AAR GST
Advance RulingsCase Briefs

   

Authority of Advanced Ruling (Karnataka): In an application filed to sought advance ruling on the question that, whether the applicant would be eligible to avail the input tax credit, in terms of Section 16 of the Central Goods and Services (‘CGST’) Act , 2017, on vouchers and subscription packages procured by the applicant from third party vendors, the two-member bench of M.P. Ravi Prasad and T. Kiran Reddy has ruled that the applicant is not eligible to avail the input tax credit, as it is not available in terms of Section 17(5)(h) of the CGST Act, 2017.

The Authority noted that the loyalty program operates in a specified manner and the applicant does not give vouchers and subscription packages to every customer but only to eligible customers participating in the loyalty program and who wish to redeem their accumulated loyalty points and the applicant do not receive any monetary consideration from the said customers. Further these points are non-transferable, can’t be converted into cash.

Further, the applicant procures the vouchers and subscription packages from third party vendors upon payment of GST and provide the same to customers on redemption of the loyalty points earned by them and are themselves not in the business of supply of the said vouchers and subscription packages. The vendors will be raising invoices on the applicant by classifying their outward supply as ‘other professional, technical and business services’.

Moreover, the expenditure incurred by the applicant in running the loyalty program and procuring the said vouchers is not in the nature of capital expenditure or in the nature described under Sections 30 to 36 of the Income Tax Act, 1961. Thus, the said amount is expended wholly and exclusively for the purpose of business of the applicant and the same is allowed under Section 37(1) of the Income tax Act, 1961 in computing the income chargeable under the head ‘Profits and gains of business or profession’.

The Authority observed that the input tax credit is an entitlement to a registered person which can be taken subject to conditions and restrictions as may be prescribed. Also, Section 17(5) prescribes that input tax credit shall not be available in respect of certain supplies. Thus, the issue is to decide whether the inward supply i.e., the voucher merits classification as ‘goods and services’ and if they are goods whether they were disposed of by way of gift.

The Authority took note of the ‘voucher’ under Section 2(118) of the CGST Act, 2017 and observed that the subscription packages procured by the applicant from vendors and supplied to customers against loyalty points is also a ‘voucher’ as it places an obligation on the potential supplier to accept it as consideration for supply of goods and services to the holder of the instrument. Further, the vouchers printed on paper are undoubtedly goods as they are tangible, however, e-vouchers are also goods as the definition of goods under Section 2(52) of the CGST Act, is not restricted to tangible property and refers to every kind of movable property capable of transmitted or supplied.

The Authority took note of the ruling in Vikas Sales Corporation v. Commissioner of Commercial Taxes, Appeal (Civil) 7771-75 of 1996, wherein the Court held “that import licenses are not actionable claims, they have a monetary value, they are freely transferable and hence are goods”, and observed that voucher is like an import license and thus, vouchers are covered under goods. Further, Para 1 (a) Schedule II to Section 7 specifies that any transfer of the title in goods is supply of goods, as transfer of supply of voucher involves transfer of the title, thus, they are covered under supply of goods.

Moreover, the Authority observed that the applicant based on a particular transaction by the customer through their e-commerce platform subject to acceptance of terms and conditions, allows the customer to earn loyalty points. The applicant in the said transaction recovers the full amount from the customer and gives the loyalty points free of cost. As the vouchers are issued free of cost to the customer, it amounts to disposal of vouchers by way of gifts and covered under Section 17(5)(h) of the CGST Act. Thus, the applicant cannot avail the input tax credit.

[Myntra Designs Pvt. Ltd., In re, 2022 SCC OnLine Kar AAR-GST 14, decided on 14.09.2022]


Advocate who appeared in this case :

Represented by: Advocate Tarun Gulati.

Madhya Pradesh High Court
Case BriefsHigh Courts

   

Madhya Pradesh High Court: Dwarka Dhish Bansal, J., while dismissing a second appeal held that in presence of prior execution of agreement of Gift, the Will becomes a suspicious document.

The factual matrix of the case was that the land in question belonged to a deceased-Vindeshwari Prasad. It was alleged in the plaint that after the death of Vindeshwari Prasad, the plaintiffs and defendants 1-2 were having 1/3rd share each and there was no right vested in defendants 3-6. The instant suit was filed as second appeal against the judgement rendered by Additional District Judge (Fast Track Court) Rewa which had confirmed the judgment and decree passed by 5th Civil Judge Class-II Rewa.

It was submitted by the appellant that in view of the concurrent finding of the fact that the plaintiff was not in physical possession of the land, the suit filed was not maintainable in view of provision under Section 34 of the Specific Relief Act, 1963. It was further contended by the appellants that in absence of the evidence of any forged document, the suit was not maintainable. It was contended by the appellants that Will in question was not a proven document and the Trial Court had made an error.

The counsel for the respondent submitted that as the Will was not proved by the defendants 3-5 and could not been found proved by the Courts, no interference could be warranted in the second appeal. It was further contended by the respondents that Will in question was propounded by the defendants 3-5, and therefore they were liable. It was also contended by the respondents that the property in question was an agriculture /revenue paying land and partition had to be effected by the Tehsildar.

The first substantial question of law was whether the declaration of share could be made irrespective of Section 34 of Specific Relief Act, 1963. The High Court came to the conclusion that the declaration of share could be made irrespective of Section 34 of the Specific Relief Act, especially in case where the land was agriculture land. The Court relied on the judgement of Karelal v. Gyanbai, 2018 SCC OnLine MP 1021 where there were identical set of facts and circumstances, and the Court had held that- “The matter can be ascertained from another angle also. In the present case, only the agricultural land is the disputed property. If the defendants had never challenged the rights and title of the plaintiffs, then there was no need for the plaintiffs to file a suit for declaration of title or even for partition.”

The second substantial question of law was that the Will was propounded by defendants 3-5, therefore it was for them to prove Will in question which was not proved by the Courts below. The Court relied on the judgment of Anathula Sudhakar v. P. Bucchi Reddy, (2008) 4 SCC 594 where it was held that “a cloud is said to raise over the person’s title, when some apparent defect in his title to a property, or when some prima facie right of a third party over, is made or shown.” The Court pointed out that the principle enshrined in order 6 rule 13 Civil Procedure Code, 1908 is also worth importance wherein it was specifically laid down that the burden of proving the will always lies upon the propounder, i.e. defendant in the present case. The Court also considered the proposition laid down by Supreme Court in Anathula Sudhakar after which it became apparent that a relief of declaration is required to be sought only when the defendant is able to show any apparent defect in title of plaintiff. It was observed by the Court that the findings with regard to the execution of the will was purely a question of fact and therefore cannot be interfered with by this Court as it was laid down in Sham lal v. Sanjeev Kumar, (2009) 12 SCC 454. The Court held that in presence of prior execution of Agreement of Gift, the Will becomes a suspicious document.

The High Court dismissed the second appeal.

[Ramkali v. Murirtkumari, Second Appeal No.1015 of 2004, decided on 20-07-2022]


Advocates who appeared in this case :

Sankalp Kochar, Advocate, for the Petitioner;

Ashok Lalwani, Advocate, for the Respondent.

Punjab and Haryana High Court
Case BriefsHigh Courts

Punjab and Haryana High Court: Expressing that when the children, who the parents have reared with untold sorrows and miseries, throw them at the mercy of their destiny and use their muscle power to torture and harass them, the parents’ world get totally shattered which marks as the beginning for the unfortunate tale of their moving from one Forum to another for redressal, Harnaresh Singh Gill, J., while quoting from the holy script of  Sri Guru Granth Sahib, Sri Guru Ram Dass has written ‘KAAHAY POOT JHAGRAT HA-O SANG BAAP/ JIN KAY JANAY BADEERAY TUM HA-O TIN SIO JHAGRAT PAPP//” (O son, why do you argue with your father? It is a sin to argue with the one who fathered you and raised you) stated that “we have to treat our parents as God.


Life is full with extraordinary challenges and unrivalled opportunities, but such chances must not be used against those who parented you.

Classic Example

Instant matter was a classic example, wherein the petitioners sought equities entirely forgetting that it is because of their conduct that their old and aged parents had to seek their eviction so as to buy back their peace and freedom.

Grievance

Issuance of writ of mandamus was sought for directing respondents 1 to 3 to protect the life and liberty of the petitioners at the hands of respondents 4 and 5 and mandate them not to interfere in the property of the petitioners.

Application filed by respondent 4 under the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 wherein the petitioners have been ordered to be ejected from the house is also sought to be dismissed.

Factual Background

Respondent 4 had filed an application under the provisions of the 2007 Act against the petitioners i.e. his son and daughter-in-law. Petitioners were not treating respondent 4 and 5 properly and depriving them even of the basic necessities and just wanted to grab respondents’ property and owing to their behaviour, respondents 4 and 5 had disowned petitioner 1 from their movable and immovable property.

Respondents had even requested the petitioners to vacate the house in question, but they did not. Sub Divisional Magistrate in his report recommended the ejectment of the petitioners and sent the same to the District Magistrate who ordered the ejectment of the petitioners from the house.

Petitioners’ Contention

Counsel for the petitioner contended that the house in question was a joint Hindu Family Property and petitioner 1 had also contributed to the construction of ground floor of the house, he also started a business in which respondent 4 was shown the proprietor.

Another submission was that the respondents had ill-treated petitioner 2 and accordingly FIR under Sections 498-A, 406, 323, 506 and 34 of Penal Code, 1860 were registered against the respondents.

Adding to its submissions, the petitioners counsel also contended that the District Magistrate had no power under Section 23 of the 2007 Act to direct a son to vacate the house of his parents because none of the circumstances contemplated in the statutory provisions, is attracted in a father-son-relationship.

Analysis, Law and Decision

Respondent 4’s case was that the house in question was his self-acquired property, and rather it was not a Joint Hindu Family Property.

SDM in its report had stated that as per the sale deed, respondent 4 was the owner of the house in question.

High Court stated that even if for the sake of arguments, Court assumes that respondent 4 had gifted the house to the petitioners, even then the transfer of property was to be held void in certain circumstances.

Section 23 of the 2007 Act dealt with the validity of the transfer of property in certain circumstances.

“…if a senior citizen who, after the commencement of the 2007 Act, has transferred by way of gift or otherwise, his property, with the condition that the transferee would provide basic amenities and basic physical needs to the transferor, who thereafter refuses or fails to provide such amenities and physical needs, then the transfer of the property made by the senior citizen shall be deemed to have been made by fraud or coercion or under undue influence and shall at the option of the transferor, be declared void by the Tribunal.”

Rule 24 of the Rules provides in the action plan as to how the property of senior citizen, which includes a residential building, can be vacated from his son, daughter or legal heir(s) while in an unauthorized occupation and how the said order is to be enforced.

Court added that though the present matter is not the one wherein any transfer or gift has been executed by respondent 4 and 5. Hence, the petitioners cannot maintain the claim on the alleged ground that petitioner 1 had contributed towards the renovation of the house.

Adding more to the analysis, Bench expressed that even in the cases, where a gift deed was executed by the parents in favour of the children, it was held that irrespective of any condition regarding providing to the transferor the basic amenities, the transferee would be bound to maintain the transferor.

High Court referred to this Court’s decision in Raksha Devi v. Deputy Commr., decided on 3-5-2018.

In view of the above, Court dismissed the petition on not finding any merit. [Anil Kumar Dhiman v. State of Haryana, CRWP 1357 of 2019, decided on 21-9-2021]


Advocates before the Court:

Mr Akhil Bhasin, Advocate, for the petitioners.

Mr Pardeep Prakash Chahar, DAG, Haryana.

Mr Anuj Balian, Advocate, for respondents 4 and 5.


Additional Reading:


“Daughters are daughters forever and sons are sons till they are married”: Bom HC orders son to vacate flat of 90 yrs old parents

Under Parents and Senior Citizens Act, is it necessary to find out whether property belongs to parent exclusively or is a shared household in which daughter-in-law has rights? Bom HC deciphers

Children living in parents’ house are at best licensees: Cal HC says senior citizens’ exclusive residentiary rights to be viewed from prism of Art. 21

P&H HC | Maintaining elderly parents is not only a value based principle but a bounden duty under Maintenance and Welfare of Parents Act

Madras HC | Sons turning turtle after giving undertaking to vacate their father’s premises is Contempt of Court: Read synopsis of Court’s opinion

Del HC | Which is the proper forum for filing appeals from the eviction order passed by DM under Delhi Maintenance and Welfare of Parents and Senior Citizens Act? Court answers

All HC | Is the District Magistrate under obligation to provide protection to senior citizens being harassed by their children? HC explains

Bom HC | “If children cannot take care of their parents and allow them to live in peace, they atleast ought not to make their life a living hell”; Court sternly warns daughter to not harass mother physically & mentally

Chh HC | Step-son held duty bound to maintain his step-mother under Maintenance and Welfare of Parents and Senior Citizens Act

Maintenance – Children and Parents

Parents can evict children under the provisions of MWPSC Act, 2007 upon being harassed: Bombay HC

Legislation UpdatesRules & Regulations

The Central Government, after consultation with the Governments of the State concerned,  notifies All India Services (Conduct) Amendment, Rules, 2021  to amend the All India Services (Conduct) Rules,1968, namely:-

Key Amendments:

  • In the All India Service (Conduct) Rules, 1968, in rule 11, after sub-rule (3), the following sub-rule shall be inserted, namely:-

“(4) Notwithstanding anything contained in sub-rules (1), (2) and (3), a member of the Service, being a member of the Indian delegation or otherwise, may receive and retain gifts from foreign dignitaries in accordance with the provisions of the Foreign Contribution (Acceptance or Retention of Gifts or Presentations) Rules, 2012, as amended from time to time”.

AAR
Advance RulingsCase Briefs

Authority for Advance Ruling, GST: A Division Bench of Dr Ravi Prasad M.P. (Additional Commissioner of Commercial Taxes) and MashhoodUr Rehman Farooqui (Joint Commissioner of Central Tax) addressed whether the input tax credit can be availed on the distribution of promotional products to distributors/dealer’s showrooms for the purpose of marketing the products and promoting the brand.

In the instant application, it has been stated that the applicant was engaged in the manufacture, distribution and marketing of Knitted and Woven Garments under the brand name of “Jockey”, swimwears and swimming equipment’s under the brand name “SPEEDO”.

Applicant sought advance ruling on the classification of goods and services as under:

“Whether in the facts and circumstances of the case, the promotional products/materials and Marketing Items used by the applicant in promoting their brand and marketing their products can be considered as “inputs” as defined under Section 2(59) of the CGST Act, 2017 and GST paid on the same can be availed as input tax credit in terms of Section 16 of the CGST Act, 2017?”

Applicant submitted that as per Section 16 of the CGST Act, every registered person subject to terms and conditions specified in Section 49 of CGST Act is entitled to avail the same as “Input Tax Credit” the GST paid by him on the supply of goods or service to him, which are used or intended to be used in the cause or in furtherance of his business and same will be transferred to his electronic credit ledger.

Adding to the above submissions, the applicant stated that promotional/marketing items using by them at point of purchase i.e. showrooms or to their distributor/dealer’s showrooms is to promote their brands and made known the range of products manufactured by them.

The said promotional/marketing items are distributed for free by the applicant to promote their brand, hence the same cannot be construed as “gift” and made applicable Section 17(5)(h) of CGST Act.

Applicant add that in respect of the promotional/marketing items to their own showrooms there was neither “supply” nor there was “gift” and hence applying the provisions of Section 17(5)(h) of CGST Act, 2017 and apportioning the input tax credit should not arise.

Analysis and Decision

Promotional/marketing items sent to showrooms and to distributor/dealer’s showrooms to use in promoting their brands and market their products will amount to use of said goods in business or furtherance of the applicant’s busniess. Therefore, the same would qualify as “input” in terms of Section 2(59) of CGST Act, 2017 and GST paid on the same is entitle to avail as “input tax credit” in terms of Section 16 of CGST Act, 2017.

Bench noted that the goods were not transferred out of the accounts of the applicant and remained in the accounts of the applicant as assets, which were returnable items but the applicant did not show any proof of the said being returned to the applicant and disposed at the end of the period of usage.

In light of the above-stated scenarios, the applicant uses the goods till the goods are usable for the promotion of his business and claims depreciation on the same.

In the applicant’s opinion, the above-stated goods are covered under “input”.

AAR expressed that,

Since the ownership of the material is being retained by the applicant, they could be treated as capital goods hence needs to be capitalized in his books of accounts. The said cannot be treated as “input” since the said term excludes capital goods.

Whether input tax credit can be availed on the capital goods?

Section 16 of the GST Act provides for the eligibility for taking/availing input tax credit.

Since the applicant used or intended to use the goods and services procured in the course or furtherance of business, the applicant was entitled to take the input tax credit, subject to other provisions of the Act and hence there was no blockage attributable to Section 17(1) as the applicant used the goods in the course or furtherance of business.

Ruling

  • ITC on GST paid on procurement of the “distributable” products which are distributed to the distributors, franchisees is allowed as the said distribution amount to supply to related parties. The said distribution to the retailers for their use cannot be claimed as gifts to the retailers or to their customers free of cost and hence ITC of GST paid on such procurement is not allowed as per Section 17(5) of the GST Acts.
  • GST paid on the procurement of “non-distributable” products qualify as capital goods and not as “inputs” and the applicant is eligible to claim input tax credit on their procurement, but in case if they are disposed of by writing off or destroyed or lost, then the same needs to be reversed under Section 16 of CGST Act, 2017 read with Rule 43 of the CGST Rules, 2017.

[Page Industries Ltd., In Re., 2020 SCC OnLine Kar AAR-GST 7, decided on 15-12-2020]