Amendment to NI Act regarding place of filing cheque bounce compliant has retro-effect

The amendments made to the Negotiable Instruments Act, 1882 by the Second Ordinance of 2015, as regards territorial jurisdiction for filing cheque bounce complaints, retrospectively apply to pending cases filed before the Ordinance came into force. The words "….as if that sub-section has been in force at all material times…."used wrt new section 142(2) in new section 142A(1) gives retrospective effect to new section 142(2)

Facts:

a)   A cheuqe was drawn on the Union Bank of India, Chandigarh by the respondent to the appellant - M/s Bridgestone India Pvt.Ltd. The appellant presented the said cheque at IDBI Bank in Indore for realization, the same was dishonoured on account of insufficient funds.

b)   On failing to discharge obligation by respondent, the appellant initiated proceeding in the Court of the Judicial Magistrate, First Class, Indore (‘Magistrate’) under Section 138 of the Negotiable Instruments Act, 1881

c)   The Magistrate by an order held that he had the territorial jurisdiction to adjudicate upon the controversy raised by the appellant under Section 138 of the Negotiable Instruments Act, 1881. The decision rendered by the Judicial Magistrate, First Class, Indore, was assailed by the accused-respondent in another petition under Section 482 of the Criminal Procedure Code, in the High Court of Madhya Pradesh before its Indore Bench

d)   The High Court accepted the prayer made by the accused-respondent - Inderpal Singh by holding, that the jurisdiction lay only before the Court wherein the original drawee bank was

located, namely, at Chandigarh, where-from the accused-respondent had issued the concerned cheque, drawn on the Union Bank of India, Chandigarh.

e) Dissatisfied with the order passed by the High Court, the appellant has approached Supreme Court. The appellant cited the decision rendered by a three-Judge Bench of this Court in Dashrath Rupsingh Rathod v. State of Maharashtra and another, (2014) 9 SCC 129

The Supreme Court held as under:

1)  In view of the decision rendered by this Court in Dashrath Rupsingh Rathod's case, it was apparent, that the impugned order passed by the High Court of Madhya Pradesh, Bench at Indore, was wholly justified. Howeve, Section 142(2)(a), amended through the Negotiable Instruments (Amendment) Second Ordinance, 2015, vests jurisdiction for initiating proceedings for the offence under Section 138 of the Negotiable Instruments Act, inter alia in the territorial jurisdiction of the Court, where the cheque is delivered for collection (through an account of the branch of the bank where the payee or holder in due course maintains an account).

2)   Based on Section 142A(1) to the effect, that the judgment rendered by this Court in Dashrath Rupsingh Rathod's case, would not stand in the way of the appellant, insofar as the territorial jurisdiction for initiating proceedings emerging from the dishonor of the cheque in the present case arises.

3)   Since cheque was drawn on the Union Bank of India, Chandigarh, was presented for encashment at the IDBI Bank, Indore, which intimated its dishonor to the appellant we are of the view that the Judicial Magistrate, First Class, Indore, would have the territorial jurisdiction to take cognizance of the proceedings initiated by the appellant under Section 138 of the Negotiable Instruments Act, 1881, after the promulgation of the Negotiable Instruments (Amendment) Second Ordinance, 2015. The words "...as if that sub-section had been in force at all material times..." used with reference to Section 142(2), in Section 142A(1) gives retrospectivity to the provision.

4)  In the above view of the matter, the instant appeal was allowed, and the impugned order passed by the High Court of Madhya Pradesh, was set aside - Bridgestone India (P.) Ltd. v. Inderpal Singh [2015] 64 taxmann.com 50 (SC) 

During course of international voyage traffic between Indian ports deemed as 'international traffic'

Journey of a vessel between two Indian ports deemed as "international traffic" under Article 8 of India-Singapore DTAA as same was part of a larger journey between two foreign ports

Facts

a)    Assessee-company had acted as an agent of three vessels which had transported goods from Kandla Port to Vizag.  The vessels had undertaken such freight transportation during the journey from Singapore to Dubai.

b)    The freight beneficiary was one M/s. Jaldhi Overseas Pte Limited, who claimed benefit under Article 8 of India-Singapore DTAA.

c)    The Assessing Officer (AO) contended that transportation between Kandla to Vizag cannot be considered as international traffic in terms of India-Singapore DTAA.

d)    The tribunal set aside the order of AO. Aggrieved by the order of tribunal, revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

1)    The word ‘international traffic' is defined in Article 3 of DTAA between India and Singapore as under:

"the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State."

