tag:blogger.com,1999:blog-75810332584689734402024-03-15T18:09:48.286-07:00Legal CornerAdv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.comBlogger39125tag:blogger.com,1999:blog-7581033258468973440.post-59228097098069632182021-10-14T03:30:00.002-07:002021-10-14T03:30:46.705-07:00Blog # 28. Principles of Natural Justice In Indian Constitution<p style="text-align: justify;"><span style="background-color: #e8e6d7; color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;">In The Constitution of India, nowhere the expression Natural Justice is used. However, golden thread of natural justice sagaciously passed through the body of Indian constitution. Preamble of the constitution includes the words, ‘Justice Social, Economic and political’ liberty of thought, belief, worship... And equality of status and of opportunity, which not only ensures fairness in social and economical activities of the people but also acts as shield to individuals liberty against the arbitrary action which is the base for principles of Natural Justice.</span></p><p style="background-color: #e8e6d7; box-sizing: border-box; margin: 0px 0px 10px; padding: 0px;"></p><div style="text-align: justify;"><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><br /></span></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Apart from preamble Art 14 ensures equality before law and equal protection of law to the citizen of India. Art 14 which strike at the root of arbitrariness and Art 21 guarantees right to life and liberty which is the fundamental provision to protect liberty and ensure life with dignity. Art 22 guarantees natural justice and provision of fair hearing to the arrested person. Directive principles of state Policy specially Art 39-A takes care of social, economic, and politically backward sections of people and to accomplish this object i.e. this part ensure free legal aid to indigent or disabled persons, and Art 311 of the constitution ensures constitutional protection to civil servants. Furthermore Art 32, 226, and 136 provides constitutional remedies in cases violation of any of the fundamental rights including principles of natural justice. With this brief introduction author undertakes to analyze some of the important provision containing some elements of Principle of Natural Justice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">2. Constitutional Provisions relating to the ‘Principles of Natural Justice’</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">2 (a) Article 14: as we know that this Article guarantees equality before law and equal protection of law. It bars discrimination and prohibits both discriminatory laws and administrative action. Art 14 is now proving to be bulwark against any arbitrary or discriminatory state action. The horizons of equality as embodied in Art 14 have been expanding as a result of the judicial pronouncements and Art 14 has now come to have a highly activist magnitude. It laid down general preposition that all persons in similar circumstance shall be treated alike both in privileges and liabilities imposed.</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700; margin: 0px; padding: 0px;"><div style="text-align: justify;">Art 14 manifests in the form of following propositions:</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(i) A law conferring unguided and unrestricted power on an authority is bad for being arbitrary and discriminatory.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(ii) Art. 14 illegalize discrimination in the actual exercise of any discretionary power.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(iii) Art. 14 strikes at arbitrariness in administrative action and ensures fairness and equality of treatment.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In some cases, the Courts insisted, with a view to control arbitrary action on the part of the administration, that the person adversely affected by administrative action be given the right of being heard before the administrative body passes an order against him. It is believed that such a procedural safeguard may minimize the chance of the Administrative authority passing an arbitrary order. Thus, the Supreme Court has extracted from Art. 14 the principle that natural justice is an integral part of administrative process.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Art. 14 guarantee a right of hearing to the person adversely affected by an administrative order. In<span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;"> Delhi Transport Corporation v. DTC Mazdoor Union</span>, SC held that “the audi alteram partem rule, in essence, enforce the equality clause in Art 14 and it is applicable not only to quasi-judicial bodies but also to administrative order adversely affecting the party in question unless the rule has been excluded by the Act in question.” Similarly in Maneka Gandhi v. Union of India SC opined that Art 14 is an authority for the proposition that the principles of natural justice are an integral part of the guarantee of equality assured by Art. 14 an order depriving a person of his civil right passed without affording him an opportunity of being heard suffers from the vice of violation of natural justice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">There are several instances where Art 14 of the Constitution is invoked to protect individual from the violation of natural justice principles, in Central Inland Water Transport Corporation Ltd v. Briojo Nath in this case a government company made a service rule authorizing it to terminate the service of permanent employee by merely giving him a three months’ notice or salary in lieu of notice. The rule was declared to be invalid as being violative of Art. 14 on the ground that it was unconstitutional. The rule in question constituted a part of the employment contract between the corporation and its employees. The Court ruled that it would not enforce, and would strike down, an unfair and unreasonable clause in a contract entered into between parties who were not equal in bargaining power. This was in conformity with the mandate of the “great equality clause in Art. 14.”</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">The Court emphasized that the judicial concept of Art. 14 have progressed “from a prohibition against discriminatory class legislation to an invalidating actor for any discriminatory or arbitrary state action.” The Court also emphasized that the rule was “both arbitrary and unreasonable” and “as it also wholly ignored and set aside the Audi alterum partum rule” violated Art. 14. This is of the view that “the principle of natural justice has now come to be recognized as being a part of the constitutional guarantee contained in Art. 14.” The rule in question was “both arbitrary and unreasonable,” and it also wholly ignored and set aside the Audi alterm partum rule and, thus, it violated Art 14.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Cantonment Board, Dinapore v. Taramani</span> in this case the Commanding-in-chief of the cantonment board cancelled the board’s resolution after giving it a hearing but not to the respondent to whom the permission had been given. The Supreme Court ruled that Commanding-in-chief ought to have given a hearing to the respondent as well before cancelling the permission given by the board. The Court observed: audi alteram partum is a part of Art. 14 of the Constitution”. The real affected party in fact was the party being ultimately affected by cancellation of the Board’s resolution. Because of Art.14 “no order shall be passed at the back of a person, prejudicial in nature to him, when it entails civil consequences.” This is how Art 14 of the Constitution holds element of Natural justice into it. </div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">2 (b) Art. 21: Article 21 lays down that no person shall be deprived of his life or personal liberty except, according to ‘procedure established by law’. The most important word under this Article is ‘procedure established by law’ the question arises whether these words can be read as rules of natural justice. i.e. whether ‘law’ U/Art 21 can be read as principles of natural justice? To this question The Supreme Court ruled by majority that the word ‘law’ in Art. 21 could not be read as rules of natural justice. These rules (natural justice principles) were vague and indefinite and the constitution could not be read as laying down a vague standard. Nowhere in the constitution was the word ‘law’ used in the sense of abstract law or natural justice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> The word ‘law’ was used in the sense of state (lex) made law and not natural law (jus). The expression ‘procedure established by law’ would therefore mean the procedure as laid down in an enacted law. On the other hand, Fazal Ali, J., disagreeing with the majority view, held that the principle of natural justice that ‘no one shall be condemned unheard’ was part of general law of the land and the same should accordingly be read into Art 21. However, later on majority opinion of A.K. Gopalan was discarded; this is because right to life does not mean mere animal existence. This right cannot be allowed to violate by law, which is wholly unreasonable, such law must be reasonable, fair and just. These terminologies are similar in content that of ‘due process’ clause of American constitution. Accordingly such law must prove substantive reasonableness as well as procedural reasonableness, later one requires such procedure should be ‘fair’, fairness requires reasonable notice, reasonable opportunity of hearing, legal representation, reasons for decision, etc. which are the fundamental component of natural justice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;"><a href="http://www.legalservicesindia.com/forum/topic80-maneka-gandhi-vs-union-of-india.html" style="background: transparent; box-sizing: border-box; color: maroon; cursor: pointer; margin: 0px; padding: 0px;" target="_blank"><span style="box-sizing: border-box; color: navy; margin: 0px; padding: 0px;">Maneka Gandhi v. Union of India</span></a></span>, SC by realizing the implications of Gopalan during 1975 emergency took ‘U’ turn and held that “Art 21 would no longer mean that law could prescribe some semblance of procedure however arbitrary or fanciful, to deprive a person of his personal liberty. It now means that the procedure must satisfy certain requisites in the sense of being fair and reasonable. The procedure “cannot be arbitrary, unfair or unreasonable”. The concept of reasonableness must be projected in the procedure contemplated by Art.21. The Court has now assumed the power to adjudge the fairness and justness of procedure established by law to deprive a person of his personal liberty. The Court has reached this conclusion by holding that Arts. 21, 19 and 14 are mutually exclusive, but are inter-linked.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> Bhagawati, J., “the principle of reasonableness which legally as well as philosophically is an essential element of equality or non-arbitrariness pervades art 14 like a brooding omnipresence”. Thus, the procedure in Art. 21 “must be right, just and fair” and not arbitrary, fanciful or oppressive, otherwise, it would be no procedure at all and the requirement of Art. 21 would not be satisfied. In the same case Iyer, J., opined procedure in Art. 21, means fair, not formal, procedure; ‘law’ is reasonable law and not any enacted piece. This makes the words “procedure established by law” by and large synonymous with the ‘procedural due process’ in the U.S.A. this makes the right of hearing a component part of natural justice. Accordingly as result of this epoch making judgment in Maneka Gandhi case Court came to conclusion that ‘as the right to travel abroad falls under Art. 21, natural justice must be applied while exercising the power of impounding a passport under the passport Act. Although the passport Act does not expressly provide for the requirement of hearing before a passport is impounded, yet the same has to be implied therein’.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Supreme Court of India knowing the importance of ‘fair trial’ by liberal interpretation of Art. 21, made several provision for the protection of accused and provided adequate safeguards to defend his case. SC is of the opinion that conducting a fair trial for those who are accused of criminal offences is the cornerstone of democracy. Conducting a fair trial is beneficial both to the accused as well as to the society. A conviction resulting from an unfair trial is contrary to our concept of justice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">The Supreme Court has taken a gigantic innovative step forward in humanizing the administration of criminal justice by suggesting that free legal aid be provided by the State to poor prisoners facing a prison sentence. When an accused has been sentenced by a Court, but he is entitled to appeal against the verdict, he can claim legal aid: if he is indigent and is not able to afford the counsel, the State must provide a counsel to him. The Court has emphasized that the lawyer’s services continued an ingredient of fair procedure to a prisoner who is seeking his liberation through the Court’s procedure, Bhagwati, J., has observed in <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Hussainara Khatoon case</span>. </div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">“Now, a procedure which does not make available legal service to an accused person who is too poor to afford a lawyer and who would, therefore, have to go through the trial without legal assistance, cannot possibly be regarded as ‘reasonable, fair and just”. Accordingly in India free-legal aid to indigent or disabled person is considered to be essential component of Natural Justice. To ensure free legal aid to citizen of India Art 39A is inserted in part IV of the constitution which states that, The State shall secure that the operation of the legal system promotes justice, on a basis of equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities. Accordingly sufficient safeguard has been provided under Indian Constitution to get Legal representation.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">2 (c) Art. 22: gives protection to arrested person against arrest and detention in certain cases which within its ambit contains very valuable element of natural justice,</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> (1) No person who is arrested shall be detained in custody without being informed, as soon as maybe, of the grounds for such arrest nor shall he be denied the right to consult, and to be defended by, a legal practitioner of his choice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(2) Every person who is arrested and detained in custody shall be produced before the nearest magistrate within a period of twenty-four hours of such arrest excluding the time necessary for the journey from the place of arrest to the court of the magistrate and no such person shall</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">be detained in custody beyond the said period without the authority of a magistrate.</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700; margin: 0px; padding: 0px;"><div style="text-align: justify;">Article 22 (1) and (2) confers four following fundamental rights upon a person who has been arrested:</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">i) Right to be informed, as soon as may be, of the grounds for such arrest.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">ii) Right to consult and to be defended by a legal practitioner of his choice.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">iii) Right to be produced before the nearest magistrate within twenty-four hours of his arrest excluding the time necessary for the journey from the place of arrest to the Court of Magistrate.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">iv) Right not to be detained in custody beyond the period of twenty four hours without the authority of the Magistrate.</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: navy; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; margin: 0px; padding: 0px;"><div style="text-align: justify;"><span style="font-weight: 700;">2 (c) (i): Right to be informed of the Grounds of Arrest:</span></div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">The object underlying the provision that the ground for arrest should be communicated to the person arrested appears to be this. On knowing about the grounds of arrest, the detenue will be in a position to make an application to the appropriate court for bail or move the High Court for a writ of habeas corpus. The Supreme Court observed that Article 22 (1) embodies a rule which has always been regarded as vital and fundamental for safeguarding personal liberty in all legal systems where the Rule of Law prevails. Information as to the grounds of arrest provide reasonable opportunity to prepare a case by detenu, such grounds must be precise clear and unambiguous, if the grounds are not fully disclosed to accused than it would amount to denial of ‘fair hearing’ and results into violation of Natural Justice.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In re, Madhu Limaye the facts were: Madhu Limaye, Member of the Lok Sabha and several other persons were arrested. Madhu Limaye addressed a petition in the form of a letter to the Supreme Court under Article 32 mentioning that he along with his companions had been arrested but had not been communicated the reasons or the grounds for arrest. It was stated that the arrested persons had been merely told that the arrest had been made “under sections which are bailable”. In the return filed by the State this assertion had neither been controverted nor had anything been stated with reference to it. One of the contentions raised by Madhu Limaye was that there was a violation of the mandatory provisions of Article 22 (1) of the Constitution.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> The Supreme Court observed that Article 22 (1) embodies a rule which has always been regarded as vital and fundamental for safeguarding personal liberty in all legal systems where the Rule of Law prevails. The court further observed that the two requirements of Clause (1) of Article 22 are meant to afford the earliest opportunity to the arrested person to remove any mistake, misapprehension or misunderstanding in the minds of the arresting authority and, also to know exactly what the accusation against him is so that he can exercise the second right, namely of consulting a legal practitioner of his choice and to be defended by him. Those who feel called upon to deprive other persons of liberty in the discharge of what they conceive to be their duty must, strictly and scrupulously, observe the forms and rules of law.</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700; margin: 0px; padding: 0px;"><div style="text-align: justify;"><span style="box-sizing: border-box; margin: 0px; padding: 0px;"><span style="box-sizing: border-box; color: navy; margin: 0px; padding: 0px;">2 (c) (ii): Right to consult and to be defended by Legal Practitioner</span></span>:</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> as we already dealt U/Art. 21 that principle of fair hearing requires adequate legal representation, this principle is carried forward by Art. 22 (1). Art 22(1) guarantees right of legal representation by advocate of his choice. The Article does not require the state to extend legal aid as such but only requires to allow all reasonable facilities to engage a lawyer to the person arrested and detained in custody. The choice of counsel is entirely left to the arrested person. The right to consult arises soon after arrest.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Nandini Satpathy v. P.L. Dani </span>the Supreme Court observed that Article 22 (1) directs that the right to consult an advocate of his choice shall not be denied to any person who is arrested. This does not mean that persons who are not under arrest or custody can be denied that right. The spirit and sense of Article 22 (1) is that it is fundamental to the rule of law that the services of a lawyer shall be available for consultation to any accused person under circumstances of near-custodial interrogation. Moreover, the observance of the right against self incrimination is best promoted by conceding to the accused the right to consult a legal practitioner of his choice. Lawyer's presence is a constitutional claim in some circumstances in our country also, and in the context of Article 20(3) is an assurance of awareness and observance of the right to silence. Nandini Satpathy's Case makes a clear departure from the literal interpretation stance of the Supreme Court in earlier cases. The case added an additional fortification to the right to counsel. The Supreme Court went a step forward in holding that Article 22(1) does not mean that persons who are not strictly under arrest or custody can be denied the right to counsel. The Court enlarged this right to include right to counsel to any accused person under circumstances of near-custodial interrogation.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Joginder Kumar V. State of U.P</span>. The Supreme Court held that right of arrested person upon request, to have someone informed about his arrest and right to consult privately with lawyers are inherent in Articles 21 and 22 of the Constitution. The Supreme Court observed that no arrest can be made because it is lawful for the Police officer to do so. The existence of the power to arrest is one thing. The justification for the exercise of it is quite another. The Police Officer must be able to justify the arrest apart from his power to do so. Arrest and detention in police lock-up of a person can cause incalculable harm to the reputation and self-esteem of a person. No arrest should be made by Police Officer without a reasonable satisfaction reached after some investigation as to the genuineness and bona fides of a complaint and a reasonable belief both as to the person's complicity and even so as to the need to effect arrest.</div></span><span style="box-sizing: border-box; margin: 0px; padding: 0px;"><div style="text-align: justify;"><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700;"><br /></span></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700;"><div style="text-align: justify;">The Supreme Court issued the following requirements:</div></span></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> (1) An arrested person being held in custody is entitled, if he so requests, to have one friend, relative or other person who is known to him or likely to take an interest in his welfare told as far as practicable that he has been arrested and where is being detained.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(2) The Police Officer shall inform the arrested person when he is brought to the police station of this right.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(3) An entry shall be required to be made in the Diary as to who was informed of the arrest. These protections from power must be held to flow from Articles 21 and 22 (1) and enforced strictly. The above requirements shall be followed in all cases of arrest till legal provisions are made in this behalf. In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">M.H.Hoskot V. State of Maharashtra</span> it was observed by the Supreme Court that generally speaking and subject to just exceptions, at least a single right of appeal on facts, where criminal conviction is fraught with long loss of liberty, is basic to civilized jurisprudence. Every step that makes the right of appeal fruitful is obligatory and every action or inaction which stultifies it is unfair and unconstitutional. Pertinent to the point are two requirements: (i) service of a copy of the judgment to the prisoner in time to file an appeal and (ii) provision of free legal services to a prisoner who is indigent or otherwise disabled from securing legal assistance where the ends of justice call for such service. Both these are State responsibilities under Article 21. Where the procedural law provides for further appeal these requirements will similarly apply. One of the ingredients of fair procedure to a prisoner, who has to seek his liberation through the court process is lawyer's services. Judicial justice, with procedural intricacies, legal submissions and critical examination of evidence, leans upon professional expertise and a failure of equal justice under the law is on the cards where such supportive skill is absent for one side. The Indian socio-legal milieu makes free legal service at trial and higher levels, an imperative processual piece of criminal justice where deprivation of life or personal liberty hangs in the judicial balance. Partial statutory implementation of the mandate is found in S. 304 Cr. P.C., and in other situations courts cannot be inert in the face of Article 21 and 39-A. <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;"><a href="http://www.legalservicesindia.com/forum/topic80-maneka-gandhi-vs-union-of-india.html" style="background: transparent; box-sizing: border-box; color: maroon; cursor: pointer; margin: 0px; padding: 0px;" target="_blank"><span style="box-sizing: border-box; color: #993333; margin: 0px; padding: 0px;">Maneka Gandhi's Case</span></a></span> has laid down that personal liberty cannot be cut out or cut down without fair legal procedure. Enough has been set out to establish that a prisoner, deprived of his freedom by court sentence but entitled to appeal against such verdict, can claim, as part of his protection under Article 21 and as implied in his statutory right to appeal, the necessary concomitant of right to counsel to prepare and argue his appeal.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">If a prisoner sentenced to imprisonment, is virtually unable to exercise his constitutional or statutory right of appeal, inclusive of special leave to appeal for want of legal assistance, there is implicit in the Court under Article 142 read with Articles 21 and 39-A of the Constitution, power to assign counsel for such imprisoned individual 'for doing complete justice'. The inference is inevitable that this is a State's duty and not Government's charity. Equally affirmative is the implication that while legal services must be free to the beneficiary the lawyer himself has to be reasonably remunerated for his services. Naturally, the State concerned must pay a reasonable sum that the court may fix when assigning counsel to the prisoner. Of course, the court may judge the situation and consider from all angles whether it is necessary for the ends of justice to make available legal aid in the particular case. That discretion resides in the Court. This is the present position relating to legal representation to detenu U/Art 22(1).</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> </div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Art 22 (4) to (7) deals with preventive detention, Art. 22(5) provides same safeguards to person detained under Preventive Detention Laws, like Under COFEPOSA-1974, National Security-1980, etc In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Nandlal Bajaj v. State of Punjab</span>, the Court allowed legal representation to the detainee through a lawyer even when Section 11 of the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, 1980, and Sec 8(e) of COFEPOSA- 1974 denied legal representation in express term, because state had been represented through a lawyer. The SC observed even when the law does not allow legal representation to the detenu, he is entitled to make such a request and the advisory board is bound to consider this request on merit, and Board is not preclude to allow such assistance when it allows the state to be represented through a lawyer.</div></span><span style="box-sizing: border-box; margin: 0px; padding: 0px;"><div style="text-align: justify;"><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700;"><br /></span></div><span style="box-sizing: border-box; color: navy; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700; margin: 0px; padding: 0px;"><div style="text-align: justify;">2 (d): Art 32, 226 and 227:</div></span></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> Art 32 and 226 of the constitution provides for constitutional remedies for violation of fundamental Rights and other legal rights respectively remedies, Under Art 32 and 226 can be exercised by issuing appropriate Writ, Direction and Orders. Writs in the nature of Habeas Corpus mandamus, prohibition quo-warranto and certiorari. Writ of Habeas Corpus is invoked to prevent unlawful detention and Mandamus is invoked to compel public official to perform his legal duties. Whereas Writ of Prohibition and Certiorari are used to prevent Judicial and quasi-judicial bodies from acting without jurisdiction, in excess of jurisdiction, or where error of law apparent on face of record, violation of Fundamental Right and on the ground of violation of Principles of Natural Justice. However, in recent time it is new development that Writ of Certiorari can also be invoked against Administrative authority exercising adjudicatory function.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">U.P.Warehousing Coproration V. Vijay Narain</span>, in this case Court held that Writ of certiorari or prohibition usually goes to a body which is bound to act fairly or according to natural justice and it fails to do so. In the same manner where the decision is affected by bias, personal, or pecuniary, or subject matter as the case may be considered as violation of principle of natural justice. In such circumstances also writ of certiorari and prohibition can be issued both Under Art 32 and 226. In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Manacle V. Dr. Premchand</span>, speaking for SC, Gagendragadkar, J., remarked: “it is obvious that pecuniary interest, however small it may be in the subject matter of matter of the proceedings, would wholly disqualify a member from acting as judge. In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Gullapalli Nageshwar Rao V. APSRTC</span> the SC quashed the decision of the AP Govt., nationalizing Road transport on the ground that the Secretary of the Transport Department who was given a hearing was interested in the subject matter. Any order made in violation of principles of natural justice is void ab-initio and is liable to be annulled and cancelled. The Supreme Court in <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Nawabkhan Abbaskhan V.State of Gujarat</span> held that an order which infringes a fundamental freedom passed in violation of the audi alteram partem rule is a nullity. When a competent court holds such official act or order invalid or sets it aside, it operates from nativity, i.e. the impugned act or order was never valid.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Parry &Co V. P.C.Pal </span>it was observed that writ of certiorari is generally granted when a Court has acted without or in access its jurisdiction. It is available in those cases where a tribunal though competent to enter upon an inquiry, acts in flagrant disregard of the rules of procedure or violates the Principles of Natural Justice, where no particular procedure is prescribed. Where the tribunal has disabled itself from reaching a fair decision by some considerations extraneous to the evidence and the merits of the case or where the conclusion on the very face of it is so wholly arbitrary and caprices that no reasonable person can ever have arrived at the conclusion interference under Art. 226 would be justified.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Apart from Art.32 and 226, it is Art 227 which can be used by High Court as another extraordinary weapon to prevent violation principles of natural justice in any of the lower courts or tribunals as the case may be. Art 227 runs as follows,</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700; margin: 0px; padding: 0px;"><div style="text-align: justify;">Art.227. Power of superintendence over all courts by the High Court</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(1) Every High Court shall have superintendence over all courts and tribunals throughout the territories in relation to which it exercises jurisdiction</div></span><p></p><p style="background-color: #e8e6d7; box-sizing: border-box; margin: 0px 0px 10px; padding: 0px;"></p><div style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; text-align: justify;">(2) Without prejudice to the generality of the foregoing provisions, the High Court may</div><div style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; text-align: justify;">(a) Call for returns from such courts;</div><div style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; text-align: justify;">(b) Make and issue general rules and prescribe forms for regulating the practice and proceedings of such courts; and</div><div style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; text-align: justify;">(c) Prescribe forms in which books, entries and accounts shall be kept by the officers of any such courts</div><div style="text-align: justify;"><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><br /></span></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(3) The High Court may also settle tables of fees to be allowed to the sheriff and all clerks and officers of such courts and to attorneys, advocates and pleaders practicing therein: Provided that any rules made, forms prescribed or tables settled under clause (2) or clause (3) shall not be inconsistent with the provision of any law for the time being in force, and shall require the previous approval of the Governor</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(4) Nothing in this article shall be deemed to confer on High Court powers of superintendence over any court or tribunal constituted by or under any law relating to the Armed Forces.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">High Court may in exercise of its power of superintendence issue direction, Order or writ in cases where it felt that there is violation of principles of natural justice accordingly it is one of the constitutional provisions framed in the spirit of principles of natural justice.</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: maroon; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; margin: 0px; padding: 0px;"><div style="text-align: justify;"><span style="box-sizing: border-box; margin: 0px; padding: 0px;"><span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">2 (e): Art. 311 and principles of Natural Justice</span></span><span style="color: #333333;">:</span></div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Art 311 deals with Dismissal, removal, or reduction in rank of persons employed in civil capacities under the Union or a State, though Art. 310 of the constitution adapts ‘doctrine of Pleasure’ Art 311 constitution provides sufficient safeguards against misuse of such power, (1) of Art 311 declares that no person who is a member of civil service of the Union or an all-India service of State or holds a civil post under Union or a State shall be dismissed or removed by an authority subordinate to that by which he was appointed and Clause (2) of Art.311 declares no such person as aforesaid shall be dismissed or removed or reduced in rank except after an inquiry in which he has been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges. The word ‘reasonable opportunity of being heard’ includes all the dimension of principles of natural justice, accordingly no dismissal, removal, or reduction of rank of civil servant can be made without giving reasonable opportunity of being heard.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Punjab National Bank V. Kuna Bihar Mira</span>, the following question was raised: when the inquiry officer, during the course of the disciplinary proceedings, comes to the conclusion that the charges of misconduct against an official are not proved, then can the disciplinary authority differ from that view and give a contrary finding without affording and opportunity to the delinquent officer The Court has ruled that natural justice demands that the authority which proposes to hold the delinquent officer guilty must give him a hearing. If the inquiry officer olds the charges to be proved then the report has to be given to the delinquent officer who can make a representation before the disciplinary authority takes further action prejudicial to the delinquent officer.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> Art. 311 requires the authority, which has to take a final decision and can impose a penalty, to give an opportunity to the officer charged of misconduct to file representation before the disciplinary authority records its findings on charges framed against the officer. This is because before imposing the punishment, the employer is expected to conduct a proper enquiry in accordance with the provisions of the Standing Orders, if applicable, and principles of natural justice. The enquiry should not be an empty formality.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> Effect of failure of natural justice in proceedings contemplated U/Art. 311 is defends upon the following circumstances (i) where there is total violation of natural justice, i.e., where no opportunity of hearing has been given: where there has been no notice/ no hearing at all; and</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(ii) Where a facet of natural justice has been violated, i.e. where there has been adequate opportunity of hearing, or where a fair hearing is lacking.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In situation (i), the order would undoubtedly be void. In such a case, normally, the authority concerned can proceed afresh according to natural justice.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In situation (ii), the Court has to see whether in totality of the circumstances, the delinquent servant did or did not have affair hearing. While applying the audi alterm partem rule, the ultimate and overriding objective must be kept in mind, to ensure a fair hearing and to ensure that there is no failure of justice. These prepositions were laid down by Hon’ble SC in <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">State Bank of Patiala V. S.K.Sharma</span> these prepositions equally applies to inquiry affected by bias, enquiry officer should be a person with an open mind and he should hold an impartial domestic enquiry. He should not be based either in favour of the department or against the person against whom the inquiry is to be held, or prejudge the issue, or have a foreclosed mind, or have pre-determined notions.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">An inquiry by a person who is biased against the charged officer is clear denial of reasonable opportunity. For example, one and the same person cannot be a judge and a witness in the same case. Therefore, the inquiry officer cannot also be a witness against the servant against whom he is holding the inquiry; such a procedure denotes a biased state of mind against the person concerned.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;"> In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Kuldeep Singh V. Commissioner of Police</span>, the SC held that the inquiry office as biased as he “did not sit with an open mind to hold an impartial domestic inquiry which is an essential component of natural justice as also that of “reasonable opportunity”, contemplated by Art. 311(2) of the Constitution.” The enquiry officer, said the Court, acted arbitrarily in the matter and found the employee guilty in such a coarse manner that it became apparent that he was merely carrying out the command from some superior officer who perhaps directed to “fix him up”.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">However, merely because officer holding enquiry is not liked by servant there may not be possibility of bias and no proceeding in such circumstance said to be affected by bias, there is authority for the view that, where there are certain rules governing the procedure of enquires, the mere violation of such rules will not give a party a cause of action unless there has been, inconsequence, prejudice caused.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Another important question here is should an Advocate be Permitted in all Domestic Enquiries?</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In the <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Board of Trustees V. Nadkarni </span>the Supreme Court stated that in the past there was informal atmosphere before a domestic enquiry forum and that strict rules of procedural law did not hamstring the enquiry. We have moved far away from this stage. The situation is where the employer has on his pay rolls Labour Officers. Legal Advisors, Lawyers in the garb of employees and they are appointed as Presenting Officers and the delinquent employee pitted against such legally trained personnel has to defend himself.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">However, the fact is that the weighted scales and tilted balance can only be partly restored if the delinquent is given the same legal assistance as the employer. It applies with equal vigour to all those who must be responsible for fair play. When the Bombay Port Trust Advisor and Junior Assistant Legal Advisor would act as the Presenting cum Prosecuting Officer in the enquiry, the employee was asked to be represented by a person not trained in law, was held utterly unfair and unjust. The employee should have been allowed to appear through legal practitioner and failure vitiated the enquiry. In <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Ghatge Patil Transport Pvt. Ltd. V B.K. Patel and others. </span>Apart from the provisions of law, it is one of the basic principles of natural justice that the enquiry should be fair and impartial. Even if there is no provision in the Standing Orders or in Law, wherein an enquiry before the domestic mind, if he seeks permission to appear through a legal practitioner the refusal to grant this request would amount to a denial of reasonable request to defend himself and the essential principles of natural justice would be violated. And in <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">India Photographic Co V. Sumatra Mohan Kumar</span> though the court should discourage involvement of legal practitioners in simple domestic enquiries, like disciplinary enquiries, for avoiding complications and delays, yet the court’s refusal of such representation would constitute failure of the enquiry itself. Principles of Natural Justice demands conceding to such a claim. No general rule can be laid down in this respect but the issue must be left for the consideration in the light of the facts and circumstances of each individual case. The view of Calcutta HC appears to be correct.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Further in enquiry when Principles of Natural Justice have not been observed, if the disciplinary authority comes to the conclusion that the inquiry was not made in conformity with principles of natural justice, it can also remit the case for further enquiry on all or some of the charges. The discretion in this regard should be exercised by the disciplinary authority for adequate reasons to be recorded in writing. A further enquiry may be ordered, for example, when there are grave lacunae or procedural defects vitiating the first enquiry and not because the first enquiry had gone in favour of the delinquent officer. In latter type of cases, the disciplinary authority can, if it is satisfied on the evidence on record, disagree with the findings of the Inquiring Authority.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In this context the following observations of the Rajasthan High Court in <span style="box-sizing: border-box; font-weight: 700; margin: 0px; padding: 0px;">Dwarka Chand V. State of Rajasthan</span> are relevant: If we were to hold that a second departmental enquiry could be ordered after the previous one has resulted in the exoneration of a public servant the danger of harassment to the public servant, would in our opinion, be immense. If it were possible to ignore the result of an earlier departmental enquiry, then there will be nothing to prevent a superior officer, if he were so minded, to order a second or a third or a fourth or even a fifth departmental enquiry after the earlier ones had resulted in the exoneration of a public servant.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Art 311 (2) provides invaluable safeguards to civil servants but at the same time provides some exception to requirement of natural justice, under following circumstance reasonable opportunity of being heard is not essential to civil servants under Union of India or a State,</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(i) Where a person is dismissed, removed or reduced in rank on the ground of misconduct which has led to his conviction on a criminal charge.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(ii) Where the authority empowered to dismiss or remove a person or to reduce him in rank is satisfied that for some reason, to be recorded by that authority in writing, it is not reasonably practicable to hold such an enquiry.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">(iii) Where the President or the Governor as the case may be is satisfied that in the interest of the Security of the State, it is not expedient to hold such enquiry.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">Referring to Article 311 (2) (b), the judges have pointed out that sometimes by not taking prompt action might result in the situation worsening and at times becoming uncontrollable. This could also be construed by the trouble makers and agitators as a sign of weakness on the part of the authorities. It would not be reasonably practicable to hold an inquiry where the Government Servant terrorizes threatens or intimidates disciplinary authority or the witnesses to the effect that they are prevented from taking action or giving evidence against him. It would not be reasonably practicable to hold the enquiry where an atmosphere of violence or general indiscipline and insubordination prevails.</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">This is about constitutional provision embedded with principles of natural justice.</div></span><div style="text-align: justify;"><br /></div><span style="box-sizing: border-box; color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px; font-weight: 700; margin: 0px; padding: 0px;"><div style="text-align: justify;"> 3. Conclusion</div></span><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In a welfare state like India, the role and jurisdiction of administrative agencies is increasing at a rapid pace and with rapid expansion of state liability and civic needs of the people conferment of administrative discretion became need of an hour. With expansion in scope of discretionary power of administrative authority the regulatory measures are to be equipped with sufficient power to prevent abuse of discretion. In this regard Constitutionalzed rule of law country like India, component of natural law, i.e. fair play in action must be found and reproclaimed by judiciary to keep intact the supremacy of rule of law in India. In this regard author submits that “the rules of natural justice can operate only in areas not covered by law validly made” such old judicial decisions of Apex Court and other High Court must be reconsidered and correct view would be declaring principles of natural justice necessary corollary of Law, they must operate in presence of and even in contravention to the established law where the interest of justice demands.</div></span><div style="text-align: justify;"><br /></div><span style="color: #333333; font-family: "Open Sans", Arial, sans-serif; font-size: 14px;"><div style="text-align: justify;">In India, the principles of natural justice are firmly grounded in Article 14 & 21 of the Constitution. With the introduction of concept of substantive and procedural due process in Article 21, all that fairness which is included in the principles of natural justice can be read into Art. 21. The violation of principles of natural justice results in arbitrariness; therefore, violation of natural justice is a violation of Equality clause of Art. 14.</div></span><p></p>Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-37260514448725523432021-09-07T03:51:00.001-07:002021-09-07T03:52:02.794-07:00Blog # 27. Conditional Legislation<p> </p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">Law reaches its end of serving justice and equity only if the medium of transportation and execution of the equivalent is prime. Having a law just in books and having a working, known, very much actualized and executed law are two different circumstances. Former is an instance of legislature at work and the latter is that of legislature and executive working together for reaching the end.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">Thus, conditional legislation is that thin line where these organs function independently as well as are interdependent in their exercise. Since, lawmakers cannot be present everywhere at every time, they delegate their legislative powers to subordinates where they can implement law to the extent of power they have been delegated. When conditions are added to such delegated power in matters of implementation, it becomes a conditional legislation. In the Venn diagram of Legislation , if delegation of power is a subset then conditional legislation is a sub-sub-set shown by “A” , “B” and “C” respectively.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">A – LEGISLATION</p><div class="lawbh-content_2" id="lawbh-709391010" style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin-left: auto; margin-right: auto; text-align: center;"></div><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">B – DELEGATED LEGISLATION</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">C- CONDITIONAL LEGISLATION</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">It is the concept of delegation of power which has given rise to what is currently known as Administrative Law. It is an uncodified law which has gained supreme importance in working of the organs of the nation. The major function of these authorities is to exercise their functions within the sphere of powers allotted.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">It is clear that parliament isn’t accessible consistently to take decisions in trivial issues of processing laws or when there is a requirement for adaptability be it in crisis circumstances or climatic calamities or in issues where the requirement for specialists in specialized issues can’t be overlooked that delegated legislation comes in salvage. But the question which arises is how and where the concept of conditional legislation is acquainted in the law systems.</p><h2 style="background-color: white; box-sizing: inherit; clear: both; color: #404040; font-family: "Roboto Condensed"; font-size: 26px; line-height: 1.2; text-align: justify;"><span class="ez-toc-section" id="DEFINITION_OF_CONDITIONAL_LEGISLATION" style="box-sizing: inherit;"></span><span style="box-sizing: inherit; font-weight: bolder;">DEFINITION OF CONDITIONAL LEGISLATION</span><span class="ez-toc-section-end" style="box-sizing: inherit;"></span></h2><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">When the law is complete and certain conditions are laid down as to how and when the law would be applied by the delegate, it is conditional legislation. It includes no law-making powers but only the power of determining when it should come into force or when it should be applied.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">Supreme Court in <em style="box-sizing: inherit;">Hamdard Dawakhana v. Union of India [1] </em>stated that in conditional legislation, the delegate’s power is that of determining when a legislative declared rule of conduct shall become effective.</p><h2 style="background-color: white; box-sizing: inherit; clear: both; color: #404040; font-family: "Roboto Condensed"; font-size: 26px; line-height: 1.2; text-align: justify;"><span class="ez-toc-section" id="Conditional_Legislation_can_be_found_in_the_occurrences_where_-_2" style="box-sizing: inherit;"></span><span style="box-sizing: inherit; font-weight: bolder;">Conditional Legislation can be found in the occurrences where :- [2]</span><span class="ez-toc-section-end" style="box-sizing: inherit;"></span></h2><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; padding-left: 40px; text-align: justify;">I. The legislature empowers the executive to expand the activity of a current law to a specific area or region.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; padding-left: 40px; text-align: justify;">II. To determine and decide the time of application of an Act to a given area.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; padding-left: 40px; text-align: justify;">III. To broaden the span of a Temporary Act, subject to maximum period fixed by the legislative assembly.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; padding-left: 40px; text-align: justify;">IV. To determine and decide the degree and limits within which the statute or Act should be employable and operative.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; padding-left: 40px; text-align: justify;">V. Lastly, to introduce a special law if the contemplated situation has arisen in the opinion of the government.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">Conditional Legislation allows better implementation and better reach of laws as it gives them ample discretion to work and to make decisions regarding implementation in the best manner possible. Thus, all the modern socio-economic welfare schemes are a formation of the legislature, but they have become successful in the country because of their implementation. All the “when, where and how” aspects of implementation have been ticked generously by the government because of the discretion that they have been given by the legislature for the implementation of the Acts framed by the lawmakers. But this discretion cannot be exercised beyond the power that has been delegated. If exceeded, then that action is null and void.</p><h2 style="background-color: white; box-sizing: inherit; clear: both; color: #404040; font-family: "Roboto Condensed"; font-size: 26px; line-height: 1.2; text-align: justify;"><span class="ez-toc-section" id="Conditional_Legislation_can_be_classified_in_3_categories_-_3" style="box-sizing: inherit;"></span><span style="box-sizing: inherit; font-weight: bolder;">Conditional Legislation can be classified in 3 categories :</span>– [3]<span class="ez-toc-section-end" style="box-sizing: inherit;"></span></h2><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">1. In the first category, when the Legislature has completed the task of enacting a Statute, the entire structure of the legislation is ready but its future appropriateness to a given region is left to the subjective satisfaction of the delegate who being fulfilled and satisfied about the conditions showing the correct time for applying the provisions of the said Act to a given region exercises that power as a delegate of the parent legislative body. At the point when the Act itself is finished and is sanctioned to be consistently applied in future to each one of the individuals who are to be secured by the scope of the Act, the Legislature can be said to have completed its task. This would be an act of pure and simple conditional legislation depending upon the subjective satisfaction of the delegate as to when the said Act enacted and completed by the parent Legislature is to be made effective.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">2. The second category of conditional legislations wherein the delegate has to decide whether and under what circumstances a completed Act of the parent legislation which has already come into force is to be partially withdrawn from operation in a given area or in given cases so as not to be applicable to a given class of persons who are otherwise admittedly governed by the Act. In such type of cases, the delegate has to act negatively by withdrawing the operating act, fully or partially due to any causes of action of governance.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">3. The third category of cases wherein the exercise of conditional legislation would depend upon satisfaction of the delegate in objective facts placed by one class of persons seeking benefit of such an exercise with a view to deprive the rival class of persons who otherwise might have already got statutory benefits under the Act and who are likely to lose the existing benefit because of exercise of such a power by the delegate. In such type of cases the satisfaction of the delegate has necessarily to be based on objective consideration of the relevant data for and against the exercise of such power.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">The landmark case for delegation of legislation is the <span style="box-sizing: inherit; font-weight: bolder;">Re : Delhi Laws Act Case</span> [4], which revolved around the question of whether giving the Lt. Governor the power to extend the application of law is delegation of power? Privy council observed that Indian legislature is not an agent or delegate but was intended to have plenary powers of legislation and of the same nature of the parliament itself. It was observed that Indian legislature had exercised its judgement as to the place, person, law, powers and what the governor was required to do was to make it effective upon fulfilment of certain conditions. This is called conditional legislation which was upheld by the court. [5] In <span style="box-sizing: inherit; font-weight: bolder;">Jatindra Nath v. Province of Bihar</span> [6], it was held that there could be no delegated legislation in India beyond conditional legislation.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;"></p><h2 style="background-color: white; box-sizing: inherit; clear: both; color: #404040; font-family: "Roboto Condensed"; font-size: 26px; line-height: 1.2; text-align: justify;"><span class="ez-toc-section" id="CONDITIONAL_LEGISLATION_AND_DELEGATED_LEGISLATION" style="box-sizing: inherit;"></span><span style="box-sizing: inherit; font-weight: bolder;">CONDITIONAL LEGISLATION AND DELEGATED LEGISLATION :-</span><span class="ez-toc-section-end" style="box-sizing: inherit;"></span></h2><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">Conditional legislation though a kind of delegated legislation is different from it as the latter includes conferring law-making power to another body, but the former is only for bringing the law in force by another body without having any law-making power. Both the jobs are being done by delegates, but one involves law making and the other involves implementing the same. The point of commonality being that both are done by delegates with a motive of better implementation and usage of law. One with framing supporting rules, guidelines, notifications and the other with method and satisfying conditions for execution of the law made by the assembly accordingly. In the end, delegated legislation be it of any kind is working under the umbrella of powers given by the law-making bodies of central and state governments respectively.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;"></p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;"><span style="box-sizing: inherit; font-weight: bolder;">References</span></p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">[1] AIR 1960 SC 554.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">[2] Dr. N. V. Paranjape, Studies in Jurisprudence and Legal Theory, 8th Edition, Central Law Agency, Pg. 331.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">[3] In Re the Delhi Laws Act, 1912 v. The Part C States (Laws) Act, 1951 AIR 332 read along with Conditional Legislation and Delegated Legislation, available at https://www.lawyersclubindia.com/articles/Conditional-legislation-and-delegated-legislation-1126.asp</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">[4] AIR 1951 SC 347.</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">[5] IN RE DELHI LAWS ACT CASE : LANDMARK IN CONCEPT OF DELEGATED LEGISLATION IN INDIA , MANUPATRA ARTICLES, available at http://www.manupatra.com/roundup/333/Articles/In%20re%20Delhi%20Laws%20Act%20Case.pdf</p><p style="background-color: white; box-sizing: inherit; color: #404040; font-family: "Source Sans Pro", Graphik, -apple-system, BlinkMacSystemFont, "Segoe UI", Helvetica, Arial, sans-serif; font-size: 18px; margin: 0px 0px 1.5em; text-align: justify;">[6] ( 1949 ) 2 FCR 595.</p>Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-90772194898215610982020-10-02T04:21:00.002-07:002020-10-02T04:21:17.273-07:00Blog # 26. Concept of Real Income under the Income Tax Act, 1961<p style="text-align: justify;"><strong> </strong></p>
