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INCOME TAX
NOTIFICATION NO. F. NO. 187/7/2024-ITA-I, DATED 01-08-2024
CBDT specifies situations where enquiries/verification tasks by Verification Unit not to be communicated electronically
Editorial Note: The CBDT has specified that inquiry or verification functions by the Verification Unit should not be communicated electronically under section 144B in cases where there is no digital footprint, no response to electronic notices, or when physical verification is required.
SECTION 9 OF THE INCOME-TAX ACT, 1961 - INCOME - DEEMED TO ACCRUE OR ARISE IN INDIA
Royalties/Fee for technical services - Design, Drawing and documentation: Where assessee, a tax resident of Switzerland, had entered into composite contracts for supply of design and engineering and supply of plant and equipment, since both contracts were inextricably linked and income from supply of plant and equipment was held to be not taxable in India, amount received by assessee from supply of drawings and designs was not also taxable in India as FTS - Andritz AG v. DDIT (International Taxation) - [2024] 165 taxmann.com 76 (Delhi - Trib.)
Permanent establishment: Receipts from onshore supervisory services, being attached to supervisory PE in India, have to be taxed on net basis under Article 7 of treaty - Andritz AG v. DDIT (International Taxation) - [2024] 165 taxmann.com 76 (Delhi - Trib.)
Royalties/Fees for Technical Services - Supervisory Services: Where assessee had entered into composite contracts involving both supply of plant and equipment, drawings and design, provision of supervisory services, erection, commissioning etc., services provided by assessee, being technical in nature, supervisory fee received by assessee was taxable in India in terms of Article 12(4) of tax treaty, irrespective of fact whether assessee had a PE in India or not - Andritz AG v. DDIT (International Taxation) - [2024] 165 taxmann.com 76 (Delhi - Trib.)
Royalty/Fees for technical services - Reimbursement of expenses: Where assessee, a Austria based company, received reimbursements from Indian group entities for running business without any mark-up, same could not be treated as FTS and brought to tax in India - Andritz AG v. DDIT (International Taxation) - [2024] 165 taxmann.com 76 (Delhi - Trib.)
SECTION 28(i) OF THE INCOME-TAX ACT, 1961 - BUSINESS LOSS/DEDUCTIONS - ALLOWABLE AS
Forfeited amount: Where assessee, engaged in real estate business, entered into agreement to purchase a property and paid part of consideration as advance but for failure of assessee to pay balance amount, seller forfeited amount paid as advance, such loss having been incurred in course of business activity was allowable as business loss - ACIT v. Ridgeview Developers (P.) Ltd. - [2024] 165 taxmann.com 45 (Delhi - Trib.)
SECTION 37(1) OF THE INCOME-TAX ACT, 1961 - BUSINESS EXPENDITURE - ALLOWABILITY OF
Foreign travelling expenses: Where assessee incurred foreign travelling expenses but failed to provide sufficient evidence to establish that entire amount was exclusively for business, Assessing Officer was to be directed to restrict disallowance to 25 per cent of total expenses - Galaxy International Overseas v. ITO - [2024] 165 taxmann.com 78 (Rajkot - Trib.)
Motor car expenses and depreciation: Disallowance of motor car expenses on account of personal wage to be restricted to 10 per cent - Galaxy International Overseas v. ITO - [2024] 165 taxmann.com 78 (Rajkot - Trib.)
SECTION 40A(2) OF THE INCOME-TAX ACT, 1961 - BUSINESS DISALLOWANCE - EXCESSIVE OR UNREASONABLE PAYMENTS
Merely because assessee had paid interest at different rates to different parties, that itself could not be a ground to come to a conclusion that payment of interest to related parties at rate other than that paid to other party was excessive and unreasonable - Galaxy International Overseas v. ITO - [2024] 165 taxmann.com 78 (Rajkot - Trib.)
SECTION 41(1) OF THE INCOME-TAX ACT, 1961 - REMISSION OR CESSATION OF TRADING LIABILITY
Where liabilities on account of sundry creditor were offered to tax by assessee in subsequent years, addition under section 41(1) in relevant year was to be deleted - Galaxy International Overseas v. ITO - [2024] 165 taxmann.com 78 (Rajkot - Trib.)
SECTION 43CA OF THE INCOME-TAX ACT, 1961 - FULL VALUE OF CONSIDERATION FOR TRANSFER OF ASSETS, OTHER THAN CAPITAL ASSETS IN CERTAIN CASES
Reference to DVO: Where assessee sold a land and Assessing Officer made addition of amount of difference between sale consideration and stamp duty valuation without referring matter to DVO despite assessee’s specific objections to stamp duty valuation, addition was liable to be deleted - ACIT v. Ridgeview Developers (P.) Ltd. - [2024] 165 taxmann.com 45 (Delhi - Trib.)
