Loading...

⚠ ✕
❮ Top
☎ Help
☰
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback✕

Contact Us At :

✉ E-mail: [email protected]

✆ Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters 0/2000
Make Most of Text Search ✕
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
╳
Add to...
You have not created any category. Kindly create one to bookmark this item!
✕
Create New Category
Hide
Title :
Description :
❮❮ Hide
❮ Default View
Expand ❯❯
Close ✕
🔎 Filters / Advanced Search ❯
TEXT

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In
Main Text + AI Text ❯
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws---- ❯
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ---- ❯
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
Relevance Default Date
    News Bill
    Tax rates under section 202
    News Bill
    Individual, HUF, association of persons, body of individuals, artificial juridical person.
    News Bill
    Co-operative Societies
    News Bill
    Firms
    News Bill
    Local authorities
    News Bill
    Companies
    News Bill
    Surcharge on income-tax
    News Bill
    Marginal Relief
    News Bill
    Education Cess
    News Bill
    Rates for deduction of income-tax at source during the financial year (FY) 2026-27 from certain inco...
    News Bill
    Individual, HUF, association of persons, body of individuals, artificial juridical person.
    News Bill
    Co-operative Societies
    News Bill
    Firms
    News Bill
    Local authorities
    News Bill
    Companies
    News Bill
    Rationalising the due date to credit employee contribution by the employer to claim such contributio...
    News Bill
    Exemption on interest income under the Motor Vehicles Act, 1988.
    News Bill
    No tax to be deducted at source in respect of interest on compensation amount awarded by Motor Accid...
    News Bill
    Enabling electronic verification and issuance of certificate for deduction of income-tax at lower ra...
    News Bill
    Relaxation from requirement to obtain tax deduction and collection account number (TAN) by a residen...
❮
❯
❯❯
Maximize Maximize Maximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

+

Are you sure you want to delete "My most important" ?

NOTE:

