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Published by caaahmedabad, 2019-12-05 01:44:28



Ahmedabad Chartered Accountants Journal

E-mail : [email protected] Website : - caaahmedabad

Volume : 43 Part : 6 September, 2019


To Begin with

Editorial ............................................................................................CA. Nirav R. Choksi......................335

From the President............................................................................ CA. Anand S. Sharma...................336


Deemed Export Refund Under GST.................................................... CA. Jaykishan Vidhwani...............337

Direct Taxes

From the Courts.................................................................................. CA. C.R. Sharedalal &

CA. Jayesh C. Sharedalal...........340

Tribunal News.....................................................................................CA. Yogesh G. Shah &
CA. Aparna M. Parelkar............. 343

Unreported Judgements...................................................................... CA. Sanjay R. Shah.................... 348

Controversies.......................................................................................CA. Kaushik D. Shah....................350

FEMA & International Taxation

OECD’s Proposal for a “unified approach” for additional market CA. Dhinal A. Shah &
country tax.........................................................................................CA. Sagar V. Shah.........................353

FEMA Updates................................................................................... CA. Savan R. Godiawala..............359

Indirect Taxes

GST & VAT Judgments and Updates................................................... CA. Bihari B. Shah &
CA. Vishrut R. Shah.......................361

Corporate Law & Others

Corporate Law Update....................................................................... CA. Naveen R. Mandovara............364

Allied Laws Corner..............................................................................Adv. Ankit M. Talsania...................365

From Published Accounts ................................................................. CA. Pamil H. Shah..................... 371

From the Government ......................................................................CA. Ashwin H. Shah &
CA. Kunal A. Shah........................374

New Delhi Times................................................................................CA. Aniket S. Talati.................... 375

Association News.............................................................................. CA. Shivang R. Chokshi &
CA. Ketan G. Mistry....................378

Ahmedabad Chartered Accountants Journal September, 2019 333

CA. Nirav R. Choksi Journal Committee CA. Sarju Mehta
Chairman Members Convenor

CA. Ashok K. Kataria Ex-officio CA. Atul R. Shah
CA. Darshan A. Shah CA. Shivang R. Chokshi CA. Jayesh Sharedalal

CA. Nitesh J. Jain CA. Rajni M. Shah
CA. Ronak M. Khandwala CA. Shailesh C Shah

CA. Anand S. Sharma CA. Ketan G. Mistry


Members / Subscribers / Authors / Contributors

1. Journals are carefully posted. If not received, you are requested to write to the Association's Office within one

month. A copy of the Journal would be sent, if extra copies are available.

2. You are requested to intimate change of address to the Association's Office.

3. Subscription for the financial year 2019-20 is ` 1500/-, single copy ` 150/- (if available).

4. Please mention your membership number in all your correspondence.

5. While sending Articles for this Journal, please confirm that the same are not published / not even meant for

publishing elsewhere. No correspondence will be made in respect of Articles not accepted for publication, nor

will they be sent back.

6. The opinions, views, statements, results published in this Journal are of the respective authors / contributors

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

concur with the authors / contributors.

7. Life Membership/Annual Membership and Other Fees F. Y. 2019-20 Amount in `

1. Admission Fees Basic GST Total
2. Annual Membership Fees 500 90 590
a. If Paid Prior to june 30 of each financial year :
i. In case of membership (of ICAI) for a period of less than or equal to five years 600 - 600
ii. In case of membership of (ICAI) for a period more than five years, 750 - 750
b. If paid after june 30 of each financial year :
i. In case of membership (of ICAI) for a period of less than or equal to five years, 720 - 720
ii. In case of membership of (ICAI) for a period of more than five years 900 - 900
3. Life Membership Fees
i. In case of membership (of ICAI) for a period of less than or equal to five years 4000 720 4720
ii. In case of membership of (ICAI) for a period more than five years 7500 1350 8850
4. Brain Trust Membership Fees
a. Individual Membership Fees 1000 180 1180
i. In case of membership (of ICAI) for a period of less than or equal to five years 1200 216 1416
ii. In case of membership of (ICAI) for a period more than five years 3000 540 3540
b. Flexi Firm/Corporate Membership Fees***

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

Professional Awards

The best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and 'Allied
Laws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by experts in the
profession. Articles and reading literatures are invited from members as well as from other professional colleagues.

Published By

CA. Nirav Choksi, on behalf of Chartered Accountants Association, Ahmedabad, 1st Floor, C. U. Shah Chambers,
Near Gujarat Vidhyapith, Ashram Road, Ahmedabad - 380 014. Phone : 91 79 27544232
No part of this Publication shall be reproduced or transmitted in any form or by any means without the permission
in writing from the Chartered Accountants Association, Ahmedabad.
While every effort has been made to ensure accuracy of information contained in this Journal, the Publisher is
not responsible for any error that may have arisen.

Printed : Pratiksha Printer, Ahmedabad Mobile : 98252 62512 E-mail : [email protected]

334 Ahmedabad Chartered Accountants Journal September, 2019

Editorial [email protected]

In the testing times the Indian Economy is facing today, the role of Chartered Accountant is
becoming increasingly important. We are not only into compliance work but we are also advisors
to our clients and the public at large. In this time of despondency and helplessness which
every businessman is facing, we should stand shoulder to shoulder with them.

All our clients and the people with whom we interact take our words very seriously. If we start
propagating that the economy is under severe recession, the entrepreneurial mindset of our
clients will take a severe step back. It is not appropriate also on our part to show them a non-
existent rosy picture of businesses. There is surely a slowdown in business and only those
clients who are fundamentally strong will withstand this period and can make a turn around
when the opportunity is available. Each business is peculiar in its nature and operation and
therefore a common sentiment of recession cannot be applied to all businesses. Some may be
in the phase of change over, some may be in the phase of change of marketing techniques,
some may be impacted due to global recession factors, so on and so forth. We cannot have a
single yardstick for measuring the slowdown for all the businesses. We are fortunate enough,
due to our varied list of clients and widespread knowledge, to have in depth understanding of
many businesses. We have seen our clients make critical mistakes and we have also seen them
succeed from no hope positions. In fact we have lived their business adventures without
participating in the risk and the reward of their business. It’s time to use this experience of us.
It’s time to use our skills for calming their nerves and helping them in these critical times.

The Central and State Governments are realising that there will be tough times ahead and
drafting the policies accordingly. Whether these policies will be effective or not, only time
can tell. As of now, let’s focus back on our clients. Since majority of us have completed the
yearly compliances by now, we can extend the services to our clients which they desperately
need. A knowledgeable and diligent Chartered Accountant is a boon for a businessman. Let’s
add value to ourselves and the society around us.

As a Journal Committee Chairman I request that the members keep on sharing their knowledge
among other members of the association. A special request to the senior members of the
profession to kindly encourage and guide the younger members to contribute articles related
to our profession.

Feel free to write back to us on the official email ID of the association. Your feedbacks are
very important for us and we always look forward to qualitative and meaningful suggestions
given to us.

On Behalf of Editorial Board

CA. Nirav R. Choksi

Ahmedabad Chartered Accountants Journal September, 2019 335

From the CA. Anand S. Sharma

President [email protected]

Dear Professional Members, active in brand building by attending close meeting
along with other bodies with The Finance Minister
Honourable The Finance Minister Nirmala and discussion various issues that are faced by the
Sitharaman slashed the corporate tax rate for tax payers and professionals in compliances and
domestic companies to 22%from 30%, and even procedural aspects, Joint Seminar with GCCI under
lower to 15% for new manufacturing companies Sabka Vikas Scheme 2019 where Shri Ajay Jain,
that will be incorporated on or after 1st October Chief Commissioner, CGST, Ahmedabad
2019. The effective tax rate, including surcharge deliberated on the scheme introduced by
and education cess, will be 25.17% and 17.16%, Government of Gujarat, Association also became
respectively. This bold move by the government is a support partner with Young CII who organised
aimed to spur investment, revive growth and boost “Enterprising Giants” delivered by one of the
job creation. With the debate raging over structural successful entrepreneur Dr. A Aelymani.
problems in the Indian economy, the direct tax
reform will help companies improve their valuations I am pleased to inform that for the first time in
the medium term. The government hopes that a Association, Women’s’Committee was formed and
lower tax rate shall encourage corporates to invest first ever women centric program was organised by
further into future capacities. the Committee. I sincerely congratulate and thank
CA Diti Vashi, Chairperson, CA Krishna
India is keen to attract manufacturing companies that Khandwala, Convener and their team for successfully
are looking to diversify their production out of China. organising the program at one of the state of art
The latest scheme has made the country one of the Auditorium of KD Hospital. It is a start and I am
lowest tax jurisdictions in Asia Pacific Region. A hopeful in times and years to come this committee
lower rate comparable with Asian peers and that too will definitely give lot of value addition to Women
without any exemptions, will make large Indian Members and spouse of Members of theAssociation.
companies far more competitive, leave them with
more cash for investment. Allowing contract I am also pleased to inform that CA Association is
manufacturing under the framework will make it near to add 100 new members in a short span of six
easier for foreign investors to set up a base in the months. I request all members to kindly spread the
country along with their component suppliers. The word to young Chartered Accountants to become
above two decision of Government has really paved member of Association and take advantage of
way for domestic and foreign investors to invest in unique culture of study, entertainment and
business market and in turn, let us all be hope full togetherness that Association possesses.
that there will be bountiful work for professionals.
As rightly said by Chanakya “As soon as the fear
It is September and we all are busy with the Audits approaches near, attack and destroy it”. With so
and tax compliances and now with the addition much of changes in the entire economy and
GST we have one more dimension to keep ourselves compliances there is fear and anxiety but let this
abreast with. The new reforms in Tax Audit and fear and anxiety be not allowed within us to destroy
GST keeps us on our toes to meet the various us. Let us hail positively and with clarity of mind
deadlines. The horizons have widened for us and let us attack and destroy fear and anxiety before it
so have the challenges, but we Chartered start taking possession over our inner self.
Accountants have been well trained to provide with
the best practices and professional services on a Jai Hind ! ! !
continuous basis.
CA. Anand Sharma,
For CA Association this month was full of activities President
not only study related but Association has been

336 Ahmedabad Chartered Accountants Journal September, 2019

Deemed Export Refund CA. Jaykishan Vidhwani
Under GST [email protected]

Introduction Description of Supply
01. Supply of goods by a registered person against
“Deemed Exports” refers to supplies of goods
manufactured in India (and not services) which are Advance Authorisation
notified as deemed exports under Section 147 of 02. Supply of capital goods by a registered person
the CGST/SGST Act, 2017. The supplies do not
leave India and payment for such supplies is against Export Promotion Capital Goods
received either in Indian rupees or in convertible Authorisation
foreign exchange. 03. Supply of goods by a registered person to
Export Oriented Unit
Deemed exports are not zero rated supplies by 04. Supply of gold by a bank or Public Sector
default, unlike the regular exports. Hence, all Undertaking specified in the notification No.
supplies notified as supply for deemed export will 50/2017-Customs, dated the 30th June, 2017
be subject to levy of taxes i.e. such supplies can be (as amended) against Advance Authorisation
made on payment of tax and cannot be supplied For the purposes of the above notification, –
under a Bond/LUT. 1. “Advance Authorisation” means an
authorisation issued by the Director General
However, the refund of tax paid on the supply of Foreign Trade under Chapter 4 of the
regarded as Deemed export is admissible to either Foreign Trade Policy 2015-20 for import or
the supplier or the recipient. The application for domestic procurement of inputs on pre-import
refund has to be filed by the supplier or recipient basis for physical exports.
(subject to certain conditions) of deemed export 2. Export Promotion Capital Goods Authorisation
supplies, as the case may be. means an authorisation issued by the Director
General of Foreign Trade under Chapter 5 of
Meaning of Deemed Export the Foreign Trade Policy 2015-20 for import
of capital goods for physical exports.
As per Section 2(39) of CGST Act 2017, 3. “Export Oriented Unit” means an Export
“Section (2) Oriented Unit or Electronic Hardware
Technology Park Unit or Software Technology
.. Park Unit or Bio-Technology Park Unit
.. approved in accordance with the provisions of
(39) “deemed exports” means such supplies of Chapter 6 of the Foreign Trade Policy 2015-20.
goods as may be notified under section 147;” Procedure for Refund to be followed in case

Categories of supply of goods notified as Deemed of Deemed Export supplies.
Exports Deemed Export Refund

In exercise of powers conferred under Section 147 Claim by Supplier Claim by Recipient
of the CGST Act, the Central Government has
issued Notification no. 48/2017-Central Tax
dated 18.10.2017 wherein the following categories
of supply of goods has been declared as Deemed
Exports: -

Ahmedabad Chartered Accountants Journal September, 2019 337

Deemed Export Refund Under GST D. Documents to be submitted at the time of
filing of Manual Refund application
Option 1 Refund Claim by supplier of Deemed
Export supplies. - Online Form GST RFD-01A

Notification no. 49/2017-Central tax dated - Manual Form GST – RFD -01
18.10.2017 read with Circular no. 14/14/2017-
GST dated 06.11.2017 lays down the procedure - Undertaking by Recipient that No ITC has
and list of evidences which are required to be been availed by him and it shall not claim
produced by the supplier of deemed export supplies any refund. (As per Notification no. 49/
for claiming refund. 2017-Central tax dated 18.10.2017 ).

A. Prior intimation by recipient to its - Acknowledgment by Jurisdictional officer
Jurisdictional Officer and Jurisdictional of recipient that goods have been actually
Officer of Supplier received by the saidAdvanceAuthorisation
or Export Promotion Capital Goods
Intimation to be given in FORM A (appended Authorisation holder or endorsed invoice
to circular) bearing a running serial number copy by recipient. (As per Notification no.
containing the goods to be procured, as pre- 49/2017-Central tax dated 18.10.2017).
approved by the Development Commissioner
and the details of the supplier before such - Online Refund ARN receipt (RFD-01A)
deemed export supplies are made
- Letter of Authority
The said intimation shall be given by recepient
to – - Online GSTR – 3B for the relevant month

(a) the registered supplier; - GSTR 1 of May 2019

(b) the jurisdictional GST officer in charge of - Electronic Credit ledger
such registered supplier; and
- Acknowledgement of Manual Intimation
(c) its jurisdictional GST officer. of Intent of Procurement in form A to
Jurisdiction of Supplier and Receiver as per
B. The registered supplier thereafter will Circular No 14/14/2017-GST.
supply goods under tax invoice to the
recipient EOU / EHTP / STP / BTP unit. - Acknowledgement of Manual Intimation
of Actual Procurement in form B to
C. Intimation after receipt by recipient to its Jurisdiction of Supplier and Receiver as per
Jurisdictional Officer and Jurisdictional Circular No 14/14/2017-GST.
Officer of Supplier
- Statement 5B
On receipt of such supplies, the EOU / EHTP
/ STP / BTP unit shall endorse the tax invoice - Purchase Invoice and Extract of GSTR 2A
and send a copy of the endorsed tax and FORM the registered supplier;
B (appended to circular) invoice to –
Due to the non-availability of the refund module
(a) the registered supplier; on the common portal, it has been decided by
the competent authority, that the applications/
(b) the jurisdictional GST officer in charge of documents/forms pertaining to refund claims
such registered supplier; and on account of deemed export supplies shall be
filed and processed manually till further orders.
(c) its jurisdictional GST officer. Circular No. 17/17/2017-GST dated
15.11.2017 and Circular no. 24/24/2017-GST
The endorsed tax invoice will be considered as dated 21.12.2017 prescribing the detailed
proof of deemed export supplies by the procedure have been issued in this regard.
registered person to EOU / EHTP / STP / BTP

338 Ahmedabad Chartered Accountants Journal September, 2019

The above procedure and safeguards are in Deemed Export Refund Under GST
addition to the terms and conditions to be
adhered to by a EOU / EHTP / STP / BTP unit - Statement 5B
in terms of the Foreign Trade Policy, 2015-20
and the duty exemption notification being - Purchase Invoice and Extract of GSTR 2A
availed by such unit. the registered supplier;

Option 2 Refund Claim by recipient of Deemed Time Limit for filing refund claim
Export supplies.
For obtaining refund the recipient or supplier of
As per 3rd proviso to Rule 89(1) of CGST Rules, deemed export supplies has to file an application in
2017, application for refund in case of deemed FORM GST RFD-01 through the Common Portal,
exports can either be filed by the recipient of either directly or through a Facilitation Centre
deemed export supplies or the supplier. notified by the Commissioner before the expiry of
two years from, the date on which the return relating
A. Prior Intimation by recipient to its to such deemed export supplies is to be furnished
Jurisdictional Officer and Jurisdictional electronically.
Officer of Supplier. (As Supra Above)
Restriction on Export if benefit of Deemed
B. The registered supplier thereafter will Export is availed.
supply goods under tax invoice to the
recipient EOU / EHTP / STP / BTP unit. It may be noted that rule 89(4A) of the CGST
(As Supra Above) Rules, 2017 as amended vide Notification no. 75/
2017-Central Tax dated 29.12.2017 (w.e.f
C. Intimation After Receipt by recipient to its 23.10.2017), the recipient of deemed export
Jurisdictional Officer and Jurisdictional supplies can claim refund of input tax credit availed
Officer of Supplier. (As Supra Above) only in respect of other inputs or input services used
in making zero-rated supply of goods or services
D. Documents to be submitted at the time of or both, in case of deemed export supplies on which
filing of Manual Refund application the supplier has availed the benefit of notification
No. 48/2017-Central Tax dated 18.10.2017.
- Online Form GST RFD-01A
Further Rule 96(10) of the CGST Rules, 2017 as
- Manual Form GST – RFD -01 amended vide Notification no. 54/2018-Central Tax
dated 09.10.2018 also provides that the recipient
- Undertaking by Supplier that it shall not of deemed export supplies on which the supplier
claim any refund. has availed the benefit of notification No. 48/2017-
Central Tax dated 18.10.2017 cannot export on
- Endorsed invoice copy on receipt of payment of integrated tax.
goods. Online Refund ARN receipt
(RFD-01A) Author's Comment

- Letter of Authority If the supplier has availed the benefit of deemed
export as per notification No. 48/2017-Central Tax
- Online GSTR – 3B for the relevant month dated 18.10.2017, the recipient cannot export with
payment of IGST and has to compulsorily export
- GSTR 1 of May 2019 under LUT. The restriction is applicable only
against the procurement on account of Inputs
- Electronic Credit ledger against Advance Authorisation. The
aforementioned restriction is not applicable in
- Acknowledgement of Manual Intimation respect of procurement of capital goods against
of Intent of Procurement in form A to Export Promotion Capital Goods Scheme.
Jurisdiction of Supplier and Receiver as per
Circular No 14/14/2017-GST. ❉❉❉

- Acknowledgement of Manual Intimation
of Actual Procurement in form B to
Jurisdiction of Supplier and Receiver as per
Circular No 14/14/2017-GST.

Ahmedabad Chartered Accountants Journal September, 2019 339

From the

CA. C. R. Sharedalal CA. Jayesh C. Sharedalal

[email protected] [email protected]

Business loss v/s. Capital Gain on sale of Finding of fact and High Court

51 shares 52 Alpasso Industries Pvt. Ltd. v/s. ITO
Pr. CIT v/s. Hardik Bharat Patel (2019) 410 ITR 212 (Delhi)
(2019) 410 ITR 202 (Bom)
Issue :
How the finding of fact can be dealt with by High
On the facts, whether profit arising from sale of Court?
shares can be considered as business income or
capital gain? Held:

Held : A decision of a question of fact depends upon
appreciation of evidence and material placed before
For the assessment year 2008-09, the Tribunal the authorities. The Tribunal, as a final fact finding
directed the Assessing Officer to treat the profit of authority, has to determine and decide the questions
the assessee that arose out of the frequent and of fact in dispute by examination of evidence and
voluminous transactions initiated with borrowed material produced. Inference and conclusion based
funds in shares as “long term Capital Gains” instead upon appreciation of facts does not give rise to a
of as business income following its order for the question of law. A finding of the Tribunal on the
earlier assessment year. The Department contended facts does not become perverse merely because
that the amount invested in shares by the assessee another finding or conclusion was possible. The
was out of borrowed funds and therefore, the profit test and benchmark of perversity is stringent and
was to be treated as business income and not as strict. Factual findings can be only interfered with
long term capital gains. On appeal: when they are patently unreasonable, not supported
by any evidence or are based upon extraneous and
Held, dismissing the appeal, (i) that the Department irrelevant material. Interference may be justified
was bound by Circular No. 6 of 2016 dated when the conclusions are based upon mere
February 29, 2016 issued by the Central board of conjectures and surmises or where no person acting
Direct Taxes and the distinction which had been judicially and properly instructed under the relevant
sought to be made by the Department could not law could have come to the same decision and
override the circular which made no distinction conclusion.
whether the investments made in shares were out
of borrowed funds or out of the assessee’s own Specified domestic transactions: Sec.
funds. No question of law arose.
53 92BA/40A(2)(b)
That the issue whether the Tribunal was justified in HDFC Bank Ltd. v/s. Asst. CIT
directing the Assessing Officer to treat the notional (2019) 410 ITR 247 (Bom)
loss incurred on transaction as normal business loss
was concluded against the Department by the Issue:
decision of this court.
Specified transaction are explained by High Court
vis-à-vis sec. 92BA/40A(2)(b)

340 Ahmedabad Chartered Accountants Journal September, 2019

Held: From the Courts

For a specified domestic transaction there are two Delhi or on his behalf, as to why such a long time
types of pricing: the arm’s length price and the was taken in approving the proposal. In fact, there
transfer price. The arm’s length price is the price was no attempt to explain it. The applicant being a
between unrelated parties. This price is determined senior officer of the Revenue would undoubtedly
by market forces. Transfer price, on the other hand, be conscious of the fact that the time to file the
is the price of the transaction fixed between two appeals was running against the Revenue and there
related parties. Since these related parties are subject must be an averment in the application of the steps
to common control, the price of inter se transactions he was taking to expedite the approval process.
amongst the related parties can be manipulated to Further, there was no proper explanation for the
transfer profit from one party to another in order to delay after having received the approval from the
evade tax. It is for this very reason that the transfer Chief Commissioner at Delhi on May 29, 2017.
pricing provisions were brought into force by the No explanation was offered in the affidavits dates
Legislature so as to determine the arm’s length price September 16, 2017 for having filed the appeal on
of a transaction between related parties. If the July 20, 2017, i.e. almost after two months. The
transfer price is different from the arm’s length price delay could not be condoned.
the taxing officer can make adjustments after
following the provisions as set out in Chapter X of Sec. 80DD: Advice by Supreme Court
the Income Tax Act, 1961. Section 92BA sets out
the meaning of a specified domestic transaction and 55 to Government
stipulates that for the purposes of this section and Ravi Agrawal v/s. Union of India
sections 92, 92C and 92E” specified domestic (2019) 410 ITR 399 (SC)
transactions” in the case of an assessee, inter alia,
means the transactions set out thereunder from Issue:
clauses (i) to (vi). If they were to fall within the
term of a specified domestic transaction, they would Advice given to Government by Supreme Court in
be covered under clause (i) of section 92BA which respect of provisions of Sec. 80DD in respect of
provides that it should be a transaction between the payment of money to dependent disabled person,
assessee and a person referred to in section after death of assessee.
40A(2)(b) for an expenditure in respect of which
payment has been made or is to be made to such Held:
There could be harsh cases where handicapped
Condonation of delay in filing appeal by persons may need the payment on annuity or lump
Department sum basis even during the lifetime of their parents
or guardians. For example, where the guardian has
54 CIT(E) v/s. Lata Mangeshkar Medical retired from service and no longer has any source
Foundation of income. In such cases, it may be difficult for such
(2019) 410 ITR 347 (Bom) a parent or guardian to take care of the medical needs
of his or her disabled child. Even when he or she
Issue: has paid the full premium, the handicapped person
is not able to receive any annuity only because the
How to deal with delay in filing appeal by parent or guardian of such handicapped persons is
Department? still alive. However, it is for the Legislature to take
care of these aspects and to provide suitable
Held: provision by making necessary amendments in
section 80DD of the Act, We urge the Union of
The Chief Commissioner of Income Tax was also India to have a relook into this provision taking into
an officer of the Department and there was no consideration all the aspects, including those
explanation offered by the Chief Commissioner at highlighted by the court in this judgment, and
explore the possibility of making suitable

Ahmedabad Chartered Accountants Journal September, 2019 341

From the Courts

Condonation in filing Return of Income: The circular dated February 29, 2016 applied to
the assessee. The Tribunal was right in deleting the
56 How to be considered. addition made under section 68 upon sale of shares
Regen Powertech P. Ltd. v/s. CBDT when the Department had accepted the purchases
(Mad) (2019) 410 ITR 483 (Mad) of the shares in question as genuine and in holding
that the share transaction as investment and directing
Issue: the Assessing Officer to treat the sum as short/long
term capital gains and not business income.
How the application to condone the delay in filing
Return of Income is to be considered? Black Money (Undisclosed Foreign
Income and Assets) and Imposition of
58 Tax Act, 2015 and Persecution.
Once an authority has been conferred discretion to Shrinidhi Karti Chidambraram v/s.
condone delay, a highly pedantic approach should Principal Chief CIT
be eschewed, and a justice oriented approach (2019) 411 ITR 1 (Mad)
should be adopted and a party should not be made
to suffer on account of technicalities. Issue:

Once the authority has been conferred with If foreign assets are acquired out of amounts
discretion to condone the delay, the application disclosed in Books, whether prosecution is valid?
seeking condonation of the delay of 37 days could
not be rejected for such reasons as were assigned Held:
by the Board. The Board should exercise its
discretion in a proper manner. The delay had to be There was no false statement. Though a reply had
condoned. been given to the notice under section 10(1) of the
2015Act, no order had been passed and even before
Circular dt. 29/02/2016 in respect of the conclusion of the assessment proceedings,
capital gain on sale of shares, how to be sanction had been granted and prosecution
launched. It was an admitted fact that the foreign
57 followed. asset in each case was acquired with money that
Pr. CIT v/s. Remniwas Ramjivan Kasat was disclosed in the books of account of the assessee
(2019) 410 ITR 540 (Guj) (and tax paid) and which was remitted through
banking channels under schemes approved by the
Issue: RBI. There was no allegation of black money or
unaccounted money or money that had escaped tax
How circular dt. 29/02/2016 issued by CBDT is to or money that was remitted through illegal channels.
be construed for capital gain? It was not disputed by the Income Tax Department
that the source of investment was tax paid money
Held: remitted through banking channels in accordance
with schemes approved by the Reserve bank of
Circular dated February 29, 2016, issued by the India.
Central Board of Direct Taxes provides that in
respect of listed shares and securities held for a Reassessment notice on wrong facts:
period of more than 12 months immediately
preceding the date of their transfer, if the assessee 59 Effect thereof
desires to treat the income arising from the transfer Ankita A. Choksey v/s. ITO
thereof as capital gains that shall not be disputed (2019) 411 ITR 207 (Bom)
by the Assessing Officer and the Department shall
not pursue the issue if the necessary ingredients are Issue:
satisfied, the only rider being that the stand taken
by the assessee in a particular year would be Whether notice u/s 147/148 issued on incorrect facts
followed in the subsequent years also and the
assessee would not be allowed to adopt a contrary is valid? contd. on page no. 347
stand in such subsequent years.

342 Ahmedabad Chartered Accountants Journal September, 2019


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

Mahindra & Mahindra Ltd. v. DCIT Held

31 107 134 (Mum) The assessee-company sells its vehicles through a
Assessment Year:2007-08 Order dated: wide network of dealers spread across the country.
14 May, 2019 The purchaser of the vehicle is entitled for availing
certain number of free services of the same. The
Basic Facts value of the service coupons are factored by the
assessee into the sale price at the time of sale of
The assessee-company was engaged in vehicles to its dealers for an ascertained price. In
manufacturing automobile, vehicles, tractors, etc. turn, the dealer makes onward sales to the customers
It had made payment to its dealers towards service at a price which includes free service obligations.
coupons. The AO was of the view that the payment The dealers are obliged to render free services to
made by the assessee to its dealer was pursuant to a the customers on surrendering of the free service
contract, as per which the dealer was providing coupons by them. As at the time of sale of the
services on behalf of the assessee in lieu of money. vehicle, it is not ascertainable as to from which dealer
In fact, it was observed by the AO that as was the customer would avail the free services, therefore,
discernible from the ‘dealership agreement’, the the authorized dealer through whom the vehicle is
amount of the service coupon was based on the sold is not paid for the services at the time of the
cars sold by the assessee to the dealers. As such, sale. The assessee-company enters into a back up
the AO holding a conviction that as there was contract (appointment) with its dealers, as per which
principal-to-agent relationship in the aforesaid the dealers are obliged to provide free services to a
transaction, thus the assessee was obliged to deduct vehicle sold by the assessee through any dealer as
tax at source u/s 194C at the time of making of long as the same satisfies the conditions of warranty
such payment to the dealers. Due to a failure by against the service coupon. After the customer had
assessee to comply with the same, the AO availed the free service from the dealer on
disallowed the payment made to dealers towards surrendering of the service coupon, the latter in turn
service coupons under section 40(a)(ia). On appeal, is paid the predefined amount by the assessee-
the CIT(A) upheld the disallowance made by the company. Based on the arrangement, it was held
AO. Aggrieved, the assessee preferred an appeal that as the dealers provide free services to the
before the ITAT. vehicles of the customers in discharge of the
obligation of the assessee-company towards such
Issue customers, the assessee was the actual beneficiary
of the value of the services provided by the dealers.
Whether assessee was obligated to deduct tax
at source u/s 194C at time of making payment In view of the same it was held that the payments
to dealers in lieu of service coupons? made by the assessee to its dealers for providing
free services in lieu of service coupons was not in
Whether such payment was reimbursement of the nature of any reimbursement of expenditure
expenses or payment pursuant to contract? incurred by such dealers, and the nature of payment

Ahmedabad Chartered Accountants Journal September, 2019 343

Tribunal News Held

was consideration pursuant to a contract, as per The Hon’ble ITAT noted that the RBI’s terms of
which the dealer provided such services to the issue of bonds prohibits utilization of proceeds for
ultimate customers. Accordingly, it was held that trading purposes. The assessee had used the same
the assessee was obligated to have deducted tax at for business investments and for ongoing
source at the time of making of such payments capitalization programs, hence as per the Hon’ble
towards service coupons to its dealers. As the ITAT the gains were on capital account. Further, it
assessee had failed to do so, the said amount was was noted that in order to invoke the provision of
liable to be disallowed under section 40(a)(ia). Section 28(iv) of the IT Act, the benefit which is
received has to be in some other form rather than in
DCIT v. Pidilite Industries Ltd. 107 the shape of money. But in the given case the
amount was received as cash receipt due to the
32 91 (Mum) waiver of loan. Hence, the aforesaid condition of
Assessment Year: 2010-11 Order dated: Section 28(iv) of the Act are not satisfied and
06 June, 2019 accordingly, the same could not be brought to tax
under Section 28(iv). While so holding the Tribunal
Basic Facts relied on the Supreme Court decision in case of
Mahindra and Mahindra Ltd. 255 Taxmann 305
The assessee company is engaged in manufacturing & TheBombay High Court in Xylon Holdings (P.)
of adhesives. During assessment proceedings, it Ltd. 211 Taxmann 108 (Mag). The Hon’ble ITAT
transpired that the assessee reduced its business accordingly confirmed the decision of the CIT(A)
income by the amount of discount received by the and held in favour of the assessee.
assessee for FCCB buy-back. It was submitted that
during Financial Year 2007-08, the assessee issued Summit India Water Treatment &
zero coupon convertible bonds in foreign currency
mainly for capital expenditure and funding the 33 Services Limited vs PCIT107
international acquisitions. The FCCBs were 444 (Ahd)
convertible, at the option of the investor, any time Assessment year: 2013-14 Order Dated:
prior to their maturity. In case of maturity, the FCCB 27th May 2019
were to be redeemed at a premium. The net proceeds
was partly used for investment in foreign subsidiaries Basic Facts
and partly for ongoing capitalization programs. The
assessee, carried out buy-back FCCB at a discount, The assessee company was engaged in
as per permission granted by RBI. The deduction of manufacturing water treatment chemicals. It filed
the discount was claimed while computing business return of income declaring loss for the relevant
income, being capital receipts. However, the AO, assessment year. The AO passed assessment order
treating the same as income u/s 28(iv) and relying under section 143(3) accepting total loss declared in
upon the decision of Hon’ble Bombay High Court return of income. The PCIT noticed that during the
rendered in Solid Containers Ltd. v. Dy. CIT [2009] year under consideration, the assessee had made
178 Taxman 192/308 ITR 417, added the same to export sales to its US based related entity. On
the income of the assessee. The CIT(A) deleted the verification, it was found that the assessee had not
said addition. Aggrieved, the revenue preferred an filed Form 3CEB report electronically in respect of
appeal before the ITAT. the international transactions entered into by it.
Therefore, it was held that the assessment order
Issue passed by the AO under section 143(3) in the case
of the assessee was erroneous inasmuch as it was
Whether gain on buyback of FCCB at a prejudicial to the interest of the revenue by reason of
discount could be brought to tax under section

344 Ahmedabad Chartered Accountants Journal September, 2019

failure by the AO to make proper inquiry/verification Tribunal News
regarding the levy of penalty under section 271BA
and failure to make reference to TPO under section the AO on the ground that valuation was based on
92C. In the instant appeal, the assessee contended projection of revenue which did not match with the
that it had filed Form 3CEB report manually, actual revenues of the subsequent years. Further,
therefore, it could not be said that assessee had not the assessee made no efforts to substantiate its claim
furnished a report as required under section 92E. and also failed to provide any basis for its projection.
AO contended that instead of investing the amount
Issue of share premium to earn some income, the assessee
had made investment in debentures of its associate
Whether furnishing of Form 3CEB report company which does not justify the basic substance
electronically is mandatory as per Rule 12(2)? of receiving the high premium. The AO then took
fair market value of share premium at Nil and made
Held addition in accordance with section 56(2)(viib) of
the Act. On first appeal, the CIT(A) upheld the order
Even though it was contended by the assessee that of AO. The assessee being aggrieved made the
it had indeed filed report manually on 23/9/13, second appeal before ITAT.
though not electronically, the Hon’ble ITAT found
that it has been prescribed in the Rule 12(2) that it Issue
is mandatory that the assessee should furnish 3CEB
Report electronically with effect from 1-4-2013. In Whether AO can examine or substitute his own
view of the provisions of law, the assessee has not value in place of value of shares determined by
filed the aforesaid report electronically and as result the assessee as per section 56(2)(viib) r.w.r.
the case of the assessee could not be referred to the 11UA?
TPO by the AO. This issue was not examined by
the AO as the assessee has also not brought on record Held
reason for not filing the report electronically. To
that extent, the Hon’ble ITAT held that the PCIT The Hon’ble ITAT held that section 56(2)(viib) can
was justified in invoking the provision of section be invoked only if it has been demonstrated by the
263 holding that the order passed by the AO as revenue authorities that the entire motive for such
erroneous and prejudicial to the interest of revenue. issuance of shares on higher premium was tax abuse
It was also held that the assessee may submit which is not the case as it is the tax paid money of
corresponding reasons for not filing the Form 3CEB the investors duly disclosed and confirmed. Further,
electronically before the PCIT at the time of it has been held by the ITAT that if the statute provides
appellate proceedings. that the valuation has to be done as per the prescribed
method and one of the prescribed methods has been
Cinestaan Entertainment (P.) Ltd. vs. adopted by the assessee, then AO has to accept the
same and in case of dissatisfaction, there is no express
34 ITO 106 300 (Del) provision where AO can adopt his own valuation or
Assessment Year: 2015-16 Order dated: get it valued by some different valuer. Where the
27th May 2019 assessee gets the valuation done from a valuer, the
same cannot be rejected because neither theAssessing
Basic Facts Officer nor the assessee have been recognized as
expert under the law. Also, AO and CIT(A) cannot
During the year under consideration, for the purpose question the wisdom of outside investors who
of setting up business, the assessee company raised accepted the valuation as they will not make any
funds by way of equity shares which were issued investment merely tocarry out any charity albeit their
over and above the face value. The value was decision is guided by business and commercial
determined by a chartered accountant in accordance prudence to evaluate a start-up company like
with the rule 11UA(2) by using the ‘DCF Method’. assessee. Resultantly, the revenue’s approach cannot
However, the said valuation report was rejected by be sustained.

Ahmedabad Chartered Accountants Journal September, 2019 345

Tribunal News was also a flagship project of the Government of
India for sustaining its growth rate and to create the
35 Escorts Skill Developments vs. CIT(E) pool of skill worker to further enhance its growth
108 53 (Del) and development. These were charitable activities
Order dated: 26th April 2019 falling within the definition of charitable purpose
under section 2(15) being “Education”.
Basic Facts Accordingly, the assessee would be eligible for
registration under section 12AA and consequent
During the year under consideration, the assessee approval under section 80G. The appeal filed by
filed an application for registration under section the assessee was allowed and the CIT(E ) was
12AA before the commissioner which was rejected directed to grant registration under section 12AA
on the ground that the primary aim of forming the to the assessee and consequent approval under
assessee under section 8 of the Companies Act, section 80G.
2013 was merely to comply with the requirement
of Corporate Social Responsibility (CSR) of its Shree Khedut Sahakari Khand Udyog
parent company. Accordingly, activities carried out
by assessee did not partake the meaning of public 36 Mandli Ltd. vs. ITO 108
charitable company under section 2(15). The 258 (Surat)
assessee being aggrieved made an appeal before Assessment Year 2012-13, Order dated:
the ITAT. 19th July 2019

Issue Basic Facts

Whether assessee formed with object of Assessee is a cooperative society manufacturing
complying with requirement of CSR of its sugar and by-products and was in practice of
parent company was eligible for registration making payments to sugarcane suppliers over and
under section 12AA? above the price declared by the government for
particular crushing season. The price thus paid was
Held exempt in the hands of sugarcane growers being
agricultural income. The AO made an addition to
The Hon’ble ITAT held that there is a close the income of the assessee on the ground that price
arrangement vide which parent entity is not only paid over and above the statutory minimum price
able to redeem its CSR obligation but also at the with ulterior motive is a diversion of income in the
same time able to control the finances of the nature of ‘distribution of profits’ and hence is not
assessee. Further, it was held that the CIT(E) deductible as expenditure. On first appeal, the
declined the registration merely on the basis of CIT(A) confirmed the addition. Aggrieved, the
assumptions and presumptions by ignoring the fact assessee preferred an appeal before ITAT.
that the main activity of the assessee is providing
vocational training. As per the Tribunal, the CIT Issue
(E ) was only required to firstly satisfy himself if
the trust has been established for charitable activities Whether price paid to sugarcane growers over
and its activities are genuine for the purpose of grant and above the statutory minimum price be
of registration under section 12AA, rest of the allowed as deduction ?
suspicion and apprehensions raised by the
Commissioner (Exemption) can be taken care of Held
by the revenue at the time of framing assessment.
The Hon’ble ITAT based on the observations &
Further the objectives of assessee to establish & directions of the Supreme Court in the case of CIT
run educational institution like school, colleges, v. Tasgaon Taluka S.S.K. Ltd. (103
apprentice training, practical training classes, 57) dealing with case of sugarcane cooperative
vocational training, boarding facilities, NGO, restored the matter to the file of AO with directions
gurukuls, teaching classes, etc. in India & abroad
was imparting ‘skill development training’, which

346 Ahmedabad Chartered Accountants Journal September, 2019

in line with directions given by the Supreme Court Tribunal News
in the above case. The AO was directed to allow
deduction for the price paid under clause 3 of the the distribution of profits can only be qua the
Sugar Cane (Control) Order, 1966 and then payments made to the members. In so far as the
determine the component of distribution of profit non-members were concerned, the AO was directed
embedded in the price paid under clause 5A, by to consider the matter afresh by applying the
considering the statement of accounts, balance sheet provisions of section 40A(2) of the Act, as has been
and other relevant material supplied to the State held by the Hon’ble Supreme Court supra. The
Government for the purpose of deciding/fixing the Tribunal also directed that the assessee would be
final price/additional purchase price/SAP under this allowed a reasonable opportunity of hearing by the
clause. The amount relatable to the profit AO in such fresh determination of the issue. It was
component or sharing of profit/distribution of profit further made clear by the Tribunal that the assessee
paid by the assessee, which would be appropriation will be at liberty to raise any other argument
of income, would not be allowed as deduction, concerning the issue before the AO.
while the remaining amount, being a charge against
the income, will be considered as deductible ❉❉❉
expenditure. The Tribunal also made it clear that

contd. from page 342 From the Courts

Held: Issue:
When there is ambiguity, the interpretation should
The Assessing Officer had proceeded on be in favour of Assessee?
fundamentally wrong facts and come to the Held:
conclusion that income chargeable to tax had It is settled law that the rule of “strict interpretation”
escaped assessment. When this was pointed out by is the relevant one in so far as fiscal statutes are
the assessee, the Assessing Officer in his order concerned.
rejecting the objections raised by the assessee did If the interpretation of a fiscal enactment is in doubt,
not consider the factual position asserted by her. the construction most beneficial to the subject or
Thus, it could be concluded that the Department assessee should be adopted, even if it results in
did not dispute the facts stated by the assessee. The obtaining an advantage to the subject or assessee.
notice issued under section 148 was without
jurisdiction and therefore, quashed and set aside. ❉❉❉

Interpretation of statute: Ambiguity :

Interpretation in favour of Assessee.
60 Lakshadweep

Corporation Ltd. v/s. Addl. CIT

(2019) 411 ITR 213 (Ker) (FB)

Ahmedabad Chartered Accountants Journal September, 2019 347


In this issue we are giving gist of recent decision of CA. Sanjay R. Shah
Hon’ble ITAT, Ahmedabad in the matter of Gujarat [email protected]
Energy Transmission Corporation Ltd. in relation
to the validity of notice u/s 148 and the application for admission of additional
consequential reassessment u/s 147 of the Act when ground to challenge the notice u/s 148 and
the income was computed under MAT which remain the consequential reassessment
unchanged even after reassessment and the assessee proceedings u/s 147 of the Act. The
was assessed under MAT at the same income. permission was granted by the Hon’ble
Tribunal to move additional ground and the
We hope the readers would find the same useful. same was admitted.
2. The original assessment order was passed
In the Income Tax Appellate Tribunal u/s 143 (3) whereby total income was
‘C’ Bench, Ahmedabad assessed under normal provision at Rs.
NIL, whereas deemed income under MAT
Before Shri Pradip Kumar Kedia, Accountant provision of u/s 115JB was assessed at
Member & Rs.113.10 crores and thus accordingly the
assessee was assessed under MAT on
Shri Mahavir Prasad, Judicial Member income of Rs.113.10 crores.
ITA No. 3440/Ahd/2015
3. Thereafter, the AO issued notice u/s 148
(Assessment Year : 2008-09) (2) to re-open the assessment to disallow
the prior period expense of Rs.836.34
Gujarat Energy Vs. Deputy Commissioner Lakhs. Thus, even after the reassessment
order, the normal income continued to
Transmission Corpn. Ltd. of Income Tax stand at Rs. NIL whereas deemed income
u/s 115JB also stood at Rs.113.09 crores,
Sardar Patel Vidyut Circle 1 (1), that is the same as the originally assessed
income. In the background of this fact, the
Bhavan, Race Course Baroda-390007 assessee contended that there was no
escapement of income and hence
Circle, Baroda-390007 reassessment proceedings were invalid.
The assessee also relied on the decision of
PAN : AABCG4029R Hon’ble Gujarat High Court in the case of
India Gelatine and Chemicals Ltd. v/s
Appellant Respondent ACIT 364 ITR 649, which was also
followed in the case of Motto Tiles Pvt.
Appellant by : Shri Manish J. Shah, A.R. Ltd. v/s ACIT 386 ITR 280 (Guj.) to
Respondent by : Shri O.P. Sharma, CIT D.R. support his contention .

Date of Hearing : 24/09/2019 4. The DR on the other hand relied upon the
action undertaken u/s 147 /148 of the Act
Date of Pronouncement : 04/10/2019 and submitted that in view of Explanation


Gist Only

A. Facts of the case

1. The assessee challenged the disallowance
of prior period expense of Rs.836.34
Lakhs on merits before the Hon’ble
Tribunal. The assessee also moved an

348 Ahmedabad Chartered Accountants Journal September, 2019

2(c) below section 147 a completed Unreported Judgements
assessment can be re-opened even where
excessive loss or allowance has been wherein, the court in a case where the
claimed or where income chargeable to tax assessee had declared a loss of Rs.1.44
has been under assessed de hors the ultimate crores under the normal computation and
assessed income. In this scenario the case the assessment was framed on book profit
of the assessee should fall within of Rs.2.89, had held that even if the
Explanation-2 before section 147 and expenditure of Rs.116.86 lakhs is
hence reassessment should be upheld. disallowed, there would be no resultant
change in the petitioner’s tax liability since
Decision the petitioner had already paid much
higher tax and had allowed the petit ion.
The Hon’ble Tribunal after considering the rival It appears that the revenue has accepted
contention, held as under: the said decision and has not challenged
the same before the higher forum. The
“7. We have carefully considered the rival learned counsel for the respondent has
submissions. The limited controversy raised by urged that the decision requires
way of additional ground whereby the Tribunal reconsideration. Having regard to the facts
has been called upon to adjudicate as to and circumstances of the case, as well as
whether re-opening under s.147/148 of the Act the fact that the revenue has accepted the
in maintainable where tax liability as per book said decision, the court does not find any
profits computed under s .115JB of the Act is reason to refer the matter for consideration
not disturbed and also exceeds the total income to a Larger Bench.
determined as per normal provisions. We find
that the issue is no longer res integra in view of 12. In the light of the decision of this court in
the judgment rendered by Jurisdictional High the case of India Gelatine and Chemicals
Court. The Hon’ble Gujarat High Court in Ltd. (supra) having regard to the fact that
India Gelatine and Chemicals Ltd. (supra) has even if the entire amount which is proposed
observed that in the absence of any addition to to be added by the Assessing Officer is
the tax liability of the assessee computed under sustained, there would be no addition to
s.115JB of the Act (which exceeds the tax the tax liability of the petitioner and the
liability under normal provisions), the petitioner would still be governed by the
jurisdiction of the AO is ousted even if the provisions of section 115JB of the Act and
proposed disallowance of expenditure by the assessed on the same book profit , i t cannot
AO under normal provisions is sustained. The be said that there was sufficient material
view expressed in India Gelatine and before the Assessing Officer to form the
Chemicals Ltd. (supra) was adopted by the belief that income chargeable to tax has
Hon’ble Gujarat High Court Motto Tiles (P.) escaped assessment. The impugned notice
Ltd. vs. ACIT (2016) 386 ITR 280 (Guj). issued under section 148 of the Act,
therefore, cannot be sustained.
8. The relevant operative para in later decision
of Hon’ble Gujarat in Motto Tiles (P.) Ltd. 13. For the foregoing reasons, the petition
(supra) is reproduced hereunder: succeeds and is, accordingly, allowed. The
impugned notice dated 02.03.2015 issued
“11. Insofar as the second contention raised by the respondent under section 148 of the
on behalf of the petitioner is concerned, Income Tax Act, 1961 is hereby quashed
the controversy stands squarely concluded and set aside. Rule is made absolute,
by the decision of this court in the case of accordingly, with no order as to costs.”
India Gelatine and Chemicals Ltd. (supra)
contd. on page no. 363

Ahmedabad Chartered Accountants Journal September, 2019 349


Issue: CA. Kaushik D. Shah
[email protected].
Whether the term ‘Accumulated Profit’, appearing
in Section-2(22)(e) of the Income Tax Act, 1961, Bombay High Court held that for
would include ‘Capital Reserve’? computing accumulated profits, the
Assessing Authority is required to take into
Propositions: consideration the depreciation as provided
under the Income Tax Act and not as
· What is the Term- ‘Accumulated Profit’?: provided in the Companies Act as the
deemed dividend u/s 2(22)(e) is an
i) Accumulated Profits for a company which admissible income. [Refer also Star
is not in liquidation, shall include all profits Chemicals (P) Ltd. v CIT(1993) 203 ITR
of the company up to the date of distribution 11 (Bom)].
or payment. If the closely held company
gives loan or advance as per Sec-2(22)(e), · It is proposed that the word ‘Accumulated
it shall be up to the date on which loan or Profit’ does not include Capital Reserve.
advance is given to the shareholder/concern/
or any other person, as the case may be. View against the propositions:

ii) Therefore, accumulated profits should i) Share Premium account would not partake
include the credit balance of profit & loss nature of commercial profits and thus cannot
account, general reserves, investment be treated as accumulated profits [Dy CIT
allowance, capitalized profits and profits of v RadheShyam Jain (2013) 140 ITR 244
the year up to the date of distribution/ (Chandigarh)(Tri)].
liquidation. However, provisions and
reserves meant for specific liability, to the Share premium would not constitute
extent of the liability shall not be included. accumulated profits or even profits of the
Provision for income tax, provision for company. [CIN v Shree Balaji Glass
dividend, reserve for depreciation do not Manufacturing P. Ltd (2016) 386 ITR 128
form part of the accumulated profit. (Cal)].

iii) Accumulated Profits mean commercial ii) Share Forfeiture Receipts available with a
profits and not assessed income: The company are capital receipts and do not form
accumulated profits refer to the commercial part of accumulated profits. [Jai Kishan
profits accumulated by a company [Badiani Dadlam (2005) 4 SOT 138 (Mum)].
(P.K.) v CIT (1976) 105 ITR 642 (SC)]. This
case related to part of profits which were iii) Do accumulated profits include current
transferred to development rabate reserve profits and general reserves?
account and the same was capitalized.
However, in case of CIT v Pushparthy Packs - Explanation 2 to Section 2(22) provides
Pvt. Ltd. (2014) 98 DTR 65 (Bom), the that the expression accumulated profits
in sub clauses (a), (b), (d) and (e) shall
include all profits of the company up to
the date of distribution of payment and

350 Ahmedabad Chartered Accountants Journal September, 2019

in sub clause (c) shall include all profit Controversies
of the company till the date of liquidation,
subject to the exception provided therein. disbursement and expenditure in fact
- Accumulated profits include general
reserves [CIT v Shrinivasan (K.) (1963) - Further, Capitalisation of accumulated
50 ITR 788 (Mad)]. profit prior to such payment of loan or
advances, cannot be deemed as dividend
· Thus, it is very clear that Capital Reserve u/s 2(22)(e).
can be considered as a part of
‘Accumulated Profit’. - Share Premium is not accumulated
iv) The phrase “Accumulated Profit” does not
mean aggregate of assessed profits but · Share forfeiture receipts- are not
commercial profits. If certain disbursements accumulated profits (Jai Kishan Dadlam
have been disallowed in the assessment (2005) 4 SOT 138 (Mum))
proceeding, but the expenditure had in fact
been incurred, they should be excluded from · In the matter of Navnitlal C. Jhaveri v. CIT
Accumulated Profits. In computing (1971) 80 ITR 582 (Bom), Held:
commercial profits, all the disbursements
made and expenditure incurred for the - While calculating accumulated profits, an
purpose of business should be taken into allowance for depreciation at the rates
account. The following are the items which provided by Income Tax Act itself, has to
are to be included or excluded in computing be made by way of deduction.
accumulated profits:
Sr. Items to be excluded Items to be
No. included · The five instances of dividend enumerated
by this section in clauses (a) to (e) are cases
a) Provision for taxation Development of distribution or payment out of, or to the
extent of accumulated profits of the
and dividend Rebate company (Explanation 2). The ‘deemed’
dividend under this sub clause is not
b) Depreciation Refund of restricted to profit proportionate to the
Income Tax shareholding of the assessee in the capital
but it extends to the entire accumulated
c) Difference between Development profits. ‘Accumulated profits’means profits
depreciation Rebate Reserve in a commercial sense. The expression
calculated at the includes tax-free profit like agriculture
rate given under income, general reserve, development rebate
IT Act and rate reserve, credit balance and initial
adopted in books depreciation but not normal depreciation nor
provision for taxation and dividends. In the
View in favour of proposition: case of Girdhardas v. CIT, the Bombay
High Court has held that ‘accumulated
· In the matter of P.K. Badiani v. CIT (1976) profits’ referred to profits out of which
105 ITR 642(SC), Held: distribution was actually made.Any notional
income of the company on which company
- Accumulated profits mean commercial has been assessed but had not reached the
profits and not assessed income. It does company’s hands and which was not
not mean the aggregate of the assessed available for distribution among
income arrived at after disallowing

Ahmedabad Chartered Accountants Journal September, 2019 351

Controversies · Attention is also invited to the decision of
the ITAT Mumbai Bench F in the case of
shareholders could not be taken into account Vijay Furniture and Manufacture Company
for the purpose of this clause. Limited in ITA No. 7104/ MBM/2005 dated
9th July, 2008, where Para 9, it has been
· It appears that there is no bar for crediting held as under :
the capital profit on sale of the asset to the
capital reserve . All the decisions referred to - “In view of the facts and circumstances
in view against the proposition have been of the case , respectfully following the
rendered, are in the context of the fact that ratio laid down by the Hon.ble Supreme
such profits were credited to the profit and Court in Apollo Tyres Ltd., Vs
loss account and having regard to the CIT(supra) and the decision of Hon.ble
decision in the case of Apollo Tyres Bombay High Court in the case of CIT
Limited 255 ITR 273 (SC), it was held that Vs.M/s. Akshay Textiles Trading &
the same could not be excluded from the Agencies Pvt. Ltd., (supra), we do not
computation of book profits under Section find any merit in interfering with the order
115 JB of the Act. of the CIT(A) in holding that the
Assessing Officer has no power to recast
However, if the capital profits are credited the profits once it is certified by the
to capital reserve in the published accounts Statutory Auditors of the company and
the fact that the capital profits have been only those adjustments which are
credited to capital reserve, will have to be permitted by Explanation to sub - section
disclosed in the financial statements by way 2 of Section 115JA of the Act are to be
of notes so as to conform to AS4. made . Therefore , we uphold the order
of CIT ( A ) and dismiss the grounds of
It will also be better to disclose the treatment appeal raised by the Revenue.”
of taking the capital profit to capital reserve
under the balance sheet in the Directors’ · Thus, in view of the above, if capital profit
Report also. is directly credited to capital reserve, it
cannot be treated as part of accumulated
The following decisions also be referred to which profit.
are favorable to assessee & which support the
proposition in favour of assessee that when capital ❉❉❉
gain is directly credited to capital reserve the same
is not liable to tax u / s 115JB of the I.T. Act.

1. 304 ITR 401 (Bom) in the case of Akshay

2. 309 ITR 146 ( AT ) Mumbai in the case of
Kopran Pharmaceuticals

352 Ahmedabad Chartered Accountants Journal September, 2019

OECD’s Proposal for a “unified
approach” for additional
market country tax

CA. Dhinal A. Shah CA. Sagar Shah
[email protected] [email protected]

1. Executive summary reduction in their tax base. The report does not
indicate which countries are expected to see
On 9 October 2019, the Organisation for this adverse impact.
Economic Co-operation and Development
(OECD) released a public consultation 2. Detailed discussion
document outlining a proposal from the OECD
Secretariat for a “unified approach” under Pillar 2.1 Background
One (Secretariat Proposal) of the ongoing
project titled “Addressing the Tax Challenges In October 2015, the OECD released the
of the Digitalisaton of the Economy” (the Final Report on Action 1 (the Action 1
Consultation Document). The Secretariat Final Report), Addressing the Tax
Proposal does not represent the consensus view Challenges of the Digital Economy,
of countries that are members of the Inclusive together with the final reports on the other
Framework on Base Erosion and Profit 14 elements of the Action Plan on BEPS.
Shifting (BEPS). The Secretariat Proposal The Action 1 Final Report provides the
provides high-level suggestions on the scope OECD conclusions regarding the digital
of the new rules being developed under Pillar economy and recommended next steps to
One, an approach to the new nexus concept, address the tax challenges presented by its
and an approach for new and revised profit evolution. The Action 1 Final Report states
allocation rules. The Consultation Document that special rules designed exclusively for
does not address the Pillar Two work on the digital economy would prove
development of new global minimum tax rules. unworkable, broadly stating that the digital
economy cannot be ring-fenced because it
Interested parties are invited to submit “is increasingly becoming the economy
comments on the Consultation Document no itself,” and summarizes key features of
later than 12 November 2019. The OECD will evolving digital business models that the
hold a consultation meeting in Paris on OECD considers relevant for the overall
21 and 22 November 2019 to give stakeholders BEPS analysis. In addition, the Action 1
an opportunity to discuss their comments with Final Report considers broader direct and
the Inclusive Framework countries. indirect tax challenges raised by the digital
economy and evaluates options to address
The report to the G20 also includes a brief those challenges. However, the Action 1
outline of preliminary findings in the Impact Final Report does not recommend any of
Assessment of the Pillar One and Pillar Two the options analyzed and leaves it up to
proposals. The report indicates that the two individual countries to introduce any of
pillars taken together are expected to result in them as additional safeguards against
an overall increase in global tax revenues with BEPS.
a redistribution of taxing rights. It further
indicates that investment hubs with high levels In this regard, on 9 October 2019, the
of residual profits would be expected to see a OECD released a public consultation

Ahmedabad Chartered Accountants Journal September, 2019 353

OECD’s Proposal for a “unified approach” for additional market country tax

document with a proposal developed by taxing rights in favor of the user/market
the OECD secretariat for a “unified jurisdiction; and 4) all the proposals seek
approach” under Pillar One. The OECD simplicity, administrability, and increased
also held on the same date webcast where tax certainty through effective and binding
members of the Secretariat described the dispute prevention and resolution
Secretariat Proposal and discussed the mechanisms.
current status and next steps in the project.
Drawing on these commonalities, the
2.2 A “unified approach” under Pillar One Secretariat Proposal is designed to grant
new taxing rights to market jurisdictions.
The Consultation Document states that the The proposed “unified approach” would
proposal for a “unified approach” does not retain the current rules based on the arm’s-
represent the consensus view of the length principle in cases where they are
Inclusive Framework jurisdictions. The widely regarded as working as intended
Consultation Document emphasizes that but would introduce formula-based
the proposed “unified approach” is a solutions in situations where there are
Secretariat Proposal that is intended to increased tensions.
facilitate negotiations among the countries,
with the aim of achieving the objective of Scope
a political agreement among the Inclusive
Framework jurisdictions by the first half The Secretariat Proposal suggests that a
of 2020. “unified approach” under Pillar One
should focus on large consumer-facing
The Secretariat Proposal builds on the businesses. This would cover highly
alternative approaches for Pillar One digitalized business models and also
described in the February 2019 businesses interacting with final
Consultation Document and the customers. The Secretariat Proposal
commonalities among them identified in broadly defines large consumer-facing
the Programme of Work, taking into businesses as businesses that generate
account the views expressed during the revenue from supplying consumer
March 2019 Public Consultation, the products or providing digital services that
ultimate objective of these approaches, and have a consumer-facing element. In this
the different perspectives of the regard, the Secretariat Proposal notes that
jurisdictions participating in the Inclusive further work is needed to articulate the
Framework. scope of the “unified approach,” including
how to define a consumer-facing business
According to the Consultation Document, and how to deal with the supply of goods
the commonalities across the three and services through intermediaries, the
alternative approaches under Pillar One supply of component products and the use
(the “user participation” proposal, the of franchise arrangements.
“marketing intangibles” proposal and the
“significant economic presence” proposal) Moreover, the Secretariat Proposal
are the following: 1) all the proposals indicates that some sectors should be
envision a new nexus rule that would not carved out, citing extractive industries and
depend on physical presence in the user/ commodities in particular. It also notes that
market jurisdiction; 2) all the proposals go there should be further consideration of
beyond the arm’s-length principle and whether other sectors (e.g., financial
depart from the separate entity principle; services) should be carved out. In addition,
3) all the proposals would reallocate it indicates that consideration should be

354 Ahmedabad Chartered Accountants Journal September, 2019

OECD’s Proposal for a “unified approach” for additional market country tax

given to a size-base limitation (e.g., using the next question would be how much
the BEPS Action 13 country-by-country profit should be allocated to that
reporting €750 million revenue threshold). jurisdiction. The Secretariat Proposal
describes a new profit allocation rule that
New nexus is applicable to taxpayers within the scope
of the “unified approach” and that would
The Secretariat Proposal describes a new operate regardless of whether taxpayers
nexus concept that is not dependent on have an in-country marketing or
physical presence and is largely based on distribution presence (a permanent
sales that would be separate from the establishment or a subsidiary) or
existing permanent establishment concept. sell through unrelated distributors.
The new nexus would ensure that a
business that has sustained and significant The Secretariat Proposal suggests that the
involvement in the economy of a market new and revised profit allocation rules,
jurisdiction is taxable there, even if such a taken together with existing transfer
business is not physically present in that pricing rules, will need to be simple, avoid
jurisdiction. double taxation, and significantly improve
tax certainty relative to the current
The Secretariat Proposal suggests that the position. The rules should be applicable
simplest approach for the new nexus to both profits and losses in order to avoid
would be to define a revenue threshold. distortions. The Secretariat Proposal for a
The revenue threshold could be adjusted “unified approach” under Pillar One
depending on the size of the market proposes a three-tier mechanism for
jurisdiction and should take into account allocating profits.
certain activities, such as online
advertising services that are directed to 2.3 Pillar Two and Impact Assessment
non-paying users in that jurisdictions (even
though the revenue related to such activity In addition to an overview of the
may be recorded somewhere else). The Consultation Document on Pillar One, the
revenue threshold should also apply to report includes a brief update on the Pillar
groups that sell in a market through a Two work, noting that progress is being
distributor (whether a related or unrelated made on the Pillar Two work, with
local entity) in order to ensure neutrality agreement reached on the design of new
between different business models and rules to operate as a top-up to a fixed
capture all forms of remote involvement minimum rate of tax that will be agreed
in the economy of a market jurisdiction. on once other key design elements of the
minimum tax rules are finalized.
Moreover, the Secretariat Proposal
indicates that the new nexus should be a According to the report, it is hoped that
standalone treaty provision, operating on some of the main features of Pillar Two
top of the permanent establishment rule. can be agreed by the next meeting of the
It is suggested that taking this approach Inclusive Framework in January 2020,
would limit unintended spill-over effects while a political agreement on the
on other existing rules. architecture of Pillar Two is expected in
the first half of 2020.
New and revised profit allocation rules
The report also provides a brief update on
Once it is determined that a jurisdiction the work on the Impact Assessment, which
has the right to tax profits of a nonresident aims to measure the economic and tax
enterprise under the new nexus approach,

Ahmedabad Chartered Accountants Journal September, 2019 355

OECD’s Proposal for a “unified approach” for additional market country tax

revenue impact of the proposals. jurisdictions participating in the Inclusive
According to the report, the work has Framework. However, the proposal was
started but the final outcomes will depend developed by the OECD Secretariat to
on the design of the proposals and the facilitate negotiations among the countries
behavioral responses of countries and on a “unified approach” in an effort to
MNEs. Nonetheless, based on a make progress in the coming months so
preliminary assessment it is expected that that a political agreement on Pillar One
the combined effect of Pillars One and can be reached in the first half of 2020.
Two would be a significant increase in The re-allocation of taxing rights under
global tax revenues as well as a Pillar One has fundamental implications
redistribution of taxing rights to market for the international tax framework and
jurisdictions. Under this preliminary such changes would need to be
assessment, on average, low and middle- implemented simultaneously by all
income economies would be expected to jurisdictions in order to avoid double
gain from Pillar One, experiencing a taxation.
higher rate of increase in revenues than
high-income economies even though The complex issues underlying both the
larger market jurisdictions would be Pillar One and Pillar Two proposals will
expected to gain more revenue in absolute continue to be the subject of both policy
terms. Investment hubs, where the analysis and technical discussions among the
suggests that current levels of residual Inclusive Framework jurisdictions through
profit are high, would be expected to at least 2020. The Consultation Document
experience significant losses in tax base. underscores that the international tax
The report further indicates that MNEs changes being contemplated will have
operating in digital-oriented and implications well beyond digital
intangible-intensive sectors would be businesses and digital business models.
significantly impacted by both pillars. These proposals could lead to significant
changes to the overall international tax
2.4 Next steps rules under which multinational
businesses operate and could have
Interested parties are invited to submit important consequences in terms of
comments on the Consultation Document businesses’ overall tax liability and
no later than 12 November 2019. The countries’ tax revenues.
OECD will hold a consultation meeting
in Paris on 21 and 22 November 2019 to It is important for companies to follow
give stakeholders an opportunity to these developments closely as they unfold
discuss their comments with the Inclusive in the coming months and to consider
Framework countries. engaging with the OECD and policy
makers at both national and multilateral
On Pillar Two, the OECD expects to levels on the business implications of these
release a consultation document in early proposals. Companies should also begin
November 2019, be followed by a to evaluate the potential impact of these
consultation meeting in December 2019. changes on their business models.

2.5 Implications ❉❉❉

The Secretariat Proposal included in the
Consultation Document does not
represent the consensus views of the

356 Ahmedabad Chartered Accountants Journal September, 2019

Ahmedabad Chartered Accountants Journal September, 2019 357

358 Ahmedabad Chartered Accountants Journal September, 2019

FEMA CA. Savan Godiawala
Updates [email protected]

14 Voluntary Retention Route (VRR) for which would need to abide by the same terms and
Foreign Portfolio Investment in Debt conditions. FPIs can invest the income from their
investments through the route at their discretion, and
The Reserve Bank has been encouraging long-term such investments will be permitted even in excess
stable foreign portfolio investments. Towards this of the CPS.
end, separate limits have been carved out of the
General Investment Limit for FPIs with a long-term The first tranche of investment limits (`400 billion
view. The Reserve Bank launched the Voluntary for VRR-Govt and ` 350 billion for VRR-Corp)
Retention Route (VRR) in debt on March 1, 2019 were made available for allotment ‘on tap’between
under which FPIs can voluntarily commit to remain March 11, 2019 and April 30, 2019. Allotments
invested in a Committed Portfolio Size (CPS) for a amounting to ` 203.93 billion were made to FPIs
committed retention period (minimum period of under VRR-Corp under the aforesaid tranche. The
three years or as decided by the Reserve Bank). second tranche of investment limits (` 546.06 billion
Investments can be made in G-secs (including State forVRR-Combined) was opened on May 27, 2019,
Development Loans) and Treasury Bills (VRR- and will remain open for allotment till December
Govt) or in corporate bond instruments permitted 31, 2019 or till the exhaustion of the limits,
under FEMA (VRR-Corp) or in all the instruments whichever is earlier.
eligible under both VRR-Govt and VRR Corp
(VRR-Combined). Source:

Participating FPIs are provided special facilities such Annual Report 2018-2019 (Report of the Central
as permission to carry out repo/reverse repo Board of Directors on the working of the Reserve
transactions for cash management and the use of Bank of India for the year ended June 30, 2019
currency/interest rate derivatives to hedge currency/ submitted to the Central Government in terms of
interest rate risks. They are also given the flexibility Section 53(2) of the Reserve Bank of India Act,
to modulate their investments between 75 - 100 per 1934)
cent of CPS. Besides, investments through the VRR
are exempt from some macro-prudential measures, For full text refer:
viz., minimum residual maturity requirement,
concentration limit and single/group investor-wise
limits. At the end of the retention period, an FPI PDFs/0ANNUALREPORT 2018193CB8CB2D3
may (a) liquidate its portfolio and exit, or (b) DEE4 EFA8 D6F0F6BD 624CEDE.PDF
continue its investment under VRR for an identical
retention period, or (c) shift its investment to General The USD/INR Buy/Sell Swap: A New
Investment Limit subject to availability of limits
therein, or (d) hold its investments until its date of 15 Armour in RBI’s Liquidity
maturity or sale whichever is earlier. FPIs can also Management Toolkit
exit before the committed retention period by selling
their investments, fully or partly, to other FPI/FPIs A foreign exchange swap (FX swap) between two
parties involves the exchange of one currency for
another on an agreed date, price and tenor, with a

Ahmedabad Chartered Accountants Journal September, 2019 359

FEMA Updates managing liquidity include the Netherlands,Austria,
Germany, Belgium, Kuwait, the United Arab
subsequent re-exchange of these two currencies on Emirates, Oman, Malaysia and Thailand.
the maturity date. The FX swap is the most popular The Reserve Bank conducted two US$/INR buy/
over-the-counter foreign exchange instrument in the sell swaps with Authorised Dealers (ADs) –
global forex market. Nearly 91 per cent of the FX Category 1 banks, with the notified amount of US$
swaps had the US dollar as one of the currencies. 5 billion each for tenor of 3 years on March 26 and
The main reason for the popularity of FX swaps is April 23, 2019. The bids received in the two
the elimination of exchange rate risk, as the initial auctions, at US$ 16.3 billion and US$ 18.7 billion,
and terminal exchange rates are agreed upon at the respectively, amounted to more than three times the
time of the contract. FX swaps are usually used by notified amount of US$ 5 billion. The Reserve Bank
banks/financial institutions and their customers accepted US$ 5 billion in each of the auctions at
(multinational companies), institutional investors the cut-off premium of ¹ 7.76 and ¹ 8.38,
who want to hedge their foreign exchange positions, respectively, and simultaneously injected ¹ 345.6
and/or engage in speculation. Use of FX Swaps by billion and ¹ 348.7 billion into the banking system.
Central Banks Central banks in both advanced and The US dollar amounts mobilised through the swap
emerging economies have used FX swaps under auctions are reflected in the Reserve Bank’s foreign
differing circumstances. The Swiss National Bank exchange reserves for the tenor of the swap as well
used them as the main instrument for management as in the Reserve Bank’s forward liabilities.
of bank reserves, mainly because of the lack of
short-term government securities. The Monetary Source:
Authority of Singapore (MAS) actively uses FX
swaps for liquidity management in addition to direct RBI/2019-20/44 A.P. (DIR Series) Circular No. 06
borrowing/ lending, repos on Singapore dated August 16, 2019
Government Securities (SGS) and MAS Bills. The
Central Bank of the Russian Federation introduced For full text refer:
the US$/RUB sell/buy FX swaps in September
2014 for providing dollar liquidity support to h t t p s : / / w w w. r b i . o r g . i n / s c r i p t s / B S _ C i r c u l a r
Russian credit institutions. Saudi Arabia has used IndexDisplay.aspx?Id=11664
FX swaps to provide emergency liquidity during a
regional crisis, while SouthAfrica conducts special ❉❉❉
currency swaps from time to time with banks.
Bahrain has also used US dollar swap facility to
provide liquidity in special circumstances. Other
countries that have used the FX swap as a tool for

360 Ahmedabad Chartered Accountants Journal September, 2019

GST and VAT CA. Bihari B. Shah CA. Vishrut R. Shah
Judgments [email protected] [email protected]
and Updates
during the pendency of any proceedings
[I] Important Judgment/Decision: under section 62, if the Commissioner is
of the opinion that for the purpose of
[i] One important judgment delivered by protecting the interest of the Government
the Hon. Gujarat High Court on case revenue he may, by order in writing, attach
of Cengres Tiles Ltd. v. State of Gujarat. provisionally any property including the
Bank account belonging to the taxable
Facts of the Case: person.

Under the Central Goods & Service Tax, The Hon. Court observed that much before
the Department has seized the stocks of the notice under section 46 came to be
goods as well as Bank Accounts and being issued or rather, much before the
aggrieved, the appellant has filed a Writ assessment could be undertaken under
Petition before Hon. Gujarat High Court. section 62 of the Act, the authority
The Hon. Gujarat High Court has decided straightaway proceeded to pass orders of
the action taken by the department cannot provisional attachment of the goods as well
be in accordance with the law and as Bank accounts.
Provisional Attachment of goods as well
as Bank Accounts were quashed and set The Hon. Court held that such action,
aside. cannot be said to be in accordance with
law. The impugned orders of provisional
Gist of the Judgment: attachment of the goods as well as the Bank
Accounts were quashed and set aside. The
As per Section 62 of the CGST Act, a petition came to be disposed of accordingly.
registered person fails to furnish the return
under the Provisions of Section 39 & 45 [II] Important Case Laws (AAR):
even after the service of Notice u/s. 46, the
proper officer may estimate the tax liability The following case laws of AAR issued by
and issue the Asst. Order to the appellant. Madhya Pradesh and Maharashtra which are
However, as per section 83 of the CGST very important for the Practitioners in the field
Act, the officer has power for provisional of GST.
attachment to protect the revenue in certain
cases. As per the provision, it is necessary [i] Services Provided by school for
to forward the order in writing for organizing conference for students &
provisional attachment, then the officer has staff of other schools are chargeable to
to attach the stock and bank accounts. GST:

The Hon. Gujarat High Court held that Emarald Heights International School,
according to the scheme of theAct, section In re [2019] 109
83 would come into play only after the 377[AAR – Madhya Pradesh.
necessary action is taken under section 62
of the Act. Section 83 makes it clear that

Ahmedabad Chartered Accountants Journal September, 2019 361

GST and VAT - Judgements and Updates

The applicant is a school and is intending The applicant is engaged in management
to hold an educational conference. It will consultancy services to ship owners,
charge consideration in the form of fees logistics services through water, etc. It is
for hosting and managing the events in the going to enter into an outsourcing
conference. It was filed an application for agreement for which they will provide
advance ruling to determine the taxability backend services in respect of foreign
under GST for consideration received by business carried out by MSS Marine Ltd
the applicant from participant schools for in Hong Kong. For performing such
participation of students and staff in the services, the applicant will be reimbursed
conference. on actual basis salaries paid to its
employees, office rent and other office
The Authority for Advance Rulings, expenses. It has sought an advance ruling
Madhya Pradesh observed that supply of to determine whether GST will be
all services to an educational institution is applicable on such reimbursements or not?
not exempt. Only the services specified
under exemption notification are exempt. The Authority for Advance Rulings,
However, the services of holding and Maharashtra observed that the applicant is
organizing educational conference/ arranging or facilitating the business of its
gathering for students and staff of other foreign client by liaising with the
schools do not fall under any of the customers of foreign clients. Therefore,
services mentioned in the said exemption supply is not undertaken by the applicant
notification. Therefore, consideration is an intermediary and not acting as a pure
charged for such services is not exempt agent. The place of supply in the
from GST. intermediary case is the location of supplier
of services, i.e. the applicant in this case
Also, various services provided in the who is located in the taxable territory and
conference shall be liable to GST at the will be liable to discharge GST on such
rate applicable to the respective services. services provided by it.
For instance, the catering services shall be
liable to GST at 5% without eligibility for The reimbursements received by the
ITC. Similarly, security or cleaning or applicant relate to establishment costs
housekeeping services shall be liable to which would be incurred by it for running
GST at 18%. its office in India. In this case,
reimbursements are recovered in addition
The Authority for Advance Rulings. to management fees from its clients and,
Madhya Pradesh held that consideration therefore, it is to be considered as additional
received by applicant from other participant consideration charged for supply. As per
schools for participation in the conference the valuation provisions under GST, value
will be chargeable to GST. Also, services of supply will include all costs, including
provided for organizing the said the employee cost provided by one distinct
conference shall be liable to GST at the entity to other distinct entities.
rate applicable to the respective services.
The Authority for Advance Rulings,
[ii] GST applicable on reimbursement of Maharashtra held that GST will be
office expenses, salaries etc. done by the applicable on the salaries, office expenses,
foreign company to an Indian Entity. etc. reimbursed by the foreign company to
the applicant.
Maansmarine Cargo International
LLP, In re [2019] 109
372 (AAR – Maharashtra)

362 Ahmedabad Chartered Accountants Journal September, 2019

[iii] Service relating to conduct of online GST and VAT - Judgements and Updates
examination is a composite supply under
GST. provides services to completely manage the
conduct of examination electronically
Attest Testing Services Ltd. In re [2019] through facilitation of online booking of
109 366 (AAR – examination slots, setting-up questions,
Maharashtra) conducting exams at examination centers,
exam evaluation services etc. It charges
The applicant is engaged in providing fees on per hour basis. Under GST,
exam certification and other allied services. composite supply means two or more
It has entered into contracts with customers taxable supplies of goods or services which
to provide services such as conducting are naturally bundled and supplied in
online examination along with pre and conjunction with each other. Therefore, the
post-exam management processes. It has services of the applicant are naturally
sought an advance ruling to determine bundled with the principal supply of
whether service related to conduct of conduct of examinations.
online examination is to be treated as
composite supply or mixed supply under The Authority for Advance Rulings,
GST? Maharashtra ruled that service related to
conduct of online examinations provided
The Authority for Advance Rulings, by the applicant is a composite supply.
Maharashtra observed that the applicant

contd. from page 349 Unreported Judgements

9. In view of the unequivocal and clinching assessment notice is accordingly quashed and
observations made by the Jurisdictional High re-assessment order is declared null and void.
Court, we are not in a position to take any 10. As the assessee has succeeded on additional
indulgence at the plea of the Department for ground of legal nature itself, we do not seek to
maintainability of re-assessment notice and re- delineate on the merits of the disallowance of
assessment order having regard to legislative prior period expenses, nor the same has been
fiat by way of Explanation 2 to Section 147 of addressed in the course of hearing by either
the Act referred to and relied upon. Needless sides.
to say, Article 141 of the Constitution embodies 11. In the result, the appeal filed by the assessee
the rule of precedent. All the subordinate courts allowed.”
are bound by judgment of the High Courts.
Thus, governed by the decision of the Hon’ble ❉❉❉
Gujarat High Court as noted above, we find
merit in the plea raised by the assessee by way
of its additional grounds of appeal. The re-

Ahmedabad Chartered Accountants Journal September, 2019 363

Corporate CA. Naveen Mandovara
Law Update [email protected]
3. The Companies (Appointment and
MCA UPDATES: Qualification of Directors) Fourth
Amendment Rules, 2019:
1. National Financial Reporting Authority For the financial year ending on 31st March,
(Amendment) Rules 2019: 2019, the individual shall submit e-form DIR-
3 KYC or web form DIR-3 KYC-WEB, as
The MCA has amended the National Financial the case may be, on or before the 14th October,
Reporting Authority Rules, 2018, namely; 2019.
[F. No. 01/22/2013-CL-V dated 30.09.2019]
· Due Date for filing of a return in Form 4. The Companies (Registration Offices and
NFRA-2 with NFRA by the Auditors has Fees) Fifth Amendment Rules, 2019:
been changed from “30th April” to “30th Following Note has been inserted:
November” every year. Note: For the financial year ended on 31st
March, 2019, no fee shall be payable in respect
· The Form NFRA-2 (Annual Return to be of e-form DIR-3 KYC or DIR-3 KYC-WEB
filed by auditor with The National through web service till 14th October, 2019.”
Financial Reporting Authority) has been [F. No. 01/16/2013-CL-V (Pt-1) dated
inserted in the Rules. 30.09.2019]

[F. No. 01/04/2016-CL-I dated 05.09.2019] ❉❉❉

2. Relaxation of additional fees and extension
of last date of filing of Form BEN-2 and

The time limit for filing e-form No. BEN-2 is
extended up to 31.12.2019 without payment
of additional fee and thereafter fee and
additional fee shall be payable. Consequent to
the extension in the date of filing of e-Form
BEN-2, the date of filing of Form BEN-1 may
be construed accordingly.

[F. No. 01/01/2018-CL-V dated 24.09.2019]

364 Ahmedabad Chartered Accountants Journal September, 2019

Allied Laws Adv. Ankit Talsania
Corner [email protected]

Insolvency and Bankruptcy Code linked plan and the corporate debtor was
obliged to deliver possession within the
Recently, the National Company Law Appellate period of 30 months with a further grace
Tribunal in the case of Sunil Handa Vs. Today period of 120 days, failing which the
Homes Noida India Limited reported in (2019) corporate debtor was to pay
108 517 (NCLT-NEW DELHI) compensation, at the rate of Rs. 5 per sq.
held that under the Insolvency and Bankruptcy ft. per month for the area of each unit.
Code, where corporate debtor (real estate developer)
was required to deliver possession of respective 5. It was submitted by the financial creditors
units latest by 2016-17 but despite having received that as per the agreement, the possession
almost 90 per cent of purchase value of flats of the said flat had to be handed over latest
corporate debtor had not handed possession of said by the year 2016. It was stated that despite
unit, corporate debtor could not take a plea that it having received the almost 90 per cent of
had been granted time till 2021 to complete project the purchase value of the flats, the
in terms of RERA as provisions of IBC being later corporate debtor had till date neither
statute will override RERA and petition filed u/s 7 handed over the possession of the said unit
was to be admitted. nor had refunded the amount paid by the
financial creditors.
A. Facts of the Case :
6. The applicant had asked the corporate
1. The applicant/financial creditors is home debtor for compensation for the delayed
buyer (Mr. Sunit Handa) and he bought possession of the said apartment as per the
flat from Corporate Debtor (M/s. Today rules and provisions laid down under the
Home Noida Private Limited) and entered RERA Act, 2016. But there was
into a Flat Buyers Agreement dated deafening silence
7. The respondent-corporate debtor had filed
2. The Respondent Corporate Debtor is its reply and it was asserted that the
Private Limited Company and provisions of Real Estate (Regulation and
incorporated as on 11.09.2009 and its Development) Act, 2016 came into force
registered office situated at New Delhi. on 1-5-2016 and in terms of section 3 of
RERA, the respondent filed application
3. Home Buyer had paid almost 90 per cent for registration of its project namely Ridge
of the purchase value of the flats in respect Residency as an ongoing project before
of the Ridge Residency housing project the Real Estate Regulatory Authority, Uttar
in Noida. Pradesh. Thereafter, in terms of section 5
of the RERA, the said project was
4. According to Flat Buyer Agreement, the accorded registration and further time of
applicants were supposed to make all the four years had been granted to the
regular payments, towards the apartment corporate debtor for the completion of the
allotted to them, as per the construction

Ahmedabad Chartered Accountants Journal September, 2019 365

Allied Laws Corner the applicants had repeatedly requested the
Corporate debtor to deliver possession of
project. Therefore, for the completion of the said apartment and the Corporate
the project the time was extended till 30- debtor has failed to hand over the
6-2021. possession of the flat. It is further
submitted by the financial creditors that
8. The financial creditors in their rejoinder more than 60 months have elapsed and
also submitted that the corporate debtor the possession of said apartment has not
has not only admitted the fact that the been given to the applicant till date.
applicants had paid the amount claimed Therefore, the applicant had asked the
by them to the corporate debtor in lieu of Corporate debtor for compensation for the
purchase of units in a residential project delayed possession of the said apartment
called, ‘Ridge Residency’, but had also as per the rules and provisions laid down
admitted the fact that the CD has miserably under the RERA Act, 2016. But there is
failed to deliver possession of the said deafening silence.
residential units, even though as per the
builder buyer agreement the possession 3. The Respondent-Corporate Debtor has
was to be delivered within a time of span filed its reply and it is asserted that the
of 30 months from the date of agreement provisions of Real Estate (Regulation and
with a further grace period of 120 days. Development) Act, 2016 (hereinafter
There by admitting the existence of a referred to as RERA) came into force on
‘financial debt’ and a ‘default’. 1.05.2016 and in terms of Section 3 of
RERA, the Respondent filed application
9. The financial creditors filed application for registration of its project namely Ridge
under section 7, with a prayer to trigger Residency as an ongoing project before
Corporate Insolvency Resolution Process the Real Estate Regulatory Authority, Uttar
in respect of corporate debtor. Pradesh. Thereafter, in terms of Section 5
of the RERA, the said project was
B. Judgment from the Hon’ble National accorded registration and further time of
Company Law Tribunal : four years has been granted to the
Corporate Debtor for the completion of
1. As per the Petition submitted by the the project. Therefore, for the completion
Financial Creditor that as per the of the project the time is extended till
Agreement the possession of the said flat 30.06.2021.
had to be handed over latest by the year
2016. It is stated that despite having 4. The Corporate Debtor further asserted that
received the almost 90%of the purchase the Applicants have purchased the unit in
value of the flats, the Corporate debtor has question in 2011/2012 and that 5 out of
till date neither handed over the possession 11 Applicants have also filed their
of the said unit nor has refunded the Application under section 12(l)(c) of the
amount paid by the Financial Creditors. Consumer Protection Act bearing No. 76/
2017, before the Hon’ble National
2. The Financial Creditor had given details Consumer Disputes Redressal
of the total amount of the Financial debt Commission, thereby seeking possession
and the transaction on account which the of their respective Units/refund of the
debt fell due. The Total amount of financial amount paid by the Allottee.
debt as regards the financial creditors is
Rs. 4,18,23,303/- along with the interest
at the rate of 24% deposited on scheduled
dates as per flat buyers’ agreement. The
Financial Creditor further submitted that

366 Ahmedabad Chartered Accountants Journal September, 2019

5. The Financial Creditors sought the Allied Laws Corner
compensation from the respondent on the
basis of the clause 7.2 of the allotment in Part I, particulars of the corporate
letter, however the applicant has failed to debtor in Part II, particulars of the
point out that the payment of proposed interim resolution
compensation for delay in possession is professional in Part III, particulars of
subject to various other conditions the financial debt in Part IV and
including the conditions provided in clause documents, records and evidence of
itself. As per the same clause the period default in Part V. Under Rule 4(3),
of completion was subjected to various the applicant is to dispatch a copy of
conditions such as timely payment by the the application filed with the
applicant, force majeure conditions, adjudicating authority by registered
change in law, availability of the raw post or speed post to the registered
material, the circumstances beyond the of the corporate debtor. The speed,
reasonable control of the respondent. within which the adjudicating
authority is to ascertain the existence
6. The Applicants has filed rejoinder of a default from the records of the
controverting the averments made in the information utility or on the basis of
reply and reiterating the one made in the evidence furnished by the financial
application. Reliance has been placed on creditor, is important. Thus it must do
the following observations of the Hon’ble within 14 days of the receipt of the
Supreme Court in Innoventive Industries application. It is at the stage of
Ltd. v. ICICI Bank Ltd. [2017] 84 Section 7(5), where the adjudicating 320/143 SCL 625, which authority is to be satisfied that a
are follows: default has occurred, that the
corporate debtor is entitled to point
’28. When it comes to a financial creditor out that a default has not occurred in
triggering the process, section 7 the sense that the “debt”, which may
becomes relevant. Under the also include a disputed claim, is not
Explanation to Section 7(1), a default due. A debt may not be due if it is
is in respect of a financial debt owed not payable in law or in fact. The
to any financial creditor of the moment the adjudicating authority is
corporate debtor — it need not be a satisfied that a default has occurred,
debt owed to the applicant financial the application must be admitted
creditor. Under Section 7(2), an unless it is incomplete, in which case
application is to be made under sub- it may give notice to the applicant to
section (1) in such form and manner rectify the defect within 7 days of
as is prescribed, which takes us to the receipt of a notice from the
Insolvency and Bankruptcy adjudicating authority. Under sub-
(Application to Adjudicating section (7), the adjudicating authority
Authority) Rules, 2016. Under Rule shall then communicate the order
4, the application is made by a passed to the financial creditor and
financial creditor in Form 1 corporate debtor within 7 admission
accompanied by documents and or rejection of such application, as the
records required therein. Form 1 is a case may be’.
detailed form in 5 parts, which
requires particulars of the applicant 7. The Financial Creditors in their rejoinder
also submitted that the Corporate Debtor
has not only admitted the fact that the

Ahmedabad Chartered Accountants Journal September, 2019 367

Allied Laws Corner

Applicants herein had paid the amount force of The Real Estate (Regulation and
claimed by them to the Corporate Debtor Development) Act, 2016 (“RERA”), the
herein in lieu of purchase of units in a Application of the Applicants herein is not
residential project called, “Ridge maintainable before this Hon’ble
Residency” in Sector 135, Noida Tribunal, on account of the existence of
Expressway, but has also admitted the fact an alternative remedy. It is submitted that
that the CD has miserably failed to deliver section 5 (8)(f) which reads as under:
possession of the said residential units,
even though as per the builder buyer ‘5. Definitions
agreement the possession was to be
delivered within a time of span of 30 (8) “financial debt” means a debt
months from the date of agreement with a alongwith interest, if any, which is
further grace period of 120 days. Thereby disbursed against the consideration
admitting the existence of a ‘financial debt’ for the time value of money and
and a ‘default’. includes—

8. Further, Section 88 of RERA provides (f) any amount raised under any other
that RERA shall be in addition to, and not transaction, including any forward
in derogation of, the provisions of any sale or purchase agreement, having
other law for the time being in force. the commercial effect of a borrowing;
Further, Section 89 of RERA provides
that the provisions of RERA shall have Explanation:- For the purposes of this
effect, notwithstanding anything sub-clause
inconsistent contained in any other law for
the time being in force. Likewise both (i) any amount raised from an
statues operates in different fields and in allottee under a real estate project
any case section 238 has a non-obstante shall be deemed to be an amount
clause which would prevail over the having the commercial effect of
provision of RERA, Section 238 of the a borrowing; and
IBC provides that the provisions of the
IBC are to have effect, notwithstanding, (ii) the expressions, “allottee” and
anything inconsistent therewith contained “real estate project” shall have
in any other law for the time being in force the meanings respectively
or any instrument having effect by virtue assigned to them in clauses (d)
of any such law. The admission of an and (zn) of section 2 of the Real
application under the IBC results in the Estate (Regulation and
commencement of the corporate Development) Act, 2016;’
insolvency resolution process while a
complaint under RERA could result in the 10. The Financial Creditors have further relied
adjudicating authorities imposing penalties on the judgment of the Hon’ble Supreme
on the promoter and an order for return of Court of India Chitra Sharma v. Union of
money to the home buyer with interest and India [2018] 96 216/148
compensation. SCL 833. The observations of the
Supreme Court supports the case of the
9. It was also contended by the Financial Financial Creditor and the same reads as
Creditors that the main contention under:
advanced by the Corporate Debtor in its
reply is that on account of the coming into “27 As a result of the amendment brought
about in the definition of’ ‘financial
debt’, amounts raised from allottees
under real estate projects are deemed

368 Ahmedabad Chartered Accountants Journal September, 2019

to be amounts “having a commercial Allied Laws Corner
effect of a borrowing”. Hence
outstandings to allottees in real estate agreement, the Corporate Debtor was
projects are statutorily regarded as required to deliver possession of the
financial debts. Such allottees are respective units latest by the year 2016-
brought within the purview of the 17. Thus, the period of default has
definition of financial creditors.” commenced latest by the year 2016-17 for
the applicants and is still subsisting
Further, the Section 2(d) of RERA is as whereas the present application was filed
under: in July 2018.

‘“allottee”, person to a real estate project, 13. The contention of the Corporate Debtor
means the person to whom a plot, is that it has been granted time till 2021 to
apartment or building, as the case may be, complete the said project. We find that the
has been allotted, sold (whether as freehold argument is completely fallacious, in as
or leasehold) or otherwise transferred by much as the same would not absolve the
the promoter, and includes the person who CD of its liability to honor the
subsequently acquires the said allotment commitment made to the applicants herein
through sale, transfer or otherwise but as per the builder buyer agreement for the
does not include a person to whom such purposes of the Code. Merely because
plot, apartment or building, as the case may the builder has been provided a
be, is given on rent’ different time-line for completion of the
project to the RERA would not cut any
11. The said period having elapsed and the ice because IBC override RERA and
Corporate Debtor having failed to secondly the financial creditor is not a
deliver possession of the said flats, there party to any such transaction.
is a clear default committed by the Moreover, there is contravention of clause
Corporate debtor which is correct 7.1 of the agreement and has also not paid
position taken by the financial creditor refund or any compensation to the unit
to put in statutory slot and we may refer holders as agreed in the builder buyer
to Section 3(12) of the Code and the same agreement.
is reproduced hereunder:
14. It is settled principle of law that
(12) “default” means non-payment of wherever time is the essence of a
debt when whole or any part or contract in such types of construction
installment of the amount of debt has contracts, the builder is required to
become due and payable and is not adhere to the date of delivery mentioned
repaid by the debtor or the corporate in the builder-buyer agreement despite
debtor, as the case may be; the presence of similar reservations in
the contract. We are supported by the
12. The Financial Creditors have rightly observations of Hon’ble National
argued that the period of default has Consumer Disputes Redressal
commenced from the date when the Commission in the case of Pradeep Narula
Corporate Debtor was required to v. Granite Gate Properties (P.) Ltd. 2016
deliver possession of the respective SCC Online SCDRC 1050. The learned
units. In the present case, the flat buyer commission has negatived a similar
agreements in respect of all the applicants contention and held as under:
was executed between 2011-13.
Accordingly, as per the Clause 7.1 of the ‘5. Despite use of the words “the
company shall endeavor to complete

Ahmedabad Chartered Accountants Journal September, 2019 369

Allied Laws Corner them. Moreover, RERA was notified on
1st May, 2016 and IBC was notified later
the construction”, I am of the view on different dates commencing from
that unless prevented by reasons 05.08.2016. The provisions of Section
beyond its control, the opposite party 238 were enforced with effect from
was under a contractual obligation to 1.12.2016. It is well settled that the later
complete the construction and hand statues would override the earlier one on
over possession of the apartments to account of its overriding provisions as the
the complainants within 39 months law maker are supposed to have
from the date of allotment.’ knowledge of all existing laws.

15. The Hon’ble Member further of the view 17. So on that basis u/s 7 of the IBC Code,
that the Corporate Debtor has proceeded the application filed by the Financial
on incorrect premise of Section 89 of creditor has to be satisfied and admitted
RERA. The provisions of RERA cannot on those reasons (i) Default has occurred
override the non-obstante clause laid by the Corporate Debtor (ii) Application
down under Section 238 of IBC which filed by the Petitioner is complete and (iii)
reads as under: No disciplinary proceeding against the
proposed IRP is pending.
“238. Provisions of this Code to override
other laws- The provisions of this 18. The Judgment in this matter could not be
Code shall have effect, pronounced earlier as the issue concerning
notwithstanding anything constitutional validity of explanation to sub
inconsistent therein contained in any section 8 (f) of Section 5 of the Code, 2016
other law for the time being in force was subject matter of challenge before
or any instrument having effect by Hon’ble the Supreme Court in a bunch of
virtue of any such law.” petitions. In the lead case titled as Pioneer
Urban Land & Infrastructure Ltd. v.
16. It is a settled principle of law that a non- Union of India [2019] 108
obstante clause has effect only in case 147. We have gone through the order and
of a conflict between two statutes. It is find that the directions issued by the
submitted that RERA and IBC work Hon’ble Supreme Court do not in any
in two different fields, while the former manner advance the case of the Corporate
has been enacted with a view to regulate Debtor and the petition deserves to be
and promote the real estate sector while admitted. It may also be noticed that at no
ensuring the protection of consumer stage possession has been offered and the
interest; the latter seeks to consolidate denial of possession does not arise.
the law relating to insolvency and
bankruptcy and ensure resolution of 19. Hence, petition has been admitted.
insolvency of corporate persons, firms
and individuals in a time bound ❉❉❉
manner. Thus, there is no question of a
conflict between the two enactments
and both will have an overriding effect
in the fields exclusively assigned to

370 Ahmedabad Chartered Accountants Journal September, 2019

From CA. Pamil H. Shah
Published [email protected]
“Fair values are categorised into different levels in
Fair Value Measurement - a fair value hierarchy based on the inputs used in
Annual Report 2018-19 the valuation techniques as follows.

Indostar Limited Level 1: quoted prices in active markets for identical
assets or liabilities.
2.3 (VII) (b) Fair Value Measurement
Level 2: inputs other than quoted prices included
On initial recognition, all the financial instruments in level 1 that are observable for the asset or liability,
are measured at fair value. For subsequent either directly or indirectly.
measurement, the Company measures certain
categories of financial instruments as explained in Level 3: inputs for the asset or liability that are not
note 31 at fair value on each balance sheet date. based on observable market data.
Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly If the inputs used to measure the fair value of an
transaction between market participants at the asset or a liability fall into different levels of the fair
measurement date. value hierarchy, then the fair value measurement is
categorised in its entirety in the same level of the
The fair value measurement is based on the fair value hierarchy as the lowest level input that is
presumption that the transaction to sell the asset or significant to the entire measurement.
transfer the liability takes place either:
i. In the principal market for the asset or liability, The Company recognises transfers between levels
of the fair value hierarchy at the end of the reporting
or period during which the change has occurred, if any
ii. In the absence of a principal market, in the most
Alkem Laboratories Limited
advantageous market for the asset or liability
2b (e) Fair Value Measurement
A fair value measurement of a nonfinancial asset
takes into account a market participant’s ability to Some of the Company’s assets and liabilities are
generate economic benefits by using the asset in its measured at fair value for the financial reporting
highest and best use or by selling it to another market purposes. Central corporate treasury team works
participant that would use the asset in its highest with various banks for determining appropriate fair
and best use. value of derivative assets and liabilities. Central
treasury team reports to the Chief Financial Officer.
The Company uses valuation techniques that are In estimating the fair value of derivative assets and
appropriate in the circumstances and for which liabilities, the Company uses market-observable
sufficient data are available to measure fair value, data to the extent it is available.
maximising the use of relevant observable inputs
and minimising the use of unobservable inputs. VRL Logistics Limited

In order to show how fair values have been derived, 1 (k ).Fair Value Measurement
financial instruments are classified based on a
hierarchy of valuation techniques, as summarised The Company measures financial assets and
below: financial liability at fair value at each balance sheet

Ahmedabad Chartered Accountants Journal September, 2019 371

From Published Accounts levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant
Fair value is the price that would be received to sell to the fair value measurement as a whole) at the
an asset or paid to transfer a liability in an orderly end of each reporting period.
transaction between market participants at the
measurement date. The fair value measurement is The Company’s Valuation team determines the
based on the presumption that the transaction to sell policies and procedures for both recurring fair value
the asset or transfer the liability takes place either: measurement, such as derivative instruments and
unquoted financial assets measured at fair value,
- In the principal market for the asset or liability, and for non-recurring measurement.
Manaksia Limited
- In the absence of a principal market, in the most
advantageous market for the asset or liability 2 (e) Fair Value Measurement

The principal or the most advantageous market must A number of the Company’s accounting policies
be accessible by the Company. The fair value of an and disclosures require the measurement of fair
asset or a liability is measured using the assumptions values, for financial assets and financial liabilities.
that market participants would use when pricing The Company has an established control framework
the asset or liability, assuming that market with respect to the measurement of fair values. The
participants act in their economic best interest. management has overall responsibility for
overseeing all significant fair value measurements
A fair value measurement of a non-financial asset and it regularly reviews significant unobservable
takes into account a market participant’s ability to inputs and valuation adjustments. If third party
generate economic benefits by using the asset in its information, such as broker quotes or pricing
highest and best use or by selling it to another market services, is used to measure fair values, then the
participant that would use the asset in its highest valuation team assesses the evidence obtained from
and best use. The Company uses valuation the third parties to support the conclusion that these
techniques that are appropriate in the circumstances valuations meet the requirements of Ind AS,
and for which sufficient data are available to measure including the level in the fair value hierarchy in
fair value, maximising the use of relevant which the valuations should be classified. Fair
observable inputs and minimising the use of values are categorized into different levels in a fair
unobservable inputs. value hierarchy based on the inputs used in the
valuation techniques as follows:
All assets and liabilities for which fair value is
measured or disclosed in the financial statements Level 1: Inputs are quoted prices (unadjusted) in
are categorised within the fair value hierarchy, active markets for identical assets or liabilities that
described as follows, based on the lowest level the Company can access at the measurement date;
input that is significant to the fair value measurement
as a whole: - Level 2 : Inputs are inputs, other than quoted prices
included within Level 1, that are observable for the
Level 1 - Quoted (unadjusted) market prices in asset or liability, either directly or indirectly; and
active markets for identical assets or liabilities
Level 3 :No significant observable inputs for the
Level 2 - Valuation techniques for which the lowest asset or liability. Some observable inputs used in
level input that is significant to the fair value fair value measurement are discounted cash flows,
measurement is directly or indirectly observable market multiple method etc. When measuring the
fair value of an asset or a liability, the Company
Level 3 - Valuation techniques for which the lowest uses observable market data as far as possible. If
level input that is significant to the fair value the inputs used to measure the fair value of an asset
measurement is unobservable. For assets and or a liability fall into different levels of the fair value
liabilities that are recognised in the financial
statements on a recurring basis, the Company
determines whether transfers have occurred between

