HC holds IGST as part of customs duty cannot be levied on reimport of goods after repairs

 This Tax Alert summarizes recent ruling of the Delhi High Court (HC) ^[1] on whether integrated tax (IGST) is payable on cost of repairs, insurance and freight in case of re-import of goods which were earlier exported for repairs.

Notification No. 45/2017–Customs provided exemption from duties of customs on re-imported goods in excess of duty which would be leviable if the value of re-imported goods were made up of the fair cost of repairs, insurance and freight charges.

The same was amended by Notification No. 36/2021 – Customs, and Circular No. 16/2021 – Customs was issued to clarify that the integrated tax and cess under Customs Tariff Act, 1975 (CTA) would also be payable on the fair cost of repairs, etc.

The key observations of the HC are:

Tax Due Date - March 2025.

 

Sr No	Due Date	Related to	Compliance to be made
1	11.03.2025	GST	Filing of GSTR 1 for the month of February, 2025

2

20.03.2025

GST

Payment of GST for the month of February, 2025 Filing of GSTR 3B for the month of February, 2025

3	07.03.2025	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 February 2025. · Deposit TDS from Salaries deducted during the month of February 2025 • Deposit TCS for collections made under section 206C including sale of scrap during the month of February 2025, if any
4	15.03.2025	Income Tax	Payment of Advance Tax
5	31.03.2025	GST LUT	Filing of LUT for the FY 24-25

Section 50D of the Income Tax Act: A Comprehensive Analysis

 1. Introduction

Section 50D of the Income Tax Act, 1961, is applicable in cases where the consideration for the transfer of a capital asset is either not ascertainable or is inadequate. This provision ensures that capital gains tax is levied even in situations where the sale consideration is indeterminate, thereby preventing potential tax avoidance.

Taxation of ESOP.

 The document explores the tax implications of compensations paid for the diminution in the value of Employee Stock Ownership Plan (ESOP) options following corporate events like disinvestment. It delves into legal precedents, judicial rulings, and tax treatments under Indian Income Tax laws.

Will Renting of Residential Flat Be Charged Only Under House Property Post the Amendment in Finance Act 2024?

 The Finance Act 2024 has introduced a significant amendment that impacts the taxation of rental income from residential properties. This amendment has effectively reclassified the income from letting out residential houses, ensuring that it is taxed under 'Income from House Property' rather than 'Profits and Gains of Business & Profession.'

Is RPM is the appropriate method for a distributor incurring AMP expenses?

 The key issue is whether the Resale Price Method (RPM) is appropriate for determining the Arm’s Length Price (ALP) for a distributor incurring Advertisement, Marketing, and Promotion (AMP) expenses. The assessee, a joint venture between a UK luxury brand and an Indian entity, imports and resells luxury goods without adding value. The Transfer Pricing Officer (TPO) and Dispute Resolution Panel (DRP) rejected RPM due to high AMP expenses.

However, authoritative guidance and judicial precedents support RPM in such cases. The UN Transfer Pricing Manual (2021) prioritizes functional comparability over product comparability for RPM. OECD guidelines state that RPM is suitable when a distributor resells goods without further processing. The Bombay High Court (L’Oréal India, 2015) and the Delhi High Court (Burberry India, 2019) upheld RPM despite AMP expenses.

Given these precedents, the TPO’s rejection of RPM appears incorrect, as AMP expenses alone do not disqualify its application when the distributor operates on a limited-risk resale basis.

New Customs Scheme for Manufacturing Sector

 The Regulations enable an Authorized Importer to clear the imported goods directly from port to its manufacturing unit (‘Authorised Premises’) and file Bill of Entry for home consumption thereof from its Authorised Premises.

 

Understanding the US SEC's Role in Digital Asset Regulation

 The article outlines the U.S. Securities and Exchange Commission’s (SEC) evolving role in regulating digital assets such as cryptocurrencies and tokens. It highlights key enforcement actions, legislative efforts, regulatory clarifications, and their impacts on various stakeholders.

