Chartered Accountant and Advocate arrested for evading GST of Rs. 50 Crore

Three persons including a Chartered Accountant and an Advocate arrested in Noida on Monday for allegedly evading Rs 50 crore of Goods and Services Tax (GST).

The three were arrested from their office in Noida Sector 63 and were produced before a special chief judicial magistrate court in Meerut. They were remanded to judicial custody after having been booked under 2017’s GST Act’s Section 132 (1) A, Times of India reported.

Director General of GST Intelligence (DGGI) detectives from the Ghaziabad regional unit apprehended the accused and took them to the Meerut headquarters. As per Special Public Prosecutor Lakshay Kumar Singh, the accused were identified as Akhilesh Sharma, Advocate Rahul Jain and CA Madhusudan Pandey. Sharma was reportedly appointed as a director in several bogus companies.

The accused along with a dozen others were involved in the fake billing of more than 20 firms reportedly. As per officials, Pandey confessed to having committed the crime and said that he and Jain used to provide clients to Sharma for fake invoices, in exchange of commission.

An officer, at the condition of anonymity, explained to to TOI and said that via bogus companies registered with GST, the accused issued tax invoices for even those companies that did not supply or deal with any goods or services. These invoices were then sold to clients in need, leading to wrongful utilisation of input tax credit.

IT Exemption allowable on Sponsorship Receipt Received by Charitable Trust for Conducting Seminars: ITAT [Read Order]

The New Delhi bench of the Income Tax Appellate Tribunal (ITAT) in the case Income Tax Officer v. M/s Escorts Cardiac Disease Hospital Society wherein held that Income Tax exemption allowable on sponsorship receipt received by the charitable trust for conducting seminars.

In instant case, Assessee is a registered society engaged in the business of building and running hospital also do some medical relief. During the assessment proceedings, the Assessing Officer disallowed an amount of 9 Lakhs for non-deduction of tax to the assessee.

The first appellate authority sustained the action of AO and pointed that AO rightly made the addition on account of Assessee had paid the honorarium to the doctor from abroad who attended the seminars.

Also, they observed that the Assessee made the payment outside India through banking channels and not obtained approval from RBI and the same covered under FEMA, also the violation of provisions of section 11(1)(c) of the Income Tax Act, 1961.

The counsel for Assessee contended that the payment of honorarium is not liable to be taxed outside India and the same is not comes under the application of income under charitable purpose.

However, the counsel for Revenue supported the decision of Assessing Officer and relied on various cases. On counter-part Assessee also contended section 11(1)(c) would not attract since the matter is outside India and also added that such payments are done according to the laws which require the certificate of an accountant for making the payment.

The bench including Judicial Member H.S Sidhu and Accountant Member Anadee Nath Mishra heard the rival contention and perused the documents on record and found that the said Assessee is not running any hospital in spite they conducted a seminar for the benefit of the parent body which is a private company.

“The expense has been incurred outside India and therefore, it is a violation of Section 11(1)© and the above transaction is covered under the FEMA Act, for which the approval of the RBI is essential. Since assessee is remitting funds outside India and claiming it as the application of income, which is a violation of section 11(1)©, hence, the amount of Rs. 9,76,031/- was rightly disallowed by the AO,” the Tribunal said.

Subscribe Taxscan Premium to view the Judgment

GST Inspector Arrested in a Bribery Case

A central excise Goods and Services Tax ( GST ) Inspector was arrested by the Anti- Corruption Bureau (ACB) on Monday for accepting bribe of Rs. one lakh from a businessman, Business standard reported.

The Inspector accepted bribe from a Businessman in Alwar District in Rajasthan, ABC official said.

The accused officer, Shayar Singh, had demanded Rs 4 lakh as a bribe from complainant Lokpal Saini for not taking action against him related to his GST evasion. The deal was settled at Rs 3 lakh, the officer said.

A case was registered against Singh under sections of the Prevention of Corruption Act and further investigation is on in the matter, police said.

GSTN updates Facility to Claim Refund of Excess Payment of Tax

The Goods and Services Tax Network ( GSTN ) has updated a new functionality enabling the taxpayers to claim refund on account of excess payment of tax.

“Facility to claim refund on account of excess payment of tax has been enabled on GST Portal for the taxpayers,” GSTN said in a statement.

Last day, the GSTN has updated two new features such as, the facility to upload statement 4 for Refund and the facility for amendment in Registration of Core fields.

The Statement upload for Refund Taxpayers filing refund application on account of supplies made to SEZ unit/ SEZ Developer, with payment of tax, has now been provided with facility to upload Statement 4, at the time of filing Refund application.

