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Ahmedabad Chartered Accountants Journal May, 2022 65

Volume : 46 Part : 02 May, 2022

E-mail : [email protected] Website : www.caa-ahm.org

Ahmedabad Chartered Accountants Journal

C O N T E N T S To Begin with

- Art of Leaving.................................................................. CA. Nirav Choksi......................... 67

Editorial ............................................................................................CA. Rutvij P. Shah...........................68

From the President............................................................................CA. Sarju Mehta............................69

Articles

Filing of Updated Return - All that Glitters is not Gold........................CA. Manthan Khokhani................70

Income vs. Capital Receipt under Income Tax Act, 1961......................CA. Jay Sharma...........................74

Section 194R : TDS on benefits or perquisite.......................................CA. Akshat Vithlani.........................79

Direct Taxes

Glimpses of Supreme Court Rulings....................................................Adv. Samir N. Divatia....................82

From the Courts..................................................................................CA. Jayesh Sharedalal................. 84

Tribunal News.....................................................................................CA. Yogesh G. Shah &CA. Aparna Parelkar.................... 87

Unreported Judgements......................................................................CA. Sanjay R. Shah......................93

Controversies.......................................................................................CA. Kaushik D. Shah....................95

Judicial Analysis..................................................................................Adv. Tushar Hemani......................97

FEMA & International Taxation

Update on Recent Case Laws – International Taxation and .............. CA. Dhinal A. Shah &Transfer Pricing CA. Karan Sukhramani...............106

FEMA Updates....................................................................................CA. Savan Godiawala..................108

Indirect Taxes

GST and VAT Judgments and Updates................................................ CA. Bihari B. Shah &CA. Vishrut R. Shah.....................110

Corporate Law & Others

Corporate Law Update.......................................................................CA. Naveen Mandovara................113

GujRERA Corner..................................................................................CA. Manan Doshi.........................116

Allied Laws Corner............................................................................. Adv. Ankit Talsania.......................119

Capital Markets.................................................................................. CA. Karan P. Vora........................122

From Published Accounts ................................................................ CA. Pamil H. Shah..................... 127

From the Government ......................................................................CA Ashwin H. Shah &CA. Kunal A. Shah........................129

IT Corner...........................................................................................CA. Rushabh Shah..................... 131

Association News.............................................................................. CA. Rushabh Shah &CA. Jay Parekh............................133

ACAJ Crossword Contest......................................................................................................................140

- caaahmedabad

Ahmedabad Chartered Accountants Journal May, 202266

AttentionMembers / Subscribers / Authors / Contributors1. Journals are carefully posted. If not received, you are requested to write to the Association's Office within one

month. A copy of the Journal would be sent, if extra copies are available.2. You are requested to intimate change of address to the Association's Office.3. Subscription for the financial year 2022-23 is ` 1500/-, single copy ` 150/- (if available).4. Please mention your membership number in all your correspondence.5. While sending Articles for this Journal, please confirm that the same are not published / not even meant for

publishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication, norwill they be sent back.

6. The opinions, views, statements, results published in this Journal are of the respective authors / contributorsand Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it necessarilyconcur with the authors / contributors.

7. Life Membership/Annual Membership and Other Fees F. Y. 2022-23 Amount in `Basic GST Total

1. Admission Fees 500 90 5902. Annual Membership Feesa. If Paid Prior to june 30 of each financial year :i. In case of membership (of ICAI) for a period of less than or equal to five years 600 - 600ii. In case of membership of (ICAI) for a period more than five years, 750 - 750b. If paid after june 30 of each financial year :i. In case of membership (of ICAI) for a period of less than or equal to five years, 720 - 720ii. In case of membership of (ICAI) for a period of more than five years 900 - 9003. Life Membership Feesi. In case of membership (of ICAI) for a period of less than or equal to five years 4000 720 4720ii. In case of membership of (ICAI) for a period more than five years 7500 1350 88504. Brain Trust Membership Feesa. Individual Membership Feesi. In case of membership (of ICAI) for a period of less than or equal to five years 800 144 944ii. In case of membership of (ICAI) for a period more than five years 1000 180 1180b. Flexi Firm/Corporate Membership Fees*** 2000 360 2360*** Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting. AdditionalRepresentatives can be nominated @1000/- plus GST per participant subject to maximum of 20 participant per firm

Published ByCA. Rutvij P. Shah, on behalf of Chartered Accountants Association, Ahmedabad, 2nd Floor, Darshak, 14/A, SwastikSociety, Opp. Shrey Hospital, Navrangpura, Ahmedabad - 380 009 Phone : +91 79 40392596No part of this Publication shall be reproduced or transmitted in any form or by any means without the permissionin writing from the Chartered Accountants Association, Ahmedabad.While every effort has been made to ensure accuracy of information contained in this Journal, the Publisher isnot responsible for any error that may have arisen.

Professional AwardsThe best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and 'AlliedLaws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by experts in theprofession. Articles and reading literatures are invited from members as well as from other professional colleagues.

Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]

Journal CommitteeCA. Rutvij Shah CA. Ashish Sharma

Chairman ConvenorCA Uday Shah CA Jayesh Sharedalal

EC Representative Past President

CA. Monish Shah CA. Riken PatelCA. Ashok Kataria CA. Pratik Kikani

CA. Nirav Shah CA. Pratik Jain

Members


A video of Late Shri Arun Jaitley speaking inthe Parliament is doing the rounds onwhatsapp these days. He was referring to thetrend of retired High Court and Supreme Courtjudges self-appointing themselves on variouscommittees or departments after theirretirement. The majority of these posts werenot related to their area of work. He raised apertinent question in my mind, are we readyto LEAVE?.

This is just an instance which has beendebated upon in that video, but if we thinkand introspect, this is applicable to all of us.A businessman, not ready to hand over thereigns of his business to the next generation.A politician not willing to see anyone else inthe chair which he has once occupied.Consistent efforts being made by him tocontinue to be in power, either directly orthrough his nominees. A government officernot ready to accept the fact that he is no longerthe boss who once was the center of allimportant or major events happening in hisdepartment. A sportsman or an actor who oncewas a darling of crores is now a nobody. Allthese instances are emanating from the factthat WE ARE NOT READY TO LEAVE?. Weare not ready to leave the Power, Fame, Glory,Position, Control and similar delusional

ART OF LEAVING

CA. Nirav [email protected]

achievements, which we have enjoyed at somepoint of time in our lives.

It’s easier said than done. If you have been inlimelight for a major part of your life andsuddenly the scenario changes, it is verydifficult for a human being to accept thechange. The worst part is that the change isvery immediate and the outlook of generalpeople towards you also changes abruptly.And in majority of the cases the outlook goesnegative. But that is not in our hands as tohow people behave with us. What best we cando is prepare ourselves for this change.Leaving cannot be compared withabandoning. We must not abandon ourresponsibilities towards the family andsociety. But we must inculcate the culture oftransmission of powers and responsibility sothat the coming generation does not get awedwhen suddenly the powers and responsibilitycome to them. Remember the fact that expirydate of our life is not ascertained but there isevery certainty of the event to come.

Let us all decide to LEAVE proactively andLIVE peacefully.

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April and May are months of Vacations. In today’s stressful life, vacations have become veryimportant. It rejuvenates us and gives us time to rest, relax and recharge. It helps us to preventburnouts and improves our mental and physical wellbeing. A person who comes back fromvacations shows improved productivity and focus on work.

Apart from this, vacations have certain hidden benefits also. In today’s busy life, we are alwaysplaying catch up with various statutory deadlines and commitments. Many a times we find ithard to attend to family gatherings and miss out on opportunities of family bonding. Therefore,it is very important to spend time with someone you love. Vacations provide this quality familytime. It allows us to unplug from our busy work schedules and spend quality time with ourloved ones. It makes family relationship strong.

In earlier times vacations were the times to visit Mama, Kaka, Masi and Foifor kids. They weregreat family fun times. In today’s time, things have changed. However, importance of vacationhas not diminished one bit. There are many opportunities for kids to take part in adventurecamps and trekking activities. It provides a great platform for them to improve their socialskills and gives them valuable experience.

April and May months are relatively easy for us professionally. There are not many statutorydeadlines or work which requires our urgent attention in these months. We can utilize thismonth to prepare our office for upcoming busy season. We can refresh ourselves with newprovisions of law, update our checklists and work SOPs. We can also look into our ownaccounting, finances and billing aspects. All these will help us to be ready and prepared forupcoming season.

A new team has taken charge at the helm of our association. I would like to congratulate newoffice bearers of our Association led by President CA. Sarju Mehta, Vice President CA. ShivangChoksi and Hon. Secretaries CA. Jay Parekh and CA. Mayur Modha. I also wish them a verysuccessful and fulfilling tenure.

Recently our association held an essay competition in the memory of Late Shri C.R. Sharedalal.The competition was open for junior members of our association and topic was Income vs.Capital Receipt under Income Tax Act, 1961. CA. Jay Sharma was awarded first prize in thiscompetition. This article is published in this issue of our journal.

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EditorialCA. Rutvij Shah

[email protected]


Dear Members,

Hope all of you and your loved ones are safe and in pink of health.

It gives me immense pleasure to write this message as the 66th President of our Association. Iwill faithfully execute the office of the President to the best of my ability and will preserve,protect and defend the bye laws of this august Association and that I will devote myself to theservice and wellbeing of the members of our Association.

The torch bearers change but the show must go on. I and my team consisting of CA ShivangChokshi (Hon. Vice President), CA Jay Parekh and CA Mayur Modha (Hon. Secretary) willensure that the activity of the Association will be carried on without any breaks. The year hasstarted with a great publication in form of Schedule III Reporting and the book has receivedtremendous response across the State of Gujarat. In the coming months, we will ensure that allthe meetings related to amendments specifically related to Companies Act, Income Tax, GSTand Trust will be arranged.

I am happy to inform that the First Brain Trust Meeting is scheduled on 18th June, 2022 andRRC to Udaipur is also launched for 23, 24 and 25th June, 2022.

Along with the programs, we are also working on getting technologically advanced withassociation using all forms of Social Media to stay in touch with the members. Our websiteneeds to be updated to the current needs which is to perform as a data centre and also cater tovarious professional information being available for members. We would be carrying out theupdation soon and the committee for the same will ensure proper updation.

I on behalf of my team and myself would like to thank you all for trusting me with theopportunity in serving the noble profession. I shall try my best to serve to the need of all ofyou and also ensure you that me and my team will be available 24 x 7 and will also ensure thatthe Association will be happy to serve any need of its members.

CA SARJU MEHTA

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CA. Sarju [email protected]

From thePresident


Preface

The Finance Act 2022 has amended the provisionsof Section 139 of the Income-tax Act, 1961 (“TheAct”) dealing with filing of returns, to insert a newsub-section (8A) so as to allow the taxpayers to filean “updated return of income”.

Presently, the Income-tax Act allows taxpayers tofile their original return of income within the duedate as specified under the Act. In case, the originalreturn cannot be filed within the time specified, thetaxpayers still have an option to file a belated returnof income. Further in case of errors or omissions inthe original return of income, the taxpayers are evenallowed to file a revised or rectified return of income.However, time limit available to taxpayers to file arevised or belated return ranges from one month tofive months only depending on whether they arecovered under audit or not. Therefore, the FinanceAct 2022 seeks to provide one more opportunity tothe taxpayers to disclose any additional incomewhich they might have missed to report by way offiling an updated return. However, unlike a belatedor revised return, filing of an updated return comeswith certain riders and involves an additional costto the taxpayers.

The Memorandum explaining the provisions of theFinance Bill, 2022 reads out the following as thebasic understanding of win-win both for the revenueand the taxpayers:

“The proposal for updated return over a periodlonger than that is provided in the existing provisionsof Income-tax Act would on the one hand bringuse of huge data with the IT Department to a logicalconclusion resulting in additional revenuerealisation and on the other hand, it will facilitateease of compliance to the taxpayer in a litigationfree environment.”

The speech of the Finance Minister whileintroducing the provisions read as under:

121. India is growing at an accelerated pace andpeople are undertaking multiple financialtransactions. The Income Tax Department hasestablished a robust framework of reportingof taxpayers’ transactions. In this context,some taxpayers may realize that they havecommitted omissions or mistakes in correctlyestimating their income for tax payment. Toprovide an opportunity to correct such errors,I am proposing a new provision permittingtaxpayers to file an Updated Return onpayment of additional tax. This updated returncan be filed within two years from the end ofthe relevant assessment year.

122. Presently, if the department finds out that someincome has been missed out by the assessee,it goes through a lengthy process ofadjudication. Instead, with this proposal now,there will be a trust reposed in the taxpayersthat will enable the assessee herself to declarethe income that she may have missed outearlier while filing her return. Full details ofthe proposal are given in the Finance Bill. Itis an affirmative step in the direction ofvoluntary tax compliance.”

Basically, this may be treated as the Department’sway of asking the taxpayers to disclose anyadditional income which they might have missedout rather than waiting for a notice of reassessmentu/s. 148 which might be on the way consideringthe data mining done by the department.

Time limit for filing of updated return

Updated return can be filed by the taxpayers withina period of twenty four (24) months from the endof the relevant assessment year. Filing of the

CA. Manthan [email protected]

Filing of Updated Return - Allthat Glitters is not Gold


Filing of Updated Return - All that Glitters is not Gold

updated return can be undertaken irrespective ofthe fact as to whether the original or belated returnhas been filed by the assessee or not.

Form for filing of the updated return

Vide notification No. 48/2022 dated 29th April,2022, the CBDT has inserted a new Rule 12AC toprovide for a new ITR U form in order to file anupdated return of income by the specified class ofassessees.

Restrictions on filing of updated return

First Proviso to Section 139(8A) spells out certaincircumstances under which an updated return cannotbe filed. Accordingly, an updated return cannot befiled if:

1. The updated return is a return of loss; or

2. The updated return has the effect of decreasingthe total tax liability of the taxpayer alreadydetermined in the original or revised or belatedreturn filed by the assessee; or

3. The updated return results in refund or increasesthe refund due on the basis of the original orrevised or belated return filed by the assessee.

Simply put, if the updated return is not favourableto the revenue, the taxpayers will not be allowed tofile an updated return.

Though the provisions of Section 139(8A) allows“Any Person” to file an updated return, the same issubject to the second proviso to the said sectionwhich disqualifies certain class of taxpayers fromfiling an updated return. Accordingly, the followingclass of taxpayers are barred from taking a benefitof the provisions of Section 139(8A)

1. A person in whose case a search has beeninitiated u/s. 132 or books of accounts or otherdocuments or assets are requisitioned u/s. 132Aof the Act.

2. A person in whose case a survey has beenconducted u/s. 133A of the Act except forsurvey in respect of TDS/TCS.

3. A person in whose case a notice has beenissued to the effect that any money, bullion,jewellery or valuable article or thing seized or

requisitioned u/s. 132 or 132A in case of anyother person belongs the said person.

4. A person in whose case a notice has beenissued to the effect that any books of accountsor documents seized or requisitioned u/s. 132or 132A pertains to or information containedtherein belongs to or relates to such person.

When the provisions of this section were initiallyintroduced by the Finance Bill, 2022, the aforesaidcategories of persons were barred from filing anupdated return for the two assessment yearspreceding the assessment year relevant to the yearof search or survey or requisition. However, whenthe Finance Bill was tabled in the Lok Sabha it wasamended so as to provide that such categories oftaxpayers will not be allowed to file an updatedreturn for any of the preceding assessment years.

Lastly, the third Proviso to Section 139(8A)specifies certain circumstances under which anupdated return cannot be filed.

1. Where the assessee has already filed an updatedreturn once, he is not allowed to file an updatedreturn again for the same assessment year.

2. Where any proceeding for assessment or re-assessment or re-computation or revision ispending or has been completed for the relevantassessment year.

3. Where the assessing officer has in hispossession, information in respect of thetaxpayer under the Smugglers and ForeignExchange Manipulators Act, 1976 ofProhibition of the Benami PropertyTransactions Act, 1988 or the Prevention ofMoney Laundering Act, 2002 or the BlackMoney Act, 2015 and the same has beencommunicated to the taxpayer.

4. Where information for the relevant assessmentyear has been received under an agreementreferred to in Section 90 or Section 90A inrespect of the assessee and the same has beencommunicated to him.

5. Where prosecution proceedings under ChapterXXII have been initiated for the relevantassessment year


6. The assessee is a person who belongs to theclass of persons as may be notified by the Boardin this regard.

Payment of additional tax

Apart from the tax on the income disclosed in theupdated return and consequential interest and latefees, the taxpayers will be required to pay‘additional tax’ before filing the updated return.

The additional tax will be 25% of the ‘additionaltax dues’ if the updated return is filed within 12months from the end of relevant assessment yearand 50% of the ‘additional tax dues’ if the updatedreturn is filed beyond 12 months but before 24months from the end of the relevant assessmentyear.

The assessees will be liable to pay additional tax@ 25% / 50% as the case may be, if additional taxis payable at the time of filing of the updated return,after considering the following:

Where original Where original return hasreturn has not been filedbeen filed

Advance tax Self Assessment tax (Creditof which has been claimedin the earlier return)

Tax Deducted at Tax Deducted at SourceSource (which has not been claimed

in the earlier return)

Relief of tax u/s. Relief of tax u/s. 90 or 91 or89 or 90 or 91 90A on such income whichor 90A has not been included in the

earlier return

Tax credit u/s. Tax Credit u/s. 115JAA or115JAA or 115JD which has not been115JD claimed in the earlier return

Further, in case the original return has already beenfiled by the taxpayer, the interest already paid atthe time of filing of the original return will beallowed to be reduced while computing theadditional tax payable. Further the additional taxpayable, computed in the manner prescribed aboveshall be increased by refund, if any, already issuedto the taxpayer.

It has also been clarified that for the purpose ofcomputation of “additional income-tax”, surchargeand cess on tax shall also be included.

Illustration

Mr. A is having only salary income on which thetax payable comes to say Rs. 100,000. However,Mr. A failed to file the original as well as belatedreturn. Now, if Mr. A wishes to file an updatedreturn within 12 months from the end of the relevantAssessment Year, the calculation of additional taxpayable will be as under:

Particulars Amount (Rs.)

Tax payable 100,000

Health & Education Cess 4,000

Interest u/s. 234A, 234Band 234C 18,320

Penalty u/s. 234F 10,000

Tax payable 132,320

Additional tax(25% of the above) 33,080

Total tax payable 165,400

Amendment to Section 139(9)

The provisions of Section 139(9) of the Act havealso been amended to provide that updated returnfiled u/s. 139(8A) shall be treated as defective ifthe updated return is not accompanied by proof ofpayment of the additional tax, interest and fees etc.payable in the manner prescribed under the Act.

Issues in filing of updated return

1. No tax is payable despite increase in thetaxable incomeMr. A is having a total income of Rs. 240,000.He had filed the original return u/s. 139(1) ofthe Act declaring the same. Now Mr. A wishesto disclose an additional income of Rs.180,000. After considering the additionalincome of Rs. 180,000 the tax payable will stillbe Rs. Nil since the income is less than Rs.500,000 and the Mr. A will be eligible to claimrebate of tax u/s. 87A. Whether Mr. A can filean updated return?



In these circumstances, a strict interpretationof the provisions of Section 139(8A) wouldentitle Mr. A to file the updated return since itis

a. Neither a return of loss

b. Nor results in decrease of tax liability

c. Nor results in refund or increase in therefund of tax already claimed

Accordingly, though the intention of thelegislature is to allow filing of updated returnsonly in case of payment of additional incometax, such a situation has yet not been excludedfrom the category of omissions.

2. Penalty u/s. 270A

Though the Income-tax Department isencouraging the taxpayers to take the benefitof filing an updated return, there is nocorresponding amendment to the provisions ofSection 270A dealing with levy of penalty forunder reporting or mis reporting of income.

3. Filing of updated return if it results inincrease of MAT Credit

Clause (b) and (c) of the first proviso to section139(8A) provides that updated return cannotbe filed if it has the effect of decreasing the taxliability on the basis of return already filed.However, if the updated return results inincrease in the MAT Credit already claimedthere is no omission that is expressly provided.For instance, if a company had filed the originalincome tax return upon payment of MAT andnow intends to reduce the normal income andresultantly reduce the normal income taxpayable, it would result in large MAT Creditfor the company.

4. Whether credit of tax paid by the assesseeis available while computing the additionaltax payable, if return of income was notfiled?

For instance, Mr. A had paid tax of Rs. 100,000for the A.Y. 2021-22 on 05th April, 2021.However, Mr. A failed to file the original aswell as the belated return of income. Now, Mr.

A wishes to file an updated return. Whethercredit of Rs. 100,000 will be available to Mr.A while calculating the additional income taxpayable?

Interpretation of the provisions of Section 140Breveals that where return of income was notfiled by the assessee, he is entitled to a credit ofadvance tax, TDS and relief under specifiedsections. However, the amount of Rs. 100,000paid by Mr. A is not an advance tax since itwas paid after the end of the financial year.Neither the same is TDS nor a relief under thespecified provisions.

Accordingly in the Author’s humble view, dueto an anomaly in the said provisions, Mr. Awould be disentitled from claiming credit ofthe said payment of Rs. 100,000 whilecalculating the additional tax payable.

5. Whether receipt of intimation u/s. 143(1) ofthe Act would tantamount to assessment orinitiation of assessment and thereby barringtaxpayers from filing of an updated return?

In a plethora of decisions, it has been clearlyheld that intimation received u/s. 143(1), thoughappealable, is not an order of assessment.Accordingly, mere receipt of an intimation u/s.143(1) cannot be termed as barring the assesseefrom claiming the benefit of filing an updatedreturn.

6. Can updated return be updated?

The provisions of Section 139(8A) provides aone time opportunity to the taxpayers to file anupdated return. Updated returns once filedcannot be revised or updated in any manner.

Conclusion

The Finance Minister raised the hopes of taxpayerswhile introducing the Updated Return in her Budgetspeech. However, as the old saying goes, ‘all thatglitters is not gold’. The taxpayers have to carefullyevaluate the pros and cons of filing an UpdatedReturn, on a case-to-case basis, to ensure they getbenefit in return.

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A brief history of taxation in India

“It was only for the good of his subjects that hecollected taxes from them, just as the Sun drawsmoisture from the Earth to give it back a thousandfold” – as Kalidas described in Raghuvanshamacclaiming KING DILIP.

Taxes are defined as ‘compulsory charges leviedby a government for the purpose of financingservices performed for the common benefit’.Taxation is always an integrated part of everysystem of governance in India viz. monarchy,republic and modern democratic system. Taxationis found in ancient India as it described by anusmritiand Arthasastra. Present Indian tax system is basedon ancient tax system which believed in maximumsocial welfare. There was a very general consensusin ancient India that tax should be in such manneras nobody feel to hurt. In this regard, Chanakya,in very smart way, quoted the example of the honeybee, saying that “the king should gather the taxfrom the state in the manner as the bees collectshoney without hurting the flower. ”Kautilya’sconcept of taxation also emphasized on two basiccannon of taxation i.e. equity and justice.

Constitution of India has already been provided theprovision of taxes, which could be levied byauthority as article 265 states that no tax shall belevied or collected except by the authority of law.Identically, Central Government has the powerto levy tax on income, other than agriculturalincome, as specified by Entry 82 of List 1 ofConstitution of India. The Central Governmenthas enacted the Income Tax Act, 1961 (“the Act”).Income Tax is a charge on income of a person,earned during the previous year, at the rate(s)specified in the relevant Finance Act. Income of anassessse has to be computed in the manner laid

down under the Act. The Act has made elaborateprovisions for classification of incomes undervarious heads and deductions permissible undereach head. Income is chargeable to tax on the basisof either receipt or deemed receipt or accrues orarises or deemed to accrue or deemed to arise inIndia during the previous year relevant toassessment year. But, what is income has not beendefined and the Act provides an inclusive definitionwhich has vide connotations.

Income and its attributes

The definition of the term ‘income’ in section 2(24)is an inclusive. Therefore, the term ‘income’ notonly includes those things which are included insection 2(24), but also includes such things whichterm signifies according to its general and naturalmeaning. Therefore, before discussing the definitionof income given under section 2(24), it is imperativeto understand the meaning of ‘income’ as generally.

Entry 82 of List 1 of the Seventh Schedule to theConstitution empowers Parliament to levy “taxeson income other than agricultural income”. Entriesin the lists in Seventh Schedule to the constitutionshould not be read in a narrow or restricted manner.1

It is therefore, follows that in addition to receiptsmentioned in section 2(24), any other receipt istaxable under the Act, if it comes within the generaland natural meaning of the term ‘income’.According to the Shorter Oxford EnglishDictionary, “income” means “that which comes inas the periodical product of one’s week, business,lands or investments and annual or periodicalreceipts accruing to a person or a corporation.”Income connotes a periodical monetary return‘coming in’ with some sort of regularity or expectedregularity from definite sources. The source is notnecessarily one which is expected to be

CA. Jay [email protected]

Income vs. Capital Receiptunder Income Tax Act, 1961


total income of any previous year of a person whois resident, includes all income from whateversource derived, and shall be taxable. Thus, sections4 and 5 imposes general liability to tax upon allincome but the Act does not provide that whateveris received by the person must be regarded asincome liable to tax.5 No tax can be levied on thefuture potentiality of earning any income. Incometax is concerned with real income which accruesor arises to a person and not with future possibilityof an income from the use of any money availablewith the assesseee.

