Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPI) investment in Debt

A.P. (DIR Series) Circular No. 34 dated May 24, 2019

Based on the feedback received the RBI has revised the directions issued vide A.P. (DIR Series) Circular No. 21 dated March 01, 2019. These changes include, inter alia, the following:

(i) Introduction of a separate category, viz., VRR-Combined
(ii) The requirement to invest at least 25% of the Committed Portfolio Size within one month of allotment has been removed
(iii) FPI are provided with an additional option at the end of the retention period, viz., continue to hold their investment until the date of maturity or the date of sale, whichever is earlier
(iv) FPIs that were allotted investment limits under the ‘tap’ open during March 11, 2019 – April 30, 2019 may, at their discretion, convert their full allotment to VRR-Combined

Revised direction may be referred to on RBI website at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11561&Mode=0

Gist of some Compounding Orders passed by Reserve Bank of India

Amendment to Maharashtra Real Estate (Regulation & Development) (Registration of Real Estate Project, Registration of Real Estate Agents, Rate of Interest & disclosure on web site) Rules, 2017 Notification No. REA 2018/CR/106-RR-2 dated 6th June 2018

Important Amendment to Maha Rera Rules :

1. Project Registration Fees for plotted scheme of land is reduced from Rs.10/- to Rs.5/- per sq mt.

2. Minimum Project Registration Fee reduced from Rs.50,000/- to Rs.10,000/-

3. The Revision in Project Registration fees also applies to fees payable for Extension Application for the Project.

4. Land Cost shall be replaced by ASR value on the date of registration. The earlier provisions of Indexation factor is done away with.

5. Marketing and Brokerage Expenses though part of project cost shall not be considered for the purpose of development cost and for the purpose of withdrawal from designated separate account.

6. The provision of submission of Certificate of Architect, Engineer and Chartered Accountant in Form 1, 2 and 3 respectively also applies to ongoing projects.

7. Rules for Conveyance :

a. Single Building – Execution of Conveyance of Title shall be done by Promoter with in three month of issue of occupancy certificate.

b. Lay Out

Execute conveyance of structure of building or part thereof within three month of receipt of occupancy certificate for building or part there of

Execute Conveyance of land Title with three months of receipt of occupancy certificate for the last building.

8. Model Draft Agreement may contain clause pertaining to brokerage payable by Promoter/ Allottee to Agents.

Co-operative Societies

(1) Separate Chapter XI-1A of the MCS Act, 1960 is notified for commencement from 22nd Feb, 2019 for Non Agricultural Cooperative Credit Societies.

(2) Non Agricultural Cooperative Credit Societies Regulatory Body vide circular dated 10th May, 2019 has advised to all credit societies that administrative expenses cannot exceed 2% of working capital and shall maintain cash liquidity ratio of 2% of deposits, statutory liquidity Ratio of 25% of deposits effective from 1st July, 2019. They are also required to file quarterly returns to registrar regarding CLR and SLR.

The Maharashtra Goods and Services Tax Act, 2017 Circulars

The Commissioner of Goods and Services Tax, Maharashtra State, has issued Circulars as below:

i) Circular 20T of 2019 dated 15/5/2019 by which the clarifications and FAQ’s on Settlement of Arrears of Tax, Interest, Penalty or late fees Ordinance, 2019 is given.

ii) Circular 21T of 2019 dated 15/5/2019 in which the extension of due date for submission of Forms for one time option to pay tax in respect of ongoing project from 10th May, 2019 to 20th May, 2019 is informed.

iii) Circular 22T of 2019 dated 17/5/2019 by which the levy of GST on Priority Sector Lending Certificates (PSLC) for the period 1/7/2017 to 27/5/2018 is clarified.

iv) Circular 23T of 2019 dated 17/5/2019 by which the circulars issued earlier under the MGST Act, 2017 is clarified.

v) Circular 24T of 2019 dated 17/5/2019 by which mentioning details of inter-state sale supplies made to unregistered persons in Table 3.2 of Form GSTR-3B and Table 7B of Form GSTR-1 is clarified.

