A two-judge bench of the Allahabad High Court has held that the presumption of valid service of notice under Section 282 of the Income Tax Act is not applicable in a case where the department had the correct address of the assessee and the notice was sent to an incorrect address.
The return filed by the assessee was rejected by the Assessing Officer on ground of failure to prove the genuineness of purchase and sale of shares. The notice for assessment was sent to an address i.e, 109, North Idgah Colony, Agra, which he had left the address two years back. The assessee had filed his return at his new address i.e. 2, Rishi Marg, Shahganj, Agra. The Department had with it the new address of the assessee, but the notice was sent at old address on the ground that it was the address available with the Bank in respect of bank account of the assessee.
The assessee contended that the notice under Section 148 of the was never served on him.
The department, on the other hand, contended that the notice under Section 148 was duly sent by speed post which was not returned back by the postal authority with the remarks “not found or not served or refused”. The notice was served on the correct address. Therefore, the plea of non-service of notice could not be accepted in absence of change in address having been informed to the postal authority.
A division bench comprising Justices Bharati Sapru and Dinesh Kumar Singh held that “Considering the aforesaid aspect of the matter, when the Department had correct address of the assessee, sending notice at incorrect address and then presumption drawn of service of notice is wholly erroneous. We find that the presumption drawn by the Tribunal on the ground that since notice was not received back unserved, it would be deemed to be service of notice, cannot be sustained.”
Subscribe Taxscan Premium to view the JudgmentThe Central Board of Indirect Taxes and Customs ( CBIC ) has formed a standing committee for the Consumer Welfare Fund under the Central Goods and Services Tax Rules, 2017.
The anti-profiteering authority was set up in last November to ensure that the prices are increased under the GST regime.
Under the GST law, if the anti-profiteering authority finds that a company has not passed on the GST benefits, it will either direct the entity to pass on the benefits to consumers or if the beneficiary cannot be identified, will ask the company to transfer the amount to the ‘consumer welfare fund’ within a specified timeline.
As per an order passed by the GST (Policy Wing) of the CBIC, the standing committee would be headed by the Secretary, Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution. The following are the other members.
(i) Secretary, Department of Expenditure in the Ministry of Finance or the Financial Adviser, Department of Consumer Affairs in the Ministry of Consumer Affairs, Food and Public Distribution, who shall be the vice-Chairman of the committee; (ii) Chairman, Central Board of Indirect Taxes and Customs or an officer not below the rank of a Joint Secretary in the Department of Revenue of the Ministry of Finance; (iii) Member (GST) of the Central Board of Indirect Taxes and Customs; (iv) Secretary/ Joint Secretary/ Economic Advisor, Department of Rural Development; (v) Chief Executive Officer, Food Safety and Standards Authority of India (FSSAI) (vi) Secretary or his nominee not below the rank of Joint Secretary, Ministry of Information and Broadcasting; (vii) Secretary or his nominee not below the rank of Joint Secretary, Department of Higher Education, Ministry of HRD; (viii) Director General/ Additional Director General, Bureau of Indian Standard; and (ix) The Additional Secretary/ Joint Secretary in charge of Consumer Welfare Fund in the Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution who shall also be the Member Secretary of the Committee.
Subscribe Taxscan Premium to view the JudgmentThe Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that if assessee had paid tax for the sale consideration shown in the sale deed which is not the actual amount of sale consideration, affidavit shown by the assessee can be considered.
In the instant case, assessee is an individual who declared income from salary and other sources. He deposited an amount in his bank account. During the assessing procedures, he submitted that he has sold an agricultural land during the year and sale consideration was received in cheque as well as cash. He claimed that the said agricultural land is not a capital asset as per definition of Section 2(14) of the Income Tax Act, 1961. During the year, assessee had withdrawn a sum from his bank account and had subsequently deposited an amount back. He had claimed that he had agricultural income during the year. A.O disregarded that contention of the assessee and observed that the entire sale consideration amount was received through the bank channel. Argument of assessee that he has received certain sum in cash against the sale of land was rejected. A.O also observed that there wasn’t any question of having income from agricultural activity as assessee had sold agricultural land at the beginning of financial year. He added that money has been withdrawn on regular basis which must have been used for household purposes. A.O treating cash deposit amount as unexplained cash credit under Section 68 of the act added it to the total income of the assessee. Aggreived by A.O’s decision assessee appealed to the CIT(A) which dismissing the claims of assessee upheld the A.O’s decision.
The Tribunal bench comprising of Judicial Member Madhumitha Roy Accountant Member Waseem Ahmed held that, “it’s an undisputed fact that assessee had sold the land for the amount shown in sale deed only and the additional amount of cash deposits is without any substance. They added that an affidavit has been furnished by the assessee stating the additional amount of money received in cash and directed the A.O to verify the purchase consideration from the purchasers, adjudicate the issue fresh after providing reasonable opportunity of being heard according to the provisions of law”.
Subscribe Taxscan Premium to view the JudgmentThe Jaipur bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the deduction under Section 80IE of the Income Tax Act would not be available to interest on income tax refund.
The assessee, M/s OMIL JSC (JV) Kameng is a joint venture concern engaged in manufacturing, fabrication, erection, commissioning of pen stock steel liner, steel Radial Gates of Hydromechanical works/ equipments in the State of Arunachal Pradesh. During the year under consideration, the assessee has declared income under the head “Other sources” amounting to Rs. 4,47,166 which consists of interest on income tax refund amounting to Rs. 3,53,135/- and miscellaneous receipts of Rs. 94,031/-. The assessee also exemption under section 80IE in respect of the same. The Assessing Officer rejected the claim by finding that in order to claim deduction under section 80IE, the profits should have been derived by the undertaking from manufacture or production of eligible article or thing. He was of the view that there must be direct nexus between profit and manufacturing activity of the industrial undertaking.
Before the Tribunal, the assessee contended that it has only one business undertaking and the only business of the undertaking is that of manufacturing activity and any income derived by the undertaking, including the interest income, can only be derived by the undertaking whole of which is eligible for deduction under section 80IE of the Act. It was, therefore, contended that any interest even if the same has accrued on account of excess deduction of taxes at source, the same would be in nature of “business income” and not income under the head “Income from other sources”.
The Tribunal bench noticed the decision in Atria Power Corporation Ltd.v. DCIT wherein the co-ordinate bench of the Tribunal held that the interest earned on income-tax refunds was not assessable as part of the profits and gains of the power generation business eligible for deduction under section 80-IA(4)(iv) and the interest was assessable under the head “Income from other sources”.
In light of above decision, the bench held that the interest on income tax refund is held not eligible for deduction under section 80IE of the Act.
Subscribe Taxscan Premium to view the JudgmentThe Finance Ministry has invited comments from Stakeholders and General Public on Proposed Amendments to Income Tax Rules, 1962 by 4th September 2018.
The Income Tax Rules, 1962 (I.T.Rules) 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 rationalise 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 required to be amended. This is vital for minimising the human interface and reducing the compliance burden on the applicant.
Comments and suggestions on the Draft Notification may be sent by 4th September 2018 electronically at the email address ts.mapwal@nic.in.
Subscribe Taxscan Premium to view the JudgmentThe Kerala High Court has recently allowed a petitioner to pay his entry tax dues in ten equal instalments.
In the year 1999, the petitioner, a driver, imported a ‘Toyota Prado’ car from the Gulf. The department imposed entry tax on the same which was eventually challenged before the Court. When the matter reached before the Supreme Court, the petitioner could not secure relief and consequently, the department demanded a huge amount as tax and interest.
Before the High court, the petitioner pleaded financial hardship and therefore sought for permission to pay the amount in fifteen instalments.
While disposing the petition, Justice Dama Seshadri Naidu said that “Though the petitioner pleads that he needs at least 15 instalments, this Court cannot use the discretion under Article 226 of the Constitution of India to interfere with the taxing power of the State or its recovery mechanism, unless the Government’s action violates any of the established legal principles of judicial review. So the petitioner must pay the entry tax along with interest in 10 equal monthly instalments, commencing from 05.9.2018. If the petitioner defaults for any two consecutive months, the respondents can proceed further without reference to this judgment.”
Subscribe Taxscan Premium to view the JudgmentA two-judge bench of the Madras High Court, while hearing a petition challenging the constitution of the Appellate Tribunal ( GSTAT ) under the Goods and Services Tax (GST) regime, noted that the provisions of Sections 109 and 110 of the Central Goods and Services Tax (CGST) Act 2017 are prima facie contrary to the Apex Court’s decision in Union of India vs. R.Gandhi.
The bench comprising Chief Justice Indira Banerjee and Justice P T Asha also directed to issue notice to the Central and State Governments, GST Council and the Attorney general of India in this regard.
