DIRECT TAXES UPDATES

Recent circulars/ notifications/ rules/ clarifications/News

♦ CBDT extends due date for Income Tax Returns for FY 2018-19 from 31st July 2020 to 30th September 2020 (Notification no. 56/2020 dated 29th July 2020).

♦ CMDT amends rule 31a and form 26Q from 3rd July 2020 w.r.t. providing certain information related to cash withdrawals under section 194N in form no. 26Q mandatorily. It also mandates that details of interest liable to TDS (sec 194A), even where tax has not been deducted or deducted at lower rate (Notification no. 43/2020 dated 3rd July 2020)

♦ CBDT clarifies on validity of Section 194N exemptions i.e. shall be deemed to be issued under fourth proviso to Section 194N as amended by FA 2020 (Circular 14/2020 dated 20/07/2020)

Direct & Indirect Taxes

♦ CBDT has given 1 time relaxation for verification of last 5 years “E-filed” income Tax returns i.e. for AY 2015-16 to 2019-20- time provided upto 30th September 2020 (Circular no. 13/2020 dated 13/07/2020)

♦ CBDT notifies / amends rule for furnishing party wise break up of TCS (Notification no. 54/2020 dated 24th July 2020).

Income Tax Compliance calendar – August 2020

Things to remember
Due Date Particulars
7th August 2020
  • Due date for deposit of Tax deducted/collected for the month of July, 2020. However, all 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 August 2020
  • Due date for issue of TDS Certificate for tax deducted under section 194-IA in the month of June, 2020
  • Due date for issue of TDS Certificate for tax deducted under Section 194-IB in the month of June, 2020
  • Due date for issue of TDS Certificate for tax deducted under Section 194M in the month of June, 2020
15th August 2020
  • Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of July, 2020 has been paid without the production of a challan
  • ​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 July, 2020
  • Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending June 30, 2020
  • Certificate of tax deducted at source to employees in respect of salary paid and tax deducted during Financial Year 2019-20. The due date for issuing certificate has been extended from June 15, 2020 to August 15, 2020 vide the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 read with Notification No. 35 /2020, dated 24-06-2020.
30th August 2020
  • Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA for the month of July, 2020
  • ​Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194-IB in the month of July, 2020
  • ​Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194M in the month of July, 2020

Important cases decided

♦ Rectification u/s 154 can be exercised only if their is mistake apparent from records i.e. a matter which is incapable of any argument or debate (JMD auto Pvt Ltd vs ACIT)

♦ Section 11 exemption cannot be denied merely because income is exempt from Principles of mutuality (Confederation of Indian Textile Industry vs ITO)

♦ Disallowance for depreciation on Brand License fees is unjustified (Star India (P) Ltd vs ACIT)

♦ Stay of Demand extended by ITAT in case where delay was not attributable to Assessee (Infosys Ltd Vs ACIT)

♦ Ex-parte order for non – attendance during lockdown is unjustified (Uttar Pradesh Water Supply and Sanitation Mission vs ACIT)

♦ MD fined and Sentenced for TDS default of concerned company – Due to non-deposit of deducted TDS on time- Fine of Rs. 5000 & Imprisonment of 3 months (Suryodaya Infrastructure (P) Ltd vs ITO)

♦ Withholding of refund for non-completion of assessment is invalid (Cooner institute of Health care and Research Centre (P) Ltd vs ITO)

♦ Mere expense on electricity and water bills wont covert the status of plot to residential for claiming exemption u/s 54 of Income Tax Act (Shri Shailesh Kumar Chaturvedi vs ITO)

♦ TDS u/s 194C is applicable on payment made for advertisement expenses. In case of non deduction, disallowance is made u/s 40(a)(ia) (Mehra Eyetech (P) Ltd. Vs Add. CIT)

INDIRECT TAXES UPDATES

GST

GST Compliance Calendar – Returns to be filed in the M/O August 2020

GST Return Form Name Filing Period Due Dates in August 2020
GSTR 01 (T.O. up to 1.5 Crore) Quarterly (April – June 2020) 03rd August
GSTR 01 (T.O. more than 1.5 Crore) Monthly (June 2020) 05th August
GSTR 5A Monthly (June) 20th August
GSTR 04 FY 2019-20 31st August
GSTR 05 Monthly (March 2020 to July 2020) 31st August
GSTR 06 Monthly (March 2020 to July 2020 ) 31st August
GSTR 07 Monthly (March 2020 to July 2020) 31st August
GSTR 08 Monthly (March 2020 to July 2020) 31st August
GSTR-1 July’2020 11th August
GSTR 3B July ‘2020 20th August
ITC-04 April to June 2020 31st August

