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Home e-Newsletters Index Year 2024 March Day 16 - Saturday

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TMI Tax Updates - e-Newsletter
March 16, 2024

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise



Highlights / Catch Notes

    GST

  • Cancellation of GST registration of petitioner - The Court noted the reasons for cancellation as non-filing of returns for over six months, a violation under the Central Goods and Services Tax Act, 2017. - Despite the dismissal of the appeal by the appellate authority due to the delay in filing, the Court acknowledged the petitioner's health issues and the need for a remedy. - Referring to a precedent case, the Court directed restoration of the registration subject to certain conditions, ensuring compliance with tax obligations.

  • Search and seizure - The case involved a challenge to a prohibitory order issued under the GST Act following a search and seizure procedure. The petitioners sought release of seized goods, but the court emphasized the necessity of following prescribed mechanisms under the Act for such requests. Without an application for release under Section 67(6), the court found no grounds for interference and disposed of the writ petition accordingly.

  • Rejection of petitioner's application for grant of registration by a non-speaking order - In this case, the petitioner, a successful Resolution Applicant under the Insolvency Resolution Process, was denied registration under the Uttar Pradesh Goods and Services Tax Act, 2017, despite its Resolution Plan being accepted by the NCLT. The Court found the denial of registration to be a violation of the petitioner's fundamental right to carry on business and ordered the Registering Authority to reconsider the application on its merits within a week.

  • Seeking grant of Regular Bail - The case involves a bail application under Section 439 of the CrPC in connection with an FIR registered under the CGST Act. The applicant is accused of issuing fake invoices without supplying goods, causing substantial loss to the government. The defense argues innocence and coercion during investigation, while the prosecution highlights the seriousness of the offence and potential tampering with evidence. Despite the gravity of the allegations, the court grants bail, balancing the applicant's right to liberty with the need for judicial process and constitutional rights.

  • Maintainability of petition - availability of alternative remedy - Stay of demand - The petitioner sought relief due to the non-constitution of the Appellate Tribunal, which deprived them of their statutory right to appeal against an order issued under the CGST/OGST Acts. The Court, considering the circumstances, granted interim relief to the petitioner while outlining the procedure for future appeal filing once the Tribunal became operational.

  • Lack of mention regarding tax demand in the show cause notice - Apparent discrepancy in treatment of refund claim and tax demand. - Scope for granting interim order on the writ petition - The Court observed that there was no error in the order passed by the learned Single Bench, which refused to grant interim relief on the writ petition. As of the date of the appeal, no demand notice had been issued to the appellant by the concerned authority. Therefore, the appeal was disposed of with the liberty granted to the appellant to file a fresh stay application before the learned Single Bench once a demand notice is issued.

  • Classification of goods - Bike and Scooter seat cover - to be classified under CTH 87089900 or not - rate of tax of 28% is correct or not - The Appellate Authority found that seat covers are not integral to the seat's function but are accessories enhancing comfort, convenience, or aesthetics. Thus, they do not qualify as 'parts' of seats. The Authority clarified the distinction between parts and accessories, emphasizing that parts are essential for functionality, whereas accessories are not. Consequently, it was determined that seat covers are correctly classified under CTH 87141090, attracting a 28% GST rate, thereby modifying the AAR's classification to 8714 10 90 but maintaining the tax rate.

  • Classification of goods - car seat Cushion Suspension wires - Steel hooks - The Authority for advance ruling extensively reviewed the function and use of the products, the relevant legal and tariff provisions, and the general rules for interpretation of the Customs Tariff Act, 1975. - The Authority noted that Chapter 94 provides a specific entry for seats and their parts, while Chapter 87 offers a general entry for motor vehicle parts and accessories. Since the products in question form an essential part of the car seat structure, their classification under Chapter 94 was deemed more appropriate. - The Authority ruled that both the Car Seat Cushion Suspension Wires and Steel Hooks should be classified under HSN 94019900, subject to a GST rate of 9% CGST and 9% SGST.

