CA and CS HUB

Centre releases Rs2,000 crore for Employees’ Pension Scheme

Centre has released Rs2,000 crore to Employees’ Pension Scheme as its contribution for the year 2015-16, Minister of State for Labour and Employment Bandaru Dattatreya said on Monday.

This contribution is in addition to the Rs250 crore contributed by the government as grant-in-aid in the Employees’ Pension Scheme, 1995 for providing minimum pension of Rs1,000 to pensioners under the scheme, the Minister said in a statement.

The contribution of central government is calculated at a rate of 1.16% of the monthly wages of the members contributing to the scheme. It is in addition to the contribution made by employers covered under the Act.

Employers contribute 8.33% of the monthly wages of the scheme members. Since last September, EPS pensioners have been assured of a guaranteed minimum pension of Rs1,000 per month and it has been necessary to infuse additional amount as grants-in-aid by the Centre to sustain the continuance of the minimum pension.

Source : Livemint

Matrix Cellular gets Sebi’s go-ahead to launch IPO

International SIM card provider Matrix Cellular has received capital markets regulator Sebi’s approval to float an initial public offer (IPO).

The company provides country specific SIM card, offers voice, data and SMS services under the brand name ‘Matrix’ to travellers outbound from India. The firm had filed its draft red herring prospectus (DRHP) with Sebi through its lead merchant banker IIFL Holding Ltd on 26 June this year.

The Securities and Exchange Board of India (Sebi) issued its final observations on the draft offer documents on 26 August, which is necessary for companies to launch any public offer. As per the draft papers, IPO comprises an offer for sale of 15,172,540 equity shares from its promoters and existing shareholders, The promoters--Gagan Deep Singh Dugal, Manjit Singh Dugal and Urvashi Kaur--have proposed to offer 25.64 lakh shares, while Aleta and AAJV Investment Trust plan to offer 1.26 crore shares. Matrix Cellular (International) Services plans to come out with the IPO in order to “achieve the benefits of listing the equity shares on the stock exchanges.”

The company proposes to list its shares on the BSE and the NSE. According to an estimate, Indian outbound international roaming market, which has a total size of Rs1,185 crore at the end of fiscal 2014, is likely to grow at a CAGR (compound annual growth rate) of 14% to reach Rs2,595 crore by fiscal 2020.

Since the beginning of the year, Sebi has given approval to 26 companies to launch IPOs, while 13 firms have already tapped the route to raise funds and initial share sale plan of two companies are currently underway.

Source : Livemint

RBI ranks SBI and ICICI Bank as too big to fail

The Reserve Bank of India (RBI) on Monday named State Bank of India (SBI) and ICICI Bank Ltd, the country’s two largest banks and also the biggest in public and private sectors respectively, as Domestic Systemically Important Banks (D-SIBs), or banks perceived to be too big to fail.

This is the first time the central bank named D-SIBs, and it will be an annual affair every August. Originally, the plan was to list four to six banks in that category.

Out of five systemic importance buckets, SBI falls in bucket three while ICICI Bank is in bucket one.

Under the framework, SIBs will be divided into five buckets initially. The higher the bucket number, the more systemically important the bank. So, among the two, SBI is more systemically important, since it falls in bucket three.

These two banks will be “subjected to differentiated supervisory requirements and higher intensity of supervision based on the risks they pose to the financial system,” RBI said in its July 2014 framework for dealing with such big banks.

The systemic importance score is based on analysis of the banks’ size as a percentage of annual GDP.

As on 30 June, SBI’s loan book was at Rs.12.8 trillion, while ICICI Bank’s loan book was close to Rs.4 trillion.

Banks which are more systemically important will have to maintain progressively higher share of risk weighted assets as Tier-I equity, which is a measure of the bank’s core equity.

Each of these banks will be required to raise the level of buffers they hold to balance out the higher risk they pose to the system. To identify such systemically important banks, RBI used indicators such as size, interconnectedness, substitutability and complexity. Banks having a size beyond 2% of the gross domestic product (GDP) will be considered to be part of this category.

In November 2011, the Basel committee had announced a framework for identifying global systemically important banks and the additional buffers that such banks needed to hold. Following this, most countries have moved to institute similar frameworks. RBI had in July 2014 released its framework for dealing with domestic systemically important banks (SIBs).

“SIBs are perceived as banks that are ‘Too Big To Fail (TBTF)’. This perception of TBTF creates an expectation of government support for these banks at the time of distress. Due to this perception, these banks enjoy certain advantages in the funding markets. However, the perceived expectation of government support amplifies risk-taking, reduces market discipline, creates competitive distortions, and increases the probability of distress in the future,” said RBI in its July 2014 framework adding that these considerations require that SIBs should be subjected to additional policy measures to deal with the systemic risk and moral hazard posed by them.

All banks have been given time until April 2019 to meet the additional requirements.

RBI intends to review the list of SIBs once every year from now on.

Source : Livemint

Will GST make things costlier or cheaper?

The goods and services tax (GST) is being talked about as the single most powerful tax reform that India will see. The objective is to end the regime of multiple taxes on goods and services and bring them under one rate.

The system will change from the current production-based taxation to being consumption-based. Along with bringing about a semblance of uniformity in taxes across states, this is expected to increase efficiency and compliance in the system. A recent note from HSBC Global Research stated that although the growth impact of GST on the economy is difficult to quantify, a positive impact of 100-150 basis points (bps) can be considered assuming an “ideal” GST. One basis point is one-hundredth of a percentage point.

The report added that not including goods like petroleum, electricity and alcohol can blunt this range by at least 20 bps. Nevertheless, it is expected that GST will have a positive impact on India’s growth.

The government has a deadline of 1 April 2016 for implementation of GST, albeit a watered down version. Whether it is able to meet the deadline is debatable given the logjam in passing the Constitution amendment bill as a first step towards GST implementation.

In the meantime, let’s understand if this were to get implemented, how will your spending pattern change. Will you pay more or less for goods and services than you do now?

Goods likely to get cheaper

What the GST will do at a basic level is replace all the indirect taxes that currently exist. The central excise duty, value added tax, service tax, octroi, luxury tax and so on will get substituted with one GST.

For manufactured consumer goods, the current tax regime means the consumer pays approximately 25-26% more than the cost of production due to excise duty (peak of about 12.5%) and value added tax. While there hasn’t been any indication of a GST rate, experts suggest between 18% and 22%. Given this, basic goods are likely to become marginally cheaper.

Dharmesh Panchal, partner-indirect tax, PwC India, said, “In today’s system, production of goods is taxed and the rates are high. Moreover, tax on tax adds to the cost build-up. With GST, overall taxes on goods are likely to come down making them cheaper.” Consuming states will receive revenue from tax and producing states will get compensation.

Certain essential items such as raw food articles are not taxed at present and this is expected to continue. Bipin Sapra, tax partner, EY, said, “Where food articles presently don’t have a value added tax or excise, GST is unlikely to apply.” Hence, prices of essential food supplies may not change.

Processed food will continue to be taxed, but the applicable GST is likely to be lower than the current combined tax on such products. Hence, expect these to become slightly cheaper.

On the other hand, for goods where the current duty structure is lower, for example, small cars, which have an excise duty of only 8%, the impact of GST will most likely be opposite—these can get more expensive. Heavy vehicles such as SUVs and large cars that have an excise duty of 27-30% will see a marked drop in prices if GST is implemented in the expected range of 18-22%.

There is one more item to watch out for; petroleum. It has been proposed to keep this out of the GST umbrella for at least the first two years, which means petroleum prices aren’t likely to change with the advent of GST and the variance in prices across states could also continue.

Sapra said, “With the cost of goods and services that are consumed in refining and distributing petroleum remaining high, indirect cost on goods distribution will also remain high and that might add up to the final cost of goods.” So, the effect of petroleum cost will not change for the time being. But given that crude oil prices are falling at present, petroleum cost may not have a negative impact.

Lastly, prices of goods may not be completely uniform across states as there is talk of allowing states to have 1-2% variance in tax. “Let’s assume that if the median GST rate is 20% and the Centre applies 10%, for the remainder, the states may be allowed, say, a range of 9-11% levy,” said Sapra.

We will have to wait and see what this difference amounts to. Dinesh Agrawal, executive director, indirect tax, Khaitan and Co., said, “At present, the difference in prices of goods across states is more due to octroi and value added tax. Even if the variable tax of 1-2% for states comes into play with the GST, the difference won’t be much. By and large, there should be one maximum retail price (MRP) as companies should be able to absorb this amount.”

Services that could get costlier

Service tax rate at present is 14% and it applies to almost all services other than essential ones such as ambulance services, cultural activities, certain pilgrimages, sporting events, among others.

If GST is implemented, this rate will increase (given the expectation that GST will be 18-22%) making services more expensive. So, if you eat out often or travel a lot, your bill is likely to get higher.

“With overall taxation changing, the central government also has the task to balance its books. By and large, cost of services will go up but essential services for mass consumption could see a lower rate,” said Panchal.

Investment management and insurance premiums, which attract a service tax currently, will also become costlier with the higher rate of GST.

Agrawal said, “All financial services will continue to be in the tax net. The question is how the value of a service will get computed. Initially, this value may be on the lower side resulting in a lower tax amount, and gradually it could be taken up.”

Possible roadblocks

Will the GST really unify goods and services and remove distinction? Agrawal said, “The objective is to dilute the distinction between goods and services but some distinction may be needed, at least in the initial phase, so that the change in taxes for services isn’t too sharp.”

