DIRECT TAXES UPDATES
Recent circulars/ notifications/ rules/ clarifications/News
♦ CBDT issues Notification extending various Income Tax due date extended to the 30th September, 2021) (including for imposition of penalty under Chapter XXI, Linking of Aadhhar with PAN, for assessment or reassessment completion under section 153 or section 153 B the Income-tax Act. Notification No. 74/2021-Income Tax [S.O. 2580(E)] Dt:- 25/06/2021
♦ Last date of payment under Vivad se Vishwas extended to 31st August 2021. Notification No. 75/2021-Income Tax [S.O. 2581(E)] Dt:- 25/06/2021
♦ Compliance Check Functionality for Section 206AB & 206CCA available on income tax portal for imposed higher TDS/TCS rate on the “Specified Persons (effective from 1st July 2021). Notification No. 01 of 2021-Income Tax- DGIT Dt:- 22/06/2021.
♦ CBDT amends TDS Rule 31A & Annexures to Form 26Q, 27EQ, 27Q (TDS returns) Notification No 71/2021-Income Tax [G.S.R. 395(E)] Dt:- 08/06/2021.
Income Tax Compliance calendar – July 2021
|7th July 2021||Due date for deposit of Tax deducted/collected for the month of June, 2021.
Due date for deposit of TDS for the period April 2021 to June 2021 when Assessing Officer has permitted quarterly deposit of TDS under section 192, 194A, 194D or 194H
|15th July 2021||-Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of May, 2021.
-Due date for issue of TDS Certificate for tax deducted under Section 194-IB in the month of May, 2021.
-Due date for issue of TDS Certificate for tax deducted under Section 194M in the month of May, 2021.
-Quarterly statement in respect of foreign remittances (to be furnished by authorized dealers) in Form No. 15CC for quarter ending June, 2021.
-Quarterly statement of TCS deposited for the quarter ending 30 June, 2021.
-Upload the declarations received from recipients in Form No. 15G/15H during the quarter ending June, 2021.
-Due date for furnishing statement in Form no. 3BB by a stock exchange in respect of transactions in which client codes been modified after registering in the system for the month of June, 2021.
-Certificate of tax deducted at source to employees in respect of salary paid and tax deducted during Financial Year 2020-21.
-Statement to be furnished (in Form No. 64C) by Alternative Investment Fund (AIF) to units holders in respect of income distributed during the previous year 2020-21.
|31th July 2021||-Quarterly TCS certificate in respect of tax collected by any person for the quarter ending June 30, 2021.
-Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA for the month of June, 2021.
-Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194-IB for the month of June, 2021.
-Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194M for the month of June, 2021.
-Quarterly statement of TDS deposited for the quarter ending June 30, 2021.
-Quarterly return of non-deduction of tax at source by a banking company from interest on time deposit in respect of the quarter ending June 30, 2021.
-Statement in Form no. 10 to be furnished to accumulate income for future application under section 10(21) or 11(1) (if the assessee is required to submit return of income on or before July 31, 2021)
-Due date for claiming foreign tax credit, upload statement of foreign income offered for tax for the previous year 2020-21 and of foreign tax deducted or paid on such income in Form no. 67. (If the assessee is required to submit return of income on or before July 31, 2021.)
Important cases decided
♦ Income declared on proportional receipt basis cannot be questioned (DCIT Vs Monster.Com (India) Private Limited (ITAT Hyderabad) Dt:- 23/06/2021
♦ Income actually accrued is taxable not the receipt (CIT Vs T. Jayachandran (Madras High Court) 21/06/2021
♦ Reassessment Valid if AO had ‘reason to believe’ income chargeable to tax escaped assessment Valmik Thapar Vs ACIT (ITAT Delhi) Dt:- 11/06/2021
♦ No disallowance u/s 36(1)(iii) as borrowed fund had direct nexus with utilization towards interest-bearing advances ACIT Vs Sh. Parminder Singh Kalra (ITAT Delhi)
♦ Depreciation allowable despite claim of entire cost of Asset as application of Income by Trust CIT Vs Ramananda Adigalar Foundation (Madras High Court) Dt: 21/06/2021.