  • Input Tax Credit (ITC) - availability of inputs to the Assesses when the Godowns constructed by him is entirely meant for renting it out for Commercial purposes to registered dealers - The Authority for Advanced Ruled (AAR) analyzed Section 17(5)(d) of the CGST Act, which clearly states that no ITC is available for goods or services used in constructing immovable property for one's own account. It rejected the applicant's argument that denial of ITC violates Article 14 of the Constitution, stating that legislative intent prevails. - The AAR ruled that the legislative scheme restricts the flow of credit in certain situations, and taxpayers must adhere to these restrictions. Therefore, the AAR held that no Input Tax Credit is available on inputs when godowns are constructed for renting out for commercial purposes.

  • Levy of GST - transmission or distribution of electricity services provided by them is exempt from GST - various charges collected along with network/wheeling charges, cross subsidy surcharge and additional charges - This case clarifies the GST implications for various charges collected by electricity distribution licensees. While the distribution of electricity itself is exempt from GST, ancillary services that do not form an integral part of this distribution may be subject to GST. This distinction is crucial for electricity distribution companies to accurately classify their services and apply the correct GST rates. The ruling underscores the importance of distinguishing between the principal supply and ancillary services in the context of GST legislation.

  • Nature of activity - replacing the old scrap received from the customers with the already processed Winding wire, then and there, at a fixed differential price - sale of goods or service? - Applicability of reverse charge mechanism (RCM) - The Authority for Advance Ruling determined that the applicant's activity constituted a sale of goods, not a service. Therefore, the applicable tax structure was provided, clarifications were made regarding composite supply and RCM applicability, and the appropriate HSN code was specified. The ruling concluded that the applicant was not liable for RCM on purchases from unregistered persons.

  • Income Tax

  • Stay of demand - payment of 20% of the outstanding demand - ITAT rejecting its application for stay on the recovery of demand during the pendency of appeal - The Delhi High Court dismissed the petition challenging the ITAT's order on the recovery of tax demand from a national political party. The judgment underlines the importance of compliance with statutory requirements, especially timely filing of tax returns and adherence to conditions for receiving donations, to qualify for exemptions. It also highlights the significance of the taxpayer's conduct in seeking relief from tax demands, concluding that the petitioner's lackadaisical approach and failure to engage with the tax authorities in a timely manner undermined its position.

  • Addition u/s 14A r.w.r. 8D - Addition under special provision u/s 115JB - Minimum Alternate Tax (MAT) - the case revolved around the disallowance made under Section 14A of the Income Tax Act and its implications for computing Minimum Alternate Tax (MAT) under Section 115JB. The Court upheld the ITAT's decision to delete the disallowance under Section 14A and concluded that such disallowance cannot be added back to book profit for MAT computation under Section 115JB.

  • Liability for salary and wages arising out of the Justice Palekar Award - ascertained lability or not - The High court referred to precedent and held that the liability accrued when the provision was made, regardless of the actual agreement date. It emphasized that the provision made was for services already rendered and was a prudent business practice. - The court disagreed with the tribunal's decision and held that the liability for salary and wages arising from the specific award should be allowable as expenditure in the relevant assessment year.

  • Reopening of assessment u/s 147 - Disallowance of CSR amount u/s 37(2) - reason to believe or suspect - tangible material to reopen - AO power to review not to be confused with the power to re-assess - The petitioner argued that the notice was based on a change of opinion and lacked fresh tangible material. They also contested the treatment of CSR expenses and claimed that their practice was lawful. The High Court ruled in favor of the petitioner, holding that the notice for reopening the assessment was invalid and unsustainable, and the treatment of CSR expenses was permissible under the law. - The Court agreed with the petitioner's contention that donations made to eligible trusts, even if funded by CSR, qualified for deduction under Section 80G of the Act

  • Disallowance of TDS on account of mismatch & later on TDS matched but AO not given credit - Although the rectification application was filed beyond the permissible time limit, the Tribunal invoked Section 155, which empowers the AO to rectify apparent errors in credit of taxes. Considering the appellant's efforts to rectify the TDS credit and the genuineness of the tax credit denied by the AO, the Tribunal directed the AO to pass a consequential order granting the tax credit due to the appellant.

