Section 80EE Income Tax Benefit on Home Loan Interest

Income Tax Benefit on Home Loan Interest under Section 80EE Of Income Tax Act .For the A.Y. 2014-16.

Introduction- Finance Minister inserted a new section relating to the additional deduction in respect of interest on loan taken for residential house property. Assessee can avail the benefits of this section in two A.Y. 2014-15 & 2015-16.Purpose of this section is to promote house ownership & give a fillip to a number of industries like steel, cement, brick, wood etc. besides jobs to thousands of construction workers.

Applicability- Benefit of this section can avail by Individual assessee. Deduction under this section is not available for any other assessee (like HUF, firm etc.). Individual can claim benefit under this section only when all the following conditions are satisfied, these are-

Purchaser should be first time buyer. i.e. he has never purchased any house and now he is going to purchase a house.
Value of the house should not more than 40 lakh.
Loan taken by Individual for the purpose of buy a house should not be more than 25 lakh.
On the date of sanction of loan individual does not have any own residential house property.
Loan for this purpose taken by individual should be from the Financial Institution or Housing Finance Company.
For this purpose, loan should be sanctioned between 01.04.13 to 31.03.14.

U/s 80EE (4) - Provides that where a deduction under this section is allowed for any interest payable on loan only when deduction shall not be allowed in respect of such interest under any other provisions of the Act for the same or any other assessment year.

Quantum of Deduction- Assessee can take deduction u/s 80EE on interest payable on home loan upto 1 Lakh in A.Y.2014-15. It can claim deduction in two assessments year. Means if whole amount of interest payable upto 1 lakh is not claim as deduction in A.Y.2014-15 then remaining balance amount upto 1 lakh can claim in A.Y.2015-16.Total deduction under this section shall not be more than 1 lakh.

Example- Assessee has taken a loan for the purpose of residential house property & interest payable on loan Rs. 90000/- for the A.Y.2014-15.In this case assessee can claim deduction 90000/- in A.Y.2014-15 and other remaining balance i.e. Rs. 10,000/- ,can claim in A.Y.2015-16

Clarification of Section 24 and 80EE-

Where the property has been acquired, constructed, repaired, renewed or reconstruction with borrowed capital, the amount of any interest payable on such capital is deductible under section 24(b), subject to the prescribed conditions.

As per Sub Section 4 section 80EE, assessee can avail deduction in respect of interest payable on loan only when assessee does not claim any deduction in respect of such interest in any other provisions of the Act.

However Finance Bill , 2013 contain an announcement of additional deduction of interest on housing loan for first time buyer state that-

I propose to allow such home buyers an additional deduction of interest of Rs.100000/- to be claimed in A.Y.2014-15. If the limit is not exhausted, the balance may be claimed in A.Y.2015-16. This deduction will be over and above the deduction of Rs.150000/-allowed for self occupied properties under section 24 of the income tax Act.

So as per above explanation there is clash between Sub section 4 of section 80EE and as per announcement under para 132.So according to me assessee may also claim additional deduction U/s 80EE apart from deduction U/s 24.

Key Notes

1) Deduction available to individual only not to other persons.

2) Deemed owner concept does not apply in respect of such deduction.

3) Spouse would not disqualify for relief U/s 80EE in case of residential house purchased in joint names.

4) Assessee can purchase house for both purpose .i.e. it can be for self occupied or can be Non self occupied.

5) Interest includes "any service fee or other charges in respect of money borrowed or processing fees".

6) Date of make application to loan irrelevant but date of sanction of loan is relevant.

Section 80EE : Deduction for interest on loan for residential house property

Account Payee Cheques cannot be credited to any person other than the payee named therein

Posted In RBI / FEMA | Notifications | 1 Comment »

RBI/2013-14/458
DBOD.BP.BC.No. 87/21.01.001/2013-14

January 22, 2014

The Chairmen / Chief Executives of
All Scheduled Commercial Banks (excluding RRBs)

Collection of Account Payee Cheques -
Prohibition on Crediting Proceeds to Third Party Account

Please refer to our circular DBOD.BP.BC.No.50/21.01.001/2011-12 dated November 4, 2011 advising banks that they are prohibited from crediting 'account payee' cheques to the account of any person other than the payee named therein. We reiterate these instructions and advise that banks should strictly collect 'account payee' cheques only for their payee constituents.

2. Banks may, however, consider collecting account payee cheques drawn for an amount not exceeding Rs.50,000/- to the account of their customers who are co-operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies, as advised in our above circular dated November 4, 2011.

Yours faithfully,

(Chandan Sinha

ICAI : Online Registration Portal for ITT, OP and GMCS Courses

Posted In CA CS ICWA | News | 1 Comment »

The application provides the facility for online process for registration, selection of batch/location, payment of course fee through payment gateway, filling up online feedback form and also for generating online certificates to the participants of ITT/ OP/GMCS Courses.

Key features:

Facility for Student: The application will provide facility for the student to -

Register online from anywhere in any open batch.
Register in waiting list with preferred location, in absence of current batch.
Make payment online through payment gateway and offline by DD. For offline, DD to be submitted to respective branch who in receipt of the same will confirm batch on auto generated email.
Check the student detail from CITRIX / VIP software.
Transfer from allotted batch.
Submit of feedback online.
Process the completion certificates online.

Facility for Faculty: The application will provide facility for faculty to -

Register online for taking classes.
Modify his registration form time to time.
View the result of feedback given by the students.

Facility for POU: The application will provide facility for POU to -

Launch every batch of every activity online.
View the status of registration of each batch.
Access data of faculties for different subject who are registered on web site and then have to allocate online the subject to them.
Get the list of registered student for each batch three days in advance with payment details so that they can reconcile with actual payments.
Print out of the attendance sheet of the candidate well before 24 hours of batch commencement.
Generate the statement to claim the money from respective branch, in case of batch transfer.
Generate MIS for Batches organised, students participated for reconciliation purpose of every activity.
Approve / disapprove the faculty after registration.
Approve the attendance of Students.

Link to ICAI Online Registration Portal for ITT, OP and GMCS Courses – http://www.icaionlineregistration.org/index.html

GVAT : Penalty without issuing show cause notice cannot sustain – HC

Posted In GST | Judiciary | No Comments »

Abdul Karimhaji Umarbhai Rasulbhai v/s State of Gujarat( Gujarat High Court)

In this matter, the Hon 'ble Gujarat High Court has remanded the issue of not allowing input tax credit on purchases affected through retail invoices to Tribunal for fresh adjudication. For penalty imposed u/s 34 (12) of The GVAT Act, 2003, the Court observed that though statutory notice in Form No. 309 was served on to the appellant, it did not contain any proposal to impose penalty under the said section. Consequently, the levy of penalty was quashed and set aside

HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL NO. 638 of 2013

ABDUL KARIMHAJI UMARBHAI RASULBHAI

Versus

STATE OF GUJARAT

Date : 21/12/2013

ORAL JUDGMENT

(PER : HONOURABLE MR.JUSTICE M.R. SHAH)

1. Admit. Shri Jaimin Gandhi, learned AGP waives service of notice of admission on behalf of the respondent.

2. In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the appeal is taken up for final hearing today.

3. Feeling aggrieved and dissatisfied with the order dated 28.03.2013 passed by the learned Gujarat Value Added Tax Tribunal passed in Second Appeal No. 710 of 2011, the appellant has preferred the present tax appeal to consider the following substantial questions of law:

(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in treating the invoices produced by the appellant as "Retail Invoices" even though the nomenclature of a document cannot be conclusive to decide as to whether a invoice produced is a Retail Invoice or a Tax Invoice and even though admittedly, the invoice produced contained all the essential ingredients of a Tax Invoice including details of tax charged separately?

(ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that Input Tax Credit can be allowed to the purchasing dealer in the absence of tax invoice only when the retail invoice, debit note or cash memo produced in lieu of tax invoice contains all the requisite particulars of tax invoice and that the selling dealer is prohibited under the Act from issuance of tax invoice and that the selling dealer has paid the tax amount collected from the purchasing dealer to the State Government?

(iii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in directing the assessing authority to allow input tax credit on purchases effected through tax invoices after verifying that tax collected from the appellant by the selling dealers has actually been deposited to the state coffers even though such a provision was inserted in the statute book only w.e.f. 01/04/2013 by insertion of a new sub section (7A) in Section 11?

(iv) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the penalty levied under Section 34(12) of the Act by the assessing authority and partly confirmed by the first appellate authority even though the assessing authority had never proposed to impose any penalty under the said section in the statutory notice in Form No.309 issued for this purposes and even though the said notice was served on to the appellant after the date of passing assessment order?"

4. At the outset, it is required to be noted that Shri A.N.Mehta, learned advocate appearing on behalf of the appellant does not press the present appeal qua question No. (iii). Hence, present tax appeal is dismissed as not pressed so far as question No. (iii) is concerned.

5. Now, so far as question Nos. (i) and (ii), which are interrelated, are concerned, there is a broad consensus between the learned advocates appearing on behalf of the respective parties that the matter be remitted to the learned Appellate Tribunal to consider the said issues afresh in accordance with law and on merits and the learned advocates appearing on behalf of the respective parties do not invite any further reasoned order while remanding the matter to the learned Tribunal to consider the issue/question Nos. (i) and (ii) afresh in accordance with law and on merits.

6. Now, so far as question No.(iv) i.e. whether on the facts and circumstances of the case the Appellate Tribunal was right in law in confirming the penalty levied u/s 34(12) of the Gujarat Value Added Tax Act, 2003 (hereinafter referred to as the Act) is concerned, Shri Mehta, learned advocate appearing on behalf of the appellant has vehemently submitted that, as such, before levying the penalty u/s 34(12) of the Act no show cause notice has been issued upon the appellant calling the appellant to show cause as to why the penalty u/s 34(12) of the Act may not be imposed. It is submitted that as such while issuing the statutory notice in form No.309 the appellant was called upon to show cause why the penalty u/s 34(7) and u/s. 12(7) of the Act may not be imposed.

7. It is submitted that however there was no reference of levying the penalty u/s. 34(12) of the Act. It is submitted that the order passed by the First Authority imposing penalty u/s. 34(12) of the Act, partly confirmed by the First Appellate Authority and even confirmed by the learned Appellate Tribunal, deserves to be quashed and set aside.

8. Shri Jaimin Gandhi, learned AGP appearing on behalf of the respondent, as such, is not in a position to satisfy the Court that before imposing the penalty u/s 34(12) of the Act, any show cause notice was issued upon the appellant.

9. We have perused the statutory notice issued in Form No.309 and considering the same it appears that there is a reference to the penalty u/s 34(7) and u/s 12(7) of the Act only. However, there is no reference of penalty u/s 34(12) of the Act. Thus, before imposing the penalty u/s 34(12) of the Act neither any statutory notice has been served upon the appellant nor the appellant has been called upon to show cause as to why the penalty u/s 34(12) of the Act may not be levied/imposed. Under the circumstances, the order passed by the First Adjudicating Authority, partly confirmed by the First Appellate Authority and confirmed by the Appellate Tribunal imposing the penalty u/s 34(12) of the Act cannot be sustained and the same deserves to be quashed and set aside as the same is in breach of principle of natural justice. Consequently, the order passed by the First Adjudicating Authority imposing penalty u/s 34(12) of the Act, partly confirmed by the First Appellate Authority and further confirmed by the Appellate Tribunal, is hereby quashed and set aside.

10. Consequently, the present appeal succeeds in part. So far as challenge to levying/imposing the penalty u/s 34(12) of the Act is concerned, the order passed by the First Adjudicating Authority levying/imposing the penalty u/s 34(12) of the Act is hereby quashed and set aside.

10.1. So far as questions No. (i) and (ii) are concerned, the impugned judgment and order passed by the learned Appellate Tribunal is hereby quashed and set aside qua the said issues and the matter is remitted to the learned Tribunal to consider the said issues afresh in accordance with law and on merits after giving opportunity of hearing to all concerned.

10.2. So far as question No. (iii) is concerned, as stated hereinabove, the present appeal is dismissed as not pressed. No costs.

Penalty u/s 45 (3A) of the Gujarat Sales Tax Act, 1969 is not mandatory.

Posted In GST | Judiciary | No Comments »

State of Gujarat v/s Narendrakumar Revachand Kotak (Gujarat High Court)

In this matter, the Hon 'ble Gujarat High Court has held that prima facie it is of the view that penalty u/s 45 (3A) of the Gujarat Sales Tax Act, 1969 is not mandatory. However, in the opinion of the court, the question as to whether once the authority decides to impose penalty, can it reduce the same below the minimum prescribed required closure scrutiny. The question was, however, kept open to enable the State to urge the same in future in appropriate case and the appeals of the State were dismissed / disposed of on the ground that amounts involved were extremely small.

HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No. 928 of 2013
With

TAX APPEAL No. 929 of 2013
To

TAX APPEAL No. 930 of 2013

STATE OF GUJARAT

Versus

NARENDRAKUMAR REVACHAND KOTAK

Dated : 9th January 2014

COMMON ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI)

State has preferred these Appeals challenging separate but similar orders passed by the Gujarat Value Added Tax Tribunal, Ahmedabad ["Tribunal" for short]. We may notice the facts from Tax Appeal No. 928 of 2013. In such appeal, the judgment of the Tribunal dated 2^ndApril 2013 is under challenge. Following question of law has been presented for our consideration :‑

"Whether on the facts and in the circumstances of the case, the Tribunal has rightly held that the provision of penalty under section 43(3A) of the Gujarat Sales Tax Act, 1969 is not mandatory to levy penalty per default of filing declaration or late return ?"

For the alleged breach of furnishing return by the prescribed date, as required under section 40 (1) of the Gujarat Sales Tax Act, 1969 {"Act" for short}, the competent authority imposed penalty under section 45 (3A) of the said Act. Such penalty was challenged before the Tribunal. Tribunal, by the impugned judgment, held that it was not mandatory to levy penalty at the rate of Rs. 200/= per month for the default of filing declaration or return beyond the prescribed date. The Tribunal relied on its earlier judgment in case of Shree Rubber Industries Limited v. State of Gujarat to come to the conclusion that combined reading of Section 45 (3A) with Section 45(9) of the Act would show that the provision for penalty was not mandatory and the word "shall" contained in subsection (3A) of Section 45 should be read as "may" and resultantly, the penalty was not mandatory.

Having said so, considering the facts of the case, the Tribunal reduced the penalty from that imposed by the competent authority and confirmed by the appellate authority.

Learned AGP Mr. Jaimin Gandhi appearing for the State, however, relied on the decisions of the Supreme Court in case of Union of India & Ors. v. Dharamendra Textile Processors & Ors., reported in (2008) 13 SCC 369 and Union of India v. Rajasthan Spinning & Weaving Mills, reported in (2009) 13 SCC 448 to urge that such penalty is mandatory. However, we do not conclude this issue in the present Tax Appeals and therefore refrain from making any observations in this regard.

To our mind, whether certain penalty is mandatory or not is somewhat different context. On the question whether once the authority decides to impose penalty, it can reduce the same below the minimum prescribed under the statute. If a penalty is not mandatory, for variety of reasons, the authority may chose not to impose the penalty. However, whether mandatory or otherwise, the authority for valid reasons decides to impose penalty, the question would be could such penalty be reduced below the minimum prescribed under the law.

With the view of the Tribunal that the penalty under section 45(3A) of the Act is not mandatory, we are prima facie in agreement with. In this context, we refer to the decision of the Apex Court in case of Hindustan Steel Limited v. The State of Orissa, reported in 25 STC 211, wherein, it was held that penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances.

The question, however, may still remain whether once the authority decides to impose penalty, can it reduce the same below the minimum prescribed. In this context, decision of the Tribunal may require a closer scrutiny. We would have certainly undertaken the said task but for the fact that we are informed that the total effect of reduction of penalty in all three appeals puttogether is less than Rs. 35,000/=. Under the circumstances, keeping this question open to enable the State to urge the same in future in appropriate case, only on the ground of smallness of the claim amount in these appeals, such appeals are disposed of.

RBI to withdraw bank notes issued prior to 2005 wef 01.04.2014

Posted In RBI / FEMA | Notifications | 4 Comments »

Banknotes issued prior to 2005 to be withdrawn: RBI Advisory

The Reserve Bank of India has today advised that after March 31, 2014, it will completely withdraw from circulation all banknotes issued prior to 2005. From April 1, 2014, the public will be required to approach banks for exchanging these notes. Banks will provide exchange facility for these notes until further communication. The Reserve Bank further stated that public can easily identify the notes to be withdrawn as the notes issued before 2005 do not have on them the year of printing on the reverse side.

(Please see illustration below)

Illustration

Figure 1: Banknote on which the year of printing is not indicated and will be
WITHDRAWN after March 31, 2014

Figure 2: Banknote on which the year of printing is indicated and will therefore not be withdrawn
The Reserve Bank has also clarified that the notes issued before 2005 will continue to be legal tender. This would mean that banks are required to exchange the notes for their customers as well as for non-customers. From July 01, 2014, however, to exchange more than 10 pieces of `500 and `1000 notes, non-customers will have to furnish proof of identity and residence to the bank branch in which she/he wants to exchange the notes.

The Reserve Bank has appealed to the public not to panic. They are requested to actively co-operate in the withdrawal process.

Ajit Prasad
Assistant General Manager

The short issue in this appeal is whether or not penalty under section 44AB will also be attracted in the case in which the professional income of the assessee received from partnership firm of Chartered Accountants is taxable under the head "income from business or profession". In the relevant previous year, the assessee, a Chartered Accountant, received Rs.32,76,000/- from M/s. Lovelock & Lewes of which she was a partner. In terms of section 28(v), the said income was taxable under the head "Profits & Gains from Business or Profession". The Assessing Officer was of the view that the assessee ought to have obtained the audit report under section 44AB of the Income Tax Act and her failure to do so, invited penalty under section 271B of the Act. The assessee's contention, on the other hand, was that since the assessee was not carrying out any independent profession and the taxability of the said income received under the head "profits and gains from business or profession" was only due to technical requirement of section 28(v) of the Act the provisions of section 44AB are not attracted. The Assessing Officer rejected this plea of the assessee on the basis of a decision of this Tribunal in the case of Amal Ganguly (ITA No. 2135/Kol./2008, Assessment Year 2003-04) vide order dated 20.02.2009. The Assessing Officer was of the view that since the plea raised by the assessee is not acceptable to the jurisdictional Tribunal, the same cannot be accepted by him. Respectfully following the view of the Tribunal and thus holding that the assessee ought to have got her accounts audited under section 44AB of the Act, the Assessing Officer imposed penalty of Rs.16,380/- under section 271B of the Act. Aggrieved, the assessee carried the matter in appeal before ld. CIT(Appeals) but without any success. Ld. CIT(Appeals) also took note of the decision of the Coordinate Bench of this Tribunal, which covered the issue against the assessee. The assessee is not satisfied and is in further appeal before us.

INCOME TAX APPELLATE TRIBUNAL, KOLKATA

Before Shri Pramod Kumar (Accountant Member),

and Shri George Mathan (Judicial Member)

I.T.A. No.: 703/ Kol. / 2012 – Assessment year : 2006-07

Usha A. Narayanan Vs. Deputy Commissioner of Income Tax

Date of pronouncing the order : March 25, 2013

ORDER

Per Pramod Kumar:

1. By way of this appeal, the assessee-appellant has challenged correctness of learned Commissioner of Income Tax (Appeals)'s order dated 16th March, 2012, in the matter of penalty under section 271B of the Income Tax Act, 1961, for the assessment year 2006-07, on the following grounds:-

(1) The ld. CIT(A) erred in confirming the penalty u/s. 271B imposed on appellant without considering the fact and circumstance of the case.

(2) The ld. CIT(A) erred in not distinguishing the income from profession by an individual professional and the income from profession by a partner of a professional firm (which consists partners salary, commission, share of profit as per Partnership Deed) in the light of provision of income Tax Act, 1961 vis-à-vis Indian Partnership Act, 1932.

2. When this appeal was called out for hearing, none appeared for the assessee nor there was any adjournment petition. Even on earlier occasions, the assessee was unrepresented. In this view of the matter and as pointed out by ld. Departmental Representative that the issue is a covered matter, we are proceeding the case ex-parte qua the assessee and disposing the matter on the basis of arguments of ld. D.R., material on record and binding judicial precedence on the issue.

3. The short issue in this appeal is whether or not penalty under section 44AB will also be attracted in the case in which the professional income of the assessee received from partnership firm of Chartered Accountants is taxable under the head "income from business or profession". In the relevant previous year, the assessee, a Chartered Accountant, received Rs.32,76,000/- from M/s. Lovelock & Lewes of which she was a partner. In terms of section 28(v), the said income was taxable under the head "Profits & Gains from Business or Profession". The Assessing Officer was of the view that the assessee ought to have obtained the audit report under section 44AB of the Income Tax Act and her failure to do so, invited penalty under section 271B of the Act. The assessee's contention, on the other hand, was that since the assessee was not carrying out any independent profession and the taxability of the said income received under the head "profits and gains from business or profession" was only due to technical requirement of section 28(v) of the Act the provisions of section 44AB are not attracted. The Assessing Officer rejected this plea of the assessee on the basis of a decision of this Tribunal in the case of Amal Ganguly (ITA No. 2135/Kol./2008, Assessment Year 2003-04) vide order dated 20.02.2009. The Assessing Officer was of the view that since the plea raised by the assessee is not acceptable to the jurisdictional Tribunal, the same cannot be accepted by him. Respectfully following the view of the Tribunal and thus holding that the assessee ought to have got her accounts audited under section 44AB of the Act, the Assessing Officer imposed penalty of Rs.16,380/- under section 271B of the Act. Aggrieved, the assessee carried the matter in appeal before ld. CIT(Appeals) but without any success. Ld. CIT(Appeals) also took note of the decision of the Coordinate Bench of this Tribunal, which covered the issue against the assessee. The assessee is not satisfied and is in further appeal before us.

4. We see no reason to take any contrary view other than the view so taken by the Coordinate Bench of this Tribunal in the case of Amal Ganguly (supra). Respectfully following the said decision, we uphold the action of authorities below and decline to interfere in the matter.

5. In the result, the appeal is dismissed. Order pronounced in the open Court on 25th day of March, 2013.

Regards

Prarthana Jalan

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Prarthana Jalan

To New_Delhi_CA Moderatorlucknow-ca@yahoogroups.comcasofpune@yahoogroup.com and 3 More...

22 Jan

INCOME TAX APPELLATE TRIBUNAL, KOLKATA

Before Shri Pramod Kumar (Accountant Member),

and Shri George Mathan (Judicial Member)

I.T.A. No.: 703/ Kol. / 2012 – Assessment year : 2006-07

Usha A. Narayanan Vs. Deputy Commissioner of Income Tax

Date of pronouncing the order : March 25, 2013

ORDER

Per Pramod Kumar:

(1) The ld. CIT(A) erred in confirming the penalty u/s. 271B imposed on appellant without considering the fact and circumstance of the case.

5. In the result, the appeal is dismissed. Order pronounced in the open Court on 25th day of March, 2013.

IT: Where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing Officer sent notices to share applicants which returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68

■■■

[2013] 40 taxmann.com 458 (Delhi)

HIGH COURT OF DELHI

Commissioner of Income-tax

Ultra Modern Exports (P.) Ltd.*

S. RAVINDRA BHAT AND R.V. EASWAR, JJ.

IT APPEAL NO. 262 OF 2012†

DECEMBER 11, 2012

Section 68 of the Income-tax Act, 1961 - Cash credits [Share application money] - Assessment year 2007-08 - In course of assessment, Assessing Officer noticed that assessee received share application money from nine applicants - Upon enquiry, five out of nine notices issued to share applicants under section 133(6) were returned unserved - Furthermore, materials on record in form of returns of income of share applicants furnished by assessee disclosed that applicants had very meager income - In such circumstances, Assessing Officer added amount of share application money to assessee's taxable income under section 68 - Commissioner (Appeals) as well as Tribunal took a view that documentary evidence furnished by assessee such as PAN numbers, detailed particulars of addresses, audited accounts and bank statements of share applicants etc., sufficiently proved identity and creditworthiness of share applicants - Accordingly, addition made by Assessing Officer was deleted - Whether information that assessee furnishes would have to be credible and at same time verifiable - Held, yes - Whether in view of fact that notices to five share applicants returned unserved and still assessee was able to secure documents such as their income tax returns as well as bank account particulars, it would itself give rise to a circumstance in which Assessing Officer rightly proceeded to draw adverse inference - Held, yes - Whether, therefore, Commissioner (Appeals) and Tribunal fell into error in holding that Assessing Officer could not have added back said amount under section 68 - Held, yes [Para 9] [In favour of revenue]

CASES REFERRED TO

CIT v. Dwarkadhish Investment (P.) Ltd. [2011] 330 ITR 298/[2010] 194 Taxman 43 (Delhi) (para 3), CIT v. Lovely Exports (P.) Ltd. [2008] 172 Taxman 44 (Mag.) (SC) (para 6), CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi) (para 7) and Gupta Citi Shelters Ltd. v. CIT [IT Appeal No. 1324 of 2008, dated 23-12-2011] (para 7).

