Thursday, 14 June 2018

CBIC withdraws revised monetary limits for high ranking Customs officers for adjudicating confiscations


CBIC withdraws Circular No. 16/2018-Cus specifying monetary limits for adjudication by specified Customs officers in cases liable to confiscation under Chapter XIV of Customs Act; Notes that as a result of such Circular, show cause notices issued previously would need to be amended in terms of revised adjudication powers, which would delay the adjudication proceedings; Show cause notices issued for adjudication of cases falling under Chapter XIV (Section 122(a) of Customs Act) are answerable to Principal Commissioner / Commissioner / Jt. Commissioner without any limits : CBIC Circular

HC : 'Interest' recoverable under VAT law on belated installment payment under sales-tax deferment scheme


HC dismisses assessee’s writ, upholds recovery of interest on belated payment of installments under sales tax deferment scheme u/s 25 of AP VAT Act, 2005 (Act) dealing with recovery of tax as an arrear of land revenue; Remarks that, “after indicating four different types of amounts, viz., (1) tax assessed; (2) penalty levied; (3) interest payable under the Act; and (4) amount of tax under the deferment scheme, the last part of Section 25 uses an omnibus expression, viz., the whole of the amount then remaining unpaid”, thus, rejects assessee’s plea that Section 25 cannot be invoked for recovery of interest due on installments; Explains that, tax deferment is granted by Government generally in terms of Section 69 of Act but manner in which eligibility period has to be fixed, method of debiting eligibility amount and question of repayment, are all left to rule making authorities u/s 69(3); Perusing Rule 24(5)(b) of AP VAT Rules, HC elucidates that, “Once the order granting the facility of deferred payment of tax becomes infructuous, the amount that remains unpaid automatically gets restored to the status of a tax”, consequently, Section 22(2) would come into play which indicates that liability to pay interest is not just correlated to tax assessed or penalty levied, but has a correlation even to 'any other amount due' which would include “arrears or installments payable under a deferment scheme”; Further finds no illegality in the order of attachment, states that, “To have an attachment on the property which is already under mortgage to the Bank is completely different from the priority that Section 26E of the Securitization Act talks about” : Andhra Pradesh HC

CBDT: Proposes amendments in Forms 36/36A for filing appeals / cross objections before ITAT

CBDT issues draft notification substituting old Forms 36/36A with new Forms for filing appeals / cross objections before ITAT, with a view to rationalise these Forms to make them more informative; The new Forms seek additional details about appellant, respondent, pending appeals, amount disputed in appeal or cross-objections; Invites stakeholders’ comments by July 2nd

CBDT: Proposes amendments in Forms 36/36A for filing appeals / cross objections before ITAT

CBDT issues draft notification substituting old Forms 36/36A with new Forms for filing appeals / cross objections before ITAT, with a view to rationalise these Forms to make them more informative; The new Forms seek additional details about appellant, respondent, pending appeals, amount disputed in appeal or cross-objections; Invites stakeholders’ comments by July 2nd. 

AAR : 65 Key observations from AAR MasterCard ruling on PE constitution, Royalty & FTS taxation

AAR rules that the Applicant (a Singaporean MasterCard group company) has a fixed place PE, service PE and dependent agent PE in India under Article 5 of the India Singapore DTAA in respect of the services with regard to use of a global network and infrastructure to process card payment transactions for Customers in India; AAR notes that the transaction processing activity consists of electronic processing of payments between banks of merchants and cardholders through the use of MasterCard Worldwide Network (‘the Network’) and the MlPs (MasterCard Interface Processor) are located at the Customers' locations in India that connects to MasterCard's Network and processing centers; Holds that MIPs and MasterCard Network create a fixed place PE of the Applicant in India, even if MIPs are automatic equipment placed at the site of customer banks in India, holds that they pass the test of permanency and they are at the disposal of the Applicant despite not being owned by Applicant; Holds that MIPs in India carried out significant functions of preliminary verification/validation of PIN, card codes, names and address in India which  facilitate authorization part of the transaction processing and cannot be said to be preparatory or auxiliary; Notes that though MIPs are owned by Indian subsidiary (‘MISPL’), but considering the FAR profile of MISPL which shows that it is performing support activity and not actual transaction processing, AAR holds that “This clearly means that authorization part of the transaction processing activity, carried on by MIPs, is the activity of the Applicant and not of MISPL.”, further notes that the software inside MIP is owned by the Applicant; Further, holds that MasterCard Network also creates a fixed place PE considering significant activities relating to clearance and settlement taking place in India through the MasterCard Network; Likewise, AAR observes that the India subsidiary (‘MISPL’) constitutes Applicant's PE in India , finds force in Revenue’s submission that while erstwhile LO (the activities of which are now taken over by subsidiary) was doing transaction processing activity accepting 100% income attribution, MISPL is shown doing only support activities, resulting in drastic reduction of income returned in India; Holds that since transaction processing activities carried out in India through MIP and MasterCard Network are not reflected in FAR analysis of MISPL, to that extent it constitutes fixed place PE for the Applicant;  Also upholds constitution of service PE on account of Applicant’s employees visiting India and constitution of Dependent agent PE for MISPL securing orders for the Applicant; Extensively relies upon Formula one, e-Funds, Morgan Stanley rulings, subsidiary’s TP report, also relies on Amedeus and Galileo rulings; On royalty taxation, AAR holds that “licensing of various IPs in the form of brand/trade name/mark etc. are not incidental to the activity of transaction processing and the payment made by various customer banks in India to the Applicant is also for the use of these IPs and hence is royalty.”, also upholds royalty taxation for use of equipment, software and secret process; However, AAR clarifies that since the payment is effectively connected with various types of PEs held as above, “it would get taxed with the PE under Article 7 and not under Article 12.”; Lastly, AAR clarifies that arm’s length remuneration to PE on account of Indian Subsidiary for the activities performed / to be performed in India, would not absolve the Applicant from any further attribution of its global profits in India since the FAR of the Indian Subsidiary does not reflect the functions/risks of the Applicant performed/undertaken by it:AAR