Summary: During the week of 19th-25th August 2024, significant notifications and circulars were issued across various domains. The CBDT clarified that Income-tax clearance certificates (ITCC) under Section 230(1A) are now required only in specific cases involving financial irregularities or significant tax arrears. New guidelines for Section 10(46A) applications were introduced, emphasizing the process for bodies seeking tax exemptions. In the Supreme Court, Vodafone Idea was exempted from deducting TDS on foreign telecom charges, while the Delhi High Court ruled that adding the value of shares granted under an ESPS as a perquisite is unsustainable. GST updates included a new RCM Liability/ITC statement on the GST portal and mandates for furnishing bank account details before filing GSTR-1/IFF. Customs saw amendments to duty drawback rates and the introduction of ICETABs for faster clearance processes. DGFT announced export allowances for non-basmati rice and streamlined re-export rules for unutilized drugs. SEBI amended Research Analysts Regulations and set new borrowing guidelines for Category I and II AIFs. These updates collectively aim to enhance compliance, streamline processes, and provide clarity across various regulatory frameworks.
A. Income Tax
CBDT issues clarification in respect of Income-tax clearance certificate (ITCC): Section 230 (1A) relates to obtaining of a tax clearance certificate, in certain circumstances, by persons domiciled in India. The Finance (No.2) Act, 2024 has only inserted reference of the Black Money Act in the said section to also cover the liabilities in the same manner as the liabilities under the Income-tax Act and other Acts are dealt with. Every person is not required to obtain a tax clearance certificate. The ITCC may be required to be obtained by persons domiciled in India only in the following circumstances:
(i) where the person is involved in serious financial irregularities and his presence is necessary in investigation of cases under the Income-tax Act or the Wealth-tax Act and it is likely that a tax demand will be raised against him, or
(ii) where the person has direct tax arrears exceeding Rs. 10 lakh outstanding against him which have not been stayed by any authority.
Further, a person can be asked to obtain a ITCC only after recording the reasons for the same and after taking approval from the PCIT or CCIT. (Income Tax Press Release Dated 20/08/2024)
Guidelines for Filing application under section 10(46A): CBDT has issued new guidelines for filing applications under Section 10(46A) of the Income-tax Act. This section, added by the Finance Act, 2023, provides tax exemptions for certain bodies, authorities, boards, trusts, or commissions established under Central or State Acts, specifically those involved in public housing, city planning, or public benefit activities. It has mandated that applications must be submitted to the Principal Commissioner/Commissioner of Income-tax or Principal Director/Director of Income-tax, as applicable. Applicants are required to use the prescribed format (Annexure-A) and provide all necessary documents along with an acknowledgment receipt confirming submission to the jurisdictional office. (CBDT Guidelines Dated 20/08/2024)
SC, Vodafone Idea Not Required to Deduct TDS on Foreign Telecom Charges: Case of DDIT vs Vodafone Idea Limited, SC Judgement Dated 26th July 2024. Supreme Court dismissed the Special Leave Petition filed by the Income Tax Department, affirming that Vodafone Idea is not required to deduct TDS on interconnectivity usage and bandwidth charges paid to non-resident telecom operators. The Court’s decision aligns with its earlier judgment in Engineering Analysis Centre of Excellence Private Ltd. v. CIT (2022) and similar cases. SC found that the petition was covered by the precedent set in these cases and that a review petition pending before the Court did not warrant reconsideration of the matter. The Court’s decision reinforces the existing legal position on TDS obligations for payments to non-resident entities, as previously established in related judgments. (SC Judgement Dated 26/07/2024)
