Direct tax 

Case Laws

 Section 69A cannot be invoked if cash sales are correctly accounted: Delhi ITAT 

– Where assessee, engaged in business of trading wood, deposited cash in bank account during demonetization period out of sales made to various parties in cash and cash deposits were out of sale proceeds. 

– Assessing Officer (AO) however rejected explanation of assessee and made addition of such cash deposits to income of assessee under section 69A. 

– But such sales made by the assessee were shown in the regular books of account and have been accepted as such by VAT authorities while framing the VAT assessment 

– The proceedings were further supported by credible evidence like copies of invoices, stock registers maintained on a day-to-day basis, VAT returns filed from time to time and orders of VAT authorities. 

– Tribunal therefore passed an order in favour of Assessee. 

Deduction under section 54 can be claimed even if it is made in spouse’s name: Delhi ITAT 

– Assessee, a non-resident individual, sold her property in India and out of sale proceeds, invested in the purchase of a new residential house in the name of her spouse and claimed deduction under section 54. 

– However, the Assessing Officer disallowed the claim of deduction on ground that residential property was registered in the name of spouse of assessee, and not in name of assessee. 

– The Assessee submitted documentary evidence in form of bank statement and payment receipt issued by builder to substantiate that investment had actually been made out of sale proceeds of property sold by assessee. 

– ITAT held that registry of plot for new property was completed in name of Assessee’s spouse for sake of convenience as assessee was in UAE at the time of registration and such sale proceeds having been duly invested in acquisition of new property within due time allowed, assessee would be eligible for claim of deduction under section 54. 

– As a result, a decision was passed in favour of assessee. 

No revisionary proceedings can be initiated if necessary details already submitted during original assessment: Delhi ITAT 

– Assessee’s case was selected for scrutiny because of large share premium received during relevant assessment year. 

– The Assessing Officer passed assessment order by making disallowance under section 36(1)(va) on account of late payment of ESI/PF. 

– The Principal Commissioner observed that Assessing Officer had made no enquiry with respect to valuation of shares and merely accepted Assessee’s claim of share premium. He, thus, passed revision order setting aside assessment. 

– But since, assessee had already produced all details in respect of issue of large share premium received during year under consideration at time of original assessment proceedings itself which had been already dealt by Assessing Officer, order of revisional authority was to be set aside. 

– Therefore, decision was passed in favor of assessee.

GST Update

Facilitating Data Exchange: The Role of Public Tech Platform for Frictionless Credit under GST

1. Section 158A(1) of the Central GST Act, 2017 states that the GSTN portal may share the following information furnished by the registered person with such other systems as may be notified by the Government:

a) Particulars furnished in the application of registration or the return filed under section 39 or 44 of the CGST Act, 2017.

b) The particulars uploaded on the common portal for preparation of invoice, the details of outward supplies furnished under section 37 and the particulars uploaded on the common portal for generation of documents under section 68.

c) Such other details as may be prescribed.

2. Notably, Section 158A(2) stipulates that consent from the following parties is required for sharing the aforementioned information:

– Suppliers in respect of all of the above details.

– Recipients in respect of the details furnished under points (b) and (c) above but only when such information contains recipient identity details.

Notification No. 06/2024 

3. In this regard, the Central Government has notified “Public Tech Platform for Frictionless Credit” as the system with which information may be shared by the common portal based on the consent of the supplier or recipient as stated above.

4. The term “Public Tech Platform for Frictionless Credit” means an enterprise-grade open architecture information technology platform, conceptualised by the Reserve Bank of India as part of its “Statement on Developmental and Regulatory Policies” dated 10th August 2023 and developed by its wholly owned subsidiary, Reserve Bank Innovation Hub, for the operations of a large ecosystem of credit, to ensure access of information from various data sources digitally and where the financial service providers and multiple data service providers converge on the platform using standard and protocol-driven architecture, open and shared Application Programming Interface (API) framework

GST Litigation Update

No GST on volume discount offered to dealer – Madras High Court 

In a recent ruling, the Madras High Court addressed a key issue concerning the taxation of volume discounts received by dealers. The case involved M/s Supreme Paradise, a retailer of mobile phones, who received volume discounts from the manufacturer for achieving sales targets. The GST authorities sought to levy GST on these discounts, arguing that they constituted consideration for the supply of mobile phones. 

