Weekly Round-up on Tax and Corporate Laws | 20th to 25th April 2026

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from April 20^th  to 25^th 2026, namely:

1. AO Has to Prove With Relevant Evidence That the Assessee Violated Section 269ST to Levy Penalty Under Section 271DA: ITAT
2. SEBI Proposes Faster Release of Pledged Unpaid Securities on the Same Day if Paid Before 5 PM, Otherwise Next Day
3. Respondent’s Unjustified Absence From PE&MT Gave No Right to Reschedule; Tribunal and High Court Rulings Overturned: SC
4. Pigmy Agents Held Employees Under Bank Control; Commission Paid to Them Is Not Subject to GST: HC
5. GST Rate Split of Goods and Service at 70:30 Ratio in Solar EPC Supply Pre-01.01.2019 Without Examining Contract Unjustified: HC
6. Revenue Recognition in Joint Development Agreements Under the AS Framework – When Should a Land Owner Recognise Income?

1. AO Has to Prove With Relevant Evidence That the Assessee Violated Section 269ST to Levy Penalty Under Section 271DA: ITAT

A search under section 132 was conducted in the MSN Group. During the search, the AO found an Excel sheet in the possession of the assessee’s cashier. The said Excel sheet contained date-wise details of sales of spent solvents and scraps. In this regard, the AO contended that the assessee received cash of Rs. 2 lakhs or more in a single transaction. Thus, the AO levied a penalty under section 271DA for the violation of section 269ST.

Aggrieved by the order, the assessee filed an appeal to the CIT(A). The CIT(A) upheld the penalty order. The assessee filed an appeal to the Hyderabad Tribunal.

The Tribunal held that the Excel sheet did not show any details of each sale made to each buyer on said date. Further, the cash proceeds from the sales of spent solvents recorded in the Excel sheet were not received immediately. Except for the entry appearing on a particular date in excess of Rs. 2 lakhs or more, no tangible and cogent material on record to infer the violation of provisions of section 269ST in the case of the assessee. It is a settled law that the burden of establishing the occurrence of default by the assessee under the relevant provision, which makes the assessee liable for a penalty, is on the Revenue.

In the present case, since the AO has alleged a violation of section 269ST, the onus lies on the Revenue to establish the violation. From the material considered for the levy of penalty under section 271DA, no such evidence is forthcoming from the seized material. No evidence has been brought on record by the AO. Although the JCIT observed that it is for the assessee to discharge the burden by furnishing relevant evidence and proving that the cash received is less than the amount specified under section 269ST, once the AO alleges a violation, it is for the AO to prove the allegation with relevant evidence.

In the present case, admittedly, there is no evidence, such as sales bills or cash receipts, for the sale of unaccounted spent solvents and scraps. The only evidence found is the Excel sheet maintained by the Cashier for the entire group, which contains consolidated details for five companies and various plants/units. Only based on consolidated entries in the Excel sheet can it be alleged that the assessee violated Section 269ST and that a penalty under Section 271DA was imposed.

Therefore, the AO has not conclusively proved the violation of section 269ST to levy a penalty under section 271DA, and the penalty is not sustainable on the merits in the facts and in law.

Read the Ruling

2. SEBI Proposes Faster Release of Pledged Unpaid Securities on the Same Day if Paid Before 5 PM, Otherwise Next Day

In order to strengthen investor protection by ensuring proper segregation and safeguarding of clients’ securities, the existing framework governing unpaid securities was introduced through earlier circulars and subsequently consolidated under the Master Circular for Stock Brokers. These provisions, inter alia, require unpaid securities to be pledged in a designated “Client Unpaid Securities Pledgee Account” (CUSPA) until the client fulfils the payment obligation within the prescribed timeline.

Over time, however, certain operational challenges and interpretational issues have emerged in the implementation of this framework. Further, regulatory developments, such as the introduction of mandatory direct pay-out of securities to clients’ demat accounts, have had a bearing on the manner in which unpaid securities are handled in practice. In this backdrop, representations were received from the Brokers’ Industry Standards Forum (ISF) seeking clarity and rationalisation of certain provisions.

