AUDIT & AUDITORS
The Ministry has taken a big step by notifying 183 major sections of Companies Act, 2013 w.e.f. 01.04.2014 out of which the provisions relating to Audit & Auditors is of utmost importance for all the Chartered professionals out there. This article contains the keyamendments bought into effect in relation to audit and auditors and the way forward.
Chapter X –Audit & auditors ranging from Sections 139 to 148 of the Companies Act, 2013 (the 'Act') alongwith Companies (Audit and Auditors) Rules, 2014( the 'Rules') have been notified & they shall come into force on the 1st day of April, 2014.
Below is the summary of all the sections within the ambit of this Chapter alongwith the corresponding section form Companies Act, 1956:
| Companies Act, 2013(New Act) | Companies Act, 1956(Old Act) | Section Title |
| 139 | 224, 224A, 619 | Appointment of Auditors |
| 140 | 225 | Removal, Resignation of auditor and giving of special notice. |
| 141 | 226 | Eligibility, qualifications and disqualifications of auditors. |
| 142 | 224(8) | Remuneration of auditors. |
| 143 | 227, 228, 263A | Powers and duties of auditors and auditing standards. |
| 144 | Nil | Auditor not to render certain services. |
| 145 | 229, 230 | Auditors to sign audit reports, etc. (similar) |
| 146 | 231 | Auditors to attend general meeting.(similar) |
| 147 | 232, 233, 233A | Punishment for contravention. |
| 148 | 233B | Central Government to specify audit of items of cost in respect of certain companies. (Cost Audit) |
Note: Sub-section 5 & proviso to sub-section 4 of Section 140 of Companies Act, 2013 has not been yet notified & Proviso to sub-section (3) of Section 225 of Companies Act, 1956 still remains in effect.
KEY CHANGES :
1) The term of auditor holding the office in a company is increased to 5 years subject toratification at every AGM as compared to one year in the previous act.
2) Mandatory rotation of auditors in case of listed companies, certain unlisted companies & certain private companies after 5 years.
3) No. of audits per individual/partner reduced to twenty including private limited companies.
4) LLP is eligible to be appointed as an auditor
5) A firm/LLP can partner with non-CA's and still be appointed as auditor.
6) Automatic re-appointment of retiring auditor in case of other companies where no resolution is passed in AGM
7) Certain services named in Section 144 which an auditor cannot provide to its auditee
8) Compliances in relation to appointment, resignation of auditor have increased.
9) Acts of Relative is included within the ambit of disqualification of an auditor
10) Limits for disqualification in case of holding of security, indebtness to a company or providing guarantee to a company have increased.
11) Business relationship with a company is bought within the ambit of disqualification of an auditor
12) As per Section 143 (2), an auditor is required to make a report to the members on the accountsexamined by him and on every financial statement which are required by or under this Act to be laid in GM report shall after taking into account the provisions of this Act, the accounting and auditing standards and matters which are required to be included in the audit report
a. Balance Sheet
b. Profit & Loss Account
c. Cash Flow Statement
d. A statement of changes in equity if applicable
e. Other Statements as prescribed
Note : CFS is not mandatory in case of One Person Company, Small Company & Dormant Company.
Small Company means a company other than public company of which Paid up share capital does not exceed Rs. 50 lakh or such prescribed amount & T/o of which as per its last P & L A/c does not exceed 2 crores or such amount as prescribed. These do not include holding or subsidiary company.
13) As per 143(9) of the company's act 2013, every auditor shall comply with the auditing standards.
14) Fraud Reporting to CG has been introduced and provisions regarding this are required to be followed by auditor immediately within the specified time.
SECTION 139 – Appointment of auditors:
1) Appointment of Auditors other than First:
A company shall, at the 1st AGM, appoint an individual or an audit firm (always includes LLP) as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its 6th AGM and thereafter till the conclusion of every 6th AGM.
Appointment of First Auditors:
However, the first Auditors of a company are to be appointed always by the BOD within 30 days ofregistration of company and in case of failure to do so, the members shall be informed who shall within 90 days at an EGM appoint such auditor and such auditor shall hold office till conclusion of 1st AGM.
2) Ratification at every AGM :
Company shall place the matter relating to such appointment for ratification by members at every AGM.
