Friday, June 30, 2017

10 things to know before GST rollout

GST will be rolled out from July 1, 2017 and just before its implementation the Govt. had issued various notifications on GST.

Key takeaways from such notifications are given here under: 

1. There is a requirement to mention HSN code of items in tax invoice under GST. Now the Govt. has given some relief to small assessees with annual turnover uptoRs 1.5 crores. They are not required to mention HSN code in their tax invoice. Taxpayers having turnover in the range of Rs 1.5-5 crore will be required to mention only two digits of HSN code and taxpayers with turnover more than Rs 5 crore will be required to mention four digits of HSN code.

2. Now the Govt. has given exemption from reverse charge in those cases wherein the value of goods or services does not exceed Rs 5000 and such goods or services are received by registered person from the unregistered person.

GST be made effective from July 1, 2017: Date Notified

Even after the announcement of GST rollout from July 1, 2017 there was doubt on its implementation from said date. Now GST would definitely be implemented from said date as Government has notified date of applicability of the CGST and the IGST Act as July 1, 2017.

Earlier the Govt. had notified two rules, viz, composition and registration under CGST. Now the Govt. has notified remaining rules under CGST Act.

High Court absolves Son in cheque bouncing case as it was issued from his father’s account

Facts of the case:

a) In the recent case law, the accused – Son had issued a cheque in respect of loan outstanding against him. The said cheque was issued by the accused towards outstanding amount from his father’s account. However, the same cheque was dishonored for want of sufficient funds in the account.

b) Lender - bank has issued notice to accused for payment of dishonored cheque. As accused - Son failed to pay outstanding amount, the lender - bank filed a complaint before trial court which was dismissed by the magistrate.

c) Being aggrieved at the judgement of trial court, lender- bank preferred an appeal to the Bombay High Court.

The Bombay High Court held as under:

i. If cheque had been issued by the Son from the account of his father and it bounced, then the lender - bank could not file a criminal case against Son, as one of the ingredients of section 138 of the Negotiable Instrument Act for holding one guilty was not satisfied that cheque must have been issued from an account maintained by the accused. Therefore, the case would not fall within the ambit of Section 138 of the Negotiable Instrument Act. [2017] 82 432 (Bombay)

No denial of sec. 54 relief just because purchase agreement specifies delivery of flat after 3 yrs


a) The assessee had shown long-term capital gains from sale of a residential house. She claimed deduction under section 54 on the ground that a part of said gain had been invested in a flat.

b) The AO noted that as per the purchase agreement flat would be delivered to the assessee within a period of 36 months with a grace period of six months from the date of actual start of construction.

c) The AO concluded that the said flat could not be handed over to the assessee by the builder within a period of 3 years from the date of transfer of the original asset and, therefore, denied the exemption claimed under section 54.

d) The assessee submitted that since full/substantial consideration had been paid by her, she was entitled to benefit of deduction on account of the investment in the flat under section 54. The Commissioner (Appeals) upheld the order of AO. The aggrieved assessee filed the instant appeal.

The ITAT held as under:

1) If substantial amount of capital gain has been invested by the assessee for the purpose of purchasing a new house, deduction under section 54 cannot be denied for the reason that construction was not completed within three years or house was not purchased within two years. In the present case the assessee had invested substantial amount for purchasing the new asset and thus she was entitled to claim deduction under section 54.

2) Even otherwise section 54 gives a window period of three years from the date of transfer of original asset, for the construction of a new house and two years for purchasing a new house. Further as per the section the amount utilized for the said purpose along with the amount deposited in a specified bank account for the purpose, before the date of filing of return of income, is treated as cost of construction of the new asset and exemption granted thereof.

3) Thus, clearly, as per section 54(2), exemption to the extent of amount utilized for construction is to be granted in the year of transfer of asset and the condition of completion of construction is to be looked into only after the window period provided by the Act of three years expires.

4) Therefore, impugned order rejecting assessee's claim for deduction in year of filing return itself, was to be set aside. - [2017] 82 306 (Chandigarh - Trib.) 

Sec. 14A disallowance not to be considered while computing book profits under MAT: ITAT special bench

The issue before the special bench of ITAT was:-

“Whether the expenditure incurred to earn exempt income computed u/s 14A could not be added while computing book profit u/s 115JB of the Act” ITAT special bench held in favour of assessee as under:

1) Applicability of provisions of sec. 14A is confined to computation of tax liability under the five heads of income enumerated in sec. 14 under normal provisions contained in Chapter IV of the Act. The said section 14A cannot be extended and read into section 115JB, falling under Chapter XI1-B of the Act.

2) Further, the scope of section 14A and section 115JB is entirely different. Under section 14A, disallowance is made of expenditure in relation to the earning of income not forming part of the total income. Thus, it takes within its sweep both direct and indirect expenditure having proximate connection with earning of exempt income.

3) However, under clause (f) of the Explanation 1 to section 115JB, only those expenditures debited to the profit and loss amount, which are relatable to earning of income exempt u/s 10 (excluding section 10(38) or section 11 or section 12 are added back while computing adjusted book profit. Thus, only direct expenditure associated with the earning of said income would be added back.

4) Therefore, there could not be any room for making adjustment in accordance with any other provision of the Act, except to the extent specified under the Explanation. Therefore, computation under clause (f) of the Explanation 1 to section 115JB(2) was to be made without resorting to the computation as contemplated u/s 14A, read with Rule 8D of the Income-tax Rules, 1962. - [2017] 82 415 (Delhi - Trib.) (SB)

No denial of sec. 54 relief just because construction wasn't completed in 3 years


a) The assessee sold his property and invested capital gains amount in purchase of new property. Capital gain was appropriated within a period of 3 years from the sale of the property.

b) The possession of the new property was handed over to the assessee after 3 years when the construction of the new property got completed.

c) Assessing Officer (AO) disallowed capital gain exemption as the construction of residential property was not completed within 3 years from the transfer of residential capital asset

d) On appeal, CIT (Appeals) upheld the disallowance. Aggrieved-assessee filed the instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

1) It was held in by the Karnataka High Court in the case of CIT v. Smt. B.S. Shantha kumari [2015] 60 74/233 Taxman 347 that completion of construction within three years was necessary and not mandatory to claim section 54 exemption.

2) In the instant case, assessee had already appropriated the capital gains for the purpose of construction of residential unit. However, construction was not completed within the stipulated period. Therefore, liberal interpretation was to be considered while granting exemption under section 54, as it was beneficial provision.

3) Since assessee over and above satisfied the conditions laid down by section 54 and demonstrated his intention to invest the capital gains in residential house he was entitled to exemption under section 54. - [2017] 82 284 (Chennai - Trib.)