Wednesday, December 26, 2012


On 18th December, 2012 the Companies Bill, 2011 had been passed by the Lok Sabha. However, it was passed with certain modifications as recommended by the Parliamentary Standing Committee on Finance. Some of the amendments to the Companies Bill (as passed by the Lok Sabha) are as under:

1) Definition of 'key managerial personnel'(KMP) in clause 2(51) amended to include ‘Whole-time director' within its realm. Further, the pre-condition of CFO’s appointment by BOD to treat him as KMP was deleted;

2) As per amended clause 3, in case of One Person Company, nominee mentioned in Memorandum of Association would become member not only on subscriber's death but also in the case of subscriber's incapacity to contract due to insanity, etc.;

3) Words ‘of money’ omitted from Sec. 2(64) to cover bonus shares in paid-up share capital;

4) As per amended clause 2(40), the ‘statement of changes in equity’ should form an integral part of the financial statements of companies governed by Ind-AS;

5) Clause 23 amended to allow a private company to make rights and bonus issues;

6) Members are empowered to offer whole of their holdings of shares to public in offer for sale; earlier this was restricted to part shareholdings only;

7) In accordance with the Supreme Court's interpretation of section 67 of the Companies Act, 1956 in Sahara India Real Estate Corpn. Ltd. v. SEBI [2012] 115 SCL 478/25 18, clause 42 was amended to define 'private placement' in order to curb public issues in the garb of private placement;

8) Time-limit for filing annual return in clause 92(4) relaxed from 30 days to 60 days from the date of AGM or due date of AGM, if the AGM wasn’t convened;

9) Corporate Social Responsibility spending has been made mandatory;

10) As per amended clause 139 appointment of auditors for five years needs to be ratified by members at every Annual General Meeting;

11) Clause 152(6) provides that not less than two-thirds of the total number of directors of a public company shall be liable to retire by
rotation and be appointed by the company in general meeting. The independent directors are being excluded from the "total number of directors" for computing the proportion, nonetheless they are appointed under this Act or any other law;

12) As per newly inserted clause 245(2), where members or depositors seek any other suitable action from or against an audit firm, the liability shall be of the firm as well as of each partner who was involved in making any improper or misleading statement of particulars in the audit report or who acted in a fraudulent, unlawful or wrongful manner;

13) Provisions relating to voluntary rotation of auditing partner (in case of audit firm) modified to provide that members may rotate the partner at such interval as may be resolved by members instead of every year.

Tribunal applied ‘force of attraction rule’ to tax income indirectly connected to PE in India

The basic philosophy underlying the ‘force of attraction’ rule is that when an enterprise sets up a PE in another country, it brings itself within the jurisdiction of that another country to such a degree that such another country can properly tax all profits that the enterprise derives from such country- whether the transactions are routed and performed through the PE or not

In the instant case, the moot question that arose for consideration before the Tribunal was “Whether services rendered by PE in India to Indian project could only be made taxable and similar services rendered by general enterprise of such PE outside India will not be taxable as the same doesn’t amount to income indirectly attributable to PE in India”

The Tribunal held in favour of revenue as under:

1) It held that not only the profits directly attributable to the work performed by the PE but the entire profits whether “directly” or “indirectly” attributable to the PE could be made taxable;

2) The connotations of “profits indirectly attributable to permanent establishment” do indeed extend to incorporation of the ‘force of attraction’ rule embedded in Article 7(1);

3) In addition to taxability of income in respect of services rendered by the PE in India, any income in respect of the services rendered to an Indian project, which is similar to the services rendered by the PE, should also to be taxed in India in the hands of the assessee irrespective of the fact whether such services are rendered through the PE, or directly by the general enterprise;

4) This indirect attribution, in view of the specific provisions of India UK tax treaty, was enough to bring the income from such services within ambit of taxability in India. The twin conditions to be satisfied for taxability of related profits are: (i) the services should be similar or relatable to the services rendered by the PE in India; and (ii) the services should be ‘directly or indirectly attributable to the Indian PE’, i.e., rendered to a project or client in India. In effect, thus, entire profits relating to services rendered by the assessee, whether rendered in India or outside India, in respect of Indian projects are taxable in India;

5) The Tribunal has taken a considered view on interpretation of the aforesaid article that the entire profit relating to services rendered by the assessee whether rendered in India or outside India, in respect of Indian Project are taxable in India and it was not permissible to review the decision of the Tribunal in the guise of rectification under section 254(2) - Linklaters & Paines v. ITO, International Taxation [2012] 28 250 (Mumbai - Trib.)

Wednesday, December 19, 2012

Airport Authority isn’t a ‘municipality’; agriculture land in its limit but beyond municipal limit isn’t a cap. asset

As Hyderabad Airport Development Authority (“HADA”) can’t be treated as a ‘municipality’, agricultural land situated within its jurisdiction isn’t a ‘capital asset’ by virtue of exclusion u/s 2(14)(iii) and capital gains resulting from sale of such land aren’t taxable as capital gains

In the instant case, the moot question that arose before the Tribunal was whether HADA could be considered as municipality and agricultural land situated within its jurisdiction could be considered as capital asset under section 2(14)(iii)(a)/(b).

The Tribunal held as under:

1) It was  clear from section 2(14)(iii)(a)/(b) that the gain on sale of an agricultural land would be exigible to tax only when the land transferred was located within the jurisdiction of a municipality;

2) HADA was basically and essentially a creation of the Act of the State Legislature consisting of persons appointed by the State Government on salary basis. The Board Members were not elected by the people and there was no element of people’s choice being represented in any manner in the constitution of the Board. The Board functioned strictly under the supervision and control of the State Government and did not hold or possess a “local fund”. Being so, HADA couldn’t be called as a local authority;

3) HADA was only entrusted with the responsibility of preparing draft Master Plans and granting technical approval for any proposed construction or development in its jurisdiction. It didn’t have any power or ability to collect taxes nor was it responsible for provision of civic amenities which would be within the exclusive domain of the local authorities;

4) HADA, being a Development/Special Area Authority constituted under the said Act, couldn’t be either equated with a distinct municipality or considered as a complete substitute of a municipality or any other local authority;

5) HADA couldn’t be treated as a 'Municipality' and, as such, the agricultural lands situated within the jurisdiction of HADA wouldn’t constitute capital asset. Thus, gains consequential to sale of such land wouldn’t be chargeable to tax - Smt. T. Urmila v. ITO [2012] 28 222 (Hyderabad - Trib.)

Tuesday, December 18, 2012

A perpetual sole occupancy right given to a shareholder in a flat is deemed dividend

Transferable occupancy rights of a flat given to shareholders by a company on perpetual basis subject to deposit of a meagre sum, are deemed dividend under section 2(22)(a)
In the instant case, HPPL, a company had constructed a building and given occupancy rights of flats in the said building to its shareholders. The assessee ( i.e. one of the shareholder) got occupancy right of flat on deposit of certain sum towards proportionate cost of land and cost of construction. The AO held that distribution of occupancy rights should be considered as dividend under section 2(22)(a), and made addition under section 2(22)(a). However, the CIT (A) treated same as perquisite under section 2(24)(iv).

On appeal, the Tribunal held in favour of revenue as under:

1) The CIT (A) was not justified to hold that it was perquisite given by HPPL to its shareholders and not the transfer of occupancy rights to its shareholders. Hence, the provisions of section 2(24)(iv) would not apply to grant of occupancy rights by HPPL;

2) The assessee had got the occupancy rights in perpetuity as assessee could transfer his occupancy rights of the premises under consideration by way of sale to a third party subject to condition that transferee was to deposit the required amount of interest free security deposit with HPPL;

3) The consideration to be received by the assessee on transfer of his occupancy right was not to be refunded to HPPL. HPPL would have no objection for creating third party rights in the occupancy rights given to assessee; and

4) The AO had rightly held that the value of flats received was nothing but dividend given in the form of assets by HPPL. Hence, the decision of the AO, that said occupancy rights of the premises allotted by HPPL to assessee amounted to deemed dividend under section 2(22)(a), was upheld - Shantikumar D. Majithia v. Dy.CIT [2012] 28 149 (Mumbai - Trib.)