Ms. Suruchi Aggarwal for the Appellant. Ajay Vohra, Ms. Kavita Jha and Somnath Shukla for the Respondent.

ORDER

S. Ravindra Bhat, J. - The Revenue is in appeal, aggrieved by the order of the ITAT dated14.06.2011 in ITA-87/del/2011. The question of law urged is: —

"Whether on the facts and circumstances of the case, the ITAT could have deleted the entire addition of Rs.4,34,00,000/-, citing the reason that the AO has not doubted the identity of the share applicants and by placing reliance on the decision of the Apex Court in the case of M/s Lovely Exports Pvt. Ltd. besides other cases like Dhirajlal Girdhari Lal v. CIT, 261 TR 736?"

2. The facts necessary for deciding this case are that for AY 2007-08, the AO held that the assessee had received Rs.4,34,00,000/- as unexplained credit in the form of share application money from 9 applicants. After considering the materials on record, including the documentary evidence furnished by the assessee such as PAN numbers, detailed particulars of the addresses, audited accounts and bank statements of the share applicants etc. and lastly the return of allotment filed by the assessee with the ROC, the AO was of the opinion that the burden which was primarily upon the assessee had not been discharged in explaining adequately the source of the said amount. The same was accordingly added back.

3. The assessee feeling aggrieved appealed to the CIT (A) which after considering the records and submissions and taking note of the applicable precedents, particularly, CIT v. Dwarkadhish Investment (P.) Ltd. [2011] 330 ITR 298/[2010] 194 Taxman 43 (Delhi), proceeded to hold as follows: —

'4. I have verified the copies filed as on 15-10-2010 which include certificate with regard to share application, bank statement showing the name of the assessee company, copy of income tax returns, copy of the audited balance sheet and copy of additional information as required under Companies Act in all the five cases. In this regard ld. AR has relied on various judgments of the Hon'ble S.C. as under: —

(a)		CIT v. G.P. International Ltd. (2010) 325 ITR 25 (P&H)
(b)		CIT v. Orbital Communication Pvt. Ltd. (2010) 327 ITR 560 (Delhi)
(c)		CIT v. Dwarkadhish Investment (P) Ltd. (2010) 194 Taxman 43 (Delhi)
(d)		CIT v. Lovely Exports (P) Ltd. (2009) 319 ITR (St.) 5 (SC).

Assessee's reliance on the above mentioned case laws is appreciated. In the latest judgment in the case of CIT v. Dwarkadhish Investment (P) Ltd. (2010) 194 Taxman 43 (Delhi), the Hon'ble Delhi High Court has held as under: —

"Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors by either furnishing their Pan or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue-just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68 - Revenue has all the power and wherewithal to trace any person - Moreover, it is settled law that the assessee need not to prove the 'source of source' - In the instant case, the tribunal has confirmed the order of the CIT (A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques - No question of law arise."

The ratio of the case law in the case of CIT v. Dwarkadhish Investment (P) Ltd. clearly hits the instant case as the AO has formed his opinion of addition on the basis of the fact that some letters issued u/s. 133 (6) of the IT Act were returned back. However, assessee has fully satisfied the identity, capacity and creditworthiness of the share applicant.

4.1 The AO has not doubted the identity of the share applicants which is stated to be the main parameter to be discharged by the assessee in respect of share application money/share capital received as held recently by the judicial for all over the country.

4.2 It is settled principle of law that no addition/disallowance can be made on suspicion, surmises and conjectures as held by the Hon'ble Supreme Court in the following cases: -

(a)		Dhirajlal Girdharilal v. CIT 26 ITR 736
(b)		Omar Salay Mohammed Sait v. CIT 37 ITR 151
(c)		Dhakeshwari Cotton Mills Ltd. v. CIT 26 ITR 775
(d)		Lal Chand Bhagat Ambica Ram v. CIT 37 ITR 288

4.3 In the case of Acchyalal Shaw v. ITO (2009) 30 SOT 44 (Kol.) (URO), the Hon'ble ITAT observed as under: -

"Suspicion cannot replace evidential document. Simple argument or allegation of manipulation is not sufficient without proper evidence."

4.4 In view of the above discussion, I am of the considered view that addition amounting to Rs. 4,34,00,000/- is misconceived, hence deleted and the appeal of the appellant is allowed'

4. The Revenue's appeal was rejected by the ITAT which held as follows: —

"6. We have heard the rival contentions in the light of the material produced and precedent relied upon. We find that in this case the assessee has furnished the basic information in this regard. These were certificate with regard to share application, bank statement showing the name of the assessee company, copy of income tax returns, copy of the audited balance sheet and copy of addition information as required under the Companies Act in all the five cases. Thus, the identity of these share applicants is duly established. The Assessing Officer has also not disputed the identity of share applicants. In these circumstances, Hon'ble Apex Court decision in the case of CIT v. Lovely Exports P Ltd. (216 CTR 195) is relevant. In this case, it was held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee.

7. In the background of the aforesaid discussion and precedent, in our considered opinion, there is no illegality or infirmity in the order of the Ld. Commissioner of Income Tax (Appeals), hence, we uphold the same."

5. Learned counsel for the Revenue submits that the assessee had sought for share application amounts in the very first year of its functioning and claimed premium ranging between Rs. 90-190 per share. Nine share applicants had invested huge amounts. Upon enquiry, 5 out of 9 notices issued to the applicants under Section 133 (6) were returned unserved. Furthermore, the materials on record in the form of the returns of income of the share applicants furnished by the assessee disclosed that the applicants had very meager income; in these circumstances, the AO was justified in deducing that Rs.4.34 Crores was unexplained cash credit liable to be treated as such and added back under Section 68.

6. Counsel for the assessee argued that this Court should sustain the concurrent orders of the CIT (Appeals) and the Tribunal. It was submitted that the decision of the Supreme Court in CIT v. Lovely Exports (P.) Ltd. [2008] 172 Taxman 44 (Mag.) (SC) only requires that the assessee should, in order to discharge the onus which falls upon it in the first instance whenever Section-68 is sought to be invoked, furnish such materials as are necessary and in its possession. This would be in the form of proof of identity of the share applicants, its PAN, addresses, materials evidencing its existence such as relevant extracts of the ROC register or returns etc. Once this burden is discharged, the onus shifts back to the AO who has to then in order to dislodge the burden make further enquiries and satisfy himself that indeed the amount is to be added back under Section 68.

7. Learned counsel for the assessee submitted that by furnishing addresses and other particulars such as PAN and ROC certificate/documents, the assessee had in fact discharged its burden. The fact that some of the notices were returned back unserved could not adversely affect its position. In this regard, learned counsel relied upon the decision reported as CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi) and CIT v. Dwarkadhish Investment (P) Ltd. (supra). Learned counsel also relied upon the judgment of the Division Bench of this Court inGupta Citi Shelters Ltd. v. CIT [I.T. Appeal No. 1324 of 2008, dated 23-12-2011], especially the following extracts :—

"The entire case of the Revenue based on the plea that as per the report, the investing companies were not found at the given addresses and on this basis, argument is raised that the companies are non-existing and the transactions were bogus and not genuine. Here, the case of the Revenue is even weaker than the cases discussed above. It is not even the case that the Directorate of Income Tax (Investigation) has found Mr. Mahesh Garg in such racket of floating bogus companies. We state at the cost of repetition that after the assessee had furnished the evidence, initial onus had been discharged and it was for the AO to make further necessary inquiries which are completely missing."

8. The AO in this case while proceeding to add back the sum of Rs. 4.34 Crores reasoned as follows: —

'3.3 Therefore, to verify the source of fund so invested by other entities in the assessee company, Notice u/s 133(6) sent to above entities for calling the information and their existences. But the Notices were received back unserved from the addresses provided by the AR. Accordingly, vide order sheet entry dated 17/12/2009 the AR was asked that "You have given the details of investors during the assessment proceedings but Notices u/s 133 (6) sent to these entities for calling the information, received back unserved from the most of the addresses provided by you. Please explain and produce the Directors of these entities. In reply to the above query, AR filed letter dated 21/12/09 and replied that all the subscribers are private limited companies duly incorporated under the provisions of Companies Act, 1956, having a distinct, separate and legal identity whereby the existence of identity of the person is comprehensively and conclusively proved. The confirmation would provide adequate and sufficient proof/evidence in respect of identity, creditworthiness and genuineness of all persons from whom Share Application Money had been received."

Notices u/s 133 (6) were sent to investors out of which Notices sent to below mentioned entities are received back as unserved.

S. No.	Name of the Investor	Amount invested (Rs.)
1	Fairdeal Information & Technology Pvt. Ltd.	10000000
2	Sunlight Tour & Travels Pvt. Ltd.	15400000
3	Jagdishwar Pharmaceuticals Ltd.	5500000
4	Impala Industrial Enterprises Ltd.	5500000
5	Supreme Telecom & Network India Pvt. Ltd.	7000000
	Total	Rs. 43400000

3.4 Therefore, the AR was specifically asked to produce the Directors of above mentioned investors but the same were not produced. It has been noticed from the details filed by the AR that the investors are declaring very small income in their Return of Income and further noticed that before issue of cheque to M/s Ultra Modern Exports Pvt. Ltd. Huge amounts are being transferred in its accounts. Therefore it could not be said that creditworthiness of these investors were proved. Keeping in view the above facts and discussions, I have no option but to treat the Share Capital amount of Rs. 4,34,00,000/- as unexplained cash credits and added back to the income of the assessee company. Since the assessee has furnished inaccurate particulars of income, penalty proceedings u/s 271(1)(c) is being initiated separately.'

9. As noticed previously, the CIT (A) was of the opinion that the assessee had discharged the basic onus which was cast upon it after considering the ruling in Lovely Exports (P.) Ltd.'s case (supra). The material and the records in this case show that notice issued to the 5 of the share applicants were returned unserved. The particulars of returns made available by the assessee and taken into consideration in paragraph 3.4 by the AO in this case would show that the said parties/applicants had disclosed very meager income. The AO also noticed that before issuing cheques to the assessee, huge amounts were transferred in the accounts of said share applicants. This discussion itself would reveal that even though the share applicants could not be accessed through notices, the assessee was in a position to obtain documents from them. While there can be no doubt that in Lovely Exports (P.) Ltd. (supra), the Court indicated the rule of "shifting onus" i.e. the responsibility of the Revenue to prove that Section 68 could be invoked once the basic burden stood discharged by furnishing relevant and material particulars, at the same time, that judgment cannot be said to limit the inferences that can be logically and legitimately drawn by the Revenue in the natural course of assessment proceedings. The information that assessee furnishes would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. In the backdrop of this circumstance, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging between Rs. 90-190 per share and was able to garner a colossal amount of Rs. 4.34 Crores, this Court is of the opinion that the CIT (Appeals) and the ITAT fell into error in holding that AO could not have added back the said amount under Section 68. The question of law consequently is answered in favour of the Revenue and against the assessee.

10. The Appeal is accordingly allowed.

SUNIL

*In favour of revenue.

†Arising out of order of ITAT in ITA No. 87 (Delhi) of 2011, dated 14-6-2011.

--
Regards,

IT : Deeming fiction created by section 50C which substitutes consideration received on sale of a capital asset by stamp duty valuation, is applicable only in case of a seller and not buyer of property

■■■

[2013] 40 taxmann.com 398 (Gujarat)

HIGH COURT OF GUJARAT

Commissioner of Income-tax -IV

Sarjan Realities Ltd.*

AKIL KURESHI AND MS. HARSHA DEVANI, JJ.

TAX APPEAL NO. 1374 OF 2011

SEPTEMBER 17, 2012

Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for full value of consideration in certain cases [Applicability of] - Assessing Officer made an addition on basis of difference in valuation of land by treating same as unexplained investment - Tribunal holding that provisions of section 50C would apply to a seller only and not to a purchaser, deleted said addition - Whether deeming fiction created by section 50C which substitutes consideration received on sale of a capital asset by stamp duty valuation is applicable only in case of a seller and not buyer of property - Held, yes - Whether, therefore, Tribunal was justified in deleting impugned addition - Held, yes [Para 7] [In favour of assessee]

Ms. Paurami B. Sheth for the Appellant.

ORDER

Akil Kureshi, J. - Revenue has challenged the judgment of the Income-tax Appellate Tribunal ("the Tribunal" for short) dated 21-1-2011 raising following questions for our consideration :

"(A)		Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance of Rs.46,964/- u/s. 36(1)(va) as the payment of P.F. deducted from the employee's contribution were deposited in the Government Account after the due date?
(B)		Whether the Appellate Tribunal is right in law and on facts in deleting the disallowance of Rs.57,04,000/- made on account of Land Survey expenditure?
(C)		Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.34,09,400/- made on account of difference in valuation of land by treating the same as unexplained investment?"

2. Insofar as the question-A is concerned, we notice that the amount involved is only 46,964/-. The tax effect even if such an addition is made would be smaller. On the ground of extent of small tax implication, this question is not considered without entering into the merits.

3. Insofar as the question-B is concerned, the same pertains to deletion of disallowance of Rs.57,04,000/- made by the Appellate Commissioner reversing the order of the Assessing Officer. In appeal before the Tribunal at the hands of the revenue, the Tribunal noted that the issue was squarely covered by the decision of the Gujarat High Court rendered in Tax Appeal No.703 of 2009 dated 02-08-2009 in case of this very assessee for earlier year. The High Court had rejected the revenue's appeal, observing that the assessee was in the business of purchasing the land suitable for setting up windmills. The lands purchased by the assessee form part of its stock in trade. For the purpose of deciding the-suitability of the land for the purpose of windmill, the survey was conducted. Considering the nature of the assessee's business, conducting survey of the land for the purpose of deciding its suitability was an integral part of its business and was held to be a revenue expenditure.

4. Issue being identical, without further elaboration, such question is not required to be considered.

5. The last surviving question pertains to addition of Rs.34,09,400/- made by the Assessing Officer on the basis of difference in valuation of the land by treating the same as unexplained investment. The CIT (Appeals), however, deleted such additions. Upon further appeal before the Tribunal, the Tribunal confirmed the appellate order relying on the earlier decisions of the Tribunal on the issue. The Tribunal noted that the provisions of section 50C of the Act will apply to a seller only and not to a purchaser.

6. As is well known, section 50C of the Act makes special provision for full value of consideration in certain cases. Sub-section (1) thereof provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of stamp duty in respect of such transfer, such value shall for the purpose of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

7. Clearly thus, section 50C of the Act by a deeming fiction substitutes the consideration received on sale of a capital asset by stamp duty valuation. Such deeming fiction, however, is applicable only in case of a seller for the purpose of section 48 of the Act.

8. In the circumstances, the Tribunal committed no error in confirming the view taken by the CIT (Appeals) that the Assessing Officer had wrongly applied the stamp duty valuation for the purpose of ascertaining the actual consideration expended by the seller of the land.

9. In the result, Tax Appeal is dismissed.

SUNIL

*In favour of assessee.

Tax Audit Provision applies to Income From Partnership Firm

Posted In Income Tax Case Laws | Judiciary | 4 Comments »

The brief facts of the case are that the AO observed from the return of income filed by the assesee that the assessee' s income included income from salary from Price Water House of which he was a partner. Since income by way of salary or remuneration from a firm was to be assessed under the head profit and gains from business from profession in terms of section 28(v) of the Income tax Act and the receipts from the profession of the assessee was Rs.74,16,000/- i.e. exceeding Rs.10 lakhs, the assesee was required to get his accounts audited within the specified time and furnish the audit report before the specified date under the provision of section 44AB of the Act. Since the assessee failed to do so the AO imposed levying of penalty of Rs.37,080/- by invoking the provision of section 271B of the Act.

Since the receipt of the assessee is more than Rs. 10 lakhs, in the previous year relevant to the assessment year under consideration, we are of the considered view that the assessee is required to get his accounts audited as per section 44AB of the Act and to enclose a copy of the said report in the prescribed form before the specified date. The assessee has admittedly not got his accounts audited under section 44AB of the Act. Therefore, we hold that the ld. CIT(A) has rightly confirmed the action of the AO to impose penalty under section 271B of the Act of Rs.58, 719/-. Hence, we uphold the order of the ld. CIT(A) and reject the grounds of appeal taken by the assessee.

INCOME TAX APPELLATE TRIBUNAL, KOLKATA

ITA No.692/Kol/2012- Assessment Year : 2006-07

Sagar Dutta -versus- D.C.I.T.

Date of Pronouncement : 03.05.2013.

ORDER

Per Shri N.S.Saini, AM

This is an appeal filed by the assessee against the order of ld. CIT(A)-XXXVI, Kolkata confirming the levy of penalty u/s 27 1B of the IT Act imposed by the AO.

2. The brief facts of the case are that the AO observed from the return of income filed by the assesee that the assessee' s income included income from salary from Price Water House of which he was a partner. Since income by way of salary or remuneration from a firm was to be assessed under the head profit and gains from business from profession in terms of section 28(v) of the Income tax Act and the receipts from the profession of the assessee was Rs.74,16,000/- i.e. exceeding Rs.10 lakhs, the assesee was required to get his accounts audited within the specified time and furnish the audit report before the specified date under the provision of section 44AB of the Act. Since the assessee failed to do so the AO imposed levying of penalty of Rs.37,080/- by invoking the provision of section 27 1B of the Act.

2.1. Being aggrieved against this order of the AO the assessee filed appeal before the ld. CIT(A), who confirmed the order of the AO by following the order of the Kolkata 'A' Bench of the Tribunal in the case of Amal Ganguli vs DCIT, Kolkata for A.Yr. 2003-04 passed on 20.02.2009 in ITA NO.2135/Kol/2008.

3. The ld. AR of the assessee fairly conceded that the issue was covered against the assesee and in favour of the Revenue by the order of the Tribunal in the case of Amal Ganguli vs DCIT (supra).

4. After considering the submissions of both the parties, we find that in the instant case penalty of Rs.37,080/- was imposed u/s 271B of the Act by the AO as the assessee failed to filed audit report u/s 44AB of the Act along with the return of income. It is not in dispute that the assessee received salary from M/s. Price Waterhouse which is a partnership firm and that the same was assessed to tax under the head profit an gains from business or profession. The total receipts from profession of the assessee was Rs.74,16,000/- which was exceeding Rs.10 lakhs and therefore in view of the provision of section 44AB the assessee was required to get his audit report u/s 44AB of the Act and file the same along with the return of income within the due date prescribed u/s 139(1) of the Act. The assessee failed to do so. Therefore, the assessee was laible to levying of penalty u/s 271B of the Act @0.5% on total professional receipts of the assessee. We find that in the similar facts and circumstances of the case the Kolkata 'A' Bench of the Tribunal in the case of Amal Ganguli vs DCIT (supra ) has confirmed the levy of penalty by observing as under :-

"6. We have carefully considered the submissions of the ld. Representatives of the parties and the orders of the authorities below. We have also considered the provisions of section 44AB of the Act. There is no dispute to the fact that the assessee is a Chartered Accountant and is engaged in the profession. However, the assessee is a partner in the firm "Price Waterhouse" which is a firm of Chartered Accountants. We are of the considered view that the assessee is carrying on the profession of Chartered Accountant though not individual but as a partner. The assesee has received income by way of salary, allowance, commission and interest on capital from the firm. During the course of hearing, the ld. A.R. in reply to a query from the Bench admitted that the assessee is holding a certificate of practice to carry on the profession. Therefore, the assessee has received the above amount from the firm as a partner and he is a partner only because he is engaged in the business of Chartered Accountants and is eligible to carry on the profession of Chartered Accountant. Thus we are of the considered view that the assesee has received the said amount as a professional fee as a partner from the firm. There is no dispute to the fact that the amount received by the assessee by way of salary, allowance, commission, interest from the firm is assessable under section 28(v) of the Act under the head "profits and gains of business or profession". Since the receipt of the assessee is more than Rs. 10 lakhs, in the previous year relevant to the assessment year under consideration, we are of the considered view that the assessee is required to get his accounts audited as per section 44AB of the Act and to enclose a copy of the said report in the prescribed form before the specified date. The assessee has admittedly not got his accounts audited under section 44AB of the Act. Therefore, we hold that the ld. CIT(A) has rightly confirmed the action of the AO to impose penalty under section 271B of the Act of Rs.58, 719/-. Hence, we uphold the order of the ld. CIT(A) and reject the grounds of appeal taken by the assessee."

4.1. We therefore do not find any good and justifiable reasons to interfere with the order of the ld. CIT(A). It is confirmed and the grounds of appeal of the assessee are dismissed.

5 . In the result the appeal of the assessee is dismissed.

Order pronounced in the court on 03.05.2013.

The Finance Ministry has approved a proposal for providing a minimum monthly pension of Rs 1,000 to workers in the organised sector, a move which would benefit 27 lakh pensioners immediately.

The ministry has also approved a proposal for raising the basic wage ceiling under the Employees Provident Fund Scheme to Rs 15,000 from existing Rs 6,500 per month.At present, there are about 44 lakh pensioners. Of this 27 lakh, including 5 lakh widows, get less than Rs 1,000 a month.

"The Finance Ministry has approved the proposal for providing a minimum monthly pension of Rs 1,000 under the Employees Pension Scheme 1995 (EPS-95) run by EPFO. The ministry also cleared enhancing the wage ceiling to 15,000 under social security schemes run by the retirement fund body," an official source said.

The government will provide additional subsidy of Rs 1,217 crore to ensure the minimum monthly pension of Rs 1,000 starting 2014-15. Pensioners are, therefore, expected to get benefit with effect from April 1 this year.

Labour Minister Oscar Fernandes, however, is yet to decide on whether the move requires the Cabinet approval or not.

The Labour Ministry's proposal on giving a minimum monthly pension of Rs 1,000 under the EPS-95, run by the Employees' Provident Fund Organisation (EPFO), has been pending for a long time.

Earlier, the Labour Ministry had proposed that government should increase subsidy on EPS-95 from 1.16 per cent of basic wage to 1.79 per cent to ensure minimum pension. However, it did not find favour with the Finance Ministry as this would have resulted in a permanent increase in subsidy.

The Labour Ministry in its revised proposal has asked the Finance Ministry to provide for around Rs 1,217 crore additional amount every year, and indicated that this amount can come down over a period of time with more members subscribing to EPS-95.

Exposure Drafts on Amendments to Indian Accounting Standards (Ind ASs)

Posted In CA CS ICWA | News | No Comments »

The Ministry of Corporate Affairs had placed Ind-AS which are converged with IFRSs on its website. Thereafter, certain new standards/amendments to the IAS/ IFRS have been issued by the IASB. With a view to keep pace with the new IFRS/ revisions in IAS/IFRS, the ICAI has issued exposure drafts of Ind-AS on the following topics for public comments:

Ind AS 1: Clarification of the requirements for comparative information
Ind AS 16: Classification of servicing equipment
Ind AS 32: Tax effect of distribution to holders of equity instruments
Ind AS 34: Interim financial reporting and segment information for total assets and liabilities
Ind AS 36: Recoverable Amount Disclosures for Non-Financial Assets
Ind AS 37: Appendix B-1 Levies
Ind AS 39: Novation of Derivatives and Continuation of Hedge Accounting

Last date for public comments for ED on Ind AS 39 is 21 February 2014. In all other cases, the last date is 17 February 2014.

How to Do Concurrent Audit?

Posted In Finance | Articles | 12 Comments »

The word concurrent itself defines its meaning, concurrent means happening at the time. Concurrent Audit means doing the examination of the financial transactions at the time of happening or parallel with the transaction.

Most of the new articles who have been assigned to do the concurrent audit become terrified when they have to go to bank alone, questions like what is this. How to do this? New and horrible banking software? Etc. arises. It is normal to be nervous at the first time but later on everything starts running smoothly. In my case such things had happened even I was out of station alone. So instead of getting lost what to do, we just can learn the things from there. If we do the concurrent audit of banks very precisely then we can learn a lot of banking core knowledge, new banking software, RBI norms and many more. So for the aid of new articles doing concurrent audit I am going to write this article so that they can make intellectual profit from this.

To conduct the concurrent audit of banks we should generally look forward following things:

1. Cash Balance:

Every morning we shall have to check the cash balance of Cash Book of Bank in which all details regarding cash balances are written on daily basis and manager and cashier do the authorization. Once in the month we have to do physical verification of cash in hand with bank and ATM (if any) surprisingly and if any discrepancy found shall be reported in the report.

2. KYC Policy:

This is the most sensitive and crucial part of the concurrent audit. KYC stands for "Know Your Customer", a term used for customer identification process. It involves making reasonable efforts to determine true identity of the beneficiary of account, source of Fund, nature of customer's business etc, which in turn helps bank to manage their risk prudently. The major things we observe in KYC checking are identity proof and address proof. We should be sure that whether AOF (Account Opening Form) is properly filled or not. The introducer who introduces the new customer to the bank should have maintained his/her account for at least 6 months without falling under inoperative account. In AOF there is clearly mentioned the required documents in order to open the account in bank. Recently RBI has fined some of the nationalized banks and other big banks for non-adherence of KYC norms and hence as a concurrent auditor we should ensure the KYC adherence of the customers and any irregularities should be reported duly in the report. We should also discuss the major irregularities with branch officials and look forward for the solution.

3. Loans and Advance Checking:

The most sensitive part of banking operation s Loans and Advances and their compliances. To check newly sanctioned loans and advances we've to ask the Loan Manager of Bank for Document Register and they'll provide us that. Document register is nothing just a register maintained by bank for their advances, in which they usually write name of the party, details of sanction made, papers submitted by party to bank etc. and is verified by both credit manager and Manager of the Branch. Following are the crucial points to verify any advances:

Fulfillment of KYC norms and proper fling of AOF.
Whether CIBIL (Central Information Bureau of India Ltd.) report is good or not. Higher points in CIBIL report show the higher credibility of that party.
Proper documents in order to sanction the loan are submitted by the party or not like Project Report, past few years' statement of affairs and projected statement of affairs if the project is new then full proof projection and duly authorized by a Chartered Accountant or an expert on respective fields.
If the loan is personal loan then purpose of loan should be mentioned, for vehicle loan RC i.e. Joint registration with transport department is required within one month from the date of purchase of vehicle further the copy of original invoice is also required.
Details of primary and collateral security mortgaged with bank. Creation of charge with ROC.
The form should be signed by at least one guarantor.
For CC (Cash Credit) account party shall have to submit stock statement within 7 days from the end of respective month. And we should have to check the DP (Drawing Power) calculation.
See the Insurance register in order to verify the expiry of insurance of stock and securities mortgaged with bank.
We've to check the account statement of the party and see the transaction there if any doubt arise then that should be cleared.
NPAs and potential NPAs are to be checked carefully. And see the effort made by bank to recover the amount from NPAs
See the regularity in payment of interest, installments etc.
If Ad hoc limit is provided by bank then check the repayment of same and proper functioning of account because no ad hoc limit can be provided to irregular advance. Ad hoc limit means providing some amount to an existing customer temporarily when the fixed limit provided by bank is insufficient for spending. It should be repaid within 15 to 30 days. Usually there is the limit in providing ad hoc limit which varies over bank to bank.

4. Deposit:

Generally we have to look through some high balance account and the trail of transaction. If there is any non-operative account then we've to make effort to make them operative. We have to see whether interest code and rates are correctly fed in to the system, any change in interest rates are effectively fed into the system or not etc.

5. Forex:

If your auditing branch is authorized to do foreign exchange transactions then you are lucky that you got to know about forex. In forex, we look through the exchange rate change and their correct valuation in books. Available foreign exchange with bank, profit and loss in foreign exchange. There are some RBI guidelines regarding foreign exchange and we have to see the adherence of same.

6. Income leakage:

This is the most important and sensitive part of concurrent audit. In most of the banks there are some income leakage and we have to find out that. Generally income leakage arises due to following reasons and we have to look that:

Undercharge of processing fee, upfront fee and other charges by the bank during disbursement of loans.
Wrong feeding of interest rates in the system.
Wrong calculation of profit in forex transaction etc.

To overcome these types of revenue loss of bank we as an auditor go through the calculation and genuineness of the different charges. Though banks are working on highly intelligent software but due to human errors such kinds of leakage arise and we have to minimize those. Both the ICAI and Bank provides the manual for revenue audit, if we go through that very carefully then we can understand the leakage more effectively. We have to generate various MIS reports from the system and analyze them. If bank undercharges the fees then it lost its income & the performance of the bank looks very weak due to this reason its share on the market falls down. On the other hand, if bank does overcharge of such things then the false performance of bank is shown and customer may be misguided due to this. It is the prima facial duty of auditor to shoe the true and fair performance of the clients.

7. Housekeeping and computer:

As a concurrent auditor we have to check overall housekeeping maintenance of the branch. Whether the branch is located in safe area or not, what safety vaults are adopted by the bank, safety of lockers, computer, its software and its security etc.

8. Remittance:

It is also an important job of bank to provide remittance facility to their customer. We as an auditor should check the trail of remittance. If the remittance made in foreign country then adherence of Foreign Exchange Management Act, 1999, RBI guidelines etc are done or not.

9. Others:

There are other so many fields of banks. And as far as possible we have to cover all the areas, because there may be fraud prone areas. We have to see the clearing process of cheque, Bills for collection and other bills should be checked properly.

Hope this article will certainly help you guys going for concurrent audit.

(Submitted by Umesh Rijal a CA student from Nepal currently residing in Laxminagagr New Delhi)

Learning for CA Students – Should We Go For Satellite Classes?

Posted In CA CS ICWA | News | 1 Comment »

Considering many aspects, it is a matter of confusion for the CA Students specially whether to go for satellite class or face to face class. I am presenting an article in the above mentioned topic so that the confusion among us could be reduced/removed to some extent.

The technological development at present scenario in respect of computer & internet has brought the vast changes in human life-the way we live, work & study. It is obvious that change is inevitable and one should accept the technological change so as to understand it and be familiar with it, i.e. we should be flexible to accept the change. Until and unless we change the way we study, we cannot move ahead.

Let us discuss about the satellite classes/e-learning/online coaching:

Simply speaking, e-learning is the use of technology that enables us to study (learn) at any time & from anywhere in an electronic way with the help of computers & Internet. E-learning means electronic learning. It is a computerized and digital type of education in which texts, audio or sound, pictures, images, graphics and videos can be simultaneously presented online to students. The term eLearning is really just an umbrella term which covers a wide set of electronic educational applications and processes such as Web-based learning, computer-based learning, virtual classrooms, and digital collaboration. It includes the delivery of content via network, audio and video recordings, satellite broadcast, interactive TV, and CD-ROM as well as many, many others. Students can study anywhere they have access to a computer and Internet connection i.e., students can take classes by sitting at home.

Without facts and proofs no one can say/suggest CA Students either to go for satellite class or to opt for face t o face classes, so I am going to highlight its some merits and demerits:

MERITS

1. Time and money factor:

Traveling time can be saved from home/office place to class and vice-versa as we can take classes on laptops or if we join the nearest satellite centre.

Cost can be saved in the following sense:

- Obviously travelling cost could be saved.

- Satellite classes' fees are low in compare to face to face classes.

- If one friend wishes to take class from the laptop then his friend also could attend the same class with him by sharing/dividing the fees among them.

- and reduces the need for costly classroom-based training

2. Flexibility:

Satellite classes ensure flexibility in the sense that there is no fixed time to take the class if a student is taking class through it as those classes could be accesses 24/7 through internet connection. One can take class whenever he becomes free.

3. Quality in class

It is cent percent clear that even no teacher dreams for providing satellite classes unless he is a renowned, leading, well-experienced faculty. The two-way transmission quality is very good. Both audio and video have high degree of clarity. The large–size image is not eye straining, even for 4 hour sessions.

Let's take an example for this: Online e-Learning facility provided by ICAI consists of best faculties' lectures, Satellite classes of Accounts by CA. Parveen Sharma Sir is another instance.

4. Doubts solving:

It should not be misunderstood that the doubts of our friend remain unsolved/unanswered by our CA. Sirs if we go for satellite classes, those queries are handled by the same faculties when we send the query /ies via, sms or email. Students can speak to the faculty, raise queries and interact, as in a normal class atmosphere. The faculty can see the students and speak to them very clearly.

5. No. of students:

Neither teacher nor students can concentrate over each other as it has become a practice of keeping at least 800 to 1000 (or even more than this) ca students by our CA Sirs in a single class in case we go for Face to Face Mode. Could you imagine this?

Nobody knows anyone. Interaction among the students could be found unprofessional in many cases. While in satellite classes the class size consists of approx 50 students which seem to be fruitful.

6. Learning:

Students develop knowledge of the Internet and computers skills that will help learners throughout their lives and careers. Successfully completing online or computer-based courses builds self-knowledge and self-confidence. Encourages students to take responsibility for their learning

DESPITE OF SEVERAL MERITS SATELLITE CLASSES CARRY FOLLOWING DEMERITS:

1. Unfamiliar (lack of it skills)

We CA Students are not even used to in operating the computer and using internet in a normal way and we are not aware about the changes in technology, so we are running after the traditional method of learning. We the students have to manage our time in article ship as well and being familiar with technology & implementing them to study the classes could be a limiting factor for CA Students.

2. Queries:

A CA Student can ask doubt even then & there or at the break time to the teacher, however, in case of satellite classes the SMS sent doesn't get delivered timely even if the SMS gets delivered the teacher would ignore the message thinking it to be irrelevant or out of syllabus, the mail sent may not be replied. Thus, the CA Student cannot come out of the confusion.

3. Class cancellation:

Cancellation of satellite classes is frequent due to light issue and atmospheric change (environmental change) in India. If the day is cloudy or rainy we cannot watch the clear videos so that the class gets cancelled. In many cases it has been seen that those cancelled classes are being operated by the satellite centers in another time (ie. For example: cancelled class time: 6.30 to 10.30 in the morning & re-operated time: 5.30 to 9.30 in the evening). It is difficult for us to manage the time.

4. Suitability:

One has to maintain the perfect discipline and dedication while attending CA Classes through satellite mode which is quite uncommon quality among CA Students so, their small misbehavior in the class may interrupt the whole class.

5. Fees of some teachers:

We have discussed and it is well known to us that Satellite classes are being delivered by top faculties in India and in CA teaching field it has been seen that no cost saving in respect of fees is possible as the fees charged is high. E.g.-Fee of face to face class is 20000/- and Satellite Class is 19000/- (This situation can be reviewed by every CA Student). A very low benefit.

Now coming to the conclusion what I would like to focus is that – you can't have it both ways. If you desire to become a responsible, self-sufficient, independent learner and would like be familiar with the emerging technology then it's the time to start for the Satellite Classes. The choice is yours whether to accept the change or follow the same old method of learning.

The above article is contributed by Niraj Thapa (ICAI Reg. No. : FRO0004147), a CA Final Student currently doing Article ship in a Delhi based Firm. For any queries and suggestions you may reach him at: tniraj20@hotmail.com, (Mob. No: +91-7503500777).

S. 68 Merely transfer through bank account does not prove that the money is explained

Posted In Income Tax Case Laws | Judiciary | 1 Comment »

Deletion of addition under section 68 for unexplained credits without examining creditworthiness of the persons or genuineness of the transactions for the mere fact that credit were made through Banking channels not justified.

Transaction through bank is not sufficient as per the ratio laid down in the case of CIT Vs. Precision Finance Pvt. Ltd, 208 ITR 465 Cal. Merely because the money is transferred through the bank account does not prove that the money is explained. The appellate authorities have not examined the creditworthiness of the persons or genuineness of the transactions. In the instant case, the remand report was not considered. Hence, the facts are not clear in the case. When it is so, then in the interest of justice we deem it fit to restore the matter back to the Tribunal to examine the matter afresh.

High Court of Allahabad

Commissioner Of Income Tax

V/s..

Smt. Prem Lata Sethi

INCOME TAX APPEAL No. – 36 of 2009

Assessment Year 2004-05

Order Date:- 25th Oct., 2013

Hon'ble Rajiv Sharma,J. Hon'ble Dr. Satish Chandra,J.

(Delivered by Hon. Dr. Satish Chandra, J)

The present appeal has been filed by the appellant-Department under Section 260A of the Income-tax Act, 1961, against the judgment and order dated 28.11.2008, passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A.No.561/luc/2008, for the assessment year 2004-05.

On 17.11.2009, a Coordinate Bench of this Court has admitted the appeal on the following substantial question of law:-

"Whether, on the facts and circumstances of the case, the Income Tax Tribunal erred in deleting the addition of Rs. 72,10,100/- on account of unexplained cash credit without giving any clear finding regarding the creditworthiness of the creditors and genuineness of the transaction?"

The brief facts of the case are that the assessee is an individual who is engaged in trading of consumable white goods in the name and style of M/s. Ashirwad Distributors. For the assessment year under consideration, the assessee has filed the return by showing an income of Rs.1,49,276/-. On 22.12.2006, the A.O. passed an order under Section 143(3) of the Act, on total income of Rs.80,11,200/-. The A.O. observed in his order that the borrowed funds and unsecured loans were introduced in the assessee's account from a common pool saving bank account No.45729 in Punjab National Bank. The details of the accounts are as under:-

1. Rs.25,05,100/-

2. Rs.4,22,500/-

3. Rs.17,20,000/-

4. Rs.20,00,000/-

5. Rs.8,35,500/-

Total:- Rs.74,82,600/-

The funds were transferred from the saving bank account No.45729, Punjab National Bank which was known as common pool account. So, the A.O. made the addition accordingly. However, the first appellate authority has admitted the fresh evidence and deleted the addition by observing that all the credits were from closed family members. The department preferred a second appeal before the ITAT against all the above additions except for the deleted amount of Rs.2,72,500/-. In other words, the department has filed an appeal before the Tribunal for deleting the addition of Rs.72,10,100/-. The Tribunal confirmed the order of the first appellate authority for deleting the additions. Still not being satisfied, the department has filed the instant appeal.

With this backdrop, Sri D.D.Chopra, learned counsel for the department has justified the order passed by the A.O. At the strength of the written submissions, he submits that on various dates unsecured loans and credits were taken from the common pool, where the assessee herself, Sri Rohit Rai Sethi, Sri Mohit Sethi, and Ms. Ruchi Sethi were the accounts holders. The assessee was asked to furnish the source of addition and capital account and details of unsecured loan. No satisfactory reason/reply was furnished. So, the A.O. has rightly made the addition. He also submits that in the common pool, no source was furnished. Lastly, he made a request to set aside the order passed by the appellate authorities.

None appeared on behalf of the assessee though the name of Sri Mudit Agarwal is printed in the cause list. Service is sufficient.

From the record, it appears that on 29.03.2004, an amount of Rs.25,05,100/- was transferred through joint saving bank account No.45729 of assessee with others. The source of this entry was shown that on 29.03.2004, a sum of Rs.25 lacs was transferred from the account No.980 of M/s. Shubham India Market, and Propriety Firm of Sri Mohit Sethi, son of the assessee. But the assessee did not furnish the details of the account No.980 of M/s Shubham India Marketing, during the course of assessment proceedings inspite of being repeatedly asked. A graphic description of transfer was also shown in the remand report. The A.O. has verified the credit entries amounting to Rs.15 lacs, Rs.10 lacs, Rs.25 lacs and Rs.25 lacs all dated 27.03.2004 respectively, appearing in the savings bank Account No.987 of the assessee. An earlier examination of these entries on 24.08.2007 with the books of account of the assessee shows that these were said to have been payments received from the various parties against sales viz. M/s. Goldee Entertainment, M/s. Sangeet Radio, M/s. Shobha Electronic, and M/s Electronic Plaza. The assessee was required to produce all the invoices regarding the transfer entries appearing in the bank account No.987 vide ordersheet dated 12.09.2007.

Lastly, the A.O. observed that as per the list submitted by the assessee, no debit or credit balance was outstanding against the M/s. Subham India Marketing. This goes to prove that the assessee firm has not made any sales to the firm M/s. Subham India Marketing and the assessee has filed invoices just to form the basis of transfer entries from the bank account of Subham India Marketing to the bank account of the assessee firm. So, a deep investigation is required. But the CIT(A) has deleted the addition by observing that no cash deposits are reflected in the bank account in the month of March. The Tribunal uphold the order passed by the CIT(A) without examining the remand report.

Needless to mention that the transaction through bank is not sufficient as per the ratio laid down in the case of CIT Vs. Precision Finance Pvt. Ltd, 208 ITR 465 Cal. Merely because the money is transferred through the bank account does not prove that the money is explained. The appellate authorities have not examined the creditworthiness of the persons or genuineness of the transactions. In the instant case, the remand report was not considered. Hence, the facts are not clear in the case.

When it is so, then in the interest of justice we deem it fit to restore the matter back to the Tribunal to examine the matter afresh in the light of above discussions as per law at the earliest preferably within a period of four months.

When we have restored the matter back to the Tribunal, no answer to the substantial question of law is required.

In the result, appeal filed by the department is allowed for statistical purposes.

Additions without proper opportunity of being heard not justified

Posted In Income Tax Case Laws | Judiciary | 2 Comments »

Ld. Counsel of the assessee submitted that the assessee has not been given proper opportunity of being heard. He submitted that the assessment order was passed on 28.12.2007. He submitted that the query in this regard came from the Assessing Officer on 20.12.2007. Within a short while of one week assessee was not in a position to submit the necessary details. The Assessing Officer has proceeded to make the additions without getting the details from the assessee. He further pointed out that the order of the Ld. CIT(A) is also exparte. He prayed that one opportunity may be given to the assessee, so that assessee may submit the necessary details before the revenue authorities. Ld. DR did not have any serious objection to this proposition. Accordingly, we set aside the issue to the file of the AO. The Assessing Officer shall consider the case afresh, after giving the adequate opportunity of being heard to the assessee.

INCOME TAX APPELLATE TRIBUNAL, DELHI

I.T.A. No. 2723/Del/2012 – A.Y. : 2005-06

M/s JKD Capital & Finlease Ltd.

V/S.

Income Tax Officer

ORDER

SHAMIM YAHYA:

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals-VII), New Delhi dated 11.3.2010 pertaining to assessment year 2005-06.

2. The issue raised is that Ld. CIT(A) has erred in law on facts in confirming the addition of Rs. 17 lacs that too without giving adequate opportunity of hearing to the assessee and without serving the mandatory notices as per law.

3. The main ground in this case pertains to addition of Rs. 17,00,000/- by the AO on account unexplained credit entries in the bank account in terms of section 68 of the I.T. Act. It was found by the AO during the assessment proceedings that there were certain credit entries in the bank account of the assessee. The assessee was, therefore, asked to explain the sources of the following credit entries appearing in the bank account:-

i) Rs. 2,00,000/- from Nureeru & Farms on 31.7.2004.

ii) Rs. 8,00,000/- from Mahindra Urban Co-op Bank, Ghaziabad on 27.9.2004 and

iii) Rs. 7,00,000/- from Mahindra Urban Co-op Bank, Ghaziabad on 27.9.2004.

However, the assessee did not give any reply to the above query made by the Assessing Officer. In the background of the above facts, the Assessing Officer added the amount of Rs. 17.00.000/- to the total income of the assessee company.

4. Upon assessee's appeal Ld. CIT(A) affirmed the action of the Assessing Officer. He noted that no details and supporting evidence whatsoever were furnished by the assessee during the course of assessment proceedings or during the appellate proceedings. Hence, he did not find any infirmity in the order of the AO. Ld. CIT(A) concluded as under:-

"As per the ratio laid down by the Apex Court and the jurisdictional High Court of Delhi, the Assessing Officer is duty bound to investigate the identity and creditworthiness of the share applicants and the genuineness of the transaction. In the instant case, the appellant has failed to discharge its primary burden of proving the identity of the share applicants as the relevant details of the address or PAN identity of the subscriber were not furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. In view of the foregoing discussion, I am of the considered view that the AO was justified in adding the amount of Rs. 17,00,000/- to the income of the assessee in the financial year in question. Therefore, the order of the Assessing Officer in respect of the addition of Rs. 17,00,000/- is confirmed."

5. Against the above order the Assessee is in appeal before us.

6. We have heard both the counsel and perused the records. At the outset, Ld. Counsel of the assessee submitted that the assessee has not been given proper opportunity of being heard. He submitted that the assessment order was passed on 28.12.2007. He submitted that the query in this regard came from the Assessing Officer on 20.12.2007. Within a short while of one week assessee was not in a position to submit the necessary details. The Assessing Officer has proceeded to make the additions without getting the details from the assessee. He further pointed out that the order of the Ld. CIT(A) is also exparte. He prayed that one opportunity may be given to the assessee, so that assessee may submit the necessary details before the revenue authorities. Ld. DR did not have any serious objection to this proposition. Accordingly, we set aside the issue to the file of the AO. The Assessing Officer shall consider the case afresh, after giving the adequate opportunity of being heard to the assessee.

7. In the result, the Appeal filed by the Assessee stands allowed for statistical purposes.

Order pronounced in the Open Court on 13/1/2014.

40 officers of Customs & Central Excise Department been selected for Presidential Award

Posted In Excise Duty | Notifications | 1 Comment »

Grant of Presidential Awards to the Officers of the Customs Central Excise and Directorate of Enforcement on the EVE of Republic Day, 2014

This year, 40 officers of the Customs & Central Excise Department have been selected for grant of Presidential Award of Appreciation Certificate for 'Specially distinguished record of service'.

Every year, the officers of the Customs & Central Excise Department are considered for grant of Presidential Award of Appreciation Certificate for 'exceptionally meritorious service rendered at the risk of life' and for Presidential Award of Appreciation Certificate for 'specially distinguished record of service' on their achieving and maintaining excellence in the discharge of their duties. These awards are announced on the eve of Republic Day.

These officers have been selected on the basis of their exemplary and flawless performance in their respective field of services over the years. The awardees selected this year include the officers working as Commissioners/Additional Director Generals/Joint Secretary, Additional Commissioners/Additional Directors, Superintendents/SIOs, Assistant Chief Accounts Officer/Administrative Officer, Inspectors/IOs, Senior Tax Assistant, Driver/Hawaldar who have been consistently committed to the department in various fields.

The aforesaid officer's performance in various fields includes the prevention of smuggling of contrabands and Narcotics Drugs, detection of tax evasion and trade based money laundering, detection of foreign exchange violations by booking / arresting the offenders and seizing the smuggled goods upgradation of anti-smuggling equipments and streamlining enforcement procedures etc in the department. Besides, many awardees have shown their brilliance and given commendable performance in other fields as varied as revenue mobilization, development of software for automation at Customs, Central Excise and Service tax formations, reducing litigations, international Conventions and Protocol relating to Trade Facilitation and enforcement, dispute resolution, effective defence of cases in the Tribunals and High Courts, preparing informative web sites for revenue officers as well as deft handling of administrative work .

The list of officers, along with their designation and their present place of posting, who have been selected for grant of the Presidential Award of Appreciation Certificate for 'Specially distinguished record of service', on the occasion of Republic Day, 2014 is given below:

COMMISSIONERS/ADDITIONAL DIRECTOR GENERALS/JOINT SECRETARY

1. Shri Pranab Kumar Das, Commissioner (RI&I), Anti-Smuggling Unit, Central Board of Excise and Customs, New Delhi

2. Shri R.D. Negi, Commissioner, Central Excise, Jaipur-II Commissionerate, Jaipur

3. Shri Rajiv Talwar, Joint Secretary, Drawback Wing, Central Board of Excise and Customs, New Delhi

4. Shri Satish Kumar Agrawal, Commissioner, Central Excise, Delhi-II Commissionerate, New Delhi

5. Shri Surjit Bhujabal, Additional Director General, DGCEI, Zonal Unit, Bengaluru

6. Smt. R. Bhagya Devi, Commissioner, Central Excise, Chennai-III Commissionerate, Chennai

ADDITIONAL COMMISSIONERS/ADDITIONAL DIRECTORS

7. Shri Sanjay Mangal, Additional Commissioner, Central Excise, Rohtak Commissionerate, Rohtak

8. Shri Vijay Singh Chauhan, Director, FMO, Ministry of Finance, New Delhi

9. Shri Shubhchintan, Additional Commissioner, Delhi Customs Zone, Chief Commissioner Unit, New Delhi

10. Shri Yashwant Lal Mahawar, Additional Director, DGCEI Hqrs., New Delhi

11. Shri J.M. Kennedy, Director (Tax Research Unit), Central Board of Excise and Customs, New Delhi

12. Shri K. Balaji Majumdar, Additional Director, DRI, Zonal Unit, Chennai

13. Shri Ganga Singh Karki, Additional Director, DRI Hqrs., New Delhi

SUPERINTENDENTS / SENIOR INTELLIGENCE OFFICERS/ ENFORCEMENT OFFICER

14. Shri Debaprasad Ghanti, Senior Intelligence Officer, DGCEI, Kolkata Zonal Unit, Kolkata

15. Shri Virender Kumar Sethi, Superintendent, O/o Chief Commissioner of Customs, Delhi Zone, New Delhi

16. Shri S. Shyam Sundar Rao, Superintendent, Large Tax Payer Unit, Bengaluru

17. Shri J. Hariharan, Superintendent, Directorate General of Vigilance, South Zonal Unit, Chennai

18. Smt. S.A. Saradha, Superintendent., Directorate General of Systems & Data Management, Chennai

19. Shri Vibhav Shankar Pandey, Senior Intelligence Officer, DRI Hqrs., New Delhi

20. Shri Dhoom Singh Chauhan, Senior Intelligence Officer, DGCEI Hqrs., New Delhi

21. Shri Sanjay Kumar Bansal, Senior Intelligence Officer, DGCEI Hqrs., New Delhi

22. Shri Saikrishna B Hatangadi, Senior Intelligence Officer, DRI, Zonal Unit, Mumbai

23. Shri Asharam Meena, Senior Intelligence Officer, DGCEI, Regional Unit, Vapi

24. Shri Tassine Sultan, Superintendent (on deputation as Assistant Director), Financial Intelligence Unit-India, New Delhi

25. Smt. K. Geetha, Superintendent (on deputation as Additional Assistant Director), DGHRD, New Delhi

26. Shri Ramesh Chander Bhardwaj, Superintendent, ICD, Tughlakabad, New Delhi

27. Shri Chittari Vijay Kumar S. Varma, Superintendent., Central Excise, CCO, Pune Zone, Pune

28. Shri Neeraj Agrawal, Senior Intelligence Officer, DGCEI Hqrs., New Delhi

29. Smt. Sabrina Cano, Superintendent, Office of the Commissioner(AR), CESTAT, Bengaluru

30. Shri Chandra Narayan Mishra, Superintendent, NACEN, Regional Training Institute, Kanpur

31. Shri Raju P. Amlani, Enforcement Officer (on deputation as Junior Analyst), Department of Revenue, New Delhi

ASSISTANT CHIEF ACCOUNT OFFICER/ADMINISTRATIVE OFFICER

32. Shri Ramesh Gangadhar Noolvi, Assistant Chief Accounts Officer/Administrative Officer, Central Excise Commissionerate, Mangalore

INSPECTORS/INTELLIGENCE OFFICERS/ STA

33. Shri Sreekant Purohit, Intelligence Officer, DGCEI, Regional Unit, Raipur

34. Shri Jayant Prabhakar Nair, Intelligence Officer, DRI, Zonal Unit, Mumbai

35. Shri Umeshchand Rameshchand Gupta, Intelligence Officer, DGCEI, Hqrs., New Delhi

36. Shri Vijay V. Chary, Intelligence Officer, DRI, Zonal Unit, Mumbai

37. Shri Shivendra Satyarthi, Intelligence Officer, DRI, Sub-Regional Unit, Muzaffarpur, Lucknow Zonal Unit

38. Shri Kanchan Sil, Senior Tax Assistant, Commissioner of Customs (Port), Kolkata

DRIVER/HAWALDAR

39. Shri Shiv Kumar Sharma, Driver, Grade I, DRI Hqrs., New Delhi

40. Shri Anil Kumar, Hawaldar, DRI Hqrs., New Delhi

RD must project objections of Income Tax Dept in cases involving arrangement / compromise / reconstruction / amalgamation

Posted In Company Law | Notifications | No Comments »

General Circular No 1/2014, Dated :15th January 2014.

Subject: Report u/s 394A of the Companies Act, 1956- Taking accounts of comments/inputs from Income Tax Department and other sectoral Regulators while filing reports by RDs.

Section 394A of the Companies Act, 1956 requires service of a notice on the Central Government wherever cases involving arrangement/compromise (under Section 391) or reconstruction / amalgamation (under Section 394) come up before the Court of competent jurisdiction. As the powers of the Central Government have been delegated to the Regional Directors (RDs) who also file representations on behalf of the Government wherever necessary.

2. It is to be noted that the said provisions is in addition to the requirement of the report to be received respectively from the Registrar of Companies and the Official Liquidator under the first and second provisos to Section 394(1). A joint reading of Sections 394 and 394A makes it clear that the duties to be performed by the Registrar and Official Liquidator under Section 394 and of the Regional Director concerned acting on behalf of the Central Government under Section 394A are quite different.

3. An instance has recently come to light wherein a Regional Director did not project the objections of the Income Tax Department in a case under Section 394. The matter has been examined and it is decided that while responding to notices on behalf of the Central Government under Section 394A, the Regional Director concerned shall invite specific comments from Income Tax Department within 15 days of receipt of notice before filing his response to the Court. If no response from the Income Tax Department is forthcoming, it may be presumed that the Income Tax Department has no objection to the action proposed under Section 391 or 394 as the case may be. The Regional Directors must also see if in a particular case feedback from any other sectoral Regulator is to be obtained and if it appears necessary for him to obtain such feedback, it will also be dealt with in a like manner.

4. It is also emphasized that it is not for the Regional Director to decide correctness or otherwise of the objections/views of the Income tax Department or other Regulators. While ordinarily such views should be projected by the Regional Director in his representation, if there are compelling reasons for doubting the correctness of such views, the Regional Director must make a reference to this Ministry for taking up the matter with the Ministry concerned before filing the representation under Section 394A.

5. This Circular is effective from the date of issue.

F.No 2/1/2014

Yours Faithfully,

(Vinod Sharma)

Deputy Director

Ph: 23385382

IN THE INCOME TAX APPELLATE TRIBUNAL

HYDERABAD BENCH 'A', HYDERABAD

ITA No. 246/Hyd/2011

Assessment Year: 2007-08

Sahitya Housing Pvt. Ltd., Date of pronouncement: 24/01/2014 We have heard the arguments of both the parties, perused the record and have gone through the orders of the revenue authorities 15. Therefore the only exception that the Assessee can claim is when payments are required to be made on days when the Banks were closed on account of holidays or strike. Transactions after the banking hours in the course of regular business will not fall within this exception. In those transactions, the payment is not required to be made when the banks are closed i.e. after banking hours. Further the purpose of the disallowance u/s 40A (3) is to dissuade transactions by cash.

16. Sec 40A(3) itself provides that the exceptions will have to be prescribed having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors. Taking all these factors, considering the nature of activity of the Assessee and the necessity for them to pay cash to the land owners we are of the opinion that the condition under Rule 6DD for exemption viz., transactions should have taken place on Bank Holidays should be read down in the case of the Assessee 17. In the case under consideration, no banking facility is available where the properties were purchased by Assessee, therefore, there was no choice for the assessee except to make the payments in cash due to exceptional or unavoidable circumstances as provided under Rule 6DD. In view of the above discussion, we set aside the order of CIT(A) and delete the addition of Rs. 4,09,98,105/- made u/s 40A(3) of the Act

IN THE INCOME TAX APPELLATE TRIBUNAL

HYDERABAD BENCH 'A', HYDERABAD ITA No. 155/Hyd/2013

Assessment year 2009-10 M/s. Good Health Plan

Limited, Hyderabad. Date of pronouncement: 22.01.2014 We have considered rival submissions of the parties and

perused the material on record and orders of the authorities below.

According to the assessee's counsel, the assessee is under the bonafide

belief that provisions of section 194J of the Act were not applicable

to it and it was only after the CBDT came out with circular No. 8 of

2009 dated 24.11.2009 regarding applicability of the said circular to

TPAs that it became aware of the applicability of the provisions to it. In

our opinion, we find force in the argument of the assessee's counsel. Therefore, in our considered opinion,

bona-fide belief in non-deduction of TDS would constitute a reasonable

cause. Ignorance of law may be no excuse but simultaneously it is

also true that there is no presumption that everyone knows the law.

What is important is the fact that a person comes to know that he has

committed a mistake and being a person of reasonable intelligence and

ordinary prudence, if he takes corrective measures rectifying the same,

then it cannot be said that he has acted deliberately with complete

disregard to law. There is force in the contention of the assessee's

counsel that the assessee held the reasonable belief not to deduct

TDS on the payment made to hospitals on behalf of insurance

companies. When the AO himself treated the assessee as an assessee not

in default in respect of the amounts of TDS to be deducted, then there

cannot be any scope for levying penalty u/s. 271C of the Act. As in this

case the amount of tax has been paid by the recipient of the income.

Being so, the provisions of section 271C cannot be applied to the

assessee's case as these provisions clearly state that if any person fails to deduct whole or any part of the tax as required under the

provisions of Chapter XVII-B, then such person shall be liable to pay by

way of penalty an amount equal to the amount of tax which such

person failed to deduct or pay as above said.

IN THE INCOME TAX APPELLATE TRIBUNAL

HYDERABAD BENCH 'A', HYDERABAD The Deputy CIT

Central Circle_6

Hyderabad

vs. Sri K. Babu Rao Date of pronouncement: 24.01.2014 We have heard both the parties and perused the

material on record. In other words, there should be material on record to

show that the income is assessed on the basis of material/

evidence in hands of the Assessing Officer while making assessment u/s 153A of the Act Being so, in our opinion, guess work is not possible in case

of search assessment framed u/s. 143(3) or u/s. 153A of the Act

without any proper material. The AO shall have the basis for

assuming that the expenditure incurred by the assessee is out of

undisclosed income. It is not permissible to assess the

undisclosed income in the absence of any other evidence on

arbitrary basis. The unsubstantiated loose sheets cannot be considered as a conclusive evidence to make any addition

towards undisclosed income. It was held by the Supreme Court

in the case of CBI vs. V.C. Shukla (1998) 3 SCC 410 that "file

containing loose sheets of papers are not books" and hence

entries therein are not admissible u/s. 34 of the Evidence Act,

1872. In our opinion, the document

recovered during the course of search was a dumb document

and led nowhere. The CIT(A) rightly came to the conclusion

that it cannot be acted upon and deleted the addition.

IN THE INCOME TAX APPELLATE TRIBUNAL

HYDERABAD BENCH 'A', HYDERABAD ITA No. 246/Hyd/2011

Assessment Year: 2007-08

Sahitya Housing Pvt. Ltd Date of pronouncement: 24/01/2014 The unsubstantiated material found in the pendrive cannot be

considered in the hands of the assessee as a conclusive

evidence so as to make additions towards unexplained credit.

It was held by the Hon'ble Supreme Court in the case of CBI

Vs. V.C. Shukla [1998] 3 SCC 410 that " file containing loose

sheets of paper are not books" and entries therein are not

admissible u/s 34 of the Evidence Act, 1872." In the present

case, the pendrive found during the course of survey

proceedings in the case of T. Veeraiah Choudhary, M.D. of

assessee company, which reflect the cash payment of Rs. 1.3

crores made to Shri RTV Prasad. The same was considered in

the hands of the Sri T. Veeraiah Choudhary as an investment

for the AY 2006-07. In our opinion, as this is not substantiated

by any corroborative evidence to establish that the assessee

is involved in this transaction, so as to make addition in the

hands of the assessee. Hence, in the absence of any

corroborative evidence or material to establish that the entry is pertaining to Assessee, we set aside the order of CIT(A)

and delete the addition on this count. Accordingly, this ground

appeal of Assessee is allowed.

IN THE INCOME TAX APPELLATE TRIBUNAL

HYDERABAD "B " BENCH, HYDERABAD ITA No.1200/Hyd/2010

Assessment Year 2006-07. Sri N. Prasad Date of pronouncement 27-01-2014 The only issue arising for consideration in the present appeal

is whether the CIT (A) was correct in deleting the addition of Rs.25

lakhs by holding that there is no transfer within the meaning of sec.

2(47) of the Act. The learned DR submitted that since the assessee received the

excess consideration of Rs.25 lakhs towards transfer of goodwill, the

Assessing Officer has rightly taxed it as short term capital gain. He

further submitted that as goodwill is a capital asset, any

consideration received towards transfer of goodwill is chargeable to

capital gain tax. Therefore, CIT (A) was not correct in deleting the

addition made by relying upon a decision which is factually

distinguishable. While the Assessing Officer brought to tax the surplus amount

of Rs.25 lakhs by treating it as a transfer of goodwill, the CIT (A)

deleted the addition by holding that there is no 'transfer' when a

partner received his share in the partnership business. Keeping in

view the aforesaid basic facts we will now examine the legal issue

whether there at all is a 'transfer' within the meaning of sec. 2(47)

of the Act. That apart, a reading of clause 4 of the deed of retirement makes it

clear that the amount of Rs.1.25 cores was paid to the assessee

towards his share capital and not for relinquishing or extinguishing

his rights over any assets of the firm. The term 'goodwill,' in our

view has been loosely used in the aforesaid clause. Furthermore, a

plain reading of the clause 4 will not in any manner indicate that

payment of Rs.25 lakhs was towards transfer of goodwill as suggested by the Assessing Officer. Therefore, considering totality

of facts and the circumstances of the case and applying the ratio

laid down by the Hon'ble jurisdictional High Court in the case of

Chalasani Venkatesara Rao (supra), which is binding on us, we are

of the view that the order passed by the CIT (A) needs to be upheld.

Accordingly, we dismiss the grounds raised by the department

Attachment(s) from Kapil Goel

What are Circuit Filter/Circuit Breaker?

Posted In Finance | Articles | No Comments »

Deepak Rathore

Circuit Filter/Circuit Breaker is the band that set upper and lower limit within which stock / Sensex can fluctuate on any particular day. These filters restrict extreme price movement and curb price manipulation to some extent by stock operators. Circuit Filter also protects investors from extreme price fluctuation.

Circuit filter in respect of shares are price bands imposed by the Securities Exchange Board of India (SEBI) to restrict the movement of stock prices (up or down), of listed securities.

Circuit Filter in respect of Sensex is the maximum permissible movement allowed to Sensex or Nifty in a trading session on a daily basis.

For Example:
When the stock price crosses a stipulated price band as decided by stock exchanges, trading in that particular stock is suspended. For example, if you have a share price of Rs 100, and there is a circuit breaker of 10%, it will stop trading if the share price goes above Rs 110. Similarly if the stock price drops below Rs 90, the lower end circuit filter is applied and trading is suspended.

Circuit breakers are applied only on equity and equity derivative markets. Whenever the major stock indices like BSE Sensex and Nifty cross the threshold level, SEBI rules require that the trading at the stock exchange be stopped for a certain period of time beginning from half an hour to even an entire day. The time frame for which trading is stopped depends upon the time and amount of movement in the indices. The idea is to allow the market to cool down and resume trading at normal levels. The thresholds are implemented stage wise

Movement in Indices	Time	Close period
10 per cent	Before 1.00 pm	1 hour
	1.00 pm to 2.30 pm	½ hour
	After 2.30 pm	Does not close
15 per cent	Before 1.00 pm	2 hour
	1.00 pm to 2.30 pm	1 hour
	After 2.30 pm	Close for the rest of the day
20 per cent	Any time	Close for the rest of the day

Upper circuit and Lower circuit

An upward movement over the threshold will cause a stock to enter an upper circuit. Similarly a downward movement in stock price beyond the threshold will cause a stock to enter a lower circuit. The objective of circuit breakers is to control the stock markets at times when they move beyond reasonable limits. When a stock enters an upper circuit, it puts an investor who has already invested in the stock at an advantage. On the contrary a stock movement into a lower circuit places the investor at a disadvantage because it is now difficult to sell off these shares as they have lost a lot of money.

For any Comments & clarifications Kindly Contact @ Deepakrathore.8888@gmail.com

IT: Where assessee did purchase cloth and sell finished goods, but purchasers were not traceable, profit element embedded in purchases would be subjected to tax and not entire amount

■■■

[2013] 40 taxmann.com 494 (Gujarat)

HIGH COURT OF GUJARAT

Commissioner of Income-tax

Bholanath Poly Fab (P.) Ltd.*

AKIL KURESHI AND MS. HARSHA DEVANI, JJ.

TAX APPEAL NO. 63 OF 2012†

OCTOBER 23, 2012

Section 69 of the Income-tax Act, 1961 - Undisclosed investments [Bogus purchases] - Assessment year 2005-06 - Assessee was engaged in business of trading in finished fabrics - Assessing Officer found that concerned parties from whom material was purchased were not found at their addresses and held that purchases made by assessee were bogus - Accordingly, he made disallowance - Tribunal found that though purchases were made from bogus parties, but purchases themselves were not bogus as entire quantity of stock was sold by assessee and held that only profit margin embedded in such purchases would be subjected to tax and not entire purchases - Whether no illegality was committed by Tribunal - Held, yes [Para 6] [In favour of assessee]

FACTS

■		The assessee was engaged in the business of trading in finished fabrics.
■		The Assessing Officer found the assessee had not kept day-to-day stock register and held that purchases made by the assessee were unexplained since concerned parties from whom purchases were made were not available at addresses given. Accordingly, he disallowed said purchases as unexplained.
■		The Commissioner (Appeals) concurred with the Assessing Officer.
■		The Tribunal was of the opinion that the purchases were made from bogus parties, but the purchases themselves were not bogus as entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax.
■		On further appeal:

HELD

■

The Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. In the result, tax appeal is dismissed. [Para 6]

CASE REVIEW

Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj.) (para 6) followed.

CASES REFERRED TO

Sanket Steel Traders v. ITO [IT Appeal Nos. 2801 & 2937 (Ahd.) of 2008, dated 20-5-2011] (para 5), Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 ITD 428 (Ahd.) (para 5), Sanjay Oilcake Industries v. CIT [2009] 316 ITR 274 (Guj.) (para 6) and CIT v. Kishor Amrutlal Patel [Tax Appeal No. 679 of 2010, dated 16-8-2011] (para 6).

Manav A. Mehta for the Appellant.

JUDGMENT

Akil Kureshi, J. - The Revenue is in appeal against the judgment of the Income-tax Appellate Tribunal dated July 26, 2011, raising the following questions for our consideration :

"(i)		Whether the Income-tax Appellate Tribunal erred in law by not appreciating the fact that the assessee had not kept day-to-day stock register, in the absence of which production of finished goods received, the shortage arrived, goods sent for processing, goods received from processing, etc., on a particular day could not be verified ?
(ii)		Whether the Income-tax Appellate Tribunal erred in law by not appreciating the fact that in the absence of day-to-day stock register, in the absence of which production of finished goods received, the shortage arrived, goods sent for processing, goods received from processing, etc., could not be verified and thus cannot be considered as evidence for purchase of goods ?
(iii)		Whether the Income-tax Appellate Tribunal had erred in law by not appreciating the fact that the purchase made as claimed by the assessee, was not substantiated by any circumstantial evidence ?
(iv)		Whether the Income-tax Appellate Tribunal had erred in law by not appreciating the fact that the parties from which purchases were made, as claimed by the assessee, could not be found out by the Department and that the burden was on the assessee to prove the genuineness of the parties ?"

2. Though the questions per se do not bring out the real controversy, having perused the orders on record with the assistance of the learned counsel for the Revenue, we find the following facts emerging from the record.

3. The respondent-assessee is engaged in the business of trading in finished fabrics. For the assessment year 2005-06, the Assessing Officer held that the purchases worth Rs. 40,69,546 were unexplained. He, therefore, disallowed such expenditure claimed by the assessee and computed the total income of Rs. 41,10,187.

4. The issue was carried in appeal by the assessee before the Commissioner. The Commissioner rejected the appeal, upon which the assessee went in further appeal before the Tribunal. The Tribunal, substantially allowed the assessee's appeal. In so far as the question of bogus purchase is concerned, the Tribunal concurred with the Revenue's views that such purchases were made from bogus parties. The Tribunal noted that the Assessing Officer had issued notice to all parties from whom such purchases were allegedly made. Such notices were returned unserved by the postal authorities with the remark that the address was incomplete. The inspector deputed by the Income-tax Department also could not find any of the parties available at the given addresses. The assessee was unable to produce any confirmation from any of the parties. Though the assessee had claimed to have made payment by account payee cheques, upon verification, it was found that the cheques were encashed by some other parties and not by the supposed sellers.

5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of the entire 1,02,514 metres of cloth were sold during the year under consideration. The Tribunal, therefore, accepted the assessee's contention that the finished goods were purchased by the assessee, may be not from the parties shown in the accounts, but from other sources. In that view of the matter, the Tribunal was of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. The Tribunal relied on its earlier decision in the case of Sanket Steel Traders v. ITO [IT Appeal Nos. 2801 & 2937 (Ahd.) of 2008, dated 20-5-2011] and also made reference to the Tribunal's decision in the case of Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 ITD 428 (Ahd).

6. We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industriesv. CIT [2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 2011, in Tax Appeal No. 679 of 2010 in the case of CIT v. Kishor Amrutlal Patel. In the result, tax appeal is dismissed.

■■

*In favour of assessee.

†Arising out of order of Tribunal dated 26-7-2011.

KOLKATA, JAN 24, 2014: THE issues before the Bench are - Whether a single transaction can be considered as business transaction when the motive behind such a transaction was to make Investment; Whether the amount received on sale of shares can be considered as LTCG when the period of holding of shares was more than two years and the valuation of such shares was at the cost price in the respective balance-sheets from the date of purchase and Whether disallowance u/s 14A is attracted even when the securities fetching exempt income are held as stock in trade. And the verdict partly goes in favour of Revenue.

Facts of the case

The assessee wrote off a sum of Rs.15 lakh in its Profit and loss account. The AO observed that the assessee was earlier engaged in the trading of suiting & shirting and thereafter, it started trading in shares and securities. According to the AO, the assessee was not engaged in the business of purchase and sale of land. The AO held that the said amount of Rs.15 lakh was not bad debt as the same was not incidental to the assessee's business. No relief was allowed in the first appeal.

On Appeal before the Tribunal the DR submitted that the amount was not a bad debt. The assessee never earned any income on account of transaction of making advance to M/s. ZEPL. The AR submitted that the amount should be considered as 'Business loss' deductible u/s.28 of the Act. It was further submitted that mere the fact that the assessee kept on claiming before the authorities below that it was a case of bad debt, would not preclude it from the contending that the amount should be considered as "business loss" and hence deductible, if it is actually so.

Having heard the parties, the Tribunal held that,

++ a single business transaction can be considered as "adventure in the nature of trade". However, it is of utmost importance that the facts must prove that such an isolated transaction was, in fact, entered into with the object of doing "business". The assessee miserably failed to prove that the present transaction was in the nature of a 'business transaction'. It is so for the reason that the amount of Rs.37.50 lakh given as advance was never given with the intention of doing any business in "real estate". This solitary transaction of paying Rs.37.50 lakh to M/s.ZEPL was with the object or making an "Investment" and the non-receipt of refund of Rs.15 lakh out of such transaction cannot be characterized as anything but a loss of capital nature;

++ on the issue of treatment of Rs.9,22,445/- as LTCG instead of 'Business profit', it is a settled legal position that nomenclature of a transaction is not relevant. It is the real character of the transaction which is looked into. The period of holding was more than two years and the valuation of such shares were at cost price in the earlier balance-sheet. These shares were in fact held as "Investment". Once the shares are held as 'Investment, any profit or loss from their transfer has to be considered under the head 'Capital gains' and not as 'Business income';

++ on the issue of deletion of addition of Rs.15,000/- made by the AO u/s 14A , we find no force in the contention urged on behalf of the assessee that no disallowance of expenses u/s 14A can be made when the shares are held as stock in trade. As we are dealing with the AY 2006-07 the disallowance is required to be made u/s. 14A on some reasonable basis.

(See 2014-TIOL-47-ITAT-KOL)

IT: Assessee's liability to penalty for not paying self assessment tax does not cease merely by reason that before levy of such penalty, he has paid tax

■■■

[2013] 40 taxmann.com 460 (Mumbai - Trib.)

IN THE ITAT MUMBAI BENCH 'D'

Diamondstar Exports Ltd.

Income-tax Officer, Ward - 8(1)(3)*

I.P. BANSAL, JUDICIAL MEMBER
AND RAJENDRA, ACCOUNTANT MEMBER

IT APPEAL NO. 761 (MUM.) OF 2012
[ASSESSMENT YEAR 2009-10]

OCTOBER 4, 2013

Section 221, read with section 140A, of the Income-tax Act, 1961 - Collection and recovery of tax - Penalty payable when tax in default [Sufficiency of reason] - Assessment year 2009-10 - Assessee had not paid due taxes before filing return, though it was not first year of commencement of business - Assessee paid taxes only after it received a letter from Assessing Officer - Only reason given by assessee-company for not paying self assessment tax was that staff members of its accounts section inadvertently did not make payment of taxes and that staff was overburdened with work - However, it was found that assessee was maintaining a separate section to deal with accounts including taxation matters which proved that it was aware of duties regarding tax payments - Besides, assessee was also assisted by qualified professionals who had represented it before departmental authorities - Whether assessee had not offered any good and sufficient reason for not paying taxes on due dates - Held, yes - Whether assessee would not cease to be liable to penalty under section 221(1), merely by reason of fact that before levy of such penalty he had paid tax - Held, yes [Para 5.2] [In favour of revenue]

Words and Phrases : Words 'good and sufficient reason' as occurring in section 271 of the Income-tax Act, 1961

FACTS

■		The assessee filed its return of income declaring nil income. It computed liability on account of self-assessment tax (SAT) at Rs. 10.70 lacs. Assessing Officer (AO) found that SAT was not paid before filing of return of income u/s.139(1). The assessee paid tax only after receiving letter from the Assessing Officer.
■		The Assessing Officer found that self assessment tax (SAT) was not paid before filing return under section 139(1). Accordingly, he levied penalty under section 221(1).
■		The assessee preferred appeal before first appellate authority, where it was held that the only reason given by assessee-company for not paying self assessment tax, was that the staff members of account section inadvertently did not make the payment of taxes because staff was overburdened with the work. Since this was not a genuine reason for not paying tax on time, the appellate authority confirmed the penalty levied by Assessing Officer.
■		On appeal:

HELD

■		The Assessing Officer had levied the penalty after issuing show-cause notice to the assessee. Assessing Officer has followed the mandate of the Act. The Assessee did not file any reply before the Assessing Officer and before the FAA it submitted that because of the mistake committed by the members of the staff tax could not be in time. FAA has clearly held that before him the assessee did not furnish any good or sufficient reason. Words 'Good and Sufficient reason' have not been defined in the Act. The situation beyond control of the assessee can be termed sufficient cause. The assessee had not shown any cause as why it could not pay taxes in time. The assessee is a corporate entity paying tax of lakhs of rupees every year. It is not functioning from a remote village. It is not the case that assessee was facing financial crunch and because of that it could not pay taxes in time. As discussed earlier, paucity of funds or financial problems have been considered sufficient cause for not making payment of taxes by the Courts. Such extra ordinary situation were not present in the case under consideration. The assessee cannot claim ignorance of its duty of paying taxes in stipulated time-frame. For last so many year Income-tax department launches audio visual campaign to remind the assessee about the due dates of tax payment. The fact that the assessee is maintaining a separate section to deal with accounts, including taxation matters prove that it is aware of the duties regarding tax payment. Besides, assessee is also assisted by qualified professionals who have represented it before the departmental authorities. The penalty imposed/confirmed by the Assessing Officer /FAA is in the nature of additional tax for securing compliance with the provisions of the Act. Penal provisions for non-payment of taxes have been incorporated in the Act as stated earlier, so that the tax is paid by the assessees, within the time allowed under section 140A(1) of the Act. [Para 5.2]
■		As a result, appeal filed by the assessee would stand dismissed.

CASE REVIEW

Bawa Satya Paul Singh v. ITO [1966] 62 ITR 147 (Punj.) (para 5.2) distinguished.

CASES REFERRED TO

Bawa Satya Paul Singh v. ITO [1966] 62 ITR 147 (Punj.) (para 4), CIT v. Indo American Electricals Ltd. [1985] 155 ITR 63/21 Taxman 43 (Cal.)(para 5.2), Sreedharan & Co. Ltd. v. CIT [1992] 195 ITR 807/63 Taxman 8 (Ker.) (para 5.2) and Ramachandra Pesticides (P.) Ltd. v. CIT [2006] 285 ITR 45/155 Taxman 111 (Kar.) (para 5.2).

K.K. Ved for the Appellant. Salman Khan for the Respondent.

ORDER

Rajendra, Accountant Member - Following Grounds of appeal have been filed by the assessee against the order dated 11-11-2011 of the CIT(A)-16,Mumbai:

1:O Re.: Levy of penalty u/s. 221(1) r.w.s. 140A(3):

1:1 The Commissioner of Income-tax (Appeals) has erred in confirming the action of the Assessing Officer of levying a penalty u/s. 221(1) r.w.s. 140A(3) of the Income-tax Act, 1961 on the Appellant.

1:2 The Commissioner of Income-tax (Appeals) has erred in not considering the fact that the Appellant was not provided any opportunity of being heard as required in terms of first proviso to section 221(1) before the levy of penalty u/s.221(1) r.w.s. 140A(3).

1:3 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no penalty whatsoever can be levied on it u/s. 221(1) r.w.s. 140A(3) of the Income-tax Act, 1961 and the Commissioner of Income-tax (Appeals) ought to have held as such.

1:4 The Appellant submits that the impugned order levying penalty u/s. 221(1) r.w.s. 140A(3) of the Income-tax Act, 1961 be struck down.

2:0 Re : General:

2:1 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal.

Brief facts of the case:

2. Assessee filed its return of income on 30.09.2009, declaring income of Rs. Nil. It computed liability on account of self-assessment tax (SAT) at Rs. 10.70 lacs. Assessing Officer (AO) found that SAT was not paid before filing of return of income u/s.139(1) of the Act. He issued a letter dated 20.01.2010 to the assessee and directed to furnish photocopy/(ies)of the challans evidencing the payment of SAT. Assessee, vide its letter dated 27.01.2010,furnished photocopies of challans showing payment of Rs. 11,13,008/-.AO was of the opinion that the assessee had default in making payment of SAT as required by the provisions of section 140A(1)of the Act. He issued a further letter, dated 4.02.2010,to the assessee asking him to show cause and explain as to why penalty u/s. 221(1) r.w.s. 140A(3) of the Act should not be levied for default in payment of SAT. As per the AO till 09.03.2010 assessee did not file any reply to his show cause notice. AO passed order on 09.03.2010 u/s. 221(1) r.w.s. 140A(3) of the Act on the basis of the details available on record. He held that assessee had taxable income and was obliged to make payment of tax in four installments of advance tax for the year under consideration, that it abstained from making any payment of advance tax, that the SAT liability was computed at Rs.10.7 lacs, that same was not paid before filing of return, that SAT was paid on 27.01.2010- only after issue of letter dated 20.01.2010,that it was to be held as 'assessee in default' as per the provisions of section 140A(3) of the Act. He levied penalty of Rs.1,07,019/- (10% of the SAT liability)u/s.221 of the Act.

3. Assessee preferred an appeal before the First Appellate Authority(FAA).After considering the order passed by the AO and the submissions of the assessee, FAA held that the only reason given by the assessee-company for not paying SAT was that the staff-members of the account section inadvertently did not make the payment of taxes, that staff was over burdened with the work, that the submission of the assessee could not be accepted as genuine, that when return was filed payment of taxes had to be checked, that the year under consideration was not the first year of the assessee, that payment of taxes was a regular and systematic activity undertaken by the assessee, that it was hard to believe that the members of account section had committed the mistake of not paying taxes. Finally, he held that assessee-company had not advanced a good and sufficient cause for not paying SAT in time for the year under consideration. Accordingly, he confirmed the penalty levied by the AO.

4. Before us, Authorised Representative(AR) submitted that assessee always intended to pay tax in time, that due to an over site of members of the staff of SAT would not be paid at the time of filing of return of income, that once the mistake was brought to notice of the assessee by the AO it made a payment of Rs.11.13 lacs, said amount included SAT of Rs.10.7 lacs and interest of Rs. 42,816/- that the assessee's account and finance set of work was quite small, that there was a genuine cause for self-payment of SAT that the default committed by it was technical in nature. He relied upon the order of Bawa Paul Singh delivered by the Hon'ble High Court of Punjab reported in Bawa Satya Paul Singh v. ITO [1966] 62 ITR 147 (Punj.). Departmental Representative (DR) supported the order of the FAA.

5. We have heard and perused the material before us. Before proceeding further, we would like to consider the history, background and principles governing the provisions of the section 140A of the Act. Section 140A was introduced by the Taxation Laws (Amendment) Act, 1970, with effect from April 1,1971 and has been amended from time to time. The first major amendment to it was brought by the Taxation Laws (Amendment) Act, 1975, w.e.f. from April 1, 1976 and it was operative till 31st March, 1989.After the amendment, the assessee was required to pay the tax due on self-assessment and produce proof of such payment along with his return. In the earlier days, the entire tax was payable, only after the assessment was completed. Amendment to section, introduced in 1988, provided for 'recovery by way of penalty from an assessee' who failed to pay the tax or any part thereof in accordance with the provisions of sub-section (1). Explanation introduced by the amendment of 1989 provided that where the amount paid by the assessee under this sub-section fell short of the aggregate of the tax and interest amount so paid would be first adjusted towards the interest payable as aforesaid and the balance, if any, would be adjusted towards the tax payable. It also provided that assessee would be deemed to be an assessee in default for tax as well as interest amount. Another amendment of the year 1989 brought concept of payment of interest u/s.234 A and 234 B of the Act. Next major change in the section came in the year 1999when provision of the section 140A were made applicable to section 158BC.Now the provisions of the section have been made applicable to the assessment to be made u/s.153A of the Act also. Amendment of 2013 talk of sums appearing under five heads that have to be considered for calculating 'payable tax' as per the provisions of section 140A of the Act. Similarly, for calculating interest u/s. 234A of the Act, special procedure has been prescribed. Explanation to section 3 defines assessed tax. Though many a amendments have been made to the section since 1971, yet the penal provisions have remained almost same.

5.1 It will be useful to understand the basic principles of section 140A. As per the provisions of section 139 of the Act, every person whose total income, during the previous year, exceeds the maximum amount not chargeable to tax is supposed to furnish a return of income in the prescribed manner within the prescribed period. Provisions of the Act also provide for payment of advance tax by such assessee. Advance tax is payable in instalments. The liability to pay advance tax is based upon the theory 'pay as you earn'. It is said that section 140A is one of the modes/stages of collection of tax devised by Parliament. The principle behind the said section is that if at the end of the year the assessee is liable to pay any tax according to his own estimate of his income, he should normally pay almost the entire tax in the shape of advance tax. In other words it is reasonable to presume that every person earning taxable income knows approximately the tax due from him and is expected to and has to pay the same in accordance with law. So, it can safely said that the portion of income, due towards income-tax, should not be treated 'income' by a prudent and reasonable assessee, because what is due towards tax is a debt due to the State. The mere fact that it is not quantified by the department on that date would not make it anything less the tax due under section 140A(1).

5.1.a If an assessee required to pay advance tax, does not do so, he is treated to be an assessee in default in respect of such instalment or instalments, as the case may be. As a result, penalty can be levied by the AO for said default.

5.1.b A discretion is conferred upon the AO in the matter of levying the penalty. In a proper case, he may decline to levy any penalty. There is nothing in the provisions of section 140A that compel the AO to levy such a penalty in each and every case and/or up to the maximum limit. In other words failure to pay the tax, as provided in section 140A of the Act, does not automatically lead to the levy of penalty under sub-section(3).The proviso to Sec.140A(3)expressly provides for giving reasonable opportunity to the assessee before levying penalty. In short, the power to levy penalty u/s.140A(3) of the Act is not absolute but discretionary.

5.1.c Even if there is a default, AO is bound to consider the circumstances of the case and give his reasons as to why the penalty should be imposed as per the provisions of section 140A(3).

5.1.d The question whether the facts of a given case will constitute good and sufficient reason for not imposing a penalty is a question of fact.

5.1.e Financial crisis can be one of the sufficient and good reason for not levying penalty. But, the closing cash balance cannot provide a basis for ascertaining the actual financial condition of the assessee.

5.2 Undisputed facts of the case are that the assessee had not paid due taxes before filing of return, that it was not the first year of commencement of business, that assessee paid taxes after it received a letter from the AO. Provisions of Sec.140A(3)r.w.s.221(1)of the Act are very clear.Section140A(3) stipulates that if any assessee fails to pay the whole or any part of such tax /interest/both in accordance with the provisions of sub-section (1), he shall, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid, and all the provisions of this Act shall apply accordingly. Section 221(1) comes in to play once it is found that default has been committed by any assessee in payment of tax. Explanation to the section 221(1)provides that an assessee shall not cease to be liable to any penalty under this sub-section merely by reason of the fact that before the levy of such penalty he has paid the tax. In our opinion, explanation has made it clear that mere payment of taxes will not exonerate the assessee and he cannot claim immunity from the penal provisions as envisaged in the section. As per the provisions of the section penalty is not to be levied if assessee proves, to the satisfaction of the AO, that the default was for good and sufficient reasons. Second condition for levying penalty is that before levying any such penalty the assessee has to be given a reasonable opportunity of being heard. As far as first condition is concerned, onus is on the assessee to prove the existence of good and sufficient reason, whereas AO has to establish that he afforded a reasonable opportunity of hearing to the assessee. In the case under consideration it is found that the AO had levied the penalty after issuing show cause notice to the assessee. Thus, as far as AO is concerned, he has followed the mandate of the Act. We are of the opinion that same cannot be held in the case of the assessee. Assessee did not file any reply before the AO and before the FAA it submitted that because of the mistake committed by the members of the staff tax could not be in time. FAA has clearly held that before him the assessee did not furnish any good or sufficient reason. Words 'Good and Sufficient reason' have not been defined in the Act. But, courts are of the view that beyond control of the assessee can be termed sufficient cause. We find that the assessee had not shown any cause as why it could not pay taxes in time. Assessee is a corporate entity paying tax of lacs of Rupees every year. It is not functioning from a remote village. It is not the case that assessee was facing financial crunch and because of that it could not pay taxes in time. As discussed earlier, paucity of funds or financial problems have been considered sufficient cause for not making payment of taxes by the Courts. In the matters of CIT v. Indo American Electricals Ltd.[1985] 155 ITR 63/21 Taxman 433 (Cal), Sreedharan & Co. Ltd. v. CIT [1992] 195 ITR 807/63 Taxman 8 (Ker.) and Ramachandra Pesticides (P.) Ltd. v. CIT [2006] 285 ITR 45/155 Taxman 111 (Kar.) Hon'ble High Courts of Calcutta, Kerala and Karnataka have held that siphoning off of funds or poor recoveries from consumers or shortage of fund due to natural calamities can be considered the reasonable cause for not paying advance tax. But, such extra ordinary situation were not present in the case under consideration. Assessee cannot claim ignorance of its duty of paying taxes in stipulated time-frame. For last so many year Income-tax department launches audio visual campaign to remind the assessees about the due dates of tax-payment. The fact that the assessee is maintaining a separate section to deal with accounts, including taxation matters, prove that it is aware of the duties regarding tax payment. Besides, assessee is also assisted by qualified professionals who have represented it before the departmental authorities. We are of the opinion that penalty imposed/confirmed by the AO/FAA is in the nature of additional tax for securing compliance with the provisions of the Act. Penal provisions for non-payment of taxes have been incorporated in the Act, as stated earlier, so that the tax is paid, by the assessees, within the time allowed u/s.140A(1) of the Act. We are aware that income of an assessee belongs to him, but his right is subject to payment of dues to the Sovereign i.e. taxes. State has all the rights to recover taxes and a make reasonable provision to secure payment of tax on due date. In our opinion that the assessee had not offered any good and sufficient reason for not paying taxes on due dates, so FAA was justified in rejecting appeal filed by it. We are of the opinion that payment of tax, along with interest, after due dates cannot be considered a sufficient cause for adhering to the provisions of section 140A of the Act. We find that the facts of the case relied upon by the assessee is not relevant for deciding the issue before us. Therefore, upholding the order of the FAA, we decide effective ground of appeal against the assessee-company.

As a result, appeal filed by the assessee stands dismissed.

*In favour of revenue.

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Dated 24th January, 2013
Press Release

The procedure for PAN allotment process will undergo a change w.e.f.
03.02.2014. From this date onwards, every PAN applicant has to submit
self-attested copies of Proof of Identity (POI), Proof of Address
(POA) and Date of Birth (DOB) documents and also produce original
documents of such POI/POA/DOB documents, for verification at the
counter of PAN Facilitation Centres. The copies of Proof of Identity
(POI), Proof of Address (POA) and Date of Birth (DOB) documents
attached with PAN application form, will be verified vis a vis their
original documents at the time of submission of PAN application at PAN
Facilitation Centre. Original documents shall not be retained by the
PAN Facilitation Centres and will be returned back to the applicant
after verification.

(Rekha Shukla)
Commissioner of Income Tax (M&TP)
Official Spokesperson, CBDT
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Be Always Happy; Have a nice day

Thanks & Regards
CA Naveen Kumar Goyal

2014-TIOL-86-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

Tax Appeal No.1703 of 2005

COMMISSIONER OF INCOME TAX

BISAZZA INDIA LIMITED

M R Shah And R D Kothari, JJ

Date of Decision: December 21, 2013

Appellant Rep by: Mrs Mauna M Bhatt, Adv .
Respondent Rep by: None

Income Tax - Sections 2(24), 80HHC, 145A - turnover - excise duty - Whether Sales Tax and excise duty can be included in working out total turnover for the purpose of computing deduction u/s 80HHC.

The assessee is an industrial concern. It had claimed that excise duty need not be included in working of total turnover for the purpose of computing deduction u/s 80 HHC. Having heard counsel appearing on behalf of the Revenue, it appears that the aforesaid substantial question of law framed was not res integra and the aforesaid substantial question of law was held against the Revenue by the SC in the case of CIT vs. Lakshmi Machine Works (2007-TIOL-72-SC-IT) and the decision of the SC in the case of CIT vs. Shiva Tex Yarn Ltd. reported in (2012) 25 Taxmann.Com 302 (SC). It was required to be noted that initially revenue's counsel tried to distinguish the aforesaid two decisions by submitting that in the said decisions section 145A had not been considered and dealt with. However, considering the fact that as such there was no amendment in section 80HHC and considering the observations made by the SC in the case of Lakshmi Machine Works. Counsel appearing on behalf of the Revenue was not in a position to satisfy the Court as to how the decisions of SC in the cases of Lakshmi Machine Works and Shiva Tex Yarn Ltd. would not be applicable to the facts of the case on hand.

Held that,

++ having heard counsel appearing on behalf of the Revenue and the substantial question of law raised, referred to hereinabove, and the decisions of the SC in the cases of Lakshmi Machine Works and Shiva Tex Yarn Ltd., we are of the opinion that the substantial question of law raised in the present tax appeals is now not res integra and the same is squarely covered against the Revenue by the decisions of the SC in the cases of Lakshmi Machine Works and Shiva Tex Yarn Ltd. It was observed by the SC that tax under the Act is upon income, profits and gains. It is not a tax on gross receipts. Under Section 2(24) the word "income" includes profits and gains. The charge is not on gross receipts but on profits and gains. The charge is not on gross receipts but on profits and gains properly socalled . Gross receipts or sale proceeds, however, include profits. According to"The Law and Practice of Income Tax" by Kanga and Palkhivala , the word "profits" in Section 28 should be understood in normal and proper sense. However, subject to special requirements of the income tax, profits have got to be assessed provided they are real profits. Such profits have to be got to be ascertained on ordinary principles of commercial trading and accounting. However, the income tax has laid down certain rules to be applied in deciding how the tax should be assessed and even if the result is to tax as profits what cannot be construed as profits, still the requirements of the income tax must be complied with. Where a deduction is necessary in order to ascertain the profits and gains, such deductions should be allowed. Profits should be computed after deducting the expenses incurred for business though such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act. Therefore, schematic interpretation for making the formula in Section 80HHC workable cannot be ruled out. Similarly, purposeful interpretation of Section 80HHC which has undergone so many changes cannot be ruled out, particularly, when those legislative changes indicate that the legislature intended to exclude items like commission and interest from deduction on the ground that they did not possess any element of "turnover" even though commission and interest emanated from exports. We have to read the words "total turnover" in Section 80HHC as part of the formula which sought to segregate the "export profits" from the "business profits". Therefore, we have to read the formula in entirety. In that formula the entire business profits is not given deduction. It is the business profit which is proportionately reduced by the above fraction/ratio of export turnover w total turnover which constitute 80HHC concession (deduction). Income in the nature of "business profits" was, therefore, apportioned. The above formula fixed a ratio in which "business profits" under Section 28 of the Act had to be apportioned. Therefore, one has to give weightage not only to the words "total turnover" but also to the words "export turnover", "total export turnover" and "business profits". That is the reason why we have quoted hereinabove extensively the illustration from the Direct Taxes (Income tax) Ready Reckoner of the relevant word. In the circumstances, we cannot interpret the words "total turnover" in the above formula with reference to the definition of the word "turnover" in other laws like Central Sales Tax or as defined in accounting principles. Goods for export do not incur excise duty liability. As stated above, even commission and interest formed a part of the profit and loss account, however, they were not eligible for deduction under Section 80HHC. They were not eligible even without the clarification introduced by the legislature by various amendments because they did not involve any element of turnover. Further, in all other provisions of the income tax, profits and gains were required to be computed with reference to the books of accounts of the assessee . However, as can be seen from the Income Tax Rules and from the above Form No.10CCAC in the case of deduction under Section 80HHC a report of the auditor certifying deduction based on export turnover was sufficient. This is because the very basis for computing Section 80HHC deduction was "business profits" as computed u/s 28, a portion of which had to be apportioned in terms of the above ratio of export turnover to total turnover.

++ section 80HHC(3) was a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under Excess Profits Tax Act, it existed in the Business Profits Tax Act. Therefore, just as commission received by an assessee is relatable to exports and yet it cannot form part of "turnover", excise duty and sales tax also cannot form part of the "turnover". Similarly, "interest" emanates from exports and yet "interest" does not involve an element of turnover. The object of the legislature in enacting Section 80HHC of the Act was to confer a benefit on profits accruing with reference to export turnover. Therefore, "turnover" was the requirement. Commission, rent, interest etc. did not involve any turnover. Therefore, 90% of such commission, interest etc. was excluded from the profits derived from the export. Therefore, even without the clarification such items did not form part of the formula in Section 80HHC( 3) for the simple reason that it did not emanate from the "export turnover", much less any turnover. Even if the assessee was an exclusive dealer in exports, the said commission was not includible as it did not spring from the "turnover". Just as interest, commission etc. did not emanate from the "turnover", so also excise duty and sales tax did not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover, such taxes had to be excluded. Commission, interest, rent etc. do yield profits, but they do not partake of the character of turnover and, therefore, they were not includible in the "total turnover". The above discussion shows that income from rent, commission etc. cannot be considered as part of business profits and, therefore, they cannot be held as part of the turnover also. In fact, in Civil Appeal No.4409 of 2005, the above proposition has been accepted by the A.O. [See: page no.24 of the paper book], if so, then excise duty and sales tax also cannot form part of the "total turnover" under Section 80HHC( 3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc. It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula u/s 80HHC would become unworkable. The view which we have taken is in the light of amendments made to Section 80HHC from time to time. Even in the subsequent decision in the case of Shiva Tex Yarn Ltd., SC even with respect to assessment order after section 145A, has followed the decision of the SC in the case of Lakshmi Machine Works. Applying the ratio of law laid down by the SC in the case of Lakshmi Machine Works to the facts of the cases on hand, the question raised is held against the Revenue and it is held that the Tribunal has not committed any error in holding that the excise duty is excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC. Under the circumstances, Tax Appeal deserves to be dismissed and is, accordingly, dismissed. No cost.

Revenue's appeal dismissed

Case followed:

CIT vs. Lakshmi Machine Works (2007-TIOL-72-SC-IT)

JUDGEMENT

Per: M R Shah:

1.0. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal, Ahmedabad (hereinafter referred to as the "ITAT") dated 23.12.2004 passed in ITA No.2613/AHD/2004 for AY 2001-02, the revenue has preferred present Tax Appeal raising following substantial question of law.

"Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal was right in upholding the order of the CIT(A) directing to exclude sales tax and excise duty while computing total turnover for the purpose of deduction u/s. 80HHC of the I.T. Act?"

2.0. We have heard Ms. Mauna Bhatt, learned advocate for the revenue.
3.0. As stated hereinabove, present Tax Appeal has been admitted to consider the substantial question of law whether the Appellate Tribunal is right in law and on facts in holding that excise duty is to be excluded for the purpose of computation of deduction under Section 80HHC ?

4.0. Having heard Ms. Mauna Bhatt, learned counsel appearing on behalf of the Revenue, it appears that the aforesaid substantial question of law framed is now not res integra and the aforesaid substantial question of law is held against the Revenue by the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Lakshmi Machine Works reported in 290 ITR 667 [ paras 16 to 18] = (2007-TIOL-72-SC-IT) and the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax vs. Shiva Tex Yarn Ltd. reported in (2012) 25 Taxmann.Com 302 (SC).

