TMI Tax Updates - e-Newsletter
February 23, 2022
Case Laws in this Newsletter:
Income Tax
Articles
By: Shripada Hegde
Summary: Revenue officers in Karnataka have issued notices demanding GST on the holding of equity in subsidiary companies, classifying it as a service under Service Code 997171 with an 18% tax rate. This demand targets Indian holding companies and Indian subsidiaries of foreign companies. Critics argue that the notices lack justification under the CGST Act, as the act of holding shares does not fit the definition of a "service" or "supply." The notices fail to meet the burden of proof for taxability, and the classification used is inconsistent with legislative intent and Article 14 of the Constitution. The valuation method applied is also criticized as inappropriate. There is a call for government clarification to prevent unnecessary litigation.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: A Power of Attorney (PoA) is a legal document that authorizes an agent to act on behalf of a principal. The Power of Attorney Act outlines its execution, allowing the agent to perform acts as if done by the principal. Payments made in good faith under a PoA remain valid despite changes in the principal's status unless known otherwise. PoAs can be deposited in court for verification. Married women can appoint attorneys as if unmarried. Types of PoA include general, limited, durable, and medical. Registration is not mandatory unless involving significant property. A Supreme Court case affirmed that a PoA holder can act without the original document if not explicitly revoked.
By: Arun Singh
Summary: All deposit-taking Non-Banking Financial Companies (NBFCs) and non-deposit taking NBFCs with an asset size of 100 crore and above must establish a Liquidity Risk Management framework. This includes policies, strategies, practices, internal controls, and disclosures on liquidity risk, currency risk, and maturity profiling, to be reported quarterly and annually. Additionally, non-deposit taking NBFCs with assets of 5,000 crore and above, and all deposit-taking NBFCs, must disclose their Liquidity Coverage Ratio (LCR) quarterly. This involves detailing main LCR drivers, changes, High-Quality Liquid Assets (HQLAs) composition, funding source concentration, derivative exposures, currency mismatches, and other relevant liquidity profile factors.
News
Summary: The Finance Minister chaired a post-Budget meeting with leaders from banks, non-banking financial companies (NBFCs), and financial institutions, emphasizing the adoption of the Account Aggregator Framework to enhance credit flow and digital lending. Discussions covered budget initiatives related to infrastructure, defense, telecom, and manufacturing, alongside schemes like the Emergency Credit Line Guarantee Scheme (ECLGS) and Aatma Nirbhar Bharat. The meeting highlighted the importance of digital banking and financial inclusion, urging banks to open accounts for unbanked adults and ensure insurance and pension coverage. With strong financial indicators, banks are poised to support economic growth and expand lending activities.
Summary: NITI Aayog and WRI India, supported by GIZ India, organized a virtual workshop to explore financing solutions for decarbonizing India's transport sector under the NDC-Transport Initiative for Asia. The event aimed to unite financial institutions and transport organizations to develop sustainable financing strategies. Key speakers emphasized the need for innovative financial instruments to promote clean mobility and the importance of multi-stakeholder collaboration. The transport sector, a significant contributor to India's greenhouse gas emissions, requires strategic investments to transition to zero-emission vehicles. The initiative involves India, China, and Vietnam, supported by Germany's Federal Ministry for the Environment.
Summary: The 25th meeting of the Financial Stability and Development Council (FSDC) took place in Mumbai, chaired by the Union Finance Minister. The Council discussed the need for ongoing vigilance over financial conditions and institutions due to potential vulnerabilities. Key topics included macroeconomic challenges, financial sector development, and inclusive growth. Operational issues like currency management were also addressed. The meeting reviewed actions by the FSDC Sub-Committee and past decisions. Attendees included senior government officials and financial regulators. The FSDC aims to maintain financial stability, enhance regulatory coordination, and promote financial sector development while focusing on financial literacy and inclusion.
