Volume : 46 l Part 01 l April, 2022
Diamond Jubilee Celebration
December, 2010
Ahmedabad Chartered Accountants Journal
E-mail : [email protected] Website : www.caa-ahm.org - caaahmedabad
Volume : 46 Part : 1 April, 2022
CONTENTS
To Begin with
- Remembrance of GOD at least for a minute every hour... CA. Ajit C. Shah............................. 3
Editorial ............................................................................................ CA. Rutvij P. Shah...........................4
From the President............................................................................CA. Monish Shah............................5
Articles
Demystifying Amendments in Schedule III.......................................... CA. Chintan N. Patel.........................6
E-invoice System..................................................................................CA. Rikin Parikh............................16
Direct Taxes
Glimpses of Supreme Court Rulings.................................................... Adv. Samir N. Divatia....................20
From the Courts.................................................................................. CA. C.R. Sharedalal &
CA. Jayesh Sharedalal................. 22
Tribunal News.....................................................................................CA. Yogesh G. Shah &
CA. Aparna Parelkar.................... 25
Unreported Judgements...................................................................... CA. Sanjay R. Shah......................30
Controversies.......................................................................................CA. Kaushik D. Shah....................32
Judicial Analysis.................................................................................. Adv. Tushar Hemani......................34
FEMA & International Taxation
Update on Recent Case Laws – International Taxation and .............. CA. Dhinal A. Shah &
Transfer Pricing CA. Karan Sukhramani.................38
FEMA Updates....................................................................................CA. Savan Godiawala...................40
Indirect Taxes
GST and VAT Judgments and Updates................................................ CA. Bihari B. Shah &
CA. Vishrut R. Shah........................42
Corporate Law & Others
Corporate Law Update.......................................................................CA. Naveen Mandovara................45
GujRERA Corner..................................................................................CA. Manan Doshi.........................48
Allied Laws Corner............................................................................. Adv. Ankit Talsania.......................51
Capital Markets.................................................................................. CA. Karan P. Vora..........................53
From Published Accounts ................................................................ CA. Pamil H. Shah....................... 58
From the Government ......................................................................CA Ashwin H. Shah &
CA. Kunal A. Shah........................60
IT Corner...........................................................................................CA. Rushabh Shah....................... 61
Association News.............................................................................. CA. Rushabh Shah &
CA. Jay Parekh.............................63
ACAJ Crossword Contest......................................................................................................................64
Ahmedabad CharteredAccountants Journal April,2022 1
Journal Committee
CA. Rutvij Shah Members CA.Ashish Sharma
Chairman Convenor
CA. Ashok K. Kataria Ex-officio CA. Mehul Shah
CA. Mohit Tibrewal CA. Nirav J. Shah
CA. Niren M. Nagri CA. Riken Patel
CA. Monish Shah CA. Sarju Mehta
CA. Rushabh Shah CA. Jay Parekh
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 `
1. Admission Fees Basic GST Total
2. Annual Membership Fees 500 90 590
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 800 144 944
i. In case of membership (of ICAI) for a period of less than or equal to five years 1000 180 1180
ii. In case of membership of (ICAI) for a period more than five years 2000 360 2360
b. Flexi Firm/Corporate Membership Fees***
*** 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
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.
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.
Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]
2 Ahmedabad CharteredAccountants Journal April,2022
REMEMBRANCE OF GOD AT CA. Ajit C. Shah
LEAST FOR A MINUTE EVERY [email protected]
HOUR
In the course of a day, several jobs we work on,
If even after all the efforts, we cannot stabilize do not absorb our full attention and our whole
ourselves for a considerable period in the intellect. In the house or out of the house, in
remembrance of GOD, then, to begin with, we whatever work we are occupied, we can set our
should necessarily find a minute every hour to mind on GOD if we care to. Unfortunately, man
contemplate specially on our own selves and to does not heed this and, while doing his day-to-
enjoy the bliss out of the remembrance of GOD day work, his mind entertains useless thoughts.
love fully and devoutly. This is not asking for Nothing else but if we utilize well the small
too much. Anyone should be able to do this. intervals we get frequently in the mind of our
When our doctor asks us to take small dose of a work, or between one piece of work and the
particular (homeopathic) medicine every two other, even then we can improve the chart.
hours, do we not, with a view to recovery, take That is why GOD says,” Dear Children, if you
care to remember this direction and take the cannot remember ME constantly the whole of
medicine at the prescribe interval? In the same your time, you may give ME at least the time
manner, we should not forget to remember GOD that you would squander away in gossip, in
for a minute every hour, for, this remembrance useless contemplation or in other such trash
is such a unique medicine as brings a man health, which result only in harming you. Considering
wealth and happiness for several lives. Do we that you spend, say eight hours at your job or in
not observe that he who is addicted to a certain your vocation and about this much time in sleep
habit, say chewing betel-leaf, easily remembers and other daily needs, you have still eight hours
it and takes it every two hours or as often as he left which you can spend in deep spiritual
likes? Why should not we, on our part, cultivate meditation.”
the clean habit of remembering often as we like
to? This habit does not cost us anything but it ❉❉❉
brings us happiness and strength. It has been
perfectly and rightly said that all kinds of
intoxications are harmful but once you start
reveling in the remembrance of the Lord, you
rise above all intoxications.
Ahmedabad CharteredAccountants Journal April,2022 3
Editorial
CA. Rutvij Shah
[email protected]
Recently a war has broken out between Russia and Ukraine. This war has put India in a great dilemma.
At the one end, we have a friend who supplies more than 60% of our defence equipment and on the
other hand we have a country which has been invaded disregarding all rule-based order.
Diplomatically, India has done well to distance itself from the conflict. India has withstood pressure
to take sides and give prominence to national interest. We have chosen a path which is best for us
as a country. At the same time, we have not shied away from fulfilling our responsibilities by
supplying humanitarian aid to Ukraine and food for the world.
This war has put tremendous pressure on global supply chain. After Covid pandemic, the world is
seeing another event which is disrupting global supply chain big time.War has paralyzed Ukraine
and severe sanctions have been put on Russia. This has led to shortage in supply of energy resources,
wheat, sunflower oil, fertilizers and rare earth minerals used in semiconductor industry amongst
others.This unprecedented disruption has already resulted into high energy and commodity prices.
In India we are already witnessing fuel prices in excess of 100 rupees. This in turn will have
cascading effect on prices of all things consumed by humans and will lead us to an era of high
inflation. An early resolution of this war is in best interest of humanity.
After Covid and this was in Europe, all nations of the world are realizing that they need to diversify
their supply chain. They are also realizing that putting all eggs in one basket will expose them in
their hour of crises. They need to build their relations and do business with countries who believe
in rule-based order. Therein lies the opportunity for us. India with its vibrant democracy and belief
in the ethos of “Vasudhaiva Kutumbakam” (The World Is One Family) is best placed to take benefit
of this situation and become manufacturing hub of the world. I hope right steps are taken in this
direction to seize this opportunity.
This is last issue of Journal published under the present committee. I take this opportunity to
thank all my committee members for their immense support in timely publishing of our Journal
with good content. I also thank all the columnists for regularly sending their columns in time
every month. I also thank all authors of articles of our Journal during last year. I also thank our
back-office staff and our printer for their continuous support in publishing the Journal.
❉❉❉
4 Ahmedabad CharteredAccountants Journal April,2022
From the
President
CA. Monish Shah
[email protected]
Dear Members,
It gives me immense pleasure to write to you this month. To begin with, this is the last month when I write as the
President of the Chartered AccountantsAssociation, Ahmedabad. As I look back to the year in retrospect, it
brings content to my heart that I am able to do a certain bit, by serving the profession.As a torch bearer, I have
always keenly looked into newer areas and avenues to develop practice. This year we had two Presidents of
ICAI visit our office courtesy of our Vice President of ICAI 2022-23 CA. Aniket Talati and they all have
shared immense respect for theAssociation. Their goals and views on the role of our profession are akin to that
of ourAssociation. Information Technology has undergone a lot of change and is going to impact our profession
in a big way. Online filing of Returns, reports and financial Statements, faceless assessments& faceless appeals
all are now reality. This digital transformation has become a necessity now. We need to enhance our ability to
work in this new digital environment. Necessary steps need to be taken to ensure that our traditional practice
breaches the gap between the physical and digital need without losing its aim.
The need now is to look beyond the traditional way of looking at Balance Sheet and just be profit/ surplus
oriented. The areas of sustainability reporting and focus on such non numeric yet important factors need also to
be considered while framing of our audit reports. The outlook through which we derived numbers to make
financial decisions is going to change manifold. Digital currency is something which will also take shape and is
going to be a new challenge for the profession. The way it will be taxed is something which we are going to
learn in the years to come. I am sure that the profession as dynamic as our and the credentials that our
members have will make it easy to adopt to such changes but the effort needs to be put in this direction. In the
last year we have tried to touch base on these issues and tried to bring the flavour on the table for the members
through our study circle meetings and journals.
As I conclude, I thank Respected Vice President of ICAI 2022-23 CA. Aniket Talati and Past President
CA.SunilbhaiTalati for their immense help throughout the year. Their continuance guidance helped us to make
sure that every event of theAssociation is done in the best possible manner. I thank the RCM CA.HiteshbhaiPomal
without whom the Platinum Jubilee wouldn’t have been such a great success. I also thank RCM CA. Vikas
Jain for his help and motivation through-out the year. I thank all the members for ensuing me with the responsibility
of leading theAssociation and serving the profession in the best possible manner. I thank all the members of the
Executive Committee without whom this year would not have been so easy to conclude. I thank all the Sub
Committee Chairmen who have worked hard in carrying out the activities of the Association. I thank all the
office staff for fully supporting me and my team in this tenure of ours. I also thank my Office Bearers for the
year 2021-22, especially Hon Secretary CA Rushabh Shah & CA Jay Parekh and Vice President CA Sarju
Mehta for shouldering the responsibility equally. I reassure you that we have tried to put our best foot forward.
However, if there has been any mistake or someone has been knowingly or unknowingly hurt by our deeds I
regret and apologise.
I am sure the incoming President will take our association to new heights and that the lighted lamp of our
Association would always shine and brighten in days to come.
ThankingYou
CA Monish S Shah
President
❉❉❉
Ahmedabad CharteredAccountants Journal April,2022 5
Demystifying CA. Chintan N. Patel
Amendments [email protected]
in Schedule III
(after its incorporation) the corresponding
(Applicable from FY 2021-22) amounts (comparatives) for the immediately
preceding reporting period for all items shown in
The ministry of corporate affairs (MCA) has amended the Financial Statements including notes shall also
Schedule III of the Companies Act, 2013 vide be given.” Hence, the comparative for the previous
notification number G.S.R. 207(E) dated 24/03/2021 year is required as per amended Schedule III.
that significantly amends Format of financials for the
companies following Division – 1 ‘Accounting Thus, the amendments are in practice applicable for
Standards’, Division – II ‘Indian Accounting current financial year 2021-22 with comparative for
Standards’ and NBFC companies following Division- financial year 2020-21. Therefore it is a mammoth
III. task for the accountant and auditor to provide/verify
the disclosure in the first year of its applicability.
As per notification dated 24th March, 2021, the
amendments are effective fromApril 2, 2021.Schedule
II clearly specifies – “Except in the case of the first
Financial Statements laid before the Company
1. Summary of KeyAmendments
Sr. Particulars Requirement CARO Practical
No.
Reporting? applicability?
Changes Applicable to all Companies (AS and IND AS)
(A) Improving Transparency and useful in Financial Analysis
1. Trade Receivables Detailed Trade Receivables ageing No Yes
ageing schedule is required to be disclosed in
place of earlier requirement of
“outstanding for a period exceeding six
months from the date they are due for
payment”.
2. Trade Payables ageing New requirement to provideAgeing No Yes
schedule for Trade Payables
3. Capital Work in - Ageing schedule of CWIP/IAUD with No Onlyin
companies with
Progress (CWIP) and classification in status ‘in progress’ and capital projects
in progress
IntangibleAssets under ‘temporarily suspended’ is required to
(IAUD) development be given.
Ageing - In case, where completion is overdue
or exceeded compared to original plan,
than the project wise details of
expected completion to be provided.
6 Ahmedabad CharteredAccountants Journal April,2022
Demystifying Amendments in Schedule III
4. Disclosure regarding - In case of revaluation of Property plant Yes No, very few
[3(i)(d)] companies may
revaluation and equipment and Intangible assets,
have
the change is to be disclosed if change is revaluation
10% or more in aggregate of net carrying
value of each class of PPE/Intangible
asset.
- If revaluation is done, to disclose
whether done by registered valuer or
not.
5. Disclosure of 11 Ratios - 11 Financial Ratios to be disclosed. Yes Yes
- In case of change in ratio of more than [3(xix)]
25% compared to preceding year, the
reason thereof to be provided.
(B) Close Group related disclosures
6. Disclosure of In case of promoters, the details of No Yes
Promoter’s shareholding is mandatorily to be
Shareholding provided irrespective of number/
% of shares.
7. Loans or Advances In case of loan given to promoter/ Yes No, in very
[3(f)] few cases
granted to promoters, director/related parties repayable on such loans
or advances
directors, KMPs and demand (or other than specifying terms may have
been granted
the related parties of repayment), the details of outstanding
amount and % to total loans is required
to be disclosed.
(C) Control over Property
8. Details of Benami Details of property, amount etc. if benami Yes No, confirmation
Property held proceedings initiated or pending. [3(i)(e)] (MRL) should
9. Relationship with In case of any transactions with struck off No be taken.
Struck off Companies companies, nature of transactions, Yes, require
assessment
relationship and outstanding balance is to
be disclosed.
10. Detailed disclosure - Exhaustive disclosure of class-wise Yes Yes, require
[3(i)(c)] one-time
regarding title deeds immovable properties, if not held in the assessment
of Immovable Property company’s name or jointly holder need
not held in name of to be provided.
the Company. -Also need to provide the details of the
person in whose name properties held,
information if held in the name of
promoter/relative/directors /employees.
Ahmedabad CharteredAccountants Journal April,2022 7
Demystifying Amendments in Schedule III
(D) Control on Fund Movement
11. Disclosure on circular If the company has advanced/received Auditor Based on
Report understanding
movement of fund any fund to/from any person/entities of promoters,
director’s and
including foreign entities with
group of
understanding to directly or indirectly companies
lend/invest in other persons/entities or
provide any guarantee, security or like,
on behalf of the funding party (ultimate
beneficiaries), than details thereof need
to be disclosed
12. Use of borrowing for Details to be disclosed in case of use of Yes, in case Yes, when
specific purpose
borrowed funds for the purpose other than of term loans there is
for which it was borrowed. [3(ix)(c)] borrowings
13. Disclosure when In case borrowings based on security Yes, Yes, when
borrowing based on of current assets, whether the statements applicable if borrowing
security of current filed are in agreement with books of based on
assets accounts and if not, than reconciliation WCL in security of
summary and reason. excess of current assets
Rs. 5 crore
[3(ii)(b)]
14. Disclosure in case a In case if the company declared willful Yes No,
[3(ix)(b)] confirmation
company is a declared defaulters, the date and details of defaults (MRL) should
wilful defaulter to be disclosed be taken.
15. Compliance with If the company has not complied with No No,
number of layers of number of layers prescribed than the confirmation
companies details thereof to be disclosed. (MRL) should
be taken.
(E) Compliance with Laws and Disclosures thereof
16. Compliance with If any approved scheme of arrangement, No No, as it is
event specific
approved Scheme(s) of to disclose the compliance of accounting No
disclosure
Arrangements in accordance with scheme and Yes
[3(xx)] Yes, when
deviations if any borrowing
No on security
17. Pending registration of In case of pending registration /
taken
charges or satisfaction satisfaction of charges, the details and
Yes, only
with Registrar of reason thereof to be disclosed. when it is
applicable
Companies
No, as this
18. Disclosure regarding Amount, nature and other details of may be
Corporate Social CSR expenditure is to be provided.
Responsibility undertaken at
very less
19. Details of Crypto Amount held, Profit & Loss and companies
Currency orVirtual deposits or advance related to Crypto
Currency currency and Virtual Currency is to be
provided.
