Journal November 2022

Ahmedabad Chartered Accountants Journal

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

Volume : 46 Par t : 08 November, 2022

CONT ENTS

To Begin with

- Is Bhagwad Gita relevant today ?..................................... CA. Ashok Kataria..................... 403

Editor ial ............................................................................................CA. Rutvij P. Shah.......................404
Fr om the Pr esident............................................................................CA. Sarju Mehta.........................405

Ar ticles

Mastering Communication - Art, Skill or Genetics ?............................CA. Priyanka Sharma..................406
The Business Case for Sustainability - Part 4 ..................................... CA. Vivek Shah............................408

Direct Taxes

Glimpses of Supreme Court Rulings....................................................Adv. Samir N. Divatia....................413
From the Courts..................................................................................CA. Jayesh Sharedalal............... 414
Tribunal News.....................................................................................CA. Yogesh G. Shah &

CA. Aparna Parelkar.................. 418
Unreported Judgements......................................................................CA. Sanjay R. Shah....................424
Controversies.......................................................................................CA. Kaushik D. Shah....................427
Judicial Analysis..................................................................................Adv. Tushar Hemani......................428

FEM A & I nternational Taxation

FEMA Updates....................................................................................CA. Savan Godiawala..................432

I ndirect Taxes

GST and VAT Judgments and Updates................................................ CA. Bihari B. Shah &
CA. Vishrut R. Shah.....................434

Cor por ate L aw & Other s

Corporate Law Update.......................................................................CA. Naveen Mandovara................436

Guj RERA Corner..................................................................................CA. Manan Doshi.........................439

Capital Markets..................................................................................CA. Karan P. Vora........................443

Fr om Published Accounts ................................................................ CA. Pamil H. Shah..................... 448

Fr om the Gover nment ......................................................................CA Ashwin H. Shah &
CA. Kunal A. Shah........................451

I T Cor ner ...........................................................................................CA. Rushabh Shah.....................458

Association News.............................................................................. CA. Jay B. Parekh &
CA. Mayur H. Modha..................460

ACAJ Cr osswor d Contest......................................................................................................................464

Ahmedabad Chartered Accountants Journal November, 2022 401

CA. Rutvij Shah Journal Committee CA. Ashish Sharma
Chairman Members Convenor

CA Uday Shah CA Jayesh Sharedalal
EC Representative Past President

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

CA. Nirav Shah CA. Pratik Jain

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Published By

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402 Ahmedabad Chartered Accountants Journal November, 2022

Is Bhagwad Gita CA. Ashok Kataria
relevant today ? [email protected]

In today’s era of technological advancements when in to such an extent that we have become forgetful
everyone around seems to be busy with fast paced of the fact that our scriptures have declared this
activities, a question may arise, whether Bhagwad entire world to be one family, Vasudhaiva
Gita, the text which is said to be more than five Kutumbakam.
thousand years old, relevant today? The knowledge
that was given at the battlefield of Kurukshetra, Where the first verse begins with the identification
whether it can cater to the needs of a modern man? of problem of a human being, the last verse of the
Is there any need to study the Bhagwad Gita and Bhagwad Gita gives an assured formula for success:
can it have an impact in present times? Instead of
finding an answer to these pertinent questions, let’s ²~¢ ²¢ïx¢ïEÚ: ÜUëc‡¢¢ï ²~¢ Тƒ¢ïü {Ýé{üÚ: ¢
see the two verses of the Bhagwad Gita, the first ¼~¢ Ÿ¢è<±…²¢ï |¢êç¼{íé±¢ Ýèç¼}¢üç¼}¢ü}¢ ¢¢
and the last verse.
Wherever there is Shree Krishna, the Lord of all
The Bhagwad Gita comprises of eighteen chapters Yog, and wherever there is Arjun, the supreme
containing seven hundred verses. It starts with a archer, there will also certainly be unending
question from Dhritarashtra to Sanjay: opulence, victory, prosperity, and righteousness. Of
this, I am certain.
{ë¼Ú¢cÅî ©±¢™ ¢
{}¢üÿ¢ï~¢ï ÜUéLÿ¢ï~¢ï „}¢±ï¼¢ ²é²éy„±: Krishna symbolizes knowledge and Arjuna, a man
}¢¢}¢ÜU¢: Т‡Ç±¢pñ± çÜU}¢ÜUé±ü¼ „x…² of action. Wherever there is action backed by
knowledge, such a man attains success that includes,
“Dhritarashtra said: O Sanjay, after gathering on fame, victory, wealth and prosperity. The two verses,
the holy field of Kurukshetra, and desiring to fight, the beginning one identifies the reason of problems
what did my sons and the sons of Pandu do?” of mankind and the concluding verse gives us the
path to achieve success in life. Even though this text
These opening words of Dhritarashtra seem to be is thousands of years old, it is relevant even today.
a simple and a specific question. However, if we Arjuna is our representative and as he got dejected
think about the words he spoke, it will reflect the and confused at the most important time of his life,
mindset of the blind king and ultimately the so do we also fail at the crucial juncture of decision
common cause of the problems we face in life. The making and when it comes to taking charge of our
battle ground was ready for a war between the two life. Each verse of the Bhagawad Gita is a gem and
cousins, Pandavas and the Kauravas. The Pandavas treasure in itself. Like equipments and gadget come
had grown up with Kauravas and for Dhritarashtra, with an instruction manual and the person who
his nephews were like his own children. They all studies the manual is better equipped to optimally
were part of one family but Dhritarashtra addressed utilize the gadget; similarly, the Bhagwad Gita is a
the two armies as my sons and Pandu’s sons. This manual of life prescribing human beings how to live.
was the cause of all problems for the king of One who studies it and lives it, experiences a happy
Hastinapur who was emotionally attached with his life. Bhagawad Gita contains timeless knowledge
sons and could not distinguish between right and beyond religious boundaries that is pertinent even
wrong, dharma and adharma. This also remains today.
to be the cause of problems today, where we do
not see identify things as a whole and fight for petty 3-12-2022, Shukla Ekadashi, Margashirsha was
things as mine and yours. This selfishness has crept the Geeta Jayanti.

❉❉❉

Ahmedabad Chartered Accountants Journal November, 2022 403

Editor ial

CA. Rutvij Shah
[email protected]

When we got independence, we decided to become parliamentary democratic republic. It means that
people of India will choose and decide who will govern them. We are celebrating 75 years of our
independenceand our democracy hasstood thetest of time. In thepast, therehavebeen many situations
whereour democracy passed through difficult phase. Emergency declared during June1975 to March
1977 wasthedarkest phasein our history and asanation wecameout of it with flying colours. Infact, we
aretheonly country in our wholeneighborhood with robust and thriving democracy.

If our Parliament istempleof democracy then electionsarefestival of democracy. Every fiveyearswe
exercise our right to determine who will govern us at village, city, state or country level for next five
years. Over aperiod of 75 years, wehaveseen many peaceful transitionsof power in Statesand Center.
Electionshaveestablished that Will of peopleissupreme.

Electionsin Indiaarehandled by ElectionCommission of India. It isan independent constitutional body
which conductselectionsin India. Thestatisticsof today’sIndian electionsaremind boggling.Ason 1-
1-2022 therewere95.25 Croresregistered votersin India. Not only wehavethelargest number of voters
in the world, but they are spread across the most diverse geographical areas with vide differences in
religions, cultures, languagesandethnicity. Holdingfreeandfair electionsinsuch diverseenvironment in
itself isahugechallengewhich our ECI ishandling with great efficiency.

Themanagement of electionsinIndiaiscontinually evolving. Fromseparateballot boxesfor eachcandidate
to themarking system, to EVMs(electronic voting machines) hasbeen along journey. EVMsaresimple,
friendly, cost-effectiveand givefaster and error freevoting and counting and havebeen agamechanger.
EVMsalsoresultsinhugesavingsby way of cost of paper, printing,transportation, storageanddistribution.
Result can be declared within 2 to 3 hours as compared to 30-40 hours, on an average, under the
conventional system. NOTA (Noneof theAbove) isanother inclusion in our system whereacitizen can
choosenot to votefor any candidateswho arecontesting theelections. Sinceitsintroduction in 2013,
NOTA has gained increasing popularity amongst the Indian electorate, securing more votes than the
victory margin in many cases.

Wewill becelebrating festival of democracy in Gujarat next month wherepeopleof Gujarat will choose
who will govern them for next fiveyears. I appeal all readersto votein thisupcoming electionsand take
activepart in our vibrant democracy.

hhh

404 Ahmedabad Chartered Accountants Journal November, 2022

From the CA. Sar j u M ehta
President [email protected]

Dear Members,

I am very happy to write this message on next day of our Diwali Get Together Function held
on Saturday 5th November. All the members with their families met and greeted each other at
lush green venue and spent the entire evening with lots of fun clicking their cameras for
finest memories and by winning as good as fifteen prizes followed by dinner. The event was
planned and executed with minute planning and perfect monitoring and I congratulate our
executive committee for organizing such an excellent event.

In thenext month on 15th December, we all will be celebrating our Foundation Day with great
zeal and enthusiasm and I invite you all to participate in the same. Details of which will be
circulated shortly.

Further, series of the signatureprogram of our Association ie Brain Trust Meetings is now on
the way for all of us. The Brain Trust Committee has planned various meetings in coming
monthswhich will remain very helpful to our young memberswho arein practiceby interacting
with senior members participating in program as well asfrom Group Leaders and Trustees of
the Brain Trust Meetings.

As I sharedearlier that coming winter will be with full of Sports and Recreation Events, I am
happy to mention that much awaited Cricket Tournament islaunched by our SportsCommittee
and the First Cricket Match between President Eleven and Secretary Eleven will be played at
the prestigious Cricket Ground at Sardar Patel Stadium on 31st December, 2022, Saturday at
08.30 am onwards.

- CA. SARJU MEHTA

hhh

Ahmedabad Chartered Accountants Journal November, 2022 405

Mastering Communication - Art, CA. Pr iyanka Shar ma
Skill or Genetics ? [email protected]

Much has been harped about the importance of communicate. However, how effectively one
communicati on ski ll s i n one’s personal and communicatesiswhat formspart of thiseliteskill
professional life. Communication skillsassuchare set.
often used synonymously with soft skills which
apparently makeall thedifferenceconcerninghow Firstly, let’s break this dilemma into the basics –
far ahead and how fast you will reach your career communication and skills
successgoals.
A recent survey report on thekey traitsthat define
great leadersshowed thefollowing

But what arecommunication skills? From theaboveonecan easily infer that effective
communicationisalearned skill that canbebettered
In my experienceasasoft skillstrainer, I often ask with practice. It comesunder thecategory of soft
my audiencethisquestion and I alwaysmarvel at skills. Hencethough one’spersonality doesplay a
the vari ed answers. Peopl e of ten rel ate part in how onecommunicates; itseffectivenessis
communication with fluency in language(mostly largely based on practiceand experience.
theEnglish language!), whileothersthink it’sthe
ability to choose the best words to convey one’s So let’sbreak somemyths, shall we?
thoughts. When asked “Do geneticsplay apart in
havi ng great communi cati on ski l l s?”, an M yth #1 – Effective communication is lar gely
overwhelming majority said yes! about languagefluency

If you agreeto any of theanswersgiven above, I’m A goodknowledgeof thelanguagedefinitely helps
glad you choseto read thisarticle! you choose better words and make you a better
speaker/ writer/ orator. However, doesit makeyou
Next to breathing, communicating iswhat comes abetter communicator?
naturally to us. From an infant crying for milk to a
CA pitchinghisservicestoaclient, onecannot not “ The si ngl e bi ggest probl em i n
communicationistheillusion that it hastaken
place”

GeorgeBernard Shaw

While only concentrating on words and fluency,
though we might feel good about our language
prowess, wemost certainly fail to factor in oneof

406 Ahmedabad Chartered Accountants Journal November, 2022

M aster ing Communication - Ar t, Skill or Genetics ?

the critical communication success parameters – just hear what people are saying but to take it in,
Under standing. One-si ded communi cati on, digest it and understand it.
though well-spoken, ismost often misinterpreted
by thereceiver. Simpleand effectivedelivery with Active listening does not come naturally to us, a
clarity of message and encouragement to the consciouseffort isrequiredtofully immerseyourself
receiver to ask questionsto aid their understanding into what thespeaker issayingand to understand it
are the hallmarks of effective communication. without pre-judgment. This requires continuous
Hence knowledge of your audience along with practice, aconsciouseffort to keep distractionsat
empathy for their understanding is critical for bay, not cloud your head with other thoughts, and
successful communication. most importantly tonot pre-formulateyour answers
whiletheother person isstill talking!
M yth #2 –Communication isall about wor ds
Effectivecommunicatorsarealwaysgood listeners.
Peopl e of ten thi nk that by usi ng compl ex I t i s wi del y mi sunderstood that ef f ecti ve
vocabulary, they can impress people and emerge communication only involvesstating your point in
asgreat communicators. However, thisisfar from the best possible manner. As a matter of fact,
thetruth. effecti ve communi cati on i nvol ves an equal
proportionof speakingandlistening,sometimesthe
How you communicate is more important than proportion of listening is much higher. Active
what youcommunicate.Takealook at Mehrabian’s listening involvesunderstandingnot just thewords
model of effectivecommunication below : spoken but also thewordsleft unspoken.

M yth #4 – You are born with it!

A whopping 93% of the effectiveness of your Communication isaskill. Just likeany other skill,
communication is attributed to your voice, tone, it can belearned and mastered through practice. It
pitch& body language. Interestingly, arecent study is also unique to each person practicing it. Each
stated that onl y 10% of confl icts are due to person is wired differently in terms of nature,
differences of opinion, while 90% are due to the personality, behaviour & individual attributeswhich
wrong toneof voice! may makesomepeopleacquiretheseskillsfaster
or easier than others, but there isnothing that the
M yth #3 –Speaking clear ly and confidently is world’s best communicators have that you can’t
thesecr et to effectivecommunication acquirethrough hard work.

In effect, communication isa2-way street. Truth is Acqui ri ng Communi cati on ski l l s i s not an
that communication isasmuch about speaking as insurmountablemountain. Thereal magicisinthe
it isabout L istening. precision, consistency, and practiceof theskill.As
author and former presidential speechwriter James
Listeningissomething wealwaystakefor granted. C. Humeswrites,
It iscommon that peopleoften hear what isbeing
said but hearing isalot different from listening. To “The art of communication is the language
listen, we need to make a conscious effort not to of leadership.”

Those who master the art can convince others to
help them movemountains.

hhh

Ahmedabad Chartered Accountants Journal November, 2022 407

The Business Case for
Sustainability - Part 4

Context – CA. Vivek Shah
[email protected]
In the previous arti cles, we had covered the
background concepts of sustai nabil ity, ESG Without going into the approach and context of
reporting and sustainability risks. We had also implementingsustainability initiatives, weshall try
coveredtheevolutionof thesustainability reporting and make out a busi ness case f or thei r
landscape in India. We then went on to cover the impl ementati on which woul d be based on a
concepts of stakeholders and how sustainability traditional cost-benefit standpoint.
risks impact decision making for external and
internal stakeholders.Wecoveredthekey questions TheBusinesscasefor sustainability and defining
that a provider of finance would tend to ask and it –
addresswhilemakinglending/ financingdecisions.
When it comesto sustainability, many companies
In this article, we shall discuss the business case face the issue whether investing or spending on
for sustainability and endeavour to cover thewhy, sustainablebusinesspracticesisreally worthit. The
how and when of sustainability reporting and businesscasefor sustainability isdiscussed from
implementation of sustainability initiatives for a different perspectives. Emphasis is placed on
business. theconnectionbetweeneconomicsuccessand
the business case, the levels of engagement,
I ntr oduction – different approachesto defining thebusinesscase
and the lack of strategic management for its
The management of any for profit business takes implementation. However, beforewelook into the
strategi c deci si ons based on a vari ety of different aspectsof developing and implementing
circumstances. Someof thesemay beextenuating the business case for sustainability, we need to
externalities and some may be internal business defi ne i t. Wi thout strategi c pl anni ng and
relatedfactors.Asthebottom line, themanagement implementation, thebusinesscasefor sustainability
woul d be i nterested i n creati ng val ue f or is often seen as an adhoc measure that may
stakeholdersbased out of their strategic business coincidentally complement theexisting business
outlook. Businessexecutivesdeal with acomplex model andpotentially bring economicbenefitsasa
mi x of soci al , envi ronmental , market and consequence.
technological trends and factors while going
through their decision making process. It hasbeen From atheoretical point of view, thebusinesscase
theexperiencethat decisionsinafor profit business for sustainability can generally bedescribed as“a
aremoreoften than not, taken on theyard stick of a situati on whereeconomi c successisi ncreased whil e
cost-benefit analysi s of factors affecti ng the performing in environmental and social issues”
decision. When it comes to legal compliance, (Schaltegger et al. 2012).
externali ti es wi ll preclude such an analysi s.
However, for amajority of other decisions, thecost- Another definition of thebusinesscaseisthrough
benef i t rati onal e i s the basi s whi ch dri ves the mainstream win-win paradigm of corporate
stakeholder valuecreation asisbelieved. sustai nabi l i ty, where the busi ness case
should achieve economic, environmental and
social sustainability goalssimultaneously(Hahn
et al. 2010). Thisdefinition isan adaptation of the
definition from the Brundtland Commission, to

