CGST (RATE) NOTIFICATIONS
23/2017
Seeks to amend notification No. 17/2017-CT(R) to make ECO responsible for payment of GST on services provided by way of house-keeping such as plumbing, carpentering etc.
22/2017
Seeks to amend notification No. 13/2017-CT(R) to amend RCM provisions for GTA and to insert explanation for LLP.
21/2017
Seeks to amend notification No. 12/2017-CT(R) to exempt services provided by Fair Price Shops to Government and those provided by and to FIFA for FIFA U-17. Also to substitute RWCIS & PMFBY for MNAIS & NAIS, and insert explanation for LLP.
20/2017
Seeks to amend notification No. 11/2017-CT(R) to reduce CGST rate on specified supplies of Works Contract Services, job work for textile & textile products, printing service of books, newspapers etc, admission to planetarium, and, also to provide option to GTA & transport of passengers by motorcab service providers to avail full ITC & discharge CGST @ 6%
UTGST (RATE) NOTIFICATIONS
23/2017
Seeks to amend notification No. 17/2017-UTT(R) to make ECO responsible for payment of GST on services provided by way of house-keeping such as plumbing, carpentering etc.
22/2017
Seeks to amend notification No. 13/2017-UTT(R) to amend RCM provisions for GTA and to insert explanation for LLP.
21/2017
Seeks to amend notification No. 13/2017-UTT(R) to amend RCM provisions for GTA and to insert explanation for LLP.
20/2017
Seeks to amend notification No. 11/2017-UTT(R), to reduce UTGST rate on specified supplies of Works Contract Services, job work for textile & textile products, printing service of books, newspapers etc, admission to planetarium, and, also to provide option to GTA & transport of passengers by motorcab service providers to avail full ITC & discharge UTGST @ 6%.
IGST (RATE) NOTIFICATIONS
23/2017
Seeks to amend notification No. 14/2017-IT(R) to make ECO responsible for payment of GST on services provided by way of house-keeping such as plumbing, carpentering etc.
22/2017
Seeks to amend notification No. 10/2017-IT(R) to amend RCM provisions for GTA and to insert explanation for LLP.
21/2017
Seeks to amend notification No. 09/2017-IT(R) to exempt services provided by Fair Price Shops to Government and those provided by and to FIFA for FIFA U-17. Also to substitute RWCIS & PMFBY for MNAIS & NAIS, and insert explanation for LLP.
20/2017
Seeks to amend notification No. 08/2017-IT(R) to reduce IGST rate on specified supplies of Works Contract Services, job work for textile & textile products, printing service of books, newspapers etc, admission to planetarium, and, also to provide option to GTA & transport of passengers by motorcab service providers to avail full ITC & discharge IGST @ 12%
CASE LAWS
2017-TIOL-1629-HC-KERALA-IT
Somasundaram Vs CCIT : KERALA HIGH COURT (Dated: July 24, 2017)
Income Tax Act 1961- Writ Petition - Income tax Rules - 16, 48, 54, 57, 58, 60 & 61.
Keywords - Assignment - Auction - Sale - Stay order - Recovery of tax.
The writ petition was filed by assessee's deceased wife, who was a defaulter under the Income Tax personally as well as in her capacity as the Director of a company. Proceedings were initiated against her for recovery of the tax. She could not paid tax amount.To recover the tax amount her property was attached and sold through auction. While the sale was taking place, the defaulter moved to the High court, who passed order staying further proceedings pursuant to the sale. While the stay order was in force, the defaulter transferred the property to Sri.R.S.Moideen, (Assignee). Subsequently, the Purchaser expired. Later on interim order of stay was vacated. Subsequently, the purchaser's wife remitted the balance amount and the sale was confirmed. The defaulter filed appeal and the appeal was dismissed by the Chief CIT. It was this order, which was challenged in writ petition. The writ petition was dismissed by Single Judge, mainly concluding that the defaulter having transferred the property, did not have locus standi to maintain an appeal.It is this judgment, which was under challenge in writ by the deceased defaulter's husband (Assessee). It was the contention of assessee that the rules contained in the IInd Schedule to the Income Tax Act govern the procedure for sale of an immovable property and, according to him, the rules governing deposit of the auction money were mandatory in character. It was stated that in this case, these mandatory rules were not complied with and, therefore, the sale was void.
Whether auction sale of property can be challenged when auction purchaser does not pay the balance amount within prescribed time after removal of stay order - YES : HC
Whether auction sale completed without the permission of the Tax Recovery Officer is void - YES : HC
After hearing parties, the High Court held that,
++ reading of the provisions of the IInd Schedule to the Act show that the requirement of deposit of 25% as contemplated in Rule 57(1) immediately after a person is declared to be the purchaser and also deposit of the balance purchase money on or before 15th day of date of sale of the property in terms of Rule 57(2), are mandatory in character.
