ALP tolerance range extended to fiscal year 2020-21

 

Indian Transfer Pricing regulations provide methods for determining arm's-length price (‘ALP’) of transactions that qualify as International Transaction/Specified Domestic Transaction(‘SDT’). The regulations also provide for the tolerance range for the variation between the ALP and the transaction price.

Under the transfer pricing methodologies, the computation of ALP is based on a set of comparable companies’ margins. When the dataset constructed for determining ALP consists of 6 or more comparable companies, ALP shall be determined on the basis of the range concept (i.e., 35th percentile and 65th percentile of the dataset).

Transfer Pricing & Covid 19.

  

The Covid-19 pandemic has dramatically disrupted business operations and financial markets, leaving many companies scrambling to adjust to ever-changing economic circumstances. Many companies are still managing business emergencies or reorganizing operations on the fly, but as organizations begin to stabilize and plan for 2021 (and beyond), transfer pricing is one area that companies should be thinking about.

 

Different Forms under TDS provisions

 

 

Form Name	Description
Form 15CA	This is the form for providing information to be furnished under Sub-section (6) of Section 195 of Income Tax Act, 1961 relating to remittance of payments to a non-resident or to a foreign company

Income Tax Implications on ESOP at time of exercise and sale

 

Income tax implications for Employees who have been granted shares under Employee Stock Options Scheme (ESOP's) and this is mostly at a per-share price which is significantly lower compared to the prevailing price at which the company share is traded.

The mistake did while filing ITR make the tax department hound you with notices under Black Money Act

 

One may wonder that Black Money Act is for people having black money in Foreign banks and not for the common taxpayer. But beware of such a notion! One may get sleepless nights and may get hound with notices under Black Money Act for mere forgetting to disclose the details of foreign assets and bank accounts in their Income Tax Returns (ITR) which might be the simple clerical error of you or your tax advisor while filing ITR. 

The benefit of the creation of creating a trust for children

 

When it comes to securing generational wealth and our children’s future, there is nothing more important than succession and estate planning. At its heart, estate planning is the simple act of preparing for the transfer of a person’s wealth and assets during and/or after their death. One of the most important tools in estate planning is a Family Trust (“Trust”). While Wills are hygiene documents put in place to take care of inheritances in a simpler manner, they have their own set of limitations:

CBIC specifies the mechanism for issuance of RoDTEP scrips

 

In the recent Circular No. 23/2021-Customs dated September 30, 2021, wherein the Central Board of Indirect Taxes and Customs (‘CBIC’) has specified the mechanism for issuance of e-scrips under RoDTEP scheme.

New Reengineered Form 15CA & 15CB submission process:

 

Income Tax Department is introducing a completely new reengineered Form 15CA and Form 15CB submission process based on various feedbacks provided by numerous corporates and professionals all over India. These transformations will simplify the preparation, assignment, submission, and verification process involved in the entire filing cycle of the Form.

RESTRICTIONS ON RECEIPT AND PAYMENT OF CASH IN INCOME TAX ACT

 

Note discusses implications under Income Tax Act on any company, firm, individual who pays or receives cash beyond certain limits.

I)            Business Receipts – Sec 269ST, Sec 271DA (Penalty) and Sec 37

 

Interest Subsidy and Excise Duty Refund are Capital Receipts, rules ITAT

In a major relief to JMW India, the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the interest subsidy and the excise duty refund shall be treated as capital receipts and therefore, not subject to income tax while computing book profit under the provisions of the Income Tax Act, 1961. Theassessee, a company engaged in the business of trading and manufacturing of copper products, filed its income tax return declaring total income at Rs.1,23,71,780/-. The Assessing Officer, while completing the proceedings, observed thatthe assessee, had received an amount of Rs.30,01,143/- representing interest subsidy and an amount of Rs.4,98,49,144/- representing Excise Duty refund which are subject to income tax. Before ethe Tribunal, the assessee contended that the interest subsidy of Rs.30,01,143/- and Excise Duty refund of Rs.4,98,49,144/- shall be excluded for the purpose of computing book profit u/s 115JB. While allowing the plea of the assessee, Judicial Member Vijay Pal Rao and Accountant Member R K Panda held that “since, in the instant case, the Revenue has accepted the order of the CIT(A) in holding that interest subsidy and Excise Duty refund are capital receipts, therefore, respectfully following the decision of the Hon’ble Calcutta High Court in the case of Ankit Metal & Power Ltd., cited (supra) and in absence of any contrary material brought to our notice, we hold that the above two receipts being not in the nature of income cannot be included for the purpose of computation u/s 115JB of the IT Act. We, therefore, set aside the order of the ld.CIT(A) on this issue and allow the grounds raised by the assessee.”

GST Import of service from overseas branches.

 

Facts:

·        Company A registered in India  providing software services to its global customers.

·        To serve its Global customers, Company A opened foreign branches in different parts of the world.

·        These overseas branches provide onsite service and sales & marketing services to the clients of the Company A. For these onsite services rendered by the branches, the concerned branch of the Company A would raise the invoice directly on the clients/customers. However, the amounts are collected or received directly into the Indian banks of the Company A. The Company A would transfer funds to its overseas branches to meet the expenses of the respective branch

India Tax Administration extends applicability of transfer pricing safe harbor rules to financial year 2020-21

 A “safe harbor” is defined in the Indian Income Tax Law (ITL) as circumstances under which the tax authorities will accept the transfer price declared by the taxpayer. India’s Central Board of Direct Taxes (CBDT), the apex Indian tax administration body, first issued transfer pricing (TP) safe harbor rules (SHR) on 18 September 2013, applicable for five years from financial year (FY) 2012-13 to FY 2016-17. The CBDT through notification dated 7 June 2017 amended the SHR, which were applicable for three FYs from FY 2016-17 through FY 2018-19. For FY 2016-17, taxpayers had the option to elect the rule which was more beneficial. On 20 May 2020, the CBDT issued a notification amending the SHR to extend the applicability to FY 2019-20, without any modifications.

