Weekly Round-up on Tax and Corporate Laws | 05th January 2025 to 10th January 2026

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from Jan 05^th  to Jan 10^th 2026, namely:

1. Section 10(23BBA) exemption confined to statutory bodies, not temples: HC;
2. IBBI launches revised LIQ forms for liquidation process, streamlining filings and reducing compliance burden;
3. Corporation can invoke Section 45A of the Employees’ State Insurance Act, only if employer fails to produce records or obstructs inspection: SC;
4. GSTN enables online filing of opt-in declaration for “Specified Premises” for hotel accommodation services: Advisory;
5. Refund of accumulated ITC of cess paid on inputs used in the manufacture of goods to be exported is admissible: HC;
6. NFRA issues Circular on communication with those Charged with Governance: Key non-Compliances and auditor takeaways; and
7. Ind AS 116 perspective on rights to use underground space when surface rights remain with the landowner.

1. Section 10(23BBA) exemption confined to statutory bodies, not temples: HC

The assessee-petitioners were either administrative bodies of temples under the Malabar Devaswom Board or temples represented by their administrative bodies. They sought the benefit of section 10(23BBA) for exemption from income tax, for a refund of TDS deducted on deposits held in the names of the respective temples with financial institutions, and, in some cases, a declaration of exemption.

The administrative bodies were constituted under schemes framed pursuant to section 58 of the Madras Hindu Religious and Charitable Endowments Act, 1951, and under the scheme, the properties and endowments from which income arose belonged to the deity/temple, with the administrative bodies managing such properties and income.

In some instances, assessment orders were passed against the temples, while in others, claims for refund of Tax Deducted at Source (TDS) on temple deposits were rejected or notices under section 148A were issued. Aggrieved by the order, the assessee preferred a writ petition to the Kerala High Court.

The Court held that the exemption contemplated under section 10(23BBA) is only for the body or authority created by the statute to govern public religious institutions, but the said provision is not intended to provide exemptions to public religious institutions governed by such body or authority. In other words, the exemption contemplated as per the said provision is for the income of bodies like the Devaswom Board, Waqf Board, etc., and not to the religious establishments governed by such institutions.

Further, there is a separate provision for exemption under sections 11, 12, and 12A for religious establishments. The religious institutions referred to in section 10(23BBA), including trusts, endowments, or societies, are eligible for exemption under sections 11 and 12 upon complying with the conditions stipulated in those provisions.

Further, the income of such body or authority alone is exempted, and the establishments/institutions which are under the administration of the said authority, as such, are not exempted from the liability to pay the income tax. A proviso to the said provision confirms the said aspect, by clearly specifying that the provisions under the said Act should not be construed to mean that the income of any proposed endowment or society which is subjected to the administration by the bodies referred to in the provision is exempted from tax.

Read the Ruling

2. IBBI launches revised LIQ forms for liquidation process, streamlining filings and reducing compliance burden

The Insolvency and Bankruptcy Board of India has issued a circular dated 5 January 2026 announcing the launch of revised forms for the liquidation process. This follows the amendment to the IBBI (Liquidation Process) Regulations, 2016, notified on 2 January 2026, which mandates the filing of prescribed forms, along with enclosures, on the electronic platform of the Board within specified timelines.

a) Background and rationale

Earlier, through its circular dated 28 June 2024, the Board had introduced a streamlined framework of forms for monitoring liquidation. Pursuant to the recent regulatory amendment, the existing forms have now been comprehensively revised. The revised framework aims to reduce compliance burden by eliminating duplication, rationalising data requirements and leveraging technology for auto-population of information already available on the portal. These changes are intended to reduce time and effort for insolvency professionals while ensuring timely availability of essential information with the Board.

b) Structure of revised forms

The revised framework comprises four forms, each linked to a specific stage of the liquidation process and having defined timelines:

• Form LIQ-1 covers the period from the commencement of liquidation till the public announcement, including basic details of the corporate debtor and the public announcement. It must be filed on or before the 10th day of the subsequent month after the public announcement.
• Form LIQ-2 relates to the quarterly progress of the liquidation process. It includes details of valuation, realisation, avoidance transactions, stakeholders’ consultation committee meetings, and receipts and payments. This form is to be filed on or before the 10th day of the subsequent month after submission of the progress report to the Adjudicating Authority.
• Form LIQ-3 covers the period from the last progress report till filing of the application for dissolution or closure. It captures details of the application, unclaimed proceeds, realisation, distribution, receipts, and payments for the entire liquidation process. Filing is required on or before the 10th day of the subsequent month after submission of the dissolution or closure application.
• Form LIQ-4 relates to the period from the filing of the dissolution or closure application till the passing of the final order. It includes details of the order, any change in distribution or receipts and payments, and the status of avoidance applications. This form is to be filed within seven days of disposal of the application by the Adjudicating Authority.

c) Electronic filing and availability

All revised forms, except LIQ-2, are available on the IBBI website from 1 January 2026. Since LIQ-2 becomes applicable only from February 2026, it will be enabled accordingly. The existing forms stand discontinued with effect from the said date. Filing is to be done electronically using the unique login credentials provided by the Board, with authentication through DSC or e-sign.

d) Transition and compliance relaxation

To facilitate familiarisation with the revised forms and address initial technical issues, the Board has clarified that no penalty will be levied for delayed filing during the initial quarter from January to March 2026. Further, a form-modification utility has been introduced on the electronic platform to allow insolvency professionals to correct errors or omissions in already filed forms through an OTP-based authentication process.

