TMI Tax Updates - e-Newsletter
January 20, 2022
Case Laws in this Newsletter:
Articles
By: Shripada Hegde
Summary: The article discusses the complexities and legal interpretations surrounding Section 16(4) of the CGST Act, 2017, which sets a time limit for availing Input Tax Credit (ITC). It highlights the issues faced by taxpayers when filing GSTR-3B returns after the deadline, which leads to the denial of ITC. The author argues that the law lacks clarity on what constitutes the "availment of credit" and suggests that the focus should be on the accounting records rather than the return filing date. The article emphasizes the need for amendments to the GST framework to align with the original intent of seamless credit and to avoid undue hardships on businesses.
News
Summary: The Cabinet Committee on Economic Affairs has approved an equity infusion of Rs. 1,500 crore into the Indian Renewable Energy Development Agency Limited (IREDA). This investment is expected to generate approximately 10,200 jobs annually and reduce CO2 emissions by about 7.49 million tonnes per year. The additional funding will enable IREDA to lend approximately Rs. 12,000 crore to the renewable energy sector, supporting an additional capacity of 3,500-4,000 MW. It will also enhance IREDA's net worth and improve its capital-to-risk weighted assets ratio, thereby facilitating further lending and borrowing operations in the renewable energy sector.
Summary: The Union Cabinet has approved a scheme to grant an ex-gratia payment of Rs. 973.74 crore to cover the difference between compound and simple interest for borrowers in specified loan accounts from March 1 to August 31, 2020. This initiative aims to support small borrowers affected by the pandemic, regardless of whether they utilized the moratorium. The scheme, initially approved in October 2020 with a budget of Rs. 5,500 crore, covers various loan categories up to Rs. 2 crore. The State Bank of India, as the nodal agency, has received claims totaling approximately Rs. 6,473.74 crore from lending institutions.
Notifications
Customs
1.
01/2022 - dated
18-1-2022
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Cus
Seeks to exempt BCD and IGST on goods imported for the purpose of AFC Women's Asian Cup India, 2022
Summary: The Central Government of India issued Notification No. 1/2022-Customs, dated January 18, 2022, exempting certain goods imported for the AFC Women's Asian Cup India 2022 from Basic Customs Duty (BCD) and Integrated Goods and Services Tax (IGST). The exemption applies to items such as referee kits, uniforms, match balls, and flags, provided they are imported by the All India Football Federation. The exemption is contingent upon the importer presenting a certificate from the Ministry of Youth Affairs and Sports and committing to re-export non-consumable items within three months post-event. A utilization certificate must also be furnished within the same timeframe.
GST - States
2.
9/2021– State Tax (Rate) - dated
6-1-2022
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Delhi SGST
Amendment in Notification No. 02/2017-State Tax (Rate), dated the 30th June, 2017
Summary: The notification issued by the Finance Department of Delhi on January 6, 2022, amends the earlier Notification No. 02/2017-State Tax (Rate) dated June 30, 2017, under the Delhi Goods and Services Tax Act, 2017. The amendment involves a substitution in the schedule of the notification, specifically for Serial No. 86, which now pertains to seeds, fruit, and spores used for sowing, explicitly excluding seeds intended for purposes other than sowing. This amendment is effective from October 1, 2021, as ordered by the Lieutenant Governor of Delhi.
3.
34/2021– State Tax - dated
5-1-2022
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Delhi SGST
Seeks to extend timelines for filing of application for revocation of cancellation of registration to 30.09.2021, where due date for filing such application falls between 01.03.2020 to 31.08.2021, in cases where registration has been canceled under clause (b) or clause (c) of section 29(2) of the DGST Act.
Summary: The notification extends the deadline for filing applications for the revocation of registration cancellations under clauses (b) or (c) of section 29(2) of the Delhi Goods and Services Tax Act. This extension applies to cases where the original deadline for such applications fell between March 1, 2020, and August 31, 2021. The new deadline is set for September 30, 2021. This modification is issued by the Lieutenant Governor of the National Capital Territory of Delhi, based on recommendations from the Council, and is in accordance with relevant sections of the Delhi, Integrated, and Union Territory Goods and Services Tax Acts.
4.
30/2021– State Tax - dated
5-1-2022
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Delhi SGST
Delhi Goods and Services Tax (Sixth Amendment) Rules, 2021.
