IT : Assessee is eligible for deduction under section 80-IB(10) in relation to additional income offered in a statement under section 132(4) in course of search and subsequently declared in return filed in response to notice under section 153A(1)(a)

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[2014] 44 taxmann.com 242 (Pune - Trib.)

IN THE ITAT PUNE BENCH 'A'

Malpani Estates

Assistant Commissioner of Income-tax, Central Circle -1(1), Pune*

G.S. PANNU, ACCOUNTANT MEMBER
AND R.S. PADVEKAR, JUDICIAL MEMBER

IT APPEAL NOS. 2296 TO 2298 (PUNE) OF 2012
[ASSESSMENT YEARS 2008-09 TO 2010-11]

JANUARY 30, 2014

Section 80-IB, read with sections 132 & 153A to 153C, of the Income-tax Act, 1961 - Deduction - Profits and gains from certain industrial undertakings (Housing projects) - Assessment years 2008-09 to 2010-11 - Whether where in response to notice issued under section 153A(1)(a) after search, assessee-firm declared certain additional income pertaining to a housing project undertaken by it, nature of income has to be treated as 'business income' albeit same was not accounted for in books of account - Held, yes - Whether benefits of Chapter VI-A, which inter alia includes section 80-IB(10) are applicable to an assessment made under sections 153A to 153C - Held, yes - Whether assessee is eligible for deduction under section 80-IB(10) in relation to additional income pertaining to a housing project which was offered in a statement under section 132(4) in course of a search and subsequently declared in return filed in response to notice under section 153A(1)(a) - Held, yes [Paras 11, 14 & 19][In favour of assessee]

FACTS

Facts

■		The assessee, a partnership firm engaged, in construction business was subject to a search action under section 132(1). In the course of search, partner of the assessee-firm in a statement deposed under section 132(4), declared certain additional income pertaining to the housing project undertaken by the firm. The additional income declared was on account of on-money received from the customers to whom flats were sold in the said project. The assessee duly reflected such additional income in the returns of income filed in response to notice issued under section 153A(1)(a) for the captioned assessment years as the profits from its housing project, and since the said housing project was eligible for deduction under section 80-IB(10), it claimed deduction under section 80-IB(10) in relation to such additional income.
■		The Assessing Officer did not allow the claim of the assessee for deduction under section 80-IB(10). Firstly, according to the Assessing Officer enhancement of claim under section 80-IB(10), was not permissible in an assessment under section 153A. Secondly, the on-money received by the assessee on sale of flats was not taxable as 'business income' and hence assessee was not eligible for deduction under section 80-IB(10).
■		The Commissioner (Appeals) affirmed the action of the Assessing Officer in denying the deduction under section 80-IB(10). As per the Commissioner (Appeals), the claim of the assessee was not maintainable because (i) the undisclosed income declared by the assessee could not be assessed under the head 'business income' but under the head 'income from other sources'; and, (ii) the benefits of Chapter VI-A, which include section 80-IB(10), are not applicable to assessments made under sections 153A to 153C.

Issue involved

■

Whether benefits of Chapter VI-A would be available in an assessment made under section 153A?

HELD

■		It is not in dispute that the assessee has derived income from undertaking a housing project, which is eligible for section 80-IB(10) benefits. In the return of income originally filed under section 139(1), assessee had claimed deduction under section 80-IB(10) in relation to the profits derived from the said housing project and the same stands allowed even in the impugned assessment which has been made under section 153A(1)(b) as a consequence of a search action under section 132(1). [Para 10]
■		It cannot be denied that the additional income in question relates to the housing project undertaken by the assessee. The material seized in the course of search; the deposition made by the assessee's partner during search under section 132(4); and, also the return of income filed in response to notice issued under section 153A(1)(a) after the search, clearly show that the source of impugned additional income is the housing project. The aforesaid material on record depicts that the impugned income is nothing but unaccounted money received by the assessee from customers on account of sale of flats of its housing project. Clearly, the source of the additional income is the sale of flats in the housing project. Therefore, once the source of income is established the assessability thereof has to follow. The nature of income, thus on facts, has to be treated as 'business income' albeit, the same was not accounted for in the account books. In this manner, the stand of the Assessing Officer or of the Commissioner (Appeals) that the said income is not liable to be taxed as 'business income' cannot be accepted. [Para 11]
■		In terms of clause (i) of the Explanation to section 153A(2), it is evident that all the provisions of the Act shall apply to an assessment made under section 153A save as otherwise provided in the said section, or in section 153B or section 153C.
■		Section 153A(1)(b) requires the Assessing Officer to assess or reassess the 'total income' of the assessment years specified therein. Ostensibly, section 80A(1) prescribes that in computing the 'total income' of an assessee, there shall be allowed from his 'total income' the deductions specified in Chapter VI-A. The moot point is as to whether the aforestated position prevails in an assessment made under section 153A(1)(b) or not?
■		Having regard to the expression 'all other provisions of this Act shall apply to the assessment made under this section' in Explanation (i) of section 153A, it clearly implies that in assessing or reassessing the 'total income' for the assessment years specified in section 153A(1)(b), the import of section 80A(1) comes into play, and there shall be allowed the deductions specified in Chapter VI-A, of course subject to fulfilment of the respective conditions.
■		Therefore, the stand of the Commissioner (Appeals) to the effect that the benefits of Chapter VI-A, which inter alia include section 80-IB(10), are not applicable to an assessment made under sections 153A to 153C cannot be subscribed. The Phraseology of section 153A read with Explanation (i), does not support the premise arrived at by the Commissioner (Appeals) and accordingly, the same is rejected. Therefore, the assessee's claim for deduction under section 80-IB(10) even with regard to the enhanced income was well within the scope and ambit of an assessment under section 153A(1)(b) and the Assessing Officer was obligated to consider the same as per law. [Para 14]
■		In fact, once it is factually explicit that the additional income in question is derived from the housing project, which is eligible for section 80-IB(10) benefits, such an income merely goes to enhance the 'business income' derived from the eligible housing project and shall be entitled for section 80-IB(10) benefits. [Para 18]
■		In the result, on the basis of the aforesaid legal position and the material and evidence on record, assessee is eligible for deduction under section 80-IB(10) in relation to impugned additional income offered in a statement under section 132(4) in the course of search and subsequently declared in the return filed in response to notice under section 153A(1)(a). [Para 19]
■		For all the above reasons, the order of the Commissioner (Appeals) is set aside and the Assessing Officer is directed to allow deduction under section 80-IB(10) for the captioned assessment years. [Para 22]

CASE REVIEW

CIT v. Sun Eng. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) (para 16) distinguished.

CASES REFERRED TO

CIT v. Sheth Developers (P.) Ltd. [2012] 210 Taxman 208 (Mag.)/25 taxmann.com 173 (Bom.) (para 8), CIT v. Gem Plus Jewellery India Ltd. [2010] 330 ITR 175/194 Taxman 192 (Bom.) (para 8) andCIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 (SC) (para 12).

Nikhil Pathak for the Appellant. Mrs. M.S. Verma for the Respondent.

ORDER

G.S. Pannu, Accountant Member - The three captioned appeals relate to the same assessee and involve a common issue, therefore, they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.

2. The captioned three appeals by the assessee are directed against a consolidated order dated 25.09.2012 passed by the Commissioner of Income Tax (Appeals)-I, Pune which, in turn, has arisen from the respective assessment orders passed by the Assessing Officer dated 19.12.2011 u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 (in short "the Act") for assessment year 2008-09 and 2009-10 and u/s 143(3) of the Act for assessment year 2010-11.

3. Substantially speaking in all the appeals the solitary issue relates to assessee's claim for deduction u/s 80IB(10) of the Act in respect of income which was declared by the assessee in the course of search conducted u/s 132(1) of the Act.

4. In the context of controversy before us, the relevant facts can be summarized as follows. The appellant is a partnership firm engaged in construction business which was subject to a search action u/s 132(1) of the Act on 06.10.2009. In the course of search, Shri Rajesh Malpani, partner of the assessee firm in a statement recorded u/s 132(4) of the Act on 03.12.2009 admitted certain undisclosed income in relation to housing project undertaken by the firm i.e. 'The Crest' at Pimple Saudagar, Pune. The assessee duly reflected such additional income in the returns of income filed for the captioned assessment years as the profits from its housing project, and since the said housing project was eligible for deduction u/s 80IB(10) of the Act, it claimed deduction u/s 80IB(10) of the Act even in relation to such additional income. Such claim of the assessee has been denied, which is the subject-matter of dispute before us.

5. As the facts and circumstances pertaining to the aforesaid dispute are common in all the assessment years, the appeal for assessment year 2008-09 is taken as a lead case in order to appreciate the rival contentions. In assessment year 2008-09, assessee had originally filed a return of income on 28.09.2008 declaring 'NIL' income which, inter-alia, included profits from execution of a housing project amounting to Rs.2,10,86,083/-, which was claimed as exempt u/s 80IB(10) of the Act. Thereafter, on 06.10.2009 there was a search action u/s 132(1) of the Act and in response to a notice issued u/s 153A(1)(a) of the Act, assessee furnished a return of income on 24.06.2010 disclosing total income of Rs. 'NIL' after claiming deduction u/s 80IB(10) of the Act of Rs. 2,46,89,494/-, as against a deduction of Rs.2,10,86,083/- claimed in the return of income originally filed u/s 139(1) of the Act. The enhanced claim of deduction u/s 80IB(10) of the Act was on account of an additional income of Rs.36,03,411/- declared by the assessee in the return filed in response to notice issued u/s 153A(1)(a) of the Act. The said additional income was declared on account of on-money received by it from its customers on sale of flats. The claim of the assessee was that the additional consideration received from the customers which was hitherto not declared in the regular books of account but declared in the statement deposed u/s 132(4) of the Act during the course of search, was nothing but an income in respect of the project 'The Crest' at Pimple Saudagar, Pune, which was eligible for deduction u/s 80IB(10) of the Act. The claim of the assessee was that the additional income, which was on-money received on sale of flats was eligible for deduction u/s 80IB(10) of the Act.

