CA and CS HUB

Quitting an organisation? Four tips to exit gracefully

Quitting an organisation is important for an employee to expand and diversify their skills set. It also helps the organisation churn out new talent.However, the manner of your exit can have repurcussions on your professional life. Says Deepa Jain, co-founder, Gourmetitup, "Every employee needs to find newer opportunities that can enhance their careers. However, when it comes to quitting a company, the best way to avoid any animosity between the employee and employer is by serving the stipulated notice period and ensuring a proper handover. Employers usually hold such workers in high regard and are comfortable keeping in touch with them."
Inform personally When an employee decides to make a career transition and quit an organisation, there a few aspects he/she must keep in mind when communicating this news to their co-workers.

"Although writing a resignation letter is the official mode of communicating one's decision to quit, it is best to make the announcement in person to your direct reporting manager. Whatever the reason for your exit, while serving the notice period, you must conduct yourself professionally, and continue to engage in constructive discussions with your team. After informing your supervisor personally, you must also convey the news to key employees you have worked with. All this goes a long way, as you never know when you and your co-workers will cross paths professionally," states Lina Das, director learning and organisation development, HR Anexi Pvt Ltd.

Proper handover What follows the announcement of resignations is a proper hand-over of your responsibilities, suggests Ameya Sule, business director, GroupM ESP. "Brief your colleagues about your roles and responsibilities and ensure that they have access to essential files and other resources.Doing so considerably helps your successor and makes their transition into the role smooth," he says.

It is equally important to not leave your work-station in a mess and clear personal items off your desk. Ensure that files are in order, well labeled, accessible and share all your logins and passwords with your team members. "Create specific files that contains data pertaining to your projects, such as timelines, resource allocations, intermediaries, progress of on-going projects and other recommendations, to ensure that your ongoing projects don't go into a limbo," adds Das.

Exit interview It is best to handle exit interviews in a poised and composed manner.Conduct yourself with dignity, don't be rude, avoid bickering about or blaming the company and do not talk ill about your boss and colleagues. A balanced exit interview can help bridge unseen gaps between the organisation and the employee. Says Sule, "Exit interviews are essential to gather vital feedback that can better the work environment, create a healthy atmosphere and improve the functioning of the organisation." Adds Das, "Communicate your concerns issues in a professional manner, but remember that an exit interview is not a complain session where one can go on and on about how unhappy you were at work."

Don't switch off Employees usually tend to slack while serving their notice period and end up whiling away their time during work hours. "This is an unprofessional approach and slacking off in your final weeks on the job can destroy the goodwill you have built and tarnish your image. Work productively and complete unfinished projects. This is also a time when one must work on passing the baton to their successor and adequately preparing them for the role," opines Sule.

When parting ways with a company, try to leave on a positive note. "Remember, last impressions matter too", concludes Jain. "It is important to be available even after you have quit the company as it not only helps a new employee but also increases your value in the opinion of your former employer. This will encourage the employer keep you in mind for opportunities in the future."

(By Purnima Goswami Sharma)

Source : ET wealth

Taxman Launches Upgraded Website for Filing Returns

The Income Tax Department has launched an upgraded version of its official web portal featuring better links for taxpayer services and grievance redressal.
The new website - incometaxindia.gov.in - features a special link for 'taxpayer services' on the main page and it subsequently navigates the user to all important works that a person needs to get done from the tax department like getting a new PAN card, filing e-returns, checking refunds and registering grievances.

The website is also hosting, from the past, various links for use by taxpayers including a special section on new I-T circulars, notifications and laws.

The improved website of the Income Tax Department is being created and maintained by its systems wing as the unit has been on a spree, for quite some time now, to continuously make I-T processes easy for taxpayers so that they can perform their tasks over the internet rather than going to a tax office.

"The new website has been made operational and a special section on tax FAQs for senior citizens and other class of taxpayers has also been brought out prominently," a senior official said.

The department has recently launched a pilot project to see if the lengthy scrutiny proceedings could be done over the e-mail even as it recently begun sharing information on social networking site Twitter with an exclusive handle - 'IncomeTaxIndia_'.

Source : NDTV

There is no TDS for interest earned on saving bank accounts

Interest above a certain level earned on fixed deposits attracts tax deduction at source (TDS). Recurring deposits have also been brought under the net of TDS, effective 1 June 2015. But there is no TDS on interest earned from a savings account of an individual or a Hindu Undivided Family (HUF). While this interest does not attract TDS, it is taxable in the hands of the account holder, if it is more than a certain limit.

INCOME TAX ON SAVINGS ACCOUNT INTEREST

Section 80TTA in the Income-tax Act, 1961 has been implemented from the assessment year 2013-14. Under this section, interest up to Rs.10,000 earned from all savings bank accounts is exempt from tax. The account can be with either a bank, a co-operative society engaged in carrying out the business of banking (including a co-operative land mortgage bank or a co-operative land development bank), or a post office. In case interest earned is more than Rs.10,000 in a financial year, the difference will attract tax. So, if your interest income from the savings accounts is Rs.9,000, you don’t have to pay any tax on it. But if it is Rs.18,000, you need to pay income tax on Rs.8,000 according to your tax slab. Remember, deduction under section 80TTA is not available on interest earned on fixed deposits or term deposits with a bank or post office.

TAX LIABILITY

It is the responsibility of the account holder to evaluate her interest income and pay the tax accordingly. Interest income from a savings bank account is considered under the head “income from other sources”. You can either disclose or declare the interest earned from different savings accounts to your employer and ask it to deduct the TDS on your income, or you can pay the taxes on your own. If the amount is substantial, you may also need to pay advance tax on it. You should evaluate your tax liability on interest earned before the advance tax due dates and make the payment accordingly. Advance tax instalment dates and percentage of taxable income are 15 September (30%), 15 December (30%) and 15 March (for the remaining amount). You do not have to attach an interest certificate while filing income tax returns. However, you should retain the original certificate to show it to the assessing officer in case of a tax scrutiny.

MINT MONEY TAKE

Usually, tax filers do not evaluate or disclose their interest earnings from savings accounts and the taxes due on it while filing income tax returns. But it would be sensible to do so; one should take advantage of the available deduction limit specified specially for such income and file the return accordingly. Not only is it incorrect to avoid or ignore savings account interest while filing tax return, but may also be penalised. You may have to file a revised return.

Source : Livemint

There is no TDS for interest earned on saving bank accounts

Interest above a certain level earned on fixed deposits attracts tax deduction at source (TDS). Recurring deposits have also been brought under the net of TDS, effective 1 June 2015. But there is no TDS on interest earned from a savings account of an individual or a Hindu Undivided Family (HUF). While this interest does not attract TDS, it is taxable in the hands of the account holder, if it is more than a certain limit.

INCOME TAX ON SAVINGS ACCOUNT INTEREST

Section 80TTA in the Income-tax Act, 1961 has been implemented from the assessment year 2013-14. Under this section, interest up to Rs.10,000 earned from all savings bank accounts is exempt from tax. The account can be with either a bank, a co-operative society engaged in carrying out the business of banking (including a co-operative land mortgage bank or a co-operative land development bank), or a post office. In case interest earned is more than Rs.10,000 in a financial year, the difference will attract tax. So, if your interest income from the savings accounts is Rs.9,000, you don’t have to pay any tax on it. But if it is Rs.18,000, you need to pay income tax on Rs.8,000 according to your tax slab. Remember, deduction under section 80TTA is not available on interest earned on fixed deposits or term deposits with a bank or post office.

TAX LIABILITY

It is the responsibility of the account holder to evaluate her interest income and pay the tax accordingly. Interest income from a savings bank account is considered under the head “income from other sources”. You can either disclose or declare the interest earned from different savings accounts to your employer and ask it to deduct the TDS on your income, or you can pay the taxes on your own. If the amount is substantial, you may also need to pay advance tax on it. You should evaluate your tax liability on interest earned before the advance tax due dates and make the payment accordingly. Advance tax instalment dates and percentage of taxable income are 15 September (30%), 15 December (30%) and 15 March (for the remaining amount). You do not have to attach an interest certificate while filing income tax returns. However, you should retain the original certificate to show it to the assessing officer in case of a tax scrutiny.

MINT MONEY TAKE

Usually, tax filers do not evaluate or disclose their interest earnings from savings accounts and the taxes due on it while filing income tax returns. But it would be sensible to do so; one should take advantage of the available deduction limit specified specially for such income and file the return accordingly. Not only is it incorrect to avoid or ignore savings account interest while filing tax return, but may also be penalised. You may have to file a revised return.

Source : Livemint

Provisions related to Right Issue of Shares under Companies Act, 2013

CS Prem Pyara Tiwari

Introduction:
As per the provisions of clause (a) of sub-section 1 of section 62 of the Companies Act, 2013, where at any time, a Company having a share capital proposes to increase its subscribed capital by the issue of further shares, then such shares shall always be offered to persons, who, at the date of the offer, are holders of equity shares of the Company, in proportion as nearly as circumstances admit, to the paid-up share capital on those shares, unless a resolution authorizing the issue of further shares other than to the holders of equity shares as mentioned above is passed.

Eligible Shareholders:

All the persons, holding equity share capital, in terms of clause (a) of sub-section 1 of section 62 of the Companies Act, 2013, as on the record date are eligible and shall be offered shares on right basis.