Monday, December 17, 2012

Concealing a receipt in ROI attracts penalty even if taxes due thereon are deposited

Merely by depositing taxes due on concealed income, bona fides of assessee could not be said to be established until such income was included in the ROI filed by the assessee

In the instant case, the assessee was working with a foreign company (“the employer”) and his services were terminated by the said company. But the employer offered him continued employment for a limited tenure and paid him an extraordinary compensation for retention and severance of his services. The assessee had determined and paid the taxes due on his income after including the said sum. However, he attached a note to the computation of income and claimed that the said sum received was non-compete fee, which was not chargeable to tax being a capital receipt. Thus, he filed his ROI by excluding the said receipt and claimed refund of the sum deposited. The AO imposed concealment penalty on the assessee. However, the CIT(A) deleted the penalty holding that there was no concealment of particulars of income or  furnishing of inaccurate particulars thereof on the part of the assessee since the bona fides of the assessee were proved by the disclosure in the return and the payment of taxes.

On appeal, the Tribunal held in favour of revenue as under:

1) The provisions laid down under section 17(3) are very clear that profit in lieu of salary includes the amount of any compensation due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto. Thus, there was no reason available with the assessee for nurturing a belief that the amount received was a capital receipt not chargeable to tax;

2) Merely by depositing the due tax on the amount received on termination of employment the bona fides of the assessee in not declaring the receipt as income in its return of income were not established;

3) The provisions laid down under section 17(3) were clear to bring the receipt as taxable and there was no scope of debate regarding its taxability, the  explanation of the assessee that he was under a belief that the amount received was a capital receipt and was not chargeable to tax  was not acceptable; and

4) By not declaring the said receipt in his ROI, the assessee had furnished inaccurate particulars of income attracting the penal action provided under section 271(1)(c) - ADIT v. Ravindra Bahl [2012] 28 130 (Delhi - Trib.)

Retro amendments don’t automatically alter analogous DTAA provisions and can’t be read into DTAA provisions

If a particular term has been specifically defined in the treaty, the retrospective amendment to the definition of such term under the Act would have no bearing on the interpretation of such term in the context of the Convention.

In the instant case, the Mumbai Tribunal decides on the issue of applicability of retrospective amendments to the provisions of treaty as under:

1) Para 1 of Article 23 of India-Mauritius treaty provides that “the laws in force in either of the Contracting States shall continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Convention”;

2) When we read full text of Para 1 of Article 23, it becomes manifest that if there is some provision in the Treaty contrary to the domestic law, then it is the provision of the treaty which shall prevail;

3) If the retrospective amendment is in the realm of a provision of which no contrary provision is there in the Treaty, then such amendment will have effect even under the DTAA and vice versa;

4) If a particular term has been specifically defined in the Treaty, the amendment to the definition of such term under the Act would have no bearing on the interpretation of such term in the context of the Convention;

5) A country who is party to a Treaty cannot unilaterally alter its provisions. Any amendment to Treaty can be made bilaterally by means of deliberations between the two countries who signed it;

6) The term “royalty” has been defined in the DTAA as per Article 12(3) of Indo-US DTAA.  Such definition of the term “royalty” as per this Article is exhaustive. Pursuant to the insertion of Explanation (5) by the Finance Act, 2012, no amendment has been made in the DTAA to bring the definition of royalty at par with that provided under the Act. Subject matter of the Explanation is otherwise not a part of the definition of Royalty as per Article 12; and

7) Thus, the retrospective insertion of Explanation 5 to section 9(1)(vi) couldn’t be read in the DTAA - WNS North America Inc. v. ADIT [2012] 28 173 (Mumbai - Trib.)

Thursday, December 13, 2012

CA is supposed to be diligent and careful enough in his professional work; a member suspended for being negligent

Not only ‘gross negligence’, but ‘due diligence’ is equally relevant and important criterion in measuring and determining “professional misconduct” in case of a Chartered Accountant.

In the instant case, the petitioner, a practicing CA, was aggrieved by two concurrent orders passed by disciplinary and appellate committee whereby punishment of removal of petitioner's name from the register for a period of 1 year was imposed and confirmed. The above order was passed on the basis of following reasoning:

a) The petitioner did not exercise due diligence;

b) He had shown gross negligence and carelessness in certifying tax audit report which did not reflect true and fair picture of the company’s affairs; and

c) He had signed the tax audit report without actually performing the audit as required.

The High Court dismissed the petition by holding as under:

1) The petitioner was conveniently overlooking the fact that as a professional CA while certifying audit report, it was his duty to diligently prepare the report without any mistake. It was his obligation to be diligent, careful and cautious before issuing certificate;

2) “Gross negligence” alone is not required to be taken into account while examining the act of the petitioner. But the exercise of due diligence is equally vital to decide whether acts of omission and/or commission amount to misconduct;

3) Once a particular factual aspect or entries, etc., are prepared, signed and certified by CA they are ordinarily accepted without further probing or investigation. In such circumstances, the duty and obligation of being absolutely diligent, conscious and careful are multiplied manifold and a CA shouldn’t perform his duties lightly or casually;

4) A mistake by a petty clerk or lower level accountant may be dealt with in a different manner but a mistake by a CA cannot be treated casualty;

5) The professional or trained CA is equipped with knowledge, training and experience to catch a mistake and if such trained and experienced professional allows so many mistakes,  pass-by without detecting them and if he signs and authenticates report containing such mistakes, etc., and also issues certificate, then, in such circumstances, any fault cannot be found with the conclusions drawn by the Disciplinary Committee, also confirmed by the Appellate Committee;

6) The petitioner had tried to wish-away his failure in detecting, catching and correcting the mistakes by attributing the blame to typist and computer operator. Therefore, the Court was not inclined to accept the petitioner's contention that the action taken by the institute was too harsh - CA Rajesh v. Disciplinary Committee [2012] 28 100 (Gujarat)

‘Willful defaults’ even cover those cases where ‘lender-borrower’ relationship is missing among parties and banks

In the instant case the moot question which arose before the Supreme Court was as under:

“Whether the expression ‘lender’ used in para 2.1 of RBI’s Master Circular dated 01.07.2008 on willful defaults should be restricted to a bank which had lent funds by way of loans and advances or it could be extended to cover a bank to which customer owes money under a derivative transaction”

Deliberating on the above issue the Supreme Court held as under:

1) The purpose of RBI’s Master Circular on willful defaults was  “to put in place a system to disseminate credit information pertaining to willful defaulters for cautioning banks and financial institutions so as to ensure that further bank finance is not made available to them”;

2) This Master Circular was issued pursuant to Central vigilance commission’s instructions, which covered “all cases of willful default of Rs. 25 lakhs and above” and were not confined to only willful default by a borrower of his dues to the bank in a lender-borrower relationship;

3) The mischief that was sought to be remedied was that banks should not be exploited by parties who have the capacity to pay their dues to the banks but who willfully avoid paying their dues to the banks;

4) It is crystal clear from a bare reading of para 2.6 of the Master Circular that non-funded facilities such as a guarantee is covered by the Master Circular and when a guarantee is invoked by a bank/financial institution but is not honoured, the defaulting constituent of the bank is treated as a willful defaulter even though it may not have borrowed funds from the bank in the form of advances or loans.

On basis of above, it was held that ‘willful defaults' of parties under a derivative transaction with a bank are covered by the Master Circular - Kotak Mahindra Bank Ltd. v. Hindustan National Glass & Ind. Ltd. [2012] 28 140 (SC)

Wednesday, December 12, 2012

Seismic services aren’t taxable under Sec. 44DA as Sec. 44BB specifically covers them; HC affirms AAR’s ruling

The assessee, a tax-resident of UK, was awarded contracts for procuring, processing and interpretation of data in respect of an off shore exploration block in India. It applied for lower tax deduction certificate under Section 197 at the rate of 4.223% as per section 44BB. However, the concerned authority directed the assessee to receive payments after effecting tax deduction at the rate of 10% in respect from such revenue. Aggrieved by the order, the assessee approached the AAR pleading that its services clearly fell within the ambit of Section 44BB. The AAR accepted the assessee’s claim. The revenue, thus, filed the present writ petition contending the validity of AAR’s ruling.

