Tax INFORM- November 2021

The eleventh 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:

• Nature of capital asset on the date of sale relevant for determining whether asset is capital asset or agricultural asset; subsequent use not relevant.
• Invokes Sec. 68 on LTCG earned through bogus sale of shares; terms the transaction as colourable device to avoid tax.

International Tax Rulings:

• 5% withholding applicable on dividends paid to Dutch Co in view of MFN clause under the India-Netherlands tax treaty
• Payment of legal fees to non-resident limited partnership firm in Poland is not Fees for technical Service; not liable for withholding tax
• FTC available even on exempt Income in India under the India – Japan tax treaty

Allows loss on bonus stripping against long term capital gains.

Foreign Court Ruling:

• Dutch Shipping Company was the beneficial owner of Royalty and thus was entitled to claim exemption in light of Article 12(2) of the DTAA.

Notifications/Circulars:

• CBDT notified an e-settlement scheme, 2021.
• CG has notified tolerance range of one percent for wholesale trading and three percent for in all other cases for assessment year 2021-22.
• Clarification issued with regard to the term “indirectly” used in the Seventh proviso to clause (23FE) of Section 10 inserted by the Finance Act, 2021

Indirect Tax – 

• GOODS AND SERVICES TAX

  Case Laws:

  • Assessment order passed without any breathing time given to Assessee to respond quashed. 
  • Trashes Assessee’s “false case” challenging search & seizure proceedings, calls it an “afterthought”. 
  • High Court grants bail rejecting ‘open investigation’ as a ground for ‘indefinite’ detention in custody.
  • ‘Uninterrupted Power Supply’ classified as ‘mixed supply’. 
  • Madras High Court sets aside the “clarificatory” Circular denying exemption for ‘fish meal.’ 
  • Papad, not restricted to traditional round shape, can be in different shapes/size for purpose of classification. 
  • ‘Fuel Reimbursement’ received by Aircraft Rental service-provider forms part of ‘value’, rejects ‘pure-agency’. 
  • ‘Bio-Fertilizers’ to be classified under CTH 3105 with 5% GST. 
  • No GST on third-party canteen charges collected by employer from employee.
  • Services of providing documentaries, testimony picture to Govt. Dept./Corporations taxable @ 18%. 

   

  Circulars:

  • CBIC issued clarification in respect of applicability of Dynamic Quick Response (QR) Code on B2C invoices.
  • CBIC issued clarification on Section 51, 52 and 54 of the Central Goods and Services Tax Act, 2017 and Rule 89(2)(l) or 89(2)(m) of the Central Goods and Services Tax Rules, 2017.