DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

♦ The Lok Sabha on 23rd March 2021 passed the Finance Bill, 2021 to give effect to the financial proposals of the Central Government for the financial year 2021-2022. (The Finance ACT, 2021 NO. 13 OF 2021 dated 28th March, 2021)

♦ CBDT revises Form No. 12BA (statement showing particulars of perquisites , other fringe benefits or amenities and profits in lieu of salary with value thereof) , Part B to Form 16 (Detail of salary paid and any other income and tax deducted) and Annexure II to Form No. 24Q (Notification No. 15/2021-Income Tax [G .S. R. 170(E)] dated 11/03/2021

♦ TDS on Cash Withdrawal above 20 Lakh by an account holder under section 194N of Income Tax Act 1961. TDS @ 2% on aggregate cash withdrawals in excess of Rs. 20 Lakh in a year. TDS @ 5% on aggregate cash withdrawals in excess of Rs. 1 Crores in a year.
(Notification No. SB Order No. 05/2021 Dated 09/03/2021)

♦ The Central Board of Direct Taxes (CBDT) deferred the Tax Audit Clause 30C and 44 till 31st Mar 2022 due to COVID-19. Circular No. 05/2021 , Dated 25th March, 2021

♦ CBDT notifies reporting of Capital Gain, Dividend, Interest Income in Statement of financial transaction (Notification No. 16/2021-Income Tax/G.S.R 175(E) dated 12/03/2021)

Income Tax Compliance calendar – April 2021

Things to remember
Due Date Particulars
7th April 2021 Payment of TDS/TCS deducted /collected by an office of the government in March 2021.
30st April 2021 -Payment of TDS/TCS deducted by an assesse other than an office of the government in March 2021.

-Uploading declarations received from recipients / assesses in Form. 15G/15H during the quarter ending March, 2021.

-E-filing of a declaration in Form No. 61 containing particulars of Form No. 60 received during the period October 1, 2020 to March 31, 2021

Important cases decided

♦ ITAT allows depreciation on Goodwill under section 32 of income tax Act 1961. (Geodis Overseas Pvt. Ltd. Vs DCIT (ITAT Delhi))

♦ ITAT directs AO to consider allow ability of additional depreciation claimed during assessment proceedings (Lord Krishna Rice Mills Vs ITO (ITAT Delhi))

♦ Indexed Long-Term Capital Loss from Sale of Government Securities allowable ( Peerless General Finance & Investment Company Limited Vs DCIT (ITAT Kolkata)

♦ Face of foreign cab aggregator in India not liable to deduct tax under Section 194C for payments made to driver partners- . Uber India Systems (P) Limited v. JCIT – [2021] 125 taxmann.com 185 (Tri-Mumbai)

♦ Booking of flat and payment of consideration within stipulated time will suffice for exemption under Section 54- (Harminder Kaur v. ITO – TS-74-ITAT-2021 (Del)

INDIRECT TAXES UPDATES

GST

GST Compliance Calendar – Returns to be filed in the M/O April 2021

GST Return Form Name Filing Period Due Dates in April 2021
GSTR-1 (Outward return) Monthly (March 2021) 11th April 2021
GSTR 3B (Tax summary return) March 2021 20th April 2021 ( In case Aggregate turnover more than or equal to Rs 5 crore in the previous Year)

22nd / 24th April 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) March 2021 20th April 2021
GSTR 05 (by non-taxable resident persons) March 2021 20th April 2021
GSTR 06 (ISD) March 2021 13th April 2021
GSTR 07 (TDS) March 2021 10th April’2021
GSTR 08 (TCS) March 2021 10th April’2021

E-invoicing mandatory for taxpayers having aggregate turnover exceeding INR 50 crore: A registered person (except specified person) having an aggregate turnover in a financial year exceeding INR 50 crore in any preceding financial year from 2017-18 onwards will be required to comply with Rule 48(4) of the CGST Rules, 2017 with effect from 1 April 2021. Rule 48(4) provides for preparation of invoice after obtaining an Invoice Reference Number by uploading information on the Common GST Electronic Portal. It may be noted that at present taxpayers whose aggregate turnover exceeds INR 100 crore are only liable to comply with said provisions. (Notification No. 5/2021-Central Tax, dated 8 March 2021 will amend Notification No. 13/2020-Central Tax)

Refund on exports/deemed exports clarified: Observing that there is no restriction under Rule 89(1) of the CGST Rules, 2017 on recipient of deemed export supply, claiming refund of tax paid on such deemed export supply, on availment of ITC on the tax paid on such supply, the Central Board of Indirect Taxes and Customs (‘CBIC’) has amended its earlier Circular No. 125/44/2019-GST, dated 18 November 2019 which provided for such restrictions. Further, the 2019 circular has been amended to extend the relaxation provided for filing refund claims where the taxpayer has inadvertently entered the details of export of services or zero-rated supplies to a Special Economic Zone Unit/Developer in table 3.1(a) instead of table 3.1(b) of Form GSTR-3B till 31 March 2021. The relaxation was earlier available only till 30 June 2019. (Circular No. 147/03/2021-GST, dated 12 March 2021)