HC, Addition of value of shares granted under Employees Stock Purchase Scheme as perquisite not sustained: Case of Ravi Kumar Sinha vs CIT, Delhi HC Judgement Dated 14th August 2024. The petition majorly addresses two questions of law i.e. whether the Tribunal erred in law in confirming addition of Rs.86,28,750/ – as perquisite value of shares granted under Employees Stock Purchase Scheme (ESPS) and whether value of stock purchase option exercised by the employee/ assessee is to be reckoned on the date of exercising such option and taxing it for the difference in market price had cost paid by the assessee to its employer. HC held that addition of value of shares granted under the Employees Stock Purchase Scheme as perquisite in terms of section 17(2)(iiia) of the Income Tax Act unsustainable in law. The court analysed that in light of the restriction with respect to marketability and trade ability of the stock in question, the FMV could not have been recognized to exceed the face value of the shares and thus the determinative being INR 15/-. The Valuation Report, as noted above, was at best a medium adopted by the employer in order to broadly ascertain its obligations for the purposes of withholding tax. The same could not have consequently been taken into consideration for the purposes of FMV. HC held that the face value alone would be conclusive for purposes of taxation. (Delhi HC Judgement Dated 14/08/2024)
B. GST
Advisory, Introduction of RCM Liability/ITC Statement: To assist taxpayers in correctly reporting Reverse Charge Mechanism (RCM) transactions, a new statement called “RCM Liability/ITC Statement” has been introduced on the GST Portal. This statement captures the RCM liability reported in Table 3.1(d) and the corresponding Input Tax Credit (ITC) claimed in Table 4A(2) and 4A(3) of GSTR-3B for each return period. It will be applicable from August 2024 for monthly filers and the July-September 2024 period for quarterly filers. Taxpayers must also report the RCM ITC opening balance, considering returns up to July 2024 for monthly filers and Q1 FY 2024-25 for quarterly filers. (GSTN Advisory Dated 23/08/2024)
Advisory for furnishing bank account details before filing GSTR-1/IFF: As per CGST Rule 10A, a taxpayer is required to furnish details of a valid Bank Account within a period of 30 days from the date of grant of registration, or before furnishing the details of outward supplies of goods or services or both in FORM GSTR-1or using Invoice Furnishing Facility (IFF), whichever is earlier. Now, from 01st September, 2024 this rule is being enforced. Therefore, for the Tax period August-2024 onwards, the taxpayer will not be able furnish GSTR-01/IFF, without furnishing the details of a valid Bank Account in their registration details on GST Portal. (GSTN Advisory Dated 23/08/2024)
Advisory for Biometric-Based Aadhaar Authentication and Document Verification for GST Registration Applicants of Dadra & Nagar Haveli, Daman & Diu, Chandigarh: CGST rule was amended to provide that an applicant can be identified on the common portal, based on data analysis and risk parameters for Biometric-based Aadhaar Authentication and taking a photograph of the applicant along with the verification of the original copy of the documents uploaded with the application. The said functionality has been developed by GSTN. The new functionality mandates that after submitting Form GST REG-01, applicants will receive an email with either a link for OTP-based Aadhaar Authentication or a link to book an appointment at a GST Suvidha Kendra (GSK). It has been rolled out in Dadra & Nagar Haveli, Daman & Diu, Chandigarh on 24th August 2024. (GSTN Advisory Dated 24/08/2024)
HC, Refund the GST paid by the assessee on the ocean freight under the reverse charge mechanism: Case of Viterra India Pvt Ltd vs union of India, Madras HC Judgement Dated 14th August 2024. The petitioner/assessee has challenged the order in appeal, and the rectification order passed by the respondent department rejecting the refund claim of the assessee. The assessee sought directions for the respondents to sanction and grant the refund along with appropriate interest. The Court noted that the core issue, the levy of GST on Ocean Freight Services, had already been resolved by the Supreme Court, in the case of Mohit Minerals Private Limited, in which it was held that no IGST is payable on ocean freight under the reverse charge mechanism for cost, insurance, and freight (CIF) imports. Further, the notifications were struck down as ultra vires. Therefore, the department is not empowered to collect GST for Ocean Freight Services, and consequently, the department is bound to refund the amount collected. (Madras High Court Judgement Dated 14/08/2024)
C. Central Excise
No Notifications/ Circulars during the week.
