A two-judge bench of the Delhi High Court has held that the payment for encashment of bank guarantee and the interest paid on late payment are capital expenditure for the purpose of Income Tax Act.
The assessee was primarily engaged in the business of developing, maintaining and operating of Bus-Q-Shelters (BQS), metro stations, highways etc., in its return of income filed on 29th September 2009 had declared net loss of Rs.8,11,91,801/-. While completing the assessment, the Assessing Officer disallowed expenditure of Rs.2,08,92,603/- as capital loss suffered by the respondent-assessee for failure to perform its part of the concessionaire agreement with the Delhi Transport Corporation.
The Revenue contended that Rs.2,08,92,603/- paid by the respondent-assessee on encashment of bank guarantee and interest on late payment, was capital expenditure and not revenue expenditure.
The bench comprising Justice Sanjiv Khanna and Chander Sekhar observed that whether the expenditure is capital or revenue in nature has to be looked at from a commercial point of view.
“In the present case as noticed there was the failure on the part of respondent-assessee to perform its part of the agreement including operation and maintenance of bus shelters and pay concessionaire fee of Rs.4.09 crores per month. Any expenditure or payment of the said nature would necessarily be revenue in character. Even construction cost of the shelters had to be amortized over a period of 10 years. These would, therefore, not be the expenditure of capital nature,” the bench said.
“The Assessment Order does not refer to the enduring or permanent benefit acquired by the respondent-assessee and therefore on default and failure to abide by the terms, the expenditure or loss incurred by the respondent-assessee was capital expenditure/loss. Cost of construction as recorded and held above was not capital expenditure. Further, the respondent-assessee was liable to pay the monthly fee of Rs.4.09 crores to the Delhi Transport Corporation, which is certainly revenue expenditure. Additionally, the respondent-assessee was under obligation to maintain and operate shelters which again would be revenue expenditure,” the bench added.
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A two-judge bench of the Madras High Court held that the term “foreign projects” for the purpose of Income Tax deduction under section 80HHB(2)(b)(ii) of the Income Tax Act, 1961 would also include the works done in connection with shut down of the refinery.
In the instant case, the assessee entered into a Company in Abu Dhabi for undertaking work in connection with shut down of refinery and claimed the deduction by treating as a “foreign Project” under section 80HHB(2)(b)(ii). The Assessing Officer, while examining the deduction claim noted that the assessee was a sub-contractor, and the work awarded to the assessee formed part of general refinery shut down, which was purely a repair and maintenance work, which do not form part of the foreign project defined under the Act. The Assessing Officer further held that the assessee had not contributed for the construction of any road, building, dam, bridge or other structure nor had performed the work of assembly or installation of any machinery or plant. Accordingly, the deduction claim was rejected.
On the second appeal, the Tribunal ultimately held that the work in connection with shut down of refinery undertaken by the assessee would not fall within the definition of the expression ‘foreign project’ as defined under Section 80HHB(2)(b)(ii) of the Act.
Before the High Court, the assessee contended that this was a project by itself, as it had resulted in the construction of a new structure, though called as shut down, which was a technical term and did not constitute repairs or maintenance work
The bench comprising Justice T.S.Sivagnanam and Justice V.Bhavani Subbaroyan noted that the Tribunal lost sight of the most important factor pointed out by the assessee before the CIT (A) that the term ‘shut down’ does not denote repairs and maintenance and that it is a technical term, which is peculiar to the industry in question.
“Therefore, if the Tribunal had to come to a different conclusion, it should have reappreciated the factual position and then rendered a finding, which it has failed to do so. Rather, the Tribunal sought to adopt a very narrow approach by referring to the dictionary meaning of the words ‘assembly’ and ‘installation’,” the bench said.
The bench further said that “It has to be borne in mind that Section 80HHC of the Act is a provision, which grants incentive to the assessee for growth and development and as held by the Hon’ble Supreme Court in several decisions, such provision should be liberally construed, as it will promote economic growth of the country.”
It was, therefore, concluded that the Statute has clearly circumscribed as to what is a foreign project and we agree with the factual findings recorded by the CIT (A) that the scope of work done by the assessee will fall within the meaning of the expression ‘foreign project’ as defined under Sub-Section (2)(b) of Section 80HHB of the Act.