2)    The term 'international traffic', as noted above, is defined to mean any transport by a ship or aircraft operated by an enterprise of a contracting state. This definition, however, has an exceptional clause which excludes the transport when the ship or aircraft is operated solely between the places in the other contracting state.

3)    Hence, it is only when a ship or aircraft is operating 'solely' between places in other contracting state that the transport is excluded from scope of "international traffic". 

4)    In the instant case, the transportation between two Indian ports was undertaking during a larger journey of the vessels from Singapore to Dubai. Therefore, the requirement of such journey being solely between places in the other contracting state was not satisfied.

5)    Thus, journey of a vessel between two Indian ports would be deemed as "international traffic" under Article 8 of India-Singapore DTAA if the same was part of a larger journey between two foreign ports- CIT v. Taurus Shipping Services [2015] 64 taxmann.com 64 (Gujarat)

Now employees can file PF withdrawal claims without employers’ attestation

Claiming Provident Fund will become easier now as employees can now directly submit forms to their respective regional office without having to seek employer’s signatures. Employees’ Provident Fund Organisation has also come out with new forms – 19UAN, 10CUAN and 31UAN

– for all employees whose Aadhaar number and bank details have been duly verified by the employer, using digital signature.

Aadhaar-seeded Universal Account Number (UAN) holders will, with immediate effect, no longer require employer attestation to make provident fund claims.

Employees whose details like Aadhaar Number and Bank Account Number have been seeded in their UAN and whose UAN have been activated, may submit claims in Form-19, Form-lOC and Form 31 directly to the Commissioner without attestation of their employers, in such form and manner as may be specified by the Central Provident Fund Commissioner for fast settlement of claims.

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No need to deposit in Cap Gain Scheme if house is purchased within time limit of sec. 54F

Issue

Whether exemption under Section 54F could be denied to assessee who had purchased a new residential house within 2 years from the date of transfer of original asset on ground that he had not deposited the amount in capital gain account scheme before the due date of filing of return under section 139(1)

The tribunal held in favour of assessee as under-

1.  A combined reading of sections 54F(1) and 54F(4), makes it clear that the assessee would be entitled to exemption under section 54F in the event he purchases new asset within two years from the date of transfer of original asset or the amount is utilized before the date of furnishing the return under section 139. In a case it is not utilized for the purpose of aforesaid and within the period aforementioned, section 54F(4) mandates the assessee to deposit such amount in capital gain account scheme before due date of filing of return under section 139(1).

2.  Therefore, there is no ambiguity in the provision; so far deposit of the unutilized amount is concerned, it has to be deposited in a specified capital gain account before the due date of filing of return under section 139(1).

3.  In the instant case, the return was filed by assessee in response to a notice issued under Section 148 and not under section 139(1). Therefore, the contention of the assessee was that he should be allowed exemption under section 54F even if had not deposited the amount in capital account scheme.

4.  The Karnataka High Court in the case of CIT v. K. Ramachandra Rao [2015] 56 taxmann.com 163 held that when the assessee had invested the entire sale consideration in construction of a residential house within the three years from the date of transfer, he could not be denied exemption under section 54F on the ground that he did not deposit the said amount in capital gain account scheme before the due date prescribed under section 139(1).

5.  Under section 54F (1), the exemption would be available if the assessee purchased the residential house within two years after the date when transfer took place. Hence, as per judgment of Karnataka High Court, the provisions of section 54F(4) would not be attracted if assessee has purchased or constructed the residential house within period prescribed under section 54F(1).