Addressing the Non-Transferability of MOOWR License in Cases of Merger/Demerger/Amalgamation

 The MOOWR (Manufacturing and Other Operations in Warehouse) scheme has been a valuable tool for businesses operating within the customs framework. However, a significant challenge has emerged concerning the non-transferability of the MOOWR license in cases of corporate restructuring such as mergers, demergers, or amalgamations. This issue has become a major concern for license holders, creating legal and financial uncertainties.

Summary of Budget 2025 - Transfer Pricing (TP) Amendments

 The Union Budget 2025 introduces significant amendments to transfer pricing (TP) regulations under the Income Tax Act. These changes focus on multi-year application of arm’s length price (ALP), streamlining compliance, and reducing litigation. The key amendments affect Section 92CA (Transfer Pricing Officer’s Reference) and Section 155 (Recomputation of Income).

---

1. Key Transfer Pricing Amendments

1.1. Amendments to Section 92CA – Reference to Transfer Pricing Officer (TPO)

• Existing Provision:

  • The Assessing Officer (AO) can refer international or specified domestic transactions to the Transfer Pricing Officer (TPO) for determining the Arm’s Length Price (ALP).
  • The TPO then assesses the transaction and passes an order.

• Amended Provision:

  • New Subsections (3B) and (4A) allow the ALP determined in one year to be applied to similar transactions for the next two years if the taxpayer opts for it.
  • Conditions for ALP Application for Two Additional Years:
    • The taxpayer must formally opt-in for this provision.
    • The option must be exercised in a prescribed form and manner.
    • The TPO must approve the option within one month of submission.
  • Implications:
    • Reduces Compliance Burden: Eliminates the need for annual ALP determinations.
    • Ensures Pricing Consistency: Provides tax certainty and reduces disputes.
    • Facilitates Tax Administration: Streamlines TP assessments for businesses and tax authorities.

• Effective Date:

  • These amendments will be effective from April 1, 2026, applying to Assessment Year 2026-27 and beyond.

---

1.2. Amendments to Section 155 – Recomputation of Income

• New Subsection (21) is inserted in Section 155 to mandate the recomputation of income for two consecutive years if the ALP for a transaction is applied under Section 92CA (3B).
• The Assessing Officer (AO) must adjust the income in line with the ALP determined by the TPO.
• Time Limit: Recomputation must be completed within three months from the completion of the original assessment.

---

2. Outstanding Questions & Clarifications Needed

1. Definition of "Similar Transactions":
   • The amendments rely on transactions being similar for ALP applicability, but clear criteria for similarity need to be defined.
2. Process & Forms for Claiming Multi-Year ALP Option:
   • A notification or circular is expected to outline the procedure for opting in.
3. Clarification on Filing Timelines:
   • The timeframe within which taxpayers must apply for multi-year ALP treatment needs specification.

---

3. Conclusion

• The Budget 2025 TP amendments provide greater certainty, reduce compliance costs, and streamline TP administration.
• However, businesses must await clarifications on procedural aspects before fully utilizing these changes.

Summary of the Input Service Distributor (ISD) Mandate

The Input Service Distributor (ISD) mandate, introduced in the Union Budget 2024, will take effect from April 1, 2025, as per amendments to Section 20 of the Finance Act, 2024. The mandate primarily addresses the distribution of input tax credit (ITC) through the ISD mechanism, particularly for reverse charge mechanism (RCM) payments on inter-state supplies.

 

Union Budget 2025 - Analysis of Tax Impact

 Direct Tax

·       No change in the rate of corporate tax including surcharge & cess.

 

TAX DUE DATE - FEBRUARY 2025

 

Sr No	Due Date	Related to	Compliance to be made
1	11.02.2025	GST	Filing of GSTR 1 for the month of January, 2025

2

20.02.2025

GST

Payment of GST for the month of January, 2025 Filing of GSTR 3B for the month of January, 2025

3

07.02.2025

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 January 2025. · Deposit TDS from Salaries deducted during the month of January 2025 • Deposit TCS for collections made under section 206C including sale of scrap during the month of January 2025, if any

CBDT clarification on applicability of PPT while granting treaty benefits:

 Background:

1.           MLI coming into force: On October 1st, 2019, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, otherwise referred to as the Multilateral Instrument or MLI, came into force.