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The Mumbai bench of Income Tax Appellate Tribunal (ITAT) in Haware Engineers & Builders Private Limited versus Deputy Commissioner of Income Tax Central Circle, held that the income received from flats or shops held as stock-in-trade is business income for the purpose of Income Tax Act, 1961.
The sole issue in instant appeal regarding the addition made because of notional rental income against unsold properties which happens to be held as stock-in-trade by the assessee. In instant case, the assessee is a corporate entity engaged in the business of real estate developer.
During the proceedings, assessing officer found that certain unsold units like flats and shops were held in stock in trade, and the cost of construction would amount to 14 crores. After providing the statutory deduction of 30% as per Section 24(b), the net addition thus worked out was added to the income of the assessee.
The stand of CIT(A) was against assessee which made them approach this tribunal and drawn the attention of recent decision in sister concern which was settled in assessee’s favor.
The ITAT bench including Judicial Member Ravish Sood and Accountant Member Manoj Kumar Aggarwal heard the rival contention and noted that the assessee is engaged as Real Estate Builder and carries out the project at various places. The year-end inventory is shown in the Balance Sheet comprises-off of certain unsold completed units in the shape of Flats/shops valued at Rs.14.39 Crores. The notional rental value of these units, in the opinion of Ld. AO, was to be taxed under the head Income from House Property.
Finally, the bench observed that “Keeping in view the consistent stand of this Tribunal and respectfully following the same, we hold that if an immovable property in the shape of flats/shops is held as stock-in-trade, then it becomes part of trading operations for the assessee and as a natural corollary, any income derived therefrom would be Business Income and not Income from House Property.”
Accordingly, the bench allowed the appeal of the assessee and treated the same as business income of the assessee.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Indirect Taxes and Customs (CBIC) has clarified the miscellaneous issues relating the refund under the Goods and Services Tax ( GST ) law.
With regard to the issue of Status of refund claim after issuance of deficiency memo and re-credit of electronic credit ledger, it was clarified that presently, the common portal does not allow a taxpayer to file a fresh application for the refund once a deficiency memo has been issued against an earlier refund application for the same period. Therefore, it is clarified that till the time such facility is developed, taxpayers would be required to submit the rectified refund application under the earlier Application Reference Number (ARN) only. Thus, it is reiterated that when a deficiency memo in FORM GST RFD-03 is issued to taxpayers, re-credit in the electronic credit ledger (using FORM GST RFD-01B) is not required to be carried out and the rectified refund application would be accepted by the jurisdictional tax authorities with the earlier ARN itself. It is further clarified that a suitable clarification would be issued separately for cases in which such re-credit has already been carried out.
On the issue of allowing exporters who have received capital goods under EPCG to claim the refund of IGST paid on exports, the circular said that the net effect of the amendments in September would be that any exporter who himself/herself imported any inputs/capital goods in terms of notification Nos. 78/2017-Customs and 79/2017-Customs both dated 13th October 2017 shall be eligible to claim the refund of the IGST paid on exports till the date of the issuance of the notification No. 54/2018 – Central Tax dated the 9th October 2018.
“Further, after the issuance of notification No. 54/2018 – Central Tax dated the 9th October 2018, exporters who are importing goods in terms of notification Nos. 78/2017- Customs and 79/2017-Customs both dated 13th October 2017 would not be eligible for the refund of IGST paid on exports as provided in the said sub-rule. However, exporters who are receiving capital goods under the EPCG scheme, either through import in terms of notification No. 79/2017-Customs dated 13th October, 2017 or through domestic procurement in terms of notification No. 48/2017-Central Tax, dated 18th October, 2017, shall continue to be eligible to claim refund of IGST paid on exports and would not be hit by the restrictions provided in the said sub-rule. All clarifications issued in this regard vide any Circular issued earlier are hereby superseded,” it said.
Subscribe Taxscan Premium to view the JudgmentAfter the implementation of the auditor’s regulator National Financial Reporting Authority (NFRA), the Government is now looking to discipline the three professional institutes, including the Institute of Chartered Accountants of India ( ICAI ), Institute of Company Secretaries of India (ICSI) and the Institute of Cost Accountants of India (ICWAI), Times of India reported.
According to the report, the government has pulled out a report of the high-level committee headed by O retired bureaucrat Meenakshi Datta Ghosh, that no suggested a massive overhaul of the disciplinary actions taken by the three professional bodies.
