Tax INFORM- February 2022

The fourteenth issue of our monthly tax newsletter – Tax Inform is out. Through these newsletters, we provide a compilation of key tax-related case laws, circulars, notifications, etc. issued by the authorities in the previous month impacting entities & individuals operating in India.

The highlights of the current issue are:

Direct Tax – 

Domestic Tax Rulings:

• High Court quashes re-assessment notice issued on the basis of material already available on record during the course of original assessment proceedings.
• Expenses incurred to defend promoters of a company against criminal prosecution, in which the assessee has huge financial investment, allowed u/s 37(1) of the Act.
• TDS proceedings u/s 201(1) and 201(1A) for payments made to non-residents need to be made in a reasonable period of time. Proceedings beyond a period of 4 years from the end of the AY, to be deemed as ‘time barred’.

International Tax Rulings:

• Interest on income tax refund taxable at concessional rate as per treaty and not as business income, presence of PE for taxation of interest income as business income is irrelevant.
• Delhi HC, as an interim measure, permits withholding tax at 8% instead of 10%, till the resolution of the dispute over the interplay of Equalisation Levy (EL) & Royalty/FTS.
• CBDT Circular on MFN clause transgresses Section 90(1) and is not binding on Tribunal/ Assessee.

Notifications/Circulars:

• CBDT issues clarification regarding MFN Clause.

Indirect Tax – 

GOODS AND SERVICES TAX

Case Laws:

• Supreme Court denies Assessee’s claim for exemption of contract labour as job-work.
• High Court quashes summons issued because allegation of ‘co-operative behavior’ was absent
• High Court widens the scope of exemption of residential premises; shall include leasing of premises used as “hostel”.
• AAAR held that “export “does not include sharing of the report of Technical Testing Services performed in India for overseas customers.
• Goa AAR held that sub-dividing land into smaller plots for sale is not a “supply”.
• AAR held that GST is not applicable on money recovered from employees towards Notice Pay and Parental Insurance.
• AAR held that fees collected by clubs are liable to GST.
• AAR held that GST paid on RCM for hiring bus for employee transportation is eligible for ITC for a manpower service-provider.
• AAR held that “export of services” does not include inspection service performed on goods that are sold to a foreign buyer.
• Tribunal held that taxes wrongly paid due to misconception of law shall to be refunded to the Assessee.
• Tribunal quashed Revenue’s demand for reversal of CENVAT credit wrongfully availed.

Excise  

• Tribunal held that a mutually beneficial agreement cannot make parties related.

 Customs

• Tribunal upholds levying Anti-Dumping Duty on imports notified before clearance from the warehouse.

Circulars

• The Central Government vide Circular No.3/2022 clarified that SWS is not required to be calculated on a notional customs duty.