In this edition, we bring you, the possibility of claiming refund of unutilised input tax credit at the time of closure of the unit. Under the GST laws, business carried in each state by a registered person is obligated to obtain registration. There arises a situation, when one of the said registered person has unutilised credit for various reasons, intends to close the business in such state, whether there would be any possibility of approaching the authorities for grant of refund. We have taken a case study to explore this point.

The next article is on the concluding piece of ‘residence’ under Income Tax Act. We have written two pieces earlier, which were published in our previous editions. This conclusion part deals with mostly no-touched area dealing with crew member of ship and aircraft.

The subsequent article is on the various issues arising from computation of capital gain on sale of depreciable asset in terms of Section 50 of Income Tax Act. Basis our experience, we have collated certain issues, which would arise, when the sale of depreciable asset happens and by taking help of the judicial precedents tried to analyse the same.

The finale is on the recent support extended by Government in the form of Aatmanirbhar Bharat Rojgar Yojana (ABRY). Through this, the Government intends to contribute the PF share of employer and employee in certain class of establishments and employee share in certain class of establishments qua new employees to promote the employment generation. The insights were contributed by our learned senior associate Mr SV Ramachandra Rao.

We hope that you will have good time reading this edition and please do share your feedback. I will also urge clients to mail us topics or issues on which you want us to deliberate in our future editions, so that we can contribute to the same.

KEY TOPICS:

GST

• REFUND OF UNULTILSIED CREDIT - CLOSURE OF UNIT

DIRECT TAX

• RESIDENTIAL STATUS AND TAXABILITY OF CREW MEMBERS OF A SHIP OR AIRCRAFT
• VARIOUS ISSUES UNDER SECTION 50 - CAPITAL GAINS - DEPRECIABLE ASSET

LABOUR LAW

• INSIGHTS INTO ABRY

In this budget edition, we discuss the various proposals segment and tax wise. Hope this effort of ours is useful for understanding the proposals. I would like to gather your attention to certain major amendments before the detailed analysis.

The changes in direct taxation are mainly focused to remove inconsistencies and rationalise the provisions. The significant amendment is the taxation on gains arising from transfer of virtual digital assets. The tax rate of 30% is huge and not allowing any set-off of losses against such gain would have a huge impact on the crypto industry. Further, the roll out of tax deduction at source for purchase of crypto currency would also create hurdles and may have a strong impact on the said industry. Having said so, there is a silver line here, that the government started recognising this class of asset. With the adequate and appropriate representations, I believe that there would be further fine tuning to these set of provisions.

The changes in GST laws are very minimal. The increase in transfer of credits through fake invoices is making the Government to further tighten the provisions dealing with availment of credit. These provisions are creating hardships to genuine taxpayers.  

With this brief, I present you the detailed analysis on significant clauses on Finance Bill 2022. We wish this effort of ours is fruitful and we would love to receive feedback on this.

Read more: SBS Wiki Budget Special Edition 2022

In our previous article[1], the concept of deemed residency under Section 6 of ITA[2] has been discussed in detail. In this part, various issues related to determination of residential status of an individual are aimed for discussion. As per Section 6(1) of ITA an individual shall be treated as resident:

1. If he is in India for a period of 182 days or more during previous year or
2. If he is in India for a period of 365 days within 4 years immediately preceding previous years and 60 days or more during the previous year.

A person being an individual is treated as resident in India if any of the conditions i.e., (a) or (b) above is satisfied. Otherwise, such person is treated as non-resident. Further, Explanation 1 to Section 6(1) states that in case of an individual:

1. being a citizen of India who leaves in India in any previous year as a member of crew member of an Indian ship or for the purposes of employment outside India, the period of stay for that year specified above as 60 days is to be replaced with 182 days.
2. being a citizen of India or person of Indian origin, who is staying outside India, comes to India on a visit to India in any previous year
3. the period of stay specified above as 60 days is to be replaced with 182 days.
4. In the case of such person having total income, other than income from foreign sourced income, exceeding INR 15 lakhs, the period of stay specified above as 60 days is to be replaced with 120 days.

A plain reading of Section 6 seems to be easy to understand. However, each and every aspect of Section 6 needs to be analyzed carefully, as many practical difficulties would arise while interpreting the provisions.

Let us proceed to analyze various aspects of provisions of Section 6.

Read more: Various Issues of Residency under Section 6

One of the mysteries of the 21^st Century is the taxation of rental income under the IT Act[1]. The classification of such rental income is quite challenging and garnering a unanimous view among tax practitioners itself is impossible, forget about the authorities and courts. In this article, we try to analyse the various judgements on the issue and provide our conclusions about the classification.

Before proceeding to analyse the various judgments, a quick look at the scheme of IT Act is essential. Section 4 of the IT Act deals with charge of income tax on total income earned by the assessee in the previous year. The tax on the total income of the previous year has to be classified under the heads of income as provided in Section 14 of Act and accordingly the liability has to be computed. Each head of income is different from other head and has different entitlements, restrictions and prohibitions in the total scheme of the act. Hence, classifying an income under the appropriate head is important because of different tax consequences. For example, an income which is classified under IFHP[2] is eligible only for a standard deduction of expenditure as against actuals, however, the same income, which if classified under PGBP[3], does not have any restriction for claiming the expenditure. Hence, it is important to classify the income under appropriate head to avoid any future litigations on the said count.

Read more: Rental Income – IFHP vs PGBP vs IFOS - A Challenging Tax Puzzle