the chartered accountants study circle

Volume 30 Issue 6 Monthly September 2016 Rs.25/-

CASC Annual Members are requested to renew theirsubscription for 2016 - 2017

Page No.

• Recent Decisions - Service Tax 7

• Recent Decisions in Sales Tax / VAT 14

• Legal Update on Direct Taxes 18

• Doctrine of CY Pres and Exit Tax on ErringCharitable Trust Origin and Meaning of CY Pres 27

• Recent Decisions - Excise and Custom Laws 32

• Insolvency and Bankruptcy Code 2016 - An Insight 37

• Excel Tips 42

INDEX

Preceeded with High Tea Half an hour before the scheduled time of meeting.

MEETINGS

Date Time Speaker Topic

01.09.2016Thursday

06.30 p.m. CA. M P Vijaykumar CARO 2016-GovernmentTrust

Auditors

for

CorporateGovernance.

22.09.2016Thursday

06.30 p.m. CA. Shaik Abdul Samad Excise - Gold Jewellery -An In-depth Analysis

+91 9940680500 +91 9900093129+91 9940680500 +91 9900093129

in CCH iFirmin CCH iFirmin CCH iFirm

3CASC BULLETIN, SEPTEMBER 2016

ICAI Exam Results

The results to the Final Exams held inthe month of May 2016 are out and it isworth noting that the pass percentage isin double digits. An analysis of theresult throws out certain facts which arevery interesting. The number of studentsattempting both the groups are around50% of the students attempting any onegroup. This is the new trend setter inMay 2016 exams as this the lowestpercentage since 2010. In May 2010 thispercentage was 71.54% and slowly andsteadily has fallen to 51.92% in therecently held exams namely May 2016.In case we further get deep into the factsthe gap is much more in absolute terms.In absolute terms the gap between thenumbers of students attempting bothgroups versus one of the group hasincreased from 14521 to 37194. Thistrend is not good for the students andrequires remedial measures wherein themembers can pitch in guiding thestudents.

This time around the toppers in theFinal Exams are all from smaller citiesand Towns like Salem, Vijayawada andJamnagar whereas in earlier exams more

were from bigger cities or metropolitancities like Chennai, Delhi, Mumbai,Kolkata, etc. It is surely the celebrationtime for the achievers. However, it isalso quite natural for people who aredirectly or indirectly linked or connectedto the toppers may be coaching centresor the Principals or firms, etc., wouldlike to catch upon in spite of the factthat it is more of the student’s effort andmay not be the guidance of the so calledconnected people. In social media aswell as in print media there are lots ofmaterial and/or advertisement goingaround with claims of achievementwhereas only the student will be able tostate whether there was any effect of theso called connected persons.

The Members of CASC andManagement Committee congratulatesall the students who have successfullycleared the CA Course and request themto join CASC as a member to enrich andget enriched through the knowledgesharing endeavour carried out by it.

Assessing Officer in Different Role

The Government had brought outschemes for Direct taxes, through

GST - "One Nation One Tax" - It will be a reality now

One of the most important tax reforms ever brought in India after Independence isGST. The Constitution (122nd Amendment) (GST) Bill, 2014, has finally reached itsfinal journey in the first part, which had commenced on 19th December, 2014,passing through various stages of referral to the select committee and obtaining ofreport thereto, before it was finally adopted by the Rajya Sabha on 3rd August, 2016and thereafter got ratified by Lok Sabha, for amendments made by Rajya Sabha, on8th August, 2016 whereby the total time taken for the journey to complete as far asthe Indian Parliament is concerned, is 598 days.

Stage Date Introduction Dec 19, 2014

Com. Ref. May 14, 2015 Com. Rep. July 22, 2015 Lok Sabha May 06, 2015 and Aug 8, 2016

Rajya Sabha Aug 3, 2016 In the second part of the journey, now the ball is in the court of the StateAssemblies. According to the Clause (2) of Article 368 of the Constitution, more than50% of the State legislatures have to have ratify the same and already few of thestates have ratified the same.

State Date

Assam August 12, 2016 Bihar August 16, 2016

Jharkhand August 17, 2016

Himachal Pradesh August 22, 2016

Chhattisgarh August 22, 2016

Gujarat August 23, 2016

Madhya Pradesh August 24, 2016

Delhi August 24, 2016

Nagaland August 26, 2016

EDITORIAL


Finance Act, 2016, one for IncomeDisclosure and another for DisputeResolution. Sensing the chance of failureof the scheme for Income Disclosure, theGovernment has pressed into promotionmode. In this process the departmentalpeople were asked to conductpromotional meetings and all of asudden the Assessing Officer were madeto do certain activities which they havenever done. The CBDT came out withFAQs in 4 sets to clarify and convincethe stakeholders to opt for the scheme.All kinds of methods like threatening aswell as convincing, are used to makethe scheme successful. The AssessingOfficer are now made to behave like asalesman who has to achieve the targetof making the scheme successful andalso document the same by updatingthe higher authorities with pictures andvisuals. The Assessing Officer have beenprovided with all materials likestandees, banners, pamphlets, etc. Themajor controversy was created witheffective rate of tax and secondcontroversy related to reopening of theassessment. The effective rate of tax hasbeen put to rest after requirement ofclarification was forced upon CBDT byrepresentation from professionalassociations and others. However, the

other controversy continues with thestatement from CBDT confirming thatSection 197(C) of Income Disclosure Act,2016, will prevail over the reopeningscheme under Income Tax Act. TheCBDT seems to ignore the fact that theSection 197 starts with the words “Forthe removal of doubts ….” and thus arenot able to explain how these words canbe ignored. However, the CBDT istrying its level best to make the schemesuccessful and let’s hope it succeeds.

Appeal

Members are requested to attend theprograms conducted by CASC and arealso requested to send their suggestionsand / or value additions to the servicesprovided by CASC including thisBulletin. The same can be sent by hardcopy to the office of the CASC oremailed to [email protected] or anyof the Members on the ManagementCommittee.

For and on behalf of Editorial Board

Editor

With the above trend, the amendment bill will go through the second part of its

journey quickly. Thus the GST may become a reality from 1st April, 2017. It is

expected that 11 types of taxes are to be subsumed in single tax. Thus it is a

game changer for Indian Economy. The mute question to be answered now is

whether all the stakeholders are ready for implementation. This will require use

of technology to the core. Already humans have become machine dependent and

highly influenced by its impact. Technology will be boon only if used judiciously

else become a bane. This could be seen in many areas already like the notices

received from Income tax Department based on AIR information which has

created many unproductive opportunities. Implementation would be major

challenge going forward and we have to wait and watch what is store for us.

There is no doubt that there will more professional opportunities and one more

arena of practice is in store for the professionals. It is right time for us to

prepare and equip ourselves to the grab the opportunity and help the nation in

its growth.

CAG Report – CENVAT credit Scheme

The CAG has submitted its report to the Department of Revenue on the Cenvat

Credit Scheme vide its report No. 10 of 2016. In the performance audit on Cenvat

Credit Scheme, the CAG has concluded that the audit process has revealed

certain inadequacies and deficiencies in internal controls relating to the Cenvat

Credit Scheme and made recommendations which are as stated here in under:

1. The Ministry may insert a provision in Cenvat Credit Rules, to reverse the

proportionate Cenvat credit of input services at the time of clearance of

input/capital goods.

2. Government may consider making suitable amendment to the Notification to

restrict credit on input services.


3. The government may consider inserting provision for reversal of Cenvat

credit where the inventories were declared as obsolete but were not written

off from the books of accounts and where capital goods after being used are

written off but not removed from the factory.

4. The Government may consider inserting provision for charging interest in

case of non/delayed reversal of Cenvat credit in respect of non/delayed

receipt of goods sent to job worker.

5. The government may consider inserting provision for furnishing detailed

information regarding Cenvat credit availed by the assessee containing

invoices/documents nos., date of invoices, name of goods with chapter

heading, amount of credit taken etc. so that preliminary

Check may be exercised at Range level.”

Appeal

Members are requested to attend the programs conducted by CASC and are also

requested to send their suggestions and / or value additions to the services

provided by CASC including this Bulletin. The same can be sent by hard copy to

the office of the CASC or emailed to [email protected] or any of the

Members on the Management Committee.

For and on behalf of Editorial Board

Editor


DISCLAIMER :

The contents of this Monthly Bulletin are solely for informational purpose. Itneither constitutes professional advice nor a formal recommendation. Whiledue care has been taken in assimilating the write-ups of all the authors. Neitherthe respective authors nor the Chartered Accountants Study Circle acceptsany liabilities for any loss or damage of any kind. No part of this MonthlyBulletin should be distributed or copied (except for personal, non-commercialuse) without express written permission of Chartered Accountants Study Circle.

COPYRIGHT NOTICE :

All information and material printed in this Bulletin (including but notflowcharts or graphs), are subject to copyrights of Chartered Accountants StudyCircle and its contributors. Any reproduction, retransmission, republication,or other use of all or part of this document is expressly prohibited, unlessprior permission has been granted by Chartered Accountants Study Circle.All other rights reserved.

ANNOUNCEMENTS :

1. The copies of the material used by the speakers for the regular meetings heldtwice in a month is available on the website and is freely downloadable.

2. Earlier issues of the bulletin is also available on the website in the “News” column.

The soft copy of this bulletin will be hosted on the website shortly.

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You may please send your Feedback Contributions / Queries on Direct Taxes, IndirectTaxes, Company Law, FEMA, Accounting and Auditing Standards, Allied Laws orany other subject of professional interest at [email protected]

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RECENT DECISIONS - SERVICE TAX

1. BANKING AND OTHERFINANCIAL SERVICES –HANDLING OF APPLICATIONFORMS FOR RBI BONDS DOESNOT TANTAMOUNT TO APROVISION OF BROKERAGESERVICE, NOTWITHSTANDINGITS NOMENCLATURE BY RBI:

In CST, Mumbai-I v. J.M.MorganStanley RetaiL Services (P) Ltd 2016 43STR 198 (Tri.-Mum.), the assessee hadfiled applications on behalf ofintending purchasers of bonds,designated as 6.5% Savings Bond,issued by the Reserve Bank of India andare received commission for the bondsthat were issued against theseapplications which was designated as‘brokerage’ by RBI. The adjudicatingauthority confirmed the demand under‘banking & other financial services’,holding that the assessee receivedbrokerage from RBI and overruled theobjections of the assessee that theyrendered distributing applicationforms to the prospective investors ofthe Bonds and submitting thecompleted forms to the receivingoffices alone and not anything more.

