TMI Tax Updates - e-Newsletter
February 11, 2022
Case Laws in this Newsletter:
Articles
By: Bimal jain
Summary: The Allahabad High Court ruled that issuing assessment orders without allowing the assessee an opportunity to be heard violates the principles of natural justice. The case involved a petitioner challenging an order by the Commissioner of Commercial Tax, which was issued without a hearing as required by Section 75(4) of the Central Goods and Services Tax Act, 2017. The court found that the show cause notice lacked details for a personal hearing, and the order was thus unsustainable. The matter was remanded for a fresh hearing, and no coercive action was to be taken against the petitioner until then.
By: Aporna Dasgupta
Summary: The article discusses the implications of Goods and Services Tax (GST) on the rapidly growing e-commerce sector in India, highlighting recent amendments and their impact. E-commerce operators (ECOs) are now liable for GST on certain services, such as passenger transport and food delivery, which were previously exempt. These changes aim to curb tax evasion and ensure accurate revenue reporting, particularly by smaller restaurants. However, the amendments raise questions about the differentiation in taxation for services provided through ECOs and the potential impact on the market. The article suggests that these changes may conflict with constitutional rights and public interest, calling for further clarification and possible adjustments.
By: Sadanand Bulbule
Summary: The article discusses the evolving nature of the Goods and Services Tax (GST) law and its penal provisions, particularly under Section 122. It highlights the challenges of tax evasion and the need for effective penalties to safeguard revenue. Section 122 outlines penalties for various offences, including tax evasion and fraudulent activities. The article emphasizes the importance of proper adjudication under Sections 73 and 74 before imposing penalties under Section 122, to avoid double jeopardy. It underscores the necessity for transparent and fair adjudication processes to ensure justice and compliance with the GST Act.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The article discusses the budget proposals for inclusive growth in 2022-2023, emphasizing equitable economic development. Key initiatives include a 2.37 lakh crore direct payment to farmers for wheat and paddy procurement, promotion of chemical-free natural farming, and support for millet production. The government aims to boost domestic oil seed production and implement digital agricultural services through public-private partnerships. The use of drones for agricultural efficiency and revising agricultural university syllabi are highlighted. Additionally, a fund facilitated by NABARD will support agricultural startups, and significant investment is planned for irrigation and river-linking projects to enhance water supply and power generation.
By: Bimal jain
Summary: The Supreme Court of India ruled that a taxpayer accused of tax evasion cannot be detained indefinitely while an investigation is pending. The court granted bail to the petitioner, who had been in custody for 25 months, noting that the maximum sentence for the alleged offense is five years. The court observed that the respondent's stance was influenced by prior adverse proceedings initiated by the petitioner against the revenue authority. The petitioner was cautioned against future misconduct and granted bail under the trial court's terms. The case involved alleged violations under Section 132(1) of the Central Goods and Services Tax Act, 2017.
News
Summary: The Governor's statement highlights the global economic challenges posed by the pandemic, with India showing a unique recovery trajectory supported by vaccinations and fiscal measures. The Monetary Policy Committee (MPC) decided to maintain the repo rate at 4% to support growth and manage inflation. Despite Omicron's impact, India's GDP is projected to grow, aided by government spending and robust exports. Inflation is expected to peak before moderating, with core inflation remaining high due to rising crude prices. The RBI focuses on financial stability, liquidity management, and enhancing infrastructure for MSMEs, while extending support for health and contact-intensive sectors.
Summary: The statement outlines several developmental and regulatory policy measures. Liquidity measures include extending a Rs. 50,000 crore facility for COVID-19 health services and a Rs. 15,000 crore window for contact-intensive sectors until June 30, 2022. Financial market initiatives involve increasing the Voluntary Retention Route limit by Rs. 1,00,000 crore and allowing banks to engage in the offshore Foreign Currency Settled Rupee Derivatives market. Payment and settlement enhancements include raising the e-RUPI voucher cap and increasing the NACH mandate limit for MSME receivables to Rs. 3 crore. Regulatory updates focus on IT outsourcing and governance, proposing new guidelines for risk management and operational resilience.
