The Income Tax Appellate Tribunal ( ITAT ) in Pune held that No Tax Deduction at Source ( TDS ) is required on purchases of copyrighted software licenses. So the assessee had not committed default in terms of section 201(1) and 201(1A) of the Income Tax Act.
The assessee had made certain payments to the non-resident / foreign companies. The AO was of the view that provisions of section 195 of the Act were squarely applicable to the payments made by the assessee to non-resident suppliers / foreign companies and the assessee was bound by law to deduct tax before remitting the money to non-residents. However, the assessee had failed to deduct tax or withhold the tax and as such had committed default in terms of section 201(1) and 201(1A) of the Act. The AO held the assessee liable to deduct tax @ 20% and also grossing up the amount and charged interest under section 201(1A) of the Act.
The assessee submitted that in the light of the judgment in case of John Deere India Pvt. Ltd. (2019) 70 ITR (Trib) 73 (Pune) DCIT-(IT) Vs. Welspun Corporation Ltd. (2017) 77 Bramhacorp Hotels & Resorts Ltd. Vs. DDIT-(IT) (2015) 61 the issue raised was against non-deduction of tax on payment for software licenses and IT support services. He had made the aforesaid payments for the acquisition of software licenses, wherein the assessee had acquired copyrighted article and hence, such payments were not taxable as royalty in India, as per DTAA between India and Singapore. He stated that no requirement to deduct tax out of such payments and hence, the assessee had not defaulted. In relation of tax deduction at source (TDS) out of training charges paid, he referred to the provisions of section 9(1)(vii) of the Act pointed out that it refers to managerial services and once it is not covered by DTAA, then it would become business income in the hands of assessee. He further pointed out that since all these concerns had no Permanent Establishment (PE), then there no business income arises in India and in the absence of any PE, there was no question of any taxability under Article 7 of DTAA.
The Assessing Officer was of the view that the payments made to AB Tetra Pak, Sweden, which is in respect of purchase of copyrighted software were in the nature of royalty and for non-deduction of tax at source, the assessee was held to be liable and demand was raised under section 201(1) of the Act and interest was charged under section 201(1A) of the Act.
The division bench comprising of Judicial Member Sushma Chowla and Accountant Member D. Karunakara Rao held that the assessee had only purchased internally developed software by the Sweden entity and it had not passed the copyright and only ‘right to use’ had been given to the assessee and in the absence of purchase of any copyright in the article, the assessee cannot be held liable to deduct tax at source out of such payments. Hence, the assessee has not defaulted in not deducting the tax at source. So no TDS is required to be deducted on purchases of copyrighted software licenses. Considering the training charges paid by the assessee to Tetra Pak group companies, payments made to the entities residents of countries of category III i.e. Singapore, USA, Switzerland and Sweden are not exigible to tax deduction at source. The assessee in such circumstances cannot be held to be in default for not deducting tax out of said payments. The Assessing Officer is directed to apply the said decision and re-compute the demand, if any, under section 201(1) and 201(1A) of the Income Tax Act.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Indirect Taxes and Customs (CBIC) has issued the Frequently asked questions (FAQs) on Electronic Invoice (E-Invoice) system
Electronic Invoice System is mandatory for business with Rs. 100 crores turnover from April 1st, 2020. E-invoice will be mandatory for both these business categories. For businesses having a turnover of less than 100 Crore, it would remain voluntary and on trial basis from 1st April 2020.
The FAQs issued by CBIC has addressed the significant issued related to E-Invoicing said that a foreign service provider can integrate with IRP only from within the shores of India.
IRP will validate for GSTIN existence (of seller and buyer) and deduplication of the invoice. If non-existent GSTIN and/or a duplicate invoice is found, the invoice will be returned with relevant error codes, without registering it. IRP will validate for only GSTIN correctness and whether the invoice already exists in the GST system.
Subscribe Taxscan Premium to view the JudgmentThe Madhya Pradesh High Court dismisses a writ petition challenging the legality and validity of attachment of Benami Properties and Provisional Attachment Order.
The division bench comprising of Justice Sujoy Paul and Justice Anjuli Palo finds this as trite law that scope of interference at the stage of issuance of show cause notice by this Court is limited.
In the present case, show-cause notice has been issued, the opportunity has been given to the petitioner. The order impugned is provisional/tentative in nature. It is subject to judicial review by adjudicating authority. If the order of adjudicating authority goes against the petitioner, the further forums of judicial review of the said order are available to the petitioner before the appellate tribunal and then before this Court. Hence, against the tentative/provisional order, no interference is warranted by this court at this stage. During the pendency of this case, the respondents have passed a consequential order under Section 24(5) of the Prohibition of Benami Properties Transactions, 1988 (Act of 1988). Shri Mishra urged that as per Section 24 of the Act of 1988, the Initiating Authority must have reasons to believe that on the basis of material in his possession any person is a benamidar in respect of the property.
The Court came into the conclusion in the light of judgment in Kailash Assudani vs. Commissioner of Income Tax, which was affirmed by the Divisional Bench impugned notice is tentative in nature and after passing the order as envisaged in Sub-section (5) of Section 24 of the Act, the petitioners have a valuable right and forum to get their points redressed. The adjudication will be made by Adjudicating Authority wherein all necessary points can be taken note of. At this stage, interference may be declined. He placed reliance on the order passed by this Court.
While dismissing petitions court observed that the petitioner is at liberty to raise all relevant aspects before the Adjudicating Authority under Section 26 of the Act of 1988, interference is declined.
Subscribe Taxscan Premium to view the JudgmentThe Ernst & Young ( EY ) has invited applications from qualified CA / CPA / CMA / ICWA candidates for the post of Accounting Consultants – Manager.
