Quvisor’s weekly refresher on Legal updates in India: Jan 24, 2020


Notifications levying IGST on importer on component of Ocean Freight paid by foreign seller unconstitutional – Guj. HC
GST : No tax is leviable under Integrated Goods and Services Tax Act, 2017, on ocean freight for services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India upto customs station of clearance in India and levy and collection of tax of such ocean freight is not permissible in law; Notification No.8/2017-Integrated Tax (Rate) dated 28-6-2017 and Entry 10 of Notification No.10/2017-Integrated Tax (Rate) dated 28-6-2017 are

Filing of GSTR-3B to be introduced in a staggered manner
The government will enable filing of GSTR-3B in a staggered manner. For taxpayers having annual turnover of Rs. 5 crore and above in the previous F.Y., due date will be 20th of next month. Taxpayers having annual turnover below Rs. 5 crore will be divided into 2 categories. For taxpayers of 15 specified states, GSTR-3B will be filed by 22nd of next month and for remaining specified 22 States, GSTR-3B shall be filed by 24th of next month.

ITC available to authorized dealer of motor vehicles on vehicles being used for demonstration purposes
GST : Where applicant, an authorised dealer of motor vehicles, uses certain demo cars for demonstration purpose, it is entitled to avail input tax credit charged on inward supply of motor vehicles which are used for said demonstration purpose in course of business of supply of motor vehicle as input tax credit on capital goods and same can be utilised for payment of output tax payable under the Act

Detention of goods & vehicle on account of different route opted by driver was not justified: HC
GST: Where Competent Authority had detained goods of assessee under transport and also vehicle at a place vizhavila on ground that e-Way Bill showed that it was to cover a transportation from Pazhoor-Peppathi to Vettoor road-Kaniyapuram, whereas Vazhayila was not on that route, detention of goods solely because driver had opted for a different route was not justified


Income tax:

PAN not linked with Aadhar shall not be inoperative till SC’s larger bench finalise the validity of Aadhar Act
INCOME-TAX : Where relief claimed in petition is to direct department to accept return of income of applicant for assessment year 2017-18 furnished electronically under section 139(1) and to declare that section 139AA violates article 21 of Constitution of India, since on question as to whether Aadhaar Act was rightly introduced as a ‘Money Bill’, Supreme Court vide in case of Rojer Mathew v. South Indian Bank Ltd. has referred issue for consideration by a Larger Bench and therefore, validity of Aadhaar Act has not attained finality, with a view to balance equities, the High Court ordered that PAN of applicant shall not be declared inoperative and applicant would not be in default in any proceedings only for reason that permanent account number is not linked with Aadhaar or Aadhaar number is not quoted and applicant shall not be subjected to proviso to sub-section (2) of section 139AA till judgment of Supreme Court in Rojer Mathew v. South Indian Bank Ltd. [2019] 111 taxmann.com 208 is delivered and available

Loss suffered during first year of business started with husband’s fund is to be clubbed entirely
INCOME TAX : Where wife of assessee started business of Futures and Options (F&O) by having some contribution from assessee in shape of gifts and incurred loss, entire amount of loss resulting from said business of F&O with gifts received from assessee was liable to be clubbed in hands of assessee in terms of Explanation 3 read in conjunction with section 64(1)(iv). Therefore, assessee was entitled to club full loss from business of F&O in his personal income
Assessee’s wife started new business of Futures and Options on 18-9-2013. Assessee claimed that she incurred loss of Rs. 31.56 lakh in such business which was clubbed in his hands. The Assessing Officer accepted the primary claim of the assessee, however, he did not accept the assessee’s contention that entire loss of Rs. 31.56 lakh be set off against the assessee’s income. Considering the mandate of Explanation 3 to section 64(1), the AO held that only that part of the business loss incurred by the assessee’s wife could be set off against the assessee’s income which bears the proportion of amount of investment out of gift on the first day of previous year to the total investment in the business as on the first day of previous year.
In case of newly set up business, the previous year shall be the period beginning with the date of setting up of the business and ending with said financial year. Thus, in the instant case, the amount of assets received by wife as invested in business and total investments in the business including assets received from assessee will be same. Therefore, going by the explanation 3 read in conjunction with section 64(1)(iv), the entire amount of loss resulting is liable to clubbed in hands of assessee.

Onus to prove that a transaction is benami is upon one who asserts it: SC
INCOME TAX/BENAMI ACT : Benami transactions are forbidden by reason of section 3; no action lies, nor can any defense in a suit be taken, based on any benami transaction in terms of section 4 and onus of establishing that a transaction is benami is upon one who asserts it

Sec. 80G approval couldn’t be denied in absence of proof that funds of trust were utilized for private purposes
INCOME TAX : Where High Court upheld Tribunal’s order holding that in absence of any evidence on record showing that funds of assessee trust were being utilised for private purposes, Assessing Officer was not justified in refusing to grant approval under section 80G(5)(vi), SLP filed against said order was to be dismissed


Corporate Laws:

Valuation of infrequently traded shares of target-co. to be carried out as per valuation factors of Takeover Code
COMPANY LAW/SEBI: Where target company located abroad was a going concern but its shares were infrequently traded, in terms of Regulation 8 of takeovers Regulations 2011, valuation of shares had to be carried out by taking into account valuation parameters including book value, comparable trading multiples and such other parameters as were customary for valuation of shares of such companies

NCLAT directs DLF to register transfer of 60,000 shares to investor’s legal heirs
IBC: Where principal borrower availed unsecured loan from financial creditor and corporate debtor stood as guarantor on behalf of principal borrower, on default of principal borrower in repayment of loan amount, corporate debtor being guarantor was liable to pay due amount

Broker violated SEBI norms by transferring clients’ money from equity account to commodity account

COMPANY LAW/SEBI ACT: Where stock broker transferred money from clients account in securities market to client’s accounts in broker’s group company dealing in commodities market without authority of client, same was in violation to SEBI’s Circular No. SMD/SED/CIR/93/23321 dated 18-11-1993

SEBI rejects Axis Bank’s plea from accessing pledged Karvy shares

COMPANY LAW : Pledging of securities of unpaid clients requires taking of ‘explicit authorization’ by stock broker from each such client and in respect of each such pledging. Further, in this regard, SEBI’s circular dated 23-4-2010 makes it clear that PoA given by client to broker can be used for purpose of pledging in favour of stock broker, ‘only’ for meeting margin requirements


Insolvency & Bankruptcy Code:

Contention of pre-existing dispute can’t be accepted if dispute wasn’t raised within 10 days of demand notice
IBC : Where corporate debtor defaulted in payment of dues towards supply of Digital Set Top Boxes by operational creditor and no dispute was raised within statutory period of 10 days from date of issuance of demand notice, CIRP petition was to be admitted

Financial creditor can claim its due from guarantor on default of principal borrower in repayment of loan
IBC: Where principal borrower availed unsecured loan from financial creditor and corporate debtor stood as guarantor on behalf of principal borrower, on default of principal borrower in repayment of loan amount, corporate debtor being guarantor was liable to pay due amount

Order admitting CIRP u/s 9 to be set aside when parties has reached settlement prior to constitution of CoC
IBC: Where parties had reached settlement prior to constitution of ‘Committee of Creditors’, order admitting CIRP under section 9 was to be set aside

NCLAT stays prohibition on former bankers’ appointment as Insolvency Resolution Professionals
IBC : NCLAT stays operation of order of NCLT whereby it directed substitution of Resolution Professional who was ex bank employee on ground that such Resolution Professional was unlikely to act fairly and cannot be experted to act as an independent umpire

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