CBDT notifies conditions for presumptive taxation of foreign cruise ship operators in India

 This Tax Alert explains the Notification  dated 21 January 2025 issued by the Central Board of Direct Taxes (CBDT) prescribing conditions for taxation of non-resident cruise ship operators in India under a new presumptive tax regime (new tax regime) applicable from tax year 2024-25 onwards.

TP in an Inflationary Economy: Navigating Challenges and Adjusting Strategies

 In today’s volatile economic landscape, inflationary pressures have become a significant challenge for multinational enterprises (MNEs). These pressures complicate the management of transfer pricing (TP), which governs inter-company transactions to ensure compliance with the arm’s length principle. As inflation reshapes market conditions, businesses must adapt their pricing models to mitigate risks and maintain compliance. This article explores the key challenges inflation poses to TP and outlines strategies for adjusting inter-company pricing models.

CBDT issues guidance on application of Principal Purpose Test

 This Tax Alert summarizes a recent Circular No. 01/2025 dated 21 January 2025 (Circular) issued by the Central Board of Direct Taxes (CBDT) providing guidance on application of the Principal Purpose Test (PPT) provisions in the context of Indian tax treaties.

Broadly, the Circular clarifies that PPT provisions are to be applied prospectively from (i) the date of entry into force of the treaty/amending protocol whereby PPT was introduced pursuant to bilateral negotiations; or (ii) the effective date of provisions introducing PPT into the treaty through Multilateral Instrument (MLI).

Further, it also clarifies that grandfathering benefit with reference to capital gains arising from transfer of shares of an Indian company by treaty residents of Mauritius, Singapore and Cyprus in respect of shares acquired prior to 1 April 2017 will be outside the purview of PPT and instead be governed by specific provisions of the respective tax treaty.

ITC not available on distribution of promotional items - High Court

 This is to update you about an important decision by Hon’ble Madras High Court (‘HC’/’Court’) in the case of ARS Steel and Alloy International Private Limited, WP No 31,33 & 35 of 2024. The court held that Input Tax Credit (ITC’) shall not be allowed on:

 

Scope of Direct Tax Vivad Se Vishwas Scheme, 2024 expanded

 Scope of Direct Tax Vivad Se Vishwas Scheme, 2024 expanded to cover cases where orders had been passed on or before 22 July 2024 where time to file an appeal had not expired

This Tax Alert summarizes Order No. 8/2025 dated 20 January 2025 (Order) issued by the Central Board of Direct Taxes  (CBDT) to expand the scope of Direct Tax Vivad Se Vishwas Scheme, 2024 (VSV 2.0) to include appeals filed in a timely manner after 22 July 2024, in respect of orders passed on or before 22 July 2024 for which the time to file an appeal had not expired as on 22 July 2024. In such cases, disputed tax is calculated based on such appeal.

Identifying a Drafting Error in GST Amnesty Provisions

 Provision Regarding Amnesty Scheme

Section 128A was introduced into the Central Goods and Services Tax (CGST) Act by the Finance Act, 2024, with effect from November 1, 2024. The relevant portion of the provision is as follows:

SC dismisses SLP to hold that capital reduction leads to transfer of shares and exigible to capital gains taxation

This Tax Alert summarizes a ruling of the Supreme Court (SC) in the case of Jupiter Capital Pvt. Ltd. ^[1] (Taxpayer) which dismissed the petition filed by the Tax Authority against admissibility of capital loss arising in the hands of shareholders on cancellation of equity shares held in subsidiary company pursuant to a scheme of capital reduction. In other words, the issue under consideration was whether capital reduction by a company amounts to “transfer” under the Indian Tax Laws (ITL) in the hands of the Taxpayer-shareholder and, accordingly, whether the Taxpayer can claim capital loss, if any, pursuant to the same.

