Transfer Pricing

Amendment of Section 92CA of the Income Tax Act | Reference to TPO

In section 92CA of the Income-tax Act, in sub-section (9), in the proviso, for the figures “2022”, the figures “2024” shall be substituted.

Sub-section (8) to (1) of Section 92CA was inserted by the Act. No. 38 of 2020, w.e.f. 1 November 2020. Subsection (8) of Section 92CA provided that the Central Government may make a scheme, by notification in the Official Gazette, for the purposes of determination of the ALP to impart greater efficiency, transparency and accountability by:

  1. Eliminating the interface between the Transfer Pricing Officer and the assessee or any other person to the extent technologically feasible;
  2. Optimizing utilization of the resources through economies of scale and functional specialization;
  3. Introducing a team-based determination of ALP with dynamic jurisdiction.

In this regard sub-section (9) of Section 92CA provided that the Central Government may, for the purpose of giving effect to the above may, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification, provided that no direction shall be issued after the 31 March 2022.

Pursuant to the Finance Bill of 2022, this date of 31 March 2022 has been extended to 31 March 2024. Thereby extending the due date by which the Central Government may provide relevant directions to give effect to the above.

Amendment of Section 153 r.w. 263 of the Income Tax Act | Time limit for completion of the assessment, re-assessment and re-computation r.w. Revision of orders prejudicial to revenue

As per Section 263 of the Act, “the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may call for and examine the record of any proceeding. If he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.”

Pursuant to the Finance Bill of 2022, para 48, it is intended to include the order passed by a TPO as well. It is also stated “(5A) Where the Transfer Pricing Officer gives effect to an order or direction under section 263 by an order under section 92CA and forwards such order to the Assessing Officer, the Assessing Officer shall proceed to modify the order of assessment or re-assessment or re-computation, in conformity with such order of the Transfer Pricing Officer, within two months from the end of the month in which such order of the Transfer Pricing Officer is received by him.”

The amendment has the effect of overturning a recent ruling reported in JCB India Ltd5. The amendments will take effect from 1 April 2022.

5. Delhi Income Tax Appellate Tribunal (ITAT) Appeal No. 518 & 519 / Del / 2021 (AY 2014 -15 & 2015-16)

Indirect Tax

CBIC issues guidelines for recovery of ‘self-assessed tax’ on account of GSTR-1 vs. GSTR-3B mismatch

[Instruction No. 01/2022-GST dated 7 January 2022]

If the tax payable in respect of details of outward supplies furnished in GSTR-1 has not been paid through GSTR-3B, whether wholly or partly, or any amount of interest payable on such tax remains unpaid, then the tax short paid on such self-assessed and thus, self-admitted liability along with interest thereon, are liable to be recovered under the provisions of Section 79 of CGST Act.

However, in cases where there is a genuine reason for the difference between the details of outward supplies declared in both the returns, an opportunity needs to be provided by the proper officer, by way of communication (with DIN) either to pay or to explain the said difference before any action under Section 79 is taken for recovery of the said amount.

If a registered person fails to reply to the communication or fails to make the payment of such amount within the prescribed time or fails to explain the reasons for the difference to the satisfaction of the proper officer, then the proceedings for recovery may be initiated by the proper officer.

Maharashtra Government’s guidance on GST scrutiny parameters and system or data related difficulties faced by field officers

[Internal Circular No. 1A of 2022 dated 17 January 2022]

In continuation to the earlier guidelines6 issued to standardize and streamline the procedural aspect of scrutiny of GST returns as per Section 61 of the CGST/ MGST Act, the Maharashtra Government has issued further clarifications addressing the difficulties faced by field officers relating to scrutiny parameters and system or data-related issues. Some of the key clarifications are as follows:

  • In case of mismatch of ITC claimed on account of IGST paid on imports by courier, where the courier company has paid the duty on behalf of importers before taking delivery of parcels, the submission of taxpayer containing the details viz., airway bill or any other document stating details of transport by air, courier bill of entry evidencing payment of IGST, assessment note containing the details of imported goods, etc. may be accepted if found proper.
  • Where the BoE wise details have not been provided in respect of excess ITC claimed on account of IGST paid on import of goods in GSTR-3B/ GSTR-9 vis-à-vis actual payment, the tax officers are advised to refer to Part D (under the heading “tax paid on overseas import of goods and import of goods from SEZ”) of the GSTR- 2A/2B which is to be downloaded for the entire period covered under scrutiny.
  • In cases of ITC on purchase invoices uploaded by the supplier in GSTR-1 filed after the last date of availment (Parameter 79), the proper officers are advised to download the GSTR- 2A/2B of all periods under scrutiny where the date of filing of GSTR-1 by the supplier is available against the invoices appearing therein.
  • Where the ITC claim of GSTR-3B appears to be in excess of that available in GSTR-2A, but while filing of GSTR-9 the taxpayer has reconciled the differences in Table 8 thereof, the proper officers are also advised to consider ITC shown in column 6M of GSTR-9, i.e., any other ITC availed but not specified in 6B to 6L, as well as ITC claimed in the subsequent financial year in column 8C for the purpose of reconciliation.
  • Where for the purpose of verification of ITC, the invoice numbers are not available with respect to suppliers who have filed GSTR-1 after the due date of March 2019, the tax officers are advised to refer to the guidelines of Internal Circular No. 6A of 2021 and accordingly, refer to the details like invoice number, invoice date, upload date, etc. available in GSTR-2A.
  • The information available in the GST BO system is more updated and accurate in terms of data. Hence, the officers are advised to refer to the BO report in lieu of the difference in GST- 3B vs. GSTR-2A communicated by the Economist Intelligence Unit (EIU).

The mechanism for filing GST refunds by taxpayers registered in erstwhile UT of Daman and Diu for the period prior to the merger with UT of Dadra and Nagar Haveli

[Circular No. 168/24/2021-GST dated 30 December 2021]

Due to the transfer of ITC balance from ECrL of old GSTINs to new GSTINs, the taxpayers are unable to apply for a refund on account of zero-rated supplies and inverted rated structure for the period prior to the merger of Union Territories. Also, due to system validations, such taxpayers are unable to claim refunds from the new GSTIN as all the invoices bear the old GSTIN.

In this regard, CBIC has notified the mechanism for filing refund claims by such taxpayers under “Any Other” category using their new GSTIN. After filing the application, no debit from the Electronic Credit Ledger (ECrL) is required.

If the proper officer is satisfied that the whole or any part of the amount claimed is payable as a refund, he shall request the applicant to debit the said amount from the ECrL through Form DRC-03. Once the proof of such debit is received, he shall proceed to issue the refund order in Form GST RFD-06 and the payment order in Form GST RFD-05.

No refund claim requiring debit from the ECrL or where the refund would result in re-credit of the amount sanctioned in the ECrL, shall be filed using old GSTIN.

6. Internal Circular No. 6A of 2021 dated 11 June 2021

Tax Street January 2022