Journal November 2023

Ahmedabad Chartered Accountant Journal November, 2023 473 Volume : 47 Part : 08 November, 2023 E-mail : [email protected] Website : www.caa-ahm.org Ahmedabad Chartered Accountant Journal In this Issue Contents Author's Name Page No. - caaahmedabad Journal Committee Shah Rajni Mangaldas Kataria Ashok Chhugamal Shah Karan Dhirenbhai Sheth Prakash Bharatkumar Chairman Convener E. C. Representative Past President Members Shah Rutvij Pankajkumar Desai Maulik Sharadbhai Choksi Nirav Rameshbhai Shah Jignesh Jaswantlal Shah Monish Suketu Shah Rushabh Mayank - FEAR CA. Deepal Choksi 475 Editorial CA. Rajni M. Shah 476 In Memoriam CA. Pradyumna N. Shah 477 From the President CA. Shivang Chokshi 478 Articles Embracing Rupee's Global Odyssey CA. Swati Panchal 479 Interplay between Section 68 and Section 56(2)(viib) of the Income-Tax Act, 1961 CA. Manthan S. Khokhani 481 Direct Taxes Glimpses of Supreme Court Rulings Adv. Samir N. Divatia 483 From the Courts CA. Jayesh Sharedalal 484 Tribunal News CA. Yogesh G. Shah & 492 CA. Aparna Parelkar Unreported Judgements CA. Sanjay R. Shah 498 Judicial Analysis Advocate Tushar Hemani 500 Controversies CA. Kaushik D. Shah 505 FEMA & International Taxation FEMA Updates CA. Dr. Savan R. Godiawala 507 Indirect Taxes GST and VAT Judgments and Updates CA. Bihari B. Shah & 508 CA. Vishrut R. Shah Advance Ruling under GST CA. Monish S. Shah 510 Corporate Law & Others Corporate Law Update CA. Naveen Mandovara 516 GujRERA Corner CA. Manan Doshi 521 Capital Markets CA. Karan P. Vora 524 From Published Accounts CA. Pamil H. Shah 529 From the Government CA. Ashwin H. Shah & 532 CA. Kunal A. Shah Association News CA. Mayur H. Modha & 534 CA. Prakash B. Nandola ACAJ Crossword Contest 536

474 Ahmedabad Chartered Accountant Journal November, 2023 Attention Members / Subscribers / Authors / Contributors 1. Journals are carefully posted. If not received, you are requested to write to the Association's Office within one month. A copy of the Journal would be sent, if extra copies are available. 2. You are requested to intimate change of address to the Association's Office. 3. Subscription for the financial year 2023-24 is ` 1500/-, single copy ` 150/- (if available). 4. Please mention your membership number in all your correspondence. 5. While sending Articles for this Journal, please confirm that the same are not published / not even meant for publishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication, nor will they be sent back. 6. The opinions, views, statements, results published in this Journal are of the respective authors / contributors and Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it necessarily concur with the authors / contributors. 7. Life Membership/Annual Membership and Other Fees F. Y. 2023-24 Amount in ` Basic GST Total 1. Admission Fees 500 90 590 2. Annual Membership Fees a. If Paid Prior to june 30 of each financial year : i. In case of membership (of ICAI) for a period of less than or equal to five years 600 - 600 ii. In case of membership of (ICAI) for a period more than five years, 750 - 750 b. If paid after june 30 of each financial year : i. In case of membership (of ICAI) for a period of less than or equal to five years, 720 - 720 ii. In case of membership of (ICAI) for a period of more than five years 900 - 900 3. Life Membership Fees i. In case of membership (of ICAI) for a period of less than or equal to five years 4000 720 4720 ii. In case of membership of (ICAI) for a period more than five years 7500 1350 8850 4. Brain Trust Membership Fees a. Individual Membership Fees i. In case of membership (of ICAI) for a period of less than or equal to five years 800 144 944 ii. In case of membership of (ICAI) for a period more than five years 1200 216 1416 b. Flexi Firm/Corporate Membership Fees*** 2400 432 2832 *** Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting. Additional Representatives can be nominated @1200/- plus GST per participant subject to maximum of 20 participant per firm Published By CA. Rajni M. Shah, on behalf of Chartered Accountants Association, Ahmedabad, 2nd Floor, Darshak, 14/A, Swastik Society, Opp. Shrey Hospital, Navrangpura, Ahmedabad - 380 009 Phone : +91 79 40392596 While every effort has been made to ensure accuracy of information contained in this Journal, the Publisher is not responsible for any error that may have arisen. Professional Awards The best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and 'Allied Laws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by experts in the profession. Articles and reading literatures are invited from members as well as from other professional colleagues. Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]

Ahmedabad Chartered Accountant Journal November, 2023 475 Fear is the primal emotion that often steers our decisions,thoughts and actions. The Fear can work in both ways being limiting or being expansive. Understanding fear in our lives plays a crucial role for personal and professional growth. What exactly is FEAR: It is a natural response to “perceived threat”. It triggers “flight and fight” response preparing our body and mind to either confront or escape the danger. While we are all aware of physical fears, what I believe more dangerous are the emotional and psychological fears. While fear can protect us, it can also limit our personal growth, hinder opportunities and lead to many disorders. Fear can stop us to go out of our comfort zone, and that is where millions of opportunities are created. We get stuck by “What Ifs” , not trying/creating something new because of the fear of FAILURE. That I think is the biggest fear of all. The anxiety of not meeting the expectations or falling short of goals can be overwhelming, however understanding and addressing this fear is very important in moving forward. To address the same we should view failure as a learning experience rather than a judgement , Accepting failure will help us analyze it and get to know our mistakes for future improvements. It is important to set practical and realistic goals. Emphasize should be made on continuous effort and not only on strength or intelligence. Focus should be on doing your best rather than doing it perfect because “perfection” is very subjective and FEAR CA. Deepal Choksi [email protected] can lead to false expectations and false failures. Practising mindfulness like meditation, yoga or pursuing a hobby will also help to remove fear as such things reduces anxiety and increases acceptance power of an individual. Sharpening the saw as Stephen Covey says,should be made an integral part of routine to be fresh and accept things. Discussing the idea of fear of failure or its possibility or actual failure with loved ones serves as a relief too. Talking about failure and asking for support should not be considered demeaning rather should be one of the first steps in dealing with Fear of failure or any fear as a matter of fact. Taking small steps outside your comfort zone and gradually building confidence and acceptance is the key to embrace the fear of failure in our lives. Always remember fear of failure is natural emotion but it doesn’t have to dictate your way of working or living. We need to remember what Sir Winston Churchill said “Success is not final, failure is not fatal: It is the courage to continue that counts”. ❉ ❉ ❉

476 Ahmedabad Chartered Accountant Journal November, 2023 It is with deep sorrow that we announce the passing away of Shri. P N Shah who was a luminary in the field of accountancy and taxation and one of the founding members of Manubhai & Shah LLP. With over seven decades of dedication to the profession, he has left behind an indelible legacy in the realm of accountancy & and tax expertise. As a Chartered Accountant, ICWA, and DCT, Shri. P N Shah embarked on his illustrious journey as a consultant contributing his acumen to various organizations across diverse industries. His comprehensive knowledge and extensive experience in taxation spanned both domestic and international landscapes, earning him recognition as a Bheeshmapitamaha of the accounting profession. Throughout his distinguished career, Shri. P N Shah served in leadership roles with prestigious institutions such as The Institute of Chartered Accountants of India, Bombay Chartered Accountants' Society, Western India Regional Council of the Institute and The Chamber of Tax Consultants. His leadership skills were instrumental in bringing these organizations to achieve greater heights. A prolific author and speaker, Shri. P N Shah generously shared his insights through books like "Method of Accounting u/s. 145 of I.T. Act – Accounting Standards applicable to Non-Corporate Entities" and "Kar Vivad Samadhan Scheme – 1998," published by BCAS. His lectures and articles covered a broad spectrum of subjects, including Corporate Taxation, Personal Taxation, Estate Planning, Amendments in Tax Laws, Accounting Standards, Internal Audit, Education and training, and Professional Ethics. It was he who had initiated the process of introduction of section 44AB for the Tax Audit in the Income Tax Act which provided new opportunities for the Chartered Accountants for expanding their practice besides providing the tax department ready instrument for easy assessment on routine matters enabling them to concentrate on more important issues. Shri. P N Shah believed in knowledge sharing to empower others. His guiding roadmaps and proficient leadership at Manubhai & Shah LLP have left an enduring impact on the firm and the professionals he mentored. His dedication to the profession can be gauged from the fact that till his last breath at the age of 94 years, he was actively engaged in professional work; a true ‘karmayogi’ indeed. In mourning his loss, we remember Shri. P N Shah as a stalwart in the world of accounting and taxation whose contributions and leadership will be dearly missed. Our condolences are with his family, friends, and colleagues during this difficult time. ❉ ❉ ❉ In Memoriam Late Shri P. N. Shah

Ahmedabad Chartered Accountant Journal November, 2023 477 Free Free Free Over the span of last decade, one term has captured our minds and that is ‘Revdi Culture’. In order to win elections and amass the general votes, the political parties have started to give freebies to the people at large because everyone is aware of the “Free Free Free” mentality of general population. Broadly speaking, while this culture was largely prevalent in southern part of the country over the years, one IITian turned politician deserves the credit to ride this wave and make it rampant across the country only to be picked up by all other parties to keep up with the competition. Despite the other parties having a choice to take up a different path, they chose to walk on the same path in the fear of losing the public vote. While development and appeasment were the election narratives in the past two General Elections, it now seems to have been losing its charm against the new normal of “Revdi Culture”. Even the currently concluded state elections show that people have started losing their wisdom and intelligence and are blind folded by the freebies thrown at their faces. However, it is now feared that this culture, if it expands, can lead to a dangerous situation whereby instead of helping the needy, the political parties at large will be donating to the greedy. The situation of the remotely placed people is quite sorrowful as they are yet to fulfill their basic need of Roti, Kapda and Makaan whereas the already stable people are enjoying the Revd is in form of loan waivers and free electricity. As a result, the rich keeps on becoming richer and the poor keeps on getting poorer. Also the Revdis are not in essence ‘Free’ but have a nasty impact on the state exchequer and thereby submerging the state into debt. If the political parties keep of distributing these freebies at par, the real benefit of these freebies keep of fading away. It is therefore essential to clearly distinct necessity from freebies and make sure that the Government continues to provide its support in what is necessary for the people. While welfare schemes are a must for the upliftment of the needy, the Government should strive more for promoting more such schemes rather than writing off the bad loans of industrialists and friends. Just as over consumption of Revdis results in ill health, over consumption of this freebies culture will deteriorate the financial health of the state and the country at large. The question therefore remains as to whether any political party can have the courage to take the path less travelled and bell the cat? The Hon. PM in his last many addresses has been vocal about the negative impacts of the growing Revdi culture in the country and therefore it is high time for the citizens to be aware of the long term impacts of such scheme rather than be blinded by the “Free Free Free” culture which looks good in the short term. Also, will it be too much to expect the Hon. Apex Court to intervene in such a situation particularly when it has been poking its nose in almost every other matter suo motu. Though it is not a part of its duty but it would be appropriate for the Supreme Court to intervene in the matter in order to protect the interest of the country and its citizens in the long run. Lastly, let us conclude by brainstorming in deciding what is sweeter, Hunger or Revdi.. ❉ ❉ ❉ CA. Rajni M. Shah Editorial [email protected]

478 Ahmedabad Chartered Accountant Journal November, 2023 Respected Members Wishing you all A Very Happy and Prosperous New Year. I understand that giving New Year wishes after almost a month of Diwali may be stale but it is always a good omen to start the new year with happiness. CAA celebrated Diwali with the gathering held at Ratnamani Farm on 22.11.2023 which was a huge success with attendance of approximately 400 people. It was a historic event as we had presence of our very own CA Aniket Sunil Talati, President ICAI along with Vice President ICAI CA Ranjit Agrawal and galaxy of Central Council and Regional Council Members of ICAI. The members enjoyed housie game and sumptuous dinner along with live folk music from various street artists. We also launched a book on Goods and Service Tax – A Ready Referencer by CA Parth Joshi. The topic of GST is ever evolving with multiple notifications and updation of law. The book is an effort from the association to help members have a first hand information compiled and ready for use. The soft copy of the book is distributed to all members free of cost with a motive to disseminate knowledge to the fraternity. The content is very engaging in form of charts and I am confident that this book will be an asset. The association had also organised a three day workshop on Information Technology which had received tremendous response. The members enjoyed learning many new tools which help in their day to day professional life. I am sure that members in Diwali break would have got a good quality time with their family members and are now back to the routine office work as the deadlines in form of litigation, GSTR 9/9C would be falling in December. We are also marching towards the end of another calendar year and it is time to take stock of the Year 2023 and how it has treated you and more importantly how you have treated yourself! It is very important to look to the past to understand and plan your future. The future of the country in terms of the economic development has taken a rampant phase and the nation is running towards a US$ 5 trillion economy by 2025 becoming the world’s third largest economy. As auditors, with introduction of Social Stock Exchange and certification by ICAI on Social Audit, a sea of professional opportunities reck on wherein the business community along with the auditors can impress upon the need to keep in check the impact on society while achieving such economic milestones. India in its nascent stage can be a front runner for the world to adopt the policies of social audit and guide the world to achieve performance without creating an adverse social impact. As auditors we will have lot of responsibilities in this field and at association we will try to bring knowledge and opportunities to members to the best of our ability. 15th December is CA Association Foundation Day and we have organised a Half Day Seminar on 16.12.2023 wherein we will be launching the Journal Website. The website will be a treasure chest of all the articles published in our journal for past 2 decades. It will help our members access these articles with ease. The seminar also has lectures by Sr. Adv. Tushar Hemani and Adv. Uchit Sheth. There will also be a panel discussion on Capital Market with session chairman being our Past President CA Yamal Vyas. I appeal to all members to take part in this seminar as we will be having limited seats. Looking forward to a wonderful time. Thank you! ❉ ❉ ❉ From the President From the President From the President CA. Shivang Chokshi [email protected]

Ahmedabad Chartered Accountant Journal November, 2023 479 In a strategic move set to redefine India’s economic landscape, the Reserve Bank of India (RBI) recently granted permission to banks from 22 countries to establish Special Vostro Rupee Accounts (SVRAs). These countries, ranging from Bangladesh and Germany to the United Kingdom and beyond, are now key players in India’s ambitious venture to facilitate trade settlements in Indian Rupees (INR). Let’s delve into the implications and the progressive outlook that this move brings to India’s economic forefront. Understanding the Mechanism: Under this new arrangement, Indian traders can now conduct payments in INR for all imports. These payments will be credited to Vostro accounts, specialized rupee accounts in Indian banks, held by corresponding banks of partner countries. On the other side, Indian exporters will receive payments from the balances in these designated Vostro accounts. This streamlined process not only simplifies transactions but also opens avenues for surplus rupee balances to be utilized for investments, including Government of India securities. Expanding Horizons: India’s collaborative efforts have extended beyond conventional trading partners. An impactful agreement was inked with Iran, enabling eligible trade transactions using the Indian Rupee. This arrangement fosters seamless trade interactions, showcasing India’s commitment to bolstering economic ties with nations across the globe. Embracing Rupee's Global Odyssey CA. Swati Panchal [email protected] Other nations, including Cuba and Luxembourg, have expressed keen interest in rupee-based trade settlements. This burgeoning trend indicates a growing international acceptance of the INR as a reliable and viable trading currency. India’s Net Import Dynamics: India’s status as a net importer has historically shaped its economic strategies. The declining value of the Indian Rupee against the dollar has been a critical concern. However, this recent move to promote INRbased settlements signifies a strategic shift, empowering Indian businesses and traders to navigate global markets more efficiently. Regional and Global Acceptance: The Indian Rupee has gained acceptance in various nations, including Singapore, Malaysia, Indonesia, Hong Kong, Sri Lanka, the UAE, Kuwait, Oman, Qatar, and the UK. Additionally, it holds legal tender status in Nepal and Bhutan. Central banks of these countries also hold significant Indian assets, further solidifying the INR’s credibility on the international stage. Understanding the Shift: The Reserve Bank of India’s decision last year to allow merchants to trade in INR with other nations laid the foundation for this transformative step. With the recent launch of India’s Foreign Trade Policy (FTP) 2023, a comprehensive strategy aimed at elevating the rupee’s international standing, this move holds strategic importance. It is more than just a financial shift; it’s a diplomatic and economic maneuver designed to bolster India’s global presence.

