c.v.o. ca’s news & views vol. 21 no. 6 / … rohan rohit chheda pundi ghatkopar-east,mumbai...

C.V.O. CA’S NEWS & VIEWS VOL. 21 NO. 6 / DECEMBER 2017

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From the desk of Chairman

NEWS BULLETINCOMMITEE

ChairmanCA Dinesh Shah

Office BearerCA Sunil Dedhia

AdvisorCA Manoj Shah

ConvenorCA Harsh Dedhia

Jt. ConvenorCA Jigar Chheda

MembersCA Hitesh Pasad

CA Bhavin DedhiaCA Kaushik GadaCA Nikita GogriCA Sagar MaruCA Virav DedhiaCA Zalak Savla

Sp. InviteesCA Rakesh Vora

C O N T E N T S

ASSOCIATION NEWS

Forth ComingEvents ........................... 4

EventsRetrospect ..................... 4

New Memberenrolled .......................... 6

A R T I C L E S

The Intricacieson Transfer ofUnquoted Shares ........... 8

Bottle Necks ............... 12

ArtificialIntelligence –What DoesThe FutureHave in Store? ............ 15

LEGAL UPDATES

Direct TaxUpdates ....................... 16

Updates onGST ............................. 17

Updates onSEBI andCorporate Law ............. 20

UnreportedDecisions –Income Tax .................. 22

In every relationship, personal or professional, there will always be somedisagreement. We will never find an environment where people always agree andunderstand each other. Similarly we’d all like to sail through life peacefully withnever a cross word said by us or to us. But, we all know that this is impossible.

Even the happiest relationships, be they personal or professional, experienceconflict or disagreement from time to time and, if managed correctly, it is ahealthy component of any partnership as it allows both parties to air their viewsand to hopefully reach a solution that will further strengthen the relationship.

The Doctrine of Anekantavada of Jainism propounded and gifted to theuniverse by Lord Mahavira and also the theory of relativity by AlbertEinstein bring forth a unique concept - “It is quite possible that variousversions of the same occurrence hold true.”

When we do not understand each other, there is a tendency to disagree. Wheneach one is busy wanting to be heard and doesn’t spend any time trying tounderstand, disagreement is lurking right around the corner. When we come toan understanding that most of us are more alike then we are different, we beginto tolerate and accommodate - even appreciate - a different point of view, seek tounderstand and appreciate. That does not mean you have to agree, just that you’reopen to hearing them out.

Many disagreements stem from something that has been said, which is usuallyfear and awareness of one’s limitations. Whatever may have happened in yourpast, we need to find a way to get past and see that we are in a new situation witha person who doesn’t mean you harm.

In any disagreement, it’s important for both to be heard. And that means to be agood listener - curious, open minded and non-judgmental. A good listener giveshis full attention, asks for clarification when necessary, and can listen todifferent opinions without becoming defensive or argumentative. The best way tolisten is to be silent. That’s when we can learn.

It is easy to start making accusations, especially in heated disagreements layingblame and making excuses. One needs to work through it, be honest and try totake full responsibility for the feelings and interpretations that may havecontributed to the breakdown.

In times of intense disagreement, it’s not uncommon for one or both to have onefoot out the door. If we want to truly get to the heart of the matter, make sure theother person understands the commitment to the relationship. Even if we have anissue with the behaviour, try to keep that separate.

No one wants to be called by names or be called out in a negative way, or to hearall the bad things they have done in the past. If spoken in negatives, it may hurtsomeone’s feelings. Bringing positivity to what you are trying to say, that there

EXPRESSING YOUR FEELING IN DISAGREEMENT

VOL. 21 NO. 6 / DECEMBER 2017 C.V.O. CA’S NEWS & VIEWS

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EVENTS IN RETROSPECT

Compiled by :CA. Harsh DedhiaCA. Jigar Chheda

ASSOCIATIONNEWS

FORTHCOMING EVENTS

STUDY CIRCLE COMMITTEE

Event GST STUDY GROUP

Topic Issues in Valuation ofGoods and services.

Date 19th December, 2017Venue D R Ghalla HallSpeaker GD shall be lead by group memberFees Members Rs.200/- per session

Non-Members Rs.300 per session

MEMBERSHIP & RECREATION COMMITTEEEvent FAMILY PICNICDate 1st December, 2017 to 3rd December, 2017Venue Tathastu, Pench, NagpurParticipants 76 including KidsRemarks All the participants enjoyed the facilities at resort along with entertainment program,archery, swimming, adventurous activity, cycling etc. Group did Pench Jungle safari and walk withNaturalist at evening. Had also sight of leopard, tiger and few more animals. All the participantsappreciated the arrangements and resort facilities.

CAPITAL MARKET COMMITTEE

Event WORKSHOP ON STOCK MARKET

Topic Techinchal Analysis CourseDate 23.12.2017 and

24.12.2017Venue D R Ghalla HallFees Rs.8,000/- for CVOCA Members

Rs.10,000/- for others

is every likelihood that you’ll be heard, and that the disagreement can be resolved more quicklyand easily.

The best way to begin resolving a disagreement is to look for common ground. When we concentrateon differences the space grows wider, but when we seek out what we have in common it helpsbridge the gap.

Disagreements are a way of life. While not always pleasant, they are, however a fundamental partof a life. They are inevitable from time to time and, if managed well, are often simply themechanisms which allow us to get over a hurdle and to move on positively and don’t have to causehavoc.

TREAT OTHERS THE WAY YOU WANT TO BE TREATED

REMEMBER “ THE SOUL IS ON THE JOURNEY “

Mumbai CA Dinesh Shah


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RESIDENTIAL REFRESHER COURSE 2018Goa being traveler’s dream destination, Dadar (E) CPE is pleased to announce the next Residential Refresher Course(RRC) for 22nd - 25th February 2018 (4 Days / 3 Night). With 4 days at disposal, we have ensured perfect blend of studiesalong with leisure.

About the destination:The fun, sunshine and the smallest state of Indiadoesn’t need any introduction. We all feel our soulsrecharged by just hearing the name Let’s Go Goa. SoWhy not make our mood motivated with ResidentialRefresher Course RRC at Club Mahindra South Goa

About Club Mahindra Emerald Palms ResortA sprawling Portuguese villa, located amidst thisscenic and beautiful backdrop. The rooms arespacious and have fabulous views. Though it is nota beach resort, the sea is just a few minutes away.In addition, there are a host of amenities that areaimed at making your stay at Club MahindraEmerald Palms memorable and eminently relaxing.

Distinguished features of RRC 2018: For the first time, we are arranging 4 days - 3 night at Club Mahindra Goa and very nominal cost of Rs. 11K

(ex Club Mahindra Rsort, Goa). RRC is aimed to provide relaxed schedule for learning and enough time forparticipants to enjoy the venue and places around.

The relaxed schedule also helps in networking with professional brethren coming from various professional fields. The participants will be immensely benefitted from multifaceted inputs and views from highly experienced

panelists. There will be longer duration for intensive group discussion. Faculties will be given more time to cover the case

studies in greater depth. After all preliminary learning on GST, now its time to step-up and get answer for all issues being faced day to day.

With dedicated time slot for Q&A on GST we have ensured, you get answer to all your outstanding issues be ittechnical or procedural.

Host : WIRC of ICAI jointly with Dadar East CPE Study Circle.Day & Date : 22nd - 25th February 2018 (4 days 3 Nights)Venue : Club Mahindra Emerald Palms Resort, Pedda, Uttor Doxi,

Varca, South Goa, Salcete, Goa 403721Fee Charges : Rs. 11,000 + applicable GST of Rs 1,980 (registration before 30th Nov)

: Rs 12,000 + GST of Rs 2,160 (for registration after 30th Nov).(All rates ex-Club Mahindra Resort)

Date Topic Faculties/Panellists22nd Feb Keynote Address & Future of CA M.M. ChitaleThursday Accounting & Auditing Profession23rd Feb Discussion paper on Income Tax CA Padamchand KhinchaFriday24th Feb Panel Discussion and dedicated 2 hours for Q&A to CA Heetesh Veera, CA Ashit Shah,Saturday clarify procedural and technical issues on GST CA Shreyas Sangoi, CA Kewal Satra25th Feb Burning issues in IndAS CA Himanshu KisnadwalaSunday. Practice Development Eminent Speaker*Proposed topics: · Discussion on capital market way forward if time permits.

