Plea in Rajasthan High Court challenging One Year restriction to claim Transitional Credit under GST [Read Order]

The Rajasthan High Court issued the notice to the State Government on a plea challenging a one-year restriction to claim transitional credit.

The petitioner, Rajasthan State Co-operative Marketing Federation Ltd. (RAJFED) challenged the Constitutional validity of Section 140(3)(iv) of the Rajasthan Goods and Service Tax Act (RGST).

Section 140(3)(iv) which says that a registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012—Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day, within such time and in such manner as may be prescribed, subject to the condition that such invoices or other prescribed documents were issued not earlier than twelve months immediately preceding the appointed day.

Advocate Rahul Lakhwani from Chir Amrit Legal LLP, appearing on behalf of petitioner, argued that the restriction under said section arbitrarily and unreasonably restricts transitional credit of tax paid on the buffer stock of fertilizers, invoices of which were issued twelve months before 01.07.2017. Thus, Petitioner becomes disentitled for the transitional credit of tax paid in respect of buffer stock purchased before 30.06.2016 under RGST regime without any fault on their part. The Counsel further argued that the such condition is leading to cascading which is against the objective of GST.

The division bench of Justice Manoj Kumar Vyas and Justice Sabina ruled that has issued notices on a writ petition challenging the constitutional validity of Section 140(3)(iv) of Rajasthan Goods and Services Tax Act, 2017 which restricts the transitional credit of stock of goods purchased prior to one year from 01.07.2017 under RGST regime.

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No Income Tax Applicable on Income earned from sale of investment: ITAT grants relief to Oriental Insurance [Read Order]

In a major relief to Oriental Insurance, the Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the no Income Tax Applicable on Income earned from the sale of an investment.

The assessee, Oriental Insurance had claimed profit derived from sale/ redemption of investments to the tune of Rs 535.25 crores as exempt by relying upon CBDT Circular No. 528 dated 16th December 1988. Thereafter, during the course of assessment, revised computation of income was filed by the assessee making a further claim of exemption of Rs 26.66 crores.

The subject matter of dispute before the CIT (A) was whether the entire amount of Rs 561.92 crores (i.e. Rs 535.25 crores + Rs 26.66 crores) was exempt from tax while computing the total income of the assessee.

The assessee submitted that the issue as to whether profit derived by the assessee from sale/ redemption of investments is exempt from tax is a legacy issue. In earlier years too similar additions were made by the lower authorities and the matter now stands settled by the decision of the High Court in case of assessee for AY 2005- 06 reported in 407 ITR 658 (Del).

The coram of Accountant Member, Anil Chaturvedi and Judicial Member Sudhanshu Srivastava in the light of the  High Court in case of the assessee for AY 2005- 06 held that the Legislature intended to bring the profit on the sale of investments to tax, it has chosen to re-introduce the earlier provision by virtue of the amendment effective from Assessment Year (AY) 2011-12. Since there is no difference in the facts for the year under consideration vis-a-vis the assessment year 2005-06

The ITAT while allowing the appeal of the  assessee, Oriental Insurance held that the authority erred in holding that the income earned on sale/redemption of investment was chargeable to tax.”

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Advocates with 10 years experience to be appointed as Judicial Members of various Tribunals: Govt. amends Service Rules [Read Notification]

The Government notified advocates with 10 years experience to be appointed as Judicial Members of various Tribunals.

The government notified the Tribunal, Appellate Tribunal, and other Authorities (Qualifications, Experience and other Conditions of Service of Members) (Amendment) Rules, 2021 which seeks to amend the Tribunal, Appellate Tribunal, and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020.

It has been notified that in respect of Income-tax Appellate Tribunal under the Income-tax Act, 1961, a person shall not be qualified for appointment as President unless he is a sitting or retired Judge of a High Court and who has completed not less than seven years of service as a Judge in a High Court or a Vice-President of the Income-tax Appellate Tribunal.

The Central Government may appoint one or more members of the Income-tax Appellate Tribunal to be the Vice-President or, as the case may be, Vice-Presidents thereof.

The notification reads, a person shall not be qualified for appointment as a Judicial Member, unless, he has, for a combined period of ten years, been a District Judge and Additional District Judge; or he has been a member of the Indian Legal Service with ten years of experience in litigation and has held a post of Additional Secretary or any equivalent or higher post for two years; or he has been an advocate for ten years with substantial experience in litigation under Income-tax laws in Income-tax Appellate Tribunal, High Court or Supreme Court.

Accountant Member, unless, a person shall not be qualified for appointment as an Accountant Member, unless he has for twenty-five years been in the practice of accountancy, as a chartered accountant under the Chartered Accountants Act, 1949 (38 of 1949); or as a registered accountant under any law formerly in force; or partly as such registered accountant and partly as a chartered accountant; or he has been a member of the Indian Revenue Service (Income-tax Service Group A) and has held the post of Principal Commissioner of Income-tax or any equivalent or higher post for two years and has performed judicial, quasi-judicial or adjudicating function for three years.

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DGFT temporarily removes Import restrictions on Refined Palm Oil, Refined Palm Olein, Potatoes [Read Notification]

The Director-General of Foreign Trade (DGFT) temporarily removes import restrictions on refined palm oil, refined Palm Olein, Potatoes.

According to a notification of the DGFT, import policy of refined bleached deodorised palm oil, and refined bleached deodorised palm Olein “is amended from restricted to free with immediate effect and for a period up to December 31, 2021”. It, however, added that the import is not permitted through any port in Kerala.

