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TMI Tax Updates - e-Newsletter
February 19, 2022
Case Laws in this Newsletter:
Articles
By: Bimal jain
Summary: The Karnataka High Court ruled that Integrated Goods and Services Tax (IGST) is not payable on residential properties rented for use as hostels for students and working women. The court quashed the earlier decision by the Appellate Authority for Advance Ruling (AAAR), which denied tax exemption, arguing that such properties are used for residential purposes. The court clarified that the term "residential dwelling" includes hostels, and the exemption does not require the lessee to use the premises personally. The decision allows the property owner to benefit from the exemption under Entry 13 of the Exemption Notification.
By: Rachit Agarwal
Summary: The Gujarat High Court addressed a case involving a dealer whose application for registration under the CGST and GGST Acts was initially rejected due to technical glitches within the GST Network (GSTN). The Appellate Authority later ruled in favor of the dealer, but the respondent failed to implement this decision. The court directed the respondent to promptly execute the Appellate Authority's order and provide the dealer with all due benefits. The court emphasized that technical glitches within GSTN should not hinder the enforcement of favorable rulings for registered dealers.
News
Summary: The Government of India, along with the state governments of Karnataka and Odisha, has signed a $115 million loan agreement with the World Bank for the "Rejuvenating Watersheds for Agricultural Resilience through Innovative Development" (REWARD) project. This initiative aims to enhance watershed management practices to improve farmers' resilience to climate change, boost productivity, and increase incomes. The project supports India's goal to restore 26 million hectares of degraded land by 2030 and double farmers' income by 2023. It emphasizes science-based planning and data-driven approaches to strengthen sustainable agriculture, particularly in rainfed areas, with financial support allocated to Karnataka, Odisha, and the central government.
Summary: The Central Bureau of Narcotics raided a clandestine Tramadol manufacturing plant in Bawana Industrial Area, New Delhi, disguised as a honey processing facility. The operation uncovered 52.245 kg of Tramadol pills and powder, along with 1.08 kg of suspected opium. A parallel raid at a store in Sirsa, Haryana, revealed pills containing 1.420 kg of medicinal opium and 0.495 kg of Tramadol. The manufacturing and distribution operations were masked as Ayurvedic medicine production. Two individuals were arrested under the NDPS Act, 1985, and further investigations are ongoing. The Narcotics Commissioner emphasized continued crackdowns on illegal drug activities.
Summary: The Gems and Jewellery sector in India is projected to reach an export target of $40 billion this year, marking a 6.5% growth over pre-COVID levels, according to a government official. The sector, a significant contributor to India's GDP and employment, is being promoted as a focus area for export growth under the leadership of the Prime Minister. Recent policy changes, such as reduced import duties on polished diamonds and extended credit schemes for MSMEs, aim to boost the sector's global presence. The India International Jewellery Show 2022 highlighted the sector's potential, attracting thousands of international visitors.
Notifications
Customs
1.
10/2022 - dated
17-2-2022
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Cus (NT)
Rate of exchange of one unit of foreign currency equivalent to Indian rupees - Supersession Notification No.08/2022-Customs(N.T.), dated 3rd February, 2022
Summary: Notification No.10/2022-Customs (N.T.), issued by the Central Board of Indirect Taxes and Customs, supersedes Notification No.08/2022-Customs (N.T.) and establishes new exchange rates for foreign currencies against the Indian rupee, effective from February 18, 2022. These rates apply to both imported and exported goods, with specific rates detailed for various currencies such as the US Dollar, Euro, and Japanese Yen, among others. The notification provides separate rates for imported and export goods, ensuring accurate currency conversion for customs purposes. The notification was later superseded by Notification No.13/2022, effective March 4, 2022.
Highlights / Catch Notes
GST
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Court Rules Student Hostels Qualify for GST Exemption as Residential Premises, Clarifying 'Residence' and 'Dwelling' Terms.