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The Securities Appellate Tribunal (SAT), Mumbai upheld the penalty imposed by the Bombay Stock Exchange (BSE) for non-appointment of Company Secretary and two Independent Directors in the absence of cogent reasons.
Penalty imposed by Bombay Stock Exchange (BSE) for non-compliance of various provisions of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 cannot be waived or reduced other than in exceptional cases like calamity, seizure of books/computers by regulatory/statutory authorities, the compliances not approved by the Board, directions issued by the Court/regulator which prevented from making the requisite disclosure and accidental damage.
The ruling was made by the Coram comprising of Presiding Officer Justice Tarun Agarwala and Member Dr. C.K.G. Nair on an application filed by Advance Lifestyles Ltd.
The Appellant is a public listed company and has more than 6800 shareholders. Under the Listing Regulations, the appellant was required to comply with various provisions and upon failure, penalties could be imposed for non-compliance. In this regard, SEBI issued a circular dated May 3, 2018, known as “Standard Operating Procedure” which streamlined the process and adopted a uniform approach in the matter of levy of fines for non-compliance of certain provisions of the Listing Regulations. The said circular also provided discretion to the stock exchange to deviate from the circular dated May 3, 2018, under exceptional circumstances only after recording reasons in writing. Thus, flexibility and discretion were provided to the stock exchange for levying penalties for noncompliance with the Listing Regulations. The present appeal has been filed against the order of Bombay Stock Exchange Ltd.dated August 19, 2019, and October 7, 2019, whereby a total penalty of Rs. 20,40,000/- has been imposed for non-compliance with various provisions of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Securities Appellate Tribunal (SAT), therefore, finds that there no justification or any reason has been given as to why a Company Secretary and the two independent directors could not be appointed. In the absence of any cogent reasons, we do not find any justification to reduce the quantum of penalty.
Subscribe Taxscan Premium to view the JudgmentThe Income Tax Appellate Tribunal (ITAT) held that one-time payment of annual lease rent paid does not lose the character of the annual rent, so it considers as revenue expenditures and not capital in nature.
The petitioner, Multitude Infrastructure Pvt. Ltd. purchased a hotel constructed on leased land obtained from Jaipur Development Authority (JDA) from Vishnu Apartments Pvt. Ltd. vide agreement dated 05.11.2008 and as per clause 28 of the sale agreement, the petitioner was under an obligation to pay to the seller Government rate taxes and cess, etc. from the date of agreement. Vide letter dated 22.06.2011, JDA required Vishnu Apartment Pvt. Ltd. to pay a cumulative sum of Rs.1,35,34,794/- (Rs.62,15,978 on account of Annual Lease Rent up to the Year 2011-12 and lumpsum payment of Annual Lease Rent of Rs.73,18,816/). Proportionately the share of the petitioner out of that payment was computed at Rs.42,11,495/-. These facts were not at all disputed by the Revenue expenditures at any point in time. In the present case, Annual Lease Rent payable per annum is approximately that of 1% to 1.25% and such payment, if paid annually is to be treated as revenue expenditure.
The Tribunal Bench comprising of Vice President G S Pannu and Judicial Member Suchithra kamble allowed the appeal on three grounds:
The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in passing the order dated 02.03.2017 under section 250 of the Income Tax Act, 1961
The Ld Commissioner of income tax (Appeals) erred in law and on facts in confirming the disallowance of Rs.42,11,415/- on account of Leasehold rent paid by Appellant treating the same as capital expenditure. The appellant contends that the amount was paid by the appellant as per the terms of the agreements between the Appellant and Vishnu Apartments Pvt. Ltd. and not as leasehold rent, therefore no disallowance in this regard should be made.
The appellant prays that he may be allowed to add, amend, alter or forego any of the above grounds of appeal as the circumstances may warrant.”
While allowing the appeal ITAT also observed that onetime payment of the annual rent as per the lease deed is rightly claimed by the petitioner as revenue expenditure. The Assessing Officer was not right in holding that the payment during the year relates to land which is capital in nature. In fact, the petitioner is running the mall and hotel constructed on the leased land of Jaipur Development Authority which was given to Vishnu Apartments Private Ltd. In fact, the mall and hotel were constructed by the Vishnu Apartments Private Ltd. The CIT(A) also ignored this fact. Therefore, the order of the CIT(A) is set aside.
Subscribe Taxscan Premium to view the JudgmentThe Customs Excise & Services Tax Appellate Tribunal (CESTAT) held that wide area network/global network (WAN/PGN) services which in the nature of providing internet connection and communication is not taxable under “Online Information Database Access and Retrieval (OIDAR service)”.
The appellants, Philips Electronics India Ltd. are a 100% EOU (Software Technology Park Unit) are engaged in the developing and export of software. No part of the output services is rendered to any client in India. The appellants have entered into various agreements with their group companies in the Netherlands to avail of various services, inter alia, wide area network/global network (WAN/PGN) services which in the nature of providing internet connection and communication. Revenue alleges that this is a taxable service under “Online Information Database Access and Retrieval (OIDAR service)”. The appellants have also received Maintenance or Repair Services in respect of software/computers under AMC from Foreign Service providers, which were provided by service providers from outside India. The appellants also received some services which are in the nature of Commercial Training or Coaching. They have also availed Management Consultancy Services. Revenue has issued a show-cause notice dated 19/03/2009 demanding service tax of Rs. 6,71,95,540/-(Rupees Six Crore Seventy One Lakhs Ninety-Five Thousand Five Hundred and Forty only). The show-cause notice was adjudicated, vide order No. 82/2010 dated 22/11/2010, by Commissioner of Service Tax, Bangalore wherein an amount of Rs. 5,70,20,902/- (Rupees Five Crore Seventy Lakhs Twenty Thousand Nine Hundred and Two only) of service tax was confirmed for the period 01/01/2005 to 30/09/2008. He also imposed penalties under Section 76 & 77 of the Finance Act,1994.
