Insights

Tax INFORM- September 2021

The ninth 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:

    • Disallowance u/s. 14A not applicable if surplus funds and free reserves available and assessee is not legally liable to maintain separate books to substantiate this fact.
    • Gujarat High court allows unconditional stay of demand and requests ITAT to dispose of the final appeal within 2 months from the date of receipt of this writ order.
    • Amount originally received towards share allotment and subsequently treated as gift to circumvent FEMA provisions, not taxable as income.
    • Deemed dividend u/s. 2(22)(e) not applicable where lender and recipient companies had substantial common shareholder.
  • Personal Tax Rulings:

    • Allows set off of long-term capital loss (LTCL) on shares against long term capital gain (LTCG) on sale of property and reiterates that tax planning is valid and legal.
    • Allows loss on bonus stripping against long term capital gains.
  • International Tax Rulings:

    • Payments to Non-residents for online advertisement, bulk mail facility and web-based information technology infrastructure are not in the nature of royalty and hence no TDS is deductible.
  • International Court Ruling:

    • Tax authorities are not obliged to decide in advance the implication of potential assessment or contravention of DTAA provision.
  • Circulars:

    • Extension of timelines for electronic filing of various forms under the Income tax Act.
    • Extension of time- lines for filing of Income tax returns and various reports of audit for A.Y. 2021-22.

Indirect Tax – 

  • GOODS AND SERVICES TAX

    Case Laws:

    • Ex-parte demand order held violative of natural justice principles.
    • Classification of ‘other charges’ received by real-estate developers.
    • Students hostel charge less than INR 1000 per day is exempt from GST.
    • ‘Reimbursement’ arising under ‘the Supply of Transfer of Going concern Service’ is exempt from GST.
    • JDA taxable on the completion date and not on the date of transfer of the development rights. 
    • Clarification on the classification of Chain Sprocket.

     

    Circular:

    • Clarification on restrictions regarding input tax credit and carrying of physical copies of tax invoice.
    • Clarifications regarding the scope of ‘intermediary services’.
    • Clarification regarding ‘export of services’ by a subsidiary/sister concern/group concern, etc. of a foreign company.
  • CUSTOMS

    Recent Case Laws:

    • Vessels change to “conveyances” on import into India.

    Notifications:

    • The CBIC has notified the Electronic Duty Credit Ledger Regulations, 2021 (Regulations) for credit of duty.
    • GOI has notified the manner to issue duty credit for goods exported under the Remission of Duties and Taxes on Export Products (RoDTEP) Scheme and also listed out the conditions to be fulfilled for the issue of duty credit.