6. The Assessing Officer has not allowed the claim of the assessee for deduction u/s 80IB(10) of the Act with respect of the aforesaid component of on-money on sale of flats received by the assessee. The Assessing Officer accepted the additional income of Rs. 36,03,411/- as a part of total income but did not treat it as 'business income' of the assessee and therefore he did not allow deduction u/s 80IB(10) of the Act with respect to such sum. Firstly, as per the Assessing Officer, assessee had claimed deduction u/s 80IB(10) of the Act, of Rs.2,10,86,083/- in the original return which was enhanced to Rs.2,46,89,494/- in the return filed u/s 153A of the Act, and, according to the Assessing Officer enhancement of claim u/s 80IB(10) of the Act, was not permissible in an assessment u/s 153A of the Act. Secondly, according to the Assessing Officer, the on-money received by the assessee on sale of flats was not taxable as 'business income' and hence assessee was not eligible for deduction u/s 80IB(10) of the Act. On being denied u/s 80IB(10) of the Act on the component of the on-money declared in the return filed u/s 153A(1)(a) of the Act, assessee carried the matter in appeal before the CIT(A).

7. In appeal, assessee assailed the action of the Assessing Officer in law and on facts. Assessee canvassed that there was no justification for not allowing the claim u/s 80IB(10) of the Act with respect to the impugned income which was ostensibly derived from the execution of the housing project, 'The Crest' at Pimple Saudagar, Pune, which was eligible for deduction u/s 80IB(10) of the Act. On facts, assessee canvassed out that the additional income in question was unaccounted sale consideration received from customers to whom flats were sold and accordingly the same was liable to be assessed as 'business income' and not as 'income from other sources'. The CIT(A) has since disagreed with the stand of the assessee and has affirmed the action of the Assessing Officer in denying the deduction u/s 80IB(10) of the Act with respect to the impugned income. As per the CIT(A), the claim of the assessee is not maintainable because (i) the undisclosed income declared by the assessee cannot be assessed under the head 'business income' but under the head 'income from other sources'; and, (ii) the benefits of Chapter VIA, which include section 80IB(10), are not applicable to an assessment made under sections u/s 153A to 153C of the Act. For the aforesaid reasons, the CIT(A) has upheld the action of the Assessing Officer. Not being satisfied with the order of the CIT(A), assessee is in further appeal before us.

8. Before us, the learned counsel for the assessee has vehemently pointed out that the lower authorities are not justified in denying the claim of deduction u/s 80IB(10) of the Act. The learned counsel pointed out that the additional income of Rs. 36,03,411/- was declared in the course of search as consideration received from customers on sale of flats. Accordingly, it was nothing but additional sale price received by the assessee which was liable to be taxed as 'business income' relating to its housing project, 'The Crest' at Pimple Saudagar, Pune and therefore the same is eligible for benefits of section 80IB(10) of the Act. It is further pointed out that there is no bar either in the provisions of section 80IB(10) or section 153A of the Act that the deduction u/s 80IB(10) is not allowable in respect of income by way of on-money received on sale of flats. In support of his submissions, the learned counsel has relied upon the judgment of the Bombay High Court in the case of CIT v. Sheth Developers (P.) Ltd. [2012] 210 Taxman 208 (Mag.)/25 taxmann.com 173 (Bom.) and in the case ofCIT v. Gem Plus Jewellery India Ltd. [2010] 330 ITR 175/194 Taxman 192 (Bom.).

9. On the other hand, the learned Departmental Representative appearing for the Revenue has relied upon the orders of the authorities below in support of the case of the Revenue.

10. In the present case, it is not in dispute that the assessee has derived income from undertaking a housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. In the return of income originally filed u/s 139(1) of the Act, assessee had claimed deduction u/s 80IB(10) of the Act in relation to the profits derived from the said housing project and the same stands allowed even in the impugned assessment which has been made u/s 153A(1)(b) of the Act as a consequence of a search action u/s 132(1) of the Act.

11. In the course of search, in a statement deposed u/s 132(4) of the Act, assessee declared certain additional income pertaining to the housing project in question. The additional income declared was on account of on-money received from the customers to whom flats were sold in the said project. At the time of hearing, learned counsel referred to the copy of statement recorded u/s 132(4) of the Act of Shri Rajesh Malpani, a partner of the assessee firm and also copies of some of the seized papers, which indicated receipt of on-money, and the same have placed in the Paper Book at pages 35 to 52. A perusal of the seized material shows that a complete detail of that on-money received is enumerated, viz. name of the customers, amount and the respective flat sold in the project. Even in the deposition made u/s 132(4) of the Act, the partner of the assessee firm made a yearwise detail of additional income declared on account of on-money received on sale of flats in the project. Accordingly, the impugned sum has been declared as unaccounted income from the housing project in question. In the return of income filed in response of notice issued u/s 153A(1)(a) of the Act, assessee has declared such additional income as income from housing project, 'The Crest' at Pimple Saudagar, Pune. The declaration made in the return of income has not been disputed by the Assessing Officer. The only dispute raised by the Assessing Officer is with regard to nature of such income, which according to the Assessing Officer "does not fall under of the any heads of income as described u/s 14 of the I.T. Act". In coming to such conclusion, he has disagreed with the stand of the assessee that such additional income was a 'business income' of the assessee relating to the housing project, 'The Crest' at Pimple Saudagar, Pune. However, as per the CIT(A), the income in question is assessable under the head 'income from other sources'. Ostensibly, the CIT(A) has not agreed with the inference of the Assessing Officer that the impugned income does not fall under any heads of income u/s 14 of the Act because according to her such income is liable to be assessed under the head 'income from other sources. Thus, as of now, before us the inference of the Assessing Officer does not survive any longer since the order of the Assessing Officer has merged in the order of the CIT(A) and in any case the Revenue is not in appeal on this aspect. Be that as it may, factually speaking, it cannot be denied that the additional income in question relates to the housing project, 'The Crest' at Pimple Saudagar, Pune undertaken by the assessee. The material seized in the course of search; the deposition made by the assessee's partner during search u/s 132(4) of the Act; and, also the return of income filed in response to notice issued u/s 153A(1)(a) of the Act after the search, clearly show that the source of impugned additional income is the housing project, 'The Crest' at Pimple Saudagar, Pune. The aforesaid material on record depicts that the impugned income is nothing but unaccounted money received by the assessee from customers on account of sale of flats of its housing project, 'The Crest' at Pimple Saudagar, Pune. Clearly, the source of the additional income is the sale of flats in the housing project, 'The Crest'. Therefore, once the source of income is established the assessability thereof has to follow. The nature of income, thus on facts, has to be treated as 'business income' albeit, the same was not accounted for in the account books. In this manner, we are unable to accept the stand of the Assessing Officer or of the CIT(A) that the said income is not liable to be taxed as 'business income'.

12. Now, coming to the point as to whether such 'business income' qualifies to be eligible for deduction u/s 80IB(10) of the Act in the course of an assessment made u/s 153A(1)(b) of the Act. On this aspect, the learned Departmental Representative submitted that the assessment in cases of search action or requisition are made u/s 153A or 153C of the Act in order to assess undeclared incomes and such provisions are for the benefit of the Revenue and therefore a claim u/s 80IB(10) of the Act cannot be considered in such proceedings, especially when such a claim was not made in the return of income originally filed under section 139 of the Act. In this regard, the learned Departmental Representative has referred to the judgment of the Hon'ble Supreme Court in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297/64 Taxman 442 to point out that even in the cases of re-assessment u/s 147/148 of the Act fresh claims cannot be raised by the assessee. Secondly, it is pointed out by the learned Departmental Representative that even if the claim was to be considered then it was not allowable because the requisite condition that the return of income has to be accompanied by the prescribed audit report has not been complied with by the assessee. On the basis of aforesaid reasons, the claim of the assessee has been opposed.

13. Sections 153A to 153C of the Act contain provisions relating to assessments to be made in cases where search is initiated u/s 132 or a requisition is made u/s 132A of the Act after 31st May, 2003. Clause (b) of sub-section (1) of section 153A postulates assessment or re-assessment of total income of six assessment years preceding the assessment year relevant to the previous year in which such search is conduced or requisition is made. Shorn of other details, it would suffice for us to notice clause (i) of the Explanation below section 153A(2) of the Act, which reads as under :—

"Explanation. — For the removal of doubts, it is hereby declared that, —

(i)

save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section."