“On hearing the learned counsel for the petitioner, prima facie it appears that the constitution of the Appellate Tribunal is contrary to the decision in Union of India vs. R.Gandhi, In such view of the matter, this Court feels it appropriate to issue notice to the respondents returnable in six weeks,” the bench said.
A petition filed by Advocate V Vasanthakumar has contended that Sections 109 and 110 of the Central Goods and Services Tax (CGST) Act 2017 are unconstitutional as the same are void, defective and unconstitutional, being violative of doctrines of separation of powers and independence of judiciary.
The provisions are relating to constitution of the AT and qualification, appointment and condition of services of its member. As per the petitioner, “…during the pre-GST regime, taxes were levied under separate laws namely Central Excise, Custom and Service tax had also the scheme of second appeal before the Appellate Tribunal known as Custom, Excise & Service Tax Appellate Tribunal (‘CESTAT’). Each bench of CESTAT consisted of two members, one Judicial Member and one Technical Member. “GST law provide for constitution of Appellate Tribunal.
The Appellate Tribunal is constituted under Section 109 of the CGST Act and Tamil Nadu GST Act and Section 110 of the CGST / TNGST Act, provides for qualification appointment, condition of services, etc., for President and members of the Appellate Tribunal.
According to the petitioner, the provision is contrary to the decision of the Supreme Court in Union of India v R. Gandhi wherein it was categorically enunciated that Bench of National Company Law Tribunal / National Company Law Appellate Tribunal should consist of one Judicial Member and one Technical Member or the Judicial Member should be equal or in majority in compare to the Technical Member and in no circumstances the number of Technical Member should be in majority compared to Judicial Members.
Subscribe Taxscan Premium to view the JudgmentIn a major relief to the non-salaried taxpayers, the Central Board of Direct Taxes ( CBDT ) has postponed the implementation of proposed GST and GAAR reporting under the amended tax audit form.
This relief would be available for tax audit reports to be furnished on or after August 20 but before April 1, 2019, the Board said in a statement on Friday.
The Board had been received representations requesting to postpone the same and the implementation of the reporting requirement under the proposed Clause 30C (pertaining to General Anti-Avoidance Rules or GAAR) and the proposed Clause 44 (pertaining to Goods and Services Tax compliance) of the tax audit Form No 3CD may be deferred.
The newly revised Form 3CD was released last month.
“The matter has been examined and it has been decided by the Board that reporting under the proposed Clause 30C and proposed Clause 44 of the Tax Audit Report shall be kept in abeyance till March 31, 2019. Therefore, for Tax Audit Reports to be furnished on or after August 20, 2018, but before April 1, 2019, tax auditors will not be required to furnish details called for under the two clauses,” the CBDT circular said.
Subscribe Taxscan Premium to view the JudgmentThe State of Kerala is witnessing the worst flooding in 100 years, the Central Board of Indirect Taxes and Customs (CBIC) has announced that the goods imported by the Charitable organizations and Red Cross Society would be exempted from Integrated Goods and Services Tax (IGST) and Customs Duty.
The Central Tax, Central Excise, and Customs, Thiruvananthapuram Zone had received numerous requests from general public/charitable and voluntary organizations regarding the procedure for duty-free clearance of materials imported for the purpose of relief and rehabilitation of people affected by floods in Kerala.
In this background, the Board, on Saturday announced that goods such as foodstuffs, medicines, medical stores of perishable nature, clothing and blankets imported by Charitable Organizations and goods imported by Red Cross Society would be exempted from whole of Customs Duty and Integrated Tax subject to certain conditions laid down in the CBEC Notifications dated 19.08.2014.
“The Trade/Charitable/Other voluntarily organizations involved in relief and rehabilitation of people affected by floods in the State of Kerala may address their applications in the prescribed format with relevant documents to Member (Customs), Central Board of Excise and Customs, North Block, New Delhi-110001 for Ad-hoc exemption,” the Board said.
Subscribe Taxscan Premium to view the JudgmentThe Institute of Chartered Accountants of India ( ICAI ) will be introducing India’s first award to celebrate the new business practice of integrated reporting, internationally acknowledged as the emerging best practice in corporate reporting and encouraged by the Securities and Exchange Board of India (SEBI)[1]. This new category, endorsed by ICAI’s Council, is part of the ICAI Awards for Excellence in Financial Reporting and is intended to boost awareness of integrated reporting as well as incentivize companies to adopt it.