Before GST sees the light of the day, there are many creases to be ironed out. “Firstly, the constitution amendment bill needs to pass for GST to become a reality. Then the technology platform, which the government is working on, should be implemented, and the GST draft legislation needs to be released for discussion with all stake holders,” said Panchal.

We also have to consider the impact of inflation. The HSBC Global Research report said that assuming GST at 20%, services would see a rise in tax rates while manufactured consumer goods may see a fall. The two are likely to offset each other resulting in a limited net impact on inflation based on the consumer price index. But actual impact on inflation can’t be known with certainty as much depends on how the change in tax rates is passed on to consumers and what the actual GST rate is. If there is a partial pass through of higher taxes, impact could be limited, but if GST rate is higher than 18-22%, effect on inflation can be more than anticipated.

Apart from that, two levels of GST—state and Centre—also means multiple compliances. This could mean stricter compliance and audit but also an increase in cost of compliance. Globally, the norm is a single, central GST. “It’s yet to be seen how the central government and state governments function on a common platform given the existing cultural and operational differences,” said Agrawal.

The GST credit flow is proposed to be in a way that each person needs to input details of invoices issued containing details of the customer, for the next to receive credit. According to Sapra, if vendors aren’t able to upload invoice details, then credit blockages can happen.

Mint Money take

Besides the political will to pass the necessary bills in Parliament, there are still many roadblocks to be crossed when it comes to implementation of this new tax regime. Whether it eventually makes life less costly and more efficient remains to be seen. But what is certain is that if your monthly budget is beyond just the essential consumer goods, there will be a one-time impact that will make your overall expenses increase when the new regime comes into force. Moreover, there could be an inflationary impact to deal with. The extent will depend on the GST rate and the pass through.

Source : Livemint

Top 10 tips for CA Students - Your Attitude Matters the Most

In a career spanning close to , one and a half decade and working with some of the best brains in the country, as I look back , I personally feel there are a few things that makes the winner stand out vis a vis their peers . In this short Article, I am trying to summarize some of these character traits, for the benefits of the students :-

1. YOUR OWN CONVICTION MATTERS THE MOST

Until you are convinced that YOU CAN, even GOD may not be able to help you. I heard a great quote from the Movie Manjhi “Bhagwan ke Bharose Mat Baitho, Kya Pata Bhagwan tumhare Bharose Baitha Ho” – not a literal translation, but it goes something like this “ Do not sit idle in a hope that God will do everything , may be HE has hope, that you would be able to do everything and hence may not come to your rescue. ITS ONLY YOUR BELIEF OF SUCCESS THAT CAN GET THINGS GOING.

2. FOCUS ON YOUR STUDIES – LET OTHERS DO THEIR OWN

What you study matters, what others do is none of YOUR BUSINESS – Do not get upset from preparation of others. Half the time, they are worried from what you are doing…

3. “CONCEPT” ALONE IS THE MOST LETHAL WEAPON IN YOUR ARMOURY

Understanding of the concept matters more than the number of times you have finished your syllabus.

a. After all, chances are few that the questions you have revised would come as a God’s gift on an “As is basis in the Exam room”;

b. If this were true, people appearing for the 4th or 5th time would be Rank Holders. History of results, would mostly prove otherwise.

4. FORGET THE PAST

Your past school Grades need not be a reflection of your performance in CA. After all, large number of students mug up to get Great Grades at school level their Grades, and I can tell you for sure, mugging isn’t great help here.. Like I said, CONCEPTS do matter…

5. ARE YOU SERIOUS ?

Start CA Course, only if you are serious about completing it. IF YOU DON’T TAKE CA SERIOUSLY, I bet it would heartily reciprocate and IT WOULD NOT TAKE YOU SERIOUSLY.

6. Get the BASICS right

Today many people are in the business of confusing students. Any qualified CA would tell you that without the Study Material, you would for sure not sail through. Its like you need to have the ability to read words, before you can read sentences/paragraphs. If you don’t know how to read words, for sure you can never read sentences.

7. BALANCING IS A DIFFICULT ACT, BUT IS THE RIGHT MEDICINE

Balance your time to devote equal attention to all the subjects.. there is no point of a distinction in one if you fail in any of the papers… While the tilt of mind would be to do what we are good at, balancing is more important than feelings.

8. A FRIEND ALWAYS MATTER

Might seem contradictory, but you should play to your strengths to cross the lucky aggregate number. There has to be a FRIENDLY subject that should help you sail through.

9. WHO IS YOUR KRISHNA

Have a person who can guide you as “SRI KRISHNA” helped ARJUNA in Mahabharata. In the midst of hectic study and tight schedules, there are always moments when you need that helping hand, who can put hands on your shoulders and say, its fine and YOU WILL MAKE IT. This Krishna can be anyone.

10. HISTORY DOES REPEAT ITSELF

Some wise men said “Those who don’t learn from History, are bound to be doomed”.. Same applies here as well.. Past papers give you great insight of the mindset of the paper setters. Do look at them on a regular basis as you study a particular Chapter, and not when the exams are near. Its better to prepare 80% chapters completely, than 100% with an average learning curve.

While I would agree with your point of view that CA is a tough journey, but I can definitely say that the rewards are worth pursuing. The testimony to this is the 229,000 + members who are there. You may say, that there are a larger number of unsuccessful people as well. I would say I AGREE.. but again, it’s a matter of where you want to be.. FOCUS only on that.. YOU need only one seat, and we all know that there are 5000+ CA in every attempt.. Try for that 1 seat and I am sure, you will get it..

GOOD LUCK TO YOU.. WE, THE MEMBERS AWAIT FOR YOU AS OUR CO-FELLOW OF ICAI, AND I AM SURE, YOU WOULD NOT DISAPPOINT US…

About the Author

Arinjay Kumar Jain, is a Chartered Accountant, who is fond of teaching and guiding young students for their careers. An all India CA Final Rank Holder of November 2001, he worked with leading International and M&A Tax specialist firms, last being as a Director in KPMG M&A Tax. He is now enjoying his life as an entrepreneur and can be reached at arinjay2009@gmail.com

By Arinjay Jain

Seven tips to ace a job interview

Meeting prospective employers can be a nerve-wracking experience. This guide can help you make the best impression. Getty Images
Meeting prospective employers can be a nerve-wracking experience. From asking the right questions to picking a right belt, this guide can help you make the best impression.

Whether you're giving your first interview or the umpteenth one, there's always a bit of "How do I crack this one?" going on in your head. An interview is a daunting task -it's a power game that is always tilted towards the interviewers. But you can tip the balance a wee bit and create a favourable impression on the panel. Being in a city that has as many challenges as opportunities, here's some special advice for all you people.

Choose your kind of job

Mumbai has an amazing array of options when it comes to job roles. So even before you walk in for an interview, think about what work you want to do.Just because you are an IT grad doesn't mean that you have to be a programmer.You could work in an e-learning agency creating technical training modules. You could be a content writer, writing niche content for tech companies. Or, you could completely change your field and get into event management if that's what you really enjoy doing.

Partner at Ernst & Young, Devendra Parulekar strongly suggests that you reflect and find your strengths. "Trained interviewers practise the art of funnelling, where they start asking a broad range of questions and then explore the three-four areas you consider your strengths. So know what you're good at. If you're a fish, don't attempt to climb a tree."

Do your homework

Almost all companies in Mumbai have a website. Read up about the company you'd like to work in. If you want to join the finance team, find a senior in their finance department on LinkedIn.Writing to somebody in particular (john.doe@company.com) rather than to a generic email address (careers@ company.com) increases your chances of getting a reply. Doing your homework on a company and its job profiles will not only help you bag an interview but will also impress your interviewers.

Plan for the silliest things

Which Mumbaikar hasn't faced the wrath of Mumbai traffic? Use Google Maps to plan your travel a day in advance. Consider factors like time of day, rain, festivals, transport strikes, waiting for the elevator and the possibility of a security check at the venue. If you're taking a train, allot time to freshen up at your destination. As a rule, you should be at the waiting lounge of your interview venue at least 10 minutes before time.

"Plan to deal with rain, wind or hot weather, because there's a chance that the interview will happen outdoors. Being prepared will help you focus on the interview," says Tristan Fernandes, a content writer who once had a job interview at an outdoor cafe.

Dress appropriately

Are you wearing shorts and chappals because it's a startup? Don't be so sure. If you get the chance, ask the person coordinating your interview what the dress code is. If you're not sure, be on the safer side by wearing formal or semiformal attire, based on your judgement.

Khushbu Merchant, a KPMG senior and corporate blogger, says, "If you're getting interviewed by an MNC, wear a suit to your interview. If you're a woman, blend it with a female touch. That makes an impression that you can stay in touch with your feminine side and still kick some a** at work."

Use an air-conditioned cab service to get to your interview to look your freshest. Avoid travelling by train during rush hour, if possible.

Answer questions carefully

When Akhil Parekh decided to settle in India after working in North America for nine years after his Masters, he realised that the interview styles in the two regions were very different. "Apart from technical skills, people here also focus on personal aspects. 'Are you married?', 'What do your parents do?', 'How much student loan do you still have to pay off?' This is the kind of stuff nobody asks you in North America. But in India, they probably do so to gauge how stable your background is."

In Mumbai, where job hopping is easy, companies want to make sure that you'll stay put for a while. Having greater personal and financial stability decreases your chances of looking for a job elsewhere anytime soon, giving your interviewers confidence in you.

Ask the right question

At the end of an interview, your interviewers may tell you to ask any questions you have. Don't say "Nothing" because that speaks very little of your thought process. If you draw a blank, at least ask where the job location is many companies have a central hiring team that hires across the city (or country). So while your interview may be in Malad, the actual job may be based in Vikhroli.

