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3CASC BULLETIN, MAY 2017

EDITORIALDo we have time now?

The Government had got through theFinance Bill 2017 into Act as Money Bill infag end of March 2017 and also got theGST Bills through. While passing theFinance Act 2017 as a Money Bill theGovernment has squeezed through manymore items, to be precise 15 more Actswere amended, which experts havecommented cannot be considered asMoney Bill. According to Article 110 ofthe Constitution of India, 1949, a MoneyBill is defined to be one, ONLY if itcontains provisions dealing with all or anyof the following namely

(a) the imposition, abolition, remission,alteration or regulation of any tax;

(b) the regulation of the borrowing ofmoney or the giving of any guaranteeby the Government of India, or theamendment of the law with respect toany financial obligations undertakenor to be undertaken by theGovernment of India;

(c) the custody of the consolidated Fundor the Contingency Fund of India, thepayment of moneys into or thewithdrawal of moneys from any suchFund;

(d) the appropriation of moneys out ofthe consolidated Fund of India;

(e) the declaring of any expenditure to beexpenditure charged on the

Consolidated Fund of India or theincreasing of the amount of any suchexpenditure;

(f) the receipt of money on account of theConsolidated Fund of India or thepublic account of India or the custodyor issue of such money or the auditof the accounts of the Union or of aState; or

(g) any matter incidental to any of thematters specified in sub clause (a) to(f)"

However, the Speaker's decision is finalwhether a Bill is a Money Bill or not.Whether it is a colourable excise of Powerby the Government? It seems to be so asit is trying to get through the laws whichit could otherwise cannot get it done as itlacks the majority in the Upper house orthe required consensus amongst theParliamentarians in the Upper House. Beas it may, the Finance Bill has got theassent and has become law of the land tillit is held otherwise by the Judiciary.

The Income Tax Act has been amendedwhereby it is now mandatory to quoteAadhar in the Income Tax Returns andsame has been done by inserting a newSection 139AA. Hence, an Income TaxReturn cannot be uploaded in case onedoes not possess an Aadhar Number. It isnot only that one cannot upload the return,one cannot apply for a PAN. In otherwords one has to obtain first the Aadhar


or apply for Aadhar before applying forthe PAN. It is also provided that anyperson holding a PAN as on 1st July 2017and eligible to obtain Aadhar as per theAadhar Act, 2016, shall intimate to suchauthority in such form and manner as maybe prescribed by the Central Government.When the Apex Court is seized of thematter, is it not a Colourable Excise ofPower particularly when there is breach ofdata and leakages have happened asknown in the media ignoring theinformation which is not readily availablein the public forums.

This time around when the TDS Returnsare to be filed for the final quarter of thefinancial year 2016-17, much moreprecautions has to be taken care of. Inparticular Form 24Q as the amendment inSection 192 with the insertion of SubSection (2D) whereby the Employer has toobtain evidences for claims made by theemployees in the prescribed form. Thiswas amended by Finance Act, 2017 andeffective from 1st June 2015. On 29thApril, 2016, vide Notification No. 30/2016,the Form No. 12BB has been notifiedeffective from 1st June, 2016. Hence, everyemployer has to obtain and retain thedetails along with the evidences for claimsof the employee, in Form 12BB and it hasto be retained till the period of Sevenyears from the end of the financial yearin which payment is made or credit isgiven as per Section 201(3) irrespective ofthe quantum involved. The Governmenthas passed on all the cost relating to

maintenance to the employer though theyare the helping tool to the Government incollecting the taxes. It is irony when onelooks into the said Form 12BB, it has noplace to state the employer's name andhence it would be worthwhile for theemployers to devolve a standardoperating procedure for implementation ofobtaining as well as retaining the same.

Appreciation

On 26th March, 2017, our member CA.Goutamchand M. Jain, more popularlyknown amongst to us as "MGB" wasconferred with the prestigious Award of"Rajasthan Shree" by the RajasthaniAssociation, Tamilnadu, for his services tothe Society. The Management Committeeon behalf of each and every membercongratulates CA. Goutamchand Jain M.,on this achievement and wishes him toattain more laurels to the everyorganisations to which he is attached with.

Appeal

Members are requested to attend theprograms conducted by CASC and are alsorequested to send their suggestions and /or value additions to the services providedby CASC including this Bulletin. Thesame can be sent by hard copy to theoffice of the CASC or emailed [email protected] or any of theMembers on the Management Committee.

For and on behalf of Editorial Board

Editor


DISCLAIMER :The contents of this Monthly Bulletin are solely for informational purpose. Itneither constitutes professional advice nor a formal recommendation. Whiledue care has been taken in assimilating the write-ups of all the authors. Neitherthe respective authors nor the Chartered Accountants Study Circle acceptsany liabilities for any loss or damage of any kind. No part of this MonthlyBulletin should be distributed or copied (except for personal, non-commercialuse) without express written permission of Chartered Accountants Study Circle.

COPYRIGHT NOTICE :All information and material printed in this Bulletin (including but not flowchartsor graphs), are subject to copyrights of Chartered Accountants Study Circleand its contributors. Any reproduction, retransmission, republication, or otheruse of all or part of this document is expressly prohibited, unless prior permissionhas been granted by Chartered Accountants Study Circle. All other rightsreserved.

ANNOUNCEMENTS :

1. The copies of the material used by the speakers for the regular meetings heldtwice in a month is available on the website and is freely downloadable.

2. Earlier issues of the bulletin is also available on the website in the “News” column.

The soft copy of this bulletin will be hosted on the website shortly.

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RECENT DECISIONS - SERVICE TAX

CA. VIJAY ANAND

1. Franchise Agreement executed outsideindia on 23.9.2009 and accepted by aparty on 1.10.2009 at Netherland andanother party at USA on 02.10.2009 andthereafter communicated to the Indiancompany at Noida – analogy thatcontract not to apply in the state ofU.P as the same was executed outsideIndia not sustainable.

In Dominos Pizza OverseasFranchising B.V. V. State of U.P2017(49) STR3(All.), the petitioner is aCorporation registered in Netherlandand engaged in the business offranchising Domino Pizza Storeswhich specialize in business of sale ofpizza, feature carryout, deliveryservices and operate a uniformbusiness format, specially designedequipment, recipes, methodsprocedure sand designs. Thepeti t ioner entered into a licenceagreement dated 17.04.2007 withDominos IP Holder LLC, a limitedliability company, organized underthe State of Delaware, United Statesof America. Under the said agreement,Dominos IP Holder LLC provided topetitioner, right to grant franchisesfor Dominos Pizza Stores includingright to licence, use of trademark“DOMINOS PIZZA”, in certain areas,outside United States of America.Accordingly, petitioner entered into a

Master Franchise agreement dated23.09.2009 (herein after refer red to asthe “Franchise Agreement”) with M/s. Jubilant Food works Ltd. (here inafter referred to as the “JFL”)todevelop and operate Dominos PizzaStores and to grant sub franchise ofDominos Pizza Stores in India, Nepal,Bangladesh and Srilanka. Thefranchise agreement dated 23.09.2009was executed in Netherland wherein,in lieu of grant of such franchise, JFLwas paying on side ration, equivalentto 3% of total sales made in stores, as”Royalty” to petitioner. JFL is alsopaying applicable “Service Tax” onRoyalty amount, paid to petitioner,under category of “franchise service“under Section 65 (105 (zze) of FinanceAct, 1994, under reverse chargemechanism. The commercial taxauthorities confirmed the demandunder the VAT Laws on Royalty paidby JFL, overruling the contention thatthere was no jurisdiction to levy suchtax as the agreement was executed


outside India, consequent to whichwrit petition were filed in the HighCourt which observed as under:

1. Intellectual property holder (IP holder)entered into an agreement dated27.03.1995 with M/s Domino’s PizzaIndia Limited, after obtaining approvalof collaboration from Reserve Bank ofIndia vide Bank’s letter dated January,1995. Subsequently, arrangement waschanged and Franchiser entered into alicence agreement dated 17.04.2007with IP Holder, obtaining right to grantfranchise for “Domino’s Pizza Stores”including right to licenced use of marksin certain areas, outside the UnitedStates of America.

2. M/s “Domino’s Pizza India Limited”then requested Franchiser to grantMaster Franchise to develop andoperate and to grant sub-franchises ofDomino’s Pizza Stores in the area ofIndia, Nepal, Bangladesh and SriLanka.

3. Accordingly, a new agreement wasexecuted on 23.09.2009/ 01.10.2009/02.10.2009 with a clear stipulation thatit will supersede provisions of originalMaster Franchise Agreement andsubsequent amendments and terms andconditions of such agreement.

4. Assessing Officer has not gone into thisquestion, whether agreement totransfer of right to use goods wasexecuted in India or outside India but

he has proceeded to decide matter onthe premise that place of agreement isnot relevant and instead it is “place ofbusiness”, as defined under VAT Act,2008, which is crucial to decidetaxability upon petitioner.

5. In VAT Act, 2008, the definition of“place of business” includes that placewhere right to use goods is exercised.The validity of aforesaid provision isnot under challenge in this writ petitionwhile the real issue is which is the placewherefrom the right to use goods hasbeen exercised.

6. The view taken by assessing authoritythat place of execution of agreement soas to transfer right to use goods is notrelevant and reliance placed on thisCourt’s Single Judge judgment inVysya Bank Ltd. Vs. The Commissionerof Trade Tax 2009 NTN (Vol 41) 327 isnot correct for the reason that thereinthe learned Single Judge found as amatter of fact that agreement was notexecuted at Delhi and, therefore, afinding of fact was recorded which wasnot found to be incorrect. There wasnothing to show that agreement wasexecuted outside the State of U.P. andit is in these facts and circumstances,the Court decided the matter.

7. A perusal of the agreement indicatesthat document has been signed ondifferent dates by parties but no placeof signature has been mentioned at all.


It does not appear that the documentwas prepared and executed when allthe parties were present at one place.

8. The address of registered office ofFranchiser/DPOF is that ofAmsterdam, Netherland while that of“Domino’s Pizza India Limited” isNehru Place, New Delhi and headoffice at Noida, State of Uttar Pradesh.The name of Company, M/s “Domino’sPizza India Limited” changed to“Jubilant Food works Limited”, i.e.,J.F.L. This change was authorized byshareholders in general meeting dated16.09.2009 but when this changeactually took place after approval byconcerned High Court is not statedanywhere in writ petition or in itsenclosures.

9. In the present case, right to use goodsconstitute a brand name “DOMINO’SPIZZA”. This right was transferred byagreement dated 23.09.2009/01.10.2009/ 02.10.2009. Record does notshow that agreement was executed atNetherland and it appeared that anoffer/proposal was made by M/sDomino’s Pizza India Limited at Noidawhich was accepted by Franchiser/DPOF and IP Holder on 01.10.2009 and02.09.2009 respectively at Amsterdam(Netherland) and Michigan (UnitedStates of America) and such acceptancewas communicated to Proposerat Noida. Therefore, apparently theagreement between parties concluded

at Noida. Head office of petitioner isadmittedly at Noida. It is neither theircase nor material was placed on recordto show that correspondence was atany other place than Noida.

10. In the entire writ petition the onlypleading with regard to place ofexecution of contract is that it wasentered at Netherland, i.e., outsideIndia vide Master FranchiseAgreement dated 23.09.2009 betweenpetitioner and JFL.

11. The agreement shall take effect uponits execution between parties. There isa covering letter appended to saidagreement on which requests the twoCompanies to convey their consent inrelation to proposals of aforesaid letterand requested them to forward consentfor record. Mode of communication isneither pleaded nor shown by placingrelevant material on record.

12. It is in these facts and circumstances itbecomes utmost important question, asto the place where it can be said thatagreement was executed or concludedcontract came into existence.

13. In Bhagwandas Goverdhandas KediaVs. Girdharilal Parshottamdas and Co.and others, AIR 1966 SC 543 Courtwherein it was held that acceptance andintimation of acceptance of offer areboth necessary to result in a bindingcontract. In case of a contract which


consists of mutual promises, the offerormust receive intimation that offeree hasaccepted his offer and has signified hiswillingness to perform his promise. Ifoffer and acceptance is not being madein presence of both parties at the sameplace and parties are at different places,except where negotiation is by post,the contract is complete whenacceptance of offer is put into a courseof transmission to the offeror.

