JOURNAL OCTOBER 2023

Ahmedabad Chartered Accountant Journal October, 2023 405 Volume : 47 Part : 07 October, 2023 E-mail : [email protected] Website : www.caa-ahm.org Ahmedabad Chartered Accountant Journal In this Issue Contents Author's Name Page No. - caaahmedabad Journal Committee Shah Rajni Mangaldas Kataria Ashok Chhugamal Shah Karan Dhirenbhai Sheth Prakash Bharatkumar Chairman Convener E. C. Representative Past President Members Shah Rutvij Pankajkumar Desai Maulik Sharadbhai Choksi Nirav Rameshbhai Shah Jignesh Jaswantlal Shah Monish Suketu Shah Rushabh Mayank - Play with me but hurt me not CA. Mayur H. Modha 407 Editorial CA. Rajni M. Shah 408 From the President CA. Shivang Chokshi 409 Articles An Analysis - Section 115BAC CA. Atul R. Shah 410 E-commerce and TCS in GST - An overview CA. Ankit Parikh 412 ECRRS : Is ita Delight for the Department and a Dilemma for the Taxpayers ? CA. Yash Shah 421 Direct Taxes Glimpses of Supreme Court Rulings Adv. Samir N. Divatia 423 From the Courts CA. Jayesh Sharedalal 425 Tribunal News CA. Yogesh G. Shah & 430 CA. Aparna Parelkar Unreported Judgements CA. Sanjay R. Shah 436 Judicial Analysis Advocate Tushar Hemani 439 Controversies CA. Kaushik D. Shah 442 FEMA & International Taxation FEMA & International Taxation CA. Dhinal A. Shah & 443 CA. Hardik Khatri FEMA Updates CA. Dr. Savan R. Godiawala 446 Indirect Taxes GST and VAT Judgments and Updates CA. Bihari B. Shah & 447 CA. Vishrut R. Shah Advance Ruling under GST CA. Monish S. Shah 449 Corporate Law & Others Corporate Law Update CA. Naveen Mandovara 454 GujRERA Corner CA. Manan Doshi 456 Capital Markets CA. Karan P. Vora 459 From Published Accounts CA. Pamil H. Shah 463 From the Government CA. Ashwin H. Shah & 466 CA. Kunal A. Shah IT Corner CA. Rushabh Shah 468 Association News CA. Mayur H. Modha & 470 CA. Prakash B. Nandola ACAJ Crossword Contest 474

406 Ahmedabad Chartered Accountant Journal October, 2023 Attention Members / Subscribers / Authors / Contributors 1. Journals are carefully posted. If not received, you are requested to write to the Association's Office within one month. A copy of the Journal would be sent, if extra copies are available. 2. You are requested to intimate change of address to the Association's Office. 3. Subscription for the financial year 2023-24 is ` 1500/-, single copy ` 150/- (if available). 4. Please mention your membership number in all your correspondence. 5. While sending Articles for this Journal, please confirm that the same are not published / not even meant for publishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication, nor will they be sent back. 6. The opinions, views, statements, results published in this Journal are of the respective authors / contributors and Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it necessarily concur with the authors / contributors. 7. Life Membership/Annual Membership and Other Fees F. Y. 2023-24 Amount in ` Basic GST Total 1. Admission Fees 500 90 590 2. Annual Membership Fees a. If Paid Prior to june 30 of each financial year : i. In case of membership (of ICAI) for a period of less than or equal to five years 600 - 600 ii. In case of membership of (ICAI) for a period more than five years, 750 - 750 b. If paid after june 30 of each financial year : i. In case of membership (of ICAI) for a period of less than or equal to five years, 720 - 720 ii. In case of membership of (ICAI) for a period of more than five years 900 - 900 3. Life Membership Fees i. In case of membership (of ICAI) for a period of less than or equal to five years 4000 720 4720 ii. In case of membership of (ICAI) for a period more than five years 7500 1350 8850 4. Brain Trust Membership Fees a. Individual Membership Fees i. In case of membership (of ICAI) for a period of less than or equal to five years 800 144 944 ii. In case of membership of (ICAI) for a period more than five years 1200 216 1416 b. Flexi Firm/Corporate Membership Fees*** 2400 432 2832 *** Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting. Additional Representatives can be nominated @1200/- plus GST per participant subject to maximum of 20 participant per firm Published By CA. Rajni M. Shah, on behalf of Chartered Accountants Association, Ahmedabad, 2nd Floor, Darshak, 14/A, Swastik Society, Opp. Shrey Hospital, Navrangpura, Ahmedabad - 380 009 Phone : +91 79 40392596 While every effort has been made to ensure accuracy of information contained in this Journal, the Publisher is not responsible for any error that may have arisen. Professional Awards The best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and 'Allied Laws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by experts in the profession. Articles and reading literatures are invited from members as well as from other professional colleagues. Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]

Ahmedabad Chartered Accountant Journal October, 2023 407 Play with me but hurt me not Jest with me but shame me not -Gabriel Harvey As per the Rig Veda, ‘Jayasvantashyattino’ always honouring respectable gentlemen. Not all men are hungry for money or luxury. Many people are hungry for respect, so respect those who are older, respect them without insulting or mocking them, do not try to portray them as small. No matter how high the mansion of hypocrisy is built, if there are no strong bricks like “Sadwichara”, “Sadachar” or “Sanskar” in the foundation of life, eventually it comes time to be buried in it. By insulting or making fun of someone, he does not have any respect, respect or love towards us. Bitterness is added day by day from above. Deliberate snickering is as easy as serving a plate of stale confections of dishonourable insults. In our Scriptures, there so many incidents mentioned i am mentioning few of them here. In Yudhishthira’s Rajasuya yagna, when Duryodhana fell into the water in the hall formed by Maydanavas mistaking Jalkund for water, Bhimsen laughed out loud in the assembly and Draupadi sneered. “The son of the blind must be blind!!” This sarcasm, this laughter, this joke, this mockery and the fire of insults dragged Duryodhana to the battlefield of Kurukshetra. The whole life of the abandoned Karna was laughable. Another famous incident is, Drupada and Dronacharya were disciples of the same Guru. Drupada promised Dronacharya that he would love to help him unconditionally in the time of his need when the kingdom came into his hands. But when DaridraPlay with me but hurt me not Dronacharya went to a friend to ask for something, Drupada insulted him in the assembly. Made fun of him. Because of this mockery, this insult, both friends became eternal enemies. No matter how soft words a man uses, no matter how humble he shows, his hypocritical nature is revealed in the lines of his face. Hypocrisy does not go uncaught. Respect is at the core of every human interaction. Regardless of how old you are or what social status you hold, we all need to feel respected and valued. More respect you give others more you will get. Same thing is mentioned in our scriptures. Every one knows Vidur respected by God Krishna, one of the highest honors for Vidur was the immense respect Lord Krishna had for him. During one of the visits to Hastinapur, Krishna chose to stay at Vidur’s home because of his trust in Vidur’s integrity and honesty. Krishna had faith in his character and his hospitality which Vidur proved right. Krishna’s stay at Vidur’s home was respectful and Krishna could sense his affection and a great hospitality. This is one of the reasons why Vidur is a highly respected character in the epic. Krishna’s respect for Vidur’s conduct and character played a huge role in depicting how Vidur chose Dharma and Truth over everything else. So, in the light of Our Scriptures, we have to honour the respectable gentlemen in our professional life too. Also, not to portray them as small. ❉ ❉ ❉ CA. Mayur H. Modha [email protected]

408 Ahmedabad Chartered Accountant Journal October, 2023 Distrusting the Trusts By the time this piece reaches our desks, I am sure most of us would be taking a sigh of relief from the hectic last days of filing of income tax returns for companies and filing of ROC returns and not to forget the newly introduced Form 10BB and Form 10B for Charitable Trusts. If we look at the recent history of the amendments made by the Finance Ministry in the past 2-3 years, it becomes very perceptible that the intent of this Government is very clear to pluck down the laundering activities which were highly rampant under the garb of charitable activities.Misuse of the form of trusts and NGOs had become so rampant that even the Delhi High Court had publicly remarked that 99% of the NGOs in India were “Fraud” and “Money Making Devices”. It was therefore incumbent upon the Government to introduce laws to tighten the noose around these fraudulent entities and hence a series of amendments were brought about in the laws governing these trusts. The revised audit report, as we are aware, requires reporting of identities of the relatives of the trustees, settlors and substantial contributors along with the information about electronic and other modes of payments. Also, donations made by foreigners & NRIs, though in INR needs to be separately reported. One of the amendments made require the charitable trusts to apply for renewal of registration six months before the date of cancellation failing which the trust shall lose its exemption status and the entire income shall be taxable at the maximum marginal rate. A slight error by the charitable trust might cost heavy to them. While the intention of the Department is not questionable, the new forms are in fact too complex and burdensome for smaller genuine charitable trusts. Most of the trusts find it difficult, if not impossible, to furnish all the required details considering the limited resources and expertise available with them and their accounting staff. Further, the burden from the trustees normally percolate onto the practicing professionals who need to burn the midnight oil to make sure these cumbersome and complex compliances are carried out in time. At the same time, the trustees are not willing to spend an equivalent amount on professional fees since they feel as they are doing something for charity so should the professional do and therefore this area of practice is slowly diminishing as far as professionals are concerned. While large trusts belonging to the who’s who of the countries and hospitals have their arrangements to meet these regulations, lakhs of charitable trusts which operate from humble offices are facing the real challenge of reporting these details and comply with the law. Whether it is the process of re-registration of charitable trusts or filing the extensive audit report in Form 10BB, Charitable Trusts have a tough task to manage their compliance calendars. In our country, lot of philanthropy takes place through charitable trusts and therefore the Government ought to maintain a balance by empowering the smaller trusts and some freedom to legitimate and genuine trusts. It is also the responsibility of our Institutes and Associations to apprise the Ministry of the practical difficulties that are being faced by the trusts and identify possible solutions to enable smooth operations for genuine trusts. It is also the need of the hour for the Department and the Ministry to enhance their supervision and surveillance over the unscrupulous elements rather than punishing the honest. While the laws in our country have always been framed with the right intention, the implementation of the same in its right spirit have always been questionable with the powerful class “managing everything” and the common man finding it tough in managing “everything”.. ❉ ❉ ❉ CA. Rajni M. Shah Editorial [email protected]

Ahmedabad Chartered Accountant Journal October, 2023 409 Respected Members I hope that all of you had a wonderful audit season and are currently busy in filing tax returns along with looking into the long list of work which had taken back seat during September. October is also the month of festivities wherein the longest dance festival of Navratri is thoroughly enjoyed especially in the state of Gujarat. We have witnessed a huge rise in the amount of Raas-Garba being organized by societies and multiple agencies wherein the ticket prices have matched that of cricket world cup matches! The amount of money being spent on these events by the people in the city and the state is increasing every year.The driving reason is the large and fast growing middle class which is helping in the consumer spending index. The higher tax limit exemptions from FY 23-24 is also an indicator from government who is pushing India to be a spending economy. As per report of the Federation of Automobile Dealers Association, 11000 cars and 40000 bikes were sold across Gujarat on Dussehra. On a macro level, India is also poised to surpass Japan and become 2nd largest economy of the Asia-Pacific region. The CA fraternity will be playing a huge role in the rise and management of the earnings of the population of India. However, in all of these, it is very important to take care of our health too as we read in the media about the ever increasing health cases especially the cardiac events. Our profession combined with ever increasing use of technology is making the office hours sedentary. It is very important to take care of the body as much as it is to take care of the mind. The association along with Ahmedabad Branch of ICAI has been actively organizing programs on health like free medical test camps, CPR training and organ donation but sadly it is seen that members do not participate in large numbers. This shows that we are taking our health for granted.Lifestyle changes is the need of the day and as professionals, we need to be front runners in creating a mindset for it. It gives me great pleasure to inform that the Publication Committee chaired by CA MukeshKhandwala have contributed in the form of a book by CA Atul Shah on the topic Charitable Trust –Law & Practice. The book was released by CAA on October 13 at the author’s seminar organized by Ahmedabad Branch of ICAI. It is penned in a very lucid manner keeping in mind the vast amendments related to laws governing the Charitable Trust and process of filing the audit report. The book has received phenomenal response from the fraternity. It is priced at Rs. 250/- and it is available to members of CAA for special rate of Rs. 200/-. I urge all members to buy this book which will serve as a ready reckoneron the subject. The Office Bearers of the Association along with Chairman CA S K Sadhwani and Convenor CA Ajit Shah of Direct Tax Representation Committee had a meeting with Principal Chief Commissioner of Income Tax Gujarat Shri Yeshwant U Chavan and Director General of Investigation – Gujarat Shri Ravjit Arneja. We had a fruitful discussion about the current and future scenario of Income Tax, Allied Laws and its assessments. The principal authorities have urged us to bring to their attention any issues being faced by assesses in any matter related to Income Tax. They were very patient and positive in all the points discussed with them. The demeanor of these apex authorities clearly show the friendly attitude towards the honest tax payers along with stern eye on the dishonest ones. The ‘Tech Tuesdays’ email compiled by Information Technology committee have been receiving great response. Chairman CA Rushabh Shah and his team have planned many more such knowledge sharing emails and seminars on tools and shortcuts which can be useful for daily office work helping to save time. As we move to Smart Work instead of Hard Work, there are multiple events planned for the upcoming months being a mix of professional development, sports and fellowship. Looking forward for a wonderful participation. Thank you! ❉ ❉ ❉ From the President From the President From the President CA. Shivang Chokshi [email protected]

410 Ahmedabad Chartered Accountant Journal October, 2023 New scheme of taxation Section 115BAC: Tax on income of individual and HUF: with effect from Assessment Year 2024-25. New scheme of taxation was introduced by the Finance Act, 2020, with effect from 01.04.2021. Upto assessment year 2023-24, the scheme was applicable to individual and HUF only. Byinsertion of new sub-section (1A) to the section 115BAC, applicability of the section is further extended to AOP (other than a co-operative society),BOI (whether incorporated or not) and an artificial juridical person (other than, company, firm, AOP, BOI and local authority). Upto assessment year 2023-24, the default scheme was old scheme of taxation, a person who wants to go for new scheme of taxation has to opt for the new scheme by filling form 10 IE. On and from, assessment year 2024-25, the new scheme is a default scheme and a person who wants to go for old scheme has to opt for the old scheme by filing form 10 IE. A. Under the new scheme, following exemption or deduction will not be allowed for calculating total income of the person. Income do not form part of total income: 1. Travel concession by employer to employee. (Section 10(5)) 2. Rent Allowance by employer to employee. (Section 10(13A)) 3. Special allowance to meet the expenses in performance of duties, whether or not are actually incurred or not. (Section 10(14)(i)) 4. Special allowance to meet his personal expenses or to compensate the increased cost of living. (Section 10(14)(ii)) An Analysis - Section 115BAC CA. Atul R. Shah [email protected] 5. Daily allowance to Member of Parliament or State Legislature. (Section 10 (17) (i)) 6. Constituency allowance to Member of Parliament or State Legislature. (Section 10 (17) (ii) and (iii)) 7. Minor child income if included in the income of the person to the extent of R.s 1500/-. (Section 10 (32)) 8. Income from Special Economic Zones. (Section 10AA) Income from Salaries: 9. Entertainment allowance received by Government employee. (Section 16 (ii)) 10. Professional Tax paid by the employee. (Section 16 (iii)) Income from House Property: 11. Interest paid on the housing loan in respect of self-occupied house property. (Section 24 (6)) Business Income: 12. Additional depreciation on plant and machinery installed after 31.03.2005. (Section 32 (1) (iia)) 13. Additional depreciation on plant and machinery installed in Notified Backward areas in certain States after 01.04.2015. (Section 32AD) 14. Deduction in respect of Tea, Coffee and Rubber development account. (Section 33AB) 15. Deduction in respect of Site restoration Fund. (Section 33ABA)

