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TAXPERT JOURNAL September, 2021

“BE UPDATED, BE AHEAD”

Recent Updates

2 © Taxpert Professionals| September, 2021

TABLE OF CONTENTS

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DIRECT TAXATION

RECENT JUDICIAL PRONOUNCEMENTS

1. Supreme Court Ruling on Section 14A – to keep Tax system simple & convenient [South

Indian Bank Ltd. V. Commissioner of Income-tax [2021] 130 taxmann.com 178 (SC) [09-

09-2021]

7

2. As per Section 24(b) there is no bar on an Assessee to claim deduction of interest payable

on a loan taken for purchasing a residential property, though, possession of same might

not have been vested with him [Abeezar Faizullabhoy V. Commissioner of Income tax

(Appeals)-28, Maharashtra [2021] 130 taxmann.com 156 (Mumbai - Trib.) [01-09-2021]

8

3. R&D exp. incurred outside India eligible for deduction u/s 35(1)(iv) and not u/s 35(2AB)

[ ITAT MAHLE Behr India (P.) Ltd. V. Deputy Commissioner of Income Tax 130

taxmann.com 7 (Pune - Trib.) [31-08-2021]]

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4. Difference between agreement value and stamp duty value if less than 10 per cent, no

addition under section 56(2)(vii)(b) was to be made by keeping in view third proviso to

section 50C(1) and provisions of section 56(2)(x)[ Joseph Mudaliar V. Deputy

Commissioner of Income-tax [2021] 130 taxmann.com 250 (Mumbai - Trib.)[14-09-2021]

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5. Reopening of assessment justified on facts which emanated after rectification application

had been filed by assessee. [M/s. Thiriveni Earthmovers V. Assistant Commissioner of

Income Tax [2021] 130 taxmann.com 183 (Madras)[01-09-2021]

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NOTIFICATION/ CIRCULARS/ PRESS RELEASE 14

1. TAX CALENDER FOR OCTOBER, 2021 17

2. INDIRECT TAXATION


1 3. No writ admissible if statutory remedy available & there was no violation of principles of

natural justice: SC. (The Assistant Commissioner of State Tax V. M/s Commercial Steel

Limited [2021] 130taxmann.com180(SC)[03-09-2021]

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2 5. Mere suspicion is not a sufficient cause to invoke provision of confiscation of goods. [A.P.

Refinery (P.) Ltd. V. State of Uttarakhand [2021] 130 taxmann.com 307 (Uttarakhand)[10-

09-2021]

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3. 6. A reasonable opportunity ought to have been granted to all 'registered persons'/taxpayers

to submit/revise/ re-revise electronically their Form GST TRAN-1/TRAN-2: [Ratek

Pheon Friction Technologies Pvt. Ltd Vs. Principal Commissioner, [2021] 130

taxmann.com 367 (Allahabad)[15-09-2021]

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4. 7. Gauhati HC ruling on refund of accumulated ITC in case of inverted duty [BMG

Informatics Pvt Ltd Vs Union of India [2021] 130 taxmann.com 182 (Gauhati) [02-09-

2021]

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8. AUTHORITY FOR ADVANCE RULINGS

1. 9. ITC not to be availed if supplier furnishes invoices for FY 2019-20 in GSTR-1 of

November 2020. Authority for Advance Rulings (AAR), West Bengal, Goods & Services

Tax [2021] 130 taxmann.com 232 (AAR - WEST BENGAL) [09-08-2021]

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2. 10. Tissue Paper not to be covered under Heading No. 4802 of uncoated paper and paperboard

Authority for Advance Rulings, Karnataka [In re Premier Tissues India Limited, GST AAR

Karnataka]

26

3. 11. Charitable Trust running medical store to give medicines without profit required to be

registered under GST [Nagri Eye Research Foundation v. Union of India, Gujarat High

Court SCA [No. 7822 Of 2021]

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12. NOTIFICATION/ CIRCULARS/ PRESS RELEASE 29

13. TAX CALENDER FOR OCTOBER, 2021 34

14. INTERNATIONAL TAXATION

15. RECENT JUDICIAL PRONOUNCEMENTS

1. 16. Reassessment can be initiated based on materials which weren’t considered during original

assessment [ M/s Cairn India Ltd V. Deputy Director of Income-tax-I, (International

Taxation), Chennai [2021] 130 taxmann.com 167 (Madras)[01-09-2021]

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https://taxguru.in/goods-and-service-tax/gauhati-hc-ruling-refund-accumulated-itc-case-inverted-duty.html

Recent Updates


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2. 18. Income earned by company from sale of software licenses and income from support,

maintenance and training services rendered in relation to such software licenses sold

through third parties in India was not chargeable to tax as "Royalty" under section 9 as well

as under article 12 of DTAA [BMC Software Asia Pacific Pvt Ltd. V. Assistant

Commissioner of Income-tax, (International Taxation), Circle-1, Pune [2021] 130

taxmann.com 205 (Pune - Trib.)[08-09-2021]

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3. Where there was alleged interest-free debt funding of a fully owned overseas special

purpose vehicle (SPV) to use fund for overseas acquisition of a target company, it was held

that there cannot be a transaction of interest-free debt funding of overseas SPV by its

sponsor; even if such a transaction is at all hypothetically possible, arm's length interest on

such funding will be 'nil' [Bennett Coleman & Co. Ltd. V. Deputy Commissioner of

Income-tax [2021] 129 taxmann.com 397 (Mumbai - Trib.)[30-08-2021]

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4. There cannot be a transaction, between independent enterprises, of interest-free debt

funding of an overseas SPV by its sponsorer; if such a transaction between independent

enterprises is at all hypothetically possible, arm's length interest on such funding will be 'nil'

[Bennett Coleman & Co. Ltd. V. Deputy Commissioner of Income-tax [2021] 129

taxmann.com 398 (Mumbai - Trib.)[30-08-2021]

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NOTIFICATION/ CIRCULARS/ ORDERS 42

TAX CALENDER FOR OCTOBER, 2021 44

CORPORATE LAWS


1. Parties engaged in commercial litigation must weigh commercial interests and avoid filing

mindless appeals Uflex Ltd. V. Government of Tamil Nadu [2021] 130 taxmann.com 317

(SC)[17-09-2021]

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2. Due regard would have to be given to inconvenience of flat purchaser and hardship faced

by him if petition was entertained and doctrine of 'forum non-conveniens' applied in full

vigor in instant facts and in favour of flat purchaser Hagwood Commercial Developers (P.)

Ltd. V. Rahul Madhukar Deshmukh [2021] 130 taxmann.com 313 (Bombay)[06-09-2021]

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3. Preferential allotment can be issued by issuer company, however, before issuance of

preferential allotment certain conditions are required to be complied which is mandatory

as per Regulation 160 of ICDR Regulations. Regulation 160(d) provides that issuer is

required to be in compliance with LODR RegulationsAshav Advisory LLP V. Securities

and Exchange Board of India [2021] 130 taxmann.com 204 (SAT - Mumbai) [09-09-2021]

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4. NCLT held that there was ample power to invoke section 242 at any stage and, therefore,

interim reliefs were to be allowed and petitioners were directed to use all powers available

with them to extend their long arm to thoroughly investigate affairs of companies [Union

of India V. Videocon Industries Limited [2021] 130 taxmann.com 52 (NCLT - Mum.) [31-

08-2021]

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5. Madras HC remanded matter back as SEBI failed to fix liability on writ-applicant [Golden

Trees Plantation Ltd. V. Securities & Exchange Board of India [2021] 130 taxmann.com

410 (Gujarat) [06-09-2021]

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NOTIFICATION/ CIRCULARS/ PRESS RELEASE 54

Recent Updates


DIRECT

TAXATION

Recent Updates



Supreme Court Ruling on Section 14A – to keep Tax system simple & convenient [South Indian Bank Ltd. V. Commissioner of Income-tax [2021] 130 taxmann.com 178 (SC) [09-09-2021]

FACT OF THE CASE:

1) The South Indian Bank Ltd [hereinafter referred “Appellant (s)”] are scheduled banks and in course

of their banking business, they are also engaged in the business which earned income from

investments made in tax-free securities.

2) In Finance Act, 2001, Section 14A of Income Tax Act, 1961 (hereinafter referred as “Act”) was

retrospectively amended from 01.04.1962 and inserted that no deduction for expenses incurred

to earn exempt income.

3) A proviso later introduced by the Finance Act, 2002 with effect from 11.05.2001 whereunder,

re-assessment, and rectification of assessment was prohibited for any assessment year, up-to the

A.Y. 2000-2001.

4) The Appellant(s) were concerned about the allowances made under Section 14A of the Act for

A.Y. commencing from 2001-2002 onwards or for pending assessments.

5) None of the Appellant(s) banks, maintained separate accounts for the investments made in

bonds, securities and shares wherefrom the tax-free income was earned so that disallowances

could be limited to the actual expenditure incurred by them.

6) The Appellant(s) did not maintain separate accounts for the investments made in bonds,

securities and shares wherefrom the tax-free income was earned so that disallowances could be

limited to the actual expenditure incurred by them.

7) During the Assessment, the Assessing Officer made proportionate disallowance of interest

attributable to the funds invested to earn tax-free income. Since there was no actual income

available in figured, the Assessing Officer worked out proportionate disallowance by referring

to the average cost of deposit for the relevant year.

8) The CIT (A) had concurred with the view taken by the Assessing Officer.

9) This was further appealed in ITAT wherein the ITAT after considering the Appellant(s) nature

of business and after noticing the surplus reserves and funds accepted that the Appellant(s) that

investments were not made out of interest or cost bearing funds alone. Thus, it was held by the

ITAT that disallowance under Section 14A is not warranted, in absence of clear identity of funds.

10) ITAT decision was reversed by the High Court.

11) The Appellant(s) then filed the appeal in Hon’ble Supreme Court for clear interpretation of

Section 14A.

ISSUE:

i. Whether proportionate disallowance of interest paid by the banks is called for under Section 14A

of Income Tax Act for investments made in tax free bonds/ securities which yield tax free

dividend and interest to Appellant(s) Banks when Appellant(s) had sufficient interest free own

funds which were more than the investments made.

Recent Updates



OBSERVED:

The Hon’ble Supreme Court observed that Section 14A of the Act does not allow the department to make

presumptions and disallow an expenditure for earning tax free income in cases where assessee, do not

maintain separate accounts for the investments and other expenditures incurred for earning the tax-free

income. It also observes that for a good mechanism of tax regulations the department should make the

keep the compliances simple and convenient. Further the Circular no. 18 of 2015 dated 02-11-2015, clearly

explained that all the shares and securities held by a bank which are not bought to maintain Statutory

Liquidity Ratio (SLR) are its stock-in-trade and not investments and all income received on these shares

will be considered as business income.

HELD:

The Hon’ble Supreme Court answered these appeals against the Revenue and in favour of the Appellant(s)

agreed with the view taken by ITAT. The appeals by the Appellant(s) are accordingly allowed with no

order on costs and no deduction was disallowed on the grounds of Section 14A of the Act.

As per Section 24(b) there is no bar on an Assessee to claim deduction of interest payable on a loan taken for purchasing a residential property, though, possession of same might not have been vested with him [Abeezar Faizullabhoy V. Commissioner of Income tax (Appeals)-28, Maharashtra [2021] 130 taxmann.com 156 (Mumbai - Trib.) [01-09-2021]

FACT OF THE CASE:

1) The Abeezar Faizullabhoy (hereinafter referred to “Assessee”) who is a lawyer by profession had filed his

Return of Income (ROI) for A.Y. 2015-16 on 31.03.2017, declaring a total income of Rs.1,19,68,190/-

2) The case of the assessee was selected for scrutiny assessment u/s 143(2) of the Income Tax Act, 1961

(hereinafter referred as “Act”)

3) Assessing Officer (AO) observed that the assessee had under the head “Income from House

property” claimed deduction of interest paid on borrowed capital of Rs. 2,00,000/- under Section

24(b) of the Act.

4) It was submitted by the assessee that the aforesaid claim for deduction of interest pertained to the

funds which were borrowed by him for purchasing a residential property.

5) It was a noted that the assessee has not taken the possession of the said flat, henceforth the AO

issued the order u/s 143(3) of the Act, dated 27.12.2017 and assessed the income of the assessee at

Rs.1,21,68,190/-.

6) The Assessee appealed before Commissioner of Income Tax (Appeals) [CIT-(A)] (hereinafter referred to

as “Respondents”) which upheld the decision of AO. Aggrieved by the order the appeal was filed before

Hon’ble ITAT.

Taxpert Professional’s comments:

The Supreme Court clearly mentioned that for good and smooth compliances of the tax the

department/government have to bring in simple and convenient regulations and also marked

that there are no rooms for presumptions in the Taxation regime.

Recent Updates



ISSUE:

i. Whether or not the lower authorities were justified in law and the facts of the case in declining the

assessee’s claim for deduction of the interest paid on loan that was utilized for purchasing a residential

house vide a registered “agreement‟ dated 20.09.2009.

OBSERVED:

The Hon’ble ITAT observed that the assessee had provided the certificate evidencing the payment of the

aforesaid amount of interest on borrowed funds was filed by the assessee in the course of the assessment

proceedings. The AO and the CIT-(A) erred in appreciating the evidences provided by the assessee. In

respect of deduction claimed by the assessee u/s 24(b) of the act there is neither any such precondition

nor an eligibility criterion prescribed that the assessee should have taken possession of the property so

purchased or acquired by him. Thus, the view of the AO and CIT-(A) was bad in law.

HELD:

The Hon’ble ITAT stated that the 1 & 2 proviso to Section 24(b) does not jeopardize the entitlement of

assessee to claim deductions on interest payable on property acquired by him. It was interpreted by the

ITAT that Section 24(b) does not bar deductions of interest even though the assessee might not be in

possession of the property and the appeal filed by the assessee was allowed.