Though there are different concepts of ‘income’ forthe purpose of taxation, income is broadly definedat the true increase in the amount of wealth whichcomes to a person during a stated period of time. Itis immaterial whether income is received in cash orkind, if it is in kind, its valuation is to be madeaccording to the rules prescribed in the Income TaxRules. If there is no prescribed rule, valuation thereofis made on the basis of market value. Further,Income tax law does not make any distinctionbetween income accrued or arisen from a legalsource and income tainted with illegality. However,it is a fundamental rule of law of taxation that, unlessotherwise expressly provide, the same incomecannot be taxed twice. In the Act, there is no conceptof deferred income meaning thereby, income on itscoming into existence attracts tax.

Revenue Receipt vs. Capital Receipt

Having understood general meaning of income, letus understand kinds of receipts vis-à-vis revenuereceipts and capital receipts. As the Act does notcontain the terms “capital receipts” and “revenuereceipts”, one has to depend upon natural meaningof the concepts as well as facts of the case.Accordingly to Shorter Oxford English Dictionary,the word “capital” means “accumulated wealthemployed reproductively” whereas the word“revenue” means “the return, yield or profit of anylands, property or other important source of incomethat comes in to one as a return from the propertyor source”.

A receipt on account of circulating capital is revenuereceipt, whereas a receipt on account of fixed capital

Income vs. Capital Receipt under Income Tax Act, 1961

continuously productive, but it must be one whoseobject is the production of a definite return excludinganything in the nature of a mere windfall.2

The expression “income” includes not merely whatis received or what comes in by exploiting use of aproperty but also what once saves by using it byoneself and also which can be converted intoincome. The word income is of the widest amplitudeand it must be given its natural and grammaticalmeaning.3 The word ‘income’ used in the Act iswide and vague in its scope. It is a word of elasticimport. All receipts by an assesseee cannotnecessarily be deemed to be the income of theassessee for the purpose of the Act and whetherany particular receipt is income or not completelydepends upon the nature of the receipt. The incometax authorities cannot assess all receipts and theycould assess only those receipts falls into term‘income’.

One of the characteristics of the term ‘income’ isthe power or complete control over its disposal. Ifrestraints were placed over legitimate or legalspending of the income, it loses the character ofincome. Income which is not available for instantuse takes away essential characteristic of incomeand constrain placed over it prevents one to call itas income. Income should have possessed thecharacteristic of being available either for revenueexpenditure or to acquire a capital asset. It becomesincome only on the year in which and to the extentto which the restrictions placed were removed andthe permission to spend the amount was grantedand by spending certain income if the assesseeacquires a capital assets then it can be legitimatelycalled as income in the year in the which such capitalasset comes into existence.4

In order to say a particular receipt is an income, it isessential that it should come within the definitionof ‘income’. Section 4 of the Act imposes incometax upon a person in respect to his income. It is truethat every income is a receipt but in other way roundevery receipt is an income is not true. The term’income’ has been defined in section 2(24) of theAct which includes profit and gains, value ofperquisites or profit in lieu of salary, etc. Section 5,defining the scope of total income, says that the


is capital receipt. Fixed capital is what the ownerturns into profit by keeping it in his possession viz.tangible and intangible assets employed. Circulatingcapital is what he makes profit of by parting with itand letting it change matters. It is worthwhile tomention that the same asset may be fixed capital inone business and circulating capital in anotherbusiness and, therefore, the nature of a receipt mayvary according to the nature of trade in connectionwith which it arises.

It is well-settled that in order to find out whether areceipt is a capital receipt or revenue receipt, it hasto be seen what it is in the hands of the receiver andnot its nature in the hands of the payer. In otherwords, the nature of the receipt is determinedentirely by its character in the hands of the receiverand the source from which the payment is madehas no bearing on the question.6 Therefore, itfollows that even if the amount is paid out of capital,it may partake of the character of a revenue receiptin the hands of the recipient. Payment received onthe redemption of debentures, held as investments,is a capital receipt in hands of the recipient, even ifthe company makes payment out of its profits.Further, the motive of payer is not relevant whiledeciding whether a particular receipt is revenue orcapital in nature.

A receipt in lieu of source of income is capitalreceipt. A receipt in lieu of income is revenuereceipt. For instance, compensation for loss ofemployment is a capital receipt, as it is in lieu ofsource of income whereas if trees are cut so thatthey regenerate in course of time, the amount ofreceipt would be revenue receipt. Further,periodicity of receipt is immaterial to distinguishbetween capital receipt and revenue receipt.

The distinction between the two is vital becausecapital receipts are exempt from tax unless they areexpressly taxable (for instance, capital gains aretaxable under section 45, even if they are capitalreceipts). On the other hand, revenue receipts aretaxable unless they are expressly exempt from tax(for instance, incomes exempt under section 10).In all cases in which a receipt is sought to be taxedas income, the burden lies upon the Income taxDepartment to prove that it is within the taxing

provision. Where, a receipt is in nature of income,burden of proving that it is not taxable because itfalls within an exemption provided in the Act, liesupon the assesseee.

The aforesaid principles have been superseded to avery large extent by section 17, 28 and 56(2). Onthe combined reading of the aforesaid principlesand sections, the following positions arise whereincapital receipts are specifically liable to tax asincome:

· Compensation for termination ofmanagement/office/agency :-

Any compensation due to or received inconnection with termination of management oroffice or agency or modification of terms andconditions relating thereto by any person whomanaging whole affairs of the company oragency, is taxable under section 28(ii), even itis capital receipt.

In the aforesaid provision, compensation istaxable under section 28, even if recipient is anemployee and his regular income is taxableunder section 15.

· Compensation for vesting of business/property in Government :-

Any compensation due to or received by anyperson in connection with the vesting of themanagement of any property or business in theGovernment or a corporation owned orcontrolled by Government, is taxable undersection 28(ii). It is immaterial whethercompensation is capital receipt or revenuereceipt.

· Compensation for termination of anybusiness contract: -

Any compensation due to or received by anyperson at or in connection with termination ofany contract relating to his business, shall bechargeable to tax under section 28(ii) under thehead “Profit and gains of business orprofession”. In such case, it is immaterialwhether compensation is capital receipt orrevenue receipt.



· Termination /modification of employmentcontract when compensation is receivedfrom employer:-

In a case not covered by section 28(ii), anycompensation due to or received by anindividual from his employer or formeremployer at or in connection with terminationor modification of terms of employment istaxable as profit in lieu of salary under section17(3)(i) and in such case the principles ofgoverning capital and revenue receipts are notrelevant.

· Termination /modification of employmentcontract when compensation is receivedfrom person other than employer:-

Any compensation or other payment due to orreceived by any person in connection withtermination of his employment or themodification of the terms and conditionsrelating thereto shall be chargeable to tax undersection 56(2)(xi) under the head “Income fromother source”. In such case the principles ofgoverning capital and revenue receipts are notrelevant.

· Compensation for refraining fromcompetition:-

Compensation paid for agreeing to refrain fromcarrying on competitive business in respect ofwhich an agency was terminated or loss ofgoodwill will prima facie be of the nature ofcapital receipt. Similarly, compensation forrestraint on exercise of profession is a capitalreceipt. However, such compensation ischargeable to tax under section 28(va).

· Forfeiture of advance money received incourse of negotiation for transfer of a capitalasset :-

Advance money received in the course ofnegotiation for transfer of an asset being capitalasset and later on forfeited by the recipient istaxable under section 56(2)(ix) under the head“Income from other source”. However, if theasset is not capital asset, then forfeiture of

advance money will not be taxable undersection 56(2)(ix).

· Assistance in the form of subsidy / grant :-

Finance Act inserted sub clause (xviii) insection 2(24) w.e.f. assessment year 2016-17.Subsidy/grant is taxable as income if conditionsspecified therein get fulfilled.

Apart of the above, the following few instances ofcapital receipts which are not liable to tax.

· Entrance fee:-

Non refundable entrance fees charged by clubas a one-time fee for enrolment is a capitalreceipt.

· Forfeiture of share application money :-

Amount of forfeited share application moneytransferred to separate account is a capitalreceipt and it cannot be taxed as income ofassesseee either under section 28(iv) or undersection 41(1).

· Alimony from husband:-

Amount realized by an assesseee as alimonyfrom her husband in terms of decree of divorce,is to be regarded as capital receipt not liable totax.

Section 2(24) defines the term “income” whichincludes revenue receipts as well as capital receipts.Instances of receipts except the mentionedhereinabove are stated as below.

· Profit and gains, dividend income, voluntarycontributions received by trust and institutioncreated for charitable or religious purposes.

· Perquisite, special allowances or benefits in thehands of employee.

· Benefit of perquisite to a representative assessee

· Insurance profit and Income of banking of aco-operative society.

· Capital gain income and winning from lottery

· Employees’ contribution towards providentfund or welfare funds



· Amount received under keyman insurancepolicy

The following few instances of revenue receiptswhich are liable to tax.

· Compensation for loss of trading asset :-

Compensation received in respect of loss of atrading asset or stock in trade is a revenuereceipt liable to be taxed.

· Forfeiture of security deposit: -

Forfeited security deposits would be revenuereceipts if they are related to the assesseee’strading activity.

Apart from the concept of real income stated above,there are certain provisions in the Act which levytax on notional incomes/deemed incomes. Underthe head “income from house property” provisionof section 23(1) specifies that annual value of anyproperty shall be deemed to be the same for whichproperty might reasonably be expected to be let fromyear to year. Under “Profit and Gains of Businessor Profession”, there are many provisions whicheither consider income by deeming notionalincomes and also various provisions to disallowexpenditures which are otherwise spent; forinstance: section 36(1)(va), 40(a)(i), 40(a)(ii), 40(b),43CA. In the similar manner, under the head“Capital Gain” provisions section 50C / 50CA goesagainst the concept of real income. These areinstances wherein there is no actual fund flow. Itcasts unnecessary burden upon the assessee toprove that no such notional income was earned atall.

Conclusion

Whether a particular receipt is capital or incomefrom business has frequently engaged the attention

of the courts. There is nothing in the income-taxAct laying down any legal criterion fordistinguishing between capital and revenuereceipts, nor does any definite and clear criterionemerge from English or Indian decisions on thesubject. It depends upon the facts or each casewhich must be considered for determining whethera particular payment should be held to bechargeable as income under the Income-tax Act ornot. It is well settled that the words of the statute,when there is doubt about their meaning, are to beunderstood in the sense in which they bestharmonize with the subject of the enactment andthe object which the legislature has a view. Theirmeaning is found not so much in a strictlygrammatical or ethnological property of language,nor even in its popular use, as in the occasion onwhich they are used, and the object to be attained.

(Footnotes)1 Bhagwan Dass Jain vs. Union of India (1981) 5

Taxmann 7 (SC)2 CIT vs. Shaw Wallas & Co. 6 ITC 178 (PC)3 Toyo Engineering India Ltd. vs. Joint CIT

(2006) 100 TTJ (Mum) 3773, 3794 Sri Hiranyakeshi Sahakari Sakhare Karkhane

Niyamit vs. ITO (1986) 15 ITD 343, 358-59(Mad)

5 Moti Lal Sharma vs. Ass. CIT (1992) 42 ITD653, 659-60 (Del.)

6 CIT vs. Kamal Behari Lal Singha (1971) 82 ITR460 (SC)

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As we are aware, the Government is trying to collectmore and more data by way of TDS and SFT so thatmore tax net can be established. With this vision andaim, from 01/07/2022, new TDS provision has beeninserted where, 10% TDS is required to be deductedin case of any perquisite or benefit provided toanother person in cash or in kind where the value ofsuch benefit or perquisite is above 20000/-.

History and related Legal Provisions

Section 28 (IV) of the Act:

The value of any benefit or perquisite, whetherconvertible into money or not, arising from businessor the exercise of a profession.

Section 194R of Income Tax Act:

(1) Any person responsible for providing to aresident, any benefit or perquisite, whetherconvertible into money or not, arising frombusiness or the exercise of profession, by suchresident, shall, before providing such benefit orperquisite, as the case maybe, to such resident,ensure that tax has been deducted in respect orsuch benefit or perquisite at the rate of tenpercent of the value or aggregate value of suchbenefit or perquisite.

Provided that in a case where the benefit orperquisite, as the case may be, is wholly in kindor partly in cash and partly in kind but suchpart in cash is not sufficient to meet the liabilityof deduction of tax in the respect of whole ofsuch benefit or perquisite, the personresponsible for providing such benefit orperquisite shall, before releasing the benefit orperquisite, ensure that tax required to bededucted has been paid in respect of the benefitor perquisite:

Provided further that the provisions of thissection shall not apply in case of a residentwhere the value or aggregate of value of thebenefit or perquisite provided or likely to beprovided to such resident during the financialyear does not exceed twenty thousand rupees:

Provided Also that the provisions of this sectionshall not apply to a person being an individualor a Hindu Undivided Family, whose totalsales, Gross Receipts, or in case of profession,during the financial year immediatelypreceding the financial year in which suchbenefit or perquisite, as the case may be, isprovided by such person.

(2) If any difficulty arises in giving effect to theprovisions of this section, the Board may, withthe previous approval of the CentralGovernment, issue guidelines for the purposeof removing the difficulty.

(3) Every guideline issued by the Board under subsection (2) shall, as soon as may be after it isissued, be laid before each House ofParliament, and shall be binding on the incometax authorities and on the person providing anysuch benefit or perquisite.

Explanation:- For the purposes of this section,the expression “person responsible forproviding” means the person providing suchbenefit or perquisite, or in case of a company,the company itself including the principalofficer thereof.

Noteworthy points

1. The benefit or perquisite recipient should beresident and the payer can be resident may notbe resident. Let us analyse few situations.

CA. Akshat [email protected]

Section 194R : TDS onbenefits or perquisite


Payer Recipient TDS required u/s 194R?

Resident Resident Any person Yes

Non resident Resident Any person Yes

Resident (Individual/HUF having Turnover or Resident Any person YesGross receipt more than 1 Cr)

Resident (Individual/HUF having Turnover or Resident Any person No (Proviso 3 of section 194R)Gross receipt Less than 1Cr)

Resident Non Resident No (Section 195 will beapplicable)

2. Meaning of Benefit or Perquisite: Meaning ofbenefit or perquisite is not given in Section194R. Can we borrow the meaning ofperquisite from section 17 (2)? Yes, as perinterpretation rules, where the meaning isgiven anywhere in act, the same can beborrowed. However one rider is here thatSection 17(2) is for Salary and applicable tosalary head only. Whereas the section 194Ris applicable in case where the benefits orperquisites are arising from business or theexercise of profession. I.e. it is covered underchapter business and profession. Hence, thedefinition of section 17 (2) will be helpful ornot only time will tell us. There are fewexamples which can be considered as benefitor perquisites arising from Business orexercise of profession is as under:

a. Foreign trip to the person in case ofAchievement of Turnover/Target: We allare aware about the Supreme Court recentjudgement on freebies to doctors by thepharma industries. However, if any free tripis sponsored by the businessman in caseof specified turnover is achieved, then itwill surely come under purview of Section194R of the Income Tax Act and TDS willbe applicable.

b. Winner of prize in case of online Games:In case of online games like Dream 11, ifany winner wins the prizes then can it becovered u/s 194R? One can take a viewthat the same is not arise on the basis ofbusiness/ profession. However, the

department can take strict view anddisallow the thirty percent of value undersection 40 (a) (ia) and to safeguard againstthe same if the TDS is done on safer sidethen one more controversy will arise wherethe recipient will get the Tax credit only ifit has been included in the income of therecipient. Hence, if the TDS is deductedwhen no TDS is required, to get the creditof such TDS, the recipient will need toinclude the same in Income. However, itis questionable whether the recipient willget credit of TDS even if it is not includedin income or the TDS amount will be thecost to the recipient. This will openPandora box and litigation may be arise infuture in this particular issue.

c. Turnover discount: Can Turnover discountbe considered as benefit or perquisite? Inour opinion No. It is surely arguable thatthe discount will reduce the value ofsupply, and it is not part of benefit. This isthe same controversy is going on in GST.And the same issue will come in this sectionalso. Cement and Consumer industries willbe hit by this controversy.

d. Gifts in Diwali / Festival: Gifts, perks orbenefits provided on some specialoccasions like festivals, marriageoccasions, etc. to supplier, purchaser Willit be liable for TDS or not? It is clear that ifthe benefit/ perquisite is arise out ofbusiness or profession then only the samewill be liable for TDS.

Section 194R : TDS on benefits or perquisite


Let us check the question with different angle.If the gifts are given to employees in anyoccasion and if below 5000 then it is not taxableas per rule 3 of Income Tax Act. Hence, thevalue of gift will be considered as nil only if itis below 5000/-. Hence, it is taxable and if werefer Section 192 then TDS is also applicable.The same ratio is applicable in Section 194Rand TDS will be applicable in case of gifts /perquisites given to supplier and purchaser.However, another view can be taken where theTDS is deducted against the Sale under section194H under Commission.

3. Consequences of Non Compliance

a. If the required TDS is not deducted or TDSdeducted but not paid within time theninterest is payable on applicable rate. IfTDS is late deducted then interest @1%per month or part of the month is to be paidand if the TDS is deducted but not paidthen 1.5% interest per month or part of themonth. We are very much conversant withthis interest provision.

b. Also, if the TDS not deducted or deductedand not paid till the due date of filing ofreturn, Section 40 (a) (ia)can come intopicture and thirty percent of benefit valuecan be disallowed. The section isreproduced as below.

40. Notwithstanding anything to thecontrary in sections 30 to 38, thefollowing amounts shall not bededucted in computing the incomechargeable under the head “Profitand gains of business andprofession”,-

………………..will

(ia) thirty per cent of any sum payable toa resident, on which tax is deductibleat source under Chapter XVII-B andsuch tax has not been deducted or,after deduction has not been paid onor before the due date specified insub-section (1) of section139:……………

Section 194R provides the TDS is required tobe deducted on the benefit or perquisites arisingout of business/ profession. I.e. The assessee isgoing to claim the expenses as deductibleexpenses in profit and loss account and out ofthe same thirty present will be disallowed if theTDS is not deducted/ not paid according tosection 40 (a) (ia).

In 3CD report, the auditor is required to disclosewhether any sum is disallowable under section40 (a) (ia) (supra). Hence, based on thecomment on the auditor in 3CD, the CPC willprocess the return and automatically willdisallowed the required portion as per act.

Conclusion

Utmost care is required to be taken by Assesseeand Auditor both, in case of scrutinising the profitand loss account and if there is any benefit orperquisite given in the course of Business/Profession, then TDS should be deductedaccordingly. Also, it is expected from Governmentto clarify the meaning of benefits and perquisites toavoid future litigations.

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Section 194R : TDS on benefits or perquisite


Tax effect for maintainability of appeals

When what was assailed by the Revenue was thepenalty amounting to Rs. 29,02,743 and not thepenalty reduced by the Commissioner (Appeals).Therefore, it cannot be said that the appeal beforethe High Court at the instance of the Revenuechallenging the order passed by the ITAT was notmaintainable in view of CBDT Circular, dated 10-12-2015.

(Late Gyan Chand Jain v. CIT [ Civil Appeal No.2704 of 2022 19 April, 2022]

Foreign exchange fluctuations-freshclaim-

i). The assessee not only claimed deduction inrespect of loss of Rs. 1,10,53,909 arising onaccount of exchange fluctuation, but also setup a fresh claim in respect of revenue expensesto the tune of Rs. 2,46,04,418, erroneouslycapitalised in the returns.

ii). As regards, the transaction of loan between theappellant and Commonwealth DevelopmentCorporation, the same was in the nature ofborrowing money by the appellant, which wasnecessary for carrying on its business offinancing. It was certainly not for creation ofasset of the appellant as such or acquisition ofasset from a country outside India for thepurpose of its business. In such a scenario, theappellant would be justified in availingdeduction of entire expenditure or loss sufferedby it in connection with such a transaction interms of section 37 of the Act. For, the loan iswholly and exclusively used for the purposeof business of financing the existing Indianenterprises.

Glimpses ofSupreme CourtRulings

4 iii). Further, it was not open to the ITAT toentertain such fresh claim for the first time.This submission needs to be stated to berejected.

iv). The observations in the decision in Goetze(India) Ltd. (284 ITR 323) at footnote No.10 itself make it amply clear that suchlimitation would apply to the ‘assessingauthority’, but not impinge upon the plenarypowers of the ITAT bestowed under section254 of the Act.

{Wipro Finance Ltd. v. CIT} [Civil Appeal No.6677 of 2008 . dt 12 April, 2022]

High Court concurring with order ofITAT but no reasons stated

As the impugned order passed by the High Courtis a non-speaking and non-reasoned order and eventhe submissions on behalf of the revenue are notrecorded, the impugned order passed by the HighCourt dismissing the appeal is unsustainable.

3.2 Under the circumstances, the impugned orderis hereby quashed and set aside. The matter isremanded to the High Court to decide anddispose of the appeal afresh in accordance withlaw and on its own merits. If the High Court isof the opinion that the proposed questions oflaw are not substantial questions of law andthey are on factual aspects, it will be open forthe High Court to consider the same inaccordance with law, however, the High Courtto pass a speaking and reasoned order afterrecording the submissions made on behalf ofthe respective parties.

[Pr. CIT v. Bajaj Herbals (P.) Ltd{Civil Appeal No. 2659 of 2022 dt.7 April, 2022}

Advocate Samir N. [email protected]

5 6


Amalgamation and Income Tax-assessment-question of fact

this Court notes and holds that whether corporatedeath of an entity upon amalgamation per seinvalidates an assessment order ordinarily cannotbe determined on a bare application of Section 481of the Companies Act, 1956 (and its equivalent inthe 2013 Act), but would depend on the terms ofthe amalgamation and the facts of each case.

The court, undoubtedly noticed SaraswatiSyndicate. Further, the judgment in Spice (supra)and other line of decisions, culminating in this court’sorder, approving those judgments, was also noticed.Yet, the legislative change, by way of introductionof Section 2 (1A), defining “amalgamation” wasnot taken into account. Further, the tax treatment inthe various provisions of the Act were not broughtto the notice of this court, in the previous decisions.

There is no doubt that MRPL amalgamated withMIPL and ceased to exist thereafter; this is anestablished fact and not in contention. Therespondent has relied upon Spice and Maruti Suzuki(supra) to contend that the notice issued in the nameof the amalgamating company is void and illegal.The facts of present case, however, can bedistinguished from the facts in Spice and MarutiSuzuki on the following bases.

The facts of the present case are distinctive, asevident from the following sequence:

1. The original return of MRPL was filed underSection 139(1) on 30.06.2006.

2. The order of amalgamation is dated 11.05.2007but made effective from 01.04.2006. It containsa condition Clause 220 - whereby MRPLsliabilities devolved on MIPL.

3. The original return of income was not revisedeven though the assessment proceedings werepending. The last date for filing the revisedreturns was 31.03.2008, after the amalgamationorder.

4. A search and seizure proceeding wasconducted in respect of the Mahagun group,including the MRPL and other companies:

5. That all the liabilities and duties of theTransferor Companies be transferred withoutfurther act or deed to the Transferee Companyand accordingly the same shall pursuant toSection 394 (2) of the Companies Act, 1956be transferred to and beco.

6. When search and seizure of the Mahagungroup took place, no indication was givenabout the amalgamation.

7. A statement made on 20.03.2007 by Mr. AmitJain, MRPLs managing director, duringstatutory survey proceedings under Section133A, unearthed discrepancies in the books ofaccount, in relation to amounts of money inMRPLs account.

8. The return apart from specifically beingfurnished in the name of MRPL, also containedits PAN number.

9. During the assessment proceedings, there wasfull participation on behalf of all transferorcompanies, and MIPL.

10. A special audit was directed (which is possibleonly after issuing notice under Section 142).Objections to the special audit were filed inrespect of portions relatable to MRPL.

11. After fully participating in the proceedingswhich were specifically in respect of thebusiness of the erstwhile MRPL for the yearending 31.03.2006, in the cross-objectionbefore the ITAT, for the first time (in the appealpreferred by the Revenue), an additionalground was urged that the assessment orderwas a nullity because MRPL was not inexistence.

12. Assessment order was issued undoubtedly inrelation to MRPL (shown as the assessee, butrepresented by the transferee company MIPL).11. Appeals were filed to the CIT (and a cross-objection, to ITAT) by MRPL represented byMIPL.

[Pr. CIT ... vs M/S Mahagun Realtors (P) Ltd dt5 April, 2022]

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Glimpses of Supreme Court Rulings

7


How the power to remand a case is to beexercised by Tribunal.Golden Gate Properties Ltd. V/s. Dy.CIT (2021) 435 ITR 258 (Karn)

Issue:

How should the power to remand a case beexercised by Tribunal?