480 Ahmedabad Chartered Accountant Journal November, 2023 The Mechanism in Action: The operationalization of the Rupee Vostro account by the India International Bank of Malaysia (IIBM) through its corresponding bank in India exemplifies the practicality of this initiative. By enabling direct trade in INR, this mechanism curtails the currency conversion spreads, offering traders tangible benefits. Notably, major global players like Sberbank and VTB Bank from Russia have already initiated the process, highlighting the international interest in this venture. Implications and Opportunities: International Trade and Investment Boost: Streamlining cross-border transactions reduces currency exchange costs, fostering increased international trade and investments. Enhanced transactional efficiency becomes a catalyst for economic growth. Foreign Exchange Reserves Surge: INR’s global recognition might prompt other nations to include it in their foreign exchange reserves, stabilizing both the currency and India’s foreign exchange position. Exchange Rate Dynamics: The value of the INR, relative to major currencies, could experience shifts based on global demand and supply trends, impacting both domestic and international markets. Monetary Policy Transformation: International recognition might necessitate adjustments in India’s monetary policy, as global factors could wield more influence on interest rates and policy decisions. Foreign Investment Magnet: A globally accepted currency enhances India’s attractiveness for foreign investments. Confidence in Rupee-denominated assets may drive increased foreign funding, stimulating economic growth. Trade Balance Shuffle: While a stronger INR can make imports more affordable, it might challenge export competitiveness. A careful balance is essential to sustain trade dynamics. Capital Flows and Volatility: Increased globalization may lead to higher capital flows, presenting opportunities and challenges. Managing these flows is crucial for maintaining financial stability. Financial Market Nexus: A globally accepted INR could bring Indian financial markets closer to the international arena, affecting liquidity and depth within domestic markets. Geopolitical Implications: The acceptance of INR on the global stage can influence international relationships, shaping diplomatic and geopolitical collaborations. Embracing Strategic Transformation: I can say, as India’s currency steps onto the global stage, strategic adaptation becomes paramount. Businesses, policymakers, and financial institutions must align their strategies with these shifts, embracing the opportunities while mitigating challenges. This journey is not just a financial evolution; it’s a testament to India’s resilience and adaptability in an everchanging global economy. Let’s navigate these waters together, shaping a prosperous future for both India and its international partners. ❉ ❉ ❉ Embracing Rupee's Global Odyssey

Ahmedabad Chartered Accountant Journal November, 2023 481 Controversy illustrated M/s. Benami Private Limited had issued 10,000 shares during the year under consideration at a price of Rs. 1000 per share. The face value of the shares was Rs. 10 per share. During the course of the assessment the AO noticed that the fair market value of the shares on the date of issue was Rs. 150 per share. The AO also asked for the details of the subscribers of shares and the source for making the investment. The company failed to prove the identity, genuineness as well as the credit worthiness of the subscribers. The AO therefore proposed to tax the entire amount received u/s. 68 of the Act in the hands of the company and therefore applied tax rate as per Section 115BBE of the Act. The company however argued that the provisions of Section 56(2)(vii)(b) were squarely applicable to the facts of the case and therefore the addition ought to be taxed @ 30% under the provisions of Section 56(2)(vii)(b) of the Act. Advise. Brief Discussion The issue at hand is primarily to decide whether the provisions of Section 68 of the Act would apply over the provisions of Section 56(2)(viib) or vice versa. In a situation where the conditions of both the provisions of the Act are fulfilled simultaneously which provision shall be applied first is the point of discussion. Looking to the scheme of the Act, if the provisions of Section 56(2)(viib) have been violated so to say the company has issued shares at a price exceeding the fair market value, the difference has to be taxed as the income of the company as income from other Interplay between Section 68 and Section 56(2)(viib) of the Income-Tax Act, 1961 CA. Manthan S. Khokhani [email protected] sources. However, if during the course of the assessment proceedings, the company is not able to prove the identity, genuineness or creditworthiness of the shareholders, whether the provisions of section 68 will be attracted so as to tax the company at a higher rate of tax? Or in a situation, can there be a double taxation whereby the assessee shall be subjected to tax under both the provisions of the Act viz. Section 68 as well as Section 56(2)(viib) of the Act? Ideally, the assessee cannot be subjected to double taxation of the same income in view of the express ruling of the Hon. Supreme Court in the case of Jain Brothers Vs. UOI 77 ITR 107 (SC). Whenever the legislature has intended for double taxation, it has expressly enacted the same in the scheme of the Act for instance Section 45(4) and Section 9B. Therefore had the intention of the legislature been to double tax the above scenario there would have been an express provision. The question therefore stands as to how to resolve the conflict between the two provisions and which provision shall be applied first. The difference between both the provisions is that while Section 68 taxes the entire receipt of Share Capital money, section 56(2)(viib) seeks to tax only the premium received. Also while Section 56(2)(viib) makes the receipt taxable at normal rate of tax, section 68 proposes to levy the higher rate of tax of approx. 77%. It is therefore or paramount importance to draw a clear distinction between the applicability of both the provisions.

482 Ahmedabad Chartered Accountant Journal November, 2023 Interplay between Section 68 and Section 56(2)(viib) of the Income-Tax Act, 1961 To start with, let us understand as to whether there is an actual conflict between the applicability of both the provisions or not. Both these sections have been introduced by the same Finance Act 2012 and therefore it cannot be said that there could exist a conflict between these provisions as the Legislature was very well aware of both these provisions which were introduced simultaneously at the same time. The question therefore remains as to what should be applied first. Section 56 looks at the valuation aspect of the transaction whereas Section 68 looks at the Identity, Genuineness and Creditworthiness of the subscriber to share capital. If we look at the importance of the tests laid down by the provisions of Section 68 they seem to of a higher importance then that laid down by Section 56. If the assessee is unable to prove the Identity, Genuineness and Creditworthiness of the share subscriber is not proved it would essentially mean the flowing back of ones own money and the other person merely acting as an accommodator. However Section 56 requires the existence of two persons whereby the money clearly flows from one person to another albeit at a value higher than the fair value. Therefore, looking to the scheme of the Act and the gravity of the provisions involved it can be concluded that if the assessee is unable to prove the identity, genuineness and creditworthiness of the subscriber then the provisions of Section 68 would have to be applied rather than the provisions of Section 56 because in such a situation there would not be any real flow of money from one person to another as envisaged by Section 56. This view has also been affirmed by the Recent decision of the Kerela High Court in the case of Sunrise Academy 169 DTR 65. Another useful analogy that can be drawn from the aforesaid discussion is that if during the course of the assessment proceedings the Assessing Officer proceeds with addition of the share application money u/s. 56 of the Act then one can clearly infer that the provisions of Section 68 have been complied with by the assessee that is the assessee has duly proved the identity, genuineness and creditworthiness of the subscriber and therefore at no time in the further proceedings can the assessee be subjected to the provisions of Section 68. ❉ ❉ ❉ Take care! Beware of everything that is untrue; stick to truth and we shall succeed, maybe slowly, but surely.” “When you are doing any work, do not think of anything beyond. Do it as worship, as the highest worship, and devote your whole life to it for the time being.” Swami Vivekanand

Ahmedabad Chartered Accountant Journal November, 2023 483 Sec. 153C- PERIOD OF SIX YEARS COMMENCEMENT The Supreme Court (SC) emphasized that the six-year assessment period under Section 153C begins from the date the seized material is handed over to the Assessing Officer (AO) of the person ‘other than the searched person’, and not the date the search took place. The court rejected the Revenue’s limited view of the proviso to Section 153C(1). It emphasized the Parliament’s broader intention was to determine the starting point of the six-year period, especially concerning the returns of third parties whose premises weren’t searched. The Supreme Court’s verdict underscores the importance of fair and broad statutory interpretations, emphasizing the need to prevent disproportionate consequences on third parties. It firmly establishes that under Section 153C, the assessment period’s commencement is tied to the forwarding of seized material, not the search date. This decision upholds the essence of justice and equity in tax law. Jasjit Singh Vs CIT (S.L.P.(C) No. 6644 of 2016) dt 26.09.2023) Capital or revenue expens-nature ofTelecom licence fees The fact that failure to pay the annual variable licence fee leads to revocation or cancellation of the licence, vindicates the legal position that the annual variable licence fee is paid towards the right to operate telecom services. Though the licence fee is payable in a staggered or deferred manner, the nature of the payment, which flows plainly from the licensing conditions, cannot be re-characterized. A single transaction cannot be split up, in an artificial manner into a capital payment and revenue payments by 23 Advocate Samir N. Divatia [email protected] Glimpses of Rulings simply considering the mode of payment. Such a characterization would be contrary to the settled position of law and decisions of this Court, which suggest that payment of an amount in instalments alone does not convert or change a capital payment into a revenue payment. It is trite that where a transaction consists of payments in two parts, i.e., lump-sum payment made at the outset, followed up by periodic payments, the nature of the two payments would be distinct only when the periodic payments have no nexus with the original obligation of the assessee. However, in the present case, the successive instalments relate to the same obligation, i.e., payment of licence fee as consideration for the right to establish, maintain and operate telecommunication services as a composite whole. This is because in the absence of a right to establish, maintenance and operation of telecommunication services is not possible. Hence, the cumulative expenditure would have to be held to be capital in nature. Thus, the composite right conveyed to the respondents-assessees by way of grant of licences, is the right to establish, maintain and operate telecommunication services. The said composite right cannot be bifurcated in an artificial manner, into the right to establish telecommunication services on the one hand and the right to maintain and operate telecommunication services on the other. Such bifurcation is contrary to the terms of the licensing agreement(s) and the Policy of 1999. C.I.T., DELHI v BHARTI HEXACOM LTD (CIVIL APPEAL NO(S). 11128 OF 2016 dt. 16.10.2023) 24 Continued to page 491

484 Ahmedabad Chartered Accountant Journal November, 2023 Change of jurisdiction and Validity of completed assessment: Dy. CIT v/s. Kalinja Institute of Industrial Technology (2023) 454 ITR 582 (SC) Issue: When the jurisdiction has changed after returns were filed and the assessee has not objected to such a change within 30 days of notice u/s 142(1), can the assessment be held to be invalid? Held: Head Notes: “The impugned order set asides the assessment for AY 2014-2015 on the ground that the jurisdictional officer had not adjudicated upon the returns. The jurisdiction had been changed after the returns were filed. However, the records also reveals that the assessee had participated pursuant to the notice issued under Section 142 (1) and had not questioned the jurisdiction of the assessing officer. Section 124(3)(a) of the Income Tax Act precludes the assessee from questioning the jurisdiction of the assessing officer, if he does not do so within 30 days of receipt of notice under Section 142 (1).” Meaning of “Valuable article or thing” under section 69A: D.N. Singh v/s. CIT (2023) 454 ITR 595 (SC) Issue: Whether “Valuable article” for section 69A would include “any article of value”? Held: Head Notes: “77. This Court has referred to the Principles of Ejusdem Generis and Noscitur a Sociis, which undoubtedly are rules of construction the latter being described as having treacherous under pinnings and the former requiring the existence of a genus which is not exhausted by the categories catalogued in the statute. This Court has also referred to the definition of the words, money, bullion valuable and article. The Court approves the view taken by the High Court of Gujarat in Bhagwandas Narayandas (supra) that a document of title to immovable property or a fixed deposit receipt would not qualify as other valuable article. The reasons which have been given appear to us to be sound. A document of title or a fixed deposit receipt would not be ‘articles’ which can be bought and sold in a market. An article would also not encompass an item of immovable property. This Court can safely conclude that an article must be movable property. One strong indication that the Principle of Ejusdem Generis may not apply is a decision of this Court in Chuharmal (supra), where the articles involved were watches. Watches by no stretch of imagination can be brought in on the basis of ejusdem generis. They do not belong to the so-called genus of money or bullion or jewellery. The hallmark of a watch in the context of the expression ‘other valuable article’ would be that it is marketable and it has value. When it comes to value, it is noticed that in the definition of the word ‘valuable’ in Black’s Law Dictionary, it is defined as ‘worth a good price; having a financial or market value’. The word ‘valuable’ has been defined again as an adjective and as meaning worth a great deal of money in the Concise Oxford Dictionary. Valuable, therefore, cannot be understood as anything which has any value. The intention of the law-giver in introducing Section 69A was to get at income which has not CA. Jayesh C. Sharedalal [email protected] 71 From the Courts 72

Ahmedabad Chartered Accountant Journal November, 2023 485 been reflected in the books of account but found to belong to the assessee. Not only it must belong to the assessee, but it must be other valuable articles. Let us consider a few examples. Let us take the case of an assessee who is found to be the owner of 50 mobile phones each having a market value of Rs.2 lakhs each. The value of such articles each having a price of Rs.2 lakhs would amount to a sum of Rs .1 crore. Let us take another example where the assessee is found to be the owner of 25 highly expensive cameras. Could it be said that despite having a good price or worth a great deal of money, they would stand excluded from the purview of Section 69A. On the other hand, let us take an example where a person is found to be in possession of 500 tender coconuts. They would have a value and even be marketable but it may be wholly inapposite to describe the 500 tender coconuts as valuable articles. It goes both to the marketability, as also the fact that it may not be described as worth a ‘good’ price. Each case must be decided with reference to the facts to find out that while articles or movables worth a great deal of money or worth a good price are comprehended articles which may not command any such price must stand excluded from the ambit of the words ‘other valuable articles’. The concept of ‘other valuable articles’ may evolve with the arrival in the market of articles, which can be treated as other valuable articles on satisfying the other tests. 78. Bitumen is defined in the Concise Oxford English Dictionary as ‘a black viscous mixture of hydrocarbons obtained naturally or as a residue from petroleum distillation, used for road surfacing and roofing’. Bitumen appears to be a residual product in the petroleum refineries and it is usually used in road construction which is also probabalised by the fact that the appellant was to deliver the bitumen to the Road Construction Department of the State. Bitumen is sold in bulk ordinarily. In the Assessment Order, the Officer has proceeded to take Rs. 4999.58 per metric ton as taken in the AG Report on bitumen scam. Thus, it is that the cost of bitumen for 2094.52 metric From the Courts ton has been arrived at as Rs. 1,04,71,720.30. This would mean that for a kilogram of bitumen, the price would be only Rs.5 in 1995-1996 (F.Y). 79. Bitumen may be found in small quantities or large quantities. If the ‘article’ is to be found ‘valuable’, then in small quantity it must not just have some value but it must be ‘worth a good price’ {See Black’s Law Dictionary (supra)} or ‘worth a great deal of money’ {See Concise Oxford Dictionary (supra)} and not that it has ‘value’. Section 69A would then stand attracted. But if to treat it as ‘valuable article’, it requires ownership in large quantity, in the sense that by multiplying the value in large quantity, a ‘good price’ or ‘great deal of money’ is arrived at then it would not be valuable article. Thus, this Court would conclude that ‘bitumen’ as such cannot be treated as a ‘valuable article’.” The meaning of the word “owner” under section 69A: D.N. Singh v/s. CIT (2023) 454 ITR 595 (SC) Issue: Whether a person, who is in illegal possession of an article can be considered as ‘owner’ for the purposes of section 69A? Held Head Notes: “58. When it came to the Podar Cement Pvt. Ltd.(supra), this Court took into consideration the ground reality in the context of Section 22 of the Act and approved of taxing the income of a person who is entitled to receive income from the property in his own right under Section 22. We have elaborately referred to the judgment of the Patna High Court in the Sahay Properties case. The full rights of an owner as set out therein may again be reiterated as: (1) The power of enjoyment which includes the power to destroy. (2) The right to possession which includes the right to exclude others. (3) The power to alienate inter vivos or to charge as security. (4) The power to bequeath the property. 73