vi) Circular 25T of 2019 dated 17/5/2019 by which Compliance of Rule 46(n) of the MGST Rules, 2017 while issuing invoices in case of inter-state supply is explained.

vii) Circular 26T of 2019 dated 17/5/2019 by which clarification regarding tax payment made for supply of warehoused goods while being deposited in a customs bonded warehouse for the period July, 2017 to March, 2018 is given.

viii) Circular 27T of 2019 dated 17/5/2019 by which the clarification on various doubts related to treatment of sales promotion schemes under GST is given.

ix) Circular 28T of 2019 dated 17/5/2019 by which the nature of supply of Priority Sector Lending Certificates (PSLC) is clarified.

x) Circular 29T of 2019 dated 17/5/2019 by which clarifications on refund related issues under GST are clarified.

xi) Circular 30T of 2019 dated 17/5/2019 by which the verification of applications for grant of new registration is clarified.

xii) Circular 31T of 2019 dated 17/5/2019 by which clarification in respect of transfer of input tax credit in case of death of sole proprietor is given.

xiii) Circular 32T of 2019 dated 17/5/2019 by which the clarification regarding exercise of option to pay tax under notification no. 2/2019 -State Tax (Rate) dt. 7/3/2019 is given.

xiv) Circular 33T of 2019 dated 17/5/2019 by which the clarification in respect of utilization of input tax credit under GST is given.

xv) Circular 34T of 2019 dated 17/5/2019 by which the clarification regarding filing of application for revocation of cancellation of registration in terms of Removal of Difficulty Order (ROD) no.5/2019- State Tax (Rate) dated 23/4/2019 is given.

xvi) Circular 35T of 2019 dated 17/5/2019 by which the GST applicability on Seed Certification Tags is clarified.

xvii) Circular 36T of 2019 dated 17/5/2019 by which the GST exemption on the upfront amount payable in installments for long term lease of plots, under Notification no. 12/2017 State Tax (Rate) sr. no. 41 dated 29/6/2017 is given.

xviii) Circular 37T of 2019 dated 17.5.2019 by which the GST on Construction of “Affordable Residential Apartments” in Mumbai Metropolitan Region is clarified.

xix) Circular 38T of 2019 dated 1/6/2019 by which the mechanism for redressal of difficulties faced by tax payers due to technical glitches on the portal www.mahagst.gov.in of the Maharashtra Goods and Services Tax Department is clarified.

Case: WESTERN CONCESSIONS PVT LTD [2019-TIOL-163-AAR-GST (MAHARASHTRA)]

Floating Storage Re-gasification Unit shall be categorized as ‘factory ship’ in the commercial world. The pipeline cannot exist in a vacuum without a factory. The term pipelines outside the factory explained in section 17(5) signifies that the pipeline is to transport some product from the factory to the end user. The LNG re-gasified by the applicant in the ship is transported through the pipeline, which is outside the factory ship. The ITC of the tax paid on goods and services used for construction of Tie-in pipeline is not available, as the pipeline in the present case classifies as pipeline outside the factory. The same does not qualify as an equipment, apparatus or machinery for purpose of claiming ITC, the restriction on availment of ITC u/s 17(5)(c) & 17(5)(d) is applicable.

Case: MULTIPLES ALTERNATE ASSET MANAGEMENT PVT LTD [2019-TIOl-162- AAR-MAHARSHTRA]

The Advisory & Management Fees received by the applicant are for financial services rendered to the Alternative Investment Fund (“AIF”). As the location of both the applicant as well as the AIF is in India, the place of supply must be determined by applying provisions of Section 12 of the IGST Act - As both parties are within taxable territory & the services rendered by the applicant to AIF are taxable, hence GST is payable u/s 12(12) of the IGST Act. The applicant’s contention that Advisory & Management Fees received in foreign currency from overseas contributors located outside India for the services rendered by the applicant be treated as Zero rated supply, is not correct proposition of law as the applicant is providing services to AIF and not to individual investors.