Nil GSTR-1 can be filed through short   message service (SMS) from 01-07-2020: Form GSTR-1, relating to outward supplies, for a   month having nil or no entry in all the Tables can   be filed through a SMS using the registered mobile number. As per new Rule 67A of the Central Goods and Services Tax Rules, 2017, which is effective from 01-07-2020, the said form having details of outward supplies can be verified by a registered mobile number based One Time Password facility. It may be noted that Form GSTR-3B can also be filed through SMS and the provisions relating to the latter were made effective from 08-06-2020. (Notification No. 58/2020-Central Tax, dated 01-07-2020)

Due date for filing FORM GSTR-4 for financial year 2019-2020 has been extended to 31st Day of August, 2020” – Earlier date of filing was “15th day of July, 2020” .(Notification No. 59/2020-Central Tax, dated 13-07-2020)

Cases Law

TRAN-1 Rule 117 of CGST Rules is not ultra vires Section 140 of CGST Act Time limit provided therein is mandatory: The Madras High Court has held that Rule 117 of the Central Goods and Services Tax Rules, 2017 is not ultra vires Section 140 of the Central Goods and Services Tax Act, 2017 and is liable to be construed as a mandatory provision. The Court was of the view that ITC cannot be availed without complying with the conditions prescribed thereto and that prior to the retrospective amendment to Section 140 of the CGST Act, the power to frame rules fixing a time limit was and continues to be traceable to Section 164, which is widely worded and imposes no fetters on rule making powers. The Bombay High Court’s decision in the case of Nelco Limited v. Union of India [2020 SCC Online Bom 437] was held to be correct by the Court while it held that views of the Delhi High Court in the case of SKH Sheet Metal Components v. Union of India Ors, [2020 SCC online Del 650] cannot be subscribed to. [P.R. Mani Electronics v. Union of India & Ors. Judgment dated 13-07-2020 in WP. No. 8890 of 2020 and WMP No. 10803 of 2020, Madras High Court]

ITC available on steel structures used to install water slides: In a case where the assessee-applicant was involved in construction of a water park, AAR Madhya Pradesh has held that steel and civil structure on which the water slides were installed qualify as ‘plant and   machinery’ as it formed foundation and support structure which were used to fasten plant and machinery to the earth. Allowing the input tax credit (“ITC”), the AAR also held that the water slides fell within the meaning of the term apparatus, equipment and machinery. The AAR also allowed ITC on foundations to install machines though rejected the credit in respect of construction of machine room for housing the machines. It held that such room was not a foundation for machines. ITC was also not allowed on the services used for area development and preparation of land on which water slides were placed. AAR in this regard observed that said expenses were liable to be capitalized under the head, ‘land’ and because of specific exclusion of land from the meaning of ‘plant and machinery’. ITC was also not allowed on goods and services used for construction of swimming pools or wave pools in which the water slides directly ran into. The AAR held that such pools were civil structures. ITC on transformers, sewage treatment plant, electrical wiring and fixtures, surveillance systems. D.G. sets, lifts, air handling units, etc. was denied observing that the same were sine qua non for a commercial mall and hence could not be considered separate from the building or civil structure. (Atriwal Amusement Park – 2020 VIL 218 AAR)

ITC not available on lift installed in hotel intended for providing taxable service: AAR Madhya Pradesh has held that input tax credit of tax paid on procuring the lift to be installed in the hotel building which in turn is intended to be used for providing taxable service, is not available. Reliance in this regard was placed on the scope of Section 17 (5)(d) of the CGST Act, 2017 along with the Explanation to Section 17(6) wherein the term, ‘plant and machinery’ has been described The authority observed that a lift became a part of the building and was not a separate thing and did not have an identity even when removed from the building. Additionally, the AAR was of the view that a lift was not an item that was purchased and sold but it was a customized mechanism for transportation, designed to suit a specific building. (Jabalpur Hotels Private Limited – 2020 VIL 220 AAR)