  • Disallowing claim of expenditure - non-carrying of business activity during the year under reference - The case involved an appeal by an assessee against the disallowance of expenditure claimed during the assessment year due to the absence of revenue generation. The assessee, engaged in real estate business, argued that it had commenced its business by purchasing land, which was reflected in its balance sheet. The ITAT, relying on relevant precedent, concluded that the acquisition of land marked the initiation of business operations, irrespective of revenue generation during the assessment year. Consequently, the Tribunal allowed the appeal, affirming the allowability of the claimed expenditure.

  • LTCG - Exemption claimed u/s. 54F - Failure to deposited in capital gain deposit scheme - The appellant sold a property, deposited the sale proceeds in a capital gain account scheme, and intended to utilize the funds for the purchase or construction of a new property within the statutory period. However, the completion of construction was delayed beyond the prescribed time frame. The ITAT ruled in favor of the appellant, emphasizing that the utilization of funds from the capital gain account scheme for the new investment was not mandatory, and the appellant could use other available funds without affecting their claim for deduction.

  • The ITAT Mumbai's judgment in this cross-appeal largely favored the assessee, addressing complex issues related to disallowances, the nature of expenses, additional depreciation claims, prior period expenditure and the treatment of subsidies. The Tribunal meticulously applied legal principles and precedents to guide its decisions, ensuring that each disputed item was carefully analyzed in light of the Income Tax Act's provisions and judicial interpretations.

  • TP Adjustment - notional interest on outstanding receivables due from Associated Enterprises (AES) - assessee not charging any interest from its AEs - Treatment of outstanding receivables as a separate international transaction - Common policy of not charging interest on delayed payments from AEs and third parties - Ultimately, the ITAT partly allowed the assessee's appeal, directing adjustments to be computed following the directions of the DRP. This included considering the receivables cleared within specific timeframes and applying appropriate interest rates. - The Tribunal emphasized the need for a case-by-case examination of transactions and directed the AO to set off receivables cleared within certain periods.

  • Validity assessment proceedings u/s 153C - recording of satisfaction - The ITAT examined the language of Section 153C and referenced the judgment in Ganpati Fincap Services P. Ltd & Ors v. Commissioner of Income Tax. It concluded that only one satisfaction note is required, even if the Assessing Officer of the searched person and the other person is the same. The satisfaction note must confirm that the seized documents belong to the other person, fulfilling the requirements of Section 153C. - It was clarified that the failure of the Assessing Officer of the searched person to make a note in the file of the searched person after transmitting documents to the Assessing Officer of the other person does not invalidate the proceedings under Section 153C.

  • Capital gain - Denial of benefit of 1st proviso to section 50C(1) which allows the consideration value fixed in the agreement to be considered instead of the stamp valuation for the computation of full value of consideration for transfer. - Proof of agreement prior to application of section 50C - The Tribunal noted that a part of the consideration must be received through specific banking channels before the agreement date. As the payment did not meet this requirement, the benefit of the first proviso was denied. - The ITAT also dismissed the contention regarding the denial of deduction under section 54B, upholding the lower authorities' decision.

  • Assessment against company dissolved/insolvent - This case revolved around an appeal against the order of the CIT(A) by an assessee undergoing Corporate Insolvency Resolution Process under the IBC, 2016. The ITAT Kolkata dismissed the appeal as infructuous, acknowledging the ongoing CIRP and its implications on income tax proceedings. The tribunal highlighted the overriding effect of the IBC over other laws, including the Income Tax Act, and noted the binding nature of an approved resolution plan on all stakeholders, including tax authorities.

  • Validity of reopening of assessment - The case involved a dispute over the deletion of addition on account of undisclosed capital gain and the validity of the assessment order. The Revenue's arguments regarding undisclosed capital gain were dismissed by the Tribunal, highlighting the lack of responsibility on the assessee's part and the significance of matching amounts in documents. Furthermore, the Tribunal found the assessment order invalid due to improper notice under section 148 of the Act, emphasizing the jurisdictional requirement for proper notice and quashing the reassessment proceedings as a result.

