Page 20 - Banking Finance October 2024

LEGAL UPDATE

No GST on Fines and Pen-

alties Collected by RBI,
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Rules Maharashtra AAR Ô Ô Ô Ô Ô » »» »¹ ¹¹ ¹ ¿ ¿¿ ¿ ´ ´´ ´
The Maharashtra Authority for Ad-
vance Rulings (MAAR) has ruled that
the Reserve Bank of India (RBI) does
not need to pay Goods and Services Ò»©­
Tax (GST) on fines, penalties, and late
fees collected from regulated entities.
The ruling was issued after the RBI
sought clarity on whether such fines,
collected for contraventions or viola-
tions of laws, are taxable under GST.
MAAR concluded that these penalties employee using income beyond known Legal experts have raised concerns
are not considered payment for any means will be classified as benami prop- about the retrospective application of
service or supply and are levied to en- erty. This ruling came while examining the Benami Act, a matter currently
sure discipline and deter violations. the case of an agriculture department under review by the Supreme Court
Therefore, they do not constitute con- employee who purchased properties following the 2022 Ganpati Dealcom
sideration for a taxable service. Simi- worth Rs. 4.58 crore, which were in- case, which ruled against the law's
larly, penalties imposed on third-party consistent with his earnings. retroactive application.
vendors for non-performance or
underperformance as per contract The employee, who had a net earning
terms will also not attract GST, as these of Rs. 63.95 lakh from his job until IT Tribunal Allows Double
do not qualify as a supply of services. March 2020, acquired 12 acres of ag- Deduction Claims Under
ricultural land and 12 plots in the
Property acquired through names of his wife and two sons. The Sections 54 and 54F
Illicit Income Ruled as tribunal ruled that the employee had In the case of Ramdas Sitaram Patil vs.
used unaccounted money to purchase ACIT, the Income Tax Appellate Tribunal
Benami Transaction the properties for his own benefit, has ruled that taxpayers can claim de-

The Delhi Appellate Tribunal under the making it a benami transaction. The ductions under both Sections 54 and 54F
Prohibition of Benami Property Trans- tribunal noted that the employee's in- of the Income Tax Act simultaneously.
actions Act (PBPTA) has ruled that come was insufficient to justify the The appellant had claimed deductions on
property acquired by a government acquisition of such properties. a new residential property but was de-
nied by the assessing officer, who argued
that the property was purchased before
Tribunal's Ruling Highlights Complexities of Benami the stipulated one-year period from the

Act's Application sale of the original asset.
The Benami Act's application continues to generate legal challenges, par- The Tribunal cited previous rulings, in-
ticularly regarding properties acquired before the law's amendment in No- cluding the CIT vs. Dr. Laxmichand
vember 2016. The Delhi Appellate Tribunal's recent ruling classifies a gov- Narpal Nagda case, where it was held
ernment employee's acquisitions beyond known income sources as benami, that the term "purchase" does not
while the Supreme Court is still reviewing the law's retrospective applica- require legal transfer of the title within
tion in the Ganpati Dealcom case. one year for deduction purposes. The
Tribunal concluded that the appellant
The ruling by the tribunal underscores the stringent enforcement of the was entitled to claim both deductions,
Benami Act post-amendment but raises questions about its application to reaffirming that no legal bar exists on
cases preceding the 2016 amendment, an issue likely to be resolved by the claiming deductions under both sec-
Supreme Court in the coming months. tions for the same asset.

18 | 2024 | OCTOBER | BANKING FINANCE