Chamber Voice – September 2019

President's Note

Dear Friends,

I thank you all for having re-elected me as the President of the Chamber for a second term. In all humility I accept this honour that has been bestowed on me once again. I thank the members of Cochin Chamber of Commerce and Industry for the trust reposed in me and assure you that I shall do my best to do justice to this responsibility given me.

On the 29th of August, we were privileged to host the visiting delegates from the Consulate General of Netherlands, in the Chamber. The delegation included Mr. Joost Geijer, Head of Economic Affairs, Embassy of the Kingdom of the Netherlands, New Delhi, Ms. Caroline Rietveld, Deputy Consul, Consulate General of the Netherlands, Mumbai, Mr. V. Vijay Kumar, Special Advisor, Consulate General of the Netherlands. Bengaluru and Ms. Vera Bakker, Intern, Consulate General of the Netherlands, Mumbai. The visit was primarily to discuss the Programme Schedule for the Visit of the Business Delegation from the Netherlands to Kochi on the 17th and 18th October 2019.

We started this month’s programmes with the CEO Forum Breakfast Meeting on the 6th of September, 2019. Mr. Alwar Rajkumar, Director, PwC’s Mergers & Acquisitions Tax Practice was the Guest Speaker on the occasion and he spoke on ‘Cross Border Mergers and Tax Due-Diligence Impact Areas.’ The Session covered the regulations relating to cross border mergers from various aspects, such as tax exchange regulations, and accounting.

To understand the concept of ‘Status Quo’ and to meet challenges fearlessly, the Chamber organized an Interactive Workshop on ‘Challenge the Status Quo’ on 20th September 2019. The Workshop was handled by Cmde. S. Sreeram and Cdr. Ninad Phatarphekar, Founders of Transformavens Training & Consulting LLP, Mumbai. The Workshop was designed to empower the participants to dispense with constraints and generate original and innovative solutions.

The existing Return Formats under GST are proposed to be replaced with the New Return Format, from a date to be notified by the Government. In this regard, we conducted a Workshop on the New Return Forms along with a demonstration of the Offline Tool, led by Mr. Asoka Narayanan, Superintendent of Central Excise Department, CGST, Trivandrum.

Detailed reports on these programmes along with the pictures are carried elsewhere in this issue of the Newsletter.

The 10th Breakfast Meeting under the aegis of the Chamber’s CEO FORUM 2019 will be held on Friday, the 4th of October 2019. The Speaker at this Session will be Ms. Shyama Kuriakose, Senior Project Fellow (Environment Law), Vidhi Centre for Legal Policy, New Delhi. She will speak on “Climate Change in Kerala: A Way Forward for Collective Action”.

As you all know, the Chamber organises an Annual Memorial Lecture to pay tribute to, and remember one of the greatest visionaries that this country has seen, Dr. A P J Abdul Kalam. This time, the 5th Dr. APJ Abdul Kalam Memorial Lecture will be held on 8th October 2019 at Hotel Avenue Centre. Mr. S Nambi Narayanan, Padma Bhushan recipient and Indian Scientist and Aerospace Engineer (ISRO) will be the Speaker at the Lecture. The details of this programme are being sent to you separately and I hope that you will all participate in this event.

I once again thank you all for having me elected to serve a second term as the President of the Cochin Chamber of Commerce and Industry and look forward to an eventful year with the full support and co-operation of you all in all the activities of the Chamber.

I also take this opportunity to thank my fellow Executive Committee Members of the Chamber for their support and co-operation in the last year and look forward to more of the same in the year ahead.

V Venugopal


Fine Points

Recent Events

Visit of a Delegation from the Consulate of the Kingdom of Netherlands to the Chamber


Representatives of the Embassy of the Kingdom of the Netherlands and the Consulate General of the Netherlands visited the Cochin Chamber of the Commerce and Industry on Thursday, 29th August 2019 at 3 pm.

The visitors included;

Mr. Joost Geijer, Head of Economic Affairs, Embassy of the Kingdom of the Netherlands, New Delhi

Ms. Caroline Rietveld, Deputy Consul, Consulate General of the Netherlands, Mumbai

V. Vijay Kumar, Special Advisor, Consulate General of the Netherlands. Bengaluru and

Ms. Vera Bakker, Intern, Consulate General of the Netherlands, Mumbai

The Chamber was represented by;

Mr. V. Venugopal, President, Mr. C.S. Kartha and Mr. P S Menon, Executive Committee Members and the Chamber Secretariat.

The agenda for the meeting was to discuss the Programme Schedule for the Visit of the Delegation from Netherlands to Kochi on the 17th and 18th October 2019.

The visit of the Business Delegation from Netherlands is a follow up to the visit of the Chief Minister of Kerala to the Netherlands in May earlier this year.

Two Business Missions will be visiting Kochi for 2 days (17th and 18th October 2019).  The first mission visiting Kochi on the 17th of October will be focusing on the Maritime Sector and the second mission, visiting on the 18th of October will focus on Water and Solid Waste Management.

