Weekly Round-up on Tax and Corporate Laws | 14th to 19th March 2022

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from 14th to 19th March 2022, namely:

(a) CBDT allows manual filing of Form No. 3CF for approval under Section 35

(b) CBDT condones delay in filing of Form 10-IC by Cos. opting for Section 115BAA during AY 2020-21

(c) CBIC notifies powers of Commissioners for adjudication of SCNs issued by officers of DGGI

(d) CCI drops suo-motu inquiry initiated against Amazon based on Reuters Report

(e) Mere pendency of certain proceedings before State Authority can’t restrain Central Authority from issuing summon

(f) Preparations required before the commencement of the Bank Branch Audit

1. CBDT allows manual filing of Form No. 3CF for seeking approval under Section 35

An assessee can claim deduction under section 35 for the amount contributed to a company for undertaking scientific research. However, such deduction can be claimed if such a company is approved on this behalf. For getting such approval, the company must make an application in Form 3CF and fulfil the prescribed conditions.

The application for approval shall be furnished electronically under the digital signature if the return of income is required to be furnished under the digital signature. In any other case, such application shall be furnished electronically through an electronic verification code. Further, the application shall be verified by the person authorized to verify the return of income.

Due to the non-availability of Form No. 3CF on the e-filing portal, the CBDT has allowed the applicants seeking approval under section 35(1)(ii)/(iia)/(iii) to file form physically.

The applicant may file Form No. 3CF manually till 30-09-2022, or the date of availability of Form No. 3CF for electronic filing on the e-filing website, whichever is earlier.

Read the Circular

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2. CBDT condones delay in filing of Form 10-IC by Cos. opting for Sec. 115BAA during AY 2020-21

Section 115BAA of the Income-tax Act allows a domestic company to pay income tax at 22% plus surcharge and cess, provided the total income is computed without claiming specified exemption or deductions. A domestic company can exercise this option regarding any assessment year by furnishing the necessary details on or before the due date for furnishing of return of income (ITR). The benefit of Section 115BAA was available with effect from Assessment Year 2020-21.

The eligible domestic company has to exercise this option by filing Form No. 10-IC on or before the due date for furnishing the return of income, and once such option is exercised, it shall apply to subsequent assessment years.

The CBDT has received representation from the stakeholders stating that Form 10-IC could not be filed with the return of income for the Assessment Year 2020-21, which was the first year of filing this form. Thus, the delay in filing Form 10-IC may be condoned.

Considering the matter, the CBDT has issued directions that the delay in filing of Form 10-IC for Assessment Year 2020-21 is condoned if the domestic companies satisfy the following conditions:

(a) The ITR for Assessment Year 2020-21 has been filed on or before the due date specified under section 139(1), i.e., the original due date of filing of return;

(b) The domestic company has opted for section 115BAA under the ‘Filing Status’ in ‘Part A-GEN’ of the ITR-6 Form; and

(c) Form 10-IC is filed electronically on or before 30-06-2022 or 3 months from the end of the month in which this Circular is issued, whichever is later.

Read the Circular

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3. CBIC notifies powers of Commissioners for adjudication of SCNs issued by officers of DGGI

The CBIC has issued the notification to empower Additional Commissioners of Central Tax/Joint Commissioners of Central Tax of some of the specified Central Tax Commissionerates, with All India Jurisdiction for the purpose of adjudication of the show cause notices issued by the officers of the Directorate General of Goods and Services Tax Intelligence (DGGI).

Notification No. 02/2017-Central Tax, dated 19-06-2017, has been amended to provide that the Central Tax officers of Audit Commissionerates and DGGI shall exercise the powers only to issue show-cause notices. A show-cause notice issued by them shall be adjudicated by the competent Central Tax officer of the executive Commissionerate in whose jurisdiction the noticee is registered when such cases pertain to jurisdiction of one executive Commissionerate of Central Tax only.

There may be cases where the principal place of business of noticees fall under the jurisdiction of multiple Central Tax Commissionerates or where multiple show-cause notices are issued on the same issue to different noticees, having principal place of business falling under the jurisdiction of multiple Central Tax Commissionerates. For the purpose of adjudication of such show-cause notices, Additional/Joint Commissioners of Central Tax of specified Commissionerates have been empowered with All India jurisdiction. In this regard, Notification No. 02/2022-Central Tax, dated 11-03-2022, has been issued.

Read the notification

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4. CCI drops suo-motu inquiry initiated against Amazon based on Reuters Report

In this important ruling in the matter of ‘Allegations about private label brands related to Amazon sold on Amazon India marketplace’, In re [2022] 136 taxmann.com 198 (CCI), the CCI decided to drop the suo-motu inquiry initiated against Amazon, based on a Reuters report, after it received the satisfactory submissions.

Facts

The regulator (CCI) had taken suo moto cognizance of the matter after a report stated that “Amazon copied products and rigged search results to promote its brands, documents show”. The CCI directed Amazon Seller Services Pvt. Ltd. (ASSPL) to file certain information as sought, duly supported by an affidavit within four weeks of receipt of the order and subsequently, on the request of ASSPL, the time for submission was extended.

