This is to update you on the notifications issued
yesterday by the Ministry of Finance:
Sunday, 25 March 2018
Copy of Bombay HC verdict upholding sales tax on return of kerosene post extraction
Copy of
Bombay HC verdict upholding sales tax on return stream of kerosene after
extraction of N-Paraffin under Bombay Sales Tax Act, albeit prospectively i.e.
from date of order of Maharashtra Sales Tax Tribunal; Bombay HC refused to
consider such return stream between Bharat Petroleum Corporation Ltd &
Reliance Industries Ltd as “sales return” u/s 2(35), 2(36) of Bombay Sales Tax
Act and Rule 4 of Bombay Sales Tax Rules, and instead, concurred with Tribunal
that same would amount to 'purchase' transaction : Bombay HC
LUT for FY 2018-19. ( only for exporter).
Dear All:
It is hereby brought to your notice for renewal of LUT
issued by your jurisdictional department for making Zero Rated Supply i.e.,
Export Supply and SEZ supply without payment of tax
Although the previous LUT issued may be valid upto 30th
June’18, it is suggested to get it renewed w.e.f. 1st Apr’18 for the
FY 18-19
As on date the procedure to renew your LUT application is to
file an online application by uploading the existing LUT. On filing the same,
copy of the application along with a proof of filing Feb’18 GST returns needs
to be submitted to your jurisdictional officer
Imp Case Laws
Honda Motor Co. Ltd vs. ADIT (Supreme Court)
S. 148: The AO is not
entitled to issue a reopening notice only on the basis that the foreign company
has a permanent establishment (PE) in India if the transactions in respect of
which it is alleged that there has been an escapement of income had already
been disclosed by the Indian subsidiary and found by the Transfer Pricing
Officer (TPO) to be at arm's length Notifications 54 and 55 | FTP 2015-20
This is to update you on the recent notifications issued by
the Directorate General of Foreign Trade
►
Notification No 54/2015-20 dated 22 March 2018 – FTP
· Exemption
from Integrated Tax and Compensation Cess under Advanced Authorization Scheme
under Para 4.14 and under EPCG Scheme under Para 5.01(a) of FTP 2015-20 has been extended up to 01 October
2018
►
Notification No 55/2015-20 dated 23 March 2018 – FTP
· Exemption
from Integrated Tax and Compensation Cess under EOU Scheme under Para
6.01(d)(ii) of FTP 2015-20 has been
extended up to 01 October 2018.
Wednesday, 21 March 2018
CBDT invites suggestions from general public on new direct-tax law, issues questionnaire
CBDT invites suggestions
and feedback from stakeholders and general public for drafting the new direct
tax law; Issues questionnaire covering over 25 questions on broadly six
categories, viz. Filing of return of income, Tax credit, Processing / scrutiny
of return, Litigation and recovery of disputed tax demand and Penalty &
prosecution and the residuary category; Seeks feedback on e-filing of
income-tax returns, TDS returns, working of the Centralised Processing Centre
(‘CPC’), seeks suggestions for tackling TDS mismatch; Likewise, seeks views on
the newly implemented e-assessment process, effectiveness of the Mutual
Agreement Procedure (‘MAP’), working of Income tax Appellate Tribunal, Income
tax Settlement Commission; Invites suggestions/ feedback by April 2nd.
