TMI Tax Updates - e-Newsletter
January 18, 2023
Case Laws in this Newsletter:
Articles
By: DEVKUMAR KOTHARI
Summary: Virtual courts should continue and offer video conferencing options to save manpower and reduce costs associated with travel and administration, thus expediting justice delivery. They are environmentally and health-friendly, and many courts already operate both physical and virtual sessions. Virtual courts enhance flexibility, reduce adjournments, and allow judges, litigants, and representatives to work from anywhere, making legal processes smoother and more cost-effective. The integration of Information Technology Enabled Services (ITES) can expedite case disposal and make court operations more efficient, offering a preferred mode of working for all involved parties.
By: Vivek Jalan
Summary: The article discusses the legal considerations regarding the use of Excel sheets found during searches as evidence for undisclosed cash receipts under the Income Tax Act. It examines whether such documents, even if undated and unsigned, can be deemed reliable evidence for tax purposes. The article references Section 132(4A) of the Income Tax Act, which presumes the authenticity of documents found in possession during searches, and Section 156 of the Indian Evidence Act, which addresses corroborative evidence. It emphasizes the need for further investigation by tax authorities when presumptions are denied, particularly in cases involving the Percentage Completion Method of revenue recognition.
By: Dr. Sanjiv Agarwal
Summary: Confiscation under the GST Act is the expropriation of goods for public use without compensation, as outlined in Section 130 of the CGST Act, 2017. Goods can be confiscated if they are involved in tax evasion, not accounted for, supplied without registration, or transported in violation of the Act. The law mandates penalties and fines, which cannot exceed the market value of the goods. Amendments in 2021 stipulate penalties equal to 100% of the tax payable. Confiscated goods vest with the government, and the owner is given a chance to pay a fine in lieu of confiscation. Services are not covered under these provisions.
By: Bimal jain
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Chennai ruled that a customs broker cannot be held liable for undervaluation of exported goods, as valuation is determined by the contract between exporter and importer, not the broker. The case involved a customs broker penalized under the Customs Act and Customs Broker Licensing Regulations for alleged undervaluation. The tribunal found no evidence of the broker's involvement in value determination, thus setting aside the penalty as legally unsound. This decision underscores that brokers have no role in the valuation process, which is exclusively between the trading parties.
By: Bimal jain
Summary: The Jharkhand High Court addressed a case involving a company engaged in the business of Ferro Alloys, which faced a demand and detention order due to the alleged expiry of an E-Way Bill during transit. The company challenged the order, arguing no tax evasion or jurisdiction for proceedings. The court, however, emphasized that a writ petition is not maintainable when an effective alternative remedy, such as an appeal under Section 107 of the CGST Act, is available. The court directed the company to approach the Appellate Authority and allowed for manual filing if technical issues prevented online submission.
News
Summary: The Supreme Court allowed taxpayers to file TRAN forms from October 1 to November 30, 2022. However, some taxpayers submitted but did not finalize their forms with e-sign within this period. These taxpayers also did not report any issues on the GST Grievance Portal and some indicated they did not intend to file. Consequently, they are unable to file their GSTR-3B. The GSTN advises these taxpayers to raise a ticket on the GST Grievance Portal to reset their TRAN filing status, allowing them to proceed with filing their GSTR-3B.
Summary: A new functionality on the GST Portal allows for the automated dropping of proceedings for GSTINs suspended due to non-filing of returns. Taxpayers who have filed their pending returns, either six monthly or two quarterly, can benefit from this feature. Once all pending returns are filed, the system will automatically revoke the suspension. If the GSTIN status does not change to active, taxpayers can manually initiate the drop proceedings via the portal. This applies to GSTINs suspended after December 1, 2022.
Summary: The Reserve Bank of India (RBI) has issued guidelines for acquiring and holding shares or voting rights in banking companies, requiring prior approval for significant acquisitions. Applicants must submit a declaration and undergo due diligence to assess their suitability. Limits are set for non-promoter and promoter shareholdings, with specific conditions for Financial Action Task Force non-compliant jurisdictions. The RBI may permit higher shareholding in certain cases, imposing a lock-in period for significant shareholdings. Voting rights are capped at 26% of total voting rights, with specific conditions for depositories and beneficial interest holders. Compliance with these guidelines ensures regulated ownership in banking companies.
Summary: The Government of India has announced the re-issue of three government securities: 7.38% GS 2027 for Rs 7,000 crore, 7.26% GS 2032 for Rs 12,000 crore, and 7.36% GS 2052 for Rs 9,000 crore. The auctions will be held on January 20, 2023, by the Reserve Bank of India using price-based methods. The government may retain additional subscriptions up to Rs 2,000 crore for each security. Up to 5% of the securities will be allocated to eligible individuals and institutions under a non-competitive bidding scheme. Results will be announced on the same day, with payments due by January 23, 2023.