All subsequent filings are required to be made only through the revised forms by the insolvency professional who is in office as liquidator as on the relevant cut-off date. The Board has reiterated that failure to file forms, or filing of inaccurate or incomplete information, will attract liability under the applicable provisions of the Code and the regulations framed thereunder.

Read the Circular

3. Corporation can invoke Section 45A of Employees’ State Insurance Act, only if employer fails to produce records or obstructs inspection: SC

The Supreme Court, in the matter of Carborandum Universal Ltd. vs. ESI Corporation [2025] 181 taxmann.com 683 (SC), held that the Corporation can invoke Section 45A of the Employees’ State Insurance Act, only if employer fails to produce records or obstructs inspection by the employer.

• Brief facts of the case:

In the instant case, the appellant–company, engaged in manufacturing and covered under the Employees’ State Insurance Act, 1948, with an employer code, had been making statutory contributions for covered employees. The respondent-Corporation issued a show-cause notice alleging non-submission of returns and non-production of complete records for the period from August 1988 to March 1992, proposing an assessment of about Rs. 26.44 lakhs under Section 45A of the Act.

The appellant submitted explanations, attended personal hearings, and produced ledgers, cash books, bank books, journal vouchers, relevant bills, contractor records, and returns of contribution for verification.

The Corporation thereafter passed an order under Section 45A determining a contribution of about Rs. 5.43 lakhs for the said period with interest and warned of recovery under Sections 45C to 45I of the Act.

The appellant challenged the order before the Employees Insurance Court under Section 75(1)(g) of the Act. However, the Court rejected the challenge, recorded that the appellant did not produce necessary documents either during the personal hearings or before it, accepted the Corporation’s contention that relevant records were not furnished, and dismissed objections as to limitation and jurisdiction. The petition was dismissed.

Thereafter, the appellant filed an appeal before the High Court. The High Court noted that a show cause and a personal hearing were afforded and that the order was passed after considering the record produced, and dismissed the appeal, holding that no interference was called for. Aggrieved by the same, the appellant filed an appeal before the Supreme Court.

• Supreme Court Observations:

The Supreme Court noted that Section 45A of the Act provides for a summary method to determine contribution in case of deliberate default on the part of the employer or where there is no co-operation by the employer.

Section 45A is a special provision for expeditious action against an employer who commits a default. This special provision has been enacted only to weed out unscrupulous employers who default in maintaining records and in submitting correct returns for the payment of contributions.

However, where an order is passed under Section 45A, it is for the employer to approach the Employees Insurance Court if he wants to challenge the same. In such an eventuality, the limitation prescribed is three years. On the other hand, ordinarily if the corporation disputes any contribution of the employer, it has to take recourse to Section 75, in which event, it has to move the Employees Insurance Court for recovery of the amounts due.

For that, the corporation has to invoke Section 77 to initiate proceedings before the Employees’ Insurance Court. However, to ensure that stale claims are not agitated, the legislature has prescribed a limitation of five years for raising such claims or disputes by the corporation. The limitation for institution of claims by the corporation before the Employees Insurance Court, as noticed supra, is prescribed under the proviso to Section 77(1A)(b), which mandates that no claim shall be made by the corporation after five years of the period to which the claim relates

• Supreme Court Ruling:

The Supreme Court held that Section 45A is designed as a mechanism that a Corporation may employ only when there is a default under Section 44 or when statutory inspection under Section 45 becomes impossible on account of the conduct of the employer.

Further, the foundation for the exercise of power under Section 45A of the Act is either the non-production of records, the absence of cooperation, or obstruction of inspection. When records are produced and cooperation is forthcoming, assessment must be carried out under Section 75(2)(a) and not under Section 45A of the Act.

Section 45A is not meant to be an alternative mode of computation at the option of the Corporation whenever the employer’s records are perceived as deficient or inadequate. Where there is non-production of records or obstruction to inspection by the employer, the Corporation can invoke section 45A for the determination of contributions.

The Supreme Court also held that where the appellant had produced ledgers, cash books, journal vouchers, contractor records and returns of contribution for the period in question and had appeared through its authorised representative in personal hearings, the invocation of Section 45A by the Corporation was unsustainable.

Read the Ruling

4. GSTN enables online filing of opt-in declaration for “Specified Premises” for hotel accommodation services: Advisory

The GSTN has issued an advisory enabling online filing of opt-in declarations on the GST Portal for recognising hotel accommodation premises as ‘specified premises’ under GST. Eligible taxpayers may electronically file Annexure VII for FY 2026–27 within the prescribed window, subject to eligibility conditions and statutory exclusions. This was stated in GSTN Advisory, Dated 04-01-2026.

