Respected Professional

Colleagues,

At the outset I wish you

all the happy Ganesh

Chaturthi. May the God

Ganesha, Lord o f

wisdom, bestow upon

you all his blessings to fulfill all that you

aspire for. This is month of September and

celebration of Ganesh Chaturthi definitely

takes a back seat for all of us. Our priority of

course would be to successfully complete the

tax audits. The extension of the date for filing

non-tax audit returns by one month has the

far reaching effect on the work of tax audits.

With so many changes in the tax audit

reporting requirements, the responsibility of

the auditors has increased considerably. It is

really daunting task for all of us. Keeping in

view the requirements of tax audit and

changes that have taken place in the

reporting, the ICAI has already submitted

memorandum to CBDT for extension of the

date for filing ITR. Let us hope for a positive

outcome. Anyhow lets all gear up for the

challenge and discharge our duties to the best of

our ability without compromising on the quality of

the work. Let us all complete the work and be

ready for festive and cheerful Dussehra &

Deepavali festivals.

Yours in Service

Shivakumar Khadabadi

Chairman

Our Profession... Our Pride

OFFICE BEARERS

CA. Shivakumar D. Khadabadi

Chairman

CA. Satish M. Mehta

Vice Chairman

CA. Jaykumar N. Patil

Secretary

CA. Chetan V. Chougule

Treasurer

CA. Rahul V. Adake

SICASA Chairman

CA. Praveen P. Ghali

ITT Co-ordinator

The Institute of

Chartered Accountants of India (Set up by an Act of Parliament)

Belgaum Branch of ICAI

E-News Letter Issue – 8 | September 2018 | Pages 10

SEPTEMBER-2018

GST:

Registration by person supplying

through own website.

I am engaged in supply of goods through my own

website. My annual turnover at present is Rs 15

lacs. Whether I need to obtain registration?

As per Section 2(45) of the CGST Act, 2017

electronic commerce operator means any person who

owns, operates or manages digital or electronic platform

for electronic commerce. Further, Section 2(44) provides

that electronic commerce means the supply of goods or

services or both including digital products over digital or

electronic network. Based upon above definitions under

GST law as you are supplying goods through website you

are an 'electronic commerce operator' and by operation of

Section 24(x) of the CGST Act, 2017 you would be com-

pulsorily required to obtain registration, as the threshold

exemption limit of turnover of 20 lacs as provided in

Section 22 will not apply in view of fact that Section 24

overrides Section 22.

However, an amendment is proposed to Section 24

(x) of the CGST Act, 2017 wherein it is proposed that

only the electronic commerce operator who is required to

collect tax at source under section 52 would be required

to obtain registration. Needless to mention that under

Section 52, tax is required to be collected by electronic

commerce operators on value of taxable supplies made by

other suppliers through it. As you are supplying your own

products on your website, once above amendment is

made to the CGST Act, you will fall out of Section 24

and will fall back under section 22 wherein you will be

allowed a threshold exemption limit of Rs. 20 lacs,

provided no inter-State supply of goods is made, as else

you will be caught by Section 24(i) of the CGST Act.

Tax Rate on supply of food in office

canteen.

I am engaged in supply of food at a canteen of an

office. I am confused about which rate of GST to

apply, viz. , 18 % or 5 % and whether I can avail of

input tax credit or not? Please guide me this regard.

GST rate of 5 % will be applicable in your case.

Further, credit of input tax charged on goods and services

used in supplying the service cannot be taken by you. In

this regard the GST Council in its 28th meeting held on 21

-07-2018 had decided to rationalize entry relating to

composite supply of food and drinks in restaurant, mess,

canteen, eating joints and such supplies to institutions

(educational, office, factory, hospital) on contractual basis

at GST rate of 5 % ; and making it clear that the scope of

outdoor catering on which GST rate of 18 % is applicable

is restricted to supplies in case of outdoor/indoor functions

that are event based and occasional in nature. In order to

give effect, inter-alia, to above decision of the GST

Council, Notification No. 13/2018-Central Tax (Rate)

dated 26-07-2018 and similar Notification in other GST

Acts have been issued by which any doubt regarding tax

rate of such transactions has evaporated.

Input Tax Credit of tax paid under re-

verse charge mechanism.

We are making advance payment for sponsorship.

Are we liable to pay GST under reverse charge on

such payment? If yes, when should we avail credit

of such GST paid under RCM, i.e., whether immedi-

ately on making payment to Government or after we

have received sponsorship service/receipt of invoice

from supplier?