The Madras High Court held that, for the petitioner, what matters is the “transaction value” relevant for tax payment on the supplies it makes. Discounts offered by suppliers to buyers cannot be included in the transaction value of the buyer on further supply to his client or customer unless they are essentially subsidies disguised as discounts. The discounts received by the petitioner can only affect the transaction value of the supplier of the petitioner, not the petitioner’s transaction value. 

Furthermore, the High Court noted the important distinction between the discount offered to the petitioner and the discounted price at which the petitioner sells to its customers. These are separate transactions, and there is no basis for conflating them to demand tax from the petitioner. As such, the High Court set aside the demand orders and remanded back the matter to the original authority to reconsider the matter based on its merits. 

Interest is not payable on delayed filing GSTR-3B if GST was deposited in the electronic cash ledger before due date – Madras High Court 

In the instant case, Eicher Motors Limited encountered technical issues while filing their TRAN-1, leading to the incomplete reflection of the transitional credit in their Electronic Credit Ledger. Consequently, they could not file their monthly GST return in Form GSTR-3B within due date. However, they discharged GST liability by depositing the tax amounts in the Electronic Cash Ledger within due date. 

The GST department argued that depositing tax in the Electronic Cash Ledger did not constitute payment of tax and amounted to a failure to remit GST on time, thereby attracting interest liability. 

Upon reviewing various provisions of the Central GST Act, the Madras High Court observed that monthly returns in Form GSTR-3B mandate providing details about the tax paid. This implies that tax should have been paid by the registered person before filing Form GSTR-3B, as outlined in Section 39(1) of the CGST Act. 

The High Court further held that that tax payment occurs upon using Form GST PMT-06 for depositing GST in electronic cash ledger, regardless of when GSTR-3B is filed. The electronic credit ledger or electronic cash ledger is maintained by assesses solely for accounting purposes. When GST is paid using Form GST PMT-06, the tax liability is discharged accordingly. 

While filing GSTR-3B return ensures complete discharge of GST liability through accounting entries in the ledgers, it does not dictate when the government can utilize GST collections made by registered persons. 

Therefore, the Madras High Court held that interest is not payable by the petitioner since the GST amount was paid by them by generating PMT-06 before the due date. 

Service Tax litigation update

No service tax on incentive received from OEMs – Tribunal Chennai 

The dispute in present case relates to the taxability of incentives received from OEMs by M/s Jubilant Motor Works (South) Pvt Ltd (“appellant”) engaged in the sales and service of ‘AUDI’ brand cars. 

The incentives in question were target-based incentives received from M/s. Volkswagen for the sale of Audi brand cars/parts and from M/s. Castrol India Ltd. for the purchase of engine lubricants. 

The tax department contended that the incentives were intended to promote the business of M/s. Volkswagen and M/s Castrol India. 

The Tribunal noted that the appellant purchases the cars from the Company, becoming the owner, and subsequently resells them to customers. In this process, there cannot be any activity aimed at promoting the sales of M/s. Volkswagen or M/s. Castrol India Ltd. The incentives received for achieving sales targets cannot be construed as incentives for promoting the sale of M/s. Volkswagen. The appellant’s primary interest lies in increasing their own sales to generate more profit, rather than promoting the sales of M/s. Volkswagen or M/s. Castrol India Ltd. 

Thus, the Tribunal ruled in favour of the appellant and set aside the demand of service tax raised on incentives. 

Singapore Updates

Monetary Authority of Singapore

MAS Introduces bill to enhance investigative, supervisory and inspection powers over financial institutions 

On 10th January 2024, the Monetary Authority of Singapore (MAS) has introduced the Financial Institutions (Miscellaneous Amendments) Bill 2024 (FIMA Bill) for First Reading in Parliament. Through the FIMA Bill, MAS aims to enhance its powers of investigation, reprimand, supervision and inspection of financial institutions under the 

Financial Advisers Act 2001 (FAA), Financial Services and Markets Act 2022 (FSM Act), Insurance Act 1966 (IA), Payment Services Act 2019 (PS Act), Securities and Futures Act 2001 (SFA) and Trust Companies Act (TCA). The FIMA Bill is expected to be passed by Parliament and come into force in the second half of 2024. 

Enhanced investigative powers 

The FIMA Bill seeks to enhance the investigative powers of MAS under the SFA and FAA and amend the IA, PS Act, TCA and FSMA to broadly align the investigative powers under the other Acts with those under the SFA and FAA. This will strengthen the evidence gathering powers of MAS and facilitate greater inter agency coordination. The main changes are as follows:

Power to compel individuals to attend interviews and record written statements. MAS’ existing power under the SFA and FAA to compel individuals to attend interviews and record written statements will be extended to the FSM Act, IA, PS Act and TCA.

Entering premises without warrant. MAS’ existing power under the SFA and FAA will be enhanced to allow MAS agents to enter premises without prior notice, provided there are reasonable grounds for suspecting that the premises are or have been occupied by a person under investigation in relation to a contravention of the SFA and FAA. This power will also be extended to the FSM Act, IA, PS Act and TCA.

Obtaining court warrant to seize evidence. MAS’ power under the SFA, FAA and TCA to obtain a court warrant to enter premises and seize evidence under specified circumstances will be extended to the IA, PS Act and FSM Act.

Transfer of evidence between MAS and other agencies. The current provisions in the SFA and FAA that allow for evidence to be transferred between MAS and the Commercial Affairs Department (CAD) or the Attorney-General’s Chambers (AGC) will be expanded and extended to the FSM Act, IA, PS Act and TCA.

Enhanced supervisory and inspection powers 

The FIMA Bill also enhances MAS’ supervisory and inspection powers under the SFA, FAA and TCA to ensure consistency across those Acts and to align with the Banking Act 1970. Key amendments are as follows:

Appointment and removal of key persons. Singapore-incorporated RMOs, RCHs and ATs will require MAS’ approval, premised on satisfaction of the fit and proper test, to appoint chief executive officers and directors. The provisions

in the FAA and TCA on appointment of key persons such as CEOs, directors and resident managers will also be amended to align with the position under the SFA.

Control requirements. Existing requirements in the SFA and FAA which require MAS’ approval to be obtained whenever a person obtains a 20% or more stake in a CMSL holder will be refined so that MAS’ approval is only required prior to the obtainment of effective control. The approval requirement will also be extended to controllers of RMOs, RCHs and ATs.

Appointment of agents by foreign regulators. MAS will have the power to approve the appointment of agents by foreign regulators to conduct inspection of specified financial institutions under the SFA.

Appointment of external auditors. Existing provisions in the SFA will be amended to require approved exchanges, licensed trade repositories, approved clearing houses and approved holding companies to appoint an auditor on an annual basis subject to MAS’ approval.

Failure to exercise reasonable care in submission of information. The FAA, SFA and TCA will be amended to make it an offence for a person who is not an individual to fail to take due care to ensure that information provided to MAS under those Acts is not false or misleading.

Service of documents. The provisions in the SFA, TCA and FAA on service of notices, orders or documents by registered post and electronic service will be aligned to achieve consistency between those Acts. 

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Inland Revenue Authority of Singapore

IRAS’ Voluntary Disclosure Programme On 5th January 2024, the Inland Revenue Authority of Singapore (IRAS) published the eleventh edition of the e-tax guide (the “Guide”) on IRAS’ Voluntary Disclosure Programme. 

This e-Tax Guide provides guidance on the conditions for a voluntary disclosure to qualify under IRAS’ Voluntary Disclosure Programme (VDP). 

The IRAS Voluntary Disclosure Programme (VDP) encourages taxpayers who have made errors in their tax returns to come forward voluntarily, in a timely manner, to correct their errors. IRAS is prepared to reduce penalties for voluntary disclosures which meet the qualifying conditions. 

Qualifying conditions 

The IRAS VDP applies to Income Tax (including cash payouts / bonus), GST, Withholding Tax and Stamp Duty. To qualify for IRAS VDP, one need to submit a voluntary disclosure that is:

– Accurate and complete; and

– Timely and self-initiated.

A voluntary disclosure is considered timely and self-initiated under either one of the following conditions:

– Before you receive a query from IRAS relating to your tax or cash payout / bonus matters; or

– Before you receive notification from IRAS on the commencement of an audit or investigation on your tax or cash payout / bonus matters.

After submitting a voluntary disclosure, you must also:

– Cooperate fully with IRAS to correct the errors made; and

– Pay or make arrangements with IRAS to pay additional taxes or amount exceeding cash payout / bonus than entitled to and penalties imposed (if any), and honour such arrangements till all payments are made. 

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Fixed Expense Deduction Ratio (FEDR) for self-employed persons 

For a simplified tax filing experience, qualifying self-employed commission agents, private hire car (PHC)/ taxi drivers and delivery workers can claim their business expenses based on a prescribed percentage of their gross income earned. 

From YA 2024, FEDR is further extended to self-employed delivery workers with annual gross income of $50,000 or less earned from delivery services based on prescribed delivery modes. 

With effect from YA 2024 (i.e. for income earned in 2023 and onwards), qualifying delivery workers can choose to claim tax deductions on business expenses based on a fixed proportion of their annual gross income earned from delivery services (including both food and goods delivery). 

In order to increase the tax filing and compliance rate, IRAS has introduced Fixed Expense Deduction Ratio (FEDR) for self-employed persons. It works by claiming a deemed amount of business expenses based on a prescribed percentage of the gross income earned, instead of claiming tax deductions based on the actual amount of allowable business expenses incurred. 

Qualifying self-employed persons such as private hire car drivers, taxi drivers, commission agents and delivery workers can use this method when filing their annual individual tax returns. 

However, if the actual amount of allowable business expenses is more than the FEDR, one can choose to claim tax deductions based on the actual allowable business expenses incurred in earning the income. Self-employed persons can exercise this option each year whether to claim tax deductions based on the FEDR or the actual allowable business expenses incurred. 

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Legal Updates

Notification under the Jan Vishwas (Amendment of Provisions) Act, 2023:

The Ministry of Law and Justice, on 11th August 2023, has published the Jan Vishwas (Amendment of Provisions) Act, 2023 (“Amendment Act”), to decriminalize certain offences. 

Under the Amendment Act, certain amendments to enactments have been published and the same will come into force as and when the Central Government may notify. Accordingly, the Central Government has notified the provisions relating to the Payment and Settlement Systems Act, 2007 (hereinafter the “PSS Act”), set out under serial number 38 of the Amendment Act, to come into force from 22nd January 2024. 

The Amendment Act has amended the penalty provisions of Sections 26(3)(i) and 26(6)(ii) of the PSS Act, to state that, the penalty will be imposed in accordance with the provisions of Section 30 (Power of the Reserve Bank to impose fines); and the word ‘fines’ under Section 30(1) of the PSS Act, has been substituted with penalties. Further, the threshold of penalty under Section 30(1) has been increased from INR 5,00,000/- to INR 10,00,000/-. 

The Competition Commission of India (General) Amendment Regulations, 2024: 

On 12th January 2024, the Competition Commission of India has brought into effect the Competition Commission of India (General) Amendment Regulations, 2024 (“CCI Amendment Regulations”), to amend the existing Competition Commission of India (General) Regulations, 2009 (“Principal Regulations”). The amendments are briefly summarized below: 

Interlocutory Applications: 

a) In the Principal Regulations, the definition of ‘Interlocutory Application’ has been inserted, as Regulation 2(1)(fa).

b) In Regulation 15 of the Principal Regulations, which stipulates procedure for scrutiny of information or reference, sub-regulation (6) has been inserted. This sub-regulation sets out the essentials for filing an interlocutory application.

c) Regulation 49 stipulates the fees for any application filed under Section 19(1)(a) of the Competition Act, 2002. Section 19(1)(a) stipulates that, upon payment of requisite fees, the Commission may enquire into any alleged contravention of anti-competitive agreements or abuse of dominant position. In Regulation 49, sub-regulation (1A) has been inserted to stipulate the applicable fees in case of Interlocutory Applications.

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