Procedure:

Following is the procedure for issue of shares on right basis-

Notice of Board Meeting:

Firstly, notice calling the Board Meeting shall be issued to all the Directors at least 7 days before the date of Board Meeting along with the agenda and other related note as required under section 173 of the Companies Act, 2013 read with the Secretarial Standard-1.

Holding of Board Meeting:

On the date specified in the notice, the Board Meeting shall be convened and the Board will consider and approve the following:

Proposal of issue of shares on right basis
Price at which shares to be issued including Premium, if any
Draft Letter of Offer for Right Issue
Terms of Right Issue
Record Date
Any other ancillary matter
Filing of MGT-14:

In case of public Companies the resolution approving the issue of shares on Right basis shall be filed with the concerned Registrar of Companies in E-Form-MGT-14 within 30 days of passing of such resolution.

Issue of Offer Letter:

The Offer Letter shall be dispatched by registered post or by speed post or through electronic mode to all the existing equity shareholders of the Company, at least three days before the opening of the issue.

However, as per the recent exemptions given to private Companies, if the 90% or more shareholders of the private Company give their consent then in such case the period lesser then the specified above shall be applicable.

Share Application Form shall also be attached with the Offer Letter.

Tendering Period:

The Right Issue Offer shall be open for at least 15 days but shall not remain open for more than 30 days from the date of the offer, if the offer is not accepted within the time prescribed, than such offer shall be deemed to have been declined.

However, as per the recent exemptions given to private Companies, if the 90% or more shareholders of the private Company give their consent then in such case the period lesser then the specified above shall be applicable.

Right of Renunciation:

Unless the articles otherwise provide, the Right Issue Offer shall be deemed to include a right to renounce the shares offered in favor of any other person. The Offer Letter shall also contain this statement.

Decline of Offer:

If any shareholder, to whom the Right Offer is made, declines the offer or does not accept the offer, than in such cases, the Board shall have the power to dispose of such shares offered, in any manner, which is in the best interest of the Company and the Shareholders.

Receipt of Funds:

The Shareholders, who accept the offer, shall pay the amount as indicated in the Offer Letter or the amount to the extent of shares accepted, as the case may be to the Company, at the time of accepting the offer.

It is pertinent to note here that such shares must be issued within 60 days of the receipt of the funds.

Issue of Notice of Board Meeting and Convening of Board Meeting:

After closure of the issue the Board Meeting shall be Convened on due notice as per the details prescribed above to consider and approve the allotment of shares.

Allotment in case of Foreign Shareholder:

If there is any foreign shareholder, than receipt of funds towards issue of shares from such foreign shareholder shall amount to FDI, hence the Company shall also be required to file Form FC-GPR with the RBI within 30 days of the allotment of the shares. (For detailed note on issue of shares to foreign person, kindly write me back to my mail id given at the end.)

Filing of Return of Allotment:

After allotment, the Company is required to file a return in the E-Form- PAS-3 with the concerned Registrar of Companies along with the complete list of Shareholders within 30 days of allotment of shares.

Issue of Share Certificate:

After allotment the Company shall issue the share certificate as per the provisions and the time prescribed under section 46 of the Companies Act, 2013.

The author is the Company Secretary from Delhi and can be contacted at prempyaratiwari1@gmail.com/ 08430645653.

Prosecution – made more simpler for revenue

How to read this article-:  This article is structured under following headings

Background-: ITAT’s power to stay prosecution proceedings

Why this article-: Whether ITAT has power to stay prosecution proceeding

Conclusion-: No

Points considered for forming conclusion-: As the name suggests, the basis on which the conclusion is formed.

Basis of conclusion -: It is the analysis of the points considered above.

1. The reason for this opening paragraph is to equip the reader to plan his order of reading. Invariably, it happens that, each of the reader is at different level of maturity and has different priorities at different times.

2. This article is updated upto 21 November 2015.

Background-:

3. 3-4 days ago, a news was published in the economic times carrying the news of this judgement. It took time for me to get the actual copy of judgement. The same is attached for your reference.

Why This Article-:

4. Punjab and Haryana High Court has delivered a landmark judgement whereby the Revenue department will get a boost to launch prosecution proceedings.

Questions framed-:

5. After appraising submissions by counsel for the parties, the findings recorded in the impugned order, the following questions were framed:-

a. Whether Section 254 of the Income Tax Act, 1961 empowers the Income Tax Appellate Tribunal to interfere in prosecution proceedings either at the stage of show cause notice or at any other stage?

b. Whether pendency of quantum appeals by the assessee and the revenue, appeals against penalty and appeals challenging orders passed consequent to an order passed under Section 263 of the Income Tax Act, would confer power/jurisdiction upon the Tribunal to stay a show cause notice calling upon the assessee to show cause why prosecution be not launched?”

Answer-:

6. Consequently, we answer the two questions by holding that we cannot read into Section 254 of the Act, any power in the Income Tax Appellate Tribunal to interfere in a prosecution under the Act, either at the stage of a show cause notice or at any other stage. The pendency of appeals regarding quantum and penalty and an appeal challenging an order passed under Section 263 would not, in our considered opinion, confer power upon the Tribunal to stay consideration of a show cause notice calling upon the assessee to show cause why prosecution be not launched.

Points considered for forming conclusion-:

Points on which there was consensus

7. The arguments for and against the impugned orders have primarily centered around the interpretation of the words “pass such orders thereon as it thinks fit”, used in Section 254(1) and “any proceedings relating to an appeal” used in the first proviso to Section 254(1) of the Act, with counsel for the revenue urging that power conferred by Section 254(1) to grant stay cannot be extended to any matter, which is not subject matter of an appeal before the Tribunal, whether incidental or collateral but with counsel for the assessee urging to the contrary, namely, that these expressions inhere a plenary power, in the Appellate Tribunal, to stay proceedings which though independent are intrinsically linked to the outcome of an appeal.

8. Counsel for the revenue and for the assessee relied upon various judicial pronouncements to support their arguments that the Tribunal is / is not empowered to stay prosecution.

9. It was also accepted a fact that, ITAT has the power to grant stay as incidental or ancillary to its appellate jurisdiction.

10. Counsels for the parties have fairly conceded that the Act does not empower the Tribunal to consider or entertain an appeal against the legality or validity of a prosecution launched under the Act.

Arguments of Revenue

11. The Tribunal is neither the appellate nor the revisional forum against a prosecution.

12. Issuance of notice for prosecution is an administrative act and no harm is made to the parties concerned.

Arguments of Assessee

13. The decision in the pending appeals would have a direct bearing on the consideration of the show cause notice and in case the appeals are allowed or the impugned orders are modified, the show cause notice would either be rendered infructuous or the matter would have to be re considered.

14. The assessee got a close miss where a judgement of Delhi HC had come to its help but distinguished by the HC.

The judgment by the Delhi High Court in The Commissioner of Income Tax (Central-II) v. Income Tax Appellate Tribunal and others, has to be read in the context of its own peculiar facts, namely, an order was passed under Section 263, restoring the assessment to the Assessing Officer, The assessee filed an appeal. The Income Tax Appellate Tribunal, stayed assessment proceedings. The order was upheld, by the Delhi High Court as assessment proceedings were intrinsically linked to and not severable from the legality of the order passed, under Section 263,namely, jurisdiction to re-open an assessment.

Judgement of Court-:

15. the Supreme Court in Income Tax Officer, Cannanore (supra) held as follows

Appellate Tribunal must be held to have the power to grant stay as incidental or ancillary to its appellate jurisdiction. This is particularly so when section 220(6) deal expressly with a situation when an appeal is pending before the Appellate Assistant Commissioner, but the Act is silent in that behalf when an appeal is pending before the Appellate Tribunal. It would well be said that when section 254 confers appellate jurisdiction, it impliedly grants the power of doing all such acts, or employing such means, as are essentially necessary to its execution and that the statutory power carries with it the duty in proper cases to make such orders for staying proceeding as willprevent the appeal if successful from be ingrendered nugatory.”

16. A perusal of the aforesaid judgment reveals that the power to grant stay was held to be inherent in Section 254, (as it existed before the power to grant stay was conferred),i.e., inherits a power to do all such acts or employ all such means, as are essential for the exercise of the power of appeal including the power to grant stay, in proper cases and to make such orders for staying proceeding to prevent the appeal, if successful being rendered nugatory.

17. A prayer for stay of prosecution or stay of the show cause would, therefore, have to be made by resort to other remedies provided under law and not by praying for a stay before the Tribunal.

18. It would also be appropriate to point out that the notice to show cause why prosecution be not initiated is a purely administrative act and it is only after consideration upon the notice and the reply reaches fruition, may the assessee seek his legal remedies in accordance with law.

Basis of conclusion -:

19. As a consequence of revision u/s 263 by CIT, a fresh assessment order was made on 19.09.2013, by adding Rs.81.59 crores, claimed on account of sales tax subsidy, Rs.1.40 crores claimed on account of Section 43B of the Act andRs.5,91,106/- on account of additional depreciation for computers.

20. The Assessing Officer had also initiated penalty proceedings under Section 271(1)(c) of the Act and eventually passed an order dated 28.11.2013, imposing penalty.

21. The revenue served a notice dated 26.12.2014, calling upon the assessee to show cause, why prosecution be not initiated, under Section 276C(1).

