CJ May 2013 PDF

cmyk
ALLIED LAWS COMMITTEE DIRECT TAXES COMMITTEE

Study Circle Meeting held on 8th Intensive Study Group (Direct Tax) Meeting
16th April, 2013 on the subject “FEMA Provisions held on 18th April, 2013 on the subject
with respect to Inbound & Outbound Investment “Recent Important Decisions
in Real Estate”. under Direct Taxes”.
Shri D. T. Khilnani CA Jagdish Punjabi

addressing the members. addressing the members.
STUDY CIRLCE & STUDY GROUP COMMITTEE

Study Group Meeting held on 16th April, 2013 on the subject Study Circle Meeting held on
“Recent Decision under Direct Tax”. 25th April, 2013 on the subject
“Rectification, Refund and Tax credits
in relation to e-filing of Tax Returns”.
Shri Keshav Bhujle, Advocate addressing the members. Seen from

L to R : CA Ashok Sharma, Chairman, Allied Laws Committee,
CA Mulesh Savla, Convenor, Shri Paras S. Savla, Advocate, CA Haresh
Kenia, Chairman, Study Circle & Study Group Committee, CA Manoj Shah, CA Mahendra Sanghvi
President, CA Dilip Sanghvi, Vice Chairman, CA Dinesh Shah, Convenor. addressing the members.
MEMBERSHIP & EOP, RRC & PR AND JOURNAL COMMITTEE

Launching of e-Journal & Revamped Website & Organising a Musical Evening held on
19th April, 2013 at The Mysore Association Auditorium
C ntents
Editorial
Vol. I No. 8
May – 2013
................................................................... K. Gopal............................................5
From the President ................................................................... Manoj Shah.......................................6
An Introduction to – Ved and Vedanta.............................................. V. H. Patil.........................................9
1. SPECIAL STORY : Maharashtra Co-operative Housing Societies – Part-II
1. Registration of a Society................................................... Kishor Vanjara.................................19
2. Smooth Sailing of Redevelopment of the Society................ Bharat Joshi.....................................22
3. Prescribed New Model Bye-Laws........................................ Bharat Joshi.....................................26
4. Property and Funds.......................................................... Priti Savla........................................31
5. Management of a Society.................................................. Kishor Vanjara.................................36
6. Accounts and Audit........................................................... Atul T. Suraiya.................................41
7. Election Rules................................................................... A. S. Merchant.................................46
8. Powers, Duties and Responsibilities of Office Bearers........... A. R. Jani.........................................55
9. Records to be maintained by the Society and Check list
for transfer of a flat.......................................................... Vipin Batavia....................................60
10. Various types of meetings................................................. Ajit Rohira........................................65
11. Co-operative Courts.......................................................... Dilip Sanghvi....................................68
12. Landmark Judgments........................................................ Vinod Sampat..................................77
2. Special Article – Recent Amendment applicable to Property Tax... V. R. Ghelani....................................83

3. DIRECT TAXES
• High Court ................................................................... Ashok Patil, Mandar Vaidya &............87
Priti Shukla
• Tribunal ................................................................... Jitendra Singh & Sameer Dalal..........93
• Statutes, Circulars & Notifications...................................... Sunil K. Jain.....................................97
4. INTERNATIONAL TAXATION
• Case Law Update.............................................................. Tarunkumar Singhal & Sunil Lala..... 102
5. INDIRECT TAXES
• Central Excise and Customs – Case Law Update................. Hasmukh Kamdar........................... 114
• VAT Update ................................................................... Nikita Badheka............................... 116
• Service Tax – Statute Update............................................ Rajkamal Shah & Naresh Sheth....... 118
• Service Tax – Case Law Update......................................... Bharat Shemlani............................. 120
6. corporate LAWS
• Company Law Update....................................................... Janak C. Pandya............................. 125
7. OTHER LAWS
• FEMA Update ................................................................... Mayur Nayak, Natwar Thakrar &...... 128
Pankaj Bhuta
8. BEST OF THE REST ............................................................... Ajay Singh & Suchitra Kamble......... 136
9. ECONOMY & FINANCE .......................................................... Rajaram Ajgaonkar......................... 143
10. Your questions & our answers.................................... V. H. Patil ..................................... 146
11. THE CHAMBER NEWS ........................................................... Hitesh Shah & Paras Savla.............. 148
i The Chamber's Journal May 2013

39
The Chamber of Tax Consultants
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The Chamber's Journal

Editor & Journal Committee Managing Council
Editorial 2012-13 2012-13
Board
Chairman
2012-13 President
Yatin Vyavaharkar Manoj Shah
Editor Vice Chairman
K. Gopal Apurva Shah Vice President
Editorial Board Ex-Officio Yatin Desai
Manoj Shah Yatin Desai
Chairman Hon. Secretaries
V. H. Patil Convenors Hitesh Shah Paras Savla
Toral Shah Bhadresh Doshi
Members Treasurer Imm. Past President
Keshav Bhujle Past President
Kishor Vanjara Vipin Batavia Avinash Lalwani Parimal Parikh
Pradip Kapasi Office Bearer Members
S. N. Inamdar Paras Savla Ajay Singh Apurva Shah
Subhash Shetty Mg.Council Members Ashit Shah Ashok Sharma
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Atul Bheda Bakul Mody
Bhavik Shah Dhaval Thakkar K. Gopal Keshav Bhujle
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Yatin Vyavaharkar Dhiren Dalal Indira Gopal Ketan Vajani Kishor Vanjara
Janak Pandya Ketan Jhaveri Ninad Karpe Vijay Bhatt
Ex-Officio Mitesh Kotecha Nikita Badheka Vipul Choksi Vipul Joshi
Manoj Shah Pankaj Majithia Rajkamal Shah
Yatin Desai Shivratan Singrodia Sonal Desai Yatin Vyavaharkar
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The Chamber's Journal May 2013 ii

:4
Editorial
This issue of the Chamber’s Journal brings to you, the second part of the Special
Story – Maharashtra Co-operative Housing Societies. In this issue, we have
covered several new and pertinent topics. Both the issues put together, would
constitute useful reference material as far as Co-operative Housing Societies are
concerned. Leading professionals handling issues pertaining to Co-operative
Housing Societies have contributed to this issue. I thank all of them for sparing
their valuable time.
While the Chamber was busy putting together this Special Story on Co-operative
Housing Societies in Maharashtra, it is ironic that two tragic and puzzling
incidents occurred involving the housing societies – one that of the collapse of an
illegal structure in Mumbra, in which about 75 people were killed and another, the
Campa Cola compound residents, who faced eviction and subsequent demolition
of their houses.
The tragic collapse of the illegal structure causing end of several innocent lives
and the subsequent ‘bandh’ called by the politicians in protest against orders of
the local authorities to demolition other such illegal structures speaks volumes
about the stink in the industry. The age-old nexus between the politicians and
builders has fractured the legal structure within which the housing society
industry is to function – the collapse is symbolic of the collapse of the legal
structure itself and it also highlights the necessity to revive the legal framework.
Equally puzzling was the scene of wailing residents of the Campa Cola Compound
– elements in the local authority let the illegal structure be constructed and
inhabited for twenty long years and one fine day, for reasons best known to it,
ordered eviction and subsequent demolition. Builders coming up with illegal
structures, selling them at very high costs under the protection of the local
politician-goons, the builder ultimately abandoning the responsibility of the
structure once his pockets are filled is quite common throughout Mumbai –
whether it is far flung and impoverished areas like Mumbra or posh localities like
Worli. I hope these incidents serve as pointers to all the stakeholders involved – the
buyers, the sellers and the politicians. I wish this Special Story would come to the
aid of all the members who are definitely part of the industry in various capacities.
K. Gopal
Editor
iii The Chamber's Journal May 2013

59
From the President
Dear Reader,
It’s time to renew our ties with the Chamber; yes I am

referring to renewing membership of the Chamber. Quite a
few members are yet to renew their membership. I request
them to do so at earliest. May I further request readers
to spread awareness about Chamber and its activities
amongst your group of professional acquaintances to
mobilise membership of the Chamber. It would surely be
your contribution to profession in terms of offering an
opportunity to a professional to be part of continuous process
of knowledge dissemination which Chamber carries as its core
object.
Chamber has launched its revamped website on 19th April,

2013, the day of Ram Navami. I would urge members to
visit website (www.ctconline.org) and give their constructive
suggestions, especially on the e-Journal in terms of
accessibility, search functions and user friendliness.
Last few days have been extremely disturbing from India’s

governance perspective. Scams after scam have hit the
headlines and as a country and its citizens we are passing
through one of the worst phase. It seems country’s leaders
are morale proof. It is absolutely chaotic and uncontrollable,
be it cash for job instance, or tampering with CBI’s report, the
governance and ethical standards have hit the rock bottom. In
the wake of this state of affairs, important bills like Companies
Bill, Land Reforms Bill may not get a chance to turn into
Act/s.
While summer is at its peak in May, the heat on professional

front would be at its lowest in this month. And therefore
month of May is a time to relax, unwind ourselves and
be with family and enjoy vacation time. Being less hectic,
month of May is offering us an opportunity to think out
The Chamber's Journal May 2013 iv

:6
of box for our practice; to develop or think of venturing into
newer areas in practice where as a professional one would
have developed interest by now. Many of us would have
entered practice without having any specific goal of developing
practice in certain direction. Rather, the flow of work would
have decided the direction of practice. This sort of growth in
practice at times leads to fatigue as things become too routine
and therefore current practice may not be offering charm and
joy of professional achievement. But this requires us to move
out of comfort zone and take risk in terms of developing area of
practice where one has keen interest. The best way to develop
is to learn the subject of desire deeply and simultaneously get
ready to expose oneself by leading study circles and writing
articles. This approach will bring objectivity to learning and
study. In my view, this is the only way for a professional to
demonstrate his abilities and speaking and writing is the only
way of marketing for a professional.
Let the heat of summer ignite the fire within us to do what

we like as professionals. Each one of us has potential, may be
untapped so far.
Let me leave you with these thoughts and saying – First Deserve
& then Desire.
Manoj Shah
President
The power is with the silent ones, who only live and love and then
withdraw their personality. They never say “me” and “mine”; they are
only blessed in being instruments.
— Swami Vivekananda
v The Chamber's Journal May 2013

79
The Chamber of Tax Consultants
Vision Statement
The Chamber of Tax Consultants (The Chamber)
shall be a powerhouse of knowledge in the field
of fiscal laws in the global economy.
The Chamber shall contribute to the development

of law and the profession through research,
analysis and dissemination of knowledge.
The Chamber shall be a voice which is heard and

recognised by all Government and Regulatory
agencies through effective representations.
The Chamber shall be pre–eminent in laying

down and upholding, among the professionals,
the tradition of excellence in service, principled
conduct and social responsibility.
The Chamber's Journal May 2013 vi

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Ved and Vedanta
V. H. Patil, Advocate
Ved and Vedanta
SANKHYA (JNANA) Arjuna uvaca:

THE YOGA OF KNOWLEDGE Katham Bhismamaham sankhye Dronam ca
Sanjaya uvaca: Madhusudana
Tam tatha krpayavistamasrupurnakuleksanam Isubhih prati yotsyami pujarhavarisudana 4
Visidantamidam vakyamuvaca Madhusudanah 1 Arjuna said:
Sanjaya said: 4. How shall I, O Madhusudana, fight with
1. To him who was thus overcome with pity, arrows against Bhisma and Drona in battle, they
whose eyes were filled with tears, who was who are worthy of worship, O Arisudana?
agitated and despondent, Madhusudanah spoke Gurunahatva hi mahanubhavan
these words.
Sreyo bhoktum bhaiksyamapiha loke
Sri Bhagavan uvaca:
Hatvarthakamamstu gurunihaiva
Kutastva kasmalamidam visame samupasthitam
Bhunjiya bhogan rudhirapradigdhan 5
Anaryajustamasvargyamakirtaramarjuna 2
5. Better indeed is to live on alms in this
The blessed Lord said: world than to slay the most noble teachers; but
2. Whence has this dejection come upon by slaying them all my enjoyments of wealth
you in a crisis, unworthy of an Aryan, attaining and desires even here will be stained with blood.
neither heaven nor fame, O Arjuna. Na caitadidmah kataranno gariyo
Klaibya ma sma gamah Partha naitattvayyu- Yadva jayema yadi va no jayeyuh
papadyate
Yaneva hatva na jijivisama
Ksudram hrdayadaurbalyam tyaktvottistha
Parantapa 3 Ste’vasthitah pramukhe dhartarastrah 6
3. Yield not to unmanliness, O Partha, it does 6. Nor do we know which is better for us,
not befit you. Casting off this mean weakness of that we should conquer them or they should
heart, arise O Parantapa. conquer us. The very sons of Dhrtarastra, whom
vii The Chamber's Journal May 2013

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Ved and Vedanta
having slain we do not wish to live, stand facing The blessed Lord said:
us.
11. You have been grieving for those that
Karpanyadosopahatasvabhavah should not be grieved for and you speak words
of wisdom. The wise grieve neither for the living
Prcchami tvam dharmasammudhacetah nor for the dead.
Yacchreyah syanniscitam bruhi tanme Na tvevaham jatu nasam na tvam neme janadhipah
Sisyaste’ham sadhi mam tvam prapannam 7 Na caiva na bhavisyamah sarve vayamatah param 12
7. My nature is overpowered by the taint of 12. Never indeed was I not, nor you, nor these
pity. With my mind confused as to duty I ask rulers of men; also none of us will cease to be
thee: Tell me decisively which is good for me. hereafter.
I am thy disciple Instruct me who has taken
refuge in thee. Dehino sminyatha dehe kaumaram yauvanam jara
Na hi prapasyami mamapanudyad Tatha dehantarapraptirdhirastatra na muhyati 13
Yacchokamuchosanamindriyanam 13. Just as the embodied (passes through)
childhood, youth and old age in this body, so
Avapya bhumavasapatnamrddham does it pass into another body; there the wise
Rajyam suranamapi cadhipatyam 8 one is not grieved.
8. I do not see that which can remove the Matrasparsastu Kaunteya sitosnasukhduhkhadah
grief which is drying up my senses even on Agamapayino nityastamstitiksasva Bharata 14
obtaining prosperous and unrivalled kingdom
on earth and lordship over the gods. 14. The sense contacts, O Kaunteya, which
cause heat and cold, pleasure and pain, they
Sanjaya uvaca: come and go, they are impermanent; endure
Evamuktva Hrsikesam Gudakesah parantapa them, O Bharda.
Na yotsya iti Govindamuktva tusnim babhuva ha 9 Yam hi na vyathayantyete purusam Purusarsabha
9. Having spoken thus to Hrsikesa, Samaduhkhasukham dhiram so mrtatvaya kalpate 15

Gudakesah, the destroyer of foes, said to 15. The man who, verily, these afflict not, O
Govinda, “I will not fight” and became silent. Purusarsabha; balanced in pain and pleasure,
Tamuvaca Hrsikesah prahasanniva Bharata steadfast, he is fit for immortality.
Senayorubhayormadhye visidantamidam vacah 10 Nasato vidyate bhavo nabhavo vidyate satah
10. To him who was despondent in the midst ubhayorapi drsto ntastvanayostattvadarsibhih 16
of the two armies, Hrsikesa, smiling as it were, 16. The unreal has no existence, the real never
spoke these words, O Bharata. ceases to be, the truth about both these indeed
Sri Bhagavan yvaca has been seen by the seers of truth.
Asocyananvasocastvam prajnavadamsca bhasase Avinasi tu tadviddhi yena sarvamidam tatam
Gatasunagatasumsca nanusocanti panditah 11 Vinasamavyayasyasya na kascitkartumarhati 17
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Ved and Vedanta
17. Know indeed That to be indestructible by Nainam chhindanti sastrani nainam dahati pavakah
which all this is pervaded, none can cause the
destruction of this Imperishable. Na caiman kledayantyapo na sosayati marutah 23
Antavanta ime deha nityasyoktah saririnah 23. Weapons do not cleave This, nor fire burns
This, nor water wets This, nor wind dries.
Anasino prameyasya tasmadyudhyasva Bharata 18
Acchedyo yamadahyo yamakledyo sosysa eva ca
18. These bodies of the Embodied, which is
eternal, indestructible, immeasurable, are said to Nityah sarvagatah sthanuracalo yam sanatanah 24
have an end. Therefore fight, O Bharata. This cannot be cut, nor burnt, nor wetted, nor
Ya enam vetti hantaram yascainam manyate hatam dried. This is eternal, all-pervading, stable,
immovable and ancient.
Ubhau tau na vijanito nayam hanta na hanyate 19
Avyakto yamacintyo yamavikaryo yamucyate
19. He who regards This as slayer and he who
thinks This is slain, both of them are ignorant. Tasmadevam viditvainam nanusocitumarhasi 25
This neither slays nor is slain. 25. This is said to be unmanifest, This is
Na jayate mriyate va kadacin- inconceivable, This is unchangeable; therefore,
knowing This as such, you should not grieve.
Nayam bhutva bhavita van a bhuyah
Atha caiman nityajatam nityam va manyase mrtam
Ajo nityah sasvato yam purano
Tathapi tvam Mahabaho nainam socitumarhasi 26
Na hanyate hanyamane sarire 20
26. But if you think This as constantly
20. This is not born nor does it die, nor having being born and constantly dying, even then, O
been will ever again cease to be; This is unborn, Mahabaho, you should not grieve like this.
eternal, changeless, ancient, It is not killed when
the body is killed. Jatasya hi dhruva mrtyurdhruvam janma mrtasya ca
Vedavinasinam nityam ya enamajamavyayam Tasmadapariharye rthe na tvam socitumarhasi 27
Katham sa purusah Partha kam ghatayati hanta 27. Certain, indeed, is death for the born
kam 21 and certain is birth for the dead; therefore you
should not grieve over the inevitable.
21. He who knows This to be indestructible,
eternal, unborn, immutable, how can that man, Avyaktadini bhutani vyaktamadhyani Bharata
O Partha slay anyone or cause anyone to be Avyaktanidhandnyeva tatra ka paridevand 28
slain?
28. Beings are unmanifest in their origin,
Vasamsi jirnani yatha vihaya manifest in their middle, unmanifest again in
Navani grhnati naro parani their end, O Bharata, what is there to grieve
about?
Tatha sarirani vihaya jirna-
Ascaryavatpasyati kascidena-
Nyanyani samyati navani dehi 22
Mascaryavadvadati tathaiva canyah
22. Just as a man casting off worn-out
garments puts on new ones, so the embodied Ascaryavaccainamanyah srnoti
casting off worn-out bodies enters new ones. Srutvapyenam veda na caiva kascit 29
ix The Chamber's Journal May 2013

119
Ved and Vedanta
29. One sees This as a wonder so also another Avacyadamsca bahunvadisyanti tavahitah
speaks of This as a wonder, another hears, of
This as a wonder; and though having heard, Nindantastava samarthyam tato duhkhataram nu
none knows This at all. kim 36
Dehi nityamavadhyo yam dehe sarvasya Bharata 36. And your enemies will say many
unbecoming words caviling your prowess. What
Tasmatsarvani bhutani na tvam socitumarhasi 30 indeed could be more painful than that?
30. This Indeweller in the bodies of all is ever Hat ova prapsyasi svargam jitva va bhoksyase mahim
indestructible, O Bharata; therefore you should
not grieve for any creature; Tasmaduttistha kaunteya yuddhaya krtaniscayah 37
Svadharmamapi caveksya na vikampitumarhasi 37. Either slain you will attain heaven or
victorious you will enjoy the earth, therefore
Dharmyaddhi yuddhacchreyo nyatksatriyasya na arise O Kaunteya, determined to fight.
vidyate 31
Sukhaduhkhe same krtva labhalabhau jayajayau
31. Further, looking at your own duty you
should not waver, for there is nothing better for Tato yuddhaya yujyasva naivam papamavapsyasi 38
a kshatriya than a righteous war.
38. Treating alike pleasure and pain, gain and
Yadrcchaya copapannam svargadvaramapavrtam loss, victory and defeat, then get ready for battle,
thus you will not incur sin.
Sukhinah ksatriyah artha labhante yuddhamidrsam 32
Es ate bhihita sankhye buddhiyoge tvimam srnu
32. Happy are the kshatriyas, O Partha, who
get such a battle that comes unsought as an open Buddhya yukto yaya Partha karmabandham
door to heaven. prahasyasi 39
Atha cettvamimam dharmyam sangramam na 39. This is the wisdom of sankhya taught to
karisyasi you, now listen to the wisdom of yoga, endowed
Tatah svadharmam kirtim ca hitva papamavapsyasi 33 with which O Partha, you shall cast off the bond
of action.
33. Now, if you will not wage this righteous
war, when having abandoned your duty and Nehabhikramanaso sti pratyavayo na vidyate
fame you will incur sin. Svalpamapyasya dharmasya trayate mahato bhayat 40
Akirtim capi bhutani kathayisyanti te vyayam 40. In this there is no loss of effort nor is there
Sambhavitasya cakirtirmaranadatircyate 34 production of contrary result. Even very little of
this discipline protects one from great fear.
34. People also will recont your perpetual
dishonour and to the honoured, dishonour is Vyavasayatmika buddhirekeha Kurunandana
worse than death.
Bahusakha hyanantasca buddhayo vyavasayinam 41
Bhayadranaduparatam mamsyante tvam maharathah
41. In this the intellect is resolute and one-
Yesam ca tvam bahumato bhutva yasyasi laghavam 35 pointed O Kurunandana; many-branched and
endless indeed are the thoughts of the irresolute.
35. The great chariot-warriors will think that
you have withdrawn from the battle out of fear Yamimam puspitam vacam pravadantyavipascitah
and you that were highly esteemed by them will
be lightly held. Vedavadaratah Partha nanyadastiti vadinah 42
The Chamber's Journal May 2013 x

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Ved and Vedanta
Kamatmanah svargapara janmakarmaphalapradam 48. Seadfast in yoga, perform actions O

Dhananjaya, renouncing attachment and being
Kriyavisesabahulam bhogaisvaryagatim prati 43 the same in success and failure; evenness is
Bhogaisvaryaprasaktanam tayapahrtacetasam called yoga.
Vyavasayatmika buddhih samadhau na vidhiyate 44 Durena hyavaram karma buddhiyogaddhananjaya

Buddhau saranamanviccha krpanah phalahetavah 49
42. The unwise utter flowery speech, rejoicing
in the letter of the Vedas O Partha, saying. 49. Far inferior to yoga of knowledge is
“There is nothing else than this.” action O Dhananjaya. Seek refuse in knowledge;
wretched are they whose motive is fruit.
43. Obsessed with desires, with heaven as the
ultimate goal of birth and action, (they prescribe) Buddhiyukto jahatiha ubhe sukrtaduskrte
many specific rites for attainment of pleasure Tasmadyogaya yujyasva yogah karmasu kausalam 50
and power.
50. United to knowledge, one sheds here both
44. Those are attached to pleasure and power, good and bad deeds, therefore devote yourself to
whose minds are drawn away by that (flowery yoga; skill in action is yoga.
speech), have no determined intellect fixed in
Karmajam buddhiyukta hi phalam tyaktva manisinah
Samadhi (God-consciousness).
Janmabandhavinirmuktah padam gacchantya-
Traigunyavisaya veda nistraigunyo bhavarjuna namayam 51
Nirdvandvo nityasattvastho niryogaksema atmavan 45 51. The wise, united to knowledge, renouncing
45. The Vedas deal with the three gunas the fruit of action, liberated from the bond of
(attributes). Be thou free, O Arjuna, from the birth, indeed reach the state beyond evil.
three gunas, free from the pairs of opposites, Yada te mohakalilam buddhirvyatitarisyati
remain ever in sattva (purity), free from
Tada gantasi nirvedam strotavyasya srutasya ca 52
acquisition and preservation and established in
the Self. 52. When your intellect will cross the mire of
delusion then you will grow indifferent to what
Yavanartha udapane sarvatah samplutodake has been heard and what is yet to be heard.
Tavansarvesu vedesu brahmanasy vijanatah 46 Srutivipratipanna te yada sthasyati niscala
46. To an enlightened Brahmana all the Vedas Samadhavacala buddhistada yogamavapsyasi 53
are of as much use as a pond is where there is a
53. When your intellect, perplexed by what
flood of water everywhere.
has been heard, shall stand immovable and
Karmanyevadhikaraste ma phalesu kadacana steady in meditation then you will attain yoga
(self-realisation).
Ma karmaphalaheturbhurma te sango stvakarmani 47
Arjuna uvaca:
47. Your right is in action only, never to the
fruits; let not the fruit of action be your motive Sthitaprajnasya ka bhasa samadhisthasya Kesava
nor let your attachment be to inaction. Sthitadhih kim prabhaseta kimasita vrajeta kim 54
Yogasthah kuru karmani sangam tyaktva Dhananjaya 54. What is the description of one of steady
wisdom merged in the super-conscious state O
Siddhyasiddhyoh samo bhutva samatvam yoga Kesava? How does one of steady wisdom speak,
ucyate 48 how sit, how walk?
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Ved and Vedanta
Sri Bhagavan uvaca: established indeed shows senses are under

control.
Prajahati yada kamansarvan Partha manogatan
Dhyayato visayanpumsah sangastesupajayate
Atmanyevatmana tustah sthitaprajnastadocyate 55
Sangatsanjayate kamah kamatkrodho bhijayate 62
The blessed Lord said:
Krodhadbhavati sammohah sammohatsmritvibhramah
55. When one completely casts off, O Partha,
all desires of the mind and is satisfied in the Smrtibhramsad buddhinaso buddhinasatpranasyati 63
Self by the Self, then is one said to be of steady 62. A man musing on objects develops
wisdom. attachment for them, from attachment arises
Dukhesvanudvignamanah sukhesu vigatasprhah desire, from desire arises anger.
Vitaragabhayakrodhah sthitadhirmunirucyate 56 63. From anger arises delusion, from delusion
confusion of memory, from confusion of memory
56. He shows mind is not agitated by sorrow loss of intellect, from loss of intellect he perishes.
nor excited by joy, who is free from desire, fear
and anger, he is called a sage of steady wisdom. Ragadvesaviyuktaistu visayanindriyatscaran
Yah sarvatranabhisnehastattatprapya subhasubham Atmavasyarvidheyatma prasadamadhigacchati 64
Nabhinandati na dvesti tasya prajna pratisthita 57 64. But the self-controlled man, free from likes
and dislikes, moving among objects with his
57. He who is everywhere without attachment, senses under control attains peace.
who having met good or evil neither rejoices nor
hates, his wisdom is established. Prasade sarvaduhkhanam hanirasyopajayate
Yada samdharate cayam kurmo nganiva sarvasah Praannacetaso hyasu buddhih paryavatisthate 65
Indriyanindriyarthebhyastasya prajna pratisthita 58 65. In peace all his sorrows are destroyed, the
intellect of the tranquil-minded soon becomes
58. When like the tortoise drawing in its limbs steady.
on all sides, he withdraws his senses from sense
objects, then his wisdom is established. Nasti buddhirayuktasya na cayuktasya bhavand
Na cabhavayatah santirasantasya kutah sukham 66
Visaya vinivartante niraharasya dehinah
66. There is neither knowledge nor meditation
Rasavarjam raso pyasya param drstva nivartate 59
for the unsteady and to the unmeditative there
59. The sense objects turn away from an is no peace; to the peaceless how can there be
abstinent man but not the relish; even his relish happiness?
turns away on seeing the Supreme.
Indrianam hi caratam yanmano’nu vidhiyate
Yatato hyapi Kaunteya purusasya vipascitah
Tadasya harati prajnam vayurnavamibhasi 67
Indriyani pramathini haranti prasabham manah 60
67. For the mind, which follows the roving
60. O Kaunteya, the turbulent senses of even senses, carries away his intellect as the wind
a wise man while striving, indeed forcibly carry (carries away) a boat on water.
away his mind.
Tasmadyasya mahabaho nigrhitani sarvasah
Tani sarvani samyamya yukta asita matparah Indriyanindriyarthebhyastasya prajna pratisthita 68
Vase hi yasyendriyani tasya prajna pratisthita 61 68. Therefore, O Mahabaho, his wisdom
61. Having controlled them all, he should is established whose senses are completely
sit focused on me as supreme, his wisdom is restrained from sense objects.
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Ved and Vedanta
Ya nisa sarvabhutanam tasyam jagarti samyami (3) One’s duly to Act (Shlokas 31 to 40)
Yasyam jagrati bhutani sa nisa pasyato muneh 69 (4) Desire ridden Actions (Shlokas 41 to 44)
69. That which is night to all beings, therein (5) Desire less actions, lead to self realization
the self-controlled one keeps awake; that in (Shlokas 45 to 53)
which beings are awake is night to the sage who
sees. (6) the qualities of an enlightened person
(jnani) (Shlokas 54 to 72)
Apuryamanamacalapratistham
The teaching of Bhagavad Gita of life and living
Samudramapah pravisanti yadvat and purpose and object of living and the ways of
their realisation are discussed in Chapter II itself.
Tadvatkama yam pravisanti sarve
To start with its teaching, it lays down, three
Sa santimapnoti na kamakami 70 basic principles.
70. As the waters enter the ocean which, filled (I) The Atma (the self) is death less and
from all sides, remains undisturbed, likewise he, indivisible;
in whom all objects of enjoyment enter, attains
peace, not the desire of objects. (II) The body of a person is insignificant and
is transcient
Vihaya kamanyah sarvanpumamscarati nihsprihah
(III) One must follow ones `Swadharma’
Nirmamo nirahankarah sa santimadhigacchati 71 to realise, one’s goal of life, one’s self
71. That man, who abandons all desires and realisation.
moves about without yearning, without the Lord Krishna starts His sermon with the nature
sense of `I’ and `mine’, he attains peace. of one’s soul. He says one who is wise neither
Esa brahmi sthitih Partha nainam prapya vimuhyati grieves for the living nor for the dead. The soul
is indestructible and it is eternal, neither with
Sthitvasyamantakale pi brahmanirvanacchati 72 the beginning nor with the end. It is Anadi
72. This is the state of Brahman O Partha; and Ananta. It was always there, it is there
attaining this none is deluded. Being established and it will be there always, without an end.
therein, even at the end of life, one attains Death is certain for the born and the birth for
oneness with Brahman. the dead. Being constently passing through the
repeated stages unmanifest `Manifest and again
in unmanifest, so why one should grieve over
SANKHYA YOGA the inevitability. The indwelling soul in the body
The second chapter of Bhagavad Gita deals with remains eternity, the same.
jnana yoga, the yoga of knowledge.
In the next ten shlokas (31 to 40) Lord tells
Sankhya deals with the basic principles of life Arjuna the importance of following one’s
and living and yoga deals with the way and swadharma. By his swadharma that is by
method of realising of sankhya principles of life. his nature, he is a kshatriya and therefore by
The second chapter has 72 shlokas. The same nature he must fight a war for a right cause.
may be divided into following parts – Abandoning such an opportunity will only incur
infamy and sin. In victory he enjoys kingdom
(1) Arjuna’s despondent condition (shlokas 1 to 7)
and in case of death in such war he will, gain
(2) Indestructibility of soul, self (Atma) heaven. Therefore the Lord advises Arjuna to
(Shlokas 8 to 30) arise from the paralysis state and fight, without
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Ved and Vedanta
concern for the result of the battle, as in either actions, and voluntarily gives up the fruits of his
case he is a gainer and not a loser. actions and uses the same for the welfare of the
others. These qualities are described by Lord Shri
Now as per Bhagavad Gita every person born Krishna in Shlokas 44 to 53. The basic principle,
has his own swadharma and he must do his is to work for work’s sake, tirelessly without
duty as per his swadharma. Every person born, caring for the results of their such work. Shlokas
is born in a family and as such he has a Father, a 47 is often quoted Shlokas and if that is followed
Mother, brother and sister and his relatives and by the Tamas India and Rajas west, it will
friends, his neighbors, his city and his country. change everything that is wrong and, the whole
His duly is to do his best without any personal humanity will live in peace, and in harmony, with
desires and without caring for the result, he all-round development with human values. This
has to serve, his parents he has to love his shloka is as under “Your right is in action only,
brothers and sisters and the relatives and live never in the fruits, let not the fruits of actions, be
harmoniously and selflessly in his all actions, as your motive nor your attachment to inactivity.”
a duty (Karma), that is duty to act selflessly, one The next Shloka (48) defines what is yoga. It says
should serve the society in which he is born. steadfast in yoga performs actions, renouncing,
(iv) Actions with desires. attachment and being the same in success or
failure, evenness, is called yoga.’
Those who fanatically adhere to mechanical
rituals irresolute whose desires dissipate the In Shloka 53 the `LORD deals one self
minds. They strick to the ritualistic portion of the realisation. He tells Arjuna that when your
Vedas and declare in a flowery speech, that there intelled perplexed by what has been heard shall
is nothing beyond, these rituals. Despite regular stand the immovable and steady in meditation,
performance of the reituals their attention in then you attain yoga (self-realisation).
life remains focused on enjoying the pleasures Now, the whole advice given by the LORD, in
and power of the world, such people posses brief can be surmised as under:
a vacillating mind, unable to concentrate and
mediate on the supreme self. (Nirguna) Sankhya + (Saguna) Yoga + (Saakaar) Sthitaprajna
(Comprehension of Art of applying Personification of those
Desireless, unattached actions, lead to self The principles of life) them in life principles and master of
realisation (shloks 45 to 53). the art
Vedas deal with three kinds of Gunas. Tamas,
Rajas and Satvick. They explain that in life one
should while working should elevate from Tamas together constitute the whole science of Life
to Rajas from Rajas to Satvick. Normally human It is bound to lead to brahmanirvana, or moksha,
beings act with two attitudes, The Tamas, the i.e. liberation of the Self and its union with the
indolent says, that if I am not getting the fruits of Brahman. What else could follow?
my actions, I will not work at all. In our country
many belong to this class of persons. The Rajas’ As up to Shloka 53 the whole sermon of life is
predominated persons, say that they will work covered, Chapt. II would have ended, but for
and keep, the fruits of their action and will the question put by Arjna in shloka 54, as to
not give away the fruits of their actions. The what is the description of one of study wisdom
western world is dominated by persons with (sthitaprajna) merged in the super conscious state?
`Rajas’ Gunas. However the best of these three How he speaks, how does he sit, how does he
categories is one with Satwick gunas’ one who work. As an answer to this question. The LORD
works, without any desires and without any narrates the qualities of a sthitaprajna, the realised
attachment, nor caring for the results of his soul. In short after attaining union with spirit
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Ved and Vedanta
a devotee’s consciousness never descend. The At the end let us describe the nature our
devotee merged in God consciousness remains Soul, our real nature, with the description of
in samadhi union with God. His plane of activity the nature of the Soul, in the words of Adia
changes instead of working in the world, while Sankaracharya.
looking towards God, he feels himself in God,
while in the world His discrimination is merged Chidanand Roop Shivoham Shivoham
with the spirit, even whether sleeps, eats, works. Chidanand Roop Shivoham Shivoham
He realises that God has become his nature,
not his little self as well as all other selves. He Aham nirvikalpo, niraakar roop,
beholds the entire material world as God saturated vibhor vyap sarvatra, sarveyendriya
cosmos. Even in the wakeful state he enjoys
nirvikalpa Samadhi or the state in which the Sadame samatvam, na muktir na bandha
devotee perceives both nature and God. He has
given up all personal desires completely, all the Chidanand roop, Shivoham Shivoham
desires of the mind and he is satisfied in the self Manobudhhi ahankar Chitta ninaham
by the self. It must be noted that giving up desires
of the mind does not mean abandonment of the Nacha Shotra jive nacha ghrana Netre
duties. He does his duties desirelessly and with Nacha Vyoma Bhoomir na tejo na vayu
even mind. He is not agitated by sorrows nor
excited by joy, he is free from desires, fears and Chidananda rupas Shivoham Shivoham 1
anger. He is everywhere without attachment,
having met good or evil neither rejoices nor hates. I am not mind, intellect, ego and the memory.
Like a tortoise withdraws his senses from sense I am not the sense of organs (ears, tongue, nose,
objects (shloka 58). The sense objects (vishaya) eyes and skin).
turn away from an abstinent man but not the
relish; even his relish turns away on seeing the I am not the five elements (sky or ether, earth,
supreme (shloka 59). Senses are very strong light or fire, the wind and the water).
and even a wise man is carried towards them.
However a wise man controlling senses must I am supreme bliss and pure consciousness,
focus on God (shloka 61). A self controlled person, I am Shiva,
a sthitaprajna, moving among sense objects with
his sense under control and he is free of attraction I am all auspiciousness, I am Shiva.
or aversion. In his tranquillity all sorrows are Nacha prana sandhno na ve manchtauh
destroyed and he becomes firm. (shloka 65). A
Jnani’s, all senses are fully under his control, na va saptadhatur na va panchakoshah
keeping them away from all sense objects. A na vak panipadau na chopastha payu
sthitaprajna keeps away all the sense objects, and
also the I and my sense, as I and mine leads for Chidananda rupas Shivoham Shivoham 2
craving. Such person (sthitaprajna) attains his
real self and becomes one with Soul. That, is he I am not Prana (energy) nor five vital airs (Panch
becomes jeevana mukta, which is the final goal of Vayu),
every person. He gets away from the circle of birth nor the seven essential material (sapta dhatu),
and death and thereafter lives in eternal peace.
nor the five sheaths of the body (pancha kosha).
With this the discussion, on the path of
knowledge ends on a Jnani realising his final I am not the organ of speech, nor hand nor the
stage of self’s union with Brahma? leg,
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Ved and Vedanta
nor the organs of procreation or the elimination I am the supreme auspiciousness of the form of
(anus). consciousness-bliss (chidananda rupah). I am the
auspiciousness
I am supreme bliss and pure consciousness,
I am Shiva, I am supreme bliss and pure consciousness,
I am Shiva,
I am all auspiciousness, I am Shiva.
Na me dwesh ragau na me loobha mohau
na me mrutu Shanka na me Jatibheda
mado naiva me naiva matsaryabhvah
Pita naiva me naiva mata na Janma
na dharmo na chartho na kamo na mokshah
na bhandu na mitra gurur naiva shishya
Chidananda rupas Shivoham Shivoham 3
Chidananda rupas Shivoham Shivoham 5
I have no hatred or dislike, neither greed nor
liking, no delusion, I have no fear of death, nor do I have death.
No doubt about my existence, nor distinction of
I have no pride or haughtiness, nor jealousy. caste. I have no father or mother, I have no birth.
I have no duty to perform (dharma), no desire I have no relatives, nor friend, nor the guru, nor
for any wealth or pleasure (kama), the disciple.
I have no liberation (moksha) either. I am pure knowledge and supreme bliss, I am
I am supreme bliss and pure consciousness, Shiva,
I am Shiva, I am all auspiciousness, I am Shiva.
I am all auspiciousness, I am Shiva. Aham Nirvikalpo Nirakar rupo
Na punyam na paapam na Saukhyam na dukham Vibhurvyapa sarvatra sarvendriyani
na mantro na tirtho na veda na yagna Sada me samatvam na muktir na bhandha
aham Bhojanam naiv bhojam na bhokta Chidananda rupas Shivoham Shivoham 6
Chidananda rupas Shivoham Shivoham 4 I am formless and devoid of all dualities
I have neither virtue, nor vice.1 I exist everywhere and pervade all senses
nor pleasure or pain, Always I am the same,
I do not need mantras (sacred chants), nor I am neither free nor bonded
pilgrimages.
I am pure knowledge and supreme bliss, I am
nor scriptures (Vedas), rituals or sacrifices Shiva,
(yajnas).
I am neither the enjoyed nor the enjoyer, nor
enjoyment. 2
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Special Story – Maharashtra Co-operative Housing Societies – Part-II
Kishor Vanjara, Tax Consultant
Registration of a Society
A Housing Society means a group of houses 3. To apply to the registration authority for
the object of which is providing its members name reservation of the society and obtain
with houses or flats and to provide its members a letter in that connection.
common amenities and services.
4. To open a bank account in the name of the
proposed society and deposit therein the
(A) Registrar (Section 3) entrance fee, share money and the amount
The State Government may appoint a person
recovered for preliminary expenses from
to be the Registrar of Co-operative Societies for
the promoters.
State and also appoint one or more persons to
assist the Registrar. The person or persons so 5. To deposit the registration fee and to
appointed to assist the Registrar and on whom obtain the receipted challan.
any powers of the Registrar are conferred,
shall work under the general guidance, 6. To prepare and to submit the proposal for
superintendence and control of the Registrar. registration.
(60% of total flat owners is minimum number of
(B) Conditions of Registration eligible members – Circular dated 24-7-1992 of
(Section 6) State Government) Om Sai Pratibha Co-operative
As provided in section 6(1) of the MCS Act, Housing Society vs. State of Maharashtra and
1961 the minimum number of persons for Others, 2002(5) Bom. C. R. 177.
registration of housing society is 10 each of
such person being member of a different family. (C) Application for Registration
[Explanation:– For the purpose of section 6 and
(Section 8)
section 8 the expression “member of family”
The application for registration should be made
means wife, husband, father, mother, son or
to the Registrar in prescribed form and shall
unmarried daughter].
be accompanied by four copies of proposed
All the persons should gather and hold a bye-laws of the society. The said application has
meeting to : to be signed by a member of the Committee.
1. Select a Provisional Committee and elect a Along with the application, the Chief promoter
Chief Promoter should submit particulars such as :-
2. Select a name for such society and to pass (a) name, address, age, occupation of the
appropriate resolution. promoter, etc.,
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199
Registration of a Society
(b) particulars of proposed society, and thereafter the Registrar shall issue a
(c) bank balance certificate, certificate of registration under his seal
and signature within a period of fifteen
(d) undertaking of the Chief promoter in form, days.
as applicable,
3. Where the Registrar refuses to register
(e) a challan showing the deposit of a proposed society, he shall forthwith
registration fee, communicate his decision, with the
(f) copy of the approved plans and reasons therefor, to the person making
declaration by promoters members the application and if there be more than
including the Chief Promoter that one to the person who has signed first
their residence is within the area of the thereon.
operation of the society. 4. The Registrar has to maintain register of
Thereafter, pursue the proposal filed with all societies registered or deemed to be
Registration Authority and get the same registered, under the MCS Act, 1960.
processed and obtained from Registration
Authority the certificate of registration with (E) Evidence of Registration (Section
registered bye-laws, etc. 10)
A certificate of registration signed by the
(D) Registration (Section 9) Registrar, shall be conclusive evidence that the
1. If the Registrar is satisfied that a proposed society therein mentioned, is duly registered,
society has complied with the provisions of unless it is provided that the registration of the
MCS Act, 1960 and the rules, or any other society has been cancelled. (Rukshana Apartment
law for the time being in force, or policy Co-operative Housing Society Ltd vs. Smt. S.
directives issued by the State Government Aluwalia and Others, 1987(T.J. 456)
under section 4 and its proposed bye-laws
are not contrary to the Act or to the rules, (F) Power of Registrar to decide
he shall, within two months, from the date
certain questions (Section 11)
of receipts of the application register the
When any question arises whether a person is
society and its bye-laws.
an agriculturist or not or whether any person
2. Where there is a failure on the part of the resides in the area of operation of the society
Registrar to dispose of such application or whether a person is or is not engaged in
within the period of two months, the or carrying on any profession, business or
Registrar shall, within a period of fifteen employment, or whether a person belongs or
days from the date of expiration of that does not belong to such class of persons as stated
period refer the application to the next in section 22(A) and has or has not incurred a
higher officer and where the Registrar disqualification, such question should decide
himself is the registering officer, to the by the Registrar and his decision shall be final
State Government, as the case may be but same shall be decided by the Registrar after
dispose of the application within two giving an opportunity of being heard.
months from the date of receipt and on
the failure of the such higher officer or (G) Amendment of Bye-Laws of
the State Government, as the case may Society (Section 13)
be to dispose of the application within The application for registration of the
that period, the society and its bye-laws amendment of bye-laws of the society shall be
shall be deemed to have been registered disposed of, by the Registrar within a period
The Chamber's Journal May 2013 SS-VII-2

:20
of one month from the date of its receipt. No continue under its new name. Where a society
amendment of bye-laws would register by changes its name, the Registrar shall enter the
Registrar if in his opinion, if the amendment name in its place in the register of societies and
is repugnant to the policy directives, if any, shall also amend the certificate of registration
issued by the State Government. After the accordingly.
registration, the Registrar would issue a copy
of the amendment certified by him, which shall (J) De-Registration (Section 21-A)
be conclusive evidence that the same is duly 1) If the Registrar is satisfied that any society
registered. If Registrar refuses to register such is registered on misrepresentation made
amendment, he should communicate the order by applicants or the purpose for which the
of the refusal, together with his reasons to the society has been registered are not served,
society. he may, after giving an opportunity
of being heard to the Chief Promoter,
(H) Power to Direct Amendment of the Committee and the members of the
Bye-Laws (Section 14) society, de-register the society.
The Registrar suo motu call upon the society, for 2) When a society is de-registered under the
amendment of the bye-laws, if it is necessary provisions of sub-section (1) the Registrar
or desirable in the interest or any bye-laws are may, notwithstanding anything contained
inconsistent with the provisions of MCS Act, in MCS Act, 1960 or any other law for the
1960 or rules, he may call upon the society in time being in force, make such incidental
the prescribed manner to make the amendment and consequential orders including
within such time as he may specify. appointment of Official Assignee as the
If the society fails to make the amendment circumstances may require.
within the time specified, the Registrar may, 3) The Official Assignee has power
after giving the society an opportunity of being to realise the assets and liquidate the
heard register such amendment and issue to the liabilities within a period of one year
society a copy of such amendment certified by from the date he takes over the charge of
him. With effect from the date of the registration property, assets, books, records and other
of the amendment in the manner aforesaid, documents, which period may, at the
the bye-laws shall be deemed to have been discretion of the Registrar, be extended
duly amended accordingly, and the bye-laws date from time to time, so however, that
as amended shall subject to appeal, if any, be the total period does not exceed three
binding on the society and its members. years in the aggregate.
(Shri Kiran Shriram and Another vs. State of 4) The remuneration and allowances as
Maharashtra and Others 2005 (4) All M. R. 94) may be prescribed shall be payable to
Official Assignee and he is not entitled to
(I) Change of Name (Section 15) any remuneration whatever beyond the
A society which wants to change its name can prescribed remuneration or allowances.
do so by passing a resolution in general meeting
and with the approval of the Registrar, it can 5) The powers of the Registrar under sub-
change its name, but changing the name shall sections (1) and (2) shall be exercised only
not affect any right or obligation of the society by the Registrar or Joint Registrar of Co-
and any legal case instituted against them will operative Societies.

