TMI Tax Updates - e-Newsletter
March 27, 2023
Case Laws in this Newsletter:
Articles
By: CSSwati Rawat
Summary: The Finance Bill, 2023 introduces significant amendments affecting capital gains, IFSC, TDS/TCS, and other tax provisions. Notably, indexation benefits for long-term capital gains on debt mutual funds are withdrawn for investments made from April 1, 2023, with such funds now taxed according to individual income tax slabs. New provisions include Section 50AA for market-linked debentures and amendments to Sections 48 and 47 regarding business trusts and joint ventures. IFSC-related changes include tax exemptions for non-residents and IFSC units, and modifications to TDS/TCS rates. Additional amendments address personal tax relief, non-resident taxation, and exemptions for specific entities.
By: Dr. Sanjiv Agarwal
Summary: Under the CGST Act, 2017, a 'notification' is defined as a notice published in the Official Gazette, intended to inform the public about exemptions or changes. The effective date is when the Gazette is made publicly available. Notifications cannot override statutory rules and must be empowered by law. They are essential for implementing statutory objectives, such as tax exemptions or procedural guidelines. Judicial pronouncements emphasize that notifications should be interpreted in favor of the subject and must align with the statutory context. Notifications are crucial in delegated legislation under GST law, binding and integral to legal frameworks.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: The Companies Act, 2013 defines a private company as one with a prescribed minimum paid-up share capital, restrictions on share transfers, a member limit of 200 (excluding employees), and a prohibition on public securities subscriptions. Private companies enjoy exemptions from certain Act provisions, including the exclusion of a cash flow statement in financial reports for startups, exemptions from related party transaction restrictions, and flexibility in share capital issuance. They are also exempt from certain compliance requirements, such as filing specific resolutions, appointing independent directors, and forming audit committees. Additionally, private companies face fewer restrictions on loans to directors and related party voting.
By: Bimal jain
Summary: The CESTAT, New Delhi ruled that no Service Tax can be levied on the take-away or parcel food from restaurants, as it constitutes a sale of goods without service elements like dining facilities. The case involved a company operating food outlets, which was audited and found not to have paid Service Tax on take-away sales and shared rent from an associated enterprise. The tribunal set aside the Revenue Department's demand, stating that such transactions are sales, not services, and sharing premises with an associated enterprise does not equate to sub-letting. The decision relied on existing circulars and previous court judgments.
By: Bimal jain
Summary: The Allahabad High Court ruled that a minor discrepancy in an e-way bill, specifically the incorrect vehicle registration number, does not warrant penalty proceedings under Section 129 of the Central Goods and Services Tax Act, 2017. The case involved a company engaged in manufacturing beverages, which faced penalties for a wrong vehicle number during a stock transfer. The court found no evidence of tax evasion intent and noted that the correct registration was mentioned elsewhere. Consequently, the court set aside previous orders imposing penalties, emphasizing that such minor errors should not attract penalties.
News
Summary: Registered and unregistered taxpayers can apply for an Advance Ruling under the GST Act using FORM GST ARA-01. The application process involves logging into the GST portal, selecting the application type, depositing the required fee, and submitting necessary documents. Applicants can seek rulings on issues like classification of goods/services, tax liability, and input tax credit admissibility. After submission, the application status can be tracked online. If the application is rejected, rectification can be sought. Appeals against Advance Ruling Orders require a fee and must be filed within specified time limits. The process includes hearings and potential rectification or appeal proceedings.
Summary: The One-District One-Product (ODOP) initiative aims to promote balanced regional development by selecting and marketing at least one unique product from each district across the country. The initiative has identified 1102 products from 761 districts, focusing on enhancing socioeconomic growth. Efforts include capacity-building workshops, e-commerce integration, and international buyer-seller meets. The Ministry of External Affairs has used ODOP products as gifts for G20 delegates to showcase India's diverse handicrafts. International promotion includes events like the Mango Festival in Japan and exhibitions in Croatia and Canada, aiming to boost exports and create a global brand image for local products.
Summary: India Post offices and approximately 5.2 lakh Common Service Centres will support government buyers, sellers, and service providers in using the GeM portal. This initiative aims to help under-served seller groups, including women, tribal entrepreneurs, and micro-enterprises, by providing direct access to government markets, thereby fostering job creation and wealth generation in rural areas. Services include buyer-seller registration, product catalogue management, and logistics support through India Post. While some services are free, nominal charges apply for others like product catalogue management. Seller registration requires specific documentation and identification details. This effort benefits local bodies and public institutions involved in procurement.
Summary: The Indian government has implemented an investor-friendly policy to encourage foreign direct investment (FDI), allowing 100% FDI under the automatic route in most sectors except strategically important ones. The Foreign Investment Promotion Board was abolished in 2017, and the approval process has been simplified, with applications now submitted through the National Single Window System Portal. Recent FDI policy reforms have been made in sectors like defense, insurance, and telecom, increasing the FDI limits. From April 2014 to March 2022, significant growth in FDI inflows was observed in sectors such as computer software, services, trading, and telecommunications.
