HC : Quashes challenge to preliminary recommendation for safeguard duty imposition on solar cells

HC dismisses challenge to preliminary findings of DG Safeguards recommending 70% ad valorem safeguard duty on import of Solar Cells whether or not assembled in modules or panels, pursuant to an investigation in this regard; Concurs with Revenue that Govt. has not imposed any provisional duty and therefore, there is no cause of action for filing writ petition and that there cannot be any investigation within an investigation for if such process is adopted, entire purpose of Section 8B(2) of Customs Tariff Act would be defeated; Observes, on a reading of Section 8B(1) & (2), it is clear that said provision does not contemplate taking views from any party and is based on subjective satisfaction of Central Govt., preliminary findings given by DG Safeguards will only constitute a material based on which provisional duty shall be imposed; Though DG Safeguards can be treated as a quasi-judicial authority for main adjudication, while recording provisional recommendation, it is not required to hear any party and the fact that Govt. may have to act reasonably / fairly does not mean that in every case, principles of natural justice must be followed; Noting that no prejudice would be caused to assessee inasmuch as public hearing will be held in due course before making a final determination, HC remarks, “actions instituted in courts….have portents of derailing decisions, which could have a cascading impact and inflict resultant damage, not only on the Domestic Industry in issue, but even on industries, which are vertically integrated to the Domestic Industry, as also on their employees and industrial labour, which perhaps at times courts cannot monetarily quantify”  : Madras HC

HC : Quashes Tribunal's pre-deposit condition for stay, where offshore works contract taxability debatable

HC quashes order of Sales Tax Tribunal directing pre-deposit as a condition for granting stay against recovery of tax pending statutory appeal; Notes that dispute arose with respect to taxability of pipeline replacement works contract undertaken for ONGC at offshore platforms located beyond territorial waters; Observes that Tribunal had rendered a prima facie opinion that in respect of sales effected to ONGC, in case the goods were appropriated to contract at supply base viz. port of import, then assessee was liable to tax as sale was completed within the State, while referring to SC ruling in ABB Ltd and Bombay HC decision in Raj Shipping; Stating that applicability of nexus theory to facts and circumstances in present case was a highly debatable issue, HC observes, if Tribunal was required to refer to not only the legal principles but eventually determine their applicability on the basis of terms and conditions of contract, there was no reason to impose any condition of part payment; Legal position, as was emerging from the judgments rendered in two distinct cases, viz. a sale and by applying nexus theory to it or a sale in course of execution of a works contract, needed a deeper consideration which justified an unconditional stay of recovery, states HC while directing Tribunal to decide the matter finally within specified period  : Bombay HC

CBIC : Fuel remnants from vessels imported for breaking, free from Chapter 27 policy conditions

CBIC issues clarification with respect to classification of remnant fuel & oils brought on board in old ships / vessels for purpose of breaking; Notes that bills of entries related to ship breaking are being provisionally assessed in view of dismissal of Revenue appeal by SC against CESTAT order which held inter alia that ships / vessels brought in for breaking up along with surplus fuel viz. MGO / HSD would be classifiable under CTH 89.08; While CESTAT agreed with view of DGFT that remnant fuel will have to be considered as an integral part of vessel / ship, the DGFT subsequently changed its stand vide Notification No. 07/2015-20 and reverted to earlier view that such fuel would be classified under Chapter 27; DGFT also freed these items from policy restrictions when imported, brought on board in old ships / vessels meant for breaking; In view thereof, CBIC states that import of remnant fuels as referred to in Circular No. 37/96-Cus would not be subject to any policy condition under Chapter 27 prior to May 20, 2015 and in view of special dispensation by DGFT as on the date, accordingly, pending provisional assessments will be finalized : CBIC Circular  

ITAT : Sales-tax subsidy for promoting industrialisation, a capital receipt; Applies 'purpose test'

Mumbai ITAT rules that sales tax subsidy received by Grasim Industries (‘assessee’) under UP subsidy scheme of Government for setting up industry in the notified area during AYs 1995-96 to 1998-99, is a non-taxable capital receipt; Notes that for promoting development of certain areas of the State, the U.P. Government granted exemption from payment of sales tax to new units as well as existing units which have undertaken expansion, diversification or modernization by making investment in fixed capital exceeding Rs. 50 crore;  Since the quantification of incentive was linked to production of goods, turnover of sale of goods and the maximum exemption was limited to certain percentage of fixed capital investment, Revenue had treated the subsidy as production incentive and taxed it as revenue receipt; Rejecting Revenue’s treatment, ITAT notes that the purpose of subsidy scheme is to attract people to invest and take part in industrialization of certain areas in the State and not for enhancing the production; Rules that it is the object for which the subsidy / assistance is given determines the nature of incentive / subsidy, clarifies that “The form or the mechanism through which a subsidy is given is irrelevant.”, applies ‘purpose test’ laid down by SC in Ponni Sugars case, :ITAT 

