Service tax levy on short-term accommodation in hotel is unconstitutional: Delhi HC

Facts:

‘Federation of Hotels and Restaurants Association of India’ filed a writ before the Delhi High Court challenging the constitutional validity provision whereby, service tax is levied on supply of food items by restaurants having AC facility. It also challenged constitutional validity of provision, whereby service tax is levied on short-term accommodation by hotels. 

The Delhi High held as under:

I. It upheld the constitutional validity of service tax levy on foods items served in AC restaurants and made following observations:

- Rule 2C of the Service Tax (Determination of Value) Rules, 2006 enables the assessing authority to put a definite value to the service portion of the composite contract of supply of goods and services in an air-conditioned restaurant.

- Correspondingly there is an abatement for that portion which pertains to the supply of goods in the form of food and drink which would be amenable to sales tax or value added tax.

- It is to be kept in mind that the ready reckoner formula is useful where an assessee does not maintain accounts in a manner that will enable the assessing authority to clearly discern the value of the service portion of the composite contract. With the machinery provision for the levy and determination of service tax on the service portion clearly being spelt out in the Rules themselves, the legal requisites stand satisfied.

Usage of second residential property as office won't lead to denial of sec. 54F relief

Facts:

a) The assessee sold his Gurgaon Flat and earned long term capital gains. He invested the same in a residential property and claimed deduction under section 54F.

b) The AO disallowed such claim as he was of the view that property of assessee (located at New Delhi) was a second residential property. The AR was of the view that such property was only used by assessee for his own profession.

c) The DR submitted that such premises was undisputedly a residential house as per the municipal corporation and thus it will not change the character.

d) The CIT(Appeals) upheld the order of the Assessing Officer.The aggrieved-assessee filed the instant appeal before Tribunal.

The Tribunal held in favour of assessee as under:

Letter of comfort given to AE is outside the ambit of international transaction

The issue for consideration of the Tribunal was as under:

Whether Letter of Comfort issued by the assessee-company to its Associate Enterprise (‘AE’) could be deemed as international transaction under transfer pricing provisions?

The Tribunal held as under:

1) Letter of Comfort was nothing but a guarantee given by the assessee-company to its AE so as to enable the AE to avail of loan facility. By giving such loan, the assessee exposed itself to the risk of repaying the loan availed by the AE.

2) However, in Redington (India) Ltd. v. Asstt. CIT [2016] 69 taxmann.com 351 (Chennai), the Tribunal held that such a guarantee or Letter of Comfort did not involve any cost to the assessee, therefore, it was outside the ambit of international transaction.

3) Thus, following such verdict of Redington (supra) it could be concluded that Letter of Comfort given to AE could not be deemed as international transaction and there would not be any need to make any adjustment in respect of Letter of Comfort. Accordingly, the orders of the lower authorities were to be set aside. - TVS Logistics Services Ltd. v. DY. CIT [2016] 72 taxmann.com 89 (Chennai - Trib.)

Income from distribution of “Ten Sports” channel to cable operators couldn’t be held as ‘royalty’

Facts:

a) The assessee was engaged in business of telecasting “Ten Sports”. Its revenue arose from advertisement and distribution of sports channel in India. A distribution agreement was entered into by the assessee with ‘Taj India’ for distribution of pay channel to various cable operators and ultimately to consumers in India.

b) The AO made following observations:

The income from distribution of sports channel by assessee is taxable as royalty.

Transponder fee paid to US based company for rendering services in connection with telecasting of “Ten Sports” was taxable as royalty.

c) The CIT(A) reversed the order of AO. The aggrieved-revenue filed the instant appeal. The Tribunal held as under:

No sec. 69C additions on basis of info received from sales tax dept. without giving hearing change to assessee

Facts:

a) The assessee filed return of income declaring certain taxable income.

b) Information received from Sales Tax Department revealed that the assessee was involved in taking accommodation entry of bogus purchases. On the basis of this information, the assessment was reopened by the AO. He made certain additions to income of the assessee under section 69C.

c) On appeal, the CIT(A) partly allowed the appeal of the assessee and restricted the disallowance to 25 per cent of the purchases.

