Anti-Dumping duty on Fluoroelastomers on import from China imposed for 5 years

Anti-Dumping duty on Fluoroelastomers on import from China imposed for 5 years

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

GOVERNMENT OF INDIA
MINISTRY OF FINANCE
(DEPARTMENT OF REVENUE)

Notification No. 40/2020-Customs (ADD)

New Delhi, the 27th November, 2020

G.S.R. —(E). – Whereas, the designated authority, vide notification No. 7/3/2020-DGTR, dated the 7th February, 2020, published in the Gazette of India, Extraordinary, Part I, Section 1, had initiated a review in the matter of continuation of anti-dumping duty on imports of ‘Fluoroelastomers (FKM)’ (hereinafter referred to as the subject goods) falling under tariff items 3904 50 90, 3904 69 10, 3904 69 90 and 3904 90 90 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) (hereinafter referred to as the Customs Tariff Act), originating in or exported from China PR (hereinafter referred to as the subject country), imposed vide notification of the Government of India, in the Ministry of Finance (Department of Revenue) No. 6/2019-Customs (ADD), dated the 28th January, 2019, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 52(E), dated the 28th January, 2019;

And whereas, the Central Government had extended the anti-dumping duty on the subject goods, originating in or exported from the subject country up to and inclusive of the 27th October, 2020 vide notification of the Government of India, in the Ministry of Finance (Department of Revenue) No. 19/2020-Customs (ADD), dated the 21st July, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R 459(E), dated the 21st July, 2020;

And whereas, the Central Government had further extended the anti-dumping duty on the subject goods, originating in or exported from the subject country up to and inclusive of the 27th November, 2020 vide notification of the Government of India, in the Ministry of Finance (Department of Revenue) No. 33/2020-Customs (ADD), dated the 27th October, 2020, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R 672(E), dated the 27th October, 2020;

And whereas, in the matter of review of anti-dumping duty on import of the subject goods, originating in or exported from the subject country, the designated authority in its final findings, published vide notification No. 7/3/2020-DGTR, dated the 19th October, 2020, in the Gazette of India, Extraordinary, Part I, Section 1, has come to the conclusion that-

(i) there is continued dumping of the subject goods from subject country and the imports are likely to enter the Indian market at dumped prices in the event of expiry of duty;

(ii) there is a continued injury to the domestic industry despite anti-dumping duty in existence;

(iii)the information on record shows likelihood of continuation of dumping and injury in case the anti-dumping duty in force is allowed to cease at this stage;

(iv) there is sufficient evidence to indicate that the cessation of anti-dumping duty at this stage will lead to continuation of dumping and injury to the Domestic Industry,

and has recommended imposition of anti-dumping duty on the subject goods, originating in or exported from the subject country.

Now, therefore, in exercise of the powers conferred by sub-sections (1) and (5) of section 9A of the Customs Tariff Act, read with rules 18 and 23 of the Customs Tariff (Identification, Assessment and Collection of Anti-dumping Duty on Dumped Articles and for Determination of Injury) Rules, 1995, the Central Government, after considering the aforesaid final findings of the designated authority, hereby imposes on the subject goods, the description of which is specified in column (3) of the Table below, falling under tariff items of the First Schedule to the Customs Tariff Act as specified in the corresponding entry in column (2), originating in the countries as specified in the corresponding entry in column (4), exported from the countries as specified in the corresponding entry in column (5), produced by the producers as specified in the corresponding entry in column (6), and imported into India, an anti-dumping duty at the rate equal to the amount as specified in the corresponding entry in column (7), as perunit of measurement as specified in the corresponding entry in column (8) and in the currency as specified in the corresponding entry in column (9) of the said Table, namely:-

TABLE

S. No.	Tariff item	Description of Goods	Country of Origin	Country of Export	Producer	Duty Amount	Unit	Currency
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
1	39045090, 39046910, 39046990,  39049090	Fluoro elast omers (FKM) *note below	China PR	Any country including China PR	M/s Chenguang Fluoro and Silicone Elastomers Co.,Ltd.	3.85	Kg	US$
2	39045090, 39046910,  39046990,  39049090	Fluoro elast omers (FKM) *note below	China PR	Any country including China PR	M/s Zhonghao Chenguang Research Institute of Chemical Industry Co., Ltd.	1.3	Kg	US$
3	39045090,  39046910,  39046990,  39049090	Fluoro elast omers (FKM) *note below	China PR	Any country including China PR	M/s Daikin Fluoro chemicals (China) Co., Ltd Through M/s M/s Uni Alliance Limited, Hong Kong	1.04	Kg	US$
4	39045090, 39046910, 39046990,  39049090	Fluoro elastomers (FKM) *note below	China PR	Any country including China PR	Inner Mongolia 3F Wanhao Fluoro chemical Co/ Ltd	6.84	Kg	US$
5	39045090, 39046910, 39046990,  39049090	Fluoro elastomers (FKM) *note below	China PR	Any country including China PR	Any other than mentioned in S.No. 1 to 4 above	8.86	Kg	US$
6	39045090, 39046910, 39046990,  39049090	Fluoro elastomers (FKM) *note below	Any country other than China PR	China PR	Any	8.86	Kg	US$

* The scope of the product under consideration is Fluoroelastomers, including Copolymer fluoroelastomers, Terpolymer fluoroelastomers, Copolymer Raw gum, Copolymer Pre- Compound, Terpolymer Bisphenol Curable Raw Gum, Terpolymer Peroxide Curable Raw Gum and Terpolymer Bisphenol Curable Pre-Compound:
Provided that FKM compound and Perfluoroelastomer (FFKM) are excluded from the scope of the subject goods.

2. The anti-dumping duty imposed under this notification shall be effective for a period of five years (unless revoked, superseded or amended earlier) from the date of publication of this notification in the Official Gazette and shall be paid in Indian currency.

Explanation.- For the purposes of this notification, rate of exchange applicable for the purposes of calculation of such anti-dumping duty shall be the rate which is specified in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), issued from time to time, in exercise of the powers conferred by section 14 of the Customs Act, 1962 (52 of 1962), and the relevant date for the determination of the rate of exchange shall be the date of presentation of the bill of entry under section 46 of the said Customs Act.

[F. No. 354/10/2019-TRU]

(Gaurav Singh)
Deputy Secretary to the Government of India

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SEZ unitdevelopers ineligible to claim refund of ITC involved in supplies received from non-SEZ suppliers

SEZ unitdevelopers ineligible to claim refund of ITC involved in supplies received from non-SEZ suppliers

The Hon’ble Appellate Authority, GST, Andhra Pradesh, in Re: Vaachi International Pvt. Ltd. [Order No. 4990 of 2020 dated February 10, 2020] held that the SEZ unit/developers shall not claim any refund against input tax credit (“ITC”) involved in supplies received by them from non-SEZ suppliers and GST Law facilitates eligibility for refund claim to suppliers who made supplies to SEZ unit/developers with payment of tax as zero rated supply under Section 16(1) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”)

Facts:-

M/s. Vaachi International Pvt. Ltd. (“the Appellant”), is engaged in the business export of Dried Ornamental Plant materials. This appeal has been filed against the tax orders passed by the Assistant Commissioner/ Assessing Authority, for the tax periods from July, 2017 to March, 2018 under Central Goods and Services Tax Act, 2017 (“CGST Act”) / Andhra Pradesh Goods and Services Tax Act, 2017 (“APGST Act”) vide orders dated May 2, 2019, disputing the rejection of refund of ₹ 20,97,104/-.