SECTION 143 OF THE INCOME-TAX ACT, 1961 - ASSESSMENT
Scrutiny assessment: Where Assessing Officer, had initially issued notice under section 143(2) for a limited scrutiny of return filed by assessee on three aspects, Assessing Officer could not have expanded scope of scrutiny prior to obtaining approval for a complete scrutiny by appropriate authority - Principal Commissioner of Income-tax v. Sukhdham Infrastructures LLP - [2024] 165 taxmann.com 84 (Calcutta)
SECTION 147 OF THE INCOME-TAX ACT, 1961 - INCOME ESCAPING ASSESSMENT - REASSESSMENT
Where assessee had exported rice and officers of Enforcement Directorate searched premises of assessee and alleged that it had mis-declared value of goods exported by it and based on documents seized during search, Assessing Officer made additions to income of assessee, since Enforcement Directorate had dropped proceedings against assessee and matter stood settled between assessee and Enforcement Directorate, Foundation of proceedings under 1961 Act stood wiped out, thus, there was no ground to make additions in returned income of assessee - Commissioner of Income-tax-II v. Sachdeva & Sons - [2024] 165 taxmann.com 82 (Punjab & Haryana)
SECTION 172 OF THE INCOME-TAX ACT, 1961 - NON-RESIDENT-SHIPPING BUSINESS OF
Ocean freight payments: Payments made to Indian agents of non-resident shipping companies for ocean freight would fall under section 172 and thus section 194C or section 195 not applicable - Galaxy International Overseas v. ITO - [2024] 165 taxmann.com 78 (Rajkot - Trib.)
SECTION 254 OF THE INCOME-TAX ACT, 1961 - APPELLATE TRIBUNAL - POWERS OF
Additional grounds: Where Tribunal were to admit additional question and proceed to accord relief to assessee with respect to return of income, insistence of revenue on a revision of return being a precondition clearly failed to take into consideration plenary powers which stood conferred upon Tribunal by virtue of section 254 - Mitsubishi Corporation v. Assistant Commissioner of Income-tax - [2024] 165 taxmann.com 79 (Delhi)
SECTION 271AAA OF THE INCOME-TAX ACT, 1961 - PENALTY - WHERE SEARCH HAS BEEN INITIATED
Conditions precedent: Assessing officer have to record a specific finding that undisclosed income as defined under section 271AAA was found based on tangible verifiable material found during course of search and onus is thus on Assessing officer and not on assessee to satisfy conditions before charge for levy of penalty is fastened on assessee - Ajay Kumar Sood Engineers and Contractors v. Deputy Commissioner of Income-tax - [2024] 165 taxmann.com 75 (Chandigarh - Trib.)
GOODS AND SERVICES TAX LAWS
New advisory in respect of Changes in GSTR-8: GSTN Update
Editorial Note: The GSTN has issued an advisory to inform that GSTN team is working on the changes announced by GST Council in respect of GSTR-8, is expected to be complete in next couple of days, and users would be able to file returns from 6th August 2024 midnight onwards.
New GSTN Advisory for Biometric-Based Aadhaar Authentication for applicants of Jammu & Kashmir and West Bengal
Editorial Note: The GSTN has issued an advisory for Biometric-Based Aadhaar Authentication and Document Verification for GST Registration of applicants of Jammu & Kashmir and West Bengal. It is also informed that new functionality has been rolled out in Jammu & Kashmir and West Bengal from 2nd August, 2024.
GSTN issued detailed Manual and FAQs on filing of GSTR-1A Editorial Note : The GSTN has issued detailed Manual and FAQs on filing of GSTR-1A. As per the directions of the Government vide Notification No. 12/2024 dated 10th July 2024, Form GSTR-1A has been made available to the taxpayers from July 2024’ tax period. GSTR-1A is an optional facility to add, amend or rectify any particulars of a supply reported/missed in the current Tax period’s GSTR-1 before filing of GSTR-3B return of the same tax period.
