TMI Tax Updates - e-Newsletter
January 21, 2022
Case Laws in this Newsletter:
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The faceless assessment scheme under Section 144B of the Income Tax Act, 1961, allows tax assessments to occur digitally, removing the need for in-person appearances. However, the right to a personal hearing remains contentious. Courts have ruled that personal hearings are a part of natural justice, even if not explicitly stated in the law. The Delhi High Court emphasized that personal hearings should be granted if requested, as they are a vested right of the assessee. The court criticized the lack of a show cause notice and personal hearing in some cases, underscoring that faceless assessments do not negate the need for such hearings.
By: Dr. Sanjiv Agarwal
Summary: Under Section 62 of the CGST Act, 2017, if a registered person fails to file returns under sections 39 or 45 despite receiving a notice under section 46, a proper officer can assess the tax liability based on available information and issue an assessment order within five years. If the person files a valid return within 30 days of the order, it is deemed withdrawn, but interest and late fees still apply. The assessment is formalized using FORM GST ASMT-13, and a summary is uploaded in FORM GST DRC-07. The process is mandatory following a notice under section 46.
News
Summary: The Finance Minister authorized an advance installment of tax devolution to state governments totaling Rs. 47,541 crore, doubling the states' January 2022 entitlements to Rs. 95,082 crore. This release follows a similar advance in November 2021 and adds an additional Rs. 90,082 crore over the budgeted amount for the fiscal year. The initiative supports state governments in enhancing capital and developmental expenditures amid the COVID-19 pandemic. Additionally, the central government completed a back-to-back loan of Rs. 1.59 lakh crore to states for GST compensation shortfalls by October 2021. The distribution details for each state are provided in the statement.
Notifications
GST - States
1.
G.O.MS.No.380 - dated
30-12-2021
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Andhra Pradesh SGST
Amendment to Go.Ms.No.257, Revenue(CT-II)Department, dated 29.06.2017
Summary: The Government of Andhra Pradesh issued an amendment to the Andhra Pradesh Goods and Services Tax Act, 2017, specifically modifying Go.Ms.No.257 dated 29.06.2017. The changes include substituting the term "motor cycle" with "motor cycle, omnibus or any other motor vehicle" and adding a clause regarding the supply of restaurant services, excluding those at specified premises. Additionally, the definition of "specified premises" now includes hotel accommodations with a tariff above 7,500 rupees per unit per day. These amendments take effect from January 1, 2022.
2.
G.O.MS.No.379 - dated
30-12-2021
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Andhra Pradesh SGST
Amendment to Go.Ms.No.588, Revenue (CT-II) Department, dated 12.12.2017
Summary: The Government of Andhra Pradesh has issued an amendment to the notification Go.Ms.No.588, dated 12.12.2017, under the Andhra Pradesh Goods and Services Tax Act, 2017. This amendment, effective from January 1, 2022, omits references to "a Governmental authority or a Government Entity" in the description of services for serial numbers 3 and 3A. Additionally, it specifies that certain services supplied through an electronic commerce operator, as notified under Section 9(5) of the Act, are excluded from the provisions in serial numbers 15 and 17. The notification is published in the Andhra Pradesh Gazette.
3.
G.O.MS.No.376 - dated
30-12-2021
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Andhra Pradesh SGST
Amendment to Go.Ms.No.258, Revenue(CT-II)Department, dated 29.06.2017
Summary: The Government of Andhra Pradesh has issued an amendment to the Andhra Pradesh Goods and Services Tax Act, 2017, specifically modifying the previous notification in Go.Ms.No.258, dated 29.06.2017. The amendments involve changes in tax schedules: Schedule II, 6% tax rate, item number 243 and its related entries are omitted, and in Schedule III, 9% tax rate, item number 452P, the phrase "in respect of Information Technology software" is removed. These changes are made under the authority of sections 9(1) and 15(5) of the Act, following recommendations from the GST Council.
4.
35/2021– State Tax - dated
17-1-2022
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Delhi SGST
Delhi Goods and Services Tax (Eighth Amendment) Rules, 2021.
