Direct and Indirect Taxes Updates- January 2020 (including Highlights of Finance Bill 2020)

DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

♦ CBDT has released Circular which explains provisions related to TDS on Salary under Section 192 of Income Tax Act, 1961 applicable for A.Y. 2020-21 or F.Y. 2019-20. Circular also explains taxation of different components of Salary, Tax Treatment of Allowances, Perquisites, Retirement benefits etc. (Circular No. 4/2020 F.No. 275/192/2019-IT(B) dated 16/01/2020)

♦ CBDT vide Income Tax has released Format of Revised Form Sahaj (ITR-1) and Sugam (ITR-4) as applicable for Assessment Year 2020-2021 and also added a new proviso to Income Tax Rule 12 and provided who cannot file Form Sahaj (ITR-1) and Sugam (ITR-4) for A.Y. 2020-21. (Notification No. 01/2020-Income Tax- dated 3rd January 2020)

♦ Deduction of TDS in respect of Cash Withdrawal above Rs. 1 Crore by an account holder of National Savings Schemes (No 09-27/2019-SB dated 09/01/2020)

Proposed Income Tax Amendments by Finance Bill, 2020

New Tax Regime (Optional Scheme) The new Sec. 115BAC has proposed to be inserted to provide an option to Individual or HUF’s to pay tax at lower rate with a condition to not claim deduction/exemptions.

Income Level New Tax rates
Up to 2,50,000 0%
2,50,000 to 5,00,000 5%
5,00,000 to 7,50,000 10%
7,50,000 to 10,00,000 15%
10,00,000 to 12,50,000 20%
12,50,000 to 15,00,000 25%
Above 15,00,000 30%

Exemptions and Deductions Foregone to opt for optional scheme- LTC, HRA, some of the allowances as per Sec 10(14), Standard Deduction (u/s 16), Allowance to MP/MLA Sec – 10(17), Allowance for income of minor, Sec – 10AA (SEZ) Exemption, , Interest on house property for self-occupied or vacant property/Loss under the head HP, Additional Depreciation, Deductions u/s 35, 35AD, 35CCC, Deduction from family pension u/s 57, Deductions under Chapter VIA (except Sec – 80CCD and 80JJAA).

♦ Increase of Limit under 44AB – Prescribed Limit of Turnover of a Business for applicability of Section 44AB has been increased from 1 Crore to 5 Crores only on the fulfilment of the condition that the Aggregate of Receipts and Aggregate of Payments in cash during the previous year does not exceed 5% of such Receipts and such Payments respectively. In other cases the limits remains of Rs. 1 Crore only.

♦ Section 115BAD – Tax on income of certain resident Co-operative Societies– This section provides an option to resident co-operative societies to compute their income tax payable at the rate of 22% from the Financial Year 2020-21. To avail this option the income of Co-operative Societies shall be calculated without giving effect to the exemptions/deductions as mentioned in Sec 115BAA.

♦ Section 115JD – Tax credit for Alternate Minimum Tax– The provision of this act is not applicable to those person who has opted to exercise the option to pay the tax under the new tax scheme i.e. U/S 115BAC, U/S 115BAD.

♦ Due Date of Corporate Tax Return – In order to enable pre filling of data in income tax return from tax audit it is proposed to amend the Sec 139(1) providing 31st October as due date for filing return instead of 30th September.

♦ Section 115-O- Tax on distributed profits of domestic companies: Dividend distribution tax (DDT) would not apply from 1st day of April, 2020. Dividend income will be taxed in the hands of shareholders only.

♦ Concessional tax rate for Electricity generation companies Concessional corporate tax rate of 15% has been expended to new domestic companies engaged in the generation of electricity.

♦ Section 80M is being reintroduced in respect to deduction of certain inter-corporate dividends which states -Where the gross total income of a domestic company in any previous year includes income by way of dividends from any other domestic company, it shall be allowed in computing the total income of such domestic company, a deduction of an amount equal to the amount of income by way of dividends received from such other domestic company does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date. Ø Where any deduction, has been allowed under sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.

♦ Interest on Loan for an affordable residential house propertyThe benefit of section 80EEA of the Act provide for a deduction in respect of interest on loan taken from any financial institution for acquisition of an affordable residential house property whose stamp duty value does not exceed 45 lacs. The deduction allowed is maximum one lakh fifty thousand rupees. The conditions as mentioned in that section was that loan must have been sanctioned during the period from 1st April, 2019 to 31st March, 2020. In order to continue promoting purchase of affordable housing, the period of sanctioning of loan by the financial institution is proposed to be extended to 31st March, 2021.

♦ Section 6 (Residential Status)-

-The amendment has been made in respect of clause b of explanation 1 to sec. 6 and that is only relevant in respect of Indian citizen or person of Indian origin visiting India and not for basic conditions as mentioned in section 6(1)(a). The period of 182 days as provided in clause b of explanation 1 to sec.6 has been decreased to 120 days.

– Not Ordinarily Resident redefined- A person is said to be “not ordinarily resident” in India in any previous year, if such person is an individual/HUF whose manager who has been a non-resident in India in 7 out of the 10 previous years preceding that year.

Section 194-O-TDS on Sale of Goods and Services through E-CommerceE-commerce operator is required to deduct tax at 1% at the time of credit of amount of sale or service, or both to the account of e-commerce participant or at the time of payment thereof to such participant by any mode, whichever is earlier. Tax is required to be deducted on the gross amount of such sales or service or both.

Relaxations in Section 194LD- Section 194LD of the Act provides for lower TDS of 5% in case of interest payments to Foreign Institutional Investors (FII) and Qualified Foreign Investors (QFIs) on their investment in Government securities and Rupee Denominated Bonds of an Indian company. It has been proposed to extend the period of concessional TDS of 5% to 01- 07-2023 from existing 01-07-2020. Further, the concessional rate of TDS of 5% under the said section shall also apply on the interest payable to an FII or QFI in respect of the investment made in municipal debt security.

♦ Fees for technical services (other than professional services) shall be subject to 2% TDS instead of 10% under Section 194J.

Section 194A- is being amended to provide a cooperative society having turnover exceeding Rs. 50 crores during the financial year immediately preceding the financial year in which interest is paid and the amount of interest, is more than Rs. 50000/- in case of payee being a senior citizen and Rs. 40000/-, in any other case require to deduct TDS on the interest amount as per the provisions of this section.

♦ Section 194 is being amended to provide for a TDS deduction @ 10% by a company before making any payment of dividend by any mode if the amount of dividend exceeds Rs. 5000. Earlier the required to deduct TDS at the specified rate if the amount of dividend exceeds Rs. 2500.

♦ Section 194 C- Amendment in definition of Works Contract– The definition of work has been proposed to be amended to provide that if any product is supplied or manufactured according to requirements of the customer, it shall fall under the category of ‘work’ even if raw material is supplied by the associated enterprise as defined u/s 40A(2)(b) of the said act of said customer.

♦ Section 194K: This new section provides that TDS at 10% shall be deducted by a person responsible for paying to a resident any income by any mode in respect of units of a Mutual Fund or units from the administrator of the specified undertaking or units from the specified company at the time of payment if the amount exceeds Rs 5,000/-.

♦ Section 194LBA has been amended to increase the rate of TDS from 5% to 10% in case of dividend paid by a business trust to a non-resident (not being a company) or a foreign company.

♦ Section 194LC-This section has been amended to provide that TDS on interest on monies borrowed by an India Company by issue of any Long term bond or rupee denominated bond shall be deducted at 4%. Such money should be borrowed between 01.04.2020 and 01.07.2023 and such bonds should be listed on a recognized stock exchange located in any international financial services center. Further, the period of said concessional rate of TDS of 5% is being extended to 1st July, 2023 from 1st July, 2020.

Widening of scope of Sec 206C to include TCS on Foreign remittance trough LRS of RBI and on selling overseas tour package as well as on sale of goods over limit

-An authorized dealer receiving an amount or an aggregate of amounts of 7 lakhs or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount (7 lacs) from a buyer being a person remitting such amount out of India, at the rate of 5%. In non- PAN/ Aadhaar cases the rate shall be 10%.

-A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of 5%. In non- PAN/Aadhaar cases the rate shall be 10%.

– A seller of goods is liable to collect TCS at the rate of 0.1 percent on consideration received from a buyer in a previous year in excess of 50 lakh rupees. In non-PAN/ Aadhaar cases the rate shall be 1 %. The above provisions are only applicable if total sales, gross receipts or turnover from the business carried on by it exceed 10 crore rupees during the financial year immediately preceding the financial year, shall be liable to collect such TCS.

♦ Rationalization of tax treatment for Contribution made by Employer to Employee to mitigate tax: Total annual limit for contribution made by employer to the salary of employee under recognized PF and superannuation fund along with deduction to employee under NPS scheme for contribution by employer is proposed to be capped at Rs. 7.5 Lacs to limit the undue benefit given by employer to high salary income employees.