Ahmedabad Chartered Accountant Journal October, 2023 411 16. Deduction of payment made to a research association, university, collage or other institution to be used for scientific research. (Section 35(1)(ii)) 17. Deduction of payment made to a company to be used for scientific research. (Section 35(1)(iia)) 18. Deduction of payment made to a research association, university, collage or other institution to be used for social or statistical research. (Section 35(1)(iii)) 19. Deduction of payment made to a National Laboratory, IIT or specified person with a direction to be used for scientific research. (Section 35(2AA)) 20. Deduction in respect of expenditure on specified business. (Section 35AD) 21. Expenditure on agricultural extension project. (Section 35CCC) Deduction in respect of Incomes: 22. All Deduction under chapter VIA (Section 80A to 80V) except: a. Deduction in respect of contribution to pension scheme of Central Government. (Section 80CCD) b. Deduction in respect of contribution to Agnipath Scheme. (Section 80CCH) c. Deduction in respect of employment of new employees. (Section 80JJAA) Set off of loss or Depreciation: 1. Any carry forward loss on account of : a. Deduction in respect of Tea, Coffee and Rubber development account. (Section 33AB) b. Deduction in respect of Site restoration Fund. (Section 33ABA) c. Deduction of payment made to a research association, university, collage or other institution to be used for scientific research. (Section 35(1)(ii)) d. Deduction of payment made to a company to be used for scientific research. (Section 35(1)(iia)) e. Deduction of payment made to a research association, university, collage or other institution to be used for social or statistical research. (Section 35(1)(iii)) f. Deduction of payment made to a National Laboratory, IIT or specified person with a direction to be used for scientific research. (Section 35(2AA)) g. Deduction in respect of expenditure on specified business. (Section 35AD) h. Expenditure on agricultural extension project. (Section 35CCC) OR 2. Any unabsorbed depreciation on account of a. Additional depreciation on plant and machinery installed after 31.03.2005. (Section 32 (1) (iia)) b. Additional depreciation on plant and machinery installed in Notified Backward areas in certain States after 01.04.2015. (Section 32AD) 3. Current year Loss under the head of “income from House Property” with any other head of income. B. No deduction or exemption for allowance or perquisite provided in any other law. C. Any carry forward loss or unabsorbed depreciation not allowed, will be deemed to have given full effect and no further deduction for such loss or depreciation shall be allowed for any subsequent year. D. As per the proviso, if the assesse has opted to have old scheme of taxation on or before 01.04.2023 and for assessment year 2024-25, the income is computed as per the new scheme of taxation, the unabsorbed depreciation in respect of a block of asset, upto 01.04.2024 will have to Continued to page 420 An Analysis - Section 115BAC

412 Ahmedabad Chartered Accountant Journal October, 2023 Background : In the recent past globally the usage of technology has increased manifold across the world. We still remember around 10 years back in the year 2013, mobile phone and smartphone was in trend and to use apps like Facebook and WhatsApp was in everybody’s mind. However, it was not possible to do online shopping, book cabs and hotels or mobile banking through smart phones. However today after 10 years your mobile phone is your office through which online shopping, booking cabs and mobile banking etc. is possible easily. With UPI and other technologies the payment to vendors have become so easy and we are moving towards cash less economy. In this article we are trying to explain the concept of ecommerce where through electronic platform, business transaction can be undertaken and what will be its effects along with GST provisions at the time of supply of goods merchandise or services through e commerce platform. We also have givenillustrations which will demonstrates the practical situation of various ecommerce transactions and provision related TCS. Lastly we also compiled to give details about statutory filings and the forms to be filed by e-commerce operator on monthly / quarterly yearly basis. Introduction In the GST context, the use of Internet network for buy and selling of goods and services over internet has been expanding massively. Post introduction of the concept of e-commerce under GST law, government has introduced the concept of TCS with effect from 1.10.2018. E-commerce can be of various types like B2B, B2C, B2G etc. The concept of TDS and TCS is not something new for a business organisation / entity. In Income Tax these concepts E-commerce and TCS in GST - An overview CA. Ankit Parikh [email protected] are used for more than a decade. Under Income Tax laws, TDS is deducted at the time of payment or credit whichever is earlier for services are provided by the supplier to the customers. Similarly, TCS, tax collected at source is also charged by specific persons (notified type of goods) on the sales made by them to the customers. Similarly, In the GST law the concept of TDS and TCS is introduced. However, few fundamental differs from that of Income tax law. We have given detailed elaboration of the concept of TCS and E-commerce operator under GST in this article. What is TDS and TCS as per GST Law? - Briefly As per GST law, when an invoice is given by the supplier to its customer for goods or services which falls within the category of Section 51 of CGST Act 2017, the customer will give the payment to the supplier after deducting the necessary TDS. The said TDS is deposited to the Government which can be used by the Supplier from making the payment of the output liability at the time of filing of its monthly return. Majorly the TDS is applicable for government contract that is goods and services provided to Government companies and Government Department. - As far as the provisions of TCS is concerned the same is applicable to an e-commerce operator who will deduct the TCS while making the remittance to the Seller while making the payment for supply of goods or services as per his terms of contract. The payment given by e-commerce operator to the supplier would be net of TCS and its commission and brokerage on the purchase & sales transaction executed on electronic commerce portal.

Ahmedabad Chartered Accountant Journal October, 2023 413 E-commerce and TCS in GST - An overview First of all, Let’s discuss the provisions of TCS as per Section 52 (1) of the CGST Act, 2017 As per Sec 52 (1) of the CGST Act, every e-commerce operator, not being an agent, shall, collect an amount calculated at such rate not exceeding 1% as may be notified by the government on the recommendations of the GST Council, on the net value of taxable supplies made through it by other suppliers where the consideration with respect to such supplies is to be collected by the e-commerce operator. The amount so collected is called as the “Tax Collection at Source” (“TCS”) Central Govt/ State Govt TCS E-com Operator through which sales and purchase are executed Seller of goods on Buyer of goods on E-commerce Platform E-commerce Platform Apparently, only those e-commerce operators (not being agents) are liable to collect TCS who allows other suppliers to supply their goods or services through its platform and alsocollects consideration in respect of such supplies. (In cases where consideration is not collected by Ecommerce operator on transactions or done directly by buyer and seller this provision will not be applicable.) Now let us go through 2 Important Definitions as below: 1. Section 2(44) - Electronic Commerce: “Electronic Commerce” means the supply of goods or services or both, including digital products over digital or electronicnetwork. 2. Section 2(45) – Electronic Commerce Operator: “Electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platformfor electronic commerce; The Concept of TCS are explained with illustrationsin detailed manner as below: Liability to collect TCS: A. E-commerce operator to collect TCS:Ecommerce operators liable to collect TCS as per Sec 52 of the CGST Act, when they are facilitating: - Actual supply of goods; or - Actual supply of services (except specified services under sec 9 (5) of the CGST Act) (Section 9(5) will be discussed later in this article.) Through their platform and collects consideration in respect of such supplies.Important Ingredients here are, i. Consideration is collected by Platform Operator (who is E-Commerce Operator) ii. He must have a Platform/Web Portal on which Transactions are undertaken of supply. For example, website / webportals like Amazon/ Flipkart on its platform have customers who can buy merchandise from the actual seller through the portal of Amazon / Flipkart. The responsibility for collection of consideration of the merchandise which is sold is completely on the website i.e. Amazon / Flipkart plus the web portal IP Ownership is of Amazon/Flipkart. Once the amount is collected by Amazon or Flipkart it deducts its commission and thereafter gives the payment to the actual vendor as per the terms of this contract. In this case Amazon and Flipkart are e-commerce operators where they are providing market place to both buyers and sellers to sale / purchase of the goods / merchandises. In case of supply of service, the best example is makemytrip.com; goibibo.com; or yatra.com Now let’s understand this with an Illustration and Financial Number: Example 1: Captain America supplies Bagsof Rs.20,000 to Iron Man through Flip kart’s website named Avengers. Bill raised by Captain America is 20,000+ 18% GST which is INR 23,600. In this case TCS will be charged @ 1% on INR 20,000

414 Ahmedabad Chartered Accountant Journal October, 2023 which is INR 200 by Flipkart (Avengers) on Captain America. Total bill is of INR 23,600 and Entire INR 23,600 will be collectedby Avengers and out of which INR 200 TCS will be paid directly to Government by Flipkart (Avengers) and INR 23,400 will be given to Capitan America. There is also a probability that less than 23,400 is given after deducting commission or Brokerage or fees by Flipkart (Avengers). Flipkart (Avengers) will raise a tax invoice of its Commission/ Brokerage to Captain America and on which applicable GST shall be levied and collected by Flipkart (Avengers) and Input tax credit shall be made available to the supplier. Tax Implications from the view point of Flipkart (Avengers) i. Flipkart (AVENGERS) will raise its own Tax Invoice of Commission/ Brokerage to Captain America on which necessary GST shall be charged and paid to the Government. ii. Flipkart (AVENGERS) will deduct GST TCS on net taxable value of supply made by Captain America and deposit the same to the government on behalf of Captain America which will be inturn eligible to Captain America for set off against its output liability of Rs. 3600. Tax Implications from the view point of Captain America i. Captain America will show GST liability of Rs.3600 in its Monthly returns and pay the same to the Government on account of supply made by it one commerce operator’s platform. ii. Captain America will claim GST TCS deducted by Flipkart (AVENGERS) in its Cash ledger and can use the same while the paying GST liability of Rs.3600. iii. Captain America will claim Input Tax Credit on Commission/Brokerage Tax Invoice raised on it by Flipkart (AVENGERS). Tax Implications from the view point of Iron Man i. Iron Man will claim Input Tax Credit on Tax Invoice raised on it by Captain America. B. E-Commerce operator not liable to collect TCS: E-commerce operators not liable to collect TCS as per Sec 52 of the CGST Act, in relation to those supplies which they make on their own account. Example 2: In this case where there is direct supply by the Vendor to the Customer either on its own website or otherwise in such cases TCS is not applicable. For example, Indian Chemical Association (ICA) has created a website on which all chemical suppliers / Vendors are registered and public at large can go to the website place order for purchase of chemicals / materials. In Such cases as there is a direct connection between Buyer and seller and consideration given is also direct from buyer to seller, the question of E commerce or TCS does not arise. Example-3 : If Flipkart as a supplier supplies other brand goods through its own website by buying such goods on its own account and sale directly to customer on its own account, then in such a transaction, Flipkart would not be considered as an e-commerce operator for the purpose of Sec 52 of the CGST Act. Hence, TCS provisions are not applicable to such transactions. Now lets discuss Section 9(5) of the CGST Act 2017 in detail: The Government has specified certain categories of services, the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services: Thus, Sec 9 (5) of the CGST Act works as an exception to the concept of TCS and in case of specified services therein, normal GST provisions as regards taxability will be applicable. Similar provisions are also contained in UTGST Act vide Sec 7 (5) thereof and IGST Act vide Sec 5 (5) ibid. Also, akin to CGST law, provisions are contained in SGST law of respective states. Lets understand the specific services which are falling under specified services u/s 9(5) of CGST Act 2017? E-commerce and TCS in GST - An overview

Ahmedabad Chartered Accountant Journal October, 2023 415 Sr. Nature of Service Supplier of Service Who is liable to pay No. Goods and Services Tax 1. Services by way of housekeeping such Any person except who is liable for E-commerce operator as plumbing, carpentering, etc. registration under section 22 (1) of the Central Goods and Services Tax Act, 2017 2. Transportation of passengers by Any person E-commerce operator motorcar, a radio-taxi, maxicab and motorcycle 3. Providing accommodation in hotels, Any person except who is liable for E-commerce operator guest houses, inns, clubs, campsites or registration under section 22 (1) of the other commercial places meant for Central Goods and Services Tax Act, residential or lodging purposes 2017 4. Supply of restaurant service other than Any person except who is liable for E-commerce operator the services supplied by restaurant, registration under section 22 (1) of the eating joints etc. located at specified Central Goods and Services Tax Act, premises. 2017 Summary table below shall be helpful to understand the Provision Description of Supply Person liable to pay GST Threshold Limit Registration mandatory exemption (Yes/No) applicability Passenger E-Commerce Operator Not required Not required Transportation Services Supply House Keeping E-Commerce Operator: Once YES Yes (Only when turnover Services Supply Supplier is liable to get registered. Cross INR 20,00,000/- Supplier shall be liable to pay GST Supply of E-Commerce Operator: Once Supplier shall be liable YES Accommodation Supplier is liable to get registered. to pay GST Yes (Only when turnover Services Cross INR 20,00,000/- Supply of Restaurant E-Commerce Operator: YES Yes (Only when turnover Service Once Supplier is liable to get Cross INR 20,00,000/- registered. Supplier shall be liable to pay GST In this regard, the Government vide notification No.17/ 2017 – Central Tax (rate), notification no. 17/2017 – Union territory tax (rate) notification No.14/2017 – integrated tax (rate) all dated 28.06.2017 effective from 01.07.2017 has specified following categories of services: (i) Services by way of transportation of passengers by a radio-taxi, motorcab, maxicab, motor cycle, omnibus or any other motor vehicle. Example 4:Suppose Mr. A wants to travel 20 kms from one location of Chandigarh to other location of Chandigarh and he books ola than in this case, E-commerce and TCS in GST - An overview

416 Ahmedabad Chartered Accountant Journal October, 2023 the estimated fare of Rs.500 Plus GST Rs.25. GST of Rs. 25 collected by olashall be paid to government by Ola and balance amount Rs.500 (after deducting fees/commission etc) will be credited to the Driver. In this case the Total Turnover of Rs.500 shall be considered as Turnover of Driver, however liability of paying GST is kept on E Commerce Operatori.eon Ola in this case. E commerce operator shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the driver. (ii) Services by way of providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes, except where the person supplying such services through e-commerce operator is liable for registration in GST. Example5: Suppose Hotel Shimla located in Shimla is registered with MakeMyTrip website for providing Accommodation service in hotel. Assuming that Turnover of Hotel Shimla does not exceed INR 20,00,000 and accordingly they are not liable to be registered under GST. Suppose Mr B is a person who books hotel Shimla through the website of MakeMyTrip. The total price charged by MakeMyTrip for 1-night stay is Rs.5000 plus GST Rs.600. In this caseMakeMyTrip will pay total Rs. 600 GST directly to the government and will pay balance amount Rs. 5000 (after deducting fees/commission etc) to the Hotel Shimla. In this case the Total Turnover of Rs. 5000 shall be considered as Turnover of Hotel Shimla, However liability of paying GST is on E Commerce Operatori.e on MakeMyTrip in this case. E commerce operator shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the driver. Example 6: If in the above case, Hotel Shimla turnover exceeded Rs. 20,00,000 and if Hotel Shimla was a Registered person under GST then in such case such services of accommodation would not fall u/s 9(5) of CGST Act 2017 and accordingly regular GST provisions would be applicable to Hotel Shimla and in such case TCS provisions would get applicable to MakeMyTrip when the Hotel Shimla is registered under GST. (iii) Housekeeping Services: Services by way of house-keeping, such as plumbing, carpentering etc, except where the person supplying such service through electronic commerce operator is liable for registration under sub-section (1) of section 22 of the said Central Goods and Services Tax Act. Example7: Suppose Mr C. is a person who books a Plumber for availing his Plumbing services through the website of Urban Clap. The total value of service availed by Mr. C is derived at Rs. 1000 plus GST. Urban Clap will raise a tax Invoice directly to Mr. C Rs. 1000 plus applicable GST suppose Rs. 180 and pay GST Rs. 180 directly to the government and will pay balance amount Rs. 1000 (after deducting fees/commission etc ) to the Plumber. In this case the Total Turnover of Rs. 1000 shall be considered as Turnover of Plumber, However liability of paying GST is on E Commerce Operator i.e on Urban Clap in this case. E commerce operator shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the Plumber. Example 8: If in the above case, Plumber’s turnover exceeded Rs. 20,00,000 and if Plumber was a Registered person under GST then in such case such services of Housekeeping service would not fall u/s 9(5) of CGST Act 2017 and accordingly regular GST provisions would be applicable to Plumber and in such case TCS provisions would get applicable to Urban Clap when the Plumber is registered under GST. (iv) Further, The GST Council in its 45th meeting recommended to notify ‘Restaurant Service’ under Sec 9 (5) of the CGST Act. Accordingly, Supply of restaurant service other than the services supplied by restaurant, eating joints etc. located at specified premises. “Specified premises means premises providing hotel accommodation service having declared tariff of any unit of accommodation above seven thousand five hundred rupees per unit (Rs 7500/- per unit) per day or equivalent.” In this regard notification no.17/2021- central tax (rate) dated 18.11.2021 has been issued and E-commerce and TCS in GST - An overview

