Journal 38

Ahmedabad Chartered Accountants Journal
E-mail : caaahmedabad@gmail.com
Volume : 38
Website : www.caa-ahm.org
Part : 01
April, 2014
Journal Committee
CA. Rajni M. Shah
Chairman
CA. Bharat C. Mehta
CA. Shailesh C. Shah
CA. Prakash B. Sheth [President (Ex-Officio)]
CA. Ashok C. Kataria

Convenor
Members
CA. Hemant N. Shah
CA. Jayesh C. Sharedalal

CA. Yogi K. Upadhyaya
CA. Chintan M. Doshi [Hon. Secretary (Ex-Officio)]
In this issue
C o n te n t s
A uthor' s N am e
Page N o.
Editor's Views
CA. Rajni M. Shah
President's Message
CA. Prakash B. Sheth
CA. Pradip K. Modi

CA. Anuj J. Sharedalal
6
9
Glimpses of Supreme Court Rulings
Advocate Samir N. Divatia
17
From the Courts
CA. C. R. Sharedalal &

18
Tribunal News
CA. Yogesh G. Shah &

CA. Aparna Parelkar
21
Unreported Judgements
CA. Sanjay R. Shah
25
Controversies
CA. Kaushik D. Shah
31
Judicial Analysis
Advocate Tushar P. Hemani
33
A rtic l es :
A case study under Section 138 of Negotiable
Instrument Act
Companies Act, 2013 Provisions relating to Depreciation
C ol u m ns :
Statute Update
(a)
Service Tax Judgements
CA. Ashwin H. Shah
37
(b)
Fema Update
CA. Savan A. Godiawala
39
(c)
Value Added Tax
CA. Bihari B. Shah
41
(d)
Corporate Laws
CA. Naveen Mandovara
43
(e)
Circulars & Notifications
CA. Kunal A. Shah
55
From Published Accounts
CA. Pamil H. Shah
56
News Lounge
Mr. Manthan Khokhani
58
Association News
CA. Chintan M. Doshi &

CA. Abhishek J. Jain
60
Updates from ICAI
CA. Uday I. Shah
16
April, 2014
Attention
Members / Subscribers / Authors / Contributors
1.
Journals are carefully posted. If not received, you are requested to write to the Association's Office within
one month. A copy of the Journal would be sent, if extra copies are available.
2.
You are requested to intimate change of address to the Association's Office.
3.
Subscription for the Financial Year 2014-15 is ` 400/-. Single Copy (if available) ` 40/-.
4.
Please mention your membership number / journal subscription number in all your correspondence.
5.
While sending Articles for this Journal, please confirm that the same are not published / not even meant
for publishing elsewhere. No correspondence will be made in respect of Articles not accepted for
publication, nor will they be sent back.
6.
The opinions, views, statements, results published in this Journal are of the respective authors / contributors
and Chartered Accountants Association, Ahmedabad is neither responsible for the same nor does it
necessarily concur with the authors / contributors.
Membership Fees (For ICAI Members)
Life Membership
` 7500/Entrance Fees
` 500/Ordinary Membership Fees for the year 2014-15
` 600/- / ` 750/Financial Year : April to March
7.
Professional Awards
The best articles published in this Journal in the categories of 'Direct Taxes', 'Company Law and Auditing' and
'Allied Laws and Others' will be awarded the Trophies/ Certificates of Appreciation after being vetted by
experts in the profession.
Articles and reading literatures are invited from members as well as from other professional colleagues.
Published By
CA. Rajni M. Sh ah,
on behalf of Chartered Accountants Association, Ahmedabad, 1st Floor, C. U. Shah Chambers, Near Gujarat
Vidhyapith, Ashram Road, Ahmedabad - 380 014.
Phone : 91 79 27544232
Fax
: 91 79 27545442
No part of this Publication shall be reproduced or transmitted in any form or by any means without the
permission in writing from the Chartered Accountants Association, Ahmedabad.
While every effort has been made to ensure accuracy of information contained in this Journal, the Publisher
is not responsible for any error that may have arisen.
Printed : Pratiksha Printer

M-2 Hasubhai Chambers, Near Town Hall, Ellisbridge, Ahmedabad - 380 006.
Mobile : 98252 62512 E-mail : pratikshaprinter@yahoo.co.in
April, 2014
Editor's Views
Thank you
This is my last editorial for the CAA, Ahmedabads Journal. The one year term comes to an end as I bid adieu to my
fellow professionals and avid readers. I grab this opportunity to express my sincere thanks and gratitude for all the
Support that I have received over the past year.
Thanks and Gratitude must be used freely for acknowledging others for their support, Co-operation and help. The
impact of expressing gratitude is tremendous and far reaching.
The power of gratitude is such that it induces the other person to also reciprocate similar feelings and this way a strong
network is built up making all happy.
The world is an easy place to live when you are generous with your thank yous. Right from your beginning of the day,
there are so many people and so many events who support you and make you to achieve what you wish. Even the GOD
nature helps you to live better. The feeling of gratitude should not be just a formality but must come from within
naturally. The ill feelings will be eliminated amongst the people and at the end of the day there will be happiness that
is what for the world is in search of all the time.
Particularly for the professionals, the need of cultivating a habit of expressing gratitude is maximum as the theory of
gratitude on one hand releases the professional stress and on the other helps in growth and development of the
profession, per se.
More energy, more forgiving attitudes, less depression, social connection and better physical health are direct benefits
of gratitude.
Initially one may feels that the expression of thanks and gratitude is a formality and just to please others, people are
expressing but on a longer run the positive energy is experienced by both the person expressing gratitude and to whom
it is being expressed.
I have observed positive negativity in the concept being discussed and few sarcastic examples are worth mentioning
1.
Thanks to Yuvraj Singhs innings in the WC T20, 2014, Manmohan Singh would have heaved a sigh of relief. His
innings isnt the worst anymore.
2.
Thanks to the recent police action, they can now aptly be called Cannon Ke Rakhwale.
3.
Thanks to the recent chain of events in the BCCI, it has proved that it is more of Board of Control; rather than
Cricket in India.
4.
The Rupee used to make a lot of sense. Thanks to the devaluation it now only makes cents.
5.
Thanks to the corrupt business practices, Business Ethics has become the most glorified oxymoron.
6.
Thanks to twitter, even Indian bowling attack has become twitter friendly. No one crosses 140.
7.
Thanks to the entertainment channels who have started to show reality shows, the news channels have started to
show fiction.
8.
Thanks to the BJPs Prime ministerial candidates rich geographic knowledge, even if you are from Somaliya, he
would relate you to Gujarat.
9.
Thanks to Mr. Arnab Goswami, we now have a different measure available to measure the sound decibel.
10. Thanks to the Constitution of India, the people of India enjoy freedom of speech in a country where its own PM is
yet to experience it.
April, 2014
Editor's Views
11. Thanks to the terror attacks in the Nation, the Government of India has started to look more like an Insurance
Company rather than securing the people.
12. The dollar value increases against Rupee: Thanks to RBI for making sure that something is rising along with
inflation.
13. Aerial Surveys are common in Election time: Thanks to high fliers politicians to give a whole new meaning of
Survey Bhavantu Sukhani
14. 14 Fake Counters allegedly took place in last decade in the state of Gujarat: Thanks to Human Rights Commission
for not bothering those who carried out other 1400 encounters across the country.
15. Our daily wages no longer guarantee daily veggies: Thanks to inflation.
16. Thanks to the politicians nasty comments, we no longer need a source of entertainment.
17. Aam Aadmi Party Convener changed his stands fast: Psychiatrists of the country thank him for providing unique
case for their study.
18. The Income tax department is issuing various notices, withholding refunds of taxes and not proceeding with many
pending applications: Thanks to them from CA fraternity for keeping them busy even in slack season.
19. Many citizens make new friends in traffic jam: Thanks to the BRTS
20. Middle aged parents (Couples) get a chance to come closer to one another: Thanks to their kids to move to foreign
countries leaving parents here.
21. Family members today do not get time to quarrel: Thanks to daily TV soaps and news channels.
22. The game of cricket is more of Betting and bowling now: Thanks to financially poor Cricketers
23. ICAI earned huge profit for the year: Thanks to CA students for donating generously.
24. Only few thousands people got dead in a natural calamity: Thanks Our Army for restricting the death toll.
25. Despite all odds common man is still optimistic: THANK GOD
In the end, a gentle reminder in view of the ensuing elections, - PLEASE VOTE.
Let us all hope that the ensuing elections do not bring a yet another Fractured mandate with a coalition Dharna as
an integral part and parcel !. Let our dreams not remain a distant dream.
Thank you
CA . Rajni M. Shah
Edi tor
rmshah@satyam.net.in
08.04.2014

Gratitude is not the greatest of virtues but

the parents of all others.: Cicero
April, 2014
President's Message

shethpb@rediffmail.com
Dear Professional Colleague,

This is the last time I am communicating with
members as the President of this august Association.
As I write, I am experiencing a mixed set of emotions.
On one hand I consider myself fortunate where I
could lead the Chartered Accountants Association for
one year as the President and on the other hand
understanding the fact that I will not be able to write
as the President henceforth.
By the time members receive the April2014 issue of
the Journal, most of them would have done through
the bank statutory audit assignment. However,
considering the new criteria and limit of advances
for bank branch audit, the total number of branches
have reduced considerably. Apart from reduction in
number of bank branches for statutory audit, the
environment around a chartered accountant is
witnessing a sea wide change. New laws are taking
over the old provisions including. The Companies Act
2013 has replaced the Companies Act of 1956.
DTC and GST are at the door steps of the
professionals. As from 01/04/2014, 183 more
sections of Companies Act have been made operative
and also the rules have been notified. It is the time
when we will have to start learning/discussing the
complexity of various provisions of the new
Companies Act. Moreover, with the advent of
technology, the procedural aspects are also going
through a major change. Filing of returns and TDS
statements, online, are the examples of this changing
era.
In view of this ever changing environment, I salute
and adore our motto Change Adopt Abide. As the
change is imperative, we have to prepare ourselves
to such an extent that we adapt each and every
change faced from the external environment. This
rule of change and its adaptation is to be abided by
for sustainable growth. Thus, Change Adapt
Abide was the theme under the backdrop of which
all the activities of the Association were carried out
during the year.
I indeed take pride in informing the members that
one more prestigious function of Felicitation of
Seniors members of our Association, 50 Years of
Excellence is to be held on 3rd May, 2014 at ICAI

Bhawan at 4.00 P.M. The function is to honor the
senior members of the Association who have
completed 50 years as a chartered accountant, as a
member of ICAI. I am fortunate enough that the
event is held in my tenure as the President. It is an
opportunity for all the members to express their
gratitude towards the pioneers of this noble
profession and hence I request all members to remain
present in large numbers as the Association felicitates
its Jewels.
The month of April is also very important at the
national level. The election for the new Parliament is
being held during the month of April14 and May14.
Everyone is wishing for a change after a dismal
performance of UPA-II government in last 10 years.
It is the duty of every citizen to go out and vote. I
believe, the person who fails to exercise his right to
vote is committing a crime because it is this
indifference towards the nation, people who should
not be the part of the legislative system, get elected.
It is always better to participate constrictively than to
regret later. The voting in Gujarat is to be held in a
single phase on 30-04-2013. I appeal everyone to
go out and participate in this great festival of
democracy.
As this is the last message from me as the President
of Chartered Accountants Association, Ahmedabad,
I would like to put on record my sincere appreciation
and gratitude to all office bearers, executive
committee members, all past presidents, all chairmen,
all conveners, members of respective committees, all
panel members of knowledge clinic, all authors of
articles and columnists, all faculties, all members of
association and office staff for their support,
guidance and encouragement provided to me. I pray
the Association scales new heights in the days to
come.
With best regards,
President
08/04/2014
April, 2014
A case study under Section 138 of

Negotiable Instrument Act
CA. Pradip K. Modi

pkm@pkmodi.com
The Section 138 of the Negotiable Instrument Act 1881

( herein after referred as Act) was brought on statute
by Central Act 66 of 1988 w.e.f. April 1, 1989 with a
view to penalise the accused in cases of dishonour of
certain cheques for insufficiency of funds in the accounts
of the Drawer. The object of bringing Section 138 on
statute appears to be to inculcate faith in the efficacy of
banking operations and credibility in transacting business
on negotiable instruments. Despite civil remedy, Section
138 intended to prevent dishonesty on the part of the
drawer of negotiable instrument to draw a cheque without
sufficient funds in his account mainly maintained by him
in a bank and induce the payee or holder in due course
to act upon it. Section 138 draws presumption that one
commits the offence if he issues the cheque dishonestly.
It is seen that once the cheque has been drawn and
issued to the payee and the payee has presented the
cheque and thereafter, if any instructions are issued to
the Bank for non-payment and the cheque is returned to
the payee with such an endorsement, it also amounts to
dishonour of cheque and it comes within the meaning of
Section 138 (M/S. Electronics Trade & vs M/S. Indian
Technologists, AIR 1996 SC 2339).
Therefore, How far it is correct to say that once cheque
is issued by drawer , need to be honoured at any cost to
avoid consequences of imprisonment under section 138
of Act. It is necessary to bring to notice that section 139
of Act provides opportunity for rebuttal of allegations on
Drawer. In view of this , the discussion of section 138
is essential. Section 138 is reproduced as under:
138. Dishonour of cheque for insufficiency, etc., of
funds in the accounts. Where any cheque drawn
by a person on an account maintained by him
with a banker for payment of any amount of
money to another person from out of that account
for the discharge, in whole or in part, of any debt
or other liability, is returned by the bank unpaid,
either because of the amount of money standing
to the credit of that account is insufficient of the
amount of money standing to the credit of that
account is insufficient to honour the cheque or
that it exceeds the amount arranged to be paid
from that account by an agreement made with
that bank, such person shall be deemed to have
6
committed an offence and shall, without prejudice

to any other provision of this Act, be punished
with imprisonment for a term which may extend
to one, or with fine which may extend to twice
the amount of the cheque, or with both:
Provided that nothing contained in this section shall apply
unless:
(a) the cheque has been presented to the bank within
a period of six months from the date on which it is
drawn or within the period of its validity, whichever
is earlier ;
(b) the payee or the holder in due course of the cheque,
as the case may be, makes a demand for the
payment of the said amount of money by giving a
notice in writing, to the drawer of the cheque, within
fifteen days of the receipt of information by him
from the bank regarding the return of the cheque
as unpaid ; and
(c) the drawer of such cheque fails to make the payment
of the said amount of money to the payee or as the
case may be, to the holder in due course of the
cheque within fifteen days of the receipt of the said
notice.
Explanation. For the purposes of this section, debt or
other liability means a legally enforceable debt or other
liability.
The perusal of section gives emergence to following five
ingredients (Kusum Ingots & Alloys Ltd., Etc. vs Pennar
Peterson Securities Ltd , 2000 (1) ALD Cri 770) for
compliance of section 138.
(i)
a person must have drawn a cheque on an account

maintained by him in a bank for payment of a
certain amount of money to another person from
out of that account for the discharge of any debt
or other liability;
(ii) that cheque has been presented to the bank within

a period of six months from the dale on which it is
drawn of within the period of its validity whichever
is earlier;
(iii) that cheque is returned by the bank unpaid, either
because of the amount of money standing to the
April, 2014
A case study under Section 138 of Negotiable Instrument Act

credit of the account is insufficient to honour the
cheque or that it exceeds the amount arranged
to be paid from that account by an agreement made
with the bank;
person liable to punishment if he proves that the offence

was committed without his knowledge, or that he had
exercised all due diligence to prevent the commission of
such offence.
(iv) the payee or the holder in due course of the cheque

makes a demand for the payment of the said
amount of money by giving a notice in writing, to
the drawer of the cheque, within 15 days of the
receipt of information by him from the bank
regarding the return of the cheque as unpaid;
Sub-section (2) of the Section 141 , makes any director/

manager/secretary or other officer of the company in
connivance or any neglect on the part of whom, an
offence under the Act has been committed by the
Company, such director/manager/secretary or other officer
is deemed to be guilty of that offence and shall be liable
to be proceeded against and punished accordingly. The
signatory to the cheque is an employee may also held
guilty for this punishable offence.
(v) the drawer of such cheque fails to make payment

of the said amount of money to the payee or the
holder in due course of the cheque within 15 days
of the receipt of the said notice.
Nexus of Cheque and Libility to pay:
If the aforementioned ingredients are satisfied then the
person who has drawn the cheque shall be deemed to
have committed an offence. In the explanation to the
section clarification is made that the phrase debt or
other liability means a legally enforceable debt
or other liability. In other words if cheques are given for
some transactions ,which cannot be used by payee for
another transaction without confirmation . The nexus of
cheque issuance and legally enforceable liability must
be established by payee apart from compliance of all
aforesaid ingredients. Without sufficient reason, if STOP
PAYMENT instruction issued to banker by Drawer is
frustrated ground of arguments. Merely obtaining cheques
in security form, shall not serve the purpose of payee. It
is equally important for the drawer to issue cheques with
forwarding letter that for what business, the post dated
cheques are issued. Once drawer of cheque rebut the
liability under section 139 and establish the facts that
dues are not legally enforceable, the onus is shifted to
payee to prove the nexus of liability and payment due.
Punishable Offence for whom:
Section 141 of Act is a provision specifically dealing with
the offences by companies. Therein it is laid down, inter
alia, that if the person committing an offence under
Section 138 of Act is a company, every person who, at
the time the offence was committed, was in charge of,
and was responsible to the company for the conduce of
the business of the company, as well as the company,
shall be deemed to be guilty of the offence and shall be
liable to be proceeded against and punished accordingly.
Under the proviso to Sub-section (1) it is laid down that
nothing contained in this sub-section shall rendered any
Juristictinal issue for Trial (Case Filing):

Under Section 177 of the Criminal proceeding Code
every offence shall ordinarily be inquired into and tried
in a court within whose jurisdiction it was committed.
The locality where the bank (which dishonoured the
cheque) is situated cannot be regarded as the sole criteria
to determine the place of offence. It must be
remembered that offence under Section 138 would not
be completed with the dishonour of the cheque. It attains
completion only with the failure of the drawer of the
cheque to pay the cheque amount within the expiry of
15 days mentioned in Clause (c) of the proviso to Section
138 of the Act. It is normally difficult to fix up a particular
locality as the place of failure to pay the amount covered
by the cheque. A place, for that purpose, would depend
upon a variety of factors. It can either be at the place
where the drawer resides or at the place where the payee
resides or at the place where either of them carries on
business. Hence, the difficulty to fix up any particular
locality as the place of occurrence for the offence under
Section 138 of the Act(K. Bhaskaran vs Sankaran
Vaidhyan Balan, AIR 1999 SC 3762).
Even otherwise the rule that every offence shall be tried
by a court within whose jurisdiction it was committed is
not an unexceptional or unchangeable principle. Section
177 of Cr P.C. itself has been framed by the legislature
thoughtfully by using the precautionary word ordinarily
to indicate that the rule is not invariable in all cases.
Section 178 of the Code suggests that if there is
uncertainty as to where, among different localities, the
offence would have been committed the trial can be
had in a Court having jurisdiction over any of those
localities. The provision has further widened the scope
by stating that in case where the offence was committed
partly in one local area and partly in another local area
April, 2014
A case study under Section 138 of Negotiable Instrument Act

,the Court in either of the localities can exercise jurisdiction
to try the case. Further again, Section 179 of the Code
stretches its scope to a still wider horizon. It reads thus:
179. Offence triable where act is done or consequence
ensues. -When an act is an offence by reason of
anything which has been done and of a
consequence which has ensued, the offence may
be inquired into or tried by a Court within whose
local jurisdiction such thing has been done or such
consequence has ensued.
The above provisions in the Code should have been borne
in mind when the question regarding territorial jurisdiction
of the Courts to try the offence was sought to be
determined.
The offence under Section 138 of the Act can be
completed only with the concatenation of a number of
acts. Following are the acts which are components of
the said offence : (1) Drawing of the cheque, (2)
Presentation of the cheque to the bank, (3) Returning
the cheque unpaid by the drawee bank, (4) Giving notice
in writing to the drawer of the cheque demanding
payment of the cheque amount, (5) failure of the drawer
to make payment within 15 days of the receipt of the
notice.
It is not necessary that all the above five acts should
have been perpetrated at the same locality. It is possible
that each of those five acts could be done at 5 different
localities. But concatenation of all the above five is a
sine qua non for the completion of the offence under
Section 138 of the Code.
In this context a reference to Section 178(d) of the Code
is useful. It is extracted below:
Where the offence consists of several acts done in
different local areas, it may be inquired into or tried by a
Court having jurisdiction over any of such local areas.
Thus it is clear, if the five different acts were done in five
different localities any one of the courts exercising
jurisdiction in one of the five local areas can become the
place of trial for the offence under Section 138 of the Act.
In other words, the complainant can choose any
one of those courts having jurisdiction over any
one of the local areas within the territorial limits
of which any one of those five acts was done.
Time Line Compliance:
On the part of the payee , he has to make a demand by
giving a notice in writing. If that was the only
8
requirement to complete the offence on the failure of

the drawer to pay the cheque amount within 15 days
from the date of such giving the travails of the
prosecution would have been very much lessened. But
the legislature says that failure on the part of the drawer
to pay the amount should be within 15 days of the
receipt of the said notice. It is, therefore, clear that giving
notice in the context is not the same as receipt of notice.
Giving is a process of which receipt is the accomplishment.
It is for the payee to perform the former process by
sending the notice to the drawer in the correct address.
If a strict interpretation is given that the drawer should
have actually received the notice for the period of 15
days to start running no matter that the payee sent the
notice on the correct address, a cheque drawer would
get the premium to avoid receiving the notice by different
strategies and he could escape from the legal
consequences of Section 138 of the Act.
The context envisaged in Section 138 of the Act invites
a liberal interpretation for the person who has the
statutory obligation to give notice because he is presumed
to be the loser in the transaction and it is for his interest
the very provision is made by the legislature. The words
in Clause (b) of the proviso to Section 138 of the Act
show that payee has the statutory obligation to make a
demand by giving notice. The thrust in the clause is on
the need to make a demand. It is only the mode for
making such demand which the legislature has prescribed.
A payee can send the notice for doing his part for giving
the notice. Once it is despatched his part is over and the
next depends on what the sender does.
It is well settled that a notice refused to be accepted by
the addressee can be presumed to have been served on
him, (Harcharan Singh v. Smt. Shivrani and Ors.,
andJagdish Singh v. Natthu Singh, 1988AIR2127)
If the notice is returned as unclaimed and not as refused.
Will there be any significant different between the two
so far as the presumption of service is concerned? In this
connection a reference to Section 27 of the General
Clauses Act will be useful. The Section reads thus:
27. Meaning of service by post. - Where any central Act
or Regulation made after the commencement of
this Act authorizes or requires any document to be
served by post, whether the expression serve or
either of the expressions give or send or any other
expression is used, then, unless a different intention
contd. on page no. 20
April, 2014
Companies Act, 2013 - Provisions

relating to Depreciation
CA. Anuj J. Sharedalal

ajs@crsharedalalco.com
I.
understanding the meaning of the same. Thus,

Section 198 will apply to all the cases where net
profits are to be calculated under the Companies
Act, 2013.
Introduction:
Companies Act, 2013 has brought a lot of challenges
for all companies, more for the private companies.
Before one could realize the impact, most of the
provisions of the Companies Act, 2013 were placed
into operation by issuance of two main notifications
i.e. one in September, 2013 and the other in the
last week of March, 2014. In my opinion, the last
few years quite challenging for Indian professionals
and business owners because of a plethora of
changes introduced in procedures in tax laws and
corporate laws. As a business owner, one has to
constantly stay in touch and keep on updating ones
business strategies in line with the changes. As a
professional, one needs to study the changes
thoroughly, examine the impact on his/her clients
and advise them accordingly. I would call todays
environment as one in which a person has to take
tomorrows decision, yesterday i.e. be prepared
well in advance.
Section 198(4) provides for the various deductions

to be made from the income of the company to
arrive at net profits, in which clause k deals with
depreciation.
Clause k gives a reference to Section 123. Section
123(2), in turn, provides that the depreciation shall
be calculated in a manner provided in Schedule II of
the Act. One may again argue that Section 123
applies only to companies which declare dividend,
which may lead to a thought that companies which
do not declare dividend can arrive at net profits
without providing for depreciation or companies may
choose not follow Schedule II of the Act and provide
depreciation in some other manner. The argument
that one can do away without providing for
depreciation would not bear much weight because
not providing for depreciation is a violation of
accounting standards. On the other side, definition
of depreciation or the manner of calculating
depreciation is not given anywhere else under the
Act except under Schedule II. Thus, Schedule II will
apply to all the cases where depreciation is to be
calculated under the Companies Act, 2013.
There are certain provisions of the Companies Act,

