Question: How to recover lost money through online fraudulent bank transfer or misuse of credit/debit cards under Information Technology Act ? chennailawyers.net courtesy
Answer: 1) Cyber space is no more safe. It is being misused by organized criminals to target credit cards, bank account and other financial instruments for fraudulent transactions. The major forms of online fraud includes, debit/credit card misuse, phishing, auctions, internet access services, work from home plans etc.
2) Nabbing a cyber fraudster who might have committed the offence sitting at a distant location possibly on a foreign shore will be difficult for a common person. So adopt the following steps to recover the lost money through fraudulent bank transfers under IT Act.
3) File an application before the Adjudicating Officer appointed under section 46 of the Information Technology Act 2000 claiming breach of reasonable security procedures by the Bank.
4) Banks usually fail in maintaining including non-compliance of KYC norms, anti-money laundering guidelines and automatic suspicious transaction monitoring facilities.
5) As per Section 43A of the Information Technology Act 2000 the banks and other intermediaries who have failed to maintain reasonable security procedures must pay adequate damages as compensation to such persons to cover the loss.
6) The Adjudicating Officers has the power to adjudicate in the matters where the claim does not exceed INR 5 crores. The Banks must prove that they have maintained reasonable security procedures to prevent such fraudulent acts.
7) In case the Banks fail to prove that they have maintained reasonable security procedure, the Adjudicating Officer who has the powers of a Civil Court, may order the Bank to pay damages as compensation to the victim.
How to File the Complaint to the Adjudicating Officer to recover money ?
a) Application must be made in a specified format.
b) Application must be accompanied by an application fee of Rs. 50 along with the appropriate fee as per the amount of compensation claimed by a Demand Draft drawn in the name of "Adjudicating Officer Information Technology Act" payable at xxxxxx
RBI enables online filing of Foreign Currency - Shares Transfer (FC-TRS) returns
RBI, under aegis of e-Biz project, enables online filing of Foreign Currency Transfer of Shares (FCTRS) returns for reporting transfer of shares, convertible debentures, partly paid shares and warrants from a person resident in India to a person resident outside India or vice versa; This is an additional facility provided with a view to promote ease of reporting of transactions under FDI; Manual system of reporting will continue till further notice: RBI
Bandhan Bank starts operations; P-notes on SEBI board meet agenda today; CCI hunts for permanent staff
Bandhan Bank starts operations; P-notes on SEBI board meet agenda today; CCI hunts for permanent staff
Over 100 companies, including United Spirits, Kingfisher Airlines, penalised for flouting SEBI norms
Provision for doubtful debts not required to be add back to arrive at book profit u/s 115JA
Citation: – The Commissioner of Income Tax vs. M/s. Salgaonkar Mining Industries Pvt. Ltd, (Goa High Court) Income Tax Appeal no 37/2007, Date of Pronouncement 23.04.2015
Brief of the case
In the case of The Commissioner of Income Tax vs. M/s. Salgaonkar Mining Industries Pvt. Ltd High Court of Goa has held that provision for doubtful debt is not required to add back while arriving book profit u/s 115JA.
Facts of the case
1. Assessee's income, under the normal provisions of the Act, was less than 30 % of its book profits, the Assessing Officer invoked Section 115JA of the Act and in terms of the explanation therein, added a sum of Rs.20.5 lakhs to the book profits, to compute the income at Rs.2.76 crores. Besides, as the respondent assessee had not computed advance tax, interest under Sections 234B and 234C of the Act was also imposed aggregating to Rs.30.71 lakhs, while computing the amount payable to the Revenue by the respondent assessee.
2. Assessee filed appeal before CIT(A) and CIT(A) CIT(A) upheld the order of the Assessing Officer on both counts and so far as the adjustment of book profits in terms of explanation (c) to Section 115JA(2) of the Act, it was noted that the provision represented advances made by the respondent assessee to its sister concern and the non-recovery of the same was provided as provision for bad debts on an adhoc basis. The CIT(A) held the same to be covered by clause (c) of explanation to Section 115JA(2) of the Act as being in the nature of unascertained liability. So far as interest payable under Section 234B and 234C of the Act as default and delay of advance tax payment was concerned, the order of the Assessing Officer was upheld.
