MM TAX CLUB

Income Tax Officer, Pune v. Roj Enterprises Pvt. Ltd.

[ITA No.1292/PUN/2018 decided on October 8, 2021]

Fact of Case

The Respondent (Roj Enterprises Pvt. Ltd) is an export house dealing in Mango Pulp. During 2004-05 it run Alliance Agro, Nagpur along with two more companies for processing Mango pulp and pumped in funds as Alliance Agro did not have any working capital finance. The Respondent had an agreement with Alliance Agro for obtaining the supply of the said processed Mango pulp. Certain expenses were incurred for the operations of Alliance Agro. Unfortunately, due to severe heat wave in Nagpur and technical snags, fruits got overripe and additionally, the plant of Alliance Agro could not start in time. The Respondent incurred a loss of Rs. 1,43,94,061/- and claimed deduction for the same.

Income Tax Officer in its assessment for 2004-05 disallowed the aforesaid deduction then The Respondent (Roj Enterprises Pvt. Ltd) filed appeal before Income Tax (Appeals), where Commissioner of IT (Appeals), Pune issued order in favor of  Enterprises Pvt. Ltd.

Present Appeal

Income Tax Officer (“the Appellant”) aggrieved by the order of Commissioner of Income Tax (Appeals), Pune filed appeal before Income Tax Appellant Tribunal (ITAT).

Order

The Hon’ble ITAT, Pune accepted the submissions of the Respondent and observed that the Respondent’s loss was incurred for its business purpose whereby the loss is of a revenue nature. Hence, the Hon’ble ITAT Pune held that the said loss of Rs. 1,43,94,061/- shall be allowed as a deduction on account of it being a Revenue Loss to the Respondent.

The officers of Central Goods and Services Tax (CGST) Commissionerate, Delhi East, carried out the detailed analysis and unearthed a network of fictitious exporters who were availing and utilizing fake Input Tax Credit (ITC) of Rs 134 crore under the Goods and Services Tax (GST) with an intent to claim IGST refund fraudulently.

On the basis of Risk Analysis, a risky exporter M/s Vibe Tradex was identified for scrutiny. M/s Vibe Tradex is engaged in export of Pan Masala, chewing tobacco, FMCG goods etc.

The network of fictitious exporters was being operated by a person named Mr Chirag Goel, who is an MBA from University of Sunderland, UK. On an extensive analysis of the e-Way Bills generated by two supplier firms/ companies owned by his associate, who is at large, it was found that the vehicles for which the e-way Bill were generated for purported supply of goods were being used in distant cities namely Gujarat, Maharashtra, Madhya Pradesh and had never entered Delhi during the said period.  The fake Input Tax Credit availed and utilized is Rs. 134 crore.  

Mr Chirag Goel masterminded a deep-rooted conspiracy to defraud the Government and committed offences specified under Section 132(1)(c) of the CGST Act, 2017 which are cognizable and non-bailable.  He has been remanded to judicial custody by the Metropolitan Magistrate Patiala House Courts, New Delhi, for a period 14 days till 26.10.2021.  Further investigation in the case is under progress.

Ex-servicemen Resettlement Society Vs West Bengal AAR

[Order no. 09/WBAAR/2021-22 dated 30/09/2021]

Fact of Case;

The Applicant is a registered society providing security services and scavenging services (Karma Bandhus) to different Medical Colleges & Hospitals.

As per west Bengal Labour law they are charging EPF and ESIC at specified rate in bill and charges GST @ 18% on gross bill amount in every month for providing said services to the Government Hospitals.

The Audit Authority of west Bengal in course of audit of Bankura Sammilani Medical College and Hospitals had raised the objection that GST should be charged on management fees only.

Query

The Applicant  has sought the advance ruling on;

1. Whether GST to be payable on Management Fee/Administrative charges only or otherwise complete billing amount?
2. Whether employer portion of EPF & ESl amount of the bill are exempted for paying GST?

Ruling

In matter of Ex-servicemen Resettlement Society, West Bengal Authority for Advance Ruling held that;

EPF and ESIC contribution made by employer does not fall in exclusion under sub section (3) of Section 15, hence there is no room left to deduct any amount from bill like management fees or employer portion of EPF and ESI for the purpose of determination of value of supply under Section 15 of the CGST Act.

Conclusion

Meaning thereby any labour contractor raises a bill including Employer portion of Employee Provident Fund or Employee State Insurance, they have to charge GST on entire billing amount including EPF & ESIC.