When liability to pay refund is acknowledged then denying relief is unjust -SC
IN THE SUPREME COURT OF INDIA
16. In the facts of the present case, the respondents do not and cannot dispute that they have to refund the seized amount. Further, considerable delay and failure to make the payment constitutes and is inseparable from the cause of action as the delay and negligence is on the part of the authorities. The appellant does not seek setting-aside or quashing of an adverse order, no third-party rights are involved and the respondents’ ex- facie would not suffer due to a change of position. Prayer for compliance of a valid and legal order passed cannot be equated with prayers made in repeated representations seeking a change of position. Acquiescence is not apposite to patience as acquiescence is not just standing-by, and refers to assent on being aware of the violation or reflects conduct showing waiver. Laches is this case would require sheer negligence of the nature and type which would render it unjust and unfair to grant relief. When, the liability to pay Rs.4,99,900/- is acknowledged and accepted, then to deny relief by directing payment in terms of the order under Section 132(5) of the Act would be unjust, unfair and inequitable. Statute mandates the respondents to make payment. To be fair to the counsel for the respondents, it was conceded that an appropriate order may be passed to do justice.
When liability to pay refund is acknowledged then denying relief is unjust -SC
17. For the aforesaid reasons, the appeal is allowed with the direction to the respondent authorities to pay Rs. 4,99,900/- with interest as per law within a period of three months from the date on which the copy of this order is received. In case of failure to pay in time, the appellant would be at liberty to file a contempt petition against the officers concerned and also claim costs.
Apart from the addition of various new reporting clauses in CARO, 2020, there were many clauses which were adopted from the previous CARO, 2016 as it is or with some amendments. In this article we’ll analyse all those clauses which were adopted from CARO, 2016 either with some amendment or not.
Amendment in existing clauses of CARO, 2016 in CARO, 2020
Analysis of change in existing clauses of CARO
CARO, 2016
CARO, 2020
Analysis
3(i)(a)
“Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets”
3(i)(a)(A)
“Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment”
Word “fixed assets” has been changed to “Property, Plant and Equipment” to make order congruent with the accounting standards.
Similar changes has also been done in clauses 3(i)(b).
3(i)(c)
Whether the title deeds of immovable properties are held in the name of the company. If not, provide the details thereof”
3(i)(c)
“Whether the title deeds of all the immovable properties (other than properties where the company is the lessee and the lease agreements are duly executed in favour of the lessee) disclosed in the financial statements are held in the name of the company, if not, provide the details thereof”
Exclusion has been added to the clause i.e. leasehold properties. Further, a format has been added in the order under this clause to give the details of deeds not held in the name of the company. Format has been given after the table in Annexure-1.
3(ii)
“Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, whether they have been properly dealt with in the books of account”
3(ii)(a)
“Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether, in the opinion of the auditor, the coverage and procedure of such verification by the management is appropriate; whether any discrepancies of 10% or more in the aggregate for each class of inventory were noticed and if so, whether they have been properly dealt with in the books of account”
Earlier material discrepancies were left on the judgement of the auditors but now it needs to be reported if discrepancies id of 10% or more.
3(iv)
“In respect of loans, investments, guarantees, and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof”
3(iv)
“In respect of loans, investments, guarantees, and security whether provisions of section 185 and 186 of the Companies Act, 2013 have been complied with. If not, provide the details thereof”
No change
3(v)
“In case, the company has accepted deposits, whether the directives issued by the Reserve Bank of India and the provisions of sections 73
to 76 or any other relevant
provisions of the Companies Act, 2013 and the rules framed thereunder, where
applicable, have been
complied with? If not, the
nature of such contraventions be stated; If an order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other tribunal, whether the
same has been complied
with or not?”
3(v)
“In respect of deposits accepted by the company or amounts which are deemed to be deposits, whether the
directives issued by the
Reserve Bank of India and
the provisions of sections 73
to 76 or any other relevant
provisions of the Companies
Act and the rules made
thereunder, where applicable, have been complied with, if not, the nature of such 5
contraventions be stated; if
an order has been passed by
Company Law Board or National Company Law
Tribunal or Reserve Bank of
India or any court or any other tribunal, whether the same has been complied with or not”
Scope of coverage has been widened by including the reporting of amounts which are deemed to be deposits.
3(viii)
Whether the company has defaulted in repayment of loans or borrowing to a financial institution, bank, Government or dues to deben ture holders? If yes, the period and the amount of default to be reported (in case of defaults to banks, financial institutions, and Government, lender wise details to be provided).
3(ix)(a)
“Whether the company has defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender, if yes, the period and the amount of default to be reported as per the format given”
Instead of words “to a bank, financial institutions, government or dues to debenture holders?” words “to any lender has been substituted.
Further, format has been prescribed for reporting which is given under Annexure-2.
3(ix)
“Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported”
3(ix)(c)
“Whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used may be reported”
Clause 3(ix) has been split up into two parts two clauses. Term loan has been separated and a new clause has been made for the same keeping all the reporting requirements unchanged.
3(x)(a)
“Whether moneys raised by way of initial public offer or further public offer (including debt instruments) during the year were applied for the purposes for which those are raised, if not, the details together with delays or default and subsequent rectification, if any, as may be applicable, be reported”
3(x)
“Whether any fraud by the company or any fraud on the Company by its officers or employees has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated”
3(xi)(a)
“Whether any fraud by the company or any fraud on the company has been noticed or reported during the year, if yes, the nature and the amount involved is
to be indicated”
Words “by its officers or employees” has been removed which widens the scope of the coverage of clause.
3(xi)
“Whether managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Companies Act? If not, state the amount involved and steps taken by the company for securing refund of the same”
–
–
This clause has been deleted from the new CARO, 2020.
3(xii)
“Whether moneys raised by way of initial public offer or further public offer (including debt instruments) and term loans were applied for the purposes for which those are raised. If not, the details together with delays or default and subsequent rectific cation, if any, as may be applicable, be reported”
3(xii)(a) and (b)
“(a) whether the Nidhi Company has complied with the Net Owned Funds to Deposits in the ratio of 1: 20 to meet out the liability; (b) whether the Nidhi Company is maintaining ten per cent. Unencumbered term deposits as specified in the Nidhi Rules, 2014 to meet out the liability”
This clause has been split up into two sub-clauses without any change.
3(xiii)
“Whether all transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the Financial Statements etc., as required by the applicable accounting standards”
3(xiii)
No change
No Change
3(xiv)
“Whether the company has made any preferentialallotment or private placement of shares or fully or partly convertible debentures during the year under review and if so, as to whether the requirement of section 42 of the Companies Act, 2013 have been complied with and the amount raised have been used for the purposes for which the funds were raised. If not, provide the details in respect of the amount involved and nature of non-compliance”
3(x)(b)
This clause has been shifted to clause 3(x)(b) without any change.
No change
3(xv)
“Whether the company has entered into any non-cash transactions with directors or persons connected with him and if so, whether the provisions of section 192 of Companies Act, 2013 have been complied with”
3(xv)
No change
No change
3(xvi)
“Whether the company is required to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained”
3(xvi)(a)
This clause has been shifted to clause 3(xvi)(a) without any change
No change
Annexure-1
Description of property
Gross carrying value
Held in name of
Whether promoter, director or their relative or employee
Period held – indicate range, where appropriate
Reason for not being held in name of company*
*also indicate if in dispute
Annexure-2
Nature of borrowing, including debt securities
Name of lender*
Amount not paid on due date
Whether principal or interest
No. of days delay or unpaid
Remarks, if any
*lender wise details to be provided in case of defaults to 6 banks, financial institutions and Government
Section 54G – Exemption on Capital gain on sale of godown situated in urban area, relocated to non-urban area
In the High Court of Judicature at Madras
JUDGMENT
We have heard Mr.T.R.Senthilkumar, learned Senior Standing Counsel appearing for the appellant – Revenue and Mr.A.S.Sriraman, learned counsel accepting notice for the respondent – assessee.
