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News Updates

Weekly Round-Up of Tax Cases: May 15 To May 21

Mariya Paliwala
22 May 2022 6:53 AM GMT
Weekly Round-Up of Tax Cases: May 15  To May 21
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Supreme Court GST Council Recommendations Not Binding On Centre & States; Both Parliament & State Legislatures Can Legislate On GST : Supreme Court Case Title : Union of India and Anr versus M/s Mohit Minerals Through Director Citation : 2022 LiveLaw (SC) 500 In a significant verdict, the Supreme Court held that the recommendations of the GST council are not binding on...

Supreme Court

GST Council Recommendations Not Binding On Centre & States; Both Parliament & State Legislatures Can Legislate On GST : Supreme Court

Case Title : Union of India and Anr versus M/s Mohit Minerals Through Director

Citation : 2022 LiveLaw (SC) 500

In a significant verdict, the Supreme Court held that the recommendations of the GST council are not binding on the Union and the State Governments.

A bench led by Justice DY Chandrachud held that the Parliament intended that the recommendations of the GST Council will have persuasive value.

Importantly, the Court held that both the Parliament and the State Legislatures can equally legislate on matters of Goods and Service Tax.

GST Council Has Unequal Voting Structure, Can Be An Avenue For Political Contestation : Supreme Court

Case Title : Union of India and Anr versus M/s Mohit Minerals Through Director

Citation : 2022 LiveLaw (SC) 500

While holding that the recommendations of the Goods and Services Tax(GST) Council are not binding on the Centre and the States, the Supreme Court has highlighted the unequal voting structure and the possibility of political contestations in the Council.

The Court noted that the recommendations of the GST Council are not based on a unanimous decision but on a three-fourth majority of the members present and voting, where the Union's vote counts as one-third, while the States' votes have a weightage of two-thirds of the total votes cast.

Delhi High Court

Time Of 8 Hours To File Reply To Show Cause Notice, Not Reasonable: Delhi High Court

Case Title: Rahul Biala Vs ITO

Citation: 2022 LiveLaw (Del) 455

The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma has held that the time of eight hours to file a reply to the show cause notice was neither reasonable nor effective. The assessee could not have provided relevant information and documents to establish his case in such a short period of time.

AO & PCIT Failed To Consider Balance Of Convenience And Irreparable Injury While Deciding The Stay Application: Delhi High Court

Case Title: Seven Seas Hospitality Private Limited Versus PCIT

Citation: 2022 LiveLaw (Del) 467

The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma has held that neither the Assessing Officer nor the Principal Commissioners of Income Tax (PCIT) have considered the three basic principles, i.e., the prima facie case, balance of convenience, and irreparable injury, while deciding the stay application.

Delhi High Court Directs Designated Committee To Manually Process Payments Of Assessee Under SVLDR Scheme

Case Title: SDB Infrastructure Pvt. Ltd. Versus Ministry of Finance

Citation: 2022 LiveLaw (Del) 468

The Delhi High Court bench of Justice Rajiv Shakdher and Justice Poonam A. Bamba has directed the designated committee to manually process payments of an assessee under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS).

Non Consideration Of Detailed Reply To Show Cause Notice Submitted After Stipulated Time, Delhi High Court Quashes Reassessment Order

Case Title: Divya Capital One Private Limited Vs. ACIT

Citation: 2022 LiveLaw (Del) 475

The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma has quashed the reassessment order, alleging income of more than Rupees one lakh crore having escaped assessment on the grounds of violation of natural justice.

Initiation Of Reassessment Proceedings By Income Tax Officer Without Jurisdiction: Delhi High Court Quashes The Proceedings

Case Title: Indus Tower Ltd. Versus ITO

Citation: 2022 LiveLaw (Del) 477

The Delhi High Court bench of Justice Manmohan and Justice Dinesh Kumar Sharma held that since the petitioner jurisdictional Assessing Officer is headquartered in Delhi, the income tax officer from Jaipur had no authority to send a notice proposing the beginning of reassessment proceedings.

No Opportunity Of Personal Hearing Granted To Taxpayer: Delhi High Court Quashes Assessment Order

Case Title: Omkar Nath Versus National Faceless Assessment Centre

The Delhi High Court bench of Justice Rajiv Shakdher and Justice Talwant Singh has quashed the assessment order as an opportunity of personal hearing was not granted to the taxpayer.

Bombay High Court

Assessment Can't Be Reopened On Mere Change Of Opinion Of AO: Bombay High Court

Case Title: Bhavani Gems Private Limited Versus Assistant Commissioner of Income Tax

The Bombay High Court, while quashing the reassessment notice, held that the assessment could not be reopened on a mere change of opinion of the Assessing Officer (AO).