Notes
Showing Results for :
Reset Filters
Results Found:
Show All Summaries Hide All Summaries
News Bill
Show AI Summary
Tax rates under section 202 set default slabs with surcharge bands, surcharge caps for specified cases, and marginal relief.
Tax rates under section 202 set graded default income-tax slabs for specified taxpayers for 2026-27, subject to an option to elect an alternative regime; a surcharge applies to higher total income bands (with inclusion rules for dividend income and capital gains), surcharge caps where alternative provisions apply and for certain associations of persons, and marginal relief to alleviate threshold impacts.
News Bill
Show AI Summary
Income-tax 2026-27: new slab rates, optional Part I-B age-based slabs, and revised surcharge caps and relief.
Section 202 prescribes progressive income-tax slabs for 2026-27 for individuals, HUFs, AOPs, BOIs and specified artificial juridical persons, while preserving an option under section 202(4) to adopt the Part I-B rates. Part I-B provides alternative slabs including age-based thresholds for senior and super senior residents. Computed tax (including specified dividend and capital gains) attracts a graduated surcharge with provisos capping surcharge on dividend/capital gains at 15%, limiting surcharge for company-only AOPs to 15%, and reducing the 37% surcharge to 25% for persons taxed under section 202; marginal relief applies.
News Bill
Show AI Summary
Co-operative societies: unchanged tax rates, tiered surcharge with marginal relief, and optional lower-rate tax regime with reduced surcharge.
Co-operative societies are taxed under Paragraph B of Part I B of the First Schedule with rates unchanged from the prior year. Surcharge applies in tiers according to total income, with marginal relief available to reduce surcharge impact where appropriate. A resident co-operative society that satisfies prescribed conditions may elect an alternative lower-rate tax regime; when elected, a specified lower surcharge percentage applies to that tax.
News Bill
Show AI Summary
Firms: income-tax rate unchanged; 12% surcharge over one crore rupees with a cap limiting additional tax.
Firms continue to pay the same specified rate of income-tax as in the prior year. A 12% surcharge applies where a firm's total income exceeds one crore rupees, but the total tax plus surcharge on income exceeding one crore rupees is limited so it does not exceed the tax on one crore rupees by more than the excess income.
News Bill
Show AI Summary
Local authorities face the same income-tax rate with a 12% surcharge above one crore, subject to a cap.
Local authorities remain subject to the same income-tax rate as specified in Paragraph D of Part I-B of the First Schedule; a 12% surcharge on such income-tax applies where total income exceeds one crore rupees, but the combined income-tax and surcharge on income above one crore is limited so it does not exceed the income-tax on one crore rupees by more than the excess amount.
News Bill
Show AI Summary
Company tax rates: domestic companies 25% or 30% with opt-in 22% regime; non-domestic companies 35%; specified surcharges apply.
The Finance Bill, 2026 sets company tax rates: domestic companies pay 25% if turnover/gross receipts for 2024-25 400 crore and under section 199, otherwise 30%; domestic companies may opt for section 200 at 22% with a 10% surcharge. Non-domestic companies are taxed at 35% on income not at special rates. Surcharges: domestic (excluding section 200/201 electors) 7% for income >1 crore 10 crore and 12% for income >10 crore; non-domestic 2% for >1 crore 10 crore and 5% for >10 crore. Marginal relief applies.
News Bill
Show AI Summary
Surcharge on income-tax stays unchanged; specified fund income exempt and special-assessment persons face a 25% surcharge cap.
Surcharge rates remain unchanged from the prior assessment year. Surcharge does not apply to income-tax computed on income of a specified fund as noted in the tax schedule. For persons assessed under the special assessment procedure, the higher surcharge tier on income above the high-income threshold (excluding dividend income and capital gains) is not applied and the surcharge is restricted to 25%.
News Bill
Show AI Summary
Union Budget 2026-27: marginal relief applies where surcharge is imposed for affected taxpayers to mitigate additional tax burden.
The Finance Bill for the Union Budget 2026-27 provides marginal relief in all cases where a surcharge is proposed to be imposed, as a mitigation mechanism to prevent disproportionate increases in tax liability when surcharge thresholds are crossed and to preserve intended tax progression.
News Bill
Show AI Summary
Health and Education Cess to be levied at 4% on income-tax inclusive of surcharge; no marginal relief.
Health and Education Cess is imposed at 4% on the amount of income-tax so computed, inclusive of any applicable surcharge, and no marginal relief is available; the cess is levied uniformly on the surcharge-inclusive tax liability.
News Bill
Show AI Summary
Rates for tax deduction at source for FY 2026-27 remain unchanged; 4% health and education cess applies to nonresidents.
Rates for deduction of income-tax at source from incomes other than salaries are specified in Part II of the First Schedule to the Finance Bill and are to be applied under the relevant sections of the Act. The rates and the Union surcharge remain the same as in the prior year, and a Health and Education Cess of 4% on income-tax including surcharge continues to apply to nonresidents and foreign companies.
News Bill
Show AI Summary
Union Budget 2026 27 sets new income tax and advance tax rates for individuals, senior citizen thresholds, and graduated surcharge bands.
Part III of the First Schedule sets FY 2026 27 tax deduction and advance tax rates: Section 202 rates use a seven bracket scale to 30% (above Rs. 24,00,000) with an option to adopt Part III rates. Paragraph A offers a four slab regime for individuals and similar entities with adjusted thresholds for senior citizens; capital gains under specified sections are included. Surcharge bands of 10%, 15%, 25% and 37% apply by income band, subject to caps and special restrictions for dividend/capital gains, associations of companies and persons taxed under section 202. Marginal relief is provided.
News Bill
Show AI Summary
Co-operative societies: existing tax rates unchanged; 7% and 12% surcharges apply with marginal relief; 22% option available.
In respect of co-operative societies, income-tax rates remain unchanged from FY 2025-26. A 7% surcharge on income-tax applies where total income exceeds one crore but does not exceed ten crore rupees, and a 12% surcharge applies where total income exceeds ten crore rupees; marginal relief is provided. A resident co-operative society that satisfies certain conditions may opt to pay tax at 22% under the Act, with a 10% surcharge on such tax.
News Bill
Show AI Summary
Firms: tax rate unchanged; 12% surcharge applies above one crore rupees with a cap on excess liability.
For FY 2026-27, firms are taxed at the Paragraph C rate in Part III of the First Schedule (unchanged from FY 2025-26) and face a 12% surcharge where total income exceeds one crore rupees; however, the aggregate tax plus surcharge on income above one crore is capped so it does not exceed the tax on one crore by more than the excess income amount.
News Bill
Show AI Summary
Local authorities face a 12% surcharge on income-tax for total income exceeding one crore, subject to a cap.
The rate of income-tax for every local authority is specified in Paragraph D of Part III and remains unchanged; a surcharge at the rate of 12% applies where total income exceeds one crore rupees, and the combined tax and surcharge on income above one crore is capped so it does not exceed the tax on one crore rupees by more than the excess amount.
News Bill
Show AI Summary
Corporate tax rates updated for FY 2026-27, including surcharge tiers and health and education cess.
Union Budget 2026-27 sets company income-tax rates and related surcharge and cess treatment for FY 2026-27: domestic companies pay 25% if turnover/gross receipts for tax year 2024-25 are four hundred crore and under the section 199 regime, otherwise 30%, with an option to opt for 22% under section 200 (10% surcharge on that tax). Non domestic companies are taxed at 35% on ordinary income. Surcharge tiers and marginal relief rules remain, and a 4% Health and Education Cess applies on tax inclusive of surcharge without marginal relief for the cess.
News Bill
Show AI Summary
Employer deduction for employee contributions will be tied to the return filing due date under section 263(1).
The Finance Bill, 2026 amends section 29(1)(e) to provide that the due date for claiming a deduction for employee contributions credited by the employer shall be the due date of filing of return of income under section 263(1); the amendment takes effect from 1 April 2026 and applies to tax year 2026-27 and subsequent years.
News Bill
Show AI Summary
Interest income under Motor Vehicles Act now exempt for individuals and legal heirs from FY 2026-27 onward.
Interest payable as part of compensation under the Motor Vehicles Act, 1988 to an individual or the legal heir for death, permanent disability, or bodily injury is proposed to be exempt by addition to the Income-tax Act Schedule; the amendment is effective from 1 April 2026 and applies to the tax year commencing then and subsequent years.
News Bill
Show AI Summary
Interest on compensation from Motor Accidents Claims Tribunal: no tax deducted at source for individuals, effective April 2026.
The Finance Bill, 2026 proposes that no tax shall be deducted at source on interest paid on compensation awarded by the Motor Accidents Claims Tribunal to an individual, removing the prior conditional threshold and providing relief to accident victims. The amendment is effective from 1 April 2026 (Clause 72).
News Bill
Show AI Summary
Electronic TDS/TCS certificates: payees may file for lower or nil deduction; authority may issue or reject applications.
Permits payees to file applications electronically for certificates for deduction of income-tax at lower or nil rates before the prescribed income-tax authority, which may issue the certificate subject to prescribed conditions or reject incomplete or non compliant applications, thereby easing compliance burdens for small taxpayers under Section 395.
News Bill
Show AI Summary
TAN requirement relaxed for resident individuals and HUFs acquiring property from non-resident sellers, effective October 1, 2026.
The Finance Bill, 2026 amends section 397(1)(c) to provide that resident individuals and Hindu undivided families are not required to obtain a tax deduction and collection account number (TAN) to deduct tax at source on any consideration for transfer of immovable property under section 393(2); the amendment takes effect from 1 October 2026.

TMI Notes

Back

All TMI Notes

Showing Results for :
Reset Filters
No Records Found

TMI Notes

Back

All TMI Notes

Indirect Corporate Control and Related-Party Classification in the Corporate Insolvency Resolution Process

25 September, 2026

Contents
Acts
Plus +
Summary
Note

Note

-

Bookmark

Print

Print

This is a neutral professional article. The judgment is analysed in the context of its factual background, issues framed, and conclusions reached by the Court.

2026 (7) TMI 250 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI

At a Glance

  • A body corporate may be a related party of a corporate debtor under Section 5(24)(i) of the Insolvency and Bankruptcy Code, 2016 even where it holds no shares directly in the corporate debtor.
  • The statutory inquiry is not confined to direct ownership. The subsidiary relationship recognised by Section 2(87) of the Companies Act, 2013 extends to control exercised through another subsidiary of the holding company.
  • Accordingly, a corporate debtor may be a step-down subsidiary of an upstream holding company. That relationship attracts Section 5(24)(i).
  • Board-composition control is an independent route to related-party status under Section 5(24)(l). Common beneficial ownership and a corporate structure evidencing control may be relevant to that inquiry.
  • A financial creditor which is a related party of the corporate debtor is excluded from representation, participation and voting in the Committee of Creditors under the first proviso to Section 21(2).