219
Smooth Sailing of Redevelopment of the Society
Bharat Joshi, Advocate
Smooth Sailing of
Redevelopment of the Society
I) N o w a d a y s i t i s s e e n t h a t m a n y whenever a piece of land is reserved

co-operative societies are opting for for any public purpose in development
redevelopment of their property. plan and the Mumbai Municipal
Corporation does not have money to
II) Every building in city or suburbs of acquire it and the owners surrender
Mumbai, either ownership, apartment or the vacant land to BMC, then for such
tenanted, wants to go for redevelopment. surrender of land the MMC will issue
Every owner wants to take advantage of a certificate to the owner authorising
the changed position in Law and develop the owner, for his entitlement of
(redevelop) vertically for high-rise development right equivalent to 40%
buildings. In the process, the occupants, of area of the land and that right can
society members and tenants, if they are be transferred (loaded on) to any other
well versed with the law, then they will be land for construction (situated in North
in a better position to negotiate and protect direction). That means if an owner
their interest either with the Builder or with surrenders 1000 sq. mtrs. of land to
the Landlord. Let us try to understand few MMC in Vile Parle (West), then the
terms which are often used in negotiation MMC will give 40% of land area i.e.
for redevelopment process. These terms are 400 sq. mtrs. of TDR certificate to him,
not as per its legal definition but they are which he can sell that right to any
explained for better understanding. other land owner in city of Mumbai
1. F.S.I. – This is a term used for North of Vile Parle (West) to construct
buildable area which can be a structure on another land, in addition
constructed on a piece of land if it is to the FSI available for the other land.
a vacant land. If the land area is 1000 3. Fungible FSI – This is a new term
sq. mtrs. and if the FSI is 2 that means floated recently which is a FSI of 0.35%
that a structure of 2000 sq. mtrs. can in case of residential premises and
be constructed on that piece of land of 0.20% in case of commercial premises
1000 sq. mtrs. on payment of premium. Earlier to
this Law certain areas like common
2. T.D.R. – This terms means transfer
passage, balcony, staircase, lift areas,
of development rights. It means
elevation designs, flowerbeds, were

:22
not considered in the computation 2) Appoint projected management

of FSI (free of FSI), such areas are consultant who will advise you on the
now allowed and charged by MMC development potential of the property,
for construction as a part of fungible for effective negotiation with the
FSI. It has been seen that the Builders builders in future.
used to charge it for all those areas
3) With due intimation, to the Registrar
by calling it super built-up area or
of co-operative society call for General
saleable area but in fact they were
Body meeting and pass a resolution for
getting it in the building plan free
redevelopment with consent of 70% of
of FSI. This FSI, which is in addition
the members out of total members.
to the FSI available on that piece of
land. Thus, a piece of land with 1 4) Appoint an Advocate for all legal
FSI can utilise 1.35 FSI for residential complexities, terms and conditions for
buildings. tender documents and bid proposal
and for development agreement and
4. Carpet area – Area which can be likewise appoint Project Management
actually used by the occupant within Consultant (PMC) for knowing
the walls is known as carpet area. potential of land and to frame bid
conditions and to evaluate proposals
5. Built-up area – It is the area measured and supervise work.
after inclusion of the walls and
normally, it is 16% more than the 5) Frame suitable terms and conditions for
carpet area but some Builder started tender such as:
charging super built-up area or jumbo (a) for additional carpet areas and
super area and later on saleable area free FSI area like balcony, flower
in which the addition to the carpet beds.
area was called as loading. Sometimes,
the saleable area would include area (b) for amount of corpus funds to
of the flat, common passage, staircase, meet with future expenses of
servant quarters and other common increase in taxes and maintenance
amenities area. charges.
(c) for special common amenities in
6. Free of FSI – Prior to fungible FSI, the new building like swimming
area used up to 15% of the FSI area for pool, garden, gym.
common passage, staircase, flowerpots,
lifts. Now, because of the fungible FSI, (d) for rent during development
it is restricted to 0.35% and in case of period and transportation
commercial it is 0.20%. charges, brokerage and
(e) for other compensation for
III) How does the co-operative housing mitigating hardship.
societies or its members ensure smooth
sailing of the process and what steps they (f) for bank guarantee.
need to take it as enlisted herein. (g) for fixed period for development.
1) Society must have conveyance of its (h) for default mechanism if

property and if not, take steps to developer fails to complete work
acquire it urgently. in time to the satisfaction.

239
Smooth Sailing of Redevelopment of the Society
(i) for all expenses by builder. before the members of society are
handed over their new flats after
(j) for damages for delay. occupation certificate.
(k) for title documents for new flats 15) Put up a condition that the Builder
for members and such other. after has to manage with BMC
to reduce the property tax ratable
6) The tender details and minimum
value.
terms to be published in 3 newspapers
inviting bids. 16) F l o a t i n g B a n k G u a r a n t e e a m o u n t
equivalent to construction cost of
7) Appoint Sub-Committees for members total flats, with reducing sum
redevelopment with different specific as per progress of the construction of
tasks and all Sub-Committees to report new building.
to Managing Committee.
17) The building plans to be passed in the
8) After examining offers with help name of the Society.
of PMC short list the builders and
check their past projects and work of 18) P u t u p p r o p e r m e c h a n i s m for
construction, other antecedents and termination of agreement.
financial capacity.
19) In event of termination, vest authority
9) The negotiation for terms of agreement in society to carry on further
to be started with 2 builders construction, with help of encashment
simultaneously. of bank guarantee.
10) Consider following additional points 20) The builder should pay to society an
besides tender terms. amount equivalent to accumulated
Sinking Fund.
11) The corpus funds should be deposited
in name of society at the time of the 21) The Agreement of development to be
Agreement for development. given to the members for discussion,
and pass it in General Body Meeting
12) The rent for alternate accommodation after intimation to Registrar.
to be paid to members for full
Development period in advance and 21A) The members be given agreement for
for the grace period by post dated new flats duly stamped and registered
cheque. after sanction of plan and flats to be
vacated.
13) The forfeiture clause for payment of
rent and the corpus amount, in the 22) The possession of new flat be taken
event of termination of the Agreement only after occupation certificate.
for reasons of undue delay in 23) All expenses, stamp duty, registration
construction. charges and incidental cost and
14) T h e r e s t r i c t i v e c o n d i t i o n t o p u t i n construction cost to be borne by
agreement for not allowing the Builder.
possession of the builders sale flats, 24) Thoroughly discuss, design of new
to be handed over to his purchasers, flats, quality of construction, fixtures,

:24
fittings, lift, amenities, common areas, be authorised to take up the work

elevation, ornamental designs and such of construction work, through a new
other things. Contractors or a new builder without
objection from old builder.
25) The builder to bear all expenses of
litigation if initiated. 32) Assess general damages and special
damages for delay in construction and
26) Do not enter into a Memorandum of put as a payment to society.
Understanding with builder but go for
Agreement for Development with all 33) T a x p a y m e n t d u r i n g d e v e l o p m e n t
terms and conditions suitably specified period and till new flat purchasers are
in it and register it. accepted as member is responsibility of
the builder.
27) Sign Agreement of development with
all consenting members as signatories (34) Every member of the Society has to
duly stamped and Register it and keep consider that what is the development
original with society. potential of the land of the Society and
out of that full development potential,
27A) D o n o t a g r e e f o r a n a r b i t r a t i o n how much the members would be
reference between developer utilising for their rehabilitation and
and society (it is misused in many any balance area, which is normally
cases) known as free sale component for
the Builder, how the Builder is going
28) Vacate the old flats only after the plans
to profit out of it which the Society
are sanctioned and IOD is issued in
members should share the profit
name of society and rent cheques for
by demanding appropriate corpus
total development period are received
fund and/or other compensation
and agreement of new flats in name
and/or rent for temporary alternate
of the members are duly signed and
accommodation.
registered.
(35) If this calculation is understood by
29) Check progress of the construction
the members, then they will be in a
of the building through project
better position to negotiate with the
management consultant (PMC) or
Builder through their Managing
the Structural Engineer and demand
Committee.
copy of sanctioned plan and all
correspondence with BMC. 36) If the proper procedure is followed
then there will be smooth selling for
30) In the cases of delay in construction
the redevelopment process and the
without justifiable cause do not
members can enjoy new construction
hesitate to encash the Bank Guarantee
with added amenity and with peace of
and terminate the Development
mind.
Agreement.
37) Do not forget to invite your Rotary
31) I n t h e e v e n t o f t h e f a i l u r e o f t h e
friends for house warming of
builder to complete the construction
ceremony.
work on schedule or undue delay in
completion of work, the Society should 2

259
Prescribed New Model Bye-Laws
Bharat Joshi, Advocate
1. Under section 79 of Maharashtra Co- bye-laws approved on 24-12-2010 for flat

operative Societies Act, the Commissioner of owners co-operative society.
Co-operation and Registrar of Co-operative 4. It has 18 chapters and 176 bye-laws.
Societies, Maharashtra State, approves It applies to co-operative housing society,
model bye-laws which prescribe a format of which are formed by the flat owners who
minimum requirement in the bye-laws of a have purchased the flats under Maharashtra
co-operative housing society. The model bye- Ownership Flats Act and formed a co-
laws are not compulsory to be adopted by the operative housing society.
co-operative housing society and it cannot be
implemented until the General Body Meeting 5. The bye-laws deals subject such as share
of the society adopts it by 2/3rd majority, capital, raising of the funds, liabilities, reserve
with suitable amendments, alterations or funds, creation & utilisation of other funds.
changes. It also defines classes of members, their
rights, responsibilities and liabilities, right of
2. The bye-laws of a co-operative society
the member to take inspection of the books
are not the statute, but it is part of delegated
and records, nomination procedure rules for
legislation and it provides mechanism for
subletting and licensee and transfer of shares
management of the day-to-day affairs and
and interest in the capital of the society.
the procedure and rules prescribed in it
for interactions between members and the
6. It also defines responsibilities and
Managing Committee. The bye-laws cannot
liabilities of members, maintenance of the
be contrary to provisions of Maharashtra
flats by the member, procedure for expulsion
Co-operative Societies Act and Rules.
of a member and liabilities of past member.
3. The Commissioner of Co-operation,
7. It also specifies levy of charges by
Maharashtra State, had approved the model
the co-operative society, its computation &
bye-laws on 2-7-2001, but it was prescribed
break up.
for all types of co-operative societies. Then on
24-12-2010 a new model bye-laws have been
approved for flat owners purchase types co- 8. The duties and powers of the
operative society. We will discuss the model co-operative society are also specified. The

:26
parking policy and management of allotment housing society is incorporated in the latest
of parking spaces, change of user of the flats model bye-laws. The said bye-laws specifies
are also part of powers of the society. that Government Resolution dated 3-1-
2009 under section 79A of Maharashtra Co-
9. Holding of General Body Meetings, operative Societies Act shall be followed in
Annual General Body Meetings and the case of redevelopment of the building.
Special General Body Meetings are also The Bombay High Court has held that the
covered up. State Government Resolution dated 3-1-2009
10. The management of the affairs of the is directory and not mandatory mechanism
society through General Body Meeting, prescribed under the State Government
operation of bank accounts, elections held Resolution applies only in the case where
in the society, custody of the records of there is a dispute between members for
the society, election of office bearers of the redevelopment of the society and not when
society and how the General Body Meetings that there is no dispute and all the decisions
are conducted are specified. are taken by appropriate majority in the
General Body Meeting of the society.
11. The maintenance of books of account
and several statutory registers to be 16. Now, I will touch with the major topics
maintained by the society is stated. for which the rules are framed in the model
bye-laws.
12. The distribution and appropriation of
17. The society has to issue share certificate
profits by the society by due contribution to
to the members of the society and it should
the statutory reserve fund is set out in bye-
bear the seal and signature of the office
laws No. 149 and also audit of the accounts
bearers of the society.
of the society under bye-laws No. 152, 153
& 154 are specified. A separate chapter on 18. The liability of the society is limited.
conveyance of the property and maintenance
19. The society has the power to constitute
of the property is incorporated in the bye-
reserve fund and collect the amounts for
laws.
the reserve fund. The society can also create
13. A special chapter on complaints or the other fund for repairs and maintenance and
mechanism of redressal of the complaints of major fund and sinking fund. These funds
the members and the action expected from the can be utilised for structural repairs, repairs
Committee within the stipulated period. & maintenance, sinking fund for emergency
and corpus fund for future exigencies. The
14. Other miscellaneous matters such major fund can be utilised for major repairs of
as service of the notice of the Meetings, the society. The society can also constitute an
notice board, right of the committee to levy investment fund and decide about the mode
penalties, operation of the lift, playing games of investment of that fund.
in the society’s compound, restriction on
playing games in the society’s compound, 20. There are two types of membership
restriction on letting or giving on leave & – principal member and associate member.
licence basis, use of terrace, copying charges The membership can be given to individuals
for the documents are all covered up in the who are not a minor and not of unsound
model bye-laws. mind and it can also be given to corporate
bodies. The Application for membership of
15. A special provision under the bye-laws the society requires to be disposed of by the
No. 176 for redevelopment of co-operative office bearers within 60 days.

279
21. The members have a right to get copy 26. In other circumstances, the transfer
of the certified bye-laws. They have the right of the shares takes place in prescribed
to inspect books and records. They have the form and the transfer fee is ` 500/- and
right to occupy their respective flat. The maximum transfer premium is ` 25,000/-.
associate member has a right to act in place Any charge demanded or recovered by the
of the principal member and with the written society exceeding the aforestated amount
consent of the principal member and attend is an illegal demand by the society and it
and vote at the General Body Meeting, contest can be recovered back even if paid under
election and hold office. duress.
22. On the death of the principal member 27. The members of the society can
or transfer of the shares by the principal exchange the flats inter se by suitable
member, the associate membership is agreement duly registered and by Application
terminated. The associate member does not to the society.
have an independent right or he is not a joint
member. His continuation as an associate 28. The member can sublet the premises
member is at the pleasure and will of the or give it on leave and licence by prior
principal member. permission of the society and now, under the
new rules by Mumbai Police Act, with the
23. The third type of category, nominal certification by the police authority about the
membership, is now discontinued after the tenant.
amendment of 14-2-2013.
29. The member occupying premises has to
24. The members can be removed by pay maintenance charges and other legal dues
resignation by the member or by providing demanded by the society in accordance with
expulsion provisions and also now, after the the law.
amendment of 14-2-2013, the society in certain
case of persistent defaulter and for non- 30. The maintenance charges of the society
attendance of the General Body Meeting for 2 is broadly computed under 2 counts – one
consecutive terms, can attract termination or is tax component and the other is known
cessation of the membership. as service charges. In tax component, the
tax levied by the local authority on the
25. The nomination by the member is a premises are charged from the members
facility that, in the event of death of the and service charge which includes salaries
member, the society can by placing the of the staff, expenses for the society’s office,
name of the nominee in the name in the stationery & postage, travelling allowance
share certificate, deal with such persons. The given to the staff by proper procedure if
nomination is not an inheritance or succession any fees are paid to the members of the
of the estate of the deceased. If the deceased society to the committee, subscription to the
member has executed a Will, then the share education fund, annual subscription to the
capital and shares and the flat will have to be housing federation to which the society is
dealt with in accordance with the Will and/ affiliated, committee fees, expenses incurred
or Probate. All the legal heirs of the deceased at the General Body Meeting and committee
member, by indemnifying the society and meetings, legal charges, common electricity
by giving written consent, can nominate charges and any other charges approved by
one of the legal heirs for transmission of the the General Body Meeting could be part of
shares of the deceased member. He could be the service charges and it is divided equally
a nominee also. among all the members and these charges can

:28
be divided on the basis of area or any other General Body Meetings which can be called
criteria. by the Managing Committee or can be
requisitioned by 1/5th of the total members
31. The tax component part is decided as of the society requesting for a Special General
levied by the local authority for the property Body Meeting on specific Agenda stated
tax. The water charges can be divided on in the requisition notice to the Managing
the basis of inlets provided in each flat. The Committee.
expenses of repairs and maintenance of the
building should be subject to the minimum 34. The General Body Meeting of a
of 0.75% p.a of the acquisition cost of the flat. society is the supreme body and it can pass
Similarly, for the lift sinking fund should be Resolutions which are not contrary to the
0.25% p.a of the construction cost of each Maharashtra Co-operative Societies Act
flat. The parking charges can be fixed by and rules and which are binding on all the
the General Body Meeting. The interest on members.
delayed payment of the charges can be fixed
by the General Body or as prescribed in the 35. The audit of accounts of the society are
bye-laws No. 72 and non occupancy charges compulsory and mandatory.
can be fixed at 10% of the service charge
and not more under bye-laws No. 43. The 36. The bye-laws of the society can
insurance charges paid by the society can be be amended by moving the appropriate
divided proportionately on area basis. The Resolution in the Special General Body
lease rent paid for the land by the society Meeting after 14 days with 2/3rd majority of
can be divided on the basis of the carpet the members present and voting in favour of
area of the flat and all other charges can be the amendment and later on the amendment
divided by the General Body Meeting of the is approved by the registering authority by
society. the Registrar of Co-operative Societies.
32. The member of the society are under 37. The Managing Committee can regulate
the wrongful impression that in any dispute the operation of the lifts, formulate a policy
with the office bearers or the society, they can for parking on fair proposals of allotment to
stop payment of maintenance charges. This is each one.
a wrong impression and maintenance charges
should not be stopped at any point of time. 38. In bye-laws chapter No. 17, deals with
The issue of excessive charges or wrongful redressal of complaint and in which different
computation can always be taken up and authorities like Registrar, Co-operative
excessive amount if paid can be adjusted from Court, Civil Court, local authority, police and
future maintenance charges or the members general body and housing corporation and
can take up the matter in Co-operative Court in which type of matters the complaints can
if the quantum of demand is large but in no be entertained by these authorities are very
circumstances the member should stop paying specifically mentioned.
maintenance charges and become a defaulter
which will have serious consequences. 39. The repairs of the society, as far as the
internal repairs in the premises is concerned,
33. The Annual General Body Meeting it is the responsibility of the member and as
are called for approval of accounts and far as the external walls, common area and
appointment of an Auditor and the other terrace is concerned, it is the responsibility of
General Body Meetings are called Special the society to carry out the repairs.

299
40. The difference between the model 41. The model bye-laws unless adopted by
bye-laws approved in 2001 and the model the society are not binding and society has
bye-laws now approved in 2010 are as all the right to adopt the model bye-laws
under :- as a format and make suitable changes in
it to suit the needs of the members of the
i) The utilisation of sinking fund with society and then put suggested additions or
approval of the General Body Meeting, deletions in the model bye-laws for approval
without the permission of the Registrar of the Registrar of Co-operative Societies for
of Co-operative Society, is now its acceptance, the proposed additions and
permitted. alterations or deletions unless are contrary to
ii) The minimum share amount is increased the Maharashtra Co-operative Societies Act
to ` 500/- to individual members and to and its rules, it will be accepted by Registrar.
` 1,000/- to corporate bodies. It can easily be said that the model bye-
laws of the co-operative housing society are
iii) Even a bank account can be opened in a guidance for the members and Managing
nationalised bank now with permission Committee members and office bearers to
of Registrar of Co-operative Society. conduct their day-to-day affairs for managing
iv) The co-operative society having share the affairs of the society and act in accordance
capital of more than ` 10,000/- are with rules.
required to hold election by secret 42. After the amendment from 14-2-2013
ballot. in Maharashtra Co-operative Societies Act,
v) The society can recover the dues of a the aforestated bye-laws requires to be
deceased member from the legal heirs of reconsidered by the authorities and well
the deceased member and/or from the specified policies for parking, repairs,
occupant of the flat. maintenance, levying of the charges and
user of common spaces like terrace, lift are
vi) The Managing Committee can co- required to be more specified and prescribed.
opt only 2 members with the prior It is seen that the dispute arises between
permission of the Registrar in members and society on aforestated grounds
the vacant post in the Managing and issues remain unresolved for years
Committee. together. In all issues approach to Court
is not proper redressal. The only solution
vii) Every co-operative society has to I suggest it to amend bye-laws and bring
prepare a plan for emergency situation required details and specifications on above
and get it approved in the General Body issues and guide members properly and
Meeting and place it and display it in constitute an in-house redressal committee to
the notice board. resolve the issues.
viii) The Managing Committee of each 43. It is high time, looking to the
society has to ensure that no child requirement of housing sector, the
labour is employed in the society and Government of Maharashtra, come with
otherwise the person employing child a separate law for housing co-operative
labour will be fined up to ` 20,000/- societies. The present Co-operative Act covers
and simple imprisonment up to 1 year. all types of co-operative societies.

:30
CA Priti Savla
Property and Funds
Chapter VI of the Maharashtra Co-operative payment of bonus to the persons other than
Societies Act, 1960 (the Act) deals with the its paid employees who are not members i.e.
Property & Funds of the Co-operative Societies non-members for the support received from
and chapter contains sections from 64 to them. Unless authorised by the Registrar, bonus
71A. Further Chapter V of the Maharashtra equalisation fund cannot be utilised for any
Co-operative Societies Rules, 1961 (the Rules) other purposes other than payment of bonus as
provides for rules with respect to the Property & per the provisions of bye-laws. Further dividend
Funds of the Co-operative Societies and chapter equalisation fund can also be created. Every
contains Rules from 49 to 56. year society can appropriate (towards dividend
equalisation fund) up to 2 per cent of the paid
Restriction on distribution of funds share capital such that aggregate amount is not
Co-operative Society is distinct from its more than 9 per cent of the paid share capital.
members. S. 64 of the Act controls distribution The society can draw amount from the dividend
of funds to its members. It lays that no funds equalisation fund only in case it is unable to
other than net profit of a co-operative society maintain uniform rate of dividend, which it
can be distributed by way of bonus or dividend has been paying during last preceding 5 years
amongst the members with an exception of or more. Maximum rate of dividend cannot be
creation of dividend equalisation or bonus exceeded by paying bonus on shares.
equalisation funds. The bonus/dividend to be Member of the society is entitled for the
declared on the basis of the profit of society remuneration for the services rendered. However
earned during the relevant year. such remuneration should be authorised by the
S. 67 of the Act lays that no co-operative society bye-laws. The payment so made can be by way
shall pay dividend to its members at a rate of honorarium2, commission, labour charges, etc.
exceeding 15% except with the prior permission Such remuneration need not be only out of the
of the Registrar. Primary agricultural credit net profits of the society. It can be paid out of
co-operative society shall pay dividend to any funds of the society.
its members as per the guidelines issued by
the Registrar, in accordance with the criteria Ascertainment and appropriation of
specified by National Bank. Salary Earners profits
Co-operative Societies are exempted from the S. 65 lays that a society shall construct its
provisions of S. 67 1. Rule 52 provides/allows relevant annual financial statements and
society to create Bonus equalisation fund for determine net profit in a prescribed manner.
1. CSL.1083/29693-15-C, dated 29-8-1983, M.G.G. Part IV-B dated 20-9-1983, p.283

2. Daulatrao Sampatrao vs. M.C. Society 8 BCT 8

319
Property and Funds
Rule 49A prescribes calculation of net profits. • provision considered necessary for
Net profits to be determined by deducting the depreciation in the value of any Security
following from the gross profits for the year – Bonds or Shares held by the society as part
• all interest accrued and accruing on of its investments;
amounts of overdue loans (excepting • any provision required to be made for the
overdue amounts of loans against fixed redemption and share capital contributed
deposit, gold, etc.); by Government or Federal Society.
• interest payable on loans and deposits; Gross profit after prescribed deduction together
• establishment charges; with the brought forward profits for the previous
year would be available for appropriation. A
• audit fees or supervision fees;
society may appropriate its net profits to the
• working expenses including repairs, rent reserves or any other funds in accordance with
and taxes; the bye-laws. However no part of the profits
• depreciation; shall be appropriated except with the approval at
• bonus payable to employees under the the AGM and in accordance with the provisions
Payment of Bonus Act, 1965; of the Act, Rules and Bye-laws.
• provision for payment of Income-tax;
Out of the profits, appropriation would
• amount to be paid as contribution to
be made as under
the Education Fund at the State Federal
a. Reserve fund (S. 66) – at least ¼th of the
Society which may be notified by the State
net profits. Registrar having regards to the
Government in this behalf;
financial position of the society or class of
• amount to be paid for contribution to the societies may fix contribution to reserve
Co-operative Cadre Employment Fund; fund which may be lower than ¼th of the
• provision for bad and doubtful debts; net profit subject to minimum of 1/10th
• provision for share capital Redemption of the net profits. Reserve fund is required
Fund; to be utilised and invested as per the
• provision for Investment Fluctuations provisions of section 70 and/or rule 54.
Fund; b. Contribution for public purpose (S. 69)
• provision for retirement benefits to the – After setting aside for the reserve fund
employees; and funds towards co-operative education
• provision for any other claims admissible / training u/s 24A, society may set aside
under any other law; maximum 20 per cent of its net profits
for contribution to public purposes. Such
• provision for bad debts and revenue losses
appropriated amount to be utilised with
not adjusted against any fund created out
the approval of federal society as may
of profits;
be notified by the State Government for
• contribution, if any, to be made towards contributing to any co-operative purpose
any sinking fund or guarantee fund, or any charitable purposes (as defined u/s
constituted under the provisions of the 2 of the Charitable Endowment Act, 1980)
Act, rules or bye-laws of the society for or any other public purposes.
ensuring due fulfilment of guarantee given
‘Public purpose’ includes a purpose, in
by Government in respect of loans raised
which general interest of the community
by the society;
as opposed to the particular interest of the
individual is directly and vitally concerned3.
3. Bhahjee Munjee vs. State of Bombay AIR 1952 Bom 476; State of Bihar vs. Kameshwar, AIR 1952 SC 262

:32
c. As per the rule 50 appropriation can be principles of commercial accounting. Creation

made – of certain funds is allowed as deduction while
i. Appropriate for the education and computing taxable income of the society6. Issue
enlightenment of the members of may arise whether dividend or bonus could
the society and any co-operative or be paid out of such funds. Considering the
charitable purposes including relief objectives of the Act, dividend or bonus would
to poor, education, medical relief and not be allowed to be paid out of such funds
advancement of any other general Investment of funds
public utility, subject to maximum of In terms of section 70, a society7 shall invest or
10 per cent of the net profits. deposits funds in one or more of the following –
‘Co-operative purpose’ means a. A District Central Co-operative Bank, the
which has an effect of advancing State Co-operative Bank having at least ‘A’
the cause of co-operation or audit class for last 3 consecutive years.
co-operative movement. Decision Prior to promulgation of the Maharashtra
under Income-tax Act, 1961 for Co-operative Societies (Amendment)
charitable purposes would also be Ordinance, 2013 dated 24th February, 2013
relevant for determining charitable investments were allowed in a Central
purposes under the Act. Bank or the State Co-operative Bank.
ii. Development fund Now investment can be made in the State
iii. Dividend equalisation fund Co-operative Bank only if such bank has
iv. Any other fund created under bye- been awarded ‘A’ audit class for last 3
laws consecutive years.
The question of appropriation would arise b. Any of the securities specified in section
only if there is net profit during the financial 20 of the Indian Trusts Act, 1882. However
year. Profits do not accrue from day-to-day certain securities as permitted by Indian
or even from month to month and have to Trusts Act, specifically bars co-operative
be ascertained by a comparison of assets at societies for making investment in them.
two stated points. Unless the right to profits Hence, under such circumstances no
comes into existence there is no accrual of investment can be made by co-operative
profits and the destination of profits must be societies in such securities.
determined by the title thereto on the day c. Shares, security bonds, debentures issued
on which they arise 4. While dealing with the by any other society with limited liability
payment of additional/final price made on the and having same classification to which it
last day of the accounting year, Hon'ble Bombay belongs.
High Court5 held that it is not appropriation of d. Any other mode as permitted by rules or
the profits. Such sum is necessarily required to by general or special order in that behalf
be deducted for ascertaining the real profits on by the State Government8.
4. CIT vs. Ashokbhai Chimanbhai (1965) 56 ITR 42 (SC)
5. CIT vs. The Solapur Dist. Coop Milk Producers and Process Union Ltd ITA No. 997 of 2008 Order dt. 4-4-2009;
CIT vs. Manjara Shetkari Sahakari Sakhae Karkhana Ltd. ITA No. 318 of 2007, 2007 (11) LJSOFT (URC) 73
6. Siddheshwar Sahakari Sakhar Karkhana Ltd. vs. CIT 270 ITR 1 (Bom); CIT vs. Malegaon Sahakari Sakhar
Karkhana 279 ITR 19 (Bom)
7. Vide the Maharashtra Co-operative Societies (Second Amendment) Act, 2008 words ‘A Society’ was replaced
with ‘Every Society other than the Co-operative Credit Structure’. However vide the Maharashtra Co-
operative Societies (Amendment) Ordinance, 2013 dt. 24th February 2013, words ‘A Society’ is again restored.
8. The Maharashtra Co-operative Societies (Second Amendment) Act, 2008 has substituted S. 70. While
substitution this clause was deleted. However vide the Maharashtra Co-operative Societies (Amendment)
Ordinance, 2013 dt. 24th February 2013, said clause is again restored.

339
Property and Funds
e. The primary agricultural credit maintenance, repair and renewal of society

co-operative society, the District building
Central Co-operative Bank or the State • Processing societies, reserve fund may
Co-operative Bank, shall invest its funds be utilised for acquisition, purchase or
subject to the guidelines issued by the RBI. construction of lands, buildings and
machinery.
Utilisation of investments – Restriction
/relaxation b. Other funds (Rule 55)
a. Reserve Fund i. A society may invest any of its other
Rule 54 provides that besides modes specified in funds in any of the modes specified in
S. 70, Reserve fund can be invested or deposited S. 70 when such funds are not utilised for
also as per the following permitted modes – the business of the society. Business of the
i. Primary societies can invest in the Central society shall include any investment made
Financing Agencies by the society in immovable property
with the prior permission of the Registrar
ii. Central Co-operative Banks and Urban
in process of recovery of the society’s
Co-operative Banks in the State
normal dues or for the purpose if construction
Co-operative Banks
of building or buildings for its own use.
iii. All societies can invest in debentures
ii. Registrar may by the general or specific
issued by the Apex Land Development
order in case of any society or class of
Bank or in Government loans or in any
society, specify maximum amount to be
immovable property specified by the
invested in any class or classes of securities.
Registrar by a general or special order
iii. Every society, who has invested minimum
iv. Societies having reserve fund equal or
10 per cent of the working capital in
more than its paid-up capital, the Registrar
securities, is required to set Investment
may by general or special order, allow
Fluctuation Reserve. Further Registrar may
such societies to invest portion of the
direct that every year a specified per cent
reserve fund exceeding paid-up capital
of the net profits is required to be credited
in its own business. However, Central
to the investment fluctuation fund.
Co-operative Banks and the State Co-
operative Banks with the special or general iv. Registrar by general or specific order shall
permission from Registrar, invest 50 per determine proportion of paid-up share
cent of their reserve fund in their business. capital of the investing company or a
Reserve fund would not be used otherwise than class of society shall invest in the shares
provided. Further pledge would be allowed or security bonds or debentures issued by
on the securities in which Reserve funds is any other society.
separately deposited/invested. However v. Where two or more societies are allowed to
securities can be pledged or fund can be enter into partnership u/s 20A of the Act, and it
utilised otherwise with the prior sanction of the is necessary to invest funds in such partnership,
Registrar. the Registrar may, in addition to general or
However, in case of – specific order of the State Government as
specified in clause (e)9 of section 70 impose
• Co-operative housing societies, reserve
such additional conditions as may be necessary
fund can be utilised for expenditure on the
in the interest of the society.
9. Rules are not amended post replacing of section 70 vide The Maharashtra Co-operative Societies (Second
Amendment) Act, 2008 and introduction of new clause (d) to section 70 vide the Maharashtra Co-operative Societies
(Amendment) Ordinance, 2013 dt. 24th February 2013. Hence reference to clause (e) be read as clause (d).