The Assessing Authority identified that the Appellant is not eligible for refund of ITC, because such eligibility is available to the taxpayers who made zero rated supplies to SEZ units/Developers with payment of tax. The Assessing Authority further stated that the facility of getting refund of tax paid is statutorily made available to those taxpayers who made supplies to SEZ only, with payment of tax. Therefore, the contention that the SEZ unit can also go for refund claim against the zero rated supplies made without payment of tax, is not tenable.

Issue:-

Whether the rejection of refund claim by the Assessing Authority, is in tune with the provisions of CGST Act/ APGST Act or not?

Held:-

The Hon’ble Appellate Authority, GST, Andhra Pradesh, in Order No. 4990/2020 dated February 10, 2020 held as under:

• Observed that the Rule 89(1) of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”), the second proviso unambiguously stipulates that in respect of supplies to SEZ units/developers, the refund “SHALL” be claimed by suppliers of goods to the SEZ unit or developer only. Further, Rule 89(2)(f) prescribes that SEZ unit/developers shall not avail input tax credit ITC on the supplies received by them from non SEZ suppliers and refund would be claimed by supplier to SEZ unit/developer only. Thus, a conjoint reading of all the above provisions undoubtedly point towards a conclusion that SEZ unit/developers shall not claim any refund against the ITC involved in supplies received by them from non SEZ suppliers. And that the Aappellant’s contentions of their eligibility regarding refund against the zero-rated supplies received by them, is found to be not tenable.

• Upheld the order of Assessing Authority for rejection of refund. Further held that, the refund eligibility claim is not in tune with the provisions of the CGST Act/ APGST Act and the Assessing Authority has precisely rejected such refund claim duly observing these provisions, it need not be interfered with.

Relevant Provisions:-

Rule 89(1) of the CGST Rules:

“Application for refund of tax, interest, penalty, fees or any other amount. – (1) Any person, except the persons covered under notification issued under section 55, claiming refund of any tax, interest, penalty, fees or any other amount paid by him, other than refund of integrated tax paid on goods exported out of India, may file an application electronically in FORM GST RFD-01 through the common portal, either directly or through a Facilitation Centre notified by the Commissioner:

Provided that any claim for refund relating to balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49 may be made through the return furnished for the relevant tax period in FORM GSTR-3 or FORM GSTR-4 or FORM GSTR-7 as the case may be:

Provided further that in respect of supplies to a Special Economic Zone unit or a Special Economic Zone developer, the application for refund shall be filed by the –

(a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone;

(b) supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone :

Provided also that in respect of supplies regarded as deemed exports, the application may be filed by,-

(a) the recipient of deemed export supplies; or

(b) the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund] :

Provided also that refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited by him under section 27 at the time of registration, shall be claimed in the last return required to be furnished by him.”

Rule 89(2)(f) of the CGST Rules:

“89. Application for refund of tax, interest, penalty, fees or any other amount.-

(2) The application under sub-rule (1) shall be accompanied by any of the following documentary evidences in Annexure-1 in FORM GST RFD-01, as applicable, to establish that a refund is due to the applicant, namely:-

(f) a declaration to the effect that tax has not been collected from the Special Economic Zone unit or the Special Economic Zone developer, in a case where the refund is on account of supply of goods or services or both made to a Special Economic Zone unit or a Special Economic Zone developer.”

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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10 Interesting Issues in TCS U/s 206C(1H) on sale of Goods

10 Interesting Issues in TCS U/s 206C(1H) on sale of Goods

With effect from 01/10/2020, every seller whose turnover in the FY 2019-20 is more than Rs. 10 Crore will be required to collect Tax at Source @ 0.075% if the value or aggregate value of sale to any buyer during the year exceeds Rs. 50 Lakh.

The TCS rate will be 1% if the PAN or Aadhar of the buyer is not available with the seller.

It may be noted that the actual rate of TCS as quoted above is 0.10% & 1% but due to Covid– 2019, the rate has been reduced till 31.03.2020 by 25% to 0.075% from 0.10%. There is no reduction in the TCS rate by 25% if the PAN / Aadhar of the buyers are not available.

Let us know 10 important issues as far as TCS U/s 206C(1H) is concerned:

1. If a person has the sale of Rs. 9 Cr & interest income of Rs. 2 Cr, then technically TCS Provisions u/s 206C(1H) would be applicable. For calculating the threshold limit of Rs. 10 crore in the preceding financial year, section 206C(1H) provides that Total Sales, Turnover, Gross Receipts from the business shall be considered. As such, the receipts of sale of services shall also be considered.

2. Even if the person has not sold the goods to the buyer during any particular financial year then also the TCS liability could arise if the amount is received during such financial year against old book debt is exceeding Rs. 50 Lakh.

3. For reckoning the limit of Rs. 50 Lakhs, whether the sales effected before 01/10/2020 shall be considered?:

Section 206C(1H) is introduced by the Finance Act 2020 and was supposed to be effective from the beginning of the FY 2020-21 i.e., 01-04-2020. However, due to pandemics covid-19, its implementation is deferred till 30.09.2020. There is nothing in section 206C(1H) as to the mode of reckoning the limit of Rs. 50 Lakh in such cases. Further, CBDT has also not issued any clarification in this respect. Going by the past examples in similar scenario, it is likely that the turnover till September 2020 will also be considered for reckoning the threshold limit of Rs. 50 Lakh.

4. Illustration as to the applicability of TCS under different circumstances

Let us consider the case of M/s Seller Pvt Ltd who is dealing with M/s Buyers Pvt Ltd under 3 different scenario:

Particulars	Case – I	Case-II	Case – III
Sales up to 30/09/2020	Rs. 35 Lakh	Rs. 65 Lakh	Rs. 65 Lakh
Amount received up to 30/09/2020	Rs. 25 Lakh	Rs. 30 Lakh	Rs. 55 Lakh
Invoices raised from 01/10/2020	Rs. 30 Lakh	Rs. 20 Lakh	Rs. 20 Lakh

Case -1:

TCS shall not be applicable On the initial receipt of Rs. 25 Lakh after 01/10/2020. So, Rs. 15 Lakh [Rs. 35 Lakh + Rs. 30 Lakh – Rs. 50 Lakh] shall be liable for TCS.

Case – II:

TCS shall not be there on the initial receipt of Rs. 20 Lakh after 01/10/2020. TCS shall be applicable as and when Rs. 35 Lakh [Rs. 65 Lakh + Rs. 20 Lakh – Rs. 50 Lakh] is received.

Case – III:

Since section 206C(1H) is effective from 01/10/2020. No TCS required on Rs. 55 Lakh already collected till 30/09/2020. TCS shall be charged on the receipt of amount on or after 01/10/2020 i.e. on Rs. 30 Lakh [Rs. 65 Lakh + Rs. 20 Lakh – Rs. 55 Lakh].

5. Lower TCS Certificate from the AO:

Section 206C(9) allows the assessee to seek from assessing officer Nil/lower tax collection at source certificate. However, the benefit of this section is not available in case of buyer covered by section 206C(1H) of the Act. The transactions covered by section 206C(1H) will have to compulsory undergo the TCS provision without any other remedy. This is seriously going to hamper when the buyers is already suffering losses. Buyer in such cases have to wait for the year end for filing income tax return and getting refund thereafter.

6. Triggering Point for TCS:

The provision is made applicable from 01/10/2020. However, the way the section is drafted; even receipt of money against sale done prior to 01/10/2020 will be subject to TCS. It will be better if CBDT clarifies the non applicability of amount amounts outstanding as on 30.09.2020.