Tribunal comprising of S.S Garg, Judicial Member and P. Anjani Kumar, Technical Member finds the contentions of the appellant, Philips Electronics India Ltd are stronger
In the light of the judgment in Indian National Shipowner’s Association Vs. Union of India –2009 (13) STR 235 (HC-Bom.) [(affirmed by Hon’ble Supreme Court 2010 (17) STR J57 (SC)] Judgment was rendered in favour of appellant and also learned Commissioner has not put forth any reasoning based on the facts of the case or the provisions under any contract.
Tribunal also observed that“The main take away from the definitions is that services provided should facilitate not only online information but also Database Access or Retrieval. From the facts on record, it appears to reason that the infrastructure services are nothing but a spider web group that connects Philips Netherlands to all its locations worldwide through the Wide Area Network (WAN) of the internet protocol. For such Philips Global Network Services, payment is made on the basis of invoices raised by Philips Netherlands towards maintenance of server/portal, license fees, server software maintenance cost, infrastructure for global platform, hiring of web space for storing data, management, and maintenance of web portal, license cost for access for wireless WAN environment, Directory services for listing, etc. Some of these services which can be availed by Philips locations and employees are of the nature of “Calendaring and Scheduling Directory, Philips e-mail, file backup, etc. In any case, all these infrastructure services are only in the nature of providing intra connectivity between Philips locations worldwide and the payments made are obviously than for sharing of the maintenance cost between the Philips’ units and not as fees for the supply of online information or retrieval of data from the portal.”
Subscribe Taxscan Premium to view the JudgmentThe Income Tax Appellate Tribunal (ITAT) held that when there is no principal-agent relationship between the bank issuing bank guarantee and the assessee, the transaction between them is not the transaction between principal and agent so as to attract tax deduction under section 194H of the Act.
The order was rendered by a tribunal bench consisting of R. K Panda, Accountant Member, and K. Narasimha Chary, Judicial Member in the case M/s. NKC Projects (P) Ltd Vs Dy. Commissioner of Income Tax.
The appellant is a contractor and is engaged in the business of constructing highways, roads and commercial buildings for the corporate sector etc. For the assessment year 2013-14, they have filed their return of income on 30/9/2013 declaring a total income of Rs. 10,51,41,070/-. During the course of assessment proceedings, learned Assessing Officer noticed that the assessee paid a bank guarantee commission amounting to Rs.1,50,59,660/- till 31/12/2012, such payments were in the nature of those mentioned in Notification No. 56/2012 dated. 31/12/2012, not covered within the definition of interest under section 2 (28 A) of the Income Tax Act, 1961 (for short “the Act”) and therefore exemption provided under section 194A (3 (iii) (a) of the Act is not applicable to such payments since payment for such services can be made without deduction of TDS to scheduled banks.
In the light of the orders of the Mumbai, Pune and Visakhapatnam benches of the Tribunal, a conclusion was reached by the Tribunal that in the absence of any principal-agent relationship between the bank issuing bank guarantee and the assessee, the transaction between them is not transaction between the principal and agent so as to attract the tax deduction under section 194H of the Act.
The Tribunal also point out that the facts submitted by the appellant, involved in both the years are identical, as observed by the learned Assessing Officer in the assessment order itself, is not contradicted by the Ld. DR. Since the issue is no longer res Integra and has squarely been covered in assessee’s own case for the earlier year by the orders of the Tribunal, while respectfully following the same and The Tribunal accordingly allowed the grounds of appeal, and direct the assessing officer to delete the addition of Rs. 1,50,59,663/-.
Subscribe Taxscan Premium to view the JudgmentIn a recent case, the Income Tax Appellate Tribunal ( ITAT) Delhi held that No CBDT circular or instruction can be contrary to the decision of the Hon’ble Supreme Court, even subsequent to the decision of the Hon’ble Supreme Court. Disallowances of foreign travel expenses incurred in respect of the family members of the directors are sustainable.
The appellant is a company engaged in the business of international trading in commodities. For the Assessment Year 2012-13, it filed its return of income on declaring net taxable income. The appellant had suffered the total loss of foreign exchange fluctuation loss, out of which there was the loss of a particular amount on account of MTM losses in accordance with AS-11 on the foreign exchange forward contracts. In the preceding two years there had been gain from forwarding contracts that have been offered to tax. The AO treated the above losses on forwarding contracts as notional and contingent in nature and thus not allowed by relying on the CBDT instruction No.03/2010. AO, therefore, made an addition on account of MTM losses on account of foreign exchange fluctuation and on account of disallowance of foreign travel expenses incurred in respect of the family members of the directors and on account of the cessation of liability. Challenging the assessment order making these additions, assessee preferred an appeal before the Ld. CIT(A). Ld. CIT(A) also confirmed the addition made by the AO but deleted the addition made on account of the cessation of liability. Aggrieved by the impugned order assessee preferred this appeal.
The appellant submitted in the light of judgments in cases CIT vs Woodward Governor India Ltd 312 ITR 254 (SC), ONGC vs CIT 322 ITR 180 (SC), Silicon Graphics Systems (India) Pvt Ltd vs DCITin ITA No.2976/Del/2013 that the authorities ignored the fact that the loss claimed on forward contracts is allowable and the same has been upheld by various judicial authorities and, therefore, the Revenue is not justified in treating the loss claimed on forward contracts as notional loss and not allowable under the provisions of income tax.