CPE Credit:15 hours

(subject toapproval)


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CA DARSHAN CHETAN GANGARGODHRAVile Parle, Mumbai 400057Mobile : 9821162791E-mail : [email protected]

CA HARSH KETSHI MARUBIDADAMulund- East, Mumbai 400081Mobile : 9869322611Email : [email protected]

CA SHRADDHA PRANAY CHHADVAGUNDALAMumbai 400008Mobile : 9833184837Email : [email protected]

CA PRANAY JAYANTI CHHADVAGUNDALAMumbai 400008Mobile : 9969505725Email : [email protected]

CA BIPIN VISANJI SHAHNUTAN TRAMBOThane-WestMobile : 9819126503E-mail : [email protected]

CA NIDHI GIRISH MARUBIDADAThane 400615Mobile : 9004887251E-mail : [email protected]

CS, LLB AASH PRAVIN DHARODWADALAMulund-West, Mumbai 400080Mobile : 9870108015Email : [email protected]

CA SWAR BHARAT VIRADESALPURGhatkopar (east), Mumbai 400075Mobile : 9773484843Email : [email protected]

CA BIJAL RAJESH GALALAKHAPURMalad (W), Mumbai 400064Mobile : 9987075904Email : [email protected]

NEW MEMBERS ENROLLEDCA VANDANA BAKUL GALACHHASARAChembur (east), Mumbai 400088Mobile : 9920164711EWmail : [email protected]

CA JINESH DHIRAJ GALALAKHAPURAndheri (east), Mumbai 400069Mobile : 9619879707Email : [email protected]

CA JUGAL MAHENDRA NAGDA

Ghatkopar (West), Mumbai 400086Mobile : 8451901381Email : [email protected]

CA SAGAR AMUL DEDHIANAVAVASMalad (east), Mumbai 400097Mobile : 8108275985

CA PRIYANKA NITIN SHAHTODATardeo (west), Mumbai 400034Mobile : 9769293652E-mail : [email protected]

CA MONICA RAMESH SAIYAGELDAThane-West 400604Mobile : 8082399736Email : [email protected]

CA ROHAN ROHIT CHHEDAPUNDIGhatkopar-East,Mumbai 400077Mobile : 9833040009E-mail : [email protected]

CA CHARMI HITESH GOGRITODAVashi, Navi MumbaiMobile : 9930812869E-mail : [email protected]

CA,CS NIRAV DINESHCHANDRA SAIYAGELADABORIVALI (EAST), Mumbai, 400066Mobile : 9969111767Email : [email protected]


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NEW MEMBERS ENROLLED123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678

123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678123456789012345678

CA VINIT KAMLESH GALACHHASRABORIVALI (WEST), Mumbai 400092Mobile : 9619161515Email : [email protected]

CA KEVAL MAHESH MAMANIAMERAUGhatkoapar (west), Mumbai400086Mobile : 8080117040Email : [email protected]

CA RUSHABH MAHESH MAMANIAMERAUGhatkopar (West), Mumbai 400086Mobile : 9869354806

CA PRACHI PRAFUL GADARAYDHANJARChinchpokli-East, Mumbai 400012Mobile : 9969190420Email : [email protected]

CA MALAY NITIN FURIAVANKIMulund-West, Mumbai 400080Mobile : 9664554827Email : [email protected]

CA ADIT KIRAN VIRAPRATAPPARBandra-West, Mumbai 400050Mobile : 8291088112E-mail : [email protected]

CA DIPESH RAVJI GADASAMAKHIALIGrant Road- West, Mumbai 400007Mobile : 9819528254E-mail : [email protected]

CA SEJAL JIGNESH CHHEDANANA BHADIYADahisar-East, Mumbai 400068Mobile : 9867419594Email : [email protected]

CA TUSHAR DEVSHIBHAI DEDHIABHORARASantacruz- East , Mumbai 400055Mobile : 9820675230E-mail : [email protected]

CA HITEN KESHAVJI DEDHIABHUJPURMalad-West, Mumbai 400064Mobile : 9869900321E-mail : [email protected]

CA MANILAL VIRJI SHAHKHAROIThane-West 400601Mobile : 9821475601Email : [email protected]

CA NEIL VIJAY GANGARBIDADAMalad-West, Mumbai - 400064Mobile : 9969940096E-mail : [email protected]


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1. Introduction

1.1. Earlier any sum of money or any property whichis received without consideration or forinadequate consideration (in excess of thespecified limit of Rs. 50,000) by an individual orHindu undivided family was chargeable toincome-tax in the hands of the resident underthe head “Income from other sources” subject tocertain exceptions. Further, receipt of certainshares by a firm or a company in which thepublic are not substantially interested is alsochargeable to income-tax in case such receipt isin excess of Rs. 50,000 and is received withoutconsideration or for inadequate consideration.Thus, anti-abuse provisions wereapplicable only in case of individual orHUF and firm or company in certain cases.

1.2. Government, with the intention to prevent thepractice of receiving the sum of money or theproperty without consideration or for inadequateconsideration, inserted section 56(2)(x) witheffect from 1st April 2018 so as to provide thatreceipt of the sum of money or the property byany person without consideration or forinadequate consideration in excess of Rs. 50,000shall be chargeable to tax in the hands of therecipient under the head “Income from othersources”.

1.3. The Finance Act, 2017 introduced new Section50CA in the Act with effect from 1 April 2018 toprovide that where consideration for transfer ofunquoted equity shares of a company is lessthan the Fair Market Value(FMV) of suchshares determined in accordance with theprescribed manner, the FMV shall be deemed tobe the full value of consideration for thepurposes of computing income under the head‘capital gains’.

1.4. Thus, a transfer of share for consideration belowFMV will be liable to tax u/s 56(2)(x) in case oftransferee and u/s 50CA in case of transferor.The CBDT vide notification no. GSR 865(E)[NO.61/2017 (F.NO.149/136/2014-TPL)], dated12-7-2017 amended rules which prescribed themethod of valuation of unquoted equity sharesfor the purpose of Section 56(2)(x) and Section

THE INTRICACIES ONTRANSFER OF UNQUOTED SHARES

50CA of the Act by taking into account the FMVof jewellery, artistic work, shares and securitiesand stamp duty value in case of immovableproperty and book value for the rest of the assets.

2. Provisions and Rules in Brief:

2.1. Section 56(2)(vii) and 56(2)(viia) is now replacedwith Section 56(2)(x):“(x) where any person receives, in any previousyear, from any person or persons on or after the1st day of April, 2017,—(a) any sum of money, without consideration,

the aggregate value of which exceeds fiftythousand rupees, the whole of the aggregatevalue of such sum;

(b) any immovable property,—(A) without consideration, the stamp duty

value of which exceeds fifty thousandrupees, the stamp duty value of suchproperty;

(B) for a consideration which is less thanthe stamp duty value of the property byan amount exceeding fifty thousandrupees, the stamp duty value of suchproperty as exceeds such consideration

(c) any property, other than immovableproperty,—(A) without consideration, the aggregate

fair market value of which exceeds fiftythousand rupees, the whole of theaggregate fair market value of suchproperty;

(B) for a consideration which is less thanthe aggregate fair market value of theproperty by an amount exceeding fiftythousand rupees, the aggregate fairmarket value of such property asexceeds such consideration…”

2.2. Newly inserted section 50CA is as follows:“50CA.Where the consideration received oraccruing as a result of the transfer by an assesseeof a capital asset, being share of a company otherthan a quoted share, is less than the fair marketvalue of such share determined in such manner

Contributed by :CA Pooja Maru(a member of the association)

she can be reached [email protected]


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as may be prescribed, the value so determinedshall, for the purposes of section 48, be deemed tobe the full value of consideration received oraccruing as a result of such transfer.”

2.3. The said notification has substituted Rule11UA(1)(c)(b)2 of the Rules. The amendmentwith respect to valuation of unquoted shares isas follows:“(b) the fair market value of unquoted equityshares shall be the value, on the valuation date,of such unquoted equity shares as determined inthe following manner, namely:—

the fair market value of unquoted equity shares=(A+B+C+D - L)× (PV)/(PE), where,

A= book value of all the assets (other thanjewellery, artistic work, shares, securities andimmovable property) in the balance-sheet asreduced by,—

(i) any amount of income-tax paid, if any,less the amount of income-tax refundclaimed, if any; and

(ii) any amount shown as asset includingthe unamortised amount of deferredexpenditure which does not representthe value of any asset;

B = the price which the jewellery and artisticwork would fetch if sold in the open market onthe basis of the valuation report obtained from aregistered valuer;

C = fair market value of shares and securities asdetermined in the manner provided in this rule;

D = the value adopted or assessed or assessableby any authority of the Government for thepurpose of payment of stamp duty in respect ofthe immovable property;

L= book value of liabilities shown in the balancesheet, but not including the following amounts,namely:—

(i) the paid-up capital in respect of equityshares;

(ii) the amount set apart for payment ofdividends on preference shares andequity shares where such dividendshave not been declared before the dateof transfer at a general body meeting ofthe company;

(iii) reserves and surplus, by whatever name

called, even if the resulting figure isnegative, other than those set aparttowards depreciation;

(iv) any amount representing provision fortaxation, other than amount of income-tax paid, if any, less the amount ofincome-tax claimed as refund, if any, tothe extent of the excess over the taxpayable with reference to the bookprofits in accordance with the lawapplicable thereto;

(v) any amount representing provisionsmade for meeting liabilities, other thanascertained liabilities;

(vi) any amount representing contingentliabilities other than arrears ofdividends payable in respect ofcumulative preference shares;

PV= the paid up value of such equity shares;PE = total amount of paid up equity sharecapital as shown in the balance-sheet;”

3. Evaluation3.1. Section 56(2)(x) widens the scope to cover to

cover Firm, Limited Liability Partnership (LLP),Association Of Person (AOP), Body ofIndividuals (BOI), Company including foreigncompany and Trust.

3.2. The definition of property under section 56(2)(x)remains similar to that of Section 56(2)(vii).

3.3. The valuation date as per prescribed rules shallmean the date on which the capital asset, beingshare of a company other than a quoted share istransferred.

