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Case Laws GST
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School affiliation services fall outside educational exemption without a direct nexus to admissions or examination conduct.
Consolidated show cause notices may combine financial years governed by Sections 73 and 74 where liabilities are segregated period-wise, each component independently meets limitation and notice requirements, the additional ingredients for fraud-based proceedings are satisfied, and no actual prejudice arises. School affiliation and affiliation-form processing charges are independent taxable supplies where they concern institutional eligibility and compliance, rather than directly and immediately relating to student admission or the conduct of examinations. A broad connection with education does not satisfy the educational-services exemption.
Case Laws GST
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Fraudulent input tax credit requires proof of fictitious supplies, absent goods receipt, and fraud-linked self-assessment, not cancellation alone.
Input tax credit from allegedly non-existent suppliers depends on proof of genuine supply and actual receipt of goods or services, not merely invoices, accounting entries, or banking-channel payments. Section 155 places the burden of establishing ITC eligibility on the claimant. Section 74 requires more than ineligible credit: the wrongful availment must be linked to fraud, wilful misstatement, or suppression to evade tax. Retrospective supplier-registration cancellation is relevant evidence but is not conclusive. A fraud-based notice must disclose facts showing fictitious suppliers, absence of supply, and a basis for inferring the recipient's knowledge or participation.
Case Laws Money Laundering
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Prolonged pre-trial incarceration may justify conditional PMLA bail when delayed trials make continued detention constitutionally disproportionate.
Section 45 of the Prevention of Money-Laundering Act remains the stringent ordinary bail threshold, requiring prosecutorial opportunity and, on opposition, reasonable grounds to believe that the accused is not guilty and unlikely to offend while on bail. Article 21 nevertheless requires a separate, fact-sensitive inquiry where prolonged pre-trial detention and an unrealistic trial timetable make custody disproportionate. Relevant factors include custody length, trial progress, remaining witnesses, secured documentary evidence, source of delay, predicate-case status, and risks of absconding or witness interference. Conditions such as passport surrender, attendance, non-contact directions, and residence disclosure may safeguard the trial.
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Prospective operation of stamp-value taxation prevents retrospective application where property agreements and substantial payments predate the charging provision.
Section 56(2)(x)(b) applies to immovable property received for inadequate consideration only where its temporal and valuation conditions are satisfied. A stamp-value difference alone does not establish taxability. Where consideration was fixed and substantial payments or contractual performance occurred before the charging provision commenced, later conveyance or registration does not by itself attract the later charge. Agreement-date valuation is available only for covered transactions where consideration was fixed and paid, wholly or partly, through prescribed banking or electronic modes on or before the agreement date. The tax authority must identify the correct statutory basis and provide a meaningful opportunity to respond.
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GST cash seizure limits require statutory relevance and restitutionary interest for unlawfully retained currency following searches.
GST seizure powers cannot be used to take cash as a general investigative measure or security for a possible tax demand. Currency is excluded from goods, and "things" is confined contextually to articles useful or relevant as evidence in GST proceedings. Valid seizure and retention require recorded statutory reasons, procedural compliance and observance of return timelines. Unauthorised retention engages property protections; later return does not cure the deprivation, and accrued interest is restitutionary rather than delayed-refund interest.
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Salary expense genuineness requires proof of actual services, business purpose, and fair testing of adverse third-party statements.
Under Section 37(1), salary expenditure is deductible only where it is actually incurred wholly and exclusively for business purposes and is supported by proof of genuine employment, services rendered, business nexus, and payment. Bank transfers and accounting entries alone are not conclusive. Where a third-party statement is central to an allegation of non-genuine salary, the taxpayer should receive disclosure and a meaningful opportunity to rebut it, including cross-examination where appropriate. A retracted and uncorroborated statement is vulnerable as the sole basis for disallowance.
Case Laws Income Tax
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Discounted cash flow valuation remains taxpayer-selected under prescribed rules, while tax scrutiny must identify specific valuation-date defects.
