Legal update

• Supreme Court: RBI's circular banning cryptocurrency set aside on the grounds of proportionality under Article 19(1)(g) of the Constitution of India
• Impact of force majeure on commercial contracts in light of the coronavirus outbreak
• Delhi High Court lays down law on classification of disputes
• NCLAT: Proceedings filed in DRT will not extend the period of limitation under the IBC, 2016

Scheme of Financial Assistance to Industries registered with EPFO

The Employees’ Provident Fund Organization, India has launched a Scheme of Financial Assistance to Industries where employers will be allowed to take loan from EPFO against the Provident Fund Corpus of their Employees for disbursement of Salary to their Employees. It is to be repaid with Interest @ 10.5% before 31st March 2022. The Conditions attached for availing this Scheme are as follows-

1. The Employers and the Employees will continue to deposit their monthly PF contribution as per standard practice without any change.
2. Employers who are willing to avail this facility have to ask their employees to surrender the benefits if any availed under the previous Scheme Notification GSR.225E announced on 27th March 2020.
3. Any Employer who avail this facility, is not allowed to terminate the services of any of his employee upto 30th Sep 2020.
4. The maximum amount of Loan available to an Employer can go upto 50 % of the total amount available in the PF accounts of all the Employees with EPFO, whose names appear on the payroll of the applicant as on 31 March 2020.
5. The total amount of loan cannot exceed 6 months’ Salary of Employees OR 50 % of the total amount available in the PF Accounts of the Employees on the payroll of the applicant, whichever out of the two is lower.
6. Repayment will start after the interest free period is over. After nearly 5 months of Interest Free Period, interest @ 10.5 % p.a. will be charged which will be borne by the Employers and not by the Employees. Prepayment is permitted without any condition

CBDT defers reporting of GAAR and GST particulars in the tax audit report till 31 March 2021

Background:

Income-tax laws ^[1] (ITL) require specified persons ^[2] to furnish tax audit report (TAR) in Form 3CD. Central Board of Direct Taxes ^[3] (CBDT) last amended TAR vide Notification No. 33/2018 dated 20 July 2018 to enhance the reporting requirements in TAR to be furnished on or after 20 August 2018^[4]. Amongst others, it introduced following two additional reporting requirements in TAR: 

1.     Clause 30C of TAR: General Anti Avoidance Rule (GAAR) – TAR requires to report whether a taxpayer has entered into an impermissible avoidance arrangement and if yes, it further requires to report the nature of such impermissible avoidance arrangement and the amount of tax benefit in the tax year arising, in aggregate, to all the parties to the arrangement.

2.      Clause 44 of TAR: Details relating to Goods and Service Tax (GST) –TAR requires reporting of details of GST viz. break-up of total expenditure with GST registered and non-registered entities and for the former, it further requires the break-up of expenditure relating to exempt supply covered under the composition scheme and other registered entities. 

Stakeholders perceived the above reporting requirements to be highly subjective and/or onerous. Hence, various representations were made to CBDT for deferring GAAR and GST reporting obligations. In response to such representations, CBDT initially deferred the aforesaid reporting obligations till 31 March 2019 vide Circular No. 6/2018 dated 17 August 2018 ^[5] and further till 31 March 2020 vide Circular No. 9/2019 dated 14 May 2019 ^[6].  

CBDT order dated 24 April 2020

In wake of various representations made before CBDT for difficulty in reporting compliances in relation to aforesaid clauses in view of the global pandemic due to COVID-19, CBDT has deferred the reporting obligation in respect of GAAR (i.e., Clause 30C of TAR) and GST law (i.e., Clause 44 of TAR) till 31 March 2021. 

Thus, TAR issued till 31 March 2021 for any tax year (including tax year 2019-20) need not contain GAAR and GST particulars, reducing compliance burden on taxpayers and tax auditors. 