14. In terms of the above referred clause (i) of the Explanation, it is evident that all the provisions of the Act shall apply to an assessment made u/s 153A of the Act save as otherwise provided in the said section, or in section 153B or section 153C of the Act. In the background of the expression "all other provisions of this Act shall apply" contained in Explanation (i) below section 153A of the Act, and in the context of the controversy before us, the moot point to be examined is as to whether or not deductions enumerated in Chapter VIA of the Act are to be considered in making an assessment made u/s 153A(1)(b) of the Act. Section 153A(1)(b) of the Act requires the Assessing Officer to assess or reassess the 'total income' of the assessment years specified therein. Ostensibly, section 80A(1) of the Act prescribes that in computing the 'total income' of an assessee, there shall be allowed from his 'total income' the deductions specified in Chapter VIA of the Act. The moot point is as to whether the aforestated position prevails in an assessment made u/s 153A(1)(b) or not? In our considered opinion, having regard to the expression "all other provisions of this Act shall apply to the assessment made under this section" in Explanation (i) of section 153A of the Act, it clearly implies that in assessing or reassessing the 'total income' for the assessment years specified in section 153A(1)(b) of the Act, the import of section 80A(1) of the Act comes into play, and there shall be allowed the deductions specified in Chapter VIA of the Act, of course subject to fulfillment of the respective conditions. Therefore, we are unable to subscribe to the stand of the CIT(A) to the effect that the benefits of Chapter VIA of the Act, which inter-alia include section 80IB(10) of the Act, are not applicable to an assessment made under sections 153A to 153C of the Act. In our considered opinion, the phraseology of section 153A r.w. Explanation (i) as noted above, does not support the premise arrived at by the CIT(A) and accordingly, the same is rejected. Therefore, assessee's claim for deduction u/s 80IB(10) of the Act even with regard to the enhanced income was well within the scope and ambit of an assessment u/s 153A(1)(b) of the Act and the Assessing Officer was obligated to consider the same as per law.

15. The other argument of the Ld. CIT-DR to the effect that the return of income was not accompanied by the prescribed audit report on the enhanced claim of deduction is too hyper-technical, and superficial. Pertinently, the Assessing Officer has not altogether denied the claim of deduction and in any case, the claim was initially made in the return originally filed, which was duly accompanied by the prescribed audit report.

16. The argument set-up by the learned Departmental Representative on the basis of the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works (P.) Ltd. (supra), in our view, is also untenable having regard to the facts of the present case. No doubt the Hon'ble Supreme Court has observed that reopening of an assessment u/s 147/148 is for the benefit of the Revenue. In the case before the Hon'ble Supreme Court, assessee wanted to set-off loss against the escaped income which was taxed in the re-assessment proceedings and the claim of such set-off was not made in the return of income originally filed. According to the Hon'ble Supreme Court, the claim was not entertainable because the said claim not connected with the assessment of escaped income. In-fact, the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra) is not an authority to say that assessee cannot raise a claim pertaining to an issue which is connected to the assessment of escaped income. In-fact, if a claim which is connected to the escaped income is set-up before the Assessing Officer in the course of re-assessment proceedings, the same is liable to be considered and the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd.(supra) only precludes such new claims by the assessee which are unconnected with the assessment of escaped income. In the present case, we are dealing with an assessment u/s 153A of the Act and the scope of such an assessment has already been examined by us in the context of the relevant specific provisions, which do not leave any scope for ambiguity. The judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt. Ltd. (supra) has been rendered on a different footing and is strictly not applicable to the present proceedings. So, however, even if one were to import the reasoning raised by the learned Departmental Representative based on the judgment of the Hon'ble Supreme Court, to the present case, yet we do not find that it would debar the assessee from claiming deduction u/s 80IB(10) of the Act on the impugned additional income declared in the return filed in response to notice u/s 153A(1)(a) of the Act. In the present case, the claim of deduction u/s 80IB(10) of the Act was made in the return of income originally filed and in the return filed in pursuance to the notice u/s 153A(1)(a) of the Act, the claim u/s 80IB(10) of the Act is only enhanced and therefore, it is not a fresh claim. Therefore, in our view, the judgment of the Hon'ble Supreme Court in the case of Sun Engineering Works (P.) Ltd. (supra) does not help the Revenue in the present case.

17. In-fact, the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra) was considering the claim of deduction u/s 80IB(10) of the Act in relation to the undisclosed income declared consequent to the search action. In the case before the Hon'ble High Court, it was factually emerging that undisclosed income was earned by the assessee in the course of carrying on his business activity of a 'builder' and the same was accepted by the Department, but the claim of the deduction u/s 80IB(10) was denied in relation to such income. However, the claim was upheld by the Hon'ble Bombay High Court. In the present case, factually, there is no material to negate the assertion of the assessee, which are borne out of the material on record, that the additional income in question has been received in the course of carrying on its business activity of developing the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits. Therefore, in terms of the parity of reasoning laid down by the Hon'ble Bombay High Court in the case of Sheth Developers (P) Ltd. (supra), the claim of the assessee is justified.

18. In-fact, once it is factually explicit that the additional income in question is derived from the housing project, 'The Crest' at Pimple Saudagar, Pune, which is eligible for section 80IB(10) benefits, such an income merely goes to enhance the 'business income' derived from the eligible housing project and shall be entitled for section 80IB(10) benefits, even as per the ratio of the judgment of the Hon'ble Bombay High Court in the case of Gem Plus Jewellery India Ltd. (supra).

19. In the result, on the basis of the aforesaid legal position and the material and evidence on record, assessee is eligible for deduction u/s 80IB(10) of the Act in relation to impugned additional income offered in a statement u/s 132(4) of the Act in the course of search and subsequently declared in the return filed in response to notice u/s 153A(1)(a) of the Act. In the result, appeal of the assessee for assessment year 2008-09 is allowed.

20. In the other assessment years also the substantive dispute is similar to that adjudicated in the earlier paragraphs for assessment year 2008-09. Therefore, our decision in assessment year 2008-09 shall apply mutatis-mutandis in other two assessment years also.

21. Pertinently, in so far as the assessment year 2010-11 is concerned, the assessment has been completed u/s 143(3) of the Act in pursuance to return of income filed u/s 139 of the Act on 13.10.2010 and it is not an assessment made u/s 153A(1)(b) of the Act. Even in this assessment, claim of the assessee has been denied. In our considered opinion, the claim for deduction u/s 80IB(10) of the Act with regard to the additional income declared for assessment year 2010-11 stands on an even stronger footing than in the other assessment years because in assessment year 2010-11 there was no return of income originally filed but only a single return has been filed on 13.10.2010 as per the provisions of section 139 of the Act, though after the search action on 06.11.2009.

22. For all the above reasons, we therefore, deem it fit and proper to set-aside the order of the CIT(A) and direct the Assessing Officer to allow deduction u/s 80IB(10) of the Act for the captioned assessment years.

23. In the result, the captioned three appeals of the assessee are allowed, as above.

LATA

*In favour of assessee.

--
Regards,

Pawan Singla , LLB

The ratio must make every one of us thinking. According to this table,more that 80% ADDITIONS ARE DELETED AT TRIBUNAL LEVEL.WE HAVE TO FIND THE REASONS FOR THIS VERY LOW SUCCESS RATE.

KINDLY OVER THIS AND MAKE TO RESOLVE TO MAKE ADDITIONS WHERE IT IS REQUIRED AND WILL BRING OUT ALL FACTS IN THE ASSESSMENT ORDER.

DON,T MAKE ADDITIONS FOR THE SAKE OF IT.

IT : In view of third proviso to section 254(2A) substituted by Finance Act, 2008, with effect from 1-10-2008, Tribunal cannot extend stay beyond period of 365 days from date of first order of stay, but assessee can file a writ petition in High Court asking for stay and section 254(2A) does not prohibit/bar High Court from granting stay of recovery

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[2014] 44 taxmann.com 166 (Delhi)

HIGH COURT OF DELHI

Commissioner of Income-tax -II

Maruti Suzuki (India) Ltd.*

SANJIV KHANNA AND SANJEEV SACHDEVA, JJ.

WRIT PETITION (CIVIL) NOS. 5003 & 5086 OF 2013†

FEBRUARY 21, 2014

Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Powers of (Power to grant stay) - Assessment year 2007-08 - Whether in view of third proviso to section 254(2A) substituted by Finance Act, 2008, with effect from 1-10-2008, Tribunal cannot extend stay beyond period of 365 days from date of first order of stay - Held, yes – Whether assessee can file a writ petition in High Court pleading and asking for stay and section 254(2A) does not prohibit/bar High Court from issuing appropriate directions, including granting stay of recovery - Held, yes - Appeal filed by assessee was pending before Tribunal - Tribunal, on stay application filed by assessee, by its order dated 4-1-2013 passed under section 254(2A) extended stay of recovery of demand beyond period of 365 days from date of first order of stay - Whether in peculiar facts of case and keeping in view of language of existing third proviso to section 254(2A), it was to be directed that appeal filed by assessee should be disposed of preferably within a period of two months and impugned demand raised against assessee would remain stayed during said period - Held, yes [Paras 26 & 35] [In favour of revenue]

FACTS

■		The appeal filed by the assessee for the assessment year 2007-08 was pending before the Tribunal. The Tribunal, on stay application filed by the assessee, by its order dated 4-1-2013 passed under section 254(2A) extended the stay of recovery of demand beyond the period of 365 days from the date of first order of stay.
■		On writ petition, the revenue contended that the language of section 254(2A) mandated that no stay order could exceed total period of 365 days and the Tribunal was foreclosed and barred from passing an order extending stay of demand beyond 365 days from the date of first order of stay.