Value of HSD supplied free of cost by service recipient, includible in value of supply: The Andhra Pradesh Advance Ruling Authority has held that value of HSD Oil issued free of cost by the service recipient to the service provider-applicant would form part of the value of supply of service provided, as per Section 15(2)(b) of the  value of supply included any amount that the supplier was liable to pay in relation to such supply but which had been incurred by the recipient and not included in the price actually paid or payable for the goods and/or services. The applicant had contended that title in HSD had not passed on to the service provider. (Pulluri Mining & Logistics Private Limited – 2020 VIL 198 AAR)

Membership/subscription fees and admission fees collected by a club from members when not ‘supply’: The Appellate AAR Maharashtra has held that the membership/subscription fees, admission fees collected by a club from its or benefits to the members. It noted that as per the financial statements, the entire subscription/ membership amount was utilised solely towards expenditures incurred in meetings, communications and other administrative expenses. Allowing the appeal, AAAR observed that the club was not involved in providing any business as envisaged under Section 2(17) of the CGST Act, 2017. It held that the activities carried out by the said club would not come under the scope of ‘supply’ under Section 7(1). Additionally, it observed that if membership fee is held liable to GST then it would be subjected to double taxation as the amount spent towards the meetings and administrative expenditure was already subjected to GST at the hands of the suppliers. (Rotary Club of Mumbai Queens Necklace – 2020 VIL 38 AAAR)

Customs

Contactless Customs – Turant Suvidha Kendra and other initiatives by Customs: CBIC has extended the facility of Turant Suvidha Kendras to all the Customs formations for carrying out various functions as specified in its Circular dated 05-06-2020 issued earlier to provide for setting up of such Kendras in Bengaluru and Chennai for the purpose of implementation of 1st phase of Faceless Assessment. Further, CBIC has enabled, w.e.f 06-07-2020, certain functionalities in ICEGATE which would reduce the need for physical interaction between Customs and trade and also speed up the Customs clearance process. the new facilities will allow registration of Authorised Dealer Code and Bank Accounts through ICEGATE, automated debit of bond after assessment, and  simplified registration of importers/exporters in ICEGATE. (Circular No. 32/2020-Customs, dated 06-07- 2020)

All Industry Rates of Duty Drawback – Changes effective from 15-07-2020: Ministry of Finance has made certain changes in the All Industry Rates (“AIRs”) of Duty Drawback which are effective from 15-07-2020. As per CBIC Circular No. 33/2020-Cus., dated 15-07-2020 while AIRs/caps of duty drawback have been enhanced for certain footwear items made of leather covered under Chapter 64 and gold jewellery covered under Chapter 71, rates of drawback have been rationalised for silver jewellery/articles covered under Chapter 71. Further, description of TIs 870301, 870303, 870305 and 870307 pertaining to motor cars of various engine capacities with Manual Transmission (“MT”) has been changed. Accordingly, the change in description will allow motor cars with Automated Manual Transmission (“AMT”) to claim the same AIRs of duty drawback as given to motor cars with MT. (Notification No. 56/2020-Cus. (N.T.), dated 13-07-2020)

Personal protection equipment (PPE) and masks Export Policy revised: The export of the following types of personal protection equipment (PPEs), either as part of kits or individual items, falling under ITC HS Codes 901850, 901890, 9020, 392690, 621790 and 630790, is prohibited:

  • Medical coveralls of all classes/categories, Medical goggles,
  • All masks other than non-medical/non-surgical-masks (cotton, silk, wool, polyester, nylon, rayon, viscose – knitted, woven or blended).
  • Nitrile/NBR Gloves, Face Shield

It may be noted that though the above-mentioned prohibitions were introduced by Notification No. 14/2015-2020, dated 22-06-2020, Notification No. 20/2015-20, dated 21-07-2020 removes from prohibition surgical drapes, isolation aprons, surgical wraps and X-Ray gowns under the medical coveralls of all classes and categories. It may be noted that export of PPE medical coveralls for COVID-19 was also made restricted (earlier prohibited) by Notification No. 16/2015-2020, dated 29-06-2020, with a monthly export quota of 50 Lakh PPE medical coveralls for COVID-19. Trade Notice No. 18/2020-21, dated 20-07-2020 lays down the procedure and criteria for submission and approval of applications for export of PPE medical coveralls for COVID-19.