Notifications
Central Excise
1.
04/2023 - dated
16-1-2023
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CE
Exemption to Excisable goods - Prescribe rates of SAED for exports of petrol and diesel - reduce the Special Additional Excise Duty on Diesel - Seeks to further amend No. 04/2022-Central Excise, dated the 30th June, 2022.
Summary: The Central Government has amended Notification No. 04/2022-Central Excise, reducing the Special Additional Excise Duty on diesel exports to Rs. 3.50 per litre. This amendment, issued under the powers of the Central Excise Act, 1944, and the Finance Act, 2002, is deemed necessary in the public interest. The changes will take effect on January 17, 2023. This notification is part of ongoing adjustments to excise duties on petroleum products, reflecting the government's fiscal strategy and economic considerations.
2.
03/2023 - dated
16-1-2023
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CE
Special Additional Excise Duty on production of Petroleum Crude and export of Aviation Turbine Fuel - Reduction in SAED - Seeks to amend No. 18/2022-Central Excise, dated the 19th July, 2022.
Summary: The Ministry of Finance, Department of Revenue, has issued Notification No. 03/2023-Central Excise, amending Notification No. 18/2022-Central Excise. Effective January 17, 2023, the Special Additional Excise Duty (SAED) on petroleum crude production is reduced to Rs. 1,900 per tonne, and on aviation turbine fuel export to Rs. 3.50 per litre. This amendment, enacted under the Central Excise Act, 1944, and the Finance Act, 2002, is deemed necessary in the public interest. The original notification was published on July 19, 2022, and was last amended on January 2, 2023.
GST - States
3.
G.O.MS.No.1 - dated
2-1-2023
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Andhra Pradesh SGST
Empowerment of Competition Commission of India to handle anti-profiteering cases under APGST Act, 2017 with effect from 01.12.2022
Summary: The Government of Andhra Pradesh has issued an order empowering the Competition Commission of India (CCI) to handle anti-profiteering cases under the Andhra Pradesh Goods and Services Tax Act, 2017, effective from December 1, 2022. This decision follows recommendations from the Goods and Services Tax Council and allows the CCI to assess whether input tax credits or tax rate reductions have led to corresponding price reductions for goods or services. This notification was published in an extraordinary issue of the Andhra Pradesh Gazette on January 2, 2023.
4.
19/2022-State Tax - dated
16-1-2023
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Delhi SGST
Delhi Goods and Services Tax (Second Amendment) Rules, 2022.
Summary: The Delhi Goods and Services Tax (Second Amendment) Rules, 2022, effective from October 1, 2022, introduces several changes to the Delhi GST Rules, 2017. Key amendments include the insertion of clauses in Rule 21 regarding the non-filing of returns for specified periods, modifications to rules on input tax credit and payment timelines, and the omission of certain forms and rules. It also updates language in various rules, such as substituting "auto-drafted" with "auto-generated" in Rule 60. These changes aim to streamline procedures and clarify compliance requirements under the Delhi GST framework.
5.
15/2022-State Tax (Rate) - dated
13-1-2023
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Maharashtra SGST
Seeks to amend Notification No 12/2017- State Tax (Rate) dated 29th June, 2017.
Summary: The Maharashtra State Government has issued Notification No. 15/2022 to amend Notification No. 12/2017-State Tax (Rate) under the Maharashtra Goods and Services Tax Act, 2017. Effective January 1, 2023, the amendment introduces an explanation for S. No. 12, clarifying that the exemption applies to renting residential dwellings to registered individuals who are proprietors using the property for personal residence. Additionally, S. No. 23A and its related entries are omitted. This amendment is made in the public interest following the recommendations of the GST Council.
Income Tax
6.
S.O. 270 (E) - dated
16-1-2023
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IT
‘Indian Institute of Science Education and Research, Tirupati approved under the category of ‘University, College or Other Institution’ for ‘Scientific Research’ for the purposes of clause (ii) of sub-section (1) of Section 35.
Summary: The Indian Institute of Science Education and Research, Tirupati, has been approved by the Central Government under the category of 'University, College or Other Institution' for 'Scientific Research' as per clause (ii) of sub-section (1) of Section 35 of the Income-tax Act, 1961. This approval, effective from the publication date in the Official Gazette, applies to the previous year 2022-23 and is valid for the assessment years 2023-2024 to 2027-2028.
Circulars / Instructions / Orders
DGFT
1.
51/2015-20 - dated
17-1-2023
Amendments in Para 2.79A of Handbook of Procedures for issue of export authorization for "Stock and Sale" of SCOMET items.
