TAXPERT JOURNAL

Insights & Analysis of

Judicial Pronouncements | Notifications| Circulars

What’s ahead

Key dates (Tax calendar)

TAXPERT JOURNAL October, 2021

“BE UPDATED, BE AHEAD”

Recent Updates

Taxpert Professionals | October 2021

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TABLE OF CONTENTS

Sr

No PARTICULARS

Page

No

DIRECT TAXATION

RECENT JUDICIAL PRONOUNCEMENTS

1. The provision of the statute is to be taken as it is nothing can be added or taken away from

the provision of statute [The Commissioner of Income Tax, Chennai Vs. Mohammed

Meeran Shahul Hameed [2021] 131 taxmann.com 94 (SC) [07-10-2021]

6

2. Assessment orders passed not in accordance with Section 144B (9) to be set aside and invite

substantial costs to be imposed on such AO {131 taxmann.com 165 (Bombay)[11-10-

2021]}

7

3. Madras High Court deletes Disallowance as Substantial Activities done shows that property

purchased was Put to Use. Commissioner of Income Tax vs. Ceebros Hotels (P.) Ltd.

[2021] 131 taxmann.com 181 (Madras)[05-10-2021]

8

ITAT RULINGS

1. ITAT recommends constitution of larger bench to decide allow ability of freebies to

medical professionals as a deduction {[2021] 131 taxmann.com 154 (Mumbai - Trib.) [14-

10-2021]}

10

2. ITAT: Assessing Officer has challenged the correctness of the order passed by the learned

CIT(A) in the matter of assessment under section 143(3) [Assistant Commissioner of

Income Tax v. Life Insurance Corporation of India Ltd. [2021] 131 taxmann.com 26

(Mumbai - Trib.) (04-10-2021)]

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NOTIFICATION/ CIRCULARS/ PRESS RELEASE 13

TAX CALENDER FOR NOVEMBER, 2021 14

1. INDIRECT TAXATION


1. Applicant-accused filed application under section 438 of Code of Criminal Procedure, 1973

praying that the applicants be granted pre-arrest bail at time of and in event of arrest in

connection with case registered with office of Deputy Commissioner of State Tax

[Nileshbhai Natubhai Patel v. State of Gujarat [2021] 131 taxmann.com 222 (Gujarat) (14-

10-2021)]

2.

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2. Electronic Credit Ledger (ECL) could not be debited for purposes of making payment of

pre-deposit of tax [Jyoti Construction v. Deputy Commissioner of CT & GST, Jaipur

[2021] 131 taxmann.com 104 (Orissa) (7-10-2021)]

17

3. 4. The grant of default bail for non-furnishing of final report is not valid [Paritosh Kumar

Singh Alias Diwakar Choudhary v. State of Chhatisgarh [2021] 131 taxmann.com 53

(Chhattisgarh) (1-10-2021)]

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AUTHORITY FOR ADVANCED RULINGS

1. AAR On Builder/developer not allowed to deduct ‘actual land-value’ from ‘transaction-

value’: Karma Buildcon, In re [[2020] 119 taxmann.com 299 (AAR - GUJARAT) (26-09-

2021]

20

2. AAR On amount forfeited on account of breach of sale of land agreement taxable under

GST [Fastrack Deal Comm (P.) Ltd., In re [2021] 124 taxmann.com 399 (AAR -

GUJARAT) (20-09-2021)]

21

3. 1. Detention of vehicle in absence of e-way bill not justified if purchased for personal use and

temporary vehicle registration obtained [Assistant State Tax Officer (Intelligence),

Alappuzha v. VST and Sons (P.) Ltd. [2021] 130 taxmann.com 486 (Kerala)]

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INTERNATIONAL TAXATION


1. SCN issued to a respondent under FEMA after 10 years of committing an offence under

FERA was rightly quashed: HC of Karnataka [Union of India v. Atul Lall Major

(19.10.2021) ([2021] 131 taxmann.com 86 (Karnataka)]

28

Sum paid to NR agent to procure export orders from outside India couldn’t be held as

FTS: ITAT [Rajinder Kumar Aggarwal (HUF) v. Deputy Commissioner of Income-tax,

New Delhi [(14th October, 2021) ([2021] 131 taxmann.com 252 (Delhi - Trib.)]

29 2.

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ITAT RULINGS

1. ITAT: Regards corporate-guarantee as international-transaction; Follows non-

jurisdictional HC decision over assessee’s own case [Siro Clinpharm (P.) Ltd. V. Income

Tax Officer [2021] 131 taxmann.com 73 (Mumbai - Trib.) [09-09-2021]

31

2. Income Tax Appellate Tribunal – Delhi M/S. Mondon Investments Ltd., New Delhi vs

Ddit, New Delhi ITA No. 3303/Del/2016

32



2. CORPORATE LAWS


1. NCLT asks Zee Entertainments to file reply to Invesco plea by Oct, 22 Zee

Entertainment Enterprises Ltd. V. Invesco Developing Markets Fund [2021] 131

taxmann.com 97 (NCLAT- New Delhi) [07-10-2021]

3.

39

2. NCLT allows Future Group to hold EGMs to sell businesses to Reliance [Future

Consumer Ltd., In re [2021] 131 taxmann.com 257 (NCLT - Mum.) (18-10-2021)]

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CORPORATE COMPLIANCE CALENDAR 47

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DIRECT

TAXATION

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FACT OF THE CASE:

1) The Assessing Officer (AO) had passed an Assessment order u/s 143(2) of the Income Tax Act for

the year 2008-2009 on 30-12-2010. A revision proceeding u/s 263 was passed to revise the assessment

order by the Commissioner of Income Tax (Herein referred to as Appellant).

2) The appellant passed an order u/s 263 of the Income Tax Act, stating that the AO failed to make

relevant and necessary enquiries and also the correct assessment of income after due application of

mind was not made. Hence the order u/s 143(3) was held to be erroneous to the interest of Revenue.

The order was set aside and directions were issued to make necessary enquiries mentioned in Section

263. The said order was challenged by the Meeran Shahul (Herein referred to as Assessee).

3) The assessee stated that he received the order on 6-8-2012, therefore the assessee requested for the

copy of order passed by the appellant. Aggrieved by the order of Commissioner the assessee appealed

before Hon’ble ITAT.

4) The assessee claimed before the learned ITAT that the order passed by appellant was beyond the

period of limitation mentioned u/s 263 (2) of the act. These contentions were accepted by the ITAT.

This appeal by the assessee was allowed and it was held that the order passed was beyond the period

of limitation.

5) The appellant aggrieved by the Order then appealed before the High Court of Madras, appellant

raised the question of whether the last date for passing the assessment order is 31-03-2012 and on

the ground that the order was served on 29-11-2012.

6) The High Court had dismissed the said appeal and confirmed the order passed by ITAT that the

order passed by appellant was in fact barred by limitation. The High court also held the date of order

received by the assessee was the relevant date for determining the period of limitation u/s 263(2) of

the Income Tax Act. The present appeal was filed after this judgement in Hon’ble Supreme Court.

ISSUE:

i. Whether in the facts and circumstances of the case, the High Court of Madras and the learned ITAT

are right in holding that the order passed by the learned Commissioner passed under section 263

was barred by period of limitation provided under Section 263 (2) of the Act?

ii. Whether the High Court is right in holding that the relevant date for the purpose of considering the

period of limitation under section 263(2) of the IT Act would be the date on which the order passed

under section 263 by the learned Commissioner is received by the assessee?

OBSERVED:

1) On reading sub-section (2) of Section 263, its states that no order shall be “made” after expiry of

two years, therefore the word used is “made” not order “received” by the assessee.

2) Hence, once it is established that the order was made under Section 263 within the period of two

years from the end of financial year, such order cannot be said to be beyond the period of limitation

prescribed under S263(2).

The provision of the statute is to be taken as it is. Nothing can be added or taken away from the

provision of statute [The Commissioner of Income Tax, Chennai Vs. Mohammed Meeran

Shahul Hameed [2021] 131 taxmann.com 94 (SC)[07-10-2021]

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3) Receipt of the order passed under Section 263 by the assessee has no relevance for the purpose of

counting the period of limitation provided under Section 263 of the Income Tax Act.

4) In the present case, the order passed by the learned Commissioner on 26-3-2012 and according to

the department it was dispatched on 28-3-2012. If the interpretation made by the High Court and

the learned ITAT is accepted, in that case it will be in violation of the provisions of Section 263 (2)

of the Act and would add something which is not there in the section.

HELD:

It was held that the order passed by the learned Commissioner under section 263 of the Income Tax Act

was within the period of limitation prescribed under sub-section (2) of Section 263 of the Act.

FACT OF THE CASE:

1) Mantra Industries Ltd. (“the Petitioner”) had impugned the assessment order dated 08.06.2021 issued

under Section 156 of the Income Tax Act, 1961 (“the Act”) along with show cause notice dated

08.06.2021 issued for initiating penalty proceedings under section 274 read with Section 270A of the

Act.

2) The Petitioner had received a notice dated 22.04.2021 for AY 2018-2019 calling upon to show cause

as to why assessment should not be completed as per the draft assessment order. The Petitioner was

to submit its response by 23:59 hours of 24.04.2021. The Petitioner filed its response and sought 20

days to fulfill the requirements as per the notice. Additionally, the Petitioner requested for a personal

hearing.

3) The Petitioner filed its response on 27.04.2021, providing the were required as per the show because

notice issued.

4) On 08.06.2021, the AO issued the impugned assessment order, show cause notice and notice of

demand.

5) The Petitioner challenged the assessment order on the grounds that the contentions that the

assessment order is an exact reproduction of the draft assessment and not in line with the provisions

laid in section 144B (9) of The Income Tax Act.

Taxpert Professional’s comments:

The requirement in Section 263(2) is to pass the order within the period as prescribed in the

said section. The provision in the statute/act is to be read as it is and nothing can be added or

taken away from the provision of the statue. This precedent would be beneficial for considering

the limitation period.

Assessment orders passed not in accordance with Section 144B(9) to be set aside and invite

substantial costs to be imposed on such AO { 131 taxmann.com 165 (Bombay)[11-10-2021]}

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ISSUE:

The Petitioner correctly responded to the notice issued by the AO in the given time along with request of

personal hearing and the same was ignored when the actual order was passed. Further, the actual order

was a replica of the draft order and no details provided by the petitioner was considered.

OBSERVED:

i. The assessment order passed which was an exact reproduction of draft assessment order

ii. It did not consider the replies filed by petitioner and petitioner's request for personal hearing. Thus,

the impugned order was to be set aside as it was not made in accordance with procedure laid down

under section 144B (9).

iii. Further, Court will be constrained to impose substantial costs on concerned Assessing Officer to be

recovered from his/her salary.

HELD:

1) The Honorable High Court of Bombay rejected the order passed by AO.

2) The Court also directed circulation of orders to every member of the Finance Ministry and if such

orders which are replica of draft order are continued to be passed without consideration of reply by

the Petitioner, Court will be constrained to impose substantial costs on concerned Assessing Officer

to be recovered from his/her salary.