The DR submitted that in view of CBDT instructions, the MTM losses on account of forwarding contract/derivatives are not allowable and in the marked to market methodology financial instruments are valued at market rate so as to report their actual value on the reporting date; and that where companies make such adjustment through the trading or profit and loss account, the book loss in their accounts and such loss is notional loss as no sale had actually taken place and the assets continue to be owned and possessed by the company.
While allowing the appeal, the Tribunal bench comprising of Shri K. Narasimha Chary, Judicial Member And Shri B.R.R. Kumar, Accountant Member held that the decision in the case of Woodward Governor P Ltd and ONGC vs CIT is applicable, and the line of judicial view is that the Revenue cannot be permitted to contend that there is a CBDT circular or instruction No. 03/2010 to the contrary. No CBDT circular or instruction can be contrary to the decision of the Hon’ble Supreme Court, even subsequent to the decision of the Hon’ble Supreme Court. So, therefore, accept the contention of the assessee and hold that the addition is unsustainable and directing the AO to delete the same. In respect of addition made on the foreign travel expenses of the wives, minor children and others, that fail the test of commercial expediency and there are no valid reasons to interfere with the findings of the authorities below on the disallowance of the foreign travel expense relatable to the wives and minor children of the directors, management trainees and overseas employees of the assessee company.
Subscribe Taxscan Premium to view the JudgmentThe Institute of Chartered Accountants of India ( ICAI ) has announced the CA exams dates for the next Chartered Accountants Foundation Course {Under New Scheme}, Intermediate (IPC) {Under Old Scheme}, Intermediate {Under New Scheme} and Final {Under Old & New Scheme} Examinations.
The ICAI said that CA Exams will be held on the dates given below at the following places provided that a sufficient number of candidates offer themselves to appear from each centre.
Similarly, Examinations in Post Qualification Course under Regulation 204, viz.: International Trade Laws and World Trade Organisation (ITL & WTO) and International Taxation – Assessment Test (INTT – AT) (which is open to the members of the Institute) will be held on the dates and places (centres in India only) which are given below provided that sufficient number of candidates offer themselves to appear from each of the below-mentioned places.
The ICAI also said that It may be emphasized that there would be no change in the examination schedule in the event of any day of the examination schedule being declared a Public Holiday by the Central Government or any State Government / Local Holiday.
FOUNDATION COURSE EXAMINATION – Under NEW SCHEME
11th, 13th, 15th & 17th May 2020
INTERMEDIATE (IPC) COURSE EXAMINATION – Under OLD SCHEME
Group-I: 3rd, 5th, 8th & 10th May 2020
Group-II: 12th, 14th & 16th May 2020
INTERMEDIATE COURSE EXAMINATION – Under NEW SCHEME
Group-I: 3 rd, 5th, 8th & 10th May 2020
Group-II: 12th, 14th, 16th & 18th May 2020
FINAL COURSE EXAMINATION – Under OLD SCHEME
Group -I: 2nd, 4th, 6th & 9th May 2020
Group -II: 11th, 13th, 15th & 17th May 2020
FINAL COURSE EXAMINATION – Under NEW SCHEME
Group -I: 2nd, 4th, 6th & 9th May 2020
Group -II: 11th, 13th, 15th & 17th May 2020
INTERNATIONAL TRADE LAWS AND WORLD TRADE ORGANISATION (ITL & WTO), Part I EXAMINATION
Group A 3 rd & 5th May 2020
Group B 8 th & 10th May 2020
INTERNATIONAL TAXATION – ASSESSMENT TEST (INTT – AT)
11th & 13th May 2020
Subscribe Taxscan Premium to view the JudgmentThe Authority of Advance Rulings (AAR) in Karnataka ruled that free transfer of assets to the landlord on vacation of leased premises shall amount to supply within the meaning of “supply” within section 7 of the Central Goods and Services Tax Act, 2017 and is chargeable to tax under the GST Acts.
The ruling was made by a bench constituting of Sn. Harish Dharnia, Addl. Commissioner of Central Tax, Member (Central Tax) and Dr. Ravi Prasad M.P. Joint Commissioner of Commercial Taxes, on an application filed by M/s. Aquarelle India Private Limited.
The applicant is a registered dealer having a registered office in Karnataka. The leased premise of the applicant was taken on lease from 01.07.2011 to 30.06.2022 with a lock-in period of the first three years. The applicant wishes to vacate the leased premises. The possession of the premises will be handed over to the owner along with fixtures to the building which cannot be dismantled on vacating the leased premises. The company wishes to vacate the building with the fastened assets and hand over to the building owner in “as is where is’ condition without any consideration charged for the assets.
The applicant sought advance ruling in matter of whether disposing off assets (no CENVAT/VAT Credit was taken) fastened to the building on delivering possession to the lesser, on which no consideration will be received, shall fall within the ambit of “Supply” as per Section 7 of Central Goods and Services Tax Act, 2017 and shall be chargeable with GST. The applicant also sought ruling of whether the value appearing in the books as on the date of disposal may be construed as the “open market value” on which GST is to be discharged as per Rule 27 of the CGST rules 2017?
The applicant argued that the assets were put to use in the pre-GST regime without availing of CENVAT/VAT credit and hence the disposal of such assets in the GST regime should not amount to supply and hence not liable to GST. The applicant also contended that treating such transactions as “Supply” might lead to double taxation, which goes against the very spirit of the GST Law. The applicant further submitted that if it is treated as supply, and the value should be ascertained in line with Rule 27 of the CGST Rules 2017, i.e., the open market value.