  • Addition of excess stock found during the course of survey - unexplained investments u/s 69 r.w.s.115BBE - The Tribunal observed that the assessee provided plausible explanations supported by evidence, including invoices, ledger accounts, bank statements, and acknowledgments from the parties. Despite this, the AO made the addition solely based on the partner's statement during the survey. However, the Tribunal found that the explanations provided by the assessee were credible and that there was no basis for the addition.

  • Additions on various grounds during post search Assessment u/s 153A - The ITAT's decision showcases a detailed analysis of each issue, balancing the need for legal compliance with fairness to the taxpayer. While the tribunal upheld some of the additions made by the AO, it provided relief on several counts by setting aside the contentious additions for re-examination or deleting them, particularly highlighting the importance of accurately tracing the source and beneficiary of transactions in tax assessments. This case underscores the complex nature of tax litigation and the critical role of evidence and documentation in resolving tax disputes.

  • Customs

  • The notification includes Bihta, Bihar, as a designated location for the purpose of "Unloading of imported goods and loading of export goods" at Inland Container Depots (ICDs). This signifies a significant expansion in the geographical scope of customs activities in Bihar.

  • Effective rates of customs duty on import of goods - The notification introduces changes to the tariff classification for certain goods related to X-ray machines used in medical, surgical, dental, or veterinary fields, reducing the customs duty rate from 15% to 10%. Specifically, amendments include substitutions and additions of specific items such as High Frequency X-Ray Generators and related components.

  • The Government issued notification to raise the basic rate of import duty for two specific categories of goods: (i) X-ray tubes, classified under tariff item 9022 30 00. (ii) Other goods falling under tariff item 9022 90 90. - Importers and manufacturers of X-ray tubes and other related equipment will bear the brunt of the increased import duty rates from 10% to 15% - However effective rate of duty on specified times reduced to 10% by another notification.

  • Notification issued by the Ministry of Finance, under the authority of the Customs Act, 1962 and the Customs Tariff Act, 1975 exempting gold imports under Customs Tariff Heading 7108 when imported by the Reserve Bank of India from customs duties and the Agriculture Infrastructure and Development Cess.

  • The Ministry of Finance, through Notification No. 01/2024-Customs (CVD), has extended the countervailing duty on imports of pneumatic radial tyres from China PR until July 23, 2024. This extension, in accordance with the Customs Tariff Act and Rules, aims to address concerns related to subsidized articles and injury determination.

  • Waiver of pre-deposit - dismissing the appeal for non-compliance of the deposit order - Unless Section 129E is complied with, the Appellate Authority cannot proceed to hear the appeal on merits. - Considering the facts, the court found that the appellants did not comply with the pre-deposit order despite dismissal of their waiver applications and rejection of their writ petitions. Consequently, the CESTAT was justified in dismissing the appeals for non-compliance.

  • Wilful misdeclaration or suppression of facts - benefit of Merchandise Export from India Scheme (MEIS) - Export of various frozen seafood - exporting goods as ‘Frozen Leather Jacket Fish’ - The Tribunal noted that the appellant's classification of the product under the contested HSN code was based on a legitimate interpretation and that the customs had accepted this classification at the time of export. The reclassification by the department after issuing a Public Notice could not retroactively invalidate the appellant's eligibility for MEIS benefits. - The Tribunal also addressed the legal validity of the MEIS scrips obtained based on the exports under dispute, concluding that if the scrips were deemed valid for the importers, they must also be considered valid for the exporter (the appellant).

  • Classification of imported goods - Boronated Calcium Nitrate - to be classified under CTH 3102 60 00 of the First Schedule to the Customs Tariff Act, 1975 or not - concessional rate of 5% BCD - The Appellant argued that their submissions were not considered and relevant reports were not provided during the proceedings, violating principles of natural justice. The Tribunal, emphasizing the need for clarity on the product's nature, set aside the impugned order and remanded the matter for reconsideration by the Adjudicating Authority.

  • DGFT

  • The public notice issued by the DGFT announces amendments to Para 4.14 and 4.06 of the Handbook of Procedures 2023, under the authority of the Foreign Trade Policy 2023. The amendments aim to modernize and simplify procedures related to norm fixation and the notification of Standard Input-Output Norms (SION) under the Advance Authorisation Scheme. By leveraging rule-based IT environments and empowering the Norms Committee, these changes seek to enhance efficiency, transparency, and compliance in international trade operations.

