Service Tax on Rent-A-Cab Service – A Guide
Manoj Agarwal1. Definition and Scope of Rent-A-Cab Service
1.1 What is Rent- A-Cab Service?
Rent-A-Cab Service means renting of any motor vehicle designed to carry passengers!!!
1.2 What??? I haven't heard or read such a definition anywhere?
Correct, but let me explain – As per Finance Act, 1994 the relevant definitions contained in Section 65 are as follows:
Section 65(105)(o) – 'taxable service' means any service provided or to be provided "to any person, by a 'rent-a-cab scheme operator' in relation to the renting of a cab."
Section 65(91) – "rent-a-cab scheme operator means any person engaged in the business of renting of cabs."
Section 65(20) – "Cab means –
(i) a motorcab, or
(ii) a maxicab, or
(iii) any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward:
Provided that the maxicab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab."
Provided that the maxicab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab."
Section 65(71) read with Section 2(25) of Motor Vehicle Act, 1988, "motor cab means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward."
Section 65(70) read with Section 2(22) of Motor Vehicle Act, 1988, "maxi cab means any motor vehicle constructed or adapted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward."
Section 65(73) read with Section 2(28) of Motor Vehicle Act, 1988, "motor vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding thirty-five cubic centimetres."
However, as per Notification No. 20/2012-ST dated 05-06-2012, the provisions of Section 65 shall not apply with effect from 01-07-2012. It means, in the Negative List regime, the definitions contained in Section 65 are no longer applicable for service provided or agreed to be provided on or after 01-07-2012. The new definitions are contained in section 65B of the Finance Act, 1994 which do not define 'Rent-A-Cab' or any similar service.
1.3 How rent-a-cab service has been defined at Answer to Q. 1.1 above?
For the purposes of abatement and reverse charge mechanism, the service of 'renting of motor vehicle designed to carry passengers' has been specifically provided. And as per rules of interpretations under section 66F(2), where a service is capable of differential treatment for any purpose based on its description, the most specific description shall be preferred over a more general description. So, the definition given at answer to Q.1 is not the statutory definition, but adopted for the sake of convenience to name such specific description. Also for payment of tax, the accounting code '00440048' of rent a cab operator service is the most appropriate code for such service.
1.4 Who are covered under rent-a-cab service?
Any person providing service of 'renting' of motor vehicle designed to carry 'passengers', which is not covered under the negative list u/s 66D and also not exempted vide Notification No.25/2012-Service Tax, dated the 20th June, 2012 is covered in the description of rent-a-cab service. It can be clearly seen that renting of any motor vehicle (and not just a cab/taxi) is included. It means it includes renting of motor cars, motor cabs, maxi cabs, mini buses, buses and all other motor vehicles which are designed to carry passengers, irrespective of its passenger carrying capacity. The more meaningful description of this service could be 'Rent-A-Passenger Vehicle Service' which is not provided in the listed services. Also note that the vehicles like truck, trailer, dumper, etc designed to carry goods are not covered by this description.
It is pertinent to mention that as per declared service u/s 66E(f), the levy of service tax is attracted on transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods. This is because any transfer of right to use goods is considered as 'deemed sale' as per Article 366(29A) of the Constitution of India and the Central Government is not empowered to levy service tax on such transactions. However, almost all the state governments have levied VAT on such deemed sale. It means that any such activity of renting, hire, lease, licence, etc would attract service tax or VAT, which are mutually exclusive, depending on transfer of right to use as per facts and circumstances of each transaction and based on judicial precedents.
The Hon'ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. held that 'transfer of right to use goods' involves transfer of possession and effective control over such goods, but mere transfer of custody along with permission to use or enjoy such goods, per se, does not lead to transfer of possession and effective control. This being a completely different and vast subject in itself, the author does not wish to elaborate more of it here.
1.5 What is the meaning of 'renting'?
As per Section 65B(41), "renting means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in an immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of immovable property."
The term renting has been defined above in the context of renting of immovable property and the same definition can't be imported to interpret 'renting of motor vehicle'. Hence, renting has to be given its general and common usage meaning in the context of motor vehicles. The meaning of 'rent' as per Oxford Dictionary is: (i) "Pay someone for the use of (something, typically property, land, or a car)." (ii) "A sum paid for the hire of equipment."
1.6 Whether ownership of the vehicle is a pre-requisite?
No. Even the erstwhile statutory definition of 'rent-a-cab scheme operator' uses the words 'renting of cabs' and does not stipulate that the cab must be owned by the operator.
a) In case of Transport Solutions Group Vs. CCE (2006), the Tribunal, Mumbai held that there is no requirement for a rent-a-cab scheme operator to own the vehicles which are rented out.
b) In case of Ghanshyam Transport Vs. CCE (2009), it was held that if a person is engaged in business of engaging taxis for customers and giving them services without even owning or plying vehicle, service tax is payable under 'Rent-a-cab scheme operators' service.
In the negative list regime, any service other than in negative list or exempted is a taxable service. An operator can take a vehicle on rent and then rent it out to a third party; he will be treated as a rent-a-cab operator. Similarly, the owner of the vehicle in such situation will also be treated as rent-a-cab operator when he renders service of renting of motor vehicles.
1.7 Whether service tax is attracted when the customer hires the vehicle on per KM rate basis, agreeing to some minimum fare and where the driver as well as the fuel is provided by the service provider?
Prior to 01-07-2012, i.e. in the positive list approach of taxation, various courts held that such services are in the nature of 'transportation service' provided to the customer wherein neither the possession, not the control has been given to the customer and service tax not attracted.
a) In the case of Kuldip Singh Gill Vs. CCE [2006(3) STR 689], [STO-2005-CESTAT-324] has observed that the vehicle running on Kilometre basis are not liable to service tax.
b) In the case of RS Travels Vs. CCE [2008 (12) STR 27] [(2008) 15 STT 437 (New Delhi – CESTAT)], where the Tribunal observed that the cab operator providing cab with driver for going from one place to another either on Kilometre basis or lump sum basis based on the distance is that of a transportation service and observed that no service tax is payable as the control over the vehicle is with the rent-a-cab operator. Similar view was taken in the case of Surya Tours & Travels Vs. CCE [2008 (10) TMI 123 – CESTAT, NEW DELHI].
c) Further, in the case of Cochin International Airport Prepaid Taxi Operators Co-op society [2008 (16) STT 190], the Tribunal held that a co-operative society formed by taxi drivers playing to and for airport cannot be considered as operating tours in a tourist vehicle for purpose of levy of service tax.
However, all these judgement are with respect to 'rent a cab scheme operator' service which had a statutory definition u/s 65(91) and is no more applicable in the negative list regime. In author's view, all such services which were earlier termed as 'transportation service' are now liable to service tax as rent-a-cab service.
2. NEGATIVE LIST
2.1 What types of Rent-A-Cab services are not taxable?
The service of transportation of passengers with or without accompanied belongings by a stage carriage; and metered cabs, radio taxis or auto rickshaws are covered in the negative list, hence not taxable.
As per Section 65B(40) "stage carriage means a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey"
As per Section 65B(32) "metered cab means any contract carriage on which an automatic device, of the type and make approved under the relevant rules by the State Transport Authority, is fitted which indicates reading of the fare chargeable at any moment and that is charged accordingly under the conditions of its permit issued under the Motor Vehicles Act, 1988 (59 of 1988) and the rules made there under"
The term 'radio taxi' has neither been defined in the Finance Act, 1994 nor in the Central Excise Act, 1944 or in any rules framed there under. However, the intention could be to exempt radio taxis operated by operators who obtained licence under any scheme, in this behalf, framed by the state government u/s 74 and other provisions of the Motor Vehicle Act, 1988. In general, but not necessarily, the main features of radio taxis are:
- The vehicle should be fitted with electronic fare meters on the front panel.
- The vehicle should be fitted with GPS/GPRS based tracking devices which must be in constant communication with the Central Control unit while the vehicle is on duty.
- The vehicle should be equipped with a mobile radio fitted in the front panel for communication between driver and the main control room of the licensee.
- On the roof of the vehicle there should be an LCD board to display that the vehicle is a radio taxi.
- The scheme may provide for minimum fleet size, say 100 cabs for making application for licence under the scheme.
- The scheme may also prescribe the manner in which the fare is to be charged.
3. EXEMPTION
3.1 Whether ambulance service provided by hospitals is exempted?
Yes, as per entry no. 2 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, health care services, which include services by way of transportation of patient to and from a clinical establishment is exempted. Also, as per clarification given by CBEC vide Letter F. No. 334/1/2007- TRU dated 28-02-2007, ambulances are not meant for carrying passengers for hire or reward. Hence, service tax liability does not arise on renting of ambulances.
3.2 Whether services provided to an educational institution including schools, colleges and universities by way of transportation of students, faculty or staff is exempted?
Yes, as per entry no. 9 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, auxiliary educational services, which include services relating to transportation of students, faculty or staff of such institution is exempted.
3.3 Whether services provided by an educational institution including schools, colleges and universities by way of transportation of students, faculty or staff is exempted?
The exemption was given under the above entry no. 9 which has been withdrawn w.e.f. 01-04-2013. However, as per entry no. 23 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, service of transport of passengers, with or without belongings, by a contract carriage for the transportation of passengers, excluding tourism, conducted tour, charter or hire is also exempted.
As per section 2(7) of the Motor Vehicles Act, a "contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether express or implied, for the use of such vehicle as a whole for the carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorized by him in this behalf on a fixed or an agreed rate or sum–
a) On a time basis, whether or not with reference to any route or distance; or
b) From one point to another;
And, in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes
a) A maxi cab; and
b) A motor vehicle notwithstanding that separate fares are charged for its passengers."
The essential ingredient of a contract carriage is that it plies under a contract for a fixed set of passengers, and does not allow any other passenger to board or alight from the carriage at will. The transportation service provided by educational institutions is in the nature of contract carriage and hence exempted. Moreover, this exemption is not restricted to educational institutions but can be availed by any 'contract carriage'.
3.4 Whether any other exemption is also available?
As per entry no. 22 of mega exemption Notification No. 25/2012-ST dated 20-06-2012, services by way of giving on hire – (a) to a state transport undertaking (as defined in section 2(42) of Motor Vehicle Act, 1988), a motor vehicle meant to carry more than twelve passengers; (b) to a goods transport agency, a means of transportation of goods; is exempted.
4. REVERSE CHARGE MECHANISM
4.1 When is Reverse Charge Mechanism – RCM applicable for Rent-A-Cab Service?
As per Section 68(2) of the Finance Act, 1994, the Central Government is empowered to notify such services on which the liability of pay service tax shall be on the service receiver to the extent specified, instead of service provider. The Central Government has issued Notification No. 30/2012-ST dated 20-06-2012 and RCM is also applicable on Rent-A-Cab service if all the following conditions are fulfilled:
5. Illustrations under various situations to show whether reverse charge mechanism is applicable or not, assuming that both the service provider and service receiver are located in the taxable territory.
6. ABATEMENT
6.1 When is abatement available for Rent-A-Cab Service?
As per Sr. No. 9 of Notification No. 26/2012-ST dated 20-06-2012, abatement of 60% is available on Rent-A-Cab Service i.e. service of renting of any motor vehicle designed to carry passengers. It means service tax is payable on only 40% of the value of Rent-A-Cab service. The abatement is subject to the condition that the Cenvat Credit of inputs, capital goods and input services, used for providing the taxable service, has not been taken under the provisions of Cenvat Credit Rules, 2004. If the service provider avail cenvat credit on any input, capital good or input service, used for providing rent a cab service, then abatement is not available.
7. CENVAT CREDIT
7.1 Whether Cenvat Credit is available on Rent-A-Cab Service?
The Hon'ble Karnataka High Court in the case of CCE Vs. Stanzen Toyotetsu India (P) Ltd. [(2011) 32 STT 244 (Kar.)] held that the transportation/Rent-a-Cab service is provided by the assessee to their employees in order to reach their factory premises in time which has a direct bearing on manufacturing activity. In fact, the employee is also entitled to conveyance allowance which would form part of his condition of service. Therefore, by no stretch of imagination it can be construed as a welfare measure by denying the availment of Cenvat credit to the assessee for providing transportation facilities as a basic necessity which has a direct bearing on the manufacturing activity. This decision was again followed by the same court in the case of CCE Vs. Tata Auto Comp Systems Ltd. CEA No. 132 of 2009.
But, w.e.f. 01-04-2011, the Central Government has amended the definition of 'input service' under Rule 2(l) of Cenvat Credit Rules, 2004 vide Notification No. 3/2011 – CE(NT) dated 01-03-2011 and again vide Notification No. 18/2012 – CE(NT) dated 17-03-2012 (w.e.f. 01-04-2012). The effect of the amendment is that rent-a-cab service has been specifically excluded from the definition of 'input service' and hence cenvat credit is generally not available. Cenvat Credit is available only when rent a cab service could be related to a motor vehicle which is capital good for them. In other words, when a motor vehicle designed to carry passengers including their chassis, registered in the name of provider of service, when used for provided output service of- (i) transportation of passengers; or (ii) renting of such motor vehicle; or (iii) imparting motor driving skills, then cenvat credit can be availed.
8. EFFECTIVE RATE OF SERVICE TAX
8.1 What is the effective rate at which service tax is payable by Service Provider?
8.2 What is the effective rate at which service tax is payable by Service Receiver?
The service receiver shall pay service tax @ 4.944% (i.e. 12.36% of 40% Value) only when reverse charge is applicable. His liability to pay service tax is not affected by cenvat credit availed or not availed by the service provider. When RCM is not applicable, service receiver is not required to pay any tax.
9. Below is the Flow Chart of effective rate of service tax payable by service provider and service recipient under various situations:
POINTS TO NOTE:
1. When the service provider has not availed any cenvat credit, i.e. when abatement is available, then the service tax is payable @ 4.944% either by provider or receiver depending of applicability of RCM.
2. When the service provider has availed any cenvat credit, i.e. when abatement is not available, then the total service tax is payable @ 12.36% by provider or jointly with receiver depending of applicability of RCM.
3. As far as service receiver is concerned, he shall pay @ 4.944% only, irrespective of abatement, only when RCM is applicable.
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Manoj Agarwal, Service Tax Consultant,
Ganpati Campus, Lal Building Road,Rourkela – 769012
E:Mail: ServiceTaxExpert@yahoo.com
IT: While determining taxable profits, assessee's claim for deduction in respect of foreign buyer's agent commission was to be allowed
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[2014] 41 taxmann.com 422 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax -I
v.
Vishal Janakkumar Agarwal*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
TAX APPEAL NO. 550 OF 2011†
OCTOBER 22, 2012
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Commission] - Whether while determining taxable profits, assessee's claim for deduction in respect of foreign buyer's agent commission was to be allowed - Held, yes [Para 3] [In favour of assessee]
Manav A. Mehta for the Appellant.
ORDER
Akil Kureshi, J. - Revenue is in appeal against the Income-tax Appellate Tribunal dated 22-10-2010. Following question has been framed for our consideration for assessment year 2004-05 :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in deleting disallowance of Rs.42,07,936/- out of the claim made by the assessee under the head foreign buyer's agent commission under section 37 of the Income-tax Act, 1961?"
2. Though it is true that in Tax Appeal No.1346 of 2010, a somewhat similar question is pending before this Court, however, counsel for the revenue candidly pointed out that similar question in case of another assessee came up for consideration before this Court, in which this Court rejected the revenue's appeal, making following observations :
'3. Question No.1 pertains to amount of Rs.58.08 lacs (rounded off) disallowed by the Assessing Officer where assessee had claimed deduction of agency commission to foreign agent. In appeal, CIT(A) confirmed the addition. The assessee carried the issue further before the Tribunal. The Tribunal by the impugned order deleted the addition primarily holding that the assessee received only the net amount i.e. a gross bill amount less the agent's commission. He was, therefore, of the opinion that the assessee was entitled to such deduction. The Tribunal recorded that there is no dispute regarding the commission paid by the assessee. The foreign buyer had stated that commission would be distributed to the agents abroad. The Tribunal, therefore, concluded that in the present case, the export sale proceed received by the assessee was of net amount and not the gross amount. The Tribunal, therefore, was of the opinion that even if the assessee had not paid to the foreign buyer any amount by way of commission directly, but there was an adjustment of such amount through the export invoices which reflected such commission / discount. The Tribunal, therefore, observed as under :
"14. When the factum of actual receipt of sale proceeds to the extent of net invoice amount is established beyond any doubt, there is no justification in overlooking upon those speaking facts on the technical ground that the assessee has claimed the DEPB benefit on the gross amount of the invoice. The DEPB claim was made by the assessee on the basis of permission granted by the RBI and that has nothing to do with the actual amount of export sales proceeds received by the assessee in the form of convertible foreign exchange.
15. Therefore, it is quite obvious without much discussion and deliberation that the revenue has no case to hold the assessee responsible for an additional income of Rs.58,08,755/-. The said addition is accordingly deleted. Our above view also finds support from the decision of this Tribunal in the case of Shri Sanjay Jain v. Dy. CIT in ITA No.1533/Ahd/2008 for assessment year 2004-05 order dated 16-12-2009."
4. We are of the view that the Tribunal committed no error. The revenue has not been able to establish that the assessee received any payment in excess of the invoiced amounts which did not indicate the receipt of a gross, but the net amount after adjustment of foreign buyer commission. We are of the opinion that no question of law, therefore, arises. Such questions have been considered by this Court previously and not entertained.'
3. Without recording separate reasons, this tax appeal is also dismissed.
SUNIL*In favour of assessee.
†Arising out of order of ITAT, dated 22-10-2010.
IT: Question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant only when income of trust is being assessed in terms of section 11, however, at time of disposing of application of a trust seeking registration, Commissioner has to merely decide whether said trust has fulfilled necessary requirements of registration as provided under section 12A
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[2014] 42 taxmann.com 181 (Gujarat)
HIGH COURT OF GUJARAT
Commissioner of Income-tax, Rajkot -II
v.
Leuva Patel Seva Samaj Trust*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
TAX APPEAL NO. 59 OF 2012
NOVEMBER 6, 2012
Section 12AA, read with sections 11 and 13, of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure [Scope of power] - Assessee, a public charitable trust, applied for registration under section 12AA - Commissioner rejected said application holding that trust was for benefit of Leuva Patel Community and, therefore, it would be covered under section 13(1)(b) - Tribunal, however, allowed assessee's application - Whether question as to whether trust is created or established for benefit of any particular religious community or caste would be relevant when income of trust is being assessed in terms of section 11 - Held, yes - Whether insofar as section 12AA is concerned, Commissioner has to merely decide if trust has fulfilled necessary requirements of registration as provided under section 12A - Held, yes - Whether in view of above, impugned order passed by Tribunal was to be upheld - Held, yes [Para 4][In favour of assessee]
CASES REFERRED TO
Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) (para 3) and Shantagauri Ramniklal Trust v. CIT [1999] 239 ITR 528(para 4).
Pranav G. Desai for the Appellant.
ORDER
Akil Kureshi, J. - The appellant-revenue is in appeal against the judgment of the Income-tax Appellate Tribunal ("the Tribunal" for short), dated 8-7-2011. Following question has been framed for our consideration:
"Whether in the facts and circumstances of the case, the learned ITAT has erred in law in directing the Commissioner of Income-tax to grant the assessee registration under section 12AA of the Income-tax Act 1961?"
2. The question arises in following factual background. The respondent, a Public Charitable Trust had applied for registration under section 12AA of the Income-tax Act, 1961 ("the Act" for short). The Commissioner, however, under his order dated 21-3-2011, rejected such an application on the ground that under section 13(1)(b) of the Act, nothing contained in section 11 or 12 would operate to exclude from the total income of such trust in case the trust is created or established for the benefit of any particular religious community or caste. The Commissioner after examining the objects of the trust, came to the conclusion that the trust was for the benefit of Leuva Patel Community and therefore, would be covered under section 13(1)(b) of the Act.
3. In appeal before the Tribunal, the Tribunal reversed the decision of the Commissioner. The Tribunal referred to several decisions including the decision of the Supreme Court in the case of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704. The Tribunal also examined the objects of the trust and observed as under:
"7. From the above clauses of the Trust Deed, any adult person after paying prescribed fees can become a member of the said trust. This trust will perform without any discrimination in Leuva Patel caste and will follow non-political and secular objects of the trust. The first object of the trust is to carry out activities for the purpose of development and improvement of the education. The ITAT, Ahmedabad Bench in case ofLeuva Patel Nutan Kelwani Mandal v. ITO, 12 ITD 276 (Ahd.) on identical set of facts held that the case of the assessee could not brought within the provisions of section 13(1)(b) in view of the Explanation 2 to the said section. Apart from this, it was also held that the Leuva Patel community consists mainly of agriculturists. Such community cannot be dubed as religious community or caste as had been held by the Income-tax Authorities.
I also found that in the case of dissolution of the trust the accumulated fund or capital will not be distributed for personal benefit but it will be handing over to the other institution having similar object. In the light of the above discussion, I find that the facts of the case are identical to the facts in the case of Leuva Patel Nutan Kelwani Mandal v. ITO, 12 ITD 276 (Ahd.). I follow the same and in the light of that, the CIT is directed to allow the registration u/s. 12AA of the Act."
4. Having thus heard the learned counsel for the revenue, we are of the opinion that the question whether the trust is created or established for the benefit of any particular religious community or caste would be relevant when the income of the trust is being assessed and the question whether such income should be excluded from the total income of the trust in terms of section 11 of the Act. Insofar as section 12AA of the Act is concerned, the Commissioner had to take a decision if the trust fulfilled necessary requirements of registration as provided under section 12A of the Act. A Division Bench of this Court in the case of Shantagauri Ramniklal Trust v. CIT [1999] 239 ITR 528, in this context, observed as under :
"While considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fulfilled, the exemption must follow whether registration is accorded or not."
5. In view of the above conclusive opinion of a Division Bench of this Court, we do not see any reason to interfere. Tax Appeal is, therefore, dismissed.
SUNIL [2008] 170 TAXMAN 612 (SC)
SUPREME COURT OF INDIA
Assistant Commissioner of Income-tax
v.
Surat City Gymkhana *
ASHOK BHAN AND DALVEER BHANDARI, JJ.
CIVIL APPEAL NOS. 4305 AND 4306 OF 2002
MARCH 4, 2008
Section 12A of the Income-tax Act, 1961 - Charitable or religious trust - Registration of - Assessment years 1991-92 and 1992-93 - Whether registration under section 12A is a fait accompli to hold Assessing Officer back from further probe into objects of trust - Held, yes
S. Wasim Quadri, Jubair Ahmed Khan, Vikram Gulati and B.V. Balaram Das for the Appellant. H.A. Raichura for the Respondent.
JUDGMENT
1. The respondent-assessee claimed exemption under section 10(23) of the Income-tax Act, 1961, for the assessment years 1991-92 and 1992-93. The said exemption was claimed on the basis that the objects of the respondent-assessee are exclusively charitable. The Assessing Officer rejected the claim. The appeals filed before the Commissioner of Income-tax (Appeals) were also dismissed. Aggrieved thereby, the assessee filed further appeals before the Income-tax Appellate Tribunal ('the Tribunal'). The Tribunal, by order dated 20-1-2000, allowed the appeals filed by the respondent-assessee. The appellant filed appeals before the High Court of Gujarat. The revenue claimed that the following two substantial questions of law arise from the order of the Tribunal :
"(A)Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that the objects of the trust restricting benefit to the members of the club would fall within the purview of the act of 'general public utility' under section 2(15) of the Income-tax Act constituting as a section of public and not a body of individuals ?
(B)Whether, on the facts and circumstances of the case, the Income- tax Appellate Tribunal was justified in law in holding that registration under section 12A was a fait accompli to hold the Assessing Officer back from further probe into the objects of the trust ?"
2. By the impugned order, the High Court dismissed the appeals, in limine, relying on a decision of the same court in the case of Hiralal Bhagwati v. CIT [2000] 246 ITR 188 , holding that the questions raised in the appeals are covered by the aforesaid decision.
3. Being dissatisfied by the order of the High Court, the revenue has filed these appeals.
4. This Court, on 22-7-2002, granted leave in respect of question No. 'B' only. The appeals were not entertained in respect of question No. 'A' and it was noted that the appeals were rightly dismissed by the High Court insofar as question No. 'A' is concerned as the appellant did not challenge the correctness of the judgment in the case of Hiralal Bhagwati (supra).
5. On a perusal of the judgment of the Gujarat High Court in the case of Hiralal Bhagwati (supra ), we now find that, question No. 'B' is also concluded by the said judgment [refer to the 1st paragraph of page 196]. Since the revenue did not challenge the decision in the said case, the same has attained finality. Question No. 'B', therefore, is to meet the same fate as question No. 'A' as this Court had declined to grant leave in respect of question No. 'A' on the ground that the revenue did not challenge the correctness of the decision in the case of Hiralal Bhagwati (supra). It appears that the fact, that question No. 'B' was also covered by the aforementioned judgment, was not brought to the notice of their Lordships and, therefore, leave granted was restricted to question No. 'B'.
6. In this view of the matter, these appeals deserve to be dismissed. Ordered accordingly.
7. No costs.
UOI vs. Tata Chemicals Ltd (Supreme Court)
S. 244A: Deductor entitled to interest on refund of excess TDS from date of payment
The assessee made an application u/s 195(2) for permission to remit technical service charges and reimbursement of expenses to a foreign company without deduction of tax at source. The AO passed an order directing the assessee to deduct TDS at the rate of 20% before making remittance. The assessee effected the deduction and filed an appeal before the CIT(A) in which it claimed that the said remittance was not subject to TDS. The CIT(A) upheld the claim with regard to the reimbursement of expenses with the result that the TDS thereon was refunded to the assessee. However, the AO declined to grant interest u/s 244A on the said interest by relying on Circular Nos 769 dated 06.08.1998 and 790 dated 20.4.2000 issued by the CBDT. The CIT(A) upheld the AO's stand though the Tribunal and High Court upheld the assessee's stand. On appeal by the department to the Supreme Court HELD dismissing the appeal:
(i) A "tax refund" is a refund of taxes when the tax liability is less than the tax paid. When the said amount is refunded it should carry interest in the matter of course. As held by the Courts while awarding interest, it is a kind of compensation of use and retention of the money collected unauthorizedly by the Department. When the collection is illegal, there is corresponding obligation on the revenue to refund such amount with interest in as much as they have retained and enjoyed the money deposited. Even the Department has understood the object behind insertion of Section 244A, as that, an assessee is entitled to payment of interest for money remaining with the Government which would be refunded. There is no reason to restrict the same to an assessee only without extending the similar benefit to a deductor who has deducted tax at source and deposited the same before remitting the amount payable to a non-resident/ foreign company;
(ii) Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors' lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course;
(iii) The said interest has to be calculated from the date of payment of such tax.
IT : Merely because assessee changed nature of treatment of subsidy received in year 1995 from subsidy account to partner's capital account for accounting purpose, it would not permit revenue to examine taxability of such receipt in assessment year 2004-05 by reassessment proceedings
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[2014] 42 taxmann.com 386 (Gujarat)
HIGH COURT OF GUJARAT
Chimanlal and Sons
v.
Deputy Commissioner of Income-tax*
AKIL KURESHI AND MS. HARSHA DEVANI, JJ.
SPECIAL CIVIL APPLICATION NO. 16846 OF 2011
OCTOBER 8, 2012
Section 28(i), read with section 147, of the Income-tax Act, 1961 - Business income - Chargeable as [Subsidy] - Assessment year 2004-05 - Assessee, engaged in business of texturising of yarn, received subsidy from State Government in year 1995 - Said amount was sanctioned and paid in year 1995 - Since then, such subsidy had been reflected in its balance sheet in subsidy account - During year under consideration, such amount was transferred to partners 'capital account, making reserve and surplus subsidy nil and, correspondingly, partners' capital was increased by such amount - Consequently, assessment was sought to be reopened to examine taxability of such receipt - Whether since no taxable event did arise during year under consideration, merely because assessee changed nature of treatment for accounting purpose, it would not permit revenue to examine taxability of such receipt in assessment year 2004-05 and thus, reassessment lacked validity - Held, yes [Para 10] [In favour of assessee]
FACTS
| ■ | The assessee was engaged in the business of texturising of yarn. The assessee had distributed the subsidy received from the Government in year 1995 among the partners instead of any utilization for business in year 2004-05. | |
| ■ | Assessment for year in which such subsidy was received was sought to be reopened on ground that said subsidy was required to be considered as business income and the taxable income was to be re-computed accordingly. | |
| ■ | On appeal, the assessee submitted that reassessment was not permissible as there was no concealment on the part of the assessee in furnishing truly and fully all material facts and that no taxing event took place during the year under consideration. |
HELD
| ■ | Notice for reopening having been issued beyond a period of four years from the end of relevant assessment year, the requirement that the income chargeable to tax should have escaped assessment, for the failure of the assessee to furnish truly and fully all material facts for assessment, would become relevant. [Para 9] | |
| ■ | Though, in the balance sheet, the assessee did diminish the reserve and surplus state subsidy amount by a sum of Rs. 17,33,554, it was not immediately apparent where this amount was shifted. It is true that such amount was taken into partners capital account but without any specific mention of this amount in the break up given. [Para 9] | |
| ■ | Suffice it to say either on accrued or actual receipt, the taxable event did not arise during the year under consideration. If such subsidy receipt invited tax, the assessee ought to have been taxed at the relevant time in the previous assessment year corresponding to the previous year when such subsidy was paid. In the previous year relevant to assessment year 2004-05, nothing has happened which would permit the department to collect tax on such receipt. Because the assessee changed the nature of treatment for accounting purpose to such subsidy amount received in the year 1995, it would not permit the Revenue to examine the taxability of such receipt in the assessment year 2004-05. Only on this ground, the Assessing Officer's belief that income chargeable to tax during the year under consideration had escaped assessment, lacked validity. [Para 10] |
Tushar P. Hemant and Ms. Vaibhavi K. Parikh for the Petitioner. Manav A. Mehta for the Respondent.
JUDGMENT
Akil Kureshi, J. - Rule. Learned counsel Mr. Manav A. Mehta waives service of notice of Rule on behalf of the respondent.
2. The petition is taken up for final hearing forthwith.
3. The petitioner is a partnership firm and is regularly assessed to tax. The petitioner has challenged a notice dated 28th March 2011 issued by the respondent-Assessing Officer under section 148 of the Income Tax Act, 1961 (hereinafter to be referred to as "the Act") . By such notice, he desired to reopen the assessment of the petitioner for the assessment year 2004-05. At the request of the petitioner, the respondent supplied reasons recorded for such reopening, which read as under:—
"2. In relation to the re-assessment proceedings in your case for the A.Y. 2004-05, the reasons for the re-opening of the proceedings, as recorded earlier during the course of initiation of relevant proceedings, are supplied in detail below:
3. In this case, during the relevant A.Y. 2004-05, the assessee has been engaged in the business of texturising of yarn. It has been found that in the relevant A.Y., the assessee has received subsidy of Rs.17,33,554/- from the Government which has been subsequently distributed among the partners instead of any utilization for business. The return of income in the relevant year has been processed under section 143(1) of the assessee. The aforesaid subsidy of Rs. 17,33,554/- from the Government, which has been subsequently distributed among the partners instead of any utilization for business by the assessee is required to be considered as business income and the taxable income his to be re-computed accordingly.
4. Hence, on the facts of the case, ensuring subsidy of Rs.17,33,554/- has been wrongly distributed amongst the partners instead of being utilized for business purpose. The original assessment has resulted in escapement of such income and consequent short levy of tax and interest the tune of Rs.6,65,445/-. Such an income is liable to be added back to the taxable income for the relevant A.Y.
5. Thus, on the facts of the case, the undersigned is also reasonably satisfied and has the relevant reasons to believe that there has been escapement of income on account of original assessment whereby income chargeable to tax has been assessed at too low a rate, which requires reconsideration and re-assessment. Therefore, on the facts of the case, the case of your concern for A.Y. 2004-05 has been re-opened for reassessment of such income chargeable to tax, which has escaped assessment."
4. The petitioner raised objections to such proposal for reopening under communication dated 20th June 2011. Such objections, however, were rejected by the respondent under order dated 30th August 2011. The petitioner has, therefore, filed this petition challenging such notice of reopening of assessment.
5. From the record, it can be seen that the reopening is proposed beyond a period of four years from the end of relevant assessment year. In the reasons recorded by the Assessing Officer, though it is stated that the assessment of the petitioner for the year under consideration was accepted under section 143(1) of the Act, it is a common ground that such narration is a mere oversight and, in fact, the return was taken in scrutiny and a scrutiny assessment under section 143(3) of the Act was framed. We have, therefore, proceeded on such basis.
6. Mr. Tushar P. Hemani, learned counsel for the petitioner, drawing our attention to the reasons recorded, submitted that the petitioner-assessee had setup a texturising plant. Under the State Subsidy Scheme, it received subsidy of Rs.17,33,554/- at the rate of 30% of the investment in the eligible assets which included the building, plant and machinery. Such subsidy was released under a sanction order dated 5th September 1995 and was paid shortly thereafter. Since then, the petitioner has been reflecting such subsidy in its balance-sheet in the subsidy account. During the year under consideration, such amount was transferred to the partners' capital account. The subsidy account was reduced by such amount, that is, Rs.17,33,554/-, making the reserve and surplus subsidy nil. Correspondingly, the partners' capital was increased by such amount making a grand total of Rs.71,12,365/- as on 31st March 2004. He, however, did agree that in the partners' capital, the breakup of transfer of reserve and surplus state subsidy amount of Rs.17,33,554/- was not specifically mentioned.
7. Be that as it may, counsel challenged the impugned notice on the following contentions:-
7.1 That there was no concealment on the part of the petitioner in furnishing truly and fully all material facts. Reopening for assessment beyond a period of four years from the end of relevant assessment year was not permissible.
7.2 No taxing event took place during the year under consideration. The petitioner had received such subsidy of Rs. 17,33,554/- way back in the year 1995.
The income if at all accrued and was actually received thus nearly ten years back.
7.3 Counsel submitted that mere accounting entry would not make such sum exigible to tax, that too during the year under consideration. The subsidy was given for having set up the plant and machinery, the cost for which the petitioner had already incurred. Diverting such amount for the business of the partnership, therefore, did not make any change insofar as the taxability is concerned.
7.4 Counsel also submitted that the subsidy was a capital receipt in the nature. The same was, even otherwise, not taxable.
8. On the other hand, learned counsel Mr. Manav A. Mehta for the Department opposed the petition contending that the petitioner did not disclose truly and fully all material facts. The partners' capital in the balance sheet did not indicate the transfer of such sum of Rs.17,33,554/-. When such amount was distributed amongst the partners, petitioner was liable to pay tax on the same.
9. Notice for reopening having been issued beyond a period of four years from the end of relevant assessment year, the requirement that the income chargeable to tax should have escaped assessment, for the reasons of the assessee to fail to furnish truly and fully all material facts for assessment, would become relevant. In the present case, however, we are not inclined to terminate the proceedings on the ground that there was no such failure on the part of the petitioner. This we record because though, in the balance sheet, the petitioner did diminish the reserve and surplus state subsidy amount by a such sum of Rs.17,33,554/-, it was not immediately apparent where this amount was shifted. It is true that, as pointed out by the counsel for the petitioner, such amount was taken into partners' capital account but without any specific mention of this amount in the break up given. Without, therefore, basing our conclusion on the question of failure on the part of the petitioner to disclose truly and fully all material facts, we are inclined to consider the question whether the notice was otherwise valid on the basis of the reasons recorded. In this context, we would examine whether the Assessing Officer could form a reasonable belief that income chargeable to tax have escaped assessment.
10. In this respect, we find that admittedly the petitioner received subsidy from the State Government at the rate of 30% of the investment in the eligible assets which included building, plant and machinery. Such amount was sanctioned and paid in the year 1995. We are not called upon to decide whether such receipt of subsidy was taxable or, as contended by the petitioner being in the nature of capital receipt, was not exigible to tax. Suffice it to say either on accrued or actual receipt, the taxable event did not arise during the year under consideration. If such subsidy receipt invited tax, the petitioner ought to have been taxed at the relevant time in the previous assessment year corresponding to the previous year when such subsidy was paid. In the previous year relevant to assessment year 2004-05, to our mind nothing has happened which would permit the department to collect tax on such receipt. Because the petitioner changed the nature of treatment for accounting purpose to such subsidy amount received in the year 1995, would not permit the Revenue to examine the taxability of such receipt in the assessment year 2004-05. Only on this ground, we hold that the Assessing Officer's belief that income chargeable to tax during the year under consideration had escaped assessment, lacks validity.
11. In the result, impugned notice dated 28th March 2011 is hereby quashed. Rule is made absolute accordingly with no order as to costs.
IT : Where Assessing Officer issued notice seeking to reopen assessment on wrong address and person alleged to be an employee of assessee was not authorized to receive notice, presumption of service of notice under section 292BB would not be attracted and, therefore, impugned additions made in reassessment proceedings deserved to be set aside
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[2014] 42 taxmann.com 387 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
Dr. Ajay Prakash*
SUNIL AMBWANI AND SURYA PRAKASH KESARWANI, JJ.
IT APPEAL NO. 551 OF 2009†
SEPTEMBER 12, 2013
Section 292BB, read with sections 148 and 282 of the Income-tax Act, 1961 - Notice - Deemed to be valid in certain circumstances [Conditions precedent] - Assessment year 1998-99 - Assessing Officer issued notice to assessee under section 148 - Assessee did not appear in proceedings - Assessing Officer considered service to be sufficient are thereafter made various additions - Tribunal noted that notice was sent on wrong address and person alleged to be an employee of assessee was not authorized to receive notice - Tribunal thus opined that presumption of service of notice under section 292BB would not be attracted - Accordingly, additions made in reassessment proceedings were deleted - Whether finding recorded by Tribunal being a finding of fact, no substantial question of law arose therefrom - Held, yes [Para 7] [In favour of assessee]
Shambhu Chopra for the Appellant. Rahul Agarwal for the Respondent.
ORDER
1. We have heard Sri Shambhu Chopra for the appellant-department. Sri Rahul Agrawal appears for respondent-assessee.
2. This Income-tax Appeal under Section 260-A of the Income Tax Act 1961 is directed against the judgment and order of the Income tax Appellate Tribunal, Agra Bench, Agra dated 23.04.2009 in ITA No. 428/Agr/2007 for the Assessment year 1998-99.
3. The assessee-appellant has raised the following substantial questions of law for consideration:—
| " 1. | Whether Hon'ble ITAT was legally correct in quashing the assessment order holding that there was no valid evidence of proper service of notice u/s 148 of IT Act ignoring that the notice was issued within prescribed time as required u/s 149 of the IT Act and properly served by the Income Tax Inspector and also through the speed post?. | |
| 2. | Whether the Hon'ble ITAT was legally correct in holding that the notice u/s 148 was not issued on the last known address of the assessee ignoring that there exists minor mistake/difference in the address i.e. there should have been 49 Old Vijay Nagar colony in place of 49, North Vijay Nagar Colony and such minor mistake cannot make the notice invalid as per the provision of Section 292 BB of IT Act 1961? | |
| 3. | Whether the Hon'ble ITAT was legally correct in holding that unless a particular person is authorized to receive a notice as his/assessee's agent, any notice served upon and received by him would not bind the assessee ignoring the Rule of consistency in assesee's case that factually the notice u/s 148 was served on the person/employee of the assessee as per the past practice on the direction of the assessee i.e. a doctor/professional of well repute who is well known among the citizens of Agra and surrounding districts and also ignoring the position of law that direction/instruction can be given by a person/assessee either orally or in writing?" |
4. The AO issued notice to the assessee u/s 148 of the Act. The assessee did not appear in the proceedings. The AO considered the service to be sufficient thereafter made various additions. The CIT (A) held that notice was sent at the wrong address. Sri Mahesh on whom the notice was allegedly served was not an employee of the assessee. The Tribunal found that the notice sent by speed post was on wrong address whereas the assessee's correct address was 49 Old Vijay Nagar Colony, Agra and not of 49 North Vijay Nagar Colony Agra, and thus presumption of service of notice by speed post as well as Section 292 BB will not be attracted.
5. It is submitted by Shri Shambhu Chopra that there was a technical defect. The respondent-assessee is a well-known doctor. He managed to return the notices. A small error in the address could not be ground to make the notice under Section 148 of the Act as invalid, and in any case Section 292 BB would be attracted.
6. We have examined the findings and do not find any good reason to disagree with the findings of CIT (A) and ITAT in which they have held that notices were sent at a wrong address. The finding recorded by Tribunal in para 3 of the order is quoted as under:—
"Here we are concerned only with the valid service of a notice issued u/s 148 of the Act. The invalidity of the notice issued under Section 148 renders the entire reassessment proceedings as null and void whereas non service of a notice issued u/s 148 renders the assessment framed as bad in law. in this case there is no doubt that notice u/s 148 was served on an incorrect address and against which the explanation of the department is that the address of the assessee is well known and the Inspector of the department had gone to a correct address to serve this notice, is not tenable in the eyes of the law when the record reveals that the notice was never served upon the assessee. A notice issued u/s 142 (1) was sent back by Shri Alik Farsaiya, the legal consultant on the reasoning that the notice did not belong to any of his clients. Another notice, allegedly, sent and received by Shri Mahesh, the alleged employee of Dr. Ajay Prakash, when it is found that he was not an employee of the assessee, cannot be said to be duly served. The entire records were produced before the ld. CIT (A) and he found the above contention of the assessee to be correct. Unless a particular person is authorized to receive a notice as his agent, any notice served or received by him would not bind the assessee. In this case, nobody participated in the re-assessment proceedings and the objection regarding the service of notice was taken before ld. AO himself. Therefore newly inserted provisions of Section 292-BB would also not help the department. This is trite law that unless a valid notice is served upon the assessee any reassessment framed has to be quashed. In this regard, the binding decision of jurisdictional high court in the case of Madan Lal Agrawal v. CIT 144 ITR 745 (Ald), inter alia, is relevant and can be cited as relevant decision, being that of the jurisdictional High Court. The ld. AO has refrained from sending his comments even in his reply in remand report despite the fact it was sent to him with a specific direction by the ld. CIT (A) and therefore it is confirmed on record that the AO had nothing to say in the matter. Since the notice was not issued on the known address of the assessee and there being no valid evidence of proper service of this notice, the impugned order passed by the ld. AO becomes bad in laws. Therefore, the ld. CIT (A) has correctly quashed the impugned assessment order. Hence, we cannot allow the appeal of the Revenue and the same is hereby dismissed."
7. The findings recorded by the Income-tax authorities that the notice was sent on wrong address and that the person Mahesh alleged to be an employee of assessee was not authorized to receive notice is a finding of fact. We do not find that the questions of law as framed are such that the same are to be admitted.
8. The Income Tax Appeal is dismissed.
SUNIL*In favour of assessee.
†Arising out of order of Tribunal in ITA No. 428/Agr/2007, dated 23-4-2009.
IT : Provisions of sections 147 and 148 are not applicable to block assessment order passed under Chapter XIVB
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[2014] 42 taxmann.com 376 (Chhattisgarh)
HIGH COURT OF CHHATTISGARH
Assistant Commissioner of Income-tax -1
v.
Sunil Kumar Jain*
YATINDRA SINGH, CJ.
AND MANINDRA MOHAN SHRIVASTAVA, J.
AND MANINDRA MOHAN SHRIVASTAVA, J.
TAX CASE NO. 17 OF 2011†
JANUARY 15, 2014
Section 158BC, read with sections 132, 147, 148, 158B and 158BH, of the Income-tax Act, 1961 - Block assessment in search cases - Procedure for [Reassessment] - Block period 1-4-1989 to 17-11-1999 - Whether provisions of sections 147 and 148 are not applicable to block assessment order passed under Chapter XIVB - Held, yes [Para 32] [In favour of assessee]
FACTS
| ■ | The Assessing Officer as a result of search conducted under section 132 upon the assessee passed block assessment order on him. | |
| ■ | Subsequently the Assessing Officer issued on the assessee a notice under sections 147 and 148 for reassessment. Further he passed reassessment order on the assessee. | |
| ■ | On appeal, the Commissioner (Appeals) set aside the reassessment order on the plea that the block assessment could not be reopened under sections 147 and 148. | |
| ■ | On second appeal, the Tribunal held that the provisions of sections 147 and 148 were not applicable to the block assessment order passed under chapter XIVB. It, therefore, dismissed the revenue's appeal. | |
| ■ | On appeal to High Court: |
HELD
| ■ | Chapter XIVB is titled as 'Special procedure for assessment of search cases'. It provides special procedure for assessment under such cases. Under this Chapter, the assessment of many years together and not only one year is done. This is called block period. [Para 15] | |
| ■ | Section 158B is titled as 'Definitions'. It defines block period as well as undisclosed income. [Para 16] | |
| ■ | At the relevant time, Chapter XIVB provided the 'block period' to mean, the previous years relevant to ten assessment years preceding the previous years in which the search was conducted and up to the date of commencement of the search. [Para 17] | |
| ■ | Section 158BH in Chapter XIVB is titled as 'Application of other provisions of this Act'. It applies other provisions of this Act to the block assessment under this chapter. It was necessary to clarify this as this chapter provides a special procedure in case of search for assessing the income for the block period. [Para 18] | |
| ■ | Nevertheless a provision will become applicable by virtue of section 158BH only if it can be applied on its wording to Chapter XIVB. [Para 19] | |
| ■ | Section 147 is titled as 'Income escaping assessment'. It provides that if the Assessing Officer has reason to believe that any income chargeable to the tax has escaped in any assessment year, he could reassess the income subject to fulfilling other conditions mentioned in that section. [Para 22] | |
| ■ | Section 148 is titled as 'Issue of notice where income has escaped assessment'. It provides issuance of notice before making the assessment, reassessment or recomputation under section 147. [Para 23] | |
| ■ | Section 147 uses the words 'in any assessment year'. It does not use the words 'in any assessment year or for any block period'. Had it used the words 'in any assessment year or for any block period', the matter would have been different. [Para 24] | |
| ■ | Often the block assessment is in respect of the years for which the assessment has already been done under the Act. The block assessment is a kind of reassessment on the basis of material found in the search. This is also indicated by first proviso to section 158BC(a). [Para 25] | |
| ■ | Section 158BC is titled as 'Procedure for block assessment'. The first proviso to section 158BC(a) provides that for the purpose of proceedings under Chapter XIVB, no notice under section 148 is required to be issued. [Para 26] | |
| ■ | In case sections 147and 148 are applicable to the block assessment, it will amount to reassessment of the reassessment proceeding. [Para 27] | |
| ■ | Section 147 has not used the word 'the block period'. The reason seems to be simple that the block assessment itself is the reassessment proceedings. There was no necessity for providing reassessment of the reassessment proceedings. [Para 28] | |
| ■ | Therefore, the provisions of sections 147 and 148 are not applicable to the block assessment order passed under Chapter XIVB. [Para 32] | |
| ■ | Therefore, the appeal of the revenue was liable to be dismissed. [Para 33] |
CASE REVIEW
Cargo Clearing Agency (Gujarat) v. Jt. CIT [2008] 218 CTR (Guj.) 541 (para 29) followed.
CIT v. Suresh N Gupta [2008] 297 ITR 322 ITR 322/166 Taxman 313 (SC) (para 20) distinguished.
CIT v. Peerchand Ratanlal Baid (HUF) [2010] 322 ITR 544 (Gau.) (para 29) Dissented from.
CASES REFERRED TO
CIT v. Suresh N Gupta [2008] 297 ITR 322 ITR 322/166 Taxman 313 (SC) (para 14), CIT v.Peerchand Ratanlal Baid (HUF) [2010] 322 ITR 544 (Gau.) (para 14) and Cargo Clearing Agency (Gujarat) v. Jt. CIT [2008] 218 CTR (Guj.) 541 (para 29).
Anand Dadariya for the Appellant. G.N. Purohit and Abhishek Oswal for the Respondent.
JUDGMENT
1. The only question involved in this tax case is,
'Whether sections 147/ 148 of the Income Tax Act, 1961 (the Act) providing for reassessment are applicable to the block assessment under Chapter XIVB of the Act or not.'
It arises in this tax appeal filed under section 260-A of the Act against the order of the Income Tax Appellate Tribunal, Bilaspur Bench, Bilaspur (the Tribunal) dated 22.01.2010 dismissing the appeal filed by the Income Tax Department (the Department) against Shri Sunil Kumar Jain (the Assessee) for the block period 01.04.1989 to 17.11.1999.
THE FACTS
2. The Assessee is a jeweller. A search took place on 17.11.1999 in the residential as well as business premises of the Assessee. Thereafter, a notice under section 158BC of the Act was issued on 10.07.2000. It was served on the Assessee on 29.07.2000.
3. The Assessee filed his return on 11.09.2000 declaring total undisclosed income of Rs. 41,692/-. The Assessing Officer (the AO), by his order dated 30.01.2002, framed the block assessment of Rs. 98,002/-.
4. Aggrieved by the aforesaid order, the Assessee filed a revision under section 264 of the Act. It was partly allowed by the Commissioner of Income Tax, Raipur (the CIT) on 26.03.2002 granting relief of Rs. 15,450/-.
5. Subsequently, the CIT initiated a proceeding under section 263 of the Act and remanded the case back to the AO for re-consideration on 25.03.2004.
6. Aggrieved by the aforesaid order, the Assessee filed an appeal before the Tribunal. It was allowed on 14.01.2005 and order of the CIT dated 25.03.2004 under section 263 of the Act was set aside.
7. Subsequently, a notice under section 148 read with section 158BH of the Act was issued for reassessment on 13.03.2005. This notice was on the basis of same material on which the CIT had passed the order under section 263 of the Act.
8. The Assessee filed a writ petition namely WP(T)-1676 of 2005, challenging the notice under section 148 of the Act. However, no interim order was granted in the writ petition and the assessment proceedings before the AO continued. The AO by his order dated 29.03.2006, assessed the undisclosed income of Rs. 2,96,74,778/-.
9. The Assessee filed an appeal before the Commissioner of Income Tax (Appeals) (the CIT-A). It was allowed on 29.05.2006 and the order of the AO was set aside essentially on the following findings:
| (i) | The block assessment cannot be reopened under sections 147 and 148 of the Income Tax Act; | |
| (ii) | The reasons for re-opening of the assessment are the same for which the action was taken and the order passed under section 263 of the Act. This order has been set aside by the Tribunal and the order of the Tribunal has become final. Now, on the basis of the same material, notice under section 148 of the Act, cannot be issued; | |
| (iii) | The AO has completed the assessment on protective basis, however, there cannot be protective re-opening; | |
| (iv) | The fact that the AO had made protective assessment shows that he was not sure about the income of the Assessee and as such it cannot be said that there was any reason to believe that the income of the Assessee had escaped assessment and the condition precedent for issuing of the notice under section 148 of the Act was not satisfied; | |
| (v) | There was no fresh material and the AO could not to review his own decision as it was impermissible under the law; | |
| (vi) | The notice under section 148 was issued four years after it was first assessable in the block period and the conditions precedent under section 147 of the Act were not fulfilled. | |
| (vii) | The order is illegal. |
Apart from the aforesaid findings, there were other objections including non-application of mind and limitation under section 149 of the Act.
10. After order of the CIT-A dated 29.05.2006, the WP(T) 1676 of 2005 was dismissed on 26.06.2006 on the ground that it has become infructuous.
11. The Department filed an appeal before the Tribunal against the order of the CIT-A dated 29.05.2006. It was dismissed essentially on the ground that sections 147/ 148 of the Act were not applicable to the block assessment under Chapter XIVB of the Act. Hence, the present appeal.
QUESTIONS FOR DETERMINATION
12. We have heard counsel for the parties. The appeal was admitted for hearing on 06.07.2011 on the following substantial questions of law:
| '(i) | Whether on the facts and in the circumstances of the case and in law the tribunal was justified in holding that the provisions of Section 148 of the Act are not applicable to the block assessment order passed under Chapter XIVB of the Act and thereby allowing relief to the assessee; | |
| (ii) | Whether on the facts and circumstances of the case, the CIT(A) and the Tribunal was legally justified in holding that the entire proceedings in re-assessment is vitiating on account of issuance of notice under Section 148 of the Income Tax Act, 1961?' |
13. The aforesaid two questions are substantially same as the question mentioned in the opening paragraph of this judgement.
THE DECISION
Submissions of Department Counsel
14. The counsel for the Department relies upon section 158BH of the Act, and the decisions in:
| (i) | CIT v. Suresh N Gupta [2008] 297 ITR 322/166 Taxman 313 (SC) (the Suresh-Gupta case); and | |
| (ii) | CIT v. Peerchand Ratanlal Baid (HUF) [2010] 322 ITR 544 (Gau.) (the Peerchand case). |
He submits that:
| • | Section 58BH applies all other provisions of the Act to the assessment under Chapter XIVB of the Act; | |
| • | Sections 147 and 148 of the Act are other provisions of the Act and are also applicable for the block assessment made under the Chapter; | |
| • | The entire proceeding can not be set aside on the ground that sections 147/ 148 of the Act are not applicable to the block assessment under this Chapter. |
Chapter XIVB —Special Procedure
15. Chapter XIVB is titled as 'Special procedure for assessment of search cases'. It provides special procedure for assessment under such cases. Under this Chapter, the assessment of many years together and not only one year is done. This is called block period.
16. Section 158B is titled as 'Definitions'. It defines block period as well as undisclosed income.
17. At the relevant time, Chapter XIVB provided the 'block period' to mean, the previous years relevant to ten assessment years preceding the previous years in which the search was conducted and up to the date of commencement of the search.
18. Section 158BH of the Act is in Chapter XIVB of the Act. It is titled 'Application of other provisions of the Act': It applies other provisions of this Act to the block assessment under this chapter. It was necessary to clarify this as this chapter provides a special procedure in case of search for assessing the income for the block period.
19. Nevertheless, a provision will become applicable by virtue of 158BH only if it can be applied on its wording to Chapter XIVB. The question is, can it be so applied?
20. The Suresh-Gupta case is related to the block assessment but the question whether sections 147/ 148 of the Act were applicable in the block assessment or not, was not involved therein. However, in Peerchand case, this very question was involved and was answered in favour of the Department.
Sections 147/ 148 Should Be Strictly Construed
21. Kanga, Palkhivala and Vyas on The Law and Practice of Income Tax, Volume-II, Ninth Edition, page 1826 explains the scope of the section 147 of the Act as follows:
'This section imposes no charge on the subject but deals merely with the machinery of assessment [Bhimraj Panna Lal v. CIT [1997] 32 ITR 289 (Patna), affirmed in Bhimraj Panna Lal v. CIT[1961] 41 ITR 221 (SC); Radhakant v. V.K Johri [1960] 39 ITR 182; Chhagan Lal v. ITO [1962] 46 ITR 351 (Raj.); CR Dalmia (A.O.P.) v. CIT [1992] 194 ITR 700 (Delhi) affirmed in R. Dalmia v.CIT [1999] 236 ITR 480 (SC) on another issue; CIT v. V.D Saraf (HUF) [1994] 207 ITR 217 (Bom.); Sardar Harvinder Singh Sehgal v. Asstt. CIT [1997] 227 ITR 512 (Gau.) and in interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable CIT v. Mahaliram Ramjidas [1940] 8 ITR 442 (PC); CIT v. Sun Engg. Works (P.) Ltd.[1992] 198 ITR 297 (SC) and S.1 under Interpretation of the Income Tax Act. This, however, does not mean that the section is to be liberally construed; since the reopening of an assessment is a power of an extraordinary nature, the section should be strictly construed. [New Kaiser-Hindu Spg. & Wvg. Co. Ltd.v. CIT [1997] 107 ITR 760 (Bom.); ITO v. Mewalal Dwarka Prasad [1989] 176 ITR 529 (SC).'
It is in this light that sections 147/ 148 are to be construed ie they are to be construed strictly.
22. Section 147 of the Act is titled as 'Income Escaping Assessment'. It provides that if the Assessing Officer has reason to believe that any income chargeable to the tax has escaped in any assessment year, he could re-assess the income subject to fulfilling other conditions mentioned in that section.
23. Section 148 is titled as 'Issue of notice where income has escaped assessment'. It provides issuance of notice before making the assessment, re-assessment or re-computation under Section 147 of the Act.
24. Section 147 of the Act uses the words 'in any assessment year'; it does not use the words 'in any assessment year or for any block period'. Had it used the words 'in any assessment year or for any block period' the matter would have been different but in absence of these words, can we read these words in the section when they are not there. If we do so, then will it be not stretching the words too far?
25. Often the block assessment is in respect of the years for which the assessment has already been done under the Act. The block assessment is a kind of re-assessment, on the basis of material found in the search. This is also indicated by first proviso to section 158BC (a) of the Act.
26. Section 158BC is titled as 'Procedure for Block Assessment'. The first proviso: The relevant portion of the proviso provided that no notice under section 148 is required to be issue for the purpose of proceeding under this chapter to section 158BC(a) of the Act provides that for the purpose of proceedings under Chapter XIVB of the Act, no notice under section 148 of the Act is required to be issued.
27. In case sections 147/ 148 of the Act are applicable to the block assessment, it will amount to reassessment of the reassessment proceeding.
28. Section 147 of the Act has not used the word 'the block period'. The reason seems to be simple that the block assessment itself is the re-assessment proceedings. There was no necessity for providing reassessment of the reassessment proceedings.
29. The Gujarat High Court has considered this question in detail in Cargo Clearing Agency (Gujarat) v.Jt. CIT [2008] 218 CTR (Guj) 541 (the Cargo-Clearing case) and has held that sections 147/ 148 of the Act are not applicable to the assessment under Chapter XIVB of the Act. We agree with the same and are unable to subscribe to the view taken by the Gauhati High Court in the Peerchand case.
30. The material for notice for reassessment under section 148 of the Act is the same as was for passing order under section 263 of the Act. The order under section 263 of the Act has been set aside by the Tribunal on the ground that the initial order passed by the AO was not prejudicial to the interest of the Revenue.
31. In view of above, the CIT-A has held that once the order under section 263 has been set aside, the same material cannot be used for notice under section 148 of the Act. However, neither the Tribunal has gone into this question nor this case has been admitted on the same. Thus, we refrain from expressing our view on this point or any other findings recorded in favour of the Assessee by the CIT-A.
CONCLUSIONS
32. Our conclusion is, that sections 147/ 148 of the Act for reassessment are not applicable to the assessment under Chapter XIVB of the Act.
33. In view of the above, the questions are answered in favour of the Assessee and against the Department. The tax case is dismissed.
S.K.J.*In favour of assessee.
†Appeal arising out of order of Tribunal dated 22-1-2010.
IT-Dept invites suggestions for building the new website
Calling all stakeholders to contribute in building the new National website of the Income-tax Department.
The National website of the income-tax department, www.incometaxindia.gov.in is undergoing re-development. In this regard, the Department is inviting suggestions from all the stakeholders on the design, facilities, contents and features that you would like to incorporate in the new Website. The last date for submitting suggestions is 25.03.2014. Online Suggestions form can be accessed at the following link
http://www.incometaxindia.gov.in/Feedback_Website.asp
PPF and SCSS, 2004 Interest Rate wef 01.04.2014
RBI/2013-14/526
DGBA.CDD. No. 5342 /15.02.001/2013-14
DGBA.CDD. No. 5342 /15.02.001/2013-14
March 21, 2014
Public Provident Fund Scheme, 1968 (PPF Scheme, 1968) and Senior Citizens Savings Scheme, 2004 (SCSS, 2004) – Revision of interest rates
Please refer to our circular RBI/2011-12/359 dated January 20, 2012 regarding interest rates on small savings schemes, wherein it was indicated that as per Government's decision on revision of interest on small savings schemes, the interest rates on various small savings schemes for every financial year will be notified by the Government before April 1st of that year.
The Government of India has now vide their Office Memorandum (OM) No. 6-1/2011-NS.II dated 4th March 2014, advised the rate of interest on various small savings schemes for the financial year 2014-15. Accordingly, the rates of interest on PPF, 1968 and SCSS, 2004 for the financial year 2014-15, effective from April 01, 2014, on the basis of the interest compounding/payment built-in in the schemes, will be as under:
| Scheme | Rate of Interest w.e.f. 01.04.2013 | Rate of Interest w.e.f. 01.04.2014 |
| 5 Year SCSS, 2004 | 9.2% p.a. | 9.2% p.a. |
| PPF, 1968 | 8.7% p.a. | 8.7% p.a. |
The contents of this circular may be brought to the notice of the branches of your bank operating the PPF, 1968 and SCSS, 2004 schemes. These should also be displayed on the notice boards of your branches for information of the PPF, 1968 & SCSS, 2004 subscribers.
Yours faithfully
(Shrikant Hamine)
Manager
Manager
Amendment in Rule 12CCC of Central Excise Rules, 2002, – Power to impose restrictions in tax evasion cases
Notification No. 14/2014 – Central Excise (N.T.) , Dated- 21st March, 2014
G.S.R. (E).— In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the Central Excise Rules, 2002, namely:-
1. (1) These rules may be called the Central Excise (Second Amendment) Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. For rule 12CCC of the Central Excise Rules, 2002, the following shall be substituted, namely:—
"12CCC. Power to impose restrictions in certain types of cases.— Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent of evasion of duty, nature and type of offences or such other factors as may be relevant, is of the opinion that in order to prevent evasion of, or default in payment of duty of excise, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, first stage and second stage dealer or an exporter may, by notification in the Official Gazette, specify the nature of restrictions including suspension of registration in case of a dealer, types of facilities to be withdrawn and procedure for issue of such order by the Chief Commissioner of Central Excise.
Explanation.- For the purposes of this rule, it is hereby clarified that every proposal initiated in terms of the procedure specified under notification no. 05/2012-CE (N.T.) dated the 12th March, 2012 published in the Gazette of India, Part II, Section 3, Sub-section (i) vide number G.S.R. 140(E), dated the 12th March, 2012, which is pending, shall be treated as initiated in terms of the procedure specified under this rule and shall be decided accordingly."
F. No. 267/13/2013-CX.8
(Pankaj Jain)
Under Secretary to the Government of India
Note.- The principal rules were published in the Gazette of India vide notification number 04/2002-CE(NT), dated the 1st March, 2002 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (i) vide number G.S.R. 143(E), dated the 1st March 2002 and were last amended vide notification number 08/2014-Central Excise (NT) dated the 28th February, 2014, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R 134 (E), dated the 1st March, 2014.
Amendment in 12AAA of CENVAT Credit Rules, 2004- Power to impose restrictions
Notification No. 15/2014 – Central Excise (N.T.), Dated- 21st March, 2014
G.S.R. (E).— In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944), the Central Government hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely:-
1. (1) These rules may be called the CENVAT Credit (Fifth Amendment) Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. (1) For rule 12AAA of the CENVAT Credit Rules, 2004, the following shall be substituted, namely :—
"12AAA. Power to impose restrictions in certain types of cases.— Notwithstanding anything contained in these rules, where the Central Government, having regard to the extent of misuse of CENVAT credit, nature and type of such misuse and such other factors as may be relevant, is of the opinion that in order to prevent the misuse of the provisions of CENVAT credit as specified in these rules, it is necessary in the public interest to provide for certain measures including restrictions on a manufacturer, first stage and second stage dealer or an exporter, may by notification in the Official Gazette, specify the nature of restrictions including restrictions on utilization of CENVAT credit and suspension of registration in case of a dealer and type of facilities to be withdrawn and procedure for issue of such order by the Chief Commissioner of Central Excise.
Explanation.- For the purposes of this rule, it is hereby clarified that every proposal initiated in terms of the procedure specified under notification no. 05/2012-CE (N.T.) dated the 12th March, 2012 published in the Gazette of India, Part II, Section 3, Sub-section (i) vide number G.S.R. 140(E), dated the 12th March, 2012, which is pending, shall be treated as initiated in terms of the procedure specified under this rule and shall be decided accordingly."
F. No. 267/13/2013-CX.8
(Pankaj Jain)
Under Secretary to the Government of India
Note.- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), dated the 10th September, 2004, vide Notification No. 23/2004 – Central Excise (N.T.) dated the 10th September, 2004, vide number G.S.R. 600(E), dated the 10th September, 2004 and last amended vide Notification No. 09/2014-Central Excise (N.T.) dated the 28th February, 2014 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 135 (E), dated the 1st March, 2014.
Chief Commissioner of Central Excise to order withdrawal of facilities or impose restrictions in excise evasion cases
Supersedes Notification No 5/2012-C.E.(N.T.) dt 12.03.2012;Chief Commissioner of Central Excise to order withdrawal of facilities or impose the restrictions as specified
Notification No. 16/2014 – Central Excise (N.T.)
New Delhi, the 21st March, 2014
G.S.R. (E).— In pursuance of rule 12CCC of the Central Excise Rules, 2002, and rule 12AAA of the CENVAT Credit Rules, 2004 and in supersession of the notification of the Government of India in the Ministry of Finance, Department of Revenue, No. 05/2012-Central Excise (N.T.), dated the 12th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 140(E), dated the 12th March, 2012, except as respects things done or omitted to be done before such supersession, the Central Government hereby declares that where a manufacturer, first stage or second stage dealer, or an exporter including a merchant exporter is prima facie found to be knowingly involved in any of the following :-
(a) removal of goods without the cover of an invoice and without payment of duty;
(b) removal of goods without declaring the correct value for payment of duty, where a portion of sale price, in excess of invoice price, is received by him or on his behalf but not accounted for in the books of account;
(c) taking of CENVAT Credit without the receipt of goods specified in the document based on which the said credit has been taken;
(d) taking of CENVAT Credit on invoices or other documents which a person has reasons to believe as not genuine;
(e) issuing duty of excise invoice without delivery of goods specified in the said invoice;
(f) claiming of refund or rebate based on the duty of excise paid invoice or other documents which a person has reason to believe as not genuine;
(g) removal of inputs as such on which Cenvat credit has been taken, without paying an amount equal to credit availed on such inputs in terms of sub-rule (5) of rule 3 of the Cenvat Credit Rules, 2004,
the Chief Commissioner of Central Excise may order for withdrawal of facilities or impose the restrictions as specified in para 2 of this notification.
2. Facilities to be withdrawn and imposition of restrictions.- (1) Where a manufacturer is prima facie found to be knowingly involved in committing the offences specified in para 1, the Chief Commissioner of Central Excise may impose following restrictions on the facilities, namely:-
(i) the monthly payment of duty of excise may be withdrawn and the assessee shall be required to pay duty of excise for each consignment at the time of removal of goods;
(ii) payment of duty of excise by utilisation of CENVAT credit may be restricted and the assessee shall be required to pay duty of excise without utilising the CENVAT credit;
(iii) the assessee may be required to maintain records of receipt, disposal, consumption and inventory of the principal inputs on which CENVAT credit has not been taken;
(iv) the assessee may be required to intimate the Superintendent of Central Excise regarding receipt of principal inputs in the factory on which CENVAT credit has or has not been taken, within a period specified in the order and the said inputs shall be made available for verification upto the period specified in the order:
Provided that where a person is found to be knowingly involved in committing any one or more type of offences as specified in para 1 subsequently, every removal of goods from his factory may be ordered to be under an invoice which shall be countersigned by the Inspector of Central Excise or the Superintendent of Central Excise before the said goods are removed from the factory or warehouse.
Explanation.- For the purposes of this paragraph, it is clarified that-
(i) a person against whom the order under sub-para (2) of para 4 has been passed may continue to take CENVAT credit, however, he would not be able to utilize the credit for payment of duty during the period specified in the said order.
(ii) "principal inputs" means any input which is used in the manufacture of final products where the cost of such input constitutes not less than 10% of the total cost of raw materials for the manufacture of unit quantity of a given final product.
(iii) if the assessee commits any offence specified in para 1 for the first time, the period of imposition of restrictions may not be more than 6 months.
(iv) if the assessee commits any offence specified in para 1 subsequently, the period of imposition of restrictions shall not be more than 1 year.
(2) Where a first stage or second stage dealer is found to be knowingly involved in committing the type of offence specified at clauses (d) or (e) of para 1, the Chief Commissioner of Central Excise may order suspension of the registration granted under rule 9 of the Central Excise Rules, 2002 for a specified period.
(3) During the period of suspension, the said dealer shall not issue any Central Excise Invoice:
Provided that he may continue his business and issue sales invoices without showing duty of excise in the invoice and no CENVAT credit shall be admissible to the recipient of goods under such invoice.
(4) Where a merchant exporter is found to be knowingly involved in committing the type of offence specified in clause (f) of para 1, the Chief Commissioner of Central Excise may order withdrawal of the self sealing facility for export consignment and each export consignment shall be examined and sealed by the jurisdictional Central Excise Officer:
(5) If a manufacturer, first stage dealer or second stage dealer or an exporter does anything specified in clause (f) of para 1, the Chief Commissioner of Central Excise may order withdrawal of the other facility available to them.
3. Monetary limit.- The provisions of this notification shall be applicable only in a case where the duty of excise or CENVAT Credit alleged to be involved in anything specified in para 1 exceeds rupees ten lakhs.
4. Procedure.- (1) The Commissioner of Central Excise or Additional Director General of Central Excise Intelligence, as the case may be, after examination of records and other evidence, and after satisfying himself that the person has knowingly committed the offence as specified in para 1, may forward a proposal to the Chief Commissioner of Central Excise, to withdraw the facilities and impose restriction during or for such period, within 30 days of the detection of the case, as far as possible.
(2) The Chief Commissioner of Central Excise shall examine the said proposal and after satisfying himself that the records and evidence relied upon in the said proposal are sufficient to form a reasonable belief that the person has knowingly done or contravened anything specified in para 1, may issue an order specifying the type of facilities to be withdrawn or type of restrictions to be imposed, along with the period for which the said facilities will not be available or the period for which the restrictions shall be operative:
Provided that the Chief Commissioner of Central Excise, before issuing the order, shall give an opportunity of being heard to the person against whom the proceedings have been initiated and shall take into account any representation made by such person before he issues the order.
5. Proposals which are pending before the officer authorized by the Central Board of Excise and Customs or the Director General of Central Excise Intelligence in terms of notification no. 05/2012-CE (N.T.) dated the 12th March, 2012, on the date of coming into force of this notification, shall be transferred to the Chief Commissioner of Central Excise, who shall decide the same in accordance with the procedure specified in paragraph 4 and the proposals pending before the Chief Commissioner of Central Excise shall also be decided accordingly.
F. No. 267/13/2013-CX.8
(Pankaj Jain)
Under Secretary to the Government of India
The Companies Act, 2013- Provisions relating to loans and investments
G S RaoIntroduction: Inter corporate loans and investments play a vital role in the growth of Industries since they result in flow of funds to group companies or other companies in need of funds. In the Companies Act, 1956 Section 372-A deals with inter corporate loans and investments. In 1998 to give free hand to industries drastic changes were made by merging section 370 and 372 into a new Section 372-A enabling more flexibility and dispensing with approval of central Government. The Companies Act, 2013(CA2013 or new Act) incorporated Section 186 which deals with loans and investments and corresponds with Section 372-A of the Companies Act, 1956(CA1956 or Old Act). The focus of the article is to compare Section 186 of CA 2013 with Section 372-A of CA1956.
Section 372-A
Section 372-A is one of the most important sections which is be used by every company in the ordinary course of its business. Every company has to plan to deploy its surplus funds in a productive manner and within the legal frame work of Section 372-A. Since Section 186 of CA 2013 has not been notified, Section 372-A applies to Public Limited companies. Let us see the permissions/restrictions imposed by this section.
- Applicability: This section is applicable only to public Ltd companies and not to private Ltd companies.
- Transactions: Section 372-A is applicable to following type of transactions
- loans given to another body corporate( Loans include ICDs and debentures)
- Guarantees given by the company as a back up for any loan given by any other person to any other body corporate.
- Investment in shares of another body corporate by way of subscription or by purchase of shares.
- Approvals: Unanimous consent of all directors present at the meeting of Board is required for passing a resolution for approving inter corporate loans or investments. Resolution must specify the limits.
- Limits: Board of directors can exercise their power for making inter corporate loans or investments up to 60% of paid up capital and free reserves of the company or 100% its free reserves which ever is higher. {Free reserves means for this section, reserves free for distribution as dividends and share premium but excluding shares application money}. Prior approvals of financial institutions (if any loans are subsisting) if there is default in repayments of interest/installments as per terms. For granting loans or making investments or giving guarantees exceeding the limits permissible for Board, approval of shareholders by a special resolution has to be obtained.
- Guarantees in emergency: In case of urgency, guarantees exceeding the limits can be given subject to the condition that such urgent approval is justified and approval of shareholders has to be obtained within 12 months from the date of board meeting or on the date of next AGM held after board meeting which ever is earlier. This relaxation is only to facilitate business transactions in the interests of the company.
- Other restrictions:
- Loans shall not be made at a rate below the prevailing bank lending rate
- If any default u/s 58-A is committed, Company is prohibited from giving making ICDs and investments/guarantees.
- Register of inter corporate loans/investments: A register must be maintained showing the details of ICDs and investments made during the year such name of the body corporate, date and amount of loan/investment/guarantee, purpose, entries have to be made within 7dyas of making investment or giving of loan or guarantee
- Exemptions: The restrictions of 372-A are not applicable to loans, investments etc made by
- A Banking company, insurance or housing financing company, in the ordinary course of their business;
- Company established with the object of financing industrial enterprises or of providing infrastructural facilities.
- Company whose principal business is the acquisition of shares, stock, debentures or other securities.
- Private company unless it is a subsidiary of public Ltd company
- Investments in wholly owned Subsidiary, Loans made/ guarantees given by a holding company to its wholly owned subsidiary co
- Investment made in rights shares allotted in pursuance of section 81(1)
Provisions of Section 186:
This section corresponds to section 372-A of Old Act. Having seen the requirements of Section 372-A, let us now analyse Section 186. This section has not been brought into force and as such Section 372-A is to be followed by the companies till this section is notified for compliance.
Significant changes:
- Restriction on layers: Firstly this section prohibits investment through more than 2 layers of investment companies. However this restriction is not applicable for investment in company incorporated out side India which has investment subsidiaries beyond two layers as per laws of that country. What is the meaning of layer? Let us find out the reason for this stipulation. If a holding company wants to invest funds, then it can invest directly in another two subsidiaries of it which are investment companies. This restriction is obviously for preventing siphoning of funds through subsidiaries which are investment companies. This could also be for easy tracking of funds and bring out transparency. Whether this restriction applies only for direct investment? Can the investment company create layers? There is some ambiguity and clarifications are expected from MCA in this regard for clear understanding and to avoid violation of the section.{Section 186(1)}
- Limits: The same limits as in Section 372-A have been retained for exercising power by the board of directors and prior approval of shareholders is mandatory for any limits beyond 60% of paid up capital + free reserves+ securities premium account or 100% of free reserve. However this limit not only covers the transactions with bodies corporate but also transactions with any person. This is a significant change. {Section 186(2) and (3)}
- Disclosure: This is a new requirement. Section 186(4) stipulates that a disclosure has to be made in the financial statement about the full particulars of loans given, investments made or guarantees or security given and the purpose for which the recipient is going to utilise the loans/guarantees/security. This disclosure ensures good governance and transparency. This change is welcome.
- Approvals: There is no change in the manner of seeking approvals for granting of loans or investments. Like in 372-A, unanimous consent of Board of directors for limits up to 60% is required. Prior approval of institutions is required only, if loans are subsisting and default is made in payment of either interest or installments as per terms of loan. Prior approval of shareholders is to be obtained in case company wants to sanction loans/guarantees/investments exceeding the limits fixed for sanction by board of directors. {section 186(5) and 186(3) }
- Restriction on companies registered with SEBI: This is also a new requirement to protect the shareholders interest. The central government may notify such class of companies which will be prohibited from taking inter corporate loans or deposits exceeding the prescribed limit and shall make a disclosure of loans or deposits taken in its financial statement.{Section 186(6)}
- Rate of Interest: There is change in this provision also. The rate of interest on loans given can not be less than the prevailing yield rate on 1 year,3 year, 5 year or 10 year government securities closest to the tenor of the loan.{section 186(7)}
- Penalty: The fine for violation of Section 186 has been increased. Fine levied can be any sum between Rs.25,000 to 5.00 lakhs on defaulting company and every defaulting officer can be punished with imprisonment for a term up to 2 years besides the fine ranging from Rs.25,000 to 1.00 lakh.
- With drawl of exemption: This section is applicable to both private and public Ltd while section 372-A is applicable only to public Ltd companies. Similarly loans given/ Investments made by a holding company in its wholly owned subsidiary also comes under the purview of Section 186 while it is specifically exempted by Section 372-A of CA1956.
Other requirements/restrictions such as maintaining a register of inter corporate deposits/ loans/ guarantees and keeping it open for inspection by any member, exemptions(excepting layers) as mentioned in section 372- A above remain the same.
Clarifications of MCA: On 14th February 2014 MCA issued a clarification vide its General Circular No 03/2014 as section 185 (as this section was notified on 13.09.2013 and comes into force) prohibits giving of guarantees or any security by a holding company for any loans availed by its subsidiary except in the ordinary course of its business. This circular had clarified that exemption provided by Section 372A is applicable for such transactions. This clarification is surprising. Even without clarification section 372-A is applicable as section 186 has not been notified yet. This clarification however does not resolve the restriction imposed by section 185(Loans to directors) on guarantees to be given by holding company for loan availed by its subsidiary which is an unintended drafting error. Similarly in November, 2013 Circular no.18 of 2013 was issued which clarifies that Section 372-A remains in force till section 186 is notified.
Conclusion: There is always an apprehension that the flexibility given by Section 372-A or Section 186 for loans or investments can be misused to siphon of funds. The law makers must have obviously kept in mind some fraud cases wherein inter corporate investments and loans are used as a tool for siphoning of funds to group companies or director related firms or companies. This apprehension may be the reason for bringing in restriction on layers of investment. Let us hope that other sections in the new act too act as checks and balances for preventing misuse of position of directors
G S Rao, Consultant
Source: Companies Act, 2013, Companies Act,1956, Circulars issued by MCA
Tags: The Companies Act, 2013, Loans and investments, inter corporate loans and investment
10 powerful ways to use Excel's paste features
Excel's Paste and Paste Special commands harbor a multitude of useful options. Use them to do everything from transposing data to copying Validation rules.
The Paste Special command is in most Office applications, but Excel users probably benefit from it the most. Using this basic feature — as well as assorted Paste options — you can make short work of a few common tasks and some rather complex problems. These tricks are so easy to implement that you'll probably find yourself using the paste features a lot more than you used to.
In Excel 2007 and 2010, Paste is in the Clipboard group on the Home tab. In Excel 2003, Paste Special is on the Edit menu. For the shortcut enthusiasts, we've included a table at the end that contains keyboard shortcuts for most of these operations.
1: Copy column width
When you copy data into a new column, the column's width doesn't automatically adjust to accommodate the new values. With an extra click, you can copy the source column's width to the target column, as follows:
- Select the data and press [Ctrl]+C to copy the selected values to the Clipboard.
- Select a cell in the destination column.
- On the Home tab, click the Paste option in the Clipboard group and choose Keep Source Column Widths. This option requires an extra step in 2007: Choose Paste Special from the Paste drop-down, click the Column Widths option in the Paste section, and click OK.
Excel will copy the data and the source column's width to the target cells.
2: Perform calculations
You can use Paste Special to add, subtract, multiply, and divide. Simply enter a number and press [Ctrl]+C. Then, select the values you want to change by the number you just entered and click Paste Special in the Clipboard group. In the resulting dialog, click the appropriate operator and then click OK. Excel will perform the appropriate operation using the value you copied to the Clipboard.
You can also perform calculations using multiple values. Use the same process, but copy a range of several values instead of just one. Excel doesn't care if the range dimensions match; it will perform the calculations relative to the positions of the copied values.
3: Transpose data
Excel offers a transposing feature, but sometimes Paste Special is quicker. Select the source data and do the following:
- Press [Ctrl]+C to copy the data to the Clipboard.
- Select the top-left cell in the target range.
- Click the Home tab (if necessary) and choose Transpose from the Paste drop-down.
That's all there is to it! You can copy a column of data to a row or vice versa.
4: Replace formulas with their evaluated results
Occasionally, you'll want to replace formulas with their literal values. For instance, you might want to replace a range of RAND() functions with their values instead of letting the formulas recalculate. This is a common task for Paste Special. To copy formulas with their values, do the following:
- Select the range for the formulas and press [Ctrl]+C.
- In the Clipboard group, click the Paste drop-down.
- Choose Values.
Doing so replaces the formulas with their literal values. Before you use this technique, you might want to make a backup of your workbook, just in case.
There's also a shorter mouse trick that performs the same task:
- Select the range.
- Right-click a border and drag the range to the next column (or row).
- Drag the selected range back to the source. This forces Excel to display a shortcut menu, without actually moving the selected values.
- Select Copy Here As Values Only.
5: Copy formats
Most of us use Format Painter to copy formats from one cell to another or to small ranges. But it can be a bit awkward to use Format Painter with an entire row or column. Here's how to use Paste Special instead:
- Select the cell that contains the format you want to copy and press [Ctrl]+C.
- Click inside the column or row you want to format. (Press [Ctrl]+Spacebar to select the entire column or [Shift]+Spacebar to select the entire row.)
- With the row or column selected, choose Formatting from the Paste drop-down in the Clipboard group. Excel 2007 requires an extra step: Choose Paste Special from the Paste drop-down, click Formats in the Paste section, and click OK.
6: Copy chart formats
You can work hard to get a chart looking just right and then find that you need to do it all again with different data. When this happens, don't reformat the new chart manually — use Paste Special. The premise is the same as #5, but the steps are just a bit different:
- Select the chart with the formatting you want to copy and press [Ctrl]+C.
- Select the chart you want to format and choose Paste Special from the Paste drop-down. Excel will display the Paste Special dialog, with just three options.
- Choose Formats and click OK.
Excel responds differently when copying chart formats, but it can easily handle the task.
7: Skip blanks in a series
Using the Skip Blanks option, you can replace existing values while ignoring blank cells in the source data. In other words, if there's a blank in the source range and an existing value in the corresponding paste range, this option won't replace the existing value with a blank. You use it like all the other options:
- Select the source range and press [Ctrl]+C.
- Select the top-left cell in the destination range.
- From the Paste drop-down, choose Paste Special.
- Check the Skip Blanks option and click OK.
Excel will not overwrite existing values with blanks.
8: Copy Data Validation
After taking the time to set up a Data Validation rule or list to improve data input, you might want to apply the same rule to another cell or range. The good news is you don't have to go through the entire setup process again. Using Paste Special, you can just copy it, as follows:
- Select the cell that contains the Data Validation rule and press [Ctrl]+C.
- Select the target cell.
- From the Paste drop-down, choose Paste Special.
- Click the Validation option and click OK.
Setting up Data Validation can be a bit tedious and time-consuming; Paste Special is much easier!
9: Clean up Web text
When copying text from the Web, you can end up with a mess because Excel retains the source formatting. Most of the time, that's not what you'll want. If you have Excel's Show Paste Options feature enabled (available in the Advanced pane of the Excel Options dialog box), you'll see a Clipboard icon immediately after pasting the text into your worksheet. You can choose Match Destination Formatting from the Clipboard drop-down to get rid of the unwanted formatting.
If you have Excel 2010, you may prefer to use this Paste Special solution:
- Copy the text from the Web.
- In Excel, click where you want to insert the text.
- Select the Paste drop-down and choose Match Destination Formatting.
Use this option to copy any foreign data, not just Web text, into Excel.
10: Paste references
You can reference a cell by prefacing a cell address with the equals sign. For example, enter =A1 to return the contents of cell A1. Usually, we use these references in larger expressions and formulas. Occasionally, we just reference a cell by itself. Paste Link can help when referencing a large range of cells instead of just one:
- Select the range and press [Ctrl]+C.
- Select a target cell and choose Paste Link from the Paste drop-down.
Paste Link is quicker than entering cell references manually, if you need several.
Keyboard shortcuts for paste actions
ITAT criticises AO and DRP for blatantly frivolous and unsustainable additions
Issue- whether or not addition of Rs 5,739.60 crores (Rs 5739,60,05,089) made by the Assessing Officer with respect to the disallowance of loss on transfer of telecom infrastructure is justified, tenable in law and on the facts of this case. The related grievances, as set out in the memorandum of appeal, are as follows:
Briefly stated, the relevant material facts are like this. The assessee before us is a company engaged in the business of telecommunication services. On 30th September 2008, the assessee filed an income tax return disclosing taxable income of Rs 1,608.58 crores (Rs 1608,58,05,679). In its computation of taxable income, the starting point was the profit as per profit and loss account. In the course of scrutiny assessment proceedings, the Assessing Officer noted that "the assessee has booked an expenditure of Rs 5739,60,05,089 on account of loss on transfer of telecom infrastructure to Bharti Infratel Limited as a reduction in WDV ( i.e. written down value) of fixed assets" and that "the same is disallowable from the profit and loss account, as per provisions of the Income Tax Act, as it is clearly a capital loss". It was explained by the assessee that the reflecting the loss in the profit and loss account did not have any impact on the profits as the debit, by way of loss on transfer of telecom infrastructure, was squared by corresponding credit from the 'business restructuring reserve', and thus there was no debit to the profit and loss account. The amounts were only in the inner columns and there was no net debit by way of entry in the outer column. It was explained that "the loss on sale of telecom infrastructure to BIL is corresponding to the amount credited to business restructuring reserve" and that "if this amount is not withdrawn from the said reserve, the profit of assessee company is lowered by Rs 5,739 crores for the year under consideration". None of these submissions impressed the Assessing Officer and, in the draft assessment order, the Assessing Officer proposed an addition of Rs 5739,60,05,089 in respect of the above loss.
An objection was taken up by the assessee before the Dispute Resolution Panel as well however, the DRP proceeded to reject the same by making following brief, or rather cryptic, observations:
" We have considered the facts of the case. Submission of assessee has also been gone through. The disallowance of Rs.5 73 9,60,05,000 by the AO in normal computation provisions as capital loss representing loss on transfer of Telecom Infrastructure to Bharti Infratel Limited is held as perfectly in order. Therefore, as for as disallowance is concerned, no interference is called for. However, as regards the claim of assessee of not reducing the equivalent sum from the computation of income, it is noted that it is a matter of pure verification. The AO is directed, to verify the claim of the assessee from the records and take necessary action."
In the final assessment order, passed as a result of the above DRP directions, the Assessing Officer made the impugned additions. The Assessing Officer noted that the "from the directions of Hon'ble DRP, it is abundantly clear that the DRP has categorically held that the disallowance of Rs 5739,60,05,089 by the Assessing Officer represents capital loss on transfer of telecom infrastructure to Bharti Infratel Limited in the computation as per normal provisions of the Act was perfectly in order and no interference was called for", and "therefore, the contention of the assessee company that there is double addition of the above sum, is incorrect". As for the DRP's directions to the Assessing Officer to make verifications with respect to "not reducing the claim of assessee of not reducing the equivalent sum from the computation of income", the Assessing Officer noted that "after verifications, it is ascertained that these are the same documents and papers which were available before the Assessing Officer during the course of assessment proceedings leading to draft assessment order" and that "there are no fresh or additional documents except the written submissions". The Assessing Officer then took note of the fact that in the computation of income attached to the return of income, the assessee has first added Rs 5739,60,05,089 as "Loss on transfer of telecom infrastructure to Bharti Infratel Limited" and then reduced Rs 5 739,60,05,089 as "amount withdrawn from Reserve for Business Restructuring". Effectively thus, according to the Assessing Officer, there was a debit and credit of the same amount and he was justified in adding back the loss of transfer of telecom infrastructure debited to the profit and loss account. He thus concluded that "in view of the above and consequent upon verification of facts as directed by the learned DRP, the finding for addition of Rs 5739,60,05,089 in the computation of income by the Assessing Officer under the normal provisions of the Act is found to be correct for the assessment year under consideration".
When this issue came up in hearing before us, learned counsel for the assessee submitted that it is a case of frivolous double addition on deliberate misconception of the facts. He took us through the year-end financial statements of the assessee and its computation of income to demonstrate that the impugned addition made by the Assessing Officer amounted to making an addition for loss on transfer of telecom assets whereas no deduction in respect of such loss was claimed by the assessee. He invited our attention to the observations made in the stay order to the effect that it is a case of "prima facie" double addition and it was also submitted that at the stage of hearing of stay petition in this case, the Assessing Office himself has accepted that it is a case of double addition. Learned Departmental Representative, on the other hand, dutifully placed his rather bland reliance on the stand of the Assessing Officer and the Dispute Resolution Panel. It was in this backdrop that we called for personal appearance of the Assessing Officer concerned. When the Assessing Officer appeared before us, and we asked him to justify this addition of Rs 5,739.60 crores, whereas, for all practical purposes, the assessee has not even claimed deduction of the same in the computation of business income, he had nothing to say. When he was asked why DRP's directions about verifications were not complied with, he stated that, as stated in the assessment order itself, there was no fresh material at that stage over and above what was produced in the original assessment proceedings, and thus it was not open to the Assessing Officer to take any other view of the matter than the view originally taken. The Assessing Officer submitted that the loss on sale of assets could not be allowed as a deduction but that does not justify the addition on merits, because the assessee has not challenged this proposition at any stage and has merely contended that no such disallowance is warranted on the facts of this case as the said amount has not been debited to the profit and loss account at all. In effect thus, we are dealing with a situation that here is a Rs 5,739.60 crore addition, which has been made by the Assessing Officer and sustained by the Dispute Resolution Panel, and effectively there is no argument to defend it.
It is not an uncommon sight that even the most distinguished and learned Departmental Representatives, as also other revenue authorities appearing before us, simply place their bland reliance on the impugned orders- as in this case, rather than dealing with specific justification for the additions or disallowances made therein and with the arguments advanced by the taxpayer's representatives. By such a conduct, any transparent debate about correctness or otherwise of such additions impugned in appeal is pre-empted. Of course, such an exercise does render our adjudication process a one way street but, as long as legal and factual position warrants due relief to the assessee and as long as impugned additions are so frivolous, there is nothing wrong in it. However, if an action of the Assessing Officer is so blatantly unreasonable that such seasoned senior officers well versed with functioning of judicial forums, as the learned Departmental Representatives are, cannot even go through the convincing motions of defending the same before us, such unreasonable conduct of the Assessing Officer deserves to be scrutinized seriously. At a time when evolving societal pressures demand greater degree of accountability in the governance also, it does no good to the judicial institutions to watch such situations as helpless spectators. If it is indeed a case of frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer -rather than being allowed to walk away with a subtle, though easily discernable, admission to the effect that yes it was a frivolous addition, and, if it is not a frivolous addition, there has to be reasonable defence, before us, for such an addition. The case before us, for the reasons we will set out now, appears to be in the category of a wholly frivolous, and simply indefensible, addition to the income returned by the assessee.
A plain look at the above material shows that there was no effective debit to the profit and loss account as the amount of Rs 5739,60,05,089 reflected in the "Loss on transfer of telecom infrastructure to Bharti Airtel Limited" was squared up against the credit amount of Rs 5739,60,05,089 representing "Amount withdrawn from Reserve for Business Structuring" in the inner column of the profit and loss account. These entries were absolutely profit neutral so far as the profit as per profit and loss account is concerned, and since it is this profit which is starting point for computation of business income, effectively no adjustments thereto were required. Even if no adjustment was carried out in the computation of income, the resultant income would have been the same, but the adjustments, if at all required for the sake of completeness and transparency, were required for both the entries, i.e. loss on transfer of assets as also amount withdrawn from business restructuring. This is precisely what the assessee has done. As much as the loss on transfer of assets is not a tax deductible item, the amount transferred from reserves is also not a taxable item. The assessee thus reversed both these entries, as depicted above, in the computation of income. The Assessing Officer has taken note of the fact that in the computation of income attached to the return of income, the assessee has first added Rs 5739,60,05,089 as "Loss on transfer of telecom infrastructure to Bharti Infratel Limited" and then reduced Rs 5739,60,05,089 as "amount withdrawn from Reserve for Business Restructuring", but then, instead of taking note of the unambiguous fact that these two distinct entries representing two facets duly reflected in the profit and loss account, the Assessing Officer assumes that since debit and credit of the same amount, resulting in neutralizing each other, he is justified in adding the loss of transfer of telecom infrastructure to the profit as per profit and loss account. Neither there was an effective debit to the profit and loss account, since the loss was squared up by transfer from reserve rather than by debit to profit and loss account, nor was it open to the Assessing Officer to take into account loss on transfer of assets, though reflected in the inner column, without taking into account another inner column item reflecting transfer from reserves to square up this loss. Whichever way one looks at these entries, the inescapable conclusion is that the addition made by the Assessing Officer is wholly erroneous and devoid of any legally sustainable merits. In this case, the Dispute Resolution Panel has also been somewhat superficial in its approach in confirming the addition by observing that, "the disallowance of Rs.5739,60,05,000 by the AO in normal computation provisions as capital loss representing loss on transfer of Telecom Infrastructure to Bharti Infratel Limited is held as perfectly in order" because the grievance raised by the assessee was specifically against the erroneous approach of the Assessing Officer in not taking a holistic view of the accounting entries. There is no, and there was never, any dispute on whether such a loss is tax deductible or not. The dispute was confined to the question whether, on the given facts, the Assessing Officer could have made an addition for this amount to the income returned by the assessee. The contention of the assessee was that no such addition was justified because the assessee has, on his own, made appropriate adjustments in the computation of taxable income and an addition by the Assessing Officer will result in double disallowance of the said amount. No doubt, the Dispute Resolution Panel did mention that, "as regards the claim of assessee of not reducing the equivalent sum from the computation of income, it is noted that it is a matter of pure verification" and directed the Assessing Officer "to verify the claim of the assessee from the records and take necessary action", but then it was the inaction and inability of the Assessing Officer in correctly doing so that the objection was raised before the Dispute Resolution Panel and all the related facts, including accounting entries and treatment given in the computation of taxable income, were placed before the Dispute Resolution Panel. The fact that even such purely factual issues are not adequately dealt with by the DRPs raises a big question mark on the efficacy of the very institution of Dispute Resolution Panel. One can perhaps understand, even if not condone, such frivolous additions being made by the Assessing Officers, who are relatively younger officers with limited exposure and experience, but the Dispute Resolution Panels, manned by very distinguished and senior Commissioners of eminence, will lose all their relevance, if, irrespective of their heavy work load and demanding schedules, these forums do not rise to the occasion and donot deal with the objections raised before them in a comprehensive and effective manner. While we delete the impugned addition of Rs 5739,60,05,089, we also place on record our dissatisfaction with the way and manner in which this issue has been handled at the assessment stage. Let us not forget that the majesty of law is as much damaged by not rendering justice to the conduct which cannot be faulted as much it is damaged by a wrongdoer going unpunished; not giving relief in deserving cases is as much of a disservice to the cause of justice and the cause of nation as much a disservice it is, to these causes, by granting undue reliefs. The time has come that a strong institutional check is put in place for dealing with such eventualities and de-incentivizing this kind of a conduct. With these observations, the impugned addition of Rs 5739,60,05,089 is deleted. The assessee gets the relief accordingly.
Source- Bharti Airtel Limited vs. ACIT (ITAT Delhi),I.T.A. No.: 5816/Del/2012, Date of pronouncing the order : March 11, 2014
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