Weekly Round-up on Tax and Corporate Laws | 17th November to 22nd November 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Nov 17^th to Nov 22^nd 2025, namely:

1. Key Highlights of the New Labour Code Regime;
2. No gift deed required when the donor is a relative; ITAT deletes addition;
3. CBDT notifies amendment in Capital Gains Account Scheme to allow deposit of capital gain by electronic mode;
4. GST not leviable on DDA’s conversion charges as these form part of immovable property sale consideration: HC;
5. Liquidated damages held non-taxable under GST as genuine pre-estimated loss without element of service supply: AAR; and
6. Ind AS 12 analysis of deferred tax arising from Parent’s loan and deemed investment in a Subsidiary.

1. Key Highlights of the New Labour Code Regime

The Ministry of Labour and Employment has notified the new Labour Codes regime w.e.f. November 21, 2025, formally transitioning from a fragmented system of Central Labour Laws to a simplified, consolidated framework aimed at improving transparency, ensuring ease of doing business, while strengthening the rights and welfare of workers.  The New Labour Regime consolidates the 29 Central labour laws into 4 labour codes – ‘The Industrial Relations Code, 2020’, the ‘Occupational Safety, Health and Working Conditions, 2020’, ‘the Code on Social Security, 2020 ‘and ‘the Code on Wages, 2019’.

The key highlights of the New Labour Codes are as follows:

a) The Industrial Relations Code, 2020

The Industrial Relations Code, 2020, has repealed three legislations: the Industrial Disputes Act, 1947, the Industrial Employment (Standing Orders) Act, 1946 and the Trade Unions Act, 1926. The key highlights of this Code are as below:

• The Code is applicable to certain specific industrial establishments and trade unions as prescribed under the Code.
• Definition of ‘wages’ has been elaborated. It has been provided that if allowances paid to an employee exceed 50% of basic pay plus DA plus retaining allowance, the excess will be treated as part of ‘wages’. [Section 2(zq)]
• Remuneration in kind up to 15% will be part of ‘wages’. This is faulty drafting. The words ‘does not exceed’ should have been ‘exceeds’. Otherwise, all canteen, subsidy, free transport, etc. will be part of ‘wages’, if they are less than 15% of ‘total wages’. [Explanation to Section 2(zq)]
• Prior permission of the government before closure, lay-off, or retrenchment is mandated for establishments with at least 300 workers, instead of 100 workers. [Section 77]
• Concept of ‘public utility service’ is eliminated, as now 14 days’ notice for strike and lockout is required in all cases. [Section 62]
• Concerted casual leave on a given day by 50% or more workers would come within the definition of ‘strike’. [Section 2(zk)]
• Provision for reskilling fund made for workers being laid off. [Section 83]

b) The Occupational Safety, Health and Working Conditions Code, 2020

The Code consolidates 13 existing Labour Laws (including the Factories Act, the Mines Act, the Contract Labour (Regulation and Abolition) Act, the Motor Transport Workers Act, etc.) into a single unified Code. The objective of this Code is to improve the health, safety & welfare of workers across various sectors.  The key highlights of this Code are as below:

• The Code applies to any establishment with 10 or more workers, including industries, motor transport, newspapers, audio-visual work, construction, plantations and factories, and it covers all mines and dock work. Certain provisions also extend to contract labour and inter-state migrant workers.
• Definition of ‘wages’ has been elaborated. It has been provided that if allowances paid to an employee exceed 50% of basic pay plus DA plus retaining allowance, the excess will be treated as part of ‘wages’. [Section 2(1)(zzj)]
• Factory definition amended to 20 workers for premises where the process uses power and 40 workers where the process uses no power. [Section 2(1)(w)]
• Applicability of contract labour provisions only when 50 or more contract labour employed. [Section 45]
• Hotels, restaurants and eating places have been specifically excluded from the definition of the term ‘factory. [Section 2(1)(w)]
• Daily work hour limit fixed at a maximum of 8 Hours per day. [Section 25]
• Workers earning a maximum of Rs. 18,000 per month will be allowed to avail benefits like Public Distribution System (PDS), building cess, insurance and provident fund. [Section 2(1)(zzl)]