Note : If the appointment is not ratified, the rules prescribe that the Board of Directors shall appoint another individual or firm as its auditor or auditors after following the procedure laid down in this behalf under the Act.
3) Compliance before appointment by company/auditor:
Before the appointment, a company shall obtain from the auditor–
a. Written consent of the auditor to such appointment
b. Certificate that
(a) auditor is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules or regulations made there under;
(b) the proposed appointment is as per the term provided under the Act;
(c) the proposed appointment is within the limits laid down by or under the authority of the Act;
(d) the list of proceedings against the auditor or audit firm or any partner of the audit firm pending with respect to professional matters of conduct, as disclosed in the certificate, is true and correct.
4) Compliance after Appointment by Company:
A Company shall inform the auditor of his appointment & is to file a notice of appointment with ROC within 15 days of the meeting in which auditor is appointed. (Form No. ADT – 1)
5) Mandatory Rotation of Auditors in case of Listed Companies & Certain classes of Companies :
All Listed companies and Companies prescribed by CG shall not appoint or re-appoint–
- an individual – for more than one term of 5 consecutive years
- an audit firm - for more than two terms of 5 consecutive years
Classes of Company prescribed by CG under the Rules :
(a) all unlisted public companies having paid up share capital of rupees ten crore or more;
(b) all private limited companies having paid up share capital of rupees twenty crore or more;
(c) all companies having paid up share capital of below threshold limit mentioned in (a) & (b) above, but having public borrowings from financial institutions, banks or public depositsof rupees fifty crores or more.
Cooling Period:
An individual or audit firm as the case may be who/which has completed the abovementioned terms shall not be eligible for re-appointment as auditor in the same company for 5 yearsfrom the completion of such term
Common Partners Restriction:
As on the date of appointment, no audit firm having a common partner/s to the other audit firm, whose tenure has expired in a company immediately preceding the F.Y., shall be appointed as auditor of the same company for a period of 5 years.
Transition Period :
Every company required to comply as above, existing on or before the commencement of this Act, shall comply with the above requirements within 3 years from 01.04.2014.
Rights of shareholders/ auditor unharmed :
Nothing contained above with respect to rotation shall prejudice the right of the company to remove an auditor or the right of the auditor to resign from such office of the company.
Provisions in Rules regarding rotation :
- The period for which the individual/firm has held office as auditor prior to the commencement of the Act shall be taken into account for calculating the period of 5 or 10 years, as the case may be.
- The incoming auditor/audit firm shall not be eligible if such auditor/audit firm is associated with the outgoing auditor/audit firm under the same network of audit firms.
Here, "same network" includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control.
For the purpose of rotation of auditors,-
(a) a break in the term for a continuous period of five years shall be considered as fulfilling the requirement of rotation;
(b) if a partner, who is in charge of an audit firm and also certifies the financial statements of the company, retires from the said firm and joins another firm of chartered accountants, such other firm shall also be ineligible to be appointed for a period of five years.
Illustration explaining rotation in case of audit firm :
| Number of consecutive years for which an audit firm has been functioning as auditor in the same company [in the first AGM held after the commencement of provisions of section 139(2)] | Maximum number of consecutive years for which the firm may be appointed in the same company (including transitional period) | Aggregate period which the firm would complete in the same company in view of column I and II |
| I | II | III |
| 10 years (or more than 10 years) | 3 years | 13 years or more |
| 9 years | 3 years | 12 years |
| 8 years | 3 years | 11 years |
| 7 years | 3 years | 10 years |
| 6 years | 4 years | 10 years |
| And so on | |
6) Reappointment in case of other than listed companies possible:
A retiring auditor is eligible for reappointment at an AGM, if
a) He is not disqualified for re-appointment
b) He has not given notice in writing of unwillingness to be re-appointed
c) SR passed at a meeting that some other auditor is to be appointed or expressly providing that he shall not be re-appointed (Read special notice requirement in Section 140)
Where at any AGM, no auditor is appointed or re-appointed, the existing auditor shall continue to be the auditor of the company.
7) Additional rights provided to Shareholders :
Subject to the provisions of this Act, members of a company may resolve to provide that -
- In the audit firm appointed by it, the auditing partner and his team shall be rotated at such intervals as may be resolved by members; or
- The audit shall be conducted by more than one auditor.
