JOURNAL JANUARY 22

Volume : 45 l Part 10 l January, 2022

Budget Meeting
February, 2019



Ahmedabad Chartered Accountants Journal

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

Volume : 45 Par t : 10 Januar y, 2022

CONT ENTS

To Begin with

- Share and Care................................................................ CA. Jayesh Sharedalal............... 491

Editor ial ............................................................................................CA. Rutvij P. Shah.........................492
Fr om the Pr esident............................................................................CA. Monish Shah..........................493

Ar ticles

Short Analysis of Faceless Assessment u/s 144B of the Income
Tax Act, 1961 .....................................................................................Adv. Tej Shah..............................494

Cryptocurrency- New Era of Technologies.........................................CA. Samirkumar S. Chaudhary....497
Direct Taxes

Glimpses of Supreme Court Rulings....................................................Adv. Samir N. Divatia....................502
From the Courts..................................................................................CA. C.R. Sharedalal &

CA. Jayesh Sharedalal............... 504
Tribunal News.....................................................................................CA. Yogesh G. Shah &

CA. Aparna Parelkar.................. 508
Unreported Judgements......................................................................CA. Sanjay R. Shah....................514
Controversies.......................................................................................CA. Kaushik D. Shah...................516
Judicial Analysis..................................................................................Adv. Tushar Hemani......................518

FEM A & I nternational Taxation

Summary of Recent Case Laws ..........................................................CA. Dhinal A. Shah &
CA. Karan Sukhramani...............522

FEMA Updates....................................................................................CA. Savan Godiawala..................525
I ndirect Taxes

GST and VAT Judgments and Updates................................................ CA. Bihari B. Shah &
CA. Vishrut R. Shah.....................527

Cor por ate L aw & Other s

Guj RERA Corner..................................................................................CA. Manan Doshi.........................530
Capital Markets..................................................................................CA. Karan P. Vora.........................533

Fr om Published Accounts .................................................................CA. Pamil H. Shah..................... 538

Fr om the Gover nment ......................................................................CA Ashwin H. Shah &
CA. Kunal A. Shah......................542

I T Cor ner ...........................................................................................CA. Rushabh Shah.....................544

Association News.............................................................................. CA. Rushabh Shah &
CA. Jay Parekh...........................547

ACAJ Cr osswor d Contest....................................................................................................................548

Ahmedabad Chartered Accountants Journal Januar y, 2022 489

Journal Committee

CA. Rutvij Shah CA.Ashish Sharma

Chair man M ember s Convenor

CA. Ashok K. Kataria CA. Mehul Shah

CA. Mohit Tibrewal Ex-officio CA. Nirav J. Shah
CA. Niren M. Nagri CA. Riken Patel

CA. Monish Shah CA. Sarju Mehta

CA. Rushabh Shah CA. Jay Parekh

A t t ent i on

M ember s / Subscr iber s / Author s / Contr ibutor s

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and Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it necessarily

concur with the authors / contributors.

7. L ife M ember ship/Annual M ember ship and Other Fees F. Y. 2021-22 Amount in Rs.

Basic GST Total
90 590
1. Admission Fees 500
- 600
2. Annual M ember ship Fees - 750

a. If Paid Prior to june 30 of each financial year : - 720
- 900
i. In case of membership (of ICAI) for a period of less than or equal to five years 600
720 4720
ii. In case of membership of (ICAI) for a period more than five years, 750 1350 8850

b. If paid after june 30 of each financial year : 180 1180
216 1416
i. In case of membership (of ICAI) for a period of less than or equal to five years, 720 540 3540

ii. In case of membership of (ICAI) for a period of more than five years 900

3. L ife M ember ship Fees
i. In case of membership (of ICAI) for a period of less than or equal to five years 4000

ii. In case of membership of (ICAI) for a period more than five years 7500

4. Br ain Tr ust M ember ship Fees
a. I ndividual M ember ship Fees
i. In case of membership (of ICAI) for a period of less than or equal to five years 1000

ii. In case of membership of (ICAI) for a period more than five years 1200

b. Flexi Firm/Corporate Membership Fees*** 3000

* * * Registered Firm/Corporate can nominate any two participants from their firm for each Brain Trust Meeting. Additional
Representatives can be nominated @1500/- plus GST per participant subject to maximum of 20 participant per firm

Professional Awar ds

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 AccountantsAssociation, 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.

Pr inted : Pr atiksha Pr inter, Ahmedabad Mobile: 98252 62512 E-mail : [email protected]

490 Ahmedabad Chartered Accountants Journal Januar y, 2022

CA. Jayesh C. Shar edalal
[email protected]

Shar e and Car e An ideal partnership would be a combination of like-
minded persons, which may bejuniorsaswell asseniors.
“I am a‘giver’! Being successful means The seniors have to do the hand holding of juniors and
adequately reward them by an appropriate share in the
being agiver. Let usintrospect on thestatement : Whether surpl us of the firm. Such reward should keep on
am I a giver ? increasing as the junior gains in experience and inputs
his timeless and quality efforts for the firm’s growth.
I begin with our days of ‘Articleship’. Our profession Similarly the senior should slowly start to reduce his /
of Chartered Accountancy is in one sense very unique her rewards from the firm as he/she advances in age. A
and we all have gone through that unique phase of our question may beposed that why theseniorsshould adopt
professional journey. Thisphasehas remained common this policy? My answer is that a professional is at his
in the professional career of a senior most chartered best between the age of 40 years and 65 years, not that
accountant right down to a fresh qualified person. I am hefadesout as hecrossestheage of 65 years. However,
referring to thephaseof “articles”.All CA aspirantshave he/she has to act in the best interest of the firm. The
to go through the stage of “articles”, which in my view seni or though has vast experi ence and i mmense
makes our profession very unique. During these years, knowledge, he/sheisexpected to passon his/ her mantle
the incumbents are trained by qualified persons. The to the junior partners so as to keep their zeal alive to
knowledge, as well as the experience of putting the perform at their pinnacle along with a suitable increase
knowledge to practical use, is taught to the Articled in theshareof asurplus of thejuniors. Makeno mistake
students. Depending upon the hunger in the articled in understanding this concept. This is not an act of
student, to gain knowledge, he or she is taught all the kindness, rather it is an act of being a righteous person
nuances of the professi on. Thus, the gai ni ng of who iswilling to share, rather payback, what he/shehas
knowledge, free of cost, starts from this stage in the gained from other seniors in his / her junior days. He/
professional life of a CA. The receiver is the articled she becomes a giver! What he/she is doing is giving
student and the giver is the Principal. back what was similarly received years back by him/
her.
We also know that the speakers at the study circles,
seminars, and conferences share their knowledge with Posing here for a moment, let me put a question to the
the participants at such events without any reward in readers. Is it not the case when you were working as a
monetary terms. They spare their valuable time only proprietor in your starting career, you had looked upon
out of their zeal to sharetheir experiencewith othersfor and had been supported, albeit without expectation of
the betterment of their professional colleagues. The any monetary reward by a senior/mentor?
knowledgeisgained again freeof cost except thenominal
registration fee to take care of the admin cost of the Therefore, believe me, this approach of sharing and
organizing professional body. The participants are the caring will work in a win-win situation for both the
receivers and the faculty is the giver. junior and the senior and ultimately have a smooth
rel ati onshi p between them and wi l l propel the
It will not be out of place if I may talk about the rel ationshi p of partners from that of a firm to an
partnership modulein our profession. Thereis areceiver “Institution”.
and a giver here also.

I am a strong believer in the concept of working in a Therefore, become a giver and be a successful human
module of partnership qua chartered accountants in being.
practice. My belief is strengthened as the years pass by
because the government is increasing the compliance Om Shanti !!
burden on the taxpayers which eventually passes on to
the shoulders of practicing chartered accountants. hhh

Ahmedabad Chartered Accountants Journal Januar y, 2022 491

Editor ial

CA. Rutvij Shah
[email protected]

CBDT has now announced another extension for filing of Tax Audit Reports and for filing of IncomeTax Returns.
This is third extension this year. This year, the main culprit is newly launched income tax websitewhere facility to
filetax audit reportswith thehelp of third-party softwarestarted in themonth of December only. With 31st December
being deadline for filing non tax audit returns, extension was inevitable.

Filing of online ITR started from Asst. Year 2007-08. Filing of online tax audit reports started from Asst. Year
2012-13. It has been 9 years sinceonline filing of tax audit reports have started. And in all theseyears, duedate of
filing tax audit report has been extended ranging from seven days to three and half months.

It is now high time that we introspect and try to find out reasons why extensions are required every year. Here are
my thoughts on why extensions havebecome a norm and not an exception.

- With digitization, government is receiving ready data in the form of xml / json file which is easier for them to
process. However, too much information is asked in ITRs and TARs. Every year additional information is
being added in ITRsand TARs. It lookslikegovernment want information for each and every clausecontained
in Income Tax Act. It is certainly good for them to get everything ready on aplatter but someonehasto do this
laborious job. Gathering and filling up all these information requires a lot of time and energy resulting into
delays. Government should simplify formsand not collect information which is not of much use. e.g.in clause
31 of Form 3CD, information of all loans / deposits exceeding Rs. 20,000/- is required to be given. Even
amount of loan, mode of taking loan for each receipt and maximum amount of loan is also required to be
reported. I am wondering how this information is helping the government. Instead of this lengthy reporting, if
details of only those loans accepted or repaid in contravention of Section 269SS and 269T is asked then it can
be moremeaningful and will save alot of time.Sameis thecase with reporting in Clause34 of Form 3CD with
regards to TDS.

- Overall number of compliances under various laws have become very high. Micro and Small Enterprises
mostly rely on part timeaccountants to preparetheir dataas they cannot afford to have full time staff for these
compliances. Thesepart timeaccountants cannot complete thework in timeas they have to cater to number of
clients in a very short period of time resulting into delays.

- Higher digitization has brought overflow of information. This requires number of reconciliations. Turnover as
per GST with turnover as per books. Income as per 26AS with income shown in books. TCS with Purchases.
Income as per AIS with Income as per Books. These arejust some examples. All these reconciliations require
expert knowledge and lots of time resulting into delays.

- There are number of monthly deadlines for compliances under various laws. These regular compliances keep
staff busy leaving not much time for yearend closure related work resulting into delays in finalization of
accounts.

Government should trust assessees, reduce compliances and simplify various forms only then we will be able to
complete the work in time without any need of extensions.

In this issue, we have taken photographs of Budget Meeting which is held every year for benefit of our members.
Senior Advocate Shri Saurabh Soparkar is the guest speaker in this special meeting and this event is held jointly
with other professional bodies. On this day wealso reveal theBudget Booklet in English and Gujarati published by
our Association for benefit of members and public at large.

hhh

492 Ahmedabad Chartered Accountants Journal Januar y, 2022

From the
President

CA. M onish Shah
[email protected]

Dear Members,

We have welcomed New Year with a great enthusiasm, frolic and fun. The year began with a bang, the
most awaited event of the CA Association that is RRC was held. This year the event was organised at
Rishikesh and Mussorie. Interestingly this was the Golden Jubilee of RRC and it was a great event by
all means. The members and their family enjoyed Ganga Aarti, BBQ Dinner and DJ Night at the RRC.
Compliments to the RRC Committee for organising the event in such a grand manner. In fact, even a
souvenir of all the 50 RRC was published for the benefits of all the members present. The same will
also be put on the website of the CAAA soon. It is a journey that we all cherish it is the hard work of all
the past RRC chairmen and their team. It is a glory of all the Paper Writers. The event is a signature
event as it showcases the warmth and brother hood of members and their families.

It also gives me immense pleasure to announce that this year 100 New Members have joined us and we
have been able to achieve this significant number due to support of you all. This month is also the
festive month as 14th January 2022, was celebrated with great pompous across India. It really shows
that India though being diversified is united and celebrates together. 26th Jan 2022 is also a day which
we Indians proudly look forward to. The parade held on the Republic Day is an event not to be missed.
I remember how as a Kid we would be glued to the Television set to watch the parade. I still have a
dream to watch this event live one day. It still brings goose-bumps when I see the army parade that day.

Last month was election Month of ICAI and it brings me delight to announce that all the contestants
from Ahmedabad contesting were members of our Association and all were victorious. I congratulate
CCM: Aniket Talati, Purshottam Khandelwal. RCM:Hitesh Pomal, Vikas Jain & Chintan Patel. Further,
two of the Three RCM are also chairman of various committees of our Association.

Past President Shri Biharibhai B Shah quoted “There is no shortcut to Success” for the event of Platinum
Jubilee and as today we look at the success story of 71st years of our Association’s journey the line is
aptly put. It’s the hard work of so many Presidents, his team, chairmen and members that has made this
possible. Today I salute to all of them for creating this story of Success. This quote also will be an
inspiration for all incoming presidents and I am sure they will keep no shortcuts but will surely achieve
success

The third wave in the name of Omicron has hit us. The spread is fast. We all need to fight this pandemic
and come out victorious. This reminds me of the poem that was recited by members of the Association
and is available on YouTube too. This shall also Pass Away. We need to put our masks, wash our hands
and get ourselves vaccinated. The government is doing whatever, is possible to make people vaccinated.
We need to support the cause. Those who have qualified for taking Booster Dose, I am requesting all of
them to register and take the Dose asap.

To end Lets Stay Healthy# Lets Be vaccinated# Lets Be Healthy

Thanking you,

CA. Monish S. Shah
Presi dent

hhh

Ahmedabad Chartered Accountants Journal Januar y, 2022 493

Short Analysis of Faceless Adv. Tej Shah
Assessment u/s 144B of the [email protected]
Income Tax Act, 1961

In order to eliminate the interaction between the (i) Asper S. 144B(1)(i) and (ii), whereanoticeu/
AssessingOfficer (“AO” for short) andtheassessee, s143(2) isissued by theNFAC, theassesseeis
thelegislaturefor the1st timecameupwith ascheme given 15 daysto filehisresponse.
of facelessassessment by way of theFinanceAct
of 2018. However, sinceproper procedurewasnot (ii) As per S. 144B(1)(vii), where information,
laid in theIncomeTax Act (“theact” for short), a documentsor evidencehasbeen called by the
new section i.e. S. 144B prescribing the said NFAC from theassesseeasper clause(vi), he
procedure was enacted. This article succinctly hasto respond within thetimespeci fied therein
discussestheprescribedprocedureat variousstages or such timeasmay beextended by theNFAC.
of assessment, the short comings faced by the
assesseeandthemanner inwhichcourtshavecome (iii) Asper S. 144B(1)(xi), wheretheassesseefails
to aid. to comply with thenoticereferred to in clause
(vi) or notice issued u/s 142(1) or with a
Application of thissection: Asper S. 144B(1)(i), directionu/s142(2A), theassesseeisgiventime
casesfor fresh assessmentsbeginning on and after asprescribed therein [which may beextended
01-04-2021andasper clause(iii) shall begoverned by theNFAC asper clause(xii)] to respond to
by thissection, which are: theshow causefor completing assessment u/s
144.
(a) hasfurnished hisreturn u/s139 or in response
to anoticeu/s142(1) or u/s148(1) andanotice (iv) As per S. 144B(xvi)(b), the NFAC upon
u/s 143(2) has been issued by the AO or the receiving thedraft assessment order (“DAO”
prescribed authority; or for short) from the assessment unit, provide
anopportunity to theassesseefor any variation
(b) has not furnished his return in response to a proposed against him and the assessee shall
noticeu/s142(1) issued by theAO; or submit hisresponse as per thedate and time
specified therein asper clause(xxii). Thisisa
(c) has not furnished his return u/s 148(1) and a very i mportant j uncti on as i t requi res
noticeu/s142(1) hasbeen issued by theAO, ful fillment of obl igati on by the both the
assesseeand theNFAC. Firstly, if theNFAC
Theabove3 clausesarecasesbefore01-04-2021 isproposing any addition/disallowance, then
whereassessment wasrequired to bemadeunder it isincumbent upon it to givereasonsfor the
theerstwhileprovisionsof S. 143whereasnow they same. It cannot be at the whims and fancies
aretobemadeby theNational FacelessAssessment of theNFAC. Secondly, such reasonshaveto
Centre (“NFAC” for short) asper S. 144B. be on the basis of the material provided by
the assessee which was asked by the NFAC
I ssuance of Notice at var ious stages and its as per clause (vi). And thirdly, such reasons
complianceby theassessee: To comply with the shoul d be sati sfi ed obj ecti vel y and not
principlesof natural justice, theassesseeisgiven subj ectivel y by the NFAC. Thereafter, it
opportunitiesat variousstagestorespondtonotices
issued by theNFAC. Theseareasfollows:

494 Ahmedabad Chartered Accountants Journal Januar y, 2022

Shor t Analysis of Faceless Assessment u/s 144B of the I ncome Tax Act, 1961

becomes incumbent upon the assessee to Noticefor Personal Hearingwhen tobegr anted:
sati sf y the NFAC by provi di ng al l the
explanation and evidencesin hisdefensethat (i) As per S. 144B(7)(vii), in case a variation is
such addition/disallowanceisnot sustainable. proposed in the DAO/Final DAO or Revised
It is to be noted that since the evidences or DAO, the assessee may request for personal
submissionsprovided by theassesseeareon hearing for making oral submissions.
the online portal, it is deemed to have been
received at the end of the NFAC. The NFAC (ii) As per clause (viii), the CC or DG in charge
cannot later refute that no evidences were MAY approveof such personal hearing asper
provided by the assessee. This is the part thecircumstancesreferred to in clause(xii)(h)
wheretheassesseewasearlier (asper theold and i t may take pl ace through vi deo
procedure) not made aware of any such conferencing or videotelephony asmentioned
additions/disallowancesproposed to bemade in clause(ix).
and the only recourse was to fightit out in
appeal, subject to payment of disputed taxes. It hasto bekept in mind that even though no such
Now, theassesseeismadeawareof hisrights circumstances for granting personal hearing are
of any adverse findings against him and mentioned, variouscourtshaveinterpreted that the
whatever could have been filed before the word MAY has to be treated as SHALL as and
appellatecommissioner, can beexplained to when theassesseedemands.
theNFAC itself. Thisisawelcomemoveand
will help in reducing unnecessary litigation Analysingtheaboveprovisions, it isclear that even
cost, especially to theassessee. thoughtheright of opportunity totheassesseearises
at variousstages, it doesnot provideany timelimit
(v) Asper S. 144B(xviii)(b), theNFACshall, upon to the assessee within which reply is to be filed.
receiving concurrence of the review unit, Suchlimit isonly providedinitially u/s144B(1)(ii)
providean opportunity to theassesseefor any for filing reply to noticeissued u/s143(2). Taking
variationproposedagainst himandtheassessee advantage of this anomaly, the NFAC has been
shall submit his response as per the date and adopting avery lackadaisical attitudeby granting
timespecified therein asper clause(xxii). almost little or no time to the assessee to enable
him to file reply. In such cases, the assessee has
(vi) As per S. 144B(xxi), the NFAC shall, upon been constrained to knock the doors of the High
receiving Final DAO from theassessment unit courtsand seek appropriaterelief. Below arefew
as mentioned in clause (xix), provide an such examplesasto theinterpretation of theterms
opportunity to the assessee for any variation “r easonable oppor tunity” and “pr inciples of
proposed against him and the assessee shall natur al j ustice” to be followed by the NFAC
submit his response as per the date and time beforepassing any order:
specified therein asper clause(xxii).
(i) Final Or der passed without issuing SCN/
(vii)As per S. 144B(xxv), the NFAC shall, upon DAO - Guj ar at HC in Gandhi Reality (133
recei vi ng the Revi sed DAO f rom the taxmann.com 83);Bombay HC in Golden
assessment unit, incasethevariationsproposed Tobacco L td. (132 taxmann.com 296);
areprejudicial totheassesseeincomparison to Tr endsut r a Fi nanci al Ser vi ces (132
theDAO or theFDAO, provideanopportunity taxmann.com 104)and Delhi HC in Fakir
to the assessee and the assessee shall submit Chand (130 taxmann.com 323) – Wherethe
hisresponseasper thedateand timespecified NFAC passed Final Order without issuing a
asper clause(xxii). SCN i n the f orm of a DAO whi ch was
mandatory asper S. 144B(1)(vi), theimpugned
order was quashed. The Hon’bleGujarat HC

Ahmedabad Chartered Accountants Journal Januar y, 2022 495

Shor t Analysis of Faceless Assessment u/s 144B of the I ncome Tax Act, 1961

even went astep ahead andobserved that even Therefore, courts throughout the country have
though theother requirementslikeissuanceof unanimously heldthat wheredueprocedureaslaid
noticeu/s143(2), furnishing documentsto the down in thissection hasnot been followed or even
assessee and allowing hearings from time to if followed, but reasonabletimeisnot given to the
time have been followed but if DAO is not assessee to file his reply, then in all such cases,
issued/served on the assessee, then any final assessment is to be quashed set aside. On theflip
order pursuant to that isliableto bequashed. side, even though the assessment is quashed and
In Fakir Chand, theassesseecould not filehis set aside, a second innings is granted to the
reply owing to an error on the portal of the AssessingOfficer tocarry out freshassessment after
NFAC and final order was passed without followingthedueprocedureandopportunity to the
consideringhisreply.Thecourt heldthisaction assessee. Let me put a pin here and refer to sub-
tobeinviolationof principlesof natural justice section (9) to S. 144B. It saysthat assessment made
and quashed theassessment. under this section SHAL L be “non-est” if such
assessment is not made in accordance with the
(ii) Final Or der passed without oppor tunity of procedurelaid down under thissection. Theplain
or al hear ing to theassessee - interpretation of the words “non est” means that
such assessment order never existed or isdeemed
Del hi H C i n Dar H ousi ng L t d. (132 never to have been passed. Therefore, if the
taxmann.com 29); Umkal Healthcar e(131 legislatureinitsown wisdom hasmadeit clear that
taxmann.com 325)AND; Bombay HC in if assessment not made in accordance with the
Piramal Enterprises(129taxmann.com 18)– procedurelaid down under thissection isnon est,
Assessment order passedwithout providingdue thenaquestionarisesastowhether canthejudiciary
opportunity of hearing to theassesseeasper S. overridetheclear intent of thelegislatureand still
144B(7) wasliableto bequashed. giveasecond chanceto theAssessing Officer for
fresh assessment?Thisisexactly why theHon’ble
(iii) No r easonable oppor tunity to the assessee Bombay Hi gh cour t i n the case of Par ag
to filer eply - K ishorchandr a Shah (W.P. No. 11052 of 2021)
quashedtheassessment doneby theAOandtreated
a) Bombay HC in Uday Desai HUF (132 it asnon est within themeaning of sub-section (9).
taxmann.com 117) – Wheretheassessee It also imposed a cost on the officer as a penal
wasgiven merely aday’stimeto filereply consequence for passing such reckless order.
toSCN and final order waspassedthenext However, it isonly theHon’bleBombay Highcourt
day, thesaid order wasin violation of the in theaforesaid case(and no other courts) held the
principles of natural justice and was set assessment as non est. Therefore, bei ng an
aside. advocate, I would certainly recommend raising an
addi ti onal argument of not all owing a fresh
b) Bombay HC in Sureshkumar L akhotia assessment (whilst quashingthecurrent assessment)
(133 taxmann.com 59) – Where the by rel ying upon the decision of the Hon’ble
assessee was given only 30 hours to file Bombay High Court in Parag Shah (supra).
reply to SCN even in times of Covid
lockdown and when the assessee sought hhh
for more time by way of an adjournment
and also asked for personal hearing, the
officer passedtheassessment order holding
that no documents/evidences have been
filed. Such order wasliableto bequashed.

496 Ahmedabad Chartered Accountants Journal Januar y, 2022

Cryptocurrency- New Era of CA. Samir kumar S. Chaudhar y
Technologies [email protected]

I ntroduction History of Cr yptocur r ency

We are l ivi ng i n a worl d whi ch bel ieves i n o Thehistory of cryptocurrenciescan betraced
Technology. Inotherswords, wecansay that digital back tothe1980s, whenthey werecalled cyber
world is a part of Human Life. Technology have currencies.
taken amajor part in our Life, if onewill look into
its usual life pattern, one can feel that we use o These coins started gaining in popularity in
Technology in our Everyday Li fe. Likewi se, 2008 with theintroduction of Bitcoin, which
Technology has also taken place into Currency wascreated by an anonymousprogrammer or
world, if wearetalking about History, wherethere group of programmersunder thenameSatoshi
wereAsharfis(Goldor Metal Coins), Fiat Currency, Nakamoto.
Plastic Currency, Bank Transfers, UPI’s and now
weareinto theworld of Cryptocurrency. Today in o But i t was onl y i n the early 1990s that
this article we will discuss at various aspect of cryptographic protocolsand softwarebegan to
Crypto currency. be developed that would make possible the
creationof atruly decentralizeddigital currency.

What isCryptocurrency? o InOctober 2008, apaper by Satoshi Nakamoto
(apseudonym) titled Bitcoin: A Peer-to-Peer
o As per the definition of “Investopedia.com”, Electronic Cash System outlined asystem for
Cryptocurrency isdefined asfollows: creating adigital currency that did not require
trust in any third party. Nakamoto’s paper
“A cryptocurrency i s a digital or virtual effecti vely l aunched the cryptocurrency
currencythatissecuredby cryptography” revolution

o Many cryptocurrencies are decentralized Over view of Blockchain
networksbased on blockchain technology—
adistributedledgerenforcedby adisparate o A blockchain isadistributed database that is
network of computers. shared among the nodes of a computer
network.
o In fact, cryptocurrencies, even popular ones
l i keBi tcoi n, arehardl y usedf or retai l
transactions. However, theskyrocketing value
of cryptocurrencieshasmadethem popular as
trading instruments.

Ahmedabad Chartered Accountants Journal Januar y, 2022 497

Cr yptocur r ency- New Er a of Technologies o All new information that followsthat freshly
added block iscompiled into anewly formed
o Asadatabase, ablockchainstoresinformation block that will then also beadded to thechain
electronically indigital format.Blockchainsare oncefilled.
best known f or thei r cruci al rol e i n
cryptocurrency systems, for maintaining a o A databaseusually structuresitsdataintotables,
secureanddecentralizedrecordof transactions. whereasablockchain, structuresitsdatainto
blocksthat arestrung together.
o Blocks have certain storage capacities and,
when filled, are closed and linked to the o Thi s data structure inherentl y makes an
previously filledblock, formingachainof data i rreversi bl e ti me l i ne of data when
known astheblockchain. implemented in adecentralized nature. When
ablock isfilled, it isset in stoneand becomes
apart of thistimeline. Each block in thechain
isgiven an exact timestamp when it isadded
to thechain.

Number sof Cr yptocur r ency
o EstimateNumber of cryptocurrenciesworldwidefrom 2013 to January 2022:

o Therearenearly over 6,000 cryptocurrenciesasof 2021- asevereincreasefromjust ahandful of digital
coinsin 2013.

o However, that alargeportion of thesecryptocurrenciesmight not bethat significant. Dueto how open
thecreation processof acryptocurrency, it isrelatively easy to makeone.

o Indeed, it isbelieved that thetop 20 cryptocurrenciesmakeup nearly 90 percent of thetotal market

498 Ahmedabad Chartered Accountants Journal Januar y, 2022

M ain Typesof Cr yptocur rencies Cr yptocur r ency- New Er a of Technologies

o Bitcoin isconsidered thefirst cryptocurrency First parody coin or the meme coin that
created, and everything else is collectively wascreated wastheDogecoin which was
known asan “altcoin” (acombo word derived inspired by a popular Doge meme based
from “alternativecoin”). on the Japanese Shiba Inu dog in 2013.
Shi ba Inu came i n as a ri val of the
o Whileit’sdifficult tosay which cryptosarethe Dogecoin in 2020. Meme Coins such as
best ones, Bitcoin and some of the largest Shiba Inu and Dogecoin are some of the
altcoinsout therearetop-tier optionsbecause prominent memecoinsthat ruledtheroost
of their scalability, privacy, and the scope of in 2021.
functionality they support.
Stat us of Cr ypt ocur r ency accept ance i n
Coin Total M ar ket Differ ent Countries
Value* o Several nations have outright banned digital
Bitcoin (BTC)
Ethereum (ETH) (I n Bilion $ ) currency, whileothershavetried to cut off any
826 banking andfinancial system support essential
for itstrading and use.
390 o The Library of Congress (LOC) identified
many countriesthat allow cryptocurrenciesto
BinanceCoin (BNB) 79.5 beused. Hereareafew of them.
Car dano (ADA) 66.3
Dogecoin (DOGE) 63.4 - El Salvador :
Tether (USDT) 58.2 El Salvador istheonly country intheworld
XRP (XRP) 51.8 that hasdeclaredbitcointobelegal tender.
In June 2021, the country’s Congress
Polkadot (DOT) 30.5 approved Presi dent Nayi bBukel e to
I nter net Computer (ICP) 25.6 formal l y adopt bi tcoi n as a form of
Bitcoin Cash (BCH) 20.1 payment.

Alt Coins - Other CountriesWhereBitcoin IsLegal:
Several other countriesallow Bitcointobe
o Altcoins are cryptocurrencies other than used in transactions and have developed
Bitcoin. formsof regulation. Someexamplesare:

o Al tcoi n i s a combi nati on of the words
“alternate” and “coin”. Thesecoinsdifferentiate
themselves from Bitcoin by extending their
capabilitiesand pluggingtheir shortcomings.

TYPES OF ALTCOI NS

o Thereareseveral categoriesof altcoinson the
basis of their functionalities and consensus
mechani sms— mining-based, pre-mined,
meme coins, utility tokens, security tokens and
stablecoins.

- Meme coins: Memecoins, also known as
parody coins, are cryptocurrenci es
inspired by jokes or memes on social
media.

Ahmedabad Chartered Accountants Journal Januar y, 2022 499

Cr yptocur r ency- New Er a of Technologies

· TheUnited States · TheEuropean Union hasalready been started and it will bereally
hard to suppressthesame, sinceit isaccepted
· Canada · Australia by many Developed Countriesof theWorld
and it is acceptable to many and also it is
· Denmark · France getting popular with the passage of time. It
isobviousthat investing into it isRisky since
· Germany · Iceland it ishighly volatile. But asit issaid, NEVER
KEEP ALL THE EGGS IN THE SAM E
· Japan · Mexico BASKET.” And one can invest 5-10% of its
investment in such currency and not the
· Spain · United Kingdom whole hard earn money. So, one can use it
as a High Risk investment, and looking its
CountriesWith I mplicit Bans: hi story, pati ence i s requi red i n such
investment.
o TheLibrary of Congressidentified42countries
with implicit banson certain cryptocurrency Taxation aspect of the gain/loss while tr ading
uses in its November 2021 update. Some of cr yptocur r ency in I ndia:
thecountriesit listsare:
o Sincethecryptocurrency isnot yet legalized
· Bahrain · Burundi by theReserveBank of India(RBI), it cannot
escape from taxability. An investor earning
· Cameroon · Central African Republic profitsfrom thesaleof cryptocurrency must
pay incometax.
· Gabon · Georgia
o All incomes, except exempted explicitly by
· Guyana · Kuwait the Income Tax Act, are subject to tax. Till
wereceiveany clarification from theincome
· Lesotho · Libya tax department, investors must pay income
tax on the crypto-transactions based on the
· Macao · Maldives natureof thetransaction.

· Vietnam · Zimbabwe

Countr iesWith AbsoluteBans:

o The Li brary of Congress i dentified ni ne
countrieswith absolutebanson cryptocurrency
in November 2021.

· Algeria · Bangladesh

· China · Egypt

· Iraq · Morocco

· Nepal · Qatar

· Tunisia

W het her t o I nvest or Deal i n
Cryptocurr ency

Even few people consider the same as an
Investment or some other consi dered as
Specul ati on Transaction. But as per my
humbleopinion, and considering thehistory
of Cryptocurrency and its growth and its
uniquecharacteristics, it isalready aNew Era

500 Ahmedabad Chartered Accountants Journal Januar y, 2022

o As per the standard income tax rules, the Cr yptocur r ency- New Er a of Technologies
gai ns on the crypto-transacti ons woul d
become taxable as(i)Businessincomeor - Pan Card
(ii) Capital gains.Thisclassificationwill
depend on theinvestors’intention and nature - Adhaar Card
of thesetransactions.
- Holding Statement (if any)
o If therearefrequent tradesand high volumes,
gains from the cryptocurrency transactions - Transaction Statement
will be taxed as‘businessincome’.
- Profit and LossStatement
o However, they will betaxed as‘capital gains’
if thepurposeof owning them isprimarily to - Reconciliation of Transaction wherewehave
benefi t from longer-term appreciation in transferred to different Exchanges (For eg.
value with fewer trades. Mr. X holding 100 BTC transferring 10 to
Zebpay, 50 to Wazirx, 30 to Binance and 10
I n case of Notice r eceived fr om Depar tment in CoinDCX (baseexchange) wherehehave
with respect to Cr yptocur rency Tr ansaction: purchased, and simultaneously salethesame
from different exchanges.)
It has been noticed in recent times that many
assesseshavereceived noticesfrom IncomeTax - It isto benoted that such transfer of coinsin
Department wi th respect to Transacti on i n sameaccount with Different exchangeswill
Cryptocurrency i n vari ous Exchanges, and not beconsidered asSaleor Transfer but final
asking for details. The points to be considered sale and realization of Fund will only be
with respect to same: considered asSale of Assets.

