Court Explains law on what constitutes Specified Domestic Transactions

Domestic TP : Court Explains law on what constitutes Specified Domestic Transactions

Bombay High Court in matter of HDFC Bank Ltd v/s Assistant Commissioner of Income Tax

In this case the Petitioner purchased loans of HDFC Ltd. of more than Rs. 5,000 Crores, and Tax authorities held that said transaction entered into by Petitioner is “Specified Domestic Transactions” (here after referred as SDT) as per section 92BA(i) of Income Tax Act and Arms Length Price of said transactions is required to be determined.

Court observed that section 92BA(i) read with section 40A(2)(b) clarifies that for transactions to fall within the meaning of a SDT, the assessee has to have a transaction with a person as listed in clauses (i) to (vi) of section 40A(2)(b) and that section 92BA(i) states that any transaction in which any expenditure in respect of which payment has been made or is to be made by the assessee to a person referred to in clause (b) of sub-section 2 of section 40A, would be a SDT.

It was held that HDFC Ltd. does not have a substantial interest in the Petitioner :

1. ) HDFC Ltd. admittedly holds 16.39% of the shareholding in the petitioner and therefore, is not a person as contemplated under section 40A(2)(b)(iv) for the present transaction to fall within the meaning of a SDT as set out in section 92BA (i).

2.) Further, the loans purchased by the Petitioner from HDFC Ltd. were reflected in the balance-sheet and not in the Profit and Loss account. This is not an expenditure at all as contemplated under section 92BA(i), and therefore, the money expended for purchasing these loans can never be termed as an ‘expenditure’ incurred by the Petitioner.

It would, therefore, not fall within the meaning of a SDT as understood under section 92BA(i)

The Extract of Judgement is given below : 

43. Similarly, we find that the reliance placed by Mr Chhotaray on the decision of the Supreme Court in the case of CIT v/s Podar Cement Pvt. Ltd. (supra) is wholly misplaced. In this case, the Supreme Court was called upon to decide whether in law the income derived by the assessee company by letting out flats of a building is taxable under the head 'Income from other Sources' under section 56 of the Act or whether the same was to be taxed as 'Income from House Property' under section 22 of the Act. On carefully going through this judgment, we do not see how this decision in any way supports the contention of Mr Chhotaray. Section 22 of the Act deals with 'Income from House Property' and stipulates that the annual value of property of any buildings or lands appurtenant thereto of which the assessee is the owner, other than such portions of such property as he may occupy for the purpose of any business of profession carried on by him the profits of which are chargeable to income tax, shall be chargeable to income tax under the head 'Income from House Property'. The owner of house property has also been defined in section 27 and clause (iii) thereof inter alia stipulates that a member of a co-operative society to whom a building or part thereof is allotted or leased under a house building scheme of the society, shall be deemed to be the owner of that building or part thereof. Section 27(iii)(a) and (iii)(b) also set out who shall be deemed to be the owner in certain circumstances. It is whilst interpreting these provisions, the Supreme Court was deciding as to who would be the owner as contemplated under section 22 of the Act. We fail to see that this judgment can be of any assistance to the Revenue in the facts and circumstances of the present case. The Supreme Court was considering completely different sections of Income Tax Act and whose wordings are materially different from the wordings of section 40A(2)(b) of the Act. We therefore find that the reliance placed by Mr Chhotaray on this decision is also wholly misplaced.

44. In view of the foregoing discussion, we find that none of the three transactions that form the subject matter of this Petition fall within the meaning of a SDT as required under section 92BA(i) of the I.T. Act. This being the case, we find that Respondent No.1 was clearly in error in concluding that these transactions were SDTs, and therefore required to be disclosed by the Petitioner by filing Form 3CEB. He therefore could not have referred these transactions to Respondent No.2 for determining the ALP.

45. In these circumstances, and in view of the foregoing discussion, the Writ Petition is allowed in terms of prayer clause (a). Rule is made absolute in the aforesaid terms. However, in the facts and circumstances of the case, there shall be no order as to costs.

