsubsequent financial years unless an optout declaration (Annexure IX) is filed withinthe prescribed time.6. Downloading of Filed Declarations• Filed Annexures (VII / VIII) can bedownloaded from: Services ->Registration ->Declaration for SpecifiedPremises -> Download• Separate reference numbers aregenerated for each declared premise.7. Email and SMS Intimation• Confirmation via email and SMS will besent to all authorised signatories uponsuccessful filing of the declaration.Note:1. For the first year, i.e., FY 2025–26, thesedeclarations were filed manually with thejurisdictional authority. However, since anonline filing facility has now been madeavailable, it is requested that such taxpayersshall file Annexure VII for the specifiedpremises again electronically for FY 2026–27 from 1st January 2026 to 31st March 2026.2. Declaring specified premises for the first time:Such taxpayers are required to file AnnexureVII for FY 2026-27 from 1st January 2026 to31st March 2026.2) Advisory & FAQ on Electronic Credit Reversaland Re-claimed Statement & RCM Liability/ITCStatement (GST updates 29th December,2025)1. To ensure correct and accurate reporting ofreversed and reclaimed ITC and to avoidclerical mistakes, Electronic Credit Reversaland Re-claimed Statement (ReclaimLedger) was introduced on the GST portalfrom August 2023 return period onwards formonthly taxpayers and from July-September2023 quarter for quarterly taxpayers. ThisReclaim Ledger captures the ITC temporarilyreversed in Table 4(B)2 and its subsequentreclaim in Table 4(A)5) and 4(D)1.2. As of now taxpayer get a warning message ifa taxpayer attempts to re-claim excess ITC intable 4D(1) than the available ITC reversalbalance but the taxpayer is allowed to file itsForm GSTR-3B.3. To the taxpayers multiple opportunities havebeen given to report their opening balancewhich was earlier reversed ITC but was notreclaimed till that time, for the newly introducedReclaim Ledger.From the Government

Ahmedabad Chartered Accountant Journal January, 2026 941TM4. This statement can be viewed by the taxpayerby navigating to the Dashboard › Services ›Ledger › Electronic Credit Reversal and Reclaimed.5. To assist taxpayers in correctly reportingReverse Charge Mechanism (RCM)transactions, another statement called ”RCMLiability/ITC Statement” (RCM Ledger) wasintroduced on the GST Portal from August 2024onwards for monthly filers and from JulySeptember-2024 period for quarterly filers.The ledger captures and track the RCM liabilityshown in Table 3.1(d) of GSTR-3B and itscorresponding ITC claimed in Table 4A(2) and4A(3) of GSTR-3B for each return period.6. A warning message comes to the taxpayerin case the ITC claimed in Table 4(A)2 and4(A)3 exceed the closing balance of RCMledger plus the liabilities being reported inTable 3.1(d).7. To the taxpayers multiple opportunities havebeen given to report the RCM ITC openingbalance and amend the opening balance forboth the said statements where any transactionrelated to excess ITC reversal or excessRCM liability/ITC prior to implementation ofthe said statements could be declared asopening balance to these statements.8. This RCM Liability/ITC Statement can beaccessed through: Services >> Ledger >>RCM Liability/ITC Statement.9. Now, the taxpayers are hereby informed that,shortly, negative values or availment ofexcess ITC over and above availablebalance, shall not be allowed in both theledgers. Both the statements shall have abelow mentioned validation for regulation ofITC:a. The reclaimed ITC in Table 4(D)(1) shallbe lesser than or equal to the combinedvalues of closing balance of ElectronicCredit Reversal and Re-claimedStatement and ITC being reversed inTable 4(B)(2) of current period GSTR-3B.and,b. The RCM ITC claimed in Table 4(A)2 &4(A)3 shall be equal to or less than thecombined values of RCM liabilities paidin Table 3.1(d) of the same GSTR-3B andclosing balance of RCM Liability/ITCStatement.10. In case the taxpayers are already havingnegative closing balance in Electronic CreditReversal and Re-claimed Statement or RCMLiability/ITC Statement, the system will notallow such taxpayers to file their GSTR-3Buntil:a. Mandatorily reversal of such excessclaimed ITC (Negative closing balance)as per Electronic Credit Reversal andRe-claimed Statement is made in Table4(B)(2) of current period GSTR-3B. Incase there is no ITC available in currentperiod, this reversal declared in table4(B)2 will be added to the liability of thetaxpayer in current period while filingGSTR-3B.b. For negative balance in RCM Liability/ITC Statement, taxpayer need to eitherpay the additional RCM liability equivalentto negative closing balance in Table3.1(d) or reduce the ITC claimed in Table4A(2) or 4A(3) to the extent of closingbalance in the current return period.11. For more information on Electronic CreditReversal and Re-claimed Statement pleaserefer the advisory dated 17th September, 2024issued by GSTN by clicking below link https://tutorial.gst.gov.in/downloads/news/itc_pending_ledger.pdf. Also, detailedadvisory on Introduction of RCM Liability/ITCStatement can be seen by clicking on belowlink:https://services.gst.gov.in/services/advisoryandreleases/read/514 .FAQs related to Electronic Credit Reversal and Reclaimed Statement and RCM Liability/ITC StatementFrom the Government