Leave with clear next steps

Before you get up from that chair, ask your interviewers what the next steps are. Will you get a call back? How many days will they take to make a decision? Don't be too pushy and blackmailing the panel by telling them you have another offer on the table is not okay.

So, there you have it. Jobs are calling. Where's your CV?

Source : ET wealth

ICAI follows with authority to extend due date for filing return

As you are aware, the Direct Taxes Committee of ICAI has already made a representation for extension of due date for filing return of income and is very vigourously pursuing the same. The Direct Taxes Committee of ICAI with the help of the President, ICAI , the Vice-President, ICAI and other Council Members is putting in best efforts and leaving no stone unturned in following up with the authorities that the due dates of returns of income should be extended reasonably to enable compliance by the assessees. However, the ICAI has no alternative but to make representations, pursue in the best possible manner and depend upon the Government to take a pro-active decisions.

Though, the Direct Taxes Committee and the ICAI President are still pursuing with the authorities and the Ministry. Concerned members may bring this to the notice of their respective clients.

Chairman
Direct Taxes Committee of ICAI
(dtc@icai.in)

Issuance of Show cause notice mandatory for recovery of erroneous refund granted

Case Law Citation

The Commissioner of Central Excise Coimbatore Vs. M/s.Pricol Ltd. Perinaickenpalayam Coimbatore 641 103 (HIGH COURT OF MADRAS); C.M.A. NO. 3185 OF 2008; Date of Decision: 12.02.2015

Brief Facts

The assessee is engaged in the manufacture of automobile parts and components. The assessee cleared waste and scrap and replacement of defective products without payment of duty. The period in question pertains to September, 1998. On the ground that the investigation revealed that the assessee cleared waste and scrap and replacement for defective products without payment of duty and also resorted to under-valuation of the goods, adjudication proceedings were initiated and pending adjudication, the assessee deposited Rs.1.55 Crores under protest for the purpose of co-operating with the investigation of the Department. A show cause notice dated was issued on the assessee invoking the extended period of limitation as provided under proviso to Section 11A (1) of the Central Excise Act, demanding duty, interest and also penalty. After adjudication, the demand was confirmed by the Commissioner of Central Excise. Against the said order of the Commissioner, an appeal was filed to the Tribunal and the Tribunal set aside the impugned order of adjudication and allowed the appeal of the assessee.

Pursuant to the same, the assessee filed a claim for refund of deposit made under protest, including the deposit made at the time of filing the appeal to the Tribunal. The said refund application was sanctioned by the jurisdictional Assistant Commissioner. However, no appeal was filed against the order of the Assistant Commissioner of Central Excise, ordering refund.

The Commissioner of Central Excise, however, took up the matter in exercise of powers conferred under Section 35E (2) of the Act and directed the authority to file an appeal to the Commissioner (Appeals) within the time limit prescribed thereunder. On the appeal filed by the Department, the Commissioner (Appeals) took up the same and allowed the appeal filed by the Department and directed the jurisdictional authority to verify the plea with regard to unjust enrichment.

The assessee went on appeal before the Tribunal against the said order of the Commissioner (Appeals). The Tribunal, in the said appeal, came to hold that there was no case of unjust enrichment on the facts of the said case, as the assessee had produced the Chartered Accountant’s certificate to the effect that refund claim has not been passed on to the customers.

Aggrieved against the said order of the Tribunal, the Department was before this Court by filing the present appeal.

Contentions of the assessee

The assessee contended that even though the appeal was filed well within the time limit as specified under Section 35 (E) (3) of the Act, however, no notice, as contemplated under Section 11-A of the Act has been issued for making recovery of the erroneous refund.   The Assessee placed reliance on the Board’s circular No.423/56/98-CX dated 22.9.1998 and the decision of the Supreme Court in Commissioner of Central Excise Vs. Re-Rolling Mills (1997 (94) ELT 8 (SC)), which in turn relied upon the decision in Union of India Vs Jain Shudh Vanaspathi Ltd. & Anr. (1196 (86) ELT 460 (SC): 1996 (10) SCC 520). In the Circular No.423/56/98-CX dated 22.9.1998, the CBEC had issued the following clarification:-

“Certain doubts have been raised regarding whether the erroneous refunds granted could be recovered by recourse to review under Section 35-E of the Central Excise Act or demands under Section 11A within the statutory time limit as laid down.

The SC in the case of CCE Vs. Re-rolling Mills (reported in 1997 (94) ELT 8 (SC) has inter alia held as following.

“The learned Counsel for the parties do not dispute that this appeal is covered by the decision of this Court in Union of India & Ors. Vs. Jain Shudh Vanaspati Ltd. & Anr. 1996 (86) ELT 460 (SC) = (1996) 10 SCC 320. In that case the court was dealing with Section 28 of the Customs Act which is in parimateria with Section 11A of the Central Excise Act. The said decision is thus applicable to the present case also. For the reasons given in the said judgement, the appeal is dismissed”.

In this context the point to be stressed is that the Order passed u/s 35-E (2) does not automatically result in the recovery of the refund. This has to be followed by SCN U/S 11A which should be issued within 6 months from the date of actual refund. Since time limit for filling appeal u/s 35E (2) is longer than the time limit prescribed u/s 11A, the SCN, the SCN should precede the proceedings u/s 35-E (2).

This view has been supported by the opinion of the Law Ministry. The Law Ministry vide F.No. 387/78/98-JC has opined thus, “In view of the judgement of the Apex Court in CCE Vs. Re-rolling Mills [1997 (94) ELT 8] dismissing the appeal preferred by the Department against the CEGAT order, the order passed by the Tribunal on 27.1.98 in the present case of M/s Fag Precision Bearing Ltd. reflects the correct legal position. We, therefore, agree with the view of the referring Department that the demand for recovery of erroneous refund has to be made u/s 11A of the Central Excise Act, 1944 within the prescribed limitation period”.

In view of above it is clarified that timely demands should invariably be raised (within six months normal period) under Section 11A the Act.””

Contentions of the Revenue

The Revenue contended that the appeal was filed well within time. Further, it was submitted on behalf of the appellant that the Supreme Court in Asian Paints (India) Ltd. Vs. Collector of Central Excise, Bombay (2002 (142) ELT 522 (SC)) has negatived the contention that recovery of excise duty cannot be made pursuant to an appeal filed after invoking the provisions of Section 35E if the time limit provided under Section 11A has expired, since such an invocation would, in effect, render Section 35E virtually ineffective and the same is impermissible.

Held by Hon’ble High Court of Madras

The Hon’ble High Court of Madras stated that the first question of law, which is raised, relates to the plea of unjust enrichment and much emphasis is laid on the decision of the Supreme Court in Mafatlal Industries case (1997 (89) ELT 247 (SC)).

In the present case, as is evident from the records, it is not a case of refund of duty. It is a pre-deposit made under protest at the time of investigation, as has been recorded in the original proceedings itself. In this regard, it has to be noticed it has been the consistent view taken by the Courts that any amount, that is deposited during the pendency of adjudication proceedings or investigation is in the nature of deposit made under protest and, therefore, the principles of unjust enrichment does not apply. The abovesaid view has been reiterated by the High Court of Bombay in Suvidhe Ltd. Vs. Union of India (1996 (82) ELT 177 (Bom.)), and by the Gujarat High Court in Commissioner of Customs Vs. Mahalaxmi Exports (2010 (258) ELT 217 (Guj.)). There are also many judgments of various Courts, which have also reiterated the same principles that in case any amount is deposited during the pendency of adjudication proceedings or investigation, the said amount would be in the nature of deposit under protest and, therefore, the principles of unjust enrichment would not apply. In view of the catena of decisions, available on this issue, the Hon’ble Court answers the first substantial question of law against the Revenue and in favour of the assessee.

The Hon’ble Court further stated that 2nd issue raised by the Department is whether the Tribunal was justified in holding that without a show cause notice issued under Section 11-A, there could be no recovery consequent to proceedings initiated under Section 35-E of the Act.

The reliance placed by Department on the case of Asian Paints (India) Ltd. – Vs Commissioner of Central Excise, Bombay (2002 (142) ELT 522 (SC)). was distinguished by the Hon’ble Court on the ground that the said decision did not deal with the issue as to whether a notice under Section 11A of the Central Excise Act is mandatory for the purpose of proceeding for recovery.

The Hon’ble Court further stated that the circular as produced above relies upon the decision of the Supreme Court in Re-Rolling Mills case (supra) and the provisions of Section 11-A of the Act to state that timely demand should be raised, i.e., within six months as prescribed under Section 11-A of the Act. Section 11-A of the Central Excise Act, as it stood prior to amendment with effect from 12.5.2000, relates to recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded, within the period prescribed from the relevant date. The present case pertains to 1998 at which point of time the period of limitation fixed for issuance of show cause notice was six months. The said period of six months was amended to one year by Section 97 of the Finance Act 2000 (10 of 2000) with effect from 12.5.2000. Therefore, for all purposes, any period prior to 12.5.2000, for the purpose of recovery of duties not levied or not paid or short-levied or short-paid or erroneous refund, the time for issuance of show cause notice is only six months from the relevant date.

The Hon’ble Court further stated that it is clear that the said section mandates the issuance of a show cause notice, prior to passing an order, asking the person to show cause as to why duty, which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, shall not be paid. From a perusal of the documents available on record, as also the order of the Tribunal, it is clear that no such notice, as mandated under Section 11A, was issued for recovery of the duty on the ground of erroneous refund.