14. In the present case, there is noaverment regarding mode ofcommunication adopted by petitionercommunicating the acceptance. Thereis not even a whisper as to howand in what manner communicationof acceptance was made. In absence ofany specific pleading so as to attractexceptions with regard tocommunication, we have no option butto hold that acceptance will becompleted only when it iscommunicated to offeror and thatcommunication obviously would be ata place wherefrom offer was made.That be so, the agreement can be saidto become a concluded contract andexecuted when it is communicated toProposer/ Offeror at Noida wherefromoffer was made. The ultimate resultwould be that the very foundationof argument that taxing authoritiesin Uttar Pradesh had no jurisdiction,disappears and vanishes. It cannot thus

be said that impugned orders arepatently without jurisdiction.

Hence, the writ petitions were dismissed.

2. Conducting clinical trials of drugsprovided by customers located outsideIndia on eligible volunteers – coveredunder rule 4 of the place of provision ofservices (pop) rules, 2012. In case – noservice of clinical pharmacology isprovided by the applicant and moreservice of clinical research is provided –covered under rule 3 of pop rules

In RE: Steps Therapeutics Limited,2017(49) S.T.R.114(A.A.R.) the applicantproposes to establish, develop and carryon research in basic and applied sciencesin relation to all kinds of drugs,pharmaceuticals and formulations, healthcare and bio-technology etc. to itscustomers located outside India oneligible volunteers within the applicant’sfacilities. In doing so, the applicant is torender the following services:

a. Clinical Pharmacology: The Serviceinvolves Bio-equivalence andBio-availability clinical studies (studiescarried out for generic drugs) whichincludes fasting and fed conditions, singleand multiple dose in healthy subjects,drug-drug interaction, drug-foodinteraction, special/patient populationstudies. The study is proposed tobe undertaken using formulations inthe form of tablets, capsules, gelssprinkles, syrups, sprays, inhalers etc.


b. Clinical Research: The service involvesactivities in nature of ProjectManagement, Regulatory Affairs, ProjectMonitoring, Medical Writing,Bio-Statistics and Programming andCompliance.

c. Project Management- Planning andintegration service which includesserving as the primary resources andpoint of communication for sponsor/project team, undertaking study/sitefeasibility assessment, updating thesponsor and participation in telecom~

d. Regulatory Affairs: Assistance inregulatory submissions at all phases ofdrug development and obtainingapprovals from DCGI, DGFT and ICMRincluding approvals for conduct of clinicaltrials in India, for importing test drugand for exporting biological samples~

e. Medical Writing: Assistance inpreparation of investigator brochure,protocol, case report form, patientinformation leaflets, informed consentform, safely data reports, medicaltranslation and study related forms andlogs~

f. Project Monitoring: 24/7 response linefor medically related questions or reportadverse events.

g. Compliance: Audit of investigator sitesas per protocol and other regulatoryrequirements like GCP compliancereview, IRB/EC audits, on-site

investigator audits, drug accountabilityreviews, database audit, study documentreviews.

An application was filed to answer thequestion as to whether the proposedactivities of undertaking Clinical Researchand Clinical Pharmacology by the Applicantare taxable under the Act in light of Rule 3 ofthe Place of Provision of services (POP) Rules,2012 as the applicant renders the said servicesto its customers and the place of provision islocated outside India. The authorityobserved as under:

1. The issue involved is whether the servicesi.e. Clinical Pharmacology and ClinicalResearch proposed to be provided by theapplicant shall be liable to Service Tax,as place of provision of service would belocation of the recipient of service in termsof Rule 3 of POP Rules or the locationwhere services are actually performed interms of Rule 4 of POP Rules.

2. As per Rule 14 of POP Rules, whereasthe provision of a service is prima facie,determinable in terms of more than onerule, it shall be determined in accordancewith the rule that occurs later among therules that merit equal consideration.Therefore, in the case, if proposedservices are covered by Rule 4, then Rule3 shall not be applicable.

3. As per rule 4(a) with respect to this casethat the place of provision shall be thelocation where services are actuallyperformed if.


a) Services are provided in respect of goodsand

b) Said goods are required to be madephysically available by the recipient ofservice to the provider of service.

4. The applicant’s proposed service ofClinical Pharmacology is study carriedout for generic drugs. Further, study isproposed to be undertaken usingformulations in the form of tablets,capsules, gels sprinkles, syrups, sprays,inhalers etc. provided by applicant’scustomers located outside India, oneligible volunteers in India.

5. Hence, it is clear that the formulations invarious forms (goods) shall be providedby applicant’s customers located outsideIndia, who is recipient of service fromthe applicant - provider of service.

6. Further, service of Clinical Pharmacologyis in respect of said formulation, whichis provided to the applicant by itscustomers from outside India.

7. Consequently, the said service of ClinicalPharmacology satisfies above referred 2conditions and therefore would fall in theambit of Rule 4(a) of POP Rules.

8. The contention of the applicant is that asper requirement of Rule 4(a) of POP Rules,it is mandatory that the services areprovisioned qua the specific goods andnot class thereof. It is observed that thelanguage of said Rule 4 (a) do not statethat services provided be in respect

specific goods. Therefore, the contentionof the applicant is not correct.

9. The applicant has submitted two typesof intended situations whoseapplicability of the POP Rules could besummarised as under:-

a) Service provided in respect of goods -When Clinical Research is carried out inrespect of formulations that are requiredto be made physically available to theapplicant (i.e. service provider) by theservice receiver located outside India,such service shall be covered under Rule4 of the POP Rules. Clinical Researchcarried out in respect of formulationsreceived from the service receiver, thatare consumed in the process or clinicaltesting, which are necessary for carryingout other processes of Clinical Research,would also be covered under thiscategory, as these services will beprovided in respect of formulation.

(b) Service relating to Clinical Researchprovided on stand-alone basis - Servicesrelating to Clinical Pharmacology andClinical Research wherein volunteerswhich are identified, selected andgathered by the applicant are in India andsuch volunteers having nothing to dowith the Drug Company i.e. the servicerecipient, andtherefore the saidvolunteers cannot be said to be acting onbehalf of the receiver. In such casesClinical Pharmacology (which isprovided in respect of formulations


received from service receiver locatedoutside India) is not provided by theapplicant and only service of ClinicalResearch is provided, then this servicewould not be in relation to formulation.There will not be physical presence of anindividual, represented either as theservice receiver or a person acting onbehalf of the receiver, in terms of Rule 4(b) of POP Rules. Therefore, such servicewill not fall in the ambit of Rule 4.

Consequently the authority ruled as under:

a. The proposed activities of undertakingClinical Pharmacology by the applicantare taxable under the Act under rule 4 ofthe Place of Provision of Services (POP)Rules, 2012, as the services are proposedto be provided in respect of goods thatare required to be made physicallyavailable by the service receiver to theservice provider (applicant).

b. Clinical Research service provided inrespect of goods that are required to bemade physically available by the servicereceiver to the service provider(applicant) are also taxable under the Actunder Rule 4 of the POP Rules.

c. Where service of Clinical Pharmacologyis not provided by the applicant and onlyservice of Clinical Research is provided,then such service would not be in relationto formulation provided by the servicereceiver located outside India, to theapplicant. In such cases, it would be nottaxable under the Act in light of Rule 3

of the POP Rules, 2012 as the applicantrenders said services to its customers andthe place of provision is located outsideIndia.

Accordingly, the application was disposedoff.

3. 3. Scientific or Technical ConsultancyService and Chartered AccountantsService provided to a unit in SEZ forauthorised operations – refund of servicetax paid thereof along with educationcess and higher education cess not tobe denied.

In Mangalore SEZ Ltd. V. CCE,Mangalore, 2017(49) STR311 (Tri.-Bang.) the assessee is a holder of ServiceTax Registration under the category of“Renting of Immovable PropertyService”and “Business Auxiliary Service”.The assessee obtained the formalapproval from the Ministry of Commerceand Industry, Govt. of India, for settingup a Special Economic Zone (SEZ) andare entitled to various duty benefitsunder SEZ Act 2005 and SEZ Rules 2006.The assessee filed a refund applicationdated 22.7.2010 for refund of Service Taxamounting to Rs. 9,54,353/- in terms ofNotification No. 09/2009- ST dated20.5.2009. On scrutiny of the refund claim,the Assistant Commissioner rejected therefund on ‘Scientific or TechnicalConsultancy Service’ and ‘CharteredAccountants’ Service’ as the same was notfound in the approved list of specific


services in Annexure II & III andconsequently, denied the refund on thesetwo services vide Order-in-Originaldated 29.9.2010. In the same order,the Assistant Commissioner has alsorejected the refund claim of Rs. 12,197being Education Cess and HigherEducation Cess and sanctioned therefund of Rs. 4,06,584/- being serviceTax paid on the services, which was setaside by the Commissioner (Appeals). Ondepartmental appeal, the tribunalapproved as under:

1. Government’s intention is clear that theSEZ units should either not require to payor if paid they are eligible for refund.Mere not mentioning the services inAnnexure II & III is only a technicalone which should not debar thesubstantial benefit.

2. In this case, it is clear that the appellantwho had availed the services inside theSEZ were not liable to pay Service Taxand the appellant who had availed theservices inside the SEZ were not liableto pay Service Tax and the appellant whohad paid the Service Tax for the servicesavailed within SEZ should not bepenalised for the same.

3. Denying the eligible refund to theappellant on the ground that servicesavailed by the appellant were not listedin the annexure II & III is not justifiedand would be against the both law andspirit.”

Hence, the appeal was disposed off.

4. Ex-Parte Order on Show Cause Noticesent by courier without anyacknowledgement of receipt – demandset aside

In Raja Sethi Financial Services V. CCE,Hapur, 2017 (49) S.T.R.432 (Tri.-All.),SCN was sent by courier on 27.8.2008 andthe Notice of Personal Hearing was alsosent by courier. The demand wasconfirmed by an ex-parte order dated30.12.2008. The assessee was aware of theorder only through letter dated01.06.2015 for the collection of demand.Thereafter the appeal was filed beforeCommissioner (Appeals), who rejectedthe appeals holding that the SCN wasdespatched through courier and appearsto have been successfully delivered as nocorrespondence of non-delivery wasreceived from the courier.

On writ petition before the High Court,it was observed that the serving of theSCN and the notice of personal hearingdoes not tantamount to a valid servingof the notice under the provisions of theact read with the rules thereunder.

Accordingly the impugned orders werenot tenable and was set aside and theassessee was entitled to consequentialrelief.

5. Mandatory Pre-Deposit of 10% forsecond appeal does not include the 7.5%paid before Commissioner (Appeals).


In Hindalco Industries Ltd. V. CCE,Kolkatta-II, 2017 (49) S.T.R.590 (Tri.-Kolkata), the assessee paid mandatorypre deposit @ 7.5% while filing theirappeal before the Commissioner(Appeals). On the second appeal, out ofthe 10% pre-deposit that they weresupposed to make the appellantdeposited @ 7.5%. The deposit that theyhave made while filing appeal beforeCommissioner Appeals, and remittedonly differential 2.5% of deposit forwhich they have issued differentsummons, for which a defect memo wasissued demanding pre-deposit of tax ofbalance 7.5% (10% for the second appealless 2.5% deposited by the appellants).During the hearing, the Tribunalobserved as under:-

1. Neither Section 35F(iii) of the CentralExcise Act, 1944 nor CBEC Circular dated16.09.2014 specifically mention whether10% deposit required before Appeal isentertained should be inclusive orexclusive of 7.5% deposit made beforethe first appellate authority.

2. It is a well-known fact that success rateof departmental cases before theappellate authorities is very poor. Thatis the reason that percentage of depositrequired to be made before the firstappellate authorities is as low as 7.5% ofthe disputed amounts or penalties.

3. After success at the level of first appellateauthority may be Legislature wants thatthe case has passed one test of first appealsuccessfully and Revenue deserves anadditional 10% of the duty or penalty asdeposit till the issue is finally decided inthe second appellate stage.

4. In any case, Appellant is not at a loss inthe above procedure of paying additional10% of deposit, because in case Appellantwins then Appellant is eligible to interestfrom the date of deposit it made, as perSection 35FF of the Central Excise Act,1944 or Section 129EE of the Customs Act,1962, all introduced w.e.f. 06.08.2014.

