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EDITORIAL
Cause of Concern
On one hand the Government is promoting
“Make in India” concept against “Made in
India” and for the same the Prime Minister
has reached out to the Indian Corporates
for the launch program scheduled on 25th
September, 2014, with an intention to project
India as investor friendly destination. To
this campaign at least 500 corporates heads
have confirmed their participation. On the
other hand the so called “Tax Terrorism”
is not showing any let off. Hitherto it was
used against the top business houses or the
International investor. The salvo which was
issued by CBDT with regard to new tax audit
report and confusion created thereafter by the
notification extending the date for submission,
has effected every assessee carrying on
business man in India. How can India be an
investor friendly destination when the arm
of the Government is speaking different
language than the head of the Government?
The issue relating to the notification extending
the date for filing of tax audit report landed in
more than one High Court of the country, and
three of the honorable high courts have come
out with a direction to the CBDT to consider
extending the date for filing the return of
income to 30th November, 2014 and pass the
order before 30th September 2014.
The High Court at Hyderabad for the States of
Telangana and Andhra Pradesh has decided
by observing that there is no justification in
extending only the date of filing the TAR
and has directed CBDT to consider the
CASC Bulletin, Oct. 2014
representation of the petitioner (AIFTP) and
dispose of the same by 30th September, 2014.
The honorable Gujarat High Court while
disposing of the writ petition had passed
strictures against the CBDT to take advantage
of its own wrong and disregarding genuine
hardship of taxpayers and held as under:
The Petitioner filed a Writ Petition claiming
that the action of the CBDT/ Government
in issuing Notification dated 25.07.2014 to
exercise the due date for filing the tax audit
report u/s 44 AB but in not extending the
due date for filing Income Tax Returns from
30.09.2014 to 30.11.2014 was arbitrary. It was
pointed out that great prejudice was being
caused to the taxpayers by the said action of
the CBDT. HELD by the High Court:
(i) We are not impressed by the stand
taken by the Revenue urging inter alia
that the format of the tax audit report
nowhere requires certification of the Tax
Consultants or Tax Auditors in relation
to the information to be furnished
for which Tax Audit is conducted
…. Though the filing of the return of
income is the responsibility of the tax
payer, that in no manner would make
the Tax Auditors and the Consultants
who are professionals any less concerned
for correct computation of the income
and true presentation of entire material
before the Tax authorities;
(ii) The change of utility and non-availability
of the new version till 20.08.2014 is the
cause for the issue to have cropped up.
The assesses cannot be put to the hardship
nor can the professionals be made to rush
only because the department chose to
change the utility during the mid-year;
(iii)One of the main objectives of the
computerization programme is to
improve the efficiency and effectiveness
of the tax administration. If the very
computerization has caused genuine
hardship to one and all concerned, CBDT
ought to have paid heed to the repeated
requests of all concerned in exercise of
its statutory powers;
(iv)It would have been desirable for the
CBDT to have considered the request
for extension of the due date as a very
peculiar situation has arisen portraying
the genuine hardship to the assessee and
the tax consultants;
(v) Non-collection of tax for a period of two
months and possible loss of Rs. 220 crore
in terms of interest for a period of two
months in the event the self-assessed tax
not paid, appear clearly as the reasons
in the foundation for CBDT to deny
such extension. The Revenue cannot be
permitted to take advantage of its own
error or delay, by putting forth magnified
figures of loss and thereby also possibly
in the process gaining interest for late
filing of return in complete disregard to
requirement of efficient management;
(vi)The CBDT ought to have responded to
the representation. Instead, it chose not
to respond but later before this Court
in no uncertain terms has termed such
a request impermissible on the ground
that the grievances are not sustainable.
Therefore, considering the larger cause
of public good and keeping in mind the
requirement of promotion of justice, we
chose to exercise the writ of mandamus
directing the CBDT to extend the date of
filing of return of income to 30.11.2014,
which is due date for filing of the TAR
as per the Notification dated 20.08.2014.
Such extension is granted with the
qualification that the same may not result
into non-charging of interest u/s 234A.
(source: itatonline.org)
In one of the news read out in Doordarshan
the news reader has pronounced the name of
the Chinese President as “Eleven Jingping”
instead of “Xi Jingping” and the immediate
action was that the said person was put under
suspension in spite of the fact that the said
person was makeshift arrangement. Whereas
the top officials go scot free even after making
blunders. This has to change if India is to
grow faster though we should not get worried
with every small change but at the same time
we can’t close our eyes to problems created
by ourselves (If one has to use the words of
Prime Minister).
In the interview with CNN the Prime Minister
has stated in reply to specific question relating
to the behaviour of China
“Prime Minister: India is different. It is a
country of 1.25 billion people. We can’t run our
country if we get worried about every small
thing. At the same time, we can’t close our
eyes to problems. That’s why India maintains
that we are now in a different era. We are not
living in the eighteenth century. China is also
a country with an ancient cultural heritage.
Look at how it has focused on economic
development. It’s hardly the sign of a country
that wants to be isolated. It wants to stay
CASC Bulletin, Oct. 2014
connected. That is why we should have trust
in China’s understanding and have faith that
it would accept global laws and will play its
role in cooperating and moving forward.”
CBDT has come out with Instruction No. 6 /
2014 dated 2nd September, 2014, with regard to
the instructions for procedure and criteria for
selection of returns/cases for scrutiny during
financial year 2014-15. This is coming on 2nd
September and literally the Assessing Officer
will have only 28 days to serve the notices
on the assessee. Why this is much delay in
decision making? This should be viewed in
the light of the present staff strength of the
Department and it is a difficult task and this
will only lead to the use of unethical methods
by the department of fulfilling the legal
requirement of serving for the notices. The
officials go overboard in calling the assessee
to appear and file the power of attorney, as
they do not have the acknowledgement for
serving the notices.
Government back to teaching Basics
Till late 80’s, in the school, students were
taught about rules and ways of crossing like
one should cross the road by seeing to the left,
then to the right and again to the left before
you cross, do not come from behind or front
of a parked vehicle, etc., and the traffic police
used to have traffic parks where the school
would be requested to bring students there
to learn more about it. However, the schools
discontinued this, may be thinking that the
parents will take care of this. Today if we
were to follow the thumb rule of crossing
the road of seeing the left, etc., we will be left
out on the same side of the road. Now the
Government is back to teaching the basic to
CASC Bulletin, Oct. 2014
its field by few notifications issued off-late
like the notification from CBDT to respect
the time (copy of the notification is carried
in this bulletin), office memorandum (No.
25(6)/E.Coord.-2014 dated 22nd August, 2014)
issued by Ministry of Finance, Department
of Expenditure, on Economy in use of paper
like both sides of the paper should be used for
noting or typing, etc. This only shows that one
should never forget basics as well as should
also pass on the basics to the subordinate
even in our offices.
Achievement of India
24th September, 2014 is a golden day in the
history of India as on this day the scientists
of Indian Space Research Organisation has
successfully placed ‘Mangalyaan’ (Orbit
Insertion Maneuver) in the orbit of Mars.
India is the first country in the world to do so
in very first attempt and also the first country
to do so among other Asian countries..
It is a proud moment and CASC joins the
entire country in congratulating all the
persons involved directly or indirectly in this
historic achievement.
Recent Development
In a recent judgement delivered on 18th
September, the Supreme Court has held
that e-evidences like printouts, CDs, etc.
are prima facie is not an evidence without
authentication of the same. According to the
said judgment “it is pertinent for the Supreme
Court to correct its position now as there had
been a “revolution” in the way evidence were
produced before courts.” This is reversal of the
view taken by the Supreme Court in 2005 in
the case of N.C.T. of Delhi v. Navjot Sandhu.
Source; The Hindu. This may have impact on
the books of accounts kept in electronic form
and the Income tax Act not recognising the
same.
member is interested in joining they may feel
free to send a mail to [email protected]
and appropriate action will be taken subject
to the terms and conditions.
Recent Activities
Appeal
The Study Groups formed by CASC in the
field of Direct taxes, Indirect taxes and Audit /
Companies Act, with an intention to deliberate
on specific issues either raised by themselves
or brought before them by nay member and
in the process to share knowledge, have
commenced their activities and each group
have met once in the month of September.
The process has commenced and with the
active participation of members, it will surely
be fruitful elsewhere in this bulletin the
minutes out of the discussion held is carried
for the benefit of the members.. In case any
Members are requested to attend the
programs conducted by CASC and are also
requested to send their suggestions and /
or value additions to the services provided
by CASC including this Bulletin. The same
can be sent by hard copy to the office of the
CASC or emailed to [email protected]
or any of the Members on the Management
Committee.
For and on behalf of Editorial Board
Editor
CASC Bulletin, Oct. 2014
Disclaimer:
The contents of this Monthly Bulletin are solely for informational purpose. It neither
constitutes professional advice nor a formal recommendation. While due care has been
taken in assimilating the write-ups of all the authors. Neither the respective authors nor
the Chartered Accountants Study Circle accepts any liabilities for any loss or damage
of any kind. No part of this Monthly Bulletin should be distributed or copied (except
for personal, non-commercial use) without express written permission of Chartered
Accountants Study Circle.
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or graphs), are subject to copyrights of Chartered Accountants Study Circle and its
contributors. Any reproduction, retransmission, republication, or other use of all or part
of this document is expressly prohibited, unless prior permission has been granted by
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Announcements:
1. The copies of the material used by the speakers for the regular meetings held twice
in a month is available on the website and is freely downloadable.
2. Earlier issues of the bulletin is also available on the website in the “News”
column.
The soft copy of this bulletin will be hoisted on the website shortly.
Reader’s Attention
You may please send your Feedback Contributions / Queries on Direct Taxes,
Indirect Taxes, Company Law, FEMA, Accounting and Auditing Standards, Allied
Laws or any other subject of professional interest at [email protected]
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Chennai - 600 086. Phone 91-44-28114283
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for updates on monthly meetings and professional news.
Please email your suggestions / feedback to [email protected]
CASC Bulletin, Oct. 2014
Recent Decisions in Sales Tax / VAT
Input tax credit:
When there was no specific rule providing
for the manner in which the Assistant
Commissioner had assessed the dealer to
tax, the assessing authority could not insist
on the dealer adopting a particular method
which would deny it the benefit of utilisation
of the balance available tax deferment in its
entirety, and instead pay tax. Article 265 of the
Constitution of India also states that no tax can
be levied or collected except by authority of
law and in the absence of a procedure, it was
not open to the assessing authority to contend
that a particular mode should be adopted,
or that the procedure adopted by the dealer
was not rational. The order of assessment,
to the extent the assessing authority
adjusted the input-tax credit first against
the manufacturing activity of the dealer and
the balance against its trading activity, was
neither a method authorised by law nor could
such a method be forced on the dealer to its
detriment . The assessment order must, to this
limited extent, be set aside. [2013] 62 VST 573
(AP) MAXWROTB PLYWOODS PRIVATE
LIMITED v. ASSISTANT COMMISSIONER
(CT) (AUDIT) VAT MANAGEMENT UNIT
II, VISAKHAPATNAM
Natural Justice:
Mere issuance of show-cause notice is not
sufficient for complying with the basic
requirement of hearing. A reasonable
opportunity to put forth its defence is part
of the dealer’s right. [2013] 63 VST 1 (Guj)
BSCPL INFRASTRUCTURE LIMITED
CA. V. V. Sampath Kumar
v. COMMERCIAL TAX OFFICER AND
OTHERS
Works contract:
When the gravel was supplied free of cost by
the contractee, the transportation charges for
transporting gravel from the quarry to the work
spot added to the value of the gravel, that the
gravel was incorporated while executing the
works contract, the incorporation value of the
gravel was the value which had to be taken into
consideration while computing the turnover
assessable to works contract. [2013] 63 VST
5 (AP) DUGGIRALA RAMAKOTAIAH v.
STATE OF ANDHRA PRADESH
Penalty:
There is no justification for the authorities to
initiate penalty proceedings in a case where
the department themselves are in doubt as
to the category under which the activity of
polishing of granite stones was to be treated
as mentioned in a circular issued earlier and
when the assessing officer had accepted that
the activity of the respondent-dealer was
manufacture. [2013] 63 VST 14 (Karn) STATE
OF KARNATAKA v. KRISHNA STONE
TECH PVT. LTD.
CASC Bulletin, Oct. 2014
Appeal:
When the dealer was fully conscious of the
proceedings taken and the service effected by
the assessing officer duly following the Rules,
the dealer after getting certified copy of the
assessment proceedings, per se, could not
claim the appeal as one filed in time. Going
by the service of the order in accordance
with the Rules, the filing of the appeal with
the certified copy could not be treated as one
filed within the period of limitation. [2013} 63
VST 39 (Mad) PAVITHRA LEATHERS v.
COMMERCIAL TAX OFFICER, RANIPET
(SIPCOT)
ASSESSMENT
CIRCLE,
RANIPET AND OTHERS
Purchase Tax:
Old jewellery purchased and used in the
manufacture of new jewellery was liable for
purchase tax under section 7 A of the Tamil
Nadu General Sales Tax Act, 1959. [2013] 63
VST 158 (Mad) SELVA MALIGAl v. STATE
OF TAMIL NADU.
Interpretation:
A statute must be construed according to its
plain language and neither should anything
be added nor should anything be subtracted
unless there are adequate grounds to justify
the interference that the Legislature clearly
so intended. [2013] 63 VST 181 (WBIT)
CHAMONG TEA COMPANY LIMITED
v. SALES TAX OFFICER, ESPLANADE
CHARGE AND OTHERS
Seizure:
The driver carried only one copy of the tax
invoice. Despite sufficient opportunity being
accorded, the duplicate copy of the tax invoice
could not be produced by him. The dealer
CASC Bulletin, Oct. 2014
infringed the mandatory provisions contained
in the State VAT Act and the conditions
prescribed in corresponding l Value Added
Tax Rules of the State, by carrying one
copy of the tax invoice. The transport of the
goods not having been done in accordance
with the provisions of the Act / Rules of
the goods , the seizure had been lawfully
made in accordance with the provisions of
applicable the Act, whether the infringement
was of minor nature or not. [2013] 63 VST 197
(WBTT) TUOBRO FURGUSON (INDIA)
PVT. LTD. v. ASSISTANT SALES TAX
OFFICER, BAROVISHA CHECK­POST
AND OTHERS
Rectification:
Whether the dealer’s application for
rectification fell within the contours of
applicable State VAT rule was a matter to be
determined by the Commercial Tax Officer.
The Commercial Tax Officer could not
however decline to exercise jurisdiction on the
sole ground that an order of assessment was
passed. [2013] 63 VST 216 (AP) GAMMON
INDIA LTD. v. COMMERCIAL TAX
OFFICER, SRI NAGAR COLONY CIRCLE,
HYDERABAD
Limitation:
A petition was filed delayedly after a lapse
of 3567 days. The plea of the dealer that the
delay had occurred due to some domestic
reason and not knowing the limitation for
filing the appeal, did not fall within the
ambit of “sufficient cause” under section 5 of
the Limitation Act, 1963. [2013] 63 VST 219
(P&H) PUNDHIR GRAM UDYOG PATTI
KALYANA, SAMALKHA v.STATE OF
HARYANA
Constitutional Validity:
GUJARAT AND OTHERS.
The courts have the power to read down the
provision of a statute, but that power is invoked
to save the statutory provision from the vice of
unconstitutionality. The question of reading
down a provision arises, not for avoiding
any hardship to a dealer, or to sustain any
administrative action, but only if it is found that
but for such an exercise, the legislation would
be an unconstitutional one. [2013] 63 VST 237
(Ker) JOSCO GOLD CORPORATION PVT.
LTD. v. COMMERCIAL TAX OFFICER, 1ST
CIRCLE, KOTTAYAM AND OTHERS
Revision by Court:
Alternative remedy:
The availability of remedy was not a bar to
the Court exercising writ jurisdiction under
article 226 of the Constitution of India, if it
was pointed out that the order passed by the
authority was either ex facie illegal, opposed
to the principles of natural justice or passed
without any jurisdiction. [2013] 63 VST
246 (Guj) MEET TRADERS v.STATE OF
GUJARAT AND ANOTHER
Recovery:
When the appellate authority was seized
of the dealer’ appeal and application for
waiver of pre-deposit, the coercive recovery
proceedings should not been made and in this
matter, even without waiting for a reasonable
period, such recovery was made in haste
and hence the dealer was well within its
right to approach the Court and seek interim
protection. Availability of alternative remedy
or actual filing of such appeal therefore was
not ground to reject the petition. [2013] 63
VST 262 (Guj) ASIAN GANITO INDIA
LIMITED AND ANOMER v. STATE OF
Without any finding of the Tribunal’s order
being vitiated by reason of perversity, the
Court cannot interfere with findings of facts
recorded by the lower authorities, sitting in
the revisional jurisdiction conferred under the
State Sales Tax Act.[2013] 63 VST 268 (Ker) K.
P. VARGHESE v.STATE OF KERALA
Purchase tax and additions:
The dealer having produced no material to
substantiate as to what was purchased and
sold, its contention that certain turnover
represented the dealer’s sales turnover of
lime stone powder could not be accepted.
When the admitted fact was that the dealer
purchased lime shells and hence, it was
liable to be assessed under section 7 A of the
TNGST Act, 1959. Though the dealer had not
maintained the production account, which
was in violation of rule 26(14) of the TNGST
Rules, 1959, the assessing officer had not
alleged any ground to discredit the accounts
of the dealer and in the absence of any further
materials there was no warrant for the two
per cent addition. [2013] 63 VST 275 (Mad) R.
RAGUPATHI V. STATE OF TAMIL NADU
Tribunal:
If the assessee is merely an agent then the
freight charges which were shown separately
cannot form part of total turnover under the
U.P. Trade Tax Act, 1948. But if the assessee
is a dealer, the freight even if charged
separately is not liable to be excluded from
his total turnover. The Tribunal being the
final fact-finding authority had not recorded
any finding as to whether the petitioner is a
CASC Bulletin, Oct. 2014
commission agent or a dealer by examining
the relevant material. The Court remanded
the matter back to the Tribunal with a
direction to pass fresh orders.[2013] 63 VST
310 (AIl) RAGHVENDRA MANI TRIPATHI
v.
COMMISSIONER,
COMMERCIAL
TAX, GOMTI NAGAR,LUCKNOW AND
OTHERS
Input tax credit:
Though the dealer had claimed that the
purchases were supported by tax-suffered
invoices issued by the supplier, the Court
would not in revision examine the invoices.
Admittedly, purchases were suppressed in
the books of account and returns and the
explanation offered had been rejected both by
the assessing authority and the first appellate
authority. The dealer had not challenged the
finding. The scheme of the Act would require
the input-tax credit to be claimed along
with the return, supported by tax-suffered
invoices and the quantum of eligible credit
being determinable as reflected from the
books of account. The dealer had admittedly
not disclosed the transaction in his books of
account or his return nor had he filed any
revised return. The fact that the purchases
were made from a Government company
would not automatically entitle a dealer to
claim input-tax credit. And if the purchases
had suffered tax input-tax credit is has to be
claimed and availed of in accordance with
the provisions of the Act. On the finding
that there was no such attempt made by the
dealer and on the further ground that the
dealer has suppressed, the denial of input
tax was justified. [2013] 63 VST 317 (Ker)
M. MOHAMMED HAJI v. STATE OF
KERALA
(The author is a Chennai based Chartered
Accountant. He can be reached at vvsampat@
yahoo.com)
Income Tax Notification:
NOTIFICATION NO. 43/2014 [F.NO.152/1/2013-TPL]/SO 239(E),
DATED 16-9-2014
Effect of this is that the rate of depreciation on windmill is restored back to 80% for all the
windmills installed on or after 1.04.2014.
CASC Bulletin, Oct. 2014
Recent Decisions – Service Tax
1. Restaurant service - service portion not to
include the value of sale of goods.
In Hotel East Park v. UOI [2014] 35 S.T.R. 433
(Chhattisgarh), the petitioner was having a
hotel including an airconditioned restaurant
and a bar.
The petitioner challenged the vires of sec.
66E(i) of the Finance Act, 1994 and had raised
the following points for determination:a) Whether any service tax can be charged
on sale of an item or vice versa?
b) Whether in view of article 366(29A) (f),
service is subsumed in sale of food and
drinks?
c) Whether section 66E(i) of the 1994-Act
is violative of article 366 (29A)(f) of the
Constitution?
The observations of the High Court were as
under:No service tax on sale and vice versa:1. Vat is a tax of sale or purchase of goods
and is within the legislative competence
of the state (entry 54 of list-II).
2. Parliament has legislative competence to
impose tax of the sale and purchase of
newspapers only and not on other goods
sold within the state. It does not have
legislative competence to impose tax on
sale of food and drinks sold within a
state.
3. Service tax is imposed under the residuary
list entry of the central list (entry 97 of
list-I).
4. Hence, parliament cannot impose tax on
10
CA. V. Vijay Anand
the sale and purchase within the state.
Section 66 E (i) intra vires
5. In the State of Himachal Pradesh v. M/
s. Associated Hotels of India Limited
[AIR 1972 SC 1131], the Supreme Court
held that the supply of food to a person
staying in the hotel was part of service.
This analogy was extended in Northern
India Caterers (India) Ltd. v. Lt. Governor
of Delhi [AIR 1980 SC 674 = (1980) 2
SCC 163]. In Northern-Caterers’ case, the
supply of food in a high class restaurant
was held to be a part of the service.
6. The result of the aforesaid decisions was
that no sales tax could be charged on sale
of food and drinks to the person staying
in a hotel or in a high class restaurant
as it was held to be a part of service.
A review petition filed in the Northern
Caterers’ case was dismissed
7. The entire idea of inserting of article
366(29A)(f) was to bifurcate sale of the
food or drinks from the service part
as interpreted by the Supreme Court.
Therefore, by amending the constitution,
the supply of food or drinks to a person
CASC Bulletin, Oct. 2014
in a hotel or in a restaurant had been
bifurcated into two parts, namely, service
part and sale of goods. This was clear
from the wordings of article 366(29A) (f)
of the constitution.
8. Service portion in an activity wherein
goods, being food or any other article
of human consumption or any drink
(whether or not intoxicating) was
supplied in any manner as a part of
the activity was specifically included in
declared services.
9.
The definition of service in section
65B(44) specifically excluded supply of
goods that were deemed as sales under
article 369(29A) of the constitution.
10. Article 366(29A)(f) did not indicate that
the service part was subsumed in the
sale of food.
11. Section 65B(44) and 66E(i) charged
service tax on the service part and not
on the sale part.
12. Hence, Section 66E(i) was intra vires the
constitution.
Others:15. Article 366(29A)(f) separated sale of
food and drinks from service part but
the difficult part was how much was
the service part and how much was the
sale part. This has been explained under
rule 2C of the valuation rules, read with
notification dated 20-6-2012.
16. Rule 2C of the rules clarified that in case
of a restaurant, service was presumed to
be 40% of the bill value and in case of
outdoor catering, it was presumed to be
60% of the bill value. It shows that the
value of the food was 60% of the bill in
CASC Bulletin, Oct. 2014
the case of restaurant and 40% of the bill
in case of catering service.
17. Sales tax was charged under the VAT
Act. Generally, the hotel and restaurant
owners charge service tax on 40% or
60% of the bill amount. The 40% or 60%
over which service tax had been charged,
cannot be subject to VAT. However,
assessee charged service tax on the entire
value as the commercial taxes authorities
might be taking the value of the food and
drinks to be the bill value. This was not
proper.
18. As no VAT can be charged over the
amount meant for service, it would be
open to the petitioner to object the same
before the VAT authorities. However,
there should be coordination between
the State and the Central Government
authorities. The amount over which
service tax has been charged should not
be subject to VAT.
19. There was no provision in the VATAct to bifurcate the amount. The State
Government ought to frame such rules to
that effect. The State Government will be
advised to issue a clarification/direction
in this regard and will ensure that the
consumers are not unnecessarily doubly
taxed over the same amount.
Hence, the writ petition was dismissed with
the above observations.
2. Management maintenance or repairing
service – exclusion for services rendered
to motor vehicle parts cannot be denied on
the ground that dismounting had taken at
a place different from the workshop of the
assessee.
In Kuttukaran Trading Ventures v. C.C.U.
11
& S.T., Cochin [2014] 35 S.T.R. 481 (Ker.),
the appellant was reconditioning/repairing
motor vehicle engines. The adjudicating
authority confirmed the demand on the
appellant, overlooking the appellant’s claim
for exclusion as a part/engine of motor
vehicle and was sustained by the Tribunal.
On further appeal before the high court, the
following observations were made:1. The Tribunal had proceeded on the basis
that if a motor vehicle was brought to
the service centre of the appellant and
thereafter the engine was dismounted
and repaired, the appellant would be
entitled for the benefit of exclusion as the
appellant, in the process of repairing the
vehicle, was repairing the engine of the
vehicle as well while if the engine alone
was brought for repairs or any other
part on which the necessary repairs were
carried on, the appellant could claim the
exclusion provided under the statue.
2. The exclusion was not given with a
condition that the dismounting should
have not taken place and such a view
could not be accepted as motor vehicle
included all its parts as well and ceased to
be a motor vehicle without the individual
parts. Such part cannot be used for any
other purpose and it is normally fitted
to the same vehicle from which it was
dismounted.
3. Hence, if any service centre or
maintenance centre or workshop did
maintenance or repairs to any part of
the motor vehicle, it was also entitled to
get the benefit of exclusion, as provided
under section 65(64) of the Finance Act,
1994.
4. When the statute clearly intended to
12
exclude motor vehicle, it was apparent
that it excluded parts of motor vehicle
also. \any other interpretation would
render ineffective the very purpose of
such exclusion.
Hence, the appeal was allowed in favour of
the appellant.
3. Refund claim – unjust enrichment – not
applicable when the assessee has borne the
duty.
In CCU, CE & ST. v. Indian Farmers Fertilizers
Coop. Ltd., [2014] 35 S.T.R. 492 (All.), the
assessee purchased natural gas through a
pipeline for which transmission charges was
paid along with the applicable service tax.
Subsequently, the authority was subjected
to the downward revision by the statutory
board and the excess transmission charge was
credited to the assessee by raising credit notes.
Subsequently, the assessee filed a claim for
refund. The Assistant Commissioner granted
the refund, against which the department
went on appeal before the Commissioner
(Appeals), who reversed the order of the
adjudicating authority. On further appeal
before the Tribunal, the refund claim was
allowed, against which the department filed
a further appeal before the high court which
observed as under:1. Once the finding of the adjudicating
authority that the claim for refund was
filed within the period of limitation of
one year under section 11B was not
challenged by the revenue before the
first appellate authority, such a ground
cannot be urged for the first time in an
appeal before the Court.
2. The Tribunal was correct and justified
in following that principle. The assessee
CASC Bulletin, Oct. 2014
was the recipient of the taxable service
provided and had borne the incidence of
service tax.
3. Hence, the assessee was entitled to
claim a refund of excess service tax
paid consequent upon the downward
revision of the transmission made by the
Regulatory Board.
4. The entire record would indicate that the
only objection of the revenue was to the
maintenance of the refund application
at the behest of the assessee. The fact
that the assessee did not pass on the
burden has been amply established in
the order of the adjudicating authority.
That finding was not challenged by the
revenue in the grounds of appeal before
the first appellate authority nor in the
cross objections before the Tribunal.
5. The finding of fact of the first appellate
authority to the effect that the prices of
urea are prescribed by the Government
and that the final product manufactured
by the assessee was exempted from the
payment of excise duty and there would
be no occasion for unjust enrichment was
not questioned by the department.
Hence, the appeal was dismissed.
4. Service tax on loading, shifting and
feeding of coal and gypsum by road – HSD
provided free of cost – not to be included in
the taxable value – extended period not to be
invoked:
In Naresh Kumar & Co. Pvt. Limited v. UOI
[2014] 35 STR 506 (Cal.), the petitioner was
awarded a contract for carrying out loading,
shifting and feeding of coal and gypsum by
road wherein high speed diesel (HSD) was
supplied free of cost. The petitioner was
CASC Bulletin, Oct. 2014
paying service tax on the amount charged in
the invoice which did not include HSD. On
audit of the accounts by CERA, a show cause
notice was assessee for the period 2-3-2000 to
8-9-2000.
The assessee filed a writ petition before the
high court which observed as under:1. The Delhi High Court, in Intercontinental
Consultants & Technocrats Pvt. Ltd.
v. UOI 2013 (29) S.T.R. – 9 (Del.), held
that rule 5(1) of the valuation rules was
ultra vires section 67 of the Finance Act,
1994.
2. The Tribunal in Karamjeet Singh & Co.
Ltd. v. CCE, Raipur 2013 (32) S.T.R. 740
held that non inclusion of value of HSD
supplied by the service receipt did not
constitute willful suppression .
3. In view of the clear exposition of law
that the value of the diesel supplied free
of cost by the service recipient cannot
constitute taxable event, the authorities
could not take a contrary stand by
placing reliance upon of the provision
which had been declared ultra vires.
4. Hence, the invocating of the extended
period was illegal and invalid.
5. The demand for the normal period could
not be validated as the foundation of the
impugned notice was laid on rule 5(1) of
the said rule, which was declared ultra
vires by the Delhi High Court.
6. The impugned show-cause was liable to
be quashed and set aside.
Hence, the writ petition was allowed.
5. Service tax – conduct of audit pursuant
to rule 5a(2) of the Service Tax Rules not to
have a statutory force when the statute does
13
not stipulate audit.
In Travelite (India) v. UOI, [2014] 35 S.T.R. 653
(Del.), the petitioner was a registered service
tax assessee and was given intimation for
scrutiny by an audit party under rule 5A(2)
of the Service Tax Rules, 1994 and contended
that there was no power under the Finance
Act for scrutiny of records, except the power
of an assessing officer to call for records can
be ordered by recourse to Section 72A of the
Act. The High Court observed as under:
1) Rule 5A of the Service Tax Rules, 1994
obligated an assessee to make available
the records to audit party.
2) Rule making power conferred upon the
executive was in section 94 of the Finance
Act.
3) The only provision in Chapter V of the
Finance Act on scrutiny and audit of
records of the assessee was section 72A
of the Finance Act.
4) Section 72A envisaged an audit of
an assessee’s records only in special
circumstances, namely, when there was a
failure to declare or compute the value of
the taxable service, when the utilization
of CENVAT credit in excessive of the
limit permissible or by fraud etc., and
when the business operations of the
assessee are dispersed across multiple
locations.
5) Apart from section 94, the revenue
could not show any other substantive
provision which justified a probe into the
records of the assessee, under conditions
akin to those contemplated by Rule
5A(2). Revenue was unable to show the
compulsion of arming authorities with
such sweeping powers, under the rules.
14
6) A rule acquires a statutory force, so long
as it first, conforms to the provisions of
the statute under which it is framed and
second, it must be within the rulemaking
power of the executive authority charged
with framing the rules.
7) Rules may only give effect to the statute’s
provisions and intent and cannot be used
to create substantive rights, obligations
or liabilities that are not within the
contemplation of the statute. 8) It was apparent that the only type of
audit within the contemplation of the
statute was that stipulated for in section
72A. Parliament thus had a clear intention
to provide for only a special audit. Any
attempt to include provision for such
a general audit through the back-door,
such as through the impugned rule,
was ultra-vires the rule making power
conferred under section 94(1). Rule 5A(2)
must consequently be struck down.
9) Executive instructions without statutory
force, cannot possibly override the
law; consequently, any notice, circular,
guideline etc. contrary to statutory laws
cannot be enforced. 10) The Service Tax Audit Manual, 2011 was
merely an instrument of instructions
for the service tax authorities. It was
not a statutory instrument and had no
statutory force.
11) Therefore, rule 5A(2) could not be
justified.
Hence, the writ petition was allowed with no
cost and the impugned letter set aside.
(The author is a Chennai based Chartered
Accountant. He can be reached at reachanandvis@
gmail.com)
CASC Bulletin, Oct. 2014
Risk Based Internal Audit (Rbia)–A Step By Step Approach
As this eighteenth edition goes to press on 22
September 2014, we watch with bated breath
if the Gujarat and Delhi High Courts will
grant extension of time for filing the returns,
a fair and justified request from the Chartered
Accountant fraternity. Amongst, the clauses
that have been amended, there appears to one
which causes the greatest concern. This relates
to Clauses pertaining to Tax Deductions at
Source.
CA. Sripriya KUMAR
I do believe that this amendment will spin
off TDS Audits as a separate professional
engagement especially in large organisations
where the tax auditors may want comfort
before they sign the Form 3CD. It would
be akin to reliance on Internal Audits by
Statutory Auditors.
• Actual Deduction at the time of credit /
payment which ever is earlier
This edition focuses on the key risks in the
TDS landscape, suggested Control Design
and Operating Effectiveness evaluation as
well as certain indicative audit procedures for
the same.
Form 3 CD Requirements
TDS – The Landscape
The landscape of TDS presupposes the
following
• Vendor rendering services / Employee
• The Nature of Payments and rates
appropriate thereto
• Remittance to the government on or
before the due date
• Filing of e TDS returns on or before the
due date
The Key requirements in the amended Form 3
CD are as under:
(a) Whether the assessee is required to
deduct or collect tax as per the provisions
of Chapter XVII-B or Chapter XVII-BB, if
yes please furnish:
(b) Whether the assessee has furnished the
statement of tax deducted or tax collected
within the prescribed time. If not, please
furnish the details
• The various sections of the Income Tax
Act 1961
(c) Whether the assessee is liable to pay
interest under section 201(1A) or section
206C(7). If yes, please furnish:
• Local / Foreign Remittance
The Biggest Risk
• Applicability of TDS
The biggest risk that one envisages in
CASC Bulletin, Oct. 2014
15
transactions escaping TDS. This is the most difficult to detect especially when the transaction
volumes are very large and business contracts are complex and hybrid contracts involving
materials and services is in vogue. The next few pages discuss the key risks and the smartest
audit approach to test if such risks exist and if errors and omissions need to be disclosed in
the Form 3 CD. It is my hope and prayer that this date gets extended so that this edition is of
immediate use to you
Key Risks
Audit Steps
Tax not deducted
on certain eligible
parties (at party
level)
• Review Vendor Ledger Balances (Trial Balance) for all accounts
including Nil Balance Accounts
• Obtain TIN, Service Tax numbers, CST numbers, PAN numbers
for all such vendors
General Review Procedures
Take the master list of vendors and invoices booked. Sort in descending
order. Map the above list to the e TDS list. Check for vendors not
featuring in the e TDS return on a case to case basis by a verbal review
with the management
List A : Predominantly Materials Related Vendors
• Create a separate list of vendors who have only TIN and / CST
numbers and no service tax numbers. This means that they are most
likely to be material supply vendors. Perform a quick review with
the client on all such vendors and check 50 invoices (maximum) of
the top 10-20 parties.
• Compare this list with the list of vendor names and PAN numbers
as featured in the TDS return. Ideally, there should be no common
vendors.
List B : Non Materials Related Vendors
From the main list of vendors, eliminate List A vendors. These vendors
should have ideally suffered tax deduction at source. In case certain
vendors have not suffered TDS as per the e TDS return list, then the
parties have to be reviewed on a case to case basis
contd...
CBDT Instruction:
Instruction No. 7/2014, dated 26.09.2014
Sub: Scope of enquiry in cases selected for scrutiny during the financial year 2014-15 on
basis of AIR/CIB/26AS mismatch regarding.
16
CASC Bulletin, Oct. 2014
Key Risks
Audit Steps
TDS Omissions at
transaction level
• It is likely that TDS may have been missed on certain transactions
as a result of clerical omissions. To test this, check a sample of 50
– 100 invoices spanning the entire year for about 50 vendors (2
invoices per vendor) and if there are no omissions, the process is
robust.
• Review with the management, how they ensure that no TDS
omissions are likely to occur. Scrutinise all credit card payments
of owners, managers and directors and check if there are any
payments which have been reimbursed by us
Application of
wrong rates
• From this point on wards we will rely on the e TDS return data for
all 4 quarters. Consolidate into a single file and check if there are
parties for whom multiple rates have been applied
• Also test check a sample of transactions to ensure that TDS rates
have been applied properly especially on integrated contracts
spanning multiple payment natures where tax has to be deducted
at the higher rate (warehousing including rent – Rate applicable
for rent u/s 194I and not 194C)
Concessional Rates
applied wrongly
• In cases of vendors where concessional rates have been applied
(see TDS return) examine the Form 13 related certificate and check
whether
o The rate is correct
o The certificate is valid as on the date of deduction
o The particular client’s name features in the Form 13
o The gross business value, if specified, is followed
o The certificate should have come directly from the
Assessing Officer who had issued the same.
Foreign remittances
• Check if Sec 195 Certificates have been obtained and if Form 15CA
upload has been done correctly
• Pay specific attention to reimbursable and obtain expert guidance
where necessary
contd...
“Time and health are two precious assets that we don’t recognize and appreciate until they have been
depleted. ”
- Denis Waitley
CASC Bulletin, Oct. 2014
17
Key Risks
Audit Steps
Timing of
deduction
• The law is extremely clear that TDS needs to be done on credit to
ledger or payment, whichever is earlier. Yearend liability accruals
based on bills and not in the nature of ad-hoc provisions have to be
reviewed carefully
• In organisations where Service Receipt (like Goods Receipt Note) is
automated, the TDS liability devolves on such dates of acceptance
of service liability
Non remittance of
payments
• Perform a reconciliation of TDS payable Ledgers vs payment in the
following manner for the financial year for all months
April 2014 May2014…
Opening Balance as at April 1, 2014
Add : Payable during the year
Less : Payments
Closing Balance
Remitted on / before due date
Balance ( should be Nil )
Non-payment of
interest on delayed
payments
• Interest to be computed properly based on above table
Non submission of
returns / delayed
filing
• Due dates and actual dates to be verified with reference to challans
and supporting documentation
Regardless of the nature of audit performed, adequate protections exists to any auditor in so
far as we perform our work with due diligence and document the same correctly. The above
procedures if performed correctly with knowledge of the intent of the law (documented as risks)
along with robust working papers for the same will protect the fraternity from professional
liabilities. A law can expect the auditor to be a watchdog, blood hound or a tiger, but certainly
not a magician to search and find Omissions that are like a needle in a hay stack which is what
TDS compliance is in relation to the organisations throughput of transactions
The New Companies Act 2013 makes it mandatory for Directors to certify compliance with
all laws and regulations (Section 134 (2)). In the next edition, we shall see how this task can be
carried out with reference to a few legislations which impact India Inc. Am told there are over 80
legislations. I know of 40, can I have your lists as well. Please mail me so that we can start!
(The author is a member of the ICAI and can be contacted at [email protected])
18
CASC Bulletin, Oct. 2014
Excel Tips
Understanding the Technique about Names
Most Excel users have an understanding
of named cells and named ranges. You can
use the Formulas > Define Name command
(under the ribbon named “Define Names” to
provide a meaningful name to a cell or range.
CA. Dungar Chand U. JAIN
Then you can use
those defined names
in your formulas.
For example, if
you give the name
Sales to range H2:
H10, you can write
a formula such as
=SUM(Sales).
Though
this
concept is referred
as named ranges
or named cells,
this terminology is
not quite accurate,
however.
Actually, when you
create a name, you’re
creating a named
formula. Unlike a
normal
formula,
a named formula
doesn’t exist in a
cell. Rather, it exists
in Excel’s memory.
CASC Bulletin, Oct. 2014
19
When you work with the New Name dialog
box, the Refers To field contains the formula,
and the Name field contains the formula’s
name. You’ll find that the contents of the
Refers To field always begin with an equal
sign, which makes it a formula.
As you can see in Figure, the workbook
contains a name “Sales” for cell H2 to H10 on
Sheet1 which
The “Refers To” field lists the following
formula:
=Sheet1!$H$2: $H$10
Whenever you use the name Sales, Excel
evaluates the formula named Sales and
returns the result. For example, you might
type this formula into a cell:
reference in your formulas. To make things
easier, you probably would name this cell
something like ServTax.
You can store the Service tax rate by using a
name (and avoid using a cell)
1. Choose Formulas > Define Name to open
the New Name dialog box.
2. Enter the name (in this case, ServTax)
into the Name field.
3. Click the “Refers To” field, delete
its contents, and replace it with “
=12.36%”
4. Click OK to close the dialog box
=Sum(Sales)*8%
When Excel evaluates this formula, it first
evaluates the sum of formula named Sales
(which exists only in memory, not in a cell).
Excel then multiplies the result of this named
formula by 8% and displays the result. This
cell formula, of course, is equivalent to the
following formula, which uses the actual cell
reference rather than the name:
=(Sheet1!$H$2: $H$10)*8%
The preceding steps create a named formula
that doesn’t use any cell references. To try it
out, enter the following formula into any cell:
Using Named Constants
=ServTax
This tip describes a useful technique that can
remove some clutter from your worksheets:
named constants.
This simple formula returns .1236 the result
of the formula named ServTax. Because this
named formula always returns the same
result, you can think of it as a named constant.
And, you can use this constant in a more
complex formula, such as this one:
Illustration 1:
Consider a worksheet that generates an
invoice and calculates Service tax for a Service.
The common approach is to insert the Service
tax rate value into a cell and then use this cell
20
=A1*ServTax
ServTax is a workbook-level name, so you can
CASC Bulletin, Oct. 2014
use it in any worksheet in the workbook.
=”Bulletin: “&CASC
Illustration 2 :
This formula returns the text Bulletin: The
Chartered Accountants Study Circle
A named constant can also consist of text.
For example, you can define a constant for a
organisation’s name. You can use the New
Name dialog box to create the following
formula, named CASC:
=”ThChartered Accountants Study Circle”
Also, you can change the value of the constant
at any time by using the Name Manager
dialog box (choose Formulas > Above Defined
Names > Name Manager). Just click the Edit
button to display the Edit Name dialog box.
Then change the value in the Refers To field.
When you close the dialog box, Excel uses the
new value to recalculate the formulas that use
this name.
(The author is a Madurai based Chartered
Accountant. He can be reached at dungarchand@
hotmail.com)
Then you can use a cell formula, such as this
one:
New forms notified under Company’s Act 2013:
Ministry of Corporate Affairs (MCA) has amendment to Companies (Appointment and
Qualification of Directors) Rules, 2014 and has come up with revised forms.
The following substituted and/or new forms have been notified:
Form Purpose
Form DIR-3
Application for allotment of Directors Identification Number
Form DIR-3A Declaration Format by person who does not have a last name.
Form DIR-3B Intimation of DIN to the company by the director
Form DIR-3C Intimation of DIN by the company to the Registrar
Form DIR-6 Intimation of change in particulars of directors to be given to Central
Government
Kindly visit www.mca.gov.in for further clarifications.
Announcement:
Please block your dates for the 16th RRC.
Dates: 24.01.15-26.01.2015
Kindly await for further announcements.
CASC Bulletin, Oct. 2014
21
CASC CHENNAI, MEMBERSHIP FEE
Corporate Membership
Corporate Annual Membership
Corporate Life Membership (20 Years)
3,000.00 PLUS SERVICE TAX
20,000.00 PLUS SERVICE TAX
Individual Membership
Annual Membership
750.00 PLUS SERVICE TAX
Life Membership
7,500.00 PLUS SERVICE TAX
CASC BULLETIN - ADVERTISEMENT TARIFF - per month
Full Page Back Cover
2,000.00 PLUS SERVICE TAX
Full Page Inside Back Cover
1,600.00 PLUS SERVICE TAX
Half Page Back Cover
1,250.00 PLUS SERVICE TAX
Half Page Inside Back Cover
1,000.00 PLUS SERVICE TAX
Full Page Inside
1,200.00 PLUS SERVICE TAX
Half Page Inside
750.00 PLUS SERVICE TAX
Strip Advertisement Inside
500.00 PLUS SERVICE TAX
Minimum 6 months advertisement is required.
If advertisement is 12 months or above, special discount of 15% is available
CASC BULLETIN - HALL RENT
HALL RENT FOR 2 HOURS
1,000.00 PLUS SERVICE TAX
HALL RENT FOR 2-4 HOURS
1,500.00 PLUS SERVICE TAX
HALL RENT FOR FULL DAY
2,500.00 PLUS SERVICE TAX
LCD RENT FOR 2 HOURS
600.00 PLUS SERVICE TAX
LCD RENT FOR 2-4 HOURS
800.00 PLUS SERVICE TAX
LCD RENT FOR FULL DAY
1,200.00 PLUS SERVICE TAX
Your demand draft should be drawn in the name of
“The Chartered Accountants Study Circle” payable at Chennai.
22
CASC Bulletin, Oct. 2014
Latin Words in Interpretation of Fiscal Laws
Compiled by CA. Louis Dominic
Ex Visceribus Actus: [Four corners of the
Act]
Meaning: The Latin word ‘Ex Visceribus’
literally means ‘from the bowels’ (the large
intestine in man); from the vital part or the
very essence of the thing. When God answer
our prayer, we thank Him from the bottom of
our heart. When we say ‘OM’ or equivalents
in other Faiths, the sound originates from
deep inside. Similarly, where the law is
ambiguous, contradictory, ultra vires or
apparently unintended, it must be answered
(interpreted) from the very essence of the
legislative intention as appearing in the Act.
In legal parlance ‘Ex Visceribus Actus’ means
(statutes must be interpreted) ‘within the four
corners of law’. Sir Edward Coke was the
author of this rule.
Need for the rule: The legislature is not
supposed to make a mistake, leave anything
unexplained, make contradictory provisions
or enact provisions which are beyond its
legislative competence. “Parliament does
not waste its breath unnecessarily. Just as
Parliament is not expected to use unnecessary
expressions, the Parliament is also not
expected to express itself unnecessarily. Even
as Parliament does not use any word without
meaning something, Parliament does not
legislate where no legislation is called for.
Parliament cannot be assumed to legislate for
the sake of legislation, nor can it be assumed
to make pointless legislation. Parliament
does not indulge in legislation merely to state
what is unnecessary or to do what is already
CASC Bulletin, Oct. 2014
validly done. Parliament may not be assumed
to legislate unnecessarily”. [Utkal Contractors
& Joinery (P) Ltd., v. State of Orissa AIR 1987
SC 1454] In short, it is a basic presumption in
law that every law enacted by the Parliament
is valid and the words therein carry the
meaning that Parliament intended. However,
the drafting/piecemeal amendments/change
in concepts and policies etc sometimes leaves
scope for differing views, in which case, the
legislative intention is ascertained by reading
the statute as a whole. It is spoken of as
construction ex Visceribus Actus. But, where
there is no obscurity in the language of the
section, there is no scope for the application
of the rule ex Visceribus Actus.
Limitation of Definitions: We noticed in an
earlier compilation that the words in the Act
must be given the meaning as given in the
definition clause. “It is a well settled principle
that when a word or phrase has been defined
in the interpretation clause, prima facie that
definition governs whenever that word or
phrase is used in the body of the statute. But
where the context makes the definition clause
inapplicable, a defined word when used in
the body of the statute may have to be given a
meaning different from that contained in the
interpretation clause; all definitions given in an
interpretation clause, are, therefore, normally,
enacted subject to the usual qualification “unless the context otherwise requires” [Read
the opening words of definition section in all
fiscal laws. This permits application of the
rule ex Visceribus Actus]. Even in the absence
23
of an express qualification to that effect such a
qualification is always implied. The meaning
of a word or expression defined may have to
be departed from on account of the subject
or context in which the word had been used
and that will be giving effect to the opening
sentence in definition section, namely, “unless
the context otherwise requires”. In view of
this qualification, the Court has not only
to look at the words but also to look at the
context, the collocation and the object of such
words relating to such matter and interpret
the meaning intended to be conveyed by
the use of the words in a particular section.”
[Commissioner of ST (Bombay) v. Union
Medical Agency 1981 SCR (1) 870]
Application of the rule in India: The Supreme
Court in Poppatlal Shah v. State of Madras,
(AIR 1953 SC 274) called it a settled rule and
observed: “It is a settled rule of construction
that to ascertain the legislative intent, all
the constituent parts of a statute are taken
together and each word, phrase or sentence
is to be considered in the light of the general
purpose of the Act itself.” Reading the statute
or the instrument as a whole requires that
every provision of the statute is construed
with reference to the context, the collocation,
the object and the other provisions of the Act
to ensure that the interpretation of a particular
provision makes a reasonable and consistent
enactment of the whole statute, obscurity is
removed, and as far as possible, the provision
is brought within the competence of the
legislature.
Instances of application:
1. The Finance Act, 1992 recast the system
of taxation of long-term capital gains.
24
The concept of cost inflation index was
introduced to off-set the effect of inflation.
The meaning of the words ‘cost to the
previous owner’ remained undisturbed.
However, one school of thought appears
to be of the view, to put it in their own
words: “As per S. 49(1) (iii) (a) of the Act
cost to the previous owner is deemed to
be the cost of acquisition to the assessee
in cases where capital asset became the
property of the assessee under transfer as
specified in the section. The Explanation
provided therein, there is no ways to
put any cost of acquisition because
even the previous owner, (assessee’s
father) acquired it through inheritance
provided U/s. 49 (1) (iii) and this is to
be excluded. So the cost inflation index
is to be applied from the year when the
assessee became the owner and not the
previous owner”. [Note: The mere use of
the label “Explanation” is not decisive
of the true meaning and scope of the
provision. Ordinarily, the purpose of an
Explanation in a statute is to clarify or
explain or settle any doubt or ambiguity
or controversy.]
The Bombay and Delhi High Courts
interpreted the words – cost to the
previous owner - with reference to the
entire scheme of taxation of capital gains
including the definitions, applied the
rule of ex Visceribus Actus and held that:
“While computing capital gains arising
on transfer of a capital asset acquired by
the assessee under a gift, indexed cost
of acquisition has to be computed with
reference to the year in which previous
owner first held the asset and not the
CASC Bulletin, Oct. 2014
year in which assessee became owner of
the asset.” [2012; 204 Taxman 691 BOM]
This point has been clarified by CBDT
in paragraph 35 of circular no: 636 dated
31.08.1992 [contemporanea exposito].
The Madras High Court considered the
meaning of ‘cost to the previous owner’
in detail in the case reported in 152 ITR
669 based on ‘A Priori theory’. This
decision holds good even today.
2. Section 74A (3) of the Income tax Act,
1961 deals with losses from horse racing
and permits set-off against income from
the same source upon the condition
that the assessee must maintain the race
horses. In the instant case the assessee
maintained the race horses through an
agent for consideration. The Department
gave a literal meaning that assessee
should personally look after the horses
and on that ground refused set-off of
losses. The court held: Construction
should be Ex Visceribus Actus, i.e.,
construction within the four-corners of
the Act. The words of a statute should be
given a sensible meaning so as to make
them effective. However complicated or
mind boggling a provision may be, the
court must attempt to give it a meaning.
This principle is laid down in the dictum:
Ut res magis valeat quam pereat [It
is better to validate a thing than to
invalidate it; better the Act prevails
than perish]. In our opinion, the words
“horses maintained by him” should not
be construed to mean that the assessee
should personally look after the horses.
The principle laid down in the dictum
“Qui facit per alium, facit per se” (He,
CASC Bulletin, Oct. 2014
who acts through another, acts himself)
is applicable. As such, horses could be
maintained through others also.
3. Whether, in a discretionary trust,
the amount received by one of the
beneficiaries can be taxed in the
individual assessment of the beneficiary
or the same is taxable in the hands of
the trustees only. The provisions of
S.160, S.161 and S.164 will have to be
read together and some portions of
S.160 and S.161 will have to be read into
S.164, in order to make the said section
workable. Indeed, even apart from the
compulsion of context and construction,
ex visceribus actus is a settled rule and,
therefore, to ascertain the meaning of
a clause in a statute, the Court must
look at the whole statute, at what
precedes and at what succeeds, and not
merely at the clause under construction,
irrespective of the setting of the other
relevant provisions in the scheme of
the statute. “The best interpretation
is made from things preceding and
following”. [EXPROCEDENTIBUS ET
CONSEQUENT IBUS OPTIMA FIT
INTERPRETATIO]
4. The Karnataka High Court interpreted
S. 64 (2) applying this rule in Gopal
Ramanarayan v. CIT 175 ITR 32.
5. Provision of S.5 of Kerala Agricultural
Income tax Act, 1950 provides for
computation of agricultural income after
making deductions enumerated in clauses
(a) to (n). Clause (j) is of residuary
nature. Question arose as to whether
Explanation 2 to the Section, making a
25
person disentitled to deduction in certain
circumstances, is applicable to residuary
clause only or to all the clauses. The
Apex Court after considering the Act as a
whole observed”. the mere fact that some
(clauses) alone are illustrated specifically,
do not render those provisions to be read
in a truncated or disjointed manner from
the residuary clause ignoring the avowed
object of S.5 as a whole, viz., computation
of agricultural income, as defined in S.2
(a) of the Act after making the deductions
to which an assessee is found eligible”
[Commissioner of Agricultural Income-tax v.
Plantation Corporation of Kerala Ltd., 247
ITR 155].
Instances of application of the rule are
many. The object is to find out the
intention of the Parliament within the
four corners of law. Speaking about
the scope and place of legislative intent
in the interpretation of provisions of a
statute, the Gujarat High Court in CIT
v. Mayur Madhukant Mehta, (1972) 85
ITR 230 cautioned that the intention of
the legislature is a common but very
slippery phrase. The nebulous concept
of the legislative intent cannot be used
to curtail the explicit provisions in a
statute. Further, the legislative intent of
a statute has, apart from other things, to
be gathered from the ‘four corners of the
MAct’.
_________________________________
An exposition which springs from
the vitals of the cause is the fittest and most
powerful in law. [EXPOSITIO QUAE EX
VISCERIBUS CAUSAE NASCITUR EST
OPTISSIMA ET FORFISSIME IN LEGE]
LATEST VAT CIRCULARS
1. Circular No. : 39/2014
Q4/27905/2014
Dated
: 8.9.2014
Sub.
: Commercial Taxes Department – Tamil Nadu Tax on Entry
of Motor Vehicles Act, 1990 – Registration of vehicles in
Tamil Nadu and payment of Entry Tax – Reg.
2. Circular No. : 40/2014
Q4/27746/2014
Dated
: 15.9.2014
Sub.
: TNVAT Act 2006 – Leakage of revenue - Arresting of tax evasion
– Verification of goods at the Premises of Railway Stations and
Parcel Offices - Directions of the Hon’ble High Court of Kerala – Reg.
26
Ref. : Southern Railway ref.No.C.30/XVI/Vol.II dated 17.2.2006.
CASC Bulletin, Oct. 2014
Recent Decisions – Customs & Excise Law
Cenvat
credit taken on fuels used in
generation of electricity outside factory
premises not admissible
In the case of Bhushan Steel & Strips Ltd
Varruchi Sharma vs CCE – 2014-TIOL-1444CESTAT-MUM, the taxpayer filed an appeal
against invoking larger period of limitation on
the issue of denying credit on fuels used for
generation of electricity wheeled outside the
factory premises for use in residential quarters
and for sale. The Tribunal while holding that
taxpayer was not entitled for Cenvat credit on
fuel took the following views on limitation:The first member took the view that since there
were divergent views available during the
period in dispute on the issue, the allegation
of suppression with intent to evade payment
of duty is not sustainable and accordingly the
demand beyond normal period of limitation
was set aside along with penalty.
The second member held that delay in issuing
the notice is solely due to conduct of the
taxpayer which clearly suggests that there
was suppression of facts with willful intention
to avail ineligible credit. It was thus held that
demand for the extended period is liable to
be confirmed. It was also held that the period
of limitation should be counted from the date
of taking suo motu credit which was earlier
reversed.
The third member took the view that taxpayer
was not entitled to avail Cenvat credit in view
of the settled position and therefore there can
be no bonafide belief on part of the taxpayer
CASC Bulletin, Oct. 2014
CA. S. Vinodh & CA. Sukhpal Singh
in availing the said credit. In brief it was held
that –
− Extended period is applicable for demand
of Cenvat credit;
− No penalty as issue
interpretation of law;
relates
to
− On the date for computation of time
limit, no decision was taken as such
by holding that such exercise is purely
academic since the demand is well within
the period of limitation.
Therefore, in view of the majority view,
demand was confirmed but penalty was set
aside
Valuation of goods in case of inter-unit
transfer
In the case of M/s ITC Ltd vs CCE– 2014VIL-135-CESTAT-CHE-CE, the taxpayer was
engaged in the manufacture of packaging
materials by using paper and paper board
supplied by their sister unit on payment of
excise duty under Rule 8 of Central Excise
Valuation Rules by following the procedure
of CAS-4. The taxpayer also cleared their
27
manufactured goods to their own units on
payment of duty by following Rule 8 of the
Central Excise Valuation Rules and CAS-4
and also sold to outsiders. The Revenue had
raised the demand by alleging that taxpayer
had contravened the provisions of Rule 8 of
Central Excise Valuation Rules on account of
undervaluation of cost of paper and paper
board and non-inclusion of unabsorbed
overheads in the cost of production.
On the issue of inclusion of debit note as a
component of cost of raw materials
The Tribunal took the view that value of
debit notes is notional in nature and cannot
be considered as cost of raw material for the
purpose of determining value under Rule 8 of
the Valuation Rules for captive consumption.
Inclusion of unabsorbed overheads due to
idle capacity in the cost of production
The Tribunal observed that ‘abnormal and
non-recurring cost’ arising due to unusual
or unexpected occurrence for keeping the
machines idle for want of job/order would
require to be considered for arriving at the
cost of production. Therefore, it was held that
abnormal idle capacity for lack of orders shall
not form part of the cost of production.
Invocation of larger period of limitation
The Tribunal held that since two issues were
decided in favour of the taxpayer and one
issue referred to larger bench, there is no need
to examine the issue of limitation of penalty.
Therefore, the division bench of the Tribunal
set aside the demand of duty along with
interest and penalty on the two issues held in
favour of taxpayer as discussed above.
28
On the inclusion of entire value of paper and
paper board (ie 115%/110%) or 100% of cost
of production excluding notional loading of
15%/10%
Since there were conflicting decisions on the
similar issue, the matter was referred to the
Larger Bench
Valuation of goods manufactured and
supplied to contractor executing a works
contract
In the case of Mazagaon Dock Ltd vs CCE
– Appeal No. E/88681/13, the issue before
Tribunal pertained to valuation of job-worked
goods supplied to contractor pursuant to a
works contract.
The taxpayer was discharging excise duty
liability on the value consisted of cost of
material supplied main contractor, design and
engineering charges, administration charges,
yard facility charges and fabrication charges.
Revenue was of the view that as the goods
manufactured by taxpayer were not sold but
captively consumed in execution of work, the
valuation must be done in terms of Rule 10(iii)
read with Rule 8 of Central Excise Valuation
Rules (i.e. 110% of cost of production).
The Tribunal observed that the contract
awarded to taxpayer was a ‘works contract’
and accordingly, supply of goods thereunder
was deemed sale subject to levy of VAT/sales
tax as per Article 366(29A) of the Constitution
of India. Further, since sale value of jobworked goods was determinable from the
agreement, Tribunal expressed its inability
to understand how the valuation as per Rule
10A(i) could not be ruled out. It stated that
there was no captive consumption of jobworked goods by the main contractor who
CASC Bulletin, Oct. 2014
only undertook installation on the platform
at site.
In view thereof, Tribunal remanded the
matter back to the adjudicating authority for
fresh consideration.
Eligibility to Cenvat credit of service tax paid
on input services relating to grass shifting/
cutting and cleaning
In the case of M/s Godrej Consumer Products
Ltd vs CCE – 2014-TIOL-1262-CESTAT-DEL,
the taxpayer disputed the denial of Cenvat
credit of service tax paid on the grass shifting/
cutting work and water removing outside the
factory.
The Tribunal observed that it was necessary
to get sweeping, cleaning of floor with water
for smooth functioning of the plant. The
taxpayer was an ISO certified company,
therefore required to follow environment
laws which include the maintenance of
garden inside the factory. The taxpayer also
required regular maintenance to eliminate
pollution free surroundings of the plant and
machinery as well as work force engaged in
the manufacture of goods
Basis above, Tribunal held that since these
are essential requirements under various
laws and was a requisite condition for the
manufacture of their final product, demand is
not sustainable.
Admissibility of Cenvat Credit of services
like document processing charges
In the case of M/s Hindalco Industries Ltd
vs CCE & ST - 2014-TIOL-1313-CESTATAHM, the taxpayer filed a stay and appeal
against denial of Cenvat credit on services
like document processing charges.
The
CASC Bulletin, Oct. 2014
taxpayer was availing Cenvat credit from
the place of removal as well as at the port
of export at the time of clearances of goods
from the factory and at the time of export.
It was also contended that these services
are essential for proper flow of funds for
undertaking manufacturing activities and fro
conducting business. Revenue denied the
credit by observing that activities undertaken
by manufacturer will not ipso-facto make the
credit admissible as it should be analogous to
the activities mentioned in relation to business
under definition of ‘input service prior to
April 1, 2011.
The Tribunal observed that service availed
in relation to ‘financing’ are specified in the
definition of ‘input service’ before and after
April 1, 2011. It was also observed that
proper flow of funds for manufacturing
activity /business of a unit are required as
financial management where such finances
are arranged from the banking channels or by
speedy recovery of amounts due from clients
or from any government department.
The Tribunal therefore granted stay on the
recovery of amounts and penalty.
Cenvat credit of duty paid on Laptops is
admissible as ‘Capital Goods’
In the case of M/s Midi Extrusions Ltd vs
CCE – 2014-TIOL-1467-CESTAT-DEL, the
taxpayer was the manufacturer of aluminium
extrusions.
Revenue denied the Cenvat
credit on laptops used for managing the
functionalities of the machines, by alleging
that laptop was movable and hence not capital
goods.
The Tribunal observed that 29
− The machines were not in a position to
work without laptop
EXIM policy and the benefits granted to the
exporter under the said policy.
− Merely because the laptop is a movable
item and can be shifted from to another
place cannot be reason to hold that the
same would not fall within the definition
of capital goods;
Inclusion of Documentation charges,
training, training aids, non recurring
expenditure and project management
charges separately charged by manufacturer
under a supply contract.
− Laptop falls within Chapter 84 and as
per the definition of capital goods, goods
falling under Chapter 84 are to be treated
as capital goods. There is nothing in the
definition to assert that movable capital
goods are not capital goods.
In the case of Brahmos Aerospace Pvt Ltd
vs CCE 2014-VIL-133-CESTAT-BLR-CE, the
taxpayers were engaged in supply of various
types of Supersonic Cruise Missiles, Ground
Support Equipment, User Documentation,
Spares for Ground Supporting Equipment,
Training Aids besides providing Training,
Infrastructure Development and Project
Management. The contract specifies the
quantities to be supplied in each category and
the price.
Basis the above observation, the Tribunal held
that taxpayer is entitled to avail the credit of
duty paid on laptops.
EOU’s DTA sale entitlement cannot be taken
away merely because there was a delay in
issuing the letter of permission by the DC
In the case of Deendayal Magasvargiya
Sahakari Soot Girni Ltd vs CCE 2014-TIOL1527-CESTAT-MUM, the taxpayer was
an EOU engaged in manufacturing. They
obtained permission from the Development
Commissioner (“DC”) for sale of manufactured
products and waste into DTA based on their
export performances. The issue before the
Tribunal was whether the benefit of DTA
clearance should be denied during the interim
period of first day of financial year and the
date of issue of permission by the DC.
The Tribunal held that accrued/vested right
cannot be taken away merely because there
was a delay in issuing the letter of permission
by the DC. An interpretation that DTA sale
is not permissible during the interim period
would make a mockery of the provisions of
30
The taxpayer did not pay excise duty on
documentation charges, training, training
aids, non-recurring expenditure and project
management.
Revenue demanded excise duty on
documentation expenses, NRE, project
management, training and training aids
and Hub extension supplied to army on the
grounds that these are additional consideration
flowing from buyer to seller.
The Tribunal observed that the contention
of the taxpayer that documents supplied are
classified under CETH 49.01 and therefore are
completely exempted even if they are related
to missiles supplied by them was not accepted.
The documentations relating to the missiles
are definitely attributable to the designs,
plans, sketches, development of missiles and
therefore are covered under clause (iv) of
CASC Bulletin, Oct. 2014
Explanation (1) to Rule 6 of Central Excise
Valuation Rules. Since the seller is producing
the missile and supplying to the buyer and
is charging for documents and hence it is an
additional consideration,
The Tribunal thus held that documentation
charges was includible. However, as regards
other expenses, the Tribunal observed the
following
− Training or training aids was a post-sale
activity and unless the missile is ready,
produced and ready to fire, there cannot
be any training. Hence the same was not
to be added to the value of goods;
− Project management fees was definitely
relatable to sale of goods being valued
and is includible;
− Non-recurring expenditure paid to the
taxpayer for research and development
and up-gradation of the systems etc
was related to production and hence
includible
Appeal can be dismissed for non-compliance
of the conditional stay granted by the
Tribunal
In the case of Chitra Construction Pvt Ltd vs
CESTAT 2014-TIOL-1138-HC-MAD-ST, the
appeal was filed before High Court against
the order of Tribunal who dismissed the
appeal filed by the taxpayer herein for noncompliance of the conditional stay granted by
the Tribunal.
The Tribunal had directed the taxpayer to
deposit an amount within a specified period
and report compliance on a specified date.
On the specified date, the taxpayer did not
appear to report compliance and therefore
CASC Bulletin, Oct. 2014
tribunal dismissed the appeal.
The High Court held that Section 35-F of the
Central Excise Act, 1944 states that before filing
an appeal the duty demanded or the penalty
levied should be deposited, unless the same is
dispensed with by the Tribunal. In case such
deposit as contemplated under Section 35-F
of the Central Excise Act is not deposited, the
appeal is liable to be dismissed.
Extension of stay beyond the total period of
365 days by Tribunal
In the case of Commissioner vs Small
Industries Development Bank of India 2014VIL-179-GUJ-CE, the question before the
High Court is whether the Appellate Tribunal
can extend the stay beyond the total period of
365 days from the date of passing of the initial
stay.
The High Court held as follows:
− According to section 35C(2A) of the
Central Excise Act, 1944, it cannot be
inferred a legislative intent to curtain
/ withdraw power of the Appellate
Tribunal to extend stay beyond the total
period of 365 days
− Extension would always be subject
to satisfaction of Tribunal and on an
application made by the taxpayers to
extend stay and that the delay is not
attributable to the taxpayers
− It may not be construed that widest
powers are given to the Tribunal to
extend the stay indefinitely. The Tribunal
is required to dispose of the appeal at the
earliest and pass a speaking order while
extending stay.
31
furnishing a BG; Thus, the condition
of providing BG by a Status Holder is
repugnant to the privilege granted under
the FTP;
Bank Guarantee exemption for Status
Holders under Foreign Trade Policy
In the case of BRG Iron & Steel Co Pvt Ltd
vs Union of India – 2014-TIOL-1526-HCDEL-CUS, taxpayer is a Status holder who
obtained the Advance Authorisation (“AA”)
under Foreign Trade Policy (“FTP”) filed
the appeal against a communication issued
by Additional Director General of Foreign
Trade (“Additional DGFT”) restricting the
entitlement under AA and also to submit the
AA for endorsement of BG condition for the
differential amount;
The High Court observed the following:On the issue of entitlement under AA
• In terms of para 4.7.1 of HBP, BRG being
a status holder is entitled to 500% of the
value of exports in the preceding year. Since taxpayer had applied for AA on
March 14, 2012, the relevant preceding
year would be 2010-11;
• In terms of para 4.7.1 of HBP, the correct
value of AA would be five times the
export declared by taxpayer and the
restriction on entitlement is correct.
On the issue of furnishing BG
• One of the privileges extended to Export
and Trading House Status Holder is that
they are exempt from furnishing BG by
virtue of clause (v) of para 3.10.4 of
FTP;
• Para 4.7.1 of HBP provides for the
quantum of entitlement of AA and para
4.7.3 of the HBP expressly provides
that an authorisation in excess of the
entitlement would be permitted on
32
• The scheme of FT (D&R) Act, FTP, role of
DGFT, HBP are notified for the purpose
of carrying out the policy as formulated
by CG; Since FTP expressly provides that
a Status Holder will have the privilege
of exemption from providing a BG, the
HBP which provides for the procedure
in aid to FTP cannot impose a condition
which mitigates against the said policy
• Thus, it was held that repugnancy
between clause 4.7.3 of HBP and para
3.10.4 (v) of FTP must be resolved in
favour of the FTP;
• Therefore, the condition imposed under
clause 4.7.3 of HBP to the extent it
requires a Status Holder to provide a
BG to the CA is contrary to policy and
is thus liable to be set aside.
Bars domestic sale of imports under Advance
Authorisation before Export Obligation
fulfillment
In the recent ruling of Unimark Remedies
Ltd and Others vs CC (Appeal No. C/270 to
274/11 & C/270 to 274/11), the taxpayer was
the manufacturer of bulk drugs by importing
majority of inputs under Advance Licence
(“AL”) and some inputs also procured locally. The taxpayer is selling those drugs in the
domestic market and also exporting the same
outside India. The taxpayer filed the appeal
against the order of the Commissioner of
Customs (“CC”).
The
Tribunal
observed
and
held
the
CASC Bulletin, Oct. 2014
following:-
additional export obligation to be fulfilled.
Goods manufactured out of duty free inputs
were cleared in the domestic market before
fulfillment of EO
Domestically procured goods have been used
against exported goods and imported inputs
have been used for goods cleared in domestic
area
Before fulfillment of EO, clearance of final
products in the domestic market by using the
duty free imported goods is a clear violation
of the condition of AL;
The term ‘physically incorporated’ only
implies that such items are required for the
manufacture and it is not necessary that only
imported exempt material is incorporated.
In the condition sheet attached to AL, it is
clear that exempt material is required to be
utilised in accordance with the provision of
Foreign Trade Policy (“FTP”) and the relevant
Notifications and the said conditions were
violated.
The Tribunal observed the following:
Raw material actually imported is excess than
the norms fixed under SION
The exemption is granted to raw materials
imported against AL issued in terms of FTP
and is subject to limitation provided in the
Notifications. FTP does not state that the AH
can use the surplus material for own use;
HBP also clarifies that duty is to be paid or
The imported inputs have not been used
against the specified AL which is a clear
violation of the Notifications and FTP. The
raw material imported are required to be used
in specific export for claiming duty free import
of inputs. Since the imported raw materials
are not used in the exported product, the plea
of debiting the value of inputs against some
other licenses was rejected
Import of raw materials in excess of norms
specified in AL under Adhoc basis
Export Obligation Discharge Certificate is yet
to be obtained for the disputed AL. There is
no evidence that Export Obligation Period is
extended and the condition specified in the
Notifications is not satisfied.
The Tribunal, therefore upheld the demand
for the above issue.
(The authors are a Chennai based Chartered
Accountants. They can be reached at s.vinodh@
bmradvisors.com & sukhpal.singh@bmradvisors.
com respectively)
ANNOUNCEMENT:
Mr. M. Rathinasamy, IRS, Director of Income Tax (International Taxation), Chennai has
been kind enough to address us on the subject “International Taxation - Procedural
Issues” on 30.10.2014. Hence, members are requested to send in their queries and /
or issues faced by them to enable the speaker to deal upon the same. Kindly send the
same by 20th October, 2014 to CASC at [email protected] in order to enable us to
compile the same and forward to the learned speaker.
CASC Bulletin, Oct. 2014
33
Loan To Directors And Other Interested
Entities Under The New Regime
Restriction on granting of loan to its directors
by a company and other entities in which
directors are interested has been one of the
most touching issues in the Companies Act,
2013, since 12th September 2013, when Ministry
of Corporate Affairs notified 98 Sections of the
Companies Act, 2013 to become effective and
applicable from that date.
Section 185 of the Companies Act, 2013 which
contains provisions dealing with granting
of loans & advances and providing of
guarantees and securities by a company to its
directors and other entities in which directors
are interested got notified with effect from
12.09.2013. This section is applicable both to
private and public companies. This section
in general prohibits a company to grant
loans or advances or provide guarantees and
securities, in any manner, to its directors or
other entities in which directors are interested
subject to few exceptions discussed below.
Section 295 of the Companies Act, 1956
contained similar provisions, but with two
important differences. One, the Section was
not applicable to Private Companies. This
meant that Private Company was not governed
by the restrictions imposed by Section 295
and was free to grant loans to its directors.
Secondly, even in case of public companies,
these transactions could be undertaken with
the approval of Central Government. But
now the situation has changed completely.
RESTRICTION ON LOAN TO DIRECTORS
AND OTHER INTERESTED ENTITIES
34
CS. Smita Chirmar
SECTION 185)
Companies Act, 2013 prohibits loan in any
form by a company to any of its directors and
other persons in whom director is interested
subject to the exceptions given below and
subject to any other provision provided in the
Act regarding this. This section is applicable
both to private and public companies.
Section 185 prohibits following transactions
between a company and its directors/other
persons in whom director is interested:
• Advancing any loan, including any loan
represented by a book debt
• Giving any guarantee or providing any
security in connection with any loan
taken
Entities to which the above transactions are
prohibited:
• any director of the company
• any director of the holding company
• any partner or relative of director of
company or holding company
CASC Bulletin, Oct. 2014
• any firm in which any such director or
relative is a partner
• any private company of which any such
director is a director or member
• any body corporate at a general meeting
of which not less than 25% of the total
voting power may be exercised or
controlled by any such director, or by
two or more such directors together
• any body corporate, the Board of directors,
managing director or manager, whereof
is accustomed to act in accordance with
the directions or instructions of the
Board, or of any director or directors, of
the lending company.
the Reserve Bank of India.
• Any loan made by a holding company
to its wholly owned subsidiary company
or any guarantee given or security
provided by a holding company in
respect of any loan made to its wholly
owned subsidiary company is exempted
from the requirements under this section
provided such loans made are utilised by
the subsidiary company for its principle
business activities.
• Any guarantee given or security provided
by a holding company in respect of
loan made by any
bank or financial
institution to its subsidiary company is
exempted from the requirements under
this section provided such loans made
are utilised by the subsidiary company
for its principle business activities.
Penal Provisions:
RESTRICTED TRANSACTIONS
Exceptions:
• Giving of any loan to a managing or
whole-time director as a part of the
conditions of service extended by the
company to all its employees or pursuant
to any scheme approved by the members
by a special resolution.
• A company which in the ordinary course
of its business provides loans or gives
guarantees or securities for the due
repayment of any loan and in respect of
such loans an interest is charged at a rate
not less than the bank rate declared by
CASC Bulletin, Oct. 2014
Company:
Fine, which shall not
be less than Rs. 5 Lakhs
but which may extend
to Rs. 25 Lakhs.
Director
or
other person to
whom any loan
is advanced or
guarantee
or
security is given
or provided in
connection with
any loan taken
by him or the
other person:
Imprisonment which
may extend to 6
months
or
Fine which shall not be
less than Rs. 5 Lakhs
but which may extend
to Rs. 25 Lakhs,
or
Both.
(The author is a Chennai based Company
Secretary. He can be reached at smita.chirimar@
gmail.com)
35
Revised Forms and Procedure and for allotment of Director Identification
Number, listing in Independent Directors Repository
Ministry of Corporate Affairs (MCA) has amendment to Companies (Appointment and
Qualification of Directors) Rules, 2014 and has come up with revised form DIN-11 related to
appointment/cessation of directorship. Also three new e-forms have been introduced. The
summary of amendment made is as under:
Rule 6(2)
The requirement of following information has been removed for eligible and willing persons to be appointed as independent directors
for listing in Independent Directors Repository
Income Tax PAN - Clause (c)
The mother’s and spouse’s name - Clause (d)
Rule 6(4)
The condition Any person who desires to get his name included in the
data bank of independent directors shall make an application to “the
agency” in Form DIR-1 Omitted
Rule 9(3)
The requirement to verify the contents of DIR-3 has been added.
Requirement of verification in DIR-4 removed.
Rule 9 (4)
New clause (4) added to provide that in case the name of a person
does not have a last name, then his or her father’s or grandfather’s
surname shall be mentioned in the last name along with the declaration in Form No. DIR-3A.
Rule 10(1), (2), (3)
The practice of issuing “Provisional DIN” has been withdrawn and
till the DIN is confirmed by the Central Government, an “application
Number” shall be generated and allotted by the system.
Rule 10A
New Rule 10A inserted o provide that Every director, functioning as
a director in one or more companies on or before the 30th June, 2007
and who has not yet intimated his DIN to such company or companies
shall, within one month of the receipt of Director Identification Number from the Central Government, intimate his Director Identification
Number to the company or all companies wherein he is a director as
per Form DIR-3B.
The intimation by the company of DIN of its directors under section
shall be furnished in Form DIR-3C within fifteen days.
Rule 12(1)
In case of any change in the particulars specified in DIN, the form
DIR-6 shall now be filed electronically.
36
CASC Bulletin, Oct. 2014
The following substituted and/or new forms have been notified:
Form
Purpose
Form DIR-3
Application for allotment of Directors Identification Number
Form DIR-3A
Declaration Format by person who does not have a last name.
Form DIR-3B
Intimation of DIN to the company by the director
Form DIR-3C
Intimation of DIN by the company to the Registrar
Form DIR-6
Intimation of change in particulars of directors to be given to Central Government
Source: abcaus.in
Facilities Available to Account Holders Under Pradhan Mantri Jan Dhan Yojana
(PMJDY) to be Extended to the Existing Account Holders as Well
The Government has decided that the following facilities available to those account holders
who have opened their accounts under Pradhan Mantri Jan Dhan Yojana (PMJDY) would
also be extended to the existing account holders subject to submission of an application by
the account holder(s) to the concerned bank branch:
(i) For issuance of RuPay Debit card having inbuilt accident insurance cover of Rs.1 lakh;
(ii) For issuance of an overdraft facility of Rs.5000 after satisfactory operations in the
account for some time.
The plan (PMJDY) inter-alia, envisages Universal access to banking facilities under which
all the six lakh villages across the entire country would be mapped, organised into Sub
Service Areas (SSAs) of 1000-1500 households and allocated to the Banks to provide at
least one fixed point Banking outlet in form of either a branch or a Business Correspondent
(who is named as Bank Mitra). The other components of the plan are providing at least one
Basic Banking Account to each household with RuPay Debit card having inbuilt accident
insurance cover of Rs. 1 lakh; an overdraft facility of Rs.5000 after satisfactory operations
in the account for six months. Further, an additional life insurance cover of Rs. 30,000/- is
also available to accounts opened up to 26th January, 2015, for which detailed modalities
are being worked-out.
The Government has asked the banks to extend overdraft facility of Rs.5,000 as above to
only one member, preferably lady of a house-hold.
********
DSM
(Release ID :109735)
CASC Bulletin, Oct. 2014
37
F.No.Dir(Hqrs.)/Ch.(DT)/29/2013
Government of India
Ministry of Finance
Department of Revenue
{ Central Board of Direct Taxes }
Room No.155, North Block, New Delhi,
Dated the 22vd August, 2014.
OFFICE MEMORANDUM
Subject: Instructions to maintain the schedule of appointments with tax payers etc.-reg.
It has been brought to the notice of the Board that some of the officers are issuing
notices to the taxpayers/witnesses/representatives etc. indicating a standard time of
appointment. Thus, many persons called for hearing etc. on a day by an officer are given
the same time for appearance. Naturally the persons are made to wait for their turn.
Such actions, apart from causing avoidable inconvenience to the taxpayers/witnesses/
representatives etc. cause great embarrassment to the Government.
All the officers, are therefore, advised to strictly maintain the appointment schedule
in spirit with the Citizen’s Charter, 2014 of the Department which specifically provides
that we (in the Department) endeavour “to adhere to the schedule of appointments with
taxpayers”. All the Supervisory officers, i.e. the CCsIT, CsIT and the Addl. CsIT are
requested to ensure that officers reporting to them strictly comply with this instruction
and avoid fixing multiple appointments at the same time. Instances of disregard to these
instructions may be viewed seriously.
This issues with the approval of Chairman, CBDT
–Sd–
(Anil Uniyal)
Dir.(Hqrs.),CBDT
To
All Pr. CCsIT/Pr. DGsIT/ CCsIT/DGsIT for ensuring compliance in their respective
jurisdiction.
Copy to: PSs to Chairman/Members /CBDT.
38
CASC Bulletin, Oct. 2014
Minutes Out Of Discussion Held by
The Study Group on Companies Act, 2013
The depreciable amount of an asset is the cost
of an asset or other amount substituted for
cost, less its residual value.
Issue As per erstwhile Companies Act 1956,
when assets were revalued it was possible
for a company to transfer from revaluation
reserve an amount equal to the excess
depreciation calculated on the revalued
additions, to neutralize the impact on the
profit and loss account. This was provided
as per the guidance issued in respect of use
of revaluation reserves. Now the Companies
Act 2013 uses the word amount substituted
for cost while calculating depreciation, does
this mean the option of transferring from
revaluation reserves is no longer available?
Group View: The Additional depreciation to
be debited to P&L and not to be adjusted from
the revaluation reserve. This is in view of the
wording ‘amount substituted for cost’. ICAI
to clarify whether the principles outlined in
the erstwhile guidance note can be applied or
not.
Issue Can the residual value be zero?
useful life and residual value of the assets.
Can the company have a different useful life
as well as different residual value other than
those prescribed in Part C.?
Group View: It is possible only for those
company who are to be notified under para
3(1)
Issue A Ltd within its operations within a
township comprising of its factory building,
godowns and staff quarters. So far it has
provided depreciation on the building on
at the rates applicable to factory building
because when it planned the factory and
other facilities it estimated the life of the entire
township to be the same.
Group View: As per notes 1 to schedule II
“Factory buildings” does not include offices,
godowns, staff quarters. Hence the company
has to segregate the building into factory
building and others. Within other buildings
it has to segregate into RCC and non RCC.
This may pose practical difficulties in
implementation. ICAI guidance is required.
Group View: As para 3 (1) when a company
is given a freedom to determine a residual
value other than prescribed in Part C, it can be
interpreted to adopted a residual value at Nil
also provided adequate disclosure based on
a technical evaluation to be made. The group
differed in views whether the ‘limit’ for the
purpose of mandatory technical evaluation is
taken at 5% or more
Issue SL no 4 of notes to Schedule II reads
as follows: Useful life specified in Part C of
the Schedule is for whole of the asset. Where
cost of a part of the asset is significant to total
cost of the asset and useful life of that part is
different from the useful life of the remaining
asset, useful life of that significant part shall
be determined separately. Does this mean
component method of providing depreciation
is mandatory?
Issue: II Part C of the schedule II prescribes
Group View: It is voluntary for F. Y. 14-15
CASC Bulletin, Oct. 2014
39
and mandatory from 15-16
Issue. When the asset is revalued on what
amount the residual value to be calculated? Is
it on cost or is it on revalued amount?
Group View: Residual value shall not exceed
5% of the original cost of the assets in whatever
manner it is calculated.
VII. SL No 7 of notes to Schedule II reads as
follows
From the date this Schedule comes into effect,
the carrying amount of the asset as on that
date—
(a) shall be depreciated over the remaining
useful life of the asset as per this
Schedule;
(b) after retaining the residual value, shall
be recognised in the opening balance of
retained earnings where the remaining
useful life of an asset is nil.
Issue What practical impact this will have?
Group View: If the life of an asset is expired
then the company has an option to debit to
retained earnings or charge to profit and loss
account.
If the life is less than 1 year, then it will be
charged to profit and loss account.
Where the useful life as on 1st April 14 is more
than 1 year, then it will be spread over the
balance period estimated.
VIII. How to resolve the inconsistency
between AS 6 and Note SL No 7
The Depreciation on fixed asset as per
Schedule-II of Companies Act, 2013 became
operational from 01/04/2014 vide MCA
40
notification no S. O.902(E) dated 26/03/2014.
In new era of depreciation, useful life of the
asset plays a crucial role for calculation of
depreciation. The change in the method of
providing depreciation from fixed percentage
(Schedule-XIV of Companies Act 1956) to
useful life (Schedule-II of Companies Act,
2013) requires change in accounting policy of
the company. For change in accounting policy,
provision contained in Accounting Standards5 “Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies” as
well as AS-6 “Depreciation Accounting” both
are required to be taken into consideration.
Para- 21 of AS-6, Depreciation Accounting:
“The depreciation method selected should be
applied consistently from period to period.
A change from one method of providing
depreciation to another should be made
only if the adoption of the new method is
required by statute or for compliance with
an accounting standard or if it is considered
that the change would result in a more
appropriate preparation or presentation of
the financial statements of the enterprise.
When such a change in the method of
depreciation is made, depreciation should
be recalculated in accordance with the new
method from the date of the asset coming into
use. The deficiency or surplus arising from
retrospective re-computation of depreciation
in accordance with the new method should be
adjusted in the accounts in the year in which
the method of depreciation is changed. In case
the change in the method results in deficiency
in depreciation in respect of past years, the
deficiency should be charged in the statement
of profit and loss. In case the change in the
method results in surplus, the surplus should
CASC Bulletin, Oct. 2014
be credited to the statement of profit and loss.
Such a change should be treated as a change
in accounting policy and its effect should be
quantified and disclosed.
Group View: Determination of useful life is
an estimate. Whether any change in the useful
life would result in merely a change in estimate
or change in method of depreciation. Pending
a resolution of this issue, group viewed that
Schedule II will prevail over AS 6
Issue. How to treat assets costing less than Rs.
5000/Group View: Schedule II does not specifically
provide that asset costing less than Rs. 5000
to be written off. However on materiality
considerations the company may take a
call and determine the threshold for 100%
depreciation.
Issue An asset has a fixed production
capacity and has balance of XXX capacity
when the schedule II was notified. Hitherto
the company was following SLM basis at the
rates specified as per erstwhile schedule XIV
of the companies act 1956. Can it now switch
over to Unit of Production method?
Group View The key issue is whether the
switching over can lengthen the life of an asset
beyond the period prescribed under part C.
As per notification dated 29th Aug 14
“(i) The useful life of an asset shall not
ordinarily be different from the useful life
specified in Part C and the residual value of
an asset shall not be more than five per cent.
Of the original cost of the asset:
Provided that where a company adopts a
useful life different from what is specified
CASC Bulletin, Oct. 2014
in Part C or uses a residual value different
from the limit specified above, the financial
statements shall disclose such difference
and provide justification in this behalf duly
supported by technical advice”;
On the above basis it is possible that the
company can switch over to providing
depreciation on the basis of unit of production
method
Issue The application of component accounting
is likely to cause significant changes in
accounting for replacement costs. Currently,
companies need to expense such costs in the
year of incurrence. Under the component
accounting, companies will capitalize these
costs, with consequent expensing of net
carrying value of the replaced part. How to
resolve this when accounting standard has
not subscribed to this treatment?
Group View: Para 4(a) of the amended
notification of 29th Aug 14 states that Useful
life specified in part c of the schedule is for
whole of the asset and where cost of a pad
of the asset is significant to total cost of the
asset and useful life of that part is different
from the useful life of the remaining asset,
useful life of that significant part shall be
determined separately. Para 8.2 of AS 10
speaks of spares and it does not components.
Hence it is possible to adopt a different life for
a component
Issue. How the rates of depreciation will be
arrived at for each class of asset under WDV
method as per Schedule II, when each asset is
capitalized at different dates in a year?
Group View: It can be worked out. Use the
excel sheet enclosed.
41
Minutes of proceedings at the first meeting of
The Study Group on Direct Taxes
Topic – Tax Audit U/s. 44AB – Issues & the New Form 3CD
Discussion
Issue No. 1
The First Issue which was taken up was
relating to the confusion created by the Order
U/s. 119 Issued by CBDT (F.No.133/24/2014TPL dated 20th August, 2014).
Going by the provisions of the Act, Section
44AB, Section 139(1), 139C & 139D, it seems
that the CBDT has gone beyond powers by
asking the Chartered Accountants to upload
the form online. In case the assessee obtains
the hardcopy of the audit report and does
mentions the date of the audit report and the
date on which the same has been handed over
to the assessee in the return form. There are
many decisions in which it has been held that
the audit report can be submitted during the
assessment proceedings. It could also lead to
discussion relating to the code of ethics under
the Chartered Accountants Regulations.
For the benefit of the discussion to be carried
forward the Issues / Questions were framed by
CA. Uttamchand Jain into broad categories–
Issue No. 1 – Whether the uploading of the
Tax Audit Report is Valid as per Income tax
Act, 1961? What are the consequences, if not
uploaded by the Chartered Accountant?
Issue No. 2 – Whether the Order U/s. 119
issued by CBDT on August 20, 2014 extended
the due date of filing of return U/s. 139(1)?
Whether the period also gets extended for
application of Section 43B, 40(a), etc.?
Issue No. 3 – Whether the tax Audit report
Uploaded and accepted by the Assessee
during the period 24th July, 2014 till 29th July,
2014 will be valid?
Issue No. 4 – Whether the tax Audit report
Uploaded and not accepted by the Assessee
during the period 24th July, 2014 till 29th July,
2014 will be valid?
Issue No. 5 – Whether the Tax Audit Report
Issued prior to 24th July, 2014 will be valid?
What are the consequences and remedy
available, if any?
Issue No. 6 – Whether the audit U/s. 44AD,
44AE, etc. – presumptive taxation – time
limit for submission of audit report also gets
extended?
42
Issue No. 2
References – Order U/s 119 dt 20.08.2014,
44AB, 44AD, 139
The Various provisions were analysed, the
usage of the word Obtaining and Furnishing
of the Audit report under section 44AB of the
Act. A reference to section 44AB was made,
wherein it has been prescribed that every
person, fulfilling the conditions under any of
clause (a) to (d), shall get his account audited
by an accountant before the specified date and
furnish by that date the report in prescribed
form
Further, explanation to section 44AB, defines
specified date as a due date for furnishing the
return of income under 139(1).
Section 139(1) prescribes that every person
shall on or before due the date furnish a return
CASC Bulletin, Oct. 2014
of income. Explanation 2 to section 139(1)
prescribes the due date as July 31, September
30 or November 30 as the case may be.
It was discussed that there is a gap in the
provision that 44AB refers 139(1) and there is
no date prescribed therein. Hence, in a logical
conclusion, it is drawn that due date in the
explanation under section 139(1) should be
specified date.
Hence it is in this backdrop, the due date of
return filing should logically be extended
to November 30 2014, or otherwise the
notification would become absurd.
Other practical issue with respect to the
return filing utility was also discussed. It was
pointed out that without furnishing the date
of furnishing of audit report, the utility would
not generate a xml file and accordingly it
would not possible to file the return of income
in the present scenario.
Other concerns which were raised, that the
due date of filing of return will affect the
provisions with respect to 40(a) (ia), 43B, carry
forward of losses etc.
It is recommended by the group, that assesse
(especially those who have losses) are advised
to consider the above issues and file before
September 30 until a clarification is received
from the CBDT.
Issue No 3
It was discussed that the tax Audit report
Uploaded on or before July 24, 2014 and
accepted by the Assessee during the period
24th July, 2014 till 29th July, 2014 will be valid,
since once the assessee accepts the TAR, the
date of filing of TAR would be date it is filed
by the CA.
CASC Bulletin, Oct. 2014
Issue No. 4
The TAR is filed on or before July 24, 2014
and same was not accepted between 24th
July, 2014 and 29th July, 2014, in this scenario,
the assessee could not have accepted the
TAR after July 29, 2014, since the utility in
the website was disabled. It was pointed out
there could only be 2 option
Option 1 – Either, the assesse should request
the Chartered Accountant to issue a fresh
Form 3CD as well as upload the same on to the
website. However, the Chartered Accountant
is advised to follow the procedure for calling
back the audit report issued and issue of a
fresh report in lieu thereof.
Option 2 – New form 3CD could be filed with
giving appropriate clarification that the audit
was completed before the due date, however
the same was not filed in the website. The
new columns may left blank and then the
form 3CD can be filed.
Issue No. 5 – Whether the Tax Audit Report
Issued prior to 24th July, 2014 will be valid?
What are the consequences and remedy
available, if any?
Audit completed in Old Form 3CD on or
before July 24, 2014. However the same was
not filed in the website. (Examples in case
of Branches of Banks, Insurance companies,
etc.)
It was pointed out there could only 2 options
Option 1 – Either, the assesse should request
the Chartered Accountant to issue a fresh
Form 3CD as well as upload the same on to the
website. However, the Chartered Accountant
is advised to follow the procedure for calling
back the audit report issued and issue of a
43
fresh report in lieu thereof.
Option 2 – The Chartered Accountant
uploading the Form 3CA along with Form
3CD may clarify or give an observation or
qualification in relation to the contents in
Form 3CD by mentioning appropriately in last
para of Form 3CA stating that the Form 3CD
issued in the erstwhile Form 3CD has been
relied upon for the branches and compilation
has been carried out wherever possible.
Issue 6
The group concluded the unanimously that
the due date for all tax audit report covered
under section 44AB is extended. The order
under section 119, clearly prescribes tax audit
carried on under section 44AB and does not
refer to any specific clauses.
Discussions on the above issues, there were
other issues raised such as
1. Legal position with respect to initiating
of forms by the Auditor in the website.
Whether the existing process of CA
initiating the forms legally valid.
2. What would happen if the assesse has
obtained an audit report in hardcopy and
auditor does not initiate in the website.
In this case, The assesse has complied
with the provisions of section 44AB.
3. Whether in Scenario 2, the auditor
should call for the old report and issue
a new report, would required to follow
the procedures laid down by the ICAI.
4. Which form the followed, whether the
form notified by the notification or the
utility. Since there are differences in the
forms.
5. Whether the changing of utility in the
website without any notification is
valid.
The conveners requested that there should
be more participation from each of the group
members. Further, in light of the additional
issues raised and also considering the
importance of the topic, the group members
requested that there should be additional
meetings on the same topic.
Important Communication from TDS CPC:
Communication No. 27, dated 10.09.2014
Source: http://contents.tdscpc.gov.in/en/tdscpc-communication.html#
One of the important points is as under:
The CPC (TDS) system gives credit of TDS against different sections of the act, even
though a specific section has been quoted in the challan.
44
CASC Bulletin, Oct. 2014
Minutes of proceedings at the first meeting of The Study Group on
Indirect Taxes
Queries raised with clarifications:
1. What is a TNVAT Assessment? How an
assessee is selected for assessment?
Under the Provisions of TNVAT, the monthly
filing of returns itself a provisional selfassessment. The VAT Assessing Officer, a
notice shall be sent to the assesse in case of
any query by the AO
The assessment is selected by way of random
selection, the number of cases selected shall
not exceed 20% of the total assessment for a
year.
2. How VAT returns are filed?
The month on month VAT returns are filed
online through TNVAT website. The online
facility of VAT return filing will be available
in the TNVAT website only for the past two
months of VAT return, after which the assesse
has to file the return manually.
For eg. On 20th August 2014, the assesse can
file the return online for July & June 2014
only.
3. Is there an option of filing the revised
return online?
Yes, Returns can be modified with in a period
of 6 months from the date of filing of filing of
original return.
As of now, there are no provisions available
in the TNVAT website for filing the revised
returns. Hence revised returns are to be filed
manually, within the prescribed period.
4. What is the time limit for re-opening of
CASC Bulletin, Oct. 2014
Assessment? And for how many years
Assessing officers are authorised to
inspect the Books of accounts and other
records?
Under section 27 (1) (a) of the Act, the time
limit for re-opening of assessment is 6 years
from the date of assessment and the with
in the same period the Assessing officer is
authorized to Inspect the Books of accounts
and relevant records.
5. What is the remedy in case an assessee
receives a notice for mismatch of Input
Tax Credit (ITC)?
There may be several reasons for mismatch of
ITC as claimed by the purchaser of the goods.
Once such reason may be manual Return
filing by the seller of the goods.
The notice issued for the above reason, will
also contain Interest/Penalty u/s 27(4) of 50%
of the amount claimed as ITC and 100 % of
ITC in subsequent cases.
In such cases, the assesse can submit a copy of
the Invoice, along with the proof of payment
of tax by the seller. And on submission of the
said documents and perusal of the documents,
the assessing officer may treat the same as
compliance.
6. What is the remedy in case an assessee
receives a notice for mismatch of Input
Tax Credit (ITC) for the reason that the
registration of the seller is cancelled or
an Invalid TIN?
If the notice received is for the reason that
registration of the seller is cancelled by the
45
VAT authorities, then ITC has be reversed,
since there was no input is passed on to the
purchaser.
and such goods used for manufacturing or
stock transferred to a place outside the state
or distributes otherwise by way of sale.
In the above case, if the purchaser has paid
the VAT liability, inspite of cancellation of the
TIN, then the Assessing officer may pass the
ITC to the purchaser, since there is no revenue
loss to the Authorities.
Purchase tax liability cannot be paid by way
of ITC adjustment.
For claim of huge of ITC/first time claim of
ITC from the seller, it is advisable to verify the
TIN before claim of ITC in the Vat returns.
7. What is Form JJ? How long the Form JJ
are to be preserved?
Form JJ is a document to be accompanied
along with movement of goods for Intra
Company purpose specifically for Interstate
movements. It can also be used for Intra state
movement of goods.
Form JJ are to be maintained as serially
printed numbered, issued chronologically
and in quadruplicate manner.
For payment of purchase tax, the payment has
to be made by way of a separate cheque.
The Purchase tax paid can be taken as ITC,
only within the same financial year. For eg.
Purchase tax paid on 30th December 2013,
identified during the TNVAT audit of 201213, cannot be taken as ITC.
If the ITC is claimed in December 2013 VAT
returns, such ITC has to be reversed and taxes
are to be paid along with Interest/penalty.
If purchase tax is paid in pursuant to notice
from the VAT authorities, ITC cannot be
claimed on such payments.
8. What is Purchase Tax? Can ITC be
claimed on such Purchase Tax?
9. A dealer purchases oil worth Rs.50,000.
Since the turnover of the Seller not
crossed Rs.5 crores, the seller has not
charged VAT in the Invoice. Is the
Purchaser liable to pay Purchase tax?
In case of purchase of Taxable goods from a
dealer, who has not levied tax in the Invoice
Yes. The purchaser is liable to pay the Purchase
Tax out of cash and not out of ITC available.
46
CASC Bulletin, Oct. 2014
F.No.153/53/2014-tpl (Pt.I) Government of India Ministry of Finance
(Department of Revenue)
(Central Board of Direct Taxes)
North Block, TPL Division
th
New Delhi, the 26 September, 2014
Order under section 119 of the Income-tax
Act, 1961
Section 44AB of the Income-tax Act, 1961
(„the Act„) read with rule 6G of the Incometax Rules, 1962 („the Rules„) requires certain
persons to file tax audit report in Form
No.3CA/Form No.3CB along with prescribed
particulars in Form No.3CD. Vide Notification
th
No. 33/2014 dated 25 July, 2014, the forms
for filing tax audit report have been revised.
As per section 44AB of the Act, the tax audit
report has to be obtained and furnished
th
electronically by 30
November of the
Assessment year in case of an assessee who
is required to furnish report under section
th
92E of the Act and 30
September of the
Assessment year in case of other assessees.
2. In view of the representations received
by the Central Board of Direct Taxes („the
Board„), the due date for obtaining and
furnishing of tax audit report under section
44AB of the Act for assessment year 2014-15
in respect of assessees who are not required
to furnish report under section 92E of the
th
Act has been extended from 30 September,
th
2014 to 30
November, 2014 vide Order
th
No.133/24/2014-TPL dated 20
August,
2014 in exercise of power of the Board under
section 119 of the Act. It has been further
clarified that the tax audit report filed during
the period from 01.04.2014 to 24.07.2014 in the
pre-revised forms shall be treated as valid tax
audit report under section 44AB.
CASC Bulletin, Oct. 2014
3. After the extension of the due date for
obtaining and furnishing of tax audit report
under section 44AB of the Act, a number of
representations have been received in the
Board requesting for extension of due date
for furnishing of return of income for the
assessees who are required to obtain and
furnish tax audit report under section 44AB
of the Act and for whom the due date for
furnishing return of income under section
th
139(1) of the Act is 30 September, 2014. Writ
petitions have also been filed in various High
Courts for directing the Board to extend the
due date for furnishing of return of income
th
th
from 30 September, 2014 to 30 November,
2014 in conformity with the extension of the
due date for filing of tax audit report.
4. In the High Court of Delhi, a writ petition
No.5990/2014 has been filed on this issue.
However, before the pronouncement of
judgement, the petitioner withdrew the
rd
writ petition on 23 September, 2014. The
High Court of Madras passed interim order
on 24.09.2014 in writ petitions No.25443
and 26306 to 26310 of 2014 and directed the
Board to consider the request of the assessees
in general and consider the extension of
time for furnishing the return of income, in
tune with the order passed by the Board in
F. No.133/24/2014-TPL dated 20.08.2014.
It has been reported that the High Court
of Judicature at Hyderabad for the State of
Telangana and the State of Andhra Pradesh
disposed the writ petition No.28159 and
28627 of 2014 with a direction to the Board to
47
dispose of the representation of the petitioners.
The High Court of Bombay disposed of writ
petition No.2492 of 2014 vide order dated
25.09.2014 and directed the Board to look into
the practical difficulties of the petitioners and
take a just and proper decision in this matter.
5. The Gujarat High Court allowed Special
Civil Application No.12656 of 2014 with
Special Civil Application No.12571 of 2014
and vide judgement dated 22.09.2014 directed
the Board to modify the order under section
119 of the Act dated 20.08.2014 by extending
the due date for furnishing the return of
th
income to 30 November, 2014. It has also
been further stated in the said order that
it would be open for the Board to qualify
such relaxation by extending the due date
for all purposes, except for the purpose of
Explanation 1 to section 234A of the Act.
6. In compliance to the judgement of High
Court of Gujarat and after considering the
representations made for extension of due
date for furnishing of return of income in
compliance with the directions of the other
High Courts, the Board, in exercise of power
conferred by section 119 of the Act, hereby
extends, subject to para 7 below, the 'duedate' for furnishing return of income from
30th September, 2014 to 30th November,
2014 for the assessment year 2014-15 for all
purposes of the Act, in case of an assessee,
who,
48
(i) is required to file his return of income
by 30th September, 2014 as per clause
(a) of Explanation 2 to sub-section (1)
of section 139 of the Income-tax Act,
1961; and
(ii) is also required to get his accounts
audited under section 44AB of the Act
or is a working partner of a firm whose
accounts are required to be audited
under section 44AB of the Act.
7. There shall be no extension of the “due date”
for the purposes of Explanation 1 to section
234A (Interest for defaults in furnishing
return) of the Act and the assessees shall
remain liable for payment of interest as per
the provisions of section 234A of the Act.
8. For removal of doubt, it is clarified that
for an assessee (other than working partner
of a firm which is required to obtain and
furnish tax audit report), who is required to
th
file its return of income by 30 September,
2014 but not required to obtain and furnish
tax audit report under section 44AB, the
due date for furnishing of return of income
th
for assessment year 2014-15 remains as 30
September, 2014.
(Rajesh Kumar Bhoot)
Director (TPL)
CASC Bulletin, Oct. 2014