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Home e-Newsletters Index Year 2024 November Day 11 - Monday

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TMI Tax Updates - e-Newsletter
November 11, 2024

Case Laws in this Newsletter:

GST Income Tax Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws



Highlights / Catch Notes

    GST

  • Taxpayers' pre-deposit refunds for GST appeals allowed.

    Circulars : This corrigendum clarifies that the restriction on refund u/s 150 of the Finance (No. 2) Act, 2024 will not apply to refunds of pre-deposit amounts paid by taxpayers at the time of filing appeals under sub-sections (6) of Section 107 or (8) of Section 112 of the CGST Act, where such appeals are decided in favor of the taxpayer. It inserts this clarification at the end of paragraph 4 of Circular No. 237/31/2024-GST dated 15th October 2024, issued by the Central Board of Indirect Taxes and Customs, GST Policy Wing, Ministry of Finance, Government of India.

  • Goods seized for lacking e-way bill despite tax compliance; High Court quashes order citing no tax evasion intent.

    Case-Laws - HC : Non-generation of e-way bill during transportation of goods led to seizure order u/s 129(3) of GST Act, imposing penalty and interest. However, it was admitted that goods were transported with relevant documents except e-way bill, which was produced before seizure order. No finding recorded regarding intention to evade tax. Relying on precedent, High Court held that in absence of intention to evade tax and production of e-way bill before seizure order, impugned orders cannot be sustained and quashed the same. Petition allowed.

  • Apex Court Upholds GST on Royalties Paid for Mining Concessions by State Authorities.

    Case-Laws - HC : Royalty paid by a mineral concession holder for mining concessions granted by the State is subject to GST levy. The constitutional validity of notifications issued by the Central and Himachal Pradesh governments imposing GST on such royalty payments is upheld. The Supreme Court's nine-judge bench ruling in Mineral Area Development Authority & Anr. v. Steel Authority of India & Anr., overruling its earlier decision in India Cement Limited v. State of Tamil Nadu, clarified that royalty is not a tax. Consequently, the respondents are within their rights to levy GST on royalties paid for mining concessions granted by the State. The High Court upholds the impugned orders and notices regarding GST levy on such royalties and dismisses the petition.

  • Cement firm boss accused of siphoning off funds, faces dual FIRs for tax evasion & embezzlement.

    Case-Laws - HC : High Court dismissed petition seeking quashing of FIR related to clandestine manufacture and supply of cement clinker and cement without invoices and accounting. Court held second FIR maintainable as offense under GST Act would not cover misappropriation of company funds for personal use resulting in wrongful loss. Allegations in second FIR pertain to misappropriation of company funds, distinct from allegations in first FIR regarding document forgery. Complainant having interest in company has locus standi to initiate proceedings. High Court should be slow in interfering with criminal proceedings at initial stage unless complaint discloses no offense or prosecution barred. Powers u/s 482 CrPC wide but require caution in exercise. Investigation at nascent stage, second FIR based on different facts not covered in first FIR, hence maintainable despite some overlap.

  • Project Delay Penalty Quashed: Court Sides with Firm for Timely Production Commencement.

    Case-Laws - HC : The petitioner was directed to pay a 5% penalty of the prevailing plot cost for the belated implementation of the project as per Clause 2.1.2.(a) of O.O.No.30 of 2020. However, the petitioner complied with the clause by utilizing more than 65% of the plot and had commenced production before dispatching goods. Despite paying the penalty amount, the petitioner was again directed to pay a 5% penalty. The Court found infirmity and illegality in the impugned order and quashed it, allowing the petition, as the petitioner had already paid the penalty and commenced production before dispatching goods, complying with all conditions.

  • Construction services taxable under GST despite annuity payments exemption.

