TMI Tax Updates - e-Newsletter
March 28, 2023
Case Laws in this Newsletter:
Articles
By: Vivek Jalan
Summary: Section 68 of the Income Tax Act addresses unexplained credits in an assessee's books. If an assessee cannot satisfactorily explain the nature and source of a credited sum, it may be taxed as income. The Finance Act 2012 required that the source of funds for share-related credits be explained in the shareholder's hands. However, loans required only proof of the creditor's identity, creditworthiness, and transaction genuineness. The Finance Act 2022 amended this, mandating explanation of the source in the creditor's hands for all credits, except for Venture Capital Funds or Companies. This places the onus on the assessee to establish the source, identity, capacity, and creditworthiness of creditors.
By: DR.MARIAPPAN GOVINDARAJAN
Summary: In a case involving a trust, the Income Tax Appellate Tribunal (ITAT) addressed whether the purchase of an Audi car was allowable as an expenditure for educational purposes. The trust's income was initially assessed with an addition of Rs. 38,01,582 by the Assessing Officer, who argued the car was for personal use by trustees. The Commissioner of Income Tax (Appeals) upheld this decision. However, the ITAT found no evidence to counter the trust's claim that the car was used for educational activities by school staff. Consequently, the ITAT directed the deletion of the disallowance, allowing the trust's appeal.
By: Bimal jain
Summary: The Jharkhand High Court ruled against the Revenue Department for issuing a vague and cryptic Show Cause Notice (SCN) without providing a personal hearing to the petitioner, a logistics company. The court found that the orders demanding reversal of excess Input Tax Credit (ITC) were beyond the scope of the original SCN, violating principles of natural justice. The petitioner had mistakenly deposited GST in the wrong account and sought a refund, which was denied based on issues not mentioned in the SCN. The court quashed the SCN and subsequent orders, emphasizing that new grounds cannot be introduced during adjudication.
By: Bimal jain
Summary: The Income Tax Appellate Tribunal (ITAT) in Ahmedabad ruled that a penalty for concealing income could not be imposed if the income in question was already taxed in another entity's hands. The case involved an appellant accused of being the benami owner of a transport business, with income added to their tax liability. The ITAT found that the income was already taxed under another individual's name, Nilesh Shah, and directed the Revenue Department to remove the penalty under Section 271(1)(c) of the Income Tax Act, 1961, as the appellant did not conceal or inaccurately report the income.
News
Summary: The first G20 Trade and Investment Working Group meeting under India's presidency is set in Mumbai from March 28-30, 2023, with over 100 delegates from G20 nations and other entities. The meeting will focus on enhancing global trade and investments. An International Conference on Trade Finance will be held, addressing the trade finance gap and digital solutions. Key discussions will include making trade inclusive, integrating MSMEs into global trade, and developing resilient Global Value Chains. The aim is to formulate human-centric outcomes to accelerate global trade and investment while reducing transaction costs and improving logistics infrastructure.
Summary: The Union Minister of State for Commerce and Industry inaugurated the 23rd INDIASOFT event in New Delhi, emphasizing India's goal to become a developed nation by 2047 with a GDP of USD 32 trillion. The Minister highlighted India's progress in the ICT sector and projected exports to reach USD 750 billion by 2022-23. The event, featuring over 650 delegates from 80 countries and 1500 Indian exhibitors, showcases India's technological advancements. The Minister noted that India aims to become a USD 5 trillion economy by 2027 and stressed the global relevance of India's technology solutions.
Summary: The International Conference on G20 Trade Finance Cooperation, part of the 1st Trade and Investment Working Group meeting under India's G20 Presidency, will take place in Mumbai from March 28-30, 2023. The event, organized by the Export Credit Guarantee Corporation of India and India EXIM Bank, aims to address the growing trade finance gap, which has expanded to $2 trillion. The conference will feature two sessions: one focusing on the role of financial institutions in closing the gap, and the other on how digitalization and fintech can improve access to trade finance, particularly for MSMEs.
