Tuesday, March 17, 2015

[aaykarbhavan] Judgment and Information [4 Attachments]





Fraudulent investment websites under Sebi scanner

By PTI | 16 Mar, 2015, 08.29PM IST
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Several big corporate deals besides Jet-Etihad leaked: CBI


Sun-Ranbaxy, Tata-SIA details were also known; corporate houses beneficiaries
  • Representational image File Photo dna Research & Archives
The Central Bureau of Investigation (CBI) probe into the corporate espionage has revealed that not just the controversialJet-Etihad deal but several other big corporate deals inked between 2012 and 2014 were leaked ahead of their final approval by the Foreign Investment Promotion Board (FIPB).
The crucial deals that have caught the attention of the investigative agency are Sun-Ranbaxy, Tata-SIA, Glenmark-Aurbindo Pharma and HDFC Bank's FDI limit, among others.
"We are scrutinising all sensitive documents and the communication details unearthed from arrested officials. The documents pertain to the communication between the finance ministry, FIPB and Sebi. We have also received several legal documents related to several corporate deals," a senior CBI official told dna.
What kind of info was being leaked?
The CBI probe revealed that every single communication was shared with middlemen, right from the proposal stage to the final documents of the deal. "Not only big-bang decisions, but every small thing, even notes from the top level to the upper division clerk, were allegedly shared with middlemen," said officials.
What did the recipients do with the documents?
Agency sources alleged that a chartered accountant firm and a law firm played a pivotal role. They acted as middlemen and charged huge amounts, terming it as "fee" for their services. There, however, was no fixed fee for sharing information. It all depended on the size of the deal.
Who are the ultimate beneficiaries?
The CBI suspects that big corporate houses were indeed the ultimate beneficiaries. "The leaked documents will be definitely beneficial to respective companies. The rivals kept a close watch on the deal process to either derail the deal or malign the corporate's image probably," said a government official on condition of anonymity.
Will the CBI continue with its investigation?
On Monday, CBI arrested Daljeet Singh, an upper division clerk with the commerce ministry as the agency found that documents on foreign investments in HDFC Bank and Glenmark Pharmaceuticals were also leaked, reported PTI. According to PTI, the CBI also summoned a senior official of Reliance Industries, who was allegedly in regular touch with Khemchand Gandhi, a CA in Mumbai. Gandhi was arrested in Mumbai by CBI last week.
Is there a consultancy involved?
dna learns that the agency is probing the role of a consultancy group to gather corroborative evidence and decipher the official-middleman-corporate nexus in getting hands on confidential documents. According to PTI reports, an official of PricewaterhouseCoopers (PwC) was allegedly procuring documents from the department of economic affairs through Gandhi.
What did PwC say about its involvement?
In a media statement, PwC said that it had clarified its stand to the CBI. "Our manager met CBI officials on Monday in connection with the FIPB applications filed by our clients and the official communication that we have exchanged with FIPB in this regard, in the normal course of business. Necessary clarification as asked for were provided," the company said.
How did the Jet-Etihad deal take place?
Jet-Etihad deal is one of the most controversial deals in the aviation sector or even in the corporate industry. The deal has been going back and forth for long, before finally getting approval on November 12, 2013. Jet Airways and Etihad signed a strategic alliance. Etihad agreed to pick up a 24% stake in Jet Airways for about Rs 2,060 crore. The same year in May, Subramanian Swamy and Jaswant Singh complained to the prime minister against the deal. In July 29, FIPB gave the deal a conditional approval. Subsequently, Swamy filed a petition in supreme court against the deal and demanded a CBI probe. And finally in November, the Competition Commission of India gave its go-ahead to the deal.
How did the CBI find out the leak?
According to CBI sources, cross- questioning of suspects and phone intercepts, it emerged that Jet-Etihad deal was one of the deals whose records were leaked to middlemen. "But there might be other major deals that have been leaked with the help of some FIPB officials," added officials.
What does India's FDI policy say?
As per the FDI Policy, foreign investors are free to invest in India, except in a few sectors/activities, where prior approval from RBI or FIPB would be required. FIPB provides a single-window clearance for proposals on FDI in India. Recommendations of FIPB for proposals up to Rs 1,200 crore are approved by finance ministry. Recommendations for proposals of more than Rs 1,200 crore need to be approved by Cabinet Committee on Economic Affairs (CCEA).
How many deals were reported in the previous years?
FIPB approved 200 deals in 2013, which is almost the same as in 2012. If a listed company acquires up to 25% of another company, then the company has to follow SEBI guidelines and come up with an open offer. Earlier, the CBI had said that "first and second level of decision making in the finance ministry were compromised." But now, agency sources say that the probe may bring into scanner officials above these levels too.
How many arrests have been made by CBI so far?
The CBI has so far arrested six persons, including an under-secretary in the Department of Disinvestment and Grievances, Ashok Kumar Singh; an assistant in FIPB section, Ram Niwas; and, a section officer in the Department of Economic Affairs, Lala Ram Sharma. It has also arrested Paresh Chimanlal Buddhadeb, a partner in Chitale Law Associates, a Mumbai-based law firm.