Click here to Download the OrderDownload

Source: https://studycafe.in/2018/12/court-explains-law-on-what-constitutes-specified-domestic-transactions.html

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All you need to know about Equalisation Levy in Income Tax Act

Equalisation Levy was introduced in India in the year, 2016 (vide notification no. 37/2016: F.NO. 370142/12/2016-TPL) with an intent to tax the Business to Business (B2B), E - Commerce transactions/Digital transactions. Provisions of chapter VIII of Finance Act, 2016 deals with the “Equalisation levy”.

Let’s have a look on the provisions deals with the equalisation levy:

Following are the sections, which deals with the provisions related to Equalisation Levy:

S.No.	Section	Description
1	165	Charge of Equalisation Levy
2	166	Collection and recovery of Equalisation levy
3	167	Furnishing of statement
4	168	Processing of statement
5	169	Rectification of mistake
6	170	Interest on delayed payment of equalisation levy
7	171	Penalty for failure to deduct or pay equalisation levy
8	172	Penalty for failure to furnish statement
9	173	Penalty not to be imposed on certain cases
10	174	Appeal to Commissioner of Income – tax(Appeals)
11	175	Appeal to Appellate Tribunal
12	176	Punishment for false statement
13	177	Institution of Persecution

1) Charge of Equalisation Levy (Sec – 165)

Sec – 165 deals with the provisions related to the charge of equalisation levy. Equalisation levy shall be charged @ 6% of the amount of consideration payable, for any specified service received or receivable from a non-resident, by –

i. A person resident in India carrying on any business or profession; or

ii. A non-resident having permanent establishment in India.

“Specified Service” means online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement, or includes any other service as may be notified by the central government in this behalf.

- Equalisation levy under sub-section (1) shall not be charged in the following cases: -

• The non-resident providing specified service has a permanent establishment in India and the specified service is connected with such permanent establishment; or

• The specified service is not for the purpose of carrying out business or profession (i.e. for personal purpose); or

• The aggregate amount of consideration payable for the specified service received or receivable does not exceeds Rs. 1 Lakh.

2) Collection and recovery of Equalisation levy (Sec – 166)

Sec- 166 deals with the provisions related to the collection and recovery of equalisation levy. As per these provisions, every person, who is responsible to deduct the equalisation levy shall pay the amount of equalisation levy so deducted, to the credit of central government with in a period of 7 days from the end of the month, in which such levy was so deducted.

For example: - For the month June 2018, the amount of equalisation levy shall be credited to the central government, by 7th of July, 2018.

3) Furnishing of statement (Sec -167)

Sec- 167 deals with the provisions related to the furnishing of equalisation levy statement. Due date of furnishing of equalisation Levy Statement is 30th June, hence the statement is required to be filed on or before 30th June from the end of relevant financial year. The statement is an annual statement and shall be filed in Form-1.

For example: - Mr. A make the payment of consideration for specified service in the month of December, then he shall have to deposit the tax by 7th of January, 2018 and file the annual statement in Form -1 on or before 30th June, 2018.

4) Processing of statement (Sec- 168)

Sec -168 deals with the provisions related to the processing of statement filed u/s 167 by the assessee. Where any statement filed by the assessee u/s 167, the same shall be processed to-

- Check the accuracy of statement, to avoid any arithmetical errors; or

- Determine the amount of interest, if any payable on the basis of sum deductible as computed in the statement; or

- Determine the amount payable, or refund due to the assessee, if any

An Intimation shall be generated and send to the assessee specifying the amount payable or refund due to, the assessee. However, no intimation shall be send after the expiry of 1 year form the end of financial year in which such statement is filed.

5) Rectification of mistake (Sec- 169)

Sec-169 deals with the provisions related to the rectification of any mistake apparent from the records. The Assessing officer is empowered to amend any intimation, to rectify any mistake apparent from record, either on suo moto basis or any mistake brought to his notice by the assessee, within a period of 1 year from the end of financial year in which such intimation, which is sought to be amended, was issued.