++ admittedly, the sale was on 12.5.1995. On 12.5.95 purchaser was declared to be successful and, therefore, she deposited 25% of the purchase money and thus complied with Rule 57(1). She ought to have deposited the balance amount within 15 days thereafter. It is the contention of the Department and the purchaser that the interim order passed by this court on 12.5.95 in O.P.7180/95 prevented the authorities from accepting the balance sale consideration within the 15 days period. Even if we accept the aforesaid contention in favour of the Income Tax Department and the purchaser, that benefit can extend only till 18.2.2005 when the stay was vacated by this court. Then also, the Purchaser or it being the estate left behind by the Purchaser, who had expired in the meantime, his legal heirs, had the duty to comply with the requirements of Rule 57(2) within 15 days thereafter.
++ the wife of the deceased Purchaser, who also held power of attorney of the other legal heirs of the deceased, did not deposit the balance amount within the 15 days period specified in Rule 57(2), even if the said period is reckoned from 18.2.2005, when the order of stay was vacated by court. This means that the confirmation of sale, ordered on 29.3.2005 is of a void sale and the sale certificate issued on 30.9.2005 being a dependent order is also void and is of no consequence.
++ Rule 60 and 61 of the IInd Schedule to the Income Tax Act are pari materia with the provisions contained in Rule 89 and 90 of Order 21 C.P.C., and as held by the Apex Court the principles which govern the rules under Order XXI would apply to the rules in the IInd Schedule to the Act also. Therefore, the principles of law laid down by the Apex Court in the context of Rule 89 and 90 are equally applicable in interpreting Rule 60 and 61 of the Ist Schedule.
++ admittedly, it was the default of the deceased defaulter which led to the sale and the consequential proceedings. It was the defaulters property, which came to be proceeded against and was ultimately sold. According to the Revenue, such a sale is hit by Rule 16 of the Rules in the IInd Schedule. This rule provide that any private alienation after notice under Rule 2 has been served on the defaulter, except with the permission of the Tax Recovery Officer shall be void. Sale admittedly was without the permission of the Tax Recovery Officer. Therefore, and as rightly contended by the counsel for the Revenue, the sale is void at least as against the Revenue. If that be so, insofar as the proceedings between the assessee and the Revenue are concerned, the assessee is fully entitled to maintain legal proceedings impugning the sale and the further proceedings. Hence Single judge erred in dismissing the writ petition filed by the assessee. Accordingly, writ appeal is allowed.
Assessee's writ petition allowed
2017-TIOL-1628-HC-DEL-VAT
HG INTERNATIONAL Vs CTT: DELHI HIGH COURT (Dated: August 16, 2017)
Delhi VAT Act - Sections 32, 33, 66, 68, 81, 86(3)
Keywords - default assessment - penalty - delegation of power - jurisdiction of VAT officer
The Assessee dealer is engaged in the business of trading in auto parts, tyres and the lubricant oil. During the subject year, dealer's claim of input tax credit was rejected for three quarters for A.Y 2008-09 resulting in creation of demand and imposition of penalty. The matter travelled to the Special Commissioner, who also happened to be the VATO (Audit), after hearing of dealer, upheld the orders of default assessment and interest & penalty issued by VAT Officer. This assessment was confirmed by the VAT Appellate Tribunal.
On appeal, the HC held that,
Whether VATO(Audit) can pass default assessment order in terms of DVAT Act, if he was delegated all the powers of auditor u/s 58 of DVAT Act for confirming assessment under review or serving notice of re-assessment - YES: HC
++ it is seen that Section 58(4) of DVAT Act states that the Commissioner shall, after considering the return, the evidence furnished with the returns, if any, the evidence acquired in the course of audit, if any, or any information otherwise available to him, either confirm the assessment under review or serve a notice of the assessment or re-assessment of the amount of tax, interest and penalty pursuant to Sections 32 and 33 of the DVAT Act. The powers u/s 58 can be delegated by the Commissioner to named officers in terms of Section 66 (1) r/w/s 68 of the DVAT Act. At that relevant time when the audit of dealer took place, there was an order issued by the Commissioner, VAT u/s 68 of DVAT Act r/w Rule 48 of DVAT Rules, delegating his powers under various provisions of the DVAT Act to an officer of a particular designation. At the time when the impugned orders of default assessment of tax, interest, and penalty were passed by the VATO (Audit) in the present case, the above order was in force. It is a validly issued order and is not a subject matter of challenge in the present proceedings. The above order delegates to the VATO all the powers of an auditor u/s 58 of DVAT Act for (a) confirming the assessment under review or (b) serving a notice of assessment or re-assessment. Consequently, in the present case, the impugned orders of default assessment of tax, interest and penalty issued by the VATO (Audit) were validly issued and were within his powers and jurisdiction in terms of Section 58(1) r/w/s 58(4), and Section 66 r/w/s 68 of the DVAT Act.