Summary: The Delhi Goods and Services Tax (Eighth Amendment) Rules, 2021, effective from September 24, 2021, introduce several amendments to the Delhi GST Rules, 2017. Key changes include mandatory Aadhaar authentication for registered persons, with specific provisions for proprietorships, partnerships, companies, and other entities. Rule 10B mandates Aadhaar verification for filing applications related to registration revocation, refunds, and tax payments. Amendments also redefine reporting periods and specify bank account requirements for refund credits. These changes aim to enhance compliance and streamline processes under the Delhi GST framework.
5.
05/GST-2 - dated
18-1-2022
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Haryana SGST
Notification to amend notification no. 46/ST-2, dated 30.06.2017 under the HGST Act, 2017
Summary: The Haryana Government's Excise and Taxation Department has amended notification No. 46/ST-2, dated June 30, 2017, under the Haryana Goods and Services Tax Act, 2017. Effective January 1, 2022, the amendments involve changes to the description of services in specific items within the notification. The words "Union territory, a local authority, a Governmental Authority or a Government Entity" have been replaced with "Union territory or a local authority" in certain descriptions. Additionally, specific conditions related to these items have been removed. This amendment was made in the public interest on the recommendations of the Council.
6.
04/GST-2 - dated
18-1-2022
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Haryana SGST
Notification to amend notification no. 35/ST-2, dated 30.06.2017 under the HGST Act, 2017
Summary: The Haryana Government's Excise and Taxation Department issued a notification amending a previous notification under the Haryana Goods and Services Tax Act, 2017. Effective January 1, 2022, the amendment involves changes to the tax schedules. In Schedule I, the 2.5% tax rate for serial number 225 and its related entries are omitted. In Schedule II, a new entry is added with serial number 171A1, specifying a 6% tax rate for footwear with a sale value not exceeding Rs. 1000 per pair. This amendment supersedes a prior notification dated December 29, 2021.
7.
18/2021 – State Tax - dated
24-12-2021
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Jharkhand SGST
Amendment in Notification No. 49 – State Tax, dated the 29th June, 2017
Summary: The Government of Jharkhand has amended Notification No. 49 - State Tax, dated 29th June 2017, under the Jharkhand Goods and Services Tax Act, 2017. The amendments involve changes in the wording related to tax payment obligations and adjustments in the interest rates applicable to taxpayers based on their turnover. Taxpayers with turnovers exceeding 5 crores are subject to 9% interest for the first 15 days post-due date and 18% thereafter. Those with turnovers up to 5 crores have a graded interest rate structure for March, April, and May 2021. The notification is effective from 1st June 2021.
8.
17/2021 – State Tax - dated
24-12-2021
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Jharkhand SGST
Amendment in Notification No. 83/2020 – State Tax, dated the 29th January, 2021
Summary: The Commissioner of the Commercial Taxes Department in Jharkhand has amended Notification No. 83/2020 - State Tax, initially issued on January 29, 2021. This amendment, effective from June 1, 2021, involves the insertion of the words "and May, 2021" in the second proviso of the original notification. This change is made under the authority granted by the Jharkhand Goods and Services Tax Act, 2017, following the recommendations of the Council. The amendment was officially documented in Notification No. 17/2021 - State Tax, dated December 24, 2021.
9.
40/2021 – State Tax - dated
11-1-2022
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Maharashtra SGST
Maharashtra Goods and Services Tax (Tenth Amendment) Rules, 2021.
Summary: The Maharashtra Government issued the Maharashtra Goods and Services Tax (Tenth Amendment) Rules, 2021, effective from December 29, 2021. Key amendments include changes to Rule 36 on input tax credit, Rule 80 on annual returns for FY 2020-2021, and Rule 95 regarding tax refund applications. Rule 142 now alters the timeline for detention and seizure notices, while Rule 144A introduces procedures for penalty recovery through auction of detained goods. Rule 154 details the appropriation of sale proceeds from goods or property. New forms and modifications to existing forms, such as GST DRC-10, DRC-11, and DRC-22, are also introduced.