Summary: The Union Cabinet, led by the Prime Minister, approved an additional instalment of Dearness Allowance for Central Government employees and Dearness Relief for pensioners, effective from January 1, 2023. This increase, amounting to 4% over the existing rate of 38%, aims to offset inflation impacts. The financial burden on the exchequer will be Rs. 12,815.60 crore annually, benefiting approximately 47.58 lakh employees and 69.76 lakh pensioners. This adjustment follows the 7th Central Pay Commission's recommendations.
Highlights / Catch Notes
GST
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High Court Reviews Denial of Input Tax Credit Refund for Export of Services u/s 2(6) of IGST Act.
Case-Laws - HC : Rejection of refund for input tax credit (ITC) - export of services - There is no dispute that the recipient of Services – that is EY Entities – are located outside India. Thus, indisputably, the Services provided by the petitioner would fall within the scope of the definition of the term ‘export of service’ under Section 2(6) of the IGST Act. - HC
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Goods Supplied Overseas Without Entering India Not Taxable Under GST, Remain Outside Taxable Territories.
Case-Laws - AAR : Classification of supply - the goods are supplied from a location outside India to a location outside India, i.e., the supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. - The supply of goods from the Applicant to the overseas customer is treated neither as supply of goods nor as supply of services. - AAR
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Aircraft Type Rating Training for Commercial Pilots Subject to GST, Not Considered Statutory Service by DGCA.
Case-Laws - AAR : Exemption from GST - supply of the aircraft type rating training services to commercial pilots in accordance with the training curriculum - The fact that such a certificate may be taken into account by the DGCA approved examiner for the purpose of evaluating the experience and content of training will not make it statutory in character. - the said services are exigible to GST. - AAR
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Transfer of Staffing Division Classified as Supply Under GST; Eligible for Exemption Benefits as Per Regulations.
Case-Laws - AAR : Classification of supply - Supply or not - transaction of transfer/ sale of one of the independent running business divisions of the Applicant, as a whole - an independent part (staffing division business) of the applicant's business is being transferred / sold by the applicant - Benefit of exemption available - AAR
Income Tax
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Court Rules on Extended Limitation for Tax Assessments Due to Incomplete Disclosure u/s 147 of Income Tax Act.
Case-Laws - HC : Reopening of assessment u/s 147 - extension of period of limitation u/s 147 - In this case, failure on the part of the assessee to fully and truly disclose all material particulars in our view would constitute the "jurisdictional fact" for invoking extended period of limitation and failure to record the existence of the above jurisditional fact while invoking the extended period under the proviso to Section 147 of the Act, would vitiate the entire proceedings. - HC
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Income Tax Commissioner Revises AO's Zero Assessment of Trust, Citing Commercial Nature u/s 263 and Section 2(15.
Case-Laws - AT : Revision u/s 263 by CIT - the AO despite having recorded that though the assessee trust’s activity fall under the ambit of “general public utility”, they are of commercial in nature and are covered by first and second proviso of section 2(15) - However, he erroneously assessed income of the assessee at Rs.NIL. - it is the clear case where the assessment order is erroneous and self-contradictory. - AT
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No Obligation to Withhold Taxes on Payments to Oilstone UAE, Confirms Section 195, Due to UAE Residency Certificate.
Case-Laws - AT : TDS u/s 195 - the assessee had also furnished declaration regarding “No Permanent Establishment in India” of Oilstone UAE to the assessing Officer during the course of assessment hearing. Further copy of Tax Residency Certificate (TRC) to the effect that Oilstone UAE is a tax resident of UAE was also furnished before the AO - the assessee was not under an Obligation to withhold taxes on such payments - AT
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Deduction Denied u/s 80IB Due to Workforce Shortage; Case Sent Back for Fact Verification.
Case-Laws - AT : Deduction u/s 80IB - Claim denied as assessee did not have 10 workers during the year - The attendance register of the appellant, that on that particular day the number of employees were less than ten, as some of them were absent on account of leave etc. These facts have not been appreciated by the AO while passing the assessment order - matter restored back to verify the facts - AT
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Liaison Office in India Not a Permanent Establishment, Activities Compliant with RBI, Tax Addition Removed.
Case-Laws - AT : Income deemed to accrue or arise in India - Liaison Office (LO) as a Service PE or Dependent Agency Permanent Establishment (DAPE) - LO did not carry any activity, beyond that permitted by the RBI. - The activities/operations of the assessee in connection with the contracts are carried from outside India. - LO of subsidiary of assessee does not constitute a PE in the case of assessee, hence, addition on this ground made by AO is directed to be deleted. - AT
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Court Rules Discrepancy in Gross Receipts Not Grounds for Additions; Taxpayer's Accounting Method Deemed Acceptable.