7. TCS has to be done not only on the amount of basic sale price but has to be done on GST components also. For example, a person has sold a goods worth Rs. 1 Cr to Mr. X and charged GST @ 18%. In short, the total amount receivable is Rs. 1.18 Cr. In such case, TCS will be required on Rs. 1.18 Cr and not merely Rs. 1 Cr.

8. In case of Sales return and refund of money thereafter, the amount of TCS cannot be returned to the buyer. The buyer would be able to get the credit towards the amount of TCS while filing their income tax returns.

9. It may be noted that TCS is leviable on “any amount as consideration for sale of any goods of the value”. In normal course, all the amount charged which has becomes the part of consideration and so, in my considered opinion, TCS will be applicable on such amount also. Even following conservative approach or considering the quantum involved, it would be advisable to comply with the TCS provisions on this amount as well.

10. TCS on receipt of money would mean that the liability will arise even in case of receipt of advance, though the goods may be delivered or billed at a later date. Further, if the deal gets cancelled in subsequent months then no refund of the TCS can be made to a buyer. The buyer would only be able to take the credit of such TCS in their income tax return.

Sub-section (1H) in section 206C in the Income Tax Act-1961 reads as under:

(1H) Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax:

Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five per cent”, the words “one per cent” had been substituted:

Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

Explanation.—For the purposes of this sub-section,—

(a) “buyer” means a person who purchases any goods, but does not include,—

(A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) of section 10; or

(C) a person importing goods into India or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein;

(b) “seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

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HC refuses to Prematurely pronounce in case related to Transfer Pricing

HC refuses to Prematurely pronounce in case related to Transfer Pricing

IN THE HIGH COURT OF JUDICATURE AT MADRAS

The Relevant Text of the Order as follows :

5. On the other hand, the learned Counsel for the Revenue, Ms.Hema Muralikrishnan supported the impugned order and submitted that the mixed questions of facts and law can be agitated by the Assessee even before the Tribunal even though the order to be passed by the Assessing Officer is a mere consequence, in pursuance of the binding directions of the DRP, which comprises of three higher level officers of the Department, and that mechanism has been created in the Act to cut short the process of assessment and for applying the guidance of higher committee in the form of DRP by the TPO, lest the individual officers may take different individual views of the matter. He submitted that Writ Jurisdiction in such cases should not be allowed to be invoked by the Assessees at this premature stage and the learned Single Judge was right in dismissing the Writ Petition as premature.

6. To allay the unfounded fears of the Assessee, she has further drawn our attention to the Affidavit filed by the third Respondent viz., the Assistant Commissioner of Income Tax, Large Tax Payer Unit II, Chennai, Dr.S.R.Nedumaran. In paragraph 3 of his Affidavit, it is clearly stated that no adjustments in respect of domestic or third party transaction shall be made by the Transfer Pricing Officer or Dispute Resolution Panel. Paragraph 3 of the said Affidavit is quoted below for ready reference:-

“3. In any event, notwithstanding the above and without prejudice it is submitted that there is no adjustment made in respect of domestic or third party transactions by the Transfer Pricing Officer or Dispute Resolution Panel. The adjustments made relate to International transactions only. Hence, there is no basis to raise a question of law. The chart filed by the appellant at page 32 of thetyped set of papers is his understanding/ interpretation of the order of the DRP. It is submitted that no adjustments were made to domestic transaction and hence the case laws quoted by the appellant have no relevance to the facts of the case.”

7. Accordingly, the learned Counsel for the Revenue has submitted that the apprehension of the Appellant/Assessee in the present case that there will be a mix up of domestic transactions and TP Adjustments can be made only for international transaction is unfounded, as the Department is very clear in its approach and TP Adjustments which can be made only to the international transactions covered by the definition given in Section 92B in the Chapter X, by the Revenue Authorities. Therefore she submitted that the Assessee may approach the learned Assessing Officer and if it is aggrieved by the order passed by the Assessing Officer, they have a further remedy of appeal before the learned Tribunal and then further appeal on substantial questions of law before the High Court under Section 260A of the Act.

8. Having heard the learned Counsel for the parties, we are of the opinion that the present Writ Appeal deserves to be dismissed as there is no merit. We cannot appreciate the arguments of the learned Senior Counsel for the Assessee that on the question of law, the DRP has disregarded the case laws of other High Courts. A mere discussion of such case laws but not applying to the facts cannot be said to be any disregard to the law laid down by the other High Courts in this respect. We cannot accept the submission of the learned Counsel further on the ground that merely because the order of the DRP may be binding on the Assessing Officer, against whose order, the appeal can be filed only before the learned Tribunal, a shortcut could be provided to the Assessee in such cases to invoke the Writ Jurisdiction, which itself has three tiers of remedies; before the High Court, two tiers, viz., the learned Single Judge dealing with the Writ Petition and the intra-Court Writ Appeal before Division Bench and then if the matter is taken up to the Hon’ble Supreme Court by way of Special Leave Petition under Article 136 of the Constitution of India. If the matter is dragged through in these three tiers, it would be impossible for the orders of the DRP to be executed by the Assessing Officer and the Tribunal to apply its mind to the factual aspects of the matter for a long period. It is needless to say that even the questions of law which are coupled or mixed with the findings of fact can be raised and argued before the concerned authorities below, including the TPO and before the learned Tribunal. Such a digression from the normal channel of the remedies provided in the Act in the said Chapter, need not be cut short by allowing the Assessee to invoke the Writ Jurisdiction in such cases.

9. In our considered opinion, this digression is self defeating and defeats the very purpose of quicker assessments sought to be achieved in the special law relating to international transactions envisaged in the Chapter X of the Income Tax Act provided for assessment of international transactions, so that an image of balanced approach by IT authorities can be projected on the international horizons. Many other developed countries provide for such quicker management of tax dispute resolution.

10. In view of the undertaking given by the Respondents in paragraph 3 of the Affidavit of the Assistant Commissioner that they are going to apply for TP Adjustments only to international transactions, even the aforesaid unfounded apprehension of the Assessee is not justified.

11. The learned Counsel for the Assessee also wanted to take us through the charts of the factual scenario which will obtain, if the directions of the DRP are implemented by the Assessing Officer for which he is bound. We are not inclined to go into the exercise of facts and figures at this stage at all, lest it affects the lower authorities in any manner and prejudices the case of either the Assessee or the Revenue. A regular appeal on substantial question of law, under Section 260A of the Act is provided in the Income Tax Act, 1961 and on those questions of law, if at all they would arise from the order of the learned Tribunal, the Assessee has a remedy even before this Court, and later before the Hon’ble Supreme Court on regular appeal.

12. This stream lined procedure, provided under the Act should not normally be allowed to be breached in such cases where a deeper analysis of facts has to be done by the authorities under the Act up to the Tribunal and a factual exercise has to be undertaken by them with regard to comparables, TP Adjustments and methods for making TP adjustments as prescribed in Rule 10B and Section 92C of the Act. Prematurely pronouncing on these issues, definitely curtails the discretion of the Assessing Authorities in this regard and as we have said above, it is a self defeating exercise, which the High Court in its Writ Jurisdiction should be reluctant to undertake.

13. Therefore we are not inclined to interfere with the order of the learned Single Judge and leaving it free for the Assessee to raise all the objections before the learned Assessing Officer and then before the learned Tribunal in the manner provided under law.

14. The present Writ Appeal is therefore liable to be dismissed and the same is accordingly dismissed. No costs. Consequently, CMP Nos.18592 and 20114 of 2017 are also closed.