6.  In the instant case, there was no dispute with regard to the fact that the assessee had purchased a new asset within two years from the date of transfer of the original asset. Therefore, following the ratio laid down by the Karnataka High Court in the case of K. Ramachandra Rao (supra), the court directed Assessing Officer to re-compute the assessed income after granting the benefit of section 54F to the assessee- Ashok Kapasiawala v. ITO [2015] 63 taxmann.com 284 (Ahmedabad - Trib.)

Valuation of DTA clearances of 'tea' by EOU to be valued as per Excise law: Apex Court

Central Excise: Where, as per exemption notification, DTA clearances by EOU are liable to excise duty equal to duty on clearances by non-EOUs, said DTA clearances are to be valued as per Central Excise Valuation rules.

Facts:

a)     Assessee was a 100% EOU engaged in manufacture of instant tea. It cleared tea manufactured wholly out of indigenous raw materials, to its sister concerns in EOU.

b)   Since, as per Notifications 8/97 and 23/2003, said clearance of tea was liable duty equal to ‘excise duty’ and any excess was exempted, assessee valued said tea as per rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

c)    Department argued that since DTA clearances by EOU are liable to excise duty equal to ‘customs duty leviable’, tea was to be valued as per customs law.

d)   Tribunal decided in favour of assessee and aggrieved department filed civil appeal in Apex Court.

Apex Court decided in favour of Assessee as under:

1) There is no doubt that the duty of excise leviable under Section 3 would be on the basis of the value of like goods produced or manufactured outside India as determinable in accordance with the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1975. However, the notification states that duty calculated on the said basis would only be payable to the extent of like goods manufactured in India by persons other than 100% EOUs.

2)    It is clear that in the absence of actual sales in the wholesale market, when goods are captively consumed and not sold, Rule 8 of the Central Excise Rules would have to be followed to determine what would be the amount equal to the duty of excise leviable on like goods.

3)   It is also clear that the said notification has been framed by the Central Government, in its wisdom, to levy only what is levied by way of excise duty on similar goods manufactured in India, on goods produced and sold by 100% EOUs in the domestic tariff area if they are produced from indigenous raw materials.

4)    Therefore, DTA clearances by assessee are rightly valued as per Central Excise Valuation rules. Appeal is, accordingly, dismissed - Commissioner of Central Excise v. Nestle India Ltd.

[2015] 63 taxmann.com 312 (SC) 

Buy-back price to be disclosed even if promoter is exempt from public announcement under takeover code

SEBI: Where appellant-promotor bought back its shares from State Financial Institution, no public announcement was required as same is being protected under regulation 3 of the SEBI (SAST) Regulations, 1997, however, rate at which shares were bought back had to be disclosed.

Facts

a)    In respect of an acquisition which was in excess of 15% of the total shareholding of the Target Company, the appellant neither in the public announcement nor in the letter had disclosed the fact that he and his associates had already bought back the shares of the Haryana State Industrial Development Corporation Limited (‘HSIDC’).

b)   The appellant had vainly and incorrectly attempted to justify his act of non-disclosure by stating that the transaction with HSIDC was protected by Regulation 3, which placed it beyond the ambit of Regulations 10, 11 and 12.

c)   Appellant had also issued post dated cheques towards the purchase consideration for the buy-back of equity of shares held by HSIDC in the Target company which were later on dishonoured.

d)    The appellant contended that the amount deposited with HSIDC via post-dated cheque was not in consideration for the buy-back of shares but were deposited by way of security for the buy-back obligation. Further, the appellant contented that cheques presented had been dishonoured on presentation, the transaction did not culminate in an acquisition.

The Supreme Court rules as under:

1)    Regulation 3 only protects a transaction between a co-promoter and a State financial institution to the extent that for such transaction a public announcement would not be required to be made as provided under Regulations 10, 11 and 12. However, it does not imply that the said transaction is to be protected from the rigours of other Regulations provided for under the Act.