Case-Laws - AT : Difference in gross receipts as per Form no. 26AS and books of accounts of the assessee - The assessee is following the method of accounting as per which it was accounting service charges received from the clients towards rendering various services as their income and reimbursement of expenses is squared off in the parties account. - Additions not permissible - AT
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Merger Rules: Partners Must Hold 50% Voting Power for 5 Years to Setoff Depreciation Under Sec 72A(6.
Case-Laws - AT : Setoff of unabsorbed depreciation and carry forward depreciation - Condition as prescribed u/s 72A(6) - Merger of partnership firm into Company - percentage of holding that the aggregate of the shareholding in the company of the partners of the firm is not less than 50% of the total voting power and their shareholding continues to be as such for a period of 5 years from the date of succession. - AT
Customs
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Unauthorized Gold Imports Confiscated u/s 111(d); Only Notified Agencies Can Legally Import Foreign-Marked Gold Bars.
Case-Laws - AT : Confiscation - Foreign marked gold bars - Unless this condition of the import (only by a notified agency) is fulfilled, gold is a prohibited good. The appellant also does not dispute that the gold can be imported only by the nominated agencies. If gold is imported by anyone else, it will be prohibited goods. - The gold bars and piece of gold were correctly held liable for confiscation under section 111(d) by the adjudicating authority - AT
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Commissioners' Committee Claims Commissioner (Appeals) Not Bound by Judicial Discipline, Criticizes Adherence to High Court Precedent.
Case-Laws - AT : Judicial discipline - We are surprised as to how the Committee of two Commissioners has not only concluded that the Commissioner (Appeals) does not have to follow judicial discipline but have gone further to say that the Commissioner (Appeals) has erred in following the binding precedent of the jurisdictional High Court. - AT
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Adjudicating Authority Must Explain Valuation Discrepancy for Barge u/r 3; Impacts Residual Method Application.
Case-Laws - AT : Valuation - barge - rejection of declared value - The adjudicating authority is also obliged to explain the different positions adopted for valuation of the same vessel which, but for a brief while, was within Indian territorial waters and, yet, was found to be valued with substantial difference on the two occasions; this could have a significant bearing on the manner in which the residual method is used for conformity with the scheme of valuation espoused in rule 3 - AT
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Customs Valuation: Transaction Value Doubts Need Solid Evidence, Can't Reject Solely on Higher Similar Goods Prices.
Case-Laws - AT : Valuation of imported goods - the word “doubt” used in the rule has to be based on cogent reasons and evidences - Clearly, for rejection of the transaction value under Rule 12, there has to be a reasonable ground and it cannot be rejected merely on the ground that similar goods have been imported at higher value without examining the applicability of Rule 5 of Customs Valuation Rules, 2007. - AT
SEBI
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Stock brokers need separate SEBI registration for each exchange and must pay fees per Regulation 10, 1992.
Case-Laws - SC : Stock broker which requires multiple registrations to operate on more than one stock exchange(s) or a single registration will suffice for all the stock exchanges - stock broker not only has to obtain a certificate of registration from SEBI for each of the stock exchange where he operates, at the same time, has to pay ad valorem fee prescribed in terms of Part III annexed to Regulation 10 of the Regulations, 1992 in reference to each certificate of registration from SEBI - SC
Central Excise
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Common Ownership Leads to Clubbing of Clearances for SSI Exemption Under Central Excise Law; Duty Imposed on Combined Values.
Case-Laws - AT : SSI Exemption - clubbing of clearances - in the present case the clubbing is not on the basis of the common facility between both the units but because of the common ownership, being same partners in both the firm. Therefore, the adjudicating authority has rightly clubbed the value of clearance of both the units and demanded excise duty - AT
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Appellants liable for penalties u/r 26(1) for aiding fraudulent Cenvat credit claims by manufacturer.
Case-Laws - AT : Levy of penalty u/r 26(1) for abatement - it is clear that all the appellants were indulged in abating the manufacturer for fraudulent availment of Cenvat credit therefore, they have made themselves liable for penalty under Rule 26(1) Cenvat credit rules 2002 - AT
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Revenue Demand Time-Barred Due to Extended Limitation Period and Delayed Show Cause Notice Issuance by Officer.
Case-Laws - AT : Invocation of Extended Period of Limitation - In this case, not only one but several rounds of audit were conducted. Show Cause Notice was issued for the previous period on the same issue by the Revenue. Thus, the department was fully aware of the issue in question, the general marketing pattern of the appellant and it was for the officer scrutinising the returns to have checked the returns and issued SCN within time. - demand set aside as time barred - AT
VAT
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Auction Buyer Not Liable for Tax Debts Without Notice, High Court Sets Aside Attachment Order.
Case-Laws - HC : Right of Auction Purchaser of property - Recovery of Outstanding dues of Bank and tax dues under the VAT / sales tax act - Priority of claims - Attachment order - The auction purchasers had never received any actual notice of the lien or constructive notice from the Respondent No.1 Authority in respect of the said writ property and thus is not liable to pay any tax separately towards the tax dues of the dealer of Respondent No.1 Authority. - Attachment order set aside - - HC
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