Weekly Tax Newsletter 07-06-2020- N Pahilwani & Associates

1. 1. COMPLIANCE CALANDER
2. INCOME TAX UPDATES
3. GST UPDATES
4. ARTICLE- SELF INVOICE UNDER GST
TAX WEEKLY NEWSLETTER
07-JUNE-2020
CONTENTS

2. 1
Weekly Newsletter
INCOME TAX UPDATES
JUDICIAL UPDATES
The burden is on the assessee to prove
eligibility to an incentive or exemption
provision and mere the most
favourable option to assessee is not
valid-Ramnath & Co vs. CIT (Supreme
Court)
(i) The sweeping proposition in some
Supreme Court decisions that when two
views are possible, the one favourable to
assessee has to be preferred & that a tax
incentive provision must receive liberal
interpretation, is disapproved by the
Constitution Bench in Dilip Kumar (2018) 9
SCC 1 (FB). The burden is on the assessee
to prove eligibility to an incentive or
exemption provision and it is subject to
strict interpretation. If there is ambiguity,
the benefit of the ambiguity has to go to
the Revenue. However, if the assessee
proves eligibility, a wide and liberal
construction of the provision has to be
done (ii) Merely having a contract with a
foreign enterprise and mere earning
foreign exchange does not ipso facto lead
to the application of section 80-O of the Act
(All judgements considered in detail)
Reassessment merely on Investigation
officer report is unsustainable-
Ashapura Minichem Limited Vs DCIT
(ITAT Mumbai) - ITAT states that the
material facts of the present case being
identical in as much as the reopening,
beyond any doubt or controversy, is
entirely based on the Hon’ble Justice M B
Shah Commission report. As a plain look at
the reasons recorded for reopening the
assessment, as also for the approval by the
Additional Commissioner of Income Tax,
the only basis for reopening of the present
assessment, as in the judgment cited
above, was report submitted by Hon’ble
Justice M B Shah Commission report.
Further ITAT states that, it is for the
Assessing Officer to form an opinion as to
whether there was escapement of income
from assessment and whether such
escapement occurred from failure on the
part of the assessee to disclose fully and
truly all material facts necessary for his
assessment for the concerned assessment
year; and it is for him to put his opinion on
record in black and white. The reasons
recorded must disclose his mind and they
should be self-explanatory.
Section 14A apply on investment made
for acquiring controlling interest-
Puran Associates Pvt. Ltd. Vs ACIT
(ITAT Delhi) - In the present case, the
assessee is engaged in the business of sale
and purchase of the shares in mutual
funds. During the year, the assessee
disclosed income of ₹ 3 crores and made
disallowance of ₹ 10,82,334/-, under
section 14A of the Act. The Assessing
Officer, rejected the action of the assessee
and disallowed ₹53,16,568/- u/s 14A
claiming to be expense on account of the
income on which no activity was done in
the previous year. The assessee explained
that, the investment in the shares of
‘Dabur India Ltd’ has been made as a
promoter of the company and no
expenditure was incurred for earning
dividend income from the said investment.
It is a strategic investment.