HC : Show cause notice alleging tax evasion intention mandatory, while invoking extended limitation

HC holds that show cause notice is mandatory for determining the disputed tax, interest and penalty and same cannot be collected for 5 years without alleging omission / commission of willful suppression, fraud, misrepresentation with intent to evade tax as enumerated under the proviso to Section 73(1) of Finance Act; Notes that pursuant to audit, the assessee, a cooperative bank, had provisionally paid CENVAT credit under protest along with interest and penalty; Rejects Revenue’s plea that no show cause notice is necessary when the assessee has paid tax and penalty upon ascertainment by Audit Enquiry Officer before service of notice u/s 73(1) of the Act; Referring to CBEC Instruction dated August 18, 2015 and provisions of Section 73(3), HC remarks, “extended period of limitation of five years is available only in cases where the omissions or commissions enumerated in proviso to Section 73(1) are alleged”; Relying on SC rulings, HC also quashes levy of penalty stating that show cause notice is mandatory where Section 78(1) is invoked  : Karnataka HC

Delhi HC begins final hearing on transitional credit limitation challenge; Petitioners plead 'double taxation'

Delhi HC begins final hearing on the question of constitutionality of Section 140(3)(iv) of CGST Act which limits transitional credit on goods in stock, to a period of 1 year; As per the petitioners, since credit is not allowed of stock prior to June 30, 2016, the conditions stipulated under said section r/w Rule 117(4)(a)(iv) of CGST Rules are arbitrary, unreasonable and in violation of Articles 14 and 19(1)(g) of Constitution; Advocate Tarun Gulati explains to the Court how assessees having valid documents are placed at a disadvantage vis-a-vis those who do not have invoices and still get reduced credit on account of proviso to Section 140(3); HC lists the matter for further hearing on May 1. 

Law of Penny Stock Explained.

Humans! We keep bringing new ideas and creations to simplify our lives and yet end up creating an intricate and complicated web which is anything but simple. We graduated from bartering to commerce and trading to make our lives easy and then to complicate the whole thing, we invented an abstract entity called “company” to limit our risk.   

Two Imp Verdicts On Core Issues

Pr. CIT vs. Veedhata Tower Pvt. Ltd (Bombay High Court)

S. 68 Bogus loans: The assessee is not required to explain the "source of source" prior to insertion of the proviso to s. 68. If the assessee has discharged the primary onus placed upon it u/s 68 by filing confirmation letters, the Affidavits, the full address and pan numbers of the creditors, the Revenue has to proceed against the persons whose source of funds are alleged to be not genuine   

Duty Free Shops at Delhi International Airport liable to GST, holds AAR

Delhi International Airport is liable to GST; As per the AAR, such supply may be taking place beyond the customs frontiers of India under IGST Act, but the said Shops are within territory of India under CGST Act; Observes, "…The said outlet is not outside India... but the same is within the territory of India as defined under section 2(56) of the CGST Act, 2017 and section 2(27) of the Customs Act, 1962, and hence the applicant is not taking goods out of India and hence their supply cannot be called 'export' under Section 2(5) of the IGST Act, 2017, or 'zero rated supply' under Section 2(23) and Section 16(1) of the IGST Act,2017. Accordingly, the applicant is required to pay GST at the applicable rates…" : 

ITAT : Grants Sec. 80P benefit, distinguishes Citizens Society SC-ruling; Assessee, not co-operative bank

Cochin ITAT dismisses Revenue’s appeal against CIT(A) order allowing deduction u/s 80P to assessee (primary agricultural co-operative society), distinguishes SC ruling in Citizens Co-operative Society; Notes that SC had denied deduction u/s 80P to assessee therein as its activities were in violation of the Provisions of the Mutually Aided Cooperative Societies Act, 1995 (MACSA) under which it was formed and substantial deposits were from `nominal members’ who were actually non-members as per the relevant provisions; Observes that definition of a 'member' as provided in Sec 2(1) of the Kerala Cooperative Societies Act includes ‘nominal member’, holds that “deposits from such nominal members cannot be considered or treated as from the non-members or from public as was noted by the aforementioned SC ruling’; Also Refers to SC ruling in U.P. Co-operative Cane Union which had held that the term ‘member’ u/s 80P(2) has to be construed in terms definition under State cooperative law; Relies on jurisdictional HC ruling in Chirakkal Service Co-operative Bank Limited & Ors., wherein it was held that a primary agricultural credit Society registered as such under the Kerala Co-operative Societies Act, 1969 is entitled to the benefit of deduction u/s 80P(2); Holds that AO is not competent to decide issue whether assessee is a primary co-operative society or a co-operative bank, notes that RBI has issued letter to societies similar to assessee stating that they are primary agricultural credit societies and thus, rejects AO’s contention that assessee is not entitled to deduction in view of provisions of Sec. 80P(4) (denying benefit to co-operative bank):ITAT 

