Weekly Round-up on Tax and Corporate Laws | 12th January 2026 to 17th January 2026

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Jan 12^th  to Jan 17^th 2026, namely:

1. Capital gains from Tiger Global’s Flipkart sale are taxable in India as TRC is not conclusive for DTAA relief and GAAR applies: SC;
2. RBI notifies FEM (Export and Import of Goods and Services) Regulations, 2026;
3. SEBI rolls out mutual funds regulations, 2026, effective April 1, 2026;
4. Initial burden to prove the deceased’s employment, direct or through a contractor, lies on claimants: HC;
5. No GST exemption on premium paid by retired bank employees towards group health insurance policy: HC;
6. In Data management services to US parent co. , place of service is outside India; GST demand quashed: HC; and
7. New Labour Codes and Gratuity Accounting: Actuarial Re-measurement or Past Service Cost?

1. Capital gains from Tiger Global’s Flipkart sale are taxable in India as TRC is not conclusive for DTAA relief and GAAR applies: SC

The assessee, a company incorporated in Mauritius, held shares of a Singapore company (Flipkart), which had investments in multiple Indian companies and derived substantial value from assets located in India. As part of a wider transaction involving the majority acquisition of Flipkart by Walmart, a US company, the assessee transferred its shares in Flipkart to a Luxembourg entity (Fit Holdings S.A.R.L) and claimed that the resulting capital gains were not taxable in India under the India–Mauritius DTAA.

The Authority for Advance Rulings (AAR) rejected this claim, holding that the applications preferred by the assessees relate to a transaction or issue which is prima facie designed for the avoidance of income tax. The assessee filed a writ petition before the High Court.

The High Court set aside the AAR’s order, noting that the transaction was not intended for tax avoidance and was protected by the grandfathering provisions of Article 13(3A) of the DTAA. The matter reached to the Supreme Court.

After further review by the SC, it was decided that following the insertion of section 90(2A), sections 90(4) and 90(5) of the Income-tax Act, the introduction of Chapter X-A (GAAR), and the inclusion of article 27A in the DTAA, merely possessing a Tax Residency Certificate is not sufficient to definitively prove treaty eligibility or prevent the revenue from investigating potential treaty abuse.

It was further held that the grandfathering benefit under article 13(3A) is restricted to direct transfers of shares of an Indian company and does not extend to indirect transfers covered by the residual article 13(4), and that where unlisted equity shares are transferred pursuant to an arrangement impermissible in law, the assessee cannot claim exemption under article 13(4).

Accordingly, upon a consideration of the facts as established on record, the transactions were held to constitute impermissible tax-avoidance arrangements attracting the provisions of Chapter X-A, with the result that the capital gains arising from transfers effected on or after 1 April 2017 were held to be taxable in India.

Read the Ruling

2. RBI notifies FEM (Export and Import of Goods and Services) Regulations, 2026

The RBI has notified the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. These Regulations lay down norms relating to declaration of exports, the manner of receipt and payment, the timelines for realization of exports, and the set-off of export receivables against import payables. Further, it prescribes norms relating to the timelines for making import payments, the import of gold and silver and merchanting trade transactions. These regulations shall come into force w.e.f. October 1, 2026.

Key provisions

The key provisions include:

• Time Period for realisation of export proceeds

Under the extant norms, exporters are required to realise and repatriate the full value of goods/software/services to India within 15 months from the date of export. However, under the new regulations, the export value of goods and services must be realised and repatriated within the following periods:

a) 15 months from the date of shipment in the case of goods (other than goods exported to a warehouse outside India) and from the date of invoice in the case of services;
b) 15 months from the date of sale of goods from the warehouse in case of goods exported to a warehouse outside India;
c) As per the payment terms of the contract, in the case of project exports

• Reduction in the export realization

Under new regulations, an Authorised Dealer may, on request from the exporter citing reasons for under-realisation or non-realisation of the full export value, allow a reduction in realisation of export value, provided that the AD is satisfied with the reasons stated.

However, where the export value is up to Rs. 10 lakh (or its equivalent in foreign currency) per shipping bill (for goods) or per invoice (for services), the reduction of export value, including non-realisation of the full export value, may be permitted based on a declaration from the exporter.