408 Ahmedabad Chartered Accountants Journal November, 2022

“meet the needs of a firm’s direct and indirect The Business Case for Sustainability - Par t 4
stakeholders[… ], without compromisingitsability
to meet theneedsof futurestakeholdersaswell”. frame condi ti ons. These dr i ver smay derive
Thewin-win paradigm hasencountered acertain f rom r egul at or y r equi r ement s, non-
level of critiqueintheliteratureduetothesimplistic governmental or ganization advocacy, product
view of achievingcontinuousharmony betweenthe r ecalls, media attention, consumer demand or
threeaspects. t he r ecogni t i on of a new mar k et
opportunity (Rossi 2014).
Dr i ves f or cr eat i ng a busi ness case f or
sustainability – To ensure a better understanding of the business
case for sustainability, one needs to be able to
Changemay berequired on different levelsof the understand thesedrivers. What drivescompanies
company’sorganization. Bearing thisin mind, the to takeaction toward developingthebusinesscase
dri vers f or devel opi ng a busi ness case f or for sustainability? Thesedriversarerelated to the
sustainability evolvefrom different situationsand initial motivationand thedirect or indirect benefits
thebusinesscasecan provide.
To provideagood overview of variousdrivers-

Aswecan seefrom thetable, different authorshavedefined different driversthat might besummarized as:

Ahmedabad Chartered Accountants Journal November, 2022 409

The Business Case for Sustainability - Par t 4

Linkagesof sustainability driverswith Financial Berlin Builders - A New Jersey-
Benef i ts - based residential construction
contractor, fined $385,000 by
All the drivers of sustainability are directly or U.S. Department of Labour for
indirectly linkedwithshort term, mediumterm and exposing workers to dangerous
longtermfinancial benefits. Rather, implementation fall hazardsat multipleworksites
of sustainability initiatives can be translatedand (Verdantix 2016a).
monetized into financial terms for a uniform
understanding. The following breakdown and Risk Volkswagen - The Ameri can
groupi ng of the dri vers provi des a better Minimization Environmental ProtectionAgency
understanding of thebenefits–
on September 18, 2015, issued a
1) Compliance& risk minimization -AvoidCosts notice of violation of the Clean
AirAct against Volkswagen. The
2) Cost savings & integrated operations – Save accusation was related to 2006-
Costs 2015 model vehicles that, as
defined by theEPA, contained a
3) Brand& reputationenhancement, - Generate “def eat devi ce” agai nst the
Additional Revenue innovation & market nitrogen-oxygen standards(EPA
development 2015). Thecompany lost 23% of
itsmarket capitalization after the
Following are the 5 steeps or rules of thumb to emi ssi onsscandal . To giveabetter
develop a business case for implementation of comparison, thesharepricesin the
sustainability initiatives– same month dropped from €
162,40 on September 18 to €
1) Definethepotential project or goal 105,00 on September 22, ending
up at € 97,75 per share on
2) Set long term goalsand gather information September 30, 2015 (Yahoo
Finance2015).
3) Assessthebenefitsand costs
British Petroleum - “BP’sshare
4) Decide tentatively whether or not to go with pricelost 50% between 20April
theproject and takethefinal decision 2010 and 29 June 2010 as the
catastrophe of the Deepwater
5) Bui l di ng the proj ect portf ol i o and Horizon oil spill unfolded. In the
implementation wakeof thedisaster, apeer group
of maj or oi l compani es l ost
Examplesof theBusinesscase- 18.5%. Since the disaster, BP’s
share price has underperformed
Wewill go through afew actual casesbased on the thepeer groupby ca.60%”(Clark
driversout of thepublicly availableand reported et al. 2014, p.14). Moreover, BP
information. hasto pay arecord $20.8 billion
fineto cover damagescaused by
Sustainability Caseexample thedisaster (Heavey et al. 2015)
Dr iver
Cost Savings Hilton - “Sincethelaunch of its
Compliance Bed Bath & Beyond, Nordstrom, corporateresponsibility strategy
JC Penney - Fined $1.3m for four yearsago, HiltonWorldwide
misleadingenvironmental claims. says global partnershi ps and
The retailers were advertising sustainability programmeshave
chemi cal l y processed rayon
textilesasmadeof “bamboo”and
f al sel y marketed them as
envi ronmental l y f ri endl y
al ternati ves (Federal Trade
Commission 2015).

410 Ahmedabad Chartered Accountants Journal November, 2022

The Business Case for Sustainability - Par t 4

helped it savemorethan $500m” of delaysand a45% reduction in
(Hawa2016, p.33). “Travel with quality issues(BITC 2011, p.9).
Purpose”isHilton’ssustainability
strategy, which is focused on Marks & Spencer – Through the
social andenvironmental aspects. Sustainability Framework and
Diminishing the use of natural Ethical Model Factories, M& S
resources is where the global worked i n partnershi p wi th
hotel group has generated cost factori es to i mprove process
savings. Theresult wasreducing efficiency asameansto increase
“energy use by 14.5%, carbon wages, reduceworkinghoursand
output by 21%, wasteby 27.6% protect the quality of products.
and water use by 14%, yielding Producti vi ty of Bangl adeshi
an esti mated $550m of Ethical Model Factoriesincreased
cumulativesavings” (ibid.). by 42%, while staff turnover
reduced from 10% to 2,5% and
Marks & Spencer - “Another Innovation absenteeism reduced from 10% to
example is Marks and Spencer & market 1,5% (BITC 2011, p.7).
who introduced ‘PlanA’to source development TetraPa -: “Light-weighting, or
responsibly, reduce waste and i mprovi ng the product-to-
helpcommunities, thereby saving packaging ratio, exemplifies an
the firm $200million annually” engineering design opportunity
(Clark et al. 2014, p.13). that affectsproduct transportation
effici ency and environmental
Cost Savings Philips - “Revenuesfrom‘Green i mpacts. For exampl e, the
Products’at Philips, adiversified product-to-packagingratiofor our
Dutch technol ogy company, cartons i s as hi gh as 96:4,
reached EUR 11.8bn representing meaningfewer trucksarerequired
ashareof 51% of total revenues. to deliver the same amount of
Philips’‘Green Products’offer a product. Ultimately, product-to-
si gni fi cant envi ronmental packaging ratio improvements
improvement on one or more coupled with an efficient shape
‘Green Focal Areas’: energy and robustness as well as no
efficiency, packaging, hazardous refrigerationrequirementsfor our
substances, weight, recyclingand aseptic containerstranslatesinto
disposal and life me reliability” greenhouse gas emi ssi ons
(Clark et al. 2014, p.13) reducti ons and i ncreased
di stri buti on cost savi ngs”
Integrated Pachacuti - “Pachacuti’sfair trade (Hermes 2012).
Operations panama hats are produced by a Airbnb - Recently emergedtrends
women’s cooperative i n the like the shared economy, are a
AndesMountainsof Ecuador. It new opportuni ty f or many
istheworld’sfirst company to be companies. Airbnb, the online
certified against SustainableFair room/apartment rental service, is
TradeManagement System.Asa probably the most successful
result, knowledgeof their entire examplein thisrespect, reaching
supply chain and production around $1 billion in revenuesin
process has resulted in a better 2015 (Henderson 2015, p.9).
understanding of the root cause

Ahmedabad Chartered Accountants Journal November, 2022 411

The Business Case for Sustainability - Par t 4

Chipotle - Chipotlepositionsitself whohavegrownupwith astrong
asfast foodchainthat responsibly sustai nabi l i ty focused val ue
sourcesall of itsingredients.With system. Theseemployees enjoy
that strategy, they achi eved workinginanenvironment where
revenues of almost $3 billion in they can more easily see their
2012 (Ofek 2012 in Henderson personal values come to life”
2015, p.8) and almost $4 billion (SustainAbility 2015, p.56).
in 2016 Summar y & Conclusion –
The business case should achieve economic,
Brand & McDonald’s - “Greenpeace, for environmental, and social sustainability goals
reputation exampl e, has accused si multaneously. Whi le achi eving continuous
enhancement McDonald’sandKimberly Clark harmony betweenthethreeaspectsmight not always
of contributiontothedeforestation bepossible,it isthenmoreimportant,how tomanage,
of the A mazon. In response advanceor innovatethelinksbetweenenvironmental
McDonald’s took the lead in and soci al action and economic success. To
spearheadingindustry wideefforts summarize, thefollowingthreegraphicsdepict ina
topreservetheAmazon, and both nutshell afinetuned detailing andelaboration from
firmshavecommitted to sourcing the practical point of view the advantages of
policies that promise to steadily implementationof sustainability initiatives–
i ncrease the envi ronmental
sustai nabi lity of their supply hhh
chains”(Henderson2015, p.5).

Brand & Nike - “As, for instance, Nike, the

reputation worl d’s l argest sports arti cl e

enhancement manufacturer, has experienced,

non-market topicscan suddenly

become economically relevant

through droppi ng sal es and

reputation when NGOs address

the topic and media attention is

given. In some cases these non-

market issuescan haveastronger

economiceffect thanmany topics

wi th a cl ear market l i nk.”

(Schaltegger 2011, p.17)

Starbucks - “Greener storeshave
not just been good for utility
savings; they hold greater appeal
f or Starbucks partners
(employees) who work in their
stores. Starbuckspartners in the
newly certified storesoften share
positivepostsabout working in a
greener building on their social
networks. M ost Bari stas are
Millennials (average age is 24)

412 Ahmedabad Chartered Accountants Journal November, 2022

Glimpses of AdvocateSamir N. Divatia
Supreme Court [email protected]
Rulings

25 Educational I nstitution – Exemption purposes u/s 2(15). The appl i cati on of the
u/s10(23C)(vi) - ProspectiveDeclaration predominant object test is inapt in the context of
of Law – Interpretation of TaxingStatute charitiesset up for advancing education

The basic provision granting exemption to any TheCourt however, clarified that sincejudgment
university or other educational instituti on in had departed from thepreviousrulingsregarding
Sec.10(23C) enjoinsthat theinstitutionshouldexists themeaning of theterm ‘solely’in order to avoid
‘solely’for educational purposesonly and not for disruption and to givetimeto theinstitution likely
purposes of profit. The term ‘solely’ means the to be affected to make appropriate changes and
exclusion of all others. Therefore, theterm‘solely’ adjustment, thelaw declared in thejudgment shall
isnot sameaspredominant or mainly. operateprospectively.

Theinstitutionshouldnecessarily haveall itsobjects Whileconsidering theapplication for approval u/s
aimed at imparting or facilitating education. The 10(23C)(vi) theconcerned authority isnot bound
requirement of theinstitutionsolely to engageitself to examine only theobjects of the institution but
ineducationor educational activitiesandnot inany al so cal l for audi ted accounts or other such
other activity of profit meansthat such institution documentsfor recording satisfaction whether the
cannot have obj ects whi ch are unrelated to institution genuinely seeksto achievetheobjects
education. which it professes.

Theapproach and reasoning applicableto charitable New Noble Education Society vs CCIT (2022)
organization set up for advancement of objectsof (448 ITR 594)
general public utility are entirely different from
charitiesset upfor theobject of impartingeducation. 26 High Cour t r efusing to admit question
in appeal in view of issues held against
Taxing statutesareto beconstrued in termsof their Depar tment in ear lier year s.
plain language. If the language is unambiguous
and capableof onemeaning, that along should be SincetheissuesraisedbeforetheHighCourt having
applied and not any other, based on theintention been held against the department with respect to
of Parliament or Legislature. It is only when the theearlier assessment yearsagainst whichthematter
application of theliteral interpretation givesrise had not been carried further by theDepartment, no
to an absurdity, that interpretation should be error was committed by High Court in affirming
expansive. theTribunal’sdecision.

Theterm‘education’inthenarrower meaningmay Pr. CIT. vs Vedanta Ltd. (448 ITR 732)
beinterpreted asscholastic structured learning under
theArticles of the Constitution. In the context of Continued to page423
Act, imparting former scholastic learning iswhat
theAct providesfor under thehead of “Charitable”

Ahmedabad Chartered Accountants Journal November, 2022 413

From the CA. Jayesh C. Shar edalal
Courts [email protected]

Two views possible one accepted: Not I nterest for shor t payment of Advance

71 erroneous: 73 Tax
Pr. CI T v/s. Deccan Jeweller a P. L td. DI T v/s. M itsubishi Cor por ation
(2021) 438 I TR 131 (AP) (2021) 438 I TR 174 (SC)

I ssue: I ssue:

When two views are possi ble and Assessi ng What should be the liability to pay interest on
Officer has accepted one, whether the order is advancetax in particular circumstances?
erroneous?
Held:
Held:
Theliability for payment of interest asprovided in
A possible view on the matter had been taken by section 234B isfor default in payment of advance
theAssessingOfficer basedonthefacts.Whenthere tax. While thedefinition of “Assessed tax” under
weretwopossibleviewsonthematter andoneview section 234B pertainsto tax deducted or collected
had been accepted by theAssessing Officer after at source, thepreconditionsof section 234B, viz.
inviting explanation from theassessesupon being liability to pay advance tax and non-payment or
satisfied on their explanation such view was not short payment of suchtax, haveto besatisfied, after
erroneous, whichinterest canbeleviedtakingintoaccount the
assessedtax.Therefore, section209of theAct while
Validity of noticeafter four year s. relatesto thecomputation of advancetax payable
by theassesseecannot beignored whileconstruing
72 First SourceSolutionsL td v/s.Asst. CI T the contents of section 234B and section 234B
(Bom) cannot bereadin isolation without referenceto the
(2021) 438 I TR 139 (Bom) other provisionsof Chapter XVII.

I ssue: Power of attachment u/s 281B even

Effect of reasonsimproved quanoticeu/s147. 74 beforecompletion of assessment.
Raghunandan Enter pr isev/s. ACI T
Held: (2022) 442 I TR 460 (Guj )

The reasons for reopening an assessment under A plain reading of section 281B of the Income
section 147 of theIncometax Act, 1961 haveto be Tax Act, 1961 would makeit clear that it provides
tested only on thebasisof thereasonsrecorded at for provisional attachment of property belonging
the time of issuing a notice under section 148 to theassesseefor aperiod of six monthsfrom the
seeking to reopen an assessment. These reasons date of such attachment unless extended, but
cannot beimproved upon or supplemented much excl uding the period of stay of assessment
lesssubstitutedby an affidavit or oral submissions. proceedings, if any. These are drastic powers

414 Ahmedabad Chartered Accountants Journal November, 2022

Fr om the Cour ts I ssueof shar esagainst inter est payable

permitting the Assessing Officer to attach any 76 to Bank:
property of an assesseeeven beforethecompletion CI T v/s. Cor eemballageL td
of assessment or reassessment. Thesepowers are (2022) 443 I TR 157 (Guj )
thusin thereturn of attachment beforejudgment.
They haveprovisional applicability andin termsof I ssue:
sub-section (2) of section 281B of theAct, alimited
life. Such powersmust, therefore, beexercised in Whether issueof sharesagainst interest payablecan
appropriatecasesfor proper reasons. Such powers beconsidered aspayment u/s43B?
must, therefore, beexercised in appropriatecases
for proper reasons. Suchpowerscannot beexercised Held:
merely by repeating the phraseology used in the
section and recording the opinion of the officer The Supreme Court observed in M.M . Aqua
passing such order that he was satisfied for the Technologies’casethat theobject of section 43B
purposeof protecting theinterestsof theRevenue, of the Income Tax Act, 1961 is to allow certain
it wasnecessary so to do. deductionsonly on actual payment. Explanation
3C to section 43B of the Act was introduced
Pr ovisional attachment of thepr oper ty retrospectively with effect fromApril 1, 1989 for
theremoval of doubtsandmadeit clear that interest
75 u/s281B that remained unpaid and hasbeen converted into
Raghunandan Enter pr isev/sAsst. CI T aloan or borrowing shall not bedeemed to have
(Guj ) been actually paid in order to bring thecasewithin
(2022) 442 I TR 460 (Guj ) the express language of Explanation 3C what is
required to be considered is the extinguishment
I ssue: of liability to pay theinterest in thefactsof each
case.
Whether the property belonging to a partnership
firmcanbeattachedinthecaseof apersontowhom Dismissing the appeal, that the finding of fact as
a share of partnership has been assi gned by recorded by theTribunal wasthat theoutstanding
partners? amount of interest to the tune of Rs. 2,70,00,000
payable to the ICICI Ltd, was extinguished by
Held: offering sharesfor which areceipt wasalso issued
by theICICI Ltd, by letter datedSeptember 3, 2001.
That the caseon hand indisputably wasnot oneof Thus, thiswasacasewherethepayment of interest
asub-partnership though in view of section 29(1) had been madeby issueof fully paid up sharesto
of thePartnershipAct,ASan assigneemay become ICICI Ltd. TheappellateTribunal wasright in law
entitled to receivetheassigned sharein theprofits and on facts in directing to allow Rs. 2.70 crores
from thefirm, not asasub partner becauseno sub being interest payableto ICICI Ltd. under section
partnership cameintoexistence, but asanassignee 43B.
to the share of profit of the assignor partner. The
subject land not being theproperty of AS, wasnot [Note:
open to provisional attachment. Even i f the
Department’scasethat therewassomeinterest of The law has been amended by FinanceAct 2022
ASinvolved in theland in question, that would not w.e.f. 01/04/2023]
makethesubject land of theownership of AS. The
provisional attachment of the subject land under
section 281B of the Act at the instance of the
Revenuewasnot sustainablein law.