Summary: The Monetary Policy Committee (MPC) decided to keep the policy repo rate unchanged at 4.0% and maintain an accommodative stance to support economic growth and mitigate COVID-19 impacts, while aiming to keep inflation within the target range. Global economic activity has been affected by the Omicron variant, leading to revised growth projections. India's GDP growth for 2021-22 is estimated at 9.2%, with inflation projected to moderate in 2022-23. The MPC acknowledges the need for continued policy support due to incomplete recovery, with risks from global volatility and supply disruptions. All members agreed on the rate decision, with one expressing reservations on the accommodative stance.
Summary: The Government of India and various state governments have implemented multiple schemes to support startups, though details of funding are not centrally maintained. The Startup India Seed Fund Scheme, launched on April 16, 2021, aims to provide seed funding through approved incubators across sectors. A grant of Rs. 945 crore has been allocated for four years starting from 2021-22. By December 31, 2021, Rs. 232.75 crore had been approved for 58 incubators, funding 146 startups. Information on seed funding from other government schemes is not centrally tracked. This was disclosed by a government official in a written reply to the Lok Sabha.
Notifications
IBC
1.
IBBI/2021-22/GN/REG/080 - dated
9-2-2022
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IBC
Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Amendment) Regulations, 2022
Summary: The Insolvency and Bankruptcy Board of India issued amendments to the Insolvency Resolution Process for Corporate Persons Regulations, 2016, effective upon publication in the Official Gazette. Key changes include the substitution of Regulation 18, detailing the conditions under which a resolution professional may convene meetings of the committee, particularly when requested by members holding at least 33% of voting rights. Regulation 39A was also replaced, mandating interim and resolution professionals to preserve records related to the insolvency process in both electronic and physical forms for specified periods, ensuring secure storage and availability for regulatory requirements.
SEZ
2.
S.O. 544(E) - dated
9-2-2022
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SEZ
Central Government de-notifies an area of 79.9241 hectares, thereby making resultant area 570.7080 hectares at Baikampady, Near Mangalore, District Dakshin Kannada in the State of Karnataka
Summary: The Central Government has de-notified 79.9241 hectares from the Special Economic Zone (SEZ) at Baikampady, near Mangalore, Karnataka, reducing the total area to 570.7080 hectares. Initially set up for petrochemicals and petroleum, the SEZ was later designated as multi-product. The de-notification follows approval from the Karnataka State Government and a recommendation from the Development Commissioner, with the land intended for industrial infrastructure development for allocation to industrial units in the Domestic Tariff Area (DTA). The changes are made under the Special Economic Zones Act, 2005, and the SEZ Rules, 2006.
Circulars / Instructions / Orders
SEBI
1.
SEBI/HO/IMD/IMD-I DOF2/P/CIR/2022/17 - dated
9-2-2022
Audit Committee of Asset Management Companies (AMCs)
Summary: The circular mandates that Asset Management Companies (AMCs) of mutual funds establish an Audit Committee to enhance oversight of financial reporting, audit processes, internal controls, and regulatory compliance. The committee must have at least three directors, with two-thirds being independent. It is responsible for reviewing financial reporting, internal and statutory audits, and ensuring compliance with laws. The committee must meet at least four times a year, with specific quorum requirements. It must also interact with auditors and the trustees' audit committee annually. These guidelines, effective from August 1, 2022, complement existing legal and regulatory obligations.
FEMA
2.
23 - dated
10-2-2022
Transactions in Credit Default Swap (CDS) by Foreign Portfolio Investors – Operational Instructions
Summary: Foreign Portfolio Investors (FPIs) are permitted to buy and sell Credit Default Swap (CDS) protection under the Credit Derivatives Directions. The Reserve Bank has set an aggregate limit for CDS protection sold by FPIs at 5% of the outstanding corporate bonds. The Clearing Corporation of India Ltd. will monitor this limit. Debt instruments received or purchased by FPIs for CDS contracts will count towards corporate bond investment limits. These transactions are exempt from certain maturity and concentration limits. The directions take effect on May 9, 2022, and are issued under the Foreign Exchange Management Act, 1999.