Accordingly, ASSPL filed confidential and non-confidential versions of the information. However, the same was not supported by an affidavit, as was directed. Subsequently, ASSPL filed the supporting affidavit. ASSPL has submitted that the Reuters Report, relied upon by the Commission to initiate suo motu action, contained fundamental factual errors and inaccurate conclusions, which are based on a misplaced understanding of ASSPL’s business.

ASSPL further contended that it neither owns nor sells any product, including products of Amazon brands, on the Amazon website. The sellers offer all products, including Amazon brands, to customers for sale on the website. They further stated that as of FY 2020-21, the gross merchandise sales arising from the sale of Amazon-branded products was 1.26% of total sales on the website, which is minuscule.

ASSPL stated that two wholly-owned subsidiaries of Amazon.com Inc. (ACI) own intellectual property rights in relation to Amazon brands. They license these brands through other group entities to third-party sellers in India (i.e., licensees)

CCI’s ruling

Based on the submissions received by ASSPL on affidavit, wherein it had categorically denied the allegations contained in the Reuters report, the Commission had decided not to pursue this inquiry at this stage. The Commission abundantly cleared that should the conduct of ASSPL or any of its related entities be found not to align with the provisions of the Competition Act, 2002 or should the submissions made by ASSPL in its affidavit be found to be incorrect, this order shall not come in the way, in any manner, in examining the conduct of ASSPL or any of its related entities either past, present or future, as may be warranted, under law.

The Commission further emphasized that the observations made in this order may not be construed as expressing any opinion on the merits of the case, in any manner, in respect of any other ongoing proceedings against ASSPL or any other entity, before the Commission or in any other Forum/Tribunal/Court.

Read the Ruling

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5. Mere pendency of certain proceedings before State Authority can’t restrain Central Authority from issuing summon: HC

The Madras High Court has recently held that if Central GST Authority issued summon under section 70 for making an enquiry, such proceedings could not wait merely on the ground that some other proceeding was pending before State GST Authority. The Madras High Court gave this ruling in the case of Kuppan Gounder P.G. Natarajan v. Directorate General of GST Intelligence, New Delhi.

Facts

The Central GST Authority issued summon to the assessee stating that an enquiry was conducted in connection with the assessee’s company under CGST and directed him to give evidence or produce documents in his possession or under his control. The assessee filed a writ petition for quashing impugned summons. The assessee submitted that after some scrutiny State Authority had already issued to him, a notice intimating discrepancies in return and proceedings were in progress. It was argued that the Central Authority was bound to wait till the conclusion of proceedings initiated by State Authority, and thus summon issued by Central Authority was without jurisdiction.

High Court

The High Court observed that the very purpose and object of section 6(2)(b) of CGST Act, 2017 is to ensure that parallel proceedings are to be avoided on the same subject. It is to be established that subject matter is one and same and mere pendency of certain proceedings before State Authority could not be a ground to restrain Central Authority from issuing summon and conduct an investigation regarding impugned allegations. Therefore, all these factors would require adjudication before the competent authority. If the summons were kept in abeyance at this stage, the same would cause prejudice to the interest of the Revenue. Therefore, the petition was liable to be dismissed.

Read the Ruling

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6. Pre-commencement Preparation for Bank Branch Audit

Banks play an essential role in the development of any country. Like all economic activities, the banking sector is also exposed to various operational risks. One of the most important factors for the safe and sound banking sector is reliable ?nancial information supported by quality bank audits.

For this, the Statutory Audit of Banks plays a significant role, and equal importance is given to it by RBI. The following guidelines are available regarding preparation required before the commencement of Bank Branch Audit:

(a) It is necessary to read the Appointment Letter carefully and duly consider all the terms and conditions mentioned therein, which are required to be followed during the audit process.

(b) A formal communication regarding the acceptance of the appointment shall immediately be sent by the Statutory Branch Auditor (SBA).

(c) The SBA shall formulate a proper work plan in accordance with SA 300, Planning an Audit of Financial Statements.

(d) An Audit Engagement Letter shall be issued according to SA 210, “Agreeing on the terms of Audit Engagements” accompanying the requisition letter containing primary details and information required to formulate the adequate audit plan and decide the composition of the audit team.

(e) No Objection Certificate (NOC) from the previous auditor shall be obtained by the SBA, to know whether he has any objection to accepting such an appointment for any valid reasons.

(f) The SBA shall obtain a preliminary understanding of the IT environment and various controls put in place by the Bank.

(g) The SBA shall carefully study RBI circulars, master directions, Bank guidelines, and closing circulars for smooth conduct of the audit.

(h) The SBA should carefully review other reports such as the previous year’s audit reports, the previous year’s Annual Report, the latest internal inspection reports of bank officials, etc. to check whether the adverse comments mentioned in such reports are taken into consideration.

Read the story

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