Further, the Board’s Circular No.423/56/98-CX dated 22.9.1998 also stresses the need for the concerned Departments to issue timely demands through show cause notices within six months period as contemplated under Section 11A of the Act. This in itself shows that the show cause notice, as provided under Section 11A of the Act is mandatory in nature and the same has to be adhered to before proceeding further in the matter. Therefore, In the absence of any such show cause notice, which is mandatory, the Department cannot seek recovery of the amount. Accordingly, the 2nd substantial question of law is answered in favour of the assessee and against the Revenue.

In view of the above, the appeal has been dismissed.

Direct Link to Download full text of the judgement

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=212843

By Rohit Gupta

In case of failure to issue proper notice to assessee, ITAT has right to review its own order

Case Law Citation-

CIT Vs M/s Sea Rose Marines Pvt Ltd (Madras High Court), Tax case (Appeal) No.172 & 173 of 2008, Date of the decision: 08-06-2015.

Brief of the case:

Madras High court in CIT Vs M/s Sea Rose Marines Pvt Ltd (Madras High Court) held that if the notice was not issued to the assessee properly then the ITAT had the right to review its own order. The ITAT had recalled the order and gave new decision after reviewing its own order by relying on the decision given in Rathore Brothers (2002 (254) ITR 656 (Mad).

Facts of the case:

The assessee was engaged in the business of exporting marine products and manufacturing cartoons and claimed exemption U/s 80HHC of the IT Act. The AO reworked the same and levied the tax accordingly aggrieved from the same the assessee filed an appeal with CIT(A) who ordered that the assessee was not entitled to any exemption u/s 80HHC of the IT Act, then the assessee field an appeal with ITAT who initially confirmed the order of the CIT(A) but latterly by reviewing its own order, it made decision in the favor of assessee.

Contention of the assessee:

Assessee was of the view that as he was not served the order properly so the order of ITAT should be recalled. In other words the appeal of revenue should be dismissed.

Contention of the Revenue:

Revenue argued that the ITAT had only the right to rectify its own order, it could not review its own order because reviewing authority could only be the higher authority from the authority who had passed the order. So in the above case as the ITAT had review its order which was against the law so the appeal of revenue should be allowed.

Held by the High Court:

High Court held that ITAT was right in recalling the matter by the virtue of rule 24 of the Appellate tribunal rules on the basis that the assessee was not noticed properly which was bought to the notice of the tribunal by way of miscellaneous applications. So the ITAT had the right to review its own order when the same was not issued properly to the assessee. Further ITAT was right in giving its decision by relying on the decision given in Rathore Brothers (2002 (254) ITR 656 (Mad) and remanded the issue to AO for fresh consideration.

Direct link to download the full text of the above judgment:

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=227243

By Rishabh Mehra

Re-assessment proceedings cannot be initiated u/s 147 just because of change in opinion

Case Law Citation-

Brief of the case:

Madras High Court held in CIT Vs M/s Schwing Stetter India P Ltd that the case only be opened for re-assessment u/s 147 only if there was a tangible material in the hand of AO , it could not be opened just because of the change in the opinion of AO.

Facts of the case:

The assessee was engaged in the business of manufacturing concrete mixtures, concrete pumps, etc and filed ROI declaring total income of Rs 1,36,15,445/- and the same was selected for scrutiny in which the total income was determined at Rs 1,40,40,250/-.After that AO issued notice u/s 148 for re-assessment on the basis of change in opinion that MODVAT was excess adjusted by the assessee.

Contention of the assessee:

Assessee was of the view that as all the documents and proofs which would justify the MODVAT received had already been submitted before the AO and the basis on which the case was reopened, was the same which had already been submitted and discussed with AO during scrutiny proceedings. There was not any new tangible material related with MODVAT on the basis of which the AO was reopening the assessment. So there was merely a change in opinion on the basis of which case could not be reopened. So the order of AO should be quashed.

Contention of the Revenue:

Revenue was of the view that mere production of profit & Loss A/c for considering the MODVAT would not amount to proper disclosure to calculate the MODVAT so the case should be reopened.

Held by High Court:

High Court held that for reopening the assessment there should be tangible material in the hand of AO. Merely change in opinion of the AO could not make the case reopened.AO could only reassess the case not review its case. Reopening of case on merely change in opinion amounted to review of its own case by AO which was against the IT act. So the appeal of revenue was dismissed.

Direct link to download the full text of the above judgment:

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=229373

By Rishabh Mehra

For computing income u/s 80I or 80 IA only losses and deductions of eligible business has to be considered from initial A.Y.

Case Law Citation-

Brief of the case:

Madras High Court in CIT Vs K Rajinikanth (Madras High Court) held that for computing the income for calculating the deduction u/s 80IA, only the profits & Losses of the eligible business had to be taken into consideration as if it was the only business of the assessee. Further once the Losses were adjusted against the other income of the business enterprise, the same would not be reopened again for calculating the income for deduction u/s 80IA.

Facts of the case:

Assessee claimed deduction u/s 80IA of the current year without adjusting the previous year losses and other deductions because the same were already adjusted in the previous year with the other income of that business and were not related with the eligible business which AO disallowed on the basis that the previous year losses and other deductions had to adjusted before calculating the amount eligible for deduction u/s 80IA.

Contention of the assessee:

Assessee was of the view that as the past years losses and other deductions were already adjusted against the profits of past years and were not related with eligible business so the same should not be adjusted for computing the income of eligible business deduction u/s 80IA for current year because the income had to be calculated as if that was the only eligible business of the assessee.

Contention of the revenue:

Revenue was of the view that past year losses and other deductions had to be adjusted for computing the current year income for sec 80IA as the same also belongs to the assessee.

Held by High Court:

High Court held that the income of only eligible business for which the assessee was taking deduction u/s 80IA had to be considered from the initial assessment years which means that the business income for calculating the deduction u/s 80IA had to be calculated as it was the only business of the assessee and the assessee was not having any other income and the profits had to be considered from the initial assessment years i.e from the year in which the enterprise had started its operations.

More over once the losses were adjusted against the other income of previous years the same would not be reopened to calculate the deduction u/s 80IA of the current year.So the past year losses and other deductions which revenue was adjusting for calculating the eligible amount of deduction was already adjusted by the assessee in the past years or with the other income of previous year .

So the appeal of revenue was dismissed.

Direct link to download the full text of the above judgment:

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=233778

By Rishabh Mehra

No wealth tax on land which remains vacant as per construction Plan

Case Law Citation-

Brief of the case:

Madras High Court held in CIT Vs M/s MIL Industries Ltd that the vacant land left on constructed property as per the construction plan of that property would not be treated as a vacant urban land because the vacant land left was the requirement of the construction plan, failing which was not possible to construct the property.

Facts of the case:

Assessee was having a land on which he had constructed a factory and some part of the land left vacant which was included by the AO in the net wealth of the assessee but the assessee argued that there used to be the condition of the municipal corporation that some part of the land had to be left vacant so the same had to be included in the proviso to sec 2(ea), in other words the vacant land had to be excluded from the definition of the asset. But revenue on the other hand argued that as the land was left vacant so the same had to be included in the net wealth of the assessee.

Contention of the assessee:

Assessee was of the view that on the land, factory was constructed according to the plan approved by the municipal authorities and as per the approved plan some vacant land had to be left while construction of a building which the assessee had kept .So the AO was wrong in considering the vacant land in the net wealth of the assessee because it was not a vacant land it was the factory building.

Contention of the revenue:

Revenue was of the view that vacant land had to be included in the definition of the asset as per the wealth tax act , So as the factory had not been constructed on the whole of the land so the same had to be included in the definition of the asset as per the wealth tax act.

Held by Hon’ble high Court:

High Court held that as the factory had been constructed on the land as per the approved plan of the local authorities and as per the approved plan some part of land had to be kept vacant, so the vacant land had to be considered as land & Building because on the land, building had been constructed which is not an asset as per the wealth tax act, So ITAT was right in upholding the appeal of CIT(A).

Direct link to download the full text of the above judgment:

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=227453

By Rishabh Mehra

If building is constructed by trust on land owned by trustee; the provisions of sec 13(1) does not gets attracted

Case Law Citation-

Brief of the case:

Madras High Court in M/s Natya sankalpaa Vs DIT Exemptions held that if the trustee would compensate the trust with the amount which trust had applied on the property of the trustee then it could not be said that the income of trust had applied to the benefit of trustee and exemption of sec 13(1) could not be denied.

Facts of the case:

Assessee formed a trust with his wife to promote bharatanatyam and other forms of Indian classical dance. Assessee was the owner of the land which he allowed the trust to construct the building with the income of the trust on the same land and use it for the trust. With this revenue was of the view that there was indirectly application of the income of the trust for the benefit of trustee i.e persons mentioned u/s 13(1). But assessee was of the view that he would return back the money of the value of building when the trust decides not to continue anymore. So, this was not an application of income for the benefit of the trustee.

Contention of the assessee:

Assessee was of the view that it was written in the agreement that when the trust would decide not to continue the trust then the trustee would pay the amount of the value of building to the trustee. So ultimately the cost which the trust would incur would come back to the trust. So the same should not be treated that the fund of trust was used for the benefit of assessee and the exemption of sec 13(1) should not be denied.

Contention of the revenue:

Revenue was of the view that as the land on which building was constructed was owned by the trustee. So, indirectly this was for the benefit of the trustee. Moreover as per sec 13(1) exemption u/s 11 would be denied if the income of the trust would be applied directly/indirectly for the benefit of trustee irrespective of the fact that there was agreement between the trust and trustee that the amount equal to the value of building would be returned back when trust decides not to continue its operations.

