Assessee Letters Cannot be Taken as Admission of Non-Disclosure or Unconditional Offer to Pay Tax: SC
The Supreme Court has said that communications sent by the assessee cannot be taken as admission of non-disclosure or being a case of unconditional offer to pay tax. While setting aside an order passed by the High Court, the apex court also noted since the disclosure in question was made by the US-based parent company, it has no relevance for the taxpayer company in India. 
 
The case was about undisclosed income and expenditure relating to Goodyear India Ltd by its US-based parent Goodyear Tyre & Rubber Co to the Securities and Exchange Commission (SEC). The US-based company had revealed amounts kept outside the books of Goodyear India in India without admitting the allegations made against it. 
 
The Delhi High Court, in its order on 28 April 2008 had observed that "In view of the facts, which have emerged from the complaint made by the SEC in US as well as the letters sent by Goodyear India to the I-T department in India, there can be no manner of doubt that Goodyear India had certain amounts outside its books of accounts which were used for purposes that were not at all legitimate inasmuch as Goodyear India was funding foreign trips by Indian government officials and had made payments to the electricity undertaking for assuring continuous power supply to its factory premises.”
 
The apex court, however, noted that Goodyear India, the assessee, had neither received the amount nor spent it. "It is not the case of the department that the amount referred to in the said disclosure has been received in the accounts of the assessee or spent for and on behalf of the appellant – assessee under instruction, so as to be treated as undisclosed income of the appellant," the bench said while setting aside the judgement of Delhi HC.
 
In an order passed on 16 October 2019, a bench of Justice AM Khanwilkar and Justice Dinesh Maheshwari, said, "Our analysis of the said letters is that, they had been in refutal of the allegations contained in the news items, which were published around that time, when the communication was sent by the assessee to the (Income-Tax or I-T) department with an explanation and a without-prejudice offer."
 
"...the two communications relied upon by the High Court cannot be taken as admission of non-disclosure nor being a case of unconditional offer to pay tax in that behalf. On the other hand, we find that the income tax appellate tribunal (ITAT) had exhaustively analysed the entire evidence, including the two letters and taken a view which, in our opinion, is a possible view. That being purely a finding of fact, no interference was warranted," the apex court said.
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    COMMENTS

    Charan Rawat

    1 month ago

    what can one say - here is a parent that states that incomes have not been disclosed . But Supreme Court says it is not admission of guilt. in that situation, will a written confession be an admission of guilt ? And is a sworn affidavit made to Court of any relevance ?

    2 in 3 Companies May Immediately Shift to New Corporate Tax Regime, Says Report
    Following the reduction in corporate tax rate announced by the government, two out of three companies would immediately shift to the new tax regime, and half of those shifting may use tax savings for ongoing capex or to strengthen balance sheet, says a research report.
     
    “Companies shifting to the new regime are likely to see close to 700 basis points (bps) of tax savings. While this may not kick-start the much-delayed private investments cycle, it could help ease funding constraints of companies to some extent. About half of the companies surveyed said they will use the savings for ongoing capex, reduce debt or retain cash, which would strengthen balance sheets and prime them for fresh capex once demand improves,” says Subodh Rai, senior director and head for analytics at CRISIL Ratings.
     
     
    In the report, CRISIL says it believes half of those shifting may use tax savings for ongoing capex or to strengthen balance sheet. Optimism as most companies will benefit and intend to retain the savings to reduce funding constraints and strengthen balance sheets to be ready for fresh capex once demand revives. And cautiousness as the savings alone may not lead to immediate pick-up in fresh capex given the weak demand environment, it added.
     
    A third of the companies surveyed – from capex-heavy sectors such as power, and oil & gas – have expressed a desire to continue with the current tax regime. However, the ratings agency says, a majority of them from sectors such as auto, chemicals, textiles, gems and jewellery, and retail are likely to shift immediately.
     
    "Around 37% of the companies surveyed are yet to decide on utilisation of tax savings though option to increase dividends found least preference. And just 10% said they will pass on the benefit through higher discounts and sales promotion – indicating the tax cut alone may not seed demand growth. Overall, the tax cut provides much-needed impetus to companies to press the capex button once demand stages a comeback. India Inc’s credit outlook remains contingent upon this pick-up in demand," CRISIL says.
     
    These finding are based on responses received in a survey of 850 large (by revenues) companies rated by CRISIL. This includes, both listed and unlisted companies spread across all sectors.
     
    As per the changes to the Income Tax Act, 1961, announced, domestic companies have the option to pay corporate tax at a reduced effective rate of 25.17%. This is conditional upon them relinquishing other exemptions such as a set-off of minimum alternate tax (MAT) credits, and incentives under special economic and tax-free zones. And once exercised, the option is irreversible.
     
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    No GST on goods bought at duty free shops: Bombay HC
    In major relief to duty free shops, the Bombay High Court has ruled that goods and services tax (GST) cannot be levied on products sold at the duty free shops in Mumbai airport.
     
    The two judge bench observed that the if duty free shops are subjected to local taxes, the tax burden will increase and price of the goods, which are supposed to be free of taxes and duties, would go up.
     
    Citing Article 286 of the Indian Constitution, the judgement said: "The supply made in the course of import into India or in the course of export out of India, can not be subjected to any tax."
     
    The judgment would have wider implications as it could set precedent for abolition of local duty on products sold through duty free shops across the country.
     
    "We also find merit in the contention of the Petitioner that both before and after the introduction of GST, the sales to arriving passengers continue to be sales in and/or from the custom area, as at the point of sale in DFS (duty free shop), the goods have neither crossed the customs frontier nor have they been cleared for home consumption by DFS. Accordingly, neither customs duty, nor Integrated Tax, is payable by DFS," it said.
     
    The judges further said that they find merit in the contention of the petitioner that arriving passenger's baggage is exempt from the integrated tax.
     
    "In view of the above exemption read with the duty free allowance available under the Baggage Rules applicable to arriving passengers, neither customs duty (upto the permitted baggage allowance) nor IGST is levied on such goods," it said.
     
    Such import of goods by arriving passengers across custom frontier as passenger baggage is therefore an exempt supply under the GST, hence no IGST is payable by either the duty free shop on its imports, or on supply to arriving passengers, it said.
     
    "The arriving passengers are also not required to pay any IGST on crossing the custom frontiers, in view of the above exemption read with the duty free allowance under the Baggage Rules."
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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