8) Casual Vacancy (CV):
- CV caused because of resignation : By BOD within 30 days but the same should be approved by the company within 3 months of recommendation and shall hold office till conclusion of next AGM
- CV caused because of other reasons (disqualifications as per 141) : By BOD within 30 days, No approval
9) Where a company is required to constitute an Audit Committee u/s 177, all appointments, including the filling of a CV of an auditor shall be made after taking into account the recommendations of such committee.
Section 140 : Removal, Resignation of auditor and giving of special notice
- The auditor appointed u/s 139 may be removed from his office before the expiry of his termonly by way previous approval of CG and a special resolution of the company to be passed in a general meeting within 60 days of receipt of approval of CG. However, before such step, the auditor shall be given a reasonable opportunity of being heard. The application to CG has to be made within 30 days of passing the board resolution. (Form No. ADT- 2 along with fees).
Here, a long-term relationship is built for 5 years, since removal before 5 years would be considered as removal before the expiry of his term. And for removal before the expiry of an auditor's term requires strict formalities to be followed.
- Compliance by auditor after resignation : The auditor who has resigned from the company shall file within a period of 30 days from the date of resignation, a statement in the prescribed form with the company and the ROC, indicating the reasons and other facts as may be relevant. (Form No. ADT-3)
Punishment if auditor doesn't comply : Fine of Rs. 50,000 to Rs. 5,00,000
- Special Notice : Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be re-appointed, except in case of mandatory rotation in case of listed companies. Other provisions w.r.t special notice are similar to the old Act.
Section 141 : Eligibility, Qualifications & Disqualifications
Eligibility:
a) Individual : Only if is a CA (The requirement of holding COP is removed)
b) Audit Firm/LLP : Majority of partners who are CA are practicing in India, apptd in Firm name. Only the partner's who are CA's are authorised to act as auditors and sign.
Note : Thus, it seems Firm/LLP can contain partner's who are Non-CA's. The introduction of LLP as an auditor and ability of a firm/LLP to operate with partners who are not Chartered Accountants is a welcome change and in line with international practices. This will also result in multi-disciplinary firms providing vide range of services.
Disqualifications : The following persons shall not be eligible for appointment as auditors of a company or shall vacate the office after appointment :—
Disqualifications similar to old act :
(a) a body corporate other than a LLP
(b) an officer or employee of the company;
(c) a person who is a partner, or who is in the employment, of an officer or employee of the company;
Disqualifications amended and its limits :
(d) a person who, or his relative or partner—
(i) is holding any security of or interest in the company or its subsidiary, or of itsholding or associate company or a subsidiary of such holding company:
Provided that the relative may hold security or interest in the company of face value not exceeding 1000 rupees or such sum as may be prescribed; (Prescribed sum is Rs. 1 lakh)
(ii) is indebted to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, in excess of such amount as may be prescribed;(Prescribed sum is Rs. 5 lakh)
(iii) has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, or its subsidiary, or its holding or associate company or a subsidiary of such holding company, for such amount as may be prescribed;(Prescribed sum is Rs. 1 lakh)
NEWLY ADDED disqualifications provided in the ACT:
(e) a person or a firm who, whether directly or indirectly, has business relationship with thecompany, or its subsidiary, or its holding or associate company or subsidiary of such holding company or associate company of such nature as may be prescribed;
The rules define the "business relationship" as any transaction entered into for a commercial purpose, except –
(i) commercial transactions which are in the nature of professional servicespermitted to be rendered by an auditor or audit firm under the Act and the Chartered Accountants Act, 1949 and the rules or the regulations made under those Acts;
(ii) commercial transactions which are in the ordinary course of business of the company at arm's length price – like sale of products or services to the auditor,as customer, in the ordinary course of business, by companies engaged in the business of telecommunications, airlines, hospitals, hotels and such other similar businesses.
(f) a person whose relative is a director or is in the employment of the company as adirector or key managerial personnel;
(g) a person who is in full time employment elsewhere
or
a person or a partner of a firm holding appointment as its auditor, if such persons orpartner is at the date of such appointment or reappointment holding appointment as auditor of more than 20 companies;
(h) a person who has been convicted by a court of an offence involving fraud and a period of ten years has not elapsed from the date of such conviction;
(i) any person whose subsidiary or associate company or any other form of entity, isengaged as on the date of appointment in consulting and specialised servicesas providedin section 144.