<ol>
<li style="text-align: justify;"><strong>What is Income ?</strong></li></ol>
<ul>
<li style="text-align: justify;">Before understanding the concept of Real Income, it shall be important to go through the the term “Income” and “Real”.</li>
<li style="text-align: justify;">Income is defined under S.2(24) of the Income Tax Act, 1961(Hereinafter referred as “the Act”).</li>
<li style="text-align: justify;">The definition as provided under the Act is an inclusive definition so as to cover up all the usual as well as unusual items, however it certainly does not define it in a way that we can be said it to be precise.</li>
<li><div style="text-align: justify;">The same can be understood by various Judge Made Laws. The first and the lead amongst them is a Privy Council Judgment in the case of</div><ul>
<li style="text-align: justify;"><em><strong>Kamakshya</strong></em><em><strong>Narain</strong></em><strong> </strong><em><strong>Singh</strong></em><strong> CIT</strong><strong> 11 ITR 513 (PC)</strong></li>
</ul>
</li>
</ul>
<p style="text-align: justify;"> <strong> Facts</strong></p>
<ul>
<li style="text-align: justify;">The assesse was a <em>“Raja” </em>gave mining lease and He received payments by way of royalty for coal mines leased out to various lessees.</li>
<li style="text-align: justify;">The case of the Assessee was that this royalty income received by the Assessee was nothing but the recoupment of the resources which shall be exhausted by the end of the lease and thus the same was not income but a capital receipt.</li>
</ul>
<p style="text-align: justify;"><strong><span> </span><span> </span>Held :</strong></p>
<ul>
<li style="text-align: justify;">"Income, it is true, is a word difficult and perhaps impossible to define in any precise general formula. It is a word of the broadest Connotation".</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>CIT vs M/s Bhogilal Laherchand Including Batliboi and Co. 25 ITR 50</strong></li>
</ul>
<p style="text-align: justify;"><span> </span><span> </span>Question raised before the Supreme Court (In todays Context Section 5 read with Section 9). The <span> </span><span> </span>Assessee claimed that there is no law to treat income as “deemed income”. The legislature cannot <span> </span><span> </span>treat something as deemed income which was not an income at the first place. The Supreme <span> </span><span> </span><span> </span>Court held that the Legislature has power to bring in to ambit such receipts and tax it in accordance with the law.In the 1922 Act, capital gain was not taxable, however by way of an amendment, capital gain was included as taxable. The Question came up before the Supreme Court that whether capital gains can be considered as “Income” (With reference to interpreting the word “income” in item no. 54 in List I of the Seventh Schedule of the Government of India Act, 1935) in the case of</p>
<ul>
<li style="text-align: justify;"><strong>Navincahandra Mafatlal vs CIT in </strong><strong>[1954] 26 ITR 758 (SC)</strong><strong>.</strong></li>
</ul>
<p style="text-align: justify;">The Supreme Court in this judgment after relying upon English Jurisprudence held that it is always open to the legislature to treat even receipt of capital nature as income.</p>
<p style="text-align: justify;"><strong><br /></strong></p><p style="text-align: justify;"><strong>Whether Legislature has power to include “Income of other person” in the hands of some other Person?</strong></p>
<p style="text-align: justify;">The Answer is Yes. The supreme court in the case of <strong>Sardar</strong> <strong>Baldev Singh Vs Commissioner of Income Tax </strong><strong>[1960] 40 ITR 605 (SC)</strong> held that a law could also be passed to prevent a person from evading the tax payable on his own income. A Law can also be passed not only as authorising the imposition of a tax but also as authorising an enactment which prevents the tax imposed being evaded. The Supreme Court in Balaji Vs ITO (1961) 43 ITR 393 further held that the scope of “Income” income is wide enough so as to instances wherein the income may not have been earned by the Assessee, but his spouse.</p>
<p style="text-align: justify;"><strong>Loan :</strong> Loan is not an income but we all are aware that S.2(22)(e) covers loans/ advances received by a share holder in conditional circumstances to be its income. The Question was raised before the Supreme Court in the case of <strong>CIT vs Navnitlal Zaveri 56 ITR 198</strong> that whether transaction which has no element of income, such as transaction of loan can be brought under the purview of the word “Income” by creating a deeming fiction. The Supreme Court held that the private companies if would have distributed the dividend, then shareholders would have paid the taxes (In those day, the dividend was taxable in the hands of shareholders), this is nothing else but a device to utilise the funds of the company without payment of taxes and therefore attempt of the legislature to tax even the loan as deemed income is a valid exercise.</p>
<p style="text-align: justify;">Section 44AC which taxes income on the presumptive basis was brought in to the statute book and the Assessees challenged the piece of law on the basis that the tax is not imposed on the income and is imposed on the turnover and the union has no power to levy tax on turnover. The case came up before the Hon’ble Supreme Court in the case of Union of India Vs A. Sayasi Rao <strong>[1996] 85 Taxman 321 (SC)</strong>, wherein it was held that held that though it is a tax on turnover, it is not a turnover tax, it is an income tax because we are now, reading down the law to require that if the assesse claims, that its taxable income is not percentage of turnover, he will be taxed on actual assessment and not on income which is presumed to be his income on percentage of turnover.</p><p style="text-align: justify;">In short while construing the term income, the courts have construed it in a very wide manner so as to include, transactions, loans, and various situation which may not ordinarily be regarded as income, but has been considered as “Income”.</p>
<p style="text-align: justify;"><strong> </strong></p>
<ol start="2">
<li style="text-align: justify;"><strong>What is Real Income?</strong></li>
</ol>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;">An assessee is required to pay tax on its income. The concept of income is discussed hereinabove. As per S.145 of the Act, the income under the head “Business or profession” or “Income from other Sources” shall be determined on the basis of Accounting, followed by an assesse regularly, being mercantile system or cash system. However, there may be situation, wherein it may appear that the assesse has earned income but in reality, he may claim that he hasn’t earned such income and that is how, the concept of Real Income has evolved.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">The fundamental question thus arises as to what do we mean by the term “Real” ?</li>
</ul>
<p style="text-align: justify;"><span> </span><span> <span> </span></span>Something which has not been earned by the Assessee, something which is being regarded as <span> </span><span> </span><span> </span>having been earned by the Assessee on a notional or Hypothetical basis but in reality is not being <span> </span><span> </span>earned it, is being taken out from the sphere of income.</p>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">In order to better understand the concept of “Real Income”, as it stands today, it is important to go through the history of its evolution in different courts. The same is summarised as under :-</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>D. Sassoon & Co. Ltd. <em>v. </em>Commissioner of Income-tax [1954] 26 ITR 27 (SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts</strong></p>
<ul>
<li style="text-align: justify;">Assessee-company were managing agents of three companies. They transferred their managing agencies to other companies during relevant accounting year and received consideration which was taken to 'capital reserve account' –</li>
<li style="text-align: justify;">Transferee companies received from managed companies certain amounts as and by way of commission in relevant accounting year –</li>
<li style="text-align: justify;">As per Agreement of agency, the amount of commission becomes payable per annum, ie. only at the end of the year</li>
<li style="text-align: justify;">The ITO taxed the commission on prorate basis ie on the basis of Services which was confirmed by AAC, Tribunal and the High Court.</li>
<li style="text-align: justify;">Whether in the facts of the managing agency commission was not liable to be apportioned between assessee-company and respective transferee companies in proportion of services rendered as managing agents by each one of them</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">The Supreme Court held that as no income had accured to assessee-company on dates of respective transfers of managing agencies as the contract stipulated the accrual at the end of the year, assignment before such date to transferees defers the accrual in the hands of the Assessee.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>CIT Vs. </strong><strong>Shoorji Vallabhdas & Co.</strong><strong>[1962] 46 ITR 144 (SC) faced a similar challenge as wo to when did the income Accrue ?</strong></li>
</ul>
<p style="text-align: justify;"><strong> Facts</strong></p>
<ul>
<li style="text-align: justify;">For the A.Y. 1948-49 Assessee-firm was managing agents of two companies.</li>
<li style="text-align: justify;">It was entitled to receive as its commission, at the rate of 10 per cent of freight charged –</li>
<li style="text-align: justify;">In 1948 on request of managed companies assessee agreed to reduce commission to 2½ per cent from 10 per cent –</li>
<li style="text-align: justify;">In assessment proceedings, ITO took view that amount of larger commission (@10%) had already accrued during relevant previous year and same was thus assessable as “Income” –</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">Since reduction in share of commission was part of agreement entered into by assessee-firm agreed upon before the end of the year, larger income (@10%) neither accrued nor was received by assessee during relevant assessment year and thus only 2½ is what that can be said to have accrued and assessable in the hands of the Assessee.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Morvi Industries Vs CIT </strong><strong>[1971] 82 ITR 835 (SC) </strong></li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<p style="text-align: justify;"><strong>Facts</strong></p>
<ul>
<li style="text-align: justify;">The assessee-company, as the managing agent of its 100 per cent subsidiary company, was entitled to receive a fixed office allowance plus a commission out of the net profits and an additional commission on all purchases of cotton and an equal amount on all sales of cloth and yarn.</li>
<li style="text-align: justify;">The managed-company's accounting year closed on the 30th day of December and that of the appellant-company on the 30th day of June every year. Clause 2(<em>e</em>) of the managing agency agreement dated 30th December, 1946, contained the following term as to when the commission would be due and payable:</li>
</ul>
<p style="text-align: justify;">"(<em>e</em>) The said commission shall be due to the agents yearly on the thirty-first day of December or any other date on which the company's yearly accounts close in each and every year during the continuance of this agreement and shall be payable and be paid immediately after annual accounts of the said company have been passed by the board of directors, and auditors of the company and by the company in general meeting".</p>
<ul>
<li style="text-align: justify;">For the assessment years 1956-57 and 1957-58, the managed company suffered losses and consequently, the commission payable on the net profits was nil.</li>
<li style="text-align: justify;">The assessee-company relinquished the managing agency commission after it became due but before it was <strong>payable</strong> in terms of clause 2(<em>e</em>) of the agreement, on the ground that the managed company had been suffering heavy losses in the past years. It also relinquished the fixed office allowance.</li>
<li style="text-align: justify;">The ITO included the relevant amounts in the assessee's total income, on the ground that the fixed office allowance having been given to enable it to recoup the expenses incurred on behalf of the managed company, the relinquishment was <em>ex-gratia, </em>and that the commission having been forgone after it had become due, it was taxable on accrual basis.</li>
<li style="text-align: justify;">On reference, the High Court observed that the accrual of income was complete within the accounting year of the managed company and as no relinquishment had been done before the amount became due, the case strictly came within the ambit of section 4(1)(<em>b</em>)(<em>i</em>). The relinquishment, it was further observed, was a unilateral act of the assessee.</li>
<li style="text-align: justify;">On Appeal before the Supreme Court</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">The Supreme Court observed that in the present case, the Assesse has relinquished its rights after the income was accrued, after the completion of the year. Once the income accrues to him, it is his right and company’s liability to pay him the said amount. It is a different matter that by way of an agreement the payment was differed to a later date, that does shifts the accrual of income. Thus relinquishing the right to recovery does not mean that the income never accrued.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Thus from the above cited cluster of 3 cases, it can be said that the concept of Real Income shall be checked upon at the time of Accrual and not at the time of receipt.</strong></li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>Evolution of the law thereafter</strong></li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>Godhara Electricity Co. Ltd. Vs. CIT </strong><strong>[1997] 91 Taxman 351 (SC)/225 ITR 746 </strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee-company, a licencee to generate and supply of electricity to its consumers enhanced the charges for electricity and motive power in 1963.</li>
<li style="text-align: justify;">Suits filed by the consumers challenging enhancement were allowed by the lower courts except the Division Bench of the High Court.</li>
<li style="text-align: justify;">The Supreme Court in 1969 ultimately decided case in favour of the assessee.</li>
<li style="text-align: justify;">Shortly thereafter, the Under Secretary to the Government of Gujarat wrote a letter advising the assessee-company to maintain the <em>status quo</em> for the rates to the consumers for at least six months.</li>
<li style="text-align: justify;">While so, the consumers also filed another representative suit wherein interim injunction was granted and finally decreed in favour of the consumers by the lower court.</li>
<li style="text-align: justify;">During pendency of the subsequent suit the management of the undertaking of the assessee-company was taken over by the Government of Gujarat under the Defence of India Rules, 1971.</li>
<li style="text-align: justify;">During pendency of these litigations the assessee-company was not able to realise the enhanced charge from the consumers for the assessment years 1969-70 to 1972-73.</li>
<li style="text-align: justify;">The Assessing Officer while making the assessment included the disputed amount in the hands of the assessee-company on the ground that it was following mercantile system of accounting and it had the legal right to recover the said amount.</li>
<li style="text-align: justify;">The first appellate authority, however, deleted the additions and that was affirmed by the Tribunal after holding that the increased tariff income recorded by the Assessee in its books is nothing but a Hypothetical Income.</li>
<li style="text-align: justify;">But on reference, the High Court upheld the view taken by the Assessing Officer.</li>
<li style="text-align: justify;">On Appeal to the Supreme Court</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">In the instant case even though the assessee-company was following the mercantile system of accounting and had made entries in the books regarding enhanced charges for the supply made to the consumers, <strong>no real income had</strong> accrued to the assessee-company in respect of those enhanced charges in view of the fact that soon after the assessee-company decided to enhance the rates in 1963 representative suits were filed by the consumers which were decreed by the trial court and which decree was affirmed by the appellate court and the High Court and it was only on 3-10-1968 that the letters patent appeals filed by the assessee-company were allowed by the Division Bench of the High Court and the said suits were dismissed But appeals were filed against the said judgment by the consumers in the Supreme Court and the same were dismissed by the judgment of the Supreme Court dated 26-2-1969. Shortly thereafter, on 19-3-1969, the Under Secretary to the Government of Gujarat wrote a letter advising the assessee-company to maintain the status quo for the rates to the consumers for at least six months.</li>
<li style="text-align: justify;">No doubt, the letter addressed by the Under Secretary to the Government of Gujarat to the assessee-company, had no legally binding effect but one has to look at things from <strong>practical point of view that the assessee-company</strong>, being a licensee, could not ignore the direction of the State Government which was couched in the form of an advice, whereby the assessee-company was asked to maintain the status quo for at least six months and not to take steps to recover the dues towards enhanced charges from the consumers during this period Before the expiry of the period of six months the subsequent suit had been filed by the consumers and during the pendency of the said suit the undertaking of the assessee-company was taken over by the Government of Gujarat under the Defence of India Rules, and subsequently, it was transferred to the Gujarat State Electricity Board and, as a result, the assessee-company was not in a position to take steps to recover the enhanced charges.</li>
<li style="text-align: justify;"><strong>The question whether there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity had to be considered by taking the probability or improbability of realisation in a realistic manner</strong></li>
<li style="text-align: justify;">If the matter was considered in this light it was not possible to hold that there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity which were added by the AO while passing the assessment orders in respect of the assessment years under consideration</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">Thus Supreme Court now laid down two interesting points that needs to be considered while determining the Real income. The same are as under</li>
</ul>
<ol>
<li style="text-align: justify;">To look at things from practical point of view that the assessee-company.</li>
<li style="text-align: justify;">Probability or improbability of realisation in a realistic manner</li>
</ol>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">Thus before this law was laid down, the concept of real income was a pure question of law/ theoretical. However after this Judgment, the examination of facts and entire scenario becomes an important criteria while determining the real income in a given situation.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">At this juncture, the following tests laid down by the Hon’ble Supreme Court needs to be summarised</li>
<li style="text-align: justify;">Whether the income accrued to the assessee is real or hypothetical;</li>
<li style="text-align: justify;">Whether there is a corresponding liability of the other party and</li>
<li style="text-align: justify;">The probability or improbability of realisation of the such income by the assessee considered from a realistic and practical point of view</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">The above three tests were applied by the Supreme Court in</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>CIT Vs Excel Industries Ltd. [2013] 358 ITR 295</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee maintained its accounts on mercantile basis. In its return the assessee claimed deductions under the head 'advance license benefit' receivable and 'duty entitlement pass book benefit' receivable.</li>
<li style="text-align: justify;">The Assessing Officer did not accept the assessee's claim on the ground that the taxability of such benefits was covered by section 28(<em>iv</em>).</li>
<li style="text-align: justify;">The Commissioner (Appeals) relying upon orders passed in case of assessee in earlier assessment years, held that benefits in question could not be brought to tax in assessment year in question.</li>
<li style="text-align: justify;">The Tribunal as well as the High Court upheld the order of the Commissioner (Appeals).</li>
<li style="text-align: justify;">On appeal to the Supreme Court: The Question raised before was whether the benefit of an entitlement to make duty free imports of raw materials obtained by the assessee through advance licences and duty entitlement pass book issued against export obligations is income in the year in which the exports are made or in the year in which the duty free imports are made.</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<ul>
<li style="text-align: justify;">In so far as the present case is concerned, even if it is assumed that the assessee was entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialise and its money value is therefore not the income of the assessee.</li>
<li style="text-align: justify;">Thus Applying three tests as ie. Whether the income accrued to the assessee is real or hypothetical; whether there is a corresponding liability of the other party to pass on the benefits of duty free import to the assessee even without any imports having been made; and the probability or improbability of realisation of the benefits by the assessee considered from a realistic and practical point of view (the assessee may not have made imports), it is quite clear that in fact no real income but only hypothetical income had accrued to the assessee at the time of exports and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. <strong>Essentially, the Assessing Officer is required to be pragmatic and not pedantic.</strong></li>
</ul>
<p style="text-align: justify;"> </p>
<ol start="3">
<li style="text-align: justify;"><strong>Where did the Concept of Real Income Failed and Why?</strong></li>
</ol>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">The point needs to be noted is that the concept of whether income accrued/ arisen or not, needs to be looked in to only at the stage of Accrual. The following judgments, clarifies this point as under and explains where the concept of real income failed and why ?</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>State Bank of Travancore Vs CIT [1986] 158 ITR 102(SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts</strong></p>
<ul>
<li style="text-align: justify;">The assessee, a subsidiary bank of the State Bank of India, was following the mercantile system of accounting.</li>
<li style="text-align: justify;">In the course of its banking business the assessee used to charge interest on advances, including even those which it considered doubtful of recovery, termed as 'sticky advances', by debiting the concerned parties but, instead of carrying the same to its 'profits and loss account', it credited the same to a separate account called 'Interest suspense account'.</li>
<li style="text-align: justify;">According to the assessee, the principal amounts of these 'sticky advances' had become not bad or irrecoverable, but extremely doubtful of recovery.</li>
<li style="text-align: justify;">In its returns, the assessee had disclosed such interests separately and claimed that the sums were not taxable as income of the concerned years. The assessee's claim was rejected by the ITO, the Tribunal as well as the High Court.</li>
<li style="text-align: justify;">On appeal before the Supreme Court, the assessee contended: (<em>i</em> ) that what was chargeable to income-tax in respect of a business, was profits and gains of that business actually resulting from the transactions of the previous year,</li>
</ul>
<p style="text-align: justify;">(<em>ii</em>) that even under the mercantile system of accounting, accrual of 'real income' in the commercial sense only was chargeable to tax and this must accrue in substance according to the realities of the situation, that if regard was had to realities of the situation as well as the actual commercial principles, it would be evident that in cases of banks, financial institutions and money-lenders, the bulk of the income was usually earned by way of interest and as such there could not be any accrual of real income from interest on doubtful advances or sticky advances and, therefore, the entries made in respect of such accounts in case of all such traders following the mercantile system of accounting only reflected hypothetical income which did not materialise,</p>
<p style="text-align: justify;">(<em>iv</em>) that, therefore, it was proper to carry such interest to 'Interest suspense account', as carrying the same to 'profit and loss account' would amount to showing unreal and inflated profits, thereby leading to improper and illegal distribution or remittance thereof,</p>
<p style="text-align: justify;">(<em>v</em>) that Reserve Bank's instructions contained in several circulars issued by the Board which lent support to the assessee's stand were in consonance with the accepted principles of accountancy and had held the field for over 53 years, and</p>
<p style="text-align: justify;">(<em>vi</em>) that since such claims had been allowed to be exempted for more than half of century, the practice had transformed itself into law, and this position should not have been deviated from.</p>
<p style="text-align: justify;"> <strong>Held </strong></p>
<ul>
<li style="text-align: justify;">The question of how far the concept of real income entered into the question of taxability in the facts and circumstances of this case and how far and to what extent the concept of real income should intermingle with the accrual of income will have to be judged in the light of the provisions of the Act, the principles of accountancy recognised and followed the feasibility.</li>
<li style="text-align: justify;">Besides, any strait-jacket formula is bound to create problems in its application to every situation.</li>
<li style="text-align: justify;">It must depend on the facts and circumstances of each case when and how income accrues and what consequently follow from the accrual of income.</li>
<li style="text-align: justify;">Whether an accrual has taken place or not must, in appropriate cases, be judged on the principles of real income theory.</li>
<li style="text-align: justify;">After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted.</li>
<li style="text-align: justify;">In determining the question whether it is hypothetical income or whether real income has materialised or not, various factors will have to be taken into account.</li>
<li style="text-align: justify;">It would be difficult and improper to extend the concept of real income to all cases depending upon the ipse dixit of the assessee which would then become a value judgment only. What has really accrued to the assessee has to be found out, and what has accrued must be considered from the point of view of real income, taking the probability or improbability of realisation in a realistic manner and dovetailing these factors together, but once the accrual takes place, on the conduct of the parties subsequent to the year of closing, an income which has accrued cannot be made 'no income'. In this connection the following proposition emerge:</li>
</ul>
<p style="text-align: justify;">(1) It is the income which has really accrued or arisen to the assessee that is taxable. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation.</p>
<p style="text-align: justify;">(2) The concept of real income would apply where there has been a surrender of income which in theory may have accrued but in the reality of the situation no income had resulted because the income did not really accrue.</p>
<p style="text-align: justify;">(3) Where a debt has become bad, deduction in compliance with the provisions of the Act should be claimed and allowed. (4) Where the Act applies, the concept of real income should not be so read as to defeat the provisions of the Act.</p>
<p style="text-align: justify;">(5) If there is any diversion of income at source under any statute or by overriding title, then there is no income to the assessee.</p>
<p style="text-align: justify;">(6) The conduct of the parties in treating the income in a particular manner is material evidence of the fact whether income has accrued or not.</p>
<p style="text-align: justify;">(7) Mere improbability of recovery, where the conduct of the assessee is unequivocal, cannot be treated as evidence of the fact that income has not resulted or accrued to the assessee. After debiting the debtor's account and not reversing that entry, but taking the interest merely in suspense account, cannot be such evidence to show that no real income has accrued to the assessee or has been treated as such by the assessee.</p>
<p style="text-align: justify;">(8) The concept of real income is certainly applicable in judging whether there has been income or not, but in every case it must be applied with care and within well-recognised limits, and must not be called in aid to defeat the fundamental principles of law of income-tax as developed.</p>
<ul>
<li style="text-align: justify;">Keeping in view the legal position set out above, the impugned interest on sticky advances in the instant case was taxable as the assessee's income of the years in question.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Shiv Prakash Janak Raj & Co. (P.) Ltd. 222 ITR 583 (SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee-company had advanced a loan to the firm on which it was charging interest. However, in respect of the assessment year 1968-69, the assessee-company passed a resolution before the end of the accounting year deciding not to charge interest from the firm in view of the difficult financial position of the firm. For the next three assessment years the assessee passed resolutions to waive interest at the request of the firm. The resolutions were passed after the expiry of the relevant accounting year in question. The Assessing Officer taking the view that inasmuch as the loans were interest-bearing loans and because the assessee-company had relinquished the interest without any commercial considerations and further because the directors/shareholders of the assessee-company were interested in the firm, it was a case of collusion between them to evade the tax liability, brought to tax the interest income on accrual basis. The AAC found that inasmuch as the resolution to waive the interest was passed after the expiry of the accounting year and further because the assessee-company was following the mercantile system of accounting, the interest must be held to have already accrued to the assessee before it was waived. He, therefore, dismissed the appeal of the assessee. The Tribunal also confirmed the order of the AAC. On reference, however, the High Court allowed the assessee's appeal following the decision in <em>CIT </em> <em>Birla Gwalior (P.) Ltd. </em><a href="fileopen.aspx?id=101010000000078536&source=link">[1973] 89 ITR 266 (SC)</a>. The High Court held that in view of the said decision, the principle of earlier decision in <em>Morvi Industries Ltd. </em>v. <em>CIT </em><a href="fileopen.aspx?id=101010000000079416&source=link">[1971] 82 ITR 835 (SC)</a> could not be applied to the instant case.</li>
<li style="text-align: justify;">On the revenue's appeal before the Supreme Court:</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">The resolution waiving interest was passed after the expiry of the relevant accounting year in question. The assessee-company was maintaining its accounts on mercantile basis. The Tribunal had found it as a fact that the waiver was not based upon any commercial considerations. Of course, no entries were made in the accounts of the assessee-company, or for that matter in the accounts of the firm, in respect of four assessment years concerned therein, that any interest was received or paid On those facts, it had to be held that in the assessment years in question, the interest had accrued to the assessee notwithstanding the fact that no entries might have been made in the accounts of the assessee to that effect. The waiver of interest after the expiry of the relevant accounting year only meant that the assessee was giving up the money which had accrued to it. It could not be said, in the circumstances, that the interest amount had not accrued to the assessee. Therefore, the Tribunal was right in taking the view it did.</li>
<li style="text-align: justify;">There is no contradiction or inconsistency between the holding in Birla Gwalior (P.) Ltd.'s case (supra) and in Morvi Industries Ltd.'s case (supra)</li>
<li style="text-align: justify;">So far as the contention of the assessee that applying the real income theory, it must be held that no interest had really accrued to or received by the assessee was concerned, the concept of real income cannot be employed so as to defeat the provisions of the Act and the Rules. Where the provisions of the Act and the Rules apply, it is only those provisions which must be applied and followed. There is no room - nor would be permissible for the Court - to import the concept of real income so as to whittle down, qualify or defeat the provisions of the Act and the Rules.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Shri Mahila Sewa Sahakari Bank Ltd. 395 ITR 324 (Guj.)</strong></li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Summary :</strong> The concept of real income can be applied at the Accrual stage and not thereafter. <strong>The same cannot be employed so as to defeat the provisions of the Act and the Rules. </strong></li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<p style="text-align: justify;"><strong> </strong></p>
<ol start="4">
<li style="text-align: justify;"><strong>Relevancy of Accounting Entry Vis a Vis the Concept of Real Income</strong></li>
</ol>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;">For the purpose of understanding, it would be worthwhile to go through the provisions of the Act, which affects this topic. Section 145 of the Act, reads as under :-</li>
</ul>
<p style="text-align: justify;"><strong><em>Method of accounting.</em></strong></p>
<ol start="145">
<li style="text-align: justify;"><em>(1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.</em></li>
</ol>
<p style="text-align: justify;"><em>(2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income.</em></p>
<p style="text-align: justify;"><em>(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in </em><em>section 144</em><em>.</em></p>
<p style="text-align: justify;"><em> </em></p>
<ul>
<li style="text-align: justify;">Now Question arises, can an entry, its absence or otherwise in the books of accounts determine the taxability of Income ?</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs CIT [1997] 227 ITR 172</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee-company during construction and establishment of its factory, before commencement of manufacturing activities, invested funds borrowed for the purpose of setting up factories in short-term deposits with banks and earned interest thereon.</li>
<li style="text-align: justify;">In its return, it disclosed the interest earned as income from other sources and after setting off same against business loss claimed carry forward of remaining loss.</li>
<li style="text-align: justify;">Later on, it filed revised return claiming that interest and finance charges along with other production expenses will have to be capitalised and, therefore, the interest income should go to reduce the pre-production expenses which would ultimately be capitalised and as such, the interest income was not exigible to tax.</li>
<li style="text-align: justify;">The ITO as well as the Tribunal rejected the assesse's claim.</li>
<li style="text-align: justify;">In view of the conflicting decisions of various High Courts on the issue, the Tribunal made reference to the Supreme Court under section 257.</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">In the present case, whether a particular receipt is of the nature of income and falls within the charge of section 4 is a question of law which has to be decided by the Court on the basis of the provisions of the Act and the interpretation of the term 'income' given in a large number of decisions of the High Courts, the Privy Council and also this Court.</li>
<li style="text-align: justify;">It is well-settled that income attracts tax as soon as it accrues. The application or destination of the income has nothing to do with its accrual or taxability.</li>
<li style="text-align: justify;">It is also well-settled that <strong>interest income </strong>is always of a revenue nature unless it is received by way of damages or compensation.</li>
<li style="text-align: justify;">The Court further held that It is true that the Apex Court has very often referred to accounting practice for ascertainment of profit made by a company or value of the assets of a company. But when the question is whether a receipt of money is taxable or not or whether certain deductions from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with accountancy practice.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>CIT Vs U.P. State Industrial Development Corporation </strong><strong>[1997] 225 ITR 703 (SC) </strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee, a State-owned financial institution, had been financing industries. One of the clauses for financing the companies by the assessee was that on the shares of such companies subscribed by the public, the assessee would be entitled to commission as well as brokerage on the sale of shares and in case the shares were not subscribed by the public <em>in toto, </em>the assessee was obliged to subscribe those shares at face value but was entitled to underwriting commission and brokerage in the same manner as if the shares were subscribed by the public.</li>
<li style="text-align: justify;">The method adopted by the assessee was that instead of crediting the underwriting commission and brokerage to its profit and loss account in the case of such companies the shares of which had to be subscribed by the assessee itself, it used to reduce the cost of the shares held by it as stock-in-trade.</li>
<li style="text-align: justify;">While the Assessing Officer added the entire underwriting commission and brokerage as part of taxable income, the AAC held that the brokerage on the shares held by the assessee could not be included in the income and it had to be adjusted against the cost of the shares.</li>
<li style="text-align: justify;">The Tribunal held that the practice followed by the assessee was in accordance with accountancy principles and that the underwriting commission in respect of the shares held by the assessee would reduce the cost of the shares and would not be separately assessable as the assessee's income.</li>
<li style="text-align: justify;">The High Court upheld the order of the Tribunal holding that the transaction in substance resulted in the assessee purchasing those shares for a consideration which was equal to the face value of the shares as reduced by the amount of commission and brokerage and in such a case, the amount of underwriting commission and brokerage merely went to reduce the value of the shares and it could not be considered to be the income of the assessee.</li>
<li style="text-align: justify;">On appeal to Supreme Court:</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">The accounting practice followed by the assessee in the instant case was in consonance with general principles of accountancy governing underwriting accounts.</li>
<li style="text-align: justify;">It is a well-accepted proposition that for the purposes of ascertaining profits and gains the ordinary principles of commercial accounting should be applied, so long as they do not conflict with any express provision of the relevant statute.</li>
<li style="text-align: justify;">The Tribunal, after referring to authoritative books on accountancy, had found that the assessee was maintaining the accounts correctly in accordance with the principles of accountancy applicable to underwriting accounts and keeping in view the said principles the underwriting commission on the shares which were not subscribed by the public and were purchased by the assessee could not be treated as profit earned by the assessee in the transaction and the said commission could only be treated as reducing the price of the shares purchased by theassessee. The Tribunal had also stated that there was no contrary provision in the Act.</li>
<li style="text-align: justify;"><strong>The revenue had not shown that the accountancy practice followed by the assessee was repugnant to any provision of the Act.</strong> In the circumstances, it must be held that the Tribunal and the High Court had not committed any error in taking the view that the underwriting commission earned by the assessee in respect of the shares which were riot subscribed by the public and were purchased by the assessee, would not be treated as a part of its taxable income.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>CIT Vs Virual Soft Systems Ltd. [2018] 404 ITR 409 (SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee a registered company filed return of income for relevant assessment year declaring loss of Rs. 70.24 lakhs while claiming an amount of Rs 1.65 crores as deduction for lease equalization charges.</li>
<li style="text-align: justify;">On scrutiny, the Assessing Officer, after perusal of the return and hearing the parties, disallowed deduction claimed as the lease equalization charges and added the same to the income of the assessee under the IT Act, 1961.</li>
<li style="text-align: justify;">On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer and dismissed the appeal.</li>
<li style="text-align: justify;">On further appeal, the Tribunal allowed the appeal of the assessee while setting aside the orders passed by Commissioner (Appeals) and the Assessing Officer.</li>
<li style="text-align: justify;">On appeal by revenue, the High Court dismissed the appeals at the preliminary stage while confirming the decision of the Tribunal.</li>
<li style="text-align: justify;">On appeal by revenue to the Supreme Court:</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">The ICAI is an expert body, created by the Parliament under the Chartered Accountants Act, 1949. The ICAI's publication on the subject indicates that the Guidance Note on Accounting for Leases was issued by it for the first time in 1988 which was later on revised in 1995. The Guidance Note reflects the best practices adopted by the accountants throughout the world. The ICAI is a recognized body vested with the authority to recommend accounting standards for ultimate prescription by the Central Government in consultation with the National Advisory Committee of Accounting Standards for the presentation of true and fair financial statements.</li>
<li style="text-align: justify;">Section 211 of the Companies Act, 1956 as it stood before the amendment dealt with 'the Form and contents of balance-sheet and profit and loss account'. Sub clause (3C) of section 211 was added <em>vide</em> 1999 amendment with retrospective effect.</li>
<li style="text-align: justify;">The method of accounting provided in the Guidance Note of 1995, on the one hand, adjusts the inflated cost of interest of the assets in the balance sheet. Secondly, it captures 'real income' by separating the element of capital recovery (essentially representing repayment of principal amount by the lessee, the principal amount being the net investment in the lease), and the finance income, which is the revenue receipt of the lessor as remuneration/reward for the lessor's investment.</li>
<li style="text-align: justify;">As per the Guidance Note, the annual lease charge represents recovery of the net investment/fair value of the asset lease term. The finance income reflects a constant periodic rate of return on the net investment of the lessor outstanding in respect of the finance lease. While the finance income represents a revenue receipt to be included in income for the purpose of taxation, the capital recovery element (annual lease charge) is not classifiable as income, as it is not, in essence, a revenue receipt chargeable to income tax.</li>
<li style="text-align: justify;">The bifurcation of the lease rental is, by no stretch of imagination, an artificial calculation and, therefore, lease equalization is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. Moreover, there is no express bar in the IT Act which bars the bifurcation of the lease rental. This bifurcation is analogous to the manner in which a bank would treat an EMI payment made by the debtor on a loan advanced by the bank. The repayment of principal would be a balance sheet item and not a revenue item. Only the interest earned would be a revenue receipt chargeable to income tax. Hence, there is no force in the contentions of the Commissioner that whole revenue from lease shall be subjected to tax under the IT Act</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>The Ratio that can be drawn out of the three Judgments is that any accounting entry which is not contrary to the law, is permissible so as to decide the question of “Real Income”.</strong></li>