R&D exp. incurred outside India eligible for deduction u/s 35(1)(iv) and not u/s 35(2AB) [ ITAT MAHLE Behr India (P.) Ltd. V. Deputy Commissioner of Income Tax 130 taxmann.com 7 (Pune - Trib.) [31-08-2021]]

FACT OF THE CASE:

1) M/s MAHLE Behr India (p.) Ltd (hereinafter referred to “Assessee”) filed its return declaring total

income of Rs.3.56 crore and odd.

2) The assessee has three Associate Enterprises (AEs) situated in the USA, Japan and Germany

respectively for which the assessee had claimed weighted deduction u/s.35 (2AB) of Income Tax

Act, 1961 (hereinafter referred as “Act”) amounting to Rs. 26,73,42,263/- on Research and

Development expenses (R&D)

3) Assessing Officer (AO) observed that the assessee claimed weighted deduction on R&D costs of

Rs.9,61,80,237/- carried outside India. Therefore, AO disallowed a sum of Rs.8,86,84,811/-, being,

the amount of capital R&D expenditure incurred outside India.

4) Thereafter the assessee appealed in CIT-(A) which disallowed for all the weighted deductions prior

to grant of approval.

5) Hence the Assessee approach the ITAT.


Taxpayer will be eligible to claim deduction for payment of interest on home loan for purchase

of house property, if the property is acquired or purchased even though possession of such

house property is not taken by the taxpayer.

Recent Updates



ISSUE:

i. Whether the denial of weighted deduction claimed by the assessee u/s 35 (2AB) of the act on

R&D expenditure is valid

OBSERVED:

The fact that the claim of the assessee cannot be entertained under one provision does not oust it from

consideration under any other provision, if it is otherwise allowable under such latter provision. We have

noticed that the amount of capital expenditure incurred on research and development outside India is

eligible for deduction u/s.35(1)(iv). The same, therefore, has to be allowed as such. The ld. DR’s

contention in this regard is sans merit and hence repelled.

HELD:

The entire amount of R&D expenditure incurred in India is eligible for weighted deduction u/s 35(2AB);

revenue R&D expenditure incurred outside India as claimed by the assessee got allowed in the assessment

itself; total of capital R&D expenditure incurred outside India will be eligible for deduction u/s 35(1)(iv)

of the Act. The Appeal is partly allowed.

FACT OF THE CASE:

1) Joseph Mudaliar, an individual (hereinafter referred to “Assessee”), is stated to be engaged in the business

of trading in imitation jewellery.

2) The assessee filed the Return of Income (ROI) on 30.09.2015 declaring total income of Rs.

6,28,420/- and current year loss of Rs. 76,18,500/-. Later, on 30.09.2016 assessee filed a revised

return of income declaring total income of Rs. 6,20,650/- and current year loss of Rs.79,43,584/-

3) During the assessment proceeding the Assessing officer (AO) found that that assessee had

purchased four immovable properties at lower rate than the market value having a difference of

Rs.23,30,695/- between the two values.

4) Hereinafter, the AO called upon assessee to show cause why the difference amount should be

added u/s 56(2)(vii)(b) of the Income Tax Act, 1961 (hereinafter referred as “Act”)

5) Aggrieved by the decision of AO the assessee further appealed to CIT-(A) which disallowed

assesee’s contentions. Hence, the present appeal is with Hon’ble ITAT.

Difference between agreement value and stamp duty value if less than 10 per cent, no addition under section 56(2)(vii)(b) was to be made by keeping in view third proviso to section 50C(1) and provisions of section 56(2)(x)[ Joseph Mudaliar V. Deputy Commissioner of Income-tax [2021] 130 taxmann.com 250 (Mumbai - Trib.)[14-09-2021]


The assessee would be eligible to claim deduction of revenue R&D Expenditure incurred

outside India u/s 35(2AB) whereas capital R&D expenditure incurred for business purpose

outside India would be allowed as deduction u/s 35(1)(iv) of the Act.

Recent Updates



ISSUE:

i. Whether the Learned CIT(A) has erred in making addition of Rs. 23,30,694/- difference between

the agreement value & stamp duty value on purchase of office premises u/s 56 (2) (viib), ignoring

the fact that property was booked under construction in Oct’ 2013 when the property market price

was lower.

OBSERVED:

The Hon’ble ITAT observed that the Hon’ble ITAT relied on the case of Shri Sandip Patil vs ITO (supra)

and Maria Fernandes Cheryl vs ITO (supra) and stated that assessee would be eligible to get the benefit

of ten per cent margin difference in the valuation between the value determined by the stamp duty

authority and the declared sale consideration if the variation between the aforesaid two values falls within

the range of ten per cent, no addition can be made.

HELD:

The issue is no more res integra in view of a number of decisions of different benches of the Tribunal.

The Tribunal has consistently expressed the view that since the aforesaid amendments made by Finance

Act, 2018 with effect from 01-04-2019 are curative in nature and beneficial provisions, it would apply

retrospectively. The addition of Rs. 23,30,694/- was deleted and the ground was allowed.


There is no more an ambiguity and the benefit of marginal variation is given to the assessee

that he can get the benefit of 10% of margin difference between Stamp Duty valuation

determined by the authority and sale consideration value as per the agreement.

Recent Updates



FACT OF THE CASE:

1. M/s. Thiriveni Earthmovers Private Limited (hereinafter referred as “Assessee”) filed the Return of Income

(ROI) for the A.Y. 2008-09 on 30.09.2008 declaring a total income of Rs. 117,55,95,560/- A notice

under Section 143 of Income Tax Act, 1961 (hereinafter referred as “Act”) dated 23.09.2009 was issued

with a total tax demand of Rs. 38,82,78,150/- after credit of TDS of Rs. 8,51,06,508/- instead of Rs.

9,04,19,747/- claimed by the assessee.

2. Thus, a rectification request was filed by the Assessee where a rectification order was passed and a

revised demand for Rs. 38,05,14,782/- was issued after a credit of Rs. 8,51,06,508/- instead of Rs.

9,04,19,747/- because of which interest was payable by the assessee.

3. The assessee appeals that if the deduction of TDS for Rs. 55,65,195 will be allowed then they will not

be liable to pay any tax

4. While the rectification u/s 154 was in process, under section 148 of the Act the notice was issued and

the case was reopened after 4 years, on the ground that income had escaped assessment stating that

from the Form 26AS downloaded the assessee was in receipt of Rs. 419,47,44,777/- as opposed to the

total amount credited to the P&L account of Rs. 387,30,50,376/- and therefore the Deputy

Commissioner of Income Tax had a reason to believe that income of Rs. 41,59,51,722/- had escaped

assessment.

5. The assessee filed a writ petition to high court in view of the re-opening of assessment after 4 years

by the Assessing officer (AO) submitting that the re-opening was completely not tenable as complete

information was available with the Assessing Officer even at the time of scrutiny under section 143 of

the Act and the reopening was contrary to law

6. The AO resisted the petition by stating the huge mismatch of the information in Form 26AS and the

amount in P&L in the books of the assessee and also proved that it had reasons to believe that income

has escaped assessment as the assessee mentioned about the TDS amount in the rectification appeal

and not in the notice issued u/s 143.

OBSERVED:

As the assessee failed to make full and true disclosure of all material facts during original assessment and

a huge difference between Form 26AS and Amount booked in P&L constitutes that AO had sufficient

material to reopen the assessment even after 4 years in AY 2012-13 and the reopening of the assessment

was not based on the change of opinion but the facts which emanated after the rectification application

was filed by the assessee.

Reopening of assessment justified on facts which emanated after rectification application had

been filed by assessee. [M/s. Thiriveni Earthmovers V. Assistant Commissioner of Income

Tax [2021] 130 taxmann.com 183 (Madras)[01-09-2021]

Recent Updates



HELD:

As there were reasons for AO to believe that income has escaped assessment due to mismatch of amount

in Form 26As and P&L of the assessee and further the details of TDS amount claimed were disclosed by

the assessee in the rectification appeal and not during the assessment proceedings u/s 143. Therefore, the

reopening of the assessment for the AY 2008-09 was valid and the appeal of the assessee was dismissed.


The AO has the power to reopen the assessment u/s 148 even after time barred period of 3

years on the basis of non-disclosure of income while assessment u/s 143 and the reopening

would be held valid.

Recent Updates


NOTIFICATIONS/CIRCULARS/PRESS RELEASE

1. The replacement of the Authority for Advance Rulings (‘AAR’) with the Board for Advance

Rulings ‘Board’

[Notification No. 96/2021/F. No. 370142/31/2021-TPL (Part II) & Notification No. 97

/2021/F. No. 370142/31/2021-TPL (Part II) dated 01st September, 2021]

CBDT has issued Notification Nos. 96 & 97 of 2021, whereby it has been provided that:

a. The AAR shall cease to operate on and from 1 September 2021.

b. Three Boards will become operational for the purposes of giving advance rulings on or after

1 September 2021:

i. Board for Advance Rulings-I headquartered at Delhi

ii. Board for Advance Rulings-II headquartered at Delhi

iii. Board for Advance Rulings-III headquartered at Mumbai

c. As a part of this transition, all applications pending before the AAR shall be transferred to

the Board on 1 September 2021. An application would be said to be pending if either:

i. no order for allowing or rejecting the application has been passed before 1 September

2021, or

ii. no advance ruling with respect to the application has been pronounced before 1

September 2021.

2. CBDT notifies Form 12BBA to be submitted by senior citizens wishing to claim benefit of

Sec. 194P [Notification G.S.R 612(E) [no. 99/2021/F.No.370142/11/2021-TPL], dated 2-9-

2021] [Notification S.O. 3595(E) [No. 98/2021/F. No. 370142/11/2021-Tpl], Dated 2-9-

2021]

In the notification by the Income-Tax (twenty-sixth amendment) rules, 2021 CBDT amended rules

31 and 31A and inserted rule 26D and clarifies the terms ‘Specified Bank’ for the purpose of IT

Section 194P relating to TDS in the case of Specified Senior Citizens (of age 75 or more having

pension/ interest income only), who have been exempted from filing of ITR u/s 139, in respect

of FY 2021-22/ AY 2022-23.

The new Rule 26D to provide that senior citizens are required submit Form 12BBA with specified

bank in order to claim the benefit of section 194P. The board has also amended Form 16, Form

24Q, Form 26QC and Form 26QD to incorporate necessary changes related to provisions of

section 194P.

Further, Central Government notifies specified Bank to mean a banking company which is a

scheduled bank and has been appointed as agents of Reserve Bank of India under section 45 of

the Reserve Bank of India Act, 1934 (2 of 1934).

3. Income-Tax (Twenty-Seventh Amendment) Rules, 2021 - Insertion of Rule 14c [Notification No. G.S.R. 616(E) [No. 101/2021/F.No.370142/35/2021-Tpl (Part I), Dated 6-9-2021] It has been notified that The Income Tax (I-T) Department has inserted a new Rule 14C to ease authentication of electronic records submitted in faceless assessment proceedings. If electronic records are submitted through registered account of taxpayer on the income tax portal, separate authentication through EVC is not required to be done

NOTIFICATIONS

Recent Updates



4. Income-Tax (Twenty-Eighth Amendment) Rules, 2021 - Amendment In Rule 11UAC

[Notification G.S.R. 623(E) [No. 105/2021/F. No. 370149/158/2021-TPL], Dated 10-9-2021] The Central Board of Direct Taxes notifies that in the Income-tax Rules, 1962, in rule 11UAC, after clause (3), the following clause shall be inserted, namely: — i. "(4) any movable property, being equity shares, of the public sector company, received by a

person from the Central Government or any State Government under strategic disinvestment.

Explanation. —For the purpose of this clause, „strategic disinvestment‟ shall have the same

meaning as assigned to it in clause (iii) of Explanation to clause (d) of sub-section (1) of section

72A.".

5. Income-Tax (Twenty-Ninth Amendment) Rules, 2021 - insertion of rule 12F

[Notification G.S.R. 627(E) [No. 109/2021/F. No. 370142/27/2021-Tpl (Part I)], Dated 13-9-2021] The CBDT notifies that in the Income-tax Rules, 1962, after rule 12E, the following rule shall be

inserted, namely: —

i. "12F. Prescribed Income-tax authority under second proviso to clause (i) of sub-section (1) of

section 142. —The prescribed Income-tax authority under second proviso to clause (i) of sub-

section (1) of section 142 shall be an income-tax authority not below the rank of Income Tax

Officer who has been authorized by the Central Board of Direct Taxes to act as such authority

for the purposes of that clause.".

1. CBDT extends due dates for filing of Income Tax Returns and various reports of audit for

the Assessment Year 2021-22 dated

(Circular No. 17/2021 [F. No. 225/49/2021/ITA-1I] dated: 09/09/2021)

Due to technical glitches in the new Income Tax Portal, the taxpayers & other stakeholders are

facing difficulty in filing Income Tax Returns (ITR) & various other compliances as required by

the Income Tax Act, 1961. Taking the same into consideration, the Central Board of Direct Tax

(CBDT) has further extended the deadlines for filing ITR and various Audit reports for

Assessment Year 2021-22.

CIRCULARS

NOTIFICATIONS

Recent Updates


NOTIFICATIONS/CIRCULARS/ PRESS RELEASE

Summary of extended ITR and other due dates

Taxpayers Category Original Due

Date

Extended Due

Date

Revised

Extended Due

Date

ITR-Individuals/ HUF/Firm/Trust

(Where tax audit is Not Applicable)

31-Jul-2021 30-Sep-2021 31-Dec-2021

Tax Audit u/s 44AB or u/s 10B 30-Sep-2021 31-Oct-2021 15-Jan-2022

Transfer Pricing (TP) Audit u/s 92E 31-Oct-2021 30-Nov-2021 31-Jan-2022

ITR [Company or Individuals/HUF/Firm/

Trust where Tax Audit is applicable]

31-Oct-2021 30-Nov-2021 15-Feb-2022

ITR-Taxpayers where TP Audit is applicable 30- Nov-2021 31-Dec-2021 28-Feb-2022

Belated/ Revised ITR 31-Dec-2021 31-Jan-2022 31-Mar-2022

1. Section 132 of the Income-Tax Act, 1961 - search and seizure - general - Income Tax department conducts searches in Delhi, Gujarat and Dadra [Press release, dated 2-9-2021] The Income-tax Department carried out a search and seizure operation on 1-9-2021 on a manufacturer and distributor of synthetic yarns and polyester chips having corporate office in Delhi and factories at Dadra & Nagar Haveli and Dahej.

