TMI Tax Updates - e-Newsletter
January 10, 2025

Case Laws in this Newsletter:

Articles

1. ROLES AND RESPONSIBILITIES OF TRUSTEES UNDER MUTUAL FUND REGULATIONS

   By: DR.MARIAPPAN GOVINDARAJAN

2. Game-Changer for AEO-T2 and T3 Clients: CBIC Rolls Out Automated Out of Charge!

   By: DrJoshua Ebenezer

3. State Wise Guidelines for FSSAI Certificate Download in India

   By: Ishita Ramani

4. SCN and Order uploaded under Heading “View Additional Notices and Orders” not proper service

   By: Bimal jain

News

1. Rationalise GST slabs, provide relief to middle class, lower income groups: Cong leader Pilot

2. Implementation of mandatory mentioning of HSN codes in GSTR-1 & GSTR 1A

3. India’s GST world’s ‘worst’ tax regime, middle class contributing to govt's revenue collection: Cong

4. Days ahead of Union Budget, revenue secretary Arunish Chawla shifted to DIPAM

5. Chouhan discusses agri proposals with FM ahead of Budget

6. Register PMLA case against Walmik Karad, demands Sule

7. Finance Secretary Shri Tuhin Kanta Pandey takes charge as Secretary, Department of Revenue, Ministry of Finance, today

8. Japan's Ishiba heads to Malaysia, Indonesia to strengthen defence, economic ties

9. Delhi elections: I-T dept sets up control room to keep vigil on movement of unaccounted wealth

10. Govt revises gold import data from April; cuts Nov figures by USD 5 bn to USD 9.84 bn

11. Jharkhand govt to act against firm for 'economic offence': Minister

Notifications

GST - States

1. G.O.Ms.No.273 - dated 22-11-2024 - Andhra Pradesh SGST

Amendment in Notification No. G.O.Ms.No.226, Revenue(CT-II) Department, dated 22nd June, 2017

2. G.O.Ms.No.272 - dated 22-11-2024 - Andhra Pradesh SGST

Provide waiver of late fee for late filing of NIL FORM GSTR-7

3. 07/2024-State Tax (Rate) - dated 8-1-2025 - Delhi SGST

Amendment in Notification No. 11/2017- State Tax (Rate), dated 30th June, 2017

Highlights / Catch Notes

GST

• High Court Reinstates GST Registration if Petitioner Pays Dues and Applies for Reversal Within One Week.

  Case-Laws - HC : Petitioner's GST registration cancellation set aside by HC on condition of depositing outstanding tax dues including interest and penalty within one week and applying for reversal of cancellation. Competent authority directed to consider application and pass appropriate order within one week from production of certified HC order copy along with application.
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• Sikka Ports Denied Input Tax Credit for Vessel Repairs; Section 17(5)(b) CGST Act Applied to SPV Hiring.

  Case-Laws - AAAR : The AAAR held that the respondent, M/s. Sikka Ports and Terminals Ltd., is not eligible for availing input tax credit (ITC) on input services for repairs and maintenance of Diving Support Vessels (DSVs) and Security Patrol Vessels (SPVs) as these vessels are not used for transportation of goods. Additionally, the respondent cannot claim ITC on hiring of SPVs u/s 17(5)(b) of the CGST Act, 2017, as the hiring service was not used for making an outward taxable supply of the same category of service or as an element of a taxable composite or mixed supply.
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• AAAR rules no GST on free employee bus transport; ITC allowed for buses over 13 seats; canteen recoveries exempt.

  Case-Laws - AAAR : The AAAR held that the respondent is not liable to pay GST on free bus transportation facility provided to its employees as per employment contract. ITC is admissible for transportation services with a seating capacity of more than 13 persons. Recoveries made by the applicant from employees for providing canteen facility are exempt under Sl. No. 15 of N/N. 12/2017 - Central Tax (Rate) dated 28.06.2017.
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Income Tax

• High Court Validates Tax Case Transfer from Mumbai to Delhi u/s 127(2) for Coordinated Investigation.