942 Ahmedabad Chartered Accountant Journal January, 2026TM1. How to view my Electronic Credit Reversal andRe-claimed Statement? You can view the statement by navigating tothe Dashboard › Services › Ledger › ElectronicCredit Reversal and Re-claimed.2. How to view my RCM Liability/ITC Statement? You can view the RCM Liability/ITC Statement bynavigating to the Dashboard › Services › Ledger› RCM Liability/ITC Statement.3. What will be changed in the GSTR-3B in respectof Electronic Credit Reversal and Re-claimedStatement? Shortly, taxpayer will not be able to file their GSTR3B in case the ITC claimed in Table 4D(1) exceedsthe closing balance in the Electronic CreditReversal and Re-claimed Statement (ITC reclaimledger) and the ITC reversed in Table 4B(2) of thecurrent return period putting together.4. How to file GSTR-3B if closing balance ofElectronic Credit Reversal and Re-claimedStatement (ITC reclaim ledger) is alreadyNegative? If the closing balance of the ITC reclaim ledger isnegative, it indicates that excess ITC wasreclaimed earlier. Therefore, to file GSTR-3B, youmust reverse the excess claimed ITC in Table4B(2) of the respective return period, up to theamount of the negative closing balance. This willallow you to correct the discrepancy and proceedwith filing the return. In case there is no ITCavailable, this reversal declared in table 4(B)2 willbe added to your liability in current period whilefiling GSTR-3B. Example: The closing balance of the ITC reclaimledger for the current return period is -Rs. 10,000,which means Rs. 10,000 of excess ITC has beenreclaimed in earlier periods. To file your GSTR-3B,you would need to reverse this earlier excessreclaimed ITC of Rs. 10,000 in Table 4B(2) for thecurrent period.5. How will the validation mechanism work inGSTR-3B for RCM Liability/ITC Statement?. The taxpayers will not be able to file GSTR-3B incase the claimed RCM ITC in Table 4A(2) or 4A(3)exceeds the available balance in the RCMLiability/ITC Statement and the RCM liabilityreported in Table 3.1(d) for the current return periodput together.6. How to file GSTR-3B if closing balance of RCMLiability/ITC Statement is Negative? If the closing balance of the RCM Liability/ITCStatement is negative, it indicates that excessRCM ITC has been claimed earlier. To proceedwith filing, you must either pay the outstanding RCMliability in Table 3.1(d) or reduce the ITC beingclaimed in Table 4A(2) or 4A(3) in the current returnperiod, equivalent the amount of the negativeclosing balance. Once the discrepancy iscorrected, you will be able to file your return. Example: Let’s assume that the closing balance of the RCMLiability/ITC Statement is -Rs. 5,000. This meansthat Rs. 5,000 of excess RCM ITC has beenclaimed earlier. To resolve this and file your GSTR3B, you can: 1. Pay the RCM liability: You can pay additionalRs. 5,000 in Table 3.1(d) for the current returnperiod to cover the excess ITC claimed.OR 2. Reduce the ITC claimed: You can reduceRs. 5,000 from the RCM ITC in Table 4A(2) orTable 4A(3) for the same period, if RCM ITCis available more than Rs. 5,000 in currentperiod.Once either the excess RCM liability is paid orthe requisite ITC is reduced from available ITC tomatch the available negative closing balance, thediscrepancy will be resolved, and you canproceed with filing your return.❉ ❉ ❉From the Government

Ahmedabad Chartered Accountant Journal January, 2026 943TMThe Digital Personal Data Protection Act, 2023:AWake-Up Call for Chartered AccountantsIntroductionThe Digital Personal Data Protection Act, 2023 (DPDPA)has emerged as one of the most significant pieces oflegislation affecting professional practice in recentyears. While much has been written about itsimplications for large corporations, e-commerceplatforms and technology companies, there has beensurprisingly little discussion about how it affects us -the Chartered Accountants who serve as custodiansof some of the most sensitive personal data in thecountry.With the DPDP Rules, 2025 now notified and thecompliance timeline set (Rules 3, 5 to 16, 22 and 23come into force eighteen months from publication, i.e.,by May 2027), the time for complacency is over. Thisarticle examines the practical implications of DPDPAfor CA practices and provides a roadmap forcompliance.Chartered Accountants as Data FiduciariesUnder Section 2(i) of the DPDPA, a Data Fiduciary isdefined as “any person who alone or in conjunctionwith other persons determines the purpose and meansof processing of personal data.” Every CA practice -whether a sole proprietorship or a large firm - squarelyfalls within this definition.Consider what a typical CA office holds:• PAN numbers and Aadhaar details of clients andtheir family members• Bank account