TMI Tax Updates - e-Newsletter
March 15, 2023
Case Laws in this Newsletter:
Articles
By: Abhijeet Mane
Summary: The Finance Bill, 2023 aims to harmonize income tax provisions by integrating sections 241A and 245, effective April 1, 2023. Section 245 allows tax authorities to offset refunds against taxpayer liabilities, while section 241A permits withholding refunds if it may impact revenue recovery. The Bill's changes could widen tax authorities' powers to withhold refunds, potentially causing delays for taxpayers, especially large corporations. Courts have previously ruled against mechanical withholding of refunds during assessments. The Bill's amendments, still in proposal, may lead to increased litigation if enacted without adjustments to address taxpayer hardships.
By: Vivek Jalan
Summary: The OECD/G20 Inclusive Framework on BEPS has released technical guidance to aid governments in implementing the Global Minimum Tax (GMT), set to launch on January 1, 2024. This guidance ensures multinational entities face a minimum 15% tax rate and clarifies the interpretation of the GloBE Rules. Jurisdictions must adjust their non-Euro thresholds annually, using exchange rates from the European Central Bank or their central bank if necessary. The guidance allows for jurisdiction-specific customization of the Qualifying Domestic Minimum Top-Up Tax. India, as a member of the framework, supports the 15% minimum tax rate to prevent profit shifting to tax havens.
By: Rajeev Jain
Summary: The Composite Scheme under GST is designed for small taxpayers or business entities with a turnover of less than Rs.1.50 Crore, allowing them to pay GST at a fixed rate on total turnover. Eligible businesses include producers, retailers, and restaurants without alcohol, while manufacturers of ice cream, tobacco, and pan masala, inter-state suppliers, casual taxpayers, non-resident taxpayers, and e-commerce operators are excluded. Benefits include reduced paperwork and lower tax liabilities, with specific GST rates for manufacturers, traders, and restaurants. Participants must file quarterly and annual returns and comply with additional forms and provisions, such as issuing bills of supply and not availing input tax credit.
By: DEVKUMAR KOTHARI
Summary: The phrase "has reasons to believe" is crucial in legal contexts, particularly under various tax and customs laws, where it mandates a serious and diligent approach by authorities. However, authorities often treat it casually, leading to unnecessary litigation and delays. The article discusses a case involving search and seizure under the Customs Act, highlighting procedural errors and delays in the judicial process. The Supreme Court's handling of the case, including the misapplication of legal sections, underscores a need for greater attention to detail by legal professionals and court officials. The case exemplifies how procedural lapses can lead to justice being delayed.
By: Bimal jain
Summary: The Gujarat High Court annulled a Show Cause Notice (SCN) and subsequent order by the Revenue Department against a business due to a breach of natural justice principles, as no hearing opportunity was provided. The SCN lacked detail and was not physically delivered to the business, making it difficult to respond. The court ordered the Revenue Department to issue a new SCN with adequate hearing opportunities and reinstated the business's GST registration. The decision emphasized the need for clear communication and adherence to procedural fairness in GST registration cancellations.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The procedure for obtaining an advance ruling under the Central Goods and Services Tax Act, 2017 involves several steps. An applicant, whether registered or unregistered, must file an application using Form GST-ARA 01 and pay a fee of Rs. 10,000. The Authority for Advance Ruling (AAR) reviews the application, may call for records, and decides to admit or reject it. If admitted, the AAR issues a ruling within 90 days. The ruling is binding on the applicant and relevant officers unless obtained by fraud or misrepresentation. Errors in rulings can be rectified within six months. The AAR has powers similar to a civil court for procedural matters.
By: Bimal jain
Summary: The Jharkhand High Court invalidated an order issued by the Revenue Department against a company engaged in solar power systems due to procedural flaws, specifically the absence of a proper Show Cause Notice (SCN). The company discovered debits from its electronic credit and cash ledgers without prior knowledge or receipt of necessary documents. The court found discrepancies between documents obtained via the Right to Information Act and the original records, indicating irregular adjudication. It ruled that the proceedings violated principles of natural justice, setting aside the order and directing a fresh review with a proper SCN.