  • The Public Notice No. 50/2023 issued by the DGFT, amends the Foreign Trade Policy (FTP), 2023, to exempt certain Ministries/Departments from mandatory Quality Control Orders (QCOs) for inputs used in manufacturing export products. Effective immediately, this amendment streamlines import processes for entities like Advance Authorisation holders, Export Oriented Units (EOUs), and Special Economic Zones (SEZs), aiming to bolster export manufacturing and improve administrative efficiency in trade facilitation.

  • DGFT issues Public Notice regarding the procedure for import allocation of Calcined Petroleum Coke (CPC) for the Aluminium Industry and Raw Petroleum Coke (RPC) for CPC manufacturing industry for the financial year 2024-25. This notice follows directives from the Hon'ble Supreme Court and the Commission for Air Quality Management, which set import limits for these materials.

  • Incorporation of Policy condition for export of Chitin, Chitosan, Chitosan Salts, Chitosan Salts (Chitosan Hydrochloride, Chitosan Acetate, Chitosan Lactate) and Chitosan Derivatives (Chitosan Succinamide) - While the export of these products is declared as 'Free', exporters are required to adhere to specific conditions when exporting to the EU. This includes obtaining a 'Shipment Clearance Certificate' from CAPEXIL and a 'Health Certificate' jointly issued by CAPEXIL and the Regional Animal Quarantine Officer, Department of Animal Husbandry, Dairying and Fisheries, Government of India.

  • Amendment in export Policy of Human Biological Samples under Chapter-30 of ITC HS schedule-2 of export policy. - The revised policy now mandates obtaining a No Objection Certificate (NOC) from either the Central Drugs Standard Control Organization (CDSCO) or the Indian Council of Medical Research (ICMR)/Department of Health Research (DHR) for the export of human biological materials falling under Chapter 30. While items related to activities covered under the Drugs & Cosmetics Act 1940 require NOC from CDSCO, those not covered necessitate NOC from ICMR/DHR.

  • Corporate Law

  • Corporate Social Responsibility - Determination of net worth - Company fall within the purview of section 135 of Companies Act or not - Exclusion of reserves created from amalgamation - The High court found that the petitioner company did not comply with the CSR obligations despite having a net worth exceeding the prescribed threshold. The court noted that the company failed to make CSR expenditures or provide reasons for not doing so in its Board's report, as required by the law. - The court disagreed with the petitioners’ interpretation of net worth. It held that the benefits of excluding reserves created from amalgamation from the net worth calculation do not extend beyond the year of amalgamation. Consequently, the petitioners could not continuously exclude these reserves to avoid CSR obligations in subsequent years. - There is thus sufficient materials on record making out a prima facie case against the petitioners in respect of the offences alleged.

  • IBC

  • Admission of section 9 application - initiation of CIRP - pre-existing disputes or not - he National Company Law Appellate Tribunal (NCLAT) found ample evidence of a pre-existing dispute between the parties. The correspondences and the issues raised by the Corporate Debtor regarding the quality and supply of cables were sufficient to establish a dispute. The court highlighted that the operational creditor's failure to respond to the Corporate Debtor's notices and to file a Section 9 application promptly after receiving the dispute notice further indicated the persistence of a dispute. - The NCLAT set aside the NCLT's order and dismissed the Section 9 application filed by the operational creditor.

  • PMLA

  • Seeking grant of anticipatory bail - This case revolves around allegations of a sophisticated money laundering scheme linked to illegal coal levy collection. The court meticulously examined the legal arguments, the evidence presented, and the applicable legal standards under the PMLA. Despite the defense's arguments regarding the applicant's eligibility for anticipatory bail, the court found compelling reasons to deny the application based on the seriousness of the offences, the evidence suggesting the applicant's involvement, and the overarching principles governing bail under the PMLA. - Ultimately, the court decided against granting anticipatory bail to the applicant.