Note :
BUSINESS RELATIONSHIP IS AN INCLUSIVE TERM WHICH IS OPEN TO VIDE INTERPRETRATIONS THOUGH THE EXCEPTIONS ARE PROVIDED BUT THE EXCEPTIONS ARE LIMTED TO CERTAIN COMMERICAL TRANSACTION OF CERTAIN INDUSTRIES
LIMITS FOR AN INDIVIDUAL/PARTNER REDUCED TO TWENTY :
The 1956 Act and the Institute of Chartered Accountants of India ('ICAI') restrict the number of companies in which a person/ firm can be appointed as auditor. An individual cannot be appointed as auditor for more than 30 companies. Further, an individual cannot be appointed as auditor for more than 20 public companies and of which not more than 10 companies should have a paid up share capital of more than Rs 25 lakh. In case of a firm, such ceiling is determined for every partner of the firm. This limits specifically excluded private companies. However, the ICAI had notified that an auditor could accept 30 audits including private companies.
But the Companies Act, 2013 simply restricts the number of audits to 20 companies for an individual/ partner. It does not provide any restrictions based on nature/ size of the companies.Thus, this limit is further reduced.
Section 144 – New Insertion:AUDITOR NOT TO RENDER CERTAIN SERVICES :
In Old Act, there was no provision as to rendering of non-audit services to an audit client. It was determined by applying the Code of Ethics and the Guidance Note on Independence of Auditors issued by the ICAI. But the New Act contains specific provisions that prohibit auditors of a company to render non-audit services to an audit client directly or indirectly or its holding company or subsidiary company.
Prohibited services include:
• Accounting and book keeping services;
• Internal audit;
• Design and implementation of any financial information system;
• Actuarial services;
• Investment advisory services;
• Investment banking services;
• rendering of outsourced financial services; and
• Management services.
Here, the Act has provided a transition period 1 year meaning an auditor who has already been performing any non-audit services shall comply with this section till 31.03.2015.
Directly or Indirectly Defined :
Auditor – Individual : His Relative, Any other person connected/associated with such individual, entity in which such individual has significant influence or control or whose name/trademark/brand is used by such individual.
Auditor – Audit Firm : All partners, parent/subsidiary/Associate Entity or entity in which firm/partner has significant influence or whose name/trademark/brand is used by such firm/partners.
Comments :
This section will significantly damage the ability of an audit-firm/individual to provide most non-audit services. The requirements appear to be quite onerous and indeed would appear to prohibit an audit firm from providing a wide range of services, even when those are non-material.
Section 142 : Remuneration of auditors
First Auditor : Board
Other : GM
As per the old Act, any sums paid by the company in respect of the auditors' expenses shall be deemed to be included in the expression "remuneration". But as per the new act, the remuneration in addition to the fee payable to an auditor, include the expenses, if any, incurred by the auditor in connection with the audit of the company and any facility extended to him but does not include any remuneration paid to him for any other service rendered by him at the request of the company. Thus, the presentation and components of remuneration to auditors to be shown in P & L a/c will change.
Section 147 : Penalty
Penalty w.r.t to contravention of Section 139 to 146 :
Company : Rs. 25,000 to Rs. 5,00,000
Officer in Default : Rs. 10,000 to Rs. 1,00,000 or imprisonment upto 1 year or both
Auditor (Sec 139, 143, 144, 145) : Rs.25000 to Rs. 5,00,000
Central Excise
Rule 14 of Cenvat Credit Rules, 2004 - Credit taken but not utilized till reversal - Whether Interest and Penalty can be levied? The controversy of "'and" & ''or'' finally comes to an end? HC
THE short point involved in the present Civil Miscellaneous Appeal is as to whether a mere taking of CENVAT credit facilities without actually using it, would carry interest as well as penalty? Court has perused the entire decision in (Commissioner of Central Excise & S.T Bangalore Vs. Bill Forge Private Limited) - 2011-TIOL-799-HC-KAR-CX and ultimately found that mere taking of CENVAT credit facilities is not at all sufficient for claiming of interest as well as penalty. It is an admitted fact that Rule 14 of the Cenvat Credit Rules has been subsequently amended, wherein it has been clearly stated as "taken and utilised". Therefore it is quite clear the mere taking itself would not compel the assessee to pay interest as well as penalty. Further, the subsequent amendment has given befitting answer to all doubts existed earlier.
