AccViz&Co Auditors & Accountants’ Post

Tax Liability Strategies that you need to know

Penalty u/s. 270A - under reporting of income by not reducing the insurance claim received by the assessee from the block of assets which has in fact resulted in excess claim of depreciation- ITAT MUMBAI, DCIT-15 (3) (2) , MUMBAI VERSUS M/S. SASAN POWER LTD. AND (VICE-VERSA)-No.- ITA No. 1923/Mum/2023 And CO No. 95/Mum/2023 (Arising out of ITA No. 1923/Mum/2023) Dated.- December 22, 2023 FACTS -The assessee while computing the income from business had reduced the amount of profit on disposal of assets of Rs. 4,62,00,000/- as being fixed asset and while computing the depreciation it had erroneously not reduced the amount of insurance claim received from the block of assets, thereby claiming higher depreciation on fixed assets. It is observed that the company had then filed revised working of deprecation during the assessment proceeding after duly reducing the claim of insurance from the block of assets where the reduced claim of depreciation was worked out at Rs. 3,17,94,645/-. The ld. A.O. disallowed the excess claim of depreciation on fixed assets amounting to Rs. 3,17,94,645/- and determined the total income at Rs. (- )1252,37,71,789/- and book profit u/s. 115JB at Rs. (-)95,37,05,064/- and added the same to the total income of the assessee. The ld. A.O. also initiated penalty proceedings u/s. 270A of the Act for under reporting of income. The ld. A.O. then passed the penalty order dated 10.01.2022 u/s. 270A of the Act determining the penalty amount to be Rs. 52,56,132/- being 50% of the amount of tax on the under reported income amounting to Rs. 3,17,94,645/-.Aggrieved the assessee was in appeal before the ld. CIT(A) who vide order dated 31.03.2023 deleted the impugned penalty for the reason that the assessee’s claim of excess depreciation was a bona fide mistake and that there was no mens rea on the part of the assessee to suppress any material fact for the purpose of avoiding tax. The ld. CIT(A) relied on the decision of the Hon'ble Apex Court in the case of CIT vs. Reliance Petro Product Ltd. 322 ITR 158 (SC). HELD-The assessee has relied on various other decisions which have reiterated the proposition that the claim of higher depreciation would not amount to concealment of income. It is also observed that the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Somany Evergreen Knits Ltd. [2013] 35 taxmann.com 529 (Bom) has held that excess claim of depreciation was a bona fide mistake on the part of the assessee which attracts no levy of penalty. 13. By respectfully following the above said decision, we deem it fit to hold that there is no infirmity in the order of the ld. CIT(A) in deleting the penalty levied by the ld. A.O.

I have found that HMRC have increasingly been issuing personal liability notices for VAT penalties ✉. This power causes the individual to face joint and several liability for a penalty attributable to the company where: 👉 A company officer has intentionally failed to declare the correct amount of VAT; and 👉 The company goes into liquidation, or it can be found that the officer attempted to gain personally from the action. As a whole I believe it is a power for good as it prevents individuals from simply liquidating the company and never being held accountable for the errors. However, the legislation does incentivise HMRC to look for fraudulent behaviour where there may actually be none. I have found that directors in some instances can find themselves stuck in stressful and frustrating enquiries, where their company goes into liquidation due to the unexpected VAT liability, and then to add further pain, their house and all their personal possessions are being put on the line. In one such enquiry I worked on, HMRC had not even asked why the errors occurred but had become so entrenched in their position that, despite this, they raised deliberate penalties and personal liability notices! I have found the key in respect of HMRC VAT enquiries is to get an experienced tax disputes specialist onboard as early as possible into the investigation to manage the correspondence and avoid falling into similar issues. 💡 If you or your clients are facing similar issues and would like to have a chat about strategy or how our team at Grant Thornton could help, please do not hesitate to get in touch.📞 💻 #VATPenalties #PersonalLiabilityNotices #TaxCompliance #TaxServices #TaxProfessionals #TaxLaw #TaxRegulations #Taxpayer #HMRC #TaxLiabilities #TaxPayersRights #TaxPayersObligations #TaxAdvisor #TaxConsultant #GrantThornton

Excellent piece from David regarding personal liability notices for VAT penalties. Please don't hesitate to get in touch with David, one of the team or I if you or your client is impacted. #taxdisputes #VAT #personalliabilitynotices #hmrc