Cases Law

Valuation Import prices as per international journals on date of contract between related parties, acceptable: CESTAT Ahmedabad has held that the portion of SVB Order, holding that if contemporaneous imports at higher prices by the importers are noticed, valuation may be done under the appropriate provisions of the Valuation Rules, cannot be read in isolation and must be read with Rule 3(3)(a) of the Customs Valuation Rules, 2007. Further, relying on Dow Chemical International Pvt. Ltd. v. Commissioner [2008 (226) ELT 420 (Tri- Ahd.)], it held that addition to the value was not correct as the imports were assessed on the contract price corresponding to the internationally prevailing prices as reported in international journals on the date of contract. Revenue had sought to increase the value based on import of identical goods from the same supplier and the same country of origin, at the same bottom cargo from the same port, but assessed at a much higher price. (Mosaic India Pvt. Ltd. v. Commissioner – 2020 TIOL 998-CESTAT AHMD)

Amendment is retrospective if it introduces anything omitted by mistake in original provision. The Calcutta High Court has held that if the law maker by way of amendment introduces anything which was left out or omitted by mistake in the original provision, then such amendment may operate retrospectively with effect from the date of the original provision. The Court, however, declined to grant retrospective effect to the notification dated 04-11-1999 amending Notification No. 29/97-Cus., dated the 01-04-1997. It observed that the relevant amendment in the customs notification was made to introduce two additional import items (textile and chemical sectors) to give effect to the amendment of the EXIM Policy announced on 01-04-1999 and that the notification was not issued for rectification of any mistake. Further, denying the benefit of reduced Customs duty, the High Court also held that date of filing of bill of entry is not relatable to the Foreign Trade (Development and Regulation) Act, 1992 or any notification or policy promulgated thereunder. The importer had filed the Bill of Entry after the changes in EXIM Policy though goods had arrived earlier, and hence claimed the benefit thereunder. (Director General of Foreign Trade v. Ruis Cotex Ltd. – 2020 (6) TMI 500 – Calcutta High Court)

Excise & Service Tax

Multi-level car parking at airport is part of airport Construction not liable under Works Contract service: CESTAT Bengaluru has held that Multi-Level Car Parking built by the assessee at airport forms part of the airport and hence construction of same is exempt from service tax. The Tribunal was of the view that the said parking is not separate from the airport and hence the construction is not taxable under Works Contract service. Definition of Airport in Section 2(b) of the Airport Authority of India Act, 1994, read with Section 2(2) of Aircraft Act, 1934, and definition of ‘Aerodrome’ Section 2(2) of the Aircraft Act, 1934,    were relied upon. Department’s contention that the facility cannot be sought to be included under passenger facility, since it is used by others also, was thus rejected. (GMR Projects Pvt. Limited v. Commissioner – Final Order No. 20363/2020, dated 17-06-2020, CESTAT Bengaluru)

Refund of duty paid by EOU on exports when rebate claim denied: In a case where a now defunct EOU had earlier paid central excise duty on exports using accumulated Cenvat credit, but where its rebate claim was denied as clearances by EOU were otherwise exempt, Madras High Court has allowed the rebate. It relied on Karnataka High Court’s decision in Slovak India Trading Co-Private Limited [2006 (201) ELT 559] as maintained by the Supreme Court, allowing refund of Cenvat credit. The Court noted that if the petitioner had continued to carry on the activity and registered itself under Central Goods and Service Tax, 2017, it would have been entitled to transitional credit under Section 142 of the said Act. Allowing the writ petition, it held that since the EOU was entitled to procure goods without payment of duty under Notification No. 22/2003-C.E. but had procured on payment of duty, leading to accumulation of credit, the amount of duty paid on exports can be refunded as no duty was payable by them even otherwise. The department was directed to ascertain the amount that had remained unutilised in view of the denial of rebate claim and refund the same. (Leo Prime Comp Private Limited v. Deputy Commissioner – 2020 VIL 286 MAD CE)

CMA Rakesh Bhalla 9779010685 nancybhalla@yahoo.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.

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