Before any amendment, the assessing officer shall give a notice to the assessee of his intention, and shall also give the assessee a reasonable opportunity of being heard.

6) Interest on delayed payment of equalisation levy (Sec – 170)

Sec -170 deals with the provisions related to the interest on delayed payment of equalisation levy. Every assessee, who fails to pay the amount of equalisation levy or any part thereof, to the credit of central government, within such a period as may be specified u/s 166, then he shall be liable to pay simple interest @ 1% of such levy for every month or part of month, by which such credit to the central government is delayed.

7) Penalty for failure to deduct or pay equalisation levy (Sec – 171)

Sec- 171 deals with the provisions related to the penalty for failure to deduct or pay equalisation levy which are as follows:-

Liability of	Failure	Penalty
Assessee	Failure to deduct the equalisation levy	In addition, to paying the amount of equalisation levy or interest, Penalty of amount equivalent to the equalisation levy.
	Failure to pay the deducted amount of equalisation levy	In addition, to paying the amount of equalisation levy or interest, Penalty of Rs. 1000/- per day, during which such failure continues, subject to a maximum of the amount of equalisation levy, which he failed to pay

8) Penalty for failure to furnish statement (Sec – 172)

Sec-172 deals with the provisions related to the penalty for failure to furnish the equalisation levy statement. Every assessee who fails to furnish the equalisation levy statement, within the time period as specified u/s 167, shall be liable to a penalty of Rs. 100/- per day during which such failure continues.

9) Penalty not to be imposed on certain cases (Sec -173)

Sec -173 deals with the provision related to certain cases, in which penalty should not be imposed. Penalty u/s 171/172 shall not be levied, if the assessee proves to the satisfaction of the assessing officer that there was a reasonable or sufficient cause for such failures.

10) Appeal to Commissioner of Income – tax (Appeals) (Sec -174)

Sec-174 deals with the provisions related to an appeal to Commissioner of Income – Tax (Appeals). Every assessee, who is aggrieved by an order imposing penalty by assessing officer, may prefer an appeal to CIT (A) within a period of 30days from the date of receipt of order.

Appeal to CIT (A) shall be made in such a form as specified and accompanied with fees of Rs. 1000. (Other provisions of sec- 249 to 251 of IT Act shall be applicable).

11) Appeal to Appellate Tribunal (Sec – 175)

Sec-175 deals with the provisions related to an appeal to appellate tribunal. Every assessee, who is aggrieved by an order of CIT (A), may prefer an appeal to appellate tribunal, within a period of 60days from the date on which the order sought to be appealed against, received by the assessee.
Appeal to appellate tribunal shall be made in such a form as specified and accompanied with fees of Rs. 1000. (Other provisions of sec- 253 to 255 of IT Act shall be applicable).

12) Punishment for false statement (Sec – 176)

Sec- 176 deals with the provisions related to the punishment for false statement.

Liability of	Furnishing of information	Punishment
Assessee	Furnishes any false statement, delivers any false statement or account, which he knows or believes to be false.	Imprisonment for a term, which may extend to 3 years and with fine

13) Institution of Persecution (Sec – 177)

Sec-177 deals with the provision related to the institution of prosecution which provides that no prosecution shall be instituted against the assessee for offence u/s 176, except with the prior approval of Chief Commissioner of Income Tax.

Notes: - 1) Acc. To the provisions of sec – 40(a)(ib) of IT Act – 1961, Any consideration paid or payable to the non-resident, for the specified service, which is subject to equalisation levy, and if such equalisation levy has not been deducted or deducted but not paid on or before the due date of furnishing of return (specified u/s 139), shall not be allowed while computing the income under the head PGBP. Further, such sum shall be allowed in the year in which such sum is paid.

2) Any income arising to the non-resident, by providing the specified service, which is subject to equalisation levy, shall be exempt from tax in the hands of such non-resident.