CA. VIJAY ANAND

On appeal, the Tribunal observed asunder:-

1. The adjudicating authority had reliedon the designation of the paymentreceived by the assessee and wasinfluenced by its status as a bodycorporate to confirm liability to tax asprovider of Banking and otherfinancial services.

2. A demand that has been confirmed bymere reference to a description inunrelated documents was contrary toall canons of taxation. A service istaxable only to the extent that it findscoverage in one of the sub-clauses ofsection 65(105) as articulated by the theHigh Court of Gauhati in MagusConstruction (P) Ltd v Union of India[2008 (11) STR 225 (Gau] and reiteratedin a number of judgements thereafter.


3. The tax would be leviable, in thecontext of the present dispute, if theassessee was a broker dealing in thesavings bonds and received brokerageas the fee thereon.

4. Brokerage is earned by a broker in thecourse of sale and purchase. The factthat the assessee is registered as abroker with the Securities andExchange Board of India does notautomatically tantamount to all itsactivities to be that of brokering.

5. Brokering of securities requires theexistence of securities as well as a buyerand seller of securities. Purchase andsale of securities is predicated uponstock being available for trading. It isclear from the scheme of the savingsbond issue that these are not tradeable.The bonds are subscribed to byindividuals & RBI manages the issueon behalf of the Central Government.

6. RBI is not the seller of the savings bondas the bonds do not belong to it. Thesubscriber to the bond issue is a regularcustomer of the assessee as a broker ofsecurities. Such a relationship orequation does not, for that reasonalone, attract tax burden on othertransactional activities of the two.

7. There is no allegation of receipt of anyconsideration from the subscriber of thebond issue. It is from the RBI thatdesignated intermediaries receivepayment. However, as RBI is not theseller of the said bonds, it cannot be acustomer of a broker and the paymentit makes cannot be considered to bebrokerage.

8. RBI undertakes the management of theissue as an agency function for theCentral Government in exercise of astatutory responsibility. There is nobrokering of securities in the disputedtransaction.

9. The fee paid to receiving offices andbrokers for their role in the bond issueis not brokerage but commission. Thefoundation for confirmation of thedemand in the impugned order is tototter.

10. In Morgan Stanley Mutual Fund vKartick Das [(1994) 4 SCC 225], it washeld that prior to allotment, shares donot exist and the handling ofapplication forms for an intendingsubscriber cannot constitute brokeringin securities because the securities donot exist at that stage. The foundationfor the demand in the impugned orderno longer totters but collapses.


11. Taxing of a transaction under ‘banking& other financial services’ merelybecause the remuneration is designatedas brokerage and the recipient of thatbrokerage is a body corporate is notsustainable without a clear finding thatthe bond is a tradeable security and thatthe recompense flows to the assessee.

12. Hence, the assessee’s appeal wasallowed with consequential relief.

2. REFUND UNDER NOTIFICATIONNO. 41/ 2007-ST DATED 06.10.2007 –ORIGINAL CLAIM FILED WITHINTHE TIME PERIOD – RETUNEDCITING DEFICIENCIES –SUBSEQUENT FILING REJECTEDAS TIME BARRED – NOTSUSTAINABLE:

In Repro India Ltd. V. CCE, Belapur -[2016] 43 STR 203 (Tri. – Mum.), theappellant is in the business ofproducing, single colour/multi-colourprinted books that are exported forwhich they have availed a number ofcredits which, being used as inputs forexports, that were exempt from beingtaxed. The appellant claimedexemption on the same through arefund route prescribed in notificationno. 41/2007-ST dated 06.10.2007. Theappellants filed refund claim for the

quarter ending September 2008 on31.03. 2009 and for the quarter endingDecember 2008 on 30.06.2009respectively, which was the very lastpermissible day for the respectiveperiods.

Thereafter, on grounds of insufficiencyof supporting evidence, both theseclaims were returned to the applicanton more than one occasion with re-submissions thereon, after a lapse oftime. The quantum in the claims wasalso revised during this period ofcorrespondence. Ultimately, separateshow cause notices for rejection of therefund claim of the two quarters wereissued on 06.05.2011, which was alsosustained by the Commissioner(Appeals). The appellants preferred afurther appeal before the Tribunal,which observed as under:-

1. For the quarters relevant to the twoclaims, the stipulated deadline was sixmonths from the end of the quarterwhich was complied with by theappellants. Subsequent return of theapplications for rectifying deficienciesand the re-filings is a clear indicationthat the competent authorities wereunaware that the claims had been filedon time. If the completeness of theapplication was a sine qua non for


admissibility of the application, theclaim could well have been rejected byimmediate issue of a show cause noticeand adjudicated thereupon instead oftaking the course that it did.

2. With the elapse of time in finalizing theclaim for refunds, the validity of whichwas not questioned, the originalauthority has been actuated by theprobability of claim for interest arisingfrom the delay and resorted to therejection of the claims, not on merit buton bar of limitation, at the end of theprotracted process reflects lack ofresponsibility and lack ofaccountability.

3. The appellant is an exporter whoseprices, in accordance with well-entrenched policy, are not to be loadedwith the tax element should have beensufficient cause to demonstratejudiciousness in disposing off theclaims.

4. In Premier Tyres Ltd. v. Collector ofCustoms 1984 (16) ELT 419 (Tri.-Del.),it was held that if on a properclassification refund of larger amountthan admissible under the heading oritem originally claimed becomespayable to the appellant, such largeramounts should be refunded to the

appellants and should not be limitedto the amount admissible under theitem or heading originally claimed.

5. Consequent to the above, the limitationshould be computed with effect fromdate of original, albeit incomplete,filing and the appellant is entitled torefund as per claim.

Hence, the appeal was allowed.

3. CONSTRUCTION OF OWN LANDFOR SALE FOR CONSTRUCTINGRESIDENTIAL COMPLEX –TAXABLE UNDERCONSTRUCTION OFRESIDENTIAL COMPLEX ANDNOT WORKS CONTRACT W.E.F.01.06.2010 NOTWITHSTANDINGTHE PAYMENT OF VAT UNDERWORKS CONTRACT.

In Vinayaka Homes v. CCE & ST,Cochin [2016] 43 STR 251 (Tri.- Bang.),the appellants were involved indesigning, planning, developing andclearing site on their own forconstruction activities for buyers /clients and were not doing theexecution of any works contract. Theadjudicating authority confirmed thedemand under ‘works contract’services on the ground that the


appellants were paying VAT under‘works contract’, against which theappellants filed an appeal before theTribunal which observed as under:-

1. It is incomprehensible as to how theservices rendered by the appellantscould fall under the ambit of ‘workscontract’, when they were constructingresidential complex on their own landwhen there was no element of serviceof ‘works contract’ in the activityperformed by the appellants.

2. The activities of the appellants fallunder the ambit of ‘construction ofresidential complex’ which wereexempt for the period from January2009 to March 2009 under paragraph 3of the CBEC Circular No. 108/2/2009-ST dated 29.01.2009.

3. This Circular excludes any person whoprovides construction of complexservices from the applicability ofservice tax under ‘construction ofcomplex’.

4. However, such services would betaxable only w.e.f. 01.07.2010,consequent to the introduction ofExplanation to section 65(105)(zzzh).

Hence, the appeal was allowed and theimpugned order set aside.

4. UNJUST ENRICHMENT –ASSESSEE PRODUCING LEDGERCOPIES TO INDICATE THAT THESERVICE TAX PORTION FORWHICH REFUND HAS BEENCLAIMED WAS DEBITED FROMHIS ACCOUNT - BURDEN OFPROOF HAS BEEN DISCHARGED –ASSESSEE ENTITLED TO REFUND.

In Men Power Security Services v.CCE&ST, Meerut 2016 (43) STR 316(Tri.-Del.), the appellant is aproprietary concern which providedsecurity agency service to M/s AshokHall Girls Residential School. Alongwith remuneration for rendition of suchservices, the appellant also collected theservice component from the recipientof the service. The recipient school hada running account with the appellantwhere under the school was remittingthe consideration for the securityagency services received, along withthe service tax component incurred bythe appellant for remittance of tax onthe taxable services provided.

CBEC, vide Circular dated 19.9.2013,clarified that in terms of the masterNotification No.25/2012-ST dated 20th


June, 2012 enumerating exemptionsprovided to educational institution inrespect of certain services for the periodsubsequent to introduction of thenegative list, auxiliary servicesprovided to educational institutionsare exempt from the levy of service tax.Thereafter, the appellant submitted aclaim for refund of the service taxremitted by it on 20.3.2015, being theservice tax initially collected from theschool but was reversed by the servicerecipient in the ledger maintained byit.

The refund sanctioning authorityrejected claim for refund on the groundof unjust enrichment alone, which wasalso sustained by the Commissioner(appeals), notwithstanding the fact thatthe appellant had produced copies ofledger accounts of the school duringthe course of personal hearing. Onfurther appeal, the Tribunal observedas under:-

1. Section 12B of the Central Excise Act,1944 casts the burden of proof on theassessee and enacts a rebuttablepresumption as to unjust enrichment,relying on the decision in UOI v. A KSpinet Ltd. 2009 (234) ELT 41 (Raj.).

2. This presumption could, however, berebutted by showing cogent andprobative evidence as to there being noenrichment and for claiming refund.

3. In the instant case, the appellant hadproduced the ledgers maintained bythe recipient of services, in the ledger,which clearly records debit of theearlier credited amount to the appellanttowards service tax.

4. Thus the component of service taxearlier borne by the service recipientand passed on by the appellant, stoodreversed by the school and stooddebited from the consideration due tothe appellant from the school.

5. Consequently, the appellants haveclearly established that there is nounjust enrichment and that they areentitled to refund.

Hence, the appeal was allowed and theimpugned order set aside.