    Case-Laws - HC : The High Court dismissed the challenge to the Circular No.150/6/2021 GST dated 17.06.2021, which clarified that annuity payments for construction services are taxable under GST, contrary to the exemption under Sl. No.23-A of Notification No. 12/2017-CT(Rate). The Court held that the Circular did not contravene the Notification or the 22nd GST Council recommendations, as the exemption under Entry 23A covers only access to roads or bridges on payment of annuity, not construction services. The 43rd GST Council clarified that construction services are taxable, though the exemption for access services under Code 9967 remains. The Notifications do not exempt construction services under Code 9954. The Court found no jurisdictional error in issuing the show cause notice and left open the petitioner's claims to be presented before the appropriate authority for determination of contested facts.

  • Quashing GST Order for Input Tax Credit in Light of Sadhana Enviro Case.

    Case-Laws - HC : Petition seeking quashing of Order-in-Original passed u/s 73 of CGST Act, 2017, and Demand Order in GST 07 by Respondent 4. No excess claim of Input Tax Credit for 2019-20 as already denied for 2017-18. Court held issue covered by judgment in M/s. Sadhana Enviro Engineering Services case, where it was ruled that in view of amendment inserting Section 16(5) to CGST/KGST Act, petition should be disposed of, directing original authority to implement provisions after providing reasonable opportunity to petitioner, hearing them, and proceeding in accordance with law. Considering facts, circumstances, and M/s. Sadhana Enviro Engineering judgment, present petition allowed and disposed of accordingly.

  • Income Tax

  • Monetary limits on waiving interest for late tax payment: Up to 50L by Commissioner, 50L-1.5Cr by Chief Commissioner, above 1.5Cr by Pr. Chief Commissioner.

    Circulars : This order u/s 119(1) of the Income-tax Act, 1961 specifies the monetary limits for income-tax authorities to exercise their powers of reduction or waiver of interest payable u/s 220(2) for non-payment of income tax demand. Principal Commissioner/Commissioner can reduce/waive interest up to Rs. 50 lacs, Chief Commissioner/Director General between Rs. 50 lacs to Rs. 1.5 crore, and Principal Chief Commissioner above Rs. 1.5 crore. The reduction/waiver is subject to conditions of genuine hardship, circumstances beyond assessee's control, and assessee's cooperation in proceedings. The order aims to facilitate proper administration of the Act.

  • Assessee's claim for TDS credit on salary rejected due to lack of evidence like Form 16 or salary slip.

    Case-Laws - AT : The Assessee claimed TDS credit on salary, but the employer did not reflect the TDS in Form 26AS or provide Form 16. The Assessee contended that even if the employer deducted TDS but did not deposit it, the Assessee is entitled to the TDS credit as it is benevolent. The ITAT held that while the contention seems reasonable, the Assessee must discharge the primary onus by producing relevant documents. The Assessee filed a TDS working initialed by someone, but it lacked proper letterhead, signatory name, and failed to furnish any salary slip or Form 16 reflecting TDS deduction. Unlike a cited case where the Assessee established the case with documents, the Assessee here failed to do so. Considering the lack of relevant documents, the ITAT remanded the case to the Commissioner for fresh decision in the interest of justice.

  • Tribunal rejects AO's profit estimation; accepts assessee's disclosed 5.99% profit.

    Case-Laws - AT : In a case regarding GP estimation, the Assessing Officer (AO) applied an 8% profit rate on the assessee's turnover, which did not match Form 26AS. The CIT(A), considering past orders, estimated 7% profit. However, the Tribunal held that since the assessee had already disclosed 5.99% profit, no further estimation was required. The profit from the disputed Sri Lanka project was part of the total declared profit. Consequently, the assessee's appeal was allowed, and the AO's estimation was rejected by the ITAT (Appellate Tribunal).

  • Turnover calculation dispute under presumptive taxation resolved in taxpayer's favor.