ST - Tax of more than Rs 5.8 Cr collected from clients but not deposited with Govt - suppression of facts with willful intention to evade duty is clearly manifest - no merit in plea for waiver of SCN as s.73(4) expressly disentitles same: CESTAT
By TIOL News Service
MUMBAI, APR 23, 2014: THE appellant is engaged in providing various taxable services viz. Storage and Warehousing Service, Cargo Handling Service, Management, Maintenance and Repair Service, Technical Inspection and Certification Service and took registration on 10.10.2003.
During investigation, it was found that although the appellant had taken registration in October, 2003, they had not filed any returns or deposited the service tax collected from their clients. And on the occasions that they had deposited the ST, the same was far less than their service tax liability. After detection of the case, they started paying arrears of service tax in piecemeal. At the time of recording of the first statement, appellant admitted that there is unpaid service tax for the year 2004-05 amounting to Rs. 92,50,777/-. A part of the amount along with interest was deposited also. In respect of a service for which they were collecting the service tax under the head Business Auxiliary Service the tax was paid in December 2004 and the return was filed only in February 2007. Investigation further yielded that even the service tax returns which were filed after initiation of investigation did not reflect the position correctly relating to value of service tax and payments. Appellant admitted these and also paid service tax thereafter.
ASCN was issued on 24.08.2008 demanding service tax of Rs. 5,85,86,971/-. By this time, appellant had paid an amount of Rs.5,57,22,052/-. It was proposed to appropriate the same. It was also proposed to appropriate the interest of Rs. 70,66,597/-already paid by them. The original authority confirmed the various demands and appropriated the various sums and imposed penalties under Section 76, 77 & 78 of the FA, 1994.
Aggrieved by the said decision of the Adjudicating Authority, the appellant is before the CESTAT and submits -
+ They do not dispute the tax liability or classification of the services, however, since the substantial amount was paid by them before the issue of SCN, as per the provisions of Section 73 (3) of FA, 1994 no show-cause notice should have been issued to them.+ At the most, a SCN for a differential amount of Rs.28,64,919/- could have been issued and even this amount was immediately paid by them, partly in cash and partly in CENVAT credit along with 25% penalty; that the part of the tax amount paid through CENVAT has now been paid in cash to avoid any further controversy or litigation.+ The promoter of the appellant company was a Captain in the Merchant Navy and is not familiar with the tax aspect and all the financial work was assigned to an independent Chartered Accountant who committed financial irregularities and hence was removed;+ Penalties should be waived in view of the aforesaid submissions taking cognizance of s.80 of FA, 1994 - a handful of case laws were cited in support.
The Revenue representative strongly objected to the submissions of clemency sought by the appellant by laying the blame at the end of the Chartered Accountant for non-deposition of taxes on time by submitting that no criminal complaint had been filed by the appellant against the CA or by referring the misdeeds of the CA to the Instituted of Chartered Accountants for initiating action. It was also submitted that even after the CA was removed in the year 2005, no concrete action was taken by the appellant to pay the dues and it was only when the investigation commenced in September, 2006 that they started paying the ST; considering the amount of ST involved, the penalties are correctly imposable.
The Bench inter alia extracted the following findings of the adjudicating authority -
The noticee has made the service tax payments as under: (A) Service Tax paid belatedly before initiation of investigations dated 26-6-2006: Rs.65.97 lakhs which includes Rs.12.59 lakhs paid on due date); (B) service tax paid belatedly during the course of investigation: Rs.491.25 lakhs (which includes Rs.8.82 lakhs paid on due date) & (C ) Service Tax paid after issue of SCN dated 24.10.2008: Rs.28,64,919/- (this includes cash payment of Rs.10,66,501/- and Cenvat credit of Rs.17,98,418/-)
- and observed that there was suppression of facts as also contravention of Rules with willful intent to evade payment of duty.
The Bench, therefore, observed that the conduct of the appellant left no doubt that ingredients to invoke proviso to Section 73(1) of FA, 1994 are present in the case.
In the matter of the submission of the appellant for waiver of SCN in terms of s. 73(3) of FA, 1994, the Bench noted that sub-section (4) of Section 73 lays down that the sub-section (3) of Section 73 shall not apply in case where any ST has not been paid by reason of suppression of facts etc. Inasmuch as since it is held that there was suppression of facts as also contravention of Service Tax Rules with willful intention, the Bench rejected the contention of the appellant that no notice was required to be issued as per Section 73 (3).
