Only deductible expenditure could be subjected to sec. 40(a)(ia) disallowance for TDS default, says ITAT
August 29, 2014[2014] 48 taxmann.com 19 (Delhi - Trib.)
IT : In order to fall within ambit of section 40(a)(ia), it is sine qua non that assessee should have been otherwise eligible for deduction of sum which is sought to be disallowed by invoking provisions of section 40
IT : Where assessee, a custom clearing agent, received certain amount from its clients as reimbursement of expenses which did not contain any profit element, Assessing Officer was not justified in applying gross profit rate at 8 per cent on estimate basis on amount so reimbursed in order to make addition to assessee's taxable income
Extension by CBDT of TAR – Are you satisfied with it?
C.P. Chugh
Dear All
True but of no use.
What we got is a big BABA JI KA TULLU (in the words of Kapil Sharma, standup comedian)
CBDT circulars/notifications are often over riding the basic of law. Law makers have thoughtfully provided sufficient time to furnish return, obtain and furnish TAR and keeping in mind the required time they have allowed a tax payer to furnish it on or before 30th September…………
Well over 180 days from the close of the accounts. Law has provided the format of Income-tax Return and format of TAR well before the close of the year.
NOW the CBDT has assumed that a period of little over 30 days is enough to submit the returns. Jawa Utility for ITR 6 being just released a few days back and new format for TAR being notified only on 25th July.
Well done CBDT……………………….?
Let any member of the Board accept the challenge and try prepare and furnish ONE return (leaving aside completing audit) with TAR in less than an Hour. They would come to know the ground realities.
Have any body thought why it has happened.
In fact it has been a systematic approach since the last couple of years.
(Courtesy PC the then FM, in one of his budget speech he referred he does not want human interference in tax matter and therefore propose to set up CPC at Bangaluru)
First e-filling was notified, then made mandatory for number of class of assessees.
Personal inter-action was removed with the Bar and Bench. Look at CPC and no body is willing to answer your querry. Territorial ITO refusing to entertain in case of e-filed return and CPC BLR suo moto adjusting your so called uploaded demands (most of which are either non-existent or wrong) and holding your refunds. You being left out in distress, not knowing whom to contact.
CPC TDS even being more aggressive and denying you to correct your wrong data, insisting of pre-payment of defaulted amount and not providing for REFUND of excess tax deposited, even in genuine cases. NO one to listen………………..
AND our Hon'ble FM says, he is not favor of TAX TERRORISM. Finance Act 2014 has redefined the tax terrorism by including more aggressive and harsh provisions.
While we enjoyed the comforts of our air conditioned offices by not moving out and furnishing returns online, we have become the slave of system. CBDT being the master of system.
Devoid of personal interactions, the relevancy of Bar Associations and such other plate forms has lost and every one has been left out to beat his drum, not producing any melodious tune to the ears of Masters.
To me, Only solution is to prepare an ONLINE association of Tax Professionals across the country and sing a melody song in fine tune so as the Masters are pleased and listen to us………….remove our worries.
Any body willing to shoulder the responsibility is welcome. I offer my unconditional support for the cause.
(Author may be contacted on cpchugh@gmail.com)
s. 54 – Depositing of unutilised portion of capital gain in notified scheme up to expiry of time-limit for filing return U/s. 139(4)
From a plain reading of Sub-section (2) of Section 54 of the Income-tax Act, 1961, it is clear that only Section 139 of the Income-tax Act, 1961, is mentioned in Section 54(2) in the context that the unutilised portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income-tax under Section 139 of the Income-tax Act. Section 139 of the Income-tax Act, 1961, cannot be meant only Section 139(1) but it means all sub-sections of Section 139 of the Income-tax Act, 1961. Under Sub-section (4) of Section 139 of the Income-tax Act any person who has not furnished a return within the time allowed to him under Sub-section (1) of Section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier. Such being the situation, it is the case of the respondent/assessee that the respondent/assessee could fulfill the requirement under Section 54 of the Income-tax Act for exemption of the capital gain from being charged to income-tax on the sale of property used for residence up to March 30, 1998, inasmuch as the return of income-tax for the assessment year 1997-98 could be furnished before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under Sub-section (4) of Section 139 of the Income-tax Act, 1961.
Gauhati High Court
Commissioner Of Income-Tax
vs
Rajesh Kumar Jalan
9 August, 2006
Equivalent citations: (2006) 206 CTR Gau 361, 2006 286 ITR 274 Gauhati
JUDGMENT
T. Nandakumar Singh J.
1. The appellant/Commissioner of Income-tax, Gauhati-I, preferred this appeal under Section 260A of the Income-tax Act, 1961 against the common order dated April 18, 2001, passed by the Income-tax Appellate Tribunal, Gauhati Bench, Gauhati, in I. T. A. No. 328(Gau) of 1999 and I. T. A. No. 49(Gau) of 2000 for the assessment year of the assessee 1996-97. By an order of this Court dated February 28, 2003, the appeal is admitted on the question : "Whether, in the facts and circumstances of the case, the assessee was entitled to claim benefit under Section 54 of the Income-tax Act, 1961, on the entire amount received by him on account of sale of his house property ?" The respondent/assessee is an income-tax assessee and the status of the assessee is that of an individual trading in the business of truck plying. The assessment year under consideration is 1996-97.