    Case-Laws - AT : Determination of turnover for presumptive taxation u/s 44AD - The assessee contended that receipts cannot be treated as ancillary receipts as the assessee had already offered income at 6% of the total turnover from eligible business as part of the business income, not on an item-wise basis. The CIT(A) considered the sale bills and ledger account and accepted the assessee's case regarding genuine turnover of Rs. 64,74,859/- and not Rs. 74,26,060/-. The ITAT held that Section 44AD is applicable to the assessee for the relevant AY 2018-19. The decisions relied upon by the CIT(A) dealt with Section 80IB, which is distinct from Section 44AD. The assessee offered to pay tax as per Section 44AD on the total turnover at 6%. The ITAT accepted the assessee's contention, set aside the CIT(A)'s order, and directed the AO to accept the new offer to tax as mentioned by the assessee. The assessee's appeal was allowed.

  • Provisional Attachment Orders Under 281B Expired After Six Months Due to Lack of Timely Extension.

    Case-Laws - HC : Provisional attachment orders u/s 281B were passed on 10.01.2024, valid for six months. The respondents were empowered to extend the provisional attachment for two more years under proviso to Section 281B(2), but failed to do so before expiry. Consequently, the provisional attachment orders ceased to have effect after six months on 10.07.2024, as no extension order was passed. Once an attachment order ceases, its continuation is impermissible unless extended per Section 281B(2) proviso. The HC's interim order of 15.02.2024 continues as long as the impugned provisional attachment order existed.

  • Software license sales by Austrian firm not taxable as royalty income in India.

    Case-Laws - AT : The assessee, a non-resident corporate entity incorporated in Austria, earned income from the sale of software licenses. The Assessing Officer (AO) computed the profit at 15% and taxed it at 40%, alleging that the assessee was not the economic owner of the IPs as most were registered outside Austria, primarily in the USA, and the assessee did not incur expenditure for developing the IPs. However, the Tribunal held that the assessee had substantial revenue from operations in different jurisdictions, including Austria, filed tax returns and was assessed by Austrian Revenue Authorities. The receipts from software license sales in India formed a small part of the total revenue. The allegation of treaty shopping was without credible reasoning. The revenue from software license sales could not be taxed as royalty income in India per judicial precedents. The assessee's tax residency and genuineness could not be doubted in the absence of evidence of fraud or illegal activity, especially when other jurisdictions did not raise such doubts. The BEPS Action Plan cannot influence judicial decision-making without evidence of the assessee lacking commercial or economic substance. Merely registering IPs in different jurisdictions does not divest the assessee's ownership rights. No evidence showed the revenue was repatriated to related parties. Thus, the assessee is entitled to India-Austria DTAA benefits, and the receipts cannot be taxed in.

  • Business expenses debated: PMS costs allowed, admin costs disallowed for capital gains.

    Case-Laws - AT : The assessee, engaged in the business of shares and securities, claimed administration expenses, including Portfolio Management Service (PMS) expenses, against capital gains. The Assessing Officer (AO) disallowed these expenses as excessive and not genuine. The key points are: The Income Tax Appellate Tribunal (ITAT) allowed the PMS expenses, considering the nature of the assessee's business and relying on precedents. However, general administrative expenses like salaries, depreciation, etc., were disallowed under the head 'Capital Gains' as per Section 48 of the Income Tax Act. These expenses can only be claimed against business income or adjusted u/s 71 if there is no business income. Regarding the treatment of share transactions as business or investment, the ITAT upheld the CIT(A)'s decision based on CBDT circulars, allowing the assessee to consistently follow the chosen method. The ITAT rejected the assessee's claim of bogus loss on the purchase and sale of shares, finding the explanations for the substantial price difference unconvincing and lacking prudence.

  • (1)(c) Penalty on deemed income from property undervalued, not imposed; but levy upheld for unexplained cash deposits.

    Case-Laws - AT : Imposition of penalty u/s 271(1)(c) of the Income Tax Act for two types of additions: (1) the addition made u/s 50C on the difference between stamp duty value and sale consideration, and (2) the addition on account of negative cash balance in the books. Regarding the Section 50C addition, it was held that penalty u/s 271(1)(c) cannot be levied when the assessee has not actually received any money over the declared sale consideration, as the addition is based on a deeming fiction. This follows the precedent set in Madan Theatres Ltd. case. However, for the addition due to negative cash balance found in the books, the assessee could not offer an explanation for the excess cash deposited in the bank account. It was held that voluntary disclosure does not preclude penalty u/s 271(1)(c), and since the surrender was after detection, it cannot be considered voluntary. Therefore, the penalty u/s 271(1)(c) was rightly levied by the Assessing Officer and confirmed by the CIT(A). The decision was partly in favor of the assessee, allowing the penalty on Section 50C addition but upholding the penalty on the negative cash balance addition.

