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Case Laws GST
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Non-business construction concessions for spinning mills require eligible recipient status and predominantly non-industrial use of the constructed buildings.
For the disputed period, the works-contract concession required both an eligible governmental recipient and structures predominantly meant for use other than commerce, industry, business or profession. Government Entity status required evidence of the recipient's constitution and qualifying governmental participation, while procurement had to relate to entrusted work. Project funding, tender approval and supervision did not by themselves establish governmental constitution or control. The spinning-mill factory buildings and allied works were intended for yarn production and related commercial activities. The residual construction-services entry carried aggregate GST of 18% for services outside the specified concessional entries.
Case Laws Customs
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Import document handling alone does not establish customs abetment or knowing use of materially false declarations.
Personal customs penalties depend on the person's own conduct, not merely on the confiscability of imported goods. Under Section 112(a) of the Customs Act, 1962, liability may arise from a person's own act or omission rendering goods liable to confiscation or from abetment of such conduct. The direct limb can operate on a strict-liability basis where a person's own act or omission renders goods confiscable; an allegation of abetment instead requires evidence of participation or culpable facilitation. Section 114AA requires knowing or intentional making, signing or use, or causing the making, signing or use, of a declaration, statement or document that is materially false or incorrect in customs business.
Case Laws GST
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Subcontracted services performed on own account are not intermediary services merely because they support overseas recruitment and customer-facing activities.
Intermediary classification under Section 2(13) of the IGST Act distinguishes arranging or facilitating supplies between other persons from supplying services on one's own account. The intermediary framework requires at least three parties, a main supply and a distinct ancillary facilitating supply, with conduct resembling that of a broker or agent. Subcontracting the whole or part of a service is not intermediary activity merely because performance supports another supplier's business or involves its customers. Neither a bilateral agreement, contractual label nor remuneration method is conclusive.
Case Laws Customs
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Split air conditioner classification requires capacity and refrigeration features to be assessed against the applicable tariff hierarchy.
Classification of ductless split air conditioners depends on the complete tariff description and the machine's technical characteristics. A complete, cooling-only, two-ton split air conditioner incorporating a refrigerating unit and lacking a heat-reversal valve falls within tariff item 8415 82 10 rather than the general split-system item 8415 10 10. Item 8415 82 10 inherits its parent subheading's refrigerating-unit requirement, while item 8415 83 10 requires the absence of such a unit. Capacity alone does not establish the applicable refrigeration-based entry. Technical evidence should establish whether the goods are a complete machine and identify their capacity and operating features.
Case Laws Income Tax
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Convertible debenture interest requires evidence-based pricing before conversion; future equity conversion alone cannot establish a nil arm's length price.
Pre-conversion interest on compulsorily convertible debentures (CCDs) issued to a non-resident associated enterprise requires arm's length pricing. Compulsory future conversion and hybrid classification do not, by themselves, establish a nil price or extinguish an existing coupon obligation. Rule 10AB's Other Method requires a price charged, paid or expected in comparable uncontrolled circumstances, with reasonably accurate adjustments for material differences under Rule 10B. Currency, benchmark date, tenure, credit risk, security, non-redemption and conversion benefits affect comparability; a conventional bank lending rate is not automatically comparable to a long-tenor CCD.
Case Laws Customs
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Split motorcycle consignments require evidence of deliberate fragmentation for composite classification, with valuation assessed independently of classification.
Clubbing of split consignments for customs classification depends on proof that apparently separate imports form one deliberately fragmented transaction, not merely on the possibility of assembly. Rule 2(a) extends a tariff heading to an incomplete article possessing the essential character of the complete article and also covers a complete article presented disassembled. A change of tariff heading alone does not establish that the transaction value is inaccurate; substantive misdescription of the goods requires separate evidentiary consideration. Replacement value must follow the prescribed sequence of methods.
Case Laws GST
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Corporate guarantee taxation depends on distinguishing taxable supply from valuation, particularly for unpaid support between related businesses.