  Case-Laws - HC : The HC dismissed the petition challenging the order transferring the petitioner's case from the jurisdictional officer in Mumbai to the counterpart in New Delhi u/s 127(2). The HC held the impugned order reasoned that centralised and coordinated investigation was required to protect revenue interests, considering the petitioner's alleged bogus transactions with entities of the 'Pacific Group'. The HC found the reasons relevant and rejected the grounds of lack of reasons and absence of agreement between the two Commissioners. The HC concluded no infirmity warranted interference under extraordinary jurisdiction.
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• High Court: Land possession transfer without ownership change or payment isn't a 'transfer' under Income Tax Act Section 2(47).

  Case-Laws - HC : The HC held that handing over possession of land to a developer for construction purposes under a development agreement, without actual transfer of ownership or payment of consideration, does not constitute a 'transfer' u/s 2(47) of the Income Tax Act to attract capital gains tax. The performance guarantee amount is refundable and not consideration. The HC distinguished the cases of Potla Nageswara Rao and Arvind S Phake, where transfer was complete with possession handover and consideration payment. The Tribunal's finding that the assessee handed over full possession for 60% constructed area and was liable for capital gains during the relevant year was held perverse.
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• High Court overturns salary expense assessment; orders fresh review without previous special audit u/s 142(2A).

  Case-Laws - HC : Impugned assessment order set aside by HC. Matter remitted back to pass fresh order independently without relying on special audit report u/s 142(2A) for earlier years. Disallowance of entire salary expenses found unsustainable. Authorities to decide afresh in accordance with law.
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• ITAT: Domestic firms must pay dividend tax u/s 115-O, not DTAA rates, for non-resident shareholders.

  Case-Laws - AT : The ITAT held that where a domestic company declares, distributes, or pays dividends to non-resident shareholders, attracting Additional Income-tax (Tax on Distributed Profits) u/s 115-O of the Act, such additional income tax payable by the domestic company shall be at the rate mentioned in Section 115-O and not at the rate applicable to the non-resident shareholders as per the relevant DTAA. The ITAT was conscious of the sovereign's prerogative to extend treaty protection to domestic companies paying dividend distribution tax through DTAAs. However, the domestic company can claim the benefit of the DTAA only if the Contracting States intend to extend such treaty protection. The decision was against the assessee.
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• ITAT Dismisses Revenue's Appeal, Rules Section 271G Penalty Inapplicable Based on Bombay High Court Precedent.

  Case-Laws - AT : The ITAT rejected the Revenue's appeal and held that the penalty u/s 271G was not exigible. The ITAT relied on the Bombay High Court's decision in Undercarriage and Tractor Parts (P.) Ltd. Vs. Dispute Resolution Panel, wherein the High Court had quashed the assessment order passed u/s 143(3) read with section 144C(13). The ITAT observed that the CIT(A) had failed to consider this High Court decision while allowing the assessee's penalty appeal. Since the Revenue did not bring any contrary decision of a Higher Forum, the ITAT held that the impugned penalty was not leviable and dismissed the Revenue's appeal.
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• Assessee's Appeal Allowed: Revisional Order u/s 263 Quashed; ITAT's Examination Upheld, No New Income Sources Found.

  Case-Laws - AT : The assessee's role was purely custodial, acting as an agent with ownership of collected funds remaining with State Government. Hence, income could not be taxed in assessee's hands, obviating need for detailed analysis u/s 11. Revenue's contention of commercial nature of activities was rejected based on Supreme Court ruling in Ahmedabad Urban Development Authority. CIT(E)'s direction u/s 263 to verify Section 11 exemption was held unjustified as nature of receipts was already examined by ITAT and no new income sources were identified. Relying on precedents, it was held Section 263 cannot be invoked merely on change of opinion. Accordingly, CIT(E)'s revisional order u/s 263 was quashed and assessee's appeal was allowed.
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• ITAT: Use Prescribed Valuation Methods for Share Valuation u/s 56(2)(viib); Favors Taxpayer in Appeal.