- It isexpected that Department may not have - Hereit is assumed that since India have not
all thedetailsor they havereceived thedetails considered Cryptocurrency asLegal Tender,
which is not complete in all sense and they we are considering the same under Asset
have received it as per basic data provided cl ass.
by such exchanges.
Conclusion:
- A s di scussed earl i er, Cryptocurrency
transaction is subject to Taxation, and what Everyone i s in Di lemma about the future of
rate of Tax to be consider and under which Cryptocurrency, and under which status it is to
head to be considered isa Debatable issue be consi dered. A nd as per vari ous aspect
discussed in this articl e, its advisable not to
- But since we have to provide all the details follow theadvertisement which saysitssafe, and
as they have asked for fol lowi ng li st of onehasto wisely invest their hard earned money.
documentswill help us: And hopeGovernment will issuesomeguidance
or advisory on the same very soon.

hhh

Ahmedabad Chartered Accountants Journal Januar y, 2022 501

Glimpses of AdvocateSamir N. Divatia
Supreme Court [email protected]
Rulings
Assuch, for applying theprincipleof waiver, it will
261. Waiver and acquiescence have to be established, that though a party was
awareabout therelevant factsand theright to take
Waiver istheabandonment of aright in such away an objection, he has neglected to take such an
that the other party is enti tl ed to pl ead the objection.
abandonment by way of confession and avoidance
if theright isthereafter asserted, andiseither express The principle of waiver although is akin to the
or implied from conduct.A person who isentitled principle of estoppel; estoppel is not a cause of
torely onastipulation, existingfor hisbenefit alone, action and isaruleof evidence, whereaswaiver is
in acontract or of astatutory provision, may waive contractual and may constituteacauseof action. It
it, and allow thecontract or transaction to proceed isanagreement betweenthepartiesandaparty fully
asthough thestipulationor provisiondid not exist. knowing of itsrightshasagreednot to assert aright
Waiver of thiskind dependsupon con sent, and the for aconsideration. Whenever waiver ispleaded, it
fact that theother Party hasacted on it issufficient isfor the party pleading thesameto show that an
consideration. agreement waiving the right in consideration of
somecompromisecameinto being.
For considering, asto whether aParty haswaived
itsrightsor not, it will berelevant to consider the For constituting acquiescenceor waiver it must be
conduct of aparty. For establishing waiver, it will established, that though aparty knowsthematerial
haveto beestablished, at aparty expressly or by its factsand isconsciousof hislegal rightsin agiven
conduct acted in a manner, which is inconsistent matter, but fails to assert its rights at the earliest
withthecontinuanceof itsrights. However,themere possibleopportunity, it createsan effectivebar of
acts of indulgence will not amount to waiver. A waiver against him. Whereas, acquiescencewould
party claimingwaiver would also not beentitled to be a conduct where a party is sitting by, when
claim thebenefit of waiver, unlessit hasaltered its another is invading his rights. The acquiescence
position in relianceon thesame. must besuch asto lead to theinferenceof alicense
sufficient to create a new right in the defendant.
A waiver cannot always and in every case be Waiver isan intentional relinquishment of aright.
inferred merely fromthefailureof theparty to take It involve conscious abandonment of an existing
theobjection. Waiver can beinferred, only if and legal right, advantage, benefit, claim or privilege.
after it is shown that the party knew about the It isan agreement not to assert aright. Therecan be
relevant factsand wasawareof hisright to takethe no waiver unless the person who is said to have
objectionin question. Thewaiver or acquiescence, waived, isfully informed asto hisrightsand with
like election, presupposes, that the person to be full knowledge about the same, he intentionally
boundisfully cognizant of hisrightsandthat being abandonsthem.
so he neglects to enforce them, or chooses one
benefit instead of another.

502 Ahmedabad Chartered Accountants Journal Januar y, 2022

27 Consumer Pr otection Act-failur e to Glimpses of Supr eme Cour t Rulings
obt ai n an occupancy cer t i f i cat e-
Damages In thepresent case, therespondent wasresponsible
for transferring the title to the flats to the society
Section 2(1)(d) of the Consumer Protection Act along with theoccupancy certificate. The failure
definesa‘consumer’asaperson that availsof any of the respondent to obtai n the occupati on
service for a consideration. A ‘deficiency’ is certificateisadeficiency in servicefor which the
defined under Section 2(1)(g) astheshortcoming respondent is liable. Thus, the members of the
or inadequacy in the quality of service that is appellant society are well within their rights as
required to bemaintained by law. In itsdecisions ‘consumers’ to pray for compensati on as a
inWing Commander Arifur Rahman Khan & recompense for the consequent liability (such as
Others v. DLF Southern Homes Private Limited payment of higher taxesand water chargesby the
& Others 9 and Pioneer Urban Land Infrastructure owners) arising from the lack of an occupancy
Limited v. Govindan Raghavan 10, thisCourt has certificate.
hel d that the failure to obtain an occupancy
certificate or abide by contractual obligations Undoubtedly, thecontinuing wrong in thepresent
amounts to a deficiency in service. In Treaty caseisthefailuretoobtaintheoccupancy certificate.
Construction v. Ruby Tower CooperativeHousing Against this act of the respondent, the appellant
Society Ltd. 11, the Court also considered the society has taken appropriate action by filing a
questi on of awardi ng compensati on for not complaint beforetheconsumer forum.
obtaining the certificate. In that case, the Court
declined to award damagesastherewasno cogent Samr uddhi Co Oper ativeHousing vsM umbai
basi s f or hol di ng the appel l ant l i abl e f or Mahalaxmi Constr uction (Civil Appeal No 4000
compensation, and assessing the quantum of of 2019 dt. 11 Januar y, 2022)
compensationor assessing thelossto themembers
of therespondent society. hhh

Ahmedabad Chartered Accountants Journal Januar y, 2022 503

From the
Courts

CA. C. R. Shar edalal CA. Jayesh C. Shar edalal

[email protected] [email protected]

Setoff of car r ied for war d business loss profession” can be carried forward and the same
can be set off against profits of any business or
81 against Capital Gains profession.It washeldthat it wasnot therequirement
Pr. CI T v/s. Alcon Developer s of section 72 of thesaidAct that such gain or profit
(2021) 432 I TR 277 (Bom) must betaxableunder thehead” Profitsand gains
of business or profession”. Thus carried forward
I ssue: business losses could be set off against the short
term capital gainson thesaleof thebuilding.
Can income under the head Capital Gains be set
off against bought forward businessloss? Thecarry forward businesslosseswould therefore
beset off against theshort-termcapital gainson the
Held: saleof building, plant and machinery.

Thebrought forward lossof Rs. 4,45,36,935/- was Compliance of r etr ospective act and
allowed to be set off against the incomefrom the
capital gains of the assessee during the relevant 82 disallowance
assessment year, though, thesame was not liable CIT v/s. NGC Networks(India) Pvt. L td.
under section72of thesaidAct videappellateorder (2021) 432 I TR 326 (Bom)
of ITAT.
I ssue:
In Hickson and Dadajee (P) Ltd. (supra) the first
substantial questionof law waswhether onthefacts Isan assesseeliableto comply with theprovision
inthecircumstancesof thecaseandlaw, theIncome of theAct which isintroduced subsequently with
Tax. AppellateTribunal wasjustified in allowing retrospectiveeffect?
set off of brought forward business loss against
deemed short term capital gains arising from the Held:
sale of building and plant and machinery. The
IncometaxAppellateTribunal, inthesaidcase, had Theview taken by theTribunal that aparty could
allowed the appeal of therespondent assesseeon not be called upon to perform an impossible act,
the issue of set off of the brought forward losses i.e. comply with a provision not in force at the
against deemed short termcapital gainsarising on relevant timebut introduced later by retrospective
thesaleof building, plant and machinery following amendment, was in accord with the legal maxim
the decision of its co-ordinate Bench in Digital lex non cogit ad impossibilia(law doesnot compel
ElectronicsLtd. (supra). In Digital ElectronicsLtd. aman to do what hecannot possibly perform).
(Supra) theIncometax AppellateTribunal hadheld
that under section 72 of thesaidAct, thelossunder Theamendment by introduction of Explanation 6
the head “ Profi ts and gains of busi ness or to section 9(1)(vi) of theAct took placein theyear

504 Ahmedabad Chartered Accountants Journal Januar y, 2022

Fr om the Cour ts

2012 with retrospectiveeffect from 1976. It could That even if theproject officewasset up after the
not havebeen contemplated by theassesseewhen effective date of contract, the assessee had the
it made the payment during the assessment year, services of its wholly owned subsidiary whose
that the payment would require deduction under personnel wereinvolvedinthebiddingprocessfrom
secti on 194J of the Act due to some future thevery beginningwithitskey personnel managing
amendment withretrospectiveeffect. theaffairsof theassessee. Theseemployeesnot only
had a secured right to use their office space but
83 Taxability without clear wor ds carried on thebusinessof theparent enterpriseand
V.S. Chandr ashekar v/s. Asst. CI T in this sense the assessee had a fixed place of
(2021) 432 I TR 330 (K ar n) business which was a permanent establishment,
from theeffectivedateof contract.
I ssue:
Sear ch Case: Value of thir d per son’s
Can tax belevied without clear words?
85 statement
Held: CI T v/s. Anand Kumar Jain (HUF)
(2021) 432 I TR 384 (Delhi)
It is a well settled rule of statutory interpretation
withregardtotaxingstatutesthat anassesseecannot I ssue:
betaxed without clear wordsfor that purposeand
every Act of Parliament has to be read as per its What isthevalueof astatement by athird party in
natural construction of words. asearch case?

From a perusal of section 2(47) and 50C of the Held:
Income tax A ct, 1961, i t i s axi omati c that
Explanation 1 to section 2(47) uses the term The statement of PKJ had evidentiary value and
“immovableproperty” whereas, section 50C uses relevanceascontemplated under theExplanation
the expression “Land” instead of immovable to section132(4) it couldnot on astand-alonebasis
property. Wherever the Legislature intended to without referenceto any other material discovered
expand themeaning of theland to includerightsor duri ng the search and sei zure empower the
interestsin land, it hassaid so specifically, viz. in Assessing Officer to make the block assessment.
section 35(1)(a), section 54G(1), section 54GA(1) According to themandateof section 153C if such
and section 269UA(d) and Explanation to section statement wasto beconstrued asan incriminating
155(5A). Thus, section 50C appliesonly in caseof material belongingtoor pertainingtoapersonother
atransfer of land. than theperson in respect of whom thesearch was
conducted, theonly legal recourseavailableto the
Non-resident: Permanent Establishment Department wasto proceed under section153C by
handing thecaseover to theAssessing Officer who
84 Technip Fr ance SAS In Re had j uri sdi ction over such person. But the
(Befor e the Author i ty for Advance assessment had been madeunder section 153A on
Rulings – NCR Br anch the basisof the statement recorded under section
(2021) 432 I TR 338 (AAR) 132(4) of a third person and the assessee had no
opportunity to cross examine the witness. That
I ssue: apart, themandatory procedureunder section153C
had not been followed. Therewasno perversity in
How themeaningof permanent establishment isto theview taken by theTribunal that theprovisions
beinterpreted?

Held: 505
Ahmedabad Chartered Accountants Journal Januar y, 2022

Fr om the Cour ts Sec. 147/148: M ereproduction of books

of section153A werewrongly applied. Noquestion 87 isnot sufficient to comeout.
of law arose. Hiteshkumar Babulal Ramani v/s.Asst.
CI T (Guj )
Registr ation of a Tr ust (2021) 432 I TR 403 (Guj )

86 CIT v/s. Vasavi Manikandan Hospital I ssue:
Tr ust
(2021) 432 I TR 393 (M ad) Whether M ere producti on of books before
Assessing Officer issufficient for non-application
I ssue: of Sec. 147/148?

How thematter of Registration of aTrust isto be Held:
handled by theDepartment?
Section 139 imposesan obligation on theassessee
Held: to furnish voluntarily areturn of his total income
and further makes it obligatory to disclose all
Theassesseewasatrust. TheTribunal directed the material factsnecessary for hisassessment for that
Commissioner to grant registration to theassessee year fully andtruly. Meresubmissionor production
under section 12A of the Income Tax Act, 1961 of books of account or other documents is not
whereupon the Commissioner called for certain sufficient. Explanation 1 to section 147 of theAct
information and documentsto befurnished by the explainsthat theproduction beforetheAssessing
assesseebut theassesseedid not appear thereafter Officer of theaccount booksor other evidencefrom
before theCommissioner and itsapplication was which material evidencecould with duediligence
dismissed for want to prosecution. However, the havebeen discovered by theAssessing Officer will
assesseefiled an appeal beforetheTribunal, which not necessarily amount to disclosure within the
treated thecompliancesassufficient and directed meaning of theprovision.
the Commissioner to accord registration to the
assesseeunder section 12A. 88 Sec. 147/148: Material on r ecor d:
Sandesh Procon L L P v/s. Asst. CI T
TheTribunal, in thecircumstances, ought to have (2021) 432 I TR 414 (Guj )
remandedthecasetotheCommissioner, sothat the
requisiteinformation and documentsfurnished by I ssue:
theassesseecould havebeen examined and verified
by him to consider theapplication for registration When material available at the time of original
under section 12A on merits. However, the trust assessment and at the time of issue of notice u/s
stood registered for thelast ten yearsin pursuance 147/148 aresame, whether reopening isvalid?
of the order of the Tribunal. It was open to the
Department to take steps for cancellation of the Held:
registration, if there was any material against the
assessee or it had violated the conditions of A bare perusal of the reasons and the original
registration or the provisions of the Act in any assessment order made under section 143(3)
manner. showed that theauthority had determined theissue
of disallowance after considering the material
availableand again without any tangiblematerial
availablewith theAssessing Officer based on the

506 Ahmedabad Chartered Accountants Journal Januar y, 2022

same materials, which ever relied at the time of Fr om the Cour ts
original assessment proceedings, hehad stated the
hehad reasonto believethat therewasescapement under section 271(1)(c) were not issued for any
of i ncome. The materi al avail abl e wi th the specific charge, i.e. for concealment of particulars
Assessing Officer while making the original of incomeor for furnishingof inaccurateparticulars.
assessment under section 143(3) of theAct and at No question of law arose.
the time of reopening of the assessment were the Note: Also see:
sameand therewasno new material on thebasisof Pr. CIT v/s. GoaDourado PromotionsPvt. Ltd.
which a notice of reassessment had been issued. (2021) 433 ITR 268 (Bom)
The Assessing Offi cer could not reopen the
assessment after four years where there was no Sec. 41(1)(a) and theconditions
failureon thepart of theassesseeto disclosefully Car bon and Chemicals(I ndia) L td. v/s.
and truly all thefactsnecessary for assessment. CI T

Noticeu/s271(1)(c) : I nvalid in absence 90 (2021) 433 ITR 14 (Ker )

89 of specific charge. I ssue:
Pr.CI T v/s. New Er a Sova M ine Whicharetheconditionstobefulfilledfor attracting
(2021) 433 I TR 249 (Bom) provisionsof Sec. 41(1)(a)?
Held:
I ssue: For the purpose of attracting section 41(1), it is
necessary that thefollowingconditions aresatisfied:
Whether notice u/s 271(1)(c) should mention (i) the assessee had made an allowance or any
specific chargefor itsvalidity. deduction in respect of any loss, expenditure, or
trading liability incurred by him (ii) any amount is
Held: obtained in respect of such lossor expenditureor
any benefit is obtained in respect of such trading
Where the Tribunal held that the penalty notices facility by way of remission or cessation thereof;
under section 271(1)(c) of the Income Tax Act, and (iii) such amount or benefit isobtained by the
1961, were not valid because they had not been assesseein asubsequent year.
issued for any specific charge, i.e. for concealment
of particulars of income or for furnishing of hhh
inaccurateparticulars, on appeals.