Ahmedabad Chartered Accountants Journal November, 2022 415

Failur eto specify whether penalty isfor Fr om the Cour ts
“under r epor ting” or “mis-reporting”.
Assessee’srequest for extension of time
77 Schneider ElectricSouth East Asia(HQ) to r epl y to show cause noti ce and
PTE L td. v/s. Asst. CI T
(2022) 443 I TR 186 (Delhi) 78 pr inciplesof natur ejustice.
Easter n M attr esses(P) L td. v/s. CI T
I ssue: (2022) 443 I TR 278 (K er )

Whether isit necessary for theassessing officer to I ssue:
specify the limb under which the penalty is
proposed to belevied u/s271A? What will bethefateof assessment order when the
assessee’s request for extension of time is not
Held: considered?

Allowingthepetitionthat theorder of theAssessing Held:
Officer denying the benefit of immunity from
penalty ontheground that thepenalty wasinitiated Allowing thepetition, that when theassesseehad
under section 270A for misreportingof incomewas sought for a further four days’time to respond to
not only erroneous but also arbitrary and bereft of the notice citing the reason to gather necessary
any reason sincein thepenalty noticehe had failed materials from different sources, the Assessing
to speci f y the l i mb- “under reporti ng” or Officer wasbound to givea response, intimating
“misreporting”of income, under which thepenalty either therejection or itsacceptanceof request for
proceedings had been initi ated and how the ti me. Such a response was part of the basic
ingredientsof sub section (9) of section270A were requirement of the principles of natural justice.
satisfied. Intheabsenceof suchparticulars, themere When there was a lack of response, it was only
reference to the word “mi sreporting” i n the probablethat theassesseewould haveexpectedhis
assessment order todeny immunity fromimposition request for adjournment had been accepted.
of penal ty and prosecuti on made the order Therefore, theAssessing Officer ought not to have
manifestly arbitrary. The entire edifice of the passed the assessment order based on the draft
assessment order passed by theAssessing Officer assessment order. Therewasviolation of principles
wasactually voluntary computationof incomefiled of natural justiceand hencethe assessment order
by theassesseeto buy peaceand avoid litigation, was set aside. The respondents were directed to
which fact had been duly noted and accepted in consider the objections, if any, of the assessee in
theassessment order and consequently, therewas responsetotheshow causenoticewithinthirty days
no question of any misreporting. Theaction of the and accordingly passappropriateorders.
Assessing Officer was contrary to the legislative
intent of section 270AA. Therefore, the order When unsecur ed loans/ar e ver ified in
passed under section 270AA(4) rejecting the or iginal assessment, r eassessment notice
assessee’sapplication for immunity from penalty
wasset asideandtheAssessingOfficer wasdirected 79 for such ver ification isvalid.
to grant immunity under section 270AA to the Regency Nir man L td. v/s. ACI T
assessee. (2022) 443 I TR 301 (Bom)

I ssue:

Whether it will beacaseof changeof opinionwhen
the unsecured l oans are verifi ed i n origi nal
assessment?

416 Ahmedabad Chartered Accountants Journal November, 2022

Fr om the Cour ts Held:

Held: “Reading of theseprovisionswould makeit clear
that theassesseehasto makeaclaimwith regard to
That indisputably, the assessee had disclosed the expenditureincurred for earning incomewhich is
unsecured loan transaction of Rs. 75 lakhsavailed not chargeabl e to tax, whi ch requires to be
of from JMPL. The assessee had availed of loan examined by theAssessing Officer and satisfaction
from multipleentities. Thisprompted theAssessing has to be recorded, more particularly, when the
Officer to seek details of unsecured loans and Assessi ng Off i cer has not agreed wi th the
depositsin aprescribed format. Not only wasthe disallowanceclaim under Section 14A of theAct.
information furnished by the assessee but all the For disagreeingwith such disallowance, deduction
supporting documents were submitted. All the of theexpenditureisnot to beallowed which has
primary facts were placed before the Assessing been incurred by the assessee in relation to the
Officer by the assessee. The search action under incomewhichdoesnot formpart of thetotal income
section 132 of the IncomeTax Act, 1961, did not under the Act as per Section 14A(1) of the Act.
reveal any tangiblematerial quathetransaction of However, such expenditurewhich hasbeen incurred
unsecured loan from JMPL. In fact, the assessee in respect of other incomewhich hasto betreated
wascalled upon to explain thevery transaction, in as part of the total income has to be considered
respect of which, during the course of scrutiny under Section 14A(2) of the Act read with Rule
assessments, thethenAssessingOfficer hadalready 8D of theRules, but suo moto disallowanceunder
solicited information and documents. Eventually, Section 14A of the Act made by the Assessing
during the course of scrutiny assessment, the Officer isunwarranted. In other words, recording
Assessing Officer having been satisfied with the of satisfaction by theAssessing Officer under Rule
explanationfurnishedby theassesseedid not make 8D(2) of theRulesismandatory. Inthelight of these
any addition. Evenin thecourseof theproceedings provisions, theAssessing Officer invoking Section
under section 153A, theDepartment did not claim 154(2) to rectify the assessment order is wholly
that any incriminating material wasfound quathe untenable for the reason that there is no mistake
transaction with JMPL. In thisview of thematter, apparent on the face of the record to invoke the
thereopening of theassessment onthepremisethat proceedingsunder Section 154 of theAct. On the
the creditor lacked the creditworthiness and thus other hand, thematter requiresadjudication upon
theloan transaction wassham, wasnothing but a theissuewhich isadebatableissueaspointed out
changeof opinion. Thenoticewasnot valid. by theTribunal. In such circumstances, the order
passed by theAssessing Officer under Section 154
Disallowanceof expenditur eu/s14A by of the Act and confi rmed by the CIT(A) i s
unsustainable. On these material aspects, the
80 way of section 154 pr oceedings not Tribunal has rightly applied its mind and has
per missible: reversedthefinding of theauthoritieswhich cannot
Pr. CI T v/s. M phasi s Softwar e and befaulted with.”
Ser vices(I ndia) Pvt. L td.
(2022) 445 I TR 468 (K ar ) hhh

I ssue:

Whether disallowanceof expenditureu/s14A can
bemadeby resorting to proceedings/s154, when
theassesseehad computeddisallowanceand made
it Suomoto?

Ahmedabad Chartered Accountants Journal November, 2022 417

Tribunal
News

CA. Yogesh G. Shah CA. Aparna Parelkar
[email protected] [email protected]

Babur ao A t l ur i V. DCI T 143 requirement. Since NFAC did not have power to
condonedelay, theappeal wasdismissed.
43 Taxmann.com 243 (Hyd)
Assessment Year :2018-19 & 2019-20, I ssue:
Or der dated:22nd July 2022
Whether ther equir ement of filing of For m no.
Basic Facts 67 ‘along with theretur n’is‘dir ector y’and not
mandator y, as was held by var ious legal for a,
Theassessee isproprietor of AdithyaEnterprises including the Apex Cour t, and CI T(A) ought
and engaged in the business of Exporting Goods to havedirected AO to gr ant credit in the light
and providingTechnical and management Services of thefact that thequantum of relief claimed u/
to Suncrest Engineering Limited Zambia. Hefiled s 90/90A was not distur bed by the AO in the
hisreturn of income11-12-2018. Thecaseof the assessment or der and DTAA should take
assessee was selected for scrutiny on account pr ecedenceover domestic laws.
DoubleTaxation relief u/s90/91 & detailsof assets
& liabilities. TheAO completed theassessment u/ Held:
s.143(3) accepting thereturn income. However, in
computation sheet did not given credit of relief u/s. TheTribunal found that the delay in filing of the
90/90A. Theassesseefiled rectificationapplication FTCcertificatein Form-67wasexplainedto bedue
u/s. 154, but theAO rejected thesame. On appeal to non receipt of thetax deduction certificateform
toNFAC, NFACheldthat theIncome-tax provisions theforeign deductor from Zambiawithin timefor
clearly stipulate the procedure and timeline for which thesaid Form-67 wasfiled belatedly by 14
making aclaim. CPC hasfollowed therulewhich days. It was stated that the tax jurisdiction of the
is mandatory and hence non furnishing of Form Zambiandeductor follow different periodfor taxing
No. 67 beforetheduedateu/s. 139(1) of theAct is theincomeand havedifferent duedatesfor filing
astringent requirement for thesaid claim. Hence, the return as compared to India. So far as the
CPC madethedisallowance. Thereisno defect in decisi on reli ed on by ld. DR i n the case of
theintimation. So far asthereasonablenessof the Muralikrishna Vaddi 142 Taxmann.com 32 was
ForeignTax Credit or eligibility isconcerned, the concerned, thetribunal found that thereisadelay
CPC cannot ignore or wai ve the procedural of more than two years without any valid and
requirement. The Income-tax provisions clearly reasonable cause. Therefore, the said decision
stipulatetheprocedureand timelinefor making a tribunal held wasnot applicableto thefactsof the
cl ai m. CPC has fol l owed the rul e whi ch i s present case. Since, theassesseein theinstant case
mandatory and hencenon furnishing of Form No. hasfiled FTCcertificatein FormNo. 67with delay
67 before the due date u/s. 139(1) of theAct is a of only ‘14’days, thereforefollowing thedecision
stringent requirement for the said claim. Hence, of theBangulur Bench of theTribunal in thecase
CPC madethedisallowance. Thereisno defect in of M/s. 42 Hertz Software India Pvt.Ltd. [2022]
theintimation. So far asthereasonablenessof the 139taxmann.com 448, whereinit washeldthat this
ForeignTax Credit or eligibility isconcerned, the requirement of filing form no. 67, cannot betreated
CPC cannot ignore or wai ve the procedural asmandatory, rather it isdirectory in nature. Since,

418 Ahmedabad Chartered Accountants Journal November, 2022

Rule128(9) doesnot providefor disallowanceof Tr ibunal News
FTCincaseof delay infilingFormNo. 67,Tribunal
directed the AO to al low the FTC after due serviceprovider i.e., theassessee. Theseservices
verification. Thegroundsraisedby theassesseeare havenot resulted in any enduring benefit to EI by
accordingly allowed. way of any knowledgewhich could beapplied by
it on its own in future without depending on the
Everest Global INC (P.) Ltd. v.ACIT 143 assessee. These are general managerial services
which are received by the assessee on recurring
44 Taxmann.com 176 (Del– Tr ib) basis. Therefore, the test laid down under article
Assessment Year : 2013-14 to 2015-16 12(4)(b) is not satisfied in the present factual
Or der dated: 30th M ay 2022 scenario. Thus, management fee received by the
assessee from EI is not taxable as FIS under the
Basic Facts provisions of India-USA DTAA.

The assessee, a US based company, entered into Subscr iption Fee
an agreement with its Indian subsidiary, Everest
India (EI) for providing management support It was noted that the Tribunal in assessment year
services and manpower supply. It also provided 2011-12 on similar issuehad held that by allowing
miscellaneous services comprising of access to accesstodatabasewhat assesseegrantstocustomers
publishedresearchreportsby providingsubscription is only a right to use a copyrighted material (i.e.,
for thesameand customized research advisory to published report). Theassesseedoesnot grant the
certain third partiesin India. TheAO held that the right to use the copyright. Hence, consideration
management fees received by the assessee was (subscription fee) received by the assessee is not
taxableasfeefor included services(FIS) asper the taxable as royalty under the provisions of article
provi si ons of I ndi a-USA DTA A and the 12(3) of the India-USA DTAA. Similarl y in
subscriptionfeereceived by theassesseefromthird customized researchadvisory servicestheassessee
parties was taxable as royalty under relevant isprovidingonly advisory servicesthrough e-mails
DTAA. On appeal, the CIT(A) upheld that order or presentations. The output of customs research
passed by AOOn the assessee’s appeal to the advisory isnot providedthroughsubscriptionmode
Tribunal: or databaseaccessmodeand,therefore,thequestion
of accessto databasedoesnot ariseat all. Further
I ssue there i s no transfer of any copyri ght to the
customers. Thus, theconsiderationsreceivedby the
Whether Management servicefeesreceived can assessee towards customized research advisory
be consider ed to be in the natur e of Fees for services are not taxable under the head Royalty.
included ser vices. Therefore, the order of theco-ordinatebench was
followed for theseyearsalso.
W het her subscr i pt i on f ees r ecei ved f or
pr oviding accessto published r esear ch r epor ts M ar labs I nnovations (P.) L td. v. DCI T
was to be consider ed as r oyalty as per I ndia-
USA DTAA 45 141 Taxmann.com314 (Bang)
Assessment Year : 2011-12,
Held Or der dated: 13thJuly2022

M anagement Suppor t Fee Basic Facts

It wasnoted that Tribunal in ITA No. 6137/DEL/ TheAssesseefiledreturn of incomeon 29-11-2011
2015 in assessment year 2011-12 had held that the in thenameof M/s.MarlabsSoftwarePvt. Ltd.By
management support servicesareneither technical order of Nati onal Company L aw Tri bunal ,
services nor do they require any technological Bangal ore assed an order i n the scheme of
knowledge, skill, or experience. Thereisnotransfer amalgamation of MarlabsSoftwarePvt. Ltd. with
of technology involved. EI isnot enabled to apply MarlabsInnovationsPvt. Ltd. on 5-9-2017. On15-
any technology on itsown without recourseto the 12-2017, theAO of MarlabsSoftwarePvt. Ltd. was

Ahmedabad Chartered Accountants Journal November, 2022 419

Tr ibunal News clerical mistakewithinthemeaningof section292B.
TheTribunal noted that theSupremeCourt in case
informed by the said company regarding the of Maruti Suzuki whiledealing with theabovetwo
amalgamationandtransfer of theassessment records cases have held that there is no conflict between
to theAO. The DRPdirectionsdated 20-12-2018 thedecisionsof SupremeCourt decision in Spice
waspassed in thenameof thetransfereecompany Enfotainment (dated 2 November 2017)36 and in
being Marlabs Innovations Pvt. Ltd. The Ld. AO Skylight Hospitality LLP(dated 6April 201837).
passed final assessment order u/s. 143(3) r.w.s. 254 Hencefollowing thedecision of Hon’bleSupreme
inthenameof non-existent company beingMarlabs Court in caseof Maruti Suzuki IndiaLtd. (supra),
SoftwarePvt. Ltd. Tribunal held that, sincetheassesseeceased to be
in existenceason thedatewhen theAO passed the
I ssue impugned order of assessment, theassessment so
framed is not sustainable in the eye of law. The
Whether the final or der passed by the AO in final order of assessment is therefore liable to be
the name of non est company wasbad in law annulled and wasaccordingly annulled.

Held RBL H ot el s (P.) L t d. v. ACI T 141

The Tri bunal noted that the scheme of 46 Taxmann.com 457 (Chennai)
amal gamati on was approved by the NCLT, Assessment Year :2012-13 & 2014-15,
Bangalore Bench on 5-9-2017. The DRP took Or der dated: 8th June 2022
cognizanceof thecompany that cameintoexistence
post amalgamationtobe“MarlabsInnovationsPvt. Basic Facts
Ltd.” which isclear from thecausetitleof theDRP
directions. On receipt of theDRPdirection, theLd. The assessee-company, engaged in business of
AO passed thefinal assessment order in thename hotels, motelsand catering etc. had purchased aland
of erstwhilecompany being MarlabsSoftwarePvt. and semi -constructed bui l di ng whi ch was
Ltd. The Tribunal found that the facts of the completedinAugust 2013. Subsequently, it entered
Assessee’scaseisidentical to thefactsof thecase into an agreement with IHCL for rendering hotel
decided by theHon’bleSupremeCourt in thecase servicesand handed over said building to IHCL to
of M aruti Suzuki I ndi a L td. [ 2019] 107 run the hotel under the assessee’s brand name.
taxmann.com 375/265Taxman 515/416 ITR 613. Duringyear, it incurredcertain amount of expenses
Si nce the assessee company ceased to be in while setting-up business and claimed same as
existence as on the date when theAO passed the deduction under section 37(1). TheAO noted that
order of assessment, assessment so framed asper theassesseedid not commencebusinessoperation
Tribunal was not sustainable in the eyes of law, andwasnot earningrevenuefromoperations. Thus,
being a nullity. The Tribunal also noted that the till thetimetheassesseewasnot ready tocommence
Hon’bleSupremeCourt inthecaseof Maruti Suzuki business, theexpenditurecould not beallowed as
India Ltd. (supra), also dealt with the decision of same woul d remai n merel y pre-operati ve
theHon’bleDelhi High Court in caseof Sky Light expenditure. TheCIT(A) upheld thedisallowance
Hospi tal i ty L L P v. A sstt. CI T [ 2018] 90 made by the AO on ground that busi ness
taxmann.com 413/254 Taxman 109/405 ITR 296 expenditureclaimed by theassesseewasrequired
anddistinguishedthedecisionof SpiceInfotainment to becapitalized alongwith thecost of thebuilding
Ltd. v. Commissioner of ServiceTax, (2012) 247 at thisstageof inception. Theassesseeisin appeal
CTR 500. TheSupremeCourt had noted that from beforetheTribunal :
a reading of the order dated 6 April 2018 in the
Special LeavePetitionfiledby Skylight Hospitality I ssue
LLPagainst thejudgment of theDelhi High Court
rejecting itschallenge, it isevident that thepeculiar Whether wher e the assessee had acquir ed
factsof thecaseweighed with theSupremeCourt necessary infrastructurefor itsbusinessand had
in coming to theconclusion that therewasonly a star ted payi ng sal ar i es and all owances of