3. 2
ITAT relying on the Supreme Court
judgement in the case of Maxopp
Investment Ltd states that prior to the
introduction of Section 14A of the Act, the
law was that when an assessee had a
composite and indivisible business which
had elements of both taxable and non-
taxable income, the entire expenditure in
respect of said business was deductible
and, in such a case, the principle of
apportionment of the expenditure relating
to the non-taxable income did not apply.
According to the Court, the said reasoning
would be applicable in cases where shares
are held as an investment in the investee
company, maybe for the purpose of having
a controlling interest therein.
Hence, the contention of the assessee
investment made for acquiring controlling
interest in Dabur India Ltd should not be
subject to disallowance under section 14A
is rejected.
Final assessment order U/s 144C
without issuing draft order is Void-ab-
Initio - Nikon India Pvt. Ltd. Vs DCIT
(ITAT Delhi) - The Tribunal vide order
dated 31.03.2017 remanded the matter
back to the TPO/AO for fresh
determination. Thus, as per Section 144C
of the Act, it is mandatory for the
Assessing Officer to pass draft Assessment
Order. But instead of that, the Assessing
Officer vide order dated 18.10.2019 merely
captioned the final Assessment Order as
Draft Assessment Order along with
issuance of notices under Section 156 and
274 read with Section 271(1)(c) of the Act
which means a final Assessment order u/s
144C was passed without following the
mandatory provisions of Section 144C of
the Act.
Thus, the Assessment order itself is bad in
law and void ab initio, hence quashed.
Hence, appeal filed by the assessee is
allowed.
AAR denies applications of Mauritius
Entities for selling Flipkart shares
under Indo-Mauritius treaty - They
were of the considered opinion that the
issue involved in the question raised in the
present applications was designed prima
facie for avoidance of tax. The applicants
have contended that shares of the
Singapore Company derived their value
substantially from assets located in India
and, therefore, it was eligible to take
benefit of Article 13 (4) of India – Mauritius
Treaty. Even if the Singapore Company
derived its value from the assets located in
India, the fact remains that what the
applicants had transferred was shares of
Singapore Company and not that of an
Indian company. The objective of India-
Mauritius DTAA was to allow exemption of
capital gains on transfer of shares of Indian
company only and any such exemption on
transfer of shares of the company not
resident in India, was never intended by
the legislator.
Further, as discussed earlier the actual
control and management of the applicants
was not in Mauritius but in USA with Mr.
Charles P. Coleman, the beneficial owner of
the entire group structure. Therefore, we
have no hesitation to conclude that the
entire arrangement made by the applicants
was with an intention to claim benefit
under India – Mauritius DTAA, which was
not intended by the lawmakers, and such
an arrangement was nothing but an
arrangement for avoidance of tax in India.
Therefore, the bar under clause (iii) to
proviso to Section 245R (2) of the Act is
found to be squarely applicable to the
present cases. Accordingly, the applications
are rejected.

4. 3
Weekly Newsletter
GST UPDATES
GST council likely to discuss the
demand for waiver of late fees from the
date of GST implementation in its next
meeting, likely to be held on 12 June -
Release ID: 1628414 – 01/06/2020 -
The current requests for waiver of late
fee pertain to the old period (August
2017 to January 2020). It may be
appreciated that the late fee is imposed
to ensure that the taxpayers file return in
time and pay taxes on the amount
collected from buyers and due to the
Government. This is a step to ensure that
a certain discipline is maintained
regarding compliance. Honest and
compliant taxpayers would be
discriminated negatively in the absence
of such a provision.
The issue of late fee would be taken up
for discussion in the next GST Council
meeting.
Centre Releases Rs. 36,400 crores as
GST Compensation to States for the
period December 2019 to February
2020- Release ID: 1629446 -
04/06/2020 - Taking stock of the
current situation due to COVID-19 where
State Governments need to undertake
expenditure while their resources are
adversely hit, the Central Government
has released the GST Compensation of
Rs.36,400 crores
JUDICIAL UPDATES
High Court sets aside cancellation of
registration without considering tax
payer’s reply - Great Sands Consulting
Private Limited (Bombay High Court) -
Bombay High Court sets aside impugned
order cancelling the registration of the tax
payer which was passed without considering
the reply and on the ground that no reply
was filed by the tax payer. The High Court
restored the proceeding to the stage of
show cause notice for deciding the matter
after considering the reply already filed by
the tax payer.
High Court refused to interfere when an
order in Form GST MOV 11 was already
passed - Shiv Agro Vs State of Gujarat
(Gujarat High Court) - When the order in
form GST MOV 11 was already passed by
the concerned authority, the High Court
refused to interfere in the matter and
suggested the writ applicant to prefer a
statutory appeal under Section 107 before
the appellate authority.
High Court directs revenue to honour
refund claim and process it through
officer interface option - Akay Flavours
& Aromatics (P) Ltd. Vs CBIC (Kerala
High Court) - The High Court directed the
Revenue to process the refund claim of the
petitioner for IGST paid on export of good
upon amendment of their GST returns. The
Court directed the Revenue to process the
refunds through officer interface option
available on ICES and take necessary
consequential steps for honoring the claim
of the petitioner for refund.
Order passed without considering the
grounds raised by the assessee is
invalid - Lakhan Singh Chauhan and
Company Vs Union of India (Madhya
Pradesh HC) - The High Court held that
where in an impugned order, there is no
consideration of the objection raised by the
assessee for non-receipt of the order and
beginning of the limitation period thereafter,

