Power of ROCs to obtain declaration/affidavits from subscribers/first directors at incorporation

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Circular No: 11/2013, Dated: 29th May, 2013

Sub: Power of ROCs to obtain declaration/affidavits from subscribers/first directors at the time of incorporation.

The matter of protection of interest of investors, including depositors, is very important to ensure healthy corporate capital market environment in the country. The recent instances of raising of monies by companies in a manner which is opaque/convoluted, non-accountable and which does not protect interests of depositors have been taken note of by the Ministry seriously.

Keeping in view the need to protect the interest of investors and ensure that companies raise monies in accordance with the provisions of the Companies Act/Deposit Rules, it is clarified that in exercise of the powers under the Companies Act, the Registrar of Companies may obtain declaration/affidavits from subscribers/first directors first at the time of incorporation and from directors, subsequently whenever company changes its objects, to the effect that company/directors shall not accept deposits unless compliance with the applicable provisions of Companies Act, 1956, RBI Act, 1934 and SEBI Act, 1992 and rules/directions/regulations made there under are duly complied and filed with the concerned authorities.

Comprehensive guidelines on Offer For Sale (OFS) of Shares by Promoters through the Stock Exchange Mechanism

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CIRCULAR No. CIR/MRD/DP/17 /2013 , Dated – May 30, 2013

Sub: Comprehensive guidelines on Offer For Sale (OFS) of Shares by Promoters through the Stock Exchange Mechanism.

1. This is with reference to the comprehensive guidelines on sale of shares through OFS mechanism issued vide circular no CIR/MRD/DP/18/2012 dated July 18, 2012 and amended vide circular CIR/MRD/DP/04/2012 dated January 25, 2013.
2. The aforesaid circular is amended as under:

2.1. Para 5 (b) shall be replaced by the following:

“Seller(s) shall announce the intention of sale of shares at least on the day prior to the offer for sale, along with the following information:”.

2.2. Para 5 (b) (i) to (viii) shall remain the same.

3. All other conditions for sale of shares through OFS framework shall be as per SEBI Circular CIR/MRD/DP/18/2012 dated July 18, 2012 and circular CIR/MRD/DP/04/201 2 dated January 25, 2013.
4. Stock Exchanges are directed to bring the provisions of this circular to the notice of the stock brokers and also disseminate the same on their website.

5. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Scrutiny Assessment Void if not as Per CBDT Scrutiny Guidelines

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INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “B” NEW DELHI

BEFORE SHRI B.R. MITAL : JUDICIAL MEMBER

&

SHRI B.R. JAIN : ACCOUNTANT MEMBER

ITA no. 3630/Del/2009 – Asstt. Yr: 2006-07

M/s Crystal Phosphates Ltd. Vs. Asstt. Commissioner of Income-tax

ITA no. 4002/Del/2009 – Asstt. Yr: 2006-07

Asstt. Commissioner of Income-tax Vs. M/s Crystal Phosphates Ltd.

 

Once the CBDT has issued instructions for assumption of jurisdiction for selection of cases of corporate assesses for scrutiny and assessment thereof, the same have to be followed in letter and spirit by the AO . The burden lies on the authority assuming jurisdiction to show and establish that such instructions have duly been complied and satisfied in letter and spirit. However, in the instant case, for the reasons stated above, instructions issued by the CBDT are not shown to have been satisfied for assumption of jurisdiction. Thus, we are in agreement with the contention raised by the appellant that notice issued u/s 143(2) of the Act for assumption of jurisdiction was not in terms of the instructions of the CBDT.
Hence, both the notice and the assessment framed are held to be without valid jurisdiction and stand quashed as such.

Income Tax Dept. Sent Letters to Another Batch of 35,000 Non-Filers

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Income Tax Department Sent Letters to Another Batch of 35,000 Non-Filers; Government Once Again Urges all Tax Payers to Disclose Their True Income and Pay Appropriate Taxes

As part of its ongoing initiative, the Income Tax Department has sent today i.e. 27^th May, 2013 letters to another batch of 35,000 non-filers. These persons were part of around 12 lakh non-filers identified as a result of data matching exercise. With this latest batch, the IT Department has now issued letters in 1,75,000 high priority cases.
The response to this initiative has been very encouraging and a large number of taxpayers have paid taxes and filed Income tax Returns. A compliance management cell has been set-up to monitor return filing and tax payment of the target segment.
The Income Tax Department has also initiated a Data Warehouse and Business Intelligence (DW & BI) Project to develop an integrated platform for effective utilisation of information to promote voluntary compliance and deter non-compliance.
The Government once again urged all the tax payers to disclose their true income and pay appropriate taxes.

Documents to be submitted with Annual Reports by listed company

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The SEBI circular No. CIR/CFD/DIL/7/2012 dated August 13, 2012 had inter-alia amended the clause 31(a) of the Listing Agreement by advising the listed companies to submit the following forms, as may be applicable, along with copies of annual reports submitted to Stock exchanges:
Form A: Unqualified/Matter of Emphasis Report
Form B: Qualified/Subject to/Except for Audit Report
The companies are required to ensure that
1) Form A or Form B as applicable is submitted with copies of the Annual Report to the Stck Exchanges where they are listed. Non-submission of Form A & B may be treated as non-submission of Annual Report and thus non-compliance with clause 31(a) of the listing agreement
2) The relevant Form, i.e. Form A/B is submitted. Submission of incorrect Form may be treated as non-submission.
3) Form A or Form B is signed by ALL the four entities mentioned in the SEBI circular i.e. CEO/ MD, CFO, Auditor and the Chairman of the Audit Committee, as per SEBI clarification. Form A or Form B not signed by all four mandated entities would be considered as incomplete submission.
4) Management comments are also submitted on the Auditors qualifications in case Form B is submitted. Companies are advised to comply with the above and extant provisions of the said SEBI circular.

Officers of Customs having jurisdiction on Duty Free Shops appointed as CE Officers

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Seeks to allow duty free sale of goods manufactured in India to the International passengers or members of crew at the DFSs located at the arrival / departure hall of International Airports and specify the procedures relating thereto.

NOTIFICATION NO 08/2013 Central Excise (N.T.), Dated: May 23, 2013

In exercise of powers conferred by clause (b) of section 2 of the Central Excise Act, 1944 read with sub-rule (1) of rule 3 and rule 33 of the Central Excise Rules, 2002, the Central Board of Excise and Customs makes the following further amendment in the notification No.38/2001-Central Excise (N.T.) dated the 26th June, 2001 [G.S.R. 467 dated 26th June, 2001], namely: -

In the said notification, in the TABLE, after S.No.9 and the entries relating thereto in column (2) and (3), the following shall be inserted, namely:-

(1)	(2)	(3)
“10.	Officers of Customs under whose jurisdiction the godowns and retail outlets of Duty Free Shops at the International Airport are located, namely:-1. Commissioner 2. Commissioner (Appeals) 3. Additional Commissioner 4. Joint Commissioner 5. Assistant Commissioner or Deputy Commissioner 6. Superintendent/Appraiser 7. Examiner/Preventive Officer/Inspector	1. Commissioner 2. Commissioner (Appeals) 3. Additional Commissioner 4. Joint Commissioner 5. Assistant Commissioner or Deputy Commissioner 6. Superintendent 7. Inspector”

No Need of registration of godown or retail outlet of a Duty Free Shop

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Seeks to allow duty free sale of goods manufactured in India to the International passengers or members of crew at the DFSs located at the arrival / departure hall of International Airports and specify the procedures relating thereto.

NOTIFICATION NO. 09/2013 Central Excise (N.T.), May 23, 2013

In exercise of powers conferred by sub-rule (2) of rule 9 of the Central Excise Rules, 2002, the Central Board of Excise and Customs makes the following further amendment in the notification No.36/2001-Central Excise (N.T.) dated the 26th June, 2001 (GSR 465 E dated 26th June, 2001) , namely:

In the said notification, after para (2), the following shall be inserted, namely:-

“(2A) hereby declares that where a godown or retail outlet of a Duty Free Shop is appointed or licensed under the provisions of sections 57 or 58 of the Customs Act, 1962 (52 of 1962), as the case may be, such godown or retail outlet shall be deemed to be registered as warehouse under rule 9 of the Central Excise Rules, 2002.”