420 Ahmedabad Chartered Accountants Journal November, 2022

experts, it can besaid that assesseehad achieved Tr ibunal News
pr ocess of establishing busi ness and, thus,
business expenditur e claimed dur ing r elevant not set-up sincetheassesseehad procured theland
year s was to be allowed as deduction under and partially constructed building during theyear
section 37(1) which wasavery vital step to commencebusiness
activitiesconsidering thefact that theassesseewas
Held engaged in hospitality business. On thebasisof all
these facts, as per Tribunal it could be said that
The Tribunal found that the main object of the though thebusinesswasset-up, however, it wasin
assessee, inter alia, includeto promote, establish, pre-commencement stageduring theyear and the
run, manage, acquire, lease, and otherwise carry business could not be commenced due to long
on thebusinessof hotels, motels, resorts, serviced gestation period. Since, the fact indicate that the
apartments, catering, food courts, restaurants, and assesseetraversed beyond thestageof exploratory
foods outlets etc. Pursuant to same, the assessee activitiesand was, in fact, engaged in activity that
hadacquiredlandandpartially constructedbuilding was integral to the profit earning apparatus, and
and thereafter, entered into a hotel operating therefore, thebusinesscould besaid to havebeen
agreement with IHCL. The assessee also entered set-up. The business would be set-up when the
into project management agreement with JLLPC necessary infrastructure was acquired by the
for thehotel project tolay interior fit-outsoncertain assesseeand theassesseestarted paying salariesand
terms and conditions. The perusal of financial allowanceof theexperts. Theassessee,intheinstant
statements for the year revealed that the assessee case, had achieved theprocessof establishing the
had obtained long-term borrowingsand acquired business. In, view of thediscussion and inthelight
tangible and intangible assets. The fixed asset of the various judicial pronouncements and the
includes land, building, electrical accessories, submissions of the assessee that its business was
i nstal l ati on charges, swi mmi ng pool work, already set-up during theassessment year 2012-13
computers and other plant and machinery. The were concurred with. Therefore, the business
assessee paid mobilization advances to various expendi ture as cl ai med by the assessee was
vendors. The nature of expenses debited in the all owablededucti onsi n both theyears.Accordingly,
profit and lossaccount isadministrativeexpenses, theappeals, for both theyears, wereallowed. The
employee’s expenses, and interest expenses. The AO wasdirected to recomputetheincomein terms
administrati ve expenses are substanti al ly i n of aboveorder.
connecti on with the constructi on work. The
assesseehasdeputed staff and paid salariesetc. In DCI T V Swiss Finance Cor por ation
thenotesto theaccounts, it hasbeen stated that the
first ventureof theassesseeisin constructionstage 47 (Maur itius), TS-832-I TAT-2022 (Mum)
andexpectedtobecompletedaroundOctober 2012 Assessment Year 2015-16 & 2017-18,
and would start functioning by January 2013. Or der dated 7th October 2022
Si mil ar are the fi nanci al statements for the
assessment year 2013-14. It isalsofoundthat finally Basic Facts:
thesitehasbeenhanded over by theassesseetothe
IHCL to run thehotel during themonth of August Assessee, a Mauritius-based Co., and a foreign
2013. Upon perusal of all thesedocuments, asper institutional investor filedreturnof incomedeclaring
thetribunal it can besaid that though thebusiness short term capital gain of Rs.2358 Cr. and long-
was in pre-commencement stage, however, the term capital gain of Rs.790 Cr. although exempt
assessee had undertaken substantial activities to under Article 13(4) of the DTTA during the year
make the business ready for commencement. under consideration and also claimed brought
Hence, it could not be said that the business was forward capital lossesof over Rs.157 Cr. TheAO
held that theAssesseeshould havefirst set off the
brought forward capital losses with the current
year’s capital gains before claiming exemption
under Article13(4) of India-MauritiusDTAA and

Ahmedabad Chartered Accountants Journal November, 2022 421

Tr ibunal News V I T P (P.) L t d. v. DCI T 143

accordingly, assessedincomeafter settingoff entire 48 taxmann.com 304 (Chennai - Tr ib.)
brought forward capital losses; CIT(A) allowed Order dated 3rd August 2022,Assessment
Assessee’sappeal. Year 2013-14 & 2014-15

I ssue: Facts:

Whether exemption as per DTAA for capital The assessee is a company and engaged in the
gain incomeisto beallowed on thegr osscapital businessof providinginfrastructural facilitieswhich
gain or net gain after set off of brought for war d inter alia include developing, operating, and
capital loss. maintaining industrial parks. During thefinancial
year 2012-13, theassesseebought back itsown 28
Held: Lakh shares at face value, namely, Rs. 100/- per
equity sharefrom itsparent company i.e.,Ascendas
Therewasno disputethat theAssesseewasentitled Property Fund (India) Pvt. Limited (APFI), who is
to claim thebenefit of exemption from tax in India theshareholder, in accordancewith theprovisions
granted by Article13(4) of theDTAA in respect of of section 77A of the CompaniesAct, 1956 and
Short/LongTerm Capital Gainsarising during the al so created Capi tal Redempti on Reserve
relevant previous year. The contention of the amounting to Rs. 28 Croresbeing thesum equal to
Revenue was that the aforesaid benefit of Article thenominal valueof thesharesthat werebrought
13(4) of DTAA could only be claimed in respect back by transferring the amount from thesurplus
of net/balanceShort/LongTerm Capital Gainsafter available in the Profit & Loss Account (P& L
setting off Brought Forward Short/Long Term Account). Duri ng the course of assessment
Capital Gains in terms of Section 74 of the Act. proceedings, theAO asked theassesseeasto why
The Tribunal had, in the case of Goldman Sachs the provisions of section 56(2)(viia) of the Act
Investments(Mauritius) Ltd. 187ITD 184(Mumbai cannot beinvokedin itscaseto bringthedifference
- Trib.) [24-09-2020, rej ected the aforesai d betweentheFair Market Value(FMV) of theshares
contentionof theRevenueholdingthat theAssessee and theconsideration paid when they are bought
was entitled to claim benefit of Article 13(4) of back.Assesseeexplained that theprovisionsunder
DTAA in respect of theentire current year Short/ section 56(2)(viia) of theAct haveno application
Long Term Capital Gains (without setting of the to thebuy back of theshares, for thereasonsthat,
Brought ForwardShort/LongTermCapital Gains). thecompany wouldnot beholding theshares, post
The Tribunal also permitted carry forward of the buy-back, it would be inferred that it did not
Brought Forward Short/LongTerm Capital Gains ‘receive’theshares, hence the taxability of same
tothesubsequent assessment yearsholdingthat the under section 56(2)(viia) does not arise. TheAO
Short/Long Term Capital Loss permitted to be however, did not agreewith theassesseeand held
carried forward in apreviousassessment could not that now here under section 56(2)(viia)(ii) of the
be reviewed in the assessment proceedings of a Act or any other section of theIncome-tax Act, it is
subsequent assessment year. In vi ew of the stated that theprovisionsof section 56(2)(viia)(ii)
aforesaid, Tribunal found merit in the contention of the Act are not applicable in the case of buy-
of theAssesseeand held that all theissuesraised back of shares. since, theassesseeisaclosely held
by theRevenuein thepresent appeal standdecided company and it received18Lakh sharesof another
infavour of theAssesseeby thedecisionof Tribunal closely heldcompany i.e.,APFI for aconsideration
i n the case of Gol dman Sachs Investments of Rs. 18 Crores at Rs. 100/- per share which is
(Mauritius) Ltd. (supra).Accordingly, they did not less than FMV of Rs. 146.817 per share and,
findany infirmity intheorder passedby theCIT(A). therefore,theprovisionsunder section56(2)(viia)(ii)
Ground No. 1, 2 and 3 raised by the Revenue are of theAct areapplicableand thereby rejected the
dismissed. appellantscontentions.Aggrievedby suchanaction

422 Ahmedabad Chartered Accountants Journal November, 2022

of theAO, theassesseepreferred an appeal before Tr ibunal News
theCIT(A) who upheldAO’sorder.
thebuyingback of ownsharesby acompany which
I ssue: becomeextinguished by reducing thecapital, it is
clear that thetest of ‘becoming property’and also
Whether pr ovi si ons of secti on 56(2)(vi i a) ‘shares of any other company’ fail s thereby
applicablefor Buyback of shar es rendering theprovisionsunder section 56(2)(viia)
of theAct inapplicableto thecasesof buyback of
Held: own shares. The Tribunal followed the Mumbai
Tribunal decisionincaseof VoraFinancial Services
It isclear that the sharesshould becomeproperty (P.) Ltd [2018] 96 taxmann.com 88/171 ITD 646,
of the recipient company in order to apply the since there was no other view of any higher fora
provisionsunder section 56(2)(viia) of theAct and whichwasbrought toTribunal’snotice.Therefore,
in that case, such shares should be the shares of respectfully following the view taken by a Co-
other company and cannot be its own shares, ordinateBench of Mumbai Tribunal in thecaseof.
becauseacompany cannot hold itsown sharesin (supra), held that the addition made by invoking
order that such sharesbecomeitsproperty. It isalso theprovisionsunder section 56(2)(viia) of theAct
cl ear from that the provi sions under secti on cannot besustained.Accordingly, they allowedthe
56(2)(viia) of theAct should beapplicableonly in appeal of theassessee.
caseswherethereceipt of sharesbecomeproperty
in the hands of the recipient and the shares shall hhh
becomeproperty of therecipient only if thoseare
‘shares of any other company’. With reference to

Continued fr om page 413 Glimpses of Supr eme Cour t Rulings

Deduction only on actual payment – conditioneduponpayment. Therefore, amereclaim
of expenditure in the books was insufficient to
27 Contribution toemployeeswelfarefunds entitle deduction. The assessee had before the
– Duedate– Section 36(1)(iv), 43B of I.T. prescribeddateactually topay theamountswhether
Act. towardstax liability, interest or other similar liability
spent out by thesaid proviso.
One of the rules of interpretation of tax statute is
that if a deduction or exemption is available on Checkmate Services P Ltd. vs ACIT (448 ITR
compliance with certain conditions, the said 518)
condi tions are to be strictl y compli ed wi th.
Deductionsaretobegrantedonly whenconditions hhh
which govern them arestrictly complied with.

The Legislature in introducing Sec.43B was to
pri mari l y ensure that deducti ons otherwi se
permissible on mercantile basis are expressly

Ahmedabad Chartered Accountants Journal November, 2022 423

Unreported
Judgements

Inthisissue, wearegivinggist of therecent decision CA. Sanj ay R. Shah
renderedby ‘SMC’Benchof IncomeTaxAppellate [email protected]
Tribunal,Ahmedabadinthecaseof M/s. Shardaben
Education Trust vs. ITO, wherein the i ssues Factsof theCase:
primarily beforetheTribunal were, whether when
theaudit report in Form No.10B wasnot furnished 2. The bri ef facts are that the assessee i s a
along with thereturn of incomeand wasfurnished chari tabl e trust regi stered wi th chari ty
for the first time before the I.T.A.T. whether it is commissioner Mehsana since 11th October
sufficient compliancewiththeprovisionsof section 2006 and also registered under section 12AA
12A(1)(b) of theAct, and secondly, whether filing of the Act vi de regi strati on dated 12th
of audit report is a procedural requirements, and November 2009. The assessee, for the year
hence, directly and not mandatory. under consideration filed belated return dated
2nd June 2015 decl ari ng an i ncome of
Wehopethereaderswould find thesameuseful. Rs.15,26,210/- and the same was processed
under section 143(1) of theAct.
Annexur e
3. TheassesseebeforetheAO filed aletter dated
I n the I ncomeTax AppellateTr ibunal 22ndSeptember 2016whereinit wassubmitted
“SM C” Bench, Ahmedabad that despitebeing eligiblefor deduction under
section 11 of theAct, it had omitted to claim
BeforeShr i Waseem Ahmed, the exemption under section 11 of theAct in
Accoutant M ember the return of income due to error and lack of
proper guidancefrom consultant. Theassessee
I TA No.2312/Ahd/2018 further submitted that it isunableto revisethe
Assessment Year : 2014-15 return of income and correct the error for the
reasonthat theoriginal returnwasfiledbelated.
M/s. Shardaben Vs. The ITO, Therefore, it should be provided with the
benefit of section 11 of theAct and wrong tax
Education Trust (Exemption), Ward-1, paid for Rs.3,79,020/- by way of TDS credit
and self-assessment tax should be refunded.
(Applicant) (Respondent) However, the AO vi de order dated 09th
November 2016 under section 143(3) of the
Appellant by : Shri ParimalsinghB. Parmar,A.R. Act rejectedtheclaimof theassesseeby holding
Respondent by: Shri Atul Pandey, Sr. D.R. that the claim of exemption under section 11
of theAct wasnot madeinthereturnof income.
Dateof hearing : 12.10.2022 Therefore, asper theprovision of theAct and
ratio laid down by theHon’bleSupremecourt
Dateof pronouncement : 16.11.2022 in the case of Goetze (India) Ltd vs. CIT, the
office of AO is not empowered to admit any
Gist Only: claim which isnot madein return of income.

1. In this appeal, the only effective issue raised 4. In the appeal before CIT (Appeals), CIT
by the assessee was that the learned CIT (Appeals) allowed theappeal of the assessee
(Appeals) erred in holding that theassesseeis
not eligiblefor exemption u/s.11 of theAct if
audit report inFormNo.10B wasnot furnished
along with thereturn of income.

424 Ahmedabad Chartered Accountants Journal November, 2022

Unr epor ted Judgments

subject to the condition that if theAppellant “12.2 In view of the above we hold that the
had filed audit report along with return of assesseecannot bedenied thebenefit of
incomethen, it wouldget exemption,otherwise exemptionfor whichit isentitled merely
the Appel lant would not get exempti on. on thelapseof procedural requirement
Aggrieved by theorder of CIT (Appeals), the i.e. delay in filing theaudit report in the
Assesseefiled appeal beforetheTribunal and prescribed form. In thejudgment cited
contended that theprovisionsof section 11 of above, it was provided that the audit
theAct have been duly complied with by the report was filed by the assessee before
assesseeexcept theprocedural requirement of the completion of the assessment. In
filing theaudit report along with thereturn of other words, thecomplianceof thelaw
incomethough such audit report wasobtained was made by the assessee when the
fromthecharteredaccountant much beforethe assessment proceedings was pending
dateof filing of return of income, and hence, before the AO whereas in the case on
the benefit of exemption u/s.11 should be hand the assessee compl i ed the
availableto theAppellant. requirement at the stage of appellate
proceeding before tribunal. Thus, a
Held: question arises before us whether the
principles laid down in the judgment
5. The Tribunal, after hearing both the parties, cited abovecan beapplied in thegiven
referred to section 12A(1)(b) of the Act, factsand circumstances. In thiscontext
wherein it ismentioned that in order to claim wenotethat, inthejudgment citedabove
exemption u/s.11, the assessee has to get the i t was observed that procedural
accounts audited as well as obtain the audit requirement for filing the audit report
report intheprescribedformfromthechartered wasfulfilled by theassesseebeforethe
accountant which isto befiled along with the completion of the assessment. But the
return of income. Admittedly, in the present facts of the case on hand are different
case, theassesseehasnot filed form10B along insofar theaudit report wasfiled by the
with the return of income and the same was assessee after the completion of the
also not fi l ed til l the compl eti on of the assessment framed under section 143(3)
assessment order aswell asappellateorder by of the Act. In this regard we note that
thelearned CIT (Appeals). Of course, theaudit the assessment remainspending if any
report was obtained on 5th September 2014 appeal is pending before the higher
much before the date of filing the return of forum. In other words, if any appeal is
income by the assessee, and thus, the audit pending either before the ld. CIT-A or
report intheprescribed formwaspreparedwell beforetheITAT which transpiresthefact
in timebut it wasfiled belatedly. that theassessment ispending.Inholding
so wedraw support and guidancefrom
6. The Tribunal, thereafter, held that act of the the judgment of Hon’ble Gujarat High
assesseeto filetheaudit report duly signed by Court i n case of CI T vs. M ayur
the chartered accountant i s a procedural Foundation reported in 274 ITR 562,
requirement and the court has held that the wherein it washeld asunder:
assesseecannot bedeniedthebenefit for which
it is entitled in the event of any procedural Thus, the proceedi ngs before the
contraventionspecifiedunder theprovisionsof Tribunal are meant to correctly assess
theAct. TheTribunal relied, for thispurpose, thetax liability of an assessee: If thisbe
onthejudgment of Hon’bleGujarat HighCourt so, i t fol l ows that the assessment
i n case of CIT vs. Gujarat Oi l & All ied proceedi ng cannot be sai d to be
Industries reported i n 201 ITR 325. The
Tribunal, thereafter, held asunder:

Ahmedabad Chartered Accountants Journal November, 2022 425

Unr epor ted Judgments Assesseehasfiled incometax return with
full relianceput on professional person
completeand ispending till theappeal andfurther suchprofessional personhas
isheard and disposed of by theTribunal also not guided properly while filing
and the order of the Tribunal is given income tax return hence due to this
effect to by the assessing authority by assessee has paid tax which otherwise
computing thecorrect tax liability of an not required to pay by them as per
assessee. In other words, whether an provision of incometax Act, 1961.
assessee i s requi red to pay tax or
becomesentitled to a refund, would be After that assessee is received notice
ascertained by the assessing authority under secti on 143(2) for scr uti ny
after giving effect to the order of the assessment and onreceipt of suchnotice
Tribunal. they have contacted to di fferent
professional person and on verification
12.3 Admittedly, the appeal was pending of records by new professional person
before the ITAT at the time when the hasguidedthemthat theyareentitled to
audit report inform10B wasfiledwhich exemption under section 11 of Income
transpires that the assessment has not TaxAct, 1961. Hencethisclaimhasbeen
reached to the finality and therefore put first timewhilereplyingtoAOduring
principlelaiddown by theHon’bleHigh scrutiny assessment proceeding.
Court of Gujarat in the case of CIT vs.
Gujarat Oil & Allied Industries(Supra), But actuallyAOhasinformedthat hehas
that therequirement for filing theaudit not power toallowfreshclaimotherwise
report isaprocedural requirement, can than revised return hence he has not
be appl i ed i n the gi ven f acts and allow claimof exemption under section
circumstances. Therefore, thebenefit for 11 of IncomeTax Act, 1961.
which theassesseeisentitled cannot be
denied. 12.5 The above contention raised by the
assessee before the learned CIT-A has
12.4 Beforeparting, theabovefinding given nowherebeendoubtedby theauthorities
by us is dehors that there was some below. Thus, thecumulativeeffect from
reasonable cause which prevented the thereadingof theabovefactsrevealsthat
assessee in filing the prescribed audit there was lack of guidance on the part
report within the time permitted under of theassesseeby thetax professionals.
theprovisionsof law.Theonusliesupon Thus, in theevent of any disallowance
the assessee to justify the reasonable of thebenefitsavailableto theassessee,
causefor delayed filing theaudit report. it will causeunduehardship to it in the
In thisregard, wenotethat theassessee givenfactsandcircumstances. Thusafter
despitebeing eligiblefor theexemption considering the factsin totality, we set
under section 11 of theAct, haspaid the asidethe finding of the learned CIT-A,
taxesof Rs.3,79,027.00only. Thus, from anddirect theAOtoallow theexemption
thefact of making thepayment of tax, it under section 11 of theAct. Hence the
is transpired that the assessee was not ground of appeal of the assessee is
properly guidedby thetax consultant and allowed.
this contention was duly raised by the
assesseebeforethelearnedCIT(A). The 13. In the result, the appeal filed by the
relevant extract of thecontention of the assesseeisallowed.”
assessee before the learned CIT(A) is
reproduced asunder: hhh

426 Ahmedabad Chartered Accountants Journal November, 2022

Controversies

CA. K aushik D. Shah
[email protected].

