Assessing Officer couldn't step into shoes of assessee to decide amount to be paid to avail a particular services

[2018] 96 taxmann.com 272 (Hyderabad - Tribunal)

Facts:

• The assessee-company was an investment company and filed its return of income. It was found by Assessing Officer (AO) that a sum of Rs. 18 lakhs was claimed towards service charges paid to company SRSR.
• Said service charges were paid for the services like advisory services in its business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land properties, etc.
• AO was of the opinion that the Directors of SRSR were related persons to the Directions of assessee-company. He estimated sum of Rs. 3 lakhs at Rs. 25,000 per month as reasonable expenditure considering the nature and volume of business of assessee-company and the nature of services rendered by SRSR. The balance of Rs. 15 lakhs was disallowed under section 37(1).
• CIT(A) confirmed the disallowance. Aggrieved-assessee filed the instant appeal before the ITAT.

The ITAT held in favour of assessee as under:

• There was no power of AO to reduce the claim. He could only examine whether the amount could be allowed in full or not. There was no dispute that the amount was paid for the purpose of business, as Assessing Officer had allowed the amount partly.
• Since the provisions of section 37(1) do not have any restriction to allow the amount partly, so long as the expenditure is incurred for the purpose of the business wholly and exclusively, the same has to be allowed.
• The restrictions placed in other provisions like that of section 36(1)(iii) for the purpose of interest, under section 40A (expenses or payment not deductible in certain circumstances) and also restrictions placed under sections 30 and 31 won’t apply to the facts of the case.
• Since the restrictions under section 37(1) were not applicable, the whole of the amount claimed was to be allowed as the expenditure was not of personal or capital in nature, as provided in the section itself.

Cleaning of agricultural produce away from agricultural farm not entitled to GST exemption: AAR

Rara Udhyog, In re- [2018] 95 taxmann.com 118 (AAR- Rajasthan) 

The assessee is engaged into the activities of cleaning of the various agriculture produce like Saunf (Fennel) Dhaniya (Coriander), Jeera (Cumin seeds), etc. It removes the various impurities which do not change the essential character of the agriculture produce and makes the product marketable for primary market. It filed an application for Advance Ruling on the issue whether such activity would attract nil rate of tax? 

The Authority for Advance Ruling held that the exemption is available only on those processes which are carried at Agriculture Farm and which do not change the essential characteristics of the Agricultural Produce but only make it marketable for primary market. In the given case, the activity of cleaning using specific machines are installed at its premises, i.e., away from Agricultural farm. Therefore, the activity of the assessee will not attract nil rate of tax.

Determination of place of supply is kept out of purview of Authority for Advance Ruling

Utility Powertech Ltd., In re [2018] 95 taxmann.com 88 (AAR-Chhattisgarh) 

The assesse is registered in the State of Chhattisgarh. It received a contract for supply of manpower from NTPC BHEL Power Project Pvt. Ltd. (NBPPL), Andhra Pradesh. It procured and deputed the manpower in the State of Andhra Pradesh. It filed an application for Advance Ruling on the issue whether it is required to charge IGST or CGST and SGST on such services and if IGST is charged on such transaction, will the credit of IGST be available to NBPPL against their output tax liability. 

The Authority for Advance Ruling, Chhattisgarh is not the proper authority to pronounce the ruling regarding the availability of ITC to a firm which is registered outside the State of Chhattisgarh. Therefore, it is held that the determination of place of supply has been kept out of the purview of Authority for Advance Ruling (AAR) stipulated under the provisions of section 97(2) of the CGST Act, 2017.

GST is chargeable on surplus profit transferred by beer manufacturer to brand owner

United Breweries Ltd., In re - [2018] 95 taxmann.com 87 (AAR-Karnataka) 

The assessee entered into an arrangement with contract bottling units (CBU) for using its brand name on beer bottles. The CBU had manufactured the beer using the brand name of assessee and supplied such beer to market. The assessee filed an appeal for Advance Ruling on the issue whether the sale of beer by CBU under its invoicing would be considered as supply of services and Whether GST is payable by the Brand owner on the surplus profit transferred by the CBU to the assessee out of such manufacturing activity? 