Assessee's appeal dismissed
2017-TIOL-1627-HC-GUW-NDPS
MD ABDUL KADIR MAZUMDAR Vs STATE OF ASSAM: GAUHATI HIGH COURT (Dated: August 14, 2017)
NDPS - Accused-appellant convicted under Sections 20(ii)(c) of the NDPS Act, 1985 to undergo rigorous imprisonment for 10 years and to pay a fine of Rs.1,00,000/-, in default, to suffer simple imprisonment for 1 year - appeal u/s 374(2) of Cr.P.C on the ground that he was not in possession of the seized Ganja and that it was not recovered from his house, as alleged; that the electoral roll, bearing the name of the accused appellant, recovered from the house from where the seized Ganja was recovered, cannot be the basis for arriving at a conclusion that it was his house from where the Ganja, involved in this case, was seized. Held: Reliance has to be placed only on the oral testimony of the prosecution witnesses - defence never questioned on the content of the information on the strength of which raid was conducted - No step was taken to call for any such record - Infact, the defence did not even dispute the recovery of cannabis from the house in question - The very nature of power vested by Section 41 (2) requires an element of stealth hence the prosecution in a case of this nature cannot be expected to bring independent witnesses to show who identified the house of the convict appellant - From the chronology of the facts/events, it can be concluded that the plea that instead of the house of the accused appellant some other house was searched appears to be a plea without any substance, for if the accused appellant is a resident of the same village he could have easily adduced evidence to probabilise his plea; that a mere suggestion to prosecution witnesses that the house from where the seized cannabis was recovered does not belong to him cannot be accepted to be a sufficient compliance of probabilising the plea of lack of possession when it was within the reach and means of the appellant to show that even though he is a resident of Nagaypam, Jamunamukh, his house is situated at a different location in that village and is different from the one in which the search was conducted and the contraband was recovered - no interference with the judgment and order of the learned Trial Court is called for - appeal dismissed: High Court [para 26, 27, 28, 35, 37]
Appeal dismissed
2017-TIOL-1618-HC-MUM-IT + Story
CIT Vs AJANTA PHARMA LTD: BOMBAY HIGH COURT (Dated: August 9, 2017)
Income tax - Sections - Explanation to 37(1) & 148.
Keywords - Illicit payment - Kickbacks - reasons to believe - Volcker Committee Report.
Whether the Explanation to Sec 37(1) gets attracted even if there is no specific material to suggest participation of the assessee in alleged kickbacks detailed by an international inquiry report - NO: HC
The Assessee, a pharma company, had won the bid for Supply of medicines in North Iraq, raged in war. After the Gulf War, the USA had imposed trade sanctions against Iraq and the UN had initiated Oil-for-Food programme, whereby Iraq was given choice to decide the countries to whom it sold its oil. In this programme, it was only on a recommendation of the Reserve Bank of India, in the case of Indian Companies/entities, the UN Board instructed the designated banks, with whom the escrow funds were parked, to release the payments to be made to Indian Companies who were supplying goods to the Iraq Government.
For smooth conduct of its business the assessee had appointed a Jordanian company M/s Galala as its agent. The assessee paid commission on agreed basis. The payment of commission was as per UN sanctioned percentage of 10% of trade amount/invoice price.
However, in view of the Volcker Committee Report alleging instances of Iraq Govt officials seeking kickbacks from suppliers of goods, the AO decided to issue Sec 148 notice to the assessee. The CIT(A) confirmed the AO’s order but the Tribunal disagreed.