5. In case Appellant loses the case, then alsoAppellant will have to pay lesser interestfor the period when amount was lyingwith the department as deposit.

Hence, it is held that appellants wererequired to pay additional 10% deposit inaddition to 7.5% deposit made before thefirst appellate authority and that defectmemoranda were thus correctly issued byCESTAT Registry and all the above appealsare dismissed for non-compliance of therequirement under Section 35F(iii) of theCentral Excise Act, 1944 or Section 129E ofthe Customs Act, 1962, as the case may be.

(The author is a Chennai based CharteredAccountant. He can be reached at reached [email protected])


CASC CHENNAI, MEMBERSHIP FEE

Corporate MembershipCorporate Annual Membership 3,000.00Corporate Life Membership (20 Years) 20,000.00

Individual MembershipAnnual Membership 750.00Life Membership 7,500.00

CASC - HALL RENTHALL RENT FOR 2 HOURS 1,000.00HALL RENT FOR 2-4 HOURS 1,500.00HALL RENT FOR FULL DAY 2,500.00LCD RENT FOR 2 HOURS 600.00LCD RENT FOR 2-4 HOURS 800.00LCD RENT FOR FULL DAY 1,200.00

The above amounts are EXCLUSIVE of Service Tax. Applicable Taxes will be added.

CASC BULLETIN - ADVERTISEMENT TARIFF - PER MONTH

Full Page Back Cover 2,500.00Full Page Inside Cover 2,000.00Half Page Back Cover 1,500.00Half Page Inside Cover 1,250.00Full Page Inside 1,200.00Half Page Inside 750.00Strip Advertisement Inside 500.00

Minimum 6 months advertisement is required.If advertisement is 12 months or above, special discount of 15% is available

Your demand draft / cheque at par should be drawn in the name of“The Chartered Accountants Study Circle” payable at Chennai.

Kindly contact [email protected] for the updates.

Rs.


RECENT DECISIONS IN VAT / CST

Alternative remedy:

The question of relegating the dealer to thealternative remedy would not arise, whenthe assessing officer had gone against anorder of determination which was bindingon him and when his reasons fordiscarding such order of determinationwere wholly invalid. [2016]95 VST70 (Guj)WEST COAST WATERBASE PRIVATELIMITED AND ANOTHER V STATE OFGUJARAT AND ANOTHER

Penalty:

If at the time of assessment turnover hadbeen recorded as per the books of account,verified, by the Department and in suchcircumstances, suppression cannot beattributed. Transactions giving rise, to,taxable turnover had been categoricallydeclared by the dealer as composite workscontract and tax had been paid at theconcessional rate of four per cent. In suchcircumstances, it could not be said that-itwas a, case of deliberate and wilful non-disclosure of turnover in the return.Admittedly, there was no suppression inthe books of account. That fact had beencategorically stated by the appellateauthority in his order, in which event thedealer was entitled to invoke Explanations

CA. V.V. SAMPATHKUMAR

(i) and (ii) to section 12(3)(b) of the Act.The Tribunal had not considered the caseof the dealer in consonance with theclauses (i) and (ii) of Explanation to section12(3) (b) of the Act. The Tribunal was notright in applying Explanation (iii) to section12(3)(b) of the Act to sustain the levy ofpenalty. [2016] 95 VST 382 (Mad) SHYAMAIR FRIDGE V STATE OF TAMILNADU

Input tax credit:

If the selling dealer has not paid thecollected tax that liability has to be fastenedon the selling dealer and it cannot befastened on the purchasing dealers who hasshown the proof of payment of tax on thepurchase made and in the regard, theCourt held that the petitioner-dealeralready paid 25 per cent of the tax amountalso. Therefore, the orders were to be setaside and the matters remitted to theauthority to give one more opportunity of


hearing to the dealer and thereafter passappropriate orders on the merits and inaccordance with law. [2016] 95 VST 391(Mad) SRI NATARAJA MEDICALAGENCIES v. COMMISSIONER OFCOMMERCIAL TAXES, CHEPAUK,CHENNAI AND ANOTHER

Penalty:

The officer at the check post cannotdetermine the nature of transaction, thatbeing the job of the regular assessingauthority. Accordingly, the proceedingsinitiated for levy penalty were to bequashed. [2016] 95 VST 394 (P&H) HCLINFOSYSTEMS LTD. v. STATE OFPUNJAB

Penalty:

Where the assessing officer assessed thedemand of tax, interest and penalty andon appeal, the view taken by the firstappellate authority was that there was notaxable liability and therefore he set asidethe demand of tax and interest as well aspenalty but the Additional Commissioner,in revision, found that there was taxableliability. The Court held that when thequestion of liability to tax could be said tobe doubtful the imposition of penalty wasnot satisfied and the penalty required tobe set aside. [2016] 95 VST 398 (Karn)

SOUTHERN POWER EQUIPMENTCOMPANY PRIVATE LIMITED v.ADDITONAL COMMISSIONER OFCOMMERCIAL TAXES, ZONE-II,GANDHINAGAR, BANGALORE

Going Concern:

When a person might carry on several linesof business and each line of business woulda unit of business by itself; if there was asale of that unit of the business, as a whole,then the assessee would not be liable to betaxed either on the general principle thatthere was no sale in the course of business,since closure of a line of business could notbe incidental or ancillary to its carrying onor on the alternative basis of applicationof Explanation III, to sub-section (41) ofsection 2 of the Tamil Nadu Value AddedTax Act, 2006, which stated that, anyamount realized by a dealer by way of saleof his business as a whole shall not beincluded in the turnover”. Therefore thetransfer of one line of business of thepetitioner, namely, wind-mill divisionamounted to transfer of business as a wholeand the order of assessment, assessing thewind mill disposal value was to be set aside.[2016] 95 VST 494 (Mad) VTXINDUSTRIES LIMITED v. AC (CT), FASTTRACKASSESSMENT CIRCLE,POLLACHI, COIMBATORE


Mutuality:

The assessee-club charged and paid salestax when it sold products to non-membersor guests who accompanied permanentmembers but when invoices were raisedin respect of supply made in favour ofpermanent members, no sales tax wascollected. When there was levy of tax, theclub prayed before the WBTT for adeclaration that it was not a “dealer” withinthe meaning of the Act as there was no saleof any goods in the form of foodrefreshments, drinks, etc., by the club toits permanent members and hence, it wasnot liable to pay sales tax under the Act.The Tribunal (WBTT) held that the club-was not eligible to tax under the Act. On awrit petition filed by-the Revenue, the HighCourt upheld the view of the Tribunal. Onappeal by the Revenue, the Apex held thatthat the controversy that had arisen in thecase had to be authoritatively decided bya larger Bench in view of the law laid downin Cosmopolitan Club v. State of TamilNadu [2009] 19 VST 456 (SC) and FatehMaidan Club v. CTO [2008] 12 VST 598 (SC)because none of the judgments laid downthat the doctrine of mutuality would applyor not but proceeded on that principlerelying on the earlier judgments. As theposition should be clear, the matter should

be referred to a larger Bench framing thequestions (i) whether the doctrine ofmutuality was still applicable toincorporated clubs or any club after theinsertion of article 366(29A) in theConstitution of India, (ii) whether thejudgment of the court in JCTO v. YoungMen’s Indian Association [1970] 26 STC 241(SC) still held the field even after the 46TH

of the Constitution of India, and whetherthe decisions in Cosmopolitan Club [2009]19 VST 456 (SC) and Fateh Maidan Club[2008] 12 VST 598 (SC) which remitted thematter applying the doctrine of mutualityafter the Constitutional amendment couldbe treated to state the correct principle oflaw, and (iii) whether the Forty-sixthAmendment to the Constitution, by adeeming fiction provided that provision offood and beverages by incorporated clubsto their permanent members constitutedsale liable to sales tax. [2016] 96 VST 20(SC) STATE OF WEST BENGAL ANDOTHERS v. CALCUTTA CLUB LIMITED

Pre deposit:

Where the DC Appeals) determined thepre-deposit amount for entertainment ofappeal at Rs.68,95,367 and the Tribunalbrought it down to Rs.42,87,364 but addedup not only the interest but commensurate


penalty and determined the amountpayable as Rs.1,11,87,731 observing that theinvestigation carried out by theDepartment revealed existence of hawalatransactions The Court held that theTribunal should be aware that the firstappeal was still pending before the DC(Appeals) and that he had yet to apply hismind to the merits. All that was underconsideration of the Tribunal was adirection of pre-deposit and that theTribunal was not justified in going into themerits and express such opinion as wouldinfluence the outcome of the appeal.[2016] 96 VST 96 (Bom) BRAVEENGINEERING PVT. LTD. v. STATE OFMAHARASHTRA AND OTHERS

Inter- State sales or not?

The Bombay High situated at about 180kms from the shores of India was not partof the territory of India as stated in article1 of the Constitution. As per section 7 ofthe Maritime Zones Act, it was part ofExclusive Economic Zone. Under article 297of the Constitution, all lands, minerals andother things of value underlying the oceanwithin the territorial waters, or thecontinental shelf or the Exclusive EconomicZone of India would vest in the Union andbe held for the purposes of the Union.

However, this was not the same thing asto suggest that such areas of ExclusiveEconomic Zone formed part of the IndianTerritory. A perusal of the relevantprovisions of the Maritime Zones Act, 1976,would show that for the limited purposeof extension and application of lawsnotified by the Central Governmentexclusive economic zone would be deemedto be a part of the territory of India andthat the sovereign rights that the Union hadover the exclusive economic zone, were forthe limited purpose of exploration,exploitation, conservation andmanagement of the natural resources. Itwas only by virtue of notification in officialgazette that the Central Government mightdeclare any area of the exclusive economiczone to be a designated area. Thus whenthe sale of goods took place, at BombayHigh or which the goods moved fromHazira to Bombay High such movementdid not get covered within the expression“movement of goods from one. State toanother” contained in clause (a) of section3 of the Central Sales Tax Act as BombayHigh did not form part of any State ofUnion of India. Further admittedly, nonotification had been issued by the CentralGovernment extending all or any of theprovisions of the Central Sales Tax Act toany of the designated areas, continental


shelf or exclusive’ economic zone.Therefore the Department could not havedemanded tax under the Central Sales TaxAct from the respondents on the sale whichsale was completed at Bombay High.Therefore, the Tribunal was justified inarriving at the conclusion that thetransaction was not liable to Central salestax. [2016] 96 VST 98 (Guj) STATE OFGUJARAT V. LARSEN AND TOURBOLTD.

Input Tax Credit:

Non-intimation of change in constitutionof an entity is an irregularity and not anillegality and the assessing authority is notcorrect in reversing the entire input taxcredit on the ground for not informing thechange in constitution and obtaining freshregistration. [2016-17] 22 TNCTJ167(Mad)Sri Kamatchi Gas Service Vs AC (CT)Kanchipuram Assessment Circle.

Penalty:

Wilful non-disclosure of any assessableturnover is the criteria for invoking thepenal provisions of section 27(3) of theTNVAT act 2006 and if wilful suppressionis not found levy of penalty is not justified.[2016-17] 22 TNCTJ 173 The State of TamilNadu Vs Golden Homes Pvt Ltd

SEZ:

Supply of Ready Mix Concrete to An SEZUnit is exempt from tax vide Notificationin GO Ms 193 dated 30.12.2006.[2016-17]22 TNCTJ 184 IJM Concrete Products PvtLtd., Vs AC CT Ponnamallee AssessmentCircle

Rectification:

A rectification order causes grievance to adealer, then it is an appealable order u/s55(4) of the TNGST Act and if therectification request is successful, then anyrectification order in this regard cannot beappealed. [2016-17] 22 TNCTJ 255 P C WCastings Pvt Ltd Vs ADC CT Chennai(East).

Input Tax Credit:

Non-intimation of change in constitutionof an entity is an irregularity and not anillegality and the assessing authority is notcorrect in reversing the entire input taxcredit on the ground for not informing thechange in constitution and obtaining freshregistration. [2016-17] 22 TNCTJ167 (Mad)Sri Kamatchi Gas Service Vs AC (CT)Kanchipuram Assessment Circle.