Now You Have to Pay GST on Losses as Well!

Recently, a few announcements made by our Finance Minister, Nirmala Sitharaman, sparked widespread discussions, particularly in the retail and automobile sectors. Some panic ensued, driven by misunderstandings about the impact of changes in tax rates on the sale of old cars. Let’s break down the scenario for better clarity.

Bad Debts: Section 36(1)(vii) and Key Legal Precedents

 Bad debts are a critical consideration for businesses when filing tax returns, and Section 36(1)(vii) of the Income Tax Act provides the framework for claiming such deductions. However, several conditions must be satisfied to qualify for this deduction. Let’s explore the section’s key provisions and some significant legal precedents that shape its interpretation.

Reduce your capital gain tax via a housing loan.

Many of us rely on home loans to purchase residential property, but are you fully aware of how tax laws impact your financial strategy? Under the current tax regime, deductions on home loan interest for self-occupied properties are capped at ₹2 lakh annually. So, what happens to the interest paid beyond this limit? Is it a loss, or can it be leveraged in another way?

 

HSN Reporting Changes in GST Returns

 This is to update you about a recent GST Advisory issued by GST portal with respect to the changes in reporting of HSN Codes in Table 12 of Form GSTR-1, w.e.f. January 2025 returns. 

ITC is available on GST charged on advances - High Court

 This is to update you about an important decision by Bombay High Court (‘HC’ / ‘Court’) in the case of L&T IHI Consortium v. UOI, W.P. No. 2980 of 2019. The Court held that Input Tax Credit (‘ITC’) shall be allowed to the recipient on Goods and Services Tax (‘GST’) charged by the supplier on advance payments.

 

-Gujarat HC holds assignment of leasehold rights is not liable to GST

 This Tax Alert summarizes the recent ruling  of the Gujarat High Court (HC). The issue pertains to levy of goods and services tax (GST) on assignment of leasehold rights by lessee (assignor) to a third party (assignee).

Comparison of doing business between Singapore & Hong Kong

 

Particulars	Singapore	Hong Kong
Corporate Tax rate	17%	16.5%.
Number of DTAA	102 countries	40 countries.
Capital gain tax	NO	YES
WHT on Dividend	NO	YES
Local Director	Min 1.	NO
Political Stability	Stable.	China factor is there.
IP Rights	In terms of international IP treaties, Singapore holds a distinct advantage over Hong Kong by being a member of a greater number of these agreements. This includes significant treaties such as the Brussels Convention, the Singapore Treaty on the Law of Trademarks, and the Hague Agreement Concerning the International Registration of Industrial Designs, among others
Bank Account Opening	No need for personal visit to branch	Directors require to visit bank for opening bank account.

CBDT extends due date for filing declaration under VSV 2, without payment of additional amount, to 31 January 2025

 This Tax Alert summarizes Circular No. 20/2024 dated 30 December 2024 (Circular) issued by the Central Board of Direct Taxes (CBDT) providing extension in due date for filing declaration under the Direct Tax Vivad Se Vishwas Scheme, 2024 (VSV 2) from 31 December 2024 to 31 January 2025. The Circular provides that any declaration filed on or before 31 January 2025 will not require payment of additional amount under VSV 2. Consequently, declarations filed on or after 1 February 2025 till sunset date (to be notified) will require settlement under VSV 2 with payment of additional amount

TAX DUE DATE- JANUARY 2025

 

Sr No	Due Date	Related to	Compliance to be made
1	11.01.2025	GST	Filing of GSTR 1 for the month of December 2024
2	20.01.2025	GST	Payment of GST for the month of December 2024 Filing of GSTR 3B for the month of December 2024
4	07.01.2025	TDS/TCS (Income Tax)	Deposit TDS for payments of Salary, Interest, Commission or Brokerage, Rent, Professional fee, payment to Contractors, etc. during the month of December 2024. Deposit TDS from Salaries deducted during the month of December 2024 • Deposit TCS for collections made under section 206C including sale of scrap during the month of December 2024, if any
5	31.01.2025	TDS/TCS	Filing of TDS/TCS quarterly return for Q3 (Oct to Dec-2024).