2013, which will affect all the companies right from
day one i.e. 1st April, 2014. One of them being
adjustment to carrying amounts of certain fixed assets
and recalculation of depreciation thereon. This article
focuses on the provisions of the Companies Act 2013
with respect to assets and depreciation thereon.
I I . Depreciation under Companies Act, 2013 Section 123, Section 198 & Schedule II:
Sections 123 and 198 were made effective from 1st
April, 2014 vide notification issued by the Ministry
of Corporate Affairs dated 26th March, 2014.
To sum up, depreciation is to be calculated in the

manner provided in Schedule II to arrive at the net
profits of the company, subject to other adjustments
given in Section 198 with effect from 1st April, 2014.
II I. Schedule II:
Section 198 provides the method for calculating the

net profits of a company for any financial year.
One may argue that Section 198 is applicable only
to public companies who intend to pay managerial
remuneration because the opening lines of the
section are In computing the net profits of a
company in any financial year for the purpose of
section 197. However, in my opinion, since the
term net profits is not defined anywhere else under
the act, one will have to rely on Section 198 for
April, 2014
Schedule II of the Act has also come into force from

1st April, 2014 vide notification issued by the Ministry
of Corporate Affairs dated 26th March, 2014.
The Schedule is divided into three parts:
-
Part A Depreciable amount, Useful life,

residual value, intangible assets, etc.:
Paragraph 1 of part A lays down that
depreciation is the systematic allocation of
Companies Act, 2013 - Provisions relating to Depreciation

the depreciable amount of an asset over its
useful life.
In cases where a Regulatory Authority constituted

under an Act of Parliament or the Central
Government notifies Useful life or residual value of
any specific asset for accounting purposes, then for
such assets, requirements of Schedule II shall not
apply.
There are a few terms in Paragraph 1 which need

to be understood here:
a . Systemic Allocation: This term is nowhere
defined in the Act or AS 6 Depreciation
Accounting. The word allocation has been
defined as apportionment or allotment
or an allowance made upon an account
in the Chambers dictionary. The word
systematic has been defined as according
to system or methodical in the Chambers
dictionary.
Thus, clubbing the dictionary meanings of
the two words, one can say that the term
systematic allocation means methodical
apportionment of something.
b . De p r e cia b l e a mo u n t : Depreciable
amount has been explained under Part A as
the cost of an asset or substituted cost less
its residual value.
c . Useful Life: Useful Life has to be taken as
given under Part C.
d . Residual Value: As given under Part C of
Schedule II, Ordinarily, the residual value
of an asset is often insignificant but it should
generally be not more than 5% of the
original cost of the asset.
A different useful life and residual value can be
taken, only if the same is justified by the
Company. Such departure has to be disclosed in
the accounts as per Note 3 to Part C.
S ch e du le II d o es no t ap p ly to In t a ng ible
Assets:
Part A also mentions that Schedule II does not apply
to intangible assets and they will be covered under
relevant accounting standards. Thus, intangible
assets can be continued to be amortized as per
prevailing accounting standards in the same manner
as it is being done at present until new accounting
standards are prescribed under Section 133 of the
Companies Act, 2013.
-
10
Part B Useful life or residual value of any

specific asset:
Part C Useful lives, part of an asset having

significant value, residual value, transitional
provisions etc.:
Para 5 under Part C enlists useful lives for various
kinds of assets like buildings, machines, ships, motor
cars, furniture etc. A specimen of Schedule II has
been given in the form of an Annexure to this article.
Assets used for a part of the year:
An asset which has been used for a part of the year
has to be depreciated on a pro rata basis. This is
similar to the requirement under Section 350 read
with Schedule XIV of the Companies Act, 1956.
Different useful lives for different significant
parts of an asset:
Another important consideration would be in case
of those assets where individual parts are of
significant value as compared to total cost. In such
cases, useful life of that part can be determined
separately. Typical example in this case is that of an
airplane. The cabin interiors, airframes and engine
of an airplane would have different lives. Each of
them may be having a significant value. In that case,
the parts can be separately depreciated over their
respective useful lives. This concept or process is
called componetization under IFRS.
One point of caution is that this process requires
professional judgment and also involvement of
technical experts. A rule of thumb is to look for such
items that will require an overhaul or replacement
before the end of the entire assets useful life, and
to treat such items as components.
Extra Shift depreciation:
Another important change is the manner in which
extra shift depreciation has to be claimed. If an asset
is used for any time during the year for double shift,
the depreciation will increase by 50% for that period
and in case of the triple shift the depreciation will
increase by 100% for that period. Thus, at first the
depreciation has to be calculated normally by
systematically allocating the depreciable amount i.e.
April, 2014

cost less residual value, over its useful life as per
Part C. Then this depreciation has to be increased
by 50% or 100% for that period for which the asset
has worked in two shifts or three shifts during the
financial year. It may be noted that continuous
process plants, i.e. plants that work for twenty four
hours a day, are not eligible for extra shift
depreciation since the same has already been
considered by reducing the useful life of such asset
in the Schedule.
Residual Value:
As seen earlier, residual value cannot be taken as
more than 5% of the original cost of asset. However,
a higher residual value can be taken if the same is
justifiable. Typical example would be that of a luxury
motor car which would have a residual value of more
than 5% even if sold after its useful life as given
under Schedule II i.e. eight years is over.
The following Paragraph 10 of AS 6 is noteworthy
in the context of residual value:
10. Determination of residual value of an asset is
normally a difficult matter. If such value is
considered as insignificant, it is normally regarded
as nil. On the contrary, if the residual value is likely
to be significant, it is estimated at the time of
acquisition/installation, or at the time of subsequent
revaluation of the asset. One of the bases for
determining the residual value would be the
realisable value of similar assets which have
reached the end of th eir useful lives and
have operated under conditions similar to
those in which the asset will be used.
Transitional effect of Schedule II:
The most important and challenging aspect of
Schedule II is the effect to be given in the books of
account on the date of transition, i.e. 1st April, 2014.
Reproduced below is Note 7 to Part C of Schedule
II,
7. From the date this Schedule comes into
effect, the carrying amount of the asset as
on that date(a) shall be depreciated over the remaining
useful life of the asset as per this Schedule;
earnings where the remaining useful life

of an asset is nil.
There could be two possibilities regarding the
assets as on 1st April, 2014 in context of the
above note:
1 . Asset s remain ing usef ul life a s per
Schedule II is nil:
In that case, as per Note 7(b), the carrying
amount has to be adjusted in the opening
balance of retained earnings in the balance
sheet after retaining the residual value.
2 . Assets remaining useful life is as per
Schedule II is not nil:
If one reads Note 7, specifically clause (a),
then one has to continue depreciating the
balance as on 1st April, 2014 systematically
over the remaining useful life after
recalculating the rate of depreciation. In that
case, no effect of restating the carrying
amount will be needed to be given.
However, there is another possibility here,
discussed later.
Applicability of Accounting Standard 6 vis-vis Companies Act, 2013:
Section 133 of the Companies Act, 2013 gives power
to the Central Government to prescribe accounting
standards after considering recommendation of the
ICAI and the National Financial Reporting Authority.
Section 133 came into force from 12th September,
2013, however no standards have been prescribed
till date. It was clarified vide General Circular No.
15/2013 dated 13 th September, 2013, that till
standards are prescribed under Section 133,
accounting standards notified under Companies Act,
1956 shall be applicable.
The same has been reiterated in Companies
(Accounts) Rules, 2014 that have come into force
with effect from 1st April, 2014. As per Rule 7 of the
said rules, the standards of accounting as specified
under the Companies Act, 1956 shall be deemed to
be the accounting standards until accounting
standards are specified by the Central Government
under Section 133. Accounting for depreciation is
covered by AS 6 Depreciation Accounting.
(b) after retaining the residual value, shall be

recognized in the opening balance of retained
April, 2014
11

W h e t h e r p r o vi d in g d e p r e c ia t io n a s p e r
Schedule II amounts to change in method of
depreciation:
Before going to the above question, it is necessary
to understand the situation that existed till now and
compare the same with the provisions of the new
Act.
There were two methods of depreciation given under
Schedule XIV of the Companies Act, 1956:
(i) Straight Line Method (SLM)
(ii) Written Down Value method or reducing balance
method (WDV)
Rates of depreciation were different under both these
methods. However, the rates were calculated in such
a manner that any of these methods would enable
a company to write off the asset upto its residual
value over the same period of time.
E.g. The rate of depreciation under Schedule XIV
for Motor-cars, motor cycles, scooters & other
mopeds (NESD) is 25.89% and 9.5% under WDV
and SLM methods respectively. This means, that
irrespective of the method that a company chooses,
the asset will be completely written off barring its
residual value in 10 years.
Now, let us compare both these methods with the
method of depreciating an asset given in Schedule
II of the Companies Act, 2013.
Under Schedule II, depreciation has to be provided
on a systematic basis over the useful life of the
asset.
Also, the definition of depreciation under AS 6
is somewhat similar:
3.1 Depreciation is a measure of the wearing out,
consumption or other loss of value of a depreciable
asset arising from use, effluxion of time or
obsolescence through technology and market
changes. Depreciation is allocated so as to
charge a fair proportion of the depreciable
amount in each accounting period during
t h e e xp e ct e d u se f u l l if e o f t h e a ss e t .
Depreciation includes amortisation of assets whose
useful life is predetermined.
Paragraph 20 of the standard is also noteworthy in
this regard:
12
20. The depreciable amount of a depreciable asset

should be allocated on a systematic basis to
each accounting period during the useful life of the
asset.
AS 6 permits both the methods, WDV as well as
SLM.
Thus, in my opinion, both the above methods
i.e . S LM & W D V ca n b e sa id t o b e
sy st e m a t ic a llo c a t io n o f d e p r e cia b le
amount over the useful life of the asset.
Thus, what has been proposed under the new Act is
only a revision of estimated useful lives of
assets, there is no change in method proposed.
In such a situation, when there is change in estimate,
Paragraph 23 of AS -6 comes into play:
Where there is a revision of the estimated
u se f ul lif e o f a n a sse t , t h e u n a mo rt ise d
depreciable amount should be charged over
the revised remaining useful life.
Similar principle is laid down under Note 7(a) of
Schedule II:
7. From the date this Schedule comes into
effect, the carrying amount of the asset as
on that date(a) shall be depreciated over the remaining
Thus, companies will have to recalculate the rates
of depreciation under SLM or WDV method,
depending on the methods which they use at
present, and continue depreciating the carrying
amount as on 1st April, 2014 at the re-calculated
rates.
Now, we have seen that the new Act has only
provided for a change in estimated useful lives of
the assets as compared to the old Act i.e. Companies
Act, 1956. There is no requirement to change the
method of depreciation.
Another possibility - Change in method of
depreciation:
Another possibility here is for companies which want
to change the method of systematically allocating
depreciation. Before going to the same, it is
important to note that change in the method of
depreciation is not permitted frequently, and,
April, 2014

generally the method of depreciation is to be applied
consistently from period to period as per AS 6.
Unlike the Companies Act, 1956, which spelt out
rates as per SLM and WDV methods, Schedule II
lays down the useful lives of assets. Thus, under
Companies Act, 1956, generally, one had to follow
either SLM or WDV method, which may not be the
case under Companies Act, 2013.
Schedule II of Companies Act, 2013, lays down that
depreciation is the systematic allocation of the
depreciable amount of an asset over its useful
life. Systematic allocation, meaning methodical
or rational apportionment of something, is a very
wide term and goes beyond SLM and WDV methods.
It means any formula that is logical and acceptable
can be applied for depreciating assets. The method
used under the aegis of systematic allocation could
be rate based or activity based. E.g.
Depreciating an asset over a 10-year period with
the same amount of depreciation expense each year
is systematic and rational. On the other hand,
depreciating the asset on the basis of the output in
each period is also systematic and rational.
Thus, there is a possibility for companies which feel
that the present method of depreciation needs to
be changed in view of a more systematic allocation
method being permissible from FY 2014-15 onwards.
Schedule II doesnt provide any guidance for cases
in which there is a change in the method of
depreciation. Thus, one has to refer the Accounting
standard for guidance in a situation where there is a
change in accounting policy/method.
Reproduced below are Paragraphs 15 and 21 of the
standard:
15. The method of depreciation is applied
consistently to provide comparability of the results
of the operations of the enterprise from period to
period. A ch a n g e f r o m o n e me t h o d o f
providing depreciation to another is made
only if the adoption of the new method is
required by statute or for compliance with an
accounting standard or if it is considered that the
change would result in a more appropriate
preparation or presentation of the financial
statements of the enterprise. When such a
ch an ge in th e me th od of d ep re ciat io n is
ma d e , d e p r e ci a t io n is r e ca lcu la t e d in
April, 2014
accordance with the new method from the

d a t e o f t h e a sse t co m in g i n t o u se . T h e
d e f icie n cy o r su r p lu s a r is in g f r o m
retrospective recomputation of depreciation
in a cco r d a n ce w it h t h e n e w m e t h o d is
adjusted in the accounts in the year in which
the method of depreciation is changed. In
case the change in the method results in deficiency
in depreciation in respect of past years, the
deficie ncy is charged in the state ment of
profit and loss. In case the change in the method
results in surplus, the surplus is credited to the
statement of profit and loss. Such a change is
tr eate d a s a cha nge in a cco unting policy
and its effect is quantified and disclosed.
21. The depreciation method selected should be
applied consistently from period to period. A
ch a n g e f r o m o n e me t h o d o f p r o vid in g
depreciation to another should be made only
if the adoption of the new method is required
by statute or for compliance with an accounting
standard or if it is considered that the change would
result in a more appropriate preparation or
presentation of the financial statements of
the enterprise. When such a change in the
method of depreciation is made, depreciation
should be recalculated in accordance with
the new method from the date of the asset
coming into use. The deficiency or surplus
arising from retrospective recomputation of
de preciation in accor dance with t he n ew
method should be adjusted in the accounts
in t h e y e a r in w h ich t h e m e t h o d o f
depreciation is changed. In case the change in
the method results in deficiency in depreciation in
respect of past years, the deficiency should be
charged in the statement of profit and loss.
In case the change in the method results in surplus,
t h e su r p lu s s h o u ld b e cr e d it e d t o t h e
statement of profit and loss. Such a change
should be treated as a change in accounting policy
and its effect should be quantified and disclosed.
As mentioned earlier, change in the method of
depreciation is not permitted frequently, and,
generally the method of depreciation is to be applied
consistently from period to period. Change in
method of depreciation can be done only if such a
change fulfills the criteria given in the above
paragraphs of AS 6. Careful consideration is
13

required on part of the company wanting to change
the method of depreciation. Appropriate reasons and
justifications for the same should be taken on record
and documented. The same needs to be disclosed
in the financial statements also.
Thus, as per Accounting Standard 6, the following
needs to be done on 1st April, 2014 in cases where
the company goes for change in method of
depreciation:
Conclusion:
The impact of Schedule II and AS 6 provisions will be big
on each and every company having a significant asset
base. In my opinion, the task would be a comfortable
one if the companys fixed assets register is in perfect
order.
The following can be concluded regarding provisions
relating to Depreciation under the new Companies Act,
2013:
1. Document the reasons behind change in method

of depreciation and also include the impact of
such change on the financial position of the
company.
2. The above document should be presented and
approved at a Board of Directors meeting by
passing a board resolution.
3. Ascertain the depreciable amount for each asset
or significant part of asset i.e. cost of asset
(Original purchase price) less residual value.
4. Re-calculate depreciation as per method given
in Schedule II of Companies Act, 2013 for the
period upto 31st March, 2014 i.e. using new
method.
Annexure
5. Deduct such depreciation as calculated in Step

4 from the depreciable amount.
PART A
6. Compare the new carrying amount arrived at in

Step 5 with the present carrying amount.
SCHEDULE II (See section 123) USEFUL LIVES

TO COMPUTE DEPRECIATION
1.
Depreciation is the systematic allocation of the

depreciable amount of an asset over its useful life.
The depreciable amount of an asset is the cost of
an asset or other amount substituted for cost, less
its residual value. The useful life of an asset is the
period over which an asset is expected to be available
for use by an entity, or the number of production or
similar units expected to be obtained from the asset
by the entity.
2.
For the purpose of this Schedule, the term

depreciation includes amortisation.
3.
Without prejudice to the foregoing provisions of

paragraph 1,
7. Charge the excess depreciation to be provided

to Profit & Loss Account and vice versa.
8. From the financial year 2014-15 onwards,
depreciation will be provided on the newly
arrived carrying amount as per Schedule II.
9. In case the remaining useful life as on 1st April,
2014 is already nil, the effect will be given to
retained earnings account as discussed earlier.
Impact of AS 22 Accounting for taxes on
Income:
The impact of this restatement will also have to be
seen in the light of AS 22 Accounting for taxes
on Income. Necessary effect will have to be given
to the deferred tax account of the company by
recalculating the deferred tax impact again. In my
opinion, the same will be smoother if books of
accounts asset base and income tax block of assets
base are compared instead of depreciation values.
14
(i) In case of such class of companies, as may be

prescribed and whose financial statements
comply with the accounting standards prescribed
for such class of companies under section 133
the useful life of an asset shall not normally be
different from the useful life and the residual
value shall not be different from that as indicated
in Part C, provided that if such a company uses
April, 2014

a useful life or residual value which is different
from the useful life or residual value indicated
therein, it shall disclose the justification for the
same.
(ii) In respect of other companies the useful life of
an asset shall not be longer than the useful life
and the residual value shall not be higher than
that prescribed in Part C.
(iii) For intangible assets, the provisions of the
Accounting Standards mentioned under sub-para
(i) or (ii), as applicable, shall apply.
PART B
4.
The useful life or residual value of any specific asset,

as notified for accounting purposes by a Regulatory
Authority constituted under an Act of Parliament or
by the Central Government shall be applied in
calculating the depreciation to be provided for such
asset irrespective of the requirements of this
Schedule.
PART C
5.
Subject to Parts A and B above, the following are

the useful lives of various tangible assets:
Nature of Assets
I
Useful Life
Buildings [NESD]
(a) Buildings (other than factory

buildings) RCC Frame Structure
60 years
(b) Buildings (other than factory

buildings) other than RCC
Frame Structure
30 years
(c) Factory buildings
-do-
XV Hydraulic works, pipelines

and sluices [NESD]
15 years
Note : Paragraph 5 has been intentionally shortened.

For entire Paragraph please refer the Companies
Act, 2013.
Notes.1. Factory buildings does not include offices,
godowns, staff quarters.
2. Where, during any financial year, any addition
has been made to any asset, or where any asset
has been sold, discarded, demolished or
destroyed, the depreciation on such assets shall
be calculated on a pro rata basis from the date
April, 2014
of such addition or, as the case may be, up to

the date on which such asset has been sold,
discarded, demolished or destroyed.
3. The following information shall also be disclosed
in the accounts, namely:
(i) depreciation methods used; and
(ii) the useful lives of the assets for computing
depreciation, if they are different from the
life specified in the Schedule.
4. Useful life specified in Part C of the Schedule is
for whole of the asset. Where cost of a part of
the asset is significant to total cost of the asset
and useful life of that part is different from the
useful life of the remaining asset, useful life of
that significant part shall be determined
separately.
5. Depreciable amount is the cost of an asset, or
other amount substituted for cost, less its residual
value. Ordinarily, the residual value of an asset
is often insignificant but it should generally be
not more than 5% of the original cost of the
asset.
6. The useful lives of assets working on shift basis
have been specified in the Schedule based on
their single shift working. Except for assets in
respect of which no extra shift depreciation is
permitted (indicated by NESD in Part C above),
if an asset is used for any time during the year
for double shift, the depreciation will increase
by 50% for that period and in case of the triple
shift the depreciation shall be calculated on the
basis of 100% for that period.
7. From the date this Schedule comes into effect,
the carrying amount of the asset as on that
date
(a) shall be depreciated over the remaining
(b) after retaining the residual value, shall be
recognised in the opening balance of retained
earnings where the remaining useful life of
an asset is nil.
8. Continuous process plant means a plant which
is required and designed to operate for twentyfour hours a day.