The committee, whose report has not been made public, had recommended that the ministry of corporate affairs should appoint directors or discipline and secretaries in all three professional Institutes. These Functionaries are proposed to the government officers and may be appointed In the same way as those in autonomous bodies.
The new disciplinary platform will be independent of the professional bodies. The report sought for a time of one year to dispose of the cases. Currently, the matters take three to five years for disposal. It also suggested reducing the practice of frequent adjournments.
The committee had also asked the government to merge the disciplinary committee and the board of discipline and said members elected to the institutes’ councils, the apex decision-making body, should recuse themselves in case they are subjected to any disciplinary action.
The GST department, Pune arrested a person for allegedly involved in an evasion of rupees 80 crores by issuing fraudulent invoices worth Rs 415 crores.
The Directorate General of GST Intelligence’s (DGGI’s) Pune zone unit on Sunday said that it has unearthed an Rs 80 crore “fraud” which is suspected to have been perpetuated through procurement of “bogus invoices” from markets and arrested one person from Mumbai.
the arrested person Modsingh Padamsingh Sodha was found to be operating over 10 dummy companies that had issued fraudulent invoices worth Rs 415 crores, the DGGI said.
The officials suspected that the bogus invoices might have been utilized to get enhanced credit limits from banks, “thereby laying the foundation of a future banking fraud”.
“No goods were supplied and all transactions were on paper. GST fraud of around Rs 80 crore has been detected in this case, which was paid through set-off of fraudulently availed Input Tax Credit on the basis of invoices procured through the market without receipt of goods,” it stated.
During the course of the search, the department recovered Rs 2.18 crore from the dummy companies. “Investigation is going on and it has been found that this is just a tip of the iceberg,” it claimed.
The accused was produced before a court in Pune which remanded him in judicial custody of 14 days.
“After analyzing a large amount of data, some key players of this racket were identified and simultaneous raids were conducted in Mumbai and Pune by the officers,” stated the release.
A large number of similar entities involved in this fraud have been identified which indicate that it is a much bigger racket and its threads are spread all over India, it said.
The amount of fraudulent ITC detected, in this case, has reached the figure of over Rs 220 crores and is likely to further go up, it said.
“The value of supplies as per the bogus invoices detected till date is around Rs 900 crore, which indicates the extent of bogus transactions, which appear to have been also done for inflating turnover of companies/firms which may have been utilized to get enhanced credit limits from banks, thereby laying foundation of a future banking fraud,” the office said in its note.
Till date, the Goods and Services Tax ( GST) Council has taken 918 decisions related to GST laws, rules, rates, compensation and taxation threshold etc. More than 96% of the decisions have already been implemented through 294 Notifications issued by the Central Government and the remaining are under various stages of implementation, said the Finance Ministry.
Almost equal number of corresponding SGST Notifications have been issued by each State.
The GST Council Members under the Chairpersonship of the Union Finance Minister have spent long hours discussing the broad contours as well as the nitty-gritty of the new GST regime in a harmonious and collaborative spirit. Till now, 30 the Meetings have taken place. Detailed Agenda Notes were prepared before every Council Meeting and discussed in the preparatory Officer’s Meeting to enable the Council Members to fully appreciate the issues under consideration. The Detailed Agenda Notes for the 30 GST Council Meetings ran into 4730 pages. The discussions in the GST Council were very detailed, reflecting the collective wisdom of the Council and this has been captured exhaustively in the Minutes of the 30 Council Meetings running into 1394 pages.
The GST Council was constituted on 15th September 2016 under Article 279A of the Constitution. It consists of the Union Finance Minister (Chairperson), Union Minister of State in charge of the Revenue or Finance and the Minister in charge of Finance or Taxation or any other Minister nominated by each State Government. Union Revenue Secretary is the ex-officio Secretary to the GST Council. The working of Council has ushered in a New Phase of Cooperative Federalism where the Central and the State Governments work together to take collective decisions on all issues relating to Indirect Tax regime of the country.
A two-judge bench of the Gujarat High Court has upheld the constitutional validity of the provisions of section 140 (5) of the Central Goods and Services Tax (CGST) Act, 2017 and clarified that the provision denying the credit of excise duty paid on capital goods which were in transit as on 01.07.2017, post GST rollout, is not violative of Article 14 and 19(1)(g) of the Constitution of India.
Justices Akil Kureshi and B N Karia were considering a writ petition filed by RSPL Ltd, a Company engaged in manufacturing and selling of various consumer goods. They had a manufacturing unit of Soda Ash in Gujarat. For the purpose of such manufacturing activities, the petitioner procures raw materials as well as capital goods. The GST department denied the credit of excise duty paid on capital goods which were in transit as on 01.07.2017.
Before the High Court, the petitioners claimed that the act of the department is violative of Article 14 and 19(1)(g) of the Constitution of India.
The department, in the affidavit, pointed out the reason for treating the capital goods in transit differently that the capital goods are typically slow-moving items.
“This term is not explained in detail in such affidavit. However, to us it appears that the suggestion of the respondents is that unlike inputs, the capital goods which can be in the nature of plant and machinery including highly sophisticated specially designed and manufactured machines, may take much longer time for delivery and installation after the orders are placed by the manufacturers and the legislature was not inclined to keep the issues of migration of tax credits and pending claims open for indefinite period of time,” the bench said.
It was, therefore, held that “Under the circumstances, we do not find that the statute in any manner violates Article 14 or 19(1)(g) of the constitution. It can also not be seen as taking away an existing right to claim CENVAT Credit of the duty paid on capital goods. Even in the earlier statute right to claim the credit of duty paid would arise or accrue only upon receipt of such capital goods at the place of manufacturer.”
Subscribe Taxscan Premium to view the JudgmentThe Central Goods and Service Tax ( GST ) officials in Mumbai arrested a businessman Uday Kantilal Desai, Director of Reena Tiinaz, from Navi Mumbai for issuing fake invoices of Rs 1,000 crore to avail of tax credit worth Rs 441 crore.
Reports said that the accused inflated the turnover of the companies to get more loans from banks and other facilities. Until now, Desai has taken loans of Rs 140 crore from a consortium of banks.
The arrest was recorded by the department officials following a search conducted in eight places of the accused. During the search, it was found that Desai issued these invoices through shell companies without supplying any actual goods. It was also revealed that the invoices were issued in the name of Tashee Enterprise, Prayans Trading and Shri Sai Trading without an actual supply of goods. These companies further issued invoices to two other companies — Om Enterprise and K M Trading. Even in this case, no goods were supplied.
The CGST officials also arrested proprietors of these shell companies allegedly controlled by Desai. They have been identified as Vinayak Mahadev Tawhare, proprietor, Sri Sai Trading; Shekhar Duraiswamy Mudaliyar of KM Trading; and Krunal Madhusudan Desai of Tashee Enterprises.
So far, the CGST officials have made five arrests in this case.
“It appears that this is case of paper transactions only without physical movement of goods. The accused have been remanded up to November 3 by the court,” Raghavendra Pal Singh, Joint Commissioner at CGST, Navi Mumbai, said.
The officials carried out search operations based on specific intelligence gathered under the guidance of Kiran Verma, Commissioner of CGST, Navi Mumbai, and Joint Commissioner Raghavendra Pal Singh.
The Central Government, on Saturday, appointed Senior Income Tax officer of Indian Revenue Services, Sanjay Kumar Mishra, as the interim Director of Enforcement Directorate ( ED ) for three months after its present chief, Karnal Singh retires.
Mishra will hold the permanent post of Principal Special Director and will hold additional charge of Director ED for three months or till a regular incumbent is found, whichever is earlier, as per an order issued by the Appointments Committee of Cabinet on Saturday.
He is expected to be empaneled soon and subsequently, will head the ED in a regular capacity, they said.
The ED director post is an additional secretary rank post in the Union government. The ED enforces two major laws in the country to check black money — the criminal Prevention of Money Laundering Act (PMLA) and the Foreign Exchange Management Act (FEMA).
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the cenvat credit cannot be denied to the assessee merely because the Service Tax registration number was not mentioned in the invoice. The Tribunal clarified that such omissions would only amount to procedural lapses for which the benefit cannot be denied to the assessee.
In the instant case, the department denied the claim for cenvat credit to the assessee by finding that the same would amount to contravention of the provisions of Rule 11(2) of Central Excise Rules, 2002 and Rules 9(2) of CENVAT Credit Rules, 2004 by availing CENVAT credit on the input invoices which did not bear service tax registration of the vendor.