Links:

https://www.incometaxindia.gov.in/Communications/Notification/Notification372016.pdf

https://www.incometaxindia.gov.in/Communications/Notification/Notification382016.pdf

Disclaimer: The contents of this article have been prepared in accordance with the relevant provisions, and information available at the time of preparation. The views and opinions expressed in this article are those of the author and the author does not take any responsibility and cannot guarantee that no inaccuracy occurs. This article cannot be quoted without the consent of the author. 

Do write for any Queries/suggestions or Questions at csvaishalijain.leo@gmail.com

Click here to Read other Articles by CS Vaishali Jain

Source: https://studycafe.in/2018/12/all-you-need-to-know-about-equalisation-levy-in-income-tax-act.html

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Why choosing an LLP over a private limited company may be a better option for start-ups?

When Sana started her farm-to-fork café about a year ago, she didn’t imagine the enormous success her café would achieve.
Since the café was going well, she thought of giving it a legal existence – getting it registered under a suitable law. She researched about various forms of legal entities and the associated pros and cons for each. Establishing a private limited company (PLC) seemed to be a better option to her since she wouldn’t be personally liable for her café’s loans and actions.
“Arjun, I want my café to be registered as a private limited company. Can you please tell me how to go about registering one?”, she asked Arjun, her good friend and a business consultant.
“Why are you going for higher compliances and expensive costs, Sana? Instead, register as a Limited Liability Partnership, oran LLP as its called, because it provides similar benefits as a company, but with lesser complications and cost”, Arjun replied.
She was amazed to hear that and wanted to know more about LLPs and how an LLP is a better option over a company.
Arjun explained–
“For benefitting under the “Startup India Scheme”, a start-up must be incorporated as either a partnership firm, an LLP or a private limited company.
A partnership firm is much cheaper in terms of incorporation and compliance costs, but the partners are personally liable for all the acts and contracts of a partnership firm.
LLP and private companies are separate legal entities and hence partners or directors respectively are not personally liable for the acts of the entity.”

What are the similarities between LLPs and Private Limited Companies?
Both LLP firms and private limited companies are registered with Ministry of Corporate Affairs (MCA). While an LLP is incorporated under the LLP Act, 2008, a private limited company is registered under the Companies Act, 2013.
Both require a minimum of two members (two partners in case of an LLP and two directors in case of PLCs) to incorporate. In both the entities, annual accounts must be maintained. Also, annual compliances must be fulfilled by submitting annual accounts and other prescribed documents to the MCA.

Why is LLP then preferred over Private Limited Companies?

Lesser costs and compliances – Cost incurred in setting up an LLP firm is marginally lesser when compared to incorporating a private limited company. Again, with annual compliances, given lesser compliances, lower cost is incurred for an LLP firm, while a private limited company must comply with more MCA regulations and hence higher cost.

Minimum threshold limit for audits – In case of LLPs, annual audit is required only if the turnover of an LLP is INR  40 lakhs or more, or the contribution of its partners is INR 25 lakhs or more in a financial year. On the other hand, private limited companies must get their accounts audited every financial year irrespective of the size of business or capital invested. In addition to higher cost of compliance, an audit also requires management time which is otherwise critical to the business.

No minimum requirement of board or annual general meetings – Unlike a private company, where four board meetings or an annual general meeting (AGM) are required to be held in a year, LLP firms are not bound by law to hold any such meetings.
Partners can specify the frequency of their meetings in the Partnership Agreement/Deed. They can meet and discuss the business issues in those meetings.

Conclusion – With lesser compliances required and lower costs incurred, LLPs are an easier route to set up a business in India as against a private limited company. Unless a start-up is required by their prospective investors or customers to take form of a company, it might be prudent to opt for an LLP to begin with and at a later point convert into a company.

Baywiser analyses all the aspects of the business before advising on a suitable business structure.

Whether it’s an LLP or a company, Baywiser helps in getting all the required registrations done.

Contact us at support@baywiser.com or on +919369364646 to know more.