An integrated report presents relevant financial and non-financial information in a holistic manner that aids providers of financial capital in making sound decisions, engagement and voting practices. It enables companies to take an interconnected approach towards reporting across multiple capitals, governance, management commentary, strategy, risks and sustainability aspects.
There is a growing understanding worldwide that by encouraging businesses to consider and report on how different forms of capital collectively contribute to their ability to create value over time, integrated reporting may have the potential to promote new ways for businesses and investors to assess the value for the benefit of the long-term sustainability of the economy and the society at large. It will be of immense benefit to all stakeholders including employees, customers, suppliers, business partners, local communities, legislators, regulators, and policymakers. Research published by some of the world’s leading academic institutions, such as Harvard Business School, Stanford University and the National University of Singapore shows that integrated reporting leads to higher share price performance, a lower cost of capital and a more dedicated, long-term investor base.
“The introduction of Integrated Reporting Category in ICAI Awards will create awareness and encourage Corporate in India to adopt Integrated thinking and Integrated Reporting,” said CA. Naveen N D Gupta, President ICAI and first member on IIRC Council from ICAI. “Chartered Accountants need to broaden their grasp of the content knowledge to include non-financial information, so that they can help the organizations they work for to implement integrated reporting both internally and externally. The role of Chartered Accountant as internal as well as external auditor will correspondingly expand including assurance on integrated reporting” he added.
The ICAI has been organizing ICAI Awards for Excellence in Financial Reporting since 1958 in various categories with a view to encourage better financial reporting and to recognize merit in the preparation and presentation of financial statements. “This Award is one of the most renowned Award amongst Corporates in India and the winners of ICAI Awards for Excellence in Financial Reporting will be eligible for participation in SAFA Best Presented Annual Reports Awards Competition,” said CA. Sanjay Kumar Agarwal, Chairman, Research Committee of ICAI.
Richard Howitt, CEO of the International Integrated Reporting Council said “The introduction of an integrated reporting category in ICAI’s prestigious Excellence in Financial Reporting Awards is a significant milestone on India’s journey towards accepting integrated reporting as the norm. Tata Steel, Yes Bank, Wipro, Reliance Industries and Mahindra are among the many companies already using the International Integrated Reporting Framework to prepare their reports for investors and other stakeholders. The evidence shows that integrated reporting delivers clear and tangible benefits for the business and I am delighted that ICAI, as a member of the global IIRC Council, is helping to accelerate India’s adoption of integrated reporting in this powerful way”.
The Income Tax Appellate Tribunal ( ITAT ), Mumbai bench has recently allowed relief to the well- known cricketer Sachin Tendulkar and held that he is eligible for vacancy allowances under Section 23 of the Income Tax Act as he was not able to find a tenant for his vacant flat at Saphire Park.
In the instant case, the Assessing Officer, while completing assessment, noted that the above property was vacant for the whole year for the reason that the assessee could not find a suitable tenant. He therefore, made additions towards rental income.
Before the Tribunal, the cricketer argued that he could not find a suitable tenant for that fiat although he was desirous of letting out the same on rent and had calculated the annual value as nil by claiming vacancy allowances and hence, he claimed benefit of section 23(1)(c) which duly permits deduction in this regard.
The Tribunal bench accepted the argument that the assessee had made reasonable effort by requesting the builder to identify the tenants for the concerned flat. Since appropriate tenant could not be find out, the flat remained vacant.
The bench found that the assessee has claimed that the said flat had remained vacant throughout the year despite assessee’s reasonable effort to let out the same.
“The assessee is a well renowned cricketer. He is furnishing the return of income of Rs.61,23,14,400/-. The let out value of the property in dispute is assessed as only Rs.1,26,000/- by the ld. Commissioner of Income Tax (Appeals) as rent for the whole year. When the same builder has helped the assessee to find tenant for another flat, why his letters to the same builder to help him identify one more tenant, can be considered as fake, defies logic. That the assessee should maintain a dispatch register for his letters as expected by the authorities below, is also abnormal expectation. That the assessee should get stamped receipt from the builder for the receipt of his letters, is equally quixotic proposition,” the bench said.
