Weekly Round-up on Tax and Corporate Laws | 5th to 10th May 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from May 5^th to 10^th, 2025, namely:

1. SC upheld IBBI’s power to suspend RP under IBC norms; no violation of Articles 14, 19 and 21 of Constitution of India;
2. Sec. 194N applicable on cash withdrawal by cooperative credit society irrespective of its nature: HC;
3. GSTN updates refund filing process for specific refund categories: Advisory;
4. Order to be set aside as transaction of assignment of industrial plot is not subject to GST: HC;
5. MCA notifies Ind AS 21 amendments to guide on currency exchangeability and spot rate estimation

1. SC upheld IBBI’s power to suspend RP under IBC norms; no violation of Articles 14, 19 and 21 of Constitution of India

The Supreme Court, in the matter of CA V. Venkata Sivakumar v. IBBI [2025] 174 taxmann.com 152 (SC), held that the power to suspend a Resolution Professional (RP) is conferred by Regulation 23A of the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016. The same would not violate Articles 14, 19 and 21 of the Constitution of India.

1.1 Brief facts of the case

In the instant case, the petitioner, a member of the ICAI and IBBI, was appointed as a liquidator in a liquidation process. Regulation 7A of the IBBI (Insolvency Professionals) Regulations, 2016, mandates insolvency professionals to obtain authorization for an assignment from the Insolvency Professional Agencies (IPA). Accordingly, the petitioner made an application to the Indian Institute of Insolvency Professionals of ICAI (IIIPI).

However, the IIIPI rejected the application. Subsequently, complaints were filed against him for sharing confidential information relating to the liquidation process before the IIIPA and the IBBI. The IBBI issued a show cause notice informing him that disciplinary action was to be taken against him for contravening section 208 of the IBC. A separate show cause notice was also issued by the IIIPI, proposing to take disciplinary action.

In response, the petitioner filed instant writ petitions challenging the constitutional validity of Section 204 of the IBC and Regulation 23A of the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, as ultra vires the Articles 14, 19(1)(g) and 21 of the Constitution on the ground that said regulation granted uncontrolled powers to the IBBI and the IIIPI.

Further, the petitioner submitted that the IBBI and the IIIPI, i.e., the institute, initiated parallel proceedings regarding the same action, and if punishment is imposed twice, it would amount to double jeopardy.

The High Court, vide the impugned order, dismissed the petition on the ground that it was barred by principles of constructive res judicata. The High Court held that the IIIPI has no discretion, and suspension of authorisation for assignment is automatic once disciplinary proceedings are initiated. Therefore, it can neither be termed as arbitrary nor challenged on the ground of conferring unbridled power.

Further, the petitioner or any other aggrieved professional could only insist upon the prompt completion of proceedings, and hardship cannot be a valid ground for challenging the regulation itself. Therefore, the constitutional validity of Regulation 23A was to be upheld.

The High Court also held that since Section 204 is only an enabling provision, there is no constitutional infirmity in any of the provisions under Section 204(a), (b), (c), (d), and (e) and, therefore, the instant petition was to be dismissed.

The petitioner then challenged the constitutional validity of the provisions related to the suspension of Resolution Professionals (RPs) before the Supreme Court.

1.2 Supreme Court Ruling

The Supreme Court held that the power to suspend an RP is conferred by Regulation 23A of the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016, and this does not violate Articles 14, 19 and 21 of the Constitution of India.

Read the Ruling

2. Sec. 194N applicable on cash withdrawal by cooperative credit society irrespective of its nature: HC

The petitioner was a cooperative credit society constituted by its members as shareholders, dedicated to serving their interests. The Government of India and the Government of Tamil Nadu implement their policies through such societies. The Government’s sanction funds through District Central Co-operative Banks to primary cooperative societies, and members benefit from loans, subsidies, waivers and annual gifts like Pongal gifts distributed through ration shops under the control of these societies.

The petitioner contended that the amendment to the Income Tax Act exempted cooperative societies engaged in banking activities from the purview of Section 194N. It had been consistently held that gifts like Pongal gifts and banking transactions are not subject to Section 194N.

The Madras High Court held that Section 194N applies to the petitioner’s transactions, including loans and subsidies, irrespective of the cooperative society’s nature. The legal provisions and amendments are clear, and no exemption applies in this case as claimed by the petitioner. The respondents have followed the procedures properly and passed the impugned orders in accordance with the law.

The court distinguished the precedents cited by the petitioner, noting that the factual circumstances of those cases differed from the present case. Therefore, the court upheld the respondents’ actions, including the deduction of TDS, as lawful and procedurally correct.

Read the Ruling

3. GSTN updates refund filing process for specific refund categories: Advisory

GSTN removed the requirement to select a tax period for refund claims under exports (with tax), SEZ supplies (with tax), and deemed exports. Refunds must now be filed on an invoice basis, with uploaded invoices being locked unless the application is withdrawn or a deficiency memo is issued. This was held in GSTN Advisory dated 08-05-2025.

3.1 About the Update

The Goods and Services Tax Network (GSTN) has revised the refund filing process for three specific categories:

(a) Export of services with payment of tax

(b) Supplies made to SEZ Unit/SEZ Developer with payment of tax

(c) Refund by supplier of deemed exports

The requirement to select a specific tax period while filing refund applications under these categories has been removed, and the process has been shifted from tax period-based filing to invoice-based filing.

Invoices uploaded with a refund application will be locked and cannot be amended or reused for subsequent claims. They will only be unlocked if the refund application is withdrawn or a deficiency memo is issued.

Taxpayers are required to upload eligible invoices in the prescribed statements, as specified in the advisory, to initiate refund claims under the revised process.

Read the Advisory

4. Order to be set aside as transaction of assignment of industrial plot is not subject to GST: HC

The Hon’ble Gujarat High Court held that assignment of leasehold rights in an industrial plot amounts to a transfer of immovable property and does not qualify as a ‘supply’ under section 7(1)(a) of the CGST Act. The Court reasoned that the one-time, absolute transfer under a registered deed of assignment does not constitute leasing or renting under clause 5(b) of Schedule II, and hence falls outside the scope of GST. This was held in Time Technoplast Ltd. vs. Union of India [2025].

4.1 Facts

The petitioner, a company, was originally allotted an industrial plot by the Gujarat Industrial Development Corporation (GIDC) on leasehold basis for its industrial use. The allotment conferred leasehold rights over the land and the building constructed thereon in favour of the petitioner, in accordance with the terms and conditions prescribed by GIDC. Subsequently, the petitioner, having obtained full leasehold rights, entered into a Deed of Assignment, whereby the entire interest in the said plot, including the leasehold rights, was transferred to its wholly-owned subsidiary. The transfer was executed for full and adequate consideration, duly reflected in the deed. Pursuant to this transaction, the jurisdictional GST authority issued a show cause notice under section 74 of the CGST Act proposing to demand GST on the transfer fee received by the petitioner. The notice alleged that the said transaction amounted to a ‘supply’ within the meaning of section 7(1)(a) of the CGST Act, and attracted GST under section 9. The notice specifically relied on clause 5(b) of Schedule II, asserting that the transaction amounted to a lease or letting of land and building, classifiable as a supply of services. The authority also invoked clause 5 of Schedule III in conjunction with clause 5(b) of Schedule II to contend that the transaction did not qualify as a sale of land or building, and hence did not fall within the exclusions under Schedule III, rendering it liable to GST.

Aggrieved by the issuance of the show cause notice, the petitioner approached the Gujarat High Court by filing a writ petition, seeking quashing of the said notice on the ground that the transaction was a mere transfer of immovable property and fell outside the scope of GST.

4.2 Held

The Hon’ble Gujarat High Court held that the transaction involving the assignment of leasehold rights in the industrial plot and building by the assessee to its subsidiary amounted to a complete transfer of immovable property and could not be treated as a ‘supply’ under section 7(1)(a) of the CGST Act. The Court observed that the Deed of Assignment executed between the parties evidenced a one-time, absolute transfer of leasehold rights for valuable consideration and did not constitute a service of leasing or renting as contemplated under clause 5(b) of Schedule II. Furthermore, the Court clarified that clause 5 of Schedule III, which excludes certain transactions from the scope of supply, was inapplicable in the instant case. Accordingly, impugned show cause notice was to be set aside The Hon’ble Gujarat High Court held that the transaction involving the assignment of leasehold rights in the industrial plot and building by the assessee to its subsidiary amounted to a complete transfer of immovable property and could not be treated as a ‘supply’ under section 7(1)(a) of the CGST Act. The Court observed that the Deed of Assignment executed between the parties evidenced a one-time, absolute transfer of leasehold rights for valuable consideration and did not constitute a service of leasing or renting as contemplated under clause 5(b) of Schedule II. Furthermore, the Court clarified that clause 5 of Schedule III, which excludes certain transactions from the scope of supply, was inapplicable in the instant case. Accordingly, impugned show cause notice was to be set aside.

Read the Ruling

5. MCA notifies Ind AS 21 amendments to guide on currency exchangeability and spot rate estimation

The Ministry of Corporate Affairs (MCA), through Notification No. G.S.R. 291(E) dated May 7, 2025, has amended Ind AS 21, The Effects of Changes in Foreign Exchange Rates, effective from April 1, 2025. Aimed at enhancing clarity and consistency in financial reporting, these amendments provide detailed guidance on assessing currency exchangeability and estimating spot exchange rates when exchangeability is lacking. The revised standard is particularly relevant for entities operating in jurisdictions with restricted or hyperinflationary currencies, foreign operations, or cross-border transactions involving limited currency exchangeability, and is expected to strengthen transparency, comparability, and compliance in financial statements.

5.1 Key highlights of the amendments

• Definition of Exchangeability: A currency is exchangeable into another currency when an entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations.
• Assessment of Exchangeability: Entities are required to assess the exchangeability of a currency at the measurement date for a specific purpose. If more than an insignificant amount of the currency cannot be obtained for that purpose, it is deemed non-exchangeable.
• Estimation of Spot Exchange Rate: Where a currency is non-exchangeable, the entity must estimate the spot exchange rate to reflect the rate at which an orderly exchange transaction would occur between market participants on the measurement date, under the prevailing economic conditions.
• Use of a Single Exchange Rate: When multiple exchange rates are available, entities must use a single rate per transaction, preferably the one reflecting expected cash flows on the measurement date.
• Enhanced Disclosure Requirements: Entities estimating exchange rates must disclose the nature and financial effects of non-exchangeability, the spot exchange rates used and the methods of estimation, risks from currency restrictions, and the assumptions and inputs used in estimation.
• Application Guidance: A new appendix provides a two-step process: first, determine if the currency is exchangeable; second, estimate the spot rate if it’s not exchangeable
• Transitional Provisions: Comparative periods need not be restated. Adjustments are made to opening retained earnings or the foreign currency translation reserve.

Read the Notification