c) The Code on Social Security, 2020

The Code on Social Security, 2020, consolidates 9 labour laws, including the Employees’ Compensation Act, 1923, the Employees’ State Insurance Act, 1948, the Maternity Benefit Act, 1961, the Payment of Gratuity Act, 1972, and the Unorganised Workers’ Social Security Act, 2008. The key highlights of this Code are as below:

• The Code applies chapter-wise based on size and nature of establishment, with thresholds like ten or twenty workers, special coverage for factories, mines, construction work, and separate provisions for ESI-excluded employees, unorganised workers, gig and platform workers.
• Definition of employees expanded to include more workers like inter-State migrant workers, platform workers, gig workers, film industry workers and construction workers. [Section 2(26)]
• Provision made for social security funds for unorganised workers. [Section 141]
• The provisions of ESIC would be applicable to an establishment employing even one worker if the establishment is engaged in hazardous and life-threatening activities. [Section 1(4), First Schedule]
• Fixed Term Employees’ service conditions, salary, leave and social security will be at par with the Regular Employee. In addition, the Fixed Term Employee has also been given the right to pro rata [Section 53]
• To increase the scope of EPFO, the schedule of the institutions has been removed. All institutions that have 20 or more workers will come under the ambit of the EPF. The option of EPFO for institutions with less than 20 workers and self-employed workers is also given. [Section 15]

d) The Code on Wages, 2019

The Code on Wages, 2019, has repealed four legislations, the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976. The key highlights of this Code are as below:

• The Code on Wages, 2019 applies to all employees and all establishments across India, irrespective of industry type, size or nature of work. It covers every place where any business, trade, industry, manufacture or occupation is carried on, including Government establishments. Certain provisions of the Code, however, shall not apply to employees of the Govt. establishments.
• Definition of ‘wages’ only includes basic wages, DA and retaining allowance. Other allowances are not part of wages. Hence, where minimum wages are paid, these cannot be split into various allowances to reduce the liability of PF, ESIC, bonus, gratuity, etc. [Section 2(y)]
• The scope of provisions relating to payment of wages has also been widened and coverage extended to all establishments. [Section 15 ]
• Overtime rate shall not be less than twice the normal rate of wages. [Section 14]

Upper limit of salary of Rs.  21,000 for eligibility of bonus removed from definition, but such limit can be prescribed under section 26(1) of the Code of Wages by notification by ‘Appropriate Government’. [Section 26]

Read the Notifications on:

• The Industrial Relations Code, 2020

• The Occupational Safety, Health and Working Conditions Code, 2020

• The Code on Social Security, 2020

• The Code on Wages, 2019

  

2. No gift deed required when the donor is a relative; ITAT deletes addition

The assessee, an individual, received a gift through his NRE account from his sister’s spouse, i.e., his brother-in-law. The assessee contended that the gift deed was not required in the case of movable property. Unsatisfied with the assessee’s reply, the Assessing Officer (AO) held that since no proper gift deed was made, the amount was liable to be assessed as ‘income from other sources’.

On appeal, CIT(A) upheld the additions made by the AO. The aggrieved assessee filed the instant appeal before the Tribunal.

The Tribunal held that the assessee had received the gift from his brother-in-law, and any sum received from a relative is not assessable under section 56 of the Act. The term “relative” is defined in section 56 of the Act. Thus, the spouse of the assessee’s sister is also covered as a relative. Since the assessee filed a copy of the bank account evidencing the source of the gift, the same was not liable to be added to the assessee’s income.