MCA UPDATE PERIOD/DAYS OF EXTENSION FOR NAMES RESERVED AND RESUBMISSION OF FORMS

    PERIOD/DAYS OF EXTENSION FOR NAMES RESERVED AND RESUBMISSION OF FORMS

Sl. No	Issue description					Period/Days of Extension
1	Names reserved for 20 days for new company incorporation. SPICe+ Part B needs to be filed within 20 days of name reservation.					Names expiring any day between 15th March 2020 to 3rd May would be extended by 20 days beyond 3rd May 2020.
2	Names reserved for 60 days for change of name of company. INC-24 needs to be filed within 60 days of name reservation.					Names expiring any day between 15th March 2020 to 3rd May would be extended by 20 days beyond 3rd May 2020.
3	Extension companies.	of	RSUB	validity	for	SRNs where last date of Resubmission (RSUB) falls between 15th March 2020 to 3rd May 2020, additional 15 days beyond 3rd May 2020 would be allowed. However, for SRNs already marked under NTBR, extension would be provided on case to case basis. Note: Forms will not get marked to (Not to be taken on Record)’NTBR’ due to non- resubmission during this extended period as detailed above.
4	Names reserved for 90 days for new LLP incorporation/change of name. FiLLiP/Form 5 needs to be filed within 90 days of name reservation.					Names expiring any day between 15th March 2020 to 3rd May would be extended by 20 days beyond 3rd May 2020.
5	RSUB validity extension for LLPs.					SRNs where last date of resubmission (RSUB) falls between 15th March 2020 to 3rd May 2020, additional 15 days would be allowed from 3rd May 2020 for resubmission. However, for SRNs already marked under NTBR, extension would be provided on case to case basis. Note: Forms will not get marked to (Not to be taken on Record)’NTBR’ due to non- resubmission during this extended period as detailed above.

Delhi HC’s Recent Decision on Taxation of NR's Services to Oil Industry - A Critique

The taxation in India of income derived by non-resident vendors from providing services to oil and gas companies engaged in prospecting, extraction or production of mineral oils has always been contentious. The resolution of aforesaid conflict involves examination of not one, but multiple provisions of the Income Tax Act, 1961 (‘the Act’), i.e., section 9(1)(vi) relating to taxation of ‘royalty’, section 9(1)(vii) relating to taxation of ‘fee for technical services’ (‘FTS’), section 115A[3] prescribing preferential rate of tax on ‘royalty/FTS’ earned by non-resident assessee not having a Permanent Establishment (‘PE’) in India, section 44DA[4] prescribing preferential rate of tax on ‘royalty/FTS’ earned by non-resident assessee having a PE in India, and section 44BB[5], a presumptive scheme taxing gross receipts of such non-residents @ 10%.

Competition & COVID-19-CCI issues advisory for businesses during COVID-19

The fair trade regulator, the Competition Commission of India (“CCI”), has joined other peers across the Globe and has issued a brief advisory on 19 April 2020 for guidance of businessmen across sectors on whether limited coordination can be allowed to bridge demand and supply gap during the nationwide lockdown due to COVID 19 pandemic and if so to what extent.

GST on Corporate Guarantees.

Corporate Guarantees are quite generic transaction among companies wherein holding or parent

companies issue corporate guarantee to various Banks or other Financial Institutions as a collateral security for the credit facilities availed by its subsidiaries. Also, corporate guarantee, is unsecured, which means it is not secured by or tied to any specific asset of the surety and these are issued without any fees or consideration.

Raj HC strikes down demand notices, upholds binding nature of Resolution Plan

An issue plaguing successful resolution applicants under the Insolvency and Bankruptcy Code, 2016 (“IBC”) is with respect to government claims pertaining to the period prior to approval of the Resolution Plan. Government claims, such as those raised by the Income Tax Department, Central and State GST Department, extinguished by resolution plans continue to be pursued by such departments by way of issuance of demand notices under respective statutes.

IBC- It’s a Binding Code - Tax Perspective

Insolvency and Bankruptcy Code, 2016 (IBC) is one of the showcase legislations of the Government to consolidate and amend laws relating to reorganisation and insolvency resolution of distressed corporates in a time bound manner for maximisation of value of assets and balancing the interests of all stakeholders, including alteration in the order of priority of payment of Government dues¹. The scheme of the Code marked a paradigm change from the previous regime.

A substantial issue/ question that lurks in the minds of the corporate debtor(s) and the acquiring resolution applicant(s) is the fate of statutory liabilities including income tax liabilities of the corporate debtor, relating to period prior to resolution.

Recent Circular on Challenges (GST)

(Circular No. 137/07/2020-GST dated April 13, 2020)