Source: https://studycafe.in/2018/12/why-an-llp-over-a-company-may-be-a-better-option-for-start-ups.html

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ANTI – PROFITEERING UNDER GST – ISSUES & CHALLENGES

ANTI – PROFITEERING UNDER GST – ISSUES & CHALLENGES

1. The provision in the Central GST Act - Section 171, mandates that benefits arising due to either lower tax rates or more tax credits being available in the GST regime should be passed on to the consumer by way of commensurate reduction in prices.

Let us understand anti profiteering with an example...

2. Reduction in effective rate of tax: GST rates were reduced significantly post GST , once in November 2017 , then on January 2018, and Now in Dec 2018 .Supplier need to pass the benefit arises due to such rate reduction to the recipient

If the sum total of taxes being levied on a supply prior to GST regime is more than the GST levy on the said supply, then there has to be equivalent reduction in prices of the supply. E.g. if sale of a manufactured good subject to levy of a total tax of approx. 25% (12.5% as ED and 12% as VAT) in the pre-GST regime presently attracts 18% GST, there is a reduction in rate of tax of about 6.5%.

In case of supplies exclusive of tax , passing of benefit due to reduction in tax is not a big challenge. This is because the reduction in tax rate will directly be evidenced by invoices, and the recipient will get benefit of the rate reduction.

3. Benefit of increased availability of input tax credit.: All the industries are getting advantage of better flow of input tax credit due to better credit chain. These are service sector, manufacturing, trading, or any specific industry So overall the expectations of anti-profiteering provisions are commensurate reduction in prices of supplies.

For example, CA firms earlier could not adjust the input VAT on office supplies with the output service tax payable. Now, ITC on all inputs can be adjusted against output tax. These benefits must be passed on by them.

4. Commensurate reduction in prices :- As per section 172 of the CGST Act 2017 , such benefit shall be passed on the recipient by way of COMMUNSURATE REDUCTION in prices .

What does ‘commensurate reduction’ mean? No guidance has emerged from the Government on the connotation of ‘commensurate reduction’ and its applicability in various specific scenarios.

In this scenario , it is difficult to established , how much of the benefit needs to be passed on? What does ‘commensurate reduction’ mean?

5. Emerging Issues on Anti Profiteering Under GST Act 2017

 The anti profiteering provisions have created a lot of confusion amongst the industries resulting in numerous complaints being filed more so when “any person” can file a complaint. “

Almost every contractor is in the process of invoking the change in law clause to re- negotiate the prices of the contracts especially EPC contracts. Due to unclear provisions and mechanism for calculating the “commensurate reduction” the negotiation process gets stretched which is leading to delay in completion of ongoing projects.

6. Difficulties in compliance : Practically , it is very difficult to comply provisions of Anti Profiteering measures There are many unanswered questions raised by business community :-:-

• At what profit indicator level should the anti-profiteering computation be made at product/segment/business vertical/ company. It should be considered that within different product lines, there are certain SKUs which exist. Also, while there may be profits in one product line, there may be losses in others. Further, same product may be marketed differently to different class of people
• How the margins and prices are to be checked is a subjective matter. Does one factor profit on products in absolute terms or as a percentage, on each type of product/service or company as a whole, make customer-wise bifurcations (in B-to-B scenarios)?
• While significant costs have been incurred on GST implementation, would the  same be considered in arriving at anti profiteering related decisions.
• What if prices are controlled/regulated statutorily or aligned with an international benchmark?
• What is the accepted guideline for specific sectors with inherent complexities like real estate?
• Breach of Confidentiality – The cost structure and pricing mechanism is something which is very confidential to a business, given the competition in the market. In such a scenario, ascertainment of profit being made on taxes by the consumers/ affected party becomes impossible.
• Many companies in commodities and trade have market forces based pricing model, therefore, it is not clear how anti profiteering is going to impact the prices in these cases.
• There may be external cases determining the price, for instance for drugs, medicines where other acts/ regulations have a significant interplay in the pricing of the products. Therefore, the impact of anti-profiteering has to be seen specific to these cases as well.
• Computational Mechanism – It is difficult to establish one to one correlation between ITC on inward supplies and Tax payable on outward supplies

