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May 2017, Vol 46
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Contents
IncomeTaxby:
Manish Parekh
by:
Pinkesh JainCompany Law
by:
Bhavesh ShahInterna�onal
Taxa�on
Vat &Profession Tax
by:
Pratap Magare
ServiceTaxby:
Anuya Sawant
IncomeTaxContributed by:
Manish Parekh [email protected]
1
CBDT Chief Laments Non-Disposal Of Public Grievances And Warns AOs Of Adverse Ac�on
Sushil Chandra, the Chairman of the CBDT, has addressed a le�er dated 24.04.2017 to the top brass of the
Income-tax department in which he has lamented that the CBDT is one of the Government Departments which
receives the maximum number of public grievances.
He has also lamented the fact that the grievances are not a�ended to by the AOs and remain pending for
inordinately long periods. Presently, there are 3431 pending grievances which include a large number of overdue
grievances.
The CBDT Chief has directed the top brass of the department to personally monitor the disposal of the grievances
and warned that it will be given due importance while evalua�ng the annual performance of the officers.
(h�p://www.itatonline.org)
HSBC foreign accounts case: Govt. raises Rs 5,419 crore
tax demand
The government has raised tax demand of Rs 5,419 crore on individuals who had undisclosed offshore accounts
with HSBC of which around Rs 337 crore has been recovered. Providing an update on the ac�on taken in the HSBC
list ma�er, the revenue department has informed the Public Accounts Commi�ee (PAC) of Parliament that 190
prosecu�on complaints have been filed against various en��es. The revenue department recently submi�ed a
status report on HSBC foreign accounts to the PAC following queries by its member and BJP MP Nishikant Dubey,
who has been vocal in flagging concern about illicit fund flows.
(h�p://www.financialexpress.com/economy/hsbc-foreign- accounts-case- govt-raises- rs-5419-crore-tax-
demand/653040/)
Opera�on Clean Money 2.0 : Income
Tax to probe deposits of Rs 5-10 lakh now
Following a poor response to the Pradhan Mantri Garib Kalyan Yojana (PMGKY), an income declara�on scheme,
the Income Tax department is set to launch another drive to catch hold of tax evaders who could have deposited
large sums during the demone�za�on drive. While the first phase of the so-called Opera�on Clean Money
scru�nized cash deposits of over Rs.10 lakh, the second phase will examine deposits between Rs. 5 lakh and Rs.
10 lakh. A data analy�cs firm has already started the analysis of such cash deposits made during demone�za�on
drive. The informa�on will soon be sent to the Central Board of Direct Taxes (CBDT), which will decide further
course of ac�on.
(h�p://www.business-standard.com/ar�cle/economy- policy/opera�on-clean- money-2- 0-i- t-to-probe-
deposits- of-rs- 5-10- lakh-now- 117041301293_1.html)
Aadhaar and PAN linking op�on
ac�vated on IT portal.
The Income Tax Department has made it easy for taxpayers to link their PAN with Aadhaar. Just click on the link on
the le� pane-> Link Aadhaar. Provide PAN, Aadhaar no. and ENTER NAME EXACTLY AS GIVEN IN AADHAAR
CARD (avoid spelling mistakes) and submit. A�er verifica�on from UIDAI, the linking will be confirmed. In case of
any minor mismatch in Aadhaar name provided, Aadhaar OTP will be required. Please ensure that the date of
birth and gender in PAN and Aadhaar are exactly same. There is no need to login or be registered on E-filing
website. This facility can be used by anyone to link their Aadhaar with PAN.