:34
Provident funds off against the Bad Debt Fund and the
Any society may set for its employees a provident balance, if any, may be written off against
fund u/s 71 of the Act with the contribution by the the Reserve Fund and the share capital
society and form the employees. Such provident of the society, with the sanction of the
fund shall not be utilised in the business of the general body.
society nor would from part of the assets of the b. All other dues and accumulated losses
society. However in case where provisions of or any other loss sustained by the society
Employees’ Provident Funds Act, 1952 is applicable which cannot be recovered and have been
to any society, then provisions of the said Act and certified as irrecoverable by the auditor
not the provisions of s. 71 would apply. may be written off against the Reserve
Fund or share capital of the society
Funds of the society and proceedings
c. In case society is affiliated and indebted
No expenditure from the funds of a society shall
to a Central Bank, it shall first obtain the
be incurred for the purposes of the proceeding
approval of that bank in writing and also
filed or taken by or against the any officer of
the approval of the Registrar for writing
the society in his personal capacity u/s 78 –
off the bad debts and losses.
Power of removable committee or member,
78A – Power of suppression of committee or d. If the society is affiliated but not indebted
removable of member thereof or 96 – Decision of to the Central Bank and in all other cases
Co-operative Court. In case any question arises it shall obtain the approval of the Registrar
whether expenditure can be so incurred or not, in writing.
such question shall be referred to the Registrar. e. If the society itself is a Central Bank,
In case any expenditure is incurred in violation approval of the State Co-operative Bank
of the provisions of s. 71A, Registrar shall direct and the approval of the Registrar shall first
such person to pay such sums within one month. be obtained.
In case of failure to pay, such sums could be In case of societies classified as A or B at the
collected as arrears of land revenue. Further time of last audit, no permission need be taken
such person would be disqualified to continue if the bad debts are to be written off against the
to be officer of any society or to be officer of any Bad Debt Fund specially created for the purpose.
society at any next election including any next
by-election held immediately after the expiration Sections deleted by Ordinance
of allowed period of one month. The Maharashtra Co-operative Societies
(Amendment) Ordinance, 2013 dated 24
Writing off bad debts and losses February 2013 has deleted following sections
(Rule 49) under Chapter VI - Property and Funds of
Central and primary societies including Urban Societies
Banks showing losses consistently over a period
of three years are allowed to write off against the a) Section 68 dealing with the Contribution
Reserve Fund10. Rule 49 provides for writing off to education fund of the State Federal
Bad Debts and losses as under: Society; and
a. All loans including interest thereon and b) Section 69 dealing with Contribution of
recovery charges in respect thereof which Co-operative State Cadre of Secretaries
are found irrecoverable and are certified of certain Societies and establishment of
as bad debts by the auditor appointed employment such cadre of the Act has
under section 81 shall be first be written been deleted.
10. Government Circular No. AGC-274 of 1937 dt. 4-10-1937
2

359
Management of a Society
Kishor Vanjara, Tax Consultant
The management of affairs of a Society is vested I have referred section of the Maharashtra Co-
with the Managing Committee which is duly operative Societies Act, 1960 ( MCS Act, 1960)
constituted in accordance with the provisions of and model Bye-Laws, wherever possible.
MCS Act, 1960, the rules 1961 and the bye-laws
of the society . 1. Committee, its Powers and
This article covers only following topics: Functions – Section 73
1 The Committee, its power and functions The Managing Committee of a Co-operative
2 Reservation provisions Housing Society is a Committee of the
3 Appointment of Manger, Secretary and Management in which the management of the
other officers affairs of the society is vested and it exercises
such powers and discharges such functions as
4 Maintenance charges are set out under the bye-laws of the society,
5 Annual General Body and Authority provided however that the Managing Committee
6 Special General Body and Authority has to function subject to the directions given or
7 Motion of no-confidence against officers regulations made by General Body Meetings of
the Society
8 Act of societies not to be invalidated by
certain defects The following are some of the Powers
9 Power of suspension of committee conferred and Functions of the Managing
Committee under the present model bye-laws
10 Registrars power
of the Society,
Bye-Law No. Powers and Function

6 To ensure that the society is affiliated to Housing Federation and its
subscription is regularly paid
12 ( i ) and (ii) To consider all matters relating to the creation, investment and for utilisation
14(a), (b) and (c), 15 of the repair and maintenance fund, reserve fund and sinking fund
13 (a)/13 (c) To consider and recommend to the general body the rates of contribution to
the repairs and maintenance fund and the sinking fund

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33 To ensure that, nominations and revocations thereof are recorded in the

minutes of the Managing Committee Meetings
65 To consider and decide the applications for various purposes received by
the society
69(b) To fix in respect of every flat the society’s charges (Maintenance and service
charges) on the basis of proportion as laid down under the bye-laws
71 To review the position of recovery of the charges due to the society from
members and to initiate action against defaulting members
76(a) To issue letters of allotment of flats
95/96/97 To call general body meetings and to ensure that all matters to be
considered are kept on agenda
116(a)/119 To arrange for election of a New Committee and to ensure that after
elections new committee is duly constituted
126(a) To elect office bearers
129 To fill in vacancies of the committee
156/159 To take steps to maintain the property of the society in good condition and
to carry out repair
161 To insure the property of the society
Apart from the above, the Committee can eligible to contest the election to the seat
consider and decide any other matters provided reserved under sub-section 73(1).
under the MCS Act, 1960, The MCS Rules, 1961
and the bye-laws of the society. 3. Where no women member or, as the case
may then be, women members are elected
to such reserved seats, then such seat or
2. Reservation provisions – Section seats shall be filled in by nomination from
73C amongst the women member eligible to
Section 73C is substituted by Mah. Ord. II of contest the election.
2013 , cl. 33 w.e.f. 14-2-2013
4. Nothing in this section shall apply to
1. Notwithstanding anything contained in a committee of a society exclusively of
MCS Act, or in the rules made thereunder, women members.
or in the bye-laws of any society, there
shall be two (2) seats reserved for 3. Appointment of Manager,
women on the committee of each society
consisting of individual as members Secretary and Other Officers –
and having members from such class Section 74
or category of persons, to represent the Every Managing Committee, at the first
women members. meeting, shall elect a Chairman, Secretary and
Treasurer amongst the elected members of
2. Any individual woman member of the the committee. The Managing Committee can
society, or any woman member of the appoint manager, if required, to look after day-
committee of a member – society, whether to-day affairs of the society at the reasonable
elected, co-opted or nominated, shall be salary. A Managing Committee member can

379
be paid remuneration at such rate as may be construction cost of each flat excluding the
decided in the General Body Meeting, for the proportionate cost of land.
services rendered by him to the society.
5. Annual General Body and is
4. Maintenance charges Authority – Section 75
With rights and ownership comes the Subject to the provisions, of the Act, Rules and
responsibility which a member is expected to Bye-Laws of the society, the final authority of
perform not only to protect his ownership but every society shall vest in the General Body
also to maintain the joint property. To maintain of members in General Meeting. Where the
the society, every member should contribute bye-laws of a society so provide, the general
towards various outgoing and establishment body meeting shall be attended by delegates
of its funds, such as, Property Taxes, Water appointed by the members and such meeting
charges, Common electricity charges, Repairs & shall be deemed to be the meeting of the General
maintenance of lifts, Service Charges, etc. Body, for the purpose of exercing all the powers
1) Service charges and expenses on repairs of the General Body.
and maintenance of the lift shall be borne The following are the matters which are to be
by all the members equally irrespective of considered by the General Body Meeting:
the fact whether members use the lift or 1) To read the minutes of last AGM and
not. SGM, if any, and to note the action taken
2) Lease Rent, Non-Agricultural tax and thereon
Insurance Charges shall be borne as per 2) To receive a report of the committee,
built-up carpet area of each flat. But together with the income and expenditure
in case of insurance charges, if there is account and the balance sheet
increase in the insurance premium if any 3) To consider audit memorandum, if
flat, used for commercial purposes, the received along with the audit rectification
excess insurance premium shall be shared report.
by only those members in proportion to
the built-up carpet area of their flats. 4) To declare the result of the election
5) To appoint an auditor from a panel
3) Water charges should be collected on the approved by State Government
basis of total number of taps and size of
inlets (push cocks/turn cock/mixing taps 6) To consider important communication
/flush taps) provided in each flat. received from the Registering Authority,
the Statutory Auditor, Government, Local
4) Major repairs fund to be collected as fixed or any other competent authority
by General Body on area basis. 7) Transfer of a flat
5) The fund should be collected to meet 8) Expulsion of a member
the normal recurring repairs of the 9) Levy of charges – Parking, use of terrace,
construction cost of each flat at the rate open space, etc.
fixed by General Body, subject to the
minimum of 0.75% per annum of the 10) Acceptance of resignation of the committee
construction cost of each flat. 11) Conveyance of the property
6) The sinking fund to be collected at the 12) To decide the limits for incurring
rate decided by General Body subject expenditure
to minimum of 0.25% per annum of the 13) To approve the tenders

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14) Prescribe penalties for different breaches of to be vacant.

the bye-laws of the society 2. The requisition for such special meeting
15) To approve the alteration in the bye–laws shall be signed by not less than one-third of the
16) Playing of games in society’s compound total number of members of the committee who
are entitled to elect the officer of the committee
17) To form an Advisory Committee In
and shall be delivered to the Registrar.
corporate by Mah. Ord. II of 2013
18) To prepare Annual budget for next year Provided that, no such requisition for a special
meeting shall be made within a period of six
19) All other like matters which fall within months from the date on which any of the officer
jurisdiction of the general body. referred to in sub-section 73-ID(1) has entered
It is very important to note that no resolution upon his office.
can be brought at the General Body Meeting
3. The Registrar shall, within seven days
of the society cancelling its previous resolution
from the date receipt of the requisition sub-
unless six clear months have passed after passing
section 73-ID(2), convene a special meeting of the
the previous resolution.
committee. The meeting shall be held on a date
not later than fifteen days from the date of issue
6. Special General Body and is of the notice of the meeting.
Authority – Section 76
4. The meeting shall be presided over by the
As far as Special General Body Meeting is
Registrar or such officer not below the rank of
concerned, it may be called at any time by the
an Assistant Registrar of Co-operative Societies
Chairman or by a majority of the committee
authorised by him in his behalf. The Registrar
and shall be called within one month to discuss
or such officer shall, when presiding over such
urgent, and important points, such as No
meeting, have the same powers as the President
confidence motion, major repairs etc. At the said
or Chairman when presiding over a committee
Special General Body Meeting, no other agenda
meeting has, but shall not have the right to vote.
to be discussed other than that mentioned in
the notice of meeting. The society can call any 5. The meeting called under this section shall
number of special General Body Meetings. A not, for any reason, be adjourned.
special General Body Meeting can be called at 6. The names of committee members voting
the instance of the Registrar. for and against the motion shall be read in the
It is very important to note that no resolution meeting and recorded in the minute book of
can be brought at the General Body Meeting committee meetings.
of the society cancelling its previous resolution 7. If the motion of no-confidence is rejected,
unless six clear months have passed after passing no fresh motion of no-motion of no-confidence
the previous resolution. shall be brought before the committee within
a period of one year from the date of such
7. Motion of no – confidence against rejection of the motion.
Officers – Section 73-ID
1. An officer who holds office by virtue 8. Acts of societies not to be
election on that office shall cease to be such invalidated by certain defects –
officer, if a motion of no-confidence is passed
Section 77
at a meeting of the committee by two-thirds
No act of a society or a committee or any officer,
majority of the number of committee members
done in good faith in pursuance of the business
who are entitled to vote at the election of such
of the society shall be deemed to be invalid
officer and his office shall, thereupon be deemed
by reason only of some defects subsequently

399
discovered in the organisation the society, or assistance in terms of any cash or kind or any
in the constitution of the committee, or in the guarantee by the Government.
appointment or election of an officer, or on the
ground that such officer was disqualified for his 10. Registrar’s Powers – Section 79/80
office. The Registrar on his own or on the basis of any
No act done in good faith by any person complaint received by the member or Managing
appointed in MCS Act, the rules and the bye- committee, take action against the concerned
laws shall be invalid merely by reason of the fact person or society. The main powers conferred
that his appointment has been cancelled by or in upon the Registrar are:
consequence of any order subsequently passed 1. To consider complaint against the society
under MCS Act, rules and the bye-laws. if the Management of the Society is not carried
The power has been given to the registrar to out as per the provisions of the Maharashtra
decide whether any act was done in good faith Co-operative Society Act, 1960, The Maharashtra
in pursuance of the business of the society, and Society Co-operative Rules, 1961 and the bye-
his decision thereon, is final. laws of the society.
2. A member of the committee or Managing
9. Power of Suspension of Committee can be removed by Registrar, if in
Committee – Section 78 his opinion such members makes default or is
The members of the committee shall be jointly negligent in the performance of the duties.
and severally liable for making good any loss, 3. To convene the Managing Committee
which the society may suffer on account of their meeting or annual general meeting or special
negligence or omission to perform any of the General Meeting, if the Secretary or Chairman
duties and functions cast on them under the failed to call such meeting
MCS Act, 1960, MCS Rules, 1961 and bye-law of
the society. 4. To recover the expenditure incurred in
If in the opinion of the Registrar the committee calling a meeting out of the funds of the society
of any society or any member commits default or by such person or persons who in his opinion
or is negligent, the Registrar can remove the were responsible for the refusal or failure to
committee. convene the meeting
The Registrar, after giving the committee an 5. To fix the contribution to be made to the
opportunity of showing cause, in writing, if any, reserve fund at the lower rate, after considering
within fifteen (15) days from the date of receipt the financial position of the society.
of notice and after giving reasonable opportunity
of being heard and after consultation with 6. To receive special report from Auditor
the federal society to which the society is in respect of civil or criminal offence and grant
affiliated, comes to a conclusion that the charges permission to file FIR with police.
mentioned in the notice prima facie exist, but 7. Resignation of the committee.
capable of being remedied with, he may be
order, to keep the committee under suspension 8. To seize records and property of the
for such temporary period, not exceeding six society.
months as may be specified in the order. 9. Any other, like matters which falls within
The power of appointment of an administrator jurisdiction of the Registrar.
is removed by the Mah. Ord. II of 2013, if 2
any society is not receiving loan or financial

:40
CA Atul T. Suraiya
Accounts and Audit
Introduction and the assets and liabilities of the

Maharashtra Co-operative Societies society, and
(Amendment) Ordinance, 2013 has been
( c) to furnish such statements and
notified by the Maharashtra State Gazette dated
returns and to produce such records
14th February, 2013 to amend the Maharashtra
as he may require from time to time;
Co-operative Societies Act, 1960. The said
amendment has far reaching impacts on the and the officer or officers of the society shall be
Accounts and Audit provisions of Societies. This bound to comply with his order within the period
article attempts to bring out the provisions in a specified therein.
nutshell.
Time limit
Maintenance of Accounts and Records Sub-section (1A) requires every society to file
Section 79 of the Act lays down the provisions returns within six months of the close of every
in respect of Society's obligation to file returns financial year to the Registrar or to the person
and statements and Registrar's power to enforce authorised by him, including the following
performance of such obligations.— matters, namely –
(1) The Registrar may direct any society or (a) Annual reports of its activities;
class of societies to: (b) Its audited statement of accounts;
(a) Keep proper books of account, (c) Plans for surplus disposal as approved by
including keeping and maintaining the general body of the society;
the accounts in electronic form by
using the latest technology and (d) List of amendments to the bye-laws of the
expertise as may be prescribed, with society, if any,
respect to all sums of money received (e) Declaration regarding date of holding of
and expended by the society, and its general body meeting and conduct of
the matters in respect of which the elections when due;
receipt and expenditure take place;
(f) Any other information required by the
(b) Keep records of all sales and Registrar in pursuance of any of the
purchases of goods by the society, provisions of the Act.

419
Accounts and Audit
Information about Auditor fit for each day until the Registrar's directions are
Sub-section (1B) requires every society to file carried out.
a return regarding the name of the auditor or
auditing firm from a panel approved by a State Auditor
Government in this behalf, appointed in the Section 75(2A) lays down that every society shall,
general body meeting together with his written
consent within a period of one month from the (a) Appoint an auditor or auditing firm from
date of annual general body meeting. a panel approved by the State Government
in this behalf in its annual general
body meeting having such minimum
Default
qualifications and experience as laid down
Sub-section (2) lays down that where any society
in Section 81 of the Act, for the current
is required to take any action under this Act,
financial year and
the rules or the bye-laws, or to file returns or to
comply with an order made under the foregoing (b) Shall also file in the form of return to
sub-section, and such action is not taken – the Registrar, the name of the auditor
appointed and his written consent for
(a) Within the time provided in this Act, the auditing the accounts of the society within
rules or the bye-laws, or the order as the a period of thirty days from the date of
case may be, or Annual General Body Meeting.
(b) Where no time is so provided, within (c) It is further provided that the same auditor
such time, having regard to the nature shall not be appointed for more than three
and extent of the action to be taken, as the consecutive years by the Annual General
Registrar may specify by notice in writing, Body Meeting of the same society.
the Registrar may himself, or through
a person authorised by him, take such (d) It is further provided that no auditor shall
action, at the expense of the society and accept audit of more than twenty societies
such expense shall be recoverable from for audit in a financial year excluding
the society as if it were an arrears of land societies having paid up share capital of
revenue. less than `. one lakh.
Personal liability Audit

Sub-section (3) lays down that where the Registrar Section 81 lays down the provisions relating to
takes action under sub-section (2), the Registrar Audit.
may call upon the officer or officers of the society (1) The society shall cause to be audited its
whom he considers to be responsible for not accounts at least once in each financial year
complying with the provisions of this Act, the and also cause it to be completed within
rules or the bye-laws, or the order made under a period of six months from the close of
sub-section (1) and after giving such officer or financial year to which such accounts
officers an opportunity of being heard, may relate and shall lay such audit report before
require him or them to pay to the society the annual general body meeting.
expenses paid or payable by it to the State
Government as a result of their failure to take (2) It is further provided that if the Registrar
action and to pay to the assets of the society is satisfied that the society has failed to
such sum not exceeding Rupees twenty-five to intimate and file the return as provided he
Rupees one hundred, as the Registrar may think may cause its accounts to be audited, by

:42
an auditor from the panel of the auditors (6) The Registrar shall maintain the list of
approved by the State Government. co-operative societies district-wise, the list
of working societies, the lists of societies
(3) The board of every co-operative society whose accounts are audited, the list of
shall ensure that the annual financial societies whose accounts are not audited
statements like the receipts and payments within the prescribed time and reasons
or income and expenditure, profit and therefor. He shall co-ordinate with the co-
loss and the balance sheet along with operative societies and the auditors and
such schedules and other statements are auditing firms and ensure the completion
submitted to the auditor within the period of audit of accounts of all the co-operative
as may be prescribed. societies in time every year.
(4) The auditor’s report shall have:
(i) All particulars of the defects or the Qualifications of an Auditor
irregularities observed in audit and (a) A chartered accountant within the meaning
in case of financial irregularities and of the Chartered Accountants Act 1949,
misappropriation or embezzlement who shall have a fair knowledge of the
of funds or fraud, the auditor/ functioning of the societies and shall have
auditing firm shall investigate an experience of at least three years in
and report the modus operandi, the auditing, of which the auditor would like
entrustment, amount involvement, to be included in the panel, and chartered
and fix the responsibility for such accountant shall have working knowledge
misappropriation or embezzlement of the Marathi language;
of funds or fraud, on the members (b) Auditing firm means a firm of more
of the board or the employees of than one chartered accountant within the
the society or any other person as meaning of the Chartered Accountants Act
the case may be with all necessary 1949, who shall have a fair knowledge of
evidence. the functioning of the societies and shall
have an experience of at least three years
(ii) Accounting irregularities and in auditing, of which the auditor would like
their implications on the financial to be included in the Panel, and chartered
statements to be indicated in detail accountant shall have working knowledge
in the report with the corresponding of the Marathi language;
effects on the profit and loss;
(c) A certified auditor means a person who
(iii) The functioning of the general body, holds a degree from recognised university
board and sub-committees of the and also has completed a Government
co-operative societies to be checked Diploma in Co-operation and Accountancy
and if any irregularities or violation and who shall have a fair knowledge of
observed, reported duly fixing the the functioning of the societies and shall
responsibilities for such irregularities have an experience of at least five years in
or violations. auditing, of which the auditor would like
to be included in the panel, and certified
(5) The remuneration of the auditor or auditing auditor shall have working knowledge of
firm of a co-operative society shall be borne the Marathi language;
by the society and shall be at such rate
as may be fixed by general body of the (d) Government Auditor means an employee
society. of the Co-operation Department of the

439
Accounts and Audit
State who has passed, in addition (vii) Whether the society has incurred any
to the Graduation or Post Graduation expenditure in furtherance of its objects;
Degree, Higher Diploma in Co-operative (viii) Whether the society has properly utilised
Management / Diploma in Co-operative the financial assistance granted by
Audit / Government Diploma in Co- government or Government undertakings
operation and Accountancy and who or financial institutions, for the purpose for
has completed a period of probation which such assistance was granted;
successfully and who has working
(ix) Whether the society is properly carrying
knowledge of Marathi knowledge.
out its objects and obligations towards
It may be noted that for a fresh Chartered members.
Accountant, it may be not be possible
The Registrar or the person authorised shall, for
to get empanelled, but the experience of
the purpose of audit, at all times have access to all
three years may be obtained either as an
the books, accounts, documents papers, securities,
employee of another Chartered Accountant
cash and other properties belonging to, or in
or being partner of a firm which has more
the custody of, the society, and may summon
than three years standing. This concept
any person in possession or responsible for the
has been accepted by the other authorities
custody of any such books, accounts, documents,
which also empanel Chartered Accountants
papers, securities, cash or other properties, to
as auditors. However it is recommended
produce the same at any place at the headquarters
that a clarification to this effect may please
of the society or any branch thereof.
be sought.
Every person who is, or has at any time been,
Scope of Audit an officer or employee of the society, and
The audit shall be carried out as per Accounting every member and past member of the society,
Standards as may be notified by the State shall furnish such information in regard to the
Government from time to time and shall also transactions and working of the society as the
include examination or verification of the Registrar, or the person authorised by him, may
following items, namely: require.
(i) Over dues of debts, if any; The auditor shall have the right to receive all
notices and every communication relating to
(ii) Cash balance and securities and a valuation
the annual general meeting of the society and to
of the assets and liabilities of the society;
attend such meeting and to be heard thereat, in
(iii) Whether loans and advances and debts respect of any part of the business with which he
made by the society on the basis of security is concerned as auditor.
have been properly secured and the terms
lf, during the course of audit of any society, the
on which such loans and advances are
auditor is satisfied that some books of account
made or debts are incurred are not pre-
or other documents contain any incriminatory
judicial to the interest of the society and its
evidence against past or present officer
members;
or employee of the society the auditor shall
(iv) Whether transactions of the society which immediately report the matter to the Registrar
are represented merely by book entries are and, with previous permission of the Registrar,
not prejudicial to the interest of the society; may impound the books or documents and give
(v) Whether loans and advances made by the a receipt thereof to the society.
society have been shown as deposits; The auditor shall submit an audit memorandum
(vi) Whether personal expenses have been report within a period of one month from its
charged to revenue account; completion and in any case before issuance of

:44
notice of the annual general body meeting, duly to audit of accounts of the society shall apply to
signed by him to the society and to the Registrar such re-audit.
in such form as may be specified prescribed by
the Registrar, on the accounts examined by him Rectification of defects in accounts
and on the balance-sheet and profit and loss If the result of the audit held under the last
account as on the date and for the period up to preceding section discloses any defects, in the
which the accounts have been audited, and shall working of a society, the society shall within three
state whether in his opinion and to the best of months from the date of audit report, explain
his information and according to the explanation to the Registrar the defects, or the irregularities
given to him by the society the said accounts give pointed out by the auditor, and take steps to
all information required by or under this Act and rectify the defects and remedy irregularities and
present the true and fair view of the financial report to the Registrar, the action taken by it
transactions of the society. thereon, and place before the next general body
Where the auditor has come to a conclusion meeting.
in his audit report that any person is guilty
of any offence relating to the accounts or any The Registrar may also make an order directing
other offences, he shall file a specific report to the society or its officers to take such action,
the Registrar within a period of 15 days from as may be specified in the order to remedy the
his submitting the audit report. The Auditor defects within the time specified therein.
concerned shall after obtaining written permission The Registrar or the person authorised by
of the Registrar, file a First information Report him shall scrutinise the rectification report
as contemplated by Criminal Procedure Code. accordingly, and inform the society thereabout
Failure to file First information Report, would within six months from the date of receipt of the
make auditor liable for disqualification and Rectification Report.
removal of his name from panel of auditors or
any other action as Registrar may think fit. When It shall be the responsibility of the auditor
it is brought to the notice of the Registrar that the concerned, who has conducted the audit of the
auditor has failed to initiate action as above the society, to offer his remarks on Rectification
Registrar shall cause the First Information Report Report of the society item wise till entire
to be filed by a person authorised in that behalf. rectification is made by the society, and Auditor
Where the auditor finds that there are apparent should submit his report to the Registrar.
instances of financial irregularities resulting in
to losses to the society caused by any member Penalties for various offences
of the committee, office bearers and officers of Section 146 lists out the various offences that
the society or any other person, then he shall are contemplated under the Act and Section
prepare a Special Report and submit the same to 147 lays down the punishments for the various
the Registrar along with his audit report. Failure offences, which range from fines and extend to
to file such Special Report would amount to imprisonment.
negligence in his duties and he would be liable
for disqualification for appointment as an auditor
or any other action as Registrar may think fit.
Conclusion
The new provisions require the auditing
If it appears to the Registrar, on an application and accounting profession to carry out their
by a society or otherwise, that it is necessary or professional duties with more expertise and
expedient to re-audit any account of the society, responsibility.
the Registrar may by order provide for such
reaudit and the provisions of this Act, applicable 2

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Election Rules
CA A. S. Merchant
Election Rules
I. Introduction registration of the society. In that meeting, a

This article deals and is restricted to elections in provisional committee of some members of the
Co-operative Housing Societies based on the society is constituted until the regular election of
Model Bye-laws. the management committee is held.
The management of the affairs of the
Co-operative Housing Society vests in the II. Due date of election to the
Committee of the Management duly elected Committee
by the General Body of the Society as per the Many times elections are held not at the Annual
provisions of the Maharashtra Co-operative General Meeting, which is supposed to be
Societies Act, 1960 and the Maharashtra convened on 14th August every year. They are
Co-operative Societies Rules, 1961. held sometime later during the year
1. The MCS Act was amended by an Ordinance The elections have to be conducted on or before
of 2013 w.e.f February 14, 2013. The Chapter XIA completion of 5 years from the date of previous
governing elections viz., sections 144A to 144Y election. The period of 5 years shall commence
have been deleted. Section 73CB has been inserted from the date of the previous election. Thus if
by the ordinance and the election powers in a Co- an election is held on 1st October 2012 the next
operative Society has been vested in State Election election will only be on or before 1st October 1017.
Authority. A Special General Body Meeting will have to be
2. The Mumbai District Co-operative Housing called for conducting or/and announcing election
Federation has made representation to the State results.
Government that such a provision will cause
tremendous hardships to small Co-operative III. Removal of Restriction on voting
Housing societies. Till such time the Model bye rights
laws and the election rules prescribed thereunder The Maharasthra Co-operative Societies Act 1960,
will prevail Section 27 has been amended thereby removing
3. When the society is registered, the chief the waiting period of two years for voting rights.
promoter /builder promoter has to call the first Hence, any eligible member or an associate
statutory general meeting of the society within member with the consent of 1st member can
a period of three months from the date of the contest the election immediately after seeking

:46
membership and his admission is made as a 5. After the elections are over, the Secretary of
member of the society. the previous committee of the society shall hand
over the charge to the newly elected committee.
IV. Whether a member in arrears of 6. As per section of 73 (IAB) of the
the society can contest the election Maharashtra Co-operative Societies Act, 1960
to the committee or propose or and Rule 58 A of the Maharasthra Co-operative
second any candidature Societies Rule 1961, every elected committee
1. If a member is in arrears in respect of any member shall execute a bond to the effect within 15
dues of the society on the date of scrutiny of days of his/her assuming office in form of M-20 on
nomination papers beyond 90 days as per Bye-law stamp paper of ` 200/-. The expenses shall be born
No. 118 he cannot contest the election. by the society. The member who fails to execute
such Bond within the specified period shall be
2. However if the proposer and seconder deemed to have been vacated as a member of the
member of the society are in arrears in respect of committee. The Secretary of the society shall keep
dues to the society, they can propose and second them on record of the society and according inform
any candidature. the concerned Registrar of the ward along with
copies of the bonds within 15 days from formation
3. How many times a member can propose of the committee. The execution of the bond has
or second the candidature? There are no any been waived in respect of Co-operative Housing
restrictions in this aspect. The member can any Societies by notification order No. CSL2012/CR-
numbers of times propose and second candidature. 402/15-C dated September 06, 2012.
V. Election Procedure VI. Bye law No.112. Management

1. The Managing Committee has to initiate
steps at least three months prior to the date of of the Society to vest in the
conducting election. The strength of the managing Committee.
committee shall be as per the bye-law No.115 (Rule • The management of the affairs of the society
No. 2.1) shall vest in the committee duly constituted
in accordance with the provisions of the
2. There are disqualification stated in the Act, Maharashtra Co-operative Societies Act,
Rules and Model bye-laws for any member to be 1960, the Maharashtra Co-operative Societies
elected on the committee of the management. Rules, 1961 and the bye-laws of the society.
Thus any member who has interest in respect of
services provided to the society, he cannot stand • Under bye-law No.115 there is a provision
for election regarding strength of the committee and
now it is compulsory to have at least one
3. All defaulting members in respect of dues women in the committee as provided under
of the society, shall be severed within three months section 73(BBB) of the Maharashtra Co-op
from the date of service of notice in writing, Societies Act 1960. However there is also a
demanding the payment of dues and if the dues provision that in the event of women not
are not paid before filing of the nomination and being available or not willing to represent
the date of scrutiny of nominations the nomination in the committee the seats reserved for her
will be treated as invalid. may be filled from other. The committee of
4. If the associate member does not submit No management of the society as per Model
Objection Certificate of original member then he bye-law No.115 depending on numbers
cannot stand for election. of members of the society shall consist as
under. The strength includes the reservation

479
Election Rules
of seats for women members as provided fill in the vacancies by election. On the failure of
under section 73 BBB of the Act. the general body meeting to elect the required
number of members to constitute the Committee,
No. of Strength of the M.C Quorum the elected members of the Committee shall be
Members in M.C. competent to fill in the same by co-option whether
General Women Total they form the quorum or not, notwithstanding the
Up to 50 4 1 5 3 provisions of the bye-law No. 127 regarding the
51 to 100 6 1 7 4 quorum.
101 to 300 8 1 9 5
VIII. Disqualification for election to the
301 and 9 2 11 6
above Managing committee. Bye law 118
No person shall be eligible for being elected as a
• In case women members are not available or member of the MC or Co-opted on it, if:
not willing to represent on the committee,
a. he has been convicted of the offence,
the seats reserved for them may be filled
involving moral turpitude, unless the
from other eligible members.
period of six years has elapsed since his
conviction,
Strength of the committee
The committee shall consist of 5*/7/9/11 b. he defaults the payment of dues to the
members of the society. This strength includes society, within three months from the
the reservation of seats for women members as date of service of notice in writing, served
provided under section 73 BBB of the Act, as either by hand delivery or by post (under
indicated in the above table certificate of posting), demanding the
payments of dues.
VII. Election of the Managing c. he has been held responsible under Section
79 or 88 of the Maharashtra Co-operative
Committee (MC) under Bye-law
Societies Act, 1960 or has been held
No.116 responsible for the payment of the costs of
1. Election of all the members of the Managing enquiry under section 85 of the Maharashtra
Committee shall be held once in 5 years in Co-operative Societies Act, 1960.
accordance with the Election Regulations. The
retiring members of the committee shall be eligible d. he has without the previous permission of
for election. If the paid up share capital is more the society, in writing sublet his flat or part
than ` 10,000 then the voting shall be done by thereof or given it on leave and licence
secret ballot. and caretaker basis or has parted with its
possession in any other manner or has sold
2. Election of all the members of the MC his shares and interest in the society.
shall be held once in 5 years, accordance with the
Election Regulations annexed to the Model bye- e. In case of an associate member, non
laws. The retiring members of the committee shall submission of the no-objection certificate
be eligible for re-election. The period of office of and undertaking, as prescribed under these
the committee elected shall be for 5 years. bye-laws, by the member.
3. As per Model bye-law No. 116(b) f. He is declared as ineligible as per

the provisions of the Maharashtra
In the event of receipt of inadequate valid Co-operative societies Act, 1960 and Rules,
nominations, required to constitute the full 1961.
Committee, the General body at its meeting shall

:48
g. A new sub-clause is inserted that no number of members have been elected but
person shall be eligible for being elected the committee has, for whatever reason, not
as member of the committee or co-opted been so far constituted, forward their names
on it, if he is declared as ineligible as together with their permanent addresses
per the provisions of the Maharashtra to the registrar, who shall within fifteen
Co-operative Societies Act, 1960 and Rules days from the date of receipt thereof by
1961. him, publish or cause to be published such
names and addresses by affixing a notice on
h. Under Bye-law No.118 provision for
the notice board or at any prominent place
disqualification for election to the committee
in his office, and upon such publication, the
is made. In sub-Bye-law No. 2 when a
committee of the society shall be deemed
member defaults the payment of the dues
to be duly constituted in determining two
to the society within three months from the
thirds of the number of members, a fraction
date of service of notice in writing served
shall be ignored.
either by hand or by U.P.C demanding the
payments of dues and the same has not
been compiled with then he shall not be Cessation of a member of the committee under
eligible for being elected as a member of the Bye-law No.120
committee or can be opted in to committee. A person shall cease to be the member of the
Further now even associate member has committee, if:
been given a membership right can contest
election for managing committee only if he He has incurred any of the disqualifications
has submitted no objection certificate and mentioned under the bye-law No. 118 or:
undertaking as prescribed under the present
He has failed to attend any three consecutive
Bye-law.
monthly meetings of the Committee, without the
leave of absence.
IX. Constitution of a member of the
committee Intimation of cessation of membership of the
• Under Bye-law No.119 a new provision for committee
constitution of committee has been inserted If a member of the Committee attracts any of
which is in compliance with the provisions the disqualifications under the bye-law No. 120
of Maharashtra Co-op. Societies Act, 1960 (1), the Committee shall record the fact in the
and Maharashtra Co-op. Societies (2nd minutes of the meeting and the secretary of the
Amendment) Act,1986 (MAH.XXXVII of society shall inform the member and Registrar
1986). accordingly. Such member shall cease to be the
• In a general election of members of the member of Managing Committee on the order of
committee of a society, on the election of the Registrar.
two-thirds or more number of members,
the returning officer or any other officer Period of office to the elected Committee
or authority conducting such election shall a. Under bye-law No.122 the period of office
within seven days after the declaration of of the Committee elected under the bye-law
results of the election of such members, No. 116(a) shall be for 5 years.
or where such election is held before the
date of commencement of the Maharashtra b. The first meeting of the newly elected
Co-operative Societies (second amendment) committee to be held within 30 days of its
Act, 1966 (Mah. XXXVII of 1986), such election.

499
Election Rules
c. Under bye-law No. 123(A) a provision is b. Provided that he shall cease to be the
made to hold first meeting of the newly Chairman, or as the case may be the Secretary
elected and out going committee within and Treasurer of the society if the motion of ‘No
30 days from the date of constitution Confidence’ is moved in the special meeting of
of new Committee as provided in bye-law the Committee called, and presided by Registrar
No. 119. or such officer not below the rank of an Assistant
Registrar, upon the notice given by 1/3rds
d. Subject to the provisions of the bye-law
members of the Committee and the motion ‘No
No.123(a) the secretary of the outgoing
Confidence’ is passed by 3/4th members present
Committee shall issue notice of the first
as such meeting, having attendance of a least 2/3rd
meeting of the newly elected Committee
members of the Committee, who are entitled to
and the outgoing Committee to the members
vote at election of such Chairman, Secretary and
thereof. On the failure of the secretary of
Treasurer.
the outgoing Committee to convene the
said meeting, the chairman of the outgoing c. Provided further that another motion of
Committee shall call it. On the failure of ‘No Confidence’ shall not be brought against the
both, the Registering Authority may call Chairman or as the case may be the Secretary or
such a meeting. Treasurer of the society unless the period of 6
e. Under bye-law No.126 the President, months has elapsed from the date of the preceding
Chairman, Secretary, of the society shall motion of the ‘No Confidence’.
hold office for the period of five years from d. Numbers of Committee Meetings to be held
the date of their election to such office. in a month.
However same shall not be beyond the
expiry of the term of the committee. • Under Bye law No.128 the Committee shall
meet as often as necessary but as least once
f. In case of a no confidence motion moved in a month.
against Chairman, Secretary or Treasurer
then such special meeting of the committee • In case of emergency, the committee may
called shall be presided by the Registrar place a resolution and get the same passed
or such officer not below the rank of Asst. by the committee members. However the
Registrar. The provision was not present in same be placed before the next immediate
the old Model bye-laws. meeting.
Election of office bearers of the society To fill in vacancies of the committee

• Every Committee, at its first meeting after a. Under bye-law No.129 in the event of
its election, shall elect a Chairman, Secretary vacancies in the committee, caused an account of
and Treasurer from amongst the members of the death, resignation, disqualification or removal
the Committee. of any members of the Committee, by the Registrar
the Committee may fill in such vacancies by co-
option on the Committee of any other members
Period of office of the chairman/secretary and ‘No
eligible to be on the Committee, irrespective of
Confidence’ motion against either
the fact whether there is the quorum or not, not
a. The Chairman, Secretary and Treasurer of
withstanding anything contained in the bye law
the society shall hold office for the period of 5
No. 127. Such vacancies by co-option shall not be
years from the date on which he is elected to be
more than two.
the Chairman or as the case may be the Secretary
ant Treasurer. But not beyond the expiry of term b. Bye-law No. 129 provides that in
of the Committee: case of vacancy caused due to any reason of

:50
disqualification, death, resignation or removal, elected Chairman/Secretary/Treasurer, as

the vacancy by co-option shall not be more than the case may be.
two.
d. The Committee may accept the resignation
The period of office of the member co-opted on the of the office of the Chairman/Secretary/
Committee. Treasurer only after it is satisfied that
• Under Bye-law No. 130: The period of office the Chairman or as the case may be the
of the co-opted member of the Committee Secretary or Treasurer of the society has
shall be co-terminus with tenure of office of brought up to date the work entrusted to
the Committee. him and has produced the entire papers
and property of the society, in his possession
Resignation by a member of the Committee before the Committee.
i. Under Bye-law No. 131: A member of the
e. In case entire Committee intends to resign,
Committee may, by a letter, addressed
the resignations of the Committee shall be
to the Chairman of the society, resign
placed before the general body and such
his membership of the Committee. The
resignations shall be effective from the date
resignation shall be effective from the date
of acceptance of such resignations by the
it is accepted by the Committee or an expiry
General Body. The Committee shall continue
of the period of one month from the date of
in office till alternate arrangement is made
the receipt of the letter of the resignation by
for the management of the society.
the Chairman or the Secretary of the society,
whichever is earlier.
Who can become a Returning Officer –
ii) Under Bye-law No. 132 (E) a provision is A returning officer has be appointed from amongst
made that in the event entire committee is the members if the society provided he is not
desirous to resign then the resignation of intending to contest the election or propose or
such committee shall be placed before the second any candidature. If no member is willing to
general body and such resignations shall work as returning officer, the registering authority
be effective from the date of acceptance shall appoint a returning officer. The society will
of such resignations by the general body have to pay honorarium to the said returning
till alternative arrangement is made for officer for working as a returning officer. The
the management of the society outgoing amount will be related to the number of members
committee continues in office. of the society and numbers of candidates to be
elected.
Resignation of office-bearership of the
society X. Duties of Returning Officer
a. The Chairman of the Society may resign his Duties of returning are spelled out in the Election
office as Chairman by a letter addressed to Rules
the Secretary of the Society;
a. He has to function as per Election
b. The Secretary or Treasurer of the society Programme and Rules.
may resign his office as Secretary or
Treasurer, by a letter addressed to the b. If number of nomination papers are
Chairman of the society; equivalent to number of seats on the
Committee.
c. Chairman/Secretary/Treasurer’s resignation
will be effective only after its acceptance c. If numbers of nomination papers are less
and handling over the charge to the newly than number of seats on the Committee.

519
Election Rules
d. After scrutiny of nomination papers and vote in the election to Managing Committee of the
date of withdrawal, the Returning Officer Society.
will have to report the valid number
of nominations and invalid number of 5. The retired members, if not disqualified,
nominations. If valid numbers of shall be eligible for re-election.
nominations are equivalent to the number
6. The provisional list shall be prepared by the
of seats on the Committee, no election will
Managing Committee as per (3) above and shall
be held. The Chairman has to declare in the
be notified on the Notice Board of the society, 60
General Body that they are elected.
(sixty) days before the date of election, inviting
e. However, if number of nomination papers suggestions and objections in respect of the names
or number of valid nomination papers of the members, within a period of 8 (eight) days,
are less than the number of seats on the from the publication of such list.
Committee, after scrutiny and withdrawal
7. After considering the suggestions and
of nominations the Returning Officer has
objections, if any, received, the Managing
to report accordingly to the Chairman
Committee shall publish final list of members
who will declare them as elected in the
eligible to vote, within two days of the last date as
General Body and request the members to
mentioned at 4 above.
fill up the remaining number of seats on the
Committee. 8. The provisional and final list of members
referred to above shall be in the Appendix ‘A’
f. If the General Body does not elect the
appended to these Rules.
members for the remaining seats, the newly
elected members at their first Committee 9. After the final list, the Managing Committee
meeting can co-opt the members for the shall appoint from amongst the members who are
remaining seats on the committee as per not candidates for election or who have neither
bye-law No. 116. proposed nor seconded candidature of any
member, or any other person, as Returning Officer.
XI. Election Rules However in case of member being appointed as
1. These Rules shall be called the Rules of Returning Officer, the Managing Committee shall
Election of a member of the Managing Committee obtain an undertaking from such member that he
of the ……………… Co-operative Housing Society will not contest the election nor propose or second
Ltd. They shall be deemed to have come into force any candidate. The Returning Officer shall have
from the date of their approval by the Registering authority to appoint such polling staff as he deems
Authority. necessary.
2. Every Managing Committee shall hold 10. Where the Managing Committee has failed
elections before expiry of its term. to appoint a Returning Officer, the Registering
Officer shall appoint a Returning Officer and
3. If the recovered share capital is more than
polling staff shall be borne by the Society.
` 10,000 then, voting shall be secret voting.
4. The members of the society on the Register 11. The Returning Officer shall draw and
of Members as on 31st December, if the election declare a programme of various stages of election,
is due during subsequent period between 1st on the Notice Board of the society, as indicated
January to 30th June, and as on 30th June if herein below, not later than seven days of the
election is due during subsequent period between date of publication of final list of voters of the
1st July and 31st December, only be eligible to Society.

:52
a. The Returning Officer shall submit copy 1. To draw up a detailed programme of

of such Programme to the register and the election to the Managing Committee of the society,
concerned Housing Federation. after taking into consideration the various stages of
election process, as enumerated in 9 above.
i. Last date from making nominations.
7 days from the date of declaration 2. To invite nominations, to receive and
election programme. scrutinise them, to exhibit list of valid nominations
and list of final nominations remaining after
ii. The date of publication of list of withdrawal of nominations, if any,
nominations received. On the last date
and after the expiry of the time for 3. To arrange for election by ballot in
nomination. accordance with the provisions of the Election
Rules.
iii. Date of scrutiny of Nominations. Next
day of the date making nomination 4. To funish the result of election to the
Chairman of the society for being declared at
iv. Date of publication list of valid the General Body meeting/special general body
Nominations. Next day after the date meeting of the society.
of completion of scrutiny.
5. To take such other actions as are necessary
v. Date of which candidature may be for and incidental to the election to Managing
withdrawn. After clear 15 days form Committee of the society.
the date of scrutiny.
The nominations from members shall be in form at
vi. Date of Publication of final list of Appendix ‘B’ appended to the Rules.
contesting candidates. The day next
succeeding the last date fixed for 6. No members of the society shall be eligible
withdrawal of candidature. to participate in the election of the society, If
i. He is in arrears in respect of any charges
b. Date and time during which and the place at
and any other amounts due to the society,
which the poll shall be taken
as on the date of scrutiny of nomination
i. Minimum 5 days after the date of papers.
withdrawal (time & place to be fixed
ii. He has incurred any of the disqualification
by Returning Officer)
as mentioned in the Maharashtra Co-
c. Date time and place for counting votes operative Societies Rules, 1960 and
Maharashtra Co-op Societies Rules,1961 and
i. Immediately after polling is over. the bye- laws of the society.
d. Date of declaration of results of voting 7. The nominations received till the last
i. Immediately after counting of votes. date and hour fixed for receiving nominations
shall be scrutinised by the Returning Officer
Explanation:– If the last date in reckoning dates as on the date fixed for scrutiny of nominations,
specified in the above cases is a public holiday, the in the presence of the candidates or their duly
next succeeding working day shall be fixed for the authorised representatives and the list of the valid
respective events. nominations shall be published on the Notice
Board of the society as per election programme.
The functions of the Returning Officer shall be as
The candidates whose nominations are rejected
under.
shall be informed by the Returning Officer.
in writing of the reasons for rejection of their

539
Election Rules
nominations on the same day, in form at Appendix 17. Member-Voter coming to the polling station
‘B-2’. after expiry of the time allowed for voting shall not
be allowed to vote.
8. The candidates, whose nominations have
been declared valid shall be allowed time of 15 18. Immediately after the completion of voting,
days (as required u/s 152 A of the M.C.S. Act the ballot box shall be sealed in the presence of the
1960) from the date of publication of the list of candidates or their authorized representative if
valid nominations, to withdraw their candidature present.
by means of a letter handed over to the Returning
Officer. 19. The counting of votes shall be done
immediately after the polling is over.
9. Immediately after the expiry of period
allowed for withdrawal of candidature a final list 20. The Returning Officer shall submit to the
of the candidates contesting the election shall be Chairman of the Society a report indicating the
notified on the notice board of the society. numbers of voters who voted, number of valid and
invalid votes, and the votes polled by each of them
10. The voting at the election shall be secret shall be put on the Notice Board of the society at
Ballot. the conclusion of the counting of votes.
11. The ballot paper shall be in the form of 21. The names of the candidates with votes
Appendix C’ appended to these Rules. It shall polled by each of them shall put on the Notice
bear the seal of the society and the counterfoil Board of the society at the conclusion of the
thereof shall bear the initials of the Returning counting of votes.
Officer.
22. The final result of the election shall be
12. The names of the candidates in the ballot declared in the ensuing Annual General Body
paper shall be arranged in alphabetical order with Meeting or Special General Body Meeting as the
surname appearing first. case may be.
13. The date, time and place of voting shall be 23. All the records pertaining to the election
as declared in the election programme. shall be carefully preserved in box duly locked and
sealed by the Secretary of the society for a period
14. The ballot box shall be so constructed that of 3 months and destroyed thereafter. However, if
ballot papers could be conveniently put into it the result of the election is disputed, the records
but could not be taken out, without the box being pertaining to election shall be preserved until the
unlocked. final decision of the dispute.
15. On the date of the polling, the empty ballot 24. The Committee shall be constituted as
box shall be shown to the candidates or their enumerated under section 73(3) of the M.C.S. Act
authorised agents, if any and present 15 minutes 1960.
before the time fixed for commencement of the
poll and shall be locked and sealed in their 25. If for any reasons beyond the control of
presence. the society, it is not possible to observe the time
schedule under these Rules, the Returning Officer
16. Each member voter shall be supplied with of the society may revise the same with due notice
an authenticated ballot paper after satisfying to members and with due consent of the concerned
his identity and obtaining his signature on the Housing Federation. The Returning Officer shall
counterfoil of the ballot paper. inform such revision of schedule to the Registrar.