Held by High Court:

High Court held that there was nothing to show that the income of the trust was applied for the benefit of the assessee as written in the agreement that the trustee shall compensate the trust for the value of building when the trust would decide to discontinue its operations. So, with this there could not be any application of trust income which would ultimately benefit the trustee. The contention of the revenue that the trust income was applied for benefiting the assessee was wrong .So the assessee was allowed to take the exemption of sec 13(1).

Direct link to download the full text of the above judgment:

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=232627

BY Rishabh Mehra

If building is constructed by trust on land owned by trustee; the provisions of sec 13(1) does not gets attracted

Case Law Citation-

Brief of the case:

Madras High Court in M/s Natya sankalpaa Vs DIT Exemptions held that if the trustee would compensate the trust with the amount which trust had applied on the property of the trustee then it could not be said that the income of trust had applied to the benefit of trustee and exemption of sec 13(1) could not be denied.

Facts of the case:

Assessee formed a trust with his wife to promote bharatanatyam and other forms of Indian classical dance. Assessee was the owner of the land which he allowed the trust to construct the building with the income of the trust on the same land and use it for the trust. With this revenue was of the view that there was indirectly application of the income of the trust for the benefit of trustee i.e persons mentioned u/s 13(1). But assessee was of the view that he would return back the money of the value of building when the trust decides not to continue anymore. So, this was not an application of income for the benefit of the trustee.

Contention of the assessee:

Assessee was of the view that it was written in the agreement that when the trust would decide not to continue the trust then the trustee would pay the amount of the value of building to the trustee. So ultimately the cost which the trust would incur would come back to the trust. So the same should not be treated that the fund of trust was used for the benefit of assessee and the exemption of sec 13(1) should not be denied.

Contention of the revenue:

Revenue was of the view that as the land on which building was constructed was owned by the trustee. So, indirectly this was for the benefit of the trustee. Moreover as per sec 13(1) exemption u/s 11 would be denied if the income of the trust would be applied directly/indirectly for the benefit of trustee irrespective of the fact that there was agreement between the trust and trustee that the amount equal to the value of building would be returned back when trust decides not to continue its operations.

Held by High Court:

High Court held that there was nothing to show that the income of the trust was applied for the benefit of the assessee as written in the agreement that the trustee shall compensate the trust for the value of building when the trust would decide to discontinue its operations. So, with this there could not be any application of trust income which would ultimately benefit the trustee. The contention of the revenue that the trust income was applied for benefiting the assessee was wrong .So the assessee was allowed to take the exemption of sec 13(1).

Direct link to download the full text of the above judgment:

http://judis.nic.in/Judis_Chennai/list_new2_Pdf.asp?FileName=232627

BY Rishabh Mehra

CMA Relevant Amendments & Clarification Dec 2015
Exam

Clarification for December 2015 term of Examination. This is to bring to the notice for further clarification to all concerned that the followings shall be applicable for December 2015 term of Examination

Companies Cost Records & Audit) Rules, 2014

Note: (This is already applicable since June-2015 Exam) Companies Act,2013 Applicable for CMA Inter and CMA Final

Reference Papers

Paper 10 – Cost & Management Accountancy – Section B (group II) (CMA Inter)
Paper 19 – Cost & Management Audit ( Group IV) (CMA Final)
Applicability of Companies Act, 2013

Note: Final There are some sections of Companies Act 2013 which is not yet enforced. Hence for Those corresponding sections of Companies Act,1956 as applicable for Examination of the institute is to be referred.

Applicable for CMA Inter and CMA Final

Reference Papers

Paper 6 – Laws, Ethics & Governance (Group I)
Paper 12 – Company Accounts & Audit ( Group II)
Paper 13 – Corporate Laws & Compliance ( Group III)
Paper 18 – Corporate Financial Reporting ( Group IV)
Paper 19 – Cost and Management Audit (Group IV)
CARO, 2015 – Companies(Auditor’s Report) Order, 2015

Applicable for CMA Inter and Final

Reference Papers

P12 – Company Accounts & Audit
P13 Corporate Laws & Compliance

Finance Act,2014 Assessment Year 2015-16
CMA Intermediate

P7 – Direct Taxation

Wealth Tax Act,1957 since repealed as per Finance Act,2015, hence, excluded from December 2015 term

Wealth Tax is excluded.

Revised weightage:

Income Tax (75 marks)
International Taxation(25 marks)
P11 – Indirect Taxation – As per Finance Act,2014

CMA Final

P16 – Tax Management and Practice – Wealth Tax is excluded.

Note
(l)Foreign Trade Policy,2015 is not made applicable for December 2015 term of Examination. However, it shall be made applicable from June 2016 term of Examination
(2)Amendments made through Finance Act,2015 – for Indirect Taxation is not made applicable for December,2015 term of Examination. Hence, as per the prevailing procedure, the amendments prescribed vide Finance Act, 2015 shall be made applicable for June 2016 and December 2016 terms of Examination.
(3)Wealth Tax Act,1957, since repealed vide Finance Act,2015 – is excluded from December 2015 term of Examination.

CAR and CARR (shall be applicable based on notification by the Ministry of corporate Affairs, Government of India) – shall be applicable from the date of notification in official gazette of the Government.

In case of change / amendments pronounced in CAR and CARR as per
regulations prescribed under sec. 148 of the Company Act. 2013 pronounced having less than six months, then for June 2015 term of examination, CAR-2011 and CARR-2011 shall be applicable. If the time period is more than six months, than the revised CAR and CARR shall be applicable for the month of June 2015 and December 2015 term of Examination

Cost Accounting Standards (CAS) (1-22) and Cost Audit & Assurance
Standards (CAAS) (1-4) shall be Applicable for June 2015 And Dec 2015 term of Examination.
This shall cover both syllabus 2008 and Syllabus 2012 subject/papers, As Applicable.

Click Here to Download Insurance Law (Ammendment) Act, 2015 applicable for CA Final Nov. 15 EXAMS 

Sebi asks Ally Multitrade to repay investors' money

Capital markets regulator Sebi has ordered Ally Multitrade India and its directors to refund the money, it had illegally raised from investors, along with promised returns within three months.
Besides, Securities and Exchange Board of India (Sebi) has barred the company and its director from the securities markets for four years.

A Sebi probe found that Ally Multitrade was running 'collective investment schemes (CIS)' without obtaining registration from the regulator.

The company was collecting money from public at large in the name selling of plots under its scheme.
Sebi said the company had mobilised over Rs 2.33 crore from people between 2012 and 2014. However, the firm claimed it has refunded over Rs 28 lakh to investors.

In an order, Sebi has directed the firm and its directors -- Chetan Yashwant Thakur, Vijay Dattaram Chavan and Suryakant Sambu Bhosle -- "to wind up the existing CIS and refund the money collected... with returns which are due to its investors ... within a period of three months."

Further, the regulator has barred them from accessing the securities market for four years and the ban would continue till all the CIS are "wound up and all the money mobilised are refunded to the investors with returns."

Earlier, Sebi, through an interim order in July this year, had directed Ally Multitrade and its directors "not to collect any fresh money from investors under its existing schemes" as well as "not to launch any new scheme".

In case the company fails to comply with the order, Sebi would make a reference to state government/local police to register a civil/criminal case against Ally Multitrade India, it promoters and directors, for offences of fraud, cheating, breach of trust and misappropriation of public funds."

In addition, the capital markets watchdog would make a reference to the Ministry of Corporate Affairs to initiate the process of winding up of the company.

Besides, Sebi would initiate attachment and recovery proceedings against the firm.

RBI more likely to cut rates in September, GDP growth steady: Poll

There is a better than even chance that the Reserve Bank of India (RBI) will cut interest rates at its policy meeting on Sept. 29 thanks to inflation striking a record low, according to a Reuters poll, marking a shift in expectations from earlier.
The median from survey of 21 economists showed a 60 percent chance that the central bank would cut its policy repo rate from 7.25 percent at the next meeting, whereas a previous poll in July had shown a move was more likely in the final three months of the year.

Since then, India has released consumer price data for July that showed retail inflation at a record low of 3.78%, giving the RBI more room to ease policy.

Keen to inject more momentum in the economy and encourage investment, the government and business community have urged the central bank to lower interest rates, though RBI Governor Raghuram Rajan has stressed that he wants to see low inflation on a sustained basis.
"We have fuel disinflation making a comeback all over again. Crude prices are back down," said Vishnu Varathan, senior economist at Mizuho Bank.

Varathan noted the price of onions, a staple ingredient in Indian cooking, was beginning to rise, putting upward pressure on food inflation.

But, he said the RBI would find it harder to cut interest rates later in the year, if the US Federal Reserve delays raising interest rates, which it is expected to do.

The RBI left interest rates unchanged at its last policy review on August 4, having already cut them by 75 basis points this year as a slump in global commodity prices brought inflation under control. By holding rates steady, Rajan went against the majority on an advisory panel, who had recommended a reduction.

India is due to release economic growth data for the April-June quarter on Monday.

The median forecast given by 27 economists put year-on-year growth at 7.4 percent for the quarter, slowing from 7.5% in the January-March period.

Whereas the headline figure looks healthy, many economists have treated the data series with caution since the statistics department revised its methodology for measuring gross domestic product earlier this year.

Other indicators and on-the-ground evidence suggest the economy is struggling, and there is growing impatience with Prime Minister Narendra Modi's government to implement more policies that can galvanise growth.