486 Ahmedabad Chartered Accountant Journal November, 2023 59. This Court may at this juncture observe that a carrier has none of these rights or powers. It may be true that in order to be an owner, all the rights and powers of an owner need not be present at the same point of time in the same person. It may be true that ownership may be associated with a better right to be in possession and actual possession in a given case may be harmonised with ownership. Being in possession with a right to be possession may lead to a presumption that the possessor is the owner, unless it be that there are indications to the contrary. The beneficial vesting may in the context clothe the person with title as the owner. Another concept which emerges is a person in receipt of money having actual control over the property with no person having a better right to defeat his claim of possession may open the doors to a finding that he is the owner within the meaning of Section 69A. A person in actual physical control of the property and realising the entire income for his own use may indicate the presence of ownership. The absence of the conveyance needed to complete the transfer may not detract from a person being found to be the owner. The soul of the reasoning appears to be the entitlement to receive the income from the property ‘in his right’. 60. Let us apply these tests and ascertain whether the appellant can be treated as the owner in any sense of the expression. Appellant as a carrier was entrusted with the goods. The possession of the appellant began as a bailee. The Court proceeds further on the basis that instead of delivering the goods, the appellant did not deliver the goods to the concerned divisions of the department in the State of Bihar. Ownership of the goods in question by no stretch of imagination stood vested at any point of time in the appellant. Property would pass from the consignor to the consignee on the basis of the principles which are declared in the Sale of Goods Act. It is inconceivable that any of those provisions would countenance passing of property in the goods to the appellant who was a mere carrier of the goods. Section 406 of the IPC makes it an offence for a person entrusted with property which includes goods entrusted to a carrier being misappropriated or dishonestly being converted to the use of the carrier. A specific illustration under Section 406 makes it abundantly clear that any such act by a carrier attracts the offence under Section 406. The Court in other words would have to allow the commission of an offence by the appellant in the process of finding that the appellant is the owner of the goods. In other words, proceeding on the basis that there was short delivery of the goods by the appellant, inevitably, the Court must find that the act was not a mere omission or a mistake but a deliberate act by a carrier involving it in the commission of an offence under Section 406. In other words, the Court must necessarily find that the appellant continued to possess the bitumen and misappropriated and it is in this state that assessing officer would have to find that the appellant by the deliberate act of short delivering the goods and continuing with the possession of the goods not only contrary to the contract but also to the law of the land, both in the Carriers Act 1865 and breaking the penal law as well, the appellant must be treated as the owner. 61. There is no equity about a tax. Equally, a person cannot be taxed based on intendment. Unlike the possession of a person who for all intents and purposes, and in his own right, earns income from house property, lawfully otherwise, and falls short of ownership only for want of a formal conveyance as required under Section 54 of Transfer of Property Act, a carrier who clings on to possession not only without having a shadow of a right, but what is more, both contrary to the contract as also the law cannot be found to be the owner. The possession of the carrier who deliberately refuses to act under the contract but contrary to it, is not only wrongful, but more importantly, makes it a case where the possession itself is without any right with the carrier to justify his possession. Recognising any right with the carrier in law would involve negation of the right of the actual owner which if the property in the goods under the contract has passed on to the consignee is the consignee From the Courts

Ahmedabad Chartered Accountant Journal November, 2023 487 and if not the consignor. This Court has already found that the appellant is bereft of any of the rights or powers associated with ownership of property. The only aspect was the alleged possession of the goods which is clearly wrongful when it continued with the appellant contrary to the terms of the contract and the law. 62. The Court is conscious of the fact that income derived from an illegal business can be legitimately brought to tax [See AIR 1980 SC 1271]. However, that is a far cry from justifying invocation of Section 69A of the Act as it is indispensable to invoke the said provision that the assessing officer must find that the articles in question was under the ownership of the assessee in the financial year. This is apart from other requirements being met. 63. This Court may approach the issue from another angle. Section 69A was inserted in 1964 to get at income which was sought to be screened from tax by purchasing valuable articles such as bullion and gold and jewellery besides keeping it in the form of money also. The object of such assessee would also be achieved by becoming the owners of other valuable articles. In this case, is it a case where the appellant was attempting to conceal taxable income by illegally possessing the bitumen? Proceeding further and assuming again that the assessee possessed the bitumen albeit illegally and proceeded to dispose of the same. The rationale of the Revenue involves ownership of the bitumen being ascribed to the appellant based on possession of the bitumen contrary to the contract of carriage and with the intention to misappropriate the same, which further involves the sale of the bitumen for which there is no material as such. But this Court proceeds on the basis that such a sale also took place. What is however important is, the requirement in Section 69A that the assessing officer must find that the assessee is the owner of the bitumen. This Court is unable to agree that in the facts it could be found that the appellant could be found to the owner.” From the Courts The principle of “ejusdem generis” and the rule of “noscitur a sociis”: D.N. Singh v/s. CIT (2023) 454 ITR 595 (SC) Issue: What are the conditions for applying principle of “ejusdem generis” and the rule of “noscitur a sociis”.? Held: Head Notes: “75. In Rohit Pulp and Paper Mills Limited v. Collector of Central Excise, Baroda[22], the Court was dealing with an exception clause in an exemption notification and considered the applicability of the Principle of Noscitur a Sociis, to the facts: “12. The principle of statutory interpretation by which a generic word receives a limited interpretation by reason of its context is well established. In the context with which we are concerned, we can legitimately draw upon the “noscitur a sociis” principle. This expression simply means that “the meaning of a word is to be judged by the company it keeps.” Gajendragadkar, J. explained the scope of the rule in State of Bombay v. Hosptial Mazdoor Sabha [(1960) 2 SCR 866 : AIR 1960 SC 610 : (1960) 1 LLJ 251] in the following words: (SCR pp. 873-74) “This rule, according to Maxwell, means that, when two or more words which are susceptible of analogous meaning are coupled together they are understood to be used in their cognate sense. They take as it were their colour from each other, that is, the more general is restricted to a sense analogous to a less general. The same rule is thus interpreted in “Words and Phrases” (Vol. XIV, p. 207) : “Associated words take their meaning from one another under the doctrine of noscitur a sociis, the philosophy of which is that the meaning of a doubtful word may be ascertained by reference to the meaning of words associated with it; such doctrine is broader than the maxim ejusdem generis”. In fact the latter maxim “is only an illustration or specific application of the broader maxim noscitur a sociis”. The argument is that certain essential features of attributes are invariably 74

488 Ahmedabad Chartered Accountant Journal November, 2023 associated with the words “business and trade” as understood in the popular and conventional sense, and it is the colour of these attributes which is taken by the other words used in the definition though their normal import may be much wider. We are not impressed by this argument. It must be borne in mind that noscitur a sociis is merely a rule of construction and it cannot prevail in cases where it is clear that the wider words have been deliberately used in order to make the scope of the defined word correspondingly wider. It is only where the intention of the legislature in associating wider words with words of narrower significance is doubtful, or otherwise not clear that the present rule of construction can be usefully applied. It can also be applied where the meaning of the words of wider import is doubtful; but, where the object of the legislature in using wider words is clear and free of ambiguity, the rule of construction in question cannot be pressed into service.” This principle has been applied in a number of contexts in judicial decisions where the court is clear in its mind that the larger meaning of the word in question could not have been intended in the context in which it has been used. The cases are too numerous to need discussion here. It should be sufficient to refer to one of them by way of illustration. In Rainbow Steels Ltd. v. CST [(1981) 2 SCC 141 : 1981 SCC (Tax) 90] this Court had to understand the meaning of the word ‘old’ in the context of an entry in a taxing traffic which read thus: “Old, discarded, unserviceable or obsolete machinery, stores or vehicles including waste products “ Though the tariff item started with the use of the wide word ‘old’, the court came to the conclusion that “in order to fall within the expression ‘old machinery’ occurring in the entry, the machinery must be old machinery in the sense that it has become non-functional or non-usable”. In other words, not the mere age of the machinery, which would be relevant in the wider sense, but the condition of the machinery analogous to that indicated by the words following it, was considered relevant for the purposes of the statute.” 76. About Noscitur a Sociis and how it compares with ejusdem generis, the following statement in G.P. Singh (supra) on Statutory Interpretation is apposite; “It is a rule wider than the rule of ejusdem generis; rather the latter rule is only an application of the former.” Registration u/s 12AA: No ipso facto entitlement to exemption u/s 11: CIT v/s. Chennai Port Trust (2023) 454 ITR 674 (Mad) Issue: Whether mere registration u/s 12AA would entitle an address to claim exemption u/s 11 or are the other conditions required to be fulfilled? Held: Head Notes: “16. Thus, the overall analysis of the provisions of law viz., sections 11, 12, 12AA and 13, in the light of above judgments, would compel this court to hold that the grant of registration under section 12AA in favour of the assessee cannot ipso facto give them exemption under sections 11 and 12 and an independent examination by applying the relevant provisions of law, is required by the authorities qua satisfaction of other conditions by the assessee for grant of exemption. In view of the same, the direction given by the Tribunal to the assessing officer to grant exemption to the assessee under sections 11 and 12 of the Act, merely on the basis of the registration obtained under section 12AA, is not correct and hence, the orders passed by the Tribunal to that effect, warrant interfere by this court. 17. Accordingly, the orders impugned herein are set aside and the matters are remitted to the Assessing Officer to consider afresh, as to the entitlement of exemption by the assessee, in the light of the provisions of sections 11, 12 and 13 of the Act and by conducting appropriate enquiry, after giving due opportunity to the assessee.” From the Courts 75

Ahmedabad Chartered Accountant Journal November, 2023 489 Difference between ‘Contingent’ and “Ascertained” expenditure, “Capital” and “Revenue” expenditure: Nitesh Housing Developers Pvt. Ltd. v/s. Dy CIT (Kar) (2023) 454 ITR 770 (Kar) Issue: Whether the premium payable on redemption of debentures is neither a capital expenditure nor a contingent liability and hence it is allowable as a deduction? Held: Head Notes: “12. As recorded hereinabove, issuance of debentures is not in dispute. Deduction of TDS, Tax deducted at source is also not in dispute. The Tribunal has rightly recorded the correct principle of law that premium paid on redemption of debenture is Revenue expenditure. By the second Addendum Agreement dated 12.11.2012, the HDFCs right to exercise the option of converting the debentures into preference shares has been restored in consonance with the original Agreement. The resultant position is, the HDFC, at its option, could cause the assessee to redeem all debentures on September 20, 2012. The CIT(A) has accepted assessee’s explanation that it had quantified the premium as per the agreement dated 15.05.2010 spread over for three financial years. It is trite that a borrowing Company, which issues debentures incurs liability to pay larger amount than what it has borrowed. The assessee - Company has made provision for payment of premium and also paid TDS. The adverse finding recorded by the ITAT that the parties had changed the agreement to suit their convenience and that it is a ‘makebelieve’ story is not supported by any cogent reason nor material on record and therefore, untenable. 13. Shri. Shankar has placed reliance on Bharat Earth Movers Vs. Commissioner of Income-Tax, (2000) 245 ITR 428 (SC) (para 4) wherein, it is held as follows: “4. The few is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should also be capable of being estimated with reasonable certainty though the actual quantification may net be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain.” 14. The CIT(A), following the decision in CIT Vs. Asea Brown Boveri Ltd., (2009) 316 ITR 450 and Madras Industrial Investment Corporation Ltd., Vs. Commissioner of Income-Tax, (1997) 225 ITR 802 has rightly held that the premium payable quantified on redemption of debentures as Revenue expenditure.” Net Worth “definition for Tender document: Kalinga Comm. Corp. v/s. Steel Authority of India (2023) 455 ITR 1 (Del) Issue: When “Net Worth” is defined in tender documents for a bid, should deferred tax liability be considered for computing net worth? Held: “Similarly, the reliance placed upon by Mr. Rao on section 115JB of the Income Tax Act, 1961 and rule 11UA of the Income Tax Rules, 1962 also is incorrect. Section 115JB of the Income Tax Act is a special provision which describes what “Book profit” of a company means for the purposes of determining the total income of a company for the purposes of payment of tax. Whereas rule 11UA of the Income Tax Rules, 1962 deals with the determination of fair market value for the purposes of determining income from other sources under section 56 of the Income Tax Act. Both the provisions deal particularly with determining the income of a company for the purposes of payment of tax. The calculation of the net worth of a company and 76 77 From the Courts

490 Ahmedabad Chartered Accountant Journal November, 2023 the calculation of income of a company for the purposes of payment of tax are two separate exercises and cannot be equated. It is, therefore, difficult for this court to agree with the submission made by Mr. Rao that deferred tax liability should be included for the purposes of calculating the net worth of a company.” Assessee to be given a reasonable opportunity before passing of order u/s 148A(d): Sahil Infra Creative Pvt. Ltd. v/s. ITO (2023) 455 ITR 11 (Guj) Issue: Whether the assessee is entitled to of being heard before the passing of order u/s 148A(d)? Held: Head Notes: “The assessee had filed its objections to the notice for reassessment under the unamended section 148 issued to him. However, the Assessing Officer did not advert to the objections dated October 12, 2022 and left them undecided. Therefore, the old notice dated June 30, 2021 was treated under the new provisions to be a notice under section 148A(b) and at this stage the assessee was deprived of opportunity to put fourth his case against the proposed reopening of the assessment. Hence, the order dated July 30, 2022 under section 148A(d) and the consequential notice dated July 30, 2022 under section 148 of the Income Tax Act, 1961 had to be set aside.” Meaning of term “Services” for deduction u/s 10AA: Pr. CIT v/s. Om Nanotech Pvt. Ltd. (2023) 455 ITR 50 (Del) Issue: What is the scope of definition of ‘Services’ given under SEZ Act 2005 and SEZ Rules 2006 and its relevance for deduction u/s 10AA of Income Tax Act, 1961? Held: Head Notes: “Section 10AA of the Income Tax Act, 1961, was inserted under section 27 of the Special Economic Zones Act of 2005. A plain reading of section 27 of the 2005 Act would show that the provisions of 1961 Act are made applicable to a developer or entrepreneur who carries out authorized operations in the special economic zone, subject to modifications specified in the Second schedule appended to the 2005 Act. The second schedule of the 2005 Act, which adverts to the modifications made in the 1961 Act, concededly, refers to section 10AA of the 1961 Act. Thus, having regard to the fact that the deduction made available to an assessee under section 10AA of the 1961 Act, which has a unit located in the special economic zone, is rooted in the 2005 Act, one would, necessarily have to advert to the definition of the expression “ services” contained in the Act. The definition of “services” is contained in section 2(z) of the 2005 Act. The definition of the expression “ services” is not provided in the 1961 Act. A perusal of the definition of “Services”, would show that, interalia, tradable services, which are prescribed by the Central Government for the purposes of the 2005 Act, are included in the definition. What those tradable services which are alluded to in section 2(z)(ii) are referred to in rule 76 of the 2006 Rules, with the Explanation. A plain reading of the Explanation would show that trading for the purposes of the Second Schedule of the 2005 Act means import for the purposes of re-export. Undoubtedly, the 2005 Act and rule 76 point in the direction that the expression “Services” means services which are offered by way of re-export of articles that are imported into the country. If there was any doubt as regards this aspect of the matter, it is clarified in instruction No. 4 dated May 24, 2006 issued by the Government of India. Ministry of Commerce and Industry, Department of Commerce. The instruction has been adopted by the Export Promotion Council in its Circular No. 17 dated May 29, 2006, Likewise, after rule 76 was inserted in the 2006 Rules, the Export Promotion Council for export oriented undertakings and special economic zone units issued another circular dated November 16, 2006. Thus, having regard to this intrinsic evidence available both in the 2005 Act and Rules, it was always intended that the deduction under section 10AA of the 1961 Act will also be available qua those article which, upon import to the unit located in special economic zone, were thereafter reexported.” 78 79 From the Courts