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A. R. Jani, Advocate & Solicitor
Powers, Duties and Responsibilities of

Office Bearers
1. In this article it is intended to study and Model of these Bye-laws are recommended by
discuss powers, duties and responsibilities of the the Government. All Societies function under the
Office Bearers in a Co-operative Housing Society. said Bye-laws.
The scope of the article is therefore made limited
to the subject and confined to the Office Bearers 3. It can be stated that the General Body of
of a Housing Society only. The Article may be the members of the registered Housing Society
perused with these restrictions. For this purpose are supreme in their functions and work subject
the readers may keep in view and refer the to the provisions of law, rules and regulations as
Model Bye-laws of September 2011 printed and applicable to such Housing Society. Members of
published by the Mumbai District Co-operative such Housing Society are the supreme authority.
Housing Limited, Mumbai – 400 001. 4. A Society is as such, a legal entity,
2. As it is well known now that the recognised as such and the word “limited”
properties are by and large big in size and is added at the end of its name to indicate
people purchase flats in high rise sky scrapper that the liabilities of members are limited. It
buildings and flats therein form a very small can sue and can be sued in its name. When a
part in a large complex. It is not practical to Society is formed, the property is transferred
manage such large complexes by individual flat to the Society and the Society becomes the
purchasers and Co-operative Housing Societies owner thereof. In fact, one of the main duties
are therefore formed under the provisions of The of the Office Bearers is to obtain Conveyance of
Maharashtra Co-operative Societies Act, 1960 property in Society’s favour. Usually a Housing
(the said Act). It is the main Act which governs Society has many tenements/ flats/ shops and
the administration of Housing Societies along other premises occupied by its members and
with the other types of Co-operative Societies. as such it is the Body vested with the legal and
The Act has been in existence since last more beneficial ownership. Since it is the responsibility
than 50 years. There is no separate or specific of the Society and its members, it is difficult
Act especially for Housing Societies. However, for all of them to carry out management and
so far as Housing Societies are concerned, they administration of various acts required to
are governed by the Rules framed under the be done by such Society, such as payment
provisions of the said Act and Bye-laws that of municipal taxes, land revenue, taking out
may be framed by the members of the would be insurance, carrying out repairs, collecting
Society under the said Act and Rules thereunder. outgoings, etc. The functions are many and

559
Powers, Duties and Responsibilities of Office Bearers
hence few members are selected on Managing appointed under the Maharashtra Co-operative
Committee to manage the various affairs of the Societies Act, 1960 (MCS Act) and the Rules or
Society. Therefore the Society appoints Managing Bye-Laws framed under the said Act. They are
Committee i.e. a small body of persons to the persons who give directions in regard to the
manage the affairs of the Society. It is called the business of the Society. The definition is very
Managing Committee. The Managing Committee wide and inclusive. It may be noted that it also
consists of few members, but even then some includes members of Managing Committee (vide
individual members have to be appointed as section 2 (20) of the said MCS Act). An Officer
Office Bearers and assigned specific works to be therefore means and can be read as office bearer
carried out by them and so the Office Bearers also. An office bearer is generally a person
come into existence as a matter of necessity. who has been given the post as a Chairman,
Secretary, Treasurer, etc. and he holds that post
5. The Office Bearers of a Co-operative and does the work as provided under the Bye-
Housing Society are: Laws.
(a) Chairman
7. The Chambers 20th Century Dictionary
(b) Secretary and defines the term “office bearer” as one who
holds the office or one who is appointed to
(c) Treasurer perform duty in connection with the Society,
This is as per the provisions referred to in the company, church, etc. So it is not intended to
Bye-Laws but some Societies also appoint a give a restricted meaning to the word Office
President, Vice Chairman or Vice President, Joint Bearer. Many a times the Managing Committee
Secretary, Assistant Secretary, Joint Treasurer or appoints Sub-Committees and Chairman and
Assistant Treasurer, etc., although there are no Secretary thereof and assigns them particular
specific provisions for in the Act or Bye-Laws specified works. Broadly speaking the Chairman,
for appointing additional office bearers. If they Secretary and Members of such Committees can
are appointed they are supposed to be working also be called office bearers. When elections are
with or under the principal office bearers i. e. to be held in the Society members appointed on
the Chairman, Secretary and Treasurer and they special duty can also be called the office bearers.
would be enjoying the same powers and having
8. The powers, duties and obligations
duties and responsibilities of the principal office
of the Chairman are to have an overall
bearers particularly in absence of the principal
superintendence, control and guidance in respect
office bearers. Although no specific provisions
of the management and the affairs of the Society
are made for such joint or assistant office bearers
within the framework of MCS Act 1960, MCS
but by usage and custom they have come to stay
Rules 1961, Rules and Bye-Laws of the Society.
and are generally recognised.
The Chairman is competent to exercise any
6. It will be interesting to know who is an of the powers of the Managing Committee.
office bearer. The word “office bearer” is not However, while doing so he has to record the
used in the Bye-Laws but the word “officer” is reasons thereof in writing. It will therefore be
defined in section 2(20) of the Maharashtra Co- seen that overall powers given are exercised
operative Societies Act, 1960. It means a person by the Chairman but the same will have to be
elected or appointed by the Society to any office ratified in the next meeting of the Managing
of such Society according to its’ Bye-Laws; and Committee. It will thus be seen that when
includes a Chairman, Vice Chairman, President, powers are given they are with the condition as
Vice President, Secretary, Treasurer, Member of provided in Bye-Law No. 140 to be ratified in the
the Committee and any other person elected or next meeting of the Managing Committee.

:56
9. As stated above, there is no provision for appoint a President (as some Societies do) as it
appointing a President but if any such President will create confusion and problems about the
is appointed he is appointed by the General powers and duties of such President.
Body Meeting and answerable to General Body
Meeting. He can preside over the General Body 10. The powers and duties and responsibilities
or Extraordinary General Body Meeting of the of the Secretary are enumerated in Bye-Law
Co-Operative Housing Society. This means that No. 141. They are enumerated below for ready
he will not be a part of the Managing Committee reference:
but he will represent the General Body in a 141. The functions of the Secretary of the Society
general sense. It is therefore not advisable to are those as mentioned below:
Sr. Items of the Functions Bye-Law No.

No. under which
if falls
(1) (2) (3)
1. To issue share certificate to members within the stipulated period and the 9 and 10
prescribed manner
2. To deal with resignations from members including associate and nominal 27 to 30
members
3. To enter nominations and revocations thereof in the Nomination Register 33
4. To inspect the property of the Society 48(a)
5. To issue notices regarding repairs to be carried out in flats 48(b)(c)
6. To deal with cases of expulsion of members 51 to 56
7. To deal with cases of cessation of membership, including associate and 61
nominal membership
8. To deal with the applications for various purposes received by the Society 65
9. To prepare and issue demand notices/bills for payment of the Society’s 70
charges
10. To bring cases of defaults in payment of the Society’s charges to the notice 71
of the Committee
11. To issue letter of allotment of flats 76(a)
12. To issue notices and agenda of all meetings of the general body 99
13 To record the minutes of all the meetings of the general body 109
14. To call the first meeting of the newly constituted committee 123(b)
15. To issue notices of all the meetings of the Committee 133
16 To attend meetings of the Committee and to record minutes thereof 137
17. To maintain account books, register and other records, unless otherwise 144
decided by the committee.
18. To finalise account of the Society in the required manner 147(a)
19. To produce records of the Society before different authorities concerned with 153
the working of the Society with the consent of the Chairman

579
Powers, Duties and Responsibilities of Office Bearers
20. To prepare the audit rectification reports in respect of audit memos received 154
from the Statutory and Internal Auditors
21 To bring breaches of the bye-laws by the members of their notices under 166
instructions from the committee
22. To discharge such other functions under the MCS Act, 1960, the MCS Rules
1961 and the Bye-laws of the Society and directions of the Committee and
the general body meetings, as are not expressly mentioned hereinabove
23. To place the complaint application with facts, before the Committee, in the 174
coming meeting
It will thus be seen that he (Secretary) is (iv) To scrutinize all requirements of

virtually in the overall administration of the expenditure and recommend the same
Society. sanction.
11. The Model Bye-Laws of the Society has (v) To ensure that all entries in Petty
detailed the functions of the Chairman and the Cash Book are checked thoroughly for
Secretary. However, it is silent with respect to correctness before signature and the items
the duties of the Treasurer who nevertheless purchased have been taken on charge in
occupies an important standing as an important the respective Stock Ledgers.
Office Bearer. Naturally in most Societies the
(vi) To ensure cash balance is held beyond the
Treasurer devotes his time mostly accounting
limit fixed by the Managing Committee.
functions. He is responsible for all moneys
received and paid by the Society (vii) To ensure that all transactions are properly
reflected in General Ledger connected with
A Treasurer in the Society is an important office Account.
bearer. His general duties will be to maintain
the accounts and ensure that monies received (viii) To see that Non-Expendable Items are
are entered in the account books and deposited taken on proper Register.
in the Bank and spend out of the said accounts
monies required for day-to-day and routine (ix) To report cases of Misappropriation of
expenses and such other expenses as may be Funds of the Society immediately, on
sanctioned by the Managing Committee. The detection, to the Chairman or Secretary
following may be ideally the duties of the and the Managing Committee and further
Treasurer: suggest and implement appropriate
remedial measures for avoidance or
(i) To sign all receipts for cash and cheques recurrence ff the same.
received by The Society.
(x) To ensure that all vouchers, along with
(ii) To ensure that all Account Books and the bills relating thereto, are arranged in
Registers are properly maintained. order ff entries in the Cash Book and the
Journal.
(iii) To operate the Bank Account of the (xi) To ensure proper records of all
Society jointly with the Secretary and the Counterfoils, challans, bills Receipts and
Chairman. cheques are preserved.

:58
(xii) Ensure that periodical Statements of (xxiii) To assist Hon. Secretary during audit,
Accounts are prepared by the Society. internal / statutory.
(xiii) To put up Monthly Balance Sheet and (xxiv) To assist in preparation of Audit
Income and Expenditure Statement of the Rectification Report in ‘O’ Form prescribed
year before the Managing Committee, for under Rule – 73 of the MSC Rules 1961.
approval.
(xxv) To ensure that all members pay their
(xiv) To check Monthly Bank Reconciliation dues in time and in case of default
Statements for correctness. to take action to recover the same without
delay.
(xv) To check Audit Reports and all auditable
documents. 12. Each office bearer is personally responsible
for his own area of work and will be held
(xvi) To ensure that personal Ledgers of all responsible for dereliction of his duties and
Members are properly maintained. if he fails to carry out his functions. He is
responsible to the Managing Committee as
(xvii) To initiate action for recovering also to the General Body of Members. He is
outstanding liabilities of Sundry Debtors also personally liable for criminal acts like
and Sundry Creditors. fraud, misappropriation, cheating and can be
prosecuted.
(xviii) To ensure the original FD documents are
kept safe preferably in Bank Lockers 1ith a 13. The office bearers are at present working
photocopy in office file. Also submit same free of any fees or compensation. They are
for renewal /encashment on maturity in many a time do not get time to attend Society’s
time. work because of their other activities. Since the
Society does not get members voluntarily to act
(xix) To put up Monthly Account Statement for as office bearers, it is suggested that they should
the perusal of Management Committee. be paid adequate compensation for attending
meetings and carry out their works. This will
(xx) To supervise the Accountant employed for induce them to come forward and increase their
writing accounts. accountability.
(xxi) To ensure that the Accounts are 14. The subject is vast and books and books
maintained as per statutory requirements can be written thereon. In this short Article it is
including the accounting software. sufficient if Readers are made aware and where
to look for detailed knowledge. It will be a good
(xxii) To see that Audit reports are received
habit for persons concerned to periodically
from Internal Auditors appointed in time
browse through the present Bye-Laws of the
with rectification reports thereon and
Housing Society as they spell out in great details
they are placed before the Managing
the working of a Society.
Committee.
2

599
Records to be maintained by the Society and Check list for transfer of a Flat
CA Vipin Batavia
Records to be maintained by the Society and

Check list for transfer of a Flat
Every Co-operative Housing Society is required (iii) Cash Book Folio No.
to maintain statutory records prescribed under (iv) No. of Shares (Now for Individual-10
the Co-operative Societies Act and there are Shares & Statutory Body – 20 Shares)
certain other records, like books of accounts, (v) Value of Shares
various registers, files, vouchers, other
(vi) Name of the Members to whom Shares
documents etc., are to be maintained for smooth
Allotted
running and proper management of the society
for various purposes. (vii) Date of transfer / refund
(viii) Cash Book Journal Folio No.
Records to be maintained by the (ix) No. of Shares transferred or refunded
society (x) Share Certificate Nos. transferred or
refunded
1) Nomination Register
(xi) Value of Shares transferred or refunded `
(i) Serial Number
(xii) Value of Shares transferred or refunded `
(ii) Name of the Member making nomination
(xiii) Name of transferee or the person receiving
(iii) Date of nomination refund
(iv) Name/s of nominee/s & Address/es of (xiv) Authority of transfer or refund
the nominee/s
(xv) Remarks
(v) Date of the Managing Committee Meeting
in which the nomination was recorded
3) “I” Form Register - (As per Rules –
(vi) Date of any subsequent revocation of 32 and 65 (I)) (Section 38 (I) of the
nomination Maharashtra Co-Operative Societies
(vii) Remarks Act, 1960)
Note: - On revocation, entry of fresh nomination (i) Serial Number
should be taken after the last entry in the
(ii) Date of Admission
register.
(iii) Date of payment of Entrance Fee
2) Share Register (iv) Full Name
(i) Serial Number (v) Address
(ii) Date of allotment of share (vi) Occupation

:60
(vii) Age on the Date of Admission (viii) Bill No.

(viii) Full Name and address of the person (ix) Date of Bill
nominated by the Member under Section
(x) Loan Installment
30 (I)
(xi) Interest on Loan
(ix) Date of Nomination
(x) Date of Cessation of Membership (xii) Sinking Fund
(xi) Reasons for Cessation (xiii) Repairs Fund
(xii) Remarks (xiv) Municipal Taxes
(xv) Water Charges
4) “J“ Form Register - (As per Rule 33) (xvi) Electricity Charges
(i) Serial Number (xvii) Parking Charges
(ii) Full Name of the Member (xviii) Insurance Premium of Property
(iii) Address (xix) Service Charges
(iv) Class of Member (xx) Interest on Arrears
(xxi) Total Dues
5) Sinking Fund Register
(xxii) Recoveries (Receipt No., Date and Amount
(i) Serial Number Received)
(ii) Name of the Member (xxiii) Balance
(iii) No. of the Flat allotted
(iv) Value of the flat excluding value of land 7) “O” Form Register - (As per Rule 73)
(v) The amount of Monthly / Quarterly (Rectification Report Under Section 82/87)
Contribution @ 0.25% of the Construction (i) Date of Audit
cost of the flat per year (as shown in col. (ii) Number & Date of order under Sections
4) per annum 83-84
(vi) Date of Receipt of contribution to the (iii) Period covered
Sinking Fund
(iv) Name & Designation of person carrying
(vii) Amount contributed out audit, inquiry or inspection
(viii) Remarks (v) Serial number of the objection in the Audit
memo or Report of the officer carrying out
6) Monthly Collection Register inquiry or inspection
(i) Flat Number (vi) Observations made by the Auditor or
(ii) Area (carpet) Sq. ft. officer carrying out inquiry or inspection
(iii) Rateable Value ` (vii) Explanation of the Society and remarks

regarding action taken by it to rectify
(iv) Member the irregularities and implement the
(v) Transfer Details (Date and Transfer Premia suggestions made by the Auditor or
received (`)) officer, carrying out inquiry or inspection
(vi) Vehicles (Car and Scooter / M. Bike) (viii) Number and Date of the resolution of the
committee approving the report
(vii) Month
(iv) Remarks

619
8) Investment Register Annual Non-Agriculture Assessment

(i) Name of the Fund Particulars of Building
(ii) Serial Number Completion / Occupation Certificates (BCC /
OC)
(iii) Date of Investment
Occupation Date
(iv) Details of Investment (Securities, Shares
F.D. Receipts Nos.) Municipal Assessment Year
(v) Name of the Institution / Bank Total Rateable Value
(vi) Total Amount Invested Date of Conveyance
(vii) Rate of Dividend Interest Date and Signature of the Hon. Secretary &
Chairman
(viii) Dividend / Interest Received / Accrued
Per Annum (Period & Amount)
(II) Other Details
(ix) Date of Realisation
(i) Name of Co-partner Member
(x) T.D.S. Details
(ii) Date of Possession
(xi) Amount Realised
(iii) Distinguishing No. of tenement (Flat No.
(xii) Remarks & Floor)
(iv) Description of tenement
9) Property Register
(v) Area of tenement
(I) Information about Property (vi) Cost of the tenement (Land &
Name of the Society Construction)
Address (vii) Annual Ground Rent
Registration No. and Date (viii) Date of Cessation of Membership
Municipal house no. (ix) Signature Chairman / Hon. Secretary
Survey No. / Sub Div. No. (x) Remarks (Reason of Cessation / Transfer
to Sr. No. and Date)
Land Free / Lease Hold
Annual Lease Rent 10) Members List Register
Total Plot Area (i) Serial Number
Constructed Area (ii) Flat Number
Total No. of Flats (iii) Name of the Members
Garages (iv) Joint Member
Shops (v) Associate Member
Land Cost
11) Stock / Dead Stock Register
Construction Cost
(i) Serial Number

:62
(ii) Date the auditor concern shall after obtaining

written permission from registrar to file
(iii) Cash B.F.
F.I.R. against fraud)
(iv) Article with Particulars (Name, Qty., Rate,
M. C. Resolution, Date) 13) Other Records to be Maintained
(v) Voucher No. (i) Notices & Minutes Books of meetings for:
(vi) Total Cost a) Managing Committee
(vii) Percentage of Depreciation b) Annual General Meeting
(viii) Particulars of Depreciation and Balance per c) Special General Body Meeting
Annum
d) Grievance settlement and Redressal
Year committee.
Amount of Depreciation (ii) Approved Copy of Bye Laws of the Society
Balance (iii) Maharashtra Co-operative Societies Act
Signature of Chairman or Secretary and Rules
Remarks (iv) Inward & Outward Register
(ix) Signature of Chairman or Secretary (v) Structural Audit Records
(x) Remarks (vi) Parking Register (Now parking space will

be transferable right with the flat or to
other eligible member of the society)
12) Books of Account
(vii) Annual Returns (To be filed with the
(i) The Cash & Bank Book
authority designated by state government)
(ii) The General Ledger
(viii) Record of active and non active members.
(iii) The Personal Ledger
(ix) Income Tax Records & Returns
(iv) Bill Register
(x) TDS Records & Returns
(v) Vouchers for Payment
(xi) Contract Register
(vi) Monthly / Quarterly bills raised on the
(xii) Various Files:
members for outgoings of the society.
The Housing societies should maintain separate
(vii) Receipts of the collection of charges
file for the correspondence and receipt for
/ transfer fees and other funds of the
the payment made with different statutory
society.
authorities like Local Authority (Municipality),
(viii) Bank Statement / Pass Book Registrar, Federation, Electric Department,
(ix) Statement of accounts as final Annual Collector, Police Station etc. Separate file has
Accounts of the society are prepared at the to be maintained for members’ application,
end of every financial year nomination forms, transfer forms, Building
approval records, Registration records, Circulars,
(x) Auditing records and Audit reports (Now Complaints, Tender & Quotation File, Election
the accounts are to be audited within and insurance records etc. and also separate file
six months of the close of the F.Y. and for each member of the society.

639
Check List for Transfer of a flat

A) Copy of Instrument
(i) Certified true copy of the instrument executed for transfer of right in the flat either Agreement
to sell or Gift Deed or any other instrument duly stamped and registered with Registrar of
Assurances along with other required forms and charges.
B) List of Forms to be submitted along with registered instrument for transfer of a Flat in a
Co-operative (H) Society.
Sr. Form Name of the Form To be
No. No. signed by
1 20 (1) A form of Notice of Intention of a member (Transferor) to transfer his shares Transferor
and interest in the Capital / Property of the society (Bye-law No. 38 (a) along
with the consent of transferee.
2 20 (2) A form of letter of consent of the Proposed Transferee to transfer shares and Transferee
interest of the member (Transferor) to him (Transferee) [Bye-law No. 38 (a)]
3 — The Form resignation of Membership of the society by a member (Transferor) Transferor
[Bye-law No. 38(e)(iii)]
4 21 Form of application for transfer of shares and interest in the capital / Transferor
property of the Society by the transferor (being an individual) [Bye-law
No. 38 (e) (i)] Form of Application for the membership of the society By the
proposed Transferee (being an individual) [Bye-law No. 38 (e) (ii)]
5 23 Form of Application for the membership of the society By the proposed Transferee
Transferee (being an individual) [Bye-law No. 38 (e) (ii)]
6 4 The Form of Undertaking to be furnished by the prospective member to use Transferee
the flat for the Purpose for which it is allotted. [Bye-law Nos. 17 (b) and 19
(A) (iv)]
7 — Indemnity Bond on ` 200/- Stamp Paper Transferee
8 — Possession Letter By
Transferor &
Transferee
(Both)
C) Optional Forms
(i) Form No. 14 Form of Nomination to be filed by the transferee. The amended Nomination fees
is now ` 100/- (It was ` 50/- prior to amendment)
(ii) Form No. 7 – The form of Associate Membership by an individual (New entrance fees ` 100/-)
The transferee & transferor should submit the certified copy of the instrument duly stamped &
registered along with the above set of documents to the society along with the required remittances
and the transfer fees as payable.

:64
CA Ajit Rohira
Various types of meetings
1. Type of Meeting 2.5 The strength of the Managing

Committee and its Quorum shall be as under :
Basically there are three types of meetings in
Co-operative Housing society, First is No. of Strength of Quorum in
Managing Committee Meeting, Second is Members Managing Managing
Annual General Body Meeting and third is Committee Committee
Special General Body Meeting. Up to 100 11 6
101 to 200 13 7
2. Managing Committee Meeting 201 to 300 15 8
301 to 500 17 9
2.1 Every committee at its first meeting 501 and above 19 10
after its election shall elect a Chairman,
Secretary and Treasurer from amongst the 2.6 The Chairman of the society
members of the Committee. shall preside over all the meetings.
In case he is absent, then members
2.2 The period of office of the committee of the Committee present shall
shall be for five years. Accordingly election elect one of them to be the Chairman on that
of all the members of the Committee shall be occasion.
held once in five years.
2.7 Every member of the Committee
2.3 The Committee shall meet at least once shall have one vote. However in the case of
in a month. equality of votes the Chairman shall have a
second or casting vote. All decisions shall be
2.4 For Managing Committee Meeting the taken by majority of votes.
Secretary in consultation with the Chairman
of the society has to give three days clear 2.8 The Secretary shall attend every meeting
notice for such meeting to all the members of the Committee and record its minutes.
of the Committee. Such notice shall state the After the minutes are signed by the Secretary
date, time and place of the meeting and the and Chairman of the meeting it shall be
business to be transacted. placed for confirmation before the next

659
Various types of meetings
meeting of the Committee. In the absence of Secretary their views / observations, if any
the Secretary of the society, the Chairman of on the draft minutes within 15 days from
the society shall make alternate arrangement the date of the circulation. The Committee at
for recording minutes of the meeting. its subsequent meeting should prepare the
final minutes of the general body meeting
after taking into consideration the views /
3. Annual General Meeting observations made by the members on the
draft minutes. Then the Secretary or any other
3.1 The Annual General Meeting of the person authorised should record them in the
society should be held on or before 30th Minutes Book.
September every year. There is no provision
for extension to hold Annual General Body
Meeting. 4. Special General Body Meeting
3.2 The Quorum for the meeting shall be 4.1 A special general body meeting of
2/3rd of the total number of members or 20 the society may be called at any time at the
members whichever is less. instance of the Chairman or by the decision
of the majority of the Committee and shall
3.3 If the society has passed a resolution be called within one month of the date of
that in case there is no Quorum the meeting the receipt of requisition in writing signed
will be adjourned for half an hour then the by at least 1/5th of the members of the
business as per the agenda will be transacted society or from the Registering Authority or
at the adjourned meeting irrespective of from the Housing Federation to which the
quorum. society is affiliated. The meeting so convened
shall not transact any business other
than that mentioned in the notice of the
3.4 In case of Annual General Body Meeting
meeting.
14 days' clear notice of the meeting shall be
given to all the members of the society.
4.2 The requisition for the special general
body meeting of the society shall be placed
3.5 Only a member can attend the General
within 7 days of its receipt before the meeting
Body Meeting and in his absence the
of the Committee by the Secretary of the
Associate member can attend the meeting.
society for fixing the date, time and place
No proxy or holder of Power of Attorney or
for the special general body meeting of the
Letter of Authority or Son or Daughter or
society.
relative shall have any right to attend the
meetings of the society.
4.3 In case of Special General Body Meeting
five days clear notice of the meeting shall
3.6 The Managing Committee should
be given to all the members of the society,
finalise the draft minutes of the Annual
under intimation to the federation and to
General Body Meeting within three months
the Registering Authority. In case of an
from the date of the meeting and should
emergency the Special General Body Meeting
circulate the draft minutes amongst all the
may be called even at a shorter notice, if the
members within 15 days from the meeting of
Committee unanimously decides to call the
the Committee at which the draft minutes are
Special General Body Meeting at a shorter
finalised. The members may communicate to
notice.

:66
5. Gr ievances Settlement and and Redressal Committee alongwith the

Redressal Committee documents which he relies upon. On
receipt of the application, the Grievances
Settlement and Redressal Committee shall
5.1 There shall be a Grievances Settlement
fix up a date and call upon the other party to
and Redressal Committee in each society
submit its say alongwith the documents on
to deal with the grievances of the members
which it relies and fix a date of meeting for
and the society relating to its business and
settlement of the grievance amicably by
management to be constituted in the Annual
compromise.
General Body meeting of the society to hear
and settle the grievances as far as may be
practicable within a period of three months. 5.4 If the parties with the assistance of
The committee of a society shall make a the Grievances Settlement and Redressal
report of such constitution of Grievances Committee reach a settlement agreement,
Settlement and Redressal Committee to the they would draw up a settlement agreement.
Registrar. After considering the settlement agreement,
the Grievances Settlement and Redressal
Committee shall draw a final settlement
5.2 The Grievances Settlement and
agreement resolving the grievances.
Redressal Committee shall consist of three
active members of the society, who shall
not be the members of committee of the 5.5 When the final settlement agreement
society. is drawn up, the parties shall sign the
settlement agreement and the same shall
be binding on the parties and the persons
5.3 If any member, past member or any
claiming under them. The Grievances
legal representative of the deceased member
Settlement and Redressal Committee shall
of a society has any grievance against any
authenticate the settlement agreement and
member of the society and if the parties
furnish a copy thereof to each of the parties.
agree to resolve the grievance by settlement,
The record of the entire proceedings shall
the party aggrieved shall submit written
be kept by the Grievances Settlement and
application to the Grievances Settlement
Redressal Committee.
So long as there is desire or want, it is a sure sign that there is

imperfection. A perfect, free being cannot have any desire.
— Swami Vivekananda

679
Co-operative Courts
CA Dilip Sanghvi
Co-operative Courts
Co-operative movement was initially sponsored which was later replaced by The Maharashtra
by the State and now it has become a formidable Co-operative Societies Act, 1960.
factor in an economic development of the
To resolve the dispute separate provisions were
country, particularly Maharashtra. Co-operative
incorporated in Bombay Co-operative Societies
movement has made spectacular progress. It
Act, 1925 and The Maharashtra Co-operative
is a voluntary association formed with the aim
Societies Act, 1960.
to service its members. It is a form of business
where individuals belonging to same class join In the State of Maharashtra, a Society is formed,
hands for the promotion of common goal. Co- regulated and controlled by the Maharashtra
operative Society is "a society which has its Co-operative Societies Act, 1960. There are
objective the promotion of economic interest of two machineries to resolve the disputes
its members in accordance with co-operative namely Registrar of Co-operative Societies and
principles". Unlike in Private Sector, where the Co-operative Courts. Disputes are referred
control is in the hands of Capitalist, whereas to either Registrar or Co-operative Court
Co-operative Society follows the principal of depending upon its nature.
‘one man one vote’. This is unique feature of a Section 54 of the repealed Bombay Co-operatives
Co-operative Society where the capital does not Societies Act, 1925 was dealing with the disputes
dominate the administration of Co-operative in case of Co-operative Societies. Said section of
Society. 54 of repealed Bombay Co-operatives Societies
There exist various types of Co-operative Act, 1925 and (pre-amendment) Section 91 of the
Societies such as co-operative banking, co- Maharashtra Co-operative Societies Act, 1960,
operative housing, co-operative credit societies were applying simple methods of arbitration
etc. With growth of co-operative movement, to resolve dispute between the Society and
there was increase in disputes between society its members or between society and agents or
and its members, members themselves, Registrar between society and office-bearers.
of Co-operative Society and Co-operative Under the pre-amended provisions, the Registrar
Societies. To monitor the efficient and smooth of Co-operative Societies used to publish a list of
functioning of Co-operative movement, Bombay nominees who can act as arbitrators and thereby
Co-operative Societies Act, 1925 was enacted, any dispute was referred to such nominee to

:68
arbitrate in the matter. The Civil Procedure • a claim by a society for any loss caused to
Code was not followed. Registrar’s nominee it (whether such a loss is admitted or not),
used to conduct hearing at their residence or
offices. However, Registrar’s nominees had • a refusal or failure by a member, past
power to pass awards which was binding. It member or a nominee, heir or legal
ensured speedy disposal of disputes. However, representative of a deceased member, to
with passage of time, and spectacular increase deliver possession to a society of land or
in co-operative movement, various complicated any other asset resumed by it for breach
question of law arose and need was felt to of condition as the assignment.
establish Co-operative Court. Therefore, the Who can refer case/dispute to Co-operative
Act was amended to establish Co-operative Court
Courts. Today, the Co-operative Courts are like
Civil Courts. The jurisdiction of Co-operative • Any of the parties to dispute (specified
Courts today is very wide. Unfortunately parties) or
the infrastructure provided to Co-operative • Federal society to which the society is
Courts is not sufficient to cater its increasing affiliated or
jurisdiction.
Section 91 of the Maharashtra Co-operative • Creditor of society
Societies Act, 1960, falling under Chapter Specified parties under section 91 are:
heading IX ‘Settlement of Disputes’ deals with
the types of disputes that can be referred to • a society,
Co-operative Court.
• committee or any past committee,
Section 91 of the said Act particularly relates to
disputes between the society and its members. • any past or present officer,
• any past or present agent,
Cases to be referred to Co-operative
• any past or present servant
Court
• Disputes touching the Constitution • nominee, heir or legal representative of
any deceased officer, deceased agent or
• Elections of the Committee or its officers
deceased servant of the society,
• Conduct of general meetings
• the Liquidator of the society,
• Management or business of Society
• the official Assignee of a deregistered
society,
Disputes include
• a claim by or against a society for any debt • a member, past member or a person
or demand due (whether admitted or not); claiming through a member, past member
or a deceased member of society,
• a claim by a surety for any sum or demand
due to him from the principal borrower • a society which is a member of the society,
in respect of a loan by a society and • a person who claims to be a member of the
recovered from the surety owing to the society,
default of the principal borrower (whether
such a sum or demand be admitted or • a person other than a member of the
not); society, with whom the society, has any
transactions in respect of which any

699
Co-operative Courts
restrictions or regulations have been • Excess recovery of dues from the members
imposed, made or prescribed under etc.
sections 43, 44 or 45 and any person Following disputes are specifically excluded
claiming through such person; from ambit of Co-operative Court
• a surety of a member, past member or • An industrial dispute as defined in clause
deceased member, or surety of a person (k) of section 2 of the Industrial Disputes
other than a member with whom the Act, 1947
society has any transactions in respect of
• Rejection of nomination paper at the
which restrictions have been prescribed
election to a committee of any society
under section 45, whether such surety or
person is or is not a member of the society, • Refusal of admission to membership by
society to any person who is qualified
• any other society, or the Liquidator of such
thereto
a society or de-registered society or the
official Assignee of such a de-registered • Any proceeding for the recovery of the
society. amount as arrear of land revenue on a
certificate granted by the Registrar under
With effect from 14-2-2013, even the disputes
sub-section (1) or (2) of section 101 or sub-
pertaining to elections of committees of specified
section (1) of section 137
societies including its officers are brought under
ambit of Co-operative Court. This is a positive • The recovery proceeding of the Registrar
step, as earlier dispute pertaining to specified or any officer subordinate to him or an
societies (such as Co-operative spinning mills officer of society notified by the State
or sugar factories etc) was referred to Divisional Government, who is empowered by the
Revenue Commissioner which works under Registrar under sub-section (1) of section
direct control of state Government. Now 156
bringing it under ambit of Co-operative Courts • Any order, decisions, awards and actions
will ensure independent and fair administration of the Registrar against which appeal
of Justice. under section 152 or 152A and revision
In case of Housing Co-operative Societies under section 154 of the Act has been
disputes between members or members and provided
society pertaining to following issues can be • A dispute between the Liquidator of
referred to Co-operative Courts: a society or an official Assignee of a
• Resolutions of the Managing Committee de-registered society and the members
and General Body, (including past members, or nominees,
heir or legal representative or deceased
• The election of the Managing Committee,
members) of the same society
except the Rejection of Nominations, as
provided under Section 152A of the ACT, Section 91 specifically states that the matters
which are exclusively within jurisdiction of Co-
• Repairs, including major repairs, internal
operative Court cannot be interfered with by
repairs, leakages,
the Registrar of Co-operative Societies or any
• Parking, other court. Similarly, Co-operative Court cannot
• Allotment of Flats/Plots, entertain a dispute which is within jurisdiction
• Escalation of construction cost, of Registrar of Co-operative Societies. For
instance any dispute pertaining to the election
• Appointment of Developer/Contractor,
of the Managing Committee which falls within
Architect,
the ambit of Co-operative courts cannot be
• Unequal water supply entertained by Registrar of Co-operative Societies

:70
and Co-operative Court cannot entertain any powers of the Registrar are conferred, to
dispute pertaining to misappropriation/ the Registrar
misapplication of society funds which falls • In case order or decision to the
within jurisdiction of Registrar of Co-operative Co-operative Appellate Court has been
Societies. provided under this Act, it shall lie to the
Co-operative Appellate Court.
Constitution of Co-operative Court
The State Government is empowered to Time limit
constitute one or more Co-operative courts In either case i.e., an appeal to the State
for adjudication of dispute under the Act. Government or to the Registrar or Co-operative
A Co-operative court shall consist of atleast Appellate Court, shall be filed within two
one member appointed by State Gonernment months of the date of the communication of the
possessing the prescribed qualification. A order or decision.
Co-oprative Court will have jurisdiction over
In case, remedy is not available to appeal for
the whole State unless otherwise specified by
any order, decision or award passed under
notification.
provisions of this Act, then one can file revision
application under section 154 of the Co-operative
Appeals under Co-operative Societies Societies Act, 1960.
Act, 1960 For example, in case of refusal of membership
Any dispute arising under this Act can either be to any person, sections 22 and 23 of the
referred to Registrar of Societies or Co-operative Maharashtra Co-operative Societies Act, 1960
Court established under section 91 of the empowers Registrar of Co-operative Societies
Co-operative Societies Act, 1960 depending upon to decide if such refusal is in accordance to
the type of dispute. provisions of sections 22 and 23 of the
Maharashtra Co-operative Societies Act, 1960 Maharashtra Co-operative Societies Act, 1960.
provides for independent provisions of appeal In case any of the person seeking membership
in case order passed by Registrar of Societies as is aggrieved by the order of Registrar or his
well as Co-operative Court. subordinate then remedy available to him is to
Section 152 of the Maharashtra Co-operative file application for revision under section 154 of
Societies Act, 1960 provides for appeal against the Maharashtra Co-operative Societies Act, 1960
order passed by Registrar of the societies or before higher authorities viz., higher authorities
Co-operative Court. of Registrar of Co-operative Societies and further
more to State Government.
Section 152 states that an order or decision under
sections 4, 9, 11, 12, 13, 14, 17, 18, 19, 21, 21A, 29, In case order is passed under section 23 of
35, 77A. 78, 79, 85, 88 and 105 including against the said Act by Registrar or his sub-ordinates
an order for paying compensation to society i.e. Assistant Registrar or Deputy Registrar,
shall lie: his decision or order is final and there is no
provision to appeal against the same under
• In case order is made or sanctioned
section 152 of the said Act. However, the person
or approved by the Registrar, or the
aggrieved has remedy to file revision application
Additional or Joint Registrar on whom
under section 154 of the said Act. In case of
powers of the Registrar are conferred the
extra-ordinary circumstance, person aggrieved
appeal lies to the State Government,
can take recourse by filing Writ Petition
• In case order is made or sanctioned by under Articles 226 or 227 of the Constitution of
any person other than the Registrar or the India.
Additional or Joint Registrar on whom the

719
Co-operative Courts
If the Managing Committee or its member is 97 before the said Appellate Court. The Appellate
removed under Section 77-A or 78 of the said Act Court can exercise powers of revision against any
then appeal lies with the Divisional Joint Registrar. If order passed by any Co-operative Court in the
however such powers are exercised by the Divisional state. For example, in a given case, a question of
Joint Registrar in charge of Administration, then the jurisdiction is raised before the Co-operative Court
power of appeal or Revision as the case may be, are and a decision is given by the judge of the Co-
with the State Government. operative Court holding that Co-operative Court
However, if an award is passed by the Judge of has or has no jurisdiction, a party aggrieved can
the Co-operative Court, then an appeal is provided file a revision application against such an order
under Section 97 of the said Act before the of the judge of the Co-operative Court before the
Maharashtra State Government Appellate Court Appellate Court, which Appellate Court can decide
at Mumbai (hereinafter referred to as the Appellate in its revisional jurisdiction. In short, for any order
Court). The Appellate Court has been established passed by the subordinate officer of the Registrar,
under Section 149 of the Maharashtra Co-operative an appeal or revision is provided at higher
Societies Act, 1960. If the Judge of Co-operative level viz., Divisional Joint Registrar in charge of
Court passes any interim order or interlocutory Appeals and if any order is passed by Co-operative
order by exercising powers under Section 95 of the Court, appeal or Revision is with the Appellate
said Act, then an appeal is provided under Section Court.
Offices of Registrar of Co-operative Societies

Sr. Designation of the Jurisdiction Pin Code Area Covered in Wards Address of the Office
No Registrating Authority (Wards in Charge)
1 2 3 3 4
1 Deputy Registrar C.S. A - Ward 400 001, 005, G.P.O. V.T. Colaba, Malhotra House
'A' Ward Mumbai - 01. 020, 023, 038, Marine lines, (Formely Known as
040, 039 Yogakshema, Cuffe India House),
Parade, Hutatma Chowk, 6th Floor, Opp. GP.O.
Ballard Estate, Mantralaya Mumbai - 400 001
2 Assistant Registrar C.S. B - Ward 400 003, 009 Mandvi Dongri Malhotra House
B' Ward Mumbai - 01 Umarkhadi, Masjid and 6th Floor, Opp. G.P.O.,
Adjoining Market Areas Mumbai - 400 001
3 Assistant Registrar C.S. C - Ward 400 001, 004 Kalbadevi C.P.Tank, Malhotra House
'C' Ward Mumbai - 01 Bhuleshwar and 6th Floor, Opp. G.P.O.,
Adjoining Market Areas Mumbai - 400 001
4 Deputy Registrar C.S. D - Ward 400 004, 006, Girgaon, Malabar Hill, Malhotra House
'D' Ward Mumbai - 01 007, 008, 034, Opera House, Grant Road, 6th Floor,
036 Cumbala Hill, Opp. G.P.O.,
Rajbhavan Tardev Mumbai - 400 001
5 Deputy Registrar C.S. E - Ward 400 088, 027, Tank Road, Bombay Central Malhotra House
'E' Ward Mumbai - 01 033 Chinch Bunder, Mazgaon, 6th Floor, Opp. G.P.O.,
Jijamata Udhyan, Kalachowki Mumbai - 400 001

:72
6 Deputy Registrar C.S. F - South Ward 400 012, 013, Parel, Shivadee, Malhotra House
'F'/South Ward 014, 015 Abhyudaynagar, 6th Floor, Opp. G.P.O.,
Mumbai - 01 Naigaum Mumbai - 400 001
7 Deputy Registrar C.S. F - North Ward 400 022, 030, Dadar (Central Rly), Matunga, Malhotra House
'F'/North Ward 031, 019, 014, Sion, Wadala, 6th Floor,
Mumbai - 01 Antop Hill King's Opp. G.P.O.,
Circle, Chunabhatti Mumbai - 400 001

8 Deputy Registrar C.S. G - South Ward 400 018 N. M. Joshi Marg, Malhotra House
'G/South Ward Gadge Maharaj Chowk, 6th Floor, Opp. G.P.O.,
Mumbai - 01 Prabhadevi, Worli, Mumbai - 400 001
Bhavani Shankar Road,
Dadar, Kolesewadi
9 Deputy Registrar C.S. G - North Ward 400 016, 017 Shivaji Park, Mahim Dharavi, Malhotra House
'G'/North Ward 019, Matunga (W), 6th Floor, Opp. G.P.O.,
Mumbai - 01 Dadar (W) Mumbai - 400 001
10 Deputy Registrar C.S. H-East 400 029, 51, Bombay Aerodrome, Bhandari Sahkari Bank
'H' Ward Mumbai - 01 55, 98 Bandra (E), Santacruz (W), 2nd Floor, P L Kale
Bandra (E), Bagali Naka, Guruji Marg, Dadar (W)
Vidyanagari, Vakola, Kalina Mumbai-48
11 Assistant Registrar C.S. H-West Ward 400 051, 054 Khar (W), Bhandari Sahkari Bank
'H''/West Ward, 50 Santacruz (W), 2nd Floor, P L Kale
Mumbai - 01 Bandra Guruji Marg, Dadar (W)
Mumbai-48
12 Deputy Registrar C.S. K - East Ward 400 057, 051 Vile Parle (E), J. B. Nagar, A-1 Bldg., 315/316,
'K' Ward Mumbai - 01 069, 093, 096 Chakala, MIDC Seepz, 6th Floor, Near Wadala
Andheri (E), Jogeshwari (E) Truck Terminus,
Wadala (E), Mumbai - 3
13 Deputy Registrar C.S. K - West Ward 400 056, 060 Vile Parle (W), Andheri (W), Room No. 69,
'K'/West Ward, 061, 049, 102 Jogeshwari (W), Versova (W), MHADA,
Mumbai - 01 Juhu Office Bandra.
14 Deputy Registrar C.S. L - Ward 400 024, Nehru Nagar, Saki Naka, Kokan Bhavan
'L' Ward 070, 072 Kurla Belapur,
Navi Mumbai Navi Mumbai.
15 Assistant Registrar C.S. M - Ward 400 071, 074, Chembur R.C.F. Deonar, Kokan Bhavan
'F' North Ward 085, 088,094 Govandi, Mankhurd, Belapur,
Navi Mumbai - 01. Anushakti Nagar, BARC Navi Mumbai.