[F.No.209/08/2011-CX.6]

 

S. 2(22)(e) not applies to amount advanced for investment on behalf of company

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ITAT DELHI BENCH “A^”

BEFORE SHRI SHAMIMYAHYA, ACCOUNTANT MEMBER
AND

SHRI C.M. GARG, JUDICIAL MEMBER

I.T.A. No. 4269/Del/2011 – A.Y. : 2008-09

Income Tax Officer vs. Adarsh Kapoor

 

the stand of the assessee has been that a sum of Rs. 12,00,000/- was given to the assessee company, consequent upon the Resolution passed by the Board of Directors of the said Company authorizing the assessee to invest on behalf of the company in units of M/s Reliance Equity Advantage Funds. This was due to the reasons that at that point of time the company did not meet the requirements of the Know Your Customer (KYC) Scheme (for Money Laundering Measures) and also did not have a PAN Card which was mandatory for the purpose of applying of units of Mutual Funds.

We find that in this case the assessee is a Director of M/s Nevco Engineers Pvt. Ltd. holding 99% share of the total paid up capital. Assessee has made investment to the tune of Rs. 12,00,000/- in Reliance Equity Fund on behalf of Nevco Engineers Pvt. Ltd. The proposal for the assessee to make investment on behalf of Nevco Engineers Pvt. Ltd. was duly approved by the Board of Directors of the said company. The reasons for the Company not being able to make the investment in its name was that at that point of time, the Company did not meet the requirement of Know Your Customer (KYC) Scheme (for Money Laundering measures) and also did not have a PAN card which were mandatory for the purpose of applying of units of mutual funds. The Assessing Officer’s has given the reasoning for not accepting these submissions on the ground that Company could have waited to complete the formalities before the making the investment. We find that this view of the Assessing Officer is not sustainable. It was on account of commercial expediency as to avail the business opportunity, the Company invested in the Reliance Equity Funds through the assessee. The amount investment was duly reflected in the books of accounts of the Company as an investment. Assessee did not derive any benefit for the said investment in his personal name. It has further been submitted that the said investment was redeemed on 10.12.2010 at a profit of Rs. 1,35,838.21. On 10.12.2010 on the same date there was a transfer of redemption money of Rs. 13,35,838.21 from the assessee’s bank account to the Company’s bank account. Thus, we find that it was for proper and cogent reasons due to which the investment was made in the name of assessee on behalf of the Company. The assessee did not derive any benefit out of the same. The profit derived on the investment was immediately transferred to the assessee company on redemption. Under the circumstances, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (A). Hence, accordingly, we uphold the same.

How to register as a Legal Heir to file Income Tax Return on behalf of deceased?

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User should register as a Legal Heir to do e-Filing on behalf of the deceased. This is a new feature provided for Individual user.

A Legal Heir can file Income Tax Return, View Status of Income Tax Return, ITR-V Acknowledgment and other filing status in respect of the Income Tax Return of the deceased person for the e-Filed Assessment Year

Following are the steps for registration of Legal Heir:

Step 1 − LOGIN to e-Filing application and go to ‘My Account’ –> Register as Legal Heir.
Step 2 − Provide the necessary details and attach a zip file containing the below documents
1. Copy of the Death Certificate
2. Copy of PAN card of the deceased
3. Self attested PAN card copy and
4. Legal Heir certificate.Step 3 − Click Submit.
Step 4 − The request will be sent to the e-Filing Administrator.
Step 5 − The e-Filing Administrator will review, approve/reject and a confirmation e-mail is sent to the registered e-mail ID.
After you have uploaded (Zip File) and submitted your request, you can also view the status by going to My Request List menu, post Login.
On e-Filing administrator’s approval, the ITR Form(Online/Offline) of the deceased person can be uploaded via Legal Heir login.
The Legal Heir should add his/her PAN in the verification part of the ITR Form, validate and generate the xml of the return (if using offline forms) and upload the return of the deceased using the Legal Heir login.

Note :
1. To register as a Legal Heir, the deceased and the requester should be registered in the e-Filing application.
2. The zip file attachment should not exceed 1Mb.

Expense cannot be disallowed merely because assessee named it as short recovery and not bad debt

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ITAT DELHI BENCH ‘F

ITA No.5081/Del/2012

Assessment Year : 2008–09

Income Tax Officer

Vs.

Shri Rajinder Singh Sethi

 

The undisputed facts are that the assessee was to receive the sum of 74,30,575/- from CCIL towards crane hire charges. However, actually, the assessee could receive only 58,39,011/-. The Revenue has not disputed the correctness of the assessee’s contention that it could not recover the sum of Rs. 16,66,081/-. The only ground on which the Assessing Officer made the disallowance is that the sum of Rs. 16,66,081/- was claimed as a short receipt which is not allowable because the assessee is following mercantile system of accounting. However, it is not the case of the assessee that the sum of Rs. 16,66,081/- is still receivable from CCIL and the assessee is offering the income on receipt basis. The contention of the assessee is that the assessee is unable to recover the sum of Rs. 16,66,081/-. Once the assessee is unable to recover, the non‑ recovery of the trading receipt is rightly accepted to be bad debt by the learned CIT(A). Now, so far as allowability of bad debt is concerned, this aspect has been examined by the Hon’ble Apex Court in the case of T.R.F. Ltd. Vs. CIT- [2010] 323 ITR 397 (SC) wherein their Lordships held that after the amendment of Section 36(1)(vii) of the Income-tax Act, 1961, with effect from 1^st April, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. In the case of the assessee, it is undisputed that the sum of Rs. 16,66,081/- has already been written off in the books of account, of course, named as short recovery. But, what is required is the writing off the bad debt. Therefore, in our opinion, even if the bad debt is written off in the profit & loss account as short recovery, the assessee is entitled to claim the same as bad debt. While deciding the taxability of any receipt or allowability of any deduction/claim, the true nature of such receipt/deduction is to be seen and the nomenclature given by the parties to such receipt/claim is not decisive. On examining the facts of the case, we are satisfied that the short recovery of sum of Rs. 16,66,081/- was in the nature of bad debts. That the assessee’s claim cannot be denied merely because the assessee named it as short recovery and not bad debt. Therefore, respectfully following the above decision of Hon’ble Apex Court in the case of T.R.F.Ltd., we uphold the order of learned CIT(A) and dismiss the appeal filed by the Revenue.

No Sec.14A disallowance if assessee is dealer of shares and securities

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ITAT AHMEDABAD BENCH “B”

ITA No.1800/Ahd/2008 – Assessment Year :2004-05

Hina Nitin Parikh V/s. ACIT

ITA No.2449/Ahd/2008 – Assessment Year: 2006-07

DCIT V/s. Hina Nitin Parikh

C.O. No.190-193/Ahd/2008(a/o ITA No.2445-2446/Ahd/2008
and ITA No.2448-2449/Ahd/2008)
Assessment Years: 2002-03 to 2003-04 and 2005-06 to 2006-07

Hina Nitin Parikh V/s. DCIT, Central Circle-2(1)

ITA No.2450-2451/Ahd/2008 – Assessment Years: 2000-01 to 2001 -02

DCIT, Central Circle- 2(1) V/s. Prudent Finance Pvt. Ltd.