Both missions will be accompanied by senior officials from the Netherlands and each mission will comprise of approximately 25 companies.

The event will, tentatively, be organised at the Grand Hyatt, Bolgatty, Cochin.

The Consulate representatives requested the Chamber to assist them in organising the proposed events. The Office of the Consulate General of Netherlands will share more details of the representing organisations with the Chamber, once finalised.

The meeting came to close by 4 pm.

9th CEO FORUM Breakfast Meeting - 2019

Cross Border Mergers and Tax Due-Diligence Impact Areas | 06.09.2019

The Cochin Chamber of Commerce and Industry conducted the CEO Forum’s 9th Breakfast Meeting on Friday, 6th of September, 2019 at the Taj Gateway Hotel, Ernakulam.

Mr. V Venugopal, President of the Chamber, delivered the Welcome Address and introduced the Speaker for the meeting.

Mr. Alwar Rajkumar, Director, PwC’s Mergers & Acquisitions Tax Practise was the Guest Speaker at the meeting, and he spoke on ‘Cross Border Mergers and Tax Due-Diligence Impact Areas.’

Mr. Rajkumar addressed the forum on the key aspects of tax and regulatory namely foreign tax credit, eligibility, carry forward of losses, interest deductibility, reporting obligations, etc. He also explained the scope of work, key management representations, list of documents reviewed, a summary of issues, etc. which forms the typical format of a due diligence report.

The objectives of due diligence including how to identify any material Income Tax exposures, validation of representations made by the seller, how to efficiently structure a deal and validation of assumptions made by the buyer in valuing the target were also covered in detail. Mr. Rajkumar mentioned that financial statements, tax returns, transfer pricing documents, etc. are the typical documents reviewed in due diligence.

The Session covered the difference between In-bound Merger and Out-bound Merger against the parameters like issue of shares, overseas liabilities, foreign branch regulations etc. Mr. Rajkumar presented case studies of a Parent Merger and Merger of a wholly-owned subsidiary. The key considerations of an outbound merger namely corporate law, Income Tax, SEBI regulations and exchange control were also discussed in the meeting.

Mr. C S Kartha, Programme Committee Chairman of the Chamber, presented a Memento to Mr. Rajkumar.

Mr. S P Kamath, Executive Committee Member proposed the Vote of Thanks.

One-day Workshop on "Challenge the Status Quo"


The Cochin Chamber of Commerce and Industry organized an interactive Workshop on ‘Challenging the Status Quo’ on Friday, 20th September 2019 at Hotel Park Central, Kaloor.

The Workshop was designed to empower the participants to dispense with constraints and generate original and innovative solutions. Cmdr. S Sreeram and Cdr. Ninad Phatarphekar, Founders of Transformavens Training & Consulting LLP, Mumbai were the Speakers at the Workshop.

Mr. Manu Varghese, Deputy Secretary of the Chamber delivered the Welcome Address.

The Workshop started with an overview of the term ‘status quo’, the importance of challenging it to excel in business thereby emerging as a dark horse in the race for success. Mr. Phatarphekar said that ‘status quo’ is based on the psychological principle that people like what is familiar and safe instead of what is new and dangerous.

The reality in business is that doing nothing could be more disastrous than trying something new. Competitors’ products and tactics change, customers wants and needs change and Companies who maintain status quo fall behind. Mr. Phatarphekar presented the examples of Companies who failed to cope with the changes and the successful ones who made a smooth transition by embracing the change in circumstances around them.

The second half of the Session covered the concepts of the comfort zone and the problems that come with it. Mr. Sreeram said that the fear of discomfort of stepping outside the current circumstances is greater than the discontent one feels about his/her current situation. He also highlighted the fact that this attitude restricts people from growing, from trying new things and conditions one to settle.

Mr. Sreeram said that with the right effort and patience, it’s easy to develop the habit of stepping outside the comfort zone despite the power it holds. He gave the participants some pointers on how to beat the fear that holds one back ……. like getting uncomfortable, embracing the constraints and divergent thinking.

The Workshop also had different activities which helped the participants to step out of their comfort zone and to think outside the box.

Mr. Antony Joseph, Managing Director, AQA Quality Management Systems presented Mementos to the Speakers.

Mr. Eapen Kalapurakal, Secretary of the Chamber, handed over certificates to the participants.

Mr. Thomas Sebastian, Deputy Secretary of the Chamber proposed the Vote of Thanks.

One-day Workshop on "GST on New Return Offline Tool"


The Cochin Chamber of Commerce and Industry conducted a Workshop on “GST New Returns Offline Tool” on Saturday, 21st September 2019, at Hotel Park Central, Kaloor.

Mr. Manu Varghese, Deputy Secretary of the Chamber delivered the Welcome Address and introduced the Speaker for the Workshop, Mr. Asoka Narayanan, Superintendent of Central Excise Department, CGST, Trivandrum.