Summary: The Finance Minister engaged with leaders of the financial and capital markets in Mumbai, urging them to strengthen the sector by enhancing efficiency and transparency. She praised the resilience of financial markets during the pandemic and stressed the importance of building trust to attract investors. Discussions included topics such as investor awareness, KYC norms, mutual fund penetration, corporate bonds, commodity derivatives, and market system effectiveness. Participants included heads of stock exchanges, clearing corporations, depositories, mutual fund industry, stock brokerage firms, merchant bankers, and credit rating agencies.
Notifications
GST - States
1.
72/GST-2 - dated
29-12-2021
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Haryana SGST
Haryana Goods and Services Tax (Tenth Amendment) Rules, 2021
Summary: The Haryana Goods and Services Tax (Tenth Amendment) Rules, 2021, were enacted by the Governor of Haryana under section 164 of the Haryana Goods and Services Tax Act, 2017, following the Council's recommendations. Effective from December 1, 2021, the amendment modifies the Haryana Goods and Services Tax Rules, 2017, specifically in FORM GST DRC-03. Changes include adding references to tax intimations through FORM GST DRC-01A and updating descriptions related to audits, inspections, investigations, and mismatches between various GST forms. The amendment also revises the table format under serial number 7, detailing tax period, place of supply, and other relevant tax details.
2.
F.NO.FIN/REV-3/GST/I/08(Pt-1)(Vol.II)/120 - dated
31-12-2021
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Nagaland SGST
Seeks to supersede notification F.NO.FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/108 dated the 18th November 2021 and amend notification F.NO.FIN/REV-3/GST/1/08(Pt-1)"D" dated the 30th June 2017
Summary: The Government of Nagaland has issued a notification to amend a previous notification dated June 30, 2017, under the Nagaland Goods and Services Tax Act, 2017. This amendment, effective January 1, 2022, involves changes to tax schedules: in Schedule I, the entry at serial number 225 is removed, and in Schedule II, a new entry for footwear with a sale value not exceeding Rs. 1000 per pair is added at serial number 171A1 with a tax rate of 6%. This action supersedes an earlier notification from November 18, 2021.
3.
F.NO.FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/121 - dated
31-12-2021
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Nagaland SGST
Seeks to supersede notification F.NO.FIN/REV-3/GST/1/08(Pt-1) (Vol.II)/109 dated the 18th November 2021 and amend Notification F.NO.FIN/REV-3/GST/1/08(Pt-1)"N" dated the 30th June 2017
Summary: The Government of Nagaland has issued a notification amending a previous notification dated 30th June 2017, under the Nagaland Goods and Services Tax Act, 2017. The amendments involve changes in the description of services and conditions listed in the notification's table. Specifically, references to "Governmental Authority or a Government Entity" are removed, leaving only "Union territory or a local authority." Additionally, certain conditions related to these services are omitted. This notification, intended to serve public interest as recommended by the Council, supersedes a prior notification from 18th November 2021 and takes effect from 1st January 2022.
4.
F.NO.FIN/REV-3/GST/I/08(Pt-1)(Vol.II)/118 - dated
28-12-2021
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Nagaland SGST
Amendment in Notification No. F.NO.FIN/REV-3/GST/1/08(Pt-1)/222 dated the 26th July 2018
Summary: The Government of Nagaland has issued an amendment to a previous notification dated July 26, 2018, under the Nagaland Goods and Services Tax Act, 2017. This amendment, effective from January 1, 2022, involves changes in the entries of a specified table. Specifically, the entry "4414" replaces the previous entry for S. No. 4, and the entry "7419 80" replaces the previous entry for S. No. 29. The changes were made following the recommendations of the Council and are documented by the Finance Department's Revenue Branch.
5.
