Tax INFORM- November 2022

The twenty third 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 and individuals operating in India.

The highlights of the current issue are:

Direct Tax – 

Domestic Tax Rulings:

• Hon’ble Supreme Court held that the moment employees undertake travel with a foreign leg, it is not a travel within India and hence not eligible for the LTC exemption.
• Hon’ble Supreme Court interprets the term “general public utility” appearing in section 2(15) of the Act.
• The Supreme Court interprets ‘solely’ appearing under section 10(23C) strictly & prospectively for educational institutions; Overrules its earlier decision in case of Queens Education Society.
• ‘Constructive Gift’ from paternal uncle is tax exempt u/s 56(2)(vii), even though the amount was not directly transferred from his bank account.
• Disallowance u/s 36(1)(ii) of bonus/commission paid “in lieu of profit or dividend” applies only to employees who are Partners/shareholders.

International Tax Rulings:

• Pre & post sale services for Software Solutions requires technical expertise and qualifies as FTS.
• UK law-firm eligible for treaty benefits prior to amended Protocol; Relies on Linklaters ruling.
• ESOP cross-charges paid to foreign-parent is an allowable expenditure.

Circulars and Notifications:

• Circular No. 22/2022/F. 197/93/2022-ITA-1, dated 01-11-2022
• Circular No. 23/2022/F. 370142/48/2022-TPL, dated 03-11-2022
• Draft common Income Tax Return: Request for inputs from stakeholders [F. 370133/16/2022-TPL, dated 01-11-2022]
• Instruction No. 1/2022/F. 404/1/2022-ITCC, dated 03-11-2022
• FAQs for Form 3CEB

Indirect Tax – 

Goods & Services Tax

Case Laws:

• AAR held that ‘healthcare services’ included services availed by patients at their residence.
• AAR held that input services and capital goods are eligible to be claimed as a tax credit by a used car dealer opting for Marginal Scheme.
• AAR held certain services to be liable under reverse charge regardless of exemption for the outward supply.
• AAR held that outboard motors that are a part of fishing vessels are taxable at the rate of 5%.
• AAR denied exemption for coaching provided to students enrolled in formal schools.