Latest Blogs from SBS and Company LLP

    Analysis on Supreme Court Judgment in Mohit Minerals – Striking Down the Levy on Ocean Freight

    Introduction:

    The entire country is swayed by the Honourable Supreme Court’s verdict in the matter of Mohit Minerals Private Limited[1]. This is completely unexpected decision after what we have seen in VKC Footsteps India Private Limited. The Supreme Court has struck down the obligation to pay tax under reverse charge mechanism by the importer. Earlier, the Gujarat High Court qua writ petition filed by Mohit Minerals Private Limited[2], has held the notifications bringing the tax under reverse charge mechanism are ultra-vires the law. The said judgment was appealed before the Supreme Court by Revenue, which led to the current judgment. In this write -up, we shall analyse the decision delivered by Supreme Court.

    The entire issue is, whether the importer is liable to pay tax on ocean freight services provided by foreign shipping line qua the foreign supplier under the reverse charge mechanism for the CIF contracts? The position under service tax law[3] and the analysis of the decision of Gujarat High Court[4] can be accessed here.

    The Supreme Court after listening to the appellant (the Union of India) and the respondent (Mohit Minerals Private Limited) has opined on various issues, which are summarised hereunder:

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    Certain Interesting Issues in Refund of Old Taxes vis-à-vis Transitional Provisions in GST Laws

    Introduction:

    The transition to GST from erstwhile regime is quite a challenging one for the entire country. Though the transitional provisions contained in the GST laws have been substantially improved from the bill stage to the current stage, there is still vacuum prevailing, which is causing great hardship for the tax payers. The GST Council should take stock of all such aspects and provide appropriate relief, so that the tax payers are relieved from the burden of reaching the courts time and again. In this article, we have identified certain issues, which create a problem for the taxpayers.  

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    AN ANALYSIS OF THE RECOMMENDATIONS  OF  THE COMPANY LAW COMMITTEE, 2022

    We are aware that the Companies Act, 2013, received the assent of the President on 29.08.2013, and the provisions came into effect in a phased manner from 12.09.2013. The Companies Act, 2013, was enacted on the basis of the various recommendations suggested by the very famous J.J.Irani Committee, in their report.  

    It is needless to say that the Companies Act, 2013, is a rule bases law, with substantive operative part of the provisions forming part of the Rules, unlike the Companies Act, 1956.  The main object for the same being that, the rule based enactment, enables the Government to retain the power to amend the rules by virtue of Amendment rules, Notifications, supported by Circulars, without the requiring to approach the Parliament for amendments, unless they pertain to the provisions contained in the Act. 

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    Management Support Services vis-à-vis Ancillary and Subsidiary Clause – An Analysis on position under Treaties

    Introduction:

    The concept of Fees for Technical Services (for brevity ‘FTS’) or Fees for Included Services (for brevity ‘FIS’) is a subject matter for constant litigation. The main reason for the litigation is because of the definition of FTS/FIS differs among Income Tax Act (for brevity ‘ITA’) and treaties. Added to this layer of confusion, is that such definition varies from treaty to treaty. Further, there are no hard and fast rules to consider a particular service as FTS/FIS and every transaction has to be decided on facts of each case which results in multiple interpretations and long drawn litigation for FTS/FIS.

    It is known fact, that multinational groups companies incorporate a subsidiary in India and provides various management or business support services to its subsidiary company in India to ensure effective and efficient maintenance of business operations in India.

    These services inter alia include finance, accounting, group taxation, engineering, human resources, marketing and strategic planning, management support, legal etc. (referred as ‘management support services’/’MSS’).

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    Supreme Court on Reassessment Controversy - Union of India vs. Ashish Agarwal

    Notices issued under section 148 to assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021- Supreme Court.

    Background:

    During the outbreak of COVID-19 pandemic, in order to provide sufficient time to comply with various provisions under the Income Tax Act, 1961 (‘ITA’) and other laws, Central Government (‘CG’) has enacted Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA, 2020’)

    Section 3 of TOLA, 2020 states that where the time for completion of proceedings, issue of notice, letter, intimation etc. falls between 20.03.2020 to 31.12.2020, such date is extended to 31.03.2021.

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