Custom duty borne by purchaser would be deductible even if liability disputed by importer seller

Facts:

a) Assessee-firm purchased certain imported products under two agreements. The price as agreed in both the cases was the gross costs to the sellers with certain amount of net profit. The gross cost included all expenditure incurred by the sellers for supplying the goods to the assessee.

b) However, as there was uncertainty about the incidence of customs duties, the parties inserted a clause in the agreements, to make it clear that any liability with respect to duty of customs payable by the seller, would be a part of the costs and the buyer (assessee) would pay for the same. In terms of the contract the assessee was required to pay custom duty of Rs 1.78 crores to its seller as a part of the cost of the goods.

c) While completing assessment, the Assessing Officer accepted expenditure incurred on account of customs duty. There after, the CIT, in exercise of powers under section 263, reversed assessment order holding that the amount of custom duty was a contingent liability as the sellers of goods had challenged the same in the Supreme Court.

d) On appeal, the Tribunal held that liability on account of customs duty was to be allowed as the deduction on accrual basis. Aggrieved-revenue filed the instant appeal. The High Court held in favour of assessee as under:

CBDT releases Q&As on TCS applicability on sale of motor vehicles

In order to reduce the cash transactions in sale of goods and services, the Finance Act 2016 has expanded the scope of section 206C(ID) to provide that the seller shall collect tax @1% from the purchaser on sale in cash of any goods (other than bullion and jewellery) or providing of any services (other than payment on which tax is deducted at source) exceeding two lakh rupees.

Further, with a view to bring high value transactions within the tax net, it has been provided in sub- section (1F) of section 206C that the seller, who receives consideration for sale of a motor vehicle exceeding ten lakh rupees, shall collect 1% of the sale consideration as tax from the buyer.

In this regard a number of queries have been received about the scope of the provisions of TCS and the procedure to be followed. In this backdrop the CBDT now clarifies following issues in form of questions and answers as follows:

Question 1: Whether TCS @ 1 % is on sale of Motor Vehicle at retail level or also on sale of motor vehicles by manufacturers to dealers/distributors?

Answer: To bring high value transactions within the tax net, section 206C has been amended to provide that the seller shall collect the tax @ 1% from the purchaser on sale of motor vehicle of the value exceeding ten lakh rupees. This is intended to cover all transactions of retail sales and, accordingly, it will not apply to sale of motor vehicles by manufacturers to dealers/distributors.

Krishi Kalyan Cess-Hidden Misery

Krishi Kalyan Cess (KKC) at the rate of 0.5% is being imposed on all taxable services with effect from 01.06.2016 on all taxable services provided or agreed to be provided by the service provider. The revenue collected from this Cess will be utilised by the government for improving agricultural sector and for taking initiatives to promote agricultural activities. However, the complicated provisions enshrined for this Cess tend to defeat the 'Kalyankari intention' of the government.

It is provided that only a provider of output service shall be allowed to take cenvat credit of the Krishi Kalyan Cess on taxable services leviable under section 161 of the Finance Act, 2016. This has the consequence of raising doubt as regards availment of cenvat credit of KKC levied on input services received by a manufacturer cum service provider. Not only this, it is being provided that the cenvat credit of any duty shall not be utilised for payment of KKC leviable under section 161 of the Finance Act, 2016. In the opinion of authors, literal interpretation of the provision leads to conclusion that only a service provider can avail the cenvat credit of KKC imposed on input services availed by it and the credit so availed can be utilised for payment of KKC and no other duty. 

Taxability of services provided by Senior Advocates

A senior advocate is an advocate, who with his consent, be designated as senior advocate if the Supreme Court or a High Court is of opinion that by virtue of his ability and special knowledge or experience in law, he is deserving of such distinction. Earlier, CBEC made services of senior advocate taxable under forward charge. Now, CBEC further issued three notifications 32/2016, 33/2016 and 34/2016. The impact of these notifications are as follows:

1. Earlier, legal services provided by senior advocates to any person carrying out any activity relating to industry, commerce or any other business or profession were not exempt from service tax. Now, legal services provided by senior advocates would be exempt from service tax, if services are provided to –

- Any person other than business entity, or

No service-tax on sale of under-construction flats if contract price includes value of land: HC

a. Assessee purchased flat in a residential complex. The builder, in addition to the consideration for the flats, also recovered service tax from the assessee.

b. Assessee challenged levy of service tax on ground that composite contract (inclusive of value of land) could not be charged to service tax. It was argued that the agreement with the builder was a composite contract for purchase of immovable property and in absence of specific provisions for ascertaining the service component in the said agreement, the levy would be beyond the legislative competence of the Parliament. 