Circulars / Instructions / Orders
GST - States
1.
120/2022-GST - dated
19-1-2022
GST on service supplied by restaurants through e-commerce operators
Summary: The circular from the Government of Assam clarifies the GST implications for restaurant services provided through e-commerce operators (ECOs). As per the GST Council's recommendation, ECOs are liable to pay GST on such services under section 9(5) of the Assam GST Act, 2017, effective January 1, 2022. ECOs are not required to collect TCS for restaurant services, nor do they need separate registration for these services. They must pay GST in cash for restaurant services and issue invoices for them. The circular also details reporting requirements for GST returns related to these services.
Customs
2.
02/2022 - dated
19-1-2022
Alignment of AEO Circular No. 33/2016 dated 22.07.2016 and 54/2020 dated 15.12.2020 with CAROTAR, 2020 implemented vide dated 21.09.2020
Summary: The circular issued by the Ministry of Finance's Department of Revenue aligns the Authorized Economic Operator (AEO) Circulars No. 33/2016 and 54/2020 with CAROTAR, 2020, effective from September 21, 2020. The alignment clarifies that the provisions under Section 28 DA of the Customs Act, 1962, concerning preferential duty rates and CAROTAR, 2020, take precedence over previous relaxations regarding bank guarantees for AEO categories. The new provisions override specific paragraphs of the earlier circulars, ensuring consistency with the updated customs administration rules.
Highlights / Catch Notes
GST
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Locker Rent at Bus Stands by Municipality Exempt from GST under Article 243W, per Notification No. 14/2017-CT (Rate.
Case-Laws - AAAR : Exemption form GST - Rent for locker provided in bus stand - (Rent for locker provided in bus stand by the appellant) it is held to be an activity undertaken by the Municipality as a function entrusted under 243 W of the Constitution and the service of rent or fee collection for such a facility is neither a Supply of Goods nor a supply of Service as per Notification No. 14/2017-CT (Rate) - AAAR
Income Tax
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Capital contribution of land to partnership firm triggers capital gains u/s 45(3), no taxable income without partner withdrawal.
Case-Laws - HC : Short term capital gain - capital gain arose from transfer of land to the partnership firm by way of capital contribution as the assets was converted to Fixed Capital Asset by the partnership firm - Section 45(3) seeks to determine the capital gains with reference to the value of the asset recorded in the books of account of the firm. The value so recorded is statutorily deemed to be the full value of consideration received or accruing to the partner as a result of the transfer of the capital asset to the firm. Thus, Section 45(3) does not seek to substitute by any other figure the value agreed between the partners at which the asset is transferred by a partner to the firm. - As held that there was no withdrawal by the partners from capital accounts and therefore there cannot be any income liable to tax in their hands. - HC
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Reopening Assessment u/s 147 Challenged: Notice Issued Based on Opinion Change, Not New Facts.
Case-Laws - HC : Reopening of assessment u/s 147 - The notice under Section 148 has been issued purely by way of change of opinion relying on the same set of primary facts which had been submitted by petitioner during the original assessment proceedings. In our view, the usage of expression in the reasons “there has been escapement of income by reason of failure on the part of the assessee to disclose fully and truly all material facts” is clearly made as an attempt to take the case out of the restrictions imposed by proviso to Section 147 of the Act. - HC
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Assessing Officer's satisfaction u/r 8D(2) is crucial for Section 14A disallowance; Section 154 rectification deemed invalid.
Case-Laws - HC : Disallowance u/s 14A r.w.r. 8D in rectification proceedings u/s 154 - Mandation of recording satisfaction - Recording of satisfaction by the Assessing Officer under Rule 8D(2) of the Rules is mandatory. In the light of these provisions, the Assessing Officer invoking Section 154(2) to rectify the assessment order is wholly untenable for the reason that there is no mistake apparent on the face of the record to invoke the proceedings under Section 154 of the Act. - HC
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Assessee's Unexplained Share Application Money Under Scrutiny: Section 68 Invoked Due to Questionable Creditworthiness and Transaction Genuineness.