Ahmedabad Chartered Accountant Journal October, 2023 417 clarified vide circular No.167/23/2021-GST dated 17.12.2021. Example 9: Mr D places an Order on Restaurant India Gate through Zomato app. The total Order cost is Rs. 750 plus GST Rs. 38. Zomato will raise a tax Invoice directly to Mr. D Rs. 788/- along with GST and pay GST directly to the government and will pay balance amount 750 (after deducting fees/commission etc) to the Restaurant India Gate. In this case the Total Turnover of Rs. 750/- shall be considered as Turnover of Restaurant India Gate, However liability of paying GST is on E Commerce Operator (Zomato). E commerce operator i.e Zomato shall raise a separate Tax Invoice for its own Fees/Commission/Brokerage charged on the Restaurant India Gate. · The invoice for any of the services notified under Sec 9 (5) will be issued by the e-commerce operator themselves. Specific example pertaining restaurant services provided through e-commerce operator: Example-10: Hotel Oberoi which provides accommodation services having declared tariff of rooms starting from INR 8,500 per unit per day. A restaurant unit of Hotel Oberoi is supplying restaurant service through Zomato. This case is specifically excluded from the provisions of Sec 9 (5) of the CGST Act since the restaurant unit of Hotel Oberoi is specifically excluded from the list of Services notified u/s 9(5) of CGST Act 2017 because the declared tariff of Hotel Oberoi is above Rs. 7500 per day. In such case, Hotel Oberoi suppose raising an bill of Rs. 2000 on a customer then in such case Hotel Oberoiwill charge GST on restaurant services 2000 plus GST 5%i.e Rs. 100 and in this case Zomato will collect TCS @ 1% on Rs. 2000 as per Sec 52 of the CGST Act, and deposit Such TCS of Rs. 20 directly to the government and will pay balance amount of Rs. 2080 (2000+100-20) to Restaurant unit of Hotel Oberoi. The amount of Rs. 2080 will further reduced by commission and Brokerage of Zomato. Case law: E-Commerce operator providing taxi aggregation service through its IT platform liable to pay tax u/s 9 (5) The Appellant owns and operates the IT platform for the supply of service of transportation of passengers over the digital network. On completion of the service Appellant sends an invoice to the customer through the digital network facility which is payable by the consumer to the taxi driver. Therefore, the appellant is an “electronic commerce operator” as per Sec 2 (45) of the CGST Act engaged in supply of service of transportation of passengers provided ‘through’ digital platform and by virtue of Sec 9(5) ibid, e-commerce operator (the one who manages and operates the digital platform) is liable to pay tax on all intrastate supplies as if he was supplier – AAAR Karnataka in Re : OPTA Cabs (P) Ltd. [2019 (20) G.S.T.L. 161]. Now, let us understand the Provision of valuation under TCS Tax is to be collected on net taxable value of goods or services supplied by other suppliers through e-commerce operator, to be calculated in the following manner [explanation to sec 52 (1) of the CGST Act]: Net Value of taxable supplies means: Aggregate value of taxable supplies of goods or services or both Not to be included:Service notified under Sec 9(5), made during any month by all registered taxable persons through the e-commerce operator. Reduced by : Aggregate value of taxable supplies returned to supplier during the aid month. Thus, an e-commerce company is require to collect tax only on the net value of taxable supplies made through it i.e. value of the supplies which are returned (supply / sales return) may be adjusted from the aggregate value of taxable supplies made by each supplier. Illustration:A D Pvt Ltd. is an e-commerce operator. For the month of November 2022 following information was provided by A D Pvt Ltd.: E-commerce and TCS in GST - An overview

418 Ahmedabad Chartered Accountant Journal October, 2023 S. Particulars Amount (INR) No. A Aggregate value of all 82,00,000 taxable supplies made through A D Pvt Ltd by all taxable persons B Supplies returned out of 2,59,000 A above C Value of supply of notified 10,50,000 services made by unregistered suppliers through A D Pvt Ltd., falling under Sec 9 (5) of the CGST Act In this case net value of taxable supplies for the purposes of collecting TCS @ 1% shall be INR 79,41,000 (i.e. 82,00,000-2,59,000). Accordingly amount of TCS to be collected by A D Pvt Ltd. shall be 79,410 (i.e.79,41,000 x 1%). And balance amount INR 78,61,590 (79,41,000- 79410) shall be paid by A D Pvt Ltd to the sellers and TCS deducted will be deposited by the A D Pvt Ltd directly to the government on behalf of all taxable person.Further, A D Pvt Ltd. would be considered as deemed supplier of service for INR10,50,000 in terms of Sec9 (5) of the CGST Act and such supply of notified services will not be considered for calculation of net value of taxable supplies for the purpose of collecting TCS. Summary of applicability and non-applicability of TCS provisions On the basis of above discussion, following can be summarised as regards the applicability of TCS provisions when supply of goods or services are made through an e-commerce operator: Nature of supply Whether TCS provisions are applicable? Supply of services through YES e-commerce operator where consideration is routed through such e-commerce operator and such services are not notified under sec 9 (5) of the CGST Act. Supply of goods or services through NO e-commerce operator where consideration is paid directly to the supplier of goods or services. Supply of goods or services through NO e-commerce operator acting as an agent (like Amazon Agent Selling goods on Amazon website) Supply of specified services notified NO under Sec 9(5) of the CGST Act through e-commerce operator Supply of exempt goods or services NO through e-commerce operator Supply of goods or services through NO e-platform but on his own account Supply of those goods or services NO through e-commerce operator where recipient is liable to pay tax under reverse charge Import of goods or services NO Recently the CBIC has come up with Circular No. 124/06/2023 – GST dated 17.07.23 with regards to the clarification on TCS liability in case of multiple e-commerce portal involved in a single transaction. So there can be a situation where there are more than one e-commerce operator involved in a single supply of goods and service between buyer and seller. In such case the clarification is given by CBIC which is summarised as below: Issue No. 1: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and where the supplier-side ECO himself is not the supplier in the said supply, who is liable for compliances under section 52 including collection of TCS? Ans: In this case, supplier-side ECO who finallyreleases the payment to the supplier for a E-commerce and TCS in GST - An overview

Ahmedabad Chartered Accountant Journal October, 2023 419 particular supply made by the said supplier throughhim is required to collect TCS and deposit the same to the government and will be required to make other compliances in accordance with section 52 of CGST Act with respect to this particular supply. Example 11: Mr. X is a buyer of goods who wants to buy clothing merchandise through e-commerce operator named Myntra. Mr. Y is supplier of goods i.e. Clothing merchandise who is registered on ecommerce portal name Nykaa. Both e-commerce operator i.e. Myntra and Nykaaare inter link to each other for supply of clothing merchandise and fashion accessories. In this case when goods are supplied from Mr. Y to Mr. X through the ecommerce operators i.e. Myntra and Nykaa, as per the clarification given by the CBIC in circular No.124/06/2023 the liability to collect TCS and deposit to the Government is on Nykaa who is the ECO of supplier Mr. Y. Issue No. 2: In a situation where multiple ECOs are involved in a single transaction of supply of goods or services or both through ECO platform and the Supplier-side ECO is himself the supplier of the said supply, who is liable for compliances under section 52 including collection of TCS?Ans: In such a situation, TCS is to be collected by the Buyer-side ECO while makingpayment to the supplier for the particular supply being made through it and deposit the same to the government and will be required to make other compliances in accordance with section 52 of CGST Act with respect to this particular supply. Example 12: Mr. X is the customer who wants to buy goods i.e. clothing merchandise through ecommerce operator. He goes to the website of Myntra for buying the same (Myntra is a electronic commerce operator). In this case the supplier of goods itself is Nykaa who otherwise in general parlance is also an e-commerce operator. Hence in such situations where the ECO itself is the supplier of goods then the liability for collecting and depositing TCS to the Government will be on buyer side ECO i.e. on Myntra. For more details regarding clarification regarding multiple e-commerce operator in a single supply kindly refer Circular No. 124/06/2023 – GST dated 17.07.23 Time limit for Payment As per Sec 52 (3) of the CGST Act, the amount collected as TCS shall be paid to the credit of the appropriate government by the e-commerce operator within 10 days after the end of the month in which such collection is made. Note: It is imperative here to note that payment of TCS is not allowed through input tax credit of ecommerce operator. Monthly Statements In terms of Sec 52(4) of the CGST Act read with rule 67(1) of the CGST Rules, every e-commerce operator who collects TCS, shall, furnish a monthly statement, electronically in Form GSTR-8, containing details of all amounts collected, towards outward supplies of goods or service or both effected through it, including the supplies of goods or services or both returned through it and the amount of TCS. The details in Form GSTR-8 should be furnished within 10 days after the end of the month in which such collection is made. Further, it is pertinent to note that Sec 52 (15) of the CGST has been inserted vide the Finance Act, 2023 (w.e.f. the date yet to be notified), as to provide a maximum time limit of 3 years up to which an e-commerce operator can file its Form GSTR-8, from the relevant due date of filing such return. Furthermore, it has also provided an enabling provision for extension of such time limit of 3 years, subject to certain conditions and restriction for an e-commerce operator or a class of e-commerce operators. Annual Statement In addition to the monthly statement, an ecommerce operator who collects TCS, shall also furnish an annual statement in Form GSTR-9B, electronically, containing following details [see 52 E-commerce and TCS in GST - An overview

420 Ahmedabad Chartered Accountant Journal October, 2023 (5) of the CGST Act read with rule 80 (2) of the CGST Rules]- (a) Outward supplies of goods or services or both effected through it, (b) Supplies of goods or services or both returned through it, (c) Tax collected at source as per sec 52 (1) during the financial year. Details in Form GSTR-9B should be furnished before 31st day of December following the end of such financial year. However, for financial year 2017-18 annual return in Form GSTR-9B shall not be required to be filed E-commerce and TCS in GST - An overview Continued from page 411 Article : An Analysis - Section 115BAC adjusted in the written down vale of the such block of asset. Option of taxation under old scheme to be exercised: 1. Any person having income from business or profession and who opt to have taxation under the old scheme is to be exercised on or before the due date specified under section 139(1). Once the option is exercised, the person is allowed only one time to come back to new scheme and will not be allowed to go back to the old scheme forever, except the person ceases to have any income from business or profession. 2. Any person does not have income from business or profession, has to opt for the old scheme along with the return of income furnished under Section 139(1) for such assessment year. Rate of Tax under new scheme of taxation: Sl. Total income Rate of tax No. 1 Upto Rs. 300000 Nil 2 From Rs. 300001 to Rs. 600000 5 per cent 3 From Rs. 600001 to Rs. 900000 10 per cent 4 From Rs. 900001 to Rs. 1200000 15 per cent 5 From Rs. 1200001 to Rs. 1500000 20 per cent 6 Above Rs. 1500000 30 per cent as, provision of collection of TCS has been made effective only from 01.10.2018. Further, it is to be noted that the provisions related to filing of GSTR-9B has not been notified as yet. Summary of filing Statements by E commerce Operator Statements Monthly Annual 1. 10th of succeeding 1. 31st December of month succeeding financial 2. Form GSTR-8 year 2. Form GSTR-9B ❉ ❉ ❉ Surcharge on income tax: As per the provision of the First Schedule, the amount of income tax computed in accordance with the provision of section 115BCA of the Income Tax Act, shall be increased by a surcharge as applicable to a person. Rebate and Reliefs: As per the newly inserted proviso to Section 87A, with effect from 01.04.2024, a person who does not opt for the old scheme of taxation, will be allowed: 1. If the total income does not exceeds Rs. 700000/-, 100% of the Income Tax or Rs. 25000/-, whichever is less; 2. If the total income exceeds Rs. 700000/-, tax payable on the income of Rs. 700000/-. ❉ ❉ ❉

Ahmedabad Chartered Accountant Journal October, 2023 421 Introduction On the 1st of September 2023, the GST Network introduced a significant change to the Goods and Services Tax (GST) reconciliation process.The Electronic Credit Reversal and Reclaim Statement (ECRRS) has become a crucial element in the GST 3B filing process. This statement aims to reconcilethe Input Tax Credit (ITC) and reduce errors, ensuring that taxpayers claim the correct amount of ITC. It has made a fundamental shift in the way taxpayers manage their Input Tax Credit (ITC). According to Notification No. 14/2022 Central Tax dated July 5, 2022, in conjunction with Circular 170/02/2022- GST dated July 6, 2022, significant alterations have been made to the GSTR 3B form and specified ITC disclosure manner creating a separation of permanent and temporary reversals. The amount associated with temporary reversals can now be reclaimed through entry 4A5 and must be reported in table 4D1 of the GSTR3B form.While the ECRRS promises greater accuracy and transparency, it also brings with it a set of challenges and deadlines that taxpayers must navigate.This article will delve into the quarterly taxpayers reporting their opening balances, the intricacies of amendmentsas well as the impact of ECRRS on taxpayers, exploring the hurdles it poses. Understanding the ECRRS The GST Network has recently introduced a fresh ledger in the services section of the GST portal. The ECRRS introduces three essential activities for taxpayers: 1. Historical ITC Reversal and Reclaim: Taxpayers are required to prepare a monthly statement dating back to July 2017, highlighting ITC that was reversed but has not been reclaimed. This includes cases like ITC reversed for non-payment to creditors within 180 days. This historical data provides a comprehensive view of outstanding ITC. 2. Opening Balance Adjustment: From September 1, 2023, taxpayers can adjust the opening balance of unreclaimed ITC. This adjustment allows taxpayers to claim previously reversed ITC. 3. Monthly Reporting: Any temporary reversal and reclamation of ITC reported in GSTR 3B (4B2 and 4D1) will be automatically calculated and reflected in the ECRRS. Amendments and Deadlines Taxpayers have three opportunities to amend the opening balance, but this can only be done until November 30, 2023. After this date, the opening balance becomes frozen. Any attempt to claim more ITC than the cumulative balance of ITC earlier reversed will trigger a warning signal. While taxpayers can still file their GST 3B return after receiving a warning, the tax authorities may issue notices seeking explanations for such discrepancies. ECRRS : Is ita Delight for the Department and a Dilemma for the Taxpayers ? CA. Yash Shah [email protected] What is ECRRS? This statement will deal with transactions in respect of ITC which has been temporarily reversed and eligible for reclaim in future periods. Temporary Reversal of ITC means which is temporarily ineligible in the current month, but in future, it can be re-claimed on fulfilment of specified conditions, for e.g., 180 reversal, tax payment by supplier etc.

422 Ahmedabad Chartered Accountant Journal October, 2023 Target Taxpayers Monthly Taxpayers Quarterly Taxpayers (July- September) What Amount to be reported Amount reversed but unclaimed, Amount reversed but unclaimed, as Opening Balance? till August 2023 till July 2023 Due Date for reporting the 30th November 2023 Opening Balance (Fresh) Due Date for reporting Three (3) amendments are allowed, after the 30th of November Amendments to Opening till 31st December 2023. Balance No new fresh addition can be made. Warning Message, in case While filing August’23 return, While filing July’23 to September’23 excess claimed than closing & onwards return & onwards balance Benefits of the ECRRS The introduction of the ECRRS brings several benefits to the GST filing process: 1. Reduced Errors and Mismatches: ECRRS reduces the likelihood of errors and mismatches in ITC claims, ensuring that the revenue department collects accurate tax revenues. 2. Enhanced Compliance: The ECRRS encourages taxpayers to comply with reporting requirements and deadlines, ultimately improving GST compliance rates. 3. Transparency: With a clear audit trail, tax authorities can easily trace ITC reversal and reclamation activities, reducing tax fraud. 4. Time and Resource Savings: The standardized process reduces the likelihood of litigation related to ITC reversal and reclamation, saving both time and resources for the revenue department. Challenges for Taxpayers While the ECRRS offers benefits, it also presents challenges: 1. Additional Reporting Requirement: Taxpayers must now manage an additional reporting requirement, adding to their compliance workload. 2. Time Constraints: Reporting and amending the opening balance within specified time frames (till November 30, 2023) can be challenging. 3. Limited Amendment Opportunities: Allowing only three opportunities to amend the opening balance may be insufficient for those who need to make corrections or updates.After December 31, 2023, the opening balance is frozen and subject to review by jurisdictional tax officers, potentially leading to disputes. Conclusion The Electronic Credit Reversal and Reclaim Statement (ECRRS) represents a significant step toward streamlining the GST filing process and improving compliance and transparency. While it offers numerous benefits for tax authorities, it also places additional responsibilities on taxpayers, requiring them to manage reporting and amendments within strict timeframes. To ensure a smooth transition and minimize potential issues, taxpayers should stay informed and adapt their processes, accordingly, leveraging technology solutions and seeking professional guidance when needed. Views expressed are strictly personal and cannot be considered as a legal opinion in case of any query. For feedback or queries email us [email protected]. ❉ ❉ ❉ ECRRS : Is ita Delight for the Department and a Dilemma for the Taxpayers ?

