Weekly Round-up on Tax and Corporate Laws | 7th to 12th July 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from July 7^th to July 12^th, 2025, namely:

1. Service upon CA representing the assessee doesn’t absolve the ITAT from serving copies of the order upon the assessee: HC;
2. Attachment order under PMLA post-CIRP doesn’t violate IBC moratorium as PMLA has separate adjudicatory process: NCLAT;
3. Assignment of immovable property benefits by lessee to assignee not covered under scope of supply and not liable to GST: HC;
4. Separate GST rates for existing and new buyers not allowed where erstwhile promoter opted for one-time project-wise scheme: AAR;
5. ICAI releases FAQs to clarify the implementation of the Guidance Note on Financial Statements of Non-Corporate Entities;
6. Accounting for standby equipment: Capitalisation and commencement of depreciation under Ind AS 16

1. Service upon CA representing the assessee doesn’t absolve the ITAT from serving copies of the order upon the assessee: HC

Assessee filed an appeal before the High Court of Bombay with a delay of 40 days. The delay in filing the appeal was caused because the assessee was not aware of the order passed by the ITAT until she was served with a recovery notice for the Assessment Year 2009-2010.

It was stated that a copy of the order against which the appeal was preferred was received by her Chartered Accountant, who had filed his affidavit categorically stating that he was unable to recollect if he had given copies to the assessee. The assessee applied for a certified copy of the order, which she received 40 days after receiving the recovery notice.

The High Court held that the assessee was permitted to be represented in any proceedings before any Income Tax Authorities or the Appellate Tribunal by an authorised representative, which would include a Chartered Accountant. However, from the specific provision in the form of Section 254, the intention of the Legislature can be clearly discerned that the decision of the Appellate Tribunal shall be communicated to the assessee and the Principal Commissioner/Revenue.

Section 354(3) has permitted a copy of the order to be served upon the authorised representative of the assessee. Still, it has stipulated explicitly that the copy of the order shall be sent to the “assessee”, who is permitted to file an appeal, being aggrieved by the order passed by the Appellate Tribunal, to the High Court.

Even Rule 35 cast a mandate on the Tribunal to communicate the order, after it is signed, to the assessee and the Commissioner and by use of the word “cause it to be” which clearly imply that the Tribunal shall ensure the communication of the order to the assessee by any mode of communication, the legislative intent is clear.

Thus, the statutory scheme places a burden on the Tribunal to ensure that the assessee is made aware of the order, so that, within 120 days as prescribed, they can file an appeal before the High Court. In the instant case, the authorised representative of the assessee filed an affidavit stating that he was unable to recall whether the copies were given to the assessee or his legal heirs in 2016.

Since the Tribunal of serving the copies of the order upon the assessee, who has adopted a specific stand before us that it is only upon receipt of the recovery notice, the assessee gained knowledge about the impugned order. Therefore, the delay in filing the appeal was to be condoned.

Read the Ruiling

2. Attachment order under PMLA post-CIRP doesn’t violate IBC moratorium as PMLA has separate adjudicatory process: NCLAT

The National Company Law Appellate Tribunal (NCLAT), in the matter of Anil Kohli vs. Directorate of Enforcement [2025] 176 taxmann.com 218 (NCLAT – New Delhi), held that the Prevention of Money Laundering Act (PMLA) provides its own adjudicatory mechanism and remedies for challenging attachments, which operate independently of the IBC. Therefore, the issuance of a Provisional Attachment Order (PAO) by the Enforcement Directorate under the PMLA, even after the initiation of Corporate Insolvency Resolution Process (CIRP), does not violate the moratorium under Section 14 of the IBC.

2.1 Brief Facts of the Case

In the instant case, the corporate debtor, engaged in the manufacturing and export of basmati rice, had availed substantial credit from a consortium of banks led by SBI. Due to continued defaults, its accounts were classified as NPAs, and a recall notice was issued under Section 13(2) of the SARFAESI Act, requiring the corporate debtor to repay its dues.

In view of the defaults, the SBI, as a financial creditor, filed an application under Section 7 of the IBC before the NCLT, Mumbai Bench. The NCLT admitted the insolvency application and initiated the CIRP against the corporate debtor. In the same order, the appellant was appointed as the Interim Resolution Professional (IRP), and a moratorium under Section 14 of the IBC was imposed with effect from that date.

Meanwhile, the Directorate of Enforcement (ED) had initiated an investigation under the PMLA against an associate company of the corporate debtor and traced the alleged tainted funds to the corporate debtor. Consequently, a Provisional Attachment Order (PAO) was issued under Section 5(1) of PMLA, attaching various immovable and movable assets of the corporate debtor.

The Resolution Professional (RP) requested the ED to lift the provisional attachments immediately. He explained that the moratorium barred all the proceedings, including enforcement actions like attachment against the corporate debtor. He also referred to section 238 of the IBC, which provides the Code with overriding effect over any other inconsistent law. However, the ED did not grant any relief.