The High Court held in favour of assessee as under:

1) The AAR was right in applying the basic rule that ‘specific provision excludes the general provision’ in holding that the assessee’s income should be taxed as per provisions of Section 44BB;

2) Section 44BB is a specific provision for computing business income of a non-resident in connection with providing services for extraction or production of mineral oils including petroleum and natural gas;

3) On the other hand, section 44DA is broader and more general in nature and provides for assessment of the income of the non-residents by way of royalty or fees for technical services, where such non-residents carry on business in India through a PE;

4) If, as contended by the Revenue, Section 44DA covers all types of services rendered by the non-­residents that would reduce section 44BB to a useless lumber or dead letter and such a result would be opposed to the very essence of the rule of harmonious construction;

Therefore, the writ filed by the revenue contending the decision of the AAR was dismissed - DIT v. OHM Ltd. [2012] 28 120 (Delhi)

Monday, December 10, 2012

Huge profits and lack of govt. grants took away Sec. 10(23C) exemptions of an educational institute

The assessee was a registered society formed by Govt. of Madhya Pradesh for promotion and development of open school system in the State. It had claimed exemption under section 10(23C)(iiiab). During assessment proceedings, the AO opined that the assessee was systematically generating profits, thus, it couldn’t be regarding as existing for the benefit of public at large. Accordingly, the exemption was denied by AO for impugned assessment years. On appeal, the CIT(A) affirmed the stand of the AO.

On further appeal, the Tribunal held in favour of revenue as under:

1) Only the application of income as required under the Act and the predominant objects have to be kept in mind while granting or refusing exemption under section 10(23C);

2) Sec. 10(23C)(iiiab) speaks about any educational institution which is solely existing for educational purposes and not for profit and at the same time, which is wholly or substantially financed by the Government;

3) As per the data furnished, there was huge profit generated by the assessee which clearly established the profit motive of the assessee;

4) As regards the condition of wholly and substantially financed by the Govt., it was found that only in one year the Government had given some grant to assessee;

5) In respect to government grant, the word “wholly or substantially” used in the aforesaid section, means that, either it can be 100% or nearly to 100% but in any case may not be less than 75% because it has been used with the word wholly and not singularly; and

6) Moreover, the assessee’s case couldn’t be covered under Section 10(23C)(iiiad) as it was found that the surplus generated by the assessee was in crores which indicated that a huge abnormal profit had been earned by the assessee.

In view of the above, it was held that there was no infirmity in the conclusion drawn by the lower authorities to deny section 10(23C) exemption - m.p. rajya open school v. dcit [2012] 28 29

ITAT accepts lacuna in law as sec. 41(1) doesn’t tax depreciation claim if capital loan is waived off by lender

The assessee purchased a depreciable asset for which it took loan of same amount from a group company. Subsequently, parent company waived off the loan, which was shown as capital receipt by the assessee in its financial statements, without adjusting the book value of such asset. During assessment, the AO reduced the WDV of the asset to the extent of waived off loan and disallowed the claim for differential depreciation amount pertaining to the period when such loan was waived off and for the subsequent years.

On appeal, the Tribunal held in favour of assessee as under:

1) Since there was no sale or destruction of any assets comprising the block of assets, provisions of Section 43(6)(c)(i)(B) could not be invoked on ground of waiver of loan;

2) Further, concept of 'actual cost' as defined under section 43(1) could be applied only in year of purchase of assets. Therefore, the actual cost of asset recorded in the year of purchase could not be disturbed in the year of waiver;

3) In that regard there was a lacuna, in law, inasmuch as on one hand assessee got waiver of monies payable on purchase of machinery and claimed such receipt to be not taxable in view of it being a capital receipt and on other hand assessee claimed depreciation on value of machinery for which it did not incur any cost.

In view of above, it was held that under law revenue had no remedy and, therefore, disallowance of depreciation could not be sustained - Akzo Nobel Coatings India (P.) Ltd. v. DCIT [2012] 28 82 (Bangalore - Trib.)

Thursday, December 6, 2012

Suo-motu disallowance for TDS default shielded assessee from penal consequences of sec.201

In the instant case, the assessee made provision for expenses at year-end without making specific entries into accounts of the respective parties.  In the next year, the entire provision was written back and the TDS provisions were duly complied with at the time of actual payments to respective parties. While filing the return of income for the year in which provision was created, such provision was disallowed by the assessee itself. AO, however, raised tax demand for default in TDS liability and levied interest under sections 201(1) and 201(1A) respectively. Further, the CIT (A) upheld the decision of the AO.

On appeal, the Tribunal held in favour of assessee as under:

1) Once the amount had been disallowed under the provisions of section 40(a)(i) on the reason that tax had not been deducted, it was surprising that the AO held that the said amount was subject to TDS provisions again so as to demand the tax under section 201 and to levy interest under section 201(1A);

2) Once amount was disallowed under section 40(a)(i)/(ia) on the basis of the audit report of the chartered accountant, the same amount couldn’t be subject to the provisions of TDS under section 201(1) on the reason that assessee should have deducted the tax;

3) If the order of the AO was to be accepted then disallowance under Section 40(a)(i) and 40(a)(ia) couldn’t be made and provisions to that extent might become otiose. In view of actual disallowance under section 40(a)(i)/(ia) by assessee having been accepted by the AO, the said amount couldn’t be considered as amount covered by provisions of section 194C and 194J so as to raise TDS demand again under section 201 and levy interest under section 201(A);

4) Therefore, the assessee's ground on this issue was allowed as the entire amount had been disallowed under the provisions of section 40(a)(i)/(ia) in the computation of income on the reason that TDS was not deducted - Pfizer Ltd. v. ITO(TDS) [2012] 28 17 (Mumbai - Trib.)

Tuesday, December 4, 2012

Even dishonour of cheque due to ‘signature mismatch’ would be violation of sec. 138: SC

In the instant case, the following issues came up for consideration before Supreme Court:

1) Whether section 138 of the Negotiable Instrument Act covers dishonour of cheques other than due to insufficiency of funds?

2) Whether section 138 covers dishonour of cheques on the ground that “signatures do not match with specimen signatures on records of bank”?

The Supreme Court held as under:

a) The expression “amount of money …………. is insufficient” appearing in Section138 of the Act is a genus. Dishonour for reasons such “as account closed”, “payment stopped”, “referred to the drawer” are only species of that genus;

b) Just as dishonour on the ground that the account has been closed is a dishonour falling in the first contingency referred to in Section 138, so also dishonour on the ground that the “signatures do not match” or that the “image is not found”, which too implies that the specimen signatures do not match the signatures on the cheque would constitute a dishonour within the meaning of Section 138 of the Act;

c) If after issue of the cheque the drawer closes the account it must be presumed that the amount in the account was nil, hence, insufficient to meet the demand of the cheque;

d) A similar result can be brought about by the drawer changing his specimen signature given to the bank or in the case of a company changing the mandate of those authorized to sign the cheques on its behalf;

e) So long as the change is brought about with a view to prevent the cheque from being honoured the dishonour would become an offence under Section 138 subject to other conditions prescribed being satisfied.

Thus, it held that the dishonour due to signature mismatch would be covered by Sec. 138 of the Negotiable Instrument Act, and, thus, the trial Court could now proceed with the trial of the complaints filed by the appellants expeditiously - Laxmi Dyechem v. State of Gujarat [2012] 28 1 (SC)

Subject matter to initiate winding-up proceedings isn't subordinate to pending arbitration on such matter

In the instant case, the petitioner-creditor was a NBFC. It granted credit facilities to a company. The agreement was backed up by the personal guarantees executed by two directors of the company.  The loan was partly secured by the company by pledging of a fixed deposit held in the name of the company in a bank. Cheques issued for repayment in three trenches were dishonored. In view of the huge unpaid dues, the petitioner filed winding up petition contending that the company was unable to pay its debts. Simultaneously, the petitioner invoked the arbitration clause contained in the agreement and applied to the Bombay High Court under section 9 of the Arbitration Act, 1996. The company contended that Court should exercise its discretion in not admitting the petition and should direct the petition to be stayed over till the arbitral reference between the parties would be concluded.

Deliberating on the issue, the High Court held as under:

1) The scope of an arbitral reference is altogether different from the scope of a creditor's winding up petition even though the claim in both actions may be founded on the same cause;

2) The initiation of an arbitral reference in respect of a claim, which is made the subject-matter of a creditor's winding up petition as well, will not operate as a bar on the winding-up proceedings;

3) Creditor's arbitration petition on a claim, and his simultaneous winding-up petition on the same claim could never been regarded as parallel proceedings;

4) The institution of a suit or an arbitral reference, in such a situation, makes no difference since the arbitral reference has to be initiated in place of a suit if the matrix contract on which the money is claimed is governed by an arbitration agreement.