Ahmedabad Chartered Accountant Journal October, 2023 423 Proof of WILL- tests to be applied The court has to consider two aspects: I Firstly, that the Will is executed by the testator, and secondly, that it was the last Will executed by him; ii. It is not required to be proved with mathematical accuracy, but the test of satisfaction of the prudent mind has to be applied. iii. A Will is required to fulfil all the formalities required under Section 63 of the Succession Act, that is to say: (a) The testator shall sign or affix his mark to the Will or it shall be signed by some other person in his presence and by his direction and the said signature or affixation shall show that it was intended to give effect to the writing as a Will; (b) It is mandatory to get it attested by two or more witnesses, though no particular form of attestation is necessary; (c) Each of the attesting witnesses must have seen the testator sign or affix his mark to the Will or has seen some other person sign the Will, in the presence and by the direction of the testator, or has received from the testator a personal acknowledgment of such signatures; (d) Each of the attesting witnesses shall sign the Will in the presence of the testator, however, the presence of all witnesses at the same time is not required; 21 Advocate Samir N. Divatia [email protected] Glimpses of Rulings iv. For the purpose of proving the execution of the Will, at least one of the attesting witnesses, who is alive, subject to the process of court, and capable of giving evidence, shall be examined; v. The attesting witness should speak not only about the testator’s signatures but also that each of the witnesses had signed the will in the presence of the testator; vi. If one attesting witness can prove the execution of the Will, the examination of other attesting witnesses can be dispensed with; vii. Where one attesting witness examined to prove the Will fails to prove its due execution, then the other available attesting witness has to be called to supplement his evidence; viii. Whenever there exists any suspicion as to the execution of the Will, it is the responsibility of the propounder to remove all legitimate suspicions before it can be accepted as the testator’s last Will. In such cases, the initial onus on the propounder becomes heavier. ix. The test of judicial conscience has been evolved for dealing with those cases where the execution of the Will is surrounded by suspicious circumstances. It requires to consider factors such as awareness of the testator as to the content as well as the consequences, nature and effect of the dispositions in the Will; sound, certain and disposing state of mind and memory of the testator at the time of execution; testator executed the Will while acting on his own free Will; x. One who alleges fraud, fabrication, undue influence et cetera has to prove the same. However, even in the absence of such allegations,

424 Ahmedabad Chartered Accountant Journal October, 2023 if there are circumstances giving rise to doubt, then it becomes the duty of the propounder to dispel such suspicious circumstances by giving a cogent and convincing explanation. xi. Suspicious circumstances must be ‘real, germane and valid’ and not merely the fantasy of the doubting mind’ 1 Whether a particular feature would qualify as ‘suspicious’ would depend on the facts and circumstances of each case. Any circumstance raising suspicion legitimate in nature would qualify as a suspicious circumstance for example, a shaky signature, a feeble mind, an unfair and unjust disposition of property, the propounder himself taking a leading part in the making of the Will under which he receives a substantial benefit, etc. 11. In short, apart from statutory compliance, broadly it has to be proved that (a) the testator signed the Will out of his own free Will, (b) at the time of execution he had a sound state of mind, (c) he was aware of the nature and effect thereof and (d) the Will was not executed under any suspicious circumstances. Meena Pradhan & ORS. V Kamla Pradhan & ANR. [Civil Appeal No.3351 of 2014 (Arising out of SLP(C) NO.17115/2010) dt 21.09.2023] Judgment – Writing exercise “A judgment culminates in a conclusion. But its content represents the basis for the conclusion. A judgment is hence a manifestation of reason. The reasons provide the basis of the view which the decision-maker has espoused, of the balances which have been drawn. That is why reasons are crucial to the legitimacy of a Judge’s work. They provide an insight into judicial analysis, explaining to the reader why what is written has been written. The reasons, as much as the final conclusion, are open to scrutiny. A judgment is written primarily for the parties in a forensic contest. The scrutiny is first and foremost by the person for whom the decision is meant – the conflicting parties before the court. At a secondary level, reasons furnish the basis for challenging a judicial outcome in a higher forum. The validity of the decision is tested by the underlying content and reasons. But there is more, Equally significant is the fact that a judgment speaks to the present and to the future. Judicial outcomes taken singularly or in combination have an impact upon human lives. Hence, a judgment is amenable to wider critique and scrutiny, going beyond the immediate contest in a courtroom. Citizens, researchers and journalists continuously evaluate the work of courts as public institutions committed to governance under law. Judgment writing is hence a critical instrument in fostering the rule of law and in curbing rule by the law. SBI v Ajaykumar Sood (2023) (7 SCC 282, 291). ❉ ❉ ❉ 22 Glimpses of Rulings

Ahmedabad Chartered Accountant Journal October, 2023 425 Bad debts written off by assignee are allowable : CIT v/s. Elgi Equipments Ltd (2023) 454 ITR 11 (Mad) Issue: Whether assessee can claim bad debts vis-à-vis the debts taken over under an agreement of assignments of debts? Held: Head Notes: The assessee entered into agreements with the sister concern for the take over and assignment of certain book debts. In the period relevant to the assessment year 2004-05 the assessee wrote off certain debts from certain parties as bad debts under section 36(1)(vii) of the Income Tax Act, 1961 which were disallowed by the Assessing Officer. The Commissioner (Appeals) followed his own orders for the assessment years 2001-02, 2002-03 and 2003-04 on this issue and the decision of the Tribunal in the case of two sister concerns and deleted the addition. The Tribunal upheld his order. On the question whether the Tribunal was right in allowing the bad debts: Held, dismissing the appeal, that the Tribunal was right in allowing the bad debts. The issue had already been considered and decided in favour of the assessee in judgement dated December 6, 2021 wherein it was held that section 36(1)(vii) provides for allowance of bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year and that the Tribunal had found that the memorandum and articles of association permitted the assessee to carry on the business of money lending and the transactions in question were within the realm of assessee’s business activity. Prosecution for late deposit of TDS: Dev Multicom Pvt. Ltd. v/s. State of Jharkhand (2023) 454 ITR 48 (Jharkhand) Whether the prosecution – criminal proceedings can be proceeded with when the TDS amount was deposited with interest in case of delay in depositing the TDS amount? Held: Head Notes: The tax deducted at source in all the cases was deposited with interest by the assessee and there was no reason for proceed with the criminal proceeding after receiving the amount with interest though a delay had occurred in depositing the amount. The continuation of the proceedings would amount to an abuse of the process of the court. Apart from one or two cases, the deducted amount was not more than Rs. 50,000. While passing the sanction under section 279(1) the sanctioning authority had not considered the Instruction dated May 28, 1980 issued in this regard by the Central Board of Direct Taxes. Accordingly, the entire criminal proceedings and the cognizance orders in the respective cases passed by the Sepcial Economic Offices whereby cognization had been taken against the assessee for the offences under sections 276B and 278B were quashed. Confiscation of silver by customs authority – deductible as a business loss or not. Expenditure for any purpose prohibited by law. CIT v/s. Prakash Chand Lunia (2023) 454 ITR 61 (SC) Issue: Whether the loss arising on account of confiscation of goods due to carrying on an illegal activity is covered by Explanation 1 to section 37 and hence it is not allowable as a deduction? CA. Jayesh C. Sharedalal [email protected] 61 62 From the Courts 63

426 Ahmedabad Chartered Accountant Journal October, 2023 Held “25.1. This Court merely followed Piara Singh (supra) while making a casual observation on Explanation 1 to Section 37 of the Act. The earlier decisions have not been taken into consideration as we could see in Piara Singh (supra), but the principle laid down was also not taken note of. In this connection, it has to be remembered that for a precedent to be binding there has to be a conscious consideration of an issue involved. The judgment in Dr. T.A. Quereshi (supra) was delivered by a two-Judge Bench while not taking note of a three-Judge Bench decision in Haji Aziz (supra), which has neither been disapproved nor distinguished. Hence, this decision is per incuriam and not a binding precedent. Once again, the question of a confiscation proceeding being in rem was not brought to the notice of the Court. 25.2. Therefore, there cannot be a situation where an assessee carrying on an illegal business can claim deduction of expenses or losses incurred in the course of that business, while another assessee carrying on a legitimate one cannot seek deduction for loss incurred on account of either a confiscation or penalty. The interpretation of Section 37 of the Act given by the Court in Dr. T.A. Quereshi (supra) leads to a situation where the expenditure incurred in manufacturing something illegal may not be allowable as a deduction in view of the Explanation 1, however, if upon seizure, the manufactured goods are confiscated, in that case deduction will be allowable on commercial principles. This classification being artificial not borne out by statute, which mischief is sought to be clarified by the explanation, has no legal basis.” “I. The word ‘any expenditure’ mentioned in Section 37 of the Act takes in its sweep loss occasioned in the course of business, being incidental to it. II. As a consequence, any loss incurred by way of an expenditure by an assessee for any purpose which is an offence or which is prohibited by law is not deductible in terms of Explanation 1 to Section 37 of the Act. From the Courts III. Such an expenditure/loss incurred for any purpose which is an offence shall not be deemed to have been incurred for the purpose of business or profession or incidental to it, and hence, no deduction can be made. IV. A penalty or a confiscation is a proceeding in rem, and therefore, a loss in pursuance to the same is not available for deduction regardless of the nature of business, as a penalty or confiscation cannot be said to be incidental to any business. V. The decisions of this Court in Piara Singh (supra) and Dr. T.A. Quereshi (supra) do not lay down correct law in light of the decision of this Court in Haji Aziz (supra) and the insertion of Explanation 1 to Section 37.” Co-operation credit society is not a cooperative bank and hence it is entitled to deduction u/s 80P(2) Pr. CIT v/s. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd (2023) 454 ITR 117 (SC) Issue: Whether a co-operative credit society can be termed as a bank and hence it is not entitled to deduction u/s 89P(2)? Held “Ms. Aakansha Kaul, learned counsel appearing on behalf of the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Bank/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also. There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee 64

Ahmedabad Chartered Accountant Journal October, 2023 427 cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under Section 80(P)(2) of the Income Tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable, and that the respondent/Assessee shall be entitled to exemption/benefit under Section 80(P)(2) of the Income Tax Act”. Determination of arm’s length price by Tribunal can be subject matter of scrutiny by High Court. SAP Labs India Pvt. Ltd v/s. ITO (2023) 454 ITR 121 (SC) Issue: Whether in every case where the Tribunal determines the arm’s length price, the same shall attain finality and the High Court is precluded from considering the determination of the arm’s length price determined by the Tribunal, in exercise of powers under section 260A of the Act? Held: “7. Therefore, while determining the arm’s length price, the Tribunal has to follow the guidelines stipulated under Chapter X of the IT Act, namely, Sections 92, 92A to 92CA, 92D, 92E and 92F of the Act and Rules 10A to 10E of the Rules. Any determination of the arm’s length price under Chapter X de hors the relevant provisions of the guidelines, referred to hereinabove, can be considered as perverse and it may be considered as a substantial question of law as perversity itself can be said to be a substantial question of law. Therefore, there cannot be any absolute proposition of law that in all cases where the Tribunal has determined the arm’s length price the same is final and cannot be the subject matter of scrutiny by the High Court in an appeal under Section 260A of the IT Act. When the determination of the arm’s length price is challenged before the High Court, it is always open for the High Court to consider and examine whether the arm’s length price has been determined while taking into consideration the relevant guidelines under the Act and the Rules. Even the High Court can also examine the question of comparability of two companies or selection of filters and examine whether the same is done judiciously and on the basis of the relevant material/evidence on record. The High Court can also examine whether the comparable transactions have been taken into consideration properly or not, i.e., to the extent non-comparable transactions are considered as comparable transactions or not. Therefore, the view taken by the Karnataka High Court in the case of Softbrands India (P) Ltd. that in the transfer pricing matters, the determination of the arm’s length price by the Tribunal is final and cannot be subject matter of scrutiny under Section 260A of the IT Act cannot be accepted. 8. Thus, in each case, the High Court should examine whether the guidelines laid down in the Act and the Rules are followed while determining the arm’s length price. Therefore, we are of the opinion that the absolute proposition of law laid down by the Karnataka High Court in the case of Softbrands India (P) ltd. (supra) that in the matter of transfer pricing, determination of the arm’s length price by the Tribunal shall be final and cannot be subject matter of scrutiny and the High Court is precluded from examining the correctness of the determination of the arm’s length price by the Tribunal in an appeal under Section 260A of the IT Act on the ground that it cannot be said to be raising a substantial question of law cannot be accepted. As observed hereinabove, within the parameters of Section 260A of the IT Act in an appeal challenging the determination of the arm’s length price, it is always open for the High Court to examine in each case whether while determining the arm’s length price, the guidelines laid down under the Act and the Rules, referred to hereinabove, are followed or not and whether the determination of the arm’s length price and the findings recorded by the Tribunal while determining the arm’s length price are perverse or not.” From the Courts 65

428 Ahmedabad Chartered Accountant Journal October, 2023 Interest earned from fixed deposits in banks made out of surplus funds is to be taxed as “income from other sources”. Magnum International Trading Co. Pvt. Ltd. (2023) 454 ITR 141 (SC) Issue: Whether interest income earned from bank fixed deposits made out of surplus funds is taxable under income from other sources? Held: “With regard to interest income, we are in agreement with the stand of the Revenue that this income should be taxed as ‘income from other sources’. The Commissioner of Income Tax (Appeals) had reversed the findings given by the assessing officer on the ground that the surplus funds had been utilized for earning interest income. He held that surplus funds were ‘transitory surplus funds’ and utilization of the same for earning interest income cannot take away the character of ‘business income’ from such interest. In our opinion, this finding is fallacious and wrong. The surplus funds, when deposited in a bank or otherwise to earn interest, are not taxable under the head ‘income from business’, but under the head ‘income from other sources’. This income does not have direct nexus nor earned by way of business activity. Accordingly, the interest income is not to be treated as ‘income from business’ for computation of the deduction in terms of clause (b) to Section 80- HHC(3) of the 1961 Act.” Scheme of amalgamation will relate back to the ‘appointed date’. Pr. CIT v/s. Intas Pharmaceuticals Ltd (SC) (2023) 454 ITR 421 (SC) Issue: Whether for giving effect to set off of business loss and unabsorbed depreciation, the “appointed date” or the “effective date” would be relevant? Held: “In view of the above, the impugned judgment and order passed by the High Court does not require any interference of this Court. Under the circumstances, the present Special Leave Petition deserves to be dismissed and is accordingly dismissed.” 66 From the Courts The Gujarat High Court in Tax Appeal No 311 of 2019, relying on SC decision in the case of IRM Ltd v Dy. CIT had quoted from the said decision as follows and held in favour of the assessee. “14. When once therefore, a scheme has been sanctioned bythe High Court, which would relate back to the appointeddate and such order is passed before the order ofassessment is passed, it cannot be stated that the assesseeshould be denied the benefit of such development merely onthe ground that during the accounting period and when thereturn was filed, the High Court order sanctioning thescheme was not yet passed. The very effect of the order ofHigh Court sanctioned the scheme relating back to theappointed date would be that for all purposes including forrecognising the benefit of unabsorbed depreciation andlosses of a merging Company with those of principalcompany would be available from such date. What would bethe effect of the High Court order being passed after assessment is framed is not necessary for us to enter in thepresent case.” “Provision for warranty” is an allowable as a deduction. Pr. CIT v/s. Landis Gyr (2023) 454 ITR 462 (Cal) Issue: Whether ‘Provision for warranty’ is contingent in nature and hence it is not allowable? Held: “This leaves us with substantial question of law (vii) which is a provision for warranty. The Department before the Tribunal objected to the allowaibility of provision for warranty on the ground that in the agreement the clause only mentioned about guarantee and there is no clause for warranty in the terms and conditions. The Tribunal has examined the relevant clause in the terms and conditions; more particularly condition no.19(a) and (b) and found that the warranty clause is in-built in the guarantee clause itself as the assessee, in the event of any defective supply within a period of 5-1/2 years has to replace the meters and in the event of the meters not getting replaced, the assessee has to pay twice the cost of meters. Therefore, the Tribunal on facts concluded that the assessee had agreed for both 67 68