2. The issue involved in the present appeal is the claim for benefit of exemption from being charged to income-tax on the sale of properties used for residence under Section 54 of the Income-tax Act, 1961. Section 54 of the Income-tax Act, 1961, is a beneficial provision of the Income-tax Act, 1961 for the assessee in the matter relating with the sale of properties used for residence, it appears, for the constitutional goal of providing residence to the citizen of India. It is fairly well-settled that in construing a beneficial enactment, the view that advances the object of the beneficial enactment and serves its purpose must be preferred to the one which obstructs the objects and paralyses the purpose of the beneficial enactment. In this regard, we may refer to the decision of the apex court in Kunal Singh v. Union of India . Since Section 54 of the Income-tax Act, 1961, is required to be read and discussed in the present appeal it would be more convenient to quote Section 54 of the Income-tax Act, 1961, in entirety.
54. Profits on sale of property used for residence.–
(1) Subject to the provisions of Sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset ['to which the provisions of Section 53 are not applicable, omitted by the Finance Act, 1985 with effect from 1-4-1985] being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head 'Income from house property (hereafter in this Section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this Section, that is to say,–
(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this Section referred to as the new asset, the difference between the amount of the capital gain and the cost of the new asset shall be charged under Section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gains shall not be charged under Section 45 ; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the date of furnishing the return of income under Section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under Sub-section (1) of Section 139] in an account in any such bank or institution as may be specified in, and utilized in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of Sub-section (1), the amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified in Sub-section (1), then,–
(i) the amount not so utilized shall be charged under Section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
3. The facts which would suffice for deciding the present appeal are that the respondent/assessee sold his 1/4th share in a residential property known as "Jalal House" at Rehabari, Guwahati, for a consideration of Rs. 40,00,000 (rupees forty lakhs) only to the Government of Meghalaya for the sale deed No. 348 dated December 21, 1995. Admittedly, the indexed cost of the property was worked out at Rs. 10,26,925 (rupees ten lakhs twenty-six thousand nine hundred and twenty-five) and thus, there was a capital gain of Rs. 29,73,048 (rupees twenty-nine lakhs seventy-three thousand and forty eight) earned by the respondent/assessee and it was also not disputed. The respondent/assessee with the money for the sale of his residential property known as "Jalal House" decided to purchase a residential Flat No. 4B on the fourth floor of a multistoried building situated at Bally High,l, Ballygunge Park Road, Calcutta-19, from Shri Radha Krishna Jalan and Smt. Anguri Devi Jalan on February 8, 1996, each having one half share of ownership of the residential flat. The respondent/ assessee negotiated with the above two owners to purchase their residential flat for a consideration of Rs. 30,00,000 (rupees thirty lakhs) and accordingly entered into two agreements dated May 9, 1996, and May 17, 1996, and under the said two agreements, the respondent/assessee had taken physical possession of the said residential flat. From the two agreements of purchase, it is clear that each of the co-owners agreed to transfer and assign their respective shares or interest in the said flat together with a car park space for a consideration of Rs. 30,00,000 (rupees thirty lakhs) in total.
4. The Assessing Officer (for short the "AO") under his assessment order rejected the respondent/assessee's claim for exemption under Section 54 of the Income-tax Act, 1961, for the reason that (a) the appellant/assessee has taken only a sub-lease of the property vide indenture of sub-lease dated January 17, 1998, in between him and M/s. Agarwal Company Ltd, and the said indenture has been executed in pursuance of the letter dated August 28, 1961, written by Shri R.K. Jalan and Smt. Anguri Devi Jalan to the said lessee ; (b) the sub-lease cannot be taken as a clear purchase as per the meaning of the provisions of Section 54(1) of the Income-tax Act and also that there was no transfer of property as claimed and the same was merely a sub-lease ; (c) the appellant/assessee had not complied with the provisions of Section 54(2) of the Income-tax Act by not depositing the unappropriated amount of capital gain in the Capital Gains Deposit Scheme, 1988, within the stipulated time of furnishing the return of income-tax under Section 139(1) of the Income-tax Act. The respondent/ assessee preferred the first appeal being Appeal No. GUWA-75/99/2000 against the assessment order of the Assessing Officer to the Commissioner of Income-tax (Appeals), Guwahati. The first appellate authority had partly allowed the appeal by passing the final order dated September 24, 1999, wherein the first appellate authority held that even a lease also amounts to a transfer within the meaning of the Transfer of Property Act, 1882, by referring to two decisions of the Supreme Court in R.K. Palshikar (HUF) v. CIT and A.R. Krishnamurthy v. CIT , and as such the transfer in question between the respondent/ assessee on the one side and Shri Radha Krishna Jalan and Smt. Anguri Devi Jalan on the other side is the transfer of capital asset within the provisions of Section 2(47)(v) of the Income-tax Act but the first appellate authority held that the respondent/assessee could utilise only Rs. 14,43,254 (rupees fourteen lakhs forty-three thousand two hundred and fifty-four) up to August 31, 1996, towards the purchase of the property and balance amount of capital gain of Rs. 15,29,794 (rupees fifteen lakhs twenty nine thousand seven hundred and ninety-four) was not deposited in a separate capital gain account with the bank by construing Sub-section (2) of Section 54 of the Income-tax Act, 1961, in such a manner that the appellant/assessee did not deposit the unutilized portion of the capital gain before the date of furnishing the return of income-tax under Section 139(1) of the Income-tax Act, 1961.