• Set off of export receivables against import payable

An Authorised Dealer (AD) may allow the set-off of export receivables against import payables within the same overseas buyer or supplier, or their overseas group or associate companies, within the stipulated period for realisation of export proceeds or any extended period allowed by the AD.

• Third-party receipts and payments

An Authorised Dealer (AD) may permit third-party (other than the parties undertaking the export or import) receipts and payments for export and import transactions, provided the AD is satisfied about the bona fides of the transactions.

• Time period for making import payments

An authorised dealer must monitor its Import Data Processing and Monitoring System (IDPMS) entries and follow up with the respective importers to make payment for its imports within the period specified in the underlying contract.

However, the authorised dealer may, on a request from the importer citing the reasons for the delay, allow an extension of time for payment beyond the period specified in the contract.

• Reporting Requirements

An authorised dealer must enter the details of:

a) Export Declaration Form (EDF) of its customers as received from non-EDI (Electronic Data Interchange) port in EDPMS within 5 working days of receipt of EDF.
b) EDF of service (of its customers) in EDPMS within 5 working days of receipt of EDF from an exporter.
c) Import (of its customers) as received from non-EDI port in IDPMS within 5 working days of receipt of documents.
d) Import of service in IDPMS, as declared and submitted by the importer within 5 working days of receipt of documents.
e) Inward and outward remittances for all exports, imports and Merchanting Trade Transactions in EDPMS/IDPMS.

Further, an authorised dealer must monitor all transactions in EDPMS and IDPMS for the closure of outstanding entries and follow up with the exporter, importer, and the person undertaking MTT to submit the documents for the same.

Read the Notification

3. SEBI rolls out mutual funds regulations, 2026, effective April 1, 2026

In a move to strengthen and modernise the mutual fund regulatory framework, the SEBI vide. Notification dated January 14, 2026, has notified the SEBI (Mutual Funds) Regulations, 2026, in exercise of powers under the SEBI Act, 1992. The regulations provide a consolidated framework governing registration, eligibility, governance, trustees, asset management companies, mutual fund schemes, disclosures, obligations, and regulatory oversight. The regulations shall come into force with effect from April 1, 2026.

Background and rationale

On October 10, 2025, the SEBI released a consultation paper proposing a comprehensive review and simplification of the SEBI (Mutual Funds) Regulations, 1996. This initiative formed part of SEBI’s ongoing efforts to modernise regulatory frameworks, simplify compliance requirements and enhance transparency in the functioning of mutual funds. The primary goals of this regulatory review were to facilitate compliance for mutual fund entities and to ensure investor protection through improved disclosure and governance standards.

Key highlights of the new Mutual Funds Regulations

Some of the Key highlights are as follows:

• Eligibility criteria for mutual fund registration – Under the SEBI (Mutual Funds) Regulations, 2026, the SEBI has structured the eligibility criteria for mutual fund sponsors into two distinct eligibility routes to strengthen the asset management industry. These routes include detailed parameters for experience, profitability, net worth, positive liquid net worth, lock-in requirements, and change-in-control. Earlier, only a single eligibility route was available for mutual fund sponsors.
• Changes to total expense ratio (TER) structure – Under the SEBI (Mutual Funds) Regulations, 2026, only specified expenses can be charged to schemes under the Total Expense Ratio (TER). Permissible charges include the base expense ratio, brokerage fees, actual transaction costs, statutory levies and SEBI-approved exit load charges. Earlier, the Total Expense Ratio was designed to include all costs associated with running the mutual fund scheme.
• Expanded responsibilities of trustees and independent directors – The new framework broadens the responsibilities of trustees and independent directors, who will now be required to exercise closer oversight over investment management agreements, compensation paid by schemes, service contracts with related parties and the overall reasonableness of fees charged to investors.
• Introduction of concept of base expense ratio (BER) – the SEBI has introduced the concept of a base expense ratio (BER), which will reflect only the fee charged by the AMC for managing investors’ money. Other costs, such as brokerage, securities transaction tax, stamp duty and exchange fees, will now have to be disclosed separately. Earlier, these expenses were bundled under the total expense ratio.
• Brokerage Caps Rationalised – the SEBI has rationalised brokerage limits across market segments. In the cash market, the brokerage cap has been reduced to 6 basis points (bps) from an effective 8.59 bps earlier. In the derivative segment, the net brokerage ceiling has been lowered to 2 bps from 3.89 bps.