2. This appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act), is directed against the order dated 26.6.2018 in ITA.No.1619/Chny/2017 on the file of the Income Tax Appellate Tribunal, Chennai ‘B’ Bench for the assessment year 2014-15.
3. The Revenue has filed this appeal by raising the following substantial questions of law :
“i. Whether the Appellate Tribunal is correct in law in holding that the assessee is eligible to claim deduction under Section 54F of the Income Tax Act, when the property sold at Bangalore was only a depot/godown/storage place and not an industrial undertaking ?
ii. Whether the Appellate Tribunal was justified in directing the Assessing Officer to grant deduction under Section 54G of the Act with respect to the long term capital gain earned by the assessee on the sale of its godown situated in Bangalore, an urban area and which has been relocated in a non urban area, in the outskirts of Sivakasi town?
iii. Whether the Appellate Tribunal was correct in not appreciating that the assessee had obtained LE-3 licence under the Explosives Rules, 2008 for its Bangalore property and in terms of this licence, no manufacturing activity could be conducted in the subject Bangalore property and is also not an ‘industrial undertaking’? And
iv. Whether the Appellate Tribunal is correct in law in holding that the assessee is eligible to claim deduction under Section 54F of the Income Tax Act on the amount of Rs.2,99,50,000/-, which was seized by the Department without taking cognizance of the lack of intention on the part of the assessee to make the deposit of the said amount in Capital Gains Accounts Scheme?”
4. Though the Revenue has raised four substantial questions of law, it would suffice to answer substantial question of law No.1 and therefore, we entertain this appeal on substantial question of law No.1 alone, namely
“Whether the Appellate Tribunal is correct in law in holding that the assessee is eligible to claim deduction under Section 54F of the Income Tax Act, when the property sold at Bangalore was only a depot/godown/ storage place and not an industrial undertaking ?”
Section 54G – Exemption on Capital gain on sale of godown situated in urban area, relocated to non-urban area
5. The issue, which falls for consideration, is as to whether the assessee is eligible to claim deduction under Section 54F of the Act when the assessee sold an explosive godown/property at Bangalore and invested in a property located in a non urban area i.e in the outskirts of Sivakasi town.
6. The Assessing Officer, while completing the assessment, vide order dated 31.12.2016, under Section 143(3) read with Section 153A of the Act, opined that the property sold by the assessee was only a godown and used for storing fireworks and that it could not be interpreted to mean an ‘industrial undertaking’. Accordingly, the claim for deduction under Section 54G was disallowed and an amount of Rs.50,36,72,654/- was assessed under the head ‘capital gains’.
7. As against the order of assessment dated 31.12.2016, the assessee carried the matter on appeal before the Commissioner of Income Tax (Appeals)-19, Chennai [for short, the CIT(A)], who, by order dated 04.5.2017, concurred with the findings of the Assessing Officer and while accepting the fact that the land in question was used for the purposes of the business of an industrial undertaking, denied the relief to the assessee on the ground that the sale of the store area land in Bangalore is one off transaction not specifically effected in the course of or in consequence of shifting of any industrial undertaking.
8. As against the order passed by the CIT(A) dated 04.5.2017, the assessee preferred an appeal before the Tribunal. After considering the provisions of Section 54G(1) of the Act, the Tribunal took note of the business activities of the assessee and the meaning assigned to the expression ‘industrial undertaking’ and held that the interpretation to be given should be in such a manner that it promotes economic growth and development and it should aid an industry. Keeping the said principle in mind, the Tribunal considered the facts of the assessee’s case, noted that the assessee shifted its godown storing hazardous products to a non urban area and that the activity carried on in the godown being storage and repacking, which is severable from the other activities of the industrial establishment and held that the assessee is entitled to claim exemption of capital gains as per the provisions of Section 54G of the Act. While rendering such a finding, the Tribunal noted that the factual position was not in dispute. The Revenue is on appeal before us challenging such finding.
9. In our considered view, the Assessing Officer failed to take note of the vital factor namely that the property, which was sold by the assessee in Bangalore, was a ‘magazine’. Rule 2(31) of the Explosives Rules, 2008 defines the word ‘magazine’ to mean a building or structure (other than an explosives manufacturing building) intended for storage of explosives, specially constructed in accordance with the specification provided under these Rules or of a design and approved by the Chief Controller. The expression ‘Chief Controller’ is defined under Rule 2(9) of the Explosives Rules, 2008 to mean the Chief Controller of Explosives.
10. Section 4(h) of the Explosives Act, 1884 defines the word ‘manufacture’ in relation to an explosive, which includes the process of (1) dividing the explosive into its component parts or otherwise breaking up or unmaking the explosive, or making fit for use any damaged explosive; and (2) re-making, altering or repairing the explosive. Thus, the definition of the word ‘manufacture’ as defined under the Explosives Act, 1884 is an inclusive definition and storing of bulk quantity of explosives and repacking for retail sale would undoubtedly fall within the meaning of the word ‘manufacture’. In terms of Rule 71 of the Explosives Rules, 2008, a person holding licence for possession of explosives granted under these Rules shall store the explosives only in the premises specified in the licence. Thus, possession, usage and sale of explosives are strictly regulated under the provisions of the Explosives Act and the relevant Rules framed thereunder.
11. Unfortunately, the Assessing Officer did not take note of this vital factor, but was guided by the common parlance test given to an industrial undertaking. One more factor, which the Assessing Officer lost sight of, was the manner, in which, the first limb of Section 54G(1) of the Act is worded wherein the transfer of a capital asset includes machinery or plant or building or land or any rights in the building or land used for the purpose of business of an industrial undertaking situated in an urban area. The second limb of Section 54G(1) of the Act is what had weighed in the mind of the Assessing Officer while denying the deduction under Section 54G of the Act. However, what was important to note is that where the capital gains arising from transfer of capital asset, being machinery or plant or land or building used for the purposes of business of an industrial undertaking situated in an urban area effected in the course of or in consequence of the shifting of such industrial undertaking to any area other than an urban area, the assessee is entitled to the benefit of deduction under Section 54G of the Act.
12. The scheme of the Explosives Act and the relevant Rules framed thereunder would clearly bring a ‘magazine’, which was referred to by the Assessing Officer as a godown to qualify to be a place used for the purpose of business of an industrial undertaking and in fact, going by the definition of the word ‘manufacture’ under the Explosives Act, the activity done by the assessee namely storage and repacking would also, in our opinion, fall within the definition of the word ‘manufacture’. The Tribunal, in paragraph 4.6 of its order, has specifically recorded that the facts are not in dispute. In the light of the above, we find that the interpretation given by the Tribunal to the facts of the case of the assessee is perfectly legal and valid. For the above reasons, the Revenue has not made out any ground to interfere with the order passed by the Tribunal.
13. Accordingly, the above tax case appeal is dismissed. The substantial question of law is answered against the Revenue. No costs.