Accordingly, SEBI has proposed a revised framework with the stated objective of enhancing ease of doing business for intermediaries and ease of investing for clients, while continuing to ensure protection of investor interests.

2.1 Key Issues in the Existing Framework

The existing provisions, while well-intentioned, have led to certain practical difficulties. One of the primary concerns has been the lack of clarity around the funding period, which in some cases has resulted in a perception that clients are entitled to a uniform five-day window from pay-out, irrespective of the broker’s internal policy.

Further, there is no clearly defined timeline for release of pledge once the client meets the payment obligation, leading to inconsistencies in practice. The framework also does not explicitly address scenarios involving part payment by clients or changes in value of pledged securities, thereby creating uncertainty in determining the extent of pledge to be retained.

In addition, certain operational situations—such as re-pledging between Trading Members and Clearing Members where they are separate entities, or handling of securities that cannot be liquidated due to market conditions—have not been comprehensively dealt with under the current provisions.

2.2 Key Features of the Proposed Framework

In order to address the identified concerns, the draft circular proposes the following key modifications:

• Clarity on funding period – It is expressly provided that a Trading Member may allow a funding period of up to five trading days from pay-out, or such shorter duration as may be specified in its policy communicated to clients. This removes any ambiguity around a standard five-day entitlement.
• Defined timeline for release of pledge – Where the client fulfils the payment obligation before 5 PM, the pledge is required to be released on the same day. In cases where payment is received after 5 PM, release must be effected before 5 PM on the next trading day.
• Provision for partial release of pledge – The Trading Member is required to undertake a daily assessment of the value of pledged securities and ensure that any excess pledge, beyond what is required based on client obligations, is released. This introduces a more dynamic and proportionate approach.
• Rationalised auto-release mechanism – In cases where the pledge is neither invoked nor released within the prescribed timeline, the depositories are required to automatically release the pledge within a clearly defined timeframe, thereby removing uncertainty around such situations.
• Clarity on re-pledging between TM and CM – Where the Trading Member and Clearing Member are separate entities, and the TM has not fulfilled its fund obligation towards the CM, the unpaid securities are required to be re-pledged in favour of the CM’s CUSPA account.
• Framework for exceptional circumstances – The draft circular recognises scenarios where liquidation of pledged securities may not be possible due to factors such as lower circuit limits, trading suspension, or other reasons beyond control. In such cases, a mechanism has been provided for seeking extension of pledge for a specified period, subject to conditions.

2.3 Conclusion

Overall, the proposed revisions reflect a calibrated effort to refine the existing framework rather than fundamentally alter it. While largely clarificatory, the changes are likely to have a meaningful impact by addressing gaps in timelines, valuation, and operational scenarios, thereby bringing greater certainty and consistency.

At the same time, the framework continues to emphasise investor protection through pledge-based safeguards, while introducing measured flexibility in areas such as funding period, partial release, and exceptional situations.

From a practical standpoint, the revisions should reduce interpretational issues, align broker practices with regulatory expectations, and improve transparency in broker–client interactions, while also reflecting the shift towards direct credit of securities to client accounts.

Read the Circular

3. Respondent’s Unjustified Absence From PE&MT Gave No Right to Reschedule; Tribunal and High Court Rulings Overturned: SC

The Supreme Court, in Commissioner v. Uttam Kumar [2026] 185 taxmann.com 221 (SC), held that where a candidate failed to appear for Physical Endurance & Measurement Test (PE&MT) without making sufficient effort to report or properly communicate his condition, no enforceable right to seek rescheduling arises, and his absence was rightly marked.

3.1 Brief Facts of the Case

In the instant case, the appellants conducted a public recruitment for the post of Constable under an advertisement which clearly stipulated that the PE&MT schedule was final and not subject to change under any circumstances.

The respondent qualified in the initial stage and was scheduled to appear for PE&MT. However, on the scheduled date, he did not appear and was marked “ABSENT”, citing illness such as cold, cough, fever, headache, and body pain.

The respondent claimed to have submitted three representations seeking either a reserve day or time to recover. The first representation was not accepted by the concerned officer, while there was no acknowledgment of receipt for the remaining representations. It was also noted that the respondent had reportedly visited the recruitment centre on the day prior to the scheduled test but failed to appear on the actual date.