The Delhi High Court held as under:

1. The legislative competence of the Parliament to tax the element of service involved in constructing the complex could not be disputed. But the levy itself would fail, if it did not provide for a mechanism to ascertain the value of the services component which was the subject of the levy.

Interest on compensation paid to accident victim is tax-free

Facts:

a) The assessee was travelling in a car, which met a serious accident, leaving her permanently disabled. She claimed a compensation for this tragic loss of her physical abilities. She did eventually get it after the long struggle of 21 years.

b) But this long struggle was not enough, the destiny had more in store for her. It is this settlement of the accident compensation claim that has led to a new round of litigation- this time about taxability of a component of compensation, i.e. interest component.

c) During assessment proceedings, the Assessing Officer held that that interest component on compensation was taxable as it is covered under section 145A(b) r.w.s. 56(viii).The CIT(A) had also confirmed this stand. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

IndiGo Airlines didn't abuse dominance by hiring AirIndia's pilots a􀁺er obtaining NOC from competent authority

Facts:

a) The Appellant, Air India, had filed information against the respondent- Indigo alleging that it had systematically indulged in predatory recruitment of trained pilots of appellant and had contravened provisions of section 4 of Competition Act, 2002.

b) The Commission held that allegations against respondent did not raise any competition concern in market and there was no bar on informant or any other airlines from recruiting pilots belonging to other airlines after seeking 'No objection Certificate' from them On appeal, the Competition Appellate Tribunal held as under:

1) Since except making bald allegations appellant did not produce any tangible evidence on record to prima facie show that respondent had in fact indulged in predatory hiring of pilots already serving other airlines and, thereby, affected flying operations of particular airlines, which could be treated as abuse of dominant position within meaning of section 4(2) or violation of section 3(3)(b) and (c), Commission could not have returned a prima facie finding that respondent had indulged in anti-competitive activities or abused its dominant position in relevant market

"NCLT constituted with e ect from 1-6-2016"

The Ministry of Corporate A airs (MCA) has issued notifications on 1st June, 2016, constituting the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) with e ect from 1st June, 2016 for the implementation of the provisions of Companies Act, 2013.

Hon’ble Justice S. J. Mukhopadhaya, Judge (Retd), Supreme Court of India has joined as the Chairperson of NCLAT while Hon’ble Justice M. M. Kumar, Judge (Retd), has joined as the President, NCLT.

Initially, the NCLT will have eleven branches – two in New Delhi and one each in Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata and Mumbai. Overall NCLT will have 21 benches and 63 members.

DGFT defines e-Commerce for Merchandise Export India Scheme

Background

The Foreign Trade Policy of India embarks a structure and environment for uplifting the export of goods and services. It is designed to lay emphasis on generation of employment and increasing value addition in the country to align its objectives with the "Make in India" vision of our Hon'ble Prime Minister. The government has considered extending its support to both the manufacturing and services sector, with special emphasis on improving "Ease of Doing Business in India".

The Foreign TradePolicy 2015-20¹ (hereinafter called as "FTP 2015-20"), introduced 2 new schemes for promoting exports in India. The main objective behind introducing the new schemes was to provide reward to exporters to offset infrastructural inefficiencies and associated costs involved and also to provide exporters a level playing field.

No denial of indexation benefit at assessment stage just because long-term capital gain wasn't declared in ITR

Facts:

a) The assessee invested certain amount in mutual fund units of HSBC and earned long-term capital gain on its redemption. He had not declared the said long-term capital gain in the return of income.

b) During the course of assessment proceedings, it offered to pay tax on the long-term capital gain (LTCG). The Assessing O􀁹icer (AO) added LTCG and brought it to tax at special rate of 20 per cent without giving the benefit of cost inflation indexation.

c) Commissioner (Appeals) upheld the addition made by the AO. He further held that since the assessee had not disclosed the long-term capital gain in the return of income filed, AO was free to adopt either method with or without applying cost inflation index, whichever is favourable to revenue.

d) Aggrieved-assessee filed instant appeal before the tribunal.

Tribunal held in favour of assessee as under

1) As per section 112(1)(a), any income arising to an individual from transfer of long-term capital asset is chargeable at the rate of 20% after allowing the benefit of the cost inflation indexation as provided in the second proviso to section 48. However, with respect to the income arising from the transfer of listed securities or units or zero coupon bonds, it shall be chargeable at the rate of 10% without applying cost inflation index.