On appeal, the Tribunal held as under:

Statement of salesman would trigger block assessment when assessee failed to rebut such statement

Facts:

a) The assessee was a partnership firm, engaged in the business of furniture.Survey was conducted at the premises of the assessee and an assessment was made under section 153C.

b) Assessee challenged such assessment as he was of the view that such assessment was based on statements of salesmen recorded under Section 133A. The CIT(A) and Tribunal dismissed the appeal of assessee.

c) Aggrieved-assessee filed the instant appeal.

The High Court held as under:

Society providing training in travel and tourism is entitled to sec. 11 exemption

Facts:

a) The assessee was a society registered under section 12A. It provided various courses, including certificate course in Travel & Tourism' which was being conducted in collaboration with Miranda House, University of Delhi.

b) The AO held that courses conducted by assessee did not have any recognition from Govt. and activities carried on by assessee would fall outside purview of 'charitable purpose' as given under section 2(15). Consequently, assessee was not entitled to exemption under sections 11 and 12.

c) The CIT(A) reversed order of the AO. Aggrieved-revenue filed the instant appeal. The Tribunal held in favour of assessee as under:

1) For certificate course of Travel & Tourism the course content was set by Miranda House, education and training was provided by the appellant, examination paper was set out by appellant, examination was conducted by appellant and the Diploma Certificate was awarded by both Miranda House and the appellant to the successful candidates/students.

Govt introduces employees' compensation bill in lok sabha

1. Now the Centre and the States, both have powers to make laws with respect to levy of taxes on both goods and services. However, the Parliament will have exclusive powers to make laws with respect to goods and services tax where the supply of goods, or services, or both takes place in the course of inter-State trade or commerce.

2. CGST collected from intra-State trade or commerce shall be assigned to States in accordance with law formulated by the Parliament.

3. IGST collected from inter-State trade or commerce shall be apportioned between the Union and the States on the recommendations of the GST Council.

4. GST apportioned by Central Government to States will not form part of Consolidated Funds of India.

5. The President of India will constitute GST council.

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Hevy fine for traffic violations – 8 things you should know

In an attempt to improve road safety in the country, the Cabinet has approved of the Motor Vehicle (Amendment) Bill.

Key takeaways from Motor Vehicle amendment bill are as follows:

1. Compensation for Hit and Run cases proposed to be increased from Rs. 25,000 to Rs. 2,00,000. Bill also includes provision for payment of compensation upto Rs. 10 lakh in road accident fatalities.

2. Guardian or owner shall be deemed to be guilty in cases of offences by the Juveniles. They will have to pay penalty of Rs. 25,000 apart from undergoing 3 years imprisonment. The juvenile will be tried under Juvenile Justice Act. Registration of his/her motor vehicle will be cancelled.

3. It would enable online learning licenses, increase validity period for driving licenses and do away with the requirement of educational qualifications for transport license. 

4. It proposes to have automated fitness testing for the transport vehicles with effect from 1 October 2018.

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A decade long Journey of GST Bill

Today, Rajya Sabha is discussing amendments to Constitution Bill for Goods and Service Tax i.e. Constitutional (One Hundred and Twenty-Second Amendment) Bill, 2014. Hopefully, GST will be introduced in the country after a long journey of 13 years as it was discussed in the Kelkar Task Force report on indirect taxes in 2003 for the first time.

Since, Government agreed to drop 1% additional tax which was key demand of Congress and recommendation of Select Committee of Rajya Sabha and gave assurance that it will compensate States for any revenue loss incurred due to GST rollout, there is high probability that this amendment bill will be passed and supported by all parties. Today, Ministry of Finance issued “Frequently Asked Questions” on Goods and Service Tax and ICAI issued Background Material on Model GST law. There will be a huge impact of GST on common man. Goods like Small Cars, Two wheeler, Movie Tickets, Electronic Items etc. will be cheaper. But Air Travel, Insurance, Textile, Jewellery, Mobile Calls, Cigarettes will be costlier.

Click here to View FAQ’s on GST

Click here to view BGM on Model GST Law