Ahmedabad Chartered Accountant Journal November, 2023 491 Notice of reassessment after four years (old law): Vibrant Securities Pvt. Ltd. v/s. ITO (2023) 455 ITR 58 (Bom) Issue: What are the twin conditions (under the old law) if the re-assessmemnt notice is issued after four years? Held: Head Notes: “Where a notice of reassessment is issued after four years, the Assessing Officer in addition to satisfying the jurisdictional conditions of “reason to believe” that income chargeable to tax had escaped assessment, has to show that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings. Held, that the Assessing Officer had nowhere stated that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for 80 assessment for that assessment year. Moreover the material referred to in the reasons recorded in the shape of transactions, securities, etc, did not reflect that the material was not available with the Assessing Officer during the scrutiny assessment proceedings. The Assessing Officer had relied during the scrutiny assessment proceedings. The Assessing Officer had relied solely upon information obtained from the investigation Wing of the Department without, in the least, verifying whether the issue had been gone into or disclosed by the assessee during the scrutiny assessment proceedings. The assessee, on the other hand, had placed on record details of notices and the replies submitted thereto, which would show that the information with regard to all transactions had been sought for and supplied by the assessee. The notice of reassessment was not valid.” ❉ ❉ ❉ DTAA with Oman- Dividend income The provisions of DTAA fully exempt the assessee from payment of tax on dividend in Oman which, in turn, would exempt the assessee from taxation in India. The letter issued by the Sultanate of Oman, Ministry of Finance emanates from the highest authority of the Omani regime, The clarification set out in the said letter 25 Continued from page 483 Glimpses of Rulings is valid for interpretation of the relevant clauses of DTAA, to exempt the assessee from payment of dividend tax in Oman and, in turn, in India. ❉ ❉ ❉ From the Courts

492 Ahmedabad Chartered Accountant Journal November, 2023 Takshashila Realities (P.) Ltd v. DCIT156 Taxmann.com 175 (Ahd) Assessment Year:2013-14, Order dated:1st September 2023 Basic Facts The assessee is a dealer and developer of lands, real estates, Hotel Business Operations including Restaurant and Banquet facilities. In assessment proceedings, a sum of Rs.25,64,398/- was disallowed assessee on account of prior period expenses on the basis of Special Auditor Report. The assessee submitted the details of expenses amounting to Rs. 21,68,894/- in the form of additional evidence. These expenses amounting to Rs.21,68,894/- are not debited to the Profit & Loss account during the year, as they are taken to the WIP of the respective project. This fact even though was submitted by the assessee before the AO in the assessment proceedings, however the CIT(A) called for a Remand Report from the AO. This fact could not be denied or rebutted by the A.O.In this view of the matter the Ld. CIT(A) held that there is no justification for adding this sum of Rs.21,68,894/- which has not been claimed at all during the previous year. Hence, the addition to the extent of Rs.21,68,894/- out of the total addition of Rs.25,64,398/- was deleted by CIT[A], but the balance additionof Rs.3,95,504/- was confirmed. Aggrieved against the partial relief given by the CIT(A) both the Assessee and the Revenue are in appeal before Tribunal. Issue I Whether prior period expenses are allowable Held I The assessee submitted that all the direct expenditures incurred on particular project are debited to the costof that project, irrespective of the year to which it pertain to current year or prior year. The indirect expenditure, which are not directly related to the projectare being considered whether they are of current year period orprior year period, accordingly disclosure is made in the books of accounts, which is correct one. The Tribunal relied on Jurisdictional High Court in the case of Indian Petrochemicals Corporation Ltd. 74 Taxmann.com 163, wherein it was held that prior period expenses quantified and paid during current year would be allowed as business expenditure in relevant assessment year even though assessee was following mercantile system of accounting. The Tribunal therefore deleted the addition of Rs. 3,95,504/- which has been confirmed by CIT(A).. Basic The assessee had the finished stock of unsold flats in various buildings. AO issued a show cause to the assessee as to why the as per the provisions of section 23 of the Act, Annual Letting Value (ALV) should not be computed and added to the total income, relying onthe judgment of Hon’ble Delhi High Court in the case of CIT v. Ansal Housing Finance & Leasing Co. Ltd. The assessee replied that these flats for which B.U. (Building Use) Permission have been received from the Competent Authority are shown as closing stock,since the sale deed of the same were executed in the subsequent year, even though substantial advances have already been received on sale of these flats from the buyers. However the AO was not convinced and determined 8 % ALV to the value of this closingstock of finished flats. Consequently, the A.O. made addition amounting to Rs.53,19,672/-. The Ld. CIT(A) after considering the submissions of the assessee determined the ALV at 5% of the book value of the flats and determined the income as Rs. 33,24,796/-. 43 CA. Yogesh G. Shah [email protected] CA. Aparna Parelkar [email protected] Tribunal News

Ahmedabad Chartered Accountant Journal November, 2023 493 Issue II Whether ALV needs to be computed under section 22 in respect of closing stock of finished flats though the assessee has allotted the flats/ bungalows/units to purchaser and have received as advance. Held II The basic condition for charging incomeunder section 22 of the Act is that the assessee should be ‘owner’ ofthe house property, it is immaterial whether the owner is in possession and enjoyment of house property or has been let out to third person. The word ‘Owner’ means legal owner. Where a property is handed over to a Purchaser to enjoy fruits of that property by the builder, the Purchaser is treated as the “owner” of that property, even though no registered documents have been executed in his favour. As per section 53A ofthe Transfer of Property Act, a person acquired a property becomes deemed owner of the property, although he may not the “registered owner” of the property. Merely because income in respect of said units has not been recognized during the year on account of NonExecution of Sale Deed, it cannot be held that units are vacant and owned by the assessee for the purpose of taxing notional income u/s.22 of theAct. The assessee is in business of real estate & flats in question are the part of the “stock in trade”. Therefore the ALV computed bythe lower authorities at 8% and 4% are against the provisions ofsection 22 and the addition made on this account is illegal. The Tribunal then referred to the amendment in sub-section (5) has been inserted after subsection (4) of section 23 by the Finance Act, 2017, w.e.f. 01.04.2018 which is to give relief to Real Estate Developers. As per the amendment, if the assessee is holding any house property as his stock-in-trade which is not let out for the whole or part of the year, the annual value of such property will be considered as Nil for a period up to one year from the end of the financial year in which a completion certificate is obtained from thecompetent authority. In view of the insertion of sub-section (5) in section 23 by the Finance Act, 2017, w.e.f. 01.04.2018, the tribunal deleted the addition made on account of ALV. Tribunal News Wanka Vividh Karyakari Seva Sahkari Mandali Ltd TD v. ITO 156 Taxmann.com 68 (Surat-Trib.) Assessment Year: 2017-18,Order dated: 13th October 2023 Basic Facts The assessee is a Primary Agricultural Co-Operative Credit Society and engaged in the business of providing credit facilities exclusively to its agriculturist Members by accepting deposits from them and providing loan to its members under the scheme namely, Kishan Credit Card (‘KCC’ for short). It is registered under Gujarat Co-Operative Societies Act, 1962, the status of assessee-co-operative society was accepted by AO while passing the assessment order. AO had issued notice to file return of income but since the same was issued against wrong PAN of the assessee, the assessee could not file its return of income. But it filed Proift & Loss a/c, Balance Sheet & computation of total income before the AO claiming deduction u/s 80P of the Act. But while completing the assessment, the AO did not grant the deduction u/s 80P by applying section 80A(5) on the ground that the assessee had not filed return of income. The CIT(A) confirmed the actionof AO by taking view that while claiming deduction under section 80P(2)(a)(i) and 80P(2((d) the assessee failed to file return of income and as per provision of Section 80A(5) is not eligible for claiming such deduction. The assessee is before the Tribunal Issue : Whether the assessee is eligible for deduction under section 80P without filing returned of income. Held: The Tribunal noted that the Bangalore Bench of Tribunal in case of Prathamika Krishi Pattina, Sahakara Sangha Ltd.142 taxmann.com 405 has held that provision of Section 80AC which deals with the denial of deduction inrespect of certain provision of Chapter VIA, if a returned of income isnot filed by assessee, do not apply to the claim of deduction under section 80P. It was also noted that Co-ordinate Benches of Nagpur Bench in the case of Krushi Vibhag Karmachari Vrund Sahakari Pat Sanstha Maryadit vs. ITO [2023] 147 44

494 Ahmedabad Chartered Accountant Journal November, 2023 tamann.com 449 (Nagpur-Trib.) also held that making of claim in return of income under section 80A(5) is directory and the authorities below were not justified in rejecting the claim of assessee under section 80P. Nagpur Bench in that case referred to the Supreme Court decision in the case of CIT v. G.M. Knitting Industries (P.) Ltd. [2016] 71 taxmann.com 35/[2015] 376 ITR 456/279 CTR 534 & Pr. CIT v. Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1 and held that the principle which emerges is that the fulfilment of requirement of making a claim for exemption under the relevant sections of Chapter III in the return of income is mandatory, but when it comes to the claim of a deduction, inter alia,under the relevant sections of Chapter VI-A, such requirement becomes directory. In the latter case, the making of a claim even after the filing ofreturn but before completing the assessment, meets the directory requirement of making a claim in the return of income. The instant case involves deduction u/s 80P and hence, would be governed by the principle laid down in G.M. Knitting Industries (P.) Ltd. (supra), as per which the making of a claim of deduction is mandatory but the timing is directory. Even if the claim is made during the course of assessment proceedings, such a claim has to be allowed. The Tribunal keeping inview that the nature of deduction and quantum was not disputed by AO, directed the AO to allow deduction under section 80P(2)(a)(i) and 80P(2)(d) as the case may be. Sunflower Pharmacy V. ITO156 taxmann.com 215 (Ahmedabad - Trib.) Assessment Year:2013-14, Order dated: 26th September 2023 Basic Facts The assessee was engaged in the business of trading of drugs and medicines. It paid commission to two doctors and claimed deduction of same as business expenditure under section 37(1). The AO held that that in view of the CBDT Circular No. 5 of 2012, dated 1-8- 2012, any expense incurred on Freebies to Doctors by pharmaceutical and allied health sector industry violation of the provision of Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 was not admissible under section 37(1) being expenses prohibited by law. AO while rejecting assessee’s argument that the circular was not applicable to its case as the commission expenditure could not be termed as freebies to doctors from pharmaceutical retail stores, held that the said payments were covered by the circular being cash or monetary grant and was not for any research, study, etc. through approved institutions. He also held that the assessee was allied health sector being one of suppliers of medicines which takes care of health of people and was covered by the circular while rejected the argument of the assessee it was not a pharmaceutical industry. He held that commission paid as freebees in violation of provision of Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulation, 2002, and CBDT Circular No. 5/2012 Dated 1-8-2012 is applicable and therefore not admissible as business expenditure under section 37(1) of the Act even though commission paid is against the advisory service received regarding inventory and purchase of medicines by the assessee, as it was not verifiable on facts. The CIT(A) upheld the disallowance. The assessee is in Tribunal. Issue Whether the commission paid to Doctors was a freebees in violation of provision of Indian Medical Council (Professional conduct, Etiquette and Ethics) Regulation, 2002, and CBDT Circular No. 5/2012 Dated 1-8-2012 is applicable and therefore not admissible as business expenditure under section 37(1) of the I.T. Act 1961 even though it was paid against the advisory service received regarding inventory and purchase of medicines by the assessee. Held Tribunal noted that law on the issue involved in the instant case has been clarified by the Supreme Court in the case of Apex Laboratories (P.) Ltd.v. Dy. CIT [2022]135 taxmann.com 286/286 Taxman 200/442 ITR 1.In light of the observations made by the Supreme Court in the case of Apex Laboratories (P.) Ltd. (supra), any reliance on decisions rendered by Tribunal in the assessee’s own case for prior years shall stand superseded, in case the assessee comes within the four corners of the provisions of Circular No. 5 of 2012, dated 1-8-2012. Further the assessee was not able to Tribunal News 45

Ahmedabad Chartered Accountant Journal November, 2023 495 demonstrate that the doctors had provided professional advice to the pharmacy. The fact that TDS was deducted by the assessee on such payments is immaterial for the purpose of deciding whether the payments were made for receipt of advisory services or otherwise. There was no formal agreement between the assessee and the doctors for providing any advisory services. There is specific noting that the assessee operated the pharmacy from within the premises of the hospital and hence the sales of the pharmacy were dependent primarily on the prescriptions made by both the doctors to whom the commission was paid. Further out of the gross profit of Rs. 1.01 crores the assessee has made payments amounting to Rs. 50.46 lakhs by way of commission to the two doctors. Looking into the totality of facts, the Tribunal held that assessee has not been able to establish that the payments were made by it to the doctors for rendition of any professional/advisory services, hence, the payments essentially qualify as commission payments made to doctors for promoting the sale of medicines. While rejecting assessee’s argument that both the assessee & doctors have paid taxes at same rate of tax hence there was no intention of evading taxes and the issue was tax neutral, the Tribunal for the reasons thatit is not demonstrated that both have paid taxes and whether Doctors have paid on gross income or net income. Secondly and importantly, the principle of tax neutrality typically applies where payments are made between associated enterprises. The principle of tax neutrality would not apply when payments made by the assessee have been disallowed in its hand and such payments are illegal or prohibited by law. Further the tribunal held that the assessee is falling in the category of allied health sector industry and hence covered within the scope of the circular. They also referred to the case of Confederation of Indian Pharmaceutical Industry (SSI) v. CBDT [2014] 44 taxmann.com 365/ [2013] 353 ITR 388, wherein, the Himachal Pradesh High Court has decided a similar issue in favour of the revenue. In view of the aforesaid, the payments made by the assessee to two doctors qualify as commission for promoting sale of medicines was held not allowable under section 37(1). M/s. BBC World (India) Pvt Ltd vs. ACITTS653-ITAT-2023(Del)(TP) Assessment Year 2004-05, Order dated 11th November 2023 Basic Facts: Assessee is part of BBC group which is engaged in broadcasting international TV channels throughout the world, in the production and distribution of TV and radio programmes and other related activities. The assessee is a captive service provider, with core activity of sale of airtime in the form of advertisement; marketing of the BBC Channel amongst cable operators and promotion of viewership of the channel.The assessee and its AE had entered into a service agreement with an agreed service income based on cost plus markup. The agreement also provided that all costs incurred by the assessee for payment to third party vendors for marketing and research for the channel, were to be reimbursed at cost. During the course of transfer pricing assessment proceedings, the transfer pricing officer (‘TPO’) opined that the agreement between assessee and its AEs cover all the activities which the assessee is expected to provide to its AEs and no activity is left which can be considered to be outside the purview of the service agreement which can be reimbursed at cost. The TPO observed that the expenses related to advertisement and publicity, business promotion and participation in trade events which were undertaken by the assessee at the request of the overseas entity, are incurred by the assessee for carrying out its contractual obligation with its AEs and not a passthrough cost as claimed by the assessee. Aggrieved, the assessee filed an appeal before the CIT(A). CIT(A) held in favour of the assesseeheld that expenses related to advertisement are mainly in the nature of buying advertisement space in the newspaper for AEs and hence to be treated as pass-through cost. Accordingly, the pass-through cost to the extent which is directly relatable to third parties, namely, 1) advertisement and publicity, 2) business promotion and 3) participation in trade events, only should be excluded from the cost base of the assessee. Aggrieved with the CIT(A) order, the Revenue in appeal before the Tribunal. Tribunal News 46

496 Ahmedabad Chartered Accountant Journal November, 2023 Issue: Whether the expenses incurred for advertisement and publicity, business promotion and reimbursed by AE are pass through expenses and no mark up is required Held: The ITAT noted / observed that the budget for such expenses is controlled by AEs and the risk and outcome of such expenses were borne by the AE; and the cost involved is too high for buying such space and the efforts required to buy such space is not much. As per the agreement between the assessee and AEs, all the costs incurred by the assessee with third party vendors for marketing and research for the channel were to be reimbursed at cost. ITAT distinguished the coordinate bench rulings in assessee’s own case for previous AYs on the premise that no agreement between assessee and its AE was available before the lower authorities, unlike the year under consideration. In view of the above, the ITAT confirmed the findings of the CIT(A) and held that the expenses related to advertisement and publicity, mainly in the nature of buying advertisement space in the newspaper for AEs, are pass through cost and all other items should be considered as part of the cost base of the taxpayer and should be marked up. ABB Switzerland Ltd v. DCIT TS-646-ITAT2023 (Bang) Order dated 3rd August 2023, Assessment Year 2014-15 Basic Facts: Assessee, a Switzerland based company received royalty of Rs.184.07 Cr from ABB India Ltd. (sister concern company) which was offered to tax at 10% in the return of income. The AO on the basis of Form 3CEB observed that the Assessee has received Rs.185.69 Cr from its sister concern, however, it merely offered Rs. 184.07 Cr as royalty in the return of income. The AO issued a show cause notice as to why the remaining amount of Rs.1.62 Cr should not be considered as royalty and taxed in the year under consideration to which Assessee replied that the sister concern company unilaterally created a provision of Rs.1.62 Cr in respect of royalty payments since no corresponding invoices to such provision was raised, accordingly, royalty has be taxed in the year in which consideration towards the same is received. The AO relied on SC ruling in Standard Triumph 201 ITR 391(SC), and rejected Assessee’s contention on the premise that it failed to substantiate the difference of royalty income was offered in the subsequent AY or the reconciliation of Rs.1.62 Cr, accordingly, made addition of royalty income for the year under consideration. The CIT(A) also held against the assesee and hence the assessee is in appeal before the Tribunal. Issue: Whether the royalty income was taxable in hands of the assessee on receipt basis or accrual basis Held: Before ITAT, Assessee relied on coordinate benchruling in ABB AG IT(IT)A No.1444/Bang/2019, wherein the Bombay HC ruling in Siemens Aktiengesell schaft ITA No. 124 of 2010 dated 22.10.2012, was relied upon and incontext of India-Germany DTAA it was held that royalty and FTS could be taxed on receipt basis. Alsocontended that SC ruling in Standard Triumph is not applicable since in the said case no DTAA was available between India and other party but in the present case, there is a DTAA between India andSwitzerland. While the Revenue contended that as per Article 12 of India-Switzerland DTAA, royalty andfees for technical services arising in India and paid to non-resident should be taxed on accrual basis,accordingly, royalty arises in India in the relevant AY; ITAT relied on coordinate bench ruling in ABBAG wherein it was held that FTS is taxable only in the year of receipt as per the provisions of India-Germany DTAA. Accordingly, held that the facts in coordinate bench ruling in ABB AG pertains totechnical services and the only difference in the present case is that it relates to royalty under India-Switzerland DTAA. Observes that Article 12 of DTAA defines royalty and fees for technical services in the same manner and also the DTAA provisions of India-Germany and IndiaSwitzerland are similar. Thus, following the coordinate bench ruling, ITAT allows Assessee’s appeal Tribunal News 47

Ahmedabad Chartered Accountant Journal November, 2023 497 RHONE Associates (P.) Ltd. v. ACIT 156 taxmann.com 238 (Del- Trib.) Order dated 1st November 2023, Assessment Year 2012-13 Basic Facts: The AO passed assessment order for the assessment year 2012-13.The CIT(A)), upheld said order.In the instant appeal, although the assessee had raised many grounds relating to said assessment order but the assessee had raised an additional ground regarding jurisdiction. It submitted that there was no DIN mentioned in the assessment order which was contrary to the CBDT Circular No.19/2019 dated 14th August 2019. It further submitted that in such a situation, jurisdiction assumed was invalid. Issue: Whether the assessment order passed without DIN is valid in law Held: The Tribunal noted that the CBDT Circular No.19/2019 dated 14.08.2019, makes it clear that the object behind bringing the circular is for creating an audit trail. In paragraph 2, it has been very clearly mentioned that no communication shall be issued by any income-tax authority to the assessee or any other person, on or after the 1st day of October, 2019, unless a computer generated DIN has been allotted and is duly quoted in the body of such communication. Paragraph 3 of the circular carves out certain exceptions to paragraph 2 where the communication may be issued manually but only after recording reasons in writing with prior written approval of the Chief Commissioner/Director General of Income-tax, but, the communication issued manually in such circumstances must also state the reasons why communication is issued manually without a DIN and must also mention the date and number of written approval of the Chief Commissioner/Director General of Income-tax. The paragraph 3 also gives format for recording such reasons. Paragraph 4 of the circular makes it clear that any communication issued which, is not in conformity with the circular, shall be treated as invalid and shall be deemed to have never been issued. It is well settled, that a circular issued u/s. 119 has statutory force and binding on tax authroities. A perusal of the AO order shows that, no DIN number is mentioned nor there is any reason of not mentioning the DIN number in order of the AO. Is such a situation, the AO order will lose its validity. Subsequent separate communication of DIN is a superfluous exercise. Keeping in view the decision of the Delhi High Court in the case of CIT v. Brandix Mauritius Holdings Ltd. (2023)(4) TMI 579 and in terms of paragraph 4 of the circular No. 19/2019 dated 14.08.2019, it was held that the impugned AO order is invalid and shall be deemed to have never been passed. Accordingly, the impugned assessment order was quashed. Further, the issue that a simultaneous DIN number was generated and communicated have been considered by Co-ordinate Bench of the Tribunal in the case of Abhimanyu Chaturvedi v. DCIT in ITA Nos.2486, 2487 and 2488/Del/2022 wherein it was held that the simultaneous issue of the DIN number is insignificant and superfluous exercise, in the absence of mentioning the DIN number on the body of the communication. In the result, this appeal filed by the assessee was allowed. ❉ ❉ ❉ Tribunal News 48

498 Ahmedabad Chartered Accountant Journal November, 2023 In this issue, we are giving gist of a recent decision rendered by the I.T.A.T., Ahmedabad in the case of Indra Security & Allied Services Pvt. Ltd. vs. ITO in ITA No.425/Ahd/2022 for the Asst. Year 2018-19. The issue was in connection with the disallowance made u/s. 36(1)(va) of the Act in respect of delayed payments of PF and ESIC, which was disallowed while processing the return u/s.143(1). As per the contentions of the assessee prior to amendment to Employees’ State Insurance (General) Regulations, 1950 w.e.f. 01.07.2017, the time limit given was 21 days from the last day of the calendar month, and hence, payment made within that date cannot be disallowed. Similarly, the payment made on one day after the due date when the due date falls on holiday is also not to be disallowed u/s.36(1)(va). The Tribunal dealt with both these issues. We hope the readers would find the decision useful. Annexure In the Income Tax Appellate Tribunal “A” Bench, Ahmedabad Smt. Annapurna Gupta, Accountant Member and Shri T.R. Senthilkumar, Judicial Member ITA No.425/Ahd/2022 Assessment Year: 2018-19 Indra Security & Vs. The Income Tax Officer, Allied Services Ward 2(1)(3), Pvt. Ltd., Ahmedabad. Ahmedabad. (Appellant) (Respondent) Assessee by : Ms. Astha Maniar, AR Revenue by : Ms. Saumya Pandey Jain, Sr. DR Date of hearing : 04.10.2023 Date of pronouncement : 22.11.2023 GIST ONLY Facts of the Case: 1. The solitary issue in this appeal was disallowance made u/s.36(1)(va) of the Act on account of delayed payments of PF and ESIC. 2. For the month May 2017, the assessee made payment of ESIC on 19.06.2017 and for PF for the month of September 2017, it made payment on 16.10.2017 since the due date of 15.10.2017 fell on Sunday. The Appellant considered both these payments as allowable and did not make any disallowance in the computation of income. 3. The CPC, while processing the return, disallowed both the above payments as having been made beyond due date prescribed under the Act. Contentions of the Assessee: 4. The asssessee contended as under: (i) As regards payment of ESIC prior to amendment in Regulations 31 of the Employees’ State Insurance (General) Regulations, 1950, the due date applicable was 21 days from the end of the month. Therefore, for the month of May, 2017, the due date fell on 21.06.2017, and since payment was made on 19.06.2017, it cannot be disallowed u/s.36(1)(va). (ii) Regarding payment of PF for the month of September, 2017 paid on 16.10.2017, the Counsel of the assessee contended that the due date of 15 days fell on 15.10.2017, which was a Sunday, and therefore, the payment made on 16.10.2017 i.e. immediately on the next working day should be considered to be within due date as per the provisions of section 10 of the General Clauses Act, 1897 as well as section 4 of the Limitation Act, 1963. The Counsel of the assessee also relied CA. Sanjay R. Shah [email protected] Unreported Judgements

Ahmedabad Chartered Accountant Journal November, 2023 499 on the decision of Delhi Bench of Tribunal in the case of G.D. Foods and Manufacturing (India) (P.) Ltd vs. Assistant Director of Income-tax reported in (2023) 152 taxmann.com 323 (Delhi-Trib) and prayed to delete the disallowance. 5. The Department supported the order passed by the lower authorities. Held: 6. The Tribunal, after considering the rival submissions, held as under: “5. We have given our thoughtful consideration and perused the material available on record. It is seen from the impugned order at page Nos.7 & 8, the details of sum received from the employees, statutory due date for payment, actual amount paid and date of payment. It is further seen that the due date of payment of PF for the month of May-2017 is 21/06/2017. However, the CPC has taken the amended provisions, namely 15/06/2017 as the statutory due date and made disallowance u/s.36(1)(va) of the Act. Whereas the assessee remitted the amount on 19/06/ 2017 which is well within the pre-amended due date prescribed under the PF & ESI Act, which is an apparent mistake on record and liable to be rectified by the Jurisdictional Assessing Officer. 5.1. Further, the assessee made payment of Rs.5,27,454/- on 16/10/2017 which falls on Monday. However, CPC has considered 15/10/2017 as the statutory due date and made disallowance. This issue was considered by the Co-ordinate Bench of the Delhi Tribunal in the case of G.D. Foods and Manufacturing (India) (P.) Ltd.(supra), wherein it was held as follows: “10. The section 10 of the General Clause Act, 1897 reads as under:- “Section 10 in The General Clauses Act, 1897 10 Computation of time —(1) Where, by any (Central Act) or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done Unreported Judgments or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open: Provided that nothing in this section shall apply to any act or proceeding to which the Indian Limitation Act, 1877, applies. (2) This section applies also to all [Central Acts] and Regulations made on or after the fourteenth day of January, 1887.” 11. Thus, in our opinion, considering the fact that the due date for depositing the contribution of ESIC & EPF falls on Sunday and gazetted holiday, the said delay of one day deserves to be condoned as per Section 10 of General Clauses Act. Further it is also observed that the assessee has no intention not to deposit the contribution of ESI & EPF well within the time, depositing the contribution very next day of Holiday proves the bona-fide of the Assessee. Therefore, in our opinion, the authorities have committed error in disallowing the deposit made with one day delay where the due date under respective acts falls either on Sunday or on gazetted holiday.” 5.2. Respectfully following the above decision, this issue requires adjudication by the Jurisdictional Assessing Officer. Thus, the order passed by the lower authorities are hereby set aside with a direction to the Jurisdictional Assessing Officer to verify the due dates and the actual date of payments made by the assessee applying section 10 of the General Clauses Act and pass an order accordingly. Needless to say that the assessee should co-operate with the Jurisdictional Assessing Officer by providing all the required documents for passing a fresh order. 6. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.” ❉ ❉ ❉

500 Ahmedabad Chartered Accountant Journal November, 2023 AO is required to record ‘satisfaction’ by giving proper reasons while entertaining application u/s 197 of the Income Tax Act, 1961; Estimates stated in such application cannot be made a ground for making any addition. BITKUBER Investments Pvt. Ltd. vs. DCIT WRIT PETITION NO. 11565 OF 2023 (T-IT), dated 22/09/2023 (Karnataka-HC) 19. In the light of the rival submissions, the following questions arise for consideration: a) Whether the respondent could have rejected the petitioner’s application under Section 197(1) of the IT Act on the ground that the petitioner has not filed Returns forthe four years preceding the subject financial year i.e., 2023-24. b) Whether the respondent’s rejection of the petitioner’s application by the impugned order is based on “satisfaction” that is contemplated under Section 197(1) of the ITAct and if the answer to the afore is in the negative, what is the order that should be. The first question relates to interpreting the provisions of Section 197 of the IT Act and Rule 28AA of the IT Rules, and as such, the petition is disposed of without relegating the petitioner to the admitted alternative remedy available to the petitioner. 20. It is salient that the provisions in tax statues must be interpreted strictly, and in thisregard, this Court could refer to the decision of the Hon’ble Supreme in Ajmera Housing Corporation & Ors. v. Commissioner of Income [2010] 8 SCC 739, and this proposition is reiterated in therecent 23 Advocate Tushar Hemani [email protected] decision in Checkmate Services Pvt. Ltd. v. Commissioner of Income Tax – I [reported in [2023] 6SCC 451]. xxx… 21. The provisions of Section 197(1) of the ITActstipulate that where tax [at the rates in forceunder the different provisions mentioned therein] onthe income of ‘any person’, or a sum payable to ‘any person’, is required to be deducted at the time ofcredit or at the time of payment as the case may be,the Assessing Officer, on an application made by an Assessee, shall give a Certificate, as may be appropriate, if satisfied that the total income of arecipient justifies no deduction of income tax or the deduction of income tax at any lower rate. The expressions ‘any person’ and ‘recipient’ in the provisions of Section 197(1) of the IT Act, which relate to each other, refer to Assessees without any classification. These provisions, so long as the Assessing Officer can record satisfaction, do not admit any room for doubt that there is no classification between the Assessees for the purpose of issuance of Certificate against deduction. 22. If the substantive provisions do not provide for a classification, the delegated legislation cannot devise the same. This is also trite, and a useful reference in this regard could be made to the decisionin CIT Andhra Pradesh v. Taj Mahal Hote: It has been rightly observed that the Rules were meant only for the purpose of carrying out the provisions of the Act and they could not take away what was conferred by the Act or whittle down its effect. Judicial Analysis

Ahmedabad Chartered Accountant Journal November, 2023 501 However, the contention is that because the provisions of Section 197(1) of IT Act say that the Assessing Officer shall issue a Certificate subject to the rules made under Section (2A), and hence it would be within the domain of the Board to devise a classification amongst Assessees while framing Rules. 23. The provisions of Section 197(2A) of the ITAct stipulates that the Board, having regard to the‘ convenience of the Assessees and the interests of revenue’ make Rules: [a] specifying the cases in which, and the circumstances under which, an application may be made for the grant of Certificate, [b] specifying the conditions subject to which such Certificate may be granted, and [c] providing for all the matters connected therewith. The first of the aforesaid three relate to the cases andthe circumstances in which an Assessee could file an application for issuance of a Certificate under Section 197(1) of the IT Act, the second relates to the conditions subject to which such Certificates may be issued and the third relates to other matters. The Board can stipulate the conditions that the Assessing Officer will have to examine to satisfy himself/ herself that the total income of a recipient [an Assessee] justifies the deduction of income tax at a lower rateor no deduction. The Board may devise conditions which in it opinion that the Assessing Officer must consider, but those condition cannot impose a classification amongst the Assessees to even file an application when the provisions do not contemplate the same. 24. The Board has framed Rule 28AA of the IT Rules, and the relevant provisions of Rule 28AA of the IT Rules read as follows: xxx… The Assessing Officer, in view of the provisions of Rule 28AA (1) of the IT Rules, must record satisfaction as contemplated under Section Judicial Analysis 197(1) of the IT Act determining the existing and estimated liability of an Assessee taking into consideration [a] tax payable or estimated income of the previous year relevant to the assessment year, [b] tax payable onthe assessed or returned or estimated income as thecase may be for the four previous years, [c] the existing liability under the IT Act or Wealth Tax Act 1957, and advanced tax payment, and [d] tax deducted at source and tax collected at source for the assessment year relevant to the previous year till the date of making an application. 25. This Court, on reading the provisions of Section 197 of the IT Act and Rule 28AA of the IT Rules, must observe that there are essentially three parts to the proceedings for issuance of Certificate under Section 197(1) of the IT Act, and if the first two parts relate to the Assessing Officer’s satisfaction that an Assessee’s total income justifies no deduction, or deduction at a lower rate, and the determination of the existing and estimated incomes, the third aspect relates to the materials that the Assessing Officer must consider to determine the existing and estimated income to record satisfaction as aforesaid. The Assessing Office must consider the details aforementioned to determine existing liability and estimated income to arrive at a decision on being satisfied about the requirement under Section 197(1) of the IT Act. However, the details mentioned in Rule 28AA (2) of the IT Rules cannot be read to say that a Certificate under the aforesaid provisions will be issued only when the Returns for the previous four years are filed or that the tax must be paid for the previous year relevant to the assessment year in as much as the provisions of Rule 28AA (1) and 2(i) & 2(ii) of the IT Rules contemplate estimated liability and estimated income. 26. If the contention that only if the Returns are filed for four previous years, or the payment of tax, is accepted as a condition for entertaining an application under Section 197(1) of the IT Act, it would result in permitting classification and

502 Ahmedabad Chartered Accountant Journal November, 2023 rendering redundant the concept of estimated liability and estimated income that are built into Rule 28AA of the IT Rules. This Court, therefore, has no hesitation in holding that the provisions of Rule 28AA of the IT Rules can not be read as stipulating that an assessee, to be eligible to make an application under Section197(1) of the IT Act, should have necessarily filed Returns for previous four years and paid tax for the previous assessment year, and that the failure in these regards, or the absence thereof, would create an ineligibility to file an application. 27. Further, this Court must record that it isnot even in dispute that the Assessing Officer can consider the fact that the Returns for the four previous years as aforesaid are not filed and the tax that is paid, but the Assessing Officer must consider these in conjunction with the other circumstances to arrive at an objective satisfaction on whether a Certificate under Section 197(1) of the IT Act must beissued. The first question for consideration is answered accordingly. 28. The Assessing Officer under Section 197(1)of the IT Act will have to be satisfied objectively that the total income of a recipient justifies either deduction at a rate lower than the rates mentioned inthe provisions of Section 197(1) of the IT Act or that no deduction is necessary. This objective satisfaction must be based on the determination of the existing and the estimated liability, and the estimated liabilityand income will have to be determined considering the details mentioned in Rule 28AA (2) of the IT Rules. The Assessing Officer must also be satisfied that issuance of Certificate while convenient to the Assessee will not adversely affect the Revenue’s interest. 29. If the Assessing Officer, only upon examination of the circumstances mentioned in Rules 28AA of the IT Rules, is satisfied based on the estimated income and liability justifies a Certificate foreither deduction of income tax at a rate lower thanthe prescribed rate or no deduction of the income tax, the Certificate must be issued. This would be the true import of the expression that the Assessing Officer shall on an application give such Certificate asmay be appropriate and therefore, the liability of another entity, even if it is the sister concern, would be extraneous. In this regard, this Court must record that the reliance upon the decision of the High Court of Punjab and Haryana in Serco BPO (P) Ltd. v. Assistant Commissioner of Income-tax, TDS Circle, Gurgaon supra is well founded. In this case, the High Court of Punjab and Haryana, where the proceedings were pending against a person who has filed the application, has opined that consideration of the outcome of the proceedings is extraneous, and inthe present case, the proceedings that are referred torelate not to the petitioner but to its sister concern. Therefore, this Court must opine that the reasons assigned by the respondent to say that the petitioner will not be eligible for Certificate under Section 197 ofthe IT Act because of the ambiguity surrounding the transactions with the existing concern are not justified. Shreyash Retail Pvt. Ltd. vs DCIT W.P.(C) 11877/2023, dated 07/11/2023 – Delhi HC 12. Pertinently, this Court vide an order dated 06.09.2023 came to a prima facie observation qua the Impugned Certificate read with the Impugned Letter, that Respondent No. 1 set forth no reasons whatsoever as to why the Petitioners’ request that TDS should be deducted at a rate of 0.01% (zero point zero one per cent) ought not to be accepted. Further, at the request of Mr. Sanjay Kumar, Learned Standing Counsel, an opportunity was granted to the Respondents to file a counter-affidavit in the matter which would furnish reasons as regards the conclusion arrived at in the Impugned Order. However, this Court specifically observed therein that the Impugned Order must stand on its own legs, and accordingly, the reasons furnished by way of a counter-affidavit could not be supplanted into the Impugned Order. 13. At this juncture it would be apposite to refer to the decision of the Hon’ble Supreme Court of India (the “Supreme Court”) in Mohinder Singh Gill v. 24 Judicial Analysis

Ahmedabad Chartered Accountant Journal November, 2023 503 Chief Election Commr., (1978) 1 SCC 405 wherein the Supreme Court rejected the notation of supplementing reasons in relation to an executive order by way of an affidavit. The relevant extract is reproduced as under: “8. The second equally relevant matter is that when a statutory functionary makes an order based on certain grounds, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to court on account of a challenge, get validated by additional grounds later brought out. We may here draw attention to the observations of Bose, J. in Gordhandas Bhanji [Commr. of Police, Bombay v. Gordhandas Bhanji, 1951 SCC 1088 : AIR 1952 SC 16] : “Public orders, publicly made, in exercise of a statutory authority cannot be construed in the light of explanations subsequently given by the officer making the order of what he meant, or of what was in his mind, or what he intended to do. Public orders made by public authorities are meant to have public effect and are intended to affect the actings and conduct of those to whom they are addressed and must be construed objectively with reference to the language used in the order itself.” Orders are not like old wine becoming better as they grow older.” 14. Accordingly, this Court is of the considered opinion that the principle enunciated in Mohinder Singh Gill (Supra), is applicable to the case herein. Therefore this Court must consider whether the Impugned Order read with the Impugned Letter, is a speaking and well-reasoned order so as to satisfy the mandate of Rule 28AA of the IT Rules, devoid of the reasons furnished by the Respondents before this Court vide its counter affidavit. 15. We have perused the Impugned Order read with the Impugned Letter and we find that the reasons furnished by the Respondent No. 1 qua the Application i.e., as to why the Petitioners’ request that TDS should not be deducted at a rate of 0.01% (zero point zero one per cent), hinges on broad generalizations in relation to the propriety of projected estimations of revenue and tax liability, and accordingly has been has been issued mechanically reflecting non-application of mind. 16. Accordingly, following Camions Logistics Solutions (P) Ltd. (Supra) this Court find that the Impugned Order read with the Impugned Letter suffers from non-application of mind which would certainly result in grave prejudice to the Petitioner. Thus, we set aside the Impugned Actions and remand the matter back to Respondent No. 1 to conduct a fresh determination of the Application in accordance with law as expeditiously as possible. M/s. ST Engineering Electronics Ltd. vs. ACIT ITA No.755/Chny/2022, dated 08/11/ 2023, ITAT Chennai 5. It could be seen that the whole basis of making impugned addition is the financial projections made by the assessee in an application made in earlier year u/s 197 seeking lower deduction of tax at source certificate on contract revenue. In these proceeding, the assessees estimated the project revenue over the life of the contract and sought lower TDS certificates. The assessee has undertaken fixed price contract and accordingly, the contract revenue would remain quantified for the assessee over the life of the contract. The financial statements would establish that the assessee is following percentage completion of method of accounting to recognize the revenue in the books of accounts. The same methodology is being followed to claim the applicable costs. The execution of the project started from financial year 2012-13 and is ongoing till financial year 2017-18. This method of accounting is being consistently followed by the assessee and accepted by the revenue. We further find that in terms of para-25 of AS-7, under the percentage of 25 Judicial Analysis

504 Ahmedabad Chartered Accountant Journal November, 2023 completion method, contract revenue is recognized as revenue in the statement of profit and loss in the accounting periods in which the work is performed. Contract costs are usually recognized as an expense in the statement of profit and loss in the accounting periods in which the work to which they relate is performed. However, any expected excess of total contract costs over total contract revenue for the contract is recognized as an expense immediately irrespective of stage of completion of contract activity. Following the same, the assessee has recognized contract losses of Rs.495.65 Lacs and there is no deviation from the accounting standard as alleged by Ld. AO. 6. We find that in the application made u/s 197, the assessee has merely projected the contract revenue and these estimations could not be taken to be the turnover of the assessee disregarding the actual revenue earned by the assessee. No defect in books of accounts has been pointed out by Ld. AO. The deviation in estimation and actual revenue stood explained by the fact that the duration of the project got extended to financial year 2020-21 which is much beyond the agreed original contract period. The revenue projections submitted in the course of Sec.197 proceedings are merely based on the estimated work completion whereas the revenue shown in financial statements is based on actual work certified by contractor on the basis of survey of work performed. Therefore, the financial results were to be accepted. The assessee was unable to complete the project it had estimated and accordingly, it has recognized revenue only for the portion of the work that has been completed and certified. The same, in our considered opinion, is correct methodology. 7. Another pertinent fact is that aggregate contract revenue has been offered to tax over the life of the contract period starting from financial years 2012-13 to 2022-23 which is evidenced by the details of invoices as placed on record. The same supports the argument of Ld. AR that there is no leakage of contract revenue and taxing more amounts in this year would result into bringing to tax contract revenues much more than the fixed price contract value to be received by the assessee over the life of contract. The same could not be held to be justified, in any manner. 8. Therefore considering the facts and circumstances of the case, we would hold that the impugned additions are unsustainable. The corresponding grounds raised by the assessee stand allowed. The stay application has been rendered infructuous. ❉ ❉ ❉ Take up one idea. Make that one idea your life – think of it, dream of it, live on that idea. Let the brain, muscles, nerves, every part of your body, be full of that idea, and just leave every other idea alone. This is the way to success. “Swami Vivekananda” Judicial Analysis

Ahmedabad Chartered Accountant Journal November, 2023 505 CA. Kaushik D. Shah [email protected]. Issue Whether penalty will be charged under section 271B for failure to get accounts audited in cases where no books of account are maintained? Proposition As per section 44AA, books of account and other documents must be maintained in accordance with the provisions of the act to enable the AO to compute the total income. Failure to keep and maintain the books of account and other documents as required by section 44AA is made liable to penalty under section 271A of a sum of 25,000 with effect from 1st April, 1976 at the discretion of the AO where there is no reasonable cause. According to the section 271B, the failure to get the accounts audited or to obtain and furnish an audit report, as required under section 44AB, shall made liable to penalty, of a sum equal to 0.5 per cent of the total sales, turnover or gross receipts of business or profession subject to a ceiling of 1,50,000, subject to the discretion of the AO. Section 273B provides that no penalty shall be imposable where the person proves that he had a reasonable cause for the failure specified under section 271B. Section 274 provides that no order imposing a penalty shall be made unless the Assessee has been heard or is given a reasonable opportunity of being heard. View against the proposition In the case of Rakesh Kumar Jha vs. ITO, 224 TTJ (Ranchi) 11, the assessee was required to get his books of account audited in accordance with section 44AB and on account of failure to do so, assessment was made on estimation basis on account of nonmaintenance of books of account applying provisions of section 145(3). The Assessing officer also levied penalty under section 271B. The penalty was confirmed by the commissioner. However, the assessee contended that his books of account were rejected, and therefore, he was held to have not maintained the proper books of account as prescribed. It was, therefore, not possible for him to get the accounts audited under section 44AB of the Act, and in that view of the matter, it was not possible to levy penalty under section 271B for not getting the accounts audited. The Tribunal upheld the order of AO and held that to exclude the case of a person from levy of penalty under section 271B on the ground that he has not maintained books of account was not justified legally, and was in violation of the principals of justice, equity and good conscience. In the case of Bharat Construction Co vs. ITO, 153 CTR 414, the AO levied penalty under section 271B for not getting the accounts audited, preceded by the proceedings for levy of penalty under section 271A for non-maintenance of books. It was upheld by the Madhya Pradesh High Court on the ground that the defaults contemplated under the two provisions were separate and distinct and thus, the ruling was in favour of revenue. View in favour of the proposition In the case of Taranjeet Singh Alagh Vs ITO (ITAT Delhi), in ITA No. 787/Del/2020 the Assessee was found to have not maintained the books of account and had not obtained the audit report. The AO levied penalty under section 271A for not maintaining the books of account and under section 271B for not obtaining and furnishing the Tax Audit Report. The AO later dropped the proceedings under section 271A but levied penalty under section 271B of the Act. Controversies

506 Ahmedabad Chartered Accountant Journal November, 2023 The assessee contended in writing before the tribunal that the reason accounts were not audited in the first place is that there were no books maintained and now that the penalty under section 271A has been dropped it is only right to drop the penalty under section 271B. The court held that if he was not guilty of non-maintaining of books of account, the presumption would be that he shall not require to maintain the books of account. Under these undisputed facts, imposing a penalty for non-auditing of books of account is not justified. Thereby, ruling in the favour of the assessee. It was further contended that no penalty under section 271B was maintainable where no books of account were maintained, as no audit was possible. Reliance was placed on the decision of the bench in the case of Chander Prakash Batra, ITA No. 4305/Del./2011 to support the proposition that no penalty could have been levied. The tribunal noted the facts, particularly, the fact that the Assessee was held to be not in default under section 271A. It proceeded to hold that no penalty under section 271B was leviable where books of account were not maintained, and the reason for not maintaining the books was found to be justified by the AO. Paragraph 4.1 of the order reads as under: “We have given our thoughtful consideration to the present appeal, admittedly, the penalty was initiated U/s 271A of the Act for non- maintenance of books of account as well as under s. 271B for not complying with the provisions of section 44AB of the Act regarding the auditing of the account. The penalty for nonmaintenance on books of account was dropped but the penalty for not getting the accounts audited is sustained. We find merits into the contentions of the Assessee that if he was not guilty of non-maintaining of books of account, the presumption would be that he shall not require to maintain the books of account. Under these undisputed facts, imposing penalty for non-auditing of books of account is not justified. Therefore, we hereby direct the Assessing authority to delete the penalty.” The appeal of the Assessee was allowed by the Tribunal, and the penalty was deleted. Summation There are two distinct provisions, one requires the maintenance of books of account by specified pers the maintain prescribed cases, and another provision requires the audit of accounts that were required to be maintained by the first provision. Section 44A provides for maintenance of accounts, while section 44AB requires the audit of accounts that are required to be maintained by section 44A of the Act. There are distinct provisions for levy of penalty for two different defaults. One for penalising an Assessee under section 271A for the offence of not maintaining books of account, and the second for penalising him under section 271B for not getting the accounts audited, and obtaining the audit report and filing it in time. These two provisions are separate and are provided for by two distinct provisions introduced at different points of time for penalising two different offences. The Allahabad High Court precisely held that no penalty was leviable for not obtaining the audit report in cases where the Assessee had otherwise not maintained the books of account - Bisauli Tractors (supra). The court appreciated that the Assessee could not have got the accounts audited when he had not maintained the booksappropriate for the authorities to have initiated and levied penalty under section 271A. I humbly conclude by giving my opinion that Section 273B saves cases from levy of penalty in cases where the failure was for a reasonable cause and what better cause can be conceived for the defence under section 271B, where the books of account are not maintained at all. ❉ ❉ ❉ Controversies

Ahmedabad Chartered Accountant Journal November, 2023 507 Regulation of Payment Aggregator – Cross Border (PA - Cross Border) All Payment Aggregators (PAs) which facilitate processing of domestic transactions in online mode are covered within the scope of the below circulars: a. ‘Guidelines on Regulation of Payment Aggregators and Payment Gateways’ – (a) DPSS. CO. PD. No. 1810/02.14.008/2019-20 dated March 17, 2020 and (b) CO.DPSS. POLC.No.S33/02-14-008/2020-2021 dated March 31, 2021, b. ‘Processing and Settlement of Export related receipts facilitated by Online Payment Gateways’ - A.P. (DIR Series) Circular No. 17 dated November 16, 2010, c. ‘Processing and Settlement of Export related receipts facilitated by Online Payment Gateways – Enhancement of the value of transaction’ - A.P. (DIR Series) Circular No. 109 dated June 11, 2013, d. ‘Processing and settlement of import and export related payments facilitated by Online Payment Gateway Service Providers’ – A.P. (DIR Series) Circular No.16 dated September 24, 2015, and e. ‘Processing and settlement of small value Export and Import related payments facilitated by Online Export-Import Facilitators (OEIF) (erstwhile OPGSP)’ – draft circular issued on April 7, 2022 for seeking feedback from banks and other stakeholders. Further, instructions for cross-border payment transactions are provided for in the circulars mentioned as well as through specific approval given by the RBI to banks for their collection agent arrangements. Keeping in view the developments that have taken place in the area of cross-border payments, it has been decided to bring all entities facilitating cross-border payment transactions for import and export of goods and services under direct regulation of the RBI. Such entities shall be treated as Payment Aggregator-Cross Border (PA-CB). Entities, including Authorised Dealer (AD) banks, PAs and PAs-CB, involved in processing/settlement of cross-border payment transactions for import and export of goods and services, shall comply with these instructions (as updated from time to time). This directive is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), and, Section 10 (4) and Section 11 (1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999), and is without prejudice to permissions/approvals, if any, required under any other law. Source:RBI/2023-24/80CO.DPSS.POLC.No.S-786/02- 14-008/2023-24dated October 31, 2023 For full text refer:https://rbi.org.in/Scripts/ BS_CircularIndexDisplay.aspx?Id=12561 ❉ ❉ ❉ CA. Dr. Savan R. Godiawala [email protected] 12 FEMA Updates

