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’).

Read more: Management Support Services vis-à-vis Ancillary and Subsidiary Clause – An Analysis on position...

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.

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

In this 95^th edition of, we bring you the judgments which have shaken the trade. The Supreme Court in the matter of Union of India vs. Ashish Agarwal has tried to put an end to the controversy on the re-assessment. Though the majority of the High Courts have ruled in favour of tax payers, the Supreme Court stated that it was a genuine and bona fide mistake on the part of the revenue and for which the revenue cannot be made remediless and allowed the appeal of revenue, deeming the notices issued on or after 01.04.21 under Section 148 as show cause notices issued under Section 148A. Though, the Supreme Court has not specifically stated that the extensions made under TOLA, 2020 are not valid, there exists an interpretation that notices issued on or after 01.04.21 must be treated as issued in light of new time lines as per Section 149. If such an interpretation is taken, then assessment for AY 13-14, AY 14-15, AY 16-17 and AY 17-18 would get time barred. In other words, the whole TOLA is being ignored. This definitely paves way to the second round of litigation, which has to be eventually settled by Supreme Court.

Read more: SBS Wiki E Journal June 2022

In this 94^th edition of ours, we bring you our inquisitive analysis on the judgment of Delhi ITAT in the matter of Young Indian. The story of Young Indian is quite popular and am saving your time from detailing the facts. The ITAT has made a detailed analysis of taxation of the value of assets under Section 28(iv) in the hands of Young Indian and a must read. Though the judgment deals with a total of 16 grounds, we have concentrated in the article, only the grounds that deal with the taxation. It would be as curious as any other commercial movie sequel as to what happens to the fate of tribunal’s decision in the higher courts. Let’s wait and see.

The next article is on the routine usage of the draconian powers under Section 83 of CT Act, 17. We have witnessed the usage of the Section 83 in a routine and absurd manner in one of our client’s cases, which is a large taxpayer. The Commissioner went ahead and issued a provisional attachment order attaching 6 to 7 bank accounts, without any basis in the middle of inspection proceedings, thereby creating hardship for the client. We have advised the client to file a writ petition and the matter is currently before the High Court. The same procedure is followed by authorities dehors the circular issued by CBIC, all over the country, which is evident from the judgments used in our article. The only way to restrict the powers under Section 83 is to amend it by incorporating certain conditions for its usage.

Read more: SBS Wiki E Journal May 2022