</ul>
<p style="text-align: justify;"> </p>
<p style="text-align: justify;"> </p>
<ol start="5">
<li style="text-align: justify;"><strong>Concept of Real Income while Valuing the Closing Stock</strong></li>
</ol>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">The true purpose of crediting the value of unsold stock, is to balance the cost of those goods entered on the other side of the account at the time of their purchase, so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realized on the years trading. It is a misconception to think that any profit "arises out of the valuation of the closing stock" and the situs of its arising or accrual is where the valuation is made. <a href="#_ftn1" name="_ftnref1">[1]</a>However the courts have gone in to the methods of valuation in order to get the real income out of the financial statements.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>United Commercial Bank Vs CIT [1999] 240 ITR 355</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee, a nationalised bank, following the mercantile system of accounting,</li>
<li style="text-align: justify;">The Assessee as per the RBIs directive valued all the securities (closing stock) on cost while preparing the financial statements.</li>
<li style="text-align: justify;">It claimed a notional loss of Rs. 7.45 crore on account of closing stock of securities at the market value.</li>
<li style="text-align: justify;">Since the revenue had accepted the same method for over last 30 years, the IAC accepted the same but the Commissioner proceeded for revision under section 263.</li>
<li style="text-align: justify;">He held that the assessee-bank had no right to calculate profit and loss arising out of investment trading account as it had excluded the same from the preparation of its final accounts.</li>
<li style="text-align: justify;">He held that unless a bank itself accepted the position by incorporating such loss/profit in the final accounts, it would have no right to put across such hypothetical loss for the purpose of income-tax assessment.</li>
<li style="text-align: justify;">On appeal, however, the Tribunal set aside the order of the Commissioner and accepted that of the IAC.</li>
<li style="text-align: justify;">On the revenue's appeal, the High Court, rejecting the Tribunal's order, affirmed the order of the Commissioner.</li>
<li style="text-align: justify;">On Appeal to the Supreme Court</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<ul>
<li style="text-align: justify;">What is taxable under the Act is the really accrued or arisen income. On the basis of the method of accountancy regularly employed by the assessee, the real income is pointed out in the income-tax return submitted by the assessee. This cannot be ignored by holding that in a balance sheet which is required to be statutorily maintained in a particular form, market value of the shares and securities is not mentioned or is mentioned in brackets.</li>
<li style="text-align: justify;">For the purpose of income-tax whichever method is adopted by the assessee, a true picture of the profits and gains, that is to say, the real income is to be disclosed. For determining the real income, the entries in a balance sheet required to be maintained in the statutory form may not be decisive or conclusive. In such cases, it is open to the ITO as well as the assessee to point out the true and proper income while submitting the income-tax return.</li>
<li style="text-align: justify;">For reasons, the Central Government, in exercise of the powers conferred by section 53 of the Banking Regulation Act, and on the recommendation of the RBI, permitted the assessee not to disclose the market value of its investment in the balance sheet required to be maintained as per the statutory form. But as the assessee was maintaining its accounts on mercantile system, it was entitled to show its real income by taking into account the market value of such investments in arriving at the real taxable income. On that basis, therefore, the Assessing Officer had taxed the assessee.</li>
<li style="text-align: justify;">From the various decisions of the Supreme Court, it can be held that (1) for valuing the closing stock, it is open to the assessee to value it at cost or market value, whichever is lower; (2) in the balance sheet, if the securities and shares are valued at cost but from that no firm conclusion can be drawn, a taxpayer is free to employ for the purpose of his trade his own method of keeping accounts and, for that purpose, to value stock-in-trade either at cost or market price; (3) a method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation; (4) the concept of real income is certainly applicable in judging whether there has been income or not, but, in every case, it must be applied with care and within the recognised limits; (5) whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation; (6) under section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the ITO the income cannot be properly deduced therefrom, the computation shall be made in such manner and on such basis as the ITO may determine.</li>
<li style="text-align: justify;">The assessee-bank was valuing the stock-in-trade at cost for the purpose of statutory balance sheet and for the income-tax return, valuation was at cost or market value, whichever was lower. That practice was accepted by the department and there was no justifiable reason for not accepting the same. Preparation of the balance sheet in accordance with the statutory provision would not disentitle the assessee in submitting the income-tax return on the real taxable income in accordance with the method of accounting adopted by the assessee consistently and regularly. That could not be discarded by the departmental authorities, on the ground that the assessee was maintaining balance sheet in the statutory form on the basis of the cost of the investments. In such cases, there is no question of following two different methods for valuing its stock-in-trade (investments) because the bank was required to prepare balance sheet in the prescribed form and it had no option to change it. For the purpose of income-tax as stated earlier, what is to be taxed is the real income which is to be deduced on the basis of the accounting system regularly maintained by the assessee and that was done by the assessee in the instant case. Therefore, the order of the High Court was to be set aside.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Sanjeev Woolen Mills vs CIT [2005] 279 ITR 434 (SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts</strong></p>
<ul>
<li style="text-align: justify;">The assessee-firm was engaged in the export of woollen blankets. Since the account year, 1986-87, the assessee followed the method of accounting, under which the stock of raw-material/semi-finished goods was valued at cost price and finished goods at the market price.</li>
<li style="text-align: justify;">For the assessment year 1992-93, the assessee valued the opening stock at the market rate of Rs. 90 per kg. and it valued the closing stock at the higher market-rate of Rs. 130 per kg. and claimed deduction under section 80HHC.</li>
<li style="text-align: justify;">In the subsequent assessment year 1993-94, the assessee valued the opening stock at Rs. 130 per kg. for the finished goods and there was no closing stock. For the assessment year 1993-94, the assessee returned a loss.</li>
<li style="text-align: justify;">The Assessing Officer found that the said method in the assessment year 1992-93 resulted in abnormal gross profit ratio and, accordingly, he concluded that by valuing the closing stock at market rate the assessee had artificially inflated the profits in order to get benefit under section 80HHC in the first year and to suppress the profits of the second year which amounted to tax planning with intent to defraud the revenue.</li>
<li style="text-align: justify;">The Assessing Officer further ruled that by following the aforementioned method, the assessee effectively showed to earn income out of itself, which was totally against the basic principles of accountancy and law. The Assessing Officer invoking section 145, adopted the method of valuing closing stock at cost or market price, whichever was lower, and made addition.</li>
<li style="text-align: justify;">On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer that the valuation of the closing stock required valuing of closing stock either at cost or at market price, whichever was lower.</li>
<li style="text-align: justify;">On second appeal, the Tribunal allowed the assessee's claim holding that if any firm had been employing the market value method for a long time consistently, it could not be considered as against the principles of accountancy nor the method adopted for defrauding the revenue and, accordingly, directed that valuation of finished goods as made by the assessee be accepted. Regarding the opening sock of the second year, the Tribunal had allowed the assessee to value it as the closing stock of the first year.</li>
<li style="text-align: justify;">On appeal, the High Court while setting aside the order of the Tribunal upheld that of the Assessing Officer.</li>
<li style="text-align: justify;"><strong>On Appeal to the Supreme Court </strong></li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">It is a settled law that the true profit of business for an accounting period cannot be ascertained without taking into account the value of the stock in trade remaining at the end of the period and that such valuation is a necessary element in the process of determining the trade result of the period. The principle on which the method of valuation of closing stock is done is also well settled.</li>
<li style="text-align: justify;">In L.A. Firm v. CIT <a href="fileopen.aspx?id=101010000000081023&source=link">[1991] 189 ITR 285</a>, the Supreme Court said that as against the valuation of the stock at cost or market value, whichever is lower, valuation of the closing stock at the market value will invariably create a problem.</li>
<li style="text-align: justify;">In the instant case, the method adopted by the assessee was to value the closing stock at the market value irrespective of the fact whether the market value of the stock at the relevant time was more than the cost value of the stock, which necessarily resulted in an imaginary or notional profit to the assessee which it had not actually received. In fact such a notional imaginary profit could not be taxed. It is well settled principle that a firm cannot make profit out of itself. The transaction which is not business transaction and does not derive immediate pecuniary gain is not subjected to tax. In the instant case, by showing the market value of the closing stock the assessee had earned potential profit out of itself inasmuch as the stock-in-trade remained with the assessee at the closing of the accounting year. Secondly, putting the stock at the market value did not and could not bring in any real profit which was necessary for taxing the income under the Act. Thirdly, it is a settled principle of the Income-tax Law that it is the real income which is taxable under the Act.</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>CIT vs Bannari Amman Sugars Ltd. [2012] 249 ITR 738 (SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee-company engaged in the business of manufacture and sale of sugar.</li>
<li style="text-align: justify;">By virtue of the provisions of the Essential Commodities Act, 1955 and the Sugar Control Order read with the Notification issued thereunder, a sugar manufacturer (assessee in this case) was required to sell 40% of his sugar production at the notified levy price to the Public Distribution System. At the relevant time, on an average, the levy price came to be less than the manufacturers' cost of production.</li>
<li style="text-align: justify;">t was found that even the existing sugar manufacturing units had become unviable and uneconomical. Therefore, an incentive scheme was framed, as suggested by the Sampat Committee. The said Incentive Scheme provided for an inducement for persons to set up new sugar factories or to expand the existing one. Under the Scheme, 40 per cent of the total sugar production was permitted to be sold at market price. However, the Scheme provided that excess amount realized by the manufacturer over the levy price by sale of incentive sugar would be utilized only for repayment of loans taken from the banks/financial institutions for establishing the new unit(s). In regard to utilization of excess realization towards repayment of loans, the sugar mills were directed to file certificate of chartered accountant subject to which further release orders would be issued by the Directorate of Sugar.</li>
<li style="text-align: justify;">Assessee filed its return of income for assessment year 1997-98. In its return of income, confined to its Karnataka unit, assessee valued the closing stock of incentive sugar (free sugar) at levy price. The Department valued the closing stock of incentive sugar at cost whereas the assessee claimed that the said stock should be valued at levy price which was less than the cost.</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;">The Scheme came up for consideration before the Supreme Court in the case of CIT Ponni Sugars & Chemicals Ltd. [2008] <a href="fileopen.aspx?id=101010000000080731&source=link">306 ITR 392</a>/ <a href="fileopen.aspx?id=101010000000080731&source=link">174 Taxman 87</a> in which this Court held that the excess amount realized by the manufacturer over the levy price by sale of incentive sugar should be treated as a capital receipt which was not taxable under the Income Tax Act, 1961.</li>
<li style="text-align: justify;">Now if the Stock is valued at cost, the difference between the cost price and levy price would be treated as a revenue receipt and tax shall be levied on such difference which cannot be permitted in the given circumstances.</li>
</ul>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>Summary : The concept of real income if it comes in conflict of the law, it would have to give away. However, if the concept of real income is in accordance with the requirement of law, you will have to go with the concept of Real Income.</strong></li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ol start="6">
<li style="text-align: justify;"><strong>DIVERSION OF INCOME BY OVERIDING TITLE</strong></li>
</ol>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>Sithaldas Tirathdas Vs CIT </strong><strong>[1961] 41 ITR 367 (SC) </strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee claimed deduction from his total income of the amount paid under a consent decree as maintenance to his wife and children.</li>
<li style="text-align: justify;">The ITO however disallowed said deduction and same was confirmed by the AAC and the Tribunal.</li>
<li style="text-align: justify;">On reference, the High Court held that the income to the extent of the decree must be taken to have been diverted to the wife and children, and never became income in the hands of the assessee and hence, was an allowable deduction.</li>
<li style="text-align: justify;">On appeal to the Supreme Court:</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<ul>
<li style="text-align: justify;">Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where by the obligation income is diverted before it reaches the assessee, it is deductible ; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow.</li>
<li style="text-align: justify;">It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one's own income, which has been received and is since applied.</li>
<li style="text-align: justify;">The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.</li>
<li style="text-align: justify;">The instant case was one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own.</li>
<li style="text-align: justify;">The case was one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector of another's income.</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>Murlidhar Himatsingka vs CIT [1966] 62 ITR 323 (SC) </strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts</strong></p>
<ul>
<li style="text-align: justify;">The assessee, 'M', was carrying on business under the name and style of a firm 'FM'. He was also a partner in registered firm, 'BG'.</li>
<li style="text-align: justify;">On 21-12-1949, a deed of partnership was executed by the said 'M' and his two sons, 'H' and 'R' and a grandson 'P'.</li>
<li style="text-align: justify;">The deed recited that 'M' had become too old and infirm to look after the various businesses and that 'H' and 'R' were already practically managing the business and that they had signified their intention to become the partners of the said firm 'FM' and had agreed to contribute capital, rupees ten thousand, rupees five thousand and rupees five thousand respectively.</li>
<li style="text-align: justify;">The parties further agreed to become and be partners in the business mentioned in the deed.</li>
<li style="text-align: justify;">The deed further provided that the profits and losses for the share of the said 'M' as partner in the firm of 'BG' would belong to the present partnership <em>e.,</em> 'FM' and would be divided and borne by the parties in accordance with the shares as specified but the capital with its assets and liabilities would belong exclusively to 'M'.</li>
<li style="text-align: justify;">For the assessment year 1955-56, the ITO included the income from the share in the registered firm of 'BG' in the individual assessments of 'M'. 'M' appealed to the AAC who held that as 'M' was a partner in the registered firm of 'BG' his share had to be assessed in his hands. He further held that the agreement was merely an arrangement which came into force after the profits were earned and not before they were earned. He held that this agreement being a subsequent disposition of profits, after they had been earned, had to be disregarded. The Tribunal upheld the order of the AAC.</li>
<li style="text-align: justify;">On reference, the High Court held that instant case was a case of diversion of income by 'M' after it had accrued to him and it was not a diversion at the source by any overriding interest, and hence share income from 'BG' was includible in total income of 'M'.</li>
<li style="text-align: justify;">On appeal TO Supreme Court :</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<ul>
<li style="text-align: justify;">The agreement dated 21-12-1949, constituted a sub-partnership in respect of M's share in 'BG'. Sub-partnerships have been recognised in India and registration accorded to them under the Indian Income-tax Act.</li>
<li style="text-align: justify;">The question that arose whether the interest of the sub-partnership in the profits received from the main partnership was of such a nature as diverted the income from the original partner to the sub-partnership. Suppose that 'A' is carrying on a business as a sole proprietor and he takes another person 'B' as a partner. There is no doubt that the income derived by 'A' after the date of the partnership cannot be treated as his income; it must be treated as the income of the partnership consisting of 'A' and 'B'. What difference does it make in principle where 'A' is not carrying on a business as a sole proprietor but as one of the partners in a firm. There is no doubt that there is this difference that the partners of the sub-partnership do not become partners of the original partnership. This is because the law of partnership does not permit a partner, unless there is an agreement to the contrary, to bring strangers into the firm as partners. But as far as the partner himself is concerned, after the deed of agreement of sub-partnership, he cannot treat the income as his own.</li>
<li style="text-align: justify;">In the case of sub-partnership the sub-partnership creates a superior title and diverts the income before it becomes the income of the partner. In other words, the partner in the main firm receives the income not only on his behalf but on behalf of the partners in the sub-partnership.</li>
<li style="text-align: justify;">In conclusion it was held that the High Court was in error in holding that there was no question of an overriding obligation in this case and that the income remained the income of 'M' in spite of the sub-partnership created by him under the agreement dated 21-12-1949.</li>
<li style="text-align: justify;">The object of section 23(5)(a) of the 1922 Act is not to assess the firm itself but to apportion the income among the various partners. After the income has been apportioned, the ITO has to find whether it is the partner who is assessable or whether the income should be taken to be the real income of that other person. If it is the real income of another firm, it is that firm which is liable to be assessed under section 23(5)(a) of the 1922 Act.</li>
<li style="text-align: justify;">In the result, the appeal were accepted and the judgment of the High Court was set aside.</li>
</ul>
<p style="text-align: justify;"> </p>
<p style="text-align: justify;"> </p>
<ul>
<li style="text-align: justify;"><strong>CIT Vs Sunil J. Kinariwala [2003] 259 ITR 10 (SC)</strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts </strong></p>
<ul>
<li style="text-align: justify;">The assessee, partner of a firm, was having 10 per cent share therein.</li>
<li style="text-align: justify;">He created a trust by a deed of settlement assigning 50 per cent out of his 10 per cent right, title and interest (excluding capital), as a partner in the firm, and a sum of Rs.5,000 out of his capital in the firm in favour of the said trust.</li>
<li style="text-align: justify;">The assessee claimed that 50 per cent of the income attributable to his share from the firm stood transferred to the trust resulting in diversion of income at source and the same could not be included in his total income for the purpose of his assessment.</li>
<li style="text-align: justify;">The ITO rejected the assessee's claim holding that it was a case of application of income and not diversion of income at source.</li>
<li style="text-align: justify;">The AAC allowed the assessee's appeal and directed that sum transferred to the trust be excluded from the assessee's total income. On revenue's appeal, the Tribunal, however, reversed the order of the AAC.</li>
<li style="text-align: justify;">On reference, the High Court reversed the order of the Tribunal.</li>
<li style="text-align: justify;">On Appeal before the Supreme Court.</li>
</ul>
<p style="text-align: justify;"><strong>Held </strong></p>
<ul>
<li style="text-align: justify;">Under the scheme of the Act, it is the total income of an assessee, computed under the provisions of the Act, that is assessable to income-tax. So much of the income which an assessee is not entitled to receive by virtue of an overriding title created in favour of a third party would get diverted at source and the same cannot be added in computing the total income of the assessee.</li>
<li style="text-align: justify;">The principle is simple enough but more often than not, as in the instant case, the question arises as to what was the criteria to determine, when does the income attributable to the assessee get diverted by over- riding title? The determinative factor is the nature and effect of the assessee's obligation in regard to the amount in question. When a third person becomes entitled to receive the amount under an obligation of an assessee even before he could lay a claim to receive it as his income, there would be diversion of income by overriding title; but when after receipt of the income by the assessee, the same is passed on to a third person in discharge of the obligation of the assessee, it will be a case of application of income by the assessee and not of diversion of income by overriding title.</li>
<li style="text-align: justify;">Following various decisions of the Privy Council, the Supreme Court and also of various High Courts, it was to be held that the order under challenge could not be sustained.</li>
<li style="text-align: justify;">It was, accordingly, set aside. Consequently, the share of the income of the assessee assigned in favour of the trust had to be included in the total income of the assessee.</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<ul>
<li style="text-align: justify;">The income that has actually accrued to the respondent is taxable. <strong>What income has really occurred to be decided, not by reference to physical receipt of income, but by the receipt of income in reality.</strong> Given the fact that the respondent had acted only as a broker and could not claim any ownership on the sum of Rs. 14.74 crores and that the receipt of money was only for the purpose of taking demand drafts for the payment of the differential interest payable by Indian Bank and that the respondent had actually handed over the said money to the Bank itself, it is to be held that the respondent held the said amount in trust to be paid to the public sector units on behalf of the Indian Bank based on prior understanding reached with the bank at the time of sale of securities and, hence, the said sum of Rs. 14.74 crores cannot be termed as the income of the respondent. In view of the above discussion, the decision rendered by the High Court requires no interference.</li>
</ul>
<p style="text-align: justify;"><strong> </strong></p>
<ol start="7">
<li style="text-align: justify;"><strong>Test of Real Income Applied on any other Head of Income</strong></li>
</ol>
<p style="text-align: justify;"><strong> </strong></p>
<ul>
<li style="text-align: justify;"><strong>CIT vs Balbir Singh Maini [2017] 398 ITR 531 </strong></li>
</ul>
<p style="text-align: justify;"><strong>Facts</strong></p>
<ul>
<li style="text-align: justify;">The assessee were members of the Punjabi Cooperative Housing Building Society Ltd. The society consisted of 95 members and was the owner of 21.2 acres of land. A tripartite Joint Development Agreement (JDA) for development of 21.2 acres of land was entered into between the owner, <em>e.</em>, Punjabi Cooperative Housing Building Society Ltd., HASH and THDC. Under the JDA, it was agreed that HASH and THDC <em>viz</em>., the developers would undertake to develop 21.2 acres of land owned and registered in the name of the society. The agreed consideration was to be disbursed by THDC through HASH to each individual member of the society, and different amounts and flats were payable and allotable to members having different plot sizes.</li>
<li style="text-align: justify;">The developers made payments only up to the 2nd instalment payment, and 7.7 acres of land was conveyed as mentioned, which had suffered payment of capital gains tax. The problem which arose for the subsequent assessment years was that, due to pending proceedings, in the High Court, the necessary permissions for development were not granted, as a result of which the JDA did not take off the ground.</li>
<li style="text-align: justify;">For the relevant assessment year, the assessee filed return, declaring certain taxable income. In course of assessment the Assessing Officer held that since physical and vacant possession had been handed over under the JDA, the same would tantamount to 'transfer' within the meaning of section 2(47)(<em>ii</em>), (<em>v</em>) and (<em>vi</em>).</li>
<li style="text-align: justify;">The Tribunal confirmed the order of Assessing Officer.</li>
<li style="text-align: justify;">The High Court held that the Tribunal and the authorities below were not right in holding the assessee to be liable to capital gains tax in respect of land for which no consideration had been received and which stood cancelled and incapable of performance due to various orders passed by the Supreme Court and the High Court in PILs. Therefore, the assessee's appeal was allowed.</li>
<li style="text-align: justify;">On revenue's appeal:</li>
</ul>
<p style="text-align: justify;"><strong>Held</strong></p>
<ul>
<li style="text-align: justify;">The JDA was between the housing society, who was referred to as the owner, and two developers. Strewn throughout the agreement is the fact that the owner, being absolutely seized and possessed of the property, was desirous of assigning its development rights for developing the same.</li>
<li style="text-align: justify;">A reading of the JDA in the present case would show that the owner continues to be the owner throughout the agreement, and has at no stage purported to transfer rights akin to ownership to the developer. At the highest, possession alone is given under the agreement, and that too for a specific purpose - the purpose being to develop the property, as envisaged by all the parties. Therefore, of this clause will also not rope in the present transaction</li>
<li style="text-align: justify;">In the facts of the present case, it is clear that the income from capital gain on a transaction which never materialized is, at best, a hypothetical income. It is admitted that, where for want of statutory permissions, the entire transaction of development of land envisaged in the JDA fell through. At all that, there will be no profit or gain which arises from the transfer of a capital asset, <strong>which could be brought to tax under section 45 read with section 48.</strong></li>
<li style="text-align: justify;">In the present case, the assessee did not acquire any right to receive income, inasmuch as such alleged right was dependent upon the necessary permissions being obtained. This being the case, in the circumstances, there was no debt owed to the assessee by the developers and therefore, the assessee have not acquired any right to receive income under the JDA. This being so, no profits or gains 'arose' from the transfer of a capital asset so as to attract sections 45 and 48.</li>
</ul>
<p style="text-align: justify;"><br /></p><p style="text-align: justify;"><b>SUMMARY</b></p><p style="text-align: justify;"><br /></p><p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">1.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">What
is Income?<o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Kamakshya
Narain Singh 11 ITR 513 (PC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Navinchandra
Mafatlal 26 ITR 758(SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Bhogilal
Laherchand 25 ITR 50 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Sardar
Baldev Singh 40 ITR 605 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Balaji
43 ITR 393 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Navnitlal
C Jhaveri 56 ITR 198 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l1 level2 lfo2; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Sanyasi
Rao 219 ITR 330 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">2.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">What
is Real?<o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">E.D.
Sasson & Co. Ltd. 26 ITR 27 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Shooraji
Vallabhdas & Co. 46 ITR 144 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Morvi
Industries Ltd 82 ITR 835 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Godhra
Electricity Co. Ltd. 225 ITR 746 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Excel
Industries Ltd. 358 ITR 295 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">3.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">Where
Concept of Real Income Failed and Why?<o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">State
Bank of Travancore 158 ITR 102(SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Shri
Mahila Sewa Sahakari Bank Ltd. 395 ITR 324 (Guj.)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Shiv
Prakash Janak Raj & Co. (P.) Ltd. 222 ITR 583 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">4.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">Real
Income Vis a Vis Accounting<o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Tuticorin
Alkali Chemicals 227 ITR 172 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Road
Infra. Dev. Corp. of Raj. Ltd. 96
taxmann.com 155(Raj.)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">U.P.
State Inds.Dev. Corporation 225 ITR 703 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Virtual
Soft Systems Ltd. 404 ITR 409 (SC)z</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">5.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">Concept
of Real income and Valuation of Stock<o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">United
Commercial Bank 240 ITR 355 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Chainrup
Sampatram 24 ITR 481 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Sanjeev
Woollen Mills 279 ITR 434 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Bannari
Amman Sugars Ltd. 349 ITR 708 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">6.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">Real
Income Vs. Diversion of Income<o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Sitaldas
Tirathdas 41 ITR 367 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Raja
Bijoy Singh Dudharia 1 ITR 135 (Bom.)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Murlidhar
Himatsingka 62 ITR 323 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">Sunil
J Kinariwala 259 ITR 10 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 72.0pt; mso-list: l0 level2 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: Symbol; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-ansi-language: EN-US;">T.
Jayachandran 406 ITR 1 (SC)</span><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></p>
<p class="MsoNoSpacing" style="line-height: 200%; margin-left: 36.0pt; mso-list: l0 level1 lfo1; text-indent: -18.0pt;"><!--[if !supportLists]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: Verdana; mso-fareast-font-family: Verdana;">7.<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: "Verdana",sans-serif; font-size: 12.0pt; line-height: 200%;">Applicability
of Concept on Other Heads <o:p></o:p></span></p>
<p style="text-align: justify;"><span style="font-family: Symbol; font-size: 12pt; line-height: 200%; text-align: left; text-indent: -18pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><span lang="EN-US" style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%; text-align: left; text-indent: -18pt;">Balbir
Singh Maini 398 ITR 531(SC)</span> </p><p style="text-align: justify;"><br /></p><p style="text-align: justify;"><br /></p>
<p style="text-align: justify;"><a href="#_ftnref1" name="_ftn1">[1]</a> Chainrup Sampatram vs CIT <strong>[1953] 24 ITR 481 (SC)</strong></p>
<p style="text-align: justify;"> </p>Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com26tag:blogger.com,1999:blog-7581033258468973440.post-30504146772162156122020-08-12T02:28:00.003-07:002020-08-12T02:41:50.145-07:00Blog No. 25. Discussion on Penalty u/s 270A of the Income Tax Act, 1961<p align="center" class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 36pt; text-align: center;"><br /></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 36pt; text-indent: 3.5pt;"><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"> </span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">General Understanding of <b>Penal Provisions</b> <o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#1_Paradigm_Shift_with_new_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Section 270A </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Vs 271(1)(c) <o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#3_Charge_of_Penalty_under_Sub_Section_1_to_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Charge of Penalty under Sub
Section 1 to Section 270A </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"> <o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#4_Under_Reporting_of_Income_under_Sub_Section_2_and_4_of_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Under Reporting of Income under
Sub Section 2 and 4 of Section -270A</span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"> <o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#5_Exclusions_from_Under_reported_income_under_Sub_Section_6_of_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Exceptions from Under reported
income u/s 270A(6) 270A </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"><o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#6_Mis_Reporting_of_Income_under_Sub_Section_9_of_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Mis Reporting of Income
under Sub Section 9 of Section 270A </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"> & key Words and Phrases<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#7_Quantification_of_Penalty_Under_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Quantification of Penalty
Under Section 270A </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"><o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#8_Quantification_Of_Under_Reported_Income_under_Sub_Sec_3_of_Section_270A"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Quantification Of “Under
Reported Income” u/s 270A </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">(3)<o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#9_Quantification_of_Tax_Payable"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Quantification of “Tax
Payable”</span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"><o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#10_Immunity_Section_270AA"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Immunity [Section 270AA]</span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"><o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; mso-bidi-font-family: Wingdings; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: Wingdings; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;">Ø<span face="" style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><a href="https://taxguru.in/income-tax/penalty-sec-270a-concealment-reporting.html#13_Appeal_Revision_where_an_order_us_270AA_has_been_made"><span color="" face="" style="color: windowtext; font-family: "bookman old style", serif; font-size: 10pt; text-decoration-line: none;">Appeal /Revision where an order
u/s. 270AA has been made. </span></a><span face="" style="font-family: "bookman old style", serif; font-size: 10pt; mso-bidi-font-family: Arial; mso-effects-shadow-align: center; mso-effects-shadow-alpha: 43.0%; mso-effects-shadow-angledirection: 5400000; mso-effects-shadow-anglekx: 0; mso-effects-shadow-angleky: 0; mso-effects-shadow-color: #6E747A; mso-effects-shadow-dpidistance: 2.0pt; mso-effects-shadow-dpiradius: 3.0pt; mso-effects-shadow-pctsx: 100.0%; mso-effects-shadow-pctsy: 100.0%; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN; mso-style-textoutline-outlinestyle-align: center; mso-style-textoutline-outlinestyle-compound: simple; mso-style-textoutline-outlinestyle-dash: solid; mso-style-textoutline-outlinestyle-dpiwidth: 0pt; mso-style-textoutline-outlinestyle-join: round; mso-style-textoutline-outlinestyle-linecap: flat; mso-style-textoutline-outlinestyle-pctmiterlimit: 0%; mso-style-textoutline-type: none;"><o:p></o:p></span></p><p class="MsoNormal" style="line-height: normal; margin: 0cm 18.95pt 0cm 54pt; mso-list: l0 level1 lfo1; tab-stops: list 54.0pt; text-indent: -18pt;"><br /></p><p>Download the Research Paper here : <a href="https://drive.google.com/file/d/1nwbkdXKsf4nReWG-NfPVt4kL4OGVJvKh/view?usp=sharing">Link to the Research Paper</a></p>Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-14623118464088715892020-03-31T05:23:00.002-07:002020-03-31T05:23:46.486-07:00Blog # 24. AO to accept application & issue certificate for nil/lower deduction of tax via email: CBDT<div dir="ltr" style="text-align: left;" trbidi="on">
<table border="0" cellpadding="0" cellspacing="0" style="width: 100%;"><tbody>
<tr><td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">Due to outbreak of pandemic COVID-19, the Assessing Officer finding
difficulties in disposing of the applications for lower or nil rate of
TDS/TCS. Thus, to mitigate hardship of assessees, the Central Board of
Direct Taxes (CBDT) has issued following directions and
clarifications:</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">a) In case the application is pending, the certificate issued to
assessee in the Financial Year (FY) 2019-20 will be applicable for FY
2020-21 as well till June 30, 2020 or disposal of their application,
whichever is earlier.</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">b) In case asseessee couldn’t apply for issue of lower or nil
deduction of TDS/TCS certificate, he can also use certificate issued for FY
2019-20 till June 30, 2020. However, he needs to apply at the earliest
giving details of the transactions.</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">c) In case of assessee who is not having such certificate for FY
2019-20, can apply for application for lower or nil TDS/TCS certificate
vide e-mail addressed to the concerned Assessing Officer. Certificate will
be issued to him via email. The Email shall contain the following
documents:</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">i. Form-13</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">ii. Documents/informations required to be uploaded on TDS-CPC
website while filing up Form-13</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">iii. Projected Balance Sheet and P&L account for FY
2020-21</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">iv. Provisional Balance Sheet and P&L account for FY
2019-20</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">v. Balance Sheet and P&L account for FY 2018-19</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">vi. Form-26AS for FY 2019-20 and FY 2018-19</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">vii. ITR pertaining to FY pertaining to FY 2018-19</td>
</tr>
<tr>
<td style="color: #4b4b4b; font-family: 'Source Sans Pro', sans-serif; font-size: 16.5px; line-height: 25px; padding-top: 10px; text-align: justify;">d) In case payment is being made to Non-resident having Permanent
Establishment in India, tax shall be deducted at the rate of 10% including
surcharge and cess till June 30, 2020 or disposal of application of
assessee, whichever is earlier (<i>for assessee’s not falling in (a)
or (b) category</i>).<br /><br /><a href="http://transcom.transactmile.com/paidmilecom/link.php?M=24957551&N=14044&L=191146&F=H" style="color: #6e6d6d; line-height: 25px; outline: none; text-decoration-line: none;" target="_blank"><strong>Order u/s 119, dated
31-03-2020</strong></a></td></tr>
</tbody></table>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-3199531255781338102019-03-28T07:19:00.000-07:002019-03-28T07:20:17.227-07:00Blog # 23. Stay Under the Income Tax Act, 1961.<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Sections 220 to 232 of the Income-tax
Act deals with collection and recovery of taxes. These provisions will become
active every year in the months of February and March. Probably each officer or
Commissioner may have to report to the higher authority the taxes outstanding,
and total collection of taxes in their charge. As the scope of this Article is
very limited. I will not deal with various controversial issues of Recovery
Proceedings and will restrict only to few provisions which are useful in our
day-to-day practice.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Recovery proceedings under the Act
can be started against a person only when he is in default or deemed to be in
default in making payment of taxes. The assessee who is in default or is deemed
to be in default in making payment of taxes may make an application, requesting
the Assessing Officer not to treat him as the assessee in default in respect of
the amount in dispute in the appeal preferred by the assessee. The Assessing
Officer may in his discretion and with or without imposing any conditions pass
an order, not treating the assessee as an assessee in default in respect of
such disputed amount till the appeal is pending.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">It may be noted that mere filing of
an appeal does not suo motu stay the proceedings of recovery of the tax in
demand. Therefore, it is necessary that as soon as an order raising the demand
is received, assessee must make an application to stay and keep the demand in
abeyance.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">While filing Stay application before
the Assessing Officer, the assessee will have to give the brief facts as under:<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 49.65pt; margin-right: 0cm; margin-top: 0cm; mso-list: l2 level1 lfo1; tab-stops: list 54.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The assessment history of the
assessee,<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 49.65pt; margin-right: 0cm; margin-top: 0cm; mso-list: l2 level1 lfo1; tab-stops: list 54.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">His conduct and co-operation with the
department,<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 49.65pt; margin-right: 0cm; margin-top: 0cm; mso-list: l2 level1 lfo1; tab-stops: list 54.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Points raised in the appeal,<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 49.65pt; margin-right: 0cm; margin-top: 0cm; mso-list: l2 level1 lfo1; tab-stops: list 54.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The chances of recovery in case the
appeal is dismissed and<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 49.65pt; margin-right: 0cm; margin-top: 0cm; mso-list: l2 level1 lfo1; tab-stops: list 54.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The hardship that would be caused to
the assessee by persistent demand of the tax by the department.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">If an assessee’s application u/s.
220(6) is not replied by the Assessing Officer, even though the same was filed
in time, the assessee can always contend before the Tax Recovery Officer that
before taking any action against the assessee, his application for stay of
demand should be disposed of. The Tax Recovery Officer can also consider the
assessee’s applications u/s. 225(1) and grant time for the payment of any tax
till the disposal of the assessee’s appeal by the First Appellate Authority.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">In the event of Assessing Officer
rejecting assessee’s application u/s. 220(6) of the Income-tax Act, the
assessee can prefer an application to the Commissioner of Income-tax under
whose jurisdiction assessee’s case falls for staying the demand of tax in
dispute till the hearing and final disposal of the assessee’s appeal by the
Commissioner of Income-tax (Appeals).<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">If the Commissioner fails to
discharge his duty, the assessee may file a Writ Petition under Article 226 of
the Constitution of India. However, when an appeal is pending before the Income
Tax Appellate Tribunal, the assessee can file a Stay Petition before the Income
Tax Appellate Tribunal to stay the recovery proceedings.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The Central Board of Direct taxes in
its circular No.530 dated 6-3-1989 [176 ITR St. (240) and Circular No. 589
dated 16-1-1991, 187 ITR St. (79)] has laid down the guidelines for the
Assessing Officer to exercise his jurisdiction u/s. 220(6) of the Act where an
assessee has preferred an appeal. <o:p></o:p></span><span style="color: #555555; font-family: "arial" , "helvetica" , sans-serif; font-size: 1.2em; text-align: left;">The CBDT has issued Office Memorandum dated 31st July 2017 by which it has amended the conditions stipulated in the earlier OM dated 29.02.2016 pursuant to which the AO is empowered to grant a stay of the outstanding demand till the disposal of the appeal by the CIT(A).</span></div>
<div>
<span style="color: #555555; font-family: "arial" , "helvetica" , sans-serif; font-size: 1.2em; text-align: left;"><br /></span></div>
<br />
<br />
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The discretionary power conferred by
section 220 (6) upon the Assessing Officer is coupled with a duty and if he
does not exercise it when the occasion calls for it or if he exercise it in
such a manner that it is no exercise of discretion at all, he can be compelled
to discharge his duty by an order of the court.[Ladhuram Taparia vs. B. K.
Bagchi, 20 ITR 51, (Cal.) Shivangi Steels P. Ltd. vs ACIT, 226 ITR 62, 63
(All)]<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Protective recovery of tax is not
permissible even though protective assessment can be validly made. [Sunil Kumar
vs. CIT, 139 ITR 880 (Bom.)]<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<b><u><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Representative assessee</span></u></b><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l0 level1 lfo2; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Where an assessee dies before the
issue of the certificate, unless his legal representatives are served with a
notice of demand under section 156 and they fail to comply with that notice
within 30 days from the date of receipt of the notice, they cannot be said to
be “assessee in default” and consequently no recovery proceedings can be taken
against them. [Satya Pal Verma vs. ITO, 106 ITR 540 (All) : Bai Chandanben
Jivanlal vs. I. D. Joshi, Collector, 74 ITR 448, (Guj)]<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l7 level1 lfo3; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">A recovery certificate issued or
drawn up by Tax Recovery Officer against a person who is already dead, is a
nullity. The certificate must be against a defaulter who is alive. [Isha Beevi
vs. TRO, 80 ITR 82, (Ker) on appeal 101 ITR 449, (SC)]. If an assessee in
default dies before the issue of a certificate in his name, proceedings under
Section 159 of the Act are necessary to bring on record the name or names of
the legal representative or representatives.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<b><u><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Filing of claims</span></u></b><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l11 level1 lfo4; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">If any part of the property of an
applicant is illegally or unjustifiably attached, an objection under rule 11(1)
of the second Schedule to the Act may be filed by him before the Tax Recovery
Officer who has got the jurisdiction to adjudicate upon it.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l11 level1 lfo4; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Rule 58(a) of the Order XXI of C.P.C.
provides that the claim should be preferred before the property so attached is
sold.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l11 level1 lfo4; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";"> </span></span></span><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Where a claim or objection is made
under rule 11 against attachment of a property in execution of a recovery
certificate, it is the bounden duty of the Tax Recovery Officer to first
dispose of the objection and then to proceed further. Investigation of a claim
properly filed is essential. Even if the property to which the claim or
objection applies has been advertised for sale, the Tax Recovery Officer
ordering the sale may postpone it, pending such investigation.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l4 level1 lfo5; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;">·<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Where a claim or an objection
preferred under rule 11(1) of the Second Schedule is rejected or dismissed, the
party against whom an order rejecting or dismissing the claim or objection is
made may institute a suit, under rule 11(6), in a Civil Court to establish the
right which he claims to the property. In Sawai Singhai vs. Union of India
(AIR) 1966 SC 1968), the Supreme Court observed that the suit brought under
Order 21, rule 63 (corresponding to rule 11 (6) of the Second Schedule),
concerns not only with the question of possession but also with the question of
title.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The Hon’ble A. P. High Court in ITO
vs. Khalid Mehdi Khan (minor) 110 ITR 79, has taken the view that the Tribunal
can not only stay the recovery proceedings but can also stay the proceedings
before the Assessing Officer. Therefore, in a case where order under section
263 is passed and if the appeal is pending before Tribunal and in the meantime,
if the Assessing Officer starts the assessment proceedings then in such
circumstances, the assessee can file stay petition before the Tribunal and the
Tribunal can stay the proceedings before the Assessing Officer. Please also see
Ritz Hdrs Vyas, 185 ITR 311 (Bom).<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The Hon’ble Supreme Court in CIT vs.
Bansi Dhar & Sons 157 ITR 665 has taken the view that the Tribunal can also
stay the proceedings when the reference is pending before the High Court.
Therefore, in cases where the assessee has lost before the Tribunal and the
reference is pending before the High Court and if the assessee is in a position
to establish that he is not in a position to make the payment of tax in
dispute, in such circumstances, the Tribunal can stay the proceedings till the disposal of the reference by the High
Court.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">It may be noted here that, before
filing the stay petition, it is necessary that the assessee should approach the
Commissioner to stay the recovery proceedings. When Commissioner refuses to
stay the recovery proceedings, then only the Tribunal will exercise its power.
