Connect us       New User?     Subscribe Now
Confirm your Email ID for Updates
16.09.2015 - Voice of CA presents - Updates
Wednesday, September 16, 2015

  I. Headlines Today:    

  1. MCA Noti.: The Companies (Acceptance of Deposits) Second Amendment Rules 2015  (Click for detail)
  2. CBDT forms panel to examine industry-based tax assessment system  (Click for detail)
  3. FDI Allowed via Partly Paid Shares Warrants  (Click for detail)
  4. SEBI enhances disclosure requirement for NBFCs on issuance of debt securities  (Click for detail)
  5. Guidance Note on Audit of Internal Financial Controls Over Financial Reporting  (Click for detail)
II.  Series of Synopsis on SA:

1.  In continuation of our mail of September 10, 2015 [Click for 10.09.2015 - Updates], with which Synopsis on SA 260, among others, was sent, attached now – 9th in the captioned Series - is the Synopsis on SA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management.

Click here for the ‘Synopsis’


III.  Direct Taxes Case Laws:

1.  CIT Vs. Chetan Gupta, I.T.A. No. 72 of 2014, Date of Order: 15.09.2015, High Court of Delhi

Whether the ITAT was correct in holding that since notice under Section 148 of the Income Tax Act (the Act) was not served on the Assessee in accordance with law, the re-assessment made consequent thereto was without jurisdiction and liable to be quashed?

Held Yes

(i)    Under Section 148 of the Act, the issue of notice to the Assessee and service of such notice upon the Assessee are jurisdictional requirements that must be mandatorily complied with. They are not mere procedural requirements.

(ii)    For the AO to exercise jurisdiction to reopen an assessment, notice under Section 148 (1) has to be mandatorily issued to the Assessee. Further the AO cannot complete the reassessment without service of the notice so issued upon the Assessee in accordance with Section 282 (1) of the Act read with Order V Rule 12 CPC and Order III Rule 6 CPC.

(iii)    Although there is change in the scheme of Sections 147, 148 and 149 of the Act from the corresponding Section 34 of the 1922 Act, the legal requirement of service of notice upon the Assessee in terms of Section 148 read with Section 282 (1) and Section 153 (2) of the Act is a jurisdictional pre-condition to finalizing the reassessment.

(iv)    The onus is on the Revenue to show that proper service of notice has been effected under Section 148 of the Act on the Assessee or an agent duly empowered by him to accept notices on his behalf. In the present case, the Revenue has failed to discharge that onus.

(v)    The mere fact that an Assessee or some other person on his behalf not duly authorised participated in the reassessment proceedings after coming to know of it will not constitute a waiver of the requirement of effecting proper service of notice on the Assessee under Section 148 of the Act.

(vi)    Reassessment proceedings finalised by an AO without effecting proper service of notice on the Assessee under Section 148 (1) of the Act are invalid and liable to be quashed.

(vii)    Section 292 BB is prospective. In any event the Assessee in the present case, having raised an objection regarding the failure by the Revenue to effect service of notice upon him, the main part of Section 292 BB is not attracted.

On the facts of the present case, the Court finds that the ITAT was right in its conclusion that since no proper service of notice had been effected under Section 148 (1) of the Act on the Assessee, the reassessment proceedings were liable to be quashed. Consequently, the question framed is answered in the affirmative, i.e., in favour of the Assessee and against the Revenue.

(Please click here for judgment)


2.  Oriental Insurance Company Vs. CIT, I.T.A. No. 174 of 2013, Date of Order: 15.09.2015, High Court of Delhi

Whether the AO would have jurisdiction to examine the question as to the taxability of the profits and gains from sale of securities as it is contended that the AO had already expressed his opinion in that regard in the initial assessment.

Held No.

The Assessee claimed that the profits on sale/redemption of investments amounting to `505.33 crores for the year ending 31.03.2004, were exempt from tax in view of the omission of clause (b) of Rule 5 of the First Schedule of Income Tax Act w.e.f. 01.04.1989 and in terms of the CBDT Circular No. 528 dated 16 December, 1988, providing explanatory notes to Finance Act, 1988. As per the said Circular, Rule 5 of the First Schedule of the Act was amended to provide tax exemption in respect of profits earned by General Insurance Companies on sale of investments. The provisions of clause (b) to Rule 5 were re-instated by virtue of the Finance (No.2) Act, 2009 w.e.f. 01-04-2011. Insurance Companies are required to include income from sale of investments directly in their Profit & Loss Account and, therefore, provisions of Rule 5 were amended so as to tax this income. The Assessee urged that this amendment was not retrospective and, therefore, the income from sale/redemption of investments during the Previous Year 2003-04 was not taxable. The AO rejected the above contention of the Assessee and held that the intention of the Legislature in deleting clause (b) of Rule 5 of the First Schedule of the Act was to exempt all types of gains on investments whether by way of appreciation or by way of realization and simultaneously to disallow all types of losses on investments whether by way of depreciation or by way of realization. 