5. The respondent being aggrieved by the findings of the first appellate authority, i.e., the Commissioner of Income-tax (Appeals), that the respondent/assessee was eligible for exemption under Section 54 of the Income-tax Act, 1961, to the extent of only Rs. 14,43,254 (rupees fourteen lakhs forty-three thousand two hundred and fifty-four) and direction to the Assessing Officer to levy the capital gains tax on the amount of Rs. 15,29,794 (rupees fifteen lakhs twenty nine thousand seven hundred and ninety-four) only in place of Rs. 29,73,048 (rupees twenty-nine lakhs seventy-three thousand and forty eight) under Section 54 of the Income-tax Act also preferred an appeal against the order of the first appellate authority dated September 24, 1999, before the Income-tax Appellate Tribunal, Gauhati Bench, Gauhati. The Department also preferred an appeal against the order of the learned first appellate authority, i.e., the learned Commissioner of Income-tax dated September 24, 1999, before the learned Income-tax Appellate Tribunal, Gauhati Bench, Gauhati. By a common order dated April 18, 2001, the Income-tax Appellate Tribunal had allowed the appeal preferred by the respondent/assessee and rejected the appeal preferred by the appellant/Commissioner of Income-tax, Gauhati Bench. The basis on which the Income-tax Appellate Tribunal, Gauhati Bench, allowed the appeal preferred by the respondent/assessee is that Section 54 of the Income-tax Act being the beneficial provision, it should be construed liberally to advance the object of giving benefit to the assessee by exempting the capital gain on the sale of property used for residence from being charged to income-tax and also that Sub-section (2) of Section 54 of the Income-tax Act, 1961, simply mentions that the unutilized portion of the capital gain on the sale of the property used for residence could be deposited by the assessee before the date of furnishing return of income-tax under Section 139 of the Income-tax Act and also that the Sub-section (2) of Section 54 of the Income-tax Act does not mention that the date of furnishing of return of income-tax should be construed within the meaning of Section 139(1) of the Income-tax Act, 1961. The learned Income-tax Appellate Tribunal, Gauhati Bench was of the view that the date of furnishing of return of income-tax contemplated in Sub-section (2) of Section 54 should also include Sub-section (4) of Section 139 of the Income-tax Act inasmuch as Sub-section (2) of Section 54 of the Income-tax Act mentions only Section 139 of the Income-tax Act without any further restriction or without confining to Sub-section (1) of Section 139 of the Income-tax Act, 1961. The operative portion of the order of the learned Income-tax Appellate Tribunal Gauhati Bench, Gauhati, dated April 18, 2001, reads as follows :
9. We have carefully considered the submissions of the learned representatives of the parties. We have also gone through the orders of the authorities below and the copies of the documents to which our attention was drawn by the learned representatives of the parties at the time of hearing of the appeals.
10. There is no dispute that the assessee entered into two separate agreements with Shri Radha Krishna Jalan dated May 9, 1996 ; and Smt. Anguri Devi Jalan dated May 17, 1996, for purchase of undivided 1/2 share of each in the said flat together with the said undivided share in the land for a consideration of Rs. 15 lakhs to each aggregating to Rs. 30 lakhs. We also observe from the said agreement that the said vendors agreed to transfer and assign in favour of the assessee all their rights and interest in the said flat with the absolute ownership without any objection, obstruction and/or hindrance whatsoever on their part or any person claiming through under or on their behalf. We also observe that the assessee was liable to pay all future maintenance charges, municipal rates and taxes and other outgoings in respect of the said flat. Not only this, there is no dispute that the assessee got the possession of the said flat in May, 1996. We further observe that in the balance-sheet, a copy of which is placed at pages B-l to B-6 of the paper book the assessee had shown in the list of investments in Schedule E the total investment in the properties in respect of the said flat at Rs. 30 lakhs and the balance amount payable to Sri Radha Krishan Jalan and Smt. Anguri Devi Jalan was shown as unsecured loans. Clause 5 of Section 2(47) of the Act reads as under :
any transaction involving the allowing of possession of any immovable property to be taken or retain in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882), or, . . .
11. Therefore, for the purpose of transfer the possession of the flat in part performance of the contract under Section 53A of the Transfer of Property Act is essential. Further, under the provision of Section 54(1) of the Act, it is stipulated that a person is entitled to take the benefit if the purchase has been made within the stipulated period of one year before or two years after the date on which the transfer took place. In the case before us, the assessee has undisputedly entered into agreement for purchase of the flat and taken possession within one year from the date of sale of the old residential house. Therefore, we agree with the learned authorised representative of the assessee that the assessee has complied with the requirements as laid down in Section 54(1) of the Act by purchasing the flat at a cost of Rs. 30 lakhs as against the capital gain of Rs. 29,73,048. Therefore, we agree with the learned authorised representative of the assessee that there has been no necessity to comply with the conditions for availing of the benefit from tax of the capital gain, as laid down under Section 54(2) of the Act, i.e., to deposit the unpaid amount in a separate bank account under the capital gain account scheme. We are of the view that the assessee had already appropriated the entire capital gain for purchase of the new asset within the stipulated time. In this regard, we find support from the decision of the Kerala High Court in the case of K.C. Gopalan wherein it was held that the assessee is entitled to exemption under Section 54 even though for the construction of the new house, the amount that was received by way of sale of his old property as such was not utilised. It was held by the Kerala High Court that no provision is made by the statute that the assessee should utilise the amount which he obtained by way of sale consideration for the purpose of meeting the cost of the new asset. It was held that Section 54 only provides that the assessee has to purchase a house property for the purpose of his own residence within a period of one year before or after the date on which the transfer of his property took place or he should have constructed a house property within a period of two years after the date of transfer. It was further held that entitlement of exemption under Section 54 relates to the cost of acquisition of a new estate in the nature of a house property for the purpose of his own residence within the specified period.
12. In the case before us, the ratio laid down by the hon'ble Kerala High Court squarely applies to the case before us as the assessee had acquired the house at a cost more than the capital gains within the specified period.
13. Therefore, we hold that the assessee is entitled to for the exemption under Section 54 of the Act for the entire long-term capital gain of Rs. 29,73,048. Accordingly, we allow the ground of appeal of the assessee and reject the ground of appeal of the Department.
6. From a plain reading of Sub-section (2) of Section 54 of the Income-tax Act, 1961, it is clear that only Section 139 of the Income-tax Act, 1961, is mentioned in Section 54(2) in the context that the unutilised portion of the capital gain on the sale of property used for residence should be deposited before the date of furnishing the return of the Income-tax under Section 139 of the Income-tax Act. Section 139 of the Income-tax Act, 1961, cannot be meant only Section 139(1) but it means all sub-sections of Section 139 of the Income-tax Act, 1961. Under Sub-section (4) of Section 139 of the Income-tax Act any person who has not furnished a return within the time allowed to him under Sub-section (1) of Section 142 may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment year whichever is earlier. Such being the situation, it is the case of the respondent/assessee that the respondent/assessee could fulfill the requirement under Section 54 of the Income-tax Act for exemption of the capital gain from being charged to income-tax on the sale of property used for residence up to March 30, 1998, inasmuch as the return of income-tax for the assessment year 1997-98 could be furnished before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier under Sub-section (4) of Section 139 of the Income-tax Act, 1961.
7. The apex court in State of Maharashtra v. Santosh Shankar Acharya held that it is too well known a principle of construction of statutes that the Legislature engrafted every part of the statute for a purpose. The legislative intention is that every part of the statute should be given effect. The Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the Legislature will not be accepted except for compelling reasons.
8. The apex court in Bhavnagar University v. Palitana Sugar Mill P. Ltd. , held that it is the basic principle of construction of statute that statutory enactment must ordinarily be construed according to their plain meaning and no words should be added, altered or modified unless it is plainly necessary to do so to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute. Paras. 24 and 25 of the Bhavnagar University v. Palitana Sugar Mill P. Ltd. as follows:
24. True meaning of a provision of law has to be determined on the basis of what it provides by its clear language, with due regard to the scheme of law.
25. Scope of the legislation on the intention of the Legislature cannot be enlarged when the language of the provision is plain and unambiguous. In other words statutory enactments must ordinarily be construed according to its plain meaning and no words shall be added, altered or modified unless it is plainly necessary to do so to prevent a provision from being unintelligible, absurd, unreasonable, unworkable or totally irreconcilable with the rest of the statute.
9. For the reasons discussed above, we answer the question formulated in the present case in positive. Accordingly the order of the learned Income-tax Appellate Tribunal, Gauhati Bench, Gauhati, dated April 18, 2001, passed in I. T. A. No. 328/Gau/1999 and I. T. A. No. 49/Gau/2000 is not interfered with and the appeal is dismissed.