Held:

The assessee was a public limited company engagedin the business of real estate projects. The assesseefiled its return of income for the assessment year2010-11 declaring loss. The return was selected forscrutiny and the details sought for were furnished.The Assessing Officer passed an order under section143(3) of the Income tax Act, 1961. The AssessingOfficer made an addition of Rs. 14,37,10,403/-being prior period expenses for the purposes ofdetermining the book profits under the provisionsof section 115JB of the Act. The assessee filed anappeal before the Commissioner (Appeals) who byan order deleted the addition. The Revenue filedan appeal before the Tribunal. The Tribunal set asidethe order of the Commissioner (Appeals) andremitted the matter to Commissioner (Appeals)

That it was evident that while passing the order,the Tribunal had not adverted to the reasoningassigned by the Commissioner (Appeals). The orderof remand was not justified.

Two conditions for reopening u/s 147.Garden Silk Mills Limited v/s Asst. CIT(2021) 435 ITR 351 (Guj)

Issue:

Which are the two conditions to be fulfilled forreopening u/s 147?

Held:

It is settled law that in order to assume jurisdictionunder section 147 of the Income Tax Act, 1961,where the assessment has been made under section143(3), two conditions are required to be satisfied.(a) The assessing Officer must have reason tobelieve that the income chargeable to tax haveescaped assessment. (b) Such escapement occurredby reason of failure on the part of the assessee either(a) to make a return of income under section 139or in response to the notice issued under sub section(1) of section 142 or section 148 or (b) to disclosefully and truly all the material facts necessary forhis assessment for that purpose.

Reassessment proceedings under section 147 of theAct cannot be resorted to in respect of income whichis the subject matter of an appeal, reference orrevision.

Reopening of assessment on change ofopinion.T. Stanes and Company Ltd v/s. Dy.CIT (No. 1) (2021) 435 ITR 533 (Mad)

Issue:

Whether reopening of assessment on change ofopinion is valid?

Held:

Invocation of section 148 for the purpose of theproviso to section 147 qua denial of adjustmentsunder section 72A(1)(a) by the DeputyCommissioner was inspired from a change ofopinion as the assessee had disclosed the basis onwhich it had claimed deductions in the returns ofincome and it was pursuant thereto that therespective assessment orders were passed by the

11

CA. Jayesh C. [email protected]

From theCourts

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Assessing Officer. Therefore, there was no materialsuppression of facts on the part of the assessee toeither truly or fully furnish the information that wererequired for completing the assessment. Thereforeinvocation of section 148 for the purpose of theproviso to section 147 was without jurisdiction.

Denial of claim on procedural formality.Craftsman Automation P. Ltd. v/s. CIT(2021) 435 ITR 558 (Mad)

Issue:

Whether a claim can be denied on lapse ofprocedural formality?

Held:

If an assessee is entitled to a benefit, a technicalfailure on the part of the assessee to claim the benefitin time, should not come in the way of grant of thesubstantial benefit that was otherwise availableunder the Income Tax Act, 1961 but for suchtechnical failure. The legislative intent is not towhittle down or deny benefit which are legitimatelyavailable to an assessee. The Assessing Officer isduty bound to extend substantive benefits whichare available and arrive at just tax to be paid.

The Commissioner ought to have allowed therevision application filed by the assessee undersection 264 and the assessee was entitled to partialrelief. Accordingly, the order of the Commissionerwas set aside and the Assistant Commissionerdirected to pass appropriate orders on the meritsignoring the delay on the part of the assessee infiling the revised return under section 139(5) andfailure to furnish the audit report.

Officer’s duty when substantial benefitsavailable to assessee.L. Cube Innovative Solutions P. Ltd.v/s. CIT (2021) 435 ITR 566 (Mad)

Issue:

What is the duty of A.O. when substantial benefitis available to the assessee?

Held:

The rejection of the revision application filed bythe assessee under section 264 was not justified as

From the Courts

the officers acting under the Income TaxDepartment were duty bound to extend thesubstantive benefits that were legitimately availableto an assessee. The rejection of the application forrectification by the Assessing Officer under section154 was unjustified, since the assessee was entitledto the substantive benefits under section 10B andthe delay, if any, was attributed on account of thesystem.

Notice to a non-existing entity.Tele performance Global Services v/s.Asst. CIT(2021) 435 ITR 725 (Bom)

Issue:

Whether a notice to a non existing assessee is valid?

Held:

Under an order dated February 11, 2011, a schemeof amalgamation of two companies TSPL with 1Ltd, was approved with effect from April 1, 2010,and since then TSPL ceased to exist. The successorcompany submitted returns and those were assessedfrom time to time in respect of subsequentassessment years. A notice dated March 30, 2019under section 148 of the Income Tax Act, 1961,for the assessment year 2012-13 in the name ofTSPL was issued by the Assessing Officer, withoutrealizing that the company was a nonexisting entity,directing it to file a return of income within thirtydays stating there was reason to believe that incomechargeable to tax had escaped assessment. Thenotice was void.

Order with a pre-set mind.Antony Alphonse Kevin Alphaonse v/s.ITO(2021) 435 ITR 735 (Mad)

Issue:

What is the effect of an order with a pre-set mind?

Held:

There was manifest violation of the principles ofnatural justice in passing the order before the timeprescribed for filing the reply by the assessee andconsidering such reply. The order had been passed

14

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with a pre-set mind. The order was quashed andthe matter was remitted to the Income Tax Officerfor passing a speaking order after considering theassessee’s reply. [Matter remanded].

Sec. 147/148 two conditions.Garvit Diamonds Pvt. Ltd. v/s. ITO(2021) 435 ITR 737 (Guj)

Issue:

Which are the two conditions for invokingjurisdiction u/s 147/148?

Held:

In order to confer jurisdiction under clause (a) ofsection 147 of the Income Tax Act, 1961 beyondthe period of four years, two conditions are requiredto be fulfilled, viz(i) the Assessing Officer musthave reason to believe that income, profits or gainschargeable to tax had been underassessed orescaped assessment, and (ii) the Assessing Officermust have reason to believe that such escapementor under assessment was occasioned by reason ofthe omission or failure on the part of the assessee tomake a return under section 149 of the Act or todisclose fully and truly all material facts necessaryfor the assessment of that year.

HUF: Applicability of Sec. 171.A.O. Ores v/s. ITO(2021) 436 ITR 3 (Mad)

Issue:

When can the provisions of Sec. 171 be applied inthe case of a HUF?

Held:

That during the lifetime of ARP, the deceased fatherof the assessee, the family was not assessed as aHindu undivided family. It was only where therewas a prior assessment as a Hindu undivided familyand during the course of assessment under section143 or section 144 it was claimed by or on behalfof a member of such family which was assessed asa Hindu undivided family that there was a partitionwhether total or partial among the members of such

family, that the Assessing Officer should make anenquiry after giving notice of enquiry to all themembers. Where no such claim was made, thequestion of making enquiry by an Assessing Officerdid not arise and only in such circumstances, wouldthe definition of “partition” in Explanation tosection 171 be attracted. The definition could notbe read in isolation. Where a Hindu family wasnever assessed as a Hindu undivided family, section171 would not apply even when there was a divisionor partition of property which did not fall withinthe definition. The notice issued under section 148to the estate of ARP (HUF) co-Parceners and theconsequential order issued in the name of theassessee as the karta were unsustainable.

Recovery of Demand: Direction:Restraint.Omkara Assets Reconstruction Pvt. Ltd.v/s. Asst. CIT (2021) 436 ITR 40 (Mad)

Issue:

How the Department should proceed for recoveryof tax?

Held:

In view of the fact that the main issues forconsideration in the appeal before the Commissioner(Appeals) under section 246A were limited largelyto the inclusion of unsecured loans and share capitalas part of the total income of the assessee, the courtdirected the expeditious disposal of the pendingappeal after providing a reasonable opportunity tothe assessee, including a personal hearing if sorequested. Until such time, the Department wasrestrained from recovering the demand pursuant tothe assessment order under section 143(3) read withsection 144B.

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Randox Laboratories India (P.) Ltd. v.ACIT 135 taxmann.com 341 (Bang)Assessment Year:2015-16Order dated: 4th January 2022

Basic Facts

The assessee was a wholly owned Indian subsidiaryof U.K based company. The assessee was engagedin import of reagents and diagnostic equipments(analyzers) from the parent company and sold themto independent third parties in India. During relevantassessment year, the assessee started purchasing thereagent in bulk and packed them in smallerquantities for sale in India. Also, in order to sale.The TPO rejected transfer pricing analysis done bythe assessee under RPM and proceeded todetermine the arm’s length price by applyingTNMM as the most appropriate method on groundthat the assessee was not merely a trader but wasalso engaged in research activity. Accordingly, theTPO made adjustments for internationaltransactions. The DRP upheld the decision of theTPO. On appeal to the Tribunal:

Issue

Whether where assessee resold goods importedfrom AE to third party Indian customerswithout any value addition, Resale PriceMethod (RPM) would be Most AppropriateMethod (MAM) to determine ALP of saidtransaction

Held

For sale of reagents, the assessee enters into specificagreements with third party customers. As per theterms of the agreement, the customer in India isrequired to purchase reagents from the assessee andin the event of such purchase, the assessee provides

them the analyzer for carrying out the chemicalanalysis with the reagents. As per the terms of theagreement, the analyzer is made available to thecustomer for a period of five years without any extracost. Further, as per the terms of agreement, theassessee is required to provide spares for theanalyzer and also provide services including repairs.The analyzers were kept with the third partycustomers since the assessee was undertaking aresearch regarding its products as per Indian normsfor clinical tests and to provide feedback to the HeadOffice. Thus, the analyzers were never sold to thethird-party customers who brought the reagentsfrom the assessee but were only installed in theirpremises for chemical analysis and research workfor a period of five years. After expiry of five-yearperiod, the WDV of the analyzers get reduced tozero and accounting entries to that effect are passedin the books. Thus, it was clear, the assessee ismerely purchasing reagents from its AE andreselling them to third party customers in Indiawithout making any value addition. As per theprovisions of rule 10B. more particularly sub-rule-1(b) of the aforesaid rule, RPM is applicable to acase where the price at which property purchasedor service obtained by an enterprise from the AE isresold or provided to an unrelated enterprise. Thegross profit margin of such a transaction is thereaftercompared to the gross profit margin of similarcomparable uncontrolled transactions after makingnecessary adjustment with regard to the expenditureincurred, functional and other differences, the arm’slength price is determined. Thus, in the facts of thepresent case, as the assessee has resold the goodsimported from the AE without any value addition,the most appropriate method for determining thearm’s length price is RPM and TNMM cannot be

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CA. Yogesh G. [email protected]

CA. Aparna [email protected]

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the most appropriate method in such type oftransaction. It was held that RPM is the MAM fordetermining ALP and the AO was directed tocompute the ALP after affording assesseeopportunity of being heard.

Meena Circuits (P.) Ltd. v. ACIT 135Taxmann.com 54 (Ahd)Assessment Year: 2015-16Order dated: 21st December 2021

Basic Facts

The assessee is engaged in the business ofmanufacturing of printed circuit boards. The returnof income for the year under consideration wasdeclaring total income at Rs. Nil. The said returnwas selected for scrutiny through CASS and anotice under section 143(2) of the Act along withnotice under section 142(1) of the Act was issuedby the AO to the assessee.

Issue I

Whether expenses relating to the earlier yearwere allowable in the year under consideration.

Held I

The ITAT noted from the details furnished by theassessee, the liability for the relevant expenses onaccount of AMC, professional fees and qualitycheck expenses had arisen and crystallized in theyear under consideration when the bills for thesame by the concerned parties were raised on theassessee. The ITAT therefore, found merit in thecontention of the assessee that, even though thesaid expenses pertained to the earlier year, theassessee was entitled to claim deduction for thesame in the year under consideration when theliability on account of said expenses had arisenand crystallized as a result of the bills/invoicesraised by the concerned parties. Insofar as the salepromotion expenses and commission expenseswere concerned, it was observed that thecorresponding sales in respect of which the saidcommission was payable had been made andaccounted for by the assessee in the earlier year

and the commission payable in respect of the saidsales was claimed as deduction in the year underconsideration on the basis that the proceeds of thesaid sale were realized in the year underconsideration and the said commission actuallybecame payable only when the proceeds in respectof the corresponding sales were actually realized.However, no documentary evidence either in theform of written agreement with the concernedagents or even in the form of any correspondenceto establish that the commission was payable onlyon realization of corresponding sale proceeds wasproduced before the ITAT. The ITAT therefore,was of the view that the sale promotion and salecommission expenses pertaining to the earlier werenot allowable in the year under consideration beingprior period expenses and the deduction claimedby the assessee for the same is not allowable eitherin law or even in the facts of the case. The groundof appeal of the assessee was thus partly allowed.

Issue II

Whether CENVAT Credit and service tax creditwritten off was allowable as deduction undersection 36(1)(vii) r.w. section 36(2) of the Act orin the alternate whether the same was allowableunder section 37 of the Act being the businessloss.

Held II

As per the ITAT the amounts in questionrepresenting the unutilized CENVAT and ServiceTax credit cannot be considered as trade debts ofthe assessee and deduction for the same on beingwritten off cannot be allowed under section36(1)(vii) r.w. section 36(2) of the Act. The ITATdid not allowable the same under section 37 on theground that nothing was brought on record toestablish that the unutilized CENVAT and ServiceTax credit amount in question had becomeirrecoverable during the year under considerationso that the same can be allowed as business loss inthat year. Accordingly order of the learned CIT(A)confirming the disallowance made by the AO onthis issue was upheld.

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Palogix Infrastructure (P.) Ltd v.ACIT135 taxmann.com 73(Kol)Assessment Year: 2010-11Order dated: 27 October 2021

Basic Facts

Assessee, engaged in the business of RailwaySiding Utilization Activity, filed return of income.The AO completed assessment after making variousadditions/disallowances. The CIT(A) confirmedsubstantially various additions/disallowances madeby the AO. Aggrieved by the order, the assesseehad preferred appeal before the Tribunal.Meanwhile, as assessee was in default with banksand taken before NCLT under Insolvency andBankruptcy Code, 2016, resolution plan of theresolution applicant was approved by theCommittee of Creditors and by NCLT. Theassessee raised additional ground and submitted thatin the light of the order of the NCLT and peculiarfacts of the case, the Tribunal would ascertain thatrealisable tax liability of assessee for the assessmentyear under consideration, i.e., assessment year2010-11 as Nil.

Issue

That in the light of the order of the Hon’bleNational Company Law Tribunal and peculiarfacts of the case, Hon’ble Income Tax AppellateTribunal shall ascertain that realisable taxliability of assessee for the assessment year underconsideration i.e. A.Y. 2010-11 is NIL.

Held

The order passed by the National Company LawTribunal under section 31 of the Insolvency andBankruptcy Code, 2016 has overriding effect overanything inconsistent contained in the Income-taxAct and it shall be binding on all the respectiveentities including other stakeholders, which includeCentral Government, State Government, and otherLocal Bodies. As per the said order delivered inthe case of the assessee affirming the ResolutionPlan, all dues under the provisions of the Income-tax Act including taxes, duty, penalties, interest,fines, cesses, unpaid tax deducted at source/taxcollected at source, whether admitted or not, due

or contingent, whether part of above claim ofincome tax authorities or not, whether part of taxdue diligence finding or not, asserted or unasserted,crystallized or uncrystallized, known or unknown,secured or unsecured, disputed or undisputed,present or future, in relation to any period priorto the acquisition of control by the resolutionapplicant over the company pursuant to this planshall be extinguished by virtue of the order ofthe adjudicating authority and the companyshould not be liable to pay any amount againstsuch demand. Further, all assessments or otherproceedings pending in case of the company, onthe date of the order of the adjudicating authorityrelating to the period prior to that date, shallstand terminated and all consequential liabilities, ifany, should be deleted and should be considered tobe not payable by the company by virtue of theorder of the adjudicating authority. Furthermore, allnotices proposing to initiate any proceedings againstthe company in relation to the period prior tothe date of adjudicating authority order andpending on that date, shall be considered deletedand should not be proceeded against. Post the orderof the adjudicating authority, no reassessment/revision or any other proceedings under theprovisions of the Income-tax Act should be initiatedon the company in relation to period prior toacquisition of control by the resolution applicantover the company pursuant to this plan and theassessee-company should not be liable to payagainst such demand. Since the present appealinvolving assessment year 2010-11 related to theperiod prior to the acquisition of control by theResolution Applicant over the assessee-companypursuant to this plan, all dues under the provisionsof the Act including taxes, duty, penalties, interestfines, cesses, etc. shall stand extinguished by virtueof the order of the NCLT and all proceedingsincluding the appellate proceedings pending on thedate of the order of the NCLT including the presentproceedings relating to the prior period to the dateof order shall stand extinguished and allconsequential liabilities, if any, should be deletedand should be considered to be not payable by thecompany. In the light of the order of the NCLT

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dated 12-2-2018 passed in assessee’s case, the ITATrestore the case for the assessment year underconsideration to AO for taking necessary action inaccordance with law. In the result, the appeal ofthe assessee is treated as allowed.

Mahesh Pratapsingh Asher v. ACIT135taxmann.com 74 (Mum)Assessment Year: 2013-14,Order dated: 16th December 2021

Basic Facts

The assessee a resident individual filed his returnof income. Subsequently, the assessee also filed arevised return of income. In course of assessmentproceedings, the AO noticed that in the revisedreturn of income the assessee had reduced theamount of long term capital gain When called uponto explain the reason for doing so, the assesseesubmitted that subsequent to sale of property anotherparty claimed ownership of the property sold.Therefore, the buyer filed a suit for declaration oftitle. Ultimately, the dispute was settled by virtueof consent terms approved by the High Court andas per the terms of the consent decree, the assessee,being a co-owner having 20 per cent share in theproperty, contributed an amount of Rs.80 lakhs outof the total amount paid to the buyer. Thus, it wassubmitted by the assessee, since the amount waspaid in connection with the transfer of the capitalasset, it was allowable under section 48(i). The AO,however, was not convinced with the submissionsof the assessee. He observed that the considerationreceived by the assessee had already beenmentioned in the deed of conveyance dated 18-12-2012 and there was no specific direction of the Courtto pay further compensation to the buyer. Therefore,he disallowed the deduction claimed of Rs.80 lakhsand computed long term capital gain accordingly.On appeal, the CIT(A) also sustained thedisallowance so made. On appeal to the Tribunal:

Issue

Whether amount paid as per consent termsapproved by the High Court were allowable asexpenditure u/s 48 while computing long termcapital gains.

Held

In view of the dispute in ownership of the propertyand for declaration of title, the buyer, filed a suit .The suit was decided by the High Court vide inaccordance with the consent terms. As per the orderof the High Court and the consent terms formingpart of the order reveals that the settlement of disputewas on the terms that ‘plaintiff Nos. 2 to 11 (theassessee and other co-owners) would pay plaintiffNo.1, ‘C’ a sum of Rs.4 crores. Assessee’s share inthe property being to the extent of 20 per cent, hecontributed a sum of Rs.80 lakhs. Thus, it is a facton record that as per the consent terms approvedby the High Court, assessee paid a sum of Rs.80lakhs to the buyer ‘C’. Therefore, as per the ITAT,the payment made by the assessee is established onrecord. As per the ITAT, a reading of section 48(i)makes it clear that expenditure incurred wholly andexclusively in connection with transfer of the capitalasset is allowable as deduction. Thereafter the ITATreferred to the decision in case of CIT v. ShakuntalaKantilal [1991] 190 ITR 56 (Bom), wherein theHigh Court had held, the expression ‘in connectionwith such transfer’ appearing in section 48(i) ismuch wider than the expression ‘for the transfer’.The Court had held, any amount of payment whichis absolutely necessary to effect the transfer will bean expenditure covered by section 48(i). Thus, asper the ratio laid down in the aforesaid decision,any amount paid for removing encumbrance withoutwhich the sale or transfer could not be effected, isallowable as deduction under section 48(i). As perITAT similar view has been expressed by theMadras High Court in case of V Lakshmi Reddy v.ITO [2010] 8 taxmann.com 147/[2011] 196Taxman 78/333 ITR 359. Further the jurisdictionalHigh Court in case of CIT v. Abrar Alvi [2001]117 Taxman 95/247 ITR 312 (Bom.) Accordingly,as per ITAT in the facts of the instant case, thepayment made by the assessee to ‘C’ is certainlyfor removing encumbrance and perfecting the titleover the property sold. Otherwise, the transactionwould have failed. Thus, in the light of the ratiolaid down in the decisions cited, the ITAT held thatthe amount paid by the assessee to ‘C’ is anexpenditure in connection with transfer of a capital

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asset as per section 48(i); hence allowable.Accordingly, the addition was deleted. In the result,appeal was allowed.

MRS Sikha Sanjaya Sharma V DeputyCommissioner of Income 137taxmann.com 214 (Ahm)Assessment Year: 2016-17Order dated: 13th April 2022

Basic Facts

The assessee, a resident individual, had filed herreturn of income declaring, amongst others Long-term capital gains (LTCG) earned on sale of equityshares [Securities Transaction Tax (STT) paid] andexempt under section 10(38) of the Act andclaiming carry forward of long-term capital loss(LTCL) [non-STT paid] and short-term capital loss(STCL). During the course of the assessmentproceedings, the AO set off the LTCL (non-STTpaid) and STCL against the LTCG (STT paid)exempt under section 10(38) of the Act and thus,reduced the quantum of carried forward losses.Aggrieved, the assessee filed an appeal with theCIT(A), who rejected the assessee’s appeal andupheld the AO’s order on the basis that Section 70of the Act nowhere mentioned that STCL andLTCL could not be set off against the exemptedLTCG. Aggrieved, the taxpayer filed an appealbefore the ITAT.

Issue

Whether the short term capital loss arising onsale of shares not subjected to STT can be setoff against long term capital gains subjected toSTT which is exempt from tax under section10(38) of the Act

Held

The interpretation of the provisions as per ITATare that the tax is payable on total income. The totalincome has to be computed in the manner laid downin the Act. Chapter-III of the Act prescribes incomeswhich are not to be included in total income whichincludes section 10(38) of the Act. Chapter–IV ofthe Act mandates classification of incomes undervarious heads for the purposes of charge of income-

tax and ‘computation of total income’. The effectof section 14 of the Act (relating to heads of income)was that only those incomes which form part ofTotal Income, can only be classified and computedunder various heads. In other words, the incomeswhich do not form of total income (covered underChapter-III, practically called “exemptedincomes”), are out of consideration of section 14as well as the computational scheme of variousheads prescribed in section 15 to 59 of the Act.Thereafter the scheme of set-off and carry forwardof losses prescribed in section 70 to 80 of the Acttriggered only for those losses or incomes whichhad been computed under various heads asprescribed. From the scheme as prescribed in theAct, it was clear that the exempted incomes fallingunder Chapter-III of the Act did not enter into thecomputation of total income itself and hence, suchincomes were not available for set-off of any lossunder section 70 to 80 of the Act. In view of theabove, the ITAT allowed the assessee’s appeal andheld that the assessee had rightly claimed the carryforward of LTCL and STCL without setting offagainst the exempted LTCG (STT paid).

B.T. Global Communications India PvtLtd v. DCIT TS-209-ITAT-2022 (Del)Assessment year: 2015-16,Order Dated: 23rd March 2022

Basic Facts

The assessee is engaged in providing networkconnectivity services and has obtained InternationalLong Distance, National Long Distance andInternet Service Provider license from theDepartment of Telecommunication. During AY2015-16, it paid network connectivity charges to acompany based in United Kingdom (B Co.) andclaimed the same as infrastructure cost. The assesseehad not deducted tax at source (TDS) from thepayment for network connectivity services to BCo., as B Co. did not have a permanentestablishment (PE) in India and the payment wasneither in the nature of royalty nor fees for technicalservices (FTS). In the course of assessmentproceedings, the AO treated the payment made to

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B Co. as royalty within the meaning of clause (iii)of Explanation 2 to section 9(1)(vi) of the Act onthe basis that the assessee had entered into anagreement, amongst others, with B Co. for provisionof telecommunication services. As per AO’sopinion, the assessee er was providingtelecommunication services in India by using thetelecommunication/ networking skill of B Co. Theprovisions of Telegraph Laws (Amendment Act,1961), wherein telegraph is defined in section 3(1)of the said Act, was applicable and the contentionof the assessee that it has not been using anyapparatus provided by B Co. was not acceptable.As per the explanation to section 195 of the Act,TDS was to be done irrespective of the fact whetherthe non-resident has any business connection orpresence in India or not. Accordingly, the AOdisallowed the payment made to B Co. undersection 40(a)(ia) of the Act for not deducting TDSunder section 195 of the ITA.