20. Details of undisclosed Surrendered or disclosed as income Yes No, as it is
[3(viii)] event specific
income during the year in the tax assessments
disclosure
and proper recorded in book stated
8 Ahmedabad CharteredAccountants Journal April,2022
Demystifying Amendments in Schedule III
(F) Presentation related changes
21. Roundingoff The requirement of rounding off has been No Yes
made mandatory as per Total Income of No
the company. Earlier it was optional. Yes
No
22. Presentation of PPE - Technical Improvement in Heading: Yes
and IntangibleAssets On face of balance sheet, Heading will No
be Property, Plant & Equipment and No Yes
Intangible Assets, instead of Property, No
Plant & Equipment Yes
No
- “Tangible Assets” is replaced by the No No, as it is
words “Property, Plant and Equipment”. No company
No specific
23. Classification of The company shall disclose “current disclosure
current maturities of maturities of Long-term borrowings” No, as it is
event specific
Long-term borrowings separately under heading of “Short-term
disclosure
Borrowings”. Earlier, it was under Yes, if there
is investment
heading of “Other Current Liabilities”
property
from where it is omitted now. Yes, in case
24. Classification of The company shall disclose “Security of leases
security deposits Deposits” under heading of “Other Yes
Non-Current Assets”. Earlier, it was
under heading of “Long-Term Loans”.
25. Total Revenue Total Revenue modified to ‘Total Income’
so that defined to include other income
alongwith revenue from operations.
26. Presentation of Grants Revenue from operations shall include
or donations received further classification Grants or donations
(sec. 8 company) received (relevant in case of section 8
companies only).
Changes applicable to Companies preparing
Financial AS per IND AS
1. Changes in equity A separate column for change in share
share capital due to capital due to prior period error is added
prior period errors in Statement.
2. Fair value of Based on the valuation by a registered
investment property valuer of fair value of investment
property
3. Finance lease To disclose on the face of balance sheet
obligation in Current/Non-current liabilities –
Financial liabilities: after Borrowing
4. Trade Receivables Ageing schedule along with additional
classification into Disputed/Undisputed
trade receivables which have significant
increase in credit risk
Ahmedabad CharteredAccountants Journal April,2022 9
Demystifying Amendments in Schedule III
2. Enhanced Role of Auditor in Audit Report/ revaluation is based on the valuation by
CARO a Registered Valuer;
MCA (Ministry of Corporate Affairs) has by 2. Disclosure of 11 Ratios – Capable of meeting
virtue of Section 143(11) of Companies Act, its liabilities
2013 (Companies Act) issued Companies
(Auditor’s Report) Order, 2020 (CARO, 2020) On the basis of the financial ratios, ageing and
and the same is applicable from the financial expected dates of realisation of financial assets
year commencing on or after 1st April, 2021. and payment of financial liabilities, other
The gist of notifications issued is provided information accompanying the financial
below for quick reference: statements, the auditor’s knowledge of the
Board of Directors and management plans,
Particulars Notification Date of whether the auditor is of the opinion that no
No. Issue material uncertainty exists as on the date of
the audit report that company is capable of
Companies S.O.849(E) 25/02/ meeting its liabilities existing at the date of
balance sheet as and when they fall due
(Auditor’s Report) amended 2020 within a period of one year from the balance
sheet date;(Clause 3(xix))
Order, 2020 by
3. Benami Properties
replaces CARO 2016 S.O.1219(E)
Whether any proceedings have been initiated
applicable from or are pending against the company for
holding any benami property under the
1st April 2020 Benami Transactions (Prohibition) Act, 1988
(45 of 1988) and rules made thereunder, if so,
CARO 2020 deferred S.O.4588(E) 17/12/ whether the company has appropriately
disclosed the details in its financial statements;
to be applicable from 2020 [Clause 3(i)(e)]
1st April, 2021 4. Title Deeds
MCA broaden scope G.S.R. 24/03/ Whether the title deeds of all the immovable
of reporting by 206(E) 2021 properties (other than properties where the
Auditors inAudit company is the lessee and the lease agreements
report are duly executed in favour of the lessee)
disclosed in the financial statements are held in
The CARO 2020 is applicable to same the name of the company, if not, provide the
companies as the CARO 2016 was applicable details thereof [Clause 3(i)(c)]
to. There is no change in applicability to
categories of companies. 5. Fund Circulation
The enhanced responsibility of auditor that is Rule 11 Other Matters to be included in
specifically related to Schedule III amendmentsis Auditors Report amended vide Companies
provided hereunder: (Audit and Auditors) Amendment Rules,
2021
1. Disclosure regarding Revaluation
(e) (i)Whether the management has represented
• Specify the amount of change, if change is that, to the best of it’s knowledge and belief,
10% or more in the aggregate of the net other than as disclosed in the notes to the
carrying value of each class of Property, Plant accounts, no funds have been advanced
and Equipment or intangible assets; [Clause
3(i)(d)]
• Whether the company has revalued its
Property, Plant and Equipment (including
Right of Use assets) or intangible assets or
both during the year and, if so, whether the
1 0 Ahmedabad CharteredAccountants Journal April,2022
or loaned or invested (either from Demystifying Amendments in Schedule III
borrowed funds or share premium or any
other sources or kind of funds) by the company with such banks or financial
company to or in any other person(s) or institutions are in agreement with the books of
entity(ies), including foreign entities account of the Company, if not, give details;
(“Intermediaries”), with the understanding, [Clause 3(ii)(b)]
whether recorded in writing or otherwise,
that the Intermediary shall, whether, directly 7. Willful Defaulter
or indirectly lend or invest in other persons
or entities identified in any manner Whether the company is a declared wilful
whatsoever by or on behalf of the company defaulter by any bank or financial institution or
(“Ultimate Beneficiaries”) or provide any other lender; [Clause 3(ix)(b)]
guarantee, security or the like on behalf of
the Ultimate Beneficiaries; 8. CSR
(ii) Whether the management has • Whether, in respect of other than ongoing
represented, that, to the best of it’s projects, the company has transferred
knowledge and belief, other than as unspent amount to a Fund specified in
disclosed in the notes to the accounts, ScheduleVII to the CompaniesAct within a
no funds have been received by the period of six months of the expiry of the
company from any person(s) or financial year in compliance with second
entity(ies), including foreign entities proviso to sub-section (5) of section 135 of
(“Funding Parties”), with the the said Act; Clause 3(xx)(a)
understanding, whether recorded in
writing or otherwise, that the company • Whetheranyamountremainingunspentunder
shall, whether, directly or indirectly, lend sub-section (5) of section 135 of the
or invest in other persons or entities Companies Act, pursuant to any ongoing
identified in any manner whatsoever by project, has been transferred to special
or on behalf of the Funding Party account in compliance with the provision of
(“Ultimate Beneficiaries”) or provide sub-section (6) of section 135 of the said
any guarantee, security or the like on Act; Clause 3(xx)(b)
behalf of the Ultimate Beneficiaries; and
9. Undisclosed Income
(iii) Based on such audit procedures that the
auditor has considered reasonable and Whether any transactions not recorded in the
appropriate in the circumstances, nothing books of account have been surrendered or
has come to their notice that has caused disclosed as income during the year in the tax
them to believe that the representations assessments under the Income Tax Act, 1961,
under sub-clause (i) and (ii) contain any if so, whether the previously unrecorded
material mis-statement. income has been properly recorded in the
books of account during the year; [Clause
6. Working Capital Loan 3(viii)]
Whether during any point of time of the year, the 3. Major Amendments explained
company has been sanctioned working capital
limits in excess of five crore rupees, in The main aim is to improve transparency and
aggregate, from banks or financial institutions on provide details that are useful in financial
the basis of security of current assets; whether analysis. Also, there is increased requirement
the quarterly returns or statements filed by the to provide the transactions relating to funds
circulation, Promoters/Related parties and
compliance with laws. The major amendments
that require more details in addition to
summary provided in earlier table are
explained below.
Ahmedabad CharteredAccountants Journal April,2022 11
Demystifying Amendments in Schedule III
1. Ageing
The purpose of providing transparency is
evident from the requirement of detailed ageing
(less than 1 year, 1-2 years, 2-3 years and more
than 3 years) of Trade Receivables, Trade
Payables, Capital Work in progress and
Intangible Assets under development.
(A) Trade Receivables:
Particulars Outstanding for following periods from due date of payment
Less than 6 months - 1-2 2-3 More than Total
6 months 1 year years years 3 years
(i) Undisputed Trade receivables
– considered good
(ii) Undisputed Trade Receivables
– considered doubtful
(iii) Disputed Trade Receivables
considered good
(iv) Disputed Trade Receivables
considered doubtful
(B) Trade Payable
Particulars Outstanding for following periods from due date of payment
Less than 1-2 years 2-3 More than Total
1 year years 3 years
(i) MSME
(ii) Others
(iii) Disputed dues – MSME
(iv) Disputed dues - Others
(C) Capital work in progress (and Intangible assets under development)
Earlier there was only movement of CWIP was required to be provided. Now, the breakup of CWIP into 4
ageing bracket alongwith status of project will give more clarity on the recoverability of cost.
CWIP Amount in CWIP for a period of Total*
Less than 1-2 years 2-3 More than
1 year years 3 years
Projects in progress
Projects temporarily suspended
For capital-work-in progress, whose completion is overdue or has exceeded its cost compared to its original
plan, following CWIP completion schedule shall be given**:
CWIP To be completed in
Less than 1-2 years 2-3 More than
1 Year years 3 years
Project 1
Project 2
1 2 Ahmedabad CharteredAccountants Journal April,2022
2. Borrowing based on current assets Demystifying Amendments in Schedule III
Where the Company has borrowings from banks quarterly returns/ statements only. For
or financial institutions on the basis of security example, if the company submits returns/
of current assets, it shall disclose the statements on a monthly basis say for the months
following:- ofApril, May and June, then the disclosure would
be required in the context of the returns/statements
- whether quarterly returns or statements of submitted solely for the month of June, being the
current assets filed by the Company with relevant return as at the end of a quarter.
banks or financial institutions are in agreement
with the books of accounts. 3. Ratio Analysis
- if not, summary of reconciliation and reasons There is an increased requirement to disclose 11
of material discrepancies, if any to be financial ratios with explanation of the items
adequately disclosed. included in numerator and denominator for
computing the ratios. Further explanation shall be
As per Guidance note on Schedule III issued by provided for any change in the ratio by more than
ICAI, although company may be submitting 25% as compared to the preceding year. The draft
monthly returns / statements to the lenders, format of disclosure is provided below:
reporting under this clause is confined to the
Sr. Ratio Numer- Denomi- Current Previous % Vari- Reason
No.
ator nator Period Period ance for
variance
1. Current Ratio
2. Debt-Equity Ratio
3. Debt Service Coverage Ratio
4. Return on Equity Ratio
5. Inventory turnover ratio
6. Trade Receivables turnover ratio
7. Trade payables turnover ratio
8. Net capital turnover ratio
9. Net profit ratio
10. Return on Capital employed
11. Return on investment
4. Rounding off
Rounding off is now mandatory.
Total Income Rounding Off
Less than Rs. 100 crore To the nearest hundreds, thousands, lakhs or millions or decimals thereof
Rs. 100 crore or more To the nearest lakhs, millions or crores or decimals thereof
Ahmedabad CharteredAccountants Journal April,2022 13
Demystifying Amendments in Schedule III
5. Initial Check
On transition to revised schedule III, there are few amendments that require initial check of the balances/
transactions for the period to analyse its disclosure in the financials, two of the same are provided below.
· Title deeds of Immovable Property not held in name of the Company
The company shall provide the details of all the immovable property (other than properties where the
Company is the lessee and the lease agreements are duly executed in favour of the lessee) whose title
deeds are not held in the name of the company in format given below and where such immovable
property is jointly held with others, details are required to be given to the extent of the company’s share.
Relevant line Description Gross Title Whether Property Reason for
item in the of item of carrying deeds title deed held not being
Balance sheet property value held holder is a since held in the
in the promoter, which name of the
name director or date company**
of relative# of
promoter*/
director or
employee of
promoter/
director
• PPE Land - -- - **also
• Investment Building indicate
property if in dispute
• PPE retired from
active use and held
for disposal
• Others
· Relationship with Struck off Companies
Where the company has any transactions with companies struck off under section 248 of the Companies
Act, 2013 or section 560 of Companies Act, 1956, the Company shall disclose the following details:-
Name of struck Nature of transactions with Balance Relationship with
off Company struck-off Company outstanding the Struck off
company, if any,
to be disclosed
Investments in securities
Receivables
Payables
Shares held by stuck off company
Other outstanding balances
(to be specified)
1 4 Ahmedabad CharteredAccountants Journal April,2022
Demystifying Amendments in Schedule III
6. Promoter shareholding
A company shall disclose additional information on Shareholding of Promoters irrespective of number or
percentage of shares held by them. The suggested format is as below:
S. No Shares held by promoters at the end of the year % Change during
the year
Promoter name No. of Shares % of total shares
Total
1. Promoter here means promoter as defined in the CompaniesAct, 2013.
As per sec. 2(69) “promoter” means a person—
(a) who has been named as such in a prospectus or is identified by the company in the annual return
referred to in section 92; or
(b) who has control over the affairs of the company, directly or indirectly whether as a shareholder,
director or otherwise; or
(c) in accordance with whose advice, directions or instructions the Board of Directors of the company
is accustomed to act:
2. Details shall be given separately for each class of shares
3. Percentage change shall be computed with respect to the number at the beginning of the year or if issued
during the year for the first time then with respect to the date of issue.
4. Conclusion
The enhanced disclosures will increase transparency, check on management and usefulness in analysis
of financials. There are numerous amendments that have increased responsibility on management
and auditor while preparing/reviewing financial statements. Moreover the disclosures are required to
be provided both for current and comparative period. The company management, accountants and
auditors (and the staff) need to abreast with the new requirement, get trained and ensure compliance
of the requirement.
❉❉❉
Ahmedabad CharteredAccountants Journal April,2022 15
E-invoice System
CA. Rikin Parikh
[email protected]
Ease in doing Business… Ease in GST · Credit Notes by the supplier
Compliance!
· Debit Notes by the supplier
What is E-Invoice?
· Any other document as required by law to
- As per Rule 48(4) of the CGST Rules, a notified be reported by the creator of the document
registered person have to prepare an Invoice by
uploading specified particulars of Invoice (in Form Supplies covered under E-Invoice:
GST INV - 01) on Invoice registration portal
(IRP)byobtaining Invoice Reference · Supplies to registered persons (i.e., B2B
Number(IRN). supplies),
- After following above process, the Invoice copy · Supplies to SEZs (with/without payment of tax),
containing inter alia, the Invoice Reference Number
(withQR code) issued by the notified supplier to · Exports (with/without payment of tax),
the buyer is commonly referred as to an “E –
Invoice” in GST. · Deemed exports
- In other words a mechanism where the information/ Implementation of E-Invoicefor various
data of invoice is facilitatedin structured format categories of taxpayers are covered asunder:
designed in schema (INV-01) which is
ultimatelyshared/exchange between supplier and Sr. Applicable Particulars Date of
buyer.
No. Date circular
- The Invoices does not get prepared on government
portal but get authenticated on the government 1 01-10-2020 Turn over 61/2020 -
portal. The Invoices are uploaded on government more than Central tax and
portal which in turn will get reported to Invoice Rs.500 crore 70/2020 -
Registration portal (IRP).on being reported, central tax
Invoice registration portal returns the Invoice with
unique number namely Invoice Reference Number 2 01-01-2021 Turn over 88/2020 -
(IRN). The said invoice containing IRN can be more than central tax
digitally signed and added with QR code. The entire Rs.100 crore
process is called E-Invoicing under GST.
3 01-04-2021 Turn over 5/2021-
- As per Rule 48(5) of CGST Rule, any invoice more than central tax
issued by a notified person in any manner other Rs.50 crore
than manner specified in Rule 48(4). The same shall
not be treated as an Invoice. 4 01-04-2022 Turn over 1/2022 –
more than central tax
Documents covered under E-Invoice: Rs.20 Crore
· Invoices by the Supplier Aggregate Turnover:
The term “turnover” as stated in the circular means
“Aggregate Turnover” of the tax payers. In other
words E-Invoicing is applicable if the aggregate
turnover exceeds specified limit is in any financial year
starting from F.Y.2017-18 onwards.
1 6 Ahmedabad CharteredAccountants Journal April,2022
The Aggregate turnover includes all the supplies E-invoice System
such as:
· A registered person supplying services by way
Taxable supplies, Exempt supplies, Non-taxable of admission to the exhibition of
supplies, Export of goods and Services but excludes cinematographic films in multiplex services
Inward supplies on which is tax is payable under
Reverse charge mechanism. · An SEZ unit (excluded via CBIC Notification No.
61/2020 – Central Tax)
Aggregate turnover will also include the turnover
of all GSTIN under single PAN across India. · A government department and local authority
It is pertinent to note that turnover exceeding (Excluded via CBIC Notification No. 23/2021 –
specified limit is to be considered / checked in any Central Tax)
financial year commencing from F.Y.2017-18
onwards. Therefore if the turnover has exceeded Penalties for improper issue of Invoice:
the specified limit in any of the financial year
commencing from F.Y.2017-18, then E-invoice is Any invoice issued by the applicable taxpayer without
applicable to the taxpayer. Let us take an example: the IRN is considered an invalid invoice under the
GST law. In other words, it is regarded as a non-
1) XYZ Ltd. has following turnover: issue of invoice.Non-issuance of e-invoice is an
offence under GST and thus attracts penal provisions.
Sr. No. F.Y. Turnover Below are some of the penalties for non-issuance of
invoice or issuance of incorrect invoice:
1 2017-18 18 Cr.
· Penalty for non-issuance of invoice- 100% of the
2 2018-19 19 Cr. tax due or Rs.10,000, whichever is higher.
3 2019-20 29 cr. · Penalty for incorrect invoicing is Rs.25,000.
4 2020-21 18 cr. Relaxation:
5 2021-22 16 cr. The CBIC has issued a notification seeking to waive
the penalty imposed on non-compliance of dynamic
In the current example XYZ Ltd. is required to QR code provisions for B2C invoices between 1st
comply with E-Invoicing requirement commencing December 2020 and 30th June 2021, provided the
from 1.4.2022 despite of the fact the turnover in said person complies with the provisions of the said
F.Y.2021-22 is only 16 crore. Since the turnover notification from 1st July 2021.
has exceeded specified limit in F.Y.2019-20, XYZ
Ltd. is required to generate E-invoice from 1-4-2022. Advantages of E-Invoicing:
E-Invoicing is not applicable to the following 1. Real time tracking of Invoices.
categories of registered person as notified in CBIC
notification No.13/2020 – Central Tax. 2. Standardization of the format of Invoice
Entities not covered under E-Invoice: 3. Invoices are completely inter operable & thus
eliminates transcription & other errors.
E-invoicing shall not be applicable to the following
categories of registered persons, irrespective of the 4. Though the facility of E-Invoice, the data are
turnover, as notified in the CBIC Notification No.13/ shared automatically with the GST and E-Way
2020 – Central Tax: Bill portal. Due to this data in GSTR 1 & Part
A of EWB 01 are auto populated.
· An insurer or a banking company or a financial
institution, including an NBFC 5. Scope of manipulation the invoices is less & thus
eliminates or reduce the chance of fake invoices.
· A Goods Transport Agency (GTA)
6. System level matching of ITC and OTI is
· A registered person supplying passenger enable. This allows faster availability of ITC.
transportation services
Disadvantages of E-Invoice:
Invoice Registration Portal (IRP) does not store
invoices for more than 24 hours.
Ahmedabad CharteredAccountants Journal April,2022 17
E-invoice System
What is IRN Some important question in E-invoicing:
As discussed earlier in this article, E-Invoice doesn’t 1. Whether E- Invoice is applicable in case of
mean generation of Invoice but an authentication of High Seas Sales Transaction or Bond to
Invoice through Invoice Registration portal (IRP). Bond Sales Transaction
The authentication of Invoice through the IRP is more
reliable as it not validates data but also generates a No, sinceit’s not a supply as per Schedule III,
unique number namely, Invoice Registration Number E- Invoice is not applicable on such transaction.
(IRN) which is enables supplier and buyer to
communicate and track the transaction. If the Invoice 2. Whether E-invoice applicable for NIL rated
is issued without IRN then as per Rule 48(5) of or wholly Exempt supplies?
CGST Rules the same is not a valid Invoice.Now let
us understand What is IRN? How many characters No. In those cases a bill of supply is issued and
are there in IRN and How does it look not a tax invoice consequently no e-invoice
required.
Invoice Reference Number is a Unique reference
Number (hash) generated and returned by IRP on 3. Whether e-invoice is applicable on self –
successful registration of E- Invoice. IRN is a invoice raised for RCM ITC availment
Unique 64 characters (hash). It looks when number is unregistered?
35054cc24d97033afc24f49ec4444dbab81f542c5
55f9d30359dc75794e06bbe E-invoicing is not applicable in case of self –
invoice u/s31(3)(f) i.e., invoice issued by
QR Code recipient on behalf of unregistered vendor for
enabling ITC to him when recipient is paying
What data are embedded in QR CODE? tax under RCM.
The QR code contains the following data: 4. Whether SEZ developer are exempted from
· GSTIN of supplier and recipient e-invoicing?
· Invoice Number
· Date of generation of invoice SEZ developer are not exempted from E-
· Invoice value invoicing as the exclusion mentions only SEZ
· Number of line items unit, therefore SEZ developer need to follow
· HSN code of the item with highest taxable value e-invoicing procedure.
· Unique IRN
· Date of generation of the IRN 5. Whether e-invoicing is applicable for
Financial Debit note and credit note?
Modes of Getting E- Invoice registered on IRP?
Only the credit and debit note issued under
Multiple modes will be made available for getting section 34 of CGST/SGST Act needs to be
e-Invoices registered on the Invoice Registration reported. Financial/Commercial credit note
Portal (IRP). Some of the modes are- having no impact of GST is not required to be
· Web-based, reported in e-invoicing.
· API-based,
· Offline tool based and 6. When taxable supplies made to B2B SEZ
· GSPbased. e-invoice is applicable?
FAQ Link Yes e-invoice is applicable.
The FAQs relating to registration and log in on the 7. How to disclose TCS under Income Tax
e-invoice portal can be accessed at https:// 1961 collected in invoice raised in ERP on
einvoice1.gst.gov.in/Others/FaqsFAQs relating to which GST is not levied as TCS is interim
APIs/Testing/Sandbox can be accessed at: https:// levy and not tax?
einv-apisandbox.nic.in/FaqsonAPI.html
Ø In e-invoice schema, there is particular
column for TCS collected by supplier
under Income Tax Act,1961.
Ø It could be noted that e-invoicing requires
details w.r.t disclose in GST Tax invoice
1 8 Ahmedabad CharteredAccountants Journal April,2022
E-invoice System
other details could be added when issuing window). If it is used again, then the same
final to recipient. will be rejected when it is uploaded on IRP.
8. Is Invoice number same as Invoice Ø This is because IRN is a unique string based
Reference Number (IRN)? on Supplier’s GSTIN, Document Number,
Type of Document & FinancialYear.
Ø No. Invoice no. (e.g. ABC/1/2019-20) is
assigned by supplier and is internal to 14. Procurement from vendor who is liable for
business. Its format can differ from business E-Invoice but issues normal invoice without
to business and also governed by relevant IRN [i.e.,E-Invoice generated].
GST rules.
ITC would not be eligible in hands on recipient
Ø IRN, on other hand, is a unique reference – as such invoice without IRN would be invalid
number (hash) generated and returned by and treated as only piece of paper having no
IRP, on successful registration of e-invoice. value under GST and not tax invoice.
Suggested to take a declaration from vendor
9. Is the signature (DSC) of supplier on applicability, if not applicable as on date then
mandatory while reporting e-invoice to IRP? they need to inform in advance for its
applicability.
No
15. Could goods be seized where e-invoice is not
10. Can e-commerce operators generate e- generated in case applicable?
invoices on behalf of the sellers on their Ø Transportation of goods without a valid tax
platforms? invoice can be a reason for the detention
of goods and vehicle and fines will be also
Yes, if such suppliers, selling through e- imposed.
Commerce entity are otherwise notified persons Ø Invoice without QR code along with IRN
and supposed to report invoices under Rule embedded would be invalid under GST.
48(4) Dept may contend that the intention here
is to evade the taxes and may levy seize
11. Whether invoice issued by ISD is covered the goods.
under e-invoicing applicability?
16. Whether e-invoice is applicable in case of
E-invoicing is not applicable to invoices issued exports?
by Input Service Distributor (ISD).
Yes e-invoicing is applicable when invoice
12. Will it be possible for bulk uploading of issued to recipient
invoices to IRP?
17. What is the applicability of e-invoice for
Ø Yes. It is possible. The offline utility (‘bulk import transactions?
generation tool’) serves this purpose.
E-invoicing is not applicable for import Bills
Ø Further, the ERP or accounting systems of Entry.
used by large taxpayers can be designed
in such a way that they can report invoices 18. Whether e-invoicing is applicable for Bill of
in bulk to IRP. supply, DC etc.?
However, reporting to IRP and generation of No e-invoicing is applicable only to tax
IRN will be oneafter another (which will not invoices, debit note and credit notes.
be visible for user). For the user, it will appear
like bulk upload and bulk receipt. Steps to E-Invoice Generation:
13. Can an invoice number of a cancelled IRN 1. Invoice Creation:
be used again?
Invoice is created using an accounting or billing
Ø No. Once an IRN is cancelled, the
concerned invoice number cannot be used software as per the prescribed format for E-
again to generate another e-invoice/IRN
(even within the permitted cancellation invoicing. Continued to page 21
Ahmedabad CharteredAccountants Journal April,2022 19
Glimpses of Advocate Samir N. Divatia
Supreme Court [email protected]
Rulings
2 Copyright, what is its coming into
1 Succession Act,1925- Essentials for existence & ownership
validity of WILL
i. Copyright is an exclusive right which is
The legal principles with regard to the proof of the negative in nature being right to restrict others
WILL are no longer res Integra. Sec 63 of the from doing certain acts.
Succession Act 1925 and sec 68 of the Evidence
act 1872 are relevant. The propounder of the will ii. Copyright is an intangible right in the nature
must examine one or more attesting witnesses and of a privilege which is independent of any
the onus is on the propounder to remove all material substance. Ownership in a work is
suspicious circumstances with regard to the different from the ownership of the physical
execution of the will. The testator has to sign on material in which the copyrighted work may
the will and the signature of the testator must be happen to be embodied.
such that it would “intend” thereby to give effect to
the writing of a will. Hence the genuineness of the iii. Parting with copyrights entails with the right
will must be proved by proving the intention of the to do any of the acts mentioned in Sec 14 of
testator to make testament and for that, all steps the Copyright Act. The transfer of material
which required to be taken for making a valid will substance does not, of itself, serve to transfer
must be proved by placing concrete evidence before the copyright therein. The transfer of the
the Court. ownership of the physical substance in which
copyright subsist gives the purchaser the right
Sec 63(c) states that the will has to be attested by to do with it whatever he pleases except the
two or more witnesses/attester each of whom right to reproduce the same and issue it to the
should have seen the testator sign on the will in public unless such copies are already in
his presence or has received from the testator a circulation.
personal acknowledgement of his signature on the
will. Secondly, each of the witness shall sign on iv. A license from a copyright owner conferring
the will in the presence of the testator but it shall no proprietary interest on the license does not
not be necessary that more than one witness be entail parting with any copyright and is different
present at the same time and no particular form of from a licensee issued u/s 30 which is a license
attestation is necessary. In order to prove the which grants the license an interest in the rights
execution of the document such as will as per sec mentioned in sec 14(a) and 14(b).
68 of the Evidence Act at least one of the attesting
witness who had attested the same must be called v. A non-exclusive non-transferable license
to give evidence for the purpose of proof of its merely enabling the use of a copy righted
execution. product is in nature of restrictive conditions
which are ancillary to such use and cannot be
Murthy & othrs v C. Saradambal (2022) (3 SCC construed as license to enjoy all or any of the
209) enumerated rights mentioned in sec 14.
2 0 Ahmedabad CharteredAccountants Journal April,2022
vi. The right to reproduce and the right to use Glimpses of Supreme Court Rulings
computer software are distinct and separate rights
the former amounting to parting with copyright acquirers/end-users. By way of contrast, once
and the latter, in the context of non-exclusive a book is sold on further resale of the same book
EULAs not being so. the purchaser loses the material book altogether
as such purchaser has for a consideration parted
vii. The express indication in sec 14(a)(ii) that a with the book once and for all. This may not be
copyright owner of literary works cannot so in case of a computer program.
execercisedomiain over copies in circulation
shows that exhaustion if one may term it, applies Eng. Analysis center of Excellence P Ltd v CIT
only in relation to the class of copyrights in sec (2022) (3 SCC 321)
14(a). The copyright owner of a literary work
cannot dictate how and under what conditions a 3 Disallowance of Business exp.- Expln1
copy can be resold once it is circulated. The S. 37(1)-Pharma cos. to medical
exhaustion of rights principle thus limits the practitioners
distribution right by excluding control over the use
of copies after they have been put to circulation One arm of the law cannot be utilized to defeat the
for the first time. other arm of law which would be opposed to public
policy. The agreement between pharma cos. and
viii. The language of sec 14(b)(ii) makes it clear that medical practitioners in gifting freebies for boosting
it is the exclusive right of the owner to sell or to sales of prescription drugs is violative of Sec 23 of
give on commercial rental or offer for sale or for the Contract Act 1872. The Expln. 1 to Sec 37(1)
commercial rental any copy of the computer disallow expenditure for any purposes which is an
program. It is clear that the section would apply offence or which is prohibited by law. The Act does
to the making of copies of the computer program not define these terms. Sec 2(38) of General Clauses
and then selling the reproduction of the same. The Act defines “offence” as any act or omission made
object is to interdict reproduction of the said punishable by any law for the time being in force.
computer program and consequent transfer of the
reproduced computer program to subsequent The Expln.contains within its ambit all such activities
which are illegal prohibited by law or punishable.
Apex Laboratories P Ltd v DCIT ( 442 ITR 01)
❉❉❉
Continued from page 19 Article : E-invoice System
2. Invoice Registration Number (IRN) 5. Digital Signature and QR Code Generation:
Generation:
Upon successful verification, the invoice will be
Generation of IRN usingthe IRP system of updated with IRP’s digital signature on the invoice
government portal. data and a QR code will be added to the JSON
3. Upload on Invoice Registration Portal file.
(IRP):
6. E-Invoice data transmission to E-Way Bill
JSON file for each B2B invoice (generated Portal and GST System:
through the accounting software or any third
party tool), along with the IRN, if generated is The uploaded data will be shared with the E-
uploaded on the Invoice Registration Portal way bill and GST system, which will be used
(IRP). for auto-population of GST Annexures
4. IRP Validation of Invoice Information:
7. E-Invoice Receipt back to Supplier’s ERP:
The IRN will be the unique identity of the E-
invoice for the entire financial year. The portal will send the digitally signed JSON
along with IRN and QR code back to the seller.
The invoice will also be sent to the buyer on
their registered email id.
❉❉❉
Ahmedabad CharteredAccountants Journal April,2022 21
From the
Courts
CA. C. R. Sharedalal CA. Jayesh C. Sharedalal
[email protected] [email protected]
1 Conditions for filing Revision Petition. Held:
Aafreen Fatima Fazal Abbas Sayed v/s.