In case the Commissioner grants installment facility but the assessee shows his
inability to make payment in installment and the Commissioner rejects the stay
application then the power of Tribunal can be invoked for stay. It may be
further noted that the assessee must also show that he has no liquidity to pay
the tax in dispute and if stay is not granted, great hardship will be caused to
the assessee.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The Finance (No.2) Act, 1998 with
effect from 1-10-1998 inserted sub-section (7) in section 253 prescribing for
the first time a fee of five hundred rupees whenever an application for stay of
demand has to be filed before the Appellate Tribunal.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The Finance Act, 2001 inserted two
new proviso to sub-section (2A) of section 254 with effect from 1-6-2001. As
per the first proviso, where an order of stay is made in any proceedings
relating to an appeal filed under section 253(1), the Tribunal shall dispose of
the appeal within a period of one hundred and eighty days from the date of such
stay order.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">As per the second proviso if such
appeal is not so disposed of within the period specified in first proviso, the
stay order shall stand vacated after the expiry of the said period.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">In view of the specific language of
the aforesaid second proviso, it is not only desirable but imperative on the
part of the assessee to file an application for extension of the stay or
granting of fresh stay, well in time before the expiry of the impugned six
months period.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Rule 35A of the Income Tax Appellate
Tribunal Rules, prescribes the procedure for filing the Stay Petition. As per
this rule, any assessee filing an appeal under taxation Laws, before the Income
Tax Appellate Tribunal may prefer stay application in the following manner.<br />
1.</span><span style="color: #475055; font-family: "microsoft sans serif" , sans-serif; font-size: 14pt;">a. Every application for stay of recovery of demand of tax, interest, penalty,
fine, Estate Duty or any other sum shall be presented in Triplicate by the
applicant in person, or by his duly authorised agent, or sent by Registered
Post to the Registrar/Deputy Registrar or the Assistant Registrar, as the case
may be at the Headquarters of a Bench or Benches having jurisdiction to hear
the appeals in respect of which the Stay Application arises.</span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">b. Where the application for stay
relates to demands, though for more than one assessment year but under only a
single statutory enactment, then a single stay application would be sufficient
in respect of the demands for which the stay is sought. However, separate
applications shall be filed for stay of recovery of demands under different
enactments. It may however be noted that in Wipro Ltd vs. ITO, 86 ITD 407
(Bang) the Tribunal held that reparate stay petitions should be filed seeking
stay and recovery of different assessment years. But the Bombay bench of the
Tribunal in Chirangilal S. Gaonkar vs. WTO, 66 TTJ 728 has held that a single
afflication can be filed.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">c. The application for stay should,
as far as possible, be filed in the form as per specimen as at Appendix X.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: 7.5pt; text-align: justify;">
<span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">2. Every application shall be neatly
typed on one side of the paper and shall be in English and shall setforth
concisely the following:<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 200%; margin-bottom: .0001pt; margin: 0cm; mso-list: l13 level1 lfo6; tab-stops: list 36.0pt; text-align: justify; text-indent: -18.0pt;">
</div>
<ul>
<li><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Summary of facts regarding the demand
of the tax, interest, penalty, fine, Estate Duty or any other sum, the recovery
of which is sought to be stayed;<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The result of the appeal filed before
the Commissioner (Appeals) or the Deputy Commissioner (Appeals), if any;<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The exact amount of the tax,
interest, penalty, fine, Estate Duty or any other sum demanded, as the case may
be, and the amount undisputed therefrom and the amount outstanding;<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The date of filing of the appeal
before the Tribunal and its number, if known;<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Whether any application for stay was
made to the revenue authorities concerned and if so, the result thereof (copies
of correspondence, if any, with the Revenue authorities to be attached);<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Reasons in brief for seeking the
stay;<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Whether the applicant is prepared to
offer any security in respect of the demand of tax in dispute and if so, in
what form;<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "symbol"; font-size: 10.0pt; line-height: 200%;"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">Prayer to be mentioned clearly and
concisely (stating exact amount sought to be stayed);<o:p></o:p></span></li>
<li><span style="color: #475055; font-family: "microsoft sans serif" , "sans-serif"; font-size: 14.0pt; line-height: 200%;">The contents of the application shall
be supported by an affidavit sworn by the applicant or his duly authorized agent<o:p></o:p></span></li>
</ul>
<!--[if !supportLists]--><br />
<br /></div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-55227033201966437122018-10-30T05:46:00.002-07:002018-10-30T05:52:40.624-07:00Blog # 22. S.56(2)(vii) : Property Acquired<div dir="ltr" style="text-align: left;" trbidi="on">
<div dir="ltr" style="text-align: left;" trbidi="on">
<br /></div>
<div style="line-height: 200%; text-align: justify;">
<strong><span style="border: none 1.0pt; font-size: 14.0pt; line-height: 200%; padding: 0cm;">Assessing officers in case of property being acquired by an assesse, for a cost less than the stamp valuation have started issuing show cause notices, in order to add such difference u/s 56(2)(vii) of the Act. (Stamp Valuation - Consideration). However, in order to understand the provisions, the same are reproduced as under for your ready reference :-</span></strong></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 48.2pt; text-indent: -17.0pt;">
<strong><span style="border: none 1.0pt; font-size: 14.0pt; padding: 0cm;">“</span></strong><span style="font-size: 14.0pt;">“</span><span style="color: #444444;">(<em>vii</em>) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>a</em>) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 42.55pt;">
<strong><span style="color: #444444; font-size: 13.5pt;"> </span><span style="color: #444444;">[</span><em><span style="color: #444444;">(</span></em><span style="color: #444444;">b <em>) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;</em>]</span></strong></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>c</em>) any property, other than immovable property,—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>i</em>) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>ii</em>) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 48.2pt; text-indent: -45.35pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">Provided<em> </em></span></strong><span style="color: #444444;">that where the stamp duty value of immovable property as referred to in sub-clause (<em>b</em>) is disputed by the assessee on grounds mentioned in sub-section (2) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 50C</span></span><span style="color: #444444;">, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 50C</span></span><span style="color: #444444;"> and sub-section (15) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 155</span></span><span style="color: #444444;"> shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (<em>b</em>) as they apply for valuation of capital asset under those sections :</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 48.2pt; text-indent: -45.35pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">Provided further<em> </em></span></strong><span style="color: #444444;">that this clause shall not apply to any sum of money or any property received—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>a</em>) from any relative; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>b</em>) on the occasion of the marriage of the individual; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>c</em>) under a will or by way of inheritance; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>d</em>) in contemplation of death of the payer or donor, as the case may be; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>e</em>) from any local authority as defined in the <em>Explanation</em> to clause (<em>20</em>) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 10</span></span><span style="color: #444444; font-size: 13.5pt;"> </span><span style="color: #444444;">; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>f</em>) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (<em>23C</em>) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 10</span></span><span style="color: #444444;">; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>g</em>) from any trust or institution registered under </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 12AA</span></span><span style="color: #444444;">.</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 48.2pt; text-indent: -45.35pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">Explanation.</span></em><span style="color: #444444;">—For the purposes of this clause,—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>a</em>) "assessable" shall have the meaning assigned to it in the <em>Explanation 2</em> to sub-section (2) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 50C</span></span><span style="color: #444444;">;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>b</em>) "fair market value" of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed</span><span style="color: #444444; font-size: 1.0pt;"> </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38c</span></sup> </span><span style="color: #444444;">;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>c</em>) "jewellery" shall have the meaning assigned to it in the <em>Explanation</em> to sub-clause (<em>ii</em>) of clause (<em>14</em>) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 2</span></span><span style="color: #444444; font-size: 13.5pt;"> </span><span style="color: #444444;">;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>d</em>) "property" </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38d</span></sup> </span><strong><span style="color: #444444;">[</span></strong><em><span style="color: #444444;">means the following capital asset of the assessee, namely:—</span></em><strong><span style="color: #444444;">]</span></strong></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>i</em>) immovable property being land or building or both;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>ii</em>) shares and securities;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>iii</em>) jewellery;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>iv</em>) archaeological collections;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>v</em>) drawings;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>vi</em>) paintings;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>vii</em>) sculptures; </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38e</span></sup> </span><strong><span style="color: #444444;">[</span></strong><span style="color: #444444;">*** <strong>]</strong></span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>viii</em>) any work of art; </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38f</span></sup></span><strong><span style="color: #444444;">[</span></strong><span style="color: #444444;"> <em>or</em><strong>]</strong></span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 3.0cm; text-indent: -34.0pt;">
<span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38f</span></sup></span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">[</span></strong><em><span style="color: #444444;">(</span></em><span style="color: #444444;">ix <em>)</em> <em>bullion;</em> <strong>]</strong></span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 65.2pt; text-indent: -34.0pt;">
<span style="color: #444444;"> (<em>e</em>) "relative" shall have the meaning assigned to it in the <em>Explanation</em> to clause (<em>vi</em>) of sub-section (2) of this section;</span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="color: #444444;"> (<em>f</em>) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;]</span><span style="font-size: 14.0pt; line-height: 200%;">”<strong><span style="border: none windowtext 1.0pt; padding: 0cm;">”</span></strong></span></div>
<div style="line-height: 200%; text-align: justify;">
<br /></div>
<div style="line-height: 200%; text-align: justify;">
<strong><span style="border: none 1.0pt; font-size: 14.0pt; line-height: 200%; padding: 0cm;">The legislature has clearly</span></strong> <strong><span style="border: none 1.0pt; font-size: 14.0pt; line-height: 200%; padding: 0cm;">used the words “received” in the context of provisions of S.56(2)(vii) and not acquired.</span></strong> <strong><span style="border: none 1.0pt; font-size: 14.0pt; line-height: 200%; padding: 0cm;">The Hon’ble Supreme Court in the case of</span></strong> <strong><span style="font-size: 14.0pt; line-height: 200%;">CIT</span></strong><strong><span style="font-size: 14.0pt; line-height: 200%;"> <em>v. </em>Dharamdas Hargovandas reported in [1961] 42 ITR 427 (SC) </span></strong><span style="font-size: 14.0pt; line-height: 200%;">has observed that the </span><span style="font-size: 14.0pt; line-height: 200%;">words ‘is received’ are not terms of art and their meaning must receive colour from the context in which they are used.</span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">In order to understand the context in which the word “receives” has been used in the provisions of S.56(2)(vii), I would like to draw your attention towards the brief history of the provisions of S.56(2)(vii), its insertion in to the Act and intentions. </span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">The Hon’ble Finance Minister in its Budget Speech for F.Y 2004-05 inserted S.56(v) of the Act. S.56(v) of the Act as introduced are as under for your ready reference :-</span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 36.0pt;">
<span style="font-size: 14.0pt;">“</span><em><span style="color: #444444;"> (</span></em><span style="color: #444444;">v</span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004, the whole of such sum :</span></em></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 36.0pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">Provided</span></strong><span style="color: #444444;"> <em>that this clause shall not apply to any sum of money received—</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">a <em>) from any relative; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">b <em>) on the occasion of the marriage of the individual; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">c <em>) under a will or by way of inheritance; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">d <em>) in contemplation of death of the payer.</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 36.0pt;">
<span style="color: #444444;"> Explanation.</span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">—For the purposes of this clause, "relative" means—</span></em></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">i <em>) spouse of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">ii <em>) brother or sister of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">iii <em>) brother or sister of the spouse of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">iv <em>) brother or sister of either of the parents of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">v <em>) any lineal ascendant or descendant of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 2.0pt 64.35pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">vi <em>) any lineal ascendant or descendant of the spouse of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 36.0pt;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">vii</span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">) spouse of the persons referred to in clauses (</span></em><span style="color: #444444;">ii</span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">) to (</span></em><span style="color: #444444;">vi<em>).</em></span><span style="font-size: 14.0pt;">” </span></div>
<div style="line-height: 200%; text-align: justify;">
<br /></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">The relevant part of the Hon’ble Finance Ministers Speech is reproduced as under :-</span></div>
<div style="line-height: 200%; margin-left: 72.0pt; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">“</span><strong>102.</strong> Hon’ble Members are aware that I abolished the gift tax in 1997. That decision remains, but a loophole requires to be plugged to prevent money laundering. Accordingly, <strong>purported gifts</strong> from unrelated persons, above the threshold limit of Rs.25,000, will now be taxed as income. Gifts received from blood relations, lineal ascendants and lineal descendants, and gifts received on certain occasion like marriage will continue to be totally exempt</div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">Perusal of the same it can be seen that the purpose of inserting S.56(v) of the Act, was to tax <strong>purported gifts</strong></span> <span style="font-size: 14.0pt; line-height: 200%;">from unrelated persons, above the threshold limit of Rs.25,000. {Purport: <span style="background: white; color: #222222;">appear to be or do something, especially falsely}.</span></span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="background: white; font-size: 14.0pt; line-height: 200%;">Thereafter, the provisions were amended</span><span style="background: #eaeaea; font-size: 14.0pt; line-height: 200%;">, vide Taxation Laws (Amendment) Act, 2006, w.e.f. <strong>1-4-2007 </strong>and clause vi was inserted in place of Clause (iv) of the Act, the same read as under :-</span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 48.2pt; text-align: justify;">
<span style="background: white; color: #222222;">“</span><strong><span style="color: #444444;">[</span></strong><em><span style="color: #444444;">(</span></em><span style="color: #444444;">vi<em>) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, <strong>is received </strong>without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006, the whole of the aggregate value of such sum:</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 2.85pt; text-align: justify;">
<em><span style="color: #444444;"> </span></em><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">Provided </span></strong><em><span style="color: #444444;">that this clause shall not apply to any sum of money received—</span></em></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">a <em>) from any relative; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">b <em>) on the occasion of the marriage of the individual; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">c <em>) under a will or by way of inheritance; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">d <em>) in contemplation of death of the payer; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">e <em>) from any local authority as defined in the </em>Explanation <em>to clause (</em>20<em>)</em> <em>of </em></span><span style="color: #444444; font-size: 10.0pt;"><em><span style="font-size: 12.0pt;">section 10</span></em></span><em><span style="color: #444444;">; or</span></em></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">f <em>) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (2</em>3C<em>)</em> <em>of </em></span><span style="color: #444444; font-size: 10.0pt;"><em><span style="font-size: 12.0pt;">section 10</span></em></span><span style="color: #444444;"> <em>; or</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">g <em>) from any trust or institution registered under </em></span><span style="color: #444444; font-size: 10.0pt;"><em><span style="font-size: 12.0pt;">section 12AA</span></em></span><span style="color: #444444;"> <em>.</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 2.85pt; text-align: justify;">
<span style="color: #444444;"> </span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<span style="color: #444444;">Explanation.</span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">—For the purposes of this clause, "relative" means—</span></em></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">i <em>) spouse of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">ii <em>) brother or sister of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">iii <em>) brother or sister of the spouse of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">iv <em>) brother or sister of either of the parents of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">v <em>) any lineal ascendant or descendant of the individual;</em></span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<em><span style="color: #444444;"> (</span></em><span style="color: #444444;">vi <em>) any lineal ascendant or descendant of the spouse of the individual;</em></span><span style="background: white; color: #222222;">”</span></div>
<div style="background: white; margin: 0cm 0cm 3.0pt 31.2pt; text-align: justify;">
<br /></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">Upon reading, it can be seen that the provisions were amended so as to increase the threshold limit to Rs.50,000/- from Rs.25,000/-. However, the purpose of brining in the clause itself was clear on the part of the Legislature that it was done so as to tax <strong>purported gifts</strong> from unrelated persons and thus legislature consciously used the words “receives” instead of “obtains”. The words “obtained” as well as “received” are not defined under the Income Tax Act, 1961. However, both being the verbs differ on a conceptual level so far as its use in interpretation is concerned. O<strong><span style="border: none windowtext 1.0pt; padding: 0cm;">btain</span></strong><span style="background: whitesmoke;"> means to get hold of; to gain possession of, <strong>to procure; to acquire</strong>, Whereas the word “receive” means to take something that is given or to be given something just like to receive Gifts. </span></span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">Thereafter, the provisions were again amended, and clause vii was insterted Vide Finance Act, 2010 so as to further increase the tax base in case of gifts of immovable property and S.56(2)(vii) was inserted. The relevant Amended provisions are as under for your ready reference:-</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="font-size: 14.0pt;">“</span><span style="color: #444444;">(<em>vii</em>) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>a</em>) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 42.55pt;">
<strong><span style="color: #444444; font-size: 13.5pt;"> </span><span style="color: #444444;">[</span><em><span style="color: #444444;">(</span></em><span style="color: #444444;">b <em>) any immovable property, without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;</em>]</span></strong></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>c</em>) any property, other than immovable property,—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>i</em>) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>ii</em>) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 2.85pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">Provided<em> </em></span></strong><span style="color: #444444;">that where the stamp duty value of immovable property as referred to in sub-clause (<em>b</em>) is disputed by the assessee on grounds mentioned in sub-section (2) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 50C</span></span><span style="color: #444444;">, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 50C</span></span><span style="color: #444444;"> and sub-section (15) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 155</span></span><span style="color: #444444;"> shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (<em>b</em>) as they apply for valuation of capital asset under those sections :</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 2.85pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">Provided further<em> </em></span></strong><span style="color: #444444;">that this clause shall not apply to any sum of money or any property received—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>a</em>) from any relative; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>b</em>) on the occasion of the marriage of the individual; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>c</em>) under a will or by way of inheritance; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>d</em>) in contemplation of death of the payer or donor, as the case may be; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>e</em>) from any local authority as defined in the <em>Explanation</em> to clause (<em>20</em>) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 10</span></span><span style="color: #444444; font-size: 13.5pt;"> </span><span style="color: #444444;">; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>f</em>) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (<em>23C</em>) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 10</span></span><span style="color: #444444;">; or</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>g</em>) from any trust or institution registered under </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 12AA</span></span><span style="color: #444444;">.</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 2.85pt;">
<span style="color: #444444;"> </span><span style="color: #444444; font-size: 13.5pt;"> </span><em><span style="color: #444444;">Explanation.</span></em><span style="color: #444444;">—For the purposes of this clause,—</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>a</em>) "assessable" shall have the meaning assigned to it in the <em>Explanation 2</em> to sub-section (2) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 50C</span></span><span style="color: #444444;">;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>b</em>) "fair market value" of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed</span><span style="color: #444444; font-size: 1.0pt;"> </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38c</span></sup> </span><span style="color: #444444;">;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>c</em>) "jewellery" shall have the meaning assigned to it in the <em>Explanation</em> to sub-clause (<em>ii</em>) of clause (<em>14</em>) of </span><span style="color: #444444; font-size: 10.0pt;"><span style="font-size: 12.0pt;">section 2</span></span><span style="color: #444444; font-size: 13.5pt;"> </span><span style="color: #444444;">;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>d</em>) "property" </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38d</span></sup> </span><strong><span style="color: #444444;">[</span></strong><em><span style="color: #444444;">means the following capital asset of the assessee, namely:—</span></em><strong><span style="color: #444444;">]</span></strong></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>i</em>) immovable property being land or building or both;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>ii</em>) shares and securities;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>iii</em>) jewellery;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>iv</em>) archaeological collections;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>v</em>) drawings;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>vi</em>) paintings;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>vii</em>) sculptures; </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38e</span></sup> </span><strong><span style="color: #444444;">[</span></strong><span style="color: #444444;">*** <strong>]</strong></span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444;"> (<em>viii</em>) any work of art; </span><span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38f</span></sup></span><strong><span style="color: #444444;">[</span></strong><span style="color: #444444;"> <em>or</em><strong>]</strong></span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 51.05pt;">
<span style="color: #444444; font-size: 10.0pt;"><sup><span style="font-size: 12.0pt;">38f</span></sup></span><span style="color: #444444; font-size: 13.5pt;"> </span><strong><span style="color: #444444;">[</span></strong><em><span style="color: #444444;">(</span></em><span style="color: #444444;">ix <em>)</em> <em>bullion;</em> <strong>]</strong></span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>e</em>) "relative" shall have the meaning assigned to it in the <em>Explanation</em> to clause (<em>vi</em>) of sub-section (2) of this section;</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 31.2pt;">
<span style="color: #444444;"> (<em>f</em>) "stamp duty value" means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;]</span><span style="font-size: 14.0pt;">”</span></div>
<div style="line-height: 200%; margin-left: 36.0pt; text-align: justify;">
<br /></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">Thereafter, the provisions of S.56(2)(vii) was amended vide Finance Act 2013, w.e.f 01/04/2014 so as to tax the purported gifts received for inadequate considerations. <strong>However in case when an assesse acquirs a property, the same cannot be claimed to have been received the properties and thus provisions of S.56(vii)(b) of the Act are not at all applicable to the facts of the case.</strong></span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">Let us examine this view from a slightly different angle. The transfer of property (capital assets) by way of gifts are not taxable because the same are not treated as transfers by virtue of S.47(iii) of the Act. The relevant provisions of the Act are as under for your ready reference :-</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 36.0pt; text-align: justify;">
<span style="font-size: 14.0pt;">“47. </span><span style="color: #444444;">(<em>iii</em>) any transfer of a capital asset under a gift or will or an irrevocable trust :</span></div>
<div style="background: white; margin: 0cm 0cm 4.0pt 39.7pt; text-align: justify;">
<strong><span style="color: #444444;">Provided </span></strong><span style="color: #444444;">that this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures or warrants allotted by a company directly or indirectly to its employees under any Employees' Stock Option Plan or Scheme of the company offered to such employees in accordance with the guidelines issued by the Central Government in this behalf;</span><span style="font-size: 14.0pt;">”</span></div>
<div style="line-height: 200%; text-align: justify;">
<br /></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">In order to tax such receipts ie. by way of gifts the legislature has introduced S.56(2)(vii) and the recipient of such gift is taxed. It is further well settled that the same income cannot be taxed twice. Thus, when an assesse acquires a property the amount of income ie. such difference, will be taxed in the hands of the seller by way of S.50C of the Act under the head capital gain if the seller has treated such property as a capital asset or if the asset has been treated as a stock in trade then the same shall be taxed by way of S.43CA of the Act. </span></div>
<div style="line-height: 200%; text-align: justify;">
<span style="font-size: 14.0pt; line-height: 200%;">Accordingly, if the assessing officer treats the difference as income in the hands of an acquirer of property, then the same shall amount to taxing the same income twice ie. in the hands of a seller as well in the hands of purchaser. </span></div>
<div style="line-height: 200%; text-align: justify;">
<br /></div>
<strong><span style="font-family: "times new roman" , "serif"; font-size: 14.0pt;">Disclaimer :</span></strong><span style="font-family: "times new roman" , "serif"; font-size: 14.0pt;"> The opinions expressed in this article are completely mine. <span style="color: black;">I assume no liability or responsibility for any errors or omissions in the contents contained herein neither does it give any guarantee of completeness or accuracy. The information and data contained herein may be used at your sole risk after ensuring its accuracy, correctness or completeness.</span></span></div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com2tag:blogger.com,1999:blog-7581033258468973440.post-59063497043253000302018-02-24T00:47:00.001-08:002018-02-24T00:47:35.820-08:00Blog#21 . Finance Act 2018<p dir="ltr"> <br>
<br>
Analysis of <br>
Direct Tax Proposals in Finance Act, 2018 <br>
24th February, 2018 <br>
Gujarat Chamber of Commerce and Industry <br>
& <br>
Agriculture Produce Market Committee, <br>
Mahuva <br>
<br>
CA. Mohit Balani </p>
<p dir="ltr"> <br>
1.	Rates of Taxes : In respect of income of all categories of assessees liable to tax for the assessment year 2018-19, the rates of income-tax have been specified in Part I of the First Schedule to the Bill. These are the same as those laid down in Part III of the First Schedule to the Finance Act, 2017 for the purposes of computation of “advance tax”, deduction of tax at source from “Salaries” and charging of tax payable in certain cases. <br>
A.	Individual, Hindu undivided family, association of persons, body of individuals, artificial juridical person. <br>
The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge at the rate of,— <br>
(i)	ten per cent. of such income-tax in case of a person having a total income exceeding fifty lakh rupees but not exceeding one crore rupees; and <br>
(ii)	fifteen per cent. of such income-tax in case of a person having a total income exceeding one crore rupees. <br>
However, in case of (i) above, the total amount payable as income-tax and surcharge on total income exceeding fifty lakh rupees but not exceeding one crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of fifty lakh rupees by more than the amount of income that exceeds fifty lakh rupees. Further, in case of (ii) above, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax and surcharge on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. {Marginal Relief shall be granted.} <br>
B.	Co-operative Societies <br>
No change in Tax Rates <br>
The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a co-operative society having a total income exceeding one crore rupees. <br>
However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. {Marginal Relief shall be granted.} <br>
C.	Firms <br>
In the case of firms, the rate of income-tax has been specified in Paragraph C of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for financial year 2017-18. {No Change} <br>
The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a firm having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. {Marginal Relief shall be granted.} <br>
D.	Local authorities <br>
The rate of income-tax in the case of every local authority has been specified in Paragraph D of Part III of the First Schedule to the Bill. This rate will continue to be the same as that specified for the financial year 2017-18. The amount of income-tax shall be increased by a surcharge at the rate of twelve per cent. of such income-tax in case of a local authority having a total income exceeding one crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees. {Marginal Relief shall be granted.} <br>
E.	Companies <br>
The rates of income-tax in the case of companies have been specified in Paragraph E of Part III of the First Schedule to the Bill. In case of domestic company, the rate of income-tax shall be twenty five per cent. of the total income if the total turnover or gross receipts of the previous year 2016-17 does not exceed two hundred and fifty crore rupees and in all other cases the rate of Income-tax shall be thirty per cent. of the total income. <br>
In the case of company other than domestic company, the rates of tax are the same as those specified for the financial year 2017-18. Surcharge at the rate of seven per cent. shall continue to be levied in case of a domestic company if the total income of the domestic company exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of twelve per cent. shall continue to be levied if the total income of the domestic company exceeds ten crore rupees. In case of companies other than domestic companies, the existing surcharge of two per cent. shall continue to be levied if the total income exceeds one crore rupees but does not exceed ten crore rupees. Surcharge at the rate of five per cent. shall continue to be levied if the total income of the company other than domestic company exceeds ten crore rupees. However, the total amount payable as income-tax and surcharge on total income exceeding one crore rupees but not exceeding ten crore rupees, shall not exceed the total amount payable as income-tax on a total income of one crore rupees, by more than the amount of income that exceeds one crore rupees. The total amount payable as income-tax and surcharge on total income exceeding ten crore rupees, shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees, by more than the amount of income that exceeds ten crore rupees. <br>
In other cases (including sections 115-O, 115QA, 115R, 115TA or 115TD), the surcharge shall be levied at the rate of twelve per cent.. <br>
For financial year 2018-19, additional surcharge called the “Health and Education Cess on income-tax” shall be levied at the rate of four per cent. on the amount of tax computed, inclusive of surcharge (wherever applicable), in all cases. No marginal relief shall be available in respect of such cess. <br>
<br>
2.	Rate of TDS <br>
The rates for deduction of income-tax at source during the financial year 2018-19 from certain incomes other than “Salaries” have been specified in Part II of the First Schedule to the Bill. The rates for all the categories of persons will remain the same as those specified in Part II of the First Schedule to the Finance Act, 2017, for the purposes of deduction of income-tax at source during the financial year 2017-18. <br>
However, in case of long-term capital gain referred to in section 112A of the Act, tax shall now be deducted at source at the rate of 10 per cent. <br>
3.	Deduction in respect of income of Farm Producer Companies <br>
S.80PA introduce vide Finance Act, 2018 which read as under :- <br>
80PA. <br>
(1) Where the gross total income of an assessee, being a Producer Company having a total <br>
turnover of less than one hundred crore rupees in any previous year, includes any profits and gains derived from eligible business, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to one hundred per cent. of the profits and gains attributable to such business for the previous year relevant to an assessment year commencing on or after the 1st day of April, 2019, but before the 1st day of April, 2025. <br>
(2) In a case where the assessee is entitled also to deduction under any other provision of this <br>
Chapter, the deduction under this section shall be allowed with reference to the income, if any, as referred to in this section included in the gross total income as reduced by the deductions under such other provision of this Chapter. <br>
Explanation.—For the purposes of this section,— <br>
(i) “eligible business” means— <br>
(a) the marketing of agricultural produce grown by the members; or <br>
(b) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the members; or <br>
(c) the processing of the agricultural produce of the members; <br>
(ii) “member” shall have the meaning assigned to it in clause (d) of section 581A of the Companies Act, 1956; <br>
(iii) “Producer Company” shall have the meaning assigned to it in clause (l) of section 581A of <br>
the Companies Act, 1956. <br>
Explanation <br>
Section 80P provides for 100 percent deduction in respect of profit of cooperative society which provide assistance to its members engaged in primary agricultural activities. It is proposed to extend similar benefit to Farm Producer Companies (FPC), having a total turnover upto Rs 100 Crore, whose gross total income includes any income from- <br>
(i)	the marketing of agricultural produce grown by its members, or <br>
(ii)	the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or <br>
(iii)	the processing of the agricultural produce of its members <br>
The benefit shall be available for a period of five years from the financial year 2018-19.This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. <br>
4.	Start Ups <br>
Section 80-IAC of the Act, inter alia, provides that deduction under this section shall be available to an eligible start-up for three consecutive assessment years out of seven years at the option of the assessee, if- <br>
(i)	it is incorporated on or after the 1st day of April, 2016 but before the 1st day of April, 2019; <br>
<br>
(ii)	the total turnover of its business does not exceed twenty-five crore rupees in any of the previous years beginning on or after the 1st day of April, 2016 and ending on the 31st day of March, 2021; and <br>
<br>
(iii)	it is engaged in the eligible business which involves innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property. <br>
<br>
Eligible start-up <br>
<br>
In order to improve the effectiveness of the scheme for promoting start ups in India, it is proposed to make following changes in the taxation regime for the start ups:— <br>
<br>
(i)	The benefit would also be available to start ups incorporated on or after the 1st day of April 2019 but before the 1st day of April, 2021; <br>
<br>
(ii)	The requirement of the turnover not exceeding Rs 25 Crore would apply to seven previous years commencing from the date of incorporation; <br>
<br>
(iii)	The definition of eligible business has been expanded to provide that the benefit would be available if it is engaged in innovation, development or improvement of products or processes or services, or “a scalable business model with a high potential of employment generation or wealth creation.” <br>
<br>
The amendment will take effect, from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. [Clause 26] <br>
<br>
5.	S.80JJA. Incentive for employment generation <br>
S.80 JJA Applicability <br>
(i).	44AB applicable <br>
(ii).	Includes profit and gains from business <br>
Deduction : 30% of Additional Employee Cost <br>
Period : 3 years starting from the year in which new employment is provided. <br>
What is Additional Employee Cost ? <br>
Total Emoluments paid or Payable to Additional Employees employed during the previous years <br>
Provided that in existing business additional employee cost shall be nil if there is no increase in the total number of employees as compared to last year or emoluments are paid in cash. <br>
What is Additional Employee ? <br>
Explanation (ii) defines <br>
Additional Employee hired but does not include <br>
An employee whose total emoluments are more than Rs.35,000/-. <br>
Employee who have been employed for less than 240 days (150 in case of apparel industry or “Footwear and leather industry”{Amended by Finance Act, 2018 ). <br>
Employee who does not participate in the recognised provident fund. <br>
Emoluments (Explanation (iii)): Any sum paid or payable to an employee but does not includes contribution made by employer in any provident fund and retrenchment compensation. <br>
At present, under section 80-JJAA of the Act, a deduction of 30% is allowed in addition to normal deduction of 100% in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year. However, the minimum period of employment is relaxed to 150 days in the case of apparel industry. In order to encourage creation of new employment, it is proposed to extend this relaxation to footwear and leather industry. <br>
Further, it is also proposed to rationalize this deduction of 30% by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year. <br>
This amendment will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. [Clause 27] <br>
<br>
6.	Tax treatment of transactions in respect of trading in Agricultural commodity derivatives <br>
Clause (5) of section 43 defines speculative transaction. The proviso to the said clause, however, stipulates certain transactions to be non-speculative nature even though the contracts are settled otherwise than by the actual delivery or transfer of the commodity or scraps. The clause (e) to the said proviso provides that trading in commodity derivatives carried out in a recognised stock exchange, which is chargeable to commodity transaction tax is a non-speculative transaction. <br>
Commodity transaction tax (CTT) was introduced vide Finance Act’2013 to bring transactions relating to non-agricultural commodity derivatives under the tax net while keeping the agricultural commodity derivatives exempt from CTT. Since no CTT is paid, the benefit of clause (e) of the proviso to clause (5) of the section 43 is not available to transaction in respect of trading of agricultural commodity derivatives and accordingly, such transactions are held to be speculative transactions. <br>
In order to encourage participation in trading of agricultural commodity derivatives, it is proposed to amend the provisions of clause (5) of section 43 to provide that a transaction in respect of trading of agricultural commodity derivatives, which is not chargeable to CTT, in a registered stock exchange or registered association, will be treated as non-speculative transaction. <br>
These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to assessment year 2019-20 and subsequent assessment years.[Clause 12] <br>
<br>
7.	Widening Scope of Dividend <br>
Ammendment : <br>
“Explanation 2A.–– In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation.” <br>
Explanation <br>
	Widening of scope of Accumulated profits for the purposes of Dividend <br>
Section 2 of the Act defines various terms used in the Act. Clause (22) of the said section defines “dividend” to include distribution of accumulated profits (whether capitalized or not) to its shareholders by a company, whether it is in the nature of,— <br>
<br>
(a)	release of all or any of its assets, <br>
<br>
(b)	Issue of debentures in any form (with or without interest) or distribution of bonus to its preference shareholders, <br>
<br>
(c)	distribution of proceeds on liquidation, <br>
<br>
(d)	on the reduction of capital, or <br>
<br>
(e)	in the case of an unlisted company, any loan or advance given to a shareholder having shareholding of 10% or above, or to a concern in which such shareholder holds substantial interest (exceeding 20% of shareholding or interest) or any payment by such company on behalf of or for the individual benefit of such shareholder. <br>
<br>
Explanation 2 to the said clause provides the definition of the term ‘accumulated profits’ for the purposes of the said clause, as all profits of the company up to the date of distribution or payment or liquidation, subject to certain conditions. <br>
<br>
Instances have come to light whereby companies are resorting to abusive arrangements in order to escape liability of paying tax on distributed profits. Under such arrangements, companies with large accumulated profits adopt the amalgamation route to reduce capital and circumvent the provisions of sub-clause (d) of clause (22) of section 2 of the Act. With a view to preventing such abusive arrangements and similar other abusive arrangements, it is proposed to insert a new Explanation 2A in clause (22) of section 2 of the Act to widen the scope of the term ‘accumulated profits’ so as to provide that in the case of an amalgamated company, accumulated profits, whether capitalised or not, or losses as the case may be, shall be increased by the accumulated profits of the amalgamating company, whether capitalized or not, on the date of amalgamation. <br>
<br>
3.4	Applicability: This amendment will take effect from 1st April, 2018 and will accordingly apply in relation to assessment year 2018-19 and subsequent assessment years. <br>
<br>
8.	115-O. : Application of Dividend Distribution Tax to Deemed Dividend <br>
4.1	Present Section: <br>
1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of fifteen per cent. <br>
Added vide Finance Act, 2018 <br>
Provided that in respect of dividend referred to in sub-clause (e) of clause (22) of section 2, this sub-section shall have effect as if for the words “fifteen per cent.”, the words thirty per cent.” Had been substituted; <br>
(1B) For the purposes of determining the tax on distributed profits payable in accordance with this section, any amount by way of dividends referred to in sub-section (1) as reduced by the amount referred to in sub-section (1A) [hereafter referred to as net distributed profits], shall be increased to such amount as would, after reduction of the tax on such increased amount at the rate specified in sub-section (1), be equal to the net distributed profits. <br>
Added vide Finance Act, 2018 <br>
Provided that this sub-section shall not apply in respect of dividend referred to in sub-clause (e) of clause (22) of section 2.”. <br>
After section 115Q of the Income-tax Act, the Explanation shall be omitted <br>
3.2	Explanation <br>
At present dividend distributed by a domestic company is subject to dividend distribution tax payable by such company. However, deemed dividend under sub-clause (e) of clause (22) of section of 2 the Act is taxed in the hands of the recipient at the applicable marginal rate. The taxability of deemed dividend in the hands of recipient has posed serious problem of the collection of the tax liability and has also been the subject matter of extensive litigation. <br>
With a view to bringing clarity and certainty in the taxation of deemed dividends, it is proposed to delete the Explanation to Chapter XII-D occurring after section 115Q of the Act so as to bring deemed dividends also under the scope of dividend distribution tax under section 115-O. Further, such deemed dividend is proposed to be taxed at the rate of 30 per cent. (without grossing up) in order to prevent camouflaging dividend in various ways such as loans and advances. <br>
This amendment relating to imposition of dividend distribution tax on deemed dividend will apply to transactions referred to in sub-clause (e) of clause (22) of section 2 of the Act undertaken on or after 1st April, 2018. <br>
9.	New regime for taxation of long-term capital gains on sale of equity shares etc. [Clause 5 & 31] <br>
•	Amendment <br>
in clause (38), after the third proviso, the following proviso shall be inserted, namely:— <br>
“Provided also that nothing contained in this clause shall apply to any income arising from the transfer of long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust, made on or after the 1st day of April, 2018” <br>
•	Insertion of New Section 112A <br>
After section 112 of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2019, namely:— <br>
‘112A. <br>
(1) Notwithstanding anything contained in section 112, the tax payable by an assessee on his total income shall be determined in accordance with the provisions of sub-section <br>
(2), if— <br>
(i) the total income includes any income chargeable under the head “Capital gains”; <br>
(ii) the capital gains arise from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust; <br>
(iii) securities transaction tax under Chapter VII of the Finance (No.2) Act, 2004 has,— <br>
(a) in a case where the long-term capital asset is in the nature of an equity share in a company, <br>
been paid on acquisition and transfer of such capital asset; or <br>
(b) in a case where the long-term capital asset is in the nature of a unit of an equity oriented <br>
fund or a unit of a business trust, been paid on transfer of such capital asset. <br>
(2) The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of— <br>
(i) the amount of income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per cent.; and <br>
(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee: <br>
Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, the long-term capital gains, for the purposes of clause <br>
(i), shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax <br>
<br>
•	Explanation <br>