The taxpayer may elect a prescribed DCF valuation for unquoted equity shares, and scrutiny of that method does not permit substitution with Net Asset Value merely because it produces a lower fair market value. The Assessing Officer may examine projections, discount rates, terminal assumptions, computations and source data, but rejection requires demonstrably wrong facts, material errors, a wholly erroneous basis or objectively unsupported assumptions. Subsequent financial performance cannot alone invalidate a bona fide DCF valuation; the relevant inquiry remains the reasonableness of valuation-date information.
Case Laws GST
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Excess IGST on exports remains refundable when later correction triggers automated refund and reconciliation proves duplicate payment.
Refund of excess IGST paid on zero-rated exports may arise where turnover and tax are mistakenly entered under non-zero-rated supplies in FORM GSTR-3B while export invoices and shipping bills are correctly reported in FORM GSTR-1. If the exporter then pays the same IGST in the correct zero-rated field and the automated refund is credited against that later payment, the earlier payment remains a separately identifiable potential excess; its claim is not a repeat request for the same export-tax refund.
Case Laws GST
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GST registration revocation requires timely application, return compliance, payment of dues, and a reasoned statutory decision.
GST registration revocation after cancellation for return default is a conditional, time-bound process. An application under Section 30 and Rule 23 must ordinarily be filed within ninety days, subject to prescribed extension, and cannot be made until pending returns are filed and tax, interest, penalty and late fee are paid. Portal non-acceptance may permit online or physical submission where technically unavailable, but does not condone delay or ensure revocation. The competent authority must assess statutory eligibility, sufficient grounds and compliance while following notice and hearing requirements before rejection.
Case Laws Income Tax
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Reassessment limitation under TOLA requires final notices to issue within surviving time and satisfy statutory safeguards.
Reassessment limitation under TOLA is a jurisdictional restraint. Transitional notices issued between 1 April 2021 and 30 June 2021 are treated as Section 148A(b) show-cause notices, but only the surviving time remaining until 30 June 2021 is available for completing the reassessment process. Periods for supply of material and the assessee's response are excluded, but the Section 148A(d) decision, statutory approval and final Section 148 notice must issue within the remaining period. For Assessment Year 2015-16, post-1 April 2021 notices are treated as time-barred.
Case Laws Customs
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Unseized food consignments cannot face indefinite detention without lawful seizure, valid sampling, and prompt assessment.
Provisional release of an unseized imported food consignment is not mechanically governed by Section 110A, which applies to goods seized under Section 110. Customs may examine, test, verify and reassess imports, but indefinite retention without a seizure memorandum or disclosed reasons connecting the goods with confiscation is not justified. Food sampling should follow the specialised food-safety process through an authorised officer. A valid food-safety report may support conditional clearance, while classification, duty liability, confiscation and adjudication remain open. Revenue may be protected through proportionate security.
Case Laws Customs
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Anti-dumping duty recovery permits post-clearance demands and consequential import IGST where self-assessment omitted an applicable levy.
Unpaid anti-dumping duty omitted during self-assessment may be pursued through the customs recovery procedure without prior appellate modification of the self-assessment. The recovery framework applies to anti-dumping duty through statutory incorporation of provisions concerning assessment, non-levy, short-levy, interest and recovery. Where anti-dumping duty is chargeable, it forms part of the aggregate value used to compute IGST on imports, potentially creating a consequential IGST short-payment. Recovery requires accurate assessment of notification coverage, product, origin, rate, valuation, limitation and procedural safeguards.
Case Laws GST
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Project-wise anti-profiteering requires actual input tax credit measurement and area-based allocation of benefits to real-estate purchasers.
Real-estate anti-profiteering under Section 171 requires project-level identification of additional input tax credit and allocation of the saving across total project area on a per-square-foot basis. Purchase value may quantify credit attributable to project expenditure, but turnover or collections cannot serve as the allocation basis. The comparison must use pre-GST credit actually availed rather than merely available credit. GST collected on consideration inflated by an undistributed benefit forms part of the amount not passed on and remains distinct from statutory interest.
Case Laws Income Tax
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Retirement leave encashment exemption applies under the enhanced notified ceiling while preserving non-government employee classification and statutory conditions.
