Ministry of Finance issues
clarification to allay the apprehension of changes in GST law relating to
farmers w.e.f. June 2018 according to which, they would be required to take
registration and pay GST of 18% on leasing of their land; Ministry states that such
news is “factually incorrect and misleading”; There is no change in GST law and
taxation relating to farmers since the implementation of GST w.e.f July 2017;
Clarifies that support services to agriculture, forestry, fishing or animal
husbandry are exempt and thus, renting or leasing of land with or without
structure incidental to its use by farmers for agriculture, forestry etc. is
exempt from GST; Reiterates that agriculturists (i.e. individual or an HUF who
undertakes cultivation of land by own labour or of family or by servants or
hired labour under personal supervision) are exempt from taking registration
under GST : Ministry of Finance Press Release
Wednesday 30 May 2018
ITAT : Rejects 'receipts-basis' taxation for advances received by land-owner under development agreement
Pune
ITAT accepts assessee’s (land owner) plea that advance received from
developer towards flat booking shall not be taxable in subject AY 2009-10 on
receipt basis, but in subsequent AY when the project was completed and
tenements / flats were handed over to the prospective buyers; Notes that the
assessee had given the land for development and was entitled to receive 18% on
gross sales under the terms of development agreement (‘DA’); With
respect to advance booking amount received in subject AY, ITAT remarks
that “The said amount received by the assessee is an advance receipt
because the right to collect the said amount would crystallize on the day when
the tenants or portion of land is sold by the developer to the prospective
buyers.”; Moreover, observes that the developer recognized the completion
and sale of developed portion in subsequent AY 2011-12, consequently, holds
that the business profits arising to assessee were taxable in such year;
Lastly, ITAT clarifies that since the amount is not assessable to tax as his
business profits in subject AY, the capital gains arising on conversion of
capital asset into stock-in-trade is also not to be taxed in the hands of
assessee in subject AY but in the year in which the business profits are to be
taxed:ITAT
Kerala Govt. issues guidelines for timebound scrutiny & assessment of Presumptive Tax Dealers
Kerala Govt. issues
instructions to streamline the scrutiny and VAT assessment of Presumptive Tax
dealers, so that all pending assessments are completed in time bound manner to
ensure that legitimate tax is remitted to Govt. exchequer; Directs completion
of assessment of various years from 2011 to 2016 in time series after
completing each year separately, while laying down an action plan in this
regard; States, no undue adjournments shall be given for submission of returns
or other relevant records as the dealer has already taken years, whereas “More
than two adjournments to be given only with the permission of the Deputy
Commissioner based on genuine reasons”; Since assessments are mandatory before
applying for amnesty scheme announced by Govt. for Presumptive Tax dealers, the
Scrutiny Module may be used efficiently; Along with pre-assessment notice,
print of amnesty calculation also may be given to encourage dealers to opt for
amnesty immediately in view of June 30, 2018 deadline : Kerala Govt. Circular
Imp S. 147 Bogus Purchases Verdict
PCIT vs. Manzil Dineshkumar Shah (Gujarat High Court)
S. 147: Even a s. 143(1) assessment
cannot be reopened without proper 'reason to believe'. If the reasons state
that the information received from the VAT Dept that the assessee entered into
bogus purchases "needed deep verification", it means the AO is
reopening for doing a 'fishing or roving inquiry' without proper reason to
believe, which is not permissible
It is equally well settled that the
notice of reopening can be supported on the basis of reasons recorded by the
Assessing Officer. He cannot supplement such reasons. The third principle of
law which is equally well settled and which would apply in the present case is
that reopening of the assessment would not be permitted for a fishing or a
roving inquiry. This can as well be seen as part of the first requirement of
the Assessing Officer having reason to believe that income chargeable to tax
has escaped assessment. In other words, notice of reopening which is issued
barely for making fishing inquiry, would not satisfy this requirement
Applicability of Integrated Goods and Services Tax on goods supplied while being deposited in a customs bonded warehouse
We invite your attention to Circular No 3/1/2018-IGST dated
25th May, 2018 (‘Circular) issued
by Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes
and Customs with regards to applicability of Integrated Goods and Services Tax
(IGST) on goods sold while being deposited in a customs bonded warehouse.
Please find attached the circular issued for your ready reference.
AAR : Rules on 'loan fee' taxability under French treaty; Debt claims existence crucial
AAR rules that the
‘front-end fee’ payable by a customer in India, for appraisal of loan
application carried outside India, under the financing arrangement with the
Applicant (a France based Financial Institution), not ‘interest’ under Article
12 of India-France DTAA, follows Bombay HC ruling in Commonwealth Development
Corporation; Notes that in order to constitute interest under India-France
DTAA, the income must be from debt claims, observes that there was no debt
claim in existence when the ‘front-end fee’ for loan application appraisal was
payable, further notes that the payment was fixed and mandatory and neither
dependent upon nor connected with the loans advanced; Also holds payment was
not taxable as FTS under Article 13 of DTAA, absent ‘make available’ of
technical knowledge, experience, skill, know-how or processes to the borrower,
follows Delhi HC ruling in Steria (India) Limited for reading the restricted
scope of FTS into the India-France DTAA, however, holds that the fees shall be
taxable as business income if PE for applicant exists in India; With respect to
front end fees other than appraisal fee, AAR notes that those are charged only
in respect of a successful loan approval at a certain percentage of the
proposed investment, and thus have a direct nexus with the debt claim;
Likewise AAR holds that the commitment fee, cancellation fee, amendment fee and
monitoring fee are directly related to debt claim as the fees are charged after
disbursement of loan, accordingly upholds taxability as ‘interest’ on these
payments under DTAA:AAR
HC admits challenge to 'pre-import condition' for availing exemption under Advance Authorization scheme
Delhi
HC admits writ petition challenging constitutional validity of amendment to
Notification No. 18/2015–Cus vide Notification No. 79/2017-Cus whereby
exemption from IGST and Compensation Cess on inputs under Advance Authorization
Scheme has been subjected to “pre-import condition”; Petitioner has also
challenged amendment to Para 4.14 of FTP vide Notification No. 33/2015-20 in
this regard; Matter has been listed for hearing on August 8
DIPP's "narrow" eligibility criteria for Budgetary Support Scheme in J&K, under HC scanner
J&K HC admits challenge
to the narrow eligibility criteria stipulated for industrial units to avail
DIPP’s Budgetary Support Scheme in the State of J&K; Scheme, which was
introduced in October 2017, debars units that did not commence commercial
production before July 1, 2017; Petitioner has invoked principle of promissory
estoppel while contesting said cut-off date; HC has issued notice to Revenue,
while posting the matter for hearing on June 5
AAR : US-parent Co's income from authorised Indian reseller for content delivery solutions not taxable
AAR holds that payment
received by the Applicant (a US based technology company) from its India based
group company under the non-exclusive Reseller Agreement for
sale of applicant's content delivery solutions directly to customers in
India, not taxable as FTS/FIS or Royalty under the Act or
India-US DTAA; Accepts Applicant’s contention that the Solutions provided
by it are in the nature of a 'standard facility' and do not cater to
individual requirements of the customer, moreover absent human intervention it
cannot be termed as FTS under Explanation 2 to Sec. 9(1)(vii) of the Act, also
holds that the Solutions provided do not 'make available' knowledge to
the end user so as to fall under definition of FIS under Article 12 of DTAA;
Further holds that “when payments under Reseller Agreement are not towards
any IPR/Trademarks, it cannot be covered within the definition of royalty”,
also observes that Reseller Services Agreement does not contemplate
providing any kind of a software “product” to any of its customers or to the
Reseller; Distinguishes Revenue’s reliance on ABB FZ ruling which was rendered
in the context of use/sharing of specialized knowledge, expertise, etc. by
assessee through its employees, observes in present case there is no
use/sharing of knowledge, information, etc. by the Applicant with the Reseller
or the end user, likewise distinguishes Revenue’s reliance on various of
rulings including Samsung-Synopsis ruling, Vodafone South and Verizon rulings
on facts; With respect to PE, AAR clarifies that “once we have ruled
above that income does not accrue or arise in the hands of the Applicant as
Royalty or FTS/FIS…the question of existence of a PE under Article 5 becomes
irrelevant and academic, as no income can be attributed to it, if at all there
was one.”:AAR
AAR : Transportation services naturally bundled with supply of goods, taxable as 'composite supply'
AAR holds that services of
transportation, in-transit insurance and loading / unloading in relation to
separate contract for supply of materials at ex-factory price, shall be liable
to GST at rate applicable to supply of goods; Notes that supply of goods under
First Contract cannot be executed independent of Second Contract providing for
transportation for the former does not include the provision and cost of
transportation and delivery; Moreover, the two contracts are linked by a cross
fall breach clause that specifies that breach of one contract will be deemed to
be a breach of other contract, and thereby turn them into a single source
responsibility contract; Resultantly, observes that the two promises – supply
of goods and their transportation to contractee’s site – are not separately
enforceable, the supplies of goods and services are naturally bundled;
Accordingly, states, “…supplies as that of applicant’s should be construed as
specifically mentioned under the GST Act as Composite Supply with supply of
goods as the principal supply and services like transportation, in-transit
insurance etc ancillary or incidental to the principal supply...” : West Bengal
AAR
CBIC's interim solution for IGST refunds stuck due to data non-transmission from GSTN
CBIC prescribes an interim
solution for pending IGST refunds not being sanctioned owing to
non-transmission of data from GSTN to Customs EDI system, due to mismatches in
amount mentioned by exporters in GSTR-1 and GSTR-3B; Procedure prescribed is
subject to undertakings / submission of CA certificates by exporters and post
refund audit scrutiny : CBIC Circular
ITAT : Daikin's Indian subsidiary constitutes DAPE; Attributes profits, TP-analysis not adequately reflecting FAR
Delhi ITAT rules that the
wholly owned Indian subsidiary of Daikin Industries Ltd. (assessee, a Japanese
company), constitutes assessee’s dependent agent PE for AY 2006-07; Holds
that the entire activities of identifying customers, negotiating and
finalizing prices with customers in India etc. were done by DAIPL (Indian
subsidiary) not only for the products sold as distributor, but also for which
assessee claimed to have made direct sales in India; Acknowledging the
tremendous efforts required for effecting sale in highly competitive industry
of air-conditioning and refrigeration equipments, ITAT remarks that “We
fail to comprehend as to how the assessee came in contact with customers in
India and made sales to them directly, when DAIPL, situated in India, had to
spend a huge amount of selling and distribution expenses (of Rs. 14.38
cr.) for selling similar products in India.”; Thus, rejects
assessee’s stand that DAIPL was acting only as a communication channel for its
direct sales, considering assessee's failure to demonstrate its direct
involvement from Japan in making sales to Indian customers and e-mails
exchanged between assessee and DAIPL demonstrating that DAIPL was negotiating
and finalizing deals with Indian customers; ITAT then rejects assessee’s
argument that since TPO had considered the international transaction of
commission paid by assessee to DAIPL for market support services to be at ALP
in case of DAIPL, no further income could have been attributed to assessee's
operations in India; Notes that assessee had neither reported any international
transaction in Form 3CEB nor conducted any benchmarking exercise, further, the
benchmarking of commission for DAIPL was done only with respect to 2 functions
[forwarding customers’ request to assessee and forwarding assessee’s quotations
to the customers] and thus, other functions performed (negotiating and
finalizing contracts on behalf of assessee) remained excluded from the process
of ALP-determination; Also lays down that ratio decidendi of Morgan Stanley
ruling would not apply and assessee’s case would fall within the exception laid
down by SC [i.e. if TP-analysis does not adequately reflect FAR of the
enterprise, there would be a need to attribute profits to the PE for those
functions/risks not considered]; On attribution of profits to
PE, ITAT upholds 10% net profit rate as reasonable and then determine net
profit attributable to the marketing activities in India at 30% of the net profit
so determined at 10% of sales in India:ITAT
Saturday 26 May 2018
It is not open for AO to make additions while framing assessment u/s 143(3) merely on basis of seized documents beyond period of limitation u/s 153A: ITAT
THE issue is - Whether it is open for the AO to make additions while framing an assessment u/s 143(3) merely on the basis of seized documents beyond the limitation period provided u/s 153A. NO is the answer.
Taxable event arises as soon as interest income on bank deposits accrues & becomes due; Deferred receipts on instruction of depositor will not make it hypothetical income: HC
THE ISSUE IS - Whether interest income which has already accrued on the deposits with the bank, should not be constued as "hypothetical income", simply because the receipt was deferred on the dictate of the depositor. YES IS THE VERDICT.
In absence of any yardstick or guideline to determine an expenditure as excessive payment, AO has no discretion to make disallowance: HC
THE ISSUE IS - Whether, in the absence of any yardstick or guideline to determine an expenditure as excessive payment, AO has no discretion to make disallowance. YES IS THE VERDICT.
HC : Holds Revenue's appeal 'in-time', accepts Tribunal order 'non-receipt' plea; Explains ITAT's duty
Uttarakhand HC dismisses
Hyundai's objections, holds that the appeal filed by
Revenue against ITAT ruling is within the time-limit prescribed u/s.
260A ; Hyundai contended based on RTI records that while the
Tribunal order had been served on CIT's office in
September, 2009, the tax department filed the appeal in HC only in July
2011, thereby resulting in the Revenue appeal being barred by limitation;
HC observes contradiction in the stand taken by assessee, where it is
stated at one place that the Tribunal order was 'dispatched' on
September 9, 2009 while at another place it is contended that the order
was 'served' on September 9; Accepting tax department's submission
that the order copy was not received on the said date, i.e. September
9, 2009 but only in March, 2011, HC goes on to observe
that “the respondent/assessee has not, apparently, made any efforts to
ascertain whether the impugned order, which is alleged to have been dispatched
on 09.9.2009, has actually been served, which could have been done by way of
making queries with the post-office.”; HC interprets ‘receipt’ u/s. 260A
to hold that “receipt is to be understood as meaning that there is a
duty also on the Tribunal to communicate the order to the person, who is
entitled to lodge the appeal.”; HC further rejects assessee's arguments
that sought to impute knowledge of the ITAT order on the
part of Revenue by virtue of it being a party to various writ
petitions & Sec. 263 proceedings, remarks that “it would not be
an actual accrual of cause of action to file an appeal as provided under law,
unless received.”; Also rejects assessee’s reliance on CBDT circular
of August, 2011, clarifies that the CBDT circular only contemplates that there
is duty to intimate the Tribunal about the change of jurisdiction if there
is one during the pendency of the appeal, which fact per se is not
established, moreover observes that it is not clear as to whether Circular
obliges the authority to follow it:HC
CBIC fixes Rs. 2.5 lakh monetary limit for appeals to Commissioner (Appeals) in legacy matters
CBIC
fixes monetary limit of Rs. 2.50 lakh for appeals to Commissioner (Appeals) in
respect of legacy central excise and service tax matters; Such limit would also
apply to cases currently pending at Appellate Commissioner level, and same
practice of withdrawal of Dept. appeals from CESTAT and HC shall be followed :
CBIC Instruction
No automatic denial of exemption u/s. 11 for violating Sec. 13(1) conditio
ITAT: No denial of exemption u/s. 11 for Trust advancing loan in
violation of sec.13(1)(d)
Delhi ITAT
deletes disallowance of loan advanced by assessee-trust to other charitable
institution u/s 10(23C) and u/s 11 during AY 2007-08, rules that only the loan
amount advanced by assessee-trust in violation of sec.11(5) is liable to be
taxed and that violation u/s 13(1)(d) and sec.13(1)(c) does not automatically
result in the denial of benefit u/s 10(23C) or Sec.11 ; During relevant AY,
Revenue treated the amount of loan advanced out of corpus fund to other
charitable trust as ineligible for deduction and subsequently denied exemption
u/s 11 and Sec.10(23C) ; States that assessee has not received any securities
or interest by advancement of loan to other trust, further notes that the said
sum was returned by other trust during FY 2007-08 ; On Revenue’s allegation
that there are common trustees involved due to which sec.13(1)(d) comes into
play, ITAT remarks that, “ .. nothing has been brought on record to establish
that the common trustees have substantial interest in the other trust.”; Relies
on plethora of rulings including Karnataka HC ruling in Fr.Mullers Charitable
Institutions, Bombay HC ruling in Sheth Mafatlal Gagalbhai Foundation Trust and
Allahabad HC ruling in Red Rose School
ITAT Bar Objects To Registrar Acting As 'Court' + Imp Verdicts On Non-Resident Tax And S. 147 Reopening
PCIT vs. Nova Technocast Pvt Ltd (Gujarat High Court)
S. 9/ 40(a)(i)/ 195: Explanation 2
to s. 195(1) inserted by Finance Act 2012 with retrospective effect from
01.04.1962 has bearing while ascertaining payments made to non-residents is
taxable under the Act or not. However, it does not change the fundamental
principle that there is an obligation to deduct TDS only if the sum is
chargeable to tax under the Act. If the conclusion is arrived that such payment
does not entail tax liability of the payee under the Act, s. 195(1) does not
apply
IGST on warehoused goods supply leviable during clearance for home consumption, clarifies CBIC
CBIC issues clarification
on applicability of IGST on goods supplied while being deposited in a customs
bonded warehouse; States that IGST shall be levied and collected at time of
final clearance of warehoused goods for home consumption i.e., at the time of
filing ex-bond bill of entry; Value addition accruing at each stage of supply
shall form part of the value on which IGST would be payable at the time of
clearance of warehoused goods for home consumption; In other words, supply of
goods before their clearance from warehouse would not be subject to IGST and
same would be levied and collected only when warehoused goods are cleared for
home consumption from customs bonded warehouse, explains CBIC; Said Circular
would be applicable for supply of warehoused goods, while being deposited in a
customs bonded warehouse, on or after the April 1, 2018 : CBIC Circular
Wednesday 23 May 2018
Major relief for DPS; Transport facility provided by schools to their students only, are incidental to educational activity, and hence exempted: ITAT
THE ISSUE BEFORE THE TRIBUNAL IS - Whether collection of fees by a school from the students for their transport facility, will not render it a commercial organization, and hence entitled for exemption u/s 11(4A). YES IS THE ANSWER.
On receipt of information from VAT Department about bogus purchases if AO observes that 'deep verification' is required, still reassessment proceeding cannot be initiated at this stage: HC
THE ISSUE IS - Whether, on receipt of information from the VAT Department about bogus purchases if the AO observes that 'deep verification' is required, reassessment proceeding can still be initiated at this stage. NO IS THE VERDICT.
Compensation paid to retrenched workers upon closure of one manufacturing unit is an allowable business expenditure u/s 37: ITAT
THE ISSUE BEFORE THE TRIBUNAL IS - Whether compensation paid to retrenched workers upon closure of one manufacturing unit, as a safeguard against future losses of other units, is an allowable business expenditure u/s 37. YES IS THE ANSWER.
Friday 18 May 2018
Govt. notifies creation of apex National Authority for administering all trade remedial measures
Govt. notifies creation of
‘Directorate General of Trade Remedies’ (DGTR) as the apex National Authority
for administering all trade remedial measures including anti-dumping,
countervailing duties and safeguard measures; Accordingly, DGTR will bring Directorate
General of Anti-dumping and Allied Duties (DGAD), Directorate General of
Safeguards (DGS) and Safeguards (QR) functions of DGFT into its fold by merging
them into one single national entity; It will also provide trade defence
support to domestic industry and exporters in dealing with increasing instances
of trade remedy investigations instituted against them by other countries; DGTR
has been approved with a sanctioned strength of 112 posts : Ministry of
Commerce Press Release
Imp Case law
Mangammal @ Thulasi vs. T.B. Raju (Supreme Court)
Hindu Succession Act,
1956 (HUF Law): U/s 29-A of the TN Amendment, only daughters of a coparcener
who were not married at the time of commencement of the amendment of 1989 are
is entitled to claim partition in the Hindu Joint Family Property. Married
daughters are not coparceners are are not entitled to institute suit for
partition and separate possession (Danamma @ Suman Surpur Vs. Amar 2018 (1) Scale
657 distinguished) CIT(A) Cannot Dismiss Non E-Filed Appeals + Imp SC Verdict On HUF Law
Mangammal @ Thulasi vs. T.B. Raju (Supreme Court)
Hindu Succession Act,
1956 (HUF Law): U/s 29-A of the TN Amendment, only daughters of a coparcener
who were not married at the time of commencement of the amendment of 1989 are
is entitled to claim partition in the Hindu Joint Family Property. Married
daughters are not coparceners are are not entitled to institute suit for
partition and separate possession (Danamma @ Suman Surpur Vs. Amar 2018 (1) Scale
657 distinguished) Dismisses assessee’s SLP ; FD-interest assessable as business income ineligible for Sec 80IC deduction
SC dismisses assessee’s SLP
against Uttarakhand HC decison denying Sec.80-IC deduction on interest earned
on fixed deposit with bank for AY 2009-10 as it is not 'dervied from' eligible
business; HC had observed that the Legislature has chosen to employ the word
‘derived’ in sec.80-IC as distinguished from ‘attributable to’; HC remarked
that “Had the Legislature used the words “attributable to”, then it would have
a much wider effect and it may have encompassed within itself, the income,
which is the subject matter of controversy before us.” ; HC further affirmed
AO’s order holding that interest income qualifies as business income u/s. 28
but no deduction can be allowed u/s 80-IC:SC
ITAT : Pre-2016, AO can't curtail R&D unit's weighted deduction u/s 35(2AB) citing DSIR-approved expenditure
Pune ITAT rejects Revenue’s
plea for AY 2009-10 that deduction with respect to Research & Development
(R&D) expenditure u/s 35(2AB) is restricted only to the extent of approval
granted by Department of Industrial and Scientific Research (DSIR) in form
No.3CL; ITAT clarifies that prior to amendment of IT (Tenth Amendment) Rules,
2016, DSIR had no power to quantify expenditure and highlights that issue under
consideration relates to pre-amended provisions; ITAT notes that with
effect from July 1, 2016 form no 3CL was amended and
certification of expenditure was inserted; ITAT rules that once agreement
between the R&D facility and the prescribed authority is executed
under which recognition is given to the facility, role of AO is to look into
and allow the expenditure incurred on in-house R&D facility as weighted
deduction u/s 35(2AB); ITAT thus allows weighted deduction for R&D
facility's entire expenditure u/s 35(2AB) :ITAT
HC : No delay condonation where exporter knowingly approached wrong forum over 'rebate' dispute
HC refuses to interfere
with order of Revisional Authority who dismissed revision application /
petition filed by assessee 8 years after CESTAT rejected appeal relating to
rebate of excise duty for lack of jurisdiction; Notes that assessee had
preferred an appeal before CESTAT despite knowing well that it should approach
Revisional Authority u/s 35EE of Central Excise Act in matter relating to
excise duty rebate; Dispute had arisen over entitlement to rebate in view of
amendment to Notification No. 43/2001-CE (NT) and clarification issued by CBEC
with respect to applicability of Explanation that goods should be effected
under Rule 19 of Central Excise Rules; While assessee contended that it was
entitled to rebate since goods had been cleared from factory prior to amendment
to Notification No. 43/2001-CE (NT), Revisional Authority observed that delay
of 8 years was neither a bona fide mistake nor a sufficient cause which
prevented the assessee from filing the application / petition in time;
Resultantly, HC dismisses writ petition while refraining from issuing any
direction to Authority who had considered all facts objectively :
Rajasthan HC
AAR : Liquidated damages from contractor towards delay in deliverables, liable to 18% GST
Maharashtra AAR rules that GST
is applicable on ‘liquidated damages’ chargeable upon the contractor once delay
in deliverables is established, in relation to operation & maintenance
activities and construction of new power plants or renovation of old plants;
Rejects applicant’s contention that these damages being towards deficiency in
services, amount to reduction in value of supply and same should not be
considered as separate service covered by the term “Obligation to tolerate an
act or a situation”; Perusing the agreement between the applicant and BHEL for
erection & commissioning of main plant package, AAR observes that contract
price and liquidated damages are two separate aspects / events, deduction of
one from the other is a mere facilitation towards settlement of accounts;
Stating that recovery of liquidated damages is an independent activity and
consideration for the work done remains unaltered, AAR observes “For the Taxman, what would matter is
the value for the work done. And once this valuation is properly done and tax
liability thereon discharged, whether this value is paid partially or not paid
at all would not be a concern from the taxation perspective but a matter
between contracting parties..”; Resultantly, holds that empowerment
to levy liquidated damages is for reason that there has been delay and the same
would be tolerated but for a price or damages, hence, the income of the
applicant would be for a ‘supply of service’ in terms of clause (e) of Para 5
of Schedule II; Such supply i.e. levy of liquidated damages, would be covered
under Heading 9997 i.e. “Other services” under Notification No. 11/2017-Central
Tax / State Tax (Rate) exigible to GST at 18%; Further clarifies that liability
to pay tax on services shall arise at the time of supply, if the contractor
fails to achieve trial operation within specified time period which falls under
GST regime, then levy of liquidated damages would attract GST : Maharashtra AAR
The order was passed by Shri.
B. V. Borhade and Shri. Pankaj Kumar.
Mr. S. S. Gupta, Mr. Karan Awtani, and Mr.
Ashutosh Shukla appeared on behalf of the applicant.UN Model Convention 2017 introduces anti-abuse rules, new FTS article; Incorporates BEPS language
United Nation releases 2017
update of the Model Double Taxation Convention between Developed and Developing
Countries; The UN Model Convention introduces new article 12A on 'fees
for technical services' (the article which is absent in OECD's convention); The
2017 update also incorporates some of the language of the BEPS project;
The 2017 UN Model Convention introduces a new general anti-abuse
rule in article 29(9); A note released by the UN Committee states that
"[the new rule] together with the specific anti-abuse rules included in
tax treaties, is intended to prevent transactions and arrangements from being
granted treaty benefits in circumstances where granting such benefits would be
contrary to the object and purpose of the Model Convention"; Article
4 is modified to include a new tie-breaker rule for determining the treaty
residence of dual-resident persons other than individuals and Article 5
is modified to prevent the avoidance of permanent establishment status; The
2017 Model was released during the 16th session of The Committee of Experts on
International Cooperation in Tax Matters of United Nations held this week at
New York
Wednesday 16 May 2018
HC : Concessional education facility not perquisite prior to 2001- amendment to Rule 3, TDS inapplicable
Gujarat HC reverses ITAT
order, holds that payment to education society for recouping deficit in payment
of tuition fees of employees' children does not amount to perquisite for AY
2000-01 and 2001-02; Notes that the children of the employees were studying in
that Education Society and were paying fees at a subsidized rate and burden
borne by assessee per child per month never exceeded Rs. 1000; Observes that
Rule 3 (e) prior to amendment in 2001 referred to 'free' educational facility
and the word 'concessional' was inserted by 2001 amendment only for subsequent
period; Thus, holds that payment to recoup such deficit does not amount to
perquisite in the hands of employees and "Assessee cannot be said to be a
defaulter ... and liable under Section 201 [1] of the I.T Act or
to make payment of interest leviable under Section 201 [1A] of the
Act":HC
HC : Directs assessee to approach Nodal officer for IT grievance redressal of transitional credit
HC disposes of writ
petition seeking direction to Revenue to grant benefit of transitional Input
Tax Credit on due verification of manual application and to reopen the portal
for submission of Form GST TRAN-1; Finds that Govt. has set up IT grievance
redressal mechanism to address the grievances of taxpayers due to technical
glitches on GST portal providing for appointment of Nodal Officer on identified
issues and solutions have also been suggested; Further notes that complete
procedure has been prescribed for redressal of grievance, particularly of
non-uploading of Form GST TRAN-1 due to technical glitches vide CBIC Circular
dated April 3, 2018, and the State Govt. too has appointed Nodal Officers in
this regard; Accordingly, directs assessee, who provides coal mining, logistics
and other allied services to Coal India Ltd. and had claimed transitional
credit of service tax, to approach the Nodal Officer along with all necessary
documents : Chhattisgarh HC
HC : Dismisses writ challenging SFIS denial; Cannot bypass appellate procedure apprehending Authority's incompetency
HC
dismisses writ petition challenging order passed by Asst. DGFT denying the
benefit of ‘Served from India Scheme’ (SFIS) to assessee rendering hospitality
service, on the premise that it was promoting a foreign brand; Rejects
assessee’s plea that said order lacks jurisdiction and competency and no
fruitful purpose would be served in preferring appeal as Director General
himself had earlier taken a decision contrary to assessee’s interest, which has
been quashed by Delhi HC and therefore, preferring an appeal would be an empty
formality; Perusing Section 15 of FT (D&R) Act, HC elucidates that
provision stipulated thereunder is unambiguous that any decision taken or order
passed by the Adjudicating Authority is appealable u/s 15(1) either before the
Director General or any authorised officer superior to Adjudicating Authority;
Remarks, “Law is an evolving procedure and the pragmatic approach by the Courts
as well as by the authorities are certainly in growing nature. In a developing
nation, the field of law is also being developed by new ideas and
thoughts…..apprehension…that the authority will confine himself only in respect
of the previous decision, cannot be accepted nor shall form a basis for not
exhausting the remedies provided under the Statute”; A decision taken by DGFT at
an earlier occasion will not preclude him from reconsidering issues nor
assessee can come to a conclusion that DGFT is incompetent to re-adjudicate the
issues, observes HC while stating that, “all the intermittent interventions and
the writ petitions filed without exhausting the remedies prescribed under the
Statutes need not be entertained in all circumstances in a routine manner” :
Madras HC
Increased validity applicable to all Chapter 3 scrips irrespective of policy period, clarifies DGFT
DGFT
issues clarification on the applicability of Public Notice No. 33 dated October
23, 2017 which increased validity of duty credit scrips issued under Chapter 3
of FTP on or after January 1, 2016; Accordingly, states that such extension of
validity applies to all Chapter 3 scrips respective of the Policy period; Also
informs that such scrip holders are not required to approach the Regional
Authorities for any amendment in the validity period : DGFT Trade Notice
Monday 14 May 2018
SC : Takes tough stand on delay in Revenue appeals; Refuses condonation, imposes cost
SC dismisses Revenue’s SLP
in multiple cases citing failure of Revenue to satisfactorily explain
the inordinate delay in filing of petitions; In one case while
dismissing SLP, a bench of Justice A. K. Sikri and Justice Ashok Bhushan remarks
that "There is a delay of 159 days in filing the present petition
which is not satisfactorily explained. Notwithstanding the same, we have
gone into the merits of the case and do not find any substance in the
special leave petition"; Dismissing a SLP involving a sales
issue, the bench of Justice Ranjan Gogoi, Justice R.Bhanumathi and Justice
Navin Sinha quips that “the delay of 448 days in filing the Reference
Application(s) was refused to be condoned by the HC on grounds which we
consider to be good grounds.”; In yet another matter of Shree Cement
Ltd., though SC condones delay, it imposes cost of Rs. 20,000 on Revenue.
Waiver of Late fee
This is to update you on the recent Not. 22/2018 – CT
released today, through which the authorities have notified waiver of late fees
payable under section 47, for failure to file GSTR 3B up to the due date for
the months of October 2017 – April 2018. The notification is in reference for
those registered persons whose declaration in Form GST TRAN 1 was submitted
but not filed on the portal on or before 27th December, 2017.
Provided, the registered person complies with
the following two conditions:
1.
The declaration in Form GST TRAN 1 was filed on or before 10th
May, 2018
2.
The return in Form GSTR 3B for each of the months from October 2017 –
April 2018 have been filed on or before 31st May, 2018
CBIC notifies new Customs Brokers Licensing Regulations; Prescribes different license formats, prohibition period
CBIC notifies Customs
Brokers Licensing Regulations 2018, thereby requiring a Customs Broker to hold
a license to carry on business relating to entry or departure of conveyance or
import or export of goods including audit work at any Customs Station; Bestows
the responsibility of inviting applications upon Directorate General of
Performance Management (DGPM), in lieu of Directorate General of Inspection of
Customs and Central Excise (DGICCE), while prescribing additional conditions of
holding Aadhaar number and valid PAN card, along with no penalty for an offence
under GST laws; Individual applicant shall be granted Customs Broker License in
Form B1 whereas License to a company, firm or association shall be granted in
Form B2; Period prohibiting Customs Broker from transacting business in one or
more of Customs Station shall not exceed one month from date thereof, provided
that where the license is suspended as a consequence to prohibition, the time
period for giving hearing opportunity and passing appropriate order, shall be
reckoned from date of such suspension; Customs Broker or F-Card holder (person
who has passed examination under Regulation 6) can file appeal u/s 129A of
Customs Act to CESTAT, while G-Card holder (person who has passed examination
under Regulation 13) may prefer appeal u/s 128 to Commissioner (Appeals) : CBIC
Notification
HC : Serving notice to taxpayer's CA not service at all, quashes reassessment proceedings
Chhattisgarh HC allows
assessee-company’s writ, quashes re-assessment proceedings for AY 2009-10, as
“no notice was served to the petitioner-assessee u/s. 148(1) and service of
notice to the Chartered Accountant (‘CA’) of the petitioner Company is not
service at all..”; Revenue had issued notice in March 2016 on assessee’s
incorrect address which was returned back by the post office, subsequently,
notice was served to assessee, through its CA, in April 2016 [i.e. after period
of limitation u/s. 149(1)]; Rejects Revenue’s stand that since assessee had
participated in the assessment proceedings after service of notice through CA,
filed its return and also raised objections, the assessee is deemed to have
waived service of notice in view of Sec. 292BB; Refers to the proviso to Sec.
292BB, observes that since assessee submitted its objection to AO regarding the
failure to effect service of notice upon it prior to completion of assessment
proceedings, Sec. 292BB presumption is not applicable; Relies on Delhi HC
ruling in Chetan Gupta, Gauhati HC ruling in Mintu Kalita and Allahabad HC
ruling in Laxmi Narain Anand Prakash, moreover HC observes that the notice was
served beyond the limitation period u/s. 149(1):HC
Delhi Govt. appoints Appellate Authority under DGST Act
Delhi Govt. authorizes
Additional Commissioners to perform functions of Appellate Authority, to hear
appeals against the orders of Adjudicating Authority in terms of Section 107 of
Delhi GST Act 2017 : Delhi Govt. Notification
ITAT: Micro-finance to poor at higher interest, not ‘relief of poor’; Denies exemption u/s. 11
CBDT Directs Dedication Of Fortnight For Appeal Effect And Redressing Public Grievances
The CBDT has issued a directive dated 7th May 2018 stating that the delay in giving appeal effect and passing rectification orders is the biggest source of grievance against the Department. It is pointed out that such delays also adversely affect the performance of the Department as the infructuous demand remains stuck in appeal orders and rectification petitions till these are disposed of by the assessing officer. With a view to expeditiously dispose off the appeal effect and rectification claims of the taxpayers, the CBDT has directed that the first fortnight of June, 2018 should be dedicated for attending to the pending claims in these areas
Saturday 12 May 2018
ITAT : Adwords program payment nothing but 'royalty', rejects Google's equalisation levy defence
Bengaluru ITAT adjudicates
issue of taxability of Google’s Adwords program payment in light of HC
direction to dispose of appeals independently without being influenced by
earlier ITAT order, reconfirms characterization of payment as
royalty under the domestic law as well as India-Ireland DTAA; Notes
that assessee had entered into distribution agreement as well as service
agreement with GIL and under the former, Google India was appointed as an
authorized distributor of Adwords programs to the advertisers in India, whereas
under the latter, assessee rendered ITES services and software development
services for GIL; Perusing all relevant agreements and relevant documentation,
ITAT observes that the obligation cast upon the assessee under the
Google Adword distribution / reseller agreement can only be discharged with the
help of the ITES division, therefore, the distribution agreement and the
service agreement are interconnected; Considering the nature of services
performed by the assesse with the aid of ITES division, ITAT rules that since
the assessee had an access to patent, technical know-how, IPRs, trade mark, the
process, derivative works, brand features, etc., of the GIL, “the payments of
advertisement fees ... is not the payment simpliciter towards the purchase of
AdWord space which may be treated as business profit.. but it is a payment of
royalty to the GIL...”; Relies on jurisdictional HC ruling in Synopsys
International Ltd., distinguishes ITAT rulings in Pinstorm Technologies Ltd.,
Right Florist and Yahoo India Ltd. on facts, observes unlike these cases,
assessee in the instant case, is not a simpliciter buyer of Adword Space for
putting the advertisement for himself or others; Remarks that introduction
of equilisation levy would not convert the nature of payment made by the
assessee, also rejects assessee’s bona-fide belief stand for non-deduction of
TDS observing that the distribution and service agreements were prepared in
such a way to give transaction a different colour; With respect to whether
GIL is the beneficial owner of royalty income so as to claim concessional tax
rate under DTAA, ITAT restores the matter to the AO to re-adjudicate the issue
in the light of the license agreements executed between the parent
holdings of GIL:ITAT
Tuesday 8 May 2018
HC grants interim stay against ‘best judgment’ assessment order passed after 12 years
Bombay HC grants interim
stay against ‘best judgment’ assessment order passed by Assessing
Authority after lapse of almost 12 years u/s 33(5) of Bombay Sales
Tax Act, 1959 r/w Section 9 of Central Sales Tax Act for the F.Y. 2004-05;
Notes petitioner’s stand that such an inordinate delay in
adjudication is directly in teeth of law in terms of various judicial
precedents including Court’s recent judgment in Premier Ltd; HC
observes that the only explanation provided for inordinate delay by the Dept.
is delay by petitioner in appearing for personal hearing; Accordingly, while
admitting the petition, HC holds, “prima facie arguable questions of the
inordinate delay in completing the assessment are raised” : Bombay HC
Communication from CPC for mismatch of Income as per form 26AS.
CPC – Income Tax is
sending notices to taxpayer towards
mismatch of income as disclosed in Income tax return and income as per form
26AS. The reply of same should be made
in next 30 days. In case you need any
assistance to make reply to income tax department, please take assistance of our
tax experts. Contact them at 79754 87625.
Saturday 5 May 2018
HC : Quashes seizure of consignment for non-filing of e-Way Bill's Part B during intra-state transport
HC quashes seizure order /
show cause notice passed / issued u/s 129 of CGST Act for non-filing of Part-B
of e-Way Bill during movement of goods within State of U.P up to transporter’s
premises; Accepts assessee’s contention that in terms of amendment to Rule 138
of CGST Rules vide Notification No. 12/2018-Central Tax, it was not obliged to
fill details of conveyance in Part-B where goods were being transported up to a
distance of 50 kms within the State, from the place of consignor’s business to
the place of transporter for further transportation; Finds force in assessee’s
submission that there was no intention to evade payment of tax for the reason that
it had charged IGST @ 18% in respect of such goods consigned to Gujarat; Noting
that all the documents accompanied the goods and requisite details were duly
mentioned, HC elucidates that mere non-mentioning of vehicle no. in Part-B
cannot be a ground for seizure of goods; Moreover, states that it was
obligatory on Revenue’s part to pass an appropriate reasoned order on noting
that no reasons were assigned nor any discussion mentioned therein,
consequently directs release of seized goods & vehicle: Allahabad HC
Authority for Advance Ruling passes orders on issues raised under GST
This Tax Alert summarizes the orders
passed by the Authority for Advance Rulings (AAR) under the GST in different
states.
The outcome of some of the key rulings are summarized below:
• Supply of UPS and battery for a single price cannot be considered as naturally bundled and hence is treated as mixed supply
• Supplier having only exempt supplies and also not liable to pay GST under reverse charge, is not required to register under the GST law
• Promoting the courses of foreign universities in India is not an export of service but to be treated as intermediary services liable to GST
• Meals provided to employees in a factory canteen is a supply liable to GST
• Out and out supply without physical imports into India will not attract GST
• Goods sold in duty free shop at Delhi Airport to international passengers travelling abroad is a supply within India and not exports, hence liable to GST
• Transfer of undivided share of land under a separate agreement is part of the supply of superstructure, subject however to the abatement under Notification No. 11/2017 – Central Tax (Rate)
• Rulings of the AAR may have limited applicability as the same would be binding only to the applicant and the jurisdictional tax authorities, basis the facts of the case submitted before the AAR.
• One will need to analyze the complete facts of the case before placing reliance on Advance Ruling as it may have a significant bearing on the tax treatment of the transactions, particularly those which are of recurring nature or involving high stakes.
• The finding of the AAR holding divisibility of contract as a key determinant of the nature of supply i.e. mixed supply or a composite supply, despite the products being interdependent and integral could be debatable. Industry should evaluate supplies of more than one products on case to case basis in light of the said ruling.
• AAR’s observations on taxing the entire consideration notwithstanding the fact that the agreement between the developer and the buyer is entered after part of the construction is already completed, will need to be analyzed in light of the apex court ruling and the tax treatment under the erstwhile indirect tax regime.
• Non-applicability of IGST on imported goods which do not enter territory of India may remain litigious in view of its implications on reversal of input tax credit as such supply is treated as non-taxable supply.
HC: Tribunal must hear taxpayer before allowing Revenue's ‘early hearing’ application
Delhi HC rules in favour of
NDTV promoter Prannoy Roy (assessee), holds that order granting early hearing
to Department is a ‘judicial order’and not an ‘administrative’ order; Assessee
had challenged the Tribunal order granting early hearing to Department on the
ground that neither the Department’s application for ‘early hearing’ nor the
ITAT's order granting such early hearing were provided to assessee; HC rules
that assessee must be granted hearing before allowing Department’s ‘early
hearing’ plea, also rejects ITAT's admission of additional evidence without
hearing opportunity to assessee
Chairman CBDT Adjournment - Stay granted matters
INCOME TAX APPELLATE TRIBUNAL BAR
ASSOCIATION
10TH FLOOR, ITAT
PREMISES, LOK NAYAK BHAWAN, KHAN MARKET, NEW DELHI-110003
TEL:
24628213 / 24647347 / 43528310
Website: www.itatbardelhi.com
email: info@itatbardelhi.com / itatbar@gmail.com /itatbardelhi@gmail.com
Sec. 80P deduction available on interest from investments with co-op. bank; Tax deduction u/s. 194C cannot make
ITAT: Allows Sec. 80P deduction on co-operative society’s
interest income from investments with co-operative bank
Update on 27th GST Council Meeting at New Delhi on 4th May 2018
GST Council (‘Council’) in its 27th meeting
held on 04th May 2018 has discussed and made recommendations on
various issues. The key highlights of the meeting are as follows:
· Simplification of GST
Returns
– The Council has approved principles for filing of new Return design based on
the recommendations of the Group of Ministers on IT simplification. The key
elements of the new Return design are as follows –
AAR : Solar Power Plant involves element of 'permanency'; EPC agreement taxable as "works contract"
Maharashtra AAR holds that
turnkey Engineering, Procurement and Construction contract for setting up of
solar power plant, would constitute a “works contract” in terms of Section
2(119) of CGST / MGST Act; Rejects applicant’s stand that such transaction
should be treated as “composite supply” u/s 2(30) of CGST Act, inasmuch as
supply of Solar Power Plant does not result into transfer of an “immovable
property”; To understand the meaning of the term “immovable property”, AAR
refers to SC judgments in T.T.G. Industries Ltd. & Solid and Correct
Engineering Works as well as Bombay HC ruling in Bharti Airtel Ltd. and
states, “The principles laid down in the judgments…stand good under all
statutes unlessany specific definition is available under statute…”; Analyzing
the agreement in present case, AAR finds that the owner expects the contractor
i.e. the applicant to perform all activities from engineering, design to
procurement of materials and also perform the testing and commissioning,
and “the liability of the contractor doesn’t end with the procuring of
materials but extends till the successful testing and commissioning of the
system”; Observes, said contract is to develop a 60 MWAC / 81 MWDC solar power
plant for onward sale of power to its customers, therefore such output supply
would involve an element of permanency for which it would not be possible and
prudent to shift base from time to time or locate the plant elsewhere at
frequent intervals; AAR also refers inter alia to definitions of
“Commissioning”, “Government Order”, “Grid” and “Grid Substation” along with
‘Obligations of Contractor’ clause to remark, “After having established
and commissioned such a Project which is connected to a Grid Substation, who
would be taking the Project to a different location. It would be farfetched an
argument that the Project could be shifted to a different location just to
prove that the Project is movable”; Resultantly, observes that since “works
contracts” u/s 2(119) are deemed to be supply of services, the transaction in
instant case would constitute supply of “services” falling in Entry at Sr. No.
3(ii) [Heading 9954 (Construction Services)]; Accordingly, there arises no
occasion to visit the entries prescribing tax rates for ‘goods’ and there would
be no relevance of “principal supply”, observes AAR; As regards liability of
sub-contractors, AAR notes that they either supply goods, viz. renewable energy
products and parts thereof to the contractor or engage in providing certain
portion of contract, but in the absence of documents to establish that
transaction is supply of ‘goods’, refuses to delve into said question :
Maharashtra AAR
Services of software development & customisation taxable at place of 'recipient', clarifies CBIC
CBIC
issues clarification on applicability of the Place of Provision of Services
Rules (POPS Rules) to development of software and services on software;
Explains,“Software being intangible, does not have a unique existence and can
exist on different servers at the same point in time…Limited access to the
software for a limited period through electronic protocols is given to the
service provider by the recipient of service to enable the former to provide
the service. Only the recipient of service has control over who accesses the
software, when it can be accessed, for how long and for what purpose.”;
Applying the definition of “declared services” in Section 66E(d) of the Finance
Act and the provisions of POPS Rules, CBIC clarifies – (i) in case of services where
data, instructions etc. are provided so as to develop software i.e.
development, design and programming of IT software, the place of provision of
service is the location of service recipient, while (ii) in case of services on
software involving testing, debugging, modification etc. i.e. customisation,
adaptation, ugradation, enhancement, implementation of IT software, the place
of provision of service is the location of recipient; Therefore, in both cases,
place of provision of service is the location of service recipient : CBIC
Circular
Thursday 3 May 2018
Denial of KKC credit to be transitioned into GST
This is to update you on a recent Advance Ruling issued by
the Authority for Advance Ruling (Maharashtra) wherein it has been held that
the accumulated credit by way of Krishi Kalyan cess (KKC) as appearing in the
Service tax return of Input service distributor (ISD) on June 30 2017 cannot
be carried forward in the electronic credit ledger maintained under GST.
Wednesday 2 May 2018
SC : Reverses HC, permits block assessment aided by 'simultaneous' survey on connected person
SC allows Revenue's appeal,
holds that material found in the course of simultaneous survey in the premises
of builder with whom assessee had transaction, can be used in assessee's block
assessment u/s 153A; Search was conducted at the premises of assessee between
July 17, 2002 and August 21, 2002 and simultaneous survey was carried on at
premises of ECIL (builder and decorator who had constructed and decorated
assessee's house) wherein it was found that assessee had paid in cash Rs. 95.16
lakhs to ECIL which was not accounted for, accordingly AO assessed this amount as
income in block assessment on assessee for period April 1, 1996 to July 17,
2002; SC notes that in order to add any income in the block assessment,
evidence of such must be found in the course of search u/s 132 or in any
proceedings simultaneously conducted in the premises of the assessee, relatives
or persons who are connected with assessee and are having transaction/dealings
with such assessee; Takes note of the provision of Sec 158BH under which other
provisions of Income-tax Act are made applicable to block assessment, thus
holds that any material or evidence found/collected in a survey u/s 133A which
has been simultaneously made at the premises of a connected person can be
utilized while making the Block Assessment in respect of assessee u/s 158BB r.w.s
158BH; Observes that "The same would fall under the words 'and such other
materials or information as are available with the Assessing Officer and
relatable to such evidence' occurring in Section158 BB of the Act"; Thus,
holds that AO was justified in taking into account the adverse material found
during the survey while making the Block Assessment, sets aside HC order and
restores AO's order of block assessment:SC
SC : Rescues 'marginal taxpayers', holds amendment relaxing Sec. 40 (a) (ia) disallowance rigours as retrospective
SC upholds HC rulings
giving retrospective effect to Finance Act, 2010 amendment that relaxed the
rigours of Sec. 40(a)(ia), providing that all TDS made during the previous year
can be deposited with the Government by the due date of filing the return of income;
Rejects Revenue's argument for a 'plain'/literal reading of the amendment,
notes carefully both the Finance Act 2008 & 2010 amendments; SC observes
that while the Finance Act, 2008 amendment (amended retrospectively w.e.f
1.4.2005 ) gave relief in cases where TDS had been deducted in the month of
March but deposited before due date of filing return, the Finance Act, 2010
amendment (applicable from AY 2010-11) extended this relief to TDS deducted in
the earlier 11 months as well and deposited before the return filing due date;
SC, on perusal of the Memorandum explaining the reasons behind the Sec.
40(a)(ia) amendment, observes that the same came with a purpose of ensuring tax
compliance, not to punish the assessee and hence the same should not be allowed
to be converted into an 'iron rod' provision which metes out stern punishment
and results in malevolent results; SC holds " A proviso which is inserted
to remedy unintended consequences and to make the provision workable, a proviso
which supplies an obvious omission in the Section, is required to be read into
the Section to give the Section a reasonable interpretation and requires to be
treated as retrospective in operation so that a reasonable interpretation can
be given to the Section as a whole..." ; Court justifies this liberal
interpretation citing the adverse consequences on 'marginal' and 'medium'
taxpayers if the amendment is not given retrospective operation; Relies on
co-ordinate bench ruling in Allied Motors (P) Limited case wherein Sec. 43B proviso
was held as retrospective in nature:SC
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