18. Another issue that arise for consideration is whether deduction u/s 80P(2)(d) shall be allowed on the gross interest income on FDRs or it should be allowed on the net interest income calculated after deducting the interest expenditure allocable to funds placed in form of FDR. Though the assessee has challenged the findings of the ld CIT(A) to the effect that it has not incurred any interest expenditure, we find that there is no necessity to examine the same as conceptually, the deduction under section 80P(2)(d) has to be allowed on gross and not on net interest income as held by the Hon’ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd vs ACIT [2016] 72 Taxmann.com 169 (Guj) wherein it was held as under:
“3. In all the four appeals, the common issue is grant of net deduction u/s 80P(2)(d) of the Act, in respect of interest and dividend received by the assessee from co-operative societies i.e. bank in this case. The Assessing Officer allowed deduction u/s 80P(2)(d) to the extent of net interest instead of gross interest as claimed by the assessee and disallowed the excess claim of deduction in this regard for all the years under consideration. The amount disallowed by the Assessing Officer and deduction granted by the Assessing Officer is tabularized and recorded as under:
8. We have considered the decisions cited by learned advocate for the assessee as well as the revenue. We feel that the decisions cited by the learned advocate for the assessee shall be applicable on the facts of the present case. In the case of K. Nandakumar v. ITO [1993] 204 ITR 856/[1994] 72 Taxman 223 (Ker.), the Kerala High Court has held as under:
‘4. The effect of Section 80AB is that, for the purpose of computing the deduction under Section 80L, the amount of income of that nature as computed in accordance with the provisions of the Act shall alone be deemed to be the amount of income of that nature. What the section means is that the net income by way of interest computed in the manner provided by the provisions of the Act shall alone be taken into account for computing the benefit. But it must be noted that payment of interest under a loan transaction incurred for the purpose of deriving income from business is not an item which arises in the computation of interest income “in accordance with the provisions” of the Act. The said amount has to be paid irrespective of whether any interest income is otherwise received or not. Though the interest is payable to the same bank, the fact remains that the amount of income by-way of interest is not calculated under the provisions of the Act with reference to such outgoings which fall under different heads. The assessee is entitled to deduction under Section 37 of all expenditure incurred for the purpose of deriving the business income, and it is under that head that the interest paid on the loan taken from the bank is deducted. The net amount of interest contemplated by Section 80AB should take in the net amount arrived at after meeting the expenses deductible from that item under the provisions of the Act as explained above. That is not the case here. Therefore, Section 80AB has no application to the facts of these cases. The interest paid on the loan transactions has to be deducted from the business income, and not from the interest received from the bank on the fixed deposits. The assessees were therefore right in the submissions which they made before the Commissioner of Income-tax in the revision petitions which they filed. This aspect of the matter has been overlooked by the Commissioner in passing the order, exhibit P-5.’
Deduction u/s 80P to be allowed on gross interest or net interest income
8.1 Similarly, in the case of Doaba Co-operative Sugar Mills Ltd (supra), the Punjab & Haryana High Court has held as under: ‘5. The contention of Mr. Gupta, learned counsel appearing for the Revenue, is that the Tribunal was wrong in allowing deduction under Section 80P(2) (d) of the Act because it is not established that the assessee had derived the interest by investing all the amount of surplus funds. It is further contended by Mr. Gupta that the assessee has paid interest to Jalandhar Central Co-operative Bank and has also received interest from the said co- operative bank, thereby showing that the assessee has on the aggregate paid interest to the bank and, therefore, no deduction under Section 80P(2)(d) can be allowed. To appreciate this argument, we have to look to the provisions of Section 80P(2)(d) of the Act, For facility of reference, it is reproduced as under : “80P. (2)(d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co- operative society, the whole of such income.”
6. So far as the principle of interpretation applicable to a taxing statute is concerned, we can do no better than to quote the by- now classic words of Rowlatt J., in Cape Brandy Syndicate v. IRC [1921] 1 KB 64, 71 : “…In a taxing Act, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used,”
7. The principle laid down by Rowlatt J., has also been time and again approved and applied by the Supreme Court in different cases including the one, Hansraj Gordhandas v. H. H. Dave, Assistant Collector of Central Excise and Customs, AIR 1970 SC 755, 759.
8. Section 80P(2)(d) of the Act allows whole deduction of an income by way of interest or dividends derived by the co- operative society from its investment with any other co-operative society. This provision does not make any distinction in regard to source of the investment because this Section envisages deduction in respect of any income derived by the co-operative society from any investment with a co-operative society. It is immaterial whether any interest paid to the co- operative society exceeds the interest received from the bank on investments. The Revenue is not required to look to the nature of the investment whether it was from its surplus funds or otherwise. The Act does not speak of any adjustment as sought to be made out by learned counsel for the Revenue. The provision does not indicate any such adjustment in regard to interest derived from the co- operative society from its investment in any other co-operative society. Therefore, we do not agree with the argument advanced by learned counsel for the Revenue. In our opinion, the learned Tribunal was right in law in allowing deduction under Section 80P(2)(d) of the Income- tax Act, 1961. in respect of interest of RS. 4,00,919 on account of interest received from Nawanshaln Central Co-operative Bank without adjusting the interest paid to the hank. Therefore, the reference is answered against the Revenue in the affirmative and in favour of the assessee.’
8.2 Moreover, the Bombay High Court in the case of Bai Bhuriben Lallubhai (supra) has held that the purpose for which the assessee borrowed money had no connection whether direct or indirect with the income which she earned from the fixed deposit and that she was not entitled to the deduction claimed under Section 12(2). The High Court held that if an assessee had no option except to incur an expenditure in order to make the earning of an income possible, then undoubtedly the exercise of that option is compulsory and any expenditure incurred by reason of the exercise of that option would come within the ambit of section 12(2) of the Indian Income-Tax Act but where the option has no connection with the carrying on of the business or the earning of the income and the option depends upon personal considerations or upon motives of the assessee, that expenditure cannot possibly come within the ambit of Section 12(2). In the present case, the loan was taken for business purpose more particularly purchase of yarn and not for fixed deposits.
9. In view of the above, the questions raised in the present appeals are answered in favour of the assessee and against the revenue. The order passed by the Tribunal is accordingly quashed and set aside.”
19. In light of above discussion and respectfully following the decisions referred supra, the assessee society is held eligible for deduction under section 80P(2)(d) in case of interest income of Rs 1,49,40,834 on FDRs placed with Jaipur Central Cooperative Bank Ltd.
Petitioner allowed to claim Transitional credit in GST-3B Forms in case of non-opening of Tran-1
IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH
ORDER
The petitioner, a proprietorship concern, is a Works Contractor. It is registered under the Goods and Service Tax Act, 2017. Prior to the introduction of Goods and Service Tax Act, 2017 it was registered under the provisions of Punjab VAT Act, 2005.
Grievance of the petitioner is that it could not upload the details of un-utilized Input Tax Credit (in short ‘ITC’) as per the accounts books to the electronically generated statutory Form “TRAN-I”, which was the requirement under the GST regime for availing the benefit of the previous un-utilized ITC accrued under the Taxing Statutes.
Counsel for the petitioner submits that the issue stands decided by this Court, vide judgment dated 04.11.2019, passed in CWP 30949 of 2018 titled “Adfert Technologies Pvt.Ltd. Versus Union of India and others” in favour of the Assessees, hence the petitioner-Company is also entitled to relief in the same terms.
Petitioner allowed to claim Transitional credit in GST-3B Forms in case of non-opening of Tran-1
Notice of motion.