The division bench of Justice K.R. Shriram and Justice N.R. Borkar observed that the reopening of assessment was merely on the basis of a change of opinion of the Assessing Officer from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment.

Loss On Trading In Derivatives Of Securities Not A Speculative Loss, Can Be Set Off Against Business Income: Bombay High Court

Case Title: Souvenir Developers (I) Pvt. Ltd. versus Union of India

The Bombay High Court has ruled that transactions in respect of trading in derivatives carried out in a recognized stock exchange are excluded from the definition of "speculation transaction" under the Income Tax Act, 1961.

The Bench, consisting of Justices R.D. Dhanuka and S.G. Mehare, held that an assessee is thus entitled to claim set off of the loss suffered by it in the said transactions in derivatives against its business income. The Court added that the explanatory notes on the provisions of the Finance Act, 2005, clearly indicate that an eligible transaction in respect of trading in derivatives of securities, carried out on a recognized stock exchange, shall not be deemed as a speculative transaction.

Karnataka High Court

18% GST Payable On 'Pattadar Pass Book Cum Title Deed' ; Karnataka High Court Upholds AAR Ruling

Case Title: M/s. Manipal Technologies Ltd. Versus State of Karnataka

The Karnataka High Court bench of Justice S. Sujatha and Justice Shivashankar Amarannavar, while upholding the ruling of the Authority of Advance Ruling (AAR), held that 18% GST is payable on 'pattadar pass book cum title deed'.

Allahabad High Court

Applicability of GST On Royalty On Mining: Allahabad High Court Directs Assessee To Reply To SCN

Case Title: M/s Ashish Pandey Versus UOI

The Allahabad High Court bench of Justice Devendra Kumar Upadhyaya and Justice Brij Raj Singh, while dealing with the issue of the applicability of GST on royalties on mining, has directed the assessee to reply to the show cause notice issued by the department.

Calcutta High Court

Reassessment Order Passed Without Issuance of Section 148 Notice Is Not Valid: Calcutta High Court

Case Title: Govardhan Commodities Pvt. Ltd. Vs. Assistant/Deputy Commissioner of Income Tax

Case Citation: 2022 LiveLaw (Cal) 176

The Calcutta High Court bench of Justice Md. Nizamuddin has ruled that the reassessment order passed without issuance of notice under Section 148 of the Income Tax Act is not valid.

Technical Issues In Income Tax Portal: Calcutta High Court Gives Fresh Opportunity To Assessee

Case Title: Bhadrish Jayantilal Sheth Versus Income Tax Officer

Case Citation: 2022 LiveLaw (Cal) 191

The Calcutta High Court bench of Justice Md. Nizamuddin has directed the assessing officer to do a new assessment proceedings as taxpayers could not furnish answers to the notice due to the technical glitches in the income tax portal.

Orissa High Court

Commission Paid To Persons Who Are Not Beneficial To Business Of Assessee Is Taxable : Orissa High Court

Case Title: M/s. Oripol Industries Ltd., Balasore v. Joint Commissioner of Income Tax, Balasore and Ors.

Citation: 2022 LiveLaw (Ori) 69

The Orissa High Court has dismissed a challenge against an order of the Income Tax Appellate Tribunal, Cuttack (ITAT) which disallowed commission expenses as claimed by the appellant. It held that the appellant was not able to prove the expertise of persons to help him in business to whom the said commission was paid.

A Division Bench of Chief Justice Dr. S. Muralidhar and Justice Radha Krishna Pattanaik observed, "Nevertheless, claiming that each of the seven persons to whom commission was paid actually had the expertise to help the Appellant procuring the IOF from different sources appears to be stretching things a bit too far."

Chandigarh High Court

SCN Issued By DRI Was Without Authority of Law: Chhattisgarh HC Stays Proceedings

Case Title: Vijay Baid Versus Union Of India

The Chhattisgarh High Court bench of Justice Parth Prateem Sahu has quashed the show cause notice which was issued by the DRI and stayed the proceedings.

Telangana High Court

CIT(A) Is A Quasi Judicial Authority, Not Bound By Administrative Circulars Issued By CBDT: Telangana High Court

Case Title: APR Jewellers Private Limited Versus The Commissioner of Income Tax

The Telangana High Court held that the CIT (A) is a quasi judicial authority and is not bound by the administrative circulars issued by the Central Board of Direct Taxes (CBDT).

The division bench of Justice Ujjal Bhuyan and Justice Surepalli Nanda has remanded the matter back to the CIT (A) for a fresh decision on the prayer for stay of the petitioner in accordance with law after complying with the principles of natural justice.

