In Supreme Court of India

Union of India vs. M/S Yasho Industries Ltd [Special Leave Petition (Civil) Diary No. 17547 of 2025]

Background of the Case

The legal dispute between the Union of India and Yasho Industries Limited originated from conflicting interpretations of Section 107(6)(b) of the CGST Act, 2017, which governs pre-deposit requirements for filing GST appeals. Yasho Industries, a manufacturer and exporter of specialty chemicals, had deposited Rs. 3.36 crore as a mandatory pre-deposit using its Electronic Credit Ledger while challenging a GST demand. However, tax authorities rejected this method, insisting the payment be made through the Electronic Cash Ledger.

The Gujarat High Court, in its October 2024 judgment, ruled in favor of Yasho Industries, holding that the Electronic Credit Ledger payment complied with the law. The Union of India, dissatisfied with this decision, appealed to the Supreme Court, seeking reversal on grounds of statutory misinterpretation.

Arguments by the Appellant (Union of India)

The Union of India contended that the Section 107(6)(b) implicitly required pre-deposits to be made in cash, not through input tax credits, to ensure revenue certainty. They argued that permitting Electronic Credit Ledger payments for pre-deposits could lead to potential misuse, as credit ledgers might contain disputed or unverified claims. Additionally, the appellant highlighted that similar cases filed by taxpayers were pending before the Supreme Court and urged the Court to tag this case with those matters for a consolidated ruling. The department maintained that the High Court’s interpretation conflicted with the legislative intent of safeguarding tax collection mechanisms.

Respondent’s Response (M/S Yasho Industries Limited)

Yasho Industries countered the appellant claims by emphasizing the Bombay High Court’s precedent in Oasis Realty and a 2022 CBIC circular, both of which explicitly allowed pre-deposits via the Electronic Credit Ledger. The respondent argued that the deletion of Rule 96(10) of the CGST Rules in 2024 had already resolved the underlying dispute, rendering the department’s appeal redundant. The respondent further pointed out that the pending cases cited by the Union were filed by taxpayers, not the Revenue, making them irrelevant to this appeal. The respondent asserted that the High Court’s decision aligned with GST laws and that the department’s insistence on cash payments imposed an unjust financial burden on businesses.

Court Findings and Decision

The Supreme Court upheld the Gujarat High Court’s judgment and dismissed the Union’s appeal. The Court ruled that the pre-deposit through the Electronic Credit Ledger was legally valid, as Section 107(6)(b) did not explicitly mandate cash payments. It noted that the pending cases referenced by the Revenue were materially distinct, as they involved challenges by taxpayers rather than the department. The bench also observed that the deletion of Rule 96(10) had eliminated the core controversy, making further intervention unnecessary. The judgment reinforced taxpayer-friendly interpretations of GST procedures and curtailed arbitrary revenue demands, providing clarity for similar disputes.

GST Appeal Pre-Deposit via Electronic Credit Ledger:

To download official order of Gujarat High Court, Click Here and for Supreme Court order, Click Here.“

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This new iteration follows the successful implementation of the earlier scheme. Such initiatives are increasingly becoming integral to taxation legislation, as the government prioritizes the resolution of disputes rather than dedicating administrative resources to contesting them, where the likelihood of success is minimal.

Eligible Cases ?

1. Taxpayer’s case is pending in Appeal / Writ / SLP with following as on 22^nd July 2024:
2. Joint Commissioner (Appeals)
3. Commissioner (Appeals)
4. Income Tax Appellate Tribunal
5. High Court
6. Supreme Court

• Taxpayers who have filed objections against the draft assessment order before the Dispute Resolution Panel (“DRP”) under section 144C of the Income-tax Act, 1961 (“IT Act”) and the DRP has not issued any directions to the Assessing Officer (“AO”) on or before July 22, 2024.

• Taxpayers in whose case the DRP has issued directions to the AO under section 144C(5) of the IT Act and the AO has not passed the final assessment order on or before July 22, 2024.

Taxpayers who have filed revision application under section 264 of the IT Act and such application is pending as on July 22, 2024.

Herein after referred to as “pending cases”

What to pay and what to save ?

Note:

In the following scenarios only 50% of the amount payable in the Table above shall be payable for availing the VSV Scheme, 2024:

1. Where the Pending Case has been filed by the Income-tax Authorities.
2. Where an appeal / objection has been filed before the CIT(A) / ITAT / DRP and an order in favour of the taxpayer has been received on any issue pending in the said appeal / objection from the higher Appellate Forums (and such decision has not been reversed).

Cases not covered under the VSV Scheme, 2024

• Where assessment has been made on the basis of the search initiated under section 132 or 132A of the IT Act.
• Where prosecution under the IT Act or any other specified act has been instituted on or before the date of filing declaration by the taxpayer.
• Where there is undisclosed income from a source located outside India or undisclosed  asset outside India.
• Where assessment or reassessment has been made based on the information received under Double Taxation Avoidance Agreement.
• Where an order of detention has been made under the provisions of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 on or before the date of filing of declaration and the same has not been revoked or set aside in specified circumstances.
• Where the taxpayer has been notified under section 3 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on or before the date of filing of declaration.