The Tribunal noted that the vendor applied for service tax registration number on 17.10.2001 and the same was allowed to the vendor on 29.04.2005 i.e. much before the vendor issued invoices to the Appellant for the period in question. It is not the case of Revenue that the vendor has not paid the Service Tax which was collected by him from the Appellant, who have utilised their services.
“CENVAT credit is being denied to the Appellant only on the ground that the invoices were not having the registration number of the service provider. There is no allegation or finding to the effect that the input services were not received by the Appellant or that the said services were not covered under the scope of eligible input services in terms of CENVAT Credit Rules, 2004. It is not disputed that after pointing out by the Audit about non-mentioning of service tax registration number, the Appellant immediately provided the same to them. There is no dispute that the Appellant had made substantial compliance for availing the CENVAT credit, whatever error or discrepancy has occurred that too was rectified by the Appellant without any delay. Non-mentioning of registration number is merely a procedural lapse. It is settled legal position that CENVAT credit should not be denied on mere technicalities or procedural lapses,” the Tribunal said.
Subscribe Taxscan Premium to view the JudgmentThe Institute of Chartered Accountants of India ( ICAI ) has postponed the CA Final Examination scheduled on 3rd to 19th November 2018 in Bellari and Shimoga in Karnataka State due to bye- elections.
“It is hereby notified for general information that in view of Bye – Elections to the Lok Sabha Parliamentary Constituencies and State Legislative Assemblies of Karnataka, the Chartered Accountants Final (Group I), Paper — 2, Strategic Financial Management {Under Old & New Syllabus} initially scheduled on November 3rd, 2018 in Bellary and Shimoga examination centre(s) (in the State of Karnataka) stands rescheduled and the examination in the said paper shall now be held on November 19th, 2018 at the same venue(s) and at the same timings i.e. 2.00 PM to 5.00 PM (IST),” ICAI Notified.
It was further clarified that the admit Cards already issued would remain valid for the rescheduled date.
“However, it is clarified that the schedule of examinations notified vide Notification No.13-CA(Exam)/N/2018 dated 31st July 2018 in respect of all other cities shall remain unchanged,” the Notification said.
The Central Board of Direct Taxes ( CBDT ) has made amendments to the Income Tax Rules, 1962 mandating that the certificate for the Deduction/ Collection at Source of tax at lower rate shall be filed electronically by using Digital Signature or electronic verification code.
The Income Tax Rules, 1962 prescribe Form No.13 for filing an application for seeking a certificate under Section 197 and/or under Section 206C (9) of the Income Tax Act, 1961, for no deduction of tax or deduction/collection of tax at lower rate.
In order to rationalize and make the process of issuance of the certificate for no deduction of tax or deduction/collection of tax at lower rate electronic, the existing Form No.13 and relevant I.T. Rules are amended. This is vital for minimizing the human interface and reducing the compliance burden on the applicant.
The amended rules mandated that the certificate for deduction of tax at any lower rates or no deduction of tax, as the case may be, shall be issued directly to the person responsible for deducting the tax under advice to the person who made an application for issue of such certificate. If the number of persons responsible for deducting the tax is likely to exceed one hundred and the details of such persons are not available at the time of making application with the person making such application, the certificate for deduction of tax at lower rate may be issued to the person who made an application for issue of such certificate, authorizing him to receive income or sum after deduction of tax at lower rate.
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A two-judge bench of the Bombay High Court recently held that the goods cannot be treated as ‘smuggled’ on the ground of non-keeping of Books and non-registration with the Income Tax or Sales Tax department.
A bench of Justice Riyaz I Chagla and Justice M S Sanklecha observed that in the absence of evidence in the form of regular Books of Account, Registration under the Income Tax and Sales Tax, etc., cannot ispofacto lead to the conclusion that the seized gold bars, are smuggled gold bars.
“These may lead to proceedings for breaches of other Acts but it does not follow from it that the gold bars are smuggled goods,” the bench said.
It was held that “Moreover, smuggling as defined under Section 2 (39) of the Act, is an act or omission which will render goods liable to confiscation under Sections 111 of the Act for import and 113 of the Act for exports. On reading of Sections 111 and 113 of the Act, not keeping proper books of accounts or not being registered with the Income Tax and/or Sales Tax Authorities, is not an omission which renders the good liable for confiscation i.e. smuggled goods.”