3. Assessee thereafter filed appeal before Tribunal and Tribunal held that the provision in respect of doubtful debts is not a liability much less an ascertained liability for the purposes of application of clause (c) of the explanation to Section 115JA(2) of the Act. Thus, the impugned order held that the book profits cannot be increased by Rs.20.05 lakhs being a provision for doubtful debts to determine book profits in accordance with Section 115JA of the Act. So far as interest payable in respect of the default and delay in payments of advance tax under Section 234B and 234C of the Act is concerned, the Tribunal held that the same was not payable in view of the decision of the Karnataka High Court in Kwality Biscuits Ltd. Vs. CIT, reported in 243 ITR 519 and subsequent dismissal of the Revenue's Appeal by the Apex Court.
Aggrieved by the order of the tribunal assessee filed an appeal
Issue
A) Whether on the facts and in the circumstances of the case the ITAT was justified in deleting the addition of Rs.20,05,744/- being provision for doubtful debt on the ground, that the provision for doubtful debt are doubtful for recovery and therefore cannot be equated with liability, which is contrary to provisions of Section 115JA, by ignoring the finding of the CIT(A) that the entire provision represented advances towards sister concern and not trade debts and that it was an adhoc provision made towards advances of doubtful recovery and therefore cannot be treated as unascertained liability u/s 115JA ?
B) Whether on the facts and in the circumstances of the case the ITAT erred in law by deleting the interest u/s 234B&C of the IT Act, by relying on the decision of the Hon'ble Karnataka High Court in "Kwality Biscuit Ltd. V/s CIT (243 ITR 519) and Hon'ble Supreme Court in dismissing the Appeal filed by the Department against the said decision, in "284 ITR 434(SC)" which is not applicable to the Assessee's case in view of sub-section (4) of Section 115JA of the IT Act?.
Revenue contention
That an amount of Rs.20.5 lakhs, which has been debited to the profit and loss account under the head provision for doubtful debts, would stand covered by clause (c) of the explanation to Section 115JA(2) of the Act. It is further submitted that in the present facts, there is no justification for the Tribunal to delete the addition of provision for doubtful debts made to the book profits of Rs.20.5 lakhs under Section 115JA of the Act.
Assessee's Contention
1. Assessee's relied upon order of Tribunal viz. that the provision in respect of doubtful debts is not a liability much less an ascertained liability for the purposes of application of clause (c) of the explanation to Section 115JA(2) of the Act.
2. interest payable in respect of the default and delay in payments of advance tax under Section 234B and 234C of the Act is concerned, the Tribunal held that the same was not payable in view of the decision of the Karnataka High Court in Kwality Biscuits Ltd. Vs. CIT, reported in 243 ITR 519 and subsequent dismissal of the Revenue's Appeal by the Apex Court.
High Court decision / observations
1. It is very clear from the language of clause (c) of the explanation to Section 115JA(2) of the Act that it only refers to the amount set aside for provisions made for meeting liabilities, which are not ascertained. In the present case, indisputably, the amount of Rs.20.5 lakhs sought to be added to the book profits, is in fact a provision made in respect of unlikely recovery of an advance made by the respondent to its sister concern. Thus, the same is not in the nature of a liability of the respondent assessee, but is in the nature of a recoverable from its sister concern. Such a provision causes a possible diminution in the value of asset i.e. amount recoverable.
2. Thus, on the plain reading, clause (c) of the explanation to Section 115JA(2) of the Act, would have no application to the present facts. In any case, the aforesaid issue now stands concluded in favour of the respondent assesee, by the decisions of the Apex Court in CIT V. HCL Connect Systems and Services Ltd, reported in 305 ITR 405. In this case, the Court, in respect of assessment year 1997-1998 (same in this case), has held that a provision for bad and doubtful debts would not be covered by clause (c) of the explanation to Section 115JA(2) of the Act. This is so because even if debt is not recoverable by an assessee, it cannot become as liability of the assessee.