HELD

■		The Legislature in view of the decision of the Supreme Court rendered in the case of CC&CE v.Kumar Cotton Mills (P.) Ltd. [2005] 180 ELT 434 and also the decision of the Bombay High Court rendered in the case of Narang Overseas (P.) Ltd. v. ITAT [2007] 295 ITR 22/165 Taxman 557 has amended/substituted the third proviso to section 254(2A) by the Finance Act, 2008, with effect from 1-10-2008 and added the words 'not attributable to the assessee' therein. This amendment /substitution made to the third proviso is significant. The said words are not redundant or inconsequential and in fact have been added in view of the ratio and the reasoning given in the aforesaid two decisions. This clearly underscores and highlights the intention of the Legislature. [Para 11]
■		The third proviso, after amendment, undoubtedly bars and prohibits the Tribunal from extending interim stay order beyond 365 days. It stipulates deemed vacation and imposes no fault consequences in strict terms. The language is clear and, therefore, has to be respected. However, the provision does not bar or prohibit an assessee from approaching the High Court by way of writ petition for continuation, extension or grant of stay. Fairly the revenue accepts and admits that in spite of section 254(2A), the High Court has power to grant and extend stay where the appeal is pending before the Tribunal. The constitutional power and right is available and has not and cannot be curtailed. The powers of the High Court under articles 226 and 227 form a part and parcel of the basic structure of the Constitution and cannot be over written and nullified. Thus the High Court in appropriate matters can grant or extend stay even when the Tribunal has not been able to dispose of an appeal within 365 days from the date of grant of initial stay.
■		This perhaps appears to be and apparently is the intention of the Parliament. The High Court while granting or rejecting the writ petition will examine the factual matrix, record reasons as to who is to be blamed and is responsible for the default and can also issue appropriate directions or orders for expeditious and early disposal of the appeal. The provision will propel and ensure that the Tribunal will try and dispose of and decide appeals within 365 days of the grant of stay order.
■		The Bombay High Court in the case of Jethmal Faujimal Soni v. ITAT [2011] 333 ITR 96 had occasion to deal with a similar situation and entertained the writ petition. In the said case, constitutional validity of the third proviso inserted in section 254(2A) by the Finance Act, 2008, with effect from 1-10-2008 was challenged. It was observed that the proviso enacted a stringent provision as a result of which even if the delay in disposing of the appeal was/is not attributable to the assessee, the stay stands vacated after 365 days. Thus the Tribunal was/is under binding duty and obligation to dispose of the appeal within the said time, particularly when the fault was not on the part of the assessee. In the said case, directions were issued for expeditious disposal of the appeal and it was also directed that the revenue shall not take coercive steps for enforcing demand subject matter of the appeal. [Para 17]
■		The aforesaid view taken by the Bench raises an incidental issue as to whether the High Court should be burdened with such litigation and whether the revenue should be allowed to take advantage even if there were defaults and lapses on its part. The later part can be corrected by the High Court in exercise of writ jurisdiction, but it would be appropriate and necessary for the officers of the revenue to examine and in appropriate cases make a statement before the Tribunal that no coercive steps would be taken to recover the demand as the delay was occasioned and attributable to its fault and lapse. Section 254(2A) does not bar or prohibit the revenue from not enforcing the demand, even when there is no stay of the challenged demand. The first aspect is a matter of policy and in the realm of Legislation. [Para 18]
■		It was submitted by the revenue that there are large number of appeals in which demands have been stayed by the Tribunal. These appeals are not being decided within 365 days and in spite of third proviso, the Tribunal has been extending the stay order. [Para 19]
■		Grant of stay by the Tribunal is not a matter of right, but is decided by a speaking order, recording prima facie view on merits. In case there is an error or the Tribunal has erred in granting stay, the revenue is not without remedy and can approach the High Court in accordance with law. [Para 22]
■		In view of the aforesaid discussion, the Bench has reached the following conclusion:

(i)		In view of the third proviso to section 254(2A) substituted by the Finance Act, 2008, with effect from 1-10-2008, the Tribunal cannot extend stay beyond the period of 365 days from the date of first order of stay.
(ii)		In case default and delay is due to lapse on the part of the revenue, the Tribunal is at liberty to conclude hearing and decide the appeal, if there is likelihood that the third proviso to section 254(2A) would come into operation.
(iii)		the third proviso to section 254(2A) does not bar or prohibit the revenue or departmental representative from making a statement that they would not take coercive steps to recover the impugned demand and on such statement being made, it will be open to the Tribunal to adjourn the matter at the request of the revenue.
(iv)		An assessee can file a writ petition in the High Court pleading and asking for stay and the High Court has power and jurisdiction to grant stay and issue directions to the Tribunal as may be required. Section 254(2A) does not prohibit/bar the High Court from issuing appropriate directions, including granting stay of recovery. [Para 26]

■		In the writ petition, the revenue has not stated or averred that the assessee is responsible for the delay or was adopting dilatory tactics to prevent adjudication of the appeal. [Para 34]
■		In view the aforesaid, it had to be directed that in case appeal filed by the assessee has not been disposed of, the same should be disposed of expeditiously and preferably within a period of two months. The impugned demand shall remain stayed during the said period. However, in case the appeal is not disposed of within the said period, it will be open to the assessee to file a writ petition in the High Court for grant of stay of the impugned demand. It will be also open to the Tribunal to proceed in accordance with the law as indicated above. [Para 35]

CASES REFERRED TO

IPCL v. CCE 2004 (169) ELT 267 (Trib. - Mum.) (LB) (para 3), ITO v. M.K. Mohammed Kunhi[1969] 71 ITR 815 (SC) (para 4), Polini v. Gray [1879] 12 Ch.D. 438 (para 4), Narang Overseas (P.) Ltd. v. ITAT [2007] 295 ITR 22/165 Taxman 557 (Bom.) (para 7), CC&CE v. Kumar Cotton Mills (P.) Ltd. [2005] 180 ELT 434 (SC) (para 8), CIT v. Ecom Gill Coffee Trading (P.) Ltd. [2012] 209 Taxman 190/23 taxmann.com 235 (Kar.) (para 9), PML Industries Ltd. v. CCE [2013] 39 STT 302/31 taxmann.com 382 (Punj. & Har.) (para 9), HCL Technologies Ltd. [IT Appeal No. 67 of 2013, dated 15-7-2013] (para 14), L. Chandra Kumar v. Union of India [1997] 3 SCC 261 (para 17) and Jethmal Faujimal Soni v. ITAT [2011] 333 ITR 96 (Bom.) (para 17).

N.P. Sahni and Ruchir Bhatia for the Petitioner. S. Ganesh, Anand Sukumar, S. Sukumaran andBhupesh Kumar for the Respondent.

JUDGMENT

Sanjiv Khanna, J. - The present decision will dispose of the writ petitions filed by the Commissioners of Income Tax impugning orders passed by the Income Tax Appellate Tribunal (tribunal, in short) on the stay applications filed by Maruti Suzuki (India) Limited and Bose Corporation India Pvt. Ltd. By the impugned orders, stay of recovery of demand in favour of the respondent-assessee has been extended beyond period of 365 days. The contention of the Revenue is that the Tribunal does have power to grant stay of demand pending consideration of the appeal but the said right is circumscribed and has to be exercised within the four corners of Section 254(2A) of the Income tax Act, 1961 (Act for short). The said section reads:-

"254. Orders of Appellate Tribunal. — (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit.

(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) or sub-section (2) of section 253 :

Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:

Provided further that where such appeal is not so disposed of within the said period of stay as specified in the order of stay, the Appellate Tribunal may, on an application made in this behalf by the assessee and on being satisfied that the delay in disposing of the appeal is not attributable to the assessee, extend the period of stay, or pass an order of stay for a further period or periods as it thinks fit; so, however, that the aggregate of the period originally allowed and the period or periods so extended or allowed shall not, in any case, exceed three hundred and sixty-five days and the Appellate Tribunal shall dispose of the appeal within the period or periods of stay so extended or allowed:

Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee."

2. The contention of the petitioner/Revenue is that language of Section 254(2A) mandates that no stay order can exceed total period of 365 days and tribunal is foreclosed and barred from passing an order extending stay of demand beyond 365 days. The Statute is clear. The tribunal being a creation of the statute is bound by the said provision and cannot violate and negate the express letter of law. The violation has to be checked and the legislation respected.

3. On the other hand, learned counsel for the respondents submit that the said section is not clear and the Supreme Court had examined paramateria provisions i.e. Section 35C(2A) of the Central Excise Act, 1944 (CE Act, for short), introduced w.e.f. 11th May, 2002 and had approved the ratio and view taken by the larger Bench of the tribunal constituted under the CE Act in IPCL v. CCE 2004 (169) E.L.T. 267 (Trib. - (Mum.)(LB). Stay orders can be extended if the delay is not attributable to the assessee and the assessee is not to be blamed.

4. The tribunal is an appellate forum and the final fact finding authority under the provisions of the Act. Power to grant interim stay by the tribunal was recognized by the Supreme Court in ITO v. M.K. Mohammed Kunhi [1969] 71 ITR 815, observing that express grant of statutory appellate power carries by it with by necessary implication, the authority to use all reasonable means to make such grant effective. Power to the tribunal under Section 254 of the Act, was/is of widest amplitude and, therefore, carried with it by necessary implication all powers and duties incidental and necessary to make the exercise of power fully effective. Reference was made to the powers of the court of appeal to grant stay in Polini v. Gray [1879] 12 Ch.D 438, wherein it has been observed as under:—

"It appears to me on principle that the Court ought to possess that jurisdiction, because the principle which underlies all orders for the preservation of property pending litigation is this, that the successful party in the litigation, that is, the ultimately successful party, is to reap the fruits of that litigation, and not obtain merely a barren success. That principle, as it appears to me, applies as much to the Court of first instance before the first trial, and to the Court of appeal before the second trial, as to the Court of last instance before the hearing of the final appeal."