Section 10(10AA)(ii) governs retirement leave-encashment exemption for non-Government employees, subject to the ten-month earned-leave measure, average-salary computation, and the notified monetary ceiling. Notification No. 31/2023 specifies an enhanced ceiling of Rs. 25,00,000, is deemed effective from 1 April 2023, and certifies that retrospective effect causes no adverse effect. The enhanced ceiling is treated as a remedial rationalisation of an existing exemption and may govern pending earlier-period matters, while preserving the distinction between Government and non-Government employees.
Case Laws GST
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Transit GST jurisdiction limits detention penalties for documented inter-State supplies lacking a local taxable nexus.
Transit-State jurisdiction under GST permits interception, document production, e-way bill verification and authorised physical inspection of goods moving through an intermediate State. It does not, in a pure transit movement, support detention-related penalty for an external inter-State supply where origin and destination lie outside the intercepting State, no tax is payable there, and there is no evidence of diversion, local supply, fictitious or mismatched documents, or mismatch of goods. Cross-empowerment is administrative and does not create an independent territorial taxable nexus.
Case Laws SEBI
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Shareholder ratification cannot cure preferential-issue fund diversion when disclosed objectives are abandoned, triggering securities-market fraud and disclosure concerns.
Post-facto shareholder approval cannot retrospectively validate diversion of preferential-issue proceeds contrary to issue-specific objects disclosed to shareholders and the market. A special resolution authorises the issue but does not permit unrestricted use of proceeds. Periodic deviation reporting, audit-committee review and utilisation disclosures promote transparency; they do not enable diversion followed by later regularisation. Immediate diversion, inadequate commercial justification and missing documentation may indicate that disclosed objects were not genuinely intended to be performed. Later amendment of corporate objects or shareholder ratification cannot cure a completed securities-market disclosure breach.
Case Laws Income Tax
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Cross-border software payments require copyright-right, technical-service, and permanent-establishment analysis before withholding obligations are determined under applicable treaties.
Section 195 requires withholding only from a remittance to a non-resident that includes income chargeable in India. For software, royalty depends on transfer of copyright rights, not merely the right to install, access, use, or distribute a copyrighted article under restrictive terms. Where a DTAA is more beneficial, its royalty and FTS definitions control; treaty FTS may require technology to be made available. Amounts that are neither royalty nor FTS require consideration as business profits, ordinarily taxable only where profits are attributable to a permanent establishment. Composite payments require component-wise allocation and analysis.
Case Laws GST
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Personal GST penalty requires proof that the beneficiary retained benefit and directed a covered invoice or credit transaction.
Section 122(1A) may impose personal GST penalty on a registered or unregistered person only for a covered invoice or input tax credit transaction. Liability requires cumulative proof that the individual retained an identifiable personal benefit and that the transaction was conducted at that person's instance. Directorship, employment, registration, signature authority, or association with the taxable entity neither independently establishes nor excludes liability. Proceedings require transaction-specific and person-specific allegations and findings. The provision operates prospectively for underlying acts or transactions occurring on or after 01.01.2021.
Case Laws IBC
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Proof of tenancy rights governs insolvency recovery of corporate-debtor premises from occupants lacking enforceable possessory interests.
Where premises form part of the corporate debtor's assets, Sections 18 and 25 of the Insolvency and Bankruptcy Code, 2016 require the resolution professional to take custody, control, preservation and protection measures. An occupant resisting recovery must prove a subsisting tenancy, leasehold interest or enforceable licence through reliable evidence of the parties' intended relationship and its essential terms. Permission to stock goods or conduct limited business activity, prolonged occupation, and business or utility records do not independently create rights in the premises. Section 60(5)(c) supports insolvency jurisdiction over asset-recovery measures connected with the insolvency estate.
Case Laws GST
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GST portal service requires statutory validity and practical accessibility before ex parte adjudication can fairly proceed.
GST portal service is a statutory method under Section 169, but its use in an ex parte demand proceeding depends on effective accessibility and a meaningful opportunity to reply and be heard. Rule 142 requires electronic DRC-01 and DRC-07 summaries to operate alongside the underlying show-cause notice and reasoned order. Portal placement, complete communication, e-mail transmission, technical reliability and proof of actual access may determine whether service is effective, whether waiver applies, and whether appellate limitation begins.