SECTION 2(69) OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - LOCAL AUTHORITY
Since assessee provided services for selling space for advertisements in newspapers and other print media to Pune Municipal Corporation (PMC) and Pimpri Chinchwad Municipal Corporation (PCMC), and as these municipal corporations are constituted under Maharashtra Municipal Corporations Act, 1949, they satisfy definition of a Local Authority as per Section 2(69) of CGST Act, 2017 - Lokmat Media (P.) Ltd., In re - [2024] 165 taxmann.com 92 (AAR - MAHARASHTRA)
SECTION 11 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - LEVY AND COLLECTION OF TAX - EXEMPTION - POWER TO GRANT
Where assessee is providing service of selling of space for advertisement in newspaper and other print media, said supply of selling space in print media is supply of pure services as envisaged in Sl No. 3 of Notification No. 12/2017-Central Tax (Rate), as no goods such as newspapers are transferred to recipient, instead, recipient receives only space within newspaper where their advertisement content is printed - Lokmat Media (P.) Ltd., In re - [2024] 165 taxmann.com 92 (AAR - MAHARASHTRA)
Where assessee is providing service of selling of space for advertisement in newspaper and other print media, since as per Circular No. 199/09/2016-Service tax advertisement content pertains to functions of education (including primary and secondary schools) and health and sanitation (including hospitals, primary health centers, and dispensaries), and as said pure services are provided to municipal corporations, which are classified as a local authority under Section 2(69), they are exempt from tax under Sl. No. 3 of Notification No. 12/2017-Central Tax (Rate) - Lokmat Media (P.) Ltd., In re - [2024] 165 taxmann.com 92 (AAR - MAHARASHTRA)
SECTION 17 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - INPUT TAX CREDIT - CREDIT AND BLOCKED CREDITS, APPORTIONMENT OF
Where appellant-assessee classifies demo vehicles as goods for use in business (used in furtherance of business) and not held for sale (for further supply), therefore, appellant-assessee is not entitled to avail Input Tax Credit charged on inward supply of motor vehicles which are used for demonstration purpose in course of business of supply of motor vehicle as input tax credit on capital goods - Sai Service (P.) Ltd., In re - [2024] 165 taxmann.com 93 (AAAR - GOA)
SECTION 30 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - REGISTRATION - REVOCATION OF CANCELLATION OF
Where petitioner challenged an order of cancellation of GST registration and sought revocation thereof by asserting that it could not file returns in time on account of ill-health and COVID 19 pandemic, GST registration was to be restored subject to and conditional upon assessee paying tax, interest, fine/fee for period prior to cancellation of registration, if not filed, together with tax dues along with interest thereon and fee fixed for belated filing of returns - Kamala Catering v. The Assistant Commissioner (Circle) - [2024] 165 taxmann.com 30 (Madras)
SECTION 38 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - RETURNS - INWARD SUPPLIES, FURNISHING DETAILS OF
Where impugned order and notices issued for discrepancies between turnover reported in Form GSTR 2A and taxable turnover declared in Form GSTR 3B were hosted in GST Common Portal and assessee unaware of same, case was to be remitted back to Deputy State Tax Officer (ST) to pass fresh order subject to assessee depositing 10% of disputed tax from its Electronic Cash Register - Tvl. KRV Super Market v. Government of India - [2024] 165 taxmann.com 87 (Madras)
SECTION 61 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - ASSESSMENT - SCRUTINY OF RETURNS
Where assessee failed to reply to notice issued by GST Authorities as assessee was unaware of notices which were uploaded in GST common portal, impugned assessment order was to be set aside subject to assessee depositing 25 per cent of disputed tax - Tvl. Gurusamy Shanmugaiah v. Deputy State Tax Officer - [2024] 165 taxmann.com 28 (Madras)
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SECTION 75 OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 - DEMANDS AND RECOVERY - GENERAL
Where show cause notice was only uploaded on GST portal, assessment order set aside and remanded for fresh consideration after providing opportunity of hearing, subject to assessee remitting 5% of disputed tax demand - Trident Home Furnishings (P.) Ltd. v. Assistant Commissioner (State Tax) - [2024] 165 taxmann.com 50 (Madras)
COMPANY AND SEBI LAWS
NOTIFICATION NO. SEBI/LAD-NRO/GN/2024/197, DATED 01-08-2024
SEBI amends MF Regulations; directs AMCs to put in place a mechanism for identification and deterrence of market abuse
Editorial Note: SEBI has notified SEBI (Mutual Funds) (Second Amendment) Regulations, 2024. A new sub-regulation has been inserted to Regulation 25 relating to ‘asset management company (AMC) and its obligations’. It states that the AMC must put in place an institutional mechanism as specified by the Board for the identification and deterrence of potential market abuse including front-running and fraudulent transactions in securities. Further, the term ‘market abuse’ has been defined under regulation 2(nb).
CIRCULAR NO. SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/104, DATED 01-08-2024
SEBI exempts University Funds and University-related Endowments from making additional disclosures by FPIs
Editorial Note: Earlier, SEBI vide circular dated August 24, 2023, mandated additional disclosures for FPIs that fulfil objective criteria as specified in the circular. Further, FPIs satisfying any criteria were exempted from additional disclosure requirements, subject to certain conditions. SEBI has now exempted University Funds and University-related Endowments registered or eligible to be registered as a Category I FPI from making additional disclosures subject to compliance with certain conditions.