The Session began with an overview of the New Returns System under GST, the statutory provisions namely SEC 43A, SEC 16(2), SEC 37 & 38, SEC 43A (4), etc. Mr. Asoka Narayanan explained the difference in filing returns for large taxpayers and small taxpayers, their liabilities, etc. The Session also focused on the Normal Returns, Sahaj Return and Sugam Return under the new GST Return System and their features. Mr. Asoka Narayanan later presented the roadmap to the new returns system for large taxpayers and small taxpayers.

The Speaker gave the participants an insight into the total returns filed since July 2017, GSTR1 return filing trend, GSTR 3B filing compliance, etc. The e-way bill statistics since 1st April 2018, e-way bill generation, modes of e-way bill generations like website, SMS and excel tool and GSTN’s social media presence were also discussed.

Mr. Asoka Narayanan highlighted the three main components of the new returns namely FORM GST RET-1, FORM GST ANX-1, and FORM GST ANX-2. He touched upon the important details to be declared in the FORM GST ANX-1 and the implementation schedule of the new return formats. A demonstration of the Offline Tool was also given to familiarize the participants with the tool functionalities.

The second half of the Workshop dealt with Sabka Vishwas Scheme, 2019 and its objectives. Mr. Asoka Narayanan threw some light on the cases covered under the scheme, excluded entities from the scheme, benefits of the scheme, etc. He gave a demo of the entire registration process for the benefit of the participants and also explained the features of the portal.

Following this, there was a question and answer session, where the participants cleared their doubts regarding various aspects of the GST new returns system and also shared their feedback on the Workshop. The programme was attended by 105 participants from various organizations.

Ms. Archana A K, Executive – Business Development of the Chamber proposed the Vote of Thanks.

162nd Annual General Meeting of the Cochin Chamber | Business Session


The Business Session of the 162nd Annual General Meeting of the Chamber was held at 11.00 a.m. on Friday, 27th September 2019 in the Chamber Conference Hall.

At the Business Session, Mr. V. Venugopal of Messrs. Harrisons Malayalam Ltd.  was elected PRESIDENT of the Chamber for the year 2019-2020 and Mr. K. Harikumar of Messrs. The Travancore-Cochin Chemicals Ltd. was elected VICE-PRESIDENT of the Chamber for the ensuing year.

The other elected members of the Committee are :-

Mr. P.M. Veeramani           :         R.G.N. Price & Co.

Mr. Bibu Punnooran         :         Medivision Scan & Diagnostic Research Centre Pvt. Ltd.

Mr. P.S. Menon                    :         Tropicana Logistics Pvt. Ltd.

Mr. C.S. Kartha                    :         Karthas Shipping Solutions

Ms. Vinodini Issac             :         Team One Advertising Company Pvt. Ltd.

Mr. S.P. Kamath                  :         Amalgam Foods Ltd.


Finer Points


Skill Development Initiatives in India

Feasibility of Semi-Highspeed Trains in Kerala

Trains will move at 130-180 kmph to cover north-south rail corridor from Kochuveli to Kasaragod in four hours

A 531-km semi-high-speed railway line from Thiruvananthapuram to Kasaragod to improve connectivity, reduce congestion in the State’s road network and make travel hassle-free has been found ‘feasible and financially viable’.

Also, dedicated railway lines to Thiruvananthapuram International Airport and Cochin International Airport with railway stations for inter-modal transport have been found feasible.

Semi-high-speed trains will move at 130-180 km per hour to cover the north-south rail corridor from Kochuveli to Kasaragod in four hours. Air-conditioned train sets on the lines of the newly introduced Train 18 have been proposed.


The semi-high-speed trains will halt at 10 stations — Kochuveli, Kollam, Chengannur, Kottayam, Ernakulam, Thrissur, Tirur, Kozhikode, Kannur and Kasaragod.

The third and fourth railway lines, traversing through 11 districts, except Alappuzha, Idukki and Wayanad, will be away from the existing railway line in the 300-km Thiruvananthapuram-Shoranur section. From Thirunavaya to Kasaragod, it will be parallel to the existing rail line with railway bypasses at Vadakara and Thalaserry.

Estimated cost

Paris-based engineering and consulting group Systra, the general consultant of Kerala Railway Development Corporation Limited (KRDCL), the special purpose vehicle set up to execute ‘viable’ projects on a cost-sharing basis between the State and Railways, in its feasibility report has put the estimated cost at ₹56,000 crore, including cost of land acquisition.

The project has been found to be financially viable with a Rate of Return of 6% and the feasibility report needs the clearance of the KRDCL, the State government and Railways to move ahead, Transport Department officials told The Hindu on Monday.

The alignment fixed has been proposed through thinly populated areas to lessen displacement of people and only 1,200 hectares will have to be acquired.

In cities, the option of elevated lines has been mooted. For viaducts, 15 metres and for formation, 21 to 25 metres had been proposed.

Alignment has been proposed for laying railway line to the premier airport of the State and to Cochin International Airport.

Final location survey will have to be done as land from Railways and the Cochin airport (CIAL) is needed for laying the line and constructing station.