Issue

Whether network connecting charges are in thenature of royalty or Fees for technical servicesunder the provisions of the Act & DTAAbetween India & UK

Held

The ITAT noted that as per the Agreement betweenB Co. and the assessee, the assessee had installedits own equipment in India for providing necessaryband width services to its Indian customer. Thetelecom services of the non-resident service providerwere procured only to achieve the foreign leg ofthe connectivity. The assessee was required todevelop, operate and maintain alltelecommunication network within India. Therewas no equipment of non-resident service providerin India. As per the Tribunal it has to be seen

whether the assessee had any right to use equipmentfor it to be encompassed under the definition ofroyalty under Article 13 of the India-UK tax treaty.There was a difference between an agreement thatgave “Right to use equipment” and an agreementwhich involved provision of services through useof equipment by service provider. As per theagreement, equipment in India were owned by theassessee only and B Co. did not own any equipmentin India. The arrangement between the assessee andB Co. was in the nature of service contract pursuantto which B Co. was responsible for provision fortransmission of telecommunication services outsideIndia. The network of B Co. including the relatedequipment was used by B Co. Thus, for provisionof network connectivity services of the assessee inrelation to its subscribers, no access/controlwhatsoever in relation to such network, anyequipment was provided to the assessee. Thus, theassessee did not obtain or receive any right to usethe networking of B Co. The payment was toreceive international leg of connectivity service andnot right to use any equipment of B Co. The DelhiHC in an earlier decision, Asia SatelliteTelecommunications Co. Ltd. v. DIT [2011] 9taxmann.com 168 (Delhi HC) had held that wherethe customer did not use equipment or process ofequipment itself, payment could not be termed asroyalty for use of a process or equipment. In viewof the above, the ITAT concluded that the paymentmade for connectivity services was not royalty interms of Article 13 of India-UK tax treaty and theaddition made by the AO was to be deleted.

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Tribunal News


In this issue, we are giving gist of AhmedabadTribunal decision in the case of RameshbhaiArvindbhai Patel, Vadodara in the matter ofmodality as to how the distance of an agriculturalland from municipality limits is to be measured forthe purpose of deciding whether it is a capital assetliable to capital gain tax or not. In the practicalsituations, many a times, we are faced with the issueas to whether whose certificate about the distanceof a particular land from the limits of the localmunicipality should be considered as valid fordetermining whether such agricultural land fallswithin the definition of ‘capital asset’. Though thedecision does not conclusively decide as to whosecertificate should be considered for determining theabove issue, the decision refers to quite a numberof cases which throw light on the above issue.

We hope the readers would find the same useful.

Annexure

In the Income Tax Appellate TribunalAhmedabad “SMC” Bench

Before Shri Waseem Ahmed,Accountant Member

AndShri Siddhartha Nautiyal, Judicial Member

ITA Nos.458 & 459/Ahd/2019Assessment Year: 2012-13 & 2013-14

Rameshbhai Arvindbhai Patel Vs. The ITO,Vadodara. Vadodara.PAN: AVZPP5102A(Applicant) (Respondent)

Assessee by : Shri P.B. Parmar, A.R.Revenue by : Shri Umesh Agarwal, Sr. DR

Date of hearing : 05-05-2022Date of pronouncement : 17-05-2022

GIST Only

Facts of the Case:

1. These two appeals were filed by the assesseeagainst the order of the Commissioner ofIncome Tax, (Appeals), Vadodara in which themain issue was about taxability on transfer ofagricultural land for Assessment Years 2012-13 and 2013-14. There were other issues alsobut for the present discussion, we confineourselves to the facts about the main issue abouttaxability of capital gain arising on transfer ofagricultural land.

2. For Asst. Year 2012-13, the assessee soldagricultural lands situated at village Kotambi,Bhaniyara and Bhavpura for total considerationof Rs.10,30,200/-. The gain on sale of suchagricultural lands amounting to Rs.6,60,504/-was considered exempt by the assessee on theground that these said agricultural lands at thetime of their sale were situated beyond 8 kmfrom the local limits of Vadodara MunicipalCorporation (VMC). The Learned AssessingOfficer, however, considered the capital gainon sale of land at Bhavpura and Baniyaravillage as taxable on the ground that these landswere situated within the limit of 8 km fromVMC, and hence, are capital assets. For thispurpose, the Assessing Officer on the certificatefrom Town Planner, Vododara UrbanDevelopment Authorities’ letter, specifying thearea and distance held that the same falls withinthe limit of 8 km from the local limits of VMC,and hence, they are capital assets, and hence,the provisions of section 50C can be invokedin respect of such sale.

CA. Sanjay R. [email protected]

UnreportedJudgements


3. Before C.I.T. (Appeals), the assessee succeededpartly in respect of Short Term Capital withrespect to land sold in Bhavpura village, whereC.I.T. (Appeals), on the basis of Google Maps,considered that said land falls beyond 8 km fromthe local limit of VMC. However, he confirmedthe other additions made for Long Term CapitalGain in respect of Bhaniyara village. In theremand report called for by C.I.T. (Appeals),the Assessing Officer has given a report of theExecutive Engineer of Vadodara city, whereinhe had mentioned that both Bhaniyara andBhavpura village are within VUDA limit, andhence, they are capital assets. The C.I.T.(Appeals), therefore, directed the A.R. of theassessee to verify the distance of respectiveplaces by taking help from Google Map. Theassessee found out from the Google Map thatvillage Bhavpura is beyond limit, and hence,C.I.T. (Appeals) granted relief in respect ofShort Term Capital Gain for Bhavpura land.The assessee carried the matter to the Tribunalin respect of Long Term Capital Gain in respectof the sale of agricultural land at villageBhaniyara.

4. Before the Tribunal, the assessee produceddistance certificate as well as populationcertificate issued by Talati cum Mantri in respectof the land at Bhavpura village and alsoattached the Google Map showing that the saidland falls beyond 8 km from the local limits ofthe municipality. The A.R. contended that theLearned C.I.T. (Appeals) has only givenweightage to the certificate issued by ExecutiveEngineer, Vadodara; whereas, it is the “Talaticum Mantri” which was the authority oncertifying the distance, and therefore, theircertificate should have been considered byC.I.T. (Appeals).

Held:

5. The Tribunal, after considering the rivalcontentions, observed that whether the land soldin village Bhaniayara is beyond the prescribedlimit of 8 km is a question of fact, to be decidedby the competent authority. The Income TaxAct does not specify as to who is the competent

authority to decide or adjudicate upon the issueof distance of agricultural land and themunicipality. They, thereafter, referred to thefollowing decisions:

(i) Rita Rajkumar Kochhar v. ITO [2017] 81taxmann.com 47 (Mumbai), where theTribunal held that certificate of DivisionalEngineer, PWD, Panvel certifying thedistance of land is valid.

(ii) Commissioner of Income Tax, Faridabadv. Lal Singh [2010] 8 taxmann.com 114(Punjab & Haryana) where the Courtaccepted the contention that the villageTehsildar working under the StateGovernment, is competent to measure thedistance of the land from the municipallimits.

(iii) CIT v. Smt. Sakunthala Rangarajan [2016]74 taxmann.com 94 (Madras) where theHigh Court held that the certificates of therevenue authorities were competent tomeasure the land and distance, and whosereports are accepted by the Governmentfor demarcation of the limits of an area andthe certificate of the Public TransportCorporation Ltd., should be givenweightage.

(iv) ACIT v. Alkesh Kantilal Patel /I.T.A.No.4270/Mum/2015 where it was held thatcertificate from Executive Engineer,Ahmedabad and certificate of Sarpanch ofthe Village, cannot be relied upon sincethey are not competent authority asprescribed under law and it is the villageTehsildar who is the competent authorityto issue certificate.

6. The Tribunal, thus, found that there is nospecific authority who has been designated asbeing the “competent authority” to measuredistance between the land sold and themunicipal limits, and thereafter, held that sincethere is no prescribed authority, they are unableto accept the assessee’s argument that the report

Unreported Judgments

Continued to page 112


CA. Kaushik D. [email protected].

Controversies

Issues

Whether any expense claimed as deduction whichis not accepted or acceptable by the Revenue butthere is no concealment of income or incorrectparticulars have been filed by assessee or any bonafide mistake on the part of the assessee can attractpenalty under Section 271(1)(c) of the Income-taxAct, 1961?

Extract of the Relevant Provision

As per the provisions contained in the Section271(1)(c) of the Income-tax Act, 1961, if theAssessing Officer or the Commissioner (Appeals)or the Principal Commissioner or Commissioner inthe course of any proceedings under this Act, issatisfied that any person has concealed theparticulars of his income or furnished inaccurateparticulars of such income, he may direct that suchperson shall pay by way of penalty, in addition totax, if any, payable by him, a sum which shall notbe less than, but which shall not exceed three times,the amount of tax sought to be evaded by reason ofthe concealment of particulars of his income.

Proposition

Where Revenue has not accepted the claim ofdeduction of an assessee, but there is no proof ofconcealment of income or furnishing of incorrectparticulars on the part of assessee, then the penaltyunder Section 271(1)(c) of the Act shall not beattracted.

Facts of the case

The assessee (Dhariwal Industries Ltd.) engagedin manufacturing of Pan Masala, rawa, atta, maidaand salt, sale of mineral water and power generationby wind mills. Revenue filed an appeal against theassessee for the AY 2003-04 and initiated the

assessment u/s 143(3) of the Act. Post completionof the assessment, the Assessing Officer (A.O.) alsoinitiated a penalty of INR 3,68,00,000 u/s 271(1)(c)of the said Act with respect of the followingadditions:

1. Dis-allowance u/s 80IA restricted to gross totalincome——INR 35,05,981

2. Rejection of assessee’s claim that sales taxincentive is in nature of capital receipt andtherefore not taxable —— INR 7,28,71,527

3. Addition to the total income on account of itemsnot considered to be eligible for 100%depreciation—— INR 2,37,05,481

Being aggrieved with the proceedings executed bythe A.O., the assessee filed an appeal withCommissioner of Income Tax (Appeals)-I [CIT(A)], Pune.

View against the Proposition

In the present case, Assessing Officer is of the viewthat the assessee has furnished incorrect particularswith an aim of concealing income and evading tax.Thus he has initiated penalty u/s 271(1)(c) on thebasis of certain expenses claims which he considersunacceptable.

View in favor of the Proposition

Honorable Supreme Court in the case of CIT,Ahmedabad v/s Reliance Petro Products Pvt.Ltd, held that for imposing penalty u/s 271(1)(c)of the said act, it is mandatory that certainconditions like concealment of particulars ofincome or furnishing incorrect information of theincome, exist. Mere existence of an expense forwhich the deduction claim is not acceptable by theRevenue shall not be enough to impose a penaltyu/s 271(1)(c).


Summation

CIT (A), Pune deleted penalty imposed by the A.O.relating to the Points 1 and 2 (reproduced above)but upheld the penalty relating to the point 3. Bothparties, being aggrieved with the decisions takenby CIT (A), further filed an appeal before IncomeTax Appellate Tribunal (ITAT).

ITAT gave an affirmation to the decision taken byCIT (A) relating to Points 1 and 2 and deleted thepenalty relating to the Point 3.

The basis of the decisions taken by CIT (A) andITAT are as follows:

1. As per the Point 1 reproduced above theassessee was disallowed deduction u/s 80-IAby the A.O. having a view that Gutkhamanufactured by the assessee was coveredunder the item 2 of the 11th Schedule of thesaid Act. The assessee appealed against theview with reference to the judgment given bythe Ahmedabad Bench of ITAT in the case ofKothari Products Ltd. v/s ACIT which wasin force and inter alia held that Pan masalacontaining Tobacco cannot be regarded astobacco preparation (covered under item 2 ofthe 11th schedule). All the relevant details weredisclosed by the assessee in the return ofincome thus no concealment of income orincorrect furnishing of particulars took place.

2. As per Point 2 reproduced above the assesseeclaimed that the sales incentives were of capitalnature thus not taxable and this claim was madewith reference to a decision given by a Specialbench of ITAT, Mumbai in case of DCIT v/sReliance Industries Ltd. As per facts of thecase, assessee in computation of incomeaccompanying a revised return filed haddisclosed the details relating to the receipt of

subsidy by way of sales tax exemption and itstreatment. Thus the conditions required toimpose penalty u/s 271(1)(c) were not fulfilled.

3. As far as Point 3 is concerned, CIT(A) heldthe penalty imposed by A.O. but ITAT deletedthe penalty imposed by A.O., the reason being,in the previous Assessment Year no penalty wasimposed on a similar disallowance. In thepresent Assessment Year, the facts beingidentical, penalty could not be levied for thesimilar disallowance. The Tribunal further gavereference to the case of C.P. Mohan v/s DCITto support the decision. The assessee admittedthat a mistake was made by him in applyingthe rate of depreciation at the rate 100% insteadof the applicable 80%. This being a bona fidemistake the Tribunal accepted the explanationand recorded it.

In my humble opinion, after studying the abovecase, no penalty u/s 271(1)(c) should be imposedwhen complete and accurate particulars have beenfiled by the assessee. If any expense is unacceptableby the Department, it shall be disallowed but nopenalty can be imposed unless there is any attemptto conceal income or any inaccurate particulars arefurnished in the returns.

❉ ❉ ❉

Controversies


S. 54 exemption is available even whencontribution to Capital Gains Accounts Schemeis not made in time.

CIT v. Rajesh Kumar Jalan [2006] 157Taxman 398 (Gauhati)

6. From a plain reading of sub-section (2) ofsection 54 of the Income-tax Act, 1961, it isclear that only section 139 of the Income-taxAct, 1961, is mentioned in section 54(2) in thecontext that the unutilised portion of the capitalgain on the sale of property used for residenceshould be deposited before the date offurnishing the return of the Income-tax undersection 139 of the Income-tax Act. Section 139of the Income-tax Act, 1961, cannot be meantonly section 139(1) but it means all sub-sectionsof section 139 of the Income-tax Act, 1961.Under sub-section (4) of section 139 of theIncome-tax Act, any person who has notfurnished a return within the time allowed tohim under sub-section (1) of section 142 mayfurnish the return for any previous year at anytime before the expiry of one year from the endof the relevant assessment year or before thecompletion of the assessment year whicheveris earlier. Such being the situation, it is the caseof the respondent/assessee that the respondent/assessee could fulfil the requirement undersection 54 of the Income-tax Act for exemptionof the capital gain from being charged toincome-tax on the sale of property used forresidence up to 30-3-1998, inasmuch as thereturn of income-tax for the assessment year1997-98 could be furnished before the expiryof one year from the end of the relevantassessment year or before the completion ofthe assessment whichever is earlier under sub-

section (4) of section 139 of the Income-taxAct, 1961.

7. The Apex Court in State of Maharashtra v.Santosh Shankar Acharya [2000] 7 SCC 463held that it is too well-known a principle ofconstruction of statutes that the Legislatureengrafted every part of the statute for a purpose.The legislative intention is that every part ofthe statute should be given effect. TheLegislature is deemed not to waste its words orto say anything in vain and a constructionwhich attributes redundancy to the Legislaturewill not be accepted except for compellingreasons.

8. The Apex Court in Bhavnagar University v.Palitana Sugar Mill (P.) Ltd. [2003] 2 SCC 111,held that it is the basic principle of constructionof statute that statutory enactment mustordinarily be construed according to their plainmeaning and no words should be added,altered or modified unless it is plainly necessaryto do so to prevent a provision from beingunintelligible, absurd, unreasonable,unworkable or totally irreconcilable with therest of the statute. Paras 24 and 25 of theBhavnagar University’s case (supra) read asfollows :

“24. True meaning of a provision of law hasto be determined on the basis of what itprovides by its clear language, with dueregard to the scheme of law.

25. Scope of the legislation on the intentionof the Legislature cannot be enlargedwhen the language of the provision isplain and unambiguous. In other words,statutory enactments must ordinarily be

4

Advocate Tushar [email protected]

JudicialAnalysis


construed according to its plain meaningand no words shall be added, altered ormodified unless it is plainly necessary todo so to prevent a provision from beingunintelligible, absurd, unreasonable,unworkable or totally irreconcilable withthe rest of the statute.” (p. 121)

Mrs. Kamal Murlidhar Mokashi v. ITO[2019] 110 taxmann.com 120 (Pune -Trib.)

14. As far as the issue of not depositing theunutilized portion of amount subject to capitalgains in capital gain account scheme isconcerned, it is fact that assessee had not filedthe return u/s. 139(1) of the Act but had filedthe return of income within the time limitprescribed u/s. 139(4) of the Act which wasupto 31.03.2013. It is assessee’s case that priorto filing of income tax return, assessee hadutilized the entire sale proceeds in acquisitionof the new residential house. The aforesaidcontention of the assessee has not beencontroverted by Revenue. We find thatHon’ble Punjab and Haryana High Court inthe case of Ms. Jagriti Aggarwal (supra) hasheld that benefit of Sec.54 of the Act isallowable when the assessee has acquired thenew asset before filing of return of income. Wefurther find that the Co-ordinate Bench of theTribunal in the case of Ramarao DhondibaPimple (supra) after considering the decisionsof Hon’ble Gauhati High Court in case ofRajesh Kumar Jalan (supra) and Ms. JagritiAggarwal (supra) and the decision of Hon’bleBombay High Court in the case of HumayunSuleman Merchant (supra) has held thatassessee is eligible to claim exemption in respectof investments made before filing of return ofincome. We further find that the Tribunal hasnoted that in the case of Humayun SulemnMerchant (supra), the Hon’ble Bombay HighCourt has not disapproved the ratio laid downin the case of Rajesh Kumar Jalan (supra) butthe claim was rejected on the peculiar facts ofthe case and the relevant findings of the Co-ordinate Bench of the Tribunal are as under :

‘8. We have heard the submission made byrepresentatives of rival sides and haveperused the orders of authorities below. Theground no. 1 raised in the appeal byassessee is against rejecting assessee’sclaim of exemption Rs. 71,56,000/- u/s.54B of the Act on the ground thatinvestment has been made after due datefor filing return of income u/s. 139(1) ofthe Act. It is an undisputed fact that assesseehas invested Rs. 71,56,000/- in threeproperties in August, 2012 i.e. after duedate for furnishing return of income u/s.139 (1) of the Act had elapsed. TheAssessing Officer rejected assessee’s claimof exemption in respect of aforesaidinvestment for the reason that as per theprovision of section 54B(2), the assesseeshould have invested/deposited the amountbefore the due date for fur the due date forfurnishing return of in nishing return ofincome under s come under sub-sectionsection (1) of Section 139 of the Act.

9. The Hon’ble Gauhati High Court in thecase of CIT v. Rajesh Kumar Jalan (supra)while considering assessee’s claim ofexemption u/s. 54 where the assessee haddeposited unutilized portion of capital gainin the specified scheme after the stipulatedtime for furnishing return of income u/s.139(1) of the Act has expired held:

“6. From a plain reading of sub-s (2) of s.54 of the IT Act, 1961, it is clear thatonly s. 139 of the IT Act, 1961, ismentioned in s. 54(2) in the contextthat the unutilized portion of the capitalgain on the sale of property used forresidence should be deposited beforethe date of furnishing the return of theincome-tax under s. 139 of the IT Act.Sec. 139 of the IT Act, 1961, cannotbe meant only as s. 139(1) but it meansall sub-sections of s. 139 of the IT Act,1961. Under sub-s.(4) of s. 139 of theIT Act any person who has notfurnished a return within the time

5

Judicial Analysis


allowed to him under sub-s. (1) of s.142 may furnish the return for anyprevious year at any time before theexpiry of one year from the end of therelevant assessment year or before thecompletion of the assessmentwhichever is earlier. Such being thesituation, it is the case of therespondent/assessee that therespondent/assessee could fulfil therequirement under s. 54 of the IT Actfor exemption of the capital gain frombeing charged to income-tax on thesale of property used for residenceupto 30th March, 1998, inasmuch asthe return of income-tax for the asst.yr. 1997-98 could be furnished beforethe expiry of one year from the end ofthe relevant assessment year or beforethe completion of the assessmentwhichever is earlier under sub-s. (4)of s. 139 of the IT Act, 1961.”

10. The Hon’ble Punjab & Haryana HighCourt in the case of CIT v. Ms. JagritiAggarwal (supra) while considering theissue, whether the assessee is eligible forclaiming benefit of exemption u/s. 54, ifcapital gain amount is deposited/investedafter due date of furnishing return ofincome u/s. 139(1) but before the due dateof furnishing return of income u/s. 139(4)held :

“10. Having heard learned counsel for theparties, we are of the opinion that sub-s. (4) of s. 139 of the Act is, in fact, aproviso to sub-s.(1) of s. 139 of theAct. Sec, 139 of the Act fixes thedifferent dates for filing the returns fordifferent assessees. In the case ofassessee as the respondent, it is 31stday of July of the assessment year interms of cl. (c) of the Expln. 2 to sub-s. (1) of s. 139 of the Act, whereas sub-s. (4) of s. 139 provides for extensionin period of due date in certaincircumstances. It reads as under :

11. A reading of the aforesaid sub-sectionwould show that if a person has notfurnished the return of the previous yearwithin the time allowed under sub-so (1)i.e., before 31st day of July of theassessment year, the assessee can file returnbefore the expiry of one year from the endof the relevant assessment year.

12. The sale of the asset having taken placeon 13th Jan., 2006, falling in the previous(sic-assessment) year 2006-07, the returncould be filed before the end of relevantasst. yr. 2007-08 (sic-2006-07) i.e. 31stMarch, 2007. Thus, sub-so (4) of s. 139provides extended period of limitation asan exception to sub-so (1) of s. 139 of theAct. Sub-so (4) is in relation to the timeallowed to an assessee under sub-so (1) tofile return. Therefore, such provision is notan independent provision, but relates totime contemplated under sub-so (1) of s.139. Therefore, such sub-so (4) has to beread along with sub-so (1). Similar is theview taken by the Division Bench ofKarnataka and Gauhati High Courts inFatima Bai and Rajesh Kumar Jalan cases(supra) respectively.”

11. The Hon’ble Punjab & Haryana HighCourt in another case CIT v. Jagtar SinghChawla reported as 33 taxmann.com 38following the ratio laid down in the caseof Rajesh Kumar Jalan (supra.) allowedassessee’s claim of exemption u/s. 54Fwhere the assessee paid substantial amountof sale consideration for residential housewithin extended period of filing return ofincome u/s. 139(4) of the Act.

12. In the case of Humayun SulemanMerchant v. CCIT (supra), we find that theHon’ble Bombay High Court has notdisapproved the ratio laid down in RajeshKumar Jalan case. However, the assessee’sclaim of exemption u/s. 54F was rejectedtherein as the ratio laid down in RajeshKumar Jalan’s case was not applicable on

Judicial Analysis


the facts and circumstances of thatparticular case. Relevant extract of thefindings and observation of Hon’bleJurisdictional High Court reads as under:

“(v) Lastly and in the alternative, it issubmitted by Mr. Chatterji, that as theentire amount has been paid to thedeveloper/builder before the last dateto file the return of Income underSection 139 of the Act, the exemptionis available to the appellant undersection 54F(4) of the Act. In support,the decision of Gauhati High Court inRajesh Kumar Jalan’s case (supra.) isrelied upon. The Gauhati High Courtin the above case was concerned withthe interpretation of Section 54 of theAct. It construed the provision of sub-Section (2) of Section 54 of the Actwhich is identically worded to sub-section (4) of Section 54F of the ActThe Court in the aforesaid decisionheld that the requirement of depositingbefore the date of furnishing of returnof Income under Section 139 of theAct has not to be restricted only to thedate specified in Section 139(1) of theAct but would include all sub-sectionof 139 including sub-section (4) of theAct. On the above basis it concludedthat if the amount is utilized before thelast date of filing of the return undersection 139 of the Act then theprovision of Section 54(2) of the Actwould not hit the assessee before it. Itis not very clear in the above casewhether the amounts were utilizedbefore the assessee filed its return ornot.

(w) However, the factual situation arisingin the present case is different. Thereturn of income is admittedly filed on4th November, 1996. In terms ofSection 54F(4) of the Act asinterpreted by the Gauhati High Courtin Rajesh Kumar Jalan’s case (supra)

the amounts subject to capital gain onsale of the capital asset for purpose ofexemption, has to be utilized before thedate of filing of return of income. Inthis case 4th November, 1996 is thedate of filing the return of Income. Itis not disputed that on 4th November,1996 when the return of income wasfiled, the entire amount which wassubject to capital gain tax had not beenutilized for the purpose of constructionof new house nor were the unutilizedamounts deposited in the notified BankAccounts in terms of Section 54F (4)of the Act before filing the return ofincome. It is also to be noted that inline with the interpretation of GauhatiHigh Court on Section 54F(4) of theAct, the Assessing Officer had takeninto account all amounts utilized forconstruction of a house before filingthe return of income on 4th November,1996 for extending the benefit ofexemption under Section 54F of theAct. Therefore, in the present facts, thedecision of the Gauhati High Court inRajesh Kumar Jalan’s case (supra)would not apply so as to hold that theappellant had complied with theSection 54F(4) of the Act.”

13. In the present case, the assessee hasclaimed exemption u/s. 54B of the Act. Weobserve that the provision of sub section(2) of Section 54, provision of sub section(2) of section 54B and provisions of subsection (4) of Section 54F are perimeteria.The judgments on which the ld. AR hasplaced reliance are rendered with referenceto claim of exemption u/s. 54/54F. Sinceprovisions of sub section (2) of section 54and 54B and (4) of section 54F areidentical, therefore, ratio laid down by thevarious Hon’ble High Courts would applyto provisions of section 54B (2) as well.Thus, in the light of facts of the case andvarious decisions as discussed above, we

Judicial Analysis


find merit in ground No. 1 raised by theassessee in appeal and the same is accepted.The assessee is eligible to claim exemptionu/s. 54B in respect of investment madetowards purchase of agriculture land withinthe time limit for filing return of incomespecified under section 139(4).’