7. Retail Specific Issues

In addition to the above generality, certain retail specific issues arise: Retail typically has a long supply chain. There is usually one to two months of inventory in the pipeline. Hence, it would only be prudent to have time duration specified under law/ guidelines, to take corrective actions on account of changes in rates., Many retail sectors are also required to comply with Legal Metrology Act and Rules made there under, where the standard sizes for certain identified FMCG products is provided under law itself. This may possibly disrupt the requirement to pass on benefit by way of increase in quantity.

8.Consequences for non-compliance with anti-profiteering measures :-

The provision in the Central GST Act - Section 171, empowers the Government to constitute an authority or entrust an existing authority to ensure compliance of anti- profiteering provisions.

Non compliance of anti profiteering measures may entail severe penal consequences under the GST law.

The authorities may order the defaulter to reduce the prices of supplies to

ensure that the benefit of tax rate cuts or enhanced credits is passed on to the customer. While the penalties can also be levied as provided under the law, the taxpayer may be ordered to return the amount of un passed benefit to the customer along with applicable interest. In the extreme cases, the registration of the taxpayer may also be cancelled, thereby impacting business continuity. Failure to address anti- profiteering related requirements in any manner may effect consumer confidence as well as may have a reputational impact.

9. Action needs to be taken :- It is therefore critical that businesses understand the requirements and . set up processes to compute the likely benefits and have a plan to ensure smooth passage of the benefits to the consumer.

(a) Computing Benefits due to Lower Tax Rates and Increased Credits: Currently, guidelines to compute the benefits have not been prescribed, yet taxpayers can compute the likely benefit at a boarder level.

• Taxpayer should identify benefits arising due to more Input Tax Credit available on account of transition to GST at organizational level.
• Once benefits arising from credit are captured, the next step should be to compute benefits from rate reduction, if any. This benefit may be computed at the product level based on cost sheet .

(b) Looping in Vendors / Supply Chain : While the above steps provide clarity in understanding how much benefit is arising at the manufacturing level, the company will also have to ensure that their vendors pass on the benefits by way of price reduction. To do this, the company will be required to get cost data from vendors. Once details are shared by vendors, their veracity should be verified by the company or through an independent firm. In case vendors are not willing to share details, some sample cost sheets can be prepared based on industry knowledge. The expected amount of benefits thus arrived at could be shared with vendors for confirmation and used for negotiation.

To ensure that vendors comply with the company's requests, it is advisable to add an appropriate anti-profiteering clause in the vendor agreement stating that the vendor agrees to comply with anti-profiteering provisions and to share authentic and verified data to ensure that the benefit is appropriately passed on in accordance with the provisions. Going a step further, the clause can also state that in case appropriate benefit is not passed to the customer, then the vendor will be held accountable to pay any future disputed liability along with interest, fine, penalty, litigation cost etc.

(c ) Vigilant to Govt announcements : The anti-profiteering provisions in the GST is not elaborative , leaving enough room for misperceptions and perplexities. While the steps mentioned above can help the company prepare for business conducted in the future, there are several questions such as how to change MRPs if products are already at the retail store, Is compliance mandatory even if the product is covered under drug pricing control order etc. still need clarifications.

For questions such as these, taxpayers need to be vigilant to announcements from the government on the topic and plan their processes accordingly.

• (d) System & Processes : Anti-profiteering brings in a dynamic situation for businesses where, every time there occurs a reduction in GST rates orTaxpayer should identify benefits arising due to more Input Tax Credit available on account of transition to GST at organizational level.
• Once benefits arising from credit are captured, the next step should be to compute benefits from rate reduction, if any. This benefit may be computed at the product level based on cost sheet .