Mr. Sunish Bindlish, Counsel for the respondents/ Revenue accepts notice and concedes that the issue raised in the present petition is squarely covered by the aforesaid judgment dated 04.11.2019, passed in Adfert Technologies case (supra), therefore, the present petition is liable to be disposed of in terms of the said case.
In view of above, present petition is allowed in terms of the said CWP No.30949of 2018 decided on 04.11.2019 with permission/modification to file the said Statutory Form TRAN-1 by 31.12.2019.
It is clarified that in case the petitioner is hampered in any manner from availing the benefit of aforesaid judgment, due to non opening of the Portal by the Respondents, then the petitioner shall be permitted, in the alternative to claim the benefit of unutilized credit in their GST-3B Forms to be filed for the month of January,2020 either electronically or manually.
• GSTR-2A Convertor – When documents are downloaded from GSTN portal (i.e. 2A), it is not compatible for further analysis/scrutiny. This utility helps in making it compatible, comparable with books and convert in single line item with all credit notes prefixed by minus (-) sign. It is very useful for the a person not using any software/tool and depends on 2A downloaded from GSTN. This is pertinent to note that the desired reports can be obtained within a minute.
• Party wise Reconciliation – While reconciling ITC as per 2A and ITC (B2B) as per books of accounts with the criteria of invoice number only, there are several problems being faced. Firstly, mismatch of invoice number due to minor clerical error in entering the invoice number in books, which led to mismatch of large number of invoices which is otherwise in match. Secondly, due to increasing compliances and time limitations, it is practically difficult to do this tedious task. Thus, this utility is developed which matches the ITC as per 2A and ITC (B2B) as per books of accounts with the criteria of GST number. This is an easy method to match the ITC in totality where the conditions of Sec. 16(2) are satisfied. This utility ignores invoice number and give reports on entire detail up to 10,000 line items, party-wise (supplier wise) and gives various reports like match cases, only at portal, only in books and summary report on book vs portal. Moreover, the interface of this utility is made in such a manner that no expert knowledge required to use this utility. Additionally, it is a very useful tool for the GST auditors as well as for the compliance of Rule 36(4) with the help of graphics too. This is pertinent to note that the desired reports can be obtained within a minute.
• Invoice wise Reconciliation – Although the purpose is fulfilled through Party wise utility but to be more precise this utility is developed. It works on the criteria of Invoice number + GST number and the respective tax amount. As an additional feature, the user may ignore the desired amount (i.e., rounding up) in the process of matching the ITC. The various types of reports provided by this utility are – 1. Complete report of party wise/invoice wise/Match or Mismatch, 2. Separate report for GSTN specific, 3. Match Cases, 4. Excess in Books/Portal and the like. Face of the utility has a feature of graphics also which helps to view match and mismatch at a glance. This is pertinent to note that the desired reports can be obtained within a minute.
• Utility for compliance of Rule 36(4) – This utility is prepared in view of notification regarding new rule 36(4) and circular no. 123 to determined maximum ITC (B2B) that can be availed while filing GSTR 3B.
E-invoice standard finalized after consultation with ICAI
• An e invoice standard has been finalized after consultation with trade/industry bodies as well as ICAI Adoption of this new standard ensures complete inter operability of e invoices across the entire GST eco system The new system eliminates the need for fresh data entry, reduction of reconciliation errors and population of invoice details directly into Return through Invoice Reporting Portal ( For more details on ‘e invoice’, https :://www.gstn.org.in/e invoice/
• Accounting and Billing Software Providers can enrol with GSTN to receive regular updates on e invoice
• Being key players in Indian business eco system, the role and support of Accounting and Billing Software Providers is crucial for successful implementation of GST e invoice System.
E-invoice standard has been finalized after consultation with ICAI
• In the coming months when e invoice implementation takes place, GSTN intends to interact closely with Accounting and Billing Software Providers This is to get suggestions and feedback as well as to keep them abreast of developments on new e invoice framework.
• Accounting and Billing Software Providers can enroll, by providing contact and other details.
Salient Features of CARO 2020 | CARO 2020 Notification
(Companies (Auditor’s Report) Order, 2020)
MINISTRY OF CORPORATE AFFAIRS vide notification dated 25th February 2020, has published Companies (Auditor’s Report) Order, 2020 in exercise of the powers conferred by:
Section 143(11) of the Companies Act, 2013 (18 of 2013) and
in supersession of the Companies (Auditor’s Report) Order, 2016, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), vide number S.O. 1228 (E), dated the 29th March, 2016, except as respects things done or omitted to be done before such supersession,
consultation with the National Financial Reporting Authority constituted under section 132 of the Companies Act, 2013
I. Applicability:
It shall come into force on the date of its publication in the Official Gazette.
II. Companies covered under this Rule:
It shall apply to every company including a foreign company as defined in clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) [hereinafter referred to as the Companies Act], except–
i) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
ii) an insurance company as defined under the Insurance Act,1938 (4 of 1938);
iii) a company licensed to operate under section 8 of the Companies Act;
iv) a One Person Company as defined in clause (62) of section 2 of the Companies Act and a small company as defined in clause (85) of section 2 of the Companies Act; and
v) a private limited company, not being a subsidiary or holding company of a public company, having a paid up capital and reserves and surplus not more than one crore rupees as on the balance sheet date and which does not have total borrowings exceeding one crore rupees from any bank or financial institution at any point of time during the financial year and which does not have a total revenue as disclosed in Scheduled III to the Companies Act (including revenue from discontinuing operations) exceeding ten crore rupees during the financial year as per the financial statements.
Salient Features of CARO 2020 | CARO 2020 Notification
CARO 2020 would necessitate enhanced due diligence and disclosures on the part of auditors of eligible companies and has been designed to bring in greater transparency in the financial state of affairs of such companies.
III. THE SALIENT FEATURES OF THE CARO, 2020 ARE AS UNDER:
i. The CARO, 2020 includes certain additional clauses, as compared to CARO, 2016, and the existing clauses of CARO, 2016 have been re-drafted to elicit detailed comments from the auditors.
ii. A specific format has been provided for reporting the details of such immovable properties whose title deeds are not held in the name of the company but are disclosed in the financial statements.
iii. Disclosure of details of proceedings against the company for holding Benami Property and whether the company has disclosed the details in its financial statements.
iv. Discrepancies of 10% or more in the aggregate of each class of inventory noticed during physical verification of inventory would have to be reported.
v. The auditor is to provide specific details as to whether during any point of time of the year, the Company has been sanctioned working capital limits in excess of Rs. 5 crores, in aggregate, from banks or financial institutions on the basis of security of current assets and whether the quarterly returns/statements filed by the Company with such banks or financial institutions are in agreement with the books of account of the Company.
vi. In clause 3(iii) of CARO, 2020, the auditor is to report in detail on the investments made by the company in, any guarantee or security provided or any loans or advances in the nature of loans granted, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties during the year, that they are not prejudicial to the interests of the company.
vii. A specific format has been prescribed to report the period and the amount of default by the company in repayment of loans or other borrowings or in the payment of interest thereon to any lender.
viii. The auditor is required to render his opinion on the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, the auditor’s knowledge of the Board of Directors and management plans, that no material uncertainty exists as on the date of the Audit Report that company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date.
ix. The amount of cash losses incurred in the financial year and in the immediately preceding financial year have to be reported.
x. The auditor has to take into consideration the issues, objections or concerns raised by the outgoing auditors before forming his opinion.
xi. The auditor is required to report about the company if it is a declared wilful defaulter by any bank/ financial institution/ other lender.
xii. The auditor would have to report as to whether term loans were applied for the purpose for which the loans were obtained; if not, the amount of loan so diverted and the purpose for which it is used would have to be reported.
xiii. The auditor is required to report as whether any fraud by the company or any fraud on the Company has been noticed or reported during the year; If yes, the nature and the amount involved is to be indicated.
xiv. The auditor is to consider whistle-blower complaints received during the year by the Company in his audit.
xv. The auditor is to report if the company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the RBI Act.
xvi. The auditor is now required to indicate the details of the subsidiary companies and the sub-clauses’ number containing qualifications/adverse remarks by the respective auditors in the CARO reports of the companies included in the consolidated financial statements.