739
Co-operative Courts
16 Assistant Registrar C.S. N - Ward 400 075, 077 Pantnagar, IIT Bombay, Kokan Bhavan
N' Ward, Vashi, 079, 083, 086 Rajawadi, Garodianagar, Belapur,
Navi Mumbai Tagore Nagar, Barve Nagar, Navi Mumbai.
Ghatkopar (E&W)
17 Assistant Registerar C.S. S - Ward 400 087 Bhandup (East & West), Kokan Bhavan
'S' Ward, Vashi Kanjur Marg, Belapur,
Navi Mumbai. Vikhroli (East & West) Navi Mumbai.
18 Assistant Registerar C.S. T - Ward 400 081 Mulund (East & West) Associated Cement
'T' Ward, Mulund Mulund Colony Compund, Mulund (W)
Navi Mumbai - 01. Mumbai - 80.
19 Deputy Registrar C.S. P - Ward 400 062, 063 Goregaon (E & W) P & R Ward,
'P' Ward, Mumbai-01 054, 065, 090 Malad (E & W) Mahanagar Palika Bldg.,
104 Aarey Milk Colony, Malwani, & Cultural Complex,
Marve 90 Feet D. P. Road,
Near Saint Laurence
School, Kandivali (E)
Mumbai - 400101.
20 Deputy Registrar C.S. R - Ward 400 066, 067, Borivali (E & W) P & R Ward,
'P' Ward, Mumbai-01 068, 092, 103 Kandivali (E & W) Mahanagar Palika Bldg.,
Dahisar (E & W) & Cultural Complex,
90 Feet D. P. Road,
Near Saint Laurence
School, Kandivali (E)
Mumbai - 400101.
21 District Deputy A to R Greater Mumbai District Malhotra House

Registrar, Co-op. Soc. (Formely Known As
Mumbai. India House)
6th Floor, Opp. G.P.O.,
Mumbai - 400 001
22 Deputy Registrar MHADA All Societies Under MHADA Grih Nirman,

Bhavan Opp. Kalanagar
Bandra (E), Mumbai-51
23 Assistant Registrar S R A All Societies Under Slums Asst. Registrar Co-Op-

Soc. S. R. A.
Administrative Bldg,
Gr, Floor, Behind HDFC
Bank, Anant Kanhere
Marg, Bandra (E)
Mumbai - 400051

:74
JURISDICTION OF CO-OPERATIVE COURTS

(Mumbai and Thane)
Sr. Muni Nos. Area

No. Wards
CO-OPERATIVE COURT NO. I

I A 1, 5, 20, 21, Fort, Mumbai C.S.T.
23, 38, 32, Mantralaya, Colaba.
B 3, 9, 10 Wadi Bunder, Carnac Bunder, Mandvi,
Dongri, Umarkhadi
C 2 Kalbadevi
E 8, 10, 27, 23 Ray Road, Bombay Central, Mazgaon,
M 71, 74, 84, 88, Chembur, Govandi,
94, 43 Anushakti Nagar, Deonar, B.A.R.C.

CO-OPERATIVE COURT NO. II
II D 4, 6, 7, 8, 26, 34, 35, 36,
H 51, 29, 55 Bandra (E) & (W)
52, 54 Khar, Kalina, Santacruz Airport,

CO-OPERATIVE COURT NO. III
III F 12, 15, 14, 19, 22 Parel, Sewri, Naigaum, Matunga, Sion.
G 17, 13, 18 Delisle Rd., Jacob Circle
25, 16, 28 Prabhadevi, Worli, Dadar (W),
Shivaji Park, Dharavi
S 76, 78, 83, 31 Bhandup, Kanjur Marg, Vikhroli.
CO-OPERATIVE COURT NO. IV

IV K 56, 57, 58 Vile Parle, Juhu,
59, 67, 69 Andheri, Jogeshwari,
49 Versova.
P 62, 63, 64 Barve Nagar,
65, 90 Goregaon, Malad.
R 66, 67, 68, 92 Borivali, Kandivali, Dahisar.
CO-OPERATIVE COURT NO. V

V. L 24, 70, 72 Nehru Nagar, Kurla,
79, 77, 75 Saki Naka
N 86, 87, 89 Ghatkopar, IIT.
80, 81 Rajawadi, Pant Nagar, Barve Nagar,
Mulund and Thane Dist.

759
Co-operative Courts

:76
Vinod Sampat, Advocate
Landmark Judgments
2013 – 2012 Court judgments

Sr. Citation Judgment Contents
No
1 1984 (2) Bombay Cr 505 Smt. Neena S. Wadia vs. M/s. Consent cannot mean blanket authority obtained
Bombay High Court Venus Enterprises & Kunjan at the time of agreement of sale or handing over
Construction co. vs. Deepakbhai R. possession of flat as per sec. 7 (1) of the mofa Act.
Shah & Others
2 1994 C.T.J. 22 The Mah. Smt. Mayadevi Krishna Lulla vs. Any amount due for the period prior to registration
State Co-op. Appellate Byculla Service Industries Premises of the society would be payable to the builders and
Court, Mumbai C.H.S. Ltd., & Others it was for them to claim and/or recover from the
appellant such an amount would not be payable by
the appellant as a member of the society.
3 1998 C.T.J. 103 Bombay Shalikram Shivram Khobragade & Consultation of housing federation for show cause
High Court Hon’ble S.C. Other vs. Divisional Joint Registrar u/s. 78 should be meaningful & effective
Pratap J. (Writ Petition Co-operative Societies, Nagpur &
No.1779 of 1984 ; decided Others
on the 17th December,1984)
4 1985 C.T.J. 256 Bombay R. J. Uttamchandani vs. La-Rose Society can recover amounts from occupant who is
High Court C.H.S. Ltd., & Other a (non-member)
5 WP No. 3153 of 1998 Sai Griham Apartment chs Ltd., Society can recover amounts from occupant who is
decided on 27/7/1998 vs. Dy. Registrar Co-op. Soc. Nashik a (non-member)
6 1991 C.T.J. 239 Madhukar M. Mahajan r/o Plot The activities of tuition or balawadi are permitted in
No. 4, Archana C.H.S Ltd., Pune & the housing society as the same are covered under
Others vs. Archana Sahakari Gruha the object clause of housing society
Rachna Sanstha Maryadit
7 Bombay High court Ashok Bansilal Mutha & Other vs. The Govt. will not use Ready Reckoner for
Contempt Petition No.28 of 1. State of Maharashtra calculating the stamp duty.
1993 Bombay High Court 2. Inspector General of Registration
Undertaking & Controllers Stamps, M.S. Central
Bldg., Pune. 3. Collector,
4. Sub-Registrar Registration,
Collector Compound, Ahmednagar

779
Landmark Judgments
8 Petition No. 4577 of 1985 Smt. Ramagauri Keshavlal Virani No authority of builder to sell terrace.
1999 Vol. 101 (3) Blr 184 vs. Om Walkeshwar Triveni C.H.S
Ltd., Other.
9 Supreme Court (1999) 5 Icici vs. State of Maharashtra Agreement putting lessee for a specific period does
(Scc) not amount to a lease.
10 Bombay High Court W.P. Practising Valuers Associations Registering authorities will not refuse registration
No. 2027 of 2001 (India) & Ors. vs. The State of of document on the ground that full stamp duty has
Maharashtra & Ors. not been paid in accordance with Ready Reckoner.
this will however not prevent them from taking
further action in accordance with rules.
11 1991 Mlj 630 Girdharlal Bhanulal vs. State of Bye-laws do not have the force of law.
Maharashtra
12 Air 1970 Supreme Court Co-operative Central Bank Ltd. Bye-laws of co-operative society framed in
245 (V 57 C 51) (From and Others vs. Industrial Tribunal, pursuance of provisions of the Act – they cannot be
Andhra Pradesh ) Hyderabad held to have force law.
13 1990 Ctj Page 364 Sanwarmal Kejriwal vs. Vishwa There can therefore be no doubt that that a member
C.H.S. Ltd. & Other allotted has a right to transfer his interest in the flat
to a third party and therefore the right to induct a
third party one and licence basis.
14 Maharashtra State Co.op. M/s. Prakash Auto vs. Arenja Builder cannot sell open space like basement as per
Appellant Court 86 of 2001 Arcade Premises C.H.S. Ltd. & the provisions of mofa Act.
M/s. Shabi Construction & Co.
15 1989 Ctj 659 Bombay High R. B. Rajput vs. Hiralal B. Rajput Associate member is not merely a sympathiser
Court & Another member of a nominal member but has a right which
arises out of the joint ownership of the shares.
16 1996 (4) Bom. C.R. 696 Abdul Rehman Siddique & Others Ad - Interim Injunction can be granted in very rare
vs. Ahmed Mia Gulam Mohuddin cases of compelling circumstances--- grant of such
Ahmedji and Others order in routing manner cannot be sustained.
17 1995 (3) Bom. C. R. 65 Bhujangrao vs. State of Maharashtra Public servant members of Co-operative Societies are
not public servants under sec. 6 of Corruption Act
1947 of Criminal Procedure.
18 Writ Petition No. 209/03 Jerry Alex Braganza alias Jeronimo The court in its direction may permit filing of
Amendment Act 22/02 Oriculo Alex Braganza vs. Rajeshree written statement even beyond period of 90 days.
decided on 10-7-03 (Panji- alias Rayeshri Ramdas Borkar alias
Goa) 2003 (4) Mh. L.J. Shobhavati Ramdas Borkar and
Others
19 Civil Revisional Application Western Coalfields Ltd. through Court has jurisdiction to allow written statement to
No. 1024 / 1983 decided on General Manager (Planning) be filed inspite of its earlier order.
27/4/1984. Nagpur vs. Rajkumar Kanhiyalal
Bhiwapurkar & Others.
20 Writ Petition No. 1304 of Sky Anchorage C.H.S Ltd. & Mr. Open space are meant for the benefit of all
2004 Pradeep Rathi vs. The Municipal persons, who are entitled to the benefit under the
Corporation of Grater Mumbai & development & no single individual can appropriate
Others. any part of the same.

:78
21 State of Maharashtra Writ Dr. D. C. Shah vs. State of The requirement of 90% membership of a proposed
petition No.1642 of 1983 Maharashtra society is only a part of guideline policy and not a
Decided on 28/8/1984 statutory limit.
Citation 1985 Ctj 37
22 All India Reporter 2005 Friends Colony Development Officers are liable to compensate purchasers for
Supreme Court Air 2005 Committtee vs. State of Orissa & allowing unauthorised construction.
Supreme Court Others
23 Civil Appeal No. 92 of 1998 Secretary, Thirumurugan Co- Co-op. Society are also covered under sec. 3 of
2004 Supreme Court Cases operative Agricultural Credit Consumer Protection Act.
305 Society vs. M. Lalitha
24 1989 C.T.J. 497 Andhra Toddy Tappers Co-op. Society vs. This indicates that the society is obliged to take a
Pradesh High Court Excise Superintendent decision regarding admission and communicate it
within sixty days or otherwise deeming provision
will come into operation. The interpretation by
our learned brother in the decision aforesaid will
lead to a situation where the society can deprive
all admissions to membership by merely not
taking a decision. This is contrary to the scheme
of the act which not only provides for a deemed
membership u/s. 19 (2-A), but also for a machinery
for ascertaining the eligibility and other relevant
factors of the applicant for membership.
25 Maharashtra Co-operative Sunanda Janardan Rangekar vs. Maharashtra Co-operative Societies Act, (24 of
Societies Act, Sections 101 Rahul Apartment No. 11 1961). S. 101 – Application for recovery of arrears of
and 79-A [2006(1) Mh. L.J.] Co-operative Housing Society Ltd. maintenance charges from petitioner-society levied
maintenance charges for commercial premises of
petitioner at twice the rate of residential premises in
the society – in absence of any additional services to
the petitioner being holder of commercial premises,
the society was not entitled to levy maintenance
charges twice the rate of the residential premises.
2004(5) mh.l.j.197=2003(3) All.mr 570, rel (para 7).
26 First Appeal No. 786 of 2004 M/s. Jayantilal Investments vs. Builder is supposed to provide area for amenities
and First Appeal No. 989 of Madhuvihar C. H. S. Ltd. & like garden, as he had made a mention of the same
2004 Bombay High Court Parmanand Natwarlal Parekh in brochure as well as agreement. Brochure will have
& Himatlal Virchand Sheth & to be given weightage, if the amenity also mentioned
Shri Ketan Surayakant Trivedi & in the agreement.
Shri Kirit Ramanlal Dalal & Shri
Harshad Kantilal Shah & The Mun.
Cor. of Gre. Bombay & The Exe.
Engineer

799
Landmark Judgments
27 Writ Petition No. 1820 Hanuman Vitamins Foods Pvt. Maharashtra Co-operative Societies Act 1960 – S. 29
of 1986 1991 Co-op. C-1 Ltd. and Others vs. The State of and 30 – Bombay Stamps Act, 1958 – Sections 2(1),
Co-operative Cases Maharashtra and Another 2 (G) and Schedule, Article 25 (B) (I) (As Amended
in 1985) – Transfer of shares in a co-operative
society – Document of transfer – Transferee getting
right to allotment and occupancy of office premises
previously occupied by the transferor – Though
the title is transfer of shares, it is conveyance of a
right to occupy the immovable property and was
chargeable with duty under Article 25 (b) (i) and
cannot be exempted from the duty – Levy of the
stamp duty was not ultra vires the powers of the
State Legislature.
28 1981 Bom. C.R. 716 Letters The Association of Commerce (a) The Maharashtra Ownership Flats (Regulation of
Patent Appeal No. 44 of House Block Owners Ltd. vs. the Promotion of Construction, Sale, Management
1976, in First Appeal No. Vishandas Samaldas & Ors. M.N. & Transfer) Act, 1963, secs. 4 & 7 – the construction
172 of 1974, decided on Chandurkar & R.S. Bhonsale, Jj of India, article 133 – Agreement by defendant
8-12-1980. No. 1 – promoter with plaintiff – suit for specific
performance of agreement by plaintiff respondent
No. 1 – City Civil Court decreed – Single judge
confirmed dismissing appeal by defendant no. 2 –
justification for judgment and decree of trial court
as confirmed by single judge – Held trial court and
single judge in error in decreeing plaintiff’s suit for
specific performance.
(b) The Maharashtra Ownership Flats (Regulation of
the Promotion of Construction, Sale, Management &
Transfer) Act, 1963, sec. 4 & 7 – the Indian Contract
Act, 1872, sec. 56 – Agreement in question whether
sham and bogus transaction – Mere refunding
a certain sum by cheque, not any guarantee
to genuineness of transaction – Held, plaintiff
and defendant No. 1 being closely related, said
transaction entered into between them could not be
called a genuine transaction.
(c) The Maharashtra Ownership Flats (Regulation of
the Promotion of Construction, Sale, Management
& Transfer) Act, 1963, sec. 4 & 7 – Agreement in
question whether in contravention of sec. 4 & 7 –
Courts below negatived contention of appellant
– Entitlement of appellant to plead invalidity of
agreement in light of provisions of sections 4 and
7 – Held, it is difficult to hold that transaction was
a genuine one.

:80
(d) The Maharashtra Ownership Flats (Regulation of

the Promotion of Construction, Sale, Management &
Transfer) Act, 1963, sec. 4 – Words ‘the agreement
shall be registered under the Indian registration
Act’ – Meaning of – the Indian Registration Act,
1908, sec. 32 (a) – Registration of agreement –
Whether obligation of promoter – held, if promoter
declines or avoids to get document registered,
it is permissible for purchaser to present it for
registration.
(e) The Maharashtra Ownership Flats (Regulation of
& Transfer) Act, 1963, sec. 4 – Provisions of sec. 4
whether directory and not mandatory – Tests to
be applied for – Held, no universal rule can be laid
down. It is duty of courts to get real intention of
legislature.
(f) The Maharashtra Ownership Flats (Regulation of
& Transfer) Act, 1963, sec. 7 (1) (ii) – The Indian
Contract Act, 1872, sec. 56 – Agreement in question
whether void – Held yes. agreement hit by sec. 56
of Contract Act.
29 Bombay High Court Writ Humble Home C.H.S. Ltd. vs. Shri Terrace repairs is the responsibility of the society.
Petition No. 7231 of 2002 Sham Balani & Mrs. S. N. Shetty The first issue has been answered by holding that
Leakage the terrace which forms the roof of the disputant’s
flat is the property of the society and therefore, in
reply to issue No. 2, the society has been directed to
pay an amount of ` 8.458/-
30 Air 1970 Supreme Court 245 Co-operative Central Bank Ltd. Bye-laws of Co-operative Society framed in
(V 57 C 51)(From Andhra and Others vs. Industrial Tribunal, pursuance of provisions of the Act – They cannot be
Pradesh) Hyderabad. held to have force law.
31 Bombay High Court Writ Sukhsagar Co-operative Maharashtra Co-operative Societies Act, (24 of
Petition No. 110 of 2004 Housing Society Ltd. vs. State of 1961), Ss, 2 (1 and 9) __ Registration of Co-operative
Maharashtara and Others Housing Society of Flat Owners in Builder. The
questions as to whether the construction is in
accordance with builder regulation and if so,
whether an occupation or completion certificate
should be granted, does not lie within the provision
of the Registrar.
32 In The High Court of Nahalchand Laloochand vs.
Judicature at Bombay Panchali Chs Ltd. Car Parking
Appeal Jurisdiction Space
33 In the High of Judicature at M/s. Manratna Developers vs. Builders can carry out construction even if a co-
Bombay, Oocj Appeal No. Meghratan Chs Ltd. & Ors. operative society is formed.
297 of 200 Notice of Motion
No. 1966 of 2008 Insuit No.
1698 of 2008

819
Landmark Judgments
34 Dated 15/10/2007 S. Rangarajan vs. Oyster Chs Ltd. 2008 (6) All Mr 754 Shri S. Rangarajan vs. Oyster
Chs Ltd. & Anr Writ Petition No. 7574 of 2007 12Th
February, 2008
35 The Addl. Consumer Environ Emanual Co-op. Hsg. Soc. Conveyance Order in 128 days
Redressal Forum Kokan Ltd. vs. The Environ Enterprises Inc.
Bhavan , Navi Mumbai
C/91/2008
36 Bombay High Court Second Ramdas Shivram Sattur vs. Nominee does not become the owner of the property
Appeal No. 357 of 1986 Rameshchandra Ramchandra but to hold the property in trust
decided on 9/4/2009 Popatlal Shah & Others
37 Justice Dharmadhikari Sweety Agarwal Even one member can stop the redevelopment.
38 15th July/2008 479 Natalia Co-operative Housing Stamp Duty difference after 4 months to be paid by
01/July/2010 Society vs. Navbharat Development builder. Daily fine on builder till he obtains building
Corporation and Others completion certificate
39 Complaint Case No. 1. Anand J. Gupta Vasantapt. Parking cannot be sold by developer
2008/657 (In Mumbai Gandhi Gram Rd, Juhu, Mumbai-49.
Suburban District Consumer ...............Complainant(s) vs. 1. Royal
Forum) Palms (India) Pvt. Ltd. Survey No.
69, Near Unit No. 26, Aarey Milk
Colony, Goregaon(E), Mumbai-65.
............Opp. Party(s)
40 Dated 19th July, 2010 Order 489 Commercial purpose only Consumer Course Jurisdiction
includes profit generating activity,
other goods & services are covered
under Cpa-2 (Nc) (2)
44 537 Supreme Court Nahalchand Parking Space cannot be sold by builder
Laloochand Pvt. Ltd. vs. Panchali
Co-operative Housing Society Ltd.
dated 31-8-2010
45 545 Friends Colony Judgment to be Committee to be formed to check unauthorised
added construction.
Useful Websites for Co-operative Housing Societies
Website of Bombay High Court: http://bombayhighcourt.nic.in/

Website of prime ministers office http://www.pmindia.gov.in/
New CHS Model Bye-laws: http://tinyurl.com/New-Model-Byelaws-CHS-2013
Website of Commissioner for Cooperation and Registrar,Cooperative Societies (CC & RCS) Maharashtra State,
Pune: https://sahakarayukta.maharashtra.gov.in/SITE/Home/Home.aspx
Website of Mharashtra Govt.: www.maharashtra.gov.in
http://tinyurl.com/4-pt-attack-on-corrupt-mg-cmte • http://tinyurl.com/Co-opSocyProblems
http://tinyurl.com/4RTIForms • http://tinyurl.com/LandmarkCourtOrders
http://tinyurl.com/ImpGRsCirculars • http://tinyurl.com/BldgPropDepts
http://tinyurl.com/RTILandmarkOrders • Website of DDR III: ddr3csmumbai.org
Website of MHADA http://www.mhada.org/
2

:82
Special Article – Recent Amendment applicable to Property Tax
V. R. Ghelani, Tax Consultant & Legal Advisor
Special Article
– Recent Amendment applicable to Property Tax
1) Do you know that the Mumbai Municipal of three years i.e. from 1st April, 2010 to
Corporation Act, 1888 is recently amended 31st March, 2013
and now the Property Tax is levied on the
bases of Capital Value of the Property? In 3) You may note that in fact, that Property
the case of residential premises of more Tax is a form of Compensatory Tax as
than 500 sq. ft. there shall be a cap of is evident from the provisions of the
two times of the existing tax, commercial Mumbai Municipal Corporation Act 1888
premises shall have a cap of three times including inter alia sections 61 and 140 to
of the existing tax and for residential 143. It will be seen that even though the
premises up to 500 sq.ft. the cap is tax is termed as Property Tax, it is nothing
equivalent to the existing tax up to 31- but a levy for providing services by the
3-2015. However, w.e.f. 1st April, 2016, MCGM.
the cap would stand removed and the 4) The theory of compensatory tax is that
property tax shall be increased by 40% it rests upon the principle that if the
of the property tax payable. Thereafter Government by some positive action
property tax shall be increased by 40% confers upon individual/s a particular
every five years. measurable advantage, it is only fair to the
2) Accordingly, the Municipal Corporation community at large that the beneficiary
of Greater Mumbai (MCGM) has as per shall pay for it.
the amendment made in the Act, started 5) Compensatory tax is based on the principle
issuing special notice to all property of “pay for the value”. It is a sub-class of
owners/landlords and all Societies/ “a fee”.
owners calculating the property tax based
on Capital Value (C.V.) instead of Rateable 6) Under the provisions of the Maharashtra
Value (R.V.) and demanding property tax Rent Control Act, 1999, the burden of
accordingly on the basis of the capital property tax is to be borne by the tenants.
value determined by them. Further, the In AIR 2003 SC 4278, it was held that in
MCGM has asked Citizens & others to pay view of specific provisions of the Act, the
the bills before 30th June, 2013 for a period burden of tax is imposed on the tenant,
ML-533 The Chamber's Journal May 2013

839
sub-tenant and occupiers and the tax is transferred arbitrarily to another citizen
liable to be recovered from them through and thereby causing unreasonable
the landlord or directly by attachment discrimination and deprivation. In any
of property or other coercive modes. event, Property Tax cannot be levied for
Therefore the tenants sub-tenants and the aforesaid purpose and the said levy is
occupants are entitled to an opportunity arbitrary and contrary to law.
to participate in the process of valuation
and assessment. And as such, they are also 12) The extremely high increase of taxes
entitled to get written notice apart from shall result in considerable litigation
public notice for assessment, revision of between the owners and the tenants as
assessment or amendment of assessment the tenants/occupants shall not be paying
of the consolidated rate of tax. to the owners, the increased Municipal
taxes based on capital values. The non-
7) However, it would be seen that no such payment of exorbitant taxes by the
notice has been issued to the tenants to tenants/occupants to the owners shall
enable them to make their complaints result in non-payment of taxes to MCGM
though in turn ultimately the tenants are by the owners. Although they are ready &
required to bear and pay the same. willing to pay earlier prevailing Municipal
Taxes.
8) Property Tax should have a reasonable
co-relation with the money required for 13) Similarly, under the Maharashtra Co-op.
performing the obligation cast on MCGM Housing Societies Act all the increased
with regard to the specific services for taxes and the maintenance charges are to
which the property tax is levied. In view be paid by the members of the society.
of the above, the value of the property is The members can be evicted from the
totally irrelevant for arriving at the basis of flats/premises for non-payment of
the property tax. increased taxes. This will give rise to
dispute between members and lakhs of
9) In every compensatory tax, the authorities litigations will be filed in the Co-operative
have to establish that the levy has courts.
a co-relation with the expenditure for
providing the same. Therefore, the system 14) In Mumbai the market value of premises
should be based on sound economic are very high and thus the taxes based on
consideration and commensurate with the Market Value of premises is also extremely
services provided in a given locality. high and the persons would not be able
to pay such high exorbitant taxes. The
10) In any event, MCGM has been making building which is tenanted cannot fetch
substantial surpluses every year and there the value mentioned in the Stamp Duty
is no reason or ground to increase the Ready Reckoner.
property tax being levied by the MCGM.
15) The levying of taxes in any form has to
11) If at all any concessions or free services are be prospective and not with retrospective
to be rendered by the civic corporations effect. The MCGM has levied this Property
to the slum dwellers or the like, this Tax retrospectively with effect from 1st
SUBSIDY IS THE FUNCTION OF THE April, 2010 with is illegal.
STATE. The State should bear the said
burden and cost of services rendered. 16) The levy of Municipal taxes based
This and cost of services should not be on Capital Value system is illegal,
The Chamber's Journal May 2013 ML-534

:84
unconstitutional, and beyond Legislative h) Even though the Act requires the
competence. rates to be taken as per Stamp Duty
Ready Reckoner, MCGM has failed
17) In fact, the Rules framed by MCGM for the to do so and has come out with its
present mode of arriving at the property own basis.
tax is erroneous on the following among
other grounds viz;
Under the circumstances above, the Property
a) The basis of arriving at the Capital Owners Association and its members and many
Value of property is contrary to law. others have submitted their Memorandum dated
16-1-2013 and 7th February, 2013 and made an
b) Stamp Duty Ready Reckoner is not appeal on the 15th March, 2013 to his Excellency
the measure of capital value as it the President of India, Prime Minister of India
does not arrive at true value for the and The Chief Minister of Maharashtra, etc. to
purpose of calculating capital value. issue direction/order to the MCGM and State
c) Where the building is more than of Maharashtra to forthwith withdraw the new
sixty years old, as per the Stamp property tax based on Capital Value System and
Duty Ready Reckoner, depreciation continue with collection of taxes based on old
of 70% is to be granted. This has not Rateable Value System.
been considered by MCGM.
In the meantime, The Property Owners
d) The rate should be of only 2 users – Association and few others have recently filed a
Residential and Non-residential user Writ Petition in the Hon’ble Bombay High Court
instead of the several classifications challenging the above amendment for adopting
made in the Rules. Capital Value system for levy of Property Tax
e) The formula for calculation of under the Mumbai Municipal Corporation Act,
built-up area from carpet area by 1888 and also to strike down sections 128(3);
applying a multiplying factor of 20% 129A, 144, 144A, 144E, 146, 140(1)(a), 140 (1) (b)
is erroneous 140(1)(ca) read with section 195 (E) AND 195(G):
140 (1) (d) read with sections 354 (UA), 146, 154,
f) Under the property tax while and lastly section 202 of the Act.
capping the taxes on capital value
at 2 times or 3 times of the existing All those residing or holding/having office/
taxes, the % of the general tax is 30% shop premises and immovable properties in the
of the Rateable Value in the existing area limit of the MCGM will be highly affected
bill of property tax. However the by this capital system of levy of property tax.
same is made 90% of Rateable Hence, they are requested to support the above
Value which is not valid under the Writ Petition and contact the Property Owners
Rules, as Rules cannot override the Association having address 204, Chandra
provisions of Act/section and hence Mahal, Room No.9, 1st Floor, Thakurdwar
is invalid. Road, Mumbai 400 002, Tel. No. 2385 3436,
g) In general the formula applied for for necessary guidance and to file necessary
arriving at the Rateable Value and objections and adopt further line of action in the
Tax is disputed. matter, in the interest of all concerned.

859

:86
Direct Taxes – High Court
Ashok Patil, Mandar Vaidya & Priti Shukla

Advocates
DIRECT TAXES
High Court
1. Business expenditure – S. 37 guarantee of its commitment that it will abide

– Liability on account of wage by the terms and conditions. The assessee taking
decision not to honour commitment in view of
revision – Liability deductible
losses if it fulfils the commitment. The Apparel
CIT vs. Bharat Heavy Electricals Ltd. [2013] 352
Export Promotion, encashed the bank guarantee.
ITR 88 (Delhi)
The assessee claimed the same as deduction
The assessee had claimed liability on account being compensatory in nature. The AO
of wage revision proposals, and the same was disallowed the same as the deduction claimed
certain and ascertained on the basis of past was in the nature of penalty. The Tribunal held
experience, union demands and the ability of in favour of assessee. The High Court held that,
the employer to bear the additional burden. the assessee had not contravened any provisions
The claim was disallowed by the AO as it being of law and thus forfeiture of the bank guarantee
contingent, and allowed by the Tribunal. The was compensatory in nature u/s. 37(1), and
High Court, held that the deduction could not therefore allowable.
be held to be contingent, because the wage and
probable revision or rates of revision would be 3. Income from House Property
within the fair estimation of the employer, and – S.24 – Unsold flats let out –
therefore held that the liability could not held Assessable as income from house
as contingent but an ascertained liability which
property
was deductible.
Azimganj Estate Pvt. Ltd. vs. CIT [2013] 352 ITR
82 (Cal.)
2. Business expenditure – S. 37(1) –
The assessee is a property developer and builder,
Business decision not to honour constructed a building, and had let out the
export entitlement due to losses unsold flats and offered the income as income
– Penalty – Deductible from house property. The AO disallowed the
CIT vs. Regalia Apparels Pvt. Ltd. [2013] 352 ITR same and assessed the same as income from
71 (Bom.) business income and disallowed deduction
being repairs and maintenance. The High Court
The Apparel Export Promotion Council granted
held that whether the asset was being exploited
to the assessee entitlements for export of
commercially by letting it out or whether it was
garments, in return the assessee filed a bank
being let out for the purpose of enjoyment of

879
the rent, and held that exploitation of the unsold 6. Disallowance – S. 40A(3) R. 6DD(k)
flats should be assessed as income from house – Sourcing of food articles – agent
property.
insisting on cash payments – No
disallowance could be made
4. Business expenditure – 37 – R.C. Goel vs. CIT (2013) 84 DTR (Del.) 432
Expenditure incurred for the The assessee is engaged in the business of
issue of convertible debentures – executing catering contracts for Railways in
Deductible respect of two trains. The assessee had appointed
CIT vs. Havells India Ltd. [2013] 352 ITR 376 on agent to provide supplies at various stations
(Delhi) to provide food in the train for passenger at all
times. The Agent insisted on cash payment for
The assessee had issued debentures which were providing such supplies at various stations. The
to be converted into shares on a subsequent date. AO disallowed such cash payments as it was in
The AO held that the issue of debentures is akin contravention of the provision of s. 40A(3). The
to issue of share capital, and disallowed the High Court held that in the particulars of the
expenditure related to it. The High Court held present case, the lower authorities had adopted
that in connection with the issue of debentures a unduly narrow and technical interpretation
or obtaining loan is revenue expenditure, despite of r. 6DD(k), the benefit of which the assessee
indications to the effect that the debentures are was clearly entitled to, for the reason being
to be converted in the near future into equity the assessee would have been deprived of the
shares, the expenditure incurred should be benefit of the supplies, and therefore held that
allowed as revenue expenditure on the basis of assessee’s case was covered by r. 6DD(k) and no
the factual position that the same was incurred disallowance u/s 40A(3) was called for.
at the time of issue of debentures.
7. Capital gains – S. 2(14)(ii) –
5. Business expenditure – 37 Carpets, paintings, antique
– Expenditure incurred for furniture – Capital assets –
voluntary retirement scheme of Personal effects – Not taxable
two units – Business not shut – Faiz Murtaza Ali vs. CIT (2013) 85 DTR (Del.) 33
Allowable as deduction The assessee had received items such as carpets,
CIT vs. Foseco India Ltd. [2013] 352 ITR 320 (Bom.) paintings, crystals, furniture as gifts or through
inheritance from her father or uncle. The
The assessee had shut down two of its units but assessee vide an affidavit before the AO has said
not shut down its business. It claimed deduction that all the items were held by him for personal
of the expenses incurred for voluntary retirement use by the assessee. The High Court held that,
scheme for the employees of the two units. The as the department could not give any findings to
AO and CIT(A) held the expenses as capital in the contrary of the affidavit filed by the assessee,
nature, the Tribunal decided in favour of the capital gains was not chargeable on the sale of
assessee. The High Court held that shutting these items.
of the two units and expenses incurred was a
part of restructuring of business, and the same 8. Capital or revenue – S. 4 –
is considered as expenditure in the course of Entertainment tax exemption –
conducting its business and therefore allowable
as revenue expenditure. Capital receipt not taxable – AY
2003-04

:88
DCIT vs. INOX Leisure Ltd. (2013) 85 DTR (Guj) CIT vs. UTI Bank Ltd. [2013] 32 taxmann.com 282
103 (Gujarat)
The assessee was in the business of operating
The assessee had contracted with a landlord to
multiplexes in Baroda, and for the relevant
take premises on lease for opening its branch,
year under consideration had received an
but no formal agreement was entered into. The
amount by way of exemption from payment of
landlord started the construction of the premises
entertainment tax. The assessee claimed the same
as per assessee's requirements. However, before
as capital receipt and the same being exempt, as
completion of construction, assessee came
the same was granted for covering the capital
to know of the proposed construction of an
outlay. The AO was of the opinion that the
overbridge over the said property which would
said amount was received for commencement
cause hindrance to conduct its business and
of businesss and such subsidy was for business
services. The assessee, therefore, terminated
operation. The High Court after studying the
the understanding with the landlord and paid
scheme, held that the purpose of granting
compensation to the landlord for the work done,
exemption, was for giving boost to the tourism
in lieu of withdrawing all claims against the
sector and to give incentive to the multiplex
assessee. The assessee claimed such amount paid
units which were found to be highly capital
as revenue expenditure. The Assessing Officer
incentive, same constituted capital receipt.
disallowed the amount. The CIT(Appeals) and
the Tribunal deleted the disallowance as the
9. Capital gains – S.45 – compensation was paid in the course of business
Consideration received for and for the purpose of business, to protect the
relinquishment of ownership assessee's interest and in lieu of the claims that
rights in plot – Assessable as could have been raised by the landlord. On
capital receipt – A.Y. 2006-07 further appeal by revenue. The Tribunal by
Simka Hotels and Resorts vs. DCIT (2013) 85 DTR referring to the case of J.K. Woollen vs. CIT [1969]
(Del.) 249 72 ITR 612 (SC) in which it was held, that in
applying the test of commercial expediency for
The Assessee had relinquished its ownership
determining whether an expenditure was wholly
rights in a plot of land and offered the same for
and exclusively laid out for the purpose of the
tax under the head income from capital gains
business, reasonableness of the expenditure
tax. The AO assessed the same as income from
has to be adjudged from the point of view of
other sources on the basis that the assessee had
the businessman and not of the IT department.
sold only the rights and not land. The High
On further appeal in High Court, High Court
Court held that the assessee’s interest in the plot
affirmed the findings of Tribunal and dismissed
of land was in the nature of an actionable claim
the revenues appeal.
which could be asserted in a legal proceeding,
and therefore held that the assessee had rightly
offered the income under the head capital gains. 11. Assessment order – 143(3) –
Once Assessing Officer gives
10. Capital or revenue expenditure effect to the order of Tribunal
– S.37 – Compensation paid to – Successor Assessing Officer has
the landlord for non-occupation no jurisdiction to recompute his
of premises by assessee, in lieu of predecessor's order
withdrawing claims by landlord, is Classic Share & Stock Broking Services Ltd. vs. ACIT
allowable as revenue expenditure [2013] 32 taxmann.com 273 (Bombay)

899
The assessee filed a return claiming loss of was right in setting aside the order of the
` 16.82 crores which included a loss from share Commissioner of Income Tax rejecting the
transactions of ` 13.63 crores. An assessment assessee's application for registration u/s 12AA
order was passed under section 143(3) on the grounds that the order was not passed
determining a total loss of ` 3.13 crores after within six months from the date of filing without
disallowing the loss from the share transactions. appreciating the said time limit prescribed was
On appeal, the CIT(A) upheld the disallowance only directory and not mandatory, considering
of loss from share transactions. On Second the nature and design of the relevant statutory
Appeal, the Tribunal restored the assessment provisions?
back to the AO for fresh examination of the Dismissing the appeal of the Tribunal and by
nature of the share transactions in view of SEBI remitting the matter back to the Commisioner
guidelines and to decide the matter. The AO the Hon’ble High Court set side the order
passed an order giving effect to the order of of Tribunal by relying on the decision of In
the Tribunal and recomputed the total loss at Srikhetra, A.C. Bhakti-Vedanta Swami Charitable
` 16.83. Subsequently, the successor in office of Trust vs. Asstt. CIT 2006 (II) OLR 75 wherein the
the AO passed another order computing the loss Orissa High Court took the view that period
at ` 3.19 crore. On a writ petition in High Court, of six months as provided under sub-section
the Hon’ble court allowed the Petition and held (2) of Section 12AA of Income-tax Act is not
that once effect was given to the order of the mandatory and held as follows:-
Tribunal by the passing of an order under section
….“5. We are unable to uphold such contention.
254, that order could have been modified or set
In our view the period of six months as
aside only by following a procedure which was
provided in sub-section (2) of Section 12AA is
known to the Act. The court further held that
not mandatory. Though the word 'shall' has
what the AO has done by the impugned order
been used but it is well known that to ascertain
was only a substantive review of the earlier
whether a provision is mandatory or not, the
order of the predecessor which was clearly
expression 'shall' is not always decisive. It is also
impermissible. Since the order of the successor
well known that whether a statutory provision
Assessing Officer was clearly without jurisdiction,
is mandatory or directory has to be ascertained
there was no reason or justification to relegate the
not only from the wording of the statute but
Petitioner to the remedy of an appeal.
also from nature and design of the statute
and the purpose which it seeks to achieve.
12. Failure on the part of Herein the time frame under sub-section (2) of
Commissioner of passing order section 12AA of the Act has been so provided
within six months as per section to exclude any delay or lethargic approach in
the matter of dealing with such application.
12AA of the IT Act is directory Since the consequence for non-compliance
and does not lead to the with the said time frame has not been spelt
presumption that registration is out in the statute, this Court cannot hold that
granted the said time limit is mandatory in nature nor
CIT vs. Karimangalam Onriya Pengal Semipu the period of six months has been couched
Amaipu Ltd. [2013] 32 taxmann.com 292 (Madras) in negative words. Most of the time negative
words indicate a mandatory intent. This Court
In this case the question of law framed or the is also of the opinion that when public duty
issue in dispute was as under: is to be performed by the public authorities,
“"Whether on the facts and in the circumstances the time-limit which is granted by the Statute
of the case, the Income Tax Appellate Tribunal is normally not mandatory but is directory in

:90
the absence of any clear statutory intent to the CIT(A) following the ITAT's decision in the case
contrary. See Montreal Street Railway Company of ITO (Exemption) vs. Bombay Stock Exchange
vs. Normandin AIR 1917 PC 142. Here there is no IT Appeal No. 5551 (Mum.) of 2009 dated 22nd
such express statutory intent, nor does it follow August, 2006 allowed the claim of the assessee
from necessary implication…” for exemption under section 11 of the Act. On
Further relying on the decision of CIT V., Salem further appeal filed by the revenue, the ITAT
vs. Sheela Christian Charitable Trust, wherein by while upholding the order of CIT(A) held that
following the decision of this Court reported once the registration has been granted under
in Anjuman-E-Khyrkhah-E-Aam (supra) the section 12AA of the Act, the exemption under
court held that there is no automatic or deemed section 11 cannot be withdrawn unless there
registration if the application filed under section is violation of provisions of Section 13 of the
12AA was not disposed of within the stipulated Act or the registration under section 12AA
period of six months. The court further held that (3) of the Act is cancelled. The Tribunal held
the time frame fixed under the said provision is that the decision of this Court in the matter
only directory. of CIT vs. Pruthivi Trust [1980] 124 ITR 488 is
Relying on the above decisions the court held distinguishable on facts as the Trust in that case
that the time frame under sub-section (2) of was carrying out profit making activity without
section 12AA of Income-tax Act is only directory. any authorisation in the Trust Deed. On further
Tribunal was not right in holding that since appeal in High Court, the question of law or the
the application for registration has not been issue in dispute was as under:
disposed of within the limitation of six months, “Whether on the facts and in the circumstances
the assessee company was deemed to have been of the case and in law, the Tribunal is justified in
granted registration under Section 12AA of the allowing the claim of the assessee for exemption
Act. u/s. 11 of the Act ignoring the fact that the
assessee failed to get the permission of the
13. Exemption – S.11 – Even if Charity Commissioner to raise loans for the trust
provisions of trust has not been in violation of provisions of section 36(3) of the
complied in earlier years will not Bombay Public Trust Act without considering
debar the assessee to claim the the decision of the Bombay High Court in CIT vs.
Pruthivi Trust reported in 124 ITR 488 ?”
exemption in the subsequent
assessment years u/s 11 of the IT Dismissing the appeal of the revenue the hon’ble
Act court held that in this case, there is no bar in
DIT (Exemptions) vs. G.K.R. Charities [2013] 32 the Trust Deed to take unsecured loans. The
taxmann.com 208 (Bombay) breach, if any, was in failing to comply with the
provisions of the Trust Act in an earlier year.
In this case, the respondent-assessee was
The court held that it was not in dispute that the
engaged in the charitable activities and has
unsecured loans taken in earlier years were duly
been granted registration under section 12A of
reflected in the books maintained by the assessee
the Income-tax Act, 1961 (the Act). The revenue
and though prior approval was not obtained, the
seeks to deny the benefit of exemption under
assessee had, in fact, subsequently applied for
section 11 of the Act inter alia by disallowing
approval from the Charity Commissioner and
the repayment of the interest free unsecured
the Charity Commissioner has neither granted
loan taken from the managing trustees in earlier
approval nor initiated any proceedings under the
years without obtaining prior approval from the
Trust Act for the alleged violation of obtaining
Charity Commissioner under the Bombay Public
unsecured loan without prior permission.
Trust Act, 1950 (the Trust Act). On appeal, the

919
14. Sections 35ABB, 37. Amortisation the assessee was more than the amounts shown
of expenses vs. revenue by the creditors as receivable. The Tribunal
upheld the addition. Before the High Court, the
expenditure
assessee contended that section 68 can have no
Evergrowth Telecom Ltd. 213 Taxman 299 (Bom.)
application to suppliers’ credit since it applies
The assessee had paid licence operating fees only to ‘cash credits’; the heading of section 68
of ` 115 crores to one J.T. Mobiles Ltd., who was heavily relied upon. It was held that the
had appointed the assessee as an operator heading cannot be conclusive for the purpose
for providing mobile service in Punjab circle. of interpreting the true scope of the section; a
The assessee claimed the same as revenue heading can be taken help of for guidance in
expenditure u/s. 37. The learned A.O. case of ambiguities and cannot control the words
disallowed the same on the ground that such of the section. While interpreting a section its
expenses were not allowable in one year but words have to be primarily considered and
had to be amortised over the life of the licence in the words cannot be overlooked so as to draw
view of section 35ABB. The Tribunal allowed the support from the heading. Since section 68
expenses fully u/s. 37 as revenue expenditure. applies to credits found in the books, there
It was held that the amount of ` 115crores was can be no difference between cash credits and
paid as operating licence fee and therefore no suppliers’ credit.
enduring benefit was received by the assessee.
And hence there was no warrant to spread the 16. Sections 40A(2), 143
expenditure beyond one year viz. the year of CIT vs. Rajnish Ahuja (P & H High Court) ITA No.
incurring the expenditure. It was further held 27 of 2013 dated 2nd April, 2013.
that section 35ABB would have no application
in the hands of the assessee but would apply in Sale to sister concerns at lower rate.– The
hands of M/s. J.T. Mobiles Ltd. who had paid assessee had supplied to its sister concerns at
licence fees. Further since treatment given by a lower rate compared to what was charged to
the assessee in its’ books is not conclusive of the others. The learned A.O. made an addition of
nature of the transaction nor is determinative 15% on basis of sales to non-sister concerns. It
of the eligibility for deduction, the fact that the was held that no addition can be made merely
assessee had in its books of account spread the because lower rates were charged to sister
expenditure of ` 115 crores over a period of concerns as charging of lower rates was not
time, would not change the position vis-à-vis prohibited under any provision. Further the
deduction for computation of income. sister concerns were paying tax at a higher rate
than the assessee. It was also held that section
15. Section 68- Suppliers’ credit 40A(2) would apply only to expenditures and
Smt. Rekha Krishnaraj ITA No. 811 of 2009 (Kar.) – not to sales.
decision dated 13th March, 2013.
Note: This decision impliedly overrules the Larger
There was a discrepancy in the assessee’s Bench decision in case of Manoj Agarwal 113 ITD
books of creditors. The learned A.O. noted the 377. In which it was held that section 68 cannot
discrepancies in the accounts of the creditors apply to suppliers’ credit since there is difference
and added the same being ` 19,67,702/-, to the between a case where an assessee actually receives
income of the assessee as ‘cash credits’ u/s. 68 of money and an amount shown as amount payable be
the Act. Because the credit balance as shown by assessee for value received.