Asst. CIT (2021) 434 ITR 504 (Bom) While interpreting international treaties including
tax treaties the rules of interpretation that apply to
Issue: domestic or municipal law need not be applied
for the reason, that international treaties,
What are the conditions for filing revision petition? conventions and tax treaties are negotiated by
diplomats and not necessarily by men instructed
Held: in the law. One of the avowed purposes of entering
into double taxation avoidance agreements is the
The language is quite clear that the two conditions equitable allocation of taxes concerning
are cumulative viz. there should be an appeal which transactions that are taxable in both States. The
lies but has not been made and the time for filing accepted principle applied in the interpretation of
such appeal has not expired. In clause (a) of section conventions and double taxation avoidance
264(4), between the filing of an appeal and the agreements is the principle of “common
expiry of such period and the waiver of the assessee interpretation”. This principle of common
of his right of appeal there is an “or” thereby interpretation is also recognized in private
meaning that there is an option. i.e. either the international law with regard to conflict rules. The
assessee should not have filed an appeal and the purpose is to allocate tax claims equally between
period for filing it should have expired or he should the contracting States. The courts of the contracting
have waived such right. Therefore, there are two States are, thus, required to ensure that conventions
situations which are contemplated in sub section and double taxation avoidance agreements are
4(a) of section 264. The section cannot be applied efficiently and fairly so that there is
interpreted to mean that for the Principal consistency in the interpretation of the provisions
Commissioner to exercise his powers of revision by the tax authority and courts of the concerned
under section 264 not only that the time for filing contracting State.
the appeal should have expired but also that the
assessee should have waived his right of appeal.
Double Taxation Avoidance agreement: 3 What is the Principle of Consistency?
CIT (LTU) v/s. Areva T & D India Ltd.
2 Interpretation. (2021) 434 ITR 604 (Mad)
Concentrix Services Netherlands B.V.
v/s. ITO (2021) 434 ITR 516 (Delhi) Issue:
Issue: How the rule of consistency is applicable?
How the Double Taxation Avoidance Agreements
are to be interpreted? Held:
Depreciation had been allowed on non-compete
fees for the assessment year 2001-02, which was
2 2 Ahmedabad CharteredAccountants Journal April,2022
confirmed by the Commissioner (Appeals) and From the Courts
accepted by the Department. For the assessment
year 2002-03, no scrutiny assessment had been Held:
carried out. For the assessment year 2003-04 the
Commissioner (Appeals) allowed it and the Section 80JJAA of the Income Tax Act, 1961
Assessing Officer gave effect to the order passed comes under Chapter VI-A of the Act, which deals
by the Commissioner (Appeals). For the assessment with deductions in respect of certain incomes: this
year 2004-05, no scrutiny assessment was carried deduction is permitted as an incentive to the assessee
out and for the assessment year 2005-06, the claim on fulfilling certain criteria as required under the
was allowed by the Commissioner (Appeals) and various provisions under Chapter VI-A. The
it was given effect by the Assessing Officer. Thus, incentive of the deduction provided under section
the Assessing Officer was bound to be consistent 80JJAA is with an intention to encourage the
with the earlier decisions. Therefore, the Tribunal assessee to employ more and more people.
rightly granted relief to the assessee.
A benevolent provision has to be read liberally and
[Dispute related to I.T.A.Y. 2006-07] reasonably and if there is an ambiguity, in favour
of the assessee. It is required for the Assessing
4 Notice u/s 147/148: Assessee’s right to Officer, Commissioner, Tribunal as also any other
raise objections. officer to always interpret and/or apply the
Purshottambhai Bachubhai Pitroda provisions of the Act, taking into consideration the
v/s. Dy. CIT (2021) 434 ITR 629 (Guj) intent and purport of the provisions.
Issue: 6 Setting up and commencement of
business.
How the objections raised by the assessee to notice Maruti Insurance Broking Pvt. Ltd.
u/s 147/148 are to be dealt with? v/s. Dy. CIT (2021) 435 ITR 34 (Delhi)
Held: Issue:
When a notice under section 148 of the Income Tax What is the difference in “setting up” and
Act, 1961, is issued, the proper course of action for “commencement” of business for the purpose of
the noticee is to be file a return and if he so desires to allowing expenditure?
seek the reasons for issuing notice. The Assessing
Officer is bound to furnish the reasons within a Held:
reasonable time. On receipt of the reasons, the noticee
is entitled to file objections to the issuance of notice The Income Tax Act, 1961 does not define the
and the Assessing Officer is bound to dispose of the expression “setting up of business”. This expression
objections, by passing a speaking order. finds mention though in section 3 of the Income Tax
Act, 1961 which defines “previous year”. The previous
5 Interpretation of taxing statute: year gets tied in with section 4 of theAct, which is the
Beneficial provision. charging section. In brief, section 4 inter alia, provides
CIT (LTU) v/s. Texas Instruments India that income arising in the previous year is chargeable
Pvt. Ltd. (2021) 435 ITR 1 (Karn) to tax in the relevant assessment year. Firstly, there is
a difference between setting up and commencement
Issue: of business. Secondly, when the expression “setting
up of business” is used, it merely means that the
Whether in interpretation of beneficial provision assessee is ready to commence business and not that
should be liberal? it has actually commenced its business. Therefore,
when the commencement of business if spoken of in
contradiction to the expression “setting up of
business”, it only refers to a point in time when the
Ahmedabad CharteredAccountants Journal April,2022 23
From the Courts It is settled law that when there is no failure on the
part of the assesseee to disclose, truly and fully,
assessee actually conducts its business; a stage material facts, the Assessing Officer cannot reopen
which it necessarily reaches after the business is the assessment on the basis of “mere change of
put into a state of readiness. opinion”.
7 Reopening after four years. Initiation of penalty u/s 271(1)(c) not
Asst. CIT v/s. Kotarki Constructions
Pvt. Ltd. (2021) 435 ITR 78 (Karn) 9 valid.
Pr. CIT v/s. Taneja Developers &
Issue: Infrastructure Ltd
(2021) 435 ITR 122 (Delhi)
When reopening of assessment after four years will
be valid? Issue:
Held: When basic facts were disclosed, or a new claim
was made because of change in accounting policy,
In order to reopen a concluded assessment, there whether action u/s 271(1)(c) is valid?
must be tangible material to come to the conclusion
that there is escapement of income from assessment. Held:
Where an assessment is sought to be reopened after
four years there should have been a failure on the part Where the basic facts were disclosed or where a
of the assessee in fully disclosing material facts. The new claim was made because of a change in the
primary jurisdictional requirement for reopening any accounting policy, albeit in a fresh return, and given
assessment beyond a period of four years must be up because the law, as declared did not permit such
fulfilled strictly, otherwise it would be an arbitrary a claim, in such circumstances, initiation of penalty
exercise of power. proceedings under section 271(1)(c) against the
assessee was not mandated in law.
Reopening after four years: Change of
10 Amount realized from sale of Carbon
8 opinion. Credits is non-taxable receipt.
Amrishbhai Hashmukhlal Parikh v/s. ITO CIT v/s. Vedha Spinning Mills Private
(2021) 435 ITR 97 (Guj) Limited (2021) 435 ITR 687 (Mad)
Issue: Issue:
Whether reopening of assessment after four years on Whether amount realized from sale of Carbon Credits
change of opinion is valid? is non-taxable receipt?
Held: Held:
On a perusal of the reasons recorded, it appeared Carbon credit is not an offshoot of business, but an
that the Assessing Officer had changed his opinion offshoot of environmental concerns. No asset is
with regard to the claim of the assessee without generated in the course of business, but it is generated
considering the provisions of section 80GGA read with due to environments concerns.
section 35(1)(ii) which provides for deduction in
respect of certain donations for scientific research or The amount realised by the assessee on sale of certified
rural development to any research association or emission reduction credit, which the assessee had
institution, approved for the purpose of clause (ii) of earned on the clean development mechanism in its wind
sub section (1) of section 35 of theAct. The assessee energy operations, was a capital receipt and not
had claimed deduction under section 35(1)(ii) of the taxable.
Act and not under section 80GGA of the Act. This
fact was also disclosed by the assessee in the revised ❉❉❉
return. The notice of reassessment seeking to withdraw
the deduction was not valid.
2 4 Ahmedabad CharteredAccountants Journal April,2022
Tribunal
News
CA. Yogesh G. Shah CA. Aparna Parelkar
[email protected] [email protected]
ACIT v. People Strong HR Services (P.) Issue
1 Ltd 134 taxmann.com 351(Del) Whether the notional discount on shares issued
Assessment Year:2014-15Order dated: under ESOP scheme is allowable as revenue
7th December2021 expenditure u/s 37(1) the Act and whether the
SEBI Guidelines can determine allowability of
Basic Facts expenditure u/s 37 of the Act?
The assessee has debited an amount on account of Held
amortization of deferred option of a stock option
scheme to employees. TheAO required the assessee The ITAT found that it is now well settled
to justify the claim. It was submitted that the cost proposition that the issue of allowability of ESOP
incurred for employee stock option scheme was discount being the difference between the market
recognized in line with Guidelines note of the ICAI. value of shares and the value at which employees
The expenditure was allowable as expenses and had been given the shares is covered, not only by
relied on the decision various including special the decision of Hon’ble jurisdictional Delhi High
bench decision in case of Biocon.The AO held that Court in Lemon Tree Hotels Ltd. in ITA 107/2015,
the employees’ compensation as per SEBI Dated 18-8-2015, but also by the judgement of the
guidelines does not include ESOP and held that Special Bench in the case of Biocon Ltd. ITA No.
amortization of deferred employees’ compensation No. 368/M/10 & others. The judgment of special
is not expenditure in terms of Section 37 because bench has now been approved by the Hon’ble
issue in shares at discount the company had paid Karnataka High Court vide order dated 11-11-2020
out nothing. He further held that the discount and held that employees’ discount represents
represents the difference between the market price consideration for services rendered by employees
and fair market value of the short capital receipt. and hence it is a deductible business expenditure,
Even if it were to be considered as expenditure, it and it cannot be equated with share premium and it
could only be in the nature of either notional is to be intended towards profit by securing
expenditure and of capital expenditure. The assessee employees’ consistent services. Apart from that, it
had not paid this notional discount and had no was further held that it is an ascertain liability since
liability to make such payment accordingly, the employees’ incurred obligation over the distinct
artificial difference in face value of share as period, notwithstanding the fact that exact amount
compared to so called fair market value of unquoted as quantified at the time of exercising options. The
share cannot be described as expenditure u/s 37(1) Hon’ble Karnataka High Court has also concurred
of the Act in view of above referred to judicial with the view of Hon’ble Delhi High Court in the
interpretation of the term “expenditure” u/s 37(1) case of Lemon Tree Hotels Ltd. (supra).
of the Act. Thus, he disallowed the claim of Rs. Accordingly, the ITAT upheld the order of the
3,01,60,201/-. The CIT(A) held in favour of the CIT(A). The appeal of the Revenue was thus
assessee. dismissed.
Ahmedabad CharteredAccountants Journal April,2022 25
Tribunal News that the intention of the legislature is that the pending
proceeding shall not continue but fresh proceedings
Ammann India (P.) Ltd v. ACIT 134 for the same purpose may be initiated under the new
provision. If that be so, then since the Clause (i) of
2 Taxmann.com (Ahd) section 92BA was omitted by Finance Act, 2017
Assessment Year: 2014-15 Order dated: w.e.f. 1-4-2017 from the statute the same cannot
3rdJanuary 2022 be made applicable in the pending proceeding. It
is, therefore, to be considered non-est in the
Basic Facts concerned statute as if it had never been passed.In
that view of the matter once the said Clause being
During the year under consideration the assessee omitted w.e.f. 1-4-2017 the decision made by AO/
had acquired the assets and liabilities of the asphalt TPO and DRP invoking such section 91BA is
plant business of GAIL, its domestic AE andhad without any basis, and/or jurisdiction, invalid and
acquired the assets and liabilities of sensor paver bad in law and, thus, the same is liable to be quashed.
business from another AE namely Apollo
Earthmovers Ltd. (AEML. The TPO/AO treated Baroda Citizen Community Co-op.
the said purchase of those two business undertaking
under the slump sale arrangement as Specified 3 Credit Society v. ITO 134 taxmann.com
Domestic Transaction (in short ‘SDT’) under 290 (Ahd)
section 92BA of the Act and made upward Assessment Year: 2013-14 &2014-15
adjustment. Being aggrieved by the said order the Order dated: 1st December 2021
assessee went to the DRP and submitted that
purchase of a business undertaking on a going Basic Facts
concern basis under the slump sale arrangement is
not a specified domestic transaction as per section The assessee in the is a co-operative society and
92BA of the Act. Further that section 92BA(i) was engaged in the activity of providing credit facilities to
deleted by the Finance Act, 2017 and, therefore, the members. In the year under consideration the
SDT cannot be made applicable in the instant case assessee apart from interest income earned from credit
invoking Section 92BA(i) of the Act. Such facilities provided to its member also earned interest
contention of the assessee was not found acceptable from the fixed deposit made with State Bank of India.
by the DRP who in turn upheld the order passed The surplus fund was deposited with the banks in order
by the Ld. AO/TPO. Hence, assessee is in appeal to generate the interest income as well as to maintain
before the ITAT. the liquidity for the repayment of the deposits accepted
from the members. As per the AO, the impugned
Issue amount of interest income was not arising to the
assessee from the activities of providing credit facility
Whether clause (i) of section 92BA of the Act to the members. Thus, the AO held that the interest
relating to domestic related party transactions income earned on the fixed deposits with SBI is not
which has been omitted w.e.f. 1-4-2017 would be eligible for deduction under section 80P(2)(a)(i) of
applicable retrospectively ? theAct and the same is taxable as income from other
source under section 56 of theAct.Aggrieved assessee
Held preferred an appeal to the learned CIT (A) who
confirmed the order of theAO.The assessee is before
It is a settled principle of law that when a particular the ITAT.
provision is repealed from the statue the normal effect
would be to obliterate it from the statute book as Issue
completely as if it had never been passed and the
statute must be considered as a law that never existed. When the benefit of section 80P(2)(a)(i) is not
Further that in a case where a particular provision in a allowed, whether basic exemption of Rs.50,000/
statute is unconditionally omitted and in its place - as provided in section 80P(2)(c)(ii) is allowable?
another provision dealing with the same contingency
is introduced without a saving clause in favour of
pending proceedings then it can be reasonably inferred
2 6 Ahmedabad CharteredAccountants Journal April,2022
Held Tribunal News
The provisions of section 80P(2)(c) of the Act, Basic Facts
provides that a co-operative society engaged in
activities other than those specified in clause (a) or The assessee is a tax resident of Japan. In 1997,
clause (b) of section 80P(2) (either independently of formed a joint venture company (J Co) with an Indian
or in addition to all or any of the activities so company (A Co). During the year under
specified), following deduction shall be allowed consideration, the assessee received from J
from its profits and gains attributable to such Co:Royalty, Fees for technical services (FTS),
activities: Income from supply of raw material, components,
and capital goods under the master sales agreement
(i) Rs. 1,00,000 in case of consumers’ co-operative (MSA). Receipts from transactions under the MSA
society were not offered to tax on the basis that they were
in the nature of business profit not taxable in India
(ii) Rs. 50,000 in any other case in the absence of a Permanent Establishment (PE)
under the India-Japan tax treaty.During assessment
The expression ‘profits and gains’ in clause (c) of sub- proceedings, the AO concluded that theassessee had
section (2) of section 80P of theAct is not confined to a business connection in India in terms of section
‘Profits and gains of business’. The Bombay High 9(1)(i) of the Actand a fixed place PE as well as
Court in the case of CIT v. Ratanabad Co-operative supervisory PE in India under Article 5 of the India-
Housing Society Ltd. [1995] 81 Taxman 257/215 Japan DTAAon the following basis:” Carrying on
ITR 549 has held Letting out of the shops of the of the business (fixed place PE) - J Co’s premises
assessee-society to persons other than its members in addition to hosting the business activities of J
did not fall as an activity of the assessee-society either Co, served as a “branch” and an “office” of the
in clause (a) or clause (b) of sub-section (2) of section assessee.” Disposal test (fixed place PE) - The
80P. It was an activity of the assessee-society other assessee deputed professionally qualified employees
than those specified in clauses (a) and (b) of sub- to the factory site of J Co in India and hence, such
section (2) of section 80P and as such, the question factory site constituted a fixed place PE.
arose whether the income derived by the assessee- Supervisory PE - Based on certain clauses of the
society from letting out the shops to persons other license agreement vis-a-vis the facts, the employees
than its members was exempt from tax under section visit in India were made to help J Co in setting-up a
80P(2)(c).”Thus, in case of co-operative credit new product line in India for which end-to-end
society, income to which benefit of section 80P(2)(a)(i) supervision was rendered by the assessee. The period
is not allowed, e.g., rental income, interest income from of stay of these employees in India exceeded 6 months
surplus funds kept in FDs’ of banks, etc., basic and hence, it constituted supervisory PE. Aggrieved,
exemption of Rs. 50,000 as provided for in section the taxpayer filed an appeal before DRP who upheld
80P(2)(c)(ii) must be granted. Though the word the order of AO. The assessee is before the ITAT.
‘activity’ is not defined, yet the investment activity,
activity of renting of immovable property, etc., and Issue
the consequent income attributable to such activities
would be covered under section 80P(2)(c). Hence, Whether the assessee constitutes Fixed Place
ITAT directed the AO to allow the deduction under PE and / or if there is a Supervisory PE of the
section 80P(2)(c ) of the Act. Thus, the ground of assessee in India in the AYs under consideration?
appeal of the assessee was allowed.
Held
FCC Co. Ltd v. ACIT, Int. Tax136
ITAT held as for Fixed place PE
4 taxmann.com 137 (Del)
Assessment Year: 2015-16, Order dated: The assessee had access to the factory premises of
9 March 2022 J Co, but it was for the limited purpose of rendering
agreed upon services to J Co without any control over
the said premises. Merely providing access to the
Ahmedabad CharteredAccountants Journal April,2022 27
Tribunal News
premises by J Co for the purpose of providing Japan DTAA. Therefore, there was no supervisory
agreed upon services by the assessee did not amount PE of the assessee in India.
to the place being at the disposal of the taxpayer. J
Co was an independent legal entity, carrying on its ITO v. Rajeev Ratanlal Tulshyani 136
business with its own clients for which the taxpayer
provided time-to-time technical assistance as 5 taxmann.com 42 (Mum)
required by it. The business of the assessee was Assessment Year: 2014-15 Order dated:
not being carried out from the alleged fixed place 1st October 2021
PE.Since the goods were manufactured outside
India, sale of goods took place outside India and Basic Facts
consideration was also received by the assessee
outside India, title passed outside India and hence, The assessee was a director and a major shareholder
the assessee did not carry out any operation in India in an entity namely KFPL. During the year, KFPL
in relation to supply of the raw material and capital offered right issue and the assessee was allotted 3.95
goods. In view of the above, the assessee was held Crores shares of KFPL at face value of Re.1/- each
not have a fixed place PE in India. in the right issue. However, it was alleged by AO
that the consideration of Re.1/- per share was less
Supervisory PE than fair market value (FMV) of shares as calculated
in accordance with the provisions of sec. 56(2) (vii)
From the documents submitted by the assessee, it (c) (ii) read with rules 11U & 11UA and therefore,
was noticed that its employees visited India to assist the difference between FMV and the consideration
J Co in relation to supplies made by J Co to its paid by the assessee would be taxable in the hands
customers; resolving problems relating to of the assessee u/s 56(2)(vii).The AO noticing that
production, fixing of machines, maintenance of the percentage of shareholding of the assessee in
machines; checking safety status at the premises and KFPL increased from 90.37% as on 31-3-2013 to
suggesting ways for enhancing safety; support in 96.88% as on 31-3-2014, opined that there was
quality control; IT related services; support for disproportionate allotment of shares and therefore,
launch of new segment line; etc. None of the above- the stated provisions would apply in assessee’s
mentioned activities performed by the employees case.The AO worked out intrinsic value per share
were in the nature of supervisory functions, as on 31-3-2013 at Rs. 11.85 per share on the basis
supervision being the act of overseeing or watching of formula laid down in Rules 11U and 11UA and
over someone or something, which was not taxed the differential amount of Rs. 10.85 per share
reflected in the work done by the engineers in India (Rs.11.85 per share less issue price of Re.1/- per
for J Co.Further, no installation or assembly project share). The CIT(A) held that the section would
was going on at J Co’s premises. The employees apply to allotment of shares on rights basis but will
were not rendering any services in connection with depend on the terms of allotment. If the shares are
building site or a construction project or an allotted strictly on proportionate basis based on
installation project or an assembly project. From existing shareholding, then though the provisions
the nature of the services rendered by the employees, per-se is applicable but will not operate adversely.
it was clear that these activities were not in This is because the gain accruing on allotment of
connection with a building site or construction fresh shares will be offset by the loss in value of
installation or assembly project. Hence, the issue existing shares. Since Ld. AO noted that the
of computation of the period of 6months was allotment was disproportionate, the provisions of
academic.The employees visited India to render sec. 56(2)(vii)(c) will apply. However, the principle
certain technical services under the licence of diminution in value of existing shareholding has
agreement read with dispatch of engineer’s to be considered while determining the gain.
agreement which were duly offered to tax by the Therefore, the addition of Rs. 150.87 Lacs, as
assessee as FTS as per the provisions of the India- alternatively worked out by the assessee, was to be
accepted. The department is in appeal before the
ITAT and the assessee in CO.
2 8 Ahmedabad CharteredAccountants Journal April,2022
Issue Tribunal News
Whether provisions of section 56(2)(vii)(c)(ii) right shares to existing shareholders in proportion
would be applicable to allotment of shares as to their existing shareholding and therefore, no case
right issue? of abuse or tax evasion could be made out against
the assessee.Accordingly, the ITAT allowed the
Held appeal of the assessee.
The Tribunal found that there was a clear fallacy in the ACIT v. WSP Consultants India Pvt Ltd
conclusion of lower authorities that the allotment was
dis-proportionate and skewed in favor of the 6 TS-151-ITAT-2022 (Del)
assessee in view of the fact that assessee’s Assessment year: 2013-14 & 2014-15,
shareholding increased from 90.37% to 96.88% at Order Dated: 22nd February 2022
year end. The said conclusion had overlooked the
fact that there were two right offers during the year Basic Facts
and the right issue was offered, on both occasions,
to existing shareholders in the ratio of 7:8 on first The assessee is a wholly owned subsidiary (WOS) of
occasion and 5:8 on the second occasion. The issue a Cyprus company (Cyprus Co) and is engaged in
was offered to existing shareholders in proportion the business of providing support services with respect
to their holding at the same price i.e. Re.1/- per share. to engineering design services (EDS) to its customers
The same is supported by Board Resolution which in India. The assessee set-off losses pertaining toAY
fact is nowhere in dispute. The assessee subscribed 2012-13, against income of AYs 2013-14 and 2014-
his entitlement, but the other shareholders did not 15, respectively.During the course of assessment
subscribe to the entitlements. Resultantly, the proceedings for AYs 2013-14 and 2014-15, the AO
assessee’s overall holding increased at year-end and noted that as on 31 March 2012, taxpayer’s ultimate
the holding ratio got skewed in assessee’s favor. holding company was a UK based company (UK Co)
This being so, the ratio of decision of Mumbai which continued to be so up to 31 July 2012; with
Tribunal in Sudhir Menon HUF [2014] 45 effect from 1August 2012, all shares of UK Co were
taxmann.com 176/148 ITD 260 (Mum.) would be acquired by a Canadian company (Canada Co). Thus,
applicable to the facts of the case wherein, on similar as on 31 March 2013, shares of the assessee carrying
factual matrix, the coordinate bench held that as long not less than 51% of the voting power were beneficially
as there was no disproportionate allotment i.e. shares held by Canada Co, who did not beneficially hold
are allotted pro-rata to the shareholders, based on shares of the assessee carrying not less than 51% of
their existing holdings, there is no scope for any the voting power as on 31 March 2012 (in which loss
property being received by them on the said allotment was incurred).Accordingly, theAO disallowed the set-
of shares; there being only an apportionment of the off of brought forward losses in AY 2013-14 and
value of their existing holding over a larger number of 2014-15 under the provisions of section 79 of the
shares. In such a case, the provisions of Act. On appeal before the CIT(A), the CIT(A)
sec.56(2)(vii)(c) would not get attracted. On the basis allowed the taxpayer’s claim of set-off of brought
of the CBDT circulars the ITAT inferred that provisions forward loss and held that the losses denied by theAO
of section 56(2)(vii) were introduced as an anti-abuse by invoking the provisions of section 79 of the Act
measure and to prevent laundering of unaccounted was incorrect since there was no change in the
income under the garb of gifts, after abolition of the shareholding of the assesee.Aggrieved, the Revenue
Gift Tax Act. From the lower authorities orders, filed an appeal before the ITAT
the ITAT found that there are no such allegations,
and no case of tax evasion or tax abuse has been Issue:
made out against the assessee. In fact, the
transactions are ordinary transactions of issue of Whether change in shareholding of ultimate
shareholder will trigger provisions of section 79
to deny set off of brought forward losses?
Continued to page 41
Ahmedabad CharteredAccountants Journal April,2022 29
Unreported
Judgements
CA. Sanjay R. Shah
[email protected]
In this issue, we are discussing recent decision Gist only
rendered byAhmedabad Bench of ITAT, in the matter
of Shri Amit Ramniklal Tilva, relating to penalty u/ Facts of the Case:
s.271(1)(c) read with Explanation 5A thereto. The
issue in the appeal, was when return u/s.139(1) was 1. In the facts of this case, there was a search on
not filed but return u/s.139(4) was filed, whether the the assessee u/s.132 on 22.09.2015. Thereafter,
word ‘due date’ in Explanation 5A includes such notice u/s.153A was issued to the assessee to
return, which has been filed before due date. file the return, which the assessee filed on
08.07.2016, declaring total income at
We hope the readers would find the same useful. Rs.10,14,160/-.
Annexure 2. Besides the return in response to the notice u/
s.153A, the assessee also filed return of income
In the Income Tax Appellate Tribunal under the provisions of section 139(4) on the
Ahmedabad – Bench ‘D’ same date i.e. 8th July, 2016 declaring same
amount of income of Rs.10,14,160/-.
(Conducted through Virtual Court at Ahmedabad)
3. In the assessment u/s.143(3) r.w.s. 153A, the
Before Shri Mahavir Prasad, Judicial Member income declared by the assessee in his return was
And accepted by theAssessing Officer vide his order
dated 27.12.2017. However, according to the
Shri Waseem Ahmed, Accountant Member Assessing Officer, since the assessee had filed
return u/s.139(4) after getting notice u/s.153A,
ITA No.1073/Ahd/2019 the return was not filed u/s.139(1) and since both
Assessment Year: 2015-16 the returns u/s.153A and 139(4) were filed on
the same date, it treated return filed u/s.139(4)
Shri Amit Vs. J.C.I.T., as void.
Ramniklal Tilva, And Circle – 21,
Baroda. Baroda. 4. Since according toAssessing Officer, the income
PAN:ADNPT9775H was disclosed by the assessee in consequence to
the search u/s.132 and the consequential
ITA No.1409/Ahd/2019 assessment proceedings u/s.153A, he was of the
Assessment Year: 2016-17 view that the assessee had concealed particulars
of income of Rs.10,14,160/- being the income
DCIT, Vs. ShriAmit RamniklalTilva, declared in the return, and thus, levied penalty of
Circle – 2, Baroda. Baroda Rs.1,38,500/-.
PAN: ADNPT9775H
(Applicant) (Respondent) 5. In assessee’s appeal before C.I.T.(Appeals), the
assessee took stand that since the assessed
Assessee by : Ms. Urvashi Shodhan, A.R. income was the same as returned income u/
Revenue by : Shri Purushottam Kumar, Sr. DR s.139(4), there cannot be any question of
concealment of income and penalty cannot be
Date of hearing : 30-03-2022 levied. According to assessee, the ‘due date’
mentioned in Explanation 5A to section 271(1)(c)
Date of pronouncement : 20-04-2022
3 0 Ahmedabad CharteredAccountants Journal April,2022
should be construed as all the due dates u/s.139 Unreported Judgments
including 139(4) and since the return was filed u/
s.139(4) before the time limit for such return shall, for the purposes of imposition of a
expires, the same should be construed to have penalty under clause (c) of sub-section (1)
been filed by ‘due date’. of this section, be deemed to have
concealed the particulars of his income or
6. The C.I.T.(Appeals), however, did not concur furnished inaccurate particulars of such
with the above contention of the assessee and income.”
confirmed the penalty, against which, the assessee
filed appeal before Tribunal. 8. The Tribunal held as under:
Decision of Tribunal: 8.1 Since the return of income was not filed by
the assessee before the date of search,
7. Before the Tribunal, the assessee took the same provisions specified under clause (a) above in
contention as was canvassed before the Explanation 5A cannot be applied, however,
C.I.T.(Appeals). The Appellant also drew the provisions of clause (b) would apply. It is
attention of the Hon’ble Tribunal to provisions for the reason that the assessee admittedly has
of section 271(1)(c) read with Explanation 5A, furnished return of income within the due date,
which is reproduced hereunder: as specified under the provisions of section 139
of the Act. In fact, there are different dates
“Explanation 5A.— Where, in the course of provided u/s.139 of the Act for filing returns
a search initiated under section 132 on or after of income. On reference to the provisions of
the 1st day of June, 2007, the assessee is found Explanation 5A to section 271(1)(c), it is
to be the owner of— imperative to note that the word ‘due date’ has
been mentioned and not the ‘due date’ as
(i) any money, bullion, jewellery or other specified under the provisions of section 139(1)
valuable article or thing (hereafter in this of the Act. Therefore, the Tribunal held that
Explanation referred to as assets) and the even if the assessee files return of income
assessee claims that such assets have been during the extended period provided u/
acquired by him by utilising (wholly or in s.139(4), it would be construed as if the return
part) his income for any previous year; or of income has been filed within the ‘due date’.
(ii) any income based on any entry in any books 8.2 The Tribunal also drew support from the order
of account or other documents or of Mumbai Tribunal in the case of ITO vs. Gope
transactions and he claims that such entry M. Rochlani reported in 49 taxmann.com 46.
in the books of account or other documents
or transactions represents his income 8.3 Consequently, the Tribunal held that assessee
(wholly or in part) for any previous year, has not contravened any of the provisions
provided under Explanation 5A to section
which has ended before the date of search 271(1)(c) of the Act so as to attract the penalty,
and,— and accordingly, set aside the order of
C.I.T.(Appeals) and deleted penalty.
(a) where the return of income for such
previous year has been furnished 8.4 In the second appeal, the issue was about
before the said date but such income quantum of addition, which was deleted by
has not been declared therein; or C.I.T.(Appeals) on the basis that the said
income was already offered before the
(b) the due date for filing the return of Settlement Commission, and therefore, taxing
income for such previous year has the same again would amount to double
expired but the assessee has not filed taxation. The Tribunal, accordingly, upheld the
the return, order of C.I.T.(Appeals) deleting the addition
made in the quantum proceedings, and thus,
then, notwithstanding that such income is allowed appeal of the assessee on penalty and
declared by him in any return of income dismissed the appeal of Revenue on quantum.
furnished on or after the date of search, he
❉❉❉
Ahmedabad CharteredAccountants Journal April,2022 31
Controversies
Issues CA. Kaushik D. Shah
[email protected].
Whether unexplained cash credits introduced in
the business by the partner/member of Firm/AOP 2] Explanation offered by taxpayer about the
during the first year of business in the beginning nature and source of such credit is not
of accounting period be added as the income of satisfactory in the opinion of assessing
Firm/AOP under section 68 of the Income Tax officer.
Act, 1961?
3] Such credit is referred to as unexplained
Proposition cash credit
The provisions contained in Section 68 of the Act · Unexplained cash credits are taxed at flat rate
states that any sum found credited in the books of of 60% without providing any benefit of basic
assessee (Firm/AOP) for which Firm/AOP offers exemption limit and irrespective of the tax slab.
no explanation about the nature & source thereof Surcharge is levied at 25% and a penalty of
or the explanation offered is not, in the opinion of 6%. The final tax rate comes to 83.25%
Assessing Officer, satisfactory, may be charged to (including cess).
income-tax as the income of the assessee of that
year. It is proposed that unexplained cash credit · No deduction/allowance is allowed and no loss
brought into Firm/AOP by partner/member should can be set off against such unexplained cash
not be charged as income in the hands of Firm/AOP credit which is considered as income.
if cash was introduced during first year of business
in the beginning of accounting period. In view of the above provision, Unexplained cash
credits will be chargeable to tax in the hands of
View against the Proposition assessee at the total rate of 83.25%.
Extract of the relevant provision is as under Honourable Supreme Court in the case of
Shreelekha Banerjee v. CIT [1963] 49 ITR 112
· Section 68 of the Act, considers any sum (SC) held that, ‘When a cash credit entry appears
credited in the books of taxpayer in any financial in the assessee’s books of account in an accounting
year and not already offered to tax, as income year, the assessee has a legal obligation to explain
of taxpayer during such financial year if the nature and source of such credit.’
following conditions are satisfied:
In another case of Commissioner Of Income-Tax
1] Taxpayer offers no explanation about the vs Kapur Brothers ( 1979 118 ITR 741 All)
nature and source of such credit; or Honourable Allahabad High Court has held that ,
the cash credit entries standing in the names of
the partners in the account books of the firm could
validly be treated as the income of the firm from
undisclosed sources if no explanation or
3 2 Ahmedabad CharteredAccountants Journal April,2022
unsatisfactory explanation is provided and also the Controversies
cash was not brought during the beginning of the
accounting period rather allegedly it was brought of Master Shishir Garg and not at the hands of
three weeks prior to the end of accounting period. firm.
Summation
View in favour of the Proposition Decision taken by Income Tax Appellate Tribunal
– Lucknow in the case of Lal Mohar & Others vs
Applicabilty of Section 68 depends upon the Department of Income Tax has set the benchmark
explanation provided by the assessee regarding the for key matter of this controversy.
cash credit , also on the year and period of the ITAT has held that cash credit introduced by partner/
year during which cash was introduced in the member of Firm/AOP in the first year of business
business. during the beginning of accounting period will not
be treated as income of Firm/AOP under Section
Honourable Allahabad High Court in the case of 68 of the Income Tax Act.
Commissioner Of Income Tax vs Jaiswal Grain Even if no satisfactory explanation is given by the
Store has held that, ‘ On the first day of the business, Firm/AOP. As Firm/AOP cannot be assumed to
it cannot be assumed by any stretch of imagination have illegal profits before its inception, although
that the assessee, which is a firm, though assessed the same could have been added in the hands of
in the status of an AOP (Association of Persons) the concerned partner/ member if such partner/
had unexplained income .’ member is not able to establish his financial
capabilities.
Honourable Allahabad High Court in the case of Hence, even after the decision, the issue is still
Abhyudaya Pharmaceuticals vs Commissioner Of highly debatable because tax payers can use this
Income Tax it was held that the authorities below judgement for money laundering.
have committed error as they have failed to take In view of above, in my humble opinion,
into account that this was the first year of the unexplained cash credits introduced in the business
business of the assessee-firm. The partnership firm by the partner/member of Firm/AOP during the
was formed on July 5, 1990, and on July 7, 1990, first year of business in the beginning of
Master Shishir Garg deposited Rs. 1,90,000 and accounting period should not be added as the
Rs. 72,000 as capital money with the firm through income of Firm/AOP under section 68 of the
bank clearance of two bank drafts. The accounting Income Tax Act, 1961.
period being financial year, i.e., ending on March
31, 1991, the firm could not have any income at ❉❉❉
the time of its formation. The identity of the
depositor, i.e., Master Shishir Garg was not in issue
at any point of time before the income-tax
authorities. They treated the said deposit by
Master Shishir Garg. This being so, if for one
reason or the other, they were not satisfied with
the financial capability of Master Shishir Garg,
the amounts could have been added at the hands
Ahmedabad CharteredAccountants Journal April,2022 33
Judicial
Analysis
Advocate Tushar Hemani
[email protected]
If application u/s 132B of the Act for release of the preferred by the writ applicant dated6th
seized assets is not disposed off within 120 days, the September 2019 reads thus:
seized assets have to be mandatorily released in favour
of the assessee xxx…
Ashish Jayantilal Sanghavi (Prop. of 24 The statutory provision of Section 132B of the
Act is very clear.There appears to be a mandate
1 M/s. VIR Impex) vs ITO (Special Civil and such mandate is mandatory and notdirectory.
Application No. 10667 of 2020, dated This is evident from the ratio of the decision of
12/04/2022) this High Courtin the case of Nadim
DilipbhaiPanjvani (383 ITR 375) wherein this
3 The writ applicant is engaged in the business of Court hastaken the view that the Courts should
diamonds. Thebusiness is being carried out in the attach considerable importance tothe time frame
name of a proprietary concernnamely “M/s. Vir provided under Sections 132A and 132B
Impex”. It is the case of the writ applicant that he respectively of the Actwhen it comes to a
soldpolished diamonds valued at Rs.92,09,550/ question of retention of books of accounts or
- to one company by name”Akash Diamonds Pvt. ofseized assets. It is not permissible for the Court
Ltd.” vide the invoice No.112/19/20 dated 2nd to read the time limitprovided in the proviso to
July 2019. clause (i) of sub-section (1) of Section 132B
oftheAct as being merely directory.Any attempt
4 On 8thAugust 2019, a search action under Section on the part of the Courtto read it as directory
132 of theActwas carried out by the department would substantially dilute the rigors of
at the business premises of the”Akash Diamonds thestatutory provisions and would give an
Pvt. Ltd.” It appears that during the search, one of unbridled power to the Assessing Officer to
theemployees of the writ applicant namely Parin retain the seized assets awaiting the finalization
N. Sheth was present andwas found to be in of futurepossible liability for indefinite period
possession of polished diamonds of the value without deciding the application ofthe person
referredto above.According to the writ applicant, concerned who may be legitimately in a position
his employee Parin N. Shethhad visited the to explainthe source of the asset so seized.
premises of theAkash Diamonds Pvt. Ltd. in order
tocollect the signed invoice No.112/19-20 dated 25 In the aforesaid context, we may quote few
2nd July 2019 referred toabove. The said invoice relevant observationsfrom the judgement in the
was also found during the course of the search. case of Nadim DilipbhaiPanjvani (supra):
5 The diamonds referred to above were seized from xxx…
the possessionof Parin N. Sheth.
26 In view of the aforesaid, this writ application
6 For the first time, on 6th September 2019, the writ succeeds and ishereby allowed. The respondents
applicant madea request in writing to release the are directed to hand over the seizedasset
seized asset (diamonds) in accordancewith the (diamonds) to the writ applicant within a period
provisions of Section 132(1)(i) of the Income Tax, of four weeksfrom the date of receipt of the writ
1961 [forshort, “the Act”]. The application
3 4 Ahmedabad CharteredAccountants Journal April,2022
of this order. It is needless to clarifythat the Judicial Analysis
assessment proceedings, if initiated against
Parin N. Sheth withrespect to the seized asset include the principal tax but also interest and
or even in the case of the writ applicanthimself, penalties, if any. However, under the first proviso
may continue in accordance with law. Direct to Clause (i) of sub section (1), if the person
service ispermitted. concerned makes an application within the
prescribed time and also satisfies the Assessing
2 Nadim Dilip Bhai Panjvaniv. ITO [383 Officer about the source of acquisition of such
ITR 375 (Guj)] asset, the asset would be adjustable only against
the existing liabilities. In other words, upon the
xxx… concerned person applying to the Assessing
Officer and satisfying him about the source of the
6. As per Section 1 of Section 132B of theAct, thus, acquisition of the asset, the same would be
the assets seized under Section 132 or requisitioned released after adjustment towards existing
under Section 132A has to be dealt with in the liabilities, without waiting for the outcome of the
manner provided in Clauses (i) to (iii) thereof. assessment proceedings under Section 153A of
Principally, under Clause (i), it is provided that the theAct or the assessment for the year relevant to
amount of any existing liability under the Income the previous year, in which, the search was initiated
TaxAct or the related fiscal statutes and the liability or a requisition is made or for the block period
determined on completion of assessment under referred to under Chapter XIV-B.
Section 153A and the assessment of the year
relevant to the previous year, in which, search is 8. Further proviso to Clause (i) of sub section (1)
initiated or requisition is made, or the amount of of Section 132B of the Act provides that such
liability determined including the penalty and interest asset or any portion thereof, as is referred to in
would be recovered out of such assets. Provisio the first proviso shall be released within a period
to Clause (i) of Section 1 of Section 132B, of 120 days from the date on which the last of
however, provides that where the person the authorizations for search under Section 132
concerned makes an application to theAssessing or for requisition under Section 132A, as the
Officer within thirty days from the end of the month, case may be, was executed. This further proviso,
in which, the asset was seized, for release of the therefore, has to be viewed and interpreted in
asset and the nature and source of acquisition of the background of the provisions contained in
any such assets is explained to the satisfaction of Clause (i) of sub section (1) of Section 132B of
theAssessing Officer, the amount of existing liability the Act and the first provisio to the said clause.
referred to in the said clause may be recovered The further proviso, thus, requires that such
out of such asset and the remaining portion, if any, assets or portion thereof referred to in the first
may be released to the person from whose custody provisio would be released within the prescribed
the asset was seized, with the prior approval of the time. Of course when this further proviso refers
officer prescribed under the said proviso. to any portion of the asset, as is referred to in the
first proviso, it necessarily permits theAssessing
7. Under Clause (i) of sub-section (1) of Section Officer to apply the assets against the existing
132B, any seized assets would be adjusted liability or even when not satisfied about the
towards the recoveries not only against existing source of acquisition of the asset to refuse to
but also liabilities which may crystallize on release the same till the further liabilities which
completion of the assessment under Section 153A may arise upon completion of the assessment
and the assessment of the relevant year to the under Section 153A of theAct or the assessment
previous year, in which, the search is initiated or of the year relevant to the previous year, in
the request is made or in the block assessment which, the asset was seized etc. are completed.
proceedings. Such liabilities would not only To this extent, we fully accept the stand of the
counsel for the revenue that the further proviso
Ahmedabad CharteredAccountants Journal April,2022 35
Judicial Analysis been given to the assessee and, therefore, in
view of the ratio of the above decision, there
would have to be read in continuation of the can be no doubt that the extended retention of
first proviso and therefore would not override the account books/documents is wholly illegal
the provision of the first proviso which requires and unlawful. We are, therefore, of the opinion
the Assessing Officer to release the asset only that the grievance made by the assessee is well
upon being satisfied with the source of its founded.”
acquisition. However, this further proviso puts
a time limit, within which, such asset must be 11. It can thus be seen that the Courts attach
released. The question of not releasing the asset considerable importance to the time frame
would arise only upon the decision on an provided under Sections 132A and 132B of the
application that may have been made by the person Act when it comes to a question of retention of
concerned is taken by theAssessing Officer. If no books of accounts or of seized assets. We cannot
decision is taken, necessarily, the option of the read the time limit provided in further proviso to
Assessing Officer to adjust such seized asset would Clause (i) of sub section (1) of Section 132B of
be confined to the existing liabilities. It is, in this theAct as being merely directory.Any such view
context, in our opinion, the legislature required the would substantially water down the rigors of the
Assessing Officer to follow the time limit statutory provisions and would give an unlimited
scrupulously. In other words if the person authority to the Assessing Officer to retain the
concerned has made an application for release of seized assets awaiting finalization of future possible
the asset within the prescribed time, the authority liability for indefinite period without deciding the
can refuse such request on the ground of not being application of the person concerned who may be
satisfied about the source of its acquisition. But if perfectly legitimately in a position to explain the
no such decision is taken within the time envisaged source of the asset so seized.
in the further proviso, releasing of the asset becomes
imminent. xxx…
xxx… 3 Mitaben R. Shah v. Dy. CIT [331 ITR
424 (Guj.)]
10. We may also refer to the decision of Division
Bench of this Court in case of Cowasjee 18. Having heard the learned advocates appearing
Nusserwanji Dinshaw v. ITO [1987] 165 ITR for the parties and having considered their rival
702; in which, the Court found that the books submissions in light of the statutory provisions and
and documents of the assessee, which were seized facts and circumstances of the case, the Court is
during search and seizure operation, were retained of the view that the impugned order passed by the
beyond a period of 180 days without respondent rejecting the petitioner’s application for
communicating the reasons recorded by the release of jewellary and gold ornaments is not
Assessing Officer for such purpose. The Court tenable at law and hence the same deserves to be
held that, continued retention of the books and quashed and set aside. The provisions contained
accounts and seized documents would, therefore, in Section-132B(1) are very clear and
be illegal and invalid. It was observed as under: unambiguous. Section-132B deals with the assets
seized under Section-132 or recognized under
“In the present case, the account books/ Section-132A of theAct.A detailed procedure is
documents were seized in November/ prescribed under Section-132B(1)(i) of the Act.
December,1984.Admittedly, after the expiry of Out of such seized assets, the amount of the existing
the period of 180 days, the documents have been liability or the amount of the liability determined on
retained by the revenue authorities without the completion of the regular assessment or
communicating the reasons stated by the reassessment including any penalty levied or interest
authorized officer and the approval of the
Commissioner. To date, no such intimation has
3 6 Ahmedabad CharteredAccountants Journal April,2022
payable in connection with such assessment or Judicial Analysis
reassessment is required to be recovered. The
first proviso of this Section enables the assessee jurisdiction one has to see the compliance of the
to make an application within 30 days from the provisions of Section-132B(1)(i) of theAct. The
end of the month in which the asset was seized. first thing is to make an application in time
For release of the assets the assessee is required explaining the nature and source of acquisition
to explain the nature and source of acquisition of the asset which was duly made by the
of such assets to the satisfaction of theAssessing petitioner. No dispute was raised during the
Officer. On such satisfaction and with prior permissible time of 120 days. It is only after the
approval of the Chief Commissioner the expiry of the said period the order was passed
Assessing Officer is empowered to release the raising all sorts of contentions. However, this is
asset to the person from whose custody the assets not permissible in view of the mandate contained
were seized. The second proviso to this Section in second proviso to Section-132B(1)(i) of the
makes it clear that the assets are required to be Act. It clearly says that the assets or any portion
released within a period of 120 days from the thereof shall have to be released within a period
date on which the last of the authorization for of 120 days. Once this period is over the
search under Section-132 or for requisition under respondents have no authority to retain these
Section-132A, as the case may be, was executed. assets. Interpreting somewhat similar provisions,
this Court has already taken the view in
19. Considering the above provisions, the petitioner Cowasjee Nusserwanji Dinshaw (Supra)
made an application within the permissible time wherein the books of accounts were retained
limit. Despite the fact that the period of 120 days beyond the period of 180 days from the date of
was over, the assets were not released. The seizure without communicating the reasons
petitioner thereafter sent reminder and still no action recorded by the authorised officer and approval
was taken on behalf of the respondent. The of the Commissioner was held to be illegal and
petitioner, therefore, approached this Court by way unlawful. The ratio of the said decision would
of writ petition. During the pendency of this petition, squarely cover the present case and in all these
the petitioner’s application was rejected and since cases the respondent authorities have retained
the order was passed by the respondent giving fresh the seized assets beyond the period of 120 days.
cause of action the earlier petition was allowed to The orders passed by the respondent authorities
be withdrawn with a liberty to file fresh petition. beyond such period are of no consequence and
The action of the respondent authorities is highly they are not tenable at law.
objectionable in view of the fact that in earlier
petition, after issuance of notice time was sought 20. In the above view of the matter, all these orders
for to file the reply affidavit. However, this time which are challenged in the present group of
was utilized for the purpose of passing the order petitions retaining the assets beyond the period
so as to make the earlier petition as infructuous of 120 days are hereby quashed and set aside
one. In the affidavit-in-reply the respondents have and the respondent authorities are directed to
come out with the stand that a detailed note was release the gold ornaments and jewellary seized
prepared by theAssistant Director of Investigation by them during the course of search and seizure
whereby the the petitioner’s claim for release of operation forthwith and in any case not latter than
the gold ornaments and jewellary was rejected. two weeks from the date of receipt of the writ of
However, the said note was never communicated this Court or from that date of receipt of certified
to the petitioner. The petitioner is not concerned copy of this order, whichever is earlier.
with the stand taken by the respondent in the
affidavit-in-reply. With regard to the change of ❉❉❉
Ahmedabad CharteredAccountants Journal April,2022 37
Update on Recent Case
Laws – International
Taxation and Transfer
Pricing CA. Dhinal A. Shah CA. Karan Sukhramani
[email protected]
[email protected]
Everest Global Inc vs. DDIT [2022] 136 consist of the development and transfer of a
taxmann.com 404 (Delhi - Trib.) technical plan or technical design.”
Facts · As per the MOU annexed to the India-USA
DTAA explaining the FIS, it is clarified that clause
The assessee (a US based LLC) operates as a global 4(b) ofArticle 12 excludes any service that does
services, advisory and research company. not make technology available to the person
acquiring the service.
During the course of proceedings, Assessing Officer
(‘AO’) made an addition on account of following · Everest India is not enabled to apply any
receipts (which were claimed to be not taxable in India) technology on its own without recourse to the
- service provider i.e. the assesee. These services
have not resulted in any enduring benefit to Everest
i) Payment received from Everest India (subsidiary) India by way of any knowledge which could be
towards management services fees applied by it on its own in future without
depending on the assessee. These are general
ii) Payment received from Everest India towards IC managerial services which are received by the
labour charges for supply of manpower assesee on recurring basis. Therefore, the test laid
down under Article 12(4)(b) is not satisfied and
iii) Payment received from third parties towards management fee received by the assesee from
access to published research reports Everest India is not taxable as FIS under the
provisions of India-USA DTAA.
iv) Payment received from third parties towards Payment made by Everest India for IC Labour
provision of customized research advisory Charges
The services specified at Sr. No. i) and ii) were treated · The manpower is supplied by the assesee under
as Fees for technical services (‘FTS’) as well as Fees an Inter-Company SharingAgreement. Under this
for included services (‘FIS’) whereas services at Sr. agreement, if any group entity is in shortage of a
No. iii) and iv) were treated as Royalty as well as manpower resource, any other group entity which
FTS / FIS under theAct well as India-USA tax treaty. has excess manpower resource lends the same
and in consideration charges 60% of standard
Ruling fee rate of employee lent to compensate itself for
Payment made by Everest India for availing the salary cost of the employee lent.
Management Services
· There is no rendition of technical or consultancy
· Article 12(4)(b) of the India-USA DTAA provides services by the assesee through the supply of
the meaning of the term FIS as “4. For purposes manpower which has enabled Everest India to
of this Article, “fees for included services” apply any technical knowledge, experience, skill,
means payments of any kind to any person in know-how on its own without the recourse to
consideration for the rendering of any the manpower supplied by the Assesee.
technical or consultancy services (including
through the provision of services of technical
or other personnel) if such services…………(b)
make available technical knowledge,
experience, skill, know-how, or processes, or
3 8 Ahmedabad CharteredAccountants Journal April,2022
Update on Recent Case Laws – International Taxation and Transfer Pricing
· The agreement is continuous in nature and the · TPO, vide order dated 18/10/2016 proposed
lending entity is free to withdraw the manpower the adjustment to the i) Intra Group Service -
resource if it requires the resource for its own Employee Secondment and ii) Business
business. Accordingly, the IC Labour Charges Restructuring. The remaining transactions were
received by the assesee from Everest India are not duly accepted by the TPO and no adjustments
taxable as FIS under the provisions of Article were proposed by him with respect to the
12(4)(b) of the India-USA DTAA. remaining transactions.
Payment made by third parties for access to
published research reports · Over and above the addition of Rs. 46,41,736/
- as proposed by the TPO, the AO further made
· By allowing access to database what assessee an addition of Rs. 3,11,06,565/- on account of
grants to customers is only a right to use a disallowance of support service charges paid by
copyrighted material (i.e. published report). The the assessee to group companies, by observing,
assessee does not grant the right to use the inter alia that the assessee has failed to prove with
copyright. Hence, the consideration (subscription evidence that the expenditure for support service
fee) received by the assesee is not taxable as charges has been incurred by the assessee for
royalty under the provisions of Article 12(3) of the purposes of its business and that the group
the India-USA DTAA. company has actually rendered services to the
Payment made by third parties for customized assessee.
research advisory
Ruling
· In respect of customized research advisory
services, the assessee is providing only advisory · A bare reading of section 92CA of the Act,
services through emails or presentations. reveals that theAO may refer the computation of
theALP in relation to the international transaction,
· The output of custom research advisory is not with the previous approval of the Commissioner.
provided through subscription mode or data base Where a reference is made to the TPO, he will
access mode and, therefore, the question of allow the assessee to produce the evidence in
access to data base does not arise at all. support of the computation made by the assessee
of theALP of the international transaction.
· Thus, the considerations received by the assessee
towards customized research advisory services · After hearing such evidence etc. and after taking
are not taxable under the head Royalty. into account all relevant materials, the TPO shall
pass an order in writing determining the ALP in
EFS Facilities Services (India) Pvt Ltd [TS- accordance with Section 92C(3) and send a copy
213-ITAT-2022(DEL)-TP] of his order to the AO and to the assessee.
Facts · The amended sub-section (4) to section 92CA
provides that on receipt of the order of theTPO,
· The assessee company (previously known as theAO shall proceed to compute the total income
Dalkia India Pvt. Ltd.) is a 99.9% Indian of the assesseeunder section 92C,in conformity
subsidiary of EMCOR Facilities Services with the ALP as determined by the TPO.
Mauritius Ltd. which is a subsidiary of EMCOR
Facilities Services Group Ltd., UAE, the ultimate · This provision is mandatory as by using the
holding company of the assessee. expression “shall” no discretion is provided to the
AO. Accordingly, appeal of the Revenue was
· The Assessing Officer (‘AO’) made a reference dismissed by Hon’ble ITAT.
to the Transfer Pricing Officer (‘TPO’) under
section 92CA of the Income Tax Act 1961 ❉❉❉
(‘Act’) for ascertaining arm’s length price (‘ALP’)
of the certain international transactions.
Ahmedabad CharteredAccountants Journal April,2022 39
FEMA CA. Savan Godiawala
Updates [email protected]
1 Developments in India’s Balance of · Net external commercial borrowings to India
Payments during the Third Quarter recorded outflow of US$ 0.2 billion in
(October-December) of 2021-22 Q3:2021-22 as compared with US$ 1.6 billion
a year ago.
RBI published preliminary data on India’s balance
of payments (BoP) for the third quarter (Q3), i.e., · Non-resident deposits recorded net inflow of
October-December 2021. US$ 1.3 billion as compared with US$ 3.0
billion in Q3:2020-21.
Key Features of India’s BoP in Q3:2021-22
· There was an accretion of US$ 0.5 billion to the
· India’s current account deficit (CAD) increased foreign exchange reserves (on a BoP basis) as
to US$ 23.0 billion (2.7 per cent of GDP) in compared with US$ 32.5 billion in Q3:2020-21.
Q3:2021-22 from US$ 9.9 billion (1.3 per cent
of GDP) in Q2:2021-22 and US$ 2.2 billion BoP during April-December 2021
(0.3 per cent of GDP) a year ago [i.e., Q3:2020-
21]. · India recorded a current account deficit of 1.2
per cent of GDP in April-December 2021 as
· The widening of CAD in Q3:2021-22 was against a surplus of 1.7 per cent in April-
mainly on account of higher trade deficit. December 2020 on the back of a sharp increase
in the trade deficit.
· Net services receipts increased, both sequentially
and on a year-on-year (y-o-y) basis, on the back · Net invisible receipts were higher in April-
of robust performance of net exports of computer December 2021, on account of higher net receipts
and business services. of services and private transfers.
· Private transfer receipts, mainly representing · Net FDI inflows at US$ 26.5 billion in April-
remittances by Indians employed overseas, December 2021 were lower than US$ 41.3 billion
amounted to US$ 23.4 billion, an increase of 13.1 in April-December 2020.
per cent from their level a year ago.
· Portfolio investment recorded net outflow of US$
· Net outgo from the primary income account, mainly 1.6 billion duringApril-December 2021 as against
reflecting net overseas investment income an inflow of US$ 28.9 billion a year ago.
payments, increased sequentially as well as on a
y-o-y basis. · In April-December 2021, there was an accretion
of US$ 63.5 billion to the foreign exchange
· In the financial account, net foreign direct reserves (on a BoP basis).
investment recorded an inflow of US$ 5.1
billion, lower than US$ 17.4 billion a year ago. Source:Developments in India’s Balance of Payments
during the Third Quarter (October-December) of
· Portfolio investment recorded net outflow of US$ 2021-22, dated March 31, 2022
5.8 billion as against an inflow of US$ 21.2 billion
in Q3:2020-21. For full text refer:https://rbi.org.in/scripts/
FS_PressRelease.aspx?prid=53492&fn=5
4 0 Ahmedabad CharteredAccountants Journal April,2022
2 India’s International Investment FEMA Updates
Position (IIP), December 2021
· Indian residents’ overseas financial assets
RBI released data relating to India’s International declined during the quarter, mainly due to
Investment Position at end-December 2021. reduction in currency and deposits.
Key Features of India’s IIP in December 2021 · Reserve assets accounted for 68.4 per cent of
Indian residents’ foreign assets.
· Net claims of non-residents on India increased
by US$ 21.1 billion during October-December · The share of debt liabilities in total liabilities
2021 due to an increase of US$ 16.2 billion in increased marginally during the quarter and
foreign-owned assets in India combined with a stood at 48.5 per cent in December 2021.
decline of US$ 4.9 billion in Indian residents’
overseas financial assets. · The ratio of India’s international financial assets
to international financial liabilities stood lower
· Higher inward direct investment, trade credit and at 72.1 per cent in December 2021 (73.4 per
loans contributed to the increase in non-residents’ cent in September 2021).
claims on India even as foreign portfolio investment
in India reduced during the quarter. Source: India’s International Investment Position
(IIP), December 2021, dated March 31, 2022
Continued from page 29 For full text refer: https://rbi.org.in/scripts/
FS_PressRelease.aspx?prid=53494&fn=5
Held
❉❉❉
In the year of incurrence of loss i.e. AY 2012-13 and
as on to AYs 2013-14 and 2014-15, there was no Tribunal News
change in the shareholding pattern of the taxpayer
and its immediate holding company (i.e., Cyprus Co) there was no change in the shareholding of the
continued to hold 99.9% of the shares. The taxpayer company i.e., Cyprus Co continued to hold
interpretation of the CIT(A) was correct on facts and 99.99% shares in the assessee. The Cyprus Co was
on law by relying on the ratio laid down in earlier the registered and beneficial shareholder of the
ruling in case of Yum Restaurants (India) (P.) Ltd. assessee in AY 2012-13 (i.e., the year in which loss
vs.ITO [2016] 66 taxmann.com 47 (Delhi HC) and was incurred) and in AY 2013-14 and 2014-15 (i.e.,
Just Lifestyle Pvt. Ltd. vs DCIT (ITA No. 2638/ the years in which such loss was setoff). The change
Mum/ 2012)(Mum-ITAT) of the Delhi High Court, in ultimate holding company from UK Co (up to 31
wherein it was held that:(i) Section 79 of the ITA July 2012) to Canada Co (from 1 August 2012) did
could be invoked only in case there was change in not affect the shareholding of Cyprus Co in the
immediate shareholding of a company;(ii) The assessee and there was nothing on record which
registered shareholder shall be the beneficial owner could indicate that the ultimate holding company was
of shares, unless such shares are held in the capacity the beneficial shareholder in the assessee company
of a nominee/agent/trustee; and(iii) In case of having 51% or more voting right. Further, it was a
multilayer group structure, it could not be construed well settled proposition that registered shareholder
that the intermediate holding company or ultimate is the beneficial owner of shares, unless such shares
holding could not be said to be holding shares in the are held in the capacity of a nominee/agent/trustee
company where the subsidiary of such intermediate of the real owner which was not applicable in the
holding company or ultimate holding is the case under consideration.In view of the above, the
shareholder. The aforesaid ratio was squarely ITAT allowed assessee’s claim of set-off of brought
applicable to the facts of the case under consideration, forward loss of AY 2012-13, against income ofAYs
2013-14 and 2014-15.
❉❉❉
Ahmedabad CharteredAccountants Journal April,2022 41
GST and VAT CA. Bihari B. Shah CA. Vishrut R. Shah
Judgments [email protected] [email protected]
and Updates
and mere payment should not be treated as
[I] Important Case Laws: (High Court/ admission of liability.
Suprement Court )
[2] Issue:
[1] Issue:
Order on basis of SCN which was issued
Karnataka HC allowed refund of Rs. 27 without indicating the date of hearing liable
Crores paid at odd hours during investigation to be set aside: HC:
being not voluntary.
Case Laws:
Case Laws:
GRT Hotels & Resorts (P) Ltd. v. State of
Union of India v. Bundl Technologies (P) Ltd. Andhra Pradesh [2021] 129 taxmann.com
[2022] 136 taxmann.com 112 (Kar) 426 (A.P.)
Facts: Facts:
The assessee was a company operating an e- The Competent Authority issued on assessee
commerce platform under the brand name show-cause notice to explain why tax should not
‘Swiggy’ and an investigation was initiated by be imposed granting fifteen days time to file
Director General of Goods and Services Tax objections and arguments. The assessee did not
Intelligence (DGGI). During the course of file any objections within time stipulated.
investigation, app. 27 crores were paid. The Thereafter, the Competent Authority passed an
assessee filed refund application after a lapse of order under section 74 on assessee. The assessee
10 months of investigation as no SCN was issued challenged the order on the ground that an
but no response was received. Thereafter, it filed opportunity of hearing was not granted and filed
writ petition to receive the refund of amount writ petition.
deposited.
Held:
Held:
The Hon’ble High Court observed that as per
The Hon’ble High Court observed that there was sub-section (4) of Section 75 of the GST Act,
no material on record to indicate that amounts an opportunity of hearing shall be granted
paid at odd hours were on admission by the where a request is received in writing from the
company about its liability. Moreover, there was person chargeable with tax or penalty, or where
no communication in writing from company to any adverse decision is contemplated against
proper officer about either self-ascertainment or such person. In the instant case, show cause
admission of liability by company to infer that such notice was issued to submit objections but the
payment was made voluntarily under section notice of personal hearing indicating the date
74(5) of CGSTAct.Also, the claim for refund of of hearing was not served before resorting to
amount paid during investigation and writ petition the impugned action. Since, the mandatory
were filed within two years. Therefore, it was held requirement was not complied with, the Court
that the assessee reserved its right to seek refund
4 2 Ahmedabad CharteredAccountants Journal April,2022
held that petition was allowed and matter was GST and VAT - Judgements and Updates
required to be remanded to Competent
Authority for fresh consideration. [II] Important Case Laws: (AAR)
[3] Issue: [1] Issue:
ITC received from Input service Distributor Pan shop seller not eligible to opt for
lying unutilized due to exports is eligible for composition scheme being manufacturing
refund: HC : Gutka by mixing ingredients: AAAR:
Case Laws: Case Laws:
IPCA Laboratories Ltd. v. Commissioner Gulab Singh Chauhan, In re [2022] 135
[2022] 136 taxmann.com 68 (Guj.) taxmann.com 38 (AAR – Madhya
Pradesh)
Facts:
Facts:
The applicant was a pharmaceutical company
and located in a Special Economic Zone The appellant was running pan shop and
(SEZ). It was engaged in the export of goods dealing in all types of products which would
under the Letter of Undertaking (LUT) from be related to pan and necessary items generally
the SEZ Unit. It had accumulated Input Tax accepted in pan shop in general trade parlance.
Credit (ITC) which was received from its It filed an application for advance ruling to
Input Service Distributor (ISD) and lying determine whether it would be eligible to opt
unutilized in the Electronic Credit Ledger. It composition scheme as turnover shall be much
filed the refund application in Form GST less than Rs. 1.5 crores.
RFD-01A and the same was rejected. It
preferred an appeal before the appellate Decision:
authority but appeal was dismissed. Thereafter
it filed writ petition against the same. The Authority for Advance Ruling observed
that as per section 10(2)(b) of CGST Act. the
Held: benefit of composition scheme shall not be
available to a person who is engaged in supply
The Hon’ble High Court observed that this of goods that are not leviable to tax. Also, as
Court has already decided in the case of M/s. per Notification No. 14/2019-Central Tax, the
Britannia Industries Limited v. Union of India persons who are engaged in manufacturing
[2020] 122 taxmann.com 32 (Gujarat) that of tobacco or Pan Masala, are not eligible for
assessee situated in SEZ could claim refund composition scheme.
with regard to credit in IGST distributed by
ISD for services pertaining to SEZ Unit as In the instant case, one of the goods that shall
there is no specific supplier who can claim be manufactured and sold from the applicant’s
the refund under the provisions of the CGST Pan Shop is Gutka, containing Tobacco or
Act with respect to ITC distributed by the ISD. otherwise which would be similar to Pan
Thus, the present writ application was no Masala. Thus, the preparation of Gutka at the
longer res integra in view of the aforesaid Pan Shop for sale would be covered in the
judgment and therefore, the applicant was also Second Proviso of Notification No. 14/2019-
entitled to claim the refund of the IGST lying Central Tax. Therefore, benefit of composition
in the Electronic Credit Ledger. scheme shall not be available to applicant.
[2] Issue:
Property tax, electricity charges etc. to be
excluded for calculating exemption limit of
Rs. 7,500 by housing society: AAR:
Ahmedabad CharteredAccountants Journal April,2022 43
GST and VAT - Judgements and Updates [3] Issue:
Case Law: ITC not available on GST paid for transfer
of rights of industrial plot for construction
Mahindra Splendour CHS Ltd., In of immovable property :AAR:
re[2022] 135 taxmann.com 71 (AAR –
Maharashtra) Case Law:
Facts: J. M. Chemicals Trade Name Manjuben
Rameshchandra Gupta (Legal Name), In
The applicant was a housing society whose re[2022] 135 taxmann.com 276 (AAR –
main objects were managing, maintaining and Gujarat)
administering its property; raising funds for
achieving the said objects etc. by way of Facts:
collecting contributions/charges from members
of the society, like Property Tax, Maintenance The applicant purchased rights of an industrial
Charges, Water and Electricity charges etc. It plot situated in an industrial estate from
filed an application for advance ruling to transferor. The transferor charged GST at 18%
determine taxability of amount collected under on the sale of transferring the rights of the
GST. industrial plots by executing the deed of
assignment. It filed an application for advance
Decision: ruling to determine whether it would be entitled
to claim ITC.
The Authority for Advance Ruling observed
that the applicant society and its members are Decision:
distinct persons and the various charges
received by the applicant from its members are The Authority for Advance Ruling observed
nothing but consideration received for supply that the applicant purchased rights of industrial
of goods/services as a separate entity. The plots from transferor and building would be
exemption as per the entry no. 77 of the constructed after land was acquired on lease.
Notification No. 12/2017-CT(R) would be The legislature has clearly expressed its intent
available only when a member’s contribution that ITC shall not be available in respect of
per month is up to an amount of Rs. 7,500/-. A services pertaining to land received by a taxable
member who shall contribute an amount which person for construction of an immovable
is more than Rs. 7,500/-would not be eligible property even when such services are used in
for the exemption under entry no. 77 and the course or furtherance of business. Therefore,
entire contribution amount would be liable to GST amount paid by applicant on leasing
be taxed. However, the charges collected by services received was blocked credit under
society on account of property tax, electricity section 17(5)(d) and thereby ineligible for
charges and other statutory levies would be availment of ITC.
excluded while calculating the exemption limit
of Rs. 7,500/-. ❉❉❉
4 4 Ahmedabad CharteredAccountants Journal April,2022
Corporate
Law Update
MCA Updates: CA. Naveen Mandovara
[email protected]
1. The Limited Liability Partnership (Second
Amendment) Rules, 2022: insolvency resolution process
has been initiated against the
The Ministry has notified the Limited Liability limited liability partnership under
Partnership (Second Amendment) Rules, 2022 the Insolvency and Bankruptcy
for amending the the Limited Liability Partnership Code, 2016 (31 of 2016) or the
Rules, 2009 and following are the details of such Limited Liability Partnership
amendments: Act, 2008 (06 of 2009) has
come under liquidation under
Rule No. Effect of the amendment the said Code, 2016 or the said
Act, 2006, the said Statement
Rule 11(1) Provided further that the of Account and Solvency may
be signed on behalf of limited
Second application for allotment of liability partnership by interim
resolution professional Of
proviso DPIN shall not be made by resolution professional, or
liquidator or limited liability
(Substituted) more than FIVE individuals in partnership administrator. “.
Form FiLLiP: Provided that where the
corporate insolvency
Rule 11(3) The Certificate of Rule 25(2) resolution process has been
(Inserted) Incorporation of limited liability Proviso initiated against the limited
partnership shall be issued by (Inserted) liability partnership under The
the Registrar in Form 16 and Insolvency and Bankruptcy
shall mention Permanent Code, 2016 (31 of 2016) or the
Account Number and Tax Limited Liability Partnership
Deduction Account Number Act, 200B (06 of 2009) having
issued by the Income Tax turnover upto five crore rupees
Department. during the corresponding
financial year or contribution
Rule 19(4) “4.-The person making the upto fifty lakh rupees has come
(Substituted) application shall attach a copy under liquidation under the said
Code, 2016 or the said Act,
of the incorporation certificate 2008, the said annual return may
of the limited liability partnership be sinned on behalf of limited
or the company or tile liability partnership by interim
registration certification of the resolution professional or
entity, as the case may be.”. resolution professional, or
Rule 24(6) “6) Statement ofAccount and
(Substituted) Solvency shall be signed on
behalf of the Limited Liability
partnership by its designated
partners. Where the corporate
Ahmedabad CharteredAccountants Journal April,2022 45
Corporate Law Update
liquidator or limited liability SEBI Updates:
partnership administrator and
no certification by a 1. Automation of disclosure requirements
designated partner shall be under SEBI (Substantial Acquisition of
required”. Shares and Takeovers) Regulations, 2011-
System Driven Disclosures - Ease of doing
Rule 36(6) Where the Registrar, on business:
(Inserted)
examining any application or The SEBI has decided that w.e.f. 01.07.2022,
all types of encumbrances as defined under
e-Form or document referred Regulation 28 (3) of Takeover Regulations
shall necessarily be recorded in the depository
to in sub-rule (5), finds it system through an appropriate mechanism for
dissemination of disclosures under System
necessary to call further Driven Disclosures in a simple readable pdf
format and Reconciliation of data shall be
information or finds such conducted by listed companies, stock
exchanges and depositories at least once in a
application or e-Form or quarter or immediately whenever any
discrepancy is noticed.
document to be defective or
[Circular No.: SEBI/HO/CFD/DCR-3/P/
incomplete in any respect, he CIR/2022/27 dated 07.03.2022]
shall give intimation of such 2. Revision to Operational Circular for issue
and listing of Non-convertible Securities,
information called for or Securitised Debt Instruments, Security
Receipts, Municipal Debt Securities and
defects or incompleteness Commercial Paper:
noticed electronically, by According to the SEBI’s circular dated August
10, 2021, the procedures pertaining to issue
placing it on the website and and listing of Nonconvertible Securities,
Securitised Debt Instruments, Security
also by e-mail on the last Receipts, Municipal Debt Securities and
Commercial Paper were prescribed and it had
intimated e-mail address of also provided an option to investors to apply
in public issues of debt securities with the
the person or the limited facility to block funds through Unified
Payments Interface (UPI) mechanism for
liability partnership, which application(s). Now through this Circular the
limit for investment through UPI mechanism
has filed such application or has been increased from Rs. 2 Lakh to Rs. 5
Lakh and this circular is applicable to public
e-Form or document, issues of debt securities which open on or after
01.05.2022.
directing him or it to furnish
[Circular No.: SEBI/HO/DDHS/P/CIR/
such information or to rectify 2022/0028 dated 08.03.2022]
such defects or
incompleteness or to re-
submit such application or e-
Form or document within the
period allowed under sub-rule
(7) in Form 32.
Rule 37 Furnish in Form 24.
(1A)(II)
(Substituted)
In the said rules, for RUN LLP, FiLLiP, Form
3, Form 4, Form 5, Form 8, Form 9, Form 11,
Form 12, Form 15, Form 16, Form 17, Form
18, Form 22, Form 23, Form 24. Form 25,
Form 27, Form 28. Form 31 and Form 32, shall
be substituted.
[F. No. 1/3/2021-CL-V-Part IV dated
05.03.2022]
4 6 Ahmedabad CharteredAccountants Journal April,2022
3. Securities and Exchange Board of India Corporate Law Update
(Listing Obligations And Disclosure
Requirements) (Second Amendment) The SEBI has provided the following
Regulations, 2022: clarifications and guidance for smooth
implementation of the amended Regulation 23
The SEBI, vide its notification dated March 22, of the LODR Regulations:
2022, has amended the provisions of SEBI
(Listing Obligations and Disclosure Requirements) 1) For an RPT that has been approved by
Regulations, 2015 and made the following the audit committee and shareholders prior
changes: to April 1, 2022, there shall be no
requirement to seek fresh approval from
Regulation No. Effect of the amendment the shareholders.
Regulation 17 (Omitted) 2) Regulation 23(8) of the LODR
(1B) Regulations specifies that all existing
material related party contracts or
Schedule II, “D. Separate posts of arrangements entered into prior to the date
Part E, Clause Chairperson and the of notification of these regulations and
D (Inserted) Managing Director or the which may continue beyond such date
Chief Executive Officer shall be placed for approval of the
The listed entity may shareholders in the first General Meeting
appoint separate persons to subsequent to notification of these
the post of the Chairperson regulations. In accordance with the said
and the Managing Director regulation, an RPT that has been
or the Chief Executive approved by the audit committee prior to
Officer, such that the April 1, 2022 which continues beyond
Chairperson shall –(a) be a such date and becomes material as per
non-executive director; and the revised materiality threshold shall
(b) not be related to the be placed before the shareholders in
Managing Director or the the first General Meeting held after April
Chief Executive Officer as 1, 2022.
per the definition of the
term “relative” defined 3) It is reiterated that an RPT for which the
under the Companies Act, audit committee has granted omnibus
2013.” approval, shall continue to be placed
before the shareholders if it is material in
[F. No. SEBI/ LAD-NRO/GN/2022/76 dated terms of Regulation 23(1) of the LODR
22.03.2022] Regulations.
4. Clarification on applicability of regulation [Circular No.: SEBI/HO/CFD/CMD1/CIR/
23 of SEBI (Listing Obligations and P/2022/40 dated 30.03.2022]
Disclosure Requirements) Regulations,
2015 in relation to Related Party ❉❉❉
Transaction:
Ahmedabad CharteredAccountants Journal April,2022 47
GujRERA Corner
Management of funds of society/association of CA. Manan Doshi
allotees under RERA [email protected]
Recently Gujarat RERA has issued order 66 which and financial institutions, which are related to the
has highlighted a major issue of misuse of funds by project”
real estate developers. Before discussing the said
order let us go through the statutory provisions Section 19 sub section 6 states that “Every allottee,
under RERA Act. who has entered into an agreement for sale to take
an apartment, plot or building as the case may be,
Section 11 sub section 4 clause a states that the under section 13, shall be responsible to make
promoter shall, “be responsible for all obligations, necessary payments in the manner and within the
responsibilties and functions under the provisions time as specified in the said agreement for sale and
of this Act or the rules and regulations made shall pay at the proper time and place, the share of
thereunder or to the allottees as per the agreement the registration charges, municipal taxes, water and
for sale, or to the association of allottees, as the electricity charges, maintenance charges, ground
case may be, till the conveyance of all the rent, and other charges, if any.”
apartments, plots or buildings, as the case may be,
to the allottees, or the common areas to the It was observed by Gujarat RERA that since its
association of allottees or the competent authority, inception there were multiple complaint received
as the case may be” out of which the issue relating to mismanagement
of funds of association of allotees seemed to be a
Section 11 sub section 4 clause d states that the major issue. It is well noted by Gujarat RERA
promoter shall, “be responsible for providing and that the promoter is just a “trustee” of funds
maintaining the essential services, on reasonable received from allotees for maintenance of common
charges, till the taking over of the maintenance of areas and that such funds should be used for the
the project by the association of the allottees;” purpose of maintenance of common areas and
amenities. In light of the said issue Gujarat RERA
Section 11 sub section 4 clause g states that the has issued following order:
promoter shall, “pay all outgoings until he transfers
the physical possession of the real estate project to 1. The promoter shall accept maintenance deposit/
the allottee or the associations of allottees, as the advance (or for that matter any fund accepted
case may be, which he has collected from the for the purpose of maintenance of the common
allottees, for the payment of outgoings (including areas/amenities) only after the receipt of BU
land cost, ground rent, municipal or other local permission.
taxes, charges for water or electricity, maintenance
charges, including mortgage loan and interest on 2. The amount received as maintenance deposit/
mortgages or other encumbrances and such other advance shall have to be deposited in a separate
liabilities payable to competent authorities, banks account which can be managed by the
association of allotees/society. Funds received
as maintenance deposit/advance should not be
use for any other purposed other than
maintaining of the common areas/amenities
4 8 Ahmedabad CharteredAccountants Journal April,2022
3. The promoter shall have to accept maintenance GujRERA Corner
deposit by any mode other than cash i.e. by
cheque/demand draft/any electronic form. The the real estate projects that are already in progress
promoter shall have to issue a receipt for the or not.
same.
With respect to point no. 6 the order states that if
4. Interest earned on the funds deposited in a at all the promoter utilizes funds for maintaining
separate account shall be deposited in such the common areas before the receipt of BU
separate account and shall be considered as permission, then the promoter shall have to deposit
corpus fund of allotees. such funds with interest. The said point shall be
in a way easy to implement for new project that
5. Any expense which is required to be done after yet to be launched. However, it would be difficult
the receipt BU permission for maintenance of for authority to identify misutilization of funds in
common areas/amenities shall be done from on going projects.
such separate bank account with the consent
of chairman or secretary or any other With the implementation of RERA developers
responsible person of the society/association of have been mandated to clearly state all the charges
allotees. in the builder-buyer agreement including fees,
schedule of payment, and a proper breakdown of
6. The promoter shall be responsible for the same to avoid any discrepancy.Section 13
maintaining the common areas up till the date (2) further says that such agreement for sale shall
of BU permission. If at all the promoter utilizes contain the following particulars, like development
funds for maintaining the common areas before of the project including the construction of building
the receipt of BU permission, then the promoter and apartments, along with specifications and
shall have to deposit such funds with interest. internal development works and external
development works, the dates and the manner by
7. The promoter shall enable the formation of a which payments towards the cost of the apartment,
co-operative housing society under The Gujarat plot or building are to be made by the allottees
Co-operative Societies Act, 1961 or a Section and the date on which the possession of the
8 company under The Companies Act, 2013 apartment, plot or building is to be handed over,
within 3 months of receiving BU permission/ the rate of interest payable by the promoter to the
occupancy certificate and the same shall have allottee etc.
to be communicated to the authority.
Madhya Pradesh RERA too has issues a circular
8. The promoter shall have to submit an audit named “Guidelines on maintenance chares” which
accounts during the hand over of common areas are almost similar to Gujarat RERA order. However
to the society/association of allotees w.r.t the Madhapradesh RERA circular is different in case
funds received for maitainence of common where the builder has given possession to allottees
areas/amenities and balance shall have to be without making arrangement for domestic
transferred to the society’s separate account. electricity connection, and consequently undertakes
to pay difference between the higher rate charged
The order has tried to cover majorly issues faced by the MPEB and the normal rate for the domestic
by the association of allotees however there remains connection, this difference cannot be charged to the
some issues which requires clarification. maintenance account, but must come out of the
builder’s own resources.
With respect to point no. 1 the order says that
maintenance deposit/advance shall be accepted Remedies for allotees for misappropriation of funds
only after the receipt of BU permission. There is collected as maintenance deposit/advance:
no clarity as to whether the said order applied to
Ahmedabad CharteredAccountants Journal April,2022 49
The words you are searching are inside this book. To get more targeted content, please make full-text search by clicking here.
Journal April 2022
Discover the best professional documents and content resources in AnyFlip Document Base.
Search