HC holds export benefit cannot be denied where proceeds are received in INR through an intermediary payment gateway

 This Tax Alert summarizes a recent judgement of the Madras High Court (HC)^[1]. The issue involved was whether the transaction would be treated as export of service where the proceeds are received in Indian Rupees by the petitioner through an intermediary.

RECENT DIRECT TAX JUDGEMENT FROM DELHI HIGH COURT

 ·       Delhi HC in the case of Godaddy held that domain name registration of third parties are not royalty.  They only acting as a Registrar and offering its services to its customers for having their domain names registered.      

Tax Implications of Receiving Money under Section 56(2)(x) of the Indian Income-tax Act, 1961: Does it Attract Tax Based on Fair Market Value of Consideration?

Under the India’s domestic tax law, viz., the Income-tax Act, 1961 (“IT Act”), the subject matter is tax on ‘income’, i.e., ‘income-tax’. Even if income-tax is levied on a person distributing the income (like, dividend distribution tax in the earlier tax regime pertaining to dividend, or share buy-back tax under section 115QA of the IT Act levied on the domestic companies), the same retains its character as tax on ‘income’ (to the extent distributed).

HC holds transfer of development rights by landowner to developer under JDA is exigible to GST

 This Tax Alert summarizes a recent judgement of the Telangana High Court (HC) on whether transfer of development rights pursuant to joint development agreement (JDA) can be treated as outright sale of land and hence, outside the purview of Goods and Services Tax (GST).

Taxpayer is engaged in construction of properties and entered into JDA for development of land in exchange of undivided share of land in the developed property. It filed a writ petition before the HC challenging the levy of GST on transfer of development rights by landowners to developer.

Key observations of the HC are:

CBDT issues order giving effect to the Budget proposal of remitting petty tax demands

 This Tax Alert summarizes a recent Order  issued by the Central Board of Direct Taxes (CBDT), on remission or extinguishment of small tax demands outstanding as on 31 January 2024 under the Income Tax Act 1961 (ITA) or Wealth Tax Act, 1957 or Gift Tax Act 1958, (referred as relevant Acts).

This Order gives effect to the proposal announced by Finance Minister (FM) in her speech for Interim Budget 2024-25, withdrawing direct tax demands up to INR25000 pertaining to the period up to tax year 2009-10 and up to INR10000 for tax years 2010-11 to 2014-15.

The Order, inter-alia, provides conditions/guidelines for withdrawal of outstanding demands as under and it is proposed that the same shall be implemented by Centralized Processing Centre (CPC) preferably within two months:

HC holds service tax not leviable on recovery of expenses by Venture Capital Fund from the contributors

 This Tax Alert summarizes a recent judgement of the Karnataka High Court (HC). The issue relates to applicability of service tax on recovery of various expenses by Venture Capital Fund (VCF) from the contributors.

Recovery of Taxes within 1 month of the Order

 The GST Authorities are initiating recovery proceedings by issuing 'proceedings u/s 78' alongwith the Order and require the taxpayer to pay the entire demand within 1 month from the date of the Order.  

As per Section 78, recovery can commence only after the expiry of 3 months.  However, proviso to Sec 78 allows the officer to recover the tax dues within a period of less than 3 months if the officer considers it expedient in the interest of the revenue .... for reasons to be recorded in writing.

The reason given for initiating recovery
1. As per Audit Report, liability detected is Rs ____ but taxpayer failed to discharge the same
2. Intimation in DRC 01A issued but taxpayer failed to discharge the tax
3. SCN issued but taxpayer failed to discharge the tax
4. Order passed confirming the liability
5. Considering the time already given to the taxpayer from audit to till date, liability to be discharged by the taxpayer within 30 days of the Order

Such practices of recovery even before expiry of statutory period of 3 months should be strongly opposed.

1. Taxpayer has 3 months time to file an appeal and once the appeal is filed upon payment of pre-deposit, the recovery proceedings for the balance amount shall be deemed to be stayed [Sec 107(7)]

2. The time taken from issuance of audit report to date of order is for finalization of tax liability and not time given to taxpayer to discharge liability
  
3. Proviso to Section 78 can be used in exceptional circumstances say cases where the officer believes that the taxpayer may be a fly by night operator

4. Factors like - Number of years in business and investment made in the business should also be taken into consideration by the officer before taking any action under proviso to Sec 78  

Changes in ITR 6 applicable to companies:

 CBDT has notified Income-tax Return Form 6 for the Assessment Year 2024-25, vide Notification No. 16/2024, dated 24-01-2024 Changes made have been explained below:

1. Details of Legal Entity Identifier (LEI): The company is required to furnish the LEI details if it is seeking a refund of Rs. 50 crores or more.

2. New Schedule 115TD: Any fund or institution approved under Section 10(23C) or registered under Section 12AB is liable to pay additional income tax on the accreted income, arising on conversion into a non-charitable form.