Parties are to bear their own costs.
Section 37- Redemption fine paid under Customs Act, 1962 is allowable expenditure
The respondent-assessee, a partnership firm, was engaged at the relevant time in manufacture of organic chemicals. Under an agreement dated 9th June, 1987 with M/s India Craft, the respondent-assessee purchased 630 metric tonnes Isobutanol by sale on high-sea basis. The said India Craft had procured the consignment of Isobutanol from Netherlands against REP license issued in their favour. The respondent-assessee upon import applied for clearance of goods under REP licence, but the goods were detained. This resulted in litigation between the respondent-assessee and Customs authorities. The goods in question were sold in an auction on 14th March, 1989 pursuant to the direction of the Supreme Court. In the meanwhile and as directed, adjudication proceedings under the Indian Customs Act, 1962, (Customs Act, for short) were held whereby, redemption fine of Rs.90,00,000/- and penalty of Rs.10,00,000/- was imposed on the respondent-assessee, which on appeal was reduced to Rs.45,00,000/- and Rs.2,00,000/-, respectively.
The question raised in the present appeal is whether redemption fine of Rs.45,00,000/- could be claimed as an expenditure under Section 37 of the Income Tax Act, 1961 (Act, for short) or the same is hit by the Explanation to Section 37 or was not an expenditure, wholly and exclusively for purpose of business. Learned counsel for the Revenue has submitted that the expenditure in question would be barred under the Explanation to Section 37 as redemption fine was paid by way of penalty and as per Section 111(d) of the Customs Act, the goods in question were prohibited goods.
Learned counsel for the respondent-assessee has, however, relied upon decision of this Court in Usha Micro Process Controls Ltd. Vs. Commissioner of Income Tax, (2013) 204 DLT 664. The said case also related to payment of redemption fine and reference therein was made to the judgment of the Madras High Court in Commissioner of Income Tax Vs. N.M. Parthasarathy, [1995] 212 ITR 105 and decision of the Supreme Court in Prakash Cotton Mills Pvt. Ltd. Vs. Commissioner of Income Tax (Central), Bombay, [1993] 201 ITR 684. 5. Learned counsel for the Revenue, however, submits that the decision in Usha Micro Process Controls Ltd. (supra) requires reconsideration in view of decisions of other high courts as noticed in Commissioner of Income Tax Vs. Jayaram Metal Industries, [2006] 286 ITR 403 (Kar) and Maddi Venkataraman & Co. (P) Ltd. Vs. Commissioner of Income Tax, [1998] 229 ITR 534 (SC). He submits that language of Explanation to Section 37 is quite clear and once it is held that the expenditure was incurred for any purpose, which was prohibited by law, the same is deemed not to be incurred for the purpose of business or profession. The said Explanation incorporates a deeming fiction, which must be given full effect to.
In the facts of the present case, we are not inclined to examine the larger issue raised by the appellant-Revenue because of the findings of fact recorded by the Tribunal. The requirement of Explanation is that payment in form of expenditure should not be made for the purpose, which is prohibited by law. Finding of the Tribunal, as recorded in the impugned order, is that M/s India Craft had initially entered into a contract and had purchased Isobutanol under REP licence and the same was subsequently purchased by the respondent-assessee on high-sea basis. This was a commercial transaction between two unrelated parties. It is in these circumstances, that the respondent-assessee had applied for clearance of goods in India. Earlier similar goods had been cleared by the Customs authorities under REP licence. The fault or defect in the REP licence was not attributable to the respondent-assessee as the licenses were issued to India Craft. The respondent-assessee was not to be blamed and had not indulged in any offence or incurred any expenditure for the purpose, which was prohibited by law. The respondent-assessee had to pay redemption fine in order to save and protect themselves and in terms of the order passed by the Supreme Court, they had received the balance consideration from the auction proceeds. As noticed above, the goods had been sold in auction pursuant to the direction of the Supreme Court. The finding recorded by the Tribunal is that the conduct and action of the respondent-assessee was not blameworthy or commanding censure. The respondent-assessee wanted to set-off the redemption fine from the consideration received by them. In fact, the respondent-assessee had only received the net amount after adjustment of the redemption fine. Of course, the penalty amount is not a subject matter of the present appeal and we express no opinion in that regard.
In view of the aforesaid, we do not think that the appellant-Revenue is entitled to succeed in the present appeal. The substantial question of law in the facts of the present case as found by the Tribunal has to be answered in favour of the respondent-assessee and against the appellant-Revenue. Ordered accordingly. No costs.
Section 153C – Mere use or mention of word "satisfaction" or the words "I am satisfied" in order or note is not sufficient
On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied" that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person).Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is – after such satisfaction is arrived at – that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction".
It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act.
This being the position the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed. It is ordered accordingly. The writ petitions are allowed as above. There shall be no order as to costs.
Section 153C – Mere use or mention of word "satisfaction" or the words "I am satisfied" in order or note is not sufficient
On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied" that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person).Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or re-assess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is – after such satisfaction is arrived at – that the document is handed over to the Assessing Officer of the person to whom the said document "belongs". In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction".
It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act.
This being the position the very first step prior to the issuance of a notice under Section153C of the said Act has not been fulfilled. Inasmuch as this condition precedent has not been met, the notices under Section 153C are liable to be quashed. It is ordered accordingly. The writ petitions are allowed as above. There shall be no order as to costs.
Clarification Accounting Standards (AS) 10 – Capitalization of Cost – regarding
Sumit Grover
Vide General Circular No. 35/2014, Dated 27/08/2014, Ministry of Corporate Affairs has clarified the following issues with respect to the capitalisation of borrowing costs in power projects:1) Borrowing costs incurred during extended delay in commencement of commercial production after the plant is otherwise ready, can not be capitalised by virtue of AS-10 & AS-16 issued by ICAI.
2) Other capitalisations should be made unit-wise, instead of project wise, therefore, in case one of the units of the project is ready for commercial production, capitalisation for such unit should be made, irrespective of the fact that construction of other units still continues.
3) AS-10 & AS-16 deals with all types of power projects. It doesn't differentiate treatment for cost plus projects or competitive bid projects.
Full Text of the Circular is as follows :-
General Circular No. 35/2014
F.No.17/66/2013/CL-V
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
5th Floor, 'A' Wing Shastri Bhawan,
Dr. R.P. Road, New Delhi
Dated: 27th August 2014
Dr. R.P. Road, New Delhi
Dated: 27th August 2014
To
All Regional Directors,
All Registrars of Companies,
All Stakeholders.
Subject: Clarification Accounting Standards (AS) 10 – Capitalization of Cost – regarding.
Sir,
Government has received a number of representations seeking clarifications on capitalization of costs in cases of Competitive Bid power projects. The clarifications sought were with regard to capitalization of borrowing costs incurred during extended delay in commercial production for reasons beyond the developer's control, and whether capitalization of power plant should be unit-wise or project-wise. The matter has been examined in consultation with the Accounting Standards Board (ASB) of the Institute of Chartered Accountants of India (ICAI).
2. Accounting Standards AS-10 and AS-16 prescribe the principles of capitalization of various costs based on the underlying concept that only such expenditure should be capitalized as form a part of the cost of fixed assets which increase the worth of the assets. Cost incurred during the extended delay in commencement of commercial production after the plant is otherwise ready does not increase the worth of fixed assets. Such costs cannot, therefore, be capitalized.
3. Accounting Standard AS 16, inter alia provides guidance with regard to part capitalization where some units of a project are complete. In case one of the units of the project is ready for commercial production and is capable of being used while construction continues for the other units, costs should be capitalized in relation to that part once the part is ready for commercial production.
4. It is further clarified that AS 10 and AS 16 are applicable irrespective of whether the power projects are 'Cost Plus projects' or 'Competitive Bid projects'.This issues with approval of the competent authority.Yours faithfully
(S.K Verma)
Assistant Director (Policy)
Ph: 23073067
Assistant Director (Policy)
Ph: 23073067
Black Money issue – SIT on a Wild Goose Chase? More to the point, extant global financial architecture facilitates transfer of illicit money through the Hawala route first to a Tax Haven, only to launder it in specialised locations like London. "There are 42,800 persons – let me repeat, only 42,800 persons – who admitted to a taxable income exceeding Rs 1 crore per year." That was the then Finance Minister [FM] Mr. P Chidambaram in para 126 in his Budget speech of 2013-14 in February 2013. In a way this statement of the then FM was a candid confession of the complete failure of our Income-Tax department, revenue intelligence and associated authorities in fighting the menace of Black Money within the national economy. Red Money – Not Black Money But much water has flown under the bridge since February 2013. In response to a Public Interest Litigation filed by some public spirited citizens the Honourable Supreme Court [SC] in 2011 directed the formation of a Special Investigation Team [SIT]. It may be recalled that the then UPA Government was reluctant to pursue this idea of an SIT and instead preferred a Review of this order of SC. So much for its commitment on this issue! Nevertheless, as the Supreme Court turned down this Review, it coincided with a change of Government at the Centre and the NDA assumed charge in May 2014. One of the first decision of the new Government was to comply with the order of SC and formed the SIT. The SC, through the terms of reference, mandated the SIT to "have jurisdiction over all the cases, where investigation has already commenced or pending or awaiting to be initiated or have complete with regard to instances of black money and illicit funds generated and sent to overseas destination and tax haven nations." Further, the SC directed the Union Government to "accord all the necessary financial material, legal, diplomatic resources both inside and outside the country to the SIT." In short, it is apparent that the thrust of investigations mandated by SC was to look at black monies parked by Indians abroad. Readers may be aware that Black Money is defined as that which has escaped taxation. On the other hand, monies that are illicit [and hence hazardous for anyone to claim its ownership] and hence secreted abroad are termed as Red Money. And let me hasten to add that that this is not an empty exercise in semantics. Let me elaborate. For instance, a bribe received by a Minister, being illegal, needs to be classified as Red Money and not Black Money. Recipients of such illicit monies find it risky to claim ownership of such income. Hence the necessity to park it abroad by sending such monies through the hawala route, preferably to tax havens where the identity of its ownership is kept secret by banks. Paying tax on such illicit income, I must reiterate, is a minor issue when the very source is illegal. Professor Vaidyanathan of IIM Bangaluru brilliantly captures the entire paradigm when he says – Black Money is a No Confidence on the Government of the day while Red Money is a No Confidence on the nation itself. As stated earlier, the SIT was formed in the last week of May 2014 with retired Supreme Court Judge MB Shah as its chairman and Justice (retd) Arijit Pasayat as its Vice Chairman. The eleven officers who form part of the SIT include Secretary of the Department of Revenue, a Deputy Governor of RBI, Intelligence Bureau Director, Director of ED, Director CBI, CBDT, Chairman and Director General Narcotics Control Bureau, Director of Revenue Intelligence, Director Financial Intelligence Unit, Secretary RAW and Joint Secretary (Foreign Tax and Tax Research). Interestingly, these eleven officers head departments that are legally tasked, individually and collectively, with fighting Black Money within India. And as the statement of the then Finance Minister quoted at the outset clearly demonstrates that they have been a spectacular failure even in tackling Black Money within India. Yet these very men form the SIT and are expected to unearth Red Money parked abroad, especially in tax havens! Wonders never cease, do they? The Global Money Laundering Machine It is pertinent to note that the world of finance is structured to launder Red Money parked in secret accounts in tax havens into lily white money for recirculation into global economy. And it is here that a reference to "The City" of London [which is distinct from London City] becomes mandatory. At its broadest, the term "The City" – a state within a state – refers to the financial services industry located in London. More precisely, "The City," is a 1.22 square mileslab of prime central London that stretches from the Thames at Victoria Embankment, clockwise up through Fleet Street, the Barbican Centre and to the tower of London. The seminal work on this subject is best articulated by Nicholas Shaxson in his outstanding book titled "Treasure Islands." Shaxson points out since 1950s financial services companies have flocked to "The City" because it lets them do what they cannot do at home. For instance, when the US introduced the Sarbanes-Oxley regulations in 2002 to protect Americans against the likes of Enron and WorldCom, "The City" did nothing. No wonder several global banks have centralised crucial financial operations from "The City." One of the attractions, Shaxson says, for "The City" is its secrecy. According to him "Britain does not follow the Swiss approach to bank secrecy, which makes its violation a criminal offence, it uses other mechanisms," – one that would shame the best of Tax Havens and lax jurisdiction like Luxembourg. Shaxson explains how under UK law offshore companies [which in turn masks the ultimate owners] can be directors of UK companies. Hence it is usually impossible to know who the real owners of UK Companies are. This systemically ensures proliferation of Red Money and its laundering. Alexander Zvygintsev, Russia's deputy prosecutor general, brilliantly summed up the issue when he said that 'Londongrad' was "a giant launderette for laundering criminally sourced funds."What is galling to note is that as Shaxson points out how "The City" has never transmitted even the smallest piece of usable evidence to foreign magistrate." More to the point, extant global financial architecture facilitates transfer of illicit money through the Hawala route first to a Tax Haven, only to launder it in specialised locations like "The City" and probably use Mauritius route [because of an obnoxious Double Taxation Avoidance Agreement between India and Mauritius] to re-invest in India as FDI or FII with all tax benefits and legitimacy. What is astonishing is that most in our financial sector or regulator or Government are unaware of the existence of "The City," much less its dark underbelly. Innocence thy name is Indian Establishment Now come to my alma mater – the Institute of Chartered Accountant [ICAI] which innocently believes one way of fighting this menace of illicit money is to improve transparency in financial reporting. It is in this connection the ICAI believes that India has to adopt the accounting standards [IFRS] prescribed by the International Accounting Standard Board [IASB]. Now pray who owns IASB? Where is IASB located? What is the agenda of IASB in thrusting its standards on unsuspecting nations across continents? Shaxson points out the IASB which sets rules for how companies around the world should publish their financial data, is head quartered – you guessed it right – in "The City!" Crucially, IASB that pontificates on transparency and disclosure has several unanswered questions about its ownership as it is a private