Subsequently, the RP filed an application before the NCLT under section 60(5) of the IBC, seeking to quash the provisional attachment order and a direction to the ED to recall the provisional attachment order during the CIRP or till the time moratorium was in effect.

However, the NCLT dismissed the application, holding that the Provisional Attachment Order issued by the ED under section 5(1) of the PMLA did not fall within the scope of the moratorium under section 14 of the IBC. It further opined that PMLA is a special penal statute and has a distinct adjudicatory mechanism under sections 5 to 8 of the PMLA.

Therefore, unless and until the PMLA Adjudicating Authority sets aside the attachment, the NCLT lacks jurisdiction to direct its release. Later, the Competent Adjudicating Authority of the PMLA confirmed the provisional attachment order. Consequently, an appeal was filed before the NCLAT.

2.2 NCLAT’s Observations

The NCLAT observed that Section 14 of the IBC aims to preserve lawful, unencumbered assets for the purpose of resolution. However, if the property is alleged to be proceeds of crime and is already under adjudication by a competent authority under a penal statute, such property cannot be deemed to be part of the freely available resolution estate.

Further, the NCLAT observed that the PMLA provides an independent mechanism for challenging the attachment orders passed by the Competent Authority. Accordingly, the issuance of a Provisional Attachment Order by ED under the PMLA after initiation of the CIRP does not violate the moratorium under section 14 of the IBC.

The NCLAT also acknowledged that Section 238 of the IBC is a comprehensive non-obstante clause that gives overriding effect to its provisions, notwithstanding anything inconsistent contained in any other law. The said provision ensures that the objectives of the Code are not frustrated by contrary provisions in other enactments, including the PMLA.

For the non-obstante clause to apply, two conditions must be satisfied:

(i) there must be a clear inconsistency between the two statutes; and

(ii) both statutes must operate in the same field or deal with the same subject matter.

2.3 NCLAT’s Ruling

The NCLAT held that the IBC, by virtue of section 238, does not override the PMLA with respect to proceedings involving proceeds of crime and attachment under the PMLA, if validly made and confirmed, cannot be undone merely because the CIRP is ongoing. Therefore, the NCLAT lacks the jurisdiction to interfere with a PAO that has been subsequently confirmed by the Adjudicating Authority under the PMLA.

Read the Ruling

3. Assignment of immovable property benefits by lessee to assignee not covered under scope of supply and not liable to GST: HC

The Hon’ble Gujarat High Court held that the assignment of leasehold rights or benefits in immovable property by a lessee to an assignee does not constitute a ‘supply’ under Section 7 of the CGST Act and is not liable to GST. The Court observed that such transfer merely substitutes the lessee without attracting GST as a taxable event.

3.1 Facts

The Petitioner was allotted an industrial plot by the Gujarat Industrial Development Corporation (GIDC), pursuant to which a lease deed, conveyance deed, and license agreement were executed. The Petitioner subsequently applied to GIDC for transfer of the said plot to a third party, which was duly approved by GIDC. A deed of assignment was executed between the Petitioner and the third party, whereby the Petitioner received a consideration for the same. No GST was charged or collected by the Petitioner on the said transaction. The jurisdictional officer under CGST issued a demand, asserting that the execution of the deed of assignment amounted to a supply of service and that the consideration received constituted the taxable value under Notification No. 11/2017-State Tax (Rate), dated 30-06-2017, specifically under Entry No. 16, Heading No. 9972 as ‘Real Estate Services’ taxable at 18%. The Petitioner contended that the transaction was a mere assignment or transfer of leasehold rights in immovable property, and did not amount to a taxable supply. The matter was accordingly placed before the Gujarat High Court.

3.2 Held

The Gujarat High Court held that the assignment, sale, or transfer of benefits arising out of immovable property by the lessee-assignor in favour of a third party-assignee, who would thereafter become the lessee in place of the original allottee-lessee, did not fall within the scope of ‘supply’ under Section 7 of the CGST Act read with the Gujarat GST Act. The Court noted that the leasehold rights originally vested in the Petitioner were simply being transferred to the third party, with no additional elements involved. It further held that the transaction was not covered under Notification No. 11/2017-State Tax (Rate), dated 30-06-2017, and relied upon the precedent set in Gujarat Chamber of Commerce and Industries v. Union of India [2025] 94 GSTL 113 (Guj.). Consequently, the impugned order demanding GST was quashed.

Read the Ruling

4. Separate GST rates for existing and new buyers not allowed where erstwhile promoter opted for one-time project-wise scheme: AAR

The Hon’ble AAR, Maharashtra held that a promoter who takes over an ongoing project is bound by the GST rate option earlier exercised by the erstwhile promoter under the one-time project-wise scheme. The Authority reasoned that the rate option under Notification No. 3/2019-Central Tax (Rate) attaches to the project itself, irrespective of a change in promoter, and precludes the adoption of different tax rates for existing and new buyers within the same project.