D. Custom Duty
Amendment to Duty Drawback Rates: The notification amends earlier notification 77/2023 (NT) dated 20th October 2023, which determines the rates of drawback. Specifically, the duty drawback rates for tariff items 711301, 711302, and 711401 have been revised downward. For tariff item 711301, the rate has been changed from 704.1 to 335.50, and for items 711302 and 711401, the rate has been reduced from 8949 to 4468.10. These changes reflect the government’s adjustment in duty drawback rates, aiming to align with current market conditions for gold and silver jewellery. (Custom Notification 55/2024 (NT) Dated 23/08/2024)
Anti-dumping Duty on Chlorinated Polyvinyl Chloride Resin (CPVC) originating in or exported from China and Korea: Anti-dumping Duty has been imposed on imports of Chlorinated Polyvinyl Chloride Resin (CPVC) originated in or exported from China and Korea. It shall be applicable for a period of 5 years. (Custom Notification 15/2024 (ADD) Dated 23/08/2024)
Use of ICETABs for efficient examination and clearance process: ICETAB is a mobile tablet device for use by Customs Officers for facilitating quick upload of the examination report on the go in real time basis and making the examination process transparent and faster. This new system supports a paperless, seamless examination process by providing instant access to Risk Management System (RMS) instructions, examination orders, and Bill of Entry (BE) details directly on the device. The initiative aims to reduce the time required for cargo clearance by eliminating the need for printed documents. Examination reports and images captured via ICETABs will be integrated with e-Sanchit repository for future reference. (Custom Circular 10/2024 Dated 20/08/2024)
E. Directorate General of Foreign Trade (DGFT)
Export of Non-Basmati White Rice to Malaysia through National Cooperative Exports Limited (NCEL): India permitted the export of 2,00,000 metric tons of Non-Basmati White Rice to Malaysia. This export is to be conducted through the NCEL. (DGFT Notification 24/2024 Dated 19/08/2024)
Re-export rules for un-utilized drugs simplified, no need to return to re-export to original supplier: The public notice amend paragraph 4.49(g) of the Handbook of Procedures. The revised provisions modify the requirements for handling unutilized imported quantities under Advance Authorisation. Previously, exporters needed to submit a destruction certificate or proof of re- export to the original supplier. The updated guidelines now accept any shipping bills for exports of unutilized drugs and simplify the re-export process by removing the need to return to the same supplier. Additionally, while destruction certificates can be waived under the new rules, customs duties and interest on unutilized quantities must still be paid. (DGFT Public Notice 18/2024 Dated 22/08/2024)
Draft Modalities for Pilot Launch of E-Commerce Export Hubs (ECEH): As per Foreign Trade Policy 2023, ECEH were proposed as designated areas, which would act as a centre for favourable business infrastructure and facilities for Cross Border E-Commerce activities. These hubs are intended to streamline cross-border e-commerce by providing centralized infrastructure for export activities. The draft modalities include operational procedures for goods movement, pre-screening, and customs clearance. Key features involve handling goods from suppliers, validating documents electronically, and integrating customs and fulfilment processes. Stakeholders are invited to submit proposals for establishing ECEHs, which will be reviewed to finalize the implementation details, including software requirements. (DGFT Trade Notice 14/2024 Dated 22/08/2024)
F. Securities and Exchange Board of India (SEBI)
Amendment to Research Analysts Regulations: A new regulation 15A has been inserted, which permits Research Analysts to charge fees for their services, including from accredited investors, in a manner specified by SEBI. (SEBI Notification Dated 19/08/2024)
Guidelines for borrowing by Category I and Category II AIFs and maximum permissible limit for extension of tenure by LVFs: Alternative Investment Funds (AIFs) Regulations were amended and notified on August 06, 2024, with respect to (i) norms for borrowing by Category I and Category II AIFs, and (ii) maximum permissible limit for extension of tenure by Large Value Fund for Accredited Investors (LVFs). Under the updated regulations, these AIFs are restricted from borrowing funds for investments, except to address short-term funding gaps. Such borrowing must not exceed 20% of the intended investment or 10% of the investable funds and must only occur in emergencies. SEBI has also revised the maximum tenure extension for LVFs to five years, with the consent of two-thirds of unit holders by value. Existing LVF schemes must align with these new rules by November 18, 2024. SEBI mandates a 30-day cooling-off period between borrowings and requires comprehensive disclosure to all investors regarding borrowed amounts. (SEBI Circular Dated 19/08/2024)