508 Ahmedabad Chartered Accountant Journal November, 2023 [I] Important Case Laws: [1] Issue: HC directed department to utilize penalty amount deposited in electronic cash ledger towards pre-deposit & hear appeal. Case Laws: Batra Brothers (P) Ltd. v. Union Territory of Ladakh [2023] 155 taxmann.com 266 (Jammu & Kashmir and Ladakh) Facts: The petitioner filed an appeal against adjudication order but the appeal was dismissed due to nonpayment of 25% pre-deposit of penalty as mandated under first proviso to sub-section (6) of section 107 of CGST Act, 2017. The petitioner filed writ petition against the rejection order and contended that the amount was deposited under electronic cash ledger. Held: The Hon’ble High Court noted that the petitioner made payment of 25% of penalty amount by depositing in electronic Cash Ledger. As per section 49, the amount available in electronic cash ledger could be used by assessee for making any payment towards tax, interest, penalty fees or any other amount payable under provisions of this Act. In the instant case, the requisite amount was already deposited in electronic cash ledger by petitioner, therefore, it would be appropriate and in interest of justice to hear appeal and permit department to take out and utilize amount of predeposit. Thus, the Court held that the appeal shall be taken up for consideration on merits. [2] Issue: HC directed deptt. to exclude time taken in filing revocation application for limitation period of appeal Case Laws: Sakthi Fashions v. Appellate Authority/ Additional Commissioner of GST (Appeals-II) [2023] 155 taxmann.com 314 (Mad). Facts: The petitioner was issued show cause notice after verification of records and physical inspection of its place of business to show cause as to why registration obtained by petitioner should not be cancelled. Since, the petitioner failed to respond to notice, an order was passed cancelling registration of petitioner. It filed application for revocation of cancellation of registration which was also rejected since no reply was furnished. Thereafter, the petitioner filed appeal against order for cancellation of registration but the same was rejected on ground of limitation being filed with a delay of 39 days and it filed instant writ petition. Held: The Hon’ble High Court noted that since petitioner was prosecuting application filed for revocation of cancellation of registration by filing an application under section 30 of CGST Act, the time taken in filing the revocation application was liable to be excluded for computing time period for filing of appeal. Hence the Court directed department to consider petitioner’s appeal and pass appropriate orders on merits in accordance with law. CA. Vishrut R. Shah [email protected] CA. Bihari B. Shah [email protected] GST and VAT Judgments and Updates

Ahmedabad Chartered Accountant Journal November, 2023 509 GST and VAT - Judgements and Updates [3] Issue: Refund of ITC can’t be denied on ground that one of suppliers had erroneously mentioned HSN in its invoices: HC: Case Laws: Simran Chandwani v. Principal Commissioner of CGST, Delhi [2023] 155 taxmann.com 318 (Delhi) Facts: The petitioner was engaged in the business of selling footwear which was taxable a 55% if value of product was below Rs. 1,000 while tax would be 12% if value of footwear was above Rs. 1,000/-. It filed refund application but the department denied refund on the ground that one of its suppliers had erroneously classified the supplies as HSN 6404 in its invoices instead of HSN 6406. It filed writ petition against the rejection of refund application. Held: The Hon’ble High Court noted that the petitioner had produced a certificate from the said supplier who acknowledged that it had incorrectly classified goods under HSN 6404 instead of 6406, Further the GST authorities accepted wrong classification of product by a singular supplier as correct but had not accepted correct classification of goods which all other suppliers adopted in their invoices. Therefore, the Court held that the refund of ITC could not be denied to petitioner when all other suppliers had mentioned correct classification. [4] Issue: Assessing Authority must provide hearing opportunity before passing an adverse order even if not demanded: HC: Case Laws: B. L. Pahariya Medical Store v. State of U.P. [2023] 153 taxmann.com 659 (All) Facts: In the present case, the petitioner challenged the order passed by Deputy Commissioner in which huge demand of approx. Rs. 26 Lakhs had been raised against the petitioner. It was contended that proper opportunity of hearing was not provided before passing adverse order. Held: The Hon’ble High Court noted that as per Section 75 of CGST Act, 2017, the Assessing Authority is bound to afford opportunity of personal hearing to the assessee before passing adverse assessment order. Even otherwise in context of an assessment order creating heavy civil liability, a minimal opportunity of hearing is to be granted in real terms to the assessee. Also, the Court held that a co-ordinate bench of this Court in case of Bharat Mint & Allied Chemicals v. Commissioner Commercial Tax held that a person/assessee is not required to request for ‘opportunity of personal hearing’ and it remained mandatory upon the Assessing Authority to afford such opportunity before passing an adverse order. Therefore, the Court held that the petition was allowed and the impugned order was liable to be set aside. [5] Issue: Writ Jurisdiction can’t be exercised at SCN stage when it contains necessary details and grounds: Allahabad HC: Case Law: Abhay Traders v, CCT U.P.[2023] 153 taxmann.com 725 (All). Facts: The petitioner received a notice alleging that it had made bogus purchases and credit was wrongly claimed. The petitioner was directed to reply why tax, penalty and interest would not be imposed upon the petitioner. The petitioner filed writ petition to challenge the notice by contending that the notice itself was vague and bad-in-law and, therefore be quashed and set-aside. Held: The Hon’ble High Court noted that the requirement of principles of natural justice by a show cause Continued to page 531

510 Ahmedabad Chartered Accountant Journal November, 2023 1) ITC not available on Central Air Conditioning Plant, Locker Cabinet, Lift, Electric Fittings, Generator, Fire Extinguisher, Architect Service & Interior Designing Fees. Advance Ruling (Appeal) No. Guj/GAAAR/ APPEAL/2023/05 dated October 10th 2023 In M/s. The Varachha Co-Op. Bank Ltd. Brief Facts - M/s. Varachha Co-Op. Bank Ltd. are constructing a new administrative building and incurring cost on various services. - It was also contended that they were eligible for Input Tax Credit [ITC] on the below mentioned goods and services in view of the forgoing viz: CA. Monish S. Shah [email protected] Sr. Nature of Cost/Expenses Head under which expense Capitalized Remark No. will be booked or not 1. Central Air Conditioning Plant & Machinery Yes Being plant not covered under Plant immovable property & hence ITC available. 2. New Locker Cabinet Locker Cabinet Yes Being furniture not covered under immovable property & hence ITC available. 3. Lift Plant & Machinery Yes Being plant not covered under immovable property & hence ITC available. 4. Electrical Fittings such as Electrical Fittings Yes Being electrical fittings not Cables, Switches, NCB covered under immovable and other Electrical property & hence ITC available. consumables material 5. Roof Solar Plant Plant & Machinery Yes Being plant not covered under immovable property & hence ITC available. 6. Generator Plant & Machinery Yes Being plant not covered under immovable property & hence ITC available. 7. Fire Safety Extinguishers Plant & Machinery Yes Being plant not covered under immovable property & hence ITC available. 8. Architect Service Fees Profit & Loss Account No Not being capitalized and charged to P&L A/c. no restriction on ITC. 9. Interior Designing Fees Profit & Loss Account No Not being capitalized and charged to P&L A/c. no restriction on ITC.

Ahmedabad Chartered Accountant Journal November, 2023 511 Advance Ruling under GST Question Whether M/s. Varachha Co-Op. Bank Ltd. having undertaken the construction of their new administrative office, will be eligible for the ITC of the above mentioned goods and services? The GAAR Ruling as under [GUJ/GAAR/R/37/2001 – 30.07.2021] a) Input Tax Credit is admissible on New Locker Cabinet and Generator. b) Input Tax Credit is blocked under section 17(5)(c) CGST Act for central; Air Conditioning Plant, Lift, Electrical Fittings, Fire safety Extinguishers, Roof Plant; c) Input Tax Credit is blocked under section 17(5)(d) CGST Act for Architect Services and Interior Decorator Fees. Interpretation of Applicant - Central Air Conditioning System: It states that the expression of the Works Contract under section 2(119) of the CGST Act is limited to contracts to do with immovable property, which is defined in sub clause 36 of clause 3 of the General Clauses Act, 1897. Section 3 of the Transfer of Property Act 1882 further defines the phrase ‘attached to earth’. The supply received by the applicant does not involveassimilation with the property and the work carried out by the supplier is only to make the plant ready for a ‘wobble free operation’. Thus the activity undertaken by the supplier cannot be considered as an ‘Immovable Property’by applying the permanency test. The applicant also relied upon the decision of AAAR of Maharashtra in the case of Nikhil Comforts [2020(41)GSTL, 417(AAAR-GST-Mah.)] and the ruling in the case of M/s. BAHL Papers Mills Ltd. [2018(14)GSTL, 306(AAR-GST)]. - Lift: The supply of Lift will be booked under the head of ‘Plant & Machinery’ in the books of accounts. The purpose behind attaching Lift to a concrete base was to prevent wobbling of the lift, to secure maximum operational efficiency and also for safety. The lift as per the applicant, will be saleable if somebody wants to purchase it could be dismantled and sold. Thus, it would not be prudent to hold left, assembled and created at the premises, to be an immovable property. Further, the apex court in the case of M/s. Sirpur Paper Mills [1998 (97) ELT 3 (SC)] held that where plant & Machinery are capable of being dismantled and sold without being destroyed and are only embedded to the earth because of the operational efficiency, it is not an immovable property, Even by this analogy also, ITC is available in their case. - Electrical Fittings: The applicant will install ‘Electric Fittings’ both at the exterior and the interior. The appellant does not intend to avail ITC on Electrical Fittings used in civil construction as it is being blocked via section 17(5). However, for rest of the ‘Electrical fittings’, there is no specific barring provisions. The applicant also wishes to rely on the ruling of M/s. Nipro India Corporation P. Ltd. [2018(18)GSTL, 289(AAR-GST)]. - Roof Solar Plant: The solar equipment can be qualified as ‘Plant & Machinery’ will be used for furtherance of business etc. in its business of supplying taxable service. Even though generation of electricity is an exempt supply, the applicant will be using electricity solely & consuming it captively for the purpose of supplying taxable services. From the above it is inferred that the ‘Roof Solar Plant’ will be attached to earth for operational efficiency. The whole purpose behind attaching it to a concrete base will be to secure maximum operational efficiency and for safety purpose. Further, it is also seen that the ‘Roof Solar Plant’ is saleable and that if somebody wants purchase, it can be dismantled and sold. Further, it would not be correct to hold that the ‘Roof Solar Plant’ assemble and erected at the premises of the appellant is an immovable property.

512 Ahmedabad Chartered Accountant Journal November, 2023 - Fire Safety Extinguishers: Fire Safety Extinguishers is nothing but ‘Plant and Machinery’ attached to earth which is movable as well as marketable also. They further also relied on the case of M/s. Sirpur Paper Mills, supra. Further, as per the Gujarat Fire Prevention and Life Safety Measures Act, 2013, the applicant is duty bound to install fire safety instrument at their premises. Further credit restriction is only in so far as input services ‘for construction of an immovable property’ is concerned and does not apply capital goods. The restriction provided under section 17(5)(c) & (d) does not apply to procurement of various inputs which are installed in their administrative building. Hence, ITC should be available to the applicant on these goods. - Architect Service Fees: The applicant appointed architect for structural design of building. The explanation under section 17(5) defines expression ‘construction’. In the instant case, the said expense is not capitalized and is charged to ‘Profit & Loss account’ and hence ITC is admissible. - Interior Designing Fees: The applicant has appointed the interior designer for ‘Interior Design Development’ of building which will be ultimately used for provision of supply of service. In the instance case, the said expense is not capitalized and is charged to ‘Profit & Loss Account’ and hence the ITC is admissible. Findings and Arguments - The relevant part of the provisions of ITC and blocked credit provided under section 16 & 17 of the CGST Act 2017, state as under: - Section 16 Eligibility and Conditions for taking input tax credit: Every register person shall subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. - Section 17 Apportionment of credit and blocked credits: 1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for any other purpose, the amount of any credit shall be restricted to so much of the input tax credit as is attributable to the purpose of his business. 2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the IGST Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax credit as is attributable to the said taxable supplies including zero-rated supplies. 5) Notwithstanding anything contained in sub-section (1) of section 16 and sub-section (1) of section 18, input tax credit shall not be available in respect of the following namely:- (c) Works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of works contract service (d) Goods or services or both received by a taxable person for construction of an immovable property (other than plant or machinery) on his own account including when such goods or services or both are used in the course or furtherance of business. Explanation: For the purpose of clause (c) and (d), the expression ‘construction’ includes re-construction, renovation, addition or alteration or repairs, to the extent of capitalization, to the said immovable property. Advance Ruling under GST

Ahmedabad Chartered Accountant Journal November, 2023 513 Explanation: For the purpose of this chapter and chapter VI, the expression ‘plant and machinery’ means apparatus, equipment and machinery fixed to earth by foundation or structural support that are used for making outward supply of goods or services or both and includes such foundation and structural supports but excludes (i) land, building or any other civil structures; (ii) telecommunication towers: and (iii) pipelines laid outside the factory premises. - ‘Immovable Property’ is not defined under GST. However it’s defined under section 32(6) of the General Clauses Act, 1897 to include land, benefits to arising out of land and things attached to the earth, or permanently fastened to anything attached to the earth. Likewise section 3(36) of the General Clauses Act, 1897 defines ‘Movable Property’ to mean property of every description, except immovable property. Further, section 3 of the Transfer of Property Act, 1882 stipulates that unless there is something repugnant in the subject or context, ‘Immovable Property’ does not include standing timber, growing crops or grass. Section 3 further, defines the term ‘attached to the earth’ to mean (a) rooted in the earth, as in the case of trees and shrubs. (b) embedded to earth, as in the case of walls or building and (c) attached to what is so embedded for permanent beneficial enjoyment of that to which it is attached. Thus, on a conjoint reading, ‘Immovable Property’, essentially means something which is attached to the earth, or permanently fastened to anything attached to the earth, or forming part of the land and not agreed to be served before supply or under contract of supply. - Central Air Conditioning Plant: The applicant has not submitted the details of the Central Air Conditioning Plant, its installation and functioning. However, from the general details of installation and functioning of a central air conditioning plant mentioned above, we find that the contention of the applicant that the supply does not involve assimilation with the property and the work carried out by the supplier is only towards making the plant ready for a ‘wobble free operation’ is not true representation of facts. As is evident the Central Air Conditioning Plant becomes a part of the building once it is installed and thereby an immovable property. As the construction of the central air conditioning plant via a works contract service as pointed out above, makes it an immovable property, it ceases to be a plant and machinery. - Lift: The applicant has entered into an agreement with M/s. Schindler India Pvt. Ltd. for supply and installation of Lift. The component of lift include the elevator car, Elevator doors, hoist rails, call buttons, emergency communication system, lighting and ventilation. It had installing, template fixing, commissioning, quality inspection and handover to customer. On examining the above agreement for supply of lift, we find that the same falls under the category of ‘works contracts’ service as defined under section 2(119) of CGST Act, 2017 as it fulfills the description of the works contract service. As the erection, installation and commissioning of lift via a works contract service as pointed out above, makes it an immovable property, it ceases to be a plant and machinery. - Electrical fittings such as Cables, Switches, NCB and other Electrical consumables Materials: The applicant state that they will install ‘Electrical Fittings’ in both exterior and interior and further concedes that they do not intended to avail ITC on Electric Fittings used in civil construction. However, for the rest of ‘Electrical Fittings’ they intend to avail ITC on the premises that there is no specific barring provisions. The electrical fittings are mostly concealed into the wall/floor of the building. They are concealed or fitted on to the building through pipes as it serves the dual purpose of safety and aesthetics. The supply of electrical fittings involves its installation also. The supply therefore falls under the category of ‘Works Contract Service’. Further on installation of the electrical fittings it’s becomes part of the building and thereby an immovable property. Advance Ruling under GST