(The author is a Chennai based CharteredAccountant. He can be reached [email protected])


CASC CHENNAI, MEMBERSHIP FEE

Corporate MembershipCorporate Annual Membership 3,000.00Corporate Life Membership (20 Years) 20,000.00

Individual MembershipAnnual Membership 750.00Life Membership 7,500.00

CASC - HALL RENTHALL RENT FOR 2 HOURS 1,000.00HALL RENT FOR 2-4 HOURS 1,500.00HALL RENT FOR FULL DAY 2,500.00LCD RENT FOR 2 HOURS 600.00LCD RENT FOR 2-4 HOURS 800.00LCD RENT FOR FULL DAY 1,200.00

The above amounts are EXCLUSIVE of Service Tax. Applicable Taxes will beadded.

CASC BULLETIN - ADVERTISEMENT TARIFF - PER MONTH

Full Page Back Cover 2,500.00Full Page Inside Cover 2,000.00Half Page Back Cover 1,500.00Half Page Inside Cover 1,250.00Full Page Inside 1,200.00Half Page Inside 750.00Strip Advertisement Inside 500.00

Minimum 6 months advertisement is required.If advertisement is 12 months or above, special discount of 15% is available

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Rs.


RECENT DECISIONS IN SALES TAX / VAT

Alternative remedy: When no personalhearing was granted, the court quashedthe revision orders and directed theAssistant Commissioner to grant personalhearing and pass orders afresh. Aftermany opportunities and personal hearing,the Assistant Commissioner rejected theobjections of the dealer giving specific andelaborate findings and holding that thedealer had merely crushed the stoneboulders into smaller size as blue metaljelly and therefore, no new commodityhad come into existence falling within thedefinition of “manufacture” under section2(27) of the TNVAT Act. Though thedealer claimed to have substantiated itsclaim by producing documentaryevidence, no such documents weresubmitted. Therefore, it would onlybe appropriate for the petitioner toapproach the appellate authority wherethe factual aspects can be gone into.Factual disputes cannot be decided bythis court sitting-under article 226.The issue whether the activity ofextracting, altering and processingbrought into existence a differentcommodity altogether was to be decidedby the authorities. Each activity had to beanalysed. Under these circumstances,the proper recourse for the dealer was toapproach the appellate authority.

CA. V.V. SAMPATHKUMAR

[2016] 91 VST 278 (Mad) SRC PROJECTS(P) LIMITED V. ASSISTANTCOMMISSIONER (CT), SALEM TOWNASSESSMENT CIRCLE, SALEM ANDANOTHER

Notice: The assessment proceedingsissued may be not considered to bevitiated because notice had been issued inthe trade name of the dealer and not in thename of the sole proprietors.[2016] 91VST 262 (Born) COMMISSIONER OFSALES TAX V.KLIP NAIL CARE

Input tax credit: The function of a provisois normally to carve out an exception tothe main provision. However, it couldalso in cases, which leave the court in nodoubt, have the effect of being anindependent enactment and held that thedealer was not entitled to the benefit ofinput-tax credit in respect of packingmaterials used for its finished goods,


which were stock transferred. [2016] 91VST 298 (Uttarakhand) HINDUSTANUNILEVER LIMITED v. STATE OFUTTARAKHAND AND OTHERS

Larger Bench: Where the principle of lawhas been correctly laid down by theDivision Bench, it is not necessary for thesubsequent Division Bench hearing thematter of granting relief to refer the matterto a Larger Bench.[2016] 91 VST 339 (All)TARA CHAND NAND LAL ANDOTHERS V.STATE OF U. P ANDOTHERS

Revision: When there was sufficientmaterial on the basis of which an opinionhad been formed that turnover hadescaped assessment and since turnover ofthe recorded compact discs had not beendisclosed separately in the returns or atthe time of assessment, the assessingauthority had no occasion to examine,whether such recorded compact discswould be eligible for exemption under theeligibility certificate. This aspect of thematter had neither been examined nor wasany opinion formed. Therefore, it was nota case of change of opinion. Therefore, theapproval granted by the AdditionalCommissioner for issuance of revisionnotice were justified and no interferencewas called for. [2016] 91 VST 349 (All)MOSER BAER INDIA LIMITED v.STATE OF U. P. AND OTHERS [2016] 91VST 349 (All)

Natural Justice : When the orders passedby the Officer, assessing the escapedturnover for the relevant assessment yearswhich is contended as a non-speakingorders, without considering thedocuments filed by the dealers andwithout affording an opportunity of beingheard the Court held that the issue inquestion was an escaped turnover to beassessed under section 27 of the TamilNadu Value Added Tax Act, 2006 andhence in terms of which, the petitionerwas entitled to get an opportunity of beingheard and passing, Stating so, the orderspassed without affording an opportunityof personal hearing was set-aside. [2016]91 VST 382 (Mad) INDUS TEQSITEPRIVATE LIMITED v. COMMERCIALTAX OFFICER, KODAMBAKKAMASSESSMENT CIRCLE; CHENNAI

Form F: A circular by itself cannotdisplace a legal provision. Interpretationof a legal provision is the duty of thecourt. The court cannot abdicate itsfunction and duty relying on somecirculars issued by the executive or itslanguage. The amendment brought intothe 1956 Act by insertion of section 6Awas with a specific object and purpose.That is to emphasise that the Central salestax is not leviable in respect of thetransactions of transfer of goods fromhead office to branch or vice versa, asthese transactions do not amount to sale,


but the Legislature was mindful of the factthat a blanket understanding of this typeencourages evasion of taxes. Therefore, byan amendment, it stepped in and placedburden on the dealers to prove transfer ofgoods in such cases is not by way of sale.The circular only states that in the light ofthe judgment of the Allahabad High Courtin Ambica Steels Limited v. State of U. P.[2008], dealers situated in other States mayrequire a declaration form fromMaharashtra dealers, if the goods are sentfrom these States to Maharashtra for job-work, etc. Similarly, if a Maharashtrabased dealer sends any goods to anotherState for job-work, then, the job-worker inthat State may require the Maharashtradealer to issue a declaration in form Fwhile returning the goods to Maharashtra.The Department in Maharashtra,therefore, decided to issue a declaration inform F as per normal procedure to dealersin Maharashtra. [2016] 91 VST 385 (Bom)JOHNSON MATTHEY CHEMICALSINDIA PVT. LTD.V. STATE OFMAHARASHTRA AND OTHERS

Deferral Scheme: When the StateIndustries Promotion Corporation byproceedings December 8, 2003 grantedapproval to the transfer of the deferralfacility, the finding of the AssistantCommissioner that the dealer was notentitled to such facility was baseless. Evenafter cancellation of the registration

certificates, a direction was given toinclude the turnovers of the unit, whilepassing final assessment order. TheAssistant Commissioner without issuingany prior notice and looking into theG.Os. the registration certificates andwithout considering the records and theagreement and the returns filed by thepetitioners, passed the order, without anybasis. However, since there wereallegations with regard to the violation ofthe conditions by the petitioner in respectof the products manufactured other thanthat specified, the order in question wasliable to be set aside and the respondentswere to redo the entire assessment on thebasis of the documents produced, aftergiving sufficient opportunity to thepetitioner, on the merits and in accordancewith law. [2016] 91 VST 443 (Mad) ITCLIMITED V.ASSISTANTCOMMISSIONER (CT), ZONE VIII,CHENNAI AND OTHERS

Best of Judgement Assessment: When thedealer could not reconcile daily averagesale of his business and he took up thebest judgment assessment procedure. Theorder did not show how the DC put thedaily average business of the dealer at Rs.15,000 when the return was filed showingthe sale business as Rs. 2,000. Nodocument or statement of any person orthe report of the Sales Tax Officer hadbeen placed on record by the DC to


determine the daily average business saleof the dealer as Rs. 15,000. Moreover,when the dealer is engaged in selling lowcost tiffin, and some rasgola by no stretchof imagination would the daily businessreach to such an amount. The bestjudgment procedure adopted by the DCwas held to be illegal, perverse and basedon caprices and whims of the DC andquashed. [2016] 91 VST 493 (Orissa)JAGANNATH SWEETS V.DEPUIYCOMMISSIONER OF SALES TAX,CUTTACK-I, EAST CIRCLE

Revision: The expression “reason tobelieve” does not mean a purely subjectivesatisfaction on the part of the assessingauthority. The satisfaction ought to be asatisfaction reached by the assessingauthority on the basis of facts or materialsavailable before it.If a consciousapplication of mind is made to therelevant facts and material available orexisting at the relevant point of time whilemaking the assessment and again adifferent or divergent view is reached, itis tantamount to a “change of opinion”. Ifan assessing authority forms an opinionduring the original assessmentproceedings on the basis of material factsand subsequently finds it to be erroneous,it is not a valid reason under the law forre-assessment. Thus, reason to believecannot be said to be the subjective satis-faction of the assessing authority but

means an objective view on the disclosedinformation in the particular case andmust be based on firm and concrete factsthat some turnover has escapedassessment. [2016] 91 VST 1 (SC) STATEOF UTTAR PRADESH AND OTHERSV.ARYAVERTH CRAWL UDYOUGAND OTHERS

Input tax credit: No input-tax credit willbe available to the dealer when petroleumproducts and natural gas are used as fuelor when they are exported out of the State.It had been categorically recorded by theTribunal that there was no mention in theassessment order of any petroleumproducts purchased inside the State andused in manufacture whether as fuel orotherwise. The petroleum products hadbeen purchased inside the State atconcessional rate of tax. There was nofinding to the effect that the furnace oilwas used as fuel by the dealer. In theabsence of any clear finding recorded bythe revisional authority that the furnace oilwas used as fuel by the dealer, thedisallowance of input-tax credit onpurchase of furnace oil was notsustainable. [2016] 91 VST 38 (P&H)STATE OF HARYANA v KARNALAGRICULTURAL INDUSTRIESLIMITED AND ANOTHER

(The author is a Chennai based CharteredAccountant. He can be reached [email protected])


LEGAL UPDATE ON DIRECT TAXES

CA. G. PARI & CA. P. PRADEEP KUMAR

I. Whether re-opening of assessment u/s 147 of ITA is valid for the‘disallowance of replacement of tools’as capital expenditure aftercompleting the assessment u/s 143(3)on the ground of ‘change of opinion’and whether such replacements arecapital expenditure?