Case-Laws - HC : Exemption from GST - leasing of residential premises as hostel to students and working professionals - It evident that the expression 'residence' and 'dwelling' have more or less the connotation in common parlance and therefore, no different meaning can be assigned to the expression 'residential dwelling' and it cannot be held that the same does not include hostel which used for residential purposes by students or working women. - The petitioner is held entitled to benefit of exemption notification. - HC
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Processed Seeds for Sowing Not Exempt from GST, Do Not Qualify as 'Agricultural Produce' Under GST Definitions.
Case-Laws - AAR : Exemption from GST - Seeds - seeds received, processed, packed and returned by the Applicant, as job worker, as seeds for sowing are 'agricultural produce' - - Supply of seed does not fall under the definition of agricultural produce as the seed does not fulfill the utilities prescribed therein - Similarly the said definition restricts the ‘agricultural produce’ to unprocessed goods. Further even if ‘processing’ is done it should be ‘such processing’ as done by a ‘cultivator’ for ‘primary market’. Essentially processed agricultural products do not fall under this definition. - No Exemption from GST - AAR
Income Tax
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Income from India: Taxed u/s 115A or India-Spain DTAA; Full receipts count, no exclusions for reimbursements.
Case-Laws - AT : Income accrued India - applying the tax rate as per section 115A OR tax rate as per the DTAA between India and Spain - in all cases of concessional taxation on gross receipt or revenue basis, splitting of total receipt into reimbursement or revenue, remains neutral to its chargeability. Both such cases, invariably warrant inclusion of the receipt in the revenue base for taxation so long as the receipt is relatable to costs incurred contributing to the earning of the revenue. An assessee cannot be permitted to opt for concessional rate of taxation on gross receipt basis and then claim that some part of the receipts should be left out by describing it as reimbursement. It is patently an absurd proposition. - AT
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Tax Commission Income Attributed to Hindu Undivided Family, Not Individual Assessee, Based on TDS Certificate and Bank Records.
Case-Laws - AT : Commission income belonged to the HUF or assessee - Referring to TDS Certificate issued by Ajnara India Ltd. showing TDS on commission paid to HUF of the assessee and bank account of the HUF of the assessee with Oriental Bank of Commerce, wherein commission has been deposited after TDS. - Considering all we are of the considered opinion that the commission income belonged to the HUF and rightly returned by it. Therefore, correct hand for taxing such income is HUF and not the assessee. - AT
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Late EPF/ESIC Contributions: Finance Bill 2021 Amendment Effective from April 2021, Not Applicable for Assessment Year 2018-19.
Case-Laws - AT : Disallowance towards Employees contribution to EPF/ESIC which was deposited belatedly but before the time limit prescribed u/s. 139(1) - Memorandum explaining the provisions of the Finance Bill, 2021, provides that this amendment will take effect from 1st April, 2021 and will, accordingly apply in relation to assessment year 2021-2022 and subsequent assessment years. Since the assessment year under consideration, namely, 2018-19 is anterior to the amendment carried out with effect from A.Y. 2021-22, we hold that the position of law as set out by various Hon'ble High Courts squarely applies to the facts and circumstances of the instant case - AT
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CER Credit Transfers Deemed Capital Receipts, Not Taxable Under Income Tax Act Sections 28(iv) and 2(24)(vd.
Case-Laws - AT : Receipt from transfer of Carbon Emission Reduction ("CER") - carbon credits are not offshoot of business but offshoot of environmental concerns and hence not chargeable to tax. The receipts arising from transfer of carbon credits are in the nature of capital receipts not subjected to tax in terms of section 28(iv) read with section 2(24)(vd) of the Act. - AT
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Commissioner Confirms Deletion of Additions u/s 69C; Assessee Proves Expense Validity While Protecting Informant Identity.
Case-Laws - AT : Addition made on account of informer information expenses - Additions u/s 69C - In this case, details of informants have to kept secret and the assessee has supplied enough information to substantiate the actual payment but only kept the identity of the informants. After going through detailed finding of the Ld.CIT(A) we do not find any reason to interfere with the finding of the Ld.CIT(A) - CIT(A) rightly deleted the additions - AT
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LLP's Revenue Recognition Method Challenged; GN-2012 Guidance Note Deemed Inapplicable Due to Joint Development Agreement with TATA Housing.