Summary: The Delhi Goods and Services Tax (Sixth Amendment) Rules, 2021, effective from August 1, 2021, amend the Delhi GST Rules, 2017. Key changes include the substitution of Rule 80, mandating annual returns in FORM GSTR-9 for registered persons, with specific exceptions. Electronic commerce operators must submit annual statements in FORM GSTR-9B. Entities with over five crore rupees turnover must provide a self-certified reconciliation statement in FORM GSTR-9C. Updates to FORM GSTR-9 and GSTR-9C instructions include adjustments for the fiscal years 2018-19, 2019-20, and 2020-21. The amendments also revise verification procedures and omit Part B Certification.
Income Tax
5.
09/2022 - dated
18-1-2022
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IT
Securities Transaction Tax (1st Amendment), Rules, 2022
Summary: The Securities Transaction Tax (1st Amendment), Rules, 2022, amends the Securities Transaction Tax Rules, 2004. It designates the managing director or a whole-time director of an insurance company, authorized by the Board, as responsible for collecting and paying securities transaction tax. The amendment specifies that tax payments should be made to the Central Government via authorized banks. It introduces Form No. 2A for insurance companies to report taxable securities transactions electronically. The amendment also outlines procedures for secure data transmission and mandates that returns be furnished by authorized directors.
6.
08/2022 - dated
18-1-2022
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IT
Income tax (2nd Amendment) Rules, 2022. - New Rule 8AD Computation of capital gains for the purposes of sub-section (1B) of section 45
Summary: The Income Tax (2nd Amendment) Rules, 2022, introduces Rule 8AD for computing capital gains under sub-section (1B) of section 45 of the Income-tax Act, 1961. Effective from its publication date, the rule specifies how to calculate capital gains from amounts received under specified unit linked insurance policies. For initial receipts, capital gains are calculated as the difference between the received amount and the total premiums paid. For subsequent receipts, the calculation considers previously taxed amounts. These gains are treated as arising from the transfer of units in an equity-oriented fund. The rule defines "specified unit linked insurance policy" as per the Act's provisions.
7.
07/2022 - dated
18-1-2022
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IT
e-advance rulings Scheme, 2022
Summary: The e-Advance Rulings Scheme, 2022, established by the Ministry of Finance's Central Board of Direct Taxes, outlines a digital process for handling advance tax rulings in India. It aims to streamline and automate the allocation and processing of applications for advance rulings using technology like artificial intelligence. The scheme defines key terms and procedures, including application filing, allocation, and ruling issuance, all conducted electronically to enhance efficiency and transparency. The Board for Advance Rulings is empowered to manage these processes, with hearings conducted via video conferencing and all communications handled electronically. Appeals against rulings can be made to the High Court.
SEZ
8.
S.O. 267 (E) - dated
17-1-2022
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SEZ
Central Government de-notifies an area of 9.255 hectares thereby making the total area of the Special Economic Zone as 69.783 hectares at State Industries Promotion Corporation of Tamil Nadu Limited, Industrial Growth Centre, Perundurai Village, Erode District, in the State of Tamil Nadu
Summary: The Central Government has de-notified an area of 9.255 hectares from the Special Economic Zone (SEZ) at the State Industries Promotion Corporation of Tamil Nadu Limited, Industrial Growth Centre, Perundurai Village, Erode District, Tamil Nadu. This adjustment reduces the total SEZ area to 69.783 hectares. The de-notification follows approvals from the State Government of Tamil Nadu and recommendations from the Development Commissioner of the MEPZ SEZ. The de-notified areas are specified by survey numbers and include various plots in Perundurai Village. This action is in accordance with the Special Economic Zones Act, 2005, and related rules.
Circulars / Instructions / Orders
Income Tax
1.
02/2022 - dated
19-1-2022
Guidelines under clause (10D) section 10 of the Income-tax Act, 1961
Summary: The circular issued by the Central Board of Direct Taxes provides guidelines on the tax exemption for sums received under life insurance policies, specifically Unit Linked Insurance Policies (ULIPs), under clause (10D) of section 10 of the Income-tax Act, 1961. Effective from February 1, 2021, the exemption does not apply if the annual premium exceeds Rs. 2,50,000. The guidelines detail scenarios where exemptions are applicable based on the issuance date and premium amounts of ULIPs, with examples illustrating the tax implications under various circumstances. The provisions do not apply to sums received upon the policyholder's death.