“In these circumstances, the insinuation that the assessee has submitted bogus and fake documents to support the case that reasonable efforts were made to find out a tenant for the vacant flat, is not sustainable in law. The expectation that despite his unarguably busy professional engagements commanding huge amount of money Shri Sachin Tendulkar should have embarked upon and displayed a more robust and exuberant expedition to find a tenant for his vacant flat by approaching other real estate brokers and keeping an infallible record thereof, is beyond normal conception,” the bench added.
Subscribe Taxscan Premium to view the JudgmentThe Authority for Advance Ruling (AAR), Karnataka has recently held that the salary for services like accounting, IT, human resource, provided by the head office of a company to its branch offices in other states will attract 18 per cent tax under the present Goods and Services Tax (GST) regime.
The applicant, a private limited company engaged in providing health care services categorizing them as In-patient (IP) and Out-patient (OP) services. The applicant sought for a clarification regarding its tax liability on the activities performed by the employees at the corporate office in the course of or in relation to employment such as accounting, other administrative and IT system maintenance for the units located in the other states.
The Authority noted that any activities made between related persons made or agreed to be made without a consideration shall be covered under supply of goods or services.
“The valuation of such services is to be done as per the provisions of section 15 of the Central Goods and Services Tax Act, 2017 and if any consideration is charged by issue of invoice by the IMO to the respective units would amount to transfer and hence supply as it is in the course of business under clause (a) of sub-section (1) of section. Further, these activities made between the IMO and the separately registered units are not covered under any of the entries in Schedule III,” the authority said.
According to the authority, the activities performed by the employees at the corporate office in the course of or in relation to employment, the employees employed in the Corporate Office are providing services to the Corporate Office and hence there is an employee-employer relationship only in the IMO. The other offices are distinct persons and therefore the employees in the IMO have no employer employee relationship with other offices.
“The services provided to the employer, i.e. the corporate office by the persons employed by the corporate office are in the nature of the employee-employer relationship. Further, since the corporate office and the units are distinct persons under the Act, there is no such relationship between the employees of one distinct entity with another distinct entity, at least as per the Goods and Service Tax Acts, even if they are belonging to the same legal entity,” the authority said.
“Further, the activities made between the related persons are treated as supplies and the valuation includes all costs, the employee cost also needs to be taken into consideration at the time of valuation of goods or services provided by one distinct entity to the other distinct entities,” it said.
Subscribe Taxscan Premium to view the JudgmentThe Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the compounding fee paid to the Legal Metrology department is allowable as an expenditure under Section 37 of the Income Tax Act, 1961.
Before the authorities, the assessee claimed that the compounding fees levied by the Legal Metrology department, Nagpur was compensatory in nature. Rejecting the assessees’ claim for deduction, the Assessing officer held that since legal expenses claimed by the assessee has an element of breach of law, therefore, the same was penalty and not allowable under section 37.
The bench noted that the only allowance of any expenditure, if it was incurred for illegal activities or towards infringement of law are prohibited under section 37.
The bench further noted that the impugned expenditure incurred by the assessee is more in the nature of compensatory and necessitated by commercial expediency.
“In the normal incidences of business, certain damages are to be paid by an assessee and the expenses so incurred is an allowable deduction in the ordinary course of the business. The letter of Inspector of Legal Metrology, Nagpur dated 11.7.2012 states that the assessee to make payment of Rs.20,000/- to avoid any future litigation. The assessee has settled the issue by paying the sum as compensation/ damages for the interest of its business, which according to us, cannot be treated as incurred for infraction of any law and therefore to be disallowed. We are not convinced with the action of the AO in disallowing the impugned claim of the assessee, as there is no finding recorded by the Revenue authorities below to demonstrate that expenses incurred by the assessee are penal in nature and assessee has committed any contravention of law,” the bench said.
Subscribe Taxscan Premium to view the JudgmentThe Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the interest income received by the head office of the assessee bank was not chargeable to tax in India as per the Double Taxation Avoidance Agreement (DTAA) between India and Japan.
Assessee is a foreign bank incorporated in Japan and carrying out its banking operations in India through branches situated at Mumbai and Delhi. During the relevant period, the Assessing Officer noted that the branches of the assesses bank at Mumbai and Delhi would constitute Permanent Establishment (PE) of the assessee in India within the meaning of the India-Japan Double Taxation Avoidance Agreement. He, therefore, concluded that the interest amount paid by these branches would be taxable under the Income Tax Act.
However, the CIT (Appeals) deleted the order by holding that the interest income received by the head office of the assessee bank was not chargeable to tax in India.