PRESS RELEASE

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TAX CALANDER FOR OCTOBER, 2021

DUE DATE DIRECT TAXATION

07th Oct, 2021

Deposit of Tax deducted/collected (TDS/TCS) for the month of September, 2021.

Due date for deposit of TDS for the period July 2021 to September 2021 when Assessing Officer has permitted quarterly deposit of TDS under Section 192, 194A, 194D or 194H.

15th Oct, 2021

Furnishing of Form 24G by an office of the Government where TDS/TCS for the month of September, 2021 has been paid without the production of a challan

Due date for issue of TDS Certificate for tax deducted under Section 194-IA, Section 194-IB & Section 194M in the month of August, 2021

Quarterly statement in respect of foreign remittances (to be furnished by authorized dealers) in Form No. 15CC for quarter ending September, 2021

Quarterly statement of TCS deposited for the quarter ending September 30, 2021

30th Oct, 2021

Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA, Section 194-IB & Section 194M in the month of September, 2021

Quarterly TCS certificate (in respect of tax collected by any person) for the quarter ending September 30, 2021

31st Oct, 2021

Intimation by a designated constituent entity, resident in India, of an international group in Form no. 3CEAB for the accounting year 2020-21

Quarterly statement of TDS deposited for the quarter ending September 30, 2021

Due date for furnishing of Annual audited accounts for each approved programme under section 35(2AA)

Quarterly return of non-deduction of tax at source by a banking company from interest on time deposit in respect of the quarter ending September 30, 2021

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INDIRECT

TAXATION

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No writ admissible if statutory remedy available & there was no violation of principles of natural justice: SC. (The Assistant Commissioner of State Tax V. M/s Commercial Steel Limited[2021]130taxmann.com180(SC)[03-09-2021]

FACT OF THE CASE:

1) M/s Commercial Steel Limited (Herein referred to as Respondent) is a proprietary concern engaged

in the business of iron and steel and is registered under the Central Goods and Services Tax Act 2017

and has been allotted a GST code.

2) The Respondent purchased certain goods from a dealer, JSW Steel Limited, Vidyanagar, Karnataka,

under a tax invoice dated 11 December 2019. The consignment of goods was being carried in a truck

bearing registration No KA 35 C 0141. While it was proceeding from the State of Karnataka, it was

intercepted on 12 December 2019 at 5.30 pm at Jeedimetala.

3) The tax invoice indicated that the goods were earmarked for delivery at Balanagar, Telangana. The

case of the appellants is that Balanagar is situated between the State of Karnataka and Jeedimetala and

that no reasonable person would cross Balanagar and then turn around to go back to the place of

destination. The purchase value of the goods appeared to be in the amount of Rs 11,14, 579 from the

tax invoices.

ISSUE:

i. Whether the High Court was appropriate in entertaining the writ under Article 226 of the

Constitution.

OBSERVED:

The Hon’ble Supreme Court observed that respondent had a statutory remedy under section 107. Instead

of availing of the remedy, the respondent instituted a petition under Article 226. The existence of an

alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226 of the

Constitution. But a writ petition can be entertained in exceptional circumstances where there is:

(i) A breach of fundamental rights;

(ii) A violation of the principles of natural justice;

(iii) An excess of jurisdiction; or

(iv) A challenge to the vires of the statute or delegated legislation.

In this case none was established. Thus it was not appropriate of High Court to Entertain the writ.

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Mere suspicion is not a sufficient cause to invoke provision of confiscation of goods. [A.P.

Refinery (P.) Ltd. V. State of Uttarakhand [2021] 130 taxmann.com 307 (Uttarakhand)[10-09-

2021]


HELD:

The Hon’ble Supreme court in the judicial pronouncement allowed the appeal and set aside the impugned

order of the High Court. The writ petition filed by the respondent shall stand dismissed. However, this

shall not preclude the respondent from taking recourse to appropriate remedies which are available in

terms of Section 107 of the CGST Act to pursue the grievance in regard to the action which has been

adopted by the state in the present case.

FACT OF THE CASE:

1) M/s A.P. Refinery Private. Ltd, is engaged in the supply of Rice Bran Oil (Grade-II). It is registered

with the GST Department, having GSTIN No. 03AAFCA1352B1ZX. It is registered both under the

CGST Act, 2017, and under the Punjab Goods and Services Tax Act, 2017.

2) The petitioner was transporting Rice Bran Oil from its factory located in Jagraon, Punjab to a dealer,

namely M/s Sheel Chand Agroils Pvt. Ltd, located in Lalpur, District Udham Singh Nagar in the State

of Uttarakhand by generating all E-invoices and E-Way bills.

3) The trucks left the petitioner’s place on 27.03.2021. However, as 29.03.2021 was the festival of Holi,

the drivers of the three trucks decided to wait in Ambala on 28.03.2021, lest the hooligans on the road

intercept the trucks, or damage the consignment in the garb of celebrating Holi.

4) Since the e-Way bills had expired within three days, the respondent, the Assistant Commissioner

(GST-State), issued three separate orders, all dated 01.04.2021, for physical verification/inspection of

the consignment. Upon physical verification, the description on the e-Invoices was found to be

matching with the physical goods verified in the vehicle, namely fixed vegetable oils of vegetable grade

i.e. mango kernel oil, mahua oil and rice bran oil. Even the quantity of the goods recorded in the e-

Invoices matched with the physically verified quantity.

ISSUE:

i. The department issued confiscation order and the petitioner challenged the confiscation orders by

filing writ petition.

ii. It was contended that no opportunity of being heard was given before passing the confiscation

orders under Section 130 in Form GST MOV-11.


The High Court erred entertaining its writ petition under Article 226 of the Constitution even

though the respondent had alternate remedy u/s 107 of CGST Act. The Hon’ble Supreme court

set a precedent by this judicial pronouncement so as to further avoid unnecessary writs in cases

where alternate remedies are not exhausted.

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OBSERVED:

The Hon’ble High Court observed that an order enhancing any fee or penalty or fine in lieu of confiscation

or confiscating goods of greater value or reducing the amount of refund or Input Tax Credit shall not be

passed unless the appellant has been given a reasonable opportunity of showing cause against the proposed

order. The Revenue had completely failed to show that petitioner was given an opportunity of being heard

before passing orders of confiscation in Form GST MOV-11, hence, confiscation orders not found to be

passed in accordance with law, were to be quashed and set aside

HELD:

Both the writ petitions are allowed partly. Consequently, the Hon’ble High Court quash and set aside the

impugned orders dated 23.04.2021, passed by the respondent no.3 under Section 130 in Form GST MOV-

11, and the respondents are directed to release the vehicles and goods in question, which have been

detained since 31.03.2021, upon execution of a bond for the value of the goods in Form GST INS-04 and

furnishing of a security in form of a bank guarantee equivalent to the amount of applicable tax, interest

and penalty payable, by the petitioner. The release of the vehicles and goods are subject to the final

outcome of the confiscation proceedings.

It is clarified that after giving an opportunity of being heard to the petitioner, the respondents may proceed

further in accordance with law.


The hon’ble High Court of Uttarakhand observed that the GST department failed to prove that

the opportunity of being heard was given to the assessee before the passing the orders of the

confiscation in Form GST MOV-11. Moreover, before invoking the provisions of Section 130

for confiscation, there should be a very strong base to proceed for confiscation. Mere suspicion

is not sufficient to invoke the provision of the confiscation. Therefore, it was found that order

under Section 130 was not passed in accordance with law and liable to be set aside. The court

also directed to release the vehicles and goods upon execution of a bond for the value of the

goods in Form GST INS-04 and furnishing of a security in form of a bank guarantee.

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A reasonable opportunity ought to have been granted to all 'registered persons'/taxpayers to

submit/revise/ re-revise electronically their Form GST TRAN-1/TRAN-2:[Ratek Pheon

Friction Technologies Pvt. Ltd Vs. Principal Commissioner, [2021] 130 taxmann.com 367

(Allahabad)[15-09-2021]


FACT OF THE CASE:

1) M/s Ratek Pheon Friction Technologies Pvt. Ltd (hereafter referred as the Petitioner) contents that

it filed its return under the Central Excise Act, 1944 on Form ER-1, on 13.07.2017 for the period

ending 30.06.2017, disclosing total CENVAT credit available Rs. 52,54,954/-. Also, it submitted

electronically its Form GST TRAN-1, for the period ending 30.06.2017, within time granted.

2) Inadvertently, it submitted the figure Rs. 50,702/- as admissible CENVAT in place of the actual

entitlement figure Rs. 52,54,954/-. The Form GST TRAN-1 containing the aforesaid error was

submitted electronically on 13.07.2017 on the GST portal. Despite best efforts, the petitioner could

not submit electronically the revised Form GST TRAN1 before the cut-off date 27.12.2017 as that

function on the GST portal had not been activated or not made fully functional.

3) Besides making unsuccessful attempts to revise the Form GST TRAN-1, manually, the petitioner

further claims to have written to the Principal Commissioner CGST on 10.9.2020 and 12.2.2021 to

verify the correct amount of ITC available to it and to resolve the issue in favour of the petitioner. In

the reply of the same, with respect to communication dated 15.3.2021, the Principal Commissioner

CGST refused that resolution since the petitioner’s request was received on 26.05.2020, after expiry

of the last date for that purpose, 31.03.2020.

ISSUE:

i. Whether submission/revision/ re-revision electronically allowed to the taxpayer in the Form GST

TRAN-1/TRAN-2.

OBSERVED:

i. The Hon’ble High Court noted that the general difficulty obtaining with all the “registered

persons”/taxpayers and have considered the same to be generic in nature and also make this order

applicable to all other “registered persons”/taxpayers within the State of U.P. (who are not before

this Court), within a period of eight weeks from today. The further timelines provided by this

Court shall stand modified accordingly.

ii. As to the evidence of technical difficulties experienced by the petitioners and the glitches suffered

on the GST Portal. A reference has been made to repeated extensions of time granted by all the

statutory authorities and the legislative action taken to extend the timeline to submit Form GST

TRAN-1, for that reason. Then reference has been made to Circular no. 39/13/2018-GST dated

03.04.2018 issued by CBIC. Last, reference has been made to various decisions of different High

Courts, that the GST TRAN-1 and/or TRAN-2 on the GST portal was not a local phenomenon

or a rare event but a common and generic difficulty faced by all “registered persons”/tax payers

across the country, while working on the newly designed GST Portal.

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Gauhati HC ruling on refund of accumulated ITC in case of inverted duty [BMG Informatics

Pvt Ltd Vs Union of India [2021] 130 taxmann.com 182 (Gauhati)[02-09-2021]

RECENT JUDICIAL PRONOUNCEMENTS .

HELD:

It was held that the Court has no hesitation in observing that a reasonable opportunity ought to have been

granted to all “registered persons”/taxpayers to submit/revise/re-revise electronically their Form GST

TRAN-1/TRAN-2. The GST Network shall thereupon (After filing physical forms by the petitioner)

either itself upload the GST TRAN-1/TRAN-2, within two weeks of receipt of such communication or

allow that petitioner opportunity to upload those details, within a reasonable time.

FACT OF THE CASE:

1) M/s BMG Informatics Pvt. Ltd (Hereafter Referred as Assessee) is a company dealing with IT system

integrator and is a service provider primarily engaged in sales and service of information and

technology products to Government Departments, PSU and to other Research and Educational

Institutes located in the North Eastern region.

2) The assessee is a registered dealer under the Central Goods and Service Tax Act 2017 (for short, the

CGST Act of 2017) bearing registration No. GSTIN 18AADCB2203Q3ZL.

3) The assessee submitted a claim for a refund under FORM-GST-RFD-02. In response thereof, the

department had issued a show-cause notice dated 10.04.2020 that the assessee had misdeclared the

amount of total turnover in Annexure-1 to the RFD-01 for the period October – December 2018

and, therefore, the refund claimed is liable to be rejected.

4) A reply dated 25.04.2020 showing their reasons as to why there was no mis-declaration. The Assistant

Commissioner CGST, Central Excise and Customs, Guwahati (to be referred to as the Assistant

Commissioner) in consideration of the claim of the assessee for the refund had passed the order dated

22.05.2020, whereby the claim for refund for an amount of Rs.3,92,594/- for the period from

01.10.2018 to 31.12.2018 stood rejected.


The clear intent of the legislature is to grant benefit of CENVAT and ITC under the pre-existing

laws, as may have been carried forward on the appointed date 01.07.2017. In such circumstances,

if the GST Portal had worked seamlessly, all petitioners would have submitted/revised/re-

revised electronically, their Forms GST TRAN-1 and/or TRAN-2 within the time granted. In that

situation, all petitioners would clearly be entitled to avail ITC under the CGST Act and the

UPGST Act, without any objection by the State/revenue authorities. Taxing statute and equity

considerations are not natural allies. At the same time, in the context of a purely procedural

requirement and transition provision, we cannot act unmindful of that consequence - if the

respondents had offered a functional system, the State could not have deprived the petitioners of

transition credit of CENVAT and ITC (under the repealed laws).

https://taxguru.in/goods-and-service-tax/gauhati-hc-ruling-refund-accumulated-itc-case-inverted-duty.html

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ISSUE:

i. Whether the refund claimed by the assessee was admissible by law by taking into consideration

of facts and circumstances of the case and the order passed by the assessee is liable for set aside

as the same would be unsustainable or unreasonable from the point of view of the assessee.