company registered in Delaware [which again is a state in US with extraordinary lax regulatory regime]. That implies IASB is not a multilateral rule-setting body representing Governments [like for instance the WTO is for trade]. Consequently, Shaxson opines IASB is not accountable to national Governments but to unknown private individuals who in turn set the global agenda for financial reporting! And Shaxson points out that rules framed by IASB invariably obfuscates the reporting of ownership of multi-layered entities. Lamentably, the ICAI swears by IASB despite such disturbing facts. In the process, the world's second largest body of accountants has reduced itself to become a cheerleader for this secretly owned Delaware Company. Probably, egged on by honchos of ICAI or oblivious to everything stated above, the new Finance Minister Arun Jaitley in his Budget speech for 2014-2015 observed, "There is an urgent need to converge the current Indian accounting standards with the International Financial Reporting Standards- IFRS. [Para 128]. This fixation to anything "global" or "international" by our very best without critical appreciation of facts baffles me no end. Nonetheless it reveals our fatal flaw in our collective character. Even as we set up an SIT on "Mission Impossible" we have several discomforting unanswered questions. Do the readers appreciate the enormity of the task? Do we as a nation comprehend what will it take to bring this illicit money back to India? Does the NDA Government realise the complexity of the issues involved? Given the sinister contours of global financial architecture, our inadequate preparation and consequential ignorance on these issues, the trillion dollar question remains — is the SIT on a wild goose chase? Disclaimer: Opinions expressed in this article are the author's personal opinions. Information, facts or opinions shared by the Author do not reflect the views of Niti Central and Niti Central is not responsible or liable for the same. The Author is responsible for accuracy, completeness, suitability and validity of any information in this article. Bank fraud case on Vohra- CBI: Industrialist obtained Rs 139cr loan with forged documents | ||
| OUR BUREAU | ||
Aug. 28: The CBI today lodged a case against Calcutta-based industrialist Bipin Vohra and others for allegedly cheating Central Bank of India by obtaining a loan of Rs 139.05 crore with forged documents and using the money for purposes other than that stated. According to a statement issued by the CBI today, Bipin Vohra and two other directors of his SPS Group's Bengal India Global Infrastructure Ltd had entered into a "criminal conspiracy" with the directors of Bholanath Ingots Pvt Ltd, Gouri Iron Steel Pvt Ltd and Subhlabh Steels Pvt Ltd; and B.K. Newatia, the chartered accountant partner of Jaykishan Chartered Accountants, to defraud the bank. The two other directors of Bengal India Global Infrastructure Ltd — which had a "projected sales turnover" of Rs 3,533 crore in 2012-13 according to the website of the company — against whom the CBI has lodged the case are Sanjukta Vohra and Arjun Kumar Santhalia. The statement says the accused had "availed credit facilities from Central Bank of India, Mid-Corporate Branch, Kolkata, on the basis of false & forged documents and diverted the funds for the purpose other than for which the same was sanctioned and thereby cheated and defrauded the Central Bank of India to the tune of Rs 139.05 crores". The CBI today carried out searches at 15 places in Calcutta and Durgapur in connection with the case. Earlier this year, United Bank of India had declared Bipin Vohra a "wilful defaulter" for allegedly failing to repay a loan of Rs 75 crore that had been granted to SPS Steels Rolling Mills Ltd, the flagship company of the SPS Group. A bank terms a borrower "wilful defaulter" when it feels the person is not repaying a loan despite having the money. SPS Steels Rolling Mills Ltd has a plant in Durgapur and produces TMT bars used in the construction industry. The company had actor Sanjay Dutt as its brand ambassador. Bipin Vohra, who had been nominated as the Congress candidate for the Burdwan-Durgapur Lok Sabha seat this year but had withdrawn from the fray citing personal reasons, is the chairman and managing director of the SPS Group, which has interests in steel, trading, hospitality, real estate, entertainment, security services and food processing, among others. The SPS Group has a turnover of Rs 4,000 crore, according to its website. None of the SPS Group firms is listed on stock exchanges and so, financial details are not readily available in the public domain. Bipin Vohra rode the steel boom in 2004-08 and diversified into various businesses. On July 31, Fortune Select Loudon — managed by Fortune Park Hotels Ltd, a subsidiary of ITC Ltd, and property of Embee Resources Pvt Ltd, headed by Bipin Vohra's son-in-law Ranveer Singh — downed shutters. The building is set to make way for jewellery and designerwear showrooms. Singh had told The Telegraph that the closure was "purely a business decision". "It was doing extremely well. We were having almost 100 per cent occupancy. It's purely a business decision to close it because we realised the property could be put to better use," he had said. Bipin Vohra's group had acquired Hotel Rutt Deen on Loudon Street. Rutt Deen Pvt Ltd, of which Bipin Vohra is the director, used to run the hotel before a management contract with ITC Fortune gave birth to Select Loudon in October 2010. The SPS Group had joined hands with the Mani Group, a Calcutta-based real estate firm, to acquire the EM Bypass land parcel where Emaar had considered building a hotel. Later, the SPS Group also acquired stakes in Indo-American Electricals Ltd, Bharat Biscuit and Ascon Agro. |
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