Holding that the transaction is not covered under ‘supply’ as under Section 7 (1) of the Central Goods and Service Tax Act, the Authority observed that the in the instant case there is a permanent transfer of business assets and admittedly they are capitalized before the advent of the GST Act and no input tax credit is claimed under the earlier law. Further, there is also no claim of the input tax credit, under the present GST Law.
The Authority further observed that the said transaction would be treated as a supply of goods as per entry no. 4(a) of Schedule II to the CGST Act, i.e., transfer of business assets. The Authority Substantiated the observation by reasoning that assets sought to be transferred are capitalized under the head “Office equipment, furniture, and fittings” and forms the part of the assets of the business entity, then such transfer or disposal would be a supply of goods by the applicant and it is immaterial whether the said transfer/disposal is for a consideration or not.
The Authority hence concluded that “the transaction of transfer of ownership of business assets in the course or furtherance of business for a consideration (being the monetary value in relation to the transfer of such assets) would constitute a supply in accordance with the provisions of clause (a) of Section 7(1) of the CGST Act and the same would be the supply of goods in accordance with the entry no. 4(a) of the Schedule II to the CGST Act”.
The Authority also ruled that “the value of such supply of goods would be: (a) open market value of such supply; (b) value of supply of goods of like kind and quality; (c) 110% of the book value of such goods in the books of accounts; and if none of the above is possible, it needs to be determined as per the rule 31”
Subscribe Taxscan Premium to view the JudgmentIn a recent case the Authority on Advance Ruling (AAR) in Karnataka held that the supply of accommodation services to the SEZ Units is for Authorized operations, covered under “zero-rated supplies”, and for non-authorized operations, then it would be not covered under “zero-rated supplies” under Section 16(1) of the IGST Act, 2017.
Smt. Poppy Dorothy Noel, Proprietrix, M.s The Pommels, having GSTIN number 29 ABRPN8421E1ZA, has sought Advance Ruling on Whether the IGST at 0% is applicable for the invoices raised to the SEZ Units, even if the accommodation services were rendered outside the SE Zone?
The applicant submitted that she is in the business of providing accommodation services to various corporates in Bengaluru and they include certain SEZ Units. However, “The Pommels” is located in Kalyan Nagar, Banaswadi which is outside the SEZ Zone. The applicant is providing accommodation services to the SEZ Unit employees for which the SEZ Unit had advised them to raise invoices with IGST at 0% as per section 16 of the IGST Act, 2017. The applicant states that as per Section 12(3) of the IGST Act, which determines the place of supply, since the supply has taken place outside the SEZ Zone, they are not entitled to IGST at 0%, but need to be charged IGST @ 18%.
The authority comprising of Sri. Harish Dharnia, Addl Commissioner of Central Tax, Member and Dr. Ravi Prasad M.P. Joint Commissioner of Commercial Taxes Member held that the transaction of the applicant is verified and found that the applicant is providing accommodation services to the employees of the SEZ Company and invoices are raised to the Company. The consideration for the accommodation services provided is payable by the company which is an SEZ Unit and hence as per clause (93) of section 2 of the CGST Act, 2017, the SEZ Unit would be the recipient of service and the supplier being the applicant. It would be covered under 7(5)(b) of the IGST Act and would hence be treated as an inter-State supply of services, provided that the supply of services made to the SEZ Unit is an authorized operation under the SEZ Act.
The applicant has also provided the copy of the Circular No.2/2014 issued by the Development Commissioner, Office of the Zonal Development Commissioner to all Developer, Co-Developers and Units of SEZs located in Kerala and Karnataka, in which it is stated that the Accommodation Services are added to the list of services to enable the SEZ Units to avail service tax benefits for their authorized operation. In view of the above, if the SEZ Unit is procuring the accommodation services for their authorized operation, the same would be covered under “supply to SEZ Units” and hence would be inter-State supplies and would be a “zero-rated supply” under sub-section (1) of section 16 of the IGST Act, 2017. In case of services provided to the SEZ Unit is not for authorized operations, then they would not be treated as supplies to SEZ Units and would not be covered under the zero-rated supplies but still would be a transaction covered under IGST Act, 2017 and taxable at 18% with the place of supply is the provision of such services.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Direct Taxes ( CBDT ) to levy a penalty for not providing facility to accept digital payments from February 1st, 2020.
In furtherance to the declared policy objective of the Government to encourage digital economy and move towards a less-cash economy, a new provision namely Section 269SU of the Income Tax Act was inserted vide the Finance ( No. 2) Act 2019, which provides that every person having a business turnover of more than Rs 50 Crore shall mandatorily provide facilities for accepting payments through prescribed electronic modes.
The said electronic modes have been prescribed vide notification no. 105/2019 dated 30.12.2019. Therefore, with effect from 1st January 2020, the specified person must provide the facilities for accepting digital payments through the prescribed electronic modes. Further, Section 10A of the Payment and Settlement Systems Act 2007, inserted by the Finance Act, provides that no Bank or system provider shall impose any charge on a payer making payment, or a beneficiary receiving payment, through electronic modes prescribed under Section 269SU of the Income Tax Act.
Consequently, any charge including the MDR (Merchant Discount Rate) shall not be applicable on or after 01 ” January 2020 on payment made through prescribed electronic modes.
In a Circular issued by CBDT said that the Finance Act has also inserted section 271 DB in the Income Tax Act, which provides for levy of penalty of five thousand rupees per day in case of failure by the specified person to comply with the provisions of section 269SU.
In order to allow sufficient time to the specified person to install and operationalize the facility for accepting payment through the prescribed electronic modes, it is hereby clarified that the penalty under section 271 DB of the Act shall not be levied if the specified person installs and operationalizes the facilities on or before 31″ January 2020.