On appeal, the HC held that,
++ the assessee has claimed that it did not participate in any illicit payments concerning kickbacks. Further, the Assesee was never examined by the Volcker Committee. The Assessing Officer accepted this factual position, but went on and held that even if, the payments were made, to Jordan based Company post sanction of the Reserve Bank of India, but such payment has been made with illicit intention, thus, was against legal sanction and against law. Hence, the payment of Rs.2,88,22,428/- was held to be covered by the explanation to Section 37(1) of the Income Tax Act, 1961;
++ in this factual background, the Tribunal concluded that the facts as assumed by the Assessing Officer do not attract the explanation to Section 37(1) of the Income Tax Act;
++ the sum and substance of the lengthy discussion in the Tribunal's order is that even if what is alleged by the Assessing Officer and relying upon the report is taken as true and correct, still, the participation of the assessee was not established and proved. The assessee was not found to have made any kickbacks or payment of that nature which reached the Iraq Government and through the channels indicated in the Volcker Committee Report. There was no material of this nature in possession of the Assessing Officer against the assessee. It is in these circumstances that the Tribunal concluded, and essentially in the peculiar facts of the case of the assessee, that the assessee has not incurred any expenditure for any purpose which is an offence or which is prohibited by law. The essential ingredients of explanation below SubSection 1 of Section 37, therefore, were not attracted to the Assessee's payment made to M/s. Galala & Company in Jordon;
++ this is a finding of fact and based on the material placed before the Tribunal. We do not think that the Tribunal committed any error of law apparent on the face on record in reversing the view of the Assessing Officer. We do not think that the present Appeals of the Revenue raise any substantial questions of law.
Revenue's appeal dismissed
2017-TIOL-1183-ITAT-DEL
E-SMART SYSTEMS PVT LTD Vs ITO : DELHI ITAT (Dated: August 16, 2017)
Income Tax - Sections 5, 9(l)(vi) & (vii), 32(2), 40(a)(ia), 68, 142(1), 143(2), 194J, 234B, 234D & 244A & Rule 46A
Keywords – TDS - Unabsorbed depreciation - Non-resident creditors – Evidence Act
The assessee company is engaged in the business of printing PAN Cards, Driving Licenses, Vehicle Registration Certificates and providing time and attendance services via biometric technology. In the AY 2011-2012, the assessee firm issued preference shares to two non-resident shareholders. During the assessment, the AO raised objections as to why some foreign nationals would make such huge investments in a firm which was otherwise making losses. The AO also doubted the genuineness of the trasaction and the creditworthiness of the non-resident creditors. The AO finally made additions u/s 68 of the Act. The CIT(A) largely upheld the additions.
The assessee had acquired the business of Kaizan Engineering which had been awared a contract by Delhi Integrated Multi Modal Transit System. Having taken over the assets of Kaizan the assessee incorporated the book value of all assets in its own books and capitalised the same as intangible assets. The assessee had neither claimed depreciation nor any deduction for the same in its return filed in the previous year. During the assessment, the AO had held the excess amount of consideration as royalty for obtaining 'right to use' as per Sec 9(1)(vi). Consequently, the assessing officer held that the assessee was liable to deduct tax at source therefrom u/s 194J of the Act. In view of failure on the part of the assessee to deduct tax at source from the payment u/s 194J, the aggregate amount had been added to the total income of the assessee company. The CIT(A) concurred with the view of the AO.
On appeal , the Tribunal held that,
Whether when assessee discharged its onus by submitting details of non-resident investors, their banking details and also overdraft facility availed by them, any addition u/s 68 is called for - NO: ITAT
++ the assessee put forward details of preference shares allotted and also bank details of the remittances of the amounts received. Thereby, the assessee fulfilled its onus of proving that the amounts were received by them towards share capital. The AO never disputed the genuineness of these documents or of the transaction and raised no further queries. Although the AO doubted the creditworthiness of one of the two non-resident persons on account of bank overdraft facility availed by him, it may be mentioned that only 30% overdraft was used, which sufficiently shows that the investments were greater than the overdraft;
++ accordingly, both the AO & the CIT(A) have failed to appreciate that, entire funds for making the investment originated from the bank account of shareholders who are duly identifiable and have also confirmed the investment made in the assessee company, as such, addition made by the AO and sustained by the CIT(A) is unsustainable in law;
Whether when the assessee acquires a business, any TDS obligation arises on the difference between the total consideration and the book value of assets shown in the books as 'intangible assets' - NO: ITAT
++ it is seen that payment made by the appellant is not for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel), but payment has been made for the purchase of business of Kaizan, along with all the related assets and liabilities lock stock and barrel, at a total lumpsum consideration of Rs. 1.70 crores. The book value of assets forming part of the business aggregated to Rs 70,27,217/-, which was incorporated as such in the books of the assessee company, post acquisition of business. The difference between the total agreed lumpsum consideration of Rs.1.70 crores and the aforesaid book value (Rs.70,27,217/-) of assets amounting to Rs.99,72,783 was capitalized in the books of account under the head “intangible assets” as such, payment of Rs.99,72,783/- cannot by any stretch of imagination be termed as fee for technical services obliging the assessee company to deduct tax at source. The disallowances made by invoking section 40(a)(ia) is wholly erroneous.
Assessee's appeal allowed
2017-TIOL-1184-ITAT-MUM
ACIT Vs Shahrukh Khan : MUMBAI ITAT (Dated : August 18, 2017)
Income Tax - Sections 56(2)(vii)(a), 56(2)(vii)(b) & 143(3).
Keywords - Brand endorsement - Gift transaction - Immovable property - Professional receipt - Personal friend & Tax evasion.
The Assessee is a well known film actor. He returned an income of Rs.126.31 crores. The assessment was completed at Rs.144.17 crores after making certain adjustments. The AO had made additions against an immovable property named 'Signature Villa' claimed to be received from one Dubai-based company styled as Nakheel PJSC. The Director of the donor company apparently did it out of natural love and affection. However, the AO was of the view that the donor was keen to use Assessee's image & brand for publicity for its Palm Project since 2004, whereas, the Assessee never objected to the same, which led the AO to believe that the said Gift transaction was mere camouflage to evade taxes. The AO finally concluded that the mere presence of the Assessee and speech given by him at the Annual Day tantamounted to advertisement for the donor and came to conclude that the said arrangement was nothing but a facade of Gift / quid pro quo arrangement and hence professional receipts of the Assessee. The AO, took the value of the said Villa as Rs.17,84,95,000/- being value declared by the Assessee in his wealth tax return for AY 2009-10, and added the same to the income of the Assessee. Without prejudice, the Assessee also contested the value of the Villa adopted by the AO by placing reliance on the property valuation report issued by Hamptons International according to which the value of the property on the date of gift was Rs.14,69,92,845/-. The CIT(A) agreed with the valuation arrived at by the valuer Hamptons International vide its valuation report and subsequently directed the AO to adopt the value of the Villa as Rs.14,69,92,845/-.
On appeal, the Tribunal held that,
Whether mere donee's presence at Dubai-based donor's company celebration and the news item posted on its website amount to any kind of advertisement or brand endorsement for the donor's real estate project in exchange of gift taxable as per provisions of the I-T Act - NO: ITAT
++ the AO has placed reliance on photograph depicting the event of Assessee's visit at Donor's Sales Office in the year 2004 with a news-item which gave brief account of Assessee's visit to the Nakheel Sales Centre. However, it is important to note the positioning of the news-item on the website of the company and which is reproduced in the CIT(A)'s order. A perusal of the same reveals that the website of the donor company contained a number of Tabs, one of which was 'news' which contained calendar wise 'news items'. The information of Assessee's visit to the sales center was one amongst the many news items and the list also contained information about visit of several famous personalities worldwide over several years to Nakheel and its various projects. Therefore, after perusal of the same, it is difficult to accept the fact that the said news item tantamounted to any kind of advertisement or brand endorsement for the donor in exchange of gift;
Whether though a corporate entity may have its own legal personality but the same may be construed to be integral to the personality of its Director as per the local customs - YES: ITAT
++ so far as the capacity of the corporate entity to make a gift and execution of gift deed is concerned, we find that the argument that the corporate has separate legal entity as distinct from its members / directors, may be true in Indian Context but may not be true as per customs prevailing in Dubai. Even in Indian context, Mumbai Tribunal in the case of DCIT Vs. KDA Enterprises Private Limited has held that the companies are competent to make gift and there is no requirement of any natural love or affection for making or receiving gifts by companies. Upon perusal of chain of events leading to execution of gift, we have already reached an inevitable conclusion that all events /actions were interlinked and part and parcel of the same gift transaction and therefore, gift deed was executed by the Nakheel at the behest of Sultan only in view of the fact that ownership was vested with the company;
Whether when the gift was received prior to the amendment in Sec 56(2)(vii) vide Finance Act, 2009, no addition is warranted - YES: ITAT
++ so far as taxability of gift in kind is concerned, we find that the gift of immovable property on or after 01/10/2009 has been brought to tax by Finance Act, 2009 vide amendment to Section 56(2)(vii)(b). Before this amendment, any sum of money exceeding Rs.50,000/- received by an individual / HUF without consideration could be brought to tax vide Section 56(2)(vii)(a). Since we are dealing with AY 2008-09 about taxability of an immovable property, the said amendment does not apply to the case of the Assessee and therefore could not help the revenue in any manner. We find that the contention / conduct of the Assessee outweigh the revenue's contention. Therefore, we are inclined to hold that the said Villa was received in gift by the Assessee and not out of exercise of profession and therefore, not taxable in Assessee's hands.
Assessee's appeal allowed