GST on corporate guarantees requires separate consideration of whether a taxable supply exists and how that supply is valued. Section 7(1)(c) and Schedule I encompass qualifying supplies between related or distinct persons without consideration when made in the course or furtherance of business. Rule 28(2) deems the value of a guarantee furnished to a banking company or financial institution for a related recipient in India to be one per cent of the guaranteed amount per annum or actual consideration, whichever is higher. Where the recipient is eligible for full input tax credit, the proviso treats the value declared in the invoice as the value of the supply.
Case Laws Income Tax
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Employee secondment taxation depends on employment rights, service consideration and demonstrable transfer of technical capability to host entities.
Local operational control and a stated suspension of foreign employment do not, by themselves, resolve whether underlying foreign employment rights survive. Under Article 12(4)(b) of the India-USA DTAA, technical or consultancy services must make technical knowledge, experience, skill, know-how or processes available, or involve development and transfer of a technical plan or design. Under the knowledge-transfer limb, the recipient must acquire a capability it can use independently; the mere application of expertise or presence of qualified personnel is insufficient. Recovery at actual cost and absence of markup do not, by themselves, establish that a foreign enterprise's receipt is non-taxable.
Case Laws GST
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GST appellate pre-deposits may be satisfied by verified earlier payments after demand reduction, but filing fees remain independently payable.
When the first appellate authority substantially reduces the disputed tax demand, an earlier deposit may be sufficient to satisfy the Tribunal-stage requirement, subject to verification. Sufficiency depends on the reduced liability, the applicable appellate requirements and the amount actually deposited; a first appellate payment does not automatically eliminate the additional obligation. Tribunal filing fees under Section 112(7) operate independently of pre-deposit. Where a fee shortfall and earlier deposit require verification, proof of fee payment and verification of the deposit precede consideration of admission.
Case Laws Income Tax
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Inter-co-operative society interest exemption preserves non-deduction by co-operative banks when depositors are co-operative societies under the statutory withholding framework.
Section 194A(3)(v) separately addresses interest paid by a co-operative bank to a member and interest paid by a co-operative society to another co-operative society. The exclusion of co-operative banks is confined to the member-payment limb; a co-operative bank remains a co-operative society for the inter-co-operative society limb. Paragraph 42.7 of Circular No. 19/2015 preserves non-deduction, including time-deposit interest, where the depositor is a co-operative society. Section 80P does not determine this withholding obligation.
Case Laws GST
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Input tax credit reversal requires evidence linking supplier non-payment to recipient ineligibility and a reasoned statutory inquiry.
Input tax credit under Section 16(2)(c) remains conditional on actual payment of tax to Government, but supplier non-payment or retrospective cancellation cannot by itself justify reversal. The recipient must establish eligibility through transactional evidence, while the proper officer must investigate the particular supply, disclose supplier-default and recovery material, apply the law applicable to the relevant period, and issue a reasoned, notice-bound determination. Supplier recovery status and protection against duplicate collection are material considerations.
Case Laws Customs
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Baggage-related customs appeals proceed through statutory revision when the jurisdictional exclusion applies to passenger imports.
The first proviso to section 129A(1) excludes Appellate Tribunal jurisdiction over an order under section 128A relating to goods imported or exported as baggage. The decisive issue is the order's connection with baggage, not disputes concerning confiscation, declaration, duty, personal effects, concealment, concession, or penalty. Articles carried by an international passenger in luggage or on the person may constitute baggage. Section 129DD provides revision before the Central Government, ordinarily within three months, subject to a further period on sufficient cause.
Case Laws GST
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Departmental GST appeal monetary limits regulate officers, while composite orders and proven recurring issues may permit appeals.
Sections 120 and 168 of the Central Goods and Services Tax Act, 2017 make monetary-limit directions binding within the Central tax hierarchy, while they regulate the executive decision to file rather than create an inflexible jurisdictional bar before the Tribunal. In a composite order disposing of multiple appeals or demand notices, the relevant amount is the total disputed tax, interest, penalty or late fee, as applicable. The recurring or interpretative-issue exclusion requires a reasoned, case-specific basis, and Commissioner authorisation does not itself establish compliance with the litigation policy.
Case Laws GST
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E-way bill re-use allegations require corroborated proof identifying the same goods; vehicle movement alone cannot establish contravention.
