Weekly Round-up on Tax and Corporate Laws | 9th to 14th June 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from June 09^th to 14^th, 2025, namely:

1. SEBI to introduce ‘Validated UPI Handles’ and ‘SEBI Check’ to protect investors from unauthorised money collection;
2. Compensation received for not exercising the right to sue would fall in the category of capital receipt: ITAT;
3. Customer support services provided to foreign affiliates not intermediary services; qualify as export under IGST Act: HC;
4. CBIC clarifies exemption of DIN quoting for GST communications with RFN: Circular;
5. GST Portal enables system validation for QRMP taxpayers to ensure compliance with refund application filing: Advisory; and
6. Evaluating the impact of liquidated damages on asset cost recognition under Ind AS framework.

1. SEBI to introduce ‘Validated UPI Handles’ and ‘SEBI Check’ to protect investors from unauthorised money collection

In a significant move to enhance investor protection and combat unauthorised money collection in the securities market, SEBI, vide a press Release dated June 11, 2025, announced the implementation of a mechanism involving structured and validated Unified Payments Interface (UPI) handles alongside a digital tool named ‘SEBI Check’.

This initiative comes amid growing concerns over unregistered entities misleading investors and collecting funds without proper authorisation. This new mechanism provides a secure and verifiable payment channel that enables investors to distinguish between genuine SEBI-registered intermediaries and fraudulent players.

1.1 Background and Rationale

SEBI first introduced UPI as a mode of payment in the securities market in 2019. UPI’s successful experience and efficiency resulted in its inclusion in various other processes as well. However, over the years, many unregistered entities have misled investors by unauthorised collection of money, which is mostly siphoned off for their personal gains.

Therefore, a need was felt to create a unique UPI address for collecting money by SEBI-registered intermediaries. This unique UPI address will help investors ensure that their payments are made only to SEBI-registered intermediaries, enhancing trust and transparency in financial transactions.

On January 31, 2025, SEBI released a consultation paper on the draft circular for safe and efficient UPI transfers. Accordingly, SEBI proposed the introduction of validated UPI addresses exclusively for SEBI-registered intermediaries to collect payments from investors.

1.2 Mandatory UPI address for all SEBI-registered intermediaries

SEBI has mandated a new UPI address for all SEBI-registered intermediaries who collect funds from investors. This innovative mechanism is expected to significantly improve the safety and accessibility of financial transactions within the securities market by providing a verified and secure payment channel.

1.2.1 Meaning of UPI Address

A Unified Payments Interface (UPI) address, also called a Virtual Payment Address (VPA), is a digital identifier used for sending and receiving money through UPI-enabled applications. It functions like an email ID for payments, eliminating the need to share sensitive bank details such as account number or IFSC code. Each UPI address is linked to a specific bank account, enabling real-time fund transfers between parties.

1.2.2 Structure of ‘Validated’ UPI Address

The structure of a validated and exclusive UPI address for intermediaries is as follows –

• Username: This will be a readable name chosen by the intermediary, followed by a mandatory suffix that clearly identifies their category. For example, .brk is for a stock broker, and .mf is for a mutual fund.
• Exclusive “@valid” Handle: The handle will feature a unique and exclusive identifier, “@valid,” combined with the name of a self-certified syndicate bank. The NPCI will allocate these validated handles only for payment collection by SEBI-registered intermediaries.
• Visual Verification: To ensure easy identification of legitimate transactions, investors will see a clear visual cue, a “Thumbs-Up inside a green triangle” icon, when making a payment to a registered intermediary through this new handle.
• Mandatory QR Code: For investor convenience, intermediaries must also generate a QR code prominently featuring this “thumbs-up” logo.

The validated UPI address ensures investors can confidently transfer funds only to authorised and SEBI-registered entities. It acts as a safeguard against fraud, by clearly distinguishing genuine intermediaries from unregistered or fraudulent parties.

1.3 Introduction of the “SEBI Check” Tool

 SEBI is also developing a functionality named “SEBI Check” to provide an additional layer of security and help investors verify the authenticity of an entity before processing any financial transaction. This tool will allow the investors to verify the authenticity of UPI IDs by scanning a QR code or manually entering the UPI ID.

The tool will include a feature to confirm the bank details, such as the bank account number and Indian Financial System Code (IFSC) of a registered intermediary.