The Authority for Advance Ruling held that the CBU is not engaged in supply of service to the assessee. Further, the GST would be payable by the assessee, i.e., brand owner on surplus profit transferred by the CBU. The supply of service to the CBUs is classified under Service Code 999799 and would be taxable at the rate of 18% GST. 

Hydent-K Toothpaste is classifiable as medicament

'Hydent-K Toothpaste' is classifiable as medicament under Heading No. 3003.10 

Time Pharma v. CCE, Thane-II - [2018] 94 taxmann.com 439 (Mumbai) 

The assessee was engaged in the manufacture of a product ‘Hydent-K toothpaste’. It was made of Potassium Nitrate BP and Sodium Monofluorophosphate USP. It classified the said product as Medicament under Heading No. 3003 10. 

The department held that the product in question was classified as Toothpaste under Heading No. 3306 10. The assessee filed an appeal before the Commissioner (Appeals) who allowed the appeal in favour of revenue. Being aggrieved by the order, it filed an appeal in the Tribunal. 

The Tribunal held that only pharmacopeia drugs were used in the product ‘Hydent-K toothpaste’. Therefore, the product in question was classified as Medicament under Heading No. 3003 10. Hence, the appeal filed by assessee was to be allowed.

Cold storage services in respect of agricultural produce exempt from GST: AAR

FACTS:

The applicant is the owner of the cold storage house and provides storage and warehousing facilities to variety of agriculture produce. The applicant submitted an application, seeking an advance ruling on taxability of storage services for various products namely Fennel (Saunf), Coriander (Dhaniya), Cumin Seeds (Jeera), Carom Seeds (Ajwain), Fenugreek Seeds (Kasoori Methi), Mustard Seeds (Sarson), Brown Mustard Seeds (Rai), Nigella Seeds (Kalonji), Poppy Seeds (Posara Dana). 

HELD:

The Court held that above mentioned goods fall under definition of Agricultural Produce, and therefore supply of cold storage service in relation to these products is exempt from levy of GST. However, if any processing is done on these products as is not usually done by a cultivator or producer at farm level, then these would fall outside the definition of agricultural produce and in such case, supply of cold storage service in relation to these would remain chargeable to GST.

[2018] 95 taxmann.com 122 (AAR- RAJASTHAN)

Extension of Last Date for filing GSTR-3B for July, 2018 extended till 24th August, 2018 for all class of taxpayers

The last date for Filing of Return in FORM GSTR-3B for the month of July, 2018 has been extended till 24thAugust, 2018 for all class of taxpayers by the Competent Authority. The relevant Notification for the same shall be issued shortly.

No GST on salary remitted by HO to liaison office in India for normal functioning of liaison office: AAR

Habufa Meubelen B.V., In re - [2018] 95 taxmann.com 120 (AAR- Rajasthan) 

The assessee is the Indian liaison office of a company incorporated at Netherlands. It shall not undertake any activity of a trading, commercial or industrial nature, except activities required for normal functioning of office. The salaries of the employees are remitted by HO to liaison office. The HO also reimburses the other expenses incurred by liaison office for their operation. 

The assessee filed an application for Advance Ruling on the issue ‘whether the reimbursement of expenses and salary is liable to GST and whether it is required to get registered under the GST? 

The Authority for Advance Ruling held that the liaison office in India does not render any consultancy or other services directly or indirectly. Therefore, the reimbursement of expenses and salary paid by head office to liaison office is not liable to GST. Further, no taxable supplies are made by the liaison office. Therefore, they are not required to get registered under GST.