3. CGAS: Schedule-Schedule CG has been modified to gather more information pertaining to sums deposited in the Capital Gains Accounts scheme (CGAS).

4. Disclosure of donation to political parties (Sec 80GGC): Disclosure of additional information has to be made, beyond just the amount eligible for deduction U/S 80GGC, such as contribution amount, transaction number, IFSC code, etc.

5. Disclosure for eligible start ups: New Schedule seeks details with respect to the deductions claimed by companies under Section 80-IAC such as date of incorporation, nature of business, certificate number from Inter Ministerial board of certification, first year of deduction, amount of deduction in CY.

6. Offshore banking unit or IFSC: Additional disclosures have to be made in respect of the same.

7. MSME disallowance: A new column is inserted under Part A-OI (Other Information) to disclose the sum payable to Micro or small enterprises beyond the specified time limit per the MSMED Act.

8. Online games: Schedule OS has been amended to disclose income by way of winning from online games chargeable under Section 115BBJ.

9. Due date of filing ITR: The taxpayer is required to select the applicable due date for filing the return from the provided dropdown options.

10. UDIN: Companies are now required to furnish the acknowledgement number of the audit report and the UDIN.

11. MSME registration number: The company is required to provide the registration number allotted as per the Micro, Small and Medium Enterprises Development Act, 2006.

12. Reason for tax audit under Section 44AB: New ITR-6 seeks reasons for tax audit under Section 44AB.

HC holds post-supply discount given by manufacturer is not includible in dealer’s value of supply as subsidy

 This Tax Alert summarizes a recent judgement of the Madras High Court (HC)^[1].The issue involved was whether the post-supply discount given by manufacturer is to be included as subsidy while computing value of supply in the hands of dealer.

Assessee, a dealer, was directed by the manufacturer to further supply mobile phone to the customer at a discounted price. The assessee was compensated by the manufacturer for the discount amount through credit note. Revenue passed an order demanding GST from the dealer treating such post-supply discount given by manufacturer as subsidy.

Section 15(2)(e) of the Central Goods and Services Tax Act, 2017 (CGST Act) provides for inclusion of subsidies linked to price, excluding Central Government/ State Government subsidies, in the value of supply.

The key observations of HC are:

RBI Monetary Policy - 8th Feb'2024

 

Key Highlights:

1. RBI kept the interest rates unchanged with the stance at ‘Withdrawal of Accommodation’.
2. The FY24 inflation forecasts were kept unchanged at 5.4%. However, the GDP forecast was revised upwards at 7.3% citing buoyant macroeconomic indicators and strong consumer demand.
3. Throwing water on the stance change expectations, Mr. Das highlighted that even though FY25 CPI forecast is 4.5%, the CPI inflation target continues to be 4.0%.

Delhi HC upholds constitutional validity of anti-profiteering provisions under GST

 This Tax Alert summarizes a recent ruling of the Delhi High Court (HC) upholding the constitutional validity of anti-profiteering provision under the Central Goods and Services Tax Act, 2017 (CGST Act).

DO YOU KNOW UNDER COMPANIES ACT.

·       Sharing video recording of minutes with director is discretion of the Chairman and Company Secretary; though such director can always inspect the same at the company's registered office

DO YOU KNOW UNDER IND AS

 

·       The definitions for asset and liability are different from the ones given under the Ind AS Conceptual Framework   

·       The evaluation of liability as "trade payable" has to be done in accordance with Ind AS 37

Reiteration on FEMA Regulations. - Capital Account Transactions

 

As you would be aware that Foreign Exchange Transactions in India, are governed by Foreign Exchange Management Act, 1999 (FEMA, 1999) and Rules & Regulations, Notifications, Circulars and Directions (FEMA Regulations) issued thereunder by Reserve Bank of India in consultation with Government of India.

HC holds interest not leviable on delayed filing of GSTR 3B

 

This tax alert summarizes a recent judgement of the Madras High Court (HC)  on applicability of interest where tax amount was deposited into Electronic Cash ledger (ECL) but return was not filed.

CBIC extends validity of various exemptions under Customs Act till 30 September 2024

 This tax alert summarizes recent Notifications issued by the Central Board of Indirect Taxes and Customs (CBIC) extending the validity of various exemptions provided under Section 25(1) of the Customs Act, 1962 (Customs Act).

Payments made to a foreign Entity

 

 

1.     Section 195 of the Income Tax Act pertains to the deduction of tax at source (TDS) on payments made to non-residents (including foreign companies) in India. It outlines the obligations of the person responsible for making the payment to deduct tax and remit it to the Indian government

 

Interim Budget 2024 Highlights.

Given the interim nature of the budget ahead of the general elections later this year, focus was on continuity of existing Government policies to a large extent, with a vision for inclusive growth and prosperity. We wish to share some of the key tax and policy highlights as announced in the Budget: