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    Roll over relief for capital gains: reinvestment in specified long term bonds defers tax subject to time, holding and cap conditions.
    Relief defers tax on long term capital gains from transfer of land or building when reinvested within six months into notified long term bonds, with a statutory investment ceiling and a five year holding requirement; breach by transfer, conversion to money, or borrowing on the bond triggers deeming of previously exempted amounts as taxable long term capital gains and disallows a specified deduction for amounts claimed under the relief.
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    Deemed consideration rule: stamp duty value treated as full consideration for capital gains when declared consideration is lower.
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    Deeming of short-term capital gains where transfers from a depreciable block exceed transfer expenses, opening WDV and acquisition cost.
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    Presumptive taxation for non resident activities fixes taxable profits on defined receipts and narrows audit relief.
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    Presumptive taxation regime clarified for small businesses and goods carriage operators, altering computation and compliance timing.
    Section 58 creates a presumptive taxation regime for small businesses, goods carriage operations and specified professions, prescribing turnover limits and fixed presumptive computation methods. Taxpayers may elect actual profits but must maintain books and obtain an audit if total income exceeds the basic exemption limit. The enacted text clarifies that receipts received by specified banking or online modes count for a lower percentage only if received during the tax year or before the due date, treats non account payee cheques/bank drafts as cash for cash tests, and expressly excludes goods carriage receipts from aggregation for monetary limits under book keeping/audit rules.
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    Deemed consideration: stamp duty value may be treated as full value where declared consideration is lower.
    The provision deems the stamp duty value to be the full value of consideration for transfers of non-capital land or buildings where declared consideration is below stamp duty value, subject to a statutory tolerance that preserves actual consideration if stamp duty value is within a specified margin; agreement date stamp valuations may be used when agreement and registration dates differ provided consideration (or part) was received by specified banking/online modes on or before the agreement date, with determination mechanics governed by cross referenced valuation rules.
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    Amortisation rules for telecom spectrum and licence fees require time spread deductions and proceeds offset on transfer.
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    Amortisation of prospecting expenditure permits staged tax deduction subject to funding reductions, exclusions and audit conditions.
    Amortisation allows an Indian company or resident (other than a company) engaged in prospecting for specified minerals to capitalise qualifying expenditure incurred in the year of commercial production and up to four preceding years, claim periodic instalments after reducing amounts funded by others and realizations (sale, salvage, compensation, insurance), and excluding site/deposit acquisitions and depreciable capital assets; instalments are limited so as not to reduce income from commercial exploitation below nil, unallowed amounts may be carried forward within the overall amortisation period, and audit and prescribed reporting are required for non-company assessees.
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    Site restoration fund deductions for petroleum operations, with recapture on asset disposals governed by Schedule X.
    Section 49 creates a Site Restoration Fund regime for petroleum and natural gas operations under a Central Government agreement, allowing deductions for deposits to a designated special account or site restoration account with computation governed by Schedule X. Withdrawals or transfers from those accounts are taxable in the year of withdrawal/transfer under Schedule X. The Act removes a clause in the Bill that explicitly deemed a portion of asset cost relatable to prior deductions as business income on sale within a specified holding period, instead delegating disposal and recapture rules to Schedule X.
    Act RulesIncome Tax
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    Recapture on premature disposal reverses deduction for deposits into designated tea, coffee and rubber development accounts, taxing attributable cost on disposal.
    Clause 48 permits a deduction for deposits into designated tea, coffee and rubber development accounts, with computation governed by Schedule IX; withdrawals or transfers are chargeable to tax in the year of transfer/withdrawal as per Schedule IX, and disposal of assets acquired under the scheme within the protective holding period results in deeming that portion of the asset cost attributable to earlier deductions as business income in the year of sale or transfer.
    Act RulesIncome Tax
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    Immediate deduction of capital expenditure for specified businesses, subject to conditions, approvals and an eight-year recapture rule.
    The Act permits an elective immediate deduction of whole capital expenditure incurred wholly and exclusively for specified businesses in the year of incurrence (or in year of commencement if pre-commencement cost is capitalised), subject to specified commencement dates, definitions and conditions. The deduction is disallowed where a business is formed by splitting/reconstruction or by transfer of previously used machinery (except a limited de minimis exception), requires specified approvals/notifications for certain sectors, excludes land/goodwill/financial instruments and cash over prescribed limits, and is subject to an eight-year sole-use recapture mechanism with depreciation adjustment.
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    Scientific research deductions conditional on prescribed authority certification, approval for in-house R&D, and prohibition on duplicate claims.
    The provision allows deductions for capital and revenue expenditure on business-related scientific research, excluding land costs, and deems qualifying pre-commencement salaries, materials and capital costs to the year of commencement if certified by the prescribed authority. In-house R&D deductions are available for prescribed companies with approved facilities and qualifying costs subject to prescribed conditions and documentation. Payments to approved research entities are deductible only for approved programmes and recipients. Non-duplication rules bar claiming the same expenditure under other provisions and exclude parallel asset-based deductions where research deductions have been taken.
    Act RulesIncome Tax
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    Amortisation of preliminary expenses allows spreading eligible start-up costs over successive years subject to statutory cap and compliance conditions.
    The provision permits amortisation of specified preliminary and project-related expenditures by resident Indian assessees through equal annual deductions over five successive tax years beginning with the year the undertaking becomes operational or the year of commencement. Eligible items include feasibility and project reports, market surveys, engineering services, specified legal and registration costs, prospectus and public issue expenses for companies, and other prescribed items not deductible under any other provision. A statutory cap restricts the allowable deduction to a percentage of project cost or capital employed, with project cost tied to actual cost as shown in the books, and procedural conditions require prescribed filings and audited accounts for certain taxpayers.
    Act RulesIncome Tax
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    Capitalising foreign exchange fluctuation adjusts asset cost to reflect exchange-rate differences between acquisition and payment.
    Section 42 requires capitalisation of foreign exchange variation by computing A = B - C, where B is INR paid during the tax year (excluding parts met by others) for asset cost or repayment of foreign-currency borrowings used to acquire the asset, and C is the INR liability corresponding to that payment at acquisition; the variation is added to or deducted from the asset's actual cost, specified capital expenditure categories, or cost of acquisition for set-off purposes, with forward-contract-covered amounts computed at the contract rate.