C.O. No. 194-199/Ahd/2008(a/o ITA No.2450 to 2455/Ahd/2008)
Assessment Years: 2000-01 to 2005-06

Prudent Finance Pvt., Ltd. V/s. DCIT, Central Circle-2(1)
ITA No.2549-2550 & 2554/Ahd/2008Assessment Years: 2000-01 ,2002-03 & 2006-07

DCIT, Central Circle- 2(1) V/s. Nitin B Parikh

C.O. No. 213-218/Ahd/2008(a/o ITA No. 2549-2554/Ahd/2008)
Assessment Years: 2000-01. 2002-03 to 2006-07

Nitin B Parikh V/s. DCIT, Central Circle-2(1)

Date of Hearing : 10-04-2013

Date of Pronouncement : 17-05-2013

 

 

In the judgment of Hon’ble Karnataka High Court rendered in the case of CCI Ltd. (supra) it was held that if the assessee is a dealer of shares and securities then it cannot be said that such purchases of shares and holding of shares were for the purpose of earning of dividend income and hence, expenditure incurred in acquiring these shares cannot be disallowed u/s. 14A of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act). In the present case, this is admitted position of fact that assessee is a dealer in shares and securities and this fact is noted by Assessing Officer also in his assessment order and inspite of this contention raised by Ld. AR of the assessee before us, nothing has been brought on record by Ld. CIT-DR of the Revenue to show otherwise. Since assessee is dealing in shares, we hold by following this judgment of Hon’ble Karnataka High Court that disallowance made by AO u/s. 14A of the Act on account of interest expenditure on proportionate basis cannot be sustained. We therefore do not find any reason to interfere in the order of Ld. CIT(A) on this issue. Accordingly, this ground of Revenue’s appeal is rejected. 

Stridhan of a lady seized from her ex-husband’s premises during search must be handed over to her

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HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION No. 7537 of 2012

RENUKA R MODIVersus
ASSISTANT COMMISSIONER OF INCOME TAX & 2

CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and

HONOURABLE MS.JUSTICE HARSHA DEVANI

Date : 26/09/2012

 

We further notice that the Family Court, Mumbai, has also passed an order on 22^nd February 2007 in which while granting decree of dissolution of marriage, it is provided that the petitioner would be entitled to all those ornaments lying with the Income Tax Authority, at Ahmedabad. The issue is, therefore, sufficiently clear. Gold ornaments seized by the income tax authorities from the respondent No.2 belonged to the petitioner and she is entitled to receive the same. No proceedings are pending due to which, the income tax authorities can even otherwise withhold such ornaments. Ordinarily, it may have been necessary to insist that the respondent No.2 should file a formal application before the income tax authorities in this respect authorizing the Department to handover the ornaments to the wife. However, in the present case, relations between the petitioner and the respondent No.2 have soured and they have taken divorce. Legal proceedings have period of time. The respondent No.2 has also written independently to the Income Tax Department on 23^rd March, 2012 authorizing them to handover such ornaments to the wife (the petitioner herein).

TDS not to be be deducted on expenditure on which assessee has paid FBT

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ITAT AHMEDABAD “D” BENCH

I.T.A. Nos.152 to 154, 156 to 158, 283 to 286 & 329 to 331 of 2012

A.Ys. 2006-07 to 08-09, 2006-07 to 08-09, 2006-07 to 09-10 & 2006- 07 to 08-09 respectively

Oil and Natural Gas Corporation Ltd. Vs The A.C.I.T.(TDS)

I.T.A.Nos.266 to 269, 297 to 299, 301 to 303 & 305 to 307 of 2012

A.Ys.2006-07 to 09-10, 2006-07 to 08-09, 2006-07 to 08-09 & 2006-07 to 08-09 respectively

The A.C.I.T.(TDS) V. Oil and Natural Gas Corporation Ltd.

Date of pronouncement : 11.01.2013

 

“During the period, when FBT was applicable, appellant considered reimbursements to employees under holiday home scheme to be liable to FBT under section 11 5WB(2)(G), i.e. expenditure for use of hotel, boarding and lodging facilities. During the FBT regime, expenditure borne or reimbursed by employer on traveling, accommodation and other items for holiday availed of by employee or any member of his family was prescribed as a fringe benefit for the purpose of section 1 7(2)(vi) by Rule 3(7)(ii), only in respect of those employers, who were not liable to pay fringe benefit tax under Chapter XII-H of the Act. Rule 3(7)(ii) was inserted as above through Income tax (Fourteenth Amendment) Rules, 2007 w.e.f. 1.4.2008. Thus, as far as A.Yrs.2008-09 and 2009-10 are concerned, appellant’s contention that the holiday home scheme could not be considered as perquisite u/s 1 7(2)(vi) in the hands of employees is acceptable. For A. Yrs. 2006-07 and 2007-08, since expenditure incurred by employers for holiday availed of by employees or their family members was not prescribed as a ‘fringe benefit’ for the purpose of section 17(2)(vi), it could not therefore be taxed as perquisite in employee’s hands. However, the payment received under holiday home scheme would be non taxable in employee’s hands only if it was actually and fully utilised towards hotel, boarding and lodging facilities, etc on a holiday availed by self or family member. If in any employee’s case, it is found that the payment in question was actually and/or fully not utilized towards holiday home scheme, it would constitute concerned employee’s taxable salary. As far as appellant is concerned, due to payment of FBT and due to holiday home reimbursement being not a prescribed ‘fringe benefit’ for the purpose of section 17(2)(vi) from A. Yrs. 2 006- 07 to 2009-10, appellant is not to be treated as assessee in default u/s 201(1) in this regard. For A. Y. 2010-11 also, appellant is not to be treated as assessee in default subject to verification by the ACIT(TDS) that tax at source has already been deducted from Holiday Home reimbursements

If liability to pay Excise duty is not incurred, excise duty is not to be included in closing stock

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HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No. 436 of 2011
WITH
TAX APPEAL No. 437 of 2011

COMMISSIONER OF INCOME TAX
Versus
BELL GRANITO CERAMICA LTD.

Date : 13/06/2012

 

Hon’ble Jurisdictional High Court in the case of Narmada Chematur Petrochemicals Limited (Supra) has held that, if the duty of Central Excise is not due and payable, it cannot be termed to be a cost in relation to the raw materials then such duty also cannot be termed to be a cost qua the finished goods appearing in the closing stock because admittedly, on the said day (presumption being that such goods are excisable goods) no excise duty is due and payable at the said stage and for the purposes of Excise Act, they levy is not complete unless and until Section 3 and 4 of the Excise Act operate together. According to Hon’ble High Court for the purpose of the said statute, which is the only statute under which duty of central excise can be levied and collected, the charge is not fastened in law and it cannot be stated that for the purpose of computing chargeable income such a charge gets fastened qua the finished goods appearing as part of closing stock. Further Hon’ble High Court elaborating that it would result into an anomalous situation under the two statutes, the Excise Act and the IT Act leading to contrary positions under both the statutes and in the facts of the present case, even on application of the general principles, the addition sought to be made by Revenue cannot be sustained. Further, it is held that making of an entry or absence of an entry cannot determine rights parties. In other words, Hon’ble High Court held that if the law does not lead to incurring of a liability, or does not lead to a corresponding right to insist for discharging such a liability any accounting practice (even if suggested by the ICAI) cannot lay down anything to the contrary. Hon’ble High Court has discussed the provisions of Section 145A which has been inserted by Finance (No.2) Act, 1998 w.e.f. 1st April, 1999. Hon’ble High Court considered that though the Bill proposed retrospective insertion ultimately the section has come on the statute book only from 1^st April, 1999 but what is more material is that the same relates to inclusion in the value of inventory the amount of any tax, duty etc. paid or liability incurred for the same under any law in force. Meaning thereby such tax, duty, etc. should have been actually paid or should be actually due and payable under the law applicable to such tax, duty, etc. in force. Otherwise even Section 145A will also not carry case of Revenue any further. CIT v. English Electric Co. of India Ltd. (2000) 243 ITR 512 (Mad) and CIT v. Dyanavision Limited (2004) 267 ITR 600 (Mad) was also considered. And finally concluded that under the scheme of the excise duty, the assessee incurs liability to pay excise duty only upon both the events taking place, namely manufacture of excisable goods and removal of excisable goods; excise duty is not therefore includible in the valuation of closing stock.

Loan Prepayment charges allowed as deduction from house property income

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INCOME TAX APPELLATE TRIBUNALMUMBAI BENCHES “G”, MUMBAI

Before Shri R. K. Gupta, JM and Shri R. S. Syal, AM

ITA No.7192/Mum/2010

Asst.Year 2006-2007

M/s.Windermere Properties Pvt.Ltd.