Note

Where the declarant had, before filing the declaration under this scheme, paid any amount under the Income-tax Act in respect of his tax arrears which exceeds the amount payable as depicted in table above, he shall be entitled to a refund of such excess amount, but shall not be entitled to interest on such excess amount under section 244A of the Income-tax Act.

The Direct Tax Vivad se Vishwas Scheme 2024

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The post The Direct Tax Vivad se Vishwas Scheme 2024 will commence from 01st October 2024 appeared first on Tax Unplug.

The present case aims to nullify the Assessment Order dated May 22, 2024, which was issued by DCIT, in accordance with Section 143(3) of Income Tax for the AY 2022–23. Additionally, the petition under review challenges the Demand Notice issued by DCIT u/s 156 as well as the notices u/s 274 of the Income Tax Act of 1961.

According to the petitioner company’s learned AR, the notices were sent out following the learned National Company Law Tribunal’s (NCLT) order dated December 06, 2021, which approved the Resolution Plan for the company’s revival and restructuring. They argued that the contested order and notification dated May 23, 2024, is legally unsound and violates the Insolvency and Bankruptcy Code 2016 (“IBC”), which calls for the company to be reorganized and resolved on a “clean slate basis.”

Delhi High Court noted that the Ld. NCLT vide order dated August 29, 2019, allowed the petitioner to initiate CIRP (Corporate Insolvency Resolution Process) against the petitioner company and moratorium u/s 14 of IBC, 2016 came into force. Later, the CIRP of the petitioner concluded in a successful manner, where the revitalization and reorganization of the company of the petitioner was proposed and approved by the Committee of Creditors on September 13, 2021.

The Hon’ble HC further observed that after the adoption of the resolution plan, new management assumed control of the petitioner-company to implement the Resolution Plan in accordance with IBC.

It was a settled proposition of law that once a Resolution Plan was duly approved by the adjudicating authority u/s 31(1) of IBC, 2016, the claims as provided in the Resolution Plan shall stand frozen and it will be binding on the corporate debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stake holders.

The High Court relied on the Supreme Court’s Judgement in the case of Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd, wherein it was held that “after the authority approved the resolution plan, all such claims that are not part of the resolution plan expire and no one had the right to initiate or continue proceedings in respect of a claim that is not part of the resolution plan.”

It should be noted that the principle of a clean slate had been repeatedly reiterated and confirmed both in the Supreme Court and in this court. Therefore, if the resolution plan or sale is accepted as operative and is duly approved by the adjudicating authority, the previous obligations and claims of all debtors of the company will cease to exist.

According to the above order it clearly showed that once the resolution plan is approved by the COC, it was binding on all concerned. As a result of the above, the impugned assessment order dated 22nd May 2024 and notification dated 23rd May 2024 cannot be in the eye of the law and set aside.

The National Sewing Thread Co. Ltd vs DCIT and Others

To download the official order, click here.“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship. The information on this site is not intended to be a substitute for professional advice.”

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The Supreme Court on Friday May 17, 2024 upheld a rule issued by the Institute of Chartered Accountants of India (ICAI) that limits Chartered Accountants to a maximum of 60 tax audit assignments per financial year. The bench, comprising Justices BV Nagarathna and Augustine George Masih, ruled that the regulation (paragraph 6.0 of Chapter VI of the Council Guidelines No. 1-CA(7)/02/2008 dated August 8, 2008, and subsequent amendments) does not violate the fundamental right to practice a profession under Article 19(1)(g) of the Constitution.

The primary argument against the guidelines was that they infringed on the fundamental right to practice a profession under Article 19(1)(g) and the right to equality under Article 14. The petitioners also questioned the ICAI’s authority to impose such a restriction. Senior Advocate Paramjit Singh Patwalia represented the petitioners. Senior Advocate Arvind P. Datar, representing the ICAI, provided a historical overview of the compulsory audit requirements under the Income-tax Act, 1961.

The Court decided that this rule will be effective from April 1, 2024, and annulled the disciplinary proceedings against members who breached this limit prior to the effective date. “We quash the disciplinary proceedings initiated against the petitioners on the basis of the doctrine of legal uncertainty,” the bench declared. Additionally, the Court affirmed that the ICAI may increase the audit limit if deemed necessary.

In their judgment, the justices praised the ICAI for its high standards and significant contributions to the accounting profession, both nationally and internationally. “ICAI has, over time, received recognition as a premier accounting body domestically and globally for maintaining the highest standards…the ICAI has also played a significant role in ensuring the dynamism of the CA course and the credibility of the examination. We commend that the ICAI must be committed towards the convergence of accounting and ethical standards with international standards…the true test, however, lies in enforcement of these standards,” the Court noted.

The main findings of the ruling were outlined in the following manner:

1. Section 6 of Chapter VI and its subsequent modification are considered justifiable limitations under Article 19(1)(g).

2. This provision will be enforced starting from April 1, 2024, rendering any disciplinary measures taken prior to this date void.

3. The ICAI is authorized to regulate the quantity of audits that a Chartered Accountant may conduct.

A copy of the SC order is awaited.

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship.
The information on this site is not intended to be a substitute for professional advice.”

The post Supreme Court upholds the operation of the ICAI Rule as of April 1, 2024, placing a limit on the number of CA audits per year appeared first on Tax Unplug.

The Supreme Court has recently ruled on the taxation of interest-free or concessional loans provided to bank employees. The Court has determined that the advantage received by bank employees through such loans is a distinct fringe benefit exclusive to them. This benefit is classified as a ‘perquisite’ and is therefore subject to taxation.

The case revolved around the analysis of Section 17(2)(viii) of the Income Tax Act and Rule 3(7)(i) of the Income Tax Rules. Various petitioners, such as staff unions and officers’ associations from different banks, contested the validity of these regulations, presenting arguments against the taxation of interest-free or concessional loans given by banks to their employees.

Section 17(2)(viii) of the Act defines ‘perquisites’ to include ‘any other fringe benefit or amenity’, as prescribed. Rule 3(7)(i) of the Rules stipulated that interest-free/concessional loan benefits provided by banks to bank employees shall be taxable as ‘fringe benefits’ or ‘amenities’, if the interest charged by the bank on such loans is lesser than the interest charged according to the Prime Lending Rate of the State Bank of India.

The petitioners contested the provisions based on the excessive and unguided delegation of legislative authority to the Central Board of Direct Taxes (CBDT). They further contended that Rule 3(7)(i) was arbitrary and contravened Article 14 of the Constitution.

Nevertheless, the arguments put forth were ultimately dismissed by the Supreme Court, which upheld the provisions as valid. The Court stressed the importance of ensuring that any delegation of legislative authority remains within the confines of the original legislation and does not result in a relinquishment of crucial legislative responsibilities.

The Supreme Court held that Section 17(2)(viii) provided sufficient guidance to the CBDT for framing rules, and Rule 3(7)(i) was consistent with the legislative policy and standards laid down in the Act. Regarding the benchmarking of interest rates to the PLR of SBI, the Court deemed it rational and non-arbitrary. It noted that SBI’s interest rates significantly influence those of other banks and that using a single benchmark ensured consistency and clarity in taxation. The Court concluded that Rule 3(7)(i) was based on a fair determining principle and did not violate Article 14. The Supreme Court’s decision upholding the taxation of interest-free/concessional loans to bank employees reaffirms the legality of Rule 3(7)(i) under the Income Tax Rules. The judgment provides clarity on the taxation of fringe benefits and underscores the importance of consistency and fairness in tax legislation.

To download the official order, click here.

“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship.

The post SUPREME COURT UPHOLDS VALIDITY OF INCOME TAX PROVISIONS LEVYING TAX ON INTEREST FREE LOANS TO BANK EMPLOYEES appeared first on Tax Unplug.

Kuntala Mohapatra vs Principal Commissioner of Income Tax SPECIAL LEAVE PETITION (CIVIL) Diary No(s). 5269/2024

The assessee submitted its return for the relevant year. Subsequently, after a survey, the assessee filed a revised return and claimed exemption for long-term capital gains on shares under section 10(38). However, the Assessing Officer rejected the assessee’s plea and made additions under sections 68 and 69 based on statements from ‘entry operators’. The Commissioner (Appeals), on appeal, accepted the assessee’s claim. The Commissioner noted that the shares were purchased through Account Payee Cheques, held in a Demat Account for over 12 months, and sold through a recognized stock exchange after payment of security transaction tax. The Tribunal also upheld the decision of the Commissioner (Appeals). The Tribunal emphasized the assessee’s right to correct mistakes and criticized the Assessing Officer’s reliance on statements from ‘entry operators’ to support the additions under sections 68 and 69. The statements were recorded in unrelated proceedings before the survey on the assessee, and the assessee was not given an opportunity to challenge or cross-examine the providers of those statements. On the revenue’s appeal, the High Court confirmed the order of the Tribunal. Furthermore, the Supreme Court dismissed the revenue’s Special Leave Petition to interfere with the High Court’s order.

To Download official order, click here. –
“The site is for information purposes only and does not provide legal advice of any sort. Viewing this site, receipt of information contained on this site, or the transmission of information from or to this site does not constitute an attorney-client relationship.
The information on this site is not intended to be a substitute for professional advice.”

The post Supreme Court dismissed SLP challenging order of High Court which allowed exemption u/s 10(38) in case of penny stock appeared first on Tax Unplug.