The Central Administrative Tribunal directed the authorities to permit the respondent to take the test with the next batch, which was upheld by the High Court. Aggrieved, the appellants approached the Supreme Court.

3.2 Supreme Court Observations

The Supreme Court observed that the recruitment conditions clearly provided that the schedule for PE&MT was final and not subject to alteration. It further noted that a large number of candidates had participated in the process, and no other candidate had sought such rescheduling.

The Court emphasised that even if the respondent was unwell, the nature of the illness was not such as to render him completely immobile. In such circumstances, at the very least, he ought to have made an effort to remain physically present on the scheduled date, report his condition, and formally request rescheduling.

It was also observed that there was no material on record to establish that the representations submitted by the respondent were duly received by the authorities. Mere non-response to such representations, even if assumed to have been received, would not create any enforceable right in favour of the respondent.

Further, the Court held that the respondent’s belonging to a backward community could not, by itself, be a determinative factor for granting such relief in the absence of sufficient justification.

3.3 Supreme Court Ruling

The Supreme Court held that the respondent’s absence on the scheduled date was rightly marked, and no enforceable right to seek rescheduling of the test had accrued to him. Accordingly, the order of the Tribunal, as affirmed by the High Court, directing the authorities to allow the respondent to appear in the next batch, was set aside.

Read the Ruling

4. Pigmy Agents Held Employees Under Bank Control; Commission Paid to Them Is Not Subject to GST: HC

The High Court held that pigmy agents constituted employees of the bank and commission paid to them was not subject to GST. It held that such commission was in the nature of wages arising out of employment and, under section 7 read with Schedule III, services rendered by an employee to the employer are outside the scope of supply.

4.1 Facts

The petitioner, a Regional Rural Bank, was subjected to inspection, pursuant to which DRC-01A was issued by the jurisdictional officer under CGST proposing the levy of GST under reverse charge on commissions paid to pigmy agents. It was submitted that pigmy agents functioned as employees under its control and were not independent business facilitators. Therefore, commissions paid to them constituted wages under an employer-employee relationship. It was contended that such services fell outside the scope of supply and no GST, including under reverse charge, was payable. The petitioner relied upon the terms of engagement, demonstrating that the bank exercised pervasive control over the agents. The petitioner further submitted that classifying such agents as business facilitators was erroneous, as they did not operate as intermediaries under the RBI model. The matter was accordingly placed before the High Court.

4.2 Held

The High Court held that the relationship between the petitioner and the pigmy agents constituted that of employer and employee. It held that the commissions paid to such agents were in the nature of wages arising out of employment and not consideration for independent services. The Court interpreted Section 7 read with Schedule III of the CGST Act to conclude that services rendered by an employee to the employer in the course of employment are outside the scope of supply and therefore not exigible to GST. It concluded that classifying such agents as business facilitators was invalid because the factual matrix did not meet the criteria for independent intermediaries and GST, including under the reverse charge mechanism, was not payable on such payments, and the impugned show cause notices were liable to be quashed.

Read the Ruling

5. GST Rate Split of Goods and Service at 70:30 Ratio in Solar EPC Supply Pre-01.01.2019 Without Examining Contract Unjustified: HC

The High Court held that applying the 70:30 split of goods and services to solar EPC supply for the pre-01-01-2019 period without examining the contract was unsustainable. It held that the explanation inserted by Notification No. 24/2018-Central Tax (Rate), dated 31-12-2018 was not retrospectively mandated.

5.1 Facts

The petitioner, a solar EPC supplier, was assessed in respect of supplies of solar power generating systems, and the assessment order passed during the pendency of the writ petition was challenged. It submitted that its supplies constituted a composite supply and contended that the explanation inserted by Notification No. 24/2018-Central Tax (Rate), dated 31-12-2018, providing for a 70:30 split of goods and services was optional and operative only from 01-01-2019. It was further contended that such split to the pre-01-01-2019 period was erroneous, particularly when the nature of supply had not been examined. It submitted that no determination had been made as to whether the supply resulted in immovable property or involved installation of movable goods, and thus the proper tax treatment was not ascertained. The matter was accordingly placed before the High Court.