The DGFT has further notified that import policy of potatoes (fresh or chilled) wherein the existing import policy of “import of Potatoes from Bhutan is permitted any to 31st license, up January 2021” has been amended to “import of Potatoes from Bhutan is permitted any to 31st license, up June 2022.

Under the restricted category, an importer has to obtain a licence or permission from DGFT for inbound shipments.

The government on Tuesday cut basic customs duty on crude palm oil to 10 per cent till September this year.

Indonesia and Malaysia are the two countries that supply palm oil. Domestic edible oil prices have more than doubled in the past year. India meets about two-thirds of its edible oil demand through imports. As per data by industry body SEA, India’s import of palm oils rose by 48 percent to 7,69,602 tonnes in May 2021, on higher shipments of crude palm oil. India, the world’s leading vegetable oil buyer, had imported 4,00,506 tonne palm oil in May 2020. The country’s total vegetable oil imports rose 68 percent to Rs 12.49 lakh tonne in May 2021, compared to 7.43 lakh tonne in the year-ago period.

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ITAT’s VPs, President, Chairperson to either avail Accommodation or claim House Rent Allowance: Govt. amends Service Rules [Read Notification]

The Government notified that Chairman, Chairperson, President, Vice Chairman, Vice-Chairperson or Vice President of Tribunal, Appellate Tribunal either to avail of accommodation or entitled to house rent allowance.

The government notified the the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) (Amendment) Rules, 2021 which seeks to amend the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020.

These rules shall apply to the Chairman, Vice-Chairman, Chairperson, Vice-Chairperson, President, Vice- President, Presiding Officer, Accountant Member, Administrative Member, Judicial Member, Expert Member, Law Member, Revenue Member, Technical Member, Member of the Tribunal, Appellate Tribunal or, as the case may be, Authority as specified in column (2) of the Eighth Schedule to the Finance Act, 2017.

In the principal rules, in rule 2, for clause (g), the clause shall be substituted, namely ‘Search-cum-Selection Committee means the Search-cum-Selection Committee referred to in sub-section (3) of section 184 of the Finance Act, 2017 (Act 7 of 2017)’.

The notification inserted Rule 15 in respect of House rent allowance which reads “With effect from the 1st January 2021, the Chairman, Chairperson, President, Vice Chairman, Vice-Chairperson or Vice President shall have the option to avail of accommodation to be provided by the Central Government as per the rules for the time being in force or entitled to house rent allowance subject to a limit of Rs. one lakh fifty thousand rupees per month and the Presiding Officers and Members shall have the option to avail of accommodation to be provided by the Central Government as per the rules for the time being in force or entitled to house rent allowance subject to a limit of Rs.one lakh twenty-five thousand rupees per month.”

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GSTN enables New Functionality to discharge GST Liability with reference to ‘Reconciliation Statement’ GSTR-9C

The Goods and Service Tax Network (GSTN) enabled the New functionality to discharge Goods and Service Tax(GST) liability with reference to ‘Reconciliation Statement’ i.e. GSTR-9C.

To avail this facility the taxpayers must login to the GST portal, then choose ‘Reconciliation Statement’ from the dropdown menu under the head ‘Cause of Payment’, then specify payment date and Financial Year.

Every registered person whose aggregate turnover during a financial year exceeds two crore rupees shall get his accounts audited as specified under sub-section (5) of section 35 of the CGST Act. They shall furnish a copy of the audited annual accounts and a reconciliation statement, duly certified, in form GSTR-9C.

GSTR-9C must be prepared and certified by a Chartered Accountant or Cost Accountant. It must be filed on the GST portal or through a facilitation center by the taxpayer, along with other documents such as the copy of the Audited Accounts and Annual Return in form GSTR-9. This statement is applicable to all those taxpayers who must get their Annual Accounts audited under the GST laws.

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BCI constitutes Committee to Review its Recent Amendment regarding Professional Misconduct

The Bar Council of India (BCI) constituted the Committee to Review its recent amendment regarding Misconduct.

The BCI said that the committee is constituted to address concerns expressed by some members of the Bar.

The Bar Council of India has decided to review the said rules relating to misconduct.

The BCI stated, the Committee shall consist of some senior Advocates, representatives of State Bar Councils and High Court and other Bar Associations, besides five Members of Bar Council of India. The Committee shall be requested to submit its report within 3 weeks. Thereafter, the Council will proceed to act in accordance with the provisions of Advocates Act, 1961.

As per the notification dated June 26, 2021, issued by the BCI “An Advocate shall conduct himself/herself as a gentleman/gentle lady in his/her day to day life and he/she shall not do any unlawful act, he/she shall not make any statement in the Print, Electronic or Social Media, which is indecent or derogatory, defamatory or motivated, malicious or mischievous against any Court or Judge or any member of Judiciary, or against State Bar Council or Bar Council of India.”

The review committee will take into consideration the representations received from some of the associations and it will frame the rules after noticing the issues raised by all concerned.

“Till the report of the Review Committee is received, considered and acted upon by the Council, the operation/implementation of the amended rules published in Gazette Notification dated 26.06.2021 in Extraordinary Part-III-Section-4 with respect to Amendment in Part-VI, Chapter-II of Bar Council of India Rules relating to the conduct of Advocates shall be kept in abeyance,” stated BCI.

The BCI in notification avers that no prudent and real Advocate would oppose such steps of Bar Council of India; And only those who are not in active practice, but, always indulge in nasty and nefarious activities and have been maligning the image of the profession raise a hue and cry when meaningful steps are taken to preserve the dignity of the profession. Some people are in the habit to object to each and every reformative step, but, Bar Council of India is not going to succumb to any such undue pressure.