3) The Court also directed the department to place such judicial orders in career records of such

Assessing Officer.

FACT OF THE CASE:

1) Ceebros Hotels (“The Assessee, “) was running a Hotel and Real Estate business and major revenue

was received from hotel business.

2) For AY 2015-16, Assessee claimed an amount of Rs.41,37,73,978/- as “Interest Payable” at 13.75%

p.a. on a loan amount of Rs.301.92 Cr, obtained from IFCI Limited.

3) The Assessing Officer observed that the said loan was obtained for the specific purpose of purchasing

the land to an extent of 90.53 grounds in MRC Nagar. According to the Assessing Officer, the

assessee had entered into the business of Real Estate for the first time during the Assessment Year


This benchmark order by the High court will ensure the proper compliance of the provisions

of Section 144B(9) of the Income tax act and will also make the AO’s to act more responsibly

before passing any order.

Madras High Court deletes Disallowance as Substantial Activities done shows that property

purchased was Put to Use. Commissioner of Income Tax vs. Ceebros Hotels (P.) Ltd. [2021]

131 taxmann.com 181 (Madras)[05-10-2021]

[2021] 131 taxmann.com 181 (Madras)[05-10-2021]

http://taxmann.com/

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2015-16, in which, the assessee had offered some income from the Real Estate business. AO was of

the view that no activity had commenced in new project and, thus, assets were not put to use.

Therefore, MRC Nagar project was defined as a qualifying project and therefore to capitalize interest

cost and reflect the same in closing stock in the profit and loss account AO had made disallowance

for the amount of the closing stock and as per the decision of the Special Bench of the Tribunal in

Wallstreet Construction Ltd. is concerned.

4) Aggrieved by the same, the assessee preferred an appeal to the Commissioner of Income Tax

(Appeals)-I, Chennai whereby the appeal was allowed on the grounds that Assessee had furnished

ledger accounts for the expenses pertaining to said new project and also facts that they carried on

major work of demolition of existing structure which was newly built by previous owner for hotel

business and this demolition was done by assessee. Thus, the revenue filed the appeal under section

260A of the Income Tax Act to the High court.

ISSUE:

Whether assessee was able to establish that substantial activities had been done in the project which

would go to show that property purchased was put to use and the contention of AO to disallow the

same was correct or not?

OBSERVED:

i. The Contention of Assessing Officer was not justified in treating the property in MRC Nagar as not

‘put to use’.

ii. Further, the Tribunal observed that the purchase of inventory in the course of carrying on business

should be reckoned as the continuation of the same business activity in the normal course and cannot

be equated or termed as an extension of business activity.

iii. Furthermore, the Tribunal noted that the assessee has offered substantial income from the Atlantic

project and the attempt to apply the Matching Concept principle is misconceived as the said case

was not in line with Wallstreet Construction Ltd.

HELD:

1) The Honorable High Court has allowed the interest amount as deduction

2) The Court dismissed the appeal by stating that the contention of AO was not in accordance with the

law.

3) Further the court also held that Tribunal was right in allowing the appeal filed by the assessee and

that the term “put to use” applies to capital asset only because capital asset is held to facilitate the

business activity.

4) Sometimes, it needs to be prepared after it is acquired for being used to facilitate the business activity.


There must be substantial work done or expenditure incurred on the fixed asset to consider it

as put to use and the core business activities should not be clubbed with other business

activities entered by the assessee for the relevant AY.

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ITAT RULINGS

FACT OF THE CASE:

1) Macleods Pharmaceuticals Ltd. (“the Respondent”) appealed before the Commissioner of Income

Tax (“the CIT (A)”) against the order of the Assessing Officer whereby a deduction of Rs

111,11,70,500 for the assessment year 2011-12 and of Rs 137,62,61,659 for the assessment year 2012-

13 was disallowed on account of the expenditure being for providing freebies to the doctors on the

basis of combined reading of Section 37(1) of the Income Tax Act with the guidelines issued by

Medical Council of India regulations vide Gazette notification dated 10.12.20009 and the Circular

issued by the Central Board of Direct Taxes Circular No. 05/2012 dated 01.08.2012, that the sales

promotion expenses made by the Respondent are prohibited in law as the medical practitioners have

been barred from accepting freebies.

2) Consequentially The CIT (A) had overturned the said order and had allowed the expenditure as a

deduction. As a result, the Assessing Officer preferred the present Appeal to the ITAT Mumbai.

3) The Respondent argued that CIT(A), in the Respondent’s own case, had allowed such expenditure by

accepting the plea that “no disallowance of such sales promotion expenses could be made by applying

the CBDT circular dated 01.08.2012 in so far as the CBDT circular was effective from Assessment

Year 2013-14”, and further that, in view of the decision of another bench in the case of DCIT Vs PHL

Pharma(supra) Pvt Ltd [(2017) 163 ITD 10 (Mum)] the disallowance could not be sustained as the

Medical Council of India regulations vide Gazette notification dated 10.12.2009 bind only the medical

professionals and not the pharmaceutical companies.

ISSUE:

Whether an item of expenditure on account of freebies to medical professionals, as under rule 6.8.1 of

Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 read with

section 20A of the Indian Medical Council Act 1956, can be allowed as a deduction under section

37(1) of the Income Tax Act, 1961 in the hands of the pharmaceutical companies?

OBSERVED:

i. The AO was of the view that the expense should be disallowed as per the provisions of section 37(1)

of the Act.

ii. However, CIT(A) was of the view that since the CBDT circulars were applicable only from the

assessment year 2013-14, the disallowance under the aforesaid circular could not have been made on

the basis of the said circular.

iii. Thus, the coordinate bench of the Hon’ble ITAT Mumbai observed that the present Appeal is a fit

case for the constitution of a special bench.

ITAT recommends constitution of larger bench to decide allowability of freebies to medical

professionals as a deduction {[2021] 131 taxmann.com 154 (Mumbai - Trib.) [14-10-2021]}

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ITAT RULINGS HELD:

1) The ITAT Mumbai held that conclusions arrived in all the decisions didn’t reflect correct legal position,

and same is the position with respect to a large number of other co-ordinate bench decisions.

2) Hence, decision in PHL Pharma (supra) calls for reconsideration by a larger bench and thus

constitution of a bench of three or more Members was recommended to consider question as to

whether or not an item of expenditure on account of freebies to medical professionals, could be

allowed as a deduction under section 37(1) read with Explanation thereto, in hands of pharmaceutical

companies.

FACT OF THE CASE:

1) The assessee is a public sector undertaking engaged mainly in the business of providing life insurance.

2) The scrutiny assessment under section 143(3) was completed on 30th December, 2011, the finalized

assessment was reopened on 19th February 2015, on two counts- first, missing out on disallowance

under section 14A in respect of expenses attributable to tax-exempt income; and, second, the

inadmissibility of excessive foreign tax credit granted to the assessee.

3) Its reassessment was thus finalized on 29th February, 2016 at an assessed income of Rs. 16,520.91

crores- including disallowance under section 14A amounting to Rs. 854.96 crores, and withdrawing

inadmissible foreign tax credit of Rs. 7.57 crores.

4) For disallowance of Rs. 854.96 crores, the assessee moved an appeal before the CIT(A) and succeeded

in the said appeal.

5) Withdrawal of excessive foreign tax credit of Rs. 7.57 crores is concerned, the assessee accepted that

position by not raising any grievance against the same in appeal. The assessee accepted the fact that

its foreign tax credit claim, to the extent of Rs. 7.57 crores, was incorrect- the foreign tax credit claim,

for taxes paid abroad in Mauritius, Fiji and the United Kingdom in respect of its branches in those

jurisdictions, was in excess of the related Indian income tax liability itself.

ISSUE:

i. Whether correct legal position was that foreign tax credit, in respect of taxes paid abroad, could never

exceed Indian tax liability in respect of related income taxed abroad as also in India?

ii. Whether, further, if entire reassessment proceedings were to be quashed, Assessing Officer would be

in a worse position vis-à-vis position of him if he was not to come in appeal, in sense that even

admitted liability in respect of the incorrect foreign tax credits would stand nullified?

iii. Whether, further, appeal of Assessing Officer being dismissed on merits, instant petition under rule

27 was wholly academic and infructuous?


As the conclusion arrived by different benches marked different legal positions regarding the

matter of consideration of deduction of freebies to medical professionals under section 31(1)

of the Income tax act, the new bench of three or more Members is recommended to consider

this question with respect to allowance or disallowance of deduction.

ITAT: Assessing Officer has challenged the correctness of the order passed by the learned

CIT(A) in the matter of assessment under section 143(3) [Assistant Commissioner of Income

Tax v. Life Insurance Corporation of India Ltd. [2021] 131 taxmann.com 26 (Mumbai - Trib.)

(04-10-2021)]

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ITAT RULINGS

OBSERVED:

1) The correct legal position is that the foreign tax credit, in respect of taxes paid abroad, can never

exceed the Indian tax liability in respect of related income taxed abroad as also in India- as also

elaborated upon in the case of Bank of India v. ACIT [(2021) 125 taxmann.com 155 (Mum)].

2) The path so adopted will not yield anything more to the assessee than what the assessee would have

got anyway by dismissal simpliciter of the revenue's appeal.

3) rule 27 of the ITAT Rules 1963 provides that "(t)he respondent, though he may not have appealed,

may support the order appealed against on any of the grounds decided against him". When the

grievance against the withdrawal of foreign tax credit to the tune of Rs. 7.57 crore was not even

challenged in appeal before the CIT(A), the assessee will not be eligible for any relief on that aspect-

directly or indirectly. The assessee thus gets no additional advantage by the petition under rule 27.

4) in a situation in which the respondent to an appeal has not filed a cross-appeal or a cross-objection,

but has simply moved the petition under rule 27, one of the limitations of invoking rule 27 is that the

appellant cannot be worse off vis-à-vis the position he was in when he presented the present appeal.

5) In the present case, however, if entire reassessment proceedings are to be quashed- the Assessing

Officer will be in a worse position vis-à-vis the position if he was not to come in appeal, in the sense

that even admitted liability in respect of the incorrect foreign tax credits of Rs. 7.57 crores will stand

nullified.

HELD:

In light of the observations of the Court, the appeal was dismissed.


In case of a petition filed under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, it

empowers the respondent to defend the order appealed against on any of the grounds decided

against him, though he may not have appealed or filed a cross objection. But, limitations of

invoking rule 27 is that the appellant cannot be worse off vis-à-vis the position he was in when

he presented the present appeal.

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NOTIFICATIONS/ CIRCULARS/PRESS RELEASE/NEWS

1. Central Board of Direct Tax (CBDT) extends provisions of Rules 11UE & 11UF to Sec. 119 of

Finance Act, 2012

(NOTIFICATION G.S.R. 737 (E) [NO. 120/2021/F. NO. 370142/47/2021-TPL])

The Ministry of Finance has notified Relaxation of Validation (section 119 of the Finance Act,

2012) Rules, 2021 vide notification dated October 13, 2021. The Relaxation of Validation Rules,

2021 extends the conditions, form and manner of settling retrospective tax cases notified earlier

this month to those cases where the tax demand was validated under a special provision.

