Weekly Regulatory Roundup: Major Notifications, Circulars & Judicial Rulings (18–24 May 2026)

The period spanning 18th to 24th May 2026 witnessed a significant volume of regulatory activity across multiple domains including income tax, GST, customs duty, foreign trade, securities regulation, banking supervision, and insolvency law. This compilation presents a structured overview of the most impactful judicial pronouncements, administrative circulars, and regulatory amendments issued during this period.

A. Income Tax

Supreme Court Rulings

AOP Member Taxation — Profit Share vs. Business Receipt

Case: Sanand Properties Pvt Ltd vs Jt Commissioner of Income Tax, SC Judgement Dated 12th May 2026

The Supreme Court examined the nature of a contractual entitlement allowing a party to withdraw 35% of gross sale proceeds prior to meeting project expenses, with the remaining 65% being used to cover costs. The Court held that such a pre-expense withdrawal constitutes an overriding title, resulting in a diversion of income at the source itself.

Consequently, the 35% amount received upfront qualifies as a business receipt and is fully taxable in the hands of the recipient. It cannot be shielded from tax by treating it as a mere share of profit from an Association of Persons (AOP) that would otherwise be exempt in the hands of members under the pass-through framework.

This ruling draws a clear distinction between genuine profit sharing and contractual arrangements that effectively guarantee income before any profit is computed.

No TCS Liability on Compounding Fees for Illegal Mining

Case: DCIT Vs Collector Mining Kanker, SC Judgement Dated 12th May 2026

The Supreme Court affirmed that Tax Collection at Source (TCS) under Section 206C(1C) of the Income Tax Act, 1961 does not apply to compounding fees or fines imposed upon persons engaged in illegal mining activities.

The ruling provides important clarity on the scope of TCS provisions and limits their application to transactions that fall squarely within the legislative intent of Section 206C(1C), excluding penalty-based regulatory receipts from its ambit.

Interest Deduction on Borrowed Funds Routed Through Group Entities

Case: LK Trust vs CIT, SC Judgement Dated 7th May 2026

The apex court ruled that interest paid on borrowed capital remains deductible under Section 36(1)(iii) of the Income Tax Act, 1961, even in situations where such borrowed funds were channelled through an intermediary group concern for the purpose of acquiring shares.

The Court emphasized that the nexus between borrowing and business purpose is the controlling criterion. The fact that funds passed through a group entity before deployment does not sever this connection or disqualify the deduction, provided the original borrowing was for a legitimate business objective.

Grants Disbursed by NCDC Qualify as Revenue Expenditure

Case: National Cooperative Development Corporation Vs ACIT, SC Judgement Dated 10th December 2025

The Supreme Court ruled that disbursements of grants and subsidies made by the National Cooperative Development Corporation (NCDC) to support cooperative societies constitute allowable revenue expenditure under Section 37 of the Income Tax Act, 1961.

  • The deduction is permissible regardless of whether the source of funds is a Central Government grant or interest income earned on idle funds.
  • The Court recognized grant disbursement as an integral part of NCDC's statutory business activity, making it eligible for deduction.

High Court Rulings

Case: Hari Bhoomi Communications Pvt Ltd vs ACIT, HC Delhi Judgement Dated 21st April 2026

The Delhi High Court upheld reassessment proceedings initiated against third parties on the basis of material seized during a search operation. The Court clarified that even if a stay has been granted by another court against the primary search conducted on the original entity, this does not invalidate the use of recovered material for reassessment against third parties.

This decision reinforces the independent evidentiary standing of seized documents and material in tax proceedings.

B. GST

GSTN Portal Enhancements — e-Way Bill System

The Goods and Services Tax Network (GSTN) announced important upgrades to the e-Way Bill (EWB) Portal:

  • Mandatory "Ship-To GSTIN" Capture: In Bill-To/Ship-To transactions, the GSTIN of the actual consignee must now be mandatorily captured during EWB generation. Where the consignee is unregistered, the field must be populated with "URP".
  • Voluntary EWB Closure Facility: A new feature enables suppliers, recipients, transporters, drivers, or authorized persons to voluntarily close e-Way Bills after goods have been delivered. Closure can be performed:
    • EWB-wise or date-wise
    • Through mobile number-based functionality
    • Via API integration

These changes are aimed at improving accuracy, reducing mismatches, and streamlining post-delivery reconciliation.

Annexure-B Offline Utility for ITC Refund Applications

GSTN introduced a standardized Annexure-B Offline Utility in Excel format to facilitate refund applications involving accumulated Input Tax Credit (ITC). The utility covers:

  1. Exports without payment of tax
  2. Supplies to Special Economic Zones (SEZs)
  3. Inverted tax structure refunds
  4. Export of electricity

Key operational features:

  • Invoice-wise inward supply details must be furnished along with HSN/SAC-wise classification
  • Separate classification required for inputs, input services, and capital goods
  • Uploaded invoices will be validated against GSTR-2B
  • Mismatches relating to invoices from November 2024 onwards will be flagged in an Invalid Documents Report

The utility is designed to automate refund processing and enable system-based verification, significantly reducing manual intervention.

Supreme Court on VAT Jurisdiction — Inter-State Gas Sales

Case: State of Uttar Pradesh vs Reliance Industries Limited, SC Judgement Dated 15th May 2026

The Supreme Court settled the jurisdictional question concerning the supply of natural gas from the KG-D6 basin in Andhra Pradesh to buyers located in Uttar Pradesh. The Court categorically held that such transactions constitute inter-state sales and the State of Uttar Pradesh does not have the authority to levy Value Added Tax (VAT) on these transactions.

The exclusive power to tax inter-state sales belongs to the Union Government, and the state's appeal was dismissed accordingly.

High Court on GST Refund Withholding

Case: Truth Fashion vs SK Singh Spl Commissioner, HC Delhi Judgement Dated 5th May 2026