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Comparison of section 341 "Application of income." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

11 September, 2025

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Section 341 Application of income

Income-tax Act, 2025

At a Glance

Clause 341 of the Income Tax Bill, 2025 (Old Version) sets out what constitutes permissible application of income by registered non-profit organisations. It matters to charitable/religious trusts and registered non-profit organisations, and to tax authorities monitoring compliance with application-of-income conditions. Effective date/decision date: Not stated in the document.

Background & Scope

Statutory hook: Clause 341 of the Income Tax Bill, 2025 (Old Version) addressing "Application of income" of a registered non-profit organisation. Context: governs what sums may be treated as application of income for non-profit organisations to ascertain compliance with conditions for tax treatment. Coverage: sums applied for charitable/religious purposes in India, donations to other registered non-profits, corpus donations, reinvestment of corpus in permitted modes u/s 350, repayment of loans/borrowings, and exclusions. Definitions or further explanations: Not stated in the document beyond references to sections 35(b)(i), 36(4)-(7), and section 350.

Statutory Provision Mode

Text & Scope

Clause 341, Income Tax Bill, 2025 (Old Version) sets out what sums are to be allowed as "application of income" to a registered non-profit organisation. The provision identifies three categories in sub-section (1): (a) sums applied for charitable or religious purposes in India for which the organisation is registered (subject to payment during the tax year and allowability under specified sections), (b) 85% of donations made to other registered non-profit organisations, and (c) nil with respect to corpus donations to other registered non-profit organisations. Sub-section (2) includes reinvestments into permitted corpus modes and repayments of loans/borrowings within five years (subject to conditions including no prior violation and application post 31 March 2021) as application of income. Sub-section (3) excludes from application: depreciation/allowances claimed in respect of an asset acquisition already treated as application of income and set off/allowance of excess application from prior years. Sub-section (4) states that application from corpus, loan/borrowing, accumulated income, specified income or deemed accumulated income shall not be considered as application for the purpose of sub-sections (1) and (2).

Interpretation

The text links the concept of "application of income" to both timing (payment during the tax year) and substantive allowability u/ss 36(4)-(7) and 35(b)(i). Legislative intent apparent from the text is to restrict qualifying applications to sums that are both paid and allowable under income tax rules, and to avoid treating corpus transfers as qualifying applications. The Bill articulates a cross-reference approach whereby existing tax-law tests (sections 35 and 36 provisions) determine allowability. The inclusion of a prescribed percentage treatment for donations to other registered organisations (85%) indicates a legislative policy to permit a substantial portion of inter-charity donations to count as application while retaining a residual disallowance (15%).

Exceptions/Provisos

Explicit exceptions in the Bill text: corpus donations to other registered non-profit organisations are treated as nil for application purposes. Sub-section (3) excludes depreciation/allowances already claimed and set off of earlier excess applications. Sub-section (4) excludes application from corpus, loan/borrowing, accumulated income, specified income or deemed accumulated income for the purposes of sub-sections (1) and (2). There are conditional provisos in sub-section (2) requiring reinvestment or repayment within five years and that the original application from corpus or loan/borrowing be post-31 March 2021 and compliant with the Part.

Illustrations

  • Example 1 - Direct application: A registered trust pays Rs. 1,000,000 during the tax year for a charitable program for which it is registered, and the payment is allowable u/ss 36(4)-(7) and 35(b)(i). That sum would qualify as application of income under sub-section (1)(a).
  • Example 2 - Donation to another registered organisation: A registered society donates Rs. 100,000 to another registered society. Under sub-section (1)(b), 85% (i.e. Rs. 85,000) would count as application of income; under sub-section (1)(c) corpus components would count as nil if the payment is a corpus donation.
  • Example 3 - Reinvestment from corpus: Not stated in the document whether a trust that re-invests corpus within five years will satisfy other procedural prerequisites beyond those listed; the Bill requires reinvestment within five years and that the original corpus application be after 31-03-2021 with no violations. Specific permitted modes are referred to section 350 (modes) but details of those modes are Not stated in the document.

Interplay

The clause expressly refers to and depends upon sections 35(b)(i), 36(4)-(7) and section 350 for determining allowable payments and permitted modes of investment. It also cross-refers to "this Part" and corresponding provisions of the Income-tax Act, 1961 for compliance history. Specific rules, notifications or circulars beyond these textual cross-references are Not stated in the document.

Differences between the two provisions and practical impact

  • Explicit treatment of corpus donations paid to other organisations:

    • Bill (Clause 341, Document 2): sub-clause (1)(c) expressly states "nil, with respect to any sum paid as a corpus donation to any other registered non-profit organisation."
    • Act (Section 341, Document 1): sub-section (3)(c) provides that "any sum paid as a corpus donation to any other registered non-profit organisation" shall not be allowed as application of income (i.e., it is listed among claims not allowed).
    Practical impact: Both texts in effect disallow treating corpus donations to other registered entities as application of income, but the Bill states the position as a component of what is allowed (explicitly allowing "nil"), while the Act lists it among exclusions. Substance is similar; the Bill's expression is potentially clearer as a standalone rule, whereas the Act's placement in exclusions may be read as reinforcing general illegibility for application treatment.
  • Order and wording of paid sums qualifying as application:

    • Bill (Document 2): sub-section (1)(a) requires the sum be "paid during such tax year" and "such payment is allowable u/ss 36(4), (5), (6) and (7) and 35(b)(i)."
    • Act (Document 1): sub-section (1)(a) provides similar requirements but phrases them as "where such sum is paid during the tax year provided that the provisions of section 35(b)(i) and section 36(4), (5), (6), and (7) shall apply in respect of such sum."
    Practical impact: No substantive difference in the qualifying conditions; the Act's language places emphasis on the applicability of the identified sections, while the Bill is more prescriptive that payment during the year and allowability under those sections are required. Both link allowability u/ss 35/36 to qualification as application.
  • Deemed application (85% rule and deemed application mechanics):

    • Bill (Document 2): does not contain provisions comparable to Section 341(5)-(8) of the Act concerning the 85% of regular income requirement, shortfall treatment as deemed application, timing for application of deemed application, and exercise of option.
    • Act (Document 1): contains sub-sections (5)-(8) establishing an 85% regular income normative target, permitting registered organisations to elect to treat shortfall as deemed application, specifying timing rules for application, and prescribing exercise of option on or before the due date u/s 263(1) for furnishing return of income.
    Practical impact: The Act introduces a compliance mechanism (85% of regular income) and a deemed application regime with procedural timings. The Bill version lacks this constructive mechanism; therefore, under the Bill an organisation's failure to apply regular income to the extent of 85% would not be remedied by deeming (unless other provisions exist elsewhere). The Act increases formal compliance burdens and provides a remedy (option) to treat shortfall as application within specific timelines; omission from the Bill means those procedural obligations/benefits are not present in the Bill text as reproduced.
  • Capital gains treated as application:

    • Bill (Document 2): contains no counterpart to the Act's sub-sections (9) and (10) dealing with capital gains from transfer of capital assets held for charitable or religious purposes and definitions such as "appropriate fraction," "cost of transferred asset," and "net consideration."
    • Act (Document 1): specifies when capital gains on transfers of trust property are deemed application (full or fractional amounts) and provides definitions for key terms used in that analysis.
    Practical impact: The Act creates a clear statutory rule treating certain capital gains as application of income when proceeds are reinvested in qualifying capital assets; the Bill lacks such rules, leaving potential ambiguity regarding tax treatment of capital gains arising to trusts. The Act's rules may aid in tax neutrality for reinvestment of trust assets; absent that, the Bill would leave organisations reliant on other provisions or administrative guidance.
  • Express exclusions and structuring differences:

    • Bill (Document 2): The exclusions list in sub-section (3) comprises clauses (a) and (b) (depreciation/allowance previously claimed as application; set off of excess application), but does not include clause (c) of the Act (which there is included in Act sub-section (3)(c)).
    • Act (Document 1): explicitly includes three exclusions (a), (b), (c) in sub-section (3), making the treatment of corpus donations as excluded clearer within the exclusions list.
    Practical impact: The Act's exclusions list is more exhaustive. The Bill's omission (as presented) could cause interpretive uncertainty until clarified by other provisions or parliamentary amendments.

Practical Implications

  • Compliance and risk areas: The requirement that payments be "paid during such tax year" and be allowable under the cross-referenced sections imposes evidentiary and timing burdens on registered non-profit organisations to substantiate payments and their tax allowability. The 85% rule for donations to other registered entities creates a mathematical step for accounting and tax reporting; organisations must track whether payments are corpus or non-corpus to determine whether 85% or nil applies.
  • Record-keeping/evidence: Organisations will need contemporaneous payment evidence (ledgers, bank payment instruments), documentation demonstrating allowability u/ss 35/36, clear characterisation of donations as corpus or revenue, and records of repayments or reinvestments into permitted modes (section 350) within five-year periods where applicable. The Bill's five-year windows and post-31-03-2021 condition require maintenance of historical compliance records showing no violations.

Key Takeaways

  • Clause 341 defines what counts as application of income for registered non-profit organisations, linking allowability to sections 35 and 36 and to timing of payment.
  • Donations to other registered organisations are partly recognised (85%) except corpus donations which are expressly treated as nil.
  • Reinvestment into permitted corpus modes and repayment of loans may be treated as application if made within five years and subject to compliance conditions and post-31-03-2021 applicability.
  • Certain claims (depreciation/allowances already claimed as application; set off of earlier excess application) are excluded from being treated as application.
  • The clause depends on other provisions (sections 35, 36 and 350) for definitions and modalities; practical compliance requires careful recordkeeping.
  • Compared with the enacted Section 341, the Bill (old version) omits the deemed-application (85% regular income) mechanism and capital-gains-deemed-application rules present in the Act.

Full Text:

Section 341 Application of income

Topics

Acts Income Tax