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Live Animals to Undergo COVID-19 testing before imported to India, instructs CBIC [Read Instructions]

The Central Board of Indirect Taxes and Customs (CBIC) on Wednesday notified the requirement of COVID-19 testing in live animals before importing into India.

The Board has issued the notification in the light of the Office Memorandum issued by the Ministry of Fisheries, Animal Husbandry, and Dairying.

“In order to rule out the spreading of COVID-19 infection through imported animals, the Cats (domestic- Felis catus), other members of the family; Felidae i.e. tigers (Panthera tigris), lions (Panthera leo), snow leopards (Panthera uncial), pumas (Puma spp.), etc. and Gorillas (Gorilla spp.) have to be tested for COVID-19 infection by the travelers/exporters in the exporting country while importing into India, till COVID-19 situation prevails,” the CBIC while instructing all Principal Chief Commissioner/Chief Commissioner of Customs/Custom (Preventive), All Principal Chief Commissioner/Chief Commissioner of Central Tax and Customs, all Principal Commissioner/Commissioner of Customs /Custom (Preventive), and all Principal Commissioner/Commissioner of Central Tax and Customs said.

In this regard, the concerned Regional officers/Quarantine officers, Animal Quarantine and Certification Services (AQCS) will issue advance NOC/Final AQCS clearance for import of aforesaid animals into India after receiving a negative COVID-19 test report (no more than 3 days old before export into India) in addition to other existing requirements in this regard.

“It is requested that necessary action may be taken to sensitise officers under your jurisdiction regarding the above-mentioned requirements for import of live animals,” CBIC added.

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CBIC waives Penalty for Non-Compliance to GST Invoice QR Code provisions [Read Notification]

The Central Board of Indirect Taxes and Customs (CBIC) notified the waiver of the amount of penalty for non-compliance to Goods and Service Tax (GST) Invoice QR code provisions between the period from 1 December 2020 to the 30 September 2021.

In other words, the applicability of B2C dynamic QR code provisions extended to September 30, 21 instead of applicable from July 1, 2021.

“The Government on the recommendation of Council and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue), No. 89/2020 – Central Tax, dated the 29th November 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Subsection (i), vide number G.S.R. 745(E), dated the 29th November 2020, except as respects things done or omitted to be done before such supersession, hereby waives the amount of penalty payable by any registered person under section 125 of the said Act for non-compliance of the provisions of notification No.14/2020 – Central Tax, dated the 21st March 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 197(E), dated the 21st March 2020, between the period from the 1st day of December 2020 to the 30th day of September 2021,” the notification read.

Earlier, the CBIC vide Notification No. 06/2021 – Central Tax dated March 30, 2021, amended Notification No. 89/2020 – Central Tax dated November 29, 2020, to extend the waiver of penalty leviable under Section 125 of the CGST Act, 2017 (i.e. general penalty) for non-compliance of provisions of Notification No. 14/2020–Central Tax dated March 21, 2020 (Provisions of Capturing of Dynamic QR Code in GST Invoices) between the period from December 1, 2020, to June 30, 2021, subject to the condition that the said person complies with the provisions of the said notification from July 1, 2021.

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Buyer to deduct TDS on Purchase of Goods from Resident Seller: CBDT issues Guidelines [Read Circular]

The Central Board of Direct Taxes ( CBDT) issued the guidelines in respect of Section 194Q of the Income Tax Act, 1961 in respect of the buyer to deduct TDS on the purchase of goods from the resident seller.

The Finance Act, 2021 inserted a new section 194Q in the Income-tax Act 1961 which takes effect from I July, 202I. It applies to any buyer who is responsible for paying any sum to any resident seller for the purchase of any goods of the value or aggregate of value exceeding fifty lakh rupees in any previous year. The buyer, at the time of credit of such sum to the account of the seller or at the time of payment, whichever is earlier, is required to deduct an amount equal to 0.1% of such sum exceeding fifty lakh rupees as income tax.

“It has been represented that there are practical difficulties in implementing the provisions of Tax Deduction at Source CTDS) contained in section 194-Q of the Act in case of certain exchanges and clearing corporations. It has been stated that sometime in these transactions there is no one-to-one contract between the buyers and the seller,” the circular read.

The Board in order to remove such difficulties is provided that the provisions of section 194Q of the Act shall not be applicable in relation to, transactions in securities and commodities which are traded through recognized stock exchanges or cleared and settled by the recognized clearing corporation, including recognized stock exchanges or recognized clearing corporation located in International Financial Service Centre; and transactions in electricity, renewable energy certificates, and energy-saving certificates traded through power exchanges registered in accordance with Regulation 21 of the CERC.

The CBDT clarified that since section 194Q of the Act mandates buyer to deduct tax on the credit of sum in the account of the seller or on payment of such sum, whichever earlier, the provision of this subsection shall not apply on any sum credited or paid before Ist July 2021. If either of the two events had happened before 1 July 2021, that transaction would not be subjected to the provisions of section 194Q of the Act.

“Since the threshold of fifty lakh rupees is with respect to the previous year calculation of sum for triggering TDS under section 194Q shall be computed from 1 April, 2021. Hence, if a person being buyer has already credited or paid fifty lakh rupees or more up to 30th June 2021 to a seller, the TDS under section 194Q shall apply on all credit or payment during the previous year, on or after Ist July 2021 , to such seller,” the CBDT clarified.