CBIC vide Notification No. 25/2019 – CT dated 21st June, 2019 has extended the applicability of Rule 138E (restriction for generating E-way bill) of CGST Rules from 21st June, 2019 to 21st August, 2019.

With a view to further secure the interests of investors in listed debt securities, enhance transparency and to enable Debenture Trustees (DTs) to perform their duties effectively and promptly, pursuant to public consultation, amendments to the existing regulatory framework for governing Debenture Trustees (DTs), vide Gazette Notifications Nos. 150, 151, 152 dated May 7, 2019 were carried out vide circular no SEBI/HO/MIRSD/DOS3/CIR/P/2019/68.

There is an amendment to the COMPANIES (PROSPECTUS AND ALLOTMENT OF SECURITIES) THIRD AMENDMENT RULES, 2019 - AMENDMENT IN RULE 9A AND INSERTION OF FORM PAS-6 vide notification no G.S.R. 376(E) [F.NO.1/21/2013 CL-V], DATED 22-5-2019.

NATIONAL FINANCIAL REPORTING AUTHORITY (MEETING FOR TRANSACTION OF BUSINESS) RULES, 2019 are notified vide G.S.R. 377(E) [F.NO. 1/4/2016 CL-I], DATED 22-5-2019.

Shree Ram Dass Rice & General Mills vs. Deputy Commissioner of Income-tax [(2019) 105 taxmann.com 290 (Chandigarh - Trib.)]

The Assessee did not upload Accountant’s Report in Form no. 3CEB along with its Return of Income. However, the same was filed by the Assessee in the course of the assessment proceedings. The Assessing Officer levied a penalty of INR 100,000 under Section 271BA of the Income-tax Act, 1961 (‘the Act’) on account of failure of the Assessee to upload Form no. 3CEB in terms of statutory requirements. CIT(A) upheld the said penalty.

The ITAT noted that penalty under Section 271BA of the Act is discretionary and not automatic as the words used is “may” and not “shall”. Further, Section 273B of the Act which encompasses Section 271BA states that no penalty “shall” be imposed if Assessee proves “there was reasonable case for the said failure.” The ITAT appreciated that failure to upload Form no. 3CEB was unintentional and the same was made available at the time of assessment proceedings. Further, no adjustment was made by the TPO and the Assessee was not habitual defaulter. Accordingly, the orders imposing penalty under Section 271BA were set aside.

Deputy Commissioner /Assistant Commissioner of Income-tax vs. M/s. Emami Limited [TS-516-ITAT-2019(Kol)]

The Assessee had sold goods to its Associated Enterprises (‘AEs’) in Dubai & UK. The said transaction was benchmarked by applying internal cost plus method wherein gross margin of products sold to AEs were compared with gross margins of product sold to non-AEs. The Transfer Pricing Officer noted that Assessee had allowed significant credit period to its AE of around 180 days in comparison to 30 days allowed to non-AEs. Accordingly, the TPO computed working capital adjustment to the gross margins @ 8 percent and compared the adjusted margins post working capital adjustment of AEs and Non-AEs.

The ITAT noted that working capital adjustment is essentially an attempt to adjust time value of money where the payment schedules vary differently. Due to the extended credit terms, the entities are required to borrow money to fund the transactions. Accordingly, the ITAT held that “Since the exports to the AEs and non-AEs are denominated in foreign currency, it would be appropriate to work out the working capital adjustment against the relevant currency denominated LIBOR rate.” The international cost of funds in the hands of Assessee was 2.2 percent as against 8 percent adopted by the Transfer Pricing Officer. Based on revised computation of working capital as per interest rate of 2.2 percent, the Assessee’s transaction were held to be at arm’s length.

M/s. Videojet Technologies (I) Pvt . Limited vs. ACIT [TS-497-ITAT-2019(Mum)]

ITAT reversed the decision of Assessing Officer (pursuant to instructions of the DRP) and adopted Resale Price Method (‘RPM’) as most appropriate method (rejecting TNMM adopted by the Transfer Pricing Officer) noting that business of the Assessee involved only re-selling or distributing coding and marking equipment purchased from the AEs, without making any value addition.