Modalities for migration of VCFs registered under erstwhile VCF Regulations to AIF Regulations: SEBI Alternative Investment Funds (AIF) Regulations, 2012 have been amended and notified on July 20, 2024, to provide flexibility to Venture Capital Funds (VCFs) registered under the erstwhile SEBI VCFs Regulations, 1996, for migrating to AIF Regulations and to, avail the facility of dealing with unliquidated investments of their schemes upon expiry of tenure. VCFs seeking migration must submit their original registration certificate. The circular details conditions for schemes with both expired and unexpired liquidation periods. VCFs with unresolved investor complaints are ineligible for migration. SEBI has also mandated the surrender of registration by March 31, 2025, for VCFs that have wound up all schemes or made no new investments. (SEBI Circular Dated 19/08/2024)
Cybersecurity and Cyber Resilience Framework (CSCRF) for SEBI Regulated Entities (REs): SEBI introduced a new Cybersecurity and Cyber Resilience Framework (CSCRF) for all regulated entities in the Indian securities market and supersedes previous cybersecurity guidelines. The CSCRF is designed to address evolving cyber threats, align with industry standards, and ensure robust cybersecurity practices across various entities, including stock brokers, mutual funds, and investment advisors. It sets forth guidelines for anticipating, withstanding, containing, recovering from, and evolving against cyber incidents. The framework categorizes entities based on their size and scope and includes a structured methodology for implementation and compliance. It mandates the establishment of Security Operation Centres (SOC) and provides provisions for both self-managed and market-provided SOCs, aiming to simplify compliance for smaller entities. (SEBI Circular Dated 20/08/2024)
Amendment to Master Circular for Real Estate Investment Trusts (REITs)- review of statement of investor complaints and timeline for disclosure: The changes include eliminating the need for prior review of investor complaints by the Board of Directors before submission to stock exchanges. Instead, complaints must be reviewed quarterly by the Board and Trustee. The timeline for disclosing statements of deviation in the use of proceeds from REITs’ fundraising activities has been adjusted to match the quarterly submission of financial results, streamlining the process. Such statements will now be submitted to stock exchanges along with the financial results, rather than within 21 days of the quarter’s end. (SEBI Circular Dated 22/08/2024)
Amendment to Master Circular for Infrastructure Investment Trusts (InvITs) – review of statement of investor complaints and timeline for disclosure: The changes include eliminating the need for prior review of investor complaints by the Board of Directors before submission to stock exchanges. Instead, complaints must be reviewed quarterly by the Board and Trustee. The timeline for disclosing statements of deviation in the use of proceeds from InvITs’ fundraising activities has been adjusted to match the quarterly submission of financial results, streamlining the process. Such statements will now be submitted to stock exchanges along with the financial results, rather than within 21 days of the quarter’s end. (SEBI Circular Dated 22/08/2024)
Consultation Paper on Faster Rights Issue with Flexible Allotment to Selective Investors: The proposed changes to streamline the Rights Issue process and introduce flexibility in allotments. It highlights that despite the benefits of Rights Issues, such as proportional shareholder treatment, they are less favored compared to Qualified Institutional Placements (QIPs) and Preferential Allotments. Proposed reforms include eliminating the requirement for a Draft Letter of Offer (DLoF), simplifying the Letter of Offer (LoF), reducing intermediary roles, and shortening process timelines. The intention is to make Rights Issues more attractive by allowing faster processing and selective allotment to investors, addressing issues of inefficiency and preference for quicker fund-raising methods. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 20/08/2024)
Consultation Paper on Debenture Trustee Pecuniary Relationships: The paper clarify the term “pecuniary relationship” in Regulation 13A of the Debenture Trustees (DT) Regulations. The current regulation restricts DT appointments based on a pecuniary relationship threshold with issuers, which is 2% of gross turnover or ₹50 lakh. The consultation paper proposes that remuneration paid to DTs should not be counted towards this pecuniary relationship threshold, aiming to harmonize SEBI regulations with Companies Act provisions. It also suggests that issuers disclose the proportion of DT remuneration from debenture trusteeship versus total revenue in offer documents. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 21/08/2024)