Held, dismissing theappeals, that theTribunal had
correctly held in itsorder that thepenalty notices

Ahmedabad Chartered Accountants Journal Januar y, 2022 507

Tribunal
News

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

Dr Swati M ahesh Vinchur kar v. DCI T, thesubmissionsmadeby theassesseeunder first
Proviso to section 143(1) (a)(vi).
43 Bangal or e 191 I T D 434/130
taxmann.com 320 (Surat) Held
Assessment Year : 2017-18 Order dated:
28 June2021 ITAT held that both theauthoritiesbelow acted in
amechanical way. Thereisno consideration of the
Basic Facts contentionsraised by theassesseethat shehasnot
worked or earned any incomefrom such deductor.
The assessee isresident of Surat and a Doctor by In view of theITAT, oncetheassesseedenied that
profession. In thereturn filed for theyear shehad shehasnot earned such incomeasreflected in her
cl ai med refund. The CPC, Bangal ore whi l e Form-26AS, the onus shi f t on the revenue
processing the return of income made addition. authorities to prove such income was of the
Though, in response to the notice under section assessee. Theadditionwasbasedsolely onthebasis
143(2) the assessee denied of having earned any of TDS shown in Form-26AS, i gnori ng the
kindof suchincome.TheCPCmadetheseadditions submissions of the assessee. The ITAT took note
on the basis of Form-26AS, which showed TDS of theassessee’sargument that thedeductor ismore
of Rs. 10,000/- by Electricity DistributionDivision than 1000 KM away from theplaceof practiceof
Gajraula-UPandother entry of Rs. 98,252/- by way assessee. Considering thepeculiar factsof thecase,
of salary incomeand TDSof Rs. 5000/- deducted the ITAT found merit in the submissions of the
(shown) by Electricity test division Amroha-UP assesseethat theassesseehad not entered into any
Aggrieved by theadditionson thebasisof Form- suchtransactionsandthelower authoritieshavenot
26AS. Theassesseefiled appeal beforeCIT(A) and made any verification or effort to verify such
while making detailed written submissions had transactionsandthereiscertainmistakeof entering
categorically statedthat theassesseehasnot earned thewrong PAN, which belongsto theassesseeand
any such incomeasreflected in Form-26AS. The theaddition madeintheincomeisuncalledfor.The
CIT(A) despite recording the submissions of the ITAT also referred to thedecision of thecoordinate
assesseeconfirmed theaddition madeby AO/CPC bench of Tribunal in Ravindra Pratap Thareja
Bangaloreby taking view that “it seemsthat CPC [2015] 60taxmann.com304/154ITD 633(Jabalpur
had considered the appellant explanation before - Trib.), wherein it washeld that merely becausea
making disallowance”. It wasalso held that there payment was reflected in Form-26AS and was
isprimafacieevidencethat theassesseehasearned shown to havebeen madeto theassessee, it could
such incomeand dismissed theappeal of assessee. not bebrought to tax asit could not beestablished
Aggrieved, the assessee has filed present appeal that the assessee was actual beneficiary of said
beforethisTribunal. paymentsand theadditionswasliableto bedeleted.
Considering thefactual and legal discussions, and
I ssue keeping in view of the peculiar facts of the case,
ITAT held no purpose would serve to restore the
Whether it wascor rect to maketheaddition on
the basis of entr ies in For m no.26AS ignor ing

508 Ahmedabad Chartered Accountants Journal Januar y, 2022

matter back to the file of AO or to ITO (TDS), as Tr ibunal News
prayed by ld Sr.DR for the revenue. In the result,
the grounds of appeal raised by the assessee was expenditure and consequent weighted deduction
allowed. claim under section35(2AB) of theAct.Asthecase
under considerationpertainstoFY 2013-14relevant
DCI T v. For ce M otor s L td. 133 toAY 2014-15theITAT upheldCIT (Appeal) order
and relief provided to theassesseewassustained.
44 Taxmann.com 71 (Pune) Thus, grounds rai sed by the Revenue was
Assessment Year : 2014-15 Order dated: dismissed.
3rd September 2021
Estate of Ramniklala Raj mal M ehta V
Basic Facts
45 DCIT [TS-1095-ITAT-2021 (Mum)]
The assessee is engaged in manufacturing light Assessment Year : 2011-12 to 2015-16,
commercial vehicles, utility vehicles, tractorsand Or der dated: 30th November 2021
threewheelers. IntheAssessment proceedings, the
AO held that asprescribedAuthority i.e., DSIR is Basic Facts
the final authority for approving the claim u/
s.35(2AB), thededuction cannot exceed theclaims Assesseehad filed an appeal in Paper form on 23/
approved by DSIR and accordingly, the excess 01/2019 against theorder of AO dated 28/12/2018.
deduction claimed by theassesseewasdisallowed Thereafter, the appellant had filed revised Form
and added back to thetotal incomeof theassessee. No.35 in Paper Form on 27/01/2020 on account of
Aggrieved theassesseepreferred an appeal before changeof communication address. TheRule45 of
theCIT(A). TheCIT(A)) deleted thedisallowance theI.T.Rulesmandatescompulsory filing of thee-
relying on the decision of the Pune Bench of the appealsbeforetheCIT(A) w.e.f from 01/03/2016.
Tribunal in thecaseof CumminsIndiaLtd. v. Dy. As the assessee has not filed the appeal in the
CIT [2018] 96 taxmann.com 576. Aggrieved the electronic form, the CIT(A) had dismissed the
Department isin appeal. appeal, treating theappeal asinvalid

I ssue I ssue

BeforeTenth Amendment Rule, 2010, whether, Whether the CI T (A) er r ed in tr eating the
theDSI R had power toquantify theexpenditure appeal filed in physical modeasinvalid and not
incurred on in-houseR & D facility and approve maintainable as the same was not filed and
the same in for m No. 3CL . ver ified in pr escr ibed for m and manner as
stipulated under thestatute
Held
Held
The amendment brought in by the IT (Tenth
Amendment) Rules w.e.f. 1-7-2016, wherein TheBoard framed therulesto achievetheendsof
separate part has been inserted for certifying the Justice and not to put impediments in the path of
amount of expenditure from year to year and the Justice. The assessee cannot be asked to manage
amended form No. 3CL thus, lays down the theportal of therevenueandforcibly filetheappeal
procedure to be fol l owed by the prescri bed electronically. The ITAT noted that the assessee
authority.Prior totheaforesaidamendment in2016, madesufficient andsincereeffortsto filetheappeal
nosuchprocedure/methodology wasprescribed. In in electronic forms, albeit theassesseefailed in his
theabsenceof thesame, theITAT held that thereis efforts. Thenon filing of theelectronic appeal was
no meri t i n the order of AO curtai l i ng the on account of theinaccessibility of theIncometax
portal to theestateof Shri Ramniklal R. Mehtaand
assessee was forced to file the appeal in physical

Ahmedabad Chartered Accountants Journal Januar y, 2022 509

Tr ibunal News TheAO referring to certain termscontained in the
agreementsbetweentheparties, held that incourse
form. The assessee had preferred the appeal in of providing services to the assessee, the non-
electronic form on 12/03/2021 against the same resident entities have made available technical
assessment order dated 28/12/2018. Therevenue knowledge, experience, skill, know-how or process
cannot take the benefi t of non-functioni ng/ which enabled the assessee in making design,
malfunctioning of itsportal and deny thestatutory construction and design making processutilized for
right of theassessee. Inany casetheassesseecannot the purpose of business. Accordingly held such
be nonsuited for abrastion in the portal of the payments as FTS under section 9(1)(vii) of the
revenue. Therefore, theorder passedby theCIT(A) Income-tax Act, but also under article12(4) of the
wasset asidewith directionsto decidetheappeals DTA A . A nd accordi ngl y di sal l owed the
filled physically aswell aselectronically on merits expenditureunder section 40(a)(i).Assesseefiled
after grantingopportunity of hearingandpermitting appeal before the CIT(A) who held that the fees
theassesseeto fileany other documentsasdeemed paid to thenon-resident entitieswould not qualify
appropriatein support of itscase. as FTS under the tax treaty, as, no technical
knowledge, experience, skill, know-how or process
DCI T v. For um Homes (P.) L td. 132 enabling the assessee to apply the technicality
contai ned therei n i ndependentl y was made
46 Taxmann.com 223 (Mum) available.
Assessment Year : 2014-15
Or der dated: 4th October 2021 I ssue

Factsof thecase Whether consultancy feesand architect feesfor
the ser vices including supply of necessar y
Theassesseeisaresident company engaged in the desi gns and dr awi ngs i n t he nat ur e of
businessof real estate. Theassesseehadundertaken ar chitectur al, str uctur al & M EP designs &
development of aresidential project. In connection drawings, madeavailabletechnical knowledge,
with the construction/development of the said exper ience, skill & know-how or pr ocesses,
project, the assessee had availed certain services which fall within theambit of “feesfor technical
from some non-resi dent enti ti es l ocated at ser vices” as per I ncome-tax Act as well as
Singaporeand had remitted to theconcerned non- DTAA. “
resident entitiestowardsconsultancy andarchitect’s
fee. In course of the assessment proceedings, the Held
AO based on thedetailsfurnished by theassessee,
came to a conclusion that the payments made by The ITAT found that the scopeof work is limited
theassesseearein thenatureof Feesfor Technical to various types of drawings and designs for the
Services (FTS) as per section 9(1)(vii) of the residential project being developed. TheSingapore
Income-tax Act, 1961 and astax wasnot deducted entity wasto an illustrativesite/roof plan showing
at source on such payment the payment needs to all thecomponentsof theproject, general landscape,
bedisallowed under section40(a)(i) of theAct. The recommendati on and overal l i nfrastructure
Assessee’ssubmissionsthat asper article12(4) of elements, such as, entry driveways and service
the tax treaty, unless, in course of providing any circulation, Diagram showing each of the major
managerial/technical or consultancy services, public at 1:200 scale, imageboard to describethe
technical knowledge, experience, skill, know-how architectural character of theproject etc. Thescope
or processesaremadeavailableto therecipient of of work alsorequirestheentity toprepareschematic
such service, so as to, enable him to apply the design drawings, approved by theclient, in caseof
technology independently, it cannot betermed as minor adjustment.Thetermsof theagreement make
FTSunder thetax treaty wererejected by theAO.

510 Ahmedabad Chartered Accountants Journal Januar y, 2022

it clear that thedesign, drawing, rendering, model, Tr ibunal News
specification, electronic filesincluding databaseand
spreadsheets and other derivation that arepart of into brand licensing agreements with EI’s group
theproject will remain theintellectual property of entitiesand granted anon-exclusivelicenseto use
theserviceprovider and areintendedfor usesolely the Brand in India for license fees which was
with respect to the project. It further restrains the accounted forAY 2013-14 onwardsunder thecash
assesseefromutilizingsuchintellectual property for system of accounting; TheAssesseewassubjected
any other project or for additiontothesubject project to scrutiny assessment whereby the Revenueheld
or for completion of theproject by any other entity. thedefinition of ‘income’u/s2(24) iswideenough
Henceasper theITAT from thenatureof services toincludethereceipt of trademark andcopyright and
providedby thenon-resident entitiesand theterms heldit taxableasunder thehead‘IncomefromOther
and conditionsunder which it wasprovided, it was Sources’u/s56(1) and by applying thediscounted
clear that whatever services were provided are cashflow methodvaluedthetrademark andcopyright
project specific and cannot be used for any other at Rs.1,668 Cr. thus, raised ademand of Rs.719.14
project by the assessee. Further, while providing Cr. Theassesseefiled appeal beforetheCIT(A). In
suchservicesneither any technical knowledge, skill, theappellateproceedings,theCIT(A) allowedcertain
etc., ismadeavailableto theassesseefor utilizing documentsasadditional evidenceandcalledfor the
them in future, independently nor any developed remandreport whereby theRevenuesubmitted that
drawing or design have been provided to the the receipt of the Brand by the assessee was
assessee which can be applied by the assessee chargeableto tax u/s28(iv) and 56(2)(vii). CIT(A)
independently. Thus, as per ITAT it is very much held: (a) receipt of Brand ison capital account, not
clear, theconditionsof article12(4) of thetax treaty covered u/s 2(24) and, not chargeable to tax u/s
arenot fulfilled.Asper ITAT, theAO hasgenerally 56(1); (b)trademark andcopyright arenot chargeable
observed that in courseof providingservicestothe to tax u/s56(2)(vii) asthey arenot in thenatureof
assessee, the non-resident entities have made ‘work of art’, (c) receipt of theBrand did not arise
avai l abl e techni cal knowl edge, know-how, during thecourseof any business, thus, not covered
processesto theassessee. However, no substantive u/s 28(iv), and (d) addition based on difference
material hasbeenbrought onrecord by himtoback between mercantile system and cash system was
such conclusion. Accordingly, ITAT upheld the wrong because the cash system of accounting
order of the CIT(A). followedconsistently by theAssesseewasaccepted
by theRevenue;
ACI T V Balaj i Tr ust [TS-1092-I TAT-
I ssue:
47 2021(Mum)]
Assessment Year 2013-14, Whether the r eceipt of br and/tr ademar k/
Or der dated 25th November 2021 copyr ight by the assessee r om EI L td was
taxableunder theAct.
Facts:
Held:
Assessee , a private and irrevocable discretionary
trust, was settle on Mar 29, 2012 for the sole and ITAT upholdstheadmission of additional evidence
exclusivebenefit of the membersof thesettlors; EIL, by CIT(A), holds that it was not furnished with a
alimited company, voluntarily gifted thebrand to purpose or motive of bringing any fresh facts on
thecorpusof theAssesseeonMar 29, 2012without record, but for alimited purpose of dispelling all
any consideration, thus, it wasnot recognizedinthe doubts and substantiating that EIL was the owner
financialsof theAssessee; TheAssesseethenentered theBrand prior to itssettlement with theAssessee;
Ontaxability of settlement of theBrandinthehands
of the Assessee, ITAT observes that the Assessee
received theBrandasagift, involvingno exchange,

Ahmedabad Chartered Accountants Journal Januar y, 2022 511

Tr ibunal News

which constituted itsprofit-making apparatus, and avoidanceand also observesthat Assesseebeing a
thus, wouldbeinthenatureof itsfixedasset/capital, trust wasnot liableto follow AS-9 for recognizing
observesthat it neither carriesany element of profit, itsrevenue; BeforeITAT, Revenuealsoraised three
norfallsunderany category of incomespecifiedunder additional groundsfor: (a) questioningthebonafide
Sections2(24) and 56 and itspotential to generate natureof transactionbetweenEIL andtheAssessee,
royalty incomecanberealisedonly whenthegroup (b) taxability of valueof thebrand, trademarksand
companies are willing to pay and not otherwise; copyrightsu/s69A,(c)freshcomputationof thevalue
Therefore, holdscontribution of theBrand asagift of thebrand, trademarksandcopyrightsastherewas
by EIL to theAssessee’scorpusdoesnot fall under amistakeinitscomputationunder theDCFMethod;
any category of income; Onapplicability of Section ITAT reliesonSpecial BenchrulinginMahindra&
56(2)(vii),ITAT observesthat thecontroversy hinges Mahindraand rejectstheadditional groundsonthe
around Revenue’s claim that as the Brand was basisthat Revenueattemptedtoimproveitscaseor
registered by EIL as an ‘artistic work’ under the change the complexion of the case through the
Copyrights Act, 1957, it would fall within under additional grounds.
‘property’contemplated under Explanation (d) to
Section 56(2)(vii)(c), thus, chargeableto tax; ITAT M /s. Dell I nter national Ser vices I ndia
holdsthat‘artistic work’used under theCopyright Pr ivateL imited V JCI T [TS-704-I TAT-
Act ismeant toprotect therightsof anartist whichis
different from thepurposewithwhich‘any work of 48 2021(Bang)-TP]
art’isusedu/s56(2)(vii) andregistrationsimplicitor Assessment Year 2009-10,
under theCopyrightsAct, 1957as‘anartisticwork’ Or der dated 22nd December 2021
would not ipso facto mean that it isin thenatureof
‘awork of art’;Alsoobservesthat theBrandisneither Facts:
an artistic innovation nor possesses any artistic
quality for beingbrought withinthemeaningof “any Theassessee, in thebusinessof development and
work of art” under the definition of ‘property’in export of computer sof tware (SWD) and
Explanation(d) to Section56(2)(vii); Also remarks InformationTechnology Enabled Services(ITeS)
that Rule 11UA(1)(b) does not prescribe DCF for and wasentitled for tax holiday benefitsasper the
valuationof ‘awork of art’,thus,holdsthevaluation provisions of section 10A. For AY 2009-2010,
to be devoid of legal mandate; On taxability u/s assessee paid royalty on sal es to third party
28(iv), ITAT observesthat theformationof trust and customers. The assessee had made payment of
giftingof theBrandtook placeonthesameday, thus, royalty videanagreement (@3%inrespect of third
it cannot beheld that theBrand wasgenerated out party gross revenues to use a trade & corporate
of thebusinesscarriedonby theAssessee; Therefore, name, internet domainnameinconnectionwiththe
section 28(iv) that taxesthevalueof any benefit or provision of software development and related
perquisite arising from business or exercise of a services. The assessee selected Transaction Net
profession would not apply and reiterates that the Margin Method (TNMM) astheMost Appropriate
receipt of theBrand by theAssesseefrom EIL asa Method (M AM) and computed its margin at
profit-making apparatusis atransaction on capital 33.37% on operating cost (which included royalty
account; Alsoholdsthat sincetheAssesseefollows payment) in respect of its software development
cashsystem of accounting, noincomewasliableto segment. The assessee further carried out search
tax asnonewasreceived andthesumoffered totax for uncontrolled comparablesusing Prowessand
wasto theextent thepayersof licensefeewithheld CapitalineDatabaseand applying certain qualitative
tax by following mercantilesystem; Thedifference and quantitativefilters, arrived at 24 companiesin
in methods of accounting cannot be a basis of tax thecomparablelist withthearithmetical meanprofit
of 21.84%.Accordingly, theprofit margin earned

