TMI Tax Updates - e-Newsletter
March 31, 2022
Case Laws in this Newsletter:
Articles
By: DR.MARIAPPAN GOVINDARAJAN
Summary: In the case involving a corporate debtor engaged in electronic/IT solutions, employees initiated an insolvency process due to unpaid dues. The Resolution Plan approved allocated insufficient funds for provident fund dues, prompting an appeal by employees. The National Company Law Appellate Tribunal (NCLAT) noted that Section 17B of the Provident Fund Act requires the Resolution Applicant to cover outstanding dues, which was not adequately addressed in the plan. The Tribunal mandated the full payment of provident fund dues, emphasizing compliance with the law over commercial decisions by creditors, and modified the resolution plan accordingly.
News
Summary: The Project Monitoring Group (PMG), under the Ministry of Commerce and Industry, reviewed 374 high-impact infrastructure projects in FY 2021-22, focusing on timely completion to drive socio-economic growth. PMG, which oversees projects exceeding Rs. 500 crores, uses milestone-based monitoring to address delays and cost overruns. In FY 2021-22, 787 new projects worth Rs. 19.6 lakh crore were added, and 44 projects worth Rs. 1.25 lakh crore were completed. Regular meetings with state and central authorities resolved 568 issues in 248 projects valued at Rs. 12.20 lakh crore. Key projects include BharatNet and the North East Gas Grid.
Summary: As of February 28, 2022, there are 208,896 pending patent applications and 641,435 pending trademark applications. To address this backlog, the Department has implemented initiatives such as increasing manpower, modernizing IP offices, and transitioning to a computerized system. The COVID-19 pandemic prompted the use of VPN access and video conferencing for hearings. International classification tools and treaties have been adopted to streamline processes. E-filing incentives, fee concessions, and expedited examination for specific groups have been introduced. These measures have significantly reduced the examination time for patents and trademarks, enhancing efficiency in processing applications.
Summary: The Government's Startup India initiative, launched in 2016, aims to strengthen India's startup ecosystem, fostering economic growth and employment. As of March 2022, recognized startups increased from 726 in FY 2016-17 to 65,861, with over 7 lakh jobs created across 640 districts. Nearly 50% of these startups are in Tier-II and III cities. The initiative supports startups through mentorship, policy formulation, and global connections. The National Startup Awards highlight innovation across various cities. Startups contribute to government programs like AMRUT and Smart Cities Mission, with significant presence in sectors like Automotive, Healthcare, and Renewable Energy.
Summary: Under India's Foreign Trade Policy, wheat export is categorized as free, requiring no government license. Indian exporters have increased wheat exports due to rising global demand, while the government reserves its exports for humanitarian aid. Wheat exports rose significantly from 21.55 lakh metric tonnes valued at USD 567.93 million in 2020-21 to 70.35 lakh metric tonnes valued at USD 2035.09 million in 2021-22 (up to March 21, 2022). Future exports depend on domestic production, consumption, surplus, global conditions, and pricing. This information was provided by a government official in a written statement to the Lok Sabha.
Summary: The Government of India has announced the sale of Electoral Bonds under the Electoral Bond Scheme 2018. These bonds can be purchased by Indian citizens or entities and are available for purchase at 29 authorized branches of the State Bank of India from April 1 to April 10, 2022. Only political parties registered under the Representation of the People Act, 1951, which secured at least one percent of the votes in the last general election, are eligible to receive these bonds. The bonds are valid for 15 days from issuance and must be deposited within this period to be credited to the party's account.
Summary: The Emergency Credit Line Guarantee Scheme (ECLGS) has been extended until March 31, 2023, with enhanced benefits for the hospitality, travel, tourism, and civil aviation sectors. The credit support under ECLGS 3.0 has been increased from 40% to 50% of credit outstanding, with eligible borrowers in the civil aviation sector now able to access non-fund-based credit facilities. The maximum credit limit for civil aviation has been raised to Rs. 400 crore per borrower. The scheme aims to provide collateral-free liquidity at capped interest rates, with over Rs. 3.19 lakh crore in loans sanctioned, primarily benefiting Micro, Small, and Medium Enterprises.
Summary: The Monetary Policy Committee, as per Section 45ZI of the Reserve Bank of India Act, 1934, has scheduled its meetings for the 2022-2023 period on the following dates: April 6-8, 2022; June 6-8, 2022; August 2-4, 2022; September 28-30, 2022; December 5-7, 2022; and February 6-8, 2023.
Summary: The Union Cabinet has approved an additional 3% increase in Dearness Allowance for Central Government employees and Dearness Relief for pensioners, effective from January 1, 2022. This raises the rate from 31% to 34% of the Basic Pay/Pension to offset inflation, following the 7th Central Pay Commission's recommendations. The financial impact on the exchequer is estimated at Rs. 9,544.50 crore annually, benefiting approximately 47.68 lakh employees and 68.62 lakh pensioners.
Summary: India is positioning itself as a prime destination for businesses from the United Arab Emirates, according to a government official. Highlighting the strong bilateral relationship, the official emphasized India's business-friendly policies, talent pool, and open foreign direct investment in most sectors. The official encouraged UAE businesses to invest in India, citing initiatives like the Production Linked Incentive scheme and the Make in India policy. A shared vision has led to plans for an Indian Institute of Technology in the UAE. The Comprehensive Economic Partnership Agreement is seen as mutually beneficial, and the India Pavilion at Expo2020 Dubai symbolizes the enduring partnership.
Summary: The Cabinet Committee on Economic Affairs, led by the Prime Minister, approved a 36-month extension for 10 Provisional Mega Power Projects to submit final Mega Certificates to tax authorities. This extension, increasing the period from 120 to 156 months from the date of import, allows developers to competitively bid for future Power Purchase Agreements and gain tax exemptions. The initiative aims to enhance liquidity, stimulate national growth, and revive stressed power assets. During this period, bids for firm power, coordinated with the Ministry of New Renewable Energy and Solar Energy Corporation of India, will be invited, with these Mega projects expected to participate.
Summary: The India Pavilion in Dubai will become a permanent fixture, as announced by a government official, highlighting India's gratitude to the UAE for this opportunity at Dubai's planned Innovation District. The pavilion's success at the Dubai World Expo, with 1.7 million visitors, underscores the strong India-UAE partnership. The UAE is India's second-largest export destination, contributing $26 billion to India's exports. The partnership is strengthened by the Comprehensive Economic Partnership Agreement (CEPA), signed in February 2022, which includes plans for India's first overseas IIT campus in the UAE. The Dubai Expo, despite pandemic delays, was praised for its success.
Summary: The Agricultural and Processed Food Products Export Development Authority (APEDA) organized a webinar with the Indian Embassy in Brussels and Denmark to discuss revised EU regulations on organic products. The EU is a significant market for Indian organic exports, accounting for $356 million in 2020-21. The webinar aimed to address challenges faced by Indian exporters and enhance their market share in the EU. Discussions included regulatory requirements and market opportunities, with participation from trade associations, Indian missions, and certification bodies. APEDA highlighted the importance of adhering to standards for market acceptance and is negotiating with other countries for further market access.
Summary: India-UAE trade under the Comprehensive Economic Partnership Agreement (CEPA) could reach USD 250 billion by 2030, surpassing the initial USD 100 billion target, according to a government official. The partnership extends beyond trade, reflecting strong cultural ties and mutual respect. Key growth sectors include gems and jewelry, textiles, pharmaceuticals, steel, and petrochemicals. The official highlighted India's robust startup ecosystem and the potential for increased investments, particularly in fintech, agritech, and healthtech. Despite COVID-19 challenges, India's merchandise and services exports have reached record levels, and the country aims to nurture at least 75 new unicorns by its 75th year of independence.
Summary: The Union Minister of Commerce and Industry urged the Gems and Jewellery (G&J) sector to increase India's exports from $35 billion to $100 billion. Inaugurating the Indian Jewellery Exposition Centre in Dubai, he emphasized the goal of making India a global leader in both "Made in India" and "Designed in India" jewellery. The Centre will serve as a key international business hub, enhancing India-UAE trade relations. The G&J sector currently contributes about 10% to India's overall export target of over $400 billion. The Minister highlighted the cultural significance of jewellery in India.
Summary: The Direct Benefits Transfer (DBT) program, aimed at enhancing transparency by transferring subsidies directly to beneficiaries' bank accounts, has integrated 313 Central sector and Centrally sponsored schemes from 53 Ministries onto the DBT Bharat Portal. According to the Union Minister of State for Finance, this integration ensures precise beneficiary targeting. In 2019-20, there were 70.6 crore cash beneficiaries and 74.1 crore beneficiaries in kind, increasing to 98 crore and 81.9 crore respectively in 2020-21. The Minister also noted that there is no scheme named Pradhan Mantri Direct Benefit Transfer Scheme on the portal.
Summary: The Union Cabinet has approved the establishment of the National Land Monetization Corporation (NLMC), a government-owned entity with an initial authorized share capital of Rs. 5,000 crore and a paid-up share capital of Rs. 150 crore. NLMC will focus on monetizing surplus land and building assets of Central Public Sector Enterprises (CPSEs) and other government agencies. Its objectives include managing and monetizing non-core assets, advising on surplus land monetization, and creating an inventory of assets for monetization. The NLMC will be governed by a Board of Directors comprising government officials and professionals from various sectors.
Notifications
GST - States
1.
22/2021- State Tax (Rate) - dated
5-1-2022
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Manipur SGST
Seeks to supersede notification 15/2021- ST(R) dated 19.11.2021 and amend Notification No 11/2017- ST (Rate) dated 28.06.2017.
Summary: The Government of Manipur issued Notification No. 22/2021 to amend Notification No. 11/2017 related to State Tax (Rate), effective from January 1, 2022. This amendment supersedes the previous Notification No. 15/2021. Changes include revisions in the description of services and conditions in the table against serial number 3. Specifically, references to "Governmental Authority or a Government Entity" are replaced with "Union territory or a local authority" in certain items. Additionally, conditions linked to specific items are omitted. The amendments are made under the Manipur Goods and Services Tax Act, 2017, in the public interest.
2.
21/2021 - State Tax (Rate) - dated
5-1-2022
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Manipur SGST
Seeks to supersede notification 14/2021- ST(R) dated 19.11.2021 and amend Notification No 1/2017- CT (Rate) dated 28.06.2017.
Summary: The Government of Manipur issued Notification No. 21/2021 on January 5, 2022, amending Notification No. 1/2017- State Tax (Rate) under the Manipur Goods and Services Tax Act, 2017. This notification supersedes the previous Notification No. 14/2021 dated November 19, 2021. Key amendments include the omission of serial number 225 from Schedule I (2.5% tax rate) and the addition of serial number 171A1 to Schedule II (6% tax rate) for footwear with a sale value not exceeding Rs. 1000 per pair. These changes are effective from January 1, 2022.
3.
221/2022/16(120)/XXVII(8)/2021/CT-37 - dated
22-3-2022
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Uttarakhand SGST
Uttarakhand Goods and Services Tax (First Amendment) Rules, 2022
Summary: The Uttarakhand Goods and Services Tax (First Amendment) Rules, 2022, were enacted under the authority of the Uttarakhand Goods and Services Tax Act, 2017. Effective from December 1, 2021, these amendments modify Rule 97, replacing "Central" with "State" in certain sub-rules and revising sub-rule 7A to allocate 50% of funds for GST publicity, ensuring a minimum of twenty-five lakh rupees annually for consumer welfare. Additionally, changes to FORM GST DRC-03 include new language for tax intimation and adjustments to item descriptions and tables to enhance clarity and compliance.
Income Tax
4.
19/2022 - dated
30-3-2022
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IT
Faceless Inquiry or Valuation Scheme, 2022
Summary: The Faceless Inquiry or Valuation Scheme, 2022, established by the Central Government under the Income-tax Act, 1961, aims to streamline tax inquiries and valuations through a faceless, automated process. Effective from its publication date, the Scheme utilizes technology, including artificial intelligence and machine learning, for random case allocation to optimize resource use. It covers issuing notices, conducting inquiries before assessments, directing audits, and estimating asset values, all in a faceless manner as outlined in section 144B of the Act. This initiative is part of efforts to enhance efficiency and transparency in tax assessments.
5.
18/2022 - dated
29-3-2022
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IT
e-Assessment of Income Escaping Assessment Scheme, 2022
Summary: The e-Assessment of Income Escaping Assessment Scheme, 2022, effective from its publication date, was introduced by the Central Board of Direct Taxes under the Ministry of Finance. It utilizes automated allocation through algorithms, including artificial intelligence and machine learning, for the assessment, reassessment, or recomputation of income under section 147 of the Income-tax Act, 1961. Notices under section 148 will be issued based on a risk management strategy, and assessments will be conducted in a faceless manner as per section 144B. This scheme aims to optimize resource use and enhance efficiency in tax assessments.
6.
17/2022 - dated
29-3-2022
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IT
Income-tax (Third Amendment) Rules, 2022 - Linking of PAN with AADHAR
Summary: The Income-tax (Third Amendment) Rules, 2022, effective from April 1, 2022, mandate individuals to link their Aadhaar number with their PAN as per section 139AA of the Income-tax Act, 1961. Failure to do so by the specified date incurs a fee: Rs. 500 if linked within three months after the deadline and Rs. 1,000 thereafter. The amendment updates rule 114 and rule 114AAA of the Income-tax Rules, 1962, adjusting the year references from 2020 to 2022 and incorporating the fee payment requirement for delayed Aadhaar-PAN linking.
Circulars / Instructions / Orders
SEBI
1.
SEBI/HO/IMD/IMD-II DOF3/P/CIR/2022/39 - dated
30-3-2022
Timelines for Rebalancing of Portfolios of Mutual Fund Schemes
Summary: The Securities and Exchange Board of India (SEBI) issued guidelines for mutual funds regarding timelines for rebalancing portfolios in cases of passive breaches from the mandated asset allocation. For most schemes, rebalancing must occur within 30 business days, with a possible extension to 60 days upon Investment Committee approval. Failure to comply prohibits launching new schemes and levying exit loads. Asset Management Companies (AMCs) must report deviations to trustees and inform investors if the deviation exceeds 10% of the scheme's assets. These norms apply to main portfolios from July 1, 2022, under SEBI's regulatory authority.
Highlights / Catch Notes
GST
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Court Orders Transfer of Unutilized ITC to New Registration; Respondents' Actions Deemed Unjust Under GST Rule 41A.
Case-Laws - HC : Transfer of unutilized Input tax credit to new registration - unable to submit Form GST ITC- 02A online - The impugned action whereby, the respondents have failed to acknowledge and transfer the input tax credit accruing to the petitioner pursuant to the registration of its new business unit in accordance with Rule 41A of the GST Rules, is grossly illegal, arbitrary and unjust - the respondents are directed to regularise the input tax credit in favour of the petitioner as per entitlement - HC
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Appeal Delay u/r 142(5) OGST: Should Appellate Authority Condone Based on Judgments and Amendments?
Case-Laws - HC : Condonation of delay in filing appeal - Keeping in view the concern and context reflected in the Judgments, amendments to the statute and executive instruction/clarification, it is apt to say that the petitioner having filed appeal on 13.11.2020 before the Appellate Authority upon receipt of the Order in Form GST DRC-07 in terms of Rule 142(5) of the OGST Rules in connection with Section 74 of the OGST Act on 06.03.2020, the delay caused should have been condoned by the Appellate Authority. - HC
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TANGEDCO Works Contract Services for Commercial Use Subject to 18% GST, Confirms Appellate Authority Ruling.
Case-Laws - AAAR : Classification of services - works contract services to TANGEDCO - The words of the entry is clear and excludes the works supplied to Government entity, in respect of a Civil Structure or any other original works meant predominantly for commerce, industry or any other business or profession - there are no reason to disagree with the findings of the LA that the supply cannot be considered as that meant predominantly for use other than commerce, industry, or any other business or professional purposes. - Liable to GST @18% - Order of AAR confirmed - AAAR
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GST Classification of Hospitality Services: Accommodation as Principal Service in Composite Supply per AAAR Case Laws.
Case-Laws - AAAR : Classification of goods - boarding, lodging facilities and such other services - The scope, language and the terms of the agreement establishes that the applicant is to extend the bouquet of services required from them as 'Hospitality Services' together and in conjunction with each other and therefore is a naturally bundled 'composite supply' of service, with 'Provision of accommodation' as the principal service. - AAAR
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Marine Engines for Fishing Vessels Under Tariff 8902 Subject to 5% GST; Warranty Services Exempt from GST Charges.
Case-Laws - AAR : Classification of goods - rate of tax - Marine Engines - if the marine engines supplied for use as part of vessel falling under tariff heading 8902, which are used by the fishermen, then such engines as part of such vessels will only attract GST at the rate of 5% as per the above entry. - Supply of materials and labour while rendering warranty services during the warranty period, free of cost, does not attract GST separately - AAR
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Advance Ruling Application Rejected: Applicant's Query on Behalf of Customers Deemed Inadmissible u/ss 95 and 97.
Case-Laws - AAR : Maintainability of Advance Ruling application - In the instant case the applicant has sought ruling before us on behalf of their customers and the act of registration is not undertaken or to be undertaken by the applicant - this question is not admissible as per Section 97 read with Section 95 of the Act and therefore not admitted. - AAR
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Recipient's Advance Ruling Application on Inward Supply Value Deemed Inadmissible; Only Suppliers Eligible for Such Rulings.
Case-Laws - AAR : Maintainability of Advance Ruling application - Recipient of supply - if a recipient obtains a ruling on the value to be adopted of his inward supply of goods or services, the supplier of such goods or services is not bound by that ruling and he is free to assess the supply according to his own determination, in which case, the ruling loses its relevance and applicability even. - Thus, only a supplier and not the recipient is eligible to seek an advance ruling and therefore the subject application cannot be admitted - AAR
Income Tax
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High Court Restores Case for Further Review After Dismissing Writ Petition on Income Tax Assessment Reopening u/s 147.
Case-Laws - SC : Validity of Reopening of assessment u/s 147 - HC dismissed the writ petition giving reasons for the disinclination to entertain the writ petitions - - When the Constitution confers on the High Courts the power to give relief it becomes the duty of the Courts to give such relief in appropriate cases and the Courts would be failing to perform their duty if relief is refused without adequate reasons. - Matter restored before the HC - SC
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Court Rules AO Can Review Property Sale Below Circle Rate u/s 50C for Capital Gains Assessment.
Case-Laws - HC : Capital gains u/s 45 - FMV determination - admittedly, the property in question was sold by the Petitioner below the circle rate (stamp value rate) contrary to Section 50C of the Act. Consequently, this Court is of the view that the AO has the jurisdiction to examine in detail the transaction in question. - HC
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Tax Exemption Denied for Kalyana Mandapa Rental Income Due to Inadequate Financial Records u/s 11.
Case-Laws - AT : Exemption u/s 11 - Charitable activity u/s 2(15) - assessee was giving on rent Kalyana Mandapa for fees - Assessee has not been maintaining books of account separately for the business of letting out of kalyana mandapa. Therefore, even assuming the business is incidental to the attainment of the objects of the trust in absence of separate books of account, the benefit of section 11 of the I.T.Act cannot be granted. - AT
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Non-Issuance of Notice u/s 143(2) Validity Questioned; No Evidence of Objections Before Assessment Completion.
Case-Laws - AT : Validity of assessment - Non issuing of notice u/s 143(2) - Applicability of provisions of section 292BB - Before the Tribunal the AR could not submit any proof for having raised the objections before the completion of the assessment. From the evidences perused there is nothing to prove that the objection were raised before AO for non issue of notice u/s.143(2) to take shelter under proviso to 292BB and that there is no contrary evidence submitted to support the claim that the notice u/s.143(2) was not served on the assessee. - AT
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Best judgment assessment u/s 144 initiated due to non-response; case remanded for further opportunity to provide details.
Case-Laws - AT : Best Judgement assessment u/s 144 - Estimation of income - The Assessing Officer issued notices under section 143(2) as well as various notices issued under sections 142(1) alongwith the questionnaire to the assessee however, the assessee has not responded to the notice issued by the AO and consequently the assessment was framed under section 144 on the basis of the material available on record. - Matter restored back for computation of gross receipts/turnover of the assessee and estimation of income by giving one more opportunity to the assessee to furnish the relevant details - AT
Customs
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Customs Broker License Revocation Upheld for Facilitating Fraudulent Benami Imports; License Restoration Denied.
Case-Laws - AT : Revocation of Customs Broker License - filing of benami Bills of Entry - The appellant, in this case, has filed benami Bills of Entry - The irresistible conclusion is that the appellant has built its business based on facilitating fraudulent transactions for its clients and wants its Customs Broker Licence restored so that it can continue in such business - In this case, the appellant knowingly, actively, facilitated benami imports and hence is accountable for its actions. - revocation of the licence sustained - AT
State GST
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Taxpayers with turnover over Rs. 20 crores must comply with GST e-invoicing to avoid penalties and enhance transparency.
Circulars : Important advisory for e-Invoice for Taxpayers having annual turnover exceeding ₹ 20 Crores - SGST
Service Tax
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Appellant's CENVAT Credit Refund Granted: Not an Intermediary u/r 9; Services Qualify as Exports u/r 6A.
Case-Laws - AT : Refund of unutilised CENVAT credit paid - intermediary - There is no allegation that the appellant was involved in any way, either in purchase or sale of goods or even in the collection of sale proceeds from the customers of the company. By this alone, it can be safely concluded that the appellant is not acting as an agent or a middleman for anyone, and hence, is not covered by the mischief of the definition of ‘intermediary’ and consequently, Rule 9 of POP. Hence, the same cannot be held that there is no export of services under Rule 6A ibid. - AT
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Service Tax Demand on Public-Private Partnerships Set Aside; Recognized as Joint Business Activities Regardless of Structure.
Case-Laws - AT : Classification of services - support services of business or commerce or not - Such public private partnerships are at times described as collaboration, joint venture, consortium or joint undertaking. Regardless of the name or the legal form in which the same are conducted, they are essentially in the nature of partnership with each co-venturer contributing some of the resources for the furtherance of the joint business activity. - Demand set aside - AT
Central Excise
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Supreme Court Backs Refund of Education Cess Credit Pre-GST; Favors Karnataka, Punjab & Haryana High Courts' Stance.
Case-Laws - AT : Refund of accumulated balance of credit on education cess and secondary and higher education cess - credit could not be utilised prior to GST regime - It is, therefore, seen that there are conflicting decisions of the Karnataka High Court and the Punjab and Haryana High Court on the one hand and the Rajasthan High Court on the other hand. The decision of the Karnataka High Court in Slovak India was affirmed by the Supreme Court. It would, therefore, be appropriate to follow the view taken by the Karnataka High Court and the Punjab and Haryana High Court. - Refund allowed - AT
VAT
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High Court Rules Printers as Computer Peripherals for VAT, Corrects Tribunal's Error on Tax Classification.
Case-Laws - HC : Classification of goods - sale of Printer under VAT Act as a Computer peripheral - taxable at 4% or as unclassified items under Schedule @ 12.5%? - although their Printers are multifunctional in nature their components are mainly used for the purpose of printing and their main character is that of a Printer - Tribunal committed factual and legal error in treating the multifunctional printers sold by the revisionist as falling in the Residuary category - HC
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