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Kerala and West Bengal choose Option-1 to meet the GST implementation shortfall

Kerala and West Bengal choose Option-1 to meet the GST implementation shortfall

Ministry of Finance

PRESS RELEASE

25th NOV 2020

Governments of Kerala and West Bengal have communicated their acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation. The number of States who have chosen this option has gone up to 25. All the 3 Union Territories with Legislative Assembly (i.e. Delhi, Jammu & Kashmir and Puducherry) have also decided in favour of Option-1.

The States & Union Territories who choose Option-1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Government of India. The window has been operationalised since 23rd October, 2020 and the Government of India has already borrowed an amount of Rs.24,000 crore on behalf of the States in four instalments and passed it on to the States and Union Territories, who chose Option -1 on 23rd October, 2020, 2nd November, 2020, 9th November, 2020 and 23rd November, 2020. Now the State of Kerala and West Bengal will also receive funds raised through this window starting from the next round of borrowings.

Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, the States are also entitled to get unconditional permission to borrow the final instalment of 0.50% of Gross State Domestic Product (GSDP) out of the 2% additional borrowings permitted by the Government of India, under Atmnirbhar Abhiyaan on 17th May, 2020. This is over and above the Special Window of Rs.1.1 lakh crore. On receipt of the choice of Option-1 from the Government of Kerala and West Bengal, the Government of India has granted additional borrowing permission of Rs.4,522 crore to the State Government of Kerala (0.5% of Kerala’s GSDP) and Rs.6,787 crore to the State Government of West Bengal (0.5% of West Bengal’s GSDP) .

The amount of additional borrowing permission granted to 25 States and the amount of funds raised through special window and released to the 23 States and 3 Union Territories so far is annexed.

State wise additional borrowing of 0.50 percent of GSDP allowed and amount of funds raised through special window passed on to the States/UTs till 23.11.2020.

(Rs. in Crore)

S. No.	Name of State / UT	Additional borrowing of 0.50 percent allowed to States	Amount of fund raised through special window passed on to the States/ UTs
1	Andhra Pradesh	5051	672.61
2	Arunachal Pradesh*	143	0
3	Assam	1869	289.54
4	Bihar	3231	1136.27
5	Goa	446	244.39
6	Gujarat	8704	2683.88
7	Haryana	4293	1266.68
8	Himachal Pradesh	877	499.74
9	Karnataka	9018	3611.17
10	Kerala #	4,522	0
11	Madhya Pradesh	4746	1321.98
12	Maharashtra	15394	3486.24
13	Manipur*	151	0
14	Meghalaya	194	32.51
15	Mizoram*	132	0
16	Nagaland*	157	0
17	Odisha	2858	1112.42
18	Rajasthan	5462	645.06
19	Sikkim*	156	0
20	Tamil Nadu	9627	1816.66
21	Telangana	5017	164.41
22	Tripura	297	66.04
23	Uttar Pradesh	9703	1748.29
24	Uttarakhand	1405	674.27
25	West Bengal #	6787	0
	Total (A):	100240	21472.16
1	Delhi	Not applicable	1706.93
2	Jammu & Kashmir	Not applicable	661.21
3	Puducherry	Not applicable	159.7
	Total (B):	Not applicable	2527.84
	Grand Total (A+B)	100240	24000

* These States have ‘NIL’ GST compensation gap

# Funds will be released starting from next round of borrowing.

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Govt. approves Scheme of Amalgamation of Lakshmi Vilas Bank with DBS Bank India Limited

Govt. approves Scheme of Amalgamation of Lakshmi Vilas Bank with DBS Bank India Limited

Ministry of Finance

PRESS RELEASE

25th NOV 2020

The Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi has given its approval to the Scheme of Amalgamation of Lakshmi Vilas Bank Limited (LVB) with DBS Bank India Limited (DBIL). On 17.11.2020, to protect depositors’ interest and in the interest of financial and banking stability, on RBI’s application under section 45 of the Banking Regulation Act, 1949, LVB had been under moratorium for a period of 30 days. In parallel, RBI, in consultation with Government, superseded the Board of Directors of LVB and appointed an Administrator to protect the depositors’ interest.

After inviting suggestions and objections from the public and stakeholders, RBI prepared and provided a scheme for the bank’s amalgamation for the Government’s sanction, well in. advance of end of the period of moratorium so that restrictions on withdrawal faced by the depositors are minimised. With the approval of the scheme, LVB will be amalgamated with DBIL from the appointed date, and with this there will no further restrictions on the depositors regarding withdrawal of their deposits.

DBIL is a banking company licenced by RBI and operating in India through wholly owned subsidiary model, DBIL has a strong balance-sheet, with strong capital support and it has the advantage of a strong parentage of DBS, a leading financial services group in Asia, with presence in 18 markets and headquartered and listed in Singapore. The combined balance-sheet of DBIL would remain healthy even after amalgamation and its branches would increase to 600.

The speedy amalgamation and resolution of the stress in LVB is in line with Government’s commitment to a clean banking system while protecting the interests of depositors and the public as well as the financial system.

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Delhi HC Restricts Penalty Imposed by Revenue on Tata Teleservices Ltd

Delhi HC Restricts Penalty Imposed by Revenue on Tata Teleservices Ltd

IN THE HIGH COURT OF DELHI

The Text of the Order as follows :

1. The petitions have been heard by way of video conferencing. :

2. Present writ petitions have been filed challenging orders issued by respondents whereby the penalty demand of Rs.293,28,50,153/- for the assessment years 2006-07, 2007-08, 2008-09, 2009-10 and 2010-11 were stayed subject to payment of 20% of the said amount. Petitioner also sought to restrain the respondents from initiating recovery of any demand of penalty imposed on the petitioner for the relevant assessment years.

3. On 1st June, 2018, this Court had passed the following order:-

“Learned counsel for the petitioner submits that the quantum appeal is still pending before the Income Tax Appellate Tribunal. Secondly, the additions made in the assessment proceedings subject matter of the penalty orders are debatable. Primary addition relates to the expenditure incurred, which has been treated as capital expenditure. He has relied on the judgment of the Supreme Court in Commissioner of Income Tax, Ahmedabad v. Reliance Petroproducts (P) Ltd., [2010] 189 Taxman 322 (SC). The petitioner/assessee, it is stated, is a loss-making company and directions passed to pay 20% of the penalty in instalments would have grave and serious consequences, as early decisions and adjudication is not in the hands of the petitioner alone. Subject to the petitioner depositing Rs.I0,00,00,000/- in two equal instalments of Rs.5,00,00,000/- on or before 29th June, 2018 and 31st July, 2018, respectively, there would be stay of recovery by coercive steps till the next date of hearing. The deposit would be made with the Income Tax Department. We clarify that the application for stay has not been decided, and remains pending.

Relist on 11th September, 2018.

Pendency of this writ petition would not be a ground to seek the adjournments before Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal in the proceedings pending before them. It will be open for the petitioner and the Revenue to make a request for early disposal of the proceedings.

Dasti under signature of the Court Master.”

4. In pursuance to the aforesaid order, the petitioner deposited Rs.10 crores with the Income Tax Department.

5. Learned counsel for the petitioner points out that during the pendency of the present proceedings and subsequent to the order dated 01st June, 2018, the entire penalty amounts for assessment years 2009-10, 2010-11 and 2011-12 have been dropped and consequential appeal effect orders have been passed.