With regard to the TPO’s reasoning for rejection of RPM on account of accounting and functional difference, the ITAT observed as under:

If the comparable companies selected by Assessee were inappropriate then the TPO should have made adjustments (Rule 10B(1)(b)(iv)) or searched for fresh comparable companies instead of rejecting RPM citing difference of accounting policies; and

A normal distributor undertakes all such functions related to sales i.e. sales and marketing, warehousing, inventory control, etc. and bears risks such as market risks, inventory risks, etc. The TPO failed to bring any material on record to prove that the comparable companies / distributors were not undertaking aforesaid functions.

Smith & Nephew Healthcare Pvt. Ltd. vs. Income Tax Officer [TS-496-ITAT-2019(Mum)]

The ITAT appreciated the need for depreciation adjustment for benchmarking the international transactions under TNMM considering Assessee’s submission that it provided for depreciation at a higher rate as compared to the comparable companies.

The TPO had held that the error in margin computation of comparable companies does not constitutes mistake apparent from records. The ITAT held that the TPO’s stand is unacceptable and error in margin computation of comparables clearly fall within the ambit of section 154 of the Act.

With regard to determination of arm’s length price of management fees as ‘NIL’ by the TPO / DRP, the ITAT observed that the TPO / DRP has neither followed any one of the prescribed methods nor have they examined the evidences filed by the Assessee to demonstrate receipt of services.

Accordingly, ITAT restores issues of depreciation adjustment and arm’s length price determination of management services to the AO / TPO and further, directs the TPO to dispose of rectification application on merit.

Other General Update US IRS introduces campaign aimed at captive service providers

US – IRS on 16 April 2019 announced transfer pricing related campaigns that will focus on ensuring that US multinationals do not pay their foreign captive service providers more than arm’s length. The notice states that if the prices of such controlled services exceed arm’s length prices, the result could be inappropriate shifting of income and erosion of the US tax base. The motive further states that “The arm’s length price is determined by taking into consideration data available on companies performing functions, employing assets, and assuming risks that are comparable to those of the captive subsidiary”.

OECD report - ‘Programme of Work’ to develop a consensus based solution to address the tax challenges arising out of the digitalization of the economy

OECD has released the ‘Programme of work’ highlighting important areas that need to be discussed among the members of inclusive framework.

The ‘Programme of Work’ also establishes the scope of work and technical issues that it will explore to resolve through the two main pillars.

The first pillar will explore potential solutions for determining where tax should be paid and on what basis, as well as what portion of profits could or should be taxed in the jurisdictions where clients or users are located (‘profit allocation’).

The second pillar focuses on the remaining BEPS issues and seeks to develop rules that would provide jurisdictions with a right to “tax back” where other jurisdictions have not exercised their primary taxing rights or the payment is otherwise subject to low levels of effective taxation. The international community has committed to continue working toward a consensus-based long-term solution by the end of 2020.

Emerson Electric Company (India) Private Limited vs. ACIT (Mumbai ITAT) Facts

The Assessee is in the business of providing engineering support services including configuration engineering, framework design and graphical design, largely in connection with industrial automation projects undertaken by other Emerson group companies. Emerson also provided IT services including database administration and help desk support to various members of the Emerson group and maintained manufacturing and distributions operations.

For AYs 2013-14 & 2014-15, the AO made TP adjustments on account of provision of engineering and related services, provision of ITeS, provision of IT services and provision of marketing support services (‘MSS’).

Summary

Mumbai ITAT allowed aggregation of transactions falling under engineering and design services segment. It noted that the transactions of engineering service segment were closely linked to each other and the assessee had aggregated “class of transactions” under the segment and the AEs fell under “class of associated persons” as mentioned in Sec. 92C(1). It was held that as per Section 92C and Rule 10C, “Where (i) the nature and class of the international transactions; (ii) the class or classes of AEs...; as well as (iii) the FAR analysis...are similar, it would be prudent to aggregate the international transactions while determining the most appropriate method as per the Indian TP regulations.”. The TPO/DRP’s observation that the functions performed by the 3 divisions were not the same was rejected.