Under the existing regime, long term capital gains arising from transfer of long term capital assets, being equity shares of a company or an unit of equity oriented fund or an unit of business trusts , is exempt from income-tax under clause (38) of section 10 of the Act. However, transactions in such long term capital assets carried out on a recognized stock exchange are liable to securities transaction tax (STT). Consequently, this regime is inherently biased against manufacturing and has encouraged diversion of investment in financial assets. It has also led to significant erosion in the tax base resulting in revenue loss. The problem has been further compounded by abusive use of tax arbitrage opportunities created by these exemptions. <br>
In order to minimize economic distortions and curb erosion of tax base, it is proposed to withdraw the exemption under clause (38) of section 10 and to introduce a new section 112A in the Act to provide that long term capital gains arising from transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10 per cent. of such capital gains exceeding one lakh rupees . <br>
This concessional rate of 10 per cent. will be applicable to such long term capital gains, if— <br>
i)	in a case where long term capital asset is in the nature of an equity share in a company , securities transaction tax has been paid on both acquisition and transfer of such capital asset; and <br>
<br>
ii)	in a case where long term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, securities transaction tax has been paid on transfer of such capital asset. <br>
<br>
Further, sub-section (4) of the new section 112A empowers the Central Government to specify by notification the nature of acquisitions in respect of which the requirement of payment of securities transaction tax shall not apply in the case of equity share in a company. Similarly, the requirement of payment of STT at the time of transfer of long term capital asset, being a unit of equity oriented fund or a unit of business trust, shall not apply if the transfer is undertaken on recognized stock exchange located in any International Financial Services Centre( IFSC) and the consideration of such transfer is received or receivable in foreign currency. <br>
Further, the new provision of section 112A also proposes to provide the following:— <br>
i)	The long term capital gains will be computed without giving effect to the first and second provisos to section 48, i.e. inflation indexation in respect of cost of acquisitions and cost of improvement, if any, and the benefit of computation of capital gains in foreign currency in the case of a non-resident, will not be allowed. <br>
ii)	The cost of acquisitions in respect of the long term capital asset acquired by the assessee before the 1st day of February, 2018 , shall be deemed to be the higher of – <br>
a)	the actual cost of acquisition of such asset; and <br>
b)	the lower of – <br>
(I)	the fair market value of such asset; and <br>
(II)	the full value of consideration received or accruing as a result of the transfer of the capital asset. <br>
iii)	“equity oriented fund” has been defined to mean a fund set up under a scheme of a mutual fund specified under clause (23D) of section 10 and,- <br>
a)	In a case where the fund invests in the units of another fund which is traded on a recognized stock exchange,- <br>
(I)	A minimum of 90 per cent. of the total proceeds of such funds is invested in the units of such other fund ; and <br>
(II)	such other fund also invests a minimum of 90 per cent. of its total proceeds in the equity shares of domestic companies listed on recognized stock exchange; and <br>
b)	in any other case, a minimum of 65 per cent. of the total proceeds of such fund is invested in the equity shares of domestic companies listed on recognized stock exchange. <br>
iv)	Fair market value has been defined to mean – <br>
a)	in a case where the capital asset is listed on any recognized stock exchange, the highest price of the capital asset quoted on such exchange on the 31st day of January, 2018. However, where there is no trading in such asset on such exchange on the 31st day of January, 2018 , the highest price of such asset on such exchange on a date immediately preceding the 31st day of January, 2018 when such asset was traded on such exchange shall be the fair market value; and <br>
<br>
b)	in a case where the capital asset is a unit and is not listed on recognized stock exchange, the net asset value of such asset as on the the 31st day of January, 2018. <br>
v)	The benefit of deduction under chapter VIA shall be allowed from the gross total income as reduced by such capital gains. Similarly, the rebate under section 87A shall be allowed from the income tax on the total income as reduced by tax payable on such capital gains. <br>
•	Applicability: These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the Assessment Year 2019-20 and subsequent assessment years. <br>
<br>
10.	Standard deduction <br>
•	Amendment in Section 16 which was omitted by Finance Act, 2005 following clause shall be inserted <br>
In section 16 of the Income-tax Act, after clause (i) [as omitted by section 6 of the Finance Act, 2005], the following clause shall be inserted with effect from the 1st day of April, 2019, namely:–– <br>
“(ia) a deduction of forty thousand rupees or the amount of the salary, whichever is less; <br>
<br>
•	Explanation <br>
Section 16, inter-alia, provides for certain deduction in computing income chargeable under the head “Salaries”. it is proposed to allow a standard deduction upto Rs 40,000/- or the amount of salary received, whichever is less. Consequently the present exemption in respect of Transport Allowance (except in case of differently abled persons) and reimbursement of medical expenses is proposed to be withdrawn. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. <br>
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11.	Taxability of compensation in connection to business or employment <br>
•	Amendment in S.28 <br>
(I) in clause (ii), after sub-clause (d), the following sub-clause shall be inserted, namely:— <br>
“(e) any person, by whatever name called, at or in connection with the termination or the modification of the terms and conditions, of any contract relating to his business; <br>
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•	Explanation : <br>
Under the existing provisions of the Act, certain types of compensation receipts are taxable as business income under section 28. However, the existing provisions of clause (ii) of section 28 is restrictive in its scope as far as taxation of compensation is concerned; a large segment of compensation receipts in connection with business and mployment is out of the purview of taxation leading to base erosion and revenue loss. Therefore, it is proposed to amend section 28 of the Act to provide that any compensation received or receivable, whether revenue or capital, in connection with the termination or the modification of the terms and conditions of any contract relating to its business shall be taxable as business income. It is further proposed that any compensation received or receivable, whether in the nature of revenue or capital, in connection with the termination or the modification of the terms and conditions of any contract relating to its employment shall be taxable under section 56 of the Act. <br>
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•	Applicability : These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to assessment year 2019-20 and subsequent assessment years. <br>
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12.	 Conversion of Stock in Trade to Capital Asset. <br>
•	Amendment in Section 2 (24) : Income <br>
(A) after sub-clause (xii), the following sub-clause shall be inserted, namely:–– <br>
“(xiia) the fair market value of inventory referred to in clause (via) of section 28;” <br>
•	Amendment in S.28 <br>
(via) the fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner; <br>
•	Amendment in S.49 :- <br>
In section 49 of the Income-tax Act, after sub-section (8), the following sub-section shall be inserted with effect from the 1st day of April, 2019, namely:–– <br>
“(9) Where the capital gain arises from the transfer of a capital asset referred to in clause (via) of section 28, the cost of acquisition of such asset shall be deemed to be the fair market value which has been taken into account for the purposes of the said clause.” <br>
•	Fair Market Value has been defined in S. 2(22B) which are as under :- <br>
"fair market value"28, in relation to a capital asset, means— <br>
(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and <br>
where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act ;] {Rule 11UA} <br>
•	Memorandum Explaining the provisions <br>
Section 45 of the Act, inter alia, provides that capital gains arising from a conversion of capital asset into stock-in-trade shall be chargeable to tax. However, in cases where the stock in trade is converted into, or treated as, capital asset, the existing law does not provide for its taxability. <br>
In order to provide symmetrical treatment and discourage the practice of deferring the tax payment by converting the inventory into capital asset, it is proposed to amend the provisions of — <br>
(i)	section 28 so as to provide that any profit or gains arising from conversion of inventory into capital asset or its treatment as capital asset shall be charged to tax as business income. It is also proposed to provide that the fair market value of the inventory on the date of conversion or treatment determined in the prescribed manner, shall be deemed to be the full value of the consideration received or accruing as a result of such conversion or treatment; <br>
(ii)	clause (24) of section 2 so as to include such fair market value in the definition of income; <br>
(iii)	section 49 so as to provide that for the purposes of computation of capital gains arising on transfer of such capital assets, the fair market value on the date of conversion shall be the cost of acquisition; <br>
(iv)	clause (42A) of section 2 so as to provide that the period of holding of such capital asset shall be reckoned from the date of conversion or treatment. <br>
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•	Applicability : These amendments will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. <br>
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13.	Tax deduction at source and manner of payment in respect of certain exempt entities : <br>
The third proviso to clause (23C) of section 10 of the Act provides for exemption in respect of income of the entities referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of said clause in a case where such income is applied or accumulated during the previous year for certain purposes in accordance with the relevant provisions. Section 11 of the Act also contains provisions relating to income from property held for charitable or religious purposes. <br>
At present, there are no restrictions on payments made in cash by charitable or religious trusts or institutions. There are also no checks on whether such trusts or institutions follow the provisions of deduction of tax at source under Chapter XVII-B of the Act. This has led to lack of an audit trail for verification of application of income. <br>
In order to encourage a less cash economy and to reduce the generation and circulation of black money, it is proposed to insert a new Explanation to the section 11 to provide that for the purposes of determining the application of income under the provisions of sub-section (1) of the said section, the provisions of sub-clause (ia) of clause (a) of section 40, and of sub-sections (3) and (3A) of section 40A, shall, mutatis mutandis, apply as they apply in computing the income chargeable under the head “Profits and gains of business or profession”. <br>
It is also proposed to insert a similar proviso in clause (23C) of section 10 so as to provide similar restriction as above on the entities exempt under sub-clauses (iv), (v), (vi) or (via) of said clause in respect of application of income. <br>
These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent years. <br>
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14.	Presumptive income under section 44AE in case of goods carriage <br>
Section 44AE, inter alia provides that, the profits and gains shall be deemed to be an amount equal to seven thousand five hundred rupees per month or part of a month for each goods carriage or the amount claimed to be actually earned by the assessee, whichever is higher. The current presumptive income scheme is applicable uniformly to all classes of goods carriages irrespective of their tonnage capacity. The only condition which needs to be fulfilled is that the assessee should not have owned more than 10 goods carriages at any time during the previous year. Accordingly, the transporters who owns (less than 10) large capacity/ size goods carriages are also availing the benefit of section 44AE. <br>
It is necessary to mention here that the legislative intent of introducing this provision was to give benefit to small transporters in order to reduce their compliance burden. Even though the profit margins of large capacity goods carriages are higher than small capacity goods carriages, the tax consequences are similar which is against the principle of tax equity. <br>
In view of the above, it is proposed to amend the section 44AE of the Act to provide that, in the case of heavy goods vehicle (more than 12MT gross vehicle weight), the income would deemed to be an amount equal to one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, per month or part of a month for each goods vehicle or the amount claimed to be actually earned by the assessee, whichever is higher. The vehicles other than heavy goods vehicle will continue to be taxed as per the existing rates. <br>
These amendments will take effect 1st April, 2019 and will, accordingly, apply in relation to Assessment Year 2019-20 and subsequent assessment years. <br>
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15.	Extending the benefit of tax-free withdrawal from NPS to non-employee subscribers: Under the existing provisions of the clause (12A) of section 10 of the Act, an employee contributing to the NPS is allowed an exemption in respect of 40% of the total amount payable to him on closure of his account or on his opting out. This exemption is not available to non-employee subscribers. In order to provide a level playing field, it is proposed to amend clause (12A) of section 10 of the Act to extend the said benefit to all subscribers. This amendment will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.[Clause 5]. <br>
16.	Senior Citizens <br>
	Deductions available to senior citizens in respect of health insurance premium and medical treatment <br>
	Enhanced deduction to senior citizens for medical treatment of specified diseases <br>
	Enhanced deduction to senior citizens for medical treatment of specified diseases <br>
Deductions available to senior citizens in respect of health insurance premium and medical treatment <br>
Section 80D, inter-alia, provides that a deduction upto Rs 30,000/- shall be allowed to an assessee, being an individual or a Hindu undivided family, in respect of payments towards annual premium on health insurance policy, or preventive health check-up, of a senior citizen, or medical expenditure in respect of very senior citzen. It is proposed to amend section 80D so as to raise this monetary limit of deduction from Rs 30,000/- to Rs 50,000/-. In case of single premium health insurance policies having cover of more than one year, it is proposed that the deduction shall be allowed on proportionate basis for the number of years for which health insurance cover is provided, subject to the specified monetary limit. These amendments will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. <br>
Enhanced deduction to senior citizens for medical treatment of specified diseases <br>
Section 80DDB of the Act, inter-alia, provide that a deduction is available to an individual and Hindu undivided family with regard to amount paid for medical treatment of specified diseases in respect of very senior citizen upto Rs 80,000/- and in case of senior citizens upto Rs 60,000/- subject to specified conditions. It is proposed to amend the provisions of section 80DDB of the Act so as to raise this monetary limit of deduction to Rs 1,00,000/- for both senior citizens and very senior citizens. <br>
This amendment will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.[Clause 25] <br>
Deduction in respect of interest income to senior citizen <br>
At present, a deduction upto Rs 10,000/- is allowed under section 80TTA to an assessee in respect of interest income from savings account. It is proposed to insert a new section 80TTB so as to allow a deduction upto Rs 50,000/- in respect of interest income from deposits held by senior citizens. However, no deduction under section 80TTA shall be allowed in these cases. <br>
This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. <br>
It is also proposed to amend section 194A so as to raise the threshold for deduction of tax at source on interest income for senior citizens from Rs 10,000/- to Rs 50,000/-. This amendment will take effect, from 1st April, 2018.[Clause 29, 30 & 47]. <br>
17.	Rationalisation of section 276CC relating to prosecution for failure to furnish return : Section 276CC of the Act provides that if a person willfully fails to furnish in due time the return of income which he is required to furnish, he shall be punishable with imprisonment for a term, as specified therein, with fine. The sub-clause (b) of clause (ii) of proviso to the section 276CC further provides that a person shall not be proceeded against under the said section for failure to furnish return for any assessment year commencing on or after the 1st day of April, 1975, if the tax payable by him on the total income determined on regular assessment as reduced by the advance tax, if any, paid and any tax deducted at source, does not exceed three thousand rupees.In order to prevent abuse of the said proviso by shell companies or by companies holding Benami properties, it is proposed to amend the provisions of the said sub-clause so as to provide that the said sub-clause shall not apply in respect of a company. This amendment will take effect from 1st April, 2018. <br>
18.	Rationalisation of prima-facie adjustments during processing of return of income : Sub-section (1) of the section 143 provides for processing of return of income made under section 139, or in response to a notice under sub-section (1) of section 142. Clause (a) of the said sub-section provides that at the time of processing of return, the total income or loss shall be computed after making the adjustments specified in sub-clauses (i) to (vi) thereof. Sub-clause (vi) of the said clause provides for adjustment in respect of addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in computing the total income in the return. With a view to restrict the scope of adjustments, it is proposed to insert a new proviso to the said clause to provide that no adjustment under sub-clause (vi) of the said clause shall be made in respect of any return furnished on or after the assessment year commencing on the first day of April, 2018. This amendment will take effect from lst April, 2018 and will, accordingly, apply in relation to the assessment years 2018-2019 and subsequent years.[Clause 44] <br>
19.	Deductions in respect of certain incomes not to be allowed unless return is filed by the due date : The existing provisions contained in the section 80AC of the Act provide that no deduction would be admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC or section 80-ID or section 80-IE, unless the return of income by the assessee is furnished on or before the due date specified under sub-section (1) of section 139 of the Act. This burden is not cast upon assesses claiming deductions under several other similar provisions. In view of the above, it is proposed to extend the scope of section 80AC to provide that the benefit of deduction under the entire class of deductions under the heading “C.—Deductions in respect of certain incomes” in Chapter VIA shall not be allowed unless the return of income is filed by the due date. This amendment will take effect, from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years.[clause 23] <br>
20.	Rationalization of section 43CA, section 50C and section 56. At present, while taxing income from capital gains (section 50C), business profits (section 43CA) and other sources (section arising out of transactions in immovable property, the sale consideration or stamp duty value, whichever is higher is adopted. It has been pointed out that this variation can occur in respect of similar properties in the same area because of a variety of factors, including shape of the plot or location. In order to minimize hardship in case of genuine transactions in the real estate sector, it is proposed to provide that no adjustments shall be made in a case where the variation between stamp duty value and the sale consideration is not more than five percent of the sale consideration. These amendments will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years.[Clause 14, 19 & 21] <br>
21.	Tax neutral transfers : Section 47 provides for certain tax neutral transfers. Section 56 also excludes income arising out of certain tax neutral transfers from its ambit. However, the transfers referred to in clause (iv) and clause (v) of section 47 have not been excluded from the scope of section 56. In order to further facilitate the transaction of money or property between a wholly owned subsidiary company and its holding company, it is proposed to amend the section 56 so as to exclude such transfer from its scope. This amendment will take effect, from 1st April, 2018 and shall accordingly, apply in relation to the transaction made on or after 1st April, 2018. [Clause 21]. <br>
22.	Rationalization of the provisions of section 54EC : Section 54EC of the Act provides that capital gain, arising from the transfer of a long-term capital asset, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, shall not be charged to tax subject to certain conditions specified in the said section. The section also provides that “long-term specified asset” for making any investment under the section on or after the 1st day of April, 2007 means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India or by the Rural Electrification Corporation Limited; or any other bond notified by the Central Government in this behalf. In order to rationalise the provisions of section 54EC of the Act and to restrict the scope of the section only to capital gains arising from long-term capital assets, being land or building or both and to make available funds at the disposal of eligible bond issuing company for more than three years, it is proposed to amend the section 54EC so as to provide that capital gain arising from the transfer of a long-term capital asset, being land or building or both, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, the capital gain shall not be charged to tax subject to certain conditions specified in this section. It is also proposed to provide that long-term specified asset, for making any investment under the section on or after the 1st day of April, 2018, shall mean any bond, redeemable after five years and issued on or after 1st day of April, 2018 by the National Highways Authority of India or by the Rural Electrification Corporation Limited or any other bond notified by the Central Government in this behalf. This amendment will take effect, from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-20 and subsequent assessment years. [Clause 20] <br>
23.	Relief from liability of Minimum Alternate Tax (MAT): Section 115JB of the Act, provides for levy of a minimum alternate tax (MAT) on the “book profits” of a company. In computing the book profit , it provides, inter alia, for a deduction in respect of the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Consequently, where the loss brought forward or unabsorbed depreciation is Nil, no deduction is allowed. This non-deduction is a barrier to rehabilitating companies seeking insolvency resolution. In view of the above, it is proposed to amend section 115JB to provide that the aggregate amount of unabsorbed depreciation and loss brought forward (excluding unabsorbed depreciation) shall be allowed to be reduced from the book profit, if a company’s application for corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 has been admitted by the Adjudicating Authority. Consequently, a company whose application has been admitted would henceforth be entitled to reduce the loss brought forward (excluding unabsorbed depreciation) and unabsorbed depreciation for the purposes of computing book profit under section 115JB. This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years. A clarificatory amendment is also proposed in section 115JB of the Act to provide that the provisions of section 115JB of the Act shall not be applicable and shall be deemed never to have been applicable to an assessee, being a foreign company, if- its total income comprises solely of profits and gains from business referred to in section 44B or section 44BB or section 44BBA or section 44BBB and such income has been offered to tax at the rates specified in the said sections. This amendment will take effect, retrospectively from 1st April, 2001 and will, accordingly, apply in relation to the assessment year 2001-02 and subsequent assessment years. <br>
24.	Benefit of carry forward and set off of losses : Section 79 of Act provides that carry forward and set off of losses in a closely held company shall be allowed only if there is a continuity in the beneficial owner of the shares carrying not less than 51 percent. of the voting power, on the last day of the year or years in which the loss was incurred. In general, the case of a company seeking insolvency resolution under Insolvency and Bankruptcy Code, 2016, involves change in the beneficial owners of shares beyond the permissible limit under section 79. This acts as a hurdle for restructuring and rehabilitation of such companies. In order to address this problem, it is proposed to relax the rigors of section 79 in case of such companies, whose resolution plan has been approved under the Insolvency and Bankruptcy Code, 2016, after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner. This amendment will take effect from 1st April, 2018 and will, accordingly, apply in relation to assessment year 2018-19 and subsequent assessment years. It is also proposed to amend section 140 of the Act so as to provide that during the resolution process under the Insolvency and Bankruptcy Code, 2016, the return shall be verified by an insolvency professional appointed by the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016. This amendment will take effect from 1st April, 2018 and will, accordingly apply to return filed on or after the said date. <br>
25.	Rationalisation of the provisions of section 115BBE Section 115BBE provides for tax on income referred to in section 68 or section 69 or section 69A or section 69B or section 69C or section 69D at a higher rate of sixty percent. Sub-section (2) of said section provides that no deduction in respect of any expenditure or allowance or set-off of any loss shall be allowed to the assessee under any provision of the Act in computing his income referred to in clause (a) of sub-section (1). In order to rationalize the provisions of section 115BBE, it is proposed to amend the said sub-section (2) so as to also include income referred to in clause (b) of sub-section (1). This amendment will take effect retrospectively from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years. [Clause 34]. <br>
26.	Tax deduction at source on 7.75% GOI Savings (Taxable) Bonds, 2018 : Government of India introduced 8% Savings (Taxable) Bonds, 2003 in 2003. Under the existing law, the interest received by the investor is taxable. Further the payer is liable to deduct tax at source under section 193 of the Act at the time of payment or credit of such interest in excess of rupees ten thousand to a resident. Government has now decided to discontinue the existing 8% Savings (Taxable) Bonds, 2003 with a new 7.75% GOI Savings (Taxable) Bonds, 2018. The interest received under the new bonds will continue to be taxed as in the case of the earlier once. The provisions of section 193 are proposed to be amended to allow for deduction of tax at source at the time of making payment of interest on such bonds to residents. However, no TDS will be deducted if the amount of interest is less than or equal to ten thousand rupees during the financial year. This amendment will take effect from 1st April, 2018. [Clause 46] <br>
27.	 Permanent Account Number Section 139A inter-alia provides that every person specified therein and who has not been allotted a permanent account number shall apply to the Assessing Officer for allotment of a Permanent Account Number (PAN). In order to use PAN as Unique Entity Number (UEN) for non-individual entities, it is proposed that every person, not being an individual, which enters into a financial transaction of an amount aggregating to two lakh and fifty thousand rupees or more in a financial year shall be required to apply to the Assessing Officer for allotment of PAN. In order to link the financial transactions with the natural persons, it is also proposed that the managing director, director, partner, trustee, author, founder, karta, chief executive officer, principal officer or office bearer or any person competent to act on behalf of such entities shall also apply to the Assessing Officer for allotment of PAN. This amendment will take effect from lst April, 2018. <br>
28.	Laws Applicable for A.Y 2018-19, amended by Finance Act, 2017. (Please refer Circular 2 of 2018. <br>
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THANK YOU <br>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com5tag:blogger.com,1999:blog-7581033258468973440.post-2967756921919962352018-02-02T02:13:00.003-08:002018-02-02T02:13:53.067-08:00Blog # 20. S.53A of the Transfer of Property Act, 1882 and Related Laws<div dir="ltr" style="text-align: left;" trbidi="on">
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<li style="text-align: justify;"><strong>Section 53A of the Transfer of Property Act. 1882 is as under</strong>:-</li>
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“53A. Part performance. – Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,</div>
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and the transferee has, in part performance of the contract, taken possession of the property or any pat thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract,</div>
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and the transferee has performed or is willing to perform his part of the contract,</div>
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then, notwithstanding that [***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:</div>
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Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.</div>
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<li style="text-align: justify;"><em>The words ‘the contract, though required to be registered, has not been registered or’ have been omitted by <u>section 10</u> of the Registration and other Related Laws (Amendment) Act, 2001 (w.e.f. 24 September 2001).</em></li>
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<li style="text-align: justify;"><strong>Section 17 (1-A) which was inserted in the Registration Act, 1908 under the Registration and Other Related Laws (Amendment) Act 2001 (w.e.f. 24 September 2001) provides as under</strong>:-</li>
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“Section 17 (1-A): The documents containing contracts to transfer for consideration, any immovable property for the purpose of Section 53-A of the Transfer of Property Act, 1882, (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001 and if such documents are not registered on or after such commencement then, they shall have no effect for the purposes of the said Section 53-A.”</div>
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<li style="text-align: justify;"><strong>Section 49 of the Registration Act, 1908 as amended by Registration and Other Related Laws (Amendment) Act 2001 (w.e.f. 24 September 2001) provides as under</strong>:-</li>
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“<strong>49. Effect of non-registration of documents required to be registered</strong>.- No document required by Section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882) to be registered shall-</div>
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<li style="text-align: justify;">affect any immovable property comprised therein, or</li>
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<li style="text-align: justify;">confer any power to adopt, or</li>
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<li style="text-align: justify;">be received as evidence of any transaction, affecting such property or conferring such power, unless it has been registered:</li>
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Provided that an unregistered document affecting immoveable property and</div>
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required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1977 (1 of 1877), [***] or as evidence of any collateral transaction not required to be effected by registered instrument.</div>
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<li style="text-align: justify;"><em>The words ‘or as evidence of part performance of a contract for the purposes section 53-A of the Transfer of Property Act, 1882,’ omitted by <u>section 6</u> of the Registration and other Related Laws (Amendment) Act, 2001.</em></li>
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<li style="text-align: justify;"><strong>Section 12 of the Registration and other Related Laws (Amendment) Act, 2001 provides as under:-</strong></li>
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“<strong>12. Saving</strong>.- Notwithstanding anything contained in section 6 and 10, any-</div>
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<li style="text-align: justify;">right of transferor or any person claiming under him debarred under section 53A of the Transfer of Property Act, 1882 (4 of 1882) immediately before the commencement of this Act shall remain so debarred as if section 10 had not come into force in respect of such right; and</li>
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<li style="text-align: justify;">unregistered document relating to the right referred to in clause (a) may be received as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882 (4 of 1882) as if section 6 had not come into force in respect of such document.”</li>
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<div style="text-align: justify;">
2</div>
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<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="5">
<li style="text-align: justify;"><strong>Section 2(47) (as amended w.e.f. 1 April 1985) of the Income Tax Act, 1961 is as under:-</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
“transfer”, in relation to a capital asset, includes,</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">the sale, exchange or relinquishment of the asset; or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">the extinguishment of any rights therein; or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">the compulsory acquisition thereof under any law; or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment; or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(iva) the maturity or redemption of a zero coupon bond; or</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><em>(inserted w.e.f. 1 April 1988) </em>any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1982); or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><em>(inserted w.e.f. 1 April 1988) </em>any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
enabling enjoyment of, any immoveable property.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<em>Explanation 1</em>: For the purposes of sub-clauses (v) and (vi), ‘immoveable property’ shall have the same meaning as in clause (d) of section 269UA.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<em>Explanation 2</em>:<em> (Inserted Finance Act, 2012 w.e.f. 1 April 1962) </em>For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of any agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterized as being effected or dependent upon or flowing from the transfer or a share or shares of a company registered or incorporated outside India.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="6">
<li style="text-align: justify;"><strong>Section 269UA (d) of the Income Tax Act, 1961 is as under:-</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
“immovable property” means –</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">any land or any building or part of a building and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
3</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<em>Explanation- </em>For the purposes of this sub-clause, “land , building, part of a building, machinery, plant, furniture, fittings and other things” include any rights therein;</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><strong>Section 50C of the Income Tax Act, 1961 as amended by the Finance (No.2) Act, 2009, w.e.f. 1</strong><strong>st</strong><strong> October, 2009 is as under</strong>:-</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>Special provision for full value of consideration in certain case.</strong></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
50C. (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both is less than the value adopted or assessed or assessable by any authority of a State Government</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(2) Without prejudice to the provisions of sub-section (1), where-</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section</li>
</ul>
<div style="text-align: justify;">
(1) exceeds the fair market value of the property as on the date of transfer;</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
the High Court,</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-section (2), (3),</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(4), (5) and (6) of section 16A, clause (i) of sub-section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<em>Explanation 1- </em>For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<em>Explanation 2- </em>For the purposes of this section, the expression “assessable” means the price which the stamp valuation authority would have, notwithstanding</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
4</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="8">
<li style="text-align: justify;"><strong>The essential conditions required to be fulfilled for claiming protection of Section 53A of the Transfer of Property Act are as under: [Rambhau Namdeo Gajrav Narayan Bapuji Dhotra (2004) 8 Supreme Court Cases 614]</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><strong>There must be a contract to transfer for consideration any immovable property</strong></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Section 53A applies to leases and agreement to lease [Maneklal Mansukhbhai V. Hormusji Jamshedji Ginwalla & Sons AIR 1950 SC1] where in an action to eject a lessee on the ground that he had no registered deed of lease executed in his favour the defendant lessee takes the plea of part performance and proves that there was a written and signed contract of lease in his favour and that he had taken possession in accordance with the terms of the agreement and had built a factory on the land and also that he was paying rent to the plaintiffs in accordance with that agreement the defendant is entitled to retain possession in spite of an absence of the registered deed.]. Agreement to lease may be evidenced by correspondence.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Section 53A applies to mortgages with possession.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">If the agreement is void under any law, section 53A will not protect possession. The protection of part performance cannot be availed in respect of a transaction which is null and void. (CIT v. Vithalbhai P. Patel (1999) 236 ITR 1001). Sale ab initio null and void as per order of Collector in view of Section 4 of Gujarat Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972. Oorder of Collector was not challenged. No transaction of sale in eye of law. Sale not liable to tax on capital gains.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">In case of a agreement conditional on compliance with statute, there is an implied term in the contract that transferor will apply for requisite</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
5</div>
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<div style="text-align: justify;">
permission and the court will direct him to do so. (Nathulal V. Phoolchand AIR 1970 Supreme Court 546)</div>
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<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><strong>The contract must be in writing, signed by the transferor, or by someone on his behalf.</strong></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">It is not necessary that there should be a formal agreement.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><strong>The writing must be in such words from which the terms necessary to construe the transfer can be ascertained.</strong></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><strong>The transferee must in part performance of the contract take possession of the property, or of any part thereof,</strong></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">It is not necessary that the contract must contain a direct covenant regarding transfer of possession.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">It is only necessary that possession should have been taken (need not be given) in part performance of the contract.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Where only temporary possession was given for carrying out construction, it was held that the exclusive possession in the legal sense remained with the Transferor and the Transferee was not entitled to protect his possession under Section 53 A of the TP Act.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">It is not necessary that the transferee must be in possession of the entire property.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">It is enough if the transferee continues in possession or takes possession even of a part of the property.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;"><strong>The transferee must have done some act in furtherance of the contract.</strong></li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">There should be real nexus between the contract and the acts pleaded as in part performance.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Continued possession of a tenant in the property after entering into the sale agreement would not by itself amount to a part-performance. There must be some act attributable to the contract for sale and not lease.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
6</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">When a person already in possession of the property in some other capacity enters into a contract to purchase the property, to confer the benefit of Section 53A of TP Act, there must be some act consistent with the contract alleged and such as cannot be referred to the preceding title. [AIR 2003 SC 3542].</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">A tenant who continued to be in possession as tenant, cannot take benefit of Section 53A, though subsequently an agreement to sale is entered between the parties.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Where the person puts up construction after being put in possession under the contract of sale or takes electricity connection, he can gain protection of Section 53A of the TP Act.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(<strong>vi)</strong> <strong>The transferee must have performed or be willing to perform his part of the contract.</strong></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">The acts claimed to be in part performance must be unequivocally referable to the pre-existing contract.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Section 53A confers no rights on a party who was not willing to perform his part of the contract.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Part performance as statutory right is conferred upon the transferee on condition that the transferee continues to be willing to perform his part of the contract.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>(vii)The document containing contract for transfer of immoveable property, if executed on or after 24</strong><strong>th</strong><strong> September, 2001 should be registered.</strong></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">Part performance applies even if specific performance is not otherwise permissible.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The protection under section 53A can be availed of only under a registered agreement. Sukhminder Kaur V. Amarjit Singh AIR 2012 Punjab & Haryana 97 Section 53-A of the T.P. Act before amendment recognized part performance of the contract even though the contract used to be unregistered and the transferee’s rights to remain in possession was protected. By the Amendment Act No.48 of</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
2001, the words “the contract though required to be registered, has not been registered, or” have been omitted from the provision. The effect of the amendment is that now if any person takes possession in pursuance to a contract which is required to be registered but has not been registered, the transferee has no right to remain in possession of the property. To give effect to this principle, S. 17 (1A) has</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
7</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
accordingly been inserted in the Act of 1908 which mandates that such contract is now required to be registered. If such a contract entered into after the amendment is not registered then as per S. 49 of the Act of 1908, the same can neither affect any immovable property comprised therein nor will it be received as evidence of any transaction affecting such property or conferring such power.</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">A person seeking protection of his possession on the basis of unregistered agreement is a different situation and where a person seeks possession of the property by way of specific performance of the agreement which is unregistered is a different eventuality. In the latter class of cases, the agreement to sell is not required to be registered as it does not fail within the ambit of either S.53-A of the T.P. Act or S. 17(1A) of the Act of 1908 and does not require any registration. Such agreement to sell falls under the mischief of S.17(2)(v) of the Act of 1908. It itself does not create, declare, assign, limit or extinguish any right, title or interest in the property. Rather it creates a right to obtain another document which will, when executed, create, declare, assign, limit or extinguish. It is the sale deed which when executed will create right, title and interest in the property. Hence, an agreement to sell is not required to be registered and the same is receivable in evidence in a suit for specific performance.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">A transferee in-possession satisfying all conditions of the section 53A is protected by the Court, whether he comes as a plaintiff or as a defendant. The court cannot tell the transferee-in-possession if he comes as a plaintiff – ‘go back, use your physical strength and muscle power to resist and repel the attack of the transferor and drive him to come to the court as a plaintiff and then if you are arrayed as a defendant, the court will protect you.” Chetak Construction Ltd. v. Om Prakash AIR 2003 M.P. 145.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="9">
<li style="text-align: justify;"><strong>Decisions on Section 53A of T.P. Act, 1882 & Section 2(47)(v) of I.T. Act, 1961:-</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<ol>
<li style="text-align: justify;"><strong>Chaturbhuj Dwarkadas Kapadia v. Commissioner of Income Tax (2003 260 I.T.R 491(Bombay).</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">08.1994Agreement for Sale of shares in immoveable property with right to the Builders to develop the property in accordance with Building Control Regulations under which Assessee agreed to execute a limited power authorizing the Builder to deal with the property and obtain permissions and approvals from Urban Ceiling Authority MCGM and CRZ Authorities. The Agreement provided that on the Builder obtaining all necessary permissions and approvals and upon receipt of the no objection</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
8</div>
<div style="text-align: justify;">
<br /></div>
<table style="text-align: justify;">
<tbody>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">certificate under Chapter XXC of the Income</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">Tax Act, the Assessee shall grant to the Builder</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">an irrevocable licence to enter upon Assessee’s</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">share of the property, after which the Builder</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">was entitled to demolish the buildings on the</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">subject to the settling the claims of the tenants.</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">The Assessee was entitled to receive</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">proportionate rent and liable to pay outgoings</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">till payment of last instalment. Agreement</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">provided for completion of sale by the</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">execution of the conveyance.</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336"></td>
</tr>
<tr>
<td width="31">2</td>
<td width="49">31st</td>
<td width="84">March,</td>
<td width="336">The Builder paid the entire sale price except</td>
</tr>
<tr>
<td width="31"></td>
<td width="49">1996</td>
<td width="84"></td>
<td width="336">small amount.</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336"></td>
</tr>
<tr>
<td width="31">3</td>
<td width="49">15th</td>
<td width="84">November,</td>
<td width="336">MCGM issued Commencement Certificate upto</td>
</tr>
<tr>
<td width="31"></td>
<td width="49">1996</td>
<td width="84"></td>
<td width="336">plinth level.</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336"></td>
</tr>
<tr>
<td width="31">4</td>
<td width="49">12th</td>
<td width="84">March,</td>
<td width="336">Power of Attorney executed by the Assessee in</td>
</tr>
<tr>
<td width="31"></td>
<td width="49">1999</td>
<td width="84"></td>
<td width="336">favour of the Builder, Assessee paid tax on</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">capital gains in Assessment Year 1999-2000</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">but assessing officer held that it was payable in</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336">A.Y. 1996-97</td>
</tr>
<tr>
<td width="31"></td>
<td width="49"></td>
<td width="84"></td>
<td width="336"></td>
</tr>
</tbody>
</table>
<div style="text-align: justify;">
Held arrangements confirming privileges of ownership without transfer of title could fall under section 2(47(v). Section 2(47)(v) was introduced in the Act from the assessment year 1988-89 because prior thereto, in most cases, it was argued on behalf of the assesse that no transfer took place till execution of the conveyance. Consequently, the assessees used to enter into agreements for developing properties with the builders and under the arrangement with the builders, they used to confer privileges of ownership without executing conveyance and to plug that loophole, section 2(47)(v) came to be introduced in the Act (Page 499).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Capital gains is taxable in the year in which such transactions are entered into even if the transfer of immoveable property is not effective or complete under the general law (Page 500).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In such cases of development agreements, one cannot go by substantial performance of a contract. In such cases, the year of chargeability is the year in which the contract is executed. This is</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
