Sunday, 31 December 2017

Master File applicability and requirements

The CBDT vide Rule 10DA has prescribed for maintenance and filing of Master File for certain companies.  This post  provides overview on the applicability of the Rule and data required for compliance. 
The requirement of maintaining and filing Master File is applicable in the following situations:
a.            Where the consolidated revenue of the International Group (of which your company is a Constituent Entity) as per the consolidated financial statement of the International group for the Accounting Year exceeds Rs 500 Crore; and
b.            International transaction in FY 16-17 exceeds Rs 50 Crores or transactions related to IP exceed Rs 10 Crores.
International Group: International Group means any Group that includes two or more enterprises/companies which are resident of different countries or territories.
Constituent Entity: Constituent Entity means any separate entity which is included in the consolidated financial statement of the said International Group for financial reporting purposes.
Accounting Year: Accounting Year means an annual accounting period, with respect to which the parent entity of the international group prepares its financial statements
In case the above conditions are satisfied, the company will have to file both Part A and Part B of Form 3CEAA.  In case the above conditions are not satisfied, only Part A of Form 3CEAA has to be filed.  The details required for filing Part A and Part B of Form 3CEAA is attached.
In case there are more than one constituent entities resident in India, of an international group, then one entity may be designated by the international group to furnish Form 3CEAA Part A & B. Such entity shall intimate that it will furnish Form 3CEAA Part A & B by filing Form 3CEAB 30 days prior to 31.03.2018.

Please evaluate applicability of the above Rules and let us know if you require any assistance with respect to preparation and filing of Master File. 

Four Imp Verdicts On Appt Of Tribunal Members, S. 14A/ Rule 8D And S. 32 Depreciation On Intangible Assets

Sales Tax Tribunal Bar Association vs. State of Maharashtra (Bombay High Court)

Sales-tax/VAT Tribunal: (i) Only legally qualified, judicially trained and experienced persons can be appointed Members. A Chartered Accountant or Commissioner cannot be appointed unless they have expertise in the subject. (ii) The Selection Committee should be headed by either a sitting Judge or a retired Judge of the High Court. (iii) It is the constitutional obligation of the State to provide proper infrastructure to the Courts, Tribunals and Judicial Officers. Financial constraint on the part of the Government is no ground to deny the adequate infrastructure to the Courts and Tribunal. (iv) For complete transparency, the Tribunal will have to ensure that its records are digitized and all orders, short or long, are uploaded on a dedicated website   

Friday, 29 December 2017

Govt. reduces GSTR-4 late fee; Notifies E-WayBill Rules from Feb 1; Amends CGST Rules

Govt. waives late fee payable for failure to furnish return in Form GSTR-4 i.e. quarterly return by composition taxpayer, in excess of Rs. 25 per day and in case of Nil return – Rs. 10 per day; Notifies E-Way Bill Rules, viz. Rules 138, 138A, 138B, 138C & 138D of CGST Rules 2017 from February 1; Also Amends CGST Rules 2017 vide CGST (14th Amendment) Rules 2017 to inter alia disallow amendment to any particular of registration application w.e.f date earlier than date of submission of application in Form GST REG-14 on the common portal except by order of Commissioner; Modifies formula to claim refund of ITC in case of zero-rated supplies without payment of tax under bond / LUT under Rule 89 w.e.f. October 23, 2017; In case of supplies received on which supplier has availed benefit of deemed export under Notification No. 48/2017-Central Tax, refund of ITC availed in respect of other inputs / input services used in making zero-rated supplies, shall be granted; In case of supplies received on which supplier has availed benefit of Notification No. 40/2017-Central Tax (Rate) (viz. Central Tax rate of 0.05% on intra-State supply of taxable goods for export), or Notification No. 41/2017-Central Tax (Rate) or both, refund of ITC availed in respect of inputs received under said Notifications for export of goods and ITC availed in respect of   other inputs / input services to the extent used in making exports, shall be granted; Also amends Rules 95 & 96 w.e.f October 23, while tweaking Forms GST REG-10, GST REG-13, GSTR-11, GST RFD-10 and GST DRC-07 : Finance Ministry Notifications 

Happy New Year.

Greetings from taxbymanish

As the New Year approaches us with trusts once more,
here is to wishing you and your family a superb year ahead.
Glad New Year!
Given below link of e calendar of 2018.

Three Imp Verdicts On Core Issues

CIT vs. Hercules Hoists Ltd (Bombay High Court)

S. 80-IA(5): Only losses of the years beginning from the initial assessment year are to be brought forward for set-off against profits of the eligible unit. Losses of earlier years which are already set off against income cannot be brought forward notionally for set-off. The fiction in s. 80-IA(5) is created only for a limited purpose and cannot be extended   

Govt. extends deadline for furnishing GSTR-1 to January 10

Central Govt. extends the deadline for furnishing Form GSTR-1; Accordingly, registered persons having aggregate turnover of upto Rs. 1.5 Cr can furnish return by January 10th for the period ‘July to September’, by February 15th for ‘October to December’, and by April 30th for ‘January to March’ period; On the other hand, registered persons having aggregate turnover of more than Rs. 1.5 Cr shall furnish returns as follows – by January 10th for ‘July to November’, by February 10th for ‘December’, by March 10th for ‘January’, by April 10th for ‘February’, and by May 10th for ‘March’ : Finance Ministry Notifications 

Wednesday, 27 December 2017

HC : Dismisses Revenue‘s appeal; Sec. 10B benefit to commence only from EOU certification

Kerala HC dismisses Revenue’s appeal, holds assessee eligible for Sec. 10B benefit from AY 2000-01 i.e. the year of inception of 100% export-oriented undertaking (‘EOU’) and not from AY 1998-99 i.e. the year on which the manufacture was commenced; Notes that the assessee was a sole proprietorship firm, which commenced its manufacturing business in AY 1998-99, later it was converted into a partnership firm  and was also issued a certificate of it being a 100% EOU in AY 2000-01; HC refers to Sec. 10B and opines that the term ‘manufacture’ referred thereto “is one commenced pursuant to the certification of 100% export-oriented undertaking.”; HC holds that in the present case, it cannot be said that the assessee, a 100% EOU is eligible from the year in which they commenced manufacture, since in that relevant year the assessee was not a 100% EOU unit; HC rules that “The benefit being conferred only on a 100% export-oriented unit, the exemption could commence only from its certification, as such a unit and if there is no manufacture at the time of certification, from the time of commencement of manufacture.”:HC 

Sec 54EC benefits cannot be denied for not making investment within stipulated period when assessee did not get full payment at time of contract for sale: HC

THE issue is - Whether Sec 54EC benefits can be denied for not making investment within stipulated period when assessee did not get full payment at time of contract for sale. YES is the verdict.

For purpose of timely submission of audited books, onus lies on assessee to furnish necessary papers and ensure that Chartered Accountant does his job properly: ITAT

THE issue is - Whether, for the purpose of timely submission of the audited books, the onus lies on the assessee to furnish necessary papers and ensure that the CA does his job properly. YES is the answer.  

ITAT : Allows depreciation on know-how, goodwill acquired under slump-sale, upholds slump price bifurcation

Pune ITAT allows depreciation claim for AYs 2004-05 and 2005-06 on intangible assets, viz. know-how, trademark and patents, goodwill acquired by assessee-company pursuant to takeover of the catalyst business on a going-concern basis (during preceding AY 2003-04 at a slump sale price of Rs.153.18 cr.), also allows depreciation on non-compete fees payment; Rejects Revenue's stand that valuer had not correctly allocated slump sale consideration to various assets as valuer did not attribute any cost to most important asset acquired by assessee i.e. land at Panki and Taloja, perusing various agreement, ITAT holds that no land was transferred to assessee, also rejects Revenue's stand that no ‘substantial’ part of slump price can be attributed to the know-how, patents and trademarks;  Further, remarks that “ultimately after the slump price has been attributed first to the value of tangible assets, then the balance is to be attributed to intangible assets and once the same is done and whether it is under the umbrella of know-how, trademarks, patents or goodwill, it makes no difference since all these are covered under the umbrella of intangible assets, which are eligible for claim of depreciation u/s. 32(1)(ii)”, relies upon SC ruling in Smif Securities; Further,  ITAT rejects Revenue’s stand that  slump price paid for acquiring bundle of rights / assets cannot be apportioned amongst the individual assets for the purpose of depreciation, relies on Punjab & Haryana HC ruling  in Shreyans Industries Ltd., Delhi HC rulings in Triune Energy Services (P.) Ltd. and DE Nora India Ltd.; Referring to the co-ordinate bench ruling in assessee’s own case for preceding AY whereby the sum of Rs.153.18 crores was first allocated to cost of tangible assets, further to the value of trademarks, patents and know-how and the balance to the goodwill based on the values assigned by an independent Valuer and depreciation was allowed to assessee, ITAT remarks that “Once the asset has entered into ‘block of assets’ and thereafter, depreciation has been allowed ….the WDV of such asset is to be accepted as sacrosanct and depreciation has to be allowed on the same.”, relies on Bombay HC ruling in HSBC Asset Management (I) (P.) Ltd.  :ITAT 

Govt. records Rs. 80,808 Cr GST revenue in December; 53.06 lakh returns for November till December 25

Finance Ministry releases GST figures for the month of December, upto 25th; Registers total collection of Rs. 80,808 Cr comprising of Rs. 13,089 Cr  from CGST, Rs. 18,650 Cr from SGST, Rs. 41,270 from IGST and Rs. 7,798 Cr from Compensation Cess; Rs. 10,348 Cr is being transferred from IGST to CGST account, while Rs. 14,488 Cr to SGST account by way of settlement of funds, towards cross utilization of IGST credit for payment of CGST and SGST respectively, or due to inter-state B2C transactions; Thus, total collection of CGST and SGST for December is Rs 23,437 Cr and Rs. 33,138 Cr respectively including transfers by way of settlement, states the Ministry; On the registrations front, records 99.01 lakh taxpayers till said date, of which 16.60 lakh are composition dealers required to file quarterly returns; 53.06 lakh returns have been filed for November, till December 25 : Finance Ministry Press Release 

CESTAT : Cannot reject VCES declaration on mis-classification plea, 'interpretation' difference not a substantial 'mis-declaration'

CESTAT allows assessee’s appeal, holds rejection of declaration filed under Service Tax Voluntary Compliance Encouragement Scheme (VCES) on ground of mis-classification of services as unsustainable; Notes that, while assessee categorised activity of construction of residential and commercial complexes under 'construction of complex service' and claimed abatement benefit under Notification No. 26/2012, Revenue sought to disregard the declaration and classify said activity as ‘works contract service’ on ground that same were so disclosed for VAT assessment purpose; Remarks, “(VCES) was framed by the Government with the intention of encouraging voluntary compliance and payment of service tax” and “declarations made under such scheme were to be accepted, by and large”; Observes, total amount of consideration received has not been found to be different from what was declared and Revenue has not produced any contract or document indicating that assessee did not make full declaration of service tax liability for the disputed period; Further, taking note of assessee's contention that definition of works contract service under VAT law and Finance Act, 1994, is different, holds that, different interpretation on classification of services does not tantamount to substantial misdeclaration : Bangalore CESTAT

Delhi HC grants interim relief to manufacturer; Notice to Govt. over transitional credit limitation

Delhi HC grants interim relief to manufacturer challenging constitutional validity of Section 140(3)(iv) of CGST Act, 2017 that limits availment of transitional credit to 1 year; ITC, in instant case, pertains to goods transferred by said manufacturer to depot; While issuing notice to Govt, HC states, "It is open to the petitioner to claim whatever it wish to; in the event the credit sought is denied, the respective entitlement of the parties shall be subject to the final decision"; Accordingly, lists the matter on January 25, 2018 : Delhi HC 

Supreme Court rules higher pension benefit for eligible employees

The Supreme Court cited Proviso to Para 11(3) of the Pension Scheme and clarified that to avail higher pension benefit, an employee will be allowed to allocate higher amount of the employer’s Provident Fund contribution to the Pension Scheme and not be restricted on the prevailing salary ceiling.
The Supreme Court further ruled that there can be no cut-off date for an employer and an employee to avail the option of making pension contribution on higher salary beyond the prevailing salary ceiling. In case such an option is exercised by the employee, the Employees’ Provident Fund Organisation (EPFO) can divert the funds from the Provident Fund Scheme to the Pension Scheme and provide higher pension to the employees.
Following the Supreme Court ruling, the EPFO issued a circular on 23 March 2017 stating that on receipt of a joint request from an employer and an employee, the employee who has contributed toward Provident Fund on higher salary exceeding the salary ceiling can divert 8.33% of the said salary to the Pension Scheme along with interest declared under the Provident Fund Scheme. Such employee would be eligible for higher pension benefit under the Pension Scheme as calculated on higher salary.
With effect from 1 September 2014, Proviso to Para 11(3) was deleted and instead Para 11(4) was introduced in the Pension Scheme.
In our view, the Supreme Court ruling may have limited applicability in relation to an employee who satisfies the following criteria:
a. The employee had left employment prior to 1 September 2014 and is not employed in an establishment covered under the Provident Fund law; and
b. When employed, the employer’s share of Provident Fund contribution was on higher salary but contribution allocated to the Pension Scheme was on the prevailing salary ceiling.
As per another EPFO circular, this does not apply to an employer maintaining a Private Provident Fund Trust. However, this circular has since been challenged in various High Courts

Sunday, 24 December 2017

2 IMP Case Laws

CIT vs. Dr. Arvind S. Phake (Bombay High Court)

S. 2(47)(v): Immovable property can be regarded to have been transferred on the date of execution of the Development Agreement and irrevocable General Power of Attorney only if the terms indicate that complete control is given to the developer. If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer u/s 2(47)(v)
What binds this Court is that the judgment of the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia v/s. Commissioner of Income Tax (2003) 260 ITR 491 (Bom). The Division Bench held that the date of contract is relevant provided the terms of the contract indicate passing off or transferring of complete control over the property in favour of the developer. The Division Bench laid down the test for determining the date which should be taken into account for determining the relevant accounting year in which the liability accrues. Admittedly, on the date of execution of the development agreement, the entire consideration was not received by the respondent assessee. The physical possession of the property subject matter of development agreement was parted with by the respondent assessee on 1st March, 2008. It was held that on that day, complete control over the property was passed on to the developer

Greater Mohali Area Development Authority vs. DCIT (ITAT Chandigarh)

Coercive Tax Recovery: The AO wanted to preempt the Tribunal from dealing with the Stay application. The Act and conduct of the Revenue officials is against judicial conscience. Canons of law, justice and ethics have been broken down by the officials of the Department. An effort has been made to render the provisions of the law inoperative, debarring the assessee from availing any remedy from the higher forum

The act ion of the coercive recovery on the par t of the Assessing officer was against the elementary principal of rule of law. That the state is expected to act fairly. The undue haste on the part of the Assessing officer in recovering the amount was not only contrary to the binding decision of the Court but also shocking to the judicial conscience. The entire action was directed at rendering the Tribunal and the assessee helpless so that no relief can be granted in favour of the assessee. The Tribunal could not be silent spectator of the arbitrary and illegal act ion on the part of the Assessing officer so as to frustrate the legal process provided under the Act. The grant of refund of the amount that has been coercively recovered by the department was in the exercise of the tribunal’s inherent powers to ensure that the assessee is not left high and dry only on account of illegal and highhanded actions on the part of revenue and the assessing officer

HC : Property 'transfer' not effective upon mere development agreement's execution, applies 'Chaturbhuj' ratio

Bombay HC upholds ITAT order, treats the date of handing over of physical possession of property by assessee-individual (i.e. March 1, 2008), and not the date of execution of Development Agreement (i.e. September 13, 2007), as the date of transfer for AY 2008-09; Accordingly, HC allows assessee’s capital gains exemption claim u/s. 54EC by holding that the investments made by assessee in August 2008 was within the 6 months deadline prescribed u/s. 54EC; Revenue had denied Sec 54EC relief by contending that 'transfer' of asset was effected on the date of execution of Development Agreement (i.e. September 2007) and not the date of handing over of physical possession of property; HC notes the ratio of co-ordinate bench ruling in Chaturbhuj Dwarkadas Kapadia wherein it was held that the date of execution of contract is relevant provided the terms of the contract indicate passing off or transferring of complete control over the property in favour of the developer; HC notes that the terms of the development agreement provide that only upon full payment of consideration, the construction shall be undertaken by the developer; HC further observes that on the date of execution of the development agreement, the entire consideration was not received by assessee; HC also observes that when the possession was handed over by assessee to the developer on March, 1, 2008 the entire consideration under the development agreement was received by assessee and complete control over the property was passed on to the developer; Thus, upholds ITAT order holding date of parting with possession as the date of transfer, remarks that “This finding is fully consistent with the law laid down by the Division Bench in the case of Chaturbhuj Dwarkadas Kapadia.”:HC 

Saturday, 16 December 2017

Imp High Court Verdict On Bogus Long-Term Capital Gains From Penny Stocks

Sanjay Bimalchand Jain vs. Pr CIT (Bombay High Court)

Bogus LTCG from Penny stocks: The assessee has not tendered cogent evidence to explain how the shares in an unknown company worth Rs.5 had jumped to Rs.485 in no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. the assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit u/s 68

The assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. While so observing, the authorities held that the assessee had not tendered cogent evidence to explain as to how the shares in an unknown company worth Rs.5/had jumped to Rs.485/ in no time. The Income Tax Appellate Tribunal held that the fantastic sale price was not at all possible as there was no economic or financial basis as to how a share worth Rs.5/of a little known company would jump from Rs.5/to Rs.485/. The findings recorded by the authorities are pure findings of facts based on a proper appreciation of the material on record. While recording the said findings, the authorities have followed the tests laid down by the Hon’ble Supreme Court and this Court in several decisions

E-WayBill for inter-state movement mandatory from February 1, intra-state from June 1, decides GST Council

GST Council, during its 24th meeting, decides that nation-wide inter-state E-Way Bill shall be made compulsory from February 1, 2018; System shall be ready by January 16 and trade and transporters can start using the same on voluntary basis therefrom; States, “While the System for both inter-State and intra-State e-way Bill generation will be ready by 16th January, 2018, the States may choose their own timings for implementation of e-way Bill for intra-State movement of goods on any date before 1st June, 2018.”; But in any case, uniform system of E-Way Bill for inter-state as well as intra-state movement will be implemented across the country by June 1 : Finance Ministry Press Release

Sunday, 10 December 2017

I-T - Unutilised MODVAT Credit is not allowable deduction under provisions of Section 43B: HC

THE issue before the Bench is - Whether unutilised Modvat Credit is allowable as deduction u/s 43B. And the verdict is NO.
Facts of the case
The Assessee purchased raw materials and inputs that went into the manufacture of automobiles. The purchase price paid by the Assessee for raw material or inputs included excise duty. To the extent that such excise duty had been paid as part of the purchase price, the Assessee was entitled to MODVAT credit in terms of Rule 57A of the CE Rules. The excise duty paid by the Assessee was kept in a separate account, maintained as the RG23 register so that the Assessee could utilize that separate account or credit for payment of excise duty at the time of clearance of the automobiles manufactured by it from its factory. The controversy that arose was that as of 31st March 1999, the unutilized MODVAT credit stood, in the Assessee's books of accounts, at Rs. 69,93,00,428. That amount, having been paid by the Assessee on the raw material or input as excise duty, was not shown as expenditure and therefore, was not reflected in its P&L account. Instead, it was shown as a current asset in the balance sheet. The contention of the Assessee was that although the said amount was shown as unutilized MODVAT credit, it had been paid by the Assessee and should therefore be allowable as a deduction in terms of Section 43B of the Act.
However, the contention of the Revenue was that however, the Assessee might 
be the person who pays the excise duty, the liability was that of the manufacturer and that did not mean that the Assessee was the one who was liable to pay excise duty on such raw material or inputs. As per the Revenue, it was merely the incidence of excise duty that had shifted from the manufacturer to the purchaser and not the liability to pay the same. Accordingly, the AO made disallowance on that account. On Assessee's appeal, the CIT(A) upheld the decision of the AO. On further appeal by the Assessee, the Tribunal also upheld the disallowance and dismissed the appeal filed by the Assessee.
After hearing the parties, the High Court held that,
++ guidance Note issued by the ICAI answers both issues raised by the Revenue. One is that it clarified that MODVAT Credit is treated as a separate account where appropriate accounting entries will be made to adjust the excise duty paid out of the said account. It is clear that the debit balance in MODVAT/CENVAT Credit Receivable (Inputs) has to be shown on the assets side, under the head 'advances'. According to the accrual concept of accounting (mercantile system), credit is taken even after the documents evidencing payment of specific duty on inputs are received later than the physical receipt of the goods;
++ it must be noted at this stage that after hearing the arguments on 21st September 2017, an affidavit dated 6th November 2017 has been filed by the Assessee pointing out that out of the total amount of unutilized MODVAT credit of Rs. 69,93,00,428, an amount of Rs. 15,73,38,110 pertains to goods already consumed and which were, therefore, not includable in the closing stock of raw materials and inputs as on 31st March 1999. It is pointed out that this was noted by the CIT (A) in para 9.16 of the appellate order and that this finding was not questioned by the Revenue. It is accordingly submitted that even if the Revenue's contention on the interpretation of Section 43B was accepted, the Assessee is unquestionably entitled to deduction of the such amount of Rs. 15,73,38,110. It is further pointed out that out of the such unutilized MODVAT credit claimed as a deduction by the Assessee for the AY 1999-00, a further amount of Rs. 14,96,79,029 represents additional or countervailing duty which has been paid by the Assessee directly to the Customs Department on the import of raw materials, components and the inputs. This, according to the Assessee, is borne out by the RG-23 (Part-II) Register maintained by the Assessee and verified and audited from time to time by the excise authorities. It is asserted that the said amount "has actually been paid by the assessee to the customs authorities and therefore, this amount should also be allowed under Section 43B of the Act; 
++ the Court would only like to observe that it would be for the AO to give effect to the order pertaining to the such amounts paid by the Assessee to be made in respect of those goods already consumed as on 31st March 1999 and in respect of additional countervailing duty paid directly to the customs authorities. If indeed such payment has been made, the credit for the same would be allowable as a deduction under Section 43B of the Act;

++ it is also to be noted that in para 35 of the order, the ITAT has accepted the alternate contention of the Assessee that unutilized MODVAT credit of an earlier year which has been adjusted in the year in question should be allowed as a deduction in as much as such adjustment would have to be treated as an actual payment of excise duty. In view of the Court agreeing with the ITAT on the non-allowability of unutilized MODVAT credit as a deduction under Section 43B of the Act for the AY in question, this Court also agrees with the ITAT's acceptance of the Assessee's alternate contention with regards to the unutilized MODVAT credit of the earlier year being allowable as a deduction in the AY in question to the extent that it has been adjusted by treating as actual payment of the credit for the AY in question. As the ITAT has already pointed out, the Assessee would be entitled to such deduction "subject to verification provided the same was not allowed as deduction in the earlier year. An attempt was made by Mr. Ganesh to contend that it should now be allowed to be treated as unutilized MODVAT credit as part of the closing stock. An attempt was then made by Mr. Ganesh to contend that the amount of excise duty paid by the Assessee should be treated as expenditure and allowed under Section 37 of the Act as business expenditure. As rightly pointed out by Mr. Bhatia, the Assessee appears to have followed an exclusive method of valuation of stock as opposed to an inclusive stock valuation method. Such a plea was not taken at any stage of the present case before the AO, CIT (A) or the ITAT. As rightly pointed out, if the amount paid has to be allowed as a deduction under Section 37 of the Act then the inclusive method of valuation of stock has to be followed. The Assessee must opt to either treat the same as expenditure or treat it as forming part of current assets. If the plea of deduction under Section 37 is to be allowed then the question of utilising the unutilized MODVAT credit forpayment of excise duty would not arise at all;
++ after the insertion of Section 145A of the Act, with effect from 1st April 2010, an Assessee must now necessarily follow the inclusive method of valuation of stock. It was explained by the Bombay High Court in case of Cartini India Limited that as per the new provision of Section 145A of the Income-tax Act, 1961, the unutilized MODVAT credit had to be included in the closing stock of raw material and work in progress, whereas the excise duty paid on unsold finished goods had to be included in the inventory of finished goods. However, Section 145A of the Act is prospective and does not apply to the AY in question;
++ the Court is not inclined to permit the Assessee to raise the alternative plea for more than one reason. In the first place, it is a plea taken for the first time in these proceedings. It appears to be an afterthought. Secondly, the ITAT has already accepted another alternate plea made before it by the Assessee by allowing deduction in respect of the unutilized MODVAT credit of the earlier AY, the Court is not inclined to disagree with the reasoning and conclusion of the ITAT. The assessee cannot be allowed to go back and forth on the above plea. There has to be consistency. Thirdly, balance sheet of the Assessee for AY 1999-00 shows that the turnover for the year was over Rs. 8,000 crores. The corresponding sum claimed as deduction representing the unutilized MODVAT credit is not very significant in comparison. 

TDS - Premium paid by tourist operator, seperately to RMCs for purchase of foreign currency, cannot be treated as commission payment requiring TDS deduction u/s 194H: ITAT

THE ISSUE is - Whether premium paid by a tourist operator, seperately to RMCs for purchase of foreign currency, can be treated as commission payment requiring TDS deduction u/s 194H, when there is no principal agent relationship existing between the operator and the RMCs. NO is the answer.
Facts of the case:
A) The Assessee is in the business of tours and travels and in the course of such business it also engages itself in trading in foreign currency. During the assessment proceedings, the AO noticing that the assessee was also engaged in the business of trading in foreign exchange called for the details of such transactions. In response, the assessee furnished foreign exchange trading account wherein an amount of Rs. 51,13,680/- was debited towards commission payment. From the details submitted by the assessee, the AO found that assessee had not deducted tax at source on an amount of Rs. 19,09,775/-. When called upon to explain the reason for non deduction of tax at source on such amount, it was submitted by assessee that the payment was not in the nature of commission but premium paid separately to RMCs at Goa for purchase of foreign currency by the assessee from them and which they, in turn have purchased from foreign tourists. It was submitted, RMCs requested for reimbursement at card rate, i.e. the rate at which they paid to the tourists in order to keep track of profits earned by them on stock sold to the assessee. The AO was not convinced with the explanation of the assessee. He opined, though, the assessee had claimed to have entered into such transactions with RMCs on principal to principal basis, however the facts indicate a principal and agent relationship as the so called premium was debited under the head commission which was over and above the purchase price. Since, the assessee had not deducted tax at source on such payment, the AO disallowed the amount of Rs. 19,09,775/- u/s 40(a)(ia) of the Act. On appeal, the CIT(A) sustained the addition by holding that payment made by assessee was covered u/s 194H.
B) During the assessment proceedings, the AO having found that the assessee had debited expenditure amounting to Rs. 20,04,37,496/- on account of brokerage payment to various parties for arranging inter corporate deposits, called upon the assessee to furnish necessary details. After verifying party-wise details of brokerage payment furnished by the assessee, the AO alleged certain discrepancies in such payments and ultimately held that the payments are neither genuine nor for the purpose of assessee’s business. Accordingly, he disallowed an amount of Rs. 1,77,68,298/- out of the total expenditure claimed. On appeal, the CIT(A) deleted the addition made by AO.

the Tribunal held that,
++ as far as commission payment is concerned, the assessee has a foreign exchange division approved by the RBI and is authorised to buy foreign exchange and travellers cheques from RMCs and others and sell them to persons in need of them. RMCs are also authorised by RBI to buy foreign currency from non residents visiting various places in India. These facts would show that the RMCs are not agents of the assessee but are appointed by RBI. Though, it may be a fact that the assessee buys foreign currency from RMCs depending upon the needs, however, there is no principal agent relationship between the assessee and the RMCs. The RMCs are free to sell foreign currency bought from tourists to assessee, RBI or any other person authorised by the RBI to deal in foreign currency. It is also to be noted that both the RMCs as well as the assessee have shown foreign currency as their stock in trade. The assessee has no relationship with the persons from whom the RMCs purchase foreign currency and the assessee is no way connected to the concerned tourists. Therefore, in our view the transaction between the assessee and the RMCs is on principal to principal basis and there is no principal agent relationship existing between them. Merely because in the financial statement assessee has debited the amount as commission it cannot be treated so without looking at the real nature of the transaction. The AO must bring on record material to establish that there is a principal agent relationship existing between the assessee and the RMCs. No enquiry has been made by the AO with the RMCs to find out the real nature of transactions between them. Further, assessee’s contention that in no other place in India such premium paid has been disallowed requires to be taken note of. It is also relevant to observe, even in respect of premium payment in Goa, except, the impugned assessment year in no other assessment year such disallowance under section 40(a)(ia) has been made. That being the case, we are inclined to delete the addition made by the AO.

Deposit made by subscriber of Inter Corporate Deposit, issued by company on fixed rate of interest, cannot be treated as loan: ITAT

THE ISSUE is - Whether deposit made by the subscriber of the Inter Corporate Deposit, issued by a company on a fixed rate of interest, can be treated as a loan. NO is the answer.
Facts of the case:
The Assessee is a Non Banking Finance Company registered with RBI and is wholly owned subsidiary of Bennett, Coleman & Co. Ltd. (BCCL). During the year under consideration, the assessee had earned interest on Inter Corporate Deposit given to BCCL. The assessee had extended ICD amounting to Rs. 147 lacs to BCCL which was 100% holding company, initially @ 10% per annum for three years vide agreement. However in the late of the year 2009, BCCL proposed for reduction in the rate of interest to 7.25% per annum based on the then prevailing market rates. The assessee agreed to this reduction of rates, w.e.f., 1.1.2010 as it was not possible to obtain a better rate of interest from any safe source such as leading banks. The AO required the assessee to justify the reduction of rate of interest on the ICD from 10% to 7.25% per annum. In response to which, the assessee filed detailed reasons alongwith documents in support justifying the reduction of rate of interest on ICD. However the AO did not accept the assessee’s explanation and observed that rate of interest should be adopted at 15% on loans to BCCL as the charging of interest is not on arm’s length. Accordingly, he proceeded to compute the interest @ 15% per annum at Rs. 17,39,83,561/- thus making an addition of Rs. 6,77,97,413/-. 
And the Tribunal held that,
++ in any case the assessee has tried to justify the rate of interest agreed amongst the parties by bringing on record the various rate of interest on FDRs at the relevant time offered by different the bank which was far below than 7.25%, which in our opinion the onus on the assessee if any to prove the reasonableness too has been discharged, which though in our opinion was not required. AO has treated the subscription of ICD as a loan which in our understanding is not a correct way to interpret an ICD, because it is a deposit made by the subscriber of the ICD issued by a company on a fixed rate of interest and hence it cannot be treated as a loan. Thus such an enhancement of notional income as done by the AO cannot be appreciated, because the AO cannot step into the shoes of the businessman to hold that he should have maximum profit from the transaction. There is no real income which has accrued to the assessee and accordingly, the view taken by CIT(A) for deleting the addition is upheld. 

CBEC eases norms for bank guarantee & security by importers availing concessional duty

CBEC eases the norms for furnishing security / surety along with Bank Guarantee / bond by importers seeking to avail concessional duty benefit in terms of Customs (Import of Goods at Concessional Rate of Duty) Rules 2017; Accordingly, states that all importers who are manufacturers / service providers registered under GST and have been filing prescribed GST returns without fail and whose annual turnover in preceding year is above Rs. 1 Cr, shall give surety for the amount of duty foregone and where they are unable to do so, a Bank Guarantee (with self-renewal clause) / Cash security equivalent to not more than 5% of duty foregone shall be furnished; Dept. of Central Govt. / State Govt. / UT / PSU / autonomous institute under the said Govts. and all importers who are Authorised Economic Operators are exempt from such requirement; All other importers must furnish Bank Guarantee / Cash security for an amount not more than 25% of duty foregone; However, jurisdictional Commissioner may order for higher quantum subject to limit of 100% of duty foregone amount, and where importer so requests, the bank guarantee / cash security may be taken consignment-wise to obviate financial burden : CBEC Circular

Wednesday, 6 December 2017

ITAT : Grants UAE treaty benefit, holds LOB inapplicable; Accepts CIT(A)'s POEM observations

Rajkot ITAT holds that income of assessee (a UAE Co.) arising from operation of ships in India, not taxable, grants relief under Article 8 of India-UAE DTAA for AY 2008-09; Revenue had denied treaty benefits claiming that assessee could not be treated as a resident of UAE considering that its directors and shareholders were not UAE residents and its AGM was held outside UAE; ITAT notes that assessee was ‘liable to tax’ in UAE by the virtue of incorporation in UAE and hence it satisfied the ‘residency condition’, further rejects Revenue's invocation of tie breaker rule under Article 4(4) (which determines residence based on place of effective management - POEM) holding it would come into play when the assessee is resident of both the Contracting States, however, it is not AO's case that assessee is a resident of India; Also upholds CIT(A)’s observation that since the Board meetings and important decisions were  taken at Dubai and senior staff including MD were resident of Dubai,  assessee’s POEM was in UAE, further upholds CIT(A)’s order that place of holding of AGM and residential status of shareholders are not relevant factor for determining residential status of the company; Similarly, ITAT rejects Revenue’s invocation of Limitation of Benefit (‘LOB’) clause under Article 29 of India-UAE treaty on the ground that entire share capital of the assessee was held by German entities, holds that in order to invoke Article 29, “what is to be established is that if the assessee company was not to be formed in the UAE, the assessee would not have been entitled for such benefits”, relies upon MUR Shipping DMC Co ruling; ITAT holds that whether the company was to be formed in UAE or in Germany, would not have made any material difference as the Indo-German DTAA also grants similar treaty protection with regard to taxability of shipping profits:ITAT 

CBEC releases format for filing anti-profiteering application

CBEC releases Form APAF-1 for filing anti-profiteering application before Standing Committee / State level Screening Committee in terms of Rule 128 of CGST Rules; As per the law, suppliers of goods & services must pass on any reduction in tax rate or benefit of ITC to consumers by way of commensurate reduction in prices; If this is not done, consumer’s interest is protected by National Anti-profiteering Authority which may order – (a) reduction in prices, (b) return of amount not passed on with interest @ 18% to recipient, (c) imposition of penalty, and (d) cancellation of supplier’s registration; Affected consumers can file application before Standing Committee if profiteering has all-India character or before State level Screening Committee if profiteering is of local nature; Format inter alia provides for general information about the applicant, general information about supplier who has not passed on the benefit, particulars of goods / services including actual price / value charged per unit pre & post GST, and comparative per unit actual price / value of like goods / services charged by other suppliers, as well as details of reduction in tax rate / ITC benefit; Applicant must give details of input taxes / duties per unit, credit of which was not available to supplier before implementation of GST : CBEC 

ITAT : Parting with profit-share under MOU not 'diversion by overriding title', upholds taxability

Hyderabad ITAT holds that share of profit paid by assessee-builder to SIDCPL (one Infrastructure Development company) under the terms of MoU, not diversion of income by overriding title, but only an application of income, consequently holds the same taxable for AYs 2009-10 and 2010-11; Notes that the assessee had received advance of Rs. 8 crores from SIDCPL in June, 2006 which was utilised for purchase of land from HDFC Ltd. (for the purpose of developing the same), since the assessee could not repay the advance, it entered into MoU on March 22, 2007 wherein it was agreed that  87.12% of the profits (after deducting expenditure) would be distributed to the SIDCPL and only the balance would be retained by assessee; Notes that when the advance was received from SIDCPL, there was no obligation on part of the assessee to part with any of the receipts or even profit from the sale of such land, observes that so called obligation had arisen only by virtue of the subsequent MOU, not connected with property as such, holds that “The so called MOU entered, subsequent to the property being purchased and developed, cannot be considered as an obligation created at source, so as to claim diversion of income.”; Further notes that assessee had agreed only to share the profits and not the losses, remarks that “If there is an obligation at the source, then the losses arising also gets shared.”, cites principles on diversion of income laid down by SC in Sitaldas Tirathdas case; Moreover, noting that assessee was not even shown as debtor in SIDCPL’s books, ITAT doubts the real arrangement between the parties, further observes that “Since the amount of Rs. 2.05 Crores was already paid by the time the MOU entered, the distribution of profit at 87.12% also gives rise to a doubt about the ratio that was determined”:ITAT 

HC : Dismisses challenge to Designated Authority's prima facie findings to initiate anti-dumping investigation

HC upholds initiation of investigation by Designated Authority (DA) in relation to imposition of anti-dumping duty on import of ‘non-dyed polyester staple fiber’, pursuant to application of domestic producer under Rule 5(1) of Customs Tariff (Identification, Assessment and Collection of Anti-dumping duty on dumped articles and for determination of Injury) Rules, 1995 (Rules); Notes assessee’s contention that DA cannot initiate an investigation pursuant to an application filed by persons deemed to be related to exporters / importers, in terms of clauses (a) and (b) of Explanation to Rule 2(b); Notes that Rule 2(b) defines “domestic industry” to mean domestic producers as a whole engaged in manufacture of like article and any activity connected therewith or those whose collective output constitutes a major proportion of total domestic production, but excludes producers related to exporters / importers of alleged dumped article; Thus, DA is required to determine whether complaint is by any domestic industry related to exporters / importers based on which he would be in a position to determine the three factors relevant to injury contained under Rule 12(1) viz. export price, normal value and margin of dumping, and record a preliminary finding; Finding force in Revenue contention that DA had only recorded a prima facie view, HC holds that assessee’s interpretation that DA has come to a conclusion that domestic producer is related to Malaysian producer and hence not part of eligible domestic industry, is incorrect and accordingly, dismisses assessee’s writ petition with a direction to DA to hear all the interested parties  : Madras HC

HC : Allows MODVAT credit on inputs found defective / lost during manufacture of watches

HC upholds order of CESTAT allowing MODVAT credit under Rule 57A of Central Excise Rules, 1944 on inputs found defective, unfit for use on production floor in factory premises; Accepts assessee’s contention that R&D tests during which inputs were destroyed / become waste are integral to manufacturing of watches and therefore, MODVAT credit cannot be denied in terms of Rule 57A r/w Rule 57D; Notes CESTAT’s categorical finding that assessee had reversed credit availed at the time of receipt, upon discovering inputs / parts of watches unfit for use and during course of manufacture, certain inputs were found defective / lost; Further remarks that MODVAT credit cannot be denied by applying provisions of Rule 57D when duty has indeed been paid; Perusal of Rule 57A(4) indicates that MODVAT credit is available on inputs used in final products manufacture or in or in relation thereto whether directly or indirectly, hence, it is not required that said inputs should be contained in final product  : Delhi HC

ITAT: Deletes protective addition on shareholder-assessee considering substantive addition on overseas-companies

Delhi ITAT deletes protective addition of Rs.371.34cr in respect of income of overseas companies made in the hands of shareholder assessee (individual) while conducting search and seizure operation u/s 132(1) for AYs 2006-07 to 2012-13; Notes that Revenue had made addition in the hands of 3 persons – 1) overseas companies (on substantive basis) 2) assessee’s husband (on protective basis on the grounds that he exercised control and management of the affairs of the overseas companies) 3) assessee (on protective basis on the ground that even though profits of all the overseas companies were taxable in India being ‘Resident’ u/s 6(3), they did not admit to be in jurisdiction of India and hence no valid return was filed by them); ITAT opines that “when addition was already made in the hands of the overseas companies on substantive basis treating them as residents in India, there is no justification for the Assessing Officer to make such an addition in the hands of a share holder on protective basis, when no benefit was derived by her from these companies to protect the interest of revenue”; Further, noting that based on the assessment of assessee’s husband, Revenue made addition of similar amount in case of assessee, ITAT opines that “the Assessing Officer did not assess the income of the assessee based on the details filed in her return u/s 153A, but assessed the income of the overseas companies in her hands without any basis”; Observing that CIT(A) had deleted entire protective addition in assessee’s husband’s case, ITAT states that the same would apply mutatis mutandis to assessee’s case and thus deletes the addition as ‘unwarranted and unjustified’:ITAT 


Notification Nos. 59–63/2017 –Central Tax, all dated 15-11-2017 have been issued for this purpose.

Month/ Quarter
Revised due date
Additional comments
For the quarter July to September 2017
To be filed by Composition supplier.
For the month July, August, September & October 2017
To be filed by a non-resident taxable person.
For the month July, August, September & October 2017
To be filed by person supplying online information and database access or retrieval services from a place outside India to a non-taxable online recipient.
For the month July
To be filed by Input Service Distributor (ISD).
For the quarter July to September 2017
In respect of goods dispatched to a job worker or received from a job worker or sent from one job worker to another.

ITAT : Delivers mixed bag for Analjit Singh on Rs. 1000+ cr capital-gains addition vis-à-vis Vodafone call/put options

Delhi ITAT confirms substantial portion of capital gain addition on sale of shares of Scorpio Beverages Pvt. Ltd. (‘SBPL’, a company owned by assessee) by Analjit Singh (‘assessee’) to CGP Investment Ltd. (‘CGP’, a Mauritius based Vodafone affiliate) during AY 2014-15, holds that the sale value of SBPL as shown by assessee was not in    

Update on Foreign Trade Policy 2015-20

This is to update you that the Central Government has notified the revised Foreign Trade Policy 2015-2020 which shall come into force w.e.f. 05th December 2017.  
Following are the key highlights on the amendments in the policy for your information.

·           Rates of incentive under Merchandise Exports from India Scheme (‘MEIS’) and Service Exports from India Scheme (‘SEIS) have been increased for few notified goods and services respectively.  We are unable to attach the files due to size. The same can be downloaded from the link: (Public notice 44/2017-MEIS, 45/2017-SEIS). 

·           The validity period of the duty credit scrips has been increased from 18 months to 24 months.

·           Some of the facilities / benefits extended to exporters holding Authorised Economic Operator (‘AEO’) certificate vide customs circulars has been formalised under the policy. Few of such benefits are as follows:
o   Facility of deferred payment of customs duties.
o   24/7 clearances on request at all sea ports and airports without Merchant Over-Time (MOT) charges. 
o   In addition to the above benefits, such exporter can import duty free goods under a self-declaration and self-ratification instead of getting a ratification of the Norms Committee for inputs to be used in the manufacture of export products.

·         Restriction on import of second hand goods under EPCG scheme has been removed.

SC : Reverses HC; Mandates 'SSI eligibility condition’ compliance for entire tax-holiday period

SC reverses Karnataka HC ruling and rules in favour of Revenue, denies Sec. 80-IB benefit as assessee ceased to be a small scale industrial undertaking (‘SSI’) in relevant AY, being 9th year of the tax holiday period (owing to plant and machinery value exceeding Rs. 1 crore); Considering the legislative object of encouraging industrial expansion, HC had allowed Sec. 80-IB  benefit and had held that the fulfillment of SSI condition in the initial year was sufficient; Rejecting HC’s view, SC holds that incentive meant for small scale industrial undertakings cannot be availed by industrial undertakings which do not continue as SSIs during the relevant period; SC remarks that “It does not, in any manner, mean that the object of permitting industrial expansion is defeated, if benefit is not allowed to other undertakings.”; SC cites concept of vertical equity, opines that “Higher slabs of tax or higher tax burden on an assessee having higher income or higher capacity cannot in any manner, be considered unreasonable.”; Referring to Sec. 80-IB scheme, SC holds that “The scheme of the statute does not in any manner indicate that the incentive provided has to continue for 10 consecutive years irrespective of continuation of eligibility conditions.”; Rules that if an industrial undertaking does not remain small scale undertaking, it cannot claim the incentive, even if in initial year eligibility was satisfied; Distinguishes assessee’s reliance on co-ordinate bench ruling in Bajaj Tempo Ltd. to contend that incentive provisions should be construed liberally, remarks that “Construing liberally does not mean ignoring conditions for exemption.”:SC 

Monday, 4 December 2017

GSTN lists services available on GST portal as on November 30

GSTN lists down the services that have been made available to taxpayers on GST portal as on November 30; On registration front, services include inter alia – (i) application for new registration for normal taxpayer, new ISD registration, enrolment for GSTP, option for Composition Scheme, registration of casual dealer, amendment of registration for non-core fields, Form GST REG-09 (registration by non-resident taxable person), and new registration for TDS, (ii) appeal to revoke rejection of registration application, (iii) GST REG-29 – cancellation of registration of migrated taxpayers, (iii) Form GST CMP-03 – intimation of details of stock; GST portal allows online payments through internet banking & NEFT / RTGS, offline payments i.e. over the counter for amount upto Rs. 10,000/-, creation and maintenance of Electronic Cash Ledger, and Form GST PMT-07 (grievance for payment); As regards refunds, services include – (i) creation & saving of Outward Supplies Returns in Form GSTR-1, (ii) viewing of invoices uploaded by Supplier in GSTR-2A by buyer, (iii) offline utility for GSTR-1, (iv) creation, saving and filing of return Form GSTR-3B, (v) filing of Returns Forms GSTR-1 & 2, and (vi) offline utilities / tools for GSTR-2, GSTR-3B, ITC-04 & GSTR-4; Forms TRAN-1 (transitional ITC / Stock statement) & TRAN-3 (credit distribution) alongwith Table 6A of GSTR-1 for refund, RFD-01 (refund of ITC attributed to export of goods & refund of excess balance in Electronic Cash Ledger) are also available on GST portal : GSTN Tweet 

ITAT : Third party reimbursements routed through parent not taxable absent rendering of services

Kolkata ITAT rules that payment received by assessee (a US company engaged in manufacturing and sale of bearings) from its Indian subsidiary (‘TIL’) towards reimbursement of expenses for the services provided by third parties, not taxable during AYs 2002-03 to 2007-08, as assessee was not the ultimate beneficiary of the sum in question nor did it render any service to TIL; ITAT notes that expenses claimed as reimbursement included legal expenses, training, inspection & survey expenses, airfare, local conveyance, etc., further notes that the actuals billed by the third parties were paid by the assessee in USA and were later on reimbursed by TIL to assessee; ITAT remarks that “there is no basis for the AO to conclude that the payment of reimbursements were in the nature of FTS”, furthermore ITAT notes that the assessee made no profit on such reimbursements; Separately, ITAT holds that payment received by assessee for rendering intra group services to TIL was not taxable, notes that pursuant to agreement with TIL, assessee agreed to render various services (like management services, information resources, communication services, engineering services, Metallurgical services, tool design services, planning and inventory management services, quality assurance services, etc.) on cost basis to TIL, which were purely advisory in nature; Further observes that nothing was made available to TIL, cites MOU to India USA DTAA to hold that consideration for advisory services cannot be treated as fees for included services (‘FIS’) under Article 12(4)(b), moreover, absent PE in India, ITAT holds that income cannot be taxed under Article 7 as ‘business profits’ either:ITAT 

Saturday, 2 December 2017

NRI having property in India

Many non-resident Indians invest in Indian real estate market every year. While some buy for their family or those who plan to come back to the country, there are many that buy property for investment purposes. Of those investing, the purpose is to earn consistent rental income.
If you are an NRI who has purchased property in India for rental income, you should know about these five aspects:

Monday, 27 November 2017

When ITO has no raised not query during original assessment, which can substantiate that he has formed any opinion on impugned issue, then reopening in such case is not case of 'change of opinion': ITAT

THE ISSUE BEFORE THE TRIBUNAL IS - Whether when Assessee has failed to point out any query raised by AO in original assessment proceedings which can substantiate that AO has formed an opinion on impugned issue, such a case cannot be viewed as 'change of opinion'. YES is the answer.  

Substantial improvement brought in existing business, by incurring renovation expenditure of more than 50% of existing book value of machinery, is enough for claiming benefit u/s 80IA: Kerela HC

THE ISSUE BEFORE THE COURT IS - Whether laying down a new network of transmission lines u/s 80IA(4) clause (b) and simultaneously renovating them u/s 80IA(4) clause (c), exposes a temporal impossibility and and cannot be satisfied by an undertaking cumulatively, for purposes of claiming benefit of such provision. NO is the verdict.  

CBDT Circular prescribing monetary limits for Revenue to file appeals to higher courts will have retro application to even pending cases: SC

THE issue before the Bench is - Whether CBDT Circular prescribing monetary limits for Revenue to file appeals to higher courts will have retro application to even pending cases. And the SC verdict is YES.

SC : Uncertainty looms as Justice Kaul holds CBDT's appeal filing circular 'retrospective'

SC division bench of Justice Sanjay Kishan Kaul & Justice Rohinton Nariman departs from recent co-ordinate bench ruling in Gemini Distilleries,  dismisses Revenue's appeal to hold that CBDT Instruction 3/2011 (laying down monetary appeal filing limits for Revenue’s appeals) is retrospective;  SC rules that the circular would apply even to pending matters but subject to the two caveats as provided in the  three judge ruling of the apex court in Surya Herbal Ltd., namely  (i) Circular should not be applied by High Courts ipso facto when the matter had a cascading effect and (ii) where common principles may be involved in subsequent group of matters or a large number of matters; SC observes that this larger bench ruling “actually should have laid the controversy to rest.”, but notes that the Surya Herbal ruling was not brought to the notice of the co-ordinate bench in Suman Dhameja case (wherein it was held that CBDT's 2011 instruction is not retrospective in nature) and the recent Gemini Distilleries case (which merely followed Suman Dhameja case); Further, taking note of divergent views by various high courts on this issue, SC approves Karnataka HC ruling in Ranka & Ranka  wherein it was held that to bring the circular/instruction in harmony with the National Litigation Policy, it would be appropriate to hold that the such circular/instruction also applies to the pending cases as otherwise an anomalous situation would arise; SC also acknowledges that to bring down the pendency of cases and get meaningful issues decided from the judicial forums, CBDT (from time to time) has come out with administrative circulars/notifications for the Department not to litigate where the revenue impact is low; SC relies on co-ordinate bench ruling in Suchitra Components Ltd. and Mysore Electricals Industries Ltd. to hold that  a beneficial circular has to be applied retrospectively:SC 

Customs circular on applicability of IGST/ GST on goods transferred / sold while being deposited in a warehouse

This is to update you on the circular issued by CBEC Circular No. 46/2017-Customs dated 24th November 2017 (‘Circular), which is with regards to the applicability of IGST/ GST on goods transferred / sold while being deposited in in customs bonded warehouse.   

HC : Interest on VAT refund computable from 'processing' of return, not 'filing' date

HC holds that interest u/s 42 of Delhi VAT Act on refund of VAT amount accrues after period specified for processing refunds/returns u/s 38(3)(a) and not from date of filing return; Observes that sub-clauses (i) and (ii) of Section 38(3)(a) mandate refund within 1 or 2 months depending upon tax period (i.e. monthly or quarterly) and Section 42(1) prescribes simple interest payable on such refund at a rate notified by Government; Harmonious reading of Sections 38 and 42 clearly indicates that interest is to be paid from the date when same is due to be paid to assessee or date when excess amount was paid, whichever is later, and date 'when refund is due' would be the date mentioned in Section 38 (i.e. when refund becomes payable); Remarks, since both Sections 38(3) and 42(1) do not refer to the date of filing of return, same obviously cannot be the starting point for interest payment, and “Obligation of the assessee to pay tax and date when tax is payable, and the duty and date on which refund is payable by the Revenue need not coincide and could be different as per the statute”; Further, elucidates that, said interpretation is not in conflict with Section 11 which deals with computation formula to calculate tax payable and empowers dealer to seek adjustment or refund in case of a negative net tax  : Delhi HC

Sunday, 26 November 2017

CBDT highlights 7 red flags to identify post-demonetisation cash deposit cover-ups

CBDT's internal note to the Senior Revenue officers highlights taxpayers trying to build an explanation for cash deposits in their bank accounts post demonetisation by manipulating books-of-accounts and by filing revised/belated income­ tax returns;  CBDT states that based upon risk-assessment criteria, many of such cases have been selected for scrutiny and lists down seven instances which might indicate that assessee had filed revised or belated return merely as a cover-up to explain the cash deposits in bank accounts; CBDT lists down strategies for the assessing officers to be kept in consideration during verification and framing of assessments; CBDT also adds that "manipulations made fictitiously merely to build an explanation for cash deposits in bank account(s), the revised return itself becomes questionable and therefore, the transactions disclosed in it which are over and above the original return are liable to be taxed under anti-abuse provisions of the Act" : Sources