5. 4
it would be violative of principles of natural
justice and hence remanded the matter
back to the appellate authority to decide the
question of delay afresh after considering
the assessee’s grounds.
ADVANCE RULINGS
Leasing of property for cold
storage/warehousing of agricultural
produce does not fall within ambit of
exemption under Notification 12/2017
Central Tax (Rate) - Telangana
Authority for Advance Rulings - GUBBA
COLD STORAGE PRIVATE LIMITED – The
Authority held that the exemption under the
relevant notification would be available if
warehousing services are provide directly in
relation to ‘agricultural produce’ as defined
in the notification. However, if the
agreement is purely for renting/leasing of
the premises for cold storage/warehousing
by one entity to another, the activity
amounts to renting/leasing of immovable
property and does not fall within ambit of
storage services.
Place of supply in respect of goods
where the supply involves movement of
goods has to be determined with
reference to the location where the
movement of goods ultimately
terminated - Telangana Authority for
Advance Rulings -PENNA CEMENT
INDUSTRIES LIMITED - The Authority
held that in terms of Section 10(1)(a),
movement of goods in case of ex-factory
sales does not conclude at factory gate but
terminates at the place of destination where
the goods finally are destined as per the
billing address. After the goods are made
available by the supplier to the recipient at
the factory gate, the recipient subsequently
assumes the charge for transportation of
the goods up to the destination.
Accordingly, it can be inferred that the place
of supply in such cases has to be
determined with reference to the location
where the movement of goods ultimately
terminated.
Online test with human intervention
covered within scope of OIDAR services
- Karnataka Authority for Advance
Rulings - NCS Pearson INC - The
provision of taking tests online at
designated test centers are naturally
bundled activities with verification and
registration of the candidates and are
supplied in conjunction with each other in
the ordinary course of business. Therefore,
these services are Composite Supply with
the object of the whole activity being to
conduct online tests - the principal supply
would be thus OIDAR service provided by
the applicant to non-taxable online
recipients. However, the tests scored after
human intervention would be outside the
purview of OIDAR.
NATIONAL ANTI-PROFITEERING
AUTHORITY
Phillips India - The NAA in anti-
profiteering proceedings against Phillips
India held that it had not passed on any
benefit of reduction in the rate of tax in the
form of a discount - it is the basic price
(after discount, on which GST is chargeable)
that should be reduced. The Authority held
that the legal requirement is abundantly
clear that in the event of a benefit of Input
Tax Credit or reduction in the rate of tax,
there must be a commensurate reduction in
prices of the goods or services. Such
reduction can only be in absolute terms
such that the final price payable by a
consumer.

6. 5
Article: Self Invoice under GST
Fogg Deo to Big Bazar - The NAA upheld
profiteering allegations in case of supply of
Fogg Deo to Big Bazar. The manufacturer
i.e. M/s Vini Cosmetics Pvt. Ltd. had made
commensurate reduction in price, post
reduction in rate of tax, while supplying to
its super-stockiest, but the super-stockiest
had not passed on the benefit of rate
reduction on further supply, thus denying
the benefit of tax reduction to its customers
in contravention of the provisions of Section
171(1) of the CGST Act.