F.NO.FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/117 - dated
28-12-2021
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Nagaland SGST
Amendment in Notification F.NO.FIN/REV-3/GST/1/08(Pt-1)"E" dated the 30th June 2017
Summary: The Government of Nagaland has amended its notification dated June 30, 2017, under the Nagaland Goods and Services Tax Act, 2017. Effective January 1, 2022, changes include updates to the Schedule: substitution of entries for S. No. 22, 43B, 49, and 141, insertion of new entry 97A regarding tender coconut water, and omission of S. No. 101. These amendments are based on recommendations from the Council and are issued under the authority of the Finance Department's Revenue Branch.
6.
F.NO.FIN/REV-3/GST/1/08(Pt-1)(Vol.II)/116 - dated
28-12-2021
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Nagaland SGST
Amendment in Notification F.NO.FIN/REV-3/GST/1/08(Pt-1)"D" dated the 30th June 2017
Summary: The Government of Nagaland issued amendments to the Nagaland Goods and Services Tax Act, 2017, effective January 1, 2022. The changes involve updates to various schedules concerning tax rates on specific goods. In Schedule I, entries for products like yogurt, edible insects, and biodiesel are revised. Schedule II sees updates for items such as nuts and animal fats. Schedule III includes changes for products like nicotine items and ores, while Schedule IV introduces entries for tobacco products. These amendments reflect adjustments in tax classifications and rates for a wide range of goods.
Highlights / Catch Notes
GST
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Court Denies Writ Application on Confiscation Order; Appeal Available u/s 107 of GST Act for Ex-Parte Issue.
Case-Laws - HC : Validity of final order of confiscation - ex-parte order - this writ application is not entertained on the short ground that the writ applicant has a statutory remedy of filing an appeal before the Appellate Authority under Section 107 of the Act. If any appeal is filed, the writ applicant can take up, as one of the grounds while challenging the final order of confiscation, that the same is ex-parte, or to put it in other words, no opportunity of hearing was given to the dealer. - HC
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GST Registration Canceled for Non-Payment; Monthly Installments Required by 7th to Avoid Reinstatement of Cancellation Order.
Case-Laws - HC : Cancellation of registrations of petitioner - Non-payment of GST dues alongwith interest and penalty - Upon such determination the petitioner firm shall pay the determined monthly installments within the 7th of every month - it is further provided that if the petitioner firm do not comply with the requirement of paying the determined monthly installment within the 7th of every month, there shall be a periodical review by the departmental authority every month and in the event of default, the earlier order of cancellation may be revived by the department without any further reference. - HC
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Petitioner's Refund Claim for Input Service Credit Denied Under GST Act and CENVAT Rules; Authorities' Decisions Upheld.
Case-Laws - HC : Refund of input service Credit - transitional provision under Section 142(3) of Central Goods and Service Tax Act, 2017 read with Section 11-B of Central Excise Act, 1944 and Rule 2(l) and Rule 3 of the CENVAT Credit Rules, 2004 - the petitioner never had a right to claim refund under the existing law and had failed to exercise their right to claim CENVAT Credit as per law and wrongly claimed the impugned amount as credit in Service Tax Return (S.T. 3 return). - There are no reason to interfere with the findings and reasons assigned by the adjudicating authority as well as the appellate authority rejecting the application for refund filed by the petitioner under section 11B of Central Excise Act read with Section 142(3) and 174 of CGST Act - HC
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Court Allows GST Registration Revival for Non-Filers, Emphasizes Opportunity to Rectify Defaults with Safeguards.
Case-Laws - HC : Cancellation of GST Registrations - returns not filed for a continuous period of 6 months - Since, no useful will be served by not allowing persons like the petitioners to revive their registration and integrate them back into the main stream, the impugned orders are liable to be quashed and with few safeguards - these petitioners deserve a chance and therefore should be allowed to revive their registration so that they can proceed to regularize the defaults. - HC
Income Tax
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Vivad se Vishwas Scheme's restrictive interpretation risks unsustainability; rigid cutoff dates challenge its tax dispute resolution goal.