I ssue In view of Section 37(1) read with Explanation 1,
any expenditure expended for the purpose of
Whether consent feesor settlement feespaid to businessor professionshall beallowedasdeduction
SEBI is allowable as an expense under section under section 37(1) if it is not incurred for any
37(1)? purposewhich isan offenceor prohibited by law.
Henceconsent feesor settlement feespaid to SEBI
Pr oposition should not beallowed asdeduction under section
37(1) if the same is considered as penalty for
As per Section 37(1), any expenditure expended infraction of thelaw.
for thepurpose of businessor profession shall be
allowedasdeduction under section37(1) if it isnot Incaseof DCIT VsM/sPrabhudasLiladhar Private
incurred for any purpose which is an offence or Limited, ITAT-Mumbai, AO had levied penalty
prohibited by law. It isproposed that asconsent or under section 271(1)(c) ontheground that payment
settlement feespaidisnot relatedtopenalty imposed paid by assesseeto SEBI under consent order was
by SEBI but for settlement of dispute, legal in thenatureof thepenalty for infractionof thelaw
expenditure and other administrative charges of and washit by Explanation 1 to section 37(1) and
SEBI thereforeconsent feesor settlement feespaid hencewasnot an allowablebusinessexpenditure.
to SEBI should be allowed as an expense under
section 37(1). View in favour of theProposition

View against theproposition Thepayment of settlement chargesisneither inthe
natureof protectionmoney, nor extortion, nor hafta
Extract of therelevant provision isasunder nor bribe. Such payment is made for the purpose
of the business or profession carried on by the
AccordingtoSection 37(1) of theIncome-Tax Act, assessee – to save the time, cost and hassle of a
1961, Any expenditure(not being expenditureof long winded l itigation as also to protect the
the nature described in sections 30 to 36 and not reputation of the company. Also the consent or
being in the nature of capital expenditure or settlement feespaidisnot relatedtopenalty imposed
personal expenses of the assessee), laid out or by SEBI but for settlement of dispute, legal
expended wholly and exclusively for thepurposes expenditure and other administrative charges of
of the business or profession shall be allowed in SEBI without admitting or denying the charges.
computing theincomechargeableunder thehead HenceSettlement charges/ consent feepaid by the
“Profitsand gainsof businessor profession”. assesseeto SEBI not being in thenatureof penalty
should beallowed asexpenseunder section 37.
Explanation 1- For the removal of doubts, it is
hereby declared that any expenditureincurred by In the case of ITO Vs Reliance Share & Stock
an assesseefor any purposewhich isan offenceor BrokersPvt. Ltd, (supra), (ITAT-Mumbai), it was
which isprohibited by law shall not bedeemed to observed that:
havebeen incurred for thepurposeof businessor
profession and no deduction or allowanceshall be Continued to page438
madein respect of such expenditure.

Ahmedabad Chartered Accountants Journal November, 2022 427

Judicial
Analysis

AdvocateTushar Hemani
[email protected]

L aw with r espect to r aising of an additional before the authorities) which bears on the tax
ground before Tr ibunal liability of the assessee, whether the Tribunal
hasjurisdictionto examinethesame?”
28 CIT v. S. Nelliappan [1967] 66 ITR 722
(SC) 5. Under section254of theIncome-taxAct, 1961,
theTribunal may,after givingboththepartiesto
In hearing an appeal theTribunal may give leave theappeal an opportunity of being heard, pass
to theassesseeto urgegroundsnot set forth in the such ordersthereon asit thinksfit. Thepower
memorandum of appeal, andindeciding theappeal of theTribunal in dealing withappealsis, thus,
theTribunal isnot restrictedtothegroundsset forth expressed in the widest possible terms. The
in thememorandum of appeal or taken by leaveof purposeof theassessment proceedingsbefore
the Tri bunal . The Tri bunal was, therefore, thetaxing authoritiesisto assesscorrectly the
competent to allow the assessees to raise the tax liability of an assesseein accordancewith
contention relating to thecash creditswhich was law. If, for example, as a result of a judicial
not made the subject-matter of a ground in the decisiongivenwhiletheappeal ispendingbefore
memorandum of appeal. It cannot be said that in theTribunal, it isfoundthat anon-taxableitem
accepting thecontention of theassesseesthat the is taxed or a permissible deduction is denied,
cash creditsrepresented incomefrom thebusiness we do not see any reason why the assessee
withheld from thebooks, theTribunal madeout a shouldbepreventedfrom raisingthat question
new caseinconsistent with theassessee’sown plea. beforetheTribunal for thefirst time, so long as
In any event the Tribunal is not precluded from therelevant factsareonrecordinrespect of that
adjusting thetax liability of theassesseein thelight item. We do not see any reason to restrict the
of its findings merely because the findings are power of theTribunal under section254only to
inconsistent withthecasepleadedby theassessees. decidethegroundswhich arisefrom theorder
of the Commissioner (Appeals). Both the
29 National Thermal Power Co. Ltd. v. CIT assesseeaswell astheDepartment havearight
[1998] 97 Taxman 358 (SC) to file an appeal/cross-objections before the
Tribunal.Wefail toseewhy theTribunal should
4. The Tribunal has framed as many as five bepreventedfromconsideringquestionsof law
questionswhilemakingareferencetous. Since arisinginassessment proceedingsalthoughnot
theTribunal hasnot examined theadditional raised earlier.
grounds raised by theassessee on the merits,
we do not propose to answer the questions 6. In thecaseof JuteCorpn. of IndiaLtd. v. CIT
relating to themeritsof thosecontentions. We [1991] 187 ITR 688, thisCourt, whiledealing
reframe the question which arises for our with thepowersof theAAC, observed that an
consideration in order to bring out the point appellate authority has all the powers which
which requiresdetermination moreclearly. It theoriginal authority may havein deciding the
i s as fol l ows : question beforeit subject to therestrictionsor
limitations, if any, prescribed by thestatutory
“Where on the facts found by the authorities provisions. In the absence of any statutory
below aquestionof law arises(thoughnot raised

428 Ahmedabad Chartered Accountants Journal November, 2022

Judicial Analysis

provision, theappellateauthority isvestedwith 30 Shilpa Associates v. I TO [2004] 135
all theplenary powerswhich thesubordinate Taxman 277 (Raj asthan)
authority may havein thematter. Thereis no Thisappeal under section 260A of theIncome-tax
goodreason tojustify curtailment of thepower Act directed against theorder of Tribunal, Jodhpur,
of theAACinentertaininganadditional ground dated5thJune, 2002, wasadmittedfor adjudication
raised by theassesseein seeking modification of thefollowing substantial question of law :
of theorder of assessment passed by theITO.
ThisCourt further observed that theremay be “Whether the Tribunal was right in holding that
several factorsjustifying theraising of anew additional ground can be raised in the memo of
plea in an appeal and each case has to be appeal after theexpiry of theperiod of limitation?”
considered on itsown facts. TheAAC must be
satisfied that theground raised wasbonafide 2. Therelevant factsfor adjudication of theabove
and that thesamecould not have been raised
earlier for good reasons. The AAC should substantial questionof law arethat theappellant
exercise his discretion in permitting or not preferred an appeal beforetheTribunal against
permitting the assesseeto raise an additional the j udgment of the CIT(A) dated 17th
groundinaccordancewithlaw and reason. The November, 2000. The appeal was presented
same observations would apply to appeals within thelimitation. During thependency of
beforetheTribunal also. appeal, theassesseefiledanapplicationseeking
permission to amend the existing grounds of
7. Theview that theTribunal isconfined only to appeal to raiseadditional grounds. Theprayer
issues arising out of the appeal before the isextracted asfollows:
Commissioner (Appeals) takes too narrow a
view of thepowersof theTribunal - vide, e.g., “The appellant seeks your honour’s kind
CIT v. Anand Prasad [1981] 128 ITR 388/ 5
Taxman 308 (Delhi), CIT v. Karamchand permission to frame one ground as against 7
Premchand (P.) Ltd. [1969] 74 ITR 254 (Guj.) grounds of appeal raised in the memo of
and CIT v. Cellulose Products of India Ltd. appeal. The amended ground reads as under
[1985] 151 ITR 499/[1984] 19 Taxman 278 as Sl. No. 1 :
(Guj.) (FB). Undoubtedly, the Tribunal will
havethediscretion toallow or not allow anew 1. ‘That onthefactsand circumstancesof the
ground to beraised. But wheretheTribunal is case, the authori ti es bel ow erred i n
only required to consider a question of law
arising from the facts which are on record in applyingthenet profit rateof 12.5per cent
theassessment proceedingswefail to seewhy asagainst disclosed at 10.32 per cent.’
such a question should not be allowed to be
raised when it is necessary to consider that In addition to above. I seek your honour’s
question in order to correctly assess the tax ki nd permi ssi on to rai se f ol l owi ng
liability of an assessee. additional groundsof appeal asSl. No. 2 :

8. Thereframed question, therefore, isanswered 2. That on thefactsand in thecircumstances
i n the affirmative, i .e., the Tri bunal has of thecase, theauthoritiesbelow erred in
jurisdictiontoexamineaquestionof law which not allowing the following deductions
arisesfromthefactsasfoundby theauthorities from theprofit estimated by applying net
below and having abearing onthetax liability
of theassessee. Weremand theproceedingsto profit rate: Rs.
the Tribunal for consideration of the new (a) Depreciation 97,062
groundsraised by theassesseeon themerits. (b) Interest to third party 17,600
(c) Provident fund 1,05,009
2,19,671.”

3. TheTribunal permitted theamendment of
original groundby raisingamendedground
No. 1. Thepermission to raisetheadditional
groundasgroundNo. 2wasrejectedasthe
Tribunal wasof the view that a new/fresh

Ahmedabad Chartered Accountants Journal November, 2022 429

Judicial Analysis

issuecan beraised only within theperiod agreement with theview expressed by the
prescribed for filing the appeal and not MadrasHigh Court.
beyond that. The reasoning given by the 6. For the foregoing reasons, we allow the
Tribunal was that such a new/fresh issue appeal and set aside the judgment of the
pertainstothechangeof natureof appeal. Tribunal, Jodhpur, dt. 5th June, 2002. The
4. The view expressed by the Tribunal is permission toraisetheadditional grounds
obviously erroneous. Thereasoningof the before the Tribunal in ITA No. 123/Ju./
Tribunal istotally misplaced. It iswithinthe 2001 (Assessment year 1997-98) i s
domain of theTribunal to permit or not to granted. Theappellant shall carry out the
permit afreshissueto beraised at thetime amendment in the memo of appeal. The
of arguments, but it cannot declineto raise Tribunal shall pass a fresh order after
by way of amendment in the memo of hearing theparties. Cost easy.
appeal onthegroundof limitationfor filing
theappeal. An appeal against theorder of 31 P.V. Doshi v. CI T [1978] 113 ITR 22
CIT(A) before the Tribunal can be filed (GUJ.)
under section 253 of the Income-tax Act,
1961. Sub-section(3) of section 253 of the Even thealternativeground of finality of thisorder
Income-taxAct, 1961, providesasunder : of theTribunal suffersfrom thesameinfirmity, as
“Every appeal under sub-section(1) or sub- the Tribunal has failed to notice this material
section (2) shall befiled within sixty days distinction between amereprocedural provision
of the date on which the order sought to which could be waived and such jurisdictional
beappealedagainst iscommunicatedtothe provision or a mandatory provision enacted in
assesseeor totheCommissioner,asthecase publ ic i nterest whi ch coul d not be wai ved,
may be:” because by consent no jurisdicti on could be
5. Thus, thelimitation isprovided only for conferred on the authority unlessthe conditions
thepurposeof filing theappeal. Oncethe precedent werefirst fulfilled. In DasaMuni Reddy
appeal is filed within the limitation, the v. Appa Rao, AIR 1974 SC 2089, 2092, such a
memo of appeal can be amended as per question of waiver was examined also in the
thepracticeandprocedure. Theview does context of thebar of estoppel or of resjudicata.At
not requireany precedent to support. If it page 2091, i t was poi nted out that want of
i s requi red, even f or the cosmeti c jurisdiction must bedistinguished from irregular
purposes, thelearned counsel hasreferred or erroneous exercise of jurisdiction. If there is
to adecision of theMadrasHigh Court in want of jurisdictionthewholeproceeding iscoram
J.D.B. Sri nivasan v. Secretary to the non judice. Theabsenceof acondition necessary
Government of Tamil Nadu [1994] 92 to found thejurisdiction to makean order or give
STC 631. In thesaid case, theCourt held a decision deprives the order or decision of any
that sincethefiling of additional grounds concl usive effect. (See Hal sbury’s Laws of
was a part of the continuous process of England, 3rd edition, volume15, paragraph 384).
filing the appeal and the appeal having Further proceeding at page2092, it was pointed
been filed in time, theadditional grounds out that just asthecourtsnormally did not permit
which could not be put forth before the contracting out of theActs so there could be no
lower authority or along with theappeal, contracting in. A status of control of premises
could be raised subsequent to the filing under theRent Control Actscould not beacquired
of theappeal. TheCourt further observed either by estoppel or by res j udi cata. Thei r
that there was no time-limit for filing Lordshipsin termsheld that theprinciplewasthat
additional grounds, nor wastherearigid neither estoppel nor res judicata could give the
rule in that regard. We are in complete court jurisdiction under theActswhich thoseActs
said it was not to have. Therefore, bar of res
judicataor estoppel or waiver werenegatived in

430 Ahmedabad Chartered Accountants Journal November, 2022

such acasewherethepleawasoutsidetheambit Judicial Analysis
of theRent Control Act, for thesimplereason that
as one could not confer jurisdiction by consent, reference being a competent reference, the writ
similarl y one coul d not by agreement waive petition was dismissed. The order of the High
exclusivejurisdiction of the rent courts over the Court wasafinal judgment which terminated the
buildingsin question. It istruethat section 254(4) independent writ proceeding. It washeld at page
in termsprovidesthat saveasprovided in section 1186 that that order having not been appealed
256 (which providesfor thereferenceto theHigh beforetheSupremeCourt, it had becomefinal and
Court), orders passed by theAppellate Tribunal it wasno longer open to thepartiesto raiseaplea
on appeal shal l be f i nal . That f i nal i ty or of jurisdiction in appeal against the subsequent
conclusiveness could only arise in respect of award given by the Industri al Tribunal after
orders whi ch are competent orders wi th exercising jurisdiction which the Tribunal was
jurisdiction andif theproceedingsof reassessment permitted to exercise by the order of the High
arenot validly initiated at all, theorder would be Court. Thesewerecompetent proceedingsand the
avoid order asper thesettled legal position which independent writ proceeding was also finally
could never haveany finality or conclusiveness. terminatedand, therefore, thisfinal order precluded
If theoriginal order iswithout jurisdictionit would the parties from reagitating the same question
beonly anullity confirmed in further appeals. If before the Industrial Tribunal. Their Lordships
theessential distinction isbornein mind in such distinguished theearlier decision in Satyadhyan
cases when there is such defect of jurisdiction Ghosal v. Smt. Deora-jin Debi,AIR 1960 SC 941,
because the conditions to found jurisdiction are where the questi on had ari sen about the
absent, theTribunal also would besuffering from applicability of section 28 of theCalcuttaThika
the same defect and it coul d not confer any Tenancy Act, 1949, and the plea having been
jurisdiction on theIncome-tax Officer by making rejected by themunsif trying asuit, revision, the
the remand order, because of the settled legal High Court had held that operation of section 28
principlethat consent could not confer jurisdiction of the Act was not affected by the subsequent
when j uri sdi ction coul d be created onl y by amendment Act and thecasewasremanded to the
fulfilment of the condition precedent as in the munsif for disposal according to law. After the
present case. Therefore, no question of finality of final decree was passed by the munsif and the
the remand order could ever arise in the present appeal finally cameto theSupremeCourt, it was
context, if themandatory conditionsfor founding held by the Supreme Court that the order of the
jurisdiction for initiating reassessment proceeding High Court holding section 28 to be applicable
wereabsent. Thisistheview in Commissioner of could not operateasresjudicatain appeal before
Income-tax v. Nanalal Tribhovandas[1975] 100 theSupremeCourt, becausetheHigh Court’sorder
ITR 734 (Guj), agreeing with the Madras view of remand was merely an interlocutory order,
that there would be no such finality by remand which did not terminatetheproceeding pending
becauseconsent could not confer jurisdiction, and before the munsi f and whi ch had not been
so, such objection in regard to thevalidity of the appealed from at that stage. Consequently, in the
noticeunder section 34 could beraised beforethe appeal from thefinal decreeor order it wasopen
AppellateAssistant Commissioner. to theparty concerned tochallengethecorrectness
Thelearned standing counsel in this connection of the High Court’s decision. The two special
marshalledin aidthedecision in NorthernRailway featureswhich distinguished that casewere: one,
Co-operative Credit Society Ltd. v. Industrial that theorder of theHigh Court which wasrelied
Tribunal, Rajasthan, AIR 1967 SC 1182; 31 FJR upon to invoke the principle of res judicata was
511, which could hardly beinvoked in thepresent an interlocutory order, and the other, that it was
case. TheretheHigh Court in writ jurisdiction had made in a pending suit which as a result of that
held at theearlier stagethat thedisputein question order did not finally terminate. In thepresent case
was an industrial dispute and, therefore, the al so the remand order di d not terminate the
proceedingsat theearlier stage. Infact, noquestion