3.4. When the assets are received as underlyingassets of unquoted equity shares of a company,the FMV/stamp duty value has to be taken intoconsideration for determining the value of suchshares. All the assets and liabilities a company tobe taken at book value except the followingassets: Jewellery, work of art - Market price as per

valuation report Unquoted Equity shares - FMV determined

in the manner provided under the Rule Immovable property – Stamp duty Value Quoted shares and securities - Transaction

value recorded in such stock exchange on


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date of transaction. If share is not traded ason valuation date, lowest price on anyRecognised Stock Exchange preceding thevaluation date

Unquoted equity shares= (A +B+C+D – L) x(PV) / (PE) (i.e., same valuation approach asdescribed hereinabove)

3.5. Illustration in order to evaluate the ValuationRule:

Following are some of the assets held by anIndian Company and its impact on thecomputation of FMV of the said Indian company:

Goodwill, trademark or other intangibleassets – No valuation mechanism prescribedfor valuation of intangibles, hence to betaken at book Value

Partner in LLP - No valuation mechanismprescribed for valuation of interest inpartnership, hence to be taken at bookValue

Share of a listed company which holdsimmovable property - FMV of the companybased on stock exchange value on date oftransaction. No need to separately evaluateFMV based on the above formula

Shares of a closely held company whichholds immovable property- Need to calculatethe FMV of closely held company byconsidering the above formula i.e.considering stamp duty value of the saidimmovable property.

Foreign Listed Company which principallyowns immovable properties outside India –Foreign listed shares not considered quotedshares for the purpose of Rule 11UA. Bookvalue of immovable property can be takenin absence of Stamp Duty mechanism inthat country

3.6. Section 50CA applies to all assesse and all shareswhether equity or preference. The Ruleprescribes FMV of Preference shares to be takenas certified by accountant or merchant banker.

3.7. Section 50CA per se has no impact on MATcomputation and transfers exempt u/s 47 ortreaty protected or exempt otherwise.

4. Controversies/Shortcomings:

4.1. Section 50CA per se has no impact on transferwithout consideration i.e. where noconsideration received or accruing. However,section 56(2)(x) taxes the same in the hands ofTransferee and cost step up is available u/s 49(4)for the transferee. Thus, gifting of shares to anon-relative is taxable in the hands of non-relative at FMV of shares as computed underthis Rule.

4.2. Transaction covered under section 47 shall beoutside the scope of section 50CA but may becovered under section 56(2)(x) in some cases. Forinstance, transfer of shares from Wholly ownedsubsidiary to holding or vice versa is exemptunder section 47(iv)/ 47(v) but the same has notbeen excluded fromthe scope of section 56(2)(x)and thus taxable in the hands of Transferee.

4.3. Where unquoted equity shares are contributedby a partner to a firm, the question will arisewhether the provisions of section 50CA wouldoverride section 45(3). In this respect one maytake guidance from the decision in the case ofCanoro Resources Ltd., In re [2009] 180 Taxman220 (AAR) and decision in the case of CarltonHotel (P.) Ltd. v. Asstt. CIT [2010] 35 SOT26(Lucknow Tribunal)

4.4. Valuation Rules makes no distinction between:

Productive v/s Surplus/ Unproductive assets

Assets held as Inventory or CapitalAsset(Jewellery, immovable propert, etc)

4.5. No tolerance band provided u/s 50CA. Thus,FMV as per the above formula method will betaken as full value of consideration, even ifdifference in FMV and the sale consideration ismarginal. However, section 56(2)(x) providesfora limit of Rs 50,000/-.

4.6. There could be difficulty at the time ofwithholding tax. Suppose a non-resident sellertransfers certain unquoted equity shares to aresident at Rs. 100 per share whereas theFMV ofsuch share as per new valuation method is Rs.500 per share. Assuming that cost of shareacquired by a non-resident is Rs. 50 per share,the capital gain would be Rs. 50 per share (ifactual sale consideration is considered) or Rs.450 per share (if FMV of share is considered). In


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this respect, it is as yet unclear whether residentpayer shall withhold tax under section 195 onRs. 50 or Rs. 450.

4.7. In many cases, FMV of immovable property isless than the Stamp Duty Value. Thus, there willbe overvaluation of shares to the extent of thedifference in FMV and the stamp duty value ofthe immovable property. Unlike section 50C, itdoes not give a reference to valuation officer forvaluation of immovable property. (Food forthought: whether vires of section 50CA bechallenged in light of SC ruling in case of K PVarghese v ITO [1981] 131 ITR 597)

4.8. Following practical difficulties may be facedwhile computing FMV: Valuation of overseas listed and unlisted

companies. Valuation of shares in case of cross holding

in any company. All down-stream investment may be

difficult to value as underlying balancesheets may not be available.

4.9. The valuation Rules, are silent on reduction ofsecurities premium payableon redemption ofpreference shares

4.10. Rules being notified on 12th July, 2017 andbeing made effective from 01 April,2017, norelaxation has been provided to transactionsentered between 01 April, 2017 and 12 July,2017.

5. ConclusionThe rules will have an impact on the valuationof unquoted equity shares of investment holdingcompanies wherein its downstream investmentswould now need to be valued applying theprescribed valuation approach. The similarimpact would be there on mere property holdingcompanies where the stamp duty value of theproperty would be considered now. This is awelcome move by CBDT as it would curtail thepractice of transferring shares of companies atnominal value, which holds assets whoseunderlying value is far higher than the carryingvalue. Hope the government may come up withthe required clarifications on this subject torationalize the reading.

FOR ATTENTION OF MEMBERS/SUBSCRIBERS Members are requested to come forward and contribute

their articles in CVO CA’s News & Views, the mouthpiece ofour Association. Best Article contributed by new comershall be awarded with a special prize.

While sending Articles for News & Views, please confirmthat the same are not published/not given for publishingelsewhere. No correspondence shall be made inrespect of Articles not accepted for publication; nor willthey be sent back.

The views and opinion expressed or implied in the Newsand Views are those of the authors and do notnecessarily reflects those of the association. Theopinion expressed herein should not be construed aslegal or professional advice. Neither the Association northe authors/contributors are responsible in any mannerfor any personal or professional liability arising due tothe decisions taken by readers on the basis of theseviews. The association is also not in any wayresponsible for the result of any action taken on thebasis of the advertisement published in the journal.

This is “YOUR” magazine. Please give your feedback/suggestions etc. Kindly intimate change of youraddress by sending the necessary intimation to theAssociations’ Office.

Non receipt of News & Views may be intimated to :

CA Harsh Dedhia - 9892444121

Email Id - [email protected]

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BOTTLENECKS

Long time ago, when there were only a few airlines (and the airlines staff were better behaved) a renownedairline was facing a peculiar problem. They had started receiving complaints from passengers travelling for‘Hajj” that their baggages were coming in late,as late as a day or two. A Team was assigned the task to trainthe customer service desk, to handle customer grievances.

Another set of the team started grilling into the actual issue. They found out that the baggages were beingloaded on a different flight and in such cases the baggages had to be called back and re-transported and hencethe delay.

Were the loaders of baggages new? Were they not trained? Were they being negligent on duty? What was it?Further enquiry revealed, that new baggage labels of destination for all Islamic countries were being printedin the Arabic language. The loaders found it confusing and time consuming to get a clarification on the same.What was the quickest solution then… reprint the labels in English, train the loaders in the Arabic languageor hire loaders who knew the language?

At a brain storming session of the top notch in the team, they arrived at a classic solution -Colour coding. Sothe destination labels were colour coded, the loaders were trained to load the baggage on flights as per assignedcolours and the bottleneck was eliminated.

Bottlenecks, a term most commonly used in relation to production or manufacturing, simply means, a pointwhere things slow down or stop , preventing it to move forward at the pace in which they should have otherwisemoved.

When water is poured out of a bottle, it has to pass through the bottle’s neck oropening. The wider the bottle’s neck, the more water you can pour out and viceversa.A bottleneck in a process occurs when input comes in faster than the next stepcan use it to create output. Similar is the case with information, materials,products, man hours etc.

A particular broad road, which narrows down,creates a bottleneck causing slow moving traffic.

A senior with piles of files on his table for review,could often be a bottleneck, delaying the final filingof the report.

An absentism of a team member, could lead to animportant task not done, because no one other thanhim/her would be assigned to do it.

Bottlenecks ! We face them all along and we oftenourselves become bottlenecks!

Contributed by :CA Nisha Gala(a member of the association)


CAUTION :BOTTLENECK AHEAD !


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Think of an office scenario.

An office boy gathers all the outside work/deliverable documents etc. and leaves office at 12:30 p.m. everyday.He has been instructed that he has to first go to a particular clients office for his signature and then proceedto other places.

Invariably, he reports back with one of the many tasks not done for some reason. So daily, one of the task isnot done and the office boy is labelled as inefficient.

May be a few Why’s could help identify the reason ?

Why was the work not getting done ? - he did not have enough time .

Why wasn’t there enough time ? - he spent an hour at clients place to get signature

Why would it take one hour ? : the client would either be in a meeting or would have gone for lunchand he would have to wait.

Why would he have to wait ? : the receptionist was following a general instruction of the clientthat he should not be disturbed while in a meeting or over lunch.

Why didn’t the office boy communicate this ? According to him, this was the way it was supposed to beand the person assigning the task knew about this.

