Page 24 - Banking Finance June 2023

LEGAL UPDATE

the same pedestal as other tax issues, This is part of an interim plan for Fiscal tered unit is a 'distinct person'. A trans-
where both, the Indian Revenue Au- Year 2023-24, circulated among offi- action between distinct persons even
thorities (IRA) as well as taxpayers, can cials. The document, has set the dead- without consideration is termed as a
approach a HC after a decision by the line for demand verification. Accord- supply and is taxable.
ITAT. ingly, checking of all demand PAN-wise
When the services of employees de-
As is the trend with many tax disputes, and year-wise from systems, AST/TMS ployed in a registered place of business
this is likely to increase the timeframe (software for return processing) or are provided to another registered
to resolve TP disputes and result in manual demand, wherever remaining premises of the company, it is treated
more litigation, as typically the tax- and removal of all duplicate entries as a supply and is subject to GST at
payer or IRA is likely to file appeals need to be completed by June 30. The
18%.
against unfavorable ITAT orders before same timeline will be for verification
This concurs with advance rulings given
the HC. and certification in CPC Financial Ac-
in the past, including a ruling given by
counting System (FAS) where notice
On appeal, there is also likelihood of
the Karnataka bench of the Appellate
has been issued till March 31, 2023.
HCs remanding such matters to the
Authority for Advance Rulings in the
ITAT for adjudication, instead of pass-
case of Columbia Asia Hospitals.
ing a speaking order on merits. No input tax credit: Intra-
To give a background, in August 2018,
co services GST a pain Tribunal cannot overrule
in what is widely viewed as a landmark
A recent advance ruling given by the state government's orders
case, the Karnataka HC had put forth
Tamil Nadu bench in the case of
significant principles relating to admis- Can a tribunal overrule a state
Profisolutions, a private company, re-
sibility of appeals concerning TP issues government's order, such as the need
affirms that GST is applicable on ser-
by the HC. to get the forest department's clear-
vices provided intra-company. In this
ance for a project? No, says Justice M
The HC had held that ITAT is the final
case, the branch office in Chennai
Nagaprasanna of the High Court of
fact finding authority and, therefore,
(Tamil Nadu) provided support services
Karnataka, Bengaluru, in a case be-
questions such as appropriateness of
like engineering services, design ser-
tween the Principal Conservator of
qualitative and quantitative filters for
vices and accounting services to its Forests, Karnataka, and Wind World
identifying comparable and accep-
head office in Bangalore, which was India Pvt Ltd, an insolvent wind turbine
tance/rejection of comparable should
registered in Karnataka under the GST manufacturer.
not be reviewed by the HC.
Act.
Wind World India had been operating
Following this ruling, the Karnataka HC
For GST to be triggered, there must be a wind farm on a 222-ha forestland
as well as some other HCs dismissed a
a 'supply' of goods or services. The
plethora of TP appeals on the grounds leased to it by the Karnataka Renew-
moot question before the Authority for
that substantial question of law did not able Energy Development Corporation
Advance Ruling (AAR) was whether
arise in those cases. Ltd. The 15-year lease expired in June
provision of services by a branch office
2018. In January 2020, the company
in one state to its head office in an- applied for a licence renewal, which
Take immediate action on
other state, through employees who
was granted subject to the condition
outstanding demand, re- are common to the company, consti-
that the company would secure the
tutes a 'supply' of services.
fund approval: Tax Dept forest department's clearance.
A physical presence of a unit, such as
In order to facilitate compliance by When the state government noticed in
assessees, the Income Tax Department the head office or branch offices, ne- May 2022 that the company was op-
has instructed its officers to take im- cessitates a GST registration. In other erating its wind turbines without for-
mediate action on outstanding de- words, the registrations are state-spe- est clearances, it ordered suspension of
mand and refund approval. cific. The AAR held that each regis- the operations.
22 | 2023 | JUNE | BANKING FINANCE