With respect to TDS under section 194Q of the Act, the Board clarified that when tax is deducted at the time of credit of amount in the account of the seller and in terms of the agreement or contract between the buyer and the seller, the component of GST comprised in the amount payable to the seller is indicated separately, tax shall be deducted under section 194Q of the Act on the amount credited without including such GST. However, if the tax is deducted on a payment basis because the payment is earlier than the credit, the tax would be deducted on the whole amount as it is not possible to identify that payment with the GST component of the amount to be invoiced in the future.

It is requested to clarify if the provisions of section 194Q of the Act shall apply to a buyer being a non-resident. To remove difficulties, it is clarified that the provisions of section 194Q of the Act shall not apply to a non-resident whose purchase of goods from seller resident in India is not effectively connected with the permanent establishment of such non-resident in India. For this purpose, “permanent establishment” shall mean to include a fixed place of business through which the business of the enterprise is wholly or partly carried on.

It is requested to clarify if the provisions of section 194Q of the Act shall apply to a buyer in the year of its incorporation. It is clarified that under section 194Q of the Act a buyer is required to have total sales or gross receipts or turnover from the business carried on by him exceeding ten crore rupees during the financial year immediately preceding the financial year in which the purchase of goods is carried out. Since this condition would not be satisfied in the year of incorporation, the provisions of section 194Q of the Act shall not apply in the year of incorporation.

“If a transaction is both within the purview of section 194-Q of the Act as well as sub-section (I H) of section 206C of the Act, the tax is required to be deducted under section 194-Q of the Act. The transaction shall come out of the purview of sub-section (1 H) of section 206C of the Act after tax has been deducted by the buyer on that transaction. Once the buyer has deducted the tax on a transaction, the seller is not required to collect the tax under sub-section (I H) of section 206C of the Act on the same transaction. However, if, for any reason, tax has been collected by the seller under sub-section (I H) of section 206C of the Act, before the buyer could deduct tax under section 194-Q of the Act on the same transaction, such transaction would not be subjected to tax deduction again by the buyer. This concession is provided to remove difficulty since tax rate of deduction and collection are same in section 194Q and sub-section (IH) of section 206C of the Act,” the CBDT said in the circular.

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Total Restriction On Advocates’ Free Speech violative of Fundamental Rights: Plea filed in Supreme Court challenging Amended BCI Rules [Read Petition]

The plea has been filed in the Supreme Court challenging the amendment in Bar Council of India Rules on the grounds that the Total Restriction On Lawyers’ Free Speech violates Fundamental Rights.

The Petitioners, Rohini Amin are instituting the instant writ petition for a declaration that Section V and V-A added to Part VI, Chapter II of the Bar Council of India Rules is void being violative of Section 49 (1) of the Advocates Act, 1961 and the fundamental rights guaranteed under Part III of the Constitution, in particular, Articles 14, 19 (1) (a), 19 (1) (c) and 21. On 25/06/2021 the Bar Council of India amended its rules and thereby introduced Section V and Section V-A on the premise of maintaining and improving the standards of professional conduct and etiquette for Advocates, however these rules flagrantly violate the fundamental rights of Advocate enumerated under Article 19(1)(a) and per se these rules are devoid of “reasonable restriction test” enunciated under Article 19(2) of the Indian Constitution.

Advocate Manju Jetley Sharma on behalf of the petitioner contended that It is unthinkable for a body like that of the Bar Council of India to bring an amendment of such ramifications, stifling the very freedom of speech and expression without which the very right to life is meaningless, keeping the Bar and the public at large in darkness.

Advocate Sharma further contended that the BCI has no legislative powers, and the only power vested in it is to give effect to the Advocates Act. The impugned Rules are ultra vires of this legislation, and BCI has no power to make any substantive law taking away or abridging legal and fundamental rights.

The petition read nobody, today, would feel the need for any further legal protection to the judges. Far from a cry for providing further protection to the members of the judiciary, the demand of the civic society, today, is for greater freedom to fearlessly express injustice and sufferings in the justice delivery system.

The petitioner further submitted that nothing could be more incredulous than for the Bar Council to enact a regulation such as Section V and V-A under challenge, protecting itself against criticism. As aforesaid, defamation is in the realm of private law. No state or instrumentality of state can ever claim to have suffered a legal injury such as defamation. To repeat, defamation is in the realm of private law. A private company, despite not being an animate entity, can claim damages for defamation. The reason is that the injury suffered is in the realm of private law. Government and public authorities like the Bar Council cannot ever be construed to have suffered, or be capable of suffering a legal injury like defamation which is in the province of private law.

“It is difficult to believe that the Bar Council of India made such rules, which even the worst dictator, the tyrant would not have thought to. The prohibition is absolute. The word employed is ‘or’. The prohibition against publication is not merely against any derogative or abusive comments/words against the Bar Council, its office bearers, or members. There is an absolute bar against the publication of anything or making any statement or press release in the print, electronic or social media against any resolution or order of the State Bar Council or the Bar Council of India, which is an absolute infringement of the very freedom of speech and expression which is an integral component of the right to life, which is innate in every human being, recognized from time immemorial and guaranteed under Part III of the Constitution,” the petition added.

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Limitation Act applicable on Arbitration Proceedings initiated under MSMED Act: Supreme Court [Read Judgment]

The Supreme Court held that the Limitation Act applicable on Arbitration Proceedings initiated under Micro, Small and Medium Enterprises Development  Act, 2006 (MSMED).

The respondent, Kerala State Road Transport Corporation (KSRTC), invited tenders for the supply of thread rubber for tire rebuilding. The appellants, M/s. Silpi Industries and M/s. Khyaati Engineering herein who were the claimants before the arbitrator was given purchase orders.