2. CBDT exempts certain non-residents from furnishing ITR subject to fulfillment of

conditions

(NOTIFICATION S.O. 4207(E) [NO. 119/2021/F. NO. 225/76/2021-ITA.II])

The board has provided exemption to certain non-residents from filling of Income Tax returns.

Further, it has also mention that the exemption will not prevail in case where a notice under sub-

section (1) of section 142 or section 148 or section 153A or section 153C of the said Act has

been issued for the non-resident assessees.

3. CBDT notifies rules for implementing amendments made in provisions of indirect transfer

of Indian assets

(NOTIFICATION G.S.R. 713(E) [NO. 118/2021/F. NO. 370142/47/2021-TPL])

The 31st Amendment rules inter-alia, amended the Income-tax Act, 1961 (Income-tax Act) to

provide that no tax shall be demanded in future for the amendment to section 9 of the Income-

tax Act made vide Finance Act, 2012 on any indirect transfer of Indian assets for transaction

undertaken before 28th May, 2012 The Rule 11UE provides for the specified conditions in order

to be eligible to claim relief under 2021 Act whereas Rule 11UF which provides the form and

manner of furnishing the undertaking for withdrawal of pending litigation, claiming no cost,

damages, etc.

4. Government notifies Sovereign Gold Bond Scheme 2021-22

(NOTIFICATION GSR NO. 750 dated 21/10/2021)

The Government has notified Sovereign Gold Bond Scheme 2021-22. The Sovereign Gold

Bonds will be issued from November 2021 to March 2022. These will be sold through Scheduled

Commercial banks, Designated Post Offices, Stock Holding Corporation of India Ltd. (SHCIL),

authorized stock exchanges and Clearing Corporation of India Limited (CCIL) and any other

entity as may be approved by RBI.

1. Over 2 crore returns filed on new e-filing portal of Income-tax (Press Release dated

14/10/2021)

A number of glitches that affected the e-filing portal of the Income Tax department have been

resolved and the performance of the portal has substantially stabilized. Over 13.44 crore unique

taxpayers have logged in until 13 October. All Income-tax Returns have been made available for

e filing. More than 2 crore ITRs for AY 2021-22 have been filed on the portal, of which ITRs 1

& 4 constitute 86%.

NOTIFICATIONS

PRESS RELEASE

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TAX CALENDER FOR NOVEMBER, 2021

Due dates Particulars

07th Nov, 2021

Due date for deposit of Tax deducted/collected for the month of October, 2021

14th Nov, 2021

Due date for issue of TDS Certificate (Form 16B) for tax deducted under section 194-IA in the month of September, 2021

Due date for issue of TDS Certificate (Form 16C) for tax deducted under section 194-IB in the month of September, 2021

Due date for issue of TDS Certificate (Form 16D) for tax deducted under section 194M in the month of September, 2021

15th Nov, 2021

Quarterly TDS certificate (in respect of tax deducted for payments other than salary) for the quarter ending September 30, 2021

30th Nov, 2021

Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IA in the month of October, 2021

Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194-IB in the month of October, 2021

Due date for furnishing of challan-cum-statement in respect of tax deducted under section 194M in the month of October, 2021

Upload the declarations received from recipients in Form No. 15G/15H during the quarter ending June, 2021

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INDIRECT

TAXATION

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Applicant-accused filed application under section 438 of Code of Criminal Procedure, 1973

praying that the applicants be granted pre-arrest bail at time of and in event of arrest in

connection with case registered with office of Deputy Commissioner of State Tax [Nileshbhai

Natubhai Patel v. State of Gujarat [2021] 131 taxmann.com 222 (Gujarat) (14-10-2021)]

FACT OF THE CASE:

1) The applicant viz., Nileshbhai Natubhai Patel of Criminal Misc. Application No.17697/2021 is the

Chairman and Whole-Time Director of M/s. Madhav Copper Limited (hereinafter referred to as

“the Company”), whereas the applicant viz., Company is a Public Limited Company listed on the

National Stock Exchange (NSE) and is governed by the strict Rules framed by the Securities and

Exchange Board of India (SEBI).

2) The Company of the applicants is a producer Company which produces the finished goods of

copper and the raw material is acquired from the local markets and also from the abroad and the

purchases and sales data matches, in spite of that, the allegations are leveled by the respondents that

the purchase is not genuine one and the goods have not been moved from the sellers to purchasers.

3) It is submitted that it is the case of the respondent that the applicants have claimed to purchase the

material worth of Rs.762.00 crores, which in fact has not purchased but fake bill have been obtained

so as to wrongfully claim Input Tax Credit and the said purchases have been allegedly made from

36 different firms and companies.

ISSUE:

i. Whether the pre-arrest bail be granted at time of and in event of arrest in connection with case

registered with office of Deputy Commissioner of State Tax, Enforcement?

ii. Whether the offence is of grave nature that if the applicants are granted anticipatory bail, it would

result in them tampering with evidence and witnesses?

OBSERVED:

1) Evasion of tax by applicants took place by producing fake bills to wrongfully claim input tax credit

worth Rs. 137 crores, since investigation revealed that there was no actual movement of goods and

false invoices were raised on 36 firms.

2) Hon’ble Supreme Court in Satender Kumar Antil Vs. Central Bureau of Investigation & Anr. in

Special Leave to Appeal (Crl.) No.5191/2020 has laid down certain guidelines for the grant of bail

in categories/types of offence. The Court noted that the present offence can be categorized as

“economic offence” where huge public money in the form of alleged tax liability of Rs.137.00 Crores

is involved.

3) The Court considered the seriousness of the charges and the fact that the applicants had not

cooperated with the investigating agency though directed by the Hon’ble Supreme Court and,

therefore in the fact of the present case, the aforesaid order passed by the Hon’ble Supreme Court

would not be applicable.

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HELD:

i. The Hon’ble High Court is of view that the applicants are enlarged on anticipatory bail then there

are chances that the applicants will tamper with the evidence and witnesses and at the time of trial,

the applicants would not be available.

ii. Custodial interrogation of applicants was necessary and applicants not having cooperated with

Investigating Agency could not be enlarged on anticipatory bail as they would tamper with evidence

and witnesses. Hence, the application for anticipatory bail was denied.

Electronic Credit Ledger (ECL) could not be debited for purposes of making payment of pre-

deposit of tax [Jyoti Construction v. Deputy Commissioner of CT & GST, Jaipur [2021] 131

taxmann.com 104 (Orissa) (7-10-2021)]

FACT OF THE CASE:

1) M/s The Petitioner is a partnership firm engaged in the business of execution of works contract

including civil, electrical and mechanical.

2) In the instant case, a demand was raised by the Deputy Commissioner of CT & GST, Barbil Circle,

Jaipur, Odisha (Opposite Party No. 1) which resulted in an extra demand for IGST, CGST and

OGST inclusive of interest. An appeal was filed in Form-GST APL-01 before the appellate authority

i.e. Opposite Party No. 2 under section 62 (1) of the OGST Act read with Rule 100 (1) of the OGST

Rules. This was filed electronically.

3) The Petitioner was required to make payment equivalent to 10% of the disputed amount of tax

arising from the order against which the appeal is filed. This payment was required to be made by

the Petitioner by debiting its ECL as provided under section 49(3) read with Rule 85 (4) of the

OGST Rules. According to the Department, this liability of pre-deposit could be discharged only

by debiting the ECL. However, it was noticed that the Petitioner sought to make payment of the

pre-deposit by debiting the ECRL. Considering this to be defective and liable for rejection of the

appeal, a show cause notice (SCN) was issued on 25th January 2021 and 17th February, 2021.

ISSUE:

Whether the amount available in the ECRL could be used for making "any payment towards output

tax" under the OGST Act or the IGST Act "in such manner and subject to such conditions and within

such time as may be prescribed"?


In determining whether anticipatory bail can be granted under Section 438 of Code of Criminal

Procedure, the nature and possibility of the applicants interfering with the law must be taken

into consideration. In the present case, the applicant did not cooperate with the authorities

and the Court believed that the applicant would involve in tampering if granted with

anticipatory bail, hence bail was denied.

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OBSERVED:

i. As under Rule 85 (4) of the OGST Rules, the amount deducted under section 51, or collected under

section 52, or the amount payable on reverse charge basis, or; the amount payable under section 10,

or any amount payable towards interest, penalty, fee or "any other amount under the Act" shall be

paid by debiting the ECL (i.e., the cash ledger) maintained under Rule 87 and the electronic ledger

liability register (ELR) shall be credited accordingly.

ii. It is not possible to accept the plea of the Petitioner that "Output Tax", as defined under section

2(82) of the OGST Act could be equated to the pre-deposit required to be made in terms of Section

107 (6) of the OGST Act.

iii. Further, the proviso to Section 41 (2) of the OGST Act limits the usage to which the ECRL could

be utilized. It cannot be debited for making payment of pre-deposit at the time of filing of the appeal

in terms of Section 107 (6) of the OGST Act.

iv. It is not therefore possible to accept the plea Section 107 (6) of the OGST Act is merely a

"machinery provision".

HELD:

1) The Court was of the view that the prayer of the Petitioner that the debiting of the ECRL made

by it should be reversed is a separate cause of action for which the Petitioner should

independently seek appropriate remedies in accordance with law.

2) The making of the pre-deposit by the Petitioner is not contingent upon the above reversal of

the debit entry in the ECRL. Therefore, the writ petition was dismissed.

FACT OF THE CASE:

1) The petitioners have been arrested and produced before the Magistrate concerned on 25.01.2021

from where they have been remanded in judicial custody and as per Section 132 (1)(b) and (c) of the

CGST Act of 2017 maximum punishment is 5 years with fine. As per Section 167(2) Cr.P.C.

respondent authorities are bound to file charge-sheet within 60 days and in this case charge-sheet has

not been filed but a complaint has been filed on 25.03.2021.

2) The petitioner has collected remand order sheets which show that investigation has not been

completed, therefore, they seek further time to file charge-sheet, therefore, the petitioners have been

taken into judicial custody. Thereafter, one Bharat Bhushan Sahu who claims himself to be Senior

Intelligence Officer in the Office of GST, Raipur filed application on 25.01.2021 and sought judicial

custody for 14 days which was accepted and extended by the Court.

3) As per the provisions of Cr.P.C. it is responsibility of the respondent authority to submit charge sheet

within 60 days, however, in the present case, no charge-sheet has been filed, therefore, the petitioners


Output Tax as defined under section 2(82) of OGST Act cannot be equated to pre-deposit

required to be made in terms of section 107(6) of OGST Act.

The grant of default bail for non-furnishing of final report is not valid [Paritosh Kumar Singh

Alias Diwakar Choudhary v. State of Chhatisgarh [2021] 131 taxmann.com 53 (Chhattisgarh)

(1-10-2021)]

v.

State of Chhattisgarh

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are entitled to be released on bail but the same has been denied by the Chief Judicial Magistrate,

Raipur vide order dated 12.05.2021 against which revision was preferred which was also dismissed

vide impugned order dated 26.06.2021. Thereafter, the present writ petition (criminal) has been filed.

ISSUE:

Whether the accused is entitled to be released on bail as charge-sheet is not filed within 60 days?

OBSERVED:

1) The Court examined the factual foundation with regard to submission of complaint on 25.03.2021

which is within 60 days as reflected in the chart made in the foregoing paragraphs of the order.

2) Thus, it is quite clear that complaint has been filed within 60 days of their arrest which is within the

time prescribed for filing of complaint to entitle or disentitle the accused persons for default bail.

3) As the complaint has been filed within 60 days, therefore, on this count also, the petitioners are not

entitled to get default bail and present writ petition challenging the order dated 26.06.2021 passed

by 5th Additional Sessions Judge in Criminal Revision No. 62/2021 and order dated 12.05.2021

passed by the Chief Judicial Magistrate First Class in 3600/2021 is liable to be dismissed.

HELD:

The contention of the petitioner for grant of default bail under Section 167(2) for non-furnishing of final

report was rejected.


Authorized officer can only make a complaint under Section 190(1) of the Cr.P.C. and not

submit final report as he is not a police officer. Therefore, if a complaint has been duly filed,

the question of default bail does not arise in this particular case.

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AUTHORITY FOR ADVANCE RULINGS [AAR]

FACT OF THE CASE:

1) The applicant (Karma Buildcon) is engaged in the business of construction. For the purpose of business, it buys land and develops residential/commercial property on that land and sells such property with undivided rights of land.

2) The applicant enters into agreements with prospective buyers for such residential/commercial property. The agreements entered into are for inclusive of land or undivided share of land basis.

ISSUE:

i. What will be the value of supply for the transaction of sale of residential/commercial property with

undivided rights of land?

ii. In the case of construction of residential/commercial complex, the builder charges an amount which

is inclusive of land or undivided share of land. As per Not No. 11/2017-CT (Rate) and 08/2017- I.T

(Rate) both dated 28-6-2017 the land value is deemed to be one third (33.33%) of the total amount

(i.e., value including land value) and GST is payable on balance amount. But in applicant's case the

value of Land is clearly ascertainable. In that case actual cost of Land can be deducted for the for the

purpose of arriving at the taxable value of supply?

OBSERVED:

1) In para 2 of Notification No. 11/2017-CT (Rate) dated 28-6-2017, as amended vide Notification No.

1/2018-C.T. (Rate), dated 25-1-2018, there is deemed provisions that the value of transfer of land or

undivided share of land, as the case may be, and the value of such transfer of land or undivided share

of land, as the case may be, in such supply shall be deemed to be one third of the total amount charged

for such supply.

2) The applicant contention to allow the deduction of actual value of land from the sale value on the

grounds that their land value is ascertainable and other grounds is not legal in terms of para 2 of Not.

No. 11/2017-CT (Rate) dated 28-6-2017 as amended vide Notification No. 1/2018-C.T. (Rate), dated

25-1-2018.

3) The reliance of Rule 18(A) (A) of the Gujarat Value Added Tax Rules, 2006 is not warranted since

the Value Added Tax Act is no more in existence. The Value Added Tax Act does not have any legal

value in determination of GST liability since the value of supply is to be arrived in terms of the

provisions of the GST Act.

AAR On Builder/developer not allowed to deduct ‘actual land-value’ from ‘transaction-value’:

Karma Buildcon, In re [[2020] 119 taxmann.com 299 (AAR - GUJARAT) (26-09-2021]

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AUTHORITY FOR ADVANCE RULINGS [AAR]

HELD:

i. The value to be arrived for the transaction of sale of residential/ commercial property with undivided

rights of land in terms of deeming provision of Para 2 of Notification no. 11/2017-CT (Rate) dated

28-6-2017, as amended by Not. No. 1/2018-C.T. (Rate), dated 25-1-2018.

ii. The actual cost of land cannot be deducted for the purpose of arriving at the taxable value of supply.

FACT OF THE CASE:

The applicant wants to sell factory land to B for Rs. 1 crore. B showing acceptance to the sale agreement, gives advance money amounting to Rs. 20 lakhs which is 20 per cent of the total sale amount. Subsequently, B could not complete the transaction upon which the applicant forfeits the amount of Rs. 20 lakhs.

ISSUE:

i. Whether the amount forfeited by applicant will attract GST?

ii. Who will be considered as Service Receiver and Service Provider?

iii. When sale of land is not treated as supply as per Schedule III of GST Act, 2017, whether forfeiture

of advance pertaining to sale of land will be treated as supply and accordingly attract GST?

OBSERVED:

1) It can be deduced from the documents submitted that the applicant has not received the said amount

on account of sale of land but received the same on account of non-fulfilment of conditions of

agreement of purchase of factory land by the customer.

2) The terms of the contract specify that ‘if purchaser fails to give remaining amount on or before 31-

12-2019 along with 18 per cent interest per annum, then amount paid by the customer to the

applicant would be treated as forfeited'.

3) The aforesaid transaction/activity of forfeiture nowhere involves sale of land. It can be termed as a

consideration to the applicant for 'refraining or tolerating or doing an act' of B to not complete the

transaction, which B (customer) had agreed in terms of contractual obligations.

4) Clause 5(e) to Schedule II to CGST Act, 2017, declares that 'agreeing to the obligation to refrain

from an act, or to tolerate an act or a situation, or to do an act' shall be treated as supply of service.

The amount, which was received from B and forfeited by the applicant, was a part of the terms and

conditions of an agreement held between the applicant and B (customer).


Value of transfer of land or undivided share of land, and the value of such transfer of land or

undivided share of land, in such supply shall be deemed to be one third of the total amount

charged for such supply. Deduction of actual value of land from the sale value on the basis that

the land value is quantifiable is not justified.

AAR On amount forfeited on account of breach of sale of land agreement taxable under GST [Fastrack Deal Comm (P.) Ltd., In re [2021] 124 taxmann.com 399 (AAR - GUJARAT) (20-09-2021)]

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AUTHORITY FOR ADVANCE RULINGS [AAR] 5) The purpose of payment of amount is an act of tolerance in the sense that when there is breach of the

contract, the appellant is put to certain hardships, which he tolerates in return of the payment received

as advance being forfeited. Therefore, the impugned transaction is also a 'supply' under the provisions

of the CGST Act and therefore taxable.

HELD:

i. The argument that sale of land is an activity or transaction, which is treated as, neither supply of goods

nor service and that such transaction is not liable to GST is not tenable.

ii. The transaction of the applicant agreeing to the obligation of refrain or tolerate or to do an act (exiting

from the contract) on the part of B (customer), for payment of a sum, will be covered under clause 5(e)

to Schedule II to CGST Act 2017, as a declared service.

FACT OF THE CASE:

1) The assessee purchased a vehicle for personal use from Coimbatore (Tamil Nadu).

2) The proper officer detained the vehicle while being transported from Coimbatore to

Thiruvananthapuram for reason that it was transported without e-way bill.

3) The assessee filed writ petition challenging the detention of the motor vehicle. The learned Single

Judge allowed the writ petition and quashed the detention order. The department field appeal against

it.

ISSUE:

i. Whether the vehicle can be classified under ‘used personal effects’?

ii. Whether the appeal is maintainable in the given case?

OBSERVED:

1. While dismissing the writ petition, the learned Single Judge relied upon the decision in KUN Motor

Co. (P.) Ltd. v. Asstt. STO [2018] 100 taxmann.com 271 (Ker.)

2. The only reason stated for detaining the goods was that it was transported without the e-way bill. It

must be remembered that goods that are classifiable as used personal and household effect falls under


As per section 7(1), activities referred to in Schedule II are covered under the scope of supply

of goods and service. Clause 5(e) to Schedule II specifically mentions that agreeing to refrain

from an act shall be treated as supply of service. Therefore, a transaction where the

consideration is paid to refrain from an act or for tolerance, the same shall be considered as a

‘declared service’.

Detention of vehicle in absence of e-way bill not justified if purchased for personal use and

temporary vehicle registration obtained [Assistant State Tax Officer (Intelligence),

Alappuzha v. VST and Sons (P.) Ltd. [2021] 130 taxmann.com 486 (Kerala)]

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AUTHORITY FOR ADVANCE RULINGS [AAR] rule 138(14)(a) of the Kerala Goods and Services Tax Rules, 2017 and are exempted from the

requirement of e-way bill.

3. The said decision [KUN Motor co. (P.) Ltd. v. Asstt. STO] held that used vehicles, even if it has run

only negligible distances are to be categorized as 'used personal effects'. The High Court of Kerala was

in agreement with the observations of this Court in the aforesaid decision. The facts in the present

appeal are similar to the facts in the above referred decision, except for the change in place from

Puthuchery to Coimbatore.

HELD:

It was held that there was no merit in the given appeal and was liable to be dismissed.


Vehicle that can be classified as ‘used personal and household effect’ under Rule 138 (14) (a)

of the Kerala Goods and Services Tax Rules, 2017 can be exempted from the requirement of e-

way bill. Even if the vehicle has run negligible distance it can be categorized as ‘used personal

effects’ and cannot be detained for want of an e-way bill.

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1. CLARIFICATION REGARDING GST RATES & CLASSIFICATION (GOODS) BASED ON RECOMMENDATIONS OF THE GST COUNCIL IN ITS 45TH MEETING HELD ON 17-9-2021 AT LUCKNOW CIRCULAR NO. 163/19/2021-GST, DATED 6-10-2021 Based on the recommendations of the GST Council in its 45th meeting held on 17th September, 2021, at Lucknow, clarification with reference to GST levy related to the following are issued through this circular:

a) Fresh vs dried fruits and nuts; b) Classification and applicable GST rates on Tamarind seeds; c) Coconut vs Copra; d) Classification and applicable GST rate on Pure henna powder and leaves, having no additives; e) Scented sweet supari and flavoured and coated illaichi; f) Classification of Brewers' Spent Grain (BSG), Dried Distillers' Grains with Soluble [DDGS]

and other such residues and applicable GST rate; g) GST rates on goods [miscellaneous pharmaceutical products] falling under heading 3006; h) Applicability of GST rate of 12% on all laboratory reagents and other goods falling under

heading 3822; i) Requirement of Original/ import Essentiality certificate, issued by the Directorate General of

Hydrocarbons (DGH) on each inter-State stock transfer of goods imported at concessional GST rate for petroleum operations;

j) External batteries sold along with UPS Systems/ Inverter; k) Specified Renewable Energy Projects; l) Fiber Drums, whether corrugated or non-corrugated.