The penalties imposed under sections 76 & 78 of the FA, 1994 were also upheld.
As for invocation of the provisions of section 80 of the FA, 1994 for waiver of penalties on the ground of their having a reasonable cause for failure to pay tax due to the deficiencies of the CA, the Tribunal observed that if the appellant had chosen to appoint an independent Chartered Accountant, then he had acted as an agent of appellant and appellant would be responsible for all his acts and, therefore, the claim made by the appellant is not tenable.
Holding that the plethora of decisions cited by the appellant were distinguishable and do not apply to the facts of the case, the CESTAT held that there was no merit in the appeal and hence dismissed the same.
(See 2014-TIOL-612-CESTAT-MUM)
By TIOL News Service
AHMEDABAD, APR 26, 2014: THE issues before the Bench are - Whether the powers of the CBDT to issue Instructions fall within the purview of delegated legislation; Whether such authority has the force of law; Whether when the language employed in a statute is crystal clear and unambiguous it would amount to a fanciful interpretation if a court of law finds it wiser to give another reasonable view; Whether when the Board Instructions clearly debar the appeals filed prior to the dates specified from being eligible to avail the monetary limits they can still be maintained; Whether from the language of the delegated legislation it can be construed that powers have been vested in the CBDT to allow pending appeals or references to be eligible for the new monetary limits and Whether the language chosen to draft the Board Instruction leaves no room for new interpretation. And the verdict goes against the assessee.
Facts of the case
The assessee is an individual. The asssessee got a favourable order from the Tribunal on the issue of tax effect of its case decided against it by the Revenue which preferred an appeal in the High Court. There is no dispute that the tax effect involved in this appeal exceeded Rs.4 lac which was the threshold limit permitting the Revenue to prefer appeal before the High Court as provided by Central Board of Direct Taxes, in its Instructions dated 15th May of 2008. There was also no dispute that such tax effect, however, did not exceed Rs 10 lac, a revised limit provided by the CBDT in its later Instructions of 2011.
While submitting before the Bench the counsel for the assessee raised a preliminary objection as to the maintainability of the appeal on the ground that the tax effect involved was less than the minimum threshold limit provided by the CBDT which was in force on the date when the appeal came up for hearing, i.e. 12th September 2012. The counsel further tried to convince the Division Bench that although at the time of filing of the appeal, the limits prescribed by the Board in its instructions of 2008 applied and in accordance with such provisions, the appeal was maintainable. However, the revised limits contained in the Instructions of 2011 should be applied when the appeal was taken up for hearing after the passing of the revised Instructions of 2011. In other words, the counsel contended that the revised limit contained in the instruction of 2011 would be applicable to all the pending appeals irrespective of the date of filing.
In support of such contentions, the counsel relied upon a decision of the Division Bench. In the said decision, the Division Bench, by relying upon a decision of the Bombay High Court2009-TIOL-772-HC-MUM-IT and certain other decisions of Delhi High Court held that the instructions of 2011 would also apply to pending appeals which were filed prior to the issue of the instructions of 2011.
The referring Division Bench, however, did not accept the contention of the counsel, but having regard to the fact that an earlier Division Bench of this Court having taken a different view in the case of Sureshchandra Durgaprasad Khatod (HUF), decided to refer the matter to a Larger Bench.
