TaxTMI 
TaxTMI 
2024 (12) TMI 1367
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....Act, 1999, on the basis of credible information that the foreign exchange was sent abroad by the said company. In this connection, a statement dated 23.04.2009 was recorded from Ms. Pushpam Apalla Naidu, Managing Director of M/s GoldQuest International Pvt. Ltd./ M/s Questnet Enterprises India Pvt. Ltd. Apart from other personal details, Ms. Pushpam Appala Naidu has stated that M/s GoldQuest India Pvt. Ltd has started as subsidiary of M/s GoldQuest International Pvt. Ltd. Hong Kong and registered in Chennai and having a branch office in Mumbai. She was appointed to head their Indian operations during 2001. She became Director in the year 2002 and the Managing Director in 2004. In the year 2004, a company by name M/s Questnet Enterprises India Pvt. Ltd was started in which she was also the Managing Director. In connection with the further investigations, statements dated 22.07.2016 and 25.07.2016 under Section 37 of FEMA were recorded from Ms. Pushpam Appalla Naidu, Managing Director of M/s GoldQuest International Pvt. Ltd./ M/s Questnet Enterprises India Pvt. Ltd.. In the said statement, to the specific query about the financial transaction that had been taken place between the I....
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....th, imparting training and conducting events to sustain the growth business. On perusal of the annexure submitted by Shri G. Narayanasamy, Auditor, vide his letter dated 28.03.2017 and statements 22.07.2016 and 25.07.2016 given by Ms. Pushpam Apalla Naidu under Section 37 of FEMA, it emerged that they have made the payments on 3 occasions to the tune of Rs. 19 Crores, towards remittance as Royalty to their parent company, through their various bank accounts. Shri Narayanasamy, Auditor, in his reply letter dated 28.03.2017, has clarified that the said amounts had been sent towards the royalty. It is also ascertained that no permission in this regard has been obtained from the Government of India. On perusal of the Balance sheet for the period 2007-2008 and the Bank Debit Advice, it is given to understand that the amounts remitted through the bank exceeds 5% of the local sales for the period 2007-2008 of M/s Questnet Enterprises India Private Limited. The details of the remittance made in the year 2007-08 are detailed as under: - Year/Date Bank Amount Rs. Balance Sheet Sales as per Balance Sheet Remittance on the sales 2007-08/15.05.2007 HDFC 7,08,13,841 2007-08 155,37,29....
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....nt of India, as prescribed in S.No. 8 of Schedule II to Rule 4 of Foreign Exchange Management (Current Account Transactions) Rules, 2000 and thereby contravened the provisions of Section 5 of FEMA, read with Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and rendered themselves liable to be proceeded under Section 13 of FEMA. b) Ms. Pushpam Appala Naidu, Managing Director of M/s Questnet Enterprises India (P) Ltd was in-charge of and was responsible for the conduct of the business of the company. Inasmuch as M/s. Questnet Enterprises India (P) Ltd has contravened above mentioned provisions, Ms. Pushpam Appala Naidu has also contravened Section 5 of FEMA, 1999 read with Rule 4 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and has rendered herself liable to be proceeded against for such contravention. Considering the cause shown in the complaint, the Adjudicating Authority issued Show Cause Notice bearing number T- 4/09/CEZO/SRO/2017 dated 31/03/2017 to M/s. Questnet Enterprises India (P) Ltd, Chennai (hereinafter referred to as Noticee 1) and Ms. Pushpam Appala Naidu, Managing Director, M/s. Questnet Enterprises....
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....Transaction) Rules, 2000, as it stood, royalty up to 5% of the local sales was permitted without any approvals; that Noticee No.1 paid Rs. 15,68,88,739 which constituted 3.66% of Gross Sales and 3.78% of the Net Sales, after reducing rebates and returns and that as such the remittances towards royalty was well within the limit of 5% prescribed under the said Rules, and hence, prayed that further proceedings be dropped, as the Schedule to the profit and loss account is now produced by the noticee, to confirm its veracity, the statutory returns filed by the Noticee No.1 before the Registrar of Companies have been requisitioned. Registrar of Companies, Chennai, vide their letter dated 23.07.2019 has furnished the entire documents relating to the said period and it confirmed with the submissions of the noticee. Another opportunity of personal hearing was given to the noticees on 23.09.2019. Shri G. Srikanth, Chartered Accountant, appeared on behalf of both noticees, before the Adjudicating Authority on 23.09.2019 and furnished various sales tax/VAT returns to substantiate their claim of sales. After hearing the rival submissions, Ld. Adjudicating Authority, concluded that Noticee No.1....