15
Updates from ICAI

Compiled by CA. Uday I. Shah
Applicability of the Companies Act, 2013 to
Auditors Report to FY 2014-15
The Ministry of Corporate Affairs, on 26th March 2014
notified a majority of the remaining sections of the
Companies Act, 2013, including sections 139 to 148,
relating to audits and auditors. The Act was stated to
be effective from 1st April, 2014.
Accordingly, queries are being raised by a number of
members as to whether any auditors report of a
company being signed on or after 01st April, 2014 would
be in accordance with the requirements of section 143
of the Companies Act, 2013.
In this context, it may be noted that the Ministry of
Corporate Affairs (MCA) has, on 04th April 2014, vide
its General Circular No. 08/2014, clarified that the
financial statements (and documents required to be
attached thereto), auditors report and Boards report
in respect of financial years that commenced earlier
than 01st April, 2014 shall be governed by the relevant
provisions/Schedules/rules of the Companies Act 1956.
This MCA Circular can be seen at URLh t t p :/ /
www.mca.gov.in/Ministry/pdf/
Ge ner al_ Cir cular_ 8_2 014 .pd f.
Therefore, it is clear from MCAs aforesaid General
Circular that the auditors report of a company
pertaining to any financial year commencing on or
before 31st march 2014, would be in accordance with
the requirements of the Companies Act, 1956 even if
that financial year ends after 01st April 2014. For
example, where the financial year of a company is 01st
January 2014 to 31st December 2014, the statutory
auditors report signed therefor would be in accordance
with the requirements of the Companies Act, 1956.
As a corollary to MCAs General Circular, it appears
that the provisions of the 2013 Act would apply only to
the financial years commencing on or after 01st April
16
2014. Thus, for example, the statutory auditors report

signed in respect of the financial year of the company
ended 31st March 2015 would need to be issued in
accordance with the provisions of the Companies Act,
2013.
Announcement reg. abstaining from sharing of
Firm details intended for comparison of Firms.
- (30-03-2014)
In this regard, Members are hereby informed that
sharing of details of their Chartered Accountants firms
in the aforesaid manner does not fall within the
permitted categories , and would therefore be violative
of Item 6 of Part-I of First Schedule to The Chartered
Accountants Act, 1949 . Further, as it is known
beforehand that the information regarding firms would
be used for ranking purposes, the sharing of such details
would tacitly result in claiming superiority of one firm
over other, which is prohibited in terms of the
Advertisement Guidelines of the ICAI under Item 7 of
Part I of First Schedule to The Chartered Accountants
Act, 1949. Members are therefore advised to abstain
from such sharing of details of their Chartered
Accountants Firms.
Clarification on prohibition of simultaneously
undertaking Concurrent Audit and Quarterly
Review of the same Bank.
Since queries are being received from members at large
on the issue, it is accordingly hereby clarified that
concurrent audit and the assignment of quarterly review
of the same Bank cannot be undertaken simultaneously
as the concurrent audit being a kind of internal audit
and the quarterly review being a kind of statutory audit
undertaken simultaneously are prohibited under the
provisions of Guidance Note on Independence of
Auditors

April, 2014
Glimpses of Supreme
Court Rulings
Advocate Samir N. Divatia

sndivatia@yahoo.com.
to second dishonor has to be issued within 30 days of

the receipt of information as to second dishonor from
bank.
Scope of Monitoring of inquiry/

investigation by Court
The monitoring of investigations/inquires by the Court is

intended to ensure that proper progress takes place
without directing or channeling the mode or manner of
investigation. The whole idea is to retain public
confidence in the impartial inquiry/investigation into the
alleged crime; that inquiry/investigation into every
accusation is made on a reasonable basis irrespective of
the position and status of that person and the inquiry/
investigation is taken to the logical conclusion in
accordance with law. The monitoring by the Court aims
to lend credence to the inquiry/investigation being
conducted by CBI as premier investigating agency and
to eliminate any impression of bias, lack of fairness and
objectivity therein.
However, the investigation/inquiry monitored by the court
does not mean that the court supervises such investigation/
inquiry. To supervise would mean to observe and direct
the execution of a task whereas to monitor would only
mean to maintain surveillance. The concern and interest
of the court in such court-directed or court-monitored
cases is that there is no undue delay in the investigation,
and the investigation is conducted in a free and fair
manner with no external interference.
(Manoharlal Shara Vs. Principal Secretary
[(2014) 2 SCC]
Negotiable Instrument Act, 1881

Representation of cheque after dishonor.
Limitation period for filing complaint for dishonor of

cheque upon re-presentation of cheque Date from
which to be reckoned Legal notice to drawer must be
issued within 30 days of that dishonor of cheque, which
matures into complaint Though first legal notice was
issued within two days of first dishonor of cheque, second
legal notice issued to drawer of cheque beyond the
limitation of period of 30 days. Although the complaintant
had right to present the said cheque for encashment a
second time after its dishonor, the legal notice pursuant
(Kamleshkumar Vs State of Bihar) (2014) 2

SCC 424)
Service law Proportionality of penalty/

punishment
It is now well-settled that it is open to the Courts in all

circumstances, to consider whether the punishment
imposed on the delinquent workman or officer as the
case may be, is commensurate with the Articles of charge
leveled against him. If, the conscience of the Court is
shocked as to the severity or in-appropriateness of the
punishment imposed, it can be remand the matter back
to fresh consideration to the disciplinary authority
concerned.
(Ishwarchandra Jaiswal Vs. UOI (2014) 2SCC 748)
Disposal of mercy petition of death

convicts
Mercu jurisprudence is a part of evolving standard of

decency, which is the hallmark of society. Prolonged
delay in execution of a sentence of death has a
dehumanizing effect and this has the constitutional
implication of depriving a person of his life in an unjust,
unfair and unreasonable way so as to offend the
fundamental right under Article 21 of the Constitution.
Right to seek for mercy under Articles 72/161 of the
Constitution is a constitutional right and not at the
discretion or whims of the executive. Every constitutional
duty must be fulfilled with due care and diligence;
otherwise judicial interference is the command of the
Constitution for upholding its values.
The fundamental right to move the Supreme Court can
be appropriately described as the cornerstone of the
democratic edifice raised by the Constitution.
Shatrughan Chauhan Vs. Union of India
[(2014) 3 SCC, Para 7]

April, 2014
17
From the Courts
CA. C. R. Sharedalal
jcs@crsharedalalco.com.
jcs@crsharedalalco.com.
Sec. 80 HHC(4) : Meaning of along with

the Return of Income :
(b) The inflated and estimated stock is hypothecated

and not pledged;
CIT v/s. Godha Chemicals (P) Ltd.
(c) No actual verification of stock is carried out by the

officer of banking authorities during the year or as
on the date of valuation of stock;
(2014) 220 Taxman 31 (Rajasthan) (Mag) : (2013)

353 ITR 679 (Raj)
(d) The assessee has maintained stock register;
Issue :
What is the meaning of along with the Return of
Income in Sec. 80HHC(4) ?
(f)
Held :
High Court has interpreted the above provision in the
following words :
Expression along with the return of income as occurring
in sub section (4) of sec. 80HHC could always be
interpreted as directory so far it relates to time of filing
report and, hence, even if report is filed during assessment
proceedings, assesee cannot be denied claim of
deduction.
Difference in Stock details in quantity

and value for obtaining loan from Bank :
CIT v/s. Riddhi Steel and Tubes (P) Ltd.
(2014) 220 Taxman 148 (Guj)

Issue :
On the facts that the assessee had given statement of
stock to bank which was inflated in quantity and value,
whether addition to income can be made on that basis?
Held :
The books of account maintained by the assessee

and accepted by the excise and /or Sales Tax
Department;
On elaborating each guideline with reference to the facts

on records the Tribunal upheld the say of the assessee.
High Court held that :
It is a settled law as rightly held by the Tribunal that
only on account of inflated statement furnished to the
banking authorities for the purpose of availing of larger
credit faculties, no addition can be made if there appears
to be a difference between the stock shown in the books
of account and the statement furnished to the banking
authorities. If for the purpose of fulfilling the margin
requirements of the base purely on inflated estimate
basis, when the stock statement has reflected inflated
value of the stock in wake of otherwise satisfactory
explanation, both for purpose of value as well as quantity,
we find no reason to interfere with the order of the
Tribunal .
Tribunal had held as under :

On perusal of the various decisions, it is gathered that
courts have laid down that additions cannot be made
on account of difference arising in the quantity and value
of stock shown in the books of account and statement
furnished to the banking authorities, admittedly to avail
higher credit facilities. Courts have laid down the
following guidelines while dealing with the issue.
(a) The stock in quantity and value is inflated on estimate
basis in the statement furnished to the banking
authorities to avail higher financial credits;
18
(e) The assessees books of account are not found to

be defective or non genuine by A.O.
Sec. 263 : Jurisdiction to issue notice :

IBM India (P) Ltd. v/s. CIT
(2013) 216 Taxman 170 (Mag)
(Karna tak a)
Issue :
Mere expression that certain expenses were to be
examined would give jurisdiction to CIT to issue notice
u/s 263 ?
Held :
In the case, assessment was completed u/s 143(3). CIT,
issued a notice u/s 263 stating that there was a need to
April, 2014
From the Courts
examine assessment order on certain aspects. In absence

of recording an opinion over why order of assessment
required initiation of revisionary proceedings, mere
expression that certain items of expenses etc. were
required to be examined did not satisfy the requirement
of issue of show cause notice u/s 263. Therefore,
impugned notice deserved to be quashed.
Sec. 271(1)(c) : Explanation 1 :

Requirements :
CIT v/s. Manjunatha Cotton & Ginning
Factory
(2013) 263 CTR 153 (Kar) : (2013) 92 ITR (Kar)

111
Issue :
What are the requirements for levy of penalty u/s

271(1)(c)
Weight to the heading to a section :

Smt. Rekha Krishnaraj v/s. ITO
Held :
(2013) 261 CTR 79 (Kar) : (2013) 91

DTR (Kar) 132
Issue
What weightage should be given to the heading to a
section ?
After insertion of Explanation 1 to Sec. 271(1)(c), the

law on concealment and penalty has become stiffer. The
explanation as it stands now is a complete code having
the following features :
Held ;
(1) Every difference between reported and assessed

income needs an explanation.
In the case of weight age to heading (cash credits) u/s

68, High Court has held as under :
(2) If no explanation is offered, levy of penalty may be

justified.
A heading is to be regarded as giving the key to the

interpretation of the clauses ranged under it, unless the
wording is inconsistent with such interpretation. The
headings might be treated as preambles to the provisions
following them. Though the Court is entitled to look at
the headings in an Act of Parliament to resolve any doubt,
they may have as to ambiguous words, the law is clear
that those headings of a section cannot be used to give
a different effect to clear words in the section where
there cannot be any doubt as to the ordinary meaning of
the words. The title of chapter be legitimately used to
restrict to the plain terms of an enactment. The headings
prefixed to sections or entries cannot control the plain
words of the provision; they cannot also be referred to
for the purpose of construing the provision when the words
used in the provision are clear and unambiguous; nor
can they be used for cutting down the plain meaning of
the words in the provision. Only in the case of ambiguity
or doubt the heading or sub heading may be referred to
as an aid in construing the provision but even in such a
case it could not be used for cutting down the vide
application of the clear words used in the provision. Those
headings are not meant to control the operation of
enacting the words and it may be a wrong to permit
them to do so.
(3) If explanation is offered, but is found to be false,

penalty will be eligible.
(4) If explanation is offered and it is not found to be
false, penalty may not be leviable.
(a)
(b)
Such explanation is bonafide.

The assessee has made available to the A.O.
all the facts and materials necessary in
computation of income.
Therefore the Explanation 1, understood in the proper

context in particular, Cl. (c ) of sub sec (1) of Sec. 271
makes the intention of the legislature manifest. It clearly
sets out when penalty is leviable and when penalty is
not leviable. The condition precedent for levying the
penalty is the satisfaction of the authority that there is
concealment of particulars of the income or inaccurate
particulars are furnished to avoid payment of tax.
Sec. 41(1) : Principles : Year :

Genuineness of transaction :
CIT v/s. Jain Exports (P) Ltd.
(2013) 217 Taxman 54 (Mag) (Delhi) : (2013)

89 DTR (Del) 25
Issue :
What are the principles for applicability of Sec. 41(1).
Which is the year of addition when genuineness is
assailed.
April, 2014
19
From the Courts
Held :
Cessation of liability may occur by reason of it becoming
unenforceable in law by creditor coupled with debtors
intention not to Honour his liability or by a contract
between parties or by discharge of debt.
Genuineness of transaction was required in year when
liability had arisen and addition could not be made on
such ground, treating it as assertion of trading liability,
when assessee had acknowledged its liability
successively.
Sec. 45(3) /45(4) of the Act :

Applicability on reconstitution of firm :
CIT v/s. P.N. Panjwani
(2013) 356 ITR 675 (Karn)

Issue :
Whether provisions of sec. 45(3)/45(4) are attracted when
share of existing partners is reduced on entry of new
partners?
Rs. 3.50 crores as their capital. On reconstitution shares

of the existing partners were reduced to half. Existing
partners had withdrawn Rs. 1,16,66,666/- each on
reconstitution. A.O. held that the said A.O. made amount
on the existing partners before reconstitution and added
the amount of the 1,16,66,666/- in each of the partners.
On appeal it is held as under :
Landed property in the firm was not owned by the
erstwhile partners. It was owned by the firm. The
erstwhile partners withdrew the money brought in by
the incoming partners as drawings. They did not retire
from the firm. They continued to be partners of the firm.
However, their share got reduced. In other words, 50
percent of their share held before reconstitution became
the share of the incoming partners. As the property was
not owned by the erstwhile partners, it could not be said
they transferred 50 percent thereof, in favour of the
income partners and any amount represented the
consideration received for such transfer. The provisions
of section 45(3) or 45(4) were not applicable to the facts
of the case No. capital gain arise.
Held :
Partnership existed between three partners having equal
share. Four new partners were admitted who brought
contd. from page 8
Article : A case study under Section 138 of Negotiable Instrument Act
appears, the service shall be deemed to be effected

by properly addressing, pre-paying and posting by
registered post, a letter containing the document,
and unless the contrary is proved, to have been
effected at the time at which the letter would be
delivered in the ordinary course of post.
No doubt Section 138 of the Act does not require that
the notice should be given only by post. Nonetheless
the principle incorporated in Section 27 (quoted above)
can profitably be imported in a case where the sender
has dispatched the notice by post with the correct address
written on it. Then it can be deemed to have been served
on the sender unless he proves that it was not really
served and that he was not responsible for such nonservice. Any other interpretation can lead to a very weak
position as the drawer of the cheque who is liable to pay
the amount would resort to the deceit strategy by
successfully avoiding the notice.
Thus, when a notice is returned by the sender as
unclaimed such date would be the commencing date in
reckoning the period of 15 days contemplated in Clause
20
(c) to the proviso of Section 138 of the Act. Of course

such reckoning would be without prejudice to the right
of the drawer of the cheque to show that he had no
knowledge that the notice was brought to his address.
Conclusion:
It is clear from various court pronouncements that even
proceedings pending before respective appellate body,
courts or board for winding up under section 536 of
Companies Act,1956 or section 22 of SICA, offence under
section 138 deemed to be committed once cheque is
dishounoured and all five ingredients of requirements
of section 138 of Act are complied with. (Orkay Industries
Limited & Others vs The State Of Maharashtra & Others
2000 (5) BomCR 14) Thus it is essential to keep in mind
while issuing and signing post dated or blank cheques
the consequential punishment under section 138 of
Negotiable Instrument Act 1881.
April, 2014
Tribunal News
CA. Yogesh G. Shah
CA. Aparna Parelkar
yshah@deloitte.com
aparelkar@deloitte.com
DDIT (INT.TAX) VS. Reliance Infocom

Ltd. 159 TTJ 589 (Mum)
Order Dated: 26 th September, 2013
Basic Facts
The assessee had entered into a Wireless Software
Contract with Indian company LTHPL of US based L group
which was subsequently assigned to an American
company LTGL for purchase of certain software for the
purpose of operation of wireless telecommunication
network. The software was supplied separately and not
along with equipments though the software was stated
to be specific for certain equipments supplied by LTGL.
Assessee made application under section 195(2) seeking
to make payment for obtaining the license without
deducting tax at source as per DTAA since the US
Company did not have PE in India. The AO held that the
payment for purchase of software amounts to royalty
within the meaning of section 9(1)(vi) of the Act and
Article 12(3) of the DTAA. He accordingly directed assesse
to deduct tax @ 20% as royalty. After deducting tax, the
assesse appealed to the CIT(A).The CIT(A) held that the
assessee under the Software Contract acquired only a
copy of software programme and did not acquire any
copyright over such software as envisaged by section 14
of the Copyright Act. Accordingly payment made by the
assessee to LTGL could not be said to be payment for
the use of or right to use of copyright. He, therefore,
held that payment was only for purchase of copyrighted
article and did not amount to royalty within the meaning
of article 12(3) of the DTAA. Aggrieved the Department
is in appeal before the tribunal.
Issue
Whether the payments made by th e assessee
for obtaining computer software is in nature of
royalty as defined by the DTAA and liable to
taxation in India?
He ld
ADIT V. WNS North America INC. 146

ITD 435 (Mum)
Assessment Year: 2007-08 Order Dated:
31 st July, 2013
Basic Facts
The assessee was resident of USA. It was engaged in
the business of rendering, marketing and management
services to WNS which was its associated enterprise in
India.Since assessees employees visited India for
providing managerial services, WNS constitutes service
PE under Article 5(2)(1) of the Indo-US DTAA. Accordingly
certain amount received from WNS was attributed to
such service PE and remaining amount was regarded for
services rendered outside India. The AO noted that the
assessee rendered expertise and technical knowledge to
WNS India. Accordingly, he held that the marketing and
management services rendered by the assessee to WNS
India were Fees for included Services (FIS) under Article
12(4)(b) of Indo-US DTAA.On appeal, the CIT(A) deleted
the order of the AO.
Issue
Under various agreements entered into by the assessee

only license to use the copyright belonging to the non-
resident is transferred and the ownership of the copyright

and all other intellectual property rights continues to be
with the supplier only. The contention that there is no
transfer of copyright or any part thereof under the
agreements entered into by the assessee with the nonresident supplier of software cannot be accepted. Under
these circumstances, payment made by assessee to LTGL/
other suppliers can be said to be payment for the use of
or right to use of copyright and amounts to royalty within
the meaning of artilce-12(3) of the DTAA. In fact, the
assessee also admitted that there were only supplies of
software, without purchase of equipments either from
the same party or from any other party. Therefore ITAT
held that the payments amount to royalty as per art.
12(3) of DTAA and tax was deductible u/s 195 of the
Act.
Whether Marketing& Management services did

not satisfy the make available criteria, to be
April, 2014
21
Tribunal News
ch arg eab le to tax as FTS un der ar ticle 12 of
Indo-US DTAA? Whether as per the Force of
Attraction Rule the amount received for services
r e n d er e d o u t sid e In d ia w o u ld b e t a xa ble a s
income of service PE in India.
He ld
The scope of section 9(1)(vii) is somewhat different in
comparison with the article 12(4)(b). In order to rope in
any amount within the purview of FIS under the article
12(4)(b) of DTAA, which has been invoked by the AO, it
is essential that the payment should be to make available
technical knowledge, experience, skill, know-how or
processes, or consist of the development and transfer of
a technical plan or technical design. On the contrary there
is no such requirement of making available any
managerial, technical or consultancy services. Simple
rendering of such services is sufficient. It is not the case
of the revenue that the assessee made available some
managerial, technical or consultancy service to WNS
India. Even if it is considered for a moment that the
marketing and management services rendered by the
assessee were in the nature of technical services as per
section 9(1)(vii), the same would not become FIS as per
the DTAA because of the language of article 12(4)(b)
which mandates that such services must be made
available to the payer of the consideration. As the
assessee in the instant case has not made available any
technical knowledge, experience, skill etc. to WNS India,
the same cannot be subjected to tax by considering the
provisions of section 9(1)(vi) on stand-alone basis. It is,
therefore, held that the marketing and management
services rendered by the assessee to WNS India are not
chargeable to tax as FIS under article 12 of the DTAA
and Tribunal following the earlier orders of this Tribunal
as well as Honble High Court this issue was decided
and in favour of the assessee.
The two essential conditions for applying the Force of
Attraction rule are (i) the business activity carried on should
be in the other state where the PE is situated (ii) the
business activity carried on must be of the same or similar
kind as those effected through PE. In this case the
condition of business activity carried on in the other state
where the PE is situated is not satisfied because the
marketing and management services in question are
provided by the assessee outside India. Since income of
such services cannot be said to have accrued or arisen to
22
the assessee or deemed to have accrued or arisen to

assessee in India, the existence of service PE in India
would not make it taxable under Article 7 of the DTAA.
Reebok India Co. V. ACIT 146 ITD

469(Del)
Assessment Year: 2008-09 Order Dated:
14 th June, 2013
Basic Facts
The assessee company, subsidiary of R Ltd. of Mauritius,
was engaged in manufacturing and trading of footwear,
apparel, sport equipment etc. The assessee paid royalty
at 5 per cent to its Associated Enterprise (AE) for providing
knowhow and granting right to utilize its technology for
manufacture of products. In its transfer pricing report,
royalty was benchmarked using CUP method. The
Transfer Pricing Officer (TPO) applied bright line test and
added excess AMP expenditure incurred by assessee over
and above the average AMP expenditure of 5
comparables chosen by him as TP adjustment. The TPO
also held that payment of royalty by assessee to its AE
for knowhow and technology did not bring any
commensurate benefit to assessee as assessees net profit
to sales ratio had declined during the relevant year.
Therefore, the TPO made adjustment taking arms length
price of royalty paid as nil.
Issue
Whether where assessee was totally dependent
o n it s a sso ci a t e d e n t e r p r ise f o r p r o vid in g
technology for manufacturing goods, can Arms
Length Price of royalty be taken as Nil?
He ld
The assessee gets goods manufactured on the basis of
technology, technical know and designs provided by the
AEs. Assessee does not undertake any significant research
and development activity on its own and totally depends
upon the AE for provision of technology.During the
relevant previous year, the total revenue of the assessee
registered a growth of 25.21 per cent. The growth in the
revenue of the assessee clearly demonstrates the benefits
derived by the assessee from the use of technology. It
has been clearly demonstrated that the very survival of
the assessee in the industry depends upon the licence
and technology & know how provided by the AE. It is
April, 2014
Tribunal News
also noted that it is on the basis of the same agreement
that royalty was paid in earlier years. In earlier years, the
payment of royalty has not been held to be non-bona
fide expenditure by the TPO.It is held that payment of
royalty in this case satisfies the benefit test. The benefit
is undoubtedly tangible and is not passive as argued by
the revenue. The assessee rightly considered the CUP
method for determining the arms length price. The
conclusion of the TPO that the arms length price of the
royalty payment should be NIL, without specifying any
cogent basis, is not sustainable. The TPOs determination
is on the basis of assumption and surmises. Hence, the
adjustment made by the TPO is liable to be deleted.
BMW India (P.) Ltd. vs ACIT146 ITD165

