January 2019- Tax Due Dates.

India

Sr No	Due Date	Related to	Compliance to be made
1	11.01.2019	GST	Filing of GSTR 1 for the month of December, 2018
2	20.01.2019	GST	Payment of GST for the month of December, 2018 Filing of GSTR 3B for the month of December, 2018
4	07.01.2019	TDS/TCS (Income Tax)	· Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of December 2018. · Deposit TDS from Salaries deducted during the month of December 2018 • Deposit TCS for collections made under section 206C including sale of scrap during the month of December 2018, if any
5	31.01.2019	TDS/TCS	Filing of TDS/TCS quarterly return for Q3 (Oct to Dec-2018).

HAPPY NEW YEAR

HC : Upholds CIT’s probe u/s. 263 into Singaporean co.’s Rs. 100 cr. contract revenue from Cairn India

Uttarakhand HC upholds invocation of CIT’s revisionary jurisdiction u/s. 263 in case of assessee (a Singaporean co. engaged in rendering offshore geophysical services), dismisses assessee’s writ; Assessee had claimed that since the duration of its contract with Cairn India (for providing seismic vessel in connection with oil exploration) was only for 102 days, the gross revenue of Rs. 100.33 cr. earned therefrom during FY 2014-15 was not taxable in India in view of Article 5(5) of India-Singapore DTAA (which provides 183 days threshold); Finds force in CIT’s view that the seismic vessel itself constituted fixed place PE under Article 5(1) of DTAA, also AO was wrong in accepting assessee’s resort to Article 5(5) and that no effort was made by AO to study relevant provision of DTAA; Further, HC states that instead of assessee giving explanation to CIT, it has filed the present writ petition before this Court, accordingly upholds the show cause notice issued u/s. 263; Noting the necessary conditions of Sec. 263 that the CIT must come to the conclusion that the order is both erroneous and prejudicial to the interest of Revenue, HC opines that there is definitely application of mind by CIT on both these aspects:HC

ITAT : No PE trigger for UAE Co. undertaking ‘grouting’ masonry work in India

Delhi ITAT rules that there is no PE of assessee (a UAE co. engaged in providing solutions for subsea off-shore construction industry) on account of the grouting activities carried out in India during AY 2007-08; Accepts assessee’s stand that the grouting activities fall within the construction activity as contemplated in specific provision of Article 5(2)(h), and since the number of days spent in India was less than the stipulated period of 9 months, there was no PE trigger for the assessee in India; Revenue had argued that Article 5(1) squarely applies to the assessee, further Revenue had argued that the assessee has equipment PE in India, lastly it was also contended that even movables place of business may constitute a PE despite they are temporary in location; Firstly, ITAT applies the maxim, “generalia specialibus non deroganf' i.e, a general provision would not be applicable when specific provision is there, next ITAT clarifies that merely because grouting is not a simple masonry work and involves complex aspects, it does not take it out of the construction activities as mentioned in Article 5(2)(h), “…and any further classification [as done by the Revenue] would amount to rewriting DTAA.”; Lastly, rejects Revenue’s stand that since the assessee indulged in on-going projects, 9 months stipulation cannot be applied, states that PE determination has to be made for each AY and with reference to DTAA provision.:ITAT

Imp Case laws on Tax Recovery

Nu-Tech Corporate Services Ltd vs. ITO (Bombay High Court)

Severe strictures issued against DCIT for illegal tax recovery. DCIT directed to pay costs of Rs. 1.50 lakh from salary to the assessee. Dept directed to make entry of lapse & error in the Annual Confidential Report of the AO. Strictures also passed against DCIT for overreaching authority & power by not allowing Dept's Counsel to argue. Such conduct of DCIT does not enhance the image and reputation of Dept

If we allow such oral routine explanation to be tendered and accepted, we do not think that the state of affairs will ever improve. The superiors in the hierarchy have never bothered as to whether the discipline demanded from these officers is indeed in place. Though there is lack of discipline and there is gross insubordination, still, the acts of omission and commission are overlooked

Etiam Emedia Limited vs. ITO (Madhya Pradesh High Court)

S. 147 Reopening to assess Bogus share capital: Law explained whether allegation that assessee is a dummy concern used to route unaccounted money by way of bogus share application money is sufficient to reopen assessment (all imp judgements referred)

The respondents have stated that there are large number of dummy/bogus/shell/briefcase/paper entities including the petitioner/company in the group, which is being managed and controlled by Shri Anand Bangur for the purposes of routing unaccounted money and the department with great difficulties and after examining huge evidence, has arrived at a conclusion to initiate the proceedings against the petitioner and it is not a case where some unilateral action has been taken against the petitioner, it is a case where petitioner will receive every opportunity to defend himself and the entire mechanism has been provided under the Income Tax Act, 1961 and the respondents have prayed for dismissal of the writ petition.

CBDT releases Explanatory Notes to provisions of the Finance Act, 2018

The Central Board of Direct Taxes (CBDT) has released the explanatory notes to the provisions of the Finance Act, 2018. These explanatory notes describe the substance of the provisions/amendments made by the Finance Act, 2018 relating to Income-tax.

read more

CBDT notifies India-Hong Kong DTAA

The Central Board of Direct Taxes (CBDT) has notified all the provisions of the agreement entered into between India and Hong Kong for he avoidance of the double taxation and the prevention of fiscal evasion with respect to taxes on Income. The agreement was signed on 19-03-2018.




https://ilt.taxmann.com/topstories/222330000000017400/cbdt-notifies-india-hong-kong-dtaa.aspx

ITAT : Disallows Law-firm’s sponsorships towards media event ; No ‘triumph’ for celebrating Achievements

Delhi ITAT upholds CIT(A)’s order disallowing a portion of the conference expenses relating to amount spent on party and dinner, media event, purchase of expensive watches, jackets, T-shirts, etc. by assessee (a Law firm) during AY 2010-11; Regarding expenses on distribution of T-shirts, caps and jackets having assessee firm’s logo on annual day celebration, ITAT remarks that“nothing is brought on record as how the distribution of the merchandise among the counsels has served the business purpose of the assessee firm, which is firm of the Advocates.”, further notes no evidence of distribution was submitted; Likewise, for dinner / video coverage expenses in relation to a party hosted to celebrate assessee-firm’s achievements in which all clients and counsels of the firm along with various dignitaries were invited, ITAT states that, “The assessee has not brought on record anything to support that the dinner hosted was for furtherance of the business interest.”; Also, ITAT disallows sponsorship fee paid by assessee for the event “PEI India Forum” for enhancing its visibility and recognition, holds the same was in violation of the Bar Council rules [whereby Indian Law firms are not allowed to advertise their practice in the market] , thereby triggering Explanation 1 to Sec. 37; With respect to the expensive watches distributed as rewards to two employees for their exceptional work, ITAT observes that assessee did not provide any rationale of watches distribution to only two such employees:ITAT 

Appellate authority upholds GST advance ruling in case of Columbia Asia - Cost of employees at head office to be cross charged to other branches

This is to update you with a recent ruling of the Karnataka Appellate Authority for Advance Ruling (‘AAAR’), in which advance ruling pronounced by Karnataka Authority for Advance Ruling (‘AAR’), in the matter of M/s Columbia Asia Hospitals Pvt. Ltd (‘Company/ Appellant’) has been upheld by the AAAR.

The AAR had held that the services of the employees at the corporate office, which benefit the other units of the Company, will be treated as a deemed supply of service in terms of entry 2 of Schedule I of the Central Goods and Service tax Act, 2017 (‘CGST Act’).   

ITAT Special Bench: Formulates guidelines for expeditious hearing of cases referred to Special Benches & Third

Ahmedabad ITAT Special Bench formulates guidelines for expeditious hearing of cases referred to Special Benches and Third Members, setting out 120 days threshold for commencing the hearing and 30 days outer limit in general for adjournments; Notes that a Special Bench was constituted in 2016 to decide on - whether or not the provisions of Sec. 92 can be invoked in a situation in which income of the assessee is eligible for tax exemption or tax holiday, or in a situation in which there cannot be any motive in manipulating the prices at which international transactions have been entered into; Further notes that despite the constitution of a special bench and the stay having been granted to assessee, the appeals have not even been listed for hearing for almost two years; Expressing anguish on the inordinate delay in the special bench case being taken up and emphasizing on priority disposal of such cases, ITAT SB now lays down guidelines; Lists the matter for February 13, 2018 and grants further stay on collection / recovery of outstanding demand of tax & interest to assessee till 180 days from the date of this order or till the disposal of these appeals- whichever is earlier.:ITAT 

Imp Verdicts

PCIT vs. The Executor of Estate of Late Smt. Manjula A. Shah (Bombay High Court)

S. 50C Capital Gains: The valuation of the stamp authority cannot be adopted for the purpose of collecting capital gain tax in the hands of the assessee if there is a long gap between the date of execution of the MOU and the execution of a formal development agreement

The assessee can be taxed only on the gain which is oozing out from the sale consideration, thus, no adverse inference can be drawn while invoking the provision of section 50C of the Act. No evidence has been produced by the Revenue at any stage that the assessee actually received the value which was adopted by the stamp valuation authority

Kerala State Co-op Agricultural And Rural Development Bank Ltd vs. ITO (Kerala High Court)

S. 220(6) Stay of demand: If the assessee has exercised on time its statutory remedy of filing an appeal and also filed a stay petition, procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition

I reckon the petitioner has exercised on time its statutory remedy of filing an appeal. It appears that it has also filed a stay petition. Procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition

HC : Debars AO from undertaking ‘full fledged’ re-assessment to work out ‘indexed cost

Bombay HC sets-aside re-assessment notice for AY 2013-14 in case of individual-assessee, upholds assessee’s computation of capital gain arising out of a sale of residential property; Notes that assessee’s original return was accepted without scrutiny, based on the  details submitted during the course of assessment proceedings for subsequent year, AO reopened assessee’s case and held that assessee had wrongly claimed benefit of indexed cost of acquisition from the date of sale agreement (1992-93) which could not be executed;  Though HC acknowledges that the AO would enjoy a greater latitude in reopening where return was accepted u/s. 143(1), HC clarifies that, “If the issue is legally concluded, there would be no point in allowing the AO to resort to full fledged reassessment since the reopening of assessment would suffer from the fundamental defect of the AO in having the material to form a reasonable belief that income chargeable to tax had escaped assessment.”; HC rejects Revenue’s  stand that the indexation benefit should be granted only from the date of HC order (2007-08) allowing execution of sale deed in favour of assessee, states that in view of SC ruling in Sanjeev Lal, the execution of sale deed by virtue of the HC judgment would relate back to the original agreement to sale; Accordingly, HC opines that, “the entire basis of the department in the reasons recorded in order to dispute the petitioner's computation of the capital gain, therefore, is rendered invalid.”  :HC 

HC : Directs CBDT to consider return-filing extension / interest waiver applications u/s 119 by assessees in Kerala

Kerala HC directs CBDT to consider applications u/s 119(2)(a)/(b) by assessees in Kerala towards claim of deductions/exemptions/refunds or waiver of interest/penalty, taking note of the flood situation that affected the State of Kerala; While CBDT had suo-motu extended the return filing due-date in the State of Kerala to October 31st taking note of floods, petitioners have argued that the mere extension by one month would not suffice; Though HC rejects assessees’ petition to issue a blanket order extending the due date u/s 139(1) till December 31, 2018 as that would be contrary to scheme of the Act, it states that “specific grievances of the assessees in individual cases can be dealt by CBDT …in terms of Sec. 119(2)(a)/(b)..”; In respect of assessees who have not been able to file a return making a claim for deductions, exemptions or refunds, HC directs them to make an application u/s. 119(2)(b) seeking extension for filing return, which shall be considered by CBDT within 2 months taking note of flood situation; Likewise, in case of assessees aggrieved by interest accrued on delayed payment of tax and who have already filed their returns either before Oct 31st or belatedly thereafter, HC directs them to make an application u/s. 119(2)(a) seeking waiver of interest / penalty which again shall be considered by CBDT within 2 months:HC 

ITAT : Reckons land-stock conversion date from building plan application date, not IOD issuance date

Mumbai ITAT accepts Revenue’s claim that the date of conversion of capital asset (plot of land) into stock-in-trade as envisaged u/s 45(2) shall be reckoned from the date when assessee-builder filed an application for building plan sanction before the Municipal Corporation (i.e. in 1994), and not when IOD was actually issued (i.e. in 1997); Assessee had decided to use portion of his land holdings for developing a housing project, rules that “what is relevant to determine the date of conversion is the intention of the assessee to commercially exploit the property which is on 02-02-1994.”; On year of taxability, ITAT upholds assessee’s stand that the capital gains shall be taxable in the year in which the project was completed and flats were ultimately sold, rejects Revenue’s stand that the LTCG shall be chargeable to tax proportionately on the basis of advance received from customers; Separately, ITAT allows assessee’s claim u/s. 80-IB(10) despite no OC issued by Municipal Corporation; Lastly, ITAT rejects assessee’s stand that interest earned on FDR was a business receipt as it had parked surplus funds generated from business in banks in order to earn interest income and reduce construction expenses, upholds AO’s action of assessing it as ‘income from other sources’.:ITAT 

HC: Explains 'substantial interest' u/s 40A(2)(b) for SDT constitution; Relies upon ICAI Guidance Note

HC allows HDFC Bank’s writ petition, quashes AO’s order and subsequent reference to TPO alleging that certain related party transactions [purchase of loans from HDFC ltd, payment for rendering services to HBL Global and interest payment to HDB Welfare Trust] were Specified Domestic Transactions (SDTs) u/s 92BA; Holds that loans purchased by assessee/ petitioner from its promoter (HDFC Ltd) does not fall within the meaning of SDT u/s 92BA(i) as HDFC Ltd does not have ‘substantial interest’ in assessee & is therefore not a ‘person’ as contemplated in Sec 40A(2)(b)(iv); Explains that 2 conditions have to be fulfilled for a person to have ‘substantial interest’ as contemplated in Explanation to Sec 40A(2)(b) – the person has to be the beneficial owner of the shares and those very shares have to carry not less than 20% of the voting power; Rejects Revenue’s clubbing of HDFC Ltd’s direct shareholding of 16.39% with indirect shareholding of 6.25% in assessee (through its wholly owned subsidiary HDFC Investments Ltd) to establish ‘substantial interest’; Holds that “….This would be contrary to all canons of Company Law….It is well settled that a shareholder of a company can never be construed either the legal or beneficial owner of the properties and assets of the company”, relies on SC rulings in Bacha F. Guzdar and Vodafone International Holdings BV; Further, noting that the transaction was a purchase of ‘asset’ reflected in the Balance Sheet and not in the P&L account, HC opines that “Acquisition of an asset…cannot be said to be in the nature of an expenditure so as to come within the ambit of section 92BA (i)"; HC also holds that assessee’s payment to HBL Global for rendering services does not qualify as SDT absent assessee holding ‘substantial interest’ in HBL Global, rejects consideration of indirect shareholding in HBL Global; Also rejects Revenue’s reliance on CBDT Circular dated July 6, 1968 and relies on ICAI Guidance Note u/s 92E; HC also holds that assessee’s interest payment to HDB Welfare would not fall within Sec 40A(2)(b) read with Explanation (b) as the Trust was exclusively set up for the welfare of its employees and there was no question of assessee being entitled to 20% of the profits of such Trust, rejects Revenue’s reliance on Karnataka HC ruling in Amco Power Systems and SC ruling in Podar Cement as ‘wholly misplaced’:HC 

Roll out of CBIC-GST Application December 2018:

Directorate General of Systems & Data Management

Central Board of Indirect Taxes & Customs

Department of Revenue, Ministry of Finance

Three Imp Verdicts On Core Issues

HDFC Bank Ltd vs. ACIT (Bombay High Court)

S. 92BA(i)/ 40A(2)(b) Domestic Transfer Pricing: Entire law on what constitutes "Specified Domestic Transactions” explained. The Dept's contention that a shareholder has beneficial interest in the assets of the company is contrary to all canons of Company law    

EY GST Update | Recommendations of 31st GST Council Meeting

This is to update you on the 31^st GST Council meeting held in New Delhi today. We have summarized some of the key points that emerged based on the press brief by the Finance Minister and the press release issued by the Ministry of Finance. It may be noted that some of the changes may warrant Amendment in Acts / issuance of relevant notifications / circulars which shall be issued in due course. Some of the key changes have been enumerated here under for ready reference:   

►   The new return filing system shall be introduced on a trial basis from April 01, 2019 and on mandatory basis from July 01, 2019;

►   There would be a single cash ledger for each tax head;

►   A scheme of single authority for disbursement of refund amount sanctioned by either the Centre or the State tax authorities would be implemented on pilot basis;

►   The due date for furnishing the annual returns in FORM GSTR-9, FORM GSTR-9A and reconciliation statement in FORM GSTR-9C for the FY 2017-18 shall be further extended till June 30, 2019. Further, clarificatory changes shall be carried out in the formats/instructions of the annual return / reconciliation statement;

►   The due date for furnishing FORM GSTR-8 by e-commerce operators for the months of October, November and December, 2018 shall be extended till January 31, 2019;

►   The due date for submitting FORM GST ITC-04 for the period July 2017 to December 2018 shall be extended till March 31, 2019;

►   Input Tax Credit in relation to invoices issued by the supplier during FY 2017-18 may be availed by the recipient till the due date for furnishing of FORM GSTR-3B for the month of March, 2019, subject to specified conditions;

►   Late fee shall be waived for all taxpayers in case FORM GSTR-1, FORM GSTR-3B and FORM GSTR-4 for the months / quarters July 2017 to September 2018 are furnished after December 22, 2018 but on or before March 31, 2019;

►   Taxpayers who have not filed the returns for two consecutive tax periods shall be restricted from generating e-way bills;

►   Clarifications shall be issued on certain refund related matters like refund of ITC accumulated on account of inverted duty structure, disbursal of refunds within the stipulated time, time allowed for availment of ITC on invoices, refund of accumulated ITC of compensation cess etc;

►   Changes made by GST Amendment Acts would be notified w.e.f. February 01, 2019;

►   Further, the GST Council has given in principle approval to the following amendments in the GST Acts:

-          Creation of a Centralised Appellate Authority for Advance Ruling (AAAR) to deal with cases of conflicting decisions by two or more State Appellate Advance Ruling Authorities on the same issue;

-          Amendment of section 50 of the CGST Act to provide that interest should be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit, i.e. interest would be leviable only on the amount payable through the electronic cash ledger.

The above recommendations of the Council will be made effective only after the necessary amendments in the GST Acts are carried out.

►   The rate of GST on certain goods attracting 28% has been reduced to 18% and 5% respectively. Also, the rate of GST on certain other goods and services has been reduced / rationalised. The attached press release provides a complete list of such changes in rates of goods / services;

►   The council has decided to refer the following issues to Committees / Group of Ministers:

-       Extending the Composition scheme to small service providers. The rate of tax and threshold limit to be proposed - Law Committee and Fitment Committee;

-       Tax rate on lotteries – Committee of States;

-       Taxation of residential property in real estate sector – Law Committee and Fitment Committee;

-       Threshold limit of exemption under GST regime – GoM on MSMEs.

The GST council in its next meeting in January 2019 would take a view on the above issues.

Update on 31st GST Council meeting held on 22nd December 2018 at New Delhi

to read the update please click the link below.

https://yoursucessstory.wordpress.com/2018/12/23/update-on-31st-gst-council-meeting-held-on-22nd-december-2018-at-new-delhi/

ITAT : Expenditure on establishing new restaurants by Olive Bar, deductible despite no commercial operations

Mumbai ITAT allows deduction for pre-operative expenses (salaries and wages, travelling expenses, repairs and maintenance, staff room expenses and other general administrative expenses) incurred by Olive Bar & Kitchen P. Ltd. (assessee, engaged in running restaurants) during AY 2013-14; During relevant AY, assessee has expanded its existing business by opening three more restaurants at different places, assessee has treated expenditure incurred in connection therewith under the head ‘capital work in progress’ in its books of account, but claimed it as revenue expenditure for income-tax purposes; Firstly, ITAT notes that though the commercial operations have not taken place in respect of the new restaurants, the commencement of the assessee’s business activities is not in doubt; Next, ITAT notes that the pre-operative expenses claimed were in the nature of revenue expenses, further clarifies that different treatment for expenditure in the books of account is irrelevant; Cites Bombay HC rulings in Reliance Supply Chain Solutions Ltd. and Evergrowth Telecom Ltd and Madras HC ruling in Shakti Sugars Ltd., to hold that expenditure on setting up of new unit by way of expansion of existing business is revenue expenditure:ITAT