Weekly Round-up on Tax and Corporate Laws | 14th to 19th July 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from July 14^th to July 19^th, 2025, namely:

1. Taxmann and EY India launch AI-powered platform to transform tax research and drafting;
2. CBDT initiates verification drive against individuals/entities claiming fake deductions in ITR;
3. SEBI proposes a review of valuation of physical gold and silver held by Exchange Traded Funds;
4. GSTN enables filing of appeals against waiver rejection orders (SPL-07) on the GST Portal;
5. GST is payable on hotel rental income when hotel is rented to Govt. to accommodate security forces: HC; and
6. Revenue recognition when goods are sold and services are procured from the same customer under Ind AS 115

1. Taxmann and EY India launch AI-powered platform to transform tax research and drafting

Taxmann, India’s premier legal content authority with over six decades of trusted service, today announced the launch of Taxmann.AI, in collaboration with EY India. Taxmann.AI is an advanced AI-powered platform designed for tax and legal professionals, offering research, document analysis, and response generation capabilities built on EY’s cutting-edge technology platform for the Tax domain.

Responses generated by Taxmann.AI are grounded in original, verifiable content from India’s largest tax and legal library, owned and maintained by Taxmann. EY’s experience in Tax consulting and technology makes the solution robust, reliable, and user-friendly. EY India has engineered the platform from the ground up, keeping India’s unique tax landscape in mind. This positions Taxmann.AI as a differentiated offering in the Indian Tax AI space based on more than six decades of authentic and reliable data, providing superior reliability compared to generic large language models (LLMs) and chatbots.

1.1 Launch phase: Addressing workflow challenges with AI-powered research

In the launch phase, Taxmann.AI features an intelligent ‘Ask Bot’ that processes natural language queries and delivers structured, reliable, source-backed responses with links to relevant sections, rules, circulars, case law, and expert commentaries. Tax professionals can now access authoritative guidance in seconds, ratherthan spending hours on manual research. The platform can also research complex topics, extract insights from intricate legal documents, identify similar legal precedents using sophisticated pattern recognition, and seamlessly integrate with Microsoft Word.

1.2 Next phase: AI-powered draft bot

Taxmann.AI will soon expand with a ‘Draft Bot’ designed to validate legal notices received from tax authorities, identify potential issues, and generate comprehensive draft responses supported by statutory provisions and relevant case law.

1.3 Built with enterprise-grade privacy and security

Taxmann.AI has been designed with a privacy-first architecture. It ensures complete confidentiality of user data and generated content through enterprise-grade encryption protocols, meeting the stringent security standards.

1.4 A strategic collaboration for the future of Tax technology

This collaboration brings together Taxmann’s six-decade legacy as India’s most trusted legal content authority and EY India’s excellence in delivering enterprise-grade Tax technology solutions across industries. The partnership ensures the platform meets the standards of India’s legal and tax professionals while incorporating world-class technology capabilities.

Taxmann.AI is now available to legal and tax professionals across India, representing a significant advancement in Tax technology solutions tailored specifically for the Indian Tax framework.

Visit:  https://www.taxmann.ai

2. CBDT initiates verification drive against individuals/entities claiming fake deductions in ITR

The Income Tax Department has initiated a nationwide verification operation across multiple locations. It targets individuals and entities that facilitate fraudulent claims of deductions and exemptions in Income Tax Returns (ITRs). This action follows a detailed analysis of the misuse of tax benefits under the Income-tax Act, 1961, often in collusion with professional intermediaries.

Investigations have uncovered organised rackets operated by certain ITR preparers and intermediaries who have been filing returns claiming fictitious deductions and exemptions. These fraudulent filings involve the abuse of beneficial provisions, with some even submitting false TDS returns to claim excessive refunds.

The Department has leveraged financial data received from third-party sources, ground-level intelligence, and advanced artificial intelligence tools to identify suspicious patterns. Furthermore, recent search and seizure operations conducted in Maharashtra, Tamil Nadu, Delhi, Gujarat, Punjab, and Madhya Pradesh have substantiated the findings of misuse of deductions and exemptions.

Read the Press Release

3. SEBI proposes a review of valuation of physical gold and silver held by Exchange Traded Funds

In a significant move to enhance transparency and standardisation in the mutual fund industry, SEBI released a consultation paper on July 16, 2025, proposing a review of the valuation methodology for physical gold and silver held by Exchange Traded Funds (ETFs). The proposed change aims to align valuations more closely with domestic market prices and ensure consistency across ETF schemes.  Public comments may be submitted by August 6, 2025.

3.1 Background

Presently, the valuation of gold and silver is based on the prices published by the London Bullion Market Association (LBMA) in US dollars per troy ounce. These prices are converted into Indian Rupees for reporting.

In contrast, when mutual funds hold gold and silver through domestic commodity exchanges, their valuation is based on the closing price of futures contracts from these Indian exchanges.

Therefore, SEBI felt the need to standardise the valuation methodology for gold and silver across the mutual fund industry, in order to avoid inconsistencies and confusion in the fund industry. Accordingly, SEBI has proposed a review of the valuation process for physical gold and silver in cases of gold and silver ETFs.

3.2 What are Exchange Traded Funds?

Exchange Traded Funds (ETFs) are investment funds that track indices such as the Sensex, Nifty, etc. Unlike traditional mutual funds, ETFs trade like a common stock on stock exchanges and their prices fluctuate throughout the trading day. The trading value of an ETF depends on the net asset value (NAV) of the underlying assets that it represents. ETFs, generally offer higher daily liquidity and lower fees as compared to regular mutual fund schemes.

For example, imagine “ABC Gold ETF,” an exchange-traded fund listed on the Indian stock exchanges. If you buy units of ABC Gold ETF, your investment’s value will rise or fall with the daily price of gold in India. Instead of owning physical gold bars or coins, you hold units in the ETF that directly reflect the current market value of gold held by the fund. This provides investors with an easy and cost-effective way to gain exposure to gold prices, without worrying about storage or security.

3.3 SEBI’s Key Proposals

SEBI has proposed the following key proposals –

Use of Domestic Spot Prices for Gold and Silver ETF Valuation

In India, spot prices for commodities such as gold and silver are published by various service providers and index providers. These include jeweller associations, commodity exchanges, and other regulated entities operating under domestic market conditions.

SEBI has noted that domestic commodity exchanges must meet specific transparency requirements and compliance standards set by SEBI. By using the spot prices published by these regulated exchanges for valuing gold and silver, mutual funds can ensure that the valuations truly reflect the prevailing prices in the Indian market and remain consistent throughout the mutual fund industry.

To address discrepancies in current practices, SEBI has now proposed that, instead of using the LBMA price as a starting point for valuation, AMCs must directly use spot prices published by domestic commodity exchanges to value gold/silver. This move is expected to reduce duplication of efforts and accurately represent the market prices of gold and silver, based on domestic demand and supply scenarios. Additionally, SEBI is proposing the establishment of a uniform domestic benchmark for valuing gold and silver across the mutual fund industry.

Detailed polling mechanism used by domestic regulated entities for determining spot prices

Currently, spot prices for gold and silver are determined through a polling process involving a panel of representatives from across the physical market, such as importers, exporters, traders, and commission agents. These participants submit their price quotes at specified times during the day, and commodity exchanges publish the resulting spot prices.

To ensure accuracy and fairness, the exchanges use established methods like the Trimmed Mean Methodology. In this approach, extreme prices that fall outside set limits are removed, and the average is then calculated using the remaining values. This helps in arriving at a representative spot price for the market.

Once all polling participants have submitted their quotes, the system processes the data and computes the official spot price for the day. After the final price is determined, it is made available to the public through the exchange’s website.

After polling, prices quoted by polling participants are entered in the system. The system then computes the spot price for the day. On completion of the polling process, the final spot price is disseminated through the exchange’s websites.

SEBI has now proposed that the detailed polling mechanism used by domestic regulated entities for determining spot prices, including the methodology of polling and the policies for the fair conduct of polling, etc., must be made publicly available.

3.4 Conclusion

SEBI’s proposal to shift the valuation of gold and silver ETFs to domestic spot prices is a positive step towards making the process more accurate and transparent. By using domestic spot prices and standardising the valuation process, it will help bring consistency across all mutual fund schemes. This move will also better reflect ETF valuations in line with actual market conditions in India, thereby improving investor confidence.

Read the News

4. GSTN enables filing of appeals against waiver rejection orders (SPL-07) on the GST Portal

The GSTN announced that taxpayers can now file appeals in Form APL-01 against rejection orders (Form SPL-07) issued under the special amnesty scheme. The portal also permits restoration of earlier withdrawn appeals upon submission of an undertaking if no fresh appeal is filed against the rejection. This was notified in the GSTN Advisory dated 16-07-2025.

4.1 About the Update

The GSTN has enabled two new functionalities on the GST Portal related to the special amnesty scheme. Taxpayers whose waiver applications filed in Form SPL-01 or Form SPL-02 have been rejected through orders in Form SPL-07 may now file an appeal in Form APL-01. The appeal once filed cannot be withdrawn on the GST Portal, and taxpayers have been advised to exercise due caution before filing.

The GSTN has also enabled the option to restore earlier withdrawn appeals against the original demand order. Under the scheme, taxpayers were required to withdraw any pending appeal before filing the waiver application. Now, if the waiver application has been rejected and no appeal is filed against the Form SPL-07, the taxpayer may restore the withdrawn appeal by submitting an undertaking under the ‘Orders’ section within the ‘Waiver Application’ case folder on the GST Portal.

Read the Ruling

5. GST is payable on hotel rental income when hotel is rented to Govt. to accommodate security forces: HC

The High Court of Jammu & Kashmir and Ladakh held that GST is payable on rental income earned by a hotelier from leasing hotel premises to the Government for accommodating security forces. The court clarified that GST at 12% must be reimbursed by the Government over and above the rent fixed by the Rent Assessment Committee.

5.1 Facts

The petitioner owned a hotel in Srinagar. The hotel was rented out to the Police Department of the Government of Jammu and Kashmir for accommodating Central Security Forces engaged in maintaining law and order in the valley. The rent was fixed by the Government in the year 2013 at the rate of Rs. 300 per day per room. Aggrieved by the inaction of the Government, the hotelier filed a writ petition before the High Court of Jammu & Kashmir. The petitioner did not dispute his liability to pay GST on the rental income derived by him by hiring his hotel rooms to the Government. Still, he claimed that the GST element, which is payable by him, must be reimbursed/paid in addition to the fixed rent by the Government. The matter reached the High Court of Jammu & Kashmir.

5.2 Held

The High Court held that the rental income received by the petitioner was now taxable at 12%. Thus, it was the liability of the Department of Home to reimburse such amount. The invoices of rent would thus have the rental fixed by the Government on the recommendation of the Rent Assessment Committee plus the GST as applicable.

Read the Ruling

6. Revenue recognition when goods are sold and services are procured from the same customer under Ind AS 115

What if a company enters into a single commercial arrangement where it sells goods to a customer and, at the same time, procures services from that very same customer? This dual relationship, where a party is both a customer and a supplier, raises a critical accounting question: Should the payment made for the services be treated as a separate expense or as a reduction in revenue?

Ind AS 115, Revenue from Contracts with Customers, provides specific guidance on such scenarios. As per Ind AS 115, any consideration payable to a customer should generally reduce the transaction price and, therefore, revenue, unless the payment is made in exchange for a distinct good or service that the customer provides to the entity. If the service is distinct (i.e., it has standalone value and is separately identifiable from the goods sold) and its fair value can be reliably measured, then the payment can be accounted for as a separate business expense. However, if the service is not distinct or the amount paid exceeds fair value, the excess must be treated as a reduction of revenue.

For example, suppose a company sells goods worth Rs. 1 crore to a customer and agrees to pay the same customer Rs. 5 lakhs to run an advertising campaign for those goods. If the advertising services are clearly distinct and could have been obtained at the same cost from a third party, the payment qualifies as a separate expense. The revenue from the sale remains unaffected at Rs. 1 crore. However, if the advertising value cannot be substantiated or if the payment exceeds fair market value, the excess must be deducted from the revenue to reflect the true economic substance of the transaction.

This distinction is critical for ensuring faithful representation of revenue. Misjudging such arrangements can result in overstated revenues and non-compliance with accounting standards. Entities must therefore perform a careful assessment of the nature of the payment, supported by market evidence and professional judgment, to determine the appropriate accounting treatment under Ind AS 115.

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