Before us, Revenue has not pointed to anycontrary binding decision in its support. Inview of the aforesaid facts and relying onthe aforesaid decisions, we are of the viewthat assessee is eligible for deduction u/s.54F of the Act. We therefore direct the AOto grant deduction. Thus, the grounds ofthe assessee are allowed.

ITO v. Nilima Abhijit Tannu [2019] 106taxmann.com 256 (Mumbai - Trib.)

14. We are of the view that section 54F of the Actonly talks about deposit within the prescribedtime period. Even on the plain reading of Sub-section (2) of Section 54 of the Income-tax Act,1961, it is clear that only Section 139 of theIncome-tax Act, 1961, is mentioned in Section54(2) in the context that the unutilised portionof the capital gain on the sale of property usedfor residence should be deposited before thedate of furnishing the return of the Income-taxunder Section 139 of the Income-tax Act. Inour view, section 139 of the Income-tax Act,1961, cannot be meant only Section 139(1),but it means all sub-sections of Section 139 ofthe Income-tax Act, 1961. The provisions ofsection 54 are beneficial provisions and are tobe construed liberally as has been held by theCoordinate Bench of ITAT, Chennai in the caseof ACIT v. Smt. Umayal Annamalai, I.T.A.No.415/Mds/2015 &. C.O.No.43/Mds/2015ITA No.415/Mds/2015. The Hon’ble HighCourt of Punjab and Haryana in the case of theCIT v. Shri Jagtar Singh Chawla [2013] 33taxmann.com 38/215 Taxman 154 held that‘Sec 54F -Deposit in capital gains accountscheme by sec 139(4) is the correct due date’.Further, in the case of CIT v. Rajesh KumarJalan [2006] 157 Taxman 398/286 ITR 274

(Gauhati), (Paras 6 and 11), held that onlySection 139 of the Income-tax Act, 1961, ismentioned in Section 54(2) in the context thatthe unutilised portion of the capital gain on thesale of property used for residence should bedeposited before the date of furnishing the returnof the Income-tax under Section 139 of theIncome-tax Act. Section 139 of the Income-tax Act, 1961, cannot be meant only Section139(1) but it means all sub-sections of Section139 of the Income-tax Act, 1961.

15. We have also considered all the otherjudgments cited by the parties as well asmentioned in the order of Ld. CIT(A) and weare also of the view that according to theprovisions of section 54 of the Act, an assesseehas an option to claim deduction against longterm capital gain on transfer of a residential flat,provided he/she invests within a period of oneyear before or two years after the date on whichthe transfer takes place to purchase or within aperiod of three years after that date to construct,one residential house in India. As per the facts,the assessee has duly acquired a new houseproperty within 2 years from the date of theoriginal transfer of flat and has accordinglyrightly claimed deduction us/ 54 of the Act. Theentitlement of exemption under Section 54relates to the cost of acquisition of a new estatein the nature of a house property for the purposeof his own residence within the specifiedperiod. If the assessee fulfils the condition forexemption u/s.54 within the extended time offiling of return u/s. 139(4) of the Act, theassessee is entitled to exemption u/s.54 of theAct. Accordingly, the assessee is entitleddeduction u/s 54 of the Act for utilization ofsale consideration for investment in newresidential property within due date asstipulated u/s. 139 of the Act. As already heldthat Section 139 of the Act cannot be meantonly section 139(1), but it means all sub-sections of section 139 of the Act. Thus, undersu-section (4) of section 139 of the Income-taxAct any person who has not furnished a returnwithin the time allowed to him under sub-

6

Judicial Analysis


section (1) of section 142 may furnish the returnfor any previous year at any time before theexpiry of one year from the end of the relevantassessment year or before the completion ofthe assessment year whichever is earlier. Sincethe assessee has fulfilled the requirement undersection 54 of the Income-tax Act for exemptionof the capital gain, therefore the assessee isentitled for the same.

Smt. Harminder Kaur v. ITO [2021] 126taxmann.com 160 (Delhi - Trib.)

11.2.1 For the purpose of above section, the duedate for deposit under the capital gain hasbeen held as due date of filing of returnunder section 139(4) Act in the case ofShankar Lal Saini (supra). The relevantfinding of the Hon’ble High Court ofRajasthan is reproduced as under:

“19. The contention of Mr. Singhi that undersection 139, investment is to be madebefore the return is filed otherwise itwill render the provision nugatory isto be considered in the light that whileconsidering the case, Karnataka HighCourt in para nos. 6 & 7 (supra) hasconsidered the provisions andinterpreted the same. Even the same isaccepted by the Punjab and HaryanaHigh Court and Gauhati High Courtwhich has taken the view contrary toKerala High Court decision.

20. In that view of the matter, three HighCourts have taken the view and theTribunal has followed the KarnatakaHigh Court which has followed theearlier Gauhati judgment which hasbeen independently supported by thePunjab of Harayana High Court.”

11.2.2 In the above decision, Hon’ble High Courtof Rajasthan has relied on the decision ofthe Hon’ble Karnataka High Court in thecase of Fatima Bai (supra), Hon’ble Punjaband Haryana High Court in the case ofJagtar Singh Chawla (supra) and JagritiAggarwal’s case (supra). The relevant

finding of Hon’ble Punjab and HaryanaHigh Court in the case of Jagriti Aggarwal(supra) has held that “sub-section (4) ofsection 139 is in fact, a proviso to sub-section(1) and provides for extension of period ofdue date for filing the return in certaincircumstances and, therefore, exemptionunder section 54 was allowable where theassessee had purchased new property beforethe extended due date of filing of return asper section 139(4) and filed return withinsuch extended time.” The relevant findingof the Hon’ble High Court is reproduced asunder:

“5. It maybe noticed that the assessee soldher residential house on 13th Jan., 2006for a sum of Rs. 45 lakhs and purchasedanother property jointly with Mr. D.P.Azad, her father-in-law on 2nd Jan.,2007 for a consideration of Rs. 95lakhs. The due date of filing of returnas per section 139(1) of the Act was31st July, 2006, but the assessee filedher return on 28th March, 2007 and thatextended due date of filing of return asper section 139(4) is 31st March, 2007.

6. Sec. 54 of the Act contemplates thatthe capital gain arises from the transferof a long-term capital asset, but if theassessee within a period of one yearbefore or two years after the date onwhich the transfer took place purchasesresidential house, then instead of thecapital gain, the income would becharged in terms of provisions of sub-section (1) of section 54. As per sub-section (2), if the amount of capitalgains is not appropriated by theassessee towards the purchase of newasset within one year before the dateon which the transfer of the originalasset took place, or which is not utilizedby him for the purchase or constructionof the new asset before the date offurnishing the return of income undersection 139, the amount shall be

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Judicial Analysis


deposited by him before furnishingsuch return not later than due dateapplicable in the case of assessee forfurnishing the return of income undersub-section (1) of section 139 in anaccount in any such bank or institutionas maybe specified. Relevant sub-section (2) of section 54 of the Actreads as under :

xxx…

7. The question which arises is; whetherthe return filed by the assessee beforethe expiry of the year ending with theassessment year is valid under section139(4) of the Act ?

8. Learned counsel for the Revenue hasargued that the assessee was requiredto file return under sub-section (1) ofs. 139 of the Act in terms of sub-section(2) of section 54 of the Act. It iscontended that sub-section (4) is notapplicable in respect of the assessee soas to avoid payment of long-termcapital gain.

9. On the other hand, learned counsel forthe respondent relies upon a DivisionBench judgment of Karnataka HighCourt in Fathima Bai v. ITO [2009]32 DTR (Kar.) 243 where in somewhatsimilar circumstances, it has been heldthat time-limit for deposit under schemeor utilisation can be made before thedue date for filing of return undersection 139(4) of the Act. Learnedcounsel for the respondent also reliesupon a Division Bench judgment ofGauhati High Court in CIT v. RajeshKumar Jalan [2006] 206 CTR (Gau.)361 : [2006] 286 ITR 274 (Gau.)

10. Having heard learned counsel for theparties, we are of the opinion that sub-section (4) of Section 139 of the Actis, in fact, a proviso to sub section (1)of section 139 of the Act. sec. 139 ofthe Act fixes the different dates for

filing the returns for different assessees.In the case of assessee as therespondent, it is 31st day of July of theassessment year in terms of cl. (c) ofthe Expln. 2 to sub-section (1) ofsection 139 of the Act, whereas sub-section (4) of section 139 provides forextension in period of due date incertain circumstances. It reads asunder:

xxx…

13. In view of the above, we find that duedate for furnishing the return of incomeas per s. 139(1) of the Act is subject tothe extended period provided undersub-section (4) of section 139 of theAct.”

xxx…

12. In the result, the appeal of the assessee isallowed.

ITO v. Smt. Rekha Shetty [2020] 118taxmann.com 10 (Chennai - Trib.)

5. We heard the rival submissions and perusedthe materials available on record. The factsnarrated in para-2 of this order, supra, are notdisputed. Therefore, the issue in this case iswhether the assessee is entitled for the benefitof deduction under section 54 in respect of thedisputed sum, when she has utilized such sumtowards purchase of the new house on 26-8-2016 and thus complied with the provisions ofsection 54(1), even though the said sum wasnot deposited in the capital gains accountscheme as required under section 54(2). Thesame issue arose before the Hon’blejurisdictional High Court in the case of VenkataDilip Kumar v. CIT [2019] 419 ITR 298(Mad.), the relevant portion of the decision isextracted as under :

“14. While the compliance of requirementunder section 54(1) is mandatory and ifcomplied, has to be construed assubstantial compliance to grant the benefitof deduction, the compliance of

8

Judicial Analysis


requirement under section 54(2) could betreated only as directory in nature. If theassessee with the material details andparticulars satisfies that the amount forwhich deduction is sought for undersection 54 is utilised either for purchasingor constructing the residential house inIndia within the time prescribed undersection 54(1), the deduction is bound tobe granted without reference to section54(2), which compliance in myconsidered view, would come intooperation only in the event of failure onthe part of the assessee to comply withthe requirement under section 54(1). Merenon-compliance of a proceduralrequirement under section 54(2) itselfcannot stand in the way of the assessee ingetting the benefit under section 54, if heis, otherwise, in a position to satisfy thatthe mandatory requirement under section54(1) is fully complied with within thetime limit prescribed therein.

15. At this juncture, the Division Benchdecision of the Karnataka High Courtmade in I. T. A. No. 47 of 2014 in thecase of CIT v. K. Ramachandra Rao isrelevant to be quoted, wherein whileconsidering the scope of section 54F(1)to 54F(4) of the Income-tax Act, it hasbeen observed as fo lows :

“If the intention is not to retain cash butto invest in construction or any purchaseof the property and if such investment ismade within the period stipulated therein,then section 54F(4) is not at all attractedand therefore, the contention that theassessee has not deposited the amount inthe bank account as stipulated andtherefore, he is not entitled to the benefiteven though he has invested the moneyin construction is also not correct.”

16. Learned counsel for the Revenue reliedon the decision of the Supreme Court inCommissioner of Customs v. Dilip Kumarand Co. [2018] 6 GSTR-OL 46 (SC)/

[2018] SCC Online SC 747 in support ofher contention that exemption notificationshould be interpreted strictly and theburden of proof of its applicability wouldbe on the assessee. I have already pointedout that the assessee, in this case, hasclaimed that it has utilised the disputedsum towards the cost of the additionalconstruction within the period of threeyears from the date of the transfer andtherefore, if such contention is factuallycorrect, it is to be held that the assesseehas satisfied the mandatory requirementunder section 54(1) to get deduction.Therefore, I find that the above decisionrelied on by the Revenue is not helpingthe case of the respondents under the factsand circumstances of the present case.

17. The claim of the assessee for deduction ofthe disputed sum towards the additionalconstruction cost was rejected only on theground that the said sum was notdeposited in the capital gains account. Inview of my findings rendered supra, theRevenue is not justified in making suchobjection. On the other hand, it has toverify as to whether the said sum wasutilised by the petitioner within the timestipulated under section 54(1) for thepurpose of construction. If it is found thatsuch utilisation was made within suchtime, the Revenue is bound to grantdeduction.”

From the above, it is clear that for seekingbenefit of deduction under section 54 of theAct, the assessee should have substantiallycomplied with section 54(1). In this case, theassessee should have purchased the residentialhouse within two years from 19-10-2015, iethe date of transfer. She has utilized such sumtowards purchase of the new house on 26-8-2016 itself. Further, she had explained thereasons for not-depositing the amount inCapital Gains Accounts Scheme which is alsonot disputed. Since the assessee hassubstantially complied with section 54(1),

Judicial Analysis


therefore, a mere non-compliance of aprocedural requirement under section 54(2)itself cannot stand in the way of the assessee ingetting the benefit under section 54. Therefore,we do not find any reason to interfere with theorder of the learned CIT (A). The Groundsraised in the appeal of the Revenue standdismissed.

Renu Jain v. ITO [2020] 121taxmann.com 222 (Jaipur - Trib.)

10. We have considered the rival submissions andperused the material available on record. Fromperusal of the reasons recorded by theAssessing Officer before issuance of notice U/s. 148 of the Act, the undisputed facts whichare emerging that the assessee sold a plot ofland on 10-1-2011 for a consideration of Rs.22,50,000/- and the said amount was depositedin FDRs maintained with ICICI Bank on 21-1-2011. The FDRs were encashed and thematurity proceeds of Rs. 23,66,223/- soreceived were deposited in Canara Bank on 3-12-2011. On the same day, out of the maturityproceeds of FDRs, the assessee has made freshdeposits of FDRs of Rs. 22,50,000/- and thistime, these FDRs were maintained with CanaraBank under the capital gain account scheme.These facts are also corroborated by the bankstatement of the assessee appearing at APBpage 66 and certificate issued by the CanaraBank dated 27-10-2015 available at APB page89. Thereafter on 21-5-2012, three FDRsmatured/encashed and amount credited inassessee’s bank with maturity value Rs.15,32,232/-and on the very next date i.e, 22-5-2012, the said maturity proceeds were utilizedfor making payment of Rs. 18,00,000 to ShirArvind Kumar Khurana, the person fromwhom the assessee has purchased a property.Thereafter the remaining FDRs matured on 25-7-2012 with matured value of Rs. 8,95,788/-which was utilized for making further payment

of Rs. 9,00,000/- to the seller of the propertyon 31-7-2012. These facts are also corroboratedby the sale deed wherein out of the totalconsideration of Rs. 1,13,00,000, an amountof Rs. 27,00,000/- has been paid throughcheques drawn on the Canara Bank out ofmaturity proceeds of FDRs maintained underthe capital gains account scheme. We, therefore,find that the whole of the sale considerationhas been deposited in the capital gains accountscheme and has been utilized in purchase ofanother property and has not been used for anyother purposes. In terms of time frame ofdepositing in capital gains account scheme, aswe have noted above, the deposits were madeon 3-12-2011 and thereafter, the assessee hasfiled her return of income on 14-12-2011 withintime limit prescribed under section 139(4) ofthe Act wherein she has made the claim u/s.54F of the Act and therefore, the question arisesas to whether the same is in compliance withthe provisions of section 54F(4) of the Act. Wefind that the said issue has arisen forconsideration before the Hon’ble JurisdictionalHigh Court in case of Shankar Lal Saini (supra)wherein the substantial question of law framedfor consideration was as under:

xxx…

In the instant case, where the amount was depositedin capital gain accounts scheme before filing ofreturn U/s. 139(4) of the Act, respectfully followingthe decision of Hon’ble Rajasthan High (supra),the same be eligible for deduction U/s. 54F of theAct. In the result, the matter is decided in favour ofthe assessee and against the Revenue and the soleground of appeal is allowed.

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9

Judicial Analysis


GRI Renewable Industries SL vs. ACIT (ITANo: 202/Pun/2021) (Pune ITAT)

Facts

· Assessee is a foreign company incorporated inSpain. During the relevant year, Assesseereceived certain amounts from an Indiancompany towards providing technical support,financial support and advice, legal support,commercial support, SAP software andimplementation of process model etc.

· Assessee declared the receipts as fees fortechnical services and royalty in terms of Article13 of the India-Spain double tax avoidanceagreement (DTAA / tax treaty).

· Further, relying upon most favoured nation(‘MFN’) clause in India-Spain tax treaty readwith Article 12 of India-Portugal tax treaty,assessee claimed taxation of aforesaid receiptsat 10% as against 20% provided in India-Spainta treaty.

· Assessing Officer rejected the assessee’s claimon the ground that the import of MFN clausefrom the India-Portuguese DTAA was notnotified by Central Board of Direct Taxes(‘CBDT’) in terms of CBDT Circular No.3/2022 dated 03-02-2022 and hence the protocolunder the DTAA between India and Spainwould have no application.

Ruling

· India entered DTAA with Portuguese (a memberof OECD Country) vide notification dated 16-06-2000. Article 12 of India-Portuguese DTAAprovides a tax rate of 10% for FTS and royalty.

· India-Spain DTAA was signed on 08-02-1993and same was notified on 21-04- 1995. On

perusal of opening part of the protocol, it is clearthat protocol has been treated as ‘integral part ofthe convention’ and accordingly, once theDTAA between India and Spain was notifiedon 21-04-1995, the Protocol, which is an integralpart of the Agreement also got automaticallynotified along with the Agreement.

· CBDT Circular No.3/2022 dated 03-02-2022mandates issuing separate notification forimporting of benefits of a treaty with second Stateinto the treaty with the first State by relying onsection 90(1) of the Income Tax Act, 1961(‘Act’). This condition of Circular is contrary tosection 90(1) of the Act read with DTAA, whichtreats protocol as an integral part of the DTAA.

· Circular issued by CBDT is binding on AO andnot on the assessee. Circular prescribingadditional stipulation that creates disabilitycannot operate retrospectively to transactionstaking place in any period anterior to its issuance.

· Once the DTAA is notified, all its integral partsget automatically notified. Accordingly, there isno need to separately notify the individual limbsof the DTAA again to make them operationalone by one.

· Accordingly, the authorities are not justified indenying the benefit of the straight rate of tax @10% as per the DTAA between India-Spain readwith Portuguese DTAA.

MOL Corporation vs. DCIT – (IT Appeal No.1554 of 2016) (Delhi ITAT)

Facts

· Assessee is US based entity and a part of theMicrosoft group. During the relevant year,assessee received consideration of INR

Update on Recent CaseLaws – InternationalTaxation

CA. Dhinal A. [email protected]

CA. Karan [email protected]


3,373,74,00,209/- as revenue from licensing ofMS Software products and revenue of INR11,35,98,751/- as revenue from online servicestermed as “Cloud Services”.

· The Assessing Officer (AO) considered thenature of income arising to the assessee onaccount of the licensing of software anddistinguished the judgment of Hon’ble DelhiHigh Court in Infrasoft Ltd (2014) 220 Taxman273.

· Further, AO had considered the receipts fromCloud Services as user based on royaltyobserving that the Microsoft online subscriptionagreement mentions that the software underlyingthe service in each kind of model i.e. PAAS /SAAS / IAAS is license to the customer andnot sold.

· The software is protected by patent, copyrightand trade mark protections, therefore the AOheld the payments made by the users as theconsideration for the use or the right to use ofsuch patents, Software and Cloud Infrastructurecovering them in the definition of royalty bothby clause 9 (1)(vi) Explanation 2 sub-clause (iii)and (v) of the Income Tax Act, 1961 (‘Act’) andalso Article 12 (3) of the India USDTAA.

Ruling

· The subscription fee for cloud services is notroyalty but merely a consideration for onlineaccess of the cloud computing services forprocess and storage of data to run theapplications.

· Cloud base services do not involve any transferof rights to the customers in any process. Thegrant of right to install and use the softwareincluded with the subscription does not include

providing any copy of the said software to thecustomer. The assessee’s cloud base services arethough based on patents / copyright but thesubscriber does not get any right of reproduction.The services are provided online via data centrelocated outside India.

· The Cloud services merely facilitate the flow ofuser data from the front end users throughinternet to the provider’s system and back. Theld. AO has fallen in error in interpreting it aslicensing of the right to use the above CloudComputing Infrastructure and Software.

· Reliance is placed upon decision of Hon’bleDelhi ITAT in case of M/s. Salesforce.comSingapore Pte. v. Dy. D.I.T. Circle-2(2) ITA No.4915/DEL/2016, Mumbai ITAT in case ofDDIT v. Savvis Communication Corporation[2016] 69 taxmann.com 106, Chennai ITAT inthe case of ACIT v. Vishwak Solutions Pvt. LtdITA No. 1935 & 1936/MDS/2010, MumbaiITAT in case of Rackspace, Us IncI.T. ANos.6195 & 4920/Mum/2018

· As regards sale of software products, Hon’bleITAT held that it does not give rise to royaltyincome in the hands of assess seem in view ofdecision of Hon’ble Delhi High Court inInfrasoft Ltd., (supra) which has now furtherbeen affirmed by the Hon’ble Supreme Courtof India in the case of Engineering AnalysisCentre of Excellence P. Ltd. (2021) 125taxmann.com 42.

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Update on Recent Case Laws – International Taxation


Processing and settlement of small valueExport and Import related paymentsfacilitated by Online Export-ImportFacilitators (OEIF) (erstwhile OPGSP)

The Reserve Bank of India (RBI) placed on itswebsite draft guidelines on ‘Processing andSettlement of small value Export and Import relatedpayments’ facilitated by Online Export-ImportFacilitators (OEIF) (erstwhile OPGSP).

With development in the ecosystem for e-commerceand the feedback received from banks and otherstakeholders, on a comprehensive review, the extantguidelines were modified to further simplify andrationalise the process for settlement of paymentfor export and import through e-commerce.

The facility of processing and settlement of importand export related remittances by entering standingcontract with Online Payment Gateway ServiceProviders (OPGSPs) in respect of export of goodsand services as well as import of goods and softwareis presently governed by the provisions containedin A.P. (DIR) Series Circular No. 17 datedNovember 16, 2010, A.P. (DIR) Series Circular No.109 dated June 11, 2013 read with A.P. (DIR) SeriesCircular No.16 dated September 24, 2015.

Excerpts of highlights from the revisedguidelines:

E-commerce means buying and selling of goodsand services, including digital products, conductedover digital and electronic network. For thepurposes of Merchandise Exports from IndiaScheme (MEIS) e – commerce shall mean theexport of goods hosted on a website accessiblethrough the internet to a purchaser. While thedispatch of goods shall be made through courier orpostal mode, as specified under the MEIS, the

payment for goods purchased on e- commerceplatform shall be in terms of extant guidelines underFEMA, 1999.

Online Export-Import Facilitators (OEIF) earlierreferred to as Online Payment Gateway ServiceProviders (OPGSPs) are Payment Aggregator (PA)or Payment Gateway (PG) that facilitate on-lineremittances for small value export and import ofgoods and digital products through e-commercetaking place in compliance with instructions givenin this circular. OEIFs may act as PaymentAggregator (PA) or Payment Gateway, or both, asthe case may be, in their contract with AD bank.

Payment Aggregator (PA) or Payment Gateway(PG) are entities as defined in Department ofPayment and Settlement System (DPSS) circularsdated March 17, 2020 and March 31, 2021 on“Guidelines on Regulation of Payment Aggregatorsand Payment Gateways” issued under Payment andSettlement Systems Act, 2007 (Act 51 of 2007). Incase of export transactions, the OEIF shall be actingas Payment Gateways and for import transactionsit shall be acting as Payment Aggregators in termsof the extant guidelines issued by DPSS. ImportCollection Account is an account opened by anOEIF with an AD bank in India, for collection ofpayments for imports as an internal account of theAD bank. Export Collection Account is an accountopened by an OEIF with an AD bank in India, forreceipt of payments for exports as an internalaccount of the AD bank.

The facility shall be available for online import ofgoods and digital products (as permitted in theextant Foreign Trade Policy) of value not exceedingUSD 3,000 (US Dollar Three Thousand) only.Collection of payment from importer in India shallonly be through online payment mode using credit

3

CA. Savan [email protected]

FEMAUpdates

4


card, debit card, UPI, net banking or any otheronline payment methods as specified in ForeignExchange Management (Manner of Receipt andPayment) Regulations, 2016 issued vide FEMA14(R)/2016-RB dated May 02, 2016 as amendedfrom time to time. Payment from importer in Indiashall be received in the nodal account of OEIF.From the Nodal account of the OEIF, the fundsshall flow into Import Collection Account of theOEIF with AD bank in India on near real time basisthrough a Straight Through Processing (STP)mechanism and must be completed on End-of-Daybasis.

The facility shall only be available for export ofgoods and digital products (as permitted in theprevalent Foreign Trade Policy) of value notexceeding USD 15,000 (US Dollar Fifteenthousand) only. AD banks providing such facilitiesshall open a Nostro Account or use their existingNostro account for receipt of the export relatedpayments through such contract. The time taken tocredit the payment in the Nostro account of the ADbank once it is received from the overseas buyershall be as per the agreement between the exporterin India and OEIF.