♦ Penalty for fake invoices by insertion of new section 271AAD– Section 271AAD has been proposed to be inserted to levy a penalty of an amount equal to the aggregate amount of such fake invoices to curb the practice of obtaining fake GST invoices so as to claim the input tax credit.

♦ Insertion of Taxpayer’s Charter in the Act- It is proposed to insert a new Section 119A in the Act to empower CBDT to adopt and declare a Taxpayer’s Charter and issue such orders, instructions, directions or guidelines to other income-tax authorities as it may deem fit for the administration of Charter.

♦ Sec 55-FMV of property purchased before 01-4-2001 shall not exceed stamp duty value- If the land or building is purchased before 01-4-2001, the fair market value as on that date can be taken as cost of acquisition of such property as per existing provisions of the Act. It has been proposed that such fair market value can’t exceed the stamp duty value of the property as on 01-04-2001.

♦ No withholding of tax at the time of ESOP’s are allotted to the employee (Sec. 192)- Deduction of tax from perquisite arising on the allotment of shares, under ESOP to an employee of a Start-up, shall be proposed to be made at the time of happening of any of the following events:

a) On expiry of 4 year from the end of the Assessment year in which ESOP are exercised;

b) At the time the employee leaves the organization; or

c) At the time of sale of shares allotted under ESOP.

♦ Instant PAN through Aadhaar-PAN shall be instantly allotted online on the basis of Aadhaar without any requirement for filling up of detailed application form.

♦ Vivaad Se Vishwas Scheme. Taxpayer has to pay only disputed tax. Complete waiver of interest and penalty provided he pays by 31 March 2020.Person availing after 31 March 2020 will have to pay some additional amount. Scheme open upto 30 June 2020 only.

♦ Charitable institution registration process switched from manual to electronic and renewal of certificate after every 5 years.

Income Tax Compliance calendar – February 2020

Date Things to remember
7th February Due date for deposit of Tax deducted/collected for the month of January, 2020. However, all the sum deducted/collected by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income-tax Challan
14th February
  • Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of December, 2019
  • Due date for issue of TDS Certificate for tax deducted under section 194-IB in the month of December, 2019
  • Due date for issue of TDS Certificate for tax deducted under section 194M in the month of December, 2019
15th February
  • Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of January, 2020 has been paid without the production of a challan
  • Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending December 31, 2019

Important cases decided

♦ Section 56(2)(vii)(b) not applicable to Property purchased before 01.04.2014 (Bajrang Lal Naredi Vs ITO (ITAT Ranchi))

♦ ITAT explains provisions of Clubbing of Income of Wife and Husband (Uday Gopal Bhaskarwar Vs ACIT (ITAT Pune))

♦ Contractual employees entitled to Employee Provident Fund benefit (Pawan Hans Limited & Ors. Vs Aviation Karmachari Sanghatana (Supreme Court)

♦ Interest Income having direct nexus with Interest income is allowable (DCIT Vs Asian Infra Projects Private Limited (ITAT Mumbai)

♦ Circular cannot over ride supreme Court/ High Court Judgement (Kuthannur Service Co-Operative Bank Limited Vs. ITO (Kerala High Court)

INDIRECT TAXES UPDATES

GST

– GST Compliance Calendar – Returns for the M/O January 2020 to be filed in February 2020

Return Last Date
GSTR-1 Outward supply for the month of January 2020 11th February 2020
GSTR-5 Non-resident foreign taxpayers return for the month of January 2020 20th February 2020
GSTR-6 Input service distributor for the month of January 2020 13th February 2020
GSTR-7 Tax Deducted at Source for January 2020 10th February 2020
GSTR-8 Tax Collected at Source by e-commerce operator for January 2020 10th February 2020
GSTR-3B Summary return tax payment for the month of January 2020 20th February 2020

Proposed Amendments by Finance Bill, 2020

There is no significant changes proposed in 2020-21 union budget. Though Hon’ble Finance minister claimed that Goods and Services Tax has been gradually maturing into a tax that has integrated the country economically and informed

Total of 60 lakh new taxpayers and 105 crore e-way bills generated under GST

The turnaround time for trucks has witnessed a substantial reduction to the tune of 20% due to abolition of check posts in GST.

The dreaded Inspector-Raj has also vanished

It has also led to significant benefits to MSME by way of enhanced threshold and composition limits.