In view of the above findings, it held that initiation of an arbitral reference in respect of a claim which is made subject-matter of a creditor's winding up petition would not operate as a bar on winding up proceedings - Maheshwary Ispat Ltd., In re [2012] 28 4 (Calcutta)

Thursday, November 29, 2012

Super profit making comparables and 'notional interest' on credit period to AEs irrelevant factors for TP adjustments

In this case, assessee had received certain commission from its AE. Consequently, it raised debit note for Rs.18,43,796 as commission @ 3%. Assessee claimed that the commission earned by him was more than the industry’s average, thus, the test of arm's length principle was satisfied. On being referenced, the TPO compared the commission of 3% with controlled transactions of Indian clients of assessee where the average commission rate was worked out to be 3.375%. However, the average rate included commission rate of 7% received from ‘E’. In addition to above the TPO noticed that assessee had allowed extended credit period to its AE. Accordingly, the TPO made an addition in respect of notional interest for extended credit period and for the difference of 0.375% in the rate of commission.

Ruling in favour of assessee, the Tribunal held as under:

1) As per industry’s policy, the media agency earns commission @2.5%; the case of ‘E’ was an extreme case of earning 7% commission. Keeping in view the principle that the extreme profit companies are to be excluded, this company couldn’t be considered as a comparable for arriving at the average mean;

2) Therefore, AO/TPO was directed to exclude ‘E’ from list of comparables and work out the commission accordingly;

3) With reference to the calculation of interest on the so-called credit period it was noticed that the assessee was not charging any interest from clients for the services rendered/debit notes provided for delay in payments as a policy;

4) It was also noticed that in some of the transactions the credit period was ranging from 5 to 476 days, which indicated that the clients would not pay amount unless they verified the bills and services rendered;

5) Since it was practice of assessee not to charge interest from any client, this aspect should not be considered as an international transaction exclusively in the case of AE as it was not assessee’s policy to provide credit to any client specifically - Lintas India (P.) Ltd. v. ACIT [2012] 27 300 (Mumbai - Trib.)

6) The nature of the service and the fees being charged to ‘E’ were entirely different when compared to the other clients, which were considered as comparable. Therefore, the fixed fee received from ‘E’ couldn’t be used for comparison as it was not comparable to the transactions of commission undertaken by assessee with the other clients;

Friday, November 23, 2012

Concealment penalty is inevitable if bogus claim is withdrawn in revised return filed after initiation of survey

The assessee, a public limited company, claimed a deduction of Rs. 10,00,000 under section 35CCA purportedly paid to a trust for assessment year 1983-84. Subsequently, the claim was withdrawn by filing a revised return. During assessment, the AO observed that assessee had revised its return of income only as a result of survey action taken by revenue in the assessee’s premises. It was further noticed by AO that the assessee was in knowledge of the fact that the trust was not genuine and had deliberately made a false claim under Sec. 35CCA to reduce its taxable income. Accordingly, the AO imposed the maximum penalty, being 200% of the tax sought to be evaded. On appeal, the CIT(A) as well as ITAT held in favour of assessee.

On revenue’s appeal, the High Court held in favour of revenue as under:

1) The assessee made the donation through cheque, which was encashed through a bogus bank account opened specifically for this purpose;

2) It was evident from the records that bank account of the drawee had been opened in a fictitious name merely for the purpose of misappropriating the amount;

3) The assessee’s contention that it was a victim of a fraud played by several persons acting in concert couldn’t be accepted because the special crossing (‘account
payee’) in the cheque was converted or altered into an ordinary crossing by the assessee’s account manager and senior advisor who had also affixed their signatures;

4) The revised return was filed by assessee only when it was cornered and the income tax authorities had collected material on the basis of which it could be said that the claim for deduction was false or bogus.

From the above facts, it was held that filing of revised return was an act of despair and it couldn’t benefit the assessee in any way. Accordingly, penalty order passed by AO was restored – CIT v. Usha International Ltd. [2012] 27 227 (Delhi)

Thursday, November 22, 2012

Performing regulatory function by BIS isn’t a business activity even if it earned profit from such functions

The BIS (“the assessee”), a statutory body, was established under the Bureau of Indian Standards Act, 1986 ("the BIS Act"). The exemption granted to assessee under section 10(23C)(iv) was withdrawn by DIT(E) on the contention that the nature of activities carried on by the assessee was hit by proviso to section 2(15), as the activities carried on by assessee were in the nature of business. The DIT(E) further noted that the assessee had earned substantial amount of income. The assessee, thus, filed instant writ against the order of DIT(E).

The High Court held in favour of assessee as under:

1) Assessee is a statutory body established under the BIS Act and brought into existence "for the harmonious development of the activities of standardization, marking and quality certification of goods". This has been its primary and pre-dominant object, and the profit/revenue earned on discharging its functions is purely incidental;

2) The assessee performs sovereign and regulatory function, in its capacity of an instrumentality of the state. Therefore, it could not be said that it was carrying on an activity of trade, commerce or business;

3) "Rendering any service in relation to trade, commerce or business" couldn’t cover within its fold the regulatory and sovereign authorities, set up to act as agencies of the State in public duties;

4) The primary object for setting up such regulatory bodies is to ensure general public utility. Further, it couldn’t be said that the public utility activity of evolving, prescribing and enforcing standards, "involves" the carrying on of trade or commercial activity.

Therefore, the impugned order of DIT was quashed by High Court - Bureau of Indian Standards v. DGIT(E) [2012] 27 127 (Delhi)

Extension of period to submit ITR-V can’t validate a time-barred Sec. 143(2) notice

In this case, the return was e-filed by the assessee on 25-09-2009. The ITR-V for the same was received by CPC on 29-11-2010 i.e., within the period as extended by Circular No. 3/2009. Consequently, the AO issued a section 143(2) notice on 26-08-2011 and also passed the order under section 143(3). Assessee contended that the time limit for issue of notice should be reckoned from the date of e-filing of return. Consequently, the order passed by AO was without jurisdiction as it was passed on the basis of a time-barred notice.
Deliberating on the issue, the Tribunal held in favour of assessee as under:

1) According to the CBDT Scheme framed in this respect, the date of transmitting the return electronically shall be the date of furnishing of return if the form ITR-V is furnished in the prescribed manner and within the period specified;

2) Since ITR-V, received by CPC was within the prescribed time in the prescribed manner and in the prescribed form, hence, for all practical purpose, the date of filing of the return shall be the date on which the return was electronically uploaded i.e. 25-09-2009.

In view of the above, it was held that the notice served on the assessee was beyond the period of six months from the end of the financial year in which the return was furnished and therefore, was invalid and could not be acted upon. Consequently, the assessment order passed was quashed - E.K.K. & Co. v. ACIT [2012] 27 111 (Cochin - Trib.)

Wednesday, November 21, 2012

Unabsorbed depreciation of earlier years brings down tax burden on long-term Capital-gains

In the instant case, the assessee’s claim to set off brought forward unabsorbed depreciation against current year's long-term capital gain was rejected by the AO on the basis of following reasoning:

a) Set-off of current year's business loss against the income under the other heads of income does not include unabsorbed depreciation as it was not a part of business loss;

b) Section 32(2) restricts the allowable depreciation of the current year only to the extent of profits and gains of business; and

c) The other reason for rejecting assessee's claim was that the Act treats business loss separately from the depreciation because business loss can be carried forward only for 8 assessment years whereas depreciation can be carried forward for unlimited period.

The AO completed the assessment after disallowing the claim of the assessee for set off of brought forward depreciation. On appeal, the CIT(A) upheld the order of the AO.

On appeal, the Tribunal held in favour as under:

1) As per provisions of sec.32(2), if the current year's depreciation cannot be set off owing to the profits or gains chargeable being less than the allowance, then the allowance or the part of the allowance to which effect has not been given shall be added to the amount of allowance for depreciation for the following previous year. This means that brought forward depreciation merges with the current year's depreciation because of the legal fiction created by provisions of Sec. 32(2) of the Act;

2) However, this fiction has been subjected to the provisions of sections 72(2) and 73(3). Bare reading of sec. 72 suggest that in case of set off of business loss vis-à-vis depreciation, the first preference shall be given to the business loss as per the provisions of section 72(1) for the simple reason that the business loss can be carried forward only up to 8 assessment years whereas the depreciation can be carried over up to unlimited period; and

3) As has been discussed hereinabove, the brought forward unabsorbed depreciation is treated as current years' depreciation because of the legal fiction, therefore, the treatment given to the current year's depreciation is equally applicable to brought forward depreciation and  the same is also allowed to be set off from the long-term capital gains - Suresh Industries (P.) Ltd. v. ACIT [2012] 27 203 (Mumbai - Trib.)