Summary: Amendments have been made to Paragraph 2.79A of the Handbook of Procedures under the Foreign Trade Policy 2015-20 concerning the export authorization for "Stock and Sale" of SCOMET items. The changes allow Indian exporters to apply for authorization to export SCOMET items to foreign subsidiaries or parent companies, excluding certain categories. Applications must include various documents, such as end-use certificates and corporate relationship proof. The amendments also allow for repeat order authorizations and require annual reporting of exports, transfers, and inventory. Non-compliance may lead to penalties or cancellation of authorization.
Highlights / Catch Notes
GST
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Court Upholds Show Cause Notice Validity u/s 74; Audit Start u/s 65 Doesn't Bar SCN Issuance.
Case-Laws - HC : Validity of SCN - Assessment u/s 74 - audit u/s 65 was initiated / commenced by the audit team of GST - There is nothing to demonstrate that when the audit under Section 65 has been kick started by way of a notice, show cause notice under section 74 is impermissible. Therefore, it is not necessary to even dilate on the principles governing interference by a writ Court qua show cause notice - Petition dismissed. - HC
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Court Orders Review of ITC Refund Claims Due to Inverted Tax Structure; Eight-Week Deadline Set for Response.
Case-Laws - HC : Refund of accumulated ITC - inverted tax structure - Right to file an appeal - time limitation - It is deemed appropriate to direct the first respondent to take up the representations dated 14.11.2022 and consider the same on merits after eight weeks from today - HC
Income Tax
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Tribunal Rules Principle of Mutuality Applies Despite Presence of Non-Permanent, Non-Voting Members Without Rights Over Surplus.
Case-Laws - HC : Principle or the doctrine of mutuality - Tribunal for the earlier years, has held that even if there are non-permanent members, non-life members, temporary or honorary members, they are not entitled to vote or offer themselves as candidates for any elective office, or have no right of disposal over the surplus in case of dissolution of the club, the assessee would not cease to be governed by the principle of mutuality. - Tribunal was not justified in taking the view that the principle of mutuality would not apply with reference to transactions entered into by the appellant with the non-permanent and non life members. - HC
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Land Sale Reclassified: Profit Assessed as Business Income, Not Capital Gains, Due to Stock-in-Trade Status.
Case-Laws - AT : Correct head of income - Profit or loss derived from sale of land - Assessee has computed profit or loss derived from sale of land under the head ‘capital gains’ to derive the benefit of indexation, otherwise, all evidences including accounting system clearly suggest that impugned land sold by the assessee was stock-in-trade and profit or loss derived from sale of said land is assessable under the head ‘income from business or profession’. - AO as well as the Ld.CIT(A) were right to assess profit or loss derived from sale of land under the head ‘income from business or profession’ - AT
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Section 68 Loan Additions Deleted: Transactions Verified, Lender's Identity and Capacity Proven, No Revenue Dispute.
Case-Laws - AT : Addition u/s. 68 - on the amounts received as loan, assessee had paid interest and had also deducted TDS on the interest paid. The factum of lending the money through banking channels is not doubted by the Revenue. Further the identity and capacity of the lender is proved by the fact that the assessee has placed documents to show that lender is an Income Tax payer, is assessed to tax and for the year under consideration, the lender has disclosed gross total income which is more than the amount advanced. - Additions deleted - AT
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Court Reviews Tax Implications of Joint Property Ownership by Salaried Wife and Husband for 2015-16 Assessment Year.
Case-Laws - AT : Assessment of income from house property - Co-ownership of property - the property has been purchased by husband and wife in co-ownership jointly. The assessee is not a housewife. Computation of income for AY 2015-16 appearing at page 2 of Paper Book shows that she is salary earner and earned salary of Rs. 24 lacs - Additions in the hands of wife confirmed - AT
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India-Netherlands Tax Treaty: No Tax Deduction Required for Aircraft Maintenance Abroad or Logo Printing Expenses Under Article 12(4B).
Case-Laws - AT : TDS u/s 195 - Payment of royalty under India – Netherlands Double Taxation Avoidance Agreement - aircraft maintenance cost - the entire repair work was carried out outside India, therefore, the assessee had no liability to deduct tax as the income was not taxable in India. Insofar as the expenses on Logo printing, the revenue has failed to demonstrate that the make available condition under Article 12(4B) of the Treaty is fulfilled. - AT
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Taxpayer Penalized u/s 271B for Skipping Mandatory Audit Despite High Receipts; Bona Fide Claim Rejected.
Case-Laws - AT : Penalty u/s 271B - no tax audit conducted u/s 44AB - bonafide belief - When Gross profit is more than Rs.4 crores, it means the Gross Receipts were definitely more than Rs.1 crores - Assessee in the case has receipts more than Rs.1 crores. Therefore, the assessee was under obligation to audit the books of account as per section 44AB of the Act - any amount above Rs.1 crores will attract minimum penalty of Rs.1,50,000/- - AT
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Assessee classified as AOP but qualifies as cooperative society; eligible for deductions under Income-tax Act section 80P(2)(a)(i).
Case-Laws - AT : Assessee is an AOP or cooperative society - The assessee has himself obtained PAN No. in the capacity of AOP and from the alphabets of PAN, it is clear that the assessee is an AOP, the arguments taken by the assessee does not survive. - Howeve, the assessee is a cooperative society for the purpose of Income-tax Act and assessee is eligible for claiming deduction as per sec. 80P(2)(a)(i) - AT
Corporate Law
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Scheme of Arrangement Rejected for Violating Companies Act; Failure to Respond to Show Cause Notices in Kerala.
Case-Laws - AT : Rejection of scheme of arrangement - in the light of the violations, committed by the Appellants, under the Companies Act, keeping in mind that both the Companies had not given replies, to the Show Cause Notices, issued by the Registrar of Companies, Ernakulam, Kerala, and also taking note of the surrounding facts and circumstances of the present case, comes to an inevitable, inescapable and irresistible conclusion that the Appellants, had not made out a fit and proper case, for Sanctioning the Scheme of Amalgamation, in accordance with Law - AT
Indian Laws
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Himachal Pradesh's Additional Special Road Tax on Vehicles Valid; Ensures Compliance with Tax Obligations and Permit Terms.
Case-Laws - SC : Scope of legislative powers - levy of tax or penalty - The Legislatures of the State have not only the power to make laws on the taxation to be imposed on motor vehicles as also the passengers and goods being transported by motor vehicles but also the power to lay down principles on which taxes on vehicles are to be levied. In the absence of any principles having been laid down by the Parliament, no fault could be found in the law enacted by Legislature of the State of Himachal Pradesh. - it cannot be said that levy of such an additional special road tax would be said to be manifestly unjust or glaringly unconstitutional. It was, in effect, to ensure payment of the chargeable taxes and use of the vehicles as per the terms of the permit. - SC
IBC
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Insolvency Funds from Avoided Transactions Must Enhance Creditor Asset Pool, Not Go to Resolution Applicant.
Case-Laws - HC : Right of claim over the amount available - Avoidance of preferential transactions - The amount that is available after the transactions are avoided cannot go to the kitty of the resolution applicant - The purpose of the avoidance application as stated above is to enhance the asset pool available for the decision of creditors who are primarily financial institutions and have taken the haircut in agreeing to accept a much lesser amount than what was due and payable to them. This is public money, and, therefore, the amount that is received if and when transactions are avoided and receive the imprimatur of adjudicating authority must be distributed amongst the committee of creditors in a manner determined by the adjudicating authority. - HC
PMLA
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Court Nullifies Search Warrant Due to Lack of 'Reasons to Believe' u/s 17(1) of Money Laundering Act.
Case-Laws - HC : Validity of Search and seizure - In the instant case the record reveals that the Additional Director of Enforcement Directorate without recording the ‘reasons to believe’ as contemplated under Section 17 (1) of PML Act, issued Search Warrant/Authorisation to the Deputy Director to conduct search and seizure of the premises of the petitioners and thereafter the Deputy Director recorded ‘reasons to believe” without any date and time. - proceedings set aside - The respondents are directed to release all the jewellery, cash and other articles seized - HC
Central Excise
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Extended Limitation Period Invalid Without Allegation of Intent to Evade Duty u/s 11A(4) in Show Cause Notice.
Case-Laws - AT : Invocation of extended period of limitation - In the absence of any allegation made in the show cause notice that the appellant had suppressed facts with intent to evade payment of duty, the Department could not have invoked the extended period of limitation under section 11A(4) of the Act. This issue was raised by the appellant before the Commissioner (Appeals), but no finding has been recorded. - The extended period of limitation could not have been invoked. - AT
VAT
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Court Denies Tax Refund on Unsold Beer; Section 27(1)(a) Confirms Tax Applies Despite Non-Removal Due to Lockdown.
Case-Laws - HC : Refund of Tax paid on beer - unsold stock due to Covid Pandemic - As such, the plea of the petitioner that non-removal of beer from the warehouse during the period of its shelf life on account of Covid lockdown would not make it liable for payment of countervailing duty in terms of proviso to section 28(1) of the Act, does not hold good in the eye of law since the taxable event occurs on the import of liquor into the territory of the State, as per the provisions of Section 27 (1) (a) of the Act. - HC
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