News
Summary: The B20 Conference in Gangtok, Sikkim, starting tomorrow, will highlight Sikkim's organic farming and explore multilateral business partnerships in tourism, hospitality, and pharmaceuticals. Organized by the Department for Promotion of Industry and Internal Trade, the event is part of a series of conferences in the North Eastern region. The conference will also focus on strengthening the global startup ecosystem, with India being a leading nation. Key discussions will include reskilling the workforce, promoting green energy investments, and fostering innovation. The event is part of India's G20 Presidency initiatives, with further summits planned in New Delhi and Gurugram.
Summary: Since its inception in April 2015, the Pradhan Mantri MUDRA Yojana (PMMY) has extended over 38.58 crore loans. Of these, 68% (26.35 crore loans) were granted to women entrepreneurs, and 51% (19.84 crore loans) to SC/ST/OBC borrowers. The scheme has facilitated the creation of 1.12 crore net additional jobs between 2015 and 2018, according to a national survey by the Ministry of Labour and Employment. These figures were disclosed by the Union Minister of State for Finance in a written reply to the Lok Sabha.
Summary: The Emergency Credit Line Guarantee Scheme (ECLGS), launched in May 2020 to support Micro, Small, and Medium Enterprises (MSMEs) affected by the COVID-19 pandemic, has issued guarantees totaling Rs 3.61 lakh crore, benefiting 1.19 crore borrowers as of January 31, 2023. The scheme has significantly aided MSMEs, with 95.18% of loans guaranteed for this sector, amounting to Rs 2.39 lakh crore. The ECLGS has prevented around 12% of MSME credit from becoming non-performing assets. Credit growth in the MSME sector has exceeded 30.6% during 2022, supported by various government measures to enhance credit flow and improve business credit health.
Summary: India's real GDP is expected to grow by 9.1% in 2021-22 and 7% in 2022-23, according to the National Statistical Office. This was confirmed by the Union Minister of State for Finance in a response to the Lok Sabha. The data indicates sustained economic growth following a full recovery. The IMF and World Bank forecast India as the fastest-growing major economy in 2023. Additionally, the World Bank ranked India as the 5th largest economy by GDP in 2021.
Summary: The government is working with G-20 nations to develop a coordinated international policy approach to crypto assets, as stated by the Union Minister of State for Finance in a Lok Sabha session. The Indian Presidency aims to prioritize crypto assets on the global agenda, emphasizing the need for international collaboration due to the borderless nature of these assets. Effective regulation or prohibition requires global cooperation to assess risks, benefits, and establish common standards and taxonomy, according to the Minister.
Summary: India has witnessed a significant increase in digital transactions, with a more than 200% growth in digital payment volume over the past four years since 2018-19. In FY 2021-22, 45 billion UPI transactions were recorded, marking an eightfold increase over three years and a fiftyfold increase over four years. The Ministry of Electronics and Information Technology introduced an incentive scheme to promote RuPay Debit Cards and low-value BHIM-UPI transactions. The government, RBI, NPCI, and banks have launched initiatives like BHIM-UPI and AePS to enhance digital payment awareness and infrastructure, allocating Rs. 2,600 crore for the current financial year.
Summary: At the CII Partnership Summit 2023, India's Commerce and Industry Minister emphasized leveraging global partnerships to address current global challenges, including post-COVID recovery and economic instability. The minister highlighted India's commitment to sustainability, circular economy, and innovative growth, citing India's significant achievements in vaccine distribution and the startup ecosystem. He stressed the importance of international cooperation, particularly in trade and technology, and India's efforts to expand rupee trade and digital partnerships. The minister also celebrated India's cultural achievements, noting recent Oscar wins as a testament to sustainable development and women's empowerment.
Notifications
DGFT
1.
