Weekly Round-up on Tax and Corporate Laws | 23rd to 28th June 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from June 23^rd to 28^th, 2025, namely:

1. Notifies protocol amending India-Oman DTAA;
2. Ex-director can’t be held liable under section 138 of NI Act for cheque issued after liquidation unless his specific role is proved;
3. CBIC clarifies Review and Appeal Process for CAA orders under CGST Act: Circular;
4. IGST paid on imported machinery through Bill of Entry cannot be availed beyond prescribed time: AAR;
5. Transfer of leasehold rights in plot held as equivalent to sale of land and declared non-taxable under GST: HC; and
6. Accounting treatment of inventory write-down and subsequent reversals when NRV fluctuates under Ind AS framework.

1. Govt. notifies protocol amending the India-Oman DTAA

The Central Government has notified the protocol amending India-Oman DTAA. The Protocol was signed in January 2025 and entered into force on May 28, 2025. It shall take effect in India from April 1 of the fiscal year following the year in which it enters into force. Thus, it shall apply in India from the financial year 2026-27.

The Protocol introduces the following changes in various Articles of the DTAA:

• Article 1 (Scope)– The preamble now explicitly emphasises the intent to eliminate double taxation and prevent tax evasion or avoidance, including through treaty-shopping arrangements aimed at benefiting residents of third states.
• Article 2 (Taxes Covered)– The definition of taxes covered is updated to include “Omani tax,” referring to income tax in Oman.
• Article 3 (Definitions)– The definition of “competent authority” for Oman has been updated to refer to the Chairman of the Tax Authority or their authorised representative. For India, it remains the Finance Minister or their authorised representative. The definition of “tax year” in Oman is also clarified in accordance with Omani income tax law.
• Article 4 (Resident)– If a person (other than an individual) is a resident of both contracting states, the competent authorities shall determine residency by mutual agreement.
• Article 8 (Air Transport)– The scope of the article is expanded to cover all entities engaged in the operation of aircraft, not just specified entities.
• Article 10 (Associated Enterprises)– A new paragraph has been inserted to allow appropriate adjustments where an enterprise of one state is taxed on profits from a related enterprise in the other state, provided the conditions are similar to those between independent enterprises.
• Article 13 (Royalties)– The withholding tax rate on royalties has been reduced from 15% to 10%.
• Article 14 (Technical Fees)– The withholding tax rate on technical fees has also been reduced from 15% to 10%.
• Article 25A (Non-discrimination)– A new Article 25A has been inserted to prevent discrimination against nationals of either contracting state, ensuring fair taxation and treatment for both enterprises and individuals.
• Article 26 (Mutual Agreement Procedure)– The mutual agreement procedure has been clarified to ensure that disputes over tax treatment can be resolved within three years of notification, even if domestic law provides a different time limit.
• Article 27 (Exchange of Information)– The provision has been expanded to allow for the exchange of information relevant to tax enforcement, with an obligation to treat such information confidentially.
• Article 27A (Assistance in the Collection of Taxes)– A new Article 27A has been introduced to provide for mutual assistance in the collection of tax claims.
• Article 27B (Entitlement to Benefits)– A new Article 27B has been inserted, which provides that benefits under the DTAA may be denied if it is determined that obtaining the benefit was one of the principal purposes of the arrangement or transaction.

Read the Notification

2. Ex-director can’t be held liable u/s 138 of NI Act for cheque issued after liquidation unless his specific role is proved

The High Court, in the matter of Sidhant Udyog (P.) Ltd. v. Modern Infra Projects India Ltd. [2025] 175 taxmann.com 675 (Calcutta), ruled that an ex-director of the company cannot be held liable under section 138 of the Negotiable Instruments Act, 1881, for a cheque issued after the liquidation of the accused company unless his specific role is pleaded and proved.

Brief Facts of the Case

In the instant case, the appellant/complainant business firm had given a loan of Rs 50 lakhs to the accused company. In discharge of its legal debts and liabilities, the accused company issued a cheque in favour of the complainant. The complainant duly presented the cheque for encashment through its banker within its validity period.

However, the cheque was returned dishonoured with the remark ‘account blocked’. Subsequently, the complainant sent a demand notice to the accused persons, demanding payment of the amount mentioned in the dishonoured cheque within 15 days from the date of receipt of the said notice.

Despite the notice having been served on the accused persons, they failed to make the payment. Consequently, the complainant filed a complaint against all the accused persons for committing the offence punishable under Section 138 read with Section 141 of the Act.

The Trial Court acquitted the respondent, ex-director, on the ground that, since the company went into liquidation and the cheque was presented thereafter, it could not be said that the company had committed the offence because of a legal bar.

Further, once it was established that the dishonour of the cheque by the bank and failure to make payment of the amount by the company were events beyond its control, the ex-directors could not be held vicariously liable.

High Court Observations

The High Court noted that the words ‘every person who at the time of the offence was committed’ occurring in section 141 of the N.I. Act is significant which indicates that criminal liability of a director must be determined on the date, the offence is alleged to have been committed.

In the present case, the accused company had admittedly gone into liquidation on 29.07.2013, and it was the specific case of the respondent that he ceased to be a director on and from that date. Accordingly, he could not be held liable for the issuance of any cheque post-liquidation unless his specific role had been pleaded and proved.

Further, the High Court observed that the vicarious liability would be attracted only when the ingredients of section 141(1) of the N.I. Act are satisfied. Merely because the respondent was a director prior to 29.07.2013, he would not become in charge of the conduct of the business of the accused company or the person responsible to the company for the conduct of the business of the company, which had admittedly gone into liquidation.

High Court Ruling

The High Court held that neither in the complaint nor in the evidence, the role of the respondent in the issuance of the impugned cheque had been canvassed or proved. The ingredients to constitute an offence under section 138 against the respondent were not proved, and, therefore, the respondent was rightly acquitted.

Read the Ruiling

3. CBIC clarifies Review and Appeal Process for CAA orders under CGST Act: Circular

The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular to clarify that in cases adjudicated by a Common Adjudicating Authority (CAA), the Principal Commissioner or Commissioner of Central Tax under whose jurisdiction the CAA is posted shall act as the Reviewing Authority under Section 107 and the Revisional Authority under Section 108 of the CGST Act, 2017. This was clarified in Circular No. 250/07/2025-GST, dated 24-06-2025.

About the Update

The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular to clarify the authorities responsible for review, revision, and appeal of Orders-in-Original (O-I-Os) passed by Common Adjudicating Authorities (CAAs) in cases arising from show cause notices issued by the Directorate General of GST Intelligence (DGGI). It has been specified that the Principal Commissioner or Commissioner of Central Tax, under whose jurisdiction the CAA (Additional/Joint Commissioner) is posted, shall function as the Reviewing Authority under Section 107 and the Revisional Authority under Section 108 of the CGST Act, 2017.

Appeals against such orders shall lie before the Commissioner (Appeals) having jurisdiction over the Commissionerate in which the CAA is posted, as per Table III of Notification No. 02/2017-Central Tax, dated 19-06-2017. The same Commissionerate will also be responsible for representing the department in the related appeal proceedings.

Read the Circular

4. IGST paid on imported machinery through Bill of Entry cannot be availed beyond prescribed time: AAR

The Authority for Advance Ruling (AAR), Maharashtra held that the time limit prescribed under Section 16(4) of the CGST Act, 2017, applies equally to IGST paid on imported goods through a Bill of Entry. The ruling construed a Bill of Entry as a valid tax invoice for the purpose of Section 16(4), thereby affirming the legislative intent to mandate timely availment of input tax credit across all categories, including imports.

Facts

The Applicant imported machinery from China and discharged IGST liability through a duly filed Bill of Entry. Although the IGST amount was reflected in GSTR-2A and subsequently in GSTR-2B, the Applicant failed to avail the corresponding Input tax credit (ITC) in the GSTR-3B return for the relevant financial year. Upon realisation, the Applicant sought to avail the unclaimed IGST credit through a subsequent return. The Applicant approached the Authority for Advance Ruling (AAR), Maharashtra, seeking clarification on whether ITC based on a Bill of Entry could be availed beyond the prescribed limitation period under the CGST Act. The matter was accordingly placed before the Authority for Advance Ruling (AAR), Maharashtra.

Held

The Authority for Advance Ruling (AAR), Maharashtra held that the time limit for availing ITC, as stipulated under Section 16(4) of the CGST Act, 2017, is applicable even to IGST paid through a Bill of Entry. It interpreted the term ‘invoice’ under Section 16(4) to include any valid document evidencing tax payment, such as a Bill of Entry, for the purpose of ensuring harmonious application of the provision. The AAR further held that the legislative intent of Section 16(4) is to enforce timely availment of ITC and prevent indefinite deferment of credit claims, which applies uniformly across all categories of ITC, including import transactions. Consequently, the Applicant was not entitled to avail the unclaimed IGST credit through any subsequent return. The ruling affirms that the statutory time limit under Section 16(4) of the CGST Act governs all ITC claims, including those based on Bills of Entry.

Read the Ruiling

5. Transfer of leasehold rights in plot held as equivalent to sale of land and declared non-taxable under GST: HC

The Gujarat High Court held that the transfer of leasehold rights in land is legally akin to the sale of land and is, therefore, excluded from the scope of ‘supply’ under Entry 5 of Schedule III to the CGST Act, 2017. The Court relied on precedent and the Transfer of Property Act, 1882 to conclude that such transactions fall outside Section 7(1)(a) and are not deemed supplies under Schedule II, rendering GST inapplicable.

Facts

The petitioner, a sole proprietorship concern, was assigned leasehold rights in a plot situated in an Industrial Estate, which had originally been allotted to an erstwhile partnership firm. Upon transfer of the leasehold rights, the jurisdictional officer under CGST issued a notice demanding GST on the ground that the transaction constituted a taxable supply. The petitioner submitted that the transfer of leasehold rights was, in substance, a transaction tantamount to a ‘sale of land’, which is excluded from the scope of ‘supply’ under Entry 5 of Schedule III to the CGST Act, 2017. It was further contended that such a transaction does not fall within Section 7(1)(a) of the CGST Act, 2017 and is thus not exigible to tax under Section 9. Notwithstanding these contentions, an order was passed demanding tax and penalty under Section 74 of the CGST Act, 2017 read with the Gujarat Goods and Services Tax Act, 2017. The matter was accordingly placed before the Gujarat High Court.

Held

The Gujarat High Court held that the assignment of leasehold rights in land is a transaction equivalent to a ‘sale of land’ and is expressly covered by Entry 5 of Schedule III to the CGST Act, 2017, which excludes such transactions from the ambit of supply. Referring to Gujarat Chamber of Commerce and Industry v. Union of India [2025] 170 taxmann.com 251 (Gujarat)/[2025] 94 GSTL 113 (Gujarat), the Court observed that such lease assignments do not fall within Section 7(1)(a), nor are they covered under Entry 2(a) of Schedule II. The Court also relied upon the legal framework under Sections 105 and 108 of the Transfer of Property Act, 1882 to support its interpretation. Accordingly, the order demanding GST and penalty was quashed.

Read the Ruling

6. Accounting treatment of inventory write-down and subsequent reversals when NRV fluctuates under Ind AS framework

Accounting for inventory write-downs and their subsequent reversals plays a critical role in ensuring that financial statements present a true and fair view of an entity’s assets. Ind AS 2, Inventories, states that inventories must be valued at the lower of cost and net realisable value (NRV). When market conditions lead to a decline in NRV below cost, due to factors such as excess supply, reduced demand, or export restrictions, the difference must be recognised as an expense in the period in which the decline occurs.

If the NRV of inventory increases in a subsequent reporting period due to improved market conditions or recovery in demand, Ind AS 2 allows the earlier write-down to be reversed. However, the reversal should be recognised as a reduction in expense in the same period in which the NRV increases, and it must be limited to the amount originally written down, ensuring that the inventory is not valued above its original cost.

For example, if inventory was originally recorded at ₹1,20,000 and had to be written down to ₹90,000 in the current year due to a fall in net realisable value (NRV), the company would recognise a loss of ₹30,000 in the profit and loss account for that year. In the subsequent year, if the NRV improves to ₹1,35,000, the company cannot increase the inventory value beyond its original cost. The reversal is limited to ₹30,000, restoring the inventory to ₹1,20,000. This reversal amount should be recognised as a reduction in expense in the profit and loss account of the subsequent year.

Ind AS 2 further requires entities to reassess NRV at each reporting date and disclose the amount of write-downs and reversals along with the circumstances that led to them. This ensures transparency and provides users of financial statements with meaningful insights into inventory valuation trends and market developments.

Read the Story