514 Ahmedabad Chartered Accountant Journal November, 2023 - Roof Solar Plant: As per the applicant they will be installing a Roof Solar Plant atop their building to generate electricity which will ultimately be used for provision of supply of service. They further stated that they will enter into comprehensive SITC Contract (supply, installation, testing and commissioning) with the vendor. The solar PV Plant is for captive consumption as the energy generated is to be used in-house & only in case the available energy exceeds the demand, it would be ‘exported’ to the DGVCL grid via Net Metering System. It will have civil work with four foundations per panel. The entire structure is supported by nuts and bolts with zero welding which reduces the fragility during high impacts. In view of the foregoing, it is abundantly clear that the roof solar plant, affixed to foundation via nuts and bolts and which has the flexibility of 4 different angles is not an immovable property but a plant and machinery. The applicant has further stated that they have capitalized the roof solar plant in their books of accounts. The Roof Solar Plant, as is evident is not permanently fastened to the building. Thus, it qualifies as a plant and machinery and is not an immovable property. - Fire Safety Extinguishers: The applicant has entered into agreement for supply and installation of ‘Fire Safety Extinguishers’ in their building premises. The applicant has submitted that in terms of section 18, 19, 20 & 21 of The Gujarat Fire Prevention and Life Safety Measures Act, 2013, it is mandatory to install fire safety instrument at their premises. We find that while section 18 of the said Act ibid makes installation of firefighting and life safety installation mandatory, Section 19 mandates that the occupancy certificate can be issued only after compliance of the provision of section 18. Thus, it can be inferred that fire safety extinguishers are integral part of any building. A building is only complete and can be occupied only when Fire Safety Extinguishers are in palace. Fire Safety Extinguishers however are permanently attached to the building and are in place during the entire life time of building. As the supply and installation of fire safety extinguishers as pointed out above, makes it an immovable property, it ceases to be a plant and machinery. - Architect Service Fees and Interior Designer Fees: The applicant, we find has contended that the expenses related to Architect services and Interior Designing fees is not being capitalized and is charged to Profit & Loss Account, to further substantiate their claim for availment of ITC. We find that accounting Standard 10 issued in terms of Section 133 of the companies Act, 2013, prescribe the accounting treatment for property, plant and equipment. AS 10 State as follows: The Cost of an item of property, plant and equipment comprises: a) Its purchase price, including import duties and nonrefundable purchase taxes, after deducting trade discounts and rebates. b) Any costs directly attributable to brining the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. c) The initial estimate of the costs of dismantling, removing the item and restoring the site on which it is located, referred to as ‘decommissioning, restoration and similar liabilities’, the obligation for which an enterprise incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during the period. As is evident, AS 10, prescribes capitalization of professional fees, meaning thereby that in this case both these services viz architect service fees and interior designer fees, should in terms of the accounting standards be capitalized. The averment therefore that since they are booking a capital expense under profit and loss account will make them eligible for ITC, is not a legally tenable argument. Advance Ruling under GST

Ahmedabad Chartered Accountant Journal November, 2023 515 Ruling: - Central Air Conditioning Plant: We hold that the ITC on the supply of Central Air Conditioning Plant, ceases to be a plant and machinery & hence, is blocked under section 17(5)(c) of CGST Act, 2017 as the same is works contract services for construction of an immovable property. - Lift: As per discussion in above para (Lift) & section 17 of the CGST Act, the applicant is not credited to ITC of GST paid on supply of Lift. - Electrical fittings such as Cables, Switches, NCB and other Electrical consumables Materials: We find that the supply of electrical fittings after installation and commissioning becomes part of the building i.e. immovable property and thus in terms of section 17 of the CGST Act, we hold that the applicant is not entitled to ITC of GST paid on Electrical Fittings. - Roof Solar Plant: It is not covered under blocked credit as mentioned in section 17(5)(d) of the CGST Act, 2017. Therefore we hold that the applicant is eligible for input tax credit on solar roof plant. - Fire Safety Extinguishers: The applicant is not entitled to ITC of GST paid on fire safety extinguishers in view of the provisions of section 17(5)(c) of the CGST Act, 2017. - Architect Service Fees and Interior Designer Fees: The applicant is not entitled to ITC of GST paid on Architect Service Fees and Interior Designing Fees in view of the provisions of section 17(5)(d) of the CGST Act, 2017. Comment: This AAAR will clarify that when ITC of the above goods or services or both are not available. The Assessee many time give the various reason for availing the ITC of the above goods or service or both but ITC is not available for above goods or services or both as per section 17 of the CGST Act, 2017. However, the AAAR or AAR is only limited to the one who takes them. We believe that as far as AC, Electrical Fittings, Solar Plant and Fire Extinguisher are allowed ITC and they are removable and will thus fall under Movable Property and not Immovable Assets. Further, even the Supreme Court Judgment in Safari retreat is pending and it may open new Pandora’s Box. However, to be safe the said ITC of capital assets maybe forgone and Depreciation may be claimed under IT Act instead of going into litigation on the said matter. As far as Bank Audit also this AAAR needs to be seen and if corresponding impacts not given MOC may be passed. The banks are allowed only 50% of ITC so the impact may not be huge but that compared in a normal business may be different and if the use is different or even if they are not capitalized may have a different footing. Thus, if ITC is claimed on said goods one must be cautious before taking the same as it may fall under the Blocked ITC of Sec 17 of CGST ACT 2017. ❉ ❉ ❉ Advance Ruling under GST

516 Ahmedabad Chartered Accountant Journal November, 2023 MCA UPDATES: 1) The Companies (Incorporation) Third Amendment Rules, 2023: With effect from 21.10.2023, following changes have been made in Rule 30(9) which pertains to (Shifting of Registered Office from one State or Union Territory to another State) in the Companies (Incorporation) Rules, 2014: Rule No. Effect of change Rule 30(9) The words “and may include such order as to costs as it thinks proper" shall be omitted; Proviso “Provided further that where the after management of the company has Proviso been taken over by new in Rule management under a resolution plan 30(9) approved under section 31 of the [Inserted] Insolvency Bankruptcy Code, 2016 (31 of 2016) and no appeal against the resolution plan is pending in any Court or Tribunal and no inquiry, inspection, investigation is pending or initiated after the approval of the said resolution plan, the shifting of the registered office may be allowed.” [F. No. 1/13/2013-CL-V, Vol. IV dated 20.10.2023] 2) The Companies (Management and Administration) Second Amendment Rules, 2023: Vide these amendment rules, following changes have been made in the Companies (Management and Administration) Rules, 2023: CA. Naveen Mandovara [email protected] Update Rule No. Effect of change Rule 9 (4) “(4) Every company shall designate [Inserted] a person who shall be responsible for furnishing, and extending cooperation for providing, information to the Registrar or any other authorised officer with respect to beneficial interest in shares of the company. Rule 9 (5) (5) For the purpose of sub-rule(4), the [Inserted] company may designatei) a company secretary, if there is a requirement of appointment of such company secretary under the Act and the rules made thereunder; or ii) a key managerial personnel, other than the company secretary; or iii) every director, if there is no company secretary or key managerial personnel Rule 9 (6) (6) Until a person is designated as [Inserted] referred under sub-rule (4), the following persons shall be deemed to have been designated person; i) company secretary, if there is a requirement of appointment of such company secretary under the Act and the rules made thereunder; or ii) every Managing Director or Manager, in case a company secretary has not been appointed; or

Ahmedabad Chartered Accountant Journal November, 2023 517 iii) (iii) every director, if there is no company secretary or a Managing Director or Manager Rule 9 (7) (7) Every company shall inform the [Inserted] details of the designated person in Annual return. Rule 9 (8) (8) If the company changes the [Inserted] designated person at any time, it shall intimate the same to the Registrar in e-form GNL-2 specified under the Companies (Registration Offices and Fees) Rules, 2014. [F. No. 01/34/2013 CL-V (Pt-III) dated 27.10.2023] 3) The Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023: Vide these amendment rules, following changes have been made in the Companies (Prospectus and Allotment of Securities) Rules, 2023: Rule No. Effect of change Rule 9(1)(2) “(2) Every public company which [Inserted] issued share warrants prior to commencement of the Companies Act, 2013 (18 of 2013) and not converted into shares shall, - a) within a period of three months of the commencement of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023 inform the Registrar about the details of such share warrants in Form PAS7; and b) within a period of six months of the commencement of the Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2023, require the bearers of the share warrants to surrender such warrants to the company and get the shares dematerialised in their account and for this purpose the company shall place a notice for the bearers of share warrants in Form PAS-8 on the website of the company, if any and shall also publish the same in a newspaper in the vernacular language which is in circulation in the district and in English language in an English newspaper, widely circulated in the State in which the registered office of the company is situated. Rule 9(1)(2) (3) In case any bearer of share warrant [Inserted] does not surrender the share warrants within the period referred to in subrule (2), the company shall convert such share warrants into dematerialised form and transfer thesame to the Investor Education and Protection Fund established under section 125 of the Act.” Rule 9B “9B. Issue of securities in [Inserted] dematerialised form by private companies:- (1) Every private company, other than a small company, shall within the period referred to in sub-rule (2)– a) issue the securities only in dematerialised form; and b) facilitate dematerialisation of all its securities, in accordance with provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder. (2) A private company, which as on last day of a financial year, ending on or after 31st March, 2023, is not a small company as per audited financial statements for such financial year, shall, within eighteen months of closure of such financial year, comply with the provisions of this rule. Corporate Law Update

518 Ahmedabad Chartered Accountant Journal November, 2023 (3) Every private company referred to in sub-rule (2) making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer, after the date when it is required to comply with this rule, shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with the provisions of the Depositories Act, 1996 (22 of 1996) and regulations made thereunder. (4) Every holder of securities of the private company referred to in sub-rule (2),- a. who intends to transfer such securities on or after the date when the company is required to comply with this rule, shall get such securities dematerialised before the transfer; or b. who subscribes to any securities of the concerned private company whether by way of private placement or bonus shares or rights offer on or after the date when the company is required to comply with this rule shall ensure that all his securities are held in dematerialised form before such subscription. (5) The provisions of sub-rules (4) to (10) of rule 9A shall, mutatis mutandis, apply to the dematerialisation of securities under this rule. (6) The provisions of this rule shall not apply in case of a Government company. [F. NO. 1/21/2013-CL-V dated 27.10.2023] 4) The Limited Liability Partnership (Third Amendment) Rules, 2023: Vide these amendment rules, following changes have been made in the Limited Liability Partnership Rules, 2009: Rule No. Effect of change Rule 22A “22A. Register of Partners.- [Inserted] (1) Every limited liability partnership shall, from the date of its incorporation, maintain a register of its partners in Form 4A which shall be kept at the registered office of the limited liability partnership: Provided that in the case of limited liability partnership existing on the date of commencement of the Limited Liability Partnership (Third Amendment) Rules, 2023, shall maintain the register of partners in Form 4A within thirty days from such commencement. (2) The register of partners shall contain the following particulars, in respect of each partner, namely:- a) name of the partner; address (registered office address in case the member is a body corporate); e-mail address; Permanent Account Number or Corporate Identification Number; Unique Identification Number, if any; father or mother or spouse’s name; occupation; status; Nationality; name and address of nominee; b) date of becoming partner; c) date of cessation; d) amount and nature of contribution (indicating tangible, intangible, movable, immovable or other benefit to the limited liability partnership, Corporate Law Update

Ahmedabad Chartered Accountant Journal November, 2023 519 including money, promissory notes, other agreements to contribute cash or property, and contracts for services performed or to be performed) with monetary value; and e) any other interest, if any, (3) The entries in the register maintained under this rule shall be made within seven days pursuant to any change made in the contribution amount, or in name and details of the partners in the Limited Liability Partnership agreement, or in cases of cessation of partnership interest. (4) If any rectification is made in the register maintained under this rule by the Limited Liability Partnership pursuant to any order passed by the competent authority under any law, the necessary reference of such order shall be indicated in the respective register and for reasons to be recorded in writing. Rule 22B 22B. Declaration in respect of [Inserted] beneficial interest in any contribution. (1) A person whose name is entered in the register of partners of a Limited Liability Partnership but does not hold any beneficial interest fully or partly in contribution (hereinafter referred to as “the registered partner”), such person shall file with the Limited Liability Partnership, a declaration to that effect in Form 4B within a period of thirty days from the date on which his name is entered in the register of partners specifying the name and other particulars of the person who actually holds any beneficial interest in such contributions: Provided that where any change occurs in the beneficial interest in such contribution, the registered partner shall, within a period of thirty days from the date of such change, make a declaration of such change to the limited liability partnership in Form 4B. (2) Every person who holds or acquires a beneficial interest in contribution of a Limited Liability Partnership but his name is not registered in the register of partners (hereinafter referred to as “the beneficial partner”) shall file with Limited Liability Partnership, a declaration disclosing such interest in Form 4C within a period of thirty days after acquiring such beneficial interest in the contribution of the Limited Liability Partnership specifying the nature of his interest, particulars of the partner in whose name the contribution stand registered in the books of the limited liability partnership: Provided that where any change occurs in the beneficial interest in such contribution, the beneficial partner shall, within a period of thirty days from the date of such change, make a declaration of such change to the limited liability partnership in Form 4C. Provided further that if the beneficial interest of registered partner is limited to the contribution stated against his name in the register of partners but he does not hold beneficial interest in contribution against any other registered partner, then, he shall not be required to file such declaration. Corporate Law Update

520 Ahmedabad Chartered Accountant Journal November, 2023 (3) Where any declaration under subrule (1) or sub-rule (2) is received by the Limited Liability Partnership, the Limited Liability Partnership shall record such declaration in the register of partners and shall file, within a period of thirty days from the date of receipt of declaration by it, a return in Form 4D to the Registrar in respect of such declaration with fees.” (4) Every Limited Liability Partnership shall specify a designated partner who shall be responsible for furnishing of and extending cooperation for providing, information with respect to beneficial interest in contribution in Limited Liability Partnership to the Registrar or any other officer authorised by the Central Government and shall file information of such designated partner with the Registrar in Form 4: Provided that until a designated partner is specified under sub-rule (4), every designated partner shall be deemed to be responsible for furnishing of, and extending cooperation for providing, information with respect to beneficial interest in contribution under this sub-rule. [F. No. Policy-01/2/2021-CL-V-MCA-Part(2) dated 27.10.2023] SEBI UPDATES: 1) Master Circular for Depositories: In order to enable the users to have access to all the applicable circulars/directions pertaining to depositories at one place, the SEBI has prepareda Master Circular for Depositories. This Master Circular shall come into force from the date of its issuance. This Master Circular covers the relevant circulars/ communications pertaining to depositories issued by SEBI upto August 31, 2023. References to the Statutes/Regulations which now stand repealed have been suitably updated in the Master Circular. This Master Circular rescinds the circulars and communications listed in SCHEDULE -A. The Master Circular consists of four sections i.e., Beneficial Owner (BO) Accounts, Depository Participants (DP) Related, Issuer related and Depositories Related. Efforts have been made to include provisions of circulars/communications relevant to each sections. However, cross referencing of circulars/communications amongst the sections may exist. Users may refer other sections also for compliance to provisions applicable to them. [Circular No.: SEBI/HO/MRD/MRD-PoD-2/P/CIR/ 2023/166 dated 06.10.2023] 2) Relaxation from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: As the MCA vide its General Circular No.09/2023 dated September 25, 2023, has extended the relaxation from sending physical copies of financial statements (including Board’s report, Auditor’s report or other documentsrequired to be attached therewith) to the shareholders, for the AGMs conducted till September 30, 2024, the SEBI also has relaxed the applicability of regulation 36(1)(b) of the LODR Regulations for Annual General Meetings (AGMs) and regulation 44(4) of the LODR Regulations for general meetings (in electronic mode) held till September 30, 2024. [Circular No.: SEBI/HO/CFD/CFD-PoD-2/P/CIR/ 2023/167dated 07.10.2023) ❉ ❉ ❉ Corporate Law Update