Sunday 25 March 2018

Notifications Issued dated 23 March 2018- GST Update.


This is to update you on the notifications issued yesterday by the Ministry of Finance:
   

Copy of Bombay HC verdict upholding sales tax on return of kerosene post extraction


Copy of Bombay HC verdict upholding sales tax on return stream of kerosene after extraction of N-Paraffin under Bombay Sales Tax Act, albeit prospectively i.e. from date of order of Maharashtra Sales Tax Tribunal; Bombay HC refused to consider such return stream between Bharat Petroleum Corporation Ltd & Reliance Industries Ltd as “sales return” u/s 2(35), 2(36) of Bombay Sales Tax Act and Rule 4 of Bombay Sales Tax Rules, and instead, concurred with Tribunal that same would amount to 'purchase' transaction : Bombay HC

LUT for FY 2018-19. ( only for exporter).

Dear All:

It is hereby brought to your notice for renewal of LUT issued by your jurisdictional department for making Zero Rated Supply i.e., Export Supply and SEZ supply without payment of tax           

Although the previous LUT issued may be valid upto 30th June’18, it is suggested to get it renewed w.e.f. 1st Apr’18 for the FY 18-19

As on date the procedure to renew your LUT application is to file an online application by uploading the existing LUT. On filing the same, copy of the application along with a proof of filing Feb’18 GST returns needs to be submitted to your jurisdictional officer

Let us know if you find any difficulties in arranging this

Imp Case Laws


Honda Motor Co. Ltd vs. ADIT (Supreme Court)

S. 148: The AO is not entitled to issue a reopening notice only on the basis that the foreign company has a permanent establishment (PE) in India if the transactions in respect of which it is alleged that there has been an escapement of income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm's length   

Notifications 54 and 55 | FTP 2015-20

This is to update you on the recent notifications issued by the Directorate General of Foreign Trade

     Notification No 54/2015-20 dated 22 March 2018 – FTP

·         Exemption from Integrated Tax and Compensation Cess under Advanced Authorization Scheme under Para 4.14 and under EPCG Scheme under Para 5.01(a) of FTP 2015-20 has been extended up to 01 October 2018

     Notification No 55/2015-20 dated 23 March 2018 – FTP

·         Exemption from Integrated Tax and Compensation Cess under EOU Scheme under Para 6.01(d)(ii) of FTP 2015-20 has been extended up to 01 October 2018.

Recent amendment in FTP after the mid-term review on 05 December 2017 had granted exemption from levy of the above taxes under the above schemes till 31 March, 2018 only. The above notifications have extended the time limit by 6 months

Wednesday 21 March 2018

CBDT invites suggestions from general public on new direct-tax law, issues questionnaire

CBDT invites suggestions and feedback from stakeholders and general public for drafting the new direct tax law; Issues questionnaire covering over 25 questions on broadly six categories, viz. Filing of return of income, Tax credit, Processing / scrutiny of return, Litigation and recovery of disputed tax demand and Penalty & prosecution and the residuary category; Seeks feedback on e-filing of income-tax returns, TDS returns, working of the Centralised Processing Centre (‘CPC’), seeks suggestions for tackling TDS mismatch; Likewise, seeks views on the newly implemented e-assessment process, effectiveness of the Mutual Agreement Procedure (‘MAP’), working of Income tax Appellate Tribunal, Income tax Settlement Commission; Invites suggestions/ feedback by April 2nd.   

HC : Order prohibiting Customs Broker's operations appealable before CESTAT; Writ petition not maintainable