Background & Context

The related-party exclusion in the corporate insolvency resolution process is directed at preserving the independence of the Committee of Creditors. The first proviso to Section 21(2) of the IBC states that a financial creditor which "is a related party of the corporate debtor" shall not have any right of representation, participation or voting in a Committee of Creditors meeting, subject to the stated statutory exception for a regulated financial creditor whose related-party status arises solely from specified debt-to-equity events.

The issue becomes particularly significant in multi-layer corporate groups. A claimant may assert that it is neither a shareholder nor a direct holding company of the corporate debtor. That assertion, by itself, does not resolve the enquiry. The IBC incorporates company-law concepts of holding and subsidiary relationships, and therefore requires examination of the complete ownership and control chain.

In 2026 (7) TMI 250 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI, the appellate tribunal considered whether an upstream entity, holding a majority interest in an intermediate entity which in turn held a majority interest in the corporate debtor, was a related party. The appellate tribunal held that the corporate debtor was the claimant's step-down subsidiary. It consequently upheld its classification as a related party under Section 5(24) of the IBC.

Key Issues / Provisions

Related party under the IBC

Section 5(24) of the IBC defines "related party", in relation to a corporate debtor. Two clauses were central to the determination:

  • Section 5(24)(i): "a body corporate which is a holding, subsidiary or an associate company of the corporate debtor, or a subsidiary of a holding company to which the corporate debtor is a subsidiary";
  • Section 5(24)(l): "any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor".

The terms "holding company", "subsidiary" and "associate company" are not separately defined in the IBC. Section 3(37) of the IBC therefore applies: words and expressions used but not defined in the Code, and defined in the Companies Act, 2013, have the meanings assigned in that Act.

Holding company, subsidiary and indirect control

Section 2(46) of the Companies Act, 2013 defines a holding company as a company of which one or more other companies are subsidiary companies. Section 2(87) defines a subsidiary, in relation to its holding company, as a company in which the holding company either "controls the composition of the Board of Directors" or "exercises or controls more than one-half of the total voting power", either by itself or together with one or more subsidiaries.

Most importantly, Explanation (a) to Section 2(87) provides that a company is deemed to be a subsidiary of a holding company even where the requisite control is exercised "by another subsidiary company of the holding company". The statutory language expressly accommodates a layered corporate structure; it does not insist upon direct shareholding by the ultimate holding company in the corporate debtor.

Section 2(6) defines an associate company as one in which another company has significant influence but which is not its subsidiary. "Significant influence" means control of at least twenty per cent of total voting power, or control of or participation in business decisions under an agreement. Further, Section 2(27) provides that "control" includes the right to appoint a majority of directors or to control management or policy decisions, directly or indirectly, including through shareholding, management rights, shareholders' agreements, voting agreements or otherwise.

Detailed Analysis

Step-down subsidiary status is sufficient under Section 5(24)(i)

The appellate tribunal's principal conclusion was founded on the interlocking operation of Section 5(24)(i) of the IBC and Section 2(87) of the Companies Act. The claimant held 63% of an intermediate company, and that intermediate company held 51.2% of the corporate debtor. The tribunal held that the intermediate company was a subsidiary of the claimant and that the claimant, through that subsidiary, controlled the corporate debtor.

The absence of direct shareholding in the corporate debtor did not assist the claimant. Explanation (a) to Section 2(87) deems a company to be a subsidiary even if the relevant control is exercised through another subsidiary of the holding company. The appellate tribunal therefore held that the corporate debtor was a step-down subsidiary and that the claimant was a related party within Section 5(24)(i). The conclusion was not dependent upon treating the claimant merely as an associate company or on proving a separate factual case of significant influence.

This construction gives operative content to the phrase in Section 5(24)(i), "a subsidiary of a holding company to which the corporate debtor is a subsidiary". It also prevents the related-party exclusion from being defeated merely because control is arranged through one or more intermediate entities.

Board control remains an independent statutory basis

The appellate tribunal also found no error in treating the claimant as a related party under Section 5(24)(l). The relevant corporate chart showed a common beneficial owner across the entities in the ownership chain. The tribunal considered that this structure supported the conclusion that control over the boards of the group entities, including the corporate debtor, could be exercised through the chain.

The Section 5(24)(l) test is framed in terms of capacity: whether a person "can control the composition" of the board. It is therefore distinct from, and may coexist with, the holding-subsidiary test under Section 5(24)(i). In an appropriate case, evidence concerning appointment rights, removal rights, voting arrangements, management rights and the corporate chain may establish this capacity even if direct shareholding in the corporate debtor is absent.