Alleged re-use of invoices and e-way bills requires the seizing authority to establish through positive, corroborated evidence that the intercepted goods are the same consignment previously transported under those documents. Toll data, vehicle movements and photographs may justify inquiry but do not alone prove prior delivery, identity of goods or re-use. Where invoices and e-way bills accompany the goods and physical verification shows no discrepancy, the authority must investigate and address any explanation of a different earlier consignment. Cases involving absent or expired transport documents remain factually distinct.
Case Laws GST
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Zero-rated supply turnover includes export invoices from the refund period when actual export is subsequently established under bond or LUT.
Under Rule 89(4), invoice values for goods invoiced before or at removal for export under bond or Letter of Undertaking may be included in zero-rated turnover for the relevant refund period, although physical export occurs later. The invoice and removal determine period-wise attribution for the refund formula, while actual export remains essential to sustain the claim. Shipping bills, bills of export and related export records must correlate with the export invoices to establish that the goods were ultimately exported. Compliance with valuation, input tax credit eligibility and bond or Letter of Undertaking conditions remains necessary.
Case Laws Income Tax
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Reassessment objections require speaking disposal and a four-week pause before scrutiny or information requests can begin.
Under the pre-amendment Section 148 framework, reassessment jurisdiction must be resolved before merits-stage scrutiny begins. The Assessing Officer must furnish recorded reasons when requested, permit objections, and decide them through a separate speaking order. A Section 143(2) notice commences scrutiny, while a Section 142(1) notice is a substantive inquiry step; neither may issue before objections are decided. Following rejection, a four-week period from service of the speaking order must be allowed before further reassessment action, preserving an effective opportunity to challenge reopening.
Case Laws GST
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Suppression of facts requires proof of deliberate tax evasion; ineligible input tax credit alone cannot support enhanced proceedings.
Section 74 permits enhanced tax determination for wrongly availed or utilised input tax credit only where fraud, wilful misstatement, or suppression of facts to evade tax is established. Wrong or ineligible credit is distinct from substantive credit eligibility and cannot, without evidence of deliberate conduct and intent, amount to suppression. Under historical Explanation 2, suppression required either omitted information legally required in prescribed filings or failure to provide information sought in writing; both operate subject to the statutory evasion requirement. Disclosed reconciliations and portal records materially weaken a bare allegation of non-declaration.
Case Laws Customs
Show AI Summary
Organic surface-active agent classification requires water solubility and stability; phase-separating low-ethoxylated products fall outside Heading 3402.
Classification of low-ethoxylated non-ionic fatty alcohol ethoxylates under Heading 3402 requires satisfaction of the cumulative water test in Chapter Note 3. At the prescribed concentration, temperature, and standing period, the product must both remain a transparent or translucent liquid, or stable emulsion, without phase separation and reduce water surface tension to the stated threshold. Non-ionic character or surface activity alone is insufficient. Where a low-ethoxylated product separates into layers and fails the solubility and stability requirement, Heading 3824 may be considered after exclusion from Heading 3402.
Case Laws Customs
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Lawful customs seizure requires recorded confiscation grounds, formal restraint where needed, and timely notice; detention cannot bypass safeguards.
Customs seizure of an imported car requires recorded reason to believe that it is liable to confiscation. A panchnama restraint cannot replace a lawful seizure order, an undertaking where seized goods remain in custody, or a served non-dealing order where seizure is impracticable. Section 110(2) requires prompt notice under Section 124, subject only to the prescribed extension mechanism. Prolonged effective detention cannot postpone those safeguards. Provisional release under Section 110A applies only to goods lawfully seized and cannot validate an earlier detention without statutory authority.
Case Laws Companies Law
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Corporate veil-piercing permits forensic scrutiny in execution where promoter-controlled entities may dissipate shareholding despite judicial assurances.
Corporate veil-piercing in execution is an exceptional response where promoters allegedly use layered entities and securities transactions to deplete shareholding represented as security through judicial assurances. Separate personality remains the rule, and control or ownership alone does not suffice; there must be a nexus between control, misuse of the corporate form, and frustration of enforcement. A forensic audit reconstructs share movements, pledges, sales, financing, approvals, disclosures, and fund flows, distinguishing legitimate enforcement of pre-existing security from coordinated asset dissipation.