Summary of the Input Service Distributor (ISD) Mandate

The document provides an FAQ-style overview of the Input Service Distributor (ISD) mechanism, which will become mandatory under GST regulations effective April 1, 2025. The ISD mechanism aims to streamline the distribution of input tax credits (ITC) among entities with multiple GST registrations. Key highlights include:

 

Non-Disclosure of ESOPs Offered by Overseas Entities

 1. Situation

I. Tax Department Summons
An employee received a summons from the tax department demanding an explanation for failing to disclose €X deposited in his German bank account.

Recommendations of 55th GST council meeting | 21 December 2024

 

Summary of the relevant updates is provided below for ease of your reference:

 

A)    Proposals relating to GST law, Compliances and Procedures

CBDT issues second round of frequently asked questions in relation to Direct Tax Vivad Se Vishwas Scheme, 2024

 This Tax Alert summarizes Circular No. 19/2024 dated 16 December 2024 (VSV 2- December Circular) issued by the Central Board of Direct Taxes^[1] (CBDT) which contains second round of 27 frequently asked questions (FAQs) on the operation of Direct Tax Vivad Se Vishwas Scheme, 2024 (VSV 2). The Circular is issued in continuation of an earlier Circular No. 12/2024 dated 15 October 2024^[2] (VSV 2 - October Circular) which contained the first round of 35 FAQs.

DIN not mandatory on GST refund related documents

 This is to update you about a recent decision passed by Delhi High Court in the case of Centrans Logistics Pvt Ltd (W.P.(C) 7983/2023, dated December 09, 2024) wherein it was held that a separate Document Identification Number (‘DIN’) is not required for issuance of communications related to processing of refund claims under the GST laws.

Switzerland revokes unilateral MFN benefit under India-Switzerland Tax Treaty w.e.f. 1 January 2025

 This Tax Alert summarizes a recent Statement issued by Switzerland Competent Authority^[1] (Swiss CA) on 11 December 2024 (2024 Statement) withdrawing Switzerland’s unilateral application through earlier Statement published on 13 August 2021 (2021 Statement) of Most Favored Nation (MFN) Clause in India- Switzerland (I-S) Double Taxation Avoidance Agreement (DTAA or Treaty) w.e.f. 1 January 2025.

The 2024 Statement acknowledges the interpretation given by the Supreme Court (SC) of India in the case of Nestle SA ^[2], wherein the SC held that the benefit of MFN Clause is not applicable in absence of a notification granting such benefit in accordance with the provisions of the Indian Tax Law (ITL). Further, the SC held that the term ‘third State which is a member of the OECD’ is to be interpreted as being limited to the member states of the Organisation for Economic Co-operation and Development (OECD) at the time when such treaties were entered into with India. Hence, the 2024 Statement acknowledges that the interpretation of MFN clause by Swiss CA through its 2021 Statement is not shared by India. Accordingly, in terms of the right reserved in 2021 Statement to reverse the unilateral interpretation if there is no reciprocity by the Indian CA, the 2024 Statement waives its unilateral application prospectively from 1 January 2025.

Further, the 2024 Statement clarifies the effect of such withdrawal w.e.f. 1 January 2025 on Indian and Swiss tax residents deriving dividend income from Switzerland and India respectively. Indian residents deriving dividend income from Switzerland, on or after 1 January 2025, shall be taxed @10% on such income without giving effect to the MFN clause. However, benefit of lower tax rate of 5% on such incomes as per MFN clause may continue to apply for dividend income earned during the tax years from 2018 to 2024.

Correspondingly, Swiss residents deriving dividend income from India w.e.f. 1 January 2025 shall get higher foreign tax credit up to 10% instead of 5%.

