I.T. MIRROR 23-24 VOL 7

Vol. 7 December Your courage and patience is inspiration to everyone Income Tax Bar Association Room No. 204, Nature View Building, Nr. Mrudul Tower, Ashram Road, Ahmedabad - 380009. Tel. No. : 079-48011947 I e-mail: [email protected] I www.incometaxbar.org

Glimpses of Third Study Circle held on 30/11/2023 on the Topic of Key Insights on Annual Return and Reconciliation Statement under GST by CA Rashmin Vaja

2 Chairman's Message 3 President's Message 4 Hon. Secretary's Message - CA (Dr.) Vishves Shah - CA Ashish Tekwani - CA Jaykishan Pamnani 1 Adv. Ashutosh R. Thakkar Adv. (Dr.) Dhruven V. Shah Adv. (Dr.) Kartikey B. Shah Dhruvin D. Mehta (IPP) Bhavesh K. Govani Hiren C. Thakkar CA Kenan M. Satyawadi Narendra D. Karkar CA Parth H. Doshi Parth K. Katharia CA Pratik P. Kaneria CA Suvrat S. Shah Adv Dhiresh T Shah President Emeritus CA Ashish T. Tekwani President CA Shridhar K. Shah Vice President CA Jaykishan P. Pamnani Hon. Secretary CA Maulik B. Patel Hon. Joint Secretary CA Shivam K. Bhavsar Hon. Treasurer CA (Dr.) Vishves Shah Chairman CA Nisha Tekwani CA Suvrat Shah CA Rajesh Mewada Co – Chairman Jinal Shah CA Kaivan Parekh CA Pratik P. Kaneria Members Room No. 204, Nature View Building, Nr. Mrudul Tower, Ashram Road, Ahmedabad - 380009. Tel. No. : 079-48011947 I e-mail: [email protected] I www.incometaxbar.org Mouth Piece of Income Tax Bar Association INVITEE MEMBERS COMMITTEE MEMBERS IT MIRROR COMMITTEE OFFICE BEARERS Vol. 7 - December CONTENTS 5 8 11 18 29 32 Important Legal Updates – CA Parag Raval Understanding Section 263 of the Income Tax Act, 1961- A Comprehensive Guide – CA Dipak C. Dama Legal Pronouncements in relation to Explanation 2 to S. 263 of the Income Tax Act – Sr. Adv. Tushar Hemani Brief of GSTR-9 and 9C – CA Deep Koradia Time limit for applying refund under GST is directory and not mandatory - A new twist under the GST regime – Adv (CA) Hirak Shah Levy of GST on Corporate & Personal Guarantees – Dr. Sanjiv Agarwal From Cash to Commodities The Evolution of 'Goods' in GST Legislation and Courtroom Battles – CA Yash Shah Fractional Ownership in the Real Estate Sector Unlocking New Possibilities – CA Harsh Mehta and Adv (CS) Lokesh Shah LIBOR – The Gamut is at end - CA Homesh Mulchandani 24 22 38

Chairman’s Message CA (Dr.) VISHVES SHAH Chairman 2 Dear Esteemed Members, It is my pleasure to address you in the Seventh Edition of IT Mirror of the Year 2023 – 2024. I express my gratitude to the editorial team and IT Mirror Committee for their dedication in getting the seventh edition ready even in the season of festivals and marriages. Furthermore, I am pleased to acknowledge the innovative approaches taken by many authors. Taxation is an ever-evolving field, influenced by technological advancements, geopolitical shifts, and societal changes. The articles in our journal have demonstrated a keen awareness of these dynamics, offering forward-looking analyses that anticipate the challenges and opportunities on the horizon. Our contributors have showcased a commitment to staying at the forefront of the field. The commitment to clarity and accessibility in our articles has been another noteworthy aspect of our journal. Recognizing that our readership includes students, advocates, chartered accountants and policymakers, our contributors have striven to present complex ideas in a manner that is both engaging and informative. This commitment to effective communication enhances the practical value of the insights shared, fostering a wider impact on the discourse surrounding taxation. In closing, thank you for being a part of this remarkable journey. The IT Mirror stands as a testament to the collective passion for advancing knowledge in the realm of taxation. Warm regards, CA (Dr.) Vishves A. Shah Chairman, IT Mirror Committee Income Tax Bar Association

3 Dear Members, As the President of our esteemed Income Tax Bar Association, I am pleased to address you in this message in this New Year after the joyous Diwali celebrations. We are publishing the seventh edition of the prestigious journal and I am delighted to extend my sincere gratitude to all who have made this journey possible. This milestone not only signifies the passage of time but, more importantly, the accumulation of knowledge and expertise within the pages of our esteemed publication. The IT Mirror has evolved into a dynamic platform for the exchange of ideas and insights, and it is with great pleasure that I commend the dedicated contributors who have fuelled its success. The richness and depth of the articles have been nothing short of exceptional, reflecting a collective commitment to advancing our understanding of the complex world of taxation. Taxation is a multifaceted subject, touching upon economics, law, ethics, and policy. The variety of viewpoints presented in our journal reflects the interdisciplinary nature of the field, contributing to a more holistic understanding of the challenges and opportunities that taxation presents. The analytical rigor showcased in each article is truly commendable. Our contributors have demonstrated not only a mastery of their respective subjects but also a commitment to addressing real-world issues. Whether examining the implications of recent tax reforms, delving into the intricacies of international taxation, or exploring the evolving landscape of digital taxation, each article has brought forth nuanced insights that resonate with our readership. Looking ahead, I am excited about the future possibilities for the IT Mirror. The intellectual curiosity and dedication exhibited by our contributors and readers alike pave the way for continued growth and excellence. I encourage you all to keep sharing your expertise, challenging conventional wisdom, and fostering the vibrant intellectual community that defines our journal. Thank you for your continued support, and I wish you a happy reading and knowledge sharing. Warm regards, CA Ashish Tekwani President Income Tax Bar Association President’s Message CA ASHISH TEKWANI President

Dear Members, I trust this message finds you well and that you had a joyous Diwali celebration. As we emerge from the festivities and embrace the new beginnings, I wanted to reach out and extend our warmest wishes to you. May the coming days be filled with prosperity, success, and abundant opportunities for all. It is with immense pleasure that I write to you today, as we prepare to embark on the journey of our 7th edition of IT Mirror. In the spirit of post-Diwali reflections, we would like to contribute to the insightful content of the IT Mirror Magazine by sharing our perspectives on the latest developments and trends in the taxation landscape and other allied laws. Our team and the authors have been diligently researching and analyzing key topics that we believe would be of great interest to your readership. In every issue of the IT Mirror, we strive to curate content that informs, inspires, and resonates with your interests. Your readership is the driving force behind our commitment to delivering high-quality, insightful, and engaging articles that cater to your diverse tastes and preferences. I thank you for being an essential part of our magazine's success. Please let us know if you find these topics intriguing or if there are specific areas within taxation or other allied laws that you would like us to focus on. We are open to suggestions to bring informative and engaging content to our readers. Your feedback and support continue to drive our commitment to excellence, and we're always eager to hear your thoughts and suggestions. I hope you enjoy this issue as much as we've enjoyed bringing it to you. Thank you for being an integral part of the IT Mirror Magazine. We look forward to continuing this journey together, exploring new horizons and discovering the limitless potential that lies ahead. Happy reading!!! Warm regards, CA Jaykishan Pamnani Hon. Secretary Income Tax Bar Association Hon. Secretary’s Message CA JAYKISHAN PAMNANI Hon. Secretary 4

INCOME TAX UPDATES A. Maintenance of books of accounts by Trusts: Rule 17AA 1. Finance Act 2022 and Rule 17AA of the Income Tax Rules inserted with effect from the assessment year 2022-23 specifies the requirements for maintaining books of accounts and other documents for trusts and institutions. 2. The notified Rule 17AA, which came into effect on 10th August 2022 outlines the form and way books of account should be maintained, the place where such books should be kept, and the duration for which books of account and other documents should be preserved. 3. Section 2(12A) of the Income Tax Act defines “books of account” as including various types of books and records, whether kept in written form, electronic form, digital form, printouts of electronically stored data, or other forms of electromagnetic data storage devices. 4. The amendment to Section 12A(1)(b) specifies that if the total income of a trust or institution, calculated without considering the exemptions under Section 10(23C) or sections 11 and 12 of the Income Tax Act, exceeds the maximum amount not chargeable to tax, that trust or institution is obligated to keep and maintain books of account and other documents. 5. Under Rule 17AA(1), organizations subject to the conditions mentioned in Section 10(23C) or Section 12A of the Income Tax Act are required to maintain specific books of account, which include: Cash book, Ledger, Journal Copies of bills and receipts, Original bills issued to individuals and receipts for payments made, Any other book required to provide an accurate view of the organization's affairs and transactions. B. System default is the standard excuse while delaying refunds: Bombay HC Matrix Publicities and Media India Pvt. Ltd. Versus Deputy Commissioner of Income Tax Circle- 16(1), Mumbai &Ors. (Writ Petition (L) No.16764 Of 2023) Facts: 1. The petition seeks a refund amount of Rs. 19,69,46,789 for Assessment Year 2020–21. The jurisdictional officer has sent a letter or email to Central Processing Centre (CPC) for early capture or update of the refund details as determined in the ITBA portal so that the final manual order can be passed by the respondent. 2. The system (under the control of CPC, Bangalore) must capture the refund already approved via the web service rectification order passed on July 29, 2023. Until the issue is resolved, proceedings in the case cannot be completed and refund cannot be granted. Hon. Bombay HC held as below : 1. The excuse used is that the system under the control of the Centralized Processing Centre (CPC), Bangalore, has some issues and, therefore, amounts are not being released to assessees. Interest is payable by law until the date of refund, and the Department does not realize that it is public money that is used to pay interest. That is a waste and a burden on the exchequer. Important Legal Updates - CA PARAG RAVAL 5