For the purpose of section 56 of the Act, there is no need or requirement for a gift deed. The AO primarily was of the view that since no proper gift deed was made, therefore, the amount was liable to be assessed as ‘income from other sources’ and not exempt under section 56 of the Act.

However, section 56 of the Act, which exempts from assessment any sum received that exceeds Rs.  50,000, does not require a valid gift deed. It is provided in the section itself that if the amount is received from a relative as defined therein, the same is not liable to be assessed under section 56 of the Act. Therefore, the addition made by the Assessing Officer was to be deleted

Read the Ruling

3. CBDT notifies amendment in Capital Gains Account Scheme to allow deposit of capital gain by electronic mode

The Central Board of Direct Taxes (CBDT) has notified the Capital Gains Accounts Scheme (Second Amendment) Scheme, 2025. The Scheme further amends the Capital Gains Accounts Scheme, 1988 (‘the Scheme’). The amendment is effective from the date of its publication in the Official Gazette, i.e., 19-11-2025.

The Scheme has been amended to include the following key changes:

a) Scheme enabled to claim Section 54GA exemption

The Capital Gains Account Scheme benefit is now extended to assessees claiming exemption under section 54GA. Although section 54GA already allows exemption when the capital gain is deposited in the Scheme, the Scheme did not expressly include section 54GA within its scope.

b) Meaning of ‘Deposit Officer’

The meaning of “Deposit Office” is expanded to include any other banking company covered under the Banking Regulation Act that receives deposits and maintains a capital gain scheme account for the depositor under the Scheme.

c) Deposit through ‘Electronic Mode’

Paragraph 5 of the Scheme is amended to recognise payment through ‘Electronic Mode’ as a valid mode for making deposits for the opening of a Capital Gains Account. Earlier, deposits could be made only in cash, by crossed cheque, or by draft.

The ‘electronic mode” means payment by use of an electronic clearing system through a bank account or by way of any of the following modes, namely:––

• credit card;
• debit card;
• net banking;
• IMPS (Immediate Payment Service);
• UPI (Unified Payment Interface);
• RTGS (Real Time Gross Settlement);
• NEFT (National Electronic Funds Transfer), and
• BHIM (Bharat Interface for Money) Aadhaar Pay.

d) Online account closure mandatory from April 2027

From 1 April 2027, the option to close the account must be submitted electronically, either through a digital signature or an electronic verification code.

Read the Notification

4. GST not leviable on DDA’s conversion charges as these form part of immovable property sale consideration: HC

The Delhi High Court held that GST is not leviable on conversion charges because conversion from leasehold to freehold appears to be part of the sale of immovable property, which is excluded from the definition of supply under the CGST Act. This was held in the case of Mala Sahni Seth vs. Delhi Development Authority.

Facts of the Case

The petitioner is the leasehold owner of certain units who paid conversion charges to the Delhi Development Authority (DDA) to convert their property into freehold, without any GST being levied. The DDA issued a retrospective demand for approximately those conversion charges, treating them as consideration for the foregoing of future lease rent. The petitioner challenged this, arguing that the DDA’s conversion scheme made no provision for GST and that converting leasehold to freehold is part of the sale of immovable property, not a service. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that, prima facie, GST is not leviable on the conversion charges because conversion from leasehold to freehold appears to be part of the sale of immovable property, which is excluded from supply under the CGST Act. The Court interpreted Section 7, Schedule II & Schedule III of the CGST Act, noting that the DDA’s attempt to classify conversion charges as ‘agreeing to refrain from collecting future rent’ is inconsistent with the nature of the transaction The conversion charges should be treated as sale consideration, not a service, and that the DDA’s retrospective GST demand under its SOP is, on its face, unsustainable.

Read the Ruling

5. Liquidated damages held non-taxable under GST as genuine pre-estimated loss without element of service supply: AAR

The Gujarat AAR held that the liquidated damages claimed constituted genuine pre-estimated loss under the agreement and were compensation for breach, and fell outside the scope of supply under Section 7 of the CGST Act. This was held in the case of JBM Ecolife Mobility Surat (P.) Ltd.

