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2024 Supreme(Mad) 41
HIGH COURT OF JUDICATURE AT MADRAS
SENTHILKUMAR RAMAMOORTHY, J.
M/s. Global Calcium Private Limited, (Represented by its Deputy General Manager, V.Sreenivasa Reddy) Hosur - Appellant
Versus
Assistant Commissioner, Hosur - Respondent
Writ Petition Nos. 78, 83 & 87 of 2024 & W.M.P. Nos. 76, 77, 85, 86, 89, 91 of 2024
Decided On : 19-01-2024
For the Petitioner:G. Natarajan, Advocate. For the Respondent: C. Harsha Raj, AGP.
The court emphasized the importance of considering relevant circulars and legal provisions in determining the tax liability of director's remuneration under the GST regime.
Headnote:
GSTIN - Assessment Orders - Tamil Nadu Goods and Services Tax Act, 2017 - Section 73, Section 17(5), Circular No.140/10/2020-GST, Section 192, Section 194-J - The court discussed the issues of Input Tax Credit (ITC) eligibility, taxation of performance linked incentives to directors, and discrepancies relating to E-way bills under the Tamil Nadu Goods and Services Tax Act, 2017. The court referred to relevant circulars and sections of the Income Tax Act, 1961 to interpret the nature of director's remuneration and its tax liability under the GST regime. The court quashed the impugned orders and remanded the matters for reconsideration by the assessing officer.
Fact of the Case:
The petitioner, a registered person under GST laws, challenged assessment orders for financial years 2017-2018, 2018-2019, and 2019-2020 due to discrepancies in ITC, taxation of performance linked incentives to directors, and E-way bill discrepancies.
Finding of the Court:
The court found that the assessing officer did not consider relevant aspects and the petitioner may not have placed all relevant documents on record. The impugned orders were quashed, and the matters were remanded for reconsideration.
Issues: Discrepancies in ITC, taxation of performance linked incentives to directors, and E-way bill discrepancies.
Ratio Decidendi: The court held that the assessing officer did not consider relevant circulars and sections of the Income Tax Act, 1961 in determining the tax liability of director's remuneration under the GST regime.
Final Decision: The writ petitions were disposed of without any order as to costs, and the matters were remanded for reconsideration by the assessing officer.
JUDGMENT
(Common Prayer : Writ Petitions filed under Article 226 of the Constitution of India, pleased to issue a Writ of Certiorari calling for the records relating to the impugned orders bearing GSTIN:33AAACG2998N1Z5/2017-18 dated 31.10.2023, GSTIN:33AAACG2998N1Z5/2018-19 dated 02.11.2023 & GSTIN:33AAACG2998N1Z5/2019-20 dated 02.11.2023 passed by the respondent and quashing the same.)
Common Order
1. In these three writ petitions, three separate assessment orders relating to financial years 2017-2018, 2018-2019 and 2019-2020 are challenged.
2. The petitioner is in the business of supply of Bulk Drugs and Pharmaceutical Intermediaries. As a registered person under GST laws, the petitioner filed returns periodically. Pursuant to an audit of the petitioner's records, certain discrepancies were noticed and communicated by issuing notices. The petitioner replied to such notices, including the show cause notice under Section 73 of the TNGST Act. Eventually, the orders impugned in these writ petitions came to be issued.
3. In the orders impugned in these writ petitions, other than W.P.No.78 of 2024, three defects were dealt with. The first of those relates to suppression of purchases by not availing of available Input Tax Credit (ITC). The second issue, which is the principal issue, pertains to the payment of performance linked incentives to two persons who held office as whole time directors of the company. By the impugned orders, such performance linked incentive was held to be liable to GST. The third issue relates to discrepancies relating to E-way bills.
4. As regards the first defect relating to ITC, learned counsel for the petitioner submits that the purchases by the petitioner were duly reflected in the returns filed by the petitioner. To the extent indicated in the impugned orders, ITC was not claimed because the petitioner was not eligible to claim ITC in terms of Section 17(5) of the Tamil Nadu Goods and Services Tax Act, 2017. As regards the performance linked incentives to the directors, learned counsel submitted that such performance linked incentives were also paid to these whole time directors in their capacity as employees of the company. When payment is made to an employee, learned counsel submitted that it is part of the contract of service and such payments are not liable to tax under the GST regime as per Circular No.140/10/2020-GST dated 10.06.2020. In spite of placing this circular before the assessing officer and pointing out that TDS was deducted under Section 192 of the Income Tax Act, 1961 (the Income Tax Act) and not under Section 194-J thereof, learned counsel submits that the assessing officer disregarded such submissions. Therefore, he contends that the impugned orders are liable to be interfered with.
5. Mr.C.Harsha Raj, learned Additional Government Pleader, made submissions in response and to the contrary. By referring to the certificate issued by the Chartered Accountant of the petitioner, learned counsel pointed out that the said certificate demarcates the amounts paid towards salary and incentives as regards the two whole time directors for each of the relevant financial years. Since such demarcation has been made in the certificate, learned counsel submits that deduction of tax at source under Section 192 of the Income Tax Act is not conclusive with regard to whether such payment was for services provided as an employee or towards any other services provided by the said persons. He further submits that the onus is on the petitioner to place on record all relevant documents to convince the assessing officer that the petitioner is exempt from tax either in terms of Circular No.140/10/2020-GST dated 10.06.2020 or otherwise.
6. As regards the first defect relating to ITC, the petitioner contended that ITC was not claimed on account of ineligibility. By referring to discrepancies as between the different returns, the proposed liability was partly confirmed and partly dropped.
7. With regard to the issue of d