512 Ahmedabad Chartered Accountants Journal Januar y, 2022

by the assessee at 33.37% on operating cost was Tr ibunal News
treated asarm’slength. Based on aTPO reference
by theAO,TheTPOheldthat no independent party aggregation of royalty under TNMM, ITAT, while
would pay royalty under similar circumstances. placing relianceon thedecisionsof Hon’bleDelhi
Therefore, the TPO determined the ALP of the HCs in Sony Ericsson Mobile Communications
international transaction in respect of “royalty” as Indiaand Maruti Suzuki India, noted that thesaid
Nil by applying test which hefelt wererelevant in HC decision wasalso relied on by theco-ordinate
determining the ALP of intra-group services. bench in the case of Toyota Kirloskar Motor,
Accordingly, the amount paid by the assessee to wherein, approach of benchmarking onaggregated
AE wastreated asALPadjustment. DRPconcurred basis was upheld. Thus, based on the said HC
and affirmed the ‘NIL’ALP of royalty payment decisions, (though rendered in thecontext of AMP
under CUPmethod expenditure), ITAT considered the rationale laid
down in thesaiddecisionstobeequally applicable
I ssue: to ALP determination of royalty payment and
therefore, deleted the TP adjustment on royalty
Whether the TPO was j ustified in consider ing payments. Therefore, ITAT UpheldTNMM (in the
AL P of Royalty at NI L absence of a CUP for the royalty payment on a
standalonebasis) asMAM withbundlingof royalty
Held: payment under the SWD services under external
TNMM to arrive at the ALP. ITAT noted that
ITAT, whi le repri mandi ng l ower authorities’ royalty as part of operating expenditure was not
inability to produce a valid CUP in support of disputed, further observed that Net operating profit
rej ecti on of TNM M , hel d that ALP of sai d to operati ng cost (OP/OC) (computed after
transaction could not bedetermined at ‘NIL’under factoring in the royalty payment) of the SWD
CUP method. ITAT considered TNMM as MAM services (33.37%) was higher than theOP/OC of
for theinstant caseof assessee(wheresuitableCUP the comparabl e compani es (21.84%). Accordi ngl y,
was not available). ITAT observed that TNMM ITAT concludedthetransaction atALPand opined
required establishing comparability at a broad that “Thus, when thesegment level profit margins
functional level, requiring comparisonbetween net are accepted by the TPO, it is impermissible to
margins from AE transactions with similar non – isolatetheroyalty payment and‘Separately evaluate
AE transacti ons and therefore removed the theALPof thesame.
limitationsof other methods(sincethecomparison
wasmadeat thenet profit level). ITAT further held hhh
that TNM M was the onl y method where
comparison waspossible(wherein, for differences
in thetransactions, reasonableadjustmentsto the
comparabl e transacti on coul d be made). On

Ahmedabad Chartered Accountants Journal Januar y, 2022 513

Unreported
Judgements

In this issue, we are giving gist culled out from a CA. Sanj ay R. Shah
decision of ITAT, Ahmedabad, in the case of [email protected]
Chhotubhai Vitthalbhai Patel inI.T.A. No.246/Ahd/
2021, wherein theHon’bleTribunal discussed the Rs.40,77,012/- claimed by the assessee was
scopeof adjustment, whichcanbemadeby Central disallowed and accordingly, a demand for
Processing Centre(CPC) whileissuing intimation Rs.16,13,560/- wasraisedagainst theassessee.
u/s.143(1). Thiswill behelpful asin largenumber Assessee’sappeal against theaboveintimation
of cases, it isobserved that CPC hasbeen making beforeC.I.T.(Appeals) wasallowed, whereby
adjustments, whi ch are outside the scope of thelearned C.I.T.(Appeals) set asidetheissue
provisionsof section 143(1). to the fi l e of the Assessi ng Offi cer f or
verification. However, the learned Assessing
Wehopethereaderswould find thesameuseful. Officer in pursuance to the direction of the
learned C.I.T.(Apeals) in his order observed
Annexur e that thelearned C.I.T. (Appeals) had no power
under theprovisionsof section 251 of theAct
In theIncomeTax AppellateTribunal to set asidetheissuetothefileof theAssessing
Ahmedabad – Bench ‘D’ Officer, and therefore, heagain confirmed the
demand raised in thei nti mati on generated under
(Conducted through virtual court at Ahmedabad) section 143(1) of theAct in his appeal effect
order.
BeforeShri Rajpal Yadav, VicePresident
and 2. In the appeal against the above order before
the C.I.T.(Appeals), the assessee di d not
Shri WaseemAhmed,Accountant Member succeed as C.I.T.(Appeals) dismissed the
appeal observing that theassesseehasfailed to
ITA No.246/Ahd/2021 provideany supporting documentsin support
AssessmentYear: 2017-18 of Grounds of appeal raised by the him. The
C.I.T.(Appeal s) further observed that the
Chhotubhai Vitthalbhai Patel Vs. The Dy.CIT, assessee has not even submitted the copy of
theITR filed by him and thecopy of theorder
Ahmedabad. CPC, Bangalore. u/s143(1) by CPC, Bengaluru in which claim
for depreciation amounting to Rs.40,77,012/-
(Appellant) (Respondent) was made. A gai nst the above order of
C.I.T.(Appeals), assessee filed appeal before
Assesseeby : Ms. Jyoti Rizwani,A.R. theTribunal, wherein theprimary challengeof
Respondent by : Shri Vidyut Trivedi, Sr. DR the assessee was two fold; (i) the adjustment
madeby CPC isof debatablein nature, which
Dateof hearing : 09-12-2021 cannot besubjectedtoadjustment under section
143(1) of the Act. Further, maj ori ty of
Dateof pronouncement : 15-12-2021 depreciation wasontheopeningWDV of plant
andmachinery, and therefore, alsowheninthe
GI ST ONLY

Factsof thecase:

1. Theassessee, an individual, filed hisreturn of
incomedeclaringan incomeof Rs.39,34,910/-
, which wasprocessed under section 143(1) of
the Act. The amount of depreci ati on of

514 Ahmedabad Chartered Accountants Journal Januar y, 2022

earlier year samewasconsidered it should not Unr epor ted Judgements
have been subjected to disallowance, (ii) the
amount of depreciationclaimedby theassessee of thejurisdictional Gujarat High Court in the
in the preceding and subsequent assessment caseof CIT vs. Mahesh Kumar Rathod – 296
year wasalso allowed by C.I.T.(Appeals). ITR 146, i n whi ch Guj arat Hi gh Court
observed asunder:
The learned DR supported the order of the
authoritiesbelow. “4. When theissuerelating to deduction or
disallowanceof deductionsisdebatable,
Findingsand Decision of Tr ibunal: theAssessing Officer cannot makeany
adjustment in an order under section
3. TheTribunal discussedthescopeof adjustment 143(1)(a).We, therefore, seenoinfirmity
u/s.143(1) of the Act whi l e passi ng the intheorder of theTribunal.Accordingly,
intimationandobservedthat following kind of we answer the question referred in
adjustments are permitted while processing favour of the assessee and against the
return u/s.143(1): revenue.”

i. Disallowance of loss claimed in cases TheTribunal further held that all thedetailsof
wherereturnshavebeen filed beyond due the assets viz a viz depreciation were duly
date specified under sub-section (1) of furnishedintheincometax returnandthemajor
section 139, part of thedepreciationclaimedby theassessee
in theyear under consideration waspertaining
ii. Disallowanceindicated by theauditorsin to the opening written down value which
theaudit report but failsto find amention cannot be di sturbed i n the year under
in thereturn of income, consideration. TheTribunal further observed
that when learned CIT (A) in the immediate
iii. Disallowanceof deductionsunder section precedi ng A.Y. 2016-17 and i mmedi ate
10AA, 80IA, 80IAB, 80IB etc. of theAct. succeeding A.Y. 2018-19 has allowed the
depreciation claimed by the assessee with
iv. If return is filed beyond the due date respect to theassetswhich wereshown for the
specified under sub-section (1) of section assessment year under considerati on, no
139 of the Income Tax Act, 1961 apart adjustment can bemadeontheground of non-
from addition to the income returned for allowability of depreciation for theyear under
want of thoseparticularsof incomewhich consideration. Thus, appeal of theassesseewas
though find amention in Form No. 26AS/ allowed.
Form No.16A or Form No.16 but havenot
beenincludedsubject totheinherent riders/ hhh
limitationscontained therein.

The Tribunal also relied on the judgment of
Hon’bleOrissaHighCourt inTataSpongeIron
Ltd. v. CIT [2010] 191 Taxman 407 and also

Ahmedabad Chartered Accountants Journal Januar y, 2022 515

Controversies

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

I ssues Asper theprovisionscontained insub-section 1 of
Section 72 of theAct, where for any assessment
Whether the brought forward business loss and year, the net result of the computation under the
brought forward long term capital loss can be set head “Profitsand gainsof businessor profession”
off against theshort term capital gain arising under isalossto theassessee, not being alosssustained
Section 50 of theIncome-tax Act, 1961 from sale in aspeculation business, and such losscannot be
of depreciableasset? or is not wholly set off against income under any
head of incomein accordancewith theprovisions
Ext r act of t he Rel evant Pr ovi si on and of theAct, so much of the loss ashas not been so
Pr oposition set off or, wherehehasno incomeunder any other
head, thewholelossshall becarried forward to the
Theprovisionscontained in Section 50 of theAct following assessment year, and:—
statesthat wherethecapital asset isanasset forming
part of a block of assets in respect of which (i) it shall beset off against theprofitsand gains,
depreciation has been allowed under thisAct the if any, of any businessor profession carried on
provisionsof Sections48 and 49 shall besubject to by him andassessablefor that assessment year;
the fol lowing modi fi cations :—
(ii) if the loss cannot be wholly so set off, the
(1) where the full value of the consideration amount of loss not so set off shall be carried
received or accruing asaresult of thetransfer forward to thefollowing assessment year and
of theasset together with thefull valueof such so on :
consideration received or accruing asaresult
of thetransfer of any other capital asset falling Further, asper theprovisionscontainedinsub-
within the block of the assets during the section 1 of Section 74 of the Act, where in
previous year, exceeds the aggregate of the respect of any assessment year, thenet result
following amounts, namely:— of the computation under the head “Capital
gains” isalossto theassessee, thewholeloss
(i) expendi ture i ncurred whol l y and shall, be carried forward to the following
excl usi vel y i n connecti on wi th such assessment year:—
transfer or transfers;
(a) in so far assuchlossrelatesto ashort-term
(ii) the written down value of the block of capital asset, it shall be set off against
assetsat thebeginningof thepreviousyear; income, if any, under the head “Capital
and gains” assessablefor that assessment year
in respect of any other capital asset;
(iii) theactual cost of any asset falling within
the block of assets acquired during the (b) in so far assuch lossrelatesto along-term
previousyear, capital asset, it shall be set off against
income, if any, under the head “Capital
such excessshall bedeemed to bethecapital gains” assessablefor that assessment year
gains arising from the transfer of short-term in respect of any other capital asset not
capital assets; being ashort-term capital asset;

516 Ahmedabad Chartered Accountants Journal Januar y, 2022

It is proposed that brought forward business loss Contr over sies
and brought forward long term capital losscan be
set off against the short term capital gain arising Transducers Ltd. has set the benchmark for key
under Section 50 of theIncome-tax Act, 1961 from matter of thiscontroversy.
saleof depreciableasset?
In thegiven casein theoriginal return of income,
View against theProposition assessee has claimed long term capital loss of ¹
1,50,48,444/- on account of sale of its factory
In thegiven caseof ITO vs. M/sSmart Sensors& building. TheAssessing Officer noted that since
TransducersLtd., theAssessing Officer wasof the the factory building is a depreciable asset, the
view that in accordance with the provisions of resultant capital gainonthesaleof suchdepreciable
section 74 of theAct, only long term capital loss asset is to be treated as short term capital gain as
can be set off against long term capital gains. AO envisaged by the provisions of section 50 of the
also noted that asper theprovisionsof section 72 Act.
of theAct, thebusinesslosscan beset off against
businessincomeand not against short term capital Consequent to this, theassesseerevised itsreturn
gainscomputed by theassesseein termsof section of incomeand offered thegain from saleof factory
50 of theAct. Accordingly, theAssessing Officer building asshort term capital gain amounting to ¹
disallowed theclaim of brought forward business 2,71,01,255/-. In the revised return the assessee
loss and brought forward long term capital gains claimed set off of brought forward businesslossof
against theshort term capital gain arisingfrom sale ¹ 73,45,952/- andbrought forwardlongtermcapital
of depreciableasset. lossof ¹ 28,17,942/- against theshort term capital
gain claimed in the revised return on account of
View in favour of theProposition saleof factory building at ¹ 2,71,01,255/-.

HonourableBombay HighCourt inthecaseof CIT As di scussed above, the A ssessi ng Offi cer
vs. Manali Investments has allowed the claim of disallowed theclaim of brought forward business
brought forward businesslossand brought forward loss and brought forward long term capital gains
longtermcapital losstobeset off against short term citing the provisions of Section 50, 72 and 74 of
capital gain computed under section 50 of theAct. theAct. Aggrieved, theassessee preferred appeal
bef ore the CI T(A ).
HonourableITAT Mumbai in thecaseof Rajshree
RoadlinesPvt. Ltd ITA No. 1627/Mum/2012 has CIT(A) after considering the submissions of the
heldthat theset off of unabsorbed depreciation and assessee and also considering the decision of
eligiblebusinesslossagainst short termcapital gain Hon’ble Bombay High Court in the case of CIT
computed u/s50 of theAct isallowable. vs. Manali Investmentsallowedtheclaimof brought
forward business loss and brought forward long
In thecaseof Digital ElectronicsLtd vsAdditional term capital loss to be set off against short term
CITG 135 TTJ419 (Mum), Mumbai Tribunal has capital gain computed under section 50 of theAct.
held that income earned by the assessee in the
relevant year on saleof factory building, plant and Accordingly ITAT Mumbai Bench upheld the
machinery althoughnot taxableasprofitsandgains decisionof CIT(A) inallowingtheclaimof brought
of businessor profession isanincomein thenature forward business loss and brought forward long
of income of business though assessed as capital term capital loss to be set off against short term
gainsunder section 50 and thereforetheassesseis capital gain computed under section 50 of theAct.
entitledtoset off of brought forwardbusinesslosses
against thesaid capital gain. In view of above, in my humbleopinion, brought
forward business loss and brought forward long
Summation termcapital losscanbeset off against theshort term
capital gainarisingunder Section50of theIncome-
Decision taken by Honourable ITAT Mumbai tax Act, 1961 from saleof depreciableasset.
Bench in thecaseof ITO vs. M/sSmart Sensors&
hhh

Ahmedabad Chartered Accountants Journal Januar y, 2022 517

Judicial
Analysis

AdvocateTushar Hemani
[email protected]

Guj ar at High Cour t holdsthat discr etion of not assessment haspassed, determiningtheliability
tr eating theassesseein default, confer red under of theassesseeto pay aparticular amount and
sub-section (6) should or dinar ily be exer cised such amount isnot paid withinthetimelimit as
in favour of assessee, unlesstheover r iding and prescribedunder sub-section(1) toSection220
over whelming r easons ar e ther e to r ej ect the or during theextended timeperiod under sub-
application of theassesseeunder Section 220(6) section(3) asthecasemay be, thentheassessee,
of theAct. because of the deeming fiction, would be
deemed to bein default. Therefore, even if the
22 Harsh Dipak Shah vsUoI (Special Civil assessee prefers an appeal challenging the
Application No. 19804 of 2021, dated 04/ assessment order beforetheCommissioner of
01/2022) (Guj ar at High Cour t) Appeals as the First Appellate Authority, he
would still betreatedasan assesseedeemed to
7.9 Thus, the writ applicant prayed for waiver of bein default becausemerefiling of an appeal
20% of the pre-deposit essentially on four would not automatically lead to stay of the
grounds (i) high pitched assessment (ii) only demandasraisedintheassessment order.It isin
sourceof incomethroughAvani PetrochemPvt. suchcircumstancesthat theassesseehastomake
Ltd.(iii) stereotypeorderpassedby thePrincipal a request before the authority concerned for
Commissioner and (iv) adverse effect on the appropriaterelief for grant of stay against such
financial affairsdueto theCovid-19pandemic. demandpendingthefinal disposal of theappeal.
This relief which the assessee seeks is within
7.10Wetakenoticeof thefact that thetotal demand thediscretion of theauthority. In other words,
raisedistothetuneof Rs.373,20,42,319/-. 20% theauthority may grant suchstay conditionally
of thesaid amount towardspre-deposit comes or unconditionally or may evendeclinetogrant
to Rs.74,64,08,464/-. any stay. However, the exerci se of such
discretionhastobeinajudiciousmanner. Such
xxx… exerciseof discretioncannot beinaarbitrary or
mechanical manner.
27. Sub-section (6) of Section 220 readsthus;
29. The aforesaid l eads us to consider what
xxx… parameters should be kept in mind by the
authority concerned while considering the
28. The plain reading of the above sub-section request of theassesseefor stay of thedemand.
wouldindicatethat if theassesseehaspresented For the time bei ng, we put aside all the
an appeal against thefinal order of assessment instructionsand circularsissued by theCBDT
under Section246of theAct, it wouldbewithin over a period of time. Undoubtedly, all such
thediscretion of theAssessing Officer subject instructions and circulars are in the form of
tosuchconditionsthat hemay deemfit toimpose guidelines which the authority concerned is
inthecircumstancesof thecase,treat theassessee supposed to keep in mind. Such instructions/
asnot beingindefault inrespect of theamount circulars are issued to ensure that there is no
in dispute in the appeal so long as the appeal
remainsundisposedof.What isdiscerniblefrom
the aforesaid is that once the final order of

