TMI Tax Updates - e-Newsletter
January 17, 2023

Case Laws in this Newsletter:

Articles

1. CONVICTION AND PUNISHMENT UNDER GST

   By: Dr. Sanjiv Agarwal

2. RECOVERIES UNDER MSMED ACT 2006

   By: VAIBHAV JAIN

3. Matter not to be remanded back when all the materials on record are available

   By: Bimal jain

4. Cancellation of registration without providing opportunity of hearing is cryptic in nature

   By: Bimal jain

5. Royalty amount for mining is to be included while arriving at the transaction value for payment GST

   By: Bimal jain

News

1. INDIA’S FOREIGN TRADE: December 2022

2. Government today thinks like a startup, relentlessly focusing on newer and better ideas to improve efficiency and integrity of systems and processes: Shri Piyush Goyal

3. IEPF Authority invites comments from stakeholders for simplifying claims refund process

4. The annual rate of inflation based on all India Wholesale Price Index (WPI) falls to 4.95% (Provisional) for the month of December, 2022 (over December, 2021) against 5.85% recorded in November, 2022

5. To foster spirit of innovation and entrepreneurship several events held on 6th day of Startup India Innovation Week

6. The two-days' G 20 Infrastructure Working Group (IWG) meeting begins in Pune, Maharashtra 

Notifications

GST - States

1. G.O.MS.NO.797 - dated 28-12-2022 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Third Amendment) Rules, 2022

2. G.O.MS.No. 777 - dated 23-12-2022 - Andhra Pradesh SGST

Appointment of 01.10.2022 as the date to bring into force the provisions of Section 2 to 15 of Amendment Act 2022(Except Section 13 of the Amendment Act)

3. G.O.MS.No 778 - dated 23-12-2022 - Andhra Pradesh SGST

Due date for the GSTR-3B for the month of September 2022 - Extended from 20th day of October to 21st day of October 2022

4. G.O.MS.No 776 - dated 23-12-2022 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Second Amendment) Rules, 2022

5. 38/1/2017-Fin(R&C)(15/2022-Rate)/2062 - dated 31-12-2022 - Goa SGST

Amendment in Notification No. 38/1/2017-Fin(R&C)(12/2017-Rate) dated the 30th June, 2017

6. 14/2022—State Tax (Rate) - dated 13-1-2023 - Maharashtra SGST

Seeks to amend Notification No 04/2017- State Tax (Rate) dated 29th June, 2017.

7. 13/2022-State Tax (Rate) - dated 13-1-2023 - Maharashtra SGST

Seeks to amend Notification No 02/2017- State Tax (Rate) dated 29th June, 2017

8. 12/2022-State Tax (Rate) - dated 13-1-2023 - Maharashtra SGST

Seeks to amend Notification No 01/2017- State Tax (Rate) dated 29th June, 2017.

Highlights / Catch Notes

GST

• Project management consultancy services classified under SAC 998349, attracting 18% GST; not covered by Si. No. 24(ii) or 21(ia).

  Case-Laws - AAAR : Classification of services - rate of GST - project management consultancy services - t the services provided by the Appellant are neither covered under Si. No. 24(ii) nor under SI. No. 21(ia) of the Rate Notification. As regards the classification of the impugned services, it is held that the impugned services of project management consultancy services provided the Appellant would merit classification under the SAC 998349 bearing description “Other technical and scientific services nowhere else classified, attracting GST at the rate of 18% (CGST @9%+SGST @9%). - AAAR
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• GST Rate Clarified: Kudankulam Project Supply Eligible for 6% CGST & 6% SGST Until December 31, 2021.

  Case-Laws - AAAR : Classification of supply - rate of GST - Government entity - execution of works contract service at Kudankulam Nuclear Power Project - The condition that the services so procured by the Government entity, in this case, NPCIL, is in relation to the work entrusted to it and therefore, the appellant are/were eligible for the concessional rate of tax @6% of CGST plus 6%of SGST for the period upto 31.12.2021. - AAAR
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Income Tax

• Surcharge u/s 113 for block assessments (Section 158BD) is prospective, not declaratory or curative. Clarity on tax rate needed.

  Case-Laws - SC : Levy of surcharge u/s 113 - Block assessment u/s 158BD - the intention of the legislature was to make it prospective in nature. This proviso cannot be treated as declaratory/statutory or curative in nature. - the rate at which the tax is to be imposed is an essential component of tax and where the rate is not stipulated or it cannot be applied with precision, it would be difficult to tax a person. - SC
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• Notice u/s 158BD Sufficient for Block Assessments; Delay in Filing Invokes Interest u/s 158BFA(1.