I. T. MIRROR (2023-24) 2. We would only hope that the Finance Ministry investigates it with seriousness and tries to put an end to the problem faced by all assessees and the Income Tax Officers. A copy of this order should be sent to the PMO, the Hon'ble Finance Minister GOI, the Hon'ble Law Minister GOI, the Central Board of Direct Taxes, and the Attorney General for India for information and necessary action. We only hope this problem gets resolved at the earliest. 3. The system default is the standard excuse of the department when it comes to giving refunds. Had the department sorted out its technical issues, totally unrelated to any substantial legal issue, nevertheless contravening the fundamental right of the petitioner to receive an undisputed amount of refund, the present proceedings would not have crept into the litigation arena. 4. The department, either by itself or through CPC, should ensure that the amount is credited to the petitioner's account on or before November 4, 2023, with interest up to the date of payment in accordance with the law. C. Sec 79 invocation when the beneficial ownership remains the same : Introduction: 1. Section 79 of the Income Tax Act disallows a closely held company from carrying forward and setting off its tax losses if there is a change in the beneficial ownership of shares carrying more than 49% of the voting power of the company as compared to the year in which the loss was incurred (subject to certain exceptions). 2. This provision is an anti-abuse provision introduced to bring an end to the practice of buying loss making entities for the sole purpose of setting off losses. Issue: 1. Various courts are besieged with the question whether beneficial ownership can be said to have remained unchanged merely because registered owner of shares, holding more than 49% of the voting power, has changed. 2. Hon'ble Karnataka High Court in the case of Commissioner of Income-tax v. AMCO Power Systems Ltd.,[[2015] 62 taxmann 350 (Karnataka)] held that a holding company would naturally exercise control over its wholly-owned subsidiary and thus, it would also be considered to have voting power over the shares of its step-down subsidiary. 3. However, the Hon'ble Delhi High Court in Yum Restaurants (India) (P.) Ltd. v. Income-tax Officer,[[2016] 66 taxmann 47 (Delhi)] held that simply because the ultimate holding company remained unchanged, this would not automatically imply that the beneficial ownership also remained unchanged. The onus was on the taxpayer to show that there was a separate beneficial shareholder, distinct from the registered shareholder, who was entitled to the benefits flowing from the shares (i.e., voting rights, dividend, etc.). 4. Similarly, the Hon'ble Delhi ITAT in ACIT v. WSP Consultants India (P.) Ltd.,[[2022] 140 taxmann 65 (Delhi – Trib.)] noted there was nothing on record to show that the ultimate holding company was the beneficial owner of shares of the company having 51% or more voting right. In the absence of such evidence, the registered shareholder would be presumed to be the beneficial shareholder. 5. In a very recent judgement of the ITAT Mumbai in the case of Hiranandani Healthcare Pvt Ltd Vs CIT (ITAT Mumbai) (I.T.A. No. 1142/Mum/2023), ITAT highlighted that the key factor in Section 79 is the maintenance of beneficial ownership by the same group of shareholders. As there was no change in the group's beneficial ownership, the ITAT ruled in favour of the Assessee. Conclusion: The taxpayers would be required to present evidence to substantiate the fact that in a given case, the beneficial owner is distinct from the registered owner. 266

I. T. MIRROR (2023-24) IBC UPDATES D. Gujarat VATdues rank equally with secured creditors under Insolvency and Bankruptcy Code: SC Sanjay Kumar Agarwal Vs State Tax Officer (1) &Anr. (Supreme Court of India) (Review Petition (Civil) No. 1620 of 2023) Facts: 1. The Hon Supreme Court, in its judgment dated 06.09.2022, clarified that Section 48 of the Gujarat VATAct is not contrary to or inconsistent with Section 53 or any other provisions of the IBC. 2. It emphasized that the State qualifies as a secured creditor under the GVAT Act, and the IBC's definition of secured creditor does not exclude any Government or Governmental Authority. 3. Subsequently, five Review Petitions were filed by aggrieved parties. Review Petitioners argued that the previous judgment had overlooked the 'waterfall mechanism' under Section 53 of the IBC and the priority given to different classes of creditors, especially the Government dues. Note: 1. Section 53 of the Insolvency and Bankruptcy Code (IBC), enacts a waterfall mechanism providing for the hierarchy or priority of claims of various classes of creditors. 2. Sec 48 of the GVATAct: Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person or account of tax, interest or penalty for which he is liable to pay to the Government shall be a first change on the property of such dealer, or such person. Hon. Supreme Court held as below: 1. The State is a secured creditor as per Sec 48 of the GVAT Act. Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of secured creditor in the IBC does not exclude any Government or Governmental Authority. 2. Section 48 of the GVAT Act is not contrary to or inconsistent with Section 53 or any other provisions of the IBC. Under Section 53(l)(b)(ii), the debts owed to a secured creditor, which would include the State under the GVATAct are to rank equally with other specified debts including debts on account of workman's dues for a period of 24 months preceding the liquidation commencement date. 3. The learned Counsels for the Review Petitioners have failed to make out any mistake or error apparent on the face of record in the impugned judgment and have failed to bring the case within the parameters laid down by this Court in various decision for reviewing the impugned judgment. 4. All the Review Petitions are dismissed. 7

Section 263 of the Income Tax Act, 1961, stands as a custodian, guarding the integrity of the tax assessment process in India. Its origin can be traced back to the imperative need for a mechanism that could rectify orders perceived as both erroneous and prejudicial to the interests of the revenue. Its genesis lies in recognition of subjectivity of tax assessments which is coupled with intricacies of tax laws, can lead to decisions with adverse implications for revenue collection. Section 263 acts as safeguard, acknowledging dynamic nature of tax assessments , providing a reviewing mechanism to ensure fairness, accuracy, and protection of the revenue's legitimate claims. Essentially, it embodies the legislative commitment to a tax administration system that is both effective and just. In essence, Section 263 is a response to the complexities of the tax landscape, acknowledging the delicate balance needed between empowering tax authorities and preventing potential errors. Through its existence, the section reflects commitment to maintaining integrity of the tax assessment process, acknowledging the ever-evolving nature of tax laws and the need for a mechanism that can adapt to changes in interpretations and protect the revenue's interests. Section 263 is not merely a provision for revision but very crucial component of Act ensuring that tax administration system remains robust, fair, and equipped to address the challenges arising in the course of tax assessments. Now let us understand from very basic to technical functions of section 263 of Income Tax Act, 1961. 1. Basic Concept : Main Objective of Section 263: Primary purpose of Section 263 is to rectify orders that are not only erroneous but also have the potential to adversely affect the revenue's interests. It provides a mechanism for the Commissioner to ensure correctness of orders passed by subordinate officers. The Commissioner's role extends beyond mere oversight; they serve as custodians of revenue. When an order is deemed "erroneous" and "prejudicial to the interests of the revenue," the Commissioner's revisionary power comes into play. "Erroneous" signifies a departure from the legal framework, while "prejudicial" pertains to circumstances that could diminish revenue rightfully owed to the government. In simpler words, if the Commissioner thinks that an order issued by assessing officer is incorrect and could result in the loss of tax revenue for the government, the Commissioner has authority to take corrective action From above basic understanding of section we can derive two key Triggers para which are must for Revision of order passed its “ Erroneous and Prejudicial ’’ Now let's see these two core principles which lie at the heart of Section 263"erroneous" and "prejudicial” An order is deemed "erroneous" if it violates the provisions of the Income Tax Act or if any relevant legal provisions are not correctly applied. However, it must be noted that mere difference of opinion between taxpayer and tax officer does not render an order "erroneous.” Understanding Section 263 of the Income Tax Act, 1961 : A Comprehensive Guide - CA DIPAK C. DAMA 268

I. T. MIRROR (2023-24) 9 Furthermore, an order is considered "prejudicial to the interests of the revenue" if it results in an avoidance or reduction of tax liability that should have been rightfully assessed. This safeguards against situations where an order might inadvertently or deliberately harm the government's revenue collection. Initiating the Revision Process: Notice and Opportunity Issuance of notice u/s. 263 of the Act, marks a critical step in a revisional process, providing taxpayer with an opportunity to respond and present their case. This procedure involves meticulous series of steps outlined in the statute to ensure fairness and transparency. Identification of Erroneous Orders: Before issuing a notice, the Commissioner identifies orders that are deemed both “erroneous” and “prejudicial to the interests of the revenue”. This involves a comprehensive examination of an assessment order by Commissioner (self) or their designated representatives. Initiation of Revision Proceedings: Once an order is identified for revision, the Commissioner initiates revision proceedings u/s. 263, proactive step taken by tax authority to rectify potential errors in the original assessment. Notice Issuance: The Commissioner issues a notice to taxpayer, informing them of the intention to revise the order. The notice typically includes specific grounds on which the revision is contemplated. It serves as a communication tool, ensuring transparency in the revision process. Providing Opportunity to be Heard: Notice provides taxpayer with a crucial opportunity to be heard. Its fundamental principle of natural justice, allowing the taxpayer to present their case, explain the grounds on which the original order is contested, and submit relevant evidence in their defence. Firstly, upon receipt of the notice, it is crucial for the taxpayer to promptly acknowledge it and meticulously review the grounds for revision outlined by the Commissioner. Understanding the specifics of the issues raised lays the foundation for an effective response. In responding to the notice, taxpayer should prepare detailed and well-structured written submission. This submission should address each ground for revision systematically, offering a clear and coherent explanation of the facts surrounding the assessment. Moreover, incorporating legal interpretations and citing relevant case laws, if applicable, can significantly bolster the taxpayer's position. To complement explanations, the submission should include supporting evidence, such as financial records and transaction details, to substantiate the claims made. By responding diligently and presenting a well-substantiated case, the taxpayer not only enhances the chances of a positive outcome but also plays a pivotal role in contributing to a fair and just resolution of the revision proceedings. 2. Commissioner's Consideration: Review of Taxpayer's Response: Commissioner carefully assesses the taxpayer's written response, examining explanations, evidence, and legal interpretations. Assessment of Factual and Legal Aspects: The Commissioner evaluates the accuracy of the taxpayer's claims and checks the legal alignment with the Income Tax Act provisions. Consideration of Case Laws: If the taxpayer cites case laws, the Commissioner reviews their relevance and contribution to the argument. Examination of Original Assessment Order: Simultaneously, the Commissioner critically re-examines the original assessment order for factual correctness and legal soundness. Decision-making Process: Based on the review, the Commissioner decides whether to confirm, modify, or set aside the original order. Communication of Revision Order: A revision order is issued, outlining findings, reasons for revision, and any modifications made to the initial assessment. By summarising basic to technical Section 263 serves as critical tool designed to rectify orders that are not only erroneous but also have the potential to adversely impact the revenue's interests. The Commissioner, in wielding

I. T. MIRROR (2023-24) this power, acts as a custodian of revenue, ensuring the correctness of orders passed by subordinate officers. Two key triggers for the revision process are orders deemed "erroneous" and "prejudicial." An order is considered "erroneous" if it violates the provisions of the Income Tax Act, and it is "prejudicial to the interests of the revenue" if it results in tax avoidance or reduction rightfully owed to the government. Initiating revision process involves the issuance of notice to the taxpayer, providing them with a crucial opportunity to respond and present their case. This procedure ensures fairness and transparency, involving a meticulous examination of orders by the Commissioner. The taxpayer's response becomes pivotal in this process, with a detailed and well-structured submission addressing each ground for revision, incorporating legal interpretations, and citing relevant case laws. The Commissioner's consideration involves a comprehensive review of the taxpayer's response and the original assessment order, assessing factual accuracy, legal alignment, and the relevance of case laws. Ultimately, the Commissioner issues a revision order, outlining findings and any modifications to the initial assessment, contributing to the fairness and justice of the tax administration system. 3. Revision vs. Appeal: It's crucial to distinguish between revision under Section 263 and the appellate process. Revision is not an appeal; it is a corrective measure undertaken by the Commissioner to protect the revenue's interests. Technical Aspects: 1. Scope of 'Erroneous' Orders: The term 'erroneous' has been interpreted broadly by courts. It encompasses not only factual errors but also errors in law or a combination of both. 2. Meaning of 'Prejudicial to the Interests of the Revenue': The Commissioner has the onus of establishing that the order adversely affects the revenue's interests. This involves demonstrating that the assessing officer failed to consider relevant facts or applied the law incorrectly. 3. Applicability to Protective Assessments: In cases of protective assessments, where the assessing officer makes an assessment to safeguard the revenue's interests, the Commissioner can revise the order if it is found to be erroneous. CASE LAWS: 1. CITvs. Max India Ltd. (2007) 295 ITR 282 (Delhi HC): In this case, the Delhi High Court held that the revisional power under Section 263 cannot be invoked merely because the Commissioner disagrees with the assessing officer's interpretation of a particular provision. 2. CITvs. G.S. Sharma (2014) 271 CTR 119 (Delhi HC): The Delhi High Court clarified that the Commissioner cannot assume revisional jurisdiction if the assessing officer has conducted a detailed inquiry and arrived at a plausible view, even if an alternative view is possible. CONCLUSION: In conclusion, Section 263 of the Income Tax Act, 1961, serves as a crucial tool for the Commissioner to rectify orders that are not only incorrect but also detrimental to the revenue's interests. The jurisprudence around this section continues to evolve through judicial pronouncements, emphasizing the need for a balanced and judicious exercise of revisional powers. This comprehensive understanding of Section 263 is essential for both taxpayers and tax professionals, as it sheds light on the intricacies of the revisional process and the principles governing its application. 2610

Pr CIT v.Shreeji Prints (P.) Ltd.[2021] 130 taxmann.com 293 (Guj.) xxx… 2 The Revenue has proposed the following questions as substantial questions of law: "(a) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in holding that the PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 thereto by ignoring that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue in as much as the Assessing Officer has passed the assessment order without making inquires/verification in the light of the unsecured loans of Rs. 2.49 Crores received from M/s. Georgette Tradecom Pvt. Ltd (GTPL) and M/s. Purba Agro Food Pvt. Ltd (PAFPL)? xxx… 4 Being aggrieved by the order passed by the PCIT under section 263 of the Act, 1961, the assessee went before the Tribunal. The Tribunal, after considering the submissions made by the assessee and after considering the scope of power to be exercised by the PCIT under section 263 of the Act, 1961 came to the conclusion that the Assessing Officer has made inquiries in detail about two unsecured loans taken by the respondent assessee and observed as under: xxx… 15 The Pr.CIT had observed that Explanation 2 of section 263 of the Act is clearly applicable and it is clear that the Assessing Officer has passed the assessment order after making enquiries for verification which ought to have been made in this case. However, we find that the Pr. CIT has not mentioned in the show-cause notice issued under section 263 that he is going to invoke the Explanation 2 to 263 hence, invocation of Explanation in the order without confronting the assessee is not appropriate and sustainable in law in support of this contention, the ld. Counsel has placed reliance on the following decision: CIT v. Amir Corporation 81 CCH 0069 (Guj.), CIT MehrotraBrothem -270 ITR 0157 (MP,CIT v. Ganpet Ram Bishnoi - 296 ITR 0292 (Raj.), Cadila healthcare Ltd. v. Cl 7, Ahmedabadh-1 [ITA no. 1096/Ahd/2013 & 910/Ahd/2014], Sri Saí Contractors v. ITO [ITO no. 109Nizag/2002] and PyarelalJaiswal v. CIT, Vamnesi [(2014) 41 taxmann.com 27& (AII Trib.)]. It was contended by the Learned Counsel that clause -(a) & (b) of Explanation 2 of Section 263 are not applicable as the Assessing Officer has made enquiry and verification which should have been made. Further, in the show cause notice, the Explanation-2 of section 263 was not invoked by the PCIT and it was referred in the order u/s.263 of the Act. Therefore, in the light of decision of the Co-ordinate Bench of Mumbai in the case of Narayan Tatu Rane - 70 taxmann.com 227 (Mum. Trt.) [PB 153-1561 wherein held that explanation cannot laid to have over ridden the law as interpreted/the various High Courts where the High Courts have held that before reaching the conclusion that the order of the Assessing Officer is erroneous prejudicial to the interest of Revenue. The CIT himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interest of Revenue. The ld. Counsel relied on the decision of M/s. Amira Pure Foods Pvt. Ltd., v. PCIT in ITA No.3205/Del/2017 and Ahmedabad Tribunal in the case of Torrent Pharmaceuticals Ltd. v. DCIT [2018] 97 taxmann.com 671 (Ahd. - Trib.). it is clear from the enquiries made by the Assessing Officer and submissions made by the assessee Legal Pronouncements in relation to Explanation 2 to S. 263 of the Income Tax Act - SR ADV TUSHAR HEMANI 11

I. T. MIRROR (2023-24) that the Assessing Officer has taken the plausible view which is valid in the eyes of law. The Assessing Officer was satisfied consequent to making enquiry and after examining the evidences produced by the assessee, he accepted the assessee's claim of loan similar view were also expressed by the Hon'ble Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 212 taxman 0184. We observe the Pr.CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of section 263 of the Act. The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142I14/2015T PL], Dated 27-11-2015 which is reproduced hereunder: "53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it/s prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. 53.2 The interpretation of expression "erroneous in so far as it is prejudicial to the interests of the revenue" has been a contentious one. In order to provide clarity on the issue, section 263 of the Income-tax Act has been amended to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner. (a) the order is passed without making inquiries or verification which, should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 53.3 Applicability: This amendment has taken effect from 1st day of June, 2015.” "17 We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues involved impliedly after due application of mind. Therefore, the Explanation 2 to section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. 18 In the light of above facts and legal position, we are of the considered view that the AO had made detailed enquiries and after applying his mind and accepted the genuineness of loans received from GTPL and 2612

I. T. MIRROR (2023-24) 13 PAFPL, which is also plausible view. Therefore, we find that twin conditions were not satisfied for invoking the jurisdiction under section 263 of the Act. The case laws relied by the ld. CIT(D.R.) are distinguishable on facts and in law hence, by the ld. Counsel as well and we concur the same hence not applicable to present facts of the case. Therefore, in absence of the same, the ld. CIT ought to have not exercised his jurisdiction under section 263 of the Act. Therefore, we cancel the impugned order under section 263 of the Act, allowing all grounds of appeal of the Assessee.” 5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. xxx… SLP against judgment of Gujarat High Court has been dismissed in Pr CIT v. Shreeji Prints (P.) Ltd. [2021] 130 taxmann.com 294 (SC) 1. Heard Mr. Balbir Singh, learned Additional Solicitor General in support of the petition. 2. We do not see any reason to interfere in the matter. The Special Leave Petition is, accordingly, dismissed. 3. Pending applications, if any, also stand disposed of. xxx… Torrent Pharmaceuticals Ltd. v. DCIT [2018] 97 taxmann.com 671 (Ahmedabad - Trib.) xxx.. 9. The Pr.CIT has drawn support from newly inserted Explanation 2 below Section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 01.06.2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of Section 263 of the Act. 9.1 The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142/14/2015-TPL], Dated 27-11-2015 which is reproduced hereunder: '53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions contained in sub-section (1) of section 263 of the Income-tax Act, before amendment by the Act, provided that if the Principal Commissioner or Commissioner considers that any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making an enquiry pass an order modifying the assessment made by the Assessing Officer or cancelling the assessment and directing fresh assessment. 53.2 The interpretation of expression "erroneous in so far as it is prejudicial to the interests of the revenue" has been a contentious one. In order to provide clarity on the issue, section 263 of the Income-tax Act has been amended to provide that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner.— (a) the order is passed without making inquiries or verification which, should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the

I. T. MIRROR (2023-24) order has not been passed in accordance with any decision, prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. 53.3 Applicability: This amendment has taken effect from 1st day of June, 2015.’ 9.2 Abare reading of the Circular gives somewhat impression that the Explanation 2 was inserted for the purpose of providing clarity on the expression 'erroneous insofar as it is prejudicial to the interest of the Revenue'. The Explanation being clarificatory would not lead to dilution of the basic requirements of Section 263(1) of the Act. The provisions of Section 263 although appears to be of a very wide amplitude and more particularly after insertion of Explanation 2 but cannot possibly mean that recourse to Section 263 of the Act would be available to the Revisional Authority on each and every inadequacy in the matter of inquiries and verification as perceived by the Revisional Authority. The Revisional action perceived on the pretext of inadequacy of enquiry in a plannery and blanket manner must be desisted from. The object of such Explanation is probably to dissuade the AO from passing orders in a routine and perfunctory manner and where he failed to carry out the relevant and necessary inquiries or where AO has not applied mind on important aspects. However, in the same way where the preponderance of evidence indicates absence of culpability, an onerous burden cannot obviously be fastened upon the AO while making assessment in the name of inadequacy in inquiries or verification as perceived in the opinion of the Revisional Authority. It goes without saying that the exercise of statutory powers is dependent on existence of objective facts. The powers outlined under section 263 of the Act are extraordinary and drastic in nature and thus cannot be read to hold that uncontrolled, unguided and uncanalised powers are vested with the competent authority. The powers under section 263 of the Act howsoever sweeping are not blanket nevertheless. The AO cannot be expected to go to the last mile in an enquiry on the issue or indulge in fleeting inquiries. The action of the Revisional Commissioner based on such expectation requires to be struck down. 9.3 The use of expression 'which should have been made' in clause (a) to Explanation 2 to Section 263 of the Act is significant. This impliedly tests the action of AO on the touchstone of reasonableness and rationality in approach. It clearly suggests that context also holds the key in the matter of enquiry. The action of the AO requires to be evaluated contextually. If the aforesaid Explanation is read in an abstract manner de horse the test of reasonableness and context, the powers of Revisional CIT would be rendered invincible and almost every assessment order can be possibly frustrated. A nuanced understanding of Explanation suggests that inadequacy in inquiry ought to be of cardinal nature to ignite the potent powers of review. 9.4 As noted, the assessee is a very big player in the pharma sector and enormity of operation is to be kept in mind. Thus what is relevant is to weigh as to what countervailing circumstances were prevailing which ought to have provoked such enquiry by a reasonable person instructed in law. In the instant case, apart from noticing that each and every issue raised in the notice were subject matter to enquiry in one way or the other, we also cannot remain oblivious of the facts that the financial accounts of the assessee are subjected to various kinds of audits under different Acts and the assessee being a listed company is presumed to function in a disciplined and regulatory environment. In the context of the mammoth scale of operation coupled with regularity of the scrutiny assessment year after year, we find apparent plausibility and sufficient strength in the contentions raised on behalf of the assessee in its defense. Having regard to colossal volume, the serious time and capacity constraints saddled upon AO while raising pitch for deeper examination must be borne in mind. 9.5 We thus find merit in the plea of the assessee that the Revisional Commissioner is expected show to that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers. The revisional powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry. If such course of action as interpreted by the Revisional Commissioner in the light of the Explanation 2 is permitted, Revisional Commissioner can possibly find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law. This would inevitably mean that every order of the lower authority would thus become susceptible to Section 263 of the Act and, in turn, will cause serious unintended hardship to the tax payer concerned for no fault on his part. 2614

I. T. MIRROR (2023-24) Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed the order in great detail after making several allowances and disallowances on the issues involved impliedly after due application of mind. Therefore, the Explanation 2 to Section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. xxx… Sir Dorabji Tata Trust v. DCIT [2020] 122 taxmann.com 274 (Mumbai - Trib.) xxx… 18. We find that the case of the Commissioner hinges on, what he perceives as, lack of inquiry, the inadequacy of inquiry, or taking up the pertinent line of inquiry but not following it to its logical conclusion. Learned Departmental Representative has also been very gracious to submit that none doubts the philanthropic work being done by the assessee trust but the short question before us really is whether or not the due verifications have been carried out by the Assessing Officer. The stand of the learned Commissioner has simply been reiterated by the Departmental Representative, and a lot of emphasis is placed on the fact in the light of Explanation 2 to Section 263 once Commissioner is of the view, as he has been on the facts of this case, that "the order is passed without making inquiries or verification which should have been made", the order is required to be treated as erroneous and prejudicial to the interest of the revenue. Therefore, we must examine the nature of inquiries conducted by the Assessing Officer and whether these inquiries were so deficient as to render the order 'erroneous and prejudicial to the interests of the revenue', within meanings of that expression assigned under section 263. 19. The question that we also need to address is as to what is the nature of scope of the provisions of Explanation 2(a) to Section 263 to the effect that an order is deemed to be "erroneous and prejudicial to the interests of the revenue" when Commissioner is of the view that "the order is passed without making inquiries or verification which should have been made". 20. Undoubtedly, the expression used in Explanation 2 to Section 263 is "when Commissioner is of the view," but that does not mean that the view so formed by the Commissioner is not subject to any judicial scrutiny or that such a view being formed is at the unfettered discretion of the Commissioner. The formation of his view has to be in a reasonable manner, it must stand the test of judicial scrutiny, and it must have, at its foundation, the inquiries, and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be. If we are to proceed on the basis, as is being urged by the learned Departmental Representative and as is canvassed in the impugned order, that once Commissioner records his view that the order is passed without making inquiries or verifications which should have been made, we cannot question such a view and we must uphold the validity of revision order, for recording of that view alone, it would result in a situation that the Commissioner can de facto exercise unfettered powers to subject any order to revision proceedings. To exercise such a revision power, if that proposition is to be upheld, will mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner's view that "the order is passed without making inquiries or verification which should have been made". Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling, the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right—public or private—of a citizen. [L HirdayNarain v. ITO [1970] 78 ITR 26 (SC). As a corollary to this legal position, 15

I. T. MIRROR (2023-24) when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise the powers, to help anyone, when circumstances so justify or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that "the order is passed without making inquiries or verification which should have been made". The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. 21. That brings us to our next question, and that is what a prudent, judicious, and responsible Assessing Officer is to do in the course of his assessment proceedings. Is he to doubt or test every proposition put forward by the assessee and investigate all the claims made in the income tax return as deep as he can? The answer has to be emphatically in negative because, if he is to do so, the line of demarcation between scrutiny and investigation will get blurred, and, on a more practical note, it will be practically impossible to complete all the assessments allotted to him within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. He need not look at everything with suspicion and investigate each and every claim made in the income tax return; a reasonable prima facie scrutiny of all the claims will be in order, and then take a call, in the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry but, as observed by Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 "it is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real-life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills [(1896) 2 Ch 279,], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had said that an auditor (read Assessing Officer in the present context) "is not bound to be a detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound.". Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bona fide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bona fide, and as long as the path adopted by the Assessing Officer is taken bona fide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Malabar Industrial Co Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83, Hon'ble Supreme Court has held that "Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the 261

I. T. MIRROR (2023-24) Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law." The test for what is the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bona fide in a real-life situation. It is also important to bear in mind the fact that lack of bona fides or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. On a similar note, a co-ordinate bench of the Tribunal, in the case of Narayan Tata Rane v. ITO [2016] 70 taxmann.com 227 (Mum.) has observed as follows: "20. Clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld. Pr. CIT cannot be taken as final one, without scrutinising the nature of enquiry or verification carried out by the AO vis-a-vis its reasonableness in the facts and circumstances of the case. Hence, in our considered view, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying out enquiries or verification, which a reasonable and prudent officer would have claimed out or not. It does not authorise or give unfettered powers to the Ld. Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made.” 22. Having said that, we may also add that while in a situation in which the necessary inquiries are not conducted or necessary verifications are not done, Commissioner may indeed have the powers to invoke his powers under section 263 but that it does not necessarily follow that in all such cases the matters can be remitted back to the assessment stage for such inquiries and verifications. There can be three mutually exclusive situations with regard to exercise of powers under section 263, read with Explanation 2(a) thereto, with respect to lack of proper inquiries and verifications. The first situation could be this. Even if necessary inquiries and verifications are not made, the Commissioner can, based on the material before him, in certain cases straight away come to a conclusion that an addition to income, or disallowance from expenditure or some other adverse inference, is warranted. In such a situation, there will be no point in sending the matter back to the Assessing Officer for fresh inquiries or verification because an adverse inference against the assessee can be legitimately drawn, based on material on record, by the Commissioner. In exercise of his powers under section 263, the Commissioner may as well direct the Assessing Officer that related addition to income or disallowance from expenditure be made, or remedial measures be taken. The second category of cases could be when the Commissioner finds that necessary inquiries are not made or verifications not done, but, based on material on record and in his considered view, even if the necessary inquiries were made or necessary verifications were done, no addition to income or disallowance of expenditure or any other adverse action would have been warranted. Clearly, in such cases, no prejudice is caused to the legitimate interests of the revenue. No interference will be, as such, justified in such a situation. That leaves us with the third possibility, and that is when the Commissioner is satisfied that the necessary inquiries are not made and necessary verifications are not done, and that, in the absence of this exercise by the Assessing Officer, a conclusive finding is not possible one way or the other. That is perhaps the situation in which, in our humble understanding, the Commissioner, in the exercise of his powers under section 263, can set aside an order, for lack of proper inquiry or verification, and ask the Assessing Officer to conduct such inquiries or verifications afresh. xxx… 17

Brief on GSTR-9 & GSTR-9C - CA DEEP KORADIA As we all know, 31st December 2023 is the due date before which a Tax Payer needs to file an Annual Return in GSTR-9 form (if Aggregate Taxable Turnover exceeds 2 crore), Along with that, a Tax Payer needs to Provide Reconciliation Statement in GSTR-9C (if Aggregate Taxable Turnover Exceeds 5 crore). For the FY 2022-23, if any Outward liability is missed or ITC is missed in Regular Returns, a Tax payer can give such Reconciliation effect upto the date of 30th Nov 2023, provided any returns are pending to give such effect. Additionally, GSTR-9 Do allow to disclose additional liability along with payment thereof via DRC-03. However, Reduction in liability can not be done in GSTR-9. With respect to ITC, if ITC is missed even in next year's returns till 30th Nov 2023, It can't be taken in GSTR-9. If a Tax Payer has any reconciliation effect given in Next Financial year, it is advisable to File GSTR-9 Voluntarily even if ATTO is below 2 crores. Apart from this, Incase of Multiple State Registration for single PAN, Turnover for each Registration is to be derived based on State wise Trial Balance Sheet. Such State wise Turnover will be the starting point for each of the GSTR-9C of respective states. GSTR-9 is a very tricky form, before filling the same, to get our self assured about the figures filled in GSTR-9 is in sync with Audited Financial Statements, following Formulas can be checked and one can assure himself about the correctness of the Data for GSTR-9: 18 GSTR9 Arithmetical Accuracy Checks Sr No Reference Formula: To be checked with: 1 OUTWARD LIAB Table 4's Tax's Outcome / Total To be match with Table 9's "Tax Payable" [Edit Manually in Table 9 if changed in Table 4] 2 OUTWARD LIAB [Table 5N] PLUS [Table 10] MINUS [Table 11] To be Matched with Actual [Audited] Liability 3 OUTWARD LIAB Table 9's Tax Payable MINUS Tax paid via cash & Tax paid Via Credit If Not Zero, then Prepare Reco due to reasons, such as: 1. Liability of Last FY 2021-22 has been discharged in 3Bs of FY 2022-23 [Negative Diff] 2. Some of the Outward Supply of FY 2022-23 missed altogether and now added in Table4 - TO BE DISCHARGED THROUGH DRC-03 [Positive Diff]

I. T. MIRROR (2023-24) 19 Sr No Reference Formula: To be checked with: 4 INWARD ITC [Table 7J] MINUS [Table 12] PLUS [Table 13] To be Matched with Actual [Audited] ITC 5 INWARD ITC ITC Taken as per 3B Table 6A MINUS Actual ITC now taken in GSTR 9 (Diff as per Table 6J) The Diff can be due to following reasons: 1. FY 2021-22's ITC taken in FY 2022-23's 3B but now not forming part of GSTR-9& Vice-Versa [Negative Diff. in 6J / Vice-Versa] 2. FY 2022-23's wrongly taken ITC (not even reversed in 3Bs till 30-11-23) now reversed - TO BE DISCHARGED THROUGH DRC-03 [Negative Diff. in 6J] Note: GSTR-9 doesn't allow to reverse the wrongly taken ITC in Table 6/7. however, if reduced and paid through DRC-03, then that will be much better way to present the data. 6 [Table 10] MINUS [Table11] To be Matched with Table 14's CGST, SGST, IGST and CESS Syncing of data between FY 2021-22& FY 2022-23 (Since Data uploaded of FY 2021-22in“3B/G1 of FY 2022-23” should not be the part of FY 2022-23's GSTR-9) 7 [Table 10]MINUS [Table 11] of FY 2021-22 To be matched with FY 2022-23's Table 9's Liability MINUSTax paid through Cash and Credit [Along with difference due to other reasons mentioned in SR No 3] OUTWARD LIAB 8 [Table 13]MINUS [Table 12] of FY 2021-22 To be Matched Difference found in Table 6J of GSTR9 of FY 2022-23 [Along with difference due to other reasons mentioned in SR No 5] INWARD ITC Apart from these, GST Council has made some of the Tables are optional in GSTR-9 and 9C. Reader may have kind attention to the Table No 5C to 5N of GSTR-9C, which council has made optional but notification 38-2023

I. T. MIRROR (2023-24) 20 CT Dated 04-08-2023 Doesn't give such exemption, so it is advisable to follow official Notification. Following Table shows which Tables are options, and which tables can be merged. GSTR-9 Mandatory v/s Optional Tables For FY 2022-23 4A to 4G Taxable Outward Supply, Tax on advances & RCM Mandatory - 4I to 4L CN, DN, Amendments with respect to 4B to 4E Supplies Mandatory - 5A to 5C Zero rated Supply without payment of Tax, supplies on which Tax to be discharged by recipient Mandatory - 5D to 5F Exempted, Nil Rated & Non-GST Supply “Exempted” and “Nil Rate” can be clubbed in 5D. Non-GST to be shown separately 5H to 5K CN, DN, Amendments with respect to 5A to 5F Supplies Optional Can be clubbed in 5A to 5F 6A Auto populated ITC based on 3B - - 6B to 6D ITC on Inward Supplies for Forward Charge & Reverse Charge - "Input" and "In Services" Can be clubbed in “Input", "Capital Goods" to be shown separately 6E Import of Goods Mandatory 6F to 6M Other ITC Mandatory 7A to 7E ITC Reversal due to Rule 37,39,42, 43, Sec. 17(5) Can be clubbed with 7H - (with Other reversals) 7F & 7G ITC Reversal due to TRAN1 & TRAN2 Mandatory 8A to 8K ITC Related Information Mandatory 9 Details of Tax payable & Tax paid Mandatory 10,11 Outward Liability Pertaining to FY 2022-23 shown/reduced in FY th 2023-24 Till 30 Nov 2023 Mandatory 12,13 ITC Pertaining to FY 2022-23 reversed/shown in FY 2023-24 Till th 30 Nov 2023 Optional (Not advisable). [Do not net off 12 & 13] 15 & 16 Info. Of Demands & Refunds, Inward supplies Optional 17 HSN for outward Supply Mandatory TO> 5 Cr, at 6 Digit level for all supplies TO<5 Cr, 4 Digit level for B2B Supplies Only] 18 Optional Tables No Nature of reporting Status Note HSN for Inward Supply

GSTR-9C Mandatory v/s Optional Tables 5A Turnover as per Audited Books Mandatory - 5B to 5O Adjustments related to Turnover Can be clubbed in 5O [5C to 5N – Clarification awaited] 7A to 7F Reco from Total Turnover to Taxable Turnover Mandatory - 9A to 9Q Reco of Tax Paid Mandatory Tables No Nature of reporting Status Note - 12A to 12D Reco of ITC between Books v/s GSTR9 Mandatory Table 14 Expense head with ITC Reconciliation Optional - I. T. MIRROR (2023-24) Particulars Figures Required to be filled in Table of GSTR-9C Figures to be taken from the Corresponding Table of GSTR-9 Reco of Total Turnover with GSTR-09 Reconciliation of Taxable Turnover with GSTR-09 Total amount paid as declared in Annual Return ITC claimed in Annual Return (GSTR9) 5Q 7F 9Q 12E 5N + 10 - 11 (4N – 4G) + (10-11) Table 9's Tax Payable + 10 - 11 7J GSTR-9C gets some of the figures from GSTR-9, and such figures only auto populate once GSTR-9 has been filled. However, it is always advisable to get ready both the forms and upon finalization of the forms, to be filled together. To get such figures of GSTR-9C from GSTR-9, following formulas can be helpful. 21

It has been almost six and a half years (6.5 years) but the Goods and Services Tax regime never fails to amaze tax payers and businesses across the country. In recent times where businesses across the country have found themselves inundated with Show Cause Notices (SCN) from GST Authorities due to a sudden surge in issuance of Notifications and clarifications, timely issuance of GST refund remains an everlasting issue for which businesses and exporters constantly pray. The present articles delves into the relevant legal provisions of refund under the Central Goods and Services Tax Act and a recent ruling of Hon'ble Madras High Court which held that the timelimit for applying refund under Section 54 is directory and not mandatory. Relevant Legal Provisions of the Central Goods and Services Act, 2017 The relevant legal provisions for in-depth analyzing the refund provision is as under: Section 54: Refund of Tax (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed: Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed. RELEVANT DISCUSSION AND WAY FORWARDS Recently the Hon'ble Madras High Court in the case of M/s Lenovo (India) Pvt Ltd vs Joint Commissioner of GST (Appeals-1)& Others vide judgement dated 06.11.2023 [W.P.Nos.23604, 23605 and 23607 of 2022] held that the time limit prescribed under section 54 of the CGST Act is directory and not mandatory. Extract of the relevant paragraphs from the Judgement are as follows: “15.7 Thus, a reading of the Section 54 (1) of CGST Act would make it clear that the assessee can make the application within two years. The terms used in said Section ''may make application before two years from the relevant date in such form and manner as may be prescribed'', which means that the assessee may make application within two years and it is not mandatory that the application has to be made within two years and in appropriate cases, refund application can be made even beyond two years. The time limit fixed under Section 54 (1) is directory in nature and it is not mandatory. Therefore, even if the application is filed beyond the period of two years, the legitimate claim of refund by the assessee cannot be denied in appropriate cases. 15.8 In the present case, the application was filed within two years and therefore, the question of making claim after two years does not arise even assuming AO made endorsement after two years, the same would in no way debar the claim as barred by limitation. Further, even Rule 90 (3) of CGST Act permits to make fresh application, which means that in appropriate cases, the Officer concerned can permit the refund application even beyond the period of limitation. Therefore, I do not find any substance in the submission made by the learned Senior Standing Counsel for the respondent and both respondents have miserably failed to consider the said aspect while passing Time limit for applying refund under GST is directory and not mandatory – A new twist under the GST regime - ADV (CA) HIRAK SHAH 22

I. T. MIRROR (2023-24) the impugned orders and hence, the same are liable to be set aside. Hence, this Court holds that when the petitioner has filed application, which is within a period of limitation, viz. 2 years as stipulated under Section 54(1) of the CGST Act, the delay in filing the supporting document at the time of filing of reply/personal herein would only extend the time limit to pass an order under Section 54 (7) of the CGST Act and non-submission of documents at the time of filing application for refund cannot be deemed to have filed with a delay, since there had been a delay in obtaining the endorsement owing to Covid-19, the petitioner could not produce the same at the time of filing application, however, produced the same at the time of personal hearing.” ANALYSIS AND COMMENTS The aforesaid ruling in case of M/s Lenovo (India) Pvt Ltd has opened floodgates for many exporters who were not able to file refund application due to lapse of the time limit of 2 years prescribed by the statute. However, it is pertinent to note that the said ruling does not provide a blanket concession intended by the Hon'ble Court as the words used are "in appropriate cases" at para 15.7 of the judgement. The tax payers may take benefit of this in genuine cases only. Further, the observations made at para 15.5 and para 15.6 of the judgement based on CBDT circular are very useful to the assessee - the officers should be prompt in giving due refund as much as they are in collecting tax. One aspect which seeks interpretation and the basis behind which the Hon'ble Court had passed such ruling, which in my respectful opinion, is the use of the word “may” is made because claiming of refund is an option available to the assessee and not a mandate. Therefore, using the words “shall” may have been considered inappropriate at the time of drafting of the statute. However, the Hon'ble Madras High Court has linked the word “may” to the time limit for filing refund application. In view of this, the Government may be forced to consider amending the refund provisions to the extent of making it amply clear that if a registered person wants to file a refund application, such application shall be filed within a period of 2 years from the relevant date only and no such refund application shall be filed after the expiry of 2 years from the relevant date. Another possible scenario which may arise is that the Department may prefer an appeal before the Hon'ble Supreme Court against the said Madras High Court ruling and the Hon'ble Supreme Court may very likely grant stay of the said Ruling or otherwise as in particular facts of the present case of M/s Lenovo (India) Pvt Ltd,it was the fault of the Department in granting refund. Only time will tell the ultimate fate of the final outcome before the Hon'ble Supreme Court and whether the assessee – M/s Lenovo (India) Pvt Ltd shall be granted refund in their particular case. The real question which is prejudicial to the Department is the interpretation of the time limit as prescribed under Section 54 of the CGST Act and that whether the same is directory and not mandatory or otherwise. 23

Taxability of corporate guarantee as a taxable supply under GST has been a contentious issue. Companies provide guarantees for loans taken by their subsidiaries to protect investments. Many times, directors of the company provide guarantee for loans in their personal capacity in normal course of business. The concept of deemed valuation of 1 percent of value of guarantee also distorts the valuation principles as per prevailing law. This may also prove to be against actual commercial transaction in some cases. It also goes against OECD guidelines on shareholder related activities. While the issue of taxation of corporate guarantee is already under litigation and show cause notices are under different stages of adjudication, it is to be seen as to what would be the fate of such ongoing proceedings. Will this be applicable with retrospective effect or prospectively! Council's recommendations are silent on this. However, in all fairness, it ought to be prospective only. The Supreme Court, in a recent ruling under Service Tax law held that the issuance of a corporate guarantee in favour of a subsidiary company would not attract service tax in the absence of a consideration. Under GST regime, however, under Schedule I of the Central Goods and Services Tax (CGST) Act, 2017, supply of goods or services among related persons in the course of or in furtherance of business without consideration qualifies as supply and hence attract GST. Section 15 (5) of the CGST Act entrusts the Government with the power to notify the value of certain supplies. MEANING OF GUARANTEE / PERSONAL GUARANTEE / CORPORATE GUARANTEE / BOARD / BODY CORPORATE These terms have been defined differently under different laws. P. RamanathaAiyar's Advanced Law Lexicon contains various meanings and interpretation of these terms. Accordingly, a guarantee is an accessory contract, by which the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person, whose primary liability to the promisee must exist or be contemplated; A collateral contract by which a third party promises to pay a debtor's debt; one of the situations requiring a written contract under the statute of frauds; An undertaking to repay in the event of a default. It may be limited in time and amount. A guarantee is a contract to perform a promise or to discharge a liability of a third person in case of his default. In such contracts the promisor is the guarantor, the promise a creditor, and the third person is the principal debtor. (Section 126 of Indian Contract Act, 1872) A collateral engagement to answer for the debt, default, or miscarriage of another person; a promise to another creditor to secure the payment of a debt payable to him. An undertaking by the guarantor that should a debtor, who is obliged to pay a sum of money to a creditor, not pay it, the guarantor would pay the same or otherwise compensate the creditor for the losses suffered by such failure to pay. Guarantee inherently leads to a tripartite contract between the debtor, creditor and the guarantor. (Kothari's Credit Derivatives) Levy of GST on Corporate and Pesonal Guarantees - DR. SANJIV AGARWAL FCA, FCS, D.Litt. 24

I. T. MIRROR (2023-24) 'Corporate' means belonging to a corporation, as a corporate name; incorporated, as corporate body. (Burrill) 'Personal' means pertaining to the person or bodily form. Pertaining to an individual, or private as opposed to public; Of or relating to a particular person [Section 81 of CPC, 1908]; exclusively for a given individual [Section 171F of IPC, 1860]. The terms- director and company / body corporate are defined in Companies Act, 2013 as under: Section 2(20) - "company" means a company incorporated under the Act or under any previous company law. Section 2(34) - "director" means a director appointed to the Board of a company. Section 2(10)- "Board of Directors" or "Board", in relation to a company, means the collective body of the directors of the company. Section 2(11) – "body corporate" or "corporation" includes a company incorporated outside India, but does not include- (i) a co-operative society registered under any law relating to co-operative societies; and (ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf; Section 2(69) -"promoter" means a person- (a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act: Sub-clause (c) shall not apply to a person who is acting merely in a professional capacity. Guarantees Corporate Guarantee Personal by Directors Taxed @ 18% On actual consideration or deemed valuation, whichever is higher Deemed valuation @1% of value of guarantee Taxed @ 18@ if consideration paid to Directors No GST if no consideration involved MEANING While corporate guarantee is given by a company / body corporate to secure any obligation on behalf of other entity, generally other entity in the same group of companies or by a holding company on behalf of any of its subsidiary or associate entity, personal guarantee is generally given by promoters - directors and / or directors of company to provide extra assurance to the lender to secure the financial or other obligations granted to the company. 25

GST COUNCIL RECOMMENDATIONS GST Council in its 52nd Council meeting held on 7th October, 2023 clarified / recommended on taxation of guarantees given by corporates and directors in their individual capacity. Personal guarantees given by directors to banks / financial institutions for corporate borrowings on behalf of company – Where company pays consideration to director in any form – directly or indirectly - to be taxed at open market value. – Where no consideration is involved – value to be considered as zero and no tax payable Corporate guarantee on behalf of related parties / subsidiaries – To be taxed on taxable value as per new Rule 28(2) in CGST Rules, 2017 @ equal to one percent of value of guarantee on actual consideration, whichever is higher, irrespective of whether full ITC is available to the recipient or net. – To be taxed @18@GST According to recommendations of GST Council, a parent company's corporate guarantee to its subsidiary for bank loan shall attract 18 percent GST. However, there will be no GST levied if a director provides a personal guarantee for a loan from a bank or any financial institution or lender to his / her own company when there is no consideration flowing to him. When the personal guarantee is given by a director to company then the value of service will be deemed to be zero, hence no tax. When no consideration is paid by the company to the director in any form, directly or indirectly, for providing personal guarantee to the bank / financial institutions on its behalf, the open market value of the said transaction / supply may be treated as zero, and hence, no tax need to be paid. However, the taxable value of supply of corporate guarantee provided between related parties (parent company and subsidiary or associate or sister firm) will be deemed to be one percent of the amount or value of such guarantee offered, or the actual consideration, whichever is higher. GST on Guarantees Personal guarantee by directors Corporate Guarantee No consideration; 1% of value of guarantee Actual consideration or 1% of value of guarantee Given on behalf of borrower company to lender Given on behalf of borrowing associate/ sister company Company pays consideration to director No consideration from company to directors Tax @ 18% on actual consideration Value Nil; No GST GST @ 18% on higher of value as per new Rule 28(2) Rule 28(2) to apply irrespective of full ITC available to recipient or not I. T. MIRROR (2023-24) 26

I. T. MIRROR (2023-24) GIST OF TAXABILITY OF GUARANTEES BY CORPORATES / DIRECTORS Levy of GST @ 18% Both types of guarantees covered – personal / corporate Personal guarantees without any consideration – not taxable Personal guarantees backed by consideration from company-taxable. Apply to both- promoter - directors / other directors Corporate guarantee to be taxed whether with or without consideration Value of service to be higher of actual consideration or 1% of guarantee value- deemed valuation Change in Rules / Clarification to be notified REVERSE CHARGE ? According to section 9 (5) of CGST Act, 2017 reverse charge mechanism is applicable to certain cases where tax liability is to be discharged by the recipient of services. In terms of Notification No. 13/2007-CT(Rate) dated 28.06.2017, one such service is services of a director. Entry No. 6 states that following service shall be covered under reverse charge mechanism where- Service is supplied by a director of a company or a body corporate to the said company or the body corporate. Service provider is a director of company or a body corporate. Service receiver is the company or a body corporate located in the taxable territory. Since the person gives his personal guarantee in his /her capacity as an individual director of that company and not in any other capacity, cases of giving personal guarantee to body corporate or company shall be covered under reverse charge mechanism. If such personal guarantee has been given in any capacity other than being a Director (e.g. manager, KMP or promoter – non-director), reverse charge mechanism may not be applicable. IMPACT OF TAX The taxability of corporate guarantees would impact the corporate taxpayers and business entities as it would add to cost where input tax credit can not be availed. For individual directors giving personal guarantee, reverse charge mechanism would be applicable. In cases where output supplies are not taxable or are exempt, it would simply add to cost and input tax credit accumulation where input tax credit can not be availed. The companies may also face issues in identifying related party and related party transactions. In view of GST Council's recommendations, corporate guarantees given in favour of related parties will be liable for 18 percent goods and service tax (GST) on 1 percent of the amount guaranteed or on the actual consideration, whichever is higher. However, personal guarantees offered by the promoters or directors of the company shall not attract tax. The move on implementation is expected to resolve conflicts on levying GST on personal and corporate guarantees between related parties. CBIC clarification on taxability of Guarantees CBIC has clarified vide Circular No. 204/16/2023-GST dated 27.10.2023 on the taxability of personal guarantee and corporate guarantee and corporate guarantee on GST, i.e., personal guarantee and valuation of the activity of providing corporate guarantee by a related person to banks/financial institutions for another related person, as well as by a holding company in order to secure credit facilities for its subsidiary company. Such activities shall be treated as supply of services even when made without consideration. In terms of rule 28 of the CGST Rules, the taxable value of such supply of service shall be the open market value of such supply. 27

When no consideration can be paid for the said transaction by the company to the director in any form, directly or indirectly, as per RBI mandate, there is no question of such supply/ transaction having any open market value. The open market value of the said transaction/ supply may be treated as zero and therefore, the taxable value of such supply may be treated as zero. In such a case, no tax is payable on such supply of service by the director to the company. Where director who had provided guarantee is no longer connected with management but his guarantee continues and is offered remuneration, the taxable value of such supply of service shall be the remuneration/ consideration provided to such a person/ guarantor by the company, directly or indirectly. In case of corporate guarantee to related persons, providing corporate guarantee by a holding company to the bank/financial institutions for securing credit facilities for its subsidiary company, even when made without any consideration, is also to be treated as a supply of service by holding company to the subsidiary company, being a related person. Taxable value will be determined as per rule 28(2) of CGST Rules but Rule 28(2) shall not apply in respect of the activity of providing personal guarantee by the Director to the banks/ financial institutions for securing credit facilities for their companies and the same shall be valued in the prescribed manner. I. T. MIRROR (2023-24) 28

INTRODUCTION: The interpretation of legal definitions plays a crucial role,in the status quo about whether the term 'goods,' as stipulated in the GST Act, includes cash. This matter holds substantial importance not only for taxation purposes but also in determining the authorities' powers of confiscation under the Act. The legislature, through the enactment of section 67 of the GST Act, has made its intentions very clear, that the seizure or confiscation of items defined as "goods" should be carried out solely to assist authorities in quantifying and demanding the tax. It is not intended as a procedural mechanism for recovering taxes.The decision by various High Courts (Gujarat, Madhya Pradesh, Delhi, Kerala)has shed light on this issue and the definition of 'goods' within the context of the Goods and Services Tax (GST) Act in India. This article will ponder upon the different views of the Court's decisions which would not only clarify the definition of 'goods' under the GST Act but also underscore the necessity for goods to be liable for confiscation under the law. BRIEF ISSUE IN DISCUSSION: Focusing on the power of the proper officer to confiscate goods, documents, books, or things under Section 67(2), recent decision of Bharatkumar Pravinkumar and Co. Vs State of Gujarat [TS-568-HC(GUJ)-2023- GST]case where the Gujarat High Court made certain observations which are important to understand: • Guiding Principle of Authority: The authority's power to seize is guided by the object of the taxing statute and the exercise ofsuch power must align with the purpose of the statute. • Seizure in GST Act Investigation:In GST Act investigation for tax evasion, cash seizure is questioned.It was realized that cash is not part of the appellant's business stock in trade.And that the same seized cash is not related to the quarry business conducted by the appellant. The Intelligence Officer's findings on suspicion and unrecorded income areirrelevant under the GST Act. The officer's findings are more suited to the Income Tax department, and not applicable to GST Act. • Judgment and Appeal Outcome: The court directs the immediate release of seized cash to the appellant. Observation 1: Whether cash is a thing u/s 67(2)? Ans: According to the Delhi High Court judgment Arvind Goyal CA v/s Union of India and other W.P.(C) 12499/2021, cash does not fall within the definition of goods, relying on the same judgement, court ruled it is not forming part of the things definition, as it should be relevant for the use in the seizure and not just any “thing”. There have been instances in income tax where the proposition is evasion of tax with respect to income, but here in GST, the provisions are to be read in reference to goods or services which is the source for taxation. Observation 2: Is there a requirement for the proper officer to have a reason to believe for the seizure to be useful for proceedings under the CGST Act (Section 67(2))? Ans: Yes, the Gujarat High Court clarified that when the proper officer confiscates goods, documents, books, or things under Section 67(2), there must be a reason to believe that they are useful or relevant to any proceedings under the CGST Act. In Arvind Goyal's case,the officer officially recorded the action as "resuming" cash in the From Cash to Commodities: The Evolution of 'Goods' in GST Legislation and Courtroom Battles - CA YASH SHAH 29

I. T. MIRROR (2023-24) panchnama, asserting that it should not be categorized as a seizure. During the proceeding, the counsel making this point was unable to identify a specific provision within the GST Act to simply "resume" cash without following established procedures. This raised a question about the legitimacy of the action, as no legal basis for such a practice is there. Observation 3: Findings Income tax v/s GST? Ans: There is a distinction between the powers and scope of authorities under the Income Tax department and those under the GST Act and findings related to income tax matters may not be relevant in the context of the GST Act. Observation 4: If nonotice for seizure, returnable within 6 months Section 67(7)? Ans: The Gujarat High Court refers to sub-section (7) of Section 67, which states that if no notice is given within six months of the seizure of goods, the goods shall be returned to the person from whose possession they were seized and the court held that the petitioner is entitled to the return of the seized cash (Rs.69,98,400) as no notice was given within the stipulated six-month period. Finding of the decision:Cash is not part of the appellant's stock in trade and therefore unauthorized seizure as per the GST Act. RELEVANT DECISION IMPACTING THE ABOVE ANALYSIS: 1. Smt. Kanishka Matta v. Union of India and Others, M.P [W.P. 8204/2020 [2020 (42) G.S.T.L. 52 (M.P.)]. a. The central issue in this case was whether the term "money" is included in Section 67(2) of the CGST Act, 2017. The petitioner argued that since "money" is not explicitly mentioned in this section, the investigating agency or department has no authority to seize it. b. It referred to Section 2(17) which defines "business" and Section 2(31) which defines "consideration." By looking at these definitions along with Section 2(75) and 67(2), the court concluded that authorised officers can indeed seize money. c. The term "things" in Section 67(2) should be interpreted broadly. Legal dictionaries like Black's Law Dictionary and Wharton's Law Lexicon define "thing" as something of value or ownership, which includes "money." Held:Ultimately, the Madhya Pradesh High Court ruled that the GST Department rightfully seized the cash. This decision confirmed that cash is considered one of the "things" that can be seized under the law. 2. Shabu George v. State Tax Office, Kerala. [W.A 514 of 2023 and W.P. (C)39406/2022 [(2023) 9 Centax 28 (Ker.)] a. In this case, the court found that there was no valid reason for seizing the cash discovered at the appellant's premises during the search. b. The court emphasized that any authority's power to seize items under a taxing statute should be guided by the statute's objectives. c. In the context of investigating tax evasion under the GST Act, the court questioned the seizure of cash, especially when it was confirmed that the cash was not part of the appellant's business stock. d. The findings of the Intelligence Officer, such as the suspicion regarding the source of the money and its unreported nature in income tax returns, were deemed irrelevant and beyond the jurisdiction of authorities under the GST Act. The court concluded that the seizure of cash was unnecessary and unwarranted. e. The State Tax Department filed a Special Leave Petition (SLP) before the Supreme Court against the High Court's ruling. 30

I. T. MIRROR (2023-24) Held : The High Court's decision, in this case, was upheld, as it determined that cash seizure in the context of GST tax evasion was not justified when the cash was not a part of the business's stock-in-trade. 3. Deepak Khandelwal v.Commissioner of CGST, Delhi[2023 (77) G.S.T.L. 5 (Del.) (2023) 9 Centax 244 (Del.)] a. Cash, is explicitly excluded from the definition of "goods." This exclusion is based on its clear categorization as "money" under the sub-section (75) of Section 2 of the Act. Cash in Indian currency is not considered "goods" because it's clearly defined as "money" in the law. b. The term "things" in sub-section (2) of Section 67 should not be considered mutually exclusive from the term "goods." Instead, "goods" in sub-section (2) primarily pertains to items that are the subject of taxable supplies under the Act. The word "things" in the law shouldn't be seen as separate from "goods." "Goods" in this context mainly refers to items that can be taxed under the law. Held : Goods that can be seized under sub-section (2) of the Act are those for which the proper officer has a reasonable belief that they are liable for confiscation. In other words, the key criterion for seizure is the potential for these goods to be involved in tax evasion. To seize something under the law, the tax officer must have a good reason to believe that it might be taken away because of tax problems, like tax evasion. 4. Arvind Goyal CA v. Union of India & Others[W.P. (C) No. 12499 of 2021, decided on 19-1-2023] a. A search operation conducted at the residence by GST officers under section 67(2) led to the discovery of cash, but no formal seizure memo was prepared for the confiscated cash, a panchnama was drawn. The absence of a seizure memo raises procedural questions regarding the legal basis for such confiscation. b. The petitioners did not willingly surrender the cash to the officers; rather, the officers' actions were coercive in nature. The absence of a provision in the GST Act makes the officer simply "resume" assets without any legal basis from an individual's premises that too without proper procedures. Held : The court provided clarityw.r.t Resumed assets and Seized assets and declared the action of taking away currency without issuinga seizure memo as illegal and ordered the authorities to return the remaining amount with interest to the petitioner and release the bank guarantee. CONCLUSION: In conclusion, the classification of "cash" as a "thing" under Section 67 of the CGST Act remains a contentious issue, with varying interpretations from different courts. The Delhi High Court adopts an expansive interpretation, while the Madhya Pradesh High Court offers a contrasting view, making the matter complex. The recent decision by the Kerala High Court, affirmed by the Supreme Court, suggests that cash can't be seized under Section 67(2) unless it is part of the business's assets.The key takeaway is that whether cash can be seized depends on whether it is generated or accumulated through business activities and forms part of the business assets. This implies that cash from personal sources, not linked to the business, should not be seized. It is crucial to consider the specific facts of each case when applying the Kerala High Court's ratio. The powers of inspection, search, and seizure under Section 67 should be exercised judiciously by GST authorities, following instructions from the competent authorities. These powers are meant to protect government revenue without unduly harassing taxpayers. To ensure proper application, these provisions are to be enforced by officers of a certain rank, like Joint Commissioners, who can effectively combat tax evasion while safeguarding taxpayer rights.There are still unresolved questions regarding the applicability of Section 83, particularly concerning the provisional attachment of property and the release of seized cash after one year has passed. 31

INTRODUCTION In recent years, the concept of fractional ownership has emerged as a groundbreaking trend in the real estate sector, reshaping the way individuals invest in and experience property ownership. This innovative approach opens up new possibilities for a diverse range of investors, offering flexibility and accessibility that traditional real estate models may lack. UNDERSTANDING FRACTIONAL OWNERSHIP What is Fractional Ownership? Fractional ownership involves multiple investors jointly owning a high-value asset, such as a property. Each investor owns a fraction of the asset, typically represented as shares. This enables individuals to invest in premium real estate without the need for a substantial capital outlay. The Mechanism Behind Fractional Ownership The process begins with a property being divided into shares, often facilitated through a specialized platform or company. Investors can then purchase these shares, entitling them to a portion of the property's value and potential returns. This approach democratizes real estate investment, allowing a broader spectrum of individuals to participate. ADVANTAGES OF FRACTIONAL OWNERSHIP Diversification of Investment Portfolio One of the primary advantages of fractional ownership is the ability to diversify one's investment portfolio. Traditionally, real estate investment required significant capital, limiting opportunities for many. Fractional ownership, however, allows investors to spread their funds across multiple properties, reducing risk and enhancing overall portfolio resilience. Access to Premium Properties For those aspiring to own a share of luxury real estate, fractional ownership provides an avenue that was previously exclusive to high-net-worth individuals. This democratization of access allows investors to enjoy the benefits of upscale properties without the burdensome financial commitment associated with sole ownership. Hassle-Free Management Property management can be an arduous task, especially for those with busy schedules. Fractional ownership offers a relief in this regard, as the responsibilities associated with property maintenance and management are often delegated to a professional management company. This allows investors to enjoy the perks of real estate ownership without the day-to-day hassles. Fractional Ownership in the Real Estate Sector: Unlocking New Possibilities CA HARSH MEHTA ADV (CS) LOKESH SHAH 32

I. T. MIRROR (2023-24) OVERCOMING CHALLENGES IN FRACTIONAL OWNERSHIP Regulatory Considerations While fractional ownership brings about numerous advantages, navigating regulatory considerations is crucial. Investors must be aware of legal frameworks governing such arrangements, ensuring compliance to mitigate potential risks. Seeking legal counsel and utilizing reputable platforms can help navigate these complexities effectively. Communication and Decision-Making With multiple stakeholders involved, effective communication and decision-making are paramount. Establishing clear protocols for decision-making processes and utilizing transparent communication channels contribute to the overall success and satisfaction of all co-owners. The Future of Fractional Ownership As the real estate landscape continues to evolve, fractional ownership is poised to become an integral part of investment strategies globally. The democratization of premium property access, coupled with advancements in technology facilitating seamless transactions, positions fractional ownership as a transformative force in the real estate sector. TYPES OF FRACTIONAL OWNERSHIP Fractional ownership isn't a one-size-fits-all concept. This section breaks down the different types, including time-based, property-based, and equity-based fractional ownership. Each type caters to different needs and preferences, offering flexibility to potential investors, all types are explained below; Equity-Based Fractional Ownership In this type of fractional ownership, investors hold actual equity in the property. The ownership structure is akin to that of traditional real estate, where each investor's share represents a percentage of the property. This model allows for a more direct connection between the value of the property and the investor's returns. Time-Based Fractional Ownership Time-based fractional ownership revolves around the allocation of time rather than equity. Investors purchase the right to use the property for a specific period each year. This is a common approach for vacation properties, ensuring that each investor has dedicated time to enjoy the asset. The schedule is often organized through a predetermined calendar or reservation system. Tokenization in Fractional Ownership With advancements in blockchain technology, tokenization has emerged as a revolutionary method in fractional ownership. Each property is represented by digital tokens on a blockchain, allowing for seamless and transparent transactions. Tokenization facilitates fractional ownership on a granular level, enabling investors to buy and sell fractions of a property with ease. Crowdfunding Real Estate Ownership Crowdfunding has transcended industries, and real estate is no exception. Fractional ownership through crowdfunding involves a collective effort of multiple investors contributing smaller amounts to collectively fund a property purchase. This approach democratizes real estate investment even further, making it accessible to a broad audience. 33

I. T. MIRROR (2023-24) Destination Clubs Destination clubs operate on a membership basis, offering investors access to a portfolio of luxury properties in various locations. Members pay an initiation fee and annual dues, granting them the right to stay in any of the club's properties for a set number of days per year. This model combines elements of both equity-based and timebased fractional ownership. Real Estate Investment Trusts (REITs) While not a traditional fractional ownership model, Real Estate Investment Trusts (REITs) allow investors to indirectly own a share of a diverse portfolio of properties. REITs are publicly traded entities that pool funds from investors to invest in income-generating real estate assets. Although not as direct as other fractional ownership models, REITs offer a liquid form of real estate investment. THE RISE OF FRACTIONAL OWNERSHIP PLATFORMS In recent years, the real estate industry has witnessed a significant transformation with the emergence and proliferation of fractional ownership platforms. These platforms have played a pivotal role in democratizing access to high-value properties and reshaping the dynamics of real estate investment. Let's delve into the factors contributing to the rise of these platforms and their impact on the market. Accessibility and Inclusivity Fractional ownership platforms have broken down traditional barriers to real estate investment by making it accessible to a broader audience. Investors no longer need substantial capital to participate in premium real estate ventures. These platforms allow individuals to purchase fractions of properties, expanding investment opportunities beyond the confines of traditional ownership models. Technology Integration The integration of advanced technologies has been a driving force behind the success of fractional ownership platforms. Online platforms streamline the entire process, from property selection to transaction execution. Blockchain technology, in particular, has brought transparency and security to these transactions through features like smart contracts and tokenization. Diverse Investment Options Fractional ownership platforms offer a diverse range of investment options, catering to varying investor preferences. Whether it's residential, commercial, or vacation properties, these platforms provide a menu of choices. Investors can select properties aligned with their risk tolerance, investment goals, and personal preferences, fostering a customized approach to real estate investment. Liquidity and Exit Strategies Unlike traditional real estate investment, fractional ownership provides investors with enhanced liquidity. Platforms facilitate the buying and selling of shares, allowing investors to exit or adjust their positions more readily. This liquidity feature adds a layer of flexibility, making fractional ownership an attractive option for those who value agility in their investment portfolio. Risk Mitigation Fractional ownership platforms often implement risk mitigation strategies, offering investors a level of security in their ventures. Diversification, both in terms of property types and geographical locations, helps spread risk. Additionally, stringent due diligence processes conducted by these platforms contribute to a more secure investment environment. 34

I. T. MIRROR (2023-24) Community Engagement The rise of fractional ownership platforms has fostered a sense of community among investors. Through online forums, social media groups, and platform-specific communities, investors can connect, share experiences, and gain insights. This communal aspect adds a layer of transparency and trust to the fractional ownership landscape. Regulatory Compliance As fractional ownership gains prominence, regulatory frameworks are evolving to provide a structured and secure environment. Reputable fractional ownership platforms prioritize compliance with relevant regulations, offering investors peace of mind and contributing to the legitimacy of the industry. THE IMPACT OF FRACTIONAL OWNERSHIP ON THE REAL ESTATE MARKET The advent of fractional ownership has reverberated through the real estate market, introducing a paradigm shift in how properties are owned, invested in, and experienced. This innovative approach has far-reaching implications, influencing various aspects of the real estate landscape. Democratization of Real Estate Investment Fractional ownership has dismantled the traditional barriers to entry in real estate investment. Historically, large capital requirements limited property ownership to a select few. However, with fractional ownership, individuals with varying financial capacities can now invest in high-value properties. This democratization broadens the investor base, injecting diversity into the real estate market. Increased Liquidity and Flexibility Traditionally, real estate investments were characterized by their lack of liquidity. Fractional ownership platforms, leveraging technology and innovative ownership structures, have introduced liquidity to the market. Investors can now buy and sell shares of properties more readily, allowing for greater flexibility in adjusting their investment portfolios based on changing circumstances. Rise of Micro-Investing Fractional ownership has paved the way for micro-investing in real estate. Investors can allocate smaller amounts of capital across multiple properties, diversifying their portfolio without the need for substantial financial resources. This micro-investing trend caters to a broader demographic, encouraging a more inclusive participation in real estate markets. Transformed Use of Premium Properties The concept of fractional ownership has transformed the utilization of premium properties. Owners of fractional shares gain access to high-end real estate assets, typically beyond the reach of individual buyers. This not only enriches the ownership experience for investors but also optimizes the usage of upscale properties, ensuring they are occupied and appreciated. Evolving Property Management Practices Fractional ownership often involves professional property management, relieving individual investors of the dayto-day responsibilities associated with property ownership. This shift towards centralized management ensures that properties are well-maintained, enhancing their overall value. It also contributes to a hassle-free ownership experience, a stark departure from the management challenges faced by sole property owners. 35

