TMI Tax Updates - e-Newsletter
January 11, 2023
Case Laws in this Newsletter:
Articles
By: Pratik Dhruve
Summary: The GST Margin Scheme allows second-hand goods dealers to pay GST only on the margin value, avoiding double taxation. The scheme applies to goods that have been previously owned, with no major processing that changes their nature. It is not mandatory for dealers to use the scheme, but those who do cannot claim Input Tax Credit on purchases of second-hand goods. Registration under GST is required if total supplies exceed the threshold. The scheme applies to both intra-state and inter-state supplies, and compliance includes generating e-way bills and following e-invoicing rules. Transactions by non-business individuals are exempt from GST.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses a legal case where the High Court ruled that no cess is payable on coal used as an input for manufacturing finished goods intended for domestic supply. The petitioner, a manufacturer, sought a refund of input tax credit on the cess paid for coal, arguing that the finished goods were exempt from cess. The Revenue initially denied part of the refund, but the Appellate Authority ruled in favor of the petitioner. The High Court upheld this decision, stating that domestic supplies not subject to cess should be considered exempt supplies, thereby excluding them from the adjusted total turnover for refund calculations. The court ordered the Department to refund the balance amount with interest.
By: Bimal jain
Summary: The Gujarat High Court ruled that a refund claim should not be denied due to deficiencies in the Goods and Service Tax Network (GSTN) software. The case involved a ceramics and tiles business seeking a refund for an export invoice, which was delayed due to a mismatch in the firm's name in the system. The court emphasized that the GSTN should address software issues and not burden the court with such matters. It ordered the refund of INR 19,94,994 with 6% interest, highlighting the respondent's obligation under Section 54(6) of the CGST Act to process refunds promptly.
By: Bimal jain
Summary: The Authority for Advance Ruling in Maharashtra determined that pipelines laid outside factory premises do not qualify as 'plant and machinery' under the Central Goods and Services Tax Act, 2017. Consequently, M/s Mumbai Aviation Fuel Farm Facility Pvt. Ltd. is not eligible for Input Tax Credit (ITC) on goods and services used for constructing a Connector Pipeline outside their premises. The decision is based on Section 17(5)(c) and 17(5)(d) of the CGST Act, which excludes such pipelines from ITC eligibility. The ruling emphasizes that the applicant could not justify ITC entitlement for the pipeline section outside the factory.
By: Vivek Jalan
Summary: Interest on delayed payments does not fall under the definition of "interest" as per section 2(28A) of the Income Tax Act, and thus is not subject to Tax Deducted at Source (TDS) under section 194A. The distinction lies in whether the payment is connected to borrowings or debt. The Supreme Court case involving Nirma Industries Ltd. supports this interpretation, indicating that interest on delayed payments is part of the product or service sold rather than financial compensation. Additionally, Section 15 of the CGST Act 2017 aligns with this view, emphasizing that such interest is not related to lending activities.
News
Summary: Startup India Innovation Week commenced on January 10, 2023, with numerous events nationwide to engage ecosystem stakeholders. The Department for Promotion of Industry and Internal Trade (DPIIT) organized a workshop on Alternative Investment Funds in New Delhi, focusing on mobilizing domestic capital for startups. Additionally, the ASCEND SAMAGAM workshop aimed to enhance entrepreneurship in Northeast India. Other events included a webinar on leadership for startup founders and various regional conferences and competitions in Hyderabad, Mumbai, Coimbatore, and Warangal, featuring topics like IT strategy, startup valuation, pitching skills, and innovation competitions, attracting significant participation from startups and stakeholders.
Summary: The 14th World Spice Congress (WSC) will take place in Mumbai from February 16-18, 2023, coinciding with India's G20 presidency. The event aims to promote international trade of Indian spices, featuring business sessions on global market perspectives, food safety, and quality requirements. Maharashtra, a major spice-producing state, will host the Congress, highlighting its significant contributions to spice exports. The WSC will include special pavilions, awards for export excellence, and cultural experiences. Organized by the Spices Board with industry associations, the Congress seeks to enhance India's spice trade, which is projected to reach USD 4 billion in exports.