3. Similarly, the Apex Court in Joint Commissioner of Income Tax Vs. M/s. Rolta India Ltd, reported in 330 ITR 470, wherein it held that where the provision has not been made for meeting liability, no occasion to apply clause (c) of the explanation to Section 115JA(2) of the Act can arise. The Apex Court observed that :
"A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case "debt" under consideration is "debt receivable" by the assessee."
In this case also, there is no debt payable by the respondent assessee, but it is a debt receivable and would not stand covered by clause (c) of the explanation to Section 115JA(2) of the Act. Thus, the issue stands concluded in favour of the respondent by the decision of the Apex Court in HCL Connect System and Services Ltd (supra) and Rolta India Ltd (supra). Hence, appeal file by revenue on this count is dismissed.
4. On question B- The Counsel for both sides are agreed that this question stands concluded in favour of the Revenue, by the decision of the Apex Court in Joint Commissioner of Income Tax Vs. Rolta India Ltd. Wherein it was held that:
"Section 115JA was inserted by the Finance Act, 1996 with effect from 1-4-1997. After insertion of section 115JA, section 115JB was inserted by the Finance Act, 2000 with effect from 1-4-2001. It is clear from reading of sections 115JA and 115JB that the question, whether a company is liable to pay tax under either provision, does not assume importance because specific provision(s) is/are made in the section saying that all other provisions of the Act shall apply to the MAT company. Similarly, amendments have been made in the relevant Finance Act providing for payment of advance tax under sections 115JA and 115JB. So far as interest leviable under section 234B is concerned, the section is clear that it applies to all companies. The pre-requisite condition for applicability of section 234B is that the assessee is liable to pay tax under section 208 and the expression 'assessed tax' is defined to mean the tax on the total income determined under section 143(1) or under section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of section 115J/115JA in the levy of interest under section 234B. The expression 'assessed tax' is defined to mean the tax assessed on regular assessment which means the tax determined on the application of section 115J/115JA in the regular assessment.
The Karnataka High Court had in the case of Jindal Thermal Power Co. Ltd. v. Dy. CIT [2006] 154 Taxman 547 has held that section 115JB is a self-contained code pertaining to MAT, which imposed liability for payment of advance tax on MAT companies and, therefore, where such companies defaulted in payment of advance tax in respect of tax payable under section 115JB, they were liable to pay interest under sections 234B and 234C. Thus, it can be concluded that interest under sections 234B and 234C shall be payable on failure to pay advance tax in respect of tax payable under sections 115JA and 115JB. For the aforestated reasons, Circular No. 13 of 2001, dated 9-11-2001, issued by the CBDT has no application. Moreover, in any event, para 2 of that circular itself indicates that a large number of companies liable to be taxed under MAT provisions of section 115JB were not making advance tax payments. In the said circular, it has been clarified that section 115JB is a self-contained code and, thus, all companies were liable for payment of advance tax under section 115JB and, consequently, provisions of sections 234B and 234C imposing interest on default in payment of advance tax were also applicable"
Therefore, in view of above decision of apex court, Revenue appeal is allowed regarding charging of interest u/s 234B&C.
- See more at: http://taxguru.in/income-tax-case-laws/provision-doubtful-debts-required-add-arrive-book-profit-115ja.html#sthash.tFu3NH0V.dpuf
Cessation of loan liability taken for purchase of capital assets is capital receipt
Citation: – The Commissioner of Income Tax vs. V. S. Dempo & Company Ltd, (Goa High Court) Income Tax Appeal no 62/2006, Date of Pronouncement 09.04.2015
Brief of the case
In the case of The Commissioner of Income Tax vs. V. S. Dempo & Company Ltd, Goa High Court has held that the principal amount of loan taken for purchase of capital assets was on capital account and therefore on cessation of its repayment there is no occasion to apply Section 41 (1) of the Act. And resultant income should only be treated as capital receipt.