Ahmedabad Chartered Accountant Journal October, 2023 429 warranty (i.e., replacement of defective meters) as well as the guarantee (paying twice the cost of meters if meters are not replaced). Thus, the learned Tribunal was convinced on facts that the clause in the terms and conditions has an in-built warranty clause. Thus, we are of the view that no substantial question of law arises on the said issue as the Tribunal has decided in favour of the assessee by returning ‘finding of fact.” Default in TDS for payments to nonresidents: Limitation period for passing order u/s 201(1) Vedanta Ltd v/s. Dy CIT (IT) (2023) 454 ITR 545 (Mad) Issue: What period should be considered as limitation period for issue of notice u/s 201(1) for payments made to non residents? Held: “Applying the law laid down by the Hon’ble Supreme Court in the above judgments it is beyond the cavil of any doubt that the extended period of limitation of 7 years would be available for passing orders under Section 201(1) of the Act deeming a person to be an “assessee in default” for failure to deduct taxes in respect of payments to residents. The sequitur is that the “reasonable batch period” for passing orders under Section 201(1) of the Act deeming a person to be an “assessee in default” for failure to deduct taxes in respect of payments to non-residents shall also be 7 years from the end of the Financial year in which the payment is made or credit given w.e.f. 1.4.2010.” Benami Property Law : Transactions relating to financial year 2014-15 Neopride Pharmaceuticals Ltd v/s. Adjudicating Authority and others (2023) 454 ITR 571 (Telangana) Issue: Whether fixed assets accrued during the financial year 2014-15 i.e. prior to 25th October, 2016, can be the subject matter of ‘benami transaction’? Held: “In this case, show cause notice under section 24(1) of the Benami Property Act dated December 30, 2019 was issued to the petitioner. M/s. Neopride Pharmaceuticals Limited by the Assistant Commissioner of Income Tax /Initiating Officer. In serial No. 3 of the statement forming part of the show cause notice, the benami property, i.e. the subject matter of benami transaction was described as under: “The movable property being 97500 shares of M/s. Neopride Pharmaceuticals Limited worth Rs. 9,75,000/ - allotted in the financial year 2014-15. 2. Proceeds thereof being corresponding “fixed asset” to the turn of equivalent amount acquired as against the share capital introduced in the books of M/s. Neopride. Pharmaceuticals Limited during the financial year 2014-15 so routed through benami transaction. The Assistant Commissioner of Income Tax/Initiating Officer, while calling upon the petitioner to show cause, passed an order under sub-section (2) of section 18 and sub section (3) of section 24 of the benami Property Act provisionally attaching the aforesaid property for a period of 90 days from the last date of the month in which the show cause notice was issued, i.e. November 30, 2019, further directing that the attached property should not be transferred or converted or disposed or moved in any manner whatsoever until or unless specifically permitted to do so. From the above, it is evident that the Supreme Court has declared that the Amendment Act of 2016 is not merely procedural but prescribes substantive provisions. Therefore, the concerned authorities cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to coming into force of the 2016. Amendment Act, i.e. October 25, 2016 As a consequence, all such transactions or confiscation proceedings shall stated quashed. The Supreme Court has also clarified that in rem forfeiture provision under section 5 of the Amendment Act of 2016 being punitive in nature can only be applied prospectively and not retroactively. In view of finality of the law declared by the Supreme Court, the impugned show cause notices, provisional show cause notices, provisional attachment orders as well as the adjudicating orders passed by the various authorities under the Benami Property Act as amended by the Amendment Act of 2016 impugned in the batch of writ petitions cannot be sustained. Accordingly, those are hereby set aside and quashed”. ❉ ❉ ❉ 69 From the Courts 70

430 Ahmedabad Chartered Accountant Journal October, 2023 JCIT v. Gujarat Energy Development Agency 154 Taxmann.com 348 (Ahd) Assessment Year:2018-19, Order dated:12th June 2023 Basic Facts The assessee, a registered charitable trust under section 12A and engaged incharitable activities for over 40 years claimed exemption under section 11.The AO disallowed claim of exemption under section 11, as audit report in Form No. 10B was not e-filed along with return of income.The CIT(A) taking note of judicial precedents to the effect that filing of Form No. 10B along with return being a procedural requirement and if the same was available during assessment or in appellate proceedings the assessee should not be denied of the benefit of exemption under section 11 allowed claim of the assessee by observing that the impugned audit report was filed before the AOin regular assessment proceedings and was available before him when he passed the assessment order.On appeal to Tribunal by revenue: Issue: Whether exemption under sections 11 & 12 be denied on the ground that audit report in form no.10B was not filed alongwith the return of income Held: The appellate proceedings being the continuation of assessment proceedings merely because the assessee has not furnished the audit report along with return of income but filed during the assessment proceedings and available even during the appellate proceedings, it cannot be stated that the assessee has failed to comply with the provisions so as to deny substantial justice by way of granting exemption. The jurisdictional High Court in Social Security Scheme of GICEA v. CIT (Exemptions) [2023] 147 taxmann.com 283 (Guj.) in a matter of exemption provisions contained in sections 11 and 12 requiring filing of Form No.10B along with return of income for claiming exemption held the requirement of furnishing of audit report to be a mandatory requirement while that of filing the report along with return of income to be a procedural requirement. The issue was identical to that as dealt with by the jurisdictional High Court in Social Security Scheme of GICEA (supra) the decision rendered therein was squarely applicable. Following the same, the tribunal held that the CIT(A) has rightly held the denial of exemption under section 11 for non-filing of requisite Form along with return of income to be not as per law noting the fact that the assessee did file the requisite Form during regular assessment proceedings and appellate proceedings before him.In the result the CIT(A)’s order was upheld. Concentrix Daksh Services India Pvt Ltd v. ACIT TS-548-ITAT-2023 (Del) Assessment Year: 2020-21, Order dated: 20th September 2023 Basic Facts The Assessee is engaged in providing Information Technology Enabled Services. It had filed its return of income forAY 2021-22, computing its tax liability by applying concessional rate of tax under Section 115BAA. The Assessee’s claim for benefit of concessional rate of taxwas denied by the CPC, which was confirmed by the NFAC on the ground that the Assessee has not filed fresh Form 10-IC, exercising its option for concessional rate of tax for the relevant Assessment Year. The assessee is in appeal before the Tribunal against the order of NFAC Issue: Whether Form no.10-IC is required to be filed every year to claim the concessional tax rate as per section 115BAA 37 CA. Yogesh G. Shah [email protected] CA. Aparna Parelkar [email protected] 38 Tribunal News

Ahmedabad Chartered Accountant Journal October, 2023 431 HELD The Tribunal noted that the second proviso to section 115BAA(5)makes it abundantly clear that once option for concessional taxregime under section 115BAA is exercised for any previous year,it cannot be subsequently withdrawn for the same or any other previous year. The department has also issued a FAQ clearly stating that if an assessee has opted for concessional rate of tax once, it shall applyto subsequent assessment years and cannot be withdrawn. Even,in the instructions issued by the Departmental for filing Form ITR6, it has been specifically mentioned that Form 10IC is required to be filed only in the first year wherein concessional rate of taxeswas opted for the first time by an assessee. Thus, not only the statutory provisions, but the clarifications issued by the Department from time to time clearly states that the assessee seeking benefit under concessional rate of tax undersection 115BAA had to exercise its option in Form 10IC only oncein the initial assessment year, wherein, he intends to avail thebenefit, and thereafter, there is no need for exercising the optionagain. That being the statutory mandate, in Tribunals view, theDepartmental Authorities have gone completely wrong in denying the benefit of concessional rate of tax under section 115BAA to the assessee on the misconceived notion that the assessee again has to file Form No. 10IC for the impugned assessment year. They accordingly set aside the order of NFAC and directed the AO to allow assessee’s claim of concessional rate of tax under section 115BAA of the Act, after factual verification. Berlian McDermotts dn. Bhd. v. ACITTS-588- ITAT-2023 (Del) Assessment Year:2018-19, Order dated: 3rd October 2023 Basic Facts In the appeal filed before the Tribunal against the order passed pursuant to DRP order. The appellant raised additional ground in respect DIN not properly mentioned. The facts regarding DIN were as under: · The DIN number quoted in the draft Assessment Order u/s 144C of the Income Tax Act, 1961 dated 30.09.2021 is ITBA/AST/F/144C/2021-22/ 1036060056(1). Tribunal News · The DIN number quoted in the Assessment Order dated 09.06.2022 is ITBA/AST/S/143(3)/2022-23/ 1043393023(1) · The DIN number was not quoted in the Order u/s 144C(5) dated 18.05.2022. · The DIN was generated on 19.05.2022 written inhandwriting is ITBA/DRP/M/144C(5)/2022-23/ 1043072206(1). · The letter of intimation for order u/s 144C(5) dated 19.05.2022 is having DIN No. ITBA/DRP/S/91/2022- 23/1043072217(1). · In the above letter, it was informed that order u/s 144C(5) dated 04.05.2022 is having DIN No.ITBA/ DRP/M/144C(5)/2022-23/1043072206(1). The assessee argued before the tribunal, that both the DIN numbers mentioned on the letter dated 19.05.2022 having DIN No. ITBA/DRP/S/91/2022-23/ 1043072217(1) as well as the DIN number of the order u/s 144C(5) mentioned inthat intimation letter which isITBA/DRP/M/144C(5)/2022-23/1043072206(1) are not existing on the website of the Income Tax Department Issue Whether both the DRP order & final assessment order without proper DIN valid Held Based on the Supreme Court decision in case of National Thermal Power Co.Ltd. Vs CIT (1998) 229 ITR 383, the Tribunal admitted the assessee’s additional ground. To verify the veracity of the claim of the assessee and the Tribunal decided to examine the existence of the DINs quoted in the orders in the Court itself inthe presence of CIT DR. The e-portal of theIncome Tax Department was examined wherein the ”authenticate notice/order issued by ITD” was entered. The OTPs received on the registered mobile number was used to verify the authenticity of the notice/orders and the resultcame “no record found for the given criteria”. The entire examination/verification of the DINs has been done in thepresence of the Income Tax Department Officers. No contraryevidence has been brought to Tribunal’s notice. Accordingly Tribunal held that as the DINs purportedly issued by the Income Tax Department have been found to be not in existence 39

432 Ahmedabad Chartered Accountant Journal October, 2023 and no record has been found, the Assessment Order is hereby quashed..In the result, the appeal of the assessee was allowed and the Stay Application of the assessee was dismissed. Religare Finvest Ltd V DCIT TS-404-ITAT2023 (Del) Assessment Year 2012-13 & 2015- 16, Order dated 13th July 2023 Basic Facts: During AY 2012-13, the assessee issued and allotted Compulsory Convertible Debentures (CCDs) to its holding company. The assessee for the AYs 2012-13 to 2015-16, amongst others, claimed interest expenditure incurred in respect of aforesaid CCDs under section 36(1)(iii) of the Act. The interest was paid by the assessee to Holding Co after deduction of tax at source and was debited to the profit and loss account under the head ‘Finance costs’. During the course of assessment proceedings, the AO, inter alia, disallowed the interest expenditure incurred by the assessee on the CCDs by holding that the interest paid on CCDs was akin to dividend as the intent for issuance of CCDs was to issue equity shares The AO relied on an earlier Circular No. 74 dated 8 June 2007, issued by the Reserve Bank of India (RBI), under the Foreign Direct Investment (FDI) Policy. Aggrieved, the assessee filed an appeal to the CIT(A) who held in favour of the assessee holding that CCDs are in nature of loan until the date of conversion into equity shares. The revenue is in appeal before the tribunal Issue: Whether interest paid on CCDs was allowable as revenue expenditure Held: Before ITAT, Assessee contended that two instruments viz ‘debenture’ and ‘shares’ are mutually exclusive, with separate rights and obligations for both the issuer company and the subscriber; Also contended that the terms and conditions of CCDs clearly stipulates: (i) interest burden on the issuing company, (ii) no voting rights in lieu of debenture holding, security issued, fixed returns, accordingly, CCDs cannot be equated with shares until conversion; Relies on jurisdictional HC rulingin Havells India 352 ITR 376 and plethora of other rulings. It relied on Rajasthan HC ruling in Secure Meters 321 ITR 661 (affirmed by SC) wherein it was held that expenditure incurred in relation to issue of debentures is allowable as revenue expenditure under Section 37(1) and issuance of any debt in any form whether convertible or non-convertible does not militate against the nature of debentures; Also relies on coordinate bench ruling in UAG Builders 53 SOT 370, wherein it washeld that the debentures whether fully or partly or optionally convertible are nothing but debt till date of conversion and any interest paid on these debentures is allowable as normal business expenditure under Section 37(1). The Tribunal rejected Revenue’s reliance on RBI circular no. 74 dt. June 8, 2017 and relies on ITAT Bangalore ruling in CAE Flight Training ITA No. 2060/Bang/2016, to observe that the Circular does not re-characterized convertible debentures into equity and the said circular deems CCDs as part of equity/capital merely for the purposeof keeping check on measures used to circumvent the framework for regulating debt flow in the countryand definition of the term convertible debentures as stipulated in the Circular cannot be applied in other context such as allowability of interest on such debentures during pre-conversion or regarding granting of voting rights to the holders of such convertible debentures before the date of conversion; Accordingly, allows Assessee’s appeal Shell Global Solutions International BV v. DCIT 155 taxmann.com 242 (AHD- Trib.) Order dated 11th October 2023, Assessment Year 2011-12 to 2013-14 Basic Facts: The assessee, is a company incorporated in Netherlands and is engaged in the business of providing research and technical services to array of petroleum related segments. It’s services include chemical analysis, crude oil evolution, engineering, energy optimisation, gas to liquids conversion, regasification, hybrid cracking, inspection, thermoanalysis and water treatment. During the course of assessment, the Transfer Pricing Officer (in short “TPO”) observed that the assessee had provided services related to operation of LNG storage and regasification terminal to its Associated Enterprises, HPPL and Hazira LNG Pvt. Ltd. The assessee has adopted CUP method Tribunal News 40 41

Ahmedabad Chartered Accountant Journal October, 2023 433 for determination of Arms Length Price (in short “ALP”). However, the TPO observed that no comparison appears to have been made with the available internal CUP nor any alteration has been made to the above amount while conducting the transfer pricing study in respect of the fact that the prices charged to non-AE parties are substantially higher than prices charged to the AE by the assessee. Further, the assessee provided manpower services to another Indian Associated Enterprise SIMPL which were benchmarked using CUP as the most appropriate method. The TPO observed that the personnel provided by the assessee to its AE were subsequently provided to a third party by the AE, the average hour rate charged by the assessee to its AE was Euro 187.5 while average hour rate charged by the AE to the third party was Euro 338.25. During the course of proceedings before the TPO, the assessee took the argument that the assessee had charged a higher price for the aforesaid services from it’s AE, it would have let to tax base erosion in India, however, the TPO rejected the assessee’s argument and made an upward adjustment on account of the above transactions during the course of the proceedings. Similar adjustments weremade for A.Ys. 2012-13 and 2013-14 by the TPO as well, against which the assessee is in appeal before the Tribunal. Issue: Whether the TP provisions are not intended to apply where the adoption of the arms-length price would result in a decrease in overall tax incidence in India. Held: The tribunal found that during the course of assessment proceedings, the assessee had apparently not given any justification as to why there was of variance between the pricecharged to its AE and the rates charged for the same services to third parties. At all stages before the Department, the assessee has stressed upon the arguments on based erosion only. However, before Tribunal the in view of the decision of Hon’ble ITAT Kolkata Special Bench in the case of Instrumentarium Corporation Ltd. (supra) the assessee did not press the argument of base erosion. In the alternative, the assessee has relied upon the Karnataka High court decision in case of CIT vs. UE Development India Ltd. ITA No. 52, 53, 54 & 55/2014 and has taken a legal argument that since in the case of AE, no transfer pricing adjustment was made by the concerned TPO, the transaction in question should be considered at ALP.However, the tribunal found that for A.Y. 2011-12 and 2012-13, in the case of HPPL, no adjustment was made since no transfer pricing reference was made. Further, in the case of HLPL, for A.Y. 2012-13, for the same services, upward adjustment has been made and the matter is pending adjudication before the ITAT Ahmedabad. The Tribunal referred to the case of ITAT Bangalore in the case of Filtrex Technologies Pvt. Ltd. vs.ACIT 93 taxmann.com 301 (Bangalore-Tribunal), wherein it was held that where assessee made payments of royalty and administrative charges to AE, mere fact that ALP of said payments had been accepted in case of AE, it could not be concluded that price paid by assessee in international transactions had tobe accepted as at arm’s length the Hon’ble ITAT in that case had taken into consideration the caseof UE Development India Pvt. Ltd. The ITAT in that case has further held that ALP has to bedetermined in the hands of the assessee irrespective of the acceptance of theALP in the hands of the AEs of the assessee. Following the decision rendered by ITAT Bangalore, the matter was restored to the file of AO for determination of ALP in respect of the aforesaid transactions. Shell Global Solutions International BV v. DCIT 155 taxmann.com 242 (AHD- Trib.) Order dated 11th October 2023, Assessment Year 2011-12 to 2013- Basic Facts I: The assessee earned revenues from provision of off the shelf standard software to certain Indian entities. The AO taxed the aforesaid amounts as software royalty in the hands of the assessee under Section 9(1)(vi) of the Act read with the applicable Treaty law. While holding receipts as royalty payment, the DRP primarily relied upon the decision of Karnataka High Court in the case of CITvs. Samsung Electronics Co. Ltd. 16 taxmann.com 141 to hold that thepayments received by the assessee company from Indian customers give rise to royalty income in terms of Article 12 of IndiaNetherlands DTAA r.w.s.9(1)(vi) of the Act. Tribunal News 42