Disclaimer:IN NO EVENT THE AUTHOR SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM OR ARISING OUT OF OR IN CONNECTION WITH THE USE OF THIS INFORMATION.
GST Department issues notices to companies over late Input Credit Claim
The Goods & Service Tax Department has issued notices to thousands of companies that had claimed input tax credit under the goods and services tax framework after missing the deadline to do so, and asked them to reverse the transaction. As per News Update, companies had claimed the input tax credit for fiscal 2018 and 2019 after missing the September deadline. The tax department has asked them to reverse the transactions and pay interest on the wrongly claimed credit.
GST Department issues notices to companies over late Input Credit Claim
Input tax credit is a mechanism whereby companies can set off GST paid on raw materials or input services against future tax liabilities. “It is noticed that you have filed returns after the due date specified for availing (of) input tax credit for discharging your tax liability. You shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date for furnishing of returns,” a tax notice seen by ET reads.
MCA has notified new CARO 2020 in replacement of CARO, 2016. With the enforcement of new order some new clause has been added to reporting while some of the existing clauses have been amended. Also, some clause has been deleted from old order. We’ll study all newly added, amended, deleted clauses of the order while comparing the same with the old order. In this part one we are going to enumerate the newly added clauses which were not there in CARO, 2016.
Analysis of newly added clauses of CARO 2020
Clause no. in CARO, 2020
Clause text as mentioned under CARO, 2020
Analyses
1. 3(i)(a)(B)
“Whether the company is maintaining proper records showing full particulars of intangibleassets”
Earlier this clause was for tangible assets only. Now, same has been inserted for intangible assets also.
2. 3(i)(d)
“Whether the company has revalued its Property, Plant and Equipment (including Right of Use assets) or intangible assets or both during the year and, if so, whether the revaluation is based on the valuation by a Registered Valuer; specify the amount of change, if change is 10% or more in the aggregate of the net carrying value of each class of Property, Plant and Equipment orintangible assets”
Following needs to be reported-
Whether company has revalued any of its assets during the year;
If yes, whether it is based on the revaluation by Registered valuer;
Amount of change, if change is 10% or more in the net carrying value of each class of assets.
4. 3(i)(e)
“Whether any proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder, if so, whether the company hasappropriately disclosed the details in its financial statements”
Following needs to be reported-
Any proceeding initiated and pending under Benami Transactions (Prohibition) Act, 1988;
Whether details has been disclosed in financial statements.
5. 3(ii)(b)
“Whether during any point of time of the year, the company has been sanctioned working capital limits in excess of five crore rupees, in aggregate, from banks or financial institutions on the basis of security of current assets; whether the quarterly returns or statements filed by the company with such banks or financial institutions are in agreement with the books of account of theCompany, if not, give details”
Following needs to be disclosed-
Working capital limit sanctioned above Rs. 5 Crore on the bases of security of current assets;
Whether quarterly statement filed with banks are in agreement with books of accounts.
6. 3(viii)
“Whether any transactions not recorded in the books of account have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961), if so, whether the previously unrecorded income has been properly recorded in the booksof account during the year”
Following needs to be disclosed-
Transactions not recorded in books but disclosed in the income tax assessment;
Whether previously unrecorded transactions have been recorded.
7. 3(ix)(b)
“Whether the company is a declared wilful defaulter by any bank or financial institution orother lender”
If the company has been declared as wilful defaulter, same needs to be reported.
8. 3(ix)(d)
“Whether funds raised on short term basis have been utilised for long term purposes, if yes, thenature and amount to be indicated”
If funds raised for short term basis has been utilized for the purpose of long term, same needs to be reported.
9. 3(ix)(e)
“Whether the company has taken any funds fromany entity or person on account of or to meet the obligations of its subsidiaries, associates or jointventures, if so, details thereof with nature of such transactions and the amount in each case”
Any funds raised from any entiry to meet the obligation of its subsidiaries, associates or joint ventures.
10. 3(ix)(f)
“Whether the company has raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies, if so, give details thereof and also report if the company has defaulted in repaymentof such loans raised”
If loan raised on pledge of securities held in its subsidiaries, associates or joint ventures, then details and defaults on such loans needs to be reported.
11. 3(xi)(b)
“Whether any report under sub-section (12) of section 143 of the Companies Act has been filed by the auditors in Form ADT-4 as prescribed under rule 13 of Companies (Audit and Auditors) Rules,2014 with the Central Government”
Reporting of ADT-4, if any filed by the auditors and complaint of whistle-blower considered. With this clause scope has been widened regarding reporting pertaining to fraud.
12. 3(xi)(c)
“Whether the auditor has considered whistle- blower complaints, if any, received during theyear by the company”
13. 3(xii)(c)
“Whether there has been any default in payment of interest on deposits or repayment thereof for any period and if so, the details thereof”
Pertaining to Nidhi companies new clause has been added which requires disclosure of default in payment of interest on deposits and repayment thereof.
14. 3(xiv)(a) and (b)
“(a) whether the company has an internal audit system commensurate with the size and nature of its business;
(b) whether the reports of the Internal Auditorsfor the period under audit were considered by the statutory auditor;”
Clause was removed when CARO, 2016 was notified and now again added in CARO 2020. Further, it is required to specifically disclosed whether report of internal audit has been considered by the statutory auditors..
15. 3(xvi)(b), 3(xvi)(c), 3(xvi)(d)
“(b) whether the company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934;
(c) whether the company is a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India, if so, whether it continues to fulfil the criteria of a CIC, and in case the company is an exempted or unregistered CIC, whether it continues to fulfil such criteria;
(d) whether the Group has more than one CIC as part of the Group, if yes, indicate the number of CICs which are part of the Group”
Earlier there was reporting whether company is required to get itself registered under section 45-IA of Reserve Bank of India, Act 1934.
Now along with this 3 more such requirements (mentioned under col. 2) needs to be analysed and reported.
16. 3(xvii)
“Whether the company has incurred cash losses in the financial year and in the immediately preceding financial year, if so, state the amountof cash losses”
Cash losses incurred by company in current and previous financial year needs to be reported.
17. 3(xviii)
“Whether there has been any resignation of the statutory auditors during the year, if so, whether the auditor has taken into consideration the issues, objections or concerns raised by theoutgoing auditors”
When a new auditor has been appointed after resignation of previous auditor, then whether new auditor has considered the issues, concerns or objections raised by the previous auditors.
18. 3(xix)
”On the basis of the financial ratios, ageing and expected dates of realisation of financial assets and payment of financial liabilities, other information accompanying the financialstatements, the auditor’s knowledge of the Boardof Directors and management plans, whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report that company is capable of meeting its liabilities existing at the date of balance sheet asand when they fall due within a period of one year from the balance sheet date”
Auditor needs to give its opinion that whether company will be able to meets its liabilities, existing on the balance sheet date as and when they fall due within 1 year.