SEPTEMBER-2018

Issue – 8 | September 2018 |

As per Section 9(3) of the CGST Act, 2017, read

with SI. No. 5 of notification 13/217 - Central Tax (Rate)

dt. 28-06-2017 services provided by any person by way

of sponsorship to any body corporate or partnership firm

located in the taxable territory are subject to payment

under reverse charge mechanism. Thus, the sponsorship

amount paid by you would fall under above notification

and you will be required to pay tax under reverse charge

mechanism. Now the next question to be answered is

when you are required to pay tax? In this regard we need

to refer to Section 13(3) of the CGST Act, 2017 accord-

ing to which the time of supply in cases of services sub-

ject to reverse charge is earlier of date of payment or 61st

day from the date of invoice. As you have made advance

payment towards sponsorship, the time of supply is trig-

gered and you will be required to pay GST on such ad-

vance paid.

As far as Input Tax Credit is concerned, as per Rule

36(1)(b) of the CGST Rules, 2017 the input tax credit can

be availed in respect of tax paid under reverse charge

mechanism on basis of an invoice issued in accordance

with the provisions of Section 31(3)(f) of the CGST Act.

The said Section mandates issuance of self-invoice by a

person liable to pay tax under reverse charge in respect of

goods or services received by him from an unregistered

supplier. Thus, such self invoice can be issued only upon

actual receipt of sponsorship service and only after issu-

ance of such invoice input tax credit can be availed.

Therefore, input tax credit cannot be availed in respect of

GST paid on advance against sponsorship and we need to

wait till actual receipt of such service.

SEPTEMBER-2018

Issue – 8 | September 2018 |

Gift of land to spouse and capital

gain thereon due to subsequent sale.

I gifted a piece of land to my wife in October, 2015.

She availed bank loan and constructed a residential

building immediately. In March, 2018 she sold the

building and out of the sale proceeds the bank loan

was repaid in full. The sale consideration consists of

the amount towards land and superstructure, i.e.,

building. My tax counsel says that the capital gain

on sale of land is chargeable to tax in my hands,

though the sale proceeds are enjoyed by my wife.

Please explain.

From the facts given by you, it is apparent that the

land is a long-term capital gain, since it was held for more

than 24 months before the date of transfer. The reduction

in time period of 24 months from 36 months to classify the

immovable property as long-term capital asset was in-

serted by the Finance Act, 2017 w.e.f. 1.4.2018.

It is not clear from your query, whether the building

construction was completed and was held for more than 24

months before the date of transfer to decide whether it is a

long-term capital asset or not.

Section 64 deals with clubbing of income arising

from the asset which was transferred to wife or son's wife

whether directly or indirectly. Therefore, the capital gain

attributable to land is chargeable to tax in your hands. The

capital gain attributable to building is chargeable to tax in

the hands of your wife. The gain or the proceeds may not

reach you or it is not enjoyed by you but the tax liability is

fastened on you. Upon clubbing, it is taxable in the respec-

tive head, i.e., as long-term capital gain in your hands.

INCOME TAX:

Validity of Appeal filed before CIT

(A) in paper form and not through

electronic mode .

I am a self-employed professional. My tax assess-

ment was completed under section 143(3) in De-

cember, 2017. I filed an appeal before the CIT (A)

by submitting all the documents such as Statement

of facts and Grounds of Appeal. I came to know of

the new procedure that it has to be filed electroni-

cally by using digital signature. I would like to

know, whether my appeal in physical paper form

instead of electronic mode would be entertained or

not? Please clarify.

I presume from your query that you have preferred

the appeal with the time limit of 30 days from the date of

receipt of the assessment order and have paid the

requisite fee. Section 249 provides the form and limita-

tion for filing an appeal.

Rule 45 of the Income-tax Rules, 1962 substituted

w.e.f. 1.3.2016 provides for filing of an appeal

electronically using digital signature. It says that

Principal DGIT shall specify the form and documents to

be filed besides data structure, standards and manner of

generation electronic verification code, etc

The Income-tax Act, 1961 is not amended to

provide for filing of an appeal in online mode with digital

signature. The Rules are always subservient to the Act.

When the rules provide some procedure, it is necessary

that Act is also correspondingly amended to accommo-

date what is stated in the rules. In the absence of such

provision in the Act, the rules do not override the legal

provision. Hence, your appeal would be admitted. At

least, an opportunity would be given to you for filing an

appeal electronically with digital signature. There are

decisions to support you by holding that the amendment

to the rules without sanction of Act is not tenable.

SEPTEMBER-2018

Issue – 8 | September 2018 |

Whether bank passbook is a ‘books

of account’ of the taxpayer.