The issue came up for consideration inthe case of UCAL MACHINE TOOLS(P.) LTD. v. ITO, Company Ward-III(1), Chennai, [2016] 71 taxmann.com230 (Chennai - Trib.), JULY 15, 2016.

FACTS:

1. The assessee is engaged in themanufacture of automobilecomponents and has incurredreplacement of tools to the tune of Rs.67,39,084/- for the assessment year2008-09. Originally the assessmentwas completed u/s 143(3) andsubsequently reopened within 4 yearsu/s 147 on the ground that suchreplacements are capital in nature.

2. The re-opening was challenged, by theassesse, before CIT(A) that havingcollected all the details while makingassessment u/s 143(3), this will resultin change of opinion; CIT(A) negatedthe assessee’s claim and held thereassessment is valid in law.

3. Aggrieved, the assessee filed an appealbefore ITAT on the following grounds:

a. Reassessment u/s 147 results inchange of opinion by placing relianceon CIT v. KELVINATOR OF INDIALTD. [2010] 320 ITR 561 (SC) and

b. Replacement of tolls are revenueexpenditure by relying on thedecisions of CIT v. MANOHAR LALHIRA LAL LTD. [2013] 39Taxmann.com 110 (Allahabad) andCIT v. TVS MOTORS LTD., [2014] 45Taxmann.com 94(Madras)

4. Revenue countered that thereplacements are capital in nature as ithas enduring benefit by placingreliance on CIT v. SARAVANASPINNING MILLS PV. LTD. 293 ITR201.

ITAT DECISION:

5. Sec. 147, after amendment with effectfrom 1.04.1989 widens the scope of AO


to re-open the assessment even ifinformation is obtained from properinvestigation from the materials andrecords or from any enquiry orresearch into the facts or law and notnecessary that such information isderived from external source andfresh matters submitted after re-opening. The decision of Kelvinatoris on the law prior to its amendmentand hence not applicable.

6. Referring the principles in AccountingStandard (AS) 2 and AS 10, machineryspares which are not specific to anyfixed asset and used generally shall betreated inventory and charged toprofit and loss account as and whenthey are consumed; On the otherhand, if the machinery spares arespecific/insurance, i.e. which are usedonly to a particular item of fixed assetand their use is irregular, it shall becapitalized and depreciated over theremaining useful life of the specificfixed asset. Held, the replacementspares are revenue in nature. Thearguments of revenue that accountingtreatment shall not be considered fortax purposes have been negated.

AUTHORS’ NOTE:

‘Reason to believe’ and ‘escapement ofincome – essential ingredients:

7. The Assessing Officer has to havereason to believe that income hasescaped assessment, but this does notimply that the Assessing Officer canreopen an assessment on mere changeof opinion. The concept of “change ofopinion” must be treated as an in-builttest to check the abuse of power. TheAssessing Officer has power to reopenan assessment, provided there is“tangible material” to come to theconclusion that there was escapementof income from assessment. Reasonmust have a link with the formation ofthe belief - CIT v. Kelvinator of IndiaLtd. [2010] 320 ITR 561 (SC).

‘Escaped assessment’ – meaning:

8. The term ‘escaped assessment’includes both ‘non-assessment’ as wellas ‘underassessment’. Income is said tohave ‘escaped assessment’ within themeaning of this section when it has notbeen charged in the hands of anassessee in the relevant year ofassessment - CIT v. SUNENGINEERING WORKS (P.) LTD.[1992] 198 ITR 297 (SC).

Replacement of moulds and dies – currentrepairs u/s 31 of ITA:

9. Moulds and dies attached to themachinery like press designsspecification are not independent of


the plant and machinery, but are partsof the machinery. Once the dies areworn out, the machine cannot turn outthe product to the businessspecifications and this has to beobtained only on a replacement of thedies and moulds and the plea that theclaim would fall for consideration u/s 31 is deserved to be accepted - CITv. TVS MOTORS LTD., [2014] 45Taxmann.com 94 (Madras).

Spinning Mill cannot be regarded as oneplant:

10. To examine, whether ring frames inspinning mill constitute a part and itsreplacement whether can be claimedas current repairs u/s 31 of ITA, it isheld that ‘spinning mill’ in textileindustry could not be characterized asa single process industry;consequently replacement could notbe automatically allowed in every caseas revenue expenditure. It found thatitems like ring frames could not,therefore, be treated as a part of alarger machinery, since they arecapable of operation by themselves -CIT v. SARAVANA SPINNING MILLSPV. LTD. 293 ITR 201.

Replacement in Revised AS-10, PlantProperty and Equipment:

11. In paragraph 6 of Revised AS-10,applicable from 01.04.2016, ‘Plant,

Property and Equipment’ is definedas, ‘Property, plant and equipment aretangible items that a) are held for use inthe production or supply of goods orservices, for rental to others, or foradministrative purposes; and b) areexpected to be used during more than aperiod of twelve months’.

Accounting treatment of replacement –with effect from 01.04.2016:

12. Paragraph 13 of AS-10 indicates thatreplacement of parts, which has usefullife of more than 12 months ought tobe recognized separately anddepreciation shall be provided in linewith its useful life. Though this is inline with replacement of parts underSchedule II of Companies Act, 2013,significant difference arose ondetermining a part in Plant, Propertyand Equipment. Replacement of partin Schedule II necessitates, ‘Where costof a part of the asset is significant tototal cost of the asset and useful life ofthat part is different from the usefullife of the remaining asset, useful lifeof that significant part shall bedetermined separately’. Theingredient spelt out in Schedule II i.e.‘part having significant value’ ismissing in Revised AS-10, where itmandates in the recognition criteriathat ‘it (part) has useful life ofexceeding twelve months’. Moreover,


the term ‘significant value’ has also notdefined in the COA 2013, perhaps hasgiven discretion to the industry todefine the same in their accountingpolicy. Parts having lesser useful lifeof 12 months will be regarded asinventory and charged to profit andloss account as and when the same areconsumed. However, the treatment forinsurance or specific spares remainsame under old and revised AS-10.Consequent to the change inaccounting treatment, claiming theseexpenditure as revenue u/s 31 as‘current repairs’ will certainly pose anissue for assesses.

II. Whether income, being capital gains,from the transfer of right, title andinterest in intangible asset beingTrade Mark by an AustralianCompany in India is taxable in asituation where the AustralianCompany, at the time of transfer, doesnot have any presence in India?

The issue came up for consideration inthe case of CUB PTY LTD. v. UOI,[2016] 71 taxmann.com 315 (Delhi HC),JULY 25, 2016

FACTS:

1. CUB P LTD (CPL) has its ultimatesubsidiary (through manyintermediaries) in India viz.,FosterIndia Limited (FIL) and executed,

initially, a Brand License Agreement(BLA) for the use of its four (4) trademarks in India and the consideration,being royalty, paid by FIL to CPL weresubject to withholding tax.

2. On 04.08.2006, an agreement, knownas ‘India sale purchase agreement’(ISPA), was executed in Melbournebetween DISMIN (one of theintermediary of CPL and referredhereinafter as `Petitioner’ hereinafter),SABMiller (A & A2) and SABMillerAfrica & Asia B.V, which, inter-alia,includes transfer or assignment of 16Trademarks, including the said fourlicensed already to FIL. Accordinglyon assignment, SAB Miller (A& A2)will be the owner of 16 Trademarks.

3. On 12.09.2006, a deed of termination ofthe BLA was executed in Australiasince there are under assignment ofSAB Miller. Further on the same day(i.e. on 12.09.2006), a deed ofassignment was executed in Australia,whereby the petitioner assigned thesaid 16 trademarks to Skol BreweriesLimited [nominee of SABMiller (A &A2)].

4. On 22.09.2006, the petitioner sought anadvance ruling on the assignment of 16Trade Marks, where the AAR ruledthat income from the transfer of right,title and interest in Trade Mark by thepetitioner (an Australian Company) in


India is taxable as these intellectualproperty rights are capital assetssituated in India and therefore incomeis accrued in India.

5. On a writ filed against the decision ofAAR:

HC DECISION:

6. The issue of ‘situs’ exists in case ofintangible assets. The legislature doesnot provide any deeming provisionsalso in respect of intangible assets.Explanation 5 to section 9(1)(i) addedby the FA 2012, with retrospectiveeffect from 01.04.1962, providedeeming income only in case of sharesor interest in a company, where itderives, directly or indirectly, its valuesubstantially from assets located inIndia. Therefore, applying theprinciple of ‘mobilia sequunturpersonam’ it is concluded that ‘The situsof the owner of an intangible asset wouldbe the closest approximation of the situs ofan intangible asset’.

7. Held, since the owner of trademarksand intellectual property rights wasnot located in India at the time of thetransaction, the situs of suchtrademarks and intellectual propertyrights are not in India and therefore,it’s assigning pursuant to the ISPA,would not be in India.

BUTTRESSES/GROUNDS for theDECISION:

Registration does not have impact on‘situs’:

8. Registration of a trademark does notentail creation of trademark and alsodoes not have any impact on itslocation - CIT v. FINLAY MILLS LTD.[1951] 20 ITR 475 (SC). Therefore,registration of trademarks in Indiadoes not mean that ‘situs’ oftrademarks had been shifted fromAustralia to India.

Rule of ‘mobilia sequuntur personam’,which means `Movables follow theperson. A person’s powers of dealing withhis movable estate and its devolution onhis death are governed by the law of hisdomicile’:

9. In India, the legislature has notspecifically provided for the situs oftrademarks and therefore, in theabsence of contrary statutoryprovisions, the common law rule of‘mobilia sequuntur personam’ would beapplicable - RELIABLE STORESCORP. v. CITY OF DETROIT: 260mich. 2 (Pg 2 and 3); HUMBLE OIL &REFINING CO. v. CALVERT: 414S.W.2d 172 (Tex. 1967) (Pg 8).