On 24 September 2021, the CBDT issued a new notification extending the applicability of SHR to FY 2020-21, without any further modifications. Taxpayers opting for SHR for FY 2020-21 would need to file the return of income for the year on or before the date of furnishing the prescribed Form 3CEFA for opting for the SHR. The due date for filing is 28 February 2022.

Further, the CBDT has yet to prescribe SHR for attribution of profits to a business connection or permanent establishment (PE) of a nonresident, which was introduced under Finance Act 2020.

Income Tax Act related provisions for Buyers of Immovable property

 

The note discusses few aspects to be checked by the Buyer of Immovable property. We will focus on the purchase of Flat or Office space or Land (Non-Agricultural)

 

Intermediary – own account exclusion

 

 

The intermediary service has been a controversial subject in cross border trade, since the days of Service Tax. The foremost controversy is on the outbound leg, as in if the services qualify as ‘intermediary services’, the place of supply becomes ‘the location of supplier of services’, and therefore ousting the services from the purview of export of services [Section 2 (6) of the IGST Act].

While the entire definition is ambiguous and pending constitutional litmus, the definition contains an inter alia exclusion of ‘own account’, which if applied correctly could provide a window of opportunity to various players to preserve the export status. The CBIC vide Circular No. 159/15/2021-GST dated September 20, 2021 (‘the Circular’) tried to provide certain clarity, but there are still gaps that need to be covered. In this backdrop, this article examines the ‘own account exclusion’.

Interest for default in payment of Advance Tax [Section 234B]

 

·      Section 234B provides for levy of interest for default in payment of advance tax. Interest under section 234B is levied in the following two cases:

SC holds that gains arising on transfer of depreciable asset will be qualified as short-term capital gains

 This Tax Alert summarizes a ruling of the Supreme Court (SC) dated 7 July 2021 in the case of Sakthi Metal Depot (Taxpayer), wherein the issue before the SC was whether on transfer of a capital asset on which depreciation was claimed and allowed to the Taxpayer for a long period but not used in business subsequently, would qualify as long-term or short-term capital gains under the provisions of the Indian Tax Laws (ITL).

GST credit not allowed if supplier furnishes GSTR-1 belatedly - WB AAR

 

It is to apprise you about a very critical decision by West Bengal Authority for Advance Ruling (‘AAR’) in the case of Eastern Coalfields Limited, 2021-VIL-345-AAR.

 

The AAR was dealing with the question as to whether the recipient is entitled to claim Input Tax Credit (‘ITC’) for invoices pertaining to FY 2019-20 where the supplier has furnished its Form GSTR-1, GSTR-3B and paid tax in November 2020 i.e. belatedly.

New Functionality on GSTN portal

 

On demand fetching of Bill of Entry details from ICEGATE Portal

We wish to update that the GSTN portal has been enabled with the functionality of fetching the bill of entry details from the ICEGATE portal which didn’t auto-populate in GSTR-2A. As per advisory on the GSTN portal, self-service functionality has been made available on the GST Portal to help importers of goods and recipients of supplies from SEZ that can be used to search such records in the GST system and fetch the missing records from ICEGATE. Taxpayers can navigate the functionality from the Services > User Services > Search BoE.

Risk and losses due to Employee reimbursement.

In any organization, Employee reimbursement is very common and the process is also user friendly. The employee first spent from his pocket based on company policies and his manager consent and then claims the same from the company by submitting the invoices. In the beginning, the purpose was limited only to food and conveyance but later on, the scope extended like training fees, online courses and online purchases of small items etc. The managers find the process of Employee reimbursement very smart & effective as it reduces the time of making purchases and payments which generally will take more time when it routes through normal vendor process.

Recommendations of 45th GST Council Meeting

 ·         Extension of existing concessional GST rates (currently valid till 30th September 2021) on Covid-19 treatment drugs, up to 31st December 2021.

·         GST rate has been amended for a number of items. Rate for Metals ores and energy renewable parts, Plastic waste etc  has been increased from 5%  to 18%.

·         Mentha oil supply bought under reverse charge

·         No  decision on bringing Petroleum under GST.

·         E Commerce Operator (CAB & Food) to pay 5% GST from January 1, 2022.

·         Carbonated Cold drinks will have GST @ 28% and Cess @ 12%.

·         UPS attract GST @ 18% and batteries @ 28%.

·         Services by cloud kitchen attract GST @ 5%.

·         Unutilized balance in CGST and IGST cash ledger may be allowed to be transferred between distinct persons (entities having same PAN but registered in different states), without going through the refund procedure, subject to certain safeguards

·         Aadhaar authentication of registration to be made mandatory for being eligible for filing refund claim and application for revocation of cancellation of registration

·         Late fee for delayed filing of FORM GSTR-1 to be auto-populated and collected in next open return in FORM GSTR-3B.

·         Rule 59(6) of the CGST Rules to be amended with effect from 01.01.2022 to provide that a registered person shall not be allowed to furnish FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for the preceding month 

·         Rule 36(4) of CGST Rules, 2017 to be amended, once the proposed clause (aa) of section 16(2) of CGST Act, 2017 is notified, to restrict availment of ITC in respect of invoices/ debit notes, to the extent the details of such invoices/ debit notes are furnished by the supplier in FORM GSTR-1/ IFF and are communicated to the registered person in FORM GSTR-2B.