  • Foreign entity's interconnectivity charges not taxable in India, lacks human element for FTS.

    Case-Laws - AT : Interconnectivity usage charges received by a foreign entity from an Indian entity cannot be considered as Fees for Technical Services (FTS) under domestic law or the tax treaty. The services were provided without human intervention through an automated system, lacking the human element required for 'technical services' under Explanation 2 to Section 9(1)(vii). The charges cannot be treated as 'other income' u/s 56 or the residual Article 24 of the tax treaty, as they constitute business income covered under Article 7. Since the foreign entity did not have a Permanent Establishment in India, the business profits are taxable only in the country of residence. The interconnectivity charges are not taxable in India, either as FTS or other income.

  • Tax scrutiny triggered by search action overtakes regular assessment; undervalued property sale voided.

    Case-Laws - AT : Assessment u/s 153C versus 143 - Additions u/s 45 - Underreporting of sale consideration for immovable property while framing the Assessment Order u/s 143(3) - Whether the Assessment Order passed by the Assessing Officer u/s 143(3) is illegal and not maintainable in view of the specific provisions of Section 153C. A search action u/s 132 was carried out, and documents were seized. The Assessing Officer recorded a 'Satisfaction Note' u/s 153C. In view of the express satisfaction note recorded u/s 153C for different Assessment Years, including the Assessment Year in question, the proceedings initiated u/s 143(2) for regular assessment must be abated and give way to the special provisions of Section 153C. A similar issue was adjudicated in a case, wherein the assessments framed u/s 143(3) were quashed. Considering the scheme of the Act for assessment of persons other than searched persons codified u/s 153C, the Assessment Order passed u/s 143(3) for the Assessment Year in question stands quashed. Decided in favor of the assessee.

  • Currency option trades deemed genuine despite AO's claims; huge profits declared offset questioned losses.

    Case-Laws - AT : Alleged fraudulent transactions and non-genuine losses claimed by the assessee in currency option trades on the United Stock Exchange (USE). The key points are: The Assessing Officer (AO) relied on the 'Project Falcon' report pertaining to stock option trading on the Bombay Stock Exchange to allege that the assessee's losses from certain currency option trades on USE were non-genuine. However, the ITAT held that the 'Project Falcon' report had no connection with the assessee's trades on USE. The assessee had declared profits from several trades, and only a few transactions showing losses were questioned by the AO without any independent inquiry. The ITAT concluded that there was no material to establish that the specific loss-making transactions were non-genuine, especially when the assessee had declared huge profits from similar transactions. The AO also made additions u/s 69C for commission on non-genuine losses, based on a statement by Arun Shah in 'Project Falcon'. However, the ITAT held that the statement had no reference to the assessee's trades, and the assessee should have been given an opportunity to rebut or cross-examine. The adhoc commission rate applied by the AO and reduced by the CIT(A) was also unsupported by evidence. The ITAT deleted the additions made by the AO for.

  • TDS on agency service payments: Assessee provided evidence, CIT(A) reasoned order upheld by ITAT.

    Case-Laws - AT : Tax deducted at source (TDS) issue related to agency services payments. Assessee demonstrated Form No. 3CD and Annexure D, showing TDS deducted u/s 194C on payments to partner firm. Commissioner of Income Tax (Appeals) [CIT(A)] examined facts, provisions, assessee's submissions, and Clause 23 of Tax Audit Report regarding payments u/s 40A(2)(b). CIT(A) passed reasoned order after considering factual information. Income Tax Appellate Tribunal (ITAT) upheld CIT(A)'s order, finding no infirmity, and dismissed revenue's appeal grounds.