  Case-Laws - SC : Levy of Interest u/s 158BFA(1) - Block assessment u/s 158BD - in case of the person other than searched person the notice under Section 158BD would be required/sufficient and in case of late filing of the return under Section 158BC, the interest will be leviable under Section 158BFA. Any other interpretation would lead to Section 158BD nugatory. - SC
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• Supreme Court reviews Clause (26AAA) proviso of Income Tax Act for potential discrimination against married Sikkimese women.

  Case-Laws - SC : Constitutional validity of the the proviso to Clause (26AAA) - A proviso cannot over arch a provision. - But in the instant case, the proviso is overriding the provision as well as the Explanation in respect of those categories of married Sikkimese women referred to in the proviso which is impermissible. Thus, the proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women. - SC
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• Supreme Court Upholds Tax Exemption for Sikkimese Domiciled Since 1975 u/s 10(26AAA), Ensures No Constitutional Violation.

  Case-Laws - SC : Constitutional validity the Explanation to Clause (26AAA) - three categories of individuals entitled to the benefit - the Explanation has to be saved from being in violation of Articles 14 or 15 of the Constitution of India as there is rationale in the three clauses of the Explanation which is a reasonable classification which has a nexus to the object sought to be achieved, which is to grant of exemption from payment of income tax only to those individuals who would qualify as ‘Sikkimese’ in terms of the Explanation to clause (26AAA) of Section 10 of the I.T. Act, 1961. - It has to be directed that till such amendment is made to the down the Explanation to Section 10(26AAA) of the I.T. Act, 1961, all individuals domiciled in Sikkim up to 26th April, 1975 shall be entitled to the exemption under the said provision from the current financial year i.e., 1st April, 2022 onwards. - SC
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• Supreme Court Strikes Down Discriminatory Tax Exemption Rule for Sikkimese Women Marrying Non-Sikkimese, Citing Constitutional Violations.

  Case-Laws - SC : Constitutional validity of the the proviso to Clause (26AAA) - Proviso excludes from the exempted category, “Sikkimese women” who marries a non-Sikkimese after 01.04.2008 - Scope of the definition of “Sikkimese” in Section 10 (26AAA) - the proviso is inherently arbitrary and discriminatory against a particular category of Sikkimese women. In other words, the Explanation to Section 10 (26AAA) of the I.T. Act, 1961 includes both Sikkimese men as well as women. Such being the interpretation, in my view, the proviso is antithetical to the Explanation and the Section as well. - The proviso to Clause (26AAA) of Section 10 of the I.T. Act, 1961 is struck down as being in violation of Articles 14 and 15 of the Constitution of India. - SC
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• Exemption Denied: Land in Municipality Over 10,000 People Not Considered Agricultural Under Income Tax Act Section 2(14)(iiia.

  Case-Laws - AT : Benefit of exemption claimed u/s 10(37) - compulsory acquisition of agricultural land - Since the land of the assessee is situated in the municipality as per the certificate and population is more than 10,000, then it is not an agricultural land referred to in Section 10(37) of the Act for the simple reason that it is situated in a municipality/cantonment where it is not considered as agricultural land as per provisions of section 2(14) (iiia) of the Act. - AT
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• Section 115JB: Minimum Alternate Tax Applies Solely to Companies, Not Broadened by Other Act Definitions.

  Case-Laws - AT : MAT applicability u/s 115JB - Deemed company - that definition includes the corporation but provision of section 115JB deals only charge of tax of a company and it refers the section 129 of the Companies Act only. - The charge of tax being a separate code and the section clearly cover the type of company under the tax net the same cannot be widened based on the definition given in the Act for the other purposes. - AT
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• No Penalty for Cash Transactions: Sections 271D & 271E Not Applicable as Book Adjustment Isn't a Loan or Deposit.

  Case-Laws - AT : Penalty u/s 271D read with section 269SS and Penalty u/s 271E read with section 269D - cash transaction - Merely on the regular balance interest paid the transaction recorded by the cashier to settle the deficit in the cash between the two company is not a loan as it is construed with purpose for which the provisions are enacted in the law. The transfer of money from one company to another with a specific intention is a mere book adjustment and cannot be considered as loan or deposit. - There exist a reasonable cause and plausible reason - No penalty - AT
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• Assessing Officer Ordered to Remove Penalty After Voluntary Income Disclosure; No Revenue Investigation Involved, Section 271(1)(C).

  Case-Laws - AT : Penalty u/s 271(1)(C) - the revenue may be technically correct in not considering the later return of income as a revised return but it cannot be denied that additional income was shown by the assessee himself and it is not the case of the revenue that they unearthed the additional income by carrying out investigations. - AO directed to delete the penalty imposed u/s 271(1)(c) under challenge - AT
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• Non-compliance with Section 142(1) notices leads to Section 271(1)(b) penalty under the Income Tax Act. No valid justification provided.