Consultation Paper on Easing Document Attestation Requirements: The paper proposes replacement of notary or gazetted officer attestations with self-attestation for certain regulatory documents. Currently, various SEBI regulations require notarized or gazetted attestations for documents related to registration, exemptions, and compliance, which can delay processing and increase expenses for market participants. Self- attestation, being a less formal yet legally binding process, is expected to lower overheads and processing times while maintaining legal deterrence against false declarations. The comments are invited from stakeholders. (SEBI Consultation Paper Dated 21/08/2024)
G. Ministry of Corporate Affairs (MCA)
NFRA imposes monetary penalty of Rs. 10 crores on BSR & Associates LLP, debars CAs: The National Financial Reporting Authority (NFRA) has imposed a monetary penalty of ₹10 crores on BSR & Associates LLP, the statutory auditors of Coffee Day Enterprises Limited (CDEL) for FY 2018-19, due to severe lapses in their audit processes. The order relates to diversion of ₹3,535 crores from CDEL’s subsidiaries to an entity controlled by CDEL’s promoters. The auditors, including the engagement partner (EP) CA Aravind Maiya and the engagement quality control reviewer (EQCR) CA Amit Somani, failed to conduct necessary audit procedures, particularly regarding significant loans and advances. The audit firm’s negligence led to gross misrepresentation of CDEL’s financial statements, including understating loans by ₹1,706 crores. NFRA also identified lapses in audit documentation, with unauthorized modifications post audit sign-off. As a result, along with the monetary penalty, CA Aravind Maiya has been debarred from audit activities for ten years, and CA Amit Somani for five years, effective 30 days from the order date. (NFRA Order Dated 19/08/2024)
NCLAT, Non-declaration of dividend & director changes not Oppression and Mismanagement: Case of Venus Petrochemicals Private Limited vs Sunil M Thakkar, NCLAT Delhi Judgement Dated 14th August 2024. The dispute arose between the two families holding equal (50:50) shareholding in Venus Petrochemicals. The case revolved around the non-declaration of dividends and the appointment/removal of directors, with the respondents claiming these actions constituted oppression and mismanagement under Sections 241 and 242 of the Companies Act. NCLAT held that these issues does not constitute oppression and mismanagement. (NCLAT Judgement Dated 14/08/2024)
H. Insolvency and Bankruptcy Board of India (IBBI)
Discussion Paper on MSME Registration and Disclosure Framework under CIRP: Currently, the Information Memorandum (IM) used in insolvency proceedings does not mandate the disclosure of whether a corporate debtor is classified as a micro, small, or medium enterprise (MSME). The proposal suggests amending Regulation 36 of the CIRP Regulations to include this disclosure. This change aims to clarify the debtor’s MSME status, potentially easing eligibility concerns and encouraging greater participation from resolution applicants. The comments are invited from stakeholders. (IBBI Discussion Paper Dated 23/08/2024)
RTI, IBBI Refuses to Disclose Insolvency Exam Papers: The appeal challenged the IBBI’s decision to withhold the last three Limited Insolvency Examination (LIE) question papers under an RTI application. The IBBI argued that disclosing these question papers would compromise the integrity of the live question bank, which is used in upcoming exams, and would breach confidentiality. The authority cited Section 8(1)(d) of the RTI Act, which exempts information that could harm the competitive position of third parties or violate intellectual property. The appellant contended that the refusal did not align with the RTI Act’s provisions, but the authority upheld the IBBI’s stance, emphasizing the need to balance private rights and public interest. The decision referenced previous court rulings, reinforcing that disclosure of exam materials could undermine the selection of candidates based on merit and intellectual capability. The appeal was ultimately rejected. (IBBI RTI-FAA Order Dated 23/08/2024)
RTI, Information published online cannot be considered under control of public authority: The appeal challenged the CPIO’s response to Ramachandra’s RTI request, which sought details about the current Official Liquidator of Hindustan Paper Corporation Ltd., Kolkata. The CPIO had informed the appellant that the requested information was publicly accessible on the IBBI website. In his appeal, Ramachandra urged the First Appellate Authority (FAA) to intervene, citing the need for this information to present to the Gauhati High Court. Upon review, the FAA upheld the CPIO’s decision, emphasizing that under the RTI Act, public authorities are not obliged to provide information already available in the public domain. The FAA referenced a similar decision by the Central Information Commission (CIC), affirming that information published online is not considered under the control of the public authority and can be accessed by anyone. (IBBI RTI-FAA Order Dated 19/08/2024)