Wealth Tax not leviable on Commercial Asset which is Capable of being put to Productive Use: ITAT [Read Order]

The Hyderabad bench of Income Tax Appellate Tribunal (ITAT) in Wealth Tax Officer versus M/s. Chavva Estates Private held that commercial asset which is capable of productive use is not eligible to wealth tax.

In the instant case, the Assessee bought a property along with two company comprising of land and building being a cinema theatre. Pursuant to the notice under section 17, Assessee filed his return of wealth and claimed exemption under section 2(ea)(i)(3) on the ground that asset is a commercial establishment and not chargeable to wealth tax.

The Assessing Officer asked to submit certain document to check the condition of the present asset and in response to the said notice Assessee filed a letter stating that no activity being carried due to some financial and procedural delays.

Since the Assessee failed to produce certain documents such as license issued by local authority, then AO proceeded to compute wealth charge taxable on the asset.

Aggrieved, the assessee preferred an appeal before CIT (A) who allowed appeal favourable to Assessee. Now revenue came with an appeal before this ITAT. This bench comprising judicial member Madhavi Devi and accountant member Rifaur Rahman heard the contention of Assessee that the said property was not active during the assessment year due to renovation into multiplex theatre.

The bench gone through several judgements and found that Assessee along with two group companies own the said property which was not active due to various reasons but that doesn’t mean that the said property lost its character.

Accordingly, the bench concluded that they are satisfied with the nature of the commercial establishment, and the exclusion provided in section 2(ea)(i)(3) would be applicable.

Subscribe Taxscan Premium to view the Judgment

‘Ada’ Classifiable as ‘Vermicelli’, 5% GST Leviable: Kerala AAR [Read Order]

The Advance Ruling Authority (AAR), Kerala has held that the product ‘Ada’ is classifiable as Seviyan (vermicelli) under Heading No. 1902 for which, GST of 5 percent is attracted.

In the instant case, the applicant was a wholesale distributor of product ‘Ada’. It filed an instant application to sought advance ruling on classification of ‘Ada’.

It was noted that the Product, ‘Ada’, in sum and substance, is something akin, i.e., similar in character to ‘Vermicelli’. Both are made from ‘maida or rice flour’ or ‘maida and rice flour’ and are manufactured through an identical process. There is indeed nothing to differentiate ‘Ada’ from ‘vermicelli’ except for the dies that are used in the manufacturing process which gives it a different shape.

The authority held that the product ‘Ada’ is something similar in character to ‘Vermicelli’ and same merits classification under HSN 1902 of 1st Schedule [Sl No. 97 – Seviyan (Vermicelli) of Notification No. 01/2017 – Central Tax (Rate) dated 28-6-2017 and State Government Notification No. 360/2017 attracting 5 per cent GST.

“Therefore, ‘Ada’ merits classification under HSN 1902 of the 1st Schedule [Sl. No. 97 – Seviyan (Vermicelli)] of Notification No. 01/2017 – Central Tax (Rate) dated 28-6-2017 and State Government Notification No. 360/2017 attracting 5 per cent GST,” the authority said.

Subscribe Taxscan Premium to view the Judgment

Cenvat Credit available to Non-Excisable Goods cleared for Consideration: CESTAT [Read Order]

The Mumbai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the cenvat credit is available to non- excisable goods cleared for consideration.

In the instant case, the Appellant is engaged in manufacture of Sugar & Molasses and they are availing facility of CENVAT credit under CENVAT Credit Rules, 2004, for input and capital goods credit as well as input service credit. During the course of manufacture of dutiable Sugar & Molasses, “Bagasse” emerges as a waste/by-product, which was being cleared by the Appellant at ‘Nil’ rate of duty.

Following the amendment made in Rule 6 of CENVAT Credit Rules, 2004 w.e.f. 01.03.2015, the department held that the Appellant is availing CENVAT credit on “Bagasse” and during the period from September, 2014 to June, 2015 they have neither maintained separate CENVAT credit account for the dutiable product and exempted product as required under Rule 6(2) of the CENVAT Credit Rules, 2004, nor followed the procedural under Rule 6(3A) of the CENVAT Credit Rules, 2004. Accordingly, interest and penalty was levied on the appellants.

Before the Tribunal, the appellants contended that “Bagasse” is nothing but waste of the finished goods i.e. Sugar and Molasses and therefore no amount is required to be paid to the department.

After perusing the explanation to Rule 6, the Tribunal observed that non-excisable goods cleared for consideration, would fall within the scope of the said Rule.

The Tribunal further accepted the contention of the appellants that reversal of CENVAT credit under Rule 6 of CENVAT Credit Rules, 2004 is not required in respect of waste or by-product or refuse generated during the process of manufacturing.