Conclusion

The SEBI (Mutual Funds) Regulations, 2026, mark a significant shift towards a more streamlined, transparent and governance-driven regulatory framework for the mutual fund industry. By rationalising eligibility norms, restructuring the expense framework, strengthening trustee and management accountability and tightening brokerage limits, SEBI has sought to balance ease of compliance with stronger investor protection.

Read the Notification

4) Initial burden to prove the deceased’s employment, direct or through a contractor, lies on claimants: HC

The High Court, in the matter of Maharaja Agrasen Hospital vs. Tulsi Joshi [2025] 181 taxmann.com 261 (Delhi), ruled that the initial burden to prove the foundational facts that the deceased was employed/engaged, either directly or through a contractor, by management lies on the claimants.

Brief facts of the case:

In the instant case, the claimants, the widow and the son of the deceased, filed an application under Section 22 of the Employees’ Compensation Act, 1923, alleging that the deceased was working as a canteen employee engaged in kitchen work and procurement of materials. It was claimed that the deceased was employed through a contractor up to 31-12-2013 and, with effect from 01-01-2014, was directly employed by the appellant-management.

On 09-01-2014, while proceeding on his two-wheeler to procure vegetables, the deceased met with an accident involving a speeding vehicle and died on the spot. It was alleged that the accident occurred out of and in the course of employment. The claimants further contended that despite repeated approaches, the management failed to pay compensation.

The appellant-management filed a written statement disputing the claim and contended that the deceased was neither directly employed by them nor engaged through any contractor, and, therefore, no liability to pay compensation arose.

The Commissioner, after considering oral and documentary evidence, allowed the claim, holding that the management employed the deceased as the principal employer and that the death occurred while he was connected with the business of the appellant. Compensation of Rs. 8.85 lakhs along with interest was awarded, with liberty granted to the management to recover the amount from the contractor. Aggrieved, the management preferred an appeal before the High Court.

High Court Observations:

The High Court observed that in proceedings under the Employees’ Compensation Act, the claimants are required first to establish foundational facts, namely the existence of an employer–employee relationship and that the death occurred during the course of employment.

Further, the High Court observed that the initial burden to prove that the deceased was employed or engaged either directly or through a contractor by the management squarely lay on the claimants. It is only when the said aspect is established that the onus of proof would shift to management to rebut it or discredit the case put forward by the claimants.

The High Court also observed that in the absence of any evidence or material to show that the deceased was employed or engaged by the management, the Commissioner erred in invoking section 106 of the Indian Evidence Act to shift the burden of proof on the management to establish that the deceased was not its employee.

High Court Ruling:

The High Court held that section 106 of the Indian Evidence Act could not be applied to relieve the claimants of their initial burden to prove foundational facts. Since there was no evidence to establish that the deceased was employed or engaged by the appellant-management, the impugned award passed by the Commissioner was unsustainable. Accordingly, the High Court set aside the award of compensation.

Read the Ruling

5. No GST exemption on premium paid by retired bank employees towards group health insurance policy: HC

The High Court held that no GST exemption is available on premiums paid by retired bank employees towards group health insurance policies. The Court held that Notification No. 16/2025-Central Tax (Rate) applies only to individual health insurance services and does not cover group insurance policies arranged through associations.

Facts

The petitioners, who were retired bank employees, challenged the levy of GST on premiums paid towards group health insurance policies arranged through the Indian Banks’ Association. It was contended that the policies were procured to provide welfare benefits to retired bank employees and that collective arrangements should not exclude them from exemption. The Department of Revenue submitted that the exemption under the Notification applied only to health insurance services where the insured is not a group and that group policies with special rates and additional benefits, fall outside the scope of the exemption. The matter was accordingly placed before the High Court.