  Case-Laws - AT : The ITAT held that for determining the fair market value of shares u/s 56(2)(viib) of the Income Tax Act, it is mandatory to follow the methods prescribed u/rs 11U and 11UA. The valuation report submitted by the assessee, which used methods like future earning analysis and adjusted net asset method not allowed under the Rules, was rightly rejected by the AO. The ITAT directed the AO to delete the addition made by treating the share premium and share capital as income u/s 56(2)(viib), as the assessee had discharged its onus by submitting a valuation report as per the prescribed Rules. The decision was in favor of the assessee.
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• ITAT: Domain Registrar's Income Not Taxable as Royalty Under Income Tax Act, Confirms DTAA Benefits for LLPs.

  Case-Laws - AT : The ITAT held that the appellant, being a domain name registrar, does not own the domain names it helps register and cannot confer the right to use or transfer such domain names. Therefore, the income earned from domain name registration services is not taxable as royalty u/s 9(1)(vi) of the Act and Article 12(3)(a) of the India-USA DTAA. The ITAT affirmed the Delhi HC's decision in the appellant's own case for earlier years. Regarding treaty benefits, the ITAT held that the appellant, being an LLP, is eligible for benefits under the DTAA, relying on precedents. The income from non-domain services like web hosting and web designing does not involve transfer of technical knowledge or know-how and hence cannot be taxed as fees for included services under Article 12(4)(b) of the DTAA.
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• ITAT Confirms Penalty for Willful Misreporting of Income u/s 270A; Mens Rea Not Required for Civil Penalties.

  Case-Laws - AT : Penalty u/s 270A levied for assessee's willful misreporting of income by claiming both capital expenses and depreciation as application of income. ITAT held mens rea not essential for imposing penalties under civil acts like Income Tax Act. Contravention sufficient to attract penalty irrespective of intention behind it as per precedent in Dharmendra Textile Processors. Assessee's failure to rectify mistake by revising return voluntarily also noted. Order of CIT(A)/NFAC set aside, AO's order levying penalty u/s 270A sustained by allowing Revenue's appeal.
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• Taxpayer Can Opt for Concessional Rate u/s 115BAC(5)(i) Despite Late Form 10IE in Previous Year.

  Case-Laws - AT : Assessee allowed to opt for concessional tax rate u/s 115BAC(5)(i) for AY 2023-24 based on Form 10IE submitted late for previous AY, subject to fulfilling other legal requirements. ITAT held that once Form 10IE rejected for late submission in earlier AY, law does not debar assessee from submitting fresh form before due date of subsequent AY's ITR to avail new tax regime benefits. No revenue loss caused by permitting option exercise for next AY based on earlier rejected form.
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• ITAT Overturns Rs. 14 Crore Addition Due to Lack of Evidence in Section 133A Survey Case on Land Transactions.

  Case-Laws - AT : Addition of Rs. 14 crores based solely on assessee's statement recorded during survey u/s 133A without corroborative evidence regarding land transactions, parties involved, computation method is unsustainable. ITAT allowed assessee's appeal, holding that additions cannot be made only on the basis of statement unless supported by incriminating evidence.
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• High Court Upholds Reopening of Assessments; Cash Receipt Issues Unexamined Initially, Section 151 Approval Considered Valid.

  Case-Laws - HC : The HC rejected the petitioner's submissions and held: The issue of alleged cash receipt was not examined during regular assessment proceedings as the information was received after conclusion of assessment. The reopening is based on information under CBDT's Risk Management Strategy, not on the erroneous statement that no return was filed. The approval u/s 151 is not without application of mind as remarks show consideration of material and information. No reason to quash the reopening notices, but petitioner can raise objections in reassessment/appellate proceedings.
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• Bombay High Court Orders TDS Verification and Refund Processing in Four Months for Petitioner.