(DE L)
Assessment Year 2008-09, Order dated:
16 th August, 2013
Basic Facts
The assessee-company, a wholly owned subsidiary of
BMW, Germany, was engaged in manufacturing, training,
marketing and distribution of motor vehicles and related
spare parts and accessories. On the basis of the TP study
documentation, the TPO sought reason for not been
compensated by its AE for its brand promotion activities
which resulted in creating marketing intangibles for its
AE. The assessee contended that there was no
international transaction in incurring advertisement
&brand expenditure. As per TPO, in view of judicial
mandate form should prevail over substance; and by
incurring expenditure over and above the bright line, the
assessee had incurred non-routine expenditure far beyond
the requirements of a normal distributor, which had
resulted in the brand promotion of the AE who was the
legal owner of the brand. Consequently, the brand had
gained value. Accordingly, he held that for the services
rendered by the assessee, it should have been
compensated and a mark-up on the costs incurred should
also have been received. Accordingly the TPO made
adjustment. On appeal, the DRP concurred with the
findings of the TPO. However, it directed the TPO of
exclude from the AMP calculation, amounts pertaining
to after sales support costs and salesman bonus etc. On
appeal to ITAT.
Issue
Whether, where compensation for such higher
se r vice w h ich w a s e mb e d d e d in p r ic in g
arrangement of contract goods itself and price
charged was adequate to ensure recovery of total
costs as well as earning of representative profits
was transfer pricing adjustment required?
He ld
It is held that there was no occasion for the AE to further
compensate the assessee for the services rendered
towards building the brand of the AE, as the same already
stood factored in the pricing adjustment of the contract
goods. As such the occasion to consider the applicability
of mark-up did not arise. The DRP specifically noted that
this was the first full year of assessees functioning. The
TP study addresses the prevalent competition in the
market and the fact that the sector is highly competitive,
becomes more so for a new entrant where there is a
declining trend seen in the automobile sale market
coupled with entrenched position of early entrants in the
sector.
ITO vs. Tirupati Cylinders Ltd. 2013 TIOL959-ITAT (Del)

Asst. Year 2004-05; Order Dated: 28 th
June,2013
Basic Facts
The assessee filed the return which was processed u/s
143(1) of the Act. Assessment order was passed u/s
143(3)/147 where the AO specifically mentioned that no
notice u/s 143(2) of the Act was served on to the assessee
within the statutory time limit during the original
assessment proceedings.The AO issued a notice u/s 148
of the Act to the assessee to which the assessee replied
through a letter asking AO to treat the return filed u/s
139 to be a return in response to the said notice. The AO
made addition of Rs.10 lakh u/s 68 of the Act in the
reassessment proceedings. In reassessment proceedings
AO had mentioned that as a matter of precaution
permission of CIT was obtained for issuance of notice u/
s 148. Assessee filed an appeal before the CIT(Appeal).
The CIT(Appeal) held that the reassessment was not in
accordance with the provisions of the Act and,
April, 2014
23
Tribunal News
accordingly, held to be null and void. The Revenue is in
appeal before ITAT.
Issue
Whether if the approval is not granted by the
J oin t/Add itio na l co mmissio ne r b u t is inst ea d
taken from the Commissioner of Income-tax then
n o t ice f o r r e a sse ssme n t issu e d u /s 1 4 8 a n d
assessment done pursuant to such notice will be
va lid?
He ld
According to section 151 of the Act it was only the Joint
Commissioner or the Additional commissioner who could
grant the approval of the issue of notice u/s 148 of the
Act. As the approval was not granted by the Joint/
Additional commissioner and was instead taken from the
commissioner of Income-tax the notice was not valid and
also because it was not an irregularity curable u/s 292B,
the said notice was invalid.The AO himself mentioned
that as a matter of precaution the permission of CIT was
obtained as he, admittedly, was not sure as to whether
a scrutiny assessment was passed in this case. As seen
from the record there is no order u/s 143(3) in the
assessees case for the impugned assessment year. Thus,
after careful consideration of the facts it was held that
the reopening is not in accordance with the provisions of
the Act and is liable to be quashed and accordingly, it
was held to benull and void.
SIRO Clinpharm (P) Ltd V DCIT 160 TTJ

70 (Mum)
Assessment Years 2003-04 to 2008-09,
Order dated 27 th September 2013
Basic Facts
The Assesseeis a company engaged in the business of
Clinical Research of pharma products. It had claimed
deduction u/s 80IB(8A) of the Act. The claim for deduction
was allowed in AY 2003-04, 2004-05 & 2006-07.
Subsequently all these assessments together with that
for AY 2005-06 was reopened on the ground that the
assesse is not involved in any research and development
activities and did not fulfill the criterion laid down in Rule
18DA(1). The AO completed the reassessment for these
years as well as regular assessments for AY 2007-08 &
24
2008-09 holding that the activity of the assesse was not

leading to Technology development or improvement of
technology and assesse also did not have the adequate
infrastructure as envisaged in Rule 18DA(1)(e ) of the IT
Rules. The CIT(A) confirmed the AOs order in appeal
filed before him. The assesse is in appeal before the
ITAT.
Issue
Whether the assessee is entitled to deduction
under section 80IB(8A) in respect of its activities
of clinical trials of pharma products.
He ld
As per Section 80IB(8A) any company carrying on
scientific research and development is entitled for
deduction in respect of 100% of the profits and gains of
such business if such company is registered in India having
its main object the scientific and industrial research
&development provided it is approved by the prescribed
authority and satisfies such other conditions as may be
prescribed. The assessee was granted approval by the
prescribed authority and it was also renewed/extended
twice having satisfied about the main objective of the
assesee, the research and development activities carried
on by it and infrastructure facilities available with it such
as laboratory, qualified manpower etc. In view of this
the ITAT held that when approval was initially granted
and further renewed only when the assesse has satisfied
the prescribed authority that it was carrying on the activity
of scientific and industrial research and development and
was having necessary infrastructure to do so, the AO or
the CIT(A) could not sit on judgment on such approval
and re-examine whether the conditions stipulated for
claiming deduction u/s 80IB(8A) of the act were satisfied
by the assesse. Accordingly the assessees claim was
allowed and the order of the CIT(A) was set aside.
April, 2014
CA. Sanjay R. Shah

sarshah@deloitte.com
In this issue we are giving gist of a landmark judgment

recently pronounced by the Honble Gujarat High Court,
wherein the taxability of retention money and concept
of accrual of income have been discussed threadbare,in
the process also distinguishing certain judgments and also
following judgments of some other courts.We hope the
readers would find them useful.
In order to permit greater liquidity to the contractors,

an option was given to receive such completion
warranty amounts also in cash, subject to providing
bank guarantee of a matching sum. Such bank
guarantee would be en-cashed to the extent of the
dues of SSNNL on any defect found in the
construction carried out or discharged at the end of
the warranty period. During the year under
consideration, the assessee had opted this optionand
received the amount on his furnishing bank
guarantee to SSNNL to the extent of Rs.1.58 crores.
The assessee did not offer this amount as income
on the ground that though the amount has received
by him and credited to Profit & Loss Account, the
amount has not accrued to him as the sumwould
accrue to him only on the certificate of Engineer Incharge that construction was carried out without any
defects. The assessee in this regard relied on the
decision of the Honble Calcutta High Court in the
case of CIT v/s Simplex Concrete Piles (India) Pvt.
Ltd. reported in 45 Taxman 370.
In the High Court of Gujarat at Ahmedabad

Tax Appeal No. 554 of 2003 and other Appeals
M/s Amarshiv Construction Pvt. Ltd.. Appellant(s)
v/s
The Deputy Commissioner of Income Tax Opponent(s)
Appearance : (Tax Appeal No. 554 of 2003)

Mr. RK Patel with Mr. BD Karia & S.R. Patel, Advocates
for the Appellant
Mr. KM Parikh, Advocate for the Opponent(s) No. 1
Coram : Honourable Mr. Justice Akil Kureshi
2.
The A.O., however, distinguished the said decision

and held that since the amount is received by the
assessee and has been credited in its Profit & Loss
account, it cannot be said that the income has not
accrued to the assessee. According to him, this was
not a case of withholding of retention money, but a
case where the amount was already released. He,
accordingly taxed it.
3.
The appellant was successful before CIT(A) who held

that the said amount is not taxable in the year under
consideration, i.e. A.Y. 1992-93, but taxable in the
A.Y. relevant to the previous year in which the work
is completed and relevant conditions of contracts
are fulfilled. It would be only in that year when the
retention money is payable to appellant as per the
terms of the contracts, i.e. after the defect liability
period is over and after the Engineer In-charge
certifies that no liability attaches to the appellant.
4.
In the departmental appeal before ITAT, ITAT

allowed the appeal of the department holding as
under :
April, 2014
25
and
Honourable Ms. Justice Sonia Gokani
19th March 2014
Gist Only
(A) Facts :
1.
The assessee was engaged in the business of civil

construction work. It was awarded construction
contract by Sardar Sarovar Narmada Nigam Limited
[SSNNL] for construction of a part of the Sardar
Sarovar dam and other canal and structural works
related thereto. Out of the running bills raised by
the assessee for such construction, the SSNNL would
retain a portion thereof for satisfactory completion
of the work. Such accumulated amount upto a
certain ceiling would be withheld for a specified
period, to be released at the end of such period
upon being certified by the Engineer In-charge that
the construction was carried out without any defects.
Such terms of the contract were later on modified.
i)
Income had accrued to the assessee and

thereafter it was retained by way of an
additional security. In fact the amount was
received by the assessee upon furnishing the
bank guarantee;
ii)
Tax was deducted at source on full amount

including the disputed receipt;
iii) The liability to return the amount may arise in

future, if there was insufficient performance of
contract. In the present case, no such liability
arose, even at a later date;
iv) The Tribunal referred to Clause 10 & 11 of
Accounting Standard 9to hold that revenue
recognition in such case should not be
postponed;
v)
The Tribunal also referred to the Accounting

Standard 7 which deals with recognition of
contract, revenue and expenses and recognizes
the percentage completion method in
construction business;
vi) The assessee had claimed full expenditure and

not deferred a portion thereof relatable to the
retention money.
On the above basis, Tribunal decided the issue in
the favour of the department. The assessee then
carried the matter to the Honble High Court.
(B) Question before Honble High Court :
The High Court admitted for consideration of
following substantial question of law:W h e t h e r o n t h e f a c t s a n d in t h e
cir cu mst a n ce s o f t h e ca s e a n d o n
appreciation of correct position of law read
along with documentary evidence on record
t h e T r ib u n a l s u l t ima t e f in d in g a n d t h e
conclusion of taxabilityof Rs.1,58,70.856/pertaining to retention money for the year
under consideration is contrary to settled
position of law and against the documentary
evidence on record with the result that the
ultimate finding and conclusion is vitiated
in the eyes of law ?
(C) Held :
After considering the contentions raised by the rival
parties, the High Court held as under:
26
1.0 Having thus heard learned counsel for the

parties and having perused the documents on
record, we may advert to the relevant terms of
the agreement more closely.
Clause 5 of the general conditions of contract
provides for the manner of security of
performance. The relevant clauses initially read
as under:
5.3 In addition to the above initial security deposit,
the Engineer In-Charge shall deduct from the
intermediate bills i.e., the running account bills
an amount a the rate of ten percent (10%) of
the total value of each bills as an additional
security deposit subject to the condition that
the total amount of such deductions shall not
exceed seven and one half percent (7.5%) of
the tendered amount as mentioned in the letter
of acceptance of the tender.
5.4 If the Contractor expressly requests in writing,
he will be permitted to convert quarterly
Security Deposit recovered from his bills into
interest bearing SSNNL Securities or interest
bearing deposits with a Scheduled Indian Bank
in the name of Executive Engineer, Narmada
Project Main Canal Construction Division No.11,
Ahmedabad-380061, Gujarat State (India).
5.5 The Bank Guarantee, the performance bond,
the interest bearing SSNNL securities and the
interest bearing SSNNL securities and the
interest bearing deposit shall remain valid for
atleast twelve months after the date of the
completion of the works.
5.6 The security deposit, less any amounts due, shall
be returned to the Contractor after defects
liability period is over and subject to the Engineer
In-Charge certifying that no liability attaches to
the contractor .
Clauses 5.3 and 5.4 were subsequently amended
as under:
5.3 In addition to the above initial security deposit,
the Engineer In-charge shall deduct from the
intermediate bills, i.e. the running account bills
an amount at the rate of ten percent (10%) of
the total value of each bills as an additional
security deposit subject to the condition that
the total amount of such deductions shall not
April, 2014
exceed five percent (5%) of the tendered
amount as mentioned in the letter of
acceptance of the tender.
security or deposits, a new option was given tothe

contractor to convert such security deposit into bank
guarantee of the specified banks. These two were
significant changes and both, it can be presumed,
were aimed at alleviating the liquidity crunch which
the contractors executing construction works of
considerable size would encounter. From a
maximum additional security deposit which could
earlier be accumulated upto a 7.5% of the tender
amount, the ceiling was reduced to 5%.
Simultaneously, the contractor was given an option
to receive the security depositin cash on giving the
bank guarantee. Since withholding of 10% of the
running account bills upto a maximum of 7.5% of
the tender amount for the entire warranty period of
twelve months would cause considerable hardship
to the contractors, more lenient terms were offered.
These modifications, however, were subject to other
conditions; including those contained in para 5.6 of
the general Conditions of the Contract, which as
noted above, provided that the security deposit
minus the amount due would only be returned to
the contractor at the end of the defects liability
period. This would be subject to Engineer In-charge
certifying that no liability attaches to the contractor
in terms of the modified conditions contained in para
5.4. Any such recovery of the amount due to SSNNL
from the contractor would be made from the bank
guarantee offered by the contractor in lieu of the
security deposit.
5.4 If the Contractor expressly requests in

writing, he will be permitted to convert
Security Deposit recovered from the bills
in t o in t e r e s t b e a r in g G o ve r n me n t /
S SNNL. S ecu rit ie s o r in t er est b e ar in g
deposits with a Scheduled Indian Bank
taken out in the name of Engineer Inch a r g e o r in t o B a n k G u a r a n t e e in
instalments of Rs.10 Lakhs each in the
form in Annexure-6 issued by a Vadodara
branch of any scheduled Indian Bank or
b y a f o re ig n B a n k a ccep t a b le t o t h e
SSNNL and confirmed by any Scheduled
Indian Bank authorized to deal in foreign
excha nge .
We are concerned with the amended terms of the
agreement. From the above clauses, it could be seen
that before amendment, the general conditions
envisaged that in addition to the initial security
deposit, the Engineer In-charge would deduct from
the running bills of the contractor, amount @ 10%
of the total value of such bills by way of additional
security deposit. The total accumulation of such
security deposit however should not exceed 7.5%
of the tendered amount. The contractor had an
option to convert such security deposit into interest
bearing SSNNL securities or interest bearing deposits
with the scheduled Indian Bank in the name of
Executive Engineer, Narmada Project Main Canal
Construction Division. As per Clause 5.5, the Bank
guarantees, the performance bond, interest bearing
securities and the interest bearing deposits would
remain valid for at least twelve months after the
date of completion of the work. Clause 5.6 which
has significance provided that the security deposit
minus any amount due from the contractor would
be returned after defects liability period is over and
subject to the Engineer In-charge certifying that no
liability attaches to the Contractor.
Such terms of the contract were later on amended.
The relevant amendments were that in para 5.4,
wherein the maximum accumulation of additional
security deposit was reduced to 5% of the tender
amount. In para 5.4, in addition to an option of
converting the security deposit into interest bearing
The question, therefore, arises whether in view of

such terms of the contract, the amount received by
the assessee which otherwise is categorized as
security deposit, after offering matching bank
guarantee, can be said to be the assessees income.
The answer would be in the affirmative, if it is found
that the right to receive such income had accrued.
The assessee following mercantile system of
accounting, this question would be relevant. Even
otherwise, as held by the Supreme Court in case of
Commissioner of Income Tax v/s Bokaro Steel
Limited, reported in 236 ITR 315 unless there is really
any income, there can be no tax levied.
2.0 The High Court further discussed the ratio decidendi
of the following cases:
April, 2014
i)
CIT v/s Simplex Concrete Piles (India) Pvt. Ltd.

[45 Taxman 370(Calcutta) ]
27
ii)
Anup Engineering Ltd. v/s CIT [247 ITR 457

(Guj.)]
iii) CIT v/s Ignifluid Boilers (I) Ltd. [238 ITR 295
(Mad.]
iv) Director of Income Tax v/s Ballast Nedam
International [33 Taxmann.com 139 (Guj.)]
v)
CIT v/s Associated Cables P. Ltd. [286 ITR 596

(Bombay)]
And further held as under :

It can thus be seen that different High Courts have
in the context of withholding of retention money for
performance guarantee of a contract has held that
the right to receive such amount did not accrue till
the performance warranty period is over.
Even in the context of actual release of such amount
on furnishing the bank guarantee, subject to the
satisfactory completion of the contract, the Bombay
High Court confirmed the decision of the Tribunal
which by majority view had held that the income
cannot be said to have accrued. In our opinion,
merely because in the present case, unlike in the
cases cited by us; including Anup Engineering Co.
Ltd. (Supra) the amount was realized, would not
change this situation. It is undisputed that every
receipt is not an income. Whether a receipt is an
income or not would depend on whether the right
to receive the same had accrued to the assessee.
The question whether in the present case
such right had accrued or not, must be judged
on the terms and conditions of the contract
between the parties. We have noted such
conditions before and after the amendment.
Before the amendment, the assessee had to
surrender a portion of the running bill amount
towards additional performance guarantee
d e p o sit. T h e a sse sse e co u ld r e q ue st t h e
employe r of the cont ract to conve rt such
amount into interest bearing securities or
deposits. The amount would still remain with
SSNNL. After amendment, the assessee had
an additional option or receiving the amount
but converting the security deposit into a
bank guarantee. In other words, the assessee
would receive the full running bill amount;
inclu ding 10% t o be set apart by w ay of
additional security deposit, upon furnishing
the bank guarantee of a matching sum. In
28
either case, namely as in the pre-amendment

sce n a r io w h e r e t h e a sse s se e w o u ld n o t
receive 10% of the running bill amount or
post amendment, when such amount would
be received by the assessee upon furnishing
the bank guarantee, para 5.6 of the general
conditions remained unchanged. As per the
said condition, the security deposit or the
se c u r it y d e p o sit c o n ve r t e d i n t o b a n k
g u a r a n t e e w o u ld b e r e t u r n e d t o t h e
cont ractor after defects lia bility perio d is
over. This would be subject to two conditions
firstly, that the employer of the contract
would deduct from such amount, any amount
due to it and that the Engineer In-charge
cer t if ie s t h at no liab ilit y a tt a ch es to th e
contractor. It can thus be seen that in either
of the two cases, SSNNL would recover from
the assessee, the amount due to SSNNL and
release the rest of the amount out of the
security deposit only upon completion of the
defects liability period and upon certification
by the Engineer In-charge. In case of the
pre-amendment period, such recovery would
be from the security deposit / interest bearing
securities or deposits; as the case may be.
In t h e p o st a me n d m e n t p e r io d , if t h e
assessee had so opted and furnished bank
g u a r a n t e e t o r e ce iv e t h e a mo u n t , s u ch
recovery would be from the bank guarantee
so furnished.
We are at pains to discuss these aspects because in
our opinion these features demonstrate that in so
far as the assessees right to receive the said amount
is concerned, there has been no change by virtue of
the amendment in the general conditions contained
in the contract. Either before or after amendment,
the right to receive he amount was always subject
to the vital conditions of recoveries and adjustments
against the dues found due to the SSNNL,
completion of the defects liability period and
certification by the Engineer In-charge that no liability
attaches to the contractor. If therefore in a
situation prior to the amendment where the
retention money was actually retained by
SS NNL, t he view o f t his Co ur t a nd o th er
Cou rt s w as t h at t h e rig ht t o r eceive th e
amount had not accrued, in our opinion after
the amendment also, such opinion would not
April, 2014
change. In various decisions no ted by us,
the Courts were influenced by the factors
that the amount of retention money withheld
by the employer of the contract could be
released only upon completion of the defects
liability and adjustment could be made from
such amount, if it is found that there is any
amount due and payable to the employer of
the contract or that the execution of the
work was not satisfactory. In the present
case also, SSNNL retained such right to make
recovery. Only the source of such recovery
cha ng ed . Ea rlier , su ch r eco ve ry cou ld b e
ma d e f r o m t h e se c u r it y d e p o sit s o f t h e
assessee lying with SSNNL. Post amendment,
such recovery could be made from the bank
guarantee furnished by the assessee. In either
e ve n t , t h e S S NNL co u l d e f f e ct r e co v e r y
without notice to the assessee. The same
uncertainty of receiving the full amount of
a dd itio n al se cur ity d ep o sit r e ma in ed th e
same, either before or after the amendment
in the conditions.
percentage completion method and the accounting

treatment to be accorded insuch case therefore was
not at issue. The assessee claiming entire expenditure
and not excluding expenditure relatable to the
withheld security deposit also would not be fatal to
the interest of the assessee. The expenditure in toto
was incurred. The question only was what would be
the total amount that the assessee would receive
for carrying out such construction. Ninety percent of
the amount was payable or already paid over. Ten
per cent of the running account bills was adjustable
towards the claims of the SSNNL and recoveries
arising out of defects; if any. Release of such amount
or part thereof would decide the ultimate profit
margin of the assessee upon execution of the
contract. The expenditure incurred by the assessee
could not be proportionately divided into that
covering the assessees ninety per cent of the bill
amount and relatable to the rest ten percent.
Under the circumstances, we find that the Tribunal
committed an error in allowing the Revenues
appeals. The question is answered in favour of the
assessee. The judgment to the extent above in each
of the respective appeals is reversed. Resultantly,
the judgment of the CIT(A) is reinstated. As a result,
consequential directions of the CIT(A) will also stand
re-instated. We reproduce such directions, again
here:
It thus emerge that the character of the amount did

not change. It still retained the character of retention
money. Its temporary release to the assessee on
furnishing the bankguarantee cannot be equated
with the right to receive such amount and resultantly
with accrual of income because the dominant control
over the said amount still remained with SSNNL.
However, the Assessing Officer is directed to tax

the said retention money in the assessment year
relevant to the previous year in which retention
money becomes payable to the appellant as per
the terms of the contracts, i.e. after the defect
liability is over and after the Engineer In-charge
certifies that no liability attaches to the appellant.
3.0 The High Court thereafter also relied on the following

decisions:
i)
CIT v/s Govind Prasad Prabhu Nath [171 ITR

417 (Alla.) ]
ii)
CIT v/s Kerala State Drugs & Pharmaceuticals

Ltd. [192 ITR 1 (Ker.)]
iii) CIT v/s Punjab Tractors Co-op. Multi Purpose

Society Ltd. [234 ITR 105 (P&H)]
iv) CIT v/s Excell Industries Ltd. & Anr. [358 ITR
295 (SC)]
v)
Appeals are allowed to the above extent.

