TMI Tax Updates - e-Newsletter
January 24, 2022

Case Laws in this Newsletter:

Articles

1. GST not leviable on handling charges of PDS distribution of Dhothies & Sarees/ School Uniforms to the state government

   By: Bimal jain

2. COVID LIMITATION EXTENDED BY SUPREME COURT

   By: Dr. Sanjiv Agarwal

3. Salary cost to be included in valuation for cross charge for supply of services between head office and branch office or vice versa

   By: Bimal jain

News

1. Shri Piyush Goyal calls upon the Indian Industry to inculcate a greater appetite for risk taking

Notifications

GST - States

1. G.O.Ms.No.22 - dated 20-1-2022 - Andhra Pradesh SGST

Amendment in Notification Go.Ms.No.494, Revenue(CT-II)Department, dated 03.11.2017

2. G.O.Ms.No.15 - dated 17-1-2022 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Tenth Amendment) Rules, 2021.

3. G.O.Ms.No.14 - dated 17-1-2022 - Andhra Pradesh SGST

Seeks to bring in force provisions of sub-rule (2), sub-rule (3), clause (i) of sub-rule (6) and sub-rule (7) of rule 2 of the Andhra Pradesh Goods and Services Tax (Eighth Amendment) Rules, 2021

4. G.O.Ms.No.13 - dated 17-1-2022 - Andhra Pradesh SGST

Andhra Pradesh Goods and Services Tax (Ninth Amendment) Rules, 2021

5. 19/2021– State Tax (Rate) - dated 4-1-2022 - Tripura SGST

Amendment in Notification No. 02/2017-State Tax (Rate), dated the 29th June, 2017

6. 18/2021– State Tax (Rate) - dated 4-1-2022 - Tripura SGST

Amendment in Notification No. 01/2017-State Tax (Rate), dated the 29th June, 2017

Income Tax

7. 10/2022 - dated 21-1-2022 - IT

U/s 10(46) of IT Act 1961 - Central Government notifies 'National Skill Development Corporation' in respect of the specified income arising to that body

Highlights / Catch Notes

GST

• GST Not Applicable on Employee Notice Pay Deductions: No Supply u/s 7(1A) of CGST Act 2017.

  Case-Laws - AAR : Levy of GST - recoveries made from the employees towards providing parental insurance - It may be concluded that, recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play - AAR
  Visit to Get Source

  ---

• Notice Pay Recovery Not Subject to GST Under CGST Act 2017; No Supply per Section 7(1A.

  Case-Laws - AAR : Levy of GST - notice pay recoveries made from the employees on account of not serving the full notice period - It may be concluded that, recovery of notice pay from dues of employee / payment of notice pay by the employee who could not serve the notice for the period as per contractual agreement / appointment letter does not amount to supply and therefore as per Section 7 (1A) of the CGST Act, 2017, the provisions of Schedule II does not come into play - AAR
  Visit to Get Source

  ---

• Dental Services GST Rates: Healthcare vs. Cosmetic Procedures Explained - Chapter Heading 999312 vs. 999722.

  Case-Laws - AAR : Classification of supply and levy of GST - Services of providing of Artificial Teeth, Crown, Bridges falls under Chapter Heading 999312, attracting Nil rate of GST only when the same are provided as Health care Services and not as a Cosmetic Services. - the services of bleaching of teeth and dental veneers for smile designing provided by dental clinic of Applicant to its patients falls under Chapter Heading 999722 at 18% GST. - AAR
  Visit to Get Source

  ---

• Credit Notes as "Cash Discounts" Not Subject to GST; No Tax on Supplier Incentives or Schemes.

  Case-Laws - AAR : Levy of GST on issuance of credit note as “cash discount” - Since the amount received in the form of credit note is actually a discount and not a supply by the applicant to the supplier, no GST is leviable on receiver on cash discount/incentive/schemes offered by the supplier to applicant through credit note against supply without adjustment of GST. - AAR
  Visit to Get Source

  ---

• Full ITC Allowed on GST Supply Invoices Without Reversal for Discounts, Unless u/s 15(3)(b) of CGST Act 2017.