518 Ahmedabad Chartered Accountants Journal Januar y, 2022

arbitrary exercise of power by the authority Judicial Analysis
concerned or inagiven case, theauthority may
not act prejudicial totheinterest of theRevenue. therespondent No.2 by merely saying that the
However, when i t comes to grant of a issuehasbeen discussedthreadbareduringthe
discretionary relief like stay of demand, it is assessment proceedings. In other words, the
but obviousthat thefour basicparametersneed findingrecordedby therespondent No.2isthat
to be kept in mind (i) prima facie case (ii) theassessment order cameto bepassed by the
balanceof convenience(iii) irreparableinjury Assessing Officer after granting sufficient
that may becausedtotheassesseewhichcannot opportunitiesand after dueconsiderationof all
be compensated in terms of money and (iv) therelevant aspectsof thematter and,therefore,
whether the assessee has come before the theissueof highpitchedassessment neednot be
authority with clean hands. considered. Thefindingsrecorded in para-3 of
30. Thepower under Clause(6) of Section 220 is theorder dated17.12.2021arenot appealingto
indeedadiscretionary power. However,it isone usat all. Thematter hasnot beenconsideredby
coupledwithaduty tobeexercisedjudiciously therespondent No.2 in itsproper perspective.
and reasonably (as every power should be), Many timesin theover zealousnessto protect
based on relevant grounds. It should not be theinterest of theRevenue,theauthoritiesrender
exercisedarbitrarily or capriciously or basedon their discretionary orders susceptible to the
mattersextraneousor irrelevant. TheIncome- complaint that thosehavebeenpassedwithout
tax Officer should apply his mind to the facts any applicationof mind. Wefail to understand
and circumstances of the case relevant to the what is so magical in the figure of 20%. To
exerciseof thediscretion, in all itsaspects. He balance the equities, the authority may even
hasalsotorememberthat heisnot thefinal arbiter consider directingtheassesseetomakeadeposit
of thedisputesinvolvedbut only thefirst amongst of 5% or 10% of the assessed amount as the
thestatutory authorities. Questionsof fact and circumstances may demand as a pre-deposit.
of law are open for decision before the two The“High PitchedAssessment” meanswhere
appellate authorities, both of whom possess the income determined and assessment was
plenary powers. In exercising his power, the substantially higher than thereturned income.
Income-tax Officer shouldnot act asameretax- For example,twicethereturnedincomeor more.
gatherer but asaquasi-judicial authority vested
with the power of mitigating hardship to the xxx…
assessee.TheIncome-tax Officer shoulddivorce
himself from hisposition astheauthority who 37. The following is discernible from the above
madetheassessment andconsider thematter in referred judgment of theMadrasHigh Court;
all itsfacets,fromthepoint of viewof theassessee
without at thesametimesacrificingtheinterests (a) TheBoardhas, whilestatinggenerally that
of the Revenue. Says ViswanathaSastri J. in the assessee shall be called upon to remit
VetchaSreemmamurthy v. ITO [1956] 30 ITR 20%of thedisputeddemand,grantedample
252 (AP) (at pages268 and 269): discretiontotheauthority toeither increase
xxx… or decreasethequantum demanded based
32. In the case on hand, unfortunatel y, the on the three vital factors to be taken into
respondent No.2 hasnot considered anything consideration,i.e.primafaciecase, balance
andhasjust mechanically declinedtogrant relief of convenienceand irreparableinjury.
as prayed for by the writ applicant. When the
writ applicant pointedout totherespondent No.2 (b) Notwithstandingthat theassesseemay not
that the case on hand is one of high pitched have speci fi cal l y i nvoked the three
assessment, thesamecameto bedismissed by parameters, referredtoabove, for thegrant
of stay, it isincumbent upon theassessing
officer to examinetheexistenceof aprima
faciecaseaswell ascall upon theassessee
to demonstratefinancial stringency, if any,
and arriveat thebalanceof convenience.

Ahmedabad Chartered Accountants Journal Januar y, 2022 519

Judicial Analysis 43. Thus, whenit comesto discretion, theexercise
thereof has to be guided by law; has to be
38. The principles relating to the exercise of accordingtotherulesof reasonandjustice; and
discretion by an authority are expounded in hasto bebased on therelevant considerations.
various decisions of the Supreme Court. We The exercise of discretion is essentially the
may refer to few decisions. discernment of what isright andproper; andsuch
discernment isthecritical andcautiousjudgment
39. In the case of Sant Raj and Anr. v. O.P. of what iscorrect andproper by differentiating
Singlaand Anr.: (1985) 2 SCC 349, the betweenshadow andsubstanceasalsobetween
SupremeCourt dealtwith thematter asregards equity and pretence.A holder of public office,
the discretion of the Labour Court to award when exercising discretion conferred by the
compensation in lieu of reinstatement and statute, has to ensure that such exercise is in
observed asunder; furtheranceof accomplishment of thepurpose
underlying conferment of such power. The
“4… ..Whenever, it issaid that something has requirements of reasonableness, rationality,
to be done within the discretion of the impartiality, fairnessand equity areinherent in
authority then that something has to be any exerciseof discretion; suchanexercisecan
doneaccording to therulesof reason and never beaccordingto theprivateopinion.
j usti ce and not according to private
opinion, according to law and not humor. 44.It ishardly of any debatethat discretionhastobe
It isto benot arbitrary, vagueand fanciful exercisedjudiciously and, for that matter,all the
but legal and regular and it must be factsandall therelevant surrounding factorsas
exercised within the limit to which an also the implication of exercise of discretion
honest man to the discharge of his office either way haveto be properly weighed and a
ought to find himself… ..Discretion means balanced decisionisrequiredto betaken.
sound discretion guided by law. It must be
governed by rule, not by humor, it must 45. Themandateof Parliament in sub-section (6)
not be arbitrary, vagueand fanciful… ..” seems to be that the lower Assessing Officer
(emphasisin bold supplied)” should abide by and being bound by the
decision of the appellate authority, should
40. In thecaseof Reliance Airport Developers (P) normally wait for thefateof such appeal filed
Ltd. v. Airports Authority of India and Ors. by theassessee. Therefore, hisdiscretionof not
(2006) 10SCC 1, the Supreme Court, with treatingtheassesseeindefault, conferredunder
referenceto vari ouspronouncementspertai ning sub-section (6) should ordinarily beexercised
to the legal connotations of‘ discretion’and in favour of assessee, unlesstheoverriding and
governing principlesfor exerciseof discretion overwhelming reasons are there to reject the
observed, inter alia, asunder: - applicationof theassesseeunder Section220(6)
of the Act. The application under Section
“30.Discretion, in general, isthediscernment 220(6) of theAct cannot normally berejected
of what is right and proper. It denotes merely describing it to beagainst theinterest
knowledgeandprudence,that discernment of Revenue if recovery is not made, if tax
which enablesa person to judgecritically demanded istwiceor moreof thedeclared tax
of what iscorrect and proper united with liability. Thevery purposeof filing of appeal,
caution; nicediscernment, and judgment which provides an effective remedy to the
directed by circumspection: deliberate assessee is likely to be frustrated, if such a
j udgment; soundness of judgment; a discretion wasalwaysto be exercised in favour
sci ence or understandi ng to di scern of revenuerather than assessee.
between falsity and truth, between wrong
and right, betweenshadowandsubstance,
between equity and colourableglossesand
pretences, and not to do according to the
will and privateaffectionsof persons.”

520 Ahmedabad Chartered Accountants Journal Januar y, 2022

46. We are of theview that the authorities should Judicial Analysis
keep in mind the following parameters while
deciding a stay application preferred by an 50. So far as the other two connected wri t
assesseepending appeal to theFirst Appellate applications are concerned, we decline to
Authority. Thesearetheparametersasl ai d down interfere having regard to the quantum of the
by theBombay High Court in thecaseof Kec amount involved inboththematters. However,
International Ltd. vs. B.R. Balakrishnan, weleaveit open for thewrit applicantsof both
(2001) 251 ITR 158/119Taxman 974; thesaid writ applicationsto filean appropriate
applicationseekingappropriaterelief beforethe
xxx… FirstAppellateAuthority, i.e,theCIT (Appeals).
Wearesayingso becausesuch powerstogrant
47. Beforeweclosethismatter, wedeemfit todraw stay canbeimpliedasinherent power of theFirst
the attention of one and all to the following AppellateAuthority.Thepowersof theAppellate
observations made by the Supreme Court in Authorities are indisputably concurrent and
the case of The Income Tax Officer, III coextensivewiththat of theAssessingAuthority
Mangalore vs. M. Damodar Bhat, reported in but wider andsuperior innature. Section251of
AIR 1969 SC 408. theAct clearly stipulatesthat in disposing of an
appeal, theCIT (Appeals) can confirm, reduce,
xxx… enhanceor annul theassessment. Section 251
(1) (c) of theAct further providesthat in other
48. Thus, what is sought to be conveyed by the cases, hemay passsuch ordersin appeal ashe
SupremeCourt isthat thewrit applicant, inthe thinks fit. These words harmoniously read,
memorandum of his writ application, must definitely mean that powers of appell ate
furnishspecificparticularsinsupport of hiscase authoritiesunder theAct arewideenough. Such
that theIncome-tax Officer hasexercised his powerscould not beintended to bedrainedout
discretion in arbitrary manner. It is just not or rendered meaningless, if thepower to grant
suff i ci ent to make an averment i n the stay against therecovery of disputeddemandis
memorandum of thewrit application that “the to be taken away from the first appellate
order of the Income-tax Officer made under authority. Suchimplied, necessary andinherent
Section 220 isarbitrary and capricious”. In the power must necessarily be read into these
absence of specific particulars by the writ provisions conferring the powers upon the
applicant inhiswrit application, theHighCourt appellate authority to modify the impugned
should not go into the question whether the assessment orderinany manner.Inspecificterms,
Income Tax Officer has arbitrarily exercised thefirst appellateauthority can even enhance
hisdiscretion. thetaxableincome, whilehehasthepower to
reduce or compl etel y set at naught the
49. For the foregoing reasons, the Special Civil assessment. The words “as he thinks fit” in
Application No.19804 of 2021 deservesto be Section251(1)(C) arenot redundant,asnosuch
allowed and thesameis, accordingly, allowed. redundancy canbeattributedtotheParliament.
Consequently, theimpugned orderspassed by Therefore, mere absence of words “power to
the respondent No.2 are setaside and the grant stay”inSection251of theAct cannot mean
respondent No.2 is directed to consider the that suchpowersarespecifically excludedfrom
application filed by the writ applicant under thejurisdiction of thefirst appellateauthority.
Sections220(3) and 220(6) respectively of the [SeeMaheshwari AgroIndustriesvs. Union of
I.T.Act afreshin conformity withall theCBDT India, (2012) taxmann.com68(Raj.)]
instructionsand theparameterslaid asaboveby
providing anopportunity of beingheard to the hhh
writ applicant andpassordersinaccordancewith
lawpreferably withinaperiodof twoweeksfrom
thedateof thereceipt of thewrit of thisorder.

Ahmedabad Chartered Accountants Journal Januar y, 2022 521

Summary of
Recent Case Laws

CA. Dhinal A. Shah CA. K ar an Sukhr amani
[email protected] [email protected]

Raj inder Kumar Aggar wal (HUF) vs DCI T - disallowanceunder section 40(a)(i) of theAct.
I T APPEAL NO.2996 (Delhi) OF 2016
I TO vs. Raj eev Suresh Ghai - I T Appeal No.
Facts 6290 (M um) of 2019

TheAssessee was engaged in the manufacturing Facts
and export of leather footwear. The Taxpayer
appointed a France based trading company as its Thetaxpayer wasanon-resident Indian settled in
agent for procuringexport ordersinFranceandpaid theUnitedArab Emirates(‘UAE’) for thelast three
commission to theagent on export sales. decades. As per information received from the
investigation wing, theAssessing Officer (‘AO’)
The Assessing Officer (‘AO’) held that payment noticedthat duringtherelevant financial period, the
made to the non-resident agent was in nature of taxpayer haspaid cash amountsaggregating to Rs.
Feesfor Technical Services(‘FTS’) andTaxpayer 2,50,40,000 to one Ahuja Builders and had also
wasliableto deduct TDSon same. receivedRs.4,47,150incash, andinterest inrespect
of theamountsso paid.
Accordingly,AO madedisallowanceby invoking
section40(a)(i) onfailureof assesseetodeduct TDS During thecourseof assessment proceedings, the
from export commissionpaidtonon-resident agent taxpayer explained that it had invested a sum of
under section 195, which action wasupheld by the Rs. 850 lakhsin residential flatsinMumbai, but all
Commissioner (Appeals). the related payments had been made by official
channels and the taxpayer produced evidence in
Ruling support of thoseremittances.

Hon’bleITAT, Delhi observed that for bringing the However, theAO noted that as per data found by
services under the net of ‘FTS’ under the India theinvestigationwing, duringthesearchandseizure
Francetax treaty, the ‘makeavailable’clausehas operation onAhujaGroup, thetaxpayer had paid
to besatisfied. cash amounts, as ‘on money’, aggregating to Rs.
2,50,40,000 to Ahuja Builders. Accordingly, this
In thepresent case, in connection with theservices amount wastreatedasan‘unexplained investment’
rendered by thenon-resident, of procuring export under section 69 of theAct. Further, theAO noted
order for the assessee, no knowledge has been asum of Rs. 4,47,150wasprobably interest on loan
provided to theassesseewhich could beexploited and brought it to tax as such under section 68 of
further by theassessee. theAct.

In suchcircumstances, theservicesrendered by the Onappeal, theCommissioner (Appeals) deletedthe
non-resident cannot be held as ‘FTS’ under the additionson theground that thetaxpayer wasatax
India-France DTAA. Accordingly, such services resident of UAE and asthe incomeunder section
will not bechargeablein Indiain thehandsof non- 68 or 69 could only be covered under the treaty
resident under DTAA and, therefore, no liability to head ‘other income’, such an incomecould not be
deduct tax at source will arise. Consequently, taxed in India.
payment to said non-resident is not liable to

522 Ahmedabad Chartered Accountants Journal Januar y, 2022

Ruling Summar y of Recent Case L aws

Thereisno disputethat thetaxpayer, beingresident · Thisarticledealsonly with taxeson capital, to
in and fiscally domiciled in theUAE, isentitled to the excl usi on of taxes on estates and
the benefits of the Indo UAE Tax treaty. The inheritancesandongiftsandof transfer duties.
aforesaidunexplainedinvestment isnot specifically Taxes on capital to which the article applies
covered under any of theheads in the India-UAE arethosereferred to in article2.
tax treaty in question.
· Taxes on capi tal general l y consti tute
Article22(2) only restrictsthescopeof article22(1) complementary taxation of i ncome from
by providing that ‘Theprovisionsof paragraph (1) capital. Consequently, taxesonagivenelement
shall not apply to income, other than incomefrom of capital can belevied, in principle, only by
immovableproperty asdefined in paragraph (2) of the State which is entitled to tax the income
article 6, if the recipient of such income, being a fromthiselement of capital.
resident of aContracting State, carrieson business
in theother Contracting Statethroughapermanent Clearly, therefore, article23(1) hasno application
establishment situated therein, or performsin that in the present context. What is impugned here is
other State independent personal services from a not a taxati on on capi tal represented by an
fixedbasesituated therein, andtheright or property immovableproperty but taxation on account of a
in respect of which theincomeispaid iseffectively part of investment in animmovableproperty being
connected with such permanent establishment or unexplained. Sinceatax oncapital isatax on assets
fixed base’. Hon’ble ITAT observed that this has rather than a tax on income, wealth tax, which is
no application in the present situation either, but covered by article2(b)(iii) couldat best becovered
what it does highlight any way is the economic by the same, but that aspect of the matter is not
activity nexuswiththeincome, whichcanbetaxed even relevant in thepresent context.
under article22(1). Whererevenueauthoritiescan
bring on record any material to demonstrate, or Coming to thepleathat the‘Indo-UAE tax treaty
indicate, that the unexplained investments in providesfor taxability of theincomeonly not the
questionhavebeenmadeout of incomesgenerated computation of income, which fallsin thedomain
in India, thesituation will bematerially different, of ITAct, 1961, thereisnomeritsinthispleaeither.
but that isnot thecaseat present. Classification of an income and taxation of an
income is inherent part of the treaty mechanism,
Asfor thepleathat theIndia-UAE treaty provides and unlessan incomefitsin thetreaty description
for taxability of income arising from immovable of that income, it cannot besubjectedtotax assuch.
property, thi s pl ea is contextual ly irrelevant
inasmuch aswhat isbeingdealt with in thepresent As a matter of the fact that the ground of appeal
caseisnot anincomefromtheimmovableproperty, itself statesthat ‘thetreaty doesnot cover thetaxation
but an income said to have been invested in an of income of the nature such as unexplained
immovableproperty. Thepleaisthusdevoid of any investment’and that istheend of theroad so far as
legally sustainablemerits. taxation of an income, in any head other than the
residuary head of ‘other income’, isconcernedand,
As for article 23(1), which refers to taxation of sincethesaid incomeisnot even taxableunder the
capital representedby immovableproperty, thesaid residuary article 22, therecannot be any taxation
article refers to taxation of capital but does not of this incomein the handsof the taxpayer under
provide, as revenueseem to suggest, for taxation theIndo-UAE tax treaty.
by virtueof investment in theimmovableproperty.
Explaining the scope of similar provision, the It isalwaysuseful to bear in mind thefact that, on
OECD Model Convention Commentary statesas the first principles, the trigger for taxation of an
follows: incomeinasourcejurisdictioniseither theeconomic
activity or the linkage of an income with that
jurisdiction, and that in the absence of such a