Holcim Board rejects Lafarge merger terms; SC to hear DLF's plea against CCI order



Detailed Judgment already sent ........ here before.

Penalty cannot be levied on bonafide transaction with no intention to evade tax and where default was of technical nature

by CA Sandeep Kanoi
In absence of any finding recorded in the assessment order or in the penalty order to the effect that repayment of loans/ deposit was not under a bonafide transaction and was made with a view to evade tax, the cause shown by the assessee was a reasonable cause and in the view of section 273B no penalty could be imposed.

Penalty cannot be levied on bonafide transaction with no intention to evade tax and where default was of technical nature

CA Mayank Parekh
Chemfert Traders (Bombay) Pvt. Ltd. Vs. ACIT (ITAT Mumbai), ITA No. 720 & 721/MUM/2011, Date of pronouncement : 18/02/2015
Facts:
The assessee company was engaged in the business of manufacturing and trading of fertilizers. Fertilizers manufactured by the assessee were sold to farmers and various farmers co-operative societies by salesman appointed by the assessee. On sudden requirement of the business the assessee during Assessment Year ('AY') 2003-04 obtained cash loans in excess of Rs 20,000 from various parties including relatives of salesman who were not having bank account. These loans were repaid in cash to the respective relatives of salesman during AY 2004-05.
As the sums were in excess of Rs 20,000 the Assessing Officer ('AO') applied provisions of section 269SS & 269T of the Income-tax Act, 1961 ('the Act') and levied penalty under section 271D and 271E for AY 2003-04 and 2004-05 respectively. However, the AO failed to appreciate that according to the exceptions laid down in the section, where the loan is accepted and repaid to agriculturist, who did not have bank account no penalty should be levied as the default would be mainly technical in nature.
Being aggrieved the assessee filed an appeal before the Commissioner of Income-tax (Appeals) ['CIT(A)']. However, the CIT(A) also confirmed the penalty. Against the order of CIT(A) appeal the assessee filed an appeal before the Income-tax Appellate Tribunal, Mumbai. ('ITAT Mumbai')
Reliance placed by the assessee before ITAT Mumbai:
Judgment:
Upon hearing contentions of both the parties ITAT Mumbai held that:
  1. Plea raised by the assessee that persons who had advanced loans were relatives of a salesman who reside in a village and were having no bank account as there was no bank in their village cannot be discarded.
  1. In absence of any finding recorded in the assessment order or in the penalty order to the effect that repayment of loans/ deposit was not under a bonafide transaction and was made with a view to evade tax, the cause shown by the assessee was a reasonable cause and in the view of section 273B no penalty could be imposed.
- See more at: Penalty cannot be levied on bonafide transaction with no intention to evade tax and where default was of technical nature
 

Director's leave of absence 'implied' in closely held cos.'; Cites mutual trust

CLB allows petition, rejects Respondent's contention that petitioner director vacated office u/s 283(1)(g) of Cos. Act, 1956, accordingly allows inspection of respondent co.'s books of accounts; Rejects respondents contention that petitioner's failure to attend three consecutive board meetings without obtaining leave of absence means he automatically vacates office of 'director' u/s 283(1)(g) and he loses requisite right of inspection of books u/s 209(4); Notes that respondent co. is 'closely held co.', holds that 'implied leave of absence' is granted without director's request (oral / written) and strikes down respondent's contention that petitioner 'automatically' ceased to be director, observes that inspite of such 'automatic cessation', respondent co. was continuously sending notice of further board meetings; Being closely-held co., CLB also observes that there was never any requirement to send any formal board meeting as parties were working on 'mutual trust'; Observes that notices of all boards meetings were sent from one particular place but notice of alleged board meeting was sent from different place and in different format, holds that such act of respondents is an 'afterthought' stimulating 'suspicion' & 'smacks of manipulation'; Relies on CLB's observations in S. Ajit Singh & Anr. v. DSS Enterprises Pvt. Ltd. & Ors.:New Delhi CLB

The Order was passed by Justice D.R. Deshmukh, Chairman, CLB, New Delhi.
Senior Advocate Virender Ganda, Advocates Vipul Ganda and C.S. Chauhan argued on behalf of petitioners while respondents were represented by Advocates Ranjana Roy Gawai and Tushita.