Summary: The Union Finance Minister chaired a meeting to assess the readiness of Public Sector Banks (PSBs) amid financial stress in the US and Europe, focusing on risk management and regulatory compliance. Discussions included the impact of bank failures like Silicon Valley Bank and Credit Suisse. The Minister urged PSBs to enhance crisis management strategies, remain vigilant to global financial developments, and leverage international opportunities. PSBs were advised to attract deposits, support credit needs, and expand in underrepresented regions. Emphasis was placed on promoting financial products, such as the Mahila Samman Bachat Patra, and increasing presence in strategic areas.
Notifications
DGFT
1.
63/2015-2020 - dated
25-3-2023
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FTP
Inclusion of 18 HS Codes under Heading 5208 in Appendix 4R for RoDTEP
Summary: The Government of India has issued a notification under the Foreign Trade Policy, adding 18 HS Codes under Heading 5208 to Appendix 4R for the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. This inclusion, effective from March 28, 2023, specifies a RoDTEP rate of 4.3% for various textile products, including handloom, lungi, saari, shirting fabrics, and others, as outlined by the Central Government on the recommendation of the RoDTEP Committee. This update is intended to enhance export incentives for these specified goods.
Circulars / Instructions / Orders
GST
1.
191/03/2023 - dated
27-3-2023
Clarification regarding GST rate and classification of ‘Rab’ based on the recommendation of the GST Council in its 49th meeting held on 18th February, 2023
Summary: The circular issued by the Ministry of Finance clarifies the GST rate and classification for 'Rab' following the GST Council's recommendations from its 49th meeting on February 18, 2023. Effective March 1, 2023, a 5% GST rate applies to Rab sold in pre-packaged and labeled forms, while Rab sold in other forms is exempt from GST. The circular also addresses past discrepancies in GST application on Rab, stating that previous interpretations will be accepted as they are. Any difficulties in implementing this circular should be reported to the Board.
Highlights / Catch Notes
GST
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Court Rules GST Registration Valid Despite Business Relocation; Cancellation Ab Initio Overturned for Delhi-Based Entity.
Case-Laws - HC : Cancellation of registration due to shifting of unit from one state to another - Seeking restoration of Goods and Service Tax (GST) registration, which was canceled ab-initio - the material on record indicates that the petitioner was carrying on its business from its principal place of business in Delhi and had shifted it to Haryana. In these facts, the petitioner’s registration cannot be cancelled from the date he had obtained the same. - HC
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High Court sets aside order; procedural error found in denying Input Tax Credit u/s 16(2)(c) of CGST Act.
Case-Laws - HC : Eligibility and conditions for taking Input Tax Credit (ITC) - Section 16(2)(c) of CGST Act - no tax had been remitted by the suppliers, since GSTR 3B had not filed by them - admittedly, there has been no opportunity granted to the petitioner prior to the passing of impugned order dated 20.01.2023 and this is a fatal flaw. Order dated 20.01.2023 is set aside. - HC
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Outgoing Member's Payment to Housing Society Taxable Under GST as Advance for Services.
Case-Laws - AAAR : Taxability of amount received - Co-operative Housing Society - receipt of a gratuitous payment from an outgoing member for the time he has resided in the society - no corresponding service being provided separately by the tax payer society - the said contribution by the outgoingmember is nothing but Advance amounts paid to the society for services carried out or to be carried out for the members of the Society and is therefore taxable as per the GST Laws. - AAAR
Income Tax
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Assessing Officer Fails to Justify Tax Refund Withholding Due to Lack of Specific Reasons u/s 241A.
Case-Laws - HC : Withholding of refund - AO is also required to give detailed and compelling reasons as to how the release of the refund will adversely affect the interest of the Revenue. - The reasons as set forth in the communication are bereft of any details and only reproduce the wordings of Section 241A of the Act with some additional sketchy and vague details. There is also a complete absence of reasoning. - HC
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Assessment Order u/ss 143(3) & 144B Criticized for Poor Structure and Improper Procedure.
Case-Laws - HC : Validity of assessment order u/s 143(3) r.w.s.144B - First 21 pages of the assessment order is a verbatim extract of the show cause notice. In page nos.22 and 23 in two paragraphs the reply given by the assessee has been summarized. From page nos.23 to 36 of the assessment order it is once again extract of the show cause and ultimately at page nos.37 and 38 the total income has been determined and the assessment is completed. - The impugned assessment order is a classical example as to how an assessment should not be made. - HC
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Res Judicata in Taxation: Prior Tribunal Decisions Can Influence Current Assessments u/s 11 If Facts Remain Consistent.