2. CLARIFICATIONS REGARDING APPLICABLE GST RATES & EXEMPTIONS ON CERTAIN SERVICES CIRCULAR NO. 164/20/2021-GST, DATED 6-10-2021 The issues received have been examined by GST Council in the 45rd meeting of the Council held on 17th September, 2021 and clarifications regarding the same are issued in this circular. The clarifications concern the following issues:

a) Services by cloud kitchens/central kitchens, b) Supply of ice cream by ice cream parlours, c) Coaching services to students provided by coaching institutions and NGOs under the central

sector scheme of 'Scholarships for students with Disabilities", d) Satellite launch services provided by NSIL. e) Overloading charges at toll plaza, f) Renting of vehicles by State Transport Undertakings and Local Authorities, g) Services by way of grant of mineral exploration and mining rights attracted GST, h) Admission to amusement parks having rides etc., i) Services supplied by contract manufacture to brand owners or others for manufacture of

alcoholic liquor for human consumption.

CIRCULARS

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1. GST REVENUE COLLECTION FOR SEPTEMBER 2021 - RUPEES 1,17,010 CRORE GROSS GST REVENUE COLLECTED IN MONTH OF SEPTEMBER 2021 (PRESS RELEASE, DATED 1-10-2021) The gross GST revenue collected in the month of September 2021 is Rs. 1,17,010 crores of which CGST is Rs. 20,578 crores, SGST is Rs. 26,767 crores, IGST is Rs. 60,911 crores (including Rs. 29,555 crores collected on import of goods) and Cess is Rs. 8,754 crores (including Rs. 623 crores collected on import of goods). The government has settled Rs. 28,812 crores to CGST and Rs. 24,140 crores to SGST from IGST as regular settlement. The total revenue of Centre and the States after regular settlements in the month of September 2021 is Rs. 49,390 crores for CGST and Rs. 50,907 crores for the SGST. The revenues for the month of September 2021 are 23% higher than the GST revenues in the same month last year During the month revenues from import of goods was 30% higher and the revenues from domestic transaction (including import of services) are 20% higher than the revenues from these sources during the same month last year The revenue for September 2020 was in itself at a growth of 4% over the revenue of September 2019 of Rs. 91,916 crores. The average monthly gross GST collection for the second quarter of the current year has been Rs. 1 15 lakh crore which is 5% higher than the average monthly collection of Rs. 1 10 lakh crore in the first quarter of the year This clearly indicates that the economy is recovering at a fast pace Coupled with economic growth anti-evasion activities especially action against fake billers have also been contributing to the enhanced GST collections It is expected that the positive trend in the revenues will continue and the second half of the year will post higher revenues Centre had also released GST compensation of Rs. 22 000 crores to States to meet their GST revenue gap.

2. FORM GSTR-2B – ADVISORY (PRESS RELEASE, DATED 19-10-2021) The press release contained information, applicability and details regarding GSTR-2B including questions such as what is GSTR-2B? When it is generated and made available to taxpayer? What are the inputs of GSTR-2B? What is the cut-off dates for GSTR-2B generation? etc.

PRESS RELEASE

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TAX CALENDER FOR NOVEMBER, 2021

DATE RETURN DESCRIPTION

10th Nov, 2021 GSTR- 7 Summary of Tax Deducted at Source (TDS) and deposited

under GST laws

11th Nov, 2021

GSTR- 8 Summary of Tax Collected at Source (TCS) and deposited

by e-commerce operators under GST laws

GSTR- 1

Summary of outward supplies where turnover exceeds Rs.5

crore or have not chosen the QRMP scheme for the quarter

of Oct-Dec 2021

13th Nov, 2021

GSTR- 6 Details of ITC received and distributed by an ISD

B2B Outward Supplies

Uploading of outward supplies affected during the first

month of the quarter by quarterly return filers opting for

the Invoice Furnishing Facility (IFF)** under the QRMP

scheme

20th Nov, 2021

GSTR- 5 Summary of outward taxable supplies and tax payable by a non-resident taxable person

GSTR- 5A Summary of outward taxable supplies and tax payable by a person supplying OIDAR services

GSTR- 3B

Summary of outward supplies, ITC claimed, and net tax payable for taxpayers with turnover more than Rs.5 crore in the last FY or have not opted for the QRMP scheme for the quarter of Oct-Dec 2021

25th Nov, 2021 PMT- 06 Challan for depositing GST by taxpayers who have opted for the quarterly filing of GSTR-3B under the QRMP scheme

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INTERNATIONAL

TAXATION

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FACT OF THE CASE:

1) A show cause notice, by which the respondent was asked as to why the proceedings as contemplated

under section 13(1) of Foreign Exchange Management Act, 1999 FEMA for violation of section

7(1) of FEMA should not be initiated against the respondent, was issued to the respondent who

was one of the directors of M/s. Entel (Pvt) Limited.

2) The respondent challenged the validity of the order before the learned Single Judge on the ground

that the show cause notice is without jurisdiction as the same had been quashed by the learned Single

Judge.

ISSUE:

i. Whether the Adjudicating Officer should take notice of any contravention of repealed Act i.e.,

FERA after expiry of a period of two years from date of commencement of FEMA?

ii. Whether a notice issued to the respondent, on 5-2-2010 i.e., after almost 10 years from FEMA

being enacted repealing Foreign Exchange Regulation Act, 1973 (FERA), was per se without

jurisdiction and had been issued in violation of bar contained in section 49(3) of FEMA and if the

said show cause notice had rightly been quashed by Single Judge?

OBSERVED:

The Court observed that the adjudicating officer was not to take any notice of any contravention under

section 51 of FERA after expiry of a period of two years from the date of the commencement of

FEMA. The proceeding was initiated against the respondent in respect of an offence under FERA. The

notice issued to the respondent on 5-2-2010 was without jurisdiction and was in violation of the bar

contained in section 49(3) of FEMA.

HELD:

A show cause notice issued by the Deputy Director under section 7(1)(a) of the FEMA pertaining to

the violation of provisions of FERA was rightly quashed by the Single Judge.


An Adjudicating Officer cannot issue a show cause notice under FEMA after 10 years of FERA

being repealed as the same would be per se without jurisdiction as any contravention under

FERA was not to be taken notice of after two years from the date of expiry of two years from

the date of commencement of FEMA.

SCN issued to a respondent under FEMA after 10 years of committing an offence under FERA

was rightly quashed: HC of Karnataka [Union of India v. Atul Lall Major (19.10.2021) ([2021]

131 taxmann.com 86 (Karnataka)]

)

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FACT OF THE CASE:

1. The assessee appointed M/s Ace Trading Company, France (Ace) as its agent to procure export orders in France and debited a sum of Rs. 1,16,99,172/- as commission paid on export sales. No tax was deducted at source by the assessee on said payment.

2. According to Assessing Officer (AO), the assessee was required to deduct tax at source on the payment in accordance with provision of section 195 of the Act and due to failure on the part of the assessee, he asked as why provision of section 40(a)(i) might not be invoked, and the payment to 'Ace' might not be disallowed.

3. Assessee contended that no TDS was attracted as commission paid to foreign payee was business income as per Article 7 of the DTAA with France and since the foreign payee had no permanent establishment in India, no income was chargeable to tax in India.

4. The AO rejected the contention of the assessee and held that as per the provisions of Explanation to section 9 for the purpose of clause (vii) (i.e. fee for technical services), the scope of the income includes services rendered outside India also, if the same have been utilized in India insofar as source of payment towards expenditure is in India.

5. The AO held the assessee in default for non-deducting tax at source on the export commission and consequently, in default under section 40(a)(i) of the Act and held the assessee liable for disallowance of such export commission of Rs. 1,16,99,172/-paid by the assessee to M/s Ace, France. The Ld. CIT(A) also upheld the finding of the AO.

6. The assessee filed an appeal before the Tribunal raising the grounds as above.

ISSUE:

The issues involved in the appeal relates to applicability of TDS u/s 195 on payments abroad of export

commission to non-resident foreign agent for procurement of export orders for the assessee and

consequently disallowance under Section 40(a)(i) of the Income-tax Act, 1961.

OBSERVED:

The non-resident can invoke DTAA between India and France, if provisions of the same are more

beneficial to the non-resident. The Tribunal referred to the case of Steria India Ltd. v. DCIT, 255

Taxman 110 (Delhi) (HC) where the Delhi High Court had held that Most Favoured Nation (MFN)

clause of the protocol will form an integral part of India France DTAA and it will be automatically

applicable without any further notification. In view of Most Favoured Nation (MFN) clause, the

beneficial provision of Convention between India and other OECD country, i.e., UK automatically

extends to India-France DTAA. In India UK DTAA fee for technical services (FTS) exclude the term

'managerial services' and provides for 'make available clause'. While analyzing the Fee for technical

Sum paid to NR agent to procure export orders from outside India couldn’t be held as FTS:

ITAT [Rajinder Kumar Aggarwal (HUF) v. Deputy Commissioner of Income-tax, Circle-

31(1), New Delhi [(14th October, 2021) ([2021] 131 taxmann.com 252 (Delhi - Trib.)]

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services (FTS) definition as per India France DTAA, in view of the MFN clause, the entire definition

of the FTS can be imported from India UK DTAA.

The Tribunal also observed that the ‘make available’ clause is to be satisfied to bring the services under

the net of Fee for Technical Services (FTS) under the India France DTAA. The services rendered by

the non-resident could not be held as FTS as no knowledge had been provided by the non-resident to

the assessee which could be exploited by the assessee. Thus, no liability to deduct tax at source will

arise as such services will not be chargeable in India in the hands of non-resident under DTAA and

payment to non-resident is not liable to disallowance under section 40(a)(i) of the Act.

HELD:

Since no knowledge was provided to assessee which could be further exploited while services were

rendered by non-resident of procuring export orders for assessee, payment made for said services could

not be held as FTS under India-France DTAA and would not be taxable in India.

The order of the CIT (A) and AO were set aside and the disallowance was deleted.


The payment made to non-resident in France for procurement of export orders is not to be

considered as fees for technical services as no knowledge is provided by the non-resident to

the assessee while providing the services. Thus, section 195 of the Income Tax Act is not

applicable to such cases as such services are not chargeable in India in the hands of non-

resident under DTAA.

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ITAT RULINGS

FACT OF THE CASE:

1) Siro Clinpharm (P.) Ltd. (hereinafter referred to as “assessee” or “appellant”) issued corporate

guarantees in respect of its Associated Enterprise (AE) namely Siro Clinpharm Germany GmbH, to

ABN Amro Bank. The assessee did not charge any guarantee commission to its AE but recovered

amount of Rs. 36,06,578 being 1.75% of the facility which was charged to the assessee by the bank.

2) The Assessing Officer proposed to hold that an arm’s length price (ALP) adjustment computed at

3% of the loan taken by the assessee will be in order taking into view the considerable risk of the

assessee in the event of default by the AE and that the assessee ideally should have charged the

guarantee fee at least @ 3% of the loan taken by the associated enterprise".

3) Aggrieved by this addition, assessee carried the matter before the DRP but the DRP confirmed the

action of the AO referring to the case of Mahindra & Mahindra Ltd [TS-324-ITAT-2013(Mum)-

TP], where the Hon'ble Mumbai ITAT had upheld 3% rate for guarantee fee on guarantees given to

the AE.

4) Assessee filed the appeal before the ITAT.