  Case-Laws - HC : Petitioner filed representation seeking refund based on TDS certificate. HC directed Respondents to dispose of representation within 3 months by verifying deductions status with Percept Pictures Company Pvt Ltd after hearing Petitioner. If deductions confirmed as per TDS certificate, refund amount to Petitioner within 1 month of determination.
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• ITAT Confirms 11% CCD Coupon Rate as Arm's Length; Allows Depreciation on Goodwill from Slump Sale u/s 32.

  Case-Laws - AT : The ITAT held that the coupon rate of 11% paid by the assessee company on Compulsorily Convertible Debentures (CCDs) was within the arm's length range based on benchmarking analysis. Hence, the addition made by TPO/DRP treating CCDs as equity was incorrect since CCDs remain debt until converted. Regarding depreciation on goodwill from slump sale, the ITAT allowed depreciation u/s 32, following jurisdictional High Court precedents that goodwill constitutes an intangible asset eligible for depreciation.
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Customs

• Simplified Process for First-Time Importers: JNCH Notice Enhances Direct Port Delivery with Verified Contact Info via Advait.

  Circulars : The JNCH Public Notice streamlines the process for first-time importers to obtain DPD facility. Email addresses and phone numbers of importer applicants will be verified from Advait to ensure OTP receipt on registered contacts. The DPD cell will send IEC lists to LRM for confirming authorized contacts. Importers can request changes to email/phone number through authorized email. Previous notices on DPD are modified accordingly.
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• Mandatory Weighment for Non-AEO Export Containers at CPP Before Customs Registration Starting September 1, 2024.

  Circulars : The Public Notice mandates weighment of self-sealed export containers at the Centralized Parking Plaza (CPP) for non-AEO exporters in certain categories before registration with Customs: (i) drawback claim over Rs. 1 lakh or IGST refund over Rs. 5 lakh, (ii) exports under special schemes, (iii) goods subject to export duty, and (iv) 10% random selection. Containers must have the CPP custodian's weighment slip for Shipping Bill registration. The Notice aims to streamline export procedures and comes into force on 01.09.2024.
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• High Court permits release of held containers; legal issues remain unresolved due to unique circumstances and extended delays.

  Case-Laws - HC : Petitioners granted release of containers containing imported consignments held by Respondents for various reasons. HC left legal issues open given unique facts and pending cases for several years. Handling charges to CONCOR left undecided. Petition disposed of.
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• CESTAT Rules Investigation Report Not Appealable; No Quasi-Judicial Order, Rights Uninfringed; Challenge Allowed in Adjudication.

  Case-Laws - AT : The CESTAT held that the Investigation Report (IR) issued by the department is not an appealable order. The appellant failed to demonstrate that the IR is a quasi-judicial decision or order under the statute, depriving them of any legal right. The IR is a product of a consultative process, and the appellant had ample opportunity to present their views. The appellant can assail the IR during the adjudication proceedings and appeal against the final order as per the statutory provisions. The right to appeal is statutory, not constitutional. The impugned order holding the IR as non-appealable is legal and proper.
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• CESTAT Rules Appellant-Importer Liable for Interest on Delayed SAD Payment; Penalties and Confiscation Dismissed.

  Case-Laws - AT : CESTAT held that appellant-importer is liable to pay interest for delayed payment of SAD u/s 28AB of Customs Act, 1962. However, penalties imposed on appellant-importer u/ss 114A and 114AA, and on CHA u/s 112(a)(ii) were set aside as conditions for invoking these provisions were not met. Confiscation of imported goods was denied as goods were cleared after due permission. Proceedings against company officials were rightly dropped by adjudicating authority. Interest already paid by appellant-importer to be appropriated against interest liability. Appeals disposed of accordingly.
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Corporate Law

• Central Government Appoints 22 Judicial and 13 Technical Members to NCLT for Five-Year Term or Until Age 65.

  Notifications : The Central Government appointed 22 Judicial Members and 13 Technical Members in the National Company Law Tribunal (NCLT) for a period of five years or till attaining 65 years of age, whichever is earlier. The appointments are effective from the date each member assumes charge of their respective office as per the pay scale and terms specified.
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• High Court: Indefinite Look Out Circulars Violate Right to Travel Under Article 21, Must Be Proportionate.