:92
Direct Taxes – Tribunal
Jitendra Singh & Sameer Dalal

Advocates
DIRECT TAXES
Tribunal
REPORTED in return filed by it. The assessee can furnish the

particulars of income in his return and everything
1. Penalty – Section 271(1)(c) of the would depend upon the return filed by him. In the
Income-tax Act, 1961 – Assessee having present case, the Tribunal found that there was no
agreed to surrender certain amount in such concealment or non-disclosure, as the assessee
the course of survey proceedings and had made a complete disclosure in the return and
filed its return subsequently wherein said offered the surrendered amount for the purposes of
amount was offered to tax – Held no tax. As such penalty under section 271 (1)(c) of the
concealment on part of assessee – Penalty Act was not leviable.
under section 271(1)(c) of the Act not
leviable. A.Ys. 2007-08 & 2008-09. 2. Revision – Section 263 of the
Income-tax Act, 1961 – Order prejudicial
Vasavi Shelters vs. ITO - (2013) 141 ITD 590 (Bang.) to interest of revenue –Where show
The assessee was engaged in real estate business. cause notice issued under section 263
For relevant assessment years, the assessee did of the Act was issued for non-deduction
not file its return before the due date as prescribed of tax at source out of certain expenses
under section 139(1). A survey was carried out at incurred by assessee, and in final order,
assessee's premises. The assessee during the course Commissioner had directed Assessing
of survey agreed to offer certain percentage of its Officer to recompute income in hands
sale, as its income. Thereupon, the assessee during of assessee by applying suitable net profit
the assessment proceedings agreed that the income rate – Such direction under section 263
declared in the course of survey be adopted as the was held to be not justified in law –
total income of the assessee. The Assessing Officer Further, revision proceedings initiated
completed the assessment based on the declaration only on basis of audit objection were also
made by the assessee and also passed/levied held to be bad in law. A.Y.: 2005-06.
penalty section 271(1) (c). Jaswinder Singh vs. CIT – (2013) 56 SOT 85 (Chd.)
On appeal Tribunal held that section 271(1) (c) The assessee was carrying on the business of
has to be construed strictly. Unless it is found that transportation by using his own trucks and hired
there is actually a concealment or non-disclosure trucks. The assessee failed to produce books
of particulars of income in return filed by assessee, of account accordingly, the Assessing Officer
penalty cannot be imposed. Concealment of invoking the provisions of section 144 completed
particulars of income or furnishing of inaccurate the assessment and estimating the income of
particulars of income by the assessee has to be the assessee from trucks in accordance with the

939
provisions of section 44AE. Further, as the assessee B.M.S. Projects (P) Ltd vs. DCIT – (2013) 85 DTR
had failed to produce the books of account, the (Ahd.) (Trib.) 393
loading charges and freight charges of the hired The assessee during the previous year relevant to
trucks were worked out on proportionate basis by the impugned assessment year deducted the TDS
the Assessing Officer. The Commissioner in exercise from the payments made to the sub-contractors.
of his powers under section 263 issued show-cause However, same was deposited in the Government
notice pointing out that since the assessee made Treasury belatedly but before the filing of the
payments on account of freight charges, loading return of income. The A.O. while finalising the
and unloading charges etc. without deducting tax at Assessment Order disallowed the payments made
source, provisions of section 40(a)(ia) got attracted. to the sub-contractors invoking the provisions of
However, during the revision proceedings after section 40(a)(ia) of the Act. On appeal the First
considering the facts of the case of the assessee Appellate Authority confirmed the disallowance
and explanation, the Commissioner, found that made by the A.O. On further appeal to the Hon'ble
the provisions of 40 (a)(i) were not attracted in the Appellate Tribunal, the Tribunal has deleted the
assessee case. However, the Commissioner directed disallowance made under section 40(a)(ia) by
the Assessing Officer to recompute the income observing that assessee having deducted TDS
in the hands of the assessee by applying a higher from the payments made to sub-contractors and
net profit rate and then disallow certain per cent deposited the same before the due date of filing
of the expenses. On appeal the Tribunal held that of returns said payments could not be disallowed
such directions of the Commissioner in exercise under section 40(a)(ia) of the Act.
of powers under section 263 of the Act were not
warranted and the same is liable to be set aside, as 4. Addition under section 69 –
the Commissioner had given direction to revise the Assessee having purchased property in
original assessment on a totally different ground the name of his wife – A.O. accepted the
than, the ground mentioned in the show-cause investment in the wife’s name and all
notice issued under section 263 of the Act issued by documents relating to the investment
him for revising the original assessment. were available in the assessment
Further, the Tribunal found from the records that, record of the wife who was assessed
the Commissioner had initiated the proceedings by the same A.O. – No addition under
under section 263 of the Act merely on the basis section 69 of the Act is called for.
of the audit objections. In this regard the Tribunal A.Y. 2005-06.
held that the provisions of section 263 are clear Asst. CIT vs. Om Prakash Lohiya (2013) 86 DTR (Jd.)
and absolute that the power is to be exercised (Tribunal) 1
by the Commissioner from the examination of
The assessee filed his return of income declaring
the records of the proceedings under the Act.
total income of ` 1,99,705/-. Subsequently the
Audit objections under no circumstances can be
assessee’s premises were subjected to the search
called as record empowering the Commissioner to
action under section 132 of the Act. In response to
exercise jurisdiction under section 263 of the Act.
the notice issued under section 153A, the assessee
Accordingly on this ground also the Tribunal held
has filed his return declaring total income at
that the order passed by the Commissioner under
` 10,99,705/-. During the course of the assessment
section 263 was not tenable.
proceedings, the A.O. made inquiries from the
3. Disallowance under section 40(a) officer of the Sub-Registrar and observed that the
(ia) – TDS deducted from the payment assessee has purchased a property at Khasra for
of the sub-contractors deposited before ` 40,000/- whereas for the stamp duty purposes
the filing of the return of income – the Sub-Registrar has adopted the value at
disallowance made under section 40(a) ` 1,43,438/-. However, this property has not been
(ia) is not justified. A.Y. 2005-06. admitted by the assessee in his statement during the

:94
search proceedings. The A.O. therefore held that the Jeewanram Choudhary vs. CIT (2013) 84 DTR (Jd)
assessee failed to explain the source of investment (Tribunal) 317
in the said property satisfactorily and therefore The assessee for the previous year relevant to
made the addition under section 69 of the Act. the assessment year 2006-07 filed the returns
The assessee being aggrieved by the Assessment declaring total income at ` 26,53,998/-. The A.O.
Order preferred an appeal before the Ld. CIT(A). after calling for the various records finalised the
During the course of the appellate proceedings, the Assessment Order under section 143(3) of the Act
assessee explained that the total investment in the at ` 39,35,440/- after making trading addition of
said property was ` 59,000/- and not ` 1,43,438/- as ` 12,81,440/- by applying the Gross Profit rate of
adopted by the A.O. and to substantiate the same 9.5 per cent as against the 8.5 per cent declared
copy of purchase deed was furnished. The assessee invoking the provisions of section 145(3) of the Act.
further explained that the said investment was duly The assessee accepted the Assessment Order and
shown in the balance sheet of wife for the relevant has not preferred any appeal. Thereafter, the Ld.
period and the same was also filed. The assessee, CIT has passed an order under section 263 of the
further, contended that his wife is also assessed Act by observing that the last hearing took place on
with the same A.O. Hence, the investment in the 14th March, 2008 on which date the assessee filed
said property is duly explained. The Ld. CIT(A) a reply along with relevant details. It requires to
after considering the submissions and the relevant be noted that the assessment was also completed
assessment folder of the wife of the assessee, deleted on 14th March, 2008 itself and the tax calculation
the additions made by the A.O. sheet was also checked and signed by the concerned
Dy. CIT as also the tax assistant on the same date
The revenue being aggrieved by the order passed
i.e. 14th March, 2008. The above facts show that
by the Ld. CIT(A) preferred an appeal before the
the assessment was completed in a very hurried
Hon'ble Jodhpur Appellate Tribunal. The Appellate
manner without looking into the details filed, leave
Tribunal confirmed the order of the Ld. CIT(A)
aside making any inquiry thereby rendering the
by observing that the A.O. having accepted the
assessment as erroneous as also prejudicial to the
investment in the hands of the assessee’s wife in
interest of the revenue.
respect of the property purchased in her name and
all the documents relating to said investment being
available in the assessment records of the assessee’s The assessee being aggrieved by the order of the Ld.
wife who was assessed by the same A.O., addition CIT preferred an appeal before the Hon'ble Jodhpur
under section 69 made in the hands of the assessee Appellate Tribunal. The Appellate Tribunal after
cannot be sustained. considering the various submissions and evidences
placed on record, quashed the order passed under
section 263 of the Act by observing that A.O. having
5. Revision under section 263 rejected assessee's books of account after discovering
– Erroneous and prejudicial order – certain defects and determining the income by
lack of proper enquiry – A.O. rejected applying net profit rate of 9.5 per cent having regard
assessee’s books of account by invoking to the past history of the case as against 8.5 per cent
the provisions of section 145(3) after declared by the assessee, it cannot be said that the
raising various queries and determined A.O. did not apply his mind while framing the
the income by applying net profit rate assessment and therefore the order passed by the
of 9.5 per cent as against 8.5 per cent A.O. cannot be held to be erroneous or prejudicial
declared – CIT exercised powers under to the interest of the revenue. Order under section
section 263 on the ground that the stock 263 passed by the CIT on the ground that the A.O.
register has not been mentioned and ought to have applied profit rate of 10 per cent
the A.O. ought to have applied net profit instead of 9.5 per cent and made separate additions
rate of 10 per cent – Not justified. A.Y.: for the said defects is not sustainable.
2006-07.

959
UNREPORTED 2. Exempted Income – Disallowance

under section 14A of the Income-tax Act,
1. Charitable or religious trust 1961, read with rule 8D of the Income-
- Section 12AA of the Income-tax tax Rules, 1962 – Disallowance under
Act, 1961 – Power of Commissioner / section 14A where shares are held as
Director to cancel registration under stock-in-trade, and not as investment,
section 12AA(3) for the registration should be restricted to disallowance of
granted under section 12 A – Enacted only direct expenses. A.Y.: 2008-09.
with effect from 1-6-2010 – Prospective –
Cancellation of Registration made with Dy. CIT vs. Gulshan Investment Co. Ltd - [I.T.A. No.:
effect from assessment year 2009-10 not 666 / Kol / 2012; Order dated 11-3-2013]
valid. A.Y.: 2009-10. The assessee was engaged in the business of share
trading. The assessee held shares as stock-in-trade.
Agra Development Authority vs. CIT – [I.T.A. No.: 166
The assessee earned dividend income but, it had not
/ Agra / 2012; Order dated 11-1-2013]
made any disallowance under section 14A of the
The assessee was constituted for development of Act in respect of expenses relatable to the exempt
Agra city. It was granted registration under section income, as according to him no expenses were
12A with effect from 1-4-2003. The Commissioner directly incurred by it for earning dividend income.
issued a notice for cancellation of registration The A.O., however, computed the disallowance
under section 12AA(3) of the Act with effect from under section 14A of the Act, read with Rule
assessment year 2009-10 by holding that the assessee 8D of the Rules. On appeal the CIT(A) held that
was rendering service in relation to trade, commerce no interest expenses were incurred as such, no
or business for a cess, fee or any other consideration disallowance could not be made in terms of Rule
and accordingly the Commissioner cancelled the 8D of the Rules. However, CIT(A) estimated ten per
registration under section 12A of the Act with effect cent (10%) of dividend earned as expenditure which
from assessment year 2009-10. could be disallowed under section 14A of the Act.
On appeal the Tribunal held that the provisions of On appeal by the Revenue to the Tribunal, held that
sub-section (1) of clause (b) and sub-section (3) of provisions of section 14A would apply irrespective
section 12AA, clearly provides that the cancellation of the fact whether the shares are held as stock-in-
of the registration under sub-section (3) of section trade or as investments. However, provisions of
12AA was provided where the registration Rule 8D(2)(ii) and (iii) of the Rules can be applied
was granted under clause (b) of sub-section (1) in a situation where shares are held as investments,
to section 12AA. The power of cancellation of and that this rule will not have any application
registration obtained / granted under section 12A when the shares are held as stock-in-trade. As one
came to be incorporated by way of amendment of the variables on the basis of which disallowance
introduced by the Finance Act, 2010 with effect under rules 8D(2)(ii) and (iii) is to be computed
from 1-6-2010. Thus, before 1-6-2010 section 12AA(3) is the value of ‘investments’, income from which
nowhere empowered the Commissioner to cancel does not or shall not form part of total income, and,
or withdraw registration granted under section when there are no such investments and the shares
12A. In absence of such power, the registration are held as stock-in-trade, the above provisions of
granted under section 12A cannot be withdrawn the Rule 8D cannot have any application. Thus,
or cancelled before 1-6-2010. The Tribunal further no disallowance can be made under rule 8D (2)(ii)
held that even the CBDT Circular No. 1/2011 dated and (iii) in case where shares on which dividend
6-4-2011 has explained that this amendment will income is earned which are held as investment
apply for assessment year 2011-12 and subsequent and, disallowance under rule 8D is restricted to the
years. Thus, the Commissioner cannot cancel the expenditure directly relatable to earning of exempt
registration granted under section 12A for A.Y. income in terms of Rule 8D (i).
2009-10.
2

:96
Direct Taxes – Statutes, Circulars & Notifications
CA Sunil K. Jain
DIRECT TAXES
Statutes, Circulars & Notifications
Notifications Double Taxation Agreement –

Agreement for Exchange of Information
Section 10(46) of the Income-tax Act, with respect to taxes with foreign
1961 – Exemptions – Statutory Body/ countries – Gibraltar
Authority/Board/Commission – Notified Agreement between the Government of the
body or authority – Assam State aids Republic of India and the Government of Gibraltar
Control Society for the Exchange of Information with respect to
taxes has been signed. The date of entry into force of
The Central Government for the purposes of the Agreement is the 11th day of March, 2013, being
section 10(46) notified the 'Assam State AIDS the date of later of the notifications of completion
Control Society', a body created by way of of the procedures as required by the respective
notification in this regard by the Government laws for entry into force of the Agreement, in
of Assam, in respect of the "amount received accordance with the provisions of Article 12 of
in the form of grants-in-aid from the Central the Agreement; The Central Government directed
Government and other international development that all the provisions of the Agreement between
agencies such as World Bank, UNAID (Joint the Government of the Republic of India and
United Nations Programme on HIV/AIDS), the Government of Gibraltar for the exchange of
USAID (United States Agency for International information with respect to taxes, as set out in the
Development), GFATM (Global Fund to fight Annexure thereto, shall be given effect to in the
AIDS, Tuberculosis and Malaria) through the Union of India with effect from date of entry into
Government of India" arising to the said Society force i.e. the 11th March, 2013.
for the financial year 2011-12 and shall apply (Notification No. 28/2013 dated 1-4-2013)
with respect to the financial years 2012-13,
2013-14, 2014-15 and 2015-16. The notification Section 90 of the Income-tax Act,
shall be effective subject to further conditions as 1961 – Double Taxation Agreement –
mentioned in the notification. The grants from Agreement for Avoidance of Double
various international development agencies shall
Taxation and Prevention of fiscal evasion
be received and applied in accordance with the
prevailing rules and regulations. with foreign countries – UAE
The Second Protocol amending the Agreement
(Notification No. 27/2013 dated 30-3-2013) between the Government of the Republic of India
and the Government of the United Arab Emirates

979
for the avoidance of double taxation and the substituted and in the Annexure, item number 7
prevention of fiscal evasion with respect to taxes has been omitted.
on income and on capital signed in April, 2012 (Notification No. 31/2013 dated 18-4-2013)
shall enter into force on the 12th day of March,
2013 after completion of the procedures as required Circulars
by the laws of the respective countries for the
entry into force of the Protocol, in accordance with Transfer Pricing – Computation of Arm's
Article 2 of the said Protocol. Now the Central
Government directed that all the provisions of the
Length Price – Application of Profit Split
Protocol annexed thereto shall be given effect to in Method
the Union of India with effect from the 12th day of Observing that clarification is needed for selection
March, 2013. of profit split method (PSM) as most appropriate
(Notification No. 29/2013 dt. 12-4-2013) method, the CBDT clarified that while selecting
PSM as the most appropriate method, the following
Section 92C of the income-tax Act, 1961 points to be kept in mind:
– Transfer pricing – Computation of arm’s 1. Since there is no correlation between cost
incurred on R&D activities and return on an
length price – Notified tolerable limit for
intangible developed through R&D activities,
determination of ALP the use of transfer pricing methods [like
The Central Government notified that where the Transactional Net Margin Method] that seek
variation between the arm's length price determined to estimate the value of intangible based on
under section 92C and the price at which the cost of intangible development (R&D cost)
international transaction or specified domestic plus a return, is generally discouraged.
transaction has actually been undertaken does 2. Rule 10B(1)(d) of Income-tax Rules, 1962
not exceed one per cent of the latter for wholesale (the Rules) provides that profit split
traders and three per cent of the latter in all other method (PSM) may be applicable mainly
cases, the price at which the international transaction in international transactions involving
or specified domestic transaction has actually been transfer of unique intangibles or in multiple
undertaken shall be deemed to be the arm's length international transactions which are so
price for assessment year 2013-14. interrelated that they cannot be evaluated
(Notification No. 30/2013 dated 15-4-2013) separately for the purpose of determining
the arm's length price of any one transaction.
Section 80-IA, sub-clause (iii) of sub- The PSM determines appropriate return
section (4) of the Income-tax Act, on intangibles on the basis of relative
contributions made by each associated
1961 – Deductions – In respect of enterprise.
profits and gains from industrial 3. Selection and application of PSM will depend
undertakings, or enterprises engaged upon following factors as prescribed under
in infrastructure development, etc. – rule 10C(2) of the Rules :
Notified undertakings – Amendment in • the nature and class of the international
Notification No.1/2013, dated 8-1-2013 transaction;
The Central Government made amendment to the • the class or classes of associated
notification dated 8th January, 2013, namely: for enterprises entering into the
the words "being developed and being maintained transaction and the functions
and operated", the words "being developed" be performed by them taking into account

:98
assets employed or to be employed non-availability of such information with the

and risks assumed by such enterprise; taxpayer.
• the availability, coverage and reliability 6. Depending upon facts and circumstances of
of data necessary for application of the the case, TPO may consider TNMM or CUP
method; method as appropriate method by selecting
• the degree of comparability existing comparables engaged in development of
between the international transaction intangibles in same line of business and make
and the uncontrolled transaction and upward adjustments taking into account
between the enterprise entering into transfer of intangibles without additional
such transactions; remuneration, location savings and location
specific advantages.
• the extent to which reliable and
accurate adjustments can be made to (Circular No. 2/2013 dated 26-3-2013)
account for differences, if any, between
the international transaction and the Section 92-C of the Income-tax Act,
comparable uncontrolled transaction 1961 – Transfer Pricing – Clarifications on
or between the enterprise entering into functional profile of development centres
such transactions; engaged in contract R&D services with
• the nature, extent and reliability of insignificant risk – Conditions relevant to
assumptions required to be made in
identify such development centres
application of a method.
On noticing that there is divergence of views
4. It is evident from the above that rule 10C(2) of
amongst the field officers and taxpayers regarding
the Rules stipulates availability, coverage and
the functional profile of development centres
reliability of data necessary for the application
engaged in contract R&D services for the purposes
of the method as one of the several factors
of transfer pricing audit and at times taxpayers
in selection of most appropriate method.
have been insisting that they are contract R&D
Accordingly, in a case, where the Transfer
service providers with insignificant risk, the TPOs
Pricing Officer (TPO) is of view that PSM
are treating them as full or significant risk-bearing
cannot be applied to determine the arm's
entities and making transfer pricing adjustments
length price of international transactions
accordingly, the CBDTclarified that a development
involving intangibles due to non-availability
centre in India may be treated as a contract R&D
of information and reliable data required
service provider with insignificant risk if the
for application of the method, he must
following conditions are cumulatively complied
record reasons for non-applicability of PSM
with :
before considering TNMM or comparable
uncontrolled price method (CUP) as most 1. Foreign principal performs most of the
appropriate method depending upon facts economically significant functions involved
and circumstances of the case. in research or product development cycle
5. Application of Profit Split Method requires whereas Indian development centre
information mainly about the taxpayer would largely be involved in economically
and associated enterprises. Section 92D insignificant functions;
of the Income-tax Act, 1961 provides for 2. The principal provides funds/capital
maintenance of relevant information and and other economically significant assets
documents by the taxpayer as prescribed including intangibles for research or product
under rule 10D of the Rules. Therefore, there development and Indian development
should be good and sufficient reason for centre would not use any other economically

999
significant assets including intangibles in etc. The relevant form for such TDS certificate is
research or product development; Form No. 16 in case of deduction under section
3. Indian development centre works under 192 and Form No. 16A for deduction under any
direct supervision of foreign principal who other provision of Chapter XVII-B of the Act.
not only has capability to control or supervise TDS certificate in Form No. 16 is to be issued
but also actually controls or supervises annually whereas TDS certificate in Form No.
research or product development through its 16A is to be issued quarterly. TDS Certificate
strategic decisions to perform core functions in Form No 16 as notified vide Notification No.
as well as monitor activities on regular basis; 11/2013 dated 19-2-2013 has two parts viz Part
4. Indian development centre does not assume A and Part B. Part A contains details of tax
or has no economically significant realised deduction and deposit and Part B contains details
risks. If a contract shows the principal to of income. With a view to streamline the TDS
be controlling the risk but conduct shows procedures, including proper administration of the
that Indian development centre is doing so, Act, the Board had issued Circular No. 03/2011
then the contractual terms are not the final dated 13-5-2011 and Circular No. 01/2012 dated
determinant of actual activities. In the case of 9-4-2012 making it mandatory for all deductors
foreign principal being located in a country/ to issue TDS certificate in Form No. 16A after
territory widely perceived as a low or no generating and downloading the same from
tax jurisdiction, it will be presumed that the “TDS Reconciliation Analysis and Correction
foreign principal is not controlling the risk. Enabling System” or (https://www.tdscpc.gov.
However, the Indian development centre in) (hereinafter called TRACES Portal), previously
may rebut this presumption to the satisfaction called TIN web-site.
of the revenue authorities; and The Board has now decided :
5. Indian development centre has no ownership 1. That Part A of Form No. 16 shall be issued
right (legal or economic) on outcome of by all the deductors, only by generating
research which vests with foreign principal, it through TRACES Portal and after duly
and that it shall be evident from conduct of authenticating and verifying it. And
the parties. Part B of Form No. 16 shall be prepared
The satisfaction of all the above-mentioned by the deductor manually and issued to
conditions should be borne out by the conduct of the deductee after due authentication and
the parties and not merely by the contractual terms. verification along with the Part A of the Form
(Circular No. 3/2013 dated 26-3-2013) No. 16 stated above. Rule 31 of the Rules sets
the time limit for issuance of Form 16 by the
Issuance of certificate for tax deducted deductor to the employee. Currently, Form 16
at source in Form No. 16 in accordance should be issued by 31st May of the financial
with the provisions of section 203 of year immediately following the financial year
in which income was paid and tax deducted.
the Income-tax Act, 1961 read with the
Rule 31 of the Income-tax Rules, 1962 – 2. The Director General of Income-tax (Systems)
shall specify the procedure, formats and
Regarding standards for the purpose of download of
Section 203 of the Income-tax Act 1961 and Rule 31 Part A of Form No. 16 from the TRACES
of the Income-tax Rules, 1962 stipulates furnishing Portal and shall be responsible for the
of certificate of tax deduction at source (TDS) by day-to-day administration in relation to
the deductor to the deductee specifying therein the the procedure, formats and standards for
prescribed particulars such as amount of TDS, valid download of Part A of Form No. 16 in
PAN) of the deductee, and TAN of the deductor, electronic form. It has further been clarified

:100
that Part A of Form No. 16 issued by the Officer has resorted to summary additions, routine
deductors in accordance with this circular disallowances or best judgment assessment without
and as per the procedure, formats and any worthwhile independent inquiry. Reporting of
standards specified by the Director General of such cases would be viewed adversely. The cases
Income-tax (Systems) and containing Unique where addition has been made due to Transfer
Identification Number shall only be treated Pricing Adjustment on the basis of TPO report
as a valid compliance to the issue of Part A should not be included. The Central Charges also
of Form No. 16 for the purpose of section 203 requested to incorporate those cases where the
of the Act read with rule 31 of the Rules. Assessing Officer, while framing assessments in
(Circular No. 04/2013 dated 17th April, 2013) search and seizure cases, have been able to establish
tax evasion and made independent detailed
Instructions investigation traversing beyond the indicated facts
in Appraisal report of the investigation unit. The
Compilation of quality scrutiny assessments in any other cases which reflect the
work done by the Assessing Officers on the basis
assessment cases completed during of their independent investigations may also be
financial year 2012-13 included if it amounts to quality work.
In view of the CBDT’s decision to review the (CBDT’s Letter [F. No. 225/65/2013/ITA-II],
quality of assessments completed by the dt. 11-4-2013)
Assessing Officers during financial year
2012-13 in each CCIT/DGIT charge which finds Press Release/Memorandums
mention in "Guidelines for Scrutiny Selection"
for Financial Year 2012-13, all the CCsIT/DGsIT Agreement and protocol signed between
charges have been requested to ensure that a India and Malta for the avoidance of
compilation of at least 50 quality assessments passed double taxation and the prevention of
in their respective charges be made in respect of
scrutiny assessments completed during financial fiscal evasion with respect to taxes on
year 2012-13, clearly bringing out the quality of income
work done and the resultant revenue impact. The The Double Taxation Avoidance Agreement
compilation has been directed to be made in the (DTAA) and the Protocol between the Republic
format enclosed thereto keeping all the parameters of India and Malta for the avoidance of double
in to consideration. The Board's letter dated taxation and for the prevention of fiscal evasion
20-9-2012 mentions that quality orders compiled with respect to taxes on income is already in
through above process would form source material force since February, 1995. Both India and Malta
for quality assessment work to be incorporated in have renegotiated the Agreement to bring in line
forthcoming issue of 'Let us share’. with international standards, change in domestic
The board also directed that compilation should laws and changed economic scenario. India and
not include the cases of PSU, Government Malta have now signed the new DTAA. Once
organisations and the cases with a history of the DTAA enters into force, it will stimulate the
addition/disallowances being consistently made flow of capital, technology and personnel between
and contested in appeals in the past years. In such both the countries and will further strengthen the
cases only those issues may be reported which have economic relationship. It also provides tax stability
been detected for the first time during the year. and reduces any obstacles in providing mutual co-
Before reporting such cases in compilation, due operation between India and Malta.
care to be taken that the issues have been properly (Press Release, dated 15-4-2013)
thrashed and it is not a case where the Assessing
2

1019
international taxation – Case Law Update
CA Tarunkumar Singhal & CA Sunil Lala
international taxation
Case Law Update
A] HIGH COURT JUDGMENTS 4. The Revenue was of the view that 10 per
cent of the remuneration received by the assessee
I. Whether a non-resident of the nature mentioned in section 44BB of the
enterprise not having a permanent Act must be deemed to be the profits chargeable
establishment in India, would not come to tax under the head ‘Profits and Gains from
within purview of section 44BB even in Business and Profession’. In order to claim any
respect of remuneration received by it lower amount of profit, the assessee ought to have
maintained books of account as per section 44AA
in connection with any matter provided of the Act and get the same audited as per section
in Section 44BB ? Held : Yes 44AB of the Act.
CIT vs. Enron Oil & Gas Expat Services Inc. [2013] 29
taxmann.com 419 (Uttarakhand) Judgment
1. The Hon’ble High Court held that Section
Facts
44BB will apply irrespective of the fact whether
1. The assessee, Enron Oil & Gas Expat
the assessee makes a profit or not. Thus 10 per
Services Inc., a non-resident USA company, was
cent of the remuneration would be taxed under
providing cost-to-cost services based on a tripartite
section 44BB of the Act unless books of account
agreement.
are maintained under section 44AA(2) and are
2. The assessee claimed that since it provided audited under section 44AB of the Act to declare
cost to cost services, it was outside the scope of a lower amount of profits.
section 44BB of the Act. It did not maintain books
2. The Hon’ble High Court further observed
of account and other documents as required under
that there was no dispute that the assessee had no
section 44AA(2) of the Act and did not get its
permanent establishment in India and no such fact
accounts audited as required under section 44AB
was determined by the Assessing Officer and the
of the Act.
Commissioner of Income Tax (Appeals).
3. It was also contended by the assessee that it
3. Following its earlier judgment of the
does not have a permanent establishment in India
Division Bench of the same Court in the case
as per Article 7 of the Double Taxation Avoidance
of the assessee itself, it held that Article 7 of
Agreement between India and USA (‘the DTAA’)
the DTAA requires a non-resident to have a
and hence it does not come under the purview of
permanent establishment in India for being taxed
section 44BB of the Act.

:102
in India; otherwise it is not taxable in India in Hon’ble Tribunal had also passed a detailed order
view of the DTAA even if it receives remuneration for exclusion of the same.
in connection with any matter provided in section 2. As regards the question of allowing safe
44BB of the Act. harbour margin, the Hon’ble High Court held that
the same was academic if the 8 comparables were
II. Whether if the Tribunal had, excluded.
after detailed analysis, held that the
comparables selected by the TPO were III. Whether the Hon’ble Tribunal was
not functionally comparable to the right in accepting the Cost Plus Method
assessee, then no question of law arises method adopted by the assessee to
for consideration? Held :Yes compute the arm’s length price of the
CIT vs. Carlyle India Advisors (P.) Ltd. [2013] international transaction where the AO
32 taxmann.com 23 (Bombay) Assessment Year: had accepted the CPM method in the
2007-08 subsequent assessment years and there
was no allegation by the Revenue that
Facts
1. The assessee, Carlyle India Advisors (P.)
the facts in the subsequent years were
Ltd. rendered investment advisory and related materially different? Held : Yes
support services to its Associated Enterprise in CIT vs. M/s. L’oreal India Pvt. Ltd. [TS-58-HC-
Hong Kong. 2013(BOM)-TP] Assessment Year : 2002-03
2. During the course of Transfer Pricing Facts

assessment, the Transfer Pricing Officer 1. The assessee company, L’oreal India Pvt.
(“TPO”) rejected all the comparables except one Ltd. had adopted Cost Plus Method (“CPM”)
comparable chosen by the assessee and selected 8 as the most appropriate method to compute the
more comparables. arm’s length price in respect of international
transaction relating to purchase of raw material
3. The Hon’ble Tribunal, by way of a detailed
from its associated enterprise.
order, held that the 8 comparables selected by
the TPO were not comparable to the assessee 2. For year under consideration, the Transfer
company. Pricing Officer (“TPO”) did not accept CPM as
the most appropriate method and instead chose
4. Aggrieved, the Revenue filed an appeal Transaction Net Margin Method (“TNMM”)
before the Hon’ble High Court on whether the to compute the arm’s length price of the said
Hon’ble Tribunal was correct in deleting the international transaction.
comparables and allowing safe harbour margin of
5%. 3. In the subsequent years, A.Ys. 2003-04
and 2004-05, the Assessing Officer (“AO”) had
accepted CPM as the most appropriate method
Judgment
to compute the arm’s length price of the said
1. The Hon’ble High Court did not entertain
international transaction.
both the questions raised by the Revenue and
dismissed the appeal. It observed that for the 4. Aggrieved, the assessee went in appeal
subsequent assessment years, the Assessing before the CIT(A) who upheld that CPM was
Officer himself had found that the 8 comparables correctly chosen as the most appropriate method.
selected by the TPO were not functionally On further appeal, the order of the CIT(A) was
comparable with the assessee. Moreover, the upheld by the Hon’ble Tribunal.

1039
5. Aggrieved, the Revenue filed an appeal to be established first before there

before the Hon’ble High Court questioning can be question of deduction of tax at
whether the Hon’ble Tribunal was right in
source – Held : Yes – Sections 40(a)(ia)
accepting CPM adopted by the assessee to arrive
at the arm’s length price. and 195 of the Act
M/s C U Inspections (I) Pvt. Ltd. vs. DCIT [2013-TII-
62-ITAT-MUM-INTL] Assessment Year: 2006-07
Judgment
1. The Hon’ble High Court held that the
Revenue could not prove that the facts in the Facts
subsequent year, where the AO held CPM to be 1. The assessee is a subsidiary of M/s P.S.O.
the most appropriate method, were materially Beheer B.V., a resident of Netherlands. It is
different from the relevant year. engaged in the business of certification of activities
in respect of quantity, quality, pre-shipment
2. Accordingly, the Hon’ble High Court did inspections, surveys, etc.
not entertain the question of law proposed by the 2. The assessee entered into an agreement with
Revenue. its holding company towards incurring of various
overhead expenses, in terms of which, the holding
B] TRIBUNAL DECISIONS company agreed to incur various costs for and on
behalf of the assessee and other group concerns.
IV. Reimbursement of Expenses – The total overhead costs was to be collected from
Whether reimbursement of overhead various group members at certain percentage
expenses without any profit element of the total cost determined as per arm’s length
can be charged to tax in the hands principle by considering the size of the group
member, percentage of ownership, time spent by
of the recipient – Held : No; Whether the management, number of visits, etc.
when the amount paid by the assessee 3. The assessee paid ` 34.94 lakhs to its
is not taxable in the hands of the holding company towards reimbursement of
recipient, there can be any question overhead expenses without deducting tax at
of making any disallowance for non- source. However, the AO observed that section
deduction of tax at source - Held: No; 195 was applicable on these payments and hence
the assessee should have deducted tax at source
Whether when the assessee availed and in default, disallowed the expenditure u/s
services from some third parties and 40(a)(ia). On appeal, the CIT(A) confirmed the
payment for such services was made to disallowance.
such third parties through the medium 4. The assessee claimed deduction for a
of its holding company, such payment sum of ` 15.44 lakh towards training expenses
can be considered as reimbursement to its employees claiming the amount paid
of expenses at cost to its holding as reimbursement of expenses to its holding
company. No tax was deducted at source from
company – Held: No; Whether there such payment. The training was, in fact, imparted
can be situations under which albeit the to the employees of the assessee by one Mr. Henk
payment includes income element but Jan Sijtsma and Mr. Mike van de Laak. This was
it still may not be not chargeable to tax arranged by the holding company. Two invoices
– Held : Yes; Whether chargeability to were raised by the holding company on the
assessee for the training imparted by these two
tax in the hands of the recipients needs persons.