The approach is consistent with 2022 (7) TMI 661 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI. That decision examined contractual and governance rights and held that being in a position to exercise positive control over management or policy decisions could attract related-party status. Actual exercise of the control was not treated as an indispensable requirement where the arrangements placed the person in a position to exercise it.

Control must be substantive, not merely formal

The inquiry remains one of statutory substance. 2018 (10) TMI 312 - Supreme Court, while considering control in a different IBC setting, describes control as positive and proactive control, whether de jure or de facto, over management or policy decisions. It distinguishes such control from mere negative or protective rights. The decision also recognises that corporate structures may be examined to identify the persons who, in substance, control or act in concert.

For the purpose of Section 5(24)(i), however, once the statutory subsidiary relationship is established through Section 2(87), the related-party conclusion follows from the statutory relationship itself. A separate factual contest over every instance of management intervention is not necessary. Section 5(24)(l) may nevertheless provide an additional and independent basis where board-composition control is demonstrable.

Relevant point of time and past regulatory supervision

The appellate tribunal rejected the contention that a prior period during which the corporate debtor was under a revival or regulatory regime negated the upstream entity's related-party status. It held that control and shareholding before commencement of the CIRP are relevant to determination of related-party status. A past period of external supervision did not displace the admitted ownership structure preceding the CIRP.

2021 (2) TMI 91 - Supreme Court provides the complementary principle that the related-party exclusion under Section 21(2) must be purposively applied to protect the creditor process from conflicts of interest. That authority recognises that a purported alteration of status cannot be used as a commercial contrivance to defeat the exclusion where the debt originated during a related-party relationship. The primary enquiry in a holding-company case remains the applicable statutory category and the factual corporate relationship; however, the CoC process must not be permitted to be manipulated through artificial restructuring.

The contrasting importance of evidence of continuing relationship

2023 (11) TMI 173 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB illustrates that related-party classification is evidence-sensitive. In that matter, the tribunal upheld exclusion where the claimant's own claim form and corporate records continued to reflect related-party status, and the asserted share transfer had not been implemented or recorded. Conversely, it found that another entity could not be excluded merely on an alleged historical relationship where the record did not establish a continuing disqualifying relationship at the relevant point.

The practical lesson is that a bare assertion of separation from the corporate debtor will not suffice. Share registers, filings, claim forms, board rights, voting rights, agreements and the implementation of any alleged transfer or restructuring must be examined. In the case of an upstream holding entity, the statutory effect of the ownership chain must receive particular attention.

Practical Implications

  • Resolution professionals should obtain a complete group structure chart, identify direct and indirect voting rights, and trace each intermediate entity between the claimant and the corporate debtor.
  • The analysis should expressly apply Explanation (a) to Section 2(87) where control is exercised through a subsidiary. A direct-shareholding-only test is legally inadequate.
  • Where Section 5(24)(l) is invoked, the record should identify the source of board-composition control, including appointment or removal rights, voting arrangements, constitutional documents and management agreements.
  • Claimants asserting independence should furnish reliable evidence that any asserted share transfer, resignation, relinquishment of rights or restructuring was completed and legally effective before the relevant stage.
  • The Committee of Creditors should record the basis for exclusion carefully. Since Section 21(2) removes representation, participation and voting rights, the classification has direct consequences for CoC constitution and voting shares.
  • An entity may remain entitled to pursue the adjudication of its claim despite related-party classification; the immediate consequence considered here is exclusion from CoC participation under the first proviso to Section 21(2).

Key Takeaways

  • Section 5(24)(i) expressly reaches group-company relationships and must be read with the Companies Act definitions imported through Section 3(37) of the IBC.
  • Under Section 2(87), subsidiary status can arise through control held by another subsidiary of the holding company. This is the statutory basis for recognising a step-down subsidiary relationship.
  • Direct ownership of shares in the corporate debtor is not a precondition for related-party status where indirect majority control through a subsidiary is established.
  • Section 5(24)(l) independently covers a person capable of controlling board composition; common beneficial ownership and governance rights may be relevant evidentiary circumstances.
  • The related-party exclusion in Section 21(2) protects the integrity of the Committee of Creditors by denying a related financial creditor representation, participation and voting rights.

 


Full Text:

2026 (7) TMI 250 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI

Topics

Acts Income Tax