15.8 C
New York
Monday, April 19, 2021

Delhi High Court restricts tax authorities from issuing show cause notices to banks

Must read

IBM returns to sales growth after a year of declines on cloud strength

Economy7 minutes ago (Apr 19, 2021 04:35PM ET) (C) Reuters. FILE PHOTO: A man stands near an IBM logo at the Mobile World Congress in...

United Airlines loss bigger than feared on higher fuel costs, capacity slide

Stock Markets7 minutes ago (Apr 19, 2021 04:35PM ET) (C) Reuters. FILE PHOTO: A United Airlines passenger jet takes off with New York City as...

United Airlines Holdings Earnings, Revenue Miss in Q1

Stock Markets10 minutes ago (Apr 19, 2021 04:32PM ET) (C) Reuters. United Airlines Holdings Earnings, Revenue Miss in Q1 Investing.com - United Airlines Holdings (NASDAQ:UAL) reported...

Raiders sign CB Rasul Douglas

Sports & General12 minutes ago (Apr 19, 2021 04:30PM ET) (C) Reuters. NFL: Philadelphia Eagles at New York Giants The Las Vegas Raiders on Monday announced...

The Delhi High Court has restricted the tax authorities from issuing show cause notices to 13 banks for not levying service tax on the commitment to maintain ‘minimum average balance’ (MAB) in bank accounts.

While the government has sought that show cause notices to the banks should prevail, the banks contended that if show cause notices were allowed, they will have to provision nearly Rs 50,000 crore as tax and penalty in their books as per accounting practices. This will ‘wreak havoc on the banking industry,’ the banks had argued in court.

“Though we have heard the counsels for the respondents, but we have not been able to find any reply to the first of the aforesaid contentions,” Justices Rajiv Sahai Endlaw and Asha Menon said after hearing both parties on August 28.

“In the circumstances, it is not deemed apposite to alter the interim order,” they said, effectively extending the stay issued by the Court in July 2019. The matter will be heard next on September 11.

Experts said that authorities have created a fictitious tax demand on services that have been provided free of cost by overstretching the reach of legal provisions. “Taxing any part of services without consideration, would set a wrong jurisprudence, which would have a rollover effect in goods and service tax (GST) also,” said Rajat Mohan, senior partner at AMRG Associates.

In July last year, the tax authorities had issued notices to 13 banks to pay service tax on minimum balance, amounting to Rs 38,000 crore, for “treating the commitment of customers to maintain MAB in bank accounts as a consideration for banking facilities provided free”.

The banks, including State Bank of India, Punjab National Bank, Yes Bank, HDFC, Hong Kong and Shanghai Bank among others approached the Delhi High Court for relief. HDFC Bank Limited was reported to have been facing a penalty of up to Rs 18,000 crore.

They had claimed that the government had arbitrarily decided on the service tax to be charged from them by multiplying the penalty imposed by the banks with the total number of accounts held with the bank. The show-cause notices issued by the government had been stayed till further hearing.

- Advertisement -

Latest article

IBM returns to sales growth after a year of declines on cloud strength

Economy7 minutes ago (Apr 19, 2021 04:35PM ET) (C) Reuters. FILE PHOTO: A man stands near an IBM logo at the Mobile World Congress in...

United Airlines loss bigger than feared on higher fuel costs, capacity slide

Stock Markets7 minutes ago (Apr 19, 2021 04:35PM ET) (C) Reuters. FILE PHOTO: A United Airlines passenger jet takes off with New York City as...

United Airlines Holdings Earnings, Revenue Miss in Q1

Stock Markets10 minutes ago (Apr 19, 2021 04:32PM ET) (C) Reuters. United Airlines Holdings Earnings, Revenue Miss in Q1 Investing.com - United Airlines Holdings (NASDAQ:UAL) reported...

Raiders sign CB Rasul Douglas

Sports & General12 minutes ago (Apr 19, 2021 04:30PM ET) (C) Reuters. NFL: Philadelphia Eagles at New York Giants The Las Vegas Raiders on Monday announced...

Medical examiner says Capitol Police officer Sicknick died of natural causes -report

World12 minutes ago (Apr 19, 2021 04:30PM ET) (C) Reuters. A picture of of Capitol Police officer Brian Sicknick is seen as people wait for...