It is at once clear from the above that the AO had expressed its firm opinion that profits and gains on realization of investments were exemp from taxation. It is also not disputed that the Assessee had appended a note expressly explaining that a sum of `5,05,33,63,209/- had been deducted from the taxable income. In the above circumstances, it cannot be disputed that the exemption claimed by the AO in respect of the profit on sale/redemption of investments was duly disclosed and the AO had also opined on the merits of the taxability of profits on sale/redemption of investments. The income from profit on sale/redemption of investments is now sought to be taxed as income which had escaped assessment. This, in our view, clearly represents a change in the opinion with regard to the taxability of the income in question. It is well settled that the power under Section 147 of the Act is not a power of review but a power to reassess.

(Please click here for judgment)

IV.  Indirect Taxes Case Law:

1.  Commissioner of Central Excise and Customs Vs. M/s Rasmi Wax Coated Paper & Printing Industry, C.E.A. Nos. 16 & 25 of 2005, Date: 09.07.2015, High Court of Andhra Pradesh


Whether the cutting of jumbo rolls into smaller sizes and printing on them by a job worker would amount to manufacture as defined under the Central Excise

Facts of the case

The respondents industrial concern received paper in jumbo rolls of width 470 mm to 520 mm and length 12,100 mts. The Jumbo rolls are cut into strips of width 35mm to 48 mm and length of 2000 mts., to 3000 mts., and the same returned to M/s VST Industries, Azamabad (in short VST), in smaller rolls, commonly known in trade as bobbins. These bobbins are used by the VST in its process of manufacture of filtered cigarettes. The Commissioner of Customs and Central Excise, Hyderabad, issued notice to the respondent alleging suppression of turnover with respect to the manufacturing of printed cork tipping paper falling under Chapter Sub-heading No.4901.90. The period covered under the show cause notice was 11/94 to 9/99.


The Tribunal relied upon the judgement of Supreme Court in the case of Headway Lithographic Co. v. CCE [Civil Appeal No. 8646 of 2003]. In the said judgement the apex court has held the products manufactured by the Headway Lithographic Company would be classifiable under Chapter 49, however, held Printing of biri wrappers would not and can never fit under the description transfer decalcomanias. Inasmuch as in the present case on plain paper simple printing is done on the wrappers which are cut to size for the purpose of wrapping the biris and there is no use of sheet of plastics.

Thus, the court has dismissed the appeal filed by the department and held in favour of assessee.

(Please click here for judgment)


V.  Company Law & Other Matters:

1.  Mysore Realty Pvt. Ltd. Vs. H.P. Basavaraju, CA No. 4/2014 & CP No. 11/2013 , Date: 03.07.2015, Company Law Board - Chennai

In the matter of Companies Act, 1956 Section 397 & 398

With regard to the doctrine unclean hands it is to be noted that unless and until the petition is enquired after completion of all the pleadings, it cannot be known that whether the petitioners have approached this Bench with clean hands or unclean hands.

(Please click here for judgment)

Manju Prabha Prasad Pillai Vs. R.P. Hospitalities Pvt. Ltd., CP No. 70/2012, Date: 20.07.2015, Company Law Board - Chennai

In the matter of Companies Act, 1956 Section 111, 397, 398, 402 & 403

As per the provision of law only members of the Company have the right to apply to the CLB U/S 397 or 398 and not any other person. Even if a person is a member or a shareholder has no right to apply under above provisions of Law until he or she fulfils the requisite qualification in the case of a company having share capital, not less than one hundred members of the company or not less than one- tenth of the issued share capital of the Company.

(Please click here for judgment)   


VI.  Reported Cases:

Direct Taxes Segment:

1.  First proviso to section 2(15) have no role for registration of a trust or institution under section 12A or 12AA for granting or declining registration or in respect of cancellation of registration.
2.  Provisions of section 194C would not apply where payments made by assessee to Punjab Water Supply and Severage Board were on account of legal obligation rather than contractual agreements.  
(Please click here for detail)


VII.  3rd Global Tax Summit:

1.  The Confederation of Indian Industry (CII) is organizing its day long 3rd Global Tax Summit.  This is on Thursday, 8 October 2015 at Shangri-La’s, Eros Hotel, New Delhi. You may click the link given below for the detail:


 Golden Rules:

  "Give me six hours to chop down a tree and
I will spend the first four sharpening the axe. 
.............. Abraham Lincoln"


  Thanks & Regards


Voice of CA

« Back
Online Poll
Connect Us       New User?     Subscribe Now