10. Income from intangibles are differentfrom capital gains on the transfer ofintangibles. The case referred by AAR,GEOFFREY INC. V. SOUTHCAROLINA TAX COMMISSION 437S.E. 2d 13 (para 4) deals only withincome from intangibles and notcapital gains on its transfer.

III.‘Set-up of Business’ Vs‘Commencement of Business’ -Whether consultancy charges paid forthe purpose diligence of theinvestments to be made by theassesse-company into the sharecapital of other companies prior tocommencement of business of NBFCcan be claimed as deduction u/s 37(1)of ITA as these were incurred for thepurpose of business?

The issue came up for consideration inthe case of PINEBRIDGEINVESTMENTS CAPITAL INDIA (P.)LTD. v. ITO [2016] 71 taxmann.com374 (Mumbai - Trib.), JULY 27, 2016

FACTS:

1. The assesse-company, having theobjects of NBFC, has incurredconsultancy charges for the purpose ofassessing investments to be made inother companies prior to itscommencement of business andclaimed the expenditure as deduction

u/s 37(1) of ITA as these wereincurred for the purpose of business.AO disallowed the claim as these werenot incurred for the purpose ofbusiness as there was no nexusbetween the expenses incurred andinterest income earned.

2. CIT (A) upheld the order of AO on theground that though the businessactivities of assessee-company are inthe nature of NBFC, during the year ithas not made any investments butsimply parked its surplus funds in thebank and received interest.

ITAT DECISION:

3. Consultancy charges incurred for thepurpose of due diligence of aproposed investment is clearly a partof the business activities of the assesseeand further this has been incurred inthe ordinary course of its business. Thereasons that no investment was madeduring the year and parking of fundsin the bank cannot hold that theseexpenses were not incurred for thepurpose of business, as the well settledlaw endorses that results of thebusiness activities or fruits of efforts toa business organisation may yield inthe concerned year or in subsequentyears or never. Therefore, it is heldthat the disallowance was contrary tolaw and facts.



‘Previous year’ commences from the dateof setting up of business:

4. Proviso to Section 3 of ITA providesthat in case of newly set up businessor profession in a financial year, theprevious year begins from the date ofset up of business or profession or thedate on which the newly source ofincome comes into existence.Accordingly the ‘date of set up’ is thestage from where the income istaxable, similarly expenses can beclaimed.

Setting up of business is distinct fromcommencement of business:

5. As per Oxford English Dictionary“setting up” means, “to place on foot”or “to establish”, and incontradistinction to “commence”.Therefore when business is establishedand is ready to commence then it canbe said that business is ‘set up’.`Actual date of commencement’ ofbusiness may be different and thismay not be required for the purposeof determining the `date of set up’ -WESTERN INDIA VEGETABLEPRODUCTS LTD v CIT(A) (26 ITR151)(BOM); CIT BOMBAY VRALLIWOLF LTD (121 ITR 262)

(BOM); CIT(A) v. SAURASHTRACEMENT AND CHEMICALINDUSTRIES LIMITED (91 ITR 170)(Guj).

IV. Whether for the purpose ofdisallowance u/s 43B of ITA, theemployer’s contribution andemployees’ contribution ought to betreated in the same manner,considering the repeatedamendments carried out in section43B and intention of Parliament,though the impression of employeescontribution in section 2(24)(x) readwith section 36(1)(va) indicates that ithas to be treated differently?

The issue came up for consideration in thecase of BIHAR STATEWAREHOUSING CORPORATIONLTD. v. CIT 1, Patna [2016] 71taxmann.com 247 (Patna HC), JULY 19, 2016

FACTS:

1. While completing assessment u/s143(3), AO disallowed the claim ofemployer’s contribution andemployees’ contribution as paymentswere after the due date prescribedunder the statue. On appeal CIT (A)allowed the claim of employerscontribution and upheld the Order ofAO in respect of employees’


contribution referring the provision ofsection 2 (24)(x) read with section36(1)(va).

2. ITAT dismissed both the appeals ofReveune and Assessee. On furtherappeal;

HC DECISION:

3. Relying on the decisions of BombayHC in the case of GHATGE PATIL andP&H HC in the case of HEMLAEMBROIDERY it is held that ‘on abroader reading of the amendmentsmade in to Section 43B repeatedly andthe intention of Parliament, thereappears to be sufficient justification fortaking the view that the employees’and the employer’s contribution oughtto be treated in the same manner’.


Analysis of ALOM’s case in the decisionof Patna HC:

· First proviso to Section 43B restrictsthe benefit of deduction only to tax,duty, cess or fee paid after the closingof the accounting year but before thedate of filing of the return of incomeunder Section 139 (1) but not to labourwelfare funds. Second proviso tosection 43B was then inserted to allowdeduction of contribution to, inter alia,

any provident fund if made before thedue date as per the EmployeesProvident Fund Act during theprevious year. This again resulted inimplementation problems as a result ofwhich the second proviso was deletedand the first proviso was amendedbringing about uniformity by equatingtax, duty and fee with contribution tolabour welfare funds. It was madeclear that the benefit of deductionwould be applicable, provided thepayments are made before the duedate for filing of the return – CIT v.ALOM EXTRUSIONS LTD.: [2009] 319ITR 306 (SC)

Section 43B will be applicable for bothemployer’s contribution and employee’scontribution:

4. In Alom’s case the apex court does notdeal with the distinction of employer’scontribution and employees’contribution. However, this has beensquarely dealt in the cases of BombayHigh Court in CIT v. GHATGE PATILTRANSPORTS LTD. [2014] 368 ITR749 (Bom) and Punjab and HaryanaHigh Court in the case of CIT v.HEMLA EMBROIDERY MILLS (P.)LTD. [2014] 366 ITR 167 (P. & H.),where it has been held that bothemployer’s contribution andemployees contribution are covered inthe amendments made u/s section 43B


AUTHOR’S NOTE

Contrary view taken in the case of CIT,COCHIN v. MERCHEM LTD [2015] 61taxmann.com 119 (Kerala), SEPTEMBER 8,2015:

Kerala HC decision:

5. When Sec.43B as it stood prior to theamendment and Section 36(1)(va)Explanation 1 thereto r/w Sec.2(24)(x)are considered together, it is clear thatthey operate in different fields. So faras the employee’s contributionreceived is concerned, it should havebeen paid on or before the due dateprescribed under the relevant statutes.

6. The contention that on a reading ofSection 43B(b), any sum “payable bythe assessee as an employer” by wayof contribution to any provident fundmeant payment of both employeescontribution and employer’scontribution, by the employer andtherefore the assessee was entitled topay both contributions together on orbefore the filing of the return underSec.139(1) of the Act is not acceptable.If such a contention is accepted, thatwould make Sec.36(1)(va) and theExplanation thereto otiose.

7. There was no indication in Sec.43B asit stood prior to the amendment andthereafter also to deface Section

36(1)(va) and the Explanation theretofrom the Income Tax Act. Thus, itmeans that both provisions areoperative and the contributions haveto be paid in accordance with themandate contained under Section36(1)(va) and Explanation thereto andunder Sec. 43B, respectively.

Amendments by the Finance Act, 2013 insection 43B:

8. By the Finance Act, 2003, the secondproviso to section 43B of the Act hasbeen deleted and the first proviso tosection 43B has also been amended.Deletion of the second proviso tosection 43B would be with respect tosection 43B and with respect to anysum mentioned in section 43B(a) to (f)and in the present case, the employer’scontribution as mentioned in section43B(b). Therefore, the deletion of thesecond proviso to section 43B and theamendment in the first proviso tosection 43B by the Finance Act, 2008 isrequired to be confined to Section 43Balone and the deletion of the secondproviso to section 43B cannot be madeapplicable with respect to section36(1)(va) of the Act.

(The authors are Chennai based CharteredAccountants and they can be reachedat [email protected] &[email protected] respectively)


The Norman French legal term iscontraction of ‘Cy Pres Comme Possible’and means ‘as near as possible’ or ‘asnear as may be’. This doctrine originatedin ecclesiastical law of all religions. Thedoctrine Cy Pres is that where the trustfails for whatever reason, the funds of thetrust should be repurposed / reappliedor reforms made in management of thetrust (as has been directed by the Hon’bleSupreme Court in the case of BCCI) tocarry out charitable object moreeffectively. However, this doctrine willnot apply where the terms creating thetrust contain alternative power to redirectthe funds to another charitable purpose.Nevertheless, where the alternate objectin the terms of a trust is unlawful orimpractical, Cy Pres would apply. InRoman law, Justinian I wrote of similarprinciple – Corpus Juris Civilis, whichmeans a process that redirected themoney held in trust that violated the lawto a purpose within law. This doctrineensures perpetuity of charity. Thequestion of prerogative Cy Pres (Crowntaking over assets of non-existent, defunctand illegal trusts) was settled in GaynorJones case in a series of rulings between1686 and 1690 and held that the Crowncould not appropriate funds for its ownuse but could redirect only to other validcharity.

DOCTRINE OF CY PRES AND EXIT TAX ON ERRINGCHARITABLE TRUST ORIGIN AND MEANING OF CY PRES

Cy pres in US and UK:

Uniform Trust Code (UTC) of USArecognized this doctrine and codified thatthis doctrine applies only to a charitabletrust where the original purpose of thetrust has failed, and the terms of the trustdo not specify alternate charitable object.This principle was made clear in the caseof Francis Jackson (US) who bequeathedmoneys in trust to be used to create apublic sentiment to put an end to slavery.After his death, slavery was abolished andsome of Jackson’s family attempted todissolve the trust to revert trust moneys tothem. The court ordered that to best fulfillJackson’s wishes the trust should be usedCy Pres, to promote education amongfreedman.

In the 90s, non-profit organizations madea plea that unless relieved of non-profitstatus they would be unable to compete,grow and survive. Many states enactedconversion statutes codifying common lawof charity to ensure conversions – merger,acquisition, sale of assets, dissolution orreconstruction – can be easily enforced anddirected conversion proceeds to charityunder the supervision of courts.