The ITAT also ruled on comparables for assessee’s segments of engineering services, IT support services, software development and MSS and also allowed working capital adjustment.

Elsevier Information Systems GmbH vs. Dy. Commissioner of IT (IT), Circle-2(2)(1) [TS-215-ITAT-2019 (Mum] dated 15th April, 2019 Facts

The assessee company, a tax resident of Germany, maintains an online database pertaining to chemical information. It earned subscription fees from customers worldwide including India by providing access to the database.

The assessee filed return of income declaring Nil income on the contention that subscription fees received from various customers in India was neither in the nature of royalty or FTS and in absence of PE, was not taxable in India.

AO made addition considering the subscription fees received by the assessee in nature of FTS/royalty under the provisions of tax treaty.

Aggrieved, the asssessee appealed before Mumbai ITAT.

Issue

Whether subscription fees received for online database access is considered as FTS or Royalty under Article 12 of India-Germany DTAA?

Held

ITAT noted that the assessee has created a database relating to data collated from various chemical journals and articles, which were stored in a structured and user friendly manner for the customers/users on a subscription basis, without conferring any exclusive or transferable rights to the customer/user.

ITAT also noted that assessee has retained the exclusive right and ownership over intellectual property related to the product.

ITAT held that the payment is for use of copyrighted article rather than for ‘use of’ or ‘right to use’ of copyright of literary, artistic or scientific work to its subscribers.

Relying on AAR ruling in case of Dun and Brad Street Espana, S.A. and Ahmedabad ITAT ruling in case of Cadila Healthcare Ltd and Welspun Corporation Ltd, ITAT held that subscription fees received by the assesse for providing publicly available information cannot be treated as royalty.

Relying on SC ruling in case of Bharati Cellular Ltd and A.P. Moller Maersk A.S, ITAT further held that the assessee has neither employed any technical/skilled person to provide any managerial or technical service nor is there any direct interaction between the customer/user of the database and the employees of the assessee so as to constitute the payment as FTS under Article 12 of DTAA.

ITAT thus ruled in favour of the assessee.

Linklaters vs. Dy. Director of Income Tax (IT), Circle-3(2) [TS-210-ITAT-2019 (MUM)] dated 16th April, 2019 Facts

The assessee company, a UK based law firm, was appointed as legal advisor for some of the projects in India and received fees from the clients in India towards legal consultancy services.

The assessee filed return of income declaring Nil income on the contention that in absence of PE, the fees received by it from Indian clients was not chargeable to tax in India.

AO made addition observing that employees/other personnel of the assessee have rendered services in India for more than 90 days during the period constituting service PE in India under the provisions of tax treaty.

Aggrieved, the assessee appealed before Mumbai ITAT.

Issue

Whether the multiple counting of employees in a single day to be considered for construing service PE threshold?

Held

ITAT ruled that the assessee had no PE in India under Article 5(2)(k) of India-UK DTAA.

ITAT noted that as per tax treaty if the employees or other personnel have stayed in India for a period exceeding 90 days in any 12 month period, it will constitute service PE in India.

ITAT further noted that multiple counting of employees in a single day was to be excluded while computing PE threshold.

ITAT explained that the stay of employees in India on a particular day was to be taken cumulatively and not independently.

ITAT thus held that if the multiple counting of employees on a single day was avoided and the vacation period of one of the employees was to be excluded, the aggregate period of stay of assessee’s employees in India during the 12 months period was less than 90 days threshold and thus did not constitute service PE.

ITAT thus ruled in the favour of the assessee.