Though the rail line proposed is for a 200 km per hour speed, the trains will run at a maximum of 180 km per hour. The train sets with nine cars will be initially introduced and later will be extended to 12 and 15 cars. The coaches will be made of aluminium.

“It will be a green project tapping solar energy. As much as 21% of road traffic is to be shifted to rail and economic savings had been worked out to be 1.8 lakh metric tonnes of carbon,” sources said.

With the government announcing that work on the railway lines will begin in 2020, the works to prepare the Detailed Project Report has commenced. “The DPR will be ready in October”, sources said.

New Measures to Boost Exports

Important Updates....

Key announcements made by Finance Minister Nirmala Sitharaman

-Measures are being taken to improve credit outflows from banks

-Transmission of interest rate cuts are being effected by banks

-Exports: Scheme for Remission of Duties or Taxes on Export Product (RoDTEP) will replace MEIS scheme

-Textile and other sectors that currently enjoy incentives up to 2% over MEIS will transit to RoDTEP from 1 Jan, 2020

-New export incentive scheme to replace Merchandise Exports from India Scheme

-Merchandise Exports from India Scheme or MEIS scheme to continue till 31 December

-Up to ₹50,000 crore will go through new RoDTEP scheme or Revenue foregone projected at up to ₹50,000 crore

-Fully electronic refund scheme on input tax for exporters will be in place by end of this month

-This is expected to speed up input tax credit refunds for exporters

-The scope of Export Credit Insurance Scheme (ESIC) by ECGC will be expanded

-Revised Priority Sector Lending (PSL) norms for Export Credit – This will release an additional ₹36,000 crore to ₹68,000 crore as export credit under priority sector

-Export finance will be actively monitored by an inter-ministerial working group in the Department of Commerce, tracked through a dashboard

-Free Trade Agreements or FTA Utilisation Mission, headed by a senior officer in Department of Commerce, to be set up

-Online “Original Management System” for exporters will enable them to obtain Certificates of Origin will be launched in the next few weeks

-This is expected to improve ease of doing business for exporters

-There will be time-bound adoption by industry of all necessary mandatory technical standards

-Effective enforcement will elevate quality and performance, enhance competitiveness and address issue of sub-standard imports

-India to hold annual mega shopping festivals like Dubai Shopping Festival to boost exports

-Government to cut turnaround time in ports, airports via use of technology

-Government to enable handicrafts industry to effectively harness e-commerce for exports

-Special ₹10,000 crore window to extend funding to incomplete housing projects

– ₹10,000 crore to be contributed by Government and roughly same amount from outside investors

-The objective is to focus on construction of unfinished units

-The special window will provide funding to net-worth positive housing projects (non-NPA and non-NCLT projects) in affordable and middle-income category

From the Research Wing....

1) The Chamber prepared a research brief on the Goods and Services Tax Network’s Consultation Paper on E-Invoicing. Through this submission, the Chamber emphasised the need for a detailed ‘consultation paper’ followed by a structured consultation process, technology readiness for adopting these changes by January 2020 and the need for clarity on data storage provisions in the absence of data protection laws etc.

2) The Chamber’s Research Team is preparing a ‘briefing book’ on the reforms required to facilitate overall development in Kerala. The same will be released on the 4th of October 2019.


  • The Finance Minister Mrs. Nirmala Sitharaman, on 22nd September 2019, announced a number of measures to boost the economy. The Government announced a new scheme called ‘Remission of Duties or Taxes on Export Products’ replacing the existing Merchandise Exports from India Scheme i.e. MEIS. Under the Interest Equalization Scheme, incentives have been increased to 5% for MSME exporters with effect from November 2, 2018. More details available at
  • The Government has decided to allow Corporate India to use their mandatory Corporate Social Responsibility (CSR) spending for investments in publicly-funded incubators and contribute to research efforts in science, technology, medicine and engineering at major institutions and bodies.

Source :

  • Comments invited on Draft Employees’ Provident Funds and Miscellaneous Provisions (Amendment) Bill,2019

Draft available at

Upcoming Events

10th CEO FORUM Breakfast Meeting - 2019

Climate Change in Kerala: A Way Forward for Collective Action | 04.10.2019

The 10th Breakfast Meeting under the aegis of the Chamber’s CEO FORUM 2019 will be held on Friday, the 4th of October 2019 between 8.00 am and 10.00 am at the Anchor Hall, Taj Gateway Hotel, Marine Drive, Ernakulam.

The Speaker at this Session will be Ms. Shyama Kuriakose, Senior Project Fellow (Environment Law), Vidhi Centre for Legal Policy, New Delhi who will speak on “Climate Change in Kerala: A Way Forward for Collective Action”.

Click Here to register



The 5th Annual Dr. A P J Abdul Kalam Memorial Lecture will be held on Friday, the 18th of October 2019, between 5.30 p.m. and 7.30 p.m. at Avenue Center Hotel, Panampilly Nagar, Cochin.