Given the substantial increase in the ATO issuing them, I have done a few presentations on ATO Director Penalty Notices (#DNP) over the last few months (at the #ARITA National Conference in April and with Paul McQuade KC and Scott Guthrie on 12 June). A good summary of how the director penalty regime works is set out in an article I wrote a few years back and recently updated - https://lnkd.in/dDs65WUP.   The DPNs the ATO are issuing are mainly for old Superannuation Guarantee Charge (#SGC) debts, often going back many years.  I am acting for a number of directors who have received these old SGC related DPNs. Receipt of the DPN is often the first time that the director became aware that they allegedly had such a penalty, even though their company was placed into administration or liquidation many years ago, and the directors have moved on with their lives.    A very concerning issue I have seen on two such DPNs is that the due date for lodgement of a SGC statement and payment of the SGC by the company is after the company was placed into administration or liquidation.  That means no director penalty can arise in relation to the unpaid SGC.  So the DPNs are being issued for penalties that do not exist.  The ATO is not checking before issuing these DPNs to see when, and if, the company was placed into administration or liquidation (despite the ATO being a creditor who proved in the administration or liquidation).  Directors are being subject to unnecessary distress when they receive these incorrect DPNs.  Directors are also forced to foot the legal bill to get advice on their validity, something they should not have to do.   #insolvency #directorpenalty

*Following Circulars issued on Dated 26 June 2024* 207/01/2024-GST- *Reduction of Government Litigation – fixing monetary limits for filing appeals or applications by the Department before GSTAT, High Courts and Supreme Court* 208/02/2024-GST- *Clarifications on various issues pertaining to special procedure for the manufacturers of the specified commodities.* 209/03/2024-GST- *Clarification on the provisions of clause (ca) of Section 10(1) of the Integrated Goods and Service Tax Act, 2017 relating to place of supply* 210/04/2024-GST- *Clarification on valuation of supply of import of services by a related person where recipient is eligible to full input tax credit.* 211/05/2024-GST- *Clarification on time limit under Section 16(4) of CGST Act, 2017 in respect of RCM supplies received from unregistered persons.* 212/06/2024-GST- *Clarification on mechanism for providing evidence of compliance of conditions of Section 15(3)(b)(ii) of the CGST Act, 2017 by the suppliers* 213/07/2024-GST- *Seeking clarity on taxability of re-imbursement of securities/shares as SOP/ESPP/RSU provided by a company to its employees.* 214/08/2024-GST- *Clarification on the requirement of reversal of input tax credit in respect of the portion of the premium for life insurance policies which is not included in taxable value* 215/09/2024-GST- *Clarification on taxability of wreck and salvage values in motor insurance claims.* 216/10/2024-GST- *Clarification in respect of GST liability and input tax credit (ITC) availability in cases involving Warranty/ Extended Warranty, in furtherance to Circular No. 195/07/2023-GST dated 17.07.2023* 217/11/2024-GST- *Entitlement of ITC by the insurance companies on the expenses incurred for repair of motor vehicles in case of reimbursement mode of insurance claim settlement.* 218/12/2024-GST- *Clarification regarding taxability of the transaction of providing loan by an overseas affiliate to its Indian affiliate or by a person to a related person.* 219/13/2024-GST- *Clarification on availability of input tax credit on ducts and manholes used in network of optical fiber cables (OFCs) in terms of section 17(5) of the CGST Act, 2017* 220/14/2024-GST- *Clarification on place of supply applicable for custodial services provided by banks to Foreign Portfolio Investors* 221/15/2024-GST- *Time of supply on Annuity Payments under HAM Projects* 222/16/2024-GST- *Time of supply in respect of supply of allotment of Spectrum to Telecom companies in cases where an option is given to the Telecom Companies for payment of licence fee and Spectrum usage charges in instalments in addition to an option of upfront payment.*

Can GST liability be recovered from the former Director (who resigned) from the Company? The Bombay HC HELD that - 1. Recovery sought to be made under the impugned order dated 27th November 2020 is for the period 1st April 2018 to 31st March 2019. However, from March 2018, the former Director had not taken any active part in the day-to-day affairs of the company. Thus, for the period in question, the former Director never acted as a director of the company 2. All such factual issues were required to be verified before the impugned attachment orders were passed by the designated officer, by issuing a show cause notice to the petitioner but such exercise was undertaken. 3. The former Director was neither issued a show cause notice nor was he heard, before such orders were passed - Further, the principal liability is not on the "petitioner" who is not a registered person within the meaning of Section 79(1) of the MGST Act, 2017. 4. Further Section 89 of the Act clearly provides that before taking any action of recovery against the directors of the company, a subjective satisfaction is required to be achieved by the concerned officer in regard to whether a person concerned against whom recovery is sought to be made was a director of a Private Limited Company for the concerned period. 5. It is only after such satisfaction to the effect that such person was the director of the company, the liability could be fastened against such director - as to on what basis the respondents have proceeded to make the attachment of the petitioner's property, is not known. No reasons are attributed whatsoever except for the impugned order The impugned order is in breach of the rights guaranteed to the petitioner under Art. 14, read with Art. 300A, of the Constitution