:104
5. The Assessing Officer, invoking no dearth of judgments and Tribunal

the provisions of section 40(a)(ia), made the orders to the effect that the reimbursement
disallowance for the failure of the assessee to of expenses without any profit element
deduct tax at source from such payments. On cannot be charged to tax in the hands of
appeal, the same was confirmed by the CIT(A). the recipient. If such an amount is not
chargeable to tax there cannot be any
Decision scope for deduction of tax at source from
On assessee’s appeal, the Tribunal held as follows: such payment. Once no deduction of tax
at source is contemplated, the natural
1. Re: TDS on reimbursement of overhead corollary which manifestly follows is that
expenses the provisions of section 40(a)(ia) cannot be
(i) From the Agreement and the Certificate of triggered.
the Auditor, the contents of which have not 2. Re: Payment to third party through holding
been controverted by the authorities below, company
it is amply clear that the assessee’s share at
4% of total overhead charges, as worked (i) The reimbursement of expenses for avoiding
out at ` 34.94 lakh, is without any profit deduction of tax at source contemplates the
element. When we consider the nature of actual incurring of expenses by the later
expenses borne by the head office such as in the first instance, which is subsequently
accounting, legal and professional, staff made good by the former. Where the
and management, etc., it becomes vivid that expenses are incurred not by the later itself
these expenses are otherwise in the nature but someone else, its payment by the former
of revenue expenses. It is not the case of to the later to pass it to such third person
the AO that some part of such expenses is cannot be considered as reimbursement
not deductible as breaching the mandate of of expenses to the later so as to push
section 44C of the Act. such transaction outside the ambit of the
provisions of deduction of tax at source.
(ii) A prerequisite for making disallowance
under section 40(a)(ia) is that the payment (ii) To put it in simple terms, if the Indian
for the expenditure should necessarily be subsidiary company incurs expenses or
liable to deduction of tax at source. In the makes purchases or avails any service from
instant context, an amount will be liable some third party abroad and the payment
to tax withholding if it inter alia contains to such third party is routed through its
some income element. If the amount paid holding or related company abroad, the
by the assessee is not taxable in the hands provision for deduction of tax at source
of the recipient, there can be no question apply as if the assessee has made the
of making any disallowance under this payment to such independent party de hors
provision. the routing of payment through the holding
company. The remission of amount to the
(iii) A conjoint reading of sections 195 and 40(a) holding or related company for finally
(ia) brings to the fore that the disallowance making payment to the third person will
can be made only if the amount paid be considered as payment to third party.
is chargeable to tax in the hands of the It cannot be termed as reimbursement of
recipient. In other words, if the amount expenses to the holding company.
is not chargeable to tax in the hands of
the recipient, there cannot be any scope (iii) If the contention of the assessee is accepted
for deduction of tax at source. There is and the payment to third party, routed

1059
through its related concern, is considered consider is the chargeability to tax of the
as reimbursement of expenses to the amount in the hands of the recipient. If the
related party, then probably all the relevant amount is not chargeable to tax due to one
provisions in this regard will become reason or the other, the payment cannot
redundant. Such a route is impermissible to suffer disallowance in the assessment of the
thwart the flow of law. It, therefore, follows payer
that the payment made to the related party
for paying eventually to some third party (vi) Adverting to the facts of the instant case,
cannot be construed as reimbursement of we find that the assessee paid a sum of
expenses to the related party. It is only ` 15.44 lakh to two trainers through the
where the payment is ultimately stopping medium of its holding company. Patently
with the related party that it can be the payment cannot be considered as having
considered as payment to the associated been made to the holding company at
concern and not otherwise. cost. But, in order to invoke the provisions
of section 40(a)(ia) it is of paramount
(iv) Reverting to the facts of the instant case, importance to ascertain the chargeability
it is noticed that the assessee availed of the amount to tax in the hands of such
services from some third parties. Payment two trainers who were eventual receivers.
for such services was made to such third Unless the chargeability of such amounts is
parties through the medium of its holding established in the hands of such trainers, the
company. Such payment cannot be provisions of section 195 cannot apply and
considered as reimbursement of expenses ex consequenti, the application of section
at cost to its holding company. 40(a)(ia) is ruled out. We find virtually no
discussion in the assessment order and the
(v) However, the mere fact that the payment in impugned order about the taxability of this
question is not reimbursement of expenses amount in the hands of those two trainers
to the holding company would not per se so as to bring it within the purview of
expose the expenditure to disallowance u/s chargeability. We order and direct the A.O.
40(a)(ia) of the Act. It has been noticed that to first decide the question of chargeability
the disallowance u/s 40(a)(ia) is activated or otherwise of the amounts paid by the
when there is failure on the part of the assessee in the hands of the two trainers
assessee to deduct/pay tax at source from under the relevant provisions of the Act
the payment on which tax is otherwise read with the relevant DTAA and thereafter
deductible as per law. Deduction of tax at the question of application of section 40(a)
source u/s 195 from payment is envisaged (ia).
when the amount is chargeable to tax in
the hands of recipient. Reimbursement
of expenses to the related party without IV. Online Advertising, Web
any mark-up is one of the situations Advertising, Banner Advertisement –
under which the amount paid cannot be Whether payments for advertisement
considered as chargeable to tax. There can can be deemed to be royalties u/s
be several other situations under which
albeit the payment includes income element 9(1)(vi) – Held : No; Whether online
but it still may not be not chargeable to advertising services can be considered
tax under the provisions of the Act and/ to be technical services u/s 9(1)(vii) –
or the relevant Double Taxation Avoidance Whether services rendered without
Agreement (DTAA). The crucial factor to human intervention can be considered

:106
as technical services u/s 9(1)(vii) – to establish that these entities were of the treaty
Whether in online advertising, there is partner countries. He held that whether or not,
in assessee's opinion, the income was taxable in
any transfer of any technology of any
India, the assessee ought to have approached
kind, and any payment for such service the Assessing Officer u/s 195 prior to making
is outside the ambit of source taxation the foreign remittance. In appeal, however, the
under Article 12 of India-USA DTAA – Commissioner (Appeals) deleted the impugned
Whether when recipient of an income disallowance. Aggrieved, the Revenue appealed
to the Tribunal.
does not have the primary tax liability
in respect of an income, the payer can
Decision
have vicarious tax withholding liability – The Tribunal held in assessee’s favour as under:
Article 12 of India-USA & India –Ireland
1. Re: Income accruing or arising in India:
DTAA – Sections 5(2)(a) & (b), 9(1)
(i), (iv), (vi) & (vii), 40(a)(i), 195 of the i. To examine taxability of an income in the
Income-tax Act hands of a non-resident, three aspects need
ITO vs. Right Florists Pvt Ltd [2013-TII-61-ITAT- to be examined – application of Section
KOL-INTL] Assessment Year: 2005-06 5(2)(a), application of Section 5(2)(b), and
application of Section 9 which actually
deals with the deeming fiction embedded
Facts
in Section 5(2)(b). In the present case, it is an
1. The assessee is a florist and uses advertising
admitted position that the payment was not
on search engines, i.e. by Google and Yahoo,
received or deemed to have been received
to generate business. Whenever anyone does a
in India. Section 5(2)(a), therefore, has no
web search on the respective search engines, in
application in the matter. As regards Section
looking for a particular website, and uses certain
5(2)(b), i.e. ‘income accruing or arising in
keywords, the advertisement of the assessee is
India' and ‘income deemed to accrue or
shown along with the search results.
arise in India' , let us pick up the scope of
2. The assessee had made payments in respect ‘income accruing or arising in India' first;
of online advertising to Google Ireland Limited
and Overture Services Inc USA (Yahoo USA). 2. Re: Permanent establishment:
However, no taxes were withheld from these ii. The expression ‘income accruing or arising
payments. in India' has not been statutorily defined
3. During the course of scrutiny assessment under the provisions of the Income-tax
proceedings, the Assessing Officer required the Act, 1961. However, while dealing with
assessee to show cause as to why these payments the connotations of this expression under
not be disallowed, as a deduction in computation Section 5(2), the Supreme Court, in the case
of its income, under section 40(a)(i). The assessee of CIT vs. Hyundai Heavy Industries Limited,
submitted that that the payments were made to has inter alia observed that, “……as far as
foreign entities, who did not have any permanent the income accruing or arising in India, an
establishment in India and that even u/s 9(1)(i), income which accrues or arises to a foreign
only so much of the income of the non-resident enterprise in India can be only such portion
could be brought to tax as was reasonably of income accruing or arising to such a
attributable to the operations carried out in India. foreign enterprise as is attributable to its
4. However, the A.O. held that this claim was business carried out in India. This business
unsubstantiated and that there was no material could be carried out through its branch(s)

1079
or through some other form of its presence engine like Google or Yahoo can be said
in India such as office, project site, factory, to have a PE, within its primary meaning,
sales outlet, etc. (hereinafter called as "PE of in India. It is important to bear in mind
foreign enterprise") …” the fact that the concept of PE evolved
because in traditional commerce, physical
iii. Interestingly, even though the Supreme
presence was required in the source country
Court has used the expression ‘permanent
if any significant level of business was to
establishment', this expression is used in
be carried on, but, with the development
the context of Section 5(2), and not in the
of internet, correlation between the size of
context of tax treaties – where it has its
business and extent of physical presence in
origin. The Supreme Court has explained
the source country has virtually vanished.
that, in order to attract taxability in India
In that sense, the traditional concept of
under Section 5(2)(b), the income must
PE, which was conceived at a point of
relate to such portion of income of the
time when internet and e-commerce was
non-resident, as is attributable to business
not even on the radar, does not really
carried out in India, and the business so
fit into the modern day world in which
carried out in India could be “through its
virtual presence through internet, in certain
branches or through some other form of
respects, is as effective as physical presence
presence such as office, project site, factory,
for carrying on businesses.
sales outlet, etc” as “branch or through
some other form of its presence in India vii. At a policy level, taxation may infringe
such as office, project site, factory, sales neutrality when it is dependent on the form
outlet, etc”. of presence, i.e. physical presence vis-a-vis
virtual presence, traditional commerce vis-
iv. The term permanent establishment, has its à-vis ecommerce, direct presence vis-à-vis
origin in the tax treaties but, by the virtue of presence through a dependent agent. A
judge made law – which is as binding on us search engine's presence in a location, other
as law enacted by the Parliament , it is used than the location of its effective place of
in the context of domestic law where it is not management, is only on the internet or by
defined or even elaborated upon. As to how way of a website, which is not a form of
we should construe such an expression, we physical presence.
find guidance from Australian New South
Wales Supreme Court's decision in the case viii. Clearly, conventional PE tests fails in this
of Unisys Corporation vs. Federal Commissioner virtual world even when a reasonable
of Taxation. level of commercial activity is crossed
by foreign enterprise. It is a policy
v. Since the expression ‘permanent decision that Government has to take as
establishment' is not defined by legislation to whether it wants to reconcile to the fact
at all and not adequately defined even by that conventional PE model has outlived
judge made law, it will be appropriate to its utility as an instrument of invoking
look at primary meaning of permanent taxing rights upon reaching a reasonable
establishment in the context of the tax level of commercial activity and that it
treaties, and construe the scope of the does fringe neutrality as to the form of
expression ‘permanent establishment' under commercial presence i.e. physical presence
the domestic tax law, and in the context of or virtual presence, or whether it wants to
issue before us, accordingly. take suitable remedial measures to protect
vi. Let us first examine as to what is primary its revenue base. Any inertia in this exercise
meaning of a PE and whether a search can only be at the cost of tax certainty.

:108
ix. In the light of the above discussions, a (a) When an expression or a clause is
website per se, which is the only form picked up from the OECD Model
of Google's presence in India – so far as Convention, the normal presumption
test of primary meaning i.e. basic rule is that the persons using the said
PE is concerned, cannot be a permanent clause or expression are also aware
establishment under the domestic law. about the meanings assigned to the
said clause or expression by the
x. The interpretation of the expression OECD and have used it in the same
‘permanent establishment', even in the sense and for the same purpose.
context of tax treaties, does not, therefore, Andhra Pradesh High Court in
normally extend to websites unless the the case of CIT vs. Visakhapatnam
servers on which websites are hosted Port Trust, referred to the OECD
are also located in the same jurisdiction. Commentary on the technical
The underlying principle is this. While expressions and the clauses in the
website per se, which is a combination of model conventions, and referred
software and electronic data, does not to, with approval, Lord Redcliffe's
constitute a tangible property as it cannot observation in Ostime vs. Australian
have a location which constitutes place Mutual Provident Society which have
of business, a web server, on which the described the language employed in
web site is stored and through which it is those documents as the 'international
accessible, is a piece of equipment having tax language'.
a physical location and such location may
thus constitute a “fixed place of business” (b) These documents are thus in the
of the enterprise that operates that nature of contemporanea expositio
server. A search engine, which has only inasmuch as the meaning indicated
its presence through its website, cannot in these documents to the clauses
therefore be a permanent establishment and expressions in the tax treaties
unless its web servers are also located can be inferred as the meaning
in the same jurisdiction. That's not the normally understood in, to use the
situation here and it is not the case of words of Lord Redcliffe, 'international
the revenue that servers are located in India; tax language' developed by the
organisations like OECD. Therefore,
3. Re: Implications of India's Reservations: when an expression or a clause from
xi. Coming to the reservations expressed by the OECD Model Convention is
Government of India, the first issue that used even in a bilateral tax treaty
needs to be considered is as to what is the involving a non OECD country, one
role of ‘reservations' and ‘observations' may generally proceed on the basis
in judicial examination. In our humble that it is used in the same meaning
understanding, the ‘reservations' so and with the same connotations as
expressed or ‘observations' so made to the assigned to it by the OECD Model
commentary is relevant only to the extent Convention Commentary.
that in interpreting any tax treaty, entered (c) Of course, even contemporanea
into after expressing those ‘reservations' or expositio is not a binding
making those ‘observation', to that extent, interpretation of statutory provisions
related commentary cannot be taken as and there are serious limitation in
contemporanea expositio. It is so for the its legal application, but when it
following reasons: comes to interpreting a tax treaty,

1099
the position is entirely different and practical impact on a website being

this principle has much bigger role to treated as a permanent establishment.
play because interpreting a tax treaty
is a case in which emphasis has to (xii) In the light of the above discussions, in our
be on true intentions rather than on considered opinion Google's presence in
literal meaning. India through its website cannot be said to
constitute permanent establishment in India
(d) In the view of discussions above, the under the basic rule and thus conditions of
Government of India 's reservations Section 5(2)(b), read with Supreme Court's
on the OECD Commentary are judgment in the case of Hyundai Heavy
relevant only to the extent that OECD Industries, are not satisfied to the extent that
Commentary, to that extent, cannot no profits can be said to accrue or arise in
be treated as a fair index of intention India. We, however, make it clear that our
of the Government of India and as observations are confined to the basic rule
contemporanea expositio in respect of PE and these will have no application on
tax treaties entered into by India after extended PE provisions, such as dependent
so expressing its reservations. Beyond agent permanent establishment i.e. DAPE,
that, in our humble understanding, which are relevant only in the context of tax
these reservations have no role in treaties – something with which we are not
judicial analysis. really concerned at this stage.
(e) In any event, even the reservations 4. Re: Whether the payments are royalties:
expressed by the Government of
India merely states the view (xiii) That takes us to the question whether
that website may constitute a second limb of Section 5(2)(b), i.e. income
permanent establishment in ‘deemed to accrue or arise in India', can be
certain circumstances, but it invoked in this case. So far as this deeming
does not specify what are those fiction is concerned, it is set out, as a
circumstances in which, according complete code of this deeming fiction, in
to tax administration, a website Section 9 of the Income-tax Act, 1961, and
could constitute the permanent Section 9(1) specifies the incomes which
establishment. In effect, these shall be deemed to accrue or arise in India.
reservations only reserve a right to In the Pinstorm's case and in Yahoo's case,
set out the circumstances in which the co-ordinate benches have dealt with
a website per se can be treated as only one segment of this provision i.e.
permanent establishment, even Section 9(1)(vi), but there is certainly much
though these reservations do more to this deeming fiction. Clause (i)
not really constitute actionable of section 9(1) of the Act provides that all
statements. We find it difficult to income accruing or arising whether directly
fathom the underlying principle or indirectly through or from any 'business
embedded in this reservation, and connection' in India, or through or from
to understand somewhat vague any property in India or through or from
and ambiguous stand of the tax any asset or source of income in India,
administration on this issue. In our etc. shall be deemed to accrue or arise in
considered view, therefore, even on India. However, as far as the impugned
merits, the reservations so expressed receipts are concerned, neither it is the case
by India, as on now and without of the Assessing Officer nor has it been
anything more, cannot have any pointed out to us as to how these receipts

:110
have arise on account of any business general being restricted to a sense analogous
connection in India. There is nothing on to that of less general”. Just as a man is
record to demonstrate or suggest that the known by the company he keeps, a word is
online advertising revenues generated in also to be interpreted with reference to be
India were supported by, serviced by or accompanying words. Words derive colour
connected with any entity based in India. from the surrounding words.
On these facts, Section 9(1)(i) cannot have
any application in the matter. Sections 9(1) ii. Broom's Legal Maxims (10th Edn.)
(ii), (iii), (iv) and (v) deal with the incomes observes that "It is a rule laid down by
in the nature of salaries, dividend and Lord Bacon, that copulatio verborum indicat
interest, etc., and therefore, these deeming acceptationem in eodem sensu i.e. the coupling
fictions are not applicable on the facts of of words together shows that they are
the case before us. As far as applicability to be understood in the same sense. It is,
of Section 9(1)(vi) is concerned, co-ordinate therefore, clear on principle that as long
benches, in the cases of Pinstorm and as words are used together in a statutory
Yahoo, have dealt with the same and , for provision, they take colour from each other
the detailed reasons set out in these erudite and restrict its meaning to the genus of
orders, concluded that the provisions of these words. In this way, the meaning
Section 9(1)(vi) cannot be invoked. We are of words is restricted because of other
in considered and respectful agreement words in the same group of words, and the
with the views so expressed by our meaning is so restricted to the species or
distinguished colleagues. genus of those other words. Genus of these
words should be clearly discernible from
5. Re: Whether the payments are fees for the lowest common factor in those words.
technical services:
iii. The lowest common factor in ‘managerial,
i. While there is no specific definition assigned technical and consultancy services' seems
to the technical services, and Explanation 2 to be the human intervention, because while
to Section 9(1)(vii), as also Article 12 (2)(b) these three words are of wide scope and are
merely states that ‘fees for technical services' in varied field, the only common thread in
will include considering of “rendering of these words seems to be that the services,
any managerial, technical or consultancy which are essentially professional services
services”. It is significant that the expression in nature, can be rendered with human
‘technical' appears along with expression interface. A managerial or consultancy
‘managerial' and ‘consultancy' and all service can only be rendered with human
the three words refer to various types of interface, while a technical service can be
services, consideration for which is included rendered with human interface as also
in the scope of ‘fees for technical services'. without human interface. A technical
The significance of this company of words service, for example, could be automated
lies in the fact that, as observed by a co- analysis of a chemical compound without
ordinate bench of this Tribunal in the case any scope of any human contribution at
of Kotak Securities Ltd Vs DCIT, “when two any stage, and a technical service could
or more words which are susceptible to also be physical examination by an expert
analogous meaning are used together they chemical analyst, with or without the
are deemed to be used in their cognate help of machines, of the same chemical
sense. They take, as it were, their colours compound. However, when we try to
from each other, the meaning of more restrict the meaning of technical services

1119
to the services which are covered by what constitutes a technical service without
managerial and technical services as well, human interface is essentially a question of
services without human interface will have fact and each case will have to be examined
to be taken out of its ambit. on its own facts. However, as long as there
is no human intervention in a technical
iv. It is, therefore, clear on principle that as long service, in the light of law so laid down,
as words are used together in a statutory it cannot be treated as a technical service
provision, they take colour from each other under Section 9(1)(vii).
and restrict its meaning to the genus of
these words which is evident by the lowest
common factor in those words. The lowest vii. The service which is rendered by the
common factor in ‘managerial, technical Google is generation of certain text on the
and consultancy services' being the human search engine result page. This is a wholly
intervention, as long as there is no human automated process. There is no dispute
intervention in a technical service, it cannot that in the services rendered by the search
be treated as a technical service under engines, which provide these advertising
Section 9(1)(vii). opportunities, there is no human touch at
all. The results are completely automated
v. There is one more approach to this issue, and, as evident from the screenshots, these
even though the results will be the same. results are produced in a fraction of a
The other way of looking at these three second – 0.27 seconds in the screenshot.
words on the basis of the principle of For the reason that there is no human
noscitur a sociis is, as was done by the touch involved in the whole process of
Delhi High Court in the case of CIT vs. actual advertising service provided by
Bharti Cellular Limited, is that the common Google, in the light of the legal position
characteristic of the majority of the words be that any services rendered without human
read as limitation on the scope of the other touch, even if it be a technical service, it
words. cannot such a technical service which is
covered by the limited scope of Section 9(1)
vi. We may also point out that while this (vii), the receipts for online advertisement
judgment did not meet approval of the by the search engines cannot be treated
Supreme Court, in the judgment reported as fees for technical services taxable as
as CIT vs. Bharti Cellular Limited, on the income, under the provisions of the Income
short factual aspect regarding fact of human Tax Act, in the hands of the Google. The
intervention. It was for recording the factual wordings of Explanation 2 to Section 9(1)
findings on this aspect that the matter (vii) as also that of the definition of fees
was remitted to the file of the Assessing for technical services under Article 12(2)
Officer. However, so far as the principle (b) being similar in material respects, the
laid down by the Delhi High Court on above legal proposition equally applies
the application of principle of noscitur a to the definition under Article 12 (2)(b) of
sociis in restricting the scope of ‘technical India Irish tax treaty. The income earned
services' to ‘technical services with a human by Google, in respect of online advertising
interface' was concerned, Their Lordships revenues discussed above and based on the
of the Supreme Court took note of the facts on record, cannot be brought to tax
said principle and left it intact. The stand as income deemed to accrue or arise under
taken by the Delhi Court, in our humble section 9(1)(vii), i.e. last limb of Section 9(1),
understanding, stands approved. Of course, as well.

:112
viii. Once we come to the conclusion that the issue is concerned, we have examined the
online advertising payments made to existence of PE only on the basis of website
Google Ltd. cannot be brought to tax in simpliciter, and on no other additional basis,
India, under section 5(2) r.w.s. section 9 as no case was made out for the same. In
of the Income-tax Act, we can conclude any case, revenue has not brought anything
that these amounts are not exigible to on record, either at assessment stage or
tax in India at all. The facts relating to even before us, to suggest that Google or
Yahoo being admitted similar in material Yahoo had a PE in India, and as held by a
aspects, the same conclusion holds good in Special Bench of this Tribunal in the case
respect to Yahoo as well. We may, however, of Motorola Inc vs. DCIT “DTAA is only an
point out that since Yahoo is a USA based alternate tax regime and not an exemption
Delaware company and since Indo-USA regime” and, therefore, “the burden is first
tax treaty provides for a make available on the Revenue to show that the assessee
clause which restricts the source taxation has a taxable income under the DTAA,
of only such technical services, referred to and then the burden is on the assessee to
as ‘included services' in Indo-US tax treaty, show that that its income is exempt under
as make available the technical knowledge, DTAA”. No such burden is discharged
etc. by the Revenue. Accordingly, there is no
material before us to come to the conclusion
ix. As is the settled legal position, unless that Google or Yahoo had a PE in India,
services rendered by the service provider which, in turn, could constitute the basis of
results in transfer of technology and enable their taxability in India;
the recipient of service to make use of
technical knowledge by himself, and 6. Re: Whether there was any withholding
without recourse to the service provider, liability:
mere rendition of such services cannot
be brought to tax as fees for technical xi. It is only elementary that when recipient of
service. Clearly, so far as online advertising an income does not have the primary tax
is concerned, there no transfer of any liability in respect of an income, the payer
technology of any kind, and as such any cannot have vicarious tax withholding
payment for such service is outside the liability either. This position is independent
ambit of source taxation under Article of the payer having moved an application
12. For this reason also, the payments under section 195 or not, or on the payer
made to Yahoo could not be brought to tax or the payee having obtained an advance
in India. ruling in their favour or not. The law is
now very well settled in this regard by the
x. On the limited facts of the case as produced Supreme Court's judgment in the case of
before us, the receipts in respect of GE India Technology Centre Pvt Ltd vs. CIT
online advertising on Google and Yahoo wherein Their Lordships have categorically
cannot be brought to tax in India under held that, "where a person responsible for
the provisions of the Income-tax Act, as deduction is fairly certain, then he can make
also under the provisions of India-US and his own determination as to whether the tax
India-Ireland tax treaty. This observation was deductible at source and, if so, what
is subject to the rider that so far as the PE should be the amount thereof".

1139
INDirect Taxes – Central Excise and Customs – Case Law Update
CA. Hasmukh Kamdar
INDIRECT TAXES
Central Excise and Customs – Case Law Update
Manufacturer the following question to the Hon’ble Delhi High

Commissioner of Central Excise vs. Diwan Sahib Court for determination.
Fashions Pvt. Ltd. [2013 (289) E.L.T. 113 (Del.)]
"Whether the respondents were liable to pay
The facts in this case are as follows: excise duty in respect of garments stitched by
them from fabric either bought by the customers
M/s Diwan Sahib Fashions Pvt. Ltd. (hereinafter themselves or bought by the customers from the
referred to as ‘respondents’) was engaged in Respondent for stitching purpose?”
the manufacture of readymade garments falling
under the “Chapter Heading 6201” of the First It was contended on behalf of the department
Schedule of the Central Excise Tariff Act, 1985. that since what the respondents return to the
The respondents were also engaged in stitching customers is a finished product, a garment, falling
garments out of fabric bought by customers under Chapter 62, the same is excisable. It was
from their shop or brought by the customers urged that the ownership of the raw material
from outside. In all cases, as a matter of fact, the (in this case, the fabric) is irrelevant for deciding
fabrics were given by the individual customer who the manufacturer in terms of Section 2 (f)
for stitching. On the garments so stitched by the of the Central Excise Act, 1944 is. It is settled
respondents it affixed the label “Specially Tailored law that when goods are manufactured through
by Diwan Sahib Designs for Men”. In cases where a job worker, the latter is the manufacturer
the fabrics were bought from the respondents and not those supplying raw material. In this
only, the stitching took places after the “sale” case, the job worker was the respondent, and
of the fabric. Moreover, it was not compulsory not the customers who gave the fabric. The
for the customer to get the fabric stitched from manufacturing activity is done by the respondent,
the respondents. Thus, the dispute pertained to who shall, accordingly, be liable to pay the excise
whether the tailoring activity of the respondents, duty.
in cases where the fabrics were given by the
On behalf of the respondents, reliance was placed
customer, either after being bought from the
on the Tribunal’s reasoning and conclusion and
respondents, or from outside, was liable to excise
on Rule 7AA, and its successor Rules, Rules 4 (1)
duty.
and 4 (3) of Central Excise Rules, 2001 and 2002.
After going through the process of Adjudication, It was urged that according to these rules, liability
Appeal to Commissioner (Appeals) and then to to pay excise duty is that of those who supply the
the Hon'ble Tribunal, the Commissioner referred raw material. Therefore, the excise duty, if any,

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INDirect Taxes – Central Excise and Customs – Case Law Update
was payable by the individual customer, and not on job-worker basis is put on the person who
by the respondents. Reliance was also placed on gets goods manufactured on job work basis. He
Notification No. 7/2003-C.E., dated 1-3-2003 to has to discharge such liability “as if he is the
contend that garments got stitched from one’s manufacturer”. This rule does not say anywhere
own fabric and based on measurements was that the person supplying the raw material would
exempted from excise duty. be the manufacturer. The rule only says that such
person has to discharge the liability and that in
The Hon’ble High Court observed that:
the normal course is done by the manufacturer.
“Under the special provisions made as per There is no ruling by the Court that a rule cannot
Rule 7AA of the Central Excise Rules, 1944 and be framed to make the supplier of raw material
its successor rules, the responsibility to pay liable to pay duty. This is to say that there is no
duty on textile article got manufactured on ruling that Rules like Rule 7AA and its successor
job-work basis is put on the person who gets rules are bad in law. That is to say even when
goods manufactured on job-work basis. He the manufacturer of the goods is the job worker,
has to discharge such liability “as if he is the the liability to pay duty can be on another. This
manufacturer“. This rule does not say anywhere position becomes very clear if the definition of
that the person supplying the raw material would assessee and the Rules prescribing who has to
be the manufacturer. The rule only says that such pay duty are scrutinized. Rule 7AA was making a
person has to discharge the liability and that in deviation, for textile goods, from the general rule
the normal course is done by the manufacturer. that manufacturer has to pay duty. The position
becomes clear when Rule 4 of Central Excise Rule
Notification No. 7/2003-C.E., dated 1-3-2003
as it existed prior to 25-3-2000 (After 25-3-2003
exempts from excise duty the following type of
similar provisions were incorporated as a new
goods:
rule 12B), is examined.
“Article of apparel or clothing accessories
manufactured or got manufactured for personal 28. This rule does not state that for textile
use and not intended for sale items job worker is not the manufacturer. It
only says that the duty is to be paid by the
Explanation – This exemption shall also apply person supplying the material as if he is the
to such article of apparel or clothing accessories manufacturer. So we are of the view that the
knitted or stitched by a tailor from material Appellant had no obligation to pay excise duty on
supplied by the customer for the personal use of garment stitched out of fabrics bought or brought
the customer.” by the customers. Thus, the argument that in the
This Notification makes it clear that tailoring case of textile goods got manufactured on the
establishments that stitch garments in job work basis during the period 2001-04, the
a customised manner as per the customer’s job worker has to discharge excise duty liability
specification are exempted from excise liability is not acceptable. Further if duty liability is
thereon in cases where the fabric is supplied by determined as if the customer is the manufacturer
the customer himself. This, in our opinion, settles he should be eligible for exemption for SSI units
the matter in favour of the respondent. also. But this issue need not be determined in this
proceeding because the persons to pay duty are
The Hon’ble High Court further took notice of the not before us.”
Tribunal’s observation as follows.
The Hon’ble High Court answered the question
“27. Under the special provision made as per in favour of the respondent, and against the
Rule 7AA of the Central Excise Rules, 1944 department. The appeal accordingly was
and its successor rules, the responsibility to dismissed.
pay duty on textile article got manufactured
2

1159
INDirect Taxes – VAT Update
Nikita Badheka, Advocate & Notary
INDIRECT TAXES
VAT Update
Amendment by Maharashtra Act No VIII late fee payable for late filing of the return, by class
of 2013 of dealer or classes of dealers, for such period or
periods as may be stated therein. The waiver can be
A) The effective date in all the sections given in the notification prospectively or
is 1st May 2013 except for the retrospectively.
amendment relating to Schedule A
relating to milk A.4 Automatic cancellation of Order u/s 23(1)
A.1 Amendment to Definitions Sec 23 (1) entitles the Commissioner to pass best
Sec 2(15A) and Sec 2(17A) defines motor spirits judgment order if the Registered Dealer fails to file
and petroleum products respectively . In both the the returns by the prescribed date. The first proviso to
definitions at the end i.e. after (a) to (f), it was stated this sub-section is substituted. As per the new proviso
“or any other product’ as the State government if after the Assessment order under this section is
may from time to time notify in the official gazette”. passed, the dealer submits the return for the period to
The word “or” is removed from both the places which the order relates, then the order passed under
and replaced by “and”. This means motor spirits 23(1) shall stand cancelled. However the dealer may
and petroleum products respectively would mean be assessed in respect of the same period under other
the products specified in the definition as also any provisions of the section.
other product as may be notified. It appears it was a Therefore in terms of this new sub-section unless the
mistake which is corrected. dealer files a return the order will not be cancelled.
The previous condition about the full payment of
A.2 Revised Annual Returns tax is also absent. Dealer will be able to apply for
Sec 20(4) is amended to provide for one Annual installment if eligible.
revised return for a year for the returns/revised
returns to be filed under Sec 20(4)(b) and Sec 20(4)(c). A.5 Automatic Recovery on acceptance of Audit
That means a dealer would be able to file one annual Report in Form 704
revised return after filing the Audit Report as also Section 32A is inserted. As per this new section if
after receiving the intimation under Sec 63 from the after the submission of Audit Report u/s 61, the
Department. This is in conformity with the earlier recommendation about sum payable or interest
clarification given by the Commissioner . There were payable made by Accountant i.e., CA or Cost
many problems in adjusting the findings of auditor Accountant is accepted by the dealer, either fully
in the last return. The problems are solved now. Any or partly, then the dealer shall pay the same within
revised return filed under these two sections after 30 days from the date of service of the notice issued
1-5-2013 can be single revised return for the year. by the Commissioner in this respect. The provisions
with regard to interest u/s 30(2) will apply to such
A.3 Power to reduce late fee tax accepted by the dealer. It is also provided that if
Under Sec 20(6) a new proviso is added to enable such amount is less than ` 100. The Commissioner
the State Government to exempt whole or part of the shall not recover the same.

:116
INDirect Taxes – VAT Update
A.6 Exemption power for wine Sch A- 34(b) : Milk containing any ingredients other
Sec 41 provides exemption (partial or full) to various than milk fat, milk powder or as the case may be
class of dealers. Sec 41(5) empowers the government solid non fat) and sold under a brand name.
to provide exemption in part or full on sales of
liquor. This power is now extended to wine also. B. Notification under CST Act
This amendment will enable the State to bring in first exempting interstate Sale of
point levy on wine. furnishing cloth covered by C-101
By notification issued under section 8(5) of Central
A.7 Carry forward of Refund up to ` 5 lakhs Sales Tax Act, the tax payable on interstate sale of
Section 50 of the MVAT Act is amended. A proviso furnishing cloth notified under C-101 of MVAT Act
is added to Sec 50(2) by which a dealer whose refund is exempt w.e.f 30th March 2013 (Notification No.
claim at the end of the year is ` 5,00,000/- or less would CST.1413/ CR 48/Taxation 1 dated 30th March 2013).
be allowed to carry forward such return to the return or
revised return for immediate succeeding year. C. The following are the details of
additional information/Data available
A.8 Grant of refund to Mega Unit on website, which will be useful to
Sec 51(3)(a) (iii) included various types of holders Members
of benefit PSI Scheme eligible for application of I] List of References filed by Department – You
refund qua a return/fresh return/revised return. will find remark “Accepted” by Department in
The dealers holding identification certificate issued some places.
to mega unit under PSI 2001 or under PSI 2007 are [II] List of remand back cases
now included in this sub section. One more category [III] Revised list of suspicious dealers
of dealers are included as “vi” to be eligible for filing [IV] List of Sales Tax Practitioners
the application for refund qua a return/fresh return/ Please, verify this list. I find some persons who
revised return. are already qualified as lawyer or CA in this list.
The dealer selling the goods in the course of inter The address also needs to be changed in case
State trade or commerce and whose turnover of such the old declared place is closed/changed. List
interstate sale in immediate previous year exceeds 50 includes some STP who are no more with us.
per cent of his total turnover of sale for the previous [V] Clarification is given by Commissioner of Sales
year is now eligible to apply for refund on filing of Tax.
return, fresh return or revised return. For Builders & Developers dealers :
If the land cost deduction is more than
A.9 Amendment to Sec 61
turnover of sales in case of builders &
The explanation to this section defines accountant for developers
the purpose of sec. 61 this definition of Accountant
• If the land cost deduction is more
would be made applicable to Sec 32(A) – newly
than turnover of sales, then negative
inserted discussed herein above in A.5.
turnover is reflected in return.
A.10 Company Secretary authorised to appear in • In this case ‘template’ is giving ‘error’
Sales Tax Proceedings during validation. To resolve this
Sec 82 of the MVAT Act is amended to include difficulty, the deduction on account of
Company Secretary as a person eligible to appear land cost should be claimed to the extent
before any authority in proceedings under MVAT of sales turnover, even if it is more.
Act. Consequential amendments are made in this • The deduction of balance land cost
section to include company secretary after the words should be claimed in subsequent
cost accountant. returns.
• Land cost deductions should be shown
A.11 Retrospective amendment to Entry relating to in Box no. 6(p) (line no 44) of Form 233.
milk VI] New FAQ on Developers available on website
Sch A -34(b) is substituted w.e.f 1st April 2005. The VII] List of beneficiaries against whom the FIR is
new entry reads as follows: filed.
2
1179
INDirect Taxes – Service Tax : Statute Update
CA. Rajkamal Shah & CA. Naresh Sheth
INDIRECT TAXES
Service Tax – Statute update
1. Due date for submission of ST-3 shamiana along with erection thereof and
return for 1st October, 2012 to other incidental activities do not amount to
transfer of right to use goods. It is a service
31st March, 2013 extended
of preparation of a place to hold a function
By an Order dtd. 23-4-2013, the CBEC has
or event. Effective possession and control
extended the due date of submission of ST-3
over the pandal or shamiana remains with
return for the period 1-10-2012 to 31-3-2013 as
the service provider even after the erection is
the return forms are expected to be available
complete and the specially made up space for
on ACES on 31-7-2013. The revised due date
temporary use is handed over to the customer.
for filing of these returns is 31-8-2013.
Accordingly, service provided by way of
(Order No. 3/2013 – ST dtd. 23-4-2013) pandal or shamiana would attract the levy of
service tax.
2. Due date for submission of (Circular No. 168/3/2013 – ST dtd. 15-4-2013)
ST-3 return for 1st July, 2012 to
31st September, 2012 extended 4. Applicability of service tax on
to 30-4-2013 Indian Railways deferred from
By an Order dtd. 12-4-2013, the CBEC has 1-7-2012 to 1-10-2012
extended the due date of submission of ST-3 The Finance Minister has moved the
return for the period 1-7-2012 to 31-9-2012 for amendment in the Finance Bill, 2013-
difficulties in filing the returns. The revised due 14 to the effect that no service tax would
date for filing of these returns is 30-4-2013. be levied or collected in respect of
(Order No. 2/2013 – ST dtd. 12-4-2013) taxable services provided by the Indian
Railways during the period prior to 1-10-
2012 either u/s. 66 as prevailed before
3. Tax on ser vice provided by 1-7-2012 or u/s. 66B as applicable thereafter.
way of erection of pandal or It is further clarified that no refund shall
shamiana be allowed in respect of service tax paid
The TRU has issued a circular clarifying on taxable services provided by the Indian
that the activity of providing pandal and Railways during the period prior to 1-10-2012.