7. 6
ARTICLE - SELF INVOICE UNDER GST
[Reverse charge and self-invoicing mechanism under GST]
Self-invoicing is to be done when you have purchased from an unregistered supplier and
such purchase of goods or services falls under reverse charge.
This is due to the fact that your supplier cannot issue a GST-compliant invoice, and thus
for documenting the tax liability as you become liable to pay taxes on their behalf and
availing the ITC on the same, the concept of self-invoicing was introduced.
Under GST, a person who is not registered cannot collect any amount by way of tax in
respect of any supply of goods or services. To bring such transactions under the GST
net, the concept of reverse charge mechanism has been borrowed from the erstwhile
regime and incorporated in the provisions of Section 9(3) and 9(4) of the CGST Act, and
Section 5(3) and 5(4) of the IGST Act.
The provisions of the self-invoicing are briefly as under:
Cases where self-invoice needs to be issued
The person liable to pay tax under reverse charge shall be required to issue an invoice in
respect of goods or services received by him from unregistered supplier within the time
limits specified, and shall issue a payment voucher at the time of making payment to
such supplier. However, in case of purchases from unregistered persons, the recipient
shall have an option to issue consolidated invoice at the end of the month, subject to the
specified conditions.
In terms of Section 9(3) of the CGST Act, and corresponding Section 5(3) under IGST
Act, in respect of specified categories of goods and services, the recipient of supply is
required to pay tax under reverse charge and these provisions have been specified in
Notification 4/2017 Central Tax (Rate) and Notification 13/2017 Central Tax (Rate)
respectively (and corresponding Notifications under IGST), as amended from time to
time.
Further, under Section 9(4) of the CGST Act (and Section 5(4) of IGST Act), the specified
class of persons are required to pay tax under reverse charge on purchase of specified
goods or services from unregistered persons.
Time limit prescribed in law for issuing self-invoice and discharge of tax liability
The time of supply in respect of tax payable in respect of goods and services on which
recipient is liable to pay tax under reverse charge shall be earlier of:
a. the date of the receipt of goods; or
b. the date of payment to the supplier; or
c. the date immediately following 30 days for goods and 60 days in case of services
from the date of issue of invoice by the supplier.

8. 7
Article: Self Invoice under GST
If it is not possible to determine the time of supply, the time of supply shall be the date
of entry in the books of account of the recipient.
Accordingly, the self-invoice in respect of receipt of supplies specified under above
provision issued within these time limits.
Contents of the self invoice
The contents of self-invoice have not been specifically prescribed under the law, and
hence the contents prescribed under Rule 46 of the CGST Rules would apply to self-
invoice as well. Such invoices shall include following details:
a. Name and address of the supplier;
b. Unique invoice number;
c. Date of its issue;
d. Registered person’s own GSTIN, name and address;
e. HSN code and description
f. Quantity in case of goods and unit or Unique Quantity Code thereof;
g. Total value of supply of goods or services or both;
h. Taxable value of the supply of goods or services or both taking into account
discount or abatement, if any;
i. Rate of tax and tax amounts;
j. Place of supply;
Availment of ITC on self-invoices and restrictions thereon
There is no time-limit specifically prescribed for availing ITC in respect of self invoice
hence it shall be governed by the general provisions i.e.
 ITC of tax paid under reverse charge can be availed in the same month and used
for discharge of tax liability on outward supplies
 The same shall be availed upto due date of filling September months return of the
subsequent financial year.
 These credits are also not subject to the restrictions on availment of ITC under
Rule 36(4). [10% of ITC available in GST-2A]
 However, Block Credit restrictions under section 17(5) would still continue to
apply.
Consequences of not issuing self-invoice
No specific penalty has been prescribed under law for non-issuance of self-invoices, and
hence the same will be covered under general penal provisions as applicable from time
to time.
Further, the document required to claim input tax credit of tax paid under reverse charge
is self invoice. Thus, raising self invoice is necessary to claim ITC. Without self invoice,
ITC claim can be challenged and result into loss of ITC on self invoice

9. 8
Accounting entries
The accounting entries at the time of purchases attracting reverse charge will be as
under:
1. At the time of purchase / expense
Purchase / expense account Dr.
To URD vendor account Cr.
2. At the time of creating liability under reverse charge
RCM CGST input account Dr.
RCM SGST input account Dr.
To RCM CGST payable account Cr.
To RCM SGST payable account Cr.
3. At the time of payment of tax
RCM CGST payable account Dr.
RCM SGST payable account Dr.
To bank account Cr.
4. At the time of taking input tax credit
Input CGST Dr.
Input SGST Dr.
To RCM CGST input account Cr.
To RCM SGST input account Cr.
Hope this article is helpful to you
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