  • SEBI

  • The circular issued by the Securities and Exchange Board of India (SEBI) announces the repeal of previous circulars concerning the procedure for dealing with cases involving the issuance of securities to more than 49 but up to 200 investors in a financial year, under the Companies Act, 1956. It states that the repeal is enacted to protect the interests of investors in securities and regulate the securities markets. The circular outlines a procedure wherein companies were given the option to avoid penal action by providing investors with an option to surrender the securities and receive a refund amount along with interest.

  • The circular issued by the Securities and Exchange Board of India (SEBI) on March 12, 2024, addresses the need for simplification and streamlining of Scheme Information Documents (SIDs) for mutual fund schemes. It extends the timelines for implementing the revised SID format, with the updated format to be applicable from June 01, 2024. Draft SIDs are required to be filed with SEBI by May 31, 2024, and existing SIDs must be updated with data as of May 31, 2024, by June 30, 2024.

  • This circular issued by SEBI signifies a significant step towards strengthening regulatory oversight in the Indian securities market. By expanding the framework of Qualified Stock Brokers and imposing enhanced obligations on market participants, SEBI aims to foster greater investor trust and market integrity. The introduction of additional parameters for designation as QSBs reflects SEBI's commitment to comprehensive evaluation and regulation of stockbrokers. The staggered implementation approach ensures a smooth transition, allowing market participants ample time to adapt to the new requirements.

  • Service Tax

  • Refund claim of service tax paid on cancelled transactions - Post GST era - Rejection of refund under Rule 6(3) of Service Tax Rules read with Sec 142(5) of CGST Act - payment of service tax and GST on a transaction where no service was ultimately provided - Relying on precedent cases, the tribunal held that the appellant was entitled to a refund under Rule 6(3) of Service Tax Rules read with Sec 142(5) of CGST Act due to the change in tax regime. - Consequently, the court set aside the impugned order and directed the Adjudicating Authority to grant the refund within a specified time frame along with interest.


Articles


Notifications


Circulars / Instructions / Orders


News


Case Laws:

  • GST

  • 2024 (3) TMI 684
  • 2024 (3) TMI 683
  • 2024 (3) TMI 682
  • 2024 (3) TMI 681
  • 2024 (3) TMI 680
  • 2024 (3) TMI 679
  • 2024 (3) TMI 678
  • 2024 (3) TMI 677
  • 2024 (3) TMI 676
  • 2024 (3) TMI 675
  • 2024 (3) TMI 674
  • 2024 (3) TMI 673
  • 2024 (3) TMI 672
  • 2024 (3) TMI 671
  • Income Tax

  • 2024 (3) TMI 685
  • 2024 (3) TMI 670
  • 2024 (3) TMI 669
  • 2024 (3) TMI 668
  • 2024 (3) TMI 667
  • 2024 (3) TMI 666
  • 2024 (3) TMI 665
  • 2024 (3) TMI 664
  • 2024 (3) TMI 663
  • 2024 (3) TMI 662
  • 2024 (3) TMI 661
  • 2024 (3) TMI 660
  • 2024 (3) TMI 659
  • 2024 (3) TMI 658
  • 2024 (3) TMI 657
  • 2024 (3) TMI 656
  • 2024 (3) TMI 655
  • 2024 (3) TMI 654
  • 2024 (3) TMI 653
  • 2024 (3) TMI 652
  • 2024 (3) TMI 651
  • 2024 (3) TMI 633
  • Customs

  • 2024 (3) TMI 650
  • 2024 (3) TMI 649
  • 2024 (3) TMI 648
  • Corporate Laws

  • 2024 (3) TMI 647
  • Insolvency & Bankruptcy

  • 2024 (3) TMI 646
  • PMLA

  • 2024 (3) TMI 645
  • 2024 (3) TMI 644
  • Service Tax

  • 2024 (3) TMI 643
  • 2024 (3) TMI 642
  • 2024 (3) TMI 641
  • 2024 (3) TMI 640
  • 2024 (3) TMI 639
  • 2024 (3) TMI 638
  • Central Excise

  • 2024 (3) TMI 637
  • 2024 (3) TMI 636
  • 2024 (3) TMI 635
  • 2024 (3) TMI 634
 

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