(b) Looping in Vendors / Supply Chain : While the above steps provide clarity in understanding how much benefit is arising at the manufacturing level, the company will also have to ensure that their vendors pass on the benefits by way of price reduction. To do this, the company will be required to get cost data from vendors. Once details are shared by vendors, their veracity should be verified by the company or through an independent firm. In case vendors are not willing to share details, some sample cost sheets can be prepared based on industry knowledge. The expected amount of benefits thus arrived at could be shared with vendors for confirmation and used for negotiation.

To ensure that vendors comply with the company's requests, it is advisable to add an appropriate anti-profiteering clause in the vendor agreement stating that the vendor agrees to comply with anti-profiteering provisions and to share authentic and verified data to ensure that the benefit is appropriately passed on in accordance with the provisions. Going a step further, the clause can also state that in case appropriate benefit is not passed to the customer, then the vendor will be held accountable to pay any future disputed liability along with interest, fine, penalty, litigation cost etc.

(c ) Vigilant to Govt announcements : The anti-profiteering provisions in the GST is not elaborative , leaving enough room for misperceptions and perplexities. While the steps mentioned above can help the company prepare for business conducted in the future, there are several questions such as how to change MRPs if products are already at the retail store, Is compliance mandatory even if the product is covered under drug pricing control order etc. still need clarifications.

For questions such as these, taxpayers need to be vigilant to announcements from the government on the topic and plan their processes accordingly.

(d) System & Processes : Anti-profiteering brings in a dynamic situation for businesses where, every time there occurs a reduction in GST rates or enhancement in credit pool, the benefit needs to be passed on to consumers.

Therefore, every change in prices is expected to be backed by data, documentation providing the formulas, workings, backups etc. explaining the rationale of such price increase.
Towards this, the companies should gear up their systems and processes to deal with the requirements of anti–profiteering on a go forward basis.
(e) Advance Ruling :Anti-profiteering is likely to be an area where policy and practice will continue to develop but in the interim it important to develop and implement a plan to comply with the law. As some of these clarifications may emerge in due course, industry may also think of taking advance ruling on critical issues.
(f) Articulate Methodology Articulate and evidence the methodology adopted in calculating and deploying the GST benefit Maintaining relevant commercial documentation updated to reflect GST benefits, particularlyservice contracts and pricing schedules

(g) Documentations :Other documentation to be maintained as adequate to support and evidence compliance with law

10. Anti-profiteering measures need to be consistently followed as it is not a one-time activity since the law, rates keep changing

Source: https://studycafe.in/2018/12/anti-profiteering-under-gst-issues-challenges.html

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Fact that vendors are not available at given address doesn't make purchases bogus : ITAT

Fact that vendors are not available at given address doesn't make purchases bogus : ITAT

The Fact that vendors are not available at given address is not sufficient to make purchases as bogus when assessee purchased the goods and made the payments through banking channel and he substantiated all the necessary documents which is required to be kept such as purchase invoices, ledger accounts, C Form issued to the suppliers, Form No.XXXVIII of the Department of Commercial Taxes etc.

Delhi ITAT in matter of ACIT, Central Circle-7, New Delhi. Vs. Karam Chand Rubber Industries (P) Ltd.,

Fact that vendors are not available at given address doesn't make purchases bogus : ITAT

The extract of Order is given below for reference :