As per the terms of the purchase order, 90% of the total purchase price was payable to the appellants/claimants on supply of materials and the balance 10% was to be paid subject to final performance report. This was so, since it was the condition that the thread rubber supplied by the appellants was to run a minimum number of kilometers.

When the 10% balance amount was not paid as per the purchase order, the appellants/claimants herein have approached the Industrial Facilitation Council presently under the Micro and Small Enterprises Facilitation Council constituted under Micro, Small, and Medium Enterprises Development Act, 2006. The earlier IDPASC Act was replaced by MSMED Act and the earlier Act was repealed. As the conciliation failed, the claims made by the appellants herein were referred to arbitration under provisions of the 1996 Act. The awards were passed in favor of the claimants and such awards were challenged by way of applications for setting aside the same under Section 34 of the 1996 Act. When their applications were dismissed, respondents carried the matter by way of appeals under Section 37 of the 1996 Act before the High Court of Kerala at Ernakulam.

The issue raised was whether the Limitation Act, 1963 applies to arbitration proceedings held under the IDPASC and MSMED Acts.

The division bench of Justice Ashok Bhushan and Justice R. Subhash Reddy held that the Limitation Act, 1963 is applicable to the arbitration proceedings under Section 18(3) of the 2006 Act. Thus, no further elaboration is necessary on this issue and we hold that the provisions of the Limitation Act, 1963 will apply to the arbitrations covered by Section 18(3) of the 2006 Act.

“There is no acceptable material to show that, supply of goods has taken place or any services were rendered, subsequent to registration of appellant as the unit under MSMED Act, 2006. By taking recourse to file memorandum under sub-section (1) of Section 8 of the Act, subsequent to entering into contract and supply of goods and services, one cannot assume the legal status of being classified under MSMED Act, 2006, as an enterprise, to claim the benefit retrospectively from the date on which appellant entered into a contract with the respondent. The appellant cannot become a micro or small enterprise or supplier, to claim the benefits within the meaning of MSMED Act 2006, by submitting a memorandum to obtain registration subsequent to entering into the contract and supply of goods and services. If any registration is obtained, the same will be prospective and applies for the supply of goods and services subsequent to registration but cannot operate retrospectively. Any other interpretation of the provision would lead to absurdity and confer unwarranted benefit in favour of a party not intended by legislation,” the Supreme Court said.

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Relief to Reliance: Standby Maintenance Charges received can’t be assessed as FTS, rules ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench ruled that the Standby Maintenance Charges received can not be assessed as fees for technical services (FTS) and taxable only to the extent of its reference to “business connection” in India.

The revenue contended that the CIT(A) had erred in concluding that the amount received by the assessee, Reliance Globalcom Limited from Tata Communications Ltd. (TCL) as Standby Maintenance Charges was not in the nature of “fees for technical services‟ (FTS) under section 9(1)(vii) of the Income Tax Act, 1961.

On the other hand, the assessee is aggrieved with the rejection by the CIT(A) of its claim that the Standby Maintenance Charges received from TCL only qua the portion thereof which was relatable to the length of cable in Indian territorial waters vis-a-vis the length of cable worldwide was to be taken as the total revenue deemed to accrue or arise in India from which relatable expenses were to be reduced for computing its income accruing or arising in India u/s 9(1)(i) of the Act.

The assessee at the threshold submitted that the issues involved in the present appeal were squarely covered by the orders passed by the Tribunal in the assessee‟s own case for the preceding years.

The coram headed by the Vice President, Pramod Kumar, and Judicial Member, Ravish Sood held that the Standby Maintenance Charges received by the assessee from TCL could not be assessed as FTS and was its „business income‟ that was taxable only to the extent of its reference to the “business connection” in India. The turnover (receipts) of Standby Maintenance Charges from TCL i.e attributable to the operations carried out had to be calculated on the basis of apportionment of cable length in India vis-a-vis the worldwide cable length.

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No Revision If Assessment Orders Neither Erroneous nor Prejudicial to Interest of Revenue: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Indore Bench while allowing as many as 13 appeals held that revisional jurisdiction under Section 263 of the Income Tax Act, 1961 cannot be invoked if assessment orders are neither erroneous nor prejudicial to the interest of revenue.

As many as 13 assessees have challenged the action of Pr. CIT-1 Indore, invoking the provisions of section 263 of the Act and directing for the revision of the assessment orders passed under section 143(3) read with section147 of the Act. On the grounds of three issues are involved namely Value of sale consideration to be adopted for computing the capital gain; Allowability of deduction u/s 54B of the Act; and Allowability of deduction u/s 54F of the Act.

In respect of the value of sale consideration to be adopted for computing the capital gain the Coram of Judicial Member, Madhumita Roy, and Accountant Member, Manish Borad noted that in the instant case where the payment for sale consideration mentioned in the agreement to sale has been duly received through banking channels prior to entering registered sale deed, the value of sale consideration to be adopted in these cases has to be valued as per the Stamp Valuation Authority provided u/s 50C of the Act as on the date of entering the agreement of sale or consideration mentioned in the agreement to sale whichever amount is higher.

In respect of the allowability of deduction u/s 54B of the Act, the ITAT observed that the agreement to sale was not canceled and the same was acted upon on at the same sale consideration and finally executed the registered sale deed with the same person though acting on behalf of the company as its director and since the assessee has utilized the same sale consideration for purchasing new agricultural land he should be allowed the benefit of section 54F of the Act, so as to fulfill the very object of section 54B of the Act for which it has been created in the act. This view was adopted by the AO to allow the deduction u/s 54B of the Act which is legally permissible and thus, cannot be taken as a basis to assume jurisdiction u/s 263 of the Act and holding the orders of AO as erroneous.