5. The aforesaid incidental powers are subject to and can be circumscribed by the statute. Tribunals have statutory power under Rule 35A of the Appellate Tribunals Rules 1963 to grant stay of demand. Section 254(2A) was inserted by Finance Act, 1999 w.e.f. 1st June, 1999, at the time of insertion it was as under:—

"(2A) In every appeal, the Appellate Tribunal, where it is possible, may hear and decide such appeal within a period of four years from the end of the financial year in which such appeal is filed under sub-section (1) of section 253."

6. Provisos were interested by Finance Act, 2001 w.e.f. from 1st June, 2001 read as under:—

"Provided that where an order of stay is made in any proceedings relating to an appeal filed under sub-section (1) of section 253, the Appellant Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order:

Provided further that if such appeal is not so disposed of within the period specified in the first proviso, the stay order shall stand vacated after the expiry of the said period."

The said provisos were subsequently substituted by Finance Act, 2007 w.e.f. 1st June, 2007 and the substituted provisos used to read as under:-

"Provided that the Appellate Tribunal may, after considering the merits of the application made by the assessee, pass an order of stay in any proceedings relating to an appeal filed under sub-section (1) of section 253, for a period not exceeding one hundred and eighty days from the date of such order and the Appellate Tribunal shall dispose of the appeal within the said period of stay specified in that order:

7. The effect of the added provisos as they then existed was considered by the Bombay High Court inNarang Overseas (P.) Ltd. v. ITAT [2007] 295 ITR 22/165 Taxman 557 and it was held that the provisos and the Section did not exclude or negate the power of the tribunal to grant relief after the period of 180 days. The intent of the Parliament was not to denude the tribunal of its incidental power to continue the interim reliefs and the mischief which the amendment sought to curtail was long delay and disposal of the proceedings where interim relief was obtained by the assessee. The second proviso read in a reasonable manner was to avoid and check this mischief and not an arbitrary mandate to deny an assessee continuation of interim relief beyond 180 days, when he was not at fault. Amendment of 2007 had extended the period of interim relief to 365 days with the intent that the tribunal should take note of the delay and it was not with the objective to defeat the rights of the assessee when the appeal could not be disposed of even when there was no omission or failure on the assessee's part but either for failure of the tribunal or acts of the Revenue.

8. Revenue did prefer an appeal against the said judgment but the same was disposed of as infructuous, leaving the question of law open. However, we find that the ratio of the said decision was acceptable and in accordance with law, as identical and pari materia provision of the CE Act was examined by the Supreme Court in CC&CE v. Kumar Cotton Mills (P.) Ltd. [2005] 180 ELT 434 and approving the decision of the Larger Bench of the Tribunal in IPCL's case (supra), it was observed as under:—

"3. The provision has clearly been made for the purpose of curbing the dilatory tactics of those assesses who, having got an interim order in their favour, seek to continue the interim order by delaying the disposal of the proceedings. Thus, depriving the revenue not only of the benefit of the assessed value but also a decision on points which may have impact on other pending matters.

6. The sub-section which was introduced in terrorem cannot be construed as punishing the assesses for matters which may be completed beyond their control. For example, many of the Tribunals are not constituted and it is not possible for such Tribunals to dispose of matters. Occasionally by reason of other administrative exigencies for which the assessee cannot be held liable, the stay applications are not disposed of within the time specified. The reasoning of the Tribunal expressed in the impugned order and as expressed in the Larger Bench matter, namelyIPCL v. Commissioner of Excise, Vadodara (supra) cannot be faulted. However, we should not be understood as holding that any latitude is given to the Tribunal to extend the period of stay except on good cause and only if the Tribunal is satisfied that the matter could not be heard and disposed of by reason of the fault of the Tribunal for reasons not attributable to the assessee."

9. We are aware that the Karnataka High Court in CIT v. Ecom Gill Coffee Trading (P.) Ltd. [2012] 209 Taxman 190/23 taxmann.com 235 has dissented from the view taken by Bombay High Court inNarang Overseas (P.) Ltd. (supra). However, the said decision was dealing with and interpreting provisos to Section 254 (2A) after amendment by way of Finance Act, 2008 w.e.f. 1st October, 2008. The said amendment has made substantial difference and has to be duly noted as reflecting a different legislative intent consequent to the amendment. At this stage, we would like to take notice of the decision of Punjab and Haryana High court in PML Industries Ltd. v. CCE [2013] 39 STT 302/31 taxmann.com 382, relating to provisions of Section 35(2A) of the CE Act. In the said decision after extensively referring to the case law on the subject and applying the doctrine of reading down, the High Court has held that the circular in question, which stipulated that the demand if not stayed by the tribunal within 30 days would be recovered, should be struck down. It was observed:—

"52. The assessee having preferred appeal and that Tribunal being satisfied that condition for dispensing with the pre-deposit of duty demanded and penalty levied is made out, is compelled to pay the duty demanded and penalty levied, if the appeal is not decided within 180 days. The assessee has no control in respect of matters pending before the Tribunal; in the matter of availability of infrastructure; the members of the Tribunal and the workload. Therefore, for the reason that the Tribunal is not able to decide appeal within 180 days, the vacation of stay is a harsh and onerous and unreasonable condition. The condition of vacation of stay for the inability of the Tribunal to decide the appeal is burdening the assessee for no fault of his. Such a condition is onerous and renders the right of appeal as illusory. An order passed by a judicial forum is sought to be annulled for no fault of assessee. Therefore, in terms of judgments in Anant Mills Ltd. and Seth Nandlal cases (supra), such condition of automatic vacation of stay on the expiry of 180 days, has to be read down to mean that after 180 days the Revenue has a right to bring to the notice of the Tribunal the conduct of the assessee in delay or avoiding the decision of appeal, so as to warrant an order of vacation of stay. If the provision is not read down in the manner mentioned above, such condition suffers from illegality rendering the right of appeal as redundant."

10. The third proviso to section 254(2A) after the amendment in 2008 vide Finance Ac, 2008 for the sake of convenience, is again reproduced below:

"Provided also that if such appeal is not so disposed of within the period allowed under the first proviso or the period or periods extended or allowed under the second proviso, which shall not, in any case, exceed three hundred and sixty-five days, the order of stay shall stand vacated after the expiry of such period or periods, even if the delay in disposing of the appeal is not attributable to the assessee."

The relevant portion of the proviso has been underlined for the purpose of clarity and appreciation.

11. We have quoted above, relevant portion of the decision of the Supreme Court in Kumar Cotton Mills (P.) Ltd.(supra). The said decision had drawn distinction and held that the proviso did not prohibit the tribunal from extending the interim order beyond 365/180 days if the assessee was not at fault or the delay in disposal was not attributable to him. This aspect was also highlighted in Narang Overseas (P.) Ltd.(supra). It was held that the provisos as they existed did not bar or prohibit the tribunal from extending the stay order. However, the Legislature in view of the said judgment and keeping in view the language of the existing provisions and the reasoning given in the said judgments has specifically introduced and added the words "not attributable to the assessee". This amendment/substitution made to the third proviso is significant. The said words are not redundant or inconsequential and in fact have been added in view of the ratio and the reasoning given in the aforesaid two decisions. This clearly underscores and highlights the intention of the Legislature.

12. Learned counsel for the assessees have submitted that the provision after amendment is unduly harsh, if not draconian as the assessee will now suffer for no fault or even when faults or delay are directly attributable to the Revenue. There could be faults and delay because the Bench of the tribunal may not be able to hear the appeal or the upper time limit specified comes to an end even when the judgment is reserved or judgment of the High Court or of special Bench is awaited.

13. Indeed there can be numerous reasons and causes why appeals, after grant of stay, may not get finally decided within 365 days. There is also merit in the contention of the counsel for the assessees that when an assessee is at fault and delay is attributable to him, invariably a stay granted is vacated or should be vacated by the tribunal. Stay is granted or extended only when prima facie case is made out and the assessee does not delay the proceedings. The provisions are clear that the tribunal can vacate or modify the stay order; if not, the Constitutional Courts can be moved.

14. Keeping these aspects in mind, in ITA No. 67/2013 relating to HCL Technologies Ltd. on 15th July, 2013, the following order was passed:—

"Learned counsel for the appellant has been asked to answer what the tribunal should do, when departmental representative pray for an adjournment in a stay granted matter and the period of 365 days is about to expire? Whether the tribunal can and should foreclose the right of the departmental representative to argue and proceed to dispose of the matter ex parte or at best by relying upon the assessment order or the first appellate order? Tribunal is the final fact finding body.

Learned Senior Standing Counsel for the Revenue submits that he is not in a position to answer this question without obtaining instructions".

15. The response given by Commissioner of Income Tax Central III in letter dated 31st July, 2013 was ambiguous and vague. He has relied upon the statutory provision without meeting the question or the query raised and has observed as under:—

"4. So far as appeal is concerned, it may be disposed of depending upon various facts and circumstances including the genuine requests for adjournments and principles of natural justice. It may be mentioned that even after expiry of about 17 months from the impugned order, the ITAT has not been able to dispose of the said appeal till date."