Case-Laws - HC : Benefit of Vivad se Vishwas Scheme - the stand taken by the department is not sustainable. To begin with the act was framed for resolution of the disputed taxes and the matters connected therewith and thereto. The resolution of disputed taxes is thus prime purpose of enactment of the act. We would therefore adopt an interpretation which would further this intention instead of restricting its scope. More importantly what the CBDT had done under its circular dated 04.12.2020 was to issue a clarification. A clarification by its very nature is declaratory. If for applicability of such clarification a cut off date is introduced it would run counter to the very concept of a clarification. If the CBDT circular is not read-down as to remove the rigors of the cut off date by holding that the same is not sacrosanct the same may suffer from vice of arbitrariness.- HC
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High Court Rules PCIT's Use of Section 263 Unjustified; Undermines Scheme's Purpose by Revising Prior Decision.
Case-Laws - HC : Revision u/s 263 by CIT - All particulars were available before the PCIT in respect of such income and the PCIT upon being satisfied, accepted such declaration. Thus, if the contention of the revenue is accepted that the PCIT has power to invoke Section 263 of the I.T. Act, the same, in our considered view, would frustrate the object behind introduction of such Scheme. The PCIT was not justified in invoking the power under Section 263 of the I.T. Act as it would amount to revising a decision taken by the PCIT on such declaration by the assessing officer which is not contemplated under the Income Tax Act. - HC
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Court Rules Provisional Attachment of Partnership Property u/s 281B Invalid as Land Not Owned by Assessee.
Case-Laws - HC : Provisional attachment of the subject land u/s 281B - Rights of transferee or a partner’s interest - The assessee in the case on hand is Inviddual / Partner. The provisional attachment is of the property, which belongs to the writ-applicant (Partnership Firm). The plain language of the provision of Section-281B is plain and simple. It provides for the attachment of the property of the assessee only and of no one-else. The golden rule of interpretation of the statutes is that the statute has to be construed according to its plain, literal and grammatical meaning, unless it leads to absurdity. The subject land i.e. Block No.142 not being the property of the assessee as such, was not open to provisional attachment. - HC
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Court Upholds Exemption, Rejects Revenue's Claim on Rent Adequacy and Security Deposit u/s 13(2)(b) Income Tax Act.
Case-Laws - HC : Exemption u/s 11 - Inadequate rent received by the respondent/assessee - The submission of the learned counsel for the appellant (Revenue) that the respondent had not taken any security deposit from Hamdard Dawakhana (Wakf) and thereby violated Section 13(2)(b) of the Act, has also been stated only to be rejected. Security Deposit may be one of the factors to be taken into consideration by the Assessing Officer for coming to a conclusion if the rent was “adequate”, however, it cannot be a sole determinative factor. - HC
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Notice for Reopening u/s 147 Cannot Be Issued to Deceased; Must Be Sent to Legal Heir for Validity.
Case-Laws - HC : Validity of Reopening of assessment u/s 147 - notice issued to dead person - curable defect u/s 292B or not ? - The assessee on whom the notice must be sent must be a living person i.e legal heir of the deceased assessee, for the same to be responded. This in fact is the intent and purpose of the Act. Therefore, Section 292B of the Act cannot be invoked to correct a foundational / substantial error as it is meant so as to meet the jurisdictional requirement. - HC
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Court Upholds Penalty for Undisclosed Income; Appellants Fail to Explain Non-Concealment u/s 271(1)(c.
Case-Laws - HC : Penalty levied u/s 271 (1) (c) - As the appellants had disclosed the income, after detection by the department and as per the terms of settlement, the assessing officer initiated the penalty proceedings, to which, the appellants / assesses did not submit any explanation to the effect that there was no concealment of income or furnishing of inaccurate particulars of such income, which culminated in imposition of penalties under section 271(1)(c), we do not find any infirmity or illegality in initiating the penalty proceeding - HC
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Court Voids Reassessment Notices Issued Post-April 2021 Under Unamended Section 148; Compliance with Amendments Required.
