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 24^th 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

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  

HC : No interest on delayed payment of Oil Cess absent substantive statutory provision

HC rules out leviability of interest on delayed payment of Cess on Crude Oil, absent substantive provision obliging assessee to do so under Oil Industry (Development) Act 1974; Rejects Revenue’s stand that interest was applicable in terms of Section 15(4) of said Act, which adopts the provisions of Central Excise Act and rules thereunder in relation to levy and collection of excise duties; Confirming CESTAT’s view, HC refers to SC ruling in India Carbon Ltd wherein it was held that interest on tax due could be charged only when the taxing statute made a substantive provision to pay interest for delayed payment of tax and not otherwise  : Gauhati HC

Income Tax Appellate Tribunal reaffirms availability of tax credit of State taxes paid in USA

An individual, qualifying as ordinary tax resident in India under the Income-tax Act, 1961 (the Act), is eligible to claim credit in India on taxes paid in foreign country with respect to doubly taxed income. As per India-USA Double Taxation Avoidance Agreement (India-US tax treaty), federal income taxes paid are allowed as tax credits in India. In this regard, in an earlier ruling in the case of Tata Sons Ltd, the Mumbai bench of Income Tax Appellate Tribunal (the Tribunal) had held that credit of State taxes paid in USA shall also be available in India.

The Ahmedabad bench of the Tribunal in a recent ruling in the case of Dr. Rajiv Modi has reaffirmed that a taxpayer is entitled to claim credit of State taxes paid in USA against Indian Income tax liability under the provisions of the Act irrespective of the fact that the case pertained to a country which had tax treaty with India

SC : Dismisses Revenue's appeal; Advance excise duty deposit in PLA deductible u/s. 43B

SC dismisses Revenue’s appeal and upholds Delhi & Calcutta HC rulings, rules that assessee is entitled to claim deduction u/s. 43B in respect of the excise duty paid in advance in the Personal Ledger Account (‘PLA’) for AYs 1993-1994, 1996-1997, 1997-1998 and 1998-1999;  Rejects Revenue’s stand that since actual payment of excise duty is at the stage of removal of goods, amount of advance deposit in PLA does not represent actual payment of duty so as to entitle for Sec. 43B deduction; SC refers to Central Excise rules, notes that the deposit of Central Excise Duty in the PLA is a statutory requirement,  further notes that upon deposit in the PLA, the amount stands credited to the Revenue with assessee having no domain over the amount(s) deposited;  Having regard to the object behind the enactment of Section 43B, SC rules that “it would be consistent to hold that the legislative intent would be achieved by giving benefit of deduction to an assessee upon advance deposit of central excise duty notwithstanding the fact that adjustments from such deposit are made on subsequent clearances/removal effected from time to time.”; Concludes that the advance deposit of central excise duty constitutes actual payment of duty within the meaning of Sec 43B and, therefore, the assessee is entitled to the benefit of deduction; Moreover, SC takes note of consistent practice followed by assessee (of claiming deduction u/s. 43B in respect of balance in PLA at the end of accounting year and reversing it in succeeding year) which was accepted by Revenue in earlier years, further takes note of Delhi HC and P&H HC rulings in Maruti Suzuki India Ltd., Happy Forgings Ltd. and Raj and San Deeps Ltd. rendered in favour of assessee, which attained finality and no contrary view of any other HC was brought on record; However, SC clarifies that “The Revenue cannot be shut out from the present proceedings merely because of its acceptance of the practice of accounting adopted by the assessee or its acceptance of the decision of the two High Courts in question.”:SC 

SC stays Bhushan Steel judgment on capital vs. revenue nature of sales tax subsidy

SC stays operation of Delhi HC judgment in Bhushan Steels and Strips Ltd on taxation of sales tax subsidy as revenue receipt absent capital utilization condition, issues notices for hearing of assessee's SLP; HC had held that amount received by assessee (running a manufacturing unit in a specified backward area) for AY 1995-96 by way of exemption of sales tax payments under the UP state subsidy scheme was a taxable trading receipt; HC had rejected assessee’s stand that since the quantitative limit of subsidy was linked to capital expenditure, the subsidy was capital in nature as it meant replenishing the capital expenditure; HC had clarified that the quantitative limit indicated therein was only a reference point, further HC had observed that assessee had the flexibility of using the amounts retained for any purpose, not necessarily capital