HC dismisses Custom Broker’s writ petition against prohibition order under Regulation 23 of Customs Brokers Licensing Regulations, 2013 for alleged mis-declaration of rate of duty applicable on imported goods; Referring to earlier ruling in case of Capricon Logistics Pvt. Ltd., HC rejects assessee’s plea that in terms of Section 129-A of Customs Act, only a decision or order passed by Principal Commissioner / Commissioner of Customs as an ‘Adjudicating Authority’ is appealable; Holds that Dept. authorities including Appellate Authorities and CESTAT are better equipped and manned with experts in the field to measure pros and cons of cases arising under Customs Act, and are better disposed of to deal with situations arising under the Regulations; A Customs Broker cannot completely disentangle or distance himself from mis-declaration made on behalf of / by importers themselves, states HC while observing that the non-obstante provisions of Regulation 23 to prohibit a Customs Broker from working in any section of Customs territory have been enacted to put in place effective measures against illegal activities and duty evasion; Hence, procedure of giving prior notice or hearing opportunity has been deliberately excluded, observes HC and accordingly, directs CESTAT to consider matter on merits under appellate jurisdiction  : Karnataka HC

ITAT : Relies McKinsey's earlier years' MAP settlement to determine taxability in subsequent year

Mumbai ITAT holds that taxability of Rs. 150 cr. received by assessee-company (part of the Mckinsey Group based in US) in India during AYs 2011-12 and AY 2012-13 shall be determined as per the MAP settlement for earlier years; Notes that as per the terms of MAP settlement for AYs 2008-09 to 2009-10, it was agreed that payment for providing various consultancy services (including Knowledge Pool Charges, Borrowed Service Charges, Firm Committee Pool Charge, Regional Corporate Finance Charges etc.) to its AE  shall not be taxable in India as ' Royalty ' or ' Fees for Included Service (‘FIS’) '; ITAT rejects Revenue’s stand that the MAP settlement being year-specific, cannot be made applicable to subject assessment years; Notes that the MAP settlement is with respect to amount paid by Mckinsey India to other Mckinsey entities in USA; Relies on co-ordinate bench rulings  in assessee’s own case and in case of its group companies which accepted for applying the MAP terms of earlier years:ITAT 

HC : Invokes 'savings' clause under GST enactment; Allows ITC recovery under repealed VAT Act


HC upholds recovery of refunded Input Tax Credit u/s 10(5) r/w Section 69(1) of Karnataka VAT Act despite repeal of said enactment w.e.f. July 2017 vide Karnataka GST Act, 2017; Perusing repeals and savings provisions u/s 173 r/w Section 174 of KGST Act, HC holds that repeal of KVAT would not affect proceedings initiated by Revenue authorities; Notes that refund had been granted pursuant to Division Bench decision in M K Agro Tech Pvt Ltd which had held that principles of partial rebate u/s 17 of KVAT Act were inapplicable to inputs utilized in exempt by-products, but SC had subsequently reversed said HC order; Finds that HC’s refund order was subject to outcome in SLP before SC in case of M K Agro Tech Pvt Ltd and indemnity bonds furnished by assessee and while ordinarily no rectification can be allowed on the basis of subsequent HC / SC order,  it was obligatory on assessee’s part to obey Court orders and could not now assail Revenue’s recovery proceedings; However, reads down Circular dated October 9 2017 issued by Commissioner of Commercial Taxes to maintain uniformity in collection of taxes, by holding that levy of interest  / penalty shall be subject to provision of reasonable opportunity of hearing to assessee : Karnataka HC


Saturday 17 March 2018

It is not dominant purpose test but principle of apportionment which is ingrained in provisions of Section 14A - YES: Supreme Court

THE issues are - Whether when the shares are held by the assessee not to earn exempt income but to retain controlling stake in the investee company, the dominant purpose test can be said to be relevant for the purpose of Sec 14A AND Whether when the assessee itself makes disallowance of certain expenditure incurred to earn dividend income and if the AO does not accept such disallowance, it is necessary for the AO to record satisfaction before rejecting the same. Verdict partly favours the Revenue.
Facts of the case    

Non-compete fees paid for acquisition of going concern are not eligible for depreciation: ITAT

THE issue is - Whether 'non compete fee' paid as part of slump sale consideration for acquiring a business as going concern, can be equated with 'intangible asset' so as to claim depreciation on same. NO IS THE ANSWER.   

