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LAXMANDAS SUJANDAS DALPAT Versus THE INCOME-TAX OFFICER

Unexplained cash credit u/s 68 - gifts received from NRI - ITAT reversing the order of CIT (A) of deleting the addition - Held that:- It is not possible to state that the impugned order passed by the Tribunal is based on conjectures or surmises. The Tribunal, on the contrary, has considered all the relevant material and based its conclusions on the findings recorded by it after appreciating the material on record. From the findings recorded by the Tribunal, there is nothing to indicate that it h .....

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ian donors have been placed on record, which clearly reveal that the donors did not have the financial capacity to gift such huge sums of money. Clearly therefore, the assessee has failed to prove the creditworthiness of the donors. Even the donors who appeared before the Assessing Officer clearly did not have the capacity to make such gifts. In relation to the gifts received from the NRI donors, except for the fact that such amount was received from banking channel and their confirmations were .....

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of any cogent material having been brought on record by the assessee to prove the financial capacity of the NRI donors or the genuineness of the gifts, no case has been made out for restoring the matter to the file of the Tribunal. - Decided in favour of the revenue and against the assessee - TAX APPEAL NO. 1383 of 2007 - Dated:- 25-8-2015 - MS. HARSHA DEVANI AND MR. A.G.URAIZEE, JJ. FOR THE APPELLANT : MR SN DIVATIA, ADVOCATE FOR THE RESPONDENT : MR NITIN K MEHTA, ADVOCATE ORAL JUDGMENT (PER .....

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ircumstances of the case, Income-tax Appellate Tribunal, was right in law in reversing the order of CIT (A) of deleting the addition of ₹ 7,02,000/- in respect of gifts received by the appellant as unexplained cash credit u/s 68 of the Income-tax Act, 1961? 3. The assessment year is 2002-03 and the relevant accounting period is the year ended on 31.03.2002. The assessee, who is engaged in the business of developers/housing projects, filed return of income in the capacity of an individual o .....

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ication of the capital account, it was noticed that an amount of ₹ 7,02,000/- had been credited as fresh capital introduced during the year. The source of the same was shown as gifts received from the following persons: [1] Ramesh Kheshani Rs.2,00,000/- [2] Vinod Manghnani Rs.1,00,000/- [3] Niranjan Chhotala Rs.1,00,000/- [4] Rupchand Ramlal Prajapati ₹ 50,000/- [5] Piraram Chelaram Rabari ₹ 50,000/- [6] Mahavir Prasad Prajapati ₹ 50,000/- [7] Vinod Jugraj Dungar ₹ .....

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otalal Kshatriya, who had made a gift of ₹ 1,00,000/- and Shri Piraram Chelaram Rabari, who had made a gift of ₹ 50,000/-. Their statements under section 131 of the Act came to be recorded. According to the Assessing Officer, these persons did not have the capacity or source of making such gifts and that, before issue of cheque or gift, they had deposited cash in their bank account, for which no satisfactory explanation was given. The Assessing Officer further noted that these person .....

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the gifts in all the cases was to help the assessee during the time of the earthquake. That these persons had no relations with the assessee and the assessee did not know the full names of the persons from whom such gifts were received and that there was no natural love and affection between the parties. The Assessing Officer, accordingly, came to the conclusion that the amount of ₹ 7,02,000/- credited in the capital account of the assessee remained unexplained as the gifts were not genuin .....

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returns and bank statements of Indian donors and as regards two donors from Dubai i.e. Shri Ramesh Kheshkani and Shri Vinodkumar Manghnani, the appellant has filed copy of confirmation letter and copy of passport and details regarding the period of stay of the donors in Dubai. The donor Ramesh Keshkani has been staying at Dubai since last 24 years and Vinod Manghnani has been staying since last 13 years. Most of these donors have given gift from their cash in hand or from capital account. So the .....

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aram Rabari has stated in reply to question No.9 that he has made cash deposits in his bank account and has given the gift from his savings of salary. Similarly, Niranjan Kshatriya has confirmed in his statement that the cash deposits in his bank account were from his savings. The gift of ₹ 1,00,000/- from Niranjan Kshatriya has been reflected in his capital account filed as annexure to his return of income filed on 27.5.2002 with ITO Ward 12(3), Ahmedabad. It has been held that ITAT Jodhp .....

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l before the Tribunal, which reversed the order passed by the Commissioner (Appeals) and upheld the order passed by the Assessing Officer in treating the gifts in question as unexplained cash credit and adding the same under section 68 of the Act. Being aggrieved, the assessee is in appeal. 6. Mr. S. N. Divatia, learned advocate for the appellant submitted that the Tribunal has failed to appreciate the material on record in proper perspective while holding the gifts to be unexplained cash credit .....

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dence. It was submitted that improper inference drawn from proven facts definitely gives rise to a substantial question of law. 6.1 Referring to the findings recorded by the Tribunal, it was submitted that the Tribunal has disbelieved the source of source in the hands of the persons who had given the gifts. The attention of the court was invited to the decision of this court in the case of Murlidhar Lahorimal v. Commissioner of Income Tax, [2006] 280 ITR 512 (Guj), wherein it has been observed t .....

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s a gift and being treated as undisclosed income of the assessee. Reliance was also placed upon the decision of this court in the case of Commissioner of Income Tax v. Pragati Co-operative Bank Ltd., [2005] 278 ITR 170 (Guj), for the proposition that once the assessee had given the names and addresses of the alleged creditors and it was in the knowledge of the revenue that the said creditors were income-tax assessees, if the revenue did not make any effort to pursue the so-called alleged credito .....

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e case of Commissioner of Income-tax-VI v. Bhanwarlal Sharma, [2013] 214 Taxman 122 (Gujarat), wherein the court noticed that the Assessing Officer had not summoned any of the donors. However, he had issued letters under section 133(6) of the Act and had also called for confirmation letters which were received by him. The assessee had furnished all other requisite documents like copies of DD, gift deed, copy of PAN cards, copy of acknowledgment of returns of the donors along with computation and .....

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rn to those authorities. Gifts to assessee by 24 different unrelated persons, residing at different places in Mumbai on the same day, with the draft of huge sum from the same bank and deposit within a span of 2 to 3 days would raise the eyebrows. Their non reply of letter under section 133(6) and non appearance of assessee personally may further strengthen such suspicion coupled with difference in economic strata of assessee and that of these persons. Yet, these questions do not cross the realm .....

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o.600 of 2005 to No.602 of 2005, wherein the court placed reliance upon an earlier decision of this court in the case of Murlidhar Lahorimal v. Commissioner of Income Tax (supra) and held that the assessee cannot be asked to prove the source of source. It was submitted that in the present case, two of the donors had appeared before the Assessing Officer and confirmed the gifts and accordingly, the requirements of proving the genuineness of the gifts are duly satisfied. Insofar as two foreign don .....

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o establish identity and to enable the Assessing Officer for examination and further investigation regarding genuineness of persons and creditworthiness, it was submitted that all relevant details with regard to the said persons had been furnished to the Assessing Officer and hence, the Assessing Officer could have summoned the said persons on his own. It was submitted that the Commissioner (Appeals) after duly considering the material on record, had rightly held in favour of the assessee and th .....

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s submitted that once the explanation offered by the assessee is found to be unsatisfactory, the sums credited in the books are to be charged to income tax as income of the assessee. The duty is heavily cast upon the assessee to offer a reasonable explanation as regards the nature and source of the amounts found credited in the books maintained by the assessee. It was submitted that the Assessing Officer had carefully analyzed the evidence, including statements of the assessee and the donors and .....

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ce to make such gifts and that the cash had been deposited in their bank account before the gifts came to be made. It was submitted that Shri Ramesh Kheshkani, who is alleged to be a resident of Dubai, has not come forward to record his statement and that no document has been produced to prove the genuineness of the gift and creditworthiness of that person. It was submitted that in the case of Vinod Manghnani, who is also a resident of Dubai, the facts are similar and that nothing has been broug .....

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he case, it was pointed out that insofar as Shri Rupchand Ramlal Prajapati, who is alleged to have given a gift of ₹ 50,000/- is concerned, his salary income is only ₹ 49,200/-. In the return of income, his salary income is not reflected. That though it has been recorded that most of the donors have been bringing customers for the assessee, they did not get any commission for bringing such customers and on the contrary, though they are persons of meagre means, they have given relativ .....

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ls) wherein he has recorded that the donors had given the gifts from their accumulated income, it was submitted that the same is not supported by an iota of evidence on record and is therefore, without any basis. It was submitted that the Commissioner (Appeals) while reversing the order passed by the Assessing Officer, has cursorily made reference to the evidence and without any detailed analysis in respect of each donor, by simply placing reliance upon certain decisions on which reliance had be .....

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me Court in the case of Commissioner of Income Tax v. P. Mohanakala, [2007] 291 ITR 278 (SC), wherein the court has observed that the expression the assessees offer no explanation means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. The court observed that it is true that the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is req .....

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me of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is, in the opinion of the Assessing Officer, not satisfactory. Such opinion formed itself constitutes a prima facie evidence against the assessees, viz., the receipt of money, and if the assessees fail to rebut the said evidence, the same can be used against the assessees by holding that it was a receipt of an income nature. It .....

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from the two donors was a gift in the legal sense. The court observed that the assessees had not led evidence to show whether the alleged donors had adequate funds in their respective accounts to make these purported gifts in Singapore Dollars which was almost running into more than five lakhs. Mr. Mehta submitted that therefore, the financial capacity of the donor has to be established by the assessee and merely submitting tax returns is not sufficient and that the passbooks of the bank accoun .....

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f in this regard. The onus then could not have been shifted to the Assessing Officer without dealing with the findings recorded by the subordinate authorities. Reliance was also placed on the decision of this court in the case of Kaushal H. Patel v. Income Tax Officer, [2014] 365 ITR 383 (Guj), with particular reference to paragraphs 6, 7 and 16 thereof. Reference was also made to the decision of this court in the case of Dinesh Babulal Thakkar v. Assistant Commissioner of Income Tax, [2012] 341 .....

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Delhi High Court in the case of Sarita Aggarwal v. Income Tax Officer, [2015] 92 CCH 0055 Delhi HC, was cited for the proposition that it is necessary to establish the factum of love and affection to establish the genuineness of gift. Reliance was also placed upon the decision of the Punjab and Haryana High Court in the case of Commissioner of Income Tax v. Y. M. Singla, [2014] 366 ITR 242 (P & H), for the proposition that, to prove the genuineness of the transaction, the burden lies on the .....

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s are not genuine. 7.4 In conclusion, it was submitted that thus, firstly the burden of establishing the source of the donor lies on the assessee, which the assessee has failed to prove; secondly the assessee has failed to prove the relationship of natural love and affection between the donor and donee, and thirdly, the gift far exceeds the returned income, under the circumstances, the Tribunal was wholly justified in reversing the order passed by the Assessing Officer. It was, accordingly, urge .....

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e said assessee, it was submitted that the return of income of the said assessee was duly submitted. As regards Shri Rupchand Ramlal Prajapati, it was pointed out that his return of income for the year 2000-2001 had been produced on record along with PAN card, xerox copies of balance sheet, statement of income, xerox copy of bank passbook, statement etc. As regards donor Shri Piraram Chelaram Rabari, it was pointed out that in his statement under section 131 of the Act, he has stated that he had .....

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Assessing Officer has not established as to how such funds could have gone from the pocket of the assessee to the NRI at Dubai. It was submitted that the Tribunal has observed that the original passbooks have not been produced, in which case the opportunity should have been granted to the assessee to produce the passbooks. As regards the decisions on which reliance has been placed by the learned counsel for the respondent, it was submitted that insofar as the decision of the Supreme Court in th .....

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section 68 and the genuineness of a gift are different things. Referring to the decision of this court in the case of Kaushal H. Patel v. Income Tax Officer (supra), it was submitted that the assessee did not give any explanation and hence, factually, the said decision is distinguishable and is not applicable to the facts of the present case. As regards the decision of this court in the case of Commissioner of Income Tax v. Mira S. Khurana (supra), it was submitted that in the facts of the said .....

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an opportunity to the assessee to produce the same. As regards the decision of the Supreme Court in the case of Commissioner of Income Tax v. P. R. Ganapathy (supra), it was pointed out that in the facts of the said case, the court had restored the matter to the Tribunal and directed the Tribunal to examine the question in the light of what was stated in the said decision and does not in any manner come to the aid of the respondent. 8.1 Mr. Divatia further submitted that the decisions of the De .....

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Income Tax v. Padam Singh Chouhan, [2008] 3 DTR (Raj) 190 = 315 ITR 433, for the proposition that there is no legal basis to assume, that to recognize the gift to be genuine, there should be any blood relationship, or any close relationship, between the donor and the donee. Instances are not rare, when even strangers make gifts, out of very many considerations, including arising out of love, affection and sentiments. It was submitted that the said decision would be squarely applicable to the fa .....

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Appeals) at the first instance. A perusal of the order passed by the Assessing Officer reveals that he has discussed the details with regard to each donor while coming to the conclusion that the gift made by each of the donors was not genuine in nature. The Assessing Officer has further come to the conclusion that except for Shri Niranjan Chhotalal Kshatriya and Shri Piraram Chelaram Rabari, the identity of the other persons is not proved and that the bank accounts of all the persons, creditwort .....

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account and adequacy of current year income to give gift is not to be considered as they have given gifts from the accumulated income. However, this finding of the Commissioner (Appeals) is not based on any supporting material. On the contrary, the evidence on record shows that the Indian donors have very meagre income and no reasonable person could ever come to the conclusion that they have the capacity to make such gifts. Considering the income of these persons, it is not possible for them to .....

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ri Piraram Chelaram Rabari has stated that he had deposited cash in his bank account and had given the gift from his salary. In this regard, the statement of Shri Piraram Chelaram Rabari recorded under section 131 of the Act reveals that he was working as a watchman (chowkidar) and two years prior thereto, he used to earn ₹ 2,500/- and presently, was earning ₹ 3,200/-. In answer to the query as to whether he had any income other than the salary income in the previous five years, he h .....

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scheme and they used to give some discount to such members and it is possible that such members may be giving him some commission. As regards Shri Niranjan Chhotalal Kshatriya, the Commissioner (Appeals) has observed that he has confirmed that the cash deposits in his bank account were from his savings and that the gift of ₹ 1,00,000/- has been reflected in his capital account filed as Annexure to his return of income filed on 27.05.2002 with ITO, Ward 12(3), Ahmedabad. As regards the oth .....

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Tribunal after considering the record of the case in detail, has recorded the following findings : 9. We have heard rival submissions and perused material available on record. Facts have been narrated in details above. At the outset, we would like to mention that cases regarding cash credits and gifts depend on intrinsic facts of each transactions and its only when parity of the facts is established that a principle settled by some judicial authorities can be applied to it. It is imperative to .....

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ioning, he did not remember from whom interest has been earned. He did not disclose any source of income except watchman salary, besides, answer to question No.8, he stated that he has no relationship with the assessee and has only met on number of times. Whereas in answer to question No.35, assessee contended that I have business relationship with Piraram Chelaram Rabari. Answer of the assessee itself make statement of Rabari unbelievable, who did not state that there was any business relations .....

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ri and the fact that Mr. Rabari utterly failed to establish his creditworthiness, gifts in question cannot be accepted. AO has rightly treated the same as undisclosed income of the assessee. CIT (A) except some reference to case laws, has made no objection consideration. [ii] Shri Niranjan Chhotalal Kshatriya : He is only an accountant having earning of ₹ 5,500/- per month, who is having household expenses of ₹ 3,500/- and has given a gift of ₹ 1,00,000/- to the assessee. In th .....

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Niranjan Kshatriya did not remember, even the name of any family members of the assessee and the reason of friendship is only meeting at some Advocate office. Assessee in contradiction, in answer to question No.42, said that Shri Niranjan Kshatriya used to come with Jaswantbhai on our occasion , implying thereby some family functions. Similarly, assessee contends that Shri Niranjan happens to meet him after six to eight months. In our opinion, statement of both persons are contradictory except .....

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e being contrary to deposition on oath under statutory provision i.e. section 131 and cannot be relied on. In view of these facts and circumstances, gift cannot be held to be genuine. Coming to two NRIs, it is evident that they were never produced before the AO. Assessee in his own statement also expressed his inability of any knowledge about members of the family of Shri Ramesh Keshkani and said that he met him through one Shri Mahadev Keshkani and he did not know full names and complete local .....

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ily members. He did not remember names and his family members and local addresses of Shri Vinod Meghani at Ahmedabad, he had not contacted him by mail or telephone since last six to seven years. In view of these glaring deficiency and proper establishment of identity of the donors in the form of original passport and their proper existence, relationship as alleged by the assessee, we are unable to treat this gift as genuine gift as identity and creditworthiness could not be proved by assessee in .....

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gation regarding genuineness of persons and creditworthiness could have been carried out. In the eventuality of assessee having failed to prove its burden, onus does not shift on the AO to accept gifts valid only on the basis of confirmations. 12. Thus, the Tribunal, after duly appreciating the material on record, has recorded findings of fact for the purpose of coming to the conclusion that the gifts in question are not genuine. In the present case, the returns of income filed by the Indian don .....

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no other supporting material had been produced by the assessee to prove the identity of the donors, the genuineness of the gifts and the creditworthiness of the parties. As held by the Supreme Court in the case of Commissioner of Income Tax v. P. R. Ganapathy (supra), the burden is on the assessee to show that the amount received by purported gifts from the donors was a gift in the real sense. In the facts of the present case, the assessee has not led evidence to show whether the alleged donors .....

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d the donors was the one involving natural love and affection. In the opinion of this court, having regard to the financial capacity of the donors as emerging from the record, considering the facts of the case from the point of view of a reasonable man taking a reasonable view, it is not possible to believe that the gifts in question are genuine. 13. The Supreme Court in Commissioner of Income Tax v. P. Mohanakala (supra) has held that a bare reading of section 68 of the Act suggests that there .....

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means where the assessees offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessees. It is true the opinion of the Assessing Officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference to the mate .....

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fails to rebut it, it could be held against the assessee that it was a receipt of an income nature. The court further held that section 68 of the Act itself provides, where any sum is found credited in the books of the assessees for any previous year, the same may be charged to income-tax as the income of the assessees of the previous year if the explanation offered by the assessees about the nature and source of such sums found credited in the books of the assessees is in the opinion of the Ass .....

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nking transaction but that itself is of no consequence. In Commissioner of Income Tax, U.P. v. Bharat Engineering and Construction Co., [1972] 83 ITR 187, the Supreme Court held that in the absence of satisfactory explanation from the assessee, the Income Tax Officer may assume that cash credit entries in its books represent income from undisclosed sources. But what inference should be drawn from the facts proved is a question of fact and the Tribunal s finding on that question is final. The abo .....

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of the donor was established as the donor had appeared in person before the Assessing Officer, the genuineness of the transaction was established, not only by the receipt of the bank draft, but also by the fact of the transaction having borne gift tax once the assessment was framed. The primary onus which rested on the assessee, thus, stood discharged. The court, on facts, found that the donor had produced evidence in support of the source from which the funds for making the gift were available .....

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Notification: Seeks to amend notification no. 2/2017- integrated tax(rate) dated 28.06.2017 to give effect to GST council decisions regarding GST exemptions.

Notification: Seeks to amend notification no. 1/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates

Notification: Seeks to amend notification no. 1/2017- integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates.

News: Notification Issued For GST Actionable Claim On Branded Food Products

Highlight: Classification printed computer stationary/manifold Business Forms - to be classified under Chapter Heading 4820.00 or under Chapter Heading 4901.90 - items like A4 sheets, advertisement and job card to be classified under Chapter 49

Article: RCM Applicability to persons not liable to get registered us 23(1)

Article: Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

News: GST Refund - Blockage of Working Capital of Exporters - earlier also there was a normal blockage of funds for a period of 5-6 months at least

News: Clarification about Transition Credit - ₹ 1.27 lakh crore of credit of Central Excise and Service Tax was lying as closing balance as on 30th June, 2017 - claim of credit of ₹ 65,000 crore is not unexpected

Article: 20 Things You must know about E Way Bills in GST Law

Article: MISTAKES IN DRAFTING

Highlight: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular

Highlight: The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017

Highlight: Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification

Notification: All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017

Circular: Investment by Foreign Portfolio Investors in Corporate Debt Securities Review

Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017



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