372 Ahmedabad Chartered Accountants Journal September, 2019

From Published Accounts

hierarchy, then the fair value measurement is The fair value of assets or a liability is measured
categorized in its entirety in the same level of the using the assumptions that market participants
fair value hierarchy as the lowest level input that is would use when pricing the assets or liability,
significant to the entire measurement. assuming that market participants act in their
economics best interest.
Bharat Dynamics Limited
A fair value measurement of a non-financial assets
10. Fair Value Measurement into account a market participant’s ability to generate
10.1 The Company measures certain financial economic benefits by using the assets in its highest
and best use or by selling it to another market
instruments, such as derivatives and other participant that would use the assets in its highest
items in its financial statements at fair value and best use.
at each balance sheet date.
The Groups use valuation techniques that are
10.2 All assets and liabilities for which fair value appropriate in the circumstances and for which
is measured or disclosed in the financial sufficient data are available to measure fair value,
statements are categorized within fair value maximizing the use of relevant observable inputs
hierarchy based on the lowest level input that and minimizing the use of unobservable inputs.
is significant to the fair value measurement
as a whole: All assets and liabilities for which fair value is
measured or disclosed in the financial statement are
Level 1 – Quoted prices (unadjusted) in active categorized within the fair value hierarchy,
markets for identical assets and liabilities. described as follows, based on the lowest level
input that is significant to the fair value measurement
Level 2 – Inputs other than quoted prices as a whole:
included within level 1 that are observable Level 1 - Quoted (unadjusted ) market prices in
for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. Derived from prices). active markets for identical assets and
Level3 – Inputs for the assets and liabilities Level 2 - Valuation techniques for which the
that are not based on observable market data lowest level input that is significant to
(unobservable inputs). the fair value measurement is directly
or indirectly observable.
10.3 For the purpose of fair value disclosures, the Level 3 - Valuation techniques for which the
Company has determined classes of assets lowest level input that is significant to
and liabilities on the basis of nature, the fair value measurement is
characteristics and risks of the asset or liability unobservable
and the level of the fair value hierarchy.
For assets and liabilities that are recognized in the
Sun TV Network Limited financial statement on a recurring basis, the Group
determines whether transfers have occurred between
2 (R). Fair Value Measurement levels in the hierarchy by re-assessing categorization
(based on the lowest level input that is significant
Fair value is the price that would be received to sell to the fair value measurement as a whole ) at the
an assets or paid to transfer a liability in an orderly end of each reporting period.
transaction between markets participants at the
measurement date. The fair value measurement is For the purpose of fair value disclosures, the group
based on the presumption that the transaction to sell has determined classes of assets and liabilities on
the assets or the liability takes place either. the basis of the nature, characteristics and risk of
· In the principal market for the assets or liability, the assets of the assets and liabilities and the level
of the fair value hierarchy as explained above.
· In the absence of a principal market, in the most ❉❉❉

advantageous market for the assets or liability
· The principal or the most advantageous market

must be accessible by the Group.

Ahmedabad Chartered Accountants Journal September, 2019 373

From the


CA. Ashwin H. Shah CA. Kunal A. Shah
[email protected] [email protected]

Goods and Service Tax 3) Notification relating to Changes in Form
GST RFD-01 in Annexure 1
1) Press Release relating to Extension of Due
dates of filing GSTR-9 and GSTR 9C The Central Government hereby makes the
rules further to amend the Central Goods and
Due date for filing of Form GSTR-9 (Annual Services Tax Rules, 2017 by amending the
Return) and Form GSTR-9C (Reconciliation Form GST RFD-01 in Annexure 1.
Statement) for FinancialYear 2017-18 has been
extended to 31st December 2019. Due date for (For full text refer Notification No. 56/2019
filing of the said forms for FY 2018-19 has – Central Tax, dated 14/11/2019)
been extended to 31st March 2020. (Press
Release dated 14/11/2019) Income Tax:

2) Notification relating to major changes made 1) In various income-tax forms and Rules the
in form GSTR-9 and GSTR 9C word ‘Permanent Account No.’ or ‘PAN’ is
to be substituted by the words ‘Permanent
The Government has also decided to simplify Account Number or Aadhaar Number’.
these forms by making various fields of these
forms as optional. Central Board of Indirect In exercise of the powers conferred by section
Taxes & Customs (CBIC) today notified the 139A, read with section 295 of the Income-tax
amendments regarding the simplification of Act, 1961 (43 of 1961), the Central Board of
GSTR-9 (Annual Return) and GSTR-9C Direct Taxes hereby makes the following rules
(Reconciliation Statement) which inter-alia further to amend the Income-tax Rules, 1962,
allow the taxpayers to not to provide split of namely:—
input tax credit availed on inputs, input services
and capital goods and to not to provide HSN In various income-tax forms and Rules, the
level information of outputs or inputs, etc. for word ‘Permanent Account No.’ or ‘PAN’ is to
the financial year 2017-18 and 2018-19. be substituted by the words ‘Permanent
Account Number or Aadhaar Number’,
CBIC expects that with these changes and the Changes has made it possible for a person, not
extension of deadlines, all the GST taxpayers having PAN to furnish his Aadhaar number in
would be able to file theirAnnual Returns along lieu of PAN, in all those transaction where
with Reconciliation Statement for the financial furnishing of PAN is mandatory.
years 2017-18 and 2018-19 in time. Various
representations regarding challenges faced by (Notification No. 95/2019, dated 06/11/2019)
taxpayers in filing of GSTR-9 and GSTR-9C
were received, on which, the Government has
acted in a very responsive manner.

(For full text refer Notification No. 56/2019 ❉❉❉
– Central Tax, dated 14/11/2019)

374 Ahmedabad Chartered Accountants Journal September, 2019

New Delhi CA. Aniket Talati
Times [email protected]

Urban Clap and other Aggregator Apps : (6) and (7) of Part-I of First Schedule to The
Members in Practise Not permitted Chartered Accountants Act, 1949, resulting in
professional misconduct, whether or not the
It has come to the notice of the Institute that professional services mentioned by them are
members in practice are listing with certain online actually provided through such Aggregators. The
Application based service provider Aggregators, disciplinary proceedings would be initiated
wherein other businessmen, technicians, accordingly.
maintenance workers, event organizers etc. are also
listed. As the members are aware, entries in respect ICAI Mou with Tally to offer 80%Discount to
of Chartered Accountants and Chartered members
Accountant Firms are permitted only as per;
The Institute of Chartered Accountants of India
1. “Publication of Name or Firm Name by (ICAI) has signed a Memorandum of
Chartered Accountants in the Telephone or Understanding (MoU) with Tally Solutions, the
other Directories published by Telephone country’s leading business software provider. The
Authorities or Private Bodies” (Pages 137 – agreement will provide easy access of technology
138 of Code of Ethics, 2009) for digitized accounting and compliance needs of
the members of the ICAI. This will further help the
2. Advertisement Guidelines issued by Council digitization of businesses across sectors and
under Clause (7) of Part-I of First Schedule to industries given that CAs work closely with
The Chartered Accountants Act, 1949 businesses on compliance.
(appearing at pages 309 – 312 of Code of
Ethics, 2009) As part of this MoU, Tally will be making its
flagship product Tally.ERP 9 available to the ICAI
It has been noted that the Application based members at subsidized rates. This will also be
service provider Aggregators are having features extended to all training centres and offices of the
which are not covered exclusively in any one of ICAI all over India. The initiative is aimed at
the above Guidelines. Further, these Application propelling the use of technology among members
based service provider Aggregators are also having thereby bringing in greater efficiency in their
certain features which are not covered in both of practise . Key features of the same are enumerated
the abovementioned Guidelines. Therefore, it is below;
not permissible for members to list themselves with
such Application based service provider A CA firm is eligible for 80% discount on one
Aggregators. Any failure to do so would be license of Tally.ERP 9 Gold (multi-user)
deemed as violative of the provisions of Clauses

Ahmedabad Chartered Accountants Journal September, 2019 375

New Delhi Times

If request is from a CA Firm, Firm Registration platform which works on a Self Service Mode on
Number (FRN) & Date of Establishment are the Self Service portal (SSP) and in view of the
mandatory. same, the functions/activities which were hitherto
performed by Sub-Decentralised Offices (sub-
Only in case, the practicing CA is not working DCOs) of receiving physical forms have been
under a Firm, then the CA may request for discount discontinued. All Members and Students are
in individual capacity therefore requested to use online services of ICAI
through Self-Service Portal
Discount is applicable ONLY on Tally.ERP 9 Gold
(a multi-user license), not on any other Tally Peer review Certificate Validity : Update
The Peer Review Board at its 59th meeting held
For queries please write to on 23.08.2019, while considering the difficulties
[email protected] faced by practice units on the validity of Peer
Review Certificate, decided as follows:-
Invitation for suggestions in respect of CA
examinations The Peer Review Certificate will henceforth be
effective from the date of submission of final clean
A High Level Independent Committee was report irrespective of date of Peer Review Board
constituted on 26th September 2019 to look into meeting in which it is approved.
the Examination processes and the CA Regulations
relating to CA Examinations including Regulation Provided that if the Final Clean Report has been
39(4) of The Chartered Accountants Regulations, submitted before the expiry of the earlier Peer
1988 and suggest changes wherever required. Review Certificate, the effective date of the
Certificate shall be the date next to the date at which
The Committee constituted in terms of the above earlier certificate is being expired.
reference has decided to call for views and
suggestions on these issues from students and all For example:
other stakeholders.
(a) For 1st time peer review: in case final clean
The suggestions, be brief and in any case not exceed report is received by the Board on 20.08.2019,
150 words. It is not necessary to give suggestions and approved in Board meeting on 30.09.2019,
on each of the issues The suggestions can be posted the said Practice unit cannot sign reports prior
on the link given below: to 20.08.2019 of Listed Company. Effective
date of new certificate will be 20.08.2019.
1 FA I p Q L S e C F F n U x Q b g P M z U 4 a W Z E r (b) For next cycle of Peer Review:
G t e H u r j r m 1 - J j p C WAG n s 7 T T 5 9 JAQ /
viewform?usp=pp_url - In case final clean report is received by the
Board on 20.08.2019, and approved in Board
SUB DCO at Ahmedabad Vadodara and Surat meeting on 30.09.2019, and the previous
closed certificate expired on 31.07.2019, the said
Practice unit cannot sign reports during the
ICAI’s Members and Students services have already period from 01.08.2019 to 19.08.2019 of
been made online, in digitized form on a new

376 Ahmedabad Chartered Accountants Journal September, 2019

Listed Company. Effective date of new New Delhi Times
certificate will be 20.08.2019.
objective of this MoU is to work together for
- In case final clean report is received by the establishing the possible cooperation in respect of
Board on 20.08.2019, and approved in Board Corporate Governance, Technical Research and
meeting on 30.09.2019, and the previous advice, Quality Assurance, Forensic Accounting,
certificate expired on 31.08.2019. Effective issues concerning Small and Medium-sized
date of the new certificate will be 01.09.2019. Practices (SMPs), Continuing Professional
Development (CPD) and other subjects of mutual
- In case final clean report is received by the interest. The MoU would be signed soon between
Board on 20.08.2019, date of expiry of previous the two Institutes.
certificate is 10.10.2019 and considered at
meeting held on 30.09.2019, effective date of ICAI Quick Referencer on IndAS.
certificate will be 11.10.2019.
Literature of the Indian Accounting Standards
Further, it is clarified that temporary relaxation is (IndAS) is vast and going through the entire
being given to such Practicing Units to sign listed literature when in need of a particular aspect is a
company reports as required by SEBI/other practical problem.
authorities till 30.09.2019, whose final clean reports
have been received by the Board**. Taking cognizance of this practical problem, the
ICAI has released a publication named Quick
It is further made clear that the Practicing Units shall Referencer on Indian Accounting Standards. The
not be eligible to sign listed company reports as said publication has been brought out that provides
required by SEBI/other authorities during the a glance on the basic aspects of applicable standards
intervening period, if the validity of their certificate in a summarised manner with an objective to
has expired before the submission of final clean provide a basic understanding of IndASs to the
report. Chartered Accountants (CAs).

Cabinet approves MoU with KAAA Apart from the members, the publication will be
very useful for the other concerned stakeholders.
Union Cabinet chaired by the Hon’ble Prime To download visit
Minister of India, Shri Narendra Modi has approved 57428indas46512.pdf
the Memorandum of Understanding (MoU)
between the Institute of Chartered Accountants of ❉❉❉
India (ICAI) and Kuwait Accountants and Auditors
Association (KAAA) on 23rd October 2019. The

Ahmedabad Chartered Accountants Journal September, 2019 377



CA. Shivang R. Chokshi CA. Ketan G. Mistry
Hon. Secretary Hon. Secretary

Forthcoming Programmes
4th Study Circle ( Direct Tax ) Meeting

Date Day Time Programmes Speakers Venue

23.11.2019 Saturday 9.00 a.m. 4th Study Circle Meeting CA. Kaushik Khona, ATMA Hall,
To on “Recent amendments CA. Jayesh Sharedalal, Ashram Raod,
6.30 p.m. in Income Tax Act,” Adv. Tushar Hemani
“Faceless eAssessment
procedure” Assessment
of Penny Stocks and
Cash Deposits

30.11.2019 Saturday 8.30 a.m. Cricket Match Sardar Patel
onwards President XI v/s Stadium,

Secretary XI Navrangpura,

Glimpses of events gone by:

3rd Brain Trust cum Workshop Meeting on “”Issues under GST” by
CA. Abhay Desai on 8th November, 2019

Diwali Get Together on 10th November, 2019


378 Ahmedabad Chartered Accountants Journal September, 2019

Ahmedabad Chartered Accountants Journal September, 2019 379


Contact :

The Mission

89808 14685

380 Ahmedabad Chartered Accountants Journal September, 2019

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