Summary: The Government of India announced the auction of four government securities: New Government Security 2025 for Rs. 4,000 Crore, 7.10% Government Security 2029 for Rs. 6,000 Crore, 7.41% Government Security 2036 for Rs. 11,000 Crore, and 7.40% Government Security 2062 for Rs. 9,000 Crore. The auctions, conducted by the Reserve Bank of India, allow additional subscriptions up to Rs. 2,000 Crore per security. Competitive and non-competitive bids will be submitted electronically on January 13, 2023, with results announced the same day. Payment by successful bidders is due on January 16, 2023. Securities are eligible for When Issued trading.
Notifications
DGFT
1.
53/2015-2020 - dated
9-1-2023
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FTP
Implementation of RoDTEP Committee report in relation to Anomalies etc
Summary: The Central Government has issued Notification No. 53/2015-2020, revising Appendix 4R under the Foreign Trade Policy 2015-20, effective for exports from January 16, 2023, to September 30, 2023. This revision, based on the RoDTEP Committee's recommendations, addresses errors and anomalies in 432 HS codes from a previous notification. The updated Appendix 4R details eligible export items, rates, and per-unit value caps and is accessible on the Directorate General of Foreign Trade portal. Further adjustments will be made as per the scheme's budgetary framework after September 30, 2023.
Income Tax
2.
01/2023 - dated
5-1-2023
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IT
Reporting of information relating to interest income - Format Procedure and Guidelines for submission of Statement of Financial Transactions (SFT) for Interest income (Abolishing of limit of Rs 5,000/-) - Addendum to Notification 2 of 2021.
Summary: The Government of India, through the Central Board of Direct Taxes, has issued Notification No. 1 of 2023, amending the reporting requirements for interest income under Section 285BA of the Income Tax Act, 1961. The previous threshold of Rs 5,000 for reporting interest income is abolished. Now, all interest income, except from Jan Dhan Accounts, must be reported regardless of amount. This change, effective from January 5, 2023, modifies the guidelines outlined in Notification 2 of 2021, ensuring comprehensive reporting for pre-filling income tax returns. The Directorate of Income Tax (Systems) will manage secure data procedures.
Indian Laws
3.
G.S.R. 06 (E) - dated
3-1-2023
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Indian Law
Indian Telegraph (Infrastructure Safety) Rules, 2022
Summary: The Indian Telegraph (Infrastructure Safety) Rules, 2022, established by the Central Government under the Indian Telegraph Act, 1885, regulate the legal right to dig or excavate property to prevent damage to telegraph infrastructure. Individuals intending to excavate must notify the licensee through a government portal, providing detailed information about the excavation. The licensee must then provide details of any telegraph infrastructure that may be affected and suggest precautionary measures. If no response is received in the prescribed time, excavation may proceed. Any damage caused to telegraph infrastructure will incur charges based on restoration expenses.
SEBI
4.
SEBI/LAD-NRO/GN/2023/113 - dated
9-1-2023
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SEBI
Securities Exchange Board of India (Alternative Investment Funds) (Amendment) Regulations, 2023
Summary: The Securities and Exchange Board of India (SEBI) issued amendments to the Alternative Investment Funds Regulations, 2012, effective January 9, 2023. These amendments introduce provisions for credit default swaps (CDS) across different categories of Alternative Investment Funds (AIFs). Category I AIFs can engage in hedging, including CDS, while Category II and III AIFs can buy or sell CDS under specified conditions. Additionally, sponsors or managers of Category I and II AIFs dealing in CDS must appoint a SEBI-registered custodian and adhere to the Board's specified terms and conditions.
5.
SEBI/LAD-NRO/GN/2023/112 - dated
9-1-2023
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SEBI
Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) (Amendment) Regulations, 2023
Summary: The Securities and Exchange Board of India (SEBI) issued the Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) (Amendment) Regulations, 2023, effective from January 9, 2023. The amendment mandates that registrars to an issue and share transfer agents with a certificate of registration must pay a registration fee every three years from the sixth year of registration. Category I agents are required to pay INR 270,000, while Category II agents must pay INR 90,000. This amendment updates the 1993 regulations, incorporating changes retrospectively from December 8, 2016.
Circulars / Instructions / Orders
SEBI
1.
SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2023/9 - dated
9-1-2023
Mode of settlement for trades executed on the Request for Quote (RFQ) platform
Summary: The Securities and Exchange Board of India (SEBI) has clarified that, in addition to Real-Time Gross Settlement (RTGS), other payment mechanisms provided by banks or payment aggregators authorized by the Reserve Bank of India may be used for settling trades executed on the Request for Quote (RFQ) platform. Stock Exchanges and Clearing Corporations must establish necessary infrastructure, inform stock brokers, update their regulations, and ensure uniform implementation. This directive is effective immediately and aims to protect investors and regulate the securities market under the powers granted by relevant SEBI regulations.
2.
SEBI/HO/MRD-TPD-1/CIR/P/2023/7 - dated
9-1-2023
Standard Operating Procedure for handling of Stock Exchange Outage and extension of trading hours thereof
Summary: The circular from SEBI outlines the Standard Operating Procedure for handling stock exchange outages and the extension of trading hours. It mandates that stock exchanges inform stakeholders of outages within 15 minutes and provide updates every 45 minutes until normal operations resume. If trading does not resume one hour before the scheduled market closure, trading hours will be extended by one and a half hours. The document also requires exchanges to establish a common close-out policy within 30 days and update their Business Continuity Plan. This circular is effective immediately and complements existing SEBI guidelines.
GST - States
3.
14/2022 - GST (State) - dated
6-1-2023
Clarification to deal with difference in Input Tax Credit (ITC) availed in FORM GSTR-3B as compared to that detailed in FORM GSTR-2A for FY 2017-18 and 2018-19
Summary: The circular addresses discrepancies in Input Tax Credit (ITC) claimed in FORM GSTR-3B compared to FORM GSTR-2A for fiscal years 2017-18 and 2018-19. It provides guidelines for tax officers to handle such discrepancies, ensuring uniformity in law implementation. The circular outlines scenarios where discrepancies might occur, such as incorrect supplier filings, and prescribes procedures for verification, including obtaining certificates from suppliers or accountants. It emphasizes that these guidelines apply to ongoing proceedings and are specific to errors from the specified fiscal years. The instructions aim to clarify and streamline the handling of ITC discrepancies.
4.
16/2022 - GST (State) - dated
6-1-2023
Clarification with regard to applicability of provisions of section 75(2) of Central Goods and Services Tax Act, 2017 and its effect on limitation
Summary: The circular issued by the Government of Tripura provides clarification on the applicability of Section 75(2) of the Central Goods and Services Tax Act, 2017, particularly regarding the time limits for re-determination of tax liabilities. It mandates that if a notice under Section 74 is found unsustainable due to lack of evidence for fraud or willful misstatement, the tax must be recalculated under Section 73. The re-determination must occur within two years from the appellate authority's directive. The circular also outlines the process for recalculating tax, interest, and penalties, emphasizing adherence to specified time limits to ensure uniformity in law implementation.
5.
15/2022 - GST (State) - dated
6-1-2023
Clarification on the entitlement of input tax credit where the place of supply is determined in terms of the proviso to sub-section (8) of section 12 of the Integrated Goods and Services Tax Act, 2017
Summary: The circular issued by the Government of Tripura clarifies the entitlement of input tax credit under the Integrated Goods and Services Tax Act, 2017, specifically when the place of supply is determined by the proviso to sub-section (8) of section 12. It states that for services related to the transportation of goods to a foreign destination, the place of supply is the destination country, making it an inter-State supply subject to IGST. Recipients in India can claim input tax credit for such services, provided they meet conditions in sections 16 and 17 of the CGST Act. Suppliers must report the place of supply as '96-Foreign Country' in FORM GSTR-1.
Highlights / Catch Notes
GST
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Firm's Registration Canceled for Non-Existence: Appeal Authority Failed to Consider Relocation Evidence Before Dismissing Case.
Case-Laws - HC : Cancellation of registration of the petitioner-Firm - cancellation on the ground that he was not functioning/not existing at the principal place of business - The first Appellate Authority once it had taken note about the rent agreement, should have taken into consideration that the place of business of the Assessee has changed and an opportunity should have been given to the Assessee to place all material before it and the authority should have recorded findings before rejecting the appeal confirming the order of cancellation of registration. - HC
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Court Rules Appeal Should Be Heard on Merits, Not Dismissed for Delay in Filing.