ISSUE:

i. Whether determination of arm's length price at 3% is sustainable in law?

ii. Whether entity level margins are required to be compared, or whether margins on the basis of split

profit and loss account are required to be compared with the margins on transactions with AEs?

iii. Whether commission with respect to the corporate guarantee by AE can be compared with bank

guarantee and be called in question by the TPO?

OBSERVED:

ITAT referred to the case of CIT v. Everest Kento Cylinders Ltd. [(2015) 58 taxmann.com 152 (Bom)]

where similar comparison of corporate guarantees with bank guarantees was rejected and

determination of arm's length price at 0.5% was upheld by observing as follows:

i. The assessee company had issued Corporate Guarantee and that if the subsidiary AE does not repay

loan availed of it from ICICI, then the assessee would make good the amount and repay the loan.

The considerations which applied for issuance of a corporate guarantee are distinct and separate

from that of bank guarantee and accordingly, the commission charged could not be called in

question, in the manner TPO had done. The comparison was not as between like transactions but

the comparisons were between guarantees issued by the commercial banks as against a Corporate

Guarantee issued by holding company for the benefit of its AE, a subsidiary company.

ii. The TPO had taken the entity level margins and when the objection was raised before the DRP, the

DRP also confirmed the said action The ITAT observed that when relevant segmental results are

available, and the segment computations are not in dispute, the entity level results have to make way

for the segmental profit computations. In a subsequent year, i.e., assessment year 2013-14, the TPO

himself had accepted the approach of the assessee.

ITAT: Regards corporate-guarantee as international-transaction; Follows non-jurisdictional

HC decision over assessee’s own case [Siro Clinpharm (P.) Ltd. V. Income Tax Officer [2021]

131 taxmann.com 73 (Mumbai - Trib.)[09-09-2021]

https://www.taxsutra.com/dt/rulings/itat-regards-corporate-guarantee-international-transaction-follows-non-jurisdictional-hc

https://www.taxsutra.com/dt/rulings/itat-regards-corporate-guarantee-international-transaction-follows-non-jurisdictional-hc

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ITAT RULINGS

HELD:

ITAT rejected the determination of 3% ALP and directed the AO to adopt 0.5% as an arm's length

consideration for the corporate guarantee issued by the assessee in favour of its AE. The Tribunal also

expressed that corporate guarantees are separate from guarantees issued by commercial banks as in

case of corporate guarantee, the holding company would bear the responsibility in case of default.

ITAT held that there was no justification for disregarding segmental results for the present assessment

year.

FACT OF THE CASE:

1) The assessee is a company incorporated in Cyprus. The assessee subscribed to 15% Fully

Convertible Debentures (FCDs) of face value of Rs. 100/- each issued by Indian entities.

2) The debentures were converted into 0% FCDs w.e.f. 01.01.2009. Further, on 23rd December 2009,

in addition to the conversion of 15% FCDs into 0% FCDs, the assessee has subscribed to 0% FCDs

of face value of Rs.100/- each issued by the AEs.

3) Transfer Pricing Officer (TPO) held that 15% of the FCDs have been converted into 0% FCDs

without assigning any reason, therefore by applying internal Comparable Uncontrolled Price (CUP)

as Most Appropriate Method (MAM), the TPO charged the interest on FCDs at the same rate of

15% as was being charged prior to 01.01.2009. It was also submitted that the income generated

during the subject year was only interest income on FCDs which was offered to tax at the treaty rate

of 10%.

4) The TPO made adjustments on the interest earned from various investee entities of

Rs.4,02,72,970/- which was upheld by ld. CIT (A) observing that the word "interest paid" includes

"interest payable".

5) The assessee filed an appeal before the Tribunal.

ISSUE:

Whether as per Article 11(1) of India-Cyprus DTAA, interest paid includes interest payable or not?

Income Tax Appellate Tribunal – Delhi M/S. Mondon Investments Ltd., New Delhi vs Ddit,

New Delhi ITA No. 3303/Del/2016


Corporate guarantees issued by a holding company for the benefit of its AE cannot be

compared to the guarantee issued by the commercial banks as in case of default by an AE, the

holding company would repay the amount in question and thus the commission charged by

the holding company on the corporate guarantee cannot be called in question.

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ITAT RULINGS

OBSERVED:

The Tribunal referred to the case CIT vs. Pramerica ASPF II Cyprus Holding Limited in which the Bombay

High Court has framed the following question of law:

“Whether the ITAT is correct in directing the Assessing Officer (AO) to accept the interest income

returned by the assessee on cash basis whereas the AO has made additions on the ground that interest

income was liable to be assessed on accrual basis?”

The Bombay High Court dismissed the Revenue’s appeal by following its earlier decision in DDIT vs.

Siemens Aktiengesellschaft (2009) taxmann.com 1019 and held that taxability can only be fastened on

receipt of payment.

The Tribunal also referred to the interpretation of Article 11(1) of DTAA in the case of DCIT vs. TMW

ASPF Cyprus Holding Company Ltd. in ITA No. 879/Del/2016 dated 09.08.2019 where the co-ordinate

bench of the Tribunal held:

“The aforesaid para envisages that for taxing the interest income in the hands of a non-resident, it is

necessary that the interest should arise in a contracting state, i.e., twin conditions of accrual as well as

the payment are to be satisfied.”

HELD:

The word “paid” cannot be extended to “payable” in respect of interest under Article 11 of the India-

Cyprus DTAA and thus the appeal was allowed.


Provision of Article 11(1) of the India-Cyprus DTAA which reads as “Interest arising in a

Contracting State and paid to a resident of the other Contracting State may be taxed in that

other State” does not extend to interest payable but also covers the interest that is paid. The

accrual as well as receipt of income should take place in a contracting state for the interest

income to be taxable in hands of a non-resident.

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1. Government has notified repeal of retrospective tax, pending cases can be settled within 60

days

[Notification G.S.R. 713(E) [NO. 118/2021/F. NO. 370142/47/2021-TPL], dated 1-10-2021]

i. Taxation Laws (Amendment) Act, 2021 provided that no tax demand shall be raised on basis

of amendment to Section 9 of Income-Tax Act vide Finance Act, 2012 for any offshore

indirect transfer of Indian assets before 28 May 2012. The CBDT has notified Rule 11UE and

Rule 11UF for implementing this amendment. Rule 11UE provides for specified conditions

to claim relief and Rule 11UF provides form and manner of furnishing undertaking for

withdrawal of pending litigation, claiming no cost, damages, etc.

ii. The Finance Ministry on October 1 notified the changes to Income Tax rules which

now repeal retrospective tax more than nine years after they came into force. As per the

notification, any company like Cairn Energy, Vodafone and others looking to settle pending

retrospective tax disputes will have to –

a. Indemnify the Indian government against any future claims arising out of the said

dispute

b. Give an undertaking that they will withdraw any pending litigation or proceeding

before any forum, with an assurance that they won’t pursue any further claims in the

future.

iii. The indemnity bond will have to be furnished by the company and any other interested party

with the income-tax authority and its resolution panel, according to the gazette notification,

which gives companies 30-60 days to settle their claims.

iv. After the Taxation Laws Amendment Bill was passed in Parliament in the Monsoon Session,

the CBDT sought feedback from stakeholders. As per the conditions in the gazette

notification, the companies concerned will irrevocably withdraw, discontinue and not pursue

any lawsuits, arbitration, conciliation, or mediation either in India or abroad.

v. The interested company can start the process by submitting the undertaking within 45 days

effective from October 1. Post that the tax authority will have 15 days to pass an order. Once

these conditions are fulfilled, the government will refund the tax amount paid by the

companies, without interest and penalty.

2. CBDT exempts certain non-residents from furnishing ITR subject to fulfilment of

conditions [Notification No. 119/2021/F. No. 225/76/2021-ITA.II]

The Central Board of Direct Taxes (CBDT) has exempted certain non-resident persons from the

requirement of furnishing of return of Income under section 139, subject to fulfilment of

prescribed conditions. The benefit of exemption is available from Assessment Year 2021-22

onwards.

NOTIFICATIONS

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Sr.

No.

Class of Persons Conditions

1. (i) a non-resident, not

being a company; or

(ii) a foreign

company.

(i) The said class of persons does not earn any income in India, during the previous year, other than the income from investment in the specified fund referred to in sub-clause (i) of clause (c) of Explanation to clause (4D) of section 10 of the Act; and

(ii) The provisions of section 139A of the Act are not applicable to the said class of persons subject to fulfillment of the conditions mentioned in sub-rule (1) of rule 114AAB of the Income-tax Rules, 1962.

2. a non-resident, being

an eligible foreign

investor.

(i) The said class of persons, during the previous year, has made transaction only in capital asset referred to in clause (viiab) of section 47 of the said Act, which are listed on a recognised stock exchange located in any International Financial Services Centre and the consideration on transfer of such capital asset is paid or payable in foreign currency;

(ii) The said class of persons does not earn any income in India, during the previous year, other than the income from transfer of capital asset referred to in clause (viiab) of section 47 of the said Act; and

(iii) The provisions of section 139A of the Act are not applicable to the said class of persons subject to fulfillment of the conditions mentioned in sub-rule (2A) of rule 114AAB of the said rules.

The above exemptions shall not be available where a notice under sub-section (1) of section 142

or section 148 or section 153A or section 153C of the Income Tax Act has been issued for filing

a return of income for the assessment year specified.

3. Foreign Exchange Management (Debt Instruments) (First Amendment) Regulations, 2021

(13th October, 2021)

[Notification No. FEMA.396(1)/2021-RB, Reserve Bank of India]

In exercise of the powers conferred by clause (a) of sub-section (2) of section 6 and section 47 of

the Foreign Exchange Management Act, 1999, the RBI has made the following amendments to the

Foreign Exchange Management (Debt Instruments) Regulations, 2019:

1. Amendment to Regulation 2:

i. After clause (i), the following new clause is to be inserted –

(ia) “Infrastructure Investment Trust” or “InvIT” means a business trust as defined in sub-

clause (i) of clause 13A of section 2 of the Income-tax Act, 1961.

ii. After clause (q), the following new clause is to be inserted –

(qa) “Real Estate Investment Trust” or “REIT” means a business trust as defined in sub-

clause (ii) of clause 13A of section 2 of the Income-tax Act, 1961.”

2. In sub-paragraph A of paragraph 1 of Schedule 1, after clause (k), the following new clause is

to be inserted: -

“(l) debt securities issued by (i) InvITs and (ii) REITs.”

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1. Review of Foreign Direct Investment (FDI) Policy in Telecom Sector. [Press Note No. 4

(2021 Series)]

The Government has reviewed the extant FDI policy and has increased the FDI limit in Telecom

Sector from 49% to 100% under automatic route. However, the FDI in Telecom sector shall be

subject to restrictions envisaged in Para 3.1.1 of the FDI policy (as amended vide. Press Note No. 3

dated 17-04-2020) which requires prior Government approval. The decision is to take effect

immediately.