(h�ps://incometaxindiaefiling.gov.in/e-Filing/Services/LinkAadhaarHome.html)
Back
ServiceTax Anuya Sawant
2
Clarifica�ons on Issues related to levy of
service tax on the services provided by a
person located innon-taxable territory to
a person located in non-taxable territory by
way of transporta�on of goods by a vessel from a place outside India to the customs
sta�on in India
Several representa�ons had been made seeking clarifica�on on levy of service tax on the services provided by a
person located in non-taxable territory to a person located in non-taxable territory by way of transporta�on of
goods by a vessel from a place outside India to the customs sta�on in India. In this context Government has issued
various no�fica�ons to provide clarifica�ons on these issues. The clarifica�ons in brief are as under:
• Vide no�fica�on Nos. 15/2017-ST and 16/2017-ST both dated 13 th April, 2017, the importer of goods as
defined in the Customs Act, 1962 has been made liable for paying service tax in cases of services of
transporta�on of goods by sea provided by a foreign shipping line to a foreign charterer with respect to goods
des�ned for India. This change shall come into effect from 23 rd April, 2017.
• Vide no�fica�on No. 16/2017-ST dated 13 th April, 2017, the person liable to pay service tax has been provided
an alternate mechanism for calcula�ng and paying service tax. Swachh Bharat Cess and Krishi kalyan Cess will
be paid accordingly. This op�on has been made available with effect from 22 nd January, 2017.
• Vide no�fica�on No. 14/2017-ST dated 13 th April, 2017, the point of taxa�on of services provided by a foreign
shipping line to foreign charterer with respect to goods des�ned for India, has been specified as the date of bill
of lading of goods in the vessel at the port of export. This op�on will be available with effect from 22 nd January,
2017. Thus, no service tax is leviable if the bill of lading is of date prior to 22nd January, 2017.
• Vide no�fica�on No. 10/2017-C.E (N.T) dated 13 th April, 2017, the importer of the goods has been allowed to
avail CENVAT credit on the basis of the challan of payment of service tax by the said importer on the services
provided by a foreign shipping line to a foreign charterer with respect to goods des�ned for India. This change
shall come into effect from 23 rd April, 2017.
(Circular No.206/4/2017-Service Tax and No�fica�on Nos 10, 14, 15, 16 all dated 13 th April, 2017)
Back
Important Judgments:
Business AuxiliaryServices
Where the assessee was engaged in processing disposable waste water received from factory and releasing the
same through common drainage into common effluent treatment plant the same will not amount to processing
of goods on behalf of client and hence demand of service tax thereon under the category of business auxiliary
services is not admissible
[Odyssey Organics P. Ltd. vs. CCE (2017) 47 STR289 (Tri.-Mumbai)].
VAT &Prefession Tax Pratap Magre
3
Hiring of Trucks for transporta�on of
goods does not amount to transfer of
right to use goods
The dealer was engaged in hiring of trucks to mukadam of sugar factories for transporta�on of sugar from farms
to the sugar factory. The conten�on of the department that such hiring of trucks would amount to transfer of
right to use goods under Explana�on (b) (iv) to Sec�on 2(24) of the MVAT Act, 2002, was upheld by the first
appellate authority. In Tribunal, the Sales tax department relied on the judgement of Tribunal in the case of M/s
Aurobindo Highway Services vs. State of Maharashtra to contend that trucks are given exclusively for the use and
disposal of mukadam.
Honorable tribunal rejected the conten�on of the Revenue and held that in present case there is no agreement
between the dealer and the sugar factory. The revenue did not bring anything on record to establish that nobody
else was authorized to use the trucks for any other purpose except for carrying sugarcane. Thus, Tribunal held
that unless it is posi�vely proved by the department that the trucks are exclusively given on hire to sugar factory,
the said transac�on cannot be considered as transfer of right to use goods.
Shree Enterprises vs. State of Maharashtra in Vat second appeal No. 205 of 2014 via order dated 31 st March
2017.
Contributed by:
Back
Important Judgement under MVAT Act, 2002
The Guidelines regarding Cross
Checking of Input Tax Credit (ITC)
If there are mismatches /un-matches in the ITC claim or the claimant dealer, then following procedure shall he
followed for allowance/disallowance of ITC for FY 2013-14, 2014-15 and 2015-16:
• Unmatched ITC means ITC not matched due to one of the TIN not being uploaded in either Annexure J1 or
Annexure J2. Whereas, mismatched ITC is due to the difference in amounts of transac�on disclosed by the
respec�ve buyer and supplier in their Annexure J2 and Annexure J1, respec�vely.