  Case-Laws - HC : Petitioner's right to travel abroad, integral to personal liberty under Article 21, cannot be curtailed indefinitely without credible material. While allegations of financial impropriety warrant investigation, absence of evidence of intent to abscond or obstruct investigation necessitates permitting conditional travel abroad. LOC imposed lacks proportionality given SFIO's ability to independently obtain evidence, Petitioner's disclosed foreign assets, and lack of allegations of tampering or intimidation. HC allows conditional travel, subject to applicable conditions and forfeiture of security upon violation, disposing petition.
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IBC

• NCLAT Dismisses Contempt Application; Finds No Fault in Section 7 CIRP Initiation for Samhita Project Under IBC Jurisdiction.

  Case-Laws - AT : NCLAT dismissed the contempt application against adjudicating authority. It held no contempt was committed in admitting section 7 application against corporate debtor's project Samhita by order dated 24.08.2023. Adjudicating authority exercised statutory jurisdiction under IBC while admitting section 7 application filed by financial creditors. Initiation of CIRP against Samhita project did not violate or disobey previous NCLAT order dated 13.01.2021. Contempt application lacked merit.
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Indian Laws

• High Court Affirms Complaint u/ss 138 and 141 of Negotiable Instruments Act; Partners Liable for Firm's Cheques.

  Case-Laws - HC : The HC upheld the order of the Revisional Court, declining to quash the complaint u/ss 138/141 of the NI Act against the petitioners, who were partners of the accused-firm. While the petitioners could not be held liable for cheques issued by a partner in personal capacity, they were rightly made accused for cheques issued by the partner on behalf of the firm. The HC found no reason to exercise inherent powers u/s 482 of the Code to quash the proceedings.
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• High Court Dismisses Petition, Upholds Tribunal's Discretion to Condon Delay for "Sufficient Cause" in Arbitral Proceedings.

  Case-Laws - HC : HC held that Arbitral Tribunals have discretion to recall orders and condone delays upon showing "sufficient cause." Judicial interference in arbitral proceedings should be minimal, and the HC found no reason to interfere with the Tribunal's order condoning delay in filing Statement of Defence, as exercise of such discretion did not demonstrate perversity or bad faith. Petition dismissed.
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PMLA

• Court Quashes Proceedings: No Money Laundering Found, Actions Deemed Forgery u/s 482 CrPC for Justice.

  Case-Laws - HC : The HC held that exercising its inherent powers u/s 482 CrPC to prevent abuse of process and secure ends of justice, none of the ingredients for money laundering offense existed against petitioners. Petitioners never possessed or controlled alleged proceeds of crime transferred directly to land owners' accounts. Securing loan fraudulently by submitting false documents at most constituted forgery or bank fraud, not money laundering. Petitioners' act of mortgaging property to bank for securing loan could not be termed money laundering. Petition allowed quashing proceedings against petitioners.
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SEBI

• SEBI Sets New Guidelines for Research Analysts: Registration, Compliance, Fee Caps, and More to Enhance Transparency.

  Circulars : The SEBI circular provides the following key points regarding research analysts (RAs): 1. Eligibility criteria for part-time RAs, including restrictions on providing advice/recommendations on securities without SEBI registration. 2. Compliance requirements such as appointing a compliance officer, using AI tools responsibly, maintaining research reports, disclosing terms and conditions to clients, and obtaining client consent. 3. Guidelines on fees chargeable to clients, with an annual limit of Rs. 1.51 lakh per family for individual/HUF clients. 4. Mandatory client-level segregation of research and distribution activities within an RA's group/family. 5. Guidelines for recommending model portfolios, including disclosures, methodology, benchmarking, and audit requirements. 6. KYC obligations, record maintenance of client interactions, and grievance redressal mechanisms. 7. Annual compliance audit requirements, including reporting adverse findings to SEBI and publishing the audit status on the RA's website. 8. Requirement to maintain a functional website with specified details. The circular aims to enhance transparency, mitigate conflicts of interest, and standardize practices in the research analyst industry.
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• SAT Upholds SEBI Order: PACL Must Refund Rs. 49,000 Crore from Unauthorized Investment Schemes for Regulatory Violations.

