Weekly Round-up on Tax and Corporate Laws | 26th to 31st May 2025

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from May 26^th to 31^st, 2025, namely:

1. Oral gift of property to daughter on marriage excluded from ‘one house’ limit for Sec. 54F exemption: ITAT;
2. SEBI revises appointment norms and cooling-off period for KMPs and PIDs in MIIs;
3. Matter remanded as order was passed without assessee’s reply while writ against SCN was pending: HC
4. Matter remanded for re-adjudication as SCN was issued post cancellation of registration when assessee lacked portal access: HC; and
5. Accounting treatment of air tickets sold to employees at concessional prices under Ind AS framework.

1. Oral gift of property to daughter on marriage excluded from ‘one house’ limit for Sec. 54F exemption: ITAT

The assessee sold unquoted shares for Rs. 92.49 crore and claimed Section 54F exemption by investing Rs. 43.83 crore in a house and Rs. 10.67 crore in a capital gains account. The Assessing Officer (AO) disallowed the exemption, citing that the assessee owns more than one residential house as on the date of transfer of original asset.

The assessee claimed that one residential house property was gifted to his daughter at the time of her marriage in 2015. However, AO disputed the gift of the property in the absence of a registered gift deed at the time of the gift. On appeal, the CIT(A) allowed the exemption. The matter reached the Tribunal.

The Tribunal held that the assessee claimed to have gifted one residential house property as promised in favour of her daughter on the occasion of her marriage out of natural love and affection which was solemnised by executing a registered gift deed dated 25-6-2022 and further verified by the ‘Streedhan Agreement’ between the daughter of the assessee and her husband, as per which, both parties have agreed that the property has been gifted by her father in the year 2015.

Further, the assessee had also proved the gift of the property by filing the income tax return filed by the assessee’s daughter for the relevant assessment year, where she claimed her residential address from the above house property gifted by the assessee.

From the details filed by the assessee, there is no dispute with regard to the gift of property to her daughter in the year 2015 on the occasion of her marriage. In so far as reasoning of the AO that in absence of registered gift deed, proper gift cannot be executed because of provisions of section 123 of the Transfer of Property Act, 1882, it is viewed that there is no dispute with regard to the legal position that gift of immovable property can be given only by way of a registered instrument signed by donor and attested at least two witnesses.

However, going by Indian Customs and Traditions, the assessee’s argument that he made an oral gift to his daughter on the occasion of her marriage in the year 2015 needs to be accepted because it is common in Indian Hindu Society for property to be gifted to sons and daughters out of natural love and affection even without a registered document.

Therefore, the AO’s argument that a gift cannot be considered without a valid registered gift deed is devoid of merit and accepted.

Read the Ruling

2. SEBI revises appointment norms and cooling-off period for KMPs and PIDs in MIIs

In a move to enhance governance and strengthen accountability within Market Infrastructure Institutions (MIIs), SEBI, vide. Circular dated May 26, 2025, has revised the process for the appointment, re-appointment, termination, or resignation of specific Key Managerial Personnel (KMPs). The revised process aims to ensure that MIIs are staffed by qualified, independent, competent professionals, thereby safeguarding market integrity. Further, SEBI has reviewed the re-appointment process for Public Interest Directors (PIDs) to promote greater transparency and introduced a flexible cooling-off period for KMPs transitioning to competing MIIs.

2.1 Background and Rationale

To strengthen the governance framework of Stock Exchanges, Clearing Corporations and Depositories (collectively referred to as Market Infrastructure Institutions), it is essential that KMPs of MIIs in the crucial areas of operations, such as compliance, risk management, technology and information security, are of appropriate status and independence.

These KMPs, namely the Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO), are crucial for any MII to deliver on its core public interest mandate of prioritising compliance, risk management, technological resilience, and market integrity over commercial considerations.

Based on feedback received from various stakeholders through public consultation, the recommendations of the Secondary Market Advisory Committee of SEBI (SMAC), and the Board’s approval, SEBI has decided to revise the process for the appointment, re-appointment, termination, or resignation of specific Key Managerial Personnel (KMPs).

2.2 Revised process for appointment, re-appointment, termination or resignation of specific KMPs

The revised process for appointment, re-appointment, termination or resignation of specific KMPs in MIIs shall be as under –

Process for appointment of specific KMPs

The MII must engage an independent external agency to identify and recommend suitable candidates to appoint specific KMPs. The agency must submit its recommendations to the Nomination and Remuneration Committee (NRC) of the MII.

The NRC will evaluate the agency’s recommendations and submit its recommendations for appointing such KMPs to the MII’s Governing Board. The Governing Board must make the final decision regarding such an appointment.

Process for re-appointment, termination or resignation of specific KMPs

The NRC must evaluate the cases of re-appointment, termination, or resignation of specific KMPs and submit its recommendations to the Governing Board of MII. The Governing Board must make the final decision regarding such re-appointment, termination, or resignation. However, no KMP must be terminated unless a reasonable opportunity of being heard is given to him/her by the Governing Board.

2.3 Cooling-off Period for KMPs Joining a Competing MII

The existing requirement for a cooling-off period of one year under the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and SEBI (Depositories and Participants) Regulations, 2018, has been replaced.

The Governing Board of MII must prescribe the mechanism for a cooling-off period for KMPs (including the MD) of the MII joining a competing MII as a KMP.

2.4 Re-appointment of Public Interest Director (PID)

If the Governing Board of the MII decides not to re-appoint a PID for a second term, then it must record a rationale for the same and inform the SEBI. This aims to boost transparency and guard against arbitrary board decisions.