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      Corporate Laws

      Small Industries Development Bank of India versus M/s. Sibco Investment Pvt. Ltd- Legal Position of NBFC in a civil suit.

      2 June, 2022

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      2022 (1) TMI 170 - Supreme Court

      Legal Position of NBFC in a civil suit.

      Section 45 MB of the RBI Act 1934. - Power of bank to prohibit acceptance of deposit and alienation of assets, Section 45 MC - Power of Bank to file winding up petition.

      Section 35A of the Banking Regulation Act, 1949 vests power in the RBI to give directions to banks and can take action, "to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company"

      A conjoint reading of the statutory provisions, makes it abundantly clear that for ‘public interest’ the RBI is empowered to issue any directive to any banking institution, and to prohibit alienation of an NBFC’s property.

      The term ‘Public interest’ has no rigid definition. It has to be understood and interpreted in reference to the context in which it is used. The concept derives its meaning from the statute where it occurs, the transaction involved, the state of society and its needs.

      It is not necessary for RBI to mention a specific provision before issuing directions, for it to have statutory consequences. All that is required is the authority under the law, to issue such direction.

      Therefore the RBI under Section 45-MB of the RBI Act, 1934 and 35-A of the Banking Regulation Act, 1949 has the requisite authority to issue the communication dated 09th June, 1997. Now the omission by the RBI to mention any enabling provision, doesn’t change the nature and status of the direction.

      The statutory arrangement and interpretation persuades to hold that actions in furtherance of grounds of ‘public policy’ by the RBI was justified, for issuing the Notification dated 10.04.1997. The notification itself clearly mentioned that it is issued for the benefit of "depositors and creditors" of CRB Capital.

      The actual status of the RBI Notification would have a bearing on the claim against the defendant in the suit and subsequent proceeding/s. The plaintiff, as can be noted, always had the option of challenging its legality but they have never specifically challenged those in the Suit. In a way the plaintiff " waived its right" by not challenging the RBI notification then/at that past point of time in the suit proceedings.

      The principle of waiver/acquiescence is applicable here.

      When the legality of the RBI Notification is not under challenge, relief can’t be granted in the Suit without determining its "legality". This in our perception can by itself, put a quietus on the issue at hand - the plaintiff cannot be granted parity with its predecessor-in-interest, Shankar Lal Saraf, who was paid interest which accrued in July, 1997 despite the RBI directive of 09.06.1997.

      The defendant defended this fallacy/aberration by clarifying that the payment to Shankar Lal Saraf was made before the defendant was in receipt of the RBI directive.

      Hence, the plaintiff cannot claim any advantage for themselves or parity with its predecessor-in-interest, on this cause. It amounted to sub-silencio acceptance.

      Suit barred by constructive res judicata.

      The cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata.

      Section 441(2) of the Companies Act, 1956 reveals that winding-up proceedings other than voluntary winding-up, are said to have commenced from the date of presentation of petition - A conjoint reading of Section 531 and 441(2) of the Companies Act, 1956 prima facie reveals that any transfer of property by or against a company in involuntary winding up, the suspect spell for deemed fraudulent transaction is six months before presentation of the winding up petition.

      In the present case, the petition for winding-up was submitted by RBI on 22.05.1997 and admittedly, the transfer in Shankar Lal Saraf’s favour was executed in February, 1997. The defendant’s contention as to the transfer being in the suspect spell, may be deemed fraudulent, cannot be rejected. 

      A question arose whether the present suit is barred by Constructive res judicata- It being decided that the cause of action for the plaintiff accrued the first time, when the defendant allegedly failed to pay timely interest. Since such a claim was not raised in the writ court/court of first instance, the subsequent Suit of SIBCO is barred by the principle of Constructive Res Judicata.

      This narrative makes us understand that a NBFC governed by the Banking  Regulation Act, 1949 and the  Reserve Bank of India Act, 1934 along with Section 531 and 441(2) of the Companies Act, 1956 is too subject to the common law principles and the Code of Civil Procedure, 1908 when in a civil suit before a Court of law.

       


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      2022 (1) TMI 170 - Supreme Court

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