“In the given facts and circumstances invoking provisions of section 263 of the Act on this issue so as to give direction to revise the assessment order was unjustified and uncalled for. Therefore, since the assessment orders in question are neither erroneous nor prejudicial to the interest of revenue, Pr. CIT erred in assuming jurisdiction u/s 263 of the Act and was thus not justified in setting aside the order passed by the AO u/s 143(3) r.w.s. 147 of the Act,” the ITAT said.

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CA Exams: Supreme Court rejects plea seeking Waiver of Articleship

The Apex Court rejected the plea seeking Waiver of Articleship and priority vaccination of CA candidates during the hearing of the three petitions related to the CA exams.

The plea by Anubha Srivastava Sahai has assailed a June 5 notification issued by the ICAI on the ground that it does not give students the choice to opt-out before and during the exams and to carry forward all the benefits.

The Senior Counsel Meenakshi Arora has put forth one of the prayers in respect of the waiver of the one year articleship requirement.

Ms. Arora submitted that there would be candidates who may pass the exam, but would be unable to submit the articleship, and whether certain concessions could be granted to them on account of the COVID-19 pandemic.

Senior Advocate Meenakshi Arora requested the Bench as to whether submission of the articleship could be done away with in exceptional cases.

The three-judge bench of Justice A M Khanwilkar, Justice Dinesh Maheshwari and Justice Aniruddha Bose refused to entertain some other requests which were put forth by the Petitioners.

“You are asking for too much. We cannot do this. This is a part of the exam and we cannot change it,” the court said.

The Court observed, “you are not obliging the institute by appearing in the exam. It is voluntary. You can’t make the institute responsible for your problems and issues.”

The ICAI is the note which was submitted before the Supreme Court said that candidates seeking to opt-out will have to produce a medical certificate issued by a registered medical practitioner certifying that he/ she has recently suffered from COVID-19 and is yet to recover.

“Articleship is a way of on-the-job training to equip the students with the skills required in the practical aspects of the profession. It is a statutory requirement as per the Regulation. There is the flexibility of completion of articleship as per the discretion of the Principal professional under whom the student is undergoing training. Therefore, it is not possible for a complete waiver of the articleship,” the ICAI in the brief note read.

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CA Exams July 2021: ICAI informs SC about Opt-out option available to all Syllabus candidates who recently suffered from COVID-19 [Read ICAI Note]

The Institute for Chartered Accountants of India (ICAI) has informed the Supreme Court that it is ready to extend the Opt-out option with respect to the July 2021 Chartered Accountant exam available to all syllabus candidates (whether under the old or New Syllabus) who have recently suffered from COVID-19 or are yet to recover from the after-effects of the same.

The ICAI is the note which was submitted before the Supreme Court said that candidates seeking to opt-out will have to produce a medical certificate issued by a registered medical practitioner certifying that he/ she has recently suffered from COVID-19 and is yet to recover.

As per the Brief note of ICAI wherein it changed its stance from previously providing the opt-out option in case the examinee or his family members residing in the same premises are infected with COVID-19 on or after 21 June 2021, the Brief Note submits that now the option shall be extended to those candidates (under Old or New syllabus) who have recently suffered from COVID-19 or yet to recover from the after-effects. Further, this exemption will be on the production of a Medical Certificate issued by the Registered Medical Practitioner that the candidate has recently suffered from COVID-19 and is yet to recover. The certificate should have the registered number of the Practitioner and may be issued by District Medical Officer, Primary Health Centres, Government General Hospitals, Private Hospitals, and Registered Medical Practitioners. It will be in addition to the RTPCR Report.

Further, the brief note read that only schools, colleges, and other academic institutes have been chosen to be Examination Centres, and marriage halls, banquet halls have not been hired for the purpose.ICAI assures that all the Invigilators, Supervisors at the Examination Venue will wear the masks and maintain social distance. Further, all the Examination functionaries shall carry ‘No Risk Status’ in Aarogya Setu App installed in their Mobile.

The ICAI clarified that in case there are any last-minute changes in the Examination Centres due to operational or logistical reasons, the candidates would be given an option to opt-out of the Examination only in case of inter-city change. No Opt-out option will be given where the change does not involve a change of the city.

“Articleship is a way of on-the-job training to equip the students with the skills required in the practical aspects of the profession. It is a statutory requirement as per the Regulation. There is the flexibility of completion of articleship as per the discretion of the Principal professional under whom the student is undergoing training. Therefore, it is not possible for a complete waiver of the articleship,” the brief note read.

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Andhra Pradesh HC directs Adjustment of Income Tax Refund to assessee towards Tax Arrears instead of Penalty [Read Order]

The Andhra Pradesh High Court directed the adjustment of Income Tax refundable to the assessee towards tax arrears instead of a penalty.

The petitioner, M/s Best India Tobacco Suppliers is a company engaged in the business of exporting tobacco. The petitioner was assessed income tax under the Income Tax Act and has been filing its returns before the Assistant Commissioner, Circle-I, Guntur, who is the Assessing Officer. While so, for the assessment year 1986-87 the petitioner had filed returns disclosing a net income of Rs.1,87,540/-. The Assessing Officer issued a notice under Section 143(2) of the Income Tax Act and passed an assessment order under Section 143(3) computing the total income of the assessee for the Assessment Year 1986-87 and accordingly, levied tax, interest, and penalty.

Aggrieved, the petitioner preferred an appeal before C.I.T (Appeals). The first appellate authority allowed the appeal and set aside the additions, which were made by the assessing officer.

Advocate Challa Gunaranjan on behalf of the petitioner contended that the petitioner was under the bonafide impression that the refund amount of Rs.4,86,970/- was adjusted towards tax arrears. However, the same was adjusted towards penalty contrary to the information provided to the petitioner under the Right to Information Act by the CBDT. If the refund amount is adjusted towards regular tax, the petitioner is liable to pay only Rs.74,790/- but not Rs.3,70,103/- as determined by the respondents.

The division bench of Justice U.Durga Prasad Rao and Justice J.Uma Devi directed the respondent authorities to adjust the tax refundable to the petitioner for the year 1996-97 of Rs.4,86,970/- to the tax arrears instead of a penalty and accordingly, re-determine the amount payable by the petitioner under Section 90(1) of the Finance (No.2) Act, 1998 and grant certificate expeditiously, but not later than four weeks.

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Dues of Attached Vehicles belonging to Corporate Debtor can only be Recovered under IBC, not from Auction Purchasers: Gujarat HC [Read Judgment]

The Gujarat High Court held that the dues of Attached vehicles belonging to Corporate Debtor can only be recovered under the Insolvency and Bankruptcy Code and cannot be recovered from auction-purchasers.

The petitioners, East India Enterprise Thro had prayed to vacate the Provisional Attachment Order passed by the Deputy Director, Mumbai Zonal Office-II, Directorate of Enforcement, under sub-Section (1) of Section 5 of the Prevention of Money Laundering Act, 2002 whereby, the movable properties, i.e. commercial vehicles of M/s. Siddhi Vinayak Logistic Limited (Corporate Debtor), have been provisionally attached under the provisions of the PMLA for a period of 180 days from the date of the order with the further condition that the said properties shall not be removed, parted with or otherwise, dealt with, without the prior permission from the said authority.

Ms. Kruti M. Shah, the counsel for the petitioners prayed to issue appropriate directions to the respondent, Regional Transport Offices to complete the proceedings of transfer of the vehicles purchased by the petitioners from the Court-appointed Official Liquidator of the Corporate Debtor.

Ms. Shah submitted that the petitioners are not connected with the proceedings initiated against the Company in Liquidation, M/s. Siddhi Vinayak Logistic Limited in any manner whatsoever. The petitioners had purchased the subject vehicles in the E-auction proceedings conducted by the respondent, Official Liquidator in pursuance of the order passed by the NCLT.

The single-judge bench of Justice Gita Gopi the dues relatable to the vehicles belonging to the Corporate Debtor can only be recovered under the provisions of the IB Code, i.e. the waterfall mechanism under Section 53 of the IB Code and not from the petitioners, being the auction- purchasers. The petitioners could be held liable to pay statutory dues in respect of the subject vehicles, which have been claimed by the respondent, Regional Transport Offices after their purchase by the petitioners in April 2019, only from the date when they had purchased the subject vehicles after having exercised their right to raise objections to such claim.

The Court directed the petitioners to make payment of the statutory dues from the date of purchase of the subject vehicles by the petitioners, which would be made subject to other proceedings in relation to the said vehicles since the petitioners, being the auction purchasers, could not be asked to make payment of the statutory dues claimed against the Corporate Debtor in liquidation in respect of vehicles prior to their date of purchase by the petitioners.

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Karnataka Judicial Officers Credit Co-operative Society entitled for Income Tax Deduction on Proportionate Cost, Administrative, Other Expenses: ITAT remits matter to AO [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore Bench while remitting the matter back to the Assessing Officer (AO) ruled that the Karnataka Judicial Officers Credit Co-operative Society entitled to Income Tax Deduction on proportionate cost, administrative, and other expenses.

The assessee, Karnataka Judicial Officers Credit Co-operative Society Ltd. is a credit co- operative society engaged in the business of accepting deposits from and lending loans to its members. The assessee filed its return of income claiming deduction under section 80P of the Act.

The AO rejected the claim on the reasoning that the assessee is a bank, and hence provisions of 80 Section P are not applicable. The assessee had earned interest from deposits/investments kept with other co-operative societies. The AO held that the assessee is not eligible to claim deduction under section 80P(2)(d) of the Act in respect of the income.

The issue raised was in respect of the deduction claimed by the assessee under section 80P(2)(d) of the Act in respect of interest income.

The coram of the Accountant Member, B.R.Baskaran, and Judicial Member Beena Pillai relied on the decision of the coordinate bench of ITAT in the case of Karkala Co-op Bank Ltd. wherein it was held that the interest earned by the appellant is an income from other sources without allowing deduction in respect of proportionate cost, administrative expenses incurred in respect of such deposits.

Therefore, the ITAT directed the A.O. to allow deduction of proportionate cost, administrative and other expenses, if the A.O. proposes to assess the interest income earned from bank deposits as income under the head “other sources”.

The Tribunal set aside the order of CIT(A) and restore the same to the file of the AO

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Madras HC allows Section 10B Exemption on Export of Software and IT-enabled Service [Read Judgment]

The Madras High Court  allowed section 10B exemption on export of software and IT enabled service.

The assessee, M/s. TNQ Books & Journals Private Limited is a resident company engaged in the business of export of software and IT-enabled service. For the Assessment Year 2009-2010, the assessee claimed deduction under section 10B in his return of income for an amount of Rs.12,55,03,000/-. During the assessment proceedings, the assessee has presented before the Assessing Officer that if at all the claim under section 10B is not allowed, the same may be considered under section 10A.

The Assessing Officer completed the assessment under section 143(3) and disallowed the claim of the assessee for deduction under section 10B for the amount of Rs.12,55,03,000 for want of rectification accorded by the Board of Approval appointed for this purpose by the Government of India. The Assessing Officer rejected the alternative claim of the assessee for deduction under section 10A.