Case-Laws - HC : Exemption u/s 11 - While none may successfully contend or invoke res judicata in taxation matters, at the same time, in absence of any difference of fundamental fact or law arising in subsequent Assessment Year and in face of the same dispute having been thrashed out inter partes in earlier Assessment Year and a definite opinion having been formed by the Tribunal for the same - HC
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Interest on Late TDS Payment is Deductible as Compensatory u/s 37(1) of the Income Tax Act.
Case-Laws - AT : Disallowance on account of interest payment on TDS deposited to the Income Tax Department - interest paid on late payment of TDS is compensatory in nature and is an allowable deduction under section 37(1) of the Act - AT
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Late Tax Return Denies Carry Forward of Losses and Exemptions Under Income Tax Act Sections 11 and 12.
Case-Laws - AT : Denial of benefit of carry forward & setting off of loss and exemption u/s 11 r.w.s. 12 - Belated filing of ITR - In the impugned case on hand, the total receipts declared by the assessee , we observe that there is excess expenditure over income which is loss suffered by the assessee during the year. Therefore, in this case, the claim of deduction from income under section 11 and 12(1) (ba) does not arise. - AT
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Section 147 Reopening Flawed: AO Misinterprets Facts, Incorrectly Applies Section 68 on Nonexistent Credit Entries.
Case-Laws - AT : Reopening of assessment u/s 147 - addition on account of unsecured loan from 3 parties - AO has reopened the assessment based upon wrong facts, wrong appreciation of facts and without any application of any mind, in as much as, the assessee has not taken any credit entry but, in fact, have made debit entries and, therefore, by no stretch of imagination provisions of section 68 of the Act can be applied. - AT
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Assessment Reopening u/s 147 and Receipt Addition u/s 68 Deemed Unwarranted Due to General Allegations.
Case-Laws - AT : Reopening of assessment u/s 147 - addition of other receipts u/s. 68 r.w.s. 115 BBE - allegation made by the revenue is general in nature and the addition of the whole of the receipt is not warranted. - AT
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Assessee Not in Default for Incorrect Form 15G/15H Upload Despite Non-Compliance with Section 194A Tax Deduction Rules.
Case-Laws - AT : TDS u/s 194A - assessee in default - failure to upload Form 15G/15H of the depositors in roper format - Considering the fact that the assessee has not deducted tax at source u/s 194A of the Act after receiving the physical copies of Form 15G & 15H, it should not be considered as an assessee in default. - AT
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Assessee Denied Section 54F Tax Exemption for Using Gift Deed as Colorable Device to Evade Taxes on Capital Asset Sale.
Case-Laws - AT : Exemption u/s 54F - artificial transfer of one house by way of gift deed - colourable device to claim exemption - The assessee artificially created a gift deed of the property with a view to fit into the provisions of section 54F, so that he can claim the deduction against the sale of capital asset. The act of the assessee was prearranged step for execution, and it served no commercial purpose but was motivated to avoid paying taxes. - No exemption - AT
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Incorrect Application of Section 50C for Property Transfer as Stock in Trade Overturned; Additions Deleted.
Case-Laws - AT : Correct head of income - transfer of property as stock in trade - Valuation - Application of provisions of section 50C - the AO and CIT(A) erred in applying provisions of section 50C of the Act and determination of full value consideration to compute short term capital gains from transfer of property. - Additions deleted - AT
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Shares Gifted to Assessee Taxed as Capital Gains, Not Income from Other Sources, Section 56(1) Inapplicable.
Case-Laws - AT : Income from other sources u/s. 56(1) - gift of shares received by the assessee - The gift received by the assessee in present case is in the capital field and can be brought to tax under the head capital gain. Accordingly, the provision of section 56(1) cannot be resorted to. - AT
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IT Support Payments Not Classified as Income, Technical Fees, or Royalty Under Indian Tax Law and DTAA.