9</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
in view of section 2(47)(v) of the Act (Page 500).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
In this case, the agreement is a development agreement and in our view, the test to be applied to decide the year of chargeability is the year in which the transaction was entered into. We have taken this view for the reason that the development agreement does not transfer the interest in the property to the developer in general law and, therefore, section 2(47)(v) has been enacted and in such cases, even entering into such a contract could amount to transfer from the date of the agreement itself (Page 500-501).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
If on a bare reading of a contract in its entirely, an Assessing Officer comes to the conclusion that in the guise of the agreement for sale, a development agreement is contemplated, under which the developer applies for permission from various authorities, either under power of attorney or otherwise and in the name of the assesse, then the Assessing Officer is entitled to take the date of the contract as the date of transfer in view of section 2(47)(v) (Page 501).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
We do not find merit in the argument of the assesse that the court should go only by the date of actual possession and that in this particular case, the court should go by the date on which irrevocable licence was given. If the contract, read as a whole, indicates passing of or transferring of complete control over the property in favour of the developer, then the date of the contract would be relevant to decide the year of chargeability (Page 501).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="2">
<li style="text-align: justify;"><strong>Suraj Lamp v. State of Haryana [2012] 340 ITR 1 (SC)</strong>:</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Immovable property can be legally and lawfully transferred or conveyed only by a registered deed of conveyance. Transactions of the nature of general power of attorney sales or sale agreements/general power of attorney/will transfers do not convey title and do not amount to transfer, nor can they be recognized as valid modes of transfer of immovable property. They cannot be recognized as deeds of title, except to the limited extent of Section 53 A of the Transfer of Property Act, 1882.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="3">
<li style="text-align: justify;"><strong> D. Kasturi v. CIT and Another [2010] 323 ITR 40 (Mad)</strong>:</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
10</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The subsequent act of the assessee in executing the power of attorney and the sale deeds executed by the power holder on the basis of such power of attorney would not in any way alter the status of the parties to the agreement for applicability of section 53A of the Transfer of Property Act,1882. The single judge rightly held that the assesse could no longer assert possessory rights against the firm to which possession was already given pursuant to the agreement and that too after receiving the full sale consideration.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="4">
<li style="text-align: justify;"><strong>Jasbir Singh Sarkaria, In re [2007] 294 ITR (AAR)</strong>:</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The applicant and other co-owner of certain agricultural land entered into a collaboration agreement with Santur Developers under which the developers had to obtain a letter of intent from the concerned Government Department for sanction and development of the land for building at its own cost. Under the agreement, the developers would have 84 percent share of the entire built up area and the co-owners 16 percent. The consideration for the agreement was that portion of the built up area which was to be handed over to the owners free of cost. Under clause 18 the ownership was to remain exclusively with the owners till it vested with the parties according to their respective shares on the completion of the project. The steps contemplated in the agreement were : earnest monies of Rs. One crore was to be paid at the time of entering into the agreement; “letter of intent”, viz., the licence to be granted by the Director of Town Planning to develop the land, was to be obtained not later than March 8, 2006, and in case of failure the agreement was to stand terminated; on fulfilment of the requirements of the letter of intent the owners were to execute a power of attorney in favour of the developers authorizing them to book and sell dwelling units and collect money for the same, but sale deed would be executed only after the owners received their share of the constructed area (clause 15); the owners were to grant power to the developers to enable them to transfer rights. On September 15, 2005, a supplementary agreement was entered into the salient feature of which were : apart from the sum of Rs.2 crores paid under the collaboration agreement, the balance of Rs.40 crores was payable by the developers in six instalments starting from March 8, 2006, the last instalment being payable before June 8, 2007; if the payment was not made within the maximum period of extension, the owners were at liberty to terminate the collaboration agreement after giving notice; on receipt of all payments the owners had to grant power to the developers enabling them to transfer and execute deeds in respect of the developers’ share. On these facts the applicant sought the advance ruling of the Authority regarding the year of chargeability to tax of the capital gains arising from the transaction. On the facts stated, the Authority ruled:</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
11</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
That under clause 15 it was stipulated that on fulfillment of the requirements laid down in the letter of intent, which was a provisional licence, the owner should execute an irrevocable power of attorney in favour of the developers or their nominees, inter alia, authorizing them to book and sell the dwelling units falling to their share. Thus, it was only after the deposit of the requisite charges with the Urban Development Authorities in accordance with the conditions stipulated in the provisional licence and the developers taking necessary steps pursuant to the provisional licence that the general power of attorney would be executed. Therefore, the crucial event or step that amounted to a “transaction involving the allowing of possession to be taken” within the meaning of section 2(47)(v) of the Income-tax Act, 1961, was the execution of the irrevocable general power of attorney in accordance with clause 15 of the collaboration agreement. Such general power of attorney was executed in favour of the developers on May 8, 2006, i.e. during the financial year subsequent to the year of agreement. The general power of attorney unequivocally granted to the developers a bundle of possessory rights : the acts of management, control and supervision of property being explicitly mentioned. The general power of attorney was not a mere licence to enter the land for doing some preliminary acts in relation to the development work; the power of control of the land, which was an incidence of possession, was conferred to the developers under the general power of attorney. The developers, armed with the general power of attorney, could not be regarded merely as a licensee or an agent; their possession could not be characterized as precarious or of tentative nature. The owners’ limited right to enter the land and oversee the development work was not incompatible with the developers’ right of control over the land which they derived from the general power of attorney. Therefore, the irrevocable power of attorney executed by the owners in favour of the developers had to be regarded as a transaction in the eye of law which allowed possession to be taken in part performance of the contract of transfer. The transfer within the meaning of section 2(47)(v) took place during the financial year 2006-07 corresponding to the assessment year 2007-08 and the entire capital gains including that attributable to the instalment amount remaining unpaid by March 31, 2007, arose during the financial year 2006-07 (assessment year 2007-08).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The actual receipt of the entire sale consideration during the year of “transfer” is not necessary for the purpose of capital gains.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
ANURAG JAIN, In re [2005] 277 ITR 1 (AAR) and T.V. Sundaram Iyengar And Sons Ltd. Versus CIT [1959] 37 ITR 26 (Mad) relied on.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The purpose of introducing clause (v) in conjunction with clause (vi) in section 2(47) of the Income-tax Act, 1961, defining “transfer” was to widen the net of</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
12</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
taxation of capital gains so as include transactions that closely resembled transfers but were not treated as such under the general law. Avoidance or postponement of tax on capital gains by adopting devices such as the enjoyment of property in pursuance of revocable power of attorney or part performance of a contract of sale was sought to be arrested by introducing the two clauses, clauses (v) and (vi), in section 2(47).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
For clause (v) of section 32(47) to be applicable there must be a “transaction” under which the possession of immovable property is allowed to be taken or allowed to be retained. The Legislature advisedly referred to “any transaction” with a view to emphasize that it is not the factum of entering into agreement or formation of contract that matters, but it is the distinct transaction that gives rise to the event of allowing the contractee to enter into possession that matters. That transaction is identifiable by the terms of the agreement itself and it takes place within the framework of the agreement. What is contemplated by section 2(47)(v) is a transaction which has a direct and immediate bearing on allowing possession to be taken in part performance of the contract of transfer. It is at that point of time that the deemed transfer takes place. Though entering into the agreement/contract might be a transaction in a broad sense, yet when the agreement envisages an event or an act on the happening or doing of which alone possession is allowed to be taken in part performance of the contract, the transaction of the nature contemplated by clause (v) cannot be said to have occurred before that date.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
“Possession” contemplated by clause (v) of section 2(47) need not necessarily be sole and exclusive possession. So long as the transferee is, by virtue of the possession given, enabled to exercise general control over the property so as to make use of it for the intended purpose, the mere fact that the owner has also the right to enter the property to oversee the development work or to ensure performance of the terms of the agreement does not introduce incompatibility. The concurrent purpose of the owner who can exercise possessory rights to a limited extent and for a limited purpose and that of the buyer/developer who has a general control and custody of the land can very well be reconciled. Clause (v) will have its full play even in such a situation. There is no warrant to postpone the operation of clause (v) and the resultant accrual of capital gains to a point of time when the concurrent possession will become exclusive possession of the developer/transferee after he pays full consideration. Possession given to the developer need not ripen into exclusive possession on payment of the instalments in entirely for the purpose of determining the date of transfer. It is enough if the transferee has, by virtue of that transaction, a right to enter upon and exercise acts of possession effectively pursuant to the covenants in the contract. That amounts to legal possession.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
13</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="5">
<li style="text-align: justify;"><strong>CIT v. G. Saroja [2008] 301 ITR 124 (Mad)</strong>:</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
It was not disputed that there was no written agreement between the assesse and the builder. A written agreement was a basic requirement for invoking the provision of section 53 A of the Transfer of Property Act, 1882. There was no sale Agreement and no sale consideration was received during the relevant period. The Revenue was also unable to prove that the assessee had put the developer in possession of the property by receiving the consideration partly or in full. There was no sale agreement between the assesse and the builder and the assesse had not received the sale consideration. Hence, the Tribunal was right in holding that there was no transfer of property, as contemplated under section 2(47)(v) of the Act.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="6">
<li style="text-align: justify;"><strong>CIT v. K. Jeelani Basha 256 ITR 282 (Mad)</strong>:</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Once possession, even of a part of the property was handed over to the transferee, for the purpose of section 2 (47)(v) of the Income –tax Act,1961, read with section 45, the transfer was complete and therefore the Tribunal was justified in calculating the capital gains on the basis of the consideration received in that particular year <u>for</u> <u>that part of the property which was parted with</u>.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="7">
<li style="text-align: justify;"><strong> Durdana Khatoon v. Assistant CIT 024 [ITR (Trib)] 0055</strong>:</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
“Possession” as contemplated in clause (v) of section 2(47) of the Income –tax Act,1961, need not necessarily be sole and exclusive possession, so long as the transferee is enabled to exercise general control over the property and to make use of it for the intended purpose. In the case of an agreement for development of property, the mere fact that the assesse, as owner, has also the right to enter the property to oversee the development work or to ensure performance of the terms of the agreement, does not restrict the rights of the developer or introduce any incompatibility. Even when there is concurrent possession of both parties, clause (v) has its full role to play. There is no warrant to postpone the operation of clause (v) to that point of time when the concurrent possession would become exclusive possession of the developer.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
What is meant in clause (v) is the “transfer” which involves allowing possession so as to allow developer to undertake development work on the site. It is a general control over the property in part performance of the contract. The date of that transaction determines the date of transfer. It is enough if the transfer has, by virtue of the transaction, a right to enter upon and exercise the act of possession effectively</div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">such an act amounts to legal possession over the property.</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
14</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="8">
<li style="text-align: justify;"><strong>Lajwanti Sial v. Commissioner of Income-Tax 1957 32 ITR 526 (Bombay)</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
The Assessee, who owned coal mines, formed a private company and in consideration of the company paying him a royalty of six annas per ton of coal raised, allowed the use and occupation of the running collieries to the company. HELD that as all that was done was to give the management of a capital asset, there was no transfer, sale or exchange of a capital asset and no capital gain arose out of the transfer of the management of the coal mines.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="10">
<li style="text-align: justify;"><strong>Under the Maharashtra Stamp Act, 1958, stamp duty is required to be paid on the market value of the property in respect of following instruments:-</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="5">
<li style="text-align: justify;"><strong>Agreement or its records or memorandum of an agreement –</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
5(ga[i])if relating to giving authority or power to a promoter or a developer, by whatever name called for construction on, development of or sale or transfer (in any manner whatsoever) of, any immovable property;</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
5(ga[ii])if relating to the purchase of one or more units in any scheme or project by a person from a developer</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
5(g-d) if relating to transfer of tenancy of immovable property situate within the Municipal limits for the purpose of non-residential use of any nature whatsoever and if relating to transfer of tenancy of residential premises within Municipal limits having area of more than 300 square feet.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="16">
<li style="text-align: justify;"><strong>Certificate of Sale- </strong>granted to the purchaser of any property sold by public auction by Civil or Revenue Court or Collector or other Revenue Officer or any other Officer empowered by law to sell property by public auction.</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="25">
<li style="text-align: justify;"><strong>Conveyance </strong>–</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<table style="text-align: justify;">
<tbody>
<tr>
<td width="71">25(b)</td>
<td width="295">relating to immovable property;</td>
</tr>
<tr>
<td width="71">25(da)</td>
<td width="295">relating to amalgamation of companies;</td>
</tr>
</tbody>
</table>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
Article 25 - Agreement to sell an immovable property where possession of any immovable property is transferred or agreed to be transferred to the purchaser before the execution or at the time of execution or after the execution of such</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
15</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
agreement. (The words ‘without executing the conveyance in respect thereof’ deleted by Maharashtra Act 38 of 1994 (w.e.f.17-8-1994).</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="32">
<li style="text-align: justify;"><strong>Exchange of property</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="33">
<li style="text-align: justify;"><strong>Further charge </strong>– any instrument imposing further charge on mortgaged property when the original mortgage is with possession or if at the time of execution of the instrument of further charge, possession of the property is given.</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="34">
<li style="text-align: justify;"><strong>Gift</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="36">
<li style="text-align: justify;"><strong>Lease </strong>– including under-lease or sub-lease and any agreement to let or sub-let or any renewal of the lease or any writing on an application for a lease intended to signify that the application is granted or a decree or final order of any civil court in respect of the lease and hire purchase agreement as under:-</li>
</ol>
<div style="text-align: justify;">
<strong><br /> </strong></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">for a period not exceeding 5 years;</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">for a period exceeding 5 years , but not exceeding 10 years;</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">for a period exceeding 10 years, but not exceeding 29 years;</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">10% of the market value</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">25% of the market value</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ul>
<li style="text-align: justify;">50% of the market value</li>
</ul>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
(iv) for a period exceeding 29 - 90% of the market value</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
years or in perpetuity or for</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
any indefinite period;</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>36A. Leave and License Agreement - </strong>for a period exceeding 60 months – stamp duty as leviable on the ‘Lease’ under Article 36.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="40">
<li style="text-align: justify;"><strong>Mortgage Deed </strong>– when possession of the property or any part of the property comprised in such deed, is given by the mortgagor or agreed to be given. A mortgagor who gives to the mortgagee a power of attorney to collect rents or a lease of the property mortgaged or part thereof is deemed to give possession within the meaning of this article. Where any part of the amount sought to be secured is advanced or disbursed to the mortgagor without execution of a mortgage deed, an agreement to mortgage becomes chargeable as Mortgage Deed.</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
16</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="46">
<li style="text-align: justify;"><strong>Partition</strong></li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="47">
<li style="text-align: justify;"><strong>Partnership </strong>– where share contribution is brought in by way of property.</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>Dissolution of partnership or retirement of partner </strong>- where any property is taken as his share by a partner other than a partner who brought in that property as his share of contribution in the partnership.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>48(f)(i) Power of Attorney </strong>– when given for a consideration and authorizing sale of immovable property.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>48(f)(ii) </strong>Power of attorney authorizing sale or transfer of immovable property given without consideration or without showing any consideration to a person other than father, mother, brother, sister, wife, husband, daughter, grandson, grand-daughter or such other close relative.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<strong>48(g) </strong>Power of Attorney when given to a promoter or a developer by whatsoever name called for construction on, development of or sale or transfer (in any manner whatsoever) of any immovable property.</div>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="52">
<li style="text-align: justify;"><strong>Release – </strong>whereby a person renounces a claim upon another person or against any specified property (other than Release Deed of an ancestral property or part thereof executed by or in favour of brother or sister or son or daughter or son of predeceased son or daughter of predeceased son or father or mother or spouse of the renouncer or the legal heirs of the above relations.</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="55">
<li style="text-align: justify;"><strong>Settlement</strong>– other than settlement made for a religious or charitable</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="58">
<li style="text-align: justify;"><strong>Surrender of Lease </strong>– including an agreement for surrender of lease with</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="60">
<li style="text-align: justify;"><strong>Transfer of Lease - </strong>by way of assignment.</li>
</ol>
<div style="text-align: justify;">
<br /></div>
<div style="text-align: justify;">
<br /></div>
<ol start="61">
<li style="text-align: justify;"><strong>Trust – </strong>Declaration of Trust of concerning any property other than Trust made for a religious or charitable purpose.</li>
</ol>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com11tag:blogger.com,1999:blog-7581033258468973440.post-29262942296222645412017-11-20T03:41:00.000-08:002017-11-20T03:41:21.780-08:00Blog # 19. Request for Assessment Records from Assessing Officer<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Order Sheets:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">In the order sheet there is recording about notices issued
to assessee/ taxpayer or other concerned parties, communication to and between
assessee/ parties, details of hearings and other matters with which the
assessee / concerned party is directly concerned. Even a departmental
communication between two or more authorities, in connection with assessment,
penalty , appeal, revision , audit and any other proceedings against the
assessee/ concerned party are relevant to assessee. The order sheet is a
very vital part of assessment records/ or record of other proceedings and it is
also a very vital evidence concerning proceedings taken in relation to
assessment, penalty, appeals, revision, refunds, rectification etc. The
evidence in form of order sheet can be used by the A.O. as well as the assessee
in any proceedings up to the stage of CBDT and Supreme Court.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Circular of the Board:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">The circular of the Board dt. 28.06.1965 No. 17 (XL-36),
provides for inspection fees and fees for certified copies of assessment and
other records. This circular clears that the assessee or his A/R
are entitled to inspect as well as obtain certified copies of assessment
and other records records.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">The circular also states that normally request for
inspection or copies of assessment or other records must be complied with
within three days of their receipt. In case of urgency the same must be
complied on the same day on payment of double of normal fees as provided in the
circular.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Relevant provisions of the Indian
Evidence Act, 1872:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Section 35. Relevancy of entry in public record, made in
performance of duty - An entry in any public or other official book, register
or record, stating a fact in issue or relevant fact, and made by a public
servant in the discharge of his official duty, or by any other person in
performance of a duty specially enjoined by the law of the country in which
such book, register or record is kept, is itself a relevant fact.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;"> Section 74. Public documents<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">The following documents are Public documents-<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">(i) Documents forming the acts, or records of the acts<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">(a) Of the sovereign authority,<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">(ii) Of Official bodies and the Tribunals, and<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">(iii) Of public officers, legislative, judicial and
executive, of any part of India or of the Commonwealth, or of a foreign
country.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">1. Public records kept in any State of private
documents.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Section 75. Private documents<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">All other documents are private.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Section 76. Certified copies of Public Documents<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;"> Every public officer having the custody of a public
document, which any person has a right to inspect, shall give that person on
demand a copy of it on payment of the legal fees therefor together with a
certificate written at the foot of such copy that it is a true copy of such
document or part thereof, as the case may be, and such certificate shall be
dated and subscribed by such officers with his name and his official title, and
shall be sealed whenever such officer is authorized by law to make use of a
seal, and such copies so certified shall be called certified copies.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Explanation - Any officer who, by the ordinary course of
official duty, is authorized to deliver such copies, shall be deemed to have
the custody of such documents or parts of the public documents of which they
purport to be copies.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Application in relation to order sheets under tax laws:<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">In view of the above provisions of Indian Evidence Act
the order sheets are relevant evidence in connection with any assessment,
penalty, appeal, revision, rectification or any other proceedings taken against
assessee or concerned parties.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">The order sheets are public documents within the meaning of
S.74 of the Evidence Act as reproduced above.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Inspection and copy:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Inspection of order sheets can be made by assessee or his
A/R. Therefore as per Evidence Act, certified copies need to be provided by the
A.O. as and when a request is made by assessee. Assessee as a party to
proceedings have every right to inspect them and obtain copy of the same duly
certified by the concerned officer as true copy of original record.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Rejections of application on flimsy
grounds:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Recently it has been noticed that applications for certified
copy are being rejected on flimsy grounds. For example, an application was
rejected for want of payment of fees. This is wrong because the concerned
officer has to give intimation for the fees payable and also provide a challan
to enable the assessee to pay the fees.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">In one case an application filed with paid challan for fees
paid on estimated basis in view of urgency, the officer did not respond to the
application for a considerable period. When another application ( as a
reminder) was made, it was rejected for want of fees. When fact of fees already
paid was brought to his notice he rejected application stating reason on lines
that 'order sheets are made for interdepartmental purposes and cannot be
provided to assessee'.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Thus we find that there is no consistency in the stand taken
by the officer. When at first instance he rejected application for want of
payment of fees, (though he did not notify the amount of fees and provided challan),
his reason of rejection clearly implied that on payment of fees certified
copies shall be provided.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Rejection may be considered as
non-cooperation and harassment:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">In view of the above discussion about provisions of the
Evidence Act and also the circular of the Board it is clear that an
assessing officer must take immediate steps to notify fees payable and provide
relevant challan to the assessee. Inspection and certified copies should be
provided within three days from the furnishing of the evidence of payment
of fees. In case the assessee require them on urgent basis, then he should make
application on that basis and the A.O. should issue challan of double of normal
fees on the same day and the assessee must be provided certified copies on
the day on which evidence of payment of fees is provided. If the officer
fails in these, it will amount to failure to perform duties properly and also
will amount to disregard and disobeying instructions of the Board. Undoubtedly,
so far the assessee is concerned he will definitely feel a strong pinch of
non-cooperation as well as harassment by a public servant who acts as a master
of public. <o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Commitment to tax payers:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Instructions issued by the highest authority like concerned
Board (e.g. CBDT, CBEC, Board of Revenue) to authorities which are in
nature of commitments made by the Board or the Finance Ministry in Circulars or
through websites and public announcements or in any other manner, to the tax
payers in relation to compliance of procedural instructions for
convenience of tax payers, must be regarded as commitment to the public and
must be complied with the concerned officers. However, it is noticed that in
spite of clear instructions, many officers are found to defy them at many of
the occasion. In many of the cases the assesses have to chase their
applications and claim for refund if they want disposal. Otherwise their
matters may be kept pending for a long time, at least till the limitation
period, if any. We find several cases being heard and reheard but not disposed
off, the reasons are not made known to the assessee for keeping maters pending.
All these are not as per Boards Circulars and commitments made on the websites
and in advertisement in form of Citizen's Charter etc. <o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">Taxpayer service review and audit:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">Records and orders should be reviewed by senior officers. In
fact an audit about failure of officers and office staff in non compliance of
boards circular, policy decisions and binding judgments should be conducted by
a specially trained audit party to conduct and submit a report entitled
" AUDIT REPORT ABOUT COMPLIANCE OF COMMITMENT AND SERVICE TO TAX
PAYERS ".<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">The report on such matters should be furnished to concerned
Chief commissioner and the Board. Any officer who do not comply with the
instructions to authorities which are in nature of commitments made by the
Board or the Finance Ministry in Circulars or through websites and public
announcements or in any other manner to the tax payers in relation
to compliance of procedural instructions for convenience of tax payers,
must be charged for disobeying instructions and binding judgments,
disobedience, failure in conduct as public servant, and delinquency and immediate
suitable action against erring officers must be taken.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">The biggest advantage of a government servant is that his
job, promotions and increments are almost secured. Even some repeated
adverse remarks in his annual confidential reports makes hardly any substantial
impact on his carrier and growth. The officers and staff take
fullest advantage of the same. They are 'public servants', but they consider
themselves as master of public. If a complaint is made against them to their
senior officers or in grievance cell, they find more reasons to harass the
complainant. Experience shows that even a complaint against a peon or notice
server may attract strong wrath of the entire office, including the officer.
That is the reason that people prefer not to make complaint and are compelled
to pay bribes in nature of speed money or fees for co-operation. <o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<strong><span style="font-family: "verdana" , sans-serif;">High time to enforce public
accountability:</span></strong><span style="font-family: "verdana" , sans-serif;"><o:p></o:p></span></div>
<br />
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;">In view of recent substantial increase in salary of
government officers, it is high time to make them accountable to comply with
the commitments to the public. Higher salary should be paid with more
productivity and work efficiency and no corruption. But the situation is
opposite. As usual higher the salary higher will be demand of bribes making it
very difficult to get work done from public servants honestly.<o:p></o:p></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;"><br /></span></div>
<div style="background: white; text-align: justify;">
<span style="font-family: "verdana" , sans-serif;"><b>Alternative : File an RTI </b></span></div>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-81647559710638840072017-09-16T03:03:00.000-07:002017-09-16T03:04:49.445-07:00Blog # 18. Protective Assessment Under Income Tax Act, 1961<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
In the Income Tax Act, 1961 (the Act), there is provision to make only ‘regular assessment’. As per section 2(40) of the Act, ‘regular assessment’ means the assessment made under section 143(3) or section 144. Again as per section 2(8) of the Act, ‘assessment’ includes reassessment; therefore, assessment made under section 143(3)/144/147 is also a ‘regular assessment’. Protective assessment is said to those assessments which are made to ‘protect’ the interest of the revenue. Now the question is whether there is any provision of ‘protective assessment’ in the Act. The answer is that there is no such provision in the Act. Then how can an Assessing Officer (AO) make such assessment and how is it tenable in the law? The AO is not to execute the Act alone; he is required to execute the Income tax law in its entirety. Income tax law includes i) the Act, ii) the Income tax Rules, 1962, iii) the circulars issued by the CBDT or other competent authority, iv) the instructions issued by the CBDT or other competent authority and v) the judicial pronouncements.<br />
Income tax is a charge on income and not on any other thing. The person who earns the income or to whom the income accrues or arises is only to be assessed. When the AO isn't certain of the person whom the income belongs to, by the time it becomes certain, the assessment may get barred by limitation. In these circumstances the AO may proceed to complete the assessment on protective basis. In a leading English case, it was held that the AO cannot be expected to be a silent spectator of the uncertainty as the inherent power given to him in the law is to protect the interest of the revenue which will be frustrated if he fails to act within the time of limitation. This principle was reaffirmed by the judiciary in India.<br />
In England the leading case on the ‘Protective Assessment’ is Attorney-General v. Aramayo & Others (1925) 9 Tax Case 445 (F). As a precautionary measure before the time limit expired, the Special Commissioners made an alternative assessment for 1917-18 on the company itself in the same amount as that previously made on the Local Board. This has been reaffirmed in Jagannath Hanumanbux v. ITO, <strong>(1957) 31 ITR 603 Cal</strong>, it was held that though there is no provision in the Act authorizing the levy of income-tax on a person other than ‘the assessee’, i.e., the person by whom the income-tax, etc. is payable, it is open to the income-tax authorities to make a ‘protective’ or ‘alternative’ assessment where, owing to litigation between the parties concerned in Civil Court or for other reasons, the person who is really liable to pay the tax cannot be finally determined by the income-tax authorities. There are various other case laws which recognize the protective assessment.<br />
The demand raised by a protective assessment cannot be recovered. It is required to be stayed by the AO. Similarly there cannot be any penalty on protective assessment. After recording the facts and circumstances of the case and the reason for making the assessment on protective basis in the assessment order, the AO may write that the demand that is attributable to the protective income is being stayed till substantive assessment is made.</div>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com4tag:blogger.com,1999:blog-7581033258468973440.post-73247776632838490512017-08-09T04:51:00.003-07:002017-08-09T04:51:53.146-07:00Insolvency Proffessional<div dir="ltr" style="text-align: left;" trbidi="on">
<strong style="text-align: justify;">Introduction</strong><br />
<div style="text-align: justify;">
<strong><br /></strong></div>
<div style="text-align: justify;">
<strong>1.</strong> There are different classes of professionals in India: Lawyers, Chartered Accountants, Company Secretaries, Cost and Works Accountant etc. etc. Each one of them is registered, regulated and monitored by their own professional body. However, with the passing of Insolvency and Bankruptcy Code, 2016, a new class of professionals has come into existence who will be called as 'Insolvency Professionals'.</div>
<div style="text-align: justify;">
To understand the registration, role, position and responsibilities of Insolvency Professionals, we should first understand the main objectives and processes under The Insolvency and Bankruptcy Code, 2016 (hereinafter referred as 'Code'). The Code is a landmark legislation which subsumes various legislations dealing with corporate and non-corporate (individuals and partnerships) insolvency<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn1" id="rfn1">1</a></sup>. The Code received Presidential Assent on 28 May 2016 and is drafted on the recommendations of Bankruptcy Reforms Law Committee. The code has three-fold objectives. Firstly, to create an institutional framework, consisting of Insolvency and Bankruptcy Board, Insolvency Professional Agencies, Insolvency Professionals, Information Utilities and Adjudicating Authorities. Secondly, to facilitate time bound insolvency process and liquidation. Thirdly, to improve ease of doing business in India and also to set up a better and faster debt recovery mechanism in India<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn2" id="rfn2">2</a></sup>.</div>
<div style="text-align: justify;">
The Insolvency and Bankruptcy Board which is a body corporate having perpetual succession and common seal is the centralised regulator<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn3" id="rfn3">3</a></sup> which is empowered to frame and issue regulations under the Code to regulate Insolvency Professional Agencies and Insolvency Professionals<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn4" id="rfn4">4</a></sup>. Insolvency Professional Agency is a professional body which is registered with Insolvency and Bankruptcy Board under section 201 of the Code<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn5" id="rfn5">5</a></sup>. The Institutes of Company Secretaries; Chartered Accountants; and Cost and Works Accountants have already registered them as Insolvency Professional Agencies through their subsidiaries<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn6" id="rfn6">6</a></sup>. The Insolvency Professionals are the professionals who are enrolled with the Insolvency Professional Agency and registered with the Insolvency and Bankruptcy Board<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn7" id="rfn7">7</a></sup>. They play the major role in carrying out all the processes before adjudicating authority for insolvency resolution or liquidation in case of corporate persons, or insolvency resolution or bankruptcy in case of non-corporate persons. The adjudicating authority in case of corporate person is National Company Law Tribunal and in case of non-corporate person is Debt Recovery Tribunal.</div>
<div style="text-align: justify;">
The Code is divided into five parts. First part is preliminary in nature. Part II deals with insolvency resolution and liquidation for corporate persons comprising seven chapters. Part III deals insolvency resolution and bankruptcy for individuals and partnerships (non-corporate persons) comprising seven chapters. Fourth part deals with regulation of insolvency professionals, agencies and information utilities comprising seven chapters. Fifth part is miscellaneous<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn8" id="rfn8">8</a></sup>.</div>
<div style="text-align: justify;">
The different processes under the code either lead to resolution of insolvency or initiation of liquidation in case of companies; or resolution of insolvency or initiation of bankruptcy proceedings in case of non-corporate persons (individuals and partnership firms). The process for insolvency under Part II of the code for insolvency resolution or liquidation of corporate persons can be initiated by financial creditor<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn9" id="rfn9">9</a></sup>, operational creditor<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn10" id="rfn10">10</a></sup> or by the corporate applicant itself. The steps for initiating insolvency resolution varies in each case<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn11" id="rfn11">11</a></sup>. The insolvency resolution can be initiated by a financial creditor by filing an application along with the record of default and name of Insolvency Professional who is proposed to act as an interim resolution professional. The verification of application is done by the adjudicating authority and application is either admitted or rejected. Similarly, the corporate applicant can file an application along with the details of default and verification of application shall be done by the adjudicating authority. The application is either admitted or rejected after verification. However, the operational creditor has to first deliver a demand notice along with the copy of invoice demanding payment of amount involved in default. Corporate debtor can file a reply to such notice or pay within 10 days of the receipt of the notice. The operational creditor can then file an application with the adjudicating authority where no reply or payment is received from corporate debtor. The application is verified by the adjudicating authority and is either admitted or rejected. In either of the cases, once the application is admitted by the adjudicating authority, the insolvency process commences from the date of admission of application. There is a fixed time period within which insolvency resolution process has to be completed or else the company goes into liquidation.</div>
<div style="text-align: justify;">
The Insolvency Professional under Part II may be termed as either an Interim Resolution Professional (IRP) or as Resolution Professional (RP). Interim Resolution Professional is the professional appointed by Adjudicating Authority within 14 days from commencement of insolvency process either by itself or accepted by it if applicant has made proposal for name of Insolvency Professional. The Interim Resolution Professional may continue as Resolution Professional if his name is accepted by committee of creditors at its first meeting. The committee of creditors may also replace Interim Resolution Professional with another Resolution Professional.</div>
<div style="text-align: justify;">
Part III of the code which deals with insolvency resolution and bankruptcy for non-corporate persons contains two types of insolvency procedures. Firstly, by way of Fresh Start Process<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn12" id="rfn12">12</a></sup> and secondly, by Insolvency Resolution process<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn13" id="rfn13">13</a></sup>. Under fresh start process, an eligible debtor<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn14" id="rfn14">14</a></sup> who is unable to pay his debts can make an application to adjudicating authority either personally or through an Insolvency Professional. The application is either admitted or rejected after verification. Similarly, under insolvency resolution process, a debtor or any creditor can make an application for insolvency resolution to adjudicating authority either personally or through an Insolvency Professional which is either admitted or rejected after verification. In either of the cases, once the application is admitted by adjudicating authority, the insolvency process commences from the date of admission of application. If the insolvency cannot be resolved within a fixed time period, then bankruptcy proceedings are initiated.</div>
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It may be any process under Part II or Part III of the code, the Insolvency Professionals has a prominent place. This article deals with the different facets of Insolvency Professionals, <em>inter alia</em>, their qualification, duties, obligations and monitoring.</div>
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<strong>Scope of Profession</strong></div>
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<strong>2.</strong> There are around 700 sick industrial company cases (covered by now repealed <em>Sick Industrial Companies </em>(<em>Special Provisions</em>)<em> Act</em>, 1985), 15000 Debt Recovery Tribunal cases (now subsumed under the Code), 5200 winding up / amalgamation cases pending. It is pertinent to mention that all these cases shall now be covered under the Code and the Insolvency Professional shall occupy the central stage in their processes. Further, a study has revealed that effective implementation of the Code can potentially release about Rs. 25,000 crores capital currently locked in non-performing assets over next four to five years<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn15" id="rfn15">15</a></sup>.</div>
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<strong>Registration of Insolvency Professionals</strong></div>
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<strong>3.</strong> The registration of Insolvency Professionals is governed by section 207 of the Code read with Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 [hereinafter referred as 'Insolvency Professionals Regulations']. Every Insolvency Professional is required to obtain membership of any professional agency and then register himself with the Insolvency and Bankruptcy Board (hereinafter referred as 'board')<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn16" id="rfn16">16</a></sup>. The professional seeking registration with the board must fulfil eligibility, qualifications and experience requirements.</div>
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An individual is eligible to be registered as an insolvency professional if he: (1) is a major; (2) is a person resident in India; (3) possess qualification and experience requirement; (4) has not been convicted by any competent court for an offence punishable with imprisonment for a term exceeding six months or for an offence involving moral turpitude, and a period of five years has not elapsed from the date of expiry of the sentence provided that if a person has been convicted of any offence and sentenced in respect thereof to imprisonment for a period of seven years or more, he shall not be eligible to be registered; (5) he is not an un-discharged insolvent, or has not applied to be adjudicated as an insolvent; (6) is of sound mind; and (7) is a fit and proper person. The fit and proper person is considered after taking into account criterion relating to integrity, reputation, character, competence and net worth.</div>
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An individual is said to be qualified and experienced if he: (1) has passed the National Insolvency Examination; or (2) has passed the Limited Insolvency Examination, and has fifteen years of experience in management, after he received a Bachelor's degree from a university established or recognized by law; or (3) has passed the Limited Insolvency Examination, and has ten years of experience as a Chartered Accountant, Company Secretary, Cost Accountant or an Advocate.</div>
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An individual who fulfils the eligibility, qualification and experience requirements has to make an application to the Board in Form A as mentioned in Second Schedule of the Insolvency Professional Regulations along with non-refundable application fee. The Board then inspects the documents submitted by the applicant. It may call for further information or additional documents to decide on the application. Once the Board is satisfied after inspection or inquiry as it deems necessary that the applicant is eligible, it may grant certificate of registration to the applicant to carry out activities of an Insolvency Professional. This certificate is issued in Form B as mentioned in Second Schedule of the Insolvency Professional Regulations. The time period prescribed for granting the certificate for registration is sixty days excluding the time given by the Board for representations<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn17" id="rfn17">17</a></sup>.</div>