4.0 Thus, the appeal of the assessee was allowed after
discussing threadbare the various clauses which
governed the receipt of the retention money and
the concept of accrual of income under the Income
Tax Act.
Kedarnath Jute Mfg. Co. Ltd. v/s CIT [82 ITR

363 (SC) ]
And held as under:

Reliance placed by the Tribunal to the Accounting
Standards for percentage completion method was
misplaced. The assessee did not follow the
April, 2014
29
30
April, 2014
Controversies
CA. Kaushik D. Shah

dshahco@gmail.com.
Whether interest on term loan must be excluded in

computing disallowance u/s 14-A read with rule 8D?
Issue:
Term Loan or any other loan taken for the purpose of
business results into business income liable to tax. When
term loan is utilized for the purpose of business, there is
no question of any exempt income to be earned out of
utilization of such term loan. Whether interest on term
loan has to be excluded for the purpose of computing
disallowance u/s 14A read with rule 8D.
Proposition:
When term loan is obtained, it has to be utilized for the
purpose of business and business income is always
taxable and hence, its proposed that while computing
disallowance u/s 14A, read with rule 8D, interest on term
loan has to be excluded.
View against the Proposition:
On the basis of the plain reading of rule 8D the
computation of disallowance leaves no doubt that the
entire interest has to be considered for the purpose of
disallowance. One of the variables in formula set out in
rule 8D(2)(ii), it is clearly stated that the amount of interest
paid in the relevant previous year other than interest
included in direct expenses incurred for earning tax
exempt income has to be disallowed and this provision
admittedly deals with a situation in which the assessee
has incurred expenditure by way of interest during the
previous year which is not directly attributable to any
income or receipt clearly therefore, this sub-clause seeks
to allocate common interest expenses to taxable income
and tax exempt income. In other words, going by the
plain wordings of rule 8D (2)(ii), what is sought to be
allocated is expenditure by the way of interest which
is not directly attributable to any income or receipt and
the only categories of income so far as the scheme of
rule 8D is concerned are mutually exclusive categories
of taxable and non taxable income or receipt.
Let us now refer to rule 8D and the relevant parts which
reads as under:
Method for determining amount of expenditure in
relation to income not includible in total income.
8D (1) Where the Assessing Officer, having regard to the
accounts of the assessee of a previous year, is not satisfied
with
(a)The correctness of the claim of expenditure made by
the assessee; or
(b)The claim made by the assessee that no expenditure

has been incurred
in relation to income which does not form part of the
total income under the Act for such previous year, he
shall determine the amount of expenditure in relation to
such income in accordance with the provisions of subrule (2).
(2) The expenditure in relation to income which does
not form part of the total income shall be the aggregate
of following amounts, namely:
(i) the amount of expenditure directly relating to income
which does not form part of total income;
(ii) in a case where the assessee has incurred expenditure
by way of interest during the previous year which is not
directly attributable to any particular income or receipt,
an amount computed in accordance with the following
formula, namely :
AX B
C
Where,
A = amount of expenditure by way of interest other than
the amount of interest included in clause (i) incurred
during the previous year;
B = the average of value of investment, income from
which does not or shall not form part of the total income,
as appearing in the balance sheet of the assessee, on
the first day and the last day of the previous year ;
C = the average of total assets as appearing in the
balance sheet of the assessee, on the first day and the
last day of the previous year
It can be seen that the definition of variable (A) in formula
under rule 8D(2)(ii) is clearly suggesting that in as much
as it specifically excludes interest expenditure directly
related to tax exempt income, it does not exclude
expenditure directly related to taxable income. Thus it is
submitted that though term loan may have been utilized
for the purpose of business and business income is always
taxable income there is no provision in rule 8D(2)(ii) for
exclusion of interest on term loan.
View in favor the Proposition:
First of all let us refer to section 14A which reads as
under:
For the purposes of computing the total income under
this chapter, no deduction shall be allowed in respect of
expenditure incurred by the assessee in relation to income
which does not form part of the total income under this
Act.
April, 2014
31
Controversies
The following points should be kept in mind while
understanding provisions of section 14A
1) Section 14A is basically applicable only when the
expenditure is incurred for earning exempt income
while in the case of interest expenditure on term loan,
it is for the purpose of earning business income which
is liable to tax and so its very clear that interest expense
on term loan is not for earning any exempt income
and hence no disallowance is called for u/s 14A
2) The ICAI in its guidance note in respect of provisions
of section 14A in para 40.10, has stated that interest
on term loan maybe an example of such interest
which is generally related to taxable income and is
therefor excluded.
3) It is also necessary to refer to notification number
45/2008, dated 24-3-2008 issued by CBDT, regarding
how the disallowance should be worked out.
4) Let me now refer to the decision in the case of ITO
vs. Narain Prasad Dalmia (ITAT Kolkata, decided
on January 2014) The Honorable ITAT has held that
rule 8D (2)(ii) is very clear that the expenditure on
account of payment of interest would be covered in
the said rule only if it is not directly attributable to
any particular income or receipt. If the assessee is
able to demonstrate that the payment of interest is
directly attributable to the assessees taxable business
activity then, it cannot be considered under rule
8D(2)(ii) and has to be excluded while computing
the disallowance under section 14A. Similarly in the
case of CIT vs. REI agro Ltd. Calcutta high court
ruled that under rule 8D(2)(ii) interest on loans for
specific business purposes cannot be included.
Summation:
Section 14A of the Income tax act 1961 read with rule 8D
states that if any expenditure is incurred for earning exempt
income, the same cannot be allowed as deduction. The
rule has come into place from AY 2008-09. It is now
judicially settled that it is not applicableretrospectively. It
is very clear from the formula set out in rule 8D that interest
expense directly attributable to tax exempt income as also
directly attributable to taxable income are required to be
excluded from computation of common interest expense
to be allocated under rule 8D(2). From the reading of
section 14A, one thing is very clear that if the expenditure
is incurred for earning taxable income then no disallowance
is called for. When reference is made to rule 8D(2), it is
right that there is a reference to indirect interest to be
disallowed when the same is used for earning exempt
income. But ironically if the interest is paid on loan for
earning taxable business income then there is no provision
for excluding such interest income. But then you do not
require a reference in the rule as the mandate of section
14A is very clear and that is if expenditure is incurred for
earning exempt income then such expenditure only can
32
be disallowed. It is useful to refer to the decision in the

case of Assistant commissioner of Income tax, Circle 10,
Kolkata Vs. Champion Commercial Co. Ltd 139 ITD 108
Kolkata. In the said case the Honble ITATagreed with
the argument of the assessee that if interest expenditure
is incurred for earing taxable income then, no disallowance
is called for under section 14A read with rule 8D however
the honorable ITAT in the operative para held as under
Coming to the facts of instant case, it is found that
commissioner (Appeals) has not given categorical findings
in respect of factual aspects of specific utilization of
borrowings on which interest was paid and he has simply
accepted the assessees contention that out of a total
interest expenditure of Rs.41,84,249 a sum of
Rs.36,42,935 was paid with respect to borrowing for the
purposes of trading in chemicals and the common interest
expenses to be allocated was thus only Rs.5,41,313.
Neither these details were before the assessing officer,
nor has the commissioner (Appeals) sought any remand
report on the same.
Therefore while the action of the commissioner (Appeals)
is upheld in principle, assuming that it was based on a
principle discussed above, the matter, however, is
remitted to the file of the Assessing Officer for the
adjudication de novo in the light of the legal provision
discussed above. It is made clear that the common
interest expenses which are to be allocated in terms of
the formula under rule 8D(2)(ii) will only be such interest
expenses which are neither directly attributable to
borrowings specifically used for tax exempt incomes or
receipts nor are directly attributable to borrowings
specifically used for taxable incomes or receipts. With
these directions, the matter stands restored to the file of
the assessing officer (Para 19).
Now let me refer to the decision in the case of ACIT vs.
Best and Compton engineering Ltd. ITA No. 1603/Mds/
2012. (AY 2009-10) decided on 16thJuly 2013. The honble
tribunal held as under:
On going through the order of the commissioner of
Income Tax (Appeals), we find that the commissioner of
Income Tax (Appeals) excluded the interest on bank loan
and term loans from the calculation of disallowance under
Rule 8D(2)(ii) as the assessee has utilized the bank loan
and term loan for the purpose of purchase of machineries
and for expansion of projects and these loans were
specifically sanctioned for specific project and such loans
were also used for the purpose for which they were
sanctioned. In the circumstances, we find that that the
commissioner if Income tax (Appeals) has rightly excluded
such interest from the purview of computation of
disallowance under rule 8D(2)(ii).
Finally its submitted that while computing disallowance
under section 14A r.w. rule 8D the interest on term loan
requires to be excluded.

April, 2014
Judicial Analysis
Advocate Tushar Hemani

tusharhemani@gmail.com
should have entertained those points and should not

have held that they cannot be entertained in the
appeal.
Co n ce s sio n o f La w b y Ass e sse e o r h is

Authorised Representative is not binding
Elecon Engineering v. State of Gujarat

[1994] 93 STC 397 (Guj)
xxx
19. The Supreme Court has observed on the point of
erroneous concession given by the advocate, in the
case of Moran Mar BasseliosCatholicos v. Most Rev.
Mar Poulose Athanasius AIR 1954 SC 526, as
follows:
.......... the concession made by the defendants
advocate requiring an ecclesiastical verdict as a
condition precedent to voluntary separation also was
obviously wrong and an erroneous concession of law
made by the defendants advocate could not be
relied upon for saving the plaintiffs .........
Even otherwise law on this point is well-settled that
any concession on the point of law made by the
advocate would not be binding. The aforesaid writing
of the advocate is erroneous inasmuch as it was
contrary to the judgment in the case of
VasukiCarborundum Works [1979] 43 STC 294 (Guj).
20. It may be stated that judgment in the case of
VasukiCarborundum Works [1979] 43 STC 294 (Guj)
is of November 17, 1978 and the alleged concession
was made by the advocate on August 13, 1979. It is
rather interesting to note that the Assistant
Commissioner who decided the appeal has relied
on the judgment of this Court in the case of Nowroji
N. Vakil& Co. v. State of Gujarat [1979] 43 STC
238 which was subsequently delivered, i.e., on
November 27, 1979. Both the judgments, i.e.,
judgments in the cases of VasukiCarborundum
Works [1979] 43 STC 294 (Guj) and Nowroji N.
Vakil& Co. [1979] 43 STC 238 (Guj) are reported in
the same volume of Sales Tax Cases. However, no
note of the judgment in the case of
VasukiCarborundum Works [1979] 43 STC 294 (Guj)
was taken by the Assistant Commissioner while
deciding the appeal.
21. As stated above when the questions referred to us
were coming within the subject-matter of the appeal
before the Assistant Commissioner, the Tribunal
xxx
Bhandari Metals and Alloys (P.) Ltd. v.

State of Karnataka. [2004] 136 STC 292
(Kar )
xxx
The appellant does not dispute the fact that it had
voluntarily filed a return offering the value of non-ferrous
metal scrap brought by it into the local area to entry tax
or that it had paid the entry tax on the said value or that
the assessing authority had accepted the said return and
passed the assessment orders. But the question is whether
the said action on the part of the appellant bars the
appellant from challenging the order of assessment in
appeal when once it realises that the goods in question
were exempt from tax.
The question is covered by the decision of a division Bench
of this Court in Narsepalli Oil Mills v. State of Mysore
[1973] 32 STC 599; (1973) 2 Mys LJ 367 where an
identical question was considered. The division Bench
held :
The petitioner cannot ascribe any error in the order of
the Commercial Tax Officer since his own return was
accepted by the assessing authority and there was no
dispute that the sales were not exigible to tax under the
Central Sales Tax Act. If the assessee makes a mistake
in submitting a return and submits to be assessed to tax
before the assessing authority, he is not estopped or
precluded by any law from preferring an appeal and
showing to the appellate authority that the sales are, in
fact, not exigible to tax. If such a contention is taken,
the appellate authority is under a duty to examine the
matter and determine the question whether or not the
sales are exigible to tax. There is no question of invoking
the doctrine of estoppel. In our opinion, the Deputy
Commissioner of Commercial Taxes as also the Tribunal
have failed to exercise the jurisdiction vested in them.
The second question therefore has to be answered in
the affirmative in favour of the assessee.
xxx
April, 2014
33
Judicial Analysis
DCIT v. K.S. Suresh [2009] 319 ITR 1

(M AD .)
xxx
11. Before considering the respective submissions of the

learned counsel, we feel it appropriate to refer to
certain decisions of the honble Supreme Court on
the issue of concession made by the learned counsel
before the court and its implication in deciding the
case. In the decision reported in Tripura Goods
Transport Association v. Commissioner of Taxes, AIR
1998 SC 465, the honble Supreme Court has held
as under (page 466) :
4. . . . The concession made on behalf of the State
counsel was against the statutory provisions and was
unauthorised. It has been submitted that order passed
on the basis of this erroneous concession should be
recalled . . .
9.
The assurance given by counsel of the State in court

was whether the applicants are dealers or not, he
assures that if and when the applicants approach
the Commissioner of Taxes, he shall ensure that
these forms are supplied to the petitioners. This
assurance was clearly against the law. Form 18A
cannot be issued to the transporters.
10. Although the order dated March 3, 1997, was based

on the assurance given by the senior advocate
appearing for the State the order will have to be
recalled. An advocate appearing on behalf of the
State cannot undertake that the State will do
something contrary to the statute. Therefore, this
application is allowed. We will recall the order passed
on March 3, 1997 and restore I. A. No. 2 of 1996
for hearing and disposal. These applications are
disposed of as above. There will be no order as to
costs.
12. Again, in the decision reported in Uptron India Ltd.
v. ShammiBhanAIR 1998 SC 1681, the Supreme
Court has stated the legal position as under (page
1685) :
23. In view of this observation, the question
whether the stipulation for automatic termination
of services of overstaying the leave would be legally
bad or not, was not decided by this court in the
judgment relied upon by Mr. Manoj Swarup. In that
judgment, the grounds on which the interference
was made were different. The judgment of the High
Court was set aside on the ground that it could not
decide the disputed question of fact in a writ petition
and the matter should have been better left to be
decided by the Industrial Tribunal. Further, the High
34
Court was approached after more than six years of

the date on which the cause of action had arisen
without there being any cogent explanation for the
delay. Mr. Manoj Swarup contended that it was
conceded by counsel appearing on behalf of the
employee that the provision in Standing Orders
regarding automatic termination of services is not
bad. This was endorsed by this court by observing
that Learned counsel for the respondent rightly made
no attempt to support his part of the High Courts
order. This again cannot be treated to be a finding
that provision for automatic termination of services
can be validly made in the Certified Standing Orders.
Even otherwise, a wrong concession on a question
of law, made by a counsel, is not binding on his
client. Such concession cannot constitute a just
ground for a binding precedent. The reliance placed
by Mr. Manoj Swarup on this judgment, therefore,
is wholly out of place. (Emphasis added)
13. In the decision reported in Central Council for
Research in Ayurveda and Siddha v. Dr. K.
Santhakumari, AIR 2001 SC 2306, the legal position
has been set out in paragraphs 12 and 13, which is
to the following effect (page 2308) :
12. In the instant case, the selection was made by
the Departmental Promotion Committee. The
Committee must have considered all relevant facts
including the inter se merit and ability of the
candidates and prepared the selects list on that basis:
The respondent though senior in comparison to other
candidates, secured a lower place in the select list,
evidently because the principle of merit-cumseniority held been applied by the Departmental
Promotion Committee. The respondent has no
grievance that there was any mala fides on the part
of the Departmental Promotion Committee. The only
contention urged by the respondent is that the
Departmental Promotion Committee did not follow
the principle of seniority-cum-fitness. In the High
Court, the appellants herein failed to point out that
the promotion is in respect of a selection post and
the principle to be applied is merit-cum-seniority.
Had the appellants pointed out the true position,
the learned single judge would not have granted
relief in favour of the respondent. If the learned
counsel has made an admission or concession
inadvertently or under a mistaken impression of law,
it is not binding on his client and the same cannot
enure to the benefit of any party.
13. This court in Uptron India Ltd. v. ShammiBhan, AIR
1998 SC 1681 pointed out that a wrong concession
on question of law made by counsel is not binding
April, 2014
Judicial Analysis
on his client and such concession cannot constitute
a just ground for a binding precedent. (Emphasis
added)
11. Before adverting to the said question we may

record that wrong concession of a counsel on a pure
question of law is not binding upon a party. It is
furthermore trite that non-mentioning or wrong
mentioning of a provision in an order may be held
to be irrelevant if it is found that the requisite
ingredients thereof were available on records for
passing the same. We may further notice that the
High Court proceeded on the basis that the penalty
imposed upon him was a major penalty.
14. In the decision reported in Union of India v.

MohanlalLikumal Punjabi [2004] 3 SCC 628, the
honble Supreme Court has stated the legal position
as under (page 632) :
8. We shall first deal with the effect of concession,
if any, made by learned counsel appearing for the
present appellants before the High Court. Closer
reading of the High Courts order shows that the
High Court took the view that in view of the
revocation of the order on December 19, 1994 and
the order passed by the High Court on January 11,
1995, no further order could have been passed under
section 7 of the SAFEMA. After having expressed
this view, the so-called concession is recorded. In
our view the concession, if any, is really of no
consequence, because the wrong concession made
by a counsel cannot bind the parties when statutory
provisions clearly provided otherwise. It was observed
by a Constitution Bench of this court in Sanjeev Coke
Mfg. Co. v. Bharat Coking Coal Ltd. [1983] 1 SCC
147 that courts are not to act on the basis of
concession but with reference to the applicable
provisions. The view has been reiterated in Uptron
India Ltd. v. ShammiBhan, AIR 1998 SC 1681; [1998]
6 SCC 538 and Central Council for Research in
Ayurveda and Siddha v. Dr. K. SanthakumariAIR 2001
SC 2306 ; [2001] 5 SCC 60. In paragraph 12 of
Central Council for Research in Ayurveda and Siddha
case, AIR 2001 SC 2306 ; [2001] 5 SCC 60 it was
observed as follows : (SCC page 64, paragraph 12)
...
9.
In Uptron India Ltd. v. ShammiBhan, AIR 1998 SC

1681 ; [1998] 6 SCC 538, it was held that a case
decided on the basis of wrong concession of a counsel
has no precedent value. That apart, the applicability
of the statute or otherwise to a given situation or
the question of statutory liability of a person/
institution under any provision of law would invariably
depend upon the scope and meaning of the
provisions concerned and has got to be adjudged
not on any concession made. Any such concessions
would have no acceptability or relevance while
determining rights and liabilities incurred or acquired
in view of the axiomatic principle without exception,
that there can be no estoppel against statute.
(Emphasis added)
15. Again, in the decision reported in Union of India v.