Case-Laws - AT : Revenue recognition - Acceptability of correct method of accounting as per accounting standard and revised guidance note - As stated earlier the Accounting standards and guidance notes are applied to present the financial statement reliably and for consistency. Certainly not for filing return of income. In the given case assessee is an LLP and no doubt accounting standard and guidance note is applicable to the assessee, however, the revenue sharing method and revenue declared by the assessee as per JDA are not based upon the project completion rather it depends upon the gross sales effected by the TATA Housing Development Company Ltd. Therefore, as per the facts on record the GN–2012 has no application to the case of the assessee. - AT
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Equity Shares Issuance to Sister Concern Not Taxable u/s 56(2)(viib); No Unaccounted Money Involved.
Case-Laws - AT : Addition of share premium received on issue of equity shares u/s.56(2)(viib) - shares were issued to its sister’s concern only and the transactions are between two closely held companies and it cannot be classified or equated to generations/circulations of unaccounted money. - No additions - AT
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Revenue Challenges NCLT's Approval of Resolution Plan; Right to Appeal u/s 61 of Insolvency and Bankruptcy Code.
Case-Laws - HC : Legality and validity of the order passed by the Income Tax Appellate Tribunal - Approval of resolution plan for insolvency - If the Revenue is dissatisfied in any manner with the sanctioning of the Resolution Plan by the NCLT, then liberty may be reserved in favur of the Revenue to prefer an appeal under Section 61 of the Code, 2016 before the NCLT. - HC
Customs
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Petitioner Challenges Withdrawal of Duty Credit Scrips Registration Under MEIS and ROSCTL, Citing Binding Earlier Concession.
Case-Laws - HC : Seeking direction to respondents to register duty credit scrips issued under Merchandise Exports from India Scheme (MEIS) and Rebate of State and Center Taxes and Levies (ROSCTL) - the respondents-authorities have chosen to withdraw the benefit which, at one stage, had been conceded to by them in the earlier writ petition. The said proceedings are binding on the petitioner as well as the respondents and thus, once the respondents-authorities had chosen to issue the scrips then the non-registering of the same cannot be justified. - HC
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Customs Authorities Lack Jurisdiction Over SEZ Units for Smuggling Offenses Involving Dutiable Goods from Outside India.
Case-Laws - AT : Jurisdiction - scope of the subject offence was not limited to the one within SEZ but also an offence of smuggling dutiable goods from a territory outside India into the Indian Customs territory - whether the authorities under the Customs Act enjoy jurisdiction over SEZ units? - From the above well founded orders/decisions, we have to accept that the benefit of the interpretations, drawn consistently by various Benches, are in favour of the tax payer/ appellants herein, in these batch of cases - AT
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Free Shipping Bill Conversion Rejected; Section 149 Allows Amendments for Unintentional Errors Without Fraudulent Intent.
Case-Laws - AT : Rejection of conversion of free shipping bills to advance authorization shipping bills - Section 149 is a provision which permits the importer / exporter to request for amendment of documents for the mistakes that may have happened while filing the documents. When an application for amendment is received, if it is very much clear from the documents that the mistake was only an inadvertent mistake and there is no attempt of fraud or mis-statement to evade duty, the request for conversion ought to be allowed - AT
Indian Laws
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Charitable educational institutions not exempt from electricity duty u/s 3(2) of the 2016 Act.
Case-Laws - SC : Exemption from payment of electricity duty, post 01.09.2016 or not - The exemption provision need to be interpreted literally and when the language used in exemption provision is simple, clear and unambiguous, the same has to be applied rigorously, strictly and literally. Under the 2016 Act, charitable education institutions running the schools or colleges are specifically excluded from the exemption clause/exemption provision, Section 3(2). - SC
IBC
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Court Upholds CIRP Initiation: Debtor's False Dispute u/s 9 Rejected, Application Deemed Maintainable.