434 Ahmedabad Chartered Accountant Journal October, 2023 Issue I: Whether income earned from sale of off the self standard software was taxable as royalty. Held I: Based on the Hon’ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. 125 taxmann.com 42 (SC) and also in the Supreme Court decision in the case of Infosys Technologies Ltd. 142 taxmann.com 224 (SC), wherein the Hon’ble Supreme Court had have held that amount payments by resident Indian and user / distributors to nonresident computer software manufacturers /suppliers as consideration for resale / use of computer software through distribution agreement is not payment for use of copy right in computer software and thus, same does not amount to income taxable in India.Accordingly, the issue was decided in favour of the assessee. Basic Facts II: The assessee provided Computational Fluid Dynamics (in short “CFD”) modelling of the temperature effects on the Hazira Sea Water outflow into the port and also provided marine biological advice on its implications to HLPL. Further, the assessee provided desktop quality review of Shell Reliability Centre Maintenance done by HLPL’s site team. Further, the assessee performed a Integrity Review of Ageing Switchgear (in short “IRAS”) for HPCL for providing the above services, and the assessee received consideration. The AO held that the aforesaid receipts qualify as fee for technical services under Section 9(1)(vii) of the Act read with Article12 of the Treaty. Issue II : Whether the services rendered by the assessee were technical services making available technology. Held II: On going through the description of services, perusal of the relevant agreements and the order passed by the DRP, the tribunal was the view that looking into the nature of services there was nothing to suggest that the condition of “make available” as provided in the India-Netherlands Tax Treaty have been satisfied. Further, there wasnothing to suggest that there was any agreement for transfer of any technicalplan or design to the recipient of services under the aforesaid agreement. The analysis done by the assessee was submitted in a form of report to the recipient of services, therewas nothing to suggest that the technology for providing the aforesaid services have been imparted to the recipient of services in a way that therecipient of services would not be required the services of the assessee further in the future and has been enabled by the assessee to perform such services onits own without any recourse or assistance of the assessee in the future. In this connection the tribunal also referred to the decision of Karnataka High Court in the case of CIT vs. De Beers Indian Minerals Pvt. Ltd. 21taxmann.com 214. As per the Tribunal the Department had not been able todemonstrate that in the instant facts, any technology was “made available” tothe recipient of services in such a manner that they were enabled to perform the aforesaid services in the future, without any recourse to the services of the assessee. Further, the Tribunal did not agree with the observations made by DRP that the intention of imparting advice per se involves the sharing of experience, knowledge or skills of the trainer so that the person receiving the services can use the experience, knowledge or skills shared by the services provider for his own purposes in the future. As per Tribunal there was nothing in the hand of the Tax Treaty or the judicial precedents on the subject to come to any such conclusion. In the result, the Tribunal held that the aforesaid services do not qualify as “fee for technical services” under Section 9(1)(vii) of the Act read with Article 12 of the India-Netherlands Tax Treaty. Basic Facts III: The assessee had entered into the several contracts with Larsen & Toubro (in short “L&T”) in connection with L&T’s various projects outside India. The services broadly included engineering services. The aforesaid services were provided incountries outside of India viz. Vietnam and China etc. and were in relation tooverseas EPC projects undertaken by L&T. Before the AO the assessee contended that the aforesaid receipts are not taxable in India because of exclusion clause under Section 9(1)(vii)(b) of the Tribunal News

Ahmedabad Chartered Accountant Journal October, 2023 435 Act. The assessee’s contention was that the services were provided by the assessee outside of India and hence the aforesaid receipts are not taxable in India. However, the AO did not agree with the contention of the assessee for the reason that manufacturing of gas fire equipment has been done in India by L&T and the manufactured equipment has been supplied to the non-resident third party. The AO further held that mere location of the person placing an order being outside India does not shift the source of income and economic activity outside India. The AO held that the economic activity of manufacturing to which the technical services pertained were carried out entirely in India. In appeal, DRP did not agree with the contention of the assessee and held that the assessee is not carrying out any businessoutside India and the business is being carried out from India, for which the FTS has been paid. Issue III: Whether the Income received for technology used outside India would be taxable in India Held III: The assessee relied on the decision rendered by the Jurisdictional High Court in the case of Motif India Infotech Pvt. Ltd. in ITA No. 1177 of 2018 wherein the Gujarat High Court held that the source of income is outside India since assessee’s customer work based outside India. The assessee also placed reliance on the decision of Bangalore ITAT in thecase of Titan Industries Ltd. 11 SOT 206 wherein it was held that when thecustomers of the company are located outside India, then the source is outside India. The Tribunal noted that the services were to be rendered primarily from the office of the assessee located at Germany. Further, from the terms of the services it wasseen that the services on relation to installation of equipment at Vietnam andChina. Further, it had been submitted by assessee that payment for the aforesaid services were received outside of India. The Tribunal has reproduce the relevant extracts of the ruling rendered by the Gujarat High Court in the case of Motif India Infotech Pvt. Ltd. (supra) which held that as per clause (b) of Section 9(1)(vii) the income by way of fees for technical services payable by a person who is a resident of India would be deemed to accrue or arise in India. However, this clause contains two exceptions namely where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India, or it is for the purpose of making or earning any income from any source outside India. In other words, therefore, if the assessment of an assessee falls in either of these two clauses, the income by way of fees or technical services paid by the assessee would still not be covered within the deeming clause of Section 9(1)(vii) of the Act. In the present case, the Commissioner (Appeals) and the Tribunal have accepted assessee’s factual assertion that the payments were for technical services provided by a non-resident, for providing services to be utilized for serving the assessee’s foreign clients. Thus, the fees for technical services was paid by the assessee for the purpose of making or earning any income from any source outside India. In this case, L&T has made payment for utilization of the services provided by the assessee in business carried out by L&T outside of India. The services which were provided by the assessee were utilized by L&T in respectof its plant set up in Vietnam and China for its foreign clients. Accordingly, following the decision of Motif India Infotech Pvt. Ltd. (supra),this ground of the assessee’s appeal was allowed. ❉ ❉ ❉ Tribunal News

436 Ahmedabad Chartered Accountant Journal October, 2023 In this issue, we are giving gist of recent Ahmedabad Tribunal decision in the case of Dilipkumar Jashbhai Patel in the context of provisions of section 143(3) r.w.s. 144C(13) of the Act. In the facts of the case of the nonresident assessee, there was variation proposed in the draft assessment order by the Assessing Officer. The assessee chose to file objection against the draft assessment order before DRP but was unfortunately late by one day. The Assessing Officer waited for the order of DRP, which came to be passed after almost five months rejecting the objection of the assessee on the ground of limitation. The Assessing Officer, thereafter, passed final assessment order immediately as per the provisions of section 144C(13) of the Act. The assessee challenged this order of Assessing Officer on the ground of limitation relying upon the provisions of section 144C(2) and 144C(3) of the Act on the ground that the Assessing Officer should have passed the order within 30 days of the last day of filing objection by the assessee. This was upheld by the Tribunal and the final order of the Assessing Officer was quashed. We hope the readers would find the same useful. Annexure In the Income Tax Appellate Tribunal Ahmedabad “D” Bench Before Shri Waseem Ahmed, Accountant Member And Shri Siddharth Nautiyal, Judicial Member ITA No.192/Ahd/202 Assessment Year: 2018-19 Dilipkumar Jashbhai Patel Vs. The ACIT, Vadodara. Vadodara. PAN: AKTPP3981C (Applicant) (Respondent) Assessee by : Shri Tushar Hemani, Sr. A.R. & Shri Parimalsinh B. Parmar, A.R. Respondent by : Shri Ashok Kumar Suthar, Sr. DR Date of hearing : 19-07-2023 Date of pronouncement : 16-10-2023 Facts of the case : 1. The assessee was an individual and nonresident under the I.T. Act. During the year under consideration, he sold an ancestral immovable property for consideration of Rs.2.3 crores against which the assessee claimed cost of acquisition as on 1st April 2001 at Rs.86.38 Lacs in accordance with the valuation report. Accordingly, he claimed long term capital loss of Rs.8,49,360/ - on the sale of the property. 2. The Assessing Officer during the year assessment proceedings referred the valuation of the property to the DVO under section 55A of the Act who valued the property as on 1st April 2001 at Rs.45.34 Lacs only, and accordingly, he worked out the longterm capital gain on sale of property at Rs.1.07 crore and he, thus, made the addition of this amount to the total income of the assessee in his draft assessment order. 3. The assessee, as per the provisions of the Act, filed objection against the draft assessment order before the learned Dispute Resolution Penal (DRP) as on 1st September 2021; whereas the statutory limit to file such objection was 31st August 2021, and thus, there was a delay of one day in filing such objection. The learned DRP passed order rejecting the objection of the assessee vide their order dated 22.03.2022 on the ground of limitation. Immediately thereafter, the learned Assessing Officer passed final assessment order on CA. Sanjay R. Shah [email protected] Unreported Judgements

Ahmedabad Chartered Accountant Journal October, 2023 437 23.03.2022 making the same addition as proposed in the draft assessment order. 4. The assessee in his appeal before Tribunal challenged the validity of the assessment framed under section 143(3) r.w.s. 144C of the Act on the ground that the order passed by the learned Assessing Officer is time barred. According to the AR of the assessee, once the objection against the draft order was not filed within the prescribed limit or the time limit to file objection expires, the AO was under the obligation to complete the assessment within a month from the end of month in which period of filing of objection expires. Accordingly, since the last date of filing objection was 31.08.2021 and the objection was filed on 01.09.2021, which was not within the time limit, the Assessing Officer should have passed final assessment order u/s.143(3) r.w.s. 144C on or before 30.09.2021, as against which the Assessing Officer completed assessment vide order dated 23.03.2022, which is invalid, and hence, needs to be quashed. The DR supported the assessment order passed by the learned Assessing Officer. Held: 5. The Tribunal, on the basis of the above facts, held as under: “8. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly the AO has passed draft assessment order under section 143(3) r.w.s. 144C of the Act as on 26th June 2021 and the assessee, as per the provision of section 144C(2) of the Act, was required to file the objection against draft order before the DRP on or before 31st August 2021. However, the assessee filed an objection before DRP as on 1st September 2021 i.e. delayed by 1 day. In other words, the assessee has not filed an objection till the expiry of the period to file such objection. The provisions of section 144C(3)r.w.s. 144C(4) of the Act provide that the AO will complete the assessment as per draft assessment order within a month if the assessee intimates the AO about acceptance of draft order or the assessee fails to file the Unreported Judgments objection within the period as per subsection 2 to section 144C of the Act. Thus, in our considered view, the AO as per the provisions of section 144C(3) r.w.s 144C(4) of the Act was required to complete the assessment on or before 30thSeptember 2021 as the assessee failed to file an objection on before 31st August 2021. In the identical facts and circumstances, the identical view was also taken by the coordinate bench of Pune Tribunal in the case of TDK Electronics AG vs. ACIT reported in 116 taxmann.com 986. In the case of TDK Electronics AG also the objection before the DRP was delayed by 1 day and accordingly objection was disposed-off by the learned DRP as time barred. The coordinate bench held that in such circumstances, the AO was required to complete the assessment as per subsection 3 & 4 to section 144C of the Act. The relevant finding of the Pune bench reads as under: 14. There is another facet of the case. Once it is held that filing of objections by the assessee beyond the period of thirty days is barred by limitation and hence inconsequential, it must also meet the resultant effects as well. 15. The scheme of the relevant provisions in this regard is that when the AO makes a reference to the TPO, the latter passes an order under section 92CA(3) of the Act. On receipt of the order from the TPO, the AO passes a draft order under section 144C(1). If dissatisfied with the draft order, the assessee has an option to either approach the DRP route by filing objections before the DRP or choose the appellate recourse by filing an appeal before the CIT(A). If an assessee opts to be governed by the procedure enshrined for the DRP reference, then the DRP is supposed to issue directions within nine months from the end of the month in which the draft order is forwarded to the eligible assessee as per sub-section (12) of section 144C. Sub-section (13) provides that upon a receipt of the direction in sub-section (5), the AO shall complete assessment within one month from the end of the month in which such a direction is received. At this juncture,

438 Ahmedabad Chartered Accountant Journal October, 2023 it is significant to have a glance at the mandate of sub-section (3) of section 144C, which runs as under :- ‘The Assessing Officer shall complete the assessment on the basis of the draft order, if— (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in subsection (2).’ 16. The crux of section 144C(3) in so far as clause (a) is concerned is that if an assessee accepts the variation as per the draft order, then there is no need to sail through the DRP or the appellate route. In that scenario, the AO, in terms of section 144C(4)(a), will be required to complete the assessment on the basis of the draft order within a period of one month from the end of the month in which the acceptance is received. Clause (b) of section 144C(3) deals with a situation of completing the assessment on the basis of the draft order in a case in which no objections are received within the period specified in sub-section (2). In the latter situation, clause (b) of section 144C(4) provides that the AO will pass the assessment order within one month from the end of the month in which the period of filing the objections under sub-section (2), expires. It means that if an assessee does not file objections against the draft order before the DRP within a period of thirty days as per sub-section (2), the AO, without waiting for anything else, will have to complete the assessment within one month from the end of the month in which the period of filing of objections under sub-section (2) expires. The DRP dismissed the objections of the assessee in limine by opining that the assessee could not have filed objections outside the time limit provided under subsection (2) of section 144C. The net effect of the order of the DRP is that the objections filed by the assessee were time barred and hence no cognizance could have been taken of them. Once the objections filed by the assessee are time barred, the natural corollary is that no valid objections were filed by the assessee. One cannot contemplate a situation that the objections are invalid for the DRP so as not to issue any direction under section 144C(5) and valid for the AO so as to pass order under section 144C(13) of the Act. If the objections are invalid as time barred having not been filed within the time prescribed under sub-section (2) of section 1444C, the AO will have to act in terms of section 144C(3)(b) and complete the assessment within the time prescribed under section 144C(4)(b) of the Act, namely, within one month from the end of the month in which the period of filing of objections under subsection (2) expires. 17. Adverting to the facts of the instant case, it is found that, the period of 30 days for filing objections within sub-section (2) of section 144C expired on 23-1-2019. Going by the mandate of sub-section (3) of section 144C(3)/ 144C(4), the AO was supposed to complete the assessment on the basis of the draft order by February, 2019. As against this, the AO actually completed the assessment under section 144C(13) on 24-10-2019. Such a completion of assessment not only under the wrong provision but also beyond the limitation period is ultra vires and hence cannot stand. We declare the assessment order to be time barred and ex consequenti null and void, with the effect that the returned income will automatically get accepted as finally assessed income. 7.1 In view of the above detailed discussion, we hereby hold that the order passed by the AO under section 143(3) r.w.s 144C(13) of the Act on 23rd March 2022 instead of 30th September 2021was ultra vires and we accordingly quash the same. Hence the ground of appeal of the assessee is hereby allowed.” 6. Thus, the Tribunal quashed the order passed by the Assessing Officer on the ground of limitation. ❉ ❉ ❉ Unreported Judgments

Ahmedabad Chartered Accountant Journal October, 2023 439 When all the facts are available before Tribunal, appeal should be decided on merits by passing a speaking order rather than setting it aside for giving one more opportunity to AO Rajesh Babubhai Damania v. ITO [2002] 122 Taxman 614 (Gujarat) 5. The Tribunal totally overlooked the assessment of evidence done by the Commissioner (Appeals) and dealt with the matter as if it was entertaining an appeal against the order of the Assessing Officer. There was no question of giving ‘one more inning’ to the Assessing Officer. The appeals are not to be decided for giving ‘one more inning’ to the lower authorities. In the appellate jurisdiction, the Appellate Court has to consider whether there is justification for upsetting the order against which the appeal is filed. In this case where the assessee had repeatedly produced the creditors before the ITO and had filed affidavits in support of the credit entries and also filed confirmations and given names and addresses of the concerned parties as well as proved repayment of the amounts by account payee cheques and done all that was within his power to prove the genuineness of the loans, the finding arrived at by the appellate authority on the basis of such reliable material could not have been so cursorily dealt with by the Tribunal for the purpose of giving ‘one more inning’ to the Assessing Officer. It was the duty of the Tribunal to ascertain the reasons which were given by the Commissioner (Appeals) in whose order the order of the Assessing Officer had merged and not to base its decision merely on a ‘bit of negligence’ of the Assessing Officer in not crossexamining the parties who were produced before him 4 to 5 times. In our opinion, the Tribunal has reached the conclusion which cannot reasonably 18 Advocate Tushar Hemani [email protected] be reached by anyone, and there is no warrant for restoring the matter to the Assessing Officer on such specious grounds as are given by the Tribunal. 6. We, therefore, hold that the Tribunal committed an error of law in restoring the matter to the Assessing Officer in background of the facts, on which no such conclusion could have been reached by any reasonable approach. The questions referred to us are, accordingly, answered in favour of the assessee and against the revenue. The reference stands disposed of accordingly. Ramesh Chandra M. Luthra v. ACIT [2003] 128 Taxman 765 (Gujarat) 4. It appears from the order of the Tribunal that it has not bestowed its attention to the above material reasoning adopted by the Commissioner (Appeals) for deciding the appeal. It was incumbent on the Tribunal before upsetting the order of the Commissioner (Appeals) to consider the reasons given by that authority for its decision. As held by the Supreme Court in Omar Salay Mohamed Sait v. CIT [1959] _37 ITR 151 it is necessary that every fact for and against the assessee must have been considered with due care by the Tribunal and it must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. This Court in Rajesh Babubhai Damania v. CIT [2001] __251 ITR 541 observed that it was the duty of the Tribunal to ascertain the reasons which were given by the Commissioner (Appeals) in whose order, the order of the Assessing Officer had merged. Judicial Analysis 19