CBDT issues Circular on amendment of Tax Audit Report

Section 44AB of the Income-tax Act, 1961 (‘the Act’) read with Rule 6G of the Income-tax Rules, 1962 (‘the Rules’) requires prescribed persons to furnish the Tax Audit Report along with the prescribed particulars in Form No. 3CD. The existing Form No. 3CD was amended vide Notification No. GSR 666(E) dated 20th July, 2018 with effect from 20th August, 2018.

Representations have been received by the Central Board of Direct Taxes (CBDT) that the implementation of reporting requirements under the proposed Clause 30C (pertaining to General Anti-Avoidance Rules (GAAR)) and proposed Clause 44 (pertaining to Goods and Services Tax (GST) compliance) of the Form No. 3CD may be deferred. 

On consideration of the matter, the CBDT has decided, vide Circular No. 6/2018 dated 17th August, 2018, that the reporting under the proposed Clause 30C and proposed Clause 44 of the Tax Audit Report shall be kept in abeyance till 31st March, 2019. The Circular has been uploaded on the Departmental websitewww.incometaxindia.gov.in

Income Tax Notices

Income Tax Notices have been issued by the Income Tax Department and the Enforcement Directorate. In respect of Income Tax Department, assesses including, non-resident assesses are served notices/summons consequent to the initiation of various proceedings under the Income-Tax Act, 1961, including, for assessment of income, collection, recovery and taxes, whenever required. Where information is received indicating holding of assets by NRIs, necessary enquiry is made to examine whether the assets have been disclosed in any returns of income and whether the assets would have been acquired from income chargeable to tax in India.

No such incidence has come to the notice of Enforcement Directorate (ED) and Ministry of External Affairs whereby to escape this harassment, NRIs are changing their addresses in their passports to their current addresses in countries where they reside thereby establishing their tax residency status abroad. In respect of Income Tax department, the persons are liable for taxation on income/transaction originated/attributed to India irrespective of their addresses. Giving-up of Indian addresses may not result in escaping scrutiny by the Department. Specific cases of NRIs giving-up Indian addresses solely for this purpose have not been noticed.

Under the Exchange of Information (EOI) Article present in Indian tax treaties, Indian Tax authorities can make requests for banking information. In cases where a request is made, the concerned authorities in the requested jurisdiction are able to gather banking information from the relevant banks which is then exchanged with India. In cases where the treaty does not contain a provision to exchange banking information, such exchange may not be possible.

The information for assistance in Criminal matters under Prevention of Money Laundering Act (PMLA), 2002 is sought under Mutual Legal Assistance Treaty (MLAT) or Assurance of Reciprocity. The Central authorities of the requested jurisdictions arrange banking information according to their domestic laws and share with Indian authorities.

Filings of GST Returns

The Goods and Services Tax Council has simplified the return filing process for small businesses. The GST Council, in its 28th meeting held on 21st July, 2018 in New Delhi, in principle approved the new return formats and associated changes in law for small businesses. Taxpayers who have a turnover upto Rs. 5 crores in the previous financial year shall have facility to file quarterly return with monthly payment of taxes on self-declaration basis. For such taxpayers, simplified returns have been designed called Sahaj and Sugam. Those taxpayers who have no purchases, no output tax liability and no input tax credit to avail in any quarter of the financial year shall file one NIL return for the entire quarter. NIL return filers shall have the facility to file return by sending SMS.

The Goods and Services Tax Network (GSTN) will focus on development of new return filing system, improving the user interface and business intelligence and analytics. It is working to improve the “Offline Tool” for returns under GST and is focusing on improving the user interface constantly. The user interface of FORM GSTR-3B has been made simpler and user friendly. Taxpayers have been given the facility to file NIL return by simply pressing one button. Further, GSTN is working on business intelligence and analytics such as predictive analysis, statistical scoring, 360 degree view of taxpayers etc.

Comparison of data in FORM GSTR-1 and FORM GSTR-3B is being done by GSTN for tax liability analysis. Reports based on such analysis are being shared with tax authorities for taking necessary action.