The Hon’ble Supreme Court’s decision in the matter of DSCL Sugar Ltd. (supra) has clearly laid down that bagasse is agricultural waste of sugarcane and the waste and residue of agricultural products, during the process of manufacture of goods cannot be said to be result of any process. There is no manufacturing process involved in Bagasse’s production. “Bagasse” is not ‘goods’ but merely a waste or by-product, therefore Rule 6 of CENVAT Credit Rules, 2004 is not applicable in the present case. “Bagasse” is bound to come into existence during the crushing of the sugarcanes and is an unavoidable agricultural waste. For two reasons the Board’s Circular dated 25.04.2016 has no application on the facts of the instant case, firstly no Circular can override the Rules as well as the law laid down by the Hon’ble Supreme Court and the orders of this Tribunal, and secondly the said Circular was issued on 25.04.2016 i.e. on a later date, whereas the period in dispute is March, 2015 to June, 2015,” the Tribunal said.

Subscribe Taxscan Premium to view the Judgment

Benefit of CBDT Circular permitting Holding of Gold Jewellery also applicable to Silver Jewellery: ITAT [Read Order]

The Indore bench of the Income Tax Appellate Tribunal (ITAT) has held that the benefit of the circular issued by the Central Board of Direct Taxes (CBDT) permitting the holding of gold jewellery can be applicable to silver jewellery also.

The assessee was aggrieved by the order of the Assessing Officer who made addition towards the unaccounted investment made in the silver jewellery at Rs.75,278/-. A search carried out the premises of the assessee, an individual, had resulted in seizing gold ornaments weighing 242 grams and silver articles/utensils weighing 1812 grams(net weight) valuing at Rs.75,278/-.

On the first appeal, the first appellate authority deleted the addition of gold ornaments relying on the CBDT circular dated 11.05.1994. the authority, however, sustained the addition for Rs.75,278/- on unaccounted investment in silver articles.

While allowing the second appeal, the Tribunal held that the instructions in the circular refers only to “jewellery and ornaments” and nowhere restrict it to gold jewellery.

“One cannot ignore the fact that in the Indian families there is a culture of giving silver ornaments and utensils on auspicious and marriage occasions. Restricting the limit of 500 gm/250 gm/100 gm only to the “gold jewellery ornaments” will not serve the true purpose of the CBDT instructions and it has to be applied hamnoninerly in the light of the Indian culture and traditions,” the Tribunal said.

It was, therefore, held that “the impugned silver jewellery weighing 1812 gms valuing at Rs.75,278/-should not have been added to the income of the assessee and the benefit of the CBDT Circular No. 1916 dated 11.5.1994 should also be spread so as to cover the silver articles weighing 1812 gms. We therefore set aside the orders of both the lower authorities and delete the addition of Rs.75,278/- for the alleged unaccounted investment in silver articles and allow the grounds raised by the assessee.”

Subscribe Taxscan Premium to view the Judgment

Issue of Pollution Under Control Certificate for Vehicles subject to 18% GST: AAR [Read Order]

The Authority for Advance Ruling ( AAR ), Goa has held that the activity of issuance of Pollution Under Control Certificate for vehicles issued by the Authorised Service Centre is not covered under SAC 9991 and is covered under Residual Entry and hence, should be taxed @ 18% GST.

The present application has been filed under section 97 of the Goa Good and Services Tax Act, 2017 and the Central Goods and Services Tax.

The appellant is the Authorised Service Centre appointed by Government of Goa, Directorate of Transport to carry out the services of Pollution Testing of Commercial and Non-Commercial Vehicles. The appellant carries out the Pollution testing and issues Pollution Under Control Certificate, which is a mandatory certificate as per section 190(2) of the Motor Vehicle Act, on payment of prescribed fees fixed by the Government.

The certificates are issued only if the emission of the vehicle is in alignments with standard pollution norms and are not harmful to the environment.

The applicant purchases blank leaflets books from Directorate of Transport on payment of prescribed rate per leaf and issues same leaflets to the customers after testing Pollution Control Test at the higher rate which is also prescribed by Directorate of Transport. The difference between the cost of procurement of the leaflets and issuing the same to the vehicle owners is the consideration charged for services rendered by him in issuing Pollution Control Certificate to the Vehicle Owners. They contended that the services rendered by the applicant is not covered under Schedule III appended to the Central Goods and Service Tax Act, 2017 as well as Goa Goods and Service Tax Act, 2017.

The authority noted that the services provided by the applicant are also not fully covered under SAC 9991.

“As SAC 9991 covers services provided by the Central Government, State Government, Union Territory or Local Authorities directly. It is not a pure service provided by the Central Government, State Government, Union Territory or. Local Authorities or by a Government Authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or relation to any function entrusted to the Municipality under the Article 243W of the Constitution. The Government has authorized the applicant to issue Pollution Control Certificate on payments. It is the service provided by the applicant to the customers on payment of service charges. Since the services of testing of Pollution are provided on payment of service charge, GST is payable at the applicable rate,” the authority said.

Subscribe Taxscan Premium to view the Judgment

GST Evasion: First arrest in Ahmedabad, Six Persons Booked

The Goods and Services Tax ( GST ) department, Ahmedabad has booked six persons for tax evasion of nearly 58 crores by issuing fake bills to get the input tax credit illegally.

The department took the step following raids at more than 100 traders and manufacturers of the edible oil in the state from June to September this year.

The department claimed that the illegal transfer of input tax credit of Rs 58 crore revealed in the Rs 1,000 crore billing scam extended to other states like Andhra Pradesh, Talangana and Karnataka. The epicentre of the scam was Gondal in Rajkot and Unjha in Patan districts.

The accused persons were involved in issuing bogus bills to claim the input credit without trading of the actual goods. Vimal Bhut was the kingpin of the entire scam and he had issued bogus sale bills to the tune of a whopping Rs 470.76 crore to different individuals.

The six include two brothers Vimal and Anil Bhut, Ravi Vaja, Mehul Thakkar, Amit Thakkar and his brother Mayur Thakkar. “These are the first arrests made by the department after implementation of the GST and all the six persons were produced before the court and sent to judicial custody in Sabarmati jail,” said Dr Amit Kumar, Special Commissioner of the GST.

He said, “The investigations will continue and action will be taken against those who also procured bills from the accused to evade the tax and get the input credit.”

GSTN Update: Two New Features Added to Portal

The Goods and services Tax Network ( GSTN ), the official web portal of the GST has updated two new features such as, the facility to upload statement 4 for Refund and the facility for amendment in Registration of Core fields.

The Statement upload for Refund Taxpayers filing refund application on account of supplies made to SEZ unit/ SEZ Developer, with payment of tax, has now been provided with facility to upload Statement 4, at the time of filing Refund application.

“The Facility has been provided on the GST Portal to NRTP (Non-Resident Taxable Persons), OTDAR (Online Information and Database Access or Retrieval), TDS (Tax Deducted at Source) & TCS (Tax Collected at Source) taxpayers for applying for Amendment in Registration of Core fields,” GSTN said.

Allegation on Converting Black Money Post-Demonetisation: Appellate Authority asks to reconsider Disciplinary Proceedings against CAs [Read Order]

The Appellate Authority has asked the Board of Discipline of the Institute of Chartered Accountants of India ( ICAI ) to reconsider the disciplinary proceedings against two Chartered Accountants allegedly indulged in converting Black Money Post- demonetisation.

The proceedings were initiated on the basis of a sting operation conducted by Aaj Tak News Channel aired on 14 th November, 2016 wherein the appellants were shown discussing with some individual about the manner of converting black money into white money after charging a cost / charge of 30% to 40%.

Following this a complaint was lodged against the two Chartered Accountants as the aforesaid act on the part seems to have caused grave disrepute to entire fraternity and to the Institute.

The Apex body of the Chartered Accountants (ICAI) has initiated disciplinary action against the Charered Accountants for “misconduct” with respect to offering advice on exchanging old currency notes.

After the completion of the proceedings, the Board of Discipline imposed a punishment of removal of their name from the Register of Members for a period of three months and also imposed a fine of Rs.1,00,000/-.

On appeal, the appellate authority found that the Appellants have not denied their appearance in the sting operation but from the very beginning they are denying the contents and the manner in which it was presented to the Institute.

“The raw footage which was the basic evidence in these Appeals should have been made available to the Appellants and reasonable time should have been given to them to controvert the same. Admittedly, in both these Appeals, the raw footage of the video was given to them after the Board of Discipline had issued the Report of holding them guilty. It is also not understand why the final Order was passed so hurriedly and more so in the case of Shri Bansal, whose father expired on 15th April, 2017 which is a very valid ground for giving him more time of defence. It is relevant to note here that after receipt of the raw footage, the Appellants have submitted detailed objections which need to be properly examined, which Board of Discipline could have done, had raw footage of the video of sting operation given in time to the Appellants,” the AA observed.

The authority further noted that most of the objections taken before us were filed before the Board of Discipline well within the time given by them but the Board of Discipline has not even dealt with the same in its Report.

“In fact, there is not even a mention of the same in the Report. We fail to understand why the same were not considered in the Impugned Report,” it said.

With regard to the admissibility of evidence of sting operation, the authority noted that one witness namely Mr. Puneet Jain was examined but it is not on record how he verified the veracity of raw footage of the video recorded based on which news were telecasted.