OBSERVED:

The law in this respect is settled to the extent that whenever there is a conflict between the provisions of

a statutory Act and that of a notification or circular issued by an administrative authority, the provisions

of the statutory Act would prevail over such conflicting provisions of a notification or a circular of an

administrative authority. It has been interpreted by the Supreme Court in a plethora of decisions that the

provisions of such notification or circular, which would be in conflict with the provisions of a statutory

Act, would have to be ignored and not taken into consideration for the purpose of arriving at any such

decision.

Consequently, in view of the clear unambiguous provisions of Section 54(3) (ii) providing that a refund of

the unutilized input tax credit would be available in the event the rate of tax on the input supplies is higher

than the rate of tax on output supplies, the provisions of paragraph 3.2 of the circular No.135/05/2020-

GST dated 31.03.2020 providing that even though different tax rate may be attracted at different point of

time, but the refund of the accumulated unutilized tax credit will not be available under Section 54(3)(ii)

of the CGST Act of 2017 in cases where the input and output supplies are same, would have to be ignored.

HELD:

The Hon’ble Guwahati High Court held that the rejection of the claim for refund by the petitioner assessee

in the order dated 22.05.2020 of the Assistant Commissioner by referring to the provisions of paragraph

3.2 of the circular No.135/05/2020-GST dated 31.03.2020 would be unsustainable in law. The matter

stands remanded back to the Assistant Commissioner, GST, Guwahati to consider the matter afresh and

arrive at his own factual satisfaction as to whether the actual rate of tax on the input supplies made by the

petitioner assessee is higher than the actual rate of tax on the output supplies made by them and depending

upon the satisfaction that may be arrived to pass a reasoned order on the claim of the petitioner assessee

for refund under Section 54(3)(ii) of the CGST Act of 2017.


It was found by the facts of the case read with the rules and provisons made under GST law,

there was a conflict between provisions of paragraph 3.2 of Circular No.135/05/2020-GST dated

31-3-2020 with provisions of section 54(3)(ii) and whenever there is a conflict between provisions

of a statutory Act and that of a notification or circular issued by an administrative authority,

provisions of statutory Act would prevail over such conflicting provisions of a notification or a

circular of an administrative authority. Thus, the order passed by the assistant commissioner is

unsustainable and unreasonable and was liable to set a side and the same was held by above

judicial pronouncement.

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AUTHORITY FOR ADVANCE RULINGS [AAR]

FACT OF THE CASE:

1) Eastern Coalfields Limited (hereinafter referred to as, the applicant) is stated to be a producer and

supplier of coal. The applicant submits that he has received services from M/s Gayatri Projects

Ltd (GSTIN: 19AAACG8040K1ZG) and has availed of Input Tax Credit during the tax periods

January’20, February’20 and March’20 respectively against 03 (three) invoices bearing number 43

dated 01.01.2020, 44 dated 01.02.2020 and 45 dated 02.03.2020 issued by the said supplier of

services. Payments against such supplies have also been made by the applicant.

2) However, M/s Gayatri Projects Ltd has furnished FORM GSTR-1 and FORM GSTR-3B for the

aforesaid tax periods i.e., January’20, February’20 and March’20 in the month of November’20

which has restricted input tax credit in respect of above-noted invoices in the auto-drafted FORM

GSTR-2B of the applicant for the month of November’20 with the remark ‘Return Filed Post

Annual Cut-off’.

3) Based on the aforesaid facts, the applicant has made this application under sub-section (1) of

section 97 of the GST Act and the rules made there under raising the application in FORM GST

ARA-01.

ISSUE:

i. Whether the applicant is entitled for Input Tax Credit already claimed by him on the invoices raised

by M/s Gayatri Projects Ltd. pertaining to the period Jan-2020, Feb2020 and March-2020 for which

the supplier has actually paid the tax charged in respect of such supply to the Government, either in

cash or through utilization of input tax credit admissible in respect of such supply.

ii. Whether the applicant has to reverse the said ITC already availed by him where M/s Gayatri Project

Ltd. has actually paid the tax, though belatedly and fulfilled the responsibility cast upon them by

Section 16(2)(c) of CGST Act, 2017 and all other conditions as mentioned in Section 16(2)(a),

16(2)(b), and 16(2)(d) are fulfilled by the applicant.

OBSERVED:

The Authority observed that there can be no denying that section 16 of the GST Act specifies conditions

and restrictions towards entitlement of Input Tax Credit. The said section contains four subsections which

are to be read in a conjoint manner and the same must be read together with the rules prescribed in this

regard as sub-section (1) of section 16 entitles a registered person to take Credit of Input Tax Subject to

fulfillment of such conditions and restrictions as may be prescribed. Since FORM GSTR- 2B has been

made effective from 01.01.2021, the submission made by the applicant that the auto-drafted FORM

GSTR-2B generated for the month of November’20 i.e., prior to the enactment of the amended rule, does

not have any statutory force towards entitlement of input tax credit for the tax period January-20,

February-20 and March-20. In the light of the aforesaid provisions of the GST Act and rules made there

under, the applicant has availed of input tax credit in excess of his entitlement prescribed under sub-rule

(4) of rule 36.

ITC not to be availed if supplier furnishes invoices for FY 2019-20 in GSTR-1 of November

2020. Authority for Advance Rulings (AAR), West Bengal, Goods & Services Tax [2021] 130

taxmann.com 232 (AAR - WEST BENGAL) [09-08-2021]

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RULING: We pronounce the Ruling:

The applicant is not entitled for input tax credit claimed by him on the invoices raised by M/s Gayatri

Projects Ltd. pertaining to the period Jan-2020, Feb-2020 and March-2020 for which the supplier has

furnished FORM GSTR-1 and FORM GSTR-3B in the month of November’20 and the applicant is,

therefore, required to reverse the said input tax credit.

This Ruling is valid subject to the provisions under Section 103until and unless declared void under Section

104(1) of the GST Act.

FACT OF THE CASE:

1) The applicant is engaged in the business of manufacturing of tissue paper in various categories such

as facial tissues, kitchen towel, toilet roll & napkins. These tissue papers are manufactured from

waste paper, cup stock, tissue brokes and soft wood pulp.

2) The applicant is seeking advance ruling on question as to whether the supply of tissue papers by the

applicant is covered under Sl No. 112 of Schedule II of the Notification No. 01/2017 – Central Tax

(Rate) and, therefore, is leviable to GST at the rate of 12 per cent.

ISSUE:

i. The Applicant is engaged in the manufacture of tissue paper in various categories like facial tissues,

kitchen towel, toilet roll & napkins. The applicant has sought advance ruling in respect of the

following question:

ii. Whether the supply of tissue papers by the applicant is covered under Serial No. 112 of Schedule

II of the Rate Notification No. 01/2017 Central Tax (R) and therefore, is leviable to GST at the

rate of 12%?

iii. Admissibility of the application: The question is about classification of their product falling under

"classification of any goods or services or both;" and hence is admissible under section 97(2)(a) of

the CGST Act, 2017.


According to section 16(4) of CGST Act, 2017, the registered person can avail ITC of the

previous year on or before filing of GSTR-3B for the month of September of the following

year or filing of annual return whichever is earlier. Hence, in the said case the ITC of FY

2019-20 would be eligible to claim on or before filing of GSTR-3B of September, 2020 and

the assessee claimed the same in the month of Nov 2020. Even Though the supplier

furnishes the invoices in Nov 2020 the same should have been claimed only before Sep 2020.

The above ruling passed by the West Bengal AAR explains or clarifies the same.

Tissue Paper not to be covered under Heading No. 4802 of uncoated paper and paperboard

Authority for Advance Rulings, Karnataka [In re Premier Tissues India Limited , GST AAR

Karnataka]

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OBSERVED:

i. The Entry No. 112 of Schedule II of the Notification No. 1/2017 - Central Tax (Rate), dated 28-

6-2017 covers the goods, falling under HSN 4802, that attract GST at rate of 12 per cent.

ii. The impugned products are not covered under the Heading No. 4802. The said product does not

get covered under the required description of Entry No. 112 of Schedule II to the Notification

No. 1/2017 - Central Tax (Rate), dated 28-6-2017, i.e., Heading No. 4802. Therefore, the GST

rate of 12 per cent is not applicable to the instant case.

iii. GST rate of 12 per cent is applicable only to uncoated paper and paperboard used for writing,

printing or other graphic purposes. Further the paper of Heading Nos. 4801 and 4803 are excluded

from the Heading No. 4802. The impugned products being the tissue papers fall under other paper

and paperboard not containing fibers obtained by a mechanical or chemi-mechanical process and,

hence, do not get covered under uncoated paper and paperboard. Therefore, the impugned

products of the applicant are not covered under the Entry No. 112 of Schedule II to Notification

No. 1/2017 - Central Tax (Rate), dated 28-6-2017 and, hence, the GST rate of 12 per cent is not

applicable to them.

iv. Thus, the supply of tissue papers by the applicant is not covered under the Entry No. 112 of

Schedule II to the Notification No. 1/2017 - Central Tax (Rate) and, therefore, GST rate of 12

per cent is not applicable to the supply of the applicant.


The impugned products being the tissue papers fall under other paper and paperboard not containing

fibres obtained by a mechanical or chemi-mechanical process and hence do not get covered under

uncoated paper and paperboard. Therefore, the impugned products of the applicant are not covered under

the entry No. 112 of Schedule II to Notification supra and hence the GST rate of 12% is not applicable

to them.


The impugned products being the tissue papers fall under other paper and paperboard not

containing fibres obtained by a mechanical or chemi-mechanical process and hence do not

get covered under uncoated paper and paperboard. Therefore, the impugned products of the

applicant are not covered under the entry No. 112 of Schedule II to Notification supra and

hence the GST rate of 12% is not applicable to them.

Recent Updates



FACT OF THE CASE:

1) M/s Nagri Eye Research Foundation (Herein referred to as Petitioner) is a charitable trust set up with and objective to undertake eye and research activities as well as manage funds for purpose of education and charitable activities in eye research and prevention of blindness.

2) The petitioner is running a medical store where medicines are sold to indoors and outdoors patients at low rates.

3) The petitioner filed an application before Gujrat Advance Rulings Authority (GAAR) for seeking answers wherein the GAAR passed the ruling that the sale of medicine at low rates amounts to supply of goods.

4) Aggrieved by the decision of the GAAR the Petitioner appealed before the Gujrat Appellate Advance Rulings Authority (GAAAR), which in turn dismissed the appeal.

5) Thus the Petitioner filed petition in High Court against ruling of GAAAR.

ISSUE:

i. Whether GST registration is required for medical store run by Charitable Trust?

ii. Whether supply of medicines at lower rates amount to supply of goods?

OBSERVED:

The Hon’ble high court observed that the as per Section 7(1) of the CGST Act the word supply includes

all form of supply of goods made for consideration irrespective of the amount of consideration paid. The

term business u/s 2(7) of CGST Act includes any trade, commerce, manufacture, profession, wager

whether or not done for pecuniary benefits. The petitioner failed to justify his submissions how the sale

of lower rates of medicines is not said to be trade and commerce.


That the medical store run by Charitable trust would require GST registration and Medical store providing

medicine at lower rates would amount to supply of goods.

The Hon’ble high court dismissed the appeal of the petitioner

Charitable Trust running medical store to give medicines without profit required to be

registered under GST [Nagri Eye Research Foundation v. Union of India, Gujarat High

Court SCA [No. 7822 Of 2021]


The Hon’ble Gujarat High Court stated that every supplier who falls within ambit of Section

22(1) of the Central Goods and Services Tax Act, 2017 (CGST Act) has to get himself registered

under the CGST Act. The Petitioner would require GST Registration even if supplied at lower

rate would amount to supply of goods if the aggregate turnover exceeds the threshold limit.

https://taxguru.in/goods-and-service-tax/president-assents-central-goods-services-tax-act-2017.html

Recent Updates



1. Central Goods and Services Tax (Eighth Amendment) Rules, 2021 - Amendment in Rules 10a [Notification No. 35/2021- Central Tax] i. By issuing the given notification the GST authorities made the Eighth amendment in the Central

Goods and Services Tax Rules, 2021. The Rule 10A was amended to insert the words “which is

in name of the registered person and obtained on Permanent Account Number of the registered

person” in place of “details of bank account” and the proviso inserted as in case of a

proprietorship concern, the Permanent Account Number of the proprietor shall also be linked

with the Aadhaar number of the proprietor.

ii. Further, Rule 10B regarding the Aadhaar authentication for registered person was also inserted.

It is stated that the registered person shall undergo authentication of the Aadhaar number of the

proprietor, in the case of proprietorship firm, or of any partner, in the case of a partnership firm,

or of the karta, in the case of a Hindu undivided family, or of the Managing Director or any whole

time Director, in the case of a company, or of any of the Members of the Managing Committee

of an Association of persons or body of individuals or a Society, or of the Trustee in the Board

of Trustees, in the case of a Trust and of the authorized signatory for filing of application for

revocation of cancellation of registration in FORM GST REG-21 under Rule 23 and For filing

of refund application in FORM RFD-01 under rule 89 and For refund under rule 96 of the

integrated tax paid on goods exported out of India. The manner of Aadhar Authentication is also

clarified in the said notification.

2. Section 25 of the Central Goods and Services Tax Act, 2017 - registration - procedure for notified persons for whose registration provision regarding aadhaar authentication shall not apply [Notification No. 36/2021-Central Tax dated 24/09/2021]

In exercise of the powers conferred by sub-section (6D) of section 25 of the Central Goods and Services Tax Act, 2017, the Central Government, on the recommendations of the Council, made the amendment in the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 03/2021-Central Tax, dated the 23rd February, 2021. In the notification number 36/2021, the section 25(6A) is inserted which states that every person who makes a supply from the territorial waters of India shall obtain registration in the coastal State or Union territory where the nearest point of the appropriate baseline is located. The provision of the same shall not be applicable to the person referred under notification No. 3/2021.

3. Section 25 Of The Customs Act, 1962 - Power to Grant Exemption from Duty - Exemption &

Effective Basic and Additional Customs Duty for Specified Goods - Amendment in

Notification Nos. 50/2017-Customs. [Notification No. 42/2021-Customs]

i. The Notification amend the previously issued Notification No. 50/2017 dated 30th June, 2017.