Before the tribunal, the Revenue contended that the PE in India has to be treated as separate entity and the interest payable by the said PE is to be taxed in India in the hands of PE as income.
Relying on the past decisions, the Tribunal noted that interest paid by the Indian branch of the assessee bank to its overseas head office would not be chargeable to tax in India.
“We thus, are of the considered view that in the backdrop of the fact that the issue as regards the chargeability to tax of the interest income received by the head office of the assessee bank from its Indian PE had already been adjudicated by the Tribunal in the assesses own case in A.Y. 2005-06 by following the order passed by the ‘Special Bench’ of the Tribunal in the case of Sumitomo Mitsui Banking Corporation (supra), thus finding no reason to take a different view, we respectfully follow the same. We thus, uphold the order of the CIT(A) to the extent the latter had concluded that the interest income received by the head office of the assessee bank would not be chargeable to tax in India,” the bench said.
Subscribe Taxscan Premium to view the JudgmentThe institute of Chartered Accountants of India ( ICAI ) under the Committee for Members in Industry & Business (CMI&B), seek applications from start-ups desiring space and facilities at incubation centre at ICAI Bhawan, BKC, Mumbai.
This is in a bid to promote startups by CAs has launched its first 15 seater incubation centre at ICAI Bhawan, BKC, Mumbai where whole ecosystem for startups has been developed.
Eligibility of the applicant (i) At least one of the Directors/Co-founders of the startups must be a Chartered Accountant. (ii) Startup means the startup defined under Gazette Notification No. GSR 364(E) dated 23rd May, 2017 and revised thereafter from time-to-time issued by Ministry of Commerce & Industry, Department of Industrial Policy & Promotion.
“On fine applications are invited from startups promoted by CAs desiring space and facilities at its first incubation centre. Interested members can visit https://cmib.icalorg/incubationcenterform for filling application and keeping in view the limited seats available Applicants are advised to furnish all relevant documents/information in support of their application as soon as possible. Chairman Committee for Members in Industry & Business (CMI&B) The Institute of Chartered Accountants of India,” ICAI said in an announcement.
The Bombay High Court in the case of Deepak Fertilisers and Petrochemicals Corporation Ltd. v. State of Maharashtra vide its judgment dated July 26th, 2018 held that the benefit of a lower tax rate (3%) under the MVAT Act will have to be granted only from the date from which it is extended, namely, w.e.f. 14.10.2017.
The petitioner company is engaged in the manufacture of fertilizers at its factory. The respondents 2, 3 and 4 are the Officers and the Authorities exercising powers under the Maharashtra Value Added Tax Act, 2002 (MVAT). Respondent 5 is the Gas Authority of India Limited which has been impleaded as a respondent because the petitioner for the purposes of manufacture of fertilizers, purchases natural gas from respondent 5. The intra-state purchase was made under various gas purchase agreements wherein natural gas is either utilized as fuel or as an input in the manufacture/ processing of fertilizers/ chemicals.
After the introduction of the goods and services regime and decision of state governments to keep petroleum products out of its purview, an amendment to insert Section 16(6A) under the MVAT took place to provide that any person who was not involved in the sale of the six commodities would no longer have a valid registration under the MVAT. Proviso to the same mentions that a person who wished to continue to do business in the commodities would have to apply to the Respondents in the prescribed manner to revoke the cancelled registration. Prior to 01.07.2017, the sale of natural gas was governed by the residuary Entry of the MVAT Act with applicable rate of tax of 13.5%. The petitioner was also eligible to claim set-off of the input MVAT subject to a reduction of 3% i.e. the net effective rate of MVAT on natural gas was only 3% prior to 01.07.2017 if the natural gas was consumed domestically as fuel or as an input for manufacture. This rate increased to 13.5% w.e.f. 01.07.2017 since he could not claim set-off due to Section 16(6A). Also, because to the GST Act only provided for adjustment of GST paid and not of VAT paid.
The petitioner has challenged the Trade Circular No. 3T of 2018 dated January 16th, 2018. The prayer is that the notification No. VAT-1517/C.R.136 (A)/Taxation-1 dated October 13th, 2017, Entry 16 should be given effect to and operated from August 2017.