ISSUES	CLARIFICATION
1. Advance under service contract which subsequently got cancelled
Supplier issued Invoice	• Supplier to issue a credit note under Section 34 and adjust tax liability where invoice was issued before supply of service. • If there is no output liability, apply for refund as excess payment of tax. TBM Comments: This is a benevolent circular since neither does Section 34 explicitly provide for adjustment nor does Section 54(8) provides for refund in such cases. • This is similar to an earlier clarification for credit note vide F. No. 354/32/2019-TRU.
Supplier issued Receipt Voucher	Supplier to issue refund voucher and apply for refund as excess payment of tax.
2. Sales Return after issuance of invoice
	• Supplier to issue credit note under Section 34 and adjust tax liability where goods supplied are returned by recipient. • If there is no output liability, apply for refund as excess payment of tax.
3. Clarification on Notification No. 35/2020-CT issued under Section 168A extending the compliance of various provisions under GST Laws till June 30, 2020
LUT for FY 2020-21	• Time-limit for filing LUT extended till June 30, 2020. • Supplies can be made without payment of tax under LUT, provided that GST RFD-11 of FY 2020-21 is filed by June 30, 2020 • Taxpayers may quote the reference number of LUT for the FY 2019-20
Deposit of TDS	• GSTR-7 along with deposit of TDS falling during the period March 20, 2020 to June 29, 2020 has been extended till June 30, 2020. • No interest under Section 50 shall be leviable if tax deducted is deposited by June 30, 2020. TBM Comments A similar position may be taken for deposit of TCS under Section 52. • Will the interest be applicable from the initial due date or from July 1, 2020 remains to be clarified.
Refund Timelines	Due date for filing an application for refund falling during the period March 20, 2020 to June 29, 2020 has been extended till June 30, 2020.

Eye on lockdown driven tax reliefs and various compliances under the Income Tax Act, 1961

Eye on lockdown driven tax reliefs and various compliances under the Income Tax Act, 1961 (as amended by the Finance Act, 2020) knocking at our doorstep

GST on Salaries paid to directors.

The Rajasthan AAR ruling in case Clay Kraft India  sets another example where AAR had provided more confusion to the taxpayer.  In the ruling, the AAR considered only Notification No.13 /2017- Central Tax (Rate) dated 28.06.2017, where it was held that services supplied by director of the company is liable for GST under reverse mechanism.

A Primer to “Green Channel”– automatic approval route for certain combinations

While all other regulatory functions of the fair trade regulator, the Competition Commission of India (CCI) remain suspended during the ongoing national lockdown due to COVID 19 pandemic , the “green channel”route is still available to the corporates . We provide a brief introduction on the origin and what constitutes the “green channel” and what further clarfications have been provided by CCI recently vide its latest Notifiction dated 27th March 2020 , as a ready reference , to facilitate self assessment by parties.

Overview And Theoretical Explanation Of Section 94B Of The Income Tax Act

For any business organization, having the right mix of financing in debt and equity is of extreme importance. Certain entities tend to become highly leveraged by having a thin capital structure, i.e., more debt over equity.

Introduction of section 115BBE and amendments

1. Section 115BBE of the Income-tax Act, 1961 (the “Act”) contains special provisions for taxation of cash credits, unexplained money, investments etc. It was introducedw.e.f. Financial Year 2012-13 onwards. Prior to introduction of this section, such incomes were subject to tax as per the tax rate applicable to the assessee and in case of individuals, HUF, etc., no tax was levied up to the basic exemption limit.

CBDT provides explanation to certain terms with regard to Foreign Institutional Investor

The Central Board of Direct Taxes (CBDT) vide a notification dated 13th March 2020 has given explanations to, circular IMD/HO/FPIC/CIR/P/2017/003 dated 04th January, 2017  hereby a nonresident being an Eligible Foreign Investor which operates in accordance with the SEBI deemed as Foreign Institutional Investor (FII). Some examples of FII are-sovereign wealth fund, pension fund, foreign mutual fund, insurance firm or representative agent of these entities who is registered to invest in a foreign country. As per this Notification, with regard to FII:

History of TCS and the recent changes.

The purpose of the present article is to revisit the history of TCS and to test the recent amendments based on the original purpose with which the provisions were introduced.

An Analysis of Finance Act, 2020 vis-à-vis GST

INTRODUCTION

The Finance Act, 2020 has made several amendments to the CGST Act, 2017 and corresponding amendments to the IGST Act, 2017 and UTGST Act, 2017. We have attempted to analyse the provision wise amendment made by the Finance Act, 2020 to the CGST Act, 2017.

Analysis of deemed residency

The issue of stateless persons has been bothering the tax world for quite some time. It is entirely possible for an individual to arrange his affairs in such a fashion that he is not liable to tax in any country or jurisdiction during a year. This arrangement is typically employed by high net worth individuals (HNWI) to avoid paying taxes to any country/ jurisdiction on income they earn. Tax laws should not encourage a situation where a person is not liable to tax in any country. The current rules governing tax residence make it possible for HNWIs and other individuals, who may be Indian citizen to not to be liable for tax anywhere in the world. Such a circumstance is certainly not desirable; particularly in the light of current development in the global tax environment where avenues for double non-taxation are being systematically closed.

Buy back of unlisted shares - It is Still tax efficent.

Buy-Back is one of the important provisions in the Companies Act, 2013, which enables a company to purchase its own shares. Amongst other host of reasons, a program of buy-back is resorted to by a company to distribute surplus cash to its shareholders or to even provide investors an opportunity to exit from their investment, especially in case of unlisted/private companies.