S.C. Parashar, AIR 2006 SC 3566, the honble
Supreme Court has held as under (page 3568) :
13. However, there cannot be any doubt whatsoever

that the Disciplinary Authority never intended to
impose a minor penalty. The concession of the
learned counsel appearing for the appellant before
the High Court was apparently erroneous. It is now
well-settled that wrong concession made by a
counsel before the court cannot bind the parties when
statutory provisions clearly provide otherwise.
16. In fact, Mr. R. Krishnamoorthy, learned senior
counsel appearing for the respondents/assessees
also referred to the decisions reported in (i) Ram
Bali v. State of U. P. [2004] 10 SCC 598, (ii) Roop
Kumar v. Mohan Thedani, AIR 2003 SC 2418, and
(iii) State of Maharashtra v. RamdasShrinivasNayak,
AIR 1982 SC 1249.
17. In the decision reported in Ram Bali v. State of U. P.
[2004] 10 SCC 598, the honble Supreme Court, in
paragraph 9 of the said judgment, has held that
where the High Court has specifically recorded to
the effect that only two points were urged before it,
in order to ascertain as to what transpired in the
court, the record in the judgment of the court should
be taken as a conclusive proof and no one should
be allowed to contradict such statement on an
affidavit or by other evidence. It was further held
that if a party wanted to take a stand that what was
recorded was erroneous, the party should approach
the concerned court for making any rectification and
it is not open to the party to contend contrary to
what has been recorded before the honble. Supreme
Court.
18. In the decision reported in Roop Kumar v. Mohan
Thedani, AIR 2003 SC 2418, it was again reiterated
in paragraph No. 11 that it is not open to a party to
turn around and take a plea that no concession was
given, which would amount to a case of sitting on
the fence, which should not be encouraged. It was
again stated that if really there was no concession,
the only course open to the party was to move the
concerned court and not by approaching the
appellate court.
April, 2014
35
Judicial Analysis
19. In the decision reported in State of Maharashtra v.
RamdasShrinivasNayak, AIR 1982 SC 1249, the
honble Supreme Court, while reiterating the said
position, however, carved out an exception, which
reads as under (page 1251) :
4. Of course a party may resile and an appellate
court may permit him in rare and appropriate cases
to resile from a concession on the ground that the
concession was made on a wrong appreciation of
the law and had led to gross injustice ;but, he may
not call in question the very fact of making the
concession as recorded in the judgment.
20. The principles that emerge from the above decisions
are :
(a) Any concession made by a counsel against the
statutory provisions would be unauthorised and
any order based on such erroneous concession
should be recalled. (Tripura Goods Transport
Association v. Commissioner of Taxes, AIR 1998
SC 465 ;
(b) A wrong concession on a question of law made
by a counsel is not binding on his client. Such
concession cannot constitute a just ground for
a binding precedent. (Uptron India Ltd. v.
ShammiBhan, AIR 1998 SC 1681.
(c) If the learned counsel has made an admission
or concession inadvertently or under a mistaken
impression of law, it is not binding on his client
and the same cannot enure to the benefit of
any party;
(d) Courts are not to act on the basis of concessions
but with refer ence to the applicable provisions;
(e) Any concession would have no acceptability or
relevance while determining the rights and
liabilities incurred or acquired in view of the
axiomatic principle without exception, that there
can be no estoppel against statute ;
(f)
Any wrong concession made by a counsel before

the court cannot bind the parries when statutory
provisions clearly provide otherwise ;
(g) A party may be allowed to resile and an

appellate court may permit in rare and
appropriate cases to resile from a concession
made on a wrong appreciation of the law and
had led to gross injustice though one may not
call in question the very fact of making the
concession as recorded in the judgment.
21. In the decision reported in Uptron India Ltd. v.
ShammiBhan, AIR 1998 SC 1681, it has again been
36
reiterated that a wrong concession on a question of

law made by a counsel is not binding on his client
and such concession cannot constitute a just ground
for a binding precedent. It was pointed out therein
that if the appellant in that case had pointed out
the true position, the learned single judge would
not have granted relief in favour of the respondent.
It was further held that if counsel had made an
attempt to give concession inadvertently or under a
mistaken impression of law, it would not be binding
on the client and the same cannot any how benefit
any party. The said decision was followed again by
the honble Supreme Court in the decision reported
in Central Council for Research in Ayurveda and
Siddha v. Dr. K. Santhakumari, AIR 2001 SC 2306.
In the decision reported in Union of India v.
MohanlalLikumal Punjabi [2004] 3 SCC 628, the
honble Supreme Court had gone one step further
and has held that applicability of the statute or
otherwise to a given situation or the question of
statutory liability of a person/institution under any
provision of law could invariably depend upon the
scope and meaning of the provisions and has got to
be adjudged not on any concession ; that any such
concessions would have no acceptability or
relevance while determining the rights and liabilities
incurred or acquired in view of the axiomatic principle
that there can be no estoppel against the statute.
22. A cumulative consideration of the above principles
set out in the various decisions would make it clear
that in the normal course, a party who made a
concession in one court cannot be allowed to resile
from it in the appellate court, but yet, under certain
exceptional circumstances, when such concessions
came to be made on a wrong appreciation of law
which had led to gross injustice, then in such cases,
the appellate court can permit in appropriate cases
to resile from a concession on such exceptional
grounds. The established legal position, however,
remains that there can never be a concession made
at the instance of counsel on a wrong appreciation
of law on the principle that there can never be an
estoppel against the statute. In fact, in the decision
of the honble Supreme Court reported in Central
Council for Research in Ayurveda and Siddha v. Dr.
K. Santhakumari, AIR 2001 SC 2306, it is made
clear that an admission or concession by a counsel
made inadvertently or under a mistaken impression
of law will not only bind on his client, but also the
same cannot enure to the benefit of the other party.
April, 2014
Statute Updates
CA. Ashwin H. Shah
(A) Service Tax Judgements
ashwinshah.ca@gmail.com
In this issu e, judg emen t o n vario us issues of

Service tax are reproduced below for the benefit
of Members.
Facts:On actual stock-taking, inputs were found short in

quantity as compared to that shown in accounts.
Department sought reversal of Cenvat credit taken
by assessee on ground that no inputs had actually
been received by assessee. As per RTO report, vehicle
registration numbers stated by assessee to have
been used for transportation were found to be
incapable of transporting heavy-weight inputs
allegedly purchased by assessee. Assessee claimed
that inputs found unfit had been sold in cash without
reversing credit.
1 ) Whether after incorporation of Service Tax

Vo l u n t a r y Co mp lia n ce E n co u r a g e m e n t
Scheme into Finance Act, all other provisions
of Act apply to proceedings under scheme ?
2 0 1 3 ] 4 0 t a x ma n n . co m 3 6 9 ( P u n ja b &
Ha r ya n a ) HIG H CO U R T O F P UN J AB AND
HAR YANA B a r n a la B u ild e r s & P r o p e r t y
Co n su lt a n t s v . De p u t y Co mmiss io n e r o f
Central Excise & Service Tax
Held :-
Facts:-
Lower authorities as well as Tribunal had come to

concurrent finding that assessee had taken credit
without actually receiving inputs and, therefore, said
credit was reversible. Discrepancies were noted in
large number of cases of vehicle registration number.
Alternatively, even if credit is assumed to be valid,
same was liable to be reversed as cenvated inputs
had been removed as such from factory and sold
outside in cash on alleged claim of being unfit. In
either way, credit was liable to be reversed and
invocation of extended period was therefore valid.
Assessee filed a writ petition challenging order of

designated authority rejecting its application under
Service Tax Voluntary Compliance Encouragement
Scheme (STVCES) . Assessee relied upon point 13
of Circular No. 170/5/2013-S.T., dated 8-8-2013,
which provided that such order is not appealable.
Held :It was held that Impugned order is appealable under
section 86 of Finance Act, 1994, particularly as
STVCES under which assessee has applied, is part
and parcel of Finance Act, by virtue of the Indian
Finance Act, 2013. After incorporation of STVCES
into Finance Act, all other provisions of Act except
to extent specifically excluded, apply to proceedings
under scheme . Hence, CBEC Circular holding to
contrary was incorrect . Assessees writ petition was
dismissed with liberty to file an appeal against
impugned order and such appeal was directed to
be decided within a fortnight.
3)
2 ) Where Cenvated inputs have been removed

as such from factory and sold outside in cash
on claim of being un fit for use, Whether
credit taken thereon is liable to be reversed?
and whether extended period of limitation
is invocable therefor?
[2014] 41 taxmann.com 533 (Gujarat) HIGH
CO UR T O F G UJ AR AT G ysco a l Allo ys Lt d .
v.Commissioner of Central Excise-III
April, 2014
W he re inp ut s lyin g in go do wn h ad b ee n
damaged by rain and assessee had received
in s u r a n c e co m p e n sa t io n t h e r e a g a in st ,
Wh ethe r cr edit tak en on said inpu ts w as
reversible along with interest and penalty
for suppression of said facts?
[2014] 42 taxmann.com 297 (Madras) HIGH COURT
OF MADRAS Commissioner of Central Excise,
Chennai-IV, Commissionerate v.Hanil Lear India (P.)
Ltd.
Facts:Assessee, a manufacturer of Seats and Auto Interiors
for cars, availed credit of inputs including non-woven
fabrics. Said inputs were destroyed by heavy rain
and assessee received insurance claim therefor.
Department denied credit on said inputs on ground
that they had not been used for manufacture.
Assessee claimed that said inputs were not inputs
37
(A) Service Tax Judgements
as such and were work-in-progress and credit could

not be denied. Department also demanded interest
and penalty invoking extended period of limitation
on ground of suppression of facts of damage and
receipt of insurance claim. Assessee did not dispute
demand of duty/credit but challenged levy of penalty
on ground that there was no intent to evade on
their part.
Held:It was held that assessee was unable to produce
any document to show that inputs on which credit
was availed, were used for production and partly
converted into seat covers i.e., work in progress. It
was found that raw materials were damaged at stock
godown and not in factory premises. As assessee
failed to establish that inputs were used in production
or partly used in production, question of availing
Cenvat Credit on those goods, which were damaged,
did not arise. Therefore, Cenvat Credit had to be
reversed by assessee.
Also it was further held that in response to showcause notice, assessee was unable to establish that
there was no wilful suppression of material facts
with an intent to evade payment of duty. But for
audit objection, full facts would not have come to
light, as assessee did not report about insurance
claim. Hence, penalty was leviable, as there was
suppression of facts with an intent to evade payment
of duty. Interest for delayed payment is automatic
and assessee was liable to pay same.
4 ) Whe re a ssessee had perp etua ted a fr aud
while availing Cenvat credit on raw material
a lleg e dly pr o cu re d f ro m var iou s so u rces,
t h o u g h n o su ch m a t e r ia l w a s p r o cu r e d ,
Whether Tribunal order directing part prede posit a s a co ndition of he aring a ppe al
could be faulted?
[2 0 1 4 ] 4 1 t a x ma n n . co m 5 3 5 ( P u n ja b &
Ha r ya n a ) HIG H CO U R T O F P UN J AB AND
HAR YANA G o b in d Ca s t in g s (P . ) Lt d . v.
Commissioner of Central Excise, Chandigarh
Fact s:-
Department sought reversal of Cenvat credit on
ground that assessee had perpetuated a fraud while
availing Cenvat credit on raw material allegedly
procured from various sources, though no such
38
material was procured. Out of ten transporters, seven

were found non-existent and another three had
denied any transportation carried out for assessee.
A majority of purchases were not backed by goods/
transport receipts. On assessees appeal, Tribunal
ordered part-pre-deposit and dismissed appeal for
want of compliance with pre-deposit.
Held :It was held that facts of present case prima facie
disclosed an unmitigated fraud perpetuated by
assessee while availing Cenvat credit on raw material
allegedly procured by them from various sources.
One of suppliers had stated that no inputs/goods
were supplied by them but cheques issued in respect
thereof were encashed and cash was returned to
assessee. Hence, there was no error on part of
Tribunal in directing part pre-deposit and dismissing
appeal in default thereof .
5 ) Whether Bail can be granted , where there
is a continuing offence and huge amount of
service tax is outstanding ?
Ka n d r a
R a me sh b a b u
N a id u
vs.
Superintendent (A.E.) ( Bombay High Court)
Criminal Bail Application No. 202 of 2014.
Facts :Application for bail is preferred by the applicant in
the matter of offence punishable under Section 89
read with Section 90 of the Finance Act, 1994.
During the arguments it is submitted on behalf of
the applicant that he is the Director of the company
and was arrested on 22nd January, 2014 at 9:00
p.m. under Section 89 read with Section 90 of the
Finance Act, 1994 for nonpayment of Service Tax
for the period from 2010 to December, 2013.
Held:In the opinion of this Court considering that it is a
continuing offence and as on 10.5.2013 there were
huge out-standings definitely beyond the amount of
Rs.50 Lakhs and more so said amount was
outstanding even at the time of arrest of the
applicant, it is not a case in which the applicant can
be released on bail more so when the investigation
is still going on. Consequently the present application
for bail is dismissed and accordingly disposed of.
April, 2014
Statute Updates
CA. Savan Godiawala
(B) Foreign Exchange Management Act (FEMA)

E xp o r t o f G o o d s a n d S e r vice s : E xp o r t D a t a
Processing and Monitoring System (EDPMS)
A comprehensive IT- based system called Export Data
Processing and Monitoring System (EDPMS) has been
developed for better monitoring of export of goods and
software and facilitating AD banks to report various
returns through a single platform.
-
It has been further advised that the date of inception

of the system along with user credentials and web
link for accessing the system would be communicated
to the AD banks shortly.
It is now advised that EDPMS has been
operationalized with effect from February 28, 2014
and the same would be available to AD banks with
effect from March 01, 2014. Accordingly, AD banks
are advised to use web link https://edpms.rbi.org.in/
edpms for accessing the system.
sgodiawala@deloitte.com
Foreign inward remittances received by the bank acting

as Indian Agent under MTSS (termed as Partner Bank),
may be electronically credited directly to the account of
the beneficiary, held with a bank other than the Indian
Agent Bank (termed as Recipient Bank), subject to the
following conditions:
-
The Recipient Bank will credit the amount transferred

by the Partner bank only to KYC compliant bank
accounts.
In respect of the bank accounts which are not KYC

compliant, the Recipient Bank shall carry out KYC/
CDD of the recipient before the remittance to such
account is credited or allowed to be withdrawn.
The Partner Bank shall appropriately mark the directto-account remittances to indicate to the Recipient
Bank that it is a foreign inward remittance.
The Partner Bank shall ensure that accurate originator

information and necessary beneficiary information is
included in the electronic message while transferring
the fund to the Recipient Bank. This information should
be available in the remittance message throughout
the payment chain i.e. the overseas principal, the
Partner Bank and the Recipient Bank. The Partner
Bank should add an appropriate alert in the electronic
message indicating that this is a foreign inward
remittance and should not be credited to KYC noncompliant account and NRE/NRO account.
The identification and other documents of the recipient

shall be maintained by the Recipient Bank as per the
provisions of Prevention of Money Laundering
(Maintenance of Records) Rules, 2005. All other
requirements under KYC/AML/CFT guidelines issued
by the Reserve Bank of India for MTSS from time to
time shall be adhered to by the Partner Bank.
The Recipient Bank may seek additional information

from the Partner Bank and shall report suspicious
transactions to the FIU-IND with details of the Partner
Bank through which they received the remittances.
Henceforth, the entire shipping documents should be

reported in the new system and old shipping
documents would continue to be reported in the old
system till completion of the cycle. Both the old and
new systems will run parallel to each other for some
time before the old system is discontinued which will
be advised to AD banks separately.
For full text refer to: A.P. (DIR Series) Circular No. 109
http://www.rbi.org.in/Scripts/
NotificationUser.aspx?Id=8759&Mode=0
Mo ne y Tr a n sf e r S e r vice S ch eme Dir e ct t o

Account facility
Guidelines of Payment to Beneficiaries of Annex II Section I of the A.P. (DIR Series) Circular No. 89 dated
March 12, 2013 on Money Transfer Service Scheme have
been revised to facilitate receipt of foreign inward
remittances directly into bank account of the beneficiary,
to allow foreign inward remittances received under MTSS
to be transferred to the KYC compliant beneficiary bank
account through electronic mode, such as NEFT, IMPS
etc. The procedure to be followed for the purpose is given
below.
h t tp ://w ww .r b i.o r g .in/S cr ipt s /No tif ica tio n
User.aspx?Id=8763&Mode=0
April, 2014
39
(B) Foreign Exchange Management Act (FEMA)

Rupee Drawing Arrangement - Increase in trade
related remittance limit
-
It has been decided to increase the limit of trade

transaction from the existing Rs 2,00,000/- (Rupees
Two Lakh only) per transaction to Rs 5,00,000/(Rupees Five Lakh only) per transaction, with
immediate effect, in terms of Part (B) of Annex-I to
the A.P. (DIR Series) Circular No. 28 [A. P. (FL/RL
Series) Circular No. 02] dated February 6, 2008 on
Memorandum of Instructions for Opening and
Maintenance of Rupee/ Foreign Currency Vostro
Accounts of Non-resident Exchange Houses.
Further, where there is composite sectoral cap under

FDI policy, these limits for RFPI investment shall also
be within such overall FDI sectoral caps;
RFPI shall be eligible to open a Special Non-Resident

Rupee (SNRR) account and a foreign currency account
for making genuine investments in securities.
RFPI shall be eligible to invest in government securities

and corporate debt subject to limits specified by the
RBI and SEBI from time to time;
The investment by RFPI will be made subject to the

SEBI (FPI) Regulations 2014, modified by SEBI/
Government of India from time to time;
RFPI shall be permitted to trade in all exchange traded

derivative contracts on the stock exchanges in India
subject to the position limits as specified by SEBI from
time to time;
RFPI may offer cash or foreign sovereign securities

with AAA rating or corporate bonds or domestic
Government Securities, as collateral to the recognized
Stock Exchanges for their transactions in the cash as
well as derivative segment of the market.
Any foreign institutional investor who holds a valid

certificate of registration from SEBI shall be deemed
to be a registered foreign portfolio investor (RFPI) till
the expiry of the block of three years for which fees
have been paid as per the Securities and Exchange
Board of India (Foreign Institutional Investors)
Regulations, 1995.
A QFI may continue to buy, sell or otherwise deal in

securities subject to the SEBI (FPI) Regulations, 2014
for a period of one year from the date of
commencement of these regulations, or until he
obtains a certificate of registration as foreign portfolio
investor, whichever is earlier.However, all investments
made by that FII/QFI in accordance with the
regulations prior to registration as RFPI shall continue
to be valid and taken into account for computation
of aggregate limit.
RFPI shall report the transaction to RBI as being

reported by FII in LEC Form as per extant practice.
Fore ign Port folio Investor - investment u nder

Portfolio Investment Scheme, Government and
Corporate debt
Portfolio Investment Scheme for Foreign Institutional
Investor (FII) and Qualified Foreign Investor (QFI) have
since been reviewed and it has been decided to put in
place a framework for investments under a new scheme
called Foreign Portfolio Investment scheme.
The salient features of the new scheme are:
-
The portfolio investor registered in accordance with

SEBI guidelines shall be called Registered Foreign
Portfolio Investor (RFPI).
The existing portfolio investor class, namely, Foreign

Institutional Investor (FII) and Qualified Foreign Investor
(QFI) registered with SEBI shall be subsumed under
RFPI;
RFPI may purchase and sell shares and convertible

debentures of Indian company through registered
broker on recognized stock exchanges in India as well
as purchases shares and convertible debentures which
are offered to public in terms of relevant SEBI
guidelines/ regulations.
The individual and aggregate investment limits for

the RFPIs shall be below 10% (per cent) or 24% (per
cent) respectively of the total paid-up equity capital
or 10% (per cent) or 24% (per cent) respectively of
the paid-up value of each series of convertible
debentures issued by an Indian company.

40
April, 2014
Statute Updates
CA. Bihari B. Shah
(C) Value Added Tax (VAT)

[I]
biharishah@yahoo.com.
Important Judgments : : Gujarat High Court/

GVAT Tribunal:
and put forth their point that they are not required
to pay any tax under the Act on the handling charges
so recovered by them. In any case, without any
finalized demand, the coercive recovery would not
be permissible.
[1] Collection of cheques under coercion during

the search operation without quantifying the
demand not permissible In case of M/s.
Atul Motors P. Ltd . v/s. State of Guja rat,
the Hon. Gujarat Hig h Court has decided
that recovery under pressure and without
fixing the liability is not valid The Hon.
High Court ordered that cheques collected
from the Petitioner should be returned:
Upon hearing, the learned counsel for the parties,

the controversy in the present petition gets
substantially narrowed down. The case of the
petitioner is that there could be no recovery of tax
dues unless and until the tax demand is crystallized.
In absence of any assessment, the respondent cannot
recover taxes.
The Petitioners are the authorized distributors of

Maruti Cars. They have been filing returns under
the Value Added Tax Act, 2003 (hereinafter referred
to as the Act) regularly. It is the contention of the
petitioners that they recover certain handling charges
from the customers, which are in the nature of post
sales services. On such handling charges, according
to them, they are not required to pay the Value
Added Tax (hereinafter referred to as VAT), since
such handling charges cannot form a part of sale
value of the car. The respondents carried out search
operations in the premises of the petitioners and
raised the issue of non-payment of Vat on handling
charges.
The learned counsel for the petitioner submitted that
under coercion the petitioners were made to make
payment of Rs. 15,28,972/- and Rs. 24,323/- in two
separate payments. Over and above this, the
respondents have also under duress taken three
cheques from the petitioners. Total amount of such
cheques is to the tune of Rs. 1,86,12,518/-. The
learned counsel for the petitioner further submitted
that so far there has been no adjudication on this
issue and no assessment orders have been passed
by the authorities. He submitted that in absence of
any quantified demand, the respondents cannot
recover the same. The petitioners are ready and
willing to participate in any adjudication proceedings
On the other hand, learned AGP relied on the

affidavit-in-reply to contend that in any case, the
power for passing provisional order is not taken away.
From the affidavit-in-reply field by the respondents,
we do not notice any ground permitting the
respondents to start recovery at this stage. The
insistence on collecting cheques from the petitioners,
therefore, cannot be countenanced. Under the
circumstances the respondents shall return three
cheques collected from the petitioner to them. This
is without prejudice to the power of the competent
authority to pass appropriate order, if so found
necessary to protect the interest of revenue.
Petition is disposed of accordingly.
[2] If a dealer has filed an application for the
stay of demand and the application is pending
till t he da te , th e recover y sho uld no t be
undertaken The Hon. Gujarat High Court
in case of Sahjanand Technologies Pvt. Ltd.
v/s. State of Gujarat has decided in favour
of the appellant.
April, 2014
Short controversy pertains to the steps taken by the

respondents in seeking recovery of Vat demand from
the petitioner. It is not in dispute that such demands
pertain to three assessment years for which
assessment orders have been passed by the
41
(C) Value Added Tax (VAT)

Assessing Officer against petitioner. Along with the
appeals, the petitioner had also prayed for stay/
waiver of pre-deposit. Such applications are still
pending. Under the circumstances, at this stage, at
least still such stay applications are disposed of,
without there being any special facts on record, the
action initiated by the Department in recovering the
tax demand is quashed. The Deputy Commissioner
(Appeals) before whom such stay applications are
pending may, however, endeavour to dispose of
such applications latest by 31st March 2014, for
which the petitioner shall co-operate.
Petition stands disposed of accordingly.
[3] The sales turnover was estimated on the basis
of commission income is not correct The
Ho n . T r i b u n a l in c a se o f S h a h id b h a i
Abuba kar Chama dia decide d in favo ur of
the appellant.
The assessment order passed for the year 2006-07,
2007-08 and 2008-09 raising huge demand are set
aside as the sales turnover was estimated on the
basis of commission income.
As a result of spot visit to the place of business and
residence place of the appellant, the sales turnover
was estimated on the basis of commission income
and the heavy dues including interest and penalty
were raised against the appellant. The first appeals
were summarily dismissed as the appellant did not
make payment of pre-deposit amount @ 30% of
the dues determined payable in passing of the
assessment order. The appellant contended before
the Honble Tribunal that appellant had not done
any sale or purchase transaction of the goods.
Appellant also relied on Supreme Court judgment
in case of M/s. Girdharlal Nanelal 39 STC 30 and
Honble Tribunal Judgment in case of M/s.
Rashmikant Chunilal Shah 09.09.2004 and in the
case of M/s. P. T. Metal Industries 17.08.1995.
The Honble Tribunal considering the facts of the
case set aside assessment orders. Honble Tribunal
also denied the request of the Ld. Govt. Agent to
remand the matter back to the Assessing Officer.
42
[4] T h e cla im o f co n ce ssio n a l r a t e o f t a x is

admissible on the basis of Xerox of Form C
The Hon. Tribunal has decided in case of
Safex Fire Services Ltd.
The original and duplicate counterfoil of declaration
Form C were misplaced by the appellant. However,
xerox of both the counterfoils were available with
the appellant. The appellant requested Assessing
Officer to allow the claim of interstate sale on the
basis of Xerox of the original and duplicate
counterfoil of declaration Form C. The Ld. Assessing
Officer as well as the Ld. Appellate Authority insisted
for submission of original counterfoil of Form C. The
claim of concessional rate of tax on interstate sale
made against the form C was disallowed. The
appellant by filing second appeal before the Honble
Tribunal mainly relied on Rule 4(5) of the Central
Sales Tax (Gujarat) Rules and pointed out that there
is no such requirement for submission of original
counterfoil of form C. The judgment in case of M/s.
India Agency, 139 STC Page 329 (S.C) is not relevant
in view of the Rule 4(5) of the Central Sales Tax
(Gujarat) Rules.
Hon. Supreme Court in case of M/s. India Agency
(supra) has interpreted the rule 6(b)(ii) of the Central
Sales Tax (Karnataka) Rules 1957 where there is a
mandatory requirement of submission of original
counterfoil of declaration Form C. The rule 4(5) of
the Central Sales Tax Rules is quite different than
Rule 6(b)(ii) of the Central Sales Tax (Karnataka)
Rules. The appellant also relied on judgment in the
case of M/s. Mangnese Ore (India) Ltd. 83 STC 116
(M.P.) and Tribunal judgment in the case of M/s.
Diamond Carbon and Graphite Ltd. decided on
11.04.11. The Honble Tribunal referred Rule 4(5)
of the Central Sales Tax (Gujarat) Rules and also
distinguished the Honble Supreme Court judgment
in the case of India Agency and held that the
concessional rate of tax is admissible to the appellant
based on Xerox of original and duplicate counterfoils
of declaration Form C.
April, 2014
Statute Updates
CA. Naveen Mandovara
(D) Corporate Laws
naveenmandovara@gmail.com
( A ) MCA updates:
development and relief and welfare of the

Scheduled Castes, the Scheduled Tribes, other
backward classes, minorities and women;
1 . No t if ic a t io n r e la t in g t o a me n d m e n t s o f
S ch e d u le VII o f Co mp a n ie s A ct , 2 0 1 3
(Effective from 01.04.2014).
(ix) contributions or funds provided to technology

incubators located within academic institutions
which are approved by the Central Government;
In Schedule VIl, for items (i) to (x) and the entries

relating thereto, the following items and entries shall
be substituted, namely :(i)
eradicating hunger, poverty and malnutrition,

promoting preventive health care and sanitation
and making available safe drinking water:
(ii) promoting education, including special

education and employment enhancing vocation
skills especially among children, women,
elderly, and the differently abled and livelihood
enhancement projects;
(x) rural development projects.