Case-Laws - AT : Income deemed to accrue or arise in India - receipts towards IT support services - the payment received for IT support services cannot be treated either as fee for technical services or as royalty both under the Act as well as under the DTAA. - AT
Customs
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Court Allows Provisional Release of Kiwi Fruit Consignments from UAE; Petitioner Agrees to Conditions Pending Final Order.
Case-Laws - HC : Seeking provisional release of the goods - import of consignments of fresh Kiwi Fruits from UAE - In the facts and circumstances of the case, when the petitioner has agreed to abide by the conditions which may be imposed in light of the decision of this court in M/s. A and A Shipping Services, which could be applied to guide the final order to be passed, this court is inclined to grant the prayer by allowing the provisional release of the goods. - HC
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Unjust Enrichment Refunds: Chartered Accountant Certificates Valid if Consistent with Financial Accounts in Customs Cases.
Case-Laws - AT : Refund - principles of unjust enrichment - CA certificate - there is no requirement in law that a certificate must be issued only by the statutory auditors. So long as the certificate is issued by a Chartered Accountant and it is consistent with the accounts such as Balance Sheet and Profit and Loss statement, the certificate deserves to be accepted. - AT
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Manual Breast Pumps Classed Under CTH 39269090 for Self-Use by Mothers, Not Medical Devices.
Case-Laws - AT : Classification of imported goods - import of Manual Breast Pump - the product has nothing to do with any medical or surgical procedures nor is it used by any medical practitioner. It is only a facilitating device for self use by lactating mothers. The impugned order classifying the manual breast pump under CTH 39269090 is upheld. - AT
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Appeal Restoration Application Dismissed After Six-Year Delay; Customs Act Proceedings Considered Separate from Exporter Actions.
Case-Laws - AT : Seeking restoration of appeal - application for restoration of appeal has been filed after more than six years - Any decision regarding action under the Customs Act against the exporter and/or the appellant are separate proceedings. - Application dismissed - AT
Central Excise
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Erroneous refund recovery allowed without extra notice if proceedings start within Section 35E timeframe under Central Excise Act.
Case-Laws - SC : Recovery of erroneous refund - Once the order in original sanctioning the refund came to be set aside in a proceeding under Section 35E of the Act and the proceedings under Section 35E was initiated within the time prescribed under Section 35E of the Act, thereafter there is no question of any further notice u/s 11A - SC
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Director's Penalty u/r 15(1) Overturned in CENVAT Credit Case; Employee Not Liable for Credit Decisions.
Case-Laws - AT : Levy of personal penalty under Rule 15(1) of Cenvat Credit Rules, 2004 - wrong availment of CENVAT Credit by the company - appellant submits that appellant is a technocrat and employed as Director operations and looking after production activities of the Company - The penalty under Rule 15(1) on the present appellant, who is merely an employee of the Company, is not sustainable - AT
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Court Rules SEZ Refunds Must Be Granted Despite Procedural Errors; Exemption Intended to Be Absolute.
Case-Laws - AT : Refund - Period of limitation - Considering the beneficial object of establishing the SEZ tax free, without any burden of duties, the procedural lapse, if any, cannot be the basis to deny the refund to the appellant. The exemption is intended to be absolute is further evident from para 3 (II) of the Notification which provides for ab-initio exemption. - AT
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Extended Limitation Period Unjustified: No New Evidence Found; Duty Based on Existing Invoices.
Case-Laws - AT : Invocation of extended period of limitation - In the present case, there are no new materials / evidence unearthed by the department which has formed the basis for determination of the duty. All the figures were available to the department as per the invoices submitted by the respondents - the invocation of extended period cannot be justified. - AT
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Subsidy Excluded from Transaction Value; Full Sales Tax Collected Must Be Paid by Assessee Under Promotion Policy.
Case-Laws - AT : Valuation - inclusion of subsidy - Under the promotion policy involved in these appeals, the subsidy does not reduce the sales tax that is required to be paid by the assessee. The entire amount of sales tax collected by the assessee from the customers is required to be paid. - What has been retained by the appellant is basically the subsidy amount and it is not the case of the Department that subsidy amount has to be included in the transaction value. - Subsidy amount not to be included in the transaction value - AT
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