  Case-Laws - AAR : Input tax credit - Reversal of ITC - the applicant can avail the Input Tax Credit of the full GST charged on the invoice of the supply and no proportionate reversal of ITC is required in respect of commercial credit note issued by supplier for Cash discount for early payment of supply invoices(bills) and Incentive/schemes provided without adjustment of GST, if the said discount is not covered under Section 15(3)(b) of CGST Act, 2017 and the said discounts is not in terms of prior agreement. - AAR
  Visit to Get Source

  ---

Income Tax

• High Court Invalidates Reassessment u/s 147 Due to Overreliance on Audit Objections; Deems Process Legally Unsound.

  Case-Laws - HC : Reopening of assessment u/s 147 - Reopening on the basis of the audit objections - the reasons for reopening of the assessment are almost identically worded as that of audit report. In view of the foregoing, since, in the case at hand also the reopening of the assessment being at the behest of the audit party, the reopening of the assessment is misconceived, incorrect and bad in law - HC
  Visit to Get Source

  ---

• Court Rules No Substantial Question of Law on Undisclosed Income Under Chapter XIV B, Sections 158BB(3) and 158B(b.

  Case-Laws - HC : Undisclosed income of the assessee for the purpose of Chapter XIV B of the Income Tax Act - when section 158BB(3) is read with section 158B(b), which defines undisclosed income, we reach the conclusion that for income to be considered as disclosed income, the same should have been disclosed in the return filed by the assessee before the search or requisition - there is no question of law much less substantial question of law raised in favour of the assessee - HC
  Visit to Get Source

  ---

• Court Rules Reopening of Assessment Invalid: Full Disclosure Made; Change of Opinion Not Permissible Under Sec 147.

  Case-Laws - HC : Validity of Reopening of assessment u/s 147 - It is not at all a case that petitioner has not disclosed anything in his response. Petitioner had given the full particulars. The stand taken by petitioner was also accepted by respondents on merits. The Assessing Officer even disagreed with the audit objections but on second thought, to the objections from the auditors he has re-opened the assessment. In our view, re-opening of the assessment without any basis and merely change of opinion is not permissible while exercising the powers under Section 147 read with Section 148 of the Act. - HC
  Visit to Get Source

  ---

• Court Declines to Extend Tax Filing Deadlines, Trusts Tax Administration to Address Taxpayer Issues Without Intervention.

  Case-Laws - HC : Extension of time limit for filing returns and furnishing tax audit reports - The prayers made by the petitioners in this respect are rather wide and non specific. At this stage, we leave it to the administration to deal with these issues at its level. We are hopeful that proper resolution of the difficulties of assessees would be made at the level of the administration itself without the requirement of Court’s intervention. - HC
  Visit to Get Source

  ---

• CIT Reviews Taxability of Unexplained Cash Deposits u/s 263; Considers Implications for Families with Super Seniors.

  Case-Laws - AT : Revision u/s 263 by CIT - Unexplained cash deposits - That with regard to the chargeability of cash deposit for the purpose of taxation and the applicability of section 115BBE(1) may be separately looked into by the Department. - There are several families consisting of super senior citizens whose children are well-settled but staying away from them for sake of job. It is a matter of common practice in most of the household of our country that the children take care of their parents financially even though the parents may be financially well off on their own. It is a part of moral responsibility on the part of the children for taking care of their aged parents at least by sending finances irrespective of whether they require or not. - AT
  Visit to Get Source

  ---

• Tax Tribunal Upholds Deletion of Addition u/s 69B; Trust's Self-Help Loans Verified as Non-Taxable by CIT(A).

  Case-Laws - AT : Exemption u/s. 11 - Addition u/s 69A and 69B - With respect to the applicability of Section 69B of the Act, we find that assessee has given self-help loan to the members of the trust and given the details of such money utilized for the purposes of that activity which is returnable to the assessee without any interest. These details were also verified by the learned Assessing Officer during the course of remand proceedings and based on that the learned CIT (A) has correctly deleted the addition u/s 69B of the Act. - No addition could sustain - AT
  Visit to Get Source

  ---

• Deemed Dividend Not Applicable: No Loan from Closely Held Company Found u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Addition of deemed dividend u/s 2(22)(e) - proof of incriminating material found in the course of search - There is no loan or advance received by the assessee from the company. It is seen that even as per the case of the A.O. made in the assessment order, the loan or advance has been received by the assessee from the partnership firm. Therefore, as per the admitted case of the A.O., such loan or advance having not been received by the assessee from a closely held company cannot be treated as dividend u/s 2(22)(e), since the first ingredient of section 2(22)(e) itself is not met in this case. - AT
  Visit to Get Source

  ---

• No Penalty for Assessee u/s 271B Due to Reasonable Cause; Accounts Audited Under Cooperative Societies Act.

  Case-Laws - AT : Penalty u/s. 271B - absence of auditing u/s. 44AB - The very fact that the assessee got its accounts audited under the Cooperative Societies Act prima facie shows that it entertained a bona fide belief that the amount of grant-in-aid received from Government of Maharashtra was not includible for the purposes of computing turnover u/s. 44AB. - Since the penalty section is covered u/s. 273B, we hold that the penalty was not required to be levied and confirmed. - AT
  Visit to Get Source

  ---

• Income Tax Appeal: Addition to Business Income Overturned Due to Ignoring Merits, Non-Compliance Not Enough for Upholding.

  Case-Laws - AT : Estimation of business income - The learned CIT (A) confirmed addition merely harping on non-compliance by assessee before the Assessing Officer and not applying his mind to the merits of the addition, such order is also not in accordance with the law. If the assessee is non-compliant before Assessing Officer that could not be the reason to brush aside the merits of the case and confirm addition in the hands of the assessee when complete details are available before the Commissioner of Income Tax (Appeals) - additions deleted - AT
  Visit to Get Source

  ---

• CIT's Section 263 Revision on Unexplained Share Application Money Deemed Void; Reassessment Already Addressed Issues.

  Case-Laws - AT : Revision u/s 263 by CIT - Addition u/s 68 - unexplained share application money - Since the aforesaid exercise was carried out by the second AO in the reassessment proceedings and the documents referred to above are in the assessment folder, the Second Ld. Pr. CIT erred in holding the reassessment order of the AO in respect of share capital and premium collected by the assessee as erroneous as well as prejudicial to the interest of the revenue. - the Second Ld. Pr. CIT without satisfying the condition precedent u/s. 263 of the Act has invoked the revisional jurisdiction (second time), so all his actions are ab initio void - AT
  Visit to Get Source

  ---

• Tax Provision for Future Losses Disallowed Due to Lack of Solid Basis and Reversal in Later Years.

  Case-Laws - AT : Disallowance of claim of provision for losses - In fact, the assessee reversed the provision made in this year under consideration in subsequent two financial years. Therefore, the above facts clearly show that there is no basis for the assessee to make the provision and it is only an estimation made by the assessee. - Thus estimation of future loss was neither based on any actuarial or any scientific method of determination of its liability and thus, we confirm the orders of authorities below that the losses could not be allowed on a projected basis unless they are actually incurred and verifiable with proper accounting methods. - AT
  Visit to Get Source

  ---

• Court Rules Against Reopening Assessment u/s 147 Due to Lack of Concealed Facts or Justifiable Evidence.

  Case-Laws - AT : Validity of Reopening of assessment u/s 147 - to say that the assessee had concealed any material fact relating to EDC, is not correct. That he had reflected it is as a liability in the Balance Sheet and not shown it as revenue receipt in its Profit & Loss Account, is not a matter of fact but on the contrary it is an interpretation of the fact of receipt of EDC regarding its nature and the reasons do not bring out any material /information with the AO leading him to form this opinion of the EDC charges being Revenue in nature. DR has been unable to enlighten us as to what material fact relating to EDC was concealed by the assessee so as to empower the AO to assume jurisdiction to reopen the case of the assessee beyond four years from the relevant assessment year. - AT
  Visit to Get Source

  ---

Indian Laws

• CCI's Jurisdiction Covers Anti-Competitive Practices in Regulated Commodities, Including Lotteries; No Conflict with Regulation Act.

  Case-Laws - SC : Jurisdiction - power of CCI - There was no conflict in the interplay of the two Acts that even needed reconciliation or prohibition against either one, as the limited scrutiny was to examine the mandate of Section 3(1) read with Section 3(3) of the Competition Act. Lotteries may be a regulated commodity and may even be res extra commercium. That would not take away the aspect of something which is anti-competition in the context of the business related to lotteries - The lottery business can continue to be regulated by the Regulation Act. However, if in the tendering process there is an element of anti-competition which would require investigation by the CCI, that cannot be prevented under the pretext of the lottery business being res extra commercium, more so when the State Government decides to deal in lotteries. - SC
  Visit to Get Source

  ---

• Court Finds Insufficient Evidence in Cheque Dishonor Case; Alleged Misuse by Power Agent Not Supported by Principal.

  Case-Laws - HC : Dishonor of Cheque - insufficiency of funds - misuse of blank signed cheques by power agent - In the absence of the Principal appearing before this Court to substantiate his case and there being no tangible materials based on which the complaint given by the Principal could be made out, this Court is of the considered opinion that the initiation of the complaint is only for the purpose of harassing the petitioner and cannot be said to be a pure case of cheque dishonour attracting Section 138 of the Negotiable Instruments Act. - HC
  Visit to Get Source

  ---

IBC

• Insolvency Code: Statutory dues like tax liabilities treated as Operational Debt under I&B Code, no special treatment.

  Case-Laws - AT : Approval of Resolution Plan - statutory dues (tax liability) - the claim of the Appellant is an Operational Debt and for all purposes the I&B Code, 2016 shall only apply. There is no special treatment or category made separately for such dues and the claim of the Appellant are to be treated as Operational Debt. - In view of the settled law, there is no special treatment that can be accorded to statutory dues under the scheme of the I&B Code - AT
  Visit to Get Source

  ---

• NCLT Sets Aside Application Due to Pre-Existing Dispute Confirmed by Arbitration Initiation Before Demand Notice u/s 8.

  Case-Laws - AT : Initiation of CIRP - It is pertinent to note that on 09.07.2016, ‘prior to the issuance of the Demand Notice under Section 8 of the Code’, the ‘Operational Creditor’ invoked Arbitration pursuant to the 8 project orders issued by the ‘Corporate Debtor’, which itself substantiates the ‘Existence of a Dispute’. In the ‘Notice’ invoking Arbitration, the ‘Operational Creditor’ has stated that there is an outstanding amount and has further stated that they are ready to settle the disputes through Arbitration. - we are of the considered view that there is a ‘Pre-Existing Dispute’ between the parties - Application admitted by the NCLT set aside - AT
  Visit to Get Source

  ---

Service Tax

• High Court Orders Reconsideration of SVLDRS-1 Declaration; Applicant to Receive Hearing and Potential Reliefs.

  Case-Laws - HC : SVLDRS-1 Declaration - rejection of the application under the scheme without rendering any opportunity of hearing to the declarant - The matter is remanded back to the Designated Committee to consider the said Declaration dated 30th December, 2019 filed by the petitioner in terms of the scheme as valid Declaration under the category “investigation, enquiry and audit” and grant consequential reliefs to the petitioner after providing due opportunity of hearing to the petitioner before finally deciding the issue - HC
  Visit to Get Source

  ---

Central Excise

• Order Dismissing Energy Data in Steel Case Lacks Evidence, Relies on Untested Reports; Tribunal Previously Discarded Similar Evaluation.

  Case-Laws - AT : Clandestine Removal - mild steel ingots from sponge iron - pig iron - There is no explanation forthcoming in the impugned orders for discarding of the energy consumption determined during the trial production except to cast doubts by relying upon reports that, admittedly, did not test the furnace deployed by the appellant-assessee - the singular continuity of adjudicatory evaluation from the earlier period, discarded by the Tribunal in the appeal of the very same assessee and individual, to the present demand, the impugned order is bereft of sufficient facts and evidence to be sustained in appellate proceeding. - AT
  Visit to Get Source

  ---

VAT

• Penalty u/s 10A of Central Sales Tax Act Overturned Due to Lack of Mens Rea in C-Forms Case.

  Case-Laws - HC : Levy of penalty under Section 10A of the Central Sales Tax Act, 1956 - C-Forms - inter-state sales - the essential ingredient of mens rea for levy of penalty on the petitioner, was not established. In such circumstances, the findings of the Assessing Officer as confirmed by the First Appellate Authority as well as the Tribunal that the petitioner committed the offence under section 10(b) warranting levy of penalty under section 10A of the Act, cannot be allowed to be sustained. - HC
  Visit to Get Source

  ---

• Tribunal: Dealer with common TIN can claim input tax credit on raw materials, not on intra-state stock transfers.

  Case-Laws - Tri : Input Tax Credit - Intra-state Stock transfer - This Tribunal is of the considered view that the dealer with a common TIN number can definitely claim input tax credit even on raw materials used for the purpose of manufacturing of goods at the time of its end product and not on stock transfer of goods claiming to be an intra-state stock transfer. - Tri
  Visit to Get Source

  ---