Madhya Pradesh High Court

Delay Of 18 Months In Filing Appeal Without Reasonable Justifications: Madhya Pradesh High Court Upholds Cancellation Of GST Registration

Case Title: M/s Rajdhani Security Force Pvt. Ltd Versus UOI

The Madhya Pradesh High Court bench of Justice Sheel Nagu and Justice Maninder S. Bhatti has upheld the cancellation of GST registration as there was a delay of 18 months in filing the appeal without reasonable justification.

Rajasthan High Court

Rajasthan High Court Refuses To Grant Priority of Government Dues Over Debts Due To Secured Creditors

Case Title: Asstt. Commercial Taxes Officer Versus M/s. Punusumi India Limited

The Rajasthan High Court bench of Justice Ashok Kumar Gaur has refused to grant the priority of the government dues over the debts due to secured creditors.

Meghalaya High Court

Applicability Of GST On Royalty Paid For Mining Limestone: Meghalaya High Court Stays GST Recovery

Case Title: M/s Hills Cement Company Limited vs. The Union of India & Ors

The Meghalaya High Court bench headed by Chief Justice Sanjib Banerjee and Justice W. Diengdoh has stayed the recovery of GST on royalty paid for mining limestone.

Gauhati High Court

Clarificatory Circular Operates Retrospectively And Does Not Bring Anything New: Gauhati High Court

Case Title: Sanjib Das versus Union of India and Ors.

The Gauhati High Court has reiterated that a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) which only clarifies the CBIC's original instructions and does not bring anything new is clarificatory in nature and operates retrospectively.

The Single Bench of Justice Devashis Baruah held that the exceptions enumerated in the clarificatory circular issued by CBIC, that enumerated exceptions with respect to holding pre-show cause notice consultation, would operate retrospectively from the date of issuance of CBIC's original instructions relating to pre-show cause notice consultation.

CESTAT

Compensation Received For Cancellation Of Coal Blocks Under Supreme Court Order, Not Liable To Pay Service Tax: Kolkata CESTAT

Case Title: M/s. Jindal Steel & Power Limited versus Principal Commissioner of CGST & CX, Ranchi Commissionerate

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that compensation received under a statute for cancellation of coal blocks/mines vide an order of the Supreme Court, cannot be considered as a taxable service of tolerating a situation and is thus not exigible to Service Tax.

The Bench, consisting of members P.K. Choudhary (Judicial Member) and P.V. Subba Rao, (Technical Member), held that the question of tolerating something and receiving a compensation for such tolerance pre-supposes that the person had a choice to either tolerate or not tolerate, and that the person chose to tolerate. The CESTAT added that the appellant had not chosen to tolerate the cancellation since the cancellation was in pursuance of the order of the Supreme Court and not as a result of a contract to tolerate cancellation.

Galvanised Solar Structure Manufactured And Cleared For Initial Setting Up Of Solar Power Plants Exempted From Excise Duty: CESTAT

Case Title: M/s. KEC International Limited Versus Commissioner of Central Excise and Central Goods & Service Tax (Appeals)

The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that galvanised solar structures manufactured and cleared for the initial setting up of solar power plants are exempted from excise duty.

No Service Tax Payable On Service Charges Collected By Rajasthan Cooperative Dairy Federation From Milk Unions: CESTAT Delhi

Case Title: M/s Rajasthan Co-operative Dairy Federation Limited versus Commissioner, Central Excise, Jaipur

The Delhi Bench of Custom, Excise & Service Tax Appellate Tribunal (CESTAT) has ruled that no service tax is payable on the service charges collected by the Rajasthan Cooperative Dairy Federation from the milk unions or district cooperative societies for the services rendered to them.

The Bench, consisting of Justice Dilip Gupta (President) and technical member P.V. Subba Rao, held that although the Rajasthan Cooperative Dairy Federation and the milk unions/district cooperative societies are registered under the Rajasthan Cooperative Societies Act, 2001 and are thus distinct legal entities, the nature of the relationship between them continues to be that of a club and its members. The CESTAT ruled that no service tax was payable on the services rendered by the Rajasthan Cooperative Dairy Federation to the milk unions.

ITAT

No Further Verification Required If Cash Deposit Is Up To Rs 2.5 Lakhs During The Demonetization: ITAT Delhi

Case Title: Aniket Agarwal versus Income Tax Officer

The Delhi Bench of ITAT, consisting of judicial member Chandra Mohan Garg, has held that no further verification is required in the case of an individual earning income from salary, who has deposited an amount of up to Rs 2,50,000 during the demonetization period.

Husband Entitled Capital Gain Exemption For Asset Bought In The Name Of The Wife: ITAT

Case Title: Kaushlendra Singh Versus ITO

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) consisting of Dr. S. Seethalashmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) held that the husband was entitled to a capital gain exemption for assets bought in the name of the wife.

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