Continued to page433

Ahmedabad Chartered Accountants Journal November, 2022 431

FEMA CA. Savan Godiawala
Updates [email protected]

Rupee Dr awi ng A r r angement - Investment related transactions with effect from
November 07, 2017, January 16, 2019, andAugust
15 Enabling Bhar at Bill Payment System 22, 2022, respectively. It has now been decided to
(BBPS) to pr ocess bringuniformityinimpositionof LSFacrossfunctions.
cr oss-bor der inbound Bill Payments The following matrix shall be used henceforth for
calculationof LSF, wherever applicable:
As per A.P. (DIR Series) Circular No. 120 dated
April 10, 2014 on ‘Rupee Drawing Arrangement Sr. Typeof Repor ting delays L SF
– Direct to Account Facility’, in terms of which,
foreign inward remittancesreceived under Rupee No. Amount
Drawing Arrangement (RDA) can be transferred
to theKYC compliant beneficiary bank accounts (I NR)
through electronic mode, such as, NEFT, IMPS,
etc. subject to the procedure and condi tions 1 Form ODI Part-II/ APR, 7500
mentioned therein.
As announced in Para 6 of the Statement on FCGPR (B), FLA Returns,
Developmental and Regulatory Policiesissued on
August 05, 2022, it has been decided to allow Form OPI, evidenceof
foreign inward remittances received under the
Rupee Drawi ng Arrangement (RDA), to be investment or any other return
transferred to theKYC compliant bank account of
thebiller (beneficiary) throughBharat Bill Payment which doesnot captureflows
System (BBPS), subj ect to the condi ti ons
mentioned in Para3 of A.P. (DIR Series) Circular or any other periodical reporting
No.120 datedApril 10, 2014.
Thedirectionshavebeenissuedunder Section10(4) 2 FC-GPR, FCTRS, Form ESOP, [7500 +
and Secti on 11(1) of the Foreign Exchange
Management Act, 1999 (42 of 1999) and are Form LLP(I), Form LLP(II), (0.025%
without prejudicetopermissions/approvals, if any,
required under any other law. Form CN, Form DI, Form InVi, ×A×n)]
Sour ce:RBI/2022-23/115A.P. (DIR Seri es)
Circular No. 14, dated September 15, 2022 Form ODI-Part I, Form ODI-
For ful l text r efer :https://rbi .org.in/Scri pts/
BS_CircularIndexDisplay.aspx?Id=12386 Part III, Form FC, Form ECB,

16 LateSubmission Feefor reportingdelays Form ECB-2, Revised Form
under For eign Exchange M anagement
Act, 1999 (FEM A) ECB or any other return which
TheLateSubmission Fee(LSF) wasintroduced for
reportingdelaysinForeignInvestment (FI),External capturesflowsor returnswhich
Commercial Borrowings (ECBs) and Overseas
capturereporting of non-fund

transactionsor any other

transactional reporting

Notes:

a) “n” is the number of years of delay in submission
rounded-upwards to the nearest month and
expressed up to 2 decimal points.

b) “A”istheamount involved in thedelayed reporting.
c) LSFamount isper return. However, for any number

of FormECB-2 returns, delayed submission for each
LRN will be treated as one instance for the fixed
component. Further, ‘A’for any ECB-2 return will
be the gross inflow or outflow (including interest
and other charges), whichever ismore.
d) Maximum LSF amount will be limited to 100 per
cent of ‘A’ and will be rounded upwards to the
nearest hundred.

432 Ahmedabad Chartered Accountants Journal November, 2022

e) Where an advice has been issued for payment of FEM A Updates
LSF and such LSF isnot paid within 30 days, such
advice shall be considered as null and void and The above provi sions shall come into effect
any LSF received beyond this period shall not be immediately for thedelayedfilingsmadeonor after
accepted. If theapplicant subsequently approaches the date of this circular. All other provisions of
for payment of LSF for thesamedelayed reporting, reporting under FEMA remain unchanged.
the date of receipt of such application shall be
treated as the reference date for the purpose of The‘Master Direction – Reporting under Foreign
calculation of “n”. Exchange Management Act, 1999’and ‘Master
Direction- External Commercial Borrowings,Trade
f) The facility for opting for LSF shall be available Credits and Structured Obligations’ are being
up to three years from the due date of reporting/ updated to reflect thechanges.
submission. The option of L SF shall also be
availablefor delayed reporting/submissionsunder Thedirectionshavebeenissuedunder section10(4)
the Notification No. FEMA 120/2004-RB and and 11(1) of the Foreign Exchange Management
earlier corresponding regulations, up to threeyears Act, 1999 (42 of 1999) and arewithout prejudice
from the date of notification of Foreign Exchange topermissions/approvals, if any, requiredunder any
Management (Overseas Investment) Regulations, other law.
2022.
Sour ce:RBI/2022-23/122A.P. (DIR Seri es)
g) In case aperson responsiblefor any submission or Circular No. 16, dated September 30, 2022
filing under theprovisionsof FEMA, neither makes
such submission/filing within the specified time For ful l text r efer :https://rbi .org.in/Scri pts/
nor makessuch submission/filing along with LSF, BS_CircularIndexDisplay.aspx?Id=12393
such person shall be liable for penal action under
the provisionsof FEMA, 1999. hhh

Continued fr om page 431 Judicial Analysis

of any bar of res judicataeven at the subsequent of jurisdiction got finally settled, which could not
stage of the same proceeding could arise in the be agitated unless the assessee had come in the
present casefor thesimplereason that theoriginal referenceto thiscourt at that stage. TheTribunal’s
order is said to be without jurisdiction. The first view wasalso incorrect that in restoring thecase
condition in invoking any bar of resjudicataisthe to thefileof theIncome-tax Officer by theearlier
condition about the competence of the court. order, the only point left open was in respect of
Similarly, theprovision of finality in thisrelevant addition of Rs. 19,421 on meritsand that thelegal
provision in section 254(4) could also not be or jurisdictional aspect whether thereassessment
attracted i n such a case, where the questi on proceedings were legally initiated was not kept
admittedly, went to theroot of thejurisdiction and open. Even on the third question the Tribunal’s
if that contention wasupheld, it would havemade view was erroneous that even though this point
all the proceedings of reassessment totally void went to theroot of thejurisdiction and wasa. pure
and without jurisdiction. As per the aforesaid question of law, merely because the point was
settled legal position such a point could not be initially raised and not pressed when the matter
waived and therecan beno question of theearlier was taken up before the Appell ate Assi stant
remand order operating asa final order, because Commissioner, it could bewaived and it could not
if such ajurisdictional point could not bewaived, bereagitated. Therefore, inview of thesettledlegal
even the fact of passing of the remand order by position our answers on questions Nos. 1 and 2
theTribunal could not confer jurisdiction on the arein thenegative, whileour answer on question
Income-tax Officer, if theconditionsto found his No. 3 is in the affirmative, that is to say, all the
jurisdiction wereabsent. questions are answered against the revenue and
i n favour of the assessee. The reference i s
Therefore, if this settled position was borne in accordingly disposed of and the Commissioner
mind, theTribunal’sview was clearly erroneous shall pay thecostsof theassessee.
that the matter became final when the Tribunal
passed theearlier remand order so that thispoint hhh

Ahmedabad Chartered Accountants Journal November, 2022 433

GST and VAT CA. Bihar i B. Shah CA. Vishr ut R. Shah
Judgments [email protected] [email protected]
and Updates
Case L aws:
[I] I mpor tant CaseL aws: (High Cour t)
TCI Freight v. Asstt. Commissioner (ST)
[1] Issue: [2022) 143 taxmann.com 115 (M adras)

Reply to SCN to be consider ed even if sent Facts:
by post and not through portal: MadrasHC: Thevehicleand goodstransported in vehicle
were detained by department. The owner of
Case L aws: goodsdidn’t respondto show-causenoticeand
Asia (Chennai) Engineer ing Company (P) thereafter theorder demandingtax and penalty
L td. v. Asstt. Commissioner (ST) (FAC) waspassed. Thepetitioner filed writ petition
[2022] 143 taxmann.com 126 (M adr as). to quash thedetention order. It submitted that
the vehicle and goods shall be released as it
Facts: had filed an appeal and madepre-deposit.
The Show Cause Notice (SCN) was issued
against the petitioner by the department for Held:
revoking theerroneousrefundclaim. It replied The Hon’ble High Court noted that Section
to the SCN which was sent by the post. The 107(6) of CGST Act, 2017 requi res the
department didn’t consider thereply asit was appellant to makeapre-deposit and thereafter
not sent through theportal and passed adverse the recovery proceedings for the remaining
order. Thepetitioner filed writ petition against amount shall bestayed. Thequestionof release
the same and contended that any adverse of goods wil l have to be decided by the
decision to be passed only after hearing the appellate authority upon the strength of case
petitioner. made out by assessee including prima facie
case, financial stringency and balance of
Held: convenience. But, it can’t besaidthat theseized
goods would become liable to be released
The Hon’ble High Court noted that the only automatically after payment of pre-deposit.
objectionof theDepartment wasthat thepostal/
physical reply had not been considered, since [3] Issue:
it wasnot sent through portal. The petitioner
had sent a detailed representation whi ch No violati on of natur al j usti ce for not
received by the department and it was not pr oviding cer tified copiesof mater ial seized
disputed. Thiswasacasefor erroneousrefund if not r equested by assessee: HC :
and the petitioner would deserve personal
hearing so that his objection can be heard. Case L aws:
Therefore,theCourt directeddepartment tohear Umar I ron M ar t v. Asstt. Commissioner
objections and give opportunity of personal [2022] 143 taxmann.com 130 (Andhr a
hearing to thepetitioner. Pr adesh).

[2] Issue: Facts:

Seized goods ar e not liable to be r eleased Thepetitioner wasengaged in thebusinessof
automatically on payment of pr e-deposit trading in Iron Tubes and Iron Sheets. The
amount : HC : department conductedinspectioninthepremises

434 Ahmedabad Chartered Accountants Journal November, 2022

GST and VAT - Judgements and Updates

of petitioner and seized unaccounted 36 slips High Court has observed that there are no
whichrevealedthat thepetitionerdidnot account disputed question of facts arise and it is a
for 475.165 Tons of Iron Tubes/Sheets question to be decided on admitted facts for
purchased. The department issued notice and whichnodisputeor enquiry intofactual aspects
passedorder levyingpenalty onthepetitioner. of thematter iscalled for.
The aforesaid can hardly be a good/valid
Thereafter, thepetitioner requesteddepartment ground to entertain the writ petition under
to furnish certified copies of material seized Article 226 of the Constitution of Indi a
during inspection. It wasfound that someslips challenging the Assessment Order against
were not related to petitioner and some were which a statutory remedy of appeal was
rough estimate slips. It filed writ petition to avai lable. Therefore, the Supreme Court
quashtheorder andcontendedthat if theseslips allowedtheappeal andit washeldthat theHigh
wereprovidedearlier, it would havesubmitted Court ought not to have entertained the writ
objectionsin itsreply. petition and theassesseewasrelegated to prefer
an appeal beforetheAppellateAuthority.
Held: [5] Issue:
The Hon’ble High Court observed that there SCN to beissued within 7 daysof detention
wasnoviolation of principlesof natural justice or seizur e andsnot 7 wor king days: HC:
if certified copies of material seized during Case L aws:
inspection were not furnished by the GST D. K . Enter pr i ses v. Assi stant/Deputy
authoritiesastherewasnorequest for thesame Commi ssi oner (ST ) [ 2022] 143
in petitioner’s reply to Show Cause Notice. taxmann.com 201 (Mad)
Further, thereisno disputethat thepetitioner Facts:
hasaright of Appeal under Section 107 of the Thevehicle and goods of the petitioner were
CGST Act, 2017 and theassessment involved intercepted andthedepartment issuedphysical
questionsof fact which can’t bedecidedin writ verification report. Thereafter, no notice was
petition. Therefore, thewrit petition wasliable issued within the time frame provided under
to bedismissed. Section 129 of GST Act, 2017 and no order of
[4] Issue: detention waspassed. Thepetitioner filed writ
HC not to enter tain wr it petitions under petition against the action as no order of
Article226 against appealableorder s: SC : detention hasbeen passed without which the
Case L aws: consignment would not allowed to beretained
State of M adhya Pr adesh v. Commercial by theauthorities, upon interception.
Engineer s and Body Buil ding Co. L td. Held:
[2022] 143 taxmann.com 195 (SC) TheHon’bleHighCourt that therewereserious
Facts: flawsin procedurefollowed in theinstant case
TheHighCourt of MadhyaPradeshentertained as neither order of detention nor SCN was
the writ petition under Article 226 of the issued withintimeasprescribedinsection129.
Constitution of Indiaandquashedandset aside TheSCN wasto beissued within 7 daysbeing
the Assessment Order. The revenue feeling clear from amendment brought to clause2(e)
aggrieved and dissatisfied with theimpugned of Circular dated 13.4.2018 videCircular No.
judgment andorder, had filedappeal beforethe 49/23/2018-GST, dated 21.6.2018. Therefore
Apex Court. theCourt held that theprocedurefollowed by
Held: revenuewascontrary tostatutory requirements
The Supreme Court noted that whi l e aswell asinstructionsissued and thus, thewrit
entertaining thewrit petition underArticle226 petition wasallowed.
of the Constitution of India challenging the
Assessment Order denyingtheInput rebate, the hhh

Ahmedabad Chartered Accountants Journal November, 2022 435

Corporate CA. Naveen M andovar a
Law Update [email protected]

SEBI Updates: compositionandtermsof referenceasspecified
by theBoard.
1. Suspension, Cancellation or Sur r ender of
Cer tificate of Registr ati on of a Cr edit The SGC shall comprise of individuals with
RatingAgency: relevant expertisewho can contribute to the
development of SSE. It shall have a
The Securities and Exchange Board of India balanced representation, drawingfromvarious
(SEBI) has come out with the guidelines to categoriesof stakeholderssuch as:-
facilitatetheorderly migrationof credit ratings
of debt securitiesbecauseof thecancellation i. Philanthropic andsocial sectorsincluding
of license of the Brickwork Ratings India, a public / privatesector donors,
credit rating agency.
ii. Non-profit organizations
TheSEBI hasprovided thedetailedprocedure
in order tofacilitateorderly migration of credit iii. Information Repositories
ratingsof listed or proposed to belisted, non-
converti bl e securi ti es, securi ti zed debt iv. Social Impact Investors
instruments, security receipts, municipal debt
securities or commercial paper, and other v. Social Audit Profession / self-regulatory
regulated products pursuant to cancellation, organization for social auditors,
suspension, or surrender of certificate of
regi strati on of a CRA to another SEBI- vi. Capacity Building Fund
registered CRA.
vii. Stock Exchange
For, detailed text, pleaserefer
For, detailed text, pleaserefer
https://www.sebi .gov.i n/l egal /ci rcul ars/oct-
2022/suspension-cancellation-or-surrender-of- https://www.sebi .gov.i n/l egal /ci rcul ars/oct-
certificate-of-registration-of-a-credit-rating- 2022/ gov erni ng-counci l -f or-soci al -stock-
agency_63998.html exchange-sse-_64000.html

[Ci r cul ar No. SEBI /HO/DDHS/DDHS- [Circular No. SEBI /HO/M RD/M RD-RAC-
RACPOD2/P/CI R/2022/140 dat ed 2/P/CI R/2022/141 dated 13.10.2022]
13.10.2022]
3. Block M echanism in demat account of
2. Gover ni ng Counci l f or Soci al St ock clients under taking sale tr ansactions-
Exchange(“SSE”): Clar ification:

As per Regulation 292D of the Regulations, Vide circular no. SEBI/HO/MIRSD/DoP/P/
every Social Stock Exchangeshall constitutea CIR/2022/109 dated August 18, 2022, the
Social Stock ExchangeGoverning Council to hadSEBI madethefacility of block mechanism
have an oversight on its functioning, with mandatory for all Early Pay-In transactions.