Erstwhile exempted units move HC against unavailability of transitional credit of capital goods

Uttarakhand HC hears petitioners’ challenge to unavailability of transitional credit of capital goods u/s 140 of CGST Act, 2017 to units who were availing area based exemption under erstwhile regime; HC posts the matter for hearing on April 17 

Allows Sec 10A deduction on voluntary TP-adjustment; Follows iGate over Deloitte ruling

Pune ITAT rules that assessee is entitled to Sec 10A deduction on additional income offered on account of suo-moto TP-adjustment for AY 2011-12; Notes that TPO/ CIT(A) disallowed the deduction u/s 10A as assessee failed to bring into country the export proceeds in foreign exchange as contemplated in Explanation 2 to Sec 10A in respect of such additional income offered; However, ITAT opines that the additional income was artificial/ notional income computed u/s 92(1) and it was neither export turnover nor total turnover but in fact profits of business u/s 10A(4), states that “in the absence of it being offered as export turnover or total turnover, then there could not be any condition for getting foreign exchange to India”; Further noting that additional income was offered to tax as business profits, opines that “... it forms part of profits of business and while computing the deduction under section 10A(4) of the Act, the said profits have to be taken into consideration”; Relies on Bangalore ITAT ruling in iGate Global Solutions allowing Sec 10A deduction in respect of suo-moto TP-adjustment (subsequently confirmed by Karnataka HC) and states that Mumbai ITAT ruling in Deloitte Consulting India taking a contrary view would not stand in view of ratio laid down by Karnataka HC, clarifies that “Though the said decision is of non-jurisdictional High Court, but the same is binding on the Tribunal in the absence of any contrary decision of the jurisdictional High Court”; Also holds that proviso to Sec 92C(4) [which inter alia provides that no deduction u/s 10A shall be allowed in respect of such amount of income, by which the total income of assessee had been enhanced after computation of ALP of international transactions] will not be applicable in such cases:ITAT:ITAT 

OECD's digital economy report highlights divergent views, sets deadline of 2020 for consensus-based solution

OECD's Tax Challenges Arising from Digitalisation – Interim Report 2018 (the Interim Report) released a few minutes ago acknowledges 'divergent views' on taxation approach and highlights that countries will work towards a consensus-based solution; The Interim Report notes that there is no consensus on the merits of, or need for, interim measures, and does not make a recommendation for their introduction; The Interim Report agreed by the more than 110 members of the Inclusive Framework  outlines a number of areas where there are clear differences of view among the countries, including over the need for future reform of the international tax system; The Interim Report  provides a sense of direction that reflects the commitment of the Inclusive Framework members to work towards a consensus-based, global solution on these matters;  The Interim report sets the goal of producing a final report in 2020, with an update to the G20 in 2019; The Interim Report notes that the "members agreed to undertake a coherent and concurrent review of the “nexus” and “profit allocation” rules - fundamental concepts relating to the allocation of taxing rights between jurisdictions and the determination of the relevant share of the multinational enterprise’s profits that will be subject to taxation in a given jurisdiction";  The Interim Report discusses interim measures that some countries have indicated they would implement, believing that there is a strong imperative to act quickly; The Interim Report specifically considers an interim measure in the form of an 'excise tax' on the supply of certain e-services within their jurisdiction that would apply to the gross consideration paid for the supply of such e-services; The Inclusive Framework’s Task Force on the Digital Economy will meet next in July 2018; The report cites  India has adopted rules for the VAT treatment of B2C supplies of services and intangibles by foreign suppliers in accordance with the OECD International VAT/GST Guidelines; The Interim report also describes in details India's  Significant Economic Presence based taxation, Equalisation levy & cites Bangalore ITAT ruling on  “virtual service PE” 

Key takeaways from SC ruling in Maxopp Investment on Sec. 14A

SC upholds Delhi HC ruling in Maxopp Investments Ltd., holds that interest paid on borrowings used for acquiring strategic investments is subject to Sec 14A disallowance even if earning dividend income is only incidental; Rules that the dominant or main object of investment would not be a relevant consideration in determining as to whether expenditure incurred is ‘in relation to’ the dividend income as contemplated u/s. 14A; Agrees with Delhi HC that the objective behind introduction of Sec. 14A was to cure a problem whereby the principle of apportionment was applicable only to divisible business and in case of composite or indivisible business, entire expenditure was deductible without apportionment; Thus holds that “Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in Section 14A of the Act”, relies upon SC ruling in Walfort Share and Stock Brokers; Disagrees with Punjab & Haryana HC’s application of dominant purpose test in State Bank of Patiala case while holding that Sec 14A is not applicable to investment held as stock in trade;  Notes that where shares are held as ‘stock-in-trade’, certain dividend is earned, though incidentally, which is exempt u/s 10(34), thus holds that applicability of Sec 14A is triggered which is based on the theory of apportionment of expenditure between taxable and non-taxable income; However, considering facts of Bank of Patiala case, dismisses Revenue’s appeal against HC ruling:SC 

Sec. 143(2) notice by non-jurisdictional AO, invalid despite within statutory time-line; Penalty to rehabilitation authorities for regularizing construction, allowable u/s. 37

ITAT: Sec. 143(2) notice by non-jurisdictional AO, invalid despite issued within statutory period
Delhi ITAT dismisses Revenue’s appeal and deletes addition u/s 68 on assessee-company during AY 2006-07, holds that the entire assessment proceedings are

Saturday 10 March 2018

OECD : Releases model rules requiring intermediaries to disclose CRS Avoidance arrangement, opaque offshore structures

OECD releases new model disclosure rule requiring  lawyers, accountants, financial advisors, banks, etc. to inform tax authorities of schemes they put in place for clients to avoid reporting under  Common Reporting Standard (CRS) or prevent identification of beneficial owners of entities or trusts;  Model rules require an Intermediary or user of a CRS Avoidance Arrangement or Opaque Offshore Structure to disclose certain information to its tax administration;  Where such information relates to users that are resident in another jurisdiction it would be exchanged with the tax administration of that jurisdiction in accordance with the terms of the applicable international legal instrument; Model Rule defines hallmark for CRS Avoidance Scheme and for  Opaque Offshore Structures which specifically targets Passive Offshore Vehicles that are held through an Opaque Structure; Further, Model Rules provide for definition of intermediaries, timing of disclosure requirements, information to be disclosed and penalties and other mechanisms to deal with non-compliance 

Hotels responsible for GST discharge on online bookings, clarifies Goa Govt.

Goa Govt. reiterates the clarification issued by Finance Ministry regarding levy of GST on accommodation services; Inter alia clarifies that declared / published tariff is relevant only for determination of tax rate slab and GST shall be payable on actual amount charged (transaction value); In case of different tariffs declared for different seasons or periods of the year, the tariff declared for season in which service of accommodation is provided shall apply; Further clarifies that in case of booking through online portal, the rate of tax payable would be 28% when “declared tariff” is more than Rs. 7,500/- per day; It shall be the responsibility of hotel to ensure that appropriate tax is charged and paid to Govt. exchequer, even though booking is done through online portals : Goa Govt. Trade Circular 

Obtaining 100% EOU status by DTA-unit cannot entitle Sec 10B benefit beyond 10 years

Uttarakhand HC allows Revenue’s appeal, denies Sec. 10B benefit to assessee (engaged in manufacture of handicrafts) for AY 2009-10; Notes that assessee claimed deduction u/s. 80HHC from AYs 1992-93 to 2003-04 and u/s. 80IC from AYs 2004-05 to 2008-09 and it   

E-Way Bill Update


Please find below the summary of recent changes made in e-way bill rules summarized below for your easy reference:-

1.         Provisos inserted in Rule 138(1) that transporter, on an authorization received from the registered person and courier agency on authorization from received from consigner when goods supplied through an ecommerce operator can furnish Part A of Form EWB-01 electronically to generate the unique number;    