(The author is a Chennai based CharteredAccountant. He can be reached [email protected])


LEGAL UPDATE ON DIRECT TAXES

CA. G. PARI & CA. P. PRADEEP KUMAR

1. Kumudam Publications (P.) Ltd. v.Central Board of Direct Taxes [2017]79 taxmann.com 466 (Delhi HC)

Issue:In Income declaration Scheme 2016, Doesthe expression (the) “tax and surchargepayable under section 184 and penaltypayable under section 185 in respect of theundisclosed income, shall be paid on orbefore a date to be notified by the CentralGovernment in the Official Gazette” meanonly amounts paid immediately prior tothe declaration count, thus precluding anyamounts paid for the relative orcorresponding period, or does it includeall such payments?

Facts:The petitioner-company has been filing itsReturn of Income till the financial year2008-09, i.e. AY 2009-10. Serious disputesamongst its directors, ex-directors andcertain shareholders, which arose infinancial year 2008-2009, resulted inlitigations against the company and itsdirectors etc. from the financial year 2009-2010. As a consequence, the petitioner couldnot appoint any statutory auditor. Accountscould not be made ready for subsequentyears in deference to the disputes andpending litigation. The petitioner despiteits inability to file income tax returns, paidadvance tax and other tax of Rs. 16.49crores towards income tax liabilities by oron behalf of the petitioner.

The petitioner applied under Section119(2)(b) of the Income-Tax Act on 7th July,2016 to the Revenue seeking permission tofile the Return of Income “based on theunaudited accounts and the revenue issueda notice of hearing however the notice wassubsequently cancelled. The applicationwas not decided. Pending the disposal ofthe petitioner’s application under Section119(2)(b), it made a declaration in Form 1dated 15.09.2016 under the Incomedeclaration scheme, for all the assessmentyears. The income so disclosed under thescheme and the total tax payable includinginterest and penalty as under the Schemewas adjusted against the advance tax paidby the petitioner and TDS deducted. In thisbackground, the petitioner received theimpugned order from the PrincipalCommissioner of Income-Tax, (PCIT) inresponse to its declaration in Form 1,demanding a tax full amount of taxes notgiving the credit to advance tax and othertaxes paid to the tune of Rs. 16.49 crores.


Held:

These schemes are to be seen as containingspecial dispensations, etc. and interpretedin a “stand alone” or sui generis manner.But there should be something whichprovides a clear insight that Parliamentwished that such past amounts are not tobe reckoned at all, for purposes ofpayments. All that the words of the statuteenjoin are that the tax and surchargeamounts under the scheme “shall be paidon or before a date to be notified”. Thesewords necessarily refer to all payments.They are not limited in their meaning toonly what is paid immediately before, orin the proximity of the declaration filed.Thus, there is no bar, express or implied,which precludes the reckoning or takinginto account of previously paid amountswhich have nexus with the periods soughtto be covered by the scheme.

That apart, the only bar discernible underthe scheme in question is evident fromSection 189 is that no person declaringunder the Act shall not be entitled to “claimany set off or relief in any appeal, referenceor other proceeding in relation to any suchassessment or reassessment.” Also, underthat provision the person so declaring shallnot be entitled to “ to re-open anyassessment or reassessment made underthe Income-tax Act or the Wealth-tax Act,1957 (27 of 1957)”. Therefore, the court isof the opinion that there is no bar for anassessee or declarant to claim credit of

advance tax amounts paid previouslyrelative to the assessment years or periodsfor which it seeks benefits under thescheme.

Furthermore, the court also is of theopinion that the clarification by theRevenue, that credit for TDS paid, can beenjoyed for availing the benefit (under thescheme in question) precludes anymeaningful argument by it that advance taxpayments relative for the assessment yearscovered by the declaration cannot be takeninto consideration as payments under andfor purposes of availing the benefits of thescheme.

In the light of the above findings, thepetition succeeded. Accordingly a directionwas issued to the respondents to processthe petitioner’s application under the IDS,2016, and give adjustment or credit to theamounts paid as advance tax and TDS toits account, under the Income Tax Act, andaccept the balance amounts (after alsogiving credit to the amounts paid duringthe interregnum, pursuant to the interimorder of this court dated 29th November,2016). The respondents shall ensure thatthe petitioner’s payments and declarationsare processed in accordance with the IDS,2016. The writ petition was allowed.

2. Rajasthan Cricket Association v.Additional Commissioner of Income-tax, Range-2 (3), Jaipur [2017] 79taxmann.com 464 (Jaipur - Trib.)


Issue:

Whether since predominant activity ofassessee was conducting matches of cricketwhich fell under category of general publicutility, mere fact that it earned certainancillary income in form of sale ofadvertisement and surplus of matchreceipts, would lead to conclusion thatassessee’s case was hit by proviso to section2(15) and was not entitled to the exemption.

Facts:

The assessee is an association registeredunder Rajasthan Sports (Registration,Recognition and regulation of Association)Act, 2005 and formed with the objective ofpromoting the sport of Cricket within theState of Rajasthan. RCA, under aMemorandum of Understanding withRajasthan State Council has exclusive useand possession of Sawai Mansingh Stadiumfor the purposes of organizing national andinternational cricket matches.

The main object of the association is tocontrol, supervise, regulate or encourage,promote and develop the game of cricketin the areas under the jurisdiction ofAssociation on no profit no loss basis.Assessee was holding registration u/s 12Aw.e.f. 25.11.1988 and thus was claimingexemption u/s 11. For the year relevant toappeal, assessee filed return of income on29.09.2008 declaring total income at NIL.Case got selected for scrutiny and ld. AOcompleted the assessment u/s 143(3)

withdrawing exemption u/s 11 for thereason that he observed certainamendments were carried out inmemorandum of association and rules ofassessee association in F.Y.1998-99 & laterin 2004-05, which were not intimated to ld.CIT, thus, registration granted on the basisof memorandum and rules as they stoodprior to amendment, deserved to becancelled. On the basis of information ofld. AO, ld. CIT withdrew registration u/s12A of the Income-tax Act, 1961 to theassessee from A.Y. 2005-06 and onwards.Also, ld. AO observed that assessee hadearned substantial income in the shape ofsubsidy from BCCI, Advertisementincome, membership fees etc. andconcluded that since assessee was earninghuge surplus, the same was not in thenature of charitable purpose and rather inthe nature of business.

Held:

The Assessing Officer was swayed by thevolume of receipts. In a similar case theMadras High Court in the case of TamilNadu Cricket Association v. DIT [2014 360ITR 633/221 Taxman 275/[2013] 40taxmann.com 250 the Court opined that bythe volume of receipt inference that activityis commercial cannot be drawn.

From various decisions of the Hon’bleSupreme Court, the settled position of lawemerges is that if the primary orpredominant object of an institution is


charitable, any other which might not becharitable but which is ancillary orincidental to the dominant purpose, maybe involving element of profit, would beprevent the institution from being a validcharitable trust.

In the present case also the main activityof the assessee is conducting of the cricketmatch which falls under the category ofgeneral public utility. This fact is notdisputed by the Revenue. All theseactivities (subsidy from BCCI,Advertisement income, membership feesetc.) an ancillary to the main activity.Therefore the Assessing Officer was notjustified in declining the exemption.

3. Kalyani Barter (P.) Ltd. v. Income-taxOfficer, Ward- 2(3), Kolkata [2017] 79taxmann.com 457 (Kolkata - Trib.)

Issue:

Whether the provisions of section 14A canbe invoked to make a disallowance onaccount of expenditure incurred in relationto the exempt income in the form ofdividend received by the assessee on theshares held as stock-in-trade.

Facts:

The assessee, a private limited company,is engaged in the business of trading inshares & securities. The Assessing Officerwhile completing assessment under section143(3) of the Act noticed that the assessee

has earned dividend income in the yearunder consideration which was offered totax under the head business income in itscomputation of income. The assesseeneither showed dividend income as incomefrom other sources nor claimed anyexemption on such income under section10(34) of the Act. However the AO was ofthe view that the assessee should haveclaimed exemption on such income andaccordingly should have disallowed theexpenses in pursuance to the provisions ofsection 14A of the Act. Therefore the AOcalled upon the assessee to explain/ clarifythe facts as discussed above. However thereply made by the assessee was notsatisfactory to the AO and therefore heinvoked the provisions of rule 8D read withsection 14A of the Act and made theadditions.

The Commissioner of Income Tax (Appeal)-I/Kol directed the Assessing Officer torecompute the disallowance u/s.14A andrestrict the same to the disallowance ofdirect expenses incurred by the appellantfor earning the exempt income.

Held:

The tribunal relied on the Calcutta HighCourt in the case of Dhanuka & Sons v.CIT [2011] 339 ITR 319/12 taxmann.com227/201 Taxman 105 (Mag.). In aforesaidjudgment, it has been clarified that theprovisions of section 14A are very muchattracted on those investments which areheld as stock-in-trade.


The alternative contention of the assessethat even if section 14A read with Rule 8Dis held to be applicable in its case, theAssessing Officer may be directed tocompute the disallowance as per Rule 8Dby taking into consideration only thoseshares which have yielded dividendincome in the year under consideration.Since this issue raised the assessee as analternative contention is squarely coveredin favour of the assessee by the decision ofthe Co-ordinate Bench of Tribunal in thecase of REI Agro Ltd. v. Dy. CIT [2013] 35taxmann.com 404/144 ITD 141 (Kol.-Trib.),the Assessing Officer is directed to computethe disallowance as per Rule 8D by takinginto consideration only those shares whichhave yielded dividend income in the yearunder consideration. The alternativecontention of assessee was accordinglyaccepted.

In the result, the revenue’s appeal is partlyallowed.

4. Sunil Thomas v. Income-tax Officer,Ward No. 2(1), Kochi [2017] 80taxmann.com 61 (Kerala HC)

Issue:

Where the donor didn’t explaingenuineness of transactions or thecreditworthiness by producing necessarydocuments proving his ability to makesuch substantial gift. Whether suchaddition of gift by Assessing Officertreating same as undisclosed income waslegal?

Facts:

The issue raised in this appeal is confinedto assessment of an amount of Rs.1,66,01,834/- as the income of the assesseeon the ground that he failed to prove thegenuineness of the gift transaction and thecapacity of the donor, his brother, toadvance the money as required underSection 68 of the Income Tax Act. The saidorder was confirmed by the Commissionerof Income Tax (Appeals) and the Income-tax Appellate Tribunal by dismissing theappeals filed by the assessee.

Held:

Assessee claimed benefit of exemptionunder Section 56(2) of the Income-tax Actand said section does not apply to any sumof money received from any relative.Therefore, the benefit of the proviso isavailable to any sum received from thebrother of an assessee, and such exclusionfrom assessment can be claimed by anassessee only if he satisfies the requirementsof Section 68 occurring in Chapter-VI of theAct.

Section 68 provides that where any sum isfound credited in the books of the assesseemaintained for any previous year, and theassessee offers no explanation about thenature and source thereof or theexplanation offered by the assessee is not,in the opinion of the Assessing Officer,satisfactory, the sum so credited may becharged to income-tax as the income of the


assessee of that previous year. Therefore,it is the duty of the assessee to offerexplanation about the nature and sourceof any sum found credited in the booksmaintained by him for the previous yearor if the explanation offered by him is notfound satisfactory to the Assessing Officer,the sum credited in the books of accountof the assessee may be charged to income-tax as the income of the assessee of thatprevious year.

The assessee primarily on the basis that hehas failed to prove the creditworthiness andhence the assessee contending that he hasdischarged the burden under Section 68 ofthe IT Act is not justified. In suchcircumstances, there was no illegality in theorder of the Assessing Officer, confirmedby the first appellate authority and theTribunal, in assessing the sum as theincome of the assessee.