Case-Laws - HC : Cancellation of registration of petitioner - delay in filing of appeal - the Assessee cannot be left remediless and the Appellate Authority should have entertained the appeal and decided the same on merits. The business cannot be hampered and suffered on mere technicalities of law and the Appellate Authority should have considered the appeal on merits. - HC
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GST Proceedings Invalidated Due to Lack of Show Cause Notice in FORM GST DRC-01A; Orders Also Invalidated.
Case-Laws - HC : Initiation of proceedings without issuance of SCN - notice in Part A of FORM GST DRC-01A having not been issued - validity of subsequent proceedings - As the initiation of proceedings itself are bad, the order passed consequent thereto will also fall. - HC
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Detention order overturned for exceeding 7-day limit u/s 129(3) of GST Act 2017; goods to be released.
Case-Laws - HC : Detention order - challenge on the short ground that the impugned proceedings are barred by the limitation prescribed under Section 129(3) of the GST Act, 2017 - the order u/s.129(3) of the Act is passed on the eighth day from the date of service of notice, whereas the time line stipulated under Section 129(3) of the Act is that the order ought to be passed within a period of 7 days from the date of service of such notice. - The impugned proceedings are set aside and the vehicles/goods in question shall be released forthwith - HC
Income Tax
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Court Invalidates Assessment Order Due to Lack of Hearing Opportunity; Penalty and Demand Annulled. AO May Restart Proceedings.
Case-Laws - HC : Validity of Assessment order framed u/s 143(3) r.w.s. 144B - opportunity to respond to the show-cause notice was not made available to the assessee - - the order passed u/s. 143(3) r.w.s. 144B quashed and set aside - The penalty proceedings and the demand notice are also quashed and set aside, however, we give liberty to the Assessing Officer to initiate the proceedings afresh from the stage of providing the opportunity to the petitioner of hearing if such request is made, and thereafter, to decide the matter. - HC
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Revenue Cannot Add Income Based Only on Section 132(4) Statement Without Evidence, Says Legal Precedent u/s 153A.
Case-Laws - AT : Assessment u/s 153A - undisclosed income - The only stress placed by Revenue is that the amount was accepted as undisclosed income in the statement recorded u/s 132(4) of the Act. It is a settled law that only on the basis of the statement, and without any corroborating evidence no addition of income can be made. - AT
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Late Filing of Form 67 Doesn't Block Foreign Tax Credit Claim u/r 128(9) and Sections 90/90A.
Case-Laws - AT : Foreign tax credit u/s 90/90A - delay in filing Form no.67 - mere delay in filing Form No. 67 as per the provisions of Rule 128(9), as it stood during the year under consideration, will not preclude the assessee from claiming the benefit of foreign tax credit in respect of tax paid outside India. - AT
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NCDEX trading losses reclassified as non-speculative u/s 43(5)(e), now offsettable against other business income.
Case-Laws - AT : Disallowing the NCDEX Trading Loss - Speculation Loss - It is not in dispute that the assessee's transactions in agricultural commodity derivative were otherwise eligible transaction within the meaning of Section 43(5)(e) of the Act, we set aside the orders of the lower authorities on this issue and direct the AO to treat the loss in said transaction as non- speculative business loss and accordingly allow set off of the same from other business income as per law. - AT
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Assessing Officer's Additions Exceed Scope of Section 143 Limited Scrutiny, Deemed Unsustainable by Court.
Case-Laws - AT : Scope of additions beyond the limited scrutiny assessment u/s 143 - As such the entire issue should have been limited to the extent of the dispute raised in the notice issued under section 143(2) of the Act for the limited scrutiny but the AO in the present case has exceeded his jurisdiction as discussed above. Thus, we hold the addition made by the AO without having valid jurisdiction cannot be sustained. - AT
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Domain name registration income isn't royalty under Article 12(3) of India-UAE DTAA; no rights over domain name.
