TMI Tax Updates - e-Newsletter
January 16, 2023

Case Laws in this Newsletter:

Articles

1. CRITIQUE OF THE AMENDMENTS MADE TO SECTION 44 OF THE PMLA BY THE WAY OF FINANCE ACT, 2019

   By: Aditya Mehrotra

2. RECENT DEVELOPMENTS IN GST

   By: Dr. Sanjiv Agarwal

3. Hiring of goods transportation vehicle by GTA is exempted from GST

   By: Bimal jain

4. Concessional GST rate of 12% on composite supply of works contract to be applied prospectively

   By: Bimal jain

5. Dealer cannot be compelled to carry forward the ITC to GST regime instead of refund

   By: Bimal jain

News

1. Shri Piyush Goyal calls for forging new partnerships among countries of the Global South to build resilient supply chains, increase trade and promote tourism

2. National Startup Awards 2022 to be announced on 16th January 2023

3. Several events held on Day 4 of the Start-up India Innovation to boost the entrepreneurial ecosystem in the country

4. ‘Start-Up India Innovation Week’ brings for Mentors in Mumbai, a Masterclass to sharpen mentoring skills

Notifications

Customs

1. 01/2023 - dated 13-1-2023 - Cus

Exemption to COVID -19 vaccines from basic Custom duty till 31st March, 20213

2. 04/2023 - dated 13-1-2023 - Cus (NT)

Fixation of Tariff Value of Edible Oils, Brass Scrap, Areca Nut, Gold and Silver

Circulars / Instructions / Orders

GST - States

1. GST-18/2022 - dated 4-1-2023

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

2. GST-20/2022 - dated 4-1-2023

Clarification on various issue pertaining to GST

Highlights / Catch Notes

GST

• Petitioner Failed to Use Rule 159(5) to Challenge Bank Account Attachment; Authority Can Rule on Jurisdiction u/s 83.

  Case-Laws - HC : Attachment of Bank account of petitioner - it is the Petitioner to blame for not taking recourse to Rule 159(5) of the Rules early - The contention of the Petitioner that the authority will not be able to decide the issue of jurisdiction is not correct as if the Petitioner demonstrates that the action taken under Section 83 of the Act is not proper in law and on facts, the concerned Authority can only release the attachment as per the said provision. - HC
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• Court Invalidates Order for Violating Natural Justice; Case Reverted to Show-Cause Notice Stage Without Assessee's Input.

  Case-Laws - HC : Principles of natural justice - no notice of hearing - The order impugned dated May 25, 2022 was passed without hearing the assessee and without affording the assessee an opportunity of being heard. Since the nature of the order was such that the assessee’s participation was necessary prior to the same being made, the order impugned dated May 25, 2022 is set aside and the position is set back to the stage of the show-cause notice - HC
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• Advance Ruling Denied for Completed Transactions with GST Paid and Returns Filed; Beyond Authority's Jurisdiction.

  Case-Laws - AAR : Scope of Advance Ruling application - In the instant case, the application seeking advance ruling was filed on 17.03.2022 before the RAAR with respect to supplies already being undertaken, GST being paid and GST returns has been submitted. Hence, the case is out of the purview of the Advance Ruling. - AAR
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• Project Development and Management Services Exempt from GST Under AAR Ruling as "Pure Services.

  Case-Laws - AAR : Exemption from GST - pure services or not - Project Development Service provided by the applicant to the recipient under the Contract from District Urban Development Agency which is District Level Agency of State Urban Development Agency (SUDA) and the Project Management Consultancy services under the Contract for PMAY - Such services would qualify as Pure Service (excluding works contract service or other composite supplies involving supply of any goods) - exempt from the payment of GST - AAR
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• Court Orders Refund Review for Exporter Lacking Letter of Undertaking u/s 54 of CGST Act.

  Case-Laws - HC : Refund of CGST - Section 54 of CGST Act - Export of Goods - they did not have Letter of Undertaking and the refund sought for is qua zero rated sales made to overseas purchases (exports) - respondent directed to consider, process and make orders in the refund application - HC
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Income Tax

• Court Invalidates Proceedings Due to Lack of Valid Search Warrant u/s 153A of Income Tax Act.

  Case-Laws - HC : Validity of proceedings u/s 153A - Before this Court also the Revenue has not been able to demonstrate that there exists in the records of the Revenue a valid search warrant authorizing the searches that were conducted in the premises of the Respondent-Assessee - De hors such search warrant, validly issued to authorize the search, the question of initiating proceedings u/s 153A simply did not arise. - HC
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• High Court Quashes Income Tax Reassessment Notice u/s 147 Due to Lack of New Tangible Evidence.