Our firm employed a part-time accountant who af-

ter some dispute with us took away the books of ac-

count and we could not reconstruct the books of ac-

count. In the tax assessment, the Assessing officer

treated the amounts deposited in bank account as

unexplained 'cash credit' under section 68. Is the

approach of the Assessing Officer valid in law?

Any amount credited in the books of account for

which no explanation is furnished or the information and/

or explanation is not satisfactory, the amount credited

could be chargeable to tax under section 68. The exact

issue in your query is, whether the amounts credited in

bank account could be taxed as unexplained cash credit?

There are many decisions to hold that bank account

or passbook would not form part of books of account of

the assessee. Hence taxing the amount credited in bank

account under section 68 is not tenable in law. You may

prove the deposits/withdrawals in bank account by obtain-

ing account copy from your buyers and suppliers backed

up by VAT/ GST returns.

The AO must have treated the amounts as income

from unexplained sources or unexplained money.

Treatment of amounts credited as cash credit is an obvious

error committed by the AO which may actually help you

to win in appeal. Bank passbook is not covered by the

expression 'books of account' as that is maintained by the

bank and not by the assessee. Refer to CIT v. Ms. May-

awati (2011) 338 ITR 563 (Delhi).

Section 43B and determination of

Income under section 44AD

My client engaged in running a garment factory

had turnover of 90 lakhs during the financial year

2017-18. He has GST payable of the month of

March, 2018 of Rs.1,20,000. We dispute the liabil-

ity and intend not to pay, till it is resolved. We have

two queries, viz., (i) whether GST payable has to be

included in the income of the assessee after com-

puting presumptive income under section 44AD @

8 % /6 % ? ; ( ii ) whether, the GST collections

should form part of the turnover for determination

of presumptive income under section 44AD?

Firstly, section 44AD starts with a non obstante

clause, viz, the presumptive income determined under

section 44AD is inclusive of all the provisions contained

in sections 28 to 43C of the Act. Therefore, the income

computed under section 44AD is not to be increased or

reduced by applying any of the provision contained in

sections 28 to 43C of the Act. Therefore, the provisions

of section 43B cannot be applied while determining the

presumptive income under section 44AD of the Act.

Your second query is whether turnover should

include GST? As the ICDS provisions do not apply to

incomes liable for presumptive income determination you

can adopt the turnover as reported in GST return as your

turnover. Thus, it is excluding GST.

As ICDS will not apply, the determination of

purchase cost to include rates and taxes need not be

applied in your case. The ITRs also provide separate

column for disclosing GST as receipt and payment. This

supports the view that the GST collection and payment

could be disclosed separately without aggregating with

sales and purchases.

SEPTEMBER-2018

Issue – 8 | September 2018 |

Validity of reassessment when notice

served at the wrong address of the as-

sessee.

Ours is an LLP previously operating in rental prem-

ises and we moved to our own premises recently.

Notice under section 148 was served at an address

which was in no way connected to us. We partici-

pated in the reassessment proceedings graciously

but raised our objection for the first time before the

CIT (Appeals). Will the CIT (Appeals) accept our

contention?

A Section 292BB provides the relief to the tax

officers' if the notice is not served properly but the tax-

payer has appeared or co-operated in the proceedings. The

proviso to the section carves out an exception to the blan-

ket bailout given by the main legal provision. The proviso

says that if you have raised objection before completion of

assessment or reassessment, then the assessment or reas-

sessment proceedings based on improper or defective ser-

vice of notice could make the proceedings a nullity.

When you raise the objection or deficiencies in

service of notice for assessment or reassessment, the As-

sessing officer Can set right the deficiencies. If the AO has

not cared to set right the deficiencies, the assessment

would become invalid.

In your case, you are raising the objection before

the appellate authority for the first time and, therefore,

your objection is belated one. I am afraid that you may not

succeed based on your objection raised for the first time

before CIT(A).

SEPTEMBER-2018

Issue – 8 | September 2018 |

Seminar On

“TaxaTion of Co-operaTive SoCieTieS & BankS” 01.08.2018

SEPTEMBER-2018

Issue – 8 | September 2018 |

Changes in Form –3CD

“for The aSSeSSmenT Year 2018-2019 and iT’S impliCaTionS”

04.08.2018

SEPTEMBER-2018

Issue – 8 | September 2018 |

Football Tournament for Students 05.08.2018

SEPTEMBER-2018

Issue – 8 | September 2018 |

Independence Day 15.08.2018

SEPTEMBER -2018

Issue – 8 | September 2018 |

SICASA One Day Seminar 18.08.2018