6. He states that what remains before the Commissioner of Income Tax (Appeals) is the appeals for AY 2006-07, 2007-08 and 2008-09 and the total cumulative penalty amount for these years is Rs.8,55,17,078/- and 20% of the same works out to Rs.1,71,03,416/- only. He emphasizes that in view of the aforesaid development, the balance amount i.e. Rs.8,28,96,584/- should be refunded to the petitioner.

7. Learned counsel for the respondents states that the appeals on merit (quantum) are pending before the ITAT and if the same is decided in favour of the Revenue, demand would once again arise.

8. He further admits that the penalty of Rs.72,87,99,676/- imposed with respect to the assessment year 2011-12 vide order dated 31st March, 2019 has been deleted vide order dated 05th February, 2020 passed by the Commissioner of Income Tax (Appeals).

9. Having heard learned counsel for the parties, this Court is of the opinion that even if the present writ petition(s) are dismissed at this stage, the maximum amount that the petitioners can be directed to deposit pursuant to the impugned orders and circulars issued by the CBDT would be 20% of the remaining demand which can only be Rs.1,71,03,416/-.

10. Keeping in view the aforesaid factual scenario, this Court is of the view that there is no reasonable ground for the revenue to hold the excess amount i.e. Rs.8,28,96,584/- and the same is directed to be released to the petitioners within four weeks.

11. With the aforesaid directions, present writ petitions and pending applications stand disposed of.

12. The order be uploaded on the website forthwith. Copy of the order be also forwarded to the learned counsel through e-mail.

Read or Download Order PDF

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CBIC made Clarification on Exports of Gems and Jewellery through Courier mode

CBIC made Clarification on Exports of Gems and Jewellery through Courier mode

Circular No. 52/2020-Customs

F.No. 455/03/2020-Cus.V

Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes & Customs

Room No. 49, North Block
New Delhi, dated the 27th November 2020

To,

All Principal Chief Commissioner/Chief Commissioners of Customs
All Principal Directors General/Directors General of Customs
All Principal Commissioners/Commissioners of Customs

Sub : Clarification on export of Gems and Jewellery through Courier mode- reg.

Madam Sir,

Representations have been received from the Gems and Jewellery Export Promotion Council seeking clarification on whether gems and jewellary is allowed to be exported through courier under the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 as also the Courier Imports and Exports (Clearance) Regulations, 1998.

2. The issue has been examined. It appears that the doubt has arisen as Regulation 2(2)(a)(iv) of the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 places a restriction on imports of precious and semi-precious stones, gold or silver in any form, through courier. The Regulation 2(2) (a) (iv) reads as “These regulations shall not apply to the following imported goods requiring testing of samples thereof or reference to the relevant statutory authorities or to experts before their clearance, namely precious and semi-precious stones, gold or silver in any form.”

2.1 Thus, the restriction imposed by Regulation 2(2)(a)(iv) on gems and jewellery is applicable only on their imports.

2.2 Similarly, the Courier Imports and Exports (Clearance) Regulations, 1998 place a restriction on imports of precious and semi-precious stones, gold or silver in any form and not on their exports.

3. In view of the above, it is clarified that the extant Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 and the Courier Imports and Exports (Clearance) Regulations, 1998, do not restrict exports of gems and jewellery through the courier mode.

4. The above clarification has to be read along with the other provisions applicable for exports through courier, such as those under Regulation 2(2)(b) and 2(2)(c), of the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010 and under regulation 2(2) of the Courier Imports and Exports (Clearance) Regulations, 1998 while allowing such exports. All extant provisions for export of gems and jewellery under any other law for the time being in force will also apply.

5. Difficulties in implementation of the Circular may be brought to the notice of the Board.

6. Hindi version follows.

(Temsunrao Jamir)
Additional Commissioner (ICD)

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Punjab chooses Option-1 to meet the GST implementation shortfall

Punjab chooses Option-1 to meet the GST implementation shortfall

Ministry of Finance

PRESS RELEASE

28th NOV 2020

Governments of Punjab has communicated acceptance of Option-1 to meet the revenue shortfall arising out of GST implementation. The number of States who have chosen this option has gone up to 26. All the 3 Union Territories with Legislative Assembly (i.e. Delhi, Jammu & Kashmir and Puducherry) have also decided in favour of Option-1.

The States & Union Territories who choose Option-1 are getting the amount of shortfall arising out of GST implementation through a special borrowing window put in place by the Government of India. The window has been operationalisedsince 23rd October, 2020 and the Government of India has already borrowed an amount of Rs.24,000 crores on behalf of the States in four instalments and passed it on to the States and Union Territories, who chose Option-1on 23rd October, 2020, 2nd November, 2020, 9th November, 2020 and 23rd November, 2020. Now the State of Punjab will also receive funds raised through this window starting from the next round of borrowing.

Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, the States are also entitled toget unconditional permission to borrow the final instalment of 0.50% of Gross State Domestic Product (GSDP) out of the 2% additional borrowings permitted by the Government of India, under AtmnirbharAbhiyaan on 17th May, 2020. This is over and above the Special Window of Rs.1.1 lakh crores.On receipt of the choice of Option-1 from the Government of Punjab, the Government of India has granted additional borrowing permission of Rs.3,033 crores to the State Government of Punjab(0.5% of Punjab’s GSDP).

The amount of additional borrowing permission granted to 26 States and the amount of funds raised through special window and released to the 18 States and 3 Union Territories so far is annexed.

Statewise additional borrowing of 0.50 percent of GSDP allowed and amount of funds raised through special window passed on to the States/UTstill 28.11.2020

(Rs. in Crore)

S. No.	Name of State / UT	Additional borrowing of 0.50 percent allowed to States	Amount of fund raised through special window passed on to the States/ UTs
1	Andhra Pradesh	5051	672.61
2	Arunachal Pradesh*	143	0
3	Assam	1869	289.54
4	Bihar	3231	1136.27
5	Goa	446	244.39
6	Gujarat	8704	2683.88
7	Haryana	4293	1266.68
8	Himachal Pradesh	877	499.74
9	Karnataka	9018	3611.17
10	Kerala #	4,522	0
11	Madhya Pradesh	4746	1321.98
12	Maharashtra	15394	3486.24
13	Manipur*	151	0
14	Meghalaya	194	32.51
15	Mizoram*	132	0
16	Nagaland*	157	0
17	Odisha	2858	1112.42
18	Punjab #	3033	0
19	Rajasthan	5462	645.06
20	Sikkim*	156	0
21	Tamil Nadu	9627	1816.66
22	Telangana	5017	164.41
23	Tripura	297	66.04
24	Uttar Pradesh	9703	1748.29
25	Uttarakhand	1405	674.27
26	West Bengal #	6787	0
	Total (A):	103273	21472.16
1	Delhi	Not applicable	1706.93
2	Jammu & Kashmir	Not applicable	661.21
3	Puducherry	Not applicable	159.7
	Total (B):	Not applicable	2527.84
	Grand Total (A+B)	103273	24000

* These States have ‘NIL’ GST compensation gap

# Funds will be released starting after next round of borrowing.

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DGGI arrests one for illegally manufacturing and supplying cigarettes and tax evasion

DGGI arrests one for illegally manufacturing and supplying cigarettes and tax evasion

Ministry of Finance

PRESS RELEASE

27th NOV 2020

The Directorate General of GST Intelligence (DGGI) Gurugram Zonal Unit (GZU), Haryana has arrested one Sh. Satyender Sharma resident of Haryana on charges of manufacturing and supplying illegally manufactured cigarettes without the requisite tax paying documents and without payment of applicable GST and cess.