With regard to the issue of onus of proof under section 123 of the act, it was contended on behalf of the department that the burden is upon the Respondent and that has to be discharged up to the hilt. We are unable to understand the above submission.
However, the bench rejected the contention and held that Section 123 of the Act, statutorily imposes a reverse burden of proof i.e. not upon the person (Revenue) who assert that the gold in possession of the Respondent No.1 is smuggled gold but on the person (Respondent No.1) who is found in possession of goods notified under Section 123 of the Act.
“However, this reverse burden of proof does not do away with the manner of discharging the burden of proof. Thus, the manner of discharging the burden of proof by shifting of the onus would be as applicable to all other civil proceedings,” the bench said.
“It is important to bear in mind that it is not the case of the Revenue before us that burden of proof cast by Section 123 of the Act will only be satisfied when the legal import of gold bars is evidenced by the documents, establishing its import by also having Bills of Entry, and an order for home clearance by the Customs, in his possession. Advisedly so, as after the repeal of Gold (Control) Act, gold is available as a item of trade, like any other goods. The satisfactory discharge of burden of proof, will in the absence of any legislative parameter for its satisfaction, would necessarily be the satisfaction of the Authority concerned. This satisfaction of discharge of burden of proof would depend upon appreciation of the facts by the Authority concerned as there is no absolute standard of burden of proof. In civil cases, discharge of burden of proof would be varying degrees of probability. Therefore, if the Tribunal is satisfied that burden is discharged and the finding is not perverse, then no case for interference in second appeal is, warranted,” the bench added.
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Indirect Taxes and Customs ( CBIC ) has prescribed the procedure for return of time expired drugs or medicines under the Goods and Services Tax (GST) regime.
The common trade practice in the pharmaceutical sector is that the drugs or medicines are sold by the manufacturer to the wholesaler and by the wholesaler to the retailer on the basis of an invoice/bill of supply as the case may be. It is significant to mention here that such goods have a defined life term which is normally referred to as the date of expiry. Such goods which have crossed their date of expiry are colloquially referred to as time expired goods and are returned back to the manufacturer, on account of expiry, through the supply chain.
The circular said that the retailer/ wholesaler can either Return the time expired goods treating it as fresh supply or can return the expired goods by issuing credit notes.
The circular discussed the scenarios in relation to the return of goods on account of expiry of the same, it may be applicable to such other scenarios where the goods are returned on account of various other reasons.
Subscribe Taxscan Premium to view the JudgmentA division bench of Mumbai ITAT including Judicial Member C.N. Prasad and Accountant Member Rajesh Kumar, recently held that ‘ IMD Bonds ’ can be treated as Securities and therefore it does not fall within the meaning of any some of the money.
In the instant case, Assessee had received two Indian millennium deposit bonds as the gift and the same was confirmed by state bank of India through a letter. The same will matured and the value along interest will be kept as fixed deposit. After verifying the FDR assessing officer added the increase to the income of the assessee under section 69 of the act because of not furnishing of details and evidence during assessment proceedings.
The matter travelled to the ITAT and set-aside the same to the file of CIT (A) and the matter is again on the appeal. However, CIT (A) after considering the genuineness of the transaction by verifying the identification of donor, letter from SBI and the remittance of the bond deleted the addition of principal amount and interest.
Aggrieved, the revenue approached the ITAT again opposing the statement of the assessee and contended that identity of the person who gifted the money is not adequately established and moreover the assessee is not in blood relation of the donor.
Finally, the bench after hearing all the contentions held that bond gifted as IMD is not taxable in the hands of the assessee who received the same upon gift and under the terms and conditions as stipulated in the Indian Millennium Deposit Certificate.
The bench also added that such certificate can be gifted by NRI or bank at a time only to a person who is resident to India and the IMD bonds fall under the category of securities, it does not fall within the meaning of any some of the money.
Subscribe Taxscan Premium to view the JudgmentThe Kolkata bench of Income Tax Appellate Tribunal (ITAT) in DCIT versus M/s Maa Amba Towers, held that the rental income earned from the warehouse is to be treated as business income under the provisions of the Income Tax Act, 1961.
In the instant case, the revenue approached this tribunal raising a grievance that to treat the rent from warehouses to be the income from house property instead of business income.
The CIT(A) observed from the memorandum of association that the objectives of the assessee company is to develop, operate & maintain a modern warehousing facility which could be used by the number of FMCG companies for storing numerous types of consumer products.