  Circulars : SAT upheld SEBI's order directing PACL to refund over Rs. 49,000 crore collected through illegal collective investment schemes. Key legal principles: PACL's activities violated SEBI CIS Regulations as it mobilized huge sums without regulatory approval. PACL failed to prove its business model was legitimate. SAT rejected PACL's arguments and upheld SEBI's directions to wind up schemes and refund investors.
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• SEBI Updates CRA Timelines: Press Releases in 7 Days, Rating Reviews in 2 Days, Effective Immediately.

  Circulars : SEBI modified timelines in Master Circular for Credit Rating Agencies (CRAs) to promote ease of doing business. Key changes are publication of press release within 7 working days of rating action, conducting rating review within 2 working days of receipt of delayed payment statement, tagging ratings as INC within 5 working days of 3 consecutive non-submission of no-default statements, following up with issuer within 2 working days if no confirmation received from debenture trustee on debt servicing. The circular is effective immediately under SEBI Act, 1992 and CRA Regulations.
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Service Tax

• CESTAT Rules Transportation Services as Composite; Sets Aside Demand Due to Export and Time-Barred Claims.

  Case-Laws - AT : Appellant provided services of loading, unloading, shifting, and transportation of iron ore under separate contracts. CESTAT held it was a composite service for transportation, not cargo handling. Loading/unloading activities were incidental, contract couldn't be artificially divided. For 2010-11 to 2011-12, goods were exported, so demand set aside. For extended period, demand time-barred as no suppression of facts by appellant who believed no service tax payable. Appeal allowed, demand unsustainable.
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Central Excise

• High Court: Statements by Excise Officers inadmissible without witness cross-examination under Excise Act Sections 9D(1)(a) & 9D(1)(b).

  Case-Laws - HC : The HC held that u/s 9D(1)(a) of the Excise Act, statements recorded by the Gazetted Central Excise Officer during investigation cannot be used against the assessee unless the witnesses are produced for cross-examination during adjudication proceedings, as per Section 9D(1)(b). The incriminating material/statements recorded behind the assessee's back cannot be used against them without allowing cross-examination. The appeal was dismissed.
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• Appellant Secures Duty Exemption Under Notifications 6/2002-CE & 6/2006-CE by Reversing Cenvat Credit, Avoids Penalty.

  Case-Laws - AT : The appellant is entitled to the benefit of notification no. 6/2002-CE and notification no. 6/2006 CE. The appellant reversed the Cenvat Credit attributable to the goods cleared without payment of duty along with interest during the investigation itself before issuance of the show cause notice, thereby fulfilling the condition of the notifications. No penalty is imposable. The CESTAT disposed of the appeal.
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• CENVAT Credit Reversal Not Required for Exports under Notification No. 4/2006-CE, CESTAT Rules; Appeal Allowed.

  Case-Laws - AT : The appellant had reversed CENVAT credit amount u/r 6(3) for goods cleared for export under Notification No. 4/2006-CE and claimed refund. CESTAT held that reversal u/r 6(3) was not justified for exports under conditional Notification No. 4/2006-CE as per Rule 6(6)(v). The exempted goods cleared for export are eligible for CENVAT credit. The appellant is not required to pay amount u/r 6(3) for goods exported under said notification. Impugned order set aside and appeal allowed.
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• Penalties on Co-Noticees Unsustainable When Main Case Settled Under SVLDRS 2019, CESTAT Rules.

  Case-Laws - AT : Appellant's appeal allowed. CESTAT held when main case settled under SVLDRS 2019, penalties on co-noticees in same case unsustainable. Relying on division bench judgments, CESTAT set aside penalty imposed on appellant co-noticee u/r 26 of Central Excise Rules 2002 as main noticee's case settled under SVLDRS 2019.
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