Weekly Round-up on Tax and Corporate Laws | 21st to 26th July 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from July 21^th to July 26^th,, 2025, namely:

1. ‘Hyatt International’ having pervasive control over hotel’s operations had fixed place PE in India: SC;
2. SEBI proposes to ease Annual Report dispatch norms for Debenture Holders;
   
3. GST Dept. barred from raising demand once resolution plan is approved by NCLT: HC;
4. Inter-State supplies auto-populated in Table 3.2 of GSTR-3B on the GST portal would be non-editable from July 2025: GSTN;
5. Accounting treatment of various costs incurred in obtaining a contract: Capitalisation vs. expensing under Ind AS 115

1. ‘Hyatt International’ having pervasive control over hotel’s operations had fixed place PE in India: SC

Assessee-Hyatt International was engaged in rendering consultancy services in the hotel sector. It entered into two Strategic Oversight Services Agreements (SOSAs) with an Indian company regarding the hotels in Delhi and Mumbai. For the relevant assessment years, the Assessing Officer passed assessment orders taxing the hotel-related services rendered by the assessee on the ground that it has a Permanent Establishment (PE) in India in the form of a place of business under Article 5(1) of the DTAA.

The matter reached before the High Court. The High Court held that the assessee exercised pervasive and enforceable control over the hotel’s strategic, operational, and financial dimensions. The High Court held that the assessee’s role was not confined to high-level decision making but extended to substantive operational control and implementation.

The assessee’s ability to enforce compliance, oversee operations, and derive profit-linked fees from the hotel’s earnings demonstrates a clear and continuous commercial nexus and control with the hotel’s core functions. This nexus satisfies the conditions necessary for the constitution of a Fixed Place PE under Article 5(1) of the India-UAE DTAA.

Aggrieved by the order, the assessee preferred an appeal to the Supreme Court.

The Supreme Court held that the assessee exercised pervasive and enforceable control over the hotel’s strategic, operational, and financial dimensions. Specifically, the agreement vested the assessee with powers to appoint and supervise the General Manager and other key personnel, implement human resource and procurement policies, control pricing, branding, and marketing strategies, manage operational bank accounts, and assign personnel to the hotel without requiring the owner’s consent. These rights extend well beyond mere consultancy, indicating that the assessee was an active participant in the hotel’s core operational activities.

The actual role of the assessee was not just advisory but extended to various other administrative roles. The 20-year duration of the SOSA, coupled with the assessee’s continuous and functional presence, satisfied the tests of stability, productivity, and dependence. From the nature of functions carried out by the assessee, it cannot be said that they were performing merely “auxiliary” functions.

Rather, the functions performed by the assessee, through its staff operating from the hotel premises, were not just limited to setting up a pattern of activities for the hotel but were core and essential functions, clearly establishing their control over the day-to-day operations of the hotel. Therefore, the hotel premises clearly satisfy the criteria required to be classified as a “fixed place of business” or PE.

Read the Ruling

Read the Article on Hyatt’s Ruling

2. SEBI proposes to ease Annual Report dispatch norms for Debenture Holders

In a significant move to simplify compliance and promote digital access, SEBI, on July 25, 2025, released a consultation paper proposing changes to the dispatch norms for annual reports to debenture holders. The objective of the consultation paper is to align the provisions for listed entities with non-convertible securities with those applicable to listed entities with specified securities. Public comments on the proposals can be submitted by August 15, 2025.

2.1 Background

Currently, Regulation 58(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, mandates listed entities with non-convertible securities (NCS) to send hard copy of annual report containing features of all the documents prescribed under Section 136 of the Companies Act, 2013, to all debenture holders who have not registered their email addresses either with listed entity or with any depository.

In contrast, Regulation 36(1)(b) of the LODR Regulations, applicable to specified securities, was recently amended, eliminating the requirement of sending physical copies of the abridged annual report to those shareholders whose email ID is not available. Under the revised provisions, a listed entity is required to send a letter to such shareholders indicating the link from which the annual report can be downloaded.

Further, during the COVID-19 pandemic, the MCA provided relaxations regarding physical dispatch requirements. SEBI, in turn, issued circulars from time to time, extending similar relief to entities with listed specified securities and to entities with listed non-convertible securities. These relaxations waived the requirement of sending hard copies of the annual report to shareholders and debenture holders who had not registered their email addresses.

Accordingly, SEBI has proposed to align the regulatory provisions requiring issuers of non-convertible securities to send hard copies of their annual reports to debenture holders with those applicable to equity listed entities holding specified securities. The proposals are as follows –

2.2 Relaxing the requirement of sending hard copy of annual report to debenture holders

In order to assist ease of doing business, reduce costs and enhance efficiency, SEBI has proposed to amend Regulation 58(1)(b) of the LODR Regulations, replacing the existing requirement of sending hard copies of annual report to debenture holders without registered email addresses with a letter containing a web-link and a Quick Response code to access the report online.

The inclusion of a Quick Response Code (QR) is aimed at enhancing convenience for debenture holders. This change is expected to significantly reduce costs, improve operational efficiency, and facilitate easy digital access.

2.3 Specifying timelines for issuers having listed non-convertible securities

Some issuers with listed non-convertible securities are not constituted under the Companies Act, 2013. Hence, the timelines specified under the Companies Act, 2013, for sending copies of financials to debenture holders do not apply to them. Therefore, there is a need to specify timelines within which the issuer is required to comply with the said requirements. Accordingly, to provide a timeline for the issuer, the following are proposed –

• For listed entities that are companies, the timelines specified under the Companies Act, 2013, shall be applicable.
• For listed entities that are constituted under some Act or statute, relevant provisions of the parent Act or statute shall be applicable.
• In the absence of any such provision, a timeline of 21 days may be specified in line with the provisions of the Companies Act, 2013 to ensure parity.

2.4 Conclusion

SEBI’s proposal represents a forward-looking step toward streamlining compliance requirements for issuers of non-convertible securities. By embracing digital communication methods and aligning with the existing norms for specified securities, the move aims to reduce operational burden, lower costs, and enhance accessibility for investors. It also reflects SEBI’s continued commitment to promoting ease of doing business and ensuring regulatory consistency.

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3. GST Dept. barred from raising demand once resolution plan is approved by NCLT: HC

The Allahabad High Court held that no demand can be raised by the GST Department once a resolution plan is approved by the NCLT under the Insolvency and Bankruptcy Code. The Court relied on binding Supreme Court precedent to affirm that post-approval claims are barred, as they would undermine the finality of the resolution process.

3.1 Facts

The petitioner-assessee, which had entered the Corporate Insolvency Resolution Process (CIRP), approached the High Court challenging an assessment order passed under section 73 of the CGST Act and the Uttar Pradesh GST Act as well as a show cause notice issued under the same provision. During the CIRP, the Resolution Professional had specifically notified the GST Department of the ongoing proceedings. Despite this, the jurisdictional officer proceeded to pass the assessment order and issue a separate show cause notice. The petitioner contended that once a resolution plan had been approved by the National Company Law Tribunal (NCLT) and affirmed by the National Company Law Appellate Tribunal (NCLAT), the GST Department was barred from creating further demands through adjudication proceedings. The matter was accordingly placed before the Allahabad High Court.

3.2 Held

The Allahabad High Court held that the Supreme Court had categorically held that once a resolution plan had been approved by the NCLT, all other creditors were barred from raising their claims subsequently, as the same would disrupt the entire resolution process. Accordingly, the impugned assessment order passed under section 73 of the CGST Act and Uttar Pradesh GST Act as well as the impugned show cause notice issued under the same provision, were to be quashed.

Read the Ruling

4. Inter-State supplies auto-populated in Table 3.2 of GSTR-3B on the GST portal would be non-editable from July 2025: GSTN

The GSTN has stated that, with effect from the July 2025 tax period, Table 3.2 of GSTR-3B—relating to inter-State supplies to unregistered persons, composition taxpayers, and UIN holders—will be auto-populated and non-editable. Taxpayers must ensure accurate reporting in GSTR-1, GSTR-1A, or IFF, as these will solely determine the auto-filled values in Table 3.2. This was stated in GSTN Advisory, dated 19-07-2025.

4.1 About the Update

In continuation of the previous advisory, dated 11-04-2025, the GSTN has announced that, effective from the July 2025 tax period, Table 3.2 of GSTR-3B—containing details of inter-State supplies to unregistered persons, composition taxpayers, and UIN holders—will be auto-populated and non-editable. Taxpayers must ensure accurate reporting in GSTR-1, GSTR-1A, or IFF, this will ensure accurate auto-filled values in Table 3.2. Incorrect values in Table 3.2 post-July 2025 can be corrected through GSTR-1A or later GSTR-1/IFF filings.

Read the Advisory

5. Accounting treatment of various costs incurred in obtaining a contract: Capitalisation vs. expensing under Ind AS 115

When applying Ind AS 115, Revenue from Contracts with Customers, a practical challenge that frequently arises is determining how to account for various costs incurred in the process of obtaining a contract. The core issue revolves around determining which of these costs should be capitalised and recognised as an asset, and which should be expensed immediately in the profit and loss statement. The standard provides specific guidance: only those costs that are incremental, meaning they would not have been incurred if the contract had not been obtained, can be capitalised, provided the entity expects to recover them. All other costs, including those that are part of routine business development activities or are discretionary in nature, must be expensed.

This distinction is not always straightforward in practice. Companies often incur a variety of pre-contract costs, such as proposal preparation, engineering studies, internal meetings, or legal documentation, which, while related to winning the contract, may not qualify for capitalisation because they are not contingent on success. The confusion deepens when employee incentives, sales bonuses, or broader performance-linked payouts are involved. These may appear to relate to the contract but are often based on wider team or company performance, rather than being linked to a specific contract outcome. As such, treating these as contract costs could lead to incorrect capitalisation and misstatement of assets.

To illustrate, consider the case of a company, which incurred three types of costs while bidding for a major government infrastructure contract: (a) Rs. 75 lakhs on proposal-related expenses like designs and legal reviews, (b) Rs. 10 crore commission payable only upon successfully winning the contract, and (c) Rs. 2 crore towards annual discretionary sales bonuses. As per Ind AS 115, only the Rs. 10 crore commission qualifies for capitalisation because it is both incremental and directly tied to the successful award of the contract. The other two costs, though related to the contract acquisition effort, are either not conditional on success (proposal costs) or are based on broader performance metrics (bonuses) and, hence, must be expensed as incurred.

This example highlights the importance of carefully analysing each cost in light of the standard’s definitions. Misinterpreting the nature of costs can lead to the overstatement of assets and deferral of expenses, distorting reported profits and potentially attracting regulatory attention. Therefore, entities must develop robust internal guidelines and apply consistent judgment when distinguishing between capitalizable and non-capitalizable costs. Proper documentation, supported by contractual terms and a clear understanding of cost drivers, is crucial in ensuring compliance with Ind AS 115 and the fair presentation of financial statements.

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