In the notification it was stated that due to need for public interest the CBIC by excise of powers

under section 25(1) of Customs Act, 1962, exempts some tariff items when such mentioned items

imported to India.

ii. By issuing the Notification No. 42/2021-Customs, the CBIC seeks to insert some Standard rate

as pertaining to the particular entry. The Standard rate in column (4) of Notification No. 50/2017

2.5% inserted for Sr. No. 57, 61,70 and the Standard rate 32.5% in column (4) inserted for Sr.

No. 62, 65, 71.

NOTIFICATIONS

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NOTIFICATIONS/CIRCULARS/PRESS RELEASE/

iii. Further, the same notification seeks to amend notification No. 11/2021-Customs which sought

to prescribe effective rate of Agriculture Infrastructure and Development Cess for specified

goods, in the same against Sr. No. 7, in column (3), for the entry, the entry “Crude Palm Oil”

shall be substituted and against Sr. No. 7, in column (4), for the entry, the entry “20%” shall be

substituted.

iv. It came into force from 11th September, 2021.

4. Section 25 Of The Customs Act, 1962 - Power to grant Exemption from Duty - Exemption to

Specified goods when imported into India - rescission of Notification No. 34/2021-Customs

[Notification No. 43/2021 – Customs]

This Notification Seeks to rescinds the notification of the Government of India in the Ministry of

Finance (Department of Revenue) No. 34/2021- Customs, dated the 29th June, 2021 published in the

Gazette of India which sought to reduce the basic custom duty on Crude Palm Oil [1511 10] and Palm

Oil other than Crude Palm Oil [1511 90] till 30th September 2021.

5. Section 25 Of The Customs Act, 1962 - Power to grant Exemption from Duty - Exemption &

Effective Basic and Additional Customs Duty for Specified Goods [Notification No. 44/2021

– Customs]

The Notification amend the previously issued Notification No. 50/2017 dated 30th June, 2017. In the

notification it was stated that due to need for public interest the CBIC by excise of powers under

section 25(1) of Customs Act, 1962, exempts some tariff items when such mentioned items imported

to India.

By issuing the Notification 44/2021 the CBIC seeks to amend Sr. No. 21F in Column (4) in which

Standard Rate 20% shall be inserted.

1. Easing Container Availability for Export Cargo [Circular No. 21/2021-Customs dated 24-9-

2021]

i. The circular was issued in order to ease container availability for export cargo – registration.

ii. By issuing notification the CBIC invites attention to para 4 of Board`s Circular No.83/1998-

Customs dated 05.11.1998 issued in connection with exemption to containers of durable nature in

terms of Notification No. 104/1994-Customs dated 16.03.1994, as amended. This notification

inter-alia specifies that in any particular case, the initial period of re-exporting said type of

containers imported within 6 months can be extended by the Assistant Commissioner on sufficient

cause being shown.

iii. The Circular No. 83/1998-Customs has the provision the following provision after the application

above circular–“The Assistant Commissioner may grant an extension beyond 6 months upto

further 3 months for the reasons to be recorded in writing”.

iv. As a temporary measure to ease containers available presently for export of containerised cargo

and with aim of promoting export of laden marine containers, it is guided that, where the initial

period of 6 months is till on or before 31.03.2022, the above provision of the Circular may also be

applied on receiving intimation before expiry of initial period of 6 months from the concerned

importer that the container shall be re-exported in laden condition within the next 3 months.

CIRCULARS

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2. Clarification regarding extension of time-limit to apply for revocation of cancellation of

registration in view of Notification No. 34/2021-Central Tax, [Circular No. 158/14/2021-GST

dated 6-9-2021]

i. The circular was issued in order to provide the clarification regarding extension of time limit to

apply for revocation of cancellation of registration in view of Notification No. 34/2021-Central

Tax dated 29th August, 2021 – Registration where Vide Circular No. 148/04/2021-GST, dated

18th May, 2021, detailed guidelines for implementation of the provision of extension of time limit

to apply for revocation of cancellation of registration under section 30 of the Central Goods and

Services Tax Act, 2017 (hereinafter referred to as "the CGST Act / said Act") and rule 23 of the

Central Goods and Services Tax Rules, 2017 (hereinafter referred to as "the CGST Rules") have

been specified, till the time an independent functionality for extension of time limit for applying

in FORM GST REG-21 is developed on the GSTN portal. It may be noted that notification

No.14/2021-Central Tax, dated 1st May, 2021, as amended, had, inter-alia, extended the date of

filing of application for revocation of cancellation of registration till 30th June, 2021, where the

due date of filing of application was falling between 15th April, 2021 to 29th June, 2021.

Government has now issued notification No. 34/2021-Central Tax dated 29th August, 2021

(hereinafter referred to as "the said notification") under section 168A of the said Act to extend the

timelines for filing of application for revocation of cancellation of registration to 30th September,

2021, where the due date of filing of application for revocation of cancellation of registration falls

between 1st March, 2020 to 31st August, 2021. This extension is applicable for those cases where

registrations have been cancelled under clause (b) or clause (c) of sub-section (2) of section 29 of

the said Act.

ii. In order to ensure uniformity in the implementation of the said notification across field

formations, the Board, in exercise of its powers conferred by section 168(1) of the said Act, hereby

clarifies by circular the issues relating to the extension of timelines.

iii. The suitable trade notices may be issued to publicize the contents of this circular.

3. Clarification on doubts related to scope of "INTERMEDIARY" [Circular No. 159/15/2021-

GST dated 20-9-2021]

i. This Circular clarifies and provides the insights of the definition of “Intermediary Services”. Many

taxpayers sought the clarifications for the same before the Authorities of GST. Hence, in view of

the difficulties being faced by the trade and industry and to ensure uniformity in the

implementation of the provisions of the law across field formations, the Board, in exercise of its

powers conferred by section 168 (1) of the Central Goods and Services Tax Act, 2017, CBIC

clarified the concept of Intermediary Services.

ii. From the perusal of the definition of “intermediary” under IGST Act as well as under Service Tax

law, it is evident that there is broadly no change in the scope of intermediary services in the GST

regime vis-à-vis the Service Tax regime, except addition of supply of securities in the definition of

intermediary in the GST Law. The following are the requirements in order to fall in the definition

of Intermediary Services:

(i) Minimum of Three Parties; (ii) Two distinct supplies; (iii) Ancillary supply, (iv) Intermediary service provider to have the character of an agent, broker or any other similar

person;

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(v) Sub-contracting for a service is not an intermediary service; iii. The specific provision of place of supply of ‘intermediary services’ under section 13 of the IGST

Act shall be invoked only when either the location of supplier of intermediary services or location

of the recipient of intermediary services is outside India. The same was also explained by issuing

many illustrations in the circular.

4. Clarification in respect of certain GST related issues [Circular No. 160/16/2021-GST, dated

20-9-2021]

i. The said Circular issued in respect of various representations received from taxpayers and other

stakeholders seeking clarification in respect of certain issues pertaining to GST laws. The issues

have been examined by the GST Authorities in order to ensure uniformity in the implementation

of the provisions of the law across field formations, the Board, in exercise of its powers conferred

by section 168(1) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as

“CGST Act”), hereby clarifies each of these issues as under:

ii. The clarification in respect of Section 16(4) of CGST Act, 2017 where the intent of law as specified

in the Memorandum explaining the Finance Bill, 2020 states that “Clause 118 of the Bill seeks to

amend sub-section (4) of section 16 of the Central Goods and Services Tax Act so as to delink the

date of issuance of debit note from the date of issuance of the underlying invoice for purposes of

availing input tax credit.

iii. Further, it was to clarify whether carrying physical copy of invoice is compulsory during

movement of goods in cases where suppliers have issued invoices in the manner prescribed under

rule 48 (4) of the CGST Rules, 2017 (i.e. in cases of e-invoice). Accordingly, it is clarified that there

is no need to carry the physical copy of tax invoice in cases where invoice has been generated by

the supplier in the manner prescribed under rule 48(4) of the CGST Rules and production of the

Quick Response (QR) code having an embedded Invoice Reference Number (IRN) electronically,

for verification by the proper officer, would suffice.

iv. The last issue held was only those goods which are actually subjected to export duty i.e., on which

some export duty has to be paid at the time of export, will be covered under the restriction imposed

under section 54(3) from availment of refund of accumulated ITC. Goods, which are not subject

to any export duty and in respect of which either NIL rate is specified in Second Schedule to the

Customs Tariff Act, 1975 or which are fully exempted from payment of export duty by virtue of

any customs notification or which are not covered under Second Schedule to the Customs Tariff

Act, 1975, would not be covered by the restriction imposed under the first proviso to section 54(3)

of the CGST Act for the purpose of availment of ITC.

5. Clarification relating to Export of Services-Condition (v) of Section 2(6) of the IGST ACT 2017

[Circular No. 161/17/2021-GST, dated 20-9-2021]

i. The circular was issued to provide the Clarification relating to export of services-condition (v) of

section 2(6) of the IGST Act 2017. In view of the above, it is clarified that a company incorporated

in India and a body corporate incorporated by or under the laws of a country outside India, which

is also referred to as foreign company under Companies Act, are separate persons under CGST

Act, and thus are separate legal entities. Accordingly, these two separate persons would not be

considered as “merely establishments of a distinct person in accordance with Explanation 1 in

section 8”. Therefore, supply of services by a subsidiary/ sister concern/ group concern, etc. of a

foreign company, which is incorporated in India under the Companies Act, 2013 (and thus

Recent Updates



ii. qualifies as a ‘company’ in India as per Companies Act), to the establishments of the said foreign

company located outside India (incorporated outside India), would not be barred by the condition

(v) of the sub-section (6) of the section 2 of the IGST Act 2017 for being considered as export of

services, as it would not be treated as supply between merely establishments of distinct persons

under Explanation 1 of section 8 of IGST Act 2017. Similarly, the supply from a company

incorporated in India to its related establishments outside India, which are incorporated under the

laws outside India, would not be treated as supply to merely establishments of distinct person

under Explanation 1 of section 8 of IGST Act 2017. Such supplies, therefore, would qualify as

‘export of services’, subject to fulfilment of other conditions as provided under sub-section (6) of

section 2 of IGST Act.

6. Clarification in respect of refund of tax specified in Section 77(1) of the CGST Act, 2017 and

Section 19(1) of the IGST Act, 2017 [Circular No. 162/18/2021-GST dated 25-9-2021]

i. The said notification is issued in order to clarify the refund of tax specified in section 77(1) of the

CGST Act and section 19(1) of the IGST Act. The Interpretation of the term “subsequently held”

was provided in the notification In this regard, it is clarified that the term “subsequently held” in

section 77 of CGST Act, 2017 or under section 19 of IGST Act, 2017 covers both the cases where

the inter-State or intra-State supply made by a taxpayer, is either subsequently found by taxpayer

himself as intra-State or inter-State respectively or where the inter-State or intra-State supply made

by a taxpayer is subsequently found/ held as intra-State or inter-State respectively by the tax officer

in any proceeding. Accordingly, refund claim under the said sections can be claimed by the taxpayer

in both the above mentioned situations, provided the taxpayer pays the required amount of tax in

the correct head.

ii. Further it is clarified that the refund under section 77 of CGST Act/ Section 19 of IGST Act,

2017 can be claimed before the expiry of two years from the date of payment of tax under the

correct head, i.e. integrated tax paid in respect of subsequently held inter-State supply, or central

and state tax in respect of subsequently held intra-State supply, as the case may be. However, in

cases, where the taxpayer has made the payment in the correct head before the date of issuance of

notification No.35/2021-Central Tax dated 24.09.2021, the refund application under section 77 of

the CGST Act/ section 19 of the IGST Act can be filed before the expiry of two years from the

date of issuance of the said notification. i.e. from 24.09.2021.

iii. Refund under section 77 of the CGST Act / section 19 of the IGST Act would not be available

where the taxpayer has made tax adjustment through issuance of credit note under section 34 of

the CGST Act in respect of the said transaction.

Recent Updates



DUE DATE INDIRECT TAXATION

10th Oct, 2021

GSTR 7- Summary of Tax Deducted at Source (TDS) and deposited for the month of September 2021

GSTR 8- Summary of Tax Collected at Source (TCS) and deposited by E-Commerce Operator for the month of September 2021

11th Oct, 2021 GSTR 1- Return of outward supplies of taxable goods and/or services for the Month of September 2021 (for Assesses having turnover exceeding 1.5 Cr.)

13th Oct, 2021

GSTR 6- Return for Input Service Distributors for the month of September 2021.

GSTR 1- Return of outward supplies of taxable goods and/or services for the Quarter July to September 2021 under QRMP Scheme

20th Oct, 2021

GSTR 5- Summary of outward taxable supplies and tax payable by a non-resident taxable person

GSTR 5A- Summary of outward taxable supplies and tax payable by a person supplying OIDAR services

GSTR 3B- Summary of outward supplies, ITC claimed, and net tax payable for taxpayers with turnover more than Rs.5 crore in the last FY or have not chosen the QRMP scheme for the quarter of Jul- Sept 2021

22nd Oct, 2021 GSTR 3B- Summary of outward supplies, ITC claimed, and net tax payable by taxpayers who have opted for the QRMP scheme and registered in category X states or UTs

24th Oct, 2021 GSTR 3B- Summary of outward supplies, ITC claimed, and net tax payable by taxpayers who have opted for the QRMP scheme and registered in category Y states or UTs

31st Oct, 2021 GSTR 1- Quarterly return of outward supplies of taxable goods and/or services for registered persons with aggregate turnover up to Rs. 1.50 Crores for the quarter July to September 2021

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INTERNATIONAL

TAXATION

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Reassessment can be initiated based on materials which weren’t considered during original

assessment [ M/s Cairn India Ltd V. Deputy Director of Income-Tax-I, (International

Taxation), Chennai [2021] 130 taxmann.com 167 (Madras) [01-09-2021]

FACT OF THE CASE:

1) Cairn Energy India Private Limited [“CEIPL”] and Cairn Energy Plc[“CEPLC”] has entered into

a Guarantee Fee agreement on 1st April 2005 in terms of which CEPLC has guaranteed the loan

facility of US$ 48 mn extended to CEIPL by Royal Bank of Scotland Plc.