It was contended on behalf of the petitioner that it was never the intention of the respondents at the time of the enactment of the Notification dated 24.08.2017 to restrict the benefits to only registered dealers. Further, if the contention of the respondents is accepted and particularly that this notification of 24.08.2017 is held to be applicable only to dealers registered under MVAT Act, then, the notification will be applicable to no one, as it is impossible to manufacture the other five items mentioned in MVAT Act from natural gas. Further, since no manner was prescribed yet for cancelling the revoked registration, the issuances of proforma by the respondents on petitioner’s application should be considered as registration under the MVAT Act considering the petitioner to be a registered dealer.
The respondent on the other hand argued that the petitioners paid the tax and were granted the set off submitting that the object is to prevent a cascading effect.
The High Court ruling in favor of the respondents hence held that “we cannot bring in the goods as defined under the MGST Act and the taxable person registered under the MGST Act in the Schedule B as amended. As already held above, Schedule B to the MVAT Act, 2002 has been amended and by resorting to the power to amend conferred by Section 9(1) of the MVAT Act. It is entirely for the Maharashtra Government therefore, to bring a notification to the Maharashtra Value Added Tax Act, 2002 to extend the concessional rate of duty or to enable availing of the concession by such persons who were earlier not eligible and entitled to it… Court cannot rely upon the language of the Trade Circular or the understanding of the Government as reflected from the Trade Circulars to grant any benefits to the petitioners from an earlier date or an earlier period. The benefit will have to be granted only from the date from which it is extended, namely, w.e.f. 14.10.2017.”
Subscribe Taxscan Premium to view the JudgmentThe Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the medical insurance premium paid for the family members of the employees is allowable as business expenditure under section 37 of the Income Tax Act.
The sole grievance of the assessee was that the Assessing Officer has disallowed the amount paid in relation to medical insurance premium paid for the family members of the employees of the company. The AO was of the view that such expenditure, though incurred in terms of contractual obligations entered into with the employees, cannot be stated to have been incurred wholly and exclusively for the purposes of business of the assessee.
Both the first appellate authority dismissed the appeal of the assessee.
The Tribunal overruled the findings of the lower authorities and noted that the authorities could not bring any evidence on record to substantiate that the payments so made by the assessee-company had no nexus with the business of the assessee.
“Even otherwise, it is not necessary that all the payments/expenditure incurred by the assessee should have direct bearing on earning of income, but some payments are also made under certain business expediency. In the instant case, the payments claimed to have been made by the assessee for the insurance premium of such members who have attained the age of 21 years or more or who are the remote relations of assessee have already been offered by the assessee to tax before the ld. CIT(A), as also noted in the written submissions above. The ld. Authorities below appear to have rejected the claim of the assessee that these payments were in the nature of perquisites to the employees as contemplated under sub-clause (iv) of section 17(2) of the IT Act, according to which any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee, shall be included in perquisites. However, in view of proviso (iii) & (iv) appended to this section clearly prohibit the application of section 17(2) in certain eventualities as contained in these provisos,” the bench said.
Subscribe Taxscan Premium to view the JudgmentThe Bombay High Court in the case of Axis Mutual Fund v. State of Maharashtra, held that no input tax credit can be claimed on goods not resold within a period of 6 months as is stipulated by the legislation.
The petitioner in the present case has sought quashing and setting aside the orders adjudicating against the petitioner. As per terms of the Scheme Information Document, the investment objective of the Gold ETF Scheme launched by the petitioner is to generate returns that are in line with the performance of gold. In the A.Y. 2012-13, the petitioner purchased gold worth Rs.522,48,59,036/- from a registered dealer located in the State of Maharashtra. On purchase of the gold, the petitioner has claimed set-off of the tax amount of Rs.5,17,31,276/- under the provisions of section 48 of the MVAT Act read with Rule 52 of the MVAT Rules. The petitioner duly adjusted the set-off claimed of Rs.3,10,79,343/- against its output VAT liabilities in accordance with the provisions of Rule 55 of the MVAT Rules. Consequently, the petitioner applied for refund of excess input tax credit amounting to Rs.2,06,51,993/-. During the course of assessment, the assessing authority has alleged that the petitioner is not eligible to claim any input tax credit as the goods purchased by the petitioner on which input tax credit is claimed are not resold within a period of six months from the date of purchase. The petitioner was levied with interest and penalty and hence has preferred the present appeal.