In UK, the Charities Act incorporates thisdoctrine and lists out the circumstances offailure of a trust, when this doctrine will


apply. Charity Commission for Englandand Wales, subject to the jurisdiction ofCourts, is authorized to monitorsituations. The question arose in Liverpooland District Hospital for diseases of heartV. Attorney General. The Court held thateven if the articles of a charitable companydid not contain a provision of transferringthe surplus to another charity onliquidation, such a provision was deemedto be there in the A/A. Members in acharitable company were not entitled todividend or the surplus on liquidation.The Court applied the doctrine of Cy presand transferred the surplus to anothercharity.

Cy Pres in India:

The doctrine of Cy-pres as developed bythe Equity Courts in England standsadopted by our Indian Courts since long.This doctrine was applied even prior toinsertion of S. 92 (3) of CPC in line withS. 13 of Charities Act, 1960, of UK, whichembodies this doctrine. “When theparticular purpose for which a charitabletrust is created fails or by reason of certaincircumstances the trust cannot be carriedinto effect either in whole or in part, orwhere there is a surplus left afterexhausting the purposes specified by thesettler the court would not, when there isa general charitable intention expressed bythe settler, allow the trust to fail but wouldexecute it cy pres, that is to say, in someway as nearly as possible to that which the

author of the trust intended. In such cases,it cannot be disputed that the court canframe a scheme and give suitabledirections regarding the objects uponwhich the trust money can be spent.”[Ratilal v. State of Bombay AIR 1954 SC388]

It is trite proposition in law that once aTrust is created in accordance with law, itremains always a Trust. Property of apublic charitable trust cannot be allowedto dissipate in any manner. If a publiccharitable trust fails for whatever reason,the charity must be put on track either byrepurposing the object or reapplying thefunds as permitted in law or used Cy Pres.This doctrine is embodied in CivilProcedure Code, 1908 as may be seenhereunder.

Under section 92 of CPC the Court ofDistrict Judge has the power to administerpublic charities. Sub-section (3) of section92, amended in 1976, embodies thedoctrine of Cy Pres. Sub-section (3) reallyextends the occasions on which theproperty may be applied Cy pres. Thisprovides the circumstances in which the“original purposes” of a charitable orreligious trust can be altered and theproperty can be applied cy pres. It evenallows consolidation of a number ofcharities under sub-clause (c). Thejurisdiction created by sub-section (3) andin particular sub-clause (e) affords themost important relaxation of the old cy


pres rule and will probably be of the mostpractical use in enabling funds to beutilized for the maximum benefit of thepublic. The relevant part of the sectionand sub-clause (e) reads:

Sub-section (3): “The Court may alter theoriginal purpose of an express orconstructive trust created for publicpurposes of a charitable or religiousnature and allow the property / incomeof such trust or portion thereof to beapplied Cy Pres in the followingcircumstances.”

Clause (e): “where the original purposes,in whole or in part, have, since they werelaid down, (i) been adequately providedfor by other means, or (ii) ceased, as beinguseless or harmful to the community, or(iii) ceased to be in law charitable, or (iv)ceased in any other way to provide asuitable and effective method of using theproperty available by virtue of the trust,regard being had to the spirit of the trust.”

‘Exit Tax’ and its rationale:

Chapter XII-EB of the Finance Act, 2016,in sections 115TD to 115TF, hasintroduced a concept of ‘Exit Tax’ on thenet-worth (subject to exceptions and rulesof valuation as may be prescribed) of atrust, upon cancellation of registration u/s 12AA or on transfer of its assets to anentity other than a charitable trustregistered u/s 12A/12AA of the Incometax Act, 1961. In the Explanatory

Memorandum to the Finance Bill, 2016, itis explained that ‘there is no provision inthe Income Tax Act which ensure that thecorpus and asset base of a trustaccumulated over a period of time, witha promise of it being used for charitablepurpose, continues to be utilized for acharitable purpose. It is always possiblefor charitable trusts to transfer assets to anon-charitable purpose. In order to ensurethat the intended purpose of exemptionavailed by the trust or institution isachieved, a specific provision in the Act isrequired for imposing a levy in the natureof Exit Tax, which is attracted when thecharitable organization is converted into anon-charitable organization.’ The newsections 115TD to 115TF are intended toachieve the objective outlined in thememorandum.

When ‘Exit Tax’ is attracted?

Notwithstanding any provision under theIncome tax Act, 1961 - in particularsubsections (3) and (4) of S.12AA (‘that theactivities of such trust or institution arenot genuine or are not being carried outin accordance with the objects of the trustor institution) - a combined reading ofsub-sections (1) and (3) of section 115TD,effective from 01.06.2016, mandates that atrust or institution is not eligible forregistration under the followingcircumstances and are liable to pay ‘exittax’ @ 30% on its net-worth:


1. When a trust or institution registeredu/s 12A/12AA has converted into anyform which is not eligible forregistration under the said section/s;

[For the purpose of the above, a trust orinstitution is deemed to have convertedinto any form not eligible for registrationu/s 12A/12AA, if registration granted iscancelled on any ground and the ordercancelling registration is confirmed byITAT; or has modified its objects which donot conform to the condition ofregistration and it has not applied forfresh registration; or has filed applicationfor registration but rejected by competentauthority.]

2. When a trust or institution registeredu/s 12A/12AA has merged with anyentity other than an entity which is atrust or institution having objectssimilar to it and registered u/s 12A/12AA;

3. When a trust or institution registeredu/s 12A/12AA has failed to transferupon dissolution all its assets toanother trust or institution registeredu/s 12A/12AA or to any institution/f u n d / t r u s t / u n i v e r s i t y / o t h e reducational institution/hospital/medical institution covered underclause (23C) of section 10.

4. The person to whom any asset formingpart of accumulated income of the

trust or institution has beentransferred, he shall be deemed to bean assessee in default in respect of tax,interest and penalty arising on suchtransfer. [Section 115TE (2)]

Bonam Partem:

As a rule, words and expressions are to beinterpreted Bonam partem, meaningthereby that they are prima facie to betaken in their lawful and rightful sense[Maxwell on the Interpretation ofStatutes]. “Where any law refers to andgives certain efficacy to a word, it refersto it in a lawful sense and presumes thatsuch reference is to the word signifying alegally expected character andaccompanying legally recognized actionpreceding and following it. Words in theIncome-tax Act have been generallyconstrued in Bonam partem by the Courts.Transfers must be legal and not sham,bogus and benami, to attract tax.” [(1975)99 ITR 583 (Del) and (1980) 122 ITR 461 (P& H)] The only exception to the rule ofBonam Partem is assessment of incomefrom illegal business or other illegalactivity. If a trust, without obtaining thepermission of jurisdictional court, changesits object or merges with another trust orupon dissolution fails to transfer its assetsto another charity, the violations beingillegal as the general law stands today,rule Bonam partem applies and such


violations are to be dealt with byjurisdictional court and none else.

Conclusion:

In the year 1973, law relating to charityunder sections 11 to 13 of the Income taxAct, 1961, underwent a sea change inrespect of charitable trusts / institutionsas to registration, application of incomeand assets, prohibition on certainapplication of income, pattern ofinvestment of accumulated income,reinvestment of sale proceeds of assets fora charitable purpose, accumulation ofincome subject to conditions etc. It was notthe intention of Parliament to mop uprevenue by these measures but to regulateand discipline the financial affairs ofcharitable trusts, without expresslyembodying the doctrine of cy pres in theIncome tax Act. Even in USA, ‘Statutes onConversion’ directed the proceeds ofconversion must be directed to charityonly.

In the year 1976, Parliament made itsintentions clear that the doctrine of cy presis applicable to charitable trusts in India,by inserting sub-section (3) of section 92in Civil Procedure Code, 1908, on the linesof Charities Act, 1960 of UK, withoutwaiting for an amendment to law relatingto public trusts of a religious or charitablenature. The Madras High Court in the caseof TKVTSS Medical, Educational andCharitable Trust v State of TN AIR 2002

Mad 42 (DB) held, “The courts have actedon the principle that where a gift is madeto charity and that charity failed for anyreason, the object of the donor or testatorshould not be defeated, but the propertyendowed should be applied to anotherobject approximating as nearly as possibleto the objects which the testator had inview.”

A charity remains charity forever as it isirrevocable. Cy Pres is applicable to allcommon law countries on principles ofequity. In practice, trusts approach thecourt only for framing a scheme ofmanagement in case of dispute.Otherwise, trusts seek permission ofjurisdiction CIT or Registrar of companies,as the case may be, to alter the terms oftrust or Memorandum and Articles,respectively. Nevertheless, the question iswhether the exit tax on conversion canremain a sequitur when charity cannot beobliterated under common law. Care mustcertainly be exercised not to import byanalogy what is not germane to thegeneral law of trusts, but we need have noinhibitions in administering the law byinvoking the universal rules of equity andgood conscience upheld by the Courts.

“We are all imperfect teachers, but wemay be forgiven if we have advanced thematter a little, and have done our best.” –Will Durant”

Compiled by CA Louis Dominic


RECENT DECISIONS - EXCISE AND CUSTOM LAWS

CA. B.DEBASIS NAYAK & CA. SRIHARI V.K.

CENTRAL EXCISE

Penalty collected from dealers forviolating terms of agreement is not inconnection with sale and not includiblein Assessable Value

In the case of CCE vs Skoda Auto Ltd2016-TIOL-2050-CESTAT-MUM thetaxpayer was a manufacturer of motorvehicles. Taxpayer appointed dealers forvarious geographical jurisdictions forselling the motor vehicles. In terms ofagreement, the dealers were required tosell goods in their own geographicaljurisdictions and in case the sale wasmade in other dealers’ geographicaljurisdiction, a penalty was charged bythe taxpayer. Such penalty wasrecovered through debit notes.

Revenue sought to include the amountof penalty recovered from the dealers inthe assessable value for the purpose ofcalculation of excise duty. The originalauthority confirmed the demand alongwith interest and equivalent penalty.The Commissioner (A) reduced themandatory penalty while upholding thedemand. Both, taxpayer & Revenue arebefore the Tribunal.

The Tribunal observed that everyamount collected by the manufacturerfrom the buyer is not includible in theassessable value. Tribunal furtherobserved that the Revenue did notproduce evidence to show that thepenalty amount received by the taxpayeris in connection with the sale of goodsby them to dealers. Hence it was heldthat the value cannot be included in theassessable value for the purpose ofcalculation of excise duty.