Case-Laws - AT : Royalty receipt - domain registration services - Domain names serve to identify such internet resources with a text base label that is easier to memorise than the numerical addresses used in the Internet Protocols. Domain names are also used as simple identification labels to indicate ownership or control of a resource. - since the assessee had no right in the domain name, the income received by the assessee from domain name registration does not fall in the category of royalty as defined under Article 12(3) of the India UAE DTAA. - AT
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Assessing Officer can add income items in Section 147 reopenings, but must address escaped income first for validity.
Case-Laws - AT : Reopening of assessment u/s 147 - AO can add other items of income along with the income for the escapement of which the assessment was reopened. However, without assessing that escaped income the Assessing Officer cannot make assessment of other items of income. Thus,no hesitation in holding that the addition made by disallowing the expenses claimed is unsustainable. - AT
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Tax Authorities Reject Claim of Reinvested Income for Unaccounted Purchases; Discrepancies Found in Financial Reporting.
Case-Laws - AT : Unaccounted purchases - unaccounted income of the assessee - it is difficult to accept the arguments of the assessee that income earned out of unaccounted sales is plugged back into the business and which is source for unaccounted purchases, because, unaccounted purchases noticed by the Department is more than the amount of additional income offered by the assessee. - AT
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PCIT's Revision Order Overturned: Limited Scrutiny Assessment Confines Review to Issues Initially Examined by AO u/s 263.
Case-Laws - AT : Revision u/s 263 - once the AO cannot examine any other issue except the issue as selected for limited scrutiny assessment, the PCIT can examine the only issue which was before the AO during the course of scrutiny assessment and not any other issue, which has not been subject matter of the AO for the assessment in a limited scrutiny assessment - Revision order set aside - AT
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Taxpayer Granted Section 54 Deduction Despite Delay in Capital Gains Deposit, Complies with 3-Year Investment Rule.
Case-Laws - AT : Deduction claimed u/s. 54 - delay in depositing unutilized amount in capital gains account deposit scheme - Assessee has explained reasons for depositing unutilized amount of capital gains in capital gain deposit account scheme, and further claimed that ultimately he has invested entire amount of capital gain for acquiring new asset within three years from the date of transfer of original asset. - Benefit of exemption allowed - AT
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Clarification on withholding tax u/s 195: Exam fees by educational institutions exempt under DTAA teaching provisions.
Case-Laws - AT : Withholding tax u/s 195 - foreign remittances - payment of examination fee collected from the students - The expression ‘teaching in or by educational institution’ cannot be confined to the activity of imparting the instructions alone, in a broader sense, teaching includes not only the imparting the instructions but also the verification of the extent of perception of such instruction by the pupil and thereby includes the activity of examinations also. In this sense, this particular activity falls in the ambit of the exemption clause in the DTAAs which exempt the amounts paid for teaching in or by the educational institutions. - AT
Customs
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Customs Broker Challenges License Revocation, Citing No Role in Goods Undervaluation; CBLR 2018 Regulations Disputed.
Case-Laws - AT : Revocation of customs broker license - Appellant is not a valuation expert and had played no role in the under valuation of the goods. The appellant acted purely on the basis of documents as that of invoice/purchase orders supplied by the importers. - The appellant has not committed any alleged violation of Regulation 10(a), 10(d) and 10(n) of CBLR, 2018 - the order of revoking the license of appellant and of imposing penalty upon the appellant is absolutely wrong, unreasonable and unjustified. - AT
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Government's Decision Against Anti-Dumping Duty Lacks Justification, Violates Natural Justice Principles u/s 9A.
Case-Laws - AT : Continuation of anti-dumping duty u/s 9A - The inevitable conclusion that follows from the aforesaid discussion is that the decision taken by the Central Government not to impose anti-dumping duty despite a recommendation having been made by the designated authority for imposition of anti-dumping duty, cannot be sustained as it does not contain reasons nor the principles of natural justice have been compiled with - AT
Indian Laws
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Court Upholds Broad Interpretation of "Any" in RBI Act Notification, Aligns with Legislative Intent and Scheme.