About the Update

The GSTN has introduced the facility to file opt-in declarations online for hotel accommodation premises to be recognised as ‘specified premises’ under GST. This facility is not available to composition taxpayers, TDS/TCS taxpayers, SEZ units or developers, casual taxpayers, or cancelled registrations. For FY 2026–27, taxpayers providing hotel accommodation services can file Annexure VII electronically on the GST Portal from 01-01-2026 to 31-03-2026 to declare up to 10 premises.

The option continues for subsequent years unless an opt-out declaration (Annexure IX) is filed. Suspended taxpayers may opt in, while cancelled registrations or rejected applications are not eligible. New registration applicants may file Annexure VIII within 15 days of ARN generation to declare premises from the effective date of registration. If missed, the opt-in can only be filed during the Annexure VII window.

Read the Advisory

5. Refund of accumulated ITC of cess paid on inputs used in manufacture of goods to be exported is admissible: HC

The High Court held that refund of accumulated unutilized ITC of compensation cess paid on inputs used in manufacture of goods meant for export is admissible. It was reasoned that refund provisions under the CGST Act apply mutatis mutandis to the Compensation Cess Act, notwithstanding that the manufactured goods were exempt supplies. 

Facts of the case

The petitioner challenged the rejection of its refund claims for accumulated unutilized credit of compensation cess paid on inputs, specifically coal, used in the manufacture of goods for export. The Department of Revenue denied the refund on the ground that the goods manufactured were non-taxable supplies and, therefore, the refund was not admissible. The petitioner submitted that the refund of the accumulated input tax credit of compensation cess should be allowed under the applicable provisions. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the refund of accumulated unutilized credit of compensation cess on inputs used in the manufacture of goods for export is admissible. The Court observed that the goods manufactured were exempt from tax, and the refund provisions under the CGST Act apply mutatis mutandis to the Compensation Cess Act. Consequently, the impugned orders were set aside, and the matter was remanded to the original authority to take a fresh decision in accordance with the Section 54 of the CGST Act/Telangana GST Act.

Read the Ruling

6. NFRA issues Circular on communication with Those Charged with Governance: Key non-Compliances and auditor takeaways

NFRA, through its circular dated 7 January 2026, has reiterated the critical importance of effective, timely and well-documented two-way communication between statutory auditors and Those Charged with Governance (TCWG), as required under SA 260, Communication with Those Charged with Governance and SA 265, Communicating Deficiencies in Internal Control to Those Charged with Governance and Management. The circular highlights that communication with TCWG is not a year-end formality but a continuous process covering audit planning, significant risks, materiality, key estimates and judgments, internal control deficiencies, fraud risks and going concern matters.

Based on its investigations, NFRA observed recurring non-compliances such as incorrect identification of TCWG, reliance on engagement letters or last-minute presentations, lack of two-way communication, inadequate documentation, and failure to communicate significant unusual transactions, related party concerns and internal control weaknesses to governance bodies.

NFRA emphasises that auditors must correctly identify TCWG, distinguish clearly between management and governance communications, proactively escalate significant matters, and formally communicate internal control deficiencies in writing. Weak or superficial communication with TCWG is viewed as a serious audit lapse with direct implications for audit quality and governance oversight.

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7. Ind AS 116 perspective on rights to use underground space when surface rights remain with the landowner

Entities involved in infrastructure projects often enter into long-term arrangements to use a defined underground corridor for pipelines or utilities, while the landowner continues to retain rights over the surface land. In such arrangements, the key accounting issue is whether the contractual right to use the underground space qualifies as a lease under Ind AS 116, Leases, even though legal ownership of the land is not transferred.

Ind AS 116 requires an assessment of whether the contract conveys the right to control the use of an identified asset for a period of time. An asset is identified when a physically distinct portion of land or space is specified and the supplier does not have substantive substitution rights. Control exists when the customer (a) obtains substantially all the economic benefits from use of the asset and (b) has the right to direct its use throughout the period of use.

For example, a pipeline company enters into a 20-year agreement with a private landowner to use a clearly identified and physically distinct underground corridor for laying and operating an oil pipeline, with fixed periodic payments. The contract prohibits the landowner from accessing, substituting or interfering with the specified underground space, while allowing continued use of the surface land, and grants the company unrestricted rights to operate, inspect and maintain the pipeline throughout the term. Although legal ownership of the land remains with the landowner and the purpose of use is predetermined, the company obtains substantially all economic benefits from the underground space and has the right to direct its use, thereby conveying control of an identified asset for a period of time and resulting in a lease under Ind AS 116.

Accordingly, even though ownership of the land remains with the landowner and only the underground space is used, the arrangement conveys the right to control the use of an identified asset for a period of time. The contract therefore contains a lease and must be accounted for in accordance with Ind AS 116, Leases.

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