The government is trying to introduce a nationwide goods and services tax to create a more unified market in a country where levies can differ from state to state.

Twelve of the 21 economists polled doubted whether the government could roll out the tax before the next fiscal year begins in April.

Sebi reconstitutes Takeover Panel

The Securities and Exchange Board of India (Sebi) has reconstituted its Takeover Panel, which looks into the applications seeking exemption from the mandatory open offer that an acquirer needs to make to minority shareholders. The panel, comprising independent experts, makes its recommendations to Sebi on such applications after which the regulator gives an opportunity to concerned parties before passing an order.

The newly notified Takeover Panel would be chaired by N.K. Sodhi, the former chief justice of the high courts of Karnataka and Kerala and also the former presiding officer of the Securities Appellate Tribunal. Sodhi had also chaired the Sebi panel that revisited two-decade old insider trading norms, which came into force earlier this year. S. Ravi, a renowned chartered accountant who has been on boards of various PSUs and is partner at Ravi Rajan and Company, has been appointed as a member on the new panel.

The other members of this Takeover Panel include Darius Khambata (former advocate general, Maharashtra), M.S. Raghavan (former chairman and managing director of IDBI Bank) and Thomas Mathew T (chairman of MCX Stock Exchange and former chairman of Life Insurance Corporation of India).

Sebi had first constituted a four-member Takeover Panel in November 2007, under chairmanship of former Bank of Baroda chairman K. Kannan. Separately, the regulator has also made a change in the Sebi Committee on Disclosures and Accounting Standards (SCODA), wherein it has appointed CA Pankaj Jain (member of accounting regulatory body) in place of S. Santhanakrishnan.

Chaired by Tata Sons director (finance) Ishaat Hussain, this panel advises Sebi on issues related to the disclosure requirements by the companies for protecting the interests of the investors and ensure smooth implementation of accounting standards, statements, guidance notes and studies evolved by the Institute of Chartered Accountants of India (ICAI). These panels have been reconstituted at a time when Sebi is looking to review some key norms, including its regulations governing mergers and acquisitions involving listed companies and to prescribe a new definition for “control”.

The review is aimed at making the norms easier for the companies and safeguard the interest of minority investors. Among other issues, Sebi is looking at prescribing a new definition for “control” and review the provisions governing discovery of price to be offered by acquirers to the public shareholders, sources said. Sebi had put in place a new Takeover Code in October 2011, wherein the major changes included increasing the open offer trigger for minority shareholders from 15% to 25%, while the size of the offer was also raised from 20% to 26%.

This Code replaced the takeover rules that were in force till that time since 1997. While a Sebi-appointed panel had suggested an open offer size of up to 100%, the regulator decided to keep it at 26% after public consultation to help the domestic acquirers, as they lack access to large bank funding for such deals. The review at that time was done by a Takeover Regulations Advisory Committee, which was set up in September 2009 under the chairmanship of C. Achutan and it had submitted its report to Sebi in July 2010.

EPFO likely to decide on PF interest rate for FY16 on 16 September

Retirement fund body EPFO is likely to decide on interest rate on PF deposits for 2015-16 for its over six crore subscribers in its trustees’ meet on 16 September.

“The Central Board of Trustees (CBT) headed by the labour minister may take up for discussion the proposal on payment of interest on PF deposits for 2015-16 in its meeting scheduled on 16 September,” a source said.

“The 208th meeting of the Central Board of Trustees has been scheduled on 16th September in Hyderabad,” a circular issued by the Employees’ Provident Fund Organisation (EPFO) said.

The EPFO paid 8.75% rate of interest for 2013-14 and 2014-15 financial years to its subscribers. It has over six crore subscribers on the provident fund deposits. EPFO manages a huge corpus of over Rs6.5 lakh crore with an incremental annual deposits of Rs1 lakh crore.

Source : Livemint

Can we really compare a CA with MBA?

There is often a discussion as to who is superior, a CA or a MBA. There are certain facts after that one will be able to identify as both are so different, that one can't really compare between the two :-

1. A CA is a course that one do just after completing his class 12 exams, whereas for doing a MBA one must be graduated.

2. For doing a CA there is only one institute in whole India i.e. The Institute of Chartered Accountants of India, whereas for doing MBA there are countless number of Institutions and Colleges which provide such qualification.

3. A degree of CA provides the basic and core knowledge into different subjects like taxes, accounting, Auditing, Financial Management etc. whereas a MBA has exposure in just one field, whether it is Finance, Human Resource, Marketing or others.

4. If one look at the pattern of the CA course, whether one is in some small places or even in big cities, the qualification marks are the same and the question paper is also the same, so one can't differentiate between the place from where one has passed his exam, the degree from the Institute speaks for itself, whereas in MBA one has to mention the Institute or College from where one has done , whereas the top priority are given to IIMs and least to some colleges which has not so much of recognition .

5. If one looks at the fees one pays for doing a CA it will be less than Rs. 50,000/- for a minimum of four and half year course, whereas for an MBA one pays more than Rs. 10,00,000/- for a two year course especially for reputed colleges or institutions.

6. After doing a CA, one is capable of making a profession in various fields like Auditing, Finance, Consultant, Advisor etc, whereas after doing a MBA there are not so much of options available.

7. One biggest advantage of CA course is the three years of its Article-ship, where one gets an exposure of the corporate world, and an idea of what one has to do in future whereas in MBA this important expect is missing.

The one question which often strikes our mind is as to why there is no comparison between a Doctor with MBA, an Engineer with MBA and only of CA with MBA. The course of studies is all different for a CA and MBA, but still there is always a comparison between the two as they often collide in the organisational hierarchy for the work they are doing as both CAs and MBAs are the CFO, CEO, COO, MD of big multinational companies. But still at the end a CA is fully capable of doing the work which a MBA does in an organisation but the same is not true vice versa. So at the end to conclude, we should respect each and every course and should not differentiate or compare between the two or to find out which is superior.

By Ashutosh Khaitan

Review of policy relating to forfeiture of partly paid-up shares

Discussion Paper on “Review of policy relating to forfeiture of partly paid-up shares – Amendments to SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011”

Background

1. Forfeiture of shares is a process specified under Table-F (Articles of Association of a Company Limited by Shares) of Schedule I of the Companies Act, 2013. The standard procedure to be followed in case of forfeiture of partly paid-up shares is as follows:

i. If a member fails to pay any call, or instalment of a call, on the day appointed for payment, the Board of Directors of the company may, at any time thereafter during such time as any part of the call or instalment remains unpaid, serve a notice on him requiring payment of such amount, together with any interest which may have accrued.

ii. If the requirements of any such notice are not complied with, any share in respect of which the notice has been given may be forfeited by a resolution of the Board of Directors of the company.

2. The manner of exercising voting rights on partly paid-up shares as per the Companies Act, 2013 has been specified as hereunder:

i. As per clause (b) of sub-section (1) of section 47 of the Companies Act, 2013, voting rights on a poll shall be proportionate to the paid-up equity share capital of the company. Therefore, voting rights on partly paid-up shares may be considered to be in proportion to the actual amount paid on these shares.

ii. Further, sub-section (1) of section 106 of the Companies Act, 2013 allows the articles of a company to provide that no member shall exercise any voting right in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid.

3. However, the increase in voting rights on the expiry of call notice period may not be everlasting and some shareholders may pay up the calls even after the expiry of call notice period and there would be uncertainty in this respect till the time the shares are forfeited by the company. Since the actual increase in voting rights is evident only on forfeiture of shares, the open offer obligations in such cases would trigger on the date of forfeiture of partly paid-up shares. However, the same is not explicitly provided for.

4. With regard to the issue of incidental increase in voting rights without a positive act of an acquirer, Hon’ble SAT vide order dated November 21, 2011 in the matter of Mr. Raghu Hari Dalmia and others vs SEBI had ruled that the increase in the voting rights of the appellants was not by reason of any act of theirs but was incidental to the buyback of shares of other shareholders by the company and such a passive increase in the proportion of their voting rights would not attract regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. It may be noted that open offer obligations arising as a result of buyback were subsequently brought under the scope of exemptions through the automatic route in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as the “Takeover Regulations, 2011 “).

5. The increase in the shareholding due to the expiry of call notice period and forfeiture of shares may be treated as a passive acquisition due to the following reasons:

i. Increase in voting rights of any shareholder as a result of forfeiture of partly paid-up shares held by some shareholders is passive in nature as the process is initiated due to non-payment of call money by defaulting shareholders.

ii. Similarly, accrual of voting rights to the remaining shareholders, computed on pro rata basis, upon the expiry of call notice issued to the shareholders holding partly paid-up shares is also passive in nature.

iii. Forfeiture is undertaken by the company as per the provisions of the Companies Act, 2013 where it is at full liberty to undertake this to remove defaulting shareholders from the Register of Members.

Need for regulatory amendment

6. Regulation 10 of the Takeover Regulations, 2011 provides general exemption from the obligations to make an open offer for certain acquisitions, subject to fulfillment of the conditions specified therein.

7. Increase in voting rights arising out of actions undertaken by the companies under the Companies Act, 2013 such as rights issues, buybacks and schemes of arrangement are exempt from the open offer obligations under regulation 10 of the Takeover Regulations, 2011.

8. Further, accrual of voting rights on preference shares where dividend has not been paid for two years or more as per sub-section (2) of section 47 of the Companies Act, 2013 are exempt from the open offer obligations under regulation 10 of the Takeover Regulations, 2011.