60/2015-2020 - dated
14-3-2023
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FTP
Amendment in Policy Conditions under ITC HS code 2515 of Chapter 25 and 6802 of Chapter 68 of Schedule-I (Import Policy) of ITC (HS) 2022
Summary: The Government of India has amended the import policy conditions for marble classified under ITC HS codes 2515 and 6802. The new policy allows the import of 10,000 MT of marble annually from Bhutan without a Minimum Import Price, effective immediately. This import is subject to obtaining a valid Registration Certificate from the Directorate General of Foreign Trade (DGFT) and will operate on a financial year basis. The procedure for obtaining the Registration Certificate will be announced separately. This amendment is issued with the approval of the Minister of Commerce & Industry.
Circulars / Instructions / Orders
SEBI
1.
SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/36 - dated
10-3-2023
Clarification with respect to Qualified RTAs (QRTAs)
Summary: The Securities and Exchange Board of India (SEBI) issued a circular clarifying the categorization and responsibilities of Qualified Registrars to an Issue and Share Transfer Agents (QRTAs). An RTA is classified as a QRTA if it services over 2 crore folios in a financial year. Once categorized, the RTA remains a QRTA for three financial years, regardless of any decrease in folios. Newly categorized QRTAs have 60 days to comply with enhanced requirements. This circular, effective immediately, is issued under SEBI's authority to protect investors and regulate the securities market.
Customs
2.
Instruction No.11/2023 - dated
13-3-2023
Show cause notice issued under section 28 of the Customs Act, 1962 in the case of M/s Blue-Fin Frozen Foods Pvt. Ltd. - Section 28(9A)(c)
Summary: A show cause notice was issued under Section 28 of the Customs Act, 1962, to M/s Blue-Fin Frozen Foods Pvt. Ltd. regarding the alleged wrongful availing of MEIS scrips, which are liable for cancellation. The Directorate General of Foreign Trade (DGFT) has also issued a show cause notice under the FT(DR) Act. The Central Board of Indirect Taxes and Customs instructs the adjudicating authority to defer the decision on the customs show cause notice until the DGFT resolves the matter concerning the MEIS instrument.
3.
08/2023 - dated
13-3-2023
Telecom equipment in the context of notification No. 02/2019- Customs dated 29-01-2019 amending notification No. 57/2017-Customs dated 30.06.3017
Summary: The circular addresses the identification of telecom equipment under specific tariff items in the context of amendments to customs notifications. It highlights the need for stakeholders to understand the descriptions of telecom products, particularly those listed from (b) to (h) in the notification. To facilitate this, an Annexure provides a detailed illustration of products and equipment, while importers are required to declare an alphanumeric code in their import declarations starting April 1, 2023. The circular aims to bring clarity and certainty to the identification process, with guidance and public notices to be issued accordingly.
Highlights / Catch Notes
GST
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Appellate authority failed to issue a speaking order on delay condonation; case remanded under GST Act Section 107(4).
Case-Laws - HC : Condonation of delay in filing an appeal before the appellate authority - Section 107(4) of GST - The respondent authority ought to have passed a speaking order by computing the limitation in the light of Section 107(4) of the GST Act. The matter is remanded back for consideration. - HC
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Court Rules GST Registration Cancellation Revocation Benefits Revenue, Doesn't Affect Third-Party Rights or Prejudice Others.
Case-Laws - HC : Cancellation of GST registration of petitioner - In cancellation of such GST registration for the reasons mentioned under the Section, it cannot be said that any third party rights are created against the assessee. No prejudice is caused to any other person, if the GST registration of the petitioner/assessee is revoked. No prejudice is caused to the revenue. Rather as discussed above, it will be in the interest of the revenue to permit the revocation of a cancellation of GST registration of an assessee like the petitioner so that it felicitates collection of revenue as mandated under the GST Regime. - HC
Income Tax
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Notice for Reopening Assessment Must State Assessee's Failure to Disclose Facts u/s 147.
Case-Laws - HC : Reopening of assessment u/s 147 - the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction u/s 147 - HC
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High Court Quashes Reassessment Order: Procedural Violation u/ss 148A(b) and 148A(d) of the Income Tax Act.