Cenvat Credit fraudulently taken andused for payment of Excise duty by thesupplier - Cenvat credit of duty passedon by supplier cannot be denied at thebuyers end as the buyer was not awareof the fraud

In the case of Laxmi Organic IndustriesLtd vs CCE 2016-TIOL-2086-CESTAT-MUM the taxpayer was denied Cenvat


credit on special denatured spirit on theground that the supplier fraudulentlyused Cenvat credit by overstating openingbalance of Cenvat credit and used thesame for payment of excise duty ondenatured spirit cleared by them. Thedemand was confirmed by the RevenueAuthorities and the taxpayer filed anappeal before the Tribunal againstdemand order.

The Tribunal observed that receipt ofgoods and use thereof has not beenchallenged. There is no evidenceproduced to assert that the taxpayer knewthat the supplier of goods had wronglyavailed Cenvat Credit. Relying on thedecision of RS Industries the Tribunal heldthat the Cenvat credit cannot be deniedand the appeal filed by taxpayer wasallowed.

Once taxpayer opts to pay proportionatecredit under Rule 6(3)(ii) of CenvatCredit Rules, 2004, they cannot later seekchange in the option of paying 5%/10%under Rule 6 (3)(i) of said rules andconsequently seek a refund ofdifferential Credit.

In the case of Jubilant Life Science Ltdvs CCE 2016-TIOL-2026-CESTAT-MUMthe taxpayer was engaged in themanufacture of Organic Chemicals.Couple of products manufactured by

taxpayer was exempted goods for whichproportionate Cenvat Credit was reversedunder Rule 6(3)(ii) of the Cenvat CreditRule, 2004 (“Cenvat Rules”).Subsequently, the taxpayer submitted arefund claim in terms of Section 11B ofCentral Excise Act, 1944 (“Excise Act”) onthe grounds that they should have paidan amount @5%/10% of the value of theexempted goods instead of Rule 6(3) (ii)reversal. By adopting proportionatemethod under Rule 6(3) (ii) of CenvatRules they reversed excess credit, whichis being claimed as refund.

The Revenue authorities rejected therefund claim. On Appeal, the rejectionwas upheld by Commissioner (Appeal).Aggrieved by the order of Commissioner(Appeals), taxpayer filed an appeal beforethe Tribunal.

The Tribunal observed that Explanation(1) to Rule 6(3) of Cenvat rules is very clearthat once a particular option is availed ina financial year, the same cannot bewithdrawn. When the taxpayer hasavailed option for payment ofproportionate credit as provided underCenvat Rule, they are not allowed tochange the option and claim to pay 5%/10% of value of the exempted goods. TheTribunal held that the refund ofdifferential duty is not admissible.


Packing of pre-determined quantity ofalready marketable goods in a plastic baghas not made products furthermarketable – Excise duty not leviable.

In the case of Electropneumatics &Hydraulics India Pvt Ltd vs CCE 2016-TIOL-1882-CESTAT-MUM, the taxpayerwas a manufacturer of PneumaticCylinders & valves. In an Audit by theRevenue, it was observed that during theperiod June 1999 to March 2004, taxpayerhad cleared ‘Seal kits’ for PneumaticCylinders & valves without Central Exciseduty. The taxpayer contended that thegoods were bought out items and notmanufactured by them hence Excise dutywas not leviable.

However, the Revenue Authoritiesconfirmed the demand. On Appeal beforethe Commissioner (Appeal) the Revenuedemand was upheld on the ground thatthe taxpayer was involved in packing andrepacking of the said bought out goodswhich was a manufacturing activities.

Taxpayer is before the Tribunal againstthe order passed by the Commissioner(Appeal). The Tribunal observed that thequestion of considering the packing asmanufacture does not arise as regards thesubject goods ie ‘O’ Ring & ‘U’ Capseals as they were already marketable

when the supplier/manufacturer hadmanufactured the same and cleared totaxpayer. Subsequent packing of pre-determined quantity in a plastic bag hasnot made the products furthermarketable. In the absence of any note tothe chapter that packing of pre-determined quantity would amount tomanufacture, the Tribunal held that thesaid activity cannot be considered as amanufacturing activity. The Order ofCommissioner (Appeal) was set aside.

There is no time limit prescribed forissue of SCN u/s 11B and thus it is opento Revenue to point out shortcomings inrefund claim even after one year

In the case of Behr India Ltd vs CCE 2016-TIOL-2156-CESTAT-MUM, the taxpayerfiled a refund claim on December 1, 2005and a Show Cause Notice (“SCN”) wasissued on January 23, 2006 seeking to denythe refund claim on the ground of unjustenrichment. Another SCN in respect of thesame refund claim was issued on January29, 2007 seeking to deny the same on theground of limitation.

Both the notices were heard together andthe refund claim was rejected on theground of limitation. As the lowerappellate authority upheld this order, thetaxpayer is before the Tribunal.


The Tribunal observed that the taxpayercould have opted for provisionalassessment if the assessable value wasundeterminable at the time of clearancesfrom the factory. However, the taxpayerchose to pay duty voluntarily instead ofprovisional assessment. Hence the onlyrecourse is to file a refund claim underSection 11B of Central Excise Act, 1944.The show-cause notice issued underSection 11B are in the nature ofcommunication of the objection. No timelimit is prescribed for issue of show-causenotice under Section 11B. On the abovegrounds, the Tribunal dismissed theappeal filed by the taxpayer and upheldthat decision of the lower authority inrejecting the refund claim.

Cenvat credit on repair and maintenanceof guesthouse is allowable.

In the case of JSW Steel (Salav) Ltd vsCCE 2016-TIOL-2078-CESTAT-MUMthe taxpayers were issued show-causenotices demanding reversal of creditavailed on repair and maintenance ofguesthouse. Lower authorities upheld thedemand and imposed penalties, interest.Aggrieved by the order of lowerauthorities, the taxpayer is before theTribunal.

The Tribunal observed that theguesthouse is located right next to thefactory premises. It is not the case of theRevenue that these services are used forpersonal consumption of the employees.The fact that the guesthouse is locatedright next to the factory implies that it isused in relation to the manufacturingactivity. In view of the above, the Tribunalallowed the credit of repair andmaintenance services of the guesthouse.

CUSTOMS:

Interest on delayed refund of excesscustoms duty paid: Interest payable fromthe date of refund application even if theapplication was defective and the samewas not communicated to the applicant.

In the case of Sun Tex vs CC 2016-TIOL-2069-CESTAT-MUM the taxpayerimported certain goods. The duty wasassessed by the original authority basedat a higher value. On appeal, theCommission (Appeal) set aside the orderof assessment. Taxpayer filed a refundapplication for the refund of excess dutypaid. This consequential refund wassanctioned but the claim for interest ondelayed payment of refund was notallowed on the ground that thoughthe refund application was filed on


July 27, 2009, the original documentsrequired for processing were furnishedonly on September 22, 2010 and the refundhad been sanctioned within three monthsof the latter date. Taxpayer is in appealbefore the Tribunal.

The Tribunal observed that as perCustoms regulations, if the refundapplication was not complete, the properofficer should have returned theapplication to the applicant or deficiencyshould have been brought to the notice ofthe taxpayer. However, no deficiency wasbrought to the notice of the Taxpayer.Based on the above, the Tribunal held thatthe claim of Revenue that the applicationwas incomplete does not find any supportand ordered payment of interest to thetaxpayer from the date of filing refundapplication.

Delay in filing appeal beforeCommissioner (Appeals): AppellateAuthority has no power to condonedelay beyond extendable period as perstatute

In the case of Falcon Tyres Ltd vsCESTAT & CC 2016-TIOL-1712-HC-MAD-CUS the taxpayer filed an appealbefore the Commissioner (A) againstassessment of Bill of Entry. TheCommissioner (A) dismissed the appeal

on the ground of delay being beyondcondonable period. Taxpayer contendedbefore the Tribunal that they did not fileappeal against the bill of entry but againstrejection of re-assessment which was filedsubsequently and was rejected by thedepartment which is not justified.

The Tribunal upheld the order ofCommissioner (A) after observing thatthat the appeal is filed against Bill of Entryand not against the re-assessment letter/order.

Aggrieved by the same, the taxpayerappealed before the High Court. The HighCourt observed that Appeals filed beforethe Commissioner of Customs (Appeals)shows that the appeal was filed onlyagainst the assessment order/bill of entryand not against the decision or order forre-assessment. The High Court relied onseveral Apex Court rulings which holdsthat the Commissioner of Customs(Appeals), the Appellate authority, has nopowers to condone the delay, beyond theextendable period. Based on the aboveground, the High Court dismissed theappeal filed by the taxpayer.

(The authors are Chennai basedChartered Accountants. They can bereached at [email protected] [email protected])


INSOLVENCY AND BANKRUPTCY CODE 2016 - AN INSIGHT

The existence of several laws to deal with Insolvency for thecompanies such as the Sick Industrial Companies Act, The Recoveryof Debt Due to Banks & Financial Institutions Act, the Securitizationand Reconstruction of Financial Assets and Enforcement of SecurityInterest Act, 2002, Companies Act etc and for the Individuals, soleproprietorships and partnership firms such as The PresidencyTowns Insolvency Act, 1909 and The Provincial Insolvency act, 1920(Section 107 of The Presidency Towns Insolvency Act, 1909 andSection 8 of The Provincial Insolvency act, 1920 specifically prohibitsany insolvency petition against corporation or association or

CS. S. DHANAPAL

company registered under any enactment for the time being in force) are failed to recoverthe loans and debts due from debtors.

Therefore, it is felt by the Government that there is a need to have a consolidated law orcode to govern and regulate those matters of recovery of money from debtors who haveborrowed and failed to repay after due date more particularly those are not secured.

If we look at the provisions in the Constitution of India, the item "Bankruptcy &Insolvency" is stated as Entry 9 in List III - Concurrent List, (Article 246-Seventh Scheduleto the Constitution) that is to say both Central and State Governments can make lawsrelating to this subject.