9. Currently, there is no provision for increase in the voting rights of a shareholder due to the expiry of call notice period and forfeiture of partly paid-up shares to be exempt under regulation 10 of the Takeover Regulations, 2011 and an application needs to be filed with SEBI for seeking exemption from the open offer obligations in this regard under regulation 11 of the Takeover Regulations, 2011.

10. It may be noted that the facts of these cases with respect to these applications are quite similar. However, a reasoned order must be passed by SEBI in each such case which may take enormous amount of time and effort.

11. Further, increase in the voting rights of a shareholder due to the expiry of call notice period and forfeiture of partly paid-up shares is undertaken under the Companies Act, 2013 and is passive in nature.

12. Therefore, it is proposed that the Takeover Regulations, 2011 may be amended suitably for providing general exemption from the open offer obligations in the cases of increase in voting rights as a result of the expiry of call notice period and the forfeiture of shares in line with general exemptions available with respect to rights issues, buybacks etc.

Proposed Amendment

13. Accordingly, it is proposed to insert the following as clause (j) under sub-regulation (1) of regulation 10 of the Takeover Regulations, 2011:

“Increase in voting rights arising out of the operation of sub-section (1) of section 106 of the Companies Act, 2013 or pursuant to forfeiture of shares by a company undertaken in compliance with the provisions of the Companies Act, 2013 and articles of association of the company.”

Public comments

14. Considering the implications of the said matter on the market participants including listed companies, promoters/promoter group of the said companies and investors, public comments on the amendment proposed above at paragraph 13 are solicited. Specific comments/suggestions as per the format given below would be highly appreciated:

Name of entity / person / intermediary: Name of organization (if applicable): Sr. No. Proposed /
suggested changes Rationale
sebi.gov.in or sksingh(sebi.gov.in or sent by post, to:-

Ms. V. Divya Veda

Deputy General Manager

Corporation Finance Department Securities and Exchange Board of India SEBI Bhavan

Plot No. C4-A, “G” Block

Bandra Kurla Complex

Bandra (East), Mumbai – 400 051

Ph: ~912226449629/ ~912226449370

Source- SEBI

Start Writing Now and Make Your Words Count!!!

CA Virag Shah

We all as a Professionals and students of Professional Course have to write daily by compulsion or by passion.

Then why not to make it a passion!!!

Each day, we are writing some or the other official letters / emails, writing in various audit report, or a writing a reporting to seniors. No matter what our reason for writing may be, developing a daily writing habit can be extremely beneficial to different areas of your life.

One of my uncle says, “All professional are writers, some practice and some don’t.”

The best reason to develop writing as a daily habit is because it’s a great skill to have.

Self-Development:

Write for yourself.

Just begin somewhere — anywhere. Start small and build.

Let’s start writing with your daily job profile. If your job profile is Taxation, then you may write Article on 10 check points must to be taken care before start Tax Audit or 7 Tax Saving Tips for common man. Suppose your job profile is Internal Audit, then you may write article on Importance of Internal audit in an Organisation or Benefits of Internal Audit to the Top Management. If you are working with Bank or Involved in Concurrent Audit of a Bank, then you may write article on Banking Laws or Documents required for various loans or Responsibilities of Managers in Banking Sectors. If you are working with IT Company, then you may write article on Importance of Technology. If you are dealing with Stock, then you may write on Advice to new entrant – points to keep in mind by new entrant etc.

Pick a topic and devote 30 minutes a day to writing. In a fifteen days or even sooner you will finish your First Article. After a couple of months of writing daily, you can go back and see how you were when you started.

Seeing yourself grow is a fruitful experience.

Critical Thinking

Writing skills will enhance your thinking and it will develop your thinking capacity. Believe me, you will start thinking anything in a broader prospective.

For writing on any subject, first you must be well-informed with the subject and for the purpose you have to read, read a lot. Then only you can express in a better way.

If you want to become a better writer, start reading more books. I will advise to all young professionals and students to read at least 100 books. If you are start as 25 year old, make a target of 10 books per year. Whatever your problems is, there is at least one decent book offering solution. Books hides incredible value and knowledge. Once you become a regular reader, you will realise how much you miss out if you refused to read. The impact books have made (and still making) on my life is gigantic.

You develop critical thinking skills that you learn through your writing and it helps you become a better talker, thinker, and doer.

Language Command

The most important reason that I have for you is that writing forces you to learn about the English language, whether you want to or not. You’re going to learn more words on your journey, whether it’s indirectly through contextual examples or directly from a dictionary. You start to build a tool belt of your best words, ideas, and phrases that you can use at any time. This gives you more of a chance to make a real difference with your words, not only on paper but orally as well. Your drafting will improve significantly. Drafting skill may change your career at any point of time.

Command over the English language is very important as it is the most widely spoken and influential of all languages.

Just Write.

The number one piece of advice that distinguished professionals will give is this: write.

It’s never too late to start over. If you weren’t happy with yesterday, try something different today. Don’t stay stuck. Do better.

81 % of the population feels they could write, but only the minority takes action and starts writing. The truth is, once you begin to write, you are a Writer. Finishing Article is a challenging task but the sense of Satisfaction afterward is definitely worth it.

Continue this for a Year, you will drastically improve your language and could provide the material that someday becomes a published book. Suppose, in a month you will write ONLY one Article, by the end of the year you will have twelve Article and then you may found it as a passion, and you become Author by that time…….. You don’t know until you try…..

You say you don’t know where to start??

Start right now by writing a comment on this Article, then keep writing something every day. When you begin to experience the benefits write to me again and let me know.    

To Your Success,

By CA Virag Shah

An issue of jurisdiction can be raised at any time even in appeal or execution

Case Law Citation- M/s Mavany Brothers vs. CIT (High Court of Bombay at Goa), Tax Appeal No. 8 of 2007, A.Y. 1996-97, Date of Order: 17.04.2015

Brief- High Court of Bombay at Goa has held in the case of In the case of M/s Mavany Brothers vs. CIT that that it is settled position that conferment of jurisdiction is a legislative function and cannot be conferred by consent of petitioner. An issue of jurisdiction can be raised at any time even in appeal or execution.

Brief fact of the case

The assessee filed its original return of income along with its balance sheet and profit & loss account on 22/09/1997 which was processed u/s 143(1)(a) of the Act. On 13/11/2000, a notice u/s 148 of the Act was issued seeking to re-open the assessment. In response, appellant filed a fresh return of income on 17/11/2000 and indicated that the other documents viz balance sheet and profit & loss account had already been filed with the original return of income and consequently the same again was not being filed. However, the appellant was called upon to furnish the same. The appellant by a further letter supplied copies of balance sheet and profit & loss account to the A.O. while reiterating again that the original return of income did contain the documents namely balance sheet and profit & loss account sought by Revenue and there was no difference between the original return of income filed in 1997 and the present return filed on 17/11/2000. The reason sought by the appellant in support of notice dated 13/11/2000 was also communicated by the A.O. which was mainly based on correspondence with various parties and partnership deed dated 08/08/1995 and the confidential report dt. 05/10/1999 received from DDIT(Inv), Panaji. The appellant did not object to the reasons recorded for reopening the assessment and attended the hearing before the A.O. Being aggrieved with the additions made by the A.O. based on the reasons recorded, appellant filed an appeal to the CIT(A). At that stage the appellant for the first time raised an objection to the reopening notice dated 13/11/2000 under Section 148 of the Act that it was without jurisdiction on the ground of non-furnishing of confidential report of the DDIT to the appellant and that the return of income filed in 1997 was not available with the Revenue. Consequently, there could be no occasion for the Assessing Officer to have any reason to believe that income chargeable to tax had escaped assessment. In support of this the appellant placed reliance upon an inspection of the records of the Revenue with regard to the appellant on 08/09/2004. Besides, the appellant also raised various contentions with regard to the issue of no capital gains being attracted in the facts of the present case. The CIT(A) by its order dated 30/11/2004 dismissed the appeal holding that the non availability of the original return in the record of the Assessing Officer on 08/09/2004 does not mean that the original return was not available on 13/11/2000 i.e. the date when the notice under Section 148 of the Act was issued to the appellant and also confirmed the order of A.O. w.r.t to transaction being transfer within meaning of section 2(47) of the Act. On further appeal, the Tribunal by the impugned order upheld the order of the CIT(A) both on issue of reopening of assessment as well as on the issue of capital gains. Being aggrieved, the appellant filed appeal before the High Court and appeal was admitted on following substantial question of law:-

(1) Whether the Tribunal was right in affirming the determination of the capital gains at Rs.72,28,175-00 (or Rs.72,46,825-00) in place of the loss shown in the return of income filed under Section 148?

(2) Whether having regard to the family arrangement entered into in order to put an end to civil litigation commenced against the appellant by late Tajdin and later continued by his legal heirs, no capital gains at all is liable to be assessed?

(3) Whether alternatively the payment of Rs.66 lakhs should be deducted from out of the consideration for the transfer `received by the appellant’ or should go to enhance the cost of acquisition of the land and only to view order, not for print the cinema building and accordingly the capital gains if any should be reduced by the aforesaid sum of Rs.66 lakhs?

(4) Whether on the facts and in the circumstances of the case, the assessment of the appellant for the AY 1996-97 was validly reopened and the notice under Section 147 was valid in law?

However, the High Court first addressed the basic issue raised by the appellant viz the re-opening notice without jurisdiction as the foundation of proceedings on the other issues was the validity of the reopening notices.