4.1 Facts

The Applicant took over an under-construction residential project from an erstwhile promoter who had commenced development of the project comprising two residential buildings. The erstwhile promoter had exercised the one-time option under Notification No. 3/2019-Central Tax (Rate), dated 29-03-2019, opting to pay GST at the standard rate with input tax credit in accordance with Sl. No. 3(if) of Notification No. 11/2017-Central Tax (Rate), dated 28-06-2017, read with the mechanism for 1/3rd deduction towards land value. The jurisdictional officer under CGST contended that the Applicant was bound by the option exercised by the erstwhile promoter and must pay GST at the effective rate of 12% (post land abatement) with input tax credit on all consideration received for residential premises, whether sold by the erstwhile promoter or by the Applicant to new buyers. The Applicant submitted that separate GST rates should apply—12% for balance consideration from earlier allottees and 5% (without ITC) for new buyers. The matter was accordingly placed before the Authority for Advance Ruling (AAR), Maharashtra.

4.2 Held

The Authority for Advance Ruling (AAR), Maharashtra held that the one-time option exercised under Notification No. 3/2019-Central Tax (Rate), dated 29-03-2019 was qua-project and continued to bind the Applicant. It ruled that the Applicant could not adopt two different rates of tax for the same project—12% for existing buyers and 5% for new buyers—and was mandatorily required to discharge GST at the effective rate of 12% with input tax credit for consideration received from both categories of buyers. The AAR clarified that the project-wise option once exercised under the notification attaches to the entire project regardless of change in promoter, and that the Applicant’s non-availment of unutilized input tax credit from the erstwhile promoter does not affect this liability.

Read the Ruling

5. ICAI releases FAQs to clarify the implementation of the Guidance Note on Financial Statements of Non-Corporate Entities

Non-Corporate Entities (NCEs) are businesses like sole proprietorships, partnerships, Hindu Undivided Families, trusts, societies, and other professional entities that aren’t registered under the Companies or LLP Acts. Until recently, these entities prepared financial statements in various formats, making it hard for banks, investors, and regulators to compare and analyse the information.

To address this, the ICAI released a Guidance Note, effective April 1, 2024, that requires a standard format for financial statements of NCEs. From FY 2024–25 onwards, every NCE must provide a Balance Sheet, Profit & Loss Statement, Cash Flow Statement (mandatory for larger entities), and detailed Notes to Accounts, including comparative figures from the previous year, unless it’s their first report.

The Balance Sheet now separates Owners’ Funds (capital and reserves), liabilities, and assets, with classifications into current and non-current categories. The Profit & Loss statement clearly shows income and expenses, while the Cash Flow statement helps users understand how cash moves in and out. Notes to Accounts must include accounting policies, movements in partner/owner equity, disclosures on related party transactions, contingent liabilities, MSME payables, borrowings, investments, and key estimates/judgments.

NCEs are classified into two main groups based on size: MSMEs and Large Entities. Large NCEs must comply with all applicable Accounting Standards, while MSMEs get certain exemptions, though they still must follow the prescribed formats.

Auditors are required to check compliance; if an entity deviates from the Guidance Note, the auditor must report it, potentially issuing a modified opinion. This standardisation is meant to enhance transparency, consistency, and comparability, helping users, like lenders and regulators, trust the financial information they receive. While some practitioners have raised concerns about meeting the detailed requirements by deadlines, most agree it’s a step in the right direction.

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6. Accounting for standby equipment: Capitalisation and commencement of depreciation under Ind AS 16

Standby equipment refers to machinery or components that are not used in day-to-day operations but are kept ready for immediate deployment in case of breakdowns, maintenance, or other emergencies affecting the main operating assets. Even though such equipment may never be put into active use, it plays a vital role in maintaining business continuity and managing operational risks, especially in industries where uninterrupted processes are critical.

As per Ind AS 16, Property, Plant and Equipment, standby equipment should be capitalised when it is held for use in production or operations and is expected to be used over more than one accounting period. Even if the equipment is not actively used, it qualifies for recognition as a fixed asset when it is installed, maintained, and ready to be deployed as intended by the management. Depreciation on such equipment should begin once the asset is available for use, that is, when it is in place and in the condition necessary to fulfil its designated role. The commencement of depreciation does not depend on actual usage but rather on the readiness of the asset to perform its intended function.

Consider a case of a hydroelectric company that installed two identical turbines, one for regular use and the other as a standby, fully installed and maintained for emergencies. Though the standby turbine may never be operated, it remains available for use throughout the plant’s life. The company capitalised and began depreciating it from the installation date. As the turbine is ready for use and supports long-term operations, it qualifies as PPE and depreciation should begin when it becomes available for use, not when it is physically operated as per Ind AS 16.

Therefore, the company’s accounting treatment is appropriate under Ind AS 16. Standby equipment, even if not actively used, provides ongoing economic benefits by ensuring operational continuity and must be recognised and depreciated accordingly. Aligning depreciation with availability for use, not actual usage, ensures accurate reflection of the asset’s role in the financial statements and supports faithful representation of the company’s operational readiness.

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