• Out of the total purchase on which ITC is claimed, ITC claimed on purchases from non-genuine dealers RC
cancelled dealers and Return Non-filers shall be disallowed a�er due verifica�on. For this purpose, J2 J1 u�lity
available on Mahavikas and CDA u�lity provided by EIU shall be used. If CDA u�lity is not made available by the
EIU for 2014-15 or 2015-16, then ITC verifica�on u�lity shall be used for such period. From the remaining
suppliers, top 10 suppliers or the suppliers covering at least 50% of the ITC claim (whichever is more) shall be
considered by the assessing officer.
• If there is un-matched ITC in top 10 suppliers or the suppliers covering at least 50% of the ITC (whichever is
more) then such unmatched ITC can be allowed only a�er filing of Supplementary Annexure J-1 or J-2.
• If there is mismatch in ITC from top 10 suppliers or the suppliers covering at least 50% of the ITC (whichever is
more) then such ITC can be verified through the confirma�on of ledgers of the suppliers, provided that such
supplier encloses copy of return acknowledgements for the month of March of that F.Y or acknowledgement of
Form 704 of this F.Y., duly signed & stamped by the dealer or his authorized signatory along with such
ledger confirma�ons.
• If ITC claimed per dealer per year is Rs 5 lakhs or more under unmatch/ mismatch category or in top 10 suppliers
or 50% ITC (whichever is more) then it shall be verified through SAS report.
• Notwithstanding anything contained in this circular, ledger confirma�on shall not be asked if claim of ITC is Rs
5000/- or below per supplier per year.
• If all of the above condi�ons are sa�sfied then officer may assume that the balance ITC has also matched, if any
of the condi�on is not sa�sfied, then only matched ITC credit shall be granted.
Reference: Trade Circular 11A of 2017 dated 3 rd May, 2017 on www.mahavat.gov.in
4
Transfer Pricing Adjustment in
rela�on to intra group services deleted in the
absence of jus�fica�on of Nil ALP
under CUP method
Based on the facts and in the circumstances of the case, recently, the Ahmedabad Bench of Income-tax Appellate
Tribunal in the case of SABIC Innova�ve Plas�cs India Pvt. Ltd. (the taxpayer) deleted a transfer pricing
adjustment made by the Transfer Pricing Officer (as subsequently upheld by the Dispute Resolu�on Panel)
concerning a payment for intra-group services made to a related party of the taxpayer. The tribunal rejected the
Transfer Pricing Officer’s “nil” (zero) arm’s length price on management services under the comparable
uncontrolled price method.
The taxpayer, engaged in manufacturing and trading advanced engineering thermoplas�cs and polycarbonate
sheets, made a payment to a related party for intra-group management services for assessment years 2009-2010
and 2011-2012, jus�fying the arm’s length price on the basis of the transac�onal net margin method. However,
the Transfer Pricing Officer rejected the taxpayer’s claimed tax treatment, and proposed to benchmark the
transac�on separately by applying the comparable uncontrolled price method.
The taxpayer had paid a mark-up of 10% on the receipt of informa�on technology services. However, because the
services were general in nature and there was no quan�fica�on of the services, the Transfer Pricing Officer added
a mark-up of 3% that was contended to be the arm’s length price.
The tribunal deleted the transfer pricing adjustment for receipt of management services for both assessment
years and upheld the 10% mark-up claimed by the taxpayer on informa�on services, finding that the Transfer
Pricing Officer did not provide any specific comparables for jus�fica�on.
(SABIC Innova�ve Plas�cs India Pvt. Ltd. vs ACIT (ITA No. 1125/Ahd/2014 and IT(TP) No. 427/Ahd/16))
Interna�onalTaxa�on
Contributed by:
Bhavesh Shah [email protected]
Under India-Italy tax treaty, tax is to be
deducted on actual payment of royalty
Based on the facts and in the circumstances of the case, recently, the Ahmedabad Bench of the Income- tax
Appellate Tribunal in the case of Saira Asia Interiors (P.) Ltd. held that under Ar�cle 13 of the India- Italy tax treaty
(tax treaty), taxability of royalty is dependent on the payment by the resident of a state and receipt of the same by
the resident of the other state. Therefore, unless the actual payment takes place, the taxability under Ar�cle 13 of
the tax treaty does not arise. Mere fact that an Indian resident credits the amount of royalty payable to an Italian
resident, does not trigger taxability under Ar�cle 13.