22. At that point, three matters were pending at ITAT level.

a) Validity of order u/s 263

b) the main quantum assessment and

c) the consequential penalty proceedings

23. The assessee made an application for stay of prosecution proceedings.

24. The application for stay, finally came up for hearing on23.03.2015, when the Tribunal granted a stay against initiation of prosecution.

25. A perusal of this order reveals that the Tribunal has recorded a finding that it is empowered by Section 254 of the Act to stay prosecution. The said finding is the bone of contention between the parties.

Case Analysed- Pr. Commissioner of Income Tax Vs. Income Tax Appellate Tribunal, Delhi Bench (Punjab & Haryana HIgh Court at Chandigarh),   Civil Writ Petition No.15239 of 2015, Date of Decision: 31st October, 2015

Link to Download Full Text of the Judgment

http://phhc.gov.in/pdf/fo/CWP_15239_2015_31_10_2015_FINAL_ORDER.pdf

CA Yogesh S. Limaye

Suggestions on Proposed New CARO for FY 2015-2016

Subject:          Suggestions on the Proposed New CARO for FY 2015-2016

Dear Members

The Ministry of Corporate Affairs recently constituted a Committee to formulate the Companies (Auditor’s Report) Order (CARO) to be issued under section 143(11) of the Companies Act, 2013.  This aforesaid Order is proposed to be made applicable for audit reports on the financial statements of the companies for the financial year 2015-16 and onwards.  The undersigned, as Chairman, of the Auditing and Assurance Standards Board, is representing the Institute of Chartered Accountants of India (ICAI) on this Committee.

The aforesaid Committee has requested the Auditing and Assurance Standards Board of ICAI to develop a draft of the proposed CARO for the consideration of the Committee.  With a view to ensure that the proposed CARO is a value add report for the managements, stakeholders as well as the relevant Government agencies, and at the same time adequately balances public interest vis a vis nature and scope of an audit of financial statements under the Standards on Auditing, we request you to kindly share with us your thoughts on what areas can be included for reporting under the CARO.

Kindly mail your valuable suggestions to us on aasb@icai.in by 3rd December 2015.

Regards

(CA ABHIJIT BANDYOPADHYAY)
Chairman, Auditing & Assurance Standards Board

ICAI Reply on not allowing CAs to practice Law in India

29-CA/Law/NDM-1134    Dated-27th November, 2015

To,

The Principal Chief Commissioner

Income Tax, Chandigarh

Sub: Only enrolled Advocates are licensed to practice Law in India- Not to allow Chartered Accountants/ Non- Advocates for practice of law in the course of proceedings before revenue authorities falling under the jurisdiction of Principal Commissioner of Income Tax and Commission of Income Tax, Amritsar, Jammu etc.

Dear Sir,

Recently, it has come to our knowledge that a proposal not allowing Chartered Accountants/ Non- Advocates for practice of law in the course of proceedings before revenue authorities falling in your jurisdiction is under consideration.

In this regard, although, comments have not been called for from the Institute of Chartered Accountants of India New Delhi, yet being the statutory body and regulator as well, we wish to bring the following facts for your consideration.

The Institute of Chartered Accountants of India, is a statutory body established by an Act of Parliament namely ‘The Chartered Accountants Act, 1949’ for regulating the profession of Chartered Accountants. We further, wish to inform you that a significant majority of our membership is in the practice with a good deal of specialisation in the traditional areas of direct/ indirect taxes and in emergent specialism inter alia, in financial services, information technology, insurance sector, joint ventures, mutual funds, exchange risk management, risk and assurance services, environment / energy/quality audits, investment counselling, corporate structuring and foreign collaborations etc.

The Institute of Chartered Accountants of India is also engaged in the Nation building by contributing to Central and various State Governments and other regulators viz, the Ministry of Corporate Affairs, Trade Policy division of the Ministry of Commerce and Industry, Central Board of Direct Taxes, Reserve Bank of India, Insurance Regulatory and Development Authority, Comptroller and Auditor General of India, Securities Exchange Board of India etc. to name a few, on the relevant matter of importance to the profession and having bearing to the public interest.

The education and training programme of the Institute to the qualification of Chartered Accountancy is adequately designed to ensure that our members have in depth knowledge/ experience of accounting, taxation, financing and audit etc. The Institute spares no efforts in keeping pace with the current accounting and auditing practices prevalent throughout the world. An individual who qualifies as a Chartered Accountant has to mandatorily undergo rigorous practical training and has to keep his knowledge updated in the matter relating to accountancy, audit, taxation and corporate laws etc. The area of training covers accountancy, auditing, taxation, company law and other laws. The level of knowledge prescribed in the various subjects covered by the syllabus of the Chartered Accountancy course is ‘expert knowledge’.

That Taxation including Indirect Taxes is one of the core-competence areas of Chartered Accountants. In India, Chartered Accountants have expertise in accounting, auditing and taxation, since these subjects are dealt with in great depth in the CA curriculum. Further, Taxation constitutes a significant area of practice of CAs. It is due to this reason the Institute has three separate dedicated committees on taxation, namely, Direct Taxes Committee, Indirect Taxes Committee and Committee on International Taxation. These committees are amongst the most important committees of the Institute and they act as a liaison between the Revenue and the tax payers. The Committees comprise of chartered accountant members of the Central Council, as well as other co-opted members, who are experts in the field of Taxation from across the country. Therefore, it is clear that a chartered accountant, on passing his final examination and completing his articled training, is an expert in taxation, accountancy, auditing, company law and other laws etc., and he is accordingly fully qualified to practice in these fields. Chartered Accountants are thus well trained in various laws which are applied while conducting cases before various tribunals and other similar authorities.

The provisions of Income tax Act involve computation and analysis of profit and loss account which directly relates to accounting procedure or the recording, presentation or certification of financial facts or data. Chartered Accountants being an expert in understanding and analyzing the financial statements are thus the right person for explaining the related facts in case of dispute.

For application of tax legislations, the prima facie documents are financial statements thus the government has given the task relating to financial statements appropriately to Chartered Accountants.

The matters before the Tax Authorities involve issues and questions mainly relating to accountancy and require knowledge and expertise in accounting matters. This is why many of the leading and most successful tax advocates are also qualified Chartered Accountants. The appearance of Chartered Accountants before tax authorities and tribunals has always been considered to be an integral part of the practice of a Chartered Accountancy ever since 1940s, when the Income Tax Appellate Tribunal was first set up and when Chartered Accountants began appearing before it.

It is necessary to note that the members of the Institute are thus well trained in the fields of various laws which are applied while conducting the cases before the various tax/revenue authorities. It is in recognition of that crucial fact the various applicable statutes specifically permit Chartered Accountants to appear before authorities and Tribunals constituted under those statutes. A few of such statutes are listed below:-

(a)         Section 288 of the Income Tax Act, 1961 read with Rule 50 of the Income Tax Rules, 1962

(b)         Section 35-Q of the Central Excise Act, 1944

(c)          Section 146-A of the Customs Act, 1962 read with Rule 9(a) of the Customs (Appeals) Rules, 1982

(d)         Section 15-V of the Securities and Exchange Board of India Act, 1992

(e)           Section 22(C) of the Securities Contracts (Regulation) Act, 1956

(f)            Section 17 of the Telecom Regulatory Authority of India Act, 1991

(g)          Section 432 of the Companies Act, 2013

(h)         Regulation 19 of the Company Law Board Regulations, 1991

(i)           Section 35 and Section 53 S of the Competition (Amendment) Act, 2007

(j)           Rule 61 of the Special Economic Zone Rules, 2006

(k)         Before the Central Electricity Regulatory Commission vide Notification No.8/(1)/99/CERC dated 27.8.1999

(l)            Airport Economic Regulatory Authority of India Act; in terms of section 30, CA can appear before Appelate Tribunal

(m)      The Foreign Exchange Management Act, 1999 — in terms of Sections 16 and 32

Needless to mention that the Institute, since its inception in the year of 1949, has always remained at the forefront in serving the nation by establishing sound financial prudence within the country.

Further, the Institute has a stringent code of conduct/Ethics which are required to be followed by its members. It is also pertinent to mention that the Chartered Accountants Act, 1949 provides the disciplinary mechanism for making investigation and taking disciplinary action in respect of any complaint/information of professional/other misconduct in respect of a member and/or levy of penalty of permanent removal of name from the register of members and/or levy of penalty up to Rupees Five Lakhs as well depending on the gravity of offence(s). Therefore, the Chartered Accountants are governed by the Chartered Accountants Act, 1949 and the Chartered Accountants Regulations 1988 framed there under and are subject to strict provisions of professional ethics and professional conduct and any deviation there from would make them liable for disciplinary action under the said Act. The ICAI has established a Peer Review Board to ensure compliance with technical standards, acceptance and adherence to quality control policies and procedures by Chartered Accountants firm in the services being rendered by them. Such reviews certainly boost the confidence of society at large in the quality of work of Chartered Accountants in India.