INDIRECT TAXES UPDATES
GST Compliance Calendar – Returns to be filed in the M/O July 2021
|GST Return Form Name||Filing Period||Due Dates in July 2021|
|GSTR-1 (Outward return)||Monthly (June’2021)||11th July 2021|
|GSTR 3B (Tax summary return)||June ‘2021||20th July 2021 ( In case Aggregate turnover more than or equal to Rs 5 crore in the previous Year)
22nd / 24thJuly 2021 (in case Aggregate turnover less than or equal to Rs 5 crore in the previous financial year registered in X /Y category respectively.
|GSTR 5A (online information & data access)||June ‘2021||20th July 2021|
|GSTR 05 (by non-taxable resident persons )||June ‘2021||20th July 021|
|GSTR 06 (ISD)||June ‘2021||13thJuly 2021|
|GSTR 07 (TDS)||June ‘2021||10thJuly 2021|
|GSTR 08 (TCS)||June ‘2021||10thJuly 2021|
44th GST council meeting on 12th June 2021, GST rates have been reduced on COVID 19 related material including Ambulances. GST on ambulances will be reduced to 12% from 28%. (Notification no. 5/2021 dated 14th June 2021)
Major Decisions of 43rd GST Council Meeting
1. The tax rate on ventilators, medical-grade oxygen, COVID-19 testing kits, oxygen concentrators, and Bi PAP machines has been brought down to 5 percent from 12 percent at present.
2. The GST on anti-coagulants like Heparin, high flow nasal cannula (HFNC) device, and pulse oximeters have been reduced to 5 percent from 12 percent at present.
3. The GST on hand sanitizers and temperature check equipment has been reduced to five percent from 18 percent at present.
4. 5% GST on vaccines will stay.
5. “GST rates have been decided for 4 categories of products- medicines, oxygen, oxygen-generation equipment, testing kits and other machines and other COVID19 related relief material.
6. GST Council approved all recommendations of GoM on rate rationalization. GST on ambulances reduced to 12 percent – applicable up to 30th Sep’2021
The inherent loss in a manufacturing process is inherent and such losses are not contemplated by Section 17(5)(h) of the CGST Act. Thus, reversal of ITC is not required – High Court of Madras (‘HC’) – The HC was dealing with the question as to whether the taxpayer is required to reverse proportionate Input Tax Credit (‘ITC’) on loss arising out of its manufacturing process. The Revenue authorities demanded reversal of ITC basis Section 17(5)(h) of the Central Goods and Services Tax Act, 2017 (‘CGST Act’). The provision disallows ITC in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. The HC observed that Section 17(5)(h) indicate loss of inputs that are quantifiable, and involve external factors or compulsions. A loss that is occasioned by consumption in the process of manufacture is one which is inherent to the process of manufacture itself. High Court of Madras (‘HC’) in the case of ARS Steel & Alloy International Private Limited v. State Tax Officer, 2021-VIL-484-MAD
Race club liable only on commission received for service rendered through totalisator – CGST Rule 31A(3) q1uashed- The Karnataka High Court has held that Rule 31A(3) of CGST Rules which declares value of actionable claim (taxable value) in the form of chance to win in a horse race conducted by a race club to be 100% of the face value of the bet, is ultra vires the provisions of the CGST Act. The Court held that race club provides a totalisator service for a brief period in its fiduciary capacity by holding the amount on behalf of a punter before redistribution to the winner of a stake. The commission is the only consideration received by the race club for the supply of such service. The Court further held that making the entire bet amount received by the totalisator liable for payment of GST, is against the principle that GST can only be levied on the consideration. Lastly, noting that the petitioners were not supplying bets to the punters, it was held that GST can be levied only on the commission received. (Bangalore Turf Club Limited v. State of Karnataka – Order dated 2 June 2021 in Writ Petition No. 11168/2018 (T-RES), Karnataka High Court)
Provisional release of goods / vehicle when no opportunity given for depositing tax and penalty before confiscation:
Observing that no opportunity was given to the petitioner for depositing the tax and penalty, while confiscating the goods and vehicle, the Rajasthan High Court has held that the petitioner should be allowed to avail the provisional release of the goods and the vehicle as per Rule 140(1) of the CGST Rules, 2017, after fulfilling the conditions laid under it. Writ petition was filed against the show cause notice issued under Section 129(3) of CGST Act for seizure of goods. During the pendency of writ petition an order for demand of tax and penalty was passed by the department. Thereafter, since 14 days had already lapsed when demand order was passed, an order for confiscation of goods was passed by the department. (Khalid v. State of Rajasthan & Others – 2021 VIL 414 RAJ)
Refund claim cannot be denied due to technical glitches on GSTN portal:
The Madras High Court has held that if the petitioner is eligible for refund, he cannot be denied such refund on the ground of an error which has occurred due to a glitch in the GSTN software. In this case, due to technical glitch on the GSTN portal, the petitioner’s entire refund claim for making zero rated supplies (exports), while uploading, got consolidated and figured under the head SGST only instead of being under CGST, SGST and IGST. The department had restricted the refund claim to the extent of SGST and rejected the refund amounts under the heads CGST and IGST. (Mehar Tex v. Commissioner –2021 VIL 392 MAD])
Appeal – Limitation – Liberal approach to be followed during Covid –The assessee furnished a downloaded copy of order against which an appeal was filed instead of furnishing a certified copy of order along with the appeal. The appellate authority denied condonation of delay as certified copy of the order was not furnished within the period prescribed under Rule 108(3) of CGST Rules. Considering the difficulties faced by the lawyers during Covid times in applying for the certified copy of order, the Orissa High Court has held that furnishing of downloaded copy of the order would amount to substantial compliance. It also observed that the wordings of Rule 107(4) are such that the authority is not precluded from condoning a delay for a longer period. According to the Court, when there is restricted functioning of the Courts and Tribunals, a more liberal approach has to be followed in the matters of condonation of delay. (Shree Jagannath Traders v. Commissioner – 2021 VIL 454 ORI)
No intention to evade just because validity of e-way bill not extended- The Telangana High Court has held that just by non-extension of the validity of the e-way bill by the assessee-supplier or the transporter, no presumption can be drawn that there was an intention to evade tax. The Court noted that there was no material with the authorities to conclude evasion merely on account of lapsing of time mentioned in the e-way bill. The transporter could not deliver the goods in time as got struck in a road block due to a political rally. The trolley was detained by the authorities when delivery of goods was attempted on subsequent working day. (Satyam Shivam Papers Pvt. Ltd. v. Asst. Commissioner – 2021 VIL 448 TEL)
Medicines, implants separately billed to inpatients liable to GST- In a case involving a multi-specialty hospital providing health care services with medical professionals and also supplying medicine, implants and other supplies to their patients during their treatment as an in-patient and as outpatients, the Kerala AAR has held that the package to cover the treatment including all required medicines and other supplies for a consolidated amount would not be liable to GST. It noted that the room, medicines, implants, consumables and food supplied during the treatment of patients admitted in the hospital were naturally bundled in the ordinary course of business and the principal supply (predominant element of composite supply) was that of healthcare service. It also held that in case the medicines, implants and other items are not included in the package and are separately billed, they would attract GST at the rate applicable on each of such items. (Malankara Orthodox Syrian Church Medical Mission Hospital – 2021 VIL 227 AAR)
TDS under GST – Invoice when and when not to be equated to contract – The AAR Karnataka has held that TDS provisions under Section 51 of the CGST Act, 2017 are applicable for every supply of goods and services, even in the absence of contract. Examining the definition of ‘contract’ and ‘invoice’, the Authority held that each invoice shall constitute as an individual contract. It was hence held that if the total value of supply, even in the absence of contract, exceeds rupees two lakh and fifty thousand, TDS would be required to be deducted by the virtue of Section 51. However, the Authority was of the view that in case the contract is for continuous supply of goods or services and part supplies under the contract are covered in an invoice, then, invoice would not be equated to the contract. It held that here the set of invoices issued for all the supplies made as a consequence of the contract of supply would summate to the contract and not the individual invoice. [Udupi Nirmiti Kendra – 2021 TIOL 139 AAR GST]
Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 – Amendments effective 2 February 2021 explained: The CBIC has issued a detailed Circular to explain the amendments in the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017 which have come into effect from 2 February 2021. Circular No. 10/2021-Cus., dated 17 May 2021 while highlighting that now 100% outsourcing for manufacture of goods on job-work basis has been permitted for importers who do not have any manufacturing facility at all, also states that now option is available to the importers to import capital goods for a specified purpose and after use, clear the same on payment of the differential duty and interest, at a depreciated value (Circular No. 10/2021-Cus., dated 17 May 2021)
Quantitative import restrictions – Goods imported in excess of cap are prohibited goods:
In a case where only the specific restricted quantity of the commodities covered by the notifications could have been imported and that too, under a licence, the 3-Judge Bench of the Supreme Court has held that any import within the cap (e.g. 1.5 lakh MTs) under a licence is the import of restricted goods but, every import of goods in excess of the cap is not that of restricted goods but is an import of prohibited goods. Distinguishing the Court’s earlier decision in the case of Atul Automation, the Court observed that it, in that case, had neither laid down the law that in every case of import without authorisation, the goods are to be treated as restricted and not prohibited nor that the goods so imported without authorisation are always to be released on payment of redemption fine. Further, in this case of quantitative restrictions on import of certain pulses, the Court observed that when personal business interests of importers clash with public interest, the former has to give way to the latter. It held that in such case discretion could only be for absolute confiscation with levy of penalty. [Union of India v. Raj Grow Impex LLP – 2021 TIOL 187 SC CUS LB]
Valuation – Notional transportation cost not includible in value of fuel remaining in aircraft after incoming international flight: The Larger Bench of the CESTAT has held that notional cost towards freight charges is not required to be added to the value of Aviation Turbine Fuel (‘ATF’) remaining in the aircraft after its international flight into India. The Revenue department had added 20% to the FOB value of ATF as cost of transportation under Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. The Tribunal in this regard held that firstly there is no transportation of ATF by the airlines and secondly, only the actual cost ‘paid’ or ‘payable’ can be added to the transaction value while no cost is incurred by the airlines here. The Tribunal also noted that that there is no provision either in Section 14(1) of the Customs Act, 1962 or the Valuation Rules to add ‘imputed costs’ of transportation when actually no costs are incurred. (Jet Airways (India) Limited v. Commissioner – Interim Order No. 3/2021, dated 25 May 2021 in Customs Appeal No. 86898 of 2017, CESTAT Larger Bench)
Deputy Commissioner not authorised to reject preferential duty claims and CBIC Circular No. 42/2020-Cus. bad in law – The Madras High Court has held that Deputy Commissioner was wrong in rejecting the preferential duty claims unilaterally and without assigning any reasons, as such rejection can only be done by the Principal Commissioner or Commissioner of Customs with reasons to be recorded in writing as per proviso to Section 28DA(4) of the Customs Act, 1962. The Court also noted that Section 28 DA(5) does not require the importer to furnish security for 100% of the differential duty for initiation of inquiry or launch of verification, but only as a pre-condition to release the goods. It hence was of the view that Circular 42/2020-Cus., dated 29 September 2020 under which officers were directed to initiate inquiry under Rule 5 or launch verification under Rule 6 of the CAROTAR, 2020 only if the importer furnishes 100% of the differential duty as a security, was an excess of authority and bad in law to the extent it transgresses with the statutory scheme under Section 28DA. (Abbis International v. Commissioner – 2021 TIOL 1337 HC Mad Cus)
Excise & Service Tax
Retrospective exemption and refund of service tax – Tax paid utilising Cenvat credit also refundable – In a case where the output service was exempted retrospectively with a rider that whatever tax was paid was to be refunded to the assessee, the CESTAT Ahmedabad has held that service tax paid through utilization of Cenvat credit should also be refunded. It also held that refund can not be denied by invoking Rule 6 of the Cenvat Credit Rules, 2004 as the same was not applicable here. The Tribunal also held that date of opening of tender must be taken as a date of contract when there is no separate contract/ agreement after opening of tender and acceptance. Department’s contention that the refund was deniable since the work order was dated after the cut-off date under Section 102, was thus rejected. (Shanti Construction Co. v. Commissioner – Final Order No. A/2244/2021, dated 18 June 2021, CESTAT Ahmedabad)
Interest on delayed refund of revenue deposit – CESTAT directs interest @ 12% – Noting that the rate of interest varied from 6% to 18% in the notifications issued under Sections 11AA, 11BB, 11DD and 11AB of the Central Excise Act, 1944, CESTAT Allahabad has held that grant of interest @12% per annum would be appropriate in case of refund of revenue deposit. The Tribunal also noted that there is no provision in the Central Excise Act, which deals with refund of revenue deposit and so rate of interest has not been prescribed, when revenue deposit is required to be refunded. Allahabad High Court decisions in the cases of Pace Marketing Specialities and Ebiz. Com Private Limited, were relied upon. (Parle Agro Pvt. Ltd. v. Commissioner – 2021 VIL 214 CESTAT ALH CE)
With Warm Regards & Jai Hind
CMA Rakesh Bhalla | 9779010685 | email@example.com
Information Source – M/s LKS, CBIC.gov.in., various internet websites including Income tax website, Dailyhunt, Deloitte, livemint.com, related links and various notifications, circulars, orders, press releases and other sources-many thanks to all.