It appears as follows:

LEGISLATIVE AUTHORITY UNDER CONSTITUTION OF INDIA FOR INSOLVENCY

Entry 43 List I Regulation and winding up of trading corporations, including banking, insurance and financial corporations, but not including co-operative societies.

Entry 44 List I Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities.

Entry 32 List II Incorporation, regulation and winding up of corporations, other than those specified in List I

Entry 9 List III Bankruptcy & Insolvency


The Insolvency and Bankruptcy Code, 2015 was introduced in Lok Sabha on 21 December,2015 and the same was referred to Joint Committee on The Insolvency and BankruptcyCode, 2015 for examination. The report of the Joint committee was presented in Lok Sabhaand laid down in Rajya sabha on April 28, 2016. The code has been passed by Lok Sabhaon May 05, 2016 and Rajya Sabha on May 11, 2016.

It is stated in the preamble of the Code that the law is enacted to consolidate and amendthe laws relating to reorganisation and insolvency resolution of corporate persons,partnership firms and individuals in a time bound manner for maximisation of value ofassets of such persons, to promote entrepreneurship, availability of credit and balance theinterests of all the stakeholders including alteration in the order of priority of payment ofGovernment dues and to establish an Insolvency and Bankruptcy Fund, and for mattersconnected therewith or incidental thereto. Therefore upon the code becoming into force,various remedies as stated under the following laws will be covered under one roof:

a) SICA, 1985

b) Recovery of Debts Due to Banks and Financial Institutions Act, 1993

c) SARFAESI Act, 2002; and

d) Companies Act, 2013

The Code seeks to amend the following 11 enactments while repealing Presidency TownsInsolvency Act, 1909 and Provincial Insolvency Act, 1920.

• The Indian Partnership Act 1932

• The Central Excise Act 1944

• The Income Tax Act 1961

• The Customs Act. 1962

• Recovery of Debts Due to Banks and Financial Institutions Act, 1993


• The Finance Act 1994

• The Securitisation & Reconstruction of Financial Assets and Enforcement of SecurityInterest Act 2002

• Sick Industrial Companies (Special Provisions) Repeal Act, 2003

• The payment and Settlement Systems Act 2007

• The Limited Liability Partnership Act 2008

• Companies Act, 2013 / 1956

It is stated in the Press information released by Ministry of Finance dated 11th May 2016that the objective of this new law is to promote entrepreneurship, availability of credit,and balance the interests of all stakeholders by consolidating and amending the lawsrelating to reorganization and insolvency resolution of corporate persons, partnershipfirms and individuals in a time bound manner and for maximization of value of assets ofsuch persons and matters connected therewith or incidental thereto and the salient featuresof the law are as follows:

i. Clear, coherent and speedy process for early identification of financial distress andresolution of companies and limited liability entities if the underlying business is foundto be viable.

ii. Two distinct processes for resolution of individuals, namely- “Fresh Start” and“Insolvency Resolution”.

iii. Debt Recovery Tribunal and National Company Law Tribunal to act as AdjudicatingAuthority and deal with the cases related to insolvency, liquidation and bankruptcyprocess in respect of individuals and unlimited partnership firms and in respect ofcompanies and limited liabilities entities respectively.

iv. Establishment of an Insolvency and Bankruptcy Board of India to exercise regulatoryoversight over insolvency professionals, insolvency professional agencies andinformation utilities.


v. Insolvency professionals would handle the commercial aspects of insolvency resolutionprocess. Insolvency professional agencies will develop professional standards, code ofethics and be first level regulator for insolvency professionals members leading todevelopment of a competitive industry for such professionals.

vi. Information utilities would collect, collate, authenticate and disseminate financialinformation to be used in insolvency, liquidation and bankruptcy proceedings.

vii. Enabling provisions to deal with cross border insolvency.

The simplified outline of the corporate insolvency resolution process under theinsolvency and bankruptcy code, 2016 is as below:

1. When Loan Default occurs:

Either the borrower / the lender approach the adjudicating authority which is theNATIONAL COMPANY LAW TRIBUNAL (NCLT - in case of Company’s & LLP’s) orthe Debt Recovery Tribunal (DRT – in case of individuals or partnership firms) forinitiating the resolution process.

2. Appointment of Interim Insolvency Professional (IP)

An Interim Insolvency Professional will be appointed by the Creditors to take controlof the debtor’s assets and company’s operations, collect financial information of thedebtor from the information utilities, and ascertain the claim and to constitute a creditor’scommittee.

3. Decision of the Creditor’s Committee

Every item that requires the approval of the creditors in their committee meeting needsto be passed with a voting share percentage of 75%.

4. Restructuring Process:

Upon passing of the resolution by the creditors committee, the committee shall decideon the restructuring process that could either be a revised repayment plan for thecompany or liquidation of the assets of the company. If no such decision is taken by thecreditors in their meeting then, the debtor’s assets will be liquidated to repay the debt.


5. Approval of the Tribunal / Liquidation

The resolution plan shall be sent to the NCLT for its approval and implementationthereafter. If the NCLT does not approve the resolution plan, then the liquidation processshall begin.

Notification of few provisions of the code recently by ministry of corporate affairs;

Ministry of Corporate Affairs has recently notified on 5th of August, 2016 the provisions ofsections 188 to 194 (both inclusive). Sections 188 to 194 (both inclusive) of the Insolvencyand Bankruptcy Code, 2016 and these sections fall under Chapter I of Part IV (Regulationof Insolvency Professionals, Agencies and Information Utilities) of the Code and relate tothe establishment, incorporation and constitution of The Insolvency and Bankruptcy Boardof India (“Board”), and include provisions relating to powers of the chairman of the Boardand meetings of the Board and also on 19th August 2016 following sections of the saidCode shall come into force:—

Section 3 - (i) clause (1); (ii) clause (5); (iii) clause (22); (iv) clause (26); (v) clause (28); (vi) clause (37);

section 221; section 222; section 225; section 226; section 230; section 232; section 233;

sub-section (1) and clause (zd) of sub-section(2) of sec 239; sub-section (1) and clause (zt) of sub-section (2) of section 240; section 241; and section 242

Wrap up

The primary objective of The Insolvency and Bankruptcy Code 2016 is to provide aspecialised and quick resolution mechanism in debt recovery. The Code attempts to provideone stop solution by amending various laws relating to insolvency and reorganisation ofcorporate persons, partnership firms and individuals in a time bound manner and forproviding rehabilitation opportunity to persons who are unable to repay their debts andfor maximization of value of the assets of such persons and matters connected therewithor incidental thereto.

(The author is a Chennai based Company Secretary. He can be reached at [email protected])


EXCEL TIPS

Inspecting a workbook

If you plan to share an electronic copy of a Microsoft Office Excelworkbook, it is a good idea to review the workbook for hiddendata or personal information that might be stored in theworkbook itself or its document properties (metadata).

Because this hidden information can reveal details about yourorganization or about the workbook itself that you might not CA DUNGAR CHAND U. JAIN

want to share publicly, you might want to remove this hidden information before youshare the workbook with other people.

To display the Document Inspector dialog box, choose File?Info?Check forIssues?Inspect Document.


Once you click Check for issues, the following is displayed:

A Confirmation dialog box appears once "Inspect Document" is clicked thatwhether you want to save the file.

Once you Click Yes, the dialog box with all options to be inspected is displayed.Click "Inspect" to proceed


Types of hidden data and personal information are stored in workbooks

Several types of hidden data and personal information can be saved in an Excelworkbook. This information might not be immediately visible when you view theworkbook in Office Excel, but it might be possible for other people to view orretrieve the information.

Hidden information can include the data that Office Excel adds to a workbook toenable you to collaborate on it with other people. It can also include informationthat you deliberately designate as hidden.

Excel workbooks can contain the following types of hidden data and personalinformation:

• Comments and ink annotations If you collaborated with other people to createyour workbook, your workbook might contain items such as comments or inkannotations. This information can enable other people to see the names of peoplewho worked on your workbook, comments from reviewers, and changes thatwere made to your workbook.

• Document properties and personal information Document properties, alsoknown as metadata, include details about your workbook such as author, subject,and title. Document properties also include information that is automaticallymaintained by Office programs, such as the name of the person who mostrecently saved a workbook and the date when a document was created. If youused specific features, your document might also contain additional kinds ofpersonally identifiable information (PII), such as e-mail headers, send-for-reviewinformation, routing slips, printer paths, and file path information for publishingWeb pages.

• Headers and footers Excel workbooks can contain information in headers andfooters.

• Hidden rows, columns, and worksheets In an Excel workbook, rows, columns,and entire worksheets can be hidden. If you distribute a copy of a workbookthat contains hidden rows, columns, or worksheets, other people might unhidethese row, columns, or worksheets and view the data that they contain.


• Document server properties If your workbook was saved to a location on adocument management server, such as a Document Workspace site or a librarybased on Microsoft Windows SharePoint Services, the workbook might containadditional document properties or information related to this server location.

• Custom XML data Workbooks can contain custom XML data that is not visiblein the document itself. The Document Inspector can find and remove this XMLdata.

• Invisible content A workbook can contain objects that are not visible becausethey are formatted as invisible.

Depending upon the information stored, the same shall result like this

Click Remove All next to the inspection results for the types of hidden content

that you want to remove from your document.


Important:

• If you remove hidden content from your document, you might not be able to

restore it by clicking Undo.

• If you remove hidden rows, columns, or worksheets that contain data, you

might change the results of the calculations or formulas in your workbook. If

you do not know what information the hidden rows, columns or worksheets

contain, close the Document Inspector, unhide the hidden rows, columns, or

worksheets, and then review their contents.

• The inspectors for Comments and Annotations, Document Properties and

Personal Information, and Headers and Footers cannot be used in a workbook

that has been saved as a shared workbook (Review tab, Shared Workbook

command). This is because shared workbooks use personal information to

enable different persons to collaborate on the same workbook. To remove this

information from a shared workbook, you can copy the workbook and then

unshare it. To unshare a workbook, on the Review tab, click Shared Workbook.

On the Editing tab, clear the Allow changes by more than one user at the

same time check box.

(The author is a Madurai based Chartered Accountant. He can be reached at

[email protected])

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