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Comparison of SCHEDULE VI "INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM" between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

18 September, 2025

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SCHEDULE VI - INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM

Income-tax Act, 2025

At a Glance

Schedule VI in the Income Tax Bill, 2025 (Old Version). It lists categories of income not to be included in total income of certain eligible persons connected with International Financial Services Centres (IFSCs). It matters to non-residents, IFSC units, specified funds, offshore banking units, portfolio managers and investors in such funds. 

Background & Scope

Statutory hook: Schedule VI is presented "See section 11" and is annexed to the Income Tax Bill, 2025 (Old Version). The Schedule identifies income heads and categories of eligible persons whose specified incomes "shall not be included" in total income, subject to conditions in Column D and definitions in accompanying Notes. The Schedule addresses income relating to transfers on recognised stock exchanges in IFSCs, transfers of securities, income from securitisation trusts, derivative transactions with IFSC participants, royalty/interest on lease of aircraft/ship, portfolio management receipts, capital gains on shares of domestic companies with IFSC units, specified fund returns, dividend receipts from IFSC units engaged in leasing, and interest payable by IFSC units. Definitions and clarificatory notes appear as Note 1 through Note 7 and specify terms such as "convertible foreign exchange," "investment division of offshore banking unit," "manager," "permanent establishment," "securities," "securitisation trust," "specified fund," "sponsor," "trust," and "units." The Schedule incorporates cross-references to other statutes and regulations including the Reserve Bank of India, Securities and Exchange Board of India Regulations, the International Financial Services Centres Authority Acts/Regulations and the Special Economic Zones Act.

Statutory Provision Mode

Text & Scope

Coverage: The Schedule is a table of 12 distinct items describing income types that are excluded from total income of defined eligible persons. Each row sets out (A) a description of income; (B) the eligible person; and (D) conditions for the exclusion. Core items include capital gains on transfers u/s 70(1)(r) on recognised IFSC exchanges (Sl.1), transfers of securities excluding shares of resident companies (Sl.2), income from non-resident issued securities (Sl.3), securitisation trust income (Sl.4), NDFs/ODIs/OTC derivatives transfers or distributions (Sl.5), royalty/interest on aircraft/ship leases (Sl.6), income from portfolios managed in IFSC contexts (Sl.7), capital gains on domestic company equity where the domestic company is an IFSC unit (Sl.8), income from specified funds (Sl.9), capital gains on transfer of shares of Indian resident companies linked to relocation to a resultant fund (Sl.10), dividends received by IFSC units engaged in leasing (Sl.11), and interest payable by IFSC units for borrowings on/after 1 September 2019 (Sl.12).

Interpretation

The Schedule operates as a negative inclusion clause-income of specified description shall not be included in total income when the conditions are satisfied. Legislative intent, as evidenced by cross-references and delegated prescription language, is to create tax neutrality or favourable tax treatment for financial activities routed through IFSCs and for specified funds and their non-resident unit-holders, subject to regulatory/formal conditions to prevent abuse. The repeated use of delegated-law phrasing ("as prescribed") indicates Parliament's intent to allow Central Government/Regulator-level granular conditions and computations to be specified by rules/regulations.