  • Development fees for infrastructure creation by charitable education institutions are capital receipts, not revenue.

    Case-Laws - AT : The development fund received from students, apart from tuition fees, is treated as a capital receipt or corpus donation, not a revenue receipt. The fund is utilized for creating capital assets like school buildings and infrastructure, fulfilling the society's objectives. The litmus test for a charitable institution is the application of funds, not the source of contributions. If the development fees are used for infrastructure creation, they are considered capital receipts. The advances given to staff, suppliers, and sister concerns were not treated as misappropriation of funds or investments violating Section 11(5) and 13(1)(d). The institutions receiving non-interest-bearing loans are also registered u/s 12AA and controlled by the same management, ruling out tax avoidance schemes. The rejection of accounts u/s 145(3) and the ad-hoc disallowance of 20% by the Assessing Officer, reduced to 10% by the CIT(A), is not concurred with. The expense ratio has declined compared to previous years, and the expenses claimed are reasonable, considering past accepted assessments. The ITAT finds no error in the CIT(A)'s order on this issue.

  • Not debited expenses allowed; Disallowance upheld for bogus claims; Sundry creditors need explanation; Remitted for fresh adjudication; TDS default verification ordered.

    Case-Laws - AT : Lease rentals paid by the appellant to the owner of leased assets for using those assets for business purposes are allowable revenue expenditure, despite not being debited in books of accounts, as the genuineness was not questioned. Conveyance and telephone expenses disallowed as bogus by lower authorities upheld due to lack of contrary evidence. Regarding sundry creditors, the appellant must explain their genuineness if questioned, as idle/unaltered/static creditors require verification. The matter remitted to the AO for de-novo consideration after providing reasonable opportunity of being heard to the appellant. For TDS default disallowance, the AO directed to verify if the expenditure was offered for tax earlier and fulfills conditions for allowability in the relevant year after late TDS deposit.

  • Voluntarily offered income during search can't attract penalty; lack of evidence nullifies penalties imposed.

    Case-Laws - AT : Penalty u/s 271(1)(c) was levied on additional income voluntarily offered in the statement recorded u/s 132(4). However, no reference was made to corroborative incriminating material found during the search. It was held that the CIT(A) erred in confirming the penalty u/s 271(1)(c) since the additional income was voluntarily offered. Regarding penalty u/s 271AAB, undisclosed income is defined as income represented by money, bullion, jewellery, or entries in books found during the search but not recorded before the search date. No incriminating material having a nexus with the undisclosed income offered during the search was referred to. Consequently, the Assessing Officer lacked jurisdiction to initiate penalty u/s 271AAB. Following the Paras Mal Jain case, the surrendered income cannot be construed as undisclosed income specified in the explanation to Section 271AAB(1). Therefore, the penalty of Rs. 5 lacs u/s 271AAB was deleted in favor of the assessee.

  • Reassessment Notice Timely, But Order Remanded For Fresh Adjudication.

    Case-Laws - AT : Reopening of assessment beyond the period of limitation was challenged, but the notice u/s 148 was issued within the six-year time limit on 28.03.2018 and served on 02.04.2018, complying with Section 149's requirement for issuing the notice. The legality of the assessment order was questioned due to the dismissal of the financial creditor's petition under the Insolvency & Bankruptcy Code, 2016, but the Assessing Officer had no information about the NCLT order at the time of passing the reassessment order. The addition based on audited financial statements submitted to Punjab National Bank was remitted to the Assessing Officer for de novo consideration and fresh decision, with the assessee directed to file necessary documents for proper adjudication. The appeal was partly allowed for statistical purposes.

  • Customs

  • New rules for insurance and bond value for cargo handlers and logistics operators in customs areas.

    Circulars : This circular provides clarification on the insurance amount and bond value for Customs Cargo Service Providers (CCSPs) and the validity of bonds for Authorized Economic Operators - Logistics Operators (AEO-LOs). It modifies the earlier circular regarding the insurance amount to be provided by CCSPs under Regulation 5(1)(iii) of the Handling of Cargo in Customs Areas Regulations, 2009 (HCCAR). The insurance amount should now be equal to the average value of goods likely to be stored for 5 days instead of 10 days, based on projected capacity. The custodian bond value for imported/exported goods has also been reduced to 5 days' storage from the current 10 days. For AEO-LO CCSPs, the approval as custodians is valid till their AEO authorization remains valid and not suspended or revoked, and the custodian bond's validity is the same as the approval granted under Regulation 10 of HCCAR.

  • Automating warehouse procedures - license, transfers, returns with online filing and grievance redressal.

    Circulars : The notice outlines the digitization of Customs Bonded Warehouse procedures relating to obtaining Warehouse License, Bond to Bond Movement of warehoused goods, and uploading of Monthly Returns. It enables online filing of applications for Warehouse License, submission and processing of requests for transfer of warehoused goods to another person/warehouse, and uploading Monthly Returns. The process flows for different scenarios of transfer of warehoused goods, such as change in ownership without change in warehouse, change in warehouse with no change in ownership, and change in warehouse and ownership, are detailed. The notice also highlights the requirement of furnishing security and triple duty bond, validation of bond details, and intimation to officers at the Port of Import. User Manuals are provided for guidance, and grievance redressal mechanisms are specified.

  • Balancing tax evasion probes with business convenience in import/export.

    Circulars : These guidelines instruct customs field formations on maintaining a balance between ease of doing business and investigating tax evasion cases related to import or export. Key points include: Commissioners must approve all investigations, which should conclude within one year. Thorough analysis using available data, technical literature, industry practices, and legal frameworks should precede investigations. Open-source information and existing investigations should be cross-checked. Commissioners may involve DRI for cross-jurisdictional relevance. Principles of ease of doing business like preferring written requests, reasonable timelines, relevance of information sought, prior approval for summons content, considering difficulties faced by entities, disclosing inquiry nature, allowing authorized agents, limiting document requests, and timely case closures must be followed. Voluntary payment provisions should be informed during searches/investigations without pending recoveries. Commissioners should oversee investigations and address reasonable grievances through meetings.

  • Customs cargo clearance time reduced, AEO service providers get relief.

    Notifications : The notification amends the Handling of Cargo in Customs Areas Regulations, 2009. It reduces the time period for keeping uncleared cargo in a customs area from 10 days to 5 days. For Customs Cargo Service Providers authorized under the Authorized Economic Operator Programme, their approval for appointment shall remain valid until their AEO authorization is valid and not suspended or revoked. The amendments aim to enhance efficiency in cargo handling and clearance procedures within customs areas.

  • State GST

  • Goa govt clarifies data hosting services by Indian providers to overseas cloud firms is export of services; place of supply is recipient's location.

    Circulars : Goa government circular clarifying place of supply for data hosting services provided by Indian service providers to overseas cloud computing service providers. Key points: Data hosting service providers not considered intermediaries under IGST Act; services not related to goods made available by recipient or immovable property. Place of supply determined by default provision u/s 13(2) IGST Act as location of recipient. Services provided to overseas cloud computing entities qualify as export of services subject to conditions u/s 2(6) IGST Act. Circular issued for uniform implementation of the clarification.

  • Demo vehicles for potential buyers - ITC eligibility clarified.

    Circulars : The circular clarifies the availability of input tax credit on demo vehicles used by authorized dealers for providing trial runs and demonstrating features to potential buyers. It covers two key issues: availability of ITC on demo vehicles u/s 17(5)(a) of the CGST Act, and availability of ITC where demo vehicles are capitalized by dealers. The circular states that demo vehicles promote sale of similar vehicles and are thus used for 'further supply', qualifying for ITC u/s 17(5)(a)(A). However, ITC is not available if vehicles are used for staff transportation. For dealers acting as agents, providing test drives on behalf of manufacturers, ITC is not available as they are not making further supply. The circular also clarifies that capitalization of demo vehicles does not impact ITC availability, subject to conditions like depreciation claims under Income Tax Act. Dealers must pay applicable tax when subsequently selling capitalized demo vehicles.

  • Advertising services by Indian agencies for foreign clients - Not intermediaries.

    Circulars : This circular clarifies the position regarding advertising services provided by Indian advertising companies/agencies to foreign clients. It addresses three key issues: whether the advertising company can be considered an intermediary, whether the foreign client's representative in India or target audience can be considered the recipient, and whether such services qualify as performance-based services under IGST Act. The circular clarifies that the advertising company is not an intermediary but provides services on a principal-to-principal basis. The foreign client, not its Indian representative or target audience, is the recipient. Such advertising services do not qualify as performance-based services u/s 13(3) of IGST Act. Consequently, the place of supply is determined u/s 13(2) as the location of the recipient, i.e., outside India, making it an export of services. However, if the advertising company merely facilitates the provision of media space between the foreign client and media owner, acting as an intermediary, the place of supply is determined u/s 13(8)(b) as the location of the intermediary.

  • IBC

  • New arbitration plea needs court nod after withdrawing previous one under Indian law.

    Case-Laws - SC : Application u/s 11(6) of Arbitration and Conciliation Act, 1996 maintainable only with court's liberty upon withdrawal of previous application. Principles of Order 23 Rule 1 CPC extended to Section 11(6) proceedings. Fresh application arising from same cause of action not maintainable without court's permission upon unconditional withdrawal of previous application. Application u/s 11(6) commences actual arbitration proceedings, not mere appointment. Limitation period for filing Section 11(6) application is three years under Article 137 of Limitation Act. Benefit of Section 14, Limitation Act available for condonation of delay. Section 5, Limitation Act allows condonation of delay in exceptional cases with strong grounds for Section 11(6) applications, considering legislative intent of expeditious dispute resolution under the Act.

  • Indian Laws

  • Double royalty payment for miners upheld by SC, consultations ordered on cascading effect.

    Case-Laws - SC : The Supreme Court upheld the validity of the Explanations to Rule 38 of the Mineral (Other than Atomic and Hydrocarbons Energy Minerals) Concession Rules, 2016 and Rule 45 of the Mineral Conservation and Development Rules, 2017, which provide for the computation of royalty without deducting previous royalty payments, contributions to the District Mineral Foundation, and National Mineral Exploration Trust. The Court observed that policy decisions fall within the executive's domain, and courts should refrain from interfering unless the policy is absolutely capricious or illegal. While the Explanations might have onerous monetary implications for mining leaseholders, the Court found no excess of power or statutory breach. The Explanations were deemed clarificatory and within the ambit of the main provisions. However, the Court granted the respondents two months to conclude public consultations and take a final decision on amending the cascading impact of royalty on royalty in calculating the average sale price under the Explanations.

  • Only examine arbitration agreement at Section 11 stage, leave merits & limitation to tribunal.

    Case-Laws - SC : The Supreme Court held that at the stage of Section 11 application under the Arbitration and Conciliation Act, 1996, the referral courts need only examine whether the arbitration agreement exists, and not delve into the merits of the claims. However, in rare cases where it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute, the courts can decline the reference to arbitration. The Court clarified that the period of limitation for filing a petition seeking appointment of an arbitrator cannot be conflated with the period of limitation applicable to substantive claims under the commercial contract. While the respondents contended that the petitioner's claims were time-barred, the Court left it to the arbitral tribunal to adjudicate upon this issue as a preliminary matter, as the existence of the arbitration agreement was not disputed.

  • SEBI

  • Mutual funds must disclose expenses, returns & risk levels for direct & regular plans. Color-coded risk-o-meter changes to be notified.

    Circulars : This circular mandates mutual funds to disclose expenses, half-yearly returns, and yield separately for direct and regular plans. It introduces a color scheme for the risk-o-meter depicting risk levels. Any change in the risk-o-meter must be communicated to unitholders by displaying the existing and revised risk-o-meters. The provisions aim to enhance transparency, ease investor comprehension, and standardize disclosures across the mutual fund industry.