440 Ahmedabad Chartered Accountant Journal October, 2023 5. Since the Tribunal has not appropriately considered the reasoning given by the Commissioner (Appeals) and has given its finding without dealing with the reasoning of the Commissioner (Appeals) reproduced hereinabove we are of the view that the impugned order of the Tribunal cannot be sustained and the Tribunal should consider the matter on merits in accordance with law. This appeal is accordingly allowed and the impugned order of the Tribunal is set aside with a direction to it to reconsider the revenue’s appeal No. IT Appeal No. 3125 (Ahd.) of 1995 and take a fresh decision thereon in accordance with law expeditiously. There shall be no order as to costs. Mercury Metals (P.) Ltd. v. ACIT [2002] 122 Taxman 737 (Gujarat) From the above reasons, it appears that the only ground on which the Tribunal set aside the order of the Commissioner (Appeals) is that he had applied his common sense only while arriving at the conclusion in his appellate order. While doing so, the Tribunal itself has sustained the addition to the tune of Rs. 1,50,000 without even resorting to common sense and just ipse dixit, totally oblivious of the reasoned order of the Commissioner (Appeals). This is evident from the reasoning given by the Commissioner (Appeals) in para 4.3 of his order which is reproduced hereinbelow with a view to emphasise the cursory manner in which the Tribunal has brushed aside the order without even verifying the reasons given by the learned appellate officer : xxx.. We refrain from commenting on the correctness or otherwise of the order of the Commissioner (Appeals) because, we propose to remand the matter to the Tribunal for re-consideration on the ground that it has committed an error in exercise of its jurisdiction by not calling its attention to the above reasoning given by the Commissioner (Appeals) against whose order the appeal was preferred by the revenue for its consideration. 4. We may recall here the decision of the Supreme Court in Omar Salay Mohamed Sait v. CIT [1959] Judicial Analysis 37 ITR 151 in which the Supreme Court succinctly expressed the expectation from a Tribunal while deciding such appeals : “We are aware that the Income-tax AppellateTribunal is a fact finding Tribunal and if it arrives at its own conclusion of fact after due consideration of the evidence before it this Court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this Court.” (p. 170) 5. In Rajesh Babubhai Damania v. CIT [2001] _251 ITR 541, the Division Bench of this Court observed that it was a duty of the Tribunal to ascertain the reasons which were given by the Commissioner (Appeals) in whose order, the order of the Assessing Officer had merged. 6. We are, therefore, of the view that the impugned order cannot be sustained and the Tribunal should re-consider the matter on merits in accordance with law. The appeal is, therefore, allowed. The impugned order is set aside with a direction to the Tribunal to re-consider the revenue’s Appeal in IT Appeal No. 1605 (Ahd.) of 1995 and take a decision in accordance with law expeditiously. There shall be no order as to costs. 20

Ahmedabad Chartered Accountant Journal October, 2023 441 Nirman Textile Mills (P.) Ltd. v. ACIT [2006] 155 Taxman 502 (Gujarat) 16. The legal position is well-established and bears no repetition. It was necessary for the Tribunal to bear in mind that the assessment order had merged with the order of the Commissioner of Income-tax (Appeals) and in case the Tribunal was inclined to reverse the order of the Commissioner of Income-tax (Appeals) it was necessary for the Tribunal to record, howsoever briefly the reasons for the same. The impugned order of the Tribunal nowhere reflects as to what were the facts and evidence placed before the Commissioner of Income-tax (Appeals) by the assessee and on the basis of which the Commissioner of Incometax (Appeals) accepted the explanation of the assessee. In the view that the Court is inclined to take it is not necessary to enter into a discussion on the merits of the issue involved nor the veracity or the weightage to be assigned to the evidence available on record. Suffice it to state that as against the statement regarding admission at the time of survey, the assessee had placed on record its letter of retraction and evidence in support of such retraction. The least that was expected of the Tribunal was to discuss that evidence with reasons as to why the said retraction coupled with the evidence was not acceptable, especially when the same had been accepted by the Commissioner of Income-tax (Appeals). The Tribunal states that the explanation was not furnished before the Assessing Officer and was placed on record before the Commissioner of Income-tax (Appeals) for the first time overlooking the fact that the Commissioner of Income-tax (Appeals) in paragraph No. 2.1 of his order has categorically recorded that the said evidence in the form of paper books was forwarded to the Assessing Officer and the Assessing Officer had after perusing the same offered his comments vide letter dated 6-10-1995. This is just an instance of the modality, i.e., the cursoriness with which the Tribunal has dealt with the issue. 17. In 1959, the Apex Court had observed that if the Tribunal arrives at its own conclusion of fact after due consideration of evidence before it the Court will not interfere, but for this purpose it was necessary that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the points for determination before it, and what was the evidence pro and contra in regard to each of the issues and what were the findings reached on the evidence on record before it - Omar Salay Mohamed Sait v. CIT[1959] 37 ITR 151 (SC). This position has been reiterated once again in 2002 by this Court after referring to the aforesaid judgment in the two decisions rendered in the cases of Mercury Metals (P.) Ltd. v. Asstt. CIT[2002] 257 ITR 2971 and Rameshchandra M. Luthra v. Asstt. CIT[2002] 257 ITR 4602 . The Tribunal has passed the order on 29-8-2003, and yet seems to be blissfully unaware of the legal position. 18. In the light of the aforesaid fact situation, the impugned order of the Tribunal is quashed and set aside to the extent of addition of Rs. 11,66,465 and the matter is restored to the file of the Tribunal for the purposes of adjudication afresh in the light of the well-established legal principles enunciated by the Apex Court and this Court. PNC Construction Co. Ltd. v. DCIT [2013] 37 taxmann.com 361 (Agra - Trib.) 29. As regards the contention of the ld. Departmental Representative that the matter may be sent back to the file of CIT(A), we would refer one judgment of Hon’ble Gujarat High Court in the case of Rajesh Babubhai Damania v. ITO [2001] 251 ITR 541/[2002] 122 Taxman 614 wherein it was held that there was no question of giving “one more innings” to the Assessing Officer. The appeals are not to be decided for giving “one more innings”, to the lower authorities. In the appellate jurisdiction, the appellate Court has to consider whether there is justification for upsetting the order against which the appeal is filed. We, therefore, reject the contention of the ld. Departmental Representative for sending back the matter to the file of the CIT(A). ❉ ❉ ❉ 21 22 Judicial Analysis

442 Ahmedabad Chartered Accountant Journal October, 2023 CA. Kaushik D. Shah [email protected]. Issues Whether expenditure in relation to exempt income will be allowed when such income has not accrued or arisen during the previous year? Proposition As per the relevant sections of the Income tax Act, 1961 (Act), the assessee is not eligible to claim deduction in respect of expenditure incurred by him in relation to income which does not form part of the total income under this Act. Should the assessee be eligible to claim deduction of the expense incurred in relation to the exempt income, even if no income is earned during the year. View against the Proposition After the clarification given by Finance Act, 2022, now Section 14A of the Act clarifies that deduction in respect of expenditure incurred for exempt income cannot be claimed even if such no such income arises during the year. In the case of Lally Motors India (P.) Ltd. v. Principal Commissioner of Income-tax, Jalandhar, [2018] 93 taxmann.com 39 (Amritsar - Trib.), the assessee claimed that it hadnot earned any income by way of dividend on said shares, thus, section 14A would not apply. Further, he stated it had not incurred any expenditure in relation to said investment in shares, so that section 14A would even otherwise would not apply. But it was noted that assessee firm had negative net worth during relevant year and entire investment was financed by borrowed capital and, administrative expenditure was incurred by assessee. The claim of such expenses was disallowed by the Tribunal View in favour of the Proposition Finance Act, 2022 introduced clarification on Section 14A of the Act by stating that even if no exempt income was earned during the year, expenditure incurred in relation to the same cannot be claimed as deduction from Total income. Before the introduction of Finance Act, 2022, Section 14A of the Act did not give clarity on eligibility of deduction of expense which were incurred in relation to exempt income but no exempt income was earned during the year. In the case Tamilnadu Road Development Co. Ltd. v. Dy. CIT (2021) 436 ITR 298 (Mad) (HC), the assessee maintained tax-free portfolios for earned tax-free income. The assessee incurred expenses in relation to the same but no income accrued from the same during the year. The assessee claimed deduction in respect of the same while calculating his total income but the Assessing Officer disallowed the same. Allowing the appeal, the Court held that when there is no dividend income earned, disallowance cannot be made. Summation Decision taken in the case of Principal Commissioner of Income-tax v. Delhi International Airport (P.) Ltd. [2022] 143 taxmann.com 209 (SC) has set a benchmark in this controversy. The Supreme Court held that even if there is no exempt income earned during the year, the expenditure incurred in regards to the same cannot be allowed as an eligible deduction Referring and relying on the cases above, I humbly conclude by giving my opinion that even when no exempt income is earned during the year, deduction for the expenses incurred for the same cannot be claimed as deduction. ❉ ❉ ❉ Controversies

Ahmedabad Chartered Accountant Journal October, 2023 443 Timing of withholding on dividend – Vexed Issue 1. Background : · As Dividend Distribution Tax (DDT), has been abolished through Finance Act, 2020, the dividend declared and paid by an Indian Company would be taxable in the hands of shareholders1 . Further, as per the provisions of the Income-tax Act, 1961 (the Act), an Indian Company which paying dividend to its shareholders, is required to with hold taxes as per the provisions of section 194 (for resident shareholders) and section 195 (for non-resident shareholders), as may be applicable. · Apparently, it may appear that there might not be any difficulty in complying with the with holding requirement while remitting the amount of dividend to the shareholders and the with holding for both the class of shareholders (i.e., resident shareholders and non-resident shareholders) would be required to be undertaken at the same time. However, an interesting situation may arise if the dividend is declared at the end of the month in the Annual General Meeting (AGM) and dividend is actually paid to the shareholders in the subsequent month. Let us illustratively try to understand this situation and its implications on timing of with holding in this article. 2. Illustrative scenario : · Consider a scenario, where the shareholders of an Indian company have approved the dividend in an AGM which is held in the last week of a particular month (say, dividend is approved in the AGM held on 28 September 2023). · It is pertinent to note that dividend once declared with the approval of shareholders in the AGM creates a debt due to shareholders and cannot be revoked (except in specified circumstances such as outbreak of war, etc. and where the dividend itself was declared illegally). · Accordingly, post declaration of dividend a Company would generally record the dividend liability in the books of accounts (in our illustrative case, such dividend liability would be recorded in the month of September 2023 itself) after the AGM and journal entry in the books of accounts would be passed by crediting dividend liability. · Further, after the AGM, such dividend amount is required to be transferred to a separate account (Escrow account) and the dividend will be paid to the shareholders from such Escrow account. · Prior to AGM, the Company generally requests all the shareholders (including nonresident shareholders) who were holding shares on the record date to submit the relevant documents for undertaking with holding at less than specified rate / to avail treaty benefit etc. Therefore, the Indian Companies are also aware as to the rate at which with holding is required to be undertaken in respect of the shareholders who were holding shares on the record date. · The issue which requires evaluation is regarding the stage at which dividend is required to be with held and deposited to FEMA & International Taxation CA. Dhinal A. Shah [email protected] CA. Hardik Khatri [email protected]

444 Ahmedabad Chartered Accountant Journal October, 2023 the credit of Central Government in respect of dividend payable to resident shareholders and non-resident shareholders under section 194 and / or section 195 of the Act. 3. Our thoughts : 3.1 Taxability of dividend under Section 194 of the Act (applicable for resident shareholders) : · Provisions of section 194 shall be applicable in respect of dividend payable to resident shareholders. · As per the provisions of section 194, tax is required to be deducted before making any payment / distribution of dividend. Accordingly, from the plain reading of the section, withholding requirements would trigger at the time of making payment and not at the time when dividend liability is created in the books of account. The relevant extracts of section 194(1) is reproduced under : “The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment by any mode in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India, of any dividend …., deduct from the amount of such dividend, income-tax at the rate of ten per cent :” · Therefore, in the given illustrative scenario, if the payment is made to the resident shareholders in the month of October, then withholding triggers in the month of October (before making the payment to the shareholders) and such tax would be required to be deposited prior to 7th of the next month (i.e., by 7 November 2023 in the given scenario). 3.2 Taxability of dividend under Section 195 of the Act (applicable for non-resident shareholders) : · It is pertinent to note that provisions of section 195 shall be applicable in respect of dividend payable to non-resident shareholders. · As per the provisions of section 195 of the Act, any person responsible for paying to a non-resident any sum chargeable under the provisions of the Act shall at the time of payment or credit (to the account of payee), whichever is earlier, is required to deduct tax at source at applicable rates. The relevant extracts of section 195 is reproduced under : “Any person responsible for paying to a non-resident, not being a company, or to a foreign company, …. or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries” ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:” · Accordingly, in the given scenario an interesting issue which requires evaluation is whether credit of dividend liability account in the books of account would trigger with holding requirement for the Company in respect of non-resident shareholders (even if payment is not made to such non-resident shareholders). · The taxpayers may wish to argue as under : o As per section 195 of the Act, the income (dividend in our case) is required to be credited to the account of payee to attract withholding requirements. o In the given case, there is no such credit to the account of payee. FEMA & International Taxation

Ahmedabad Chartered Accountant Journal October, 2023 445 o The amount of dividend is merely credited to dividend liability account. o The withholding triggers only at the time of payment or actual credit to the account of payee and not at the time of crediting dividend liability in the books of accounts. · Against these arguments of taxpayer, the tax department may argue as under : o An unconditional right to receive dividend vests with the shareholders post the AGM (since dividend once declared cannot be revoked). o Also, as per section 8 of the Act, any dividend declared by a company or distributed within meaning of section 2(22) shall be deemed to be income of the previous year in which it is also declared, distributed or paid, as the case may be. o The dividend liability is also crystallized by way of passing an accounting entry passed in the books of accounts. o The list of the shareholders to whom dividend is payable along with amount of dividend payable is also available with the Company. o The payee along with amount payable to such payee is also identified. o By merely not crediting individual account of the shareholders, the Company cannot postpone the timing of withholding taxes. · The above arguments showcase litigative nature of the issue. Therefore, technically and considering that delay withholding has penal consequences, conservatively, in the given illustrative scenario, the Companies may like to withhold taxes in respect of dividend payable to non-resident shareholders in the month of September and deposit the same by 7 October 2023. · Therefore, if above technical thoughts are considered, in respect of resident shareholders, the withholding triggers in the month of October and taxes will be deposited by 7 November 2023. However, in respect of non-resident shareholders the withholding triggers in the month of September 2023 itself and the taxes are required to be deposited with the Central Government by 7 October 2023. Hope you found this article interesting. This article is for information purpose only and not a conclusive appraisal of all advancements in the legislation. This article is written with a view to incite the thoughts of a reader who could have different views of interpretation. Disparity in views, would only result in better understanding of the underlying principles of law and lead to a healthy debate or discussion. While judicious upkeep has been ensured, reliance should not be placed on the contents of this article without obtaining fact specific consultation from the advisors. (Footnotes) 1 Prior to amendment made by Finance Act, 2020, Indian Company was required to pay dividend distribution tax (DDT) in respect of dividend declared to shareholders and such dividend income received by the shareholders was regarded as exempt in their hands. ❉ ❉ ❉ FEMA & International Taxation