FEMA BANKING AND INSURANCE LAWS
CIRCULAR NO. RBI/2024-25/58 DOR.CAP.REC.NO.27/09.18.201/2024-25, DATED 01-08-2024
RBI issues revised instructions for treatment of Bad and Doubtful Debt Reserve by Co-operative Banks
Editorial Note: RBI has issued revised instructions for treating Bad and Doubtful Debt Reserve (BDDR) by Cooperative Banks. As per the instructions, all provisions as per Income Recognition, Asset Classification and Provisioning (IRACP) norms, regardless of whether they are accounted for under the head “BDDR” or another head, must be charged as an expense to the P&L account in the accounting period in which they are recognised. The circular applies to all primary UCBs, SCBs and Central Co-operative Banks.
SECTION 45-IE OF THE RESERVE BANK OF INDIA ACT, 1934 - SUPERSESSION OF BOARD OF DIRECTORS OF NON-BANKING FINANCIAL COMPANY
Other than Government Company: Where petitioner claimed to be shareholder of respondent no 2 (an NBFC) filed instant writ alleging that instead of engaging in business of finance and lending, respondent no 2 was indulging in gross financial irregularities by siphoning off funds and though petitioner sent detailed complaints to RBI, no action had been taken so far by RBI, in view of fact that issue required deeper examination and same could only be answered after considering reply which was to be filed by RBI, thus, RBI was directed to file an updated status report and re-notify on 13-8-2024 and matter be kept at 'top of board' in advance list in 'part heard' category - Evaan Holdings (P.) Ltd. v. Reserve Bank of India - [2024] 165 taxmann.com 91 (Delhi)
INSOLVENCY AND BANKRUPTCY CODE
SECTION 12 OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 - CORPORATE INSOLVENCY RESOLUTION PROCESS - TIME-LIMIT FOR COMPLETION OF
Where in liquidation proceeding of corporate debtor NCLT granted an exclusion of period from 15-3-2020 to 2-10-2021 due to COVIE-19 and later e-auction was stayed on 9-11-2021, since there was no valid restriction available to liquidator to not to act during 3-10-2021 to 8-11-2021, NCLT had erred in calculating such period for purpose of exclusion and thus, stakeholder's committee was to be directed to compute and pay liquidator's fee accordingly and same was to be upheld - Sanjay Kumar Aggarwal v. Stakeholders Consultation Committee of Punjab Basmati Rice Ltd. - [2024] 165 taxmann.com 94 (SC)
SECTION 61 OF THE INSOLVENCY AND BANKRUPTCY CODE, 2016 - CORPORATE PERSON’S ADJUDICATING AUTHORITIES - APPEALS AND APPELLATE AUTHORITY
Where during pendency of an appeal, order of liquidation had already been passed by NCLT however, appellant decided to challenge order appointing liquidator under section 42, in view of facts, instant appeals challenging NCLT's order had been rendered infructuous and were to be dismissed with liberty to prefer appeal under section 42 - Sansar Investment & Finance Company (P.) Ltd. v. Atlantic Spinning & Weaving Mills Ltd. - [2024] 165 taxmann.com 90 (NCLAT - Chennai)
ACCOUNTS AND AUDIT
ICAI Invites Public Comments on Recent IASB Exposure Drafts
Editorial Note: IASB is an independent, private-sector body that develops and approves IFRSs. Recently IASB has issued 3 exposure drafts that cover amendments related to IFRS 19 concerning disclosures for subsidiaries without public accountability, IAS 21 for translation to hyperinflationary presentation currencies, and illustrative examples on climate-related and other uncertainties in financial statements. The ICAI is now inviting public comments on these exposure drafts.
OPINIONS
Impact due to taxation changes on buyback of share & real estate transactions - Jigar Mansatta, CA - [2024] 165 taxmann.com 107 (Article)
Analysis of some important amendments of the Union Budget - Saurabh Tibrewal, Partner, L.B. Jha & Co. - [2024] 165 taxmann.com 105 (Article)
Probable Effect of Section 128A of The CGST Act – Litigation Reduced or Produced? - Bhupendran Sridhar, Advocate, Erode - [2024] 165 taxmann.com 106 (Article)
RBI’s New Guidelines: A strong stance against ‘Wilful and Large Defaulters’ - Taxmann Advisory and Research Team (Corporate Laws) - [2024] 165 taxmann.com 108 (Article)
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