Auditor needs to analyse following to comment on above-
Financial ratios,
Ageing of financial assets and financial liabilities,
Expected realization of those assets and liabilities.
19. 3(xx)
“(a) whether, in respect of other than ongoing projects, the company has transferred unspent amount to a Fund specified in Schedule VII to the Companies Act within a period of six months of the expiry of the financial year in compliance with second proviso to sub-section (5) of section 135 of the said Act;
(b) whether any amount remaining unspent under sub-section (5) of section 135 of the Companies Act, pursuant to any ongoing project, has been transferred to special account in compliance with the provision of subsection (6) of section 135 ofthe said Act”
This reporting needs to be checked with pursuant of the sections of corporate social responsibility under Companies Act, 2013.
20. 3(xxi)
“Whether there have been any qualifications or adverse remarks by the respective auditors in the Companies (Auditor’s Report) Order (CARO) reports of the companies included in the consolidated financial statements, if yes, indicate the details of the companies and the paragraph numbers of the CARO report containing thequalifications or adverse remarks”
Any qualification or adverse remark mentioned in the CARO of any company included in the audit report on consolidated financial statements, needs to be mentioned here.
Note- Detail clause-wise analysis can be given once institute issues any guidance note on the above.
Reassessment-Section 143(2) notice issued without proper reasons to belive is invalid
IN THE INCOME TAX APPELLATE TRIBUNAL
The Relevant Text of Order are as follows :
I further find that the ITAT, Delhi Bench in the case of Micron Enterprises Pvt. Ltd. Vs. ITO in ITA No. 901/Del/2016 (AY 2006-07) vide order dated 14.5.2018 has decided the similar and identical issue in favour of the assessee by relying on another decision of the Hon’ble High Court in the case of Society for Worldwide Inter Bank Financial, Telecommunications decided in ITA No. 441/2010, reported at 323 ITR 249 by observing as under:-
“Learned Counsel for the Assessee submitted that assessee filed reply to the notice under section 148 of the I.T. Act on dated 26.11.2013 which is noted in the assessment order, copy of which, is filed at page-11 of the paper book, in which, assessee explained that the return already filed under section 139(1) may be treated as return filed in response to notice under section 148 of the I.T. Act. He has submitted that on the same day A.O. issued notice under section 143(2) i.e., on 26.11.2013, copy of which, is filed at page-12 of the paper book. He has, therefore, submitted that the
A.O. has not validly assumed jurisdiction under section 147 and 143(3) of the I.T. Act to pass the assessment order against the assessee. He has submitted that the issue is covered in favour of the assessee by the judgment of the Hon’ble Delhi High Court in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del.) in which it was held as under : “Both the CIT(A) and the Tribunal have returned a concurrent and clear finding of fact that the notice under s. 143(2) was issued on 23rd March, 2000 and since the return was filed on 27th March, 2000, the notice was not a valid one and, therefore, the assessment completed on the basis of the notice was also invalid and was consequently set aside. It is for the first time that the counsel for the appellant contends that the notice, in fact, was issued on 27th March, 2000 and not on 23rd March, 2000, the date which is recorded on the notice itself. No such contention was raised before the lower appellate authorities. Consequently, the said contention cannot be raised before the Court for the first time. The appellant has stated that the return was filed by the assessee on 27th March, 2000 and the notice under s. 143(2) was served upon the Authorized Representative of the assessee by hand when the Authorized Representative of the assessee came and filed return. However, the date of the notice was mistakenly mentioned as 23rd March, 2000. Assuming the aforesaid to be true, the notice was served on the Authorized Representative simultaneously on his filing the return which clearly indicates that the notice was ready even prior to the filing of the return. The provisions of s. 143(2) make it dear that the notice can only be served after the AO has examined the return filed by the assessee. Whereas it is dear that when the assessee came to file the return, the notice under s. 143(2) was served upon the Authorized Representative by hand. Thus, it would amount to gross violation of the scheme of s. 143(2).”
Reassessment-Section 143(2) notice issued without proper reasons to belive is invalid
5.1. And the conclusion is as under : “Assessment made in pursuance of a notice under section 143(2) issued on 23rd March, 2000 when the return was filed on 27th March, 2000 is invalid.” 6. He has submitted that the same order have been followed by ITAT, Delhi Bench, in the case of Shri Harsh Bhatia, New Delhi vs. ITO, Ward-50(3), New Delhi in ITA. No. 1262 and 1263/Del./2017 dated 17.10.2017 in which the Tribunal held as under :
10. “It was further argued by the ld. counsel for the assessee Dr.Rakesh Gupta that notice u/s 143(2) of the Act, was issued on 17.09.2014 and which is the same date on which return was filed. This is apparent from the Assessing Officer’s order in para 3 at page 1. Therefore, the Assessing Officer has not applied his mind independently while issuing notice u/s 148 of the Act. On this count also, the assessment deserves to be quashed. Accordingly, under the facts and circumstances of the case, the legal grounds of the assessee are allowed.”
7. On the other hand, Ld. D.R. submitted that assessee did not file return under section 148 within the specified period. Therefore, this ground of appeal of assessee may be dismissed.
8. After considering the rival submissions, I am of the view that the issue is covered in favour of the assessee by the Judgment of Hon’ble Delhi High Court in the case of Director of Income Tax vs. Society for Worldwide Interbank Financial Telecommunications (supra) and Order of ITAT, Delhi Bench in the case of Shri Harsh Bhatia, New Delhi vs. ITO, Ward-50(3), New Delhi (supra). It is an admitted fact that assessee filed reply in response to the notice under section 148 of the I.T. Act on 26.11.2013 and submitted before A.O. that original return filed before him may be treated as return filed in response to the notice under section 148 of the
I.T. Act. The A.O. on the same day served notice under section 143(2) upon assessee-company whose signature tally on the said notice. Therefore, notice issued under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. I, accordingly, set aside the orders of the authorities below and quash the re-assessment proceedings in the matter. Resultantly, all additions stands deleted. In view of the above, there is no need to decide other contentions raised by Learned Counsel for the Assessee.
9. In the result, appeal of assessee is allowed.”
6. Keeping in view of the aforesaid discussions and respectfully following the precedents, as aforesaid, I quash the reassessment proceedings being invalid in the eyes of law and accordingly, allow the ground no. 5 raised by the Assessee. Since the reassessment has been quashed, there is no need to adjudicate the other grounds.
7. In the result, the Appeal of the Assessee is allowed.
Order pronounced on this 27th day of September, 2019.
Capital gains exempt us 54EC cannot be reckoned for computing book profit us 115JA
IN THE INCOME TAX APPELLATE TRIBUNAL
O R D E R
This is an appeal filed by the assessee company directed against the Order of the Commissioner of Income Tax (Appeals)-13, Chennai, dated 01.12.2017 for the AY 1999-2000.
2. The assessee company raised the following grounds of appeal:
1. For that the Order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case and to that extent prejudicial to the interest of the Appellant. At any rate the impugned Order is opposed to the principles of equity, natural justice and fair play.
2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the Order of the Assessing Officer is on a wrong interpretation of 115JA of Income Tax and is further without jurisdiction.
3. The Ld.CIT(A) erred in confirming the incorrect interpretation of provisions of sec.115JA by the Assessing Officer
4. The Ld.CIT(A) failed to appreciate that the Appellant is even otherwise eligible for exemption u/s.54EA against the book profit u/s.115JA.
5. The Ld.CIT(A) failed to appreciate that the Audited Accounts adopted by the shareholders of the Appellant at their General Meeting and duly filed before the Registrar of Companies/ Ministry of Corporate Affairs which cannot be altered or modified by the Assessing Officer nor the said action be upheld by the Ld.CIT(A).