 The Speaker this year will be Mr. S. Nambi Narayanan, Padma Bhushan recipient and an Indian Scientist and Aerospace Engineer (ISRO)

There is no Registration Fee for the programme, however,  we kindly request you to confirm your participation by registering at the earliest.

Click Here to register

Important Updates....

Chennai - Bengaluru Industrial Corridor to Extend to Kochi

The Union Government has agreed to extend Chennai-Bengaluru industrial corridor to Kochi via Coimbatore. National Industrial Corridor Development and Implementation Trust has informed the State Government about the decision to develop Coimbatore-Kochi Industrial Corridor.

The extension of Chennai-Bengaluru industrial corridor to Kochi was one of the long-pending demands of Kerala. Of the two integrated manufacturing clusters proposed as part of the Coimbatore-Kochi industrial corridor, one would be in Palakkad zone and the other one would be in Salem in Tamil Nadu. Integrated manufacturing clusters (IMC) is considered as the next phase of Special Economic Zones. It proposes to attract industrial investment by improving infrastructure facilities.

While the Union Government had been insisting on 2,000 to 5,000 acres for an IMC this was reduced to 1,800 acres following a request by the State Government. The State Government has already identified 1,800 acres spread over Palakkad, Kannambra, Uzhalappathy and Puthussery for this purpose. Of this, a major part is already under Kinfra. Notices have been issued for acquiring land additionally required for the purpose.

A Special Purpose Vehicle (SPV) being set up jointly by the State and Central Government which will control and manage the cluster. The land price will be converted into the State’s share in the SPV. The Central Government will develop the land suitably for industrial purposes. The Union Government’s outlay will be Rs 870 crore.

The multi-product cluster will have electronics, food processing, IT, agri-based and traditional industries. The proximity of the proposed IMC to the Kochi Port could enable more industries to come up in the Palakkad-Kochi region.

Logistics parks, warehouses and cold storage could also come up in this region.

The initiative is expected to create direct employment for 10,000 people and attract an investment of Rs 10,000 crore.

The corridor is being linked with Bengaluru through Hosur in Tamil Nadu.


New Members of the Chamber

Regular Members

 1) I HITS Technologies (P) Ltd.
Thapasia Bldg., 2nd Floor,
Infopark, Kakkanad,
Cochin-682 037.
Web site                           :

Affiliate Members

7/328, Thottakath Building,
Chittoor P.O., Ernakulam,
Cochin-682 027.
Web site                           :

2) Taste India Exports Pvt. Ltd.
195/IV, South Aduvassery P.O.,
Ernakulam-683 578.
Web site                           :

3) Insight Media City (India) Pvt. Ltd.
ABM Tower, Kadavanthra,
Cochin-682 020.
Web site                           :

Tax and Regulatory Updates from PricewaterhouseCoopers

Direct Tax

FMV as on 1 April 1981 to be considered as cost of acquisition to determine capital gains on transfer of leasehold rights

Recently, the Delhi bench of the Income-tax Appellate Tribunal (Tribunal) held that leasehold rights of land acquired by the taxpayer for a period of 90 years is not a tenancy right, and accordingly, the cost of acquisition for computing the capital gain on transfer of such leasehold rights should be the fair market value (FMV) as on 1 April 1981

PwC comments: The Tribunal has held that leasehold rights for a period of 90 years are equivalent to land, and accordingly, the provisions of section 50C and section 55(2)(b) of the Act are applicable based on certain Tribunal rulings. However, the Bombay High Court, in the case of Greenfield Hotels & Estates Private Limited, and the Mumbai bench of the Tribunal in the case of Atul G. Puranik, have inter alia, held that section 50C of the Act is not applicable for leasehold rights of land. The Tribunal has neither considered nor distinguished these in this ruling. Considering there are judgements on either side of the subject, a clarification from the Government is necessary to avoid litigation and to bring certainty in computation of capital gains on transfer of leasehold rights of land.

Tribunal holds that section 47(xiii) also covers transfer by a firm of capital assets to an existing company

Recently, the Ahmedabad bench of the Income-tax Appellate Tribunal (Tribunal) held that there is no requirement under section 47(xiii) of the Income-tax Act, 1961 (Act) that a firm should be ‘converted’ into a company. Further, the Tribunal also allowed the successor company’s claim for depreciation on technical know-how and trademark.

PwC comments: This ruling distinguishes cases of conversion and succession under the Act and provides clarity on interpretation of conditions specified in section 47(xiii) of the Act.

Tribunal holds benefit of 5% variation between stamp duty value and consideration, in section 50C, is curative and applies retrospectively

Recently, the Kolkata bench of the Income-tax Appellate Tribunal (Tribunal) held that the third proviso to section 50C of the Income-tax Act, 1961 (Act) inserted by the Finance Act, 2018 should be treated as retrospective in nature. Although the amendment has been made effective from 1 April 2019, the Tribunal held that once it’s undisputed that a statutory amendment is being made to remove an undue hardship to the taxpayer or to remove an apparent incongruity, such an amendment has to be treated as curative and declaratory, and hence shall have a retrospective effect.

PwC comments: The above discussion plugs the gap between practical nuances in the real estate sector and the legal provisions under the Act. Further, holding the third proviso to section 50C of the Act as retrospective in nature would also help streamlining the litigation in this respect.

Amount received from an HUF by its member not taxable under section 56(2)(vii)

Recently, the Chandigarh bench of the Income-tax Appellate Tribunal (Tribunal) held that the provision of section 56 (2)(vii) of the Income-tax Act, 1961 (the Act) does not apply to a gift given by a Hindu Undivided Family (HUF) to its members, on the premise that a member has pre-existing right in the family properties. Thus, when a member receives any sum from the HUF, during the subsistence of the HUF or on its partition, it cannot be treated as receipt without consideration. The Tribunal also held that even otherwise, the taxpayer was entitled to exemption under section 10(2) of the Act.

PwC comments: This judgement reaffirms/ strengthens the argument of non-taxability of gifts received by an individual from an HUF.

CBDT enhances monetary limits for filing of appeals by the revenue authorities before various appellate forums

The Central Board of Direct Taxes (CBDT), vide its circular issued under section 268A of the Income-tax Act, 1961 (Act), has enhanced the monetary limits for filing of appeals by the Income-tax department before the Income-tax Appellate Tribunal (Tribunal), High Courts and Special Leave Petitions/ appeals before the Supreme Court with effect from 8 August 2019. The existing and revised monetary limits are as follows:

The CBDT has also amended its previous circular to provide that when an appellate authority passes composite orders for multiple assessment years (AY) in the case of a taxpayer, the aforementioned monetary limits shall be checked individually for each AY while filing further appeals. No appeal shall be filed in respect of AY(s) in which tax effect is less than the monetary limit specified above.

PwC comments: This is a welcome step in litigation management, which will substantially help in reducing the pendency of appeals before various appellate forums and ensure focus on complex legal/ critical issues involving substantial tax effect. It will also help in reducing tax litigation for taxpayers where tax demand is on account of small issues appearing in multiple AYs.

International Tax

Delhi HC quashes withholding tax certificate, issued without assigning cogent reasons at a rate higher than earlier years

Recently, the Delhi High Court (HC) held that there should be a separate written communication to the taxpayer giving reasons for fixing the withholding tax rate under section 197(1) of the Income-tax Act, 1961 (the Act) even when the online portal does not allow it. Further, the withholding tax order, being quasi-judicial in nature, cannot be passed arbitrarily, and merely on basis of the instructions from superior authorities. Since the tax authorities have not recorded cogent reasons for arriving at the issued withholding tax rate, the HC quashed the lower withholding certificate and asked the authorities to reconsider the application.

PwC Comments: This decision, although arising from a writ petition, may be seen as a timely relief for taxpayers, as it directs the Tax Officer to issue a lower withholding certificate, supported by cogent/ valid reasons.

Reimbursement of salary and payment for support services to non-resident neither royalty nor FTS:

Recently, the Pune bench of the Income-tax Appellate Tribunal (Tribunal) has held that reimbursement received by a non-resident company (taxpayer) towards salary cost of seconded expat from the Indian entity is not taxable as fees for technical services (FTS) under section 9(1)(vii) of the Income-tax Act, 1961 (the Act).Further, the Tribunal, while deciding on the taxability of payment received towards provision of Global Information Support services (support services), held that it does not constitute royalty/ FTS under the Act. It does not make available any technical knowledge, experience, skill, know-how to the Indian entity, and hence, it does not constitute FTS under Article 13(4) of the India-France Double Taxation Avoidance Agreement (tax treaty) when read with the Protocol to India-France tax treaty and Article 13(4) of the India-UK tax treaty.

PwC comments: The litigation around taxability of reimbursement of salary cost to an overseas entity is very common with several judicial precedents for and against. This is a welcome ruling for taxpayers to support the position that reimbursement of salary cost to overseas affiliate entities for seconded expatriates working under the supervision, control and direction of the Indian entity, would not constitute FTS under section 9(1)(vii) of the Act. It also aids in distinguishing the Centrica India Offshore Private Limited decision on the issue of taxability of reimbursement as FTS. Further, the Tribunal’s observation with regard to real recipient vis-à-vis literal recipient in the definition of FTS under section 9(1)(vii) of the Act is noteworthy.

Tribunal holds that units of an equity-oriented mutual fund are not “shares” for purposes of the article relating to capital gains in the India-UAE tax treaty

The Cochin Bench of the Income-tax Appellate Tribunal (Tribunal) held that units of mutual fund cannot be regarded as “shares,” and hence, short-term capital gains earned by the taxpayer on transfer of such units should be exempt from tax under Article 13(5) of the India-UAE Double Taxation Avoidance Agreement (tax treaty).

PwC comments: This ruling reaffirms that units of mutual funds and shares are separate securities. Hence, capital gains arising on transfer of units of mutual funds should be eligible for exemption under the tax treaties wherever available.


Supreme Court rejects review petition against order relating to exclusion of allowance for purpose of provident fund

The Supreme Court of India passed a judgement in February 2019 and laid down principles regarding the applicability of provident fund (PF) contributions on various allowances paid by employers. As per this judgement, it was held that an allowance/ payment may be excluded from the applicability of PF contribution if it is variable or incentive in nature, and is not paid across the board to all employees in a particular category, or is paid specially to those who availed the opportunity.

An appellant aggrieved by the judgement approached the Supreme Court and filed a review petition. The Supreme Court rejected this review petition, stating that it does not find any justifiable reason to entertain the same.

PwC comments: In March 2019, the PF department had issued instructions to its field officers to take prompt action in all cases that involve the issues discussed and decided by the Supreme Court in its decision. However, consequent to the review petition filed by an appellant, the PF department issued another internal circular to clarify that the PF officers may assess the dues after consideration of the facts; however, they shall take action only after the Supreme Court disposes the review petition. Further, the department also instructed its field officers not to pursue any notices that have been issued to employers without any prima facie evidence of arbitrary bifurcation of wages by employers, with an intention to avoid PF liability. Since the review petition stands dismissed, field officers may revive proceedings to determine dues payable by employers by following the principles pronounced by the Supreme Court in its judgment.

MCA issues clarification on appointed date to be specified in scheme of mergers/ amalgamation

The Ministry of Corporate Affairs (MCA) has issued a circular clarifying the meaning of appointed date mentioned in a scheme of merger/ amalgamation.

The Companies Act, 1956 did not contain any provision relating to the appointed date.

The Supreme Court in the case of Marshall & Sons, held that every scheme of amalgamation has to provide a date from which such scheme shall take effect. The Companies Act, 2013 contains a specific provision under section 232(6), prescribing that a scheme should indicate an appointed date from which it shall be effective.

In response to queries received, the MCA clarified as follows:

  • The appointed date may be a specified calendar date or may be tied to the occurrence of an event or fulfilment of any preconditions, as agreed upon between the parties, etc., which are relevant to the scheme.
  • The appointed date shall also be deemed as the “acquisition date” and the date of transfer of control for the purpose of accounting as per Ind AS 103.
  • Further, an appointed date can be a date preceding the filing of the scheme application with the National Company Law Tribunal (NCLT). In case the appointed date precedes the date of filing the application with the NCLT by more than one year, specific justification shall be required to be brought out in the scheme, and it should not be against public interest.
  • If an event based appointed date could trigger post filing of certified copy of NCLT order with the Registrar of Companies (RoC), an intimation regarding the triggering of such an event shall also be required to be filed with the RoC within 30 days of the scheme coming into force.

PwC comments: This clarification resolves certain ambiguities regarding the appointed date.

Indirect Tax

CBIC clarifies that recovery cannot be initiated in cases where a stay has been granted earlier

The Central Board of Indirect taxes and Customs (CBIC) has issued a clarification stating that in stay granted matters, recovery proceedings cannot be initiated based on the Supreme Court’s decision in the case of M/ s Asian Resurfacing of Road Agency Private Limited & Anr v. CBI, without filing an application for vacation of stay at the appropriate forum.


In M/s Asian Resurfacing of Road Agency Private Limited & Anr21, the Supreme Court had directed that the stay on investigations granted by a superior court in a civil or criminal trial court would only be valid for a period of six months from the date of order, unless extended by a subsequent well-reasoned order. Considering the above judgement, the recovery proceedings were initiated in pending indirect tax cases, where specific request for extension of stay of recovery of taxes was not sought. The Bangalore Bench of the Customs Excise and Service Tax Appellate Tribunal (Tribunal) considered the issue in M/s Vijaynagar Sugars Private Limited & Ors and held that the Supreme Court’s decision is not applicable to the Tribunal, which is not a trial court, and that the facts of the cases are not congruent. The Tribunal requested the CBIC to provide guidance to the field formations. In this background, the CBIC sought a legal opinion from the Ministry of Law and Justice, Department of Legal Affairs, which confirmed the decision in the case of Vijaynagar Sugars22. Consequently, the CBIC has now clarified this legal position and directed that before initiating recovery proceedings in cases where stay of recovery of taxes has been granted, an application for vacation for stay has to be filed at the appropriate forum.

PwC Comments: The above clarification is a welcome step in resolving the newly emerged uncertainty on the position of obtaining extension of stay of recovery of taxes. This circular is also in line with the Tribunal rulings that the stay granted against recovery of taxes continues until the final disposal of appeals and separate applications seeking for extension of stay need not be filed.

Tamil Nadu AAR holds that value of applicant’s interstate stock transfer shall be either ‘open market value’ or ‘90% of the open market value’ of supplies of similar goods


  • The applicant is engaged in trading lenses, frames, sunglasses, contact lenses, reading glasses, and complete spectacles.
  • The goods are imported as well as locally procured by the applicant.
  • The applicant has multiple branch offices all over the country.
  • The applicant makes inter-unit transfers, from where the goods are finally sold to the customers without any further value addition.

Question before the Authority for Advance Ruling

What is the value to be adopted in case of supply of goods by one branch to another?

Applicant’s view

In line with the second proviso to Rule 28 of the Central GST Rules, 2017 (CGST Rules, 2017), as the recipient branch is eligible for input tax credit (ITC), the value to be adopted will be the invoice value.

Authority for Advance Ruling's order

  • Rule 28 of the CGST Rules, 2017 provides that the value of supply of goods or services or both between distinct or related persons shall be (a) open market value (b) value of supply of like kind and quality (c) value based on cost or any reasonable means in that order.
  • There are two provisos to Rule 28 of the CGST Rules, 2017:
  • The first proviso states that if the goods are intended for further supply by the recipient, the supplier has an option of adopting value as 90% of price charged to an unrelated recipient for goods or services of similar kind and quality.
  • The second proviso states that the invoice value shall be the open market value if the recipient is eligible for full ITC.
  • The Tamil Nadu Authority for Advance Ruling (AAR) held that the second proviso has to be read along with the first proviso and that it cannot be read independently. If the value adopted is as per the first proviso, then such value appearing in the invoice will be assumed as open market value.
  • If the second proviso to Rule 28 of the CGST Rules, 2017 is to be directly adopted, any value, either higher or lower, will be adopted, which leads to passing on of higher credit or ITC accumulation, respectively. This is not the intention of a taxation based on value addition.

PwC comments: The Tamil Nadu AAR interpreted the combined reading of both the provisos in the valuation of supply between distinct or related persons. This order restricts the taxpayers from exercising the second proviso and makes the second proviso otiose. It is contradictory to the order issued by the West Bengal AAR in case of GKB Lens Private Limited. Considering the inevitability and wide ambit of branch transfers, the above order is expected to be highly litigious. Subject to appeals, while this advance ruling is binding only on the applicant and its jurisdictional officers, it is possible that this order may be referred by the revenue authorities while dealing with similar situations.

Mumbai Tribunal, while holding that lease of land for 60 years is chargeable to service tax, expresses reservations on constitutional grounds


The assessee, a step down subsidiary ultimately held by the Government of Maharashtra (GoM), was engaged in disposal of lands acquired by GoM under the Land Acquisition Act, 1894. After following the necessary procedures, the assessee leased land to private entities on long-term basis on payment of lease premium. Thereafter, on completion of construction activity and obtaining occupation certificate, a lease deed for a term of 60 years was executed for a yearly rental of INR 100. Service tax was not discharged on the said transactions.

The Commissioner issued a notice demanding tax, interest and penalty from 1 June 2007 to 31 March 2014 and confirmed this demand in the assessment. Aggrieved by such assessment, the assessee appealed the Tribunal

Tribunal’s Ruling

The Tribunal dismissed the appeals and made the following observations:

  • Various landmark decisions on leasing or licensing vacant land for business or commerce, which validated the imposition of service tax since 1 June 2007, were analysed and held to be applicable here.
  • Any amount paid or payable for taxable service provided, or to be provided is considered as consideration. Hence, lease premium along with lease rentals received should be treated as consideration for services of “renting of immovable property.”
  • “Transfer of title” is not equivalent to transfer of “right” or “interest” in immoveable property, as only the former category is precluded from taxation under section 65B(44) of the Finance Act, 1994.
  • The assessee is a “development agent” under section 113(3A) of the Maharashtra Regional and Town Planning Act, 1966 (MRTP) and not a “development authority” under section 113(3) of the MRTP. Hence, the benefit of circular 89/ 7/ 2206-ST dated 18 December 2006, which extended to public authorities undertaking statutory functions, cannot be availed.
  • Failure to disclose relevant facts, obtain registration, file returns are sufficient reasons to invoke the extended period of limitation under section 73 and impose penalty.
  • The assessee, being an industrial development corporation created by GoM, was in-principle entitled to the exemption granted under section 104 to long-term lease of industrial plots. Owing to this, the determination of this exemption was remanded back to the assessing authority for re-consideration.
  • Since leasing of land for residential purposes was also exempt, the entitlement to this exemption was also remanded back to the Commissioner for re-consideration.

It should however be noted while the two-member bench gave a concurrent ruling, the second member expressed reservations on various constitutional grounds, including the inherent right to tax transactions in land and provisions of the Transfer of Property Act, 1882.

PwC comments: This decision re-confirms service tax liability on long-term lease arrangements in general and is at par with various precedents. However, the reservations expressed on constitutional and other grounds on imposing tax on lease above 30 years have left a window open for debate at further appellate levels. However, since the Tribunal is not an authority on the Constitution, such observation of the judicial member would only have referential value, since such constitutional and other arguments beyond the tax statutes can be analysed only at the High Court and Supreme Court levels.

Exclulsive EXIM Statistics - Sample Reports