:118
INDirect Taxes – Service Tax : Statute Update
In view of this amendment, all taxable services charged by service provider can also be paid
provided by Indian Railways including by debiting the scrip obtained. Further, the
transportation of passenger, transportation of exporter would be eligible to claim CENVAT
goods, catering would remain exempt up to credit / Duty Drawback of such service tax
30-9-2012. paid by debiting the scrips. It may be noted
that the abovementioned scripts are freely
The Finance Bill is passed by both the transferable. Thus the scheme is on the line of
houses of the Parliament with this solitary DEPB (Duty Entitlement Pass Book) scheme.
amendment so far as the service tax is
concerned. The detailed clarification on how the scheme
would work is not yet provided and the same
5. Issue of duty credit scrips for will be put up in the website of the Chamber,
once it is made available.
payment of ser vice tax on
services procured by exporters (Notification Nos. 6/2013, 7/2013, 8/2013 – ST all
under the Foreign Trade Policy, dtd. 18-4-2013).
2009-14 2
The Government has issued three notifications
against export of products listed in the Hand
Book of Procedures (Volume 1) to enable the
exporters to purchase the taxable services
from a provider of taxable service in the VALUATION
taxable territory subject to the terms and
conditions specified in the notifications. Of
The Chapter 3 of Foreign Trade Policy (‘FTP’)
ASSETS
provides for various measures to promote the BRANDS
export and realisation of foreign exchange. BUSINESS
FTP , inter alia, provides for Vishesh Krishi
And Gram UgyogYojana, Focus Product GOODWILL
Scheme and Focus Market Scheme (collectively TECHNICAL KNOWHOW
referred as ‘duty credit scrips’), which
enables exporters of specific products to Several prominent valuations carried out by us
claim prescribed percentage of duty credit
scrip with an intent to reduce the cost of the
product exported. Please Contact:
Earlier, the said duty credit scrips were
allowed to be utilised for payment of customs
`$£
duty / excise duty on import or domestic ANMOL SEKHRI CONSULTANTS P. LTD.
procurement of goods respectively (DEPB).
Email : corpassistance@yahoo.co.in
However, w.e.f. 18th April, 2013 (as per
amended para 3.17.5 (c) of the FTP) the above ansekhri@hotmail.com
referred duty scrips can also be utilised for Website : www.valuationsekhri.com
payment of service tax on services procured
by exporters. In simple words, service tax

1199
INDirect Taxes – Service Tax : Case Law Update
CA. Bharat Shemlani
INDIRECT TAXES
Service Tax – Case Law Update
1. Services provided to UDS holders including land

owner. It was not the case that flats
Accommodation Service were constructed and sold, and in that
1.1 Tirumala Tirupati Devsthanams vs. view, it was not construction service for
Supt. of CCEST, Tirupati 2013 (30) STR self.
27 (AP)
The High Court in this case held that, Guest • Residential complexes were not
houses provided to pilgrims by the appellant constructed for personal use of owners
constituted under AP Charitable and Hindu of land. It was predominantly for sale
Religious Institution and Endowment of individual buyers. In few cases,
Act, 1987 is liable to service tax under considering large percentage of total
Accommodation Service. constructed area handed over to land
owners, it was clear that, land owner
Construction Service had engaged developer for construction
of flats which flats could be sold by
1.2 LCS City Makers Pvt. Ltd. vs. CST, him.
Chennai 2013 (30) STR 33 (Tri.-Chennai)
In this case the land owner transferred • Construction of flats was composite
part of his right in land and in return got contract as specified in Article 366(29A)
construction flats and thereafter, land owner of Constitution of India. Value of
share of Undivided Share of land (UDS) of material and service can be separated
flats registered in his name. The Tribunal in and subjected to service tax by
this case held as under; providing abatement from total contract
value.
• After registration of his UDS, land
• Land owner transferring part of
owner was like any other prospective
his rights in land to developer, for
buyer for whom construction of
consideration in form of constructed
complex is carried out except that he
flats received later is a type of barter
has a guaranteed right to get his share
system, and therefore value indicated in
of number of flats. Land owner parted
agreement between developer and land
with his rights in land partially for
owner was not correct. Flats handed
consideration in form of constructed
over to land owner were not different
flats to be received later. Service was

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from those sold to individual buyers, to place of delivery of goods. The appellant
and could not be assessed at different contended that, they are responsible only
values for services in respect of both. for vehicle and no custodial rights or
responsibilities in matter of goods carried.
• Works Contract Service introduced
They have also not issued consignment note.
w.e.f. 1-6-2007, covers services which
The Tribunal held that, in terms of section
were liable to Service Tax under
65(50b) of FA, 1994, when consignment note
different categories, hence it cannot
is not issued by operator, operator cannot be
be interpreted as altogether new entry.
considered as GTA. Mere fact that, activity
It only provides a new method of
of transportation carried out by operator
determining liability on such service at
not to make appellant GTA and Log book
option of service provider.
maintained can be equivalent as consignment
note. The issue is already examined in G. S.
Commercial Training or Coaching Service Lamba & Sons 2011 (430) VVST (AP), though
1.3 Soni Classes vs. CCE, Jaipur-I 2013 (30) in context of State Sales Tax, however there is
STR 92 (Tri.-Del.) no need to take different view.
The appellant a proprietary firm provided
Commercial Training or Coaching Service Clearing & Forwarding Agent Service
and another proprietary firm sold study
1.6 Jaiprakash Strips Ltd. vs. UOI 2013 (30)
material etc., to students. The department
STR 139 (Bom.)
sought to include value of study materials,
The appellant in this case engaged in
test papers etc., sold to students by the other
procurement of orders and handling of goods
proprietary firm run from the same premises.
as per terms of contract. The credit note
The Tribunal held that, there is no material
issued disclosed that, the appellant directly
on record showing other proprietary firm is
dealt with goods in lifting, providing vehicles
independent firm and there is failure to show
and delivering. The Tribunal held that, it
purchase and resale of text books to students.
is not a simple case of placing orders and
Therefore, the value of study materials is to
earning commission and the service was liable
be included in value of taxable service and
to tax under Clearing and Forwarding Agent
liable to service tax.
Service.
Rent-a-Cab Service
Management or Business Consultants
1.4 CCE, Ludhiana vs. Singh Travels 2013 Service
(30) STR 96 (Tri.-Del.)
1.7 Bharti Televentures Ltd. vs. CCE,
The assessee in this case engaged in
Delhi-I 2013 (30) STR 148 (Tri.-Del.)
providing a cab-on-call and demand. The
The appellant in this case was engaged in
Tribunal held that, such kind of service is not
liaison work and the department sought to
included in rent-a-cab service.
tax them under Management or Business
Consultants Service. The Tribunal held that,
Goods Transport Agency Service every name of service indicating entry in
1.5 Birla Ready Mix vs. CCE, Noida 2013 Section 65(105)(r) of FA, 1994 meant to cover
(30) STR 99 (Tri.-Del.) only consultancy or advisory service and not
The department in this case demanded service all activities done by others for management.
tax on vehicles used for transporting ready Liaison work not in the nature of any
mix concrete from place of manufacturing consultancy or advice but temporary function

1219
required for company’s functioning. Liaison said Notification. The Tribunal held that,
work not to be considered as “Management exemption under Notification operationalised
or Business Consultancy service”. It is further through refund mechanism and unless
held that, inclusive portion of definition conditions specified satisfied, claim cannot
cannot restrict meaning of “Means” part of be entertained. Amendment made vide
definition, defining the general meaning. Notification No. 32/2008-ST prospective and
inapplicable to past refund claims.
Business Auxiliary Service
2.2 M. R. Coatings Pvt. Ltd. vs. CCE,
1.8 Sharwan Kumar vs. CCE, Chandigarh-I Rajkot 2013 (30) STR 76 (Tri.-Ahmd.)
2013 (30) STR 176 (Tri.-Del.) In this case the appellant paid service tax
The appellant in this case, engaged in the and interest before issuance of SCN, however
process of denting and painting on the bus department imposed penalty under section 76.
bodies claimed exemption under Notification The Tribunal held that discharge of service
No. 8/2005-ST on the ground that, the process tax liability and interest thereof and no
amounts to manufacture. The department adjudication for enhancement or addition to
denied the said exemption. The Tribunal held amount already discharged. In view thereof
that, processes carried out by the appellant is provisions of Section 73(3) of FA, 1994 are
essential for completion of manufacture and applicable and issuance of SCN was not
therefore there is no reason to held processes required. The Tribunal followed Karnataka
not manufacturing activity within Section High Court decision in Adecco Flexione Work
2(f) of CEA, 1944. Further, as per Note 6 Force Solutions Ltd. 2011-TIOL-635-HC-KAR-
of Section XVII of CET, processes essential ST.
for transforming semi-finished bus body
into complete and finished article, therefore
processes of manufacture. 2.3 Anand Decorators & Hirers vs. CST,
Ahmedabad 2013 (30) STR 86 (Tri.-
Further, with regard to coverage of shifting Ahmd.)
of goods within the factory premises under The appellant in this case mis-declared value
activities amounting to “Production or of service by collection of excess amount on
processing of goods for, or on behalf of the reverse side of Invoice and short payment of
client” specified in Business Auxiliary Service, tax. They have contended that, since SCN is
it is held that, ‘production’ not covering issued after two years of SCN no demand is
shifting of goods and expression ‘processing’ to be raised. The Tribunal held that, judicial
used in company of ‘production’ to cover decision require decision of Delhi High Court
activity of bringing about change in the in Bajaj Travels Ltd. 2012 (25) STR 417 (Del.)
goods and not expressions like shifting, to be followed and hence, penalties under
transportation, storage etc. sections 76 and 78 are sustainable. Since the
appellant is partnership firm facing stringent
2. Interest/Penalties/Others financial difficulties and almost 75% of tax
demand paid before issue of SCN, penalty is
2.1 Kalyani Hayes Lemmerz Ltd. vs. restricted to 100% of Service tax demanded.
CCE, Pune-III 2013 (30) STR 71 (Tri-
Mumbai) 3. Cenvat Credit
In this case, the appellant failed to file refund
claim under Notification No. 41/2007-ST 3.1 CCE, Ahmedabad-II vs. Cadila
quarter-wise as stipulated in para 2(c) of the Healthcare Ltd. 2013 (30) STR 3 (Guj.)

:122
The High Court in this case allowed Cenvat CCR, 2004 indicating ISD to be an office of
credit on following input services; manufacturer or provider of service provider.
Sales office undisputedly is appellant's office
• Technical Testing and Analysis service and appellant is service provider, therefore
availed by appellant engaged in there is no objection for treating premises as
manufacture of medicaments, for testing ISD premises. Hence, denial of credit taken
of clinical samples by various agencies based on credit distributed by ISD is not
prior to commencement of commercial irregular.
production.
• Technical Inspection and Certification 3.3 Wadpack Pvt. Ltd. vs. CCE, Bangalore
services availed in respect of 2013 (30) STR 51 (Tri.-Bang.)
instruments used for measuring size, The department in this case disallowed
temperature, weight, humidity. Cenvat credit of service tax paid on
Business Auxiliary Service constituting
• Repair/maintenance of copier commission paid to agents for sales
machine, air conditioner, water cooler, promotion of dutiable goods. The Tribunal
Management consultancy, Interior relying on Bombay High Court decision in
Decorator, Commercial or Industrial Ultratech Cement Ltd. 2010 (20) STR 577
Construction service. (Bom.) held that, where a particular activity
• Clearing and Forwarding Agents is expressed mentioned in the inclusion part
services used for storage of goods after of definition, one need not bother to examine
clearance from factory. whether it satisfied the ingredients of main
definition. Sales promotion is expressly
• Courier collecting parcel of goods from figures in inclusion part of definition of Input
factory for further transportation. service in Rule 2(l) of CCR, 2004.
The High Court has not allowed Cenvat
credit of service tax paid on commission 3.4 Handa Refrigeration vs. CCE, Gurgaon
paid to foreign agents as agents were directly 2013 (30) STR 111 (Tri.-Del.)
concerned with sales rather than sales The Tribunal in this case allowed Cenvat
promotion and services provided by them credit of service tax paid on purchase of PMP
was neither Business Auxiliary Service nor certificate and royalty paid for repair and
they were covered under the definition of maintenance service, both used for providing
input service. The said services were not Repair & Maintenance Service.
used directly or indirectly in or in relation to
manufacture of final products or clearance of 3.5 YGI Industries (India) P. Ltd. vs. CCE,
final products from place of removal. Mumbai-III 2013 (30) STR 146 (Tri.-
Mumbai)
3.2 CCE, Guntur vs. Varun Motors 2013 (30) The Tribunal in this case held that, once the
STR 31 (Tri.-Bang.) service tax has been paid on job charges for
The appellant, authorised distributor of grooving and the said service has been used
‘Bajaj Auto Ltd.’ distributed Cenvat credit in or in relation to the manufacture of the
from Sales Office to other authorized service final products of the appellant, the appellant
station. The Adjudicating Authority revoked is rightly entitled to avail Cenvat credit. It
ISD registration as sales office not to be is further held that, whether he was entitled
treated as service provider. The Tribunal held for exemption and was not required to pay
that, Input Service Distributor definition in duty at all should not be and cannot be a

1239
consideration for the Jurisdictional Officers 3.9 Castrol India Limited vs. CCE, Vapi
at the appellant’s end, who is only a service 2013 (30) STR 214 (Tri.-Ahmd.)
recipient. The Tribunal in this case inter alia held that,
demand for disallowance of Cenvat credit
3.6 Zydus Nycomed Healthcare Pvt. Ltd. vs. distributed by HO is required to be raised at
CCE, Belapur 2013 (30) STR 197 (Tri.- the end of ISD (HO) and not at the unit level.
Mumbai)
The Tribunal in this case allowed Cenvat 3.10 CCE, Vadodara vs. Schott Glass India
credit of service tax paid on travel and car Pvt. Ltd. 2013 (30) STR 219 (Tri.-Ahmd.)
service, catering service and construction The Tribunal in this case allowed Cenvat
service used for repair and maintenance of credit of service tax paid on Rent-a-cab
factory premises. service for transportation of employees from
city to factory in a village, about 40 kms away
3.7 Hindustan Zinc Ltd. vs. CC&CE, Jaipur- on the ground that, to get proper employees,
II 2013 (30) STR 199 (Tri.-Del.) it was necessary for the assessee to provide
The department denied Cenvat credit of transportation facility from nearest city and it
input services distributed by Head Office, was welfare measure, necessary to ensure that
which distributed credit of Service Tax manufacture took place properly.
paid thereon without registration as service 2
distributor. The Tribunal observed that,
identity of head office, service recipient
and provider as well as genuinety of
transaction not in doubt. It is held that,
denial of Cenvat credit only because
invoices had name of head office, defeated
object of avoiding cascading effect. Also this
was at initial stage of implementation of
law regarding distribution of credit, where
difficulties were being experienced because
of Registration and other technical procedures
involved.
3.8 Dagger Forst Tools Ltd. vs. CCE,

Mumbai-I 2013 (30) STR 206 (Tri.-
Mumbai)
The department in this case sought to deny
distribution of credit by ISD on the ground
that, the ISD is permitted to distribute taxes
paid on or after registration. The Tribunal
held that, there is no such kind of restriction
provided in the Rules and therefore denying
distribution of credit on such basis is
unwarranted.

:124
corporate laws – Company Law Update
Janak C. Pandya, Company Secretary
corporate laws
Company Law Update
Case Law No. 1 Upon hearing of Company as well as

[2013] 177 Comp Cas 230 (Karn.) – In the Karnataka Respondent, RD has issued an order directing
High Court – Surya Elevators and Escalators India the Company to change its name.
P. Ltd v. Union of India and Others.
During this period, the Respondent has also
initiated the suit in the civil court against the
Brief Facts Company for injunction alleging “passing off”.
This writ petition has been filed by Surya The said suit was dismissed by the court with
Elevators and Escalators India P. Ltd a reason that the customers of the Respondent
(“Company”) against the order of the Regional goods are not ordinary customer and cannot be
Director (“RD”). In the said order, RD has compared with the customer buying tobacco.
directed the Company under section 22(1)(ii)(b) They are well aware people.
of the Companies Act, 1956 (“Act”) for changing
its name within 3 (three) months from the date Company has argued that object of
of the said order. section 22 under the Act is to remove confusion
when names are similar and not to provide
The Company has been registered with the name adjudicatory form and when a civil suit has
Surya Elevators and Escalators India P. Ltd. with already considered the matter. It has also
the RoC, Bangalore. At the time of registration, provided the similarities of names of various
Surya Elevators P. Ltd. (“Respondent”) has companies registered with the RoC, including
issued a no-objection certificate in favour of company registered with the same name and
the Company. Based on the said no objection object in the State of Maharashtra. It has also
certificate, the Registrar of Company (“RoC”) has submitted the meaning of generic word “Surya”.
allowed the registration of the Company. It has been also submitted that RD also needs
The Respondent has initiated the proceedings to consider the order of the court. RD has given
under section 22(1)(i) of the Act before the RD undue importance of the Respondent argument
for directing the Company to change its name. that RoC has inadvertently approved the name.
In its arguments, Respondent has claimed that It is also submitted that even court has accepted
one of its director who is a close relative of that “Surya” is a generic name and there can be
the directors of the Company, has individually no monopoly on it.
issued the no-objection certificate. The said From the Respondent side, it has been
certificate was issued without any authority. submitted that, the Company has been started

1259
by the relatives of the former director of the resembles the name of an existing company.
Respondent. He has issued the no objection Court has also relied on the judgment of Calcutta
certificate and thus acted detrimental to the High Court in the case of Kalpana Polytec India
interest of the Respondent. It has been also Ltd. vs. Union of India [2001] 106 Comp Cas 558,
submitted that to protect the interest and that the Central Government has been authorised
intellectual property of the Respondent, said to rectify a mistake which might have been
director has been removed as a director by the committed by it by way of inadvertence or
shareholders under section 284 of the Act. otherwise. Court has further observed that it
can safely be concluded that RoC has registered
Respondent has also submitted that the the Company negligently or carelessly as it has
confusion of name is not negligible as not verified as to whether Respondent has really
combination of word used in name is exactly issued the “no objection certificate”. Court has
similar. It has also submitted the fraud played by also referred the case under sections 20 and 22
the former director and that proceeding before in ”Motari Overseas Ltd. vs. Montari Industries Ltd.
the court and before RD is not similar. In its ILR 1997 Delhi 64. Court has also noted that RD
submission, Respondent has also submitted the while passing the order under section 22 of the
minutes of earlier meeting, in which directors Act should not exercise jurisdiction of the civil
have noted that no other business in the name court relating to passing-off action.
of “Surya” will be carried out by the former
director and he has been allowed to continue Case Law No. 2 Court – [2013] 177 Comp Cas 261
with its sole proprietor in Andhra Pradesh in (Delhi) – India bulls Financial Services Ltd., in re
the name of Surya Elevators Services. It was India bulls Housing Finance Ltd., in re.
also noted that Respondent will develop brand
“Surya” and none of the promoters or their Sections 391 to 394 of the Act relating to
family members or their heirs will claim the said compromise, amalgamation and arrangement
brand. is a single window clearance and there is no
requirement to follow separate procedure if,
Judgments and reasoning scheme has also proposed any alteration in the
Court has dismissed the petition and has object clause or increase in share capital.
confirmed the RD’s order. Court has observed
that unilateral issuance of no objection Brief Facts
certificate by the former director was opposed The petitioner companies have filed the scheme
to the resolution passed by the Board of the of arrangement (“Scheme”) under section
Respondent. Court has made an observation that 391 of the Companies Act, 1956 (“Act”). The
fraud vitiates everything, even judgment and Scheme is for approval of Court between the
orders of the Court. Court has also analysed the companies and their respective shareholders and
definition of fraud in Black’s Legal Dictionary creditors.
which states that “fraud as an intentional
perversion of truth for the purpose of inducing The Court has allowed the petition of
another in reliance upon it to part some valuable amalgamating company to dispense with the
thing.” Court has also analysed the provisions calling meeting of equity shareholders and
of section 20 which talks about “companies not creditors. Court has directed the amalgamated
to be registered with undesirable names” and company to call the meeting of its equity
22 of the Act related to “Rectification of name shareholders as well as secured and unsecured
of company”. Court has concluded that above creditors. The said meetings were duly held and
provisions provides that no company shall be shareholders as well as creditors had approved
registered by a name which is identical or to the Scheme.

:126
As per the requirement under the Act, petitioner the Act for increase in authorised share
companies have sent the notice of petition and capital and change in object clause as well
Scheme as well as relevant documents to the as to file necessary forms.
Regional Director (‘RD”) as representative of
the Central Government and to the Official In reply, Petitioner companies have submitted
Liquidator (“OL”). that under section 392, company has a power to
compromise or arrangement which includes re-
OL has filed its report conferring that affairs of organisation of the share capital of the company
the amalgamating company do not appear to it has also submitted that change in object
have been conducted in a manner prejudicial to clause of the company is an integral part of
the interest of it members, creditors or to public the Scheme and same has been approved by
interest. the equity shareholders. It is also submitted
that upon approval of the Scheme, order of
In its report, RD has stated as follows: the court will be filed with the Registrar of
Companies (“RoC”) and the same shall be
a. Upon sanction of the Scheme, all treated as intimation to the RoC for change in
employees of the amalgamating company Memorandum of Association. On the reliance
shall become the employees of the placed in precedent, several judgments of this
amalgamated company. court have been quoted for the above process.
With regards to compliance of RBI and stock
b. That amalgamated company has to comply exchanges requirements, petitioner companies
with the conditions raised by the Bombay have stated that same will be complied with on
Stock Exchange and National Stock applicability of the provisions of Competition
Exchange. Act, 2002, it is submitted that Scheme is for
merger of wholly owned subsidiary and thus
c. That transferor company has to comply same is not applicable.
with all the rules and regulations as
applicable to NBFC companies and RBI,
being a regulator. Judgments and reasoning
Court has sanctioned the Scheme with the
d. That amalgamated company, being a reasoning that sanction under sections 391 to
housing finance company needs to comply 394 is a single window clearance and there
with rules and regulations of National is no requirement of following the separate
Housing Bank. procedure. Thus, court has also noted that the
RD’s objection on requirement of following
e. That, petitioners have to give undertaking separate procedure under the Act for alteration
as to necessary compliance of the in the share capital and the alteration of the
provisions of the Competition Act, 2002. memorandum of association are without any
merit. Court has also taken note of several
f. That petitioner companies needs to comply judgments as to the above.
with the requirement and process under
2

1279
other laws – FEMA Update
CA. Mayur Nayak, CA. Natwar Thakrar &

CA. Pankaj Bhuta
other laws
FEMA Update
In this article, we have discussed recent changes The Credit Agreement under the LOC is effective
in FEMA through RBI circulars and key changes from February 28, 2013 and the date of execution
in Consolidated FDI Policy dated April 5, 2013. of Agreement is August 23, 2012.
[A.P. (DIR Series) Circular No. 93 dated 1st April,
A. RBI CIRCULARS 2013]
1. Exim Bank's Line of Credit of 4. Foreign investment in India by

USD 42 million to the Government of SEBI registered FIIs in Government
the Republic of Cameroon Securities and Corporate Debt
The Credit Agreement under the LOC is effective • Hitherto, the limits as stated in A.P.(DIR
from March 8, 2013 and the date of execution of Series) Circular No. 80 dated January 24,
Agreement is September 14, 2012. 2013 for investments by FII and Long
[A.P. (DIR Series) Circular No. 91 dated 1st April, Term Investors in Government securities
2013] are USD 25 billion including sub-limit of
USD 10 billion for Government securities
and USD 15 billion for Government dated
2. Exim Bank's Line of Credit of securities respectively and for Corporate
USD 5 million to Banco Exterior De debt are USD 51 billion including sub-
Cuba limit of USD 25 billion each for the bonds
The Credit Agreement under the LOC is effective of the infrastructure sector and non–
from February 28, 2013 and the date of execution infrastructure sector and USD 1 billion
of Agreement is October 10, 2012. for QFIs in non-infrastructure sector
(including mutual fund debt schemes).
[A.P. (DIR Series) Circular No. 92 dated 1st April,
• RBI has now decided to merge existing
2013]
debt limits into 2 broad categories:
3. Exim Bank's Line of Credit of (A) Government Debt Limit

USD 15 million to the Government of The sub-limit of USD 10 billion for investment in
the Republic of Benin Government securities including Treasury Bills

:128
and the sub-limit of USD 15 billion for investment in Government dated securities has been merged
within the overall limit of USD 25 billion for investment in Government securities.
(B) Corporate Debt

The sub-limit of USD 1 billion for QFIs, sub-limit of USD 25 billion for investment in non-
infrastructure sector and the sub-limit of USD 25 billion for investment in infrastructure sector has
been merged within the overall limit of USD 51 billion required for investment in Corporate Debt.
• A summary of revised position is given below:
Instrument/s Limit Eligible Investor Remarks

Government securities USD 25 billion FIIs, QFIs and long-terms Eligible Investors
including Treasury investors registered with may invest in
Bills SEBI – Sovereign Wealth Treasury Bills only
Funds (SWFs), Multilateral up to USD 5.5
Agencies, Pension/ billion within the
Insurance/ Endowment limit of USD 25
Funds, Foreign Central billion.
Banks.
Eligible instruments USD 51 billion FIIs, QFIs, long-terms Eligible Investors
as referred to in investors registered with may invest in
Schedule 5 of SEBI - SWFs, Multilateral Commercial Papers
Notification No. Agencies, Pension/ only up to USD 3.5
FEMA 20 /2000-RB Insurance/ Endowment billion within the
dated 3rd May, 2000. Funds, Foreign Central limit of USD 51
Banks. billion.
• The Non-Resident Indians which are not the Special Currency Basket was indicated as
subject to any limit for investment in ` 75.570411 effective from October 25, 2012.
Government Securities as well as corporate
debt will continue to be regulated as per Upon further revision, RBI has fixed the
extant guidelines. Rupee value of the Special Currency
Basket at ` 73.141761 with effect from March 18,
[A.P. (DIR Series) Circular No. 94 dated 1st April, 2013.
2013]
(The confusions due to various sub- [(A.P. (DIR Series) Circular No. 95 dated 4th April,
categorisations within the overall limits for 2013]
investments in government securities and
corporate debt is sought to be removed through 6. Memorandum of Instructions
this simplification with an eye to reduce the governing Money Changing Activities
current account deficit.) RBI has now allowed Authorised Money
Changers (AMCs) to sell Indian Rupees to
5. Deferred Payment Protocols foreign tourists/visitors against international
between Government of India and credit cards/international debit cards and
erstwhile USSR advised them to take prompt steps to obtain
In terms of A.P. (DIR Series) Circular No. 53 reimbursement through normal banking
dated November 20, 2012, the Rupee value of channels.

1299
All the other instructions contained in A.P.(DIR 9. Investment by Navratna Public

Series) Circular No. 57 [A.P.(FL/RL Series) Sector Undertakings (PSUs), OVL and
Circular No.4] dated March 9, 2009 as amended
OIL in unincorporated entities in oil
from time to time shall remain unchanged.
sector abroad
[A.P. (DIR Series) Circular No. 96 dated 5th April,
At present Navratna Public Sector Undertakings
2013]
(PSUs), ONGC Videsh Ltd. (OVL) and Oil
(This move by RBI will benefit the foreign India Ltd. (OIL) are allowed to invest in
tourists/visitors to a great extent.) overseas unincorporated entities in oil sector
(for exploration and drilling for oil and natural
7. Exim Bank's Line of Credit of gas, etc.), which are duly approved by the
USD 76.50 million to the Government Government of India, without any limits under
of the Republic of Malawi the automatic route.
The Credit Agreement under the LOC is effective RBI has now further allowed Navratna Public
from March 13, 2013 and the date of execution of Sector Undertakings (PSUs), ONGC Videsh
Agreement is December 13, 2012. Ltd. (OVL) and Oil India Ltd. (OIL) to invest
[A.P. (DIR Series) Circular No. 97 dated 9th April, in overseas incorporated JV/WOS in oil sector
2013] (for exploration and drilling for oil and natural
gas, etc.), which are duly approved by the
8. Trade credits for Import into Government of India, without any limits under
India – Review of all-in-cost ceiling the automatic route.
RBI has decided that all-in-cost ceiling as [A.P. (DIR Series) Circular No. 99 dated 23rd April,
specified under paragraph 4 of A.P. (DIR Series) 2013]
Circular No. 28 dated September 11, 2012 will
(This is a welcome move by RBI which will provide
continue to be applicable till June 30, 2013
flexibility to these entities to participate in equity
subject to further review. The all in cost ceiling
of SPVs abroad. This will afford these entities to be
has been continued as under:
more aggressive as their risk exposure can be limited
Maturity period All-in-cost ceilings to their equity participation in the SPVs)
over 6 months LIBOR*
Up to one year 10. Overseas Direct Investments –
More than one year
Clarification
350 basis points The RBI has observed that eligible Indian parties
and up to three years
are using ODI automatic route to set up certain
More than three years structures facilitating trading in currencies,
and up to five years securities and commodities. RBI further noticed
* for the respective currency of credit or that such structures having equity participation
applicable benchmark of Indian parties have also started offering
financial products linked to Indian Rupee
All other aspects of Trade Credit Policy will (e.g. non-deliverable trades involving foreign
remain unchanged. currency, rupee exchange rates, stock indices
[A.P. (DIR Series) Circular No. 98 dated 9th April, linked to Indian market, etc.).
2013]
(In line with continuing credit scenario in financial RBI has clarified that any overseas entity having
markets, RBI has extended the continuation of the equity participation directly / indirectly shall
overall ceiling for trade credits.) not offer such products without the specific
approval of the Reserve Bank of India given that

:130
currently Indian Rupee is not fully convertible 2. Credit of dividend payments on

and such products could have implications for QFI investments in single non-interest
the exchange rate management of the country.
bearing Rupee account [Para 3.1.7.3
Any incidence of such product facilitation would page 15]
be treated as a contravention of the extant FEMA Under the previous Consolidated FDI Policy,
regulations and would consequently attract dividends were required to be directly credited
action under the relevant provisions of FEMA, to the single rupee pool bank account if not
1999. directly remitted to designated overseas bank
accounts of the QFIs.
[A.P. (DIR Series) Circular No. 100 dated 25th
April, 2013] New Consolidated FDI Policy has allowed
QFIs to receive their dividend payments on
(RBI appears to be of the view that overseas
equity shares to be credited directly to their
structures by Indian entities which are
designated overseas bank accounts or single non-
facilitating trading in currencies, securities
interest bearing rupee account. There is no more
and commodities (including derivate financial
requirement for opening and maintenance of a
products linked to Indian Rupee) are indirectly
single rupee pool bank account.
affecting convertibility of the Indian currency
and hence put investments in entities (The Consolidated FDI Policy through ‘DIPP
undertaking such activities under the approval Circular 1 of 2013’ has incorporated RBI directions
route) issued through A.P. (Dir Series) Circular No. 7 dated
17th July, 2012.)
B. CHANGES IN CONSOLIDATED
FDI POLICY THROUGH DIPP 3. FDI in Limited Liability
CIRCULAR No. 1 OF 2013 Partnerships [Para 3.2.5 Page 16]
The significant changes introduced in FDI in LLP is permitted under Government
Consolidated FDI Policy through ‘DIPP Circular Route subject to various conditions. One of the
1 of 2013’ dated 5th April, 2013 (sixth edition of conditions which stipulated that Foreign Capital
the Consolidated FDI Policy) are as follows: participation in LLPs will be allowed only by
way of cash consideration, received by inward
remittance, through normal banking channels or
1. ‘Who can invest in India’ by debit to NRE/FCNR account of the person
redefined [Para 3.1.1 Page 13] concerned, maintained with an authorised
Hitherto, a citizen of Pakistan or an entity dealer/authorised bank has been done away
incorporated in Pakistan were not allowed within the new Consolidated FDI Policy
to invest in India even under the approval where company with FDI gets converted into
route. The amendment brought by FDI Policy an LLP.
allows citizens and entities incorporated in
Pakistan to invest in India under the approval (Under Third/Fourth Schedule of the Limited Liability
i.e. Government Route except defence, space and Partnership Act, 2008, it is a pre condition in case
atomic energy and other prohibited sectors. of conversion of a company to LLP that the partners
of LLP should comprise all share holders of the
(The Consolidated FDI Policy through ‘DIPP predecessor company and no one else and therefore,
Circular 1 of 2013’ has incorporated Press Note the condition prescribing introduction of fresh capital
3 (2012) issued on 1-8-2012 by DIPP and also was unnecessary and hence modified accordingly in
directions issued by RBI through A.P. (Dir Series) the new Consolidated FDI Policy.)
Circular No. 16 dated 22nd August, 2012.)

1319
4. Non-Residents (including NRIs) downstream investment into another Indian

allowed to subscribe shares at Face company would be in accordance/ compliance
with the relevant sectoral conditions on entry
Value [Para 3.4.2 Page 20]
route, conditionalities and caps, with regard to
The current pricing guidelines for issue of shares
the sectors in which the latter Indian company
by unlisted companies provide that issue of
is operating.
shares by such companies to persons resident
outside India shall not be at a price less than the Now, a note is added to this para specifying
fair value of shares arrived as per the Discounted that downstream investment made by a banking
Free Cash Flow method. Now relaxation has company which is owned and/or controlled
been provided for issue of shares to those non- by a non-resident under Corporate Debt
resident investors who are investing in an Restructuring (CDR) or other loan restructuring
Indian company by way of subscription to its mechanism, or in trading of books, or for
Memorandum of Association in compliance with acquisition of shares due to defaults in loan
the provisions of the Companies Act, 1956 to will not be considered towards indirect foreign
issue shares at face value. investment. However, strategic downstream
investment will count towards indirect foreign
(The amendment brings parity between Consolidated
investment. For this purpose, ‘strategic
FDI Policy and FEMA Notification No. 20 issued by
downstream investments’ means investment by
RBI where pricing guidelines were amended by RBI
these banking companies in their subsidiaries,
via A.P. DIR Circular No. 36 dated 26th September,
joint venture and associates.
2012)
(The Consolidated FDI Policy through ‘DIPP
5. Conversion of ECB/Lump sum Circular 1 of 2013’ has incorporated Press Note 2
(2012) dated 31-7-2012)
fees/Royalty, etc. to Equity [Para 3.4.6
Page 25] 7. Prohibited Sectors – Exclusion of
In case of import of capital goods/ machinery/
equipment (excluding second-hand machinery), Retail Trading [Para 6.1 Page 39]
issue of equity shares under the FDI policy is Retail trading is now excluded from the list of
allowed under the Government route subject prohibited sectors under FDI.
to some conditions. However, condition which (The Consolidated FDI Policy through ‘DIPP
required an independent valuation of the capital Circular 1 of 2013’ has incorporated Press Note 5
goods/machinery/equipment (excluding second- (2012) dated 20-9-2012)
hand machinery) to be done by a third party
entity, preferably by an independent valuer from
the country of import along with production 8. Foreign Investment Limits in
of copies of documents /certificates issued by companies engaged in Broadcasting
the customs authorities towards the assessment Carriage Services [Para 6.2.7.1 Page
of the fair value of such imports, etc is 48]
removed. FDI limits in companies engaged in providing
Broadcasting Carriage Services under the
6. Downstream Investment by an automatic/Government route have been
Indian company which is not owned reviewed and the same would be subject to the
and/or controlled by resident entity terms and conditions stipulated in Press Note
[Para 3.10.4.1 Page 32] No. 7 (2012 series) dated 20th September, 2012.
An Indian company which is not owned and/ FDI limit for service relating to Direct to Home
or controlled by resident entity/ies making a (DTH) is now increased to 74%.

:132
Mandatory requirement regarding Key Condition (f) has been inserted to stipulate that
Executives of the Company specify that security retail trading by means of e-commerce is not
clearance of the personnel will be necessary. permissible for companies with FDI.
(The Consolidated FDI Policy through ‘DIPP
9. FDI in Air Transport Services Circular 1 of 2013’ has incorporated Press Note
[Para 6.2.9.3.1 Page 56] 4(2012) dated 20-9-2012 and also the directions
Foreign airlines are allowed to participate in the issued by RBI through A.P. (Dir Series) Circular No.
equity of companies operating cargo airlines, 32 dated 21st September, 2012.)
helicopter and seaplane services. The limits and
entry routes for the same are mentioned in Press 11. FDI in Multi Brand Retail Trading
Note No. 6 (2012 Series).
[Para 6.2.16.5 Page 69]
Foreign airlines are now also allowed to invest, At present Foreign Direct Investment (FDI) is
in the capital of the Indian companies operating prohibited in retail trading, except in single-
scheduled and non-scheduled air transport brand product retail trading, in which FDI, up to
services up to the limit of 49% of their paid-up 100%, is permitted, under the Government route,
capital under Government Approval Route. The subject to specified conditions.
conditions for such investments are mentioned
With a view to liberalsed retail trading, the
in Press Note No. 6 (2012 Series).
Government of India has now permitted FDI
to invest up to 51% under the Government
10. FDI in Single Brand Product Route, in Multi Brand Retail Trading, subject to
Retail Trading [Para 6.2.16.4 Page 68] specified conditions.
The New FDI Policy Circular has amended (The Consolidated FDI Policy through ‘DIPP
condition 2 (d) to provide that for FDI in Single Circular 1 of 2013’ has incorporated Press Note 5
brand retailing for a specific brand, only one (2012) issued on 20-9-2012 by DIPP and also the
foreign investor whether owner of the brand or directions issued by RBI through A.P. (Dir Series)
otherwise shall be permitted to undertake single Circular No. 32 dated 21st September, 2012.)
brand product retailing in India. The same shall
be done through a legally tenable agreement.
The onus for ensuring the compliance of this 12. Changes in FDI Policy in Asset
condition lies with the Indian entity. At the time Reconstruction Companies [Para
of seeking approval, the investing entity shall 6.2.17.1 Page 72]
provide evidence to this compliance including At present, Foreign Direct Investment (FDI) is
a copy of licensing/franchise/ sub-license permitted in Asset Reconstruction Companies
agreement. (ARC) up to 49% under the Government route.
Condition (e) has been amended to provide The Government of India has increased the
that proposals involving FDI beyond 51% will overall limit to 74% of paid-up capital in ARCs
require sourcing of 30% of the goods purchased and also permitted FII along with FDI to invest
preferably from MSMEs. The procurement in the same through Government route and 2
requirement is required to be complied within new conditions as mentioned below have been
the first instance from the beginning of 1st April inserted:-
of the year during which the first tranche of FDI • No sponsor may hold more than 50% of
is received as an average of five years total value the shareholding in an ARC either by
of the goods purchased. way of FDI or by routing it through an FII
controlled by the single sponsor.

1339
• The total shareholding of an individual FII the country. Considering that enabling provisions are
shall not exceed 10% of the total paid-up not enacted by CCI till date, FIPB is mandated under
capital. the consolidated FDI Policy to prescribe appropriate
conditions while granting approvals.)
(The above changes were announced by the Ministry
of Finance vide Press Release dated 21st December
2012 for which corresponding Press Note was not 15. FDI in Power Exchanges [Para
issued by DIPP. The same is now incorporated in the 6.2.19 Page 79]
Consolidated FDI Policy) The Government of India has now permitted
FDI and FII to invest up to 49% in Power
13. Liberalisation in setting up Exchanges registered under the Central
Electricity Regulatory Commission (Power
subsidiaries by Non-Banking Financial Market) Regulations, 2010 under Government
Companies (NBFCs) [Para 6.2.17.8 route for FDI and under Automatic route for FII
Page 77] subject to specified conditions.
At present only 100% foreign owned NBFCs
with a minimum capital of US $ 50 million were (The Consolidated FDI Policy through ‘DIPP
allowed to set up subsidiaries for specific NBFC Circular 1 of 2013’ has incorporated Press Note
activities. 8 (2012) issued on 20-9-2012 by DIPP and also
directions by the RBI through A.P. (Dir Series)
Now the Government of India has relaxed the Circular No. 32 dated 21st September, 2012.)
condition and allowed more than 75% and up
to 100% foreign owned NBFCs to form the 16. Changes in Form FC GPR [Annex
subsidiaries for specific NBFC activities.
1 Pages 87 to 93]
(The Consolidated FDI Policy through ‘DIPP Every company, making allotment to any foreign
Circular 1 of 2013’ has incorporated Press Note investor, is required to report to Reserve Bank
9 (2012) issued on 3-10-2012 by DIPP and also of India (RBI) in Form FC GPR along with a
directions issued by RBI through A.P. (Dir Series) declaration within 30 days from the date of
Circular No. 41 dated 10th October, 2012.) allotment.
The Consolidated FDI Policy through ‘DIPP
14. Changes in FDI policy in Circular 1 of 2013’ has removed following two
Pharmaceuticals Sector [Para 6.2.18 declarations:-
Page 79] • Foreign entity/entities—(other than
At present, FDI up to 100% is allowed for individuals), to whom we have issued
brownfield investments in the pharmaceuticals shares do not have any existing joint
sector under the Government approval route. venture or technology transfer or trade
Consolidated FDI Policy has now further stated mark agreement in India in the same field.
that appropriate conditions for FDI may be For the purpose of the ‘same’ field, 4 digit
incorporated at the time of granting approval. NIC 1987 Code would be relevant.
(Press Note 3 of 2011 had placed FDI for brownfield • We are not an Industrial Undertaking
investments under Government Route mandating manufacturing items reserved for small
FIPB to review and approve proposals for an interim sector.
period of six months and providing that thereafter OR
the requisite oversight will be done by the CCI We are an Industrial Undertaking
entirely in accordance with the competition laws of manufacturing items reserved for small

:134
sector and the investment limit of 24% vide A.P. (Dir Series) Circular No. 133 dated 20th
of paid-up capital has been observed/ June, 2012.
requisite approvals have been obtained.
Further, it has added the following declaration:-
Further, it has added the following declaration:-
• The foreign investment received and
• The foreign investment received and reported now will be utilised in
reported now will be utilised in compliance with the provision of a
compliance with the provision of a Prevention of Money Laundering Act,
Prevention of Money Laundering Act 2002 (PMLA) and Unlawful Activities
2002 (PMLA) and Unlawful Activities (Prevention) Act, 1967 (UAPA). We
(Prevention) Act, 1967 (UAPA). We confirm that the investment complies with
confirm that the investment complies with the provisions of all applicable Rules and
the provisions of all applicable Rules and Regulations.
Regulations.
18. Changes in Form FC-TRS [Annex
17. Changes in Annual Return Form 8 Pages 111 to 115]
on Foreign Assets and Liabilities KYC requirements have been introduced in
[Annex 7 Pages 103 to 110] respect of non-resident investor whereby
The Consolidated FDI Policy through ‘DIPP additional declaration for information in the
Circular 1 of 2013’ has incorporated new format KYC form has to be provided along with Form
for the Annual Return on FLA introduced by RBI FC-TRS.
2
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1359
best of the rest
Ajay Singh & Suchitra Kamble, Advocates
BEST OF THE REST
1. Dishonour of cheque – Repeated as unpaid. The third condition is that the

presentation/dishonour of cheque drawer of such a cheque should have failed to
make payment of the said amount of money to
– Multiple causes of action/Cause
the payee or as the case may be, to the holder
of action arises afresh each time – in due course of the cheque within fifteen
Prosecution based upon second or days of the receipt of the said notice. It is only
successive Dishonour of cheque is upon the satisfaction of all the three conditions
permissible: Negotiable Instruments mentioned above and enumerated under the
proviso to section 138 as clauses (a), (b) and (c)
Act, 1881 – Ss. 138 proviso and 142
thereof that an offence under section 138 can
(b) be said to have been committed by the person
Neither section 138 nor section 142 or any issuing the cheque. The expression “cause of
other provision contained in the Act forbids action” has been universally understood to
the holder or payee of the cheque from mean the bundle of facts which the plaintiff
presenting the cheque for encashment on any must prove in order to entitle him to succeed
number of occasions within a period of six in the suit.
months of its issue or within the period of its
validity, whichever is earlier. The proviso to There is nothing either in section 138 or section
section 138 stipulates three distinct conditions 142 of the Act to curtail the said right of the
precedent which must be satisfied before payee, leave alone a forfeiture of the said right
the dishonour of a cheque can constitute an for no better reason than the failure of the
offence and become punishable. The first holder of the cheque to institute prosecution
condition is that the cheque ought to have against the drawer when the cause of action
been presented to the bank within a period to do so had first arisen. Simply because
of six months from the date on which it is the prosecution for an offence under section
drawn or within the period of its validity, 138, must, on the language of section 142
whichever is earlier. The second condition is be instituted within one month from the
that the payee or the holder in due course of date of the failure of the drawer to make the
the cheque, as the case may be, ought to make payment does not militate against the accrual
a demand for the payment of the said amount of multiple causes of action to the holder of
of money by giving a notice in writing, to the the cheque upon failure of the drawer to make
drawer of the cheque, the return of the cheque the payment of the cheque amount. In the

:136
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absence of any principle on which such failure must, in terms of the decision in Sadanandan
to prosecute on the basis of the first default Bhadran, (1998) 6 SCC 514, result in filing
in payment should be result in forfeiture, of prosecution, avoidable litigation would
it cannot be held that the payee would lose become an inevitable bane of the legislation
his right to institute such proceedings on a that was intended only to bring solemnity to
subsequent default that satisfies all the three cheques without forcing the parties to resort to
requirements of section 138. proceedings in the courts of law. While there is
no empirical data to suggest that the problems
There is nothing in the proviso to section of overburdened Magistracy and judicial
138 or section 142 for that matter, to oblige system at the district level is entirely because
the holder/payee of a dishonoured cheque of compulsions arising out of the decisions in
to necessarily file a complaint even when Sadanandan case, it is difficult to say that the
he has acquired an indefeasible right to do law declared in that decision has not added to
so. The fact that an offence is complete need court congestion.
not necessarily lead to launch of prosecution
especially when the offence is not a cognisable Hence Sadanandan case (supra), erroneously
one. It follows that the complainant may, even held that the second or subsequent dishonour
when he has the immediate right to institute of the cheque would not entitle the holder/
criminal proceedings against the drawer of payee to issue a statutory notice to the
the cheque, either at the request of the holder/ drawer nor would it entitle him to institute
payee of the cheque or on his own volition, legal proceedings against the drawer in the
refrain from instituting the proceedings based event he fails to arrange the payment. It was
on the cause of action that has accrued to him. erroneously held therein that while a cheque
Such a decision to defer prosecution may be is presented afresh the right to prosecute
induced by several considerations but the the drawer, if the cheque is dishonoured, is
holder of the cheque that given sometime, forfeited only because the previous dishonour
the payment covered by the cheques would had not resulted in immediate prosecution of
be arranged, in the process rendering a the offender even when a notice under clause
time-consuming and generally expensive (b) of the proviso to section 138 had been
legal recourