20+ Steps To Deliver Tax Nirvana To Citizens And Foreign Investors

– Mind set of tax officials in the field must be changed from tax collection to tax service;

– Introduce Accountability provision under the tax laws as per the recommendation of Dr. Raja Chelliah Committee;

Taxability Of Bogus Share Capital U/s 68

Introduction

The most effective and lethal weapon used by the Income-tax Department (‘Department’) against evasive tactics used by the assessees, to convert their unaccounted money in accounted one, is section 68 of the Income-tax Act, 1961 (‘Act’).

AS all  are well aware, the GST law, insofar as it concerns the Realty Sector, has been virtually re-written with effect from 1-4-2019 and that, the levy of GST at the lower rates without the benefit of ITC is compulsory for projects which commence on or after 1-4-2019 and that, in respect of 'ongoing projects', the Developer has the option to continue with the old scheme wherein, ITC is allowed. Hence, the new scheme would, by and large, boil down to the interpretation of the definitions of an 'ongoing project' and 'a project which commences on or after 1-4-2019'.

In terms of Notification No. 3/2019-CT(Rate) dated 29-3-2019, an 'ongoing project' is defined as under:

(xx)   the term "ongoing project" shall mean a project which meets all the following conditions, namely- 

(a)   commencement certificate in respect of the project, where required to be issued by the competent authority, has been issued on or before 31st March, 2019, and it is certified by any of the following that construction of the project has started on or before 31st March, 2019:-

(i)   an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or 

(ii)   a chartered engineer registered with the Institution of Engineers (India); or 

(iii)   a licensed surveyor of the respective local body of the city or town or village or development or planning authority.

(b)   where commencement certificate in respect of the project, is not required to be issued by the competent authority, it is certified by any of the authorities specified in sub- clause (a) above that construction of the project has started on or before the 31st March, 2019;

(c)   completion certificate has not been issued or first occupation of the project has not taken place on or before the 31st March, 2019;

(d)   apartments being constructed under the project have been,  partly or wholly, booked on or before the 31st March, 2019.

Explanation.- For the purpose of sub- clause (a) and (b) above, construction of a project shall be considered to have started on or before the 31st March, 2019, if the earthwork for site preparation for the project has been completed and excavation for foundation has started on or before the 31st March, 2019.

(xxi)   "commencement certificate" means the commencement certificate or the building permit or the construction permit, by whatever name called issued by the competent authority to allow or permit the promoter to begin development works on an immovable property, as per the sanctioned plan; 

(xxviii)   "project which commences on or after 1st April, 2019" shall mean a project other than an ongoing project;

Now, look at the definition of a project which commences on or after 1-4-2019, as per this Notification.

(xxviii)   "project which commences on or after 1st April, 2019" shall mean a project other than an ongoing project.

In terms of the above definitions, any project which does not fulfil the definition of an 'ongoing project' would, by default, get treated as a 'project which commences on or after 1-4-2019' thereby forcing the Developer to go for the new scheme.

Can life be as simple as that?

Take the case of the requirement to obtain a commencement certificate from the competent authority. This requirement is virtually absent in many parts of the country and is prevalent in some cities like Bengaluru wherein the commencement certificate is required to be obtained from the Brugat Bengaluru Mahanagara Palike, popularly known as BBMP. Any Developer would say that, he would need to go through a big and laborious process to obtain the Commencement Certificate from the BBMP and in many cases this certificate is obtained at the time when the construction is almost over.

Many Developers have launched residential projects in respect of which, significant construction activity has already been completed and these projects could have been launched several months ago and these Developers could have signed up many flat buyers. Prior to 1-4-2019, Developers were collecting GST @ 12% on the total value of the project and life was fine. Since obtaining the commencement certificate was not a pre-requisite, most of these Developers did not even bother to apply to the BBMP for obtaining these commencement certificates.

Suddenly, on April Fools' Day this year, all of these otherwise running projects without commencement certificates, would cease to be treated as 'ongoing projects' and by default, would get classified as projects commencing on or after 1-4-2019. Many Developers have signed agreements with flat buyers on the basis of the erstwhile GST regime, on the basis of the GST rate of 12% with ITC and they suddenly find that, they are forced to shift to the new regime of charging GST @ 5% without ITC, in respect of these otherwise running projects. Where is the logic of treating these projects that have been running for several months, as new projects commencing on or after 1-4-2019, only on the basis of the technicality of these projects not having obtained the Commencement Certificate on or before 31-3-2019? Does this requirement not discriminate a Developer who is located in a place where the practice of obtaining a commencement certificate from the competent authority as compared to a Developer who is fortunate enough to be engaged in construction of a project in a city or town where, there is no such requirement?

Taking this discussion forward… while bringing such an important substantive requirement wherein, not obtaining the commencement certificate prior to 1-4-2019 could result in the project being classified as a new project commencing on or after 1-4-2019, shouldn't the Government have given time to Developers to apply for and get these commencement certificates, wherever it is necessary? Or, shouldn't the Government have issued Notification No.3/2019-CTR well in advance, so that, Developers could have applied for and obtained these commencement certificates. The Government, sadly enough, seems to be oblivious of the ground realities related to the obtaining of the commencement certificates and the simple fact that these certificates are more of a procedural requirement and do not reflect the actual quantum of work that could have been completed in a running project.

There is another issue that would need discussion. As per the definition of an 'ongoing project', the Completion Certificate, or the 'OC' as it is popularly referred to, should not have been obtained on or before 31-3-2019. Here again, the Government seems not to have appreciated the fact that, even after obtaining the OC, there could be installments that would continue to fall due from the flat buyers and in many cases, some amount of work such as painting, etc. could be done after the date of the OC. With these projects wherein OC has been obtained before 1-4-2019, would these projects be required to be classified as 'new projects commencing on or after 1-4-2019', wherein, the Developer would necessarily need to charge GST at the rate of 5%? Can anything be more unreasonable and illogical to treat a project in respect of which OC has been obtained on or before 31-3-2019, as a new project commencing on or after 1-4-2019?

One would request the government machinery, who seem to blissfully unaware of the ground realities, while drafting these draconian Notifications, to apply their minds to these scenarios and come out with clarifications, before May 10, 2019 so that, the Developers can accordingly exercise their options vis-à-vis their running projects.

Before parting…

A clarification to the effect that, running projects as of March 31, 2019 which fulfil the other requirements except for obtaining the commencement certificate would still be treated as an 'ongoing project' would be of great help to the Realty Sector. A further clarification to the effect that, the balance installments falling due after the OC date, in respect of running projects where OC has been obtained prior to 1-4-2019, shall continue to be covered by the old scheme would also be hugely welcome. Since, the option to shift to the new scheme for ongoing projects has to be exercised and the requisite Form IV has to be filed on or before May 10, 2019, an urgent clarification would hugely benefit this ailing Realty Sector.

Highlights of the India-Hong Kong DTAA

GST - Agenda for the second year - Part 36 - Interest - Is it a consideration for supply?Govt amends Import Policy conditions for Electronics & IT goodsPrabhu meets US Counterpart; both hail robust bilateral tiesIndia takes measures to boost trade with AfricaCBIC Member John Joseph gets addl charge of Member (IT, Legal & CV)GST - Petitioners should be called before the CBIC for a consultative meeting; deliberations to be placed along with petition before the GST council for its consideration: HCArgument that price of 'Electric Chimney' was not increased at the time of introduction of GST when tax rate was fixed at 28%, hence the question of reducing price when GST rate was brought down to 18% is legally unsustainable: NAAContention that effective tax rate during VAT period was around 18% and the GST rate w.e.f 15.11.2017 was also 18%, therefore, there was no need for revision in price when tax rate had been decreased from 28% to 18% is untenable: NAAVAT - Delivery of possession is sine qua non, for transfer of 'right to use' of goods and to invoke provisions of Sec 3-F of UP VAT Act: HCGovernment permits export of Potatoes, Onions, Rice, Wheat Flour, Sugar, Dal and Eggs to Republic of Maldives under bilateral trade agreementAmendments made in ANF 3B of Handbook of Procedures for applying for SEIS benefits under FTPAmendments in ANF 3D - number of entries of Shipping bills/Airway bills which can be filed in a single online ANF 3D application increased from 50 to 250 for claiming MEIS benefitsCus - Enhancement of redemption fine without determining market value of goods and duty payable, cannot be sustained: CESTATCus - Since replacement cost represents intrinsic value of container, agreed upon between lessor and lessee in one way lease, same is basis of value: CESTATIncome tax - Omission to consider mixed question of law & fact - Fit case for remand: HCIncome tax - Independent primary evidence and not secondry, should be basis for addition u/s 69C: HCIncome tax - Active PAN number of deceased assessee is no basis to presume that assessee is alive, more so if Revenue was intimated about demise: HCIncome tax - Unaccounted cash credit - Cash payments made without any entry in balance sheet merits addition u/s 68: ITATIncome tax - Proviso to Section 2(15) will not affect institutions involved in imparting education: ITATCX - Charge of clandestine removal is a serious charge and must be supported by evidence - as no actual stocking done by Revenue, no reason to disbelieve the statement of Internal Auditor: HCST - It is inexplicable as to how Department withdrew SCN dated 30.08.2001 and issued a fresh SCN in 2004 for very same period: CESTATCX - No penalty can be imposed on a Private Limited Company under Rule 26(1) of CER: CESTATGST - Agenda for the second year - Part 36 - Interest - Is it a consideration for supply?Govt amends Import Policy conditions for Electronics & IT goods

The India-Hong Kong DTAA enters into force from 30th November, 2018. The same would be effectively applicable from 01st April, 2019.  Accordingly, the benefit of the provisions of the DTAA can be claimed in respect of the income derived in any year starting from April 1, 2019. The companies engaged into cross-border transactions with Hong Kong were eagerly awaiting this DTAA to become effective. The articles of India-Hong Kong DTAA are aligned with BEPS and MLI in order to curb tax evasion/ avoidance, treaty shopping practices, conduit companies practices etc. Now, the companies resident in India as well as Hong Kong would be able to take shelter under the treaty, thereby, avoiding double taxation and/ or taxation at higher rates.

Challenge in Realty Sector - 'ongoing projects vs new projects'

AS all  are well aware, the GST law, insofar as it concerns the Realty Sector, has been virtually re-written with effect from 1-4-2019 and that, the levy of GST at the lower rates without the benefit of ITC is compulsory for projects which commence on or after 1-4-2019 and that, in respect of 'ongoing projects', the Developer has the option to continue with the old scheme wherein, ITC is allowed. Hence, the new scheme would, by and large, boil down to the interpretation of the definitions of an 'ongoing project' and 'a project which commences on or after 1-4-2019'.   

GST updates- Notifications, Circulars & Orders -April 2019

• MOU-Data Sharing between CBDT to GSTN         
• Updated versions of GST - Concept and Status, and GST - An Update as on 01/05/2019 : 
• GST applicability on Seed Certification Tags         
• GST exemption on the upfront amount payable in installments for long term lease of plots, under Notification No. 12/2017 – Central Tax (R) S. No.41 dated 28.06.2017                
• GST Practitioner Examination     
• Time period for filing GSTR-3B for the month of March 2019 extended   
• Special Procedure for Return filing by Composition Taxpayers     
• Amendment to CGST Rules, 2017              
• Effective date of implementation of Rule 138E of CGST Rules, 2017           
• Clarification in respect of utilization of ITC under GST      
• Order of utilization of input tax credit after insertion of Rule 88A               
• CGST (Fifth Removal of Difficulties) Order, 2019 
• Revocation of cancellation of registration             
• Amendment to CGST Rules, 2017              
• Enhancements in E-Way Bill System        
• Generation of Electronic Invoice through GST Portal        
• GST Council not to adjudicate on Representations under GST : Case of Union of India Vs Shiyaad reported in 2019-TIOL-888-HCKerala-GST
• Interest mandatorily payable on gross tax liability on delayed payment of GST :  Case of Megha Engineering And Infrastructures Ltd Vs CCT  reported in 2019-TIOL-893-HC-Telangana-GST     

Tax Due Date- May 2019

Sr No	Due Date	Related to	Compliance to be made
1	11.05.2019	GST	Filing of GSTR 1 for the month of April, 2019
2	20.05.2019	GST	Payment of GST for the month of April, 2019 Filing of GSTR 3B for the month of April, 2019
3	07.05.2019	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 April 2019. Deposit TDS from Salaries deducted during the month of April 2019 Deposit TCS for collections made under section 206C including sale of scrap during the month of April 2019, if any
4	31.05.2019	TDS/TCS (Income Tax)	Furnish quarterly statement of tax deducted at source (TDS) and tax collected at source (TCS) for the quarter ended Jan-March 2019 in Form 24Q / 26Q / 27Q / 27EQ.
5	31.05.2019	Income Tax	Filing of Annual Information Return u/s 285BA

Benefits To SEZ Entities Under The Income Tax Law

Basic Understanding:

The government has notified various specified areas as Special Economic Zones (“SEZ”) or Free Trade  SEZones under the provisions of Section 3 and Section 4 of the Special Economic Zone Act, 2005 (“SEZ Act”). Section 27 of the SEZ Act provides that “the provisions of the Income-tax Act, 1961 (“the Act”), as in force for the time being, shall apply to, or in relation to, the Developer or entrepreneur for carrying on the authorized operations in a Special Economic Zone or Unit subject to the modifications specified in the Second Schedule (2^nd Schedule)”. 2^nd Schedule to SEZ Act provides the modifications made under the Income tax Act, 1961 for the purpose of giving some relaxations to the SEZ Unit. The same, inter-alia, includes the introduction of Section 10AA of the Income tax Act, 1961 w.e.f. financial year 2005-06. We will understand the provisions of Section 10AA of the Income tax Act, 1961 in this article and also the relaxations and exemptions given to SEZ under Income tax laws.  

Rule 12 of the Income Tax Rules, 1962

The Central Board of Direct Taxes, vide notification no. 32/2019 dated 1st April 2019, introduced the Income Tax (Second Amendment) Rules, 2019 which are made effective from 1st April 2019. Vide the said Income Tax (Second Amendment) Rules, 2019, rule 12 of the Income Tax Rules, 1962 has been amended and format of Form ITR-1 (SAHAJ), Form ITR-2, Form ITR-3, Form ITR-4 (SUGAM), Form ITR-5, Form ITR-6, Form ITR-7 and Form ITR-V has been updated. In this article, we look at the various changed introduced by the new Rule 12 of the Income Tax Rules, 1962.

Form ITR-1 (Sahaj)

With effect from 1st April 2019, additionally, the following categories of person will not able to a file income tax return in Form ITR-1:

• Individuals claiming deduction under section 57 (other than deduction claimed under section 57 (iia);
• Individuals being the director in any company;
• Individual holding unlisted equity shares at any time during the previous year;
• Individual who is assessable for the whole or part of the income on which TDS has been deducted in the hands of a person other than the assessee.

Form ITR-4 (Sugam)

With effect from 1st April 2019, additionally, the following categories of person will not able to file a return in Form ITR-4 i.e. SUGAM

• The person who has assets located outside India (assets includes financial interest in any entity);
• The person having signing authority in any account being located outside India;
• The person having income from any of the source outside India;
• The person having the income to be apportioned as per provisions of section 5A;
• Person being director in any company;
• The person holding any unlisted equity shares at any time during the previous year;
• The person having total income more than INR 50 Lakhs;
• The person who is the owner of more than one house property and the income of such house property is chargeable under the head ‘Income from House Property’;
• The person who is assessable for the whole or part of the income on which TDS has been deducted in the hands of a person other than the assessee.

Amendment in Mandatory Electronic Filing of Income Tax Return

As all are aware, electronic filing of income tax return is mandatory, however, the following categories of persons are exempted from the same –

• An individual having an age of 80 or more at any time during the previous year; and
• An individual who is furnishing a return of income in Form ITR-1 (SAHAJ) or Form ITR-4 (SUGAM).

The above categories of person can file their return of income in any of the following manner –

• Electronically under digital signature;
• Filing the return electronically under EVC (electronic verification code);
• Filing the return electronically and submitting the verification of return in Form ITR-V; or
• Filing the return in paper form.

I-T dept revises format of TDS certificate issued by employer

The Income Tax department has revised Form 16 by adding various details, including income from house property and remuneration received from other employers, thereby making it more comprehensive to help check tax avoidance. It will also include segregated information regarding deductions under various tax saving schemes, investments in tax savings instruments, different allowances received by the employee as well as income from other sources.

Everything about Registration of NBFC in India

NBFC stands for Non-Banking Financial Company and is registered under the Companies Act, 2013 and managed by RBI with activities very similar to the bank except for some major differences. NBFC is known to provide financial support and services to businesses and individuals. One of the principal objectives of a Non-Banking Financial Company is to provide loans, personal loans, working capital loans, shared investments, other stocks and debenture issued by the Government or the other local authorities, leasing, insurance business as well as offers Market Place Lending Platform (P2P) for businesses.

New ITR Forms For Assessment Year 2019-2020

Vide notification dated 1^st April, 2019, the CBDT has introduced Income Tax (Second Amendment) Rules, 2019. Vide the said notification the CBDT has notified Income Tax Return (ITR) Forms for the Assessment Year 2019-2020 (Financial year 2018-2019). In total 7 types of Income Tax Return Norms are being notified which are being listed herein below –

Tax due date - April 2019

Sr No	Due Date	Related to	Compliance to be made
1	11.04.2019	GST	Filing of GSTR 1 for the month of February, 2019

3

20.04.2019

GST

Payment of GST for the month of March, 2019 Filing of GSTR 3B for the month of March, 2019

4

30.04.2019

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 March 2019. · Deposit TDS from Salaries deducted during the month of March 2019 • Deposit TCS for collections made under section 206C including sale of scrap during the month of March 2019, if any

Business Connection new development

In order to align the domestic laws with the modifications being done by Organisation for Economic Co-operation and Development (OECD) through Base Erosion and Profit Shifting (BEPS) and the Multilateral Instruments (MLI) some very significant amendments have been done in international taxation  

Green Shoe Option

Public issue of shares (also knows as IPO) is a very common way of raising funds
by a corporate entity. However many a times it has been seen that after public
issue of shares the listed price of securities falls below issue price which creates panic
in the market and discourages the investors to put their hard earned money in IPO
market.