In thisconnection, it is clarified by the SEBI
that theblock mechanismshall not beapplicable
toclientshaving arrangementswithcustodians

436 Ahmedabad Chartered Accountants Journal November, 2022

Cor por ate L aw Update

registeredwithSEBI for clearingandsettlement 5. Standar dization of Rating Scales Used by
of trades. Credit Rating Agencies(CRAs):

[Cir cular No. SEBI /HO/M I RSD/DoP/P/ Standardized symbols and their definitions
CI R/2022/143 dated 27.10.2022] have been devised by the SEBI for Issuer
Rating/ Corporate Credit Rating and CRAs
4. Reduct i on i n denomi nat i on f or debt shall report on their compliancewith thesame
secur itiesand non-conver tibleredeemable (as rati fied by their respecti ve board of
prefer enceshar es: directors) to SEBI within onequarter from the
specified date of applicability. This circular
In order to increasetheability of investorsto shall beeffectivefrom 01.01.2023.
access the market for corporate bonds, the
SEBI has reduced the face value and trading Standard descriptors to be used for when an
lot size,whichinturnwill enhancetheliquidity issuer / security isplaced on “RatingWatch”
in thecorporatebond market.
- “RatingWatch with PositiveImplications”
Accordingly, the following amendments are
being made in Chapter V (Denomination of - “ Rati ng Watch wi th Devel opi ng
issuance and tradi ng of Non-converti bl e Implications”
Securities) of theOperational Circular:
- “RatingWatch with NegativeImplications”
1.1. The face value of each debt security or
non-convertible redeemable preference Standard descriptors to be used for when an
share issued on private placement basis issuer / security isplacedon“RatingOutlook”
shall beRs. Onelakh.
- Stable
2.1. Thefacevalueof thelisted debt security
and non-converti bl e redeemabl e - Positive
preference share i ssued on pri vate
pl acement basi s traded on a stock - Negative
exchangeor OTC basis shall beRs. One
lakh. St andar di zed Rat i ng Symbol s and
Definitionsfor I ssuer Rating ar easunder :
The provi si ons of thi s ci rcul ar shal l be
applicable to all issues of debt securities and Rating Definition
non-convertibleredeemablepreferenceshares, Symbol
onprivateplacement basis, throughnew ISINs,
on or after January 1, 2023. AAA I ssuers wi th thi s rati ng are
consideredtohavethehighest degree
Provided that withrespect toashelf placement of safety regarding timely servicing
memorandum which isvalid ason January 1, of debt obligations. Debt exposures
2023, theissuer thereof shall havetheoption to such issuers carry lowest credit
whileraising fundsthrough trancheplacement risk
memorandum, tokeepthefacevalueat Rs. Ten
Lakhsor Rs. OneLakh. Necessary addendum A A I ssuers wi th thi s rati ng are
shall be issued by such issuer to the shelf considered to have high degree of
placement memorandum. safety regarding timely servicing of
debt obligations. Debt exposuresto
[Circular No. SEBI/HO/DDHS/P/CIR/2022/ such issuers carry very low credit
00144 dated 28.10.2022] risk.

A I ssuers wi th thi s rati ng are
considered to haveadequatedegree
of safety regarding timely servicing

Ahmedabad Chartered Accountants Journal November, 2022 437

Cor por ate L aw Update

BBB of debt obligations. Debt exposures C I ssuers wi th thi s rati ng are
to such issuerscarry low credit risk. considered to havevery high risk of
BB default regardingtimely servicingof
B I ssuers wi th thi s rati ng are debt obligations.
considered to havemoderatedegree
of safety regarding timely servicing D Issuerswiththisrating arein default
of debt obligations. Debt exposures or areexpectedto beindefault soon.
to such issuerscarry moderatecredit
risk. Modifiers {“+” (plus) / “-”(minus)} can be
used with theratingsymbolsfor thecategories
I ssuers wi th thi s rati ng are AA to C. Themodifiersreflect thecomparative
considered to havemoderaterisk of standing within thecategory.
default regardingtimely servicingof [Ci r cul ar No. SEBI /HO/DDHS/DDHS-
debt obligations. RACPOD2/P/CI R/2022/146 dat ed
31.10.2022]
I ssuers wi th thi s rati ng are
consideredtohavehighrisk of default hhh
regarding timely servicing of debt
obligations.

Continued fr om page 427 Contr over sies

· Theconsent or settlement feespaidisnot related It washeld that the consent / settlement feespaid
to penalty imposed by SEBI but for settlement by theassesseeunder theconsent order passed by
of di spute, l egal expendi ture and other theSEBI isallowableasbusinessexpenditureunder
admi ni strati ve charges of SEBI wi thout the head “Income from Profits and Gains from
admitting or denying thecharges. Business or Profession and it was held not to be
penalty for an infraction of law withinprovision of
· Also therewasnofinal adjudication ontheissue explanation 1 to section 37(1).
of imposition of penalty by theSEBI. Possibly,
there could have been a situation where SEBI According to section 37(1) read with Explanation
after considering assessee’sexplanation might 1 any expenditureincurred for any purposewhich
havedroppedtheproceedings. Thus, whenthere isan offenceor prohibited by law isnot allowable
isno order passed by theadjudicating authority asdeduction & hencepenalty isalso not allowable
imposing penalty, the settlement charges / as business expense. However the consent or
consent feepaid by theassesseeto SEBI cannot settlement feespaidisnot relatedtopenalty imposed
betreated aspenalty for infraction of any law. by SEBI but for settlement of disputeand henceit
is allowable as business expense under section
Henceonthegroundsmentionedabove, it washeld 37(1).
that thesettlement charges/ consent feepaid by the
assesseeto SEBI not being in thenatureof penalty Even after the decision, the issue is still highly
cannot bedisallowed in termsof Explanation-1 to debatable because provisions of the Act can be
section 37. misinterpreted to thebenefit of theassessee.

Summation In view of above, in my humbleopinion, consent
fees or settlement fees paid to SEBI should be
Decision taken in the case of Reliance Share & allowed asan expenseunder section 37(1).
Stock Brokers Pvt. Ltd, (supra) has set the
benchmark for key matter of thiscontroversy. hhh

438 Ahmedabad Chartered Accountants Journal November, 2022

GujRERA Corner

L and owner s under RERA CA. M anan Doshi
[email protected]
Sincetheinception of theReal Estate(Regulation
and Development) Act, 2016, the authori ties (i) “a person who constructs or causes to be
constitutedthereunder haveshown great toughness constructed an independent building or a
and adaptability in their approach in dealing with building consisting of apartments, or converts
complex issues arising in matters of real estate, an existing building or a part thereof into
wherein multiple parties and stakeholders are apartments, for the purpose of selling all or
involved. Moreoften than not, joint development some of the apartments to other persons and
agreements between landowners and promoters includeshisassignees; or
contemplatecomplex areasharing arrangements,
revenuesharing arrangements, or hybridsthereof, (ii) a person who develops land into a project,
together with adivision of rights and obligations whether or not the person also constructs
pertaining to development of the project. It is in structureson any of theplots, for thepurpose
thiscontext that variousAuthoritieshaveexamined of selling to other persons all or some of the
whether an owner of theland on which areal estate plots in the said project, whether with or
project isproposed to bedeveloped, can in certain without structuresthereon; or
circumstances, beclassified asa‘promoter’.
(iii) anydevelopment authorityor any other public
Under RERA, it is thepromoter of thereal estate body in respect of allotteesof—
project that hastheresponsibility of registeringthe
project with theAuthority and complying with all (a) buildingsor apartments, asthecasemay
the provisions specified thereunder, including be, constructed by such authority or body
completing theproject and handing over units to on landsowned by themor placed at their
the allottees. It is solely the promoter of the disposal by theGovernment; or
registered real estateproject who isliabletorefund
the money or pay interest to the allottees upon (b) plotsowned by such authority or body or
failure to deliver apartments within the time pl aced at thei r di sposal by the
committed therefor; and/or besubject to penalties Government, for thepurposeof selling all
for contravention of the statute. It then becomes or someof theapartmentsor plots; or
essential to understand who will be considered a
‘promoter’of areal estateproject under RERA. (iv) an apex State level co-operative housing
finance society and a primary co-operative
Let usanalyzetheviewstaken by theAuthorities housing society which constructsapartments
in itsvariousordersand circulars, and evaluatethe or buildings for its Members or in respect of
impact of the same on the underlying contracts theallotteesof such apartmentsor buildings;
between thelandownersand developers. or

A “Promoter” hasbeen defined u/s2(zk): (v) any other personwhoactshimself asabuilder,
col oni ser, contractor, devel oper, estate
developer or by any other name or claims to
beacting astheholder of a power of attorney
from the owner of the land on which the

Ahmedabad Chartered Accountants Journal November, 2022 439

Guj RERA Cor ner Further, theGujRERA had issued acircular on 13/
02/2020 stating mandatory conditionswhich shall
building or apartment isconstructed or plot is be compulsorily incorporated in a development
developed for sale; or agreement. The terms which were mandated by
GujRERA areasfollows:
(vi) such other personwhoconstructsanybuilding
or apartment for saleto thegeneral public. a. If at all DA isbeing entered by land ownerson
behalf of power of attorney holders, then such
Explanation.— For the purposes of this clause, POA shall haveto beregistered.
where the person who constructs or converts a
buildinginto apartmentsor developsa plot for sale b. The development rights being transferred
and thepersonswho sellsapartmentsor plotsare includes rights of common area and land on
different persons, both of themshall bedeemed to which project isbeing developed
bethepromotersand shall bejointly liableassuch
for the functions and responsibilities specified, c. Therightsfor permissibleFSI ason dateand
under this Act or the rules and regulations made any FSI availableinfutureanditsrightsshould
thereunder;” betransferred in favour of promoter.

TheGujRERA hasissued acircular dated 23/05/ d. The terms and conditions with respect to
2019 in light of better understanding, working and payment to landowners shall be specifically
implementation of the Act, and the Rules made mentioned.
thereof, in regard to theaforesaid definition of the
term “promoter”. The circular mandates the e. TheDA shall precisely mention rights, duties
following: andresponsibilitiesof landowner andpromoter.

a. Onlineapplication for project registration shall TheGujRERA hadcomeupwiththeabovecircular
capturethefact that theproject isproposed on in order ensurepromotersandlandownersareduty
land made available for the project through bound to each other and thereby in theinterest of
development agreement. Thedigital captureof alloteescompletetheproject on time.
thisdatawill enablemonitoringof theproject,
specifically withrespect to“Landcost incurred Further acareful readingof theaforesaid definition
and paid” in CA certificate. of promoter and other relevant provisions of the
Act andtheAuthority’sexperienceof implementing
b. A joint affidavit begiven by thepromoter and theAct haverevealed that:
landowner for ensuring fulfilment of their
respectivecommitmentsunder thedevelopment Number and categor iesof pr omoter s
agreement, including participation by the
landowner inexecutionof deedsof conveyance (i) There is no bar in the Act that there can be
and titletransfer to theallottees. only onepromoter of aproject. By virtueof
section 13 of theGeneral ClausesAct, 1897,
c. Landownersliability shall belimitedtotransfer theterm‘promoter’wouldinclude‘promoters’.
of titleof land; whilepromoter shall beliable Therefore, withinthemeaning of section 3 of
for fulfilling his obligations for the entire theAct, therecan bemorethan onepromoter
projects. for aproject.

Thiscircular makesonething clear that when land (ii) Section 2(zk) of theAct mentionstwo broad
owner and promoter aredifferent and land owner categoriesof promoters— (1) theperson(s)
isonly selling development rightsto thepromoter, whoconstruct or develop theproject or cause
hisresponsibility shall belimited to transfer of title it to beconstructed or developed; and (2) the
of land and its conveyance of titles in favour of person(s) whomarket or sell apartments, plots
allotees. Therefore, it will benecessary to refer the or buildingsin theproject; and, for thesake
termsand conditionsof development agreements of convenience, they canbecalled‘developer-
between land owner and promoter.

440 Ahmedabad Chartered Accountants Journal November, 2022

promoter(s)’ and ‘sel l er-promoter(s)’, Guj RERA Cor ner
respectively.
Statusand r esponsibility of co-pr omoters:
Theextent of liability of differ ent pr omoter s:
(vi) There are no provisionsin theAct made for
(iii) By virtueof Explanation to section 2(zk) of co-promoter(s) and, thus, the term ‘co-
theAct, promotersof boththecategories, i.e., promoter’is alien to theAct. Since the Act
the devel oper-promoters and the seller- does not recognize them, co-promoters can
promotersin aproject, arepromotersjointly not be hel d liable for the functions and
liablefor thefunctionsandresponsibilitiesof responsibilitiesof promoter providedunder the
promoter provi ded under the A ct. Act. As the promoter is required to simply
Accordingly, wecan also say that whenever wri te the name of co-promoter i n the
therearetwo or morepromotersin aproject, application for registration of project and the
all such promoters, irrespective of their co-promoter is neither made a co-applicant
category, are jointly liable for the functions nor ishis consent taken, at timesthe person
and responsibilities of promoter provided namedasaco-promoter isnot evenawarethat
under theAct. heisaco-promoter of theproject.

(iv) SinceExplanation to section 2(zk) of theAct (vii) Becausetheterm ‘promoter’isnot defined to
has used the term ‘jointly liable’ and not include‘co-promoter(s)’, under section37 of
‘jointly and severally liable’, ‘thedefendant the Act, directions can be issued by the
for the original act will be held responsible Authority to the promoter, but not to a co-
for thewholedamages’, i.e., ‘each party will promoter of the proj ect. Thus, the co-
beliableup to thefull amount of therelevant promoters, if any, in aproject aretherejust in
obligation’. It implies that if there is an name; and, as copromoters, they can not be
agreement amongst promoters whi ch held liable for any of the functions and
delineates their respective functions and responsibilitiesof promoter providedunder the
responsibilities, the liability for failing to Act. But, whether named asaco-promoter or
discharge a function or responsibility of not, if aperson iscovered by thedefinition of
promoter provided under theAct will be on promoter given in theAct, theAuthority can
the promoter who is responsible for that treat him as a promoter and hold him liable
f uncti on or responsi bi l i ty under such for the functions and responsibili ties of
agreement. promoter provided under theAct.

(v) Should therebeadisputeamongst different L andowner — not a necessar y pr omoter :
promoters as to the liability for a particular
act, it isamatter they haveto settleamongst (viii) In i ts order dated 17.10.2019 made i n
themselvesat anappropriateforumoutsidethe Complaint No. RAJ-RERA-C-2018-2403
A ct, as the A uthori ty does not have “ShakuntalaNarendrasingh Chouhan versus
jurisdiction to adjudicateupon such inter se Modest InfraLimited”, theAuthority held as
matters of the promoters. So far as the under: The learned counsel of the non-
Authority isconcerned, in theabsenceof an complainant has also mentioned that the
agreement or understandingamongpromoters complainant hasnot madetheco-promoter/
or a decision of the competent forum as to landowner a party to the complaint. The
their respectiveresponsibilities, theAuthority agreement for sale is executed between the
will hold that promoter liable for an act of buyer, the bui l der and the l andowner.
commission or omission who, in itsopinion, Landowner is also equally liable for refund
wasresponsiblefor that act. ashesharestherevenuereceived in theproject
and in the event of any refund the same is
recoverablefromthelandowner aswell....The

Ahmedabad Chartered Accountants Journal November, 2022 441

Guj RERA Cor ner landowner as such is not included in the
definition of ‘promoter’given in theAct, he
non-complainant’sprayer that thelandowner need not necessarily benamed or treated asa
should also bemadeaparty to thecasesince promoter if hehasno rolein theproject either
the agreement for sale is executed between asadeveloper-promoter or asaseller-promoter.
the builder, the buyer and the landowner, is
not tenable. Thelandowner appearsto have (ix) M any a ti me, l andowner enters i nto
put his signatures on the agreement for sale development agreement simply becauseheis
only asaconfirming party [not asanecessary not willing totakethetroubleor risk involved
party] . Otherwi se, the agreement i s in hehimself acting asadeveloper or forming
substantially between the promoter and the joint venturewith adeveloper; and declares
allotteeandwhat part of thesaleconsideration therein that he will have nothing to do with
istransferred to thelandowner istheinternal the management of constructi on,
arrangement between the promoter and the development,marketingor salesof theproject
landowner, governed by the development andthat hisroleintheproject will beconfined
agreement executed between them, and not to providing land for theproject. Hedoesnot
by the agreement for saleexecuted with the haveasharein theareadeveloped for salein
allottee. We may observe here that the Act theproject and even if he hasit is meant for
onl y knows the promoter and al l the hisown useor hedoesnot intend to sell it at
obligationstotheallotteesprovidedunder the least until completion of theproject. That is
Act are of the promoter (or of real estate to say that he has no role reserved for him
agent), not of thelandowner or theso-called either asadeveloper-promoter or asaseller-
‘co-promoter’. In fact, there is no provision promoter. Thus, when in the development
of and no place for co-promoter in theAct. agreement thelandowner isentirely disowning
Though a column on co-promoter has been thefunctionsand responsibilitiesof promoter
provided in the Form of application for provided under the Act, naming him as a
registration, it appearstohavebeen provided promoter would serve no purpose and only
only for thepurposesof information, and not createavoidableconfusion.
to lessen the obligations of the promoter as
provided under theAct... simply by virtueof (x) Themere fact that thelandowner isentitled
being a landowner one does not become a to receiveacertain part of thesaleproceeds
promoter. Under the Act, it is the duty of (grossrevenues) of theproject doesnot make
promoter, and promoter alone, to deliver the him apromoter. Thedeveloper-promoter uses
flat to an allottee within the time and in thesaleproceedsof theproject also to pay to
accordance with the terms stipulated in the vari ous suppl i ers under the respecti ve
agreement f or sal e. The obl i gati on of agreementsentered into with them.A part of
refunding theamount to an allotteeisalso of thesale proceedsof theproject may also be
the promoter, and promoter alone. Under going to the Banks and other financiers
section 37 and section 38 of the Act, the towardsinterest and repayment of their loans
Authority haspowersof giving directionsto asper theagreement entered into with them.
thepromoters, theallotteesand thereal estate When noneof theserecipientsof apart of the
agents, andto no others. Therefore, whatever sale proceeds of the project are named or
directionsaretobegiveninthepresent matter treated asapromoter, thelandowner also can
have to be directed at the promoter or the not betermed asapromoter simply becausea
allottee, andnot thelandowner or anyoneelse. part of thesaleproceedsor grossrevenuesof
theproject isbeing paid to him.
Thebasic point made in theabovedecisions
of theAuthority isthat alandowner isn’t ipso Continued to page457
facto a ‘promoter’ under the Act. Since

442 Ahmedabad Chartered Accountants Journal November, 2022

Capital
Markets

CA. K ar an Vor a
[email protected]

Summar y: Key Merger andAcquisition and PE dealsinclude
Zoomcar merger wi th a Speci al Purpose
IMF said that while global economy is facing a Acquisition Company (SPAC) called Innovative
slowdown,Indiaisslatedtobecomeoneof thefastest International AcquisitionCorp(Thereisasmall note
growingmajor economiesin2022and2023.United on SPACs) and Torrent Pharmaceuticalsacquiring
Nation’sclimatechangeconference, Cop27 started 100% stakein Curatio Healthcare.
inEgypt.Sensex crossed60K andNifty crossed18K
as global cues are turning out to be favorable for
IndiaandFIIsarebecomingnet investors.