Through several rate reductions, an annual benefit of `one lakh crore has been extended to consumers. It amounts to 10% reduction in overall tax incidence

Reforms are continuing in GST. A simplified return shall be implemented from the 1st April, 2020. This is under pilot run. It will make return filing simple with features like SMS based filing for nil return, return pre-filling, improved input tax credit flow and overall simplification.

Refund process has been simplified and has been made fully automated with no human interface.

Electronic invoice is another innovation wherein critical information shall be captured electronically in a centralized system. It will be implemented in a phased manner starting from this month itself on optional basis. It will facilitate compliance and return filing

Notifications and Circulars

Central Goods and Services Tax Rules, 2017 First amendment of 2020: Rules 117(1A) and 117(4) of the CGST Rules, 2017 have been amended with effect from 1-1-2020 to provide that in cases where the registered person could not submit Tran-1 or Tran-2 on account of technical difficulties, they can submit Tran-1 by 31-3-2020 and Tran-2 by 30-4-2020. These dates were 31-12-2019 and 31-1-2020 earlier (Notification No. 2/2020-Central Tax, dated 1-1-2020)

Exemption to upfront amount for longterm lease – Conditions imposed: Sl. No. 41 of the exemption Notification No. 12/2017-CT(R) provides exemption to upfront amount payable in respect of service by way of long-term lease of 30 years or more of industrial plots or plots for development of infrastructure for financial business, provided by the State Government Industrial Development Corporations or Undertakings or by any other entity having 50% or more ownership of Central Government, State Government, Union territory to the industrial units or the developers in any industrial or financial business area. The notification has now been amended to reduce the percentage criterion of government ownership of such entities from 50% to 20%. Further, amendment has also been made to add certain conditions that the leased plots shall be used (Notification No. 28/2019-CT (Rate),dated 31-12-2019)

GST rates revised on woven and non-woven bags: Rate of GST on woven and non-woven bags and sacks of polyethylene or polypropylene strips or the like, whether or not laminated, of a kind used for packing of goods (covered under HSN 3923 or 6305), and on flexible intermediate bulk containers (FIBC – covered under HSN 6305 3200) has been revised to 18% from 12%. The change, effective from 1-1-2020, puts at rest the dispute relating to classification of woven & non- woven bags made of polyethylene or polypropylene. (Notification No. 27/2019-Central Tax (Rate), dated 30-12-2019)

Revisional authorities under CGST Section 108 notified: Principal Commissioner or Commissioner of Central Tax has been notified as the Revisionary Authority under Section 108 of the Central Goods and Services Act, 2017 for the decisions or orders passed by the Additional or Joint Commissioner of Central Tax. Further, Additional or Joint Commissioner of Central Tax are authorized as Revisionary Authority for decisions or orders passed by the Deputy Commissioner or Assistant Commissioner or Superintendent of Central Tax (Notification No. 5/2020-Central Tax, dated 13-1-2020)

Refund of IGST on exports- SOP for verification specified : In cases involving IGST refund certain exporters are taken for further verification after applying stringent risk parameters-based checks driven by rigorous data analytics and artificial intelligence tools. CBIC has now prescribed Standard Operating Procedure for verification of exporters claiming such refund. The exporters have to submit the information, as specified in the Circular, to the jurisdictional CGST authorities for verification. While, the verification must be completed within 14 working days of furnishing of information (CBIC Circular No. 131/1/2020-GST)

Cases Law

No IGST on ocean freight for import of goodsSl. No. 9(ii) of Notification Nos. 8/2017-Integrated Tax (Rate) and Sl. No. 10 in 10/2017-Integrated Tax (Rate) held ultra vires IGST Act: The Gujarat High Court has set aside the levy of IGST on ocean freight in case of import of goods on CIF basis. It held that Sl. No 9 in Notification No. 8/2017-Integrated Tax (Rate) and Sl. No. 10 in Notification No. 10/2017- Integrated Tax (Rate), levying tax on supply of service of transportation of goods by a person in a non-taxable territory to a person in a non- taxable territory from a place outside India up to the customs station of clearance in India and making the importer liable for paying such tax, are ultra vires the provisions of the IGST Act Observing that IGST was already levied and collected on import of goods on the entire value which includes the ocean freight, the Court termed the separate tax on the services components (freight) as erroneous misconception. The High Court also held that double taxation, by way of delegated legislation, when the statute does not expressly provide, is not permissible. (Mohit Minerals Pvt. Ltd. v. Union of India – R/Special Civil Application No. 726 of 2018 and Ors., decided on 23-1-2020, Gujarat High Court)

Refund of IGST when higher drawback claimed wrongly refunded with interest: In a case where the exporter had wrongly claimed higher drawback on exports, but refunded it with interest later, the Madras High Court has allowed the benefit of refund of IGST. Department’s plea that the assessee having relinquished his right to get refund of IGST, he is not entitled to refund was thus rejected. (Precot Meridian Ltd.v. Commissioner – 2019 VIL 616 MAD)

Tran-1 Proof of not being able to upload form due to technical glitches, not mandatory: In a case where the petitioner did not have any proof that they were unable to file the requisite GST Form Tran-1 due to non-functioning of GST portal, the Delhi High Court has held that the benefit of doubt can be given to him owing to similar complaints of GST portal not being accessible before the deadline. The High Court was of the view that it was not fair to expect that each person who was not able to upload the said form should have preserved some evidence of it such as by taking a screen shot, etc. It noted that many of the registered dealers/traders came from rural / semiliterate background, and that issuance of Notification No. 49/2019 itself emanates from the fact that the department recognized that registered persons were not able to upload the form due to glitches in the system. The Court directed the department to either open portal to enable petitioner to file Form TRAN-1 electronically or accept the same manually. (A.B. Pal Electricals (P) Ltd. v. UoI – 2020 VIL 06 DEL)

No interest liability when IGST amount wrongly deposited as CGST: In a case where the assessee had wrongly deposited IGST as CGST, the Jharkhand High Court has quashed the letter saddling petitioner company with liability to pay short paid IGST along with interest. The High Court however directed the petitioner to deposit IGST and to claim refund of CGST or adjust the amount wrongly deposited under CGST for future liability of CGST. The court found substance in submission that deliberately cash deposit in cash ledger, assessee could not have possibly derived any benefit and that confusion was conceivable due to initial stage of GST regime (Shree Nanak Ferro Alloys (P) Ltd. v. UoI – 2020 TIOL 128 HC JHARKHAND GST)

Anti-profiteering – Rebate and discounts cannot be treated as passing on benefit of ITC: NAPA has held that any amount passed on as discount cannot be treated as passing of benefit of additional input tax credit. The Authority was of the view that granting of rebates/discounts is the most prevalent practice followed in the construction industry to increase sales and hence said rebate cannot be equated with passing on of the benefit of ITC as per the provisions of Section 171(1) of the CGST Act, 2017. The Authority directed the assessee to return the profiteered amount to all the eligible flat buyers along with interest as it observed that the assessee had not submitted the details of the entries made in his books of account or cheques issued to the buyers or the copies of the tax invoices/demand letters or the acknowledgements made by his customers of having received the benefit of ITC due to implementation of the GST, in support of the contention that he has passed on the benefit of ITC. (Susheel Prasad Todi v. ACME Housing India (P) Ltd. – 2020 VIL 01 NAA)

Valuation in case of supply to distinct person – Rules not to be applied sequentially: The Appellate Authority for Advance Ruling, Tamil Nadu has held that the construction of Rule 28 of CGST Rules, 2017 provides the taxpayer an option to adopt 90% of the price charged for supply to unrelated recipients as value to be adopted initially (i.e., supply between distinct persons) and in the alternative, in case of full ITC being available to the recipient, the invoice value will be declared as ‘Open market value’. It held that in case the supply is made to the distinct person and the recipient will be eligible for full ITC, the second proviso provides the value declared in the invoice to be the ‘open market value’ for such transaction. The AAAR was also of the view that the second proviso does not restrict its application as in the first proviso, which is to be applied for cases of ‘as such supply’ only.( Specsmakers Opticians Private Limited – 2019 VIL 87 AAAR)

Customs

AIR drawback schedule revised New rates to come into effect from 4th of February 2020 – Drawback rates for motor vehicles however broadly remain same: Ministry of Finance has revised the All Industry Rates of Drawback available on export of goods. While the general rate of 1.5% presently available will get reduced to 1.3% for most of the products with effect from 4-2-2020, rate of drawback on leather and leather products will get marginally increased. Separate higher rates have also been prescribed for many chemicals. According to Notification No. 7/2020-Cus. (N.T.), dated 28-1-2020 which supersedes Notification No. 95/2018-Cus. (N.T.), drawback rates for many textile products have also been revised. The rates will generally get reduced on articles of wool and silk while higher drawback would be available on goods of cotton or man-made fibres. Rates have also been generally reduced on ceramic products and glassware (except Glass Artware/Handicrafts), iron and steel, copper, aluminium, zinc, tin, goods of Chapter 81, 82, 83, machinery and mechanical appliances and electrical machinery and equipment. (Notification No. 7/2020-Cus. (N.T.), dated 28-1-2020)

Export to Nepal – Mandatory online application for SAFTA and SAPTA Certificate of Origin: For exports from India to Nepal under South Asian Free Trade Area (SAFTA) and SAARC Preferential Trading Arrangement (SAPTA), application for issuance of COO must be filed online from 18.12.2019. According to DGFT Trade Notice No. 41/2019-20, dated 12-12-2019, the Preferential COO for exports made to Nepal under SAFTA and SAPTA shall be applied and issued only from the said platform w.e.f. 18-12-2019. The online platform, designed as a single-point access for all FTAs/PTAs, for issuance of Preferential COO has been live since 19-9-2019 and can be accessed at https://coo.dgft.gov.in. (DGFT Trade Notice No. 41/2019-20, dated 12-12-2019)

Gold and Jewellery exports Revision in documents to be submitted as proof of exports: Para 4.68(a) of the Handbook of Procedures Vol.1 has been amended to allow submission of self-attested copy of exporter’s copy of shipping bill in place of export promotion copy of shipping bill as “proof of exports” with respect to gold/silver/platinum jewellery and articles thereof. (DGFT Public Notice 48/2015-20, dated 18-12-2019)

Cases Law

Advance authorization – Para 4.28(f) of FTP-HoP not applicable to cases where export obligation fulfilled: CESTAT Ahmedabad has held that Para 4.28(f) of Handbook of Procedure, 2004-09 relating to regularization of bonafide default by exporters using Advance Authorisations, cannot be applied straight away to normal imports where export obligations have been fulfilled. The Tribunal in this regard noted that policy prescribed in Para 4.1.5 of FTP permitted the use of left-over material for manufactured goods and clear the same in domestic tariff area. The Revenue department had demanded Customs duty on the inputs imported duty free but not used in manufacture of export goods as lesser quantity was required. (PCL Oils & Solvent Ltd v. Commissioner – 2020 VIL 01 CESTAT AHM CU)

Valuation Service charge paid for import, when not includible: CESTAT Hyderabad has held that the service charge paid to the importer by another company (buyer) was not includible in the assessable value as there was no evidence showing that the importer-respondent acted as a canalizing agent or that the transaction was on high seas sales. It observed that the mere fact that the bids for import were finalized by the assessee-respondent after approval of the buyer company, would not change the nature of transaction. The Tribunal also noted that there was no evidence that there was privity of contract between overseas supplier of coal and the buyer company, and that the buyer company was either the owner or held themselves out to be the importer. (Commissioner v. MMTC Ltd.– 2019 TIOL 3471 CESTAT HYD)

Excise & Service Tax

Stock transfer Sale immediately by agent in another State CST not imposable merely on presumption of pre-existing contract: Madras High Court has held that merely because timing of the sale by agent in another State is immediately on receipt of goods or in near future it cannot be a ground to presume any pre- existing contract with the seller in another State and to hold the same to be an inter-State sale liable to Central Sales Tax (CST). The Court observed that assessee produced adequate proof of movement of goods from Tamil Nadu to Kerala by furnishing prescribed Form F in support of bank transfer/stock transfer. Noting that the Assessing Authority did not have record of any pre-concluded contract with the buyer, it was held that merely on the assumption or presumption of any such kind of pre-existing contract, the Assessing Authority could not have imposed the tax under the provision of Central Sales Tax Act. (Advance Paints (P) Ltd. V Commercial Tax Officer – 2019 VIL 614 MAD)

Ex-gratia charges for making good damages under a contract for unintended event not liable to service tax: Observing that the ex- gratia charges made by principal to assessee- appellant were towards making good losses or injuries arising from unintended events and did not emanate from any obligation on part of any of the parties to tolerate an act or a situation, CESTAT Allahabad has held that the payment cannot be considered to be for some services. The Tribunal was of the view that for invocation of Section 66E(e) of the Finance Act, 1994, there must be first concurrence to assume an obligation to refrain from an act or tolerate an act, etc., which was absent in the present case. (K.N. Food Industries (P) Ltd. v. Commissioner – 2019 VIL 731 CESTAT ALH ST)

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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