16. Indeed the effect of the substituted third proviso would be that the tribunal may refuse to grant adjournment on request of the Revenue, even when the briefed and arguing departmental representative is on leave or has not been able to prepare the case. However, it can be assumed that the Revenue is aware of the said consequences and the negative effect it may have.

17. In these circumstances, we have examined whether we can read down the third proviso, by applying principles of equity, justice and fair play and also the principle that the court should interpret a provision in a manner that it does not lead to arbitrary results or make it violative of Article 14 or would render it unconstitutional. However, it is clear to us that the legislative mandate has to be respected and the courts do not legislate but interpret the statute as a legislative edict. The third proviso after amendment, undoubtedly bars and prohibits the tribunal from extending interim stay order beyond 365 days. It stipulates deemed vacation and imposes no fault consequences in strict terms. The language is clear and therefore has to be respected. However, the provision does not bar or prohibit an assessee from approaching the High Court by way of writ petition for continuation, extension or grant of stay. Fairly, the standing counsel for Revenue accepts and admits that in spite of Section 254(2A), the High Court has power to grant and extend stay where the appeal is pending before the tribunal. The constitutional power and right is available and has not and cannot be curtailed. The powers of the High Court under Articles 226 and 227 form a part and parcel of the basic structure of the Constitution and cannot be over written and nullified as held by the Constitutional Bench in L. Chandra Kumar v. Union of India [1997] 3 SCC 261. Thus, the High Court in appropriate matters can grant or extend stay even when the tribunal has not been able to dispose of an appeal within 365 days from the date of grant of initial stay. This perhaps appears to be and apparently is the intention of the Parliament. High Court while granting or rejecting the writ petition will examine the factual matrix, record reasons as to who is to be blamed and is responsible for the default and can also issue appropriate directions or orders for expeditious and early disposal of the appeal. The provision will propel and ensure that the tribunal will try and dispose of and decide appeals within 365 days of the grant of stay order. The Bombay High Court in Jethmal Faujimal Soniv. ITAT [2011] 333 ITR 96, had occasion to deal with a similar situation and entertained the writ petition. In the said case constitutional validity of the third proviso inserted in Section 254(2A) of the Act by Finance Act, 2008, w.e.f. 1st October, 2008 was challenged It was observed that the proviso enacted a stringent provision as a result of which even if the delay in disposing of the appeal was/is not attributable to the assessee, the stay stands vacated after 365 days. Thus, the tribunal was/is under binding duty and obligation to dispose of the appeal within the said time, particularly when the fault was not on the part of the assessee. In the said case, directions were issued for expeditious disposal of the appeal and it was also directed that the Revenue shall not take coercive steps for enforcing demand subject matter of the appeal.

18. The view we have taken, raises an incidental issue whether the High Court should be burdened with such litigation and whether the Revenue should be allowed to take advantage even if there were defaults and lapses on their part. The later part can be corrected by the High Court in exercise of writ jurisdiction but it would be appropriate and necessary for the officers of the Revenue to examine and in appropriate cases make a statement before the tribunal that no coercive steps would be taken to recover the demand as the delay was occasioned and attributable to their fault and lapse. Section 254(2A) does not bar or prohibit the Revenue from not enforcing the demand, even when there is no stay of the challenged demand. The first aspect is a matter of policy and in the realm of Legislation.

19. During the course of hearing before us, it was submitted on behalf of the Revenue that there are large number of appeals in which demands have been stayed by the tribunal, these appeals are not being decided within 365 days and in spite of third proviso, tribunal has been extending the stay order. It was highlighted that in the case of Maruti Suzuki Ltd.,the tribunal had stayed the demand for a period of 6 months or till disposal of the appeal whichever was earlier by order dated 3rd February, 2012. The stay was extended vide order dated 28th August, 2012 for 5 months, which came to an end on 28th January, 2013. The stay was further extended by the tribunal vide order dated 8th February, 2013 for another period of 4 months. Similarly, in the case of Bose Corporation India Private Limited stay was granted for the first time on 9th December, 2011 for a period of 6 months, second time on 15th June, 2012 for a period of 180 days and third time on 4th January, 2013 for a period of 6 months. In spite of objections of the Revenue, for the fourth time stay was granted on 12th July, 2013 for another period of 180 days.

20. In light of the said submissions, while reserving the judgment on 7th November, 2013, we had asked Mr. Rajeeve Mehra, Additional Solicitor General of India to furnish information/details from the tribunal. The relevant portion of the order dated 7th November, 2013 reads as under:—

"We feel it appropriate and proper to get data from the Tribunal for last three years with regard to:

(a)		Number of appeals filed before the Tribunal by the assessee and the revenue;
(b)		Average time taken for disposal of an appeal before the Tribunal;
(c)		Number of cases in which the stay orders were passed and average time of disposal of an appeal where stay order was passed;
(d)		Number of cases/appeals where stay orders were passed but matters had/have remained pending beyond 365 days and;
(e)		The number of appeals disposed of within 365 days from the date of grant of stay.

We are not asking the Tribunal to compile the data but if the said data is available, the same may be furnished and made available as it is required for just and equitable disposal of the present writ petitions.

A copy of the order be given dasti to the office of the learned Additional Solicitor General."

21. Information/data in this regard was received vide letter dated 30th January, 2014 written by Assistant Registrar, Tribunal. The relevant portion of the said letter reads as under:—

"(a)

Number of appeals filed before the Tribunal by the assessee and the revenue is as under:-

Year	Assessee	Revenue	Total
2011	3359	3013	6372
2012	3593	3462	7055
2013	3975	3102	7077
Total	10927	9577	20504

(b)		No data is available with regard to average time taken for disposal of the appeal before the Tribunal.
(c)		(i) The year-wise details of the stay orders passed by the Tribunal are as under:—

	Year	Number of stay orders
	2011	173
	2012	278
	2013	321

		(ii) The complete details in respect of each and every appeal where stay order was passed is annexed as Annexure-1, 2 & 3.
(d)		The year-wise details of the cases/appeals which remained pending beyond 365 days of the stay order are as under:-

	Year	Number of appeals disposed-off after 365 days or pending for more than 365 days
	2011	90 Appeals
	2012	131 Appeals
	2013	36 Appeals

(e)

The year-wise details of the number of appeals disposed of within 365 days from the date of grant of stay are as under:-

	Year	Number of appeals disposed-off within 365 days or pending within 365 days
	2011	83 Appeals
	2012	147 Appeals
	2013	285 Appeals"

22. The aforesaid data does not mention the quantum of demand, which was subject matter of stay, but the position is certainly not bleak and unpalatable. Most of the appeals in which stay had/has been granted, were/are being disposed of within 365 days. Number of appeals, which were not disposed of within 365 days of grant of stay, have come down sharply in the year 2013. Grant of stay by the tribunal is not a matter of right, but is decided by a speaking order, recording prima facie view on merits. In case there is an error or the tribunal has erred in granting stay, Revenue is not without remedy and can approach the High Court in accordance with law.

23. We do not have figures or data on whether the demands raised, which was subject matter of stay, was sustained/upheld or were deleted by the tribunal. Merits and justification of additions is examined by the appellate forums and demands raised have relevance when they are sustained by the tribunal/High Court and the Supreme Court.

24. Registry of this Court has made available to us following data:—

A	B	C	D	E
*Year*	*Total number of income-tax appeals*	*Appeals filed by CIT*	*Appeals filed by assessee*	*% of appeals filed by Assessee*
2009	1367	1128	239	18
2010	2063	1790	273	13
2011	1303	1121	182	14
2012	711	578	133	19
2013	584	464	120	21

(The data/figures in columns C and D have been manually calculated and thus subject to marginal calculation error).

25. The aforesaid data reveals that Revenue is the appellant before the High Court in disproportionately large percentage of cases, being aggrieved by the finding/adjudication by the tribunal on the question of law and fact. Appeals are preferred by the Revenue mostly in cases where the tax demand is Rs.10 lakhs or above. The aforesaid figures/data does indicate that in substantial number of matters, Revenue may not have succeeded before the tribunal in sustaining the tax demand.

26. In view of the aforesaid discussion, we have reached the following conclusion:—

(i)		In view of the third proviso to Section 254(2A) of the Act substituted by Finance Act, 2008 with effect from 1st October, 2008, tribunal cannot extend stay beyond the period of 365 days from the date of first order of stay.
(ii)		In case default and delay is due to lapse on the part of the Revenue, the tribunal is at liberty to conclude hearing and decide the appeal, if there is likelihood that the third proviso to Section 254 (2A) would come into operation.
(iii)		Third proviso to Section 254 (2A) does not bar or prohibit the Revenue or departmental representative from making a statement that they would not take coercive steps to recover the impugned demand and on such statement being made, it will be open to the tribunal to adjourn the matter at the request of the Revenue.
(iv)		An assessee can file a writ petition in the High Court pleading and asking for stay and the High Court has power and jurisdiction to grant stay and issue directions to the tribunal as may be required. Section 254(2A) does not prohibit/bar the High Court from issuing appropriate directions, including granting stay of recovery.

27. We have not examined the constitutional validity of the provisos to Section 254 (2A) of the Act and the issue is left open.

28. We would now like to deal with the individual facts relating to each writ petition, though some facts have been stated in paragraph 19, above.