DGFT
2.
Policy Circular No. 38/2015-2020 - dated
19-1-2022
Clarification regarding SIMS.
Summary: Policy Circular No. 38/2015-2020, dated January 19, 2022, clarifies the Steel Import Monitoring System (SIMS) requirements. It states that re-imports of steel for packaging under HS codes in Chapters 72, 73, and 86 are exempt from SIMS as they are not intended for value addition. Additionally, SIMS registration is not required for steel items exported from Domestic Tariff Area (DTA) to Special Economic Zones (SEZ) and re-imported into DTA, whether or not value addition occurs. These clarifications follow representations from trade members and are approved by the competent authority.
Customs
3.
01/2022 - dated
18-1-2022
Retention of ISO Containers to meet future requirements
Summary: The circular from the Ministry of Finance, Department of Revenue, addresses the retention of ISO containers used for transporting Liquid Medical Oxygen during the COVID-19 pandemic. It extends the re-export deadline for these containers, initially imported under specific notifications, until September 30, 2022, upon request from importers. Additionally, it clarifies that ISO containers imported on lease with IGST exemption do not require re-export if the IGST is paid on the lease amount under CGST law. Any issues in implementing this directive should be reported to the Board.
Highlights / Catch Notes
GST
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Appellant's ITC Claim for Air Separation Unit Denied u/s 17(5)(d) of CGST/TNGST Act 2017.
Case-Laws - AAAR : Input tax Credit - entitlement to avail and utilize ITC of GST - Air Separation Unit (ASU) - ASP is installed and commissioned with foundation and structural support, embedded on the land, the leasehold rights of which is obtained by the appellant by receiving the service of agreeing to withdraw the lease hold rights held by IPL in their favour. Without the appellant having the leasehold rights. they cannot undertake 'construction' of the manufacturing Plant, ASP. - the taxes paid is restricted as per Section 17(5)(d) of the CGST/TNGST Act 2017 - AAAR
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Rodent feed not covered under HSN 2309 90 10, taxable under Sl.No.453 at 9% CGST and SGST per Notification 01/2017.
Case-Laws - AAR : Classification of goods - product Rodent Feed - classified under the HSN 2309 90 10 or not - Description to Sl.No.102 does not include rodent feed and hence taxable under Sl.No.453 of Schedule III of Notification No. 01/2017 dated: 28.06.2017 at the rate of 9% CGST & SGST each. - AAR
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Distribution Services for Sarees, Dhothies, and Uniforms Exempt from GST When Supplied to Government Departments.
Case-Laws - AAR : Levy of GST - claim of expenses incurred to handle the Cost Free Distribution Sarees & Dhothies and Cost Free School Uniform Scheme - pure services or not - supply to Revenue Department/Social Welfare Department - The services rendered by the applicant towards handling of Dhothies & Sarees/ School Uniforms from Co-operative Societies to Public Distribution System / Revenue Department is exempted from payment of GST - AAR
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5% GST Applies to Marine Engines in Fishing Vessels, Not Spare Parts, Under HS Code 8407 for Defense Use.
Case-Laws - AAR : Levy of GST - marine engines pertaining to HS code 8407 and its spare parts - engine forms a part of fishing vessel or not - Applicability of GST rate 5% on marine engines pertaining to HS code without considering its general tax rate as per the entry of Schedule I, SI.No.252 of GST Act dated 28.06.2017, being this engine forms a part of boats of HS code 8906 being supplied to defence department and Naval base, Cochin is available to the applicant when such engines are fit in vessels used for patrolling/flood relief and rescue purposes. Applicability of GST rate at 5% under SI.no.252 cited above is not available for spare parts of marine engines. - AAR
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Fusible Interlining Fabrics of Cotton Classified Under CTH 5903 After Meeting Explanatory Notes Criteria.
Case-Laws - AAR : Classification of goods - Fusible Interlining Fabrics of Cotton (FIFC) - The applicant during the personal hearing held on 11.02.2020 has stated that their product provides a stiffness; when the garment manufacturers use this, they pass through rollers which fuses to any other cloth placed beneath, i.e., these are capable of providing a bond to other fabric on the application of heat and pressure, which as per the explanatory notes is squarely covered under CTH 5903. Therefore, there are no hesitation to hold that the products in hand merits classification under CTH 5903 only. - AAR
Income Tax
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Court Invalidates Re-assessment Notices Issued Post-April 1, 2021, Without Adhering to New Section 148A; Notifications Declared Ultra Vires.