5. Akshar Infrastructure (P.) Ltd. v.Income-tax Officer, Ward 1(1) [2017] 79taxmann.com 239 (Gujarat)

Issue:

Whether even otherwise, once havingfailed before Commissioner (Appeals) toenhance unexplained investment by relyingupon DVO’s report, thereafter it was notopen for Assessing Officer to reopenassessment on very ground i.e. relying uponDVO’s report

Facts:

The assessee filed the return of incomefor the Assessment Year 2005-06. Duringthe year under consideration, the assesseepurchased one land at a price ofRs. 78 lakhs. However, stamp authoritiesvalued the same at Rs. 1,85,05,800/- andcharged the stamp duty accordingly. In thescrutiny assessment under Section 143(3)of the Act the Assessing Officer addedthe difference of Rs. 1,07,05,800/-(Rs. 1,85,05,800/- Rs. 78,00,000/-) asdeemed income, being unexplained underSection 69 of the Act. It appears that feelingaggrieved and dissatisfied with thescrutiny assessment under Section 143(3)of the Act the assessee preferred Appealbefore the learned CIT (A). At this stage,it is required to be noted that duringpendency of the scrutiny assessment, theAssessing Officer made Reference to theDistrict Valuation Officer (‘DVO” forshort). However, as according to therevenue, time limit to frame the scrutinyassessment was to over, the AssessingOfficer without waiting for the DVO’sreport finalised the scrutiny assessmentunder Section 143(3) of the Act and addedRs. 1,07,05,800/- as deemed income, beingunexplained investment, under Section 69of the Act. As observed hereinabove,against the scrutiny assessment underSection 143(3) of the Act the assesseepreferred Appeal before the learned CIT(A). In the meantime, the Assessing Officerreceived the DVO’s report valuing the


property at Rs. 4,43,83,000/- by letterdated 5/10/2008 and letter dated 29/09/2009. Before the learned CIT (A) theAssessing Officer requested to enhance thedeemed income on the basis of the DVO’sreport. However, relying upon its earlierdecision in the case of Asstt. CIT v.Balkishan Poddar rendered in ITA No.3412, 3413 & 3414/Ahd/2008 dated 12/06/2009, learned CIT (A) has specificallyobserved that no addition can be sustainedbased on either stamp duty valuation orthe valuation report of the DVO, andtherefore, the learned CIT (A) rejected theprayer of the Assessing Officer to make theaddition on the basis of the DVO’s report.

Thereafter, the Assessing Officer issued theimpugned notice under Section 148 of theAct dated 09/10/2009 to reopen theassessment for the Assessment Year 2005-06 stating that the income had escaped theassessment and asked the assessee to filethe return. By letter dated 27/11/2009 theassessee asked for the reasons recorded.

Thereafter, the Assessing Officer hasfurnished/supplied the reasons recordedto reopen the assessment for theAssessment Year 2005-06. The reasons toreopen the assessment for the AssessmentYear 2005-06 reads that the requisitevaluation report was received recentlyfrom the DVO wherein the value of thesaid land is assessed at Rs. 4,43,83,000/-.

While completing the assessment, theAssessing Officer adopted the value of theland at Rs. 1,85,05,800/- as against the valueof Rs. 4,43,83,000/- assessed by theValuation Officer. As such, the value of theland in question is assessed less by Rs.2,58,77,200/-.In view of the same the AOhas reason to believe that income of Rs.2,58,77,200/- has escaped assessmentwithin the meaning of Section 147 of theAct and the AO satisfied that the case is afit case for issue of notice under Section148 of the Act.

A writ was filed against the notice under148 of the act by the assesse.

Held:

It was held by relying on the SupremeCourt in the case of Asstt. CIT v. DhariyaConstruction Co. [2010] 328 ITR 515/ [2011]197 Taxman 202, opinion given by DVO wasnot per se information for the purpose ofreopening of assessment under section 147of the Act.

Under the circumstances, solely relyingupon and/or on the basis of theinformation in the form of DVO’s report,the Assessing Officer is not justified inreopening the scrutiny assessment undersection 143(3) of the Act.

(The authors are Chennai based CharteredAccountants and they can be reachedat [email protected] &[email protected] respectively)


RECENT DECISIONS - EXCISE LAW

1. The denial of CENVAT credit merelyon wrong address mentioned byoversight is not justified

In the case of A K Engineers Vs CCE 2017-TIOL-1292-CESTAT-BANG, the taxpayeris engaged in the manufacture of fabricatedsteel machinery parts. The assesse has beenavailing CENVAT credit on inputs, inputservices and capital goods. During audit,objections were raised as to the eligibilityof credit taken based on invoices that werenot addressed to the assesse. The companypaid the amount in cash during the audit,but filed for a refund claim later onrealization that this was a technical issueand credit should not have been denied.

Taxpayer contended before the Tribunalthat denying the refund on the ground thatthe address of the appellant on the invoicesis not correctly mentioned, is wrong andillegal given that the inputs received underthe invoice in question were received bythe appellant, accounted for and used inthe manufacture of finished goods. Thecompany further contended that when theerror was noticed, it was brought to thenotice of the input supplier whoacknowledged the same to be a clericalerror on the part of the person preparingthe invoice, in writing.

Held that, it is a well settled law thatCENVAT credit should not be denied onmere technicalities and it should be allowedin the present case.

2. Assembling computer parts &components into a working computersystem does not amount tomanufacture

In the case of NOVO COMPUTERSHOPEE vs CCE 2017-TIOL-1279-CESTAT-BANG the taxpayer was engagedin the trading of computer systems andaccessories. Upon investigation by theExcise officials, it was brought to noticethat the company has undertakenmanufacture of computers with the brandname which belonged to another person.Duty and penalty were imposed.Consequently, the company was alsodenied the benefit of small scale industryexemption.

CA. DEBASIS NAYAK & CA. DIVYA RAMESH


The taxpayer contended that the activityundertaken is that of trading and notmanufacturing and connecting together byassembling various components ofcomputers does not amount to manufactureof computers. Company also contendedthat the brand name NOVO belonged to afirm in which the brother of the proprietoris the Managing Director and there isnothing on record to suggest that they haveobjected to the use of the brand name. Thedemand was also challenged based on thegrounds of limitation.

The Revenue argued that it had been heldin many decisions that assembly of variouscomponents of computer include thecomputer system brought into existence anew product falling under 8471thus liableto payment of excise duty. Also contendedthat the appellant will not be entitled tothe SSI benefit as the goods cleared bearthe brand name of another person.

There are two issues that arise in this case:

i) If the activities can be construed as“Manufacture” and duty be demanded

ii) Whether SSI concession be denied inthis case holding that brand name ofanother person has been used

The Tribunal relied on the decision ofLampo Computers Private Limited, it isdiscussed that each of the components such

as CPU, hard disc, monitor etc. would formseparate units of ADP (automatic dataprocessing) machines. All units of ADP aredesigned to be interconnected to enable theADP system to be formed to carry out itsbusiness. Further, it relied on the Circularno. 497/63/99-CX and the case of CCE,Ahmedabad Vs. Macro Tech P. Ltd. [2008(231) ELT 59 (Tri. Ahmd.)] - 2008-TIOL-1648-CESTAT-AHM, the CESTAT heldthat the activities of assembling of variouscomponents of computers into a workingcomputer system will not amount tomanufacture and hence are not liable topayment of excise duty. Consequently,there is no need to discuss the issue ofbrand name and SSI benefit.

3. CENVAT Credit cannot be claimed oncapital goods which continue toremain in the old factory premises andare not transferred to the newpremises. CENVAT credit can beclaimed for windmills located outsidefactory premises.

In the case of Bhavani Industries VsCommissioner (Appeals) Of Central Excise,Customs and Service Tax2017-TIOL-1274-CESTAT-AHM the appellant had availedCENVAT Credit on Capital Goods in theirnew factory premises and Input Service TaxCredit oninstallation/maintenance of WindMills located outside the factory premises.A demand notice was issued to them forrecovery of the said credit along with theinadmissible credit.


None appeared on behalf of the appellant.The Ld AR contended that thoughCENVAT credit was claimed in respect ofcapital goods at the new factory premises,the capital goods in fact continued toremain in the old factory premises.Therefor the taxpayer had not followed theprocedure laid down under Rule 10 of theCENVAT Credit Rules, 2004.

The CESTAT did not find any discrepancyin the said finding of the Ld Commissioner(Appeals) and accordingly upheld thedenial of credit of the capital goods.

However, relying on Parry Engg &Electronics Pvt. Ltd. Vs. CCE & ST,Ahmedabad-I, II & III 2015 (40) STR243(Trb.-LB) - 2016-TIOL-48-CESTAT-AHM, the CESTAT confirmed theeligibility of the CENVAT Credit on InputServices relating to maintenance of WindMills outside the factory premises and heldthat the CENVAT Credit availed on theinput service used in Wind Mills wasadmissible.

4. The taxpayer is not liable to pay theexcise duty again when the mistakeis bonafide and the entire money isdeposited in Government exchequerwrongly through different codes.

In the case of Diamond Cements vs CCEBhopal 2017-TIOL-1264-CESTAT-DEL thetaxpayer is a manufacturer of “clinker”.

This “clinker” is cleared to the assessee’sother unit on payment of appropriate duty.The duty so paid by the assesse is availedas a credit by the recipient unit, since the“clinker” is used in the manufacture ofcement which is ultimately cleared onpayment of duty.

The company availed credit of the duty paidon inputs, input services and capital goodsused in or in relation to the manufactureof final product, and the same is utilizedby it towards payment of duty on clinker.The appellant invariably paid the duty onclinker through debit in its PLA whereinamount is deposited through TR-6/GAR-7 challans. During the period, the companyhad deposited duty in the education cesscode instead of excise code. The mistakewas detected by the department whileconducting the audit and the departmentdemanded the excise duty again.Aggrieved, the appellant filed an appeal.

The CESTAT held that the mistake wasbonafide and the entire money wasdeposited in Government exchequerwrongly through different codes. Thisissue is squarely covered by the Tribunalin the cases of Arcadia Share & StockBrokers Pvt. Ltd. Vs. CCE - 2013-TIOL-1044-CESTAT-MUM and South AsianPetrochem Ltd. Vs. CC - 2007 (219) ELT991 (Tri.- Kol .).


CESTAT agreed with the contention of theappellant that they are not liable to pay theexcise duty again and directed the LearnedCommissioner to make necessary accountsadjustment between the codes.

5. Sales tax would not be included aspart of transaction value if sales tax isunder a remission scheme.

In the case of M/s Welspun CorporationLimited vs CCE Mumbai I 2017-TIOL-1287-CESTAT-MUM, the taxpayer wererecovering sales tax/VAT from theircustomers on sales effected by them. Thecompany was eligible to ‘Incentive Scheme2001’ under which they were allowed torecover the sales tax amount / VATamount but to retain with themselves asan incentive.

Revenue contended that the sales taxreceived by them is required to beconsidered for the levy of Excise Duty asper the provisions of Rule 6 of CentralExcise Valuation Rules, 2000 read withSection 4 (1) and 4 (3) (a) (d) of the CentralExcise Act, 1944 and Para 10 and 11 ofBoard’s Circular No. M. F. (DR) F.No. 354/81/2000-TRU dt. 30.06.2000. The Revenuealso relied upon the judgment of Hon’bleSupreme Court in the case of M/s SuperSynotex (India) Ltd.

The assesse paid the excise duty underprotest and claimed refund of itsubsequently. They contended that under

the scheme they have opted for remissionof sales tax which means that the sales tax/VAT was payable at the time of clearancesof goods and therefore the same is not apart of the assessable value of the goods.They submitted that in case of M/s SuperSynotex there was exemption from salestax and since the said amount was notchargeable, the recovery thereof from thecustomer is liable for excise duty as beingpart of the assessable.

The adjudicating authority rejected therefund claim on the ground that the salestax collected was retained by the Companyand as the amount is not actually payable,it is liable to be included in assessable valueand is liable for duty.

The Revenue in the Tribunal contendedthat “value” in relation to excisable goodsdoes not include the amount of duty ofexcise, sales tax and other taxes if any“actually paid” or “actually payable” onsuch goods.

The company submits that under theincentive scheme they were eligible forincentive on account of fixed CapitalInvestments. The State Governmentinstead of collecting the Sales Tax payableand thereafter separately granting the samein the form of incentive, it has given effectto the said incentive scheme by grantingremission of the Sales Tax actually payable.


In their case not only Sales Tax was actuallypayable but in fact it stood actually paid,as the remission was nothing butadjustment of the Sales tax paid by themagainst the incentive which the StateGovernment granted with respect to thefixed capital investment made by it in theState of Gujarat. There is no blanketexemption form sales from the levy orpayment of sales tax.

The taxpayer also contended that“Remission” and “Exemption” aredifferent. In the case of ‘exemption’ thelevy itself is statutorily exhausted and nosales tax is paid or payable by the assessee,whereas in case of “remission” the salestax is payable as there is no exemption fromlevy and/or payment of sales tax at thetime of clearance.

Another contention by the Company is thatthe transaction value, as defined in Section4 of the Central Excise Act, 1944 does notinclude any amount of sales tax and othertaxes which are ‘actually paid’ or ‘actuallypayable’. In the instant case, there cannotbe any dispute that Sales Tax was actuallyleviable and payable in respect of theclearances made in as much as there is noexemption in respect of the said clearance.In the absence of any exemption from thelevy and/or payment, it cannot be said thatSales Tax was not payable on thetransaction in question.

Tribunal stated that the subsidy in the formof remission of sales tax was in fact waspercentage of capital investment. Theintention of the State Government was,thus, instead of granting the capital subsidyto the units setting up their manufacturingfacility, the subsidy be granted byremitting sales tax amount. The remissionof tax is thus directly related to capitalinvestment in fixed asset. There was nooption to claim exemption from paymentof sales tax. The quantum of remission wasbased upon the investment made in thefixed assets.

Held that, tax was actually payable andthere was as such no blanket exemptionfrom sales tax. The term “remission” fromsales tax itself means that the sales tax wasactually payable at the time of clearance ofgoods but was remitted at a later date bypassing of assessment orders by the SalesTax authorities. Hence, the sale tax wouldnot form a part of transaction value for thepurpose of levying Excise Duty.

6. CENVAT Credit cannot be denied ifthe supplier has issued fake invoices butthe assesse is a bona fide buyer, who hasreceived the goods and maintained all therequired documents.

In the case of M/s Sunil HealthcareLimited vs CCE Jaipur I 2017-TIOL-1265-CESTAT-DEL, the taxpayer was engaged


in the manufacture of ‘empty hard gelatincapsules’, an excisable item. The companypurchased certain capital good andclaimed CENVAT credit against theinvoice and payment of duty.

Investigation revealed that the supplier ofthese capital goods did not have capacityto produce that much quantity of capitalgoods regarding which the Company hadavailed CENVAT credit. Accordingly,SCN was issued both to the Company andthe supplier.

The Company contended that theconfirmation of demand is not sustainablein law for the reason that the appellant isa bonafide purchaser who purchased therelevant capital goods against properinvoices on payment of excise duty. Thereis no allegation against the company thathe was party to the fraud or collusion withthe supplier. It also submitted that duringadjudication proceedings, the invoices aswell as transportation receipts and otherrelevant documents were produced beforethe adjudicating authority but those wereignored while passing the impugnedorder.

Revenue argued that the demand is rightlyconfirmed because the CENVAT credithas been availed against non-existentsupply on the basis of forge/fake invoices.

The company contends that the invoicesare supported by purchase orders, thetransport documents, register, ledgeraccount as well as bank paymentdocuments. These documents indicate thatthey have purchased the impugned goodsbonafidely from the supplier and madepayment through banking channels. Thereis no allegation that the goods have notbeen received or that the excise duty hasnot been paid by the supplier. This isevidenced by the transport documentsproduced by them issued by thetransporter. Accordingly, CENVATCredit taken on the capital goods cannotbe denied.

Tribunal stated that it is not expected thatthe buyer will carry out verification of theAccounts of the supplier to find outwhether the Central Excise duty hasactually been paid on the inputs/capitalgoods. There is nothing on record to showthat the goods have not been received inthe factory, hence the CENVAT creditshould be allowed.

(The authors are Chennai based Chartered

Accountants and they can be reached at

[email protected] & [email protected])


INFORMATION UTILITY UNDERINSOLVENCY AND BANKRUPTCY CODE 2016

Information Utility is a person who is registered with theBoard as an Information utility under section 210. Themain purpose behind establishment of the informationutility, as a regulated information industry, is to ensurethat all stakeholders in the insolvency resolution processshall have access to reliable financial information aboutthe corporate debtor.

CS. S. DHANAPAL

Irrespective of the fact whether the insolvency resolution process is initiated by thecreditors or the corporate debtor himself, either of the parties shall have access to theinformation available with the information utility which shall help to ascertain theexistence of debt and default. The information available with the information utility shallbe reliable so much so that it passes the test of conclusive evidence, so that the insolvencyresolution process can be completed in a time bound manner.

The provisions relating to Information Utilities are contained in Sections 209 - 216, ChapterV, Part IV of the Code read with Insolvency and Bankruptcy Board of India (InformationUtilities) Regulations, 2017 which regulations came into force with effect from 01st April,2017.

DUTIES / OBLIGATIONS OF INFORMATION UTILITIES:

For the purposes of providing core services to any person, every information utility shall-

(a) Create and store financial information in a universally accessible format;

(b) Accept electronic submissions of financial information from persons who are underobligations to submit financial information under sub-section (1) of section 215;

c) Accept, electronic submissions of financial information from persons who intend tosubmit such information;

(d) Meet minimum service quality standards specified by regulations;


(e) Get the information received from various persons authenticated by all concernedparties before storing such information;

(f) Provide access to the financial information stored by it to any person who intends toaccess such information;

(g) Publish statistical information

(h) Have inter-operability with other information utilities.

Care in provision of services

An information utility shall provide services with due and reasonable care, skill and diligence and shall hold the information as a custodian.

Non-discrimination It shall provide services without discrimination in any manner.

Consent of users Services to the users shall be provided based on their explicit consent and their rights shall be protected. Any information submitted by a user and stored with the utility shall be transferred to another information utility only on the request of the user.

Safe keeping of information

The information utility shall – • establish adequate procedures and facilities to ensure

that its records are protected against loss or destruction;

• adopt secure systems for information flows; • Protect its data processing systems against

unauthorised access, alteration, destruction, disclosure or dissemination of information.

Risk management An information utility shall establish an appropriate risk management framework in accordance with the Technical Standards, if any, which provides for matters, including- (a) reliable, recoverable and secure systems; (b) provision of core services during disasters and emergencies; and (c) Business continuity plans which shall include disaster recovery sites.


(The author is a Chennai based Company Secretary. He can be reached at [email protected])

Restrictions on information utility

An information utility shall not- (a) outsource the provision of core services to a third-party service provider; (b) use the information stored with it for any purpose other than providing services under these Regulations, without the prior approval of the Board; (c) Seek data or details of users except as required for the provision of the services under these Regulations.

Insurance An information utility shall make adequate arrangements, including insurance, for indemnifying the users for losses that may be caused to them by any wrongful act, negligence or default of the information utility, its employees or any other person whose services are used for the provision of services.

Levy of fees The information utility shall- (a) charge uniform fee for providing the same service to different users; (b) disclose the fee structure for provision of services on its website; and (c) Disclose any proposed increase in the fees for the provision of services on its website at least 3 months before the increase in fees is effected. The fee charged for – (a) providing services shall be a reasonable reflection of the service provided; and (b) Providing access to information shall not exceed the fee charged for submission of information to the information utility.

Audit of information technology framework

An information utility shall appoint an external auditor having relevant qualifications to audit its information technology framework, interface and data processing systems every year. The auditor appointed shall submit a report to the Governing Board. The information utility shall submit the auditor’s report received, along with the comments of the Governing Board, if any, to the Board within 1 month from the receipt of the report from the external auditor.


EXCEL TIPSWorkbooks can be saved online in a cloud to yourSkyDrive, google drive, One Drive etc. or on a computerthat's connected to a LAN (local area network).

We can share these spreadsheets with others who haveInternet or network access.

Workbook sharing is perfect for spreadsheets that requirefrequent or regular data updates, especially for those whosedata comes from several different departments, personssuch as spreadsheets that track budgets or schedules tasksetc.,

CA. DUNGAR CHAND U JAIN

By sharing a workbook, several people can edit the contents of the Excel file at the sametime. We achieve this by saving the Excel file in a folder on LAN / Cloud and then sharingthe same to all users who needs to edit the spreadsheet.

You can share an Excel workbook on a local area network in one of two ways using theribbon or:

◆ set up file sharing for the workbook by clicking the Share Workbook command buttonon the Ribbon's Review tab (Alt+RW).

Click on the "Allow changes by more than one use at the same time. This also allowsworkbook merging" checkbox. (As seen in the figures below)


◆ Turn on change tracking for the workbook by choosing the Highlight Changes optionfrom the Track Changes command button's drop-down menu on the Ribbon's Reviewtab (Alt+RGH).

Click "Track changes while editing. This also shares your workbook" checkbox (as seenin the figures below)


Whenever we share a workbook using either of these two methods, Excel first confirmsthe same with a dialog box and automatically saves the workbook under the same filenamewith the shared information

The program then indicates that the workbook can now be shared by appending [Shared]to the workbook's filename as it appears on the title bar of the Excel program window.


When a second person on another computer on the network opens the shared workbookfile, Excel opens a copy of the workbook file and the [Shared] indicator also appears onthe title bar in the second person's Excel File appended to its filename.

When a workbook is shared, Excel disables some of the program's editing features andthe same can't be used in editing the shared spreadsheet.

The following tasks are not enabled in a shared workbook:

◆ Deleting worksheets

◆ Merging cells

◆ Applying conditional formats to the cells of the worksheets (although existingconditional formats prior to sharing will work)

◆ Setting up or applying data validation to cells of the worksheets

◆ Inserting or deleting blocks of cells in a worksheet (we can however insert or deleteentire columns and rows from the sheet)

◆ Drawing shapes and adding text boxes.

◆ Assigning passwords for protecting individual worksheets or the entire workbook(existing protection and passwords prior to sharing will however work)

◆ Grouping or outlining data

◆ Inserting automatic subtotals

◆ Creating data tables or pivot tables

◆ Creating, revising, or assigning macros (although existing macros prior to sharing willwork)

(The author is a Madurai based Chartered Accountant. He can be reached [email protected])


DECODING THE CODE

In this new series under the title Decoding the Code, we attempt toprovide support towards learning this new law in relation toCorporate Insolvency Resolution and to especially enable InsolvencyResolution Professionals to explore the new professional opportunity.This series will also provide some insights to managers of corporatesseeking to apply the entities they own / manage under this law

In the first edition of the series, we understood the broadobjectives of the Code and the circumstances that led to its CA. SRIPRIYA KUMARintroduction. In the second edition, we attempted to understand certain key concepts aswell as the structure of the Code, the applicability as well as the broad framework of thesame

From this segment onwards, we will try and understand the Corporate InsolvencyResolution(CIR)Process as specified in the Code. The entire process is first placed as amap followed by a set of Questions and answers on the process


1. What is Corporate Insolvency Resolution

A comprehensive process that covers the gamut of insolvency resolution frameworkfor Corporates and includes processes relating to

• Filing of application before NCLT and admission thereof

• Appointment of Interim Resolution Professional

• Takeover of the management of the Company by the Resolution Professional onbehalf of the Committee of Creditors

• Formation of the Committee of Creditors

• Confirmation of the Resolution professional

• Preparation and approval of the Resolution Plan

2. When can the CIR process be initiated against a Corporate Person?

The provisions relating to the insolvency and liquidation of corporate debtors shall beapplicable when the amount of the default is one lakh rupees or more.

However, the Central Government is empowered, by notification, to specify theminimum amount of default of higher value which shall not be more than one crorerupees.

3. Who can initiate the CIR process

The corporate insolvency process may be initiated against any defaulting corporatedebtor by

a. a financial creditor,

b. an operational creditor

c. Or the corporate debtor themselves.

4. Who is a financial creditor?

A financial creditor is a person to whom a financial debt is due

5. Who is an operational creditor?

An operational creditor is a person who is a creditor for any of the following purposes


• provision of goods or

• Provision of services

• Under Employment

• Or a debt in respect of the repayment of dues arising under any law for the timebeing in force and payable to the Central Government, any State Government orany local authority.

6. Can a supplier of Coffee file for Insolvency Resolution against a banking company

No Corporate persons who are registered Financial service providers are not coveredunder this code

7. Where should one file the application under the CIR process

The application should be filed before the National Company law Tribunal havingjurisdiction over the Corporate debtor

8. Can CIR be initiated when there is no default

No CIR cannot be initiated when there is no default

9. Can a financial creditor in respect of whom there is no default file an application ofresolution?

Yes, a financial creditor for whom there is no default can also file an application againsta corporate debtor provided, the corporate debtor has a default against some otherfinancial creditor

10. Who is not entitled to make application to initiate a corporate insolvency process?

As per Section 11 of the Code the following persons shall not be entitled to initiate thecorporate insolvency process

a) A corporate debtor already undergoing an insolvency resolution process; or

b) A corporate debtor having completed corporate insolvency resolution process12(twelve) months preceding the date of making of the application; or

c) A corporate debtor or a financial creditor who has violated any of the terms ofresolution plan which was approved 12 (twelve) months before the date of makingof an application;

d) A corporate debtor in respect of whom a liquidation order has been made.