5.0. It is required to be noted that initially Ms. Mauna Bhatt, learned counsel appearing on behalf of the Revenue tried to distinguish the aforesaid two decisions by submitting that in the said decisions section 145A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") has not been considered and dealt with. However, considering the fact that as such there is no amendment in section 80HHC of the Act and considering the observations made by the Hon'ble Supreme Court in paras 16 to 18 in the case of Lakshmi Machine Works (Supra), Ms. Mauna Bhatt, learned counsel appearing on behalf of the Revenue is not in a position to satisfy the Court as to how the decisions of the Hon'ble Supreme Court in the cases of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra) would not be applicable to the facts of the case on hand.

6.0. Identical question came to be considered by this Court in Tax Appeal No.884 of 2006 and other allied Tax Appeals and relying upon the decisions of the Hon'ble Supreme Court in the case of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra), the aforesaid question is held against the revenue. In the aforesaid decision in Tax Appeal No. 884 of 2006 and allied appeals in para 3 and 4 the Division Bench has observed and held as under:

"[3.0] Having heard Shri Manish Bhatt, learned counsel appearing on behalf of the Revenue and Shri Soparkar , learned counsel appearing for assessee in respective appeals and the substantial question of law raised, referred to hereinabove, and the decisions of the Hon'ble Supreme Court in the cases of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra), we are of the opinion that the substantial question of law raised in the present tax appeals is now not res integra and the same is squarely covered against the Revenue by the decisions of the Hon'ble Supreme Court in the cases of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra). In paras 16 to 18 in the case of Lakshmi Machine Works (Supra), the Hon'ble Supreme Court has observed and held as under:

"16. The principal reason for enacting the above formula was to disallow a part of 80HHC concession when the entire deduction claimed could not be regarded as relatable to exports. Therefore, while interpreting the words "total turnover" in the above formula in Section 80HHC one has to give a schematic interpretation to that expression. There is one more reason for giving schematic interpretation. The various amendments to Section 80HHC show that receipts by way of brokerage, commission, interest, rent etc. do not form part of business profits as they have no nexus with the activity of exports. If interest or rent was not regarded by the legislature as business profits, the question of treating the same as part of the total turnover in the above formula did not arise. In fact, Section 80 HHC had to be amended several times since the formula on several occasions gave a distorted figure of export profits when receipts like interest, rent, commission etc. which did not have the element of turnover got included in the profit and loss account and consequently became entitled to deduction. This was clarified by the above amendment to Section 80HHC commencing from 1.4.92. The said amendment made it clear that though commission and interest emanated from exports, they did not involve any element of turnover and merely for the reason that commission, interest, rent etc. were included in the profit and loss account, they did not become eligible to deduction. We have to give purposeful interpretation to the above section. The said section is entirely based on the formula. The amendments from time to time indicate that they became necessary in order to make the formula workable. Hence, we have to give schematic interpretation to Section 80HHC of the Act.

17 . Shri P.P. Malhotra , leaned senior counsel appearing for the Department (appellant), submitted that one has to give plain and unambiguous meaning to the word "turnover" in the above formula; that there was no need to call for any rule of interpretation or external aid to interpret the said word; that having regard to the plain words of the section, excise duty and sales tax ought to have been included in the "total turnover". Learned counsel submitted that the word "turnover" even in the ordinary sense would include the above two items. Learned counsel urged that the formula should be read strictly. In this connection, he pointed out that the legislature had expressly excluded items of freight and insurance and not sales tax and excise duty from the said definition. It was urged that while construing a taxing statute strict interpretation should be given by the Courts. It was urged that the definition of the words "total turnover" did not include freight/insurance. He urged that since the legislature had excluded only insurance and freight, it was not open to the courts to exclude excise duty and sales tax from the concept of "total turnover" in the said formula. He contended that the word "turnover" referred to the aggregate amount for which the goods were sold and since sales tax and excise duty formed part of the value of the goods, the said two items were includible in the definition of the words "total turnover". In this connection, learned counsel placed reliance on the judgment of the Supreme Court in the case of M/s. Chowringhee Sales Bureau (supra). Reliance was also placed on "The Law and Practice of Income Tax" by Kanga and Palkhivala (eighth edition) at page 123. In support of the contention that a tax or duty is part of the dealer's trading/business receipts, even if the tax or duty is charged separately or credited to a separate account. Reliance was also placed on the judgment of the King's Bench Division in the case of Paprika, Ltd., and Another v. Board of Trade (1944)1 All E.R. 372, in which it has been held that wherever a sale attracts purchase tax, that tax affects the price which the seller who is liable to pay the tax demands, but it does not cease to be the price which the buyer has to pay even if the price is expressed as cost x + purchase tax. Reliance was also placed on the judgment of the Court of Appeal in the case of Love v. Norman Wright (Builders), Ltd. # (1944) 1 All E.R. 618, in which it has been held that if a seller quotes a price of 'x' + purchase tax, the buyer has to pay the amount of the tax as part of the price and since the tax is charged on the wholesale value of the goods the tax element has to be taken into account. It was urged that one has to give strict interpretation to the word "turnover". It was urged that there was no question of giving purposeful interpretation to the word "turnover" in the said Section 80HHC of the Act. It was urged that the legislature had used the expression "total turnover" from which it became clear that the said expression referred to the aggregate amount for which the goods were sold and since the above two items formed part of the value of the goods, they were includible in the "total turnover". Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that excise duty was the liability of the assessee to the Government and, therefore, it was not includible in the total turnover. Learned counsel urged that there was no merit in the contention advanced on behalf of the assessee that the components of "export turnover" and "total turnover" should be the same in the above formula. Learned counsel submitted that the formula would become unworkable if the components in the "export turnover" and the components in the "total turnover" are the same. Learned counsel submitted that there was no merit in the argument advanced on behalf of the assessee that excise duty and sales tax did not form part of trading receipts. Learned counsel submitted that there was no merit in the contention of the assessee that the expression "business profits" in Section 80HHC did not include receipts which did not emanate for exports and, therefore, such receipts did not constitute an element of turnover.

18. We do not find any merit in the above contentions advanced on behalf of the Department. It is important to note that tax under the Act is upon income, profits and gains. It is not a tax on gross receipts. Under Section 2(24) of the Act the word "income" includes profits and gains. The charge is not on gross receipts but on profits and gains. The charge is not on gross receipts but on profits and gains properly so called. Gross receipts or sale proceeds, however, include profits. According to "The Law and Practice of Income Tax" by Kanga and Palkhivala , the word "profits" in Section 28 should be understood in normal and proper sense. However, subject to special requirements of the income tax, profits have got to be assessed provided they are real profits. Such profits have to be got to be ascertained on ordinary principles of commercial trading and accounting. However, the income tax has laid down certain rules to be applied in deciding how the tax should be assessed and even if the result is to tax as profits what cannot be construed as profits, still the requirements of the income tax must be complied with. Where a deduction is necessary in order to ascertain the profits and gains, such deductions should be allowed. Profits should be computed after deducting the expenses incurred for business though such expenses may not be admissible expressly under the Act, unless such expenses are expressly disallowed by the Act [SEE: page 455 of "The Law and Practice of Income Tax" by Kanga and Palkhivala ]. Therefore, schematic interpretation for making the formula in Section 80HHC workable cannot be ruled out. Similarly, purposeful interpretation of Section 80HHC which has undergone so many changes cannot be ruled out, particularly, when those legislative changes indicate that the legislature intended to exclude items like commission and interest from deduction on the ground that they did not possess any element of "turnover" even though commission and interest emanated from exports. We have to read the words "total turnover" in Section 80HHC as part of the formula which sought to segregate the "export profits" from the "business profits". Therefore, we have to read the formula in entirety. In that formula the entire business profits is not given deduction. It is the business profit which is proportionately reduced by the above fraction/ratio of export turnover w total turnover which constitute 80HHC concession (deduction). Income in the nature of "business profits" was, therefore, apportioned. The above formula fixed a ratio in which "business profits" under Section 28 of the Act had to be apportioned. Therefore, one has to give weightage not only to the words "total turnover" but also to the words "export turnover", "total export turnover" and "business profits". That is the reason why we have quoted hereinabove extensively the illustration from the Direct Taxes (Income tax) Ready Reckoner of the relevant word. In the circumstances, we cannot interpret the words "total turnover" in the above formula with reference to the definition of the word "turnover" in other laws like Central Sales Tax or as defined in accounting principles. Goods for export do not incur excise duty liability. As stated above, even commission and interest formed a part of the profit and loss account, however, they were not eligible for deduction under Section 80HHC. They were not eligible even without the clarification introduced by the legislature by various amendments because they did not involve any element of turnover. Further, in all other provisions of the income tax, profits and gains were required to be computed with reference to the books of accounts of the assessee . However, as can be seen from the Income Tax Rules and from the above Form No.10CCAC in the case of deduction under Section 80HHC a report of the auditor certifying deduction based on export turnover was sufficient. This is because the very basis for computing Section 80HHC deduction was "business profits" as computed under Section 28, a portion of which had to be apportioned in terms of the above ratio of export turnover to total turnover. Section 80HHC( 3) was a beneficial section. It was intended to provide incentives to promote exports. The incentive was to exempt profits relatable to exports. In the case of combined business of an assessee having export business and domestic business the legislature intended to have a formula to ascertain export profits by apportioning the total business profits on the basis of turnovers. Apportionment of profits on the basis of turnover was accepted as a method of arriving at export profits. This method earlier existed under Excess Profits Tax Act, it existed in the Business Profits Tax Act. Therefore, just as commission received by an assessee is relatable to exports and yet it cannot form part of "turnover", excise duty and sales tax also cannot form part of the "turnover". Similarly, "interest" emanates from exports and yet "interest" does not involve an element of turnover. The object of the legislature in enacting Section 80HHC of the Act was to confer a benefit on profits accruing with reference to export turnover. Therefore, "turnover" was the requirement. Commission, rent, interest etc. did not involve any turnover. Therefore, 90% of such commission, interest etc. was excluded from the profits derived from the export. Therefore, even without the clarification such items did not form part of the formula in Section 80HHC( 3) for the simple reason that it did not emanate from the "export turnover", much less any turnover. Even if the assessee was an exclusive dealer in exports, the said commission was not includible as it did not spring from the "turnover". Just as interest, commission etc. did not emanate from the "turnover", so also excise duty and sales tax did not emanate from such turnover. Since excise duty and sales tax did not involve any such turnover, such taxes had to be excluded. Commission, interest, rent etc. do yield profits, but they do not partake of the character of turnover and, therefore, they were not includible in the "total turnover". The above discussion shows that income from rent, commission etc. cannot be considered as part of business profits and, therefore, they cannot be held as part of the turnover also. In fact, in Civil Appeal No.4409 of 2005, the above proposition has been accepted by the A.O. [See: page no.24 of the paper book], if so, then excise duty and sales tax also cannot form part of the "total turnover" under Section 80HHC( 3), otherwise the formula becomes unworkable. In our view, sales tax and excise duty also do not have any element of "turnover" which is the position even in the case of rent, commission, interest etc. It is important to bear in mind that excise duty and sales tax are indirect taxes. They are recovered by the assessee on behalf of the Government. Therefore, if they are made relatable to exports, the formula under Section 80HHC would become unworkable. The view which we have taken is in the light of amendments made to Section 80HHC from time to time. Even in the subsequent decision in the case of Shiva Tex Yarn Ltd. (Supra), the Hon'ble Supreme Court even with respect to assessment order after section 145A, has followed the decision of the Hon'ble Supreme Court in the case of Lakshmi Machine Works (Supra).

[4.0] Applying the ratio of law laid down by the Hon'ble Supreme Court in the case of Lakshmi Machine Works (Supra) to the facts of the cases on hand, the question raised is held against the Revenue and it is held that the learned Tribunal has not committed any error in holding that the excise duty is excise duty is to be excluded for the purpose of computation of deduction u/s. 80HHC."

7.0. Applying ratio laid down by the Hon'ble Supreme Court in the case of Lakshmi Machine Works (Supra) and Shiva Tex Yarn Ltd. (Supra) as well as recent decision of this Court in Tax Appeal No. 884 of 2006 and other allied appeals, to the facts of the case on hand the question raised in the present Tax Appeal is answered against the revenue and it is held that the learned Tribunal has not committed any error in holding that the components of sales tax and central excise do not form part of sale proceeds for the purpose of Section 80HHC of the Act despite insertion of Section 145 A of the Act.

8.0. Under the circumstances, present Tax Appeal deserves to be dismissed and is accordingly dismissed. No costs.

Fast track quick revision of Profits and gains of business or profession

Posted In Income Tax | Articles | 2 Comments »

Kaushal Agrawal

This is our first video of FAST TRACK – QUICK REVISION aptly said "This is ENOUGH". This Video covers the chapter Profits and Gains from Business or Profession. Aim of this video is revision of Profits and gains of business or profession (PGBP) in shortest possible time covering 90% of syllabus from examination point of view. However in class we devote almost 20 hours to PGBP which we have tried to condensed in 24 minutes approx. This was tough but I have tried to best of my ability. I know there are topics in PGBP which I have not covered. May be in next video I shall do it. This video is useful for CA, CS, CMA, B Com, MBA students and to all those who are keen to learn tax.

The Supreme Court has upheld thatorder of the Bombay High Court and held that parking spaces cannot be sold by the builder. They are a part of the common areas and the cost of that land has to be charged to all the flat-owners in proportion to their carpet area. (Nahalchand Laloochand P.Ltd. vs Panchali Co-operative Housing Society Ltd. – JT 2010 (9) SC 414: 2010 AIR SCW 5549).

In para. 34 of the aforesaid judgement the Hon'ble Supreme Court held that:

"34. We have now come to the last question namely– what are the rights of a promoter vis-a-vis society (of flat purchasers) in respect of stilt parking space/s. It was argued that the right of the promoter to dispose of the stilt parkingspace is a matter falling within the domain of the promoter's contractual, legal and fundamental right and such right is not affected. This argument is founded on the premise, firstly, that stilt parkingspace is a `flat' by itself within the meaning of Section 2(a-1) and in the alternative that it is not part of `common areas'. But we have already held that `stilt parking space' is not covered by the term `garage' much less a `flat' and that it is part of `common areas'. As a necessary corollary to theanswers given by us to question nos. (i) to (iii), it must be held that stilt parking space/s being part of `common areas' of the building developed by the promoter, the only right that the promoter has, is to charge the cost thereof in proportion to the carpet area of the flat from each flat purchaser. Such stilt parking space being neither `flat' under Section 2(a-1) nor `garage' within the meaning of that provision is not sellable at all."

(The complete order is as follows}

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2544 OF 2010

Nahalchand Laloochand Pvt. Ltd.

Versus

Panchali Co-operative Housing Society Ltd.

CIVIL APPEAL NO. 2545 OF 2010

CIVIL APPEAL NO. 2546 OF 2010

CIVIL APPEAL NO. 2547 OF 2010

CIVIL APPEAL NO. 2548 OF 2010

CIVIL APPEAL NO. 2449 OF 2010

CIVIL APPEAL NO. 2456 OF 2010

Date : August 31, 2010

JUDGEMENT

R.M. Lodha, J.

Of these seven appeals which arise from the judgment dated April 25, 2008 passed by the High Court of Judicature at Bombay (Appellate Jurisdiction), five are at the instance of the original plaintiff and the other two are by the parties, who were not parties to the proceedings before the High Court or the trial court but they are aggrieved by the findings recorded by the High Court as they claim that these findings are affecting their rights.

The facts:

2. Few important questions of law arise in this group of appeals. It will be convenient to formulate the questions after we set out the material facts and the contentions of the parties.

The narration of brief facts from S.C. Suit No. 1767 of 2004 will suffice for consideration of these appeals. Nahalchand Laloochand Private Limited is a Private Limited Company. As a promoter, it developd few properties in Anand Nagar, Dahisar (East), Mumbai and entered into agreements for sale of flats with flat purchasers. The flat purchasers are members of Panchali Co-operative Housing Society Ltd. (for short, `the Society'). The promoter filed a suit before the Bombay City Civil Court, Bombay for permanent injunction restraining the Society 2 (defendant) from encroaching upon, trespassing and/or in any manner disturbing, obstructing, interfering with its possession in respect of 25 parking spaces in the stilt portion of the building.

The promoter set up the case in the plaint that under the agreements for sale it has sold flats in its building and each flat purchaser has right in respect of the flat sold to him and to no other portion. It was averred in the plaint that each flat purchaser has executed a declaration/undertaking in its favour to the effect that stilt parking spaces/open parking spaces shown in the plan exclusively belong to the promoter and that the declarant has no objection to the sale of such spaces by it.

The defendant (Society) traversed the claim and set up the plea that the promoter has no right to sell or dispose of spaces in the stilt portion and that the undertakings given by the flat purchasers are not binding being contrary to law and based on such undertakings, the promoter has not acquired any right to sell stilt parking spaces.

3. The parties let in evidence (oral as well as documentary) in support of their respective case.

4. On April 4, 2007, the Presiding Judge, City Civil Court, Greater Bombay dismissed the suit with costs.

5. The promoter preferred first appeal before the High Court which was dismissed on April 25, 2008.

6. For brevity, we shall describe Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963 as `MOFA', Maharashtra Ownership Flats (Regulations of the Promotion of Construction, Etc.) Rules, 1964 as `1964 Rules', Development Control Regulations for Greater Bombay, 1991 as `DCR', Maharashtra Apartment Ownership Act, 1970 as `MAOA', The Maharashtra Regional and Town Planning Act, 1966 as `MRTP Act' and Transfer of Property Act as `T.P. Act'.

The summary of findings recording by the High Court:

7. While dismissing the appeal, the High Court recorded the following findings :

7 The carpet area of any of the 56 flats/tenements in Panchali building is not less than 35 sq. mtrs. 7 The parking space either enclosed or unenclosed, covered or open cannot be a `building'.

7 It is compulsory requirement to provide for parking spaces under DCR.

7 It is obligatory on the part of the promoter to follow the DCR. The agreement signed under MOFA between the developer and the flat purchaser must be in conformity with the model form of agreement (Form V) prescribed by the State Government.

7 The model agreement does not contemplate the flat purchasers to separately purchase the stiltparking spaces.

7 The rights arising from the agreement signed under the MOFA between the promoter and the flatpurchasers cannot be diluted by any contract or an undertaking to the contrary. The undertakings contrary to DCR will not be binding either on the flat purchasers or the Society.

7 The stilt parking space is a common parking area available and the developer is obliged to provide the same under the DCR when the carpet area of the flat is 350 sq. meters It is not an additional premises/area that he is authorized to sell either to flat purchaser or any outsider. It is part and parcel of the Society building and it cannot be a separate premises available for sale. As soon as the Corporation issues the occupation certificate and the Society is registered, the building as well as the stilt parking spaces, open spaces and all common amenities become the property of the Society.

7 The stilt parking spaces cannot be put on sale by the developer as he ceases to have any title on 5 the same as soon as the occupation certificate is issued by the Corporation and it becomes the property of the society on its registration.

7 The stilt parking spaces cannot be termed as `open/covered garages' and Clause 2 of the Model Agreement–Form V provides for sale of covered/open garage in addition to the flat/shop.

7 It is immaterial if the purchase agreement does not include stilt car parking spaces in the common area of amenities. The stilt car parking spaces is part of the common amenities and it cannot be treated to be a separate premises/garage which could be sold by the developer to any of the members of the society or an outsider.

7 Under MOFA, the developer's right is restricted to the extent of disposal of flats, shops and/or garages, which means that any premises which is included in the Flat Space Index (FSI) can be sold by the developer/promoter. The stilt parking space is not included in the FSI nor it is assessable for the Corporation taxes.

The submissions:

8. Mr. Tanmaya Mehta, learned counsel appearing for the promoter–Nahalchand Laloochand Private Limited (appellant) contended that: the stilt parking space being `garage', as an independent unit is covered by the definition of `flat' in Section 2(a-1) of MOFA; Section 2(a-1) creates an artificial definition of `flat' and since in common parlance a 6 garage would not be considered as a flat, the legislature clarified and explained that the term `flat' means…… and `includes a garage'; as long as premises are covered from the roof or which have a covered roof and used for the parking of vehicles, that would qualify as `garage' and since stilt parking spaces are covered parking spaces and form part of the building, they fall within the definition of a `garage'; even if stilt parking spaces do not fall within the definition of `flat', they are nevertheless sellable as independent units since right to sell such spaces flows from the bundle of rights associated with ownership of the property and Sections 10 and 11 of MOFA read with Rule 9 of 1964 Rules are not exhaustive of the rights retained by thepromoter upon execution of conveyance.

Moreover, if stilt parking spaces are treated as `common areas' then the proportionate price for the same would have to be paid by each flat purchaser, irrespective of whether he requires the parking space or not and there may be situations where the number of parking spaces will not be equal to the number of flats and, thus, a person who has paid proportionate price for 7 the common parking space may find himself without parking space, even though he has paid for the same. Lastly, the learned counsel submitted that in any event the promoter undertakes that the parking spaces shall be sold only to persons purchasing flats within the subject layout, i.e. the purchasers of flats in the seven buildings which form part of the layout and exist in close proximity.

9. Mr. Pravin K. Samdani, learned senior counsel for one of the appellants viz., Maharashtra Chamber of Housing Industry adopted a little different line of argument. He contended that the provisions of MOFA permit a promoter to sell garage/open/covered car parking space along with the flat.

His submission is that MOFA does not define the word `garage' and that word has to be understood and interpreted in accordance with the plain grammatical meaning and not with reference to DCR which have been framed under MRTP Act having different legislative object. As to whether the stilt parking spaces are `common areas', Mr. Pravin K. Samdani would submit that MOFA does not list out the `common areas' and 8 `limited common areas' while MAOA does define these terms and parking spaces there under are `common areas and facilities' unless otherwise provided in the declaration by the owner of the property. Under MOFA, it is for the promoter and under MAOA, the declarant has to prescribe at the outset the `common areas' and `limited common areas'. He referred to Sections 3(2)(h), 4(1)(a)(v), 10 and 11 of the MOFA and submitted that the promoter must at the outset indicate the nature of organization (condominium or society or company) that would be formed at the time of sale of flats and on formation of such organization, the promoter joins such organization with a right and power to dispose of remaining flats that would include the remaining unsold open/covered parking space/garage and the organization is transferred unsold open/covered parking spaces only if all the flats have been sold by the promoter. Learned senior counsel would submit that it is wholly irrelevant whether stilt/podium/basement/covered car park attracts FSI or not but the only relevant criterion is whether the promoter has listed it as a part of common area or 9 not and if he has not done so then it is sellable. If he has listed it, then every flat purchaser is proportionately required to contribute for the same.

10. In the appeal filed by one Chirag M. Vora, Mr. Sunil Gupta, learned senior counsel appeared. He argued that MOFA was enacted and enforced in the year 1963 as a regulatory piece of legislation and barring the few aspects in respect of which MOFA makes specific inroads into the rights of the promoter in the matter of construction, sale, management and transfer of flats, all other aspects of the right of the promoter who enters into contract with the flat purchaser remain unaffected and undisturbed. His submission is that MOFA gives a wide meaning to the word `flat' so that buildings of all permutations and combinations may be covered within the scope of that Act and keeping in mind both the plain language of Section 2(a-1) as well as the object of that Act, widest meaning to the word `flat' deserves to be given so that the plain language is satisfied and also the object of the Act is better subserved. He adopted the line of interpretation put forth by Mr. Tanmaya Mehta that `garage' includes covered parking spaces and even open parking spaces and is a `flat' in itself under Section 2(a-1). Relying upon Barnett & Block v. National Parcels Insurance Company Ltd.1, learned senior counsel submitted that the minimum requirement of garage is that there should be roof (even if there are no walls) and for the purpose of MOFA, not only a covered parking space like a stilt parking space but also an open parking space is tantamount to `garage'. According to learned senior counsel the word `garage' is not to be read simply as another kind of user as contrasted with residence, office, showroom or shop or godown or industry or business rather it has to be read in contrast and juxtaposed against the expression `set of premises'; it is the alternative to the `set of premises' and not merely to the different users of the set of premises mentioned in Section 2 (a-1). Mr. Sunil Gupta, learned senior counsel would submit that each stilt parking space as well as each open parking space is a `flat' in itself de hors the other accommodations amounting to `flat' under Section 2(a-1) of MOFA. In support of his argument, he relied 1 [1942] 1 All E.R. 221 1 upon a decision of this Court in the case of Municipal Corporation of Greater Bombay & Ors. v. Indian Oil Corporation Ltd.2. In the alternative, he submitted that if the stilt parking space or open parking space is not held to be a `flat' under Section 2 (a-1), still that space/area cannot be treated as part of `common areas and facilities'. Firstly, he submitted that common areas and facilities do not include garage/parking spaces and such parking spaces remain ungoverned by MOFA. Sections 3 and 4 of MOFA concern with matters pertaining to `common areas and facilities' but MOFA does not define the meaning of `common areas and facilities'. Section 3(2)(m)(iii) leaves it to the promoter to disclose to his flat purchaser the nature, extent and description of the common areas and facilities. Section 4, by mentioning a prescribed form of agreement, rather opened the possibilities for the promoter to continue to exercise his traditional and pre-Act right to dispose of such parking spaces according to his choice. The stilt/covered/open parking spaces do not figure as part of the common areas and facilities in any project and remain within 2 1991 Suppl. (2) SCC 18 1 the contractual, legal and fundamental rights of the promoter to dispose of the same in the manner in which he proposes and his customers accept. Section 16 of MOFA does not override this right of a promoter. Secondly, learned senior counsel would submit that the provisions of MOFA must not be made to depend on the provisions of some other enactment just because the subject matter of the two legislations appears to be the same. In this regard, he referred to Maxwell Interpretation of Statutes, 12th Edition, pages 69 to 70 and G.P. Singh on Principles of Statutory Interpretations, 8th edition, pages 150 to 160. He, thus, submitted that for the purposes of understanding the meaning of `flat' under Section 2(a-1) of MOFA, the provisions of MAOA may be looked at but there would be no justification in understanding the expression, `flat' defined in MOFA with reference to MRTP Act, DCR, rules related to FSI and the provisions concerning property tax in the Bombay Municipal Corporation Act.

11. On the other hand, Mr. Neeraj Kumar Jain, learned senior counsel and Mr. Umesh Shetty, learned counsel for the Societies stoutly supported the view of the High Court.

The issues:

12. In view of the contentions outlined above, the questions that arise for consideration are : (i) whether stand alone `garage' or in other words `garage' as an independent unit by itself is a `flat' within the meaning of Section 2(a-1) of MOFA; (ii) whether stilt parking space/open parking space of a building regulated by MOFA is a `garage'; (iii) If the answer to aforesaid questions is in the negative, whether stilt parking space/open parking space in such building is part of `common areas and facilities' and (iv) what are the rights of the promoter vis-`-vis society (of flat purchasers) in respect of open parking space/s / stilt parking space/s.

13. All these questions have to be considered in the light of statutory provisions. At this stage we notice some of the provisions of MOFA. As regards other statutory provisions, we shall refer to them wherever necessary.

Relevant provisions of MOFA:

14. The definition of `flat' in Section 2(a-1) is most vital and during course of arguments it has been rightly said that meaning of the word `flat' is the actual fulcrum of MOFA.

Section 2(a-1) reads thus:

"S.2(a-1).- "Flat" means a separate and self-contained set of premises used or intended to be used for residence, or office, show-room or shop or godown or for carrying on any industry or business (and includes a garage), the premises forming part of a building and includes an apartment.

Explanation.–Notwithstanding that provision is made for sanitary, washing, bathing or other conveniences as common to two or more sets of premises, the premises shall be deemed to be separate and self-contained."

15. `Promoter' is defined in Section 2(c) as under :

"S.2(c).- `Promoter' means a person and includes a partnership firm or a body or association of persons, whether registered or not who constructs or causes to be constructed a block or building of flats, or apartments for the purpose of selling some or all of them to other persons, or to a company, co-operative society or other association of persons, and includes his assignees; and where the person who builds and the person who sells are different persons, the term includes both;"

16. The general liabilities of the promoter are set out in Section 3. To the extent it is relevant to the present case it reads thus :

"S.3.- (1) Notwithstanding anything in any other law, a promoter who intends to construct or constructs a block or building of flats, all or some of which are to be taken or are taken on ownership basis, shall in all transactions with persons intending to take or taking one or more of such flats, be liable to give or produce, or cause to be given or produced, the information and the documents hereinafter in this section mentioned.

(2) A promoter, who constructs or intends to construct such block or building of flats, shall– (a) make full and true disclosure of the nature of his title to the land on which the flats are constructed, or are to be constructed; such title to the land as aforesaid having been duly certified by an Attorney-at- law, or by an Advocate of not less than three years standing, and having been duly entered in the Property card or extract of Village Forms VI or VII and XII or any other relevant revenue record;

(b) make full and true disclosure of all encumbrances on such land, including any right, title, interest or claim of any party in or over such land;

(i) not allow persons to enter into possession until a completion certificate where such certificate is required to be given under any law, is duly given by the local authority (and no person shall take possession of a flat until such completion certificate has been duly given by the local authority);

1 (j) to (l) …..

(m) when the flats are advertised for sale, disclose inter alia in the advertisement the following particulars, namely :- (i) the extent of the carpet area of the flat including the area of the balconies which should be shown separately;

(ii) the price of the flat including the proportionate price of the common areas and facilities which should be shown separately, to be paid by the purchaser of flat; and the intervals at which the instalments thereof may be paid;

(iii) the nature, extent and description of the common areas and facilities;

(iv) the nature, extent and description of limited common areas and facilities, if any.

(n) sell flat on the basis of the carpet area only:

Provided that, the promoter may separately charge for the common areas and facilities in proportion `to the carpet area of the flat'.

Explanation.–For the purposes of this clause, the carpet area of the flat shall include the area of the balcony of such flat."

17. Section 4 of MOFA mandates that promoter before accepting advance payment or deposit shall enter into an agreement with the prospective flat purchaser and such agreement shall be registered. It provides as follows:

"S.4.- (1) Notwithstanding anything contained in any other law, a promoter who intends to construct or constructs a block or building of flats all or some of which are to be taken or are taken on ownership basis, shall, before, he accepts any sum of money as advance payment or deposit, which shall not be more than 20 per cent of the sale price enter into a written agreement for sale with each of such persons who are to take or have taken such flats, and the agreement shall be registered under the Registration Act, 1908″ and such agreement shall be in the prescribed form.

(1A) The agreement to be prescribed under sub- section (1) shall contain inter alia the particulars as specified in clause (a); and to such agreement there shall be attached the copies of the documents specified in clause (b)– (a) particulars– (i) if the building is to be constructed, the liability of the promoter to construct it according to the plans and specifications approved by the local authority where such approval is required under any law for the time being in force;

(ii) to (v) …..

(vi) the nature, extent and description of limited common areas and facilities;

(vii) the nature, extent and description of limited common areas and facilities, if any;

(viii) percentage of undivided interest in the common areas and facilities appertaining to the flat agreed to be sold;

1 (ix) statement of the use for which the flat is intended and restriction on its use, if any;

(x) percentage of undivided interests in the limited common areas and facilities, if any, appertaining to the flat agreed to be sold;

(b) ….. "

18. Section 10 casts duty upon the promoter to take steps for formation of co-operative society or company, as the case may be. The said provision reads as follows :

"S.10.- (1) As soon as a minimum number of persons required to form a Co-operative society or a company have taken flats, the promoter shall within the prescribed period submit an application to the Registrar for registration of the organization of persons who take the flats as a co-operative society or, as the case may be, as a company; and the promoter shall join, in respect of the flats which have not been taken, in such application for membership of a co-operative society or as the case may be, of a company. Nothing in this section shall affect the right of the promoter to dispose of the remaining flats in accordance with the provisions of this Act.

Provided that, if the promoter fails within the prescribed period to submit an application to the Registrar for registration of society in the manner provided in the Maharashtra Co-operative Societies Act, 1960, the Competent Authority may, upon receiving an application from the persons who have taken flats from the said promoter, direct the District Deputy Registrar, Deputy Registrar or, as the case may be, Assistant Registrar concerned, to register the society :

1 Provided further that, no such direction to register any society under the preceding proviso shall be given to the District Deputy Registrar, Deputy Registrar or, as the case may be, Assistant Registrar, by the Competent Authority without first verifying authenticity of the applicants' request and giving the concerned promoter a reasonable opportunity of being heard."

19. There is also obligation cast upon promoter to execute the documents of title and convey to the co-operative society or the company or an association of flat purchasers/apartment owners, right, title and interest in the land and building by virtue of Section 11 which reads thus:

"S.11.- (1) A promoter shall take all necessary steps to complete his title and convey to the organization of persons, who take flats, which is registered either as a co-operative society or as a company as aforesaid, or to an association of flat takers or apartment owners his right, title and interest in the land and building, and execute all relevant documents therefore in accordance with the agreement executed under section 4 and if no period for the execution of the conveyance is agreed upon, he shall execute the conveyance within the prescribed period and also deliver all documents of title relating to the property which may be in his possession or power.

2. It shall be the duty of the promoter to file with the Competent Authority, within the prescribed period, a copy of the conveyance executed by him under sub- section (1).

3. If the promoter fails to execute the conveyance in favour of the co-operative society formed under Section 10 or, as the case may be, the company or the association of apartment owners, as provided by sub- section (1), within the prescribed period, the members of such co-operative society or, as the case may be, the company or the association of apartment owners may, make an application, in writing, to the concerned Competent Authority accompanied by the true copies of the registered agreements for sale, executed with the promoter by each individual member of the society or the company or the association, who have purchased the flats and all other relevant documents (including the occupation certificate, if any), for issuing a certificate that such society, or as the case may be, company or association, is entitled to have an unilateral deemed conveyance, executed in their favour and to have it registered.

(4) …..

(5) ….."

20. Section 16 of MOFA provides that the provisions contained therein are in addition to the provisions of the T. P.

Act and shall take effect notwithstanding anything to the contrary contained in the contract.

Re: question nos. (i) and (ii):

(A) What is `flat'?

21. For proper consideration of questions (i) and (ii) as afore-referred, it is of considerable importance to ascertain the import and meaning of the term `flat' defined in Section 2(a-1) of 2 MOFA. Rather the answer to the questions presented for consideration must squarely or substantially depend on what is a `flat'. Justice G.P. Singh in the `Principles of Statutory Interpretation' (12th edition, 2010) says that the object of a definition of a term is to avoid the necessity of frequent repetitions in describing all the subject matter to which that word or expression so defined is intended to apply. In other words, the definition clause is inserted for the purpose of defining particular subject-matter dealt with and it helps in revealing the legislative meaning. However, the definitive clause may itself require interpretation because of ambiguity or lack of clarity in its language. In the `Construction of Statutes' by Earl T. Crawford (1989 reprint) at page 362, the following statement is made: "…….the interpretation clause will control in the absence of anything else in the act opposing the interpretation fixed by the clause. Nor should the interpretation clause be given any wider meaning than is absolutely necessary. In other words, it should be subjected to a strict construction."

22. The definition of term `flat' in MOFA at the time of its enactment was this: `flat' means a separate and self- contained set of premises used or intended to be used for residence, or office, showroom or shop or godown (and includes a garage), the premises forming part of a building. By Maharashtra Act No. 15 of 1971, the definition of `flat' got amended and the words `and includes an apartment' were inserted after the word `building'. Thereafter by Maharashtra Act 36 of 1986, the words `or for carrying on any industry or business' were inserted after the word `godown' and before the bracketed portion `(and includes a garage)'.

23. Before we analyze Section 2(a-1), if we ask what the term `flat' means, apart from the statutory definition, the reply must be that though it has no uniform meaning but in its natural and ordinary meaning, `flat' is a self contained set of premises structurally divided and separately owned for dwelling.

Concise Oxford English Dictionary (10th edition, revised) explains `flat' –a set of rooms comprising an individual place of residence within a larger building.

24. Webster Comprehensive Dictionary; International edition (Vol. 1) explains `flat'– 1. a set of rooms on one floor, for the occupancy of a family; apartment. 2. A house containing such flats.

25. In Stroud's Judicial Dictionary (5th edition, Vol. 2), a reference has been made to the observations of Somervell L.J, in Murgatroyd v. Tresarden, 63 T.L.R. 62 and it is stated; the natural meaning of the word `flat' is a separate self-contained dwelling.

26. In Words and Phrases, Permanent Edition, (West Publishing Company), Vol. 17, while dealing with the term `flat' generally, it is stated :

"The word `flat' has no technical, legal meaning, so that a court can pronounce absolutely one way or the other.

A building is a `flat' or not, and, where the testimony is conflicting, the question is one of fact".

27. Advanced Law Lexicon by P. Ramanatha Aiyar (3rd edition, 2005) explains the term `flat', in the following way – `in the ordinary use of the term a flat is a self-contained set of rooms, structurally divided and separately owned or let from 2 the rest of a building, which for the most part consists of other flats separated in like manner'.

28. Reverting back to the definition of the term `flat' under Section 2(a-1), for a `flat' within the meaning of this definition clause, the set of premises has to be a separate and self-contained that forms part of the building which is used or intended to be used for residence or office, showroom or shop or godown or for carrying on industry or business.

Separateness of one premises from another premises physically and also in use or intended use for one of the uses specified in the definition clause containing the necessary facilities for self-contained accommodation is sine qua non for a unit being covered by the definition of `flat' occurring in Section 2(a-1) which includes an `apartment'. In other words, it must be a separate unit conforming to the description capable of being used for one of these purposes–namely, residence, office, showroom, shop, godown or for industrial or business purposes. Alternative uses in Section 2(a-1) do expand the ordinary meaning of the term `flat' but nevertheless such 2 premises that form part of building must be separate and self- contained. A set of premises is called self-contained if it has the following basic amenities available: (a) sanitary;

(b) washing, bathing and (c) other conveniences (cooking etc.) for the use of its occupant/s although as provided in the explanation appended to Section 2(a-1) such provision may be common to two or more sets of premises. The nature of construction and user are important features of this definition clause. A unit or accommodation to fit in the definition of `flat' must meet twin-test namely: (i) self contained test and (ii) user test. The other predominant characteristic is that it must form part of a building. Crucially, for the relevant premises to be `flat':

7 It must be a separate and self contained premises;

7 It must form part of building;

7 It must be used or intended to be used for any of the uses namely–residence, office, showroom, shop, godown or for carrying on any industry or business.

29. In the discussion made above, we have not referred to the bracketed portion namely – `(and includes a garage)' so far. What is the meaning and significance of this bracketed portion? On technical linguistic basis, the bracketed phrase can only attach to the word preceding it. That may not be happy construction nor such construction by reading bracketed portion `(and includes a garage)' with the preceding word `business' appropriately reflects the meaning of the phrase. The scope of the bracketed phrase has to be seen in the context of the definition given to the word `flat' which is true indication of intent of the legislature. It was suggested by learned senior counsel and counsel for the promoters that the phrase `and includes a garage' must be read with the `set of premises' and not with the user. This does not appear to be a correct reading of the expression. We are not persuaded to accept such construction.

We think that statutory definition of `flat' must be construed keeping in view the intent of the legislature and the context of the statute and, seen thus, the phrase, `and includes a garage' in the bracket does not bring in `garage' by itself within the meaning of word `flat'. If stand alone `garage' (or a garage by itself) were intended by the legislature to be a `flat' within the meaning of Section 2(a-1), that could have been conveniently conveyed by use of the expression `or garage' after the word `business' in the same breath as preceding uses. The bracketed phrase is rather indicative of the legislative intention to include a `garage' as appurtenant or attachment to a flat which satisfies the ingredients of Section 2(a-1). To this extent Mr. Pravin K. Samdani is right in his submission. It is clear to us that stand alone `garage' or in other words `garage' as an independent unit by itself is not a `flat' within the meaning of Section 2(a-1) and we answer question (i) in the negative. The Balkrishna3 to the extent the expression `or garage' has been read after the word `godown' in para 5 (clause 2) of the report does not state the correct legal position in what we have already said above.

(B) Whether stilt parking space is a garage? 3 AIR 1972 Bombay 343 2 30. The next question is, whether stilt parking space in a building regulated by MOFA is a `garage'. The term `garage' has not been defined in MOFA and, therefore, we need to first find out what is the extent and scope of that term in Section 2(a-1). The general term `garage' is appropriated in English from the French language and means `keeping under cover' or `a place for keeping' of wagons as well as automobiles.

Concise Oxford English Dictionary (10th edition, revised) explains `garage'– 1 a building for housing a motor vehicle or vehicles. 2 an establishment which sells fuel or which repairs and sells motor vehicles.

31. Webster Comprehensive Dictionary, International edition (Vol. 1) explains the word `garage'–a building in which motor vehicles are stored and cared for.

32. Words and Phrases, Permanent Edition, (West Publishing Company), Vol. 17, states that `garage' generally is a station in which motorcars can be sheltered, stored, repaired, cleaned, and made ready for use; it is also place for private storage for motorcars; stable for motor cars.

33. The DCR define two expressions `garage-private' and `garage-public' in Regulations 2(47) and 2(48) respectively. According to these Regulations, `garage-private' means a building or a portion thereof designed and used for the parking of vehicles and `garage-public' means a building or portion thereof designed other than as a private garage, operated for gain, designed and/or used for repairing, serving, hiring, selling or storing or parking motor-driven or other vehicles. In our view, we must give to the word `garage' occurring in Section 2(a-1) a meaning that general public or for that matter a flat purchaser of ordinary prudence would give to that word or understand by that word. Learned senior counsel Mr. Sunil Gupta referred to Barnett and Block1 wherein Atkinson, J. stated as follows:

"Now what is a garage? No evidence was given to suggest or prove that the word "garage" in the trade had got any special meaning, and it was agreed to take four dictionary definitions set out in the agreed statement of facts. The four definitions were these. From the SHORTER OXFORD DICTIONARY: "A building for the storage or refitting of motor vehicles." From the NEW CENTURY DICTIONARY : "A building for sheltering, cleaning or repairing motor vehicles. To put or keep in a garage." From the NEW STANDARD DICTIONARY:

"A building for stabling or storing of motor vehicles of all 3 kinds." From NUTTAL'S STANDARD DICTIONARY :

"A storehouse for motor vehicles." Those are four definitions from leading dictionaries all containing at any rate one word in common, and that is "building." As there is no evidence as to how the general public understand the word "garage," I suppose one is entitled to use one's own knowledge. I am inclined to think that ordinary man in the street does regard a garage as connoting some sort of a building; how far he would go I do not know. I do not know whether he would think that there should be a wall all round it, or whether it would be sufficient if there were three sides walled in and a roof. I have one in mind where there is a row of sheds without any protection in front, which are commonly spoken of as "garages," but I am going to apply here the test suggested by counsel for the insured. He said "A garage is a place where one can get reasonable protection and shelter for a car." Can I say that you are getting reasonable protection and shelter for a car, if there is nothing to protect the car from above – if there is no roof of any sort? I think the ordinary man, as counsel for the insurers suggested, who took a house with a garage, if he came and found merely an open shed without any roof, would think he had been swindled, however high the walls might be. I cannot think that one is entitled to say that it is adequate or reasonable protection or shelter if there is no roof; but this is worse than that, though I agree that the walls are very good here. Wherever you put a car in this yard, in addition to there being no shelter from above, there will be no shelter on two sides. That seems to me to be really conclusive."

He, thus, submitted that even a place with merely a roof may well be a `garage'. By placing reliance on condition No. 2 in Form V of 1964 Rules, learned senior counsel submitted that 3 for the purposes of MOFA, even an open parking space is tantamount to a `garage'.

34. The relevant portion of condition No. 2, Form V appended to 1964 Rules reads as under:

"2. The Flat Purchaser hereby agrees to purchase from the Promoter and the Promoter hereby agrees to sell to the Flat Purchaser one flat No. ………. of the Type ………. of carpet area admeasuring ………. sq.

meters (which is inclusive of the area of balconies) on ………. floor as shown in the Floor plan thereof hereto annexed and marked Annexures D/Shop No. ………./covered/open Garage No. ………. in the ……….

Building (hereinafter referred to as "the Flat") for the price of Rs. ………. including Rs. ………. being the proportionate price of the common areas and facilities appurtenant to the premises, the nature extent and description of the common/limited common areas and facilities/limited common areas and facilities which are more particularly described in the Second Schedule hereunder written. The Flat Purchasers hereby agrees to pay to that Promoter balance amount of purchase price of Rs. ………. (Rupees ………. ……………) having been paid to the Promoter on or before the execution of his agreement in the following manner."

35. We do not perceive any force in the argument that open parking space tantamounts to a `garage' within the meaning of Section 2(a-1) read with condition No. 2 Form V of 1964 Rules. Can a person buying a flat for residence or one of the uses mentioned in Section 2(a-1) really think that open to 3 the sky or open space for parking motor vehicles is a garage? We do not think so. The word `garage' may not have uniform connotation but definitely every space for parking motor vehicles is not a garage. A roofless erection could not be described a garage. What is contemplated by a `garage' in Section 2(a-1) is a place having a roof and walls on three sides.

It does not include an unenclosed or uncovered parking space.

It is true that in condition No. 2, Form V the words `covered/open garage' have been used but, in our view, the word `open' used in the Model Form V cannot override the true meaning of term `garage' in Section 2(a-1). As a matter of fact, none of the provisions of MOFA regards `open garage' connoting `flat' or an appurtenant/attachment to a flat. We do not think undue importance should be given to word `open' which has loosely been used in condition No. 2, Form V. The true meaning of the term `garage' in Section 2(a-1), we think, is not affected by a Model Form V appended to the 1964 Rules.

36. The question then is as to whether the stilted portion or stilt area of a building is a garage under MOFA. A 3 stilt area is a space above the ground and below the first floor having columns that support the first floor and the building. It may be usable as a parking space but we do not think that for the purposes of MOFA, such portion could be treated as garage. It was argued that the test accepted by Atkinson, J. in Barnett & Block1-that a garage is a place where one can get reasonable protection and shelter for a car–is satisfied by stilt car parking space and such space is a garage. We are unable to agree. The test accepted by Atkinson, J. in Barnett and Block1 also does not support this argument. Even as per that test a place having roof but offering no shelter or protection on two sides cannot be a garage. It is worth repeating what Atkinson,J. said, `….I am inclined to think that the ordinary man in the street does regard a garage as connoting some sort of building; how far he would go I do not know. I do not know whether he would think that there should be a wall all round it, or whether it would be sufficient if there were three sides walled in and a roof. I have one in mind where there is row of sheds without any protection in front, which are commonly spoken of 3 as "garages".' Atkinson,J. applied the test of `reasonable protection and shelter for car' as was suggested by the counsel for the insurer while construing the term `garage' in a policy of insurance. For the purposes of MOFA, and particularly Section 2(a-1), the term `garage' must be considered as would be understood by a flat purchaser and such person would contemplate garage which has a roof and wall on three sides.

Our answer to question No. (ii) is, therefore, no. Re: question no. (iii) – Whether stilt parking spaces are part of `common areas and facilities'?

37. The High Court has held that the stilt car parking spaces are part of the common amenities. Is the High Court right in its view? MOFA does not define nor it explains `common areas and facilities' though the said phrase is used at various places in that Act. Mr. Pravin K. Samdani, learned senior counsel for Maharashtra Chamber of Housing Industry submitted that following could be termed as part of the `common areas':

7 15% Recreation Ground (RG) Area;

3 7 Recreational facilities and/or club house on above RG Areas;

7 Society Office;

7 Security guards cabin;

7 Common passage/lobbies;

7 Stair case;

7 Lift;

7 Terraces over the roof of the building;

7 Landings on each floor;

7 Columns and beams of the building 7 Playgrounds, if any.

According to him, the following could be part of `Limited Common Areas':

7 Separate lift attached to a particular flat and/or certain number of flats;

7 Terrace attached to a flat;

7 Servants toilet on each floor, meant for the user of the flats on that particular floor;

The aforesaid list as suggested by the learned senior counsel, in our opinion, is not exhaustive. It may not be out of place to refer to Section 3(f) of MAOA which defines `common areas and facilities' as follows:

"3(f) "common areas and facilities", unless otherwise provided in the Declaration or lawful amendments, thereto means– (1) the land on which the building is located;

3 (2) the foundations, columns, girders, beams, supports, main walls, roofs, halls, corridors, lobbies, stairs, stair-ways, fire-escapes and entrances and exits of t he buildings;

(3) the basements, cellars, yards, gardens, parking areas and storage spaces;

(4) the premises for the lodging of janitors or persons employed for the management of the property;

(5) installations of central services, such as power, light, gas, hot and cold water, heating, refrigeration, air conditioning and incinerating;

(6) the elevators, tanks, pumps, motors, fans, compressors, ducts and in general all apparatus and installations existing for common use;

(7) such community and commercial facilities as may be provided for in the Declaration; and (8) all other parts of the property necessary or convenient to its existence, maintenance and safety, or normally in common use;"

It is true that interpretation clause or legislative definition in a particular statute is meant for the purposes of that statute only and such legislative definition should not control other statutes but the parts of the property stated in clauses (2), (3) and (6) of Section 3(f) as part of `common areas and facilities' for the purposes of MAOA are what is generally understood by the expression `common areas and facilities'. This is fortified by the 3

fact that the areas which according to the learned senior counsel could be termed as `common areas' in a building regulated by MOFA are substantially included in a fore noticed clauses of Section 3(f) of MAOA. Looking to the scheme and object of MOFA, and there being no indication to the contrary, we find no justifiable reason to exclude parking areas (open to the sky or stilted portion) from the purview of `common areas and facilities' under MOFA.

38. It was argued that under MOFA it is for the promoter to prescribe and define at the outset the `common areas' and unless it is so done by the promoter, the parking area cannot be termed as part of `common areas'. We are quite unable to accept this submission. Can a promoter take common passage/lobbies or say stair case or RG area out of purview of `common areas and facilities' by not prescribing or defining the same in the `common areas'? If the answer to this question is in negative, which it has to be, this argument must fail. It was also submitted that by treating open/stilt parking space as part of `common areas', every flat purchaser will have to bear 3 proportionate cost for the same although he may not be interested in such parking space at all. We do not think such consideration is relevant for the consideration of term `common areas and facilities' in MOFA. It is not necessary that all flat purchasers must actually use `common areas and facilities' in its entirety. The relevant test is whether such part of the building is normally in common use. Then it was submitted that if a parking space is sold to a flat purchaser, it is to the exclusion of other flat purchasers and, therefore, logically also it cannot be part of `common areas'. This submission is founded on assumption that parking space (open/covered) is a `garage' and sellable along with the flat. We have, however, held in our discussion above that open to the sky parking area or stilted portion usable as parking space is not `garage' within the meaning of Section 2(a-1) and, therefore, not sellable independently as a flat or along with a flat. As a matter of fact, insofar as the promoter is concerned, he is not put to any prejudice financially by treating open parking space/stilt parking space as part of `common areas' since he is entitled to charge 3 price for the common areas and facilities from each flat purchaser in proportion to the carpet area of the flat. MOFA mandates the promoter to describe `common areas and facilities' in the advertisement as well as the `agreement' with the flat purchaser and the promoter is also required to indicate the price of the flat including the proportionate price of the `common areas and facilities'. If a promoter does not fully disclose the common areas and facilities he does so at his own peril. Stilt parking spaces would not cease to be part of common areas and facilities merely because the promoter has not described the same as such in the advertisement and agreement with the flat purchaser. Although there is some merit in the contention of the appellant that High Court erred in placing reliance on the two aspects–namely, that the area of stilt parking space is not included in the FSI and such area is not assessable to the corporation taxes – in reaching the conclusion that stilt parking space is part of `common areas' but in our view even if these two aspects are excluded, in what we have discussed above stilt parking space/open parking space 4 of a building regulated by MOFA is nothing but a part of `common areas' and, accordingly, we answer question no. (iii) in the affirmative.

Re: question no. (iv) – what are the rights of a promoter vis-`-vis society in respect of stilt parking spaces?

39. We have now come to the last question namely– what are the rights of a promoter vis-`-vis society (of flat purchasers) in respect of stilt parking space/s. It was argued that the right of the promoter to dispose of the stilt parking space is a matter falling within the domain of the promoter's contractual, legal and fundamental right and such right is not affected. This argument is founded on the premise, firstly, that stilt parking space is a `flat' by itself within the meaning of Section 2(a-1) and in the alternative that it is not part of `common areas'. But we have already held that `stilt parking space' is not covered by the term `garage' much less a `flat' and that it is part of `common areas'. As a necessary corollary to the answers given by us to question nos. (i) to (iii), it must be held that stilt parking space/s being part of `common areas' of the building developed by the promoter, the only right that the 4 promoter has, is to charge the cost thereof in proportion to the carpet area of the flat from each flat purchaser. Such stilt parking space being neither `flat' under Section 2(a-1) nor `garage' within the meaning of that provision is not sellable at all.

40. MOFA was enacted by the Maharashtra Legislature as it was found that uilders/developers/promoters were indulging in malpractices in the sale and transfer of flats and the flat purchasers were being exploited. The effect of MOFA may be summarized as follows. First, every promoter who constructs or intends to construct block or building of flats in the area to which MOFA applies has to strictly adhere to the provisions contained therein, i.e., inter alia, he has to make full and true disclosure of the nature of his title to the land on which the flats are constructed and also make disclosure in respect of the extent of the carpet area of the flat and the nature, extent and description of the common areas and facilities when the flats are advertised for sale. Secondly, the particulars which are set out in Section 4(1A) (a) (i) to (x) have 4 to be incorporated in the agreement with the flat purchaser.

Thirdly, the promoter has to apply to the Registrar for registration of the organization (co-operative society or company or condominium) as soon as minimum number of persons required to form such organization have taken flats. As regards unsold flats, the promoter has to join such organization although his right to dispose of unsold flats remains unaffected.

Fourthly, and more importantly, the promoter has to take all necessary steps to complete his title and convey to the organization his right, title and interest in the land and building and execute all relevant documents accordingly. It was argued by Mr. Tanmaya Mehta, learned counsel for the promoter that in view of the provisions of MOFA, Section 6 of T.P. Act and Article 300A of the Constitution, the right of the promoter to transfer parking spaces is not at all restricted. Relying upon the decisions of this Court in ICICI Bank Ltd. v. SIDCO Leathers Ltd. & Ors..4, Karnataka State Financial Corporation v. N. Narasimahaiah & Ors.5 and Bhikhubhai Vithlabhai Patel & Ors., 4 (2006) 10 SCC 452 5 (2008) 5 SCC 176 4 v. State of Gujarat & Anr.6, he submitted that the provisions contained in MOFA must be construed strictly and there is no provision either express or by necessary implication in MOFA restricting the sale of stilt or open parking spaces. Mr. Sunil Gupta also argued that promoter continues to have contractual, legal and fundamental right to dispose of the stilt/open parking space in the manner in which he proposes and his consumers accept. We think this argument does not bear detailed examination. Suffice it to say that if the argument of learned senior counsel and counsel for promoter is accepted, the mischief with which MOFA is obviously intended to deal with would remain unabated and flat purchasers would continue to be exploited indirectly by the promoters. In our opinion, MOFA does restrict the rights of the promoter in the block or building constructed for flats or to be constructed for flats to which that Act applies. The promoter has no right to sell any portion of such building which is not `flat' within the meaning of Section 2(a-1) and the entire land and building has to be conveyed to the organisation; the only right remains with the 6 (2008) 4 SCC 144 4 promoter is to sell unsold flats. It is, thus, clear that the promoter has no right to sell `stilt parking spaces' as these are neither `flat' nor appurtenant or attachment to a `flat'.

41. In view of the above, it is not at all necessary to deal with the factual submissions advanced by Mr. Tanmaya Mehta.

Having regard to the answer to question no. (iv), the finding of the High Court that undertakings are neither binding on the flat purchasers nor the society also warrants no interference.

42. These appeals, accordingly, fail and are dismissed with no order as to costs

THE issues before the Bench are - Whether in case of TDS default by the assessee, the criminal prosecution can be launched independent of the recovery proceedings; Whether the pendency of recovery proceedings is a legal impediment to the launch of criminal prosecution in case of TDS default and Whether quantification of sum for the initiation of prosecution is necessary. And the verdict goes against the assessee.

Facts of the case

The assessee is a registered company engaged in the business of operating passenger air lines in India. Revenue had filed case before the Economic Offences Court against assessee for the FYs 2009-10, 2010-11 and 2011-12 for the offences punishable u/s 276-B read with Section 278-B. A survey on the premises of assessee u/s 133-A. During survey, it was noticed from the records available that assessee had deducted TDS and failed to remit the same to the Government account for the FYs 2009-10, 2010-11 and 2011-12 to the tune of Rs.400,56,08,659/-. During verification of records, at the time of survey and in the subsequent proceedings after the survey it was detected that assessee company had deducted TDS on various payments and failed to remit the same to the Government accounts. Assessee company, its principal officer and the authorized representatives admitted the liability of TDS and failed to pay the same. AO passed an order u/s 201(1) and 201(1-A) treating assessee as an assessee in default and levied interest for not remitting the TDS within the stipulated time and raised a demand. On appeal, CIT(A) had dismissed the assessee's appeal. On further appeal, Tribunal had allowed the appeal filed by assessee, set aside the order of AO and CIT(A) and remanded the matter back to AO for reconsideration in accordance with law after providing an opportunity to the petitioners. On further appeal, HC granted an interim order of stay, staying the remand order passed by the ITAT. Thus, AO issued demand notice to the assessee. Therefore assessee approached HC challenging the order of ITAT remanding the matter and also the demand notice. HC granted an interim order subject to the petitioners depositing 50% of the demand. At that time, the Revenue filed three private complaints against the petitioners for the offences punishable u/s 276-B and 278-B in C.C. Nos. 49/2013, 77/2013 and 78/2013 on the file of Special Court (Economic Offences) Bangalore. The Special Court had taken cognizance of the offences against the petitioners, registered the cases and issued summons.

Before HC, the assessee's counsel had contended that when the order of AO treating the petitioners as assessee in default and levying interest for not remitting TDS within the stipulated time was set aside by the ITAT then the private complaints for offences punishable u/s 276-B r.w.s 278-B before the Special Court were not maintainable. The interim order granted by HC and connected matters was only restraining further proceedings pursuant to the order of remand but, it will not amount to revival of the order of AO. Therefore the very initiation of criminal proceedings against the petitioners before the special Court were liable to be dismissed as not maintainable. It was contended that without quantification of the salaries paid and TDS the proceedings initiated before the Special Court were liable to be dismissed. In the complaint filed by Revenue it was not pleaded what was the accrual of payment and what was the actual payment made to the employees as salaries and actual deductions. In the absence of any such pleadings the question of deducting TDS and remittance of the same will not arise. The alleged admission of the liability to pay TDS by the assessee was categorically negatived by the ITAT and as such no reliance can be placed on the alleged admissions. It was further contended that as per the proviso to Section 279(1) it was necessary that a direction or instruction from the officer mentioned therein was necessary for passing an order of sanction by the Chief Commissioner, Director General or Commissioner. In the instant case there was no such direction or instruction. Therefore the sanction order issued by the Commissioner to prosecute assessee was bad in law and contrary to the mandatory requirement specified in the proviso to Section 279(1). The ACIT [TDS Circle – 16(2)] sought for sanction but, it was given to ACIT [TDS Circle – 16(1)] and he has filed the complaints before the Special Court and as such they were bad in law.

On the other hand, the Revenue's counsel had contended that the complaint filed by the Revenue was not based on the order of AO u/s 201(1) and Section 201(A). The complaint against the petitioners was based on the records and the categorical admissions made by the asseseee. It was contended that the quantification of the salaries paid to the employees and the actual deduction of TDS was not necessary for initiation of proceedings for the offences punishable u/s 276-B and 278-B. It was contended that the complaint against the petitioners contain the necessary ingredients to constitute an offence against the petitioners and the same was supported by documentary evidence produced before the Special Court. It was true that the ACIT (TDS Circle 16(2)) sought sanction from the CIT to prosecute the petitioners. During the pendency of the proceedings before the Commissioner there came to be change of jurisdiction from TDS Circle 16(2) to TDS Circle 16(1). By taking notice of this change of jurisdiction, the Commissioner had rightly passed the order of sanction permitting ACIT, Circle 16(1) to prosecute the petitioners and as such there was no illegality. It was contended that the order of sanction was in accordance with Section 279(1).

Held that,

++ from the provisions of income tax Act, it is clear that wherever a company fails to deduct the tax at source and remit the same to the account of the Central Government, attracts criminal prosecution and also recovery proceedings. The criminal proceedings are independent of recovery proceedings. The criminal proceedings are not dependent on the recovery proceedings. Therefore the pendency of proceedings initiated u/s 201(1) and Section 201(1-A) is not a legal impediment to continue the criminal prosecution against the petitioners. The pendency of proceedings u/s 201(1) and 201(1-A) cannot act as a bar to the institution and continuance of criminal prosecution for the offences punishable u/s 276-B. Quantification of amount for the purpose of initiation of criminal proceedings is not necessary. Therefore I am of the considered opinion that the proceedings initiated against the petitioners cannot be quashed on the ground that the proceedings under Section 201(1) and Section 201(1-A) are pending. Respondents contend that the criminal prosecution against the petitioners is not founded upon the order of the AO u/s 201(1) and Section 201(1-A). On the other hand the complaint against the petitioners is based on the admission and representation in the form of letters written on behalf of the petitioner company. In support of this contention the respondents have relied on the letters written by the petitioner company Annexure R-4 dated 17.11.2011, Annexure R-9 dated 21.12.2011, Annexure R-10 dated 05.01.2012, Annexure R-11 dated 27.01.2012, Annexure R-12 dated 21.02.2012, Annexure R-14 dated 02.03.2012, Annexure R-15 dated 09.03.2012, Annexure R-16 dated 15.03.2012. From these documents it is seen that the petitioner No. 1 company, petitioner No.2 – Chairman and Managing Director, the authorized representatives and other concerned officials admit the deduction of tax at source, failure to credit the same to the account of the Central Government and pleaded for some time to pay the same. According to respondents the account books maintained by the petitioner No.1 company also specifies the deduction of tax at source and failure to credit the same to the account of the Central Government. It is on the basis of these documentary evidence, admissions and the audited accounts the criminal prosecution is initiated against the petitioners. Therefore the outcome of the proceedings initiated by the Assessing Authority under Section 201(1) and 201(1-A) of the I.T. Act has no bearing on the prosecution proceedings. Therefore point No. i is answered in negative and against the petitioners;

++ a reading of the complaints specifies the relevant financial years, the amount deducted at source and failure to pay the same to the account of the Central Government. Even the details of non-remittance of TDS of salaries for each financial year and monthwise is also specified. The correspondence between the parties wherein the petitioners have admitted the liability is also referred in the complaint and the same are relied on. Therefore the complaint filed by the respondent contains the necessary ingredients for taking cognizance of offence against the petitioners. Therefore the contention that on the ground of lack of necessary averments in the pleadings the proceedings are to be quashed is hereby rejected. Accordingly, point No. ii is answered in negative and against the petitioners;

++ it is contended that the Assistant Commissioner of Income Tax, TDS Circle 16(2) sought sanction from the Commissioner of Income Tax. The Commissioner of Income Tax had given sanction authorizing the Assistant Commissioner of Income Tax, TDS Circle 16(1) to initiate criminal proceedings against the petitioners and as such the same is bad in law. It is not in dispute that the case of petitioner No.1 company was pending before the ACIT, TDS Circle 16(2) and subsequently the case of the assessee was transferred to ACIT, TDS Circle 16(1). By taking note of this development the Commissioner passed an order authorizing ACIT, TDS Circle 16(1) to initiate criminal proceedings. It is necessary for the Commissioner to take into consideration the developments that had taken place pending consideration of the request for sanction. In the instant case the Commissioner rightly, by taking into consideration, the subsequent development passed the order of sanction. I find no error or illegality in the order of the Commissioner;

++ petitioner No. 2 is the Chairman and Managing Director of petitioner No. 1 Company. It is contended that the name of petitioner No. 2 do not find a place in the order under Section 201 IPC and Section 201(A). Further petitioner No. 2 was not in charge of the day-to-day business of petitioner No. 1 company in relation to deduction of tax at source and remittance of the same to the account of the Central Government. Therefore treating petitioner No. 2 as the Principal Officer of petitioner No. 1 company for the purpose of initiation of criminal proceedings is contrary to law. I decline to accept this contention of the counsel for the petitioners. Admittedly the annual report of petitioner No.1 company specifies that petitioner No. 2 is the Chairman and Chief Executive Officer of petitioner No. 1 company. In the complaint it is specifically pleaded that petitioner No. 2 being the Principal Officer of petitioner No.1 company is directly responsible for the default in deducting the tax at source and non-remittance of the same to the account of the Central Government. It is contended that petitioner No. 2 is responsible for the day-to-day conduct and business of petitioner No. 1 company. By treating petitioner No. 2 as the Principal Officer of petitioner No.1 company u/s 2(35) proceedings are initiated;

++ on 02.01.2014 petitioners filed an application u/s 482 Cr. P.C. bringing to the notice of this Court a subsequent event and a document supporting the same. The subsequent event is, treating one Sri. T.R. Venkatadri, Assistant Vice President (Regional Accounts South and Taxation) of petitioner No. 1 company as the Principal Officer under Section 2(35-B) of the I.T. Act. The counsel for the petitioners contends that in view of this development proceedings initiated against petitioner No. 2 are liable to be quashed. I decline to accept this contention of the counsel for the petitioners. A reading of Section 2(35-B) specifies that there is no bar for treating more than one person as the Principal Officer for initiation of criminal proceedings. The Supreme Court in the case of Madumilan Syntex supra, held that it was alleged in the show-cause notice as well as in the complaint that they were "principal officers" of the company. In the show-cause notice, it was asserted that the appellants were considered as principal officers u/s 2 (35). In the complaint also, it was stated that the other accused were associated with the business of the company and were treated as principal officers u/s 2(35) and hence they could be prosecuted. Dealing with an application for discharge, the trial court observed that accused No.1 was the company whereas the other accused were the directors. Whether they could be said to be principal officers or not would require evidence and it could be considered at the stage of trial and the application was rejected. In revision, the first additional sessions judge took a similar view. Therefore the subsequent event treating one Sri. T. R. Venkatadri as the Principal Officer of petitioner No.1 company will not result in quashing of the proceedings against petitioner No. 2. It is open for the respondent authorities to proceed against the company, its directors or any other principal officer or officers responsible for default. The trial Court to consider this question in the trial. Accordingly point No. iii is answered in negative and against the petitioners. For the reasons stated above, the petitions are hereby dismissed.

Technical Error in Registration of DSC at 'TRACES' Website

Posted In Income Tax | News | No Comments »

While registering DSC, some of the users might be facing "System has encountered a Technical Error". This is due to a technical issue and will be resolved soon.

Source- https://www.tdscpc.gov.in/

Draft ICAI Code of Professional Ethics- 2014

Posted In CA CS ICWA | News | No Comments »

As you are kindly aware, Ethical Standards Board of ICAI is constantly engaged in formulation of ethical standards for the members. But equally so, it has always endeared to reach out to members with new methods and strategies to ensure not only that members are well aware about the latest updates on ethics, but also to encourage the compliance with ethics to an ideal level .

Against this backdrop, I am delighted to announce one such update in ethics – the proposed replacement of ICAI Code of Ethics, 2009 with the "ICAI Code of Professional Ethics, 2014". The proposed Code will have 'Divisions' as its units. The proposed ICAI Code of Professional Ethics, 2014 will be divided as under:-

Division I: The Chartered Accountants Act, 1949

Division II: The First Schedule to the Chartered Accountants Act, 1949

Division III: The Second Schedule to the Chartered Accountants Act, 1949

Division IV: The Chartered Accountants Regulations, 1988

Division V: Rules framed under the Chartered Accountants Act, 1949

Division VI: Guidelines

It has been our earnest endeavour to make Code of Ethics of members really comprehensive , with most of the basic information relevant to members available at one place, and to present a connect between the glorious past of the profession , its progressive present and a magnificent future . The Draft Code may be assessed at ICAI Website at the following link http://www.icai.org/new_post.html?post_id=958&c_id=50. We will be pleased to get your feedback /suggestions on the same, which may be sent at ashishswaroop@icai.in and esb@icai.in

SC dismisses review petitions on its judgment on Sec 377

Posted on 29 January 2014 by Vassu Arora

Court

Supreme Court of India

Brief

The bench comprising of Justice H.L. Dattu and Justice S.J. Mukhopadhaya dismissed review petitions against the verdict of the Court in December 2013 which declared gay sex a criminal offence punishable up to life imprisonment.

Citation

Judgement

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

REVIEW PETITION (C)NOS. 41-55 OF 2014

CIVIL APPEAL NO.10972, 10974, 10986, 10981, 10983, 10984, 10975,

10973, 10985, 10976, 10980, 10982, 10977, 10978 AND 10979 OF 2013

NAZ FOUNDATION (INDIA) TRUST ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL & ORS. ... RESPONDENT(S)

WITH

REVIEW PETITION (C)NO.197 OF 2014

CIVIL APPEAL NO.10972 OF 2013

UNION OF INDIA ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL & ANR. ... RESPONDENT(S)

WITH

REVIEW PETITION (C)NO.198 OF 2014

CIVIL APPEAL NO.10972 OF 2013

NIVEDITA MENON AND ORS. ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL & ANR. ... RESPONDENT(S)

WITH

REVIEW PETITION (C)NO.202 OF 2014

CIVIL APPEAL NO.10972 OF 2013

SHYAM BENEGAL ... PETITIONER(S)

VERSUS

NAZ FOUNDATION AND ORS. ... RESPONDENT(S)2

WITH

REVIEW PETITION (C)NO.211 OF 2014

CIVIL APPEAL NO.10972 OF 2013

RATNA KAPUR AND ORS. ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL AND ANR. ... RESPONDENT(S)

WITH

REVIEW PETITION (C)NO.219 OF 2014

CIVIL APPEAL NO.10972 OF 2013

MINNA SARAN AND ORS. ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL AND ORS. ... RESPONDENT(S)

WITH

REVIEW PETITION (C)NO.221 OF 2014

CIVIL APPEAL NO.10972 OF 2013

SHEKHAR SESHADRI AND ORS. ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL AND ORS. ... RESPONDENT(S)

WITH

R.P.(C)NOS.222-233 OF 2014

CIVIL APPEAL NOS.10972, 10974, 10986, 10981, 10984,

10973, 10985, 10976, 10980, 10977, 10978

AND 10979/2013

VOICES AGAINST SECTION 377 ... PETITIONER(S)

VERSUS

SURESH KUMAR KOUSHAL AND ORS. ... RESPONDENT(S)3

O R D E R

Delay condoned.

Application for Oral hearing is rejected.

We have gone through the Review Petitions and the

connected papers. We see no reason to interfere with the order

impugned. The Review Petitions are, accordingly, dismissed.

.............................J.

(H.L. DATTU)

............................J.

(SUDHANSU JYOTI MUKHOPADHAYA)

NEW DELHI;

JANUARY 28, 20144

CHAMBER MATTER SECTION XIV

S U P R E M E C O U R T O F I N D I A

RECORD OF PROCEEDINGS

REVIEW PETITION (C) NO(s). 41-55 OF 2014 IN CIVIL APPEAL

NO.10972 OF 2013

NAZ FOUNDATION Petitioner(s)

VERSUS

SURESH KUMAR KOUSHAL & ORS. Respondent(s)

(With appln(s) for stay,oral hearing)

WITH R.P.(C)NO.197/2014 IN C.A.NO.10972/2013

(With appln.(s) for directions and office report)

WITH R.P.(C)NO.198/2014 IN C.A.NO.10972/2013

(With appln.(s) for exemption from filing c/c of the impugned

judgment and stay and oral hearing)

WITH R.P.(C)NO.202/2014 IN C.A.NO.10972/2013

(With appln.(s) for oral hearing and stay)

WITH R.P.(C)NO.211/2014 IN C.A.NO.10972/2013

(With appln.(s) for exemption from filing c/c of the impugned

judgment)

WITH R.P.(C)NO.219/2014 IN C.A.NO.10972/2013

(With appln.(s) for oral hearing, stay and c/delay)

WITH R.P.(C)NO.221/2014 IN C.A.NO.10972/2013

(With appln.(s) for oral hearing, stay and c/delay)

WITH R.P.(C)NOS.222-233/2014 IN C.A.NO.10972, 10974, 10986,

10981, 10984, 10973, 10985, 10976, 10980, 10977, 10978 AND

10979/2013

(With appln.(s) for exemption from filing c/c of the impugned

judgment, permission to file synopsis and list of dates and

permission to file addl.documents and exemption from filing

O.T. and oral hearing)

Date: 28/01/2014 These Petitions were circulated today.5

CORAM :

HON'BLE MR. JUSTICE H.L. DATTU

HON'BLE MR. JUSTICE SUDHANSU JYOTI MUKHOPADHAYA

By Circulation

UPON perusing papers the Court made the following

O R D E R

Delay condoned.

Application for oral hearing is rejected.

The Review Petitions are dismissed, in terms of the

signed order.

(G.V.Ramana) (Vinod Kulvi)

Court Master Asstt.Registrar

(signed order is placed on the file)

__._,_.___

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Chartered Accountant Finance

Wednesday, January 29, 2014

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