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The Board has the powers to refuse granting of certificate for registration under Insolvency Professional regulations<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn18" id="rfn18">18</a></sup>. In such cases, the Board, <em>prima facie </em>forms an opinion after considering the application of an Insolvency Professional. The affected applicant is then given an opportunity to give explanations. The Board after considering the explanations of the applicant forms a final opinion and communicates it to the applicant.</div>
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In <em>Re: ABC</em><sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn19" id="rfn19">19</a></sup>, the Board took into cognizance the 'fit and proper' criteria to refuse granting of certificate of registration as there were three criminal cases pending against the professional enrolled with XYZ Insolvency Professional Agency. The three criminal cases were registered by the Registrar of Companies under section <a href="https://corporatelaws.taxmann.com//fileopennew.aspx?Page=CASELAWS&id=102120000000001560&source=link" id="102520000000001560" target="_blank">58A(10)</a> of the <em>Companies Act</em>, 1956 (1956 Act) for non-compliance of directions issued by Company Law Board under provisions of section 58A(9) of 1956 Act. The Board took strength from the SEBI regulations/Securities Appellate Tribunal (SAT) orders to hold that "It is thus clear that reputation and character of the applicant is a material consideration. What is material is what others feel about the applicant who has three criminal proceedings pending against him. It is also material what kind of association the applicant has with the Company which has been repeatedly contravening the provisions of the Act and ignoring several directions of the CLB and whom he was representing before the CLB for these contraventions. Does such a person inspire confidence of the stakeholders who can entrust him with property of lakhs of crores for management under corporate insolvency resolution process? Pendency of three criminal proceedings against the applicant adversely impacts his reputation and makes him not a person fit and proper to become an IP."</div>
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In another case<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn20" id="rfn20">20</a></sup>, the Board denied registration to a professional as he was engaged in some other employment. The Board formed an opinion that his employment shall create conflict of interest as the insolvency process has to be completed within a time period of 180 days which mandates time critical services to be rendered by the Insolvency Professional. Further, the Board held that engagement in some other employment shall violate Clause 23 of the Code of Conduct for Insolvency Professionals: "23. An insolvency professional must not engage in any employment, except when he has temporarily surrendered his certificate of membership with the insolvency professional agency with which he is registered."</div>
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<strong>Appointment</strong></div>
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<strong>4.</strong> The appointment of a registered Insolvency Professional to a particular case under the Code varies from process to process. Under Part II of the Code, if the process for corporate insolvency is initiated by a financial creditor or the corporate debtor himself, then the appointment of Insolvency Professional is almost automatic provided that there is no disciplinary proceedings pending against the Insolvency Professional<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn21" id="rfn21">21</a></sup>. The financial creditor is bound to furnish the name of Resolution Professional proposed to act as an interim resolution professional<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn22" id="rfn22">22</a></sup>. The interim resolution professional may become resolution professional later on if his name is accepted by the committee of creditors. Similarly, a corporate debtor is also bound to furnish the name of resolution professional proposed to be appointed as an interim resolution professional<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn23" id="rfn23">23</a></sup>. However, an operational creditor while initiating insolvency proceedings may name a resolution professional as interim resolution professional. The Adjudicating Authority makes a reference to the Board if no proposal is made by the applicant. The Board is required to recommend the name of an Insolvency Professional against whom no disciplinary proceeding is pending.</div>
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Under Part III of the Code, there are two types of processes: (1) Fresh Start Process and (2) Insolvency Resolution Process. A Fresh Start Process may be initiated by an eligible debtor either personally or through a resolution professional. Similarly, insolvency resolution process may be initiated by a creditor or debtor either personally or through a resolution professional. In either of the cases, the Adjudicating Authority makes a reference to the board if the applicant has not named any resolution professional<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn24" id="rfn24">24</a></sup>. The Board is required to recommend the name of an Insolvency Professional against whom no disciplinary proceeding is pending.</div>
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<strong>Duties and Role</strong></div>
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<strong>5.</strong> The duties of insolvency professionals can be studied separately for corporate persons under Part II and non corporate persons under Part III. The insolvency professional plays two roles under Part II: Interim Resolution Professional and Resolution Professional. The duties of Interim Resolution Professional are enshrined under section <a href="https://corporatelaws.taxmann.com//fileopennew.aspx?Page=CASELAWS&id=102120000000061970&source=link" id="102520000000081513" target="_blank">18</a> of the Code. They are as follows:</div>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>a</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Collect all information relating to the assets, finances and operations of the corporate debtor for determining the financial position of the corporate debtor, including information relating to: (<em>i</em>) business operations for the previous two years; (<em>ii</em>) financial and operational payments for the previous two years; (<em>iii</em>) list of assets and liabilities as on the initiation date; and (<em>iv</em>) such other matters as may be specified;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>b</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Receive and collate all the claims submitted by creditors to him, pursuant to the public announcement made under sections 13 and 15;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>c</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Constitute a committee of creditors;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>d</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Monitor the assets of the corporate debtor and manage its operations until a resolution professional is appointed by the committee of creditors;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>e</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">File information collected with the information utility, if necessary; and</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>f</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Take control and custody of any asset over which the corporate debtor has ownership rights as recorded in the balance sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including: (<em>i</em>) assets over which the corporate debtor has ownership rights which may be located in a foreign country; (<em>ii</em>) assets that may or may not be in possession of the corporate debtor; (<em>iii</em>) tangible assets, whether movable or immovable; (<em>iv</em>) intangible assets including intellectual property; (<em>v</em>) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies; (<em>vi</em>) assets subject to the determination of ownership by a court or authority;</td>
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In addition to the above mentioned duties, the interim resolution professional has to perform other duties. The interim resolution professional makes a public announcement immediately after his appointment<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn25" id="rfn25">25</a></sup>. The contents of public announcement should be as per the provisions of section 15 read with Regulation 6 of Insolvency Professional Regulations. Thereafter, he has to manage the affairs of corporate debtor. All powers of the board of directors are exercised by the interim resolution professional<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn26" id="rfn26">26</a></sup>. He has to manage the corporate debtor as a going concern<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn27" id="rfn27">27</a></sup>. The interim resolution professional after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn28" id="rfn28">28</a></sup>.</div>
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The duties of resolution professional are enshrined under section <a href="https://corporatelaws.taxmann.com//fileopennew.aspx?Page=CASELAWS&id=102120000000061977&source=link" id="102520000000081520" target="_blank">25</a> of the Code. They are as follows:</div>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>a</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Take immediate custody and control of all the assets of the corporate debtor, including the business records of the corporate debtor;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>b</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Represent and act on behalf of the corporate debtor with third parties, exercise rights for the benefit of the corporate debtor in judicial, quasi-judicial or arbitration proceedings;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>c</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Raise interim finances subject to the approval of the committee of creditors under section 28;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>d</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Appoint accountants, legal or other professionals;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>e</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Maintain an updated list of claims;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>f</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Convene and attend all meetings of the committee of creditors;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>g</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Prepare the information memorandum in accordance with section 29;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>h</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Invite prospective lenders, investors, and any other persons to put forward resolution plans;</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>i</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">Present all resolution plans at the meetings of the committee of creditors; and</td>
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<td align="right" class="list" nowrap="nowrap" valign="top">(<em>j</em>)</td>
<td align="justify" class="list" valign="top"></td>
<td align="justify" class="list" valign="top">File application for avoidance of transactions.</td>
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Where the Adjudicating Authority passes an order of liquidation of the corporate debtor, the resolution professional appointed for insolvency resolution process acts as liquidator unless replaced by the adjudicating authority<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn29" id="rfn29">29</a></sup>. The insolvency professional acting as liquidator also performs various functions as enshrined under section <a href="https://corporatelaws.taxmann.com//fileopennew.aspx?Page=CASELAWS&id=102120000000061987&source=link" id="102520000000081558" target="_blank">35</a> of the Code.</div>
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Under Part III, insolvency professional has an important role to play in both Fresh Start process and Insolvency resolution process. The insolvency professional may make an application to adjudicating authority. After his appointment, he submits a report recommending for approval or rejection of application. Insolvency professional registers the claim of the creditors and prepare a list of creditors. He conducts the meetings of creditors, submits repayment plan and supervises the implementation of the repayment plan. Where the adjudicating authority passes an order of bankruptcy for non-corporate persons, the insolvency professional may act as bankruptcy trustee<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn30" id="rfn30">30</a></sup>.</div>
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<strong>Code of Conduct and Other Obligations</strong></div>
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<strong>6.</strong> The Insolvency Professionals are bound to abide by the Code of Conduct as a condition to the certificate of registration<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn31" id="rfn31">31</a></sup>. The First Schedule to the Insolvency Professional Regulations contains the Code of Conduct which must be observed by Insolvency Professionals. The focus areas of this Code of Conduct are: (1) Integrity and objectivity; (2) Independence and impartiality; (3) Professional competence; (4) Representation of correct facts and correcting misapprehensions; (5) Timeliness; (6) Information Management; (7) Confidentiality; (8) Occupation, employability and restrictions; (9) Remuneration and costs; and (10) Gifts and hospitality.</div>
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In addition, Schedule attached to the Insolvency and Bankruptcy Board of India (Model Bye Laws & Governing Board Insolvency Professional Agencies) Regulations, 2016<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn32" id="rfn32">32</a></sup> lays down some other obligations of the Insolvency Professionals: (1) Act in good faith in discharge of his duties as an insolvency professional; (2) Endeavour to maximize the value of assets of the debtor; (3) Discharge his functions with utmost integrity and objectivity; (4) Be independent and impartial; (5) Discharge his functions with the highest standards of professional competence and professional ethics; (6) Continuously upgrade his professional expertise; (7) Perform duties as quickly and efficiently as reasonable, subject to the timelines under the Code; (8) Comply with applicable laws in the performance of his functions; and (9) Maintain confidentiality of information obtained in the course of his professional activities unless required to disclose such information by law.</div>
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<strong>Remuneration</strong></div>
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<strong>7.</strong> The Code does not prescribe any fixed or specific remuneration or fee for Insolvency Professionals. The professional has to make objective assessment of his own<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn33" id="rfn33">33</a></sup>. The Code of Conduct for Insolvency Professionals provides some principles for charging fee by the professionals: (1) An insolvency professional must provide services for remuneration which is charged in transparent manner, is a reasonable reflection of the work necessarily and properly undertaken, and is not inconsistent with the applicable regulations; (2) An insolvency professional shall not accept any fees or charges other than those which are disclosed to and approved by the persons fixing his remuneration; and (3) An insolvency professional shall disclose all costs towards the insolvency resolution process costs, liquidation costs, or costs of the bankruptcy process, as applicable, to all relevant stakeholders, and must endeavour to ensure that such costs are not unreasonable.</div>
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However, the manner to determine fee payable to Insolvency Professionals acting as liquidator in case of liquidation has been prescribed<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn34" id="rfn34">34</a></sup>. The committee of creditors may fix the fee payable to liquidator before a liquidation order is passed under sections <a href="https://corporatelaws.taxmann.com//fileopennew.aspx?Page=CASELAWS&id=102120000000061985&source=link" id="102520000000081556" target="_blank">33(1)(<em>a</em>)</a> or 33(2) of the Code. In all other cases, the liquidator is entitled to a fee as a percentage of the amount realised net of other liquidation costs, and of amount distributed as prescribed under Regulation 4. The fee payable to the liquidator forms part of the liquidation cost.</div>
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<strong>Opportunities for Professionals</strong></div>
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<strong>8.</strong> The Insolvency and Bankruptcy Code, 2016 has opened up plethora of opportunities for professionals. The professionals who were dealing with corporate matters like winding up, restructuring, debt recovery are gearing up to become Insolvency Professionals. The Insolvency Professionals can do various ancillary work arising out of the Code. Deepak Jain<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn35" id="rfn35">35</a></sup> in his write up on opportunities for professionals under the Code has highlighted various ancillary works which can be done by professionals: (1) Working out voting share or voting rights of the lenders / creditors; (2) Valuation of securities held by lenders / creditors at the time of making application; (3) Valuation of assets including properties, stock, securities at the time of making of resolution plan, liquidation etc.; (4) Drawing the information memorandum and resolution plan; (5) Advisory and Due Diligence services; (6) Opportunity to run as Information Utility centres.</div>
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<strong>Conclusion</strong></div>
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<strong>9.</strong> From the above discussion, it can be noticed that the Code has opened up plethora of opportunities for Insolvency Professionals. However, the profession of Insolvency Professionals is full of challenges. It requires a high standard of integrity and morality. Only senior professionals having an experience of 15/10 years are required for the profession. The effective role of Insolvency Professionals calls for multiple skills in the field of finance, people management, court procedures, stakeholder management, business dynamics, strategic foresight and business valuation<sup><a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#fn36" id="rfn36">36</a></sup>. The Code lays down two-tier structure for strict regulation of the insolvency professionals – (1) Insolvency Professional Agencies and (2) Insolvency and Bankruptcy Board of India. Be it as it may, the single codified law for corporate insolvency is still in infancy. The regulator and other functionaries have to stand the test of time.</div>
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<div id="footnote">
<hr align="left" />
</div>
<div id="foot-fn1">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn1" id="fn1">1.</a> Deepak Jain, "The Insolvency and Bankruptcy Code, 2016 - An Analysis and Opportunities for Professionals under the Code," <em>Chartered Secretary</em>, March 2017, pp. 38-42.</div>
<div id="foot-fn2">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn2" id="fn2">2.</a> Rakesh Wadhwa, "Insolvency and Bankruptcy Code, 2016," <em>Chartered Secretary</em>, September 2016, pp. 23-28.</div>
<div id="foot-fn3">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn3" id="fn3">3.</a> <em>See generally</em>, Chapter I of Part IV of the <em>Insolvency and Bankruptcy Code</em>, 2016 (herein after referred as Code of 2016 or Code).</div>
<div id="foot-fn4">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn4" id="fn4">4.</a> <em>Code of</em> 2016, s. 240</div>
<div id="foot-fn5">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn5" id="fn5">5.</a> See generally, Chapter III of Part IV of the Code.</div>
<div id="foot-fn6">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn6" id="fn6">6.</a> ICSI Insolvency Professionals Agency; Indian Institute of Insolvency Professionals of ICAI; and Insolvency Professional Agency of Institute of Cost Accountants of India.</div>
<div id="foot-fn7">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn7" id="fn7">7.</a> Code of 2016, ss. 206 and 207.</div>
<div id="foot-fn8">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn8" id="fn8">8.</a> <em>See generally</em>, Code of 2016.</div>
<div id="foot-fn9">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn9" id="fn9">9.</a> <em>Ibid</em>., s. 5(7): Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to.</div>
<div id="foot-fn10">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn10" id="fn10">10.</a> <em>Ibid.,</em> s. 5(20): Operational Creditor means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred.</div>
<div id="foot-fn11">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn11" id="fn11">11.</a> Mahesh A. Athavale and Anagha Anasingaraju, "Opportunities for Company Secretaries under the Insolvency and Bankruptcy Code, 2016," <em>Chartered Secretary</em>, September 2016, 88-92.</div>
<div id="foot-fn12">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn12" id="fn12">12.</a> <em>Code of 2016</em>, s. 8.</div>
<div id="foot-fn13">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn13" id="fn13">13.</a> <em>Ibid.,</em> s. 94.</div>
<div id="foot-fn14">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn14" id="fn14">14.</a> <em>Ibid.,</em> s. 80(2). Eligible debtor is a person who fulfils the conditions laid down under section 80(2).</div>
<div id="foot-fn15">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn15" id="fn15">15.</a> ASSOCHAM and CRISIL, "Insolvency and Bankruptcy Code 2016: A Game Changer," 2016.</div>
<div id="foot-fn16">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn16" id="fn16">16.</a> <em>Code of 2016</em>, s. 207.</div>
<div id="foot-fn17">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn17" id="fn17">17.</a> <em>Insolvency and Bankruptcy Board of India </em>(<em>Insolvency Professionals</em>)<em> Regulations, 2016</em>, Regulation 7.</div>
<div id="foot-fn18">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn18" id="fn18">18.</a> <em>Ibid.</em>, Regulation 8.</div>
<div id="foot-fn19">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn19" id="fn19">19.</a> <em>Re: ABC</em>, Insolvency and Bankruptcy Board of India, 14 March 2017.</div>
<div id="foot-fn20">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn20" id="fn20">20.</a> <em>Re: ABC</em>, Insolvency and Bankruptcy Board of India, 02 March 2017.</div>
<div id="foot-fn21">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn21" id="fn21">21.</a> D K Prahlada Rao, "Role & Responsibility of Insolvency Professionals under the Code – An Analysis," Chartered Secretary, March 2017, pp. 21-23, at p. 21.</div>
<div id="foot-fn22">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn22" id="fn22">22.</a> <em>Code of 2016</em>, s. 7(3)(<em>b</em>).</div>
<div id="foot-fn23">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn23" id="fn23">23.</a> <em>Ibid.</em>, s. 10(3)(<em>b</em>).</div>
<div id="foot-fn24">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn24" id="fn24">24.</a> <em>Ibid.</em>, s. 97.</div>
<div id="foot-fn25">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn25" id="fn25">25.</a> <em>Ibid.</em>, s. 13.</div>
<div id="foot-fn26">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn26" id="fn26">26.</a> <em>Ibid.</em>, s. 17.</div>
<div id="foot-fn27">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn27" id="fn27">27.</a> <em>Ibid.</em>, s. 20.</div>
<div id="foot-fn28">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn28" id="fn28">28.</a> <em>Ibid.</em>, s. 21.</div>
<div id="foot-fn29">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn29" id="fn29">29.</a> Hemant Sharma, 2017, p. 58.</div>
<div id="foot-fn30">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn30" id="fn30">30.</a> <em>Code of 2016</em>, s. 125.</div>
<div id="foot-fn31">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn31" id="fn31">31.</a> <em>Insolvency Professional Regulations</em>, Regulation 7(2)(<em>h</em>).</div>
<div id="foot-fn32">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn32" id="fn32">32.</a> Part VII: Duties of Members, Schedule, <em>Insolvency and Bankruptcy Board of India </em>(<em>Model Bye Laws & Governing Board Insolvency Professional Agencies</em>)<em> Regulations, 2016.</em></div>
<div id="foot-fn33">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn33" id="fn33">33.</a> Alka Kapoor and Lakshmi Arun, 2017, p. 31.</div>
<div id="foot-fn34">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn34" id="fn34">34.</a> <em>Insolvency and Bankruptcy Board of India </em>(<em>Liquidation Process</em>)<em> Regulations, 2016</em>, Regulation 4.</div>
<div id="foot-fn35">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn35" id="fn35">35.</a> Deepak Jain, 2017, p. 41.</div>
<div id="foot-fn36">
<a href="https://corporatelaws.taxmann.com//fileopennew.aspx?id=105010000000014588&mode=home&page=ts#rfn36" id="fn36">36.</a> Alka Kapoor and Lakshmi Arun, 2017, p. 31.</div>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-4587350125944695572017-07-28T23:31:00.007-07:002017-07-28T23:33:05.208-07:00Whether Income Tax can be Abolished ?<div dir="ltr" style="text-align: left;" trbidi="on">
<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: center;">
<span style="font-size: x-large;">Income Tax Vs. Bank Transaction Tax</span></div>
</div>
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<div style="text-align: justify;">
</div>
<ul>
<li style="text-align: justify;">There are excellent arguments in favour of abolishing the income tax in India. Given the chaos that surrounds the system currently, the leakage, it doesn't even pass the usual equity desires of making sure that the richer people carry a larger part of the tax burden and as we all should know an income tax is an inefficient method of taxation to boot. So, the start of this idea is just fine, that perhaps India should cut through the Gordian Knot by just abolishing that income tax system altogether.</li>
<li style="text-align: justify;">However, there is then the question of where to gain that necessary revenue from in the absence of that taxation system. And that's where this idea fails and fails horribly. A bank transaction tax--any transaction tax in fact--would be far worse than even the current income tax system. Plus, of course, a bank transactions tax would push everyone back into the cash and black money economy we've all just spent so much time and effort trying to destroy.</li>
<li style="text-align: justify;">So, good marks for describing the problem, none at all for the solution: The most damning evidence of evasion was the fact that out of 7.6 million individuals who declare incomes above Rs 5 lakh, 5.6 million are in the salaried class, for whom the taxes are deducted at source. Clearly, it cannot be the case that India has only two million businessmen and self-employed people who earn incomes above Rs 5 lakh. Tax evasion is rampant in the country and is especially high among the non-salaried class.</li>
<li style="text-align: justify;">That's the evidence of the failure of the current system. As Adam Smith remarked there's nothing wrong, indeed much just about, with insisting that those with higher incomes should carry a more than in proportion burden of the tax system. Thus we're just fine with the general concept of a progressive income tax. Yet as we can see the current system isn't in fact progressive, we all know that the salariat is making less than those (at least, some of those) running their own businesses but it's the salariat paying the income tax. Thus we fail that equity test of the tax system.</li>
<li style="text-align: justify;">Once we've agreed that then we want to go and look at the efficiency of the system. And India's tax system is not greatly known for that in any manner. However, in economic terms we do have a spectrum of taxes, from high efficiency to low. That spectrum runs land value tax, consumption tax, income tax, capital and corporate tax, transactions taxes.</li>
<li style="text-align: justify;">For those who don't quite get the jargon here, a consumption tax is a sales tax, perhaps a VAT like the GST just coming. Yes, it's collected upon transactions but a sales tax is once only at the retail point, a VAT (or the GST) is collected in stages but it amounts to just the one rate in total at that retail point. A transactions tax is quite different, it's a tax on each and every transaction. Say it was of 1% on each transaction, just to invent a number. So, the miller buys the wheat from the farmer, 1% is paid, the miller sells the flour to the baker, 1%, the baker to the shop, 1%, the shop the bread to the consumer, 1%. But now think about a more complex and possibly more efficient economy. The farmer to the grain trader, the grain trader to the miller, the miller to the flour trader, the trader to the baker, the baker to the wholesaler, the wholesaler to the shop and so on. We've more transactions and thus more tax points and thus more tax being paid upon the same process, turning wheat into bread.</li>
<li style="text-align: justify;">Say the VAT or GST or sales tax on bread was 10%. The consumer would be paying 10% whatever the system, however many transactions there were in the process of bringing the bread to where it may be eaten. A transactions tax charges different amounts dependent upon how much division and specialisation of labour we've got in that supply chain. Worse, the more we have the more the tax rate is in total. And that's really not something we want to do, tax the division and specialisation of labour, that's the very thing which makes us richer (Adam Smith again).</li>
<li style="text-align: justify;">Transactions taxes are thus a very bad idea. They're worse than other forms of taxation in terms of efficiency. But the suggestion is that instead of the income tax we should have a transactions tax:</li>
<li style="text-align: justify;">Also, a loss of over Rs 3 lakh crore that the move would entail can be easily replaced with much more efficient mechanisms. A banking transaction tax can be considered. A small tax on any banking transaction in an economy can vastly increase the government's tax base and revenue compared to the current inefficient method.</li>
<li style="text-align: justify;">No, that's much more inefficient, a terrible idea. We want to move left along our spectrum, to more efficient taxes, not right to less. Raise the level of the GST perhaps, have a land value tax maybe, but replacing an income tax with a bank transactions tax is not something we want to do.</li>
<li style="text-align: justify;">Quite apart from anything else we get less of whatever it is that we tax. And we've just gone through great pain to encourage people to stop using cash and use banks instead. Taxing bank transactions would entirely reverse that, wouldn't it?</li>
</ul>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com2tag:blogger.com,1999:blog-7581033258468973440.post-83861739377797173002017-07-26T00:31:00.002-07:002017-07-26T02:46:28.600-07:00Blog # 15. Metamorphosis : The New Tomorrow ~ Digital & Forensic<div dir="ltr" style="text-align: left;" trbidi="on">
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<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9h_Bc7LRs4Xx-X8HrExii4rd0w3jG8rLOCZLjLZRE9N28y_stH4vbpK17CmUDACrJZ8KcnnCNVTo5Z7Etj8GFUtzZFrQZQf6Wy3WhooOY6GWgzKD6wNC8b4Ek0TtTxEAtrM-CuLnfTRc/s1600/20140146_1709225362451890_295224207517716942_n.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="526" data-original-width="526" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9h_Bc7LRs4Xx-X8HrExii4rd0w3jG8rLOCZLjLZRE9N28y_stH4vbpK17CmUDACrJZ8KcnnCNVTo5Z7Etj8GFUtzZFrQZQf6Wy3WhooOY6GWgzKD6wNC8b4Ek0TtTxEAtrM-CuLnfTRc/s200/20140146_1709225362451890_295224207517716942_n.jpg" width="200" /></a></div>
A unique IT National Conference : “Metamorphosis : The New Tomorrow ~ Digital & Forensic", hosted by Ahmedabad branch of WIRC of ICAI is all set to become premier gathering in the area of IT audit / assurance, Security & Control Professionals IT risk management, Governance, Forensics and just about anyone interested in Topics like Digital Currency, ERP for SMESs MSMEs, Big Data, Money Laundering, Forensics, Digital Footprints, IOTs etc.</div>
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It will be a Happening Event of Knowledge, Opportunities, Learning, Wisdom, Live Demonstration and Case Studies, with best of the best Speakers from the Country. Don’t forget to spread the word.</div>
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This Round Table Conference is set to be held on 11th & 12th August, 2017 @ Golden Glory Hall – Karnavati Club, Ahmedabad.</div>
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For more details & Registration visit :</div>
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<a href="http://www.icaiahmedabad.com/register.php?id=ODc3">http://www.icaiahmedabad.com/register.php?id=ODc3</a></div>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-6579688459979070152017-07-19T06:35:00.002-07:002017-07-28T23:17:00.236-07:00Blog # 14. All about Aadhar Privacy Case<div dir="ltr" style="text-align: left;" trbidi="on">
<ul>
<li style="text-align: justify;">The Supreme Court today observed that it is nearly impossible to define privacy, which is not absolute and the state cannot be prevented from imposing reasonable restrictions on citizens, according to a report by The Hindu. The nine-judge bench of the apex court, which is looking into the limited matter of right to privacy, attached to the Aadhaar case, also observed that any attempt to define privacy may cause more harm than good. The hearing in the privacy matter will continue on the second day tomorrow.</li>
<li style="text-align: justify;">The petitioners today put forth a statement by Finance Minister <a data-blogger-escaped-style="background-attachment: scroll; background-position-x: 0px; background-position-y: 0px; box-sizing: border-box; outline: none 0px;" data-blogger-escaped-target="_blank" href="http://www.financialexpress.com/tag/arun-jaitley/">Arun Jaitley</a>, which he had given in the parliament while moving the Aadhaar Bill. “The present bill presupposes and is based on a premise, and it’s too late in the day to contest that privacy is not a fundamental right. Privacy is not an absolute right, which is subjected to a restriction established by law on a fair and just procedure,” Jaitley had said.</li>
<li style="text-align: justify;"><strong>In past</strong>, the Apex court has held that right to privacy is not a fundamental right. On Tuesday, however, the Supreme Court observed, “In a Republic founded on a written Constitution, it is difficult to accept there is no fundamental right to privacy.” The court’s observation put a put a question mark on the government’s apparent efforts to make Aadhaar mandatory for access to a number of state-sponsored doles and services as well as for taxation and other aspects of regulatory governance. The court also formed a nine-judge bench headed by Chief Justice J S Khehar to decide on the privacy debate.</li>
<li style="text-align: justify;">The top court on Tuesday also said that the larger bench would examine the correctness of the two judgements delivered in the cases of Kharak Singh and M P Sharma in which it was held that right to privacy was not a fundamental right. While the Kharak Singh judgement was delivered by a six- judge bench in 1960, the M P Sharma verdict was reported in 1950 and was delivered by an eight-judge Constitution bench, according to PTI.</li>
<li style="text-align: justify;">The nine-judge bench also include justices J Chelameswar, S A Bobde, R K Agrawal, Rohinton Fali Nariman, Abhay Manohar Sapre, D Y Chandrachud, Sanjay Kishan Kaul and S Abdul Nazeer.</li>
</ul>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com2tag:blogger.com,1999:blog-7581033258468973440.post-19693128025156869762017-07-19T01:05:00.000-07:002017-07-19T01:05:36.989-07:00Blog # 13. Hon’ble Gujarat High Court raps RBI for giving Directions to NCLT<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">The Hon'ble Gujarat High Court today rebuked the Reserve Bank of India for asking the
National Company Law Tribunal in its June 13 directive to give priority to the
insolvency proceedings against companies with huge debts.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">It
also questioned the functioning of the central bank.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">The
bench of Justice S G Shah came down heavily on the RBI for stating in its press
release dated June 13, 2017 that the Insolvency and Bankruptcy Code (IBC)
proceedings against companies with outstanding dues of more than Rs 5,000 crore
“will be accorded priority by NCLT.”<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">Essar
Steel had moved the high court challenging the RBI order to banks.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">The
court also questioned the “functioning” of the RBI for its decision to issue
the press release in which it had directed banks to initiate insolvency
proceedings against defaulting companies.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">“The
RBI has to be careful while issuing press releases, it must be in consonance
with the Constitutional mandates, based upon sound principles of law, but in
any case should not be in the form of advise, guidelines or directions to
judicial or quasi-judicial authorities in any manner what so ever,” the court
said in its order.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">Further
reacting to the central bank’s submission that it has no document on record
based on which the decision to issue press release was taken, the court said,
“This goes to show the manner in which the RBI is functioning, in as much as
there is a press release even without a decision at certain level that press
release is to be published and what should be included in such press release.”<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">“This
is also an equally serious issue. It has been conveyed to the respondents that
on such disclosure that there is no other document, pursuant to such
disclosure, now, they would be debarred from relying upon any such document, if
any,” it added.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">The
court interpreted RBI’s statement in its press release that “such cases (for
insolvency proceedings) will be accorded priority by the NCLT” that the
tribunal “has to give priority to cases filed by the directives of RBI against
the cases, which are filed by other creditors or petitioners before the NCLT.”<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">The
RBI even tendered an apology to the court saying that the statement was made
due to “poor drafting” of the press release, and even issued corrigendum on
July 8, to delete the line.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">Through
in a press release dated June 13, the RBI had directed banks to launch IBC
proceedings against companies with outstanding dues of more than Rs 5,000
crore, and for other NPAs, banks should finalise resolution plans in the next
six months.<o:p></o:p></span></div>
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">During
its submissions, the central bank had apologised from the court for issuing
that statement in the press.<o:p></o:p></span></div>
<br />
<div style="text-align: justify;">
<span style="font-family: "Verdana","sans-serif";">Essar
Steel had moved the high court seeking the court’s direction to quash the RBI’s
direction to the banks to initiate insolvency proceedings against it.<o:p></o:p></span></div>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-56217455977384138832017-07-16T22:45:00.000-07:002017-07-16T23:48:13.030-07:00Blog # 12. Half Monthly Digest (Income Tax) - July 2017<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="text-align: justify;">
<span style="background-color: white; color: #222222; font-family: "garamond" , serif; font-size: 18.6667px;">In this edition, we have analysed few orders. A very brief catch note of the related section of The Income Tax Act, 1961, indicates the contents of the order. For reading the whole order, click on the hyperlink attached with the name of the order.</span></div>
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<b style="text-align: left;"><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;">S.221(1).</span></b><span lang="EN-US" style="font-family: "garamond" , serif; font-size: 14pt; text-align: left;"> Penalty u/s 221(1)
cannot be levied on the interest component charged on “tax”.</span></div>
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<a href="https://drive.google.com/open?id=0B0JsO_s_yHV-VmxoUFlYdi1yaXM" style="text-align: left;"><span lang="EN-US" style="font-family: "garamond" , serif; font-size: 14pt; text-align: left;">[CIT vs. </span><span lang="EN-US" style="font-family: , serif; font-size: 14pt; text-align: left;">M/s. Oryx Finance and Investment Pvt. Ltd.
</span></a><span lang="EN-US" style="font-family: "garamond" , serif; font-size: 14pt; text-align: left;"><a href="https://drive.google.com/open?id=0B0JsO_s_yHV-VmxoUFlYdi1yaXM">– Income Tax Appeal No. 1 of 2015 – Dt. 01/07/2017 – High Court of Bombay</a></span></div>
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<b><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;">221(1) –</span></b><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;"> </span><span lang="EN-US" style="color: #333333; font-family: "garamond" , serif; font-size: 14pt;">Penalty u/s
221(1) cannot exceed the amount of “Tax in arrears” <o:p></o:p></span></div>
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<a href="https://drive.google.com/open?id=0B0JsO_s_yHV-aHVjcXBSeDVTTEE">[CIT vs. M/s. Oryx Finance and Investment Pvt. Ltd.– Income Tax Appeal No. 1 of 2015 – Dt. 01/07/2017 – Bombay High Court]</a></div>
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<b><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;">S.37(1). </span></b><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;">Predevelopment expenses
which are directly identifiable with the operations and maintenance of existing
business shall be treated as revenue expenses, irrespective of treatment given
in the books of accounts.<o:p></o:p></span></div>
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<a href="https://drive.google.com/open?id=0B0JsO_s_yHV-NXpNbVhUX2NLQk0" style="font-family: Garamond, serif; font-size: 14pt;">[CIT VSReliance Supply Chain Solutions Ltd./ Reliance Foot Print Ltd. – Income Tax Appeal No. 892/948 of 2014 – Dt.05/07/2017 – High Court of Bombay]</a></div>
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<b><span lang="EN-US" style="font-family: "garamond" , serif; font-size: 14pt;">44AA.</span></b><span lang="EN-US" style="font-family: "garamond" , serif; font-size: 14pt;"> Separate books
of accounts would be justified only when several distinct business are carried
on and not when several business activities are carried on within the same
business.<o:p></o:p></span></div>
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<a href="https://drive.google.com/open?id=0B0JsO_s_yHV-Nmxrb01xS2Y2aE0" style="font-family: Garamond, serif; font-size: 14pt;">[CIT VSReliance Supply Chain Solutions Ltd./ Reliance Foot Print Ltd. – Income Tax Appeal No. 892/948 of 2014 – Dt.05/07/2017 – High Court of Bombay]</a></div>
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<b><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;">S.68. </span></b><span lang="EN-US" style="font-family: "garamond" , "serif"; font-size: 14.0pt;">Where the assessee
during the course of assessment proceedings, produced all the documentary
evidences to prove identity, genuineness and creditworthiness of share
applicants, addition u/s 68 of the Act cannot be made on the ground that the
appellant could not produce share applicants in person.<b><o:p></o:p></b></span></div>
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<a href="https://drive.google.com/open?id=0B0JsO_s_yHV-eDVUVzRFV0V4Unc" style="font-family: Garamond, serif; font-size: 14pt;">[CIT VSOrchid Industries Pvt. Ltd. – Income Tax Appeal No. 1433 of 2014 – Dt.05/07/2017 – High Court of Bombay]</a></div>
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<span lang="EN-US" style="background: white; font-family: "verdana" , sans-serif; font-size: 16pt; line-height: 115%;"><b style="color: #222222; font-family: arial, sans-serif; font-size: 12.8px; text-align: left;"><span style="font-family: "garamond" , serif; font-size: 14pt;">Disclaimer: </span></b><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">The information contained herein is of a general nature and is not </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">intended to address the circumstances of any particular individual or entity. Although </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">we have taken due care and </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">precautions in providing accurate and timely information, there can be no guarantee </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">that such information is accurate as of the date it is received or that it will continue to </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">be accurate in the future. Errors can occur. We </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">assume no liability or responsibility for any errors or </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">omissions in the contents contained herein neither does it give any guarantee of </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">completeness, accuracy or timeliness. The information and data contained herein may </span><span style="font-family: "garamond"; font-size: 14pt; text-align: left;">be used at your sole risk after ensuring its accuracy, correctness or completeness.</span></span><br />
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<span lang="EN-US" style="background: white; font-family: "verdana" , sans-serif; font-size: 16pt; line-height: 115%;">Quotes : </span></div>
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<span lang="EN-US" style="background: white; font-family: "verdana" , sans-serif; font-size: 16pt; line-height: 115%;">Everybody pities the weak, Jealousy you have to earn</span><span lang="EN-US" style="font-family: "verdana" , "sans-serif"; font-size: 16.0pt; line-height: 115%;"><o:p></o:p></span></div>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-75370116314117160602017-07-13T04:38:00.000-07:002017-07-13T04:38:22.682-07:00Blog # 11. Attachments under Prohibition of Benami Propert Tranactions Act, 1988 and Initial Response <div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Verdana, sans-serif; font-size: 12pt; text-align: justify;">Under the provisions of Prohibition of Benami Property
Transactions Act, 1988, the attachments are made as per the provisions of Section
24 by an Initiating
Officer. </span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Who are Initiating Officers
?<o:p></o:p></span></b></div>
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<span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">As per Section 2(19) of<b> </b>Prohibition
of Benami Property Transactions Act, 1988, initiating officer means an Assistant
Commissioner or Deputy Commissioner as defined in clause (9A) and (19A)
respectively of section 2 of the Income Tax Act, 1961.<o:p></o:p></span></div>
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<b><span style="background: white; color: #444444; font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 200%;">As per
Section 2(9A)</span></b><span style="background: white; color: #444444; font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 200%;"> of the
Income Tax Act, 1961 , "Assistant Commissioner" means a person
appointed to be an Assistant Commissioner of Income-tax [or a Deputy
Commissioner of Income-tax] under sub-section (1) of </span><span style="font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 200%;"><a href="https://www.blogger.com/null"><span style="background: white; color: #663399;">section 117</span></a><span style="background: white; color: #444444;">;] And </span></span><b><span style="color: #444444; font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">As
per Section 2(19A)</span></b><span style="color: #444444; font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 200%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-IN;">
of The Income Tax Act, 1961, "Deputy Commissioner" means a person
appointed to be a Deputy Commissioner of Income-tax under sub-section (1)
of <a href="https://www.blogger.com/null"><span style="color: #663399;">section 117</span></a>;</span><span style="background: white; color: #444444; font-family: "Verdana","sans-serif"; font-size: 12.0pt; line-height: 200%;"><o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Accordingly, proceedings under The Prohibition of Benami Property
Act, 1988 as amended by the present Modi Government can be initiated by an
Assistant Commissioner or Deputy Commissioners of Income Tax. After receiving
evidences/material against the benamidar or beneficial owner, if the initiating
officer has reasons to believe that the case falls within the purview of
Prohibition of Benami Property Transactions Act, 1988 then :-<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">( 1 )<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Record reasons in writing that
any person is a benamidar.<o:p></o:p></span></div>
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</span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Issue notice u/s 24(1) of the
Act to the Benamidar asking as to why the property should not treated as benami
property.<o:p></o:p></span></div>
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</span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Notice to Beneficial Owner as
well if his identity is known.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">( 4 )<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">If Initiating officer feels
that the person who is in possession of Benami Property may alienate such
property, then he may attach such property. Procedure of Attaching such
property:-<o:p></o:p></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Step No.1</span></b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;"> </span><b><span style="font-family: Wingdings; font-size: 12pt; line-height: 200%;">à</span></b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;"> Previous Approval from Approving Authority.<o:p></o:p></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Step No. II. </span></b><b><span style="font-family: Wingdings; font-size: 12pt; line-height: 200%;">à</span></b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;"> Pass Provisional Attachment Order attaching such Benami property
for a period of maximum of 90 days from the date of issuing notice to
benamidar.<o:p></o:p></span></div>
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</span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;"> Thereafter he makes such inquiries, calls for
reports or evidences as he deems fit and taking in to account all the
materials, if he opines that the property is benami then he may continue such provisional
Attachment beyond a period of 90 days or attaches the property if the same has
not been attached before 90 days of issuing notice u/s 24(1) of the Act, after
:-<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 12pt; line-height: 200%;">Ø<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Taking prior approval of Approving Authority.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 12pt; line-height: 200%;">Ø<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Has to again pass an order continuing the provisional attachment.