Aggrieved over the order passed by the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) and the Commissioner of Income Tax partly allowed the appeal. Challenging the same, the assessee preferred an appeal before the Income Tax Appellate Tribunal, and the Tribunal allowed the appeal by directing the Assessing Officer to verify the condition as per section 10A and allowed the claim of the assessee.

Mr. M. Swaminathan, the counsel for the department contended that Tribunal was right in allowing the appeal of the assessee, who claimed exemption under section 10B but changed its claim to section 10A when it could not produce the Board’s approval in support of its claim.

The division bench of Justice M.Durai Swamy and Justice R. Hemalatha relied on the decision of the Supreme Court in the case of Commissioner of Income-Tax III v. Mphasis Ltd. wherein it was held that there should be uniformity in the ingredients of both the numerator and the denominator of the formula since otherwise, it would produce anomalies or absurd results. Section 10A is a beneficial section. It is intended to provide incentives to promote exports. The incentive is to exempt profits relatable to exports. In the case of combined business of an assessee, having export business and domestic business, the legislature intended to have the formula to ascertain the profits from export business by apportioning the total profits of the business on the basis of turnovers Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. Though there is no definition of the term ‘total turnover’ in Section 10-A, there is nothing in the said Section to mandate that, what is excluded from the numerator that is export turnover would nevertheless form part of the denominator.

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Criminal Prosecution on same allegations can’t continue if Exoneration in Departmental Proceedings is on Merits, reiterates, Telangana HC [Read Order]

The Telangana High Court reiterated that criminal prosecution on the same allegations can not continue if Exoneration in Departmental Proceedings is on merits.

The petitioner, M/s. Deccan Tobacco Processors Limited was a manufacturer of cut tobacco which is an excisable good as per the schedule incorporated under the provisions of the Act. The case of the prosecution is that on a surprise check on 15.06.1995 at the premises of one M/s. Tirupati Cigarettes Limited, Varanasi, Uttar Pradesh, it was found that 115 bags of cut tobacco accounted for 3,910 KGs was clandestinely cleared without separate documents and payment of excise duty.

The petitioner contended that departmental proceedings were initiated by issuing a show-cause notice vide proceedings wherein similar allegations were made against the petitioners based on the same evidence including statements recorded by the respondent department during the course of the investigation, we’re relied upon in the show cause notice. The petitioners gave a detailed reply to the show-cause notice. After considering the entire evidence including the defense of the petitioners, the competent authority viz. Commissioner (Adjudication), by order, held against the accused.

Mr. Pratap Narayan Sandhi, the Council for the appellant submitted that the CESTAT, which discharged judicial duties, having adjudicated the matter on merits, opined that there is absolutely no evidence to establish the guilt of the petitioners regarding evasion of excise duty or clandestine removal of goods.

Mr. Sandhi added that the respondent could not have proceeded to prosecute the petitioners, which amounted to a violation of the fundamental rights guaranteed to the accused. Since on the same set of allegations and evidence, the CESTAT opined that there is no offense committed by the petitioners, filing of the complaint by the respondent based on the orders passed by the Commissioner (Adjudication), virtually runs contrary to the orders passed by the CESTAT and thus, the impugned proceedings are arbitrary and amount to double jeopardy. The standard of proof in criminal proceedings is much higher than in departmental proceedings. In the instant case, when the department failed to establish the guilt of the accused in the departmental proceedings, it would not be possible to establish the same in a criminal case. Hence, initiation of criminal proceedings is illegal and arbitrary.

Mr. Sandhi submitted that the Economic Offences Court does not have the jurisdiction to try the case since even according to the complainant the offences were committed at Varanasi, Uttar Pradesh, which is beyond the jurisdiction of Hyderabad.

On the other hand, Mr. B. Narasimha Sarma, Senior Central Government Standing Counsel contended that based on the material and documents collected during investigation, the case was adjudicated. Since there was the complicity of many people spread all over India, the Commissioner at Delhi was nominated to adjudicate the case and the same was adjudicated on 08.06.2001 following due process of laws. The decision to launch prosecution was taken after due approval of the Chief Commissioner and the same was launched. The department has challenged the orders of CESTAT in Appeal before the High Court. Thus, the orders of CESTAT have not become final and the same is pending.

“The adjudication and prosecution are two different limbs. As per the provisions under Section 9(c) of the Central Excise Act, a presumption can be drawn with regard to culpable mental state. Thus, criminal case cannot be quashed on the threshold of prosecution, particularly, when the same requires detailed consideration,” Mr. B. Narasimha Sarma added.

The Single Judge Bench of Justice B . Vijaysen Reddy observed that the standard of proof in criminal proceedings is higher than the standard of proof in civil/departmental proceedings. In a reverse case, where criminal proceedings ended in acquittal but simultaneous departmental proceedings continued, the result of the criminal proceedings will not have any bearing on the departmental proceedings, as a judgment of the Criminal Court is not binding in civil or departmental proceedings.

However, the court said that in the instant case, when the departmental proceedings ended in favor of the accused and moreover when the prosecution launched is on the same set of facts and allegations, the continuance of prosecution would be a gross abuse of process of law. In the instant case, as pointed out above, a complaint was filed pursuant to the observation made by the Commissioner (Adjudication), that the department is not precluded from initiating further action in law for the time being in force. The order of the Commissioner (Adjudication) merged with the order of CESTAT wherein the appeal was allowed to reverse the order of the original authority. Further appeal filed by the department before the High Court came to be withdrawn.

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