Case-Laws - HC : Reopening of assessment u/s 147 - applicability of the newly inserted provisions of Section 148A and the amendments brought inter alia w.e.f. 1.4.2021 - In view of the ratio propounded by the Allahabad and Delhi High Courts on the subject, the reassessment notices under Section 148 of the Act of 1961 served on the petitioners on or after 1.4.2021 are set aside having been issued in reference to the unamended provisions and the Explanations are to be read as applicable to reassessment proceedings if initiated on or prior to 31.3.2021, but it would be with liberty to the assessing authorities to initiate reassessment proceedings in accordance with the provisions of the Act of 1961, as amended by the Finance Act, 2021, after making all the compliances as required by law, if limitation for it survives. - HC
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Court Sets Aside Ex-Parte Order, Remands Case for Reconsideration; Petitioner Granted Opportunity to Present Case Again.
Case-Laws - HC : Validity of ex-parte impugned order - It is clear that on account of the inability and omission on the part of the petitioner to file his objections and produce documents etc., due to bonafide reasons, unavoidable circumstances and sufficient cause, the respondents have proceeded to pass the ex-parte impugned order which deserves to be set aside and the matter remitted back to the respondents for reconsideration afresh after giving one more opportunity to the petitioner. - HC
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Software Reimbursements Not Taxable as Income Under DTAA; Local Tax Act Definition of 'Royalty' Inapplicable.
Case-Laws - AT : Taxation of software reimbursements as Royalty - assessee strongly contends that reimbursements sought by the assessee represent recovery of expenses incurred by it, on behalf of Autoliv India, on an ‘at-cost’ basis - Since the term ‘Royalty’ has been defined in the DTAA, definition of the term ‘Royalty’ under the Act cannot be applied. Considering the facts of the case in totality, we hold that reimbursement towards software charges received by the assessee from Autoliv is not taxable since the same does not represent any income in the hands of the assessee - AT
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Penalty Imposed for Non-Compliance with Section 142(1) Notices; Reliance on Consultant and E-Portal Issues Not Excused.
Case-Laws - AT : Penalty u/s 271(1)(b) - non-compliance of notices u/s. 142(1) - , ‘blind faith’ in his local consultant - There has been no explanation as to why the consultant, after being apologetic of his consent, continued to behave in such an irresponsible manner, amounting to gross professional misconduct, which cannot be lightly inferred. The other reason stated for the inordinate delay in filing the appeals is the non-connectivity with the Revenue's e-portal, which could at best explain the delay by a few days. Under the circumstances, find no merit in the assessee's case qua penalty u/s. 271(1)(b) as well. - AT
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Interest Expenses Non-Deductible for Capital Work Loans u/s 36(1)(iii); Must Be Capitalized Instead.
Case-Laws - AT : Disallowance of interest expenses u/s. 36(1)(iii) - disallowance of financial cost attributable to capital work in progress and project work in progress - In case, the assessee has taken any loan for specific purpose of acquisition of asset or execution of project, then interest attributable to said purpose needs to be capitalized to work in progress account - AT
Indian Laws
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High Court Upholds Acquittal in Cheque Dishonor Case Due to Complainant's Lack of Transparency and Inconsistent Details.
Case-Laws - HC : Dishonor of Cheque - acquittal of the accused - it is evident that the complainant has not approached the Court with clean hands. He has not referred the date of payment of loan and no reasons are given for charging no interest to such a huge amount, that too during pendency of the civil litigation between the parties. Further, there is no explanation from the complainant as to why he has issued two cheques on the same day for ₹ 2.00 Lakhs each, instead of one cheque. - the judgment of acquittal does not call for any interference by this Court. - HC
Service Tax
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Can a Service Tax Refund Be Claimed Without Challenging Self-Assessment? Larger Bench to Decide Key Issues.