Impact on Traditional Real Estate Models The rise of fractional ownership poses challenges to traditional real estate models. Sole ownership may no longer be the default choice for investors seeking exposure to the real estate market. As fractional ownership gains traction, real estate developers and professionals are compelled to adapt their offerings and services to remain competitive in this evolving landscape. Globalization of Real Estate Investment Fractional ownership platforms, often facilitated through online portals, have facilitated the globalization of real estate investment. Investors can now diversify their portfolios across international borders without the logistical complexities associated with sole ownership. This global perspective introduces a new dynamic to real estate investment strategies. FAQS ABOUT FRACTIONAL OWNERSHIP 1. What exactly is fractional ownership? Fractional ownership involves multiple investors jointly owning a property. Each investor owns a fraction of the property, often represented as shares. This innovative approach allows individuals to invest in highvalue real estate without the need for a significant capital outlay. 2. How does fractional ownership differ from traditional real estate ownership? In traditional real estate ownership, an individual or entity owns the entire property. Fractional ownership, on the other hand, allows multiple investors to share ownership, dividing the property into shares that investors can purchase. 3. What types of properties are suitable for fractional ownership? Fractional ownership is versatile and can apply to various property types, including residential homes, commercial spaces, vacation properties, and luxury real estate. The flexibility of fractional ownership makes it adaptable to diverse investor preferences. 4. How are decisions made in a fractional ownership arrangement? Decision-making in fractional ownership often depends on the structure of the ownership agreement. Some decisions may require a unanimous vote, while others may be based on a majority or predetermined criteria. Clear communication and established protocols are essential for effective decision-making. 5. Can I sell my fractional ownership share? Yes, one of the advantages of fractional ownership is the potential for liquidity. Depending on the terms outlined in the ownership agreement and the platform facilitating the fractional ownership, investors can sell their shares to other interested parties. 6. How is rental income distributed in fractional ownership? The distribution of rental income typically aligns with the ownership structure outlined in the agreement. Each investor receives a portion of the rental income based on their share in the property. Platforms or management companies often handle the collection and distribution of rental proceeds. 7. Are there risks associated with fractional ownership? Like any investment, fractional ownership carries inherent risks. These may include market fluctuations, property value changes, and potential disputes among co-owners. Conducting thorough due diligence, 36

understanding the terms of the ownership agreement, and choosing reputable platforms can help mitigate these risks. 8. Are fractional ownership platforms regulated? Regulation of fractional ownership platforms varies by jurisdiction. It's crucial for investors to choose platforms that adhere to relevant legal frameworks and comply with industry standards. This ensures a secure and transparent investment environment. 9. Can I use my fractional ownership for personal use? Many fractional ownership agreements include provisions for personal use of the property. Investors may have allocated time or specific periods during which they can enjoy the property. The terms regarding personal use are typically outlined in the ownership agreement. 10. How do I get started with fractional ownership? To embark on fractional ownership, start by researching reputable platforms, understanding their offerings, and reviewing ownership agreements thoroughly. Consider consulting with financial and legal professionals to ensure informed decision-making aligning with your investment goals. 37

The term London Inter-Bank Offered Rate - LIBOR is very common for the professional working in finance industry. For last several decades, this rate has been in use as benchmark in the global financial markets. Trillions of dollars of financial transactions and derivative products have been riding on this benchmark rate. LIBOR was considered as the gold standard of the financial world as a key reference rate for setting the interest rates charged on adjustable rate loans and a variety of mortgages. However, there have been certain happenings that eroded trust on this benchmark rate and it is currently in its sunset period. In this article, we attempt to brief the history of LIBOR so as to how its birth happened, why it had been in limelight since long and more importantly, what led for its end. 1. ADVENT OF LIBOR • How the birth of LIBOR happened? In 1984, the British Bankers Association (BBA) developed the BBA Interest Rate Settlement Rates (BBAIRS) upon request by the member banks for a reliable benchmark to be used for derivative transactions. Over a period of time, this rate became London Inter Bank Offered Rate (LIBOR). From January 1986, LIBOR started officially publishing rates for three currencies US Dollar (USD), Japanese Yen (JPY) and British Pound Sterling (GBP). Through passage of time, two more currencies and further maturities were added which are EURO (EUR) and Swiss Franc (CHF). Currently rates are quoted for five currencies at present - USD, GBP, JPY, EUR and CHF. LIBOR is the reference rate at which the panel banks indicate that they can borrow short term wholesale funds from each other. The rationale for wide usage of LIBOR in the financial world is due to the fact that it represents the terms, at which the world's largest and financially sound institutions are able to obtain funds on short term basis. • Process of LIBOR Rate determination LIBOR is determined daily, through a process in which the member banks in the panel, submit quotes at 11.45 AM (London time) in the morning for different currencies and maturities ranging from 1 day to 12 months, and an average of these rates so submitted is taken and published after certain adjustments. The rates thus published are used as reference for a wide variety of financial transactions across the globe. It is estimated than an amount of USD 300 – 350 Trillion of financial instruments in corporate debt, mortgages, variable rate loans, consumer loans, municipal debt and other derivative products across the globe are linked to LIBOR as the reference rate. LIBOR has become so important that it is sometimes referred to as the financial world's most important number. • Incidences of LIBOR Rates manipulations by panel banks In 2010,The British Financial Services Authority (FSA)launched an investigation into allegations of manipulative practices followed by the member banks for determining LIBOR. The Department of Justice of the US and the UK Serious Frauds Office (SFO) investigated the member banks. A lot of US financial instruments are linked to USD LIBOR rate and hence US had the authority to prosecute the member banks. The investigations revealed that derivatives traders and employees of the member banks discussed and provided artificial rates that would benefit the traders instead of the rates that the bank would actually quote to borrow LIBOR – The Gamut is at end - CA HOMESH MULCHANDANI 38

money. Banks also coordinated with other banks and made sort of cartel to alter the rates. This made the benchmark rate to vary based on entirely the trader's positions sometimes. Further, it was revealed that bank sartificially quoted lower rates to appear during the global financial crisis of 2008 and impacted that they can borrow money at lower rates to make the financial/ banking industry appear less risky and insulate itself from the global phenomenon. The investigation revealed facts which shocked the financial world as to the scale of wrong doings and the benefits the member banks got by rigging the benchmark rate. The entire malpractices by members' banks, had eroded the trust of all financial market participants. Many banks such as UBS & Barclays were allegedly involved in misreporting and they had settled with authorities with the highest ever fines in billions of USD. In 2014, the administration of LIBOR was shifted from BBA to Inter Continental Exchange (ICE). It has brought major reforms in administration of the rates however even after these changes, the LIBOR couldn't gain the trust on LIBOR and it was too late for it to continue as the benchmark rate. Resulting to all those incidents strongly demanded for drastic change in interbank exchange rates. 2. ALTERNATIVE TO LIBOR • Major steps undertaken to overcome the challenges regards to LIBOR In July 2017,The UK Financial Conduct Authority (FCA) announced that LIBOR should be phased out by end of 2021. In April 2017, Bank of England as a part of its wider interest rate benchmark reform process selected a riskfree, Alternate Reference Rate (ARR) Rate for GBP financial contracts and derivatives. The ARR benchmark was set based on Sterling Over Night Index Average (SONIA). Over a period of time, various ARR are developed by central banks across the world. Each of the five LIBOR currency jurisdictions have worked upon the new rates and continuously addressing the transition related issues that are being emerged. ARRs will be different from LIBOR for the fact that ARRs are based on actual overnight transactions either secured or unsecured, whereas LIBOR is unsecured without any collateral and relies to a great extent on the judgment of the panel banks. This feature of judgement by banks and the associated subjectivity also became its main shortcoming over the years. The ARRs are also designed to be near risk free with no term premium. The phase out of LIBOR will mean that each of these rates will be the benchmark for reference • Effect to Indian Banks for LIBOR Phasing out and Major steps taken by Apex Bank RBI As many banks across the globe faced many difficulties in shifting over their existing exposure from LIBOR to alternative ARR, the same is the case with Indian banks too. In August 2020, the RBI had advised banks to move out from LIBOR. Almost all banks dealing in foreign exchanges, by now are ready with the transition to ARR, but they have not yet decided which one will be the most reliable ARR. Secured Overnight Financing Rate (SOFR) and Sterling Overnight Interbank Average Rate (SONIA) are the two popular alternatives, but are nowhere near as popular internationally as LIBOR, which is being phased out by this year's end. It is widely expected that Secured Overnight Financing Rate will be accepted as the new benchmark rate. SOFR is linked to US treasury market transactions and is an identified replacement for USD LIBOR. The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans that is replacing the LIBOR. Interest rate swaps on more than USD 80 Trillion in notional debt switched to the SOFR in October 2020. This transition is expected to increase long-term liquidity but also result in substantial short-term trading volatility in derivatives. The Federal Reserve Bank of New York began publishing the SOFR in April 2018. Benchmark rates such as the SOFR are essential in the trading of derivatives—particularly interest-rate swaps, which corporations and other parties use to manage interest-rate risk and to speculate on changes in borrowing costs. I. T. MIRROR (2023-24) 39

I. T. MIRROR (2023-24) Major Indian banks such as SBI have started using new ARR SOFR in place of LIBOR. On January 20, SBI said it executed two interbank short-term money market deals with pricing linked to SOFR. Apart from it, ICICI Bank said it executed the first interbank money market transaction linked to SOFR. The transaction so executed through the bank's Hong Kong branch, is part of its benchmark transition management plan to assess the preparedness towards a smooth transition to the new ARR, the bank said. 3. TRANSITIONAL STEPS AND ITS CHALLENGES FROM LIBOR TO ARR Transitioning to a new benchmark rate is difficult, as there are trillions of dollars worth of LIBOR-based contracts outstanding and some of these are not set to mature until the LIBOR's retirement. That includes the widely used three-month U.S. dollar LIBOR, which has approximately $200 trillion of debt and contracts tied to it. Reprising contracts is complex because the two interest rates have several important differences. For instance, the LIBOR represents unsecured loans, while the SOFR, representing loans backed by Treasury bonds (T-bonds), is a virtually risk-free rate. In addition, the LIBOR actually has 35 different rates, whereas the SOFR currently only publishes one rate based exclusively on overnight loans. The move to the SOFR will have the greatest impact on the derivatives market. However, it will also play an important role in consumer credit products—including some adjustable-rate mortgages and private student loans—as well as debt instruments such as commercial paper. In the case of an adjustable-rate mortgage based on the SOFR, the movement of the benchmark rate determines how much borrowers will pay once the fixed-interest period of their loan ends. If the SOFR is higher when the loan “resets,” homeowners will be paying a higher rate as well. Other countries have sought their own alternatives to the LIBOR. For instance, the United Kingdom chose the Sterling Overnight Index Average (SONIA), an overnight lending rate, as its benchmark for sterling-based contracts going forward. The European Central Bank (ECB), on the other hand, opted to use the Euro Overnight Index Average (EONIA), which is based on unsecured overnight loans, while Japan will apply its own rate, called the Tokyo Overnight Average Rate (TONAR). 40

Glimpses of Diwali Get Together 2023 on 02/12/2023 at Boot Camp Cafe & Restro

Glimpses of Diwali Get Together 2023 on 02/12/2023 at Boot Camp Cafe & Restro