Vs.

The Dy. Commissioner of Income-tax

 

The assessee claimed deduction of Rs. 11.05 crore u/s 24(b) of the Act. The Assessing Officer did not allow deduction of Rs. 1.56 crore paid as prepayment charges for the closure of the loan account which was taken for acquisition of property fetching the extant house property income. Under these circumstances the question arises as to whether such amount of `prepayment charges’ paid to HDFC for closure of loan account is deductible u/s 24(b) of the Act.

It is noticed that the assessee obtained loan from HDFC Limited for acquisition of property. Later on it arranged the money from other sources and repaid the loan which was taken for acquisition of property. The bank accepted the early repayment of loan on receipt of prepayment charges. By such repayment, the assessee managed to wipe out its interest liability in respect of the loan, which would have otherwise qualified for deduction u/s 24(b) during the continuation of loan. It is obvious that these prepayment charges have live and direct link with the obtaining of loan which was availed for acquisition of property. It is beyond our comprehension as to how the amount paid as interest for the loan taken is allowable as deduction but the amount paid as prepayment charges of the very same loan is not deductible. In our considered opinion the payment of such `prepayment charges’ cannot be considered as de hors the loan obtained for acquisition or construction or repair etc. of the property on which interest is deductible u/s 24(b) of the Act. Both the direct interest and prepayment charges are species of the term `interest’. We, therefore, set aside the impugned order on this issue and order for the grant of deduction.

Assessee entitled to Interest on cash seized during search for the period after completion of Assessment

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HIGH COURT OF DELHI AT NEW DELHI

Judgment delivered on: 12.03.2013

W.P.(C) 7551/2012

S. K. JAIN

versus

COMMISSIONER OF INCOME TAX
 

The petitioner is assessed to income tax. On 16.02.2005 a search under section 132(1) of the Income Tax Act, 1961was conducted at his residential premises in the course of which cash amounting to Rs. 8,83,800/- was found. Out of the cash found an amount of Rs. 6,33,800/- was seized. The petitioner attempted to explain the source of the cash found in his letters to the income tax authorities. The returns filed on 08.09.2006 for the assessment years 1999-2000 to 2004-05 were accepted and assessments were completed under section 153A of the Act. There was no tax liability pursuant to the assessments.
Section 132B provides for the application of seized or requisitioned assets. Under sub-section (3), any assets or proceeds thereof which remain after the liabilities of the assessee are discharged, shall have to be ^{“forthwith made over or paid to the persons from whose custody the assets were seized”. Sub-section (4) provides for the payment of simple} interest at the rate of half percent every month or part thereof on the amount by which the aggregate amount of money seized under section 132, as reduced by the amount of money released to the assessee and the amount of the proceeds, if any, of the assets towards the discharge of the existing liability of the assessee, exceeds the aggregate of the amount required to meet the liabilities of the assessee. The interest shall run from the date immediately following the expiry of the period of 120 days from the date on which the last of the authorisations for the search was executed, to the date of completion of the assessment under section 153A of the Act. This interest is to be paid to the assessee without any demand from him. In the petitioner‟s case, there is no dispute that he is entitled to this interest. The dispute is only whether the petitioner is entitled to any interest on the seized cash of Rs. 6,63,800/- from the date on which the assessment was completed under section 153A of the Act i.e. 26.12.2006 till it was actually released to him on 24.05.2011, and if so, at what rate. It is common ground that in respect of this period, that is, from the day next following the completion of the assessment till the cash was actually released to the petitioner, no interest has been provided under section 132B(4) of the Act.
In an identical situation, this Court in its order dated 28.08.2012 in W.P. (C) No.876/2012 (supra) has directed the revenue to grant interest @ 12%. In that case certain amounts had been returned to the petitioner (in that case) and accordingly adjustments were directed to be made in respect of those payments while quantifying the amount on which the interest was directed to be paid. However, so far as the period for which the interest was payable to the petitioner in that case is concerned, there is no dispute that the direction of this Court was that it should be paid from the day next following the day on which the assessment was completed till the amount was actually released to the petitioner. Interest was directed to be paid @ 12% in respect of this period on varying amounts as quantified in paragraph 19 of the order.
. In the result, we hold that the petitioner is entitled to be paid interest @ 12% in respect of the amount of Rs. 6,33,800/- for the period from 27.12.2006 to 24.05.2011 and a writ of mandamus directing the payment of the interest is accordingly issued. The respondent shall pay the interest within a period of six weeks from today.

Service Tax Return can be filed even for the period prior to registration

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CBEC has accepted the Service Tax returns for the period July-September, 2012, which were rejected by system on the sole ground that these returns were filed for the period prior to the dates of registration of the assessees, as valid returns. These returns have been reprocessed in ACES and the status of these returns is being shown in the systems as ‘filed’. These assessees, need not file the returns again for the same period and they can view the status of their returns in ACES under ‘View XML Status’ option. However, if the returns were rejected for any other reason, the assessees are required to take corrective action as per the reasons of rejection.

Condonation of Delay for Delayed Filing of Form 8 / Form 17 & Procedures

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Condonation of Delay for Delayed Filing of Form 8 / Form 17 Procedures under The Companies Act

Now condonation of delay for late filing of Form 8 and form 17 under the Companies Act, 1956, requires a petition to be filed with Regional Director, Ministry of Corporate Affairs and earlier the same was required to be made to Company Law Board. The procedure for making the petition for condonation of delay under Section 141 of the Companies Act, 1956 is given below.

1. Call for a board meeting to decide to file a petition under Section 141 for condonation of delay in respect of form 8 and form 17 filed after due date. Form 8 can be filed within 30 days from the date of creation or modification and if it is not possible additional period of 30 days is allowed that is within 60 days and in case of Form 17 within 30 days from the dated of satisfaction of charge.

2. In the Board meeting authorize the Practicing Company Secretary / Practicing Chartered Accountant to appear on behalf of the company.

3., File 8 / Form 17 with ROC. One time filing fees will be required to be paid and remark will be appearing challan of the Form 8 / Form 17 regarding number of delays.

4. Prepare a petition for condonation of delay. A format of the petition is annexed.

5. Reason for the delay must be specific. Don’t mention that mistake is made inadvertently. Please specify that the officer entrusted with the work left the company or some other specific reason.

6. Prepare the petition and file it with form 24AAA. Form 24AAA is filing of form with Regional director. The charges for filing form is Rs. 1000/-

7. File Form 61 and file it with ROC. The charges for filing form is depending upon the Authorised Share Capital of the Company varying from Rs. 200 to Rs. 500

8. The petition is required to be enclosed with the following documents. There is no need to file any demand draft along with the petition.

• Certified copy of Form 8 filed along with challan
• MOA and AOA copy
• Copy of the Board resolution
• Copy of Form 61 along with challan
• Copy of form 24AAA
• Memorandum of Appearance in case it is filed by a Practicing Professional.
• An affidavit verifying the petition on a non judicial stamp paper Rs. 20 which is notarized shall be attached.

9. The petition has to be filed with the Regional Director with the Regional Office of the Ministry of corporate Affairs in the jurisdiction where the existing registered office is situated. The following are the jurisdiction of Regional directors.

(i) Regional DirectorNorth Region Directorate Headquarter at Noida (Gautam Budh Nagar)	North Region Directorate Headquarter at Noida (Gautam Budh Nagar)States of Jammu and Kashmir, Punjab, Himachal Pradesh, Haryana, National Capital Territory of Delhi, Uttar Pradesh, Uttarakhand and Union Territory of Chandigarh.
(ii) Regional DirectorSouthern Region Directorate Headquarter at Chennai	Tamil Nadu, Union Territory of Andaman and Nicobar Islands and Puducherry
iii) Regional DirectorSouthern Eastern Region Directorate Headquarter at Hyderabad	States of Andhra Pradesh, Karnataka, Kerala and Union Territory of Lakshadweep,
(iv) Regional DirectorWestern Region Directorate Headquarter at Mumbai	States of Maharashtra, Goa and Union Territory of Daman and Diu.
(iii) Regional DirectorEastern Region Directorate Headquarter at Kolkata	States of Bihar, Jharkhand, Orissa, West Bengal.
Regional DirectorNorth Western Region Directorate Headquarter at Ahmedabad	States of Gujarat, Rajasthan, Madhya Pradesh, Chhattisgarh and Union Territory of Dadra and Nagar Haveli
Regional DirectorNorth Eastern Region Directorate Headquarter at Guwahati	State’s of Meghalaya, Assam, Arunachal Pradesh, Nagaland, Mizoram, Manipur and Tripura.”