Saturday, November 17, 2012

Subsequent reversal of a transaction among group entities isn’t colourable device, if effect carried in ledgers

The assessee-trust was managed by Ansal group. It had entered into agreement with its group concern (‘APIL’) for purchase of plots to open a school in furtherance of its objects. The assessee had paid 95 per cent of the sale consideration and obtained possession of the plots. Subsequently, the sale agreement was cancelled and entire sale consideration was returned to assessee by APIL. During assessment, AO held that the transactions were not genuine and were devised with an intention to advance surplus money to APIL. The AO withdrew the benefit of exemption under section 11 and 12 on the ground that the directors and trustees of both concerns were connected persons falling within the purview of specified persons under section 13(1)(c), and the money had been advanced without interest for the benefit of specified persons. The CIT(A) reversed the order of AO.

On appeal, the Tribunal held in favour of assessee as under:

1) The assessee was a charitable institution and there was no change in its objects;

2) From assessee's books of account, it clearly emerged that more often than not APIL had credit balance; thus, it had been providing monetary support to trust now and then. Therefore, a presumption could not be drawn that APIL had diverted the funds without proper justification for its use;

3) Assessee's debiting of 95 per cent advance to asset acquisition account itself indicated that because of substantial advance and possession it treated the plots as its assets. Treatment of these amounts as advances in APIL books did not militate against assessee's method of accounting. Therefore, the alleged variation in categorization of accounting in two different sets of books would not convert valid transactions into colourable transactions;

4) It could not be found that there was any motivation on the part of APIL to clandestinely divert Trust’s Funds for its personal use;

5) Assessee contended that cancellation of plots was in the interest of trust as by that time it had moved on to better projects including a university. Since no cancellation charges were to be levied, it terminated the agreements;

6) From objective view every entity has a right to carry on its objectives in the manner it best considers. Revenue couldn’t step in the shoes of the trustee in these matters.

Therefore, the exemption under Sec. 11 was allowed to assessee - Chiranjiv Charitable Trust v. ADIT [2012] 27 99 (Delhi - Trib.)

Friday, November 9, 2012

Indo-Swiss treaty relief extended to international shipping profits, ITAT explains meaning of ‘dealt with’

The assessee, a Swiss-company, was engaged in the business of operations of ships in international waters through chartered ships. During the relevant year, the assessee had declared his total income at nil on the following grounds:

1) There was no article in the India-Swiss treaty dealing specifically with taxability of shipping profit;

2) Article 7 of the treaty dealing with business profits specifically excluded profits from the operation of ships in international traffic; and

3) Article 22 of the treaty dealing with other income subjected to tax shipping profits only in the State of residence viz. Swiss confederation.

The AO rejected the assessee’s contention and held that the shipping profits were taxable in India under section 44B of the IT Act. CIT(A) however, allowed assessee’s appeal. The department then preferred an appeal to the ITAT.

The Tribunal held in favour of assessee as under:

1) Para 1 of Article 22 of indo-swiss treaty provides that the ‘items of income of a resident of a contracting State, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State’;

2) When Article 7 provides for taxability of business profits other than international shipping profits, then it can’t be said that the said article ‘dealt with’ international shipping profits;

3) The fact that the expression used in Article 22(1) of the Indo-Swiss treaty is “dealt with” clearly demonstrates that the expression “dealt with” is some thing more than a mere mention of such income in the article.

Article 22(1) of Indo-swiss treaty contemplates that items of income covered under this article will be taxable in the state of resident only i.e. Switzerland in the instant case. Therefore, the same couldn’t be taxed in India – ADIT v. Mediterranean Shipping Co. [2012] 27 77 (Mumbai - Trib.)

Wednesday, November 7, 2012

ITAT considered ‘carbon credits’ as inventory yet held income from their sale as ‘capital receipts

The assessee-company was generating power through biomass power generation unit. For the relevant year, it sold 1,70,556 Carbon Credits (‘CERs’) to a foreign company

for Rs. 12.87 crores. During assessment, the AO opined that the sale proceeds of the CERs were revenue receipts since the CERs are a tradable commodity and are even

quoted in the Stock Exchange. Accordingly, a tax demand of Rs. 3.60 crores was raised. The CIT (A) confirmed the order of AO.

On appeal, the Tribunal held in favour of assessee as under:

1) Carbon credit is in the nature of "an entitlement" received to improve world’s atmosphere and environment reducing carbon, heat and gas emissions;

2) Carbon credits are made available on account of saving of energy consumption and not because of assessee’s business. Transferable Carbon Credit is not a result or

incidence of one's business and it is a credit for reducing Carbon emissions;

3) The amount received is not received for producing and/or selling any product, bi-product or for rendering any service for carrying the business;

4) In the case of CIT vs. Maheshwari Devi Jute Mills Ltd. 57 ITR 36 the SC held that transfer of surplus loom hours to other mill was capital receipt and not income.

Being so, the consideration received by the assessee in respect of Carbon Credit was similar to consideration received by transferring of loom hours.

5) Carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to

environmental concerns.

Thus, the entitlement earned for Carbon Credits can, at best, be regarded as a capital receipt and can’t be taxed as a revenue receipt.

Apart, from above observation, the Tribunal at the end of judgment took a view in accordance with Guidance Note issued by ICAI which states that CERs are inventories of the generating entities as they are generated and held for the purpose of sale in ordinary course. Even though CERs are intangible assets, those should be accounted for as per AS-2 (Valuation of inventories). Thus, the assessee generating these should apply AS-9 to recognise revenue in respect of sale of CERs - MY HOME POWER LTD.V. DCIT [2012] 27 27 (Hyderabad - Trib.)

Tuesday, November 6, 2012

‘Son of Sardar’ losses against ‘Jab tak hai Jaan’; recital between single screen theatre owners and YRF held valid

The Ajay Devgn Films (“ADF”) alleged that Yash Raj Films (“YRF”) while distributing the rights to exhibit ‘Ek Tha Tiger’ put a condition on single screen theater owners that they would have to simultaneously exhibit the other film ‘Jab Tak Hai Jaan’ to be released on the eve of Diwali. The ADF further alleged that, since there was a threat that the YRF would not allow to exhibit the movie ‘Ek Tha Tiger’ if the contract to exhibit ‘Jab Tak Hai Jaan’ was not entered simultaneously, it amounted to abuse of dominance and violation of section 3 and 4 of Competition Act. ADF argued that the agreement between theater owners and YRF was a tie-in arrangement.
The grievance of the ADF arose because of its fear that it would not get enough theaters for the movie ‘Son of Sardar’ releasing on the same date as of ‘Jab Tak Hai Jaan’

The Commission held in favour of YRF as under:

a) The impugned agreement would not be affecting the competition in the Indian market as such or would not create any barriers for new entrants or drive existing competitors out of the market;

b) The single screen theater owners took competitive business decision in their interest to screen two films of YRF. Such agreement was purely commercial in nature between parties promoting their economic interests;

c) Since single screen theater owners had liberty either to agree or not to agree, the agreement could not be said to be a restraint on the freedom of business of theater owners;

d) The release of any other film including ‘Son of Sardar’ could be postponed or preponed as per availability of the screens;

e) The market could not be restricted to any particular festival period like Eid or Diwali and the market had to be considered a market available throughout the year;

f) Further, the ADF didn’t present any evidence to prove the dominant position of the YRF in the film industry. In the absence of evidence of its market share, economic strength, etc. it could not be construed that YRF had dominance in the market just because it had produced various blockbuster movies in past and it had big name in the industry.

In view of above, the Commission was prima facie of the opinion that there was no contravention of the provision of the Act – AJAY DEVGN FILMS V. YASH RAJ FILMS PRIVATE LIMITED [2012] 26 350

Monday, November 5, 2012

No exemption to a trust if its main objects are abandoned and it is just perusing other incidental objects

The main objects of the assessee, a Section 25 company, were to organize and undertake scientific research. The assessee was recognised as a scientific research institution by the CBDT from its inception, which was, however, withdrawn wef 31st March, 1981 as it was found that assessee carried out no scientific research as stated in its main objects. In 1984, assessee applied for and was granted registration under Section 12A of the Act. During the relevant year, the assessee handed over the possession of commerce centre constructed by it to the various lessees and claimed exemption under section 11(1)(a) of the Act in respect of such lease income. The AO denied the exemption. The CIT(A) and ITAT also upheld the order of AO.