Ahmedabad Chartered Accountants Journal Januar y, 2022 523

Summar y of Recent Case L aws taxability of interest is, evenby thestandardsof the
revenueauthorities, also thusfar from established.
linkageor economic activity nexus, there cannot Thereisno evidencewhatsoever, or even aserious
beany sourcetaxation. Theassesseeiscertainly an allegation, that thereisan interest income.
Indian national, but heisadmittedly resident in the
UAEsofar ashisresidential status, under theIndo- The taxpayer is a tax resident of the United Arab
UAE tax treaty is concerned, is of the UAE tax Emiratesand isthusentitled to thebenefitsof the
resident. Theresiduary taxation rights, in termsof Indo-UAE tax treaty. When the rights to tax the
the treaty provisions, belong to the residence incomeinquestion, under theapplicabletax treaty
jurisdiction, but even if that was not to be so, the provi si ons, are al l ocated to the resi dence
residence ri ghts can at best go to the source jurisdiction, it iswholly immaterial whether or not
jurisdiction, which in turn referstoajurisdiction in the source jurisdiction has the right to tax that
whi ch the i ncome i s earned, rather than a income, and, inany event,Indiaisnot evenasource
jurisdiction in which theincomeisinvested. jurisdiction for the income in question as no
economic activitieshavebeen carried out in India-
By no stretch of logic, therefore, such an income it is at best the jurisdiction in which earnings are
could betaxed in India, which isneither residence invested. That cannot any way have any bearing
nor source jurisdiction; it is at best investment on thetaxation of income. It isviewed, therefore,
jurisdiction. However, the scheme of tax treaties since, under thetermsof theIndo-UAE tax treaty,
limitstherightsof taxation either to residenceor to theright totax theamountsinquestion, evenif that
sourcejurisdiction. be of income nature in the hands of the present
taxpayer, doesnot belong to India, all theseissues
What essentially follows is that if, under the being raised are wholly academic as of now, and
domestic tax laws of the UAE, the amounts in do not call for adjudication. Having said that,
question can betreatedasof incomenature, thetax however, in duedeferenceto thelegitimaterights
implicationsof theseamounts, under the scheme of theassessee, it ismadeclear that, if so necessary
of the Indo-UAE tax treaty, can at best follow in infuture, thetaxpayer will beat liberty toraisethese
the UAE, but that is not relevant in the present issues.
context of holding theseamountsto be, even if so
permissible in our domestic tax laws, taxable in In view of thesediscussions, and bearing in mind
India. The revenue thus derives no support from the enti rety of the case, the wel l -reasoned
theIndo-UAE tax treaty, which, under thescheme concl usi ons arrived at by the Commissioner
of section 90(2), must make way to the domestic (Appeals) are approved and the matter cannot be
law provisionsexcept to theextent theapplicable interfered with.
treaty provisions are ‘more’ favourable to the
taxpayer. hhh

As for the alleged interest income, there is no
findingwhatsoever tosuggest that therewasindeed
any interest incomeinasmuchaseventheAssessing
Officer istentativewhen hestatesthat therelated
entry ‘probably’ refers to interest receipt. The

524 Ahmedabad Chartered Accountants Journal Januar y, 2022

FEMA CA. Savan Godiawala
Updates [email protected]

Ext er nal Commer ci al Bor r owi ngs ARRs, the all-in-cost ceiling for new FCY
ECBs and TCs has been increased by 50 bps
18 (ECB) and Tr adeCredits(TC) Policy – to 500 bpsand 300 bps, respectively, over the
Changesdueto L I BOR tr ansition benchmark rates.

With reference to the RBI Governor’s Statement iii. OneTimeAdjustment in all-in-cost ceiling for
on Developmental and Regulatory Policiesdated existingECBs/TCs: Toenablesmoothtransition
December 08,2021,attentionisinvitedtoparagraph of existing ECBs/TCslinked to LIBOR whose
1.5, 2.1.vi. and 14.vi. of the of Master Direction benchmarks are changed to ARRs, the all-in
No.5 dated M arch 26, 2019, on “External cost ceiling for such ECBs/TCs has been
Commerci al Borrowi ngs, Trade Credits and revisedupwardsby 100 basispointsto550 bps
Structured Obligations”, prescribing thebenchmark and 350 bps, respectively, over theARR. AD
ratesand themaximum spread over benchmark for Category-I banks must ensure that any such
calculating the all-in-cost for foreign currency revisi on in ceil ing is onl y on account of
(FCY) ECBs and TCs. transi ti on f rom L I BOR to al ternati ve
benchmarks.
In view of theimminent discontinuanceof LIBOR
as a benchmark rate, it has been decided, in Thereisnochangeintheall-in-cost benchmark and
consultation with stakeholders, to make the ceiling for INR ECBs/TCs.
following changestotheall-in-cost benchmark and
ceiling for FCY ECBs/ TCs: All other provisionsof theECB/TC policy remain
unchanged.AD Category-I banksshould bring the
i. Redefining Benchmark Rate for FCY ECBs contents of this circular to the notice of their
and TCs: Currently, the benchmark rate is constituents/customers.
definedinparagraph1.5of themaster direction
as “benchmark rate in case of FCY ECB/TC TheMaster Direction No. 5dated March 26, 2019,
refers to 6-months LIBOR rate of different isbeing updated to reflect thechanges.
currencies or any other 6-month interbank
interest rate applicable to the currency of Thedirectionscontained in thiscircular havebeen
borrowing, e.g., EURIBOR”. Henceforth, issued under section10(4) and11(2) of theForeign
benchmark ratein caseof FCY ECB/TC shall ExchangeManagement Act, 1999(42 of 1999) and
refer to any widely accepted interbank rateor arewithout prejudiceto permissions/approvals, if
alternative reference rate (ARR) of 6-month any, required under any other law.
tenor, applicableto thecurrency of borrowing.
Sour ce:RBI/2021-22/135A.P. (DIR Seri es)
ii. Change in all-in-cost ceiling for new ECBs/ Circular No. 19, dated December 8, 2021
TCs: To takeinto account differencesin credit
risk and term premiabetween LIBOR and the For full text refer:https://www.rbi.org.in/Scripts/
BS_CircularIndexDisplay.aspx?Id=12204

Ahmedabad Chartered Accountants Journal Januar y, 2022 525

FEM A Updates AD banksmay bringthecontentsof thiscircular to
thenoticeof their constituentsconcernedandadvise
19 I ntr oduction of L egal Entity I dentifier entitieswho undertakelargevaluetransactions(Rs.
for Cross-bor der Tr ansactions 50 croreand above) under FEMA, 1999 to obtain
LEI in time, if they do not already haveoneissued.
The Legal Entity Identifier (LEI) is a 20-digit
number usedtouniquely identify partiestofinancial Entities can obtain LEI from any of the Local
transactionsworldwideto improvethequality and Operating Units(LOUs) accredited by theGLEIF,
accuracy of financial datasystems. LEI has been thebody tasked to support theimplementation and
introducedby theReserveBank inaphasedmanner use of LEI. In India, LEI can be obtained from
for participants in the over the counter (OTC) Legal Entity Identifier IndiaLtd. (LEIL) (https://
derivative, non-derivativemarkets, largecorporate www.ccilindia-lei.co.in), which isalso recognised
borrowersand l argevaluetransacti onsi n central i sed asan issuer of LEI by theReserveBank under the
payment systems. Payment and Settlement SystemsAct, 2007. The
rules, proceduresand documentation requirements
In order to further harness the benefits of LEI, it may beascertained from LEIL.
hasbeen decided that AD Category I banks, with
effect from October 1, 2022, shall obtain theLEI Thedirectionscontained in thiscircular arebeing
number fromtheresident entities(non-individuals) issued under sections 10(4) and 11(1) of the
undertaking capital or current account transactions Foreign Exchange Management Act (FEMA),
of ¹ 50 crore and above (per transaction) under 1999 (42 of 1999) and are without prejudice to
FEMA,1999.Asregardsnon-resident counterparts/ permissions/approvals, if any, required under any
overseasentities, in caseof non-availability of LEI other law.
information,AD Category I banksmay processthe
transactions to avoid disruptions. Further, AD Sour ce: RBI/2021-22/137A.P. (DIR Seri es)
Category I banksmay encourageconcernedentities Circular No. 20, dated December 10, 2021
to voluntarily furnish LEI while undertaking
transactionseven beforeOctober 1, 2022. Oncean For full text refer: https://www.rbi.org.in/Scripts/
entity has obtained an LEI number, it must be BS_CircularIndexDisplay.aspx?Id=12206
reportedinall transactionsof that entity,irrespective
of transaction size. hhh

AD Category-I banks shall have the required
systemsinplaceto capturetheLEI informationand
ensure that any LEI captured isvalidated against
theglobal LEI databaseavailableon thewebsiteof
the Global Legal Entity Identifier Foundation
(GLEIF).

526 Ahmedabad Chartered Accountants Journal Januar y, 2022

GST and VAT CA. Bihar i B. Shah CA. Vishr ut R. Shah
Judgments [email protected] [email protected]
and Updates
and pass a reasoned order upon hearing the
[I] I mpor tant CaseL aws: (High Cour t) petitioner.

[1] Issue: [2] Issue:

Refund can’t bedenied even if investigation No Pr ovisional attachment or der allowed
is pending against the assessee: Bombay once final or der in For m GST DRC-07 is
HC: passed: HC:

Case L aws: Case L aws:

Ever time Over seas (P) L td. v. Union of M ahavir Enter pr ise v. State of Guj ar at
I ndi a [ 2021] 133 t axmann.com 21 [2021] 132 taxmann.com 90 (Guj arat)
(Bombay)
Facts:
Facts:
The Competent Authority passed an order in
ThePetitioner filed refund application but the Form GST DRC-07 on assesseeand fixed its
application was rejected. The department tax liability to the tune of Rs. 3.56 crores.
submitted that claim for refund would not be Thereafter, theauthority passedanorder under
processed on theground that theinvestigation section 83 on the assessee and provisionally
was pendi ng agai nst the peti ti oner. The attached i ts property. It chal l enged the
petitioner filed writ petition and claimed that provisional attachment and filed writ petition
hewasentitled to refund under theprovisions against thesame.
of section 16 of theIGST Act.
Held:
Held:
The Hon’ble High Court observed that the
TheHon’bleHigh Court observed that asper only point of consideration in this case was
sub-section 10 of section 54 of theCGST Act, whether the authority could have passed an
the proper officer can withhold payment of order of provisional attachment of property
refund if registered person has defaulted in under section 83 after passing order in form
furnishing any return or required to pay any CST DRC-07. As per section 79(3), if any
tax, interest or penalty. However, application amount of tax, interest or penalty ispayable
to processtherefund would not berejected or by a person to theGovernment under any of
kept on hol d on the ground that the theprovision of thisAct or theRulethen such
investigationwaspending. Thus, inthepresent amount can berecovered by aproper Officer
case, the department was directed to process of StateTax or theUnion Territory asthecase
theapplicationmadeby thepetitioner for refund

Ahmedabad Chartered Accountants Journal Januar y, 2022 527

GST and VAT - Judgements and Updates be considered as a local authority. But the
applicant had not produced any documentsor
may be, asif it werean arrear of StateTax or evidencetoshow that ambulanceserviceswere
the Union Territory Tax. It is like recovery suppl i ed by i t to sati sf y condi ti on of
under theBombay Land RevenueCode. This performanceof municipal functionasper article
is possible or rather permissible only after 243W of Constitution. Therefore, theservices
proper attachment of any property of the of for renting of vehicles transportation of
assessee and it has nothing to do with the Covid-19 patients provided by the applicant
provisional attachment under section 83of the would be liable to tax and exemption would
Act. Therefore, it was held that order of not be available.
provi si onal attachment i n thi s case was
without jurisdiction [2] Issue:

[II] I mpor tant Case L aws: (AAR) Activity of pr oviding hostel on r ent for
amount lessthan Rs. 1000 per day isexempt
[1] Issue: from GST : AAR:

No GST exemption on r enting of vehicles Case L aws:
(r egister ed under tour i st categor y) for
tr anspor tation of Covid-19 patients: AAR: Ghodawat Eduser veL L P, I n re[2021] 132
taxmann.com 46 (AAR M ahar ashtr a)
Case L aws:
Facts:
Geetee Tour s (P) L td. I n r e [2021] 132
taxmann.com 245 (AAR – M ahar ashtr a) The applicant was engaged in services of
commercial training and coaching servicefor
Facts: students and it was also providing hostel
facility to the students on demand basis and
Theapplicant wasengagedinbusinessof tours chargi ng them addi ti onal l y. It fi l ed an
and travels. It entered into contract with application for advance ruling to determine
Municipal Corporation of Greater Mumbai whether the activity of providing the hostel
(M CGM ) to provi de Toyota, I nnova or on the rent to various students by applicant
equivalent car servicesfor carrying COVID- would beexempt.
19 patients for medical treatment. It filed an
application for advance ruling to determine Decision:
whether supply of thesevehiclesregistered in
Tourist Category withAll IndiaTourist Permit TheAuthority for AdvanceRuling observed
for carrying COVID-19 patients for medical that it was providing residential facilities
treatment would be considered as taxable which included, well-maintained furnished
servicesor exempted services. resi dence, L i ght, Water etc., and i n
consideration, it wascharging anominal lump
Decision: sum feeof Rs. 34,000/- per year per student,
which cameto Rs. 95/- (Approximately) per
TheAuthority for Advance Ruling observed day. The hostel was also available for the
that renting/leasing of vehicles along with studentsof thenearby schools.
driverswould becovered under pureservices
supplied to the MCGM, Mumbai which can

528 Ahmedabad Chartered Accountants Journal Januar y, 2022

As per the exemption under Entry No. 14 of GST and VAT - Judgements and Updates
Notification No. 12/2012 – Central Tax (Rate)
dated 28.6.2017, it wasfound that theservices of food kits etc. It filed an application for
provided by hostel, for residential and lodging advance ruling to determine whether CSR
purposes would be covered by the scope of activities to be considered as in course of
notificationentry wherethedeclared tariff of a furtheranceof businessand would beeligible
unit of anaccommodationwould bebelow one for ITC.
thousand rupeesper day. Thus, theactivity of Decision:
providing the hostel on the rent to various TheAuthority for Advance Ruling observed
studentsby applicant would beexempt where that asper theCompaniesAct, CSR activities
hostel fees charged per student per day shall are not activities undertaken in pursuance of
belessthan Rs. 1000/-. appl i cant’s normal course of busi ness.
Moreover, as per section 16(1) of CGST Act,
[3] Issue: 2017, a registered person is entitled to take
credit of input tax charged on any supply of
I TC not allowed on tax paid on goods or goods or services or both, which are used or
servicesprocured for CSR activities: AAR: intendedtobeusedinthecourseof furtherance
of hisbusiness. Therefore, it washeld that the
Case L aws: section 16(1) of the CGST Act bars CSR
activitiesfrominput/input servicesandthusnot
Adama I ndia (P) L td., I n r e [2021] 132 eligiblefor ITC.
taxmann.com 45 (AAR – Guj ar at).
hhh
Facts:

The appl icant was engaged in supply of
insecticides, fungicidesand herbicides. It was
spendi ng the mandatory amount on CSR
activities in the form of donations to the
Government relief funds/educational societies,
ci vi l works or i nstal l ati on of pl ant and
machinery in schoolsor hospitals, distribution

Ahmedabad Chartered Accountants Journal Januar y, 2022 529

GujRERA Corner

Penalty under RERA CA. M anan Doshi
[email protected]
Some Common malpractices because of which
RERA wasintroduced: accountability. When it comesto investment
in thissector, nobody knowswhat will happen
a. L ong del ays: M any buyers have faced next. Becausethosewho areresponsiblenever
unnecessary delayswhen it comesto getting taketheaccountability of thesame. TheRERA
possession of the property. Builders extend Act isdesigned to protect therightsof buyers
the time unnecessarily for years. According and promoteclarity & liability in thesector.
to research agency, theMumbai Metropolitan
Region & National Capital Region areworse The statutory Act of the Real-estate sector was
affected due to long delays in possession of introduced to regulate the unregulated housing
the property. Both the regi ons together sector by promoting transparency in the system,
contributeup to57%of theunder-construction protectingtherightsof buyers& imposingliabilities
residential stock in thecountry. Hence, long on defaulters. Let usdiscussdefaultsand penalties
delaysareoneof themost common problems for thesame:
exasperati ng the sector currentl y. A s
everything waslargely unregulated, thisgave Section 59:”(1) If any promoter contravenes the
buildersthefreedom to run thissector asper provisions of section 3, he shall be liable to a
their benefits. penalty which may extend up to ten per cent. of
the estimated cost of the real estate project as
b. Fund Deviation: Deviating fundsisnot arare determined by theAuthority.
practiceof builders. They collect fundsin the
name of one specific project but behind the (2) If anypromoter doesnot complywiththeorders,
back of the buyers, they deflect this amount decisionsor directionsissuedunder sub-section(1)
in someother project. Thisleadsto adelay in or continuesto violatetheprovisionsof section 3,
the completion of the project in which the he shall be punishable with imprisonment for a
buyershad invested their money. Buyersget term which may extend up to three years or with
trapped in aviciouscircle. They areforced to fine which may extend up to a further ten per cent.
wait for years& yearsfor their dream flat or of theestimated cost of thereal estateproject, or
building. with both.”