Case-Laws - AT : Addition u/s 68 - assessee has received share application money as unexplained - In the instant case, assessee has only established identity of the creditor, credit-worthiness and genuineness of the transaction with the assessee have come under serious cloud, and gave rise to reasonable belief in the mind of the AO that the assessee has indulged in a dubious transaction to launder its undisclosed income. Therefore, in our view, it is a fit case where provisions of section 68 of the Act should be invoked, which the ld.AO has rightly done so - Additions confirmed - AT
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Interest Expense Disallowance u/s 14A: Remanded to Assessing Officer for Recalculation Using Rule 8D Formula.
Case-Laws - AT : Disallowance u/s 14A - Disallowing interest expense - Neither the assessee furnished the working of disallowances under section 14A, nor the lower authority made the disallowance as per the formula prescribed under Rule 8D, therefore, we restore the matter back to the file of Assessing Officer to re-compute/ rework the disallowance under section 14A read with Rule 8D. The assessee is also directed to explain the working of disallowance under section 14A before the Assessing Officer as and when called for. - AT
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CIT Revision u/s 263: Assessing Officer Must Fully Evaluate Section 56(2)(vii)(b)(ii) and Consider PCIT's Observations.
Case-Laws - AT : Revision u/s 263 by CIT - Applicability of section 56(2)(vii)(b)(ii) has to be considered by reading the provision as a whole and in the context of various exceptions provided in the provisos to the said provision. This can be done through a proper and complete enquiry being done by the assessing officer. The assessing officer cannot act independently if he is circumscribed by various observations of learned PCIT on merits. - AT
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Assessing Officer's order invalid due to lack of notice; dissolved company tax proceedings quashed u/s 263.
Case-Laws - AT : Revision u/s 263 by CIT - AO framed assessment order on died company - in the absence of a valid notice, the AO has no authority to assume the jurisdiction to assess the tax liability, therefore continuation of the proceeding under the Income Tax Act, pursuant to such invalid notice, in the name of dissolved (dead) company, is without authority of law. Therefore, impugned notice as well as the proceedings taken pursuant thereto, therefore, cannot be sustained. Therefore, we quash the consequential order passed by the ld PCIT under section 263.- AT
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CIT's revision u/s 263 disallowed exemption, but no breach of Section 11(5) and 13(1)(d) conditions found.
Case-Laws - AT : Revision u/s 263 by CIT - disallowance of exemption claimed in respect of accumulation of income u/s 11(2) - insofar as the impugned assessment year is concerned, there is no breach or violation of the conditions of section 11(5) r.w.s. 13(1)(d) of the Act. That being the case, the assessing officer could not have invoked the provisions of section 13(1)(d) r.w.s. 11(5) of the Act to deny assessee’s claim of exemption under section 11(2) of the Act in the impugned assessment year. - AT
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Interest Deduction Denied as Assessee Fails to Prove Business Purpose for Incurred Interest Expenditure.
Case-Laws - AT : Disallowance of interest expenditure - alleging that the assessee was unable to establish that the interest expenditure was incurred for the purpose of business - The onus is entirely on the assessee to establish on record that the interest expenditure claimed as deduction was incurred for the purpose of business. The assessee having failed to do so, the claim cannot be allowed. - AT
Customs
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Court Permits Finalization of 23-Year-Old Fraudulent Export Proceedings; Petitioners' Request to Dismiss Dormant Notice Denied.
Case-Laws - HC : DEEC Scheme - fraudulent export - proceedings initiated, but was not completed during the 23 years - The respondents should be granted liberty to conclude the proceedings. It is the petitioners who have approached the Court to have the impugned show-cause notice set aside. Had the petitioners not invoked the writ jurisdiction of this Court, the show-cause notice would have continued to gather dust. The petitioners, in such circumstances, cannot possibly be worse off for seeking a Constitutional remedy and thereby suffer an order to facilitate conclusion of the proceedings which, because of the inordinate delay in its conclusion, is most likely to work out prejudice to them. - HC
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Court Limits Appeal Deposit to 7.5% of Disputed Amount; Orders Refund of Excess to Petitioner.