HC : Order prohibiting Customs Broker's operations appealable before CESTAT; Writ petition not maintainable
HC
dismisses Custom Broker’s writ petition against prohibition order under
Regulation 23 of Customs Brokers Licensing Regulations, 2013 for alleged
mis-declaration of rate of duty applicable on imported goods; Referring to
earlier ruling in case of Capricon Logistics Pvt. Ltd., HC rejects assessee’s
plea that in terms of Section 129-A of Customs Act, only a decision or order
passed by Principal Commissioner / Commissioner of Customs as an ‘Adjudicating
Authority’ is appealable; Holds that Dept. authorities including Appellate
Authorities and CESTAT are better equipped and manned with experts in the field
to measure pros and cons of cases arising under Customs Act, and are better
disposed of to deal with situations arising under the Regulations; A Customs Broker
cannot completely disentangle or distance himself from mis-declaration made on
behalf of / by importers themselves, states HC while observing that the
non-obstante provisions of Regulation 23 to prohibit a Customs Broker from
working in any section of Customs territory have been enacted to put in place
effective measures against illegal activities and duty evasion; Hence,
procedure of giving prior notice or hearing opportunity has been deliberately
excluded, observes HC and accordingly, directs CESTAT to consider matter on
merits under appellate jurisdiction : Karnataka HC
ITAT : Relies McKinsey's earlier years' MAP settlement to determine taxability in subsequent year
Mumbai ITAT holds that
taxability of Rs. 150 cr. received by assessee-company (part of the Mckinsey
Group based in US) in India during AYs 2011-12 and AY 2012-13 shall be
determined as per the MAP settlement for earlier years; Notes that as per the
terms of MAP settlement for AYs 2008-09 to 2009-10, it was agreed that payment
for providing various consultancy services (including Knowledge Pool Charges,
Borrowed Service Charges, Firm Committee Pool Charge, Regional Corporate
Finance Charges etc.) to its AE shall not be taxable in India as '
Royalty ' or ' Fees for Included Service (‘FIS’) '; ITAT rejects Revenue’s
stand that the MAP settlement being year-specific, cannot be made applicable to
subject assessment years; Notes that the MAP settlement is with respect to
amount paid by Mckinsey India to other Mckinsey entities in USA; Relies on
co-ordinate bench rulings in assessee’s own case and in case of its group
companies which accepted for applying the MAP terms of earlier years:ITAT
HC : Invokes 'savings' clause under GST enactment; Allows ITC recovery under repealed VAT Act
HC
upholds recovery of refunded Input Tax Credit u/s 10(5) r/w Section 69(1) of
Karnataka VAT Act despite repeal of said enactment w.e.f. July 2017
vide Karnataka GST Act, 2017; Perusing repeals and savings provisions u/s
173 r/w Section 174 of KGST Act, HC holds that repeal of KVAT would not affect
proceedings initiated by Revenue authorities; Notes that refund had been
granted pursuant to Division Bench decision in M K Agro Tech Pvt Ltd which had
held that principles of partial rebate u/s 17 of KVAT Act were inapplicable to
inputs utilized in exempt by-products, but SC had subsequently reversed said HC
order; Finds that HC’s refund order was subject to outcome in SLP before SC in
case of M K Agro Tech Pvt Ltd and indemnity bonds furnished by assessee and
while ordinarily no rectification can be allowed on the basis of subsequent HC
/ SC order, it was obligatory on assessee’s part to obey Court orders and
could not now assail Revenue’s recovery proceedings; However, reads down
Circular dated October 9 2017 issued by Commissioner of Commercial Taxes to
maintain uniformity in collection of taxes, by holding that levy of
interest / penalty shall be subject to provision of reasonable
opportunity of hearing to assessee : Karnataka HC
Saturday, 17 March 2018
It is not dominant purpose test but principle of apportionment which is ingrained in provisions of Section 14A - YES: Supreme Court
THE issues are - Whether when the shares are held by the assessee not to earn exempt income but to retain controlling stake in the investee company, the dominant purpose test can be said to be relevant for the purpose of Sec 14A AND Whether when the assessee itself makes disallowance of certain expenditure incurred to earn dividend income and if the AO does not accept such disallowance, it is necessary for the AO to record satisfaction before rejecting the same. Verdict partly favours the Revenue.
Facts of the case
Non-compete fees paid for acquisition of going concern are not eligible for depreciation: ITAT
THE issue is - Whether 'non compete fee' paid as part of slump sale consideration for acquiring a business as going concern, can be equated with 'intangible asset' so as to claim depreciation on same. NO IS THE ANSWER.
|
Erstwhile exempted units move HC against unavailability of transitional credit of capital goods
Uttarakhand HC hears
petitioners’ challenge to unavailability of transitional credit of capital
goods u/s 140 of CGST Act, 2017 to units who were availing area based exemption
under erstwhile regime; HC posts the matter for hearing on April 17
Allows Sec 10A deduction on voluntary TP-adjustment; Follows iGate over Deloitte ruling
Pune ITAT rules that
assessee is entitled to Sec 10A deduction on additional income offered on
account of suo-moto TP-adjustment for AY 2011-12; Notes that TPO/ CIT(A)
disallowed the deduction u/s 10A as assessee failed to bring into country the
export proceeds in foreign exchange as contemplated in Explanation 2 to Sec 10A
in respect of such additional income offered; However, ITAT opines that the
additional income was artificial/ notional income computed u/s 92(1) and it was
neither export turnover nor total turnover but in fact profits of business u/s
10A(4), states that “in the absence of it being offered as export turnover or
total turnover, then there could not be any condition for getting foreign
exchange to India”; Further noting that additional income was offered to tax as
business profits, opines that “... it forms part of profits of business and
while computing the deduction under section 10A(4) of the Act, the said profits
have to be taken into consideration”; Relies on Bangalore ITAT ruling in iGate
Global Solutions allowing Sec 10A deduction in respect of suo-moto
TP-adjustment (subsequently confirmed by Karnataka HC) and states that Mumbai
ITAT ruling in Deloitte Consulting India taking a contrary view would not stand
in view of ratio laid down by Karnataka HC, clarifies that “Though the said
decision is of non-jurisdictional High Court, but the same is binding on the
Tribunal in the absence of any contrary decision of the jurisdictional High
Court”; Also holds that proviso to Sec 92C(4) [which inter alia provides that
no deduction u/s 10A shall be allowed in respect of such amount of income, by
which the total income of assessee had been enhanced after computation of ALP
of international transactions] will not be applicable in such cases:ITAT:ITAT
OECD's digital economy report highlights divergent views, sets deadline of 2020 for consensus-based solution
OECD's Tax Challenges
Arising from Digitalisation – Interim Report 2018 (the Interim
Report) released a few minutes ago acknowledges 'divergent views' on
taxation approach and highlights that countries will work towards a
consensus-based solution; The Interim Report notes that there is no consensus
on the merits of, or need for, interim measures, and does not make a
recommendation for their introduction; The Interim Report agreed by the
more than 110 members of the Inclusive Framework outlines a number of
areas where there are clear differences of view among the countries, including
over the need for future reform of the international tax system; The
Interim Report provides a sense of direction that reflects the commitment
of the Inclusive Framework members to work towards a consensus-based, global
solution on these matters; The Interim report sets the goal of
producing a final report in 2020, with an update to the G20 in 2019; The
Interim Report notes that the "members agreed to undertake a coherent and
concurrent review of the “nexus” and “profit allocation” rules - fundamental
concepts relating to the allocation of taxing rights between jurisdictions and
the determination of the relevant share of the multinational enterprise’s
profits that will be subject to taxation in a given jurisdiction";
The Interim Report discusses interim measures that some countries have
indicated they would implement, believing that there is a strong imperative to
act quickly; The Interim Report specifically considers an interim measure in
the form of an 'excise tax' on the supply of certain e-services within their
jurisdiction that would apply to the gross consideration paid for the supply of
such e-services; The Inclusive Framework’s Task Force on the Digital Economy
will meet next in July 2018; The report cites India has adopted rules for
the VAT treatment of B2C supplies of services and intangibles by foreign
suppliers in accordance with the OECD International VAT/GST Guidelines; The
Interim report also describes in details India's Significant Economic
Presence based taxation, Equalisation levy & cites Bangalore ITAT ruling
on “virtual service PE”
Key takeaways from SC ruling in Maxopp Investment on Sec. 14A
SC upholds Delhi HC ruling
in Maxopp Investments Ltd., holds that interest paid on borrowings used for
acquiring strategic investments is subject to Sec 14A disallowance even if
earning dividend income is only incidental; Rules that the dominant or main
object of investment would not be a relevant consideration in determining as to
whether expenditure incurred is ‘in relation to’ the dividend income as
contemplated u/s. 14A; Agrees with Delhi HC that the objective behind
introduction of Sec. 14A was to cure a problem whereby the principle of
apportionment was applicable only to divisible business and in case of
composite or indivisible business, entire expenditure was deductible without apportionment;
Thus holds that “Considered in this hue, the principle of apportionment of
expenses comes into play as that is the principle which is engrained in Section
14A of the Act”, relies upon SC ruling in Walfort Share and Stock Brokers;
Disagrees with Punjab & Haryana HC’s application of dominant purpose test
in State Bank of Patiala case while holding that Sec 14A is not applicable to
investment held as stock in trade; Notes that where shares are held as
‘stock-in-trade’, certain dividend is earned, though incidentally, which is
exempt u/s 10(34), thus holds that applicability of Sec 14A is triggered which
is based on the theory of apportionment of expenditure between taxable and
non-taxable income; However, considering facts of Bank of Patiala case,
dismisses Revenue’s appeal against HC ruling:SC
Sec. 143(2) notice by non-jurisdictional AO, invalid despite within statutory time-line; Penalty to rehabilitation authorities for regularizing construction, allowable u/s. 37
ITAT: Sec. 143(2) notice by non-jurisdictional AO, invalid despite
issued within statutory period
Delhi ITAT
dismisses Revenue’s appeal and deletes addition u/s 68 on assessee-company
during AY 2006-07, holds that the entire assessment proceedings are
Saturday, 10 March 2018
OECD : Releases model rules requiring intermediaries to disclose CRS Avoidance arrangement, opaque offshore structures
OECD releases new model
disclosure rule requiring lawyers, accountants, financial advisors,
banks, etc. to inform tax authorities of schemes they put in place for clients
to avoid reporting under Common Reporting Standard (CRS) or prevent
identification of beneficial owners of entities or trusts; Model rules
require an Intermediary or user of a CRS Avoidance Arrangement or Opaque
Offshore Structure to disclose certain information to its tax
administration; Where such information relates to users that are resident
in another jurisdiction it would be exchanged with the tax administration of
that jurisdiction in accordance with the terms of the applicable international
legal instrument; Model Rule defines hallmark for CRS Avoidance Scheme and
for Opaque Offshore Structures which specifically targets Passive
Offshore Vehicles that are held through an Opaque Structure; Further, Model
Rules provide for definition of intermediaries, timing of disclosure
requirements, information to be disclosed and penalties and other mechanisms to
deal with non-compliance
Hotels responsible for GST discharge on online bookings, clarifies Goa Govt.
Goa Govt. reiterates the
clarification issued by Finance Ministry regarding levy of GST on accommodation
services; Inter alia clarifies that declared / published tariff is relevant
only for determination of tax rate slab and GST shall be payable on actual amount
charged (transaction value); In case of different tariffs declared for
different seasons or periods of the year, the tariff declared for season in
which service of accommodation is provided shall apply; Further clarifies that
in case of booking through online portal, the rate of tax payable would be 28%
when “declared tariff” is more than Rs. 7,500/- per day; It shall be the
responsibility of hotel to ensure that appropriate tax is charged and paid to
Govt. exchequer, even though booking is done through online portals : Goa Govt.
Trade Circular
Obtaining 100% EOU status by DTA-unit cannot entitle Sec 10B benefit beyond 10 years
Uttarakhand HC allows
Revenue’s appeal, denies Sec. 10B benefit to assessee (engaged
in manufacture of handicrafts) for AY 2009-10; Notes that assessee claimed
deduction u/s. 80HHC from AYs 1992-93 to 2003-04 and u/s. 80IC from AYs 2004-05
to 2008-09 and it
E-Way Bill Update
Please find below the summary of recent changes made in e-way bill rules
summarized below for your easy reference:-
1. Provisos inserted in
Rule 138(1) that transporter, on an authorization received from the registered
person and courier agency on authorization from received from consigner when
goods supplied through an ecommerce operator can furnish Part A of Form EWB-01 electronically
to generate the unique number;
E-way bill for inter-state transport from April 1; GSTR-3B extended for 3 months
GST Council during its 26th
meeting approves rollout of E-way bill mechanism for inter-state
movement of goods from April 1; E-way bill for intra-state transport to be
implemented in phased manner by dividing States into 4 categories; Also extends
the existing system of filing returns viz. Form GSTR-3B for another 3 months
and in meanwhile, GOM on IT will look into it & consult tax experts among
others; Though there was no conclusive decision on returns simplification,
Council discusses 2 alternate models and shall take final call on the same; FM
Arun Jaitley says, “Tax bureaucracy felt that simplification should not provide
room for evasion”; Tax sops to exporters through exemption have been extended
by 6 months
Friday, 2 March 2018
Reopening based on fresh materials found during Special Audit report is valid, even after four years of assessment: HC
THE issue before the Bench is - Whether notice of reopening of assessment u/s 148, based on fresh tangible material in special audit report, which was not available at the time of original assessment order, can be termed void by taking shelter of the first proviso to Section 147, if issued after four years of relevant AY. And the HC verdict is NO.
HC : Directs reconsideration of excise duty on supply & installation of customised IT products
HC
exercises writ jurisdiction to set aside adjudication order confirming excise
duty liability on activity of supply of IT products purchased from vendors and
installation at customers’ premises after customization as per their needs;
Notes assessee’s claim that integrating multiple products sourced from
different vendors only involved a skill of service and nothing else,
accordingly it had paid service tax thereon; Seeking to set right the
jurisdictional error committed in decision making process, HC observes that
each of assessee’s activities would require to be examined on focal point
whether they would fall within the meaning of manufacture of goods or not;
There cannot be generalization of assessee’s activities, states HC while
observing, “No doubt, the law discussed by the Commissioner is the correct
principles revolving around the issue. But, the point is whether each of the
activities of the petitioner would fall for consideration as a 'manufacturer of
goods' or not.” ; Accordingly, remands the matter for fresh consideration,
without expressing any view on merits : Kerala HC
Tamil Nadu Govt. divides taxpayer base with Centre; Around 5 lakh taxpayers with State
Tamil Nadu Govt. notifies
division of taxpayer base with Central Govt.; 50,175 taxpayers having less than
Rs. 1.5 Cr turnover have been allotted to Centre, while 451,590 taxpayers have
been assigned to the State; In case of taxpayers with more than Rs. 1.5 Cr
turnover, 44,009 are with Centre, and 43,977 with State : Tamil Nadu Govt.
Order
ITAT : Hefty share premium received as 'conduit' taxable u/s 68 as unexplained cash-credit
ITAT upholds Revenue's plea
that assessee (a private limited company & engaged in real estate
business) received high share premium as a conduit to route the funds
involved as a 'layering' process, holds that share-premium of Rs.49.5cr is
taxable u/s 68 as unexplained cash credit for AY 2008-09; ITAT considers facts
such as absence of proper valuation report to justify high premium,
relatively weak financials compared to high valuation, issue of shares to
directors at par, discrepancies / abnormal features which indicate that share
issue was “made up” to camouflage the real purpose/intention of routing
money; Relying on Calcutta High Court ruling in Pragati Financial
Management Pvt. Ltd. Vs. CIT, ITAT holds that share capital addition can be
made u/s 68 since the initial onus was not discharged by the assessee;
Also, rejects assessee's reliance on Delhi ITAT ruling in ACIT Vs. NRA Iron
& Steel Pvt. Ltd., wherein funding was raised from multiple investors as against
assessee's facts where a single investor was present; On the issue of
jurisdiction, ITAT upholds validity of second re-assessment notice
(issued within 6 days after the first reassessment was dropped) which
resulted in share premium addition, ITAT holds that "since
substantive issue in question was never examined under the proceedings in
the first notice issued on 18.4.2012, the question of change of opinion
does not arise" :ITAT
Recent update on circular on transition credits
We refer to a recent Circular
No. 33/07/2018-GST dated 23 February 2018 issued by the Central Board of Excise
and Customs (CBEC) regarding non-utilization of disputed CENVAT credit
transitioned under the Goods and Services Tax (GST) and non-availability of
CENVAT credit carried forward but not eligible under GST.
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