  • Indian Mutual Funds Get Green Light for Overseas Counterparts with 25% India Exposure Cap.

    Circulars : This circular permits Indian mutual funds to invest in overseas mutual funds/unit trusts (MF/UTs) with exposure to Indian securities, subject to certain conditions. The key points are: Indian MF schemes can invest in overseas MF/UTs with up to 25% exposure to Indian securities. The overseas MF/UTs must have pooled investments, pari-passu rights for investors, independent fund management, public portfolio disclosure, and no advisory agreements with Indian MFs. If an overseas MF/UT exceeds 25% India exposure, Indian MFs have 6 months to monitor portfolio rebalancing, cannot make fresh investments during this period, and must liquidate holdings over the next 6 months if not rebalanced. Non-compliance attracts restrictions on fresh subscriptions, new fund launches, and exit loads. Indian MFs are exempted from fundamental attribute change for switching overseas MF/UTs in case of breach of 25% limit.

  • Service Tax

  • Educational institution's hostel construction not taxable as commercial service.

    Case-Laws - AT : The Tribunal held that the construction of a hostel building for an educational institution, in this case, the Gujarat Adani Institute of Medical Science, cannot be considered a 'commercial or industrial construction service'. This aligns with previous rulings by the Tribunal and the Rajasthan High Court, which established that the construction of buildings for educational institutions does not fall under the category of 'commercial or industrial construction service'. Consequently, the service in question is not taxable under that head. The demand raised in the present case is deemed unsustainable, and the impugned order is set aside, allowing the appeal.

  • Unbilled amounts not taxable for services, rules Supreme Court.

    Case-Laws - AT : Service tax demand on unbilled amount not chargeable. Section 67 clearly states that only the gross amount charged from the service recipient shall be considered as the gross value for service tax. The unbilled amount, not charged by the appellant to the service recipient, is not part of the gross value u/s 67. Hence, the unbilled amount is not liable to service tax. This issue has been settled by the Supreme Court in Intercontinental Consultants Technocrats Pvt. Ltd. and the Gujarat High Court in Linde Engineering India Pvt. Ltd., holding that unbilled amounts cannot be subject to service tax. Assessee's appeal allowed.

  • Commission on sales promotion services eligible for Cenvat Credit.

    Case-Laws - AT : The appellant had rightly availed the Cenvat Credit on the amount of commission paid to its sales agent for sales promotion activity. The agent's obligations included assisting the appellant in receiving payments from buyers, providing information about tenders, market rates, and competitive possibilities, and procuring sales orders. The commission was agreed at 2% of the net invoice value, payable in US$ after receiving full payment from the customer. The adjudicating authority did not provide a reasonable explanation for denying the arrangement between the appellant and the agent for sales promotion. The allegations of suppression in the Show Cause Notice are redundant, and the extended period of limitation invoked by the Department is held to be time-barred. Consequently, the appellant is entitled to avail the Cenvat Credit on the service tax paid on foreign commission under reverse charge.

  • Central Excise

  • Excise Duty Evasion Penalty Quashed: Director Exonerated from Manufacturing Liability.

    Case-Laws - AT : Imposition of penalty u/r 26 of the Central Excise Rules, 2022 on the Appellant, who was the Director of Sales and Marketing of the co-noticee Company. The Respondent Department exhibited a non-responsive attitude. The case involved the interpretation of the "Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019". Despite acknowledging that the Appellant was responsible for Sales and Marketing activities, the Commissioner held the Appellant personally liable for the manufacture of goods by the Company and the evasion of excise duty. However, the CESTAT had previously set aside the penalty order against the Appellant in 2015, and no further proceedings were initiated. Additionally, even without an application under the "Sabka Vishwas Scheme", the penalty recoverable from the Appellant should be treated as "NIL" u/s 124(1)(b) of the Amended Finance Act, 2019. The charge against the Appellant imposing penalty is unsustainable in law and facts. The CESTAT allowed the appeal, stating that there exists no scope for re-adjudication.


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