GST: Change in Constitution of the Business is Essential to constitute ‘going concern’ u/s 18, rules

The Maharashtra Authority of Advance Ruling ( AAR ) has held that change in the constitution is essential to constitute going concern u/s 18 of CGST Act 2017

The applicant M/S Crystal Crop Protection Limited, the Applicant, has two GST registrations in the State of Maharashtra. The Applicant wishes to merge both the GST registrations by way of transfer of the business of Nagpur registration with Akola registration without consideration and has submitted that the impugned merger transaction, as a going concern, is a supply of services.

The Applicant contended that if the activities of the business are continuous and uninterrupted & operations being carried out on a regular basis, then the transfer of business ongoing concern is “running business” which is capable of being carried on by the purchaser.

It was contended that M/S Crystal Crop Protection Limited, Nagpur and M/S Crystal Crop Protection Limited, Akola, are holders of the same PAN and they are merely distinct persons. Hence, the case at hand doesn’t qualify to be a “going concern to another person” as units are holders of the same PAN and they are merely distinct persons.

It was observed that u/s Section 18, the change in the constitution of thebusiness is essential otherwise, it cannot be said that there is the transfer of a business as a goingconcern.Further, as per Sr. No. I of Schedule I to the CGST Act, ‘Permanent transfer or disposal of business assets where input tax credit has been availed on such assets will be treated as supply even if made without consideration.

MAAR consist of Shri. Rajiv Magoo, Member Central Tax and Shri. T. R. Ramnani, Member State Tax in light of the case of M/S Shilpa Medicare Limited has held that the activity is a going concern and classified it to be a supply of service.

Section 148A(c) casts Duty on AO, to consider Reply of Assessee in response to Notice before making

The Delhi High Court consisting of Justice Manmohan and Justice Manmeet Pritam Singh Arora held that Section 148A(c) casts duty on AO, by using the expression ‘shall’ to consider the reply of the petitioner/assessee in response to the notice under Section 148A(b) before making an order under Section 148A(d) of the Act.

The writ petition has been filed by the petitioner, Aten Capital Private Limited challenging the order passed under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961. The Counsel for the petitioner, Amit Dayal submitted that the impugned order has been passed in complete violation of the principles of natural justice as well as the statutory mandate incorporated in Section 148A(c) and (d) inasmuch as the reply furnished by the petitioner was not taken into consideration and an adverse inference was wrongly drawn against the petitioner and further submits that Section 148A advisedly uses the expression ‘enquiry’. Consequently, according to him, it is open to the Assessing Officer to issue a notice for the purpose for verification of transaction to examine as to whether income has escaped assessment.

The Court observed that “even if the re-assessment was being done for verification in accordance with Explanation 1 to Section 148, nothing prevented the Assessing Officer from conducting an enquiry with respect to the said information in accordance with Section 148A(a) of the Act. In any event, it was all the more necessary in the present case for the Assessing Officer to thoroughly scrutinise the contentions and submissions advanced by the petitioner-assessee before passing an order under Section 148A(d) of the Act and the mandate of Section 148A(c) has been violated as it casts a duty on the Assessing Officer, by using the expression ‘shall’ to consider the reply of the petitioner/assessee in response to the notice under Section 148A(b) before making an order under Section 148A(d) of the Act.”

ITAT confirms Order of AO where Assessee failed to produce Supporting Evidence on Claim of Unsecured

The Income Tax Appellate Tribunal (ITAT), Delhi bench consisting of Anil Chaturvedi, Accountant Member, and Kul Bharat, Judicial Member confirmed the order of AO where the assessee failed to produce supporting evidence regarding the claim of unsecured loans.

The assessee, Vijay Gupta filed a return of income declaring an income of Rs.5,18,781/- after claiming a deduction by the assessee. The same was processed u/s 143(1) of the Income Tax Act, 1961. Subsequently, the case was selected for scrutiny assessment under CASS, and notice u/s 143(2) was issued and served upon the assessee. In response to the notices issued, the assessee along with Shri Ganesh Bhardwaj, (Counsel)attended the assessment proceedings from time to time. The Assessing Officer (AO) after considering the submissions of the assessee, proceeded to make additions of Rs.93,50,014/- on account of short-term Capital Gain (“STCG”), Rs.74,00,000/- on account of unexplained unsecured loan and Rs.30,897/- on account of disallowance of deduction claimed u/s 80C & 80D of the Act. Thus, the AO assessed the income at Rs.1,72,99,692/-, against the income of Rs.5,18,781/- declared by the assessee. Aggrieved by the order the assessee preferred to appeal before the Commissioner of Income Tax (CIT), who after considering the submissions of the assessee, sustained the addition made by AO. Aggrieved by the order of CIT, the appellant preferred an appeal before ITAT.

The Counsel for the respondent, Umesh Takyar submitted that AO was justified in computing the capital gain as the transfer of property was completed and all conditions for taxability of STCG were satisfied.

The Tribunal opined “The assessee was required to prove the identity of creditors, genuineness of transaction and creditworthiness of creditors. The assessee grossly failed to do so. Therefore, in the absence of the supporting evidence regarding the claim of unsecured loans, we do not see any infirmity in the finding of authorities below”