Case-Laws - HC : Refund of excess amount deposited - The petitioner is right in his contention that the maximum liability to deposit the disputed amount in the appeal already preferred by the petitioner, which is pending adjudication is 7.5% of the disputed amount; it follows therefrom that in view of my finding that the impugned letters / orders are illegal and arbitrary and deserve to be quashed, by also applying the principles of restitution, it is necessary to direct the respondents to refund / repay any sum in excess of 7.5% back to the petitioner pending disposal of the appeal and by issuing necessary directions in this regard - HC
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Appellate authority rules respondent must pay duty drawback claim with interest; rejection deemed arbitrary, violating res judicata.
Case-Laws - HC : Seeking payment of duty drawback claim, along with interest - the Order dated 06.03.2020 passed by the appellate authority was binding upon the respondent No.1 who had no other option than to give effect and implement the same thereby disbursing the duty drawback claim in favour of the petitioner together with applicable interest as directed in the Order dated 06.03.2020 and failure on the part of the respondent No.1 to appreciate this and instead proceeding to reject the claim of the petitioner on irrelevant and extraneous grounds is clearly illegal, arbitrary and opposed to the principles of resjudicata. - HC
Corporate Law
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Tribunal to Address Company Mismanagement Allegations u/ss 241 and 242; NCLT Kolkata Hearing Set for Feb 18, 2022.
Case-Laws - AT : Oppression and mismanagement - the Tribunal has the power to make Interim Orders which it thinks fit for regulation of the conduct of the affairs of the Company - keeping in mind the ingredients of Section 241 and 242 of the Act, arrives at the resultant conclusion, without expressing any opinion on the merits of the matter, also not delving deep into the case, as allegations of ‘oppression and mismanagement’ consist of mixed questions of fact and law, which cannot be decided at this interim stage, directs the NCLT Kolkata Bench to take up the matter on 18.02.2022, without any further adjournments, dealing with all issues raised, in accordance with law.- AT
Indian Laws
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Bank Clerk's Fraud Leads to Dismissal: Supreme Court Affirms Penalty for Breaching Fiduciary Duty in Financial Sector.
Case-Laws - SC : Levy of penalty of dismissal from service - Fraud by the Bank Clerk - industrial dispute - Breach of duty as a custodian of public money - The respondent was a clerk-cum-cashier. It is a post of confidence. The respondent breached that confidence. In fact, the respondent breached the trust of a widowed sister-in-law as well as of the bank, making it hardly a case for interference either on law or on moral grounds. The punishment imposed on the respondent could also hardly be said to be disproportionate. The conduct established of the respondent did not entitle him to continue in service. - SC
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Court Rules Arbitral Award Invalid; Claimant's Use of Section 18 Limitation Act Rejected in Cheque Dishonor Case.
Case-Laws - HC : Validity of Arbitral Award - dishonor of cheque - Claim u/s 18 of the Limitation Act, 1963, a fresh period of limitation - Admittedly, in this case the respondent was granted 45 days credit period for making payment of each invoice. The claimant though urged before this Court vehemently that the respondent having issued a cheque of ₹ 50 lakhs, which was dishonored, the entire outstanding claim under various invoices stood revived on the ground that there was fresh period of limitation under section 18 of the Limitation Act, the claimant having exercised the option under section 60 of the Indian Contract Act, no such inconsistent plea can be permitted. - HC
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Court Modifies Order: Suspension of Conviction Pending Appeal u/s 148, Requires 30% Compensation Deposit.