(Saira Asia Interiors (P.) Ltd. v. ITO (2017) 79 taxmann.com 460 (Ahd))
Read More
Tax credit can be claimed in respect of
taxes deducted in the U.S.; restricted to rates
prescribed in theIndia-USA tax treaty
Based on the facts and in the circumstances of the case, recently, the Ahmedabad Bench of the Income- tax
Appellate Tribunal in the case of Bhavin A Shah (the taxpayer) held that the taxpayer can claim Foreign Tax Credit
(FTC) in respect of taxes deducted in the U.S. against dividend income on the sa�sfac�on of the condi�ons
specified in the FTC Ar�cle of the India-USA tax treaty (tax treaty). Furthermore, where a tax deduc�on is at a rate
higher than the rate prescribed in the tax treaty, the taxpayer will be eligible to claim FTC restricted to the amount
computed based on the rates prescribed in the tax treaty.
The CBDT has no�fied FTC rules which have come into effect from 1st April 2017. The tribunal’s decision is in line
with these FTC rules, which provide that where foreign tax paid exceeds the tax payable as per tax treaty, such
excess shall be ignored for the purpose of compu�ng the FTC.
(Bhavin A. Shah v. ACIT (ITA No. 933/Ahd/2013) – Taxsutra.com)
5
Income of a foreign shipping company is
not taxable in India as place of effec�ve
management isoutside India
Based on the facts and in the circumstances of the case, recently, the Rajkot Bench of the Income-tax Appellate
Tribunal (the Tribunal) in the case of Pearl Logis�cs and EX-IM Corpora�on held that as per Ar�cle 9 of the India-
Denmark tax treaty income earned by a foreign company from opera�ons of ships in interna�onal traffic is not
taxable in India as Place of Effec�ve Management (POEM) of such foreign company is outside India. The Tribunal
observed that registra�on cer�ficate, residence of shareholder and passport of owner show that the foreign
company is a resident of Denmark. Director of the foreign company resides in Denmark and have been opera�ng
business wholly from Denmark. Further, all the important decisions are taken from Denmark in the form of
mee�ng and therefore, the POEM and control is in Denmark.
(Pearl Logis�cs and EX-IM Corpora�on v. ITO (2017-TII- 57-ITAT- RAJKOT-INTL) –Taxindiainterna�onal.com)
Interna�onalTaxa�on
Contributed by:
Bhavesh Shah [email protected]
Interna�onal circuitfor Formula One
championship cons�tutes a fixed place PE under the
India-U.K. tax treaty
Based on the facts and in the circumstances of the case, recently, the Supreme Court of India in the case of
Formula One World Championship Ltd (the taxpayer) held that the interna�onal circuit cons�tutes fixed place of
business under the India-U.K. tax treaty since the interna�onal circuit was under the control and at the disposal of
the taxpayer. Motor car race was physically conducted in India and from this race income was generated in India.
Therefore, the taxpayer had made their earning in India through the said circuit over which they had complete
control during the period of race. Based on the service agreements, it has been observed that the en�re event is
taken over and controlled by the taxpayer and its affiliates.
The Supreme Court held that the payment received by the taxpayer was business income earned through
Permanent Establishment (PE) and hence it is chargeable to tax in India. Therefore, tax needs to be deducted
under Sec�on 195 of the Income-tax Act, 1961. The Supreme Court also observed that only the por�on of income
which is a�ributable to the PE would be treated as business income and tax needs to be deducted only on such
por�on of income.
