Profit from sale of shares was capital gain if it was shown as investment in balancesheet: HC

Form GSTR-3B, not to be considered as a return in lieu of Form GSTR-3: Gujarat HC

AAP And Co. v. Union of India – [2019] 107 taxmann.com 125 (Gujarat)

The applicant, a practicing Chartered Accountant, filed a writ application to challenge legality and validity of press release dated 18-10-2018. It was argued that para-3 of press release purports to clarify that last date for availing of input tax credit relating to invoices issued during period between July 2017 and March 2018 would be last date for filing of return in Form GSTR-3B. It was submitted that the said clarification was contrary to section 16(4). It was also submitted that last date for availing of input tax credit relating to invoices issued during period from July 2017 to March 2018 would be last date for filing of return in form GSTR-3 and not GSTR-3B.

The Honorable High Court observed that return in Form GSTR-3B was not introduced as a return in lieu of return required to be filed in Form GSTR-3. The return in Form GSTR-3B was introduced as only a temporary stop gap arrangement till due date of filing return in Form GSTR-3 would be notified. It was also observed that Notification No.10/2017 Central Tax dated 28-6-2017 which introduced mandatory filing of return in Form GSTR-3B stated that it was a return in lieu of Form GSTR-3. However, later on Government, on realizing its mistake, rectified it retrospectively that return in Form GSTR-3B was not intended to be in lieu of Form GSTR-3 vide Notification No.17/2017 Central Tax dated 27-7-2017 and omitted reference to return in Form GSTR-3B being return in lieu of Form GSTR-3.

Therefore, it was held that impugned press release dated 18-10-2018 could be said to be illegal to extent that it purported to clarify that last date for availing of input tax credit relating to invoices issued during period from July 2017 to March 2018 was last date for filing of return in Form GSTR-3B. Hence, Form GSTR-3B is not to be considered as a return in lieu of Form GSTR-3.

Changes proposed under Budget – 2019 in Corporate and other allied Laws

The Finance Minister, Smt. Nirmala Sitharaman has presented her maiden Union Budget in the Parliament on July 5, 2019. Following are the key amendments have been proposed in the Finance (No. 2) Bill, 2019 relating to Corporate Law and allied services.

I. Amendment to the Payment and Settlement Systems Act, 2007

Banks shall not charge fees for using electronic modes of payment
[Applicable from November 1, 2019]
In order to boost digital transactions, the Finance Bill, 2019 has proposed significant amendment to the Payment and Settlement Systems Act, 2007. The proposed amendments restricts Banks and system providers from imposing any charge on anyone, either directly or indirectly, for using the modes of electronic payment prescribed under Section 269SU of the Income-tax Act.

II. Amendment to the SEBI Act, 1992

1. Amendment relating to SEBI General Fund
Amendment has been proposed to Section 14 so as to restrict the accumulation of huge surplus funds with the SEBI.

a) Approved Capital Expenditure to be credited to SEBI General Fund
Section 14 of SEBI requires creation of Fund to be called SEBI General Fund and all grants, fee and charges received by the Board are credited to the General Fund. The Finance Bill, 2019 has proposed to amend the provisions so as to require SEBI to credit the capital expenditure, as per annual capital expenditure plan approved by the Board and the Central Government, to the General Fund.

b) Constitution of Reserve Fund
The Finance Bill, 2019 proposes constitution of Reserve Fund by SEBI. It also proposes that 25% of the SEBI General Fund shall be credited yearly to such Reserve fund. However, such Reserve Fund shall not exceed total of annul expenditure of preceding two financial years.

c) Fund remaining after expenses to be transferred to CFI

The Finance Bill, 2019 requires the SEBI to transfer the surplus of General Fund, which remains after incurring all expenses and transferring to the Reserve, to the Consolidated Fund of India.

2. Maximum penalty for default by stock brokers
As per current provision, where a stock broker fails to issue contract note in the prescribed format, a minimum penalty of Rs. 1 lakh is levied. No maximum amount of penalty has been prescribed in current provisions. Therefore, a maximum penalty of Rs. 1 crore for default in such case has been proposed.

3. Penalty for alteration, destruction, etc., of records

The Finance Bill has proposed a new section 15HAA in the SEBI Act to levy penalty against any person who knowingly alters, destroys, conceals etc. any records so as to impede investigation, inquiry, audit etc. carried out by SEBI. This provision prescribes a minimum penalty of Rs. 1 lakh which could be extended to Rs. 10 crore or three times of the profits made out of the act, whichever is higher.
4.SEBI can call upon Co. & intermediary by e-communication
Section 15C of the SEBI Act levies penalty in case of failure to redress investors’ grievances. The Finance Bill, 2019 proposes amendment to such provision so as to allow the SEBI to call upon company or intermediary by any means of electronic communication (i.e., email, SMS, WhatsApp, etc.).