Commissioner of Income Tax (IT)-2 vs. M/s Indusind Bank Ltd [TS -223-HC-2019(Bom)] dated 22nd April 2019 Facts

The assessee, a scheduled bank, issued Global Depository Receipts (GDR’s) through different agencies for expansion of its business activities and for its need of capital.

The assessee engaged UAE based Amas Bank as global coordinator and lead manager and paid agreed sum of money. The assessee had deposited TDS on gross up basis on the due date.

Revenue contended that the payments for technical services were subject to deduction of tax u/s. 195 of the IT Act.

The assessee argued that foreign payee had no tax obligation in India and therefore question of deduction of TDS does not arise.

AO and CIT (A) ruled in favour of the Revenue.

Further, the assesse filed an appeal before Tribunal. The Tribunal reversed decisions of the revenue authorities and allowed the assessee’s appeal.

Aggrieved, CIT (A) filed an appeal before the High Court.

Issue

Whether the assessee was liable to deduct TDS u/s. 195 from the fees paid to Amas Bank towards services in relation to the issuance of GDRs?

Held

HC upheld ITAT order and ruled that the payment made the assessee towards services in relation to GDR issue is not FTS under explanation 2 to Sec. 9(1) (vii) and TDS deduction was not applicable.

HC further upheld ITAT conclusion that the services rendered by Amas Bank were purely of a commercial nature and bore the character of income arising to it wholly outside India.

Further, HC held that such services were neither rendered in India not utilized in India and therefore, it did not partake the character of FTS.

Further HC explained that explanations u/s. 9(1)(vii) merely seek to delink the concept of income deemed to have accrued or arisen in India from the requirement of : i) The non-resident having a residence or place of business or business connection in India and ii) The non-resident having rendered services in India.

HC further remarked that the question of non-resident having rendered services in India is quite different from such services having been consumed by the assessee in India.

As a result, the appeals were dismissed and ruled in favour of the assessee.

Deepak Kumar Todi vs. Dy. Director of Income Tax (IT), Circle-(1)(1) [TS -220-ITAT-2019(Kol)] dated 16th April 2019 Facts

The assessee, being a non-resident individual, made foreign inward remittance on account of salary in his NRE A/c. for services rendered in Nigeria. He filed his return of income claiming the remittance amount as exempt.

AO contended that the foreign inward remittance was taxable on receipt basis under section 5 (2) (a) read with section 15(a) of the Act even though service rendered outside India.

Further, the assessee filed an appeal before CIT (A) who confirmed the order of the Assessing officer.

Aggrieved, the assessee filed an appeal before Tribunal.

Issue

Whether salary received by non–resident individual for services rendered outside India and remitted to NRE A/c in India is taxable in India?

Held

There was no DTAA between India and Nigeria in the year under question and therefore provisions of the Income Tax Act would be attracted in case of the assessee.

ITAT relied on Calcutta High Court ruling in Utanka Roy wherein it was held that the salary income for services rendered outside India has to be considered as income accrued and received out of India and is not taxable in India.

ITAT thus held that, foreign inward remittance on account of salary, for services rendered in Nigeria is not taxable in India on receipt basis.

ITAT rejected Revenue’s stand that there was double non-taxation and further noted that the employer had already deducted TDS from the salary and bonus in Nigeria which was also credited to the said Government account. As a result, the appeal was allowed in favour of the assessee.

Explanation to Section 73: Amendment is effective prospectively

It was held that the amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No 2) Act 2014 was with effect from 1 April 2015. In its legislative wisdom, the Parliament amended Section 43(5) with effect from 1 April 2006 in relation to the business of trading in derivatives, Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect - Snowtex Investment Limited Appellant v. PCIT Civil Appeal No(s). 4483 of 2019 Date of order April 30, 2019.