Case-Laws - HC : Reopening of assessment u/s 147 - Validity of order 148A - the reassessment proceedings initiated are unsustainable on the the ground of violation of the procedure prescribed u/s 148A(b) of the Act on account of failure of the AO to provide the requisite material which ought to have been supplied alongwith the information in terms of the said section. - The order impugned passed u/s 148A(d), the notice impugned u/s 148 of the Act are hereby quashed. - HC
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Mauritius TRC Validates Tax Exemption for Petitioner, No Indian Capital Gains Tax on Share Sales, Says Court.
Case-Laws - HC : Income deemed to accrue or arise in India - Benefit of the Mauritius Double Taxation Avoidance Agreement (DTAA) - For the Authority to hold that if Petitioner was not interposed, the Bidvest group in accordance with the Indo-SA DTAA would have to pay capital gains on the share sale as the same is taxable in India is misplaced as not relevant as the investment is by the Petitioner. As noted above, the Petitioner has been incorporated in Mauritius, holds a TRC which is sufficient proof of its residence in Mauritius, which as noted above, cannot be enquired into unless there is a fraud or illegal activity, which in this case, has neither been alleged nor demonstrated. - HC
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High Court Grants Tax Exemption; Investment Criteria Irrelevant at Initial Approval Stage Per Supreme Court Ruling.
Case-Laws - HC : Claim of exemption u/s. 10(22) and section 10(23C)(vi) - The respondents have not substantiated their bald statement that ASB/the petitioners have not invested the surplus money in accordance with law which in any event would not be a criteria at the initial stage of approval as held by the Apex Court in New Noble Society (supra). - Benefit of exemption allowed - HC
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Faceless assessment annulled u/s 144B due to missing draft order; fresh proceedings to include personal hearing.
Case-Laws - HC : Faceless assessment u/s 144B(1)(xvi)(a) - draft order was not prepared - However, an income or loss determination proposal was prepared. - the best way forward would be to set aside the impugned assessment order, with liberty to the Assessing Officer (AO) to conduct the proceedings de novo, after according personal hearing to the petitioner/assessee and/or his authorised representative. - HC
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Court Rules on MAT Book Profit Offset Using Clause (iii) of Explanation-1, Section 115JB(2) of Income Tax Act.
Case-Laws - AT : MAT - computation of book profits - the claim of the assessee being lower of unabsorbed depreciation and business loss deserves to be set off against the current year book profit in terms of the provisions of clause (iii) of Explanation-1 of Section 115JB(2) - AT
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Assessing Officer Must Follow Higher Authority's Directive to Allow Set-Off of Business Losses as Claimed by Taxpayer.
Case-Laws - AT : Disallowance of claim of brought forward business loss - the AO was under legal obligation to comply with the direction of higher authority. We therefore, considering the totality of the facts, direct the Assessing Authority to allow set off of the losses as claimed by the assessee before the Ld.DRP. - AT
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PCIT finds AO failed to verify share premium, interest issues u/s 56(2)(vii), Rule 11UA(2)(b); revision quashed.
Case-Laws - AT : Revision u/s 263 - PCIT observed that AO had failed to examine and verify the issues related to share premium received and interest earned, which issues had remained unaddressed - The action of the Ld. PCIT is in direct contravention of the provisions of Explanation (a)(i) to section 56(2)(vii) of the I.T. Act read with rule 11UA(2)(b) of the I.T. Rules. - AO could not have changed the method of valuation opted by the Assessee - Revision order quashed - AT
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Expenses for Conferences Disallowed: Assessee Failed to Provide Healthcare Professionals' Details for Reimbursements.
Case-Laws - AT : Disallowance of expenses on account of organizing conference and seminars for the doctors and healthcare professionals - the assessee has not supplied any name and address of the healthcare personnel, to whom the conference or travel expenses have been reimbursed. - These expenditure falls under prohibited activity and therefore, expenses incurred thereon have been validly disallowed - AT
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PCIT Revises Assessment u/s 263 as AO Fails to Investigate Unexplained Cash Deposits by Appellant.
Case-Laws - AT : Revision u/s 263 by the ld. PCIT - Neither the AO had enquired into the sources of cash deposits nor the appellant had offered any explanation in support of the sources for cash deposits. This clearly goes to prove the AO had failed to examine this issue during the course of original assessment proceedings, which rendered the assessment order erroneous and prejudicial to the interests of the Revenue. - AT
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Assessing Officer Must Verify TDS Certificates; Cannot Deny Credit Arbitrarily. Check for Relief via Rectification Application.