Three Imp Verdicts On Core Issues

CIT vs. Modipon Limited (Supreme Court)

S. 43B: Advance deposit of central excise duty in the Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of s. 43B and the assessee is entitled to the benefit of deduction of the said amount
The purpose of introduction of Section 43B of the Central Excise Act was to plug a loophole in the statute which permitted deductions on an accrual basis without the requisite obligation to deposit the tax with the State. Resultantly, on the basis of mere book entries an assessee was entitled to claim deduction without actually paying the tax to the State. Having regard to the object behind the enactment of Section 43B and the preceding discussions, it would be consistent to hold that the legislative intent would be achieved by giving benefit of deduction to an assessee upon advance deposit of central excise duty notwithstanding the fact that adjustments from such deposit are made on subsequent 14 clearances/removal effected from time to time

Paradigm Geophysical Pty Ltd vs. DCIT (Delhi High Court)

S. 264 Revision: Powers and duties of the CIT while dealing with a revision application filed by an assessee explained
Commissioner cannot refuse to entertain a revision petition filed by the assessee under Section 264 of the Act if it is maintainable on the ground that a similar issue has arisen for consideration in another year and is pending adjudication in appeal or another forum. Negative stipulations are clearly not attracted. When a statutory right is conferred on an assessee, the same imposes an obligation on the authority. New and extraneous conditions, not mandated and stipulated, expressly or by implication, cannot be imposed to deny recourse to a remedy and right of the assessee to have his claim examined on merits

M/s Sainath Enterprises vs. ACIT (ITAT Mumbai) (Third Member)

Withdrawal of appeal: The Petitioner/ Plaintiff is the ‘dominus litis’ and it is open to him to pursue or abandon his case. Withdrawal cannot be denied except when the person making the prayer has obtained some advantage/ benefit which he seeks to retain

Withdrawal of appeal: The Petitioner/ Plaintiff is the ‘dominus litis’ and it is open to him to pursue or abandon his case. Withdrawal cannot be denied except when the person making the prayer has obtained some advantage/ benefit which he seeks to retain

Transfer / sale of warehoused goods exigible to IGST; Customs duty payable at ex-bonding

CBEC clarifies that transfer / sale of warehoused goods by importer to any other person falls within definition of “supply” as per Section 7 of CGST Act, taxable in terms of Section 9 of CGST Act r/w Section 20 of IGST Act; Since any supply of imported goods which takes place before they cross customs frontier of India shall be treated as an ‘inter-state’ supply u/s 7(2) of IGST Act, such transaction of sale / transfer will be subject to IGST; Value of such supply shall be determined in terms of Section 15 of CGST Act r/w Section 20 of IGST Act and rules thereunder; However, so long as such goods remain deposited in warehouse the customs duty to be collected shall be deferred; It is only when such goods are ex-bonded u/s 68 of Customs Act that same shall be collected at the value as had been determined u/s 14 of Customs Act in addition to IGST leviable on transfer / sale : CBEC Circular 

HC : Judges split over non-discrimination benefit, requirement to examine PE-status for TDS u/s 195

Delhi HC judges differ on the interplay between Sec 40(a)(i) expense disallowance for Sec. 195 TDS default on payment by assessee (Mitsubishi India, ‘MI’) to group companies (based in Japan, US, Singapore, Thailand) including Mitsubishi Corporation, Japan (‘MC’)  and the application of 'non-discrimination' clause under respective DTAAs for AY 2006-07,  places the matter before Acting Chief Justice for appropriate orders; Justice Prathiba M. Singh overturns ITAT order, holds that co-ordinate bench decision in Herbalife (rendered in context of AY 2001-02) was not applicable to present case as the scheme of the Act has undergone a substantial change subsequently; Rejects assessee’s argument that the discrimination, qua payments made to residents and non-residents, continued until  April 1, 2015 when Sec. 40(a)(ia) was amended, remarks that this argument “ignores the retrospective nature of the amendment made to Sec. 195 by insertion of Explanation 2.”; Holds that SC's GE India Technology ruling is not applicable as it relates to AY prior to insertion of Explanation 2 to Sec.195, opines that "Addition of the said explanation, in the present case, changes the nature of the payment inasmuch as it takes away the need to establish existence of a PE or a business connection in India."; With respect to assessee’s stand that payments were in the nature of purchases from group companies (and TDS on goods purchases does not apply to an Indian resident) , Justice Singh opines that “even if the payment is for purchase of goods it does not exempt the payer from making deduction of tax at source”; Justice Singh clarifies that "Section 195 and Section 40 operate in different spaces - the former at the stage of payment by the payer to the payee, and the latter at the stage of assessment of the payer. Insofar as the payer is concerned, there may be interlinking of the two however, insofar as the payee is concerned.. Section 40 is not triggered qua it at this stage"; Further opines that a resident company per se cannot  invoke the discrimination provisions of the DTAA, unless raised by non-resident payees; Justice Singh clarifies that a resident company is fully bound by the provisions of the Act, and for the said purpose the existence of a PE of the payee is not essential, “What is required to be seen is as to whether the sum is chargeable under the provisions of the Act and for the said purpose even a ‘business connection’ is sufficient as per Explanation 2 to Section 9 of the Act.”; However, Justice S. Muralidhar dissents and rules in favour of assessee, approves ITAT view that Herbalife decision squarely applied to present case as the element of discrimination continued in relevant AY; Comparing two sub-clauses i.e. (i) and (ia) of Sec. 40(a), as they stood during AY 2006-07, Justice Muralidhar notes that the expression ‘or other sum chargeable under the Act’ occurring in sub-clause (i) was missing in sub-clause (ia), highlights the distinction as regards the consequence of disallowance for non-deduction of TDS on payment to non-resident for purchases, continued, which was ultimately done away with only by the amendment of sub-clause (ia) w.e.f. April 1, 2015; Extensively cites SC rulings in GE India Technology , Transmission Corporation, opines that “Explanation 2 to Section 195 (1) will not compel deduction of TDS where the payer is reasonably certain that the sum paid for purchases is not chargeable to tax.”; Justice Muralidhar further clarifies that Explanation 2 does not dispense with the fulfilment of the pre-condition that the sum in respect of which TDS is to be deducted has to be shown to be chargeable to tax.:HC 

Milling of paddy by rice millers liable to 5% GST: FinMin clarification

Ministry of Finance clarifies that custom milling of paddy by Rice millers for Civil Supplies Corporation is liable to GST and not exempted under Notification No. 12/2017 - Central Tax (Rate), dated June 28, 2017 (Sr. no. 55) and corresponding notifications issued under IGST/UTGST Acts; Explains that, milling of paddy is not an intermediate production process in relation to cultivation of plants, but a process carried out after cultivation is over and paddy harvested; Milling of paddy into rice changes its essential characteristics, further, such process is not usually carried out by cultivators but by rice millers; Accordingly, such process of milling of paddy into rice cannot be considered as intermediate production process in relation to cultivation of plants for food, fibre or agricultural produce envisaged under the Notification; Moreover, such activity shall be liable to GST at rate of 5% pursuant to reduction in rate on services by way of job work in relation to all food and food products falling under Chapter 1 to 22: Finance Ministry Circular 

SC issues notice to assessee against CESTAT order holding water supply as 'sale'

SC issues notice to assessee in appeal filed by Revenue against CESTAT's order wherein it was held that supply of water to Chattisgarh State Industrial Development Corporation (CSIDC) is a sale of water, not taxable as ‘Business Support service” (BSS) u/s 65(105)(zzzq) of Finance Act, 1994; CESTAT noted that, assessee entered into agreement to own, develop, operate and maintain water supply, for which it was paid as per agreed tariff for supply of water and such rights were granted for 20 years after project construction without involvement of any third party; Noting that CSIDC has been consumer of water for payment of taxes on water supply to concerned State Department, CESTAT stated that whole scope of agreement is for supply of water; CESTAT remarked further that, supply of water by CSIDC to various industrial units is inconsequent as far as assessee is concerned, and giving a colour of service to pure sale of water is not legally tenable; Moreover, CESTAT observed that plain reading of statutory definition of BSS indicates that same is for outsourcing service and do not deal with any sale or purchase of items without reference to third party  

ITAT : Manufacturing pan-masala with excessive carcinogenic substance "prohibited by law"; Disallows expenses u/s 37

Ahmedabad ITAT invokes Explanation 1 to Sec. 37(1), disallows cost of production of goods incurred by assessee (manufacturer of pan masala) which were found to containing magnesium carbonate, a known carcinogenic substance, in excess of permissible limits; ITAT notes that  in terms of a court order under the Prevention of Food Adulteration Act, the goods had to be destroyed, thus holds that expenditure for making this product was something "prohibited by law"; Observes that "Pan masala is a controversial product and, even when it is manufactured within the permissible legal norms, it is considered to be responsible for oral cancer and other severe ill effects on health. In the present case, the assessee has gone even further against the public interests", thus holds expenditure on manufacturing such products whether deliberately or inadvertently, cannot be allowed as deduction; Rejects assessee’s contention that no penalty, etc. was imposed on it, observes that "... as long as the expenditure is incurred for a purpose which is prohibited by law, it is immaterial whether the said act of the assessee constitutes an offence or not"; Further remarks that "What is even more disturbing is the indifferent attitude to the assessee to the possible damage their products could have caused, and, without any remorse or regret in his conduct, claim business deduction of expenses incurred ...":ITAT

CBDT: Issues draft notification u/s. 115JG (1) relating conversion of foreign banks’ Indian branch into

CBDT issues draft notification u/s. 115JG(1) specifying the conditions to be fulfilled upon conversion of Indian Branch of foreign bank into Indian subsidiary company  and also specifying modifications, exceptions, in applicability of certain provisions of the Act to such conversion;  Draft notification proposes following conditions, viz. (a) all the assets and liabilities of the Indian branch immediately before conversion become the assets and liabilities of the Indian subsidiary Company, (b) the foreign company (engaged in banking business in India through branch)  or its nominees hold the whole of the share capital of the subsidiary company and (c) the foreign company does not receive any consideration or benefit, other than by way of allotment of shares in the Indian subsidiary company;  With respect to unabsorbed depreciation, draft notification proposes that the aggregate depreciation deduction allowable to the Indian branch and the Indian subsidiary company shall not exceed the deduction calculated at the prescribed rates as if the conversion had not taken place, and such deduction to  be apportioned between the Indian branch and the Indian subsidiary company in the ratio of the number of days for which the assets were used by them; Further, it proposes that the tax credit of the Indian branch shall be deemed to be the tax credit of the Indian subsidiary company for the purpose of the previous year in which conversion was effected and the provisions of Sec. 115JAA shall apply accordingly; Invites stakeholders comments/suggestions on the draft notification by November 30th 

CBEC notifies changes in rate of various items, exempts admission to protected monuments

Pursuant to GST Council’s 23rd meeting at Guwahati, CBEC issues notification for change in rates of various goods; Also, issues notification in respect of rate of tax applicable to restaurants (including those located in hotel premises);  Notifies 5% IGST/GST rate in respect of Scientific and technical instruments, apparatus, accessories, parts, live animals computer software, CD-ROM, recorded magnetic tapes, prototypes, supplied to public funded research institution, specified Universities, research institutions, Departments and laboratories of the Government and Cancer Institute; Extends exemption to services by way of admission to a protected monument so declared under the Ancient Monuments and Archaeological Sites and Remains Act 1958; These changes shall come into force w.e.f. November 15, 2017: CBEC Notifications