Held

The High Court held that the exemption under Notification No. 16/2025-Central Tax (Rate) dated 17-9-2025 is intended to apply exclusively to individual health insurance policies and not to group insurance. It was held that the exemption is limited to services of a health insurance business provided to individual insured persons and does not extend to group policies based on arrangements reached between an association and an insurer. Consequently, GST is leviable on premiums paid by retired bank employees for group health insurance policies, affirming the Department’s stance under Sections 11 of the CGST Act and the Kerala GST Act.

Read the Ruling

<h2id=”6″>6. In Data management services to US parent co. , place of service is outside India; GST demand quashed: HC

The High Court held that, for data management services provided by an Indian subsidiary to its US parent company, the place of supply is outside India and no GST is payable. Relying on Para 3.2 of Circular No. 209/1/2018-ST, the Court held that the place of supply for data management services is the location of the service recipient situated outside India.

Facts

The petitioner, a data management and clinical trial services provider that is a subsidiary of a US Company, provided data management services to its US parent pursuant to a Master Service Agreement. The issue in the case was whether GST could be imposed on services where the recipient was located outside India, specifically whether the place of supply rule under Para 3.2 of Circular No. 209/1/2018-ST, dated 04-05-2018, exempted the petitioner from GST liability. The matter was accordingly placed before the High Court.

Held

The High Court held that Para 3.2 of Circular No. 209/1/2018-ST, dated 04-05-2018, specifies that the place of supply for software services, including testing, debugging, modification, customization, adaptation, upgrading, enhancement, or implementation, is the recipient’s location. It was found that the petitioner’s services fell within the definition of data management services under the Circular. Consequently, the impugned GST demand was quashed and held that no GST shall be payable on services rendered to the US parent, applying Section 9 of the CGST Act, Section 13 read with Section 16 of the IGST Act and the Karnataka GST Act.

Read the Ruling

7. New Labour Codes and Gratuity Accounting: Actuarial Re-measurement or Past Service Cost?

The implementation of the New Labour Codes in India has significantly altered the definition of “wages”, mandating that at least 50% of total remuneration comprise Basic Pay, Dearness Allowance and Retaining Allowance. This change has direct implications for defined benefit obligations such as gratuity and leave encashment, which are accounted for under Ind AS 19, Employee Benefits. A critical accounting issue is whether the resulting increase in wages should be treated as a change in actuarial assumptions or as a plan amendment giving rise to past service cost.

Under Ind AS 19, actuarial gains or losses arise from experience adjustments or changes in actuarial assumptions (such as salary escalation rates) and are recognised in Other Comprehensive Income (OCI). In contrast, past service cost represents changes in the present value of defined benefit obligations due to plan amendments or curtailments and is recognised immediately in profit or loss.

An increase in wages following the New Labour Codes can stem from two distinct elements. First, if actual salary increases differ from earlier assumed escalation rates, the impact represents a change in actuarial assumptions. Second, if the salary structure itself is modified, such as reallocating remuneration to ensure wages constitute at least 50%, this constitutes a plan amendment.

Consider a case where total remuneration increases from ₹100,000 to ₹1,15,000 due to an actual increment of 15%, compared to an assumed 12%, and the wage component is revised from 35% to 50% in line with the New Labour Codes.

Under the earlier assumption, expected wages were ₹39,200 (₹1,12,000 × 35%). Post-implementation, wages amount to ₹57,500, being 50% of ₹1,15,000, resulting in a total wage increase of ₹18,300.

If the actual 15% increment is applied while retaining the earlier salary structure, wages would be ₹40,250 (₹1,15,000 × 35%). Of the total increase, ₹1,050 (₹40,250 – ₹39,200) arises from the higher-than-assumed salary escalation and is recognised as an actuarial loss in OCI, while the balance ₹17,250 results from the change in wage structure and is recognised as past service cost in profit or loss.

In conclusion, wage increases resulting from the New Labour Codes cannot be viewed purely as actuarial re-measurements. Entities must carefully bifurcate the impact between changes in actuarial assumptions and plan amendments. This approach aligns with Ind AS 19, reflects the economic substance of the changes, and enhances transparency in reporting employee benefit obligations.

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