Government of India directs to provide immediate refunds due under the Income-tax law for cases where refund is up to INR0.5 million

The Government of India (GOI) is proactively taking various steps to ease the tax compliance burden for taxpayers during COVID-19 disruption period. So far, the GOI has taken following steps on direct tax reliefs:

1.     Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020 promulgated on 31 March 2020 to extend timelines for various compliances, reduce rate of interest and waive penalties and prosecution for delay during COVID-19 disruption period ^[1].

2.       Orders issued for interim reliefs in respect of lower withholding certificate application for tax year 2020-21, disposal of pending applications over e-mail for tax year 2019-20 and interim relief for furnishing nil withholding declarations in Form 15G/Form 15H for tax year 2020-21^[2].

As a further measure to ease liquidity constraints faced by taxpayers, the GOI has, vide Press Release dated 8 April 2020 announced that that all pending refunds under the Income-tax law amounting up to INR0.5 million shall be issued immediately. As per the Press Release, this direction will benefit approximately 1.4 million taxpayers. The GOI has also decided to issue all pending Goods and Service Tax and Custom refunds which would provide benefit to around 0.1 million business entities, including micro, small and medium sized businesses. As per the Press Release, the total refund granted might be approximately INR180 billion.

Comments

The expeditious release of tax refunds is a positive move on the part of the GOI which may ease liquidity constraints faced by taxpayers due to amounts stuck in tax refunds and enable businesses to pay salaries to their employees during the current challenging period.

Reversal of service tax credit on receipt of completion certificate by a developer in GST Regime

Background

Once a booming industry, the current phase through which the real estate industry is passing through can be at least said be a slow-down phase if not exactly recession phase.

Extension of GST Dates due to Lockdown

Waiver of Interest and Late fees for GSTR-3B and GSTR-1

RETURN	TURNOVER PRECEDING FY	TAX PERIOD	RATE OF INTEREST	LATE FEES	RETURN FILING DATE	REMARK
GSTR-3B	>5 CR	Feb-20	NIL	NIL	BY 04/04/2020
			9%	NIL	FROM 05/04/2020 TO 24/06/2020	Interest applicable from 05/04/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 24/06/2020	Interest and late fees applicable from 20/03/2020
GSTR-3B	>5 CR	Mar-20	NIL	NIL	05/05/2020
			9%	NIL	FROM 05/05/2020 TO 24/06/2020	Interest applicable from 05/05/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 24/06/2020	Interest  and late fees applicable from 20/04/2020
GSTR-3B	>5 CR	Apr-20	NIL	NIL	BY 04/06/2020
			9%	NIL	FROM 04/06/2020 TO 24/06/2020	Interest applicable from 04/06/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 24/06/2020	Interest and late fees applicable from 20/05/2020
GSTR-3B	> 1.5 CR TO <=5 CR	Feb-20	NIL	NIL	BY 29/06/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 29/06/2020	Interest  and late fees applicable from 20/03/2020
GSTR-3B	> 1.5 CR TO <=5 CR	Mar-20	NIL	NIL	BY 29/06/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 29/06/2020	Interest  and late fees applicable from 20/04/2020
GSTR-3B	> 1.5 CR TO <=5 CR	Apr-20	NIL	NIL	BY 30/06/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 30/06/2020	Interest and late fees applicable from 20/05/2020
GSTR-3B	<=1.5 CR	Feb-20	NIL	NIL	BY 30/06/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 30/06/2020	Interest  and late fees applicable from 30/06/2020
GSTR-3B	<=1.5 CR	Mar-20	NIL	NIL	BY 03/07/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 03/07/2020	Interest  and late fees applicable from 03/07/2020
GSTR-3B	<=1.5 CR	Apr-20	NIL	NIL	BY 06/07/2020
			18%	Rs. 20 / 50 (CGST+SGST)	AFTER 06/07/2020	Interest and late fees applicable from 06/07/2020
GSTR-1	NA	Mar-20	NA	NIL	BY 30/06/2020
				Rs. 20 / 50 (CGST+SGST)	AFTER 30/06/2020	Late fees applicable from 30/06/2020
GSTR-1	NA	Apr-20	NA	NIL	BY 30/06/2020
				Rs. 20 / 50 (CGST+SGST)	AFTER 30/06/2020	Late fees applicable from 30/06/2020
GSTR-1	NA	May-20	NA	NIL	BY 30/06/2020
				Rs. 20 / 50 (CGST+SGST)	AFTER 30/06/2020	Late fees applicable from 30/06/2020