The authority also added that to do this activity assessee employed his skilled and semi-skilled staff and exploited the civic infrastructure and the activity carried by the assessee was regular and organized manner can be termed as the business.
The ITAT bench including Judicial Member S.S.Godara and Accountant Member M.Balaganesh made a keen observation on findings made by CIT (A) and said that object clause in the MOU duly contains the relevant stipulation regarding setting up of the warehouse in issue in the nature of its business activity.
The bench also relied on the case arose in assessee’s sister concern M/s Maa Amba Infrastructure (P) Ltd.’s and held that CIT (A) has rightly concluded assessee’s rental income from its warehouse facilities to be in the nature of business income than Income from House Property.
Subscribe Taxscan Premium to view the JudgmentIn an assessee-favour ruling, the Punjab and Haryana High Court has asked the GST department to release the detained goods on furnishing security other than bank guarantee or cash.
In the instant case, the goods belong to the petitioners were seized by the department and levied penalty. The goods detained are still in custody of the Departments concerned. Against the order, the petitioners filed statutory appeals and paid pre-deposit of 10% of the disputed tax amount. In terms of Section 107(7) of the Act, recovery of the balance amount was deemed to be stayed.
As per Section 129(1)(c) of the Act, goods can be released on furnishing of security as prescribed. Section 129(2) of the Act provides for application of Section 67(6) of the Act, which in turn has been referred to in Rule 140 prescribing the bond and the bank guarantee to be furnished.
While granting an interim relief to the petitioners, Justice Rajesh Bindal and Justice Mahabir Singh Sindhu said that “Considering the fact that the legal issues sought to be raised by the petitioners need examination in detail by the GST Council and the goods detained are still in custody of the Departments concerned, we deem it appropriate to direct the respondents to release the goods on furnishing of security other than bank guarantee or cash. The needful be done within one week. As there is no dispute regarding identity of the goods, the release shall not be treated as provisional.”
Subscribe Taxscan Premium to view the JudgmentThe Institute of Chartered Accountants of India ( ICAI ) has recently issued notices to the auditors of the Amrapali Group Companies based on the interim reports of the forensic auditors appointed by the Apex court, it is coming out that there have been huge diversion of funds of the home buyers investing in housing projects of Amprapali Group.
There were reports indicating serious irregularities in the conduct of the statutory auditors of the Amrapali Group companies which has reportedly been pointed out by the forensic auditors in their report to the Hon’ble Supreme Court.
Based on such media reports as also the various interim orders passed by the Supreme Court, the Institute of Chartered Accountants of India (ICAI) as the proactive regulator has immediately issued suo moto notices to the statutory auditors of Amrapali Group for the period 2008-2015 and also for the latter period. The ICAI has issued suo moto notices to these auditors by treating as “Information” in terms of the provisions of the disciplinary mechanism as provided in the Chartered Accountants Act, 1949 and the Rules framed thereunder.
“The ICAI would be vigorously investigating the matter and take all necessary steps for ensuring that any misconduct by the errant auditors are enquired into in a fast-track mode in terms of the procedure prescribed under the aforesaid Chartered Accountants Act and the Rules,” ICAI said in a statement.
The Central Board of Indirect Taxes and Customs ( CBIC ) has laid down the norms for processing of applications for cancellation of the GST registrations under the CGST Act.
The CGST Act provide that a taxpayer can apply for cancellation of registration in FORM GST REG-16 in certain circumstances.
Today, the last date for furnishing of FORM GSTR-10 by those taxpayers whose registration has been cancelled on or before 30.09.2018 has been extended by the Board till 31.12.2018.
Under the Act, the taxpayer seeking cancellation of registration shall have to pay, by way of debiting either the electronic credit or cash ledger, the input tax contained in the stock of inputs, semi-finished goods, finished goods and capital goods or the output tax payable on such goods, whichever is higher. For the purpose of this calculation, the stock of inputs, semi-finished goods, finished goods and capital goods shall be taken as on the day immediately preceding the date with effect from which the cancellation has been ordered by the proper officer i.e. the date of cancellation of registration.