“The request of the Appellants to cross-examine him was also not acceded, which, in our considered view is not justified,” it said.

On the basis of the above findings, the appellate authority remanded the matter back to the Board of Discipline for re-consideration with a direction to provide adequate opportunity of being heard to the appellants and to follow procedure as per law to admit the evidence of sting operation.

Subscribe Taxscan Premium to view the Judgment

When Validly Revised Return filed pursuant to notice u/s 153A, is accepted, Defects found in Original Return cannot be considered for Imposing Penalty: ITAT [Read Order]

The New Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) in M/s OSE Infrastructure Ltd. Versus ACIT, held that when a revised return is accepted as per issue of notice under section 153A and the defects found in the original return cannot hold penalty.

In the instant case Assessee filed a huge loss substantially reduced pursuant to the issue of notice under section 153A and declared reduced loss as nil income which arose chaos as concealment of income by filing inaccurate particulars.

Assessing Officer initiated levy of penalty by order being the 100% of the tax sought to be evaded. The assessee filed an appeal before CIT (A) which was dismissed by the authority. Hence Assessee approached this division bench stating that no evidence was found against assessee during the course of search and seizure operation.

The counsel for Assessee placed various contentions, firstly regarding the notice which doesn’t say under which limb of section 271(1)(C )the penalty was proposed. Secondly stated that when the return revised persuant to the notice and validly revised and the assessment completed accepting the revised return then no penalty could be levied. Lastly, counsel for Assessee added that no incriminating documents, asset or income found during the course of search.

Finally, the bench including President GD Agrawal and Judicial member Narasimha Chary heard the rival submission and perused the documents available on records. The bench raised a statement that from the assessment order it is not clear that as to whether it was concealment of income or furnishing of inaccurate particulars.

Accordingly, the bench observed that “when the revised return is accepted and the income is assessed as per the revised income, there is no scope for penalty.”

The bench pressed the decision of Kirit Dahyabhai Patel vs ACIT where High court held that “the return of income filed in response to notice under section 153(A) is termed as return filed under section 139 and officer made assessment on said revised return and the penalty is to be levied on the income assessed over and above the income returned under section 153A of the Income Tax Act, if any.”

Subscribe Taxscan Premium to view the Judgment

Deduction available on Loss on Account of Compensation on Enforcement of Security Paid to Subsidiary Companies: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the deduction is allowable on the loss on account of compensation on enforcement of security paid by the Company to its subsidiary companies.

The assessee has claimed loss incurred by two subsidiary companies M/s Mishapar Investment Ltd & Vibhadeep Investment & Trading Ltd on the ground that the said loss has been incurred wholly and exclusively in connection with its business for borrowing loan from ILFS. The AO disallowed loss claimed by the assessee on account of compensation paid to two subsidiary companies on the ground that the said loss is in the nature of capital expenditure which is incurred in connection with the repayment of loan borrowed from two subsidiaries, therefore, the said loss cannot be allowed as expenditure.

On the second appeal, the Tribunal held that “we do not find any merit in the findings of the AO for the reason that the AO has not denied the fact that the assessee has borrowed loan from M/s ILFS for the purpose of its business. In the process, the assessee has pledged NOCIL shares held by two of its subsidiary companies with the lender for the security of the loan. As per the contractual agreement between the parties, the assessee has reimbursed loss incurred by two subsidiary companies. Therefore, we are of the considered view that the said loss is incurred wholly and exclusively in connection with the business of the assessee and accordingly, the AO was incorrect in disallowing loss on account of compensation on enforcement of security.”

Subscribe Taxscan Premium to view the Judgment

GST Paid in respect of Brokerage Services can be adjusted against Output Tax payable on Renting of Immovable Property: AAR [Read Order]

The Authority for Advance Ruling (AAR), Tamil Nadu held that Input Tax Credit of the CGST & SGST charged in respect of brokerage services can be adjusted against output tax payable against Renting of immovable property.

In the instant case, the applicant has received an inward supply of real estate brokerage services for renting of property on a fee basis. Due to the services of Catalyst Consulting Chennai, the applicant was able to make an outward supply of renting of the property to Vantec Logistics India private Limited. Hence, this inward supply was used in the course of the applicant’s business.

The authority noted that the inward supply rendered by catalyst Consulting is not listed in any of the exceptions mentioned in Section 17(5) of CGST Act/ SGST Act for availing the input tax credit of CGST and SGST.