HC : Rejects standard deduction for works-contract tax, where voluminous records of actual expenses available

HC quashes re-assessment proceedings which allowed 30% deduction towards labour and like charges in respect of works contract under Rule 3(2)(m) of Karnataka VAT Rules, when actual amounts were ascertainable; Observes, assessee maintained proper books of accounts but since it was practically difficult to produce them in entirety due to their copious size, Revenue was requested to examine the books at its business premises or else allow production of documents for specific expenses incurred; Hence, in view of the fact that assessee was willing to produce the books of account before Revenue, it cannot be held that the assessee did not maintain the books or was not willing to produce the same, observes HC; Remarks, “A cartload of books of accounts requires to be examined by the Prescribed Authority to ascertain the genuineness of the claim made”, and accordingly, allows deduction towards actual labour and other like charges under Rule 3(2)(l)  : Karnataka HC

Supreme Court Explains Imp Law On Double Taxation Of Income

Mahaveer Kumar Jain vs. CIT (Supreme Court)
It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted

Kerala Govt. issues guidelines to facilitate revision of pre-GST returns by June 30

Kerala Govt. issues guidelines to facilitate revision of VAT returns for years upto June 2017 before Assessing Authority on or before June 30, pursuant to amendment to Section 42 of Kerala VAT Act; Dealer must – (i) specify the grounds for revision and specifically the corrections / modifications intended to be brought about by way of such revision, (ii) file hard copy of the old return submitted previously, and (iii) after the application is allowed by the authorities, submit the hard copy of corrected return then and there; Assessing Authority shall examine whether revision sought for is to rectify / correct the defects which are clerical / technical in nature and see that same has no impact on turnover or tax effect conceded in original return; Where application is found admissible, a report thereof shall be sent to Dy. Commissioner who shall evaluate the merit of reasons mentioned therein and decide on admissibility, and where revision is again found admissible, report shall be sent to Head Quarter recommending the revision; Where Jt. Commissioner (General) finds the application admissible, Asst. Commissioner ITMC shall be duly intimated and directed to initiate revision, resultantly the dealer may be allowed to select the correction either at state head quarter / district head quarter where he is registered and such activity shall be carried out on fixed day fixed time basis : Kerala Govt. Circular 

Only one e-Way Bill in 'Bill To Ship To' supplies, clarifies Finance Ministry

CBIC issues clarification in relation to requirement of e-Way Bill for ‘Bill To Ship To’ model of supplies; States that where movement takes place from ‘B’ to ‘C’ on behalf of ‘A’, e-Way Bill can be generated either by ‘A’ or ‘B’ in terms of CGST Rules, but only one e-Way Bill is required; Where e-Way Bill is generated by ‘B’, Part A of GST Form EWB-01 will contain – (i) details of ‘A’ in “Bill To” field, (ii) details of ‘C’ in “Ship To” field, and (iii) details of Invoice raised by ‘B’ on ‘A’; Where e-Way Bill is generated in by ‘A’ - (i) “Dispatch From” field will contain details of principal or additional place of business of ‘B’, (ii) “Bill To” and “Ship To” fields will be filled with details of ‘C’, and (iii) details of Invoice raised by ‘A’ on ‘C’  shall be filled in Part A of EWB-01 : Finance Ministry Press Release 

Rejects market value substitution as sales consideration for share-sale to related party

Delhi HC reverses ITAT order for AY 1999-2000, rejects substitution of market value as full value of consideration for sale of shares by assessee (an individual) to its related entity; Notes that AO had held that assessee backdated the sale transaction to related entity (GIPL) to August 14, 1998 instead of actual date of sale of September 30, 1998 and calculated long-term capital gains considering sale consideration based on market price as on September 30, 1998 of Rs. 1,493 as against actual sale price of Rs. 450; Notes that Sec. 52 which allowed such substitution under certain circumstances was omitted from April 1, 1988 and thus was not applicable to relevant AY; Rejects ITAT’s distinction of SC ruling in K.P. Varghese case which states that difference between the consideration actually received and market value of capital asset by itself would not justify invoking Sec 52 and understatement of sales consideration must be shown, merely because transaction "was not at arm’s length”; Further, holds that Revenue could have taxed the given transaction as gift under the Gift Tax Act, 1958 which was applicable then, remarks that, “Thus, what was apparent and simple to adopt and tax the under-statement of fair market value, was strangely ignored and allowed to lapse. Addition was made, indirectly invoking Section 52, which provision was not in the Statute, and which provision as per judicial pronouncement in K. P. Vergese (supra) could not have been invoked.”:HC