Cases Law

Refund cannot be withheld without assigning reasons as prescribed in Section 54(11) and Rule 92: Allahabad High Court has held that the order withholding the refund can be passed only if the prerequisites of recording of the opinion in terms of the provisions, i.e. Section 54(11) of the Central Goods and Services Tax Act, 2017 read with Rule 92 of the Central Goods and Services Tax Rules, 2017, is found present in a particular case. On facts of the case, the Court observed that the decision to withhold the refund did not assign any reason on which basis the Principal Commissioner had arrived at his opinion that the refund claimed by the petitioner is likely to adversely affect the revenue in the investigation (which is said to be pending) because of some material indicating some malfeasance or fraud said to have been committed by the assessee. (Bushrah Export House v. UOI & Ors – 2021 VIL 134 ALH)

Input tax credit not deniable on account of mismatch in GSTIN when forms yet to be notified: In a case involving a mistake in the form GSTR-1, due to which ITC was being denied to the recipient of the goods of the assessee, the Madras High Court has reiterated that the assessee should not be mulcted with any liability on account of the bona fide human error. The Court noted that had the requisite statutory Forms (form GSTR-1A and GSTR-2) been notified, the mismatch would have been notified by the assessee or its recipient earlier. It noted that the Revenue department did not dispute the position that goods had reached the intended recipient. . (Pentacle Plant Machineries Pvt. Ltd. v. Office of the GST Council & Ors – 2021 TIOL 604 HC MAD GST)

Transition of accumulated credit of Tax Deducted at Source under VAT: The Madras High Court has allowed the transition into the GST regime the accumulated credit of Tax Deducted at Source (‘TDS’) under Tamil Nadu VAT. The Court in this regard held that once any deduction is made towards anticipated tax liability it would assume the character of tax and will not change or fluctuate depending on whether it is held as credit or whether it is an adjustment against tax liability. Department’s argument that accumulated TDS does not bear the character of tax and TDS being a machinery provision and a tentative one, is distinct from Input Tax Credit was thus rejected. Allowing the transition of the said amount under Section 140 of the CGST Act, 2017, the Court also observed that the amount collected/deducted was captured in the returns of turnover filed under the erstwhile TNVAT regime (DMR Constructionsv. Assistant Commissioner 2021 VIL 208 MAD)

Jurisdiction can be Challenged before the Court/Tribunal If not Questioned before- An important development, the in the case of Quantum Coal Energy (P) Ltd. v. CC, 2021-VIL-229-MD-CU, High Court has set aside the show cause notice (‘SCN’) issued by Additional Director General of DRI. The High Court has not gone into the merits of the case and quashed the matter in favour of the taxpayer basis the lack of jurisdiction with DRI officers. This following the judgement of Supreme court in a case of in Canon India.

Supreme Court Allows C Forms on Petrol, Diesel etc. Post GST- in the case of Ramco Cements Ltd., 2021-VIL-42-SC, the Larger Bench of Hon’ble Supreme Court has confirmed the issuance of C Form on purchase of diesel, petrol, natural gas etc. used for manufacturing goods covered under GST Laws too. It was further stated by the Apex Court that the Jharkhand High Court decision in the case of Tata Steel Limited, 2019-VIL-446-JHR, is exhaustive and answers all the points urged before the Apex Court. Thus, the Apex Court has put to rest this issue, if pending before all the judicial forums. Please note that the Finance Bill 2021 has proposed an amendment to Central Sales Tax Act, 1956 to disallow the issuance of C Forms.

Customs

DRI investigated cases – Jurisdictional Commission rates to issue SCNs under Section 28: The CBIC has clarified that all the fresh SCNs under Section 28 of the Customs Act, 1962 in respect of cases presently being investigated by DRI are required to be issued by jurisdictional Commissionerates fromwhere imports have taken place. Instruction No. 4/2021- Cus, dated 17 March 2021 clarifying so, also states that the implications of the Supreme Court judgement in the case of Canon India are under active examination in the Board. It may be noted that the Apex Court in the said judgement has held that DRI officer is not the proper officer to issue SCN under Section 28(4).

Import authorisations for restricted goods – Applications to be filed online: The DGFT has introduced a new online module for filing of electronic, paperless applications for import authorisations with effect from 22 March 2021. Accordingly, all applications for import authorisations will need to be submitted online and authorisations will be issued by DGFT Headquarters. Applications for revalidation or amendment of authorisations issued after said cut off date will also be required to be submitted electronically to the DGFT HQ. Trade Notice No. 47/2020-21, dated 23 March 2021, issued for the purpose, also clarifies that applications for revalidation or amendment of import authorisations issued prior to 22 March may be submitted to the concerned RA who may amend such authorisation manually as per the earlier procedure.

Cases Law

SEIS – DGFT Policy Circulars restricting benefit only to net foreign exchange are ultra vires FTP 2015-20: The Bombay High Court has held that DGFT’s Policy Circular Nos. 6/2018, dated 22 May 2018 and 8/2018, dated 21 June 2018, in so far as they seek to add and amend the provisions of the Foreign Trade Policy 2015-20 by inserting additional conditions to curtail the rights / benefits of the service provider, are ultra vires the Foreign Trade Policy for 2015-20. As per the said circulars, service providers like the Port Trusts cannot claim benefits under Service Exports from India Scheme (‘SEIS’) to the extent of free foreign exchange earnings (or INR payments as allowed under the scheme) simply routed through them. The Court observed that by virtue of the two circulars, modification and alteration of provisions of Para 3.08(c) of the FTP 2015-20 were made and the rights of independent foreign exchange earner for the purposes of FTP 2015-20 and its consequential SEIS benefits in conformity with para 3.08(d) of the FTP, were curbed. Allowing the writ petition, the Court also noted that the assessee (steamer agent) had paid service tax on the gross amount and that it was wrong to say that the petitioner- assessee was appointed only as agent to pay to the actual service provider. (Atlantic Shipping Pvt. Ltd. v. Union of India – 2021 TIOL 582 HC MUM CUS)

Excise & Service Tax

Incentives received by travel agents from airlines and CRS companies not liable under Business Auxiliary Services: The Larger Bench of CESTAT has held that the target-based incentives and the Central Reservation System (‘CRS’) commission received from airlines and CRS companies respectively, by the air travel agents, is not liable to service tax under the category of Business Auxiliary Services (‘BAS’). The Tribunal in this regard held that air travel agents were promoting their own businesses and not that of airlines or CRS companies. Further, relying on the Supreme Court decision in the case of Intercontinental Consultancy and Technocrats, the 3-Member Bench of Tribunal observed that incentives in the present case were based on general performance of the service provider and were not related to any particular transaction of service, while ‘consideration’, which is taxable under Section 67 of the Finance Act, 1994 should be transaction specific. (Kafila Hospitality & Travels Pvt. Ltd. v. Commissioner – Interim Order No. 4/2021, dated 18 March 2021, CESTAT Mumbai.)

Relays used only for railway signalling equipment classifiable under Heading 8608 – Supreme Court relies on ‘sole or principal user test’: The 3-Judge Bench of the Supreme Court has held that ‘relays’ used only as railway signalling equipment would fall under Heading 8608 as claimed by the assessee and not under Tariff Item No. 8536 90 of the Central Excise Tariff, 1985 as claimed by the Department. Chapter 85 covers electrical apparatus while Chapter 86 covers Railway or tramway locomotives, rolling stock and parts thereof. According to the Court, invocation of Note 2(f) of Section XVII (excluding certain ‘parts’ from Chapter 86), overlooking the ‘sole or principal user test’ indicated in Note 3 of the said Section was not justified. It was held that those parts which are suitable for use solely or principally with an article in Chapter 86 cannot be taken to a different Chapter as the same would negate the very object of group classification. Allowing assessee’s appeal, the Apex Court was also of the view that there is fundamental fallacy in the department’s reliance on Rule 3(a) of the General Rules for the Interpretation, after concluding that by virtue of Note 2(f) of Section XVII, ‘relays’ are not even classifiable under Chapter Heading 8608. (Westinghouse Saxby Farmer Ltd. v. Commissioner – Judgement dated 8 March 2021 in Civil Appeal No. 37 of 2009, Supreme Court)

Sabka Vishwas (LDR) Scheme – Initiation of enquiry after 30 June 2019 not fatal for filing declaration under voluntary disclosure category: The Bombay High Court has held that an enquiry or investigation or audit initiated post 30 June 2019 would not act as a bar to filing of declaration under the voluntary disclosure category of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019. The Court was of the view that if clauses (e) and (f) of Section 125 of the Finance (No.2) Act, 2019 are to be read in a harmonious manner then logically it follows that the enquiry or investigation or audit referred to in clause (f) (i) would necessarily have to be initiated on or before 30 June 2019, i.e. before the cut-off date of the scheme. Question No. 39 and the answer thereto in the FAQs released by the CBIC was also relied for this purpose. The department had earlier rejected the declaration under the Scheme as the same was filed after the enquiry was initiated against the assessee in December 2019. (New India Civil Erectors Pvt. Ltd. v. Union of India – 2021 TIOL 618 HC MUM )

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CMA Rakesh Bhalla | 9779010685 | [email protected]

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.

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One Comment

  1. rajkuma singh says:

    It is very goods for Knowledge & upgrade new rules of income tax & gst related new rule so very much thank you tax guru team.

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