(1) Stamp duty Amnesty Scheme, 2019 for deficit stamped documents executed prior to 31st December, 2018 with nominal penalty of 10% is extended upto 31st Dec, 2019 and the scheme is applicable even to commercial units.

(2) On 20th August, 2019, the Urban Department has issued a notification to reduce the premium by 10% on fungible FSI and other premiums.

(3) The Consumer Protection Act, 2019 is published on 9th August, 2019 to repeal the Act of 1986. This act provides for mediation and establishes Central Consumer Protection Authority.

(4) Notification dated 1st August 2019 is published as per the directions of Supreme Court in the Civil Petition No. 558/ 2017 to take necessary actions for ULC violations.

(5) MahaREAT in the appeal to complaint No. SC10000672/691 in the matter of Geetanjali Aman Constructions Vs Hrishkesh Ramesh Paranjpee and others, held that the projects development on land less than 500 sq.meters in spite of having more than 8 units are not required to be registered with MahaRERA.

Case: Durga Projects and Infrastructure Pvt Ltd. [2019-TIOL-246-AAR-GST (Karnataka)]

The applicant is builder and have executed projects under JDA with Land Owners for an agreed ratio of built-up Area. The liability to pay tax in respect of construction services provided by applicant to land owners for the flats constructed towards land owner share shall arise in GST regime even Construction was commenced during pre-GST regime and continued under GST regime. The contention of the applicant that tax shall be applicable under GST law only on the portion of work executed under GST law is not acceptable. The time of supply shall be as per notification 4/2018-CT(Rate) i.e. on transfer of possession & value shall be equivalent to the total amount charged for such supply less the value of land or undivided share of land, as there is no information as to whether the applicant has transferred the possession of the land owner’s share of flats or not in pre GST regime.

Case: MRF Ltd. [2019-TIOl-61- AAAR-Tamilnadu]

The GST paid on the commercial price payable to the suppliers is eligible for full ITC in terms of section 16 of the CGST Act. Post supply discount, which is not liable for reduction of the value of supply in view of section 15(3) of the CGST Act shall not interfere the eligibility of full ITC of tax paid by appellants to their suppliers. The contention of the original AAR proportionate reversal of the ITC is required in case of post purchase discount given by the supplier of the goods or services, is not in consonance with the legislative intent of 2nd proviso to section 16 of the Act. The buyer has discharged the GST charged on the undiscounted transaction value at the time of supply - In the circumstances, if the GST charged and paid is not reversed/refunded in whole or part subsequently in any manner or circumstances, the credit availed on the same need not be reversed. Circular No. 122/3/2010 dated 30/4/2010 and Circular No. 877/15/2008-Cx dated 17th November 2008 regarding reversal of CENVAT Credit in case of trade discount have persuasive value.

CBIC vide Notification No. 35/2019 – CT dated 29th July, 2019 has extended the time limit for furnishing Form GST CMP - 08 (return by composition dealer) for quarter April to June, 2019 till 31st August, 2019.

CBIC vide Notification No. 36/2019 – CT dated 20th August, 2019 has extended the applicability of Rule 138E (restriction for generating E-way bill) of CGST Rules from 21st August, 2019 to 21st November, 2019. In view of above no e-way bill shall be allowed to be generated in cases of default in furnishing GST return for consecutive 2 tax periods.

CBIC vide Notification No. 37/2019 – CT dated 21th August, 2019 has extended the due date for filing FORM GSTR 3B for month of July, 2019 from 20th August, 2019 till 22nd August, 2019.

Further, due date for filing GSTR 3B for month of July, 2019 for registered person whose principal place of business in following district is extended till 20th September, 2019

CBIC vide Notification No. 12/2019 – CT (Rate) dated 31st July, 2019 has reduced the rate of GST on following goods

The notification shall come into force from 1st August, 2019

CBIC vide Notification No. 13/2019 – CT (Rate) dated 31st July, 2019 has exempted hiring of electrically operated vehicle meant for carrying 12 or more passenger by local authority from GST.

Explanation.- For the purposes of this entry, “Electrically operated vehicle” means vehicle falling under Chapter 87 in the First Schedule to the Customs Tariff Act, 1975 which is run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicle.

1. The Ministry of Corporate Affairs has amended the Companies (Share Capital & Debentures) Rules by removing Debenture Redemption Reserve requirement for Listed Companies, NCFCs and HFCs wide a press release dated 19th August 2019.
2. Companies (Share Capital and Debentures) Amendment Rules, 2019 – Amendment in Rules 4, 5, 12 & 18 vide Notification G.S.R. 574(E) [F. No. 1/4/2013-CL-V-Part-III], dated 16/8/2019
3. Central Government has made Protection of Children from Sexual Offences (Amendment) Act, 2019 (25 of 2019) applicable from 16th August 2019.

Case Law Update

The Pr. Commissioner of Income Tax vs. M/s. S. G. Asia Holdings (India) Pvt. Ltd. [Supreme Court in Civil Appeal No. 6144 of 2019 @ SLP(C)No.12126 of 2019]

The Assessee had entered into an international transaction of receipt of brokerage income from its parent company. The Assessing Officer (‘AO’) was of the view that the brokerage rate charged was lower than that prevalent in the market. The AO accordingly, made a transfer pricing adjustment under Section 92 of the Act. The said adjustment was made without a reference to the Transfer Pricing Officer (‘TPO’). The CIT(A) upheld the order of the AO. The ITAT setting aside the orders held that the transfer pricing adjustment made by the AO was contrary to the mandatory instructions issued by CBDT in its Instruction No.3/2003 dated 20/5/2003 and therefore bad in law. ITAT has refused to restore the matter observing that “The Tribunal cannot make any good to such lapse made by the AO.” The Hon’ble High Court upheld the order of ITAT.

The Hon’ble Supreme Court observed that a discretion was vested with the AO as per Section 92CA of the Act and it would not be mandatory refer every single case to the TPO. However, the CBDT’s instruction No.3/2003 put across a different perspective wherein it stated that if the aggregate value of international transactions exceeded INR 5 crs, the transactions should be referred to the TPO. In view of the guidelines issued by the CBDT, the Hon’ble Supreme Court upheld that by not making reference to the TPO, the AO had breached the mandatory instructions.

However, the Hon’ble Supreme Court observed that the ITAT ought to have accepted the submission made by the Departmental Representative and restore the file to the AO so that appropriate reference could be made to the TPO. Accordingly, Hon’ble Supreme Court stated -“We, therefore, allow this Appeal to the aforesaid extent and direct that it would now be upto the Assessing Officer to take appropriate steps in terms of Instruction No.3/2003.”

Toyota Kirloskar Motor Private Limited vs. Union of India & Others. [TS-657-HC- 2019(KAR)-TP]

The Assessee is engaged in the manufacture and trading of passenger car and multi-utility vehicles. The Assessee was subject to TP adjustment during the course of assessment proceedings in relation to its international transactions with its AE. The AO also issued a penalty notice calling upon the Assessee to show-cause why a penalty should not be imposed under Section 271(1)(c) of the Act. The Assessee initiated Mutual Agreement Procedure (‘MAP’) under India – Japan DTAA along with appellate route under Indian domestic law. MAP agreement between the competent authorities of India and Japan resulted in the reduction of TP adjustment. This reduced TP adjustment was accepted by the Assessee. The AO gave effect to the MAP and also imposed the penalty on the TP adjustment sustained in the MAP. The Assessee filed an appeal against the penalty order before the CIT(A) on merit and simultaneously preferred a writ petition before the Hon’ble HC challenging the constitutional validity of the penalty proceedings for adjustments sustained under MAP.

The Hon’ble HC upholding the constitutional validity of imposing penalty on TP adjustment determined under MAP observed that “unless a specific provision is made in the Double Taxation Avoidance Agreement in as much as penalty is concerned, the provisions of Section 271[1][c] of the Act shall continue to apply.” The Hon’ble HC observed that unless specific provision is made in MAP waiving the penalty, the penalty under Section 271(1)(c) of the Act would continue to apply.

Having said that, the Hon’ble High Court observed that penalty on TP adjustment sustained in MAP is not automatic. The levy of penalty needs to be adjudicated based on the merits, facts and circumstances and in accordance with the law.

Dy. Commissioner of Income Tax vs. M/s TMW ASPF I Cyprus Holding Company Limited [2019-TII-197-ITAT-DEL-INTL]

The Assessee, resident of Cyprus, is engaged in the business of making investment in real estate sectors via fully convertible debentures (‘FCCDs’). Due to this investment, the investee companies and the Assessee are treated as Associated Enterprises. Per the investment agreements between Assessee and investee companies, there were three independent events:

a) Subscription to FCCDs bearing an annual interest of 4%;
b) Conversion of FCCDs into equity at a conversion price on the completion of the specified term or as may be determined by the parties; and
c) Post conversion, sale of equity shares to the promoters at a consideration providing annualized 18%/19% return on investment.

The last two events are contingent and futuristic. Due to bad financial positions and cash crunch, the investee companies requested for waiver of annual interest and such request was accepted by the Assessee. Also, part of FCCDs held in one of the investee company was sold to a third party during the year at a loss.

During the TP assessment proceedings, the TPO observed that an independent company would be compensated at higher value than the rate of 4% agreed by the Assessee. Further, the TPO observed that the Assessee was to earn an assured interest rate of 18%. As the interest paid also includes payable, the TPO computed TP adjustment with respect to notional interest income in the hands of non-resident Assessee at the rate of 18% instead of 4%. The DRP deleted the adjustment. Revenue Department filed an appeal before the ITAT.

The ITAT observed that, the TP adjustment has been made on hypothetical amount of interest receivable and based on contingent event which Assessee was supposed to receive. The ITAT upholding the directions of DRP ruled that – “If income is not taxable in terms of section 4, then chapter X cannot be made applicable, because section 92 provides for computing the income arising from international transactions with regard to the ALP. Only the interest income chargeable to tax can be subject matter of transfer pricing in India. Making any transfer pricing adjustment on interest which has neither been received nor accrued to the assessee cannot be held to be chargeable in terms of the Income Tax Act read with Article 11(1) of DTAA. Here it cannot be the case of accrual of interest also, because none of the investee companies have acknowledge that any interest payment is due, albeit they have been requesting for waiving of interest of even coupon rate of 4%, leave alone the return of 18% which was dependent upon some future contingencies.”

M/s. DE Shaw India Advisory Services Pvt. Ltd. Vs. Additional Commissioner of Income Tax [2019-TII-381-ITAT-DEL-TP]

The TPO held inter-company receivables arising from the international transactions undertaken by the Assessee to constitute a separate international transaction and alleged a notional interest on the same.

The ITAT remanded the matter to the file of the AO following the coordinate bench ruling in Assessee’s own case and appreciating Hon’ble High Court decision in case of Kusum Health Care Pvt. Ltd. in I.T.A. No. 765/2016 wherein it was observed that “The inclusion in the Explanation to Section 92B of the Act of the expression ‘receivables’ does not mean that de hors the context every item of ‘receivables’ appearing in the accounts of an entity, which may have dealings with foreign AEs would automatically be characterized as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way.”

Pr CIT vs S.G. ASIA HOLDINGS (INDIA)PVT. LTD {Supreme Court of India}

The assessee, S.G. Asia Holdings (India) provides broking and clearing services to associated and unrelated parties. During AY 2005-06, assessee, received brokerage from its parent company SG Paris (AE) at 0.06% (after excluding transaction charges, investor protection fund, stamp duty, etc.). As the brokerage was at a lower rate, AO held that AE was involved in directional trade and brokerage was calculated based on the rate prevalent in the market i.e. 0.25% for cash market and 0.05% for futures. Thus, addition of Rs.2.89 crores was made by AO which was confirmed by CIT(A) vide order dated 16/2/2009.

ITAT order:

Mumbai ITAT set aside the CIT(A)’s findings and held that TP adjustment made by the AO without referring the matter to TPO was contrary to the mandatory instructions issued by CBDT in its Instruction No.3/2003 dated 20/5/2003. ITAT also clarified that while the assessment order was good in law, the TP adjustments made therein were bad in law.

HC order:

Hon’ble High Court in its order affirmed ITAT’s decision. In context of the given case, the HC noted that given the nature of the transaction, the Instruction No. 3/2003 was applicable and accordingly opined that “If they were applicable, then, there ought to be some solid ground for ignoring a mandate flowing therefrom. The mandate is that the Assessing Officer should make a reference to the Transfer Pricing Officer. That is to make the transfer pricing adjustment.”

Thus, HC concluded that, “The Tribunal’s possible view in the backdrop of these facts and circumstances cannot be interfered with.”

The revenue filed a SLP before the SC.

SC order:

SC rejected Revenue’s argument that the expression in Instruction 3/2003 to the extent that “...the Assessing Officer considers it necessary or expedient so to do, he may, with the previous approval of the Commissioner, refer the computation of the arm’s length price in relation to the said international transaction or specified domestic transaction under Section 92C to the Transfer Pricing Officer” occurring in Section 92CA of the Act signified that discretion was vested in AO and it would not be mandatory in every single case that he must refer the issue of ALP-computation to TPO.

In this regard, SC noted that certain expressions in Instruction 3/2003 put the matter in a different perspective, such as: “...The Assessing Officer can arrive at prima facie belief on the basis of these details whether a reference is considered necessary.

No detailed enquiries are needed at this stage and the Assessing Officer should not embark upon scrutinizing the correctness or otherwise of the price of the international transaction at this stage... If there are more than one transaction with an associated enterprise or there are transactions with more than one associated enterprise the aggregate value of which exceeds Rs.5 crores, the transactions should be referred to the TPO…”, “Since the case will be selected for scrutiny before making reference to the TPO, the Assessing Officer may proceed to examine other aspects of the case during pendency of assessment proceedings but await the report of the TPO on the value of international transaction before making final assessment” and “….Role of the Assessing Officer after receipt of “arm’s length price”: Under sub-section (4) of section 92C, the Assessing Officer has to compute total income of the assessee having regard to the arm’s length price so determined by the TPO.”

SC held that “In view of the guidelines issued by the CBDT in Instruction No.3/2003 the Tribunal was right in observing that by not making reference to the TPO, the Assessing Officer had breached the mandatory instructions issued by the CBDT”. However, SC remarked that ITAT ought to have accepted Revenue’s submission of restoring the matter back to the file of AO so that appropriate reference could be made to TPO. Thus, SC opined that “It would therefore be upto the authorities and the Commissioner concerned to consider the matter in terms of Sub-Section (1) of Section 92CA of the Act”.

Accordingly, SC concluded by stating that “We, therefore, allow this Appeal to the aforesaid extent and direct that it would now be upto the Assessing Officer to take appropriate steps in terms of Instruction No.3/2003.”

Rationalisation of End-use Provisions of External Commercial Borrowings (ECB) Policy

A.P. (DIR Series) Circular No.04 dated July 30, 2019

As per the existing ECB Policy, ECB proceeds cannot be utilized for working capital purposes, general corporate purposes and repayment of rupee loans except when the ECB is availed from foreign equity holder for a minimum average maturity period of 5 years.

However, based on the feedback from stakeholders and with a view to further liberalize the ECB framework, it has been decided, in consultation with Government of India, to relax the end use restrictions.

Accordingly, eligible borrowers will now be permitted to raise ECBs for various purposes mentioned in the aforesaid Circular from recognized lenders, except foreign branches/overseas subsidiaries of Indian Banks subject to paragraph 2.2 (Limits and leverage) of the Master Direction No. 5 dated March 26, 2019.

Please refer aforesaid circular available on RBI website at

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11636&Mode=0

Foreign Exchange Management (Deposit) (Amendment) Regulations, 2019 – Acceptance of Deposits by issue of Commercial Papers

A.P. (DIR Series) Circular No.06 dated August 16, 2019 and Notification No. FEMA 5(R)(2)/2019-RB dated July 16, 2019

Regulation 6(3) of Foreign Exchange Management (Deposit) Regulations, 2016 (Deposit Regulations), in terms of which a Company may accept deposits through issue of Commercial Paper (CP), has been reviewed by RBI vis-à-vis other Statutes/Regulations – notably Section 45 U(b) of RBI Act, 1934 describing CP as one of the Money Market Instruments and Section 2(c) of Companies (Acceptance of Deposits), Rules 2014 which excludes any amount received against issue of, inter alia, CPs from definition of deposits. It has also been considered that Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017 – FEMA 20(R), already allow investments in CPs issued by the Indian Companies.

Therefore, with a view to bring in consistency in statutory provisions/regulations relating to Commercial Papers (CPs), the RBI has also amended the Deposit Regulations and deleted Regulation 6(3) of FEMA 5(R)/2016-RB vide Notification No. FEMA 5(R)(2)/2019-RB dated July 16, 2019.

M/s. Kingfisher Airlines Ltd vs. The Deputy Director of Income Tax, International Taxation, (IT), Circle-1(1) [TS- 430-ITAT-2019(Bang)] dated 23rd July, 2019

Facts

The assessee company made payments to non-residents for training pilots and cockpit crew to Dubai, Germany and Singapore respectively.

The training facilities were all located outside India, the training was given in the said countries and payments for the same were also made outside India.

The assessee did not treat these services as fees for technical services (FTS) as it claimed the training given by the companies to be part of their routine business and it did not involve any transfer of any technology to employees of the assessee.

AO opined that these payments having charter of FTS u/s 9(1) (vii) as well as relevant DTAA between India and respective countries and hence, it treated the assessee as defaulter under section 201(1) and 201 (1A) for non-deduction of TDS.

Aggrieved, both assessee and revenue appealed before Bangalore ITAT.

Issue

Whether the payment made to foreign aviation academies be regarded as FTS or Royalty?

Held

In case of payment made to M/s. Lufthansa, Germany, ITAT noted that a flight simulator was an essential part of training imparted to the pilots and aircraft crew

ITAT held that without the imparting of training by the instructors, the hiring of simulator on its own did not have any purpose and hence it could not be said that the assessee paid royalty for use of simulator.

Relying on the case of ABB FZ –LLC, ITAT held that the payment was not in the nature of Royalty.

In case of payments made to M/s. Alteon Singapore, ITAT noted that even if the provision of explanation 2 to section 195 did not exist at the time when the assessee made such payments it was not possible for the assessee to foresee an obligation to deduct tax at source by a retrospective amendment to the law.

Relying on Kerala Vision Ltd, ITAT held that the liability to deduct TDS cannot be fastened on an assessee due to such retrospective amendment in law.

ITAT held that CIT (A) erred in holding that FTS was taxable in India and ITAT thus allowed assessee’s appeal.

Adidas India Marketing (P) Ltd vs. Income tax officer – Ward 1(3), New Delhi [TS-439-ITAT-2019 (Del] dated 29th July, 2019

Facts

The assessee company was engaged in the business of sourcing, distribution and marketing products of brand name “Adidas” in India.

During the survey by IT department, it was observed that there was loss of stock by fire and the assessee had received the claim from Indian Insurer in respect of fire insurance policy.

It was further observed that the German parent Company of the assessee, received insurance claim after deduction of claim received by the assessee in India from the Indian Insurer with respect to Global Insurance Policy (GIP) taken with overseas insurer.

AO made addition of insurance claim received abroad by the parent company in the hands of the assessee.

Aggrieved, the assessee appealed before Delhi ITAT.

Issue

Whether insurance claim received by the German parent company is taxable as income in the hands of assessee under Income Tax Act?

Held

ITAT noted that the insurance policy against loss of stock by fire taken by the assessee from Indian Insurer was to secure stock in trade, tangible asset, whereas GIP taken by the German parent company from overseas insurer was for the purpose of securing investment made in subsidiaries or erosion of financial interest held in subsidiary, an intangible asset.

ITAT held that the loss in economic value of the financial interest constituting insurable interest in the case of German parent company, which though had been computed with reference to loss of stock by the fire in the hands of the assessee, was distinct and separate from the insurance claimed by the assessee from the Indian insurer.

ITAT noted that the German parent company paid premium separately for GIP and no part of it had been allocated to the assessee or reimbursed by the assessee.

ITAT observed that assessee was not a party to the contract under GIP. The assessee had no right or obligation under the said GIP to receive the said insurance claim from foreign insurer and thus income cannot be assessed in the hands of the assessee.

Relying on SC decision in case of ED Sassoon & Co Ltd, ITAT ruled that, the claim of insurance received by German parent company was not taxable in the hands of the assessee either u/s. 5 or u/s. 9(1)(i) of the Act.

M/s. Faurecia Automotive Holding vs. DCIT (IT) Circle–1, Pune [TS- 417-ITAT 2019 (Pun] dated 8th July, 2019

Facts

The assessee French Co. received re-imbursement towards expat’s salary cost from its Indian counterpart for providing technical services through its employee.

TDS was deducted by the Indian entity from the total salary paid to the expatriate including the amount initially paid by the assessee in France but later on reimbursed by the Indian entity on cost to cost basis.

Revenue taxed this cost as FTS u/s. 9(1) (vii). Aggrieved, the assessee appealed before ITAT.

Issue

Whether the reimbursement of cost will be taxable as fees for technical services (FTS)?

Held

ITAT observed that the expatriate was engaged by the Indian entity as its CEO and was working under the supervision & control of the Indian entity. Further the remuneration was directly fixed by the Indian entity like any other employee.

ITAT also noted that the amount was already taxed as ‘salaries’ in the hands of expats wherein TDS was also deducted by Indian entity from the total salary paid to the expatriate including the amount initially paid by the assessee in France, but later on reimbursed by the Indian entity on cost to cost basis.

ITAT noted that as per explanation to Sec. 9(1)(vii) the amount so referred will be taxed in the hands of the real recipient viz., the expatriate and not the non-resident entity.

ITAT ruled that due to absent satisfaction of ‘make – available’ condition the payment received by the assessee from Indian counterpart towards provision of IT Support Services does not constitute royalty/FTS under the Income-tax Act or under Article 13 of India-France DTAA.

ITAT thus ruled in favour of the assessee.

Cummins Inc vs. DDIT (International Taxation -I), Pune [TS-458-ITAT-2019 (PUN)] dated 7th August, 2019

Facts

The assessee company, a tax resident of USA, received a sum from KPIT-GBS (company located in India) as consideration for grant of right to render BPO services to its group entities globally.

AO held that the sum received from KPIT-GBS is accrued in India u/s. 9(1)(i) and constitutes Agency PE in terms of DTAA and thus chargeable to tax in India.

On appeal before DRP, it held that sum received by assessee is accrued in India u/s. 9(1)(i), however constitutes Service PE instead of Agency PE in terms of DTAA

Aggrieved, the assessee appealed before Pune ITAT.

Issue

Whether sum received by non-resident entity for granting rights to render BPO services is taxable in absence of PE in India?

Held

ITAT noted that the existence of business connection in India, is sine qua non for an income to accrue or arise in India in terms of section 9(1)(i) of the Act. Such business connection can be established directly by the non-resident by doing business activity in India or indirectly through some dependent agent etc.

ITAT held that business connection is established for the assessee, however considering the net effect of section 9(1)(i) and DTAA, only such amount of business income of a non-resident can be charged to tax in India as is attributable to the carrying on of operations in India.

ITAT further held that even if there is a business income of a non-resident, the same would escape Indian taxation net if the assessee is not carrying out any operations in India or does not have a PE in India.

ITAT held that service PE is ordinarily constituted when the foreign enterprise renders services in India to its customers and such services are rendered through its own employees or other personnel.

ITAT reversed the order of DRP and held that there are no services, which have been provided by the assessee in India through its employees or other personnel for which a sum was received from KPIT-GBS and thus no service PE of the assessee is established in India.

ITAT held that the consideration received is not chargeable to tax in the absence of any business operations carried out in India as provided in Explanation 1(a) to Sec.9(1)(i) or existence of PE as per the Treaty.

ITAT thus allowed the appeal of the assessee.

Pr. CIT vs. Gujarat State Petronet Limited (Gujarat High Court)

Rule 8D does not apply automatically merely because there exist mixed fund for disallowance U/s 14A

Tax Appeal No. 208 of 2019, Date of Judgement/Order: 9/7/2019 A.Y.2010-11

The language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the Assessing Officer is obliged to indicate that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income under the Act. In other words, the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to the Rule 8. In such circumstances, the Hon. High Court was not impressed by the submission canvassed on behalf of the Revenue that once there are mixed funds, Rule 8D would be attracted automatically.

Finance (No.2) Bill, 2019

264 Taxman (st.) 1.

A bill to give effect to the financial proposal for the financial year 2019-20 as introduce in Loksabha on 5/7/2019. The finance bill, speech of Minister of Finance Nirmala Sitharaman and Memorandum explaining the provisions relating to Direct Taxes are available on above citation of Magazine.

Finance (No.2) Act, 2019

264 Taxman (st.) 213

An Act to give effect to the financial proposal of the central government for the financial year 2019-20 as assented by president of India on 1/8/2019. The Act may be called Finance (No.2) Act, 2019. The certain provisions are deemed to have effect from 1st April, 2019. The certain provision are came to effect on such date as the central government may notify in the official gazette specify.

Section 139-Income tax return – Extension of Due date of filing Income tax return for the Assessment year 2019-20

264 Taxman (st.) 195

The CBDT vide circular F No. 225/157/2018/ITA.II dated 23/7/2019 hereby extend the “due date” as prescribed u/s. 139(1) of the Act for filing Income tax returns from 31st July 2019 to 31st August 2019 in cases of all tax payers who are liable to file their Income tax returns by the due date. The due date for filing Income tax return for the assessment year 2019-20 is 31st July 2019. The CBDT has clarified that the some of the tax payer are facing difficulties in filing their Income tax return due to various reason including extension of due date for issue of Form 16 for the assessment year 2019-20.

DTAA – Agreement for avoidance of double taxation and prevention of fiscal evasion with foreign countries – China – Amendment in notification No. GSR 331 (E) dated 5/4/1995

264 Taxman (st.) 205

The Central Government vide notification no SO 2562 (E) {No. 54/2019(F. No. 503/02/2008-FTD-II)} dated 17/7/2019 notifies the protocol, amending the agreement between the Government of the Republic of India and the Government of the People’s Republic of China for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on Income which was sign at New Delhi, India on 18/7/1994. The protocol has been sign at New Delhi on 26/11/2018. The readers may refer to above citation for complete text of the notification.

Income declaration scheme, 2016-Section 187 of the scheme- Time for payment of tax-Issues in respect of third instalment under the Income Declaration Scheme, 2016

264 Taxman (st.) 193

The Central Board of Directs Taxes vide circular no. 15/2019(F.No. 225/282/2017-ITA.II), dated 12/7/2019 has issued the following clarification in respect of difficulties faced by the declarants of Income declaration scheme, 2016(IDS). Who are required to pay their determined liability towards tax, surcharge and penalty pertaining to 3rd Instalment as per the Form-2 issued by the Pr.CIT/CIT, by 30/9/2017. The declarants were facing the difficulties while effecting payment of 3rd Instalment of IDS around 30/9/2017 due to closure of Banks on account of holidays due to which they couldn’t effect payment of 3rd Instalment within the stipulated time. The representation were made to the Board u/s. 119 of the Income tax Act read with section 195 of the IDS to grant the appropriate relief.

The CBDT, in accordance with the provisions of section 10 of the General Clause Act, 1897, hereby directs that all payment made/effected by the declarants on 3/10/2017 shall also be deemed to have been paid by the due date for the 3rd Instalment i.e. 30/9/2017.

The CBDT clarified that the payment effected through cheque/RTGS/Electronic transfer by the declarant 3/10/2017, deemed extended date for the 3rd Instalment, which was credited by the Bank till 5/10/2017 shall be deemed to be paid by 30/9/2017.

The CBDT also instructed that the all actions which are to be completed as a consequence of this order either by the declarants or the departmental authorities are to be completed, by 31/8/2019.

Guidelines for Compounding of Offences under Direct Tax Laws, 2019

264 Taxman (st.) 165

Section 279(2) of the Act provides that any offence under Chapter XXII of the Act may, either, before or after the institution of proceedings, be compounded by the Pr. CCIT/CCIT/Pr. DGIT/DGIT. The necessary guidelines are issued in excise of power u/s. 119 of the Act read with explanation below section 279 (3) of the Act.

The CBDT vide Circular F. No. 285/08/2014-IT (IN.V)/147, dated 14/6/2019 issued, in supersession of earlier Guidelines on this subject, including the Guidelines of the Board issued vide F. No. 285/35/2013 IT(Inv. V)/108 dated 23/12/2014, the following Guidelines are issued for compliance by all concerned. These Guidelines shall come into effect from 17/6/2019 and shall be applicable to all applications for compounding received on or after the aforesaid date. The applications received before 17/6/2019 shall continue to be dealt with in accordance with the Guidelines dated 23/12/2014.

The Features of the Guidelines are as under:

Compounding is not a matter of right.

Applicability of these Guidelines to prosecutions under IPC

Classification of Offences.

Eligibility Conditions for Compounding

Offences normally not to be compounded

Relaxation of time

Authority Competent to Compound an Offence

Compounding Procedure

Compounding charges

Fees for compounding

Applicability of these Guidelines to offences under other Direct Tax Laws

Format of application in the Form of Affidavit for Compounding of Offences under Income-tax Act, 1961 to be submitted separately by each applicant

Suggested Check List for Compounding as per the Guidelines issued by the BCDT vide F. No. 285/08/2014-IT(Inv.V)dated 14/6/2019 on Compounding of Offences

Format for Order u/s. 279(2) of the Income-tax Act, 1961 for Compounding of an Offence as mentioned in Para 11(ii) of the Guidelines issued by the CBDT vide F.No. 285/08/2014-IT(Inv-V) dated 14/6/2019 on Compounding of Offences.

Format for Order u/s. 279(2) of the Income-tax Act, 1961 for rejecting the Compounding of an Offence as mentioned in Para 11(ii) of the Guidelines issued by the CBDT vide F.No. 285/08/2014-IT(Inv-V) dated 14/6/2019 on Compounding of Offences.