E-way bill for inter-state transport from April 1; GSTR-3B extended for 3 months

GST Council during its 26th meeting approves rollout of E-way bill mechanism for inter-state movement of goods from April 1; E-way bill for intra-state transport to be implemented in phased manner by dividing States into 4 categories; Also extends the existing system of filing returns viz. Form GSTR-3B for another 3 months and in meanwhile, GOM on IT will look into it & consult tax experts among others; Though there was no conclusive decision on returns simplification, Council discusses 2 alternate models and shall take final call on the same; FM Arun Jaitley says, “Tax bureaucracy felt that simplification should not provide room for evasion”; Tax sops to exporters through exemption have been extended by 6 months 

Friday 2 March 2018

Reopening based on fresh materials found during Special Audit report is valid, even after four years of assessment: HC

 THE issue before the Bench is - Whether notice of reopening of assessment u/s 148, based on fresh tangible material in special audit report, which was not available at the time of original assessment order, can be termed void by taking shelter of the first proviso to Section 147, if issued after four years of relevant AY. And the HC verdict is NO.   

HC : Directs reconsideration of excise duty on supply & installation of customised IT products


HC exercises writ jurisdiction to set aside adjudication order confirming excise duty liability on activity of supply of IT products purchased from vendors and installation at customers’ premises after customization as per their needs; Notes assessee’s claim that integrating multiple products sourced from different vendors only involved a skill of service and nothing else, accordingly it had paid service tax thereon; Seeking to set right the jurisdictional error committed in decision making process, HC observes that each of assessee’s activities would require to be examined on focal point whether they would fall within the meaning of manufacture of goods or not; There cannot be generalization of assessee’s activities, states HC while observing, “No doubt, the law discussed by the Commissioner is the correct principles revolving around the issue. But, the point is whether each of the activities of the petitioner would fall for consideration as a 'manufacturer of goods' or not.” ; Accordingly, remands the matter for fresh consideration, without expressing any view on merits  : Kerala HC

Tamil Nadu Govt. divides taxpayer base with Centre; Around 5 lakh taxpayers with State

Tamil Nadu Govt. notifies division of taxpayer base with Central Govt.; 50,175 taxpayers having less than Rs. 1.5 Cr turnover have been allotted to Centre, while 451,590 taxpayers have been assigned to the State; In case of taxpayers with more than Rs. 1.5 Cr turnover, 44,009 are with Centre, and 43,977 with State : Tamil Nadu Govt. Order 

ITAT : Hefty share premium received as 'conduit' taxable u/s 68 as unexplained cash-credit

ITAT upholds Revenue's plea that assessee (a private limited company & engaged in real estate business) received high share premium as a conduit to route the funds involved as a 'layering' process, holds that share-premium of Rs.49.5cr is taxable u/s 68 as unexplained cash credit for AY 2008-09; ITAT considers facts such as absence of proper valuation report to justify high premium, relatively weak financials compared to high valuation, issue of shares to directors at par, discrepancies / abnormal features which indicate that share issue was “made up” to camouflage the real purpose/intention of routing money;  Relying on Calcutta High Court ruling in Pragati Financial Management Pvt. Ltd. Vs. CIT, ITAT holds that share capital addition can be made u/s 68 since the initial onus was not discharged by the assessee; Also, rejects assessee's reliance on Delhi ITAT ruling in ACIT Vs. NRA Iron & Steel Pvt. Ltd., wherein funding was raised from multiple investors as against assessee's facts where a single investor was present; On the issue of jurisdiction, ITAT upholds validity of second re-assessment notice (issued within 6 days after the first reassessment was dropped) which resulted in share premium addition, ITAT holds that "since  substantive issue in question was never examined under the proceedings in the first notice issued on 18.4.2012, the  question of change of opinion does not arise" :ITAT 

Recent update on circular on transition credits


We refer to a recent Circular No. 33/07/2018-GST dated 23 February 2018 issued by the Central Board of Excise and Customs (CBEC) regarding non-utilization of disputed CENVAT credit transitioned under the Goods and Services Tax (GST) and non-availability of CENVAT credit carried forward but not eligible under GST.     

HAPPY HOLI


TAX DUE DATE - APRIL 2024.

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