On appeal, the High Court held in favour of revenue as under:

1) Compliance with section 12A does not entitle an assessee to the benefit of section 11, ipso facto;

2) The assessee’s contention to have been engaged in “scientific research’ was unfounded in view of the withdrawal of its recognition under section 35(1)(ii);

3) During the assessment years 1978-79 to 1992-93, its expenditure on scientific research  never exceeded 3.32% of income in any year;

4) There was only a facade of being a scientific research institution by making claims in the annual report of scientific research activity;

5) The assessee never engaged itself in any activity connected to its main object, viz., to organize, sponsor, promote, establish, conduct or undertake the scientific research in any way;

6) Under the Companies Act,1956 an entity is entitled to carry on business in respect of the incidental and ancillary activities that didn’t by itself entitle it to claim an exemption under section11;

7) If, however, the main objects are abandoned, it can hardly be said that the expenditure towards the incidental objects was towards a charitable purpose;

8) In the assessee's case, its incidental or ancillary objects on their own, did not constitute charitable purposes. Indeed, it was rightly not even suggested by the assessee that its ancillary objects by themselves constituted charitable purposes.

Therefore, assessee’s claim for exemption under section 11 failed - M. VISVESVARAYA INDUSTRIAL RESEARCH & DEVELOPMENT CENTRE V. CIT [2012] 26 200 (Bombay)

Thursday, November 1, 2012

TP provisions are self-governing; TPO finding can be used against a transaction not referred to him

The assessee-company was a manufacturer of chemicals and dyes having six manufacturing divisions. To arrive at the ALP in respect of its international transactions the TPO disallowed certain adjustments as desired by assessee. The assessee filed this present appeal. The grounds of appeal, inter alia, were as follows:

i) TPO had made an upward adjustment on account of commission. In this respect, the assessee contended that since there was no reference in respect of commission because AO had made reference only in respect of goods sold to AEs, the upward adjustment in commission receipt as suggested by the TPO was without jurisdiction;

ii) The assessee raised the issue that the provisions of Chapter X could not be invoked without prima facie demonstrating that there was some tax avoidance.

On issue of adjustment on account of commission transaction, the Tribunal held in favour of assessee as under:

i) As per Section 92CA, the role of the TPO is restricted to determining the ALP in relation to the international transaction which has been referred to him, thus, it could be said that it was not within the domain of TPO to determine the ALP of a transaction not referred to him;

ii) This ground of assessee was, therefore, allowed. However, it was also held  that as per section 92C(3), the AO could consider it as a material fact and proceed to determine an international transaction which had come to his knowledge on the basis of any material or document available with him.

On issue of invoking TP Provisions without establishing tax avoidance the Tribunal held in favour of revenue as under:

1) There is nothing in the statutory language to suggest that the AO must demonstrate the avoidance of tax before invoking TP provisions;

2) Rather, the logic is to make certain that the transactions between the AEs should not be arranged in such a way that the ultimate tax payable in India is artificially reduced. Thus, the stand of the assessee on this ground was dismissed by Tribunal - ATUL LTD. v. ACIT [2012] 26 300 (Ahmedabad - Trib.)

Assessee escaped penalty for delay in filing e-TDS return on reasoning that he was new to this stuff

In the instant case, for the relevant assessment year, the assessee had not filed the E-TDS returns within the specified time and, thus, AO levied the penalty under Section 272A(2). Aggrieved by the order of AO, assessee preferred an appeal to the CIT(A), which  confirmed the penalty order passed by AO.

 On appeal, the Tribunal held in favour of assessee as under:

1) The delay in filing the returns, even if they are characterized as negligence on the part of the assessee, can only be considered as a technical or venial breach of law for which penalty should not be levied automatically;

2) The requirement of filing Form No. 24Q was new one for the assessee being the first year of filing such return and, moreover, there was no dispute about the fact that the tax had been deducted by the assessee; and

3) As held by the ITAT Mumbai Bench in the case of Royal Metal Printers (P.) Ltd.v.ACIT [2010] 37 SOT 139, for such technical or venial breach supported by reasonable cause, penalty under Section 272A(2) is not leviable.

Therefore, the impugned penalty order was cancelled - UNION BANK OF INDIA V. ACIT [2012] 26 347 (Agra - Trib.)

Wednesday, October 31, 2012

SC reverses its earlier ruling and nods initiation of prosecution on successive dishonour of cheque

In the instant case, the respondent-company issued some cheques in favour of the appellant which were dishonored twice for insufficiency of funds. The appellant presented the issue before the Metropolitan Magistrate. During proceedings, the respondent contended that complaint had not been filed within 30 days of the expiry of the notice based on the first dishonour of the cheque. The Magistrate dismissed the application of respondent. On filing of revision petition before the High Court, it allowed the revision petition and quashed the orders passed by the Magistrate relying upon the decision of the Supreme Court in Sadanandan Bhadran v. Madhavan Sunil Kumar [1998] 6 SCC 514, according to which a complaint based on a second or successive dishonour of the cheque was not maintainable, if no complaint based on an earlier dishonour of cheque, followed by the statutory notice issued on the basis thereof, had been filed. Matter reached to the Supreme Court.

The Supreme Court held in favour of appellant as under:

1) Holder or payee of the cheque has the right to present the same any number of times for encashment during period of six months or during period of its validity, whichever is earlier: Even Sadanandan Bhadran's case (supra) upheld the same;

2) There is nothing in provisions of Act that forbids holder of a cheque to demand amount covered by cheque, by serving fresh notice under clause (b) of proviso to section 138, should there be a second or successive dishonour of cheque on its presentation;

3) So long as the cheque is valid and it is dishonored upon presentation to the bank, the holder's right to prosecute the drawer remains valid and exercisable;

4) By reason of a fresh presentation of a cheque followed by a fresh notice in terms of section 138, the drawer gets an extended period to make the payment and thereby benefits in terms of further opportunity to pay to avoid prosecution. Such fresh opportunity cannot help the defaulter on any juristic principle to get a complete relief from prosecution;

5) There is no real or qualitative difference between a case where default is committed and prosecution immediately launched and another where prosecution is deferred till cheque presented again gets dishonored.

Thus, the decision in Sadanandan Bhadran's case (supra) was overruled and it was held that prosecution based upon second or successive dishonour of the cheque was also permissible so long as the same satisfies the requirements stipulated in the proviso to section 138 - MSR Leathers v. S. Palaniappan [2012] 26 332 (SC)

US Court hails Rajat Gupta’s ‘big heart and helping hand’ but jails him for insider trading

Rajat Gupta was the director of Goldman Sachs. He was privy to information which would affect company’s share prices but not known to public. Gupta was found guilty by the jury for insider trading i.e. for leaking some unpublished price sensitive information in 2008. Gupta tipped off Rajaratnam about Warren Buffett’s soon-to-be-announced infusion of $5 billion into Goldman Sachs. Rajaratnam purchased large quantities of Goldman stock just before the market closed and booked a gain of $1,231,630 by selling the stock next morning when the Buffett investment was announced and stock prices surged. The crimes merited a prison sentence of 78-97 months under the Sentencing Guidelines of the US. Given Gupta’s exemplary humanitarian record, the US District Court of New York let him off with a ‘non-Guidelines’ sentence of 2 years prison.

The Court noted Gupta’s devotion of a huge amount of time and effort to a very wide variety of socially beneficial activities, such as the Global Fund to Fight AIDS, TB and Malaria, the Public Health Foundation of India etc. Such activities were illustrations of his big heart and helping hand. The Court hailed Gupta’s “extraordinary devotion, not only to humanity writ large, but also to individual human beings in their times of need”.

On the other hand, Gupta's criminal acts represented the very antithesis of his humanitarian record. With Goldman Sachs in turmoil but on the verge of being rescued by an infusion of $5 billion, Gupta, within minutes of hearing of the transaction, tipped Rajaratnam, so that the latter could trade on this information in the last few minutes before the market closed. This was the functional equivalent of stabbing Goldman in the back.

The Court had to balance both extremes while awarding a sentence to Mr. Gupta. Taking Court observed that “meaningful punishment is still necessary to reaffirm society's deep-seated need to see justice triumphant. No sentence of probation, or anything close to it, could serve this purpose.”

The Court took note of the provisions of the United States Code which require that the Court had to consider the need to afford specific deterrence and general deterrence. As to specific deterrence (i.e. deterring the convict repeating it in future), the Court held that loss of reputation suffered by Mr. Gupta would deter him from repeating his transgressions in future and no further punishment is needed to achieve this result. The need for general deterrence (i.e. to set an example to others), however, suggested different conclusion. Insider trading is an easy crime to commit but a difficult crime to catch. It was necessary to send out the message “when you get caught, you will go to jail”. After carefully weighing the above, the Court sentenced Rajat Gupta to 24 months' imprisonment, concurrent on all counts, to be followed by one year of supervised release and a fine of $5,000,000.

Indians need not despair that, unlike US, legal system moves slowly in India. Two recent instances offer rays of hope. One, the death sentence of Ajmal Kasab for terrorist acts on 26-11-2008 upheld by the Supreme Court in 2012. The other being two Sahara companies found guilty by the Supreme Court of public issue of securities (Optionally Fully Convertible Debentures) in the garb of private placement in 2008. Companies ordered to refund amounts collected from public. This whole case was successfully handled by SEBI, Securities Appellate Tribunal and the Supreme Court in two years flat from 2010 to 2012.

Tuesday, September 18, 2012

Income Tax Calculator-A Necessity

Everybody is aware of the word income tax. Each country has a rule of its own in terms of income tax calculations. In the modern times a person can easily calculate his or her income tax through the help of income tax calculator . There are several websites which has the programme of tax calculator. Speaking about India, the tax levels have increased from the year of 1950. During 1971 there were a total of 11 slabs in tax where the maximum tax rate was 93.5 % which included the surcharges. During 1974 the maximum rate was 97.5 %. The tax was then reduced due to the income tax circulars as the tax evasion was increasing. The tax rate was then decreased to 40 % during 1993.

The income of a person when does not exceed a certain level is not liable to tax is an asset. It becomes chargeable under the income tax. The rates are agreed by the income tax circulars and finance acts in a given assessment year and is determined according to a person’s residential status. Thus this tax is the tax which is payable at a rate which is enacted by Union Budget, every year on the basis of total income which is earned by each and every person in the preceding year. The charge is completely based upon the type of income of a person. Be it a capital or be it revenue. The educational cess becomes applicable at the rate of 3 & over the income tax of the person. The surcharge is not applicable.

Residential status also becomes necessary which is clearly stated clearly in the income tax circulars. There are basically 3 status of the residentially. The first one is for the ordinary residents. Under this, the person must reside in India for minimum 182 days in the previous year or must have a stay in India for 365 days in the last 4 years in the previous year. The regular residents are taxable always on their respective income which is earned in India as well as in the abroad. If the income of the non residential Indian is acquired from any kind of trade or business which is headquartered in India they are compelled to give a small amount of tax.

Basically the complete income of a resident is separated into 5 major parts. The first part is the income from the salary; the second can be attributed to the money coming from house property. The third one is the income which is generated from any profession or business of the person, the fourth one is in the form of capital gain and lastly there is the income from various other sources. The income tax circulars gives all the details regarding the rules and regulations and the tax calculator comes into handy which can be used by many to know the exact amount which must be given to the government.

Thursday, September 13, 2012

Great tax calculation services available online

The tax calculation is one of the most vital things in your life, as you surely need to pay tax after calculating how much you can save legally. The Service tax for instance is something that you pay yearly, but if you are not aware of the Income tax act properly then you won’t be able to know how much you can actually claim for refund. That’s exactly why you need professional services which can work on the Income tax act and find you ways to save on Service tax as much as possible for you. This is one thing that has made calculating tax with professional services a popular option. The online tax calculation services can help for sure.

When you are looking for the tax calculation service you have to make sure that you select a trustworthy service that has the right experience of the job. The Service tax payment will become just a matter of few mouse clicks with these services, and your refund will be credited to your account. All you need to do is to register with the service and they will work according to the Income tax act and make sure that your tax is submitted in time, with proper tax exemption claims.

Monday, August 20, 2012

Accessing Service Tax Rules, now easier with

Paying taxes and understanding Service Tax Rules is a complicated task for many of us and more so with the many amendments and Service Tax Circulars that the department comes up with everyday. However, to make the process of filing taxes a lot easier for the citizens there are many online tax calculator services available.

These services use the information being entered by the user about their sources of income and the claimable deductions after which the tax calculator sums up and provides an accurate figure. This process of filing my taxes was a pain and a waste of time taking into consideration the long hours one has to spend with the auditors or online trying to understand the requirements and fill up the required details and avoid any errors. However, this was so only until a friend of mine suggested me to look up the website of the that offers all kinds of services pertaining to taxes.

This apart the website also has its content sorted out neatly for people looking for additional information about the Service Tax Circulars, Service Tax Rules etc making the site helpful and informative along with being easily accessible to everybody.

Monday, July 30, 2012

How tax adviser help for current income tax rules

Let’s put it this way. I am pretty baffled and confused about Income tax rules . So, the other day I sought an appointment with a tax consultant to understand the norms and implication. What I got to understand that the tax implication is a part and parcel of life. It is equally baffling for me to understand how people make their way easily through the mesh of income tax rules. That too they are pretty adept at handling the intricacies all by themselves. Despite my confusion, I do realize their overwhelming significance. Moreover, the tax consultant is too eager to help me through the deals of calculations.

The bracket of taxation varies from individual to individual. But, as long as you belong to the bare optimum tax bracket, you cannot avoid the bills of taxation. Income tax rules change with the passage of time. This again is done, keeping in mind the interests of one and all. Consequently, it is common to come across a new Income tax act . It is quite important for tax consultants, as well as the payers, to gather factual evidence about the newly passed income tax act. Last time, my consultant briefed me about the implications of service tax notifications.

He further explained how we indirectly contribute to Service tax notifications , despite not being the owner of a service. Entrepreneurs, business houses, as well as, the tax counselors need to be well aware of service tax notifications. Tax consultants have leading roles to offer in helping people like me deal with the prospect of disbursement. Income tax act revised from time to time has to be within their fingertips.

Thursday, May 10, 2012

Tax Computation & e-Filing of Income Tax Returns

Tax Computation & e-Filling of Income-tax Returns’ are covering:

*  Computation of income under different heads of Income, i.e., Salary , House Property , Business or profession , Capital gains and Other sources
*  Relief under section 89
*  Auto computation under sections 80G, 111A, 112 etc.
*  Auto adjustment of losses & transfer thereof in schedules CYLA / BFLA / CFL
*  Computation of interest under section 234A, 234B & 234 C
*  Facility to auto generate Tax Audit Forms (i.e, 3 CA to 3 CD)
*  Computation of book profits & MAT
* Instant location and solution to validation errors
*  Facility to generate paper returns

Monday, May 7, 2012

Let Us Share A Compilation Of Best Practices & Orders

We are pleased to announce release of “Let Us Share-A Compilation of Best Practices and Orders, by Income Tax Department.

Let Us Share” was conceived three years ago, as a vehicle for sharing excellance both within the Income-tax Department and with the public. The compilation in “Let Us Share” starts with Vision, Mission & Values’ and the ‘Citizen’s Charter’ which signify the reference points for day to day working of the Income-tax Department. The remaining sections showcase the professional proficiency of the Department in the core area of taxation.

E-TDS Returns (F.Y 2012 -13)

E-TDS Returns (F.Y 2012 -13) Some of the salient features are
  * Unlimited Deductors / Companies, Deductee & Employee
  * Generates eTDS / eTCS Return for Forms 24Q, 26Q, 27Q & 27EQ
  * Generates NIL returns on a single key stroke
  * TDS/TCS Certificate – Forms 16, 16A, 27A & 27D
  Latest Integrated File Validation Utility (FVU) of NSDL for automatic data Validation
  * FVU file generation for Return submission in just on click
  * Instant display of file validation errors at same location
  Option to auto download CSI file during file validation
  Import data from Excel files (optional add-on)
  Online / Offline updation , data backup & restore facilities   Print out various utility reports
  Print out Forms 24Q, 26Q, 27Q & 27EQ for internal records
  * Option of Exporting reports in PDF/ Word/ Excel formats
  Extremely user-friendly Windows based interface.