2. Cases pertaining to ‘Pandora Papers’ to be investigated [Press release dated 04 OCT 2021 by

PIB Delhi]

i. The Government of India has taken note of the developments and relevant investigative agencies

would undertake investigation and appropriate action would be taken in the case of investigation by

the International Consortium of International Journalists (ICIJ) that is based on the leak of

confidential records of 14 offshore service providers that give professional services to wealthy

individuals and corporations from more than 200 countries and territories seeking to incorporate shell

companies, trusts, foundations and other entities in low or no-tax jurisdictions. The Government will

also proactively engage with foreign jurisdictions for obtaining information in respect of relevant

taxpayers/entities. The Government of India is also part of an Inter-Governmental Group that

ensures collaboration and experience sharing to effectively address tax risks associated with such

leaks.

ii. The Government has already enacted the Black Money (Undisclosed Foreign Income and Assets)

and Imposition of Tax Act, 2015 with an aim to curb black money, or undisclosed foreign assets and

income by imposing suitable tax and penalty on such income following earlier similar such leaks.

iii. Only a few Indians legal entities as well as individuals have appeared so far in the media. The ICIJ

website (www.icij.org) has not yet released the names and other particulars of all the entities and the

website suggests that information will be released in phases and structured data connected to the

Pandora Papers investigation will be released in the days to come on its Offshore Leaks Database.

iv. The Government has further directed that, investigations in cases of Pandora Papers leaks appearing

in the media under the name ‘PANDORA PAPERS’ will be monitored through the Multi Agency

Group, headed by the Chairman, CBDT, having representatives from CBDT, ED, RBI & amp; FIU.

1. India and Australia partner to boost bilateral trade and investment

The AIBX 2021 Business Leaders Forum brought together CEOs and business leaders from both

sides to showcase strengths and strengthen partner ties. The forum emphasizes the investment

climate in both the countries and highlighted challenges & opportunities on both sides.

With an aim to boost industrial and manufacturing activity and to drive economic growth, India has

partnered with Australia in areas such as agri-food, mining, infrastructure, healthcare and education.

The Australian government's 'Indian Economic Strategy 2035' envisions significantly raising trade

and investment with India. The flagship program by the Australian Government is entirely directed

towards advancing the commercial partnership and building two-way market linkages between

Australia and India.

PRESS RELEASE

NEWS

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TAX CALENDAR FOR NOVEMBER, 2021

Due Date International Taxation

30th November, 2021

Report in Form No. 3CEAA by a constituent entity of an international group for the accounting year 2020-21

Exercise option of safe harbour rules for international transaction by furnishing

Form 3CEFA.

Exercise option of safe harbour rules for specified domestic transaction by furnishing Form 3CEFB

Report to be furnished in Form 3CEB in respect of international transaction and

specified domestic transaction.

Within 7 days of close of the month

Borrowers are required to report all ECB transactions to the RBI on a monthly basis through an AD Category – I Bank in the form of ECB 2 Return.

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CORPORATE

LAWS

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FACT OF THE CASE:

1) Zee Entertainment Enterprises Ltd. (hereinafter referred to as “appellant”) filed an appeal against the decision of NCLT which sought to grant the appellant only 36 hours for filing a physical copy of the reply to the Company Petition.

2) The Respondent, foreign portfolio investor and shareholder of appellant (Zee), had filed petition before NCLT for holding of Extraordinary general meeting of appellant as soon as possible.

3) NCLT denied the appellant’s request for grant of additional time to file a reply. NCLT observed that the case was not a usual one and a lengthy time period could not be afforded to the appellant and hence only a reasonable time of 2 days would be sufficient.

4) The appellant was aggrieved by the order of the NCLT and filed an appeal for grant of more time.

ISSUE:

i. Whether violation of rule 37 of NCLT Rules, 2016 and Principles of Natural Justice has occurred?

ii. Whether a longer period of time should have been granted to the appellant for filing a reply?

OBSERVED:

NCLAT observed that Section 98 of the Companies Act, does not prescribe any time limit or limitation

on the Learned NCLT to pass order within that time limit. Engrafting the provisions of Section 100(4)

in Section 98 would be wholly misconceived and untenable. Undisputedly, the reliefs sought in the

Company Petition are specifically under Section 98 of the Companies Act. Given that Section 98 does

not prescribe any time limit, the Learned NCLT ought to have granted reasonable time to the

Appellant to file a reply.

HELD:

NCLAT held that the learned NCLT has committed an error in not granting reasonable and sufficient

time for filing a reply, which is a complete violation of Rule 37 of NCLT Rules and Principles of

Natural Justice.


A respondent cannot be granted a lesser time period for filing a reply merely because of the

fact that the respondents are aware of the case and the point of dispute is short. A reasonable

amount of time needs to be provided to all parties in order to abide by Principles of Natural

Justice.

NCLT asks Zee Entertainments to file reply to Invesco plea by Oct, 22 Zee Entertainment

Enterprises Ltd. V. Invesco Developing Markets Fund [2021] 131 taxmann.com 97 (NCLAT-

New Delhi) [07-10-2021]

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FACT OF THE CASE:

1) Reliance and Future Group (hereinafter referred to as the Applicant Companies) filed first motion application under section 230 seeking an order to hold meetings of creditors and/or class of creditors, members and/or class of members to consider and approve the composite scheme.

2) Amazon, which holds 50 per cent in a holding company of Future Retail, moved to the arbitration court, saying the deal would convert FRL into a shell company while the businesses would be hived off and sold to its arch rival Reliance Retail.

ISSUE:

i. Whether the Applicant Companies can be allowed to hold shareholder’s meeting for the approval

of the scheme?

ii. Whether the court at this stage can consider the objections filed by the applicant / objector at this

stage?

OBSERVED:

1) The Bench observed that in Rainbow Denim Ltd. Vs. Rama Petrochemicals Ltd. reported in (2002)

10SSC498 have held that the appropriate time for the company judge to consider the scheme is

subsequent to the approval thereof by the shareholder and the creditors of the appellant company.

Therefore, it was held that once the meetings have been held a further application will be filed to

consider the scheme.

2) Hence, the Bench observed that it is well within its rights to allow the Applicants to hold the

meeting of various stakeholders, creditors etc., which is only the initial stage in the process of

approval of the composite scheme.

3) It can be concluded that the Applicant Companies can be allowed to hold meetings of creditors

and the matter of the objector shall be considered at a future stage.

HELD:

i. The present application is the first motion application filed by the Future Group’s Transferor

Companies and Reliance Group’s Transferee Companies, seeking an order to hold the meetings

of creditors and/or class of creditors, members and/or class of members to consider and approve

the schemes shall be allowed.

ii. The objection of the applicant / objector is premature. The Hon’ble Supreme Court expressly

directed NCLT not to pass any final order for a period of four weeks from 09.09.2021.

iii. The objection of the Applicant/ Objector will be considered at the relevant stage at the time of

filing of Company Petition for sanction/approval of scheme by the Reliance Group.

NCLT allows Future Group to hold EGMs to sell businesses to Reliance [Future Consumer

Ltd., In re [2021] 131 taxmann.com 257 (NCLT - Mum.) (18-10-2021)]

Taxpert Professional’s Comment:

In the present case it can be observed that a composite scheme which has not yet been

sanctioned by the shareholders and creditors in the company’s meeting cannot be brought

into question. The objection would be premature since the core matter of the objection is

not in existence yet.

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1. GUIDELINES FOR INVESTMENT ADVISERS - EXTENSION OF TIMELINES

CIRCULAR NO. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/632, DATED 30-9-2021

The SEBI vide its Circular dated. 30th September, 2021, has extended the due date of complying with ‘Guidelines for Investment Advisers’.

The extended due dates are as follows:

Particulars Due date Extended due date

Annual Audit 30th September, 2021 31st December, 2021

Submission of adverse findings

31st October, 2021 31st January, 2022

Annual Certificate 30th September, 2021 31st December, 2021

2. RELAXATIONS RELATING TO PROCEDURAL MATTERS - ISSUES AND

LISTING

CIRCULAR NO. SEBI/HO/CFD/DIL2/CIR/P/2021/633, DATED 1-10-2021

The Securities and Exchange Board of India (SEBI) on January 19, 2021 has issued a circular for

the relaxations relating to procedural matters about issues and listing. The relaxation has been

further extended till March 31, 2021.

3. DISCONTINUATION OF USAGE OF POOL ACCOUNTS BY ENTITIES INCLUDING ONLINE PLATFORMS OTHER THAN STOCK EXCHANGES FOR TRANSACTIONS IN THE UNITS OF MUTUAL FUNDS

CIRCULAR NO. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/634, DATED 4-10-2021

The Securities and Exchange Board of India (“SEBI”), vide a circular dated October 4, 2021 (“Circular”), has prohibited Mutual Fund Distributors (“MFDs”), Investment Advisers (“IAs”), Mutual Fund Utilities (“MFU”), channel partners and other entities including online platforms (together, “Service providers”/ “Platforms”) which provide services to investors to transact in mutual fund (“MF”) units, from pooling their clients’ funds or units for such transactions.

SEBI has observed that based on a bilateral understanding with asset management companies (“AMCs”) of mutual funds, a few Platforms pool clients’ funds into a nodal account and subsequently transfer to AMCs either on a ‘per transaction’ basis or on a lump-sum basis. SEBI has vide the Circular, mandated AMCs to put in place necessary systems with respect to transactions in the units of MFs undertaken through Service Providers/Platforms other than stock exchanges.

The provisions of this Circular shall be applicable with effect from April 1, 2022.

CIRCULARS

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4. DISCONTINUATION OF USAGE OF POOL ACCOUNTS FOR TRANSACTIONS IN UNITS OF MUTUAL FUNDS ON STOCK EXCHANGE PLATFORMS CIRCULAR NO. SEBI/HO/IMD/IMD-I DOF5/P/CIR/2021/635, DATED 4-10-2021 The Securities and Exchange Board of India (SEBI decided to ban the usage of pool accounts for mutual fund transactions. The pooling of funds by stockbrokers, MF distributors, and investment advisers will be discontinued from April 1 next year. Based on discussions with stakeholders and recommendations of the Mutual Fund Advisory Committee, with respect to the transactions, the pooling of funds and/ or units by stockbrokers/clearing members in any form or manner shall be discontinued for mutual fund transactions.

5. AMENDMENTS TO MANNER AND MECHANISM OF PROVIDING EXIT OPTION TO DISSENTING UNIT HOLDERS PURSUANT TO REGULATION 22(5C) AND REGULATION 22(7) OF SEBI (INFRASTRUCTURE INVESTMENT TRUSTS) REGULATIONS, 2014 CIRCULAR NO. SEBI/HO/DDHS/DDHS_DIV3/P/CIR/2021/639, DATED 5-10-2021

The Securities Exchange Board of India vide circular dated October 05, 2021 has amended

manner and mechanism of providing exit option to dissenting unit holders of Infrastructure

Investment Trusts. The circular amends the procedure for determining the exit option price.

The circular also provides revised timeline for providing notice of meeting to unit holders,

intimation of outcome of the unit holders’ meeting by the IM to Acquirer and stock exchange(s),

creating escrow account, tendering units in exit option and Payment of consideration to

dissenting unit holders by the Acquirer.

In case an acquisition described under Regulation 22(5C) or change in sponsor or change in

control of sponsor or inducted sponsor under Regulation 22(7) of SEBI (InvIT) Regulations is

triggered pursuant to an open offer under the provisions of SEBI (Substantial Acquisition of

Shares and Takeover) Regulations, 2011, the summary of activities pertaining to exit option/offer

is indicated below along with the prescribed timelines.

Activity Description Timelines

Acquirer to give first notice to IM regarding

acquisition which triggers the provision of

Regulation 22(5C) or Regulation 22(7) of SEBI

(InvIT) Regulations.

Along with Public Announcement made for the

acquisition in terms of SEBI (Substantial

Acquisition of Shares and Takeover) Regulations,

2011

On receipt of notice, IM shall intimate to stock

exchange(s)

Immediately but not later than twenty four hours

from the receipt of such notice

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Acquirer shall give second notice to the IM for the

purpose of obtaining approval of the unit holders

under Regulation 22(5C) or Regulation 22(7) of

SEBI (InvIT) Regulations.

The acquirer shall also confirm to the IM that it shall

give exit option to dissenting unit holders in case

approval of the requisite majority is not received.

Further, a person being inducted as a sponsor shall

give declaration to IM with regard to satisfying the

eligibility conditions prescribed for a sponsor under

SEBI (InvIT) Regulations.

Not later than two working days from the

completion of the acquisition which triggered the

provisions of Regulation 22(5C) or Regulation 22(7)

of SEBI (InvIT) Regulations

On receipt of second notice, IM shall intimate to

stock exchange(s)

Immediately but not later than twenty four hours

from the receipt of such second notice

IM shall convene a meeting of unit holders for

voting

Voting to be completed not later than three working

days from the cut-off date and within twenty one

days from the date of receipt of second notice from

the acquirer

Intimation of outcome of the unit holders' meeting

by the IM to Acquirer and stock exchange(s) along

with the number of dissenting unit holders and total

number of units held by them as of the cut-off date,

as certified by its compliance officer.

IM shall provide the list of dissenting unit holders to

the Lead Manager(s).

The day of aforesaid intimation by IM shall be

construed as "Date of Intimation".

Within forty-eight hours of the last day of voting

Acquirer through the Lead Manager(s) shall send the

Letter of Offer (LoF) to all dissenting unit holders

and file a copy of the same with the stock

exchange(s). Lead Manager(s) shall exercise due

diligence with regard to all information and

disclosures contained in the LoF.

The stock exchange(s) shall disseminate the LoF on

its website as soon as it receives the same.

Within three working days from the Date of

Intimation

Acquirer shall create an escrow account wherein the

aggregate amount of consideration based on the list

of dissenting unit holders provided by the IM to

Lead Manager would be deposited in the manner

specified at para 2.6 below.

At least two working days prior to opening of the

tendering period.

Tender date and tender period for tendering units in

exit option

Seventh working day from the "Date of Intimation"

Tender period shall be five working days.

Payment of consideration to dissenting unit holders

by the Acquirer

Within a period of three working days from the last

date of the tendering period

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6. AMENDMENTS TO MANNER AND MECHANISM OF PROVIDING EXIT OPTION TO DISSENTING UNIT HOLDERS PURSUANT TO REGULATION 22(6A) AND REGULATION 22(8) OF SEBI (REAL ESTATE INVESTMENT TRUSTS) REGULATIONS, 2014 CIRCULAR NO. SEBI/HO/DDHS/DDHS_DIV3/P/CIR/2021/640, DATED 5-10-2021

In case an acquisition described under Regulation 22(6A) or change in sponsor or change in control of sponsor or inducted sponsor under Regulation 22(8) of SEBI (REIT) Regulations is triggered pursuant to an open offer under the provisions of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011, the summary of activities pertaining to exit option/offer is indicated below along with the prescribed timelines:

Activity Description Timelines

Acquirer to give first notice to Manager regarding

acquisition which triggers the provision of

Regulation 22(6A) or Regulation 22(8) of SEBI

(REIT) Regulations.

Along with Public Announcement made for the

acquisition in terms of SEBI (Substantial

Acquisition of Shares and Takeover) Regulations,

2011

On receipt of notice, Manager shall intimate to stock

exchange(s)

Immediately but not later than twenty-four hours

from the receipt of such notice

Acquirer shall give second notice to the Manager for

the purpose of obtaining approval of the unit holders

under Regulation 22(6A) or Regulation 22(8) of

SEBI (REIT) Regulations.

The acquirer shall also confirm to the Manager that

it shall give exit option to dissenting unit holders in

case approval of the requisite majority is not

received.

Further, a person being inducted as a sponsor shall

give declaration to Manager with regard to

satisfying the eligibility conditions prescribed for a

sponsor under SEBI (REIT) Regulations.

Not later than two working days from the

completion of the acquisition which triggered the

provisions of Regulation 22(6A) or Regulation

22(8) of SEBI (REIT) Regulations.

On receipt of second notice, Manager shall intimate

to stock exchange(s)

Immediately but not later than twenty-four hours

from the receipt of such second notice

Lead Manager shall submit a report to IM that the

payment has been duly made to all the dissenting

unit holders whose units have been accepted in the

exit option.

Based on the information received from Lead

Manager, IM shall update aggregate number of units

tendered, accepted, payment of the consideration

and the post-exit option unit holding pattern of the

InvIT with stock exchange(s).

Within two working days from the date of payment

of consideration

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Manager shall convene a meeting of unit holders for

voting

Voting to be completed not later than three working

days from the cut-off date and within twenty-one

days from the date of receipt of second notice from

the acquirer

Intimation of outcome of the unit holders' meeting

by the Manager to Acquirer and stock exchange(s)

along with the number of dissenting unit holders and

total number of units held by them as of the cut-off

date, as certified by its compliance officer.

Manager shall provide the list of dissenting unit

holders to the Lead Manager(s).

The day of aforesaid intimation by Manager shall be

construed as "Date of Intimation".

Within forty-eight hours of the last day of voting

Acquirer through the Lead Manager(s) shall send the

Letter of Offer (LoF) to all dissenting unit holders

and file a copy of the same with the stock

exchange(s). Lead Manager(s) shall exercise due

diligence with regard to all information and

disclosures contained in the LoF.

The stock exchange(s) shall disseminate the LoF on

its website as soon as it receives the same.

Within three working days from the Date of

Intimation

Acquirer shall create an escrow account wherein the

aggregate amount of consideration based on the list

of dissenting unit holders provided by the Manager

to Lead Manager would be deposited in the manner

specified at para 2.6 below.

At least two working days prior to opening of the

tendering period.

Tender date and tender period for tendering units in

exit option

Seventh working day from the "Date of Intimation"

Tender period shall be five working days.

Payment of consideration to dissenting unit holders

by the Acquirer

Within a period of three working days from the last

date of the tendering period

Lead Manager shall submit a report to Manager that

the payment has been duly made to all the dissenting

unit holders whose units have been accepted in the

exit option.

Based on the information received from Lead

Manager, Manager shall update aggregate number

of units tendered, accepted, payment of the

consideration and the post-exit option unit holding

pattern of the REIT with stock exchange(s).

Within two working days from the date of payment

of consideration

Recent Updates


46 tAXPERTtTTTTTTT


7. REVISED FORMATS FOR FILING FINANCIAL INFORMATION CIRCULAR NO. SEBI/HO/DDHS/CIR/2021/0000000637, DATED 5-10-2021 This circular provides the revised formats for reporting of financial information and limited review report.

8. REVISED FORMATS FOR LIMITED REVIEW/ AUDIT REPORT FOR ISSUERS OF

NON-CONVERTIBLE SECURITY CIRCULAR NO. SEBI/HO/DDHS/CIR/2021/0000000638, DATED 14-10-2021

Revised formats of Limited Review/Audit Reports (to be submitted to Stock Exchanges and placed on listed entity's website) have been mentioned in this circular.

9. STREAMLINING ISSUANCE OF SCORES AUTHENTICATION FOR COMPANIES INTENDING TO LIST THEIR SECURITIES ON SEBI RECOGNIZED STOCK EXCHANGES CIRCULAR NO. SEBI/HO/OIAE/IGRD/CIR/P/2021/642, DATED 14-10-2021

SEBI has issued a Circular in order to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. The objective of the circular is to streamline the redressal of investor grievances against companies before listing.

10. GENERAL CIRCULAR NO. 15/ 2021

Extension of last due date to submit Cost Audit Report to the Board of Directors under Rule 6(5) of

the Companies (Cost Records & Audit) Rules, 2014-reg.

In view of Pandemic situation, it has been decided by that if the cost Audit report for the Financial

Year 2020-21 by the Cost Auditor to the Board of Directors of Company is submitted by 31st October,

then same would not be viewed as violation of Rule 6(5) of Company Cost records & Audit Rules 2014.

Consecutively the Cost Audit Report for F.Y.2020-21 shall be filed in e-form CRA-4 within 30 days

from the date of receipt of copy of Cost Audit Report by the Company.

However, in case a company has got extension of time for holding AGM under Section 96(1) of the

Act then e-form CRA-1 may be filed within the timeline provided under the proviso to the Rule 6(6)

of Company Cost records & Audit Rules 2014.

E- booklet: Boost to Ease of doing Business & Investment in the country – Decriminalization of

Offences under the companies Act 2013.

Form MGT-7/MGT-7A is likely to be revised on MCA21 Company Forms Download page w.e.f

14th October, 2021. Stakeholders are advised to check the latest version before filing.

NEWS

PRESS RELEASE

Recent Updates


47 tAXPERTtTTTTTTT

CORPORATE COMPLIANCE CALENDAR

DESCRIPTION FORM DUE DATE PERIOD

Reconciliation of Share Capital Audit Report to be filed after 60 days from the end of each half-year by unlisted public companies.

PAS-6

(Filed half-yearly)

29 November 2021 29 November 2021 (For the period of April’21– September’21)

To be filed within 60 days from the conclusion of AGM. Every company should file an annual return, furnishing details about the company.

MGT- 7

(Filing of Annual Returns)

29 November 2021 (Extended till 29 January 2022)

FY 2020-21

Recent Updates


48 tAXPERTtTTTTTTT

We hope these updates would have enlightened you. For further information, feel free to connect with us at:

Contact person Area of practice Email

CA. Ankit Shah Direct Taxation [email protected]

CA. Vinay Bhushan Indirect Taxation [email protected]

CA. Sudha Bhushan International Taxation [email protected]

CA. Santosh Thanvi Corporate Laws & Tax Advisory [email protected]

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For further information or query feel free to contact, we would be happy to assist you:

[email protected] | +91-9326002456

Disclaimer:

The information provided in this update is intended for information purpose only and does not constitute any legal opinion

and advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided therein.

This update is not intended to address the circumstances of any particular individual or body corporate. There can be no

assurance that the judicial or quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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