3.
22 - dated
10-2-2022
‘Voluntary Retention Route’ (VRR) for Foreign Portfolio Investors (FPIs) investment in debt
Summary: The Reserve Bank of India has enhanced the investment limit under the Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs) in debt from Rs. 1,50,000 crore to Rs. 2,50,000 crore, effective April 1, 2022. This route allows FPIs to invest in Indian debt markets without being subject to certain regulatory norms, provided they commit to retaining a minimum percentage of their investments for a specified period. Eligible FPIs can invest in government securities, corporate debt instruments, and participate in repo transactions. The allocation is made through auctions, and FPIs must maintain at least 75% of their Committed Portfolio Size during the retention period.
Highlights / Catch Notes
GST
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Court Orders Immediate IGST Refund with 7% Interest for Zero-Rated Exports, Citing Similar Prior Case.
Case-Laws - HC : Refund of IGST - goods exported zero rated supplies - in an earlier decision the Court in detailed has discussed this very issue and held that respondents are directed to immediately sanction the refund of the IGST paid in regard to the goods exported, i.e. 'zero rated supplies', with 7% simple interest from the date of the shipping bills till the date of actual refund. - As the issue raised before this Court is identical, no separate or independent discussion would be necessary to be made before this Court. Therefore, the request of refund so far as the three shipping bills are concerned will need to be permitted. - HC
Income Tax
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Court Rules in Favor of Assessee on Amortization of Voluntary Retirement Scheme Expenditure, Rejects Department's Stance.
Case-Laws - HC : Amortisation of expenditure incurred under voluntary retirement scheme - Question framed by this Court is answered in favour of the Assessee and against the Department by holding that allowance and deduction under the VRS scheme are to be based on the entire accrued liability incurred and not just of the amount actually paid during the relevant AY. - HC
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Faceless assessment u/s 144B upheld; court says no breach of natural justice as personal hearing not requested.
Case-Laws - HC : Validity of Faceless Assessment u/s 144B - What comes out loud and clear is that liberty of being heard was offered to the petitioner. The decision taken by the impugned order may or may not be correct is not for this Court to dwell upon especially when the statutory appeal preferred by the petitioner is pending consideration. More so, since the petitioner did not make any specific express demand for a personal hearing, the non grant of personal hearing by the Assessing Officer cannot lead to a case of breach of principles of natural justice (audi alteram partem) thereby enabling the petitioner to directly approach this Court under Article 226 of the Constitution especially in the face of pending statutory appeal. - HC
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Tribunal Rules Res Judicata Inapplicable in Tax Proceedings; Consistency Principle Must Be Upheld in Identical Cases.
Case-Laws - HC : Plea of res judicata - Tribunal rightly noted the law that rule of res judicata is not applicable to income tax proceedings but the principle of consistency will definitely apply. In the preceding paragraphs we have set out the facts to show as to how the department has examined the returns filed by the assessee for the previous assessment year and the subsequent year. Therefore, we find that there cannot be different yardstick for the assessment year under consideration when facts and circumstances are identical. - Decided against revenue - HC
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Taxpayer Wins: Additional Depreciation u/s 32(1)(iia) Allowed for Machinery Not Directly Used in Manufacturing.
Case-Laws - AT : Disallowance of additional depreciation claimed u/s 32(1)(iia) - We are convinced with the alternative contention of the assessee. We have earlier noticed that the A.O. has allowed additional depreciation on machineries used for manufacture of butter, ghee, pedha, etc., which clarifies that the assessee is engaged in the business of manufacture or production of any article or thing. Hence, as per the ratio laid down by coordinate bench in the case of Texas Instruments Ltd. (supra), the assessee would be eligible for additional depreciation on other machineries also, even if those machineries are not used in the manufacture or production of article or thing. - AT
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Section 68 Case: Additional Evidence Admitted for Re-examination, Order Set Aside, Remanded to Assessing Officer for Fresh Review.