1.4 Key benefits of the ‘Validated UPI addresses’ and ‘SEBI Check Tool’

This new mechanism is expected to deliver several benefits –

• Enhanced Investor Protection: It adds a vital layer of security, allowing investors to verify an entity’s authenticity before any financial transaction.
• Assured Payments: Investors can be confident that their payments are directed only to verified and SEBI-registered market intermediaries.
• Clear Warning Signs: The absence of the “thumbs-up icon inside a green triangle” will serve as an immediate caution, alerting investors to the risk of making payments to unauthorised entities.
• Increased confidence: By streamlining payments to registered intermediaries, this initiative will instil greater confidence among investors, encouraging them to engage only with authorised entities for their investment needs.

1.5 Conclusion

SEBI’s move to introduce ‘Validated UPI addresses’ and the ‘SEBI Check tool’ is expected to significantly reduce fraud by restricting payments to only verified SEBI-registered intermediaries. This will empower investors with greater control, improve payment security, and deter unregistered entities from collecting funds unlawfully. By enhancing trust, transparency and convenience in digital transactions, the initiative will deepen investor participation and strengthen the credibility of India’s capital markets.

Read the Notification

Read the Notification

2. Compensation received for not exercising the right to sue would fall in the category of capital receipt: ITAT

The assessee, an individual, along with other family members, was involved in the manufacturing and trading of packaging materials. A joint venture (JV) agreement was entered into between the assessee and a US-based firm. The JV agreement granted PACCESS India the exclusive right to conduct business in India.

Subsequently, the JV company’s packaging business was transferred to a new company, and the US-based firm was dissolved. The new company was later dissolved, and the assessee discovered that two entities were trying to carry on the packaging business without their consent. A suit was filed against the entities, seeking certain relief.

Later, the entities expressed their willingness to discuss the issue with the assessee and others for reaching an out-of-court settlement of the dispute. After discussion between the parties, a settlement agreement was executed, and the assessee received a certain amount.

The assessee treated the amount as a capital receipt and did not offer it as income. However, the Assessing Officer (AO) treated the amount as compensation against the termination of the business contract and taxed it. The CIT(A) upheld the AO’s order, and the matter reached the Mumbai Tribunal.

The Tribunal held that the compensation received was not on account of the termination of the contract relating to any business carried on by the assessee or modification of the terms with the contract relating to any such business. The new party was never a part of the joint venture agreement, and the assessee never received any compensation from PACCESS, USA or PACCESS, LLC on account of termination of the JV Agreement or modification in conditions of the JV Agreement.

The compensation did not flow from the JV Agreement. The compensation/payment arose out of the settlement agreement. The settlement agreement was basically reached by the new party to avoid the legal consequences arising out of the suit filed by the assessee in the Delhi High Court. Therefore, the payment made was for not exercising the right to sue. This, in the Tribunal’s view, would fall in the category of a capital receipt.

Read the Ruling

3. Customer support services provided to foreign affiliates not intermediary services; qualify as export under IGST Act: HC

The High Court of Karnataka held that customer support services provided by an Indian affiliate to its foreign group companies are not ‘intermediary services’ under Section 2(13) of the IGST Act, and qualify as ‘export of service’ under Section 2(6) thereof. This was held in Amazon Development Centre India (P.) Ltd. vs. Additional Commissioner of Central Tax – [2025].

Facts

The petitioner, an Indian entity affiliated with the Amazon Group, provided Information Technology (IT) and Information Technology Enabled Services (ITES), including customer support services, to Amazon Group companies in India and abroad. Several Amazon consumer entities engaged Foreign Affiliates—group companies incorporated outside India—to provide customer support services, which were subcontracted to the petitioner through independent agreements. The petitioner addressed queries of end customers and selling partners on Amazon platforms via phone, email, chat, and other messaging modes. It neither solicited orders, identified customers, facilitated supplies, nor negotiated contracts, and was contractually prohibited from doing so. The petitioner contended that it provided services independently and not as an ‘intermediary’ under Section 2(13) of the IGST Act, and that the services qualified as ‘export of service’ under Section 2(6) of the IGST Act. A show cause notice was issued seeking recovery of sanctioned refunds, and the matter was placed before the High Court of Karnataka.

Held

The High Court of Karnataka held that the customer support services rendered by the petitioner to Foreign Affiliates did not qualify as ‘intermediary’ services under Section 2(13) of the IGST Act. It observed that the services were provided independently on a principal-to-principal basis and were not linked to the supply of goods or services between Foreign Affiliates and their customers. Since the petitioner acted solely on its own account, the conditions of ‘export of service’ under Section 2(6) of the IGST Act were satisfied. Referring to Circular No.159/15/2021-GST, dated 20-09-2021, the court noted that services provided on one’s own account are not intermediary in nature. The show cause notice was quashed, and the refund claim was allowed.

Read the Ruling

4. CBIC clarifies exemption of DIN quoting for GST communications with RFN: Circular

The CBIC has clarified that quoting a Document Identification Number (DIN) is not required for any communication issued through the GST common portal, as such communications already bear a verifiable Reference Number (RFN) ensuring traceability and authenticity. This was stated in Circular No. 249/06/2025-GST, Dated 09-06-2025.

About the Update

The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular clarifying that quoting a Document Identification Number (DIN) is not required for any communication issued through the GST common portal, as these communications already contain a system-generated and verifiable Reference Number (RFN). The RFN ensures sufficient traceability and authenticity, making the inclusion of a DIN unnecessary.

Therefore, all communications issued via the portal that carry a valid RFN should be considered valid. Taxpayers and officers are advised to rely solely on the RFN for verification using the utility available on the GST portal.

Read the Circular

5. GST Portal enables system validation for QRMP taxpayers to ensure compliance with refund application filing: Advisory

The GSTN has issued an advisory enabling system validation to ensure that QRMP taxpayers can file refund applications only for invoices pertaining to periods where the corresponding quarterly Form GSTR-3B has been filed. This was stated in the GSTN Advisory, Dated 10-06-2025.

About the Update

GSTN has revised its system to permit QRMP taxpayers to file refund applications only for invoices where the corresponding Form GSTR-3B has been filed. Invoices uploaded via the IFF for the first two months of a quarter should not be included unless the quarterly Form GSTR-3B return is submitted.

This change addresses earlier technical glitches that prevented refund claims despite timely compliance. Taxpayers must ensure all relevant Form GSTR-1 and Form GSTR-3B returns are filed before applying for refunds, as system checks will restrict applications with pending returns.

Read the Advisory

6. Evaluating the impact of liquidated damages on asset cost recognition under Ind AS framework

Under Ind AS 16, Property, Plant and Equipment, the cost of an item of PPE includes its purchase price, net of trade discounts and rebates, as well as any costs directly attributable to bringing the asset to the location and condition necessary for its intended use. However, when a contract includes a clause for liquidated damages due to delayed delivery, determining the appropriate accounting treatment for such deductions requires careful consideration.

A key question is whether the liquidated damages represent a price adjustment that influences the cost of the asset or compensation for consequential losses that should be recognized separately in profit or loss.

If the liquidated damages are structured as a contractual reduction in the purchase price, for example, a deduction agreed upon for delivery delays, they may be seen as a retrospective discount or rebate. In such cases, the deduction should be subtracted from the purchase price of the asset when determining its cost, consistent with Ind AS 16. Alternatively, if the liquidated damages are meant to compensate the buyer for losses not related to the cost of the asset, such as lost production, penalties, or other indirect effects, they should not influence the asset’s recorded cost. Instead, the full purchase price should be capitalized, and the damages should be recognized separately as other income. This approach aligns with the principle that only amounts directly linked to the asset’s acquisition should be included in its cost.

For example, consider a company that acquires machinery from a supplier under a contract that includes a liquidated damages clause for late delivery. If the machine is delivered late and the buyer deducts a fixed amount from the invoice based on this clause, the treatment depends on the clause’s nature. If the deduction is structured as a pre-agreed adjustment to the asset’s price, the asset should be recorded at net cost. However, if the deduction compensates for business disruptions due to the delay, it should be recognized separately as income and not reduce the asset’s capitalized cost.

Thus, the correct accounting treatment depends on the nature and intent of the liquidated damages clause. A detailed review of the contractual terms is necessary to determine whether the deduction reflects a direct reduction in asset cost or compensation for separate losses. Recognizing the deduction appropriately ensures faithful representation in financial statements, aligned with the principles of Ind AS 16.

Read the News