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....ls as disclosed in audit report and has actually raised a doubt, whether the company had kept requisite books of accounts which is relevant, but this fact has been ignored by the Ld. Adjudicating Authority. The said letter is reproduced as under:- Matters giving rise to uncertainty and audit consequences thereof: We have not conducted a physical count or examination of the inventory records which are told to have been seized by the law enforcement agencies. Verification of cash balances could not be done owing to disruption of operations and absence of key employees. Direct evidences in support of incomes, expenditure were either unavailable or incomplete. The absence of Inventory record, payroll records, secretarial records, incomplete books, ongoing investigation by law enforcement agencies, absence of key employees, absence of confirmation from parties (Debtors &Creditors), Inability to give unqualified opinion for previous year and other matters highlighted herein have constricted our ability to conduct our audit as per standards on auditing issued by ICAI. Prayer is accordingly made to allow the present appeal and thereby remand back the case, on account of reliance....
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....nancial statement of year 2007-08. Therefore, the said financial statements cannot be discarded, simply because the same were filed after initiation of proceedings by ED. 6. Ld. Counsel for the appellant further submitted that the Adjudicating Authority ignored to notice that in the second copy of schedule to Profit and Loss account for the year 30.03.2008 and year ending 31.03.2009 of the noticee company stated to have been obtained from ROC. In this regard he drew the attention to para 5.6 of the impugned order which did not reflect any royalty amount for the year ending 31.03.2008 in Schedule- 'O', whereas breakup royalty mentioned in paragraph 2.6 of the adjudication order pertaining to the financial year 2007-08 amounts to Rs. 15,68,88,739/-, which is subject matter of the adjudication proceedings. Thereby it casts doubt about the veracity of both the statements, which were taken for consideration in contesting the issue resulting in wrong conclusion. He contended that the quantum of royalty as such is absent in the documents produced during the course of Adjudicating proceedings. Hence, the Ld. Adjudicating Authority ought not to have considered the same. He stressed that Ld....
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....the financial year 2007-08 and the same is not a statement of merely receipt and payments. In other words, the said statements are stated to be prepared on actual basis of accounting and reflect the expenses incurred and not necessarily those paid. Accordingly, it will be incorrect to accept that the royalty of Rs. 15,68,88,739/- paid should be found in the profit and loss account. Hence, the contention raised by appellant ED is devoid of any merits, as no efforts were made to verify and cross-check the financial statements from the account books of the respondent company, which was seized by the enforcement agencies. 9. Further, the complaint lodged by respondent ED for contravention of Section 5 of FEMA read with Rule 4 of FEM (Current Account Transactions) Rules, 2000, for remitting royalty to overseas parties exceeding within the permissible limit of 5% on local sales. It wrongly adopted a sales figure of Rs. 155,37,29,278/- for computing the permissible amount of royalty, which was a net sales figure after ignoring commission of sales of Rs. 269,88,52,221/- and rebates of Rs. 13,39,50,045/-. On the basis of said complaint, Show Cause Notice was issued and matter was submitted....
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.... of India:- "Sales Turnover" means the aggregate amount for which sales are effected or services rendered by an enterprise. The terms gross turnover and net turnover (or gross sales and net sales) are sometimes used to distinguish the sales aggregate before and after deduction of returns and trade discounts. Applying the above generally accepted accounting principles, a few typical cases may be considered: (i) Discount allowed in the sales invoice will reduce the sale price and, therefore, the same can be deducted from the turnover. (ii) Cash discount other than that allowed in a cash memo/sales invoice is in the nature of a financing charge and is not related to turnover. The same should not be deducted from the figure of turnover. (iii) Turnover discount is normally allowed to a customer if the sales made to him exceed a particular quantity. This being dependent on the turnover, as per trade practice, it is in the nature of trade discount and should be deducted from the figure of turnover even if the same is allowed at periodical intervals by separate credit notes. (iv) Special rebate allowed to a customer can be deducted from the sales if it is in the nature of trade....