11. What are the basic aspects in relation to initiation of CIR

Parameter Financial Creditor Operational Creditor Corporate Applicant

By whom Financial Creditor singly or jointly

Operational Creditor Corporate Applicant

Condition Default should have occurred

Default should have occurred

Default should have occurred

Debt default Of the Financial creditor or any other financial creditor

Of the Operational Creditor Of the Corporate Creditor

Application to accompanied by

• Proof of debt • Proof of

default • Name of

insolvency resolution professional

• Proof of debt • Proof of default • Name of insolvency

resolution professional

• Demand notice / Invoice copy – Form 3 and 4

• Affidavit that there is no dispute raised by the debtor

• Certification from financial institutions that the debt has not been repaid as at the date of the application

Books of account and other documents

Format Form 1 – Application and Form 2 – Resolution Professional

In Form 5 In Form 5


1. What is Corporate Insolvency Resolution

A comprehensive process that covers the gamut of insolvency resolution frameworkfor Corporates and includes processes relating to

• Filing of application before NCLT and admission thereof

• Appointment of Interim Resolution Professional

• Takeover of the management of the Company by the Resolution Professional onbehalf of the Committee of Creditors

• Formation of the Committee of Creditors

• Confirmation of the Resolution professional

• Preparation and approval of the Resolution Plan

2. When can the CIR process be initiated against a Corporate Person?

The provisions relating to the insolvency and liquidation of corporate debtors shall beapplicable when the amount of the default is one lakh rupees or more.

However, the Central Government is empowered, by notification, to specify theminimum amount of default of higher value which shall not be more than one crorerupees.

3. Who can initiate the CIR process

The corporate insolvency process may be initiated against any defaulting corporatedebtor by

a. a financial creditor,

b. an operational creditor

c. Or the corporate debtor themselves.

4. Who is a financial creditor?

A financial creditor is a person to whom a financial debt is due

5. Who is an operational creditor?

An operational creditor is a person who is a creditor for any of the following purposes


12. Can an application to the NCLT be filed in any format

The application has to be submitted in the format as provided by the Application toAdjudicating Authority Rules and accompanied by a fee of Rs 25,000

13. What are the conditions for acceptance of an application of operational creditor byNCLT

• Application should be complete

• Operational debt is remaining unpaid

• Invoice / demand notice has been delivered and proved as delivered

• The debt is not disputed by the Corporate debtor / information utility prior tothe delivery of the notice

• No disciplinary proceeding pending against the resolution professional

• In case of any defect, 7 days’ time is provided by to rectify and to resubmit theapplication

• If all is found in order NCLT may pass orders for corporate insolvency resolution

14. What is meant by a Demand Notice?

Demand Notice means a notice served by an operational creditor to the corporatedebtor demanding repayment of the operational debt in respect of which the defaulthas occurred. As stated in Rule 5(2) of Insolvency and Bankruptcy (Application toAdjudicating Authority) Rules, 2016, the demand notice or copy of invoice shall besent to corporate debtor by post, by hand or email and the copy of demand noticeshall be forwarded to information utility.

15. What is the impact of admission of an application

The insolvency resolution process shall commence from the date of admission ofapplication by the Adjudicating Authority. It is referred to as the Corporate Insolvency


Resolution Date. The Code provides for a “calm period” of 180 days called as the“moratorium period” by staying all proceedings against the company to enable aresolution option by a Collective Mechanism of the Debtors and Creditors.

16. Can an application for insolvency process be withdrawn?

A per Rule 8 of Insolvency and Bankruptcy (Application to Adjudicating Authority)Rules, 2016, application for insolvency process may be withdrawn any time beforeadmission of application, with the permission of Adjudicating Authority

17. What is the period within which the application is to adjudicated by NCLT

The Code provides that the NCLT shall establish the default within 14 days ofapplication or reject the same providing 7 days’ time for resubmission

18. What are the grounds for rejection of application

The grounds for rejection of application are

• No debt in default

• Where operational debt is in dispute even before the date of issuance of thedemand notice

• There are disciplinary proceedings against the Interim Resolution Professional

19. Is naming an Interim Resolution Professional Compulsory along with theapplication

Yes for application by Financial Creditor and Corporate Debtor but not mandatoryfor filing of applications by Operational Creditors

(The author is a Chennai based Chartered Accountant and she can be reached at [email protected])


FOR YOUR KIND ATTENTION PLEASECORPORATE AUDIT 31ST MARCH 17

Changes in accounting standards

For those practicing chartered accountants who is not botheredabout Ind AS, thinking that it is not applicable to their clients,caution is the watch word. Slowly the government is tinkeringwith the existing accounting standards to align them in line withInd AS so that entire corporates follow the Ind AS standardsuniformly in next 5-6 years. Vide notification no G.S.R. 364(E)dated 30th Mar 16, the Companies Accounting Standard Rules

CA. R. G. RAJAN

were amended. The following standards were modified AS 2 on Valuation of inventories,AS 4 on Contingencies and events occurring after balance sheet date, AS 10-Property,Plant and Equipment, AS (13) Accounting for investments, AS (14) Accounting foramalgamation, AS (21) Consolidated financial statements, AS (29) Provisions, ContingentLiabilities and Contingent Assets. Further AS (6) on Depreciation accounting omitted

Some of the standards have undergone far reaching changes as compared to the earlierversion hence it is thought fit to provide a template of accounting policies to be disclosedin respect of those standards.

AS 10-Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation andimpairment, if any. Costs directly attributable to acquisition are capitalized until theproperty, plant and equipment are ready for use, as intended by management.

The cost of an item of property, plant and equipment is the cash price equivalent at therecognition date. If payment is deferred beyond normal credit terms, the differencebetween the cash price equivalent and the total payment is recognised as interest overthe period of credit unless such interest is capitalised in accordance with AS 16


The company depreciates property, plant and equipment over their estimated useful livesusing the straight-line method as prescribed under Part C of Schedule II of the CompaniesAct, 2013. Depreciation on additions / deletions has been provided on a pro-rata basis.Each part of an item of property, plant and equipment with a cost that is significant inrelation to the total cost of the item is depreciated separately

The estimated useful lives considered for depreciation of property plant and equipmentare as follows:

Depreciation methods, useful lives and residual values are reviewed periodically, includingat each financial year

Subsequent expenditures relating to property, plant and equipment is capitalized onlywhen it is probable that future economic benefits associated with these will flow to thecompany and the cost of the item can be measured reliably. Repairs and maintenancecosts are recognized in net profit in the Statement of Profit and Loss when incurred.The cost and related accumulated depreciation are eliminated from the financial statementsupon sale or retirement of the asset and the resultant gains or losses are recognized inthe Statement of Profit and Loss. Assets to be disposed off are reported at the lower ofthe carrying value or the fair value less cost to sell.

Items of property, plant and equipment retired from active use and held for disposal isstated at the lower of their carrying amount and net realisable value. Any write-downis recognised in the statement of profit and loss.

Assets Category Estimated useful life years

Plant and machinery ..

Computers, Laptops, and accessories ..

Vehicles ..

Servers and network ..

Furniture & Fittings ..

Office equipment ..


The carrying amount of an item of property, plant and equipment is derecognised

(a) On disposal; or

(b) When no future economic benefits are expected from its use or disposal.

The gain or loss arising from de-recognition of an item of property, plant and equipmentis included in the statement of profit and loss when the item is derecognised. The gainor loss arising from de-recognition of an item of property, plant and equipmentisdetermined as the difference between the net disposal proceeds, if any, and the carryingamount of the item.

While the cost of the fixed asset not ready for its intended use on the balance sheet dateare disclosed under capital work-in-progress, advances paid towards the acquisition offixed assets which are outstanding at each balance sheet date are disclosed under 'loansand advances' and grouped as 'non-current'.

AS 13-Accounting for Investments

Investments are segregated into long term and current. The cost of investment includesacquisition charges such as brokerage, fees and duties less the pre-acquisition interest/dividend accrued if any. The carrying amount for current investments is the lower ofcost and fair value determined either on an individual investment basis or by categoryof investment. For current investments, any reduction to fair value and any reversals ofsuch reductions are included in the profit and loss statement. Long-term investments arecarried at cost. However, when there is a decline, other than temporary, in the value ofa long term investment, the carrying amount is reduced to recognise the decline. Thereduction in carrying amount is reversed when there is a rise in the value of theinvestment, or if the reasons for the reduction no longer exist. On disposal of aninvestment, the difference between the carrying amount and the disposal proceeds, netof expenses, is recognised in the profit and loss statement. When disposing of a part ofthe holding of an individual investment, the carrying amount to be allocated to that partis to be determined on the basis of the average carrying amount of the total holding ofthe investment. Where long-term investments are reclassified as current investments,transfers are made at the lower of cost and carrying amount at the date of transfer. Whereinvestments are reclassified from current to long-term, transfers are made at the lowerof cost and fair value at the date of transfer.


AS 29- Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognized when the company has a present obligation as a result of pastevent, for which it is probable that a cash outflow will be required and a reliable estimatecan be made of the amount of the obligation. Provisions are not discounted to their presentvalue except in case of decommissioning, restoration and similar liabilities that arerecognised as cost of Property, Plant and Equipment and are determined based on bestestimate required to settle the obligation at the balance sheet date. These are reviewedat each balance sheet date and adjusted to reflect the current best estimates.

Contingent liabilities are disclosed when the company has a possible obligation and it isprobable that an outflow of resources embodying economic benefits may not be requiredto settle the obligation.

Presentation in the financial statements

The Fixed Assets standards have been renamed as Property, Plant and Equipment.However Schedule III still has the heading Fixed Assets which are segregated intoTangible Assets and Intangible Assets. Though schedule III provides a freedom to theaccounting standards to modify the presentation, still a mere substitution of propertyplant and equipment heading in place of fixed assets will not help because under fixedassets intangibles are also covered. To meet both the requirements it is suggested tomodify the tangible assets as tangible assets (property, plant and equipment). This canbe adopted in the schedule of fixed assets also if an entity is presenting the schedule offixed assets including both tangible and intangible assets.

On provision for proposed dividends

If the company intends to declare dividends for the financial year ending on 31st Mar2017 do not recognize the provision in the balance sheet. As per revised AS 4, if dividendsare declared after the balance sheet date but before the financial statements are approvedfor issue, the dividends are not recognised as a liability at the balance sheet date becauseno obligation exists at that time unless a statute requires otherwise. Such dividends aredisclosed in the notes.

(The author is a Chennai based Chartered Accountant. He can be reached at [email protected])

Visit http://tdschennai.in/

To apply for Lower TDS Certificate U/S 197


ITR FORMS FOR AY 2017-18 - WHATS NEW

CA. E. CHAITANYA

As a part of its annual exercise, the CBDT hasnotified the new ITR forms on the following dates.All the below mentioned forms are also madeavailable (in the required format) for electronicfiling.

The forms are required to be filed electronically by all the assessees except those statedbelow

a) An Individual aged 80 years or more at any time during the previous year or

b) An Individual or HUF whose income does not exceed Rs 5 Lakhs and who has notclaimed any refund in the Return of Income.

With the advent of return filing software (like winman, computax etc.), the job of theChartered Accountant being a tax practitioner, is made easy as the ITR form isautomatically selected by the software itself. Change in ITR can also be made midwayafter entering partial data without loss of such data. However, in-spite of such software,it is important to know the various forms and fields to be filled therein. The form filedcould be treated as defective/invalid if incorrect form or incorrect data is filed/filledup.

In the ensuing article, the author attempts to compare the ITR Forms for AY 17-18 andAY 16-17 and bring out the amendments made to the ITR for AY 17-18.

S.No Form Number Date of Notification 1 Form 1 & 4 31st March 17

2 Form 2 & 3 5th April 17 3 Form 5 7th April 17 4 Form 7 20th April 17


A brief scope of each form when compared with preceding assessment year is tabulatedbelow.

S.No ITR Applicable to whom Asst Year 17-18 Asst Year 16-17 1 ITR 1 For Individuals having income

from Salaries, one House Property or Other Sources and having Total Income upto Rs 50 Lakhs

For Individuals having Income from Salary, one house property & Other Sources.