5.2 Held

The High Court held that Circular No. 163/19/2021-GST, dated 06-10-2021, did not mandate retrospective application of the explanation inserted by the Notification No. 24/2018-Central Tax (Rate), dated 31-12-2018, but merely permitted its application at the option of the taxpayer. It held that the 70:30 split was applied mechanically without examining the nature of the supply or the applicability of Section 8 of the CGST Act. The assessment also ignored the pre-01.01.2019 turnover and wrongly assumed the retrospective effect of the explanation. Accordingly, the assessment order was held unsustainable, and the matter was remanded for fresh determination.

Read the Ruling

6. Revenue Recognition in Joint Development Agreements Under the AS Framework – When Should a Land Owner Recognise Income?

Joint Development Arrangements (JDAs) are widely used in the real estate sector, in which one party contributes land, and the other undertakes development, with both sharing the economic benefits in an agreed ratio. These arrangements often involve complex contractual terms, including the retention of legal ownership of the land by the landowner, the grant of development rights to the developer, joint participation in key decisions such as pricing and sale, and the sharing of risks and rewards arising from the project.

In such scenarios, a key accounting issue arises regarding the appropriate timing and basis of revenue recognition for the land-contributing party, particularly whether revenue should be recognised during the construction phase based on progress or collections, or deferred until completion of the project and transfer of property to end buyers. Additionally, questions may arise regarding the treatment of consideration attributable to unsold constructed units.

From an accounting perspective, such arrangements need to be evaluated in light of AS 27 on Financial Reporting of Interests in Joint Ventures, AS 9 on Revenue Recognition, and the Guidance Note on Accounting for Real Estate Transactions. As per AS 27, a joint venture is a contractual arrangement subject to joint control, and in the case of jointly controlled operations, each venturer is required to recognise the assets it controls, liabilities it incurs, and its share of income from the joint activity. In many JDAs, where no separate legal entity is formed and both parties contribute resources, land by one party and development expertise and funding by the other, the arrangement is in the nature of a jointly controlled operation. Accordingly, the landowner would recognise its share of income arising from the project. However, the determination of when such income is “earned” is governed by the principles laid down in AS 9 and the Guidance Note, which emphasise that revenue should be recognised only when significant risks and rewards of ownership are transferred, there is reasonable certainty of ultimate collection, and no significant uncertainty exists regarding consideration.

In typical JDAs, the legal title to land continues to vest with the landowner during the construction phase, and conveyance in favour of ultimate buyers is executed only upon completion of the project and receipt of full consideration. Further, the landowner may retain involvement in key decisions and may have protective rights such as step-in rights in case of default by the developer. These factors indicate that significant risks and rewards of ownership are not transferred during the construction period. Consequently, recognition of revenue based on advances received from customers, booking amounts, or collections routed through escrow arrangements does not meet the criteria for revenue recognition, as such receipts do not represent transfer of risks and rewards. Similarly, the percentage-of-completion method, which is applicable to construction contracts, is generally not appropriate for the land-contributing party, as its role is not that of a contractor performing construction services but rather that of a contributor of land whose performance obligation is substantially fulfilled upon transfer of ownership.

Guidance Note principles further reinforce that where transfer of legal title is a condition precedent to transfer of significant risks and rewards, revenue recognition should be deferred until such transfer takes place.

In this context, an Expert Advisory Committee (EAC), in a similar matter, has observed that such JDAs constitute jointly controlled operations and that the landowner’s income arises only from sale of units to third-party purchasers. It was opined that revenue should not be recognised during the construction phase or based on interim collections, but only upon completion of the project, execution of conveyance in favour of buyers, and receipt of full consideration, as only at that stage are the conditions for transfer of risks and rewards satisfied.

Accordingly, in arrangements of this nature, the land-contributing party should account for its interest as a jointly controlled operation and recognise its share of income only when the underlying sale to third parties is completed and the criteria for revenue recognition are fully met. Until such time, the land would continue to be classified as inventory, and any amounts received should be treated as advances. This approach ensures that revenue is recognised in accordance with the substance of the transaction and avoids premature recognition of income, thereby presenting a true and fair view of the financial performance.

Read the Story