The term ‘practice of profession of law’ has not been defined under the Advocates Act, 1961. The appearance before the Authorities established under the Income-Tax Act does not amount to ‘practice of profession of law’. The Hon’ble Supreme Court in the case of C. Venkatachalam vs. Ajitkumar C. Shah & Ors. [6 (2011) 9 SCC 707], while considering the provisions of the Consumer Protection Act, 1986, upheld the judgment of the Division Bench of the Bombay High Court, whereby the Hon’ble High Court held that a party before the District Consumer Forum/State Commission cannot be compelled to engage the service of an advocate. The Hon’ble Supreme Court also observed that the High Court was fully justified in observing that the authorized agents do not practice law when they are permitted to appear before the District Forum and the State Commission. Further, the Hon’ble Supreme Court also approved the view taken by the High Court that many statutes, such as, Value Added Tax, Income Tax and Competition Act also permit non-advocates to represent the parties before the authorities and those non-advocates cannot be said to be practicing law.

A perusal of Section 33 of the Advocates Act, 1961 shows that it specifically contemplates and provides that the other statute in question may specifically permit persons other than Advocates to appear before Courts and Tribunals functioning under that statute. Such provisions are to be found in all Central as well as State Acts dealing with various direct and indirect taxes such as Income Tax, Excise Duty, Value Added tax, etc. The Hon’ble Supreme Court in R.D. Nagpal v. Vijay Dutt [(2011) 12 SCC 498] considered the provisions of the Consumer Protection Act, 1986. Rule 14(3) of the Consumer Protection Rules, 1987 allowed the parties or their agents to appear before the National Commission, and the expression ‘agent’ as defined in Section 2(b) of the said Act means a person duly authorised by a party to present any complaint, appeal or reply on its behalf before the National Commission. The Supreme Court held that given the wide definition of the expression ‘agent’, there was no reason, if the Commission were otherwise satisfied that a person was authorised on behalf of the appellant, to refuse to allow him to represent it and to cross examine the complainant. The provisions of Section 33 of the Advocates Act of 1961 came up for consideration and it was held as follows:-

The learned counsel appearing on behalf of the respondents has relied upon Section 33 of the Advocates Act, 1961. Section 33 makes it clear that advocates alone will be entitled to practice before any court or before any authority, etc. “except as otherwise provided in this Act or in any other law for the time being in force”. The Consumer Protection Act read with the Rules would be “a law for the time being in force”.
Recently, the Lucknow Bench of the Hon’ble High Court of Judicature at Allahabad, in case No. 7116 of 2014, Tax Lawyers Association, Lucknow Throu General Secry. & Anr. vs. State of U.P. Thru Prin. Secy. Tax & Registration, has passed an Order dated 06.08.2014 directing, inter alia, that any person, who is not a registered Advocate, shall not be permitted to appear before the Authority under the U.P. VAT Act. Further, the Hon’ble Bench of the Chief Justice of Lucknow Bench of the Allahabad High Court, after hearing the arguments in detail on 20th August, 2014, modified the above Order dated 6th August, 2014 vacating the stay and consequently, Chartered Accountants continue to be permitted to appear before the authorities under the VAT Act in the State of U.P. The Division Bench of the Hon’ble Chief Justice’s Court, in its Order dated 20.08.2014, observed that Section 29 of the Advocates Act, 1961 speaks of there being only one class of persons entitled to practice the profession of law, namely, advocates. Section 33 of the said Act contemplates that only a person who is enrolled as an advocate under the Act will be entitled to practice in any court or before any authority or person. The entitlement to practice under Section 33 of the Advocates Act, 1961 is obviously an entitlement to practice the profession of law but what is more important is that Section 33 recognises that any other provision of law and for that matter, the Act itself may authorize a person who is not enrolled as an advocate under it to practice in any court or before any authority or person. Consequently, there is no question of the ultra vires doctrine being attracted for the simple reason that Section 33 of the Act of 1961 contemplates that any other law may authorize a person who is not enrolled as an advocate under the Act to practice before any court, authority or person.

It is stated that the above matter is pending before the Lucknow Bench of the Hon’ble High Court of Judicature at Allahabad for final hearing.

The Statute only confers on lawyers the exclusive right to practice law. With the passage of time there are a lot of functions which are overlapping with the practice of law and such overlapping functions cannot confer the right on lawyers under the Advocates Act. Any such interpretation will stultify the growth and evolution of society and the rules of effective and expeditious dispute resolution. It is, therefore, of vital importance to note that Section 33 of the Advocates Act, 1961 itself specifically contemplates and provides that the other statute in question may specifically permit persons other than Advocates to appear before Courts and Tribunals functioning under that statute. Such provisions are to be found in all Central as well as State Acts dealing with various direct and indirect taxes such as Income tax, Excise duty, value added tax etc. Thus, the Income Tax Appellate Tribunal is constituted under the provisions of The Income Tax Act, 1961. Section 288 of the Income Tax Act, 1961 provides for appearance by ‘authorised representatives’ before any Income-tax Authority or the Income-tax Appellate Tribunal.

Moreover, the matters before the various tax/revenue authorities involving mainly issues and questions relating to Accountancy and require knowledge and expertise in accounting matters. Indeed, even if an advocate appears in such matters, he cannot present his case in the most effective manner without a good knowledge of accountancy. This is why many of the leading and most successful tax advocates are also qualified Chartered Accountants. The appearance of Chartered Accountants before tax authorities and tribunals has always been considered to be an integral part of the practice of a Chartered Accountancy ever since 1940s. As stated above, the Institute spares no efforts in keeping pace with the accounting practices prevalent and those evolving throughout the World. A person who qualifies as a Chartered Accountant is to undergo rigorous practical training spanning three years and has to keep his knowledge updated in the matters relating to accountancy and the applicable laws. In any event, it is entirely for the framers of the various enactments viz. Income Tax Act, 1961, the Companies Act, 2013 etc. to lay down who should be eligible to appear before the Tribunals and authorities constituted under each of these respective enactments. The Income Tax Act and the provisions contained therein as to who can appear in proceedings under those enactments are special provisions of law which would necessarily prevail over the general provisions contained in the Advocates Act.

Each legislation enacted by Parliament or by a State Legislature is an independent code by itself. Parliament and the State Legislature duly take into consideration the various issues involved and incorporate the requirements into the respective legislations. Therefore, to re-write such provisions so as to provide that the appearance by other professionals is for a limited purpose only is totally unwarranted.

That law is a dynamic subject and the growth of trade and commerce and the requirements of revenues of Governments have resulted in the emergence of specialized legislations like the Income-tax Act, the Central Excise Act, 1944 and the Customs Act, 1956 and other various State-Level VAT Legislations. The Constitution of India itself has recognized the importance of the specialized fields of such legislations and has expressly provided for the creation of specialized tribunals which take care of such specialized fields of law. Parliament in its wisdom, while enacting aforesaid legislations have considered all the relevant issues before incorporating the provisions relating to authorized representatives These legislations specifically allowed professionals other than advocates to be authorized representatives. This clearly amplifies the point that the legislature is fully conscious of the requirements of the particular specialized legislation. The purpose of establishing various Tribunals is to decide issue on a particular subject by experts in that field and in that direction, specialized Tribunals have been created by the various statutes. If the Chartered Accountants, who for reasons of rigorous practical training and examinations, have acquired expertise in accounting and taxation laws, were not to be allowed to appear before such specialized authorities/Tribunals, the very purpose of establishment of such Tribunals would get defeated. Besides, such restrictions will limit the choice afforded to the affected persons by the statutes to choose their representative.

In the matter of Rajkot Engineering Association and Ors. And Tax Advocates Association and Ors. v. Union of India MANU/GJ/001 9/1986 the Gujarat High Court held as follows:

“There is no restriction on the right of the assessees to select as their own authorised representatives whomever they like whether the same chartered accountants who have carried out the tax audit or other chartered accountants or other Income Tax practitioners….

In the present state of Income Tax law, the interpretation and development of which has become very intricate and complex, it is not difficult to anticipate that a situation has arisen where more and more assessees would like to be assisted both by the chartered accountants as well Income Tax consultants and practitioners who may be non-chartered accountants in arranging their financial affairs and in the maintenance of their accounts, records and documents for preparation of the returns and in the course of assessment before tax authorities.”

In the above backdrop we are of the view that it would not be appropriate to consider any such proposal which restrains the Chartered Accountants from appearing before the revenue authorities in India particularly when various Central/State legislations including the Income Tax Act, 1961 expressly provide and authorise the Chartered Accountants to appear and represent the cases before the authorities under the Income Tax Act, 1961. Further, we may request you to consider our submissions as above and afford us an opportunity to present our case in person before taking any final decision in this regard. In case your good office needs any further clarifications, we may please be advised.

Thanking you,

Yours faithfully,

(V. Sagar)

http://resource.cdn.icai.org/40016legal281115pccrep.pdf

Import of Goods into India – Evidence of Import

RBI/2015-16/248
A.P. (DIR Series) Circular No. 29

To,
All Authorised Dealer Category – I Banks

Madam/ Sir

Import of Goods into India – Evidence of Import

Attention of the Authorised Dealers is invited to para A.10.1 of A.P. (DIR Series) Circular No. 106 dated June 19, 2003 in terms of which an importer has to submit as evidence of import, (a) the exchange control copy of the Bill of Entry for home consumption; (b) the exchange control copy of the Bill of Entry for warehousing, in the case of 100% Export Oriented Units (EOUs); or (c) Customs Assessment Certificate or Postal Appraisal Form as declared by the importer to the Customs Authorities.

2. With the establishment of Free Trade Warehousing Zones / SEZ Unit warehouses, imported goods can be stored therein, for re-export / re-selling purposes for which Customs Authorities issue Ex-Bond Bill of Entry. AD banks are advised to consider the Bill of Entry issued by Customs Authorities named as Ex-Bond Bill of Entry or by any other similar nomenclature, as evidence for physical import of goods.

3. Further, in cases where goods have been imported through couriers, the Courier Bill of Entry, as declared by the courier companies to the Customs Authorities, may also be considered as evidence of import of goods.

4. Authorised Dealers may bring the contents of this circular to the notice of their constituents concerned.

5. The directions contained in this circular have been issued under section 10(4) and 11(1) of the FEMA, 1999 (42 of 1999) and are without prejudice to permissions/ approvals, if any, required under any other law.

Yours faithfully,

(A K Pandey)
Chief General Manager

RBI permits FPI to acquire NCDs/bonds, which are under default

RBI/2015-16/253
A.P. (DIR Series) Circular No.31

All Authorised Persons

Madam/ Sir,

Attention of Authorized Dealer Category-I (AD Category-I) banks is invited to Schedule 5 to the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2000 notified vide Notification No. FEMA.20/2000- RB dated May 3, 2000, as amended from time to time and to A.P. (DIR Series) Circular No. 71 dated February 3, 2015 and A. P. (DIR Series) Circular No.73 dated February 6, 2015 in terms of which all future investments by Foreign Portfolio Investors (FPI) in NCDs/bonds shall be required to be made in securities with a minimum residual maturity of three years.

2. On a review, it has been decided to permit FPI to acquire NCDs/bonds, which are under default, either fully or partly, in the repayment of principal on maturity or principal installment in the case of amortising bond. The revised maturity period of such NCDs/bonds, restructured based on negotiations with the issuing Indian company, should be three years or more.

3. The FPI which propose to acquire such NCDs/bonds under default should disclose to the Debenture Trustees the terms of their offer to the existing debenture holders / beneficial owners from whom they are acquiring. Such investment should be within the overall limit prescribed for corporate debt from time to time (currently Rs. 2443.23 billion). All other existing conditions for investment by FPIs in the debt market remain unchanged.

4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions/approvals, if any, required under any other law. AD Category – I banks may bring the contents of this circular to the notice of their constituents and customers concerned.

Yours faithfully,

(R.Subramanian)
Chief General Manager

Gain on Sale of Shares cannot be treated as business income for Mere Sale of Share in Short Span of time

Hema Hiren Dand vs. JCIT (ITAT Mumbai), ITA No.3469/Mum/2012, Date of Pronouncement : 18/02/2015

on the case laws referred to by lower authorities in their respective orders. The question as to whether the assessee has earned capital gain or business profits on the shares sold by him depend on the facts and circumstances of each case. Such decision is to be arrived at by taking into account the intention of the assessee while purchasing the shares, as to whether the same was acquired for holding as investment or for doing business therein. The treatment given by the assessee in its books of account is also one of the decisive factors to find out whether the shares were held as investment or stock in trade. If the shares are bought with the intention of earning capital gains thereon and also dividend income by keeping the same as investment, the gain arising there from is required to be treated as capital gains.

On the other hand, if the shares are purchased with the intention to earn profit thereon and the same is treated as stock in trade in the books of account, the profit arising out of sale of such shares are liable to be treated as business income. Volume and frequency of transaction is also one of the guiding factors to find out whether the assessee is engaged in the business of purchase and sale of shares or making investment to have capital gains thereon. In the instant cases before us, we found that the assessee has invested in shares of Indian Companies since last 5-6 years, which is clear from the statement of shareholding of the assessee. Thus, the fact of the assessee investing in shares for the last several years is not in dispute. There is also no dispute to the fact that the assessee has treated the equity shares of Indian Companies as investment i.e. capital asset all along. The assessee has also taken the shares at cost of acquisition thus given a particular treatment to the shares held as investment, therefore, without brining on record contrary material, the AO cannot change the intention and manner of investment being made by the assessee. Had the assessee valued the shares at cost or market price whichever is lower, the gain arising out of sale of shares could easily be treated as business income. Assessee had not valued the shares as stock but valued the same as investment. Thus, what was a capital asset will remain a capital asset unless a person holding the asset himself changes the nature by a specific action like conversion of capital asset into stock in trade. In the instant cases before us, the assessee has not treated the investment in equity shares of Indian Companies as stock in trade. In view of the decision of Hon’ble Supreme Court in the case of Ram Kumar Agarwal & Brothers, 205 ITR 251, the AO was not justified in treating the capital gain earned from sale of these shares, as business profits, which were entered by the assessee as investment in books of account. There is also no dispute to the well settled legal proposition that principle of res judicata do not strictly apply to the income tax proceedings, but at the very same time, it is well settled that principle of consistency under the same facts and circumstances is the fundamental of judicial principle, which cannot be brushed aside without proper reasoning. In this regard, reliance can be placed on the decision in case of S.M.K. Shares and Stock Broking Private Limited, I.T.A. No. 799/Mum/09 order dated 24.11.2010. In this proposition, the decision of Hon’ble Supreme Court in the case of Gopal Purohit, 228 CTR 582, is very much relevant and important.

Merely because the assessee liquidates its investment within a short span of time, which had given better overall earning to the assessee, would not lead to the conclusion that the assessee had no intention to keep on the funds as investor in equity shares, but was actually intended to trade in shares.

Here, it is pertinent to mention the intention of Government for introducing the security transaction tax and exempt the long term capital gain earned from sale of shares and levying 10 % tax on short term capital gain and earned on sale of shares. It is noted that under the old provisions of the Income-tax Act, profits or gains arising to an investor from the transfer of securities were charged to tax either as long term capital gains or short term capital gains depending on the period of holding of the said securities; Short-term capital gains arising from transfer of securities were taxed at the applicable rates (normal rate) and Long-term capital gains were taxed @ 20%, after adjusting for inflation by indexing the cost of acquisition. For listed securities, the taxpayer had an option to pay tax on long-term capital gains @ 10% but without For Foreign Institutional Investors (FIIs), the long-term capital gains and short-term capital gains were taxed at the rate of 10% (without indexation) and 30% respectively. In case of a trader in securities, however, the gains were taxed as any other normal business income. Thus tax liability on the income from purchase & sale of shares as regards to the STCG & business income was at par. However, the issue of treatment of income from share transaction as capital gain or business income has in-fact arisen after the amendment brought with Finance Act – 2004 by insertion of provisions of section 111A and 10(38) as regards to levy of Transaction tax and exemption / concession on capital gain arising from securities entered in a recognized stock exchange. With a view to simplify the tax regime on securities transactions, a tax at the rate of 0.015 per cent. (see: change in rates on securities transactions, by Finance Acts, at appropriate head) is levied on the value of all the transactions of purchase of securities that take place in a recognized stock exchange in India. This tax is collected by the stock exchange from the purchaser of such securities and paid to the exchequer. The provisions relating to the securities transactions tax are contained in Chapter VII of the Finance (No.2) Bill, 2004, and came into effect from 01.10.2004. Further, clause (38) has been inserted in section 10 of the Income-tax Act, so as to provide exemption from long-term capital gains arising out of securities sold on the stock exchange. A new section 11 1A has also been inserted and section l15AD is amended, so as to provide that short-term capital gains arising from sale of such securities to an investor including FIIs shall be charged at the rate of ten per cent. These amendments apply to assessment year 2005-2006 and subsequent years. Through Finance Act, 2008, sections 11 1A and 1 15AD have further been amended whereby the rate of tax on such short-term capital gain has been raised to fifteen percent. Thus, w.e.f. 01.10.2004; on the share transactions subjected to STT; concessional tax rate of 10% (which has been increased to 15% from AY 2009-10) are applicable in respect of STCG whereas no tax is chargeable in respect of LTCG. It is also noted that the CBDT vide its Circular no.4/2007, dated 15.06.2007 has also recognized possibility of two portfolios, i.e. one ‘Investment portfolio’ comprising of securities which are to be treated as capital assets and the other ‘Trading portfolio’ comprising of stock in trade which are to be treated as trading assets. In view of these facts, profit arose on shares in respect of delivery based transaction are liable to be taxed as capital gain and not as business income.

Analysis of balance sheet of assessee reflects of holding of shares as investment. In the case of Gopal Purohit, 228 CTR 528 (Bom), SLP was filed by the Department against the decision of Bombay High Court and the same was dismissed by Hon’ble Apex Court vide order dated 11.2010. In the speech by Hon’ble Finance Minister regarding Direct Tax Cases (Union Budget – 2004-05), especially clause 111, the intention of Government for introducing the security transaction tax and exempting the long term capital gain or from sale of share and levying 10% tax on short term capital gain or from sale of shares also supports the case of assessee. The idea behind introduction of security transaction tax is to end the litigation on the issue, whether the profit earned from delivery based sale of shares is capital gains for business profit.