2 ITR 2 For Individuals and HUFs not carrying on business or Profession under proprietorship.

For Individuals/HUFs not having income from business or profession.

3 ITR 2A Removed For Individuals & HUFs not having Income from Business or Profession and Capital Gains and who do not hold foreign assets

4 ITR 3 For Individuals and HUFs having income from any proprietorship business or Profession

For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship

5 ITR 4 Removed For Individuals/HUF having income from proprietary business or profession

6 ITR 4 (Sugam)

For presumptive income from Business or Profession

For Individuals/HUF/Partnership Firm having income from presumptive business

7 ITR 5 For Persons other than Individual, HUF, Company and persons filing Form 7

For firms, AOPs, BOIs and LLP

8 ITR 7 For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F

For persons including companies required to furnish return under sections 139(4A) or 139(4B) or 139(4C) or 139(4D) or 139(4E) or 139(4F)


ITR 1: What’s New?

The ITR 1 for AY 17-18 comes with a cap on Total Income. This form can only be utilizedby assessees whose Total Income does not exceed Rs 50 Lakhs. Significant changes inthe New ITR are as follows,

a) Bifurcation of exempt income into incomes exempt under Sec 10(34), 10(38) andagricultural income (Which was not the case in earlier year’s ITR). It may be notedthat if the agricultural income exceeds Rs 5,000/- then ITR 1 is not applicable.

b) Introduction of column for reporting bank-wise deposit of cash between 9th

November 2017 and 30th December 2017. This is required to be given if theaggregate cash deposits in all banks put together exceeds Rs 2 Lakhs. It may benoted that this is a non-mandatory requirement in the ITR 1.

c) Removal of particulars relating to disclosure of assets and liabilities. The disclosureof assets and liabilities are not required to be given if the Total Income does notexceed Rs 50 lakhs and hence the same is removed.


Earlier year’s ITR 2, ITR 2A and ITR 3 are now clubbed together and the new ITR 2 isnotified for AY 17-18. The new ITR 2 can be used by Individuals or HUFs if they do nothave any income from proprietorship Business or Profession. The significant changes madeto new ITR 2 are as follows,

a) Introduction of column for reporting bank-wise deposit of cash between 9th

November 2017 and 30th December 2017. This is required to be given if theaggregate cash deposits in all banks put together exceeds Rs 2 Lakhs. It may benoted that this is a MANDATORY requirement in the ITR 2 for the first bankaccount i.e., the bank account in which refund is credited or any other bankaccount.

b) The new ITR 2 permits the entry of Income derived by partner of the firm. It hasintroduced a new schedule BP for reporting the same. Hence incomes such asInterest on capital, remuneration and share of profit can be reported in ITR 2 itself.Further another new schedule IF being “Information about partnership firms in


which you are a partner” is introduced. The schedule IF requires details aboutfirms such as Name of the firm, PAN of the firm, whether the firm is liable toaudit under Sec 44AB, whether 92E is applicable to the firm, % of share, capitalbalance as on 31st March 17 in the firm etc.


Earlier year’s ITR 4 has now become ITR 3 for the AY 17-18. The significant changes madeto the New ITR 3 are as follows,



ITR 4 (Sugam): What’s New?

Earlier year’s ITR 4S has now become ITR 4 for AY 17-18. The significant changes madeto the new ITR 4S are as follows,

a) Consequent to the statutory amendment, the new ITR requires the assessees tobifurcate the turnover into the following

(i) Amount received through account payee cheques, drafts or bank ECS

(ii) Any other mode.

Accordingly the presumptive tax rate of 6% or 8% would apply.

b) New column for presumptive taxation of professionals under Sec 44ADA havebeen included.

c) Introduction of column for reporting bank-wise deposit of cash between 9th

November 2017 and 30th December 2017. This is required to be given if theaggregate cash deposits in all banks put together exceeds Rs 2 Lakhs. It may benoted that this is a non-mandatory requirement in the ITR 4S.



Earlier year’s ITR 5 has now become the ITR 5 for AY 2017-18. Minimal changes havebeen made to the ITR 5. Yet some of the significant changes made are given below.



Other changes common to all ITRs: (from ITR 2 to ITR 5)

a) Increase in disclosure of reporting assets and liabilities for assessees having TotalIncome exceeding Rs 50 Lakhs. Nature of asset, location or address and cost arerequired to be disclosed for Immovable Properties. For all other assets mentionedin the schedule AL, cost needs to be disclosed. Liabilities for all the assets mustbe aggregated and disclosed.

b) Consequent to the statutory amendment by the Taxation Laws (SecondAmendment) Act 2016, Schedule SI has been changed with respect to the rate oftax from 30% to 60% under Sec 115BBE.

c) A new field has been inserted in deductions under Chapter VI-A for allowingdeduction under Sec 80EE. Since the deduction is applicable from AY 17-18, thesame is included in the new ITR forms (i.e., from ITR 1 to 4).

The Aadhaar Saga:

a) All the ITR forms from ITR 1 to ITR 4 contain a column for quoting the AadhaarNumber of the assessee. Presently all these filed are marked as non-mandatoryin the Return forms.

b) But through the Finance Act 2017, the Legislature introduced a new section i.e.,Sec 139AA. According to Sec 139AA, with effect from 1st July 2017 every assessehas to obtain and quote Aadhaar Number in PAN application or in Return ofIncome mandatorily.


c) The Section also states that if any person fails to intimate the Aadhaar Number,then the PAN allotted to such person shall be deemed to invalid.

d) Hence all the assessees have to mandatorily link/match their PAN with theAadhaar Number in the Income Tax e-filing portal before the 1st day of July 2017.In case they have not linked, they may be prohibited from filing their Return ofIncome.

e) Two petitions have been filed in the Hon’ble Supreme Court challenging theprovisions of Sec 139AA. The Central Government through the Attorney Generalof India stated that the use of Aadhaar for filing of Income Tax Returns is toensure that multiple PAN cards and fake PAN cards are not used.

f) As on the date of writing this article, the Hon’ble Supreme Court listed the matterfor further hearing on 26th April 2017, on which day a verdict is expected.

The knowledge of the Income Tax forms and the disclosures required thereunder areimportant for every tax practitioner. The government has made an attempt to reducethe number of ITR forms and increase the ease of doing business. Further processing ofIT Returns by the CPC has reduced the time taken in processing the Returns and issuingthe intimations under Sec 143(1). However the number of disclosures required in the ITRand the method of disclosing are not easy enough for a common man to understand andcomply. Further the mistakes in filing of Returns are readily identified and returns aremarked as defective. Failing to correct the defect leads to invalidating the Return.

In this challenging scenario, the tax practitioners are expected to ensure that all theapplicable fields in the ITR are duly and correctly filled to avoid unnecessary corrections/re-filings in future. The same can be achieved by having knowledge about the variousITR forms and the contents contained therein in each form. The author hopes that theabove article provided some insight into that aspect.

(The author is a Tirupathi based Chartered Accountant. He can be reached at [email protected])

mailto:[email protected])


Facts of the case:

a. Father is the only son to his Father.

b. Father passed away on 10th April 2016. Father left the following properties to bebequeathed amongst his wife and children.

1) Shares in listed companies in Demat form – Rs 20.00 Lakhs (Note : In the nominationform to be filled while opening the Demat account, the father has nominated hisfirst son)

CASE STUDY AND ITS REPLY

CA. E. CHAITANYAQuestion No. 2: Succession to property

CA. E. Chaitanya presented a paper based on case studies whichwere discussed in group discussion and thereafter the learnedauthor had presented the keys to his case study. This was donein the recently conducted Residential Refresher Course held inJanuary 2017. The RRC seminar committee acknowledges andthanks the author for the gesture of giving the keys to casestudies. There are total of 9 case studies and this month secondcase study is published. The balance case studies will bepublished in future monthly Bulletin.

Married a Hindu Woman (as per the wishes of his parents) and has a Son (GS1) and

a daughter (GD1)

Married to a Hindu on 5th

November 2008 and has a

daughter (GD2)

Left to US for a job. Married a Christian Woman in US and

has a daughter (GD3). GD3 is raised

as a Christian

Unmarried

Son 1 Daughter 1

Father - Mother

Son 2 Son 3


2) Balance in Bank accounts – Rs 20.00 Lakhs (Note : In the nomination form, thefather has nominated his daughter)

3) 2 separate and distinct pieces of Land – Rs 40.00 Lakhs. (Each valued at Rs 20.00Lakhs each)

4) Land and Buildings – Rs 20.00 Lakhs

5) Sundry Debtors to the extent of Rs 20.00 Lakhs

c. Father has written a will the summary of which is as follows,

1) Shares will belong to his daughter after his death

2) Bank account will belong to his 3rd Son after his death

d. Daughter was married according to the Hindu Customs and she was already givenStridhan (consisting of jewellery and some cash) at the time of marriage.

e. After the death of father, his 1st son comes to you for your opinion. The 1st son seeksanswers to the following questions.

(i) What is the extent of each son’s share in the property of the father? 1st son also intendsto know if daughter is eligible to share in property.

(ii) Will it make a difference in the share of the children if the property of the father isbelonging to

• Father’s HUF

• His self-acquired property

(iii)In what status (i.e., Individual/HUF), will the property bequeathed by the father willbe received by the children?

f. After the death of the father and after settlement of the property amongst the children,the daughter upon ill advice of an advocate, threatened to sue the owner of land (landwhich was bequeathed by her father) for her share in the property. The land owner,although knows that she has no rightful claim to ownership, had paid her Rs 10.00Lakhs in return for waiver of her legal right to sue. Further he has also agreed toobtain a legal advice on her behalf about the taxability of the amount paid to her. Inthis regard, you are required to issue your opinion on the following aspects

• Is the amount of Rs 10.00 Lakhs taxable in the hands of the daughter?

• Will the amount be taxable if the daughter, instead of threatening to file a suit, actuallyfiles a legal suit and Rs 10 lakhs is paid in settlement for withdrawing the suit?


Is the amount of Rs 10.00 Lakhs, paid for waiver of daughter’s legal right to sue, eligiblefor deduction in the hands of the landowner?

Reply to Question 2:

1. As per Section 72 of the Companies Act 2013, shares vest in the nominee overriding anyother law or any will made the deceased.

Harsha Nithin Kolkata Vs Saraswat Bank (Mum HC) Dayagen Vs Rajendra Dorian (Del HC) Contrary view: Jayanand Salgaonkar (Mum HC)

2. Hence shares in Limited Companies will go to the 1st Son and the money in the bankaccount will go to the 3rd Son. Balance has to be distributed as per Sec 8 of HinduSuccession Act i.e., equal share to wife and each child.

3. Daughter will be eligible to take share in father’s property ifa) Daughter is alive on 9th September 2005b) Father is alive on 9th September 2005 andc) Partition has not been made before 20th December 2004

The above law was laid down by the Supreme Court in Prakash Vs Phulvanti 2016

4. If the property is father’s HUF property, then Son 2 is excluded from father’s HUF ashe married a Christian woman. Property received will have to be viewed as HUFProperty only.

5. If the property is father’s self-acquired property, then it will devolve upon the successorsin Individual Capacity only. The same is as per the below mentioned decisions of theSupreme Court.CWT Vs Chandersen 161 ITR 378 (1986)CIT Vs Karuppan Chettiar 197 ITR 646

6. Amount of Rs 10.00 Lakhs is capital asset in the hands of the daughter. But the cost ofacquisition of the right is not determinable. Hence, in view of the decision of the SupremeCourt in B.C.Srinivasa Chetty, the capital gains cannot be calculated and the chargewill fail.

7. The position will not change if the amount is paid for withdrawing the suit. Howeverposition will be different if the same is paid for the right of specific performance.

8. Rs 10 lakhs paid to the daughter will be allowed as cost of improvement in the hands ofthe land owner subject to adequate documentation by the land owner.

(The author is a Tirupathi based Chartered Accountant. He can be reached at [email protected])

mailto:[email protected])

thInauguration of 18 Annual Residential Conference of CASC “Haai(land) to Yunakthi”

Documents

+91 9940680500 +91 9900093129+91 ... - casconline.orgcasconline.org/images/CASC BULLETIN MAY 2017.pdf · Jubilant Food works Ltd. (here in after referred to as the “JFL”)to