S. 32 Deprecation on intangible

The assessee had made payments to him to ward of competence and to protect its existing business. Receiver of sums, in turn, had agreed not to solicit contract or seek business from or to a person whose business relationship is with the assesse, would not solicit directly or indirectly any employee of the assesse and he would not disclose any confidential information which would include the past and current plan, operation of the existing business, trade secretes lists etc. It was held that the rights acquired by the assesse under the said agreement not only give enduring benefit, protected the assessee’s business against competence, that too from a person who had closely worked with the assessee in the same business. The expression “or any other business or commercial rights of similar nature” used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include the present situation - PCIT v. Piramal Glass Limited ITA No. 556 of 2017 order dt. 11 June 2019 (Bombay High Court).

S. 244 Interest on refund arising pursuant to additional claim before ITAT

The assessee had not claimed certain expenditure before the Assessing Officer but eventually raised such a claim before the Tribunal. Upon which, the Tribunal remanded the proceedings to the CIT(A). As such stage, the additional benefit claimed by the assessee was granted. This resulted in refund and the question of payment of interest on such refund. According to the Revenue, by virtue of Section 244A(2), since the delay in the proceedings resulting in the refund was attributable to the assessee, the assessee would not be entitled to such interest. It was held that there is no allegation or material on record to suggest that any of the proceedings hit the assessee’s appeal before the Tribunal or remanded the proceedings before the CIT(A) whether in any manner delayed on accounts of the reasons attributable to the assesse and accordingly allowed the interest to the assessee – CIT vs. Melstar Information Technologies Ltd. [2019] 106 taxmann.com 142 (Bombay)

S. 139(5) Post amalgamation as per the scheme, revised return can be filed irrespective of the time limit specified u/s. 139(5)

Pursuant to the approval of scheme of Arrangement and Amalgamation by hon’ble NCLT, companies filed revised return beyond the time allowed u/s. 139(5) and said returns were rejected by the revenue. On the writ petitions Madras High Court directed revenue to receive the revised returns of income filed by the respective petitioners pursuant to the scheme of arrangement and amalgamation approved by the National Company Law Tribunal, Chennai and complete the assessment for the assessment years 2015-2016 and 2016-2017 in accordance with law within a period of twelve [12] weeks from the date of receipt of the revised returns of income from the respective petitioners. It also observed that

(a) The scheme of arrangement and amalgamation approved by the National Company Law Tribunal under Section 391 of the Companies Act gives statutory force to enable the respective petitioners to file the revised returns of income beyond the prescribed period and Section 139(5) of the Income Tax Act, 1961 is not applicable for cases where revised returns of income have been filed pursuant to approval of scheme of arrangement and amalgamation by the Competent Court.
(b) The Circular issued under Section 119(2)(b) of the income tax act, namely, Circular No.9 of 2015 is not applicable for filing of revised returns of income pursuant to a scheme of arrangement and amalgamation approved by the Court under Section 391 of the Companies Act.

(c) Rule 12(3) of the Income Tax Rules which requires filing of revised returns of income electronically is not applicable to cases where revised return of income has been filed by the assessee pursuant to scheme of arrangement and amalgamation approved by the Court.

Dalmia Power Ltd. vs. ACIT [2019] 105 taxmann.com 28 (Madras).

S. 54F Deduction cannot be denied when assessee is joint owner in two house

The legislature has used the word “a” before the words “residential house”. It must mean a complete residential house and would not include shared interest in a residential house. Where the property owned by more than one person, it cannot be said that any one of them is the owner of the property. In such a case, no individual person of his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. the legislature has consciously not amended the provisions of section 54F, it has to be held that the word “own” in Section 54-F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. It was held that in such circumstances, assessee could not be treated as ‘absolute owner’ of the residential flat and the exemption u/s 54F of the Act cannot be denied to the assesse – Ashok G. Chauhan vs. ACIT [2019] 105 taxmann.com 204 (Mumbai - Trib.)

Power to make Rules or remove difficulties can be exercise by the Central Government only after the date when Act is in force

Parliament in its wisdom enacted the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and expressly provided therein that save as otherwise provided in the said Act, it shall come into force on the 1st day of April, 2016. There is, therefore, no gainsaying the legal position that, the power to make Rules or remove difficulties under the provisions of Sections 85 and 86 of the said Act, could only be exercised by the Central Government, once the said Act came into force on the 1st April, 2016, the date expressly stipulated by Parliament in this behalf, and not prior thereto.