However, if the specified person fails to do so, he shall be liable to pay a penalty of five thousand rupees ay m 01″ February 2020 under section 271 DB of the Act for such failure.
Subscribe Taxscan Premium to view the JudgmentIn order to strive and succeed in the market, every entrepreneur has to tactfully thwart legal hurdles, its possible with the help of smart and big in house legal departments, and its affordable only for large companies. what startups can do, to resolve their disputes, and not let them escalate to litigation. Litigation is a process that consumes time, money and your peace of mind. so it’s not the best option for the startup to choose.
Here I suggest a pro-active legal approach using due diligence mechanisms, technology usage, and alternative dispute resolution techniques (ADR).
Alternative Dispute Resolution (ADR) mechanisms like mediation, arbitration, etc. which when used as a tool to solve your disputes prior to litigation would cause comparatively lesser trouble in terms of money, time, paperwork and most importantly, your peace of mind. The same is the case for start-up companies.
There are certain legal requirements and obligations for every start-up company which they may not be fully aware of, but not knowing of which would lead to unanticipated consequences. Some of such things are,
o Complying with taxation and accounting laws.
o Business licenses.
o Adhering to labor laws.
o Protection of intellectual property.
o Contract management.
o Winding up of company and liabilities.
You might be very well aware of the unavoidability and necessity of having a full legal back up for any startups or company. ADR services will prove to be highly useful and efficient compared to other existing legal aid set-ups existing and available.
How ADR helps-
These processes are less expensive and less time consuming compared to conventional litigation processes as they may take years together to finish. Moreover, ADR sessions will be carried out by trained and qualified personnel entrusted for the purpose, who will help you reach an amicable and creative solution. Hence you’re legal risks and costs will be reduced.
The Delhi High Court has held that Assessing Officer cannot withhold the Income Tax Refund by citing the reason that the scrutiny notice has been issued.
The Petitioner Maple Logistics Private Limited has approached the High Court to refund the income tax amount on account of excess deduction of tax at source in respect of Assessment Years 2017-18 and 2018-19, and other consequential directions to adjust the outstanding amount of TDS and GST payable by Petitioner Company against the pending refund amount without charging of any interest for the delayed payments.
Petitioner Company is engaged in the business of providing multimodal logistics services including transportation through road, rail, etc., for its customers. Petitioner applied for a certificate of deduction as a TDS deduction of 2% causes financial difficulties, as its margin remains stuck with the government department in the form of TDS, causing acute cash flow constraints. As a consequence thereof, Petitioner is unable to service its customers, lenders and pay its statutory dues in a timely manner and assistant commissioner allowed tax deduction of 1%, Petitioner Company filed a revised income tax return in terms of Section 139(5) of IT Act to reduce the total TDS amount from Rs. 5,51,49,566/- to Rs. 5,42,91,774/- due to non-deposit of TDS by its customers. Accordingly, its refund claim stood revised to Rs. 4,79,93,740/- . Petitioner’s case was chosen for scrutiny as per computer-aided scrutiny
The division bench comprising of Justice Sanjeev Narula and Justice Vipin Sanghi observed that, “the AO has completely lost sight of the words in the provision to the effect that, “the grant of the refund is likely to adversely affect the revenue.” The reasons that are relied upon by the Revenue to justify the withholding of the refund in the present case, are abysmally lacking in reasoning. Except for reproducing the wordings of Section 241A of the Act, they do not state anything more. The entire purpose of Section 241A would be negated, in case the AO was to construe the said provision in the manner he has sought to do. It would be wholly unjust and inequitable for the AO to withhold the refund, by citing the reason that the scrutiny notice has been issued. Such an interpretation of the provision would be completely contrary to the intent of the legislature. The AO has been completely swayed by the fact that since the case of the assessee has been selected for scrutiny assessment, he is justified to withhold the refund of tax”.
The Court also said that “The power of the AO has been outlined and defined in terms of the Section 241A and he must proceed giving due regard to the fact that the refund has been determined. The fact that notice under section 143(2) has been issued, would obviously be a relevant factor, but that cannot be used to ritualistically deny refunds. The AO is required to apply its mind and evaluate all the relevant factors before deciding the request for a refund of tax. Such an exercise cannot be treated to be an empty formality and requires the AO to take into consideration all the relevant factors. The relevant factors, to state a few would be the prima facie view on the grounds for the issuance of notice under section 143(2); the amount of tax liability that the scrutiny assessment may eventually result in vis-a-vis the amount of tax refund due to the assessee; the creditworthiness or financial standing of the assessee, and all factors which address the concern of recovery of revenue in doubtful cases”.
While allowing the Writ Petition, the Court also said that “merely because notice has been issued under section 143(2), it is not a sufficient ground to withhold refund under section 241A and the order denying refund on this ground alone would be laconic. Additionally, the reasons which are to be recorded in writing have to also be approved by the Principal Commissioner, or Commissioner, as the case may be and this should be done objectively”.
Subscribe Taxscan Premium to view the JudgmentThe Swiss Re Group has invited applications from qualified CA, CPA, and ICWA candidates for the post of Senior Accountant.
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About the Role
The position holder is accountable for general ledger accounting and reporting relating to assigned entities including the provision of information to other finance departments in Swiss Re, such as tax and regional reporting teams. This position will be involved in standard-setting in general ledger accounting and closing processes and drive process improvements, harmonization and implementation.
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Solves business problems using own initiative, within parameters of own role.
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The Central Board of Indirect Taxes and Customs (CBIC) on said that it has paid IGST refund worth over Rs 1.12 lakh crores to more than 83,500 exporters to date.