Facts of the case
1. For the assessment year 1987-1988, the respondent filed a return of income on 30/7/1987 declaring a total income of Rs.50.02 lakhs. During the course of assessment proceedings, it was noticed that the respondent had shown Rs.50.96 lakhs as an income in the profit and loss account. However, the same was not taken into account while computing its total taxable income as this was a loan taken of US # 7,00,000/- for M/s. Eisenberg Inc. Japan equivalent to Rs.33.42 lakhs is not requried to be returned.
2. Assessee contented that the same was not offered for tax, as the loan was taken and utilized for purchase of machinery by its subsidiary M/s Dempo Mining Corporation. It was also contended that the loan was taken for capital purposes at a time when the Act did not apply to the State of Goa. This was not accepted by the the Assessing Officer on account of the fact that in the assessment year 1967- 1968, the liability on the loan was increased by Rs.19.07 on account of variation in the Exchange rate and this was allowed as revenue expenditure. And AO has added the amount of Rs.50.96 lakhs to the taxable income.
3. Assessee filed appeal in CIT(A) and CIT(A) has dismissed the respondent's appeal sustaining the addition made by the Assessing Officer. Thereafter assessee filed appeal in Tribunal the respondent restricted its appeal only to the principal amount of loan originally taken by it from M/s. Eisenberg Inc. Japan. The consequent increase of its liability on account of change in rate of exchange was claimed as revenue expenditure was not being contested. The respondent accepted that the amounts allowed as revenue expenditure on account of variation in the rate of exchange should be added to its income under section 41 (1) of the Act
4. The Tribunal by the impugned order only considered the original loan taken by the Assessee. On consideration, the impugned order records that the amount was to be utilized by the assessee's subsidiary for purchase of machinery. Therefore the taking of loan to procure machinery was on capital account and cannot be considered as revenue. In the circumstances, the impugned order allowed the assessee's appeal and directed a deletion of Rs.50.96 lakhs which was added to the assessee's income.
Issue
Whether on the facts and in the circumstances of the case the ITAT was justified in law in holding that the nature of the amount of Rs.50,96,000/- received by the assessee was capital in nature and not revenue.
Revenue contention
1. That whenever there was a variation in the liability arising on account of the loan taken in view of the difference in the rate of exchange, the same was allowed as revenue expenditure or added as income. It is on the above basis it is submitted that non obligation to return that loan would results in income to the respondent and stands covered by section 41(1) of the Act and is chargeable to tax.
2. That the substantial question of law as framed is to be answered in favour of the revenue by holding that the amount of Rs.50.96 lakhs is revenue in nature and has to be a part of the respondent's total income.
Assessee's Contention
1. that so far as the amounts attributed to the difference in exchange rate claimed in the earlier years and allowed as expenditure in the earlier years is being offered to tax by the respondent under Section 41(1) of the Act. So far as the loan being written off by the lender is concerned, it is submitted that the same having been on capital account for purchase of machinery, continue to be on capital account and cannot be charged to income tax.
2. It is further submitted that Section 41 (1) of the Act would have no application as held by this Court in "Mahindra and Mahindra Ltd. Vs. Commissioner of Income Tax and Commissioner of Income Tax Vs. Mahindra and Mahindra Ltd." reported in (2003) 261 ITR 501 (Bom.) and the decision in Income Tax Appeal no.3704 of 2010 in the case of "The Commissioner of Income Tax-3 Vs. M/s. Xylon Holdings P. Ltd.", rendered in 13/9/2012, wherein it has been held that when the loan has been taken for purchase of capital assets, then the waiver of that loan would not convert the loan taken on a capital account into revenue in nature.
High Court decision / observations
1. Section 41 (1) of the Act would have no application in the present facts. This is for the reason that it is not the case of revenue that the principal amount of loan received has been allowed as a revenue expenditure in the earlier years so as to make Section 41 (1) of the Act applicable. The amount which has been allowed in the earlier assessment years was only the variation on account of difference in rate of exchange. This the respondent is in any case offering for tax under Section 41 (1) of the Act.