III. Amendment to the Securities Contracts (Regulation) Act, 1956

Penalty for failure to furnish information, return, etc. to Board
Section 23A of SCRA, 1956 levies penalty on a person who fails to furnish the required information to stock exchange. The amendment proposed to this provision enlarge the scope of this provision by including the word ‘Board’. Thus, the penalty would be levied under this provision where any person fails to submit the required information or record to the SEBI.

IV. Amendment to the Prevention of Money Laundering Act, 2002

1. Insertion of section 12AA for enhanced due-diligence by reporting authorities
A new Section 12AA is proposed to be inserted in PMLA, 2002 to require every reporting authority (i.e., bank, financial institution, intermediary, etc.) to:

a)Authenticate the identity of clients undertaking specified transactions

b)Take additional steps to examine the ownership and financial position including sources of funds of the client

c)Take additional steps to record purpose behind conducting the specified transaction and intended nature of the relationship between the transacting parties.

The proposed norms also empowers reporting entity to not allow specified transactions if the client fails to fulfil the above conditions. It also empower the reporting authority to increase the future monitoring of the business relationship with clients, including greater scrutiny of transaction if transactions carried out by the client are founds suspicious or likely to involve proceeds of crime. The reporting authority shall maintain the information obtained out of due-diligence of client for a period of 5 years from the date of transactions between a client and reporting authority.
Consequential amendment has been made to Section 73 to empower the Govt. to make rules for undertaking the due-diligence under Section 12AA.

3rd July 2019

Income earned by NR from off-shore investments routed through Category I/II AIFs not taxable in India: CBDT

Circular no. 14/2019, dated 03-07-2019
The incidence of tax arising from off-shore investment made by a non-resident investor through the AIFs would depend on status of income of non-resident investor as per provisions of section 5(2) of the Income-tax Act, 1961. As per which the income of a person who is non-resident, is liable to be taxed in India if it is received or is deemed to be received in India by or on behalf of such person, or accrues or arises or is deemed to accrue or arise to him in India.
Section 115UB determines the income and tax-liability of investment funds & their investors. As per the section, it shall be deemed that the income from investment fund shall be chargeable to income-tax in the same manner as if it were the income accruing or arising to. or received by the non-resident investor, had the investments made by the investment fund been made directly by him and not through the AIF.
The matter has been considered by the Central Board of Direct Taxes (CBDT) and it has been clarified that any income of Non-resident investor from off-shore investments routed through Category I or Category II Alternate Investment Funds (AIFs), being a deemed direct investment outside India by NR investor, is not taxable in India under section 5(2).
Further, loss arising from the off-shore investment relating to non-resident investor, being an exempt loss, shall not be allowed to be set-off or carried-forward and set off against the income of the AIF.

1st July 2019

Govt. exempts levy of GST on goods supplied by outlets at International Airports, to outgoing International Tourists

CBIC has exempted any supply of goods to an outgoing international tourists made by a retail outlets established in the departure area of international airports, beyond the immigration counters from payment of IGST along with Cess. This notification would be effective from July 1, 2019 [Notification No. 11/2019-Integrated Tax (Rate)]

Retail outlets at international airports are specified as class of persons who shall be entitled to claim refund

CBIC has specified retail outlets established at the departure area of international airports, beyond the immigration counters, making tax free supply of goods to outgoing international tourists, as class of persons who shall be entitled to claim refund of applicable central tax paid on inward supply of such goods. This notification would be effective from July 1, 2019 [Notification No. 11/2019-Central Tax (Rate)]

CBIC prescribes procedure for filing & processing of refund claims by retail outlets established at Airports

CBIC has specified conditions, manner and procedure for filing and processing of refund claims of CGST, IGST,UTGST and Compensation cess paid on inward supplies which are subsequently supplied to outgoing international tourists by retail outlets established at the departure area of international airports [Circular No. 106/25/2019-GST]

TDS under GST not to be levied in case of exempt supplies provided to local authority

Time Tech Waste Solutions (P.) Ltd., In re – [2019] 106 taxmann.com 382 (AAR – WEST BENGAL

The applicant is providing conservancy/solid waste management service to the Bally Municipal Corporation (BMC). It has filed an application for advance ruling whether TDS under GST is applicable on the said service?

The Authority for Advance Rulings, West Bengal observed that the applicant is responsible for collection, segregation, storing, transport and disposal of solid waste from the municipal area of the BMC. Hence, the applicant is supplying pure service in respect of solid waste management to BMC which is a local authority. As per exemption notification for services in GST, pure services provided to local authority for solid waste management are exempt from GST.

According to the TDS provisions under GST, local authority is required to deduct TDS while making a payment to supplier for taxable goods or services or both. In this case, the applicant is making an exempt supply to BMC. Therefore, TDS is not applicable in respect of said service rendered by the applicant to BMC, being an exempt supply.

The Authority for Advance Rulings, West Bengal held that TDS under GST is not applicable in case of exempt supplies provided to local authority.

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