Case-Laws - AT : Maintainability of application - initiation of CIRP - The present is a case where we are satisfied that there is no dispute, in fact, prior to issuance of Section 8 notice. - We are fully satisfied that present is a case where Corporate Debtor is trying to raise illusory dispute and in fact no dispute existed. The Corporate Debtor cannot be allowed to raise bogy of disputes to save it from its liabilities and the debt under Section 9. - AT
Service Tax
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Facilitation Fees for Tourist Stops at Shops Under Review for Business Auxiliary Services Classification and Service Tax Implications.
Case-Laws - HC : Classification of services - Business Auxiliary services or not - The agreement between the shop owners and the assessee provided that the shop owner would pay facilitation fees per season to the corporation on the condition that the tourist buses of the corporation would stop at the showroom of the shop owners for the purpose of shopping by the tourist travelling in palace on wheels. It was thus a clear case of promotion of sale of the goods of the shop owners or the showroom owners, as the case may be. - HC
Central Excise
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High Court Quashes 16-Year-Old Show-Cause Notice, Citing Unreasonable Delay and Violation of Natural Justice Principles.
Case-Laws - HC : Delay in adjudication of SCN - show-cause notice has not been adjudicated upon for about 16 years - It is not expected from the assessee to preserve the evidence/record intact for such a long period to be produced at the time of hearing of the Show-Cause Notice. The Respondent having issued the Show-Cause notice, it is their duty to take the the said Show-Cause notice to its logical conclusion by adjudicating upon the said Show-Cause Notice within a reasonable period of time. In view of the the gross delay on the part of the Respondent, the Petitioner cannot be made to suffer - Hearing of Show-cause notice belatedly is in violation of natural justice. - SCN Quashed and set aside - HC
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Mandatory Pre-Deposit Refund Cannot Be Adjusted Against Arrears; No Provision for Offset in the Act.
Case-Laws - AT : Refund of amount of mandatory pre-deposit - adjustment/set off the amount of refund against the arrears towards assessee - There exist no other provision in the Act which enables the Revenue to adjust the amounts due to them as against the amounts due by them to the assessee - The Department can proceed against the assessee to recover the amounts due to them under the provisions of the Act but the refund to which assessee is entitled has to be sanctioned and disbursed in his favour - AT
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Court Rules CENVAT Credit Demands Invalid Due to Lack of Legal Basis u/r 14 of Cenvat Credit Rules, 2004.
Case-Laws - AT : CENVAT Credit - manufacture of dutiable as well as exempted products - The SCNs in these appeals were issued proposing to recover under Rule 14 of CCR an amount to fulfill obligations under Rule 6(3). A plain reading of Rule 14 shows that it does not empower the Revenue to compel the manufacturer to maintain separate accounts or to pay an amount equal to 10% of the value of the exempted goods. - The demands in the show cause notices under Rule 14 of the Cenvat Credit Rules, 2004 of an amount equal to 10% of the value of exempted goods Rule 6 (3) are not sustainable in law at all and, therefore, none of the demands could have been confirmed as the lack any legal basis. - AT
VAT
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Assessee Penalized for Fake Form-C Documents, Tax Evasion u/s 61 of Rajasthan VAT Act 2003.
Case-Laws - HC : Levy of penalty - tax and interest imposed by the petitioner- Assistant Commissioner Commercial Tax has been upheld - Form-C found to be fake and forged - The penalty was rightly imposed upon the Assessee by the Authorities as he (Assessee) furnished inaccurate particulars and he also concealed the transactions of sale and purchase to avoid the payment of Tax. Therefore, the Assessee is liable to pay penalty u/s 61 of the RVAT Act, 2003. - HC
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Court Rules Tribunal Must Verify Applicant's Unclaimed Tax Deposit; State Must Account for Every Rupee Deposited.
Case-Laws - HC : Whether the tax which has been deposited by the applicant proof of the same were already on record the Tribunal was justified even in not giving the benefit of the same? - The State is not an unscrupulous tax collector. In face it accounts for every rupee that the tax payer deposits with it. Merely because the assessee-revisionist may not have claimed the deposit in the original returns would be of no consequence as to computation of outstanding demand - Against the Tribunal has erred in refusing to allow such verification exercise. Accordingly the question of law is answered in the negative and in favour of the assessee-revisionist and against the revenue. - HC
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