How to Tackle Penalty Notices in the Case of Transfer Pricing Adjustments

 A. Introduction: Section 270A of the Income Tax Act classifies variations in income into two categories: under-reporting and misreporting. Penalties for under-reported income are 50% of the tax payable, while for misreported income, they escalate to 200% of the tax base calculated on such income.

Tax Tribunal Special Bench upholds applicability of transfer pricing rules to transactions between foreign enterprise and its Indian permanent establishment

 This Tax Alert summarizes a recent decision of the Special Bench (SB) of the Ahmedabad Income-tax Appellate Tribunal (ITAT), in the case of TBEA Shenyang Transformer Group Company Limited  (Taxpayer or the Head Office or HO).

The question before the SB was whether transactions between a foreign enterprise and its Indian permanent establishment (PE) can be considered an international transaction for the purpose of section 92 of the Income-tax Act, 1961 (the Act) and accordingly subject to the transfer pricing (TP) provisions of the Act. The SB ruled that a PE is a separate enterprise distinct from the HO for the purpose of the Act as well as under Article 7 of the applicable Double Taxation Avoidance Agreement (DTAA). The SB thereafter concluded that transactions between a foreign enterprise and its PE in India can be considered an international transaction and be subject to transfer pricing provisions. The SB however left the questions on whether the HO and its Indian PE are Associated Enterprises (AE) as defined in section 92A(2) of the Act and whether the transactions of the PE could be deemed international transactions under section 92B(2) of the Act for the Division Bench of the ITAT to decide based on the facts and circumstances of the case and the provisions of applicable law.

India RBI MPC Review – December 6, 2024

 The Reserve Bank of India (RBI) announced its monetary policy review on December 6, 2024, leaving the repo rate unchanged at 6.5%. However, it implemented non-conventional measures, including a phased 50 basis points (bps) reduction in the Cash Reserve Ratio (CRR) to 4.0% from 4.5%. This move is expected to inject INR 1.1 trillion ($13 billion) into the banking system, addressing liquidity concerns.

Optimizing Tax Savings for Indian SMEs

 Small and Medium Enterprises (SMEs) are a cornerstone of India’s economy, driving employment and contributing to growth. However, they often operate with limited margins while navigating complex regulations. Effective tax planning can alleviate financial pressure, allowing SMEs to maximize savings through appropriate tax deductions and credits.

CBDT Clarifies Key Points on PAN 2.0 via FAQs

 The Central Board of Direct Taxes (CBDT) has issued a press release providing clarifications on the newly introduced PAN 2.0 system. Among the Frequently Asked Questions (FAQs) shared, two stand out for their importance: FAQ 3 and FAQ 7. These address concerns about the continued validity of existing PAN cards and the functionality of QR codes in PAN 2.0.

Taxability of Transfers Between HUF Members and the HUF

 The taxation of transactions within a Hindu Undivided Family (HUF) is governed by specific provisions under the Income Tax Act, 1961. This article examines the tax implications of transfers from HUF members to the HUF and vice versa, focusing on income derived, gifts, and the treatment of HUF partition.

TAX DUE DATE - DECEMBER 2024.

 

S No	Due Date	Related to	Compliance to be made
1	11.12.2024	GSTR – 1	Filing of GSTR – 1 for the month of November 2024
2	20.12.2024	GST	Payment of GST for the month of November, 2024 Filing of GSTR 3B for the month of November, 2024
3	07.12.2024	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 November 2024. · Deposit TDS from Salaries deducted during the month of November 2024 • Deposit TCS for collections made under section 206C including sale of scrap during the month of November 2024, if any • Deliver a copy of Form 15G/15H, if any to CCIT or CIT for declarations received in the month of November 2024, if any
4	15.12.2024	Income tax	Payment of Advance tax for the Corporate and Non Corporate assesses –Amount not less than 75% and 60% of advance tax respectively.
5	31.12.2024	GST	Filing of Annual Return -  GSTR 9 & 9C.