Simple everyday bottlenecks!Expiry of Digital signatures, Unbilled fees, missing data files, revisiting routine procedures, employee suddenexit….a number of such everyday instances become, hurdles to smooth office functioning, reasons for frustration and anger , cause for dissatisfaction amongst clients, hindrances to growth

So what can be done ?There could be short term bottlenecks and ones which are long term.e.g. Absence of a person for which mailwas not sent would be a short term bottleneck . Not having a primary – secondary responsibility defined forcrucial tasks could result in a long term bottleneck.


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Lets, take our above office scenario.

IDENTIFY BOTTLENECK : Delay at Clients place

REASONS : Lack of Communication

Lack of Clarity

MANAGE : Will it help, If Client is pre-Informed that his signatures are required? If standing instructions are given to receptionist to allow the office boy to get the signatures immediately?BACK UP Should someone discuss with the office boy the urgency of the matters /documents to be delivered for say,

5 minutes each day? Should his timings be reworked, so that more or less work is allotted? Should his route be changed, if so required?

In other words,

*Increase the efficiency of the bottleneck step Or decrease input to the bottleneck step.

EXTERNAL INFLUENCESThere could be various external circumstances which are bottlenecks, for which much control is generally notin our hands.Not to mention the GST website not working and last minute changes, multiple deadlines, non clarity, and allthe updates!

As professionals, we are constantly challenged by external factors, leading to long working hours , stress , missedor extended deadlines , duplication of work , repetitive mistakes , lack of control and so on.We may not be able to eliminate , but we surely can mitigate and minimise the negative effects of thesebottlenecks .

Some of the various practical tools to handle bottlenecks would be :1. Technology update : A routine health check of the existing systems and keeping track of latest

developments could help.2. Technology optimization : One need not always invest in newer versions . Often existing systems are under

utilised and most solutions can be derived by using them effectively3. Define Systems and Procedures : More than often, something written down brings greater clarity to the

assignee as well as the assignor of the job . It bridges the gap of expectations4. Review : A periodic and disciplined review of the process, of the people involved in the process and resources

used in the process , helps curtail a crisis situation5. Implementable action points : Often reviews remain on paper, if they are not actioned or followed up.

Concluding the findings by means of an appropriate action which should be permanent is the key to handlethe bottleneck effectively.

The most crucial element of the bottleneck is Identifying it correctly and taking suitable action. Everything elseis a matter of detail and each of us are surely equipped to unbottle them at the right time Maybe Now is theright time to sharpen the axe !


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ARTIFICIAL INTELLIGENCE –WHAT DOES THE FUTURE

HAVE IN STORE?

Artificial intelligence is transforming everything - jobs, defence, communications, privacy, andethics. However, its long-term impact is unknown. Will it lead to a better, simpler future, or moveus toward catastrophe? The question of whether A.I.’s cons are likely to outweigh its pros is a topicfor debate. Scientific analysis has not been credible enough to come to a conclusion.

A major concern about artificial intelligence is that it’s taking away our jobs, displacing more andmore humans as bots grow more and more advanced. That may put many job positions at risk.Another view is that robots aren’t seizingour jobs, but rather transforming them. A.I. requirestraining to recognize human patterns of data and put them into use. Humans are paramount in thatprocess. Humans come up with inputs, instructing the A.I. on how to correctly gauge the datasupplied so that it can result in the desired outputs. People are still necessary – just in differentand unusual ways. The task now asked of humans will be to add data to the cloud for AI to functionas expected.

Some others have a bit of a radical view – AI is a threat to human survival. And these “others”include some real heavy weights. Stephen Hawking stated that the development of full artificialintelligence could spell the end of the human race. Elon Musk said that we are summoning thedemon with artificial intelligence, and calling it perhaps “our biggest existential threat.”

When Musk’s warning is serious, we’re afarcry from building machines that are smarter thanhumans. Developers can be conservative when deciding the degree of autonomy to give A.I. Thedifference between intelligence and autonomy has to be carefully considered. We have toconsciously define how we are going to use AI as well as when and where it will be used. At themoment, it is really difficult to predict when we can reach singularity despite the fact that thereare several predictions by some AI experts. However, if we reach that point in the future, then itis really important to have a centralized global governing body which lays down the framework forprioritizing the positive outcome over its own interest.

Public bodies have to speed up for decision making about the change technology is bringing as ofnow they are way too slow as to cope with the exponential growth of technological advancementsand that could be a possible solution to mitigate the challenges of the impact of AI on employmentand economy.

Contributed by :CA Jinit Bheda(a member of the association)

he can be reached [email protected]


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LEGAL UPDATES /DECISIONS

Section 143 of the Income Tax Act, 1961 –Assessment – Prima facie adjustments –Processing of returns in Form ITR-1 undersection 143(1) – Applicability of Section143(1)(a)(vi) [250Taxman (st) 17]

The CBDT vide instruction no. 9/2017 dated 11/10/2017 clarifies as under.

The section 143(1) (a) (vi) of the Income Tax Actw.e.f. 01/04/2017 prescribes that while processingthe return of income, the total income or loss shallbe computed after making adjustment of additionof income appearing in Form 26AS or Form 16A orForm 16 (the three forms) which has not beenincluded in computing the total income in thereturn.

In this regard, the doubts have arisen whileprocessing income tax return filed in ITR 1regarding the nature, extent and scope ofcomparison of information as contained in returnof income with the three forms which might leadto issuance of intimation proposing adjustment tothe returned income.

The CBDT clarified as under. In returns filed in ITR -1 Form, information

about a particular head / item of income is onlyon net basis and thus, complete data /information may not be available thereinwhich may enable comparison with the data /information as contained in the three forms ina meaningful manner. Therefore, in exerciseof its powers under section 119 of the Act, theBoard hereby directs that provision of section143(1)(a)(vi) of the Act would not be invokedto issue intimation proposing adjustment tothe income/loss so filed in ITR -1 Form in suchsituations.

Where any head/item of income has beenaltogether omitted to be included in the return

1. DIRECT TAXESUPDATE

Compiled by :CA. Haresh P. Kenia

of income filed in ITR-1 while the three formscontain specific detail in this regardpertaining to that item/head of income, section143(1)(a)(vi) of the Act shall continue to apply.Further, for purpose of section 143(1)(a)(vi) ofthe Act, only the three forms specified thereinwould be taken into consideration.

The pending intimations proposingadjustments under section 143(1)(a)(vi)wherein the taxpayer has tendered anexplanation without revising the return orhas not tendered any response till now shallbe dealt with in accordance with the abovedirection. However, in cases where onreceiving the intimation u/s. 143(1)(a)(vi) ofthe Act, the concerned assessee has alreadyfiled a revised return, such returns shall betreated as valid and handled accordingly.

New Rule 39A and insertion of Form No.28AA in Income Tax Rules, 1962 - Commentsand suggestions. Draft notification dated 19/09/2017. (250 Taxman (st.) 4)

In exercise of the powers conferred by section 295of the Income Tax Act, an amendment to theIncome Tax Rules is proposed for insertion of newrule 39A and Form No. 28AA in the Rules. It isproposed to create a mechanism for self-reportingof estimates of current income, tax payments andadvance tax liability by certain taxpayers viz,companies and tax audit cases, on voluntarycompliance basis.

The draft proposal – Rule 39A An assessee being a company and a person

(other than a company), to whom theprovision of Section 44AB are applicable shallfurnish an intimation of estimated income andpayment of taxes as on 30th September of theprevious year, on or before 15th November ofthe previous year.

If the income estimated as on 30th Septemberof the previous year is less than the income ofthe corresponding period of the immediatelypreceding previous year by an amount of Rs.


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5 Lakh or 10 per cent, whichever is higher,then the assessee shall be required to furnishan intimation of estimated income andpayment of taxes as on 31st December of theprevious year, on or before 31st January ofthe previous year.

New form 28AA. A new form 28AA is prescribed being

intimation of estimated income, tax liabilityand payment of taxes for the previous year.

The comments and suggestions ofstakeholders and general public on the abovedraft notification were invited. The commentsand suggestions may be sent electronically bySeptember, 2017 at the email address,[email protected].

Section 143 of the Income Tax Act, 1961 –Assessment – Scrutiny assessment –Conduct of assessment proceedingselectronically in time-barring scrutinycases. [Taxman 250 (st) 11]

CBDT vide instruction no. 8/2017 dated 29/09/2017 clarifies as under.

As a part of Government’s initiative towards E-governance, Income Tax Department has broughtdigital transformation of its business processes toa significant extent through the Income TaxBusiness Application (ITBA) project whichprovides an integrated platform to conductvarious tax proceedings electronically throughthe ‘e-proceedings’ facility available on it. As adigital platform for conduct of scrutinyassessment proceedings in an end to end manneris now available, CBDT has decided to utilize it ina widespread manner for conduct of proceedingsin scrutiny cases. This order covers variousaspects of conducting scrutiny assessmentselectronically in cases which are getting barred bylimitation during the financial year 2017-18.

It also specifies that the assessment proceedingsin the specified time bearing scrutiny cases,pending as on 01/10/2017 where hearing havenot been completed, would be carried out throughthe e-proceeding facility on ITBA.

On may refer to above citation for detailedinstruction.

2. UPDATE ONGST

Compiled by :

Notification No. 35/2017- CENTRAL TAX-DATED 15th September 2017Vide this Notifications, due dates for furnishingmonthly return in Form GSTR 3B and for makingpayment of tax, interest, penalty, fees or anyother amount payable for the months August2017 to December 2017 shall be 20th day ofsubsequent month.