2. The principal amount of loan having been taken for purchase of capital amount was on capital account and therefore no occasion to apply Section 41 (1) of the Act in respect of that could arise. The issue in fact stands concluded in favour of the assessee by the decision of this Court in Mahindra and Mahindra Ltd (supra) and M/s. Xylon Holding (supra) in the context of the submission made by the revenue before us. It needs to be recorded that the Revenue has made no submission to establish that the amounts received as a loan by the assessee was not capital in nature.
3. Thus the substantial question in principle has to be answered in the affirmative, i.e. in favour of the respondent/assessee and against the appellant. However, as the loan originally received from M/s. Eisenberg Inc. Japan was only of Rs.33.42 the benefit in restricted to only Rs.33.42 lakhs. The appeal is dismissed subject to the above observations.
NEW DELHI, AUG 24, 2015: THE Commissioner's order explains the case:
(a) The assessee had supplied goods to a particular type of buyers at much lower price than the price charged from the general buyers in the normal course of trade as it had obtained the facility of invalidating of advance licences from such buyers and procured imported raw material (duty free) against such licences for manufacturing of finished goods. It is, therefore, alleged that the assessee and the buyers had mutuality of interest in the business of each other and there was a flow back and the price was not the sole consideration for sale in these cases in accordance with the provisions of Section 4(1)(a) of the Act.(b) Therefore, they were related persons in terms of provisions of the erstwhile Section 4(4)(c), presently Section 4(3)(b)(iv) of the Act.(c) It is observed that para 7.7 of the EXIM Policy on Advance Release Order speaks of mutuality of interest as the assessee had procured duty free imported raw materials against invalidation of advance licence of the consignees and in turn it sold the finished goods to the said consignees at lower prices as compared to other normal buyers. Thus, the price was not the only consideration.(d) Once the advance licence is invalidated, the said clearance to the buyers who were earlier holding the said licences need not be treated as deemed export and rightly the assessee had cleared the said goods to such buyers on payment of excise duty, but at lower value than the clearance made to the normal buyers. Thus, the assessee appeared to have derived double benefits in these transactions, i.e. (i) enhanced sale and paid less duty on lower value; and (ii) imported duty free raw materials.(e) In this case, the right to procure duty free imported raw material is being transferred to supplier by the buyer. This indicates the flow back of additional considerations from the buyer of the said goods to the seller, which is the assessee.
Therefore, the Commissioner confirmed the demand of differential duty and also levied penalties and interest. The assessee challenged the order of the Commissioner by filing appeal before the Custom Excise & Service Tax Appellate Tribunal taking the plea that 'additional consideration' under Section 4 of the Act refers only to the additional consideration flowing from the buyer to the assessee and in the present case no such additional consideration flew from the advance licence buyers of the 'deemed exports'. The Tribunal, in arriving at this conclusion, relied upon its own decision in the case of IFGL Refractories Ltd. v. Commissioner of Central Excise, Bhubaneswar-II, wherein it was held that statutory benefits allowed by statutory authorities cannot be considered as additional consideration flowing to a manufacturer from the buyer. In the opinion of the Tribunal, the drawback was received from the Government and not from the buyers and, therefore, such drawback could not be treated as additional consideration for the purpose of arriving at 'transaction value' as per the definition thereof under Section 4 of the Act.
The decision of the Tribunal in IFGL's case was overruled by the Supreme Court inCommissioner of Central Excise, Bhubaneswar- II v. IFGL Refractories Ltd. - 2005-TIOL-103-SC-CX . In the said case, this Court has held such a consideration, namely, duty drawback, to be the 'additional consideration' inasmuch as the benefit of duty drawback accruing to the seller was the result of surrender of advance licence by the buyers.
The Revenue is in appeal before the Supreme Court.
Issue for consideration is as to whether it would constitute 'additional consideration' received by the assessee as per the definition of 'transaction value' contained in Section 4 of the Act read with Rule 6 of the Valuation Rules.