6. For that the Ld.CIT(A) erred in upholding the wrongful invoking of the provisions of sec.115JA
7. For that the CIT(A) erred in confirming the recasting of the Profit & Loss Account prepared under the provisions of the Companies Act by the Assessing Officer.
PRAYER
For these grounds and such other grounds that may be urged before or during the hearing of the Appeal it is most humbly prayed that the Hon’ble Tribunal may be pleased to pass Set Aside the Order of the Ld.CIT(A) and pass such other Orders as the Hon’ble Tribunal may deem fit in the facts and circumstances of the Case.
3. Briefly the facts of the case are as under:
The assessee is a company incorporated under the provisions of Companies Act, 1956. The return of income for the AY 1999-2000 was filed on 28.10.1998 declaring total income of Rs.51,851/-. Against the said return of income, the assessment was completed by the AO vide an order dated 31.01.2001 at total income of Rs.50.00 lakhs under the provisions of Sec.115JA of the IT Act. While doing so, the AO noticed that the assessee credited sum of Rs.50.00 lakhs to the reserve and surplus a/c being the amount received in lieu of surrender of tenancy rights. However, under the normal computation of income, the same was claimed exempt u/s.54E by investment in U.S.64 units of U.T.I. However, while computing the taxable income under the provisions of Sec.115JA, the same was not added to book profits. The AO was of the opinion that the same is liable to be reckoned for the purpose of computation of book profit u/s.115JA. Accordingly, the AO assessed the same u/s.115JA of the Act.
4. Being aggrieved by the Assessment Order, an appeal was filed before the Ld.CIT(A) who vide impugned order dismissed the appeal. Hence, the assessee is before us in the present grounds of appeal. It is submitted before us that the issue in the present appeal is covered by the decision of the Hon’ble High Court of Madras in the case of CIT-III, Chennai vs. M/s.Metal & Chromium Plater (P.) Ltd., reported in [2016] 76 taxmann.com 229 (Madras). On the other hand, Ld.Sr.DR placed reliance on the orders of the lower authorities.
Capital gains exempt us 54EC cannot be reckoned for computing book profit us 115JA
5. We heard the rival submissions and perused the materials placed on record.
6. The issue whether the capital gains which are exempt u/s. 54EC can be reckoned for the purpose of computing book profit u/s.115JA is settled by the Hon’ble jurisdictional High Court in the case of CIT-III, Chennai vs. M/s.Metal & Chromium Plater (P.) Ltd., in favour of the assessee company by holding as under:
6. The allowance or otherwise of the claim under Section 54AC has to be seen in the context of the provisions of Section 115 JB which is a self contained code of assessment. The levy of tax is on the ‘book profits’ after effecting various upward and downward adjustments as set out in terms of the Explanation thereto. The provisions of sub-section (5) of s.115 JB open the assessment to the application of all other provisions contained in the Income tax Act except if specifically barred by that section itself. S.115 JB (5) reads as follows;
‘(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section’.
7. Thus, the adjusted book profits would be further eligible to the benefits set out in the other provisions of the Act and the plain language of Section 115 JB thus admits of the grant of relief under section 54 EC in an assessment thereunder. We now deal with the case law relied upon by the Assessing officer in denying relief to the assessee. The Supreme Court, in the case of Apollo Tyres, (supra) is to the effect that the assessing officer is not empowered to embark on an enquiry with regard to the entries in the profit and loss account maintained in accordance with the provisions of the Companies Act 1956 and approved in the AGM except to the extent of effecting modifications in accordance with the Explanation to section 115J. The Bombay High Court in the case of Veekaylal Investments (supra) considers the inclusion of capital gain for the purposes of assessment under section 115 J. Both judgements are rendered in the context of Section 115 J which does not contain a provision analogous to sub-sections (4) of section 115 JA or (5) of section 115 JB of the Act. Thus while an assessment u/s 115J would be concluded exclusively on the basis of the book profits as adjusted by the items set out in the Explanation thereunder, in an assessment in terms of sections 115 JA or JB, the adjusted book profits would be further subjected to the effect of other provisions of the Act that are specifically brought into play by virtue of sub-sections (4) of section 115JA and (5) of section 115JB.
8. Reliance of the learned standing counsel on the decision of the Division Bench of the Kerala High Court in the case of N.J.Jose and Co.(P) Ltd. vs. Asst. Commissioner of Income Tax and another (321 ITR 133) is also distinguishable for the same reason as aforesaid.
9. In view of the above discussion, the substantial question of law is answered against the Revenue and in favour of the assessee. The departmental appeal is dismissed without costs.
7. In the light of the binding decision of the jurisdictional High Court, we hold that the capital gains which are exempt u/s.54EC cannot be reckoned for the purpose of computing book profit u/s.115JA.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced on the 20th day of July, 2019 in Chennai.
This assessee’s appeal for assessment year 2009-10 arises against the Commissioner of Income Tax-14, Kolkata’s order dated 28.02.2018 passed in case No.294/CIT(A)-14/Cir-46/2015-16, involving proceedings u/s 147 r.w.s 143(3) of the Income Tax Act, 1961; in short ‘the Act’.
Case called twice. None appears at the assessee’s behest. It is accordingly proceeded ex parte. The case is now taken up for adjudication on merits.
2. Coming to merits, we notice that both the lower authorities’ have invoked sec.40(a)(ia) disallowance of 1,19,95,048/- on account of non-deduction of TDS u/s. 194C of the Act on various head(s) of payments. The CIT(A)’s detailed discussion to this effect reads as follows:-
“4. Written submission
The A/R of the appellant submitted written submission, to substantiate its claim, which is re-produced as under:
“We write the above references, wherein the A. O. has instructed us to make payment of the demand of Rs.54,26,960/- (Rupees Fifty Four Lakhs Twenty Six Thousand Nine Hundred Sixty) only which has been raised pursuant to the assessment order dt.22.02.2016, purportedly passed u/s. 154/143(3) R. W 147 of u/s the Income Tax Act 1961.
In this connection, the following submission preferred:
A. The impugned demand has been raised to the act of applying provision of Section 40(a)(ia) read with Section 194C of the I. T. Act 1961. Based on such allegation the A.O. have taxed to the tune of Rs.54,26,960/- and also levied interest u/s 234B & 234C respectively.
B. Against such allegation we have already preferred an appeal before your goodself on and validity and legality of the amount framed u/s 143(3)/154/r.w147 has also challenged. A copy of the acknowledgement is enclosed.
C. Further, a Stay Petition has also been filed before the A.O. requesting to keep the impugned demand in abeyance till the appeal preferred before your honour be disposed off and not to treat the assessee to be at fault in not spaying the impugned demand.
D. Without prejudice to the aforesaid contentions the following further submission preferred before your kindself.
1. It may be pertinent to note that, the Income for all the assessment years have been assessed at a more than two (2) times – than the returned Income.
In this connection your kindself’s attention is drawn to the instruction of the Central Board of Direct Taxes, which is binding on’ all the authorities of Income Tax Department, including your kindself.
The Central Board of Direct Taxes, vide Notification No. 96 [F.No.1/6/69- ITCCI dated 21/08/69 – has rendered the following instructions – “Where the income determined on assessment was substantially higher that’ the returned income, say twice or more than the returned amount The collection of the tax in dispute should be held in abeyance till the decision on the appeals provided there were no lapse on the part of the assessee”.