2.5 Conclusion

The revised process for the appointment, re-appointment, termination, and resignation of specific KMPs in MIIs represents a significant step towards strengthening governance and accountability within these critical market institutions. By mandating the involvement of independent external agencies and clearly defining the roles of the Nomination and Remuneration Committee and the Governing Board, SEBI aims to ensure that only competent and independent personnel hold key managerial positions.

Additionally, the flexible cooling-off period and enhanced transparency in the re-appointment of PIDs further reinforce the integrity and impartiality of MIIs. These measures safeguard public interest, promote market stability, and promote greater confidence among stakeholders.

Read the Circular

3. Matter remanded for re-adjudication as SCN was issued post cancellation of registration when assessee lacked portal access: HC

The Hon’ble Delhi High Court held that issuance of a show cause notice after GST registration cancellation, when the assessee lacked portal access, violated principles of natural justice. The Court noted that the assessee could not file a reply solely due to lack of access to the GST portal at the relevant time. This was held in Grilled Roti vs. Commissioner of Delhi Goods and Services Tax – [2025].

Facts

The petitioner, a registered person under CGST and Delhi GST Act, challenged the validity of a demand order passed under Section 73. The petitioner submitted that the show cause notice (SCN) creating the demand was issued only after suspension and subsequent cancellation of its GST registration with retrospective effect, due to which it had no access to the GST portal. It was further submitted that upon coming to know of the SCN through alternate means, a reply was filed, but the impugned order erroneously recorded that no reply had been submitted. The petitioner contended that denial of portal access at the material time impaired the right to be heard and rendered the proceedings violative of the principles of natural justice. The matter was accordingly placed before the Hon’ble Delhi High Court.

Held

The Hon’ble Delhi High Court held that there had been a clear procedural failure, as the petitioner lacked access to the portal at the time of issuance of the SCN and was effectively denied a meaningful opportunity to respond. The Court observed that digital access is integral to procedural fairness under GST and that proper adjudication requires both notice and the ability to reply. The Court accordingly set aside the impugned order, directed restoration of portal access to the petitioner for a period of two months, and permitted submission of reply to the SCN. It further directed that a fresh adjudication be undertaken under Section 73 of CGST and Delhi GST Act after affording a personal hearing.

Read the Ruling

4. Matter remanded as order was passed without assessee’s reply while writ against SCN was pending: HC

The Hon’ble Delhi High Court held that passing an adjudication order during the pendency of a writ petition against the show cause notice, without the assessee’s reply, violated principles of natural justice. The Court observed that the petitioner was unable to respond while the matter was sub judice, and was thus entitled to a fair opportunity to contest the demand on merits. This was held in Cristoo Arora vs. Union of India – [2025] 174 taxmann.com 825 (Delhi)

Facts

The petitioner was issued a show cause notice under Section 73 of the CGST and Delhi GST Act. Without filing a reply to the said notice, the petitioner approached the Hon’ble High Court by filing a writ petition challenging the show cause notice and the related notifications. Despite the pendency of this writ petition, the adjudicating authority proceeded to pass an order confirming the demand raised in the show cause notice. The petitioner submitted that due to the pendency of the writ and circumstances prevailing at the relevant time, they were unable to file a reply to the show cause notice and thus were deprived of the opportunity to contest the demand on merits.

Held

The Hon’ble High Court held that, in light of the fact that the petitioner was unable to file a reply when the adjudication proceedings were underway and the matter was sub judice before the Court, one opportunity ought to be afforded to the petitioner to respond to the show cause notice and contest the demand. It was further observed that the denial of such opportunity would be contrary to principles of natural justice. Accordingly, the impugned adjudication order was set aside and the matter was remanded to the proper officer for re-adjudication after granting the petitioner sufficient opportunity to file a reply and be heard.

Read the Ruling

5. Accounting treatment of air tickets sold to employees at concessional prices under Ind AS framework

Entities often provide non-monetary benefits to employees, such as access to subsidised goods or services. The accounting treatment of such benefits under the Indian Accounting Standards (Ind AS) framework, particularly Ind AS 19 on employee benefits, requires recognition of the employer’s cost rather than the employee’s perceived value.

Ind AS 19 defines employee benefits broadly to include all forms of consideration provided in exchange for employee services. Short-term employee benefits include not only monetary compensation but also non-monetary benefits like concessional or free access to services. The standard requires that such benefits be measured and recognised based on the actual cost incurred by the entity in providing them. This ensures the financial statements reflect the true economic outflow rather than hypothetical values.

As an example, a commercial airline operator in India offers its employees up to 10 air tickets annually at a concessional price of Rs. 1,500, while the internal cost per seat is Rs. 2,000 and the market price is Rs. 5,000. These tickets are only provided on flights with spare capacity. The company recorded an employee benefit expense equal to the difference between the market price and the concessional price (Rs. 3,500 per ticket). However, this approach inflates the reported expense and does not align with Ind AS 19. Since there is no actual loss of revenue due to the availability of spare capacity, the economic cost to the company is only the difference between the internal cost and the amount recovered from the employee, i.e., Rs. 500 per ticket. Hence, the appropriate employee benefit expense for 1,000 tickets should be Rs. 5,00,000.

In summary, when accounting for concessional benefits under Ind AS, entities should focus on the incremental cost actually incurred in providing the benefit. Recognising expenses based on market value may lead to overstated costs and distorted financial reporting. The cost-based approach ensures consistency with the standard and presents a more accurate picture of the entity’s financial performance.

Read the Story

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