It became apparent from the investigation conducted till date, that Sh Sharma was engaged in the manufacture and supply of various cigarettes of different lengths. These include his registered brands ‘Nidhi Black’ ‘Gold queen’ and ‘E-10.’ Apart from these the investigation also revealed that Sh. Sharma was illegally manufacturing cigarettes under the brand names of ‘Paris’, Pine’ ‘Black Djarum’’ Esse Lights’ which are international trademarks owned by other companies. All these cigarettes were being cleared clandestinely without payment of applicable GST/ cess.

Sh. Sharma transported these illegally manufactured cigarettes to New Delhi for further supply across India

The investigation spanned multiple locations in Delhi and Haryana. Based on documentary evidence and statements recorded of all persons during investigation, it was ascertained that Sh. Satyender Sharma is the key person in running this racket of manufacturing cigarettes without payment of applicable GST as well as illegally manufacturing cigarettes under international brand names. Accordingly, ShSatyender Sharma was arrested on 27.11.20 and produced before Duty Magistrate, Delhi who ordered judicial custody. Total tax evasion of more than Rs. 129 croreis pegged to have been committed by the accused.

Further investigations in the matter are under progress.

Tags: News,  GST

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CBDT to validate ICAI UDIN at the time of uploading Tax Audit Reports

CBDT to validate ICAI UDIN at the time of uploading Tax Audit Reports

The Institute of Chartered Accountants of India, in its gazette notification dated 2nd August 2019, had made a generation of UDIN from ICAI website www.icai.org mandatory for every kind of certificate/tax audit report and other attests made by their members as required by various regulators. This was introduced to curb fake certifications by non-CAs misrepresenting themselves as Chartered Accountants.

In line with the ongoing initiatives of the Income Tax Department for integrating with other Government agencies and bodies, the Income-tax e-filing portal has completed its integration with the Institute of Chartered Accountants of India (ICAI) portal for validation of Unique Document Identification Number (UDIN) generated from ICAI portal by the Chartered Accountants for documents certified/attested by them.

It may be noted that, in consonance with the above requirement, Income-tax e-filing portal had already factored mandatory quoting of UDIN with effect from 27th April, 2020 for documents certified/attested in compliance with the Income-tax Act,1961 by a Chartered Accountant. With this system level integration, UDIN provided for the audit reports/certificates submitted by the Chartered Accountants in the e-filing portal shall be validated online with the ICAI. This will help in weeding out fake or incorrect Tax Audit Reports not duly authenticated with the ICAI.

If for any reason, a Chartered Accountant was not able to generate UDIN before submission of audit report/certificate, the Income-tax e-filing portal permits such submission, subject to the Chartered Accountant updating the UDIN generated for the form within 15 calendar days from the date of form submission in the Income- tax e-filing portal. If the UDIN for the audit report/certificate is not updated within the 15 days provided for the same, such audit report/certificate uploaded shall be treated as invalid submission.

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Instruction for filling & revise Income Tax Return (ITR) -2, 3, 5, 6 & 7

Instruction for filling & revise Income Tax Return (ITR) -2, 3, 5, 6 & 7

Instruction for use of offline utilities:

1. Select the Assessment Year

2. Download either excel or Java utility. The utility by default will get downloaded in your system ‘download’ folder in a compressed mode (ZIP file)

3. Extract (un-compress) the zip file containing the utilities. The folder will be extracted in the same location where the compressed utility was downloaded. Open the utility and start filling.

System Requirements

• Excel Utilities: Macro enabled MS-Office Excel version 2010/2013/2016 on Microsoft Windows 7 / 8 /10 with .Net Framework (3.5 & above)
•  Java Utilities : Microsoft Windows 7/8/10, Linux and Mac OS 10.x with JRE (Java Runtime Environment) Version 8 with latest updates.
• JRE can be downloaded from https://ift.tt/1EjlheM

Assessment Year 2020-21

Form	Description	Microsoft Excel	Java	Instructions
ITR 1	For Individuals being a Resident (other than Not Ordinarily Resident) having Total Income upto Rs.50 lakhs, having Income from Salaries, One House Property, Other Sources (Interest etc.), and Agricultural Income upto Rs.5 thousand(Not for an Individual who is either Director in a company or has invested in Unlisted Equity Shares)	LINK	LINK	LINK
ITR 2	For Individuals and HUFs not having income from profits and gains of business or profession	LINK	LINK	LINK
ITR 3	For individuals and HUFs having income from profits and gains of business or profession	LINK	LINK	LINK
ITR 4	For Individuals, HUFs and Firms (other than LLP) being a Resident having Total Income upto Rs.50 lakhs and having income from Business and Profession which is computed under sections 44AD, 44ADA or 44AE (Not for an Individual who is either Director in a company or has invested in Unlisted Equity Shares)	LINK	LINK	LINK
ITR 5	For persons other than:- (i) Individual, (ii) HUF, (iii) Company and (iv) Person filing Form ITR-7	LINK	LINK	LINK
ITR 6	For Companies other than companies claiming exemption under section 11	LINK	LINK	LINK
ITR 7	For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D)	LINK	LINK	LINK

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Timely charter services rendered by vessel cannot be treated as royalty

Timely charter services rendered by vessel cannot be treated as royalty

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

Accordingly, we are of the considered view, that unlike the facts involved in the aforesaid case before the Hon‘ble High Court, in the case before us the control of the ship had throughout remained with the assessee, and the charterer viz. Leighton India Contractor Pvt. Ltd. was only concerned with the services and had no control over the vessel or its crew members. As such, we find that the reliance placed by the lower authorities on the judgment of the Hon‘ble High Court of Madras in the case of Poompuhar Shipping Corporation Vs. ITO (I.T)-II Chennai (2014) 360 ITR 257 (Mad), being distinguishable on facts, would thus not assist the case of the revenue. In fact, our aforesaid view stands fortified by order of a coordinate bench of the Tribunal i.e ITAT, Chennai in the case of Sical Logistics Ltd. Vs. ADIT (I.T) Chennai [ITA No. 1074-1079/Mad/2015, dated 14.12.2016]. In the said case, the tribunal had distinguished the facts involved in the case before its jurisdictional High Court in the case of Poompuhar Shipping Corporation (supra). It was observed by the tribunal that in case of time charter of vessel the control of the vessel remains with the foreign shipping companies. In the backdrop of the aforesaid factual matrix the Tribunal relying on the judgment of the Hon‘ble High Court of Delhi in the case of Asia Satellite Tele communication company ltd. Vs. DIT (2011) 332 ITR 340 (Del), had observed, that there is a distinction between letting the asset and use of the asset by the owner for providing services. By drawing support from the aforesaid judgment of the High Court, it was observed by the Tribunal that the payment made for use of the asset by owner cannot tantamount to royalty. The Tribunal while concluding as hereinabove had observed as under:

“We are also not in agreement in Department‘s contention that the payment made in time charter of vessels in this case constitutes ‘‘royalty”. This perception seems to be misconceived. The Hon‘ble Delhi High Court in the case of Asia Satellite Telecommunication Co. Ltd. vs. DCIT (supra) has held that two things are necessary to christen a payment as a “royalty” under Explanation 2 appended to clause (vi), which speaks about possession and control of the vessel in the given case, the assessee neither has control nor possession over the vessels. The Captain/Master and the crew is instructed, directed and controlled by the ship owner only and not by the assessee. The assessee simply informs the description of the cargo to be carried on and from which port to which port the cargo has to be transported. Thus, it becomes clear that the assessee neither has control/nor the possession over the vessel in question.”