2) Further CEIPL and CEPLC have entered into another agreement on 27 June 2006 in terms of

which CEPLC has guaranteed the revolving credit facility of up to US$ 425 mn extended to CEIPL

by a syndicate of banks.

3) During the year under assessment the assessee company has paid Rs.14,91,73,063/- to CEPLC as

guarantee fee charged @ 1.5% of the loan facility guaranteed as per the Guarantee Fee. This fee is

paid in lieu of the risk undertaken by CEPLC in providing the guarantee on behalf of CEIPL.

4) The petitioner company filed its return for the year 2007-2008. The petitioner’s case was selected

for scrutiny. After completing all the procedures, the assessment order was passed on 24.02.2011

under Section 143(3) of the Income Tax Act.

5) The case was reopened by the Income Tax Department because the assessing officer had a “reason

to believe '' that there was income which had escaped assessment.

ISSUE:

i. Whether the Assessing Officer was right in re-opening the case because of sufficient “reason to

believe” that some income has escaped assessment or was it merely a change of opinion.

OBSERVED:

The reason given by the Assessing Officer that no TDS was deducted for the payment effected in Foreign

currency towards loan guarantee interest was sufficient reason to believe that income might have escaped

the assessment

HELD:

The reason given by the Assessing officer that no TDS was deducted for the payment effected in Foreign

currency towards loan guarantee interest was sufficient reason to believe that income might have escaped

the assessment therefore the case can be reopened and the petitioner is bound to participate in the

reopening proceedings for the purpose of defending their case by availing the opportunities to be provided

by the authorities in accordance with law.


The Assessing Officer having a sufficient reason to believe that income might have escape

Assessment is enough reason to reopen the case for scrutiny.

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Income earned by company from sale of software licenses and income from support, maintenance and training services rendered in relation to such software licenses sold through third parties in India was not chargeable to tax as "Royalty" under section 9 as well as under article 12 of DTAA [BMC Software Asia Pacific Pvt Ltd. V. Assistant Commissioner of Income-tax, (International Taxation), Circle-1, Pune [2021] 130 taxmann.com 205 (Pune - Trib.) [08-09-2021]


FACT OF THE CASE:

1) BMC Software Asia Pacific Pte Ltd. (hereinafter referred to as “assessee”), is a Singapore based

company. It did not file its return of income for the year 2010-11.

2) The (AO) observed that the assessee earned income from sale of Software Licenses services

provided in relation to such software licenses during the previous year relating to 2010-11 for which

no return of income was filed and initiated re-assessment proceedings u/s 148 of the Act.

3) The assessee submitted that it was not the owner of the software licenses rather it was only

permitted to distribute such software licenses in the Asia Pacific region.

4) AO canvassed a view that the payment received by the assessee for supply of software related

services constituted “Royalty” under the Act as well as the Double Taxation Avoidance Agreement

(DTAA) between India and Singapore and computed the total income at Rs.48,01,58,318/-.

5) Assessee raised objections before the Dispute Resolution Panel (DRP) urging that it sold software

licenses and the receipt was not in the nature of Royalty.

6) The DRP held that the action of the AO in taxing the amount was in accordance to law. Aggrieved

thereby, the assessee filed appeal before the Tribunal.

ISSUE:

i. Whether the revenue earned from sale of software and rendering of the related services for the

software is chargeable to tax as “Royalty” under the Act as well as the DTAA?

ii. Whether the reassessment was valid?

OBSERVED:

i. The Tribunal agreed that the nature of receipt was sale of software and related services.

ii. The Tribunal relying on the recent decision of the Supreme court in case of Engineering Analysis

Centre of Excellence Pvt. Ltd. Vs. CIT (2021) 432 ITR 472 (SC) and Article 12(3) of the DTAA, said

that the receipts of Rs.48.01 crore were on account of sale of Software/ license and rendition of

services and the amount cannot be brought within the ambit of ‘Royalties’ under Article 12 of the

DTAA.

iii. The taxability of amount was also considered under Section 9(1)(vi) defining the term “royalty”.

Explanation 4 clarifies that `the transfer of all or any rights in respect of any right, property or

information includes and has always included transfer of all or any right for use or right to use a

computer software (including granting of a licence) irrespective of the medium through which

such right is transferred‟. The Tribunal also referred to the view of the SC in the abovementioned

case that the Explanation 4 to section 9(1)(vi) inserted vide the Finance Act 2012 is not clear as it

expands the scope and hence prospective and held that the assessment year under consideration

is 2010-11 and hence the Explanation cannot apply to the facts of the case.

Recent Updates


Where there was alleged interest-free debt funding of a fully owned overseas special purpose Vehicle (SPV) to use fund for overseas acquisition of a target company, it was held that there cannot be a transaction of interest-free debt funding of overseas SPV by its sponsor; even if such a transaction is at all hypothetically possible, arm's length interest on such funding will be 'nil' [Bennett Coleman & Co. Ltd. V. Deputy Commissioner of Income-tax [2021] 129 taxmann.com 397 (Mumbai - Trib.)[30-08-2021]


iv. As the receipt in the hands of the assessee did not bear the character of ‘Royalty’, it was said to be

in the nature of ‘Business Profits’ under the DTAA and to bring Business Profits of a resident of

the other country to tax in India within the ambit of Article 7, the foreign entity needs to have a

Permanent Establishment (PE) in India in terms of Article 5 of the DTAA.

HELD:

As the assessee did not have a permanent establishment in India, the Income was held to be not taxable

in India.

The reassessment was also set aside on the grounds that the AO had ordered the reassessment solely on

the ground of income being Royalty. As the income was held not to be royalty under the DTAA, the

reasons for reassessment stood invalid.

FACT OF THE CASE:

1) Bennett Coleman & Co. Ltd., (hereinafter referred to as “assessee”) had a fully owned subsidiary namely, Times Infotainment Media Ltd (TIML-India, in short).

2) The assessment years in consideration are 2010-11 to 2012-13. 3) There was an interest-free debt funding by the assessee of its fully owned overseas subsidiary

company, which was in nature of a special purpose vehicle (SPV), with a corresponding obligation to

use fund for purpose of overseas acquisition of a target company abroad.

4) When the transaction came up for scrutiny before the Transfer Pricing Officer, he was of the

considered view that the amount has been as a loan by the assessee in its annual return, and, therefore,

the benchmarking of this loan transaction is required to be done as "an independent entity would

have charged interest on such a transaction".

5) The plea of the assessee that the activity was in the nature of the stewardship activity was rejected.


Once it is held that the receipt in the hands of the Assessee does not bear the character of

“Royalty”, it will be in the nature of “Business Profits‟ under the DTAA. In order to bring

`Business profits‟ of a resident of the other country to tax in India within the ambit of Article

7, it is sine qua non that the foreign enterprise must have a Permanent Establishment (PE) in

India in terms of Article 5 of the DTAA. In the absence of a PE, the taxability under Article 7

does not trigger and hence, the income can’t be bought to India

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6) The claim of the assessee that the loan was in the nature of quasi-equity and as it was for the purpose

of making strategic investments for and on behalf of TIML India and the Times Group, and,

therefore, the arm's length price adjustment for the interest was not warranted. This plea did not find

favour with the TPO.

ISSUE:

i. Whether an interest-free debt funding of an overseas company in the nature of a special purpose

vehicle (SPV), with a corresponding obligation to use it for the purpose of acquisition of a target

company abroad, can be compared with a loan simpliciter, and be subjected to an arm's length price

adjustment, on the basis of Comparable Uncontrolled Price (CUP) method?

OBSERVED:

i. Under CUP method, arm's length price of funding of SPVs by assessee company, or providing

them with wherewithal to achieve objectives of SPVs which were determined by commercial

exigencies of assessee-company, is 'nil'.

ii. If there has to be an arm's length consideration under CUP method, other than interest, for such

funding, it has to be net effective gains - direct and indirect, attributable to risks assumed

by 'sponsorer of SPV' to 'SPV'.

iii. ITAT observed that there was an error in not appreciating the fact that the subject transaction of

provision of funds by the Appellant to its AE cannot be compared to a simpliciter loan transaction

between a financial 1nstitution and its client and accordingly, arm's length analysis using CUP is not

possible. Also, that there was an error in concluding that there has been shifting of profits outside

India. Incorrect reliance on Thin Capitalization rules.

HELD:

There cannot be a transaction, between independent enterprises, of interest-free debt funding of an

overseas SPV by its sponsorer. Even if such a transaction between independent enterprises is at all

hypothetically possible, arm's length interest on such funding will be 'nil'. Impugned ALP adjustment was

to be deleted. Assessee got relief accordingly.


In this order it was held that the transaction of interest-free debt funding of an overseas SPV

by its sponsorer between the independent enterprises cannot happen. If there has to be an

arm's length consideration under the CUP method for such transaction, other than interest, it

has to be net effective gains- direct and indirect, attributable to the risks assumed by the

sponsorer of the SPV, to the SPV in question.

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There cannot be a transaction, between independent enterprises, of interest-free debt funding of an overseas SPV by its sponsorer; if such a transaction between independent enterprises is at all hypothetically possible, arm's length interest on such funding will be 'nil' [Bennett Coleman & Co. Ltd. V. Deputy Commissioner of Income-tax [2021] 129 taxmann.com 398 (Mumbai - Trib.) [30-08-2021]


FACT OF THE CASE:

1) TIML India (hereinafter referred to as assessee) entered into an agreement with SMG-UK for

purchase of Virgin Radio through its SPV TIML Golden-UK. TIML-India was specifically required

to provide comfort to the seller group since TIML-Golden was a newly set up entity for the purpose

of acquisition of Virgin Radio.

2) When the agreement to sell for sale of Virgin Radio was concluded, one of the clauses in the said

agreement, inter alia, provided that 'In consideration of the seller entering into this agreement (the

TIML-India), as primary obligor and not merely as surety, unconditionally and irrevocably

guarantees to the seller the proper and punctual performance of the purchaser's obligations under

this agreement and the transaction documents, including, without limitation, due and punctual

payment of any sum which the purchaser is liable to pay'.

3) The Transfer Pricing Officer treated this clause as a performance guarantee issued by the assessee

in favour of the TIML-Global for payment of purchase consideration for Virgin Radio.

4) The TPO proceeded to apply the CUP method for the determination of arm's length price of this

guarantee, and adopted 3 per cent as its arm's length price. Aggrieved, assessee raised the objections

before the Dispute Resolution Panel, but without any success.

ISSUE:

i. Whether when assessee already had an obligation to finance transaction of acquisition of target company by SPVs, same obligation being reiterated did not amount to a performance guarantee by SPV and if such a commitment was reiterated for performance of own obligations, reiteration of this own commitment could not have an arm's length price?

ii. Whether since assessee-company was de facto beneficiary of the transaction, assessee-company could not be treated as a guarantor but rather as a primary obligor for its own transaction undertaken through SPV?

iii. Whether impugned ALP adjustment, on CUP basis, was devoid of any legally sustainable basis?

OBSERVED:

SPVs in question came into existence due to the decision to purchase, taken by the assessee-company, and

to execute the said decision at the operational level. Thus, the entire transaction of acquiring Virgin Radios

was in furtherance of the business interests of the assessee-company, finalized by the assessee much before

even the AE in question came into existence, and the assessee-company was de facto beneficiary of this

transaction. Under these circumstances, the assessee-company cannot be treated as a guarantor but rather

as a primary obligor for its own transaction undertaken through the SPV.

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HELD:

It was held that when assessee already had an obligation to finance transaction of acquisition of target

company by SPVs, same obligation being reiterated, in different words, did not amount to a performance

guarantee by SPV and if such a commitment was reiterated for performance of own obligations, reiteration

of this own commitment could not have an arm's length price. Since assessee-company was de facto

beneficiary of the transaction, assessee-company could not be treated as a guarantor but rather as a primary

obligor for its own transaction undertaken through SPV. Thus, impugned ALP adjustment, on CUP basis,

was devoid of any legally sustainable basis.


Performance Guarantee cannot be given by the primary obligor and thus the obligation of a

company to pay a certain amount when it is the de-facto beneficiary of the transaction cannot

be considered as a performance guarantee.

Recent Updates


NOTIFICATIONS/CIRCULARS/ORDERS

1. The Central Board of Direct Taxes (CBDT) has extended the validity of provisions of Rule

10TD (1) & Rule 10(2A) till Assessment Year 2021-22.

[Notification No. 117/2021/F. No. 370142/44/2021-TPL]

i. Rule 10TD prescribes list of eligible international transactions where transfer price declared

by the assessee shall be required to be accepted by the Income-tax Authorities.

ii. In exercise of the powers conferred by sub-section (2) of section 92CB read with

section 295 of the Income-tax Act, 1961, the Central Board of Direct Taxes has made the following amendment:

iii. In the Income-tax Rules, 1962, in rule 10TD, in sub-rule (3B), for the words and figures

“Assessment year 2020-21”, the words and figures “assessment years 2020-21 and 2021-22” shall be substituted. This is deemed to have come into force from 1st April 2020.

2. Foreign Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021 [F. No. FEMA 23(R)/(5)/2021-RB]

i. Regulation 15 Foreign Exchange Management (Export of Goods & Services) Regulations, 2015 relates to the Advance payment against the exports, wherein, an exporter receives advance payment (irrespective of interest) from either a buyer or a third party named in the export declaration made by the exporter.

ii. According to Regulation 15(1)(ii), exporter is mandated to ensure that the Rate of Interest to be decided is not more than the London Inter-Bank Offered Rate (“LIBOR”) +100 basis points.

iii. RBI has announced the following amendments to the regulation: iv. Regulation 15, in sub-regulation 1, for clause (ii), the following is to be substituted, namely: v. “ii) the rate of interest, if any, payable on the advance payment shall not exceed 100 basis

points above the London Inter-Bank Offered Rate (LIBOR) or other applicable benchmark as may be directed by the Reserve Bank, as the case may be.