Case-Laws - AT : Refund of service tax - Unjust enrichment - Period of limitation - Tax paid on self assessment basis - Claim of refund without challenging the assessment, to claim the benefit of exemption - Matter referred to Larger Bench to decide the issue, "Whether refund claim of service tax is maintainable in the absence of any challenge or assessment or self-assessment in appeal or not?" - AT
Central Excise
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Attempt to Club Clearances Under SSI Exemption Fails Due to Lack of Evidence and Procedural Compliance Issues.
Case-Laws - AT : SSI Exemption - clubbing of clearances of two units - dummy units - Use of trade name of other company - In fact, there is no specific allegation that TLGW is a dummy unit. The department has proceeded to club the clearances of both these units without raising such allegation. It is found that the department has miserably failed to establish any mutuality of interest or cash flow between both the units. Further, there is no show cause notice issued to M/s.TLGW which the department alleges to be a dummy unit. - AT
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No Fraud Intent Found: Extended Limitation Period Not Applicable for Short-Paid Duty Recovery Under Revenue Neutrality Principle.
Case-Laws - AT : Seeking for recovery of the short paid duty amount - clearances made to its other units - the principle or doctrine of revenue neutrality is applicable in the case in hand inasmuch as the higher duty amount payable by the appellant under Rule 4 ibid would be available to the sister’s unit as Cenvat credit. Furthermore, it is noticed from the available records that the department was in doubt with regard to applicability of the proper valuation rules to the facts of the present case. - it cannot be said that there is element of mens rea on the part of the appellant in defrauding the Government revenue and thus, the extended period of limitation, was not available to the department for initiation of the show cause proceedings. - AT
VAT
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Department's Charge on Dealer's Father's Agricultural Land Invalid; Direct Action Against Dealer Permitted for Dues Recovery.
Case-Laws - HC : Recovery of the alleged outstanding dues - Creation of charge over the land - The very action on the part of the department in creating a charge over the agricultural land owned by the writ applicant herein being the father of the dealer is without jurisdiction. If any charge has been created in the revenue record, the same shall stand cancelled. It shall be open for the department to proceed against the dealer. If the registered dealer has any immovable property of his ownership, it is always open for the department to attach such property and recover its dues- HC
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Court Rejects Dealer's Argument on Suppressed Tax Turnover, Upholds Sales Suppression Findings by Intelligence Officer.
Case-Laws - HC : Suppression of tax - alleged unaccounted sales - scope of the word 'an estimate' - one need not dwell into all details furnished by the Intelligence Officer in Annexure-A order. It is not the case of dealer that the details, for any purpose, incorporated in the penalty order are incorrect, unrelated etc. The apportionment of profit, percentage, etc are again in line with the method adopted by the dealer. The Intelligence Officer has found out the suppression of sales turnover in a particular sale transaction through artificial and unacceptable apportionment of sale price between taxable item and exempt item. - The only ground raised by referring to estimation of suppressed turnover is equally untenable and accordingly rejected. - HC
Case Laws:
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Income Tax
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2022 (2) TMI 1491
Revision u/s 263 by CIT - Proof of lack of enquiry - HELD THAT:- Hon ble Bombay High Court in the case of Gabriel India Ltd. [ 1993 (4) TMI 55 - BOMBAY HIGH COURT ] has explained the meaning of erroneous as an order which is not in accordance with law, or which has been passed by the Income Tax Officer without making any enquiry in undue haste. The Hon ble Bombay High Court further explained the meaning of Prejudiced as an order can be said to be prejudicial to the interest of the Revenue if it is not in accordance with law in consequence whereof, lawful revenue due to the state has not be realized or cannot be realized. Facts mentioned elsewhere clearly show that this is not a case of lack of enquiry or assessment being framed in haste. Proper enquiries were made by the Assessing Officer during the course of assessment proceedings and after considering all the facts and evidences, the Assessing Officer took a view which is a plausible view. Therefore, it is not open to the ld. PCIT to direct a re-enquiry as he is of a different view. We are of the considered opinion that the assessment order dated 26.12.2018 is neither erroneous nor prejudicial to the interest of the Revenue. - Decided in favour of assessee.
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