As stated above, we have been assessed at much more than twice that of the income returned, in the assessment years, against which we have preferred an appeal before the learned CIT (A) and following the aforesaid instructions of the CBDL which Is “binding” on you and all the officers working under the, Board, it is requested to keep the collection of demand in abeyance, till the matters are being disposed off, by the learned CIT(A).
2. Reliance may kindly be placed on the following judicial pronouncements –
A. The decision of the Gujarat High Court rendered in the case of Sakarpatlal Vibhag JKSM Ltd. Vs ITO &Ors, reported in 198 ITR 685 (Guj). While delivering the judgment in the case, the Hon’ble Court has held that – ‘before rejecting the application of imposing conditions, the AC should consider all relevant aspects– without such, the order of the AO and CIT, rejecting the assessee’s stay petition was set aside.
B. The question which came up for consideration before the Hon’ble High Court. in the case of Ganjana Agencies Vs. ITO &Ors. Reported in 210 ITR 865 (Ker) was whether the ITO was justified in directing the assessee to make payment to the tax demanded in the instalments. The Hon’ble High Court at Kerala has held that the AO as not justified as grant of.
Instilments is only another mode of recovery and not an order u/s. 220 £6). Accordingly, the AC was directed to stay the recovery of the remand. till the disposal of the appeal.
Following the aforesaid decision of the Hon’ble High Court at Kerala (supra) it is requested before your kindself to kindly keep the recovery of the impugned demand in abeyance, till the learned CIT (A) disposes off the appeals.
C. The Hon’ble High Court at Delhi while rendering the judgment in the case of Maruti Udvog Ltd. Vs .Adl. CIT. reported in 264 ITR 487 (Del)has held that the AC has not acted in a reasonable way by directing the assessee to deposit certain amount as a precondition of staving the recovery of demand, pending the disposal of the first appeal by the learned CIT(A). The AC was directed by the Hon’ble High Court at Delhi, not to take any coercive steps for recovery till the CIT(A) decided the assessee’s case.
3. Reliance may kindly be placed on the following judicial pronouncements, including that of the jurisdictional High Court at Calcutta, which is binding on your kindself:
A. The jurisdictional High Court at Calcutta, while rendering the judgment In the case of Debashis Moulik Vs. DCIT, reported in 231 ITR 737 (Cal) has held that – “the ITO has no jurisdiction u/s. 220 (6) to grant stay for a -limited period and not till ‘the appeal remains undispossed off” .
It is submitted that the aforesaid decision of the jurisdictional High Court at Calcutta is squarely covered in the case of the assessee.
B. The jurisdictional High Court at Calcutta, while deciding the case of Dunlop India Ltd. Vs. ACIT & Ors” reported in 183 ITR 532 (Ca!), has held that the power to use the discretion u/s 220 (6), which has been reposed on the officer concerned must be used and exercised as a “reasonable man“.
Based on a joint reading of the principles as laid down by the aforesaid two decisions of the Hon’ble High Court at Calcutta (supra), as prudent and “reasonable Tax Officer”, it is requested before your kindself, to stay of- the recovery of demand till the matters are disposed off by the learned CIT(A).
Disallowance us 40(a)(ia) does not apply in case of short deduction of TDS
The Hon’ble High Court at Kerala, while rendering the judgment, in the case of Rajan Nair Vs. ITO & Another, reported in 165 ITR 650 (Ker). has held that the powers conferred upon the AC u/s. 220 (6) is discretionary though coupled with a duty, which is to be exercised judiciously and reasonable, based on relevant grounds. The Learned Court further held that the ITO has to act as a quasi-judicial authority and not as a mere tax gatherer. Accordingly, the order passed by the AC u/s. 220 (6) was held to not be in accordance with law and such order was held, liable to be quashed.
Considering the aforesaid submission, the judicial pronouncements relied upon and the circular of the CBDT (supra), e would request your kindseif to kindly grant the stay of recovery of demand after seized for the assessment year referred to in above, till the appeal filed before the LD. CIT (A) is being disposed off.
So, in the context we also prefer your honour that we have deducted the tax on the basis of order u/s 197(1) submitted by the deductee. In event of any shortfall of deduction of tax fully on the basis of declaration filed by the deductee on which several case laws can be produced at the time of personal having before your honour.
In any event, we would request you to kindly provide us with a chance of Personal hearing and filing of a written submission, before the aforesaid issue is being finally disposed off.
Should your honour seek any clarification, please let us know.”
4. Decision:
Since all the grounds relate to the issue of disallowance under 40(a)(ia) made by the AO of an amount of Rs 1,94,47,590, the same are dealt together. During the course of assessment proceedings the AO noticed that the appellant was required to deduct TDS in respect of various expenditures under different heads but failed to comply with the provisions of the IT act in respect of TDS deduction. The AO observes that the appellant was liable to deduct TDS of Rs4,08,954 under section 194C of the Income Tax Act from the total expenditure of Rs.2,08,88,541 relating to can outwards, labour charges, car hire charges, security charges, advertisement and office decoration charges. However, deduction was made only of Rs.1,61,856 resulting in short deduction of rupees 2,47,098. Therefore, the proceeded to disallow the sum of Rs.19,95,048 under section 40(a)(ia) respect of which no TDS was deducted. During the appellate proceedings the AR of the appellant submits that TDS was deducted at a lower rate and hence provisions of section 40(a)(ia) are not applicable in respect of the appellant. Appellant’s contentions were carefully analysed. It is observe that the appellant has not come up-with any evidence either before the AO or during the appellate proceedings that it has deducted the due TDS in respect of the impugned sum disallowed by the AO. It is also observed from the assessment order that having” regard to the lower deduction TDS certificates in respect of M/s Maheswari Transport Agency Private Limited and M/s Rohit Transport Organisation, the AO has given due allowance in respect of the TDS liability of the appellant. Therefore, the appellant’s contentions that it has deducted TDS at a lower rate as per the certificates granted is bereft of any logic. As section 40(a)(ia) mandates that failure to deduct the whole or any part of the tax entails disallowance, it was mandated upon the appellant to deduct the desired TDS at the time of credit or payment of the sum. The appellant having failed to do so violated the provisions of section 194C and, therefore, the AO is duty bound to disallow the impugned sum in respect of which no TDS deduction has been made. During the appellate proceedings the AR of the appellant further submits that vide order dated 22 February 2016 the AO has given certain relief to the appellant by rectifying apparent mistake under section 154. That be so, subject to the same, in view of the discussions mentioned above the undersigned does not find any anomaly in the action of AO in disallowing the expenditure against which due TDS deduction has not been made. Appellant’s grounds therefore, fail and the appeal is dismissed.”
3. It is sufficiently clear from a perusal of the foregoing lower appellate discussion that this is not an instance of non-deduction of TDS per se. Learned departmental representative fails to dispute that gong by the Assessing Officer’s detailed discussion in pages 2 to 3 in his assessment order dated 07.01.2016, the assessee had indeed deducted TDS u/s.194C albeit at a lesser rate followed by three other head(s) of 194-H, 194-I and 194- J involving nil deduction. And also that the Assessing Officer had disallowed the impugned sum under the first head only. We observe in this factual backdrop that hon’ble jurisdictional high court’s decision in Commissioner of Income Tax vs. S.K. Tekriwal 361 ITR (Cal) holds that the impugned disallowance u/s 40(a)(ia) does not apply in a case involving short deduction of TDS. We therefore go by the very reasoning and direct the Assessing Officer to delete the impugned disallowance.