The petitioner has contended that Deed of Trust were created as and when floated. Further, the petitioner submits that the Axis AMC purchases gold based on requests received from the investors for creation of a unit against cash. Such purchases are made in the name of the petitioner. This purchased gold is stored with an independent custodian. Based on requests received from the unit holder/investor for redemption, this underlying gold is sold by the petitioner after levying appropriate VAT on the same.
The division bench comprising of Justice S.C. Dharmadhikari and Justice Anuja Prabhudessai after having an elaborate discussion of the provisions involved, the nature of receipts, number of trusts, etc. specifically dealt with the judgments cited by the petitioners and came to the conclusion that “To our mind, therefore, none of the authorities were in any error nor their view can be termed as perverse while granting partial relief to the petitioner. We do not see how the view taken by the first appellate authority in the facts and circumstances peculiar to the petitioner’s case is perverse. We are of the view that the conclusion reached by the first appellate authority is imminently possible. It is evident from the same that the petitioner obtained registration under the MVAT Act. It invested in the gold and disposed it of, may be on behalf of the customers. However, it paid VAT on it and was held liable to pay interest if the payment of VAT is delayed. Hence, the first appellate authority has rightly concluded that the tax amount, together with interest is payable.”
Subscribe Taxscan Premium to view the JudgmentA two-judge bench of the Madras High Court has held that the depreciation under Section 32 of the Income Tax Act, 1961 is allowable on the non- competent fee and brand equity.
The bench was hearing an appeal by the Revenue against M/s.Radaan Media Works (India) Ltd wherein the Assessing Officer denied the depreciation benefit to the Company on the above claims.
When the mater travelled to the High Court, the assessee relied on the earlier decision of the High Court wherein Commissioner of Income Tax, Chennai Vs. M/s.Radaan Media Works India Ltd., wherein both the claims of the assessee was allowed by the Court.
In the earlier order, the department fairly admitted that the brand equity of a sum of Rs.75 lakhs valued at a sum of Rs.75 lakhs would be an intangible right coming within the purview of ‘business or commercial rights’ of a similar nature. Therefore, the Court had held that the brand equity constitutes an intangible asset in terms of Section 32(1)(ii) of the Income Tax Act upon which depreciation is liable to be granted.
Subscribe Taxscan Premium to view the JudgmentA division bench of the Allahabad High Court in Apar Mukhya Adhikari v. ITO, has held that the toll plaza does not include Tahbazari for the purpose of collecting Tax at Source ( TCS ).
Tahbazari, is Import fee for permission to do certain acts such as sale of goods or services. Tahbazari is charge for a privilege to sell goods and services within certain limits of a local body for such imposition; there are no contracts, no agreements and no rents. Local body has authority to refuse to grant permission to carry on such business and if it does grant permission to carry on such business, a charge is to be paid as consideration for privilege of conducting such business.
The appellant is Apar Mukhya Adhikari, Zila Panchayat constituted under the Uttar Pradesh Kshettra Panchayats and Zila Panchayats Adhiniyam, 1961. In order to regulate its functions, a policy was formulated whereby Tahbazari, Tahbazari-Vahan Stand and BaluMorang, Gitti Bolder-Vahan Shulk is auctioned and authority letter is issued to the highest bidder. The Assessing Officer conducted a survey and noticed that there were three kinds of auctions: (i) Tahbazari (ii) TahbazariVahan Stand (iii) Balu-Morang and Gitti Bolder-Vahan Shulk. The Zila Panchayat had issued licences to different persons through tender and auction for collection of Tahbazari etc. According to the Assessing Officer, the amount so collected by the Zila Panchayat fell under/within the scope of Tax collected at source.
On second appeal, the Tribunal refused to grant relief to the assessee.
The bench comprising Justices Bharati Sapru and Dinesh Kumar Singh has held that “the Tahbazari is not an item which is provided under this Section for collecting TCS. If a licence or lease is issued in favour of any other person for collecting the Tahbazari, it cannot be said that lessee is collecting toll on such licence or lease, as the case may be. We are required to construe the taxing provisions strictly and cannot give liberal interpretation to a taxing provision,” the bench said.
It was, therefore, held that the toll plaza does not include Tahbazari inasmuch as there is no toll set up for collecting the Tahbazari when licence for collecting the Tahbazari is issued.
“The Tahbazari has different connotation and it is not a toll as held by the Tribunal. We do not agree with the view taken by the Tribunal that Tahbazari is nothing but a toll or it is not different from Toll Plaza. We, therefore, set-aside the impugned order and allow the appeal,” the bench said.
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