Case-Laws - SC : Demonetization - Scope of the term "Any" - Validity of N/N. 3407(E) dated 8th November 2016, issued by the Central Government in exercise of the powers conferred by sub-section (2) of Section 26 of the Reserve Bank of India Act, 1934 - Merely because on earlier two occasions the Government decided to take recourse to plenary power of legislation, this, by itself, cannot be a ground to give a restricted meaning to the word “any” in sub-section (2) of Section 26 of the RBI Act. As already discussed herein above, the legislative intent could not have been to give a restricted meaning to the word “any” in sub-section (2) of Section 26 of the RBI Act - we are unable to accept the contention that the word “any” has to be given a restricted meaning taking into consideration the overall scheme, purpose and the object of the RBI Act and also the context in which the power is to be exercised. We find that the word “any” would mean “all” under sub-section (2) of Section 26 of the RBI Act. - SC
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Court Enforces Foreign Arbitral Award; Respondents Fail to Provide Valid Grounds for Refusal. RBI Approval Required.
Case-Laws - HC : Enforcement of final foreign arbitral award - The respondents failed to establish any ground on which the recognition of the Foreign Award should be refused. Consequently, subject to the requirement of obtaining RBI approval before initiating further proceedings for enforcement, the Foreign Award is recognized and held to be enforceable as a decree of this Court. - HC
IBC
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Tribunal Rules I & B Code 2016 Prevails Over Limitation Act for Appeals; Section 238 Reinforces Autonomy in Insolvency Cases.
Case-Laws - AT : Condonation of delay in filing appeal - appeal filed on the 35th day - Keeping in mind, the provisions of the I & B Code, 2016, having an overriding effect, in respect of other Laws, as per Section 238 of the Code, this Tribunal, taking into consideration of yet another fact that the I & B Code, 2016, is an inbuilt and a self-contained one, yet the Limitation Act, 1963, cannot supersede / march over, the I & B Code, 2016 - AT
Service Tax
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Storage Charges Beyond Three Months Excluded from Service Tax on Technical Testing Services u/s [Relevant Section.
Case-Laws - AT : Levy of Service Tax - technical testing and analysis service - we do not find any merit in the argument that the charges recovered on account of storage beyond period of 3 months can be considered as part of the provision of technical testing and analysis service. - AT
Central Excise
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Gold Balas Seized: Determined as Gold Ornaments, Not Primary Gold, Due to Definite Shape for Wearing.
Case-Laws - AT : Gold Balas - Primary Gold seizure of gold ornaments pledged with the Appellant’s family - it is quite clear that a definite shape has been given to the gold Balas in question and had it been a primary gold, it would have been simple gold rod or plate or pieces, and it should not have been bent and also given a certain shape which is evident from the picture. Therefore, there is no room for doubt that these gold Balas are gold ornaments having a definite shape to be worn by the local people.- AT
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CENVAT Credit Allowed Despite Lack of Centralized Registration; Denial Based on Technicality Deemed Inappropriate.
Case-Laws - AT : CENVAT Credit - Availment of credit by Appellant without a centralized registration - It is not a case of the department that on the input services/ invoices, no service tax was paid and there is no dispute about receipt and use of the services, which are the main criteria for allowing Cenvat credit on input service - only on the technical infraction should not be denied. - AT
VAT
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Supreme Court Affirms Input Tax Credit Indefeasibility, Rejects Denial for Claims Made After Six-Month Invoice Period.
Case-Laws - HC : Input tax credit - eligibility of benefit of input tax credit claimed after six months from the date of invoice - the Apex court has held that credit is indefeasible. The Modvat credit is similar to the Input Tax Credit in this case. Therefore, no exception can be taken to the view taken by the Hon’ble Single Judge that the Input Tax Credit cannot be denied on the anvil of the machinery provisions or the provisions relating to the time frame. - HC
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Court Rules Tax on Earthwork Contract Illegal Due to Lack of Income from Other Sources; Deduction Allowed.
Case-Laws - HC : Taxable turnover - works contract - earth work - deduction of 30% as labour charges - The Assessee – revisionist is not liable to pay any tax on the same, especially in view of the fact that neither the Assessing Authority nor the First Appellate Court nor the Second Appellate Court has held that Assessee – revisionist has income from other sources for the assessment year, therefore, the imposition of tax is illegal, hence, to be set-aside. - HC
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