statements and financial records• GST registration details including addresses andcontact information• Investment portfolios and loan documents• Employee payroll data including salary details• Digital signatures and authentication credentialsThis data is stored across multiple systems - practicemanagement software, accounting applications, Excelspreadsheets, email archives, and increasingly, cloudplatforms. Under Section 8(1) of the Act, a Data Fiduciaryis responsible for compliance “irrespective of anyagreement to the contrary or failure of a Data Principalto carry out the duties provided under this Act.” Thismeans the buck stops with you.A Reality Check: The Typical CA OfficeLet me paint a picture that might feel uncomfortablyfamiliar.It is Monday morning. You walk into your office, poweron your computer, and immediately notice the “ActivateWindows” watermark in the corner of your screen. Yourantivirus software pops up a warning - the subscriptionexpired three months ago. You dismiss it without asecond thought and open WhatsApp Web, wherenotifications pour in: clients sending photographs oftheir Aadhaar cards, PAN cards, and bank statementsfor company incorporation and GST registration. A fewmessages contain OTPs. Your articled assistantknocks on the door, asking for Mr. ABC’s Aadhaardetails for a submission. You forward the data fromyour personal Gmail to his Yahoo ID. He respondsthat he would prefer it on WhatsApp instead, so youoblige.If this scenario resonates with you, consider this: youhave potentially violated multiple provisions of theDPDPA before your working day has even begun.Understanding the Legal FrameworkThe Reasonable Security Safeguards MandateSection 8(5) of the DPDPA mandates that a DataFiduciary shall “protect personal data in its possessionCA. Darshil [email protected]

944 Ahmedabad Chartered Accountant Journal January, 2026TMor under its control... by taking reasonable securitysafeguards to prevent personal data breach.” TheDPDP Rules, 2025, under Rule 6, elaborate on whatconstitutes “reasonable security safeguards”:- Encryption and data protection measures:Appropriate data security measures such asencryption, obfuscation, masking, or virtual tokens- Access control:Appropriate measures to control access tocomputer resources- Monitoring and logging:Visibility on accessing of personal data throughappropriate logs, monitoring, and review- Business continuity measures:Reasonable measures for continued processingin event of compromise, including data backups- Data retention for audit:Retention of logs and personal data for one yearminimum for detection and investigation- Contractual safeguards:Appropriate provisions in contracts with DataProcessorsThe Penalty Structure: A Sobering PerspectiveThe Schedule to the DPDPA prescribes significantpenalties. The table below summarises the keyprovisions relevant to CA practices:Breach MaximumPenaltyFailure to take reasonable security Rs. 250 Croresafeguards (Section 8(5))Failure to notify breach to Board/ Rs. 200 CroreData Principal (Section 8(6))Other breaches of Act or Rules Rs. 50 CroreNote that the highest penalty is not for a data breachitself, but for failing to have reasonable securitysafeguards in place. The unlicensed Windows,expired antivirus and unsecured WhatsAppcommunications described earlier represent preciselythis kind of failure.IT CornerA Compliance Roadmap for CA Practices1. IT Infrastructure OverhaulLicence all software: Upgrade to licensedversions of your operating system, antivirussoftware, and all practice applications. Usingpirated or unlicensed software is not merely acopyright violation - it represents a fundamentalfailure in security safeguards. Pirated softwareoften contains malware, does not receive securityupdates, and cannot be considered a“reasonable” security measure under anyinterpretation.Implement business-grade email:Migrate from personal Gmail or Yahoo accountsto business email solutions such as GoogleWorkspace, Microsoft 365, or Zoho Mail. Theseplatforms offer Multi-Factor Authentication (MFA),advanced threat protection, data loss preventionfeatures, and audit trails - all essentialcomponents of reasonable security safeguards.Personal email accounts lack the securitycontrols, logging capabilities, and administrativeoversight required for handling sensitive clientdata.A useful exercise: visit www.haveibeenpwned.comand check if your email credentials have beenexposed in any known data breaches. The resultsmay be illuminating.Deploy end point protection:Move beyond basic antivirus to comprehensiveendpoint protection solutions. Consider ManagedDetection and Response (MDR) services thatprovide 24/7 monitoring, threat detection, andincident response. With cyber-attacks becomingincreasingly sophisticated through AI-poweredtechniques, reactive security measures are nolonger sufficient.2. Communication Channel RemediationDiscontinue WhatsApp for client data:This may be the most difficult change to implement,given how deeply WhatsApp has embedded itself