The same shall continue till the time specified in such order or till the order
is passed by the Adjudicating Authority.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 12pt; line-height: 200%;">Ø<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Draw up statement of the case and refers it to the Adjudicating
Authority. <o:p></o:p></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Or<o:p></o:p></span></b></div>
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<span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Revokes provisional
attachment after passing an order in writing after taking approval from
Approving Authority if he is satisfied that the transaction <o:p></o:p></span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;"><br /></span></b></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;">Initial Response to be taken if you
receive notice u/s 24(1) of the Act :-</span></b></div>
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</span></span><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%; text-indent: -36pt;">Request Initiating Officer to
provide materials against you.</span></div>
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</span></span><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%; text-indent: -36pt;">Request for the reasons
recorded for initiating the proceedings.</span></div>
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<b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 32px;">Initial Response</span></b><b><span style="font-family: Verdana, sans-serif; font-size: 12pt; line-height: 200%;"> to be taken in
case of proceedings before the Adjudication Authority :</span></b></div>
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<span style="font-family: Verdana, sans-serif; font-size: 12pt;">Request for the Case
Statement submitted by Initiating Officer.</span></div>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-65382453666103547302017-07-11T00:14:00.000-07:002017-07-12T22:59:09.410-07:00Blog # 10. Unnecessary Litigations<div dir="ltr" style="text-align: left;" trbidi="on">
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On May 1, the Supreme Court’s three-Judge bench headed by the Chief Justice of India, J.S.Khehar, had imposed exemplary cost of Rs.25 lakh on the NGO, Suraz India Trust, for filing frivolous petitions, and wasting judicial time, and restrained the trust and its chairman, Rajiv Daiya, from filing any case, including PIL, in any court.</div>
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On June 22, the bench gave a reasoned order for its decision. The judgment, authored by CJI Khehar, on behalf of himself, and Justices D.Y.Chandrachud and Sanjay Kishan Kaul. In its order, accompanying the judgment, the bench said that the imposition of exemplary costs on the Trust would discourage “the instant nature of indiscretion, not only at the hands of the Suraz India Trust, but also at the hands of other similarly placed individuals, who may have been emboldened, to adopt the course treaded by Rajiv Daiya.</div>
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Giving details of the 12 different petitions and applications, which were agitated by Daiya in 64 different proceedings since 2009, under the PIL jurisdiction of the Court, the bench expressed its doubts whether Daiya was a proxy litigant, and its dismay over why he should be keen to resolve complex legal questions involving the appointment of Judges in the Higher Judiciary, without having competence to understand the legal nuances himself. In his petitions, he had challenged the constitutional validity of the Judges Inquiry Act, and repeatedly filed contempt petitions in the matter, when the Supreme Court dismissed them.</div>
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The bench also expressed its dismay over his repeated prayer that his petition ought to have been heard by a 11-Judge bench as a “matter of his imagination, and not founded on any legal basis”.</div>
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The bench took note of the fact that Daiya did not attempt to even make the slightest effort, to reason out the same, or to demonstrate the veracity of his actions. “The petitioner has been seriously remiss, in his judicial interventions”, the bench held.</div>
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In Paragraph 26, the bench observed: “Extremely important matters are taken up for consideration on a daily basis, and they lag behind sometimes, because individuals who were not competent to assist this Court, insist without due cause, to be granted a prolonged hearing. Hearing is sometimes sought (as in the instant case) even in matters, which the petitioners themselves are incompetent to understand and handle. All such misadventures have to be dealt with sternly, so as to prevent abuse of judicial time. Specially by such individuals, who freely cast imaginary and scandalous accusations, in making out their submissions.”</div>
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The bench made it clear to Daiya that this order should considered as a warning enough, for the future. It asked him to refrain himself from filing any cause in public interest, either directly or through any other individual, hereinafter, in any court.</div>
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The bench directed Daiya to deposit Rs.25 lakhs with the Supreme Court Advocates On Record Welfare Trust, within three months from May 1. Failing deposit, the costs shall be recoverable from him through his personal proceeds, if necessary, it held.</div>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-91130068593870870742017-07-04T04:11:00.001-07:002017-07-26T00:54:07.592-07:00Blog # 9. Understanding S.269ST of Income Tax Act<div dir="ltr" style="text-align: left;" trbidi="on">
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Amid the brunt of the De-monetization, which was relatively fresh in the minds of the common people, Budget 2017 spelt out a loud message. The message was very clear; the government wanted the economy to be digitally equipped with no or very less cash transaction. While it seems impossible for the government to have an absolute cash free economy, but the tremors of the change can be felt.</div>
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The budget 2017 has brought with it several measures which aims to stop or minimize tax evasion, money laundering and generation of black money. One of such measures happens to be putting a cap on the cash transactions. This has been done by bringing section 269ST which bars persons receiving money in cash. Though section 269SS very well corresponds to the idea and existed since the inception of the Income Tax Act, 1961 (“IT Act”) but the application of such section is limited to only loans and deposits while section 269ST has a very wide scope. The sae is as under for your ready reference:-</div>
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<strong>269ST. Mode of undertaking transactions.</strong></div>
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No person shall receive an amount of two lakh rupees or more—</div>
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(a) in aggregate from a person in a day; or</div>
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(b) in respect of a single transaction; or</div>
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(c) in respect of transactions relating to one event or occasion from a person,</div>
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otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account:</div>
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<strong>Provided</strong> that the provisions of this section shall not apply to—</div>
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(i) any receipt by—</div>
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(a) Government;</div>
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(b) any banking company, post office savings bank or co-operative bank;</div>
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(ii) transactions of the nature referred to in section 269SS;</div>
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(iii) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.</div>
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<strong>Explanation</strong>.—For the purposes of this section,—</div>
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(a) "banking company" shall have the same meaning as assigned to it in clause (i) of the Explanation to section 269SS;</div>
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(b) "co-operative bank" shall have the same meaning as assigned to it in clause (ii) of the Explanation to section 269SS.<strong>]</strong></div>
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The proposed section is envisaged to have a far reaching effect on the transactions and so much that even withdrawal of money from the banks will also be under the tax net. However, this is only one tremor of the quake and there are more to it. Thus in an attempt to unearth the intricacies, we have tried to collate and analyze a list of questions on the section and its probable impact.</div>
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<strong>1. What is the intent behind the insertion? When is the insertion effective from?</strong></div>
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The intent of the section is clearly to put restriction on the cash transaction and reduce the quantum of black money which affects the revenue of the government. Black money is generally transacted in cash and large amount of unaccounted wealth is stored and used in the form of cash. Therefore in a bid to control unaccounted money, the section has been proposed which will limit cash transactions and in essence the black money. The section will come in effect from the financial year 2017-18 i.e. Assessment year 2018-19 onwards.</div>
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<strong>2.</strong> <strong>What does the provisions of the section 269ST say?</strong></div>
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No person shall receive an amount of two lakh rupees or more—</div>
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in aggregate from a person in a day; or</div>
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in respect of a single transaction; or</div>
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in respect of transactions relating to one event or occasion from a person,</div>
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otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account:</div>
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Provided that the provisions of this section shall not apply to—</div>
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any receipt by—</div>
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<li style="text-align: justify;">government;</li>
<li style="text-align: justify;">any banking company, post office savings bank or co-operative bank;</li>
<li style="text-align: justify;">transactions of the nature referred to in section 269SS;</li>
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such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.</div>
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<strong>3. What kind of the receipts are within the ambit of the section?</strong></div>
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The provisions of the section are applicable to all kinds of receipts irrespective of its nature, if the amount is in cash and above the specified limit.</div>
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<strong>4. What are the instances that may trigger application of section 269ST?</strong></div>
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The transaction is applicable to all such cases where the amount is received in cash and exceeds the threshold limit of Rs. 2 lacs. Further the ambit of the section has been increased by adding certain circumstances. Let us look at the section :</div>
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<strong>First limb : Receipt from a person in a day.</strong></div>
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It states that a person cannot receive any amount in cash from a single person in a day. This means that if a person is paying Rs. 1,50,000 in cash then the person receiving can receive. However if a person pays in cash in different tranches during the day, the aggregate amount of which is 2 lacs and more, the person receiving cannot receive. So an obvious question comes, if a person pays in cash on different days, then will he be covered. The answer to question lies in the second leg.</div>
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<strong>Second Limb : In respect of single transaction</strong></div>
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It simply states that no single transaction should exceed Rs. 2 lacs or more. Thus if a person splits a invoice relating to a single transaction into different invoices of smaller values, then also the person receiving such amount cannot receive in cash. However what would happen if there are multiple cashflows i.e. typically in case of loan transactions whereby repayment is done in number of installments, the answer to this question lies in the third leg.</div>
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<strong>Third Limb : In respect of the transaction relating to one event or occasion from the person</strong></div>
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It simply states that if a person receives cash in different transactions but all the transaction relate to one event or occasion, then also the recipient cannot receive cash. That is to say if all the transaction relating to one event adds up to Rs. 2 lacs or more, then the person receiving the same cannot receive. Typically in case of a loan transaction, each EMI will represent an event and consequently it cannot be broken into multiple transactions.</div>
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<strong>5. What does the term event in the section 269ST mean?</strong></div>
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The term <strong>“Event”</strong> in section 269ST means an accounting event. That is to say, every such event which is required to be accounted for will be termed as an “Event”. For example, each lease payment in a lease transaction may be called an “Event” as separate invoice is required to be raised. Similarly, each EMI for which a separate invoice is raised will be an “<strong>Event”.</strong></div>
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Further, the word <strong>“event” or “occasion”</strong> in the law are vague and may cause a lot of confusion. The intent behind the provision is that people may not split their payments into various tranches and avoid the provision. The extended scope of the offence of the section is, therefore, anti-avoidance, and not to extend the scope of the provision to smaller value transactions which otherwise are not hit by the section.</div>
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The legal meaning of the expression <strong>“event”</strong> is Eventus est qui ex causa sequitur; et dicitur eventus quia ex causis evenit. An event is that which follows from the <strong>cause, and is called an “event”</strong> because <strong>it eventuates from causes.</strong></div>
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However, it does not seem that the intent of the law is to use the word event in a legal sense. The context is making of commercial transactions and therefore, the word should be understood in commercial sense.</div>
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For example,</div>
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<li style="text-align: justify;"><strong>Example No.1 :</strong> if a person sells goods of Rs 2,10,000, for which the payment of Rs 2 lacs is made by cheque immediately. Subsequently, a payment of Rs 10000 is made in cash. Can it be argued that Rs 10000 pertains to a single event, viz., the sale, and therefore, the section is attracted? One must read the section with its opening words, which talk about receiving an amount of Rs 2 lacs or more in cash. Therefore, the transaction or series of transactions must pertain to receipt of Rs 2 lacs or more in the aggregate. In addition, the transactions must be so interrelated or integrated that the effectively form part of the same event, but are segregated merely to avoid the section.</li>
<li style="text-align: justify;"><strong>Example No. 2</strong> – a person sells goods of Rs 2 lacs. The terms of payment provide for payment in 4 installments of Rs 50000 each over 4 months. The buyer pays the price in cash. Is it a contravention of the section?. Here the underlying issue is the meaning of the term transaction. The transaction, of course, is the making of the payment. Is it possible to argue that the transactions pertain to one event or one occasion? The underlying commercial terms of the transaction provided for 4 payments spread over 4 months. Each payment is an event and it is difficult to argue that the sale is an event, and the payments are simply transactions that follow from that event.</li>
<li style="text-align: justify;"><strong>Example 3</strong> – assume that a lender has given a loan of Rs 2 lacs. EMIs amount to Rs 10000 per month and are payable over 24 months. Can it be argued that all the EMIs must be aggregated together, because they pertain to the same event, which is giving of the loan? In our view, “one event or occasion” cannot be pertaining the cause or the agreement from which the payments come. As stated before, the intent of the section cannot be hit small amounts such as Rs 10000 in cash – because then there is an unintelligible distinction between a transaction involving a sizeable payment of Rs 2 lacs in one go, and 24 installments over 24 months, with each payment being only Rs 10000. The bar of the section is on large value transactions in cash.</li>
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<strong>6. Who all are required to comply with the provisions of section 269ST?</strong></div>
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The section starts with the words “No persons” and the term person has been defined in the section 2(31) of the IT Act. It includes an individual, HUF, AOP, BOI, Firm company etc. In essence the scope of the section is very wide as it is applicable to all kind of receipts and on every person receiving such receipts.</div>
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<strong>7. Does it cover cash received by borrowers also?</strong></div>
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On a plain reading of the section it appears that all kind of receipts are covered by the section, therefore it appears cash received by the borrowers also gets covered. However when we look at the exclusion part of the section, it states that the provision of the section is not applicable to transaction of nature referred in section 269SS. While section 269SS is applicable in situations where a person receives cash as loan or deposit. Consequently a borrower is not covered by the section 269ST.</div>
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<strong>8. Are provisions of section 269ST and 269T mutually exclusive?</strong></div>
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The provisions of the section 269 ST and 269T are mutually exclusive. Section 269T imposes obligation on the borrower and is restricted to loan and deposits while section 269ST imposes obligation on the recipient and covers all kinds of receipts whether loan, deposits or otherwise.</div>
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<strong>9. Impact of the section 269ST on NBFCs?</strong></div>
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In context of NBFCs, section 269ST would impact the transactions of the following nature, where cash is being used for giving effect to the same</div>
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<li style="text-align: justify;">Receipt of down payment</li>
<li style="text-align: justify;">Acceptance of security deposit</li>
<li style="text-align: justify;">Sale of second hand repossessed motor vehicles</li>
<li style="text-align: justify;">Refurbishment expenses</li>
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Where the quantum of the aforesaid transactions exceeds Rs. 2 lacs, the same would be required to be given effect, through banking channels. Hence the transactions which have been given effect to till date in cash terms, the same will not be possible after this section is enforced.</div>
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Further to illustrate, for e.g. where a particular transaction of sale of repossessed asset has been given affect to by an NBFC, and a single invoice of Rs 5,00,000 has been raised by them on the buyer. Generally there is an upfront receipt of cash on the event of sale and if the cash received happens to be Rs. 2 lacs or more then the same will fall under the net of the section.</div>
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<strong>10. Does the section cover loan repayment also?</strong></div>
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Section 269ST states that no person shall receive an amount of Rs. 2 lacs or more:</div>
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<li style="text-align: justify;">from a single person in a day in cash or</li>
<li style="text-align: justify;">in respect of a single transaction or</li>
<li style="text-align: justify;">in respect of multiple transactions relating to the same event from a single person.</li>
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So, if a company receives any amount in cash whether it is loan repayment or otherwise through a mode other than prescribed, the section will very well apply.</div>
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<strong>11. If the answer to question 10 is yes, then whether the limit of Rs. 2 lacs received in cash will be calculated by taking: a) repayment during the tenure of loan b) repayment during the financial year c) each EMI received by the company. </strong></div>
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Section 269ST covers loan repayment and is subject to the restrictions given in three legs. The provisions of section 269ST will be applicable in the following cases:</div>
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<li style="text-align: justify;">Where an amount of Rs. 2 lacs or more is received from a single person against a single transaction;</li>
<li style="text-align: justify;">Where an amount of Rs. 2 lacs or more is received from a single person against more than one transactions in a particular day;</li>
<li style="text-align: justify;">Where multiple amounts are paid, which adds up to Rs. 2 lacs or more and the same relates to a single event or occasion. By the term event we mean an accounting event and therefore each EMI becomes an event.</li>
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CBDT Vide Circular 22/2017 clarified that in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST. Check <a href="chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/http:/www.incometaxindia.gov.in/communications/circular/circular22_2017.pdf">Circular 22/2017</a></div>
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<strong>12. What is the consequence for the violation of the section?</strong></div>
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It has been proposed to introduce section 271DA in the Income Tax Act 1961, the section provides that if a receipt is received in contravention of the provisions of section 269ST, then a penalty equivalent to the amount of such receipt may be levied on the recipient by the Joint commissioner.</div>
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Clarification till date by CBDT</div>
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<li style="text-align: justify;">CBDT Vide <strong><a href="chrome-extension://oemmndcbldboiebfnladdacbdfmadadm/http:/www.incometaxindia.gov.in/communications/circular/circular22_2017.pdf">Circular 22/2017</a> </strong>2017 clarified that in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.</li>
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<strong>Disclaimer: </strong>The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although due care and precautions has been taken in providing accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. Errors can occur. I assume no liability or responsibility for any errors or omissions in the contents contained herein neither does it give any guarantee of completeness, accuracy . The information and data contained herein may be used at your sole risk after ensuring its accuracy, correctness or completeness.</div>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-44752723174230550602017-06-26T03:38:00.001-07:002017-07-12T22:57:34.434-07:00Blog # 8. Digest - June (Coming Soon)<div dir="ltr" style="text-align: left;" trbidi="on">
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-92049123569059156822017-06-25T23:44:00.000-07:002017-07-12T22:57:18.728-07:00Blog # 7. What is Strict Liability ?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The principle of strict liability
evolved in the case of <em><span style="border: 1pt none windowtext; padding: 0cm;">Rylands v Fletcher</span></em>. In the year 1868, the principle of
strict liability states that any person who keeps hazardous substances on his
premises will be held responsible if such substances escape the premises and
causes any damage. Going into the facts of the case, F had a mill on his land,
and to power the mill, F built a reservoir on his land. Due to some accident,
the water from the reservoir flooded the coal mines owned by R. Subsequently, R
filed a suit against F. The Court held that the defendant built the reservoir
at his risk, and in course of it, if any accident happens then the defendant
will be liable for the accident and escape of the material.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">Going by the principle laid in this case, it can be said that if
a person brings on his land and keeps some dangerous thing, and such a thing is
likely to cause some damage if it escapes then such person will be answerable
for the damaged caused. The person from whose property such substance escaped will
be held accountable even when he hasn’t been negligent in keeping the substance
in his premises. The liability is imposed on him not because there is any
negligence on his part, but the substance kept on his premises is hazardous and
dangerous. Based on this judicial pronouncement, the concept of strict
liability came into being. There are some essential conditions which should be
fulfilled to categorize a liability under the head of strict liability.<o:p></o:p></span></div>
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<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Essentials of Strict Liability</span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
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<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Dangerous Substances:</span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;"> The defendant will be held strictly liable only if a
“dangerous” substances escapes from his premises.<o:p></o:p></span></div>
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<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">For the purpose of imposing strict liability, a dangerous
substance can be defined as any substance which will cause some mischief or
harm if it escapes. Things like explosives, toxic gasses, electricity, etc. can
be termed as dangerous things.<o:p></o:p></span></div>
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<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Escape: </span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">One more essential condition to make the defendant strictly
liable is that the material should escape from the premises and shouldn’t be
within the reach of the defendant after its escape.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">For instance, the defendant has some
poisonous plant on his property. Leaves from the plant enter the property of
the plaintiff and is eaten by his cattle, who as a result die. The defendant
will be liable for the loss. But on the other hand, if the cattle belonging to
the plaintiff enter the premises of the defendant and eats the poisonous leaves
and die, the defendant would not be liable. In the judicial pronouncement
of <em><span style="border: 1pt none windowtext; padding: 0cm;">Reads v. Lyons & Co.</span></em> it was held that
if there is no escape, the defendant cannot be held liable.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Non-natural Use: </span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">To constitute a strict liability, there should be a non-natural
use of the land. In the case of <em><span style="border: 1pt none windowtext; padding: 0cm;">Rylands v. Fletcher</span></em>, the water collected in the
reservoir was considered to be a non-natural use of the land. Storage of water
for domestic use is considered to be natural use. But storing water for the
purpose of energizing a mill was considered non-natural by the Court. When the
term “non-natural” is to be considered, it should be kept in mind that there
must be some special use which increases the danger to others. Supply of
cooking gas through the pipeline, electric wiring in a house, etc. is
considered to be the natural use of land. For instance, if the defendant lights
up a fire in his fireplace and a spark escapes and causes a fire, the defendant
will not be held liable as it was a natural use of the land.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">These three condition needs to be satisfied simultaneously to
constitute a strict liability.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Exception to the Rule of Strict
Liability</span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">There are certain exceptions to the rule of strict liability,
which are-<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Plaintiff’s Fault: </span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">If the plaintiff is at fault and any damage is caused, the
defendant wouldn’t be held liable, as the plaintiff himself came in contact
with the dangerous thing.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">In the judicial pronouncement
of <em><span style="border: 1pt none windowtext; padding: 0cm;">Ponting v Noakes,</span></em><u><span style="border: none windowtext 1.0pt; mso-border-alt: none windowtext 0cm; padding: 0cm;"> t</span></u>he
plaintiff’s horse died after it entered the property of the defendant and ate
some poisonous leaves. The Court held that it was a wrongful intrusion, and the
defendant was not to be held strictly liable for such loss.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Act of God: </span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The phrase “act of God” can be defined as an event which is
beyond the control of any human agency. Such acts happen exclusively due to
natural reasons and cannot be prevented even while exercising caution and
foresight. The defendant wouldn’t be liable for the loss if the dangerous
substance escaped because of some unforeseen and natural event which couldn’t
have been controlled in any manner.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Act of the Third Party: </span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The rule also doesn’t apply when the damage is caused due to the
act of a third party. The third party means that the person is neither the
servant of the defendant, nor the defendant has any contract with them or
control over their work. But where the acts of the third party can be foreseen,
the defendant must take due care. Otherwise, he will be held responsible.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">For instance, in the case of <em><span style="border: 1pt none windowtext; padding: 0cm;">Box
v Jubb</span></em>, where the reservoir of the defendant overflowed because a
third party emptied his drain through the defendant’s reservoir, the Court held
that the defendant wouldn’t be liable.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Consent of the Plaintiff: </span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">This exception follows the principle of <em><span style="border: 1pt none windowtext; padding: 0cm;">violenti
non fit injuria</span></em>.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">For instance, if A and B are neighbors, and they share the same
water source which is situated on the land of A, and if the water escapes and
causes damage to B, he can’t claim damages, as A wouldn’t be liable for the
damage.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Absolute Liability</span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The rule of absolute liability, in
simple words, can be defined as the rule of strict liability minus the
exceptions. In India, the rule of absolute liability evolved in the case
of <em><span style="border: 1pt none windowtext; padding: 0cm;">MC Mehta v Union of India</span></em>. This is one of the most
landmark judgment which relates to the concept of absolute liability.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The facts of the case are that some oleum gas leaked in a
particular area in Delhi from industry. Due to the leakage, many people were
affected. The Apex Court then evolved the rule of absolute liability on the
rule of strict liability and stated that the defendant would be liable for the
damage caused without considering the exceptions to the strict liability rule.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">According to the rule of absolute
liability, if any person is engaged in an inherently dangerous or hazardous
activity, and if any harm is caused to any person due to any accident which
occurred during carrying out such inherently dangerous and hazardous activity, then
the person who is carrying out such activity will be held absolutely liable.
The exception to the strict liability rule also wouldn’t be considered. The
rule laid down in the case of <em><span style="border: 1pt none windowtext; padding: 0cm;">MC Mehta v UOI</span></em> was also followed by the Supreme
Court while deciding the case of Bhopal Gas Tragedy case. To ensure that
victims of such accidents get quick relief through insurance, the Indian
Legislature passed the Public Liability Insurance Act in the year 1991.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">The Public Liability Insurance
Act, 1991</span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">This act was introduced with the aim of providing immediate
relief to people who are victims of accidents in which handling of hazardous
substances is involved. The main focus of the Act is to create a public
liability insurance fund which can be used to compensate the victims.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The Act states that any person who is carrying out inherently
dangerous or hazardous activities should have insurances and policies in place
where he will be insured against liability to provide compensation to the
victims in case any accident takes place, and some injury occurs. This
liability is based on the principle of “no fault liability” or in other words,
the rule of strict liability and absolute liability. Inherently dangerous or
hazardous substance covers under its scope any mixture, preparation or
substance which because of its properties can cause serious harm to human
beings, animals, plants, property or the environment. If any substance is
inherently dangerous or hazardous due to its handling also, then also the
absolute liability of the defendant arises.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<strong><span style="border: none 1.0pt; color: #222222; font-family: "verdana" , "sans-serif"; padding: 0cm;">Concluding Remarks</span></strong><span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;"><o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">The rule of strict liability and absolute liability can be seen
as exceptions. A person is made liable only when he is at fault. But the
principle governing these two rules is that a person can be made liable even without
his fault. This is known as the principle of “no fault liability.” Under these
rules, the liable person may not have done the act, but he’ll still be
responsible for the damage caused due to the acts. In the case of strict
liability, there are some exceptions where the defendant wouldn’t be made
liable. But in the case of absolute liability, no exceptions are provided to
the defendant. The defendant will be made liable under the strict liability
rule no matter what.<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">Source : Legal Desire<o:p></o:p></span></div>
<div style="background: white; line-height: 18.6pt; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #222222; font-family: "verdana" , "sans-serif"; mso-bidi-font-family: Arial;">Author: Anugya Gupta, Team Member- Legal Desire</span></div>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-2094421938720308802017-06-23T04:40:00.004-07:002017-07-12T22:54:18.911-07:00Blog # 6. Evidentiary Value of Statement made before The Income Tax Authourities<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="border: 1pt none; color: #2b2b2b; font-size: 16pt; padding: 0cm;">In the year 2003-04,The Finance Minister mentioned in his budget speech about the confiscatory statement during the search and survey made by the Income Tax Authorities </span><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">as under :</span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;"><br /></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<i><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">“That one of his priorities concerning search
and survey operations is that no confessions shall be obtained during search
proceedings. Judicial opinion also is that admissions recorded during survey
operations are invalid. Yet, this is being freely done”.</span></i><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<br /></div>
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<span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">The Board of direct taxes issued<i> </i>instruction
to theAll Chief Commissioners of Income Tax, (Cadre Contra) & All Directors
General of Income Tax Inv. vide letter F. No. 286/2/2003-IT
(Inv) dated 10.03.2003 in regard of confiscatory statement in
the course of search and seizer as under:</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 16.5pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 16.5pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<i><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">“Instances have come to the notice of the
Board where assessees have claimed that they have been forced to confess the
undisclosed income during the course of the search & seizure and survey
operations. Such confessions, if not based upon credible evidence, are later
retracted by the concerned assessees while filing returns of income. In these
circumstances, on confessions during the course of search & seizure and
survey operations do not serve any useful purpose. It is, therefore, advised
that there should be focus and concentration on collection of evidence of
income which leads to information on what has not been disclosed or is not
likely to be disclosed before the Income Tax Departments. Similarly, while
recording statement during the course of search it seizures and survey
operations no attempt should be made to obtain confession as to the undisclosed
income. Any action on the contrary shall be viewed adversely.</span></i><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 16.5pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<i><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">Further, in respect of pending assessment
proceedings also, assessing officers should rely upon the evidences/materials
gathered during the course of search/survey operations or thereafter while
framing the relevant assessment orders”.</span></i><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<br /></div>
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<br /></div>
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<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">The
Income Tax Authorities use statement as a tool against
assessee to tax him or in other words penalize the assessee during the
assessment proceeding, survey and raid conducting at the assessee’s premises.
It means my statement used against me, whether it is law full? During
assessment, assessing Officer called the debtor, creditor, loaner and other
persons related to the business or any other person reflected in the books of
account and asked him to get statement against the profit declare by assessee or
to prove entries in the books of account of assessee, which gives effect to
assessee’s income or loss as declared by him . Generally, authorities cross
their jurisdiction to show extra enthusiasm due to any constrain at the back of
assessee made inquiry or obtain statement to use against the assessee along
with or without corroborative evidence. Whether it is lawful or permits natural
justice or allowed Income Tax Act, 1961, the Indian Evidence Act, 1872, any
other lawful agreement or the legal pronouncements. Answer is big NO because
any information, material collected by assessing officer, he must completely
discharges his duty towards assessee after providing opportunity of
“confronting such statement/evidence and examining it as provided under
evidence Act, 1872 otherwise their action will not give desired result and failed
to sustain at appellate stage.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">The
Income Tax Authorities are vested with two type powers administrative and Qusi
Judicial powers at a time. Therefore, they must make distinction between
two, which and where to use. We should discuss herewith qusi- judicial powers
of an assessing Officer,where he effect assessee’s interest
adversely; assessing officer must perform qusi- judicial authority function. He
must act within the frame work of law , natural justice and judicial
pronouncement. </span><span style="border: none 1.0pt; color: #555555; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">AO is not only a tax collector
but also a quasi judicial authority. In this capacity, he (AO) is duty bound to
allow such claim which assessee is otherwise entitled to have and has not
claimed the same. (In this connection, reliance was placed by ITAT on SC ruling.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #555555; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;"> <b>Mahalaxmi Sugar Mills</b> <b>160
ITR 920, DHC</b></span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">The Full Bench of the Delhi High </span><span style="border: none 1.0pt; color: #222222; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">Court</span><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;"> was considering a case of reopening u/s
147 within 4 years from the end of the assessment year. The </span><span style="border: none 1.0pt; color: #222222; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">Court</span><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;"> held that when a regular order of
assessment is passed in terms of section 143 (3) of the Act, a presumption
can be raised that such an order has been passed on application of mind. It was
held that if it be held that an order which has been passed purportedly without
application of mind would itself confer jurisdiction upon the Assessing Officer
to reopen the proceeding without anything further, the same would amount to
giving premium to an authority exercising </span><span style="border: none 1.0pt; color: #222222; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">quasi</span><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">–</span><span style="border: none 1.0pt; color: #222222; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">judicial</span><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;"> function to take benefit of its own wrong.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
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<b><span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">In CIT vs. Kelvinator of India Ltd. 256
ITR 1(Delhi)</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: 1pt none windowtext; font-size: 16pt; padding: 0cm;">When Assessing Officer perform administrative
duties, he is duty bund with the bosses’ directions and circulars. Assessing
Officer does not require to apply his mind and he is duty bound to follow
direction given by the high up. Applicability of such directions should be
judicious and try to trace scope of unwarranted harassment. </span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">The
Income tax Act, 1961 empower the assessing officer to take statement as
provided under Section 132 Sub Section (4) of Income Tax Act,1961:</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<i><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">The
authorised officer may, during the course of the search or seizure, examine on
oath any person who is found to be in possession or control of any books of
account, documents, money, bullion, jewellery or other valuable article or
thing and any statement made by such person during such examination may
thereafter be used in evidence in any proceeding under the Indian Income-tax
Act, 1922 (11 of 1922), or under this Act.</span></i><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<i><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;"> </span><span style="border: none 1.0pt; color: #2b2b2b; padding: 0cm;"><a href="http://law.incometaxindia.gov.in/DIT/HtmlFileProcess.aspx?FooterPath=D:%5CWebSites%5CDITTaxmann%5CAct2010%5CDirectTaxLaws%5CITACT%5CHTMLFiles%5C2010&DFile=ftn1section132.htm&tar=middle"><span style="color: #24890d;">1</span></a></span></i><i><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">[Explanation.—For the removal of doubts, it is hereby declared
that the examination of any person under this sub-section may be not merely in
respect of any books of account, other documents or assets found as a result of
the search, but also in respect of all matters relevant for the purposes of any
investigation connected with any proceeding under the Indian Income-tax Act,
1922 (11 of 1922), or under this Act.]</span></i><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">During
raid, survey or assessment, Income Tax Officials obtain “Statement”
from the assessee his agent or other people available in the premises, is it
required under the law? But it become procedure to strengthen the use of
available material irrespective of Hon’able Finance Minister was willing to
curb this procedure after considering legal pronouncements. The statement
furnish during survey is more confessional statement then admission because it
penalize the assessee by way of tax and penalty.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Section
131(1) empower the assessing officer with the powers vested in a court under
the Code of Civil Procedure,95 of 1908 in connection discovery and inspection
etc. The section 2(17)(d) the Code of Civil Procedure,1908 discussed about
powers of officer of court to administer oath along with other
judicial power. The discussion about statement, admission and confession
are used as a tool of evidence therefore, without discussing </span><span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">The Indian Evidence Act, 1872 it could not be completed. The
relevant section’s headline about the admissibility of statement is as under:</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">17. Admission defined</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">18. Admission- by party to
proceeding or his agent</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">19. Admissions by persons whose
position must be proved as against party to suit</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">20. Admissions by persons
expressly referred to by party to suit</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">21. Proof of admissions against
persons making them, and by or on their behalf</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">22. When oral admissions as to
contents of documents are relevant</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">23. Admission in civil cases
relevant</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">24. Confession caused by
inducement, threat or promise when irrelevant in criminal proceedings.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">25. Confession to police
officer not to be proved</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">26. Confession by accused while
in custody of police not to be proved against him</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">27. How much of information
received from accused may be proved</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">28. Confession made after
removal of impression caused by inducement, threat or promise, relevant If such
a confession as is referred to in section 24 is made after the impression
caused by any such inducement, threat or promise has, in the opinion of the
Court, been fully removed, it is relevant.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">29. Confession otherwise
relevant not to become irrelevant because of promise of secrecy, etc.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">30. Consideration of proved
confession affecting person making it and others jointly under trial for same
offence</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">31. Admissions are not
conclusive proof of the matters admitted but they may operate as estoppels
under the provisions hereinafter contained.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">32. Cases in which statement of
relevant fact by person who is dead or cannot be found, etc, is relevant</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">33. Relevancy of certain
evidence for proving, in subsequent proceeding, the truth of facts therein
stated</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">34. Entries in books of account
when relevant</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">35. Relevancy of entry in
public record made in performance of duty</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">36. Relevancy of statements in
maps, charts and plans</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">37. Relevancy of statement as
to fact of public nature, contained in certain acts or notifications</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">38. Relevancy of statements as
to any law contained in law-books</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">39. What evidence to be given
when statement forms part of conversation, document, book or series of letters
or papersWhen any statement of which evidence is given forms part of a longer
statement, or of a conversation or part of an isolated document, or is
contained in a document which forms part of a book, or of connected series of
letters or papers, evidence shall be given of so much and no more of the
statement, conversation, document, books, or series of letters or papers as the
Court considers necessary in that particular case to the full understanding of
the nature and effect of the statement, and of the circumstances under which it
was made.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">Statement means anything stated
in writing or orally to communicate in any matter. The admission or confession
is two words with the more or less gravity but used in different sense.
Admission is admissible under section 21 of Evidence Act as proof against
persons making by and on their behalf. Admission is generally made in civil
matters. The admission can be accepted or rejected or the part of the admission
can be accepted. All the admissions are not confession.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;"> </span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">Confession is made by an
accused before the authority during his custody. It is used in criminal matters
made by an accused to acknowledge guilt. All confessions are admission for the
evidence purpose. A confession and admission must be weighing on the whole,
either to accept or reject completely during the course of evidence.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">The admission made by a counsel
is binding upon the client because he engage a counsel to conduct his case, it
is presumed, he authorized him to make binding admission before the Court
during the conduct of case. The admission by a council on a fact is not
admissible as per evidence Act, 1872 but presentation of law is admissible. The
admission of question of law , fact or mixed question of law and facts are
arguable in appeal and it is not binding upon the client.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #1f1a17; font-family: "" serif "" , "serif"; font-size: 16.0pt; padding: 0cm;">Here is relevant case law for
judicial analysis of Confession/admission:</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Bansal
High Carbons (P)Ltd. 2009) 223 CTR 179 (Del).</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">No
addition can be made only on the basis of admission in statement u/s. 132(4),
however, any expenses deduction or allowance claimed under the Act which is
found to be false and admitted so by the assessee can be added as undisclosed
income. As the AO has failed to bring any evidence in support of the addition,
the additions were deleted</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Contech
Transport Services (P) Ltd. 2009) 19 DTR 191(Mum)(Trib).</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">There
was reassessment on basis of statements made by certain individuals. Assessee
was not given opportunity to cross examine those individuals.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Sanjeev
Kumar Jain (2009) 310 ITR 178 (P&H)</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Statement
made in the course of search and seizure was retracted only after issue of
summons, addition cannot be made merely on the basis of statement.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">CIT
vs. K. Bhuvanendra and others (2008) 303 ITR 235 (Mad.)</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Adition
of undisclosed income could not be made in the hands of assessee solely on the
basis of statement of its tax consultant, more so when the statement was not
voluntary statement and has been retracted. Statement made by a third person at
the time of survey or search of another concern could not be relied upon as he
is not the controlling person of that concern and no corroborative evidence was
found in that search.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">First
Global Stock Broking (P) Ltd. vs. ACIT (2008) 4 DTR 172 (Mum.</span></b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">)</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Where
oral evidence of any party is sought to be used against an assessee ,it is
necessary that information relating to such statement or the copy of deposition
should be furnished to the assess with opportunity to cross examination the
deponent ,if required by the assessee .if it is not done ,it is violation of
principle of natural justice. Hence order will be bad in law</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">CIT
v Ashwani Gupta ( 2010 ) 322 ITR 396 ( Delhi</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Abid
Malik Vs UOI</span></b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">,
(<b>2009TIOL272HC Del-FEMA)</b></span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Retracted
confession can be a piece of corroborative evidence and not as the sole
evidence on the basis which conviction can be ordered – Once confessional
statement is retracted, burden is on the prosecution to prove that the
statement was voluntary<br />
<br />
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<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Abdul
Qaymme Vs CIT (1990) 184 ITR 404</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">An
admission or acquiescence cannot be foundation of assessment when income is
returned under an erroneous or misconception of law. it is always open to
assessee to demonstrate and satisfy the authority concerned that a particular
income is not taxable in his hands and it was returned under an erroneous
impression of law.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<br /></div>
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<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">CIT
Vs M/s Dhingra Metal Works (2010TIOL693HC Del-IT)</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="color: #2b2b2b; font-size: 16.0pt;">From a
reading of Section 133A, it is apparent that it does not mandate that any
statement recorded u/s 133A of the Act would have evidentiary value. In the
High Court’s view, for a statement to have evidentiary value, the survey
officer should have been authorised to administer oath and to record sworn
statement. This would also be apparent from Section 132(4) of the Act. From the
perusal of section 132(4), it is apparent that while Section 132(4) of the Act
specifically authorizes an officer to examine a person on oath, Section 133A
does not permit the same;</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">2.
Moreover, the word ‘may’ used in Section 133A(3)(iii) of the Act clarifies
beyond doubt that the material collected and the statement recorded during the
survey is not a conclusive piece of evidence by itself;</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">3.
In any event, it is settled law that though an admission is extremely important
piece of evidence, it cannot be said to be conclusive and it is open to the
person who has made the admission to show that it is incorrect;</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;"> <a href="http://itatonline.org/archives/index.php/cit-vs-uttamchand-jain-bombay-high-court"><span style="color: #24890d; font-family: "" serif "" , "serif";">CIT vs. Uttamchand Jain</span></a> 320
ITR 554 (Bom),</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;"> it
was held the retracted confession can be relied only there is independent and
cogent evidence to corroborate the statement.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; text-indent: 36.0pt; vertical-align: baseline;">
<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Paul
Mathews</span></b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;"> <b>263 ITR 101 (Ker)</b></span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">and</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Kader
Khan</span></b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;"> <b>300 ITR 157 (Mad)</b></span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">For
a statement to have evidentiary value, the survey officer should have been
authorised to administer oath and to record sworn statement as under s.132 (4).
While s. 132(4) specifically authorizes an officer to examine a person on oath,
s. 133A does not permit the same.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Vinod
Solanki vs. UOI Civil Appeal No. 7407 of 2008</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">arising
out of SLP (C) No. 3537of 2008 dated 18th December, 2008 UOI (233) ELT
157 (S.C.))</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<br /></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">(i) The
retracted statement must be substantially corroborated by other independent and
cogent evidences, which would lend adequate assurance to the court that it may
seek to rely thereupon;</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">(ii)
The initial burden to prove that the confession was voluntary in nature would
be on the Department.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">(iii)
The burden is on the prosecution to show that the confession is voluntary in
nature and not obtained as an outcome of threat, etc. if the same is to be
relied upon solely for the purpose of securing a conviction.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">(iv) With
a view to arrive at a finding as regards the voluntary nature of statement or
otherwise of a confession which has since been retracted, the Court must bear
in mind the attending circumstances which would include the time of retraction,
the nature thereof, the manner in which such retraction has been made and other
relevant factors. Law does not say that the accused has to prove that
retraction of confession made by him was because of threat, coercion, etc. but
the requirement is that it may appear to the court as such.</span><b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"> </span><o:p></o:p></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-family: "arial" , "sans-serif"; padding: 0cm;">Hamish Engineering Industries (P ) Ltd v Dy. CIT</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
<div style="line-height: 18.0pt; margin-bottom: .0001pt; margin: 0cm; text-align: justify; vertical-align: baseline;">
<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">(
2010 ) 34 DTR ( Mumbai ) ( Trib ) 490.</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Statements
recorded from third parties which have been relied upon by the
AO for the purpose of assessment not having been provided to the assessee
,order of AO is bad in law to that extent , impugned order is set a side and
the AO is directed to re do the assessment according to law by providing the
said statement to the assessee as well as recorded satisfaction u/s 158BD.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<b><span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">Srinivas
Naik (2009)117 ITD 201 (Bang)</span></b><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
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<span style="border: none 1.0pt; color: #2b2b2b; font-size: 16.0pt; padding: 0cm;">In
the absence of recovery of any incriminating material during the search
conducted in the premises of the assessee group, the statement of third party
could not be used against the assessee in proceedings under Chapter XIVB,
especially when the statements were recorded behind the back of the assessee. </span><span style="color: #2b2b2b; font-size: 16.0pt;">Hon’able Supreme Court of India,
Different High Courts and Tribunal are having considerate view that in absence
of corroborated evidence a confession/ admission by way of statement could not
attain evidentry value in the eyes of law. It is settled that if the department
willing to use statement, department has to prove it with other evidences and
assessee is free to prove it contrary/against the department. In my opinion
statement gives only clue to prepare or made up case against the assesee for
example a cup of tea required raw tea, milk and sugar but without fire all
these things cannot cocked good tea. Raw tea can leave its flavor, and colour
but not aroma with fresh water and will take long time and will not provide tea
satisfaction. In the same way statement is a helping verb, which required verb
(corroborative evidence) to complete sentence. Statement can utilize by the
clever assessee in his favour because statement is interpretable.</span><span style="color: #2b2b2b; font-family: "arial" , "sans-serif";"><o:p></o:p></span></div>
</div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0tag:blogger.com,1999:blog-7581033258468973440.post-77386976935347533472017-06-22T06:50:00.003-07:002017-07-12T22:54:02.973-07:00Blog # 5. Section 194-IA Vs. 195<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="background-color: white; color: #5e5e5e; font-family: Arial, Verdana, Tahoma, "Times New Roman"; font-size: 13px; line-height: 19.5px; padding: 0px; text-align: justify;">
<strong style="margin: 0px; padding: 0px;">Sec 194IA:</strong><br />
<em style="margin: 0px; padding: 0px;">(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.</em><br />
<em style="margin: 0px; padding: 0px;">(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.</em><br />
<em style="margin: 0px; padding: 0px;">(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.</em><br />
<strong style="margin: 0px; padding: 0px;">Sec 194-IA deals with TDS on sale of immovable property. Under this section TDS is to be deducted @1% </strong>at the time of credit of such sum to the account of the transferor or at the time of payment of such sum whichever is earlier on sale of immovable property.<br />
The transferor or the seller contemplated in this section should be a <strong style="margin: 0px; padding: 0px;">resident</strong> of India. Therefore, this section only deals with<strong style="margin: 0px; padding: 0px;"> sale of property by residents </strong>and TDS @1% is to be deducted on such sale by resident seller provided the consideration for sale of property exceeds Rs. 50 lacs.<br />
Now let us examine relevant extracts of section 195 of the Income Tax Act’1961.<br />
<strong style="margin: 0px; padding: 0px;">Sec 195:</strong><br />
<em style="margin: 0px; padding: 0px;">Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or <strong style="margin: 0px; padding: 0px;">any other sum chargeable under the provisions of this Act</strong> shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:</em><br />
<em style="margin: 0px; padding: 0px;">[Explanation 2.—For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has—</em><br />
<em style="margin: 0px; padding: 0px;">(i) a residence or place of business or business connection in India; or</em><br />
<em style="margin: 0px; padding: 0px;">(ii) any other presence in any manner whatsoever in India.]</em><br />
<em style="margin: 0px; padding: 0px;">(2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the [Assessing] Officer to determine, [by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable.</em><br />
<em style="margin: 0px; padding: 0px;">[(3) Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may make an application in the prescribed form to the [Assessing] Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1).</em><br />
<em style="margin: 0px; padding: 0px;">(4) A certificate granted under sub-section (3) shall remain in force till the expiry of the period specified therein or, if it is cancelled by the [Assessing] Officer before the expiry of such period, till such cancellation…..</em><br />
Section 195 talks about sums payable to a non-resident <strong style="margin: 0px; padding: 0px;">which are chargeable to tax in India</strong> under the Income Tax Act’1961.<br />
When a Non-resident sells an Immovable property in India, Capital gains income may accrue on such sale to the Non-resident which is chargeable to tax in India. Therefore, the consideration from sale of property in India by a non-resident is chargeable to tax in India and is covered by Section 195 and therefore tax has to be deducted at the time of payment of such consideration.<br />
Now the question arises as to the rate of deduction of tax. Sub-section (1) of section 195 prescribes that tax is to be deducted at the <strong style="margin: 0px; padding: 0px;">rates in force. </strong><strong style="margin: 0px; padding: 0px;">Rates in force </strong>is the rate at which a particular type of income is taxable under the provisions of the Income Tax Act. For the purpose of sale by a non-resident of an immovable property, we will have to see the rates prescribed for taxation of capital gains. As per section 112, Long term capital gains on sale of a capital asset is to be taxed at the rate of 20%. Short-term capital gain on sale of a capital asset (except on sale of equity shares and equity oriented mutual funds) is to be taxed at the slab rates prescribed under the Finance Act applicable to the year of sale. Therefore, here we can draw the conclusion that the buyer/ transferee has to deduct tax on sale of immovable property by the non-resident at the slab rate prescribed in case property is sold within three years of its purchase and at the rate of 20% where property is sold after three years of its purchase i.e where LTCG accrues.<br />
<strong style="margin: 0px; padding: 0px;">Section 90:</strong><br />
Now as per section 90 of the Income Tax Act’1961, the rates of taxation on taxable income of a non-resident will be as prescribed under the Income Tax Act’1961 or under the DTAA of India with the country of which the non-resident is a resident, whichever is more beneficial to the tax payer. Therefore, if the rates prescribed for taxation of capital gains in the DTAA are less than the 20% rate or the slab rate, then tax will be deducted at that rate. However, for availing the benefit of lower rate of deduction of tax under the DTAA, the non-resident transferor will have to furnish a Tax Residency Certificate to the payer indicating the tax residency of which he is a resident.<br />
<strong style="margin: 0px; padding: 0px;"><br /></strong></div>
<div style="background-color: white; color: #5e5e5e; font-family: Arial, Verdana, Tahoma, "Times New Roman"; font-size: 13px; line-height: 19.5px; padding: 0px; text-align: justify;">
<strong style="margin: 0px; padding: 0px;">On what amount is the tax to be deducted?</strong><br />
After determining the rate of tax, now the question arises that on which amount is the tax to be deducted. The tax is to be deducted on income only i.e on the amount of capital gains arising to the non-resident out of the total consideration. But how will the payer determine the amount of capital gains arising to the non-resident transferee. The answer lies in sub-sections (2) & (3) of section 195. Under, the provisions of these sub-sections the payer or transferor/payee may make an application to the jurisdictional Assessing officer to determine the sum of capital gains on which tax is to be deducted. The application to the AO will be made in the prescribed form. The amount determined by the AO will be the amount on which tax is to be deducted. However, <strong style="margin: 0px; padding: 0px;">if no such application</strong> is made by the payer or the payee to determine the sum chargeable to tax<strong style="margin: 0px; padding: 0px;">, the tax will be deducted on the entire consideration</strong> for sale of immovable property.<br />
<a name='more'></a>S.194-IA vs 1</div>
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Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com1tag:blogger.com,1999:blog-7581033258468973440.post-72453285497296072542017-06-21T23:28:00.002-07:002017-07-12T22:53:47.713-07:00Blog # 4. Husband Not liable for Cheque issed by wife in personal capacity<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">The Hon'ble Gujarat High Court, in Harshad Manubhai Malavaiya vs State Of Gujarat, held that husband is not liable for a cheque issued by the wife in her personal capacity.</span></div>
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<span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">In the instant matter, Justice JB Pardiwala examined the question whether the petitioner can be made vicariously liable under Section 138 for the cheque dishonoured which were issued by his wife in personal capacity.</span></div>
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<span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;"><span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">Relying on the Supreme Court’s judgment in the matter of M/s Aparna A Shah vs M/s Sheth Developers Pvt Ltd and considering the language used in Section 138 and taking note of background agreement pursuant to which a cheque is issued by more than one. </span><span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">this court held that it is only the “drawer” of the cheque who can be made liable for the penal action under the provisions of the NI Act.</span></span></div>
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<span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">The normal rule in the cases involving criminal liability is against vicarious liability. To put it clear, no one is to be held criminally liable for an act of another.</span></div>
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<span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">In the above judgment, the Supreme Court held that in case of issuance of cheque from joint accounts, a joint account holder cannot be prosecuted unless the cheque has been signed by each and every person, who is a joint account holder.</span></div>
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<span style="background-color: white; color: #444444; font-family: "lato" , "arial" , sans-serif;">In other words, only the person who signs the cheque can be prosecuted for dishonour of cheque under Section 138 of the Negotiable Instruments Act....</span></div>
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<a href="https://indiankanoon.org/doc/124948761/">Link to the Judgement</a></div>
Adv. CA. Mohit Balanihttp://www.blogger.com/profile/03161675486956253275noreply@blogger.com0