jOURNAL DEC 2022

Ahmedabad Chartered Accountants Journal December, 2022 465 Volume : 46 Part : 09 December, 2022 E-mail : [email protected] Website : www.caa-ahm.org Ahmedabad Chartered Accountants Journal C O N T E N T S - caaahmedabad đċ ēĸ ćij øĭĞĸ ċĭ Ċıē Ċēĸ To Begin with - .....................................................CA. Rajni Shah.......................... 467 Editorial ............................................................................................CA. Rutvij P. Shah.......................468 From the President............................................................................CA. Sarju Mehta.........................469 Articles ROIC - A critical tool for analyzing business.......................................CA. Jinesh Sarat Sheth..................470 Startups & ESG - The Business Case - Part 5......................................CA. Vivek Shah............................477 Direct Taxes Glimpses of Supreme Court Rulings....................................................Adv. Samir N. Divatia....................481 From the Courts..................................................................................CA. Jayesh Sharedalal............... 482 Tribunal News.....................................................................................CA. Yogesh G. Shah & CA. Aparna Parelkar.................. 486 Unreported Judgements......................................................................CA. Sanjay R. Shah....................492 Controversies.......................................................................................CA. Kaushik D. Shah....................495 Judicial Analysis..................................................................................Adv. Tushar Hemani......................496 FEMA & International Taxation FEMA Updates....................................................................................CA. Dr. Savan R. Godiawala......502 Indirect Taxes GST and VAT Judgments and Updates................................................ CA. Bihari B. Shah & CA. Vishrut R. Shah.....................504 Corporate Law & Others Corporate Law Update.......................................................................CA. Naveen Mandovara................507 GujRERA Corner..................................................................................CA. Manan Doshi.........................511 Capital Markets.................................................................................. CA. Karan P. Vora........................514 From Published Accounts ................................................................ CA. Pamil H. Shah..................... 518 From the Government ......................................................................CA Ashwin H. Shah & CA. Kunal A. Shah........................521 IT Corner...........................................................................................CA. Rushabh Shah..................... 523 Association News.............................................................................. CA. Jay B. Parekh & CA. Mayur H. Modha..................525 ACAJ Crossword Contest......................................................................................................................528

466 Ahmedabad Chartered Accountants Journal December, 2022 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 2022-23 is ` 1500/-, single copy ` 150/- (if available). 4. Please mention your membership number in all your correspondence. 5. While sending Articles for this Journal, please confirm that the same are not published / not even meant for publishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication, 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. 2022-23 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 1000 180 1180 b. Flexi Firm/Corporate Membership Fees*** 2000 360 2360 *** Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting. Additional Representatives can be nominated @1000/- plus GST per participant subject to maximum of 20 participant per firm Published By CA. Rutvij P. 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 No part of this Publication shall be reproduced or transmitted in any form or by any means without the permission in writing from the Chartered Accountants Association, Ahmedabad. 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] Journal Committee CA. Rutvij Shah CA. Ashish Sharma Chairman Convenor CA Uday Shah CA Jayesh Sharedalal EC Representative Past President CA. Monish Shah CA. Riken Patel CA. Ashok Kataria CA. Pratik Kikani CA. Nirav Shah CA. Pratik Jain Members

Ahmedabad Chartered Accountants Journal December, 2022 467 Over the past couple of years, unfortunately, the news of our fellow professionals getting arrested / facing legal action for unscrupulous works has not been new and has become quite normal. Though it is harsh but that’s a fact which we all need to accept as a bitter reality. Have we ever wondered as to why has there been a sudden spike in such instances in the last couple of years? The answer to this complex question is in fact very simple. Greed and lack of patience. As we know the fruits of patience are sweet but are we ready to be patient to let the fruit grow? This lack of patience in the present generation results in falling into the trap of sloppy ground where easy money at the cost of anything is the only mantra. Ethics at a later stage remains only a subject that we studied for our examinations only to forget at a time when it’s highly needed. It is the desire to make millions in a minute which leads to lack of patience and perseverance. The commonality has a lack of satisfaction for what they possess and they continue to focus more on what they don’t have in a manner similar to the pessimistic. Everyone remains happy with what they have till their colleague buys something new. The great architect Frank L Wright had said – “Give me the luxuries of life and I will willingly do without the necessities.” By itself, luxury and necessity are two ‘apparent’ extremes. I am using the word ‘apparent’ because in the words of world’s greatest scientist – Albert Einstein, apparent is a ‘relative term’ - one man’s luxury can be other’s necessity and vice versa. So, at the end of the day, it is the perception of a person which defines the distinction between the two words. Because, whether it is a diamond-studded, pink gold, limited edition Cartier wrist watches or a cheap quartz watch, both will show the same time! But it is human nature which is not contented (Yehdilmaange more!) and as a result, the quest for superlatives is never-ending. Also, it is not always the desires but also the lack of opportunities which may result in slipping on the slippery ground. After all the efforts that goes into passing the toughest course when a young blood who had dreamt of nothing short of luxuries – gets to travel in an overcrowded bus over large distances - giving interviews for a paltry sum of Rs. 5000, depression is bound to stand knocking the door. However it is to be understood that it is easier said than done when we advise someone to remain patient in an adverse situation since it is very frustrating. But as it is rightly said – Patience is not the art of waiting but the art of waiting with the right attitude. But the ‘Touch Screen Generation’ somehow fails to understand this art since they believe everything should be available at the tip of their touch which does not hold true in real life. This piece is not coming out merely as a philosophy; but, it is rather introspection or retrospection and understand that Rome was not built in a day. ❉ ❉ ❉ đċ ēĸ ćij øĭĞĸ ċĭ Ċıē Ċēĸ CA. Rajni Shah [email protected]

468 Ahmedabad Chartered Accountants Journal December, 2022 The United Nations (UN) was set up, 75 years ago, with the principal aim of maintaining world peace and security. It has been successful in preventing another World War. However, the 21st century world is very different from 20th century and UN has failed to adapt to new global problems and realities. Covid-19 pandemic and a war in Ukraine has exposed limitations and ineffectiveness of UN as a World Organisation for peace and security. Furthermore, world is facing increasing number of challenges that are trans-national in character (for example, terrorism, proliferation of weapons of mass destruction, pandemics, climate crisis, cyber-security and poverty). UN in its present form has failed to address and resolve global issues. India has been an advocate of reforms in UN for decades. However structural reforms have remained elusiveat UN due to rigid stand of permanent five members of UN. Recently India on its part has been focusing more on other multilateral and bilateral forums like The Association of Southeast Asian Nations (ASEAN), The Shanghai Cooperation Organization (SCO), The Eurasian Economic Union (EAEU), The Quadrilateral Security Dialogue (Quad), India-Africa Forum (IAF) etc.India’s does not want the world to be Unipolar or Bipolar where it is being led by USA and China. India is pushing for “Global South” which refers broadly to the regions of Latin America, Asia, Africa, and Oceania which have traditionally been “Third World” countries. In this scenario, India’s presidency of G20 could not have come at a better time. G20 is an intergovernmental forum comprising of 19 countries which represents 85% of the global GDP, over 75% of the global trade and about two-thirds of the world population. It is the most influential grouping outside of UN. As a President, India will have an opportunity to set the agenda of this group for 1 year.The theme of India’s G20 Presidency”Vasudhaiva Kutumbakam” or “One Earth - One Family - One Future” which truly reflects our outlook to the world.Green Development, Climate Finance & Life, Accelerated, Inclusive & Resilient Growth, Technological Transformation & Digital Public Infrastructure, Multilateral Institutions for the 21st century and Women-led development are some of the priorities of India. Further India wants this year’s G20 to be celebrated all over India. Meetings of different working groups will be held in different states of India highlighting diversity and difference in culture, food and traditions in different parts of India. The 43 Heads of Delegations- the largest ever in G20-will be participating in the final New Delhi Summit in September next year. It seems that India is now ready to take its rightful place in the world. ❉ ❉ ❉ Editorial CA. Rutvij Shah [email protected]

Ahmedabad Chartered Accountants Journal December, 2022 469 Dear Members, When I am writing this message, it is evening of 15th December, Foundation Day of our Association. Throughout the day I have remained very excited while celebrating our auspicious day. At DAWN we organized a Walkathon at the most talked about location of our city, Riverfornt. This walk for a cause was dedicated to Education Awareness. It was really an honour to march with our CAAA’s flag in hand while making Walk for a Cause. Large number of members participated in this Walkathon to mark our 72nd Foundation Day. Since all these 72 years our association has gained lot of respect in eyes of entire fraternity, exchequers, authorities and society at large. All these became possible with dedication and nourishments from all our Past Presidents and Senior Members. We all are thankful to them for the same.A Foundation Day Cake Cutting Ceremony was thereforeorganized on Our Association’s Foundation Day in their august presence and members also enjoyed a warm get-together and relished the memories of all these years. - CA. SARJU MEHTA ❉ ❉ ❉ From the President CA. Sarju Mehta [email protected]

470 Ahmedabad Chartered Accountants Journal December, 2022 ROIC which is the return on invested capital is a useful measure of creating value. ROIC can be useful, but only if it is wisely, consistently, and meticulously applied. Concept-wise ROIC is not complicated, but it requires a lot of judgment while calculating it. In this article, I shall elaborate on how to compute ROIC, illustrate how can it be connected to free cash flow (FCF), economic profit, and growth. Using a case study on Microsoft Corp., we shall work through some of the practical challenges faced & adjustments required to be made while estimating it accurately and shall review how intangible investments in R&D, S&M and G&A can affect its computation. We shall learn why decomposition of ROIC is required to assess the business strategy. We also shall know about concept of ROIIC and know the limitations of ROIC. What is ROIC & How is it Computed? ROIC = Net operating profit after taxes (NOPAT)/ Average Invested capital (IC) NOPAT = EBIT + Amortization of Acquired Intangibles – Cash Taxes Depreciation is not added back even though it’s a non-cash item because it is considered as an operating expense. Invested Capital can be computed using two approaches: Financing Approach: IC = Short term + Long Term Debt + Operating lease obligations+ Deferred Taxes + Other Liabilities + Preferred Stock + Equity Capital Operating Approach: IC = Current assets - Non-interest-bearing current liabilities (NIBCL) + Net PP&E + Acquired intangibles + Goodwill + Right-of-use asset + Any other long term operating asset Within current asset we include only such portion of Cash & CE which is required to run its operations. Computing IC from financing approach may be deceptive, if we plan to include such portion of cash & ce in current assets. Assets that are excluded from IC are excess cash &cash equivalents, associates, non-consolidated subsidiaries, equity investments in other companies, overfunded pension funds and carry forwards of tax loss. NOPAT linkages with FCF FCF is computed as NOPAT less Reinvestment Reinvestment = Capex net of Depreciation + Investment in Working Capital + Acquisitions The commonly used measure of computing FCF, i.e., Cash Flow from Operations (CFO) less Capex, is flawed, as it needs to be adjusted with stock-based compensation and operating lease payments. ROIC linkages with Economic Profit Economic Profit = (ROIC-WACC) x IC = NOPAT – (IC x WACC) ROIC linkages with Growth Growth = ROIC x (1- payout ratio) Payout ratio = (Dividends + Buybacks)/ NOPAT If we assume payout is zero, then growth would be equal to ROIC and the business would reinvest its entire NOPAT leading to a stable ROIC. Now, if the company delivers growth lower than its ROIC, it can payout excess cash to the shareholders without affecting its future growth prospects. Businesses that grow at a rate higher than ROIC would need more capital to reinvest to sustain its growth. Some Research suggestions - 1) McKinsey research suggests that businesses that sustained high ROICs and high revenue growth generated higher shareholder returns. ROIC - A critical tool for analyzing business CA. Jinesh Sarat Sheth [email protected]

Ahmedabad Chartered Accountants Journal December, 2022 471 ROIC - A critical tool for analyzing business 2) Harvard Business Review research on retail businesses suggests that avoiding investments, that generated EPS growth but did not generate Economic value, led to superior shareholder returns 3) MS Research suggests that ROICs regresses towards mean over long term. Sustaining higher than historical average ROIC for a long period of time is difficult. Some Adjustments to ROIC – Goodwill Write-offs – Businesses that have a habit of writing off assets, like for example Goodwill and intangible asset impairment, such impairments should be added back to IC to properly reflect the capital costs. Litigation – Provisions of litigation reduces the shareholders claim but does not affect the IC since its captured in other liabilities. However, future NOPAT may get affected owing to potential reputation damage. Adjusting the effect of litigation requires judgement with the core concept intact that the estimates for NOPAT and IC should be consistent and the management should be held accountable for all capital allocation decisions. Buybacks – Buybacks can increase EPS and ROE but they don’t affect ROIC and NOPAT whether it is done by utilizing excess cash or by raising debt. Intangible Assets –Intangible assets perhaps pose the biggest challenge in computing ROIC accurately. The significance of intangibles in deriving value of a business has increased drastically, whereas the contribution of tangibles towards value has declined in the recent past. The tangibles are reflected on the balance sheet and hence appear as IC and the depreciation expense spreads the cost over the life of asset. But majority of intangibles are expensed off. For example, R&D Costs, advertising, employee training and software creation. Tangible asset intensive businesses have higher NOPAT and IC vs. the intangible intensive or “asset-light” businesses. To bring a parity, we can adjust IC by treating all capital nature intangibles as capital expenditure if we can predict a reasonable useful life of such benefits to be received. Segmental ROIC Large public companies report segmental sales, operating profits and segment-wise capital employed. This information can be useful to conduct ROIC analysis for each segment, which can help in gathering further insights into how each segments operate. This can particularly assist in interacting with the management as an analyst or investor and enquire on granular details. This exercise allows investor to delve deeper into learning where value is created, and which segment value is destroyed. Segmental ROIC analysis can guide an investor in how capital re-allocation decisions can add value. ROIC as a competitive strategy analysis measure Breaking down ROIC into two components Differentiation & Cost Leadership would provide insight into the strategy the business is following. ROIC = NOPAT/ Revenue x Revenue/ Invested Capital ROIC = NOPAT Margin x IC Turn A differentiated strategy would have higher NOPATM and lower IC Turn; whereas a Cost leadership strategy shall have lower NOPATM and higher IC Turn to have the same ROIC. Very few companies have both metrics higher. For example – Companies like Microsoft, Apple, Google, Meta pursues differentiation strategy while companies like Walmart, Home Depot & Target pursue cost leadership strategy. Concept of ROIIC Return on incremental invested capital (ROIIC) is derived by dividing the change in NOPAT in one year from the investments the business made in the previous year ROIIC = (Yr1 NOPAT – Yr0 NOPAT)/(Yr0 IC – Yr-1 IC) Since annual ROIIC can be a bit noisy, rolling 3/5 yr ROIIC is preferred to smoothen the noise. Businesses with high ROIIC have demonstrated efficient capital allocation or have a decent operating leverage. ROIIC however has its flaws and cannot be used as a measure of economic value.

472 Ahmedabad Chartered Accountants Journal December, 2022 Limitations of ROIC - Effort on computing the ROIC may appear to be futile from the perspective of valuation as it does not affect the DCF; but it affects the pricing based on multiple based methods (like EV/ EBITDA, P/E). Majority investors (especially retail) rely on multiple based methods to price a business, hence knowing the concept of ROIC is useful for them. - ROIC is conceptually straightforward, but it requires lot of judgements to compute. So many adjustments are required to be made and it can be chosen which adjustments to make and which to leave aside with discretion as there is not set formula. As long as the judgements are based on diverse range of experience and are uniformly applied through a framework it should yield consistent results. - ROIC cannot be used for financial sector businesses in the present form. Instead of ROIC, ROE should be used and instead of FCFF, FCFE should be utilized. - ROIC is not a good measure to assess M&As. In M&As more relevant measure would be to compare the present value of future cashflows including synergies to the cost of acquisition. Appendix I – Computation of Adjusted NOPAT Microsoft ($ Billions rounded off) 2020 2021 2022 Traditional Reported Operating income (EBIT) 53 70 83 Adjustments: Add Back: Amortization of intangibles 2 22 Operating lease payments1 1 11 EBITA 56 73 86 Computation of Cash Taxes Income tax provision 9 10 11 Deferred taxes (1) 1 6 Tax shield2 0 00 Cash taxes 8 11 17 NOPAT 48 62 69 Adjustments for Intangibles Capitalizing Intangible Investments 34 36 41 Amortizing Intangibles 27 29 31 Add back Net Adjustments 7 7 10 Adjusted NOPAT 55 69 79 Source: Microsoft Corporation, Morgan Stanley, Counterpoint Global Note: 1. Under US GAAP entire lease expense, including embedded interest, is still expensed. Under IFRS, the lease payments are appropriately allocated between depreciation and interest expense, hence adjustment is only required in case of GAAP 2. Tax shield is the difference between the actual taxes paid by the business & the higher taxes it would have paid if it had been financed solely with equity Appendix II – Computation of Intangible Investment for 2022 (same method is used for historical years) Computation of Intangible Investment 2022 R&D 25 S&M 22 G&A 6 Total Expenses 52 % Capitalized3 R&D 100% S&M 70% G&A 20% Capitalized Intangible Investment R&D 25 S&M 15 G&A 1 Total Capitalized 41 Amortization (years)4 R&D 6 S&M 2 G&A 2 Note: 3. Capitalization is based on Charles R. Hulten, “Decoding Microsoft: Intangible Capital as a Source of Company Growth,” 4. Amortization is based as per research from leading economists, Hulten and Carol Corrado, who has estimated the useful lives of various forms of intangible investment. ROIC - A critical tool for analyzing business

Ahmedabad Chartered Accountants Journal December, 2022 473 Appendix III – Computation of Adjusted IC & ROIC Computation of Adj. Invested Capital & ROIC 2020 2021 2022 Cash5 3 34 Accounts receivable 32 38 44 Deferred income taxes 0 00 Inventories 2 34 Other current assets 11 13 17 Total current assets 48 57 69 Less: NIBCLs 69 81 92 Net working capital (21) (24) (23) PP&E 44 60 74 Operating lease right-of-use assets 9 11 13 Goodwill 43 50 68 Intangible assets 7 8 11 Other long-term assets 13 15 22 Invested Capital 95 120 165 Adjustments: Capitalized intangibles, net 78 85 95 Adjusted Invested Capital (IC) 173 205 260 Average Adjusted IC 167 189 233 Adjusted ROIC 33% 37% 34% Note 5. Cash required for running the business is assumed at 2% of revenue based on thumb rule; the balance is considered as excess cash (hence nonoperating) Appendix IV – Financial Statements of Microsoft FY’2022 ROIC - A critical tool for analyzing business

474 Ahmedabad Chartered Accountants Journal December, 2022 ROIC - A critical tool for analyzing business

Ahmedabad Chartered Accountants Journal December, 2022 475 ROIC - A critical tool for analyzing business

476 Ahmedabad Chartered Accountants Journal December, 2022 Source: Morgan Stanley, Microsoft Form 10-K for fiscal 2022 ❉ ❉ ❉ ROIC - A critical tool for analyzing business

Ahmedabad Chartered Accountants Journal December, 2022 477 Context – I take this opportunity to wish all our readers a very happy, healthy and prosperous new year 2023 with a prayer that our endeavours are rewarded with appropriate fruits in the time to come. In the previous articles, we had covered the background concepts of sustainability, ESG reporting and sustainability risks. We had also covered the evolution of the sustainability reporting landscape in India. We then went on to cover the concept of stakeholders and how sustainability risks impact decision making for external and internal stakeholders. We covered the key questions that a provider of finance would tend to ask and address while making lending/ financing decisions and then we went on to understand the business case for implementation of sustainability initiatives for an organization. In this article, we shall discuss questions related to how and why ESG initiatives are of crucial importance for a startup. Introduction – The startup ecosystem in our country and all over the world is replete with examples of success stories. Development and progress of technology has facilitated many creative ideas, thoughts and processes to bear fruition which were hitherto remaining at the ideation stage itself. The startup ecosystem is now developing in breadth and depth to bring ideas, creative thought processes and entrepreneurial abilities and insights into concrete existence. Government schemes, subsidies, tax benefits & exemptions, educational courses, support systems, incubation centres, social media platforms and advisory panels are now in place to support this ecosystem. With this backdrop in reference, we look at a general overview of the business case forESG initiatives and its importance for startups. Stakeholders in a Startup Lifecycle - To establish a contextual baseof the business case for ESG for startups, we examine the typical generic startup stakeholder groups and their engagement perspective from the point of view of startup ESG practices. Following can be generalized as the representative stakeholder groups connected with a startup depending on its stage in the life cycle – 1) Founders & partners 2) Employees 3) Customers& targeted segment of outreach 4) Investors, financers and bankers 5) Incubators & mentors 6) Governmental agencies 7) Business & technology consultants/ developers 8) Suppliers & aggregated parties 9) Customers and users 10) Local community All of these stakeholder groups will have an interest and impact on the startup at various stages of the development and life cycle of any startup. The nature of this interest and impact will vary over different stakeholder groups. Stakeholder Management for a Startup – A startup typically does not have a very robust risk appetite. While it faces similar risks as other established businesses, a startup will also face risks affecting its growth, development and its ability to scale up to get appropriate funding at various crucial stages in its life cycle. Generally speaking, stakeholder management includes the following – Startups & ESG - The Business Case - Part 5 CA. Vivek Shah [email protected]

478 Ahmedabad Chartered Accountants Journal December, 2022 · Identifying and prioritizing key stakeholders · Getting to know stakeholders and their preferred communication methods · Interacting with and relating to stakeholders based on their own goals · Determining how much influence a stakeholder has on core business operations · Beginning to influence and engage with the stakeholder, with the goal of improving the relationship Stakeholders wish to be involved in the business. They want to feel as though their time is valued and they are being notified of major events and that they are being consulted when applicable. Investors and team members can be kept on the same page through regular communications, such as meetings and broadcasts. This allows the startup to present the information that it needs to present in an organized manner. While the importance of appropriate stakeholder management cannot be stressed upon enough, in this article we will look at the stakeholders’ outlook towards a startup from the ESG point of view that would be governed by the ESG practices of the startup. ESG for Startups – Benefits and Business Case– Even though startups are viewed as giants of the future, they have largely been left out of the conversation when it comes to ESG metrics. Most of the current ESG momentum is led by VC firms. On one hand, wehave a top-down view of the markets and historical data about a number of startups, but on the other hand, we don’t have a clear bottom-up global view, across regions and funds, about the perspectives of startups when it comes to ESG. What then, does ESG practically mean for start-ups? Should start-ups be following the rigorous ESG market metrics when they are still on constant survival mode? Would it be appropriate for them to ignore ESG until they have enough resources to think about ESG? What is the role of different stakeholders supporting start-ups on their journey? To answer these questions, the World Economic Forum conducted a survey and interviewed startups from the Forum’s Global Innovators and Technology Pioneers communities. Respondents were asked to share their views about ESG and their expectations of VC funds when it comes to ESG. The findings have been published in the reportESG Pulse Check: Getting the Basics Right for Startups and Venture Capital Firms. 1) ESG should not be viewed as a stand-alone topic – ESG implementation should be embedded into key corporate strategies and decision-making, ideally from the beginning so that it scales with a company. It is always more advantageous to start when the foundations are being laid down rather than having costly rework and adaptation later. The overwhelming majority of start-ups that were surveyed (68%) integrated ESG into their business strategy from the beginning, before most even had a viable product, complete C-suite, or office space. This chart from the survey report shows the timing of ESG implementation of the surveyed firms. Source:Timing of ESG strategy integration. Image: The World Economic Forum 2) ESG metrics should be friendly towards startups - When it comes to concretely measuring ESG performance, there is still a lack of methodologies as to how start-ups could practically approach ESG. The current standards in the market (such as SASB, GRI, etc.) are mainly focused on corporates that can Startups & ESG - The Business Case - Part 5

Ahmedabad Chartered Accountants Journal December, 2022 479 dedicate resources into thoroughly tracking all required metrics. Start-ups positively viewed standard ESG frameworks that were tailored for venture-backed companies, currently being developed by certain industry communities, such as VentureESG, ESG_VC and UN-PRI. Many of the startups expressed that such metrics should not be difficult for them to follow, measure and implement, but should be practical in nature. 3) Customers and employees are the key stakeholder groups demanding ESG advancement – The majority of start-ups in the survey expressed the increasing importance of two key stakeholder groups when implementing their ESG strategies: customers (32%) and employees (27%). In addition, pressure from investors (23%) seems to be a forthcoming driver, with possibilities to closely collaborate on crafting the direction. The above extracts from the World Economic Forum survey shows us the current trends worldwide and the perceptions on ESG implementation for startups. Benefits of ESG Implementation for Startups – The analysis of the above trends brings us to look at the benefits of implementation of ESG and sustainability practices for startups right from the initial stages of the startup.Implementing and promoting ESG is critical for startups that want to be successful in the current scenario. There are several reasons it’s necessary. 1) It attracts investors – Angel investors and VC funds are already evaluating ESG factors when they make investment decisions. This is because these practices are becoming increasingly influential for market benchmarks and financial performance. Addressing ESG concerns early on in the business development and planning can help increase chances of getting funding and operating a successful business. It can help preventcivil litigation, fines, and social backlash.More importantly, investments coming from DFIs (development finance institutions) are required to confirm to certain ESG standards, while impact investors will only provide funding to businesses that demonstrate strong ESG adherence.Focusing on ESG from the beginning will increase thelikelihood of obtaining investment and can broaden the investor base. 2) Competitive edge – Many companies are beginning to prioritize ESG practices, and those that ignore it will inevitably lose out. It’s important not to be complacent because the competition is doing this too.It may be challenging in the early days of a startup while the business is resourcestrapped, but ultimately it pays off when consumers and investors see that it’s a responsible business.Short-term solutions may be cost-effective in the beginning, but sustainable, long-term results require a larger investment. Consumers also watch closely and choose companies whose values align with their own. They’re more loyal to a company that shares the same beliefs and move away brands that don’t follow sustainable business Startups & ESG - The Business Case - Part 5

480 Ahmedabad Chartered Accountants Journal December, 2022 practices.These practices work to drive growth by cultivating a customer base that values loyalty. 3) It helps build trust with stakeholders – Building trust is essential for any business, but it’s especially important for startups. When first starting out, a startupdoes not have much of a reputation to stand on.This is where ESG comes in. If it can demonstrate its commitment to corporate responsibility through ESG reporting and adhering to the UN Global Compact, it will be able to build trust with both internal and external stakeholders.Presenting at a venture capital pitch or investor meeting, for instance, being able to discuss how the business will prioritize sustainability can help earn trust. Investors will appreciate the transparency and commitment to the long-term success of the startup. 4) It boosts employee retention - A good work environment is a critical part of maintaining a healthy startup. If employees are unhappy, they’ll leave for greener pastures. ESG policies and practices can help improve the work environment by engaging the team and giving them a voice in company decisions. This improves employee happiness and retention rates.In addition to making employees feel like their opinions matter, ESG also creates a sense of community within the workplace by focusing on common values. 5) Improves reputation - For a startup reputation of the company and more importantly that of the entrepreneur/ promoter is everything. It’s the first thing people think of when they hear the company name and it can make or break the business.A good reputation attracts customers, investors, and business partners while a bad one repels them. This is why it’s so important to focus on building a positive reputation from the start.ESG can help build a positive reputation by ensuring that the company is associated with responsible and sustainable practices. This will make people more likely to do business with it and recommend it to others.It’s important to remember that reputation is always at stake, so it’s worth the effort to focus on building a good one. Pointers for Integrating ESG into the Startup – Having looked at the advantages of implementing ESG and sustainability practices in the startup, here are a few pointers on how to go about it. The actual implementation will vary widely from startup to startup depending on various factors and the stage of the startup lifecycle. Implementing these practices may need external help for the startup1) Identify the relevant ESG factors for your startup and industry 2) Create an ESG task force within the startup with external help 3) Develop an ESG reporting strategy keeping in mind key stakeholder engagement 4) Weave ESG throughout the investment and governance documents 5) Get an external ESG implementation assessment done from stage to stage Summary & Conclusion – In the present article, I have tried to present a broadbased overview of the why and how of ESG implementation for startups. The life cycle of any startup is full of challenges and opportunities which the promoter of the startup has to face and exploit at the right time in the right manner.While weaving the ESG approach in the outlook of a startup is a task which should be accomplished right from the drawing board stage, it also represents a unique set of opportunities to raise capital, funding and manage/ mitigate risks related thereto which a startup is bound to face in the not so long term looking at the current outlook of VCs and investors. It is time for startup promoters to visit the ESG domain with the help of external specialists and exploit the immense benefits it would eventually offer. ❉ ❉ ❉ Startups & ESG - The Business Case - Part 5

Ahmedabad Chartered Accountants Journal December, 2022 481 Appropriate High Court for Tax Appeal-260A, 269 of IT Act Sec 260A is open textual and does not specify the High Court before which an appeal u/s 260A would lie. Even sec 269 which defines the High Court merely relates the High Court in any state with the High Court for that State It is this uncertainty about identification of appropriate High Court for filing Tax appeal against an order of ITAT excursing jurisdiction over more than one state that the Supreme Court is called upon to decipher and declare. A judicial remedy must be effective independent and at the same certain. Certainty of forum would involve unequivocal vesting of jurisdiction to adjudicate and determine the dispute in a named forum. The most appropriate high court would be one where the assessing officer is located. The appeals cannot be made to High Court only on the basis that a bench of ITAT is located within the jurisdiction of the said High Court It would be appropriate for the ITAT to refer the question of law to the HC within whose jurisdiction the AO or CIT which decided the case is located as these authorities are bound to follow the decision of HC concerned. [Pr. CIT v ABC papers Ltd (2022)(9 SCC 1] Appointment of Trustees- condition of Residency A particular word like “resides” could carry multiple differenet connotations with reference to the time or period of its interpretation. When a particular word or expression in any document is to be operated and applied, all relevant characteristics available in present have to be kept in view for a meaningful and purposeful construction. However that meaning should not do violence to the real intent & purpose. Glimpses of Supreme Court Rulings 28 Advocate Samir N. Divatia [email protected] The issue involved in this appeal was whether the appellant was a resident of the area in question and thereby qualified to hold the position of founder trustee of the Trust? Ultimately the question of residence in every case depends on the facts but the word “resides” usually means something more than a flying visit or a casual stay. The person who has continuously been in India apart from holding property and bank accounts, Aadhar card could not be said to be a person visiting India casually or a transit tourist. Further mere holding of Green card of USA cannot be treated as decisive of the matter. Ao also when the purpose of residence is to ensure participation in the affairs of the Trust effectively as and when required, physical residence is required. V. Prakash V P.S. Govindswamy Naidu (2022){9 SCC 36} Arbitration and Conciliation Act 1996- Party autonomy If clause (a) of sub-section (7) of Section 31 of the 1996 Act is given a plain and leteral meaning, the legislative intent would be clear that the discretion with regard to grant of interest would be available to the Erbitral Tribunal only when there is no agreement to the contrary between the parties. The phase “unles otherwise agreed by the parties” clearly emphasis that when the parties have agreed with regard to any of the aspects covered under 31(7)(a), the Arbitral Tribunal would cease to have any discretion with regard to the aspects mentioned in the said provision. Only in its absence that AT would have discretion to exercise its powers u/s 31(7)(a). The discretion is wide enough, it may or may not grant interest or on whole or any part of the moneys. Delhi Airport metro Express Pvt. Ltd v Delhi metro rail Corporation (2022)(9 SCC 286) ❉ ❉ ❉ 29 30

482 Ahmedabad Chartered Accountants Journal December, 2022 Delay in filing revised return for claim of refund. Devendra Pai v/s. ACIT (2021) 439 ITR 532 (Kar) Issue: Whether assessee is entitled to refund even if not claimed in the return of income? Held: The assessee’s entitlement to exemption under section 10(10C) was noticed by the Assessing Officer. The Assessing Officer’s observation in his assessment order regarding exemption under section 10(10C) indicated that he was aware of non-claiming of the exemption by the assessee. Prima facie an order considering the letter of the assessee, dated March 18, 2008, as a rectification application and passing an order would be a legally justifiable order. As no order was passed, the assessee had decided to explore the possibility of filing a revised return. In view of Circular No. 014 (XL-35) and the peculiar facts of the case, including that letter that could be construed to be a rectification application was not decided, on the merits of the claim for exemption, the revised return could be considered. The reasons assigned while seeking condonation of delay were satisfactory. The order rejecting the condonation of delay under section 119(2)(b) was set aside and the delay was condoned. As regards the grant of refund, eventually on account of the delay, there would be exclusion of interest on the amount of refund. Assessing Officer cannot decline to exercise his powers via-a-vis rectification application. Devendra Pai v/s. ACIT (2021) 439 ITR 532 (Karn). Issue: Whether is it implicit in the nature of power entrusted with Assessing Officer to exercise it? Observation by Court: Held: Reliance is placed on the judgment of the apex court in the case of L. Hirday Narain v/s. ITO (1970) 78 ITR 26 (SC) and attention is drawn to the observation of the apex court wherein the apex court has observed as follows (Page 32 of 78 ITR): “Exercise of power to rectify an error apparent from the records is conferred upon the Income Tax officer in aid of enforcement of a right. The Income Tax officer is an officer concerned with assessment and collection of revenue and the power to rectify the order of assessment conferred upon him is to ensure that injustice to the assessee or to the Revenue may be avoided. It is implicit in the nature of the power and its entrustment to the authority invested with quasi judicial functions under the Act, that to do justice it shall be exercised when a mistake apparent from the record is brought to his notice by a person concerned with or interested in the proceeding. The High Court was, in our judgment, in error in assuming that exercise of the power was discretionary and the Income Tax Officer could, even if the conditions for its exercise were shown to exist, decline to exercise the power”. 81 CA. Jayesh C. Sharedalal [email protected] From the Courts 82

Ahmedabad Chartered Accountants Journal December, 2022 483 Sufficient time to produce the details not given. V. Thillainatesan v/s. Addl CIT (2021) 439 ITR 614 (Mad) Issue: Whether assessment order passed without giving sufficient opportunity, is there a violation of principles of natural justice? Held: The appellant is an individual and to the best of his knowledge and ability, he has furnished the details. The Assessing Officer, while completing the assessment, false the appellant for not furnishing the statement of account of the credit cards. The appellant has stated as to why there was a delay in furnishing the details, as he had to obtain the same from the concerned banks and the nine particulars called for were voluminous. It may be true that the assessment was an E-Assessment. Nevertheless, if it is a scrutiny assessment under section 143(3) of the Act, the Assessing Officer is bound to provide adequate opportunity to the appellant. Adequacy of the opportunity would vary from case to case, and there is no straight jacket formula on the same. In the case of companies registered under the Companies Act or other financial institutions, they would have a large term of legal experts to assessee and who can appear before the Assessing Officer or who can furnish details, as called for by the Assessing Officer. This may not be a case, when it comes to an individual assessee. Section 201 and 201(1A) not applicable in a bonafide mistake. Central Ford Tech. Research Institute v/s. ITO (2021) 439 ITR 735 (Kar) Issue: Whether assessee can be treated as an assessee in default when there is shortfall in deduction of TDS due to bonafide mistake? From the Courts Held: (i) That merely because the assessee was a body or undertaking owned or controlled by the Central Government, it could not be elevated to the status of Central Government. Thus, the assessee could not claim that valuation of perquisite in respect of residential accommodation should be computed as in the case of an accommodation provided by the Central Government. Therefore entry 1 of Table 1 of rule 3 of the Rules would not apply to the assessee. (ii) That the assessee made a bona fide estimate of the employees salary by valuing the perquisite in the form of residential accommodation provided to the employees by valuing it as if they were the employees of the Central Government. Hence proceedings under section 201 and 201(1A) were not justified. Provision for Bad Debts not to be added back u/s 115JB. Pr. CIT v. Narmada Chematur Petrochemicals Ltd. (2021) 439 ITR 761 (Guj) Issue: Whether u/s 115JB is it required to add back the provision for bad debts if it is correspondingly reduced from debts on the asset side of the balance sheet? The Assessing Officer made various disallowances in his order under section 143(3). The Commissioner (Appeals) deleted the addition made on account of bad and doubtful debts holding that the provision for bad and doubtful debt was not a provision for a liability but for diminution in value of assets and therefore, clause (c) of the Explanation to section 115JB would not be applicable. The assessee and the Department filed appeals before the Tribunal. The Tribunal held that since the assessee had simultaneously obliterated the provision from its accounts by reducing the corresponding amount from the loans and advances on the assets side of the balance sheet and 83 84 85

484 Ahmedabad Chartered Accountants Journal December, 2022 consequently, at the end of the year shown the loans and advances on the assets side of the balance sheet as net of the provision for bad debts, it would amount to a write off and such actual write off would not be hit by clause (ii) of the Explanation to section 115JB. On appeal: Held, dismissing the appeal, that the Tribunal was right in deleting the addition on account of the provision for bad and doubtful debts in the computation of the book profits for computation of minimum alternate tax liability in the light of clause (i) of the Explanation to section 115JB. No question of law arose. TDS deducted but not deposited in government treasury: Credit Cannot be denied to deductee Kartik Vijaysinh Sonavane v/s. DCIT (2022) 440 ITR 11 (Guj) Issue: Whether Credit of TDS deducted but not deposited in Government treasury by deductor, can be denied to the deductee? Held: The assessee was a pilot by profession and was an employee of an airline company. The company deducted tax at source of Rs. 7,20,100 and Rs. 8,70,757 for the assessment year 2009-10 and 2011-12 respectively in his case but did not deposit it in the Central Government account. The assessee was denied credit for the tax deducted at source and recovery notices for tax with interest were raised against the assessee. On a writ petition. Held, allowing he petition, that the Department was precluded from denying the assessee the benefit of the tax deducted at source by the employer during the relevant financial years. Credit shall be given to the assessee and if in the interregnum any recovery or adjustment was made by the Department, the assessee shall be entitled to the refund thereof with the statutory interest, within eight weeks. Voluntary donations towards infrastructure development and Sec. 11(1)(d) CIT (Exemptions) v/s. Choice Foundation (2022) 440 ITR 106 (Ker) Issue: Whether the voluntary donations as contribution to infrastructure development is corpus donation? Held: The Tribunal had found that the nature of receipt was building donation fund or corpus fund received by the assessee for the purpose of building fund. The Tribunal was right in holding that the contributions to the building fund were in the nature of corpus donations. Agricultural land or not: Question of fact CIT v/s. Cochin Malabar Estates and Industries Ltd (2022) 440 ITR 120 (Ker) Issue: When the standing trees on a plantation land are cut and agricultural land was sold, whether it is a sale of non-agricultural land? Held: The nature and the character of the property as stated in the memorandum of agreement, would not alter the land from it original classification. The standing trees were excluded from the scope of the memorandum of agreement. Therefore, they were cut and carried away by the assessee. The Department’s argument laid undue importance on the clause in the memorandum of agreement. There was a difference between barren or waste land on the one hand and arable land on the other hand. The property, a plantation land, was agricultural land both by classification and user till the date of cutting of the rubber trees. The user for agriculture was not denied by such cutting of the rubber trees. The vacant agricultural land available upon cutting and carrying away of trees, at best, could be called arable land: meaning, land used for any agricultural From the Courts 87 86 88

Ahmedabad Chartered Accountants Journal December, 2022 485 purpose. Either to attract the meaning of capital asset or not to attract agricultural land, something more was required. The assessee continued to treat the property as agricultural land for the financial year ending March 31, 1995. The assessee could not be expected to have control over the activities of its buyer once the transfer was completed. The incidence to pay capital gains tax could not be and ought not to be traced to an act of commission or omission by the transferee of the assessee. The assessee both factually and legally did not change the character of the land from agriculture to nonagricultural. The assessee had demonstrated that the classification of land continued to be agricultural land in the revenue records even as on the date of sale. The property consisted of vast extents of agricultural land, admittedly outside a notified area. There was no change of user at the instance of the assessee. The burden fastened on the assessee in the circumstances of the case had been discharged. The finding of fact recorded by the Tribunal did not warrant interference. It was held that no capital gains was attracted. Business Income or Income from House property CIT v/s. Prestige Estate Projects Pvt. Ltd. (2022) 440 ITR 343 (Karn) Issue: Whether rental income from building equipped according to specifications is assessable as Business Income? Held: If the assessee is in the business of taking land, putting up commercial building thereon, letting out such building with all furniture as his profession or his business then notwithstanding the fact that he has constructed building and he has also provided other facilities and even if there are two separate rental deeds, it does not fall within the income from house property. Condition precedent for reassessment u/s 147 when there in case of intimation u/s 143(1), without scrutiny. Ami Ashish Shah v/s. ITO (2022) 440 ITR 417 (Guj) Issue: Whether fresh tangible material in possession with Assessing Officer is necessary subsequent to the intimation u/s 143(1)? Held: Even where the proceedings under section 147 of the Income Tax Act, 1961 are sought to be initiated with reference to an intimation under section 143(1), the ingredients of section 147 are required to be fulfilled. Therefore, such an assessment cannot be reopened unless some new or fresh tangible material comes into the possession of the Assessing Officer, subsequent to the intimation under section 143(1) and there should exist “reason to believe” that income chargeable to tax his escaped assessment. According to the Explanatory Notes on the provisions of the Direct Tax Laws (Amendment) Act, 1987, contained in Circular No. 549, dated October 31, 1989, issued by the Central Board of Direct Taxes (1990) 182 ITR (St.) 1 ) no distinction under section 147 is contemplated between a scrutiny assessment under section 143(3) and the assessment under section 143(1) and tangible material is necessary to reopen even an assessment made without scrutiny. ❉ ❉ ❉ 89 From the Courts 90

486 Ahmedabad Chartered Accountants Journal December, 2022 Virmati Software and Tele Communication Ltd V DCIT 145 Taxmann.com 134 (Ahm) Assessment Year:2014-15, Order dated:20nd July 2022 Basic Facts The assessee has shown income from the foreign parties based in Afghanistan for the software services rendered to them. These foreign parties deducted TDS @ 7%. As per the assessee, it is entitled for the relief under section 91 of the Act, with respect to doubly taxed income for the entire amount of TDS deducted in the foreign country being lower rate of tax in the said country. The AO held that the expenses incurred by the assessee against the gross income from foreign countries needs to be adjusted for determining the rate of tax in the foreign country. But the assessee has not furnished the detailed computation of allowable tax credit of foreign countries. Thus, the AO disallowed the same. On appeal CIT (A) upheld the finding of the AO. Being aggrieved by the order of the CIT (A) the assessee is in appeal before Tribunal. Issue: Whether CIT(A) ought to have allowed credit of foreign tax credit u/s 91 as claimed by the Assessee Whether CIT(A) ought to have granted deduction of un a lowed Foreign Tax Credit u/s 37 of the Act. Held The Tribunal referred explanation to section 91 and reproduced the same as under: Explanation.—In this section,— (i) & (ii) ** ** ** (iii) the expression “rate of tax of the said country” means income-tax and super-tax actually paid in the said country in accordance with the corresponding laws in force in the said country after deduction of al relief due, but before deduction of any relief due in the said country in respect of double taxation, divided by the whole amount of the income as assessed in the said country. As per Tribunal from the above, it is revealed that the amount of tax/super tax needs to be divided by the whole amount of income to work out the rate of tax. The word used whole amount of income denotes the income which signifies after the expenses. The word gross receipts have not been used therein. Even under the normal parlance, the income denotes only to the net profit i.e., gross receipts minus the expenses. Thus, as per Tribunal, it is the only profit which should be considered while determining the rate of tax in the foreign country and the same needs to be compared with the rate of tax in India. But since the assessee has not given any working about the expenses incurred in the foreign country against the gross receipts. The Tribunal upheld that AO’s order since in the absence of sufficient details, the AO had no alternate except to work out the proportionate amount of income eligible for relief under section 91 of the Act. In respect of alternate claim of the assessee for the deduction of the taxes paid in the foreign country as expenditure under section 37(1) of the Act, the tribunal held that amount of tax paid in a foreign country which is not eligible for benefit under section 91 of the Act, is expenditure eligible for deduction under section 37(1) of the Act. It was 49 CA. Yogesh G. Shah [email protected] CA. Aparna Parelkar [email protected] Tribunal News

Ahmedabad Chartered Accountants Journal December, 2022 487 because such tax was paid in the course of the business and the corresponding business receipts were made to tax in India. While so holding the Tribunal drew support and guidance from the judgment of Hon’ble Bombay High Court in the case of Reliance Infra Structure Ltd. vs. CIT reported in 390 ITR 271. Thus, the ground of appeal raised by the assessee were partly allowed. Cemetile Industries v. ITO 145 Taxmann.com 209 (Pune – Trib) Assessment Year: 2018-19 Order dated: 23rd November 2022 Basic Facts The appeals by different assessees against the confirmation of disallowance u/s.36(1)(va) of the Act made in the Intimations issued u/s.143(1) of the Act or thereafter its confirmation in the respective rectification orders for the assessment years 2017- 18 to 2020-21, due to commonness of the issue, were disposed of thorough a consolidated order. The facts of the case are that the assessee filed its return, which was processed u/s.143(1) making disallowance, inter alia, u/s.36(1)(va) on the ground that the amount received by the assessee from employees as contribution to the Employees Provident Fund (EPF)/Employees State Insurance Corporation (ESIC) etc. (hereinafter called ‘the relevant funds’) was not credited to the employees’ accounts on or before the due date as prescribed under the respective Acts. Thereafter, the assessee applied for rectification but without any success. No succor was provided in the first appeal. Aggrieved thereby, the assessee was before the Tribunal. Issue Whether the disallowance made by the AO u/s 36(1)(va) in intimation u/s 143(1) was covered under specific four corner of the said section Held The net effect of Apex Court judgment in Checkmate Services (P.) Ltd is that the deduction u/s.36(1)(va) can be allowed only if the employees’ share in the relevant funds is deposited by the employer before the due date stipulated in respective Acts and further that the due date u/s.139(1) of the Act is alien for this purpose. The enunciation of law by the Hon’ble Supreme Court is always declaratory having the effect and application ab initio, being, the date of insertion of the provision, unless a judgment is categorically made prospectively applicable. This judgment will equally apply to the disallowance u/s.36(1)(va) anent to all earlier years as well for the assessments completed u/s.143(3) of the Act. Clause (iv) of section 143(1)(a) provides for ‘disallowance of expenditure or increase in income indicated in the audit report but not taken into account in computing the total income in the return’. The words “or increase in income” in the above provision were inserted by the Finance Act, 2021 w.e.f. 01-04-2021. The Tribunal held that the amendment would apply only to years before 1/4/ 2021. While dealing with assessee contention that disallowance made in the intimation u/s 36(1)(va) lead to increase in income and hence should not have been made given that law was applicable from 1/4/2021, the Tribunal held that disallowance made u/s 36(1)(va) in the Intimation under section 143(1)(a) is to be be construed as a ‘disallowance of expenditure indicated in the audit report not taken into account in computing the total income in the return’. Every disallowance of expenditure leads to increase of income. If the contention of the assessee is taken to a logical conclusion, then the second expression ‘or increase in income’ inserted by the Finance Act, 2021 would be rendered a redundant piece of legislation. The Tribunal explained distinction in the scope of the two aspects by pointing out that Point no. 20(b) of the audit report, dealing with section 36(1)(va), has columns, inter alia, (i) ‘Sum received from employees’; (ii) ‘Due date for payment’; and (iii) ‘The actual date of payment to the concerned authorities’. The column (i) having details of the amounts received from employees indicates about the ‘increase in income’ as per sub-clause (iv) of section 143(1)(a) if the assessee does not take this sum in computing total income. The columns (ii) and (iii) having details of due date for payment and the actual date Tribunal News 50

488 Ahmedabad Chartered Accountants Journal December, 2022 of payment indicate about ‘disallowance of expenditure’ if the assessee does not make suo motu disallowance in computing total income. The AO did not make adjustment for non-offering of income of the ‘Sums received from employees’, but made the adjustment for ‘disallowance of expenditure’ with the remarks that :’Amounts debited to the profit and loss account, to the extent disallowance under section 36 due to non-fulfillment of conditions specified in relevant clauses’. Thus, it is evident that it is a case of ‘disallowance of expenditure’ and not ‘increase of income’. DCIT v. Chandrakant L. Patel 142Taxmann.com435 (Ahm) Assessment Year: 2010-11, Order dated: 31st May 2022 Basic Facts The assessee an individual filed his return of income for the year under consideration. A search action under section 132 and survey under section 133A were carried out in the cases of B Group. During the course of said action, various documents were found and seized which revealed that the assessee had purchased agricultural land on 18-3-2010. It was also revealed that the assessee on 18-3-2010 itself had entered into a partnership firm in the name and style of VD with BOI and the said land was introduced by the assessee in the partnership firm as stock-in-trade. The AO treated the value of land in the partnership firm as the sale consideration and after deducting cost of acquisition to the assessee and stamp duty paid at the time of transfer of land in the name of the assessee, he worked out a short term capital gain chargeable to tax in the hands of the assessee for the year under consideration. It was contended that the firm VD could not have purchased the agricultural land because only such firm can purchase agricultural land where all the partners are agriculturists. It was contended that any agreement/arrangement for transfer of agricultural land to a non-agriculturist was a void agreement and the same could not be recognized or given effect to being not permitted by law. Accordingly, the CIT(A) deleted the addition made by the AO on account of short-term capital gain. On appeal by revenue to the Tribunal: Issue Whether where the partnership firm was not an agriculturist, transfer of agricultural land to partnership firm was void ab initio and it could not give rise to any capital gain which was chargeable to tax Held As contended on behalf of the assessee before the CI(A) as well as before the Tribunal, the agricultural land, as defined in sub-section (8) of section 2 of the Gujarat Tenancy and Agricultural Lands Act, 1948, cannot be sold to a person who is not an agriculturist and any such sale without the permission of the Collector shall not be valid as provided specifically in sub-section (1) of section 63. The assessee, at the time of hearing has placed on record a copy of the said Act to support and substantiate this contention and even the revenue has not been able to dispute the position clearly emerging from the relevant statutory provisions whereby the transfer of agricultural land to nonagriculturist without the permission of the Collector is barred. The transfer of land by the assessee to the partnership firm by way of partnership deed dated 18-3-2010 without the permission of Collector thus was null and void ab initio. In the case of CIT v. Vithalbhai P. Patel [1999] 102 Taxman 36/236 ITR 1001 (Guj.), the transfer of land by the assessee was declared as null and void by the Collector in view of the provisions of section (4) of the Gujarat Vacant Lands In Urban Areas (Prohibition of Alienation) Act, 1972, and taking note of the same, it was held by the Gujarat High Court that as there was no sale transaction in the eye of law, there could be no capital gain arising out of a null and void transfer of land. It is opined, the ratio of this decision of the Gujarat High Court is squarely applicable in the facts of the present case; and, respectfully following the same, the impugned order of the Commissioner (Appeals) holding that the transfer of agricultural land by the assessee to the partnership firm of VD by virtue of partnership deed dated 18- 3-2010 being null and voidable initio, it could not give rise to any capital gain which is chargeable to tax in the hands of the assessee in the year under consideration is upheld Tribunal News 51

Ahmedabad Chartered Accountants Journal December, 2022 489 Tribunal News Shree Harsaniji Public Charitable Trust v. ITO (Exemption) 142 Taxmann.com 465 (Ahd) Assessment Year:2015-16, Order dated: 24th June 2022 Basic Facts The assessee was a public charitable trust. The return was processed under section 143(1) denying the claim of deduction under section 11(2) of the Act. As against the intimation order, the assessee filed rectification petition under section 154 of the Act, claiming that the assessee though Form No. 10 was not filed along with return of 1-10-2015, it was uploaded by online on 2-1-2017 and accordingly deduction under section 11(2) of the Act should be granted. IT was also submitted that the filing of the Form No. 10 along with return of income is mandatory w.e.f. 1-4-2016 i.e., for the Asst. Year 2016-17 onwards. However, the rectification application was rejected by the DCIT (CPC) vide order dated 31-10-2019 on the ground that there is no prima facie error in order which was sought to be rectified. Aggrieved the assessee filed appeal before the CIT(A), NFAC. Before the CIT(A) the assessee referred to Circular No. 273 dated 3-6-1980 issued by CBDT, granting powers to Commissioner to condone delay in filing form no.10 if conditions given in the circular were fulfilled. The assessee has also drawn attention to Circular No. 14 (XI- 35) of 1955 dated 11-4-1955 issued by the CBDT, directing the AO to guide the assessee’s if they are ignorant of law especially in respect of relief under the Act. The assessee also relied on the decision of the Supreme court & high courts holding that such require of filing of forms can be said to have been fulfilled such forms had been filed before the assessment was completed. The CIT(A) rejected the appeal on the ground Form No. 10 was not there when the Intimation u/s 143(1) was passed. Hence not considering Form No. 10 does not constitute a mistake which is apparent from record. Hence the same cannot be rectified u/s 154. The assessee is before the Tribunal Issue Whether deduction under section 11(2) of the Act is to be denied for late filing of Form-10 for the Asstt. Year 2015-16. Held Considering the fact that the insertion of new subclause (c) of section 11(2) of the Act was by Finance Act 2015, which required the e assessee to furnish Form No. 10 along with Return of Income from the Asst. Year 2016-17 onwards. As per the CBDT Circular No. 7 of 2018, representation from the assessee that Form No. 9A and 10 could not be filed in specific time for the Asst. Year 2016-17, which were the first year of e-filing of these forms, and also to condone such delay by invoking section 11(2)(b) of the Act. All the above provisions & circulars make it clear that non-filing or delay in filing the Form No. 10, there was no time limit prescribed under the Act for the present Asst. Year 2015-16. The Tribunal observed that in spite of Circular 14 of 1955, the Departmental Officers are taking advantage of the ignorance of the assessee, instead of assisting the taxpayers more particularly in the matter of claim of relief, issuance of refund, but the officers had not taken any initiative in guiding the taxpayers in accordance with law. This attitude as per Tribunal will not give long term benefit to the department and discourage the confidence to the taxpayers. As per the Tribunal in simple words, when a litigant knocks the doors of the Temple of Justice, Justice to be rendered to his doorsteps itself and he should not be allowed to run from pillar to post for the Justice. Accordingly, while quashing the order of the CIT(A), the Tribunal allowed the assessee’s appeal. Toyota Boshoku Automotive India (P.) Ltd v. ACIT 145 Taxmann.com 141 (Bang) Assessment Year 2016-17, Order dated 18th July 2022 Basic Facts: The brief facts of the case are that the assessee is company is engaged in the business of manufacture of automobile component such as seats, door strings, 52 53

490 Ahmedabad Chartered Accountants Journal December, 2022 and interiors for the automobile industry. The AO observed that the assessee had made payment as reimbursement of salary to expatriates. In this regard the assessee provided the details of expat’s salary reimbursement and that the TDS has been deducted as per sec.192 of the Act on the entire salary paid including the salary paid in Japan. The reimbursement of salary portion paid to Toyota Boshoku Corporation (TBJ) is pure reimbursement in nature, as the amount is exactly equal to amount paid by TBJ to expat’s at Japan, without any value addition by TBJ and the assessee also submitted that the amount paid is not covered u/s 9(1)(ii) , hence sec.195 is not applicable. The AO observed that the TDS is to be deducted on the source based. He also relied on some judgments quoted in his order observed that the assessee has failed to deduct TDS as per sec.195 of the Act. Accordingly, he disallowed u/s 40(a)(i) of the Act on the entire sum paid and added into the total income of the assessee. Against the draft assessment order passed by the AO, the assessee filed objections before the DRP. The DRP while confirming the proposed addition and they directed to treat the expenditure as a capital in nature and directed to allow the depreciation on the above expenditure as per law after discussing in detail. Aggrieved by the DRP’s order, the assessee is in appeal before the Tribunal. Issue: Whether reimbursement to AE by assessee in India would not be in nature of FTS, but would be in nature of ‘salary’ and, therefore, reimbursement could not be chargeable to tax in hands of AE in Japan and, therefore, there would be no obligation to deduct tax at source at time of making payment under section 195 Held: The Tribunal noted that the assessee deducted tax at source u/s.192 of the Act, on the 100% salary paid to all the seconded employees and paid the same to the credit of the Central Government. The assessee only reimbursed part of the salary cost of the seconded employee to Toyota Corporation, Japan that was already subjected to TDS under section 192 of the Act. And therefore, at the time of making such reimbursement, to Toyota Corporation Japan, no taxes were deducted at source by the assessee in respect of reimbursements made as, according to the assessee, it was in the nature of cost-to-cost reimbursement, and, no element of income was involved. From a conjoint reading of Article 15 of the OECD Model Convention and the articles of the agreement, there was no doubt as per Tribunal that the assessee in India is the economic and de facto employer of the seconded employees. Further that all the seconded employees are in India for more than 183 days in a 12 month period. The seconded employees have PAN card as well as file their returns in India in respect of the 100 % salary, though the assessee pays only part of the salary in India. Hence Tribunal held that there exists an employer-employee relation between the assessee and the seconded employees. The definition of FTS under the Act excludes “consideration which would be income of the recipient chargeable under the head salaries.” If the seconded employee is regarded as employee of the assessee in India, then the reimbursement to Toyota Corporation, Japan, by the assessee in India would not be in the nature of FTS, but would be in the nature of ‘salary’, and therefore, the reimbursements cannot be chargeable to tax in the hands of Toyota Corporation, Japan, and therefore there would be no obligation to deduct tax at source at the time of making payment u/s.195 of the Act. Schneider Electric Infrastructure Limited V DCIT TS-856-ITAT-2022 (Ahd) Order dated 7/12/2022, Assessment Year 2017-18 Basic Facts: The assessee is a limited company and engaged in the business of manufacturing of power distribution equipments. The assessee has divided its business operation into various segments namely license Manufacturing, Contract manufacturing, Service Segment and Trading segment. The assessee has imported the raw materials and components from its AEs. The assessee has classified/shown the purchases of raw materials and components under Tribunal News 54

Ahmedabad Chartered Accountants Journal December, 2022 491 the segment of License Manufacturing for the reason that such purchases were directly connected to license manufacturing segment. As such, the assessee was under the obligation/risk for the sale of finished goods, marketing etc. out of such raw materials and components. The assessee has used the TNMM method as most appropriate method to benchmark the transactions entered for the purchase of raw materials and components from its AE’s. The assessee has selected the foreign companies as tested parties. The assessee, thus worked out the margin of the tested party at 5% and reached out at ALP (i.e. cost plus mark-up 5%). The assessee in this regard submitted that the cost plus 5% mark-up was followed up uniformly across the various Schneider Group Entities as specified in Schneider Group Transfer Pricing Policy. In this regard, the assessee also presents a picture of the same i.e. Schneider Group Transfer Pricing Policy during the assessment proceedings to substantiate its claim before the TPO. The assessee has selected mainly its two AEs based in France and Germany as tested parties from where it was procuring the raw materials and components. to the tune 42.2% and 17.9% i.e. aggregating approximately to 60% of its total purchase of raw materials and components from the AE’s. However, the comparable companies were selected based in European region only due to developed market economies. The assessee further stated that 92% of raw materials and components were procured from AEs based in Europe while 8% were procured from other AEs spread in APAC (Asia Pacific) and American Region. The assessee also claimed that the foreign AEs were considered as least complex based on FAR analysis. However, the AO/TPO rejected the ALP determined by the assessee by observing that the assessee in its TPSR mentioned that 5% markup charged on cost of raw material by AEs is the group policy. But the assessee has not furnished the Group Transfer Pricing Policy during the course of assessment proceedings as well as the presentation in the form of picture submitted. was not even containing the name of the assessee to substantiate the statement/claim. The assessee has purchased the raw materials and components from Tribunal News 24 entities spread all over the world but only two tested parties were selected. The assessee has not brought anything on record to demonstrate that foreign AEs based on FAR analysis are least complex. The assessee has not provided the data relating to the calculation of PLI. The assessee was unable to demonstrate the matrix of acceptance and rejection of comparable companies with reasoning as well as the basis of selecting the foreign companies as comparable companies. The data used by the assessee in selecting the comparable companies was for calendar year and not for the financial year. The assessee has not furnished details of the turnover of the AEs for the financial year in dispute. The margin worked out by the assessee of comparable companies was doubtful as the financials of such comparable companies were not furnished. The assessee has not maintained the requisite documents as specified in section 92D read with rule 10DA of the Income Tax Rules. The TPO order was upheld by DRP Issue: Whether the foreign AE’s can be treated as the tested party in the given facts and circumstances Held: The Tribunal noted that the selection of the tested party is a matter of dispute since beginning of the introduction of transfer pricing under the Act. It is for the reason that the Act does not define the concept of ‘Tested Party’. However, OECD has defined in detail the concept of tested party in its guidelines for Multinational Enterprises and Tax Administration. Further the same has also been defined in UN Manual. The OECD Guidelines defines ‘tested party’ as “the one to which a transfer pricing method can be applied in the most reliable manner and for which the most reliable comparable can be found, i.e. it will most often be the one that has the Downloaded less complex functional analysis.” UN Manual defines tested party in the similar manner. A Tested party should have the following attributes:1- Available of reliable and accurate data for comparison 2- Least Complex (amongst the parties to the transaction) 3- Data Continued to page 494

492 Ahmedabad Chartered Accountants Journal December, 2022 In this issue, we are giving gist of the recent decision rendered by ‘SMC’ Bench of Income Tax Appellate Tribunal, Ahmedabad in the case of ITO vs. Shri Champalal Gopiram Agarwal in respect of the income arising from the trading in so-called penny stocks. On the basis of the facts of the case, the Tribunal deleted the addition made on account of profit earned on transaction in one scrip and also restored the benefit of carry forward of loss arising in another scrip to the assessee. However, what is important is, the view of the Tribunal that income generated by the assessee cannot be held bogus only on the basis of modus operandi, generalization and assumptions of certain facts. The Tribunal held that income earned or loss incurred by the assessee can be held as bogus only if specific evidences have been brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, no adverse inference can be drawn against the assessee. We hope the readers would find the same useful. Annexure In the Income Tax Appellate Tribunal “SMC” Bench, Ahmedabad Before Shri Waseem Ahmed, Accountant Member ITA No.592/Ahd/2020 Assessment Year: 2012-13 Income Tax Vs. Shri Champalal Officer, Gopiram Agarwal Ahmedabad. Ahmedabad. (Applicant) (Respondent) Revenue by : Ms. M.M. Garg, Sr. D.R. Assessee by : Shri Vihar Soni, A.R. Date of hearing : 30.11.2022 Date of pronouncement : 23.12.2022 Gist Only: 1. In the above appeal, the issue before the Tribunal was about considering the profit by way of trading in the transaction in the scrip of M/s Aarya Global Share & Securities Ltd. as bogus, and likewise, loss by way of trading in the shares of Vax Housing Finance Corp. Ltd. also as bogus, whereby the benefit of carry forward of losses was denied to the assessee. Facts of the case: 2. The Assessing Officer received information from the DDIT (Inv.), Mumbai that the assessee has entered into the trading in penny stock namely the scrip of M/s Arya Global Shares & Securities Ltd (formerly known as Kuvam International Fashion Ltd.) and Vax Housing Finance Corp. Ltd., as a result of which, reassessment proceedings under section 147 of the Act were initiated. 3. During the re-assessment proceedings, assessee contended that both the transactions are genuine and are duly supported by the evidences which he led before the Assessing Officer. However, the Assessing Officer disagreed with the contention of the assessee and held that the DDIT in the investigation, found that the impugned scrip of M/s Arya Global Shares & Securities Ltd and Vax Housing Finance Corporation Ltd are penny stocks and managed by the entry operators. These scrips were utilized for providing accommodation entry to several beneficiaries. Therefore, the Assessing CA. Sanjay R. Shah [email protected] Unreported Judgements

Ahmedabad Chartered Accountants Journal December, 2022 493 Officer was of the view that income of Rs.19,310/- made on the sale of scrip of M/s Arya Global Shares & Securities Ltd was not genuine and similarly, loss incurred on the scrip of Vax Housing Finance Corporation Ltd was also not genuine. 4. Before the C.I.T. (Appeals), the assessee led the evidences in form of chart of purchase and sale of shares, bill of purchase and sale of shares, demat account details, payment made which was through banking channel and that on all the bills of purchase and sale on which STT was paid. The C.I.T. (Appeals) relied on the decision in the case of Pratik Suryakant Shah vs. Income-tax Officer, Ahmedabad and decided the issue in favour of the assessee. Before the Tribunal, the Department in its appeal reiterated its stand, which was there in the assessment order. 5. The Tribunal, after considering the rival submissions, held that the entire basis of the Assessing Officer to treat the transaction as bogus was based on the information received from DDIT (Inv.), Mumbai that the impugned two scrips were penny stocks. However, the Assessing Officer nowhere pointed out any adverse finding in such report against the assessee. The Tribunal also found that assessee carried out the transaction in these scrips at stock exchange through registered broker which is duly supported by the documentary evidences such as bills, Demat account, and bank statements, showing payment were done through banking channel. The Assessing Officer nowhere found any discrepancies in the documentary evidences. The dominant basis of treating the impugned transaction as bogus was based on assumption of the Assessing Officer that the impugned scrips were found as penny stock. In such circumstances, it was the onus upon the Assessing Officer to bring such facts on record before making any allegations against the assessee. In the present case, the C.I.T. (Appeals) after detailed verification has held the transaction to be genuine and based on the documentary evidence. At the time of hearing, the learned DR has not brought any iota of evidence against the finding of the learned C.I.T. (Appeals). Similarly, there was no allegation against the broker through whom the assessee has purchased and sold the scrips. What has been adopted by the Assessing Officer for making the addition/disallowances was the mere assumption. The Tribunal further held that, the mere assumption, surmises and conjectures cannot the basis of making the addition or treating the transaction as bogus until and unless it is supported by the material documents. 6. Thereafter, the Tribunal further held as under: “9.2 In our view, the income generated by the assessee cannot be held bogus only on the basis of the modus operandi, generalisation, and assumptions of certain facts. In order to hold income earned or loss incurred by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In absence of such finding, no adverse inference can be drawn against the assessee. 9.3 Now the controversy also arises whether a person who genuinely entered into purchase and sale of particular shares at stock exchange which was rigged up by some other person or group of persons, therefore, he enjoyed the windfall from such action of other person, can he be disallowed the benefit of tax exemption or carry forward of loss. To our mind the Justice cannot be delivered in a mechanical manner. In other words, what we see on the records available before us, sometime we have to travel beyond it after ignoring the same. Furthermore, while delivering the justice, we have to ensure in this process Unreported Judgments

494 Ahmedabad Chartered Accountants Journal December, 2022 that culprits should only be punished and no innocent should be castigated. An innocent person should not suffer for the wrongdoings of the other parties. In the case on hand, admittedly there was no evidence available on record suggesting that the assessee or his broker was involved in the rigging up of the price of the script of M/s Arya Global Shares & Securities Ltd and Vax Housing Finance Corp. Ltd. Thus, it appears that the assessee acted in the given facts and circumstances in good-faith.” 7. The Tribunal also relied on Delhi High court decision in case of Pr. CIT vs. Smt. Krishna Devi reported in 126 taxmann.com 80, and thereafter, further held as under: “9.5 Respectfully following the judgment of Hon’ble Delhi High Court (Supra), we hold that in absence of any specific Unreported Judgments finding against the assessee, the assessee cannot be held to be guilty or linked to the wrong acts merely on basis of surmises and assumptions. In view of the above discussion, we hold that the income earned by the assessee on the scrip of M/s Arya Global Shares & Securities Ltd and loss incurred on the scrip of Vax Housing Finance Corp. limited cannot be held bogus merely on the basis of some assumption of the AO unless cogent materials are brought on record. Therefore, we don’t find any reason to disturb the finding of the learned CIT(A) and direct the AO to delete the addition and disallowances made by him. Hence the grounds of Revenue’s appeal is hereby dismissed.” ❉ ❉ ❉ Continued from page 491 Tribunal News available can be used with minimal adjustments. Tribunal noted the assessee has carried the detailed economic analysis while benchmarking the transactions entered with its AEs. However, the Tribunal found that the assessee has failed to furnish sufficient documentary evidence in the form of financial statements of the relevant year of the foreign AE’s to substantiate the margin. There was no group transfer policy furnished by the assessee. The assessee has considered the financial statements of 2 AEs based in Germany and France wherefrom it was procuring the raw material and components to the tune of 60% only. It implies that the financials of other AE’s based in different regions including the Europe were not considered. Even at the time of hearing, the assessee has not brought anything on record contrary to the finding of the authorities below. In view of the above and in the absence of necessary information, the Tribunal disagreed with the contentions of the assessee that foreign parties were the least complex parties and were fit to be selected as tested party. Though the assessee has furnished the FAR Analysis of the foreign AE’s viz a viz of the assessee in the TPSR but same were not enough to decide the tested party until and unless the reliable data was brought on record. In other words, the financial data reflecting the transaction was equally important to determine the PLI of the tested party viz a viz the comparables. The Tribunal while so holding also drew support and guidance from the order of the coordinate bench of this tribunal in the case of General Motors India (P.) Ltd. vs. Deputy Commissioner of Income-tax / Assistant Commissioner of Income-tax reported in 37 taxmann.com 403 where it was held that tested party should be the least complex entity for which reliable data in respect of itself and in respect of comparables is available. The Tribunal in that case accepted that tested party could be the local entity or a foreign associate enterprise (AE). Thus, foreign AE’s was rejected to be treated as the tested party, ❉ ❉ ❉

Ahmedabad Chartered Accountants Journal December, 2022 495 CA. Kaushik D. Shah [email protected]. Controversies Issues Whether penalty under section 271D of the Income Tax Act, 1961 is leviable when transfer of loan or advances are done merely by the way of book entries? Proposition The provisions contained in Section 269SS of the Act states that no person shall accept any advance or deposit otherwise by the way of account payee cheque or account payee draft or any electronic mode as may be prescribed. In my opinion 269SS was introduced in the statute to prevent introduction of unaccounted money by showing cash loans etc. Section 269SS does not apply on journal entries passed in the books of accounts and hence no penalty is leviable. View against the Proposition Extract of the relevant provision is as under: - According to section 269SS of the Income Tax Act 1961, No person shall take or accept from any other person (herein referred to as the depositor), any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if,— (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more - According to section 271D of the Income Tax Act 1961, if a person takes or accepts any loan or deposit or specified sum in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so taken or accepted. In case of Pr. CIT v. Shakti Foundation (2019), the CIT(A) in para 10 of its order held that there was not any reasonable cause to believe for receiving the above said loans in violation of the provisions of section 269SS of the Act and hence penalty under section 271D was imposed. View in favour of the Proposition According to Section 269SS of the Act, no person shall accept any advance or deposit otherwise by the way of account payee cheque or account payee draft or any electronic mode as may be prescribed. Section 269SS does not apply on journal entries passed in the books of accounts and hence no penalty is leviable. A plain reading of section indicates that it applies to a transaction where a deposit or loan money is accepted by an assessee otherwise than by an account payee cheque or an account payee draft. Although in the case of cut v. Triumph International Finance (I) Ltd. (supra), it is held that the liability recorded in Continued to page 501

496 Ahmedabad Chartered Accountants Journal December, 2022 Revaluation of Assets of a Firm by crediting Partners’ Capital Account is taxable u/s 45(4) of the Act. CIT vs Mansukh Dyeing and Printing Mills (Civil Appeal No. 8259 of 2022) 2.1 The respondent assessee, a partnership firm originally consisted of four partners (all brothers) engaged in the business of Dyeing and Printing, Processing, Manufacturing and Trading in Clothing. Under the Family Settlement dated 02.05.1991, the share of one of the existing partners – Shri M.H. Doshi having 25% profit share in the firm was reduced to 12% and, for his balance 13% share, three new partners were admitted namely, viz., Smt. Ranjan Doshi (11%), Shri Prakash Doshi (1%) and Shri Rajeev Doshi (1%). It appears that thereafter, Shri M.H. Doshi, Shri Manohar Doshi and Shri V.H. Doshi retired from the partnership and reconstituted the partnership firm consisted of the partners namely, viz., Shri Hasmukhlal H. Doshi, Smt. Rajan H. Doshi, Shri Prakash H. Doshi & Shri Rajiv H. Doshi. 2.2 That on 01.11.1992, the firm was again reconstituted and three more partners, namely, viz., Smt. Vaishali Shah (18%), Smt. Bhavna Doshi (9%), Smt. Rupal Doshi (9%) and M/s. Ranjana Textile Pvt. Ltd. (10%) were admitted as partners. The contribution of new partners was as under: - Smt. Vaishali Shah – Rs. 4.50 lakhs - M/s. Ranjana Textiles Pvt. Ltd. – Rs. 2.50 lakhs - Smt. Bhavna Doshi – Rs. 2.25 lakhs - Smt. Rupal Doshi – Rs. 2.25 lakhs 32 Advocate Tushar Hemani [email protected] Judicial Analysis It was mentioned in the reconstituted partnership deed that two partners, namely, viz., Shri Hasmukh H. Doshi and Smt. Ranjan Doshi had decided to withdraw part of their capital. 2.3 On 01.01.1993, the assets of the firm were revalued and an amount of Rs. 17.34 crores were credited to the accounts of the partners in their profit-sharing ratio. Two of the existing partners, viz., namely Shri Hasmukhlal H. Doshi & Smt. Ranjan Doshi withdrew part of their capital which was roughly Rs. 20 to Rs. 25 lakhs. Thus, according to the Revenue, the new partners were immediately benefited by the credit to their capital accounts of the revaluation amount, as Rs. 3.12 crores was credited to Smt. Vaishali Shah (who contributed Rs. 4.50 lakhs); Rs.1.56 crores to Smt. Bhavna Doshi (who contributed Rs. 2.25 lakhs); Rs. 1.56 crores to Smt. Rupal Doshi (who contributed Rs. 2.25 lakhs); and Rs. 1.73 crores to M/s. Ranjana Textiles (who contributed Rs. 2.50 lakhs only). 2.4 The respondent filed its Return of Income for the relevant assessment years. The Return of Income was filed for A.Y. 1993-1994 @ Rs. 3,18,760/-. The same was accepted under Section 143(1) of the Income Tax Act, 1961. However, thereafter, the assessment was reopened under Section 147 of the Income Tax Act by issuance of the notice under Section 148. The assessment was reassessed under Section 143(3) read with Section 147 determining the total income of Rs. 2,55,19,490/-. Addition of Rs. 17,34,86,772/- was made towards short term capital gain under Section 45(4) of the Income Tax Act. Similar addition was made for A.Y. 1994-1995.

Ahmedabad Chartered Accountants Journal December, 2022 497 Judicial Analysis 2.5 As per the A.O., the assessee revalued the land and building and enhanced the valuation from Rs. 21,13,225/- to Rs. 17,56,00,000/- for A.Y. 1993-1994 thereby increasing the value of the assets by Rs. 17,34,86,772/- and therefore the revaluing of the assets, and subsequently crediting it to the respective partners’ capital accounts constitutes transfer, which was liable to capital gains tax under Section 45(4) of the Income Tax Act. As land and building was involved, the assessee had claimed the depreciation on building, and the Assessing Officer assessed the amount of short-term capital gain under Section 50. 2.6 The Commissioner of Income Tax (Appeals) [CIT(A)] by order dated 30.07.2004 confirmed the addition on account of Short-Term Capital Gains and held that there is a clear distribution of assets as partners have also withdrawn amounts from the capital account. CIT(A) also observed that value of the assets of the firm which commonly belonged to all the partners of the partnership have been irrevocably transferred in their profit-sharing ratio to each partner. To the extent that the value has been assigned to each partner, the partnership has effectively relinquished its interest in the assets and such relinquishment can only be termed as transfer by relinquishment. Therefore, according to the CIT(A), conditions of Section 45(4) are satisfied and therefore, the assets to the extent of their value distributed would be deemed as income by capital gains in the hands of the assessee firm. The CIT (A) also observed that the transfer of the revalued assets had taken place during the previous year and, therefore, the liability to capital gains arises in the A.Y. 1993-1994. The CIT(A) relied upon the decision of the Bombay High Court in the case of Commissioner of Income Tax Vs. A.N. Naik Associates and Ors., (2004) 265 ITR 346 (Bom.) and distinguished the decision of the Bombay High Court in the case of Commissioner of Income-Tax Mumbai Vs. Texspin Engg. and Mfg. Works, Mumbai, (2003) 263 ITR 345 (Bom.). 2.7 In an appeal preferred by the assessee, the ITAT by judgment and order dated 26.10.2006 and relying upon the decision of this Court in the case of Commissioner of Income Tax, West Bengal Vs. Hind Construction Ltd., (1972) 4 SCC 460 allowed the appeal and has set aside the addition made by the A.O. towards Short Term Capital Gains by observing that as observed and held by this Court in the aforesaid decision, revaluation of the assets and crediting to partners’ account did not involve any transfer. The ITAT observed and held that the decision of the Bombay High Court in the case of A.N. Naik Associates and Ors. (supra) shall not be applicable and held that the decision of the Bombay High Court in the case of Texspin Engg. and Mfg. Works, Mumbai (supra) shall be appliable. 2.8 Relying upon the decision of this Court in the case of Hind Construction Ltd. (supra), by the impugned judgment and order the High Court has dismissed the appeals preferred by the Revenue. Hence the present appeals being Civil Appeal No. 8258 of 2022 (relating to A.Y. 1993-1994) and Civil Appeal No. 8259 of 2022 (relating to A.Y. 1994-1995) have been filed by the Revenue. xxx… 6. The short question, which is posed for the consideration of this Court is the applicability of Section 45(4) of the Income Tax Act as introduced by the Finance Act, 1987. 7. The relevant portion of Section 45, with which we are concerned, is sub-section (4), which reads as under:- “(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which

498 Ahmedabad Chartered Accountants Journal December, 2022 Judicial Analysis the said transfer takes place and for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.” 7.1 Sub-section (4) of Section 45 came to be amended by the Finance Act, 1987 w.e.f. 01.04.1988. From a reading of the above subsection, to attract the capital gains, what would be required is as under:- 1. Transfer of capital asset by way of distribution of capital assets; a. On account of dissolution of a firm; b. Or other association of persons; c. Or body of individuals; d. Or otherwise; shall be chargeable to tax as the income of the firm, association or body of persons.” 7.2 The object and purpose of introduction of Section 45(4) was to pluck the loophole by insertion of Section 45(4) and omission of Section 2(47)(ii). While introduction to Section 45(4), clause (ii) of Section 2(47) came to be omitted. Earlier, omission of Clause (ii) of Section 2(47) and Section 47(ii) exempted the transform by way of distribution of capital assets from the ambit of the definition of “transfer”. The same helped the assessee in avoiding the levy of capital gains tax by revaluing the assets and then transferring and distributing the same at the time of dissolution. The said loophole came to be plucked by insertion of Section 45(4) and omission of Section 2(47)(ii). At this stage, it is required to be noted that the word used “OR OTHERWISE” in Section 45(4) is very important. 7.3 In the present case, it was the case on behalf of the assessee relying upon the decision of this Court in the case of Hind Construction Ltd. (supra) that unless there is a dissolution of partnership firm and thereby the transfer of the amount on revaluation to the capital accounts of the respective partners, Section 45(4) of the Income Tax shall not be applicable. It is the case on behalf of the assessee that there can be no income just due to revaluation of the capital assets unless capital assets is also transferred. According to the assessee, the amount credited on revaluation to the capital accounts of the partners is only notional or book entry, which is not represented by any additional tangible assets or income. Therefore, the sum and substance of the submission on behalf of the assessee is that unless there is a dissolution of the partnership firm, and there is only transfer of the amount on revaluation to the capital accounts of the respective partners, Section 45(4) of the Income Tax Act shall not be applicable. 7.4 However, in view of the amended Section 45(4) of the Income Tax Act inserted vide Finance Act, 1987, by which, “OR OTHERWISE” is specifically added, the aforesaid submission on behalf of the assessee has no substance. The Bombay High Court in the case of A.N. Naik Associates and Ors., (supra) had an occasion to elaborately consider the word “OTHERWISE” used in Section 45(4). After detailed analysis of Section 45(4), it is observed and held that the word “OTHERWISE” used in Section 45(4) takes into its sweep not only the cases of dissolution but also cases of subsisting partners of a partnership, transferring the assets in favour of a retiring partner. While holding so, it is observed in paragraphs 14, 21, 22 and 24 as under:- “14. Pursuant to the inclusion of sub-section (4) in section 45, on the dissolution of a partnership the profits or gains arising from the transfer of capital asset are chargeable to tax as income of the firm. It is contended on behalf of the assessee that even after introduction of section 45(4), the position will be the same as the definition clause i.e. namely section 2(47) has not been

Ahmedabad Chartered Accountants Journal December, 2022 499 Judicial Analysis amended. Secondly it is contended that the expression “otherwise” must be read edjusdem generis with the expression dissolution of firm. So considered, there is no dissolution on the firm. So considered, there is no dissolution on the facts of the case. On behalf of the revenue, it was, however, argued that the amendment was brought about to remove the mischief occasioned by parties avoiding to pay tax, considering the law as declared and to plug the loopholes. The expression otherwise must be read to mear transfer of capital assets of the assessee firm include to a partner. As the section is a self contained code, there was no need to amend the definition of transfer under section 2(47) of the Act. The Position therefore, will have to be examined in the context of the law as amended after 1988……………….. XXXXXXXXXXXXXX 21. With the above, we may now proceed to answer the issue. On retirement of a partner or partners from an existing firm, and who receives assets from the firm, the law before 1998 would really be of no support, as by section 45(4) what was otherwise not taxable has been made taxable. Section 45(4) seems to have been introduced with a view to overcome the judgment of the Apex Court in Malabar Fisheries Co. v. Commissioner of Income-Tax, Kerala (supra) and other judgments which took a view that the firm on its own has no right but it is the partners who own jointly or in common the asset and thereby remedy the mischief occasioned. Distribution of capital assets on dissolution now is subject to capital gains tax unless it does not fall within the definition of transfer under section 2(47) What would be the effect of partners of a subsisting partnership distributing assets to partners who retire from the partnership. Does the asset of the partnership, on being allotted to the retired partner/partners fall within the expression “otherwise”. As noted earlier on behalf of the assessee it has been contended that the expression “otherwise” would have to be read “ejusdem generis” with “dissolution of partner or body of individuals” and for that purpose reliance was placed on a judgment of the Division Bench in (Commissioner of IncomeTax, Bombay City II v. Trustees of Abdulcadar Ebrahim Trust), 1975 (100) I.T.R. 85. Section 45 is a charging section. The purpose and object of the Act of 1988 was to charge tax arising on distribution of capital assets of firms which otherwise was not subject to taxation. If the language of sub-section (4) is construed to mean that the expression “otherwise” has to partake in the nature of dissolution or deemed dissolution, then the very object of the amendment could be defeated by the partners, by distributing the assets to some partners who may retire. The firm then would not be liable to be taxed thus defeating the very purpose of the Amending Acts. Prior to the Finance Act, 1987 in case of a partnership it was held that the assets are of the partners and not of the partnership. Therefore if on retirement a partner receive his share of the assets, may be in the form of a single asset, it was held that there was no transfer and similarly on dissolution of the partnership. Another device resorted to by an assessee was to convert an asset held independently as an asset of the firm in which the individual was a partner. The decision of the Supreme Court in (Kartikeyav. Sarabhai v. C.I.T.), 1985 (156) I.T.R. 509 took a view that this would not amount to transfer and, therefore, fell outside the scope of capital gain. The rationale being that the consideration for the transfer of the personal asset was indeterminate, being the right which arose or accrued to the partner during the subsistence of the partnership to get his share of profit from time to time and on dissolution of the partnership to get the value of his share from the not partnership asset. Parliament with the avowed object of blocking this escape route for avoiding capital gains tax by the Finance Act, 1987 has introduced subsection (3) of section 45. The effect of this was that the profits and gains arising from the transfer

500 Ahmedabad Chartered Accountants Journal December, 2022 of a capital asset by a partner to a firm is chargeable as the partner’s income of the previous year in which the transfer took place. On a conversion of the partnership assets into individual assets on dissolution or otherwise also formed part of the same scheme of tax avoidance. To plug these loophole the Finance Act, 1987 brought on the statute book a new sub-section (4) in section 45 of the Act. The effect is that the profits or gains arising from the transfer of a capital asset by a firm to a partner on dissolution or otherwise would be chargeable as the firm’s income in the previous year in which the transfer took place and for the purposes of computation of capital gains, the fair market value of the asset on the date of transfer would be deemed to be the full value of the consideration received or accrued as a result of transfer. Therefore, if the object of the Act is seen and the mischief it seeks to avoid, it would be clear that intention of Parliament was to bring into the tax not transactions whereby assets were brought into a firm or taken out of the firm. 22. The expression “otherwise” in our opinion, has not to be read ejusdem generis with the expression, dissolution of a firm or body or assets of persons. The expression “otherwise” has to be read with the words ‘transfer of capital assets” by way of distribution of capital asset’s. If so read, it becomes clear that even when a firm is in existence and there is a transfer of capital assets it comes within the expression “otherwise” as the object of the amending Act was to remove the loophole which existed whereby capital gain tax was not chargeable. In our opinion, therefore, when the asset of the partnership is transferred to a retiring partner the partnership which is assessible to tax ceases to have a right or its right in the property stands extinguished in favour of the partner to whom it is transferred. If so read it will further the object and the purpose and intent of amendment of section 45. Once, that be the case, we will have to hold that the transfer of assets of the partnership to the retiring partners would amount to the transfer of the capital assets in the nature of capital gains and business profits which is chargeable to tax under section 45(4) of the I.T. Act. We will, therefore, have to answer question No. 3 by holding that the word “otherwise” takes into its sweep not only the cases of dissolution but also cases of subsisting partners of a partnership, transferring assets in favour of a retiring partner. XXXXXXXXXXXXXX 24. Considering this clause as earlier contained in section 47, it meant that the distribution of capital assets on dissolution of a firm etc. were not regarded as transfer. The Finance Act, 1987 w.e.f. 1-4-1988, omitted this clause, the effect of which is that distribution of capital assets on the dissolution of a firm would henceforth be regarded as ‘transfer’. Therefore, instead of amending section 2(47), amendment was carried out by the Finance Act, 1987, by omitting section 47(11), the result of which is that distribution of capital assets on the dissolution of a firm would be regarded as ‘transfer’. Therefore, the contention that it would not amount to a transfer has to be rejected. It is now clear that when the asset is transferred to a partner, that falls within the expression otherwise and the rights of the other partners in that asset of the partnership is extinguished. That was also the position earlier but considering that on retirement the partners only got his share, it was held that there was no extinguishment of right. Considering the amendment, there is clearly a transfer and if, there be a transfer, it would be subject to capital gains tax.” 7.5 In the present case, the assets of the partnership firm were revalued to increase the value by an amount of Rs. 17.34 crores on 01.01.1993 (relevant to A.Y. 1993-1994) and the revalued amount was credited to the accounts of the partners in their profit-sharing ratio and the credit of the assets’ revaluation amount to the capital accounts of the partners can be said to be in effect distribution of the assets valued at Rs. 17.34 crores to the partners and that during Judicial Analysis

Ahmedabad Chartered Accountants Journal December, 2022 501 the years, some new partners came to be inducted by introduction of small amounts of capital ranging between Rs. 2.5 to 4.5 lakhs and the said newly inducted partners had huge credits to their capital accounts immediately after joining the partnership, which amount was available to the partners for withdrawal and in fact some of the partners withdrew the amount credited in their capital accounts. Therefore, the assets so revalued and the credit into the capital accounts of the respective partners can be said to be “transfer” and which fall in the category of “OTHERWISE” and therefore, the provision of Section 45(4) inserted by Finance Act, 1987 w.e.f. 01.04.1988 shall be applicable. 7.6 Now, so far as the reliance placed upon the decision of this Court in the case of Hind Construction Ltd. (supra) is concerned, at the outset, it is required to be noted that the said decision was pre-insertion of Section 45(4) of the Income Tax Act inserted by Finance Act, 1987 and in the earlier regime – pre-insertion of Section 45(4), the word “OTHERWISE” was absent. Therefore, in the case of Hind Construction Ltd. (supra), this Court had no occasion to consider the amended / inserted Section 45(4) of the Income Tax Act and the word used “OTHERWISE”. Under the circumstances, for the purpose of interpretation of newly inserted Section 45(4), the decision of this Court in the case of Hind Construction Ltd. (supra) shall not be applicable and/or the same shall not be of any assistance to the assessee. As such, we are in complete agreement with the view taken by the Bombay High Court in the case of A.N. Naik Associates and Ors., (supra). We affirm the view taken by the Bombay High Court in the above decision. 8. In view of the above and for the reasons stated above, the impugned judgment and order passed by the High Court and that of the ITAT are unsustainable and the same deserves to be quashed and set aside and are accordingly quashed and set aside. The order passed by the Assessing Officer is hereby restored. ❉ ❉ ❉ Judicial Analysis the books of account by way of journal entries i.e. crediting the amount of party to whom monies payable and debiting the account of a party from whom monies are receivable in the books of account is in contravention of provisions of Section 269T of the Act but in that case also the penalty was held to be not leviable for the reason that transaction was bona fide and was not to evade taxes. In the case ofPr. CIT v. Shakti Foundation (2019), the transaction is bonafide and it was not to evade taxes. In this view of the matter and further perusing the citations of the case lawscut v. Triumph International Finance (I) Ltd. (supra), the appeal of the revenue was dismissed and no penalty was levied on the assessee. Summation Decision taken by the High Court in the case of Pr. CIT v. Shakti Foundation (2019) has set the benchmark for key matter of this controversy. It was held that the transaction is bonafide and it was not to evade taxes. Moreover section 269SS does not apply on journal entries passed in the books of accounts and hence no penalty is leviable. Even after the decision, the issue is still highly debatable because tax payers can use this judgement to evade taxes and introduce unaccounted money by showing cash loans. In view of above, in my humble opinion, 269SS was introduced in the statute to prevent introduction of unaccounted money by showing cash loans etc. Section 269SS does not apply on journal entries passed in the books of accounts and hence no penalty is leviable. ❉ ❉ ❉ Continued from page 495 Controversies

502 Ahmedabad Chartered Accountants Journal December, 2022 Reserve Bank of India (Unhedged Foreign Currency Exposure) Directions, 2022 The Reserve Bank of India has issued guidelines/ instructions/directives to the banks on Unhedged Foreign Currency Exposure (UFCE) of the entities which have borrowed from banks. The Directions on Unhedged Foreign Currency Exposure) shall come into effect from January 1, 2023. The provisions of these Directions shall be applicable to all commercial banks excluding Payments Banks and Regional Rural Banks (hereinafter collectively referred as “banks”). These Directions shall be applicable to overseas branches/ subsidiaries of banks incorporated in India. General Guidelines: Computation of UFCE (a) Banks shall ascertain the Foreign Currency Exposure (FCE) of all entities at least on an annual basis. Banks shall compute the FCE following the relevant accounting standard applicable for the entity. Explanation: Banks shall consider the items maturing or having cash flows over the period of next five years. Note: For arriving at the foreign currency exposure of entities, their exposure from all sources including foreign currency borrowings and External Commercial Borrowings shall be taken into account. (b) Banks shall assess the Unhedged Foreign Currency Exposure (UFCE) of entities with FCE by obtaining information on UFCE from the concerned entity. Provided that the information on UFCE shall be obtained from entities on a quarterly basis based on statutory audit, internal audit or self-declaration by the concerned entity. Provided further that UFCE information shall be audited and certified by the statutory auditors of the entity, at least on an annual basis. Provisioning and Capital Requirements (a) Banks shall determine the potential loss to an entity from UFCE using the largest annual volatility in the USD-INR exchange rates during the last ten years. Note: The Unhedged Foreign Currency Exposure (UFCE) in currencies other than USD shall be converted into USD using the current market rates for determining the potential loss from UFCE. (b) Banks shall determine the susceptibility of the entity to adverse exchange rate movements by computing the ratio of the potential loss to entity from UFCE and the entity’s EBID over the last four quarters as per the latest quarterly results certified by the statutory auditors. Note: (1) In cases where banks are not in position to obtain information on UFCE or EBID from listed entities for the latest quarter due to restrictions on disclosure of such information prior to finalisation of accounts, banks shall have the option to use data pertaining to the immediately preceding last four quarters for computing capital and provisioning requirements. (2) In case of unlisted entities where the audited results of the last quarter are not available, the latest audited quarterly or annual results available shall be used. The annual EBID figure used shall at least be of the last financial year. CA. Dr. Savan R. Godiawala [email protected] FEMA Updates 17

Ahmedabad Chartered Accountants Journal December, 2022 503 (c) Accordingly, banks shall apply incremental capital and provisioning requirements 5 to all exposures to such entities as under: Potential Loss/ Incremental Incremental EBID (%) Provisioning Capital Requirement Requirement Upto 15 per cent 0 0 More than 15 per cent 20bps 0 and upto 30 per cent More than 30 per cent 40bps 0 and upto 50 per cent More than 50 percent 60bps 0 and upto 75 per cent More than 75 per cent 80 bps 25 per centage point increase in the risk weight Note: The incremental provisioning for UFCE shall be based on the total exposure amount which is used for computing standard asset provisioning and incremental capital requirements for UFCE shall be based on the total exposure amount which is used for computing credit risk capital requirements. (d) Banks shall calculate the incremental provisioning and capital requirements at a minimum on a quarterly basis. (e) For projects under implementation and the new entities, banks shall calculate the incremental provisioning and capital requirements based on projected average annual EBID for the three years from the date of commencement of commercial operations. Provided that the incremental capital and provisioning requirement shall be subjected to a minimum floor of 20 bps of provisioning requirement. (f) In cases where the bank is not able to get sufficient data to assess UFCE and compute incremental capital and provisioning requirements except for the smaller entities covered under the alternative method provided in sub-clause (g) below, the bank shall take a conservative view and place the exposure to the entity at the last bucket which requires incremental provisioning of 80bps and a 25 per centage point increase in risk weight. (g) Banks shall have the option to follow an alternative method for exposures to smaller entities which are having foreign currency exposures and are not in position to provide information on their UFCE as per clause 4(b). Under this alternative method, banks shall apply an incremental provisioning of 10 bps over and above extant standard asset provisioning instead of computing incremental capital and provisioning requirements as provided in clause 5(a) to 5(e). Explanation: For this purpose, smaller entities are those entities on which total exposure of the banking system is at Rs.50 crore or less. Systems and Controls (a) Banks shall incorporate the risk of UFCE of entities in their internal credit rating system and credit risk management policies and procedures. (b) Banks shall stipulate internal limits for UFCE within the overall Board approved risk policy of the bank. Consortium Lending (a) In the case of consortium/multiple banking arrangements, the consortium leader/bank having the largest exposure shall have the lead role in monitoring the unhedged foreign exchange exposure of entities. Note: Banks shall put in place a system for information sharing and dissemination in terms of circular DBOD.No.BP.BC.94/08.12.001/ 2008-2009 dated December 8, 2008, on ‘Lending under Consortium Arrangement/ Multiple Banking Arrangements’, as amended from time to time. Exemption/Relaxation (a) Banks shall have the option to exclude the following exposures from the calculation of UFCE: (i) Exposures to entities classified as sovereign 7, banks 8 and individuals. (ii) Exposures classified as Non-Performing Assets. FEMA Updates Continued to page 506

504 Ahmedabad Chartered Accountants Journal December, 2022 [I] Important Case Laws: (High Court) [1] Issue: Interest on delay in filing of GSTR-3B to be paid even if tax was already deposited in electronic cash ledger: HC: Case Laws: RSB Transmissions (India) Pvt. Ltd. v. Union of India [2022] 145 taxmann.com 1 (Jharkhand). Facts: The department levied interest due to delay in filing of GSTR-3B returns by the petitioner. However, the petitioner denied to pay interest on delay in filing of GSTR-3B for disputed periods on ground that amount of tax had already been deposited prior to filing of GSTR3B return in its electronic Cash Ledger. The question before the High Court was whether the amount deposited as tax through valid challans by a registered person in the Government Exchequer prior to the filing of the GSTR-3B returns could be treated as discharge of the tax liability. Held: The Hon’ble High Court noted that Electronic cash ledger is just an e-wallet where cash can be deposited at any time by creating requisite challans. The assessee can claim refund of the amount deposited in Electronic Cash Ledger any time by following procedure prescribed under GST Act and the computation of interest liability is dependent upon delay in filing of returns beyond due date. Therefore, it was held that revenue had rightly computed interest on delayed payment since petitioner had delayed in filing returns for disputed period. [2] Issue: HC can examine correctness of order passed by appellate authority in absence of GST Tribunal. Case Laws: Devanshi Plyboard Industries (P.) Ltd. v. Deputy Commissioner State Tax, Goods & Service Tax [2022) 145 taxmann.com 18 (Cal.) Facts: The appellant preferred the writ petition challenging the order passed by the appellate authority. The learned Single Judge was of the view that the present round of litigation is second round of litigation and the order being a speaking order, no interference is called for and dismissed the writ petition filed by the appellant. The appellant filed this appeal and submitted that an adverse report had been relied upon by the appellate authority while rejecting the appeal and such adverse report was not furnished to the appellant in spite of a representation. Held: The Hon’ble High Court observed that as on date there is no other remedy available against the impugned order under the GST Act since the Tribunal has not been constituted. Therefore, the appellant had to necessarily approach the learned writ court for challenging the said order. The Court noted that High Court being first judicial forum can examine correctness of order passed by appellate authority. In the instant case, representation made to appellate authority had not been considered and adverse report had not been GST and VAT Judgments and Updates CA. Vishrut R. Shah [email protected] CA. Bihari B. Shah [email protected]

Ahmedabad Chartered Accountants Journal December, 2022 505 GST and VAT - Judgements and Updates furnished. Therefore the Court directed Appellate Authority to give fresh opportunity of hearing to appellant after which case was to be decided on merit. [3] Issue: Adjudication order passed straightway after issuance of SCN without granting opportunity of hearing to be quashed: HC: Case Laws: Om Prakash Store v. State of Jharkhand [2022] 144 taxmann.com 30 (Jharkahnd). Facts: The petitioner was a registered dealer and engaged in the business of trading of Jaggary, Mahua and Kirana Goods. An inspection was carried out in the premises of petitioner and thereafter summary of show cause notice in Form GST DRC-01 was issued negligently without mentioning date, time and venue and straightway, after issuance of DRC-01 m adjudication order under section was passed. The petitioner filed writ petition and contended that no show-cause notice, summary of show cause notice, adjudication order and summary of order was ever served to the petitioner. Held: The Hon’ble High Court observed that immediately after issuance of SCN under DRC01, adjudication order under section 73 was passed and also summary of order in Form GST DRC-07 was issued. Moreover, the petitioner came to know about adjudication proceeding and order passed by GST authorities only when bank attachment notice contained in GST DRC-13 was issued to banker of petitioner by attaching bank account of petitioner. The Court also noted that proper opportunity of hearing was not afforded to petitioner before adjudication order was passed. Therefore, it was held that the impugned order was liable to be quashed and matter was to be remitted back to Adjudicating Authority to issue fresh show cause notice. [4] Issue: Opportunity of personal hearing to be provided even if request for personal hearing not made: HC: Case Laws: Graziano Trasmissioni India (P) Ltd. V. State of Gujarat [2022] 143 taxmann.com 381 (Gujarat) Facts: The petitioner was manufacturing automobile components and exported the goods outside India under Letter of Undertaking without payment of GST/ It had reported the value of exports under GSTR-3B in the Column for nil rated/exempt supply and not in the Column for Zero-rated supply. The department SCN proposing demand of ITC along with interest and penalty and order was passed. It filed writ petition against the order. Held: The Hon’ble High Court observed that as per section 75(4) of the CGST Act, 2017, an opportunity of hearing is to be provided where a request is received in writing from the person chargeable with tax or penalty or where any adverse decision is contemplated against such person. The department also submitted that opportunity of hearing was not granted since the same was not requested for. However, while so arguing, the provision of section 75(4) has been missed out. Even, without any request having been made when any adverse decision is contemplated, personal hearing is a must. Hence, the same was missing in the instant case and therefore, order was quashed only on the ground of non-availment of opportunity of personal hearing. [5] Issue: HC directs anti-evasion wing not to proceed with notices issued for period whose GST audit has been commenced: HC: Case Laws: R. P. Buildcon (P) Ltd. v. Superintendent, CGST & Central Excise [2022] 144 taxmann.com 108 (Calcitta)

506 Ahmedabad Chartered Accountants Journal December, 2022 Facts: The Anti-evasion wing and Range Office have issued notices to the appellant for certain financial years for which GST audit proceedings were initiated but not completed. It filed writ petition and contended that three wings of the same department are proceeding against it. The learned Single Bench dismissed the writ petition on the ground that the proceedings are in the nature of show cause notice and therefore, the appellant filed appeal. Held: The Hon’ble High Court noted that four issues were pointed out for the said period, out of which two issues as pointed out by the audit was accepted by the appellant and the necessary tax and interest were remitted. However for the remaining two issues, the appellant had submitted response to the notice and the matter has not been taken to the logical end. In the meantime, the other two wings of the department, viz. Anti-evasion wing as well as the Range Office have also proceeded against the appellant by issuing notices for the very same period for which audit proceedings under section 65 of the Act was already commenced. Therefore, the Court held that proceedings initiated by the Anti-evasion and Range Office for the very same period shall not be proceeded with any further and audit proceedings should be taken to the logical end. Also, the order of learned Single Bench was set aside. ❉ ❉ ❉ GST and VAT - Judgements and Updates Continued from page 503 FEMA Updates (iii) Intra-group foreign currency exposures of Multinational Corporations (MNCs) incorporated outside India 9. Provided that the bank is satisfied that such foreign currency exposures are appropriately hedged or managed robustly by the parent. (iv) Exposures arising from derivative transactions and/or factoring transactions with entities, provided such entities have no other exposures to banks in India. Capital Treatment and Disclosures The incremental provision requirement for UFCE shall be treated as general provision for disclosures and inclusion in Tier 2 capital. Overseas Branches/Subsidiaries (a) The provisions of these Directions shall be applicable to overseas branches/subsidiaries of banks subject to the following: (i) With respect to the exposure to entities incorporated outside India, information on UFCE shall be obtained from such entities on a quarterly basis based on internal audit or self-declaration and the requirement of certificate from statutory auditors on annual basis, as provided in clause 4(b), may not be insisted upon. In cases where bank is not able to obtain information on UFCE from concerned entities, the treatment provided in clause 5(f) shall apply. (ii) Banks shall compute the potential loss due to UFCE by replacing INR with the domestic currency of that jurisdiction and USD with the foreign currency (i.e., currency other than domestic currency of that jurisdiction) in which the entity has maximum exposure in clause 5(a). Note: Banks shall compute the largest annual volatility over a period of last ten years in the following manner: First, daily changes in the foreign exchange rates shall be computed as a log return of today’s rate over the previous day’s rate. Second, daily volatility shall be computed as standard deviation of these returns over a period of one year (250 observations). Third, this daily volatility shall be annualised by multiplying it by square root of 250. This computation shall be performed on a daily basis for the all the days in the last ten years. The largest annual volatility thus computed shall be used for the computation of the potential loss by multiplying it with the UFCE. Source:RBI/2022-23/131DOR.MRG.REC.76/00- 00-007/2022-23, dated October 11, 2022 For full text refer:https://rbi.org.in/Scripts/ BS_CircularIndexDisplay.aspx?Id=12402#DI77 ❉ ❉ ❉

Ahmedabad Chartered Accountants Journal December, 2022 507 MCA Updates: 1. Companies (Registered Valuers and Valuation) Amendment rules, 2022: Vide these amendment rules, following changes have been made in the Companies (Registered Valuers and Valuation) Rules, 2017: Rule No. Effect of the Amendment Rule 3 (c) For the word “ineligible”, the word [Substituted] “eligible” shall be substituted; Rule 3 (f) If it is not a member of a registered [Inserted] valuers organisation: Provided that it shall not be a member of more than one such registered valuers organisation at a given point of time: Provided further that the partnership entity or company, already registered as valuers, on the date of commencement of the Companies (Registered Valuers and Valuation) Amendment Rules, 2022, shall comply within six months of such commencement with the conditions specified under this clause.” Rule 7A Intimation of changes in personal [Inserted] details etc., by registered valuer to authority. - A registered valuer shall intimate the authority for change in the personal details, or any modification in the composition of partners or directors, or any modification in any clause of the partnership agreement or Memorandum of Association, which may affect registration of registered valuer, after paying fee as per the Table -I in Annexure V.” Proviso to in clause (a), for the word, Rule 8 “standards;”, the words, “standards; or” shall be substituted. CA. Naveen Mandovara [email protected] Corporate Law Update Rule 14A Intimation of changes in composition [Inserted] of governing board, etc. by the registered valuers organisations to the authority. - A registered valuers organisation shall intimate the authority for change m composition of its governing board, or its committees or appellate panel, or other details, after payment of fee as per the Table II in Annexure V.” Explanation “Explanation: - to Annexure- For the removal of doubts, it is hereby III, in Part II, clarified that a member functioning as in serial a whole-time director in the company number XI, registered as valuer shall not be treated relating to as taking up employment for the SURRENDERpurpose of this provision”. OF MEMBERSHIP AND EXPULSION FROM MEMBERSHIP [Inserted] [F.No.1/27/2013-CL-V(Part} dated 21.11.2022] IBBI Updates: 2. IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Second Amendment) Regulations, 2022: The Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (Model Bye laws Regulations) lay down the governance structure and provides for model bye laws of the Insolvency Professional Agencies (IPA). The IBBI had issued three circulars, namely:

508 Ahmedabad Chartered Accountants Journal December, 2022 Corporate Law Update (i) Circular No. IP/005/2018 dated January 16, 2018 specifying the format for disclosure of relationship by the insolvency professional (IP); (ii) Circular no. IPA/009/2018 dated April 19, 2018 mandating IPAs to submit Annual Compliance Certificate in the format given in the circular; and (iii) Circular No. IBBI/IPA/43/2021 dated July 28, 2021 specifying the list of contraventions by IP and the amount of penalty to be imposed by IPAs. The IBBI has notified the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Second Amendment) Regulations, 2022 through which provisions of above mentioned circulars have been incorporated in the Model Bye Laws Regulations and the said circulars stand rescinded. By the said amendment, no change in the list of contraventions by the IP and the amount of monetary penalties, has been introduced, as contained in the circular no. IBBI/IPA/43/2021, dated July 28, 2021. The said amended regulations are available at www.ibbi.gov.in. [Circular No. IBBI/PR/2022/41 dated 01.11.2022] SEBI Updates: 3. Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Sixth Amendment) Regulations, 2022: Vide these amendment regulations, following changes have been made in the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015: Regulation Effect of the Amendment No. Proviso to Provided that where a special regulation resolution for the appointment of an 25 (2A) independent director fails to get the [Inserted] requisite majority of votes but the votes cast in favour of the resolution exceed the votes cast against the resolution and the votes cast by the public shareholders in favour of the resolution exceed the votes cast against the resolution, then the appointment of such an independent director shall be deemed to have been made under sub-regulation (2A): Provided further that an independent director appointed under the first proviso shall be removed only if the votes cast in favour of the resolution proposing the removal exceed the votes cast against the resolution and the votes cast by the public shareholders in favour of the resolution exceed the votes cast against the resolution.” Regulation the words “public or rights issue” shall 32 (6) & (7) be substituted with the words “public [Substituted] issue or rights issue or preferential issue or qualified institutions placement”. Proviso “Provided that for the last quarter of before the the financial year, the listed entity shall existing to submit un-audited or audited quarterly Regulation and year to date standalone financial 52 (1) results within sixty days from the end [Inserted] of the quarter to the recognised stock exchange(s):” Existing a) after the word “provided” and Proviso to before the words “that in case of Regulation entities which have listed”, the word 52 (1) “further” shall be inserted. b) the words “the information is submitted to stock exchanges” shall be deleted. Proviso to “Provided that issuers, which are Regulation required to be audited by the 52 (2)(d) Comptroller and Auditor General of [Substituted] India under applicable law, shall submit: (i) un-audited financial results along with the limited review report issued by the Comptroller and Auditor General of India or an auditor appointed by the Comptroller and Auditor General of India or a Practising Chartered

Ahmedabad Chartered Accountants Journal December, 2022 509 Accountant, to the stock exchange(s), within sixty days from the end of the financial year; and (ii) the financial results, audited by the Comptroller and Auditor General of India, to the stock exchange(s), within nine months from the end of the financial year.” Regulation Omitted. 52 (2)(f) Regulation The listed entity shall submit a 52 (2A) statement of assets and liabilities and [Inserted] statement of cash flows as at the end of every half year, by way of a note, along with the financial results. Regulation The listed entity, while submitting 52 (4) quarterly and annual financial results, [Substituted] shall disclose the following line items along with the financial results: a) debt-equity ratio; b) debt service coverage ratio; c) interest service coverage ratio; d) outstanding redeemable preference shares (quantity and value); e) capital redemption reserve/ debenture redemption reserve; f) net worth; g) net profit after tax; h) earnings per share: i) current ratio; j) long term debt to working capital; k) bad debts to Account receivable ratio; l) current liability ratio; m) total debts to total assets; n) debtors’ turnover; o) inventory turnover; p) operating margin percent; q) net profit margin percent: Provided that if the information mentioned in sub-regulation (4) above is not applicable to the listed entity, it shall disclose such other ratio/ equivalent financial information, as may be required to be maintained under applicable laws, if any.” Regulation The listed entity shall submit to the 52 (7) stock exchange(s), along with the [Substituted] quarterly financial results, a statement indicating the utilisation of the issue proceeds of non-convertible securities, in such format as may be specified by the Board, till such proceeds of issue have been fully utilised or the purpose for which the proceeds were raised has been achieved.” Regulation The listed entity shall submit to the 52 (7A) stock exchange(s), along with the [Substituted] quarterly financial results, a statement disclosing material deviation(s) (if any) in the use of issue proceeds of nonconvertible securities from the objects of the issue, in such format as may be specified by the Board, till such proceeds have been fully utilised or the purpose for which the proceeds were raised has been achieved.” Proviso to “Provided that if the listed entity has Regulation submitted both standalone and 52 (8) consolidated financial results, to the [Inserted] stock exchange(s), it shall publish consolidated financial results along with the line items referred to in subregulation (4), in the newspaper.” Regulation “Draft Scheme of Arrangement and 59A Scheme of Arrangement.59A. [Inserted] (1) Without prejudice to the provisions of regulation 11, the listed entity that has listed non-convertible debt securities or nonconvertible redeemable preference shares, intends to undertake a scheme of arrangement or is involved in a scheme of arrangement under sections 230-234 and section 66 of the Companies Act, 2013, shall file the draft scheme of arrangement with the stock exchange(s), along with a non-refundable fee as specified in Schedule XI, for obtaining the No-objection letter, before filing of such scheme with the National Company Law Tribunal, in terms of the requirements specified by the Board or stock exchange(s) from time to time. (2) The listed entity shall not file any scheme of arrangement under sections 230-234 and section 66 of the Companies Act, 2013, with Corporate Law Update

510 Ahmedabad Chartered Accountants Journal December, 2022 the National Company Law Tribunal unless it has obtained a No-objection letter from the stock exchange(s). (3) The listed entity shall place the No-objection letter of the stock exchange(s) before the National Company Law Tribunal at the time of seeking approval for the scheme of arrangement in the manner as may be specified by the Board from time to time: Provided that the validity of the No-objection letter of the stock exchange(s) shall be six months from the date of issuance, within which the draft scheme of arrangement shall be filed by the listed entity with the National Company Law Tribunal. (4) Upon sanction of the Scheme by the National Company Law Tribunal, the listed entity shall submit such documents, to the stock exchange(s), as may be specified by the Board and/ or stock exchange(s) from time to time. (5) The listed entity shall ensure compliance with such other requirements as may be specified by the Board from time to time. (6) The requirements as specified under this regulation and under regulation 94A of these regulations shall not apply to a restructuring proposal approved as part of a resolution plan by the National Company Law Tribunal under section 31 of the Insolvency Code, subject to the details being disclosed to the recognized stock exchanges within one day of the resolution plan being approved.” Proviso to “Provided that for listed entities which Regulation do not fall within the definition of 61A (3) “company” under the Companies Act, [Inserted] 2013 and the Rules made thereunder, any amount in the escrow account that remains unclaimed for seven years shall be transferred to the Investor Protection and Education Fund created by the Board in terms of section 11 of the Act.” Regulation In the heading after the words “Draft 94 [Inserted] Scheme of Arrangement and Scheme of Arrangement”, the words “in case of entities that have listed their specified securities” shall be inserted. Regulation “Draft Scheme of Arrangement & 94A Scheme of Arrangement in case of [Inserted] entities that have listed their nonconvertible debt securities or nonconvertible redeemable preference shares. 94A.(1) Upon receipt of the draft schemes of arrangement and the documents under sub-regulation (1) of regulation 59A, the designated stock exchange shall forward the same to the Board, in such manner as may be specified by the Board. (2) The stock exchange(s) shall submit to the Board its NoObjection Letter on the draft scheme of arrangement, after ascertaining whether the draft scheme of arrangement is in compliance with securities laws, within the timelines as may be specified by the Board from time to time. (3) The stock exchange(s), shall issue No-objection letter to the listed entity in the manner and within the timelines, as may be specified by the Board from time to time: Provided that the validity of the No-objection letter of stock exchanges shall be six months from the date of issuance. (4) The stock exchange(s) shall bring the objections to the notice of National Company Law Tribunal at the time of approval of the scheme of arrangement by the National Company Law Tribunal. (5) Upon sanction of the Scheme by the National Company Law Tribunal, the stock exchange shall forward its recommendations to the Board on the documents submitted by the listed entity in terms of subregulation (4) of regulation 59A. [Notification No. SEBI/LAD-NRO/GN/ 2022/103 dated 15.11.2022] ❉ ❉ ❉ Corporate Law Update

Ahmedabad Chartered Accountants Journal December, 2022 511 Agreement for sale under RERA& its controversy Prior to enactment of RERA Act, 2016 there were no clear regulations and there was no transparency in the real estate transactions. Buyers were forced to sign documents drafted on the terms of the promoter. Some notarious promoters used to harass the builders by charging large amount of money in lieu of advance payment and later forfeiting the same when the allotment of the unit was cancelled either on the request of buyers or by the promoter itself. To put a curb on such unfair practices done by some promoters, RERA Act contains the provision of Section 13 which mentions about Agreement to Sell. Section 13(1) of the Act states that, “A promoter shall not accept a sum more than ten per cent of the cost of the apartment, plot, or building as the case may be, as an advance payment or an application fee, from a person without first entering into a written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force.” Section 13(2) of the Act states that, “The agreement for sale referred to in sub-section (1) shall be in such form as may be prescribed and shall specify the particulars of development of the project including the construction of building and apartments, along with specifications and internal development works and external development works, the dates and the manner by which payments towards the cost of the apartment, plot or building, as the case may be, are to be made by the allottees and the date on which the possession of the apartment, plot or building is to be handed over, the rates of interest payable by the promoter to the allottee and the allottee to the promoter in case of default, and such other particulars, as may be prescribed.” Sub-section (1) of Section 13 of RERA Act, 2016 puts a cap on the token money that can be charged by the builder at the of booking. It states that promoter can only accept 10% of total cost of the property as advance payment from the buyer without first entering into a written agreement to sale. Thus it is quite clear from reading the section that without a registered agreement to sale promoter can charge only 10% of the total value of the property as advance payment from the buyer and it is only after entering in such agreement promoter can charge more. The requirement under Section 13 (1) is a mandatory requirement and cannot be compromised with. Ownership over any immovable property should be clear and marketable and it is said to be as such only on execution of sale deed. However in practice, purchasers execute agreement of sale as a precautionary inspite of being aware that it does not establishes a title over any immovable property. A sale deed is considered as an authentic instrument and also that establishes a clear title over the property because it is a compulsorily registrable document as per Sec 17(1) of Registration Act 1908. However, Sec 13 of the RERA Act 20161 requires a sale agreement to be registered. Although, this is not the case with the Registration Act 1908. Therefore the validity of the agreement to sell always becomes an unresolved conflict. Provisions w.r.t AFS in Registration Act Sec 17(2) (v) of the Registration Act 1908 states that “Any document other than the documents CA. Manan Doshi [email protected] GujRERA Corner

512 Ahmedabad Chartered Accountants Journal December, 2022 GujRERA Corner specified in sub-section(1A) not itself creating, declaring, assigning, limiting or extinguishing any right, title or interest of the value of one hundred rupees and upwards to or in immovable property, but merely creating a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish any such right, title or interest” When we analyse the provision, we can understand that the document which it indicates is an agreement to sell. Further it also conveys that the agreement to sell as such fall under the category of Sec 17(2) of Registration Act as a not compulsorily registrable document. There was a reason behind the insertion of this provision and the reason is that there were certain documents that did not make a greater difference with respect to right, title or interest over immovable property irrespective of the fact whether or not it is registered. So these documents were included in the category under Sec 17(2) as not compulsorily registrable. Sec 13(1) of RERA Act 2016 states that “A promoter shall not accept a sum more than ten percent of the cost of the apartment, plot or building as, the case may be, as an advance payment or an application fee from a person without first entering into written agreement for sale with such person and register the said agreement for sale, under any law for the time being in force”. From this we can conclude that this particular provision emphasizes the fact that there are two fundamental duties of a promoter: - First, the promoter, after taking the advance amount from the prospective buyer, has to execute the agreement to sell. - Secondly, the agreement to sell should be registered before appropriate authorities. In order to answer this question, we need to understand that real estate transactions in India are governed by the following enactments: - Transfer of Property Act 1882 (TPA); - Indian Contract Act 1872 (Contract Act); - Real Estate (Regulation and Development) Act 2016 (RERA); - Registration Act 1908 (Registration Act); - Indian Stamp Act 1899 (Stamp Act); and - Indian Easements Act 1882 (Easements Act). But when we analyse the Sec 13(1) of RERA Act 2016 specifies that an agreement to sell must be registered as per the law for time being in force this means that an agreement to sell is registered as per the provisions of the Registration Act, 1908. However, Sec 88 of the RERA Act 2016 states that “the act shall be in addition and not in derogation to the law for the time being in force”. This means that the RERA Act 2016 has to be read with the Registration Act 1908. On the other hand, Sec 89 of RERA Act 2016 states that “The provisions of this act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force”. This means the RERA Act 2016 will have an overriding effect. Applying the provisions of Sec 88 of the RERA Act 2016, when we analyse the provisions of both the enactment, we can observe that Sec 17(2)(v) of Registration Act 1908 negates the RERA Act 2016. Therefore as per Sec 89 of the RERA Act 2016, the provisions of Registration Act 1908 will not be taken into consideration for the purposes of registration of agreement to sell. Hence we can say that the provisions of the RERA Act 2016 shall prevail over Registration Act 2016 only with respect to the agreement to sell. Although, the RERA Act 2016 provides for a nonobstante clause in Sec 89 and as a result of the same RERA becomes applicable over Registration Act 1908. On the other hand, it also gives rise to certain other question i.e. whether an agreement to sell will create a right, title or interest over the property? This question arises because registration of documents is done usually to ensure clear right and title over the property to the purchaser. An