(Formula One World Championship Ltd v. CIT (Civil Appeal No. 3849 of 2017) – Taxsutra.com)
Back
CompanyLawContributed by:
Pinkesh Jain [email protected]
6
Clarifica�on regarding online
genera�on of Challans for Offline
payment cases.
In terms of Investors Educa�on and Protec�on Fund (Accoun�ng, Audit. Transfer and Refund) Rules, 2016 as
no�fied on 05.09.2016, and as per the prerequisites of e-form IEPF- 1, the companies are required to transfer the
amounts to Investor Educa�on and Protec�on Fund (IEPF) through Challans generated on MCA 21 portal.
A�en�on is also drawn to circular No. 13/ 2016 dated 05.12.2016 issued by this office, communica�ng that
Challans which are not generated on MCA 21 portal will not be accepted a�er 15.12.2016.
However it has been no�ced that there are companies, which have transferred the amount to IEPF prior to
15.12.2016, through Challans not generated on MCA-21 portal and these companies were/are unable to file
IEPF-1 .
To facilitate filing of e-form IEPF-1 by such companies, following two step processes is suggested:-
Step-I
Company concerned is required to submit details of the challans in prescribed format (enclosed) to IEPF
Authority on email id [email protected]. The copy of challans and cer�ficate for authen�ca�on of the
details submi�ed are required to be obtained from prac�cing professionals' viz. Chartered Accountants,
Company Secretaries and Cost Accountants. This informa�on will be accepted by IEPF Authority up to 20th May,
2017 only and no further relaxa�on shall be granted.
Step II
The submi�ed data shall be processed by the IEPF Authority and a Front Office service will be made available on
IEPF website-www.iepf.gov.in from 5th June, 2017 for a period of 30 days i.e. up to 5th July, 2017 to enable the
companies to submit the required data online. An automated generated number will be provided by the MCA21
system on valida�on of entries and using this automated generated number as SRN, companies may file e-form
IEPF-1 online & upload investor details without requirement of filing addi�onal fees.
General Circular No. 02/2017 dtd 20.04.2017
Read More
Amendment to Compromise,
arrangements and amalgama�ons rules
In exercise of powers conferred by sec�on 234 read with sec�on 469 of the Companies Act, 2013, the Central
Government, in consulta�on with the Reserve Bank of India, has made rules to amend the Companies
(Compromises, Arrangements and Amalgama�ons) Amendment Rules, 2017.
These rules shall come into force from date of publica�on in official gazzate.
The amended rules can be referred to in the following Link:
h�p://www.mca.gov.in/Ministry/pdf/CompaniesCompromises_14042017.pdf
Amendment to Removal of Names of
Companies from the Register of
Companies Rules
In exercise of the powers conferred by sub-sec�ons (1), (2) and (4) of sec�on 248 read with sec�on 469 of the
Companies Act, 2013 (18 of 2013), the Central Government has introduced form “STK-5A” for publica�on of
no�ce under clause (iii) of sub-rule (1) of Rule7.
These rules shall come into force on the date of their publica�on in the Official Gaze�e.
No�fica�on No. G.S.R. 355(E) Dtd 12.04.2017
CompanyLawContributed by:
Pinkesh Jain [email protected]
7
Amendment to Acceptance of
Deposits Rules,
In exercise of powers as conferred by sec�on 73 and 76 read with sub-sec�on (1) and sub sec�on (2) of sec�on
469 of the Companies Act, 2013 (18 of 2013), the Central Government has made rules to amend the Companies
(Acceptance of Deposits) Rules, 2014.
These rules shall come into force from their publica�on in official gazzate.
The rules may be refered in the following link:
h�p://www.mca.gov.in/Ministry/pdf/CompaniesAcceptanceofDeposits_12052017.pdf
Appointment date for Sec�on 234 (Merger or Amalgama�on of
Company withForeign Company)
In exercise of the powers conferred by sub-sec�on (3) of sec�on 1 of the Companies Act, 2013 (18 of 2013), the
Central Government hereby appoints the 13th day of April, 2017 as the date on which the provisions of sec�on
234 of the said Act shall come into force.
No�fica�on dated 13.04.2017
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