  Case-Laws - HC : Reopening of assessment u/s 147 - Reason to believe - change of opinion - the reassessment is being resorted to only on account of ‘change of opinion’ of the Assessment Officer without there being any fresh tangible evidence for reopening the assessment proceedings. - Notice quashed - HC
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• No Penalty for Non-Compliance with Special Audit if Circumstances Beyond Control: Section 271B & 142(2A) Explained.

  Case-Laws - AT : Levy of penalty u/s. 271B - Non compliance requirement in respect of special audit u/s. 142(2A) - when it appears that the performance of the formalities prescribed by a statute has been rendered impossible by circumstances over which the person interested had no control, the circumstances will be taken as a valid excuse. - No penalty - AT
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• CIT wrongly assumed jurisdiction u/s 263; AO didn't initiate penalty u/s 271(1)(c) or note satisfaction.

  Case-Laws - AT : Revision u/s 263 - AO did not initiate penalty proceedings u/s. 271(1) (c) - No hesitation in holding that the CIT is not correct in assuming jurisdiction u/s 263 of the income tax act where the learned assessing officer has failed to initiate penalty proceedings and also does not record any satisfaction of furnishing of inaccurate particulars or concealment of income in the assessment order. - AT
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• Transactions Not International u/s 92B; No AMP Expenses Liability; TPO's Benchmarking Unjustified.

  Case-Laws - AT : TP Adjustment - international transactions u/s. 92B or not - In absence on any such agreement, the first and primary condition of holding the transaction in question as an international transaction remains to be fulfilled. As the assessee cannot be held liable for expenses incurred on advertising marketing and promotion as an international transaction of AMP, the consequent benchmarking by the Ld. TPO is also not justified. - AT
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• Family Members' Fixed Deposits and Interest Income Not Attributable to Assessee's Taxable Income in Search Case.

  Case-Laws - AT : Additions against fixed deposit in the name of family members and interest income - Admittedly, the amount of fixed deposit in the name of family members can adequately be sourced from the income offered by the assessee. Even otherwise, said addition cannot be made in the hands of the assessee as the fixed deposits are not in the name of the assessee and it is a search case and the assessment has to be done as per the evidence found during the course of search and fixed deposits are in the name of family members. - AT
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• Tax Residency Criteria: Permanent Home Test, Habitual Abode & Days in India. Tie-breaker Not Sole Factor.

  Case-Laws - AT : Residential Status of Individual - permanent home test - habitual abode - number of days of stay in India - Income deemed to accrue or arise in India - No doubt the tie-breaker questionnaire having importance in determining the residency of a person, but cannot be exclusively taken into consideration as a base for deciding the residency. The permanence of home can be determined on qualitative and quantitative basis. It is not in controversy that the Appellant for the period under consideration has shown the income earned in Singapore and paid the taxes in Singapore. Therefore, as per Treaty, he cannot be subjected to tax in India in order to avoid double taxation. - AT
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• Court Directs AO to Grant Depreciation on Goodwill from Amalgamation, After Initially Denying It.

  Case-Laws - AT : Denial of depreciation on goodwill arising from scheme of amalgamation - on one hand in the remand proceedings, the AO for the first time raised doubts about the valuation report, however, on the other hand AO has allowed depreciation on intangible assets @ 25%, which were also acquired by the assessee and were also revalued in the books of the assessee upon amalgamation. - AO directed to grant depreciation on goodwill arising on account of amalgamation of subsidiary company with the assessee. - AT
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• Tribunal Confirms Arm's Length Pricing for Assessee's International Transaction, No Transfer Pricing Adjustment Needed.

  Case-Laws - AT : TP Adjustment - where the Tribunal has accepted the international transaction to be at Arm’s Length Price in the hands of AE, then the international transaction that the assessee had with the AE’s to be also at Arm’s Length Price and therefore no adjustment was warranted in the facts and circumstances of the case. - AT
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Customs

• Provisional Release of Confiscated Goods: Bank Guarantee Reduced to 5% of Goods' Value Prior to Adjudication.

  Case-Laws - AT : Seeking provisional release of goods - If the goods are confiscated and allowed redemption on payment of fine such fine has to be recovered from the appellant and some security is necessary to cover it if the goods are to be released provisionally before adjudication itself. Considering the overall factual matrix of this case we modify the impugned order reducing the amount of bank guarantee to 5% of the value of the goods. - AT
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• Re-importation of Petroleum Coke Deemed Freely Importable Under FTP 2015-2020, Clause B, Despite Subsequent Restrictions.

  Case-Laws - AT : Absolute Confiscation of re-imported goods - petroleum coke - As per para 1.05 (Clause B) of Chapter 1 of FTP 2015-2020, provides that in case of change of policy from free to restricted/prohibited etc. the imports or export already made before the date of such regulation/restrictions will not be effected. Admittedly, the export in this case was made through shipping bill dated 01.12.2017, which is before the date of restriction imposed vide aforementioned Notifications - the re-import by the appellant of the rejected goods, has to be treated as freely importable under the Foreign Trade Policy. - AT
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IBC

• CIRP Application Dismissed: Limitation Period Exceeded; TDS Deduction Not Enough to Prove Interest Payment.