Case-Laws - AT : Addition made u/s. 68 - Addition of agricultural income - admission of additional evidences - There should not be any dispute that the admission of additional evidences filed in support of the claim made in the return of income would promote the cause of justice. Accordingly, admit the additional evidences furnished by the assessee. Since both the issues required to be examined afresh duly considering the additional evidences furnished by the assessee,we set aside the order passed by Ld. CIT(A) on both the issues and restore them to the file of AO for examining them afresh. - AT
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Assessing Officer's unaccounted salary addition rejected; verified salary vouchers and bank records confirm actual payment.
Case-Laws - AT : Unexplained salary - search and seizure proceedings - The addition made by the Assessing Officer as relates to unaccounted salary does not sustain in the eyes of law as the salary vouchers which was presented before the Assessing Officer clearly shows the actual salary paid to the assessee which was verifiable from the records of the assessee's bank account and other relevant documents. Merely relying on the statement which the Assessing Officer as well as the CIT(A) though admitting that the said statement is vague and inconsistent cannot be the basis for addition. - AT
IBC
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Court Orders Reconsideration of Appellant's Claim; Arbitration Award Must Be Considered by Resolution Professional.
Case-Laws - AT : Approval of Resolution Plan - The Adjudicating Authority has not taken cognizance of the award and rejected the application filed by the Appellant. Since the Appellants claim is also supported by an arbitration award, which has not been considered either by Adjudicating Authority or Resolution Professional. Therefore, it is appropriate that the claim of the Appellant should be reconsidered even based on the arbitration award - The Resolution Professional to consider the claims of the Appellant & to proceed further in accordance with the law. - AT
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Corporate Insolvency Resolution Process (CIRP) demands evidence; mere allegations don't suffice. Claim for unpaid salary admitted.
Case-Laws - Tri : Initiation of CIRP - Mere allegation without any supporting evidence would not help the Corporate Debtor - As far as the loan taken by the applicant is concerned the applicant has already adjusted that amount from salary dues claimed in demand notice. The corporate debtor has failed to establish the fact that there is any pre-existing dispute between the parties. The Corporate debtor has also failed to prove that the salary dues are not payable to applicant or has already been paid off. - it can be concluded that the applicant has established its claim which is due and payable by the corporate debtor. The present application is admitted - Tri
Service Tax
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Fashion Designing Services Cover All Wearable Goods; Tailors and Jewelers Taxed, Not Women's Leather Footwear Manufacturers. Rule 3(ii) Exemption.
Case-Laws - AT : Classification of goods - “fashion designing” services. or “design services” - Paragraph 3 does not limit the “fashion designing” services to articles made up of clothes. Infact, it specifically provides that a fashion designer may be involved in designing of any goods which are intended to be worn by human beings. Paragraph 4 deals only with a specific query raised as to whether tailors and jewellers will be covered under the service tax. It does not talk about a manufacturer of leather footwear for women. - Further, if services are entirely provided outside India, the proviso to rule 3(ii) of the Import Rules is not applicable and no tax can be levied on the same - AT
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Money Transfer Services Fail to Qualify as Export; Service Tax Demand Upheld Due to Domestic Nature of Service.
Case-Laws - AT : Export of service or not - Since because the ultimate beneficiary is abroad, it cannot be claimed that the appellants are exporting services. Neither the place of rendering of the activity nor the type of service rendered by the appellants nor the recipient of such service are stationed abroad. Therefore, we are not inclined to consider such service as an export of service - the demand of service tax on the money transfer service rendered by the appellants requires to be upheld. - AT
VAT
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Court Finds Insufficient Evidence of Timely Notice Service; Grants Dealer Another Chance Under TNVAT Rules.
Case-Laws - HC : Service of notice - whether pre-revisional notices was served on the writ petitioner-dealer - This is a fit case to give the benefit of doubt to the writ petitioner-dealer. This means that it has not been conclusively established {vide explanation to Rule 19(1)(a) of TNVAT Rules} that the pre-revisional notices dated 18.08.2014 have been duly served on the writ petitioner-dealer on 31.08.2014. This further means that the impugned orders will have to be interfered with on this short point and the writ petitioner-dealer has to be given opportunity afresh to show cause.- HC
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