Even the Hon’ble Apex Court in the case of K.P. Verghese vs TO, 131 ITR 597 (SC) observed as under:-

“”The task of interpretation of a statutory enactment is not mechanical task. It is more than a mere reading of mathematical formulae because few word possesses the precision of mathematical symbols. It is an attempt to discover the intent of the legislature from the language used by it and it must always be remembered that language is at best an imperfect instrument for the expression of human thought and, as pointed out by Lord Denning, it would be idle to expect every statutory provisions to be „drafted with divine prescience and perfect clarity.‟ We can do better than repeat the famous words of judge Learned Hand when he said.‟

The above observations of Hon’ble Judges of the Apex Court was reiterated by Hon’ble Apex Court in the case of Kerala State Industrial Corporation, 259 ITR 51 (SC) holding as under:-

‟That the Finance Minister‟s Speech can be relied upon to throw light on the object and purpose of the particular provisions introduction by the Finance Bill has been recognized by this Court in K.P. Verghese – vs ITO 1981), 131 ITR 597 (SC), at 609. Again in the case of R & B Falcon (A) Pvt. Ltd vs CIT (2008) 301 ITR 309 (SC), it was held that (Page 323):-

Rules of executive construction in a situation of this nature may also be applied. Where a representation is made by the makers of legislation at the time of introduction of Bill or construction thereupon is put by the executive upon its coming into force, the carries great weight.‟

The Hon’ble Delhi High Court in ARJ Security Printers, 264 ITR 276 and Neo Pollypack Pvt Ltd. 245 ITR 492 (Del.) held that even when the doctrine of res judicata does not apply to income tax proceedings, where a issue has been decided consistently in earlier assessment years in particular manner, the same view should prevail in subsequent years unless there is a material change in facts, meaning thereby, there must be material change in the facts.

The Indore Bench of the Tribunal in the case of ACIT vs Om Prakash Suri (supra) held as under:-

“3. We have considered the submissions put forth by the learned Senior DR and also perused the material available on record. Brief facts are that in the past the assessee was engaged in road building contractor and was deriving income from contract receipts as well as from sale of gitti and during the impugned year, ventured into investment in share market. The income arising from F&O transactions and daily trading in shares (without physical delivery) reflected as speculative business whereas the income on delivery based transactions of sale and purchase of shares, income was shown from capital gains. The learned AO considered the income which was based on purchase and sale of shares as business income on the grounds as narrated in the assessment order as well as at pages 3 and 4 of the appellate order. Broadly, the learned AO was of the view that the intention of the assessee since beginning was sale of shares as trading activities, as evident from audited profit and loss account by not showing the same as short term capital gain and also in Form 3CD the assessee has mentioned the nature of business as trading/dealing in shares/securities and mutual funds. The frequency of transactions was also considered, consequently he treated the amount of Rs.49,81,915/- as business income from share trading. However, before the learned Commissioner of Income Tax (Appeals) the basis of additions was explained as evident from para 3.1.1 onwards. The crux of claim of the assessee is that in the audited accounts, the sale of shares amounting to Rs. 9.43 crores in which delivery had been taken, STT was paid and the shares were sold after holding for a few days/few weeks. The mutual funds of Rs. 2.91 lacs were sold and were treated as income from short term capital gains. Before the learned Commissioner of Income Tax (Appeals) the assessee also filed a detailed note on the purchase process for delivery base shares, details of dividend received on the basis of relevant statements by placing reliance on the decision of the Mumbai Bench of the Tribunal in the case of JM Shares & Stock Brokers v. JCIT dated January, 2009. Briefly, the claim of the assessee before the learned Commissioner of Income Tax (Appeals) was that the delivery based transactions were made with an investment motive and as such the income therefrom was in the nature of short term capital gains whereas the income arose from F&O transactions and daily trading in shares were with the business motive which were showed as business income only which was mainly through stock broker, Arihant Capital Markets Limited, registered with NSC, NSE and BSE. It is also seen that in the impugned order the board circular no. 4/2007 dated 15.6.2007 wherein it was emphasized that it is possible for a tax payer to have two port folios i.e. an investment port folio comprising of securities which are to be treated as capital asset and trading port folio comprising stock in trade which are to be treated as trading asset, was considered. The Board further clarifies that no single principle would be decisive and the total proposition needs to be considered. The assessee has maintained only one port folio and claimed that to be an investment folio. Undisputedly, the period of holding is less than one year, consequently, there is no infirmity in holding that these transactions would be treated as short term capital gain on which the applicable tax is @ 10% only. In view of this uncontroverted fact, there is no merit in the appeal of the revenue and the same is dismissed.

The aforesaid decision was affirmed by the Hon’ble Madhya Pradesh High Court reported in (2012) 19 ITJ 326 M.P. The Mumbai Bench of the Tribunal in the case of Shantilal M Jain vs ACIT vide order dated 27-04-2011 (ITA No. 269/Mum/201 0) held that despite large volume of shares transactions, the Assessing Officer cannot ignore the rule of consistency to treat the gains on sale of shares as STCG. In that case, the assessee was engaged in the business of trading of investment in shares and securities offered Rs. 1.54 crores as short term capital gain and Rs. 2.91 crores from long term capital gain. The long term capital gain was accepted whereas short term capital gain was held to be business profit. Since in earlier assessment years the claim of the assessee was consistently accepted as short term capital gain, it was held that the rule of consistency as propounded by Hon’ble Bombay High Court in the case of Gopal Purohit (supra), it is fairly applicable and the income has to be treated as short term capital gain. Identically in the case of Nagindas P Seth (ITA No.961/Mum/2010) it was held that despite large number of transactions in shares, the profit can be assessed as capital gains under the facts of the case. The case of the assessee is further fortified by these decisions more specifically when the assessee was hold the shares in his books as investor, as well as tock-in-trade separately. The decision in the case of Janak S Ranawala, 11 SOT 627 (Mum.) further supports the case of the assessee. Likewise, the decision from Hon’ble Madras High Court in CIT vs N.S.S. Investment Pvt Ltd. 227 ITR 149 (Mad), CIT vs. Associated Industrial Development Company, 82 ITR 526 (SC) supports the case of the assessee. In the  present appeal, we note that the assessee made investment in shares with intention to earn dividend income on appreciation of price of shares. Therefore, it cannot be said that the assessee was doing business. If the conclusion drawn in the impugned order, observations made from the assessment order, assertions made by respective counsel and the material available on record are kept in juxtaposition and analyzed, we find that the assessee had been consistently investing in shares and income arising from delivery based transaction of sale and purchase of shares was correctly shown as capital gains i.e. LTCG and STCG depending upon period of holding.

In view of the above discussion, we do not find any merit for treating the capital gains offered by the assessee as business income.

Direct Link to Download Full Text of the Judgment

http://www.itatonline.in:8080/itat/upload/251601174958390129613$5%5E1REFNOita4164.12.pdf

Reassessment proceeding based on ED information without correlating with returns filed is invalid

Commissioner of Income Tax Vs. M/s. Indo Arab Air Services (Delhi High Court), I.T.A. No. 292/2015, Date of Order: 20.10.2015

AO set out the information received from the ED, he failed to examine if that information provided the vital link to form the ‘reason to believe’ that income of the Assessee had escaped assessment for the AY in question. While the AO has referred to the fact that the ED gave information regarding cash deposits being found in the books of the Assessee, the AO did not state that he examined  the returns filed by the Assessee for the said AY and detected that the said cash deposits were not reflected in the returns.

In fact, the AO contradicted himself in the reasons recorded by him by noticing the information of the ED to the above effect and then stating that on perusal of the records for the AY in question it was noticed that the Assessee “had not disclosed these transactions in its books of accounts.”Further the AO refers to the ED’s information that Mr. Chetan Gupta, partner of the Assessee, failed to explain the sources of the cash deposits as shown in the books of accounts. However, that by itself could not have led the AO to even prima facie conclude that income of the Assessee had escaped assessment. The explanation or the lack of it of the entries in the books of accounts may have certain relevance as far as ED is concerned but that by itself does not provide the vital link for concluding that for the purposes of the Act any part of cash deposits constituted income that had escaped assessment. There is a long distance to travel between a suspicion that income had escaped assessment and forming reasons to believe that income had escaped assessment. While the law does not require the AO to form a definite opinion by conducting any detailed investigation regarding the escapement of income from assessment, it certainly does require him to form a prima facie opinion based on tangible material which provides the nexus or the link to having reason to believe that income has escaped assessment.

It is in this context that the Court finds that the decision in Mitsui & Company India (F) Ltd. v. Income Tax Officer (2012) 26 Taxmann.com 1, on which considerable reliance was placed by Mr. Kamal Sawhney, is distinguishable on facts. The nature of the information provided by the governmental agency in that case did not itself refer to any amounts or entries in the books of accounts of the Assessee. In the present case, however, the information received from the ED makes a reference to what was found in the books of accounts of the Assessee.

The next question that had to be examined by the AO was whether what was disclosed in the books of accounts was also disclosed in the returns filed by the Assessees. If it was not disclosed, then possibly the AO could have reasons to believe that the cash deposits reflected in the books of accounts may have escaped assessment. However, no effort appears to have been made by the AO to examine the returns filed by the Assessee in either of these cases.

As far as RL Travels is concerned, the further information concerning payments made to third parties, which were unable to be verified by the ED, also required to be assessed by the AO by examining the returns filed to discern whether the said transaction was duly disclosed by the Assessee. It is the treatment of the entries in the books of accounts in the returns filed by the Assessee that would be determinative of whether in fact there was any concealment of relevant information or whether any income had in fact escaped assessment.