Case-Laws - HC : Validity of reopening of assessment u/s 147 - re-assessment notice issued under the erstwhile section147/148 after 1.4.2001 without following the mandate of new section 148A - Keeping in view the aforesaid conclusions, Explanations A(a)(ii)/A(b) to the Notifications dated 31st March, 2021 and 27th April, 2021 are declared to be ultra vires the Relaxation Act, 2020 and are therefore bad in law and null and void. All the impugned notices under Section 148 of the Income Tax Act are quashed with liberty to the Assessing Officers concerned to initiate fresh re-assessment proceedings in accordance with the relevant provisions of the Act as amended by Finance Act, 2021 and after making compliance of the formalities as required by the law. - HC
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Pharmaceutical Expenses: Beneficial Circulars Applied Retrospectively, C.B.D.T. Circular No.5 of 2012 Not Retroactive for AY 2010-11.
Case-Laws - HC : Disallowance of expenses u/s 37(1) - Pharmaceutical Companies - proportionate expenditure incurred on medical practitioners - It has been held therein that while beneficial circulars have to be applied retrospectively, oppressive circulars would have prospective application. In view of this it is clear that C.B.D.T. Circular No.5 of 2012 imposes a new kind of imparity and thus the view taken in the aforesaid decisions by the Tribunal is in consonance with the law laid down by the Hon’ble Supreme Court. It is thus clear that the said Circular could not have been applied retrospectively and especially to Assessment Year 2010-11 in the present case. - HC
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Tax Authorities Confirm Income Addition Due to Unexplained Mumbai Cash Deposits; Assessee's Explanation Deemed Unsatisfactory.
Case-Laws - AT : Unexpalined Cash deposited in bank account - unsatisfactory explanation - The accounts, as noted, do not reveal the activity being pursued by the assessee, much less of it being at Mumbai, or the purpose for which cash is/was being withdrawn and accumulated, much less thereat. In the context of the case, it rather also raises the question if the cash withdrawn during earlier years, assuming so, was also at Mumbai and, where so, its relevance - Additions confirmed - AT
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Reassessment in Search Cases Must Follow Section 153C, Not Section 147, for Proper Jurisdiction.
Case-Laws - AT : Reopening of assessment u/s 147 v/s assessment u/s 153C - proceedings initiated u/s 132 - The correct course of reassessment is under section 153C not under section 147 of the Act. The Assessing Officer has no options to choose the proceedings except following the due procedure laid down in the Act particularly in the case of search, in which clear procedures are laid down by the legislature. Therefore, Assessing Officer has no jurisdiction to initiate proceedings under section 147/148 in the case of proceedings initiated under section 132 of the Act - AT
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Uttar Pradesh Industrial Scheme: VAT Subsidy as Capital Receipt, Not Taxable, Encourages New Industry Establishment.
Case-Laws - AT : VAT subsidy - Characterization of receipts - taxability of receipts - The refund now VAT as given to the industrial undertakings only for the purpose of fulfilling the best industrialization of the State by establishment of new industries. Thus, incentive provided under the Uttar Pradesh Industrial Scheme is nothing, but capital subsidy not liable to be taxed - The VAT subsidy is a capital receipt and hence not liable for tax and it cannot be treated as revenue receipt liable for tax. - AT
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Unexplained Cash Deposits Deemed Income u/s 69B; Appellant Fails to Prove Legitimacy, Additions Confirmed.
Case-Laws - AT : Unexplained Cash deposited into Bank Accounts - income from unexplained source u/s 69B - Onus to prove - Onus cast on the Appellant has not been discharged.addition u/s 68 on account of cash deposited in bank was correct when Assessee failed to give explanation regarding the source of cash. In the case of Appellant, it is seen that no details of any of the parties from whom it claims to have received the cash along with confirmation and other details to establish the identity, creditworthiness and genuineness of the transaction has been submitted. - Additions confirmed - AT
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Unexplained Investment Issue u/s 69: Assessee Fails to Prove Real Estate Income, Additions Confirmed by Authorities.