Exceptions/Provisos

Carve-outs: Many exclusions are conditional-e.g., Sl.1 requires consideration in convertible foreign exchange and that exemption be only to extent attributable to units held by non-residents or investment divisions of offshore banking units. Sl.3 requires that the income otherwise does not accrue or arise in India. Sl.6 requires that the paying IFSC unit has commenced operations on or before 31 March 2030. Sl.8 confines the capital gains exclusion to specified 10-year windows from commencement of operations (or from 1 April 2023 where applicable). Sl.10 requires transfer to a resultant fund via relocation and restricts the benefit to the extent attributable to units held by non-residents. Several notes set out detailed definitional provisos; for instance, "specified fund" requires Category III AIF registration or IFSC fund regulation and unit-holding restrictions (allowing a sponsor/manager unit and limited resident holdings up to 5% subject to conditions).

Illustrations

  • Fund A, a trust in an IFSC with all units held by non-residents, sells securities on a recognised IFSC exchange and receives convertible foreign exchange. The capital gains on the transfer may be excluded from total income of the specified fund subject to the computation rules (Not stated in the document: precise computation formula).
  • Non-resident investor receives distribution from an offshore derivative instrument entered into with an offshore banking unit in an IFSC. If the contract is with an offshore banking unit or an FPI unit of IFSC and conditions as prescribed are met, the income may be excluded from the non-resident's total income.
  • A domestic company that is an IFSC unit engaged primarily in aircraft leasing commences operations on 1 April 2024. Capital gains arising on transfer of its equity in a tax year within ten tax years may be excluded for an eligible non-resident or IFSC unit purchaser, subject to the stated conditions.

Interplay

The Schedule expressly references several external statutes and regulatory instruments: the Foreign Exchange Management Act, 1999 (for convertible foreign exchange), SEBI AIF Regulations, 2012, SEBI FPI Regulations, 2019, IFSC Authority (Fund Management) Regulations, 2022, IFSC Authority (Capital Market Intermediaries) Regulations, 2021, Special Economic Zones Act (for definition of Unit), and domestic Income-tax Act sections (section 70(1)(r), section 70(2), section 173(c), section 221(6)(d)). The Schedule anticipates delegated rules for computation and qualification ("as prescribed"), indicating reliance on subsequent notifications/circulars to operationalise conditions and valuation/computation methodologies. Specific cross-references (e.g., to section 147 for IFSC units) are used to tie tax treatment to statutory characterisation of IFSC entities.