  Case-Laws - AT : Initiation of CIRP - Financial creditors - application dismissed primarily on the ground of limitation - existence of the outstanding debt and default - whether deduction of TDS is sufficient to prove that interest amount have been paid? - Reliance on the Note in the Balance Sheet - There is no acknowledgement or acceptance of the debt within that period - Appeal dismissed - AT
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• Court Questions Lease Payment During Moratorium u/s 14(1)(d) of Insolvency and Bankruptcy Code; Order Deemed Illegal.

  Case-Laws - AT : Demand of lease amount during moratorium period - whether the Adjudicating Authority has rightly applied the explanation under Section 14(1)(d) of the Code for the purpose of directing the Appellant to pay the lease premium amount and the lease rent to the Respondent (NOIDA)? - The impugned order is patently illegal and deserves to be set aside - AT
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• NCLT Dismissal of CIRP Application Overturned Due to Misinterpretation of Financial Debt u/s 7, IBC.

  Case-Laws - AT : Initiation of CIRP - Financial debt or not - application dismissed by the NCLT - The definition of debt and default which is the only thing required for the purpose of maintaining the application under Section 7 of the Code, is satisfied - the Adjudicating Authority has committed a patent error in misreading and mis-appreciating the evidence available on record while dismissing the application, filed by the Appellant for the initiation of CIRP of the Corporate Debtor/Respondent. - AT
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• Shareholder Not Aggrieved by Liquidation Decision u/s 61 of Insolvency and Bankruptcy Code, 2016.

  Case-Laws - AT : Liquidation of the Corporate Debtor / Company - Aggrieved Person - Members of the suspended Board of Directors - Considering the fact that the Appellant / Petitioner who was a Promoter / Shareholder, invested in the Equity Shares at Rs.10/- each of the Corporate Debtor / Company (431840 Equity Shares), he is not an Aggrieved Person, in stricto sensu under Section 61 of the I & B Code, 2016, especially, in the light of Committee of Creditors, having passed a Resolution for Liquidation of the Corporate Debtor - AT
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• Tribunal Rules It Lacks Jurisdiction Over Land Title Dispute; Resolution Plan Validity Questioned Under CIRP Regulation 38.

  Case-Laws - AT : Validity of Approval of Resolution Plan - Litigation regarding dispute over land is pending before Civil Court on behalf of third party - Land belong to corporate debtor or not - in compliance of Regulation 38 of the CIRP Regulations, 2016 or not - this Tribunal does not have jurisdiction to decide the title of the land more so when a Civil Suit has already been preferred by the ‘Appellant’ herein and they have already opted for seeking a remedy before the Civil Court. - Appeal dismissed - AT
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Service Tax

• High Court Extends SVLDRS Benefits After Department's Late Appeal Filing Violates Section 86(3) Finance Act Deadline.

  Case-Laws - HC : Benefit of SVLDRS - Revenue filed the appeal after the expiry of limitation of Scheme - the appeal of the Department has been filed after the expiry of period of limitation prescribed under Section 86(3) of the Finance Act as the said provision provides a period of limitation of three months which has expired on 14.04.2020. Thus, it transpires that in the opinion of the respondent filing of the appeal has led to change in the category of petitioner from “arrear category” to “litigation category” which view is beyond the letter and spirit of the scheme. - Benefit of SVLDRS extended - HC
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• Extended Limitation Period Dismisses Service Tax Demand on Business Auxiliary Services Due to Good Faith Belief by Appellant.

  Case-Laws - AT : Extended period of limitation - Business Auxiliary Service or not - sharing of revenue - the appellant had a bona fide belief in non payment of Service Tax. The appellant also submitted that this case is falling under the principle of revenue neutrality in as much as the tax payment if any made by the appellant is available as the Cenvat credit to the contractor who has used the premises of the appellant. - The demand is set aside on the ground of limitation itself - AT
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• Appellant Entitled to Cenvat Credit for Input Services at Zonal Offices u/r 2(l) of Cenvat Credit Rules, 2004.

  Case-Laws - AT : CENVAT Credit - input services or not - The appellant has successfully established that these three zonal offices are integral part and parcel of the appellant only and the fact that they are located separately hardly makes any difference. Therefore, the appellant is justified in availing Cenvat Credit in respect of input services availed by its Zonal Training Centre, Zonal Office and Zonal Audit Office (ZAO) in terms of Rule 2(l) of Cenvat Credit Rules, 2004 and the services received by these zonal offices fall under the definition of ‘input service’ as provided by Rule 2(l) ibid. - AT
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