The CBIC also said that, “This shows that the government’s efforts to fast track refunds under GST especially to exporters are yielding results”.
In a series of Tweets, the CBIC also said that, Refunds of only Rs. 3,604 Crores are pending with Customs and out of about 185,000 exporters, a total of 6,421 exporters (about 3.4% only) including some ‘star exporters’ have been identified as risky and hence, red-flagged. Even some of the ‘star exporters’ are not traceable.
While the focus is on quick disbursal of pending refunds to exporters, data analytics has been used to identify ‘risky’ exporter entities that take input tax credit fraudulently and monetize it by paying IGST and taking refund thereof or taking refund of the accumulated ITC. These exporters are being subject to KYC and verification process before the grant of refund. The verification so far has revealed that 1,241 exporters are not traceable at their given addresses, which include 8 ‘star exporters’.
In addition, adverse verification reports have been received in the case of 399 exporters, which also include 4 ‘star exporters’. Since the advent of GST, 77% of India’s exports have been under Letter of Undertaking (LUT), which are unaffected by the verification exercise being done by the CBIC officials.
The CBIC also said that, Even in respect of the exporters identified as risky, the Government is taking all necessary steps to expedite the verification. At the same time, the Government remains concerned about the misuse of the facility of ITC credit and refunds by few unscrupulous exporters.
In a recent case, the Chhattisgarh High Court has held that the original Act of 1988 has not been either superseded or replaced by Amendment Act of 2016. The original Act of 1988 is still in operation and also in force, applies irrespective of the period of purchase of the Benami property.
The facts of the case are the respondents have initiated a proceeding under the Act of 1988 against the petitioners who are husband and wife. It is alleged that the petitioners are in possession of more than 200 acres of land in different villages. According to the respondents, all these properties in fact are of one Shri Laxminarayan Agrawal. According to the respondents, the petitioners herein are basically villagers who do not have a sufficient source of income to have such a large chunk of land. The petitioners could not provide sufficient details in respect of their income on the basis of which they had acquired or purchased these properties. They have not been able to show or recollect the details of the properties that they own in different villages and also not been able to provide the details of the loan that they had taken from different relatives or friends for the purpose of purchase of these properties and therefore the said properties are nothing but Benami properties.
The petitioners submitted in the light of judgments in S.B.C.W. No. 2915/2019 Niharika Jain Vs. Union of India and Mangathai Ammal in Civil Appeal No. 4805/2019, that all the properties which are said to be recorded in the name of the petitioners in fact are all purchased prior to 01.11.2016. On the date when the petitioners had purchased these properties, the provisions of Section 24 of the Act of 1988 were not in existence. So the proceeding drew under Section 24 subsequent to its enactment w.e.f. 01.11.2016 could not be attracted upon the petitioners. The applicability of Section 24 of the Act of 1988 would not have a retrospective effect therefore, the issuance of the order and the proceedings against the petitioner are illegal and bad in law.
The respondents submitted that the original Act of 1988 has not been either superseded or replaced a new provision of law. The original Act of 1988 is still in operation and also in force and by way of Amendment Act of 2016, certain additional provisions have been incorporated in respect of the procedures to be adopted and also in respect of making the provisions more stringent and deterrent. Therefore, the proceedings initiated by the respondents cannot be said to be without the force of law or beyond the purview of the Act of 1988.
The single bench Justice P. Sam Koshy held that it can not be said that provisions of the Amended Act of 2016 could not have been made applicable in respect of properties that were acquired prior to 01.11.2016. The whole Act of 1988 as it stands today inclusive of the amended provisions brought into force from 01.11.2016 onwards applies irrespective of the period of purchase of the alleged Benami property. Amended Act of 2016 does not have an existence by itself. Without the provisions of the Act of 1988, the amended provisions of 2016 has no relevance and the amended Provisions are only laying down the proceedings to be adopted in a proceeding drawn under the Act of 1988 and the penalties to be imposed in each of the cases taking into consideration the period of purchase of Benami property. The writ petition stands rejected.
Subscribe Taxscan Premium to view the JudgmentThe Rajasthan High Court held that the petitioner did not have any knowledge of the order had passed against the company but also the copy of the order-in-origin was not received by them. In such circumstances even though the appeal filed by the petitioner was time-barred, the appeal of the petitioner ought to be decided on merits rather dismissing the same on the ground of delay.
The facts of the case are the petitioner Ataullah Construction Private Limited is the holder of Service Tax Registration for ‘Maintenance or Repair Service’ and ‘Erection, Commissioning and installation services’. The adjudicating authority issued an order in original in disregard of the contentions made by the petitioner assessee in the declaration filed by him, thereby creating an illegal demand of service tax under Section 73(2), interest under Section 75, and penalty under Section 78 of the Finance Act, 1994. He, however, was not provided a certified copy of the order in original. The petitioner learnt about the aforesaid order only after he received a telephonic call for recovery of demand. On verification of the record, the petitioner found that no such copy of the order in original has been received by the petitioner or in his office. The petitioner immediately along-with an affidavit requested -the Assistant Commissioner, that if the adjudicating authority to provide him a copy of the order in original, which was never received by him at their address. In response thereto, the respondent provided a certified copy of the order in original to the petitioner. The petitioner without any delay filed an appeal under Section 35 of the Central Excise Act, 1944 before the Commissioner (Appeals-I). However, the Commissioner, without going into the merits of the case, dismissed the same on the ground of limitation.
The petitioner submitted that the respondent ought to have entertained his appeal on merits as he has also filed an application seeking condonation of delay giving all the aforesaid reasons. The Commissioner has mechanically rejected the appeal.