Facts of the Case

The applicant, registered under GST and operating as a concessionaire, submitted that it had executed a Concession Agreement with the Surat Municipal Corporation and, pursuant to a later tripartite arrangement, assumed operations and maintenance obligations. It was submitted that the Concession Agreement obligated the applicant to supply buses, operate and maintain the fleet, and develop related depot and charging infrastructure, with liquidated damages prescribed for specified operational defaults. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the liquidated damages claimed constituted genuine pre-estimated loss under the agreement and were compensation for breach, and fell outside the scope of supply under Section 7 of the CGST Act and the Gujarat GST Act. It was observed that the agreement did not involve any party agreeing to tolerate any default, and the charges merely enforced contractual discipline. Accordingly, it was held that the liquidated damages were not liable to GST, and therefore, no questions regarding the rate, SAC, or ITC arose.

Read the Ruling

6. Ind AS 12 analysis of deferred tax arising from Parent’s loan and deemed investment in a Subsidiary

Companies often provide interest-free loans to subsidiaries or group entities for strategic or operational support. Under Ind AS, these loans must be recorded at fair value, and the difference between the loan amount and its fair value is generally treated as an additional investment in the subsidiary. In contrast, Indian tax laws do not allow discounting of such loans, so the entire loan amount continues to be recognised at its full value for tax purposes.

As a result, the amounts recorded in the financial statements differ from their tax bases, creating temporary differences for both the loan which is recorded at fair value and unwound over time and the deemed investment which has no tax base. These differences require careful evaluation for deferred tax implications under Ind AS 12.

Ind AS 12 lays down principles for recognising deferred tax arising from temporary differences. It requires companies to recognise deferred tax liabilities for all taxable temporary differences and deferred tax assets for deductible temporary differences when future taxable profits are expected. However, the Standard also contains the initial recognition exemption which restricts recognising deferred tax when a transaction is not a business combination and affects neither accounting profit nor taxable profit at the time of initial recognition. Further, special guidance applies to temporary differences relating to investments in subsidiaries. Applying these principles, Ind AS 12 permits two acceptable approaches for interest-free loans that give rise to both a discounted loan and a deemed investment.

Under the first approach, the loan and the deemed investment are viewed as a single combined transaction since they originate from the same economic event. Here, the deductible temporary difference on the loan and the taxable temporary difference on the deemed investment offset each other, resulting in equal and opposite deferred tax amounts at inception, effectively yielding no net deferred tax impact. Subsequently, the deferred tax on the loan unwinds over time, whereas the deferred tax on the deemed investment reverses only on recovery or disposal of the investment.

Under the second approach, the loan and the deemed investment are assessed separately. In such a case, the initial recognition exemption applies, and no deferred tax is recognised on either component. Both treatments are acceptable, provided the entity applies its chosen policy consistently.

For Example, A Parent company advanced an interest-free loan of Rs. 1,00,000 to its Wholly Owned Subsidiary, and based on market lending rates, the loan’s fair value was assessed at Rs. 35,000. The Parent company therefore recognised the loan at Rs. 35,000 in its books and treated the remaining Rs. 65,000 as a deemed investment in Subsidiary. For tax purposes, however, the entire loan continued to have a tax base of Rs. 1,00,000, while the deemed investment had no tax base at all. This created a deductible temporary difference of Rs. 65,000 on the loan and an equal taxable temporary difference of Rs. 65,000 on the deemed investment.

Under Ind AS 12, the Parent company could either treat both items together or recognise offsetting deferred tax asset and liability with net effect being zero at inception along with the deferred tax asset reversing over time as the loan unwinds, or it could apply the initial recognition exemption and recognise neither the deferred tax asset nor the deferred tax liability. Both treatments are acceptable, provided the company adopts one approach consistently as its accounting policy.

Read the Story