The Supreme Court had in the case of IFGL, given the answer in the affirmative to the issue on almost identical fact situation. The Counsel for the assessee wanted the Court to take a different view. He argued that discounted price is charged from the advance licence holder category of buyers by the assessee because of saving in customs duty on inputs due to statutory notification with consequent reduction in cost of production and, therefore, it is not a consideration flowing from a buyer. His submission was that the customs duty, otherwise leviable on the inputs going into the manufacture of polyester staple fiber, is exempted by the statutory notification issued by the Central Government, being Notification No. 31/1997-CUS, and it is because of the benefit availed by the assessee under this Notification that it is able to effect supply of polyester staple fiber on discounted price to an ultimate exporter holding advance licence. Therefore, the additional discount offered to a customer, who is the exporter, is never an additional consideration.
Yet another argument was that carving out this category of buyers, namely, those who are/were the holders of advance licence, to be eligible for purchase at a discounted price was only a 'condition for sale of goods' put forth by the assessee. He submitted that 'it was not a consideration for sale of goods'. He, thus, drew distinction between condition for sale and consideration for sale of goods.
The Supreme Court was not impressed and observed,
"In the present case, we have to simply see as to whether the definition of 'transaction value', as contained in Section 4 of the Act read with Rule 6 of the Rules, would encompass this benefit as amounting to additional consideration. Our conclusion is that it would come within the ambit of additional consideration indirectly flowing from the buyers to the assessee ."
The Supreme Court noted the above findings arrived at by the Commissioner which were not disputed by the assessee:
The Supreme Court is of the opinion that the Commissioner has rightly come to the conclusion with regard to the fact that additional monetary consideration, in addition to the price being paid for the goods, i.e. transfer of advance import licence in favour of the seller by the buyer enabling the seller of the goods to effect duty free import of the raw materials and bringing down the cost of production/procurement, is a consideration, the monetary value of which has to be considered under the provisions of the Rules, i.e. Rule 6 thereof.
Thus, the Supreme Court did not see any reason to deviate from the decision rendered by the Court in IFGL's case.
The Assessee referred to another judgment of the Court in Commissioner of Central Excise, Bangalore v. Mazagon Dock Ltd. - 2005-TIOL-111-SC-CX . A vain attempt was made to show that this judgment was contrary to the decision rendered by this Court in IFGL's case.
The Supreme Court did not agree and observed,
Interestingly, the Hon'ble Judges {S.N. Variava and Dr. AR Lakshmanan, JJ.} who comprised the Bench that decided IFGL's case were the same who rendered the judgment in Mazagon Dock Ltd.'s case. Another pertinent factor which is to be taken note of is that the two decisions were rendered within a short gap of a fortnight. The decision in Mazagon Dock Ltd. was rendered on July 28, 2005 whereas IFGL's case was decided on August 09, 2005. Thus, at the time of pronouncing of the judgment in IFGL's case, the same very Bench was conscious of its judgment given immediately before in Mazagon Dock Ltd.A reading of the judgment in Mazagon Dock Ltd.'s case would reveal that in the said case subsidy of 20% was received by the assessee therein from the Government, which was sought to be included by the Revenue as 'additional consideration' to arrive at the transaction value for the purpose of central excise. The Court held that this subsidy was not received from the buyer either directly or indirectly and, therefore, could not be included in the price of goods qua purpose of excise. On the facts of that case, the Court found that the respondent in the said case had entered into contract with Oil & Natural Gas Corporation Limited (ONGC) for manufacture and supply of jack-up rigs. For such a contract, as per the policy of the Government, 20% subsidy was to be received from the Government and 10% from ONGC. As far as 10% subsidy received from ONGC is concerned, the same was also to be includible in the transaction value as additional consideration flowing from the buyer. However, 20% subsidy from the Government was under the Government's own scheme with no role of ONGC (buyer in the said case). Obviously, it could not be said that this subsidy had any flow from the ONGC either directly or indirectly. The said judgment, therefore, has no bearing on the present matter.
Supreme Court is of the considered opinion that this case is squarely covered by the judgment of this Court in IFGL's case.
The Revenue appeal is allowed.
(See 2015-TIOL-190-SC-CX)
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