[F. No . 1 /1 8 A/2 0 1 3 - CL .V
February, 2014]
2 7 th
2 . Companies (Corporate Social Responsibility

P o l icy) R u le s , 2 0 1 4 (E f f e ct ive f r o m
01.04.2014).
(iii) promoting gender equality, empowering

women, setting up homes and hostels for
women and orphans; setting up old age homes,
day care centres and such other facilities for
senior citizens and measures for reducing
inequalities faced by socially and economically
backward groups;
(iv) ensuring environmental sustainability, ecological
balance, protection of flora and fauna, animal
welfare, agroforestry, conservation of natural
resources and maintaining quality of soil, air
and water;
(v) protection of national heritage, art and culture
including restoration of buildings and sites of
historical importance and works of art; setting
up public libraries; promotion and development
of traditional arts and handicrafts:\
(vi) measures for the benefit of armed forces
veterans, war widows and their dependents;
(vii) training to promote rural sports, nationally
recognised sports, paralympic sports and
Olympic sports;
(viii) contribution to the Prime Ministers National
Relief Fund or any other fund set up by the
Central Government for socio-economic
da ted
April, 2014
These Rules deal with the provisions relating to

various items like Co r p o r a t e S o c ia l
Re sp on sibility (CS R), CS R Co mmit te e,
CS R P o li cy, C S R Ac t ivit ie s, CS R
Expenditure and CSR Reporting.
The CSR projects or programs or activities that

benefit only the employees of the company and
their families shall not be considered as CSR
activities in accordance with section 135 of the
Act.
Contribution of any amount directly or indirectly

to any political party under section 182 of the
Act shall not be considered as CSR activity.
The Boards Report of a company covered under

these rules pertaining to a financial year
commencing on or after the 1st day of April,
2014 shall include an annual report on CSR
containing particulars specified in Annexure.
The Board of Directors of the company shall,

after taking into account the recommendations
of CSR Committee, approve the CSR Policy for
the company and disclose contents of such policy
in its report and the same shall be displayed on
the companys website, if any, as per the
particular specified in the Annexure.
[F. No. 1/18/2013-CL.V dated 27 th February,

2014]
43
(D) Corporate Laws

3 . Following Rules have been notified by the
MCA, which are effective from 01 st April,
2014:
1.
Companies (Specification of Definitions Details)

Rules, 2014;
2.
Companies (Incorporation) Rules, 2014;
3.
Companies (Prospectus and Allotment of

Securities) Rules, 2014;
4.
Companies (Share Capital and Debenture)

Rules, 2014;
5.
Companies (Acceptance of Deposits) Rules,

2014;
6.
10. Companies (Audit and Auditors) Rules, 2014;

11. Companies (Appointment and Qualification of
Directors) Rules, 2014;
12. The Companies (Meetings of Board and its
Powers) Rules, 2014;
13. Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014;
14. Companies (Inspection, Investigation and
Inquiry) Rules, 2014;
15. Companies (Authorised to Registered) Rules,
2014;
16. Companies (Registration of Foreign Companies)
Rules, 2014;
Companies (Registration of Charges) Rules,

2014;
17. Companies (Nidhi) Rules, 2014;
7.
Companies (Management and Administration)

Rules, 2014;
8.
Companies (Declaration and Payment of

Dividend) Rules, 2014;
19. Companies (Miscellaneous) Rules, 2014 and
9.
Companies (Accounts) Rules, 2014;
20. Companies (Registration Offices and Fees) Rules,

2014
18. Companies (Adjudication of Penalties) Rules,

2014;
4 . Notification for applicability of following 183 new sections of the Companies Act, 2013: (Applicable
w.e.f. 01 st April, 2014):
[File No. 1/15/2013-CL.V dated 26th March, 2014]
Sr.
No . Sections
44
Particulars
Section 2Clause (2); (7); (13); (31); (41);

(42); (47); (48); (62); (83); (85);
Explanation (d) of Clause (87)
Definitions related to:

Accounting Standards.
Auditing Standards.
Books of Account.
Deposit.
Financial Year.
Foreign Company.
Independent Director.
Indian Depository Receipt (IDR).
One Person Company (OPC).
Serious Fraud Investigation Office (SFIO).
Small Company.
Subsidiary Company or subsidiary.
Section 3 to 6 (both Inclusive)
Section 7 [ Except sub-section (7)]
Incorporation of company.
Section 8 [ Except sub-section (9)]
Formation of Companies with charitable objects, etc.
Formation of company.
Memorandum.
Articles.
Act to override memorandum, articles etc.
April, 2014
(D) Corporate Laws

Sr.
No . Sections
Particulars
Section 14 [ Except second provision to Alteration of articles

sub section (1) and sub-section (2)]
Section 20; clause (b) of section (1) and

Service of Documents.
sub section (2) of section 23; sub section (3) Public Offer and Private Placement.
of section 25
Document containing offer of securities for sale to be
deemed prospectus.
Matters to be stated in prospectus.

Variation in terms of contract or objects in prospectus.
Offer of sale of shares by certain members of company.
10
Sub section (3) of section 33; clause (e) of

sub section (1) of section 35
Issue of application forms for securities.

Civil liability for mis-statements in prospectus.
11
Sub section (4) of section 39
Allotment of securities by company.
12
Securities to be dealt with in stock exchanges.
13
Global depository receipt.

Offer or invitation for subscription of securities on private
placement.
14
Section 43
Kinds of Share capital.
15
Certificate of shares.
Voting rights.
16
Application of premium received on issue of shares.

Prohibition on issue of shares at discount.
Issue of sweat equity shares.
17
Section 55 except sub section (3)
Issue and redemption of preference shares.
18
Section 56
Transfer and transmission of securities.
19
Section 61 [ except proviso to

clause (b) of sub section (1)]
Power of limited company to alter its share capital.
20
Section 62 [ except sub sections

(4) to (6)
Further issue of share capital.
21
Issue of bonus shares.

Notice to be given to Registrar for alteration of share capital.
Effect of registration.
Effect of memorandum and articles.
Commencement of Business etc.
Registered office of company
Alteration of memorandum.
Alteration of memorandum or articles to be noted in every

copy.
Rectification of name of Company.
Copies of memorandum, articles, etc., to be given to
members.
Conversion of companies already registered.
April, 2014
45
(D) Corporate Laws

Sr.
No . Sections
46
Particulars
22
Restriction on purchase by company or giving of loans by it

for purchase of its shares.
Power of company to purchase its own securities.
23
Sub-section (2) of section 70
Prohibition for buy back in certain circumstances.
24
Section 71
[ except sub-sections (9) to (11)
Debentures
25
Section 72
Power to nominate.
26
Section 73
Prohibition on acceptance of deposits from public.
27
28
29
Section 76
Sections 77 to 85 (both inclusive)
Repayment of deposits, etc accepted before

commencement of this Act.
Acceptance of deposits from public by certain companies.
Duty to register charges etc.
Application for registration of charge.
Section 77 to apply in certain matters.
Date of notice of charge, Register of charges to be kept by
Registrar.
Company to report satisfaction of charge.
Power of Registrar to make entries of satisfaction and release
in absence of intimation from company.
Intimation of appointment of receiver or manager.
Companys register of charges.
30
31
Annual Return
Return to be filed with Registrar in case promoters stake
changes.
Place of keeping and inspection of registers, returns, etc.,
Registers, etc., to be evidence.
Annual general meeting.
32
Calling of extra ordinary general meeting.
33
Section 101
Notice of meeting.
34
Third and Fourth proviso to sub section (1)

and sub section (7) of section 105
Proxies
35
Voting through electronic means.

Demand for poll.
Postal ballot.
36
Clause (b) of sub section (1) of section 113
Representation of corporations at meeting of companies

and of creditors.
37
Section 115
Resolutions requiring special notice.
38
Resolutions and agreements to be filed.

Minutes of proceedings of general meeting, meeting of
Board of Directors and other meeting and resolutions passed
by postal ballot.
Rectification by Central Government in register of charges.

Register of members.
Declaration in respect of beneficial interest in any share.
Investigation of beneficial ownership of shares in certain
cases.
April, 2014
(D) Corporate Laws

Sr.
No . Sections
Particulars
39
Section 119 [except sub-section]
Inspection of minute-books of general meeting.
40
Section 120 to 122 (both inclusive)
Maintenance and inspection of documents in electronic

form.
Report on annual general meeting.
Applicability of his chapter to One Person Company.
41
Section 123
Declaration of dividend.
42
Section 126
Right to dividend, rights shares and bonus shares to be

held in abeyance pending registration of transfer of shares.
43
Sections 128 and 129 (both inclusive)
Books of account, etc., to be kept by company.

Financial statement.
44
Section 134
Financial statement, Boards report, etc.
45
46
Section 140 [ except second proviso to

sub section (4) and sub section 95)]
Removal, resignation of auditor and giving of special notice.
47
48
Sub-section (2) of section 161
Right of member to copies of audited financial statement.

Copy of financial statements to be filed with registrar.
Internal audit.
Appointment of auditors.
Eligibility, qualifications and disqualifications of auditors.

Remuneration of auditors.
Powers and duties of auditors and auditing standards.
Auditor not to render certain services.
Auditor to sign audit reports, etc.
Auditors to attend general meeting.
Punishment for contravention.
Central Government to specify audit of items of cost in
respect of certain companies.
Company to have Board of Directors.
Manner of selection of independent directors and
maintenance of databank of independent directors.
Appointment of director elected by small shareholders.
Appointment of directors.
Application for allotment of Director Identification Number.
Allotment of Director Identification Number.
Prohibition to obtain more than one Director Identification
Number.
Director to intimate Director Identification Number.
Company to inform Director Identification Number to
Registrar.
Obligation to indicate Director Identification Number.
Right of persons other than retiring directors to stand for
directorship.
Appointment of additional director, alternate director and

nominee director.
April, 2014
47
(D) Corporate Laws

Sr.
No . Sections
48
Particulars
49
Disqualifications for appointment of director.

Number of directorships.
Duties of directors.
Vacation of office of director.
Resignation of director.
50
Section 169 except sub-section (4)
Removal of directors.
51
Register of directors and key managerial personnel and their

shareholding.
Members fight to inspect.
Punishment.
52
Meeting of Board.
Quorum for meetings of Board.
Passing of resolution by circulation.
53
Audit Committee.
Nomination and remuneration committee and Stake
Holders Relationship Committee.
Power of Board.
54
Section 184
Disclosure of Interest by director.
55
56
Section 193
Contract by one Person Company.
57
Sections 196 to 201 both inclusive
Appointment of managing director, whole-time director or

manager.
Overall maximum managerial remuneration and managerial
remuneration in case of absence or inadequacy of profits.
Calculation of profits.
Recovery of remuneration in certain cases.
Central Government or company to fix limit with regard to
remuneration.
Forms of, and procedure in relation to, certain applications.
58
Appointment of key managerial personnel.

Secretarial audit for bigger companies.
Functions of company secretary.
59
Power to call for information, inspect books and conduct

inquiries.
Conduct of inspection and inquiry.
Report on inspection made.
Search and seizure.
60
Section 210
Investigation into affairs of company.
Loan and investment by company.

Investments of company to be held in its own name.
Related party transactions.
Register of contracts or arrangements in which directors
are interested.
Contract of employment with managing or whole time
directors.
Payment to director for loss of office, etc., in connection
with transfer of undertaking, property or shares.
April, 2014
(D) Corporate Laws

Sr.
No . Sections
Particulars
61
Section 211
Establishment of Serious fraud investigation office.
62
Section 212[except references of

sub-section (10) of section 66,
sub-section (5) of section 140,
section 213, sub section (1) of
section 251 and sub section (3) of
section 339 made in sub section 96)
and also sub sections (8) to (10)]
Investigation into affairs of company by serious fraud

investigation office.
63
Section 214 and 215
Security for payment of costs and expenses of investigation.

Firm, body corporate or association not to be appointed as
inspector.
64
Section 216 [except sub section (2)]
Investigation of ownership of company.
65
Section 217
Procedure, powers, etc., of inspectors.
66
Power of inspector to conduct investigation into affairs of

related companies.
Seizure of documents by inspector.
67
Section 223
Inspectors report.
68
Section 224 [except sub section

(2) and (5)]
Actions to be taken in pursuance of inspectors report.
69
Section 225
Expenses of investigation.
70
Investigation, etc., of foreign companies.

Penalty for furnishing false statement, mutilation,
destruction of documents.
71
72
Section 370 (except the proviso)
Continuation of pending legal proceedings.
73
Section 371
Effect of registration under this Part.
74
Section 374
Obligation of Companies registering under this Part.
75
Documents, etc., to be delivered to Registrar by foreign

companies.
Accounts of foreign company.
76
Debentures, annual return, registration of charges, books

of account and their inspection
Fee for registration of documents.
77
Clause (a) of Section 386
Interpretation.
78
Dating of prospectus and particulars to be contained

therein.
Provisions as to experts consent and allotment.
Registration of prospectus.
Offer of Indian Depository Receipts.
79
Application of sections 34 to 36 and Chapter XX.
Companies capable of being registered.

Certificate of registration of existing companies.
Vesting of property on registration.
Saving of existing liabilities.
April, 2014
49
(D) Corporate Laws

Sr.
No . Sections
Particulars
80

Companys failure to comply with provisions of this Chapter
not to affect validity of contracts, etc.
81
Section 395
Annual reports where one or more State Governments are

members of companies.
82
Registration offices.
Admissibility of certain documents as evidence.
Provisions relating to filing of applications, documents,
inspection, etc., in electronic form.
83
Section 399 [except reference of word

Tribunal in sub section (2)]
Inspection, production and evidence of documents kept by

Registrar.
84
Electronic form to be exclusive, alternative or in addition to

physical form.
Provision of value added services through electronic form.
Application of provisions of Information Technology Act,
2000.
Fee for filing, etc.
Fees, etc., to be credited into public account.
85
Section 406
Power to modify Act in its application to Nidhis.
86
Section 442
Mediation and conciliation penal.
87
Adjudication of penalties.
Dormant company.
88
Section 464
Prohibition of association or partnership of persons

exceeding certain number.
89
Schedule - I
Memorandum.
Articles.
90
Schedule II
Declaration of dividend.
91
Schedule III
Books of accounts, etc., to be kept by company.
92
Schedule IV
Company to have Board of Directors.
93
Schedule V
Appointment of managing director, whole time director or

manager.
Overall maximum managerial remuneration and managerial
remuneration in case of absence or inadequacy of profits.
94
Schedule - VI
Issue and redemption of preference shares.

Loan and investment by company.
For the convenience of the members, the details of certain provisions of the Companies Act, 2013,
made applicable w. e. f. 12 th September, 2013 are reproduced hereunder:
S r . Sections
Particulars
No .
1
Section 2 Clause 1, 3 to 6, 8 to 12,
Definitions related to:
14 to 22, 24 to 28, 29 (except sub
Abridged Prospectus
clause iv), 30, 32 to 40, 43 to 46,
Alteration
49 to 61, 63 to 66, 67 (except sub
Appellate Tribunal
50
April, 2014
(D) Corporate Laws

clause ix), 68 to 82, 84, 86, 87
[except the proviso and explanation
(d)], 88 to 95.
Articles
Associate Company
Authorized Capital
Banking Company
Board of Directors/Board
Body Corporate/Corporation
Book and Paper
Branch Office
Called Up Capital
Charge
Chartered Accountant
Chief Executive Officer
Chief Financial Officer
Company
Company limited by Guarantee
Company Limited by Shares
Company Secretary/Secretary
Company Secretary in practice
Contributory
Control
Cost Accountant
Court
Debenture
Depositary
Derivative
Director
Dividend
Document
Employees
Experts
Financial Institutions
Financial Statement
Free Reserve
Global Depositary Receipt
Government Company
Holding Company
Interested Director
Issued Capital
Key Managerial Person
Listed Company
Manager
Managing Director
Member
Memorandum
Net worth
Notification
Officer
Officer who is in default
Official liquidator
Ordinary Resolution or Special Resolution
Paid up share Capital
Postal Ballot
April, 2014
51
(D) Corporate Laws
52
Section 19
3
4
5
6
Section 21
Section 22
Section 23
Section 24
Section 25
8
9
10
11
12
13
14
15
Section 29
Section 30
Section 31
Section 32
Section 33
Section 34
Section 35
Section 36
16
17
18
19
20
Section 37
Section 38
Section 39
Section 40
Section 44
Prescribed
Previous Company Law
Private company
Promoter
Prospectus
Public company
Public financial institution
Recognized Stock Exchange
Register of Companies
Registrar
Related Party
Relative
Remuneration
Schedule
Scheduled Bank
Securities
Securities and Exchange Board
Share
Subscribed Capital
Subsidiary Company or Subsidiary
Sweat Equity shares
Total voting power
Tribunal
Turn over
Unlimited Company
Voting right
Whole time Director
Words and expressions
Subsidiary company not to hold shares in its holding
company.
Authentication of documents proceedings and contracts.
Execution of bills of exchange, etc
Public offer and private placement.
Power of Securities and Exchange Board to regulate issue
and transfer of securities, etc.
Document containing offer of securities for sale to be
deemed prospectus.
Public offer of securities to be in dematerialized form.
Advertisement of prospectus.
Shelf prospectus.
Red herring prospectus.
Issue of application forms for securities.
Criminal liability for misstatements in prospectus.
Civil liability for misstatements in prospectus.
Punishment for fraudulently inducing persons to invest
money.
Action by affected persons.
Punishment for personation for acquisition, etc., of securities.
Allotment of securities by company.
Securities to be dealt with in stock exchanges.
Nature of shares or debentures.
April, 2014
(D) Corporate Laws

21
22
23
Section 45
Section 49
Section 50
24
25
26
27
28
29
Section 51
Section 57
Section 58
Section 59
Section 60
Section 65
30
Section 69
31
32
33
Section 70
Section 86
Section 91
34
35
36
37
38
39
40
41
42
43
Section 100
Section 102
Section 103
Section 104
Section 105
Section 106
Section 107
Section 111
Section 112
Section 113
44
45
46
47
48
Section 114
Section 116
Section 127
Section 133
Section 161
49
50
Section 162
Section 163
51
Section 176
52
53
Section 180
Section 181
54
55
Section 182
Section 183
56
57
58
Section 185
Section 192
Section 194
59
60
Section 195
Section 202
Numbering of shares.
Calls on shares of same class to be made on uniform basis.
Company to accept unpaid share capital, although not
called up.
Payment of dividend in proportion to amount paidup.
Punishment for personation of shareholder.
Refusal of registration and appeal against refusal.
Rectification of register of members.
Publication of authorised, subscribed and paid-up capital.
Unlimited company to provide for reserve share capital on
conversion into limited company.
Transfer of certain sums to capital redemption reserve
account.
Prohibition for buy-back in certain circumstances.
Power to close register of members or debenture holders
or other security holders.
Calling of extraordinary general meeting.
Statement to be annexed to notice.
Quorum for meetings.
Chairman of meetings.
Proxies.
Restriction on voting rights.
Voting by show of hands.
Circulation of members resolution.
Representation of President and Governors in meetings.
Representation of corporations at meeting of companies
and of creditors.
Ordinary and special resolutions.
Resolutions passed at adjourned meeting.
Punishment for failure to distribute dividends.
Central Government to prescribe accounting standards.
Appointment of additional director, alternate director and
nominee director.
Appointment of directors to be voted individually.
Option to adopt principle of proportional representation for
appointment of directors.
Defects in appointment of directors not to invalidate actions
taken.
Restrictions on powers of Board.
Company to contribute to bona fide and charitable funds,
etc.
Prohibitions and restrictions regarding political contributions.
Power of Board and other persons to make contributions to
National Defense Fund, etc.
Loan to directors, etc.
Restriction on non-cash transactions involving directors.
Prohibition on forward dealings in securities of company by
director or key managerial personnel.
Prohibition on insider trading of securities.
Compensation for loss of office of managing or whole-time
director or manager.
April, 2014
53
(D) Corporate Laws

61
62
63
64
65
66
67
Section 379
Section 382
Section 383
Section 386
Section 394
Section 404
Section 407
68
69
70
71
Section 408
Section 409
Section 410
Section 411
72
73
Section 412
Section 413
74
Section 414
75
76
Section 439
Section 443
77
78
79
80
81
82
83
Section 444
Section 445
Section 446
Section 447
Section 448
Section 449
Section 450
84
85
86
Section 451
Section 452
Section 453
87
88
89
Section 456
Section 457
Section 458
90
Section 459
91
92
93
Section 460
Section 461
Section 462
94
95
96
Section 463
Section 467
Section 468
97
98
Section 469
Section 470
Application of Act to foreign companies.