LSI Note:

Section 283 of Cos. Act, 1956 relates to "Vacation of office by directors". Section 283(1)(g) provides that office of director shall become vacant if he absents himself from three consecutive board meetings or from all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from Board.
Sec. 167 of Cos. Act, 2013 relates to "Vacation of office of director". Sec. 167 (1)(b) states that office of director shall become vacant if he absents himself from all meetings of the Board of Directors held during a period of twelve months with or without seeking leave of absence of the Board.
Section 209(4) of Companies Act, 1956 provides that books of account and other books and papers shall be open to inspection by any director during business hours.


 PFA

HC acepts cash method of accounting in respect of money retained by customers for fulfilment of warranty.

CIT Vs. Balaji Traders (2008) 303 ITR 312 (Mad)

by CA Sandeep Kanoi

CIT Vs. Balaji Traders (2008) 303 ITR 312 (Mad) - In this case it has been held that deletion of penalty was justified in a case where:- (i) creditors are genuine and transactions not doubted (ii) there is no revenue loss to the exchequer, and (iii) there is business exigency forcing the assessee to take […]cepts cash method of accounting in respect of money retained by customers for fulfilment of warranty

March 17, 2015[2015] 55 taxmann.com 158 (Gujarat)
IT : Where assessee was consistently following system of accounting of crediting MONEY retained by customers from sale proceeds as and when received and Assessing Officer accepted such method in earlier years, there was no need to disturb method of accounting followed by assessee
IT : If there was sufficient surplus fund at assessee's disposal for making any INVESTMENT and no nexus was established with expenditure incurred for earning exempt income, no disallowance could be made under section 14A


PFA

Where reasonable explanation is furnished, levy of penalty u/s 271D is not justified

by CA Sandeep Kanoi
Maheshwari Nirman Udyog (2008) 302 ITR 201 In the instant case, there was no evidence to show that money was loaned or kept deposited for a fixed period or repayable on demand. Further, the sister concerns and the assessee were owned by the same family group of people with a common managing partner with centralised […]

PFA

No Penalty for cash loan accepted out of business exigencies

by CA Sandeep Kanoi
Dy. CIT v. Vignesh Flat Housing Promoters [2007] 105 ITD 359 (Chennai) It was observed by the Tribunal that 'in the instant case the undisclosed income as declared in the block return remained the assessed income. The Revenue did not doubt the veracity of the creditors. The AO did accept the credits as genuine. Most […]

PFA


Dear Patrons,
Section 188 of Cos. Act, 2013 relating to Related Party Transactions ('RPTs') has been one of the most deliberated agenda items in board meetings, audit committee meetings as also at professional forums. The provisions have impacted most companies and their transactions with prescribed 'related parties'.
The author, Avanish Rungta (Chartered Accountant), in this article states that though scope of RPTs is significantly widened by Companies Act, 2013, a lot of implementation issues have emerged. Referring to provision of Section 188 (provides that no member of company shall vote to approve any contract / arrangement, if such member is related party), he mentions that, "The intent of the aforesaid provision seems logical, i.e. mitigating conflict of interest that may arise in approval of RPTs contracts. However, in absence of any exemption for RPTs undertaken within privately owned groups..has resulted in over-regulation, creating a deadlock in such situations." Further, author points out that the aforementioned provision exempts transactions at 'arm's length' and in 'ordinary course of business' from board and shareholder approval requirement, without however spelling definition for 'ordinary course of business.'  Expressing disappointment over the vague, subjective definition of 'arm's length' the author calls for a comprehensive review of RPT provisions under the new Companies Act.
Click here to read this incisive article titled, "Related Party Transaction Provisions - Case for Comprehensive Review!"
Best Regards,
LSI Team



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Posted by: Dipakkumar Shah <cadjshah@yahoo.com>


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