Notification No. 36/2017- CENTRAL TAX-DATED 29th September 2017Vide this Notification Rule 118 relating todeclaration to be made u/s. 142(11)(c), Rule 119relating to declaration of stock held by a principal& job worker, rule 120 relating to details of goodssent on approval basis are amended. Dates offurnishing declarations under these rules arealigned with date of furnishing declaration underRule 117 relating to declaration for tax or dutycarried forward under existing law or on goodsheld in stock on the appointed day.

Notification No. 37/2017 - CENTRAL TAX-DATED 4th October 2017As per this Notification all registered persons whointend to supply goods or services for exportwithout payment of IGST are eligible to furnish aletter of undertaking in place of bond. ThisNotification contains in detail conditions andsafeguards for furnishing such LUT.

Notification No. 38/2017- CENTRAL TAX-DATED 13th October 2017 & NotificationNo. 32/2017- CENTRAL TAX-DATED 15thSeptember 2017A casual taxable person is required to obtaincompulsory registration u/s.24 of The CGST Act,2017.Vide the Notifications Central Government hasexempted a casual taxable person making taxablesupplies of specified handicraft goods fromobtaining compulsory registration. However suchcasual taxable persons are required to obtainregistration u/s.22 upon crossing 20 lacs / 10 lacsturnover limit.

Notification No. 39/2017- CENTRAL TAX-DATED 13th October 2017The Central Government has specified that for

CA Bharat K. GosarCA Nitin D. Kenia


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the purpose of sanctioning refund u/s.54 or u/s.55of The CGST Act 2017, officers appointed underrespective SGST Act 2017 or UGST Act 2017 shallbe the Proper Officer in respect of a registeredperson located in The Territorial Jurisdiction ofthe said officer.

Notification No. 40/2017- CENTRAL TAX-DATED 13th October 2017A registered person (other than compositionperson) whose aggregate turnover is less than orequal to Rs. 1.5 crores during preceding financialyear or a person who has obtained registration inGST regime & his turnover is likely to be less thanRs.1.50 crores then he is not required to pay GSTon advance received against supply. This isapplicable from 13.10.2017

Notification No. 41/2017- CENTRAL TAX-DATED 13th October 2017Refer Notification number 59/2017- Central Taxdated 15th November 2017 for further extendeddate of furnishing form GSTR- 4.

Notification No. 42/2017- CENTRAL TAX-DATED 13th October 2017Refer Notification number 61/2017- Central Taxdated 15th November 2017 for further extendeddate of furnishing form GSTR- 5A.

Notification No. 43/2017- CENTRAL TAX-DATED 13th October 2017Refer Notification number 62/2017- Central Taxdated 15th November 2017 for further extendeddate of furnishing form GSTR- 6.

Notification No. 44/2017- CENTRAL TAX-DATED 13th October 2017Refer Notification number 52/2017- Central Taxdated 28th October 2017 for further extendeddate of furnishing form GST ITC-01.

Notification No. 45/2017- CENTRAL TAX-DATED 13th October 2017Vide this Notification following Rules areamended in The Central Goods and Services TaxRules, 2017. Amendments are effective from 13thOctober 2017.

Rule 3(3A): This sub rule is newly substituted.Now a person who has obtained registration inGST regime and intends to opt for CompositionScheme can submit intimation in GST CMP-02and he will be eligible under Composition Schemefrom 1st day of the month immediately succeeding

the month in which intimation is furnished. Hehas to furnish Stock Statement in Form ITC-03within 90 days from date of Composition granted.

Rule 46A: By inserting this Rule, Governmenthas allowed to issue a single ‘Invoice cum Bill ofSupply’ in case registered person is supplyingtaxable as well as exempted goods or services orboth to an unregistered person.

Rule 62(1) : Proviso is added. In view of Rule3(3A) substituted as explained herein above,Composition dealer will have to file return inGSTR-4 from the date of eligibility undercomposition till the end of quarter. Prior toeligibility date, he will continue to file return asper regular scheme of the Act.

Notification No. 46/2017- CENTRAL TAX-DATED 13th October 2017A eligible registered person having aggregateturnover during preceding financial year up toRs. 75 lacs was eligible to opt for CompositionScheme. The turnover limit in ‘Special CategoryStates’ was Rs.50 Lacs. Vide this notificationaggregate turnover limit is raised to Rs.1 Crores &Rs.75 Lacs respectively.

Notification No. 47/2017- CENTRAL TAX-DATED 18th October 2017Vide this notification following rule is amended inThe Central Goods and Services Tax Rules 2017.Amendment is effective from 18/10/2017

Rule 89: Third proviso is substituted. Anapplication for refund of any tax, interest,penalty, fees or any other sum paid in respect ofsupplies regarded as deemed export may be filedby the recipient of deemed export or the supplierof deemed export in case where recipient does notavail ITC on such supplies and furnishes anundertaking to the effect that the supplier mayclaim refund.

Notification No.48/2017-CENTRAL TAX-DATED 18th October, 2017Vide this notification, Central Government hasnotified specified supplies of goods that shall betreated as deemed exports.

Notification No.49/2017 – CENTRAL TAX-DATED 18th October, 2017Vide this notification, Central Government hasspecified evidences required to be produced forclaiming refunds by the supplier of deemed exportservices.


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Notification No. 50/2017 – CENTRAL TAX –DATED 24th October, 2017Late fees payable by registered person who failedto furnish the return in form GSTR-3B for themonth of August and September 2017 by duedate is waived.

Notification No. 51/2017- CENTRAL TAX -DATED 28th October, 2017 & NotificationNo. 36/2017- CENTRAL TAX - DATED 29thSeptember, 2017Vide this notification certain Rules under TheCentral Goods and Services Tax Rules, 2017 areamended :

Rule 24(4) : All registered persons under earlierlaws were migrated to Goods and Services TaxAct. However some persons were not liable toregister under GST Act and such persons aregiven an option to submit an applicationelectronically in form GST REG-29 for thecancellation of Registration. Time limit forfurnishing such application is extended from 31/10/2017 to 31/12/2017.

Rule 45(3) : Time limit for making declaration inform GST-ITC 04 in respect of goods sent to Jobworker or received form job worker or sent fromone job worker to another for any quarter is 25thday of the month succeeding the respectivequarter. Powers are now given to Commissioner ofIntegrated, Central, State or Union Territory Taxto extend the time limit for making suchdeclaration.

Rule 96(2) & 96A(2) : In these both Sub Rulespertaining to Refund of Integrated tax paid ongoods exported out of India or Refund ofIntegrated tax paid on export of goods or servicesunder Bond or Letter of Undertaking, Proviso isadded. Dates of furnishing GSTR-1 is extendedhence after furnishing GSTR 3B, exporter shallfurnish electronically, information relating toexport as specified in Table 6A of GSTR 1.

Notification No. 52/2017- CENTRAL TAX -DATED 28th October, 2017 & NotificationNo. 44/2017- CENTRAL TAX - DATED 13thOctober, 2017A Person obtaining registration in time uponcrossing prescribed turnover or has obtainedregistration voluntarily is entitled to Input TaxCredit in respect of input, Input contained in semifinished goods or finished goods held in stock onthe day preceding the date of registration. SimilarITC along with ITC on capital goods is availableto registered person shifting from composition

scheme to normal scheme or when exempt supplybecomes taxable.

Time limit for making declaration of such stock inform GST-ITC 01 by registered persons who areeligible for ITC during the month of July, August,September 2017 is extended to 30/11/2017

Notification No. 53/2017- CENTRAL TAX -DATED 28th October, 2017Refer Notification number 63/2017- Central Taxdated 15th November 2017 for further extendeddate of furnishing form GST-ITC-04.

Notification No. 54/2017 – CENTRAL TAX-DATED 30th October, 2017Refer Notification number 57/2017 & 58/2017-Central Tax dated 15th November 2017 fordeferment in filing of form GSTR-2 & GSTR-3.

Notification No.55/2017 - CENTRAL TAX-DATED 15th November 2017

Vide this Notification following Rules areamended in the Central Goods & Services TaxRules, 2017. Amendments are effective from15/11/2017.

Rule 43 (2) : Explanation is added to this subrule. It is clarified that for the purpose of Rule 42& Rule 43 Supply of Service to Nepal or Bhutanagainst payment in Indian Rupees will not beconsidered as Exempt Supply.

Rule 54: An Insurer or a Banking Company or aFinancial Institution including a non bankingfinancial company may at their option issueconsolidated tax invoice for supply of taxableservices made during a month. Till now it wascompulsory to issue such tax invoice.

Rule 97A & 107A: For the purpose of Chapter Xrelating to Refund & Chapter XII relating toAdvance Ruling, manual filling of application,intimation, reply etc. is permitted.

Rule 109A: By adding this rule, the Governmenthas appointed Appellant Authority for thepurpose of filling appeal against any Decision orOrder passed under CGST\SGST\UGST Act.

Notification No.56/2017 - CENTRAL TAX-DATED 15th November 2017Last date for furnishing return in Form GSTR-3Band making payment towards tax, interest,penalty, fee or any other amount payable underthe Act for the month of January 18, February 18


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& March 18 shall be 20/02/2018, 20/03/2018 and20/04/2018 respectively.

Notification No.57/2017- CENTRAL TAX-DATED 15th November 2017,The registered person having aggregate turnoverof up to Rs.1.5 Crores in the preceding financialyear or the current financial year are required tofurnish return form GSTR-1 for outward supplyon quarterly basis. Last date of furnishing suchGSTR -1 for 2nd, 3rd & 4th quarter of FY 2017-18 shall be 31/12/2017, 15/02/2018, 30/04/2018respectively.Time limit for furnishing return Form GSTR-2 &GSTR-3 for the period July 17 to March 18 shallbe notified subsequently.

Notification No. 58/2017- CENTRAL TAX-DATED 15th November 2017,The registered persons having aggregateturnover of more than Rs. 1.5 Crores in theproceeding financial year or the current financialyear are required to furnish return Form GSTR-1 for outward supply on monthly basis. Last dateof furnishing such GSTR-1 for July to October 17months will be 31/12/2017 & for November 17,December 17, January 18, Febuary 18 & March18 it will be 10/01/2018, 10/02/2018, 10/03/2018,10/04/2018 & 10/05/2018 respectively.Time limit for furnishing return Form GSTR-2 &GSTR-3 for the period July 17 to March 18 shallbe notified subsequently.

Notification No. 59/2017- CENTRAL TAX-DATED 15th November 2017, & NotificationNo. 41/2017- CENTRAL TAX-DATED 13thOctober 2017Time limit for furnishing return by CompositionDealer in Form GSTR 4 for the period July toSeptember, 17 is extended till 24/12/2017.

Notification No. 60/2017- CENTRAL TAX-DATED 15th November 2017,Time limit for furnishing return by a non residenttaxable person in Form GSTR 5 for the month ofJuly 2017, August 2017, September 2017 &October 2017 is extended till 11/12/2017.

Notification No. 61/2017- CENTRAL TAX-DATED 15th November 2017, & NotificationNo. 42/2017- CENTRAL TAX-DATED 13thOctober 2017Time limit for furnishing return by a personsupplying online information & database accessor retrieval services from a place outside India toa non taxable online recipient in Form GSTR 5Afor the month of July 2017, August 2017,September 2017 & October 2017 is extended till15/12/2017.

Notification No. 62/2017- CENTRAL TAX-DATED 15th November 2017, & NotificationNo. 43/2017- CENTRAL TAX-DATED 13thOctober 2017Time limit for furnishing return by an InputService Distributor in Form GSTR 6 for themonth of July 2017 is extended till 31/12/2017.Such date for August 2017, September 2017 &October 2017 will be notified subsequently.

Notification No. 63/2017- CENTRAL TAX-DATED 15th November 2017, & NotificationNo. 53/2017- CENTRAL TAX - DATED 28thOctober, 2017Vide this notification time limit for makingdeclaration for quarter July to Sept’17 in formGST-ITC-04 in respect of goods sent to job workeror received from Job worker or sent from one Jobworker to another is extended till 31/12/2017.

Notification No. 64/2017- CENTRAL TAX-DATED 15th November 2017,CGST late fee payable for non furnishing ofreturn in Form GSTR-3B in time from October2017 month onwards is Rs.10 for every dayduring which such failure continues. This isapplicable where Central Tax payable is NIL inreturns GSTR-3B. Otherwise late fees applicablewill be Rs.25.

Notification No. 65/2017- CENTRAL TAX-DATED 15th November 2017Person supplying goods or services or boththrough E-commerce operator who is required tocollect tax at source under Section 52 wascompulsory required to obtain Registration underSection 24. This notification exempts personsupplying service through E-commerce operatorfrom obtaining registration if turnover infinancial year do not exceeds Rs.20 Lacs on allIndia basis. Limit of turnover in ‘Special CategoryStates’ will be Rs10 Lacs.

Notification No. 66/2017- CENTRAL TAX-DATED 15th November 2017A registered person (other than compositiondealer) whose aggregate turnover is less than orequal to Rs. 1.5 crores during preceding financialyear or a person who has obtained registration inGST regime & his turnover is likely to be less thanRs.1.50 crores then he is not required to pay GSTon advance received against supply. This wasapplicable from 13.10.2017. This has now beenextended for all registered person other thancomposition persons.


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SEBI

A. CIRCULARS1. Review of Block Deal Window Mechanism

[Issued by the Securities and Exchange Board ofIndia vide Circular No. CIR/MRD/DP/118/2017dated October 26, 2017]

SEBI has decided to revise the framework forblock deal by providing for 2 (two) windows asfollows:(a) Morning Block Deal Window: Between 8.45AM to 9.00 AM(b) Afternoon Block Deal Window: Between2.05 PM to 2.20 PM

The minimum order size for execution on BlockDeal Window is Rs. 10 crores.

2. Securities and Exchange Board of India(International Financial Services Centres)Guidelines, 2015 –Amendments

[Issued by the Securities and Exchange Board ofIndia vide Circular No. SEBI/HO/MRD/DRMNP/CIR/P/2017/120 dated November 14, 2017]

The definition of the term ‘issuer’ as defined inclause 2(1)(i) of SEBI (IFSC) Guidelines, 2015has been amended.

3. Review of Securities Lending and BorrowingMechanism[Issued by the Securities and Exchange Board ofIndia vide Circular No. CIR/MRD/DP/122 /2017dated November 17, 2017]

SEBI has modified the framework relating toSecurities Lending and Borrowing Mechanismrelating Tenure of Contract, Position Limit ofSLB, Treatment of Corporate Actions during SLBand Rollover Facility.For further details, please refer SEBI website atwww.sebi.gov.in.

CORPORATE LAW

A. ORDER1. Companies (Removal of Difficulties) Second

Order, 2017 Central Government has amendedsection 247(1) of Companies Act, 2013 with effectfrom October 23, 2017 wherein the requirementfor registration with a recognised organisationhas been added.

B. RULES1. Companies (Filing of Documents and Forms in

Extensible Business Reporting Language),Amendment Rules, 2017

[Issued by Ministry of Corporate Affairs videnotification no. G.S.R. 1372(E) dated November6, 2017]

Rule 3 of Companies (Filing of Documents andForms in Extensible Business ReportingLanguage) Rules has been substituted. This rulelays down the XBRL filing applicability criteria.

2. Companies (Accounts) Amendment Rules, 2017[Issued by Ministry of Corporate Affairs videnotification no. G.S.R. 1371(E) dated November7, 2017] Form AOC-4 has been substituted.

For further details, please refer MCA website atwww.mca.gov.in

2. UPDATE ONSEBI ANDCORPORATELAWCompiled by : CA. Rajen GadaCA. Neha Gada

Our Association's mouthpiece "News &Views" has readership circulation ofmore than 1400 Chartered Accountantand Student members. We have nowstarted accepting advertisement for staffvacancy. In case you have any vacancyat your office or at any of your client forqualified Chartered Accountants orStudents or any administrative job, wewill publish your requirement in theJournal. This will be at very nominal costof Rs. 1,500 for quarter pageadvertisement per issue. We will betaking advertisement on first cum firstserve basis.

Kindly contact CVO CA Office on+91-22-24105987 for more details.


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Contributed by :Paras S Savla, Advocate(a member of the association)

he can be reached [email protected]

Contributed by :CA Bhakti Maru(a member of theassociation)


UNREPORTEDDECISIONS –INCOME TAX

1. Penalty u/s 271E r.w.s. 269T - Runningcurrent account balance of the assesseewith its sister concern with no interest andno fixed repayment termsdoes not amountto loan or deposit for the purpose ofSection 269T.

The assessee had outsourced the execution of‘AR Rehman show’ to its sister concern M/sContiloe Entertainment P. Ltd.. The said sisterconcern had a running current account with theassessee with multiple transactions taking placein a year. The assessee had to reimburse the costswhich were incurred by its sister concern onbehalf of the assessee, and the sister concern hadalso deducted tax where applicable. Out of totalamount of reimbursement of Rs.23,71,323/-, anamount of Rs 13,50,000 was paid in cash by theassessee and the balance amount of Rs 10,21,323was shown in the books as ‘‘payable’’. Apart fromabove, Assessee had also deposited Rs.27,00,000/- in sister concern’s bank account as there wasurgent need for payment of service tax by sisterconcern. The AO noticed that as on the date ofpayment of cash, the assessee had a creditbalance on loan account and, therefore, shouldhave repaid the same by cheque or any otherinstrument other than cash. For reimbursementsof Rs.23,71,323/-, he observed that debit notewas raised on 31.12.2009 and cash was paid on31.10.2009. In view of the above, the AOimposed a penalty of Rs.40,50,000/- u/s 269Tr.w.s. 271E of the Act. The CIT(A) confirmed thepenalty. The Tribunal held that it is a settledposition of law that penal statutes have to beconstrued strictly in the sense that if there is areasonable interpretation which will avoid thepenalty, that interpretation ought to be adopted.The Tribunal observed that the AO had nowhereheld that the assessee had availed a ‘deposit’ or‘loan’ from its sister concern as is required to bemade out at the threshold of section 269T of theAct. As the AO failed to find that assessee hadavailed of a ‘deposit’ or ‘loan’ from its sisterconcern, the Tribunal deleted the penalty u/s271E r.w.s. 269T.