“Further, Section 16(2) states that input tax credit is available only if the registered person is in possession issued by registered supplier; a supply of the service has been received; tax has been paid by supplier to Government; the recipient (applicant) has filed returns; recipient has paid the supplier the amount within a period of 180 days. Section 16(4) states that the recipient(applicant) shall not be entitled to take input tax credit after the due date of furnishing return for September following the end of financial year or annual return whichever is earlier. Similarly, Section 17 and Section 18 impose certain conditions on availment of input tax credit. Therefore, the applicant eligible to take credit of the CGST & SGST charged by M/s. Catalyst Consulting in the Tax invoice No. COO7 /17-18 dated 2O-Dec-17 raised on the applicant for real estate brokerage services for renting of property on a fee basis rendered by Catalyst Consulting, subject to the conditions as per Section 16, 17 and, 18 of CGS’I’ & SGST Act,” the authority said.

It was therefore, held that the applicant is eligible to take credit of the CGST & SGST charged by M/s. Catalyst Consulting Chennai in the Tax invoice No. C-OO7 lI7-I8 dated 20.I2.2O17 raised on the applicant for real estate brokerage services for renting of property on a fee basis rendered by Catalyst Consulting, subject to the conditions as per Section 16, 17 and 18 of CGST & SGST Act.

Subscribe Taxscan Premium to view the Judgment

Statement of Third Parties can’t be relied as Evidence If No Opportunity for Cross-Examination was granted: ITAT [Read Order]

The New Delhi bench of Income Tax Appellate Tribunal in Rajat Exports Import (India) Pvt. Ltd versus ITO held that if no opportunity for cross-examination is granted then the statement of third parties cannot be treated as solid evidence.

In the instant case Assessee produced certain documents like bank statement, share application form from investors, confirmation of share subscribers and ROC master data to the lower authorities with regard to addition under Section 68 of Income Tax Act.

The assessee also added that all the transactions are through banking channels and they are having sufficient means to make further investments.

However, the AO was not satisfied with the said evidences and found that no evidences for allotment of shares like Form No. 2 was provided during assessment proceedings. Assessee denied the explanation given by AO and added before this tribunal that Copy of Form No. 2 i.e. ROC return filed before the ROC declaring the allotment of shares is filed in PB.

Assessee already filed the certificate in the PB which is already submitted before CIT (A) and to the AO. The counsel for Assessee stated that these all are according to the suspicion of the AO to make addition against Assessee and he didn’t make any move to prove that the said document is untrustworthy.

The AO also noted in the assessment order that DIT during the investigation had taken the statements of three persons regarding the allegation but AO did not provide any opportunity to cross examine these persons on behalf of assessee to find out the truth.

Finally the bench including Judicial Member Bhavnesh Saini and Accountant Member L.P Sahu stated that initial burden of Assessee to prove identity and creditworthiness of the investors have been discharged and AO did not granted an opportunity for Assessee to cross examine those persons.

Accordingly, the bench held that statement of outsiders or third parties is not a ground for evidence to make additions.

Subscribe Taxscan Premium to view the Judgment

Tax Benefit available to Compulsory Acquisition of Urban Agricultural Land: ITAT [Read Order]

The Cochin bench of the Income Tax Appellate Tribunal (ITAT) in Income Tax Officer versus Smt.Girijakumari M held that tax benefit under Section 10 (37) of the Income Tax Act are available to compulsory acquisition of urban agricultural land.

The dispute starts with the sale of 70 cents of land which was taken over by Vizhinjam International seaport and the assessee claimed the entire sale consideration exempt from tax. The reason stated by assessee was the said land is an agricultural land, compulsorily acquired by the government of Kerala.

However, the AO held that the said sale is not a compulsory acquisition inspite sale through negotiated settlement, so that AO worked out the long-term capital gain and the assessee’s claim for exemption under section 10(37) of the Income Tax Act was not admissible.

Aggrieved by the action of AO assessee preferred an appeal before CIT (A) and the authority by following the judgment of Supreme Court in the case of Balakrishnan v. Union of India held that Assessee entitled for deduction and not liable for the long-term capital gain.

Being aggrieved revenue carried an appeal before this tribunal, the bench including Chandra Poojari, Accountant Member and George George K, Judicial Member heard the rival submission and perused the documents on record.

In the instant case, the bench observed that the entire procedure done under the Land Acquisition Act, only price was fixed upon a negotiated settlement. The bench also called the decision of supreme court in Balakrishnan v. Union of India & Others, held that sale price was fixed through a negotiated settlement, the character of acquisition would still remain compulsory.

Accordingly, bench proclaimed that acquisition of urban agricultural land was a compulsory acquisition and the same was entitled the exemption under section 10 (37) of the Income Tax Act.