The respondent has submitted that the respondent sent a copy of the order to the petitioner by post and that he has received a report from the postal department that he has delivered the same to the addressee.
The division bench comprising of Justice Mohammad Rafiq and Justice Narendra Singh Dhaddha held that even though the respondents are asserting that the letter was sent to the petitioner by post but the petitioner has filed an affidavit that not only she did not have any knowledge of the order had passed against the petitioner company but also the copy of the order-in-origin was received by her only when the respondent called the petitioner for initiation of recovery proceedings. The detailed representation which the petitioner submitted to the respondent asserts that the order-in-original was not received by the petitioner. No doubt, the appeal filed by the petitioner was time-barred but in the facts of the case, the appeal of the petitioner ought to be decided on merits rather dismissing the same on the ground of delay. So the court decided to condone the delay occurred in filing the appeal and remit this matter to the Commissioner (Appeals), Central Goods And Service Tax, Jaipur, for its decision on merits.
Subscribe Taxscan Premium to view the JudgmentThe Kerala High Court has ruled that, Actual Payment of Business Expenditure in the relevant Accounting Year not mandatory for claiming Deduction.
The appeal is filed by the revenue before the Kerala High Court and the question in consideration is expenditure to be incurred in future in respect of a liability that accrued during the accounting year eligible for deduction in the computation of taxable business income? The court held that in order to claim deduction of business expenditure, it is not necessary that the amount has been actually paid or expended during the relevant accounting year itself.
The fact of the case are the respondent/assessee is a company engaged in the business of construction and sale of residential and commercial building complexes. During the assessment year 2009-10, the assessee sold a portion of the mall building constructed by it. The construction of the building was not completed at that time. In the revised return of income filed, deduction of the expenses incurred during the financial years 2009-10 and 2010-11 for completing the construction of the building was claimed by the assessee. The assessing authority disallowed the aforesaid deduction claimed and completed the assessment. The assessee filed an appeal before the Commissioner of Income Tax (Appeals). The appellate authority allowed the appeal. The revenue challenged the order of the appellate authority before the Income Tax Appellate Tribunal. The Tribunal agreed with the view taken by the appellate authority and dismissed the appeal. The aforesaid order of the Tribunal is under challenge in this appeal filed by the revenue.
The department submitted that the claim for deduction of future expenses made by the assessee cannot be allowed. Learned counsel contended that there is a distinction between amount spent to pay off an actual liability and a liability that would be incurred in future which is the only contingent. It is contended that the former is deductible but not the latter.
The respondent contended that the amount claimed as deduction was expenditure to be incurred to meet an accrued liability and not a contingent liability. Respondent also contended that the deduction was claimed in this case after incurring the expenditure since the construction of the building was completed when the assessment proceedings were pending.
While dismissing the appeal, the division bench comprising of Justice C.K.Abdul Rehim and Justice R.Narayana Pisharadi, stated in the light of judgments in cases Calcutta Company Limited v. Commissioner of Income Tax, West Bengal : AIR 1959 SC 1165), Madras Industrial Investment Corporation Limited v. Commissioner of Income Tax : AIR 1997 SC 2063), In Bharat Earth Movers v. Commissioner of Income Tax : AIR 2000 SC 2636, that the dispute raised by the revenue is only with regard to the deduction claimed by the assessee in respect of the expenses incurred in future, that is, after the sale of the building, during the subsequent financial years, and not in respect of the expenses incurred by it during the relevant financial year. In order to claim the deduction of business expenditure, it is not necessary that the amount has been actually paid or expended during the relevant accounting year itself. It is sufficient that the liability for payment had incurred or accrued during the relevant accounting year. The actual payment of amount or discharge of liability may occur in future. What is crucial is the accrual of liability for payment or expenditure during the relevant accounting year. But, a contingent liability that may arise in future cannot be treated as expenditure. The Tribunal was right in confirming the finding of the appellate authority that, the expenditure incurred by the assessee company during the financial years subsequent to the sale of the building, is eligible for deduction in the computation of taxable income.
Subscribe Taxscan Premium to view the JudgmentThe Bombay High Court in the case of PCIT v M/s Concentrix Services upheld that the interest paid on the borrowed fund for the purpose of acquiring a controlling interest in another company would be allowable business expenditure.
Respondent engaged in the business of providing IT-enabled services such as Call Centres, BPO services, etc. Respondent claimed expenses on account of interest and finance as an allowable expenditure u/s 36(1)(iii) during the relevant AYs. The expenses are in connection with loans taken for DBS Bank for the acquisition of a Company. The AO, however, disallowed the above interest and finance expenses claimed on the ground that it relates to the acquisition of shares of a foreign subsidiary and not related to the business of the Respondent.
The issue before the present court is that whether the Tribunal was justified in directing the AO to delete the disallowance u/s 36(1)(iii) of the IT Act without appreciating the fact that the acquisition of business by way of investing into shares of that company cannot be considered to be towards expenditure for assessee’s business.
The Appellant submitted that the interest on loan and finance expenditure on account of foreign exchange variations in the loan could not have been allowed as business expenditure on the ground that the Respondent is not in the business of investment of shares but in the business of Information Technology enabled Services, BPO and Call Centres.
The Coram constituting of Justice M.S. Sanklecha and Justice Nitin Jamdar held that the decision in CIT v Srishti Securities Pvt Ltd that the interest paid on the borrowed fund for the purpose of acquiring a controlling interest in another company would be allowable business expenditure applies in the present facts of the case. The Bench, however, ruled that the question does not give rise to any substantial question of law as it is essentially a finding in the above case and dismissed the case on the same basis.
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