Friday, April 27, 2012

Taxmann’s Guide to Foreign Direct Investments in India with FDI Policy Effective From 10th April, 2012

Taxmann’s Guide to Foreign Direct Investments In India is a complete and comprehensive Guide to Consolidated FDI Policy issued on 10th April, 2012. 

Liberalisation in industrial policy and policy towards foreign investment in India was initiated in 1991.  The liberal policies introduced in 1991 are continuing and Indian economy is becoming more and more open and liberal every year.

Policy in respect to foreign investment in India (FDI) is regulated by Department of Industrial Policy and Promotion (DIPP) (FC section).  So far, the practice followed was to issue press notes in respect of industrial  and foreign investment policy.  The press notes were scattered and a single policy document was not available.

Friday, March 23, 2012

Service Tax Ready Reckoner

We are pleases to announce release of the Service Tax Ready Reckoner (Finance Bill 2012 Edition). This book will be useful for Corporate Accountants, Chartered Accountant & Service Tax Practitioners.

Thursday, March 22, 2012

Standing Committee Report on Direct Taxes Code Bill

A comprehensive analysis of the Recommendations of the Parliamentary Standing Committee on Finance on Direct Taxes Code Bill Showing:

• What the Direct Taxes Code originally proposes
• What Standing Committee now suggested
• What are the implications of the recommendations of the Standing Committee.

Wednesday, March 14, 2012

Employees How to Save Income Tax

Employees How To Save Income Tax As amended by Finance Act 2011. This edition is for assessment years 2011-12 and 2012-13. The book incorporates:

* Basic concepts
* How to Compute Salary Income
* Valuation of Perquisites
* How to Compute Property Income
* How to Compute Capital Gains
* How to Compute Income from Other Sources
* Know About Some Exemptions, Certain Deemed Incomes and Clubbing Provisions
* Deductions and Reliefs
* Computation of Net Income and Gross Tax
* Computation of Net Tax Payable
* How to Pay Taxes
* File Your Returns of Income
* Assessment and How to Face it
* New Tax Tables
* Tax Planning
* Investment Planner

Wednesday, February 8, 2012

Students Guide to Cost Accounting & Financial Management

Students Guide to Cost Accounting & Financial Management’ by
CA Bhavesh N. Chandrana. The book is an examination oriented 3-in-1 book for CA-IPCC serving as

Ø Text Book

Ø Fully Solved Question Bank

Ø Past Examination Analyser

With following Salient Features:

Ø Tabular/Bulleted Form Presentation with Conceptual Clarity

Ø Step-by-Step Solutions to Practical Problems with Interactive and Explanatory Notes

Ø Fully Solved Practical Problems Covering more than Past 25 Exams

The practical problems are solved in a unique interactive manner. At the end of each chapter, a unique chapter-wise Exam Analyser incorporated.
The book is best for students of CA-IPCC:

Friday, January 27, 2012

Auditing & Assurance Book

Students Guide to Auditing & Assurance’ 3rd Edition by Aruna Jha is an examination oriented book conceived especially for students of CA-IPCC. The entire subject is presented in a Tabular/Bulleted Form presentation for easy comprehension.

‘Students Guide to Auditing & Assurance’ 3rd edition by Aruna Jha is 3-in-1 book serves as
• Text Book
• Question Bank
• Examination Reviser

Tuesday, January 17, 2012

Illustrated Guide to Revised Schedule VI by Taxmann

The book is a comprehensive guide book on the preparation and presentation of financial statements in the revised format which resembles broadly to IFRS. The book includes special chapters on:

 Presentation of Balance Sheet
 Current Non Current Classification
 Cash And Cash Equivalents
 Presentation of Statement of Profit and Loss
 Exceptional And Extra-Ordinary items
 Condorsement Approach of IFRS Incorporation in the US
 IFRS Updates
 XBRL Awareness And Filing Norms
 Companies (Filing of Documents & Forms in Extensible Business Reporting Language) Rules, 2011

This illustrative Guide Book has been developed to discuss primarily the techniques of current non-current analysis but enlarged to cover related emerging issues in corporate reporting like XBRL Filling, Management commentary, Developments in IFRS convergence.

The book is authored by Dr. T.P. Ghosh, Professor, Institute of Management Technology, Dubai.

The book is modestly priced at ` 775 and is a must buy for the person responsible for preparing Balance Sheet of the Companies, Chartered Accountants, Company Secretaries and Corporate Accountants.

Monday, January 16, 2012


The book ‘SEBI ACT’ serves as the first comprehensive legal commentaries on the SEBI Act 1992. The book chronicles the evolution of securities law in India and provides insights on the road ahead.

Written lucidly, the book is intended to address and assist judicial officers, legal practitioners, regulatory officials, academia, securities market professionals and students of law.

SEBI ACT is first full-fledged academic study of the Securities Laws in the country. The book also analyses the practices followed by Securities Regulators around the globe.

The book aims to simplify the process of research and provide a “one stop” source for any one desirous of understanding the legal framework of the Act.

Thursday, January 12, 2012

Students Guide to Service Tax & VAT

The book incorporates Case Studies on Service Tax and VAT based on Important Case Laws, Numerical Problems and Solutions,Questions set in last 5 years for CA [IPCC] [Final]/CS [Executive/Professional]/ICWA [Inter/Final].

The book is useful for CA [PCC]/[IPCC] May/ November 2012, ICWA [Inter/Final] June/December 2012, CS [Executive/Professional] June/December 2012, B.Com., M.Com., MBA, Other Professional Examinations.

Wednesday, January 11, 2012

Direct Taxes Code - Global Think Tank

The new Indian Direct Taxes Code (DTC) Bill proposed to be introduced from financial year 2012. The proposed Code is currently being scrutinized by the Indian Parliament. Taking the opportunity to provide comments and recommendations on the New Code, the DTC Global Think Tank convened by Nishith Desai Associates analyses some of its key international Dimensions.

The members of the DTC Global Think Tank have significant expertise and experience in international tax policy and include renowned academicians, jurists, public policy experts and industry leaders from developed and developing countries.

The report of the DTC Global Think Tank provides interesting insights and an objective assessment of legal, constitutional and international law implications of specific DTC proposals that impact the global business community. The members of the Think Tank argue in favor of a robust, fair, stable, sustainable and trust based tax regime that would enhance India’s participation in international trade and investment flows and facilitate its emergence as a responsible economic power.

Tuesday, January 10, 2012

XBRL Demystified

A Practical Guide for Effective MCA Compliance & Filing In India
This book is a practical Guide to assist professionals whether in practice or part of corporate team, in filing efficiently and effectively, good quality XBRL Documents with MCA.

The book is a piece of work which will act like a practical guide and help to understand and appreciate XBRL concepts and resolved XBRL related issues.

We are sure that through this book, the concepts of XBRL, are truly and completely demystified and understood.

Saturday, January 7, 2012


First comprehensive legal commentaries on the SEBI Act, 1992. The section-wise study of the statute includes extensive reference to judicial pronouncements and their analysis, the recommendations of various expert committees, comparative study of similar powers of other regulators - both domestic as well as foreign. The book also chronicles the evolution of securities law in India and provides insights on the road ahead.

Tuesday, January 3, 2012

XBRL Zero to Pro in 2 Days

“XBRL: Zero to Pro in 2 days” provides a rare combination of concise as well as comprehensive exposition on the beleaguering topic which is “XBRL”, eXtensible Business Reporting Language. This book has been written specifically in the context of the Indian Ministry of Corporate Affairs’ XBRL mandate and thus leaves out all the unnecessary aspects of XBRL. Both, the concept of XBRL and its use for complying with the mandate, have been simplified to the maximum possible extent. This enables the common man who has absolutely no idea about XBRL to learn and become capable of using XBRL, and that too in a matter of few days!

Explanations are given in context of “Revised Taxonomy” published on 27th August, 2011 by the MCA
Interpretation and analysis of Updated Business Rules published by the MCA
Includes detailed explanation of Validation in the context of MCA validation tool
Written from the point of view of an Accountant and not from a technical standpoint
All aspects relevant to Indian MCA mandate have been dealt with, including XBRL conversion process using different software

Includes other relevant literature on Future of XBRL, Opportunities for professionals as well as General Circulars issued by the MCA.