I. Reserve Bank of India (RBI)
Processing of e-mandates for recurring transactions for FASTag and National Common Mobility card (NCMC): It has been decided to include auto-replenishment of FASTag and NCMC, as and when the balance falls below a threshold set by the customer, under the e-mandate framework. Payments for auto-replenishment, since they are recurring in nature but without any fixed periodicity, will be exempt from the requirement of pre-debit notification. The pre-debit notification is required to be sent by issuer to the customer at least 24 hours prior to the actual charge / debit to the account. (RBI Notification 64/2024 Dated 22/08/2024)
Inclusion of “UBS AG” in the Second Schedule: The “UBS AG” has been included in the Second Schedule of the Reserve Bank of India Act. (RBI Notification 65/2024 Dated 22/08/2024)
Cessation of “Credit Suisse AG” as a banking company: The “Credit Suisse AG” has ceased to be a banking company within the meaning of section 36(A)(2) of the Banking Regulation Act. (RBI Notification 66/2024 Dated 22/08/2024)
Exclusion of “Credit Suisse AG” from the Second Schedule: The “Credit Suisse AG” has been excluded from the Second Schedule of the Reserve Bank of India Act. (RBI Notification 67/2024 Dated 22/08/2024)
Exclusion of “Krung Thai Bank Public Company Limited” from the Second Schedule: The “Krung Thai Bank Public Company Limited” has been excluded from the Second Schedule of the Reserve Bank of India Act. (RBI Notification 68/2024 Dated 22/08/2024)
Cessation of “Krung Thai Bank Public Company Limited” as a banking company: The “Krung Thai Bank Public Company Limited” has ceased to be a banking company within the meaning of section 36(A)(2) of the Banking Regulation Act. (RBI Notification 69/2024 Dated 22/08/2024)
Framework for Recognition of Self-Regulatory Organisations (SROs) in Financial Markets: In view of the potential role of Self-Regulatory Organisations (SROs) in strengthening compliance culture among their members and also providing a consultative platform for policy making, RBI has issued the Framework for recognition of SROs in Financial Markets. The framework specifies the broad parameters, viz., objectives, responsibilities, eligibility criteria, membership, governance standards and application process for the recognition of SROs in financial markets. (RBI Press Release Dated 19/08/2024)
J. Miscellaneous
SC, Examine Cause of Delay, Not Just Length of delay, for Condonation Plea: Case of Mool Chandra vs Union of India, SC Judgement Dated 5th August 2024. SC reviewed the rejection of delay condonation request by the Central Administrative Tribunal (CAT) and upheld by the Delhi High Court. The appellant, Mool Chandra, a former Indian Statistical Service officer, was penalized for allegedly deserting his family in 1985 and living separately without judicial separation. After being dismissed from service in 2000, the CAT initially quashed the dismissal, leading to a minor penalty being imposed in 2004. In 2020, the Tribunal dismissed his plea for condonation of a 425-day delay, citing inadequate justification. The Delhi High Court affirmed this decision. Chandra appealed to the Supreme Court, arguing that the delay was due to his counsel’s mistake and that he should not suffer for it. SC allowed Chandra’s appeal. SC held that It is not the length of delay that would be required to be considered while examining the plea for condonation of delay, it is the cause for delay which has been propounded will have to be examined. (SC Judgement Dated 05/08/2024)
SC, Retrospective reduction of pay scale of government employee and recovery thereof illegal: Case of Jagdish Prasad Singh vs State of Bihar, SC Judgement Dated 8th August 2024. Appellant was appointed to the post of Supply Inspector in the Government of Bihar in the year 1966. After serving for 15 years, he received his first time bound promotion as Marketing Officer. The appellant was further promoted to the post of Senior Selection Grade, Marketing Officer-cum-Assistant District Supply Officer (ADSO) in March 1991. After more than eight years from his retirement, the appellant received a letter from the Government of Bihar conveying that an error had been committed in his pay fixation and, therefore, a sum of Rs.63,765/- had to be recovered from him as the same had been paid in excess beyond his entitlement. SC held that any step of reduction in the pay scale and recovery from a government employee would tantamount to a punitive action because the same has drastic consequences. The impugned action directing reduction of pay scale and recovery of the excess amount is grossly arbitrary and illegal and also suffers from the vice of non- adherence to the principles of natural justice and hence, the same cannot be sustained. (SC Judgement Dated 08/08/2024)
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