Subscribe Taxscan Premium to view the Judgment

Insolvency Law Committee submits 2nd Report on Cross Border Insolvency: Recommends adoption of the UNCITRAL Model Law

The Insolvency Law Committee (ILC) constituted by the Ministry of Corporate Affairs to recommend amendments to Insolvency and Bankruptcy Code of India, 2016,  has submitted its 2nd Report to the Government, which deals with cross border insolvency.  The Report was handed  over today to Shri Arun Jaitley, Minister of Finance and Corporate Affairs by  Corporate Affairs Secretary, Shri Injeti Srinivas.

The ILC has recommended the adoption of  the UNCITRAL Model Law of Cross Border Insolvency, 1997, as it provides for  a comprehensive framework to deal with cross  border insolvency issues.  The Committee has also recommended a few carve outs to ensure that there is no inconsistency between the domestic insolvency framework and the proposed Cross Border Insolvency Framework.

The UNCITRAL Model Law has been adopted in as many as 44 countries and, therefore, forms part of international best practices in dealing with cross border insolvency issues.  The advantages of the model law are the precedence given to domestic proceedings and protection of public interest. The other advantages include greater confidence generation among foreign investors, adequate flexibility for seamless integration with the domestic Insolvency Law and a robust mechanism for international cooperation.

The model law deals with four major  principles of cross-border insolvency, namely  direct access to foreign insolvency professionals and foreign creditors to participate in or commence domestic insolvency proceedings against a defaulting debtor; recognition of foreign proceedings & provision of remedies; cooperation between domestic and foreign courts & domestic and foreign insolvency practioners; and coordination between two or more concurrent insolvency proceedings in different countries.  The main proceeding is determined by the concept of centre of main interest (“COMI”).

The necessity of having Cross Border Insolvency Framework  under the Insolvency and Bankruptcy Code arises from the fact that many Indian companies have a global footprint and many foreign companies have presence in multiple  countries including India.  Although the proposed Framework for Cross Border Insolvency will enable us to deal with Indian companies having foreign assets and vice versa, it still does not provide for  a framework for dealing with enterprise groups, which is still work in progress with UNCITRAL and other international bodies.  The inclusion of the Cross Border Insolvency Chapter in the Insolvency and Bankruptcy Code of India, 2016, will be a major step forward and will bring Indian Insolvency Law  on a par with that of matured jurisdictions.

Growth of More Than 80% in the number of Returns Filed in the Last Four Financial Years: CBDT releases Direct Tax Statistics

Continuing the practice of placing key statistics relating to direct tax collections and administration in public domain, the Central Board of Direct Taxes (CBDT) has further released time-series data as updated up to FY 2017-18 and income-distribution data for AY 2016-17 and AY 2017-18. The key highlights of these statistics are as under:

There has been a continuous increase in the amount of income declared in the returns filed by all categories of taxpayers over the last three Assessment Years (AYs). For AY 2014-15, corresponding to FY 2013-14 (base year), the return filers had declared gross total income of Rs.26.92 lakh crore, which has increased by 67% to Rs.44.88 lakh crore for AY 2017-18, showing higher level of compliance resulting from various legislative and administrative measures taken by the Government, including effective enforcement measures against tax evasion.

The total number of taxpayers (including corporates, firms, HUFs, etc.) showing income of above Rs. 1 crore has also registered sharp increase over the three-year horizon. While 88,649 taxpayers disclosed income above Rs. 1 crore in AY 2014-15, the figure was 1,40,139 for AY 2017-18 (growth of about 60%). Similarly, the number of individual taxpayers disclosing income above Rs. 1 crore increased during the period under reference from 48,416 to 81,344, which translates into a growth of 68%.

The average tax paid by corporate taxpayers has increased from Rs.32.28 lakh in AY 2014-15 to Rs.49.95 lakh in AY 2017-18 (growth of 55%). There is also an increase of 26% in the average tax paid by individual taxpayers from Rs.46,377/- in AY 2014-15 to Rs.58,576/- in AY 2017-18.

During the three-year period under reference, the number of salaried taxpayers has increased from 1.70 crore for AY 2014-15 to 2.33 crore for AY 2017-18 (up by 37%). The average income declared by the salaried taxpayers has gone up by 19% from Rs.5.76 lakh to Rs.6.84 lakh.

During the same period, there has also been a growth of 19% in the number of non-salaried individual taxpayers from 1.95 crore to 2.33 crore and the average non-salary income declared has increased by 27% from Rs. 4.11 lakh in AY 2014-15 to Rs. 5.23 lakh in AY 2017-18.

The availability of the time-series data and the income-distribution data of fairly long periods in the public domain will be found to be useful by the academicians, scholars, researchers, economists and the public at large in studying long-term trends of various indices of the effectiveness and efficiency of direct tax administration in India.