W.P.(C) 5003/2013 (CIT versus ITAT & Base Corpn. India Pvt. Ltd.)

29. Appeal filed by the respondent-assessee relates to assessment year 2007-08 and was filed in the year 2011. Stay of the impugned demand was granted by order dated 9th December, 2011 and was extended by order dated 15th June, 2012. The question relates to determination of arms length pricing on international transactions and the tax amount involved is Rs.4,63,35,706/- which includes interest of Rs.96 lakhs under Section 234B of the Act. By the impugned order dated 4th January, 2013, stay was extended by 180 days or till the disposal of the appeal, whichever occurs first. The impugned order records that after 15th June, 2012, the appeal was listed thrice for hearing on 3rd July, 2012, 13th August, 2012 and 8th November, 2012, but adjournments were taken by the departmental representative. Earlier also on 16th February, 2012, the departmental representative had taken an adjournment. However, the assessee had taken adjournment on 11th April, 2012 on the ground of change in counsel.

30. The aforesaid facts have not been denied in the writ petition, but reference is made to the statutory provisions.

W.P.(C) 5086/2013 (CIT versus M/s Maruti Suzuki (India) Ltd.)

31. The writ petition relates to assessment year 2007-08 and the impugned order granting stay or extending stay beyond 365 days is dated 8th February, 2013. The impugned order records submission of the assessee that additional demand raised by the Assessing Officer including interest stands at Rs. 359 crores. As per the impugned order, demand of Rs.184 crores is already concluded or covered by issues which have been decided in favour of the assessee. The other major addition relates to transfer pricing adjustment resulting in demand of Rs.155.78 crores on account of advertisement, marketing and promotion (AMP). As per the impugned order, the issue was prima facie covered by the decision of the special bench of the tribunal in the case of L.G. Electronics, wherein an order of remand was passed. Application for rectification in respect of demand of Rs.18 crores was pending before the Assessing Officer. Refund of Rs.62 crores has already been adjusted against pending demand. As per the impugned order, the assessee has been asked to deposit Rs. 23 crores. Therefore, as per the assessee, on final adjudication, an amount of Rs.85 crores would be refundable.

32. Commissioner of Income Tax vide letter dated 31st July, 2013 had furnished a chart giving details of hearing before the tribunal, which indicates that 24 hearings were held till 4th June, 2013. The said chart reads as under:—

"S.No.	Date of Hearing	Adjourned to	Adjournment sought (A/R)
1	02.02.2012	14.02.2012	Part heard and continue hearing alongwith ITA No.5622, 5623/10 & 5465/2011
2	14.02.2012	15.02.2012	Adjourned
3	15.02.2012	06.03.2012	Arguments of assessee counsel partly heard. Adjourned to 06.03.2012.
4	06.03.2012	29.03.2012	Judicial members on leave
5	29.03.2012	30.04.2012	Constitution of Bench ends to be presented before regular Bench
6	30.04.2012	11.07.2012	Adjourned by Bench for want of time
7	11.07.2012	01.08.2012	Adjourned on request of both parties
8	01.08.2012	02.08.2012	Adjourned
9	02.08.2012	23.08.2012	Assessee's argument. Part Heard
10	23.08.2012	03.09.2012	Adjourned on request of both parties
11	03.09.2012	05.09.2012	Adjourned on request of both parties
12	05.09.2012	15.10.2012	Adjourned on request of both parties
13	15.10.2012	01.11.2012	Adjourned on request of both parties
14	01.11.2012	08.11.2012	Both counsel's busy in special Bench Adjourned on request of both parties
15	08.11.2012	21.11.2012	Adjourned on request of both parties
16	21.11.2012		To be listed in regular course
17	03.01.2013	30.01.2013	Adjourned on request of DR
18	30.01.2013	11.03.2013 12.03.2013	Adjourned due to paucity of time by bench
19	11.03.2013	01.04.2013	Adjourned on request of both parties
20	01.04.2013	02.04.2013	Assessee's counsel's argument heard
21	03.04.2013	09.04.2013	Special Counsel's argument continued. Adjourned to 08.05.2013.
22	08.05.2013 15.05.2013	23.05.2013	Special counsel's argument continued.
23	23.05.2013	04.06.2013	Member on leave
24	04.06.2013	02.07.2013	Member on leave and Adjourned by both parties."

33. It is apparent that the department had engaged special counsel in the present case.

34. It is noticeable that in the writ petition the Revenue has not stated or averred that the assessee is responsible for the delay or was adopting dilatory tactics to prevent adjudication of the appeal.

35. Keeping in view the aforesaid facts, we direct that in case appeals filed by the two assessees have not been disposed of, the same should be disposed of expeditiously and preferably within a period of two months. The impugned demand shall remain stayed during the said period in case appeals have not yet been disposed of. However, in case the appeals are not disposed of within the said period, it will be open to the assessee to file a writ petition in the High Court for grant of stay of the impugned demand. It will be also open to the tribunal to proceed in accordance with the law as indicated above.

36. The writ petitions are accordingly disposed of, without any order as to costs.

S.K.J.

*In favour of revenue.

†Writ Petition arising out of order of Tribunal.

GUJARAT HIGH COURT QUASHES DEPARTMENT CIRCULAR TO COLLECT DOUBLE DUTY ON SALE OF PROPERTIES THROUGH BANKS.

SCA/2113/2012 1/1 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION No. 2113 of 2012
==========================================
===============
CANARA BANK ASHRAM ROAD - Petitioner(s)
Versus
COLLECTOR OF STAMPS & 2 - Respondent(s)
==========================================
===============
Appearance :
MR KI SHAH for Petitioner(s) : 1,
None for Respondent(s) : 1 - 3.
==========================================
===============
CORAM : HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR
BHATTACHARYA
and
HONOURABLE MR.JUSTICE J.B.PARDIWALA
Date : 17/02/2012
ORAL ORDER
(Per : HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR
BHATTACHARYA)
If office objections are not removed within one week from
today, the matter will stand dismissed.
(BHASKAR BHATTACHARYA, ACTING CJ.)
(J.B. PARDIWALA, J.)
zgs/-

I-T - Whether when assessee makes a payment of Rs 20,000/- and above by crossed cheque but fails to add the word a/c payee only, such expenditure warrants disallowance u/s 40A(3)(a) - YES: HC

By TIOL News Service

AHMEDABAD, APR 29, 2014: THE issues before the Bench are - Whether when the assessee makes a payment of Rs 20,000/- and above by crossed cheque but fails to add the word a/c payee only, such expenditure warrants disallowance u/s 40A(3)(a) and Whether the banks are under directive from the RBI not to deposit the cheque amount in favour of any person other than the drawee of the cheque. And the answers go against the assessee.

Facts of the case

The assessee's return of income was taken for scrutiny. The assessing officer disallowed 20% of the total payment during the year under consideration otherwise than by account payee cheque in violation of provisions of section 40A(3)(a) of the Income Tax Act, 1961.

The CIT(Appeals) dismissed the assessee's appeal holding that the cheques were otherwise than Account Payee Cheques. It was held that the evidences in the form of endorsement and acceptance noted down on the overleaf side of the cheques confirmed that cheques were not A/c. Payee cheques. It was held that assessee tried to place a false claim by submitting the documents which he knew were not true. There was enough evidence to point out that there was violation of provisions of section 40A(3)(a) of the Act and the Assessing Officer rightly considered that payments were made otherwise than by Account Payee Cheques, and thereby, there was violation of provision of section 40A(3)(a) of the Act. CIT(Appeals) held that the Assessing Officer rightly disallowed 20% of payment and added the same to the total income of the assessee.

In further appeal, the Tribunal held that Circular issued by the CBDT referred to the Instructions issued by the Reserve Bank of India to the banks in which the difference between a crossed cheque and account payee cheque had been brought out. While account payee cheque was credited by the drawee bank to the bank account of the payee and none else, crossed cheque can be negotiated and thus can be credited by the drawee bank to the bank account of a person other than the payee. The payments made by a crossed cheque cannot be considered as payment by account payee cheque. Law required payments to be made by an account payee cheque and not by a crossed cheque. It was held that once payment exceeding Rs.20,000/- was shown to have been made otherwise than by account payee cheque drawn on a bank or account payee bank draft, the expenditure in respect of which such payment had been made cannot be allowed as deduction. The assessee-firm made impugned payments exceeding Rs.20,000/- in a day and claimed deduction in respect thereof while computing its profits. It was admitted by the assessee that the impugned payments exceeding Rs.20,000/- were made otherwise than by account payee cheque drawn on a bank or account payee bank draft. Thus all the conditions for the applicability of section 40A(3) were fully satisfied. Thus, tribunal dismissed assessee's appeals.

Assessee submitted that payments were made through cheques which were discounted through shroffs and payments were received by the drawees of the cheques. Thus the fact that all payments were received by the drawees was established. This being the paramount consideration of legislature for enactment of section 40A(3) of the Act, disallowance would not be justified. He further submitted that there was no distinction in law between a crossed cheque and an account payee cheque. Term "an account payee cheque" was not defined either under the Act or under the Negotiable Instruments Act and was, therefore, not capable of a precise meaning.