446 Ahmedabad Chartered Accountant Journal October, 2023 Clarification regarding taxability of income earned by a non-resident investor from offshore investments in investment fund routed through an Alternative Investment Fund CBDT Circular No.14/2019 dated 03.07.2019 was issued to clarify the taxability of income earned by a nonresident investor from outside India (off-shore investment) routed through investment fund as defined in Explanation 1(a) to Chapter XII-FB of the Income Tax Act, 1961 (the Act). This Circular was made available to Category I or Category II Alternative Investment Funds (AIFs), regulated under Securities and Exchange Board of India (SEBI) regulations. By Finance Act, 2023, the definition on ‘investment fund’ under the Income Tax Act, 1961, was amended to include reference to International Financial Services Centres Authority (Fund Management) Regulations, 2022, under International Financial Services Centres Authority (IFSCA) Act, 2019. In view of the aforesaid amendment in the definition of ‘investment fund’, para 3 of the Circular No.14/2019 dated 03.07.2019 is to be read as under: 3. Chapter XII-FB contains special provisions relating to tax on income of investment funds and income received from such funds. Under Chapter XII-FB, section 115UB of the Act (‘Tax on income of investment fund and its unit holders’) is the applicable provision to determine the income and tax-liability of investment funds & their investors. In this context, ‘investment fund’ is defined in Explanation 1 of Chapter XII-FB to mean any fund established or incorporated in India in the form of a trust or a company or a limited liability partnership or a body corporate which has been granted a certificate of registration as a Category I or Category II Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Fund) Regulations, 2012, made under the Securities and Exchange Board of India Act, 1992, (15 of 1992), or regulated under the International Financial Services Centres Authority (Fund Management) Regulations, 2022, made under the International Financial Services Centres Authority Act, 2019 (50 of 2019). Thus, provisions of section 115UB apply only to Category I or Category II AIFs regulated by Securities and Exchange Board of India (SEBI) or International Financial Services Centres Authority (IFSCA). All the other contents of this Circular dated 03.07.2019 remain same. Source: Circular no. 12/2023, F.No.225/79/2019-ITA-II, Government of India, Ministry of Finance, Department of Revenue, CBDT dated July 12, 2023 For full text refer: https://incometaxindia.gov.in/communications/circular/ circular-no-12-2023.pdf ❉ ❉ ❉ CA. Dr. Savan R. Godiawala [email protected] 11 FEMA Updates

Ahmedabad Chartered Accountant Journal October, 2023 447 [I] IMPORTANT CASE LAWS: [1] Issue: ITC can’t be denied due to discrepancies in GSTR-2A without proof of collusion between assessee and seller: HC: Case Laws: Diya Agencies vs. STO [2023] 154 taxmann.com 421 (Ker) Facts: In the present case, the petitioner’s claim for Input Tax Credit (ITC) had been denied on ground that invoices were not shown in GSTR-2A as taxpayers were only eligible for ITC shown in GSTR-2A. It filed writ petition and contended that ITC could not be denied merely on ground of amount not mentioned in GSTR-2A for which petitioner did had any control. HELD: The Hon’ble High Court noted that credit should not be denied unless collusion between assessee and seller is proved and genuineness of transaction has to be proved by assessee since burden to prove genuineness of transaction would be upon purchasing dealer. In instant case, the petitioner had to discharge burden of proof regarding remittance of tax to seller by proving evidence. Therefore, the Court held that the denial of ITR merely on ground that in Form GSTR-2A said tax was not reflected to petitioner was not sustainable and matter was to be remanded back. Also the Court directed Revenue to give opportunity to petitioner to give evidence in respect of his claim for Input Tax Credit. [2] Issue: GST cancellation order passed after inspecting old premises to be set aside since assessee informed change to dept.: HC: Case Laws: Frequent Logisticsw Services (P) Ltd. vs. Commissioner Goods & Services Tax Department [2023] 154 taxmann.com 336 (Delhi). Facts: In the present case, the petitioner’s GST registration was cancelled on the ground that it was not found to be existing at its principal place of business. The petitioner filed writ petition and contended that it had made application for change of its registered principal place of business and this application was allowed and amended certificate of GST Registration was issued. Held: The Hon’ble High Court noted that the Concerned Officer had inspected old premises and not new premises. The Court further noted that Show Cause Notice did not disclose that registration was proposed to be cancelled with retrospective effect, nor did it reflect any ground for same. Therefore, the Court held that the impugned order cancelling petitioner’s GST registration was liable to be set aside. Also, the notice suspending the petitioner’s registration was set aside. [3] Issue: Closure of business and lack if employees to log in GST portal regularly is reasonable explanation for delay in filing appeal: HC: Case Laws: SRM Engineering Construction Corporation Ltd. vs. Asst. Commissioner (ST) (FAC) [2023] 154 taxmann.com 448 (Mad) Facts: In the present case, the adjudication order was passed on account of mismatch between GSTR1 and GSTR-3B and there was also difference in CA. Vishrut R. Shah [email protected] CA. Bihari B. Shah [email protected] GST and VAT Judgments and Updates

448 Ahmedabad Chartered Accountant Journal October, 2023 GST and VAT - Judgements and Updates ITC between GSTR-3B and GSTR-2A. The petitioner filed writ petition and contended that the last for filing an appeal was expired but it had not filed a statutory appeal before Appellate Commissioner under section107. Held: The Hon’ble High Court noted that the petitioner had closed the business due to loss in company and it had lack of employees to log in GST portal regularly and notice adjudication order. The Court further noted that the petitioner came to know about demand only when it manually received recovery notice. Since, this was reasonable explanation for delay in filing appeal, such delay was to be condoned. Therefore, the Court allowed the petitioner to file a statutory appeal and it shall pre-deposit the amount that would be required to be pre-deposited in terms of Section 107 of CGST Act, 2017. [4] Issue: Tax and Penalty were rightly imposed where driver and person in charge of goods didn’t produce any documents :HC: Case Laws: EVM Passenger Cars India (P) Ltd. vs. State of Kerala [2023] 154 taxmann.com 555 (Kerala) Facts: In the present case, the GST department intercepted goods and vehicle of petitioner. The driver of vehicle and person in charge of goods, at the time of interception, did not produce any statutory documents pertaining to transportation of goods. However, on receipt of show cause notice (SCN), the petitioner produced copies of e-way bills and claimed that transport of goods was genuine. The Adjudicating Authority held that after issuance of SCN there is no provision to accept documents subsequently to prove genuineness of transaction and imposed tax and penalty. It filed writ petition against the demand order. Held: The Hon’ble High Court noted that the taxing provisions have to be construed strictly. If the mandate of law is that goods being transported must be accompanied with relevant statutory documents and if goods are being transported without relevant statutory documents, consequences would follow. Moreover, on verification, it was revealed that vehicle mentioned in e-way bill and vehicle through which goods were attempted to be transported was distinct. Therefore, it was held that the impugned order did not require any interference and petition was dismissed. [5] Issue: Petitioner can’t approach HC to challenge assessment order when there is no violation of principles of natural justice. Case Law: Ram Krishna Mission Ashram vs. State of Bihar [2023] 154 taxmann.com 495 (Patna). Facts: In the present case, the writ petition challenging the assessment order passed against the petition was filed. The petitioner’s contention was only that the petitioner was not issued a physical notice by the department and the electronic mode should not have been chosen. Held: The Hon’ble High Court noted that the appeal under section 107 was not filed by the petitioner against the assessment order even within limitation period extended suo motu by Supreme Court due to COVId-19. The petitioner could not seek to approach High Court under Article 226 of Constitution of India to challenge assessment order especially with respect to computation of turnover and determination of taxable turnover and tax payable without availing statutory remedies available. The Court further noted that the petition can’t be entertained when there was no jurisdictional error, violation principles of natural justice or abuse of process of Court averred or argued by petitioner. Therefore, the Court dismissed the petition. (Sources: Corporate Professionals Today) ❉ ❉ ❉

Ahmedabad Chartered Accountant Journal October, 2023 449 1. Whether the subsidy received from the Central / State Government to be excluded from the value for the purpose of arriving at the GST liability? (AAR-KAR ADRG 32/2023, Dated-15/09/2023). Brief facts of the case: 1. The applicant has stated that they intend to manufacture and supply plant and machineries to Chinnapuri Silks (Recipient) whose estimated cost is Rs.23,19,100/- (excluding GST) and cost is based on the quotation. The recipient of machinery is eligible for 90% subsidy grants from Central Government and State Government. The total amount of subsidy is Rs.20,87,280/- (being 90% of the costs of the Plant and Machinery). The amount of subsidy will be deposited in an Escrow account opened with Canara Bank where the recipient is the account holder and from this account the funds will be transferred to the supplier of Machinery, M/s. Hitze Boilers Private Limited (the Supplier). 2. The applicant has stated that the recipient is insisting that the supplier shall charge GST on the total invoice amount as reduced by the subsidy amount which is sanctioned to him and this is in line with Section 2(31) of CGST Act wherein consideration shall exclude any subsidy given by the Central Government or a State Government. 3. The applicant states that Section 15(2)(e) of CGST Act states that value of goods for GST shall exclude subsidies provided by the Central Government / State Government. They have relied on the decision of AAR Karnataka in the case of M/s. Rashmi Hospitality Services in Advance Ruling No. KAR ADRG 61/2019, dated 20th September 2019. The definition and meaning of “consideration” as stipulated in Section 2(31) of the CGST Act, 2017 (In this Act, unless the context otherwise requires,) is as under- “Consideration-(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of the supply of goods or services or both whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; On perusal of the said definition, it is clear the consideration shall not include any subsidy given by the Central Government or a State Government. It is categorically mentioned that consideration shall not include any subsidy given by the Central Government or a State Government. Thus the subsidy amount paid by the government is not to be treated as consideration for the purpose of CGST Act, 2017. The intention of the legislature is to exempt subsidy from GST. Further, in terms of Section 15(2) of CGST Act, 2017, the value of taxable supply excludes the subsidy provided by the Central Government or State Governments. Section 2(93) of the CGST Act, defines the meaning and definition of the “recipient” as under (93) recipient of supply of goods or services or both, meansCA. Monish S. Shah [email protected]

450 Ahmedabad Chartered Accountant Journal October, 2023 Advance Ruling under GST (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration. (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied; If we carefully peruse the definition of recipient Section 2(93)(a), it is evident that the recipient of supply of goods is the person who is liable to pay that consideration. In this case the government has paid the 90% of the amount and the beneficiary has paid only 10%. Hence the government has to be treated as the recipient of the goods and not the beneficiary in as much as the 90% of the cost is incurred by government. The beneficiary cannot claim expenditure to the extent of 90%. They can claim 10% as expenditure in their books of accounts. The applicant has relied upon two advance rulings. The same are discussed as under:- In Advance Ruling Number KAR.ADRG.61/ 2019 dated 20.09.2019, it is ruled that “the subsidy amount received from the Government of Karnataka for supply of service of food to the ultimate beneficiary in Indira Canteen by the applicant is excluded from the definition of consideration and would not form the part of the turnover on which the tax is liable. The consideration collected from the beneficiary is liable to tax after deducting the tax fraction as the price collected is inclusive of tax”. The said ruling is squarely applicable in this case as the Government has paid the subsidy to the supplier through escrow account and the remaining 10% of the amount is paid by the beneficiary. Hence the 90% of the amount is not includable while calculating the GST and 10% of the amount which is paid by the beneficiary includable for GST purposes. In Indira canteen the subsidy is granted by the government to the supplier only after they furnish the data of the supplies made and collection of the amount from the beneficiary. In case if it is held that the subsidy amount is taxable in this case, then the subsidy amount received from the Government of Karnataka for supply of service of food to the ultimate beneficiary in Indira Canteen by the applicant is also to be included to the definition of consideration and would form the part of the turnover on which the tax is liable to be paid. In such a situation, the intention of the legislation will be defeated. Then the rulings become contradictory to each other. In Advance Ruling Number KAR.ADRG.16/ 2020 dated 23.03.2020 in respect of M/s. MeghaAgrotech Private Limited wherein supplier claims that, he has no role to play in the transaction between the Government and the supplier and the transaction is only with the beneficiary. The three payment options such as using financial resources, taking loan from the bank or financial institutions, getting amounts through credit by the beneficiary is discussed. In the instant case, the 90% of the amount deposited by the Government in the name of subsidy cannot be used for any other purpose and even the beneficiary cannot utilize for any other purpose except for the intended purpose. It is not the case where the beneficiary incur the full 100% of the cost of the machinery and subsequently

Ahmedabad Chartered Accountant Journal October, 2023 451 government pay or reimburse the 90% of the cost to the beneficiary instead the 90% of the cost is incurred by the Government directly. Under the circumstances, this office is of the opinion that the 90% of the subsidy provided by the Government given to the supplier through ESCROW account is not includable in the “value” as the said amount is not covered within the meaning of “consideration” and “value” and hence not taxable. The remaining 10% of the amount paid by the beneficiary to the supplier is includable in the “value” for the purpose of calculation of tax. Findings and Discussion: At the outset we would like to make it clear that the provisions of CGST Act, 2017 and the KGST Act, 2017 are in pari-materia and have the same provisions in like matter and differ from each other only on a few specific provisions. Therefore, unless a mention is particularly made to such dissimilar provisions, a reference to the CGST Act would also mean reference to the corresponding similar provisions in the KGST Act. We have considered the submissions made by the applicant in their application for advance ruling. We have also considered the issues involved on which advance ruling is sought by the applicant and the relevant facts along with the arguments made by their authorized representative and their submissions made during the time of hearing. Section 9 of the CGST Act 2017 stipulates that there shall be levied a tax called CGST on all intra-state supplies of goods or services or both, on the value determined under Section 15 and at such rates as notified and the same shall be paid by the taxable person. Thus, the value of a supply has to be arrived at, as per Section 15 of the CGST Act. Further Section 15(1) stipulates that the value of the supply of goods or services or both shall be transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. In the instant case, the supplier and the recipient are not related and the price is the sole consideration for the supply and thus the transaction value becomes the value of supply. The transaction value is the value of supply and the supplier raises the invoice for full amount i.e. for the full value of the goods being supplied. The applicant contends that the subsidy amount (90% of the total cost) has to be excluded from the value of the supply in line with the Sections 2(31) and 15(2)(e) of the CGST Act 2017, which are reproduced at paras 10 and 10.1. It is observed that Section 2(31) defines ‘consideration’ and Section 15(2) deals with the component that shall be included in the value of the supply. For determining the value of taxable supply, subsections (1) and (2) of Section 15 are to be read in conjunction. As per sub-section 15(1), taxable value shall be the transaction value when the supplier and recipient are not related and price is the sole consideration for supply. Sub-section 15(2) expands the scope of value of supply so as to include such values mentioned in the clauses(a) to (e) of the sub-section. Section 15(2)(e) specifically stipulates that the value of supply shall include subsidies directly linked to the price excluding subsidies provided by the Central Government and State Governments. Thus, Section 15(2)(e) seeks to expand the value of supply so as to include subsidies which are directly linked to the price with a condition that subsidies provided by Central Government and State Governments are to be excluded. We find Advance Ruling under GST

452 Ahmedabad Chartered Accountant Journal October, 2023 that the phrase providing for exclusion of subsidies by Central Government and State Governments will apply only when two conditions are satisfied viz., (i)when such subsidies are to be added to the transaction value and (ii)when such subsidies are directly linked to the price or affects the price of supply. In the instant case, it is observed that the contract for supply of machinery is between the Applicant and the recipient i.e. M/s Chinnapuri silks; the applicant supplier raises the invoice for the full contract price and even if the recipient is not provided subsidy, the contract price is still recoverable from the recipient. Subsidies provided by State Government or Central Government in the escrow account are not separately recoverable by the Applicant, but are part of the price payable by the recipient. Thus, there does not arise a situation where the subsidies are to be added separately to the transaction value or value of supply payable by the recipient. Also, for the same reason we find that the subsidy is not affecting the price of supply. Only the subsidies provided by Central Government and State Governments which are directly linked to the price and affects the price of supply are not a part of value of supply. Hence the exclusion provided in Section 15(2)(e) is not applicable in the instant case and the subsidies provided by Central Government and State Governments cannot be excluded in determining the value of supply. Ruling: The subsidy received from the Central / State Government cannot be excluded from the value of supply as the same is not affecting the price of supply. 2. Infrastructure Ltd. liable to pay 18% GST on services provided by Irrigation Department for transfer of right to extract sand & mud from Mangalam Dam: AAR (KER/2/2023 Dated 20.02.2023) Brief facts of the case: 1. Whether we can avail the benefit of exemption notification Entry no 3 “ Pure Services ( excluding work contract services or other composite supplies involving supply of any goods) provide to the central Government, State Government or Union territory or local authority or a government authority by way of any activity in relation to any function entrusted to a panchayat under article 243G of the constitution or in relation to any function entrusted to a municipality under article 243W of the constitution vide Notification No.12/2017 Central Tax (Rate) dated 28.06.2017 as the services are provided to the Irrigation Department which is under the direct control of the kerala State? 2. Suppose the ruling for the above question is taxable, whether the applicant can pay the goods and services tax to the government under reverse charge basis as per SL No 5: “Services supplied by the Central government, state Government, Union territory or local authority to a business entity” of Notification No 13/2017 Central Tax (Rate) dated 28.06.2017? Findings & Discussion: The matter was examined in detail. The Irrigation Department of the Government of Kerala has granted a right to the applicant for desilting the reservoir or Mangalam Dam, Palakkad for removing the mud and sand and taking the same for a lumpsum consideration of Rs.15 Crores which to be payable in instalments during the period of contract. The question raised is regarding the classification the rate of tax applicable and the person liable to pay the tax on the services rendered as per the tender awarded by the Irrigation department. In Order to answer the question raised by the Advance Ruling under GST