AUGUST 2020 VOL. 52-A PART 5 PAGES 124 PRICE: R100 THE BOMBAY CHARTERED ACCOUNTANT JOURNAL CURIOSITY TO CREATIVITY 11 15 19 23 DATA-DRIVEN ‘MUTUALLY ASSURED EXCEL IN WHAT YOU INDIA: INTERNAL DESTRUCTION’ IN DO – SOME PERSONAL THE LAND AUDIT – I CORPORATE LENDING TIPS OF CREATIVITY BCAJ VOL. 52-A PART 5 | AUGUST 2020 AUGUST 5 | PART 52-A VOL. BCAJ Data-Driven Internal Audit Print version now available 58th year of continuous publication for sale across BCAS the counter REFERENCER 2020-21 India 2020 Treasure of Knowledge Accounting FEMA and Direct Indirect Company Allied and Auditing International Tax Taxes Taxes Law Laws Complimentary Referencer App Can Buy online also with all print versions Without postage Rs. 1,000/- https://bit.ly/3he1bZA Android Users With postage Rs. 1,200/- Desktop Users iOS Users https://bit.ly/2MYsvgF We provide website and E book version 7, Jolly Bhavan 2, Ground Floor, New Marine Lines, Mumbai - 400 020. Telephone: + 91 22 6137 7600 Website : www.bcasonline.org | E-mail : [email protected] | E-Journal : www.bcasonline.org E-learning : https://bcasonline.courseplay.co/ Continuous No. 726 Price Rs. 100 (For Members only) CONTENTS In this issue . THE BOMBAY CHARTERED ACCOUNTANT JOURNAL Namaskaar | 5 Editorial ‘India, that is Bharat’ | 8 QUOTE OF THE MONTH From the President | 9 Faith is the bird which feels the light when the dawn is still dark ▄ TAXATION Direct Taxes RABINDRANATH THAKUR ● GLIMPSES OF SUPREME COURT RULINGS | 43 ● CONTROVERSIES: Set Off of Unabsorbed Depreciation While Determining Book Profit u/s 40(B) | 50 ● IN THE HIGH COURTS: PART A: REPORTED DECISIONS 34 Assessment – Notice u/s 143(2) of ITA, 1961 – Limitation – Defective return – Rectification of defects – Relates back to date of original return – Time limit for issue of notice u/s 143(2) – Not from date of rectification of defects but from date of return – Return filed on 17th September, 2016 and return rectified on 12th September, 2017 – Notice u/s 143(2) issued on 10th August, 2018 – Barred by limitation; A.Y. 2016-17 | 35 35 Assessment – Notice u/s 143(2) of ITA, 1961 – Limitation – Notice calling for rectification of defects in return u/s 139(9) – Rectification within time allowed in notice – Not a case of revised return but of corrected return which relates back to date of original return – Limitation for notice u/s 143(2) runs from date of original return, not date of rectified return; A.Y. 2016-17 | 35 36 Deemed income – Section 41(1)(a) of ITA, 1961 – Remission or cessation of liability – Condition precedent – Assessee, a co-operative society, obtaining loan from National Dairy Development Board for which state government stood guarantee on payment of commission – Commission claimed by assessee as revenue expenditure in earlier assessment years – State government writing off liability and allowing it to be treated as capital grant to be VOL. 52-A I PART 5 I AUGUST 2020 used only for capital and rehabilitation purposes – Assessee continues to remain liable to repay those amounts – No remission or cessation of liability u/s 41(1)(a) – Cannot be JOURNAL COMMITTEE treated as deemed income u/s 41(1)(a); A.Y. 2004-05 | 36 37 Industrial undertaking – Special deduction u/s 80-IA(4) – Industrial undertaking engaged EDITORIAL BOARD in production of power – Meaning of ‘power’ in section 80-IA(4) – Power would include Chairman & Editor I Raman Jokhakar steam; A.Y. 2011-12 | 37 Conveners 38 Reassessment – Sections 124(3), 142(1), 143(3), 147, 148 of ITA, 161 – Notice u/s 148 – Jagdish Punjabi I Vinayak Pai Assessment proceedings pursuant to notice u/s 142(1) pending and time for completion of Publisher I Raman Jokhakar assessment not having lapsed – Issue of notice u/s 148 not permissible – That assessee had not objected to jurisdiction of A.O. not relevant; A.Y. 2011-12 | 37 Members of Editorial Board 39 Revision – Section 263 of ITA, 1961 – Diversion of income by overriding title – Interpretation Anil Sathe, Anup Shah, Ashok Dhere, of Will – Testator’s direction to executor of Will to sell property and pay balance to assessee Gautam Nayak, Kishor Karia, Sanjeev Pandit, after payment to trusts and expenses – Expenses and payments to trusts stood diverted Sunil Gabhawalla before they reached assessee – Order of A.O. after due inquiry accepting assessee’s offer Ex-Officio to tax amount of sale consideration – Revision erroneous; A.Y. 2012-13 | 38 Suhas Paranjpe I Abhay Mehta 40 Search and seizure – Block assessment – Sections 132, 158BC, 292CC of ITA, 1961 Members – Validity of search must be established before block assessment – Computation of Abbas Jaorawala | Bhadresh Doshi | income should be based on undisclosed income discovered during search; B.P. 1991-92 Chandrashekhar Vaze | Chetan Shah | Gaurav to 1998-99 | 39 Shah | Jagdish Shah | Kinjal M. Shah | Mihir Sheth | Nitin Shingala | Parth Desai | 41 Search and seizure – Assessment of third person – Section 153C of ITA, 1961 – Undisclosed Puloma Dalal | Rajaram Ajgaonkar | income – Assessment based solely on statement of party against whom search conducted Riddhi Lalan | Ritu Punjabi | Rutvik Sanghvi | – A.O. not making any further inquiry or investigation on information received from Deputy Shreyas Shah | Sonalee Godbole | Commissioner – No cogent material produced to fasten liability on assessee – Concurrent Tarunkumar Singhal | Zubin Billimoria. findings of fact by appellate authorities; A.Y. 2002-03 | 41 ● IN THE HIGH COURTS: PART B: UNREPORTED DECISIONS 8 Reopening of assessment – Beyond four years – Information from Investigation Wing – Original assessment completed u/s 143(3) – Primary facts disclosed – Reasons cannot be substitute | 41 Printed and published by Raman Jokhakar on behalf of Bombay ● TRIBUNAL NEWS: PART A: REPORTED DECISIONS Chartered Accountants’ Society, 7, Jolly Bhavan No. 2, New Marine Lines, Mumbai-400020. Phone : 61377600 E-mail : [email protected] 16 Sections 2(14), 2(47), 45, 56 – Giving up of a right to claim specific performance by conveyance in respect of an immovable property amounts to relinquishment of capital asset. Printed at Spenta Multimedia Pvt Ltd, Plot 15, 16 & 21/1, Village Chikloli, It is not necessary that in all such cases there should have been a lis pending between Morivali, MIDC, Ambernath (West), Dist. Thane. BOMBAY CHARTERED ACCOUNTANT JOURNAL AUGUST 2020 3 548 (2020) 52-A BCAJ the parties and in such lis the right to specific performance has to not: ‘“interest’” under Article 11 as there was no debt and income was be given up. The payment of consideration under the agreement of not ‘“from debt-claim’”; FTS under Article 12(5) as although provision sale, for transfer of a capital asset, is the cost of acquisition of capital of guarantee was a financial service, it was not consultancy service gains. Amount received in lieu of giving up the said right constitutes contemplated in Article 12 (5) | 32 capital gains and is exigible to tax | 27 15 Articles 5 and 12 of India-Singapore DTAA – Seconded employee 17 Sections 2(47), 45: When the terms of the sale deed and the intention working under control and supervision of Indian company did not of the parties at the time of entering into the sale deed have not been constitute service PE – Service PE under Article 5(6) and taxability adhered to whereby full sale consideration has not been discharged, as FTS under Article 12 cannot co-exist – Services provided did not there is no transfer of land, even though the sale deed has been fulfil ‘make available’ requirement under Article 12 of India-Singapore registered, and no income accrues and consequently no liability DTAA | 33 towards capital gains arises in the hands of the assessee | 28 ▄ 18 Section 115BBE, read with sections 69, 143 and 154 – Amount ACCOUNTANCY AND AUDIT surrendered, in the course of survey, as undisclosed investment in ● ARTICLE: Data-Driven Internal Audit – I | 11 stock and assessed as business income cannot be subsequently ● Ind AS/IGAAP – Reverse Factoring or Supplier Financing | 54 brought to tax u/s 115BBE by passing an order u/s 154 | 29 ● FROM PUBLISHED ACCOUNTS | 84 19 Section 2(22)(e) – No addition can be made u/s 2(22)(e) since as per annual return filed by the assessee, he had transferred his shareholding ▄ CORPORATE AND OTHER LAWS in borrower company before the advancement of loan by the lender company to the borrowing company | 29 ● ARTICLE: ‘Mutually Assured Destruction’ in Corporate Lending | 15 ● SECURITIES LAWS: Is Being a Promoter a One-way Street With no ● TRIBUNAL NEWS: PART B: UNREPORTED DECISIONS Exit or U-turn? | 77 11 Section 115JB – Waiver of loan would not assume the character of income and hence, not part of book profit and adjustment in accumulated ● ALLIED LAWS | 79 debit balance of profit & loss account through restructuring account ● LAWS AND BUSINESS: Religious Conversion & Succession | to be disregarded for the purpose of computation of brought-forward 81 losses | 30 ● CORPORATE LAW CORNER | 87 Indirect Taxes ● IS IT FAIR: Is It Fair To Treat RCM Supplies as Exempt? | 98 ● DECODING GST: Interplay Of Fixed Establishment with Permanent Establishment | 59 ▄ PRACTICE MANAGEMENT ● RECENT DEVELOPMENTS IN GST | 65 ● ARTICLE: Excel in What You Do – Some Personal Tips | 19 ● RECENT DECISIONS PART A: Service Tax | 68 ● RECENT DECISIONS PART B: Vat | 69 ▄ NEWS AND VIEWS ● RECENT DECISIONS PART C: Goods and Services Tax | 72 ● ARTICLE: India: The Land of Creativity | 23 International Taxation ● STATISTICALLY SPEAKING | 100 ● INTERNATIONAL TAXATION: Taxability of the Liaison Office of a ● ETHICS AND U | 102 Foreign Enterprise in India | 89 ● REGULATORY REFERENCER | 104 ● TRIBUNAL NEWS : PART C ● MISCELLANEA | 105 13 Sections 9, 195, 201(1A) of the Act – On facts, since non-resident ST supplier had ‘business connection’ in India, the resident payer was ● 71 ANNUAL GENERAL MEETING | 108 required to withhold tax u/s 195 | 31 ● SOCIETY NEWS | 117 14 Articles 11, 12 of India-Netherlands DTAA; section 9 of the Act – Guarantee charges paid by Indian company to non-resident AE were Your feedback may be sent to [email protected] Disclaimer The views expressed in this journal are the personal views of the contributors and the BCA Society does not necessarily concur with the same.