  Case-Laws - AT : Levy of penalty u/s 271(1)(b) - non-compliance of the notices issued u/s. 142(1) of the Act, neither by filing reply nor seeking time to file Reply - the assessee has not justified why he has not complied to the notices issued u/s. 142(1) by the Assessing Officer. Thus, we do not find any merits in the grounds raised by the assessee. - AT
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• Assessee Clarifies Lenders' Details; No Evidence of Circular Transactions or Syndicate Involvement u/s 68.

  Case-Laws - AT : Unexplained cash credit u/s 68 - the assessee furnished all such details of the lenders/ depositors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. - AT
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• Loan Creditors Added u/s 68 for Undisclosed Income; Investigation Needed on Gold and Silver Transactions Involving Assessee.

  Case-Laws - AT : Addition of loan creditors u/s. 68 - undisclosed income of the assessee - It is a clear-cut case that somebody else is operating on behalf of the assessee by using his bank account and of course, assessee cannot also be stated to be ignorant of the situation. Therefore, the assessee as well as the person who are trading with the assessee is entering into purchase and sales of gold and silver with some ulterior motive. - This apparently seems to be a case of accommodation entry provider. But deeper and complete investigation leading to beneficiary of the transaction is required. - AT
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• Entity's Auditorium Use Qualifies for Tax Exemption u/s 11 as Incidental to Educational Objectives.

  Case-Laws - AT : Exemption u/s 11 - letting-out auditorium was a commercial activity - proviso to Sec.2(15) - Once the assessee falls under the category of education in term of section 2(15) of the Act, assessee is eligible for exemption u/s.11 of the Act because letting out of auditorium is incidental to fulfilment of the object of the trust i.e., education. Hence, we allow the appeal of assessee. - AT
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• Tribunal Upholds Taxable Income Additions After Assessee Fails to Provide Complete Details to Assessing Officer.

  Case-Laws - AT : Unexplained cash - assessee had deposited a huge amount of cash in its bank account - the Tribunal also directed the assessee to produce the parties as may be required by the AO. However, as is evident from the findings recorded by the lower authorities, in the 2nd round of proceedings, the assessee failed to furnish all the details as sought by the AO. - Additions confirmed - AT
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• Reassessment u/s 147 Invalid: No Tangible Evidence Linking Belief of Escaped Income to Assessee Found.

  Case-Laws - AT : Reopening of assessment u/s.147 - there is absolutely no tangible material available with the ld. AO having live link to form a belief that income of the assessee had escaped assessment. Hence, reopening of the assessment fails on this count itself. - AT
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• Fair Market Value of Shares Based on March 31, 2013 Balance Sheet Upheld as Accurate u/s 56(2)(viib.

  Case-Laws - AT : Addition u/s. 56(2)(viib) - Computation of the fair market value of the shares - AO found that the audited balance sheet of 31.03.2013 was approved by the shareholders in the Annual General Meeting and, accordingly, computed the fair market value of the shares as per the balance sheet as on 31.03.2013 which, in our considered opinion, is as per the provisions of the Act read with the relevant rules of the IT Rules and cannot be faulted with. - AT
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• Late Filing Makes Assessee Ineligible for Section 80P(2)(a)(i) Deduction Due to Non-Compliance with Section 80AC(ii) Conditions.

  Case-Laws - AT : Deduction u/s 80P(2)(a) - return of income filed belatedly u/s 139(4) - The assessee has claimed deduction U/s 80P(2)(a)(i) on profits earned during the year and filed return of income on 31.12.2018, which is beyond the due date as prescribed as per section 139(1) of the Act, accordingly the assessee is not complying with the condition which are prescribed by section 80AC(ii) of the Act. - The assessee is not eligible to claim deduction - AT
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• Assessee Qualifies as Developer u/s 80IA(4), Eligible for Tax Deductions on Infrastructure Development Projects.

  Case-Laws - AT : Deduction u/s 80IA - merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) - As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) - AT
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• Capital Gains from Property Sale: AO's Limited Scrutiny Justified in Denying Deduction; No Fault Found.

  Case-Laws - AT : Scope of assessment under limited scrutiny - The issue in the present appeal is with respect to addition on account of capital gains from sale of immovable property. In our view, the AO was within his right to examine the issue before us and we do not find any fault on the part of Assessing Officer to deny the deduction in the case selected for limited scrutiny. - AT
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Customs

• Court Overturns Tribunal: Exporter Entitled to Service Tax Refund Under Customs Act Section 2(20) Definition.