Having heard the parties, the Court held that,

++ Section 40A(3)(a) of the Act as it stood at the relevant time provided that where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding Rs.20,000/- otherwise than by an account payee cheque drawn on a bank or account payee bank draft to the extent of 20% of such expenditure, shall not be allowed in respect of such expenditure. In subsequent year this disallowance of deduction was increased to 100% of the expenditure;

++ previously the language used in the said provision was "a crossed cheque drawn on a bank or by a crossed bank draft". Such provision was amended with effect from 13.7.2006 to substitute the expression "an account payee cheque drawn on a bank or account payee bank draft". Thus there was a conscious change in the phraseology used in the said provision and the expression "a crossed cheque drawn on a bank" was replaced by "an account payee cheque drawn on a bank". Likewise, expression "a crossed bank draft" was replaced by "an account payee bank draft". The reasons for such amendments were explained in CBDT Circular No.1 of 2007 dated 27.4.2007 providing inter alia that a crossed cheque or a crossed bank draft is not a nonnegotiable instrument. This, at times, results in crossed cheques being endorsed making it difficult to trace final payee and thus defeating the provisions of section 40A(3). As per RBI instructions to banks, an account payee cheque or account payee bank draft cannot be credited to any account other than the account of the payee. The Act was accordingly amended to substitute the said expressions;

++ it is indisputable that the term "an account payee cheque" is well understood and signifies cheque which carries a mandate to have the amount mentioned in the cheque to be paid to the drawee of the cheque. In common parlance and as per RBI directives, it would, thereafter, not be open to the drawee of the cheque to endorse the cheque in favour of another person;

++ directions thus in no uncertain terms mandate the banks to credit the amount of an account payee cheque only in the account of the payee and no other person and conversely not to accept any cheque from any source other than the person named in the account payee cheque except after requiring the drawer of the cheque to withdraw the mandate in this respect;

++ by virtue of the clear understanding of an account payee cheque in commercial parlance further amplified by RBI guidelines noted above, it cannot be said that there is no distinction between a crossed cheque and an account payee cheque. The concept of an account payee cheque which is even otherwise well known in banking circles and commercial parlance; with specific unambiguous directives by RBI gets further amplified. The banks are duty bound to carry out such directions issued by the RBI in exercise of powers under section 35A of the Banking Regulations Act;

++ previously the expression used in section 40A(3)(a) was a crossed cheque or a crossed bank draft. With specific purpose in mind, the same was amended by the legislature to be replaced by the expression "an account payee cheque or account payee bank draft". This was done in the background of the experience that even crossed cheques were being endorsed in favour of a person other than the drawee making it difficult to trace the constituent of the money. To plug this possible loophole the requirement of section 40A(3) was made more stringent. If we accept the contention of the counsel for the assessee that there was no distinction between a crossed cheque and an account payee cheque, we would be obliterating this amendment brought in the statute with specific purpose in mind;

++ even an account payee cheque may still retain its negotiability unless it carries a further endorsement "non-negotiable". To this aspect of the matter we are neither called upon nor intended to give any conclusive opinion. We, however, cannot resist referring to the decision of the Calcutta High Court in the case of Messrs. Tailors Priya, a firm vs. Messrs. Gulabchand Danraj, a firm. In such decision also it was observed that a law on the point should be reconsidered and it is generally believed that by crossing a cheque with the words "a/c. Payee only", it is made non-negotiable. It is clarified that according to the law as it stands at present a cheque even if it is account payee without the endorsement "not negotiable" would still be negotiable instrument;

++ when RBI directives command the banks not to deposit the cheque amount in favour of any person other than the drawee of the cheque and correspondingly prohibit the banks from accepting any cheque, which is account payee cheque from a source other than the drawee, lack of any distinction between a crossed cheque and an account payee cheque without a further endorsement "not negotiable" would be of no further relevance;

++ for the purpose of section 40A(3) of the Act, thus there is really a clear distinction which exists, must be recognised and implemented as required in the plain language used therein;

++ CIT(Appeals) in fact noted a futile attempt on part of the assessee to show that the cheques were A/c payee. Assessee relied on documents which were not genuine. We may, however, proceed on the basis that the payments were in fact received by respective drawees of the cheques. Admittedly, however, there was no other additional ground, compelling reason or commercial expediency, which would have left no choice, would have compelled the assessee to make payment other than by account payee cheques. It was this overwhelming consideration of impossibility of making the payments through the mode other than by account payee cheque which had convinced us to accept the case of the assessee in the case of Anupam Tele Services vs. Income Tax Officer. It was when the assessee would have got out of the business that if ignored the directions of the principal and continued to make payment by account payee cheques the Court granted relief in the said case;

+ in the result, the Tribunal, in our opinion has correctly interpreted the provisions of section 40A(3) in background of the facts arising in these appeals.

No liability of director to pay taxes of Co. if he was appointed after conversion of private co. into public co

April 29, 2014[2014] 44 taxmann.com 231 (Gujarat)

IT : Where a company was initially incorporated as a private company in September, 1991 and it was converted into a public limited company on 5-4-1995 and thereafter assessee became its director on 9-3-1996, since assessee joined company as a director only after it was converted into a public limited company, outstanding dues of company could not be recovered from him under section 179

As we all know that Most of the Provisions of the Companies Act-2013 are applicable w.e.f. 1-4-2014 and are relevant for the Financial Year 2014-15 and onwards. Many changes have taken place in the present scenario of Companies Act-2013 in comparison to Companies Act-1956.

The Board of Directors and Shareholders take many decisions by way of resolutions to run a company. As per the Companies Act-1956, some resolutions were required to be filed with ROC. But the Companies Act-2013, has widened the list of resolutions to be filed by the company with ROC. Please Note that this requirement is applicable on every company, Whether, Listed, Public, Private.

1- TIME LIMIT AND FEES FOR FILING OF RESOLUTION

SI.NO.	TIME LIMIT FOR FILING	FEES FOR FILING
1-	With in 30 days of passing the resolution	Normal fees as prescribed in Table A of Fees
2-	Within Next 270 days after above mentioned 30 days	Normal Fees + additional Fees which may go up to 12 times of normal fees

The Fees has been prescribed in the Table A and Table B of the Table given in the Companies (Registration office and fees) Rules, 2014

2- PENALTY FOR NON FILING

If the Resolutions and agreements (as given Under Section 117 to be filed) has not been filed with in the time mentioned in the above mentioned table, then the Company and Every officer in default is liable to pay penalty as given in the following table.

SI.NO.	WHO ARE LIABLE FOR PENALTY	QUANTUM OF PENALTY
1-	Company	Minimum - Rs. 5,00,000/- Maximum - Rs. 25,00,000/-
2-	Every Officer of the Company who is in default	Minimum - Rs. 1,00,000/- Maximum - Rs. 5,00,000/-

3- HOW RESOLUTIONS ARE TO BE FILED

All the resolutions and agreements which are required to be filed will be filed in FORM- MGT-14.

4- LIST OF RESOLUTIONS AND AGREEMENTS TO BE FILED (Prescribed U/S 117 of the Companies Act-2013)

(a)

All special resolutions (It is to be worth mentioning here that in Companies Act, 2013, the requirement to pass special resolutions has been prescribed in various sections)

(b)

Resolutions passed by a company according consent to the exercise by its Board of directors of any of the powers under clause (a) and clause (c) of sub-section (1) of section 180

The Resolution u/s 180(1)(a) is for

To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the company owns more than one undertaking, of the whole or substantially the whole of any of such undertakings.

The Resolution u/s 180(1)(c) is for

To borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company's bankers in the ordinary course of business:

(C)

Resolutions passed in pursuance of sub-section (3) of section 179;

The Resolutions u/s 179(3) are for

(a)	To make calls on shareholders in respect of money unpaid on their shares;
(b)	To authorise buy-back of securities under section 68;
(c)	To issue securities, including debentures, whether in or outside India;
(d)	To borrow monies;
(e)	To invest the funds of the company;
(f)	To grant loans or give guarantee or provide security in respect of loans;
(g)	To approve financial statement and the Board's report;
(h)	To diversify the business of the company;
(i)	To approve amalgamation, merger or reconstruction;
(j)	To take over a company or acquire a controlling or substantial stake in another company;
(k)	any other matter which may be prescribed (As per the prescribed Rules, the following types of resolutions are to be passed at Board Meeting) (1) to make political contributions; (2) to appoint or remove key managerial personnel (KMP); (3) to take note of appointment(s) or removal(s) of one level below the Key Management Personnel; (4) to appoint internal auditors and secretarial auditor; (5) to take note of the disclosure of director's interest and shareholding; (6) to buy, sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company; (7) to invite or accept or renew public deposits and related matters; (8) to review or change the terms and conditions of public deposit; (9) to approve quarterly, half yearly and annual financial statements or financial results as the case may be.

(d)

Resolutions requiring a company to be wound up voluntarily passed in pursuance of section 304;

(e)

Resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;

(f)

any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a managing director;

(g)

resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members;

(h)

any other resolution or agreement as may be prescribed and placed in the public domain.

5-CONCLUSION

From the above discussion it can be very well understand what is the importance of Minute Book Maintenance in real time, What are the consequences of non filing of resolutions and agreement in time, what is the importance of Professionals in the functioning of a Company, whether the company is big, medium or small.

Note : In the above article, some words have been marked in red ink which in my opinion should be emphasized.

Hope the information will assist you in your Professional endeavours. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards

CA SOHRABH JINDAL

__._,_.___

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Friday, May 2, 2014

[aaykarbhavan] Judgments and Innformation [1 Attachment]

No liability of director to pay taxes of Co. if he was appointed after conversion of private co. into public co

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