With the AO in either of these cases not having adopted that approach, it could not be said that the jurisdictional requirement of the AO having to form reasons to believe on the basis of some tangible material that income had escaped assessment was fulfilled.

Consequently, the Court finds no error having been committed by the ITAT in the impugned orders in coming to the conclusion that the reopening of the assessments was bad in law. This is consistent with the settled legal position as noticed hereinbefore.

How should you invest your short-term stipend?

Deepika Benegal is a fresh engineering graduate employed as a trainee in a large firm. She intends working for two to three years and then pursuing a masters' degree. She is keen to save some money for her higher education. However, she is not sure if this is the right time to invest in the equity market. Her parents have advised her to buy gold and take an education loan to fund her higher studies. What should be her investment plan?
Deepika needs to first consider her saving potential. Being a young earner, there will be several indulgences she would want to spend her salary on. She will have to figure out how her money can be divided between mandatory expenses such as rents, bills and travel and discretionary expenses such as entertainment, eating out and tourism.

She should control mandatory expenses by making informed choices on rent and commute. She should place a cap on her discretionary spending and limit them to say 20% of her salary. It is only after such discipline that she will be able to save regularly. The dilemma for Deepika is that she needs her investments to grow in value to meet her needs, but cannot give them the time to perform.

If she chooses equity, she runs the risk of equity markets turning bearish even as she is invested, or falling in value when she needs the money. The same is true for gold too. Traditional investments such as bank deposits will earn a low return. What might work for Deepika are hybrid investment choices, such as balanced funds, dynamic funds or debt funds with some equity. These are funds with a mix of equity and debt investments.

They will give her some equity exposure, but also protect her from risks with the debt exposure. Higher the equity component, higher the return potential, but higher the risk. Deepika should choose based on her risk appetite. The convenient thing about mutual funds is that she can begin a folio with Rs 5,000 or less, and keep adding to it as and when she saves money.

Source : ET wealth

RBI to Fine Tune Gold Monetisation Scheme

he RBI is set to "fine tune" the Gold Monetisation scheme as the initial response to the scheme has been lukewarm.
"We need some fine tuning (Gold monetisation scheme)," RBI Governor Raghuram Rajan told reporters here.

Till November 18, the gold monetisation scheme had garnered 400 grams of physical gold. The country has over 20,000 tonnes worth over Rs 52 lakh crore of idle gold with households and institutions.

Gems and jewellery industry representatives last week met Economic Affairs Secretary Shaktikanta Das and discussed ways to make the scheme attractive.

The industry associations urged the government to allow BIS certified jewellers to act as collection agent for gold monetisation scheme and the Finance Ministry had given an in-principle nod to the suggestion.

At present, there are 3.5 lakh jewellers in the country, of which 13,000 are BIS-certified.

With regard to Sovereign gold bond, the Governor said "response to the scheme has been good and encouraging".

As many as 63,000 application totalling Rs 246 crore has been received under the first tranche of Gold Bond scheme which closed on November 20. The allotment of bonds will happen on November 30.

"This is an excellent response for an innovative product," Shaktikanta Das tweeted on Friday.

Source : NDTV

Sebi Issues Format for Financial Results Disclosure

Capital markets regulator Sebi on Friday issued a format for companies, which have listed their debt securities and non-cumulative redeemable preference shares on the exchanges, for disclosing financial results.
The listed companies need to submit the half yearly financial results, year-to-date figures details for the current fiscal along with comparative figures for the year ago period. All figures should be in lakh.

Under the format, firms will have to disclose about net sales, net profit, expenditures, exceptional items, paid-up capital, earnings per share, among others.

Apart from these disclosure, banks and NBFCs will have to make submission about non-performing assets (NPA) and capital adequacy ratios.

"In order to enable investors make well-informed investment decisions, timely, adequate and accurate disclosure of financial results on a periodical basis is critical," Securities and Exchange Board of India (Sebi) said in a circular.

"At the same time, to ensure comparability, uniformity and parity in disclosures made by listed entities across stock exchanges, is essential," it added.

Source : NDTV

Sebi to introduce investment cap for debt MFs

The Securities and Exchange Board of India (Sebi) is likely to introduce a sectoral cap and a single-company exposure limit for investments in corporate bonds by fixed income mutual fund (MF) schemes to mitigate excessive credit risks and prevent investors from losing money if the underlying bond turns illiquid.

“We are working on investment exposure norms for mutual funds. There could be some sort of sectoral cap or single-company investment limit (in terms of bonds). The new norms will be announced soon,” U.K. Sinha, chairman, Sebi, said on Friday on the sidelines of an event.

The move, indicated by Sinha, aims to prevent crises such as the recent one in two fixed income schemes under JP Morgan Asset Management (India) Pvt. Ltd.

At present, a mutual fund scheme can invest up to 15% in debt papers issued by a single company.

Referring to the JPMorgan crisis, which followed a rating downgrade in its underlying bonds and a consequent erosion in the net asset values of the schemes, Sinha said the mutual fund industry was possibly not careful while managing debt schemes and there are certain areas in credit rating norms that need to be addressed.

“Mutual funds did not exercise adequate caution while investing,” Sinha said. Also, Sinha said credit rating agencies cannot suddenly suspend ratings of a company’s bonds without appropriate and prior intimation. He urged more clarity and better disclosures on the ratings rationale.

“One day, the credit rating agency maintains a high investment grade for a given paper, and suddenly the rating is downgraded. Is it because the company didn’t pay the credit rating agency or is it something more serious? Such processes need to be more streamlined and rating agencies must enable investors to take informed investment decisions,” Sinha said.

Earlier in October, the capital market regulator had asked asset management companies (AMCs) to stop depending entirely on credit rating agencies to assess corporate bond investments in their portfolios.

At a meeting between officials of Sebi and lobby group Association of Mutual Funds in India, the regulator asked MFs to develop internal credit appraisal systems to reduce the reliance on rating agencies, according to an October report in Mint.

Rating agencies have been criticized for sharp and sudden downgrades of corporate debt, which led to a hit on the fixed income portfolio of MFs. For instance, a downgrade of Amtek Auto Ltd bonds led to a redemption crisis at JPMorgan AMC.

Following such instances, the market watchdog warned AMCs to avoid taking undue credit risks by investing in debt papers of companies that are saddled with loans and could face potential rating downgrades.

Fixed income securities worth Rs.4,000 crore held by AMCs at the end of July were downgraded, according to data shared by Sebi with AMCs in October. In August end, this number went up sharply to Rs.13,000 crore, showed Sebi data.

There were 44 MF houses in India managing assets worth Rs.13.24 trillion at the end of October. The assets of credit opportunities funds, which face the maximum risk from downgrades to corporate bonds, stood at Rs.67,622 crore at the end of August, according to Crisil Ltd, a rating agency.

In September, Sebi had asked AMCs to explain the rationale behind their corporate bond investments, as it sought to avoid a redemption crisis similar to the one faced by JPMorgan AMC. Two schemes of the fund were hit because of a Rs.193 crore exposure to bonds of Amtek Auto, which were downgraded by rating agencies because of the company’s deteriorating financial situation.

The AMC was forced to restrict redemptions from the two schemes. However, last week JPMorgan split units in these schemes into two: one for Amtek Auto securities, the other for all its other investments.

Source : Livemint

Merely because assessment order of AO is Brief & Cryptic it cannot be considered as erroneous & prejudicial to revenue interest

Citation of the case:– M/s. Ved Parkash Contractors Vs CIT (ITAT Chandigarh), ITA No. 573/Chd/2015, Date of decision: 03-11-2015.

Brief of the case:

ITAT Chandigarh held in M/s. Ved Parkash Contractors Vs CIT that if the AO had passed brief and cryptic assessment order but had checked and verified all the related documents submitted by the assesse in reply to the questionnaire of the AO, which contains all the questions raised by CIT, which was found correct and genuine in the eyes of AO so it could not be said that the order passed by the AO was erroneous and prejudicial to the interest of revenue simply because in his order he did not make any elaborate discussion in that regard.

ITAT also held that the submission of partnership deed was not mandatory at the time of filing of return and could be filed at any time before the completion of assessment.

Facts of the case:

On an examination of the assessment record of the assessee for the assessment year under consideration, the CIT observed that the assessment order dated 20.01.2013 passed in this case u/s 143(3) of the Act was erroneous and in as much as it was prejudicial to the interest of Revenue. The Ld. Commissioner issued a notice to the assessee u/s 263 of the Act listing eight issues in respect to which it was found that the assessment order was erroneous and prejudicial to the interest of Revenue. In response to the aforesaid notice, the assessee contended that all the queries raised in the show cause notice had been looked into by the Assessing officer while framing the assessment order and the Assessing officer was fully satisfied with the record produced before him and the content ion put for the before him by the assessee with regard to the points raised by the Ld.Commissioner. The next contention of the assessee was that it was the prerogative of the Assessing officer to make entries in the noting sheet of the record he verified and it was also his preoperative to write the wording of the assessment order as per his choice, but this did not mean that the Assessing officer did not verify the points raised in the show cause notice merely because the order of the Assessing officer was crypt ic would not be a sufficient reason to brand the assessment order as erroneous and prejudicial to the interest of Revenue.

Contention of the assessee:

Assessee was of the view that as AO was fully satisfied with the records produced before him. Moreover it had submitted full details of the closing stock shown in the balance sheet on which AO agreed and also the assesse had submitted the details of the land which the assesse purchased was used for the business purpose during the year. It was the also AO’s preoperative to write the wording of the assessment order as per his choice, but this did not mean that the Assessing officer did not verify the points raised in the show cause notice merely because the order of the Assessing officer was cryptic would not be a sufficient reason to brand the assessment order as erroneous and prejudicial to the interest of Revenue.

Further it was well settled law that writing an order in details may be a legal requirement but the order not fulfilling this requirements could not be said to be erroneous and prejudicial to the interest of Revenue. It was apparent from the records that the assessee submitted it reply and also furnished the requisite information or details to substantiate its claim during the assessment proceedings. The Assessing officer had considered all these issues on which the assessment order was revised u/s 263, the exercise of powers u/s 263 was bad in law.

In case of submission of revised partnership deed assesse was of the view that the partnership deed could be submitted at any time before the completion of assessment.

Contention of the revenue:

Revenue was of the view that the in some of the cases AO had neither examined the issue nor applied his mind while doing the assessment and took view contrary to the law. Therefore the order was erroneous and prejudicial to the interest of revenue. Therefore the closing stock of the assesse was understated by Rs 5,95,970/- which was not checked by the AO So, CIT made an addition of Rs 5,95,970/- and also disallowed the interest paid on the loan taken to purchase the land because it was of the view that it was for the personal purpose because AO had never mentioned about the same in his assessment order.

CIT also made addition of the interest and salary given to the partners because of the view that the assesse had not submitted the revised partnership deed while filing of return.

Held by ITAT:

ITAT held that as the assesse had furnished all the details related with closing stock which CIT was considering understated. As AO had verified all the details of closing stock and considered the same to be correct so CIT could not consider the same to be erroneous and prejudicial to the interest of revenue simply because that the order of AO was brief and cryptic and had not made any elaborate discussion in that regard.

It was also true that if an enquiry was made by the Assessing officer and then objection of the CIT was that such inquiry was not adequate, the CIT would have no jurisdiction u/shttp://www.itatonline.in:8080/itat/upload/-625839831063229514113$5%5E1REFNO573-c-15-ved_parkash_contractors.pdf 263 of the Act to revise the order of the Assessing officer.

Secondly as the assesse had presented the partnership deed before the AO before the completion of assessment which was accepted by AO so, CIT was wrong in disallowing the salary and interest paid to the partners.

Appeal of the assesse was allowed.

Direct link to download the full text of the above judgment

http://www.itatonline.in:8080/itat/upload/-625839831063229514113$5%5E1REFNO573-c-15-ved_parkash_contractors.pdf

Rishabh Mehra

Format for financial results for listed entities which have listed their debt securities and/or non-cumulative redeemable preference shares

Securities and Exchange Board of India

CIRCULAR No. CIR/IMD/DF1/9/2015

All Listed Entities

All the Recognized Stock Exchanges

Dear Sir/Madam,

Sub: Format for financial results for listed entities which have listed their debt securities and/or non-cumulative redeemable preference shares

1. In order to enable investors to make well-informed investment decisions, timely, adequate and accurate disclosure of financial results on a periodical basis is critical. At the same time, to ensure comparability, uniformity and parity in disclosures made by listed entities across stock exchanges, is essential.

2. Towards this end, Regulations 52 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “the Listing Regulations, 2015”), has prescribed various disclosures to be filed under various provisions contained therein, in the formats as may be specified by the Board.

3. Formats:

a) The half yearly financial results shall be presented in the format prescribed at Annexure I for companies other than banks and Non-Banking Financial Companies (NBFCs)

b) The half yearly financial results shall be presented in the format prescribed at Annexure II for Banks and NBFCs.

c) Manufacturing, trading and service companies, which have followed functional (secondary) classification of expenditure in the annual profit and loss account published in the most recent annual report or which proposed to follow such classification for the current financial year may furnish the half-yearly financial results in the alternative format given in Annexure III (i.e. alternative format) . However it may be noted that the alternative format can be used only if such format is used consistently from the first half-year of the financial year.

d) The limited review report shall be presented in the format prescribed at Annexure IV for companies other than banks and NBFCs

e) The limited review report shall be presented in the format prescribed at Annexure V for Banks and NBFCs.

f) Annual audited financial results shall be in the format as is applicable to half yearly financial results.

4. Regulation 52(3)(a) prescribes that the listed entity shall submit audit financial results along with and either Form A (for audit report with unmodified opinion) or Form B (for audit report with modified opinion). The Listed Entity shall submit form A or form B in formats as prescribed under regulation 33(4) of Listing

5. The Stock Exchanges are advised to bring the provisions of this circular to the notice of Listed Entity and also to disseminate the same on its website. This circular shall come into force on December 01, 2015.

6. This circular is issued under regulation 52 read with regulation 101(2) of Listing Regulations, 2015.

7. This circular is available on SEBI website at sebi.gov.in under the categories “Legal Framework” and “Corp Debt Market”

Yours faithfully,

Richa Goel Agarwal

Deputy General Manager

richag@sebi.gov.in

Annexure I- Format for submitting the half yearly financial results by companies other than banks and NBFCs

Annexure II- Format for submitting the half yearly financial results by banks and NBFCs

Annexure III- Format for submitting the half yearly financial results by companies other than Banks and NBFCs eligible for alternative format

Annexure IV- Format for the limited review report for companies other than banks and NBFCs

Annexure V- Format for the limited review report for Banks and NBFCs

Welfare of a particular community can also be a charitable purpose for registration u/s 12AA

Case Law Citation:- Ranpariya Solanki Sukhadiya Parivar Trust vs. CIT(Exemptions), ITAT Ahmedabad, ITA No.467/Ahd/2015, Date of Pronouncement-5th Nov,2015

Brief of the case:

The ITAT Ahmedabad in the case of Ranpariya Solanki Sukhadiya Parivar Trust vs. CIT(Exemption) held that the application made u/s 12AA cannot be rejected even a trust’s object is to function in the interest of a particular community because to serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present.

Facts of the case:

The assessee is a religious trust newly created for the purpose of carrying on social charity, religious and educational activities. It made an application for registration of the trust u/s 12AA of the Act in prescribed form no.10A on 24th July, 2014 along with all necessary documents and all necessary undertakings and declarations as per the requirement of provisions laid down u/s 12AA of the Act.
The application was rejected by CIT(Exemptions) for the reason that the trust is established for the benefit of a particular community namely Ranpariya Solanki Sukhadiya Parivar Trust and not for general public.
Aggrieved by the order of CIT, assessee is now in appeal before ITAT.
Contention of the Assessee:

It was submitted that that the objects mentioned in the trust deed are not only for the specific community but the objects of the trust are also to provide benefit to general public.
Further, reliance was placed on the decision of Hon’ble Supreme Court in the case of Ahmedabad Rana Cast Association vs. CIT (1971) 82 ITR 704 in support of contention that even if the objects of the trust is to serve a particular section of a society it cannot be termed as non-charitable.
And the trust had submitted all necessary documents with the application in Form 10A as required by Sec 12AA. Therefore, the application made by trust was complete in all sense and could not be rejected on any ground.
Contention of the Revenue:

The learned counsel for the revenue supported the order of CIT and submitted that since the main object of the trust is to work in the interest of Rana community based as Ahmedabad , the object cannot be termed as beneficial for general public but only for a small segment of general public.
Further, the decision of coordinate Bench in the case of Shree Vasupujya Swam Jain Derasar Trust vs. CIT, Valsad in ITA No.4470/Ahd/2007, relied by the assessee, the matter was restored to the file of CIT(Exemption) with the directions to examine, the matter and, therefore, the matter in this appeal may be restored to the file of CIT(Exemption)
As per the provisions of section 12AA it is duty of CIT has to call for such documents or information from the trust or institution as the things necessary in order to satisfy himself about the genuineness of the activities and objectives of the trust or institution. After examining such documents, making such inquiries and examining the objects and activities the CIT shall pass order of either registering the trust or institution or refusing to register the trust or institution.
In the present case, the assessee has duly submitted application in form No.10A for seeking registration u/s 12AA of the Act with all the necessary enclosures as mentioned in form no.10A.
The facts of the case are identical to the case of Ahmedabad Rana Cast Association vs. CIT in which Hon’ble Supreme Court held that an object beneficial to a section of the public is an object of general public utility because to serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present.
Applying the ratio of the above decision to the facts of present case, trust is carrying charitable activities as it is also carrying out activities like charity, medical relief and promotion of educational activities.
Tribunal held that it will be just and in the interest of justice to restore the matter back to the ld. CIT with the directions to re-examine the matter in the light of various decisions mentioned above as well as the objects of the trust stipulated in the trust deed so that CIT could satisfy himself about the genuineness of objects of the trust and its activities and pass appropriate orders in accordance with law after allowing reasonable and proper opportunity of hearing to the assessee before adjudicating the issue.
Direct Link to access full text of the judgment:

http://www.itatonline.in:8080/itat/upload/-30141883656691807513$5%5E1REFNOITA_No_467-Ahd-2015_-_Ranpariya_Solanki_Sukhadiya_Parivar_Trust.pdf

CA Saurabh Chokhra