Economic Update:

- IMFsaid that theGlobal economicactivity isexperiencing a
broad-based slowdown with inflation higher than seen in
decades.

- Thecost-of-living crisis, tightening financial conditionsin
most regions, Russia’sinvasion of Ukraine, andthelingering
COVID-19 pandemic all weigh heavily on theoutlook.

- However IMF commented that Indiahasbeen doing fairly
well in 2022 and is expected to continue growing fairly
robustly in 2023.

- Fed hawkishness remained an issue for the markets. After
the75 basispointsratehikeinSeptember, theFed now looks
all set to hikeratesby another 75 basispointsin November
2022 and 50 basispointsin December 2022.

COP27:

- The2022 United NationsClimateChangeConference(UNFCCC), more
commonly referred to as Conference of the Parties of theUNFCCC, or
COP27, is the 27th United Nations Climate Change conference for
governmentsto agreeon stepsto limit global temperaturerise.

- Under the 1992 UNFCCC, every country is treaty-bound to avoid
dangerous climate change and find ways to reduce greenhouse gas
emissionsglobally in an equitableway.

- Global temperatures have risen by 1.1C and heading towards 1.5C, to
prevent this194 countriessigned theParisagreement in 2015.

Ahmedabad Chartered Accountants Journal November, 2022 443

Capital M ar kets

- Finance haslong been the talking point at thisconferences. In 2009, developed countries committed
$100Bn ayear todevelopingcountriesto helpthemreducetheemissionsandpreparefor climatechange.
Thetarget hasbeen missed and pushed to 2023.

- TheCOP27 Egyptian presidency aimsto radically acceleratethedelivery of countries’climatepledges,
as pressuremounts on developed countriesto provide moreclimate finance and on large developing
countriesto moveaway from polluting fuelslikecoal.

Trendsin Secondar y M ar kets:

- The BSE Sensex crossed 60,000 and NIFTY crossed level of 18000 in October. The Sensex was up
3,319.67 pointsor 5.78% at 60,746.59, and theNifty wasup 917.85 pointsor 5.37% at 18,012.20.

- Themarketschoseto ignorethehigh frequency pressuresof inflation and interest ratesand focuson the
long term potential of theIndiastory.

- FPIsstartedout sellingaggressively in equitiesin thefirst half of month, but turned into net buyersin the
second half. FPIsalso showed alot of enthusiasm in investing in theIPOs, both asanchor investorsand
asQIB investors.

- Q2 resultswerein full swing along with theconcern over costs.Acrosstheboard, companieshaveseen
robust top linegrowth and thegainsfor exporting companiesfrom theweak rupeedollar equation.

Equity M arkets Sep-22 Oct-22 % Change

BSE Sensex 57,426.92 60,746.59 5.78%

Nifty 50 17094.35 18012.20 5.37%

BSE 500 23,642.46 24,589.55 4.01%

BSE Healthcare 23,340.50 23,924.28 2.50%

BSE IT 27,488.42 28,930.65 5.25%

BSE FMCG 16,180.06 16,131.19 -0.30%

BSE Metal 18,015.22 19,024.82 5.60%

444 Ahmedabad Chartered Accountants Journal November, 2022

Pr imar y M arket Update: Capital M ar kets

Therewereas2 main board IPOsin October, 2022 M er ger s and Acquisitions(M & A) and Pr ivate
against 3 main board IPOsin September, 2022 of Equity (PE) key deals:
there were as 2 mai n board IPOs of Tracxn M & A: Z oomcar M er ges wi t h I nnovati ve
TechnologiesLimited and ElectronicsMart India I nternational Acquisition Cor p
Limited in October, 2022 against 3 main board Tr ansacti on:
IPOs in September of Dream Folks, Tamilnad - TheProposed Transaction between Innovative
MercantileBank andHarshaEngineers. Therewere
12 SME IPOs in October as against seven SME and Zoomcar is structured as a merger of an
IPOsin September 2022. Innovativesubsidiary apublicly traded Special
Purpose Acquisition Company (SPAC) and
Tracxn Technologies Limited, provides market Zoomcar.
intelligence data for private companies. The - The Proposed Transaction values Zoomcar at
company’s gl obal database and customi zed an impli ed pro forma enterprise val ue of
solutionsandfeaturesallow itscustomerstosource approximately $456million.
andtrack companiesacrosssectorsandgeographies - The merged enti ty wi l l be l i sted on the
to address their requirements. The Rs 309 Crore NASDAQ Stock Exchange, with i ts name
IPO wasentirely and offer for sale(OFS) of shares changed to Zoomcar HoldingsInc.
by promotersandinvestorsand wassubscribed two About Zoomcar :
timesat theclose. It wasin apricerangeof Rs75-
80 ashare. TheIPO opened at again of 17.75%. - Founded i n 2013 and headquartered i n
Bengaluru, India, Zoomcar isanonlineplatform
ElectronicsMart IndiaLimited isaretail chain of that allowsusersto book self-drivablecarsfor
store in consumer durabl e electroni cs in the short or long tripson rental basis.
Southern India. Theissueconsistsof afresh issue
of equity sharesof Rs500 Croresfor CAPEX and - Zoomcar is the leading marketplace for car
general purposes. Thepricerangefor theoffer was sharing across India, Southeast Asia and the
at Rs56-59per share. Thecompany received71.93 MENA region, with over 25,000 carscurrently
timessubscription and listed at Rs. 90 per share, a availableto guestsusing itsplatform.
strong premium of around 50%.
About I nnovative I nter national Acquisition
FundsM obilization by Corpor ates(Cr or e) Cor p.:
- Innovativeisablank check company commonly
Par ticulars Aug-22 Sep-22
referred as a Speci al Purpose Acquisiti on
I. Equity I ssues 7,866 6,839 Company (SPAC) incorporated as a Cayman
a. IPOs(i+ii) 875 2,414 Islands exempted company for the purpose of
i. Main Board 840 2,125 effecting a merger, , share purchase or similar
ii. SME Platform 34 289 busi ness combi nati on wi th one or more
b. FPOs 00 businesses.
c. Equity RightsIssue 71 298
d. QIPs/IPPs
e. Preferential Allotments 2,000 607
II . Debt I ssues 4,921 3,519
a. Debt Public Issues 45,177 83,088
b. PrivatePlacement of Debt
280 602
44,897 83,088

Total FundsM obilized (I +I I ) 53,043 89,926

Ahmedabad Chartered Accountants Journal November, 2022 445

Capital M ar kets Mahindra & Mahindra, Ford Motors amongst
othersandhadraised$92millionequity inseries
- Innovative conducted a successful IPO in E round by SternAegisVentureslast year (Nov
October of 2021, in whichit raised$235 million 2021) to atotal fund raiseof over $300 million.
with investment thesis to find an acquisition
target in the sectors of consumer technology, - This merger will make Zoomcar a publically
healthcare, information technology servicesand traded company wi th common stock on
enterpri se sof tware as a servi ce. NASDAQ at an enterpri se val ue of $456
Million.
Rationale:
About SPAC:
- Zoomcar wi l l the use proceeds from the
transaction wi th Innovative to accel erate - SPACs - Speci al Purpose A cqui si ti on
technology development and new market entry Companies— are publicly-traded investment
whilealso continuingto invest in growth across vehicles that raise funds via an initial public
exi sting markets. offering (IPO) in order to complete a targeted
acquisition.
- Zoomcar isbacked by number of PE fundsand
fami ly offices incl udi ng Sequoia Capi tal,

Mechanism: 13, 2022, SPACs have raised $9.6 billion. In
2020, SPACs accounted for morethan 50% of
- SPACs are al so known as “Bl ank Check new publicly listed U.S. companies.
Companies”, ashell corporation listed on stock
exchange. - Some of the better known companies to have
becomepublicly listedby mergingwith aSPAC
- SPACsraisefundslargely from public investors are di gi tal sports company Draft Ki ngs;
for specific purposeof M& A and with set time aerospace company Virgin Galactic; energy
frameof 18 to 24 months. storage innovator Quantum Scape; and real
estateplatform Open door Technologies.
- If SPACdoesnot mergewithinthetimeline, then
it will be liquidated and all the funds will be Benefitsof SPAC:
returned to theinvestors.
- SPACsallow acquired (target) companiesto go
Performance: publicwithout goingthroughthetraditional IPO
Process, oftenat better termsthantraditional IPO
- In2019, SPACIPOsraised$13.6billionin2019, would.
morethan four timesthe$3.5billionthey raised
in 2016. Interest in SPACs increased in 2020 - SPAC founders have the abil i ty to create
and 2021, with asmuch as$83.4 billion raised additional SPACs.
in 2020 and $162.5billion in 2021.Asof March

446 Ahmedabad Chartered Accountants Journal November, 2022

Capital M ar kets

- SPACs offer faster capital-raising relative to - Incorporated in 2005, Curatio has a strong
privatefund-raising. Theaccelerated execution presencein thecosmetic dermatology segment
and liquidity timeline is typically within 24 with a portfolio of over 50 brands. It has
monthsfrom IPO to M& A. operations in India, Nepal, Sri Lanka, and the
Philippines.
PE: Tor r ent Phar maceuticalsL td acquir es
100% stake in Cur atio Healthcar e I ndia Pvt. - Curatio’s portfolio consists of leading brands
L td. such as Tedibar, Atogla, Spoo, B4 Nappi, and
Permite, which are ranked among the top 5
Tr ansacti on: brandsin their covered market.

- Torrent Pharmaceuticals Limited (“Torrent”), - Curatio was backed by PE funds including
oneof theleading PharmaCompaniesin India, Sequoia,Anicut, and ChrysCapital.
announcedtheacquisitionof CuratioHealthcare
India Pvt. Ltd. (“Curatio”), a manufacturer of Rationale:
Skincareproducts.
- Torrent pharmasaid that theacquisition offers
- Torrent hasentered into adefinitiveagreement Torrent theopportunity to enhanceitspresence
to acquirea100% equity stakein Curatiofor Rs in dermatology with a differentiated portfolio
2,000 Crores. The consideration includes Rs. and isastrong strategic fit.
115 Crores(on thedateof signing) of cash and
cash equi val ents in the acqui red business - Curatio’srevenuefor FY22 wasRs224 Crores
indicating an Enterprise Value of Rs. 1,885 which is expected to cross Rs. 275 Crores in
Crores. FY23.

About Tor rent Phar maceuticalsL td.: - Dermatology accounts for 82% of Curatio’s
revenue. Wi thi n dermatol ogy, cosmeti c
- Torrent Pharmaceuticals is ranked 8th in the dermatology isaleading contributor. Over the
Indian Pharmaceutical Market (IPM) and is last decade, cosmetic dermatology asatherapy
among theTop 5 in the therapeutics segments has delivered an 18% CAGR which is 1.6x of
of Cardiovascular, Gastro-Intestinal, Central the IPM CAGR.
Nervous System, and Vi tami ns M i neral s
Nutritionals. - Torrent Pharma will add a Field Force of 600
Medical representatives and a distribution
- Torrent has7manufacturingplantsout of which network of 900 stockists.
4 plantsareapproved by theUSFDA.
- With this deal, Torrent Pharma will enter the
- Company has a strong focus on R& D with a league of top 10 players in the dermatology
team of morethan 800 scientists. segment and will betheleader in thecosmetic
dermatology space.
- Torrent’s turnover in FY22 was more than Rs.
8,500 Crores, with group revenueof morethan - Earlier in May 2022, Torrent Pharmaacquired
22,500 Crores. four therapy segment brandsfrom Dr. Reddy’s
LaboratoriesLtd. (DRL).’Styptovit-E’, ‘Finast’,
About Cur atio Healthcar eI ndia Pvt. L td.: ‘Finast-T’, and ‘Dynapress’ to strengthen its
presencein thetherapy segment.

A cknowl edgements: RBI Bul l eti n

(www.bul l eti n.rbi .org.i n), SEBI

(www.sebi.gov.in), NSE (www.nseindia.com),

BSE (www.bseindia.com)

hhh

Ahmedabad Chartered Accountants Journal November, 2022 447

From CA. Pamil H. Shah
Published [email protected]
Accounts
Act, 2013, in the manner state therein. High end
Proper ty, Plant and Equipment – I ND AS 16 operatingsuppliesacquiredprior tocommencement
Annual Repor t 2021-22 of the hotel operati ons and openi ng of new
restaurants/ outletsareconsideredasapart of fixed
ThePhoenix M illsL imited assets and are depreciated over a period of three
yearson straight linemethod.An asset’scarrying
Proper ty, Plant and Equipment : amount i s wri tten down i mmedi atel y to i ts
recoverableamount if theasset’scarrying amount
Freehold land iscarried at historical cost. Capital is greater than its estimated recoverable amount.
work in progress, and all other items of property, Gains and losses on disposals are determined by
plant and equipment arestatedat historical cost net comparing proceedswith carrying amount. These
of accumulated depreciation and accumulated areincluded in thestatement of profit or loss.
impairment losses, if any. Historical cost includes
expenditure that is directly attributable to the Unitech Limited
acquisitionof theitem. Such cost includesthecosts
for long-termconstructionprojectsif therecognition Proper ty, plant and equipment & depreciation:
criteriaaremet. Subsequent costsareincluded in
the asset’s carrying amount or recognised as a Property, plant and equipment (PPE) arestated at
separate asset, as appropriate, only when it is cost, net of accumul ated depreci ati on and
probablethat futureeconomic benefitsassociated accumulated impairment losses, if any. Theinitial
with theitem will flow to thegroup and thecost of cost of PPEisthecost of acquisitionor construction,
the item can be measured reliably. The carrying inclusive of freight, erection & commissioning
amount of any component accounted for as a charges and any directly attributable costs of
separateasset isderecognised when replaced.All bringing anasset toworkingconditionand location
other repairsand maintenancearechargedtoprofit for its intended use, including borrowing costs
or loss during the reporting period in which they relating to thequalified asset over theperiod up to
areincurred thedatetheasset isready tocommencecommercial
production. The carrying amount of a PPE is de-
Depreciation methods, estimated useful livesand recognized when no futureeconomic benefitsare
r esidual value: Depreciation on other fixed assets expected from itsuseor on disposal. Theestimated
(excluding land and lease land in perpetuity) is useful life of assets, as prescribed in Part C of
provided on written down valuemethod asper the ScheduleII of theCompaniesAct, 2013, isasunder:
useful lifespecifiedinscheduleII totheCompanies Asset Useful Life Building 60 Years Plant and
Act, 2013, inthemanner statetherein. Theresidual Machinery 15YearsFurnitureand Fittings10Years
valuesarenot morethan 5% of theoriginal cost of Office equipments 05 Years Vehicles 10 Years
theasset. Theassets’residual valuesanduseful lives Computers 03 Years The PPE acquired under
and method of depreciation are reviewed, and financeleases, if any, isdepreciatedover theasset’s
adjusted if appropriate, at theend of eachreporting useful lifeor over the shorter of theasset’suseful
period. Insomeof theSubsidiaries,theDepreciation life and the lease term, if there is no reasonable
is provided on thestraight linemethod asper the certainty that theCompany will obtain ownership
useful lifespecifiedinscheduleII totheCompanies

448 Ahmedabad Chartered Accountants Journal November, 2022