The circular, however, clarified that this requirement to debit the electronic credit and/or cash ledger by suitable amounts should not be a prerequisite for applying for cancellation of registration. This can also be done at the time of submission of final return in FORM GSTR-10. In any case, once the taxpayer submits the application for cancellation of his/her registration from a specified date, he/she will not be able to utilize any remaining balances in his/her electronic credit/cash ledgers from the said date except for discharging liabilities under GST Act upto the date of filing of final return in FORM GSTR-10.
The circular said that, as stated in sub-section (3) of section 29 of the CGST Act, the cancellation of registration does not, in any way, affect the liability of the taxpayer to pay any dues under the GST law, irrespective of whether such dues have been determined before or after the date of cancellation.
In case the final return in FORM GSTR-10 is not filed within the stipulated date, then notice in FORM GSTR-3A has to be issued to the taxpayer. If the taxpayer still fails to file the final return within 15 days, of the receipt of notice, proceedings may be initiated. However, if he files final return within 30 days, then the said order shall be deemed to have been withdrawn.
“However, the liability for payment of interest and late fee shall continue,” the circular said.
It was further clarified that issuance of notice would not be required for registered persons who have not made any taxable supplies during the intervening period (i.e. from the date of registration to the date of application for cancellation of registration) and has furnished an undertaking to this effect.
“It is pertinent to mention here that section 29 of the CGST Act has been amended by the CGST (Amendment) Act, 2018 to provide for “Suspension” of registration. The intent of the said amendment is to ensure that a taxpayer is freed from the routine compliances, including filing returns, under GST Act during the pendency of the proceedings related to cancellation. Although the provisions of CGST (Amendment) Act, 2018 have not yet been brought into force, it will be prudent for the field formations not to issue notices for non-filing of return for taxpayers who have already filed an application for cancellation of registration under section 29 of the CGST Act. However, the requirement of filing a final return, as under section 45 of the CGST Act, remains unchanged,” the circular said.
Subscribe Taxscan Premium to view the JudgmentThe Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has held that the certification services rendered by the Chartered Accountant is not subject to Service Tax till 28th February 2006.
A division bench of the Tribunal was hearing an appeal by the audit firm, Pricewaterhouse wherein the appellant had issued a certificate to Satyam Computers Limited for Satyam’s listing of shares on New York Stock Exchange and the said certificate was to be tendered by Satyam to Securities Exchange Commission, USA. The said certificate mentions about checking of various aspects and reporting as per the norms laid down by Securities Exchange Commission.
The department held that the said service is included under head ‘accounting and auditing’ and hence, taxable in terms of Section 65(83) read with Section 65(105)(s).
The appellant contended that the said service is not so covered under that head and is fully exempted under notification No. 59/98-ST, dated 16.10.1998 as amended.
In the Notification No. 59/98, except for 11 services covered by the said notification, all other services rendered by a Chartered Accountant are exempt from service tax. The said notification was in force till 28.02.2006 before being rescinded vide notification No. 2/2006-ST, dated 01.03.2006.
After analyzing the Notification deeply, the Tribunal noted that the appellant had checked the books of accounts and thereafter had issued the required certificate.
“In our opinion, the word ‘accounting’ implies pure accounting i.e. maintaining and writing of books of accounts etc. and there is no dispute that the appellant was not maintaining or writing any books of accounts for Satyam Computers Limited as they could not have since they were the statutory auditors of Satyam and statutory auditor cannot undertake to write and maintain books of accounts of its clients. Now, coming to the word “audit” it implies thorough checking of books of accounts, vouchers and legal and other supporting documents with a view to verify the authenticity or otherwise of the particular transaction.”
The Tribunal further noted that auditing is a statutory function in terms of Companies Act, 1956 and the report of the Auditor clearly mentions that ‘they have audited the attached balance sheet and the P&L account of the Company”. As compared to the above, the certificate issued in the present case is not even remotely concerned with auditing. It just states that the Chartered Accountant has verified/checked the books of accounts and thereafter has issued the certificate as per the norms laid down by Securities Exchange Commission.
“Thus, it was purely a certification work and nothing to do whatsoever with auditing. As can be seen, the certification service by a Chartered Accountant was not included in the 11 services enlisted in Notification No. 59/98 (supra) which were taxable. And hence, the certification service being not included in the 11 services so mentioned was clearly exempt in terms of the said notification till 28.02.2006. In view of the foregoing, we hold that the tax demand on this point is unsustainable and liable to be set aside and we do so,” the Tribunal said.
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