Having heard the counsels, the Larger Bench held that,
++ the only question that falls for determination in this Reference is whether the Instruction of 2011 would apply to all the pending appeals irrespective of the fact whether those appeals were filed after the coming into operation of the Instructions of 2011 or not, and whether the pending appeals at the instance of the Revenue shall be also not maintainable even if those appeals complied with the requirement of the Instruction of 2008 which was the applicable instruction on the date of filing of the appeals simply because the minimum tax effect for filing an appeal at the instance of the Revenue has since been increased by virtue of the Instructions of 2011;
++ after hearing the counsels and after going through the provisions of Section 268A of the Income Tax Act as well as the relevant Instructions, we find that those two instructions having been issued by the CBDT in exercise of powers conferred under section 268A of the IT Act, are really pieces of delegated legislation and consequently, have the force of law;
++ it is now well-settled law that if the language employed in a piece of legislation is clear and unambiguous, it is not for the Court to interpret the same in a different way simply because the Court thinks that it would be wiser to adopt another reasonable view instead of the one specifically mandated in the statutory provisions;
++ by applying the above principles to the facts of the present case, we find that clause 11 of the Instructions of 2011 specifically states that "this instruction will apply to appeals filed on or after 9th February 2011. However, the cases where appeals have been filed before 9th of February 2011 will be governed by the instructions on this subject, operative at the time when such appeal was filed.";
++ similarly, clause 11 of the instructions of 2008 specifically provides that "this instruction will apply to appeals filed on or after 15th of May 2008. However, the cases where appeals have been filed before 15th of May 2008 will be governed by the instructions on this subject, operative at the time when such appeal was filed.", meaning thereby, the earlier instructions;
++ there is, thus, no ambiguity in the instructions of either 2011 or 2008 as regards the applicability of those instructions in respect of the appeals, and, at the same time, it has also been made clear that if those appeals are not filed after the given dates mentioned in those instructions, the fate of the appeals will be governed in accordance with the instructions prevailing on the date of presentation of such appeals;
++ in view of such clear legislative intention, we are unable to hold that even if an appeal is filed prior to 9th February 2011, the same would be barred notwithstanding the fact that at the time of filing such appeal, the same was not barred by the then instructions of the CBDT;
++ as regards the decision of a Division Bench of this Court dated 24th August 2012 in the case of Sureshchandra Durgaprasad Khatod (HUF), it appears that the said Division Bench, in arriving at a different conclusion solely relied upon a Division Bench decision of the Aurangabad Bench of the Bombay High Court in the case of the Commissioner of Income Tax v. Smt. Vijaya V. Kavekar. In the said case, the said Division Bench, after considering the earlier instructions and relying upon a decision of the Bombay High Court in the case of 2009-TIOL-772-HC-MUM-IT, arrived at certain conclusions, which were relied upon by the Division Bench of this Court;
++ with great respect to the Division Bench of this Court in the case of The Commissioner of Income Tax vs. Sureshchandra Durgaprasad Kathod [HUF] as well as of the Division Bench of the Bombay High Court and other High Courts quoted above, we are unable to agree with the view taken therein because in those decisions, the well-settled principle laid down by the Supreme Court relating to literal construction, as reiterated in the case of B. Premchand vs. Mohan Koikal reported in AIR 2011 SC 1925, was not followed;
++ in our opinion, in the absence of any ambiguity, there is no scope of interpreting the said provision in a different way by ignoring the literal meaning of the words used in the said delegated statutory provisions. As pointed out by the Supreme Court, where the language is clear, the intention of the legislature has to be gathered from the language used. In other words, we should read the statute as it is without distorting or twisting its language;
++ moreover, from the provisions contained in Section 268A of the Act, which confers power upon CBDT to issue instruction, it appears that it simply enables CBDT from time to time, to issue orders, instructions or directions to other income-tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating filing of appeal or application for reference by any income-tax authority under the provisions of the concerned Chapter. From the language of the enabling provisions of the statute, it is clear that no power has been conferred to the CBDT to make the pending appeals or references filed in accordance with the then existing law infructuous by issuing any such direction or instruction with retrospective effect;
++ the CBDT being fully conscious of its limitation, decided to give clear prospective effect to those instructions in paragraph 11 of the instructions. Thus, there is no scope of interpreting the instructions mentioned above as done by the Division Bench of this court in the case of THE COMMISSIONER OF INCOME TAX vs. SURESHCHANDRA DURGAPRASAD KATHOD [HUF];
++ we have gone through the decisions cited by the counsel. We find that in none of those decisions, the High Court considered the above proposition of law laid down by the Supreme Court. Thus, the ultimate conclusion arrived at by the different High Court was in conflict with the existing law of the land as pointed out above. We are thus unable to follow those decisions;
++ the counsel for the Revenue, on the other hand, also placed some decisions of the other High Courts including the Full Bench decision of the Punjab and Haryana High Court in the case of CIT III Ludhiana vs. M/S Varindera Construction Co. taking the view that the said circular is not applicable to the pending appeals. We follow the above conclusion, however, based on the reason assigned by us in this judgment;
++ we, therefore, answer the reference in the negative. Let the appeal be placed before the referring Bench for deciding it in accordance with law.
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