Case-Laws - AT : Credit of TDS - AO cannot simply decline the credit of TDS and he is bound to verify TDS certificate issue in accordance with provisions of law. Further, the AO is also directed to verify if any relief has already been granted in the rectification application filed by the assessee. If so then further benefit of TDS credit may not be allowed. - AT
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Assessee's retracted statement u/s 133A deemed non-evidentiary; unexplained investment addition invalid.
Case-Laws - AT : Unexplained investment - addition made on the basis of surrender/admission made by the assessee - statement recorded during survey can safely be stated to be retracted duly evidenced with documentary evidence, and in such circumstances, the statement of the assessee recorded u/s 133A of the Act carries no evidentiary value. - AT
Customs
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Customs House Agent Penalized for Abetting Fraudulent Exports u/ss 114(iii) and 114AA of Customs Act 1962.
Case-Laws - AT : Levy of penalty on CHA u/s 114 (iii) and Section 114AA respectively of the Customs Act, 1962 - allegation of abatement - fraudulent export to claim duty drawback - The negligence of the CHA resulted into attempted of fraudulent export by his client. Therefore, the appellant is liable for penalty under Section 114(iii) and Section 114AA. - AT
IBC
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Appellant barred from Section 9 Insolvency proceedings due to dispute after Section 8 notice; must follow Distributorship Agreement remedies.
Case-Laws - AT : Initiation of CIRP - Admittedly, Distributorship Agreement between the parties is not disputed and the Appellant has claims against the Corporate Debtor. Appellant is free to take recourse to the mechanism as provided in the Distributorship Agreement for realisation of its dues. But present is not a case, where Section 9 proceedings under I&B Code can be initiated, when dispute is raised in reply to the Section 8 notice. - AT
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CIRP Cannot Be Initiated u/s 9 of IBC Due to Genuine Dispute Over Operational Debt.
Case-Laws - AT : Initiation of CIRP - existence of debt and dispute or not - In the present factual matrix, the defence raised by the Corporate Debtor cannot be held to be moonshine, spurious, hypothetical or illusory. For such disputed operational debt, Section 9 proceeding under IBC cannot be initiated at the instance of the Operational Creditor. - AT
Service Tax
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High Court Orders Tribunal to Decide Case on Merits Without Delay, Rejects Waiting for Apex Court Outcome.
Case-Laws - HC : Remand of the matter - the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the Apex Court. This approach of Tribunal is not proper. We deem it appropriate to direct the Tribunal to decide the matter on merits. - HC
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Service Tax Exemption on Seed Capital Assistance Scheme: 1% and 10% Charges Deemed as Loan Interest, Not Service Charges.
Case-Laws - AT : Levy of Service Tax - banking and other financial services - Seed Capital Assistance Scheme - Though the term used in ‘service charge’ but the underlying nature of the 1% and 10% is nothing but interest on the seed capital loan, extended to the entrepreneurs. Therefore the same is not liable to service tax. - AT
Central Excise
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Toothbrushes for export valued correctly u/s 4 of Central Excise Act; no retail price needed.
Case-Laws - AT : Valuation of export goods - method of valuation - toothbrushes supplied in bulk - to be further supplied under promotional scheme/ offer - as per standards of weights and measure Rules, the appellant are not under legal obligation to affix the retail sale price on this supplies. Therefore, the valuation of tooth brush when supplied in bulk quantity in carton was rightly valued under Section 4 of the Central Excise Act, 1944. - AT
VAT
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Dealers Must Prove ITC Claims u/s 70 KVAT Act with Detailed Transaction Records, Not Just Invoices.
Case-Laws - SC : Input Tax Credit (ITC) - Genuineness - Onus to prove - Mere production of the invoices or the payment made by cheques is not enough and cannot be said to be discharging the burden of proof cast under section 70 of the KVAT Act, 2003. The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. - SC
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