A fortiori the Central Government further could not have, prior to the said Act coming into force, altered the date on which the enactment came into force i.e. 1st April, 2016 by exercising the powers available to it under Sections 85 and 86 of the said Act by advancing it to 1st July, 2015 – Gautam Khaitan vs. UOI [2019] 105 taxmann.com 276 (Delhi).

Section 197A of the Income-Tax Act, 1961 read with Rule 29C of the Income-Tax Rules, 1962 – Deduction of Tax at Source – No Deduction in Certain Cases – Cbdt issues Notification for Amendment of Form No. 15H of the Income-Tax Rules, 1962 Cbdt Press Release, Dated 24/5/2019

Section 87A of the Act has been amended vide Finance Act, 2019 which provides that a resident individual, having total income up to Rs. 5 lakh, shall be entitled to a rebate of an amount being the amount of tax chargeable or Rs. 12,500/-, whichever is less.

However, at present, the note 10 of Form 15H does not take into account the maximum allowable rebate of Rs 12,500/- provided under section 87A as above, which is available to the assessee in respect of the tax calculated on income, there could be cases, where, though income of the assessee would be above the minimum amount chargeable to income-tax, tax liability may be nil after taking into account the rebate available under section 87A. Deduction of tax in such cases may cause undue hardship to senior citizens.

Accordingly, Income-tax Rules, 1962 have been amended by way of insertion of proviso in Note 10 of Form No. 15H and have already been notified vide Notification No. G.S.R. 375(E) dated 22nd May, 2019, so as to provide that the person responsible for paying the income referred to in column 15 of Part I shall accept the declaration in the case of the assessee, being a senior citizen, who is eligible for rebate of income-tax under section 87A, and his/her tax liability is nil after taking into account this rebate.

Section 119 of the Income-Tax Act, 1961 – Income-Tax Authorities – Instructions to Subordinate Authorities – Extension of Due Date for Filing of Tds Statement for Last Quarter of F.Y. 2018-19 from May 31, 2019 to June 30, 2019 & Due Date for issue of Tds Certificate in Form 16 from June 15, 2019 to July 10, 2019 Press Release, Dated 4/6/2019

The Central Board of Direct Taxes (CBDT) had earlier notified amended Form 24Q for filing TDS statement by deductors of tax vide Notification No. 36/2019 dated 12th April, 2019. Subsequently, the File Validation Utility (FVU) for online filing of Form 24Q was updated by NSDL on 21st of May, 2019.

With a view to redress genuine hardship of deductors in timely filing of TDS statement in Form 24Q on account of revision of its format and consequent updating of the File Validation Utility for its online filing, CBDT has ordered the following: (i) Extended the due date of filing of TDS statement in Form 24Q for financial year 2018-19 from 31st of May, 2019 to 30th of June, 2019 and (ii) Extended the due date for issue of TDS certificate in Form 16 for financial year 2018-19 from 15th of June, 2019 to 10th of July, 2019.

Section 90 of the Income-Tax Act, 1961 – Agreement for Exchange of Information between India and Marshall Islands Notified Press Release, Dated 6/6/2019

The Agreement between the Government of the Republic of India and the Government of the Republic of the Marshall Islands for the Exchange of Information with respect to taxes (India – Marshall Islands TIEA) was signed on 18th March, 2016 at Majuro, the Republic of the Marshall Islands. The India – Marshall Islands TIEA has been notified in the Gazette of India (Extraordinary) on 21st May, 2019.

The Agreement enables exchange of information, including banking and ownership information, between the two countries for tax purposes. It is based on international standards of tax transparency and exchange of information and enables sharing of information on request. The Agreement also provides for representatives of one country to undertake tax examinations in the other country.

The Agreement will enhance mutual co-operation between India and Marshall Islands by providing an effective framework for exchange of information in tax matters which will help curb tax evasion and tax avoidance.