Differences Between Documents

  • (Sl. No. 9) - Treatment of income from a specified fund or on transfer of units: Document 1 (Schedule VI of Income-tax Act, 2025) explicitly records the entry in Column D as "Nil." Document 2 (Income Tax Bill, 2025 - Old Version) leaves Column D blank (non-filled).
    • Practical impact: The Act version removes doubt by expressly providing nil conditions for the eligible person, which clarifies that no further conditions are required for that entry; the Bill's version could have generated uncertainty on whether any qualifying conditions applied.
  • Drafting and formulation differences - use of legislative phrasing: Document 1 consistently uses "as may be prescribed" in several conditions (e.g., Sl. No.1(c) "shall be computed in such manner as may be prescribed"), whereas Document 2 often uses the shorter "as prescribed" or "as notified" in similar places.
    • Practical impact: The Act version's "as may be prescribed" is the conventional indicative of delegated legislation; the Bill's shorter phrasing is substantively similar but the Act wording aligns with settled legislative drafting norms and can be interpreted as a clearer delegation to rulemaking authorities.
  • Definitions structure for "specified fund" (Note 1(g)): There are re-arrangements and slight reformulations. Document 2 presents sub-clauses (A) and (B) and then (C) and (D) (with (C) stating location and (D) the unit-holding exceptions). Document 1 embeds the location requirement as part of the initial description ("a fund ... located in International Financial Services Centres") and then sets out regulatory regimes (I) and (II) and other descriptive elements.
    • Practical impact: The Act text (Document 1) is more tightly structured to associate regulatory regime and location in a single sentence which aids interpretation that location in an IFSC is an essential attribute; the Bill's layout might have been read as fragmented and therefore more ambiguous regarding whether regulation or location were independent requirements.
  • Specific phrase differences in examples and notes: e.g., Document 2 uses "monies" in Note to Sl. No. 12 whereas Document 1 uses "moneys" (spelling variation); Document 1 cites the International Financial Services Centres Authority regulations (with years) similarly to Document 2 but sometimes presents the regulatory citation with slightly different punctuation and parenthetical years.
    • Practical impact: These are drafting-level differences with minimal substantive effect but the Act's editorial consistency reduces risk of citation ambiguity.
  • Scope of some clauses (Sl. No. 5 and related notes): Document 1 expressly includes "over-the-counter derivatives" in the heading of clause 5(b) and in certain cross references, and clarifies that qualifying counterparty may be "an offshore banking unit of an International Financial Services Centre as referred to in section 147 or any Foreign Portfolio Investor being a unit of an International Financial Services Centre." Document 2 contains a similar formulation but with slightly different punctuation and omission of the phrase "as referred to in section 147" in one place.
    • Practical impact: Document 1's explicit cross-reference to section 147 and consistent phraseology provides stronger statutory linkage to IFSC units, reducing interpretive friction when applying provisions to offshore banking units and FPIs.
  • Computational/technical wording: Document 1 uses "shall have the meanings respectively assigned to them in the Notes below the said Table" and similar phrasing; Document 2 has near identical phrasing but differs in capitalization and small syntactic points.
    • Practical impact: No substantive difference; primarily editorial and drafting refinement in the Act.

Practical Implications

  • Compliance and risk areas: Taxpayers and fund managers must ensure strict compliance with the unit-holding criteria for "specified funds" (non-resident majority with narrow resident exceptions) and with commencement-of-operations timelines (notably 31 March 2030). Failure to meet conditions will negate the exclusion. Reliance on delegated rules is necessary for computation-non-availability of notified rules would create compliance risk.
  • Record-keeping/evidence: The text implies the need to maintain documentary evidence of (i) convertible foreign exchange receipt, (ii) unit-holding registers showing resident/non-resident status and percentages, (iii) documentation of transfers on recognised IFSC stock exchanges, (iv) contracts with offshore banking units/FPIs for derivative transactions, (v) dates of commencement of operations for IFSC units, and (vi) particulars of relocation transfers between original and resultant funds. The Schedule itself does not prescribe specific documents-administrative rules likely will.

Key Takeaways

  • Schedule VI lists discrete income categories excluded from total income for specified IFSC-related actors, subject to conditions and definitions.
  • The exclusions primarily benefit non-residents, IFSC units, specified funds and their non-resident unit-holders to foster IFSC financial activity.
  • Many exclusions are conditional (convertible foreign exchange, unit-holding restrictions, commencement dates, 10-year windows), making eligibility fact-sensitive.
  • The Schedule relies on external regulations and delegated "prescribed" rules for computation and detailed conditions; absence of those rules may impede operational application.
  • Robust records proving non-resident status of unit-holders, transactional currency, dates of commencement and contractual counterparties will be central to claiming the exclusions.
  • Some drafting ambiguities in the Bill may have been clarified in subsequent Act drafting (e.g., explicit "Nil." for Sl.9 in the Act), underscoring the importance of checking final enacted text and notifications.

Full Text:

SCHEDULE VI - INCOME NOT TO BE INCLUDED IN TOTAL INCOME OF CERTAIN ELIGIBLE PERSONS IN INTERNATIONAL FINANCIAL SERVICES CENTRE OR HAVING INCOME THEREFROM

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Acts Income Tax