10. Petition should not be prepared in the letter head.

11. A hearing will not take place at the Regional Director office normally and order will be despacted after one or two weeks. However if the delay is more than one year the hearing may be held at RD office.

12. The entire process will take approximately two weeks and it also requires follow up with Regional Director Office.

S.269SS not applies to transfer between two accounts by Journal Entry

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ITAT “D” BENCH, AHMEDABAD

BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER And
SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER

I.T.A. No.643/Ahd/2010
Assessment Year: 2006-07)

Income-tax Officer

Vs.

Shri Mineshkumar Shantilal Patel

Date of Hearing: 09/11/2012Date of Pronouncement: 4^th Jan-2013

 

Section 269SS is attracted when the loan or deposit taken or accepted otherwise than by account payee cheque or account payee bank draft and in the Explanation (iii) below Sec.2 69SS, it is mentioned that loan or deposits means “loan or deposit of money” and transfer between two accounts by way of journal entry does not imply receipt of loan or deposit in money terms. When there is no violation of Section 269SS there is no question of levy of penalty of u/s.271D. The penalty of Rs.24, 74,700/- (sic.) is thus directed to be deleted.

 

S. 40A(2)(b) Interest Payment at 15% to related parties is not excessive

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ITAT AHMEDABAD, “A” BENCH

ITA No.2370/Ahd/2010

[Asstt. Year : 2007-2008]

Shri Hitesh Narendrabhai Shah (HUF) Vs. ITO

 

Only reason advanced for making disallowance out of the interest paid to two coparceners was that the interest paid to other parties was at 12% per annum. We find that the interest paid to two coparceners at the rate of 15% could not be said to be excessive, considering the prevailing rate of interest during the relevant assessment year 2007-2008. Once it is found that the rate of interest paid to two coparceners at 15% is not excessive, no disallowance could be made by invoking the provisions of Section 40A(2)(b) of the Act. The loans raised from two coparceners could be safely relied upon by the assessee-HUF as the coparceners may not demand the amount of loan back in the near future and the level of confidentiality is obviously more with regard to these coparceners. In view of the fact that the interest paid to coparceners at the rate of 15% could not be said to be excessive, we hold that the provision of Section 40A(2)(b) was wrongly invoked in this case. Accordingly, the addition of Rs.42,1 12/- is deleted and the ground of the appeal of the assessee is allowed

No Penalty on tax liability which is based on decision not available at the time of filing ROI

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HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL No. 397 of 2012

COMMISSIONER OF INCOME TAXVersus
FRIENDS SALT WORKS AND ALLIED INDUSTRIES

 

The revenue authorities had imposed penalty on the ground that deduction under section 80HHC of the Act was wrongly claimed. The Tribunal however, deleted such penalty. The Tribunal noted that tax liability against the assessee was confirmed on the basis of the decision of the Apex Court in the case of CIT v. Ravindranathan Nair, 295 ITR 228. The Tribunal noted that such decision was not available when the assessee filed the return. On such basis, the Tribunal was prompted to delete the penalty.

In our view, the Tribunal committed no error. The Tribunal relied on the decision in the case of CIT v. Reliance Petro Products Pvt.Ltd., 322 ITR 158 wherein it has been highlighted that filing of wrong claim per se would not give rise to penalty proceedings.

FAQ on ‘Business Responsibility Reports’ to be submitted with Annual Reports of listed companies

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In the larger interest of public disclosure regarding steps taken by listed companies from Environmental, Social and Governance (“ESG”) perspective, SEBI had mandated inclusion of BR Reports as part of the Annual Reports of listed companies. As per the SEBI Circular dated August 13, 2012, it is mandatory for top 100 listed companies, based on market capitalisation at BSE and NSE as on March 31, 2012, to disclose the BR Reports from financial year ending on or after December 31, 2012. Other listed companies can voluntarily disclose BR Reports as part of their Annual Reports. The said reporting requirement is in line with the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs)’ notified by Ministry of Corporate Affairs, Government of India, in July, 2011.

Listed below are Frequently Asked Questions (FAQs) regarding the aforesaid circular of SEBI on Business Responsibility Reports. The FAQs have been developed in co-ordination with the Indian Institute of Corporate Affairs (IICA) to ensure that they are in line with the intent of NVGs.

1. What is Business Responsibility Report?

Business Responsibility Report is a disclosure of adoption of responsible business practices by a listed company to all its stakeholders. This is important considering the fact that these companies have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive disclosures on a regular basis.

SEBI has prescribed a format for ‘Business Responsibility Report’ as a mandatory requirement for top 100 listed companies by SEBI’s Circular dated August 13, 2012. Other companies are encouraged to use the Business Responsibility Report for making disclosures to their stakeholders. Business Responsibility Report must be submitted as a part of the Annual Report.

2. How does Business Responsibility Report help companies to make disclosures on adoption of responsible business practices or otherwise to the stakeholders?

A Business Responsibility Report contains a standardized format for companies to report the actions undertaken by them towards adoption of responsible business practices. Business Responsibility Report has been designed to provide basic information about the company, information related to its performance and processes, and information on principles and core elements of the Business Responsibility Reporting.

The prescribed format of a Business Responsibility Report also provides a set of generic reasons which the company can use for explaining their inability to adopt the business responsibility policy.

Further, Business Responsibility Report has been designed as a tool to help companies understand the principles and core elements of responsible business practices and start implementing improvements which reflect their adoption in the manner the company undertakes its business.

3. How should a listed company, which is not among the top 100, report as per Business Responsibility Report?

The top 100 listed companies are mandatorily required to furnish the Business Responsibility Report to the Stock Exchange where they are listed and publish the report on their websites. Other listed companies are encouraged to follow guidelines and formats provided in SEBI’s Circular by including the Business Responsibility Report in their Annual Report and publishing the same on the company’s website.

4. Whether Business Responsibility Reporting applies to financial services company?

Business Responsibility Reporting is applicable to all types of companies including manufacturing, services etc. The principles of Business Responsibility Reporting are generic in nature and are applicable to all the companies.

5. How should the Business Responsibility Report be prepared by the holding and subsidiary companies where one of them is listed but may or may not be among the top 100?

The holding company and the subsidiary company are required to prepare separate Business Responsibility Reports. As stipulated in the Circular issued by SEBI, the requirement of including a Business responsibility Report is mandatory for the top 100 listed Companies. Thus, any Company, Holding or Subsidiary, which falls among the top 100 listed Companies, has to mandatorily furnish a Business Responsibility Report.

6. How does an MNC which has its subsidiary in India and which produces a single Global Reporting Initiative (“GRI”) report, or an Indian listed company that already publishes a GRI report for its operations, report its Business Responsibility Report? Does it make a separate Business Responsibility Report or can it provide a linkage of the Business Responsibility Report to the GRI report?

In case of an MNC which has its subsidiary in India and which produces a single Global Reporting Initiative (“GRI”) report, the subsidiary is required to prepare its separate Business Responsibility Report highlighting the responsible business practices it has put in place in India.

In case of an Indian listed company that already publishes a GRI report for its operations, Clause 5 of the SEBI Circular says that those listed entities which have been submitting sustainability reports to overseas regulatory agencies/stakeholders based on internationally accepted reporting frameworks need not prepare a separate report for the purpose of these guidelines but only furnish the same to their stakeholders along with the details of the framework under which their Business Responsibility Report has been prepared and a mapping of the principles contained in these guidelines to the disclosures made in their sustainability reports. Sections D and E of the Business Responsibility Report provide the minimum set of questions on which such mapping must necessarily be done. Clauses A, B and C of the Business Responsibility Report contain generic questions which may easily be filled out by companies.

7. Is there any penalty, existing or proposed, if a company listed among top 100 companies on NSE or BSE fails to file a Business Responsibility Report?

SEBI views Business Responsibility Report as an enabling instrument for listed Companies to integrate Environmental, Social and Governance (“ESG”) parameters into their core business practices.

Failure to provide Business Responsibility Report will be construed as non-compliance with Clause-55 of Equity Listing Agreement. However, no particular level of compliance with NVG has been mandated.

8. Whether the Business Responsibility Report has to only cover the disclosure format contained in Annexure 1 of SEBI Circular No. CIR/CFD/DIL/8/2012 on “Business Responsibility Reports” dated August 13, 2012, or it also has to respond on the Principles contained in Annexure 2?

Companies are expected to disclose information on responsible business practices in accordance with formats specified in Annexure 1. Whereas, Annexure 2 details the principles to assess compliance with Environmental, Social and Governance norms which may be referred to while preparing information under Annexure 1.

Companies are free to furnish additional information which may not be covered under specific Business Responsibility Report questions but may be relevant for Business Responsibility reporting.

9. Can the Business Responsibility Report be in a format different from the one provided in the Circular?

The format has been provided to capture information in a comparable manner which is important to be adhered to. Companies are advised to follow the format so that the reports of various companies are comparable to each other. Companies may, however, add tables, graphs etc. to capture the data that enhance the quality of information.

10. Does Business Responsibility Report have to be a part of the annual report, or can it form a separate document with the flexibility to be released earlier or later than the annual report?

As per paragraph 5(a) of the SEBI Circular dated August 13, 2012, the requirement to include Business Responsibility Report as a part of the Annual Report is mandatory for top 100 listed Companies based on market capitalisation at BSE and NSE as on March 31, 2012. However, those listed Companies, which have been submitting sustainability reports to overseas regulatory agencies/stakeholders based on internationally accepted reporting frameworks, need not prepare a separate report for the purpose of the Circular but only have to furnish the same to their stakeholders along with the details of the framework under which their Business Responsibility Report has been prepared and a mapping of the principles contained in the SEBI Circular to the disclosures made in their sustainability reports.

In case the company is not providing full Business Responsibility Report and is providing only the mapping of BRR in Annual Report, it is expected to ensure that such mapping is carried out to the reports (which may be released earlier or later than the Annual Report) that are drawn over same reporting period.

Companies may provide full Business Responsibility Report as a part of their Annual Report or as a green initiative, host the Business Responsibility Report on their website and provide appropriate reference to the same in the Annual Report. Companies may also provide guidance on how a shareholder may request physical copy of the Business Responsibility Report from the company, if so desired.

If the company provides the Annual Report mentioning that company publishes the sustainability report under GRI framework along with a mapping as per the SEBI Circular and Clause 55 of Listing Agreement and indicates that the sustainability report would be available on its website providing website link for the same, it would be treated as sufficient compliance of the clause 5(a) of the Circular dated August 13, 2012.

11. Does the Business Responsibility Report have to be submitted to any regulatory authorities, or only uploading on the company’s own website is sufficient?

Business Responsibility Report has to be furnished to the Stock Exchange where it is listed in electronic format.

12. Principle 1: If a company’s policy on bribery, ethics and corruption extends to some or all of the indicated entities, how should a company report?

The company may specify the list of entities to which the company’s policy is applicable along with the Business Responsibility Report.

13. Principle 2: The Business Responsibility Report reporting format requires that a company lists and provides details of up to three products/services whose design is aligned with Principle 2; How does a company report if it does not have any such products or has less than three products that it can report on? How does a company report if it has more than three products that it can report on?

The Business Responsibility Report asks for “up to 3 of your products or services”. Thus, three is only an upper limit. In case a company has less than three such products/services, it may report on the products/services it is having as on the date of reporting.

If the company has more than 3 products or services that can be reported, the company may report on top 3 products or services based on their contribution to company’s turnover.

14. Principle 2: What is “sustainable sourcing”?

“Sustainable Sourcing” essentially refers to ensuring that a company’s social and environmental performance extends to its supply chain. The company is expected to list all the activities that it is undertaking and processes it has established to encourage that its supply chain also embrace sustainability. More specifically:

• The report should indicate what proportion of its inputs (by quantity or value) are sourced from suppliers who are either covered by the company’s sustainable sourcing programmes and/or are certified to be compliant with social and environmental standards such as SA 8000, ISO 14001, OHSAS 18001 or relevant labels like Rainforest Alliance, Rugmark, RSPO etc.

• Transportation refers to initiatives taken relating to transportation of inputs e.g. use of rail, use of CNG trucks, safety training of drivers (especially relevant to transportation of hazardous material) etc.

15. Principle 2: What is the meaning of ³loRal^D in reference to procurement of goods and services?

“Local” would mean sourcing from the nearest possible place where goods of comparable quality are available. This would mean, same village/ town/ state/ country as the context might require. Further, only the producer will be considered as source, and not wholesaler or retailer.

16. Principle 2: What is the meaning of “small”in reference to procurement of goods and services?

“Small” would typically mean one where the owner herself or himself is a worker and includes informal and/or producers such as self-help groups and home-based workers as well as producer-owned entities such as cooperatives, producer companies.

Apart from providers of goods, procurement of services such as landscaping, janitorial, security, taxis etc. may also be reported.

17. Principle 2: How does a company report on mechanisms to recycle products and waste? How does a company report on ‘percentage’of recycling of products and waste?

The company has to describe what mechanism it has in place to recycle its products (including packaging) after consumption as well as for all wastes emerging out of its manufacturing process -– solid, liquid and gas.

It has to report what percentage of its product & packaging are recyclable. It further has to report what percentage of waste produced is recycled. These percentages are to be calculated in terms of weight and not in terms of value.

18. Principle 4: How does a company identify “vulnerable and marginalized”stakeholders?

“Vulnerable and Marginalized” stakeholders may be defined as “Group of individuals who are unable to realize their rights or enjoy opportunities due to adverse physical, mental, social, economic, cultural, political, geographic or health circumstances”. These groups in India include the following:

• Women and girls
• People with disabilities
• Children
• Tribals
• Migrants, migrant workers

19. Principle 4: How does a company report if it has mapped all the stakeholders but has no formal mechanism to engage with them?

Companies are encouraged to set up and continually improve on mechanisms of engagement with the stakeholders in a systematic manner. The company can explain what steps it plans to take in making such continual improvements on any of the principles.

20. Principle 8: What is meant by impact assessment and how can a company do it?

Impact refers to measurable and sustainable change as a result of a company’s programs’ initiatives ‘projects. Ideally impact assessment methodologies establish a baseline and measure change against that.

21. Principle 8: What is meant by ‘successful adoption’ of the community development initiative by the community?

Community development initiative refers to a community taking initiative for development on any environmental, social or governance front.

Successful adoption means the extent of contribution of its resources, such as, human economic, know-how etc., towards ESG initiative.

22. Principle 9: Does a company need to report on cases decided or pending or filed in any of the judicial and quasi judicial authorities?

All cases filed have to be reported.

TIN revises rates for e-TDS/TCS, AIR, Form 24G Returns

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TIN With effect from May 4, 2013, revised rates for acceptance of e-TDS/TCS, Form 24G Statements and AIR at TIN Facilitation Centres (TIN-FCs) are as under:

Basis of charges	Charges*
0 – 100 records	35.00
100 – 1000 records	200.00
More than 1000 records	650.00

*Inclusive of service tax

Purchase not bogus for mere non appearance of suppliers before AO

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HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO. 5604 OF 2010

The Commissioner of Income

versus

M/s. Nikunj Eximp Enterprises Pvt. Ltd.

 

Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the respondent ­assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad.Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs.1.33 crores was not bogus. No fault can be found with the order dated 30.04.2010 of the Tribunal.

Loss on foreign currency forward contracts which is not in respect of specified export or import is speculation loss

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INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES “E” MUMBAI

ITA No. 506/Mum/2013

Assessment Year 2008-09

S. Vinodkumar Diamonds Pvt. Ltd.,

Vs.

Addl. C.I.T. Range – 5(3)

Date of Hearing : 18-03-2013

Date of Pronouncement : 03-05-2013

 

Forward transactions in commodities may fall within proviso (a) to section 43(5) of the Act, it is necessary that the raw materials or merchandise in respect of which the forward transactions have been made by the assessee must have a direct connection with the goods manufactured or the merchandise sold by him. In other words raw material in respect of which the assessee has entered into forward transactions must be the same raw material which is used by him in his manufacturing business. We find that in the case under consideration assessee was not dealing in Foreign Exchange, therefore transactions entered into by it in Foreign Exchange cannot be held to be hedging transactions. Assessee is dealing in diamonds and FC entered into only for diamonds would have been covered by the proviso (a) to the section 43(5)of the Act. As held by the Hon’ble High Court of Calcutta in the matter of Gourepore Co. Ltd.(135 ITR 606) onus was on the assessee to prove that the transactions in question were not of a speculative nature. We are of the opinion that the assessee has failed to discharge the onus cast upon him by the statute. Assessee was also not able to contradict the finding of fact that booking and cancellation of FC of exchange were not in respect of specified export or import. Besides, finding of fact given by the Revenue Authorities remained un-contravened that loss shown by the assessee pertained to these FCs transctions, against which no actual delivery of foreign exchange was made. On appreciation of the facts surrounding the transaction we have reached at the conclusion that transactions entered in to by the assessee were not hedging transaction, but same were speculative and thus the case of the assessee is not covered by proviso(a) of the section 43(5) of the Act.Now we would like to discuss the cases relied upon by the AR. In the case of Ramchandra Shivnarain (supra) question decided by the Hon’ble Court was about applicability of proviso to manufacturing business/ to a business of sale of goods. Hon’ble court held that ‘proviso was not confined to contracts in respect of raw materials entered into by persons in the course of their manufacturing business, that it applied equally to cases of persons carrying on manufacturing as well as persons carrying on business of selling goods, that there was no scope to confine it to manufacturers.’ Thus, facts of the matter of Ramchandra Shivnarain(supra) are not applicable to the case under consideration. In the instant case booking and cancellation of forward contracts of exchange were not in respect of specified export or import orders and all contracts had been cancelled. Not only this, there was no actual delivery of Foreing Exchange. In these circumstances, we are of the opinion that finding of the FAA does not suffer from any legal infirmity. In the case of Pali Ram Bhadarmal (supra), it is found that loss suffered by the assessee, in forward contracts, was directly related to the merchandised goods dealt with by assessee. It was in this context and factual position that ITAT Jodhpur had decided the issue in favour of the assesssee holding that transaction was not speculative loss in view of cl. (a) of proviso to sec.43 (5). In the case under consideration FCs were entered into with regard to Foreign Exchange and assessee is not businesss of foreign exchange, as stated earlier. It is also a fact that loss shown by the assessee was due to FCs against which no actual delivery of foreign exchange was made. As per the settled law FCs are to be settled either by delivery of the difference has to credited/debited by the Bankers. As in the case under consideration all the FCs were cancelled, so they were not settled by actual delivery or transfer of the commodity. Therefore, in our opinion cases relied upon by the AR of no help.

Information A taxpayer can view in Form 26AS

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It is general phenomena amongst the tax payers that in form 26AS they can only view the details of TDS deducted, Advance tax and Self Assessment tax Paid.But in addition to these a taxpaer can view in 26AS the information on his income tax Refund and his transaction in Mutual Fund, Shares and Bonds, Immovable properties etc. (as reported by AIR filer).

Details in Form 26AS

• Details of tax deducted on behalf of the tax payer by deductors
• Details of tax collected on behalf of the tax payer by collectors
• Advance tax / self-assessment tax / regular assessment tax etc. deposited by the tax payers (PAN holders)
• Refund received during the financial year
• Details of following transactions done by you (as reported by AIR filer)
  • Cash deposits in saving account (Rs. 10 lakh and above)
  • Credit card bills (Rs. 2 lakh and above)
  • Mutual Fund purchase (Rs. 2 lakh and above)
  • Purchase of bonds/debentures (Rs. 5 lakh and above)
  • Purchase of shares of a company (Rs. 1 lakh and above)
  • Purchase of immovable property (Rs. 30 lakh and above)
  • Sale of immovable property (Rs. 30 lakh and above)
  • Purchase of RBI bonds (Rs. 5 lakh and above)

Levy Cheque return charges only if customer is at fault

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RBI/2012-13/493
DPSS.CO.CHD.No. 2030/03.06.01/2012-2013

May 7, 2013

The Chairman and Managing Director / Chief Executive Officer
All Scheduled Commercial Banks including RRBs /Local Area Banks
Urban Co-operative Banks / State Co-operative Banks /
District Central Co-operative Banks
Madam / Dear Sir,
Delay in re-presentation of technical return cheques and levy of charges for such returns

As you are aware, banks are expected to indicate the timeline for realisation of local/outstation cheques in their Cheque Collection policy(CCP) and charges for cheque returns to be levied in an upfront manner with due prior notice to the customers as enumerated in RBI circulars no. DPSS.CO. (CHD) No. 873 / 03.09.01 / 2008-09 dated November 24, 2008 and DBOD.No.Dir.BC. 56 /13.03.00/2006-2007 dated February 2, 2007 respectively.

2. However,recently, instances have been brought to our notice where banks are (i) levying cheque return charges even in cases where customers have not been at fault in the return and (ii) delaying the re-presentation of the cheques which had been returned by the paying banksunder technical reasons. Both of these issues result in unsatisfactory customer service.

3. It is, therefore, considered necessary to streamline the procedure followed by all banks in this regard. Accordingly, banks are advised to adhere to the following instructions with immediate effect:

1. Cheque return charges shall be levied only in cases where the customer is at fault and is responsible for such returns. The illustrative,but not exhaustive, list of returns, where the customers are not at fault are indicated in the annex.
2. Cheques that need to be re-presented without any recourse to the payee, shall be made in the immediate next presentation clearing not later than 24 hours(excluding holidays) with due notification to the customers of such re-presentation through SMS alert, email etc.

4. Banks are accordingly advised to reframe their CCPs to include the procedures indicated in paragraph 3(i) and 3(ii) above, and may note to give publicity to their revised CCPs for better customer service and dissemination of information.

5. The above instructions are issued under Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

6. Please acknowledge receipt and confirm compliance.

Changes in Custom & Excise Duty rates wef 08.05.2013

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Post Budget Changes in Custom and Excise Duty rates wef 08.05.2013

 

Notification Nos 16/2013-Central Excise, 25/2013-Customs and 26/2013 –Customs, all dated 8^th May, 2013 have been issued on 08.05.2013. The changes made in the duty rates are summarized below.

EXCISE DUTY

 

1. Excise duty on jaggery powder has been reduced from 12 % to 2 % (without CENVAT) and 6 % (with CENVAT). For this purpose, notification No. 1/2011-CE and 2/2011-CE, both dated 1-3-2011 have been amended by notification No.16 /2013-Central Excise, dated 08-05-2013. New serial number 9A in notification No. 1/2011-CE and 2A in notification No. 2/2011-CE may be referred to for details.

 

2. Particle/Fibre Board manufactured from agricultural crop residues have been exempted from excise duty. Serial number 330 of notification No. 12/2012-Central Excise, dated 17-03-2012 has been suitably amended by notification No. 16/2013-CE, dated 8-5-2013 to provide for this change.

 

3. Excise duty on flattened bamboo boards and bamboo flooring tiles has been reduced from 12% to 2% without CENVAT credit and 6% with CENVAT credit. Notification No. 16/2013-Central Excise, dated 08-05-2013 may be referred to for details.

 

4. Clay bricks (Tariff Item 69010010) and roofing tiles (Tariff Item 69051000) have been exempted from excise duty. Amendments have been carried out in notification Nos. 1/2011-CE and 2/2011-CE, both dated 1.3.2011 and 12/2012-CE, dated 17.3.2012 by notification No. 16/2013-Central Excise, dated 08-05-2013. New serial numbers 187A and 187B of notification No. 12/2012-CE may be referred to for details.

 

5. Steel supplied to the Indian shipyards manufacturing ships and vessels [CETH 8901, 8902, 8904, 8905 (except sub heading 8905 20) or 8906] in accordance with the provisions of section 65 of Customs Act,1962 has been exempted from excise duty subject to fulfillment of certain conditions. A new serial number 306B has been inserted in notification No. 12/2012-CE by notification No. 16/2013-Central Excise, dated 08-05-2013.

 

3. CUSTOMS DUTY

 

1. Exemption from basic customs duty (BCD) has been extended to Liquefied Natural Gas (LNG) and Natural Gas (NG) imported by 2 PSUs, namely, GAIL NTPC JV and Petronet LNG Ltd. for supply to a generating company as defined in section 2(28) of the Electricity Act,2003 subject to fulfillment of certain conditions. For this purpose, notification No. 12/2012-Customs, dated 17-03-2012 has been amended by notification No. 25/2013-Customs, dated 08-05-2013. New serial number 139A of notification No. 12/2012-Customs, dated 17-3-2012 may be referred to for details.

 

2. The basic customs duty (BCD) on titanium dioxide falling under heading 28.23 has been enhanced from 7.5% to 10%. Henceforth, titanium dioxide, regardless of its classification under heading 28.23 or 32.06, will attract a uniform duty at 10%. Serial number 150 of notification No. 12/2012-Customs has been amended by notification No. 25/2013-Customs, dated 08-05-2013 to provide for this change.

 

3. The basic customs duty (BCD) on polymers (CTH 3901, 3902, 3903 and 3904) including ethylene vinyl acetate (EVA) has been increased from 5% to 7.5%. Notification No. 25/2013-Customs, dated 08-05-2013 amending S. Nos. 231, 237, 238, 239 and 240 of notification No. 12/2012-Cutoms may be referred to for details.

 

4. The basic customs duty on iron or steel scrap including stainless steel scrap (CTH 7204) has been increased from Nil to 2.5%. Serial numbers 332 & 333 of notification No. 12/2012-Customs have been amended by notification No. 25/2013-Customs, dated 08-05-2013 to provide for this change.

5. The basic customs duty on aluminum scrap (CTH 7602) has been increased from Nil to 2.5%. Serial number 338 of notification No. 12/2012-Customs has been amended by notification No. 25/2013-Customs, dated 08-05-2013 to provide for this change.

6. The exemption from special additional duty (Special CVD) on brass scrap has been withdrawn. The entry at serial number 80 of notification No. 21/2012-Customs, dated 17-03-2012 has been omitted by notification No. 26/2013-Customs, dated 08-05-2013 to effect this change.

Notification Nos. 16/2013-CE, 25/2013-Customs and 26/2013-Customs, all dated 08-05-2013 may kindly be perused to note the changes.

Cash seized during search can be adjusted only against existing tax liability

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ITAT BANGALORE BENCH ‘A’

M.J. Ramani

v.

Deputy Commissioner of Income-tax

N. BARATHVAJA SANKAR, VICE-PRESIDENT
AND N.V. Vasudevan, JUDICIAL MEMBER

IT Appeal Nos. 383 & 384 (Bang.) of 2012
[ASSESSMENT YEARS 2008-09 & 2009-10]

Date of Pronouncement – 31.01.2013

 

In the present case, admittedly there is no past demand which has remained unpaid. Therefore only when the Assessee files a return of income quantifying his total income for the assessment years in question can it be said that there has arisen tax liability for the relevant AYs. The due date for filing return of income or the fact that advance tax was due on a particular date will not make the liability of the Assessee an “existing tax liability” on those dates. The Hon’ble Karnataka High Court in the case of CIT v. R.V. Raibagy & Co. & others ITR Case Nos. 4 to 10 of 2003 dated 29.3.2005 has also taken the view that adjustment of seized cash against tax due u/s.140A of the Act, on income declared in a return of income filed should be allowed. This decision supports the view taken by the CIT(A) in the present case. The decision of the Hon’ble Karnataka High Court in the case of Sri Raghavendra Traders v. Asstt. CIT ITA No.3197 of 2005 dated 20.7.2011 is a case arising u/s.158BFA(1) of the Act. There is no indication in this decision that adjustment of seized cash can be claimed even where there is no existing tax liability. The decisions of the Tribunal on which the CIT(A) has placed reliance clearly lay down that adjustment can be allowed when there is an existing tax liability. The CIT(A) has accordingly allowed adjustment of seized cash against tax liability as disclosed in the return of income filed on 29.4.2010 for both the Assessment years. The CIT(A) has not given any adjustment towards foreclosure of FD proceeds. The FD was not foreclosed and adjusted by the Department towards tax dues but was probably returned to the Assessee. We are of the view that the directions of the CIT(A) are just and proper and calls for no interference.

Partnership deed can be rectified with retrospective effect

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HIGH COURT OF ALLAHABAD

Commissioner of Income-tax

v.

Alison Singh & Co.

IT REFERENCE No. 140 OF 1987

MARCH 18, 2013

JUDGMENT

 

The partnership is governed under the provisions the Indian Partnership Act, 1932. Section-4 defines partnership as “Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all”. Section-5 provides that the relation of the partnership may be reduced in writing through a contract between them while Section-7 provides that where there is no written contract, the partnership be treated as partnership at will. In that case, terms between the partners can be examined through their conduct and other circumstances. Under this Act, the only restriction is that the contract should be a lawful contract according to the provisions of Indian Contract Act. Division of share in profit/loss of the business between the partners is governed by the mutual agreement between the partners and not by any statutory provisions. It was case of the partners that through out their agreement was to share profits/loss in the ratio of their share capital but due to inadvertent mistake in clause-5 of the deed dated 24.05.1974, sharing of profit/loss of the business in the ratio of their capital investment in the business was not mentioned, as such deed dated 06.02.1980 was executed and signed by all the partners in order to rectify this mistake. All the partners admitted that they were sharing profit/loss of the business in the ratio of their capital investment in the business through out which was also proved by producing the previous income-tax records. Thus the deed dated 06.02.1980 is only a rectification deed. Even otherwise also the partners can change terms and conditions under the law. Since deed dated 06.02.1980 is a rectification deed and has been executed according to real agreement between the partners, which is proved from their previous record as such objection of the IAC that the deed would have no retrospective effect, is not liable to be accepted.

Section 184 (4) provides that application for registration of the firm shall be made before end of the previous year for the assessment year. Section 184 (8) of the Act requires that on any change in the constitution of the firm fresh registration be obtained. Explanation of Section 185 (1) of the Act has limited scope of the inquiry of the Income-tax Officer to the extent that as to whether any partner stand in relationship of a spouse or minor child or any income of the firm being shared by benaimdar. In this case, the respondent moved for fresh registration well within time. The income of the firm was not shared by any benamidar, nor any partner stand in relationship of a spouse or minor, as such, the application could not be rejected. Income-tax Authority cannot question the change in the constitution of the firm.
 

Security services used for securing office premises are eligible as input service

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CESTAT, BANGALORE BENCH

C. Cubed Solutions (P.) Ltd.

v.

Commissioner of Central Excise, Bangalore

M. VEERAIYAN, TECHNICAL MEMBER

FINAL ORDER NOS. 571-572 OF 2012
APPEAL NOS. ST/308 & 361 OF 2009

Date of Pronouncement -10.08.2012

 

The appellant being an IT related service provider, undisputedly, the recruitment of manpower was, obviously for rendering those services and what further details were required by the department are not forthcoming. Similarly, the ‘security agency services’ are used for securing their office premises. Therefore, there is no justification for interfering with the order of the Commissioner (Appeals) allowing refund of credit in respect of these services.