3. Income-Tax (Twenty-Ninth Amendment) Rules, 2021 - Insertion Of Rule 12F

[Notification No. 109/2021/F.No. 370142/27/2021-TPL (Part I)]

i. The Central Board of Direct Taxes has made the following rules to further amend Income-

tax Rules, 1962.

ii. In the Income Tax Rules, 1962, Rule 12F is to be inserted after rule 12E.

iii. 12F. Prescribed income-tax authority under second proviso to clause (i) of sub-section (1)

of section 142.- The prescribed income-tax authority under second proviso to clause (i) of

sub-section (1) of section 142shall be an income-tax authority not below the rank of

Income-tax Officer who has been authorized by the Central Board of Direct Taxes to act

as such authority for the purposes of that clause.

4. Income-Tax (Thirtieth Amendment) Rules, 2021 - Amendment In Rule 10TD

[Notification No. 117/2021/F. No. 370142/44/2021-Tpl]

i. The Central Board of Direct Taxes (CBDT) has extended the validity of provisions of Rule 10TD (1) & Rule 10(2A) till Assessment Year 2021-22. Rule 10TD prescribes list of eligible international transactions where transfer price declared by the assessee shall be required to be accepted by the Income-tax Authorities.

NOTIFICATIONS

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NOTIFICATIONS/CIRCULARS/ ORDERS

ii. In exercise of the powers conferred by sub-section (2) of section 92CB read with section 295 of the Income-tax Act, 1961, the Central Board of Direct Taxes has made the following amendment: In the Income-tax Rules, 1962, in rule 10TD, in sub-rule (3B), for the words and figures “Assessment year 2020-21”, the words and figures “assessment years 2020-21 and 2021-22” shall be substituted.

iii. This is deemed to have come into force from 1st April 2020.

1. Extension of Time Lines for Filing of Income Tax Returns and Various Reports of Audit

for Assessment Year 2021-22 [Circular No. 1712021 [F. No. 225/49/2021/ITA-II]

i. Extension of timelines for filing Income-tax returns and various reports of audit: ii. Due date of furnishing Report from an Accountant by persons entering into international

transaction or specified domestic transaction under S 92E is further extended to 31st January 2022.

1. Section 119 of The Income-Tax Act, 1961 - instructions to subordinate authorities - order under section 119 providing exclusion to section 144B - cases in which limitation period expires on 30-9-2021 [CBDT ORDER F. NO. 187/3/2020-ITA-I, DATED 22-9-2021] The CBDT has notified two more situations where the assessment is not to be done under the faceless assessment regime. Assessment for following cases shall be completed by jurisdictional AO if the time limit for completion expires on 30-9-21.

- where afresh assessment is to be made due to assessment order being set-aside or - assessment is to be done under section 147

However, such assessment shall be pending with jurisdictional AO as on 11-09-21 or thereafter.

CIRCULARS

ORDERS

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DUE DATE INTERNATIONAL TAXATION

30th Sept, 2021

If the accounts are not audited before the due date of submission i.e. 15th July, then the FLA Return shall be submitted based on unaudited/ provisional accounts and once the accounts are audited, revised FLA Return shall be submitted by 30th September.

Within 7 days

of close of the

month

Borrowers are required to report all ECB transactions to the RBI on a monthly basis through an AD Category – I Bank in the form of ECB 2 Return

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CORPORATE

LAWS

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Parties engaged in commercial litigation must weigh commercial interests and avoid filing

mindless appeals Uflex Ltd. V. Government of Tamil Nadu [2021] 130 taxmann.com 317

(SC) [17-09-2021]

FACT OF THE CASE:

1) Government order (G.O) issued by the Government of Tamil Nadu inter alia appointed the Joint

Commissioner-II as the Tender Inviting Authority while the Commissioner of Prohibition and

Excise was appointed as the Tender Accepting Authority and a Tender Scrutiny and Finalisation

Committee for purposes of production and supply of polyester based hologram excise labels on

turnkey basis.

2) The stickers were to be pasted across the caps of bottles of liquor sold by the State Government

through one of its instrumentalities, the Tamil Nadu State Marketing Corporation.

3) The draft tender document consisting of technical specification, product specification, eligibility

criteria and general terms and conditions was approved in the fourth meeting held.

4) A Notice Inviting Tender was issued on with various technical specifications and eligibility criteria.

The pre-bid meeting was held wherein the respondents conveyed their objections and concerns

highlighting that wider participation as mandated by the G.O. should be adhered along with making

a grievance about some arbitrary conditions in the tender notice.

5) However, without waiting for the final decision in respect of the aforesaid, two of the prospective

tendering parties, viz., M/s. Kumbhat Holographics and M/s. Alpha Lasertek India LLP filed writ

petitions where intervention was also permitted by two other parties.

6) These petitions were dismissed by the learned single Judge. The primary contention both by

Kumbhat and Alpha was that the terms of the tender were skewed in favour of Uflex Limited and

Montage Enterprises Private Limited. The grievance which was made was that certain requirements

were introduced in the tender to ensure that only Uflex and Montage would be able to qualify under

the tender requirements.

7) In the course of scrutiny by the learned single Judge, the respondents were permitted to accept the

bids from prospective bidders and process the same with the report being submitted with details of

qualified bidders under the technical specifications of the tender.

8) The report of the TSC was, thus, submitted, which recorded that among the three bidders who had

submitted the bids, all three satisfied all the technical and product specifications as per NIT including

Uflex and Montage.

9) The High Court while dismissing the writ petition noted that the requirement of having minimum

three successful bidders was thus satisfied.

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ISSUE:

i. Whether the judicial process be resorted to for downplaying the freedom which a tendering party

has, merely because it is a State or a public authority.

OBSERVED:

The Hon’ble High Court stated that merely because a company is more efficient, obtains better technology,

makes more competitive bids and, thus, succeeds more cannot be a factor to deprive that company of

commercial success on that pretext. The State Government did provide relief by issuing a corrigendum to

address the issue relating to hidden text being visible only through Polaroid, as colour change background

viewable with film as an identifier did not attract the rigour of this stated patented technology. The issue

was actually over with that corrigendum.

That one of them amongst the three bidders met the technical specifications but did not succeed further

on financial issues and turnover under Part 4 of the NIT. Thus the same cannot be used to nullify the

whole tendering process the impugned order cannot be sustained for all the aforesaid reasons and must

be set aside and the appeals are accordingly allowed.

HELD:

The tender jurisdiction was created for scrutiny of commercial matters and, thus, where continuously

parties seek to challenge award of tenders, we are of the view that the succeeding party must get costs and

the party which loses must pay costs. The total costs payable to the petitioner/appellant would be

Rs.23,25,750/-. The State Government cannot be left behind so far as their compensation of costs in

defending such a litigation is concerned and we, thus, allow the costs of Rs.7,58,000/-. The costs be

accordingly paid within a period of four weeks by Kumbhat and Alpha in equal share to the two parties

as aforesaid.


The Honorable court rightly concluded that applicant are free to seek damages in civil court

& all imaginary grievances and business rivalry should be resisted. Applicant should be aware

of filing mindless appeals.

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Due regard would have to be given to inconvenience of flat purchaser and hardship faced by him

if petition was entertained and doctrine of 'forum non-conveniens' applied in full vigor in instant

facts and in favour of flat purchaserHagwood Commercial Developers (P.) Ltd. V. Rahul

Madhukar Deshmukh [2021] 130 taxmann.com 313 (Bombay)[06-09-2021]


FACT OF THE CASE:

1) The petitioner M/s. Hagwood Commercial Developers Pvt. Ltd. (hereinafter referred to as

‘developer’ for short), proposed to develop a registered project in the name of ‘Prozone Palms’ at

Nagpur. The respondent No.1 (hereinafter referred to as ‘flat purchaser’ for short) approached the

developer and booked flat No. 1202 of proposed Tower ‘Pallazio’ of ‘Prozone Palms’.

2) A fall out between developer and flat purchaser resulted in a complaint filed before the Maharashtra

RERA Authority under the provisions of the Real Estate (Regulations and Developments) Act, 2016.

3) By an order dated 16/10/2019, the ‘Authority’ held that the flat purchaser is entitled to get refund

of consideration amount and the reimbursement of registration charges and taxes with simple

interest at the rate of 10.4% from the dates of their payment till they are refunded / reimbursed was

awarded to the flat purchaser.

4) The order of the authority was challenged by the developer before the Tribunal by way of an appeal

under Section 43 of the said Act. The developer was directed to deposit entire amount as per the

authority’s order in compliance of proviso to Section 43(5) of the said Act before 4/5/2021.

5) The Tribunal’s order was challenged before Hon’ble Bombay High Court by way of a Second

Appeal. The Second Appeal was allowed to be withdrawn with liberty to file the Petition. This

Petition challenging the impugned order is accordingly filed. During the pendency of this Petition,

the appeal was dismissed for non-compliance by an order dated 26/7/2021. The dismissal is also

challenged by consequential amendments.

ISSUE:

i. Whether the objection of the flat purchaser that the present Petition should not be entertained at

the Principal Seat on merits and instead returned to the developer for presenting the same before

the Nagpur Bench to be disposed of deserves to be upheld.

OBSERVED:

The Hon’ble Bombay High Court observed that the provisions of the Articles 226 and 227 leave no

manner of doubt that as the impugned order has been passed at Mumbai, indisputably, a part of cause of

action arises in Mumbai. Thus the Petition, therefore, is maintainable at the Principal Seat of this Court.

The Hon’ble Court stated that if the convenience of all the parties is considered, it is the flat purchaser

who will be inconvenienced most in the facts of the present case.

In respect of a project of this big magnitude which is situated in Nagpur district; the agreement for sale

whereof is registered at Nagpur; the entire consideration is paid at Nagpur; the flat purchaser is resident

of Nagpur; the developer has a site office at Nagpur; the breach of obligation alleged has arisen at Nagpur,

it is appropriate if the Nagpur Bench of this Court entertains this Petition instead of the Principal Seat..

The doctrine of ‘forum non-conveniens’ applies in full vigor in the present facts and in favour of the flat

purchaser.

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HELD:

a) The objection of the Petitioner that the present Petition should not be entertained at the Principal

Seat as it will be more appropriate for the Nagpur Bench of this Court to hear the Petition is

upheld.

b) The proceedings in this Petition be placed before the Hon’ble Chief Justice on the administrative

side for His Lordship’s consideration for transferring the Petition to the Bench of this Court at

Nagpur.

c) At the request of the Petitioner, in the interest of justice, for a period of six weeks from today, the

order of the Authority impugned before the Tribunal, not to be acted upon.

d) Order accordingly. No order as to costs.

Preferential allotment can be issued by issuer company, however, before issuance of

preferential allotment certain conditions are required to be complied which is mandatory as

per Regulation 160 of ICDR Regulations. Regulation 160(d) provides that issuer is required

to be in compliance with LODR RegulationsAshav Advisory LLP V. Securities and Exchange

Board of India [2021] 130 taxmann.com 204 (SAT - Mumbai)[09-09-2021]

FACT OF THE CASE:

1) The appellant is a limited liability partnership incorporated in 2019 under the Limited Liability

Partnership Act, 2008. SEBI (Hereinafter referred to as Respondent no.1) is the Regulator

constituted under the Securities and Exchange Board of India Act, 1992 (hereinafter referred to as

“SEBI Act”). The Company Ruchi Soya Industries Ltd. (Hereinafter referred to as Respondent

no.2), the BSE Ltd. Hereinafter referred to as Respondent no.3) and the National Stock Exchange

Ltd. (Hereinafter referred to as Respondent no.4)

2) The Standard Chartered Bank and DBS Bank filed applications before the National Company Law

Tribunal, Mumbai for initiating Corporate Insolvency Resolution Process against the erstwhile Ruchi

Soya Industries Ltd. The committee of creditors and NCLT approved the resolution plan under

Section 31 of the IBC on 24th June, 2019.

3) The Board of Directors of the Company passed a resolution approving allotment of equity shares

on preferential basis to the appellant. A special resolution was passed the shareholders of the

Company authorising the Company to issue preferential allotment subject to the consent to be given

by the lenders/ creditors of the Company. The aforesaid resolution was placed before BSE and NSE

who granted in-principle approval.

4) The Company wrote letters to NSE and BSE seeking extension for completion of the formalities

under the ICDR Regulations etc. for allotment of the shares in view of the lockdown. BSE informed


As stated by the court, petition be placed in appropriate Jurisdiction thereby considering

convenience of Authorities, petitioner as well as respondent.

Recent Updates



that allotment is required to be made within the time frame as required under Regulations 170 of the

ICDR Regulations which cannot be relaxed.

5) Similarly, NSE also informed the Company that granting exemption or giving further time for

completion of formalities was outside NSE’s jurisdiction. Accordingly, the Company Ruchi Soya

made a representation to SEBI for relaxation from the approval of Regulation 170 of the ICDR

Regulations.

6) NSE sought clarification from the Company Ruchi Soya regarding its compliance with the MPS

requirements as specified under Regulation 38 of the Listing Regulations, 2015 and Regulation

160(d) of ICDR. Similar clarification was sought by BSE.

7) The Company issued clarifications to the two stock exchanges and specifically stated that the

proposed preferential allotment would not be counted for the purpose of approved mechanism of

reducing the minimum promoter’s shareholding and that the Company will undertake to reduce the

promoter’s shareholding to the desired level upon successful implementation of the resolution plan

under the IBC.

8) The BSE held that the preferential allotment was not in compliance with the “conditions for

preferential issue” as per Regulation 160(d) of the ICDR Regulations and, therefore, directed the

Company not to allot equity shares under preferential allotment to the appellant. Similar order was

passed by NSE holding that the Company was not in compliance with the MPS requirement.