Apart from that, we find that a similar view had also been arrived at by the ITAT Ahmedabad bench “I” in the case of DCIT, International Taxation, Baroda Vs. Bombardier Transportation India Pvt. ltd. (2017) 162 ITD 586 (Ahd). In the said case, it was observed by the Tribunal that the rendition of I.T support services to the assessee by a Canadian company, even if certain equipment were to be used, that by itself would not vest any right in the assessee to use the equipment, and thus, payments made by the assessee could not be viewed as payments for “use” or “right to use” any industrial, commercial, or scientific equipment. Further, we find that a similar view had also been taken by the ITAT Hyderabad Bench “A” in the case of DDIT (IT)-1, Hyderabad Vs. Dharti Dredging & Infrastructure Ltd. (2012) 146 TTJ 283 (Hyd). In the said case, it was observed by the Tribunal that as the assessee before them had only hired the dredger simpliciter from the foreign company viz. EMPL, and had neither used the same or any part thereof on its own nor was it given any right to use the same by the foreign company, the payment therein made could thus not be treated as royalty. On the basis of our aforesaid observations, we are of the considered view that as can be gathered from a perusal of the relevant extracts of the “agreement” (as reproduced by the DRP in its order), it can safely be concluded that as the assessee had received charges on account of time charter services rendered by its vessel “Smit Borneo” along with the crew to Leighton India Contractor Pvt. Ltd., and not for allowing the latter the “use” or “right to use” of industrial, commercial, or scientific equipment, the same therein cannot be treated as “royalty” within the meaning of Article 12(3)(b) of the India-Singapore tax treaty. As such, we herein not being able to subscribe to the view taken by the lower authorities, to the extent they had concluded that the amounts received by the assessee for time charter of its vessel viz. “Smit Borneo” was to be treated as royalty under Article 12(3)(b) of the India-Singapore tax treaty, therein vacate the same. As we have vacated the view taken by the A.O/DRP that the consideration received by the assessee from time charter of its vessel viz. “Smit Borneo” was to be treated as “royalty” as per Article 12 of the India-Singapore Tax Treaty, therefore, we refrain from adverting to the other contentions advanced by the ld. A.R to support its claim, which thus are left open. The Grounds of appeal No. 2 to 4 are allowed in terms of our aforesaid observations.

19. We shall now advert to the claim of the ld. A.R that the mobilisation fees of Rs.17,80,500/- received by the assessee from Leighton India Contractor Pvt. Ltd. had wrongly been treated as royalty, both under Sec.9(1)(iv) of the Act, and Article 12(3)(b) India-Singapore tax treaty. As noticed by us hereinabove, it was inter alia observed by the A.O/DRP that as the mobilisation of the vessel viz. “Smit Borneo” formed an inextricable part of the time charter services rendered by the assessee, thus the fees therein received were also to be assessed as royalty. As we have concludd that the consideration received by the assessee from time charter of the vessel viz. “Smit Borneo” would not fall within the realm of the definition of the term “royalty” as contemplated in Article 12 of the India-Singapore tax treaty, therefore, the mobilisation fees, which as observed by the A.O/DRP formed an inextricable part of such time charter services has to be similarly construed. As such, we vacate the treatment of the mobilisation fees received by the assessee as royalty by the lower authorities. The Grounds of appeal No. 5-7 are allowed in terms of our aforesaid observations.

20. We shall now take up the claim of the ld. A.R that the A.O/DRP had erred in concluding that the amount of Rs.1,31,80,903/- received by the assessee towards reimbursement of expenses which were incurred by it for and on behalf of Leighton India Contractor Pvt. Ltd. was to be assessed as royalty within the meaning of Sec. 9(1)(vi) of the Act, and Article 12(3)(b) of the India-Singapore tax treaty. As observed by us hereinabove, the amounts received by the assessee, insofar the same were towards time charter of the vessel viz. “Smit Borneo” alongwith the crew to Leighton India Contractor Pvt. Ltd. are concerned, cannot be treated as royalty within the meaning of Article 12(3)(b) of the India- Singapore tax treaty. However, as neither the details of the expenses, which as claimed by the assessee were incurred for and on behalf Leighton India Contractor Pvt. Ltd., nor the basis of allocation of the common expenses to the share of the assessee are discernible from the records, therefore, it would be premature to adjudicate the said issue in the absence of the relevant facts. Accordingly, in all fairness we restore the issue to the file of the A.O, who is herein directed to verify the nature of the amounts which as claimed by the assessee were received by way of reimbursements from Leighton India Contractor Pvt. Ltd., and also, the basis of allocation of the common expenses to the share of the said charterer. Needless to say, the A.O in the course of the “set aside” proceedings shall afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to place on record the requisite documents in support of its claim that the aforesaid amounts received from Leighton India Contractor Pvt. Ltd. were purely towards reimbursement of expenses which were incurred by the assessee for and on the latter‘s behalf.

21. The assessee has further claimed that the A.O while framing the assessment had allowed a short credit of the tax deducted at source (TDS). It is the claim of the assessee, that as against the credit for TDS of Rs.1,20,29,183/- that was raised in its return of income, the A.O had allowed credit of only Rs.95,64,832/-, which had thus resulted to a short grant of credit of TDS of Rs.24,64,351/-(principal amount). As the aforesaid issue would require verification of the facts borne from the records, we therefore restore the same to the file of the A.O who is directed to look into the said grievance of the assessee. In case, the assessee is able to substantiate the fact as regards short allowing of credit of TDS in the course of the “set aside” proceedings, the A.O is directed to issue the balance refund to the assessee, as per law. The Ground of appeal No. 11 is allowed for statistical purposes.

22. The assessee has assailed before us the levy of interest u/ss. 234A and 234B amounting to Rs.40,29,825/- and Rs.96,26,797/-, respectively. The ld. A.R had not placed any contention as to how the charging of the aforesaid respective interests suffered from any infirmity. Be that as it may, as the charging of the respective interests would be consequential to the giving effect of our aforesaid observations on the merits of the case, the A.O shall consider the claim of the assessee in the course of the “set aside” proceedings. The Grounds of appeal Nos. 12 & 13 are allowed for statistical purposes.

23. The assessee had further assailed before us the initiation of the penalty proceedings u/s 271(1)(c) by the A.O in the assessment order. As the said ground raised by the assessee is premature, therefore, the same is dismissed. The Ground o appeal No. 14 is dismissed.

24. The appeal of the assessee is allowed in terms of our aforesaid observations.

Order pronounced in the open court on 09/11/2020.

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Sec 145 Accounting Method cannot be rejected without examining books

Sec 145 Accounting Method cannot be rejected without examining books

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

20. In the impugned order in this appeal, as the assessee did not produce the books of account and vouchers before the ld AO, which is specifically mentioned by the ld AO and the ld CIT(A). This issue is harped upon vehemently by the ld DR, but disputed by the assessee. Therefore,

a. on the basis of the findings of the assessment orders for assessment year 2010 – 11 and 11 – 12, which did not make any reference to the production of the books of accounts by the assessee and further did not speak about any other defect in quantitative details,

b. the appellate order for both these years specifically not rejecting the argument of the assessee with respect to the correctness of the books of accounts,

c. Specific difference in the quantities of raw material and other material in the impugned assessment year, which is not the case in assessment year 2010 – 11 and 11 – 12.

according to us, the addition cannot be deleted based on the argument of the learned authorised representative that the issue in appeal is squarely covered in favour of the assessee by the order of the coordinate bench in assessee’s own case in earlier years.