DID YOU KNOW? 📣 If you are about to be appointed as a Director of an established company, you could be liable for historical company debts owing to the ATO, including the unpaid and unreported PAYG, GST and SGC. A newly appointed Director who realises their company has historical debts to the ATO must, within 30 days of their appointment, ensure that the company either: pays the relevant debts; appoints an administrator or small business restructuring practitioner; or commences a winding up process. If the above actions are not taken, the company can face Director Penalty Notices and lockdown liability. So, if you are thinking about accepting appointment as a director of an established company, you should consider the company's lodgement history and ensure the company has actively dealt with its tax debts. For individual advice, please get in touch with our Aintree Group Legal team. Learn more here: https://lnkd.in/gDsziZ-R

REFUND LIABILITY Over the weekend, our Finance Business Partner (FBP) team had the privilege of attending the IFRS Townhall, featuring insightful discussions led by Sobur Bello, ACA and the exceptional Kazeem Ijaola Bsc, FCA, ACTI, CertIFR(ACCA-UK) and other professionals like Idris Ayinde, ACA, CFA Abiodun Aremu MSc ACA . They moved quickly into IFRS 15, focusing on Revenue from Contracts with Customers. The session, hosted on Twitter space (X), provided a comprehensive breakdown of the IFRS 15 five-step model. Notably, Step 3, which involves determining the transaction price, led to a fascinating discussion on Refund Liability, Warranties, etc. In IFRS 15, a refund liability signifies consideration that the reporting entity expects to refund to customers. Contracts can be modified due to various factors, such as refunds, discounts, or rebates. For instance, when a company allows returns, it anticipates refunding a portion of the consideration until the right to return expires. What then does such a company do before such a right expires? a refund liability should be recognized instead of revenue for the portion it anticipates would be returned. Today let’s consider a practical scenario Company XYZ sells 10 iPhone X units for N200k each, with a 60-day return policy for a full cash refund. XYZ estimates that five iPhones will be returned, and within the specified period, three are indeed returned. Practically, XYZ recognizes sales, excluding the expected returns: Dr Cash N2 million Cr Revenue N1 million Cr Refund Liability N1 million After 60 days, when three iPhones are returned: Dr Refund Liability N600k Cr Cash N600k Once the 60-day return period expires, XYZ recognizes revenue for the remaining two iPhones: Dr Refund Liability N400k Cr Revenue N400k The essence of IFRS 15 in handling refund liability is clear: no revenue is recognized for products expected to be returned until the right of return expires. In the upcoming weeks, we will share more on the accounting entries to decrease the cost of sales and recognize corresponding assets for expected product returns. For those who missed the live session, you can catch up here; https://lnkd.in/dX4tpmxY Wishing everyone a fantastic day ahead!

PPI Claims........ Forensic VAT Reviews: The PPI of 2024! 💼💰 Remember the PPI claims boom? It felt like everyone and their dog had money owed to them, and all they had to do was ask for it. Fast forward to 2024, and we have a new champion in the ring: the Forensic VAT Review. Think of it as the PPI claims for the modern business world. Here’s why: - No Win, No Fee: Just like those PPI claims, our forensic VAT review service operates on a no win, no fee basis. If we don’t find any discrepancies or overpaid VAT, you don’t pay a penny. Simple as that! - Hidden Savings: Many businesses are unaware of the VAT they might have overpaid. Our expert team digs deep into your past VAT returns, uncovering potential refunds that are rightfully yours. - Hassle-Free Process: We handle the entire process, from reviewing your documents to submitting the claims. You get the benefits without the headache. - Peace of Mind: With regulatory changes and complex VAT laws, it's easy to miss something. Our forensic review ensures you’re compliant and not leaving money on the table. Don’t let the VAT man keep more than he’s entitled to. It’s time to get back what’s yours! 🚀 Ready to start your forensic VAT review? Get in touch today and see how much you could reclaim. #VAT #BusinessFinance #TaxSavings #ForensicReview #NoWinNoFee #PPIof2024