Monday, March 27, 2017

CBDT issues guidelines for waiver of interest of assesseein- default

CBDT via Circular No. 11/2017 dated 24-03-2017 has issued guidelines to reduce or waived off the interest charged under section 201(1A)(i) in case of assessee’s failure to deduct tax at source in some specified cases.

The cases in which the reduction or waiver of interest under section 201(1A)(i) can be considered are as follows:

1) In case where books of account and other documents necessary for making TDS were seized by the department due to which assessee was not able to deduct tax within due time.

2) Where no tax was deducted on any sum paid or payable on the basis of any order passed by the jurisdictional High Court and subsequently such order was reversed by any retrospective amendment or by a decision of Supreme Court or by a larger bench of jurisdictional High Court.

3) In respect of payment made to non-resident, where: 

a) dispute regarding the tax payable in India in respect of the said payment had been referred to the Competent Authority in India as mentioned in Rule 44H.

b) such reference had been received within a period of two years of the date on which the notice of demand determining the tax payable was received by the assessee;

c) the dispute has been settled by way of a resolution arrived at under the Mutual Agreement Procedure (MAP) provided in the said agreement; and 

d) the assessee has given his acceptance to the resolution and has withdrawn his appeal(s) pending on the issue within one month of the date on which the resolution is communicated to him.

In cases where assessee has already paid interest under section 201(1A)(i), assessee is entitled to get refund of such interest amount if the waiver order has been passed by the authority.

Payment for usage of ICC marks to promote Reebok brand can’t be held as royalty: ITAT

The issue before the Tribunal was as under:

Whether payment made by Reebok to ICC as 'Rights fee' for use of Marks of ICC for purposes of promotion and advertisement was in nature of 'Royalty' or 'Fees for technical services'?

Tribunal held in favour of Reebok as under:-

Reebok India Company (assessee) had entered into an agreement with ICC. As per terms of agreement ICC allowed Reebok to associate with it as 'Official Partner of ICC' to advertise its products during the ICC events.

ICC had agreed to grant to the assessee certain 'promotional, advertising, marketing and other commercial rights' on a worldwide basis in connection with the ICC events. In all, there were two types of payments, which the assessee was supposed to make under the Agreement, namely, 'Rights fee' and 'Royalty' Payment made by assessee as “Right fee’ exclusively for use of Marks of ICC for purposes of promotion and advertisement couldn’t be said as ‘Royalty’ asICC did not provide any technical, industrial, commercial or scientific knowledge to assessee for use of ICC marks on his product for promotion in ICC events.

There was a separate clause provided in the agreement for payment of royalty on the manufacture and sale of licensed products using the Marks of ICC which was in nature of 'Royalty' duly covered under clause(iii) of Explanation 2 to section 9(1)(iii). Thus, payment madeexclusively for use of Marks of ICC for purposes of promotion and advertisement and not for manufacture and sale of licensed products couldn’t be treated
as 'Royalty' - [2017] 79 271 (Delhi - Trib.)

Excise dept. can’t blame advocate for its own failure to remove office objections in appeal: HC

Excise department (Revenue) filed the appeal before the High Court with the plea to quash order passed by Registry dismissing its appeal seeking time to remove office objections.

High Court held as under: -

1) All the appeals filed by the revenue were entertained by condoning delay and there was enough time to remove office objections, but those were not removed.

2) Revenue officials were playing a blame-game. To cover up their lapses and deficiencies, they turned around and blamed their Advocates. They were of the opinion that their Advocates ought to have informed them and at every stage of the matter, particularly as to which office objections had to be complied with or were to be removed.

3) If the officers were unaware of legal procedures, then they had to be in touch with their Advocates. They could not expect that the Advocate himself would come to their office and apprise them as to what further had to be done after the filing of an appeal.

4) While allowing the appeal, we are expecting that this blame game will not be played further and Revenue officials must communicate with their Advocates periodically or rather regularly apprise themselves on the stages their Appeals have to go through. - [2017] 79 268 (Bombay)

SRK wins tax case; ITAT allows Rs 10 cr. deduction for securing IPL team sponsorship for Star India


a) Shah Rukh Khan (SRK) had entered into a service agreement with Star India Pvt. Ltd. (‘Star India’) for hosting of ‘KBC’.SRK had received advance of Rs.72 crores for two seasons of KBC and the same had also been offered to tax on receipt basis.

b) After the production of the episodes for first season of KBC, the Star India decided not to produce the second season for commercial reasons. So, it wanted to recover the value of the unutilized amount from the SRK for non-shooting of the second season of KBC.

c) SRK agreed to secure for Star India a sponsorship association with KKR IPL Team. For securing such sponsorship, he paid Rs.10 crores to Knight Riders Sports Pvt. Ltd. and in return sponsorship rights were awarded to Star India

d) SRK claimed deduction of such expenditure while computing his business income while Assessing Officer (AO) disallowed such expenditure as he was of the view that SRK was under no obligation to refund any amount to Star India.

e) CIT (Appeals) affirmed order of AO, aggrieved by the order of CIT, SRK filed the instant appeal before the Tribunal.

Tribunal held in favour of SRK as under:

1) It is not the legal necessity to spend the expenditure which is determinative of its allowability; rather, it is the existence or otherwise of commercial expediency which guides the allowability of expenditure under Section 37(1).

2) From the point of view of commercial expediency, it is abundantly clearly that assessee had a long-standing professional relationship with Star India Pvt. Ltd. and there is a nexus between the impugned expenditure and the purpose of business.

3) It was not for the Revenue to prescribe what expenditure should an assessee incur and under what circumstances.

4) In the instant case, there was no challenge to the bonafides of the expenditure incurred. Therefore, same could be understood to had been incurred wholly and exclusively for the purposes of business.

5) Accordingly, the order of the CIT(A) was set-aside and the AOwas directed to delete the addition of Rs.10 crores. - [2017] 79 227 (Mumbai - Trib.) 

Cabinet approves GST Bills to implement GST from July 1

On Monday, the Union Cabinet gave its nod for four crucial GST Bills to usher in the country's biggest-ever tax reform. The meeting was chaired by Prime Minister Narendra Modi. This meeting was conducted to understand and approve the four Bills - Central GST, IGST, UT GST and Compensation Bills.

Now the Government will introduce these Bills in the ongoing Budget session of Parliament itself. It is expected to be tabled in Parliament this week as Money Bills. The Government hopes to get them passed in the ongoing session to ensure the tax is implemented from July 1, 2017.

However, the State GST Bill will be taken up by State Cabinets and introduced in each State Assembly. The GST Council, in its previous two meetings, had given approval to the four legislations as also the State-GST (S-GST) bill.

Once GST is implemented, a composite tax will be levied on sale of goods or rendering of services. After the new indirect tax regime is rolled out, the revenue would be split between Centre and states in almost equal proportion. This because central taxes like excise and service tax and state levies like VAT will be subsumed in the GST. While the CGST will give powers to the Centre to levy GST on goods and services after Union levies like excise and service tax are subsumed, the I-GST is to be levied on interstate supplies. The SGST will allow states to levy the tax after VAT and other state levies are subsumed in the GST. The UT-GST will also go to Parliament for approval.