2)    Thus, the transaction between the Appellant and HSIDC would have to be subject to Regulations 16 and 20, and the rate at which the Appellant bought back the shares from HSIDC had to be disclosed in the public announcement.

3)   With regard to appellant’s contention on post-dated cheque, the Apex Court said the post-dated cheques amounted to a promise to pay and that promise would be fulfilled on the date mentioned on the cheque. Thus, this promise to pay amounted to a sale of shares/equity. The subsequent dishonouring of the post-dated cheque would have no bearing on the case.

4)   At the time of making the public announcement the Appellant had bought back the shares of HSIDC by making payment via the said post-dated cheques. Further, as the buy-back was in pursuance of an agreement, there was consensus ad idem. The Appellant had subsequently shirked his responsibility and had tried to slither away from honouring the agreement, which he could not be allowed to gain from, as is established by the legal maxim commodum ex injuri su non habere debet.

5)    Under Regulation 2 clause (1) Sub-clause (a)- ‘acquisition’ means directly or indirectly acquiring or agreeing to acquire shares or voting rights in, or control over, a Target Company. This definition clarifies that an acquisition takes place the moment the acquirer decides or agrees to acquire, irrespective of the time when the transfer stands completed in all respects. The definition clarifies that the actual transfer need not be contemporaneous with the intended transfer and can be in future. - A.R. DAHIYA v. Securities Exchange Board of India [2015] 63 taxmann.com 332 (SC) 

SC draws distinction between exempted goods and exempted units for allowing input tax credit

CST & VAT: Rajasthan VAT-Assessee could claim input tax credit of raw material used in manufacturing of Asbestos Cement Sheets when assessee was specifically exempted from paying VAT due to exemption notification.

Facts:

a)  Assessee was manufacturing Asbestos Cement Pressure Pipes and Asbestos Cement Sheets (A.C. Sheets). It had availed input tax credit (ITC) on purchase of raw material used in manufacturing of A.C. Sheets.

b)  Revenue disallowed such ITC on the ground that no tax was required to be paid by assessee due to exemption notification. However, the assessee was of the view that it was only exempted to pay duty by virtue of notification and goods manufactured by it were not exempted goods. Therefore, it was correct in claiming ITC.

c)  The High Court held in favour of assessee.Aggrieved-department filed the instant appeal.

The Apex Court held in favour of assessee as under:

1)   It was perceivable that the High Court had proceeded on foundation that there was distinction between the exempted units and exempted sales. If said distinction would be overlooked, it might lead to serious error in construction and application of taxing provisions.

2)  There is no doubt that distinction has to be drawn between exempted goods, which means complete exemption for the specified goods, and when the goods are taxable goods, but a transaction or a person is granted exemption. 

3)  When goods are exempt, there would be no taxable transactions or exemption to a taxable person. In other cases, goods might be taxable, but exemption could be given in respect of a taxable event, i.e., exemption to specified transactions from liability of tax or exemption to a taxable person, though the goods are taxable. Exemption with reference to taxable events or taxable persons would not exempt the goods as such, for a subsequent transaction or when the goods are sold or purchased by a non-specified person, the subsequent transaction or the taxable person would be liable to pay tax.

4)  Therefore, the appellant though exempted from payment of tax, subsequent transactions of sale of asbestos cement sheets would be taxable. As a logical corollary it follows that the VAT would have to be paid on the taxable goods in a subsequent transaction by the purchasing dealer.

5)  The denial of credit to assessee would lead assessee to a disadvantageous position as if subsequent sale is made by non-exempted dealer then it would suffer tax on entire sale consideration. It would make its products uncompetitive in spite of exemption notification. Thus, assessee had correctly claimed ITC. - Commercial Taxes Officer v. A Infrastructure Ltd. [2015] 63 taxmann.com 307 (SC) 

Mumbai ITAT denies to treat news distributor of 'Reuters' as its PE in India

Facts:

a)  The assessee was a tax resident of UK and it had worldwide business of providing news and financial information distributed through Reuters Global Network. In India, the assessee entered into distribution agreement with RIPL for distribution of news and information service. The assessee had also deputed one, 'S', as Bureau Chief of Bombay and he was in India during the relevant financial year.

b)  In the course of assessment, the Assessing Officer held that RIPL was to be treated as PE of assessee in India under Article 5(5) and also as service PE under India -UK DTAA.

c)  Thereafter, the AO taxed the entire 'distribution fee' on gross basis at the rate of 20 per cent under section 44D, read with section 115A. The DRP set aside objections raised by assessee.

The ITAT held in favour of assessee as under:

1)  The character of an Agent under Article 5(4) which can be said to be dependent is that the commercial activities of the agent for the enterprise are subject to instructions or comprehensive control and it does not bear the entrepreneur risk. The qualified character of the agency is authorization to act on behalf of somebody else so much as to conclude the contracts. Here in this case, there was no such terms which could be borne out from the distribution agreement that RIPL was only acting on behalf of 'Reuters' or was in kind of dependent agent. It was completely an independent entity and the relationship between the assessee and RIPL was on principal-to-principal basis

2)  Even under Para 5 of Article 5 of India-UK DTAA, the foremost condition is that the activities of such an agent are devoted wholly or almost wholly on behalf of the enterprise. Herein activities of RIPL could not be said to be devoted wholly or almost wholly on behalf of the assessee as it was entering into contracts with the subscribers in India on independent basis and on principal-to-principal for earning and generating its revenues. It was not the case here that it was completely or wholly doing activity for 'Reuters' and earning income wholly from 'Reuters' only. Thus, the conditions laid down in Article 5(5) also does not fulfill.

3) Now coming to the second limb of the controversy as to whether there is a service PE within the scope and ambit of Article 5(2)(k)? There was no furnishing of services by the Bureau Chief to the RIPL which lead to earning of a distribution fee to the assessee. As per terms of agreement, the assessee was merely delivering Reuters services to the distributors. The Bureau Chief was only acting as a Chief reporter and Text Correspondent in India in the field of collection and dissemination of news.Thus, it cannot be held that the News Bureau Chief constitute a service PE in India. Accordingly, distribution fee received by assessee was not taxable as it did not have PE in India. - REUTERS LTD. v. DY. CIT(INTERNATIONAL TAXATION) [2015] 63 taxmann.com 115 (Mumbai - Trib.)

Sec. 54(4) contemplates investment in house before due date of filing of belated return

When capital gains is utilized for purchase or construction of new asset before due date for furnishing return of belated return, assessee is entitled to claim deduction in respect of amount so utilized under section 54F.

The disputed issue is as under:

Whether Section 54 exemption would be available if capital gain is invested before due date of filing of belated return even if he no amount is deposited in capital gain account scheme before due date of filing of return under Section 139(1)

Held

The Tribunal relied upon the judgment of co-ordinate bench of the ITAT, Bangalore in the case of Nipun Mehrotra [2008] 110 ITD 520 (BANG.) and held that if the sale consideration/capital gains is utilized for the purchase or construction of the new asset before the date of filing the return under Section 139(4), the assessee is entitled to exemption under Section 54F.  - ITO v. R. Srinivas [2015] 63 taxmann.com 101 (Bangalore - Trib.)

Govt. plans to phase out corporate tax exemptions and deductions

In order to simplify and bring more transparency in tax laws, the Finance Minister in his Budget Speech, 2015 had indicated that the rate of corporate tax will be reduced from 30% to 25% over the next four years along with corresponding phasing out of exemptions and deductions.

Now Government had proposed to implement its decision in following manner:-

-  Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers.

-  The provisions having a sunset date will not be modified to advance the sunset date. Similarly the sunset dates provided in the Act will not be extended.

-  In case of tax incentives with no terminal date, a sunset date of 31.3.2017 will be provided either for commencement of the activity or for claim of benefit depending upon the structure of the relevant provisions of the Act.

- There will be no weighted deduction with effect from 01. 04.2017.

 Click here to view detailed phasing out plan