The AD bank of OEIF shall, inter alia, carry outthe due diligence on each OEIF and ensure thatKYC/AML/CFT norms are adhered to and provideany information/documentary evidence in thisregard as and when called for any regulatorycompliance, and maintain separate Export andImport Collection accounts in India for each OEIF,in case the OEIF is facilitating both export andimport transactions. Report to the Foreign

Exchange Department, Central Office, RBI,Mumbai, the details of each contract entered intowith OEIF as and when entered into, in the manneras may be prescribed from time to time.

It shall be incumbent upon the OEIF to obtainauthorization from DPSS, RBI, if it is functioningas Payment Aggregator; have a well-documentedpolicy/agreement disclosing the duties/responsibilities and rights of various stakeholdersinvolved in the contract; a copy may be sharedthrough the AD bank with RBI, have a policy inplace for resolution of payment related disputes andcomplaints with specified timelines.

AD Category-I banks may bring the contents ofthis circular to the notice of their constituents andcustomers concerned. The directions contained inthis circular have been issued under Section 10(4)and Section 11(1) of the Foreign ExchangeManagement Act (FEMA), 1999 (42 of 1999) andare without prejudice to permission/approvals, ifany, required under any other law.

Source:Press Release: 2022-2023/32, dated April7, 2022

For full text refer:https://rbi.org.in/scripts/FS_PressRelease.aspx?prid=53530&fn=5

❉ ❉ ❉

FEMA Updates


[I] Important Case Laws: (High Court)

[1] Issue:

SCN of cancellation of registration for bogusbilling without any information is notsustainable: HC:

Case Laws:

Vageesh Umesh Jaiswal v. State of Gujarat[2022] 136 taxmann.com 392 (Guj)

Facts:

The Petitioner was engaged in the business oftrading of Aluminium round bars, steel tubes,pipes etc. The show cause notice (SCN) wasissued on the petitioner seeking reason as towhy registration should not be cancelled onaccount of bogus billing. In the reply to theSCN, the petitioner brought to the notice of theCommercial Tax Officer that the show causenotice was as vague as anything as no detailsof the name of the supplier etc. had beenfurnished. The order was issued for cancellationof registration along with demand. It filed writpetition against the same.

Held:

The Hon’ble High Court observed that SCNshave great significance in adjudicationproceedings as they ensure compliance ofprinciples of natural justice. A SCN should notbe issued on assumptions and presumptions andallegations and findings in SCN must besupported by some documentary evidences. Inthe instant case, when there were allegationsof bogus billing, it was expected of the authorityto at least furnish some information about such

bogus billing. Therefore, cancelling theregistration on the ground of vague SCN wasnot sustainable and such cancellation order wasliable to ne set aside.

[2] Issue:

HC directed Competent Authority todeposit amount of refund directly in bankaccount of assessee.

Case Laws:

Hardik Textiles v. State of Gujarat [2022]136 taxmann.com 397 (Guj)

Facts:

The Petitioner was engaged in the business ofmanufacturing. It appointed a GST ConsultantChartered Accountant who filed the GSTrefund application in Form GST RFD-01. TheCompetent Authority issued the payment orderin RFD-05 but amount was not credited in thepetitioner’s account. This was when broughtto the notice of the consultant, he had checkedthe details from the online portal and realizedthat mistakenly he had given the bank accountdetails of another client. Thereafter, the requestmade for finding out the solution and providingthe guidance had not been responded to and itfield petition before the High Court.

Held:

The Hon’ble High Court observed that due tothe mistake of the consultant engaged by thepetitioner, the amount had been deposited inthe wrong account. However, the amount whichhad gone to the wrong account had beenrefunded by way of DRC-03 under section

GST and VATJudgmentsand Updates CA. Vishrut R. Shah

[email protected]. Bihari B. Shah

[email protected]


GST and VAT - Judgements and Updates

73(5) by way of voluntary payment. Since, itwas not a fault of petitioner, it should not bedeprived of amount of refund and the refundamount should be credited in bank account ofpetitioner. Thus, the Competent Authority wasdirected to deposit amount of refund directlyin bank account of petitioner.

[3] Issue:

Stock of goods, demat and current accountsnecessary for running of business can’tprovisionally attached: HC :

Case Laws:

Arya Metacast (P) Ltd. v. State if Gujarat[2022] 137 taxmann.com 173 (Guj.)

Facts:

The search was conducted by the departmentin the premises of petitioner. The order ofprovisional attachment of various properties,demat accounts, current account, stock of goodsetc. was passed after conducting search on theground that petitioner was engaged in bogusbilling by entering into purchase transactionswith 15 fictitious firms. It filed writ petitionchallenging the order of the provisionalattachment.

Held:

The Hon’ble High Court observed that theaction of provisional attachment should nothamper normal business activities. However,in the instant case, the departmental authoritynot only attached stock of goods but also dematand current accounts which would be valuableassets necessary for running of the business.Therefore, the impugned order of provisionalattachment qua stock of goods, two demataccounts as well as current account was liableto be quashed and set aside. Also the mobilephone and laptop were directed to be releasedsubject to undertaking that they would beretained in original form.

[4] Issue:

Mere undervaluation of goods is notsufficient ground to detain goods or vehicle:HC :

Case Laws:

Karnataka Traders v. State of Gujarat[2022] 137 taxmann.com 18 (Guj.).

Facts:

The Petitioner was a registered dealer underthe GST. It sent a consignment of goods whichwas intercepted by the department while it wastravelling to different direction than directionof destination. The department issued FormGST MOV-02 to conduct physical verification/Inspection of the conveyance, goods anddocuments. No discrepancy was noted by theproper officer with regard to the description ofthe goods as per invoice and conveyance norany anomaly found with regard to quantity asper invoice and physical verification undertakenby the concerned officer. The only discrepancyfound was that there was undervaluation ofgoods and goods were confiscated. It filedpetition against the same.

Held:

The Hon’ble High Court observed that merechange of route without anything more wouldnot necessary be sufficient to draw an inferencethat the intention was to evade tax. It was alsonoted that mere undervaluation of goods alsoby itself was not sufficient to detain goods andvehicle as it is a settled legal position thatundervaluation cannot be a ground for seizureof goods in transit by the inspecting authority.Therefore, it was held that confiscationproceedings were liable to be quashed.

[II] Important Case Laws: (AAR):

[1] Issue:

Services supplied to State Governmentunder ‘Noon Meal Scheme’ are exemptunder GST : AAR:


Case Laws:

Handloom Weavers Co-operative SocietyLtd. In re [2022] 136 taxmann.com 395(AAR - Tamilnadu)

Facts:

The appellant was appointed and acting asnodal agency to inspect, procure, store andtransport cost free distribution of dhotis, sareesand school uniforms under various welfareschemes for State Government. It filed anapplication for advance ruling to determinewhether services provided to State Governmentunder ‘Noon Meal Scheme’ run by StateGovernment would be eligible for exemption.

GST and VAT - Judgements and Updates

Held:

The Authority for Advance Ruling observedthat the services provided under gamut ofhandling by the applicant in respect of freedistribution of sarees and dhotis and the schooluniform to the students of Class 1 to 8 under‘Noon Meal Scheme’ are activities in relationto the functions entrusted to Panchayats/Municipality in the article 243G/243W. Sincethe applicant would supply these services tothe State Government, the exemption at Sl. No.3 of Notification No. 12/2017-C.T. (Rate)dated 28.6.2017 would be available and thusno GST would be levied.

❉ ❉ ❉

Continued from page 94 Unreported Judgments

of Executive Engineer cannot be relied uponfor determining the distance. However, theyhave also held that the Learned C.I.T. (Appeals)should have given opportunity to the assesseeto rebut the evidence being used against himand he should have also considered the evidenceplaced by the assessee on record i.e. report of“Talati cum Mantri” regarding certificate ofdistance.

7. The Tribunal also took notice of the C.B.D.T.Circular No.17/2015 dated 06.10.2015,wherein for the Asst. Years 2014-15 andsubsequent years, the C.B.D.T. accepted theposition laid down by Nagpur Bench of theHon. Bombay High Court that the distance

between the municipal limit and the agriculturalland is to be measured having regard to theshortest road distance. The Tribunal further heldthat since the present appeal relates to earlierassessment years, the entire issue is restored tothe file of the C.I.T. (Appeals) to decide afreshwith the above directions, and thus, theassessee’s appeal was allowed for statisticalpurpose.

8. The remaining issues are not discussed here.

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MCA Updates:

1. The Nidhi (Amendment) Rules, 2022:

The Ministry has amended the Nidhi Rules,2014 and made the following amendments:

Rule No. Effect of the amendment

Rule 3(1)(aa) “(aa) „Branch means a place(Inserted) other than the registered office

of Nidhi”

Fourth and “Provided also that noFifth Proviso company, which has notto Rule 3A complied with the(Inserted) requirements of this rule, or

fails to comply with suchrequirement on or after thecommencement of the Nidhi(Amendment) Rules, 2022, orin case the applicationsubmitted by the company inForm NDH-4 is or has beenrejected by the CentralGovernment, shall raise anydeposit from its members orprovide any loan to itsmembers under the provisionsof these rules from the date ofsuch non-compliance, or fromthe date of the commencementof the above said rules, or thedate of rejection of theapplication in Form NDH-4,whichever is later.Provided also that if anydeposit raised by a companyafter the date of non-compliance, or the date ofcommencement of the above

said rules, or the date ofrejection of the application inForm NDH-4, whichever islater as referred to in the fourthproviso shall be deemed tohave been raised in pursuanceof Chapter V of the Act, andshall be subject to all therequirements under thatChapter, or under any otherprovisions of the Act or therules made thereunder, as thecase may be.Provided also that nothing inthis rule shall apply tocompanies incorporated asNidhi on or after thecommencement of the abovesaid rules.”

Rule 3B Criteria for applying in(Inserted) NDH-4

Public company desirous to bedeclared as a Nidhi shall apply,in Form NDH-4, within aperiod of one hundred twentydays of its incorporation fordeclaration as Nidhi, if it fulfilsthe following conditions:1) It has not less than twohundred members; and2) It has Net Owned Fundsof twenty lakh rupees or moreetc.

Rule 4(1) The limit of Equity Share(Substituted) Capital of Rs. Five Lakh has

been changed by Rs. TenLakhs and accordingly a Nidhi

CA. Naveen [email protected]

CorporateLaw Update


Corporate Law Update

shall be a public company andshall have a minimum paid upequity share capital of ten lakhrupees and shall comply withthis requirement within aperiod of eighteen months ofcommencement ofamendment rules.

Rule 5(5) “(5) The provisions of this rule(Inserted) shall not be applicable for the

companies incorporated asNidhi on or after thecommencement of the Nidhi(Amendment) Rules, 2022”.

Rule 6(d) “(d) acquire or purchase(Substituted) securities of any other

company or control thecomposition of the Board ofDirectors of any othercompany in any mannerwhatsoever or enter into anyarrangement for the change ofits management”;

Rule 6(l) “(l) raise loans from banks or(Inserted) financial institutions or any

other source for the purpose ofadvancing loans to members ofNidhi”.

Rule 9 Limit of Net Owned Funds has(Substituted) been changed from Rs. Ten

Lakhs to Rs. Twenty Lakhs.Every Nidhi shall maintainNet Owned Funds of not lessthan twenty lakh rupees orsuch higher amount as theCentral Government mayspecify from time to time andshall comply with thisrequirement within a period ofeighteen months ofcommencement ofamendment rules.

Rule 10 Procedural changes made[Substituted/ pertaining the opening andInserted) closing branches.

Rule 12 (1) After the word, “gold” the(Inserted) word “silver” shall be inserted.Proviso to After the words, “approval ofRule 14 the Regional Director”, the(Inserted) words “by making application

in Form NDH- 2 along withfee specified in the Companies(the Registration Offices andFees) Rules, 2014” shall beinserted.

Proviso to “Provided that in case of jointRule 15(1) shareholders, the loan shall be(Inserted) provided to the member whose

name appears first in theRegister of members”.

Rule 18 “18. Dividend. A Nidhi shall(Substituted) not declare dividend

exceeding twenty-five per centin a financial year”.

Rule 20 (6) After the word “gold”,(Inserted) wherever it occurs, the words

“or silver” shall be inserted.Second and “Provided further that noThird company which has notProviso to complied with theRule 23A requirements of this rule, or(Inserted) fails to comply with such

requirement on or after thedate of commencement of theNidhi (Amendment) Rules,2022, or in case the applicationsubmitted by the company inForm NDH-4 is or has beenrejected by the CentralGovernment, shall raise anydeposit from its members orprovide any loan to itsmembers under the provisionsof these rules from the date ofsuch non-compliance, or thedate of commencement of thesaid rules, or the date ofrejection of the application inForm NDH-4, whichever islater. Provided also that anydeposit raised by a company


after the date of non-compliance, or the date ofcommencement of the abovesaid rules, or the date ofrejection of the application inForm NDH-4, whichever islater, as referred to in thesecond proviso shall bedeemed to have been raised inpursuance of Chapter V of theAct, and shall be subject to allthe requirements under thatChapter, or under any otherprovisions of the Act or therules made thereunder, as thecase may be.

[F. No. 5/28/2020-CL-VII dated 19.04.2022]

For, detailed text, please refer:

h t t p s : / / w w w. m c a . g o v. i n / b i n / d m s /getdocument?mds=LTZyclKMNK0LX6JwM%252BaPeA%253D%253D&type=open

SEBI Updates:

1. Revision of UPI limits in Public Issue ofEquity Shares and convertibles:

The SEBI has decided that all IndividualInvestors applying in Public Issues where theapplication amount is upto 5 Lakhs shall useUPI and shall also provide their UPI ID in thebid-cum-application form submitted with anyof the entities mentioned herein below:

i. a syndicate member

ii. a stock broker registered with a recognisedstock exchange (and whose name ismentioned on the website of the stockexchange as eligible for this activity)(‘broker’)

iii. a depository participant (‘DP’) (whosename is mentioned on the website of thestock exchange as eligible for this activity)

iv. a registrar to an issue and share transferagent (‘RTA’) (whose name is mentionedon the website of the stock exchange aseligible for this activity)

Corporate Law Update

This Circular shall come into force for PublicIssues opening on or after May 01, 2022.

[Circular No.: SEBI/HO/CFD/DIL2/CIR/P/2022/45 dated 05.04.2022]

2. Clarification on applicability of Regulation23(4) read with Regulation 23(3)(e) of theSEBI (Listing Obligations and DisclosureRequirements) Regulations, 2015 in relationto Related Party Transactions:

The SEBI has specified that the shareholders’approval of omnibus RPTs approved in anAGM shall be valid up to the date of the nextAGM for a period not exceeding fifteen months.

In case of omnibus approvals for materialRPTs, obtained from shareholders in generalmeetings other than AGMs, the validity of suchomnibus approvals shall not exceed one year.

[Circular No.: SEBI/HO/CFD/CMD1/CIR/P/2022/47 dated 08.04.2022]

3. Securities and Exchange Board of India(Listing Obligations and DisclosureRequirements) (Fourth Amendment)Regulations, 2022:

The SEBI has notified the SEBI (ListingObligations and Disclosure Requirements)(Fourth Amendment) Regulations, 2022, whichshall come into force on the date of theirpublication in the Official Gazette.

SEBI vide this notification has provided thatthe listed entity shall comply with all theprocedural requirements as specified inSchedule VII of the SEBI (Listing Obligationsand Disclosure Requirements) Regulations,2015 with respect to transfer andtransmission of securities.

[Notification No. SEBI/LAD-NRO/GN/2022/80 dated 25.04.2022]

For, detailed text, please refer:

https://www.sebi.gov.in/legal/regulations/apr-2022/securities-and-exchange-board-of-india-l i s t i ng -ob l iga t i ons -and -d i sc lo su re -

Continued to page 118


Structural Defects liability under RERA

Section 14(3) of the RERA Act states that, “In caseany structural defect or any other defect inworkmanship, quality or provision of services orany other obligations of the promoter as per theagreement for sale relating to such development isbrought to the notice of the promoter within a periodof five years by the allottee from the date of handingover possession, it shall be the duty of the promoterto rectify such defects without further charge, withinthirty days, and in the event of promoter’s failure torectify such defects within such time, the aggrievedallottees shall be entitled to receive appropriatecompensation in the manner as provided under thisAct.”

Quality of construction was one of the majorconcern why RERA Act came into existence.RERA Act makes sure that the promoter is boundto provide quality in form of constructed units.Section 14 (3) eliminates the risk that allotee usedto face. “Structural Defects” is not specificallydefined under RERA Act, however states haveframed rules to define Structural defects.

Sub-clause (3) also ensures that in case anystructural defect or any other defect in theworkmanship, quality or provision of services anyother obligations of the promoter as per theagreement for sale relating to such development isbrought to the notice of the promoter within a periodof five years by the allottee from the date of handingover possession, it shall be the duty of the promoterto rectify such defects without further charge, withinthirty days. If he fails to do so, the allottees areentitled to receive compensation as provided underthe Act. This an important provision as it holds thebuilder/promoter liable even after the project iscomplete. Therefore, if the promoter used inferior

quality of goods and workmanship to get thingsdone or left out things to be done, he could be heldaccountable for the same.

Let us go through the meaning of structural defectsas defined by different states:

Structural Defects as per Haryana RERA Rules,2017:

“Structural defects” means actual physical damage/defects to the designated load-bearing elements ofthe building, apartment or unit like faults, breakageor cracks, appearing over time in elements such asload-bearing columns, walls, slabs, beams etc.which can affect the strength and stability of theapartment or the building and shall include any ofthe following namely:

(i) defects due to design attributes of reinforcedcement concrete (RCC) or structural mild steel(MS) elements of an engineered (structurallydesigned) building structure,

(ii) defects due to faulty or bad workmanship ofRCC or MS work,

(iii) defects due to materials used in such RCC orMS work,

(iv) major cracks in masonry work that are inducedas a result of failures of RCC or MS work,

(v) any defect which is established to have occurredon account of negligence, use of inferiormaterials or non-adherence to the regulatorycodes of practice by the promoter.

Note: As per the HRERA Rules, 2017 thepromoter shall not be liable for any such structural/architectural defect induced by the allottee, by meansof carrying out structural or architectural changesfrom the original specifications/ design.

CA. Manan Doshi [email protected]

GujRERA Corner


Structural Defects as per Telangana Rules, 2017:

“Structural defect or any other defect inworkmanship, quality or provision of services orany other obligations of the promoter as per theagreement for sale relating to such development isbrought to the notice of the promoter within a periodof five years by the allottee from the date of handingover possession, it shall be the duty of the promoterto rectify such defects within such time, theaggrieved allottees shall be entitled to receiveappropriate compensation in the manner as providedunder the Act”.

Notwithstanding anything contained in the aboveclause the following exclusions are made:

1. Equipment (lifts, generator, motors, STP,transformers, gym equipment etc.,) which carrymanufacturer’s guarantees for a limited period.

2. Fittings related to plumbing, sanitary, electrical,hardware, etc., having natural wear and tearAllowable structural and other deformationsincluding expansion quotient

3. The terms of work like painting etc., which aresubject to wear and tear.”

Examples of Structural Defect:

Weak foundation:

Foundation is the root of any house. What make ahouse structurally sound are a compact structure ofthe foundation framing and the roof. The signs ofpoor foundation in a building can be spotted if youare unable to close windows and doors, there isinadequate draining from the foundation, theconcrete is crumbling or flaking, there are rupturesor gaps, and if there is sloping, sagging or bucklingof the foundation floors or walls. The presence oftrees near a building can also destabilise itsfoundation and drains.

Cracks on the walls:

Variations in moisture and temperature causefrequent expansion and shrinkage of the concrete,causing cracks. Some minor cracks are static,undetectable and harmless. However, it can be acause for concern if the hairline crack continues towiden over a period of time and damages the

foundation. Multiple cracks in several rooms is anindication of a major structural problem, for whichan expert intervention should be sought.

Faulty plumbing:

Defects in the plumbing system happen due to oldor incompatible piping material used, as well asfaulty fixtures and waste lines. Incorrect installationof fixtures may lead to clogged drains, shower panleaks or toilet leaks. These also lead to mouldcontamination.

Improper electrical wiring:

Improper electrical wiring in a house often leadto insufficient power, lack of overload protectionand quite often dangerous wiring connections.

Non-functional heating and air-conditioningsystems:

A defect in the air conditioning and heating systemsin a building means inadequate cooling or heating.

Defects in flooring:

Grout not holding the tile to the floor, water seepingfrom under the foundation or exterior, buckling ofhardwood floor, widening of the crack of the tile –all of these hint at improper floor framework.

The RERA Act erroneously placed ‘structuraldefects’ and ‘bad workmanship’ in the same basketwhen it comes to allowing the buyer to trigger thecompensation clause within 5 years. Section14(3) of the RERA Act lays down that a promotermust rectify any structural defect or any other defectin workmanship, quality, or provision ofservices within 30 days of the buyer bringing it totheir notice.

The Act provides the buyer with a 5 year windowwithin which such defects can be brought up.‘Structural defects’ refer to defects in the entirestructure, i.e., the building. On the other hand,‘workmanship’ refers to defects within the unit,which the allotted must identify within a year oftaking possession of the unit. The Act gives theallotted so much time to bring them to the promoter’snotice, places a disproportionately heavy burdenon the promoter.

GujRERA Corner


The Act should include a provision where in amandatory third party inspection of a project at thetime of handover of the possession is made. Whilethe time period allowed for making claims againststructural defects has to be five years. This has tobe applicable from the date of completion of aproject and not the handover of possession. On theother hand, allowing claims against badworkmanship should be limited to one year fromthe date of handing over possession to the allottee.

Summarizing section 14:

Section 14 puts a mandatory obligation onpromoters to adhere to the sanctioned plans andproject specifications as approved by the competentauthority which may be developing authority,municipal corporation, town and country planningdepartment, etc., depending upon the land on whichthe building is to be constructed. Furthermore, itsays that no alteration, construction, additions willbe allowed in the building except if they fulfil certain

GujRERA Corner

criteria. This Section does not define what are minoralterations but it does define what are not minoralterations. So, increase in super area or the carpetarea, addition of columns or floors, addition of thecovered area of the building, etc. are not minoralterations. So any addition in building or any partcannot be made without prior intimation to theallottee. This all has been done to protect the interestof actual allottees of the land or otherwise it willlead to encroachment of someone else’s propertyright if consent has not been taken. It moreoverprovides for rights of the buyer or allottee and post-possession obligation upon the builder.

In case of a structural defect or any other defect inworkmanship, it shall be the duty of the promoterto rectify the same within thirty days and in the eventof failure to do so, the aggrieved allottees shall beentitled to compensation.

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Continued from page 115 Corporate Law Update

requirements-fourth-amendment-regulations-2022_58408.html

4. SEBI (Issue of Capital and DisclosureRequirements) (Second Amendment)Regulations, 2022:

SEBI has notified the SEBI (Issue of Capitaland Disclosure Requirements) (SecondAmendment) Regulations, 2022, which shallcome into force on the date of their publicationin the Official Gazette.

Vide this notification it is provided that theamendments relating to regulations 32(3A), 49,129, 145, clause (10) and clause (15) of Part Aof Schedule XIII and Schedule XIV carried outby the SEBI (Issue of Capital and Disclosure

Requirements) (Amendment) Regulations,2022 shall come into force in the followingmanner:

1) for public issues of a size less than Rs.10,000 crore and opening on or after April1, 2022; with effect from April 1, 2022;

2) for public issues of a size equal to or morethan Rs. 10,000 crore and opening on orafter April 1, 2022; with effect from July1, 2022.

[F. No. SEBI/LAD-NRO/GN/2022/82 dated27.04.2022]

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criminal activities that constitute offences under PartA and Part C of the schedule to PMLA.

It is the case of the Petitioner that one MukhtiarSingh and Swaran Singh were accused for beingfound in possession of Heroin and subsequently,the Respondents No. 1 and 2 were also arraignedas accused in the FIR on the statement of the co-accused Mukhtiar Singh and Sukhwant Singh,however, no recovery of contraband was made fromthe Respondents. Thereafter, learned Judge, SpecialCourt, Amritsar took cognizance and Chargesheetwas filed against all accused, including RespondentNo. 1 and 2. The Respondent No. 1- GagandeepSingh was charged, under Section 420 of the IPCfor cheating and under Section 468 of the IPC forforging certain other documents with the intentionof using them to cheat and under Section 471 ofthe IPC for fraudulently using a genuine documentthat he knew to be forged, and Respondent No. 2-Paramdeep Singh was charged under Section 25of the NDPS Act for knowingly using a car asconveyance for permitting it for the commission ofthe offence.

The Petitioner further contended that theRespondents were found to be involved in aninternational syndicate of laundering the moneygenerated out of drug trafficking in Australia andother countries. The “Operation Zanella” of theAustralian Federal Police revealed that the proceedsof the crime were laundered by the Respondents.Subsequently, on 22nd November, 2014, a CriminalComplaint under Section 45 of the PMLA was filedby the ED against all the Respondents forcommission of offence under Section 3 of thePMLA, on the basis of investigation carried out forthe alleged money laundering activities of theRespondents.

Directorate of Enforcement v. Gagandeep Singh& Ors.In the High Court of Delhi2022 SCC OnLine Del 514

Introduction

The Hon’ble High Court of Delhi in the instantCriminal Revision Petition filed by the Petitionerunder Section 397 of the Penal Code, 1860 readwith Section 401 of the Code of CriminalProcedure, 1973 and Section 47 of the Preventionof Money Laundering Act, 2002 (PMLA) seekingsetting aside of the order passed by the SpecialJudge, Patiala House Courts categorically held thatthe offence of money laundering is threefoldincluding the stages of placement, whereby firstlythe criminals place the proceeds of crime to thegeneral and genuine financial system, layering,whereby such proceeds of crime are spread intovarious transactions within the financial system andfinally, integration, where the criminals avail thebenefits of crime as untainted money.

Facts of the Case

The Petitioner initiated the criminal proceedingsagainst the respondents under PMLA on the basisof independent intelligence gathered by themregarding involvement of Respondents in moneylaundering activities. An FIR bearing No. 29/2011under Section 21/25/29/61 of the Narcotic Drugsand Psychotropic Substance Act, 1985 (hereinafter“NDPS Act”) and 420/468/471/120B of the IndianPenal Code, 1860 (hereinafter “IPC”) wasregistered by the State Special Operation Cell,Amritsar against the Respondents alongwith otheraccused, and a Mutual Assistance Request was alsoissued by the Australian Competent Authorityregarding the involvement of the Respondents in

Adv. Ankit [email protected]

Allied LawsCorner


The Respondents were acquitted of charges framedagainst them by the learned Additional SessionsJudge/Exclusive Court at Amritsar in FIR No. 29/2011 holding that the prosecution failed to lead anycogent or trustworthy evidence to prove that theRespondents entered into criminal conspiracy. Afterfurther investigation, a supplementary Complaintwas filed against the Respondents before the learnedSpecial Judge, Patiala House Courts, New Delhi,based on the documents received from AustralianFederal Police. A second supplementary complaintwas also filed on the basis of additionaldocumentary evidence received from theCommonwealth Bank, Australia before the learnedSpecial Judge, Patiala House, New Delhi.

Considering all the material before it, the learnedAdditional Sessions Judge, Patiala House Courts,New Delhi passed the Order by which all theRespondents No. 1 to 3 were discharged. It wasobserved by the learned Additional Sessions Judgethat as per the material available it cannot beestablished that the accused persons were involvedin any offence involving money laundering and thecomplaints have been made on the basis of suspicionof the Petitioner. It was further noted that anysuspicion which is not well founded cannot beconsidered a prima facie proof. A criminal revisionpetition was filed by the petitioner under Section397 of the Penal Code, 1860 read with Section 401of the Code of Criminal Procedure, 1973 andSection 47 of the Prevention of Money LaunderingAct, 2002 seeking setting aside of the order passedby the Special Judge, Patiala House Courtswhereby all the accused persons were dischargedon the ground that no prima facie case was madeout against them.

Arguments of the Parties

The counsel for Petitioner submitted thatRespondents No. 1 to 3 were active members ofmoney laundering syndicate and were involved intransferring the proceeds of crime generated fromdrug trafficking in Australia and the learnedAdditional Sessions Judge erred in concluding thatprima facie case was not made out against theRespondents. The Petitioner contended that the

Allied Laws Corner

Judge while passing the impugned Order has notappreciated that the documents relied upon, and thesupplementary complaints filed also corroboratedthat Respondents No. 1 to 3 have committed theoffence of money laundering under Section 3 ofPMLA by laundering the ill-gotten funds, dealingwith proceeds of crime generated through drugs andacquiring and concealing untainted property.

The Petitioner also submitted that the complaint aswell as the documents filed alongwith thecomplaints have been scrutinized by the Petitionerand they establish active involvement of theRespondents in transferring proceeds of crime onbehalf of the Organised Crime Group, generatedfrom drug trafficking. Further, the searches andinvestigation carried out revealed that there werecertain properties worth Crores of Rupees and largeamount of currency in possession of theRespondents, for which they were not able todisclose the source of income.

On the other hand, the counsel for Respondentsopposed the instant Criminal Revision Petition andsubmitted that there is no apparent error in thefinding of the learned Additional Sessions Judgewhile discharging the Respondents and theRespondents have not committed any offence asalleged by the Petitioner. The Respondentscontended that the primary and principal conditionfor initiation of investigation under the PMLA andto make out a case under Section 3 of the Act, isthe commission of a scheduled offence from whichthe proceeds of crime are culminating and that thereis an umbilical cord connection between thescheduled offence and the offence of moneylaundering. The Respondents further submitted thatsubmitted that in the event of the proceedings underthe investigation/trial into the scheduled/predicateoffence result in recording of a finding that neitheris the person concerned involved in any criminalactivity relating thereto, nor have any proceeds ofcrime been derived or obtained therefrom, noproceedings/trial under PMLA can continue andthe learned Special Judge has rightly dischargedthe Respondents in view of the fact that the onlyscheduled offence which was alleged against the


Respondents was under NDPS Act and even withrespect to the alleged schedule offences, the SpecialCourt (NDPS), Amritsar, held that there was noinvolvement of the Respondents in the same.

Findings of the Court

The High Court firstly observed that the offence ofmoney laundering under the PMLA is layered andmulti-fold and includes the stages preceding andsucceeding the offence of laundering money aswell. Further, the Bench stated that the offence ofmoney laundering, is not to be appreciated inisolation but is to be read with complementaryprovisions. The bare perusal of the provisions ofPMLA such as Section 2 to 4 of the Act establishesthe pre-requisite relation between the commissionof scheduled offences under the PMLA and thesubsequent offence of money laundering. Thelanguage of Section 3 clearly implies that the moneyinvolved in the offence of money laundering isnecessarily the proceeds of crime, arising out of acriminal activity in relation to the scheduledoffences enlisted in the Schedule of the Act. Hence,the essential ingredients for the offence of Section3 of the PMLA become, first, the proceeds of crime,second, proceeds of crime arising out of the offencesspecified in the Schedule of the Act and third, thefactum of knowledge while commission of theoffence of money laundering.

The Hon’ble High Court expressed that, since noscheduled offence was made out against theRespondents, the Court found that an investigationand proceedings into the PMLA could not havebeen established against the respondents at the firstinstance. Further, Section 397 CrPC unequivocallystates that the High Court or Sessions Courts whichis exercising its revisional jurisdiction shall appriseitself solely of the question of correctness, legality

and propriety of the order of the Subordinate Courtand stated that in its revisional jurisdiction, the Courtshall not proceed into the enquiry of the records,documents and other evidence in considerationbefore the Trial Court, but shall constrain itself tothe findings of the lower Court in the impugnedorder and to the question whether there is any patentillegality, error apparent on record or incorrectness.

The Bench remarked that the extent of exercise ofdiscretion by the Court was limited to the primafacie satisfaction of the Court and if the Court doesnot find reasonable grounds of suspicion againstthe accused, it may discharge him of the offencealleged against him. In this case, the AdditionalSessions Judge did not find any evidence broughton record to show that the accused persons wereinvolved in the commission of the offences allegedagainst them and therefore this Court found noillegality or impropriety in the lower court’s decision,hence the petition was dismissed.

Conclusion

Considering the arguments advanced by the parties,contentions made in the pleadings and on perusalof the impugned Order, this Court does not findany cogent reason to interfere with the Order of thelearned Additional Sessions Judge, Patiala HouseCourts, New Delhi in the revisional jurisdiction.The Court interestingly observed that the offenceof money laundering under PMLA is layered, multi-fold and includes stages preceding and succeedingthe offence of laundering money.

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Allied Laws Corner


· RBI’s step was long overdue and was expected,however the sudden decision led to fall ofaround 2.3% in the market. Number of bankslike HDFC, Canara, BoM have increased theirlending rates post hike by RBI.

· As we have been covering from quite some time,globally Inflation is plaguing most of thecountries due to factors like liberal central bankpolicies post covid, abundant liquidity andgeopolitical factors like Ukraine war. Manycentral banks have now started to tightenmonetary policies Eg. US, UK.

· India’s GST collection again hit all-time high ofRs. 1.68 Lakh Crore in April on account ofincreased compliance, better tax administrationand improved economic activity. Earlier inMarch also the GST collection of Rs. 1.42 LakhCrore was a record. GST collections have nowremained over Rs. 1 lakh Crore for consecutive10 months.

Economic impact of Russia-Ukraine War:

· Russia-Ukraine war is still ongoing with largenumber of casualties and has caused largestrefugee crisis in Europe since World War II withmore than 6.1 million Ukrainians fleeing thecountry and a quarter of the population displaced.

· While Russia continues to assault and holdterritory in southern and eastern Ukraine in theareas around Kharkiv, Donetsk and Luhansk,the western military powers believe that theRussian military advances is faltering.

· Against expectations, the Russia has notdefaulted on foreign debt and Ruble is close toprewar levels, however the western sanctionsshould have long term impact on the economy.

Summary:

RBI, in an unscheduled meeting, has increasedbank rates for the first time in last three years toaddress inflation concerns. While Indian Economyis doing well with record GST collections in April,Geopolitical concerns and inflationun certaintiesremain. Stock Markets are in a bearish grip due totightening of monetary policies by central banksacross the world.

Key M&A Deal include massive announcement ofamalgamation of HDFC and HDFC Bank and PEdeal of healthtech firm Biofourm is raising $300Mn growth capital from General Atlantic to becomea unicorn.

Economic Update:

· RBI took an unscheduled monetary policydecision on 4th May to increase interest rates forthe first time in last three years; Repo rate isincreased by 40 bps to 4.40% and CRR isincreased by 50 bps to 4.50%.

· Urgency in increasing the rates in anunscheduled meeting is clearly to addressinflation which is becoming broad based. Ratehike is one of the primary tool of RBI to controlinflation as rate hike reduces the availability ofcredit. CRR is hiked to reduce excess liquidityof approx. Rs. 87000 Crore from the system.

· Inflation accelerated to 7.79% in April 2022,which is highest in eight years, above the RBIset limits of 4% ± 2% (Upper limit of 6%).

· RBI governor said that RBI will engage ingradual withdrawal of liquidity in multi-year timeframe in non-disruptive manner beginning thisyear.

CA. Karan [email protected]

CapitalMarkets


· This war has only complicated the post Covidrecoveries of number of low and mid incomeeconomies due to global demand and supplychain shocks and inflation due to prices offoodand oil & gas.

Sri Lanka Economic crisis:

· As covered last month, Sri Lanka has beengoing through Economic crisis and protests arestill ongoing. Initially peaceful protestors haveasked for number of reforms.

· As on date the PM Mahinda Rajapaksa has beenforced to resign from his position on 9 May andseasoned politician and Ex-PMRanilWickremesinghe is appointed as the new PMon 12 May along with the new cabinet.

Trends in Secondary Markets:

BSE Sensex started bullish in the month of Apriland crossed 60,000 points on 5th April, however itsoon corrected and closed at 57,601 in April end2022, down by 2.57% in the month. Nifty 50 closedat 17,103 that is 2.07% correction in the month ofApril. The correction was on account of inflationconcerns, climbing U.S. bond market yields,strengthening dollar and weaker than expected Q4results of IT companies like Infosys and blue chip

Capital Markets

companies like HDFC. Global markets have alsoremained weak as investors expect tightening ofpolicies by central banks to address inflation.

Foreign Institutional Investors (FIIs) divestedRs.40,652 Crore (Net Sales) while DomesticInstitutional Investors (DIIs) invested Rs. 29,870Crore (Net purchases) from the Indian equitymarkets in the month of April 2022.

Equity Markets Apr-22 Mar-22 Change%Sensex 57,061 58,569 -2.57%Nifty 50 17,103 17,465 -2.07%BSE 500 23,552 23,695 -0.61%BSE Bankex 41,534 41,754 -0.53%BSE ConsumerDurables 42,667 42,272 0.93%BSE Healthcare 24,341 24,304 0.15%BSE FMCG 14,082 13,335 5.60%


· BSE Indices of power, utility, FMCG andEnergy showed gains in April while IT, Techand telecom were down.

· While IT has corrected in month of April due toover valuations, IT sector has shown consistentgrowth. Top three IT service providers, TCS,Infosys and HCL have added almost 2 lakh netrecruits in FY2022 showing robust growth inrevenue.

· Infosys has recorded highest annual growth inrevenue in a decade, it’s MD commented thatInfosys has robust deal pipeline to have 13 to15% growth in 2023, unlikely to be impactedby prevailing geopolitical issues. Mindtree’s Q4profit surged by 50% year on year.

· Metal sector has also been bullish recently. Tatasteel MD commented that the steel prices willremain higher in next decade compared to lastdecade as China decreases its exports and thedemand improves around the globe. China hascut down its steel exports to meet its emissiongoals.

· Reliance Industries has reported 22.5% rise inQ4 profit on account of high oil refining marginsdue to Russia-Ukraine war, steady growth intelecom and growth in retail business.

Primary market Update:

There were three main board IPOs of UmaExports Limited, Veranda Learning SolutionsLimited and Hariom Pipe Industries Limited inApril 2022 as against none in March 2022. Therewere three SME IPOs of Dhyaani Tile andMarblez Ltd., Sunrise Efficient Marketing Limitedand Eighty Jewellers Limited as against four SMEIPOs in March 2022.

Particulars Feb-22 Mar-22

I. Equity Issue 9,671 4,461

a. IPOs (i+ii) 6,831 175

i. Main Board 6,749 0

ii. SME Platform 82 175

b. FPOs 0 0

c. Equity Rights Issue 112.64 878.9

d. QIP/IPP 1,952 2,079

e. Preferential Allotment 775 1,329

II.Debt Issue 49,999 77,732

a. Debt Public Issue 695 178

b. Private Placement of Debt 49,304 77,554

Total Funds Mobilised (I+II) 59,670 82,193

Mergers and Acquisitions (M&A)and PrivateEquity (PE)key deals:

M&A: HDFC to merge with HDFC Bank:

Transaction:

· In one of the largest deal of Indian financialsector (provided that it is approved by RBI)Board of Directors of HDFC Limited (HDFC)and HDFC Bank Limited (HDFC Bank)announced a scheme of amalgamation of: (i)HDFC Investments Limited and HDFCHoldings Limited, with and into HDFC Limited;and (ii) HDFC Limited with and into HDFCBank.

· Shareholders of HDFC Limited will receive 42shares of HDFC Bank (each of face value ofRe.1), for 25 shares held in HDFC Limited (eachof face value of Rs.2), and the equity share heldby HDFC Limited in HDFC Bank will beextinguished as per the Scheme.

· As a result of this scheme HDFC Bank will be100% owned by public shareholders and existingshareholders of HDFC Limited will own 41%of HDFC Bank.

Capital Markets


HDFC Bank Limited:

· Headquartered in Mumbai, India, HDFC BankLimited is a banking and financial servicescompany. It is India’s largest private sector bankby assets.

· HDFC Bank has more than 68 million customers,6,342 branches and a full suite of credit, liabilityand distribution offerings with deeprelationships, insights and understanding of itscustomers built over multiple decades.

HDFC Limited:

· HDFC Ltd is a housing finance company basedin Mumbai, India. HDFC Ltd offers a range ofloan products. It has undertaken severalconsultancy assignments in housing finance invarious countries across Asia, Africa and EastEurope.

· HDFC has a distribution network of 651interconnected offices and 3 representativeoffices in Dubai, London and Singapore.

Rationale:

· The combined asset book of HDFC and HDFCbank will make, combined entity second largestbank after SBI, with the asset book almostdouble the size of third largest bank, ICICI.

· Combined entity will bring complementarystrengths of both entities with product leadershipof HDFC and distribution and customerleadership of HDFC bank to cross sale acomplete suite of financial products.

· Sources of funds of HDFC were drying up asnumber of Indian lenders had reached ceilingon how much they could lend to HDFC. Post-merger the combined entity will be able toborrow more due to support of HDFC bank.

· HDFC will get access to cheaper capital ofHDFC bank, made up of large current accountsaving account(CASA) balance.

· Since last few years, especially after IL&FScrisis, RBI has introduced stringent norms forNBFCs to make them work like banks, likeregulation for increased reserves and liquidityrequirements. This made operations for NBFCs

like HDFC more challenging and made sensefor a merger with HDFC Bank. In fact this trendof conversion of large NBFCs to Bank shouldonly continue in future.

· Market cheered the strategic rational of deal asboth HDFC and HDFC bank shares registeredgains of close to 10% on announcement of deal,however later on the share prices have fallensubstantially due to concerns about RBI

approvals to merger and general correction inmarket.

PE: Biofourmis raises $300 Mn from GeneralAtlantic to become a unicorn:

Transaction:

· Biofourmis, a healthtech startup announced thatit has become a unicorn with $300 Million SeriesD investment, at a valuation of $1.3 Billion, led

by leading global private equity firm GeneralAtlantic.

· CVS Health (NYSE: CVS) and existinginvestors also participated in the round.

Biofourmis:

· Biofourmisprovides advanced technology andclinical support for Care@Home and digital

therapies. It personalizes care and predictsclinical worsening before it happens.

Capital Markets


· The platform, powered by machine learning andadvanced analytics, enables better healthcare,maximizes the effectiveness of high-value drugs,and lowers costs across the entire carecontinuum.

General Atlantic:

· General Atlantic, established 1980, is a leadingglobal growth equity firm with over four decadesof experience in providing capital and strategicsupport to over 445 growth companiesthroughout its history.

· Fund has over $84 billion in assets undermanagement and has more than 215 investmentprofessionals across the globe.

Rationale:

· With this fund raise, Biofourmis plans to scaleup its virtual care offerings which includesdelivering personalized and predictive in-homecare to acutely ill patients and expanding itsrecently announced virtual specialty careservices, Biofourmis Care, to those patients withcomplex chronic conditions.

· In parallel, Biofourmis plans to fund clinicaltrials to advance the development of digitaltherapies that work in conjunction with high-value drugs to improve efficacy.

· It also plans on forming strategic partnershipsand accelerate the growth of its virtual careplatform, Care@Home, which enables providersand payers to remotely manage patients (RPM).

It believes that traditional RPM solutions arefocused on “monitoring” as opposed to proactive“management” of patients.

· General Atlantic said that they see a significanttrend towards virtual at-home care, which hasbecome a critical alternative to in-person careand Biofourmis is differentiated by technologysolutions underpinned by its deep clinicalresearch and personalized treatments.

· Kuldeep Singh Rajput, Founder &CEO ofBiofourmis said that “We are excited to partnerwith General Atlantic, which shares our visionfor the future of virtual care and the urgency tobring the Biofourmis solution to customers andpatients across the globe.”

· Earlier Biofourmishad raised $100 million SeriesC funding round led by SoftBank Vision Fundin September 2020.

· To date, Biofourmis has raised a total of $445million in funding. Existing investors includeSoftBank Vision Fund 2, Openspace Ventures,Mass Mutual Ventures, Sequoia Capital andEDBI.

Acknowledgements: RBI Bulletin(www.bulletin.rbi.org.in), SEBI(www.sebi.gov.in), NSE (www.nseindia.com),BSE (www.bseindia.com)

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Capital Markets


Revenue from Contracts with CustomerSummary of Significant Accounting Policies

Reliance Industries LimitedRevenue RecognitionRevenue from contracts with customers isrecognised when control of the goods or servicesare transferred to the customer at an amount thatreflects the consideration entitled in exchange forthose goods or services. The Company is generallythe principal as it typically controls the goods orservices before transferring them to the customer.

Generally, control is transferred upon shipment ofgoods to the customer or when the goods is madeavailable to the customer, provided transfer of titleto the customer occurs and the Company has notretained any significant risks of ownership or futureobligations with respect to the goods shipped.

Revenue from rendering of services is recognisedover time by measuring the progress towardscomplete satisfaction of performance obligations atthe reporting period.

Revenue is measured at the amount of considerationwhich the Company expects to be entitled to inexchange for transferring distinct goods or servicesto a customer as specified in the contract, excludingamounts collected on behalf of third parties (forexample taxes and duties collected on behalf of thegovernment). Consideration is generally due uponsatisfaction of performance obligations and areceivable is recognised when it becomesunconditional. Generally, the credit period variesbetween 0-60 days from the shipment or deliveryof goods or services as the case may be. TheCompany provides volume rebates to certaincustomers once the quantity of products purchasedduring the period exceeds a threshold specified andalso accrues discounts to certain customers based

on customary business practices which is derivedon the basis of crude price volatility and variousmarket demand – supply situations. Considerationare determined based on its most likely amount.Generally, sales of petroleum products containprovisional pricing features where revenue isinitially recognised based on provisional price.

Difference between final settlement price andprovisional price is recognised subsequently. TheCompany does not adjust short-term advancesreceived from the customer for the effects ofsignificant financing component if it is expected atthe contract inception that the promised good orservice will be transferred to the customer within aperiod of one year.

Contract BalancesTrade ReceivablesA receivable represents the Company’s right to anamount of consideration that is unconditional.Contract LiabilitiesA contract liability is the obligation to transfer goodsor services to a customer for which the Companyhas received consideration (or an amount ofconsideration is due) from the customer. If acustomer pays consideration before the Companytransfers goods or services to the customer, acontract liability is recognised when the paymentis made or the payment is due (whichever is earlier).Contract liabilities are recognised as revenue whenthe Company performs under the contract.Interest IncomeInterest Income from a Financial Assets isrecognised using effective interest rate method.Dividend IncomeDividend Income is recognised when theCompany’s right to receive the amount has beenestablished.

CA. Pamil H. [email protected]

FromPublishedAccounts


From Published Accounts

Hindustan Zinc LimitedRevenue recognitionSale of goodsRevenue from contracts with customers isrecognised when control of the goods or services istransferred to the customer which usually is ondelivery of the goods to the carriers at an amountthat reflects the consideration to which the Companyexpects to be entitled in exchange for those goods orservices. Revenue is recognised net of discounts,volume rebates, outgoing sales taxes/ goods andservice tax and other indirect taxes. Revenues fromsale of by-products are included in revenue.Certain of the Company’s sales contracts providefor provisional pricing based on the price on theLondon Metal Exchange (LME), as specified inthe contract. Revenue in respect of such contractsis recognised when control passes to the customerand is measured at the amount the entity expects tobe entitled – being the estimate of the price expectedto be received at the end of the measurement period.Post transfer of control of goods, provisional pricingfeatures are accounted in accordance with Ind AS109 ‘Financial Instruments’ rather than Ind AS 115and therefore the Ind AS 115 rules on variableconsideration do not apply. These ‘provisionalpricing’ adjustments i.e. the consideration receivedpost transfer of control are included in total revenuefrom operations on the face of the Statement ofProfit and loss. Final settlement of the price is basedon the applicable price for a specified future period.The Company’s provisionally priced sales aremarked to market using the relevant forward pricesfor the future period specified in the contract and isadjusted in revenue.Revenue from freight and insurance services isrecognised over the period during which servicesare rendered.A contract asset is the right to consideration inexchange for goods or services transferred to thecustomer. If the Company performs by transferringgoods or services to a customer before the customerpays consideration or before payment is due, acontract asset is recognised for the earnedconsideration when that right is conditional onCompany’s future performance.

A contract liability is the obligation to transfer goodsor services to a customer for which the Companyhas received consideration (or an amount ofconsideration is due) from the customer. If acustomer pays consideration before the Companytransfers goods or services to the customer, acontract liability is recognised when the paymentis made or the payment is due (whichever is earlier).Contract liabilities are recognised as revenue whenthe Company performs under the contract.The Company does not expect to have any contractswhere the period between the transfer of thepromised goods or services to the customer andpayment by the customer exceeds one year. As aconsequence, the Company does not adjust any ofthe transaction prices for the time value of money.Sale of wind energyRevenue from sale of wind power is recognisedwhen delivered and measured based on rates as perbilateral contractual agreements with buyers and atrate arrived at based on the principles laid downunder the relevant Tariff Regulations as notified bythe regulatory bodies, as applicable.DividendsDividend income is recognized in the statement ofprofit and loss only when the right to receivepayment is established, provided it is probable thatthe economic benefits associated with the dividendwill flow to the Company, and the amount of thedividend can be measured reliably.Interest incomeInterest income from a financial asset is recognizedwhen it is probable that the economic benefits willflow to the Company and the amount of incomecan be measured reliably. Interest income is accruedon a time basis, with reference to the principaloutstanding and at the effective interest rateapplicable, which is the rate that exactly discountsestimated future cash receipts through the expectedlife of the financial asset to that asset’s net carryingamount on initial recognition.Others RevenueRelating to insurance claims and interest on delayedor overdue payments from trade receivable isrecognized when no significant uncertainty as tomeasurability or collection exists.

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Goods and Service Tax

1. Reporting 6% rate in GSTR-1

A new tax rate of 6% IGST or 3% CGST+ 3%SGST has been introduced on certain goodsvide Notification No. 02/2022 dated 31stMarch 2022. Changes are being made on theGST portal to include this rate in GSTR-1. Asa temporary measure, taxpayers who have toreport goods at this rate may do so by reportingthe entries in the 5% heading and then manuallyincreasing the system computed tax amount to6%. This can be done by entering the value inthe ‘Taxable value’ column next to 5% tax-rateand then increasing the system computed tax-amount to 6% IGST or 3% CGST + 3% SGSTin the ‘Amount of Tax’ column under therelevant Table, namely B2B, B2C or Export,as applicable. This will ensure that correct taxamount is reported in GSTR-1. Meanwhile, thisrate will be made available on the GST portalshortly.

(GST News and Updates, dated 10/05/2022)

2. Annual Aggregate Turnover (AATO)computation for FY 2021-22

The functionality of AATO for the FY 2021-22 has now been made live on taxpayers’dashboards with the following features:

· The taxpayers can view the exact AnnualAggregate Turnover (AATO) for theprevious Financial Year (FY).

· The taxpayers can also view the AggregateTurnover of the current FY based on thereturns filed till date.

CA. Kunal A. [email protected]

From theGovernment

· The taxpayers have also been provided withthe facility of turnover updation in casetaxpayers feel that the system calculatedturnover displayed on their dashboard variesfrom the turnover as per their records.

· This facility of turnover update shall beprovided to all the GSTINs registered on acommon PAN. All the changes by any ofthe GSTINs in their turnover shall besummed up for computation of AnnualAggregate Turnover for each of theGSTINs.

· The taxpayer can amend the turnover twicewithin the month of May, 2022. Thereafter,the figures will be sent for review of theJurisdictional Tax Officer who can amendthe values furnished by the taxpayerwherever required.

(GST News and Updates, dated 02/05/2022)

Income Tax

1. Notification regarding Amendment in Form3CF

In exercise of the powers conferred by clauses(i), (ii), (iii) and (iv) of first proviso toclause(23C) of section 10, ninth proviso toclause(23C) of section 10, sub-clauses (i) (ii),(iii), (iv), (v) and (vi) of clause(ac) of sub-section (1) of section 12A, sub-section (3) ofsection 12AB, first and fifth proviso to sub-section (1) sub-section (1A) of section 35,clauses (i), (ii), (iii) and (iv) of first proviso tosub-section (5) of section 80G, third proviso tosub-section (5) of section 80G, clauses (viii)

CA. Ashwin H. [email protected]


and (ix) of sub-section (5) of section 80G, readwith section 295 of the Income-tax Act, 1961(43 of 1961), the Central Board of Direct Taxeshereby makes the following rules further toamend the Income-tax Rules, 1962 byamending forms:-

- 3CF

- 10A

- 10AB

- 10BD

- 10BE

(For Full Text and new amended forms ,refer Notification No 51 , dated 09/05/2022)

2. CBDT amends Income Tax rule 114 related toApplication for allotment of a PAN and insertsnew Rule 114BA. Transactions for the purposesof clause (vii) of sub-section (1) of section139A and Rule 114BB. Transactions for thepurposes of sub-section (6A) of section 139Aand prescribed person for the purposes of clause(ab) of Explanation to section 139A videNotification No. 53, dated 10/05/2022.

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From the Governments

ADVERTISEMENT RATES OFAHMEDABAD CHARTERED ACCOUNTANTS JOURNAL

FOR FY 2021-22(Journal Advertisement size 10.5' length and 8' width letter size)

Page Monthly Quarterly Half yearly Yearly(Single (Three (Six (Ten

Insertion) Insertions) Insertions) Insertions)

Back Cover (Four Colour) 15000 40000 80000 125000

Inside Front (Four Colour) 10000 27000 50000 85000

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Inner Full Page (single Colour) 5000 14000 27500 42500


Understanding ONDC (Open Network forDigital Commerce) – the next UPI?

The Story

Remember what Dunzo (a grocery delivery app)did in the early days when they were just startingout?

They promised to deliver items from yourneighbourhood stores and they promised to do it ina timebound manner. And to achieve this objective,they had to on board stores, help them digitize theiroperations, offer them specialized solutions tomanage and catalogue their inventory and they hadto do it at scale. It was an unenviable task.

But at the end of it all, they managed to on boardseveral thousand stores and they’re still building onthis each day.

Or take for instance eSamudaay — a company thatdoes something very similar. If you downloadedtheir app, you could find Sujatha General Store —a small retailer in the coastal city of Udupi. Youcould browse their catalogue, order a packet ofNandini milk and you could get it delivered rightto your doorstep.

And if you’re wondering where this discussion isheading to, well, here’s the thing. There are severalcompanies that are trying to take your mom andpop shops online. Some entities are focused ondigitization. Others like Dunzo do everything —from discovery to delivery. Unfortunately, they alloperate in silos. You can’t find Sujatha GeneralStore on most e-commerce applications. And youprobably didn’t even know eSamudaay existed untilnow.

CA. Rushabh [email protected]

IT Corner

But what if you could find every retailer on everye-commerce app, irrespective of who onboardedthem? What if you could fire up Paytm on a lazySunday afternoon and order from a local Kiranastore in Guntur, even if Paytm had never heard ofthem?

Sounds like it would be a great thing.

However, this begets a few challenges. For starters,why would somebody like eSamudaay want theirretailers to be available on Paytm. After all, theydid all the hard work, onboarding these small stores,helping them with cataloguing and inventory andgetting them digital-ready. Why would they makethese stores available on a different app like Paytm?

Well, despite what you may think of Paytm, it offersreach. You may not have downloaded theeSamudaay app, but you probably have Paytm onyour phone. And if more deliveries flow throughthe app, you could figure out ways how to rewardeSamudaay in the process as well. So in effect, thisisn’t the greatest challenge. If anything both Paytmand eSamudaay have strong incentives to make thishappen.

The real challenge however is interoperability.

How do you get the Paytm app and the eSamudaayapp to talk to each other. And how do you do it atscale?

Right now, there are many companies likeeSamudaay, that are helping your local neighbourstores go online, including retailers that are tryingto go online on their own accord — using enterprisesolutions available on the market. And consumershave several e-commerce apps at their disposal,alongside Paytm. So you can’t have each individual


entity trying to integrate with every other entity outthere. It would be a logistical nightmare.

Instead, what you need is something in between— an open network pioneered and promoted by aneutral entity that will help the likes of Paytm talkto the likes of eSamudaay. They have to work onthe solution, set the ground rules, evangelize theoffering and push for adoption.

And that’s precisely what the Open Network forDigital Commerce (ONDC) is expected to do. Thecommerce ministry is spearheading the initiative andthe entity i.e. ONDC is structured as a non-profitorganization with about 150 crores in funding.

And look we’re not just talking about retailstores here. You could even onboard hotels,restaurants, and last-mile delivery partners. Ifeverything goes according to plan, consumerswill have more choices and sellers will have alarger audience. Let us illustrate thiswith another example quoted by ONDC in amasterclass they conducted a few months ago.

On a Sunday afternoon, Rushabh logs into Paytmand searches for options to buy Atta. The ONDCnetwork will kick into action and relay this searchitem to seller apps like eSamudaay. He then receivestwo options on the Paytm app.

1. Gupta Kirana Store — Rs. 50 (withoutdelivery)

2. Nearshop (fulfilled by Modern Kirana store)— Rs. 150 (with delivery)

Rushabh chooses to order the Atta through “GuptaKirana store”. However, since the store doesn’tfacilitate deliveries, he will have to choose adelivery option. Once again, he will search forsomething near his location and the ONDC network

will relay all the options available to him. This iswhat he will see on Paytm.

1. Dunzo at Rs. 50

2. Goodbox at Rs. 70

Rushabh chooses to go with Dunzo and he finallymakes the payment.

I’ve embellished the example and simplified it forgreater clarity, but hopefully, the use case isapparent by now. This is a game-changer and aswe speak, about 150 handpicked retailers on appslike eSamudaay have already connected to theONDC network and are showcasing their wares toconsumers on Paytm. It’s a pilot — a soft launchcurrently happening in Delhi, Bengaluru, Bhopal,Coimbatore and Shillong. And the products willbe delivered through Goodbox — the only logisticsprovider that has been onboarded so far.

In all honestly, this could revolutionize digitalcommerce in India.

However, like all things, there are afew unanswered questions here. For starters, whotakes the liability when things go wrong? Whenyou are interacting with just one entity, you knowwho to blame. But when you have so many movingparts involved, it gets a bit challenging. There’s alsothe question of discounts. Can small retailers reallycompete with massive retailers who can offer deepdiscounts?

Well, we don’t know. But for now, everybody isexcited about ONDC and the infinite potential itholds. So we will just have to wait and see how thepilot takes off.

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IT Corner


CA. Jay B. ParekhHon. Secretary

CA. Mayur H. ModhaHon. Secretary

AssociationNews

71st Annual General Meeting

1 At the 71st Annual General Meeting of the members of the Chartered Accountants AssociationAhmedabad held on Saturday, 7th May 2022 at Shantinath Hall, Ahmedabad, the following OfficeBearers and Executive Committee Members have been declared elected for the year 2022-23.

Office Bearers

1 CA. Sarju Mehta President 2 CA. Shivang Chokshi Vice - President

3 CA. Jay Parekh Hon. Secretary 4 CA. Mayur Modha Hon. Secretary

Executive Committee Members

1 CA Jignesh Shah 2 CA Kshitij Patel 3 CA Vartik Choksi

4 CA Nirav Chokshi 5 CA Atul Shah 6 CA Uday Shah

7 CA Riken Patel 8 CA Jinand Shah 9 CA Rinkesh Shah

The following prizes and Medals were declared:

Best Article in Ahmedabad Chartered Accountants Journal

Name of the Trophy Name of the Recipient Name of the Article published inthe Journal

Shri U. R. Shah Memorial CA. Jainam P. Shah & “Cryptocurrency – Trending Global Funds Trophy for Best Article on CA Brij Shah Currency: Accounting & Taxation” Corporate and Other Laws.

Shri Gatorbhai Patel Shiva Pharma CA Sunil Talati “Taxation of Partnership Firm under Foundation Trophy for Best Article section 9B and 45(4) of the Income on Direct Taxes (Taxation) Tax Act, 1961”

Champaben Chandulal Shah CA Nitesh Jain “GST on Ice Cream – a cold affair” Memorial Trophy

Best Study Circle Meeting Leader

Sr. Name of the Trophy Name of the Recipient Name of the Study Circle Meeting

1 Shri Dwarkadas B. Shah CA Palak Pavagadhi “Interactive Session on ProvisionsMemorial Trophy for the Best Lead of TDS, TCS and E-Filing portal 2.0“Study Circle Meetingin 2021-22


List of students, whose names have been declared for Medals / Prizes for the exams held in November2020 and January 2021

Sr. Medal Name Award for Final Exam Attempt Name of the Recipent

1 Avinash J. Buddhdev CA Final Exams MAY 2021 Divesh Dilip HarpalaniMemorial CA Student TopperAward (Cash Prize CA Final Exams DEC 2021 Saloni Manoj GolechhaRs. 11,000) Topper

2 Kantilal V. Patel Best Student in MAY 2021 Divesh Dilip HarpalaniMemorial Medal (MAY 2021) A'bad

3 Mahendra M. Patel Best Student in DEC 2021 Saloni Manoj GolechhaMemorial Medal Ahmedabad

4 H. V. Vasa Best Student in MAY 2021 Divesh Dilip HarpalaniMemorial Medal Ahmedabad DEC 2021 Saloni Manoj Golechha

5 A. M. Thaker Best Lady Student MAY 2021 Astha Mukesh MalooMemorial Medal in Ahmedabad DEC 2021 Saloni Manoj Golechha

6 Chandulal M. Shah Highest marks in MAY 2021 Divesh Dilip HarpalaniMemorial Medal Paper 1 – DEC 2021 Saloni Manoj Golechha

Financial Reporting

7 VNS & BNS Social Highest marks in MAY 2021 Yesh Shreyas ChokshiWelfare Medal Paper 2 – Strategic

Financial DEC 2021 Saloni Manoj GolechhaManagement

8 Dhirubhai B. Shah Highest marks in MAY 2021 Amit Anilkumar VidhaniMemorial Medal Paper 3 – Advanced

Auditing and DEC 2021 Kashish HemanshubhaiProfessional Ethics Bavishi

9 Mansukhbhai J. Highest marks in MAY 2021 Yesh Shreyas ChokshiShah Medal Paper 4 – Corporate

and Economic Laws DEC 2021 Saloni Manoj Golechha

10 Madhuben Prafulbhai Highest marks in MAY 2021 Divesh Dilip HarpalaniTrivedi Memorial Paper 5 - StrategicMedal Cost Management DEC 2021 Kashish Hemanshubhai

and Performance BavishiEvaluation

11 VNS & BNS Social Highest marks in MAY 2021 Hill Mahesh ShahWelfare Medal Paper 6 –

Elective Paper DEC 2021 Saloni Manoj Golechha

12 A. M. Gang Highest marks in MAY 2021 Divesh Dilip HarpalaniMemorial Medal Paper 7 – Direct

Taxes Laws & DEC 2021 Premal Brijesh BhavsarInternationalTaxation

13 C. F. Patel Highest marks in MAY 2021 Divesh Dilip HarpalaniMemorial Medal Paper 7 – Direct

Taxes Laws & DEC 2021 Premal Brijesh BhavsarInternationalTaxation

Association News


Sr. Medal Name Award for Final Exam Attempt Name of the Recipent

14 Jagrutiben K. Shah Highest marks in MAY 2021 Hareshkumar NileshkumarMemorial Medal Paper 8 – Indirect Patel

Taxes Laws DEC 2021 Saloni Manoj Golechha15 Sandesh Mundra Best Student for the MAY 2021 Saloni Manoj Golechha

Memorial Medal year 2020-21 -Paper 8 – IndirectTaxes Laws

16 Shri K. T. Thakore Best Student in MAY 2021 Saksham JainMemorial Medal Ahmedabad

17 Rameshchandra S. Best Student in DEC 2021 Simar Kaur HudaShah Memorial Medal Ahmedabad

18 B. S. Soni Best Student in MAY 2021 Saksham JainMemorial Medal Ahmedabad DEC 2021 Simar Kaur Huda

19 Hasmukhbhai J. Patel Highest marks in MAY 2021 Nisha Kishor MandaviMemorial Medal Paper 1 – Accounting DEC 2021 Simar Kaur Huda

20 Shri V. R. Shah Best Student in DEC 2021 Riya Kunjankumar ShahMemorial Medal Ahmedabad for

Paper 2 – Corporate& Other Laws

21 Lalita Khanchand Highest marks in MAY 2021 Deep Hitendra ParikhTekwani Memorial Paper 3 – Cost andMedal Management DEC 2021 Simar Kaur Huda

Accounting22 VNS & BNS Social Highest marks in MAY 2021 Kirtikumar Vipulbhai

Welfare Medal Paper 4 – Taxation DEC 2021 Axay Niravbhai Shah23 Rameshchandra S. Highest marks in MAY 2021 Parth Deepak Bansal

Shah Memorial Medal Paper 5 – AdvancedAccounting DEC 2021 Kush Dhananjay Patel

24 Nikhil M. Patel Highest marks in MAY 2021 Saksham JainMemorial Medal Paper 6 – Auditing

and Assurance DEC 2021 Simar Kaur Huda25 Mansukhbhai J. Shah Highest marks in MAY 2021 Pervez Alam Jahagir

Medal Paper 7 – EnterpriseInformation Systems DEC 2021 Kevin Mahendra Kothari& StrategicManagement

26 Office Bearers Highest marks in MAY 2021 Prarthana Ronak Patwari2018-19 (CAMS) Paper 8 – FinancialMedal Management & DEC 2021 Riya Kunjankumar Shah

Economics ForFinance

3. M/s V M. Vaghashiya & Co., Chartered Accountants, are appointed as Auditors of the Associationfor the financial year 2022-2023.

4. The 1st Executive Committee Meeting:At the 1st Executive Committee Meeting held on 7th May 2022,three senior members of the Association namely (a) CA. Chandrakant H. Pamnani, (b) CA. Yamal Vyasand (c) CA. Devang Doctor have been co-opted as the members of the Executive Committee for theyear 2022-23. The Immediate Past President CA. Monish Shah shall also be a part of the ExecutiveCommittee for the year 2022-2023.

Association News


Association News

The following Sub-Committees were formed: Journal Committee

Chairman CA Rutvij ShahConvener CA Ashish SharmaEC Representative CA Uday ShahPast President CA Jayesh SharedalalMembers CA Monish Shah

CA Riken PatelCA Ashok KatariaCA Pratik KikaniCA Nirav ShahCA Pratik Jain

Residential Refresher Course CommitteeChairman CA Chintan DoshiConvener CA Monish ShahEC Representative CA Devang DoctorPast President CA Shailesh ShahMembers CA Ashok Kataria

CA Priyam ShahCA Bharat VashiCA Maulik DesaiCA Abhishek JainCA Atul Shah

Brain Trust Cum Workshop CommitteeChairman CA Prakash NandolaConvener CA Tarun ShahEC Representative CA Riken PatelPast President CA Kunal ShahMembers CA Nirav Choksi

CA Maulik DesaiCA Rutvij Shah

Care4U CommitteeChairman CA Monish ShahConvener CA Riddhi ShethEC Representative CA Atul ShahPast President CA Jayesh MorMembers CA Rajni Shah

CA Rushabh ShahCA Samir ShahCA Darshan ParikhCA Harit DhariwalCA Rutvij ShahCA Kuntal Merchant

Legal Representation-Direct Taxes CommitteeChairman CA Rajni ShahConvener CA Ashok KatariaEC Representative CA Vartik ChoksiPast President CA Sunil TalatiMembers CA Samir Shah

Legal & Representation (Indirect Taxes Committee)Chairman CA. Priyam ShahConvener CA Tapas RupareliaEC Representative CA Monish ShahPast President CA Ashutosh NanavatyMembers CA. Nitesh Jain

CA Pravin DhandhariaCA Hem ChhajedCA Bishan ShahCA Punit PrajapatiCA Amish KhandharCA Rashmin VajaCA Rahul Patel

Information Technology CommitteeChairman CA Rushabh ShahConvener CA Ashish SharmaEC Representative CA Jinand ShahPast President CA Ashwinkumar ShahMembers CA. Rutvij Shah

CA Riken PatelCA Abhishek JainCA Tarak ShahCA Prasad AkhaniCA Pratik JainCA Shaleen Patni

Publication CommitteeChairman CA Ashok KatariaConvener CA Mohit BalaniEC Representative CA Chandrakant PamnaniPast President CA Chintan DoshiMembers CA Gaurang Choksi

CA Rajni ShahCA Priyam ShahCA Punit PrajapatiCA Shailesh ShahCA Prakash ShethCA Jayesh SharedalalCA Rutvij ShahCA Atul ShahCA Manthan Khokhani

Cultural and Entertainment CommitteeChairman CA Devang DoctorConvener CA Mihir PujaraEC Representative CA Atul ShahPast President CA Ketan MistryMembers CA. Chandrakant Pamnani


Association News

Sports CommitteeChairman CA Abhishek JainConvener CA Samirkumar ChaudharyEC Representative CA Jinand ShahPast President CA Raju ShahMembers CA Chintan Doshi

CA Maulik DesaiCA Saurabh PatelCA Vishal JhanwarCA Neerav AgarwalCA Rushabh Shah

Study Circle (Indirect Tax) CommitteeChairman CA Hem ChhajedCo- Chairman CA Pravin DhandhariaConvener CA Jenil ShahEC Representative CA Nirav ChoksiPast President CA Niren NagriMembers CA Monish Shah

CA Tapas RupareliaCA Vaibhav JajooCA Priyam ShahCA Tarang KothariCA Devam ShethCA Labdhi ShahCA Jay DalwadiCA Parshwa Shah

Study Circle (Direct tax ) CommitteeChairman CA Utsav HiraniConvener CA Jay SharmaEC Representative CA Uday ShahPast President CA Deepak ShahMembers CA Anuj Sharedalal

CA Uchit ShethCA Pratik TrivediCA Rutvik ThakkarCA Parth Gevaria

Professional Development CommitteeChairman CA Karan VoraConvener CA Ronak KhandwalaEC Representative CA Kshitij PatelPast President CA Sanjay ShahMembers CA Mukesh Khandwala

CA Darshan ShahCA Rajni ShahCA Bishan ShahCA Riken PatelCA Jatin Banka

Benevolent Fund CommitteeChairman CA Ajitkumar ShahConvener CA Prakash ShethEC Representative CA Jignesh ShahPast President CA Gaurang ChoksiMembers CA Shailesh Shah

CA Riken PatelCA Ashwinkumar Shah

Corporate Laws CommitteeChairman CA Anand SharmaConvener CA Kunal ShahEC Representative CA Nirav ChoksiPast President CA Kaushik PatelMembers CA Prakash Sheth

CA Devang DoctorCA Darshan ShahCA Riken Patel

Banking and Finance CommitteeChairman CA Hitesh PomalConvener CA Kandarp TrivediEC Representative CA Yamal VyasPast President CA Mukesh KhandwalaMembers CA Abhishek Jain

CA Vikash AgrawalCA Anand SharmaCA Hirak ShahCA Rajni Shah

Members in Industries CommitteeChairman CA Satyapal SadhwaniConvener CA Hitesh BhatiaEC Representative CA Kshitij PatelPast President CA Anand SharmaMembers CA Ajitkumar Shah

CA Hiranand SavlanyCA Ashutosh Nanavaty

Membership Development CommitteeChairman CA Abhinav MalaviyaConvener TO BE DECIDEDEC Representative CA Jignesh ShahPast President CA Ajitkumar ShahMembers TO BE DECIDED

IBC and Allied Laws CommitteeChairman CA Vikashkumar JainConvener TO BE DECIDEDEC Representative CA Rinkesh ShahPast President CA Prakash ShethMembers TO BE DECIDED


5. Glimpses of previous events:

Time Program Speaker Venue

Indirect Tax

30th April 2022 – Saturday Webinar on Assessment CA. Priyam Shah Zoom Platform5.00 pm and Audit under GST Act

Direct Taxes

26th April 2022 – Tuesday Webinar on Changes in CA Manthan Khokhani Zoom PlatformITR Form for A.Y.2022-23

24th May 2022– Webinar on Direct Taxes CA Sunil Talati Zoom PlatformTuesday Home Refresher Course (Keynote),3.00 pm from 19th May 2022 CA Jignesh Shah,

to 2nd June 2022 Adv.Vikram Vijayraghvan,CA V Ramnath,

CA Rajesh Kadakia,CA Yogesh Thar,

CA T Banushekar,CA Dhinal Shah,

CA Radhakrishna Rawal,CA Anup Shah,CA Ameet Patel,CA Rajan Vora

6. Forthcoming Programmes:

Time Program Speaker Venue

4TH June 2022, Saturday Study Circle Meeting on Adv. Tej Shah CAAEffect of the Supreme Court NavrangpuraJudgment and consequential Officeissue of notices u/s 148A of

the Income Tax Act

18th June 2022, Saturday 1st Brain Trust Meeting on CA Kaushik C. Patel ATMA HALLAmended Schedule III & & CA Krishnakant B.

CARO 2020 by SolankiCA Kaushik C. Patel &

CA Krishnakant B. Solankion 18th June, 2022

23th June 2022, Thursday 51st Residential Refresher Adv. CA Tushar Hemani, Bamboo SaaCourse at Bamboo Saa CA Rutvij Shah, Resort & Spa,Resort & Spa, Udaipur CA Ameet Patel, Udaipurfrom 23rd June 2022 to CA Pramod Jain,

25th June 2022 CA Ajit Shah,CA Atul Shah,

CA Nitesh Thakkar

Association News


7. Picture GalleryChartered Accountants Association Ahmedabad has come out with a publication “Specimen FinancialStatements as per Revised Schedule III (Division I - Non IND AS) to the Companies Act” written byCA. Prakash Sheth.

23th June 2022, Thursday

7. Picture Gallery

Chartered Accountants Association Ahmedabad has come out with E-Book on “ A ComprehensiveGuide to Various Subsidies (Gujarat State)” written and compiled by CA. Abhishek Jain.

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Across

1. The 51st RRC of the Association is to be heldat ____________

2. __________ notice has great significance inadjudication proceedings as it ensurescompliance of principle of natural justice.

3. _________ amount received by assessee from

husband in terms of decree is a capital receipt.

ACAJ Crossword Contest - 12

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Notes:

1. The Crossword puzzle is based on this issue ofACA Journal.

2. Two lucky winners on the basis of a draw willbe awarded prizes.

3. The contest is open only for the members ofChartered Accountants Association and nomember is allowed to submit more than oneentry.

4. Members may submit their reply eitherphysically at the office of the Association orby email at [email protected] on orbefore 20-06-2022.

5. The decision of Journal Committee shall be finaland binding.

Prize Courtesy

Winners of ACAJ Crossword Contest – 111. CA. Deepali Shah

2. CA. Rutvik Thakkar

ACAJ Crossword Contest 10 - SolutionAcross: Down:

1. Speaking 4. Twentyfive

2. Environmental 5. Millions

3. Five 6. Einvoice

Down4. Change of ___________ is not a valid ground

for reopening of assessment proceedings.5. As per section 194R, TDS @ 10% is to be

deducted in case of any __________ or benefitprovided to another person in cash or kindwhere the value is above Rs. 20000.

6. Finance Act 2022 has provided one moreopportunity to assessees to disclose additionalincome by way of an ____________ return.

6

5

1

2 4

3

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