16. We find merit in the above argument of the ld. counsel for the assessee. It is an admitted fact that during the course of search nothing adverse was found from the premises of the assessee regarding the purchases made from the four parties concerned. Only during post search enquiry it was found that those four parties are not available at the given address. However, it is a fact that the payments have been made through banking channel and the assessee had substantiated the purchases by providing documents such as purchase invoices, copy of the ledger accounts, evidences for having made payments through banking channels, C Form issued to the suppliers, copy of VAT return duly reflecting the said purchases, etc. The assessee has also submitted the copies of Form No.XXXVIII of the Department of Commercial Taxes which accompanies details of each consignment of goods that enters Uttar Pradesh from outside the State. None of these documents have been proved to be false or untrue and thus, the initial burden cast on the assessee was duly discharged. No doubt, those four parties were not available at the given address at the time of enquiry by the Inspector. However, is it is also an admitted fact that the enquiries were conducted at a later stage and there may be a number of reasons for those parties to shift their place of business. From the submissions made by the ld. DR, we find the names of those parties were existing at the website of the Government of NCT, Delhi earlier, but, at the relevant time of enquiry, the status of the concerns was shown as ‘cancelled.’ This indicates that at some point of time, these concerns were very much available in the website of Government of Delhi and, therefore, it cannot be said that these firms are bogus when the assessee purchased the goods and made the payments through banking channel and the assessee substantiated all the necessary documents which is required to be kept such as purchase invoices, ledger accounts, C Form issued to the suppliers, Form No.XXXVIII of the Department of Commercial Taxes which
accompanies details of each consignment of goods that enters Uttar Pradesh from outside the State. In our opinion, the assessee in the instant case has discharged the initial onus cast on it. Under these circumstances and in view of the detailed reasoning given by the CIT(A) while deleting the addition, we do not find any infirmity in the order of the CIT(A). So far as the decision in the case of N.K. Proteins Ltd., is concerned, in that case, during the course of search proceedings at the office premises of the assessee blank signed cheque books and vouchers of number of concerns were found. Accordingly, the purchases made through these concerns were treated as bogus purchases by the Assessing Officer and the entire deposits in bank accounts of these parties were treated as assessee’s income on protective basis. The Tribunal restricted the addition on account of such alleged bogus purchases at 25% of the total purchases and the Hon'ble High Court modified the order of the Tribunal and directed for addition of the entire bogus purchases. However, in the instant case, no such blank cheque books and vouchers of the alleged four concerns have been found. Therefore, the decision in the case of N.K. Proteins Ltd. cannot be applied to the facts of the present case. Similarly, in the case of Vijay Proteins Ltd., the purchases were made through brokers and such documents relating to the brokers were produced for the first time before the CIT(A) and it was also found that there was close link between the assessee company and one Mr. P. Therefore, the above decision relied on by the ld. DR is also not applicable to the facts of the present case. In view of the above discussion, we do not find any infirmity in the order of the CIT(A) deleting the above addition on account of the purchase from the four parties. Accordingly, the order of the CIT(A) is upheld and the ground of appeal No.2 of the Revenue is dismissed.

17. So far as ground No.3 is concerned, we find the Assessing Officer disallowed the entire addition of Rs.4,20,000/- paid to Smt. Shibani Khosla by invoking the provisions of section 40A(2)(b) of the IT Act and in appeal, the ld.CIT(A) deleted the addition of Rs.1,80,000/-, the reasons for which has already been given in the preceding paragraphs. We find from the order of the A.O. that Smt. Shibani Khosla was receiving salary and bonus from assessment year 2006-07 to 2010-11 ranging from Rs.3,74,000/- during financial year 2006-07 which has gone up to Rs.7,80,000/- in assessment year 2010-11. Even in the assessment order while the A.O. mentions that the kind of work rendered by Mrs. Khosla would have fetched her Rs.3000/- to 5000/- per month in an industrial area of Ghaziabad. Thus, the A.O is not saying that Mrs. Khosla has not done any work for the assessee company. Therefore, he could not have disallowed the entire salary. Since the ld. CIT(A) after considering the totality of the facts of the case has restricted Rs.1,80,000/- as against Rs.4,20,000/- disallowed by the A.O., we are of the considered opinion that the order of the ld.CIT(A) is justified under the facts and circumstances of the case. Accordingly, the same is upheld and the ground raised by the Revenue is dismissed.

18. Ground of appeal No.1 being general in nature is dismissed.

19. In the result, the appeal filed by the Revenue is dismissed.

The decision was pronounced in the open court on 12.12.2018.

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Source: https://studycafe.in/2018/12/fact-that-vendors-are-not-available-at-given-address-doesnt-make-purchases-bogus-itat.html

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