  Case-Laws - HC : Denial of rightful claim of refund of service tax being the Petitioner is an exporter - Under Section 2(20) of Customs Act the term ‘exporter’ would include any owner or any person holding himself out to be the exporter. In other words, the person holding out to be the exporter need not be the exporter. - it was in fact the Assessee which was the real exporter of the goods for the purpose of Section 2(20) of the Act - the Court is unable to concur with the view of the Tribunal that in the present case the Assessee was not entitled to the refunds since it was not the exporter. - HC
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• Court Clarifies Allocation Limits for Imported Raw Petroleum Coke; DGFT Cannot Alter Supreme Court-Set Limits of 1.4M Tonnes.

  Case-Laws - HC : Determination of criteria for allocation of imported Raw Pet Coke - Even though the public notice dated 17.04.2020 is not under challenge but this Court cannot be a party to any interpretation that will have the effect of upsetting the rationale of the Apex Court in fixing 1.4 Million Metric Tonnes of raw petroleum coke which, as stated earlier, was based on the permissible capacity as on 09.10.2018. - The learned Single Judge has, therefore, erred in coming to a conclusion that inter se allocation could have been changed by the DGFT more so because the DGFT has in its previous Minutes of Meetings rejected the claim of various applicants including Respondent No.3 for increasing their share of allocation as per their production capacities. - HC
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• Cash Security Deposit Refund Not Governed by Customs Act Section 27; Authorities Misapplied Law, Denying Claim Unjustly.

  Case-Laws - AT : Rejection of refund of cash security deposit - Period of limitation - it is very much clear that refund claim of the security deposit is not governed by the provisions of Section 27 of the Customs Act and consequently, the lower authorities have clearly erred in rejecting and confirming the rejection of refund claimed of the security deposit by invoking the provisions of Section 27(1) ibid. - AT
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FEMA

• Court Rules Against Judicial Directive for Tribunal, Upholds FCRA and Separation of Powers Doctrine in Political Party Case.

  Case-Laws - HC : Prohibition to accept foreign contribution - misuse of the Foreign Contribution (Regulation) Act [FCRA] by the political party - Setting up of such Tribunals/Authorities/Committee is purely a policy decision, taken by the Legislature. A direction for setting up a Committee or Tribunal would effectively be an amendment of the FCRA, which is beyond the scope of judicial review by this Court. Hence, an attempt by a judicial body to set up a tribunal is directly in the teeth of the doctrine of separation of powers. - HC
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PMLA

• Petitioner Challenges Provisional Attachment, Seeks to Cross-Examine Witnesses in Money Laundering Case Under PMLA Tribunal.

  Case-Laws - HC : Money Laundering - provisional attachment order - Seeking permission to cross-examine the three person - The Petitioner is relegated to the Appellate Tribunal under PMLA for agitating the challenge to the impugned order. - In the present case, though not spelt out, during the course of hearing before this Court, one of the reasons for seeking cross examination is due to the alleged retraction by one particular witness of the statements made by him to the Income Tax Department. This submission shall be considered by the Tribunal. - HC
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Service Tax

• Court Rules Incomplete Address Invalid for Notice Service u/s 27, Affecting Appeal Filing Timelines.

  Case-Laws - HC : Condonation of delay in filing appeal - The presumption of proof of service of notice is a rebuttable piece of evidence and the track consignment report having an incomplete address of the petitioner valid service of notice of the order in original cannot be presumed. Section 27 of the General Clauses Act as quoted at paragraph 6 of the impugned appellate order also provides that service shall be deemed to be effected by properly addressing, prepaying and posting it be registered post. - HC
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Central Excise

• Confectionary Valuation in Related Party Deals: Apportion ITC Cost for Mould Use, Verify Duty Payment by Leamak.

  Case-Laws - AT : Valuation of goods - confectionary items - related party transaction - The cost of ITC in so far as it relates to provision of mould on discounted rate to the appellant needs to be apportioned to the value of goods depending on the actual period of use of the said mould and the total production. The fact regarding payment of duty under the head “Cost of production not included by Leamak” needs to be ascertained. If duty has already been paid, duty may not be demanded again. - AT
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• Valuation of 'Not for Sale' Medicaments to Government Institutions Governed by Section 4, Not 4A, of Central Excise Act.

  Case-Laws - AT : Method of Valuation - to be valued u/s 4 or u/s 4A - MRP based value or Transaction value - supply of medicaments to Government Institutions such as BHEL, Railway, Government Hospitals, etc. wherein, on the package it is mentioned ‘NOT FOR SALE’ and no retail price was printed - the appellant’s case value of goods is clearly governed by Section 4 of Central Excise Act and not under Section 4A - AT
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VAT

• Transfer of Bus Use Rights to Corporation Triggers VAT and Sales Tax Liabilities Under Applicable Laws.

  Case-Laws - HC : Levy of tax - transfer of right to use the bus - by the agreement reached between the bus owner and the UPSRTC, it is clear that transfer of right to use the buses by the bus owners to UPSRTC through which the UPSRTC has effective control over the buses - HC
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