9) The SEBI rejected the request of the Company Ruchi Soya Industries Ltd. seeking exemption from

strict compliance of Regulation 170 of ICDR Regulations on the ground that the Company was not

in compliance of Regulation 160(d) of the ICDR Regulations. The appellant being aggrieved by the

order passed by BSE, NSE and SEBI has filed the present appeal.

ISSUE:

(i) Whether the application filed by the issuer Company under Regulation 3000 of the ICDR to relax

the requirement stipulated under Regulation 170 was rightly rejected by SEBI.

OBSERVED:

The Hon’ble Securities Appellate Tribunal observed that Preferential allotment can be issued by issuer

company, however, before issuance of preferential allotment certain conditions are required to be

complied which is mandatory as per Regulation 160 of ICDR Regulations. Regulation 160(d) provides that

issuer is required to be in compliance with LODR Regulations. Regulation 38 of LODR Regulations

requires issuer to comply with MPS requirement as specified under rule 19A of SCR Rules. Rule 19A

provides that minimum public shareholding (MPS) in a Company should be 25% at all times.

Rule 19A(5) further provides that if a resolution plan is issued under provisions of IBC which results in

fall of public shareholding below 25%, then issuer is required to ensure that minimum public shareholding

of 25% is achieved within three years from date of fall. Proviso to rule 19A(5) further indicates that if

MPS falls below 10%, then MPS of 10% is required to be achieved within 18 months from date of such

fall. Where 18 months had expired and no steps had been taken by Company till date to comply with MPS

requirement under proviso to rule 19A(5) and, consequently, company was not in compliance with

regulation 160(d), no preferential allotment could have been issued. Under Regulation 170 of the ICDR

Regulations, a special resolution with regard to allotment of shares is required to be carried out within 15

days failing which a fresh special resolution is required to be passed. Thus, the special resolution could not

be given effect to.

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HELD:

a. The appellant being an aggrieved person as the preferential allotment which was issued in his favour

has ultimately been declined by the stock exchange and SEBI and, therefore, to that extent the

appellant has the right to question the decision of the stock exchange and of SEBI. Thus, it was

held that the appeal is maintainable.

b. For the reasons stated aforesaid, no error was found in the impugned orders passed by the two

Stock Exchanges and SEBI. No direction can be issued to the issuer Company Respondent no.2.

c. In view of the aforesaid, the appeal fails and is dismissed with no order as to costs.

NCLT held that there was ample power to invoke section 242 at any stage and, therefore,

interim reliefs were to be allowed and petitioners were directed to use all powers available

with them to extend their long arm to thoroughly investigate affairs of companies [Union of

India V. Videocon Industries Limited [2021] 130 taxmann.com 52 (NCLT - Mum.)[31-08-2021]

FACT OF THE CASE:

1) This is a Petition filed by the Petitioner, i.e. Union of India, Ministry of Corporate Affairs through

the Joint Director, working in the Office of Regional Director (Western Region), Mumbai under

Section 241-242, read with other relevant provisions of the Companies Act, 2013, praying this

Tribunal for certain interim reliefs

2) In June 2021, NCLT Mumbai approved Twin Star Technology Ltd's offer for Videocon Industries

Ltd, resulting in almost 95 per cent haircut for lenders against approved claims of about Rs 62,000

cr. TSTL is a fully owned subsidiary of Anil Agarwal's Vedanta Group.

3) Dissenting creditors Bank of Maharashtra, IFCI, Morgan Securities, SIDBI and ABG

Shipyard moved appellate authority, National Company Law Appellate Tribunal (NCLAT), with

a plea that the resolution plan approved by the NCLT is close to the liquidation value of the

company.

4) While smaller lenders dissented against the resolution plan offered by TSTL, the larger banks in

the committee of creditors (CoC) were in favour of it.

ISSUE:

i. Whether the petition under section 241-242 praying for certain interim reliefs is maintainable?


The court considering facts of case stated that there was no error in order passed by stock

Exchange & SEBI. Also it did consider the plea as maintainable thereby safeguarding rights

of appellant to question the decision.

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OBSERVED:

1) The NCLT observed that the balance sheets of the flagship company, i.e. Videocon Industries

Ltd., the reserves and surplus as declared in the financial statements in the year 2014 as Rs.

10,028.09 crores (in December, 2014) and the same is declared as Rs. (-)2,972.73 crores in the F.Y.

ended 2019, showing the steep downfall in the reserves and surplus just within the period of five

years.

2) The Secured loans wherein it is declared as Rs.20,149.23 crores in the year 2014 and the same

increased to Rs.28,586.87 crores in the year 2019, showing a steep rise in the loan component.

Coming to the investment in the year 2014, the Company recorded Rs.5,626.93 crores and the

same is increased to Rs.9,635.75 crores, showing a rise in the investment.

3) It is also made to note that the operating income is shown as Rs. 18,967.60 crores in the year 2014

which has come down to just Rs.906.60 crores in the year 2019. Copy of the Annual Accounts for

2016-17 and 2017-18 which are marked as Annexure 3, clearly shows that the promoters hold

40.59% share capital of the company out of which 98.16% of their equity is pledged with various

financial institutions and banks

4) The Auditor was tasked to perform transaction review and identify transactions undertaken by the

Respondent No.1 i.e. (i) Preferential transactions under Section 43 of the Code (ii) Undervalued

transactions under Section 45 of the Code (iii) Extortionate credit transactions under Section 50

of the Code and (iv) Fraudulent transactions under Section 66 of the Code.

5) The Audit report concludes that the transactions mentioned in Table 1 of the judgement have had

an effect of putting such creditor entities connected/known to the Respondent No.1, in a

beneficial position than they would have been in the event of distribution of assets being made in

accordance with Section 53 of the Code. Accordingly, the Auditor has noted that the aforesaid

transactions are classified under Section 43 of the Code as preferential transaction.

HELD:

The order issued by NCLT, Mumbai, directed that all movable and immovable properties of Videocon

promoters, including bank accounts, lockers, Demat accounts jointly held properties be attached during

the insolvency process.


The court after considering all relevant provisions & facts of the case held certain reliefs as

maintainable & dismissed the rest.

Recent Updates



Madras HC remanded matter back as SEBI failed to fix liability on writ-applicant [Golden

Trees Plantation Ltd. V. Securities & Exchange Board of India [2021] 130 taxmann.com 410

(Gujarat) [06-09-2021]

FACT OF THE CASE:

1) SEBI (Herein referred to as Respondent) found that the schemes floated by the Golden Trees Plantation Ltd (Herein referred to as Petitioner) company squarely fell within the definition of a Collective Investment Scheme as defined under section 11AA of the SEBI Act.

2) Also, that several investor complaints had been made to the effect that the company was not resolving investor grievances regarding the return of dues, and as a result.

3) SEBI issued an order directing the applicant company to wind up (with returns due to investors in accordance with terms of offer).

4) However, said order did not say anything or explain as to how figure was to be arrived at. Thus, order did not fix any particular liability to be discharged by writ-applicants.

5) If upon such order, recovery was sought to be undertaken of an amount of Rs. 1068 crores, then it was expected of concerned authority to at least issue a notice to writ-applicants and give an opportunity of hearing before arriving at a particular figure. Thus the applicant filed writ in the Hon’ble High Court of Gujrat.

ISSUE:

i. Whether the direction of quashing the impugned resolution by SEBI violative of Article 14, 19(1)(g)

and 19(1)(c)?

OBSERVED:

The Petitioner has placed reliance upon the decision of the Hon’ble Supreme Court in the case of M/s.

P.G.F. Ltd. and Ors Vs. Union of India and Anr reported in AIR 2013 SC 3702 by which the provisions

of which vires are under challenge have been held constitutionally valid. The schemes of the company in

the nature of a collective investment scheme in as much as, there is a pooling of resources. However,

details of the ownership of the land on which the saplings are stated to have been planted, have not been

provided. However, the schemes floated by the company fall squarely within the definition Collective

Investment Scheme as defined under Section 11AA of SEBI Act. The various instructions issued by SEBI

from time to time as well as the statutory requirements as contained under the Act and the Regulations,

the company has failed to comply with the same. Therefore, the company has violated the provisions of

Section 12(1B) of the SEBI Act, 1992 and Regulation 5(1) read with regulations 68(1), 68(2), 73 & 74 of

the Regulations.

HELD:

The Hon’ble High Court of Gujrat quashed and set aside the impugned recovery notice and matter was

to be remanded back for adjudication afresh


SEBI erred in passing the impugned order to sought recovery to an amount of Rs. 1068

crores, without issuing a notice to writ-applicants and give an opportunity of hearing before

arriving at a particular figure. This raised a substantial rights of the writ applicants even

though SEBI order was on merit.

Recent Updates


NOTIFICATIONS/CIRCULARS/NEWS

1. Section 30 of the securities and exchange board of India act, 1992, read with regulation 3 of the securities and exchange board of India (certification of associated persons in the securities markets) regulations, 2007 and regulation 23 of the securities and exchange board of India (portfolio managers) regulations, 2020 - power to make regulations - obligation to obtain certificate [Notification no. Sebi/lad-nro/gn/2021/48, dated 7-9-2021.]

a. The associated persons, engaged as a distributor of the Portfolio Management Services, shall obtain certification from the National Institute of Securities Markets by passing the NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors Certification Examination

b. Portfolio Manager shall ensure that the associate person obtains the certification of passing within two years from the date of this notification.

2. Government notifies the Tribunal (Conditions of Service) Rules, 2021 vide [Notification No.GSR 635(E)] The In exercise of the powers conferred by section 3 of the Tribunal Reforms Act, 2021 (33 of 2021) and in supersession of the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules, 2020 except as respects things done or omitted to be done before such supersession the Central Government notified the Tribunal (Conditions of Service) Rules, 2021 and published by the Ministry of Finance in the Gazette of India, Extraordinary, Part II, Section 3, sub-section (i).

3. MINISTRY OF CORPORATE AFFAIRS NOTIFICATION New Delhi, the 1st February, 2021 G.S.R. 92(E).— (For filing of annual return of OPC and Small Companies in form 7A for financial year 2020-21) The Central Government hereby makes the following rules further to amend the Companies (Specification of Definitions Details) Rules, 2014, namely: Short title and commencement: -

i. These rules may be called the Companies (Specification of Definitions Details) Amendment Rules, 2021.

ii. They shall come into force on the 1st day April, 2021. iii. In the Companies (Specification of Definitions Details) Rules, 2014, in the rule 2, in sub-rule

(1), after clause (s), the following clause shall be inserted, namely:- “(t) For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively.”.

1. Extension of time for seeking membership of BSE administration & supervision limited [Circular no. SEBI/ho/IMD/IMD-I/DOFL/P/CIR/2021/622, dated 31-8-2021.] a. This circular is issued to protect the interests of investors in securities market and to promote

the development of, and to regulate the securities market. b. SEBI granted recognition to BSE Administration & Supervision Limited ("BASL") c. To ensure compliance with Regulation 6(n) of the IA Regulations of all existing IAs, in terms

of para 6(i) of Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/579 dated June 18, 2021 were advised to seek membership of BASL, by August 31, 2021.

NOTIFICATIONS

CIRCULARS

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d. Many existing IAs, representing BASL requested for extension of time for seeking membership therefore it has been decided to extend the timeline for seeking membership of BASL by existing IAs by a period of two months till October 31, 2021.

e. Existing IAs who fail to seek membership of BASL within the aforesaid timeline shall be liable for appropriate action including suspension or cancellation of certificate of registration of such IAs, in terms of the Securities and Exchange Board of India Act, 1992 and the Regulations framed thereunder.

2. Revised guidelines for Liquidity Enhancement Scheme in the equity cash and equity derivatives segments. [Circular no. SEBI/HO/MRD/DSA/CIR/P/2021/623, dated 1-9-2021.]

SEBI vide circular CIR/MRD/DP/14/2014 dated April 23, 2014 permitted stock exchanges to introduce liquidity enhancement schemes in the equity cash and equity derivatives segments to enhance liquidity in illiquid securities.

a. Clause 3.1 and 4.1 of said Circular are modified as under: i. "3.1 The Scheme shall have prior approval of the Governing Board of the Stock Exchange

which will be valid for one year. The Governing Board of the Stock Exchange may give yearly

approval till the time the scheme is in operation. Further, its implementation and outcome

shall be monitored by the Governing Board at quarterly intervals.

ii. 4.1. The Stock Exchange shall introduce liquidity enhancement schemes on any security. Once

the scheme is discontinued, the scheme can be re-introduced on the same security".

b. Stock exchanges are directed to: i. 4.1 take necessary steps and put in place necessary systems for implementation of the above. ii. 4.2 make necessary amendments to the relevant bye-laws, rules and regulations for the

implementation of the above decision. iii. 4.3 bring the provisions of this circular to the notice of the stock brokers/trading members of

the stock exchanges and also disseminate the same on its websites.

1. Linking of pan with aadhaar [Press release no. 27/2021, dated 3-9-2021] Central Board of Direct Taxes (CBDT) state that the Permanent Account Number (PAN) of a person allotted as on July 01, 2017 shall become inoperative if it is not linked with Aadhaar by September 30, 2021 or any other date specified by CBDT. PAN being the sole identification number for all transactions in the Securities Market, mandates all SEBI registered entities including Market Infrastructure Institutions (MIIs) should ensure compliance of said notification and accept only operative PAN (i.e., linked with Aadhaar number).

Press Release

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We hope these updates would have enlightened you. For further information, feel free to connect

with us at:

Contact person Area of practice Email

CA. Ankit Shah Direct Taxation [email protected]

CA. Vinay Bhushan Indirect Taxation [email protected]

CA. Sudha Bhushan International Taxation [email protected]

CA. Santosh Thanvi Corporate Laws & Tax Advisory [email protected]

CONTACT US

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For further information or query feel free to contact, we would be happy to assist you:

[email protected] | +91-9326002456

Disclaimer:

The information provided in this update is intended for information purpose only and does not constitute any legal opinion

and advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided therein.

This update is not intended to address the circumstances of any particular individual or body corporate. There can be no

assurance that the judicial or quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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