Contention of the Assessee

The ld. counsel submitted that re-opening of the notice dt. 13/11/2000 was completely without jurisdiction as on that day the A.O. did not had on record the original return of income filed by the appellant. This was apparent from the fact that the appellant had while filing the return of income on 17/11/2000 consequent to the reopening notice on 13/11/2000 had indicated that profit and loss account and balance sheet were part of the original return and therefore were not being separately attached. The return as filed on 17/11/2000 was identical to one filed on 22/09/1997. Inspite of the same on 20/11/2000 the Assessing Officer called for the profit and loss account and balance sheet on the ground that the same is not attached to the return of the income filed on 17/11/2000. If the return of income was available with the Assessing Officer there would had been no occasion for him to call for the balance sheet and profit and loss account again by letter dated 20/11/2000 from the appellant. Thus the conclusion of the CIT(A) as well as the Tribunal that the original return of income may have been available on 13/11/2000 when the notice for reopening was issued without any evidence/basis cannot be sustained.

Contention of the Revenue

Ld. counsel of Revenue submitted that it was not open to the appellant to raise an issue of jurisdiction to issue notice under Section 148 of the Act before the first appellate authority. This was particularly so as the appellant had not made grievance with regard to lack of jurisdiction before the A.O. Even otherwise, it was further submitted that the fact that income chargeable to tax has escaped assessment need not necessarily flow out to examination of return of income and the same could be from any other source. Thus, the requirement of having a return of income available at the time of issuing of the notice was not necessary.

Held by High Court

After considering the rival contentions, Hon’ble High Court pronounced that the jurisdiction under Section 147/148 of the Act is an extra ordinary jurisdiction and can only be exercised when condition precedent as provided in Sections 147/148 of the Act are satisfied. In the absence of the Assessing Officer having the original return of income available it would not be possible for him to have a reasonable belief that income chargeable to tax has escaped assessment. The view of the Revenue that the issue of jurisdiction could only have been raised before the Assessing Officer and not having been raised before him, the appellant had waived its rights to raise the same is not entirely correct. It is well settled that mere acquiescence will not give jurisdiction to an authority who has no jurisdiction. Mere participation by a party in proceedings without jurisdiction will not vest/confer jurisdiction on the authority. Reason to believe that income chargeable to tax has escaped assessment is a jurisdictional fact and only on its satisfaction, the Assessing Officer acquires jurisdiction to issue notice. An objection to it can be raised at any time even in appeal proceedings. The mere fact that no objection is taken before the Assessing Officer would not by itself bestow jurisdiction to the A.O. Moreover, the Apex Court in its recent decision in Kanwar Singh Saini V/s. High Court Of Delhi reported in 2012(4) SCC 307 has held that it is settled position that conferment of jurisdiction is a legislative function and cannot be conferred by consent of petitioner. An issue of jurisdiction can be raised at any time even in appeal or execution. The revenue in the present case proceeded on the basis that the return of income filed in 1997 was available with the Assessing Officer at the time when the notice dated 13/11/2000 was issued under Section 148 of the Act to the appellant. Nothing in support of the submission was placed by the Revenue before the authorities under the Act. In fact the authorities have proceeded on the basis that the original return filed in 1997 may have been available at the time when the notice on 13/11/2000 was issued under Section 148 of the Act. This conclusion has been drawn by the authorities ignoring the appellant’s contention as is evident from the revised return of income filed on 17/11/2000 wherein the appellant had specifically mentioned that the profit and loss account and the balance sheet was enclosed to the original return of income filed on 22/09/1997. The Assessing Officer had on 20/11/2000 called upon the appellant to produce the balance sheet and profit and loss account for the assessment year 1996-97 as the same were not attached to the return of income filed on 17/11/2000. In case the Revenue had in its possession the 1997 Return of Income then it would have had relied upon the annexures filed with the original return of income and no occasion to call for it from the appellant could arise. This aspect has not at all been considered by the authorities under the Act, including the Tribunal. In view of the above the impugned order of the Tribunal holding that the notice dated 13/11/2000 was issued under Section 148 of the Act was within jurisdiction was set aside. However, the same was being restored to the Tribunal to consider afresh the contentions of the appellant as well as the Revenue with regard to the existence of the original return of income filed on 22/09/1997 in the record of the Assessing Officer at the time when the notice dated 13/11/2000 was issued. The Tribunal is directed to decide the appeal afresh on all issues after hearing the parties.

By  CA Girish Gupta

Interest cannot be disallowed for interest free loan given to sister concerns for business purpose

Case Law Citation- Vassantram Mehta & Co.(P) Ltd. vs. Joint Comm. of Income Tax (High Court of Bombay at Goa), Tax Appeal No. 9 of 2008, A.Y. 2001-02, Date of Order: 17-04-2015

Brief- High Court of Bombay at Goa has held in the case of Vassantram Mehta & Co. (P) Ltd. vs. JCIT that Interest not to be disallowed if interest free advance granted to sister concern due to commercial expediency and is for business purpose of assessee.

Brief about case

The appellant-assessee filed its return of income declaring a total income of Rs.28.61 lakhs after claiming deduction of expenditure incurred on account of interest aggregating to Rs.27.03 lakhs on pre-shipment packing credit facility obtained and Rs.12.85 lakhs as loss on foreign exchange fluctuation. The A.O. disallowed the entire expenditure on account of interest of Rs.27.03 lakhs on the ground that interest paid in respect of credit facility obtained was not for the appellant’s own business as part of amount of Rs.9.36 crore out of pre-shipment packing credit funds had been diverted as advance to its sister concern M/s Bandekar Brothers Private Limited (BBPL) from whom it purchased iron ore of Rs.6.02 crores. Simultaneously out of total loss of Rs.12.85 lakhs booked on foreign exchange fluctuation on advances received for supply of iron ore from foreign parties, only a sum of Rs.3.59 lakhs was verified by A.O. being the actual loss and consequently the excess foreign exchange loss claimed of Rs.9.26 lakhs was disallowed. As a result, appellant’s income from Rs.28.61 lakhs was enhanced to Rs.35.87 lakhs after adjusting enhanced deduction u/s 80HHC of the Act. On an appeal CIT(A) upheld the decision of A.O. but restricted the disallowance to Rs.17.21 lakhs being the interest payable by the appellant in respect of advances made by it to BBPL (diverted funds) out of the packing credit facility obtained by it. However w.r.t to currency fluctuation loss, entire amount incl.Rs.3.59 lakhs allowed by A.O. was disallowed on the ground that amount received by the appellants are only in the nature of advances and the loss on account of exchange fluctuation could be only allowed as and when the goods are supplied against the advances received and not on a notional basis. On an appeal before Tribunal, order of CIT(A)was upheld. Being aggrieved by the impugned order of the Tribunal, the assessee raised following substantial question of law before the court.

Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in disallowing the claim of interest payment because of the interest-free advances made to sister concern, solely impelled by commercial expediency and used by the payee company for its business only, on the ground that the advances were excessive considering the requirements of assessee’s trade with that concern?
Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in confirming the order of the Commissioner (Appeals) disallowing the actual loss incurred due to fluctuation in currency rates in respect of advance received from a foreign buyer and demurrage payable to a foreign buyer ?
Contention of the Assessee

Advance was given to M/s BBPL for the purpose of the appellant’s business so as to ensure an uninterrupted supply of iron ore from BBPL. Moreover, it had funds of its own available for the purpose of making advances to its sister concern which was an admitted positions as recorded in the order of A.O. The assessee also contended for the allowability of whole of loss related to currency fluctuation.

Contention of Revenue

The ld. counsel of the revenue relied on the order of lower authorities and submitted no interference           is warranted to the impugned order.

Held by Court

It was an admitted position, mentioned in the assessment order dt.26/03/2004 passed by the A.O., that appellant had enough funds of its own to make advances to M/s BBPL. However, all the authorities under the Act have come to the finding of fact that the appellant had advanced money to M/s BBPL out of the interest bearing borrowed funds. However the apex court in S. A. Builders Ltd held that even where the funds are advanced out of interest bearing funds to its sister concern, yet the deduction of interest paid on account of the borrowed funds cannot be disallowed as an expenditure if the amounts have been given to a sister concern on account of commercial expediency. This is for the reason that it would then be satisfying the test of utlilising the funds for the “purposes of its business”. The Apex Court also observed that each case would be decided on its own facts, depending upon how the funds lent to the sister concern have been utlilised satisfying the test of purpose of assesse’s business. It was found that impugned order had not carried out the aforesaid exercise. Neither the Revenue led any evidence to show how the borrowed funds were utilized by BBPL or the appellant given an opportunity to establish the need of the funds by BBPL for the benefit of appellant-assessee. In view of above the order of the Tribunal disallowing payment of interest to the extent of Rs.17.27 lakhs was set aside and the issue was restored to the Tribunal for fresh consideration and to decide the applicability of Apex court decision in S.A. Builders Ltd to the present facts after letting the parties before it an opportunity to produce evidence in support of their respective cases.

          With regard to the question of allowability of currency fluctuation loss, it was held that the issue now stands covered by Apex Court decision in Commissioner of Income Tax V/s. Woodward Governor India P. Ltd. reported in (2009) 312 ITR 254 (SC). This revenue loss is not to be postponed to a future date when the transaction gets crystalised either by performance and/or cancellation of the contract. Therefore, in view of the above, the impugned order dated 08/08/2007 with regard to question (B) was also set aside. However, the issue was restored to the Tribunal for deciding the quantum of loss on account of foreign exchange fluctuation which was to be allowed to the appellant-assesse under Section 37 of the Act on the facts of this case.

BY CA Girish Gupta