Weekly Round-up on Tax and Corporate Laws | 01st to 06th November

This weekly newsletter analytically summarizes the key stories reported at taxmann.com during the previous week from 01st to 06th November 2021, namely:

(a) The CBDT rolls out Annual Information Statement (AIS) that showcases taxpayer’s financial information of the relevant year;

(b) CCI has no jurisdiction to check breach of municipal laws and non-allotment of a shop in the re-developed market;

(c) ITAT allows section 54 relief to a woman who purchased a new house jointly with her married daughter and son-in-law;

(d) AAR rules that instant mix flour which is not ready to eat is classifiable under HSN 2106 90 and taxable at 18%;

(e) High Court allowed refund of amount mistakenly paid as CGST and SGST instead of IGST if subsequently paid under the correct head; and

(f) Accounting treatment of classification and recognition of asset acquired without any cost.

1. CBDT rolls out Annual Information Statement (AIS) to provide details of the taxpayer’s financial info.

The Finance Act, 2020 has inserted a new Section 285BB to the Income-tax Act. It provides that income-tax authority shall make available an Annual Financial Statement (AIS) containing information of various financial transactions made by an assessee during the year.

This information includes interest income, dividend income, securities transactions, mutual fund transactions, foreign remittance, etc., related to the assessee.

The Income-tax Dept. has rolled out the new AIS on the compliance portal, which provides a comprehensive view of information to a taxpayer with a facility to capture online feedback.

The new AIS can be accessed from the new Income tax e-filing portal by clicking on the link of “Annual Information Statement (AIS)” in the “Services” tab.

If the taxpayer feels that the information is incorrect or relates to another person/year, duplicate, etc., a facility has been provided to submit online feedback. Taxpayers will be able to download AIS information in PDF, JSON, CSV formats.

If the taxpayer submits feedback on AIS, the derived information in TIS will be automatically updated in real-time. The derived information in TIS will be used for pre-filling of Return (pre-filling will be enabled in a phased manner).

Read the press release

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2. CCI has no jurisdiction to check breach of municipal laws and non-allotment of a shop in the re-developed market

In this significant ruling, the CCI held that it has no jurisdiction to check breach of municipal laws and non-allotment of a shop in the re-developed market as it is beyond the purview of Competition laws.

Facts

Informant filed information under Section 19(1)(a) of the Competition Act, 2002, against the Commissioner, Nanded Waghala Municipal Corporation Nanded (OP-1), and Shri Satish, Director, Sanman Buildcon Ltd. (OP-2), alleging contravention of the provisions of Sections 3 of the Act.

The Nanded Waghala Municipal Corporation decided to re-develop Mahatma Phule Market through OP2-builder by demolishing the old structure, and as a result, OP2 demolished the said market. The informant had a mobile handset repairing shop in the said market. Having lost his livelihood due to such demolition, he was aggrieved that OP2 had refused to rehabilitate the informant by denying allotment of a shop in a newly re-developed market. The informant also alleged that OP2 was pressuring OP1 to hand over land (on which said the market was constructed) on 90 years lease, which was illegal according to municipal rules, as the same could not be given beyond a period of 30 years to any private individual or private company.

CCI Ruling

The Commission held that the issues raised by the informant, such as breach of municipal by-laws, non-allotment of the shop in the re-developed market, are beyond the purview of the Act. Therefore, no case of contravention of provisions of the Act was made out against the opposite parties.

Read the Ruling

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3. ITAT allowed Section 54 relief to a woman who purchased a new house jointly with her married daughter and son-in-law

The Chandigarh Tribunal has ruled that since the assessee-mother had invested her entire sale consideration to purchase a new residential property, AO can’t deny Section 54 exemption merely because the new house was purchased in joint names of the assessee, her daughter, and son-in-law.

Facts

The assessee sold residential property and invested the entire amount in purchasing a new residential property in joint names of the assessee with her daughter and son-in-law. The share of three co-owners was 34 percent, 33 percent, and 33 percent, respectively.

The assessee claimed exemption under section 54. However, the Assessing Officer (AO) held that the assessee was entitled to exemption only to the extent of her share in the new residential property, i.e., 34 percent of total consideration invested by her.

On appeal, the CIT(A) allowed the claim because the entire capital gains earned by the assessee had been invested in the new property. AO filed the instant appeal before the Chandigarh Tribunal.

The Ruling

The Tribunal held that the AO had restricted the exemption to 34% of the Long-term Capital Gains without acknowledging the fact that the assessee had invested the entire Long Term Capital Gains in the purchase of a residential property.

In a similar issue of claim of exemption under Section 54B, the Punjab & Haryana High Court, in the case of Dinesh Verma [2015] 60 taxmann.com 461, had ruled that assessee would be entitled to the exemption on the amount invested by him after the sale of his original property.

Drawing parity from the same, the CIT(A) has rightly allowed the deduction under Section 54. The assessee had invested her entire sale consideration in the new property and was therefore entitled to exemption of the entire Long Term Capital Gains.

Read the Ruling

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4. Refund allowed of amount mistakenly paid as CGST & SGST instead of IGST if it was subsequently paid under correct head: HC

The Punjab and Haryana High Court has recently allowed the petition to refund the amount mistakenly paid as CGST & SGST instead of IGST. The Court has held that if the assessee mistakenly paid tax under the wrong head and subsequently paid under the correct head on its own, then the department is bound to refund tax wrongly paid by the assessee. This ruling is given by the Honorable High Court of Punjab and Haryana in the case of SBI Cards & Payment Services Ltd. v. Union of India.

Facts

The petitioner had inadvertently paid a tax of Rs. 108 crores approximately under head CGST instead of IGST. This was the mistake as the petitioner mistakenly considered supply undertaken by it to be Intra-State sales instead of Inter-State sales. It applied for a refund of the amount wrongly paid. The department required it first to make payment under the proper head of IGST, and then a request for a refund would be considered. Then the petitioner deposited another amount of Rs. 108 cores approximately as tax which was due on inter-state transactions. Even then, its plea for refund was rejected on the ground that the phrase ‘subsequently held’ in section 77 could only apply in a case where an adjudicating authority had held whether a transaction was inter-State or intra-State. It filed a petition against the same.

High Court

The Honorable High Court noted that the GST department did not dispute the amount of tax paid by the petitioner. There was no claim that any tax was due from the petitioner. It had also paid an additional amount of Rs. 108 crores approximately. Moreover, the CBIC has also issued a clarification that ‘subsequently held’ would also cover if this mistake was found by the taxpayer. Thus, the petition to grant a refund was allowed, and the department was directed to refund Rs. 108 crores approximately, which was deposited earlier by the petitioner towards CGST and SGST along with applicable interest.

Read the Ruling

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5. Instant mix flour which is not ready to eat is classifiable under HSN 210690 and taxable at 18%: AAR

The Authority for Advance Ruling has recently ruled that Instant Mix Flours that are not in ready to consume form are classifiable under HSN 2106 90. They require preparations for use, and after processing, such as cooking, etc., they would be ready for human consumption. Authority gives this ruling in the case of Ramdev Food Products (P.) Ltd.

Facts

The applicant was engaged in the supply of varieties of instant mix flours under a brand name. The flours would need further processing and are not in ready-to-consume form. It filed an application for the advance ruling to determine the classification and applicable rate of tax under the GST Act on the supply of instant mix flours for Gota, Khaman, Dalwada, Dahiwada, Idli, Dhokla, Dosa, Pizza, Methi Gota, and Handvo.

AAR

The Authority for Advance Ruling observed that the Product Instant Mix Flours were preparations for use. After processing, such as cooking, carrying out the detailed procedure for cooking as mentioned on the packets of all the said products, they would be ready for human consumption. Moreover, these items contained spices and additives apart from flour of dried leguminous vegetables, rice, and wheat, in different proportions. In view of the Explanatory Notes of the HSN, these products were excluded from the Heading Nos. 1101 and 1102. Since these products were not explicitly mentioned under any specific Tariff item and thus the products would merit classification under the residual entry ‘other’ at Heading No. 210690 and taxable at 18%.

Read the Ruling

Indian Taxation System has categorized over 1211 goods for levy of GST under 6 broad categories or tax-slabs. These are 0% or No Tax, 5%, 12%, 18% and 28%. It is very important to know in which of these categories your product or good has been classified. You can easily find that with a search using commonly used word for the product. Taxmann's GST Rate Finder Tool can be used to find the HSN Code for the goods or products for invoicing purposes.

6. Classification and recognition of an asset acquired without any cost

Example

S Ltd. is engaged in the manufacturing and marketing of neem-coated urea. The government has introduced the Direct Benefit Transfer scheme. In this scheme, the Department of Fertilizers imposes the fertilizers company’s responsibility to purchase and install point of sale devices at retailers’ locations from the unpaid retailers’ margin. Accordingly, the company has purchased and installed the point of sale device and obtained an undertaking from the retailer in which it is mentioned that the company has the right to withdraw the device. The cost of acquiring these devices supplied to retailers has been debited to the payable accumulated retailer margin held by the company, but not shown in the balance sheet as an asset.

Whether the accounting treatment followed by the company is correct? If not, what should be the correct accounting treatment for the same?

Answer

Assets are those resources that the company controls due to past events, and future economic benefits are expected to flow from it. Therefore, control is an essential factor while recognizing assets. Also, Ind AS 38, states that an entity controls an asset where it has the right to obtain its future economic benefit and to restrict others from those benefits. As mentioned above, “the company has the right to withdraw the device” indicates the company exercises control.

Further, if an entity does not incur any expenditure to procure any asset, it restricts an item for satisfying the definition of an asset and from recognition in the balance sheet. Therefore, point of sale devices should be capitalized and shown in the balance sheet as an asset.

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