21. As there is serious dispute between the parties whether books of account were produced before the ld AO or not, both the parties readily agreed that if the books of account are produced before the ld AO, issue may be looked at from the point of view of the decision of the Hon’ble High Court in assessee’s own case provided the other facts or any defects are not found in those accounts. Needless to say that the issue is squarely covered in favour of the assessee if the addition has only legs to stand is the qualification of the auditor. Furthermore, the quantitative difference harped upon by the learned assessing officer is also with respect to the letter submitted by the assessee and the tax audit report. Therefore, to find out the quantitative difference also with respect to Raw materials and other materials it is necessary to examine the books of accounts of the assessee. In the present case, the whole addition is made by applying the provision of section 145(3) of the Act. The provisions of Section 145 (3) can only be applied if the assessing officer is not satisfied about the correctness or completeness of accounts of the assessee primarily. Therefore, even without examination of the books of accounts of the assessee which assessee has not produced despite called for by the assessing officer, application of the provisions of Section 145 (3) is premature. Therefore, as the learned authorised representative has agreed to produce the books of accounts before the assessing officer and the learned DR has also expressed his willingness on behalf of the learned assessing officer to examine it, therefore, in the interest of justice, we set aside the whole issue back to the file of the ld AO with a direction to the assessee to produce books of accounts and vouchers before him for examination. The ld AO is also directed to examine it and then decide the issue, following the order of the Hon’ble Delhi High Court as far as it relates to valuation, and decide the issue on merits with respect to the other grounds. The assessee is directed to produce the books of account before the ld AO within 120 days from the date of this order by taking prior appointment of the ld AO. The assessing officer is directed to pass the order in the name of Dr. Oetker India Pvt. Ltd. Accordingly, ground No. 2 to 7 of the appeal are set aside to the file of the ld AO.

22. In the result, the appeal of assessee is partly allowed.

Order pronounced in the open court on 23 /07/2020.

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ITC disallowance to buyer for tax payment default by seller unsustainable

ITC disallowance to buyer for tax payment default by seller unsustainable

The Hon’ble Madras High Court in the case of M/s. Sri Ranganathar Valves Private Limited v. The Assistant Commissioner (CT) (FAC) Velandipalayam Assessment Circle, Coimbatore [W.P. No. 38488 of 2015 dated September 2, 2020] has held that Input Tax Credit (“ITC”) restriction in the hands of buyer, on the ground of tax collected but remaining unpaid to the Government by the seller “cannot be sustained” and “requires re-consideration” while disposing the writ in respect of restriction of the amount of ITC claimed for the months of December 2013 to May 2014.

Facts:

M/s. Sri Ranganathar Valves Private Limited (“Petitioner/Assessee”) filed the Writ Petition w.r.t. restriction of the amount of ITC claimed for the months of December 2013 to May 2014 for separate orders for every month. The restriction of the amount of ITC has been done predominantly on the head of (a) Prior sufferance of Taxes; (b) ITC on reversal on wastage; and (c) Ineligible claim of ITC on goods.

The Assessing Officer was of the view that some of the sellers from whom the Petitioner had purchased the goods had not paid taxes to the Government and restricted the Petitioner to claim the amount of ITC of Rs. 22,54,760/- for prior sufferance of taxes.

Issue:

Whether restriction on the amount of ITC be imposed for prior sufferance of taxes?

Held:

The Hon’ble Madras High Court in W.P. No. 38488 of 2015, dated September 2, 2020] held as under:

• Held that ITC restriction on the ground of tax collected but remaining unpaid to the Government “cannot be sustained” and “requires re-consideration”. Relying on the case of M/s. Shri Ranganathar Valves Private Limited v. Assistant Commissioner (CT), (FAC), Velandipalayam Assessment Circle, Coimbatore [W.P. Nos. 41670 to 41680 of 2016 dated November 28, 2016], in which the restriction of the amount of ITC for ineligible claim of ITC on goods has been dealt with, directed the Assessing Officer (AO) to issue a show cause notice to the Assessee calling for his objections with regard to “ITC on reversal on wastage” and “Ineligible claim of ITC on goods”.
• The Hon’ble Court also relied on Assistant Commissioner (CT), presently Thiruverkadu Assessment Circle, Kolathur, Chennai v. Infiniti Wholesale Ltd. [[2017] 99 VST 341 (Mad)], wherein this Court held that ITC cannot be disallowed on the ground that the seller has not paid taxes to the Government, when the purchaser is able to prove that the seller has collected the tax and issued invoices to the purchaser. As such, restriction of the amount of ITC on this ground, cannot be sustained and requires re-consideration.
• Remanded the issue with regard to restriction of the amount of ITC for prior sufferance of taxes back to the Assessing Officer for fresh consideration.

Comments:

Under GST provisions, Section 16(2)(c) of the Central Goods and Service Tax Act, 2017 (“CGST Act”) has been into the controversy for a long while, which imposes a restriction on the buyer to avail ITC only when the tax on the transaction has been paid to the government, which states as below:

Section 16(2)(c) of the CGST Act states as below:

“Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––

subject to the provisions of section 41or section 43A, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply;”

It provides for a condition wherein the recipient would only be entitled to ITC if the tax charged in respect of such supply has been actually paid by the supplier to the government.

In Pre-GST, the Hon’ble Apex Court in the case of Commissioner of Central Excise, Jalandhar v. M/s. Kay Kay Industries [Civil Appeal No. 7031 of 2009, dated August 26, 2013] held that the CENVAT credit is allowable to the assessee even if the supplier had not discharged its duty. Manufacturer cannot determine whether his supplier has discharged excise duty on the goods which are supplied to the manufacturer by him. Credit cannot be denied on mere non payment by the supplier. In order to avail CENVAT credit, assessee not expected to verify with Department whether supplier had paid duty on inputs or not and this would be practically impossible and would lead to transactions getting delayed.

Further, the Hon’ble Delhi HC in the case of Arise India Ltd. v. Commissioner of Tax [W.P.(C) 2106/2015 dated October 26, 2017] discussed the issue at length and held that it is an impossible task for the buyer to determine which seller would not deposit the tax collected to the Government. The Court read down Section 9(2)(g) of the Delhi Value Added Tax Act (“DVAT Act”) and noted that the benefit of ITC is denied to a bona fide purchaser. The reason of the default of the selling dealer over whom such purchasing dealer has no control. It should not be made the responsibility of the purchasing dealer to ensure that the tax is deposited by the selling dealer when the transaction is bona fide. This measure qua the purchasing dealer is arbitrary, irrational and unduly harsh and, therefore, violative of Article 14 of the Constitution of India. The HC opined that the only scenario where such provision can apply is when the revenue authorities have some material to show that the buyer and the seller have colluded in order to swindle the Government. However, where the seller has not deposited tax, the authorities should proceed against the seller and not the buyer. The SLP in this case preferred by the Revenue was subsequently dismissed by the Apex Court stating that it was not inclined to interfere with the HC order.

Furthermore, this practice of denying credit for non-payment of taxes by a supplier had been prevailing from the Value Added Tax (“VAT”) era, which is unfair and inimical to the businesses and not justifiable to put a legit taxpayers in a trouble while completing the ongoing process of collecting taxes by the authorities. The GST law not only denies credit to the buyer, but it also requires the buyer to reverse ITC along with interest if the seller has not deposited the taxes. Therefore, the buyer has been put at a situation where one is required to determine whether the intentions of the merchants are in the opportune spot or not. This expectation from the buyer needs to be amended and it needs to be assessed that till what extent the buyer should be responsible for no faut on his part. This provisions seriously required reconsideration & corresponding amendment in the GST law to provide real ease of business.

DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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