Case-Laws - AT : Unexplained investment u/s. 69 - Non maintenance of books of accounts - When the AO accepted part of her explanation and required the assessee to prove the sources of the remaining deposits, the assessee took a different stand and canvassed that her income is from real estate business and it is covered u/s 44AD etc. However, she has not let any material/ evidences before the lower authorities to prove that she was in the real estate business. It is clear that the assessee has been inconsistent about the nature of sources of the impugned cash credits. - Additions confirmed - AT
Customs
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EOU Faces Duty Demand on Excess Wastage; Revised Norms by Commerce Ministry Set Limits at 15.
Case-Laws - AT : 100% EOU - demand of duty on wastage/ breakage, over and above the permissible limit, of raw materials imported duty free, during the course of manufacture of final products by the EOU - in view of the decisions dated 23/9/2008 and 26/11/2008 of the Commerce Ministry, in the appellant’s case the wastage norms were fixed at 15 percent as against the earlier norms of 9.09 percent. The Revenue is bound by the norms fixed by SION norms fixed by the Ministry of Commerce and therefore the benefit of the same has to accrue to the appellants. - AT
Corporate Law
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Court Rules Advances for Property Sales Are Not "Deposits" Under Companies Rules 2014; Legal Proceedings Deemed Abusive.
Case-Laws - HC : Scope of Deposits - amounts collected by the petitioners for sale of immovable property as advance - would come under the purview of ‘deposits’ or would exempt from the purview of ‘deposits’ by virtue of Rule 2(1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014? - the advances received by the 1st petitioner for sale of immovable property are exempted from the purview of the deposits - in view of the proviso to Rule 2 (1) (c) (xii) (b) of the Companies (Acceptance of Deposits) Rules, 2014, the continuation of proceedings against the petitioners/A-1 to A-5 would amount to abuse of process of the Court. - HC
IBC
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Committee of Creditors Must Follow Legal Process for IRP Appointment; Single Member Cannot Override Majority Decision.
Case-Laws - AT : Nomination of IRP/RP for R-3 company - The appointment of an IRP is clearly provided under Section 22 and the replacement of IRP under Section 27 and therefore, this Application is disposed off with a direction to the CoC to proceed in accordance with law. There is no provision under the Code which empowers one of the Members of the CoC to approach this Tribunal seeking replacement of the IRP or RP when the same is rejected by a majority of Members of the CoC. - AT
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Court Rules CIRP Application Invalid Due to Disputed Interest Claim; Only Proper Jurisdiction Can Resolve the Issue.
Case-Laws - AT : Maintainability of application - initiation of CIRP - The Adjudicating Authority has also recorded finding that claim for interest on the delayed payment is a disputed fact by the Corporate Debtor and it can only be adjudicated by a court of competent jurisdiction. The claim of interest being disputed, no error has been committed by the Adjudicating Authority in rejecting the Application under Section 9 of the Code. - AT
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Court Denies Withdrawal of Insolvency Process; Settlement Can't Alter Original Default Under IBC Section 7.
Case-Laws - Tri : Seeking withdrawal of application for initiation of CIRP - On a bare reading of the provision of section 7(5) clauses (a) and (b) it is amply clear that the Adjudicating Authority has two courses of action available to it. The Adjudicating Authority must either admit the application under section 7(5)(a) or it must reject the application under section 7(5)(b) of IBC, 2016. Whereas, in the present case in hand the settlement agreement agreed between the parties is only a subsequent arrangement which cannot negate the occurrence of default much earlier. Therefore, the applicants' contention regarding change or rescheduling in date of default in lieu of the settlement Agreement holds no merit. Hence, the prayers by the applicant in the present application stands dismissed. - Tri
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Court Weighs Re-Initiating CIRP Amid Delay in Resolution Plan Implementation; No Liquidation Sought by Stakeholders.
Case-Laws - AT : Delay in implementation of approved Resolution Plan - In the present case, the Approved Resolution Plan has been alleged to be contravened by the Successful Resolution Applicant and therefore an application could have been made to the Adjudicating Authority for liquidation. In the present case, no such application for liquidation has been made by the Appellants or any other stakeholder, but on the contrary the Appellants (and also the financial creditors)have sought the re-initiation of CIRP and invitation of fresh EOIs after its (CIRP’s) extension by 90 days. There is no express provision regarding re-initiation of CIRP in the IBC. - AT
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