C. Clarity and Liability: Thereal-estatesector is Section 3 of The Real Estate (Regulation and
full of unwanted surprises for home-buyers. Development)Act 2016 statesthat:
The notori ous reputati on of thi s sector
represents a l ack of transparency & “(1) No promoter shall advertise, market, book,
sell or offer for sale, or invitepersonsto purchase
in any manner any plot, apartment or building, as
thecasemay be, in any real estateproject or part

530 Ahmedabad Chartered Accountants Journal Januar y, 2022

of it, in any planning area, without registering the Guj RERA Cor ner
real estateproject with theReal EstateRegulatory
Authority established under thisAct:… . esti mated cost of the real estate proj ect as
determined by theAuthority.”
Provided further that if the Authority thinks
necessary, in theinterest of allottees, for projects Section 61 is a residuary section wherein any
which aredeveloped beyond theplanning area but contravention by apromoter other than section 3
withtherequisitepermission of thelocal authority, or 4 of theact shall attract penalty upto 5% of the
it may, by order, direct thepromoter of such project estimated total cost of theproject.
to register with theAuthority, and theprovisionsof
thi s Act or the rul es and regul ati ons made Case laws in Gujarat pertaining to contravention
thereunder, shall apply to such projectsfromthat of section 3
stageof registration… ”
I. In case of project Damodar Park -I, form 3
Therefore, if at all apromoter advertises, markets, duly signed by a Chartered Accountant was
books, sells, offersfor sell to any allotees, section 3 submi tted at the ti me of regi strati on
shall beviolated and accordingly asper section 59 application with the status of “New project
penalty upto 10% of the estimated total cost of launch”.Asper thedetailscontained in Form
project may beleviedtothepromoter.Thesepowers 3, out of 35 units in the said project, 4 units
of authority are discretionary in nature. Penalty werebooked/sold. Theabovefactswerenoted
amount may differ from caseto case. by Guj RERA and accordingly notice was
issued to promoter for violation of Section 3
Section 60.” If any promoter provi des false of the Real Estate Regul ati on and
information or contravenes the provisions of Development Act, 2016 and opportunity of
section 4, he shall be liable to a penalty which being heard was granted. During the course
may extend up to five per cent. of the estimated of hearing, it wassubmitted by thepromoter
cost of the real estate project, as determined by that the project is located in the rural areas
theAuthority.” and dueto unawarenessthepromoter had the
noti on that the RERA regul ati on i s not
If any promoter provides any false information applicableto theproject located in theRural
regardingtheproject heshall beliabletopay penalty Areas.Asper Section 59(1) of theReal Estate
which may extend upto 5%. Section 4 talksabout Regulation and Development Act, 2016, the
documentation and details which are required to authority haspower to levy penalty upto 10%
be submitted by a promoter while applying for of estimated cost of the project (which in
project registration. Documentssuch asApproved above case was Rs 54,97,107/-). However,
Plans, titlereport of land,Affidavit anddeclarations considering thefactsand circumstanceof the
etc areextremely important.Any flaseinformation case, penalty of Rs 2 Lacs waslevied on the
by promoter shall attract ahugepenalty. promoter with thedirection that such amount
of penalty is to be paid from own funds and
Section 61. “If any promoter contravenesanyother cannot becollected from theallotees(buyers)
provisionsof thisAct,other thanthat providedunder or withdrawn from RERA designated bank
section 3 or section 4, or the rulesor regulations account of theproject.
made thereunder, he shall be liable to a penalty
which may extend up to five per cent. of the II. In caseof project named “ShreeNarayan city
scapes”, RERA registration was applied on
30.09.2017 wi th the status of “ongoi ng

Ahmedabad Chartered Accountants Journal Januar y, 2022 531

Guj RERA Cor ner therefore the said amount collect was not
“token money” but the whol e sal e
project”. The registration application was consideration.Asper thedetailsof agreement
rej ected by Guj RERA on 28.12.2018. of sale, it isevident that such agreement was
Subsequently, on 08.01.2020 the relevant executed from theyear 2017 to 2019 i.e. after
Authoritiesof Guj RERA conductedasitevisit the enactment of the A ct. Hence, the
and during thecourseof visit, it wasobserved submission given by the promoter was not
that theproject contains28 unitsout of which substantiating with theavailableevidence.As
13 uni ts were booked/sol d wi th RERA per Section 59(1) of theAct, theauthority has
registration. Accordingly, notice was issued power to levy penalty upto 10% of estimated
to promoter for violation of Section 3 of the cost of theproject (which in abovecase was
Act and opportunity of bei ng heard was Rs6,40,38,991/-). However, considering the
granted. During thecourseof hearing, it was factsand circumstanceof thecase, penalty of
submi tted by the promoter that after the Rs 2 Lacs was levied on the promoter with
enactment of RERA no booking/saleof units thedirection that such amount of penalty isto
has been done. All the mentioned booking/ be pai d f rom own funds and cannot be
sales are done before the enactment of the col l ected f rom the al l otees(buyers) or
RERA Act. It was also submitted that after withdrawn from RERA designated bank
therejection of registration application, again account of theproject.
registration was applied for in August 2020
and registration was granted on December hhh
2020. To verify the facts submitted by the
Promoter, theGuj RERA authority noted that
asper detailscontained in Form 3 submitted
at thetimeof registration inAugust 2020, the
project contained 53 units out of which 15
unitswerebooked/sold. Further, asper from
3, the amount of sale consideration of units
and amount collected from buyersweresame,

532 Ahmedabad Chartered Accountants Journal Januar y, 2022

Capital CA. K ar an Vor a
Markets [email protected]
· WB expects the i nfl ation to ri se due to
Summar y: pandemic resurgence, higher food and energy
World Bank report expectstheglobal economy to priceand supply disruptions. Thiscould lead
decelerate to in 2022 and 2023 due to risks of totighter fiscal andmonetary policiesespecially
diminished fiscal support and supply bottlenecks, inemergingmarket and developingeconomies
however Indian economy GDPgrowth will likely (EMDEs). (SeeChart)
bestrong at 8.3% in 2022 and 8.7% in 2023.U.S. · WB i s also concerned by risi ng income
consumer inflation washighest in last 4 decades. inequality aspandemichashit thelower income
There is a small note on the U.S. Feds policy of population highest.
QuantitativeEasing andTapering. · On positive side, WB expects the Indian
2021 wastheyear of IPOsastotal of 63 companies economy GDP growth at 8.3% in 2022 and
raised around Rs.1.2 lakh Crore through IPOs 8.7% in 2023. (Advanced estimatesof Indian
which isthehighest amount ever raised in asingle government are9.2% for FY22.)
cal endar year. Key M & A and PE Deal s of U.S. I nflation 4 decadehigh:
December includes Agritech platform Ninjacart · U. S. Consumer i nf l ati on was 6.8% i n
raising$145mnfromFlipkart,Walmart andAdvent November 2021 compared to a year earlier
International acquiring majority stake in digital which isthehighest inflation ratein4 decades,
engineering servicescompany Encora. last peak beingin1982. Priceincreasewasseen
Economic Update: across many sectors including gas, food and
Wor ld Bank Repor t: housing.
· World Bank (WB) said in its report “Global
· High inflation hasbrought criticism on Biden
economic prospects” in January 2022 that the government. However, Joe Bi den has
global economy, after rebounding 5.5% in maintained that inflationrateisonly transitory.
2021 (its strongest post-recession pace in 80
years) isexpectedtodecelerateto4.1%in2022 · Ontheother hand,Fedshavestarted takingfirst
on account of continued Covid-19 flare-ups, stepsto curb inflation.
diminishedfiscal support andcontinuedsupply
chain bottlenecks.
· It said that growth may soften further to 3.2%
i n 2023 as pent up demand wanes and
supporti vemacro-economi c pol i ciesunwound.

Ahmedabad Chartered Accountants Journal Januar y, 2022 533

Capital M ar kets · In response to Covid -19 pandemic a Feds
announced approx. $700 Billion of QE in
· Fedshavebegun tapering in November 2021. M arch 2020. A s of mi d-summer 2020
However, they haveavoided increasing ultra- additional $2Trillioninassetshavebeenadded
low interest ratesyet. to thebooksof Federal Reserve.

QuantitativeEasing and Taper ing: Trendsin Secondar y M ar kets:

· Quantitativeeasing (QE) isamonetary policy BSE Sensex went up by 1.73% to closeat 58,254
i n whi ch a central bank buys out the in December 2021 asagainst 3.45% down to close
government bonds and other l ong term at 57,261 in November 2021. Nifty 50 closed at
securitiesfromthemarket toincreasethemoney 17,354 which was2.18% higher asagainst 3.90%
supply. lower to closeat 16,983 in November 2021.

· Buyingsecuritiesincreasesliquidity andlowers Foreign Institutional Investors(FIIs) divested Rs.
i nterest rates and promote l endi ng and 35,494CrorewhileDomesticInstitutional Investors
investment. QE is employed when federal (DIIs) invested Rs. 31,231 Crore in the Indian
fundsrates arealready very low and can’t be equity marketsin themonth of December 21.
decreased further.

· QE increasescentral bank balancesheet size.
With QE the central banks run the risk of
inflation and currency devaluation.

· Tapering is the reverse of QE. When the Fed
systematically decreasestheamount of assets
it is purchasing each month it is known as
Tapering.

Equity M arkets Dec-21 Nov-21 Change%

Sensex 58,254 57,261 1.73%

Nifty 50 17,354 16,983 2.18%

BSE 500 23,811 23,277 2.29%

BSE Bankex 40,409 40,779 -0.91%

BSE Consumer Durables 44,768 43,101 3.87%

· QEwasemployedheavily after 2009crisisand BSE Healthcare 26,206 25,502 2.76%
continued till 2014.
BSE FMCG 13,785 13,689 0.70%

534 Ahmedabad Chartered Accountants Journal Januar y, 2022

Capital M ar kets

Majority of theBSE Indiceswent up in themonth Par ticular s Oct-21 Nov-21
of December. Thehighest increasewasInformation
Technology (10.07%) followed by Teck (8.13%). I . Equity I ssue 6,470 63,439
Amongst thestocksthat went down wereEnergy a. IPOs(i+ii) 3,047 36,305
(-1.31%) and Finance(-1.11%). i.MainBoard 2,939 36,195
ii.SMEPlatform
Pr imar y mar ket Update: b. FPOs 108 110
c. Equity Rights Issue 0 0
Therewere12 main board IPOsof Star Health and d. QIP/IPP
AlliedInsuranceCompany Limited,TegaIndustries e. Preferential Allotment 786 21,055
Limited, Anand Rathi Wealth Limited, RateGain I I. Debt Issue 1,210 5,617
Travel TechnologiesLimited, Shriram Properties 1,427 462
Limited, C.E. Info SystemsLimited, MetroBrands a. Debt Public I ssue 48,844
Limited, Medplus health Services Limited, Data b. Pr ivatePlacement of Debt 1,999 47,704
Patterns (India) Limited, HPAdhesives Limited, 46,845 50
Supri ya Li fesci ence Li mited and CMS Info Total FundsM obilised (I +I I )
Systems Limited in December 2021 as against 55,314 47,654
10main board IPOsin November 2021.
1,11,143
There were3 SM E I POS of DM R Hydro
engineering and Infrastructures Limited, Clara I POsin 2021:
Industries Limited and Brandbucket Media &
Technology Limited in December 2021 asagainst 2021 wastheyear of IPOs(Initial Public Offers).
2 SME IPOs in November 2021. Total of 63 companies raised around Rs.1.2 lakh
Crore through IPOs which is the highest amount
ever raised in asinglecalendar year.

Economic recovery following Covid-19 pandemic
and abundant li qui dity in the system due to
accommodative monetary policy provided ideal
conditions for companies to raise funds. Lot of
privateequity fundsalso madeexitswithattractive
returns.

Company Name Listed IPO Issue Listing Listing Listing Current Gain / Gain /
On
One 97 CommunicationsLtd. (PayTM) Size Price Day Day Day Price Loss Loss
Zomato Ltd. 18-Nov
Star Health and Allied Insurance Co Ltd. 23-Jul (Rs. Close Gain Gain (%)
PB Fintech Ltd. 10-Dec
SonaBLW Precision ForgingsLtd. Crore) (%)
FSN E-CommerceVenturesLtd. (Nykaa) 15-Nov
Nuvoco Vistas Corporation Ltd. 24-Jun 18300 2150 1564 -586 -27% 1318 -832 -39%
Indian Railway Finance Corporation 10-Nov
Chemplast Sanmar Ltd. 23-Aug 9375 76 126 50 66% 138 62 82%
CarTradeTech Ltd. 29-Jan
AptusValue Housing Finance IndiaLtd. 24-Aug 7249 900 907 7 1% 773 -127 -14%
AdityaBirla Sun LifeAMC Ltd. 20-Aug
Macrotech Developers Ltd. 24-Aug 5625 980 1203 223 23% 961 -19 -2%
Krishna Institute of Medical Sciences Ltd. 11-Oct
Sapphi re Foods I ndi a L td. 19-Apr 5550 291 363 72 25% 754 463 159%
28-Jun
18-Nov 5352 1125 2207 1082 96% 2114 989 88%

5000 570 531 -39 -7% 495 -75 -13%

4633 26 25 -1 -4% 23 -3 -11%

3850 541 535 -6 -1% 579 38 7%

2999 1618 1500 -118 -7% 845 -773 -48%

2780 353 347 -7 -2% 348 -5 -1%

2768 712 700 -12 -2% 536 -176 -25%

2500 486 463 -23 -5% 1240 754 155%

2144 825 996 171 21% 1492 667 81%

2073 1180 1216 36 3% 1204 24 2%

This is the list of top 15 IPOs based on the funds gainer on the day of listing followed by Clean
raised. Science and Technology Ltd. Medplus Health
Services Limited was the third highest gainer on
Performanceof theseIPOsvaried largely. FSN E- theday of listing. One97CommunicationsLimited
CommerceVenturesLtd. (Nykaa) wasthehighest

Ahmedabad Chartered Accountants Journal Januar y, 2022 535

Capital M ar kets · Indian investments of Advent include RA
Chem pharma, Aditya Birla Capital, Bharat
(PayTM) was the biggest loser on listing day serum and vacci nes, DFM f oods, Care
followed by CarTradeTech Limited. Hospi tal s etc.

Currently, CleanScienceandTechnology istrading Rationale:
above around 195% the issue price followed by
Nykaa which is trading at around 88% above the · Encora aims to accelerate its global growth,
issue price whereas Paytm is trading 39% below both organically and through targeted M& A
theissuepricein spiteof being thelargest IPO in opportunities, expanditsdifferentiateddelivery
Indian history. model and advanceitscustomer-facing digital
services.
M er ger s and Acquisitions(M & A) and Pr ivate
Equity (PE) key deals: · Venu Raghavan, co-f ounder and Chi ef
ExecutiveOfficer of Encoracommented that
M & A: Advent I nternational AcquiresM aj or ity Advent’s deep business and technol ogy
Stakein Encor a: servicessector expertise, along with itsglobal
footprint, complementsEncora’sstrengthsand
Tr ansacti on: createsopportunitiesto grow our businessin
key marketsaround theworld.
· Encora, a global digital engineering services
company, and Advent International, a global · Jan Janshen, Managing Partner at Advent
privateequity firm, announcedthatAdvent has commented that they believe Encora is well
acquired amajority stakein Encora’sbusiness positioned to capitalizeon thegrowing digital
at valuation of $1.5 Billion. servicesmarket, and they areexcitedtopartner
withVenu,Encora’stalentedmanagement team,
· Warburg Pi ncus, the exi sti ng maj ori ty and Warburg Pincusto support thecompany’s
shareholder of Encora, now retainsaminority growth in key marketsacrossNorthAmerica,
stake. Europe, India,AsiaPacific and LatinAmerica,
where Advent has a strong presence and
Encor a I nc.: domai n expertise.

· HeadquarteredinScottsdale,AZ, Encoraisinto · WarbugPincusmadesignificant returnsin this
software and digital engineering services. deal aswhileit hadacquired themajority stake
Encora provides differentiated innovation in Encora (then known as Indecomm Digital
services and software engineering solutions ServicesInc.) for $200MillioninAugust 2019,
across a wi de range of l eadi ng-edge it got exit inthisdeal at afirmvaluationof $1.5
technologies, including Big Data, analytics, Billion.
machinelearning, IoT, mobile, cloud, UI/UX,
andtest automation. PE: Agritech platform Ninjacart raises$145Mn
from Flipkar t, Walmart:
· Encorahasover 6,300associatesin40+ offices
andinnovationlabsacrossU.S., Mexico, Costa Tr ansacti on:
Rica, Brazil, Colombia, Peru, Bolivia, India,
and A si a Paci fi c. · Ninjacart, abusiness-to-businessmarketplace
for agricultural produce, hasraised$145million
Advent I nternational: in a fresh round of funding from existing
i nvestor Wal mart Inc., and i ts Indi an e-
· Founded in 1984, Advent International is a commercearm Flipkart.
global private equity investor. The firm has
invested in over 380 companies across 42
countries, and as of June 30, 2021, had $81
billion in assetsunder management.

536 Ahmedabad Chartered Accountants Journal Januar y, 2022