National Anti-Profiteering Authority is not a Price Regulator: NAA Chief B. N Sharma

Mr B N Sharma, Chairman, National Anti-Profiteering Authority, assured companies that the National Anti-Profiteering Authority is not a price regulator and neither does it have legislative intent. He was addressing an interactive session with industry organized by the Confederation of Indian Industry (CII) at Mumbai today.

Mr Sharma mentioned that authorities are sensitive to natural business outcomes and appreciate that several factors contribute to pricing decisions such as supply and demand, supplier’s cost and taxes, etc. Hence, it is not justified to lay down uniform parameters across sectors.

The Chairman said that the three-layer mechanism consisting of screening committee at state level or Standing committee where impact is pan-India; Investigatory at Director General Safe Guards and National Anti-Profiteering Authority help identify genuine cases of anti-profiteering where they exist.

The anti-profiteering measures introduced under GST are extremely critical in today’s business, as reduction of GST rates is required to be passed on to the customers on immediate basis.

Clear guidelines on how pricing and profits are to be calculated under GST regime to track any unlawful gains and whether anti-profiteering provisions would apply at entity or a product level were taken up at the session. Industry voiced concerns regarding the mechanism of calculating benefits to be passed on to the end consumers on an impromptu basis along with logistic hassles associated with it. Industry members requested for sector specific guidelines. They also expressed concerns over the mechanism of changing MRP on an instantaneous level.

Mr Sharma further elaborated that it is simple to decide the profiteering by comparing the corresponding invoices of pre-revised rates to post revision which is an accounting procedure and no legality is required. By reduction of rates, Government sacrifices revenue but commensurate reduction should be passed on to the end consumers.

Clarifying the applicability at SKU levels, he reiterated that it is product specific, affecting individual customers and cannot be clubbed. He further clarified that past losses cannot be adjusted against the reduced tax rates. Any business-as-usual activity in the form of business promotion by way of offering discounts or increasing unit quantity cannot offset the commensurate benefit to the end consumers.

Mr Sharma stressed that companies need to set mechanisms to address the requirements of the provisions of anti-profiteering.

Hike in Monetary Limit for Tax Appeals: CBIC asks Officials to Complete Withdrawal of Appeals by 31st Oct [Read Circular]

As the Government has increased the threshold limit for tax departments to file appeals in tribunals and courts in July, the Central Board of Indirect Taxes and Customs ( CBIC ) has directed the officials to complete the process of withdrawal of cases by this month end.

The Board is dissatisfied by the “tardy progress” of withdrawal of departmental appeals.

As on October 15, 2767 indirect tax cases remain to be withdrawn in CESTAT (Customs, Excise and Service Tax Appellate Tribunal), high courts and the Supreme Court, CBIC data showed.

“Filing of a common miscellaneous application covering all identified cases in the HC and The CESTAT. This has already been suggested in letter dt 14.09.2018 . As you are aware a consolidated list of cases ripe for withdrawal from the Supreme Court has already been compiled and sent to the CAS for requisite drafting of interlocutory application/filing of single application on the advice of the Ld AG. The idea behind this, is to ensure that the withdrawal takes place in a single move to save valuable time. This should be adopted in HC and CESTAT as well,” a CBIC communication said.

“…the status of withdrawals as on October 15, 2018 was put up to the Chairman who has observed “progress is very tardy”. It has been directed that the entire activity (of filing or withdrawal of departmental appeals) be positively completed by October 30, 2018,” the judicial cell of CBIC has written to all principal chief commissioners and chief commissioners of the department.

The officials have been directed to file a common miscellaneous application covering all identified cases in the high courts and the CESTAT. The department has already prepared a list of cases “ripe for withdrawal” from the Supreme Court to ensure that the withdrawal takes place in a single move to save time, the missive said, adding that the same method should be adopted for high courts and CESTAT as well.

In July, the government had hiked the threshold for appeals filed by the tax department before the Income Tax Appellate Tribunal/Customs, Excise and Service Tax Appellate Tribunal (ITAT/CESTAT) to Rs 20 lakh from Rs 10 lakh earlier, for high courts to Rs 50 lakh from Rs 20 lakh and as for the Supreme Court to Rs 1 crore from Rs 25 lakh. At tribunal level, Central Board of Direct Taxes (CBDT) files appeals in ITAT (Income Tax Appellate Tribunal) while the CBIC files appeals in CESTAT (Customs, Excise and Service Tax Appellate Tribunal).

Following the decision to hike the monetary limits for tax appeals, the CBIC was estimated to see a reduction of 18 per cent in litigation. At the tribunal level, the department was estimated to withdraw 16 per cent of the cases while 22 per cent matters in high courts and 21 per cent of the appeals in the Supreme Court were not be litigated any further.

Subscribe Taxscan Premium to view the Judgment