Display of name, etc., of foreign company.
Service on foreign company.
Interpretation.
Annual reports on Government companies.
Fees, etc., to be credited into public account.
National Company Law Tribunal and Appelate TribunalDefinitions of
Constitution of National Company Law Tribunal.
Qualification of President and Members of Tribunal.
Constitution of Appellate Tribunal.
Qualifications of Chairperson and members of Appellate
Tribunal.
Selection of Members of Tribunal and Appellate Tribunal.
Term of office of President, Chairperson and other
Members.
Salary, allowances and other terms and conditions of service
of Members.
Offences to be non-cognizable.
Power of Central Government to appoint company
prosecutors.
Appeal against acquittal.
Compensation for accusation without reasonable cause.
Application of fines.
Punishment for fraud.
Punishment for false statements.
Punishment for false evidence.
Punishment where no specific penalty or punishment is
provided.
Punishment in case of repeated default.
Punishment for wrongful withholding of property.
Punishment for improper use of Limited or Private
Limited.
Protection of action taken in good faith.
Non-disclosure of information in certain cases.
Delegation by Central Government of its powers and
functions.
Powers of Central Government or Tribunal to accord
approval, etc., subject to conditions and to prescribe fees
on applications.
Condonation of delay in certain cases.
Annual report by Central Government.
Power to exempt class or classes of companies from
provisions of this Act.
Power of Court to grant relief in certain cases.
Power of Central Government to amend Schedules.
Powers of Central Government to make rules relating to
winding up.
Power of Central Government to make rules.
Power to remove difficulties.

54
April, 2014
Statute Updates
(E) Circulars and Notifications
(Income Tax and Service Tax)
CA. Kunal A. Shah

cakashah@gmail.com
Income Tax
specified in clause (ii) ( electronically with digital

signature) and in other cases in the manner
specified in clause (ii) (electronically with digital
signature) or clause (iii) (electronically and
thereafter submitting the verification of the
return in Form ITR-V)
1 ) Cla r if ic a t io n r e g a r d in g in co m e o f t h e
p ar tn e rship f ir m in pu r su an ce of se ct io n
10(2A) of the Income Tax Act,1961.
It is clarified that the income of firm is to be taxed in
the hands of the firm only and the same can under
no circumstances be taxed in the hands of its
partners. It is further clarified that the entire profit
credited to the partners accounts in the firm would
be exempt from tax in the hands of such partners,
even if the income chargeable to tax becomes NIL
in the hands of the firm on account of any exemption
or deduction as per the provisions of the Act.
(Ci r cu la r
No
March,2014)
0 8 /2 0 1 4 ,
dated
31
st
(v) In the said rules , for Forms Sahaj (ITR-1), ITR2, Sugam (ITR4S) and ITR V the Forms Sahaj
(ITR -1), ITR-2, Sugam (ITR-4S) and ITR-V has
been substituted.
(For full text refer Notification No - 24, dated
01/04/2014)
3 ) Significant changes in the proposed Direct
Taxes Code, 2013
The Finance Ministry has released a revised and
comprehensive Direct Taxes Code 20133 . The said
Code contains several significant changes with farreaching implications to the law and practice of
income-tax. The Finance Ministry has also issued a
paper highlighting the salient features of the Direct
Taxes Code 2013
2 ) Amendment in rule 12 of the Income Tax

Rules,1962
In pursuance of section 295 of the Income Tax
Act,1961, CBDT hereby makes the following
amendments in rule 12 of Income Tax Rules, 1962:(i)
in sub-rule (1) for the figures 2013, the figures

2014 shall be substituted;
4 ) I-T asks e-filers of tax returns to send ITRV

by speed post:-
(ii) in sub-rule(2) , in the proviso after the words

and figures section 115JB the words or to
give a notice under clause (a) of sub-section
(2) of section 11 shall be inserted;
(iii) Insertion of clause (aac) after clause (aab) :- a
firm other than the firms to whom provisions of
section 44AB are applicable , shall furnish the
return for AY 2014-14 and subsequent
assessment years in the manner specified in
clause (ii) ( electronically with digital signature)
or clause (iii)( electronically and thereafter
submitting the verification of the return in Form
ITR-V)
If you are filing online your Income Tax return, the

paper copy of the ITRV should only be sent through
speed post to the Central Processing Centre (CPC)
of the department in Bengaluru.
5 ) The Central Government hereby notifies the Ace
Derivatives and Commodity Exchange Limited,
Ahmedabad as a recognized association for the
purposes of clause (e) of the proviso to clause(5) of
the section 43, with effect from the date of
publication of this notification in the official gazette.
(iv) In pursuance of sub-section (4B) of section 139,

ITR 7 is required to be furnished in the manner
April, 2014
( For Full text refer Notification No. 15, dated

20/03/2014)
55
CA. Pamil H. Shah

pamil_shah@yahoo.com
AS 10 Accounting for Fixed Assets

Allse c T e ch no log ies Limite d - An nu a l R ep or t
2012-13
Notes to Financial Statements for the year ended
31st March, 2013
2.1 Summary of Significant Accounting Policies
( c ) Tangible Fixed Assets
Fixed assets are stated at cost, net of accumulated
depreciation and accumulated impairment losses, if
any. The cost comprises purchase price, borrowing
costs, if capitalization criteria are met and directly
attributable cost of bringing the asset to its working
condition for the intended use.
Subsequent expenditure related to an item of fixed
asset is added to its book value only if it increases
the future benefits from the existing asset beyond
its previously assessed standard of performance. All
other expenses on existing fixed assets, including
day-to-day repair and maintenance expenditure and
cost of replacing parts are charged to the statement
of profit and loss for the period during which such
expenses are incurred.
VA Tech Webag Limited-Annual Report 2012-13
Summary of Significant Accounting Policies and
Other Explanatory Information
2 . Summary of Accounting Policies
2.3 T a n g ib l e
Ass e t s
Amortization
a nd
D e p r e c ia t i o n /
Tangible assets are stated at acquisition cost less

accumulated depreciation and impairment losses, if
any. Cost of acquisition comprises of purchase price
and directly attributable costs of bringing the asset
to its working condition for the intended use and is
net of refundable duties and taxes as applicable.
Cost of fixed assets not ready for the intended use
before such date is disclosed as capital work in
progress.
56
Subsequent expenditure incurred on an item of

tangible assets is added to the book value of that
asset only if this increases the future benefit from
the existing assets beyond its previously assessed
standard of performance.
Gains or losses that arise on disposal or retirement
of an asset are measured as the difference between
net disposal proceeds and the carrying value of an
asset and are recognised in the statement of profit
and loss when the assets is derecognized.
Depreciation on assets is provided on written down
value method at the rates and in the manner
prescribed in Schedule XIV to the Companies Act,
1956.
Motilal Oswal Financial Services Limited - Annual
Report 2012-13
31st March, 2013
Note 19 : Signicant Accounting Policies:
19.3 Fixed Assets & Depreciation:
Fixed Assets are stated at cost less accumulated
depreciation thereon. The cost of xed assets
comprises purchase price and any attributable cost
of bringing the asset to its working condition for its
intended use. The Company provides pro-rata
depreciation from the date on which asset is
acquired/ put to use. In respect of assets sold, prorata depreciation is provided upto the date on which
the asset is sold. On all assets, except as mentioned
below, depreciation has been provided using the
Written Down Value method at the rates specied
in Schedule XIV to the Companies Act, 1956.
a)
Assets costing R 5,000/- or less are fully

depreciated in the year of purchase.
b)
Improvements to leased Assets are depreciated

over the initial period of lease. Expenditure
which are attributable to Construction of a
project are included as part of the cost of the
construction project during construction period
April, 2014

and included under capital work in progress
which is allocated to the respective xed assets
on the completion of the construction period.
c.
The Gross Block of Fixed Assets are stated in the

Accounts at the purchase price of acquisition of such
assets including any attributable cost of bringing the
assets to its working condition for its intended use.
Office premises located at Jalgaon have been taken
on lease for a period of 50 years and the same is
reflected in Gross Block at Rs 1.0 lakh. The leasehold
premises have been amortised @ 2% per annum on
the basis of period of lease.
Godawari Power & Ispat Limited - Annual Report

2013
31st March, 2013
2.1 Summary of Significant Accounting Policies
b ) Tangible Fixed Assets
Tangible Fixed Assets are stated at acquisition cost
net of accumulated depreciation and accumulated
impirement losses, if any. Cost includes taxes, duties,
freight, installation and other direct or allocated
expenses upto the date of commencement of
commercial production and are net of CENVAT
credit.
From accounting periods commencing on or after 7
December, 2006, the company adjusts exchange
differences arising on translation/settlement of long
term foreign currency monetary items pertaining to
the acquisition of a depreciable asset to the cost of
the asset and depreciates the same over the
remaining life of the asset.
Gains or losses arising from derecognition of fixed
assets are measured as the difference between the
net disposal proceeds and the carrying amount of
the asset and are recognised in the statement of
profit and loss when the asset is derecognised.
The various expenditure incurred during the
construction stage and upto the date of
commencement of commercial production for
setting-up the relevant project-assets are grouped
under the head Pre-operative Expenditure and
allocated to related fixed assets on pro-rata basis
upon completion of project and put to use.
Bannari Amman Spinning Mills Limited Annual

Repot 2012-13
1 . Notes to Financial Statements for the year
ended 31 March 2013
Significant Accounting policies
iv. The Fixed Assets are carried at historical cost less
accumulated depreciation. Cost includes related
taxes, duties, freight, insurance etc., attributable to
acquisition and installation of assets and borrowing
cost incurred up to the date of commencing
operations, but excludes duties and taxes that are
recoverable from taxing authorities. The fixed assets
shown in the books are not revalued.
In finit e Compu te r S olution s (In dia ) Limit ed
Annual Repot 2012-13
31 March 2013
2 . Summary of Significant Accounting policies
i v . Fixed Assets
Expenditure incurred on obtaining the mining lease

and initial removal of over burden have been
capitalized under Iron Ore Mines account.
Kolte-Patil Developers Limited Annual Report
2012-13
31st March, 2013
2 . Significant Accounting policies
Fixed Assets
April, 2014
Fixed Assets are stated at cost, less accumulated

depreciation. Cost includes original cost of
acquisition, including incidental expenses related to
such acquisition and installation.
The company does not capitalize the cost of software
acquired specifically for client projects and where
there is no enduring benefit to the company following
conclusion of the project. Such software is charged
to the Profit & Loss Account in the year in which the
software is acquired.

57
News Lounge
Compiled by :
Mr. Manthan Khokhani
Indian rupee ends on a weaker note
amounted to awarding punishment, a bench of Justices
The Indian rupee ended a touch weaker on Wednesday
K.S. Radhakrishnan and J.S. Khehar said.
despite domestic shares hitting record highs as caution
It rejected the plea of senior advocate Ram Jethmalani,
prevailed ahead of the release of minutes from the US
appearing for the Sahara chief, that instead of keeping
Federal Reserves March meeting. Foreign investors have
him in Tihar jail, he could be put under house or office
been active buyers of debt and equities since March,
arrest as it is difficult to raise money while being in jail.
and net purchases in April alone have already totalled

$933.67 million, according to the market regulators data.
The rupee had touched an eight-month high of 59.5950
on April 2, before giving up some gains, with the Reserve
Bank of India also suspected of having bought dollars to
replenish its foreign exchange reserves.
I submit that there is no jurisdiction to send this person

to a criminal jail. Vacations are coming. Our difficulty is
how do we ask anybody to go and negotiate in jail,
Mr. Jethmalani said.
My client is in Tihar jail and it makes it impossible for
The partially convertible rupee closed at 60.14/15 per
anybody to approach him, he said at the outset.
dollar compared with 60.11/12 on Monday. Financial
He also said Sahara was trying to strike a deal with
markets were closed on Tuesday for a local holiday. The
international buyers and the problem is that it would be
rupee rose to the session high of 59.80 as the BSE index
difficult to do so when Mr. Roy is in jail.
rose as much as 1.77 per centto an all-time high of

22,740.04, while the NSE index rose as much as 1.7 per
We will take note of it. That is exactly we are hearing,

the bench said.
centto a record high of 6,808.70.

However, gains were capped ahead of the Feds minutes
given continued concerns about when the central bank
will start to raise interest rates as it unwinds its asset-
Mr. Jethmalani said Tihar jail can accommodate 500

prisoners, but, at present, there are 1300 inmates are
there.
purchase programme. Some dealers also cited dollar
I would suggest keep all other matters aside to consider
buying by state banks for defence purposes. In the offshore
whether this court has jurisdiction to put my client in
non-deliverable forwards, the one-month contract was
such a place, he said, adding the court lacked the
at 60.62, while the three-month was at 61.37.
jurisdiction.
(The Economic Times)

SC rejects Sahara Chiefs plea for being kept in
If we agree with you then it is the end of the matter,

the bench said at the end of the hearing and asked the
lawyers to file short written submissions on April 16, the
house arrest
next date of hearing.

Sahara Group chief Subrata Roy will continue to remain
in Tihar jail as the Supreme Court on Wednesday rejected
his plea that he be put under house arrest to enable him
negotiate deals for arranging money to repay investors.
The apex court had earlier imposed a condition that Roy

will be freed on bail only if he pays Rs. 10,000 crore out
of which Rs 5,000 crore has to be in bank guarantee and
rest Rs 5,000 crore in cash.
We have said that you are in judicial custody. You are

under our custody. We have not sent you in civil
imprisonment. In case of civil imprisonment, it would have
58
However, Sahara Group, on April 3, had expressed its

inability in immediately paying Rs 10,000 crore for
April, 2014
News Lounge
securing bail for Roy and its two directors Ravi Shankar
A week after agreeing to temporarily supply gasto
Dubey and Ashok Roy Choudhary, who are in jail since
fertiliser companies, Reliance Industries (RIL) has shot off
March 4.
a letter to them saying it is not bound by any agreement

(The Hindu)
Sensex closes at a new high of 22,702 as Sun

Pharma, Ranbaxy surge
to supply gas from its KG-D6at$4.2/mmbtueveninthe

interim.
Last week, Fertiliser Secretary Shaktikanta Das had said
that RIL had agreed to supply natural gas to fertiliser
The S&P BSE Sensex closed at a new high on Wednesday,
companies at $4.2/mmbtu till a new agreement was
asSun Pharmaceutical Industries Ltdsurgedonbroker
reached between RIL and 16 fertiliser companies that
upgrades after it agreed to acquire Ranbaxy Laboratories
buy gas from the company. Das did not elaborate on the
Ltd in a $3.2 billion deal.
duration or other terms of potential new contracts

between RIL and the fertiliser companies.
The Sensex closed 1.61%, or 358.89 points, up at

22,702.34, while the National Stock Exchanges CNX
In a strongly worded letter dated April 8, RIL has
Nifty added 1.51%, or 101.15 points, at 6,796.20.
contested this interim agreement, saying your

description of what transpired at the meetings held in
The Sensex rose as much as 396.59 points, or 1.77% to

an all-time high of 22,740.04 in intra-day trade,
surpassing its previous all-time high hit on 3 April. The
CNX Nifty rose as much as 113.65 points, or 1.70% to a
record high of 6,808.70.
Ministry of Petroleum and Natural Gas and in Department

of Fertilizers, respectively, is not accurate and does not
capture the discussions which in any case were
inconclusive. We deny that the sellers agreed to the terms
as suggested by you in your letter dated April 3.
Sun Pharma gained as much as 8.1% to Rs.634.80, before

closing 6.91% higher at Rs.627.80. Shares
ofRanbaxyralliedasmuchas6.23%toRs.472.95,before
closing 4.90% higher at Rs.467.
The letter further goes on to say that fertiliser companies

would have to provide security for the differential between
the previous price and revised price, as a part of the
revised agreement being thrashed out between RIL and
Among other gainers, Axis Bank Ltdrose 4.44%
gas buyers. The company has supplied gas to buyers
toRs.1,484.85, Tata Motors Ltd added 4.40% to
subject to its terms and conditions laid out in its letter
421,ICICI Bank Ltdclimbed4.18%toRs.1,259.55.
dated April 1, 2014.
Among
Ltdfell 1.16%
As far as RIL is concerned, gas prices have been notified
toRs.3,253.10,Tata Consultancy Services Ltd(TCS)
and all gas from KG-D6 will also be sold at revised prices
slipped 0.72% to Rs.2,134.90, while Oil and Natural Gas
from April 1.
the
losers, Infosys
Corp. Ltd(ONGC)slipped0.95%toRs.322.45.
The cabinet had last year approved a formula that linked
The S&P BSE Bankex index was the top sectoral gainer,
prices of locally produced gas with global benchmarks,
up 3.45% followed by S&P BSE Healthcare index, which
which would have nearly doubled gas prices from current
rose 2.21%. The S&P BSE IT and S&P BSE Teck indices
levels, but the Election Commission asked the
were the top losers among sectoral indices, down 1.09%
government to defer the price increase until the
and 0.84%, respectively.
completion of the elections. The Bharatiya Janata Party

(BJP) has said it will review the gas pricing formula if it is
(The Live Mint)
elected.
RIL refuses to budge on gas price hike from April

1
(The Business Standard)

April, 2014
59
Association News
CA. Chintan M. Doshi
CA. Abhishek J. Jain
Hon. Secretary
Hon. Secretary
Forthcoming Programmes
Dat e/Da y
T ime
Programmes
Venue
25.04.2014
Friday
04.00 pm
Knowledge Clinic
C. A. Associations Office,
1st Floor, C. U. Shah Chambers,
Nr. Gujarat Vidhyapith,
Ashram Road, Ahmedabad
03.05.2014
Saturday
04.00 pm to
05.00 pm
Felicitation of Senior Members

50 Years of Excellence
Shantinath Hall,
ICAI Bhawan, Ahmedabad
03.05.2014
Saturday
05.00 pm to
05.30 pm
26th Annual General Meeting of

Mutual Benefit Scheme
Shantinath Hall,
03.05.2014
Saturday
05.30 pm
onwards
63rd Annual General Meeting of

Chartered Accountants
Association, Ahmedabad
Shantinath Hall,
05.05.2014
Monday to
24.05.2014
Saturday
04.00 pm to
07.00 pm
on every alternate
day and 10.00 am
to 01.00 pm on Saturdays
Intensive Study Course on

Companies Act, 2013
C. A. Associations Office,
1st Floor, C. U. Shah Chambers,
Nr. Gujarat Vidhyapith,
Ashram Road, Ahmedabad
Glimpses of events gone by:

Seminar on Image Management with Corporate
Etiquette on 12.04.2014
Visit of President of ICAI CA. K. Raghu at C.A.

Association's Office
( L to R CA. Chintan Patel, CA. P. H. Khandelwal,

CA. Vikas Jain, CA. Aniket Talati Faculty
Ms.Bhumika Swarnkar, CA. Chintan Doshi , CA.
Prakash Sheth )
( L to R CA. K. Raghu, President, ICAI, CA. Sunil H.

Talati, Past President, ICAI, CA. Prakash Sheth, CA.
Shailesh C. Shah and CA. Chintan Doshi)

60
April, 2014

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Ahmedabad Chartered Accountants Journal

CA. Ashok C. Kataria

CA. Jayesh C. Sharedalal

CA. Rajni M. Shah

CA. Prakash B. Sheth

CA. Pradip K. Modi

Glimpses of Supreme Court Rulings

Advocate Samir N. Divatia

From the Courts

CA. C. R. Sharedalal &

CA. Yogesh G. Shah &

CA. Sanjay R. Shah

CA. Kaushik D. Shah

Advocate Tushar P. Hemani

Service Tax Judgements

CA. Ashwin H. Shah

CA. Savan A. Godiawala

Value Added Tax

CA. Bihari B. Shah

CA. Naveen Mandovara

Circulars & Notifications

CA. Kunal A. Shah

From Published Accounts

CA. Pamil H. Shah

Mr. Manthan Khokhani

CA. Chintan M. Doshi &

Updates from ICAI

CA. Uday I. Shah

Ahmedabad Chartered Accountants Journal

You are requested to intimate change of address to the Association's Office.

Printed : Pratiksha Printer

Ahmedabad Chartered Accountants Journal

Ahmedabad Chartered Accountants Journal

Gratitude is not the greatest of virtues but

Ahmedabad Chartered Accountants Journal

CA. Prakash B. Sheth

Dear Professional Colleague,

Excellence is to be held on 3rd May, 2014 at ICAI

A case study under Section 138 of

CA. Pradip K. Modi

The Section 138 of the Negotiable Instrument Act 1881

committed an offence and shall, without prejudice

a person must have drawn a cheque on an account

(ii) that cheque has been presented to the bank within

Ahmedabad Chartered Accountants Journal

A case study under Section 138 of Negotiable Instrument Act

person liable to punishment if he proves that the offence

(iv) the payee or the holder in due course of the cheque

Sub-section (2) of the Section 141 , makes any director/

(v) the drawer of such cheque fails to make payment

Ahmedabad Chartered Accountants Journal

Juristictinal issue for Trial (Case Filing):

A case study under Section 138 of Negotiable Instrument Act

requirement to complete the offence on the failure of

Ahmedabad Chartered Accountants Journal

Companies Act, 2013 - Provisions

CA. Anuj J. Sharedalal

understanding the meaning of the same. Thus,

Section 198(4) provides for the various deductions

There are certain provisions of the Companies Act,

To sum up, depreciation is to be calculated in the

Section 198 provides the method for calculating the

Ahmedabad Chartered Accountants Journal

Schedule II of the Act has also come into force from