Case-Laws - HC : Dishonor of Cheque - Suspension of order passed by the lower court - Considering the provisions of Section 148 of the N.I. Act and the Statement of Object and Reasons for the amendment, this Court finds no illegality in the direction issued by the Sessions Court in the order dated 25.02.2019 - the terminology used in the operative part of the order dated 25.02.2019 passed by the Sessions Court is modified so to be read that the conviction and sentence imposed by the trial Court shall stand suspended pending the appeal on condition that the applicant-appellant deposits 30% of the amount of “compensation” instead of the words - “cheque amount”. Rest of the directions issued in the impugned order dated 25.02.2019 remains unaltered - HC
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High Court Rules Partner Cannot Be Liable for Cheque Dishonor Without Firm's Inclusion in Proceedings.
Case-Laws - HC : Dishonor of Cheque - The actual offence should have been committed by the Company then alone the other categories of persons would become liable for the offences - in the present case though the name of the firm has been reflected in the cause title showing petitioner as partner of the firm, but the firm has not been separately, in individual capacity, made a party to the proceedings. The petitioner has been joined as a partner to the firm without impleading the firm in the criminal proceedings, which is not tenable. - HC
IBC
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Antrix's Winding-Up Proceedings Questioned: Not a Creditor Under IBC, Relies on Companies Act Section 271(c) Instead.
Case-Laws - SC : Validity of Winding up order - Antrix, which initiated the proceedings for winding up, is neither a financial creditor nor an operational creditor nor a corporate applicant. This is why Antrix have not and could not have gone for insolvency resolution process, under the IBC, but taken recourse to Section 271(c) of the Companies Act, 2013. Hence the ratio in Jignesh Shah, as applicable to debts, whose recovery in any case should not have been time barred on the date of initiation of the proceedings for winding up/insolvency resolution process, cannot have any application to the case on hand. - SC
Service Tax
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Refund Denial for Export-Oriented Unit's Input Service Tax Credit Deemed Unjustified; No Condition in Notification No. 8/2016-CE (NT).
Case-Laws - AT : 100% EOU - Refund claim of unutilised input service tax credit - the denial of refund claim in part, solely on the basis that the same was to be given in respect of closing balance of credit as declared in the return for the Month of June 2017, is not legal and proper, as substantive benefit cannot be denied on technical reasons, all the more, when there was no such condition in Notification No.8/2016-CE (NT) - AT
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Security Firm Didn't Remit Service Tax, No Fact Suppression; Extended Limitation Period Not Applicable, Says High Court.
Case-Laws - HC : Extended period of limitation - Security service - Non-payment of service tax, inspite of collection of service Tax from its clients - The fact finding authority having taken cognizance of the facts has reached at a conclusion that there was no suppression by the respondents to invoke the extended period of limitation which being purely based on the factual aspects of the matter, there are no reasons in interfere with the same. - HC
Central Excise
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Appellate Authority Can Condon Delay in Filing Appeals, Ensuring Justice Based on Case-Specific Facts and Conditions.
Case-Laws - HC : Condonation of delay in filing appeal before the Commissioner (appeals) - It is clear that in the absence of power vested with the appellate authority to condone the delay, in the peculiar facts and circumstances of the case, the ends of the justice would be met in permitting the appellants to file an appeal instead of adjudicating the matter on merits subject to conditions imposed - HC
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CENVAT Credit Allowed for Chemical Wastage During Processing; Loss Doesn't Disqualify Claim Under Manufacturing Rules.
Case-Laws - AT : CENVAT Credit - Chemicals sent to the job workers for carrying out further process - since the appellant has sent their chemicals in the water base during the process it is obvious that a certain quantity of the contaminated water shall be wasted therefore, the same is not capable of being returned by the job worker. Irrespective of the fact whether the same is liable to be returned or not there is no dispute that the non receipt of material is wastage and nothing else. It is settled that any wastage arising during the course of manufacture cenvat credit attributed to said wastage cannot be denied. - AT
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Court Grants Excise Duty Refund for Supplies to ONGC and Oil India Under International Competitive Bidding, Deeming Them Exports.
Case-Laws - AT : Refund of the amount Central Excise Duty - deemed exports or not - supplies made to ONGC and Oil India Limited against International Competitive Bidding - In view of the settled legal position there is no reason to deny the refund of excise duty paid by the appellant in respect of exempted goods - the appellant is entitled for the refund - AT
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