M/s Contiloe Films Pvt. Ltd. vs. ACIT (ITANo. 856/MUM/2016)

2. Cash Credit u/s 68 – Penny stocks - Whereassessee’s name neither appears in the listof beneficiaries in SEBI’s order nor in thestatements of third parties recorded byInvestigation Wing, it cannot be allegedthat assessee was involved in price rigging.- Assessee furnished all evidences in theform of bills, contract notes, dematstatements and the bank accounts andhence the additions of sale proceeds ofshares u/s 68 were deleted.

The assessee, on 20.12.2011, purchased 2,40,000shares of the face value of Rs.1 each in CarefulProjects Advisory Limited (CPAL) through offmarket from M/s. Brijdhara Mercantile PrivateLimited for a consideration of Rs.2,40,000. CPALwas amalgamated with KAFL and the assesseewas allotted 2,40,000 shares of KAFL of the facevalue of Rs.1 each. The assessee sold these240000 shares through M/s. Ashika StockBroking Limited, a registered share broker ofBSE in AY 2014-15 and the resulting long termcapital gain was claimed as exempt u/s 10(38).The AO observed that the assessee made gain ofalmost 3805% in a span of 24 months. The AOalso observed that during the FY 2011-12, CPALincreased its authorised share capital to Rs.29crores and then the shares of Rs.10 each weresplit into 1:10 i.e. each shares of Rs.10 into sharesof Re.1 each. The said company CPAL thereafterissued bonus shares to the existing equityshareholders in the ratio of 1:55. The ld AO,considering the weak operating profits of CPAL,suspected the issue of bonus shares in theunrealistic ratio of 1:55. The ld AO furtherobserved that CPAL was incorporated with adubious plan and premeditated arrangementand artifice to increase number of shares thereinthrough sham and non genuine transactions ofits shares which resulted in fetching exhorbitantand unrealistic considerations in the scheme ofamalgamation. While arriving at the aforesaidconclusions, the ld AO also doubted the scheme ofamalgamation.The ld AO referred to thestatement of Shri Sunil Dokania recorded u/s 131of the Act by the Investigation wing on12.06.2015, wherein, Shri Dokania hasexplained the modus operandi of providing of


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LTCG in the scrip of KAFL.The ld AO referred tothree separate orders passed by SEBI dated 29thMarch, 2016, 15th June, 2016 and 31st October,2016 in support of his adverse conclusions drawnagainst the assessee that several entities related/connected to KAFL rigged the prices by 230%during the period of January, 2013 to June,2013 (Patch-1), created artificial demand andthereafter provided exit to the beneficiariesduring the period of July 2013 to November,2014 (Patch-2). The said orders passed by SEBIcontained list of related/connected parties ofKAFL and also the list of beneficiaries.The ld AOmade enquiries from the Bombay StockExchange as to the counter party members whobought the shares of KAFL sold by the assesseethrough his share broker viz. Ashika StockBroking Limited. The ld AO found that thebuyers of the shares had weak financials andtherefore he doubted the genuineness of thetransactions. Based on above, AO concluded thatthe assessee’s transactions resulting in LTCG onsale of shares of KAFL were bogus and that theassessee ploughed back his unaccounted moneyin the books of accounts which is assessableunder section 68 of the Act. The Tribunal heldthat The AO ought not to have questioned thevalidity of the amalgamation CPAL with KAFLapproved by the Hon’ble High Court merelybased on a statement given by a third partywhich has not been subject to cross –examination. It is also pertinent to note that theassessee and / or the stock broker Ashita StockBroking Ltd name is neither mentioned in thesaid statement as a person who had allegedlydealt with suspicious transactions nor they hadbeen the beneficiaries of the transactions ofshares of KAFL. In the instant case, the shares ofCPAL were purchased by the assessee way backon 20.12.2011 and pursuant to merger of CPALwith KAFL, the assessee was allotted equalnumber of shares in KAFL, which was sold bythe assessee by exiting at the most opportunemoment by making good profits in order to havea good return on his investment. The SEBI orderdid mention the list of 246 beneficiaries ofpersons trading in shares of KAFL, wherein, theassessee and / or Ashita Stock Broking Ltd’sname is not reflected at all. Hence the allegationthat the assessee and / or Ashita Stock BrokingLtd getting involved in price rigging of KAFLshares fails. KAFL had performed very wellduring the year under appeal and the P/E ratiohad increased substantially. The enquiry by theInvestigation Wing and/or the statements of

several persons recorded by the InvestigationWing in connection with the alleged bogustransactions in the shares of KAFL also did notimplicate the assessee and/or his broker. It is alsoa matter of record that the assessee furnished allevidences in the form of bills, contract notes,demat statements and the bank accounts toprove the genuineness of the transactionsrelating to purchase and sale of shares resultingin LTCG. The AO was not justified in rejectingthe claim of the assessee on the basis of theory ofsurrounding circumstances, human conduct, andpreponderance of probability without bringingon record any legal evidence against theassessee.

Thus the addition of the sale proceeds of sharesof KAFL as undisclosed income of the assesseeu/s 68 was deleted.

Manish Kumar Baid And Mahendra KumarBaid Versus ACIT, Cir-35, Kolkata (I.T.ANo. 1236/Kol/2017)

3. Revision u/s 263 of order passed u/s 153Ar.w.s. 143(3) – Earlier order was passed u/s143(1) and after search AO passed order u/s153A r.w.s. 143(3) accepting the return ofincome –In the absence of anyincriminating material found during thecourse of the Search & seizure proceedingsconducted u/s 132(1), no addition/disallowance is permissible in respect of anunabated assessment.

Search and seizure action u/s 132 was carried outat the premises of M/s Enercon India Ltd (EIL)and its group companies. The assessee being oneof the group company of EIL was covered in theaforesaid search proceedings. The assessee hadfiled its return of income for impugned year on31.10.2007, declaring a loss of Rs. 9.53 crores.Subsequent to the aforesaid search and seizureproceedings the assessee filed same return ofincome u/s 153A on 27-2-2014, declaring a loss ofRs. 9.53 crores. During the course of theassessment proceedings the Assessing Officerobserved that the assessee had not shown anyincome from its business activities and proceededto frame assessment under section 153Ar.w.s143(3) at returned loss of Rs. 9.53 crores.The Principal CIT noticed that though theassessee had not commenced any businessduring the year under consideration andreflected its business operating income as Nil, ithad debited expenses in its “Profit & Loss A/c”


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which were not disallowed by the AO whileframing the assessment. On the basis of aboveand certain other observations, the Principal CITconcluded that the AO had failed to examine theissues and carry out necessary verification. ThePrincipal CIT initiated proceedings u/s 263 andset aside the assessment order to the file of theAO, with a direction to examine the issue afreshand complete the assessment, as per law. Theassessee being aggrieved with the order passedby the Principal CIT u/s. 263 of the Act preferredan appeal to the Tribunal. The Revenuecontended that in a case which on the date ofinitiation of search and seizure action is precededby a processing of the ‘return of income’ undersection 143(1), despite absence of any pendingassessment or reassessment proceedings, it is tobe construed as abated, and the entireassessment in the case of the assessee is thrownupon before the Assessing Officer in the course ofassessment proceedings under section 153A. TheTribunal held that as per Section 153A, it is onlywhere the assessment or reassessment, if any,relating to any assessment year falling withinthe period of six assessment years referred to insection 153A is pending on the date of initiationof the search under section 132, the same shallstand abated. Thus, except for assessment orreassessment which is pending on the date ofinitiation of the search and seizure proceedingsu/s 132(1), in no other case the abatement shalltake place. The aforesaid view also standsfortified from sub-section (2) of section 153A,which contemplates that where any order ofassessment or reassessment made u/s. 153A(1) isannulled on a further appeal or any other legalproceedings, then, notwithstanding anythingcontained in Sec.153A(1) or section 153, theassessment or reassessment relating to anyassessment order which had earlier abated underthe second proviso of sub-section (1), shall standrevived with effect from the date of receipt of theorder of such annulment by the PrincipalCommissioner of Income tax or Commissioner ofIncome tax. If the contention of revenue isaccepted then it cannot be comprehended thathow in case of annulment of the assessmentframed under section 153A, the processing of the‘return of income’ under section 143(1) can byany means lead to revival of any assessment orreassessment as contemplated under section153A(2). Since the return of income of theassessee had only been processed u/s. 143(1) forthe year under consideration and no assessmentor reassessment proceedings were pending as on

the date of search, the case of the assessee can becharacterized as an unabated assessment. Thus,in the absence of any incriminating materialfound during the course of the search andseizure proceedings, no addition in respect of theunabated assessment for the year underconsideration could be made in the hands of theassessee-company and therefore, the saidassessment cannot be faulted with and held to be“erroneous”. Thus the Principal Commissionerhad wrongly assumed jurisdiction and order u/s263 was set aside and the order passed by theAssessing Officer under section 153A read withsection 143(3) was restored.

Wind World India Infrastructure (P.) Ltd.Vs. PCIT [ITA Nos. 2370/Mum/2017]

4. Method of accounting u/s 145(2) – Power ofthe Central Government - ICDS areultravires to the extent they override theprovisions of the Act, the Rules and thejudicial precendents.

The Chamber of Tax Consultants had challengedconstitutional validity of Income Computationand Declaration Standards (“ICDS”). The Courtheld that where there is a binding judicialprecedent, by virtue of Articles 141 and 144 ofthe Constitution, it is not open to the executive tooverride it unless there is an amendment to theAct by way of a validation law. To that extent,Section 145 (2), as amended, has to be read downto restrict power of the Central Government tonotify ICDS that do not seek to override bindingjudicial precedents or provisions of the Act. Thepower to enact a validation law is an essentiallegislative power that can be exercised, in thecontext of the Act, only by the Parliament andnot by the executive. If Section 145 (2) of the Actas amended is not so read down it would be ultravires the Act and Article 141 read with Article144 and 265 of the Constitution. ICDS is notmeant to overrule the provisions of the Act, theRules there under and the judicial precedentsapplicable thereto as they stand. Thereafter theCourt went to analyse the validity of each andevery ICDS. The court held as under;

ICDS-IIt was contended that the concept of ‘prudence’has been completely done away with by theRespondents, which was present in the earlierAS – I. ICDS now stipulates that prudence is notto be followed unless specified, and that this iscontrary to Act and various decisions like CIT v.


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Triveni Engineering & Industries Ltd [2011] 49DTR 253 (Del) and CIT v. Advance ConstructionCo. Pvt. Ltd. [2005] 275 ITR 30 (Guj).TheDepartment argued that the concept of prudencehas not been done away with but has beenfollowed on a case to case basis and cannot bedealt with generally.Reliance was placed on J.K.Industries v. Union of India [2008] 297 ITR 176(SC).The Court observed ICAI too has in para 6.9of its Technical Guide clarified as under:

“6.9 Chapter IV-D of the Income Tax Act housesSection 37 which deals with expenditure which isgeneral in nature and not covered withinsections 30 to 36. Section 37 covers expenditurelaid out or expended wholly and exclusively forthe purposes of the business. The phrase “laiddown” connotes setting aside or storage forfuture. The expression “laid out” in Section 37thus encompasses not only actual outflow ofexpenses but amounts parked in the present forfuture settlement. Accordingly, the concept ofPrudence is inherent in the business incomedeductions.”

The Court observed that decision in J.K.Industries v. Union of India [2008] 297 ITR 176(SC) is distinguishable in its application to thecase on hand. It was held that ICDS-I which doesaway with the concept of ‘prudence’ is contrary tothe Act and binding judicial precedents and istherefore unsustainable in law.

ICDS-IIICDS-II pertaining to valuation of inventoriesand eliminates the distinction between acontinuing partnership business after dissolutionfrom one which is discontinued upon dissolutionis contrary to the decision of the Supreme Courtin Shakti Trading Co. [2001] 250 ITR 871 (SC).It fails to acknowledge that the valuation ofinventory at market value upon settlement ofaccounts of the outgoing partner is distinct fromvaluation of the inventory in the books of thebusiness which is continuing. ICDS-II is held tobe ultra vires the Act and struck down as such.

ICDS-III and ICDS-IXPara 10 of ICDS-III states that retention moneywould be a part of the contract and the same hasto be assessed to tax based on ‘proportionatecomputation’ method. However this is contrary tomany decisionswhich have held that theretention money does not accrue to an Assesseeuntil and unless the obligations under thecontract are fulfilled.

Based on the analysis of various decisions andthe stand of the Petitioner and theRespondent,the Court held that the treatment toretention money under Paragraph 10(a) inICDS-III will have to be determined on a case tocase basis by applying settled principles ofaccrual of income. By deploying ICDS-III in amanner that seeks to bring to tax the retentionmoney, the receipt of which is uncertain/conditional, at the earliest possible stage,irrespective of the facts whether it accrued or not.Thus it would contrary to the settled position inlaw and various judicial principles and to thatextent para 10(a) of ICDS-III was rendered ultravires.

Para 12 of ICDS-III read with para 5 of ICDS-IX, dealing with borrowing costs, makes it clearthat no incidental income can be reduced fromborrowing cost. This is contrary to the decision ofthe Supreme Court in Bokaro Steel Limited (236ITR 315) and therefore struck down.

ICDS-IVPara 5 of ICDS-IV requires an Assessee torecognize income from export incentive in theyear of making of the claim if there is ‘reasonablecertainty’ of its ultimate collection. This wascontrary to the decision of the Supreme Court inCIT v. Excel IndustriesLimited (2015) 358 ITR295 (SC), and therefore, ultra vires the Act andstruck down as such.

The proportionate completion method as well asthe contract completion method have beenrecognized as valid method of accounting underthe mercantile system of accounting by theSupreme Court in Bilhari Investment Pvt. Ltd.[2008] 299 ITR 1 and this Court in CIT v.Manish BuildwellPvt. Ltd [2011] 245 CTR 397and Paras Buildtech India Pvt. Ltd. 382 ITR 630.Therefore, to the extent that para 6 of ICDS-IVpermits only one of the methods, i.e.,proportionate completion method, it is contrary tothe above decisions, held to be ultra vires the Actand struck down as such.

ICDS-VIICDS-VI which states that marked to marketloss/gain in case of foreign currency derivativesheld for trading or speculation purposes are notto be allowed, is not in consonance with the ratiolaid down by the Supreme Court in SutlejCottonMills Limited v. CIT (1979) 116 ITR 1(SC), insofar as it relates to marked to market lossarising out of forward exchange contracts held


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for trading or speculation purposes. It is,therefore, held to be ultra vires the Act andstruck down as such.

ICDS-VIIICDS-VII provides that recognition ofgovernment grants cannot be postponed beyondthe date of accrual receipt. In other words,income has to be recognized on receipt basiswhich may not have accrued.It was explainedthat many a times, conditions are attached to thereceipt of government grant, non-fulfilment ofwhich may lead to return of such amount. Insuch instance, it cannot be said that there is anyaccrual of income although the money has beenreceived in advance. ICDS-VII however requiresthat amount has to be taxed in the year ofreceipt. The Court held that ICDS-VII whichprovides that recognition of government grantscannot be postponed beyond the date of accrualreceipt, is in conflict with the accrual system ofaccounting. To that extent it is held to be ultravires the Act and struck down as such.

ICDS-VIIIICDS-VIII pertains to valuation of securities. Forentities other than scheduled banks and publicfinancial institutions are not governed by theRBI. Part A of ICDS-VIII is applicable to suchentities and the accounting prescribed by the AShas to be followed which is different from theICDS. In effect, such entities will be required tomaintain separate records for income taxpurposes for every year since the closing value ofthe securities would be valued separately forincome tax purposes and for accountingpurposes. Under similar circumstances, ICDS IIwhich deals with valuation of inventories doesnot prescribe such a ‘bucket approach’. The Courtobserved that the separate approaches havebeen adopted at different places for purpose ofvaluation of securities, and held that this changeis not possible to be effectuated without acorresponding amendment in the Act. To thisextent Part A of ICDS VIII is held to be ultravires the Act and is struck down as such.To the extent specified as above, the Court struckdown the notification no.87 & 88 dt.29thSeptember, 2016 and Circular no.10 of 2017issued by CBDT and held as ultra vires the Act.Chamber of Tax Consultants vs. Union ofIndia (Del HC) [W.P. (C) No. 5595]

5. Interest u/s 244A - Assessee was entitled tointerest under Section 244A when refundarose due to partial waiver of interest u/s

234(A) to (C) by an order of the SettlementCommission.

The assessee filed an application before theSettlement Commission, requesting theCommission to waive the interest u/s 234A, 234Band 234C, on the ground that it caused hardshipto it. The Settlement Commission, by its orderdated 22.03.2000, referred to a circular of theCBDT which gave it the power to waive suchinterest and partially waived the said interest forthe assessment years in question. On anapplication made by the assessee, the AssessingOfficer, by his order dated 25.04.2000 refused togrant interest on the refund that was payable,and was not paid, within three months from thespecified date. This was done on two grounds,namely, that the provisions of Section 244(A) donot provide for payment of interest on refund dueon account of waiver of interest that is chargedunder Sections 234(A)-(C) of the Act and second,that the power assumed by the SettlementCommission for waiver of interest, by followingthe CBDT circular referred to, does not enablethe Settlement Commission to provide forpayment of interest under Section 244(A).CIT(A) and ITAT held that interest u/s 244Ashould be granted. However, in further appealby Revenue, the High Court held that, sincewaiver of interest was within the discretion of theSettlement Commission, no right flowed to theassessee to claim refund as a matter of rightunder law. The Supreme Court observed that asper Section 240 refund may become due to theassessee, either as a result of an order passed inappeal or other proceedings under this Act. It isclear that refund that arises as a result of anorder passed under Section 245(D)(4) is an orderpassed in “other proceeding under this Act”.Thus, it is clear that the assessee in the presentcase is covered by Section 240 of the Act. TheCourt further held that, under Section 244A, itisenough that the refund become due under theIncome-tax Act, inwhich case the assessee shall,subject to the provisions of thisSection, beentitled to receive simple interest.The expression“due” only means that a refund becomes due ifthere is an order under the Act which eitherreduces or waives tax or interest. The CIT(A) andthe ITAT were correct in their view and thatconsequently, the High Court was incorrect in itsview that since a discretionary power has beenexercised, no concomitant right was found forrefund of interest to the assessee.K. Lakshmanya& Co. vs. CIT (SC) (Civilappeal nos. 4335 to 4366 of 2012 and 5478 of2013)