Tax LawBeat: Your Daily Tax Law Newsletter

INCOME TAX CASES:

• Sindya Securities and Investments Pvt Ltd Vs ACIT [ITA No. 1816/Chny/2019] – March 04, 2021

Chennai ITAT held that the provisions of section 56(2)(viib) has no application, if shares are not issued with premium. But, the case of the Assessing Officer was that it is not a case of simple commercial transaction between the parties, but a transaction arranged to circumvent the provisions of section 56(2)(viib) of the Act. Therefore, it is essential to see whether transaction of issue of preference shares is commercial transaction between two prudent persons or a sham transaction arranged by parties to overcome the provisions of section 56(2)(viib) of the Act. In the instant case, the assessee has not explained basis for fixing different share price for equity shares and preference shares. The assessee has also not filed any evidence to explain how a prudent businessman would invest in a company, where its net worth is negative and book value of shares is far less than the face value of preference shares. Accordingly, the transaction was held to be a colorable device to circumvent the provisions of section 56(2)(viib) of the Act.

• DCIT Vs Frendi Fashions Pvt Ltd [ITA No. 1438/Chny/2018] – March 31, 2021

Chennai ITAT held the the AO has disallowed stitching charges only for the reason that party has not appeared before the Assessing Officer in response to notice u/s. 133(6). Except this, no other adverse comment has been made in respect of payment made to M/s. R Design Apparels for stitching charges. In fact, the Assessing Officer has not doubted genuineness of payment. The CIT (A), after considering relevant facts has rightly pointed out that payments have been made through banking channels after deducting applicable TDS as per law. Further, the assessee has filed necessary evidences, including bills issued by party for rendering services. Therefore, he opined that mere non-production of the party cannot be a basis to make disallowance, when all other supporting evidences have been filed to substantiate claim of expenditure. The findings of the CIT(A) goes uncontroverted from the Revenue. The revenue has failed to file any evidence to counter the finding of facts recorded by the CIT (A).

• SANDVIK IT SERVICES AB Vs ACIT [ITA No. 17/Pun/2021] – April 01, 2021

Pune ITAT observed that before reaching any conclusion as to the applicability or otherwise of Article 12 of the DTAA in this regard, it is sine qua non to ascertain the true nature of services rendered by the assessee. The assessee provided services to SAPL under an Agreement dated 01-04-2002, which is stated to be prevalent for the year under consideration as well. This factual assertion by the AR has not been denied by the ld. Departmental Representative.

Thus, it is evident that the nature of services rendered by the assessee to SAPL during the year under consideration is similar to that provided in the earlier years including the immediately preceding assessment year. The matter as to taxability or otherwise of such a sum came up for consideration before the Tribunal for the assessment year 2016-17. Vide order dated 25-11-2020, the Tribunal has held that the amount received by the assessee from SAPL is not chargeable to tax under Article 12 of the DTAA even though the same is in the nature of FTS covered u/s. 9(1)(vi) of the Act.

To buttress its view, the Tribunal took into consideration its orders for the earlier assessment years 2009-10 and 2012-13 holding similarly. As the authorities below have relied on their respective views taken in the assessee's own case for the assessment year 2016-17, which has been overturned by the Tribunal, respectfully following the precedent, we hold that the amount of Rs. 31.29 crore received by the assessee from SAPL is not chargeable to tax within the meaning of Article 12 of the DTAA.

INDIRECT TAX CASES:

• Apar Industries Ltd [ADVANCE RULING NO. GUJ/GAAR/R/02/2021] – January 20, 2021

Gujarat AAR observed that the Applicant seeks to know as to whether applicability or determination of liability to pay Tax on their goods at 5% GST rate is legally correct and in order in terms of Schedule-I to the Notification No.01/2017-Integrated Tax(Rate). Therefore, in view of non-submission of the documents such as contract/agreement/tender/ technical specifications by the applicant and without going through the conditions/provisions envisaged in the aforementioned documents, it will not be possible for the Authority to take a decision in the matter.

• Vadilal Industries Ltd [Advance Ruling No. GUJ/GAAR/R/05/2021] – January 20, 2021

Gujarat AAR observed that 'Flavoured milk' sold under trade name of Power Sip is classifiable under Tariff Item 2202 99 30 of the First Schedule to the Customs Tariff Act, 1975 as a "beverage containing milk" and is not classifiable under either CTH 0402 or 0404 as contended by applicant.

• Unlimited Unnati Pvt Ltd [Advance Ruling No. GUJ/GAAR/R/09/2021] – January 20, 2021

Gujarat AAR observed that Applicant has asked the following questions seeking Advance Ruling on the same. Whether the service provided to recipient of foreign country will be considered as export and zero rated supply? Further, commission paid to foreign agent who is non-resident of India and he does not have any permanent establishment or business connection in India then what is liability of GST on such commission payable to foreign agent related to service provided out of India?

AAR therefore held that no answer is provided to the applicant in respect of both the questions on the following grounds - ( i ) The question is outside the ambit of the provisions of Section 97(2) of the CGST Act, 2017 as both the questions are related to export of service which would also require the determination of place of supply of services which is not under the scope of jurisdiction of the Advance Ruling Authorities (ii) Non-submission of copies of the contract/agreement in respect of the services provided/to be provided by the applicant on the issue discussed herein above.

• Aristo Bullion Pvt Ltd [ADVANCE RULING NO. GUJ/GAAR/R/15/2021] – January 27, 2021

Gujarat AAR observed that Applicant cannot use the Input Tax Credit Balance available in the Electronic Credit Ledger legitimately earned on the inputs/raw-materials/inward supplies (meant for outward supply of Bullions) towards the GST liability on 'Castor Oil Seed' which were procured from Agriculturists and subsequently meant for onward supply. Even the basic conditions envisaged in the provisions of Section 16(1) have not been fulfilled in the instant case and, therefore, undoubtedly the aforementioned inputs are not used or intended to be used in the course or furtherance of the business of supply of Castor oil seeds.

• Ahmedabad Municipal Transport Service [ADVANCE RULING NO. GUJ/GAAR/R/13/2021] – January 27, 2021

Gujarat AAR observed that Applicant, Ahmedabad Municipal Transport Service (AMTS) merits qualification as "Local Authority" - AMTS is not liable to pay GST on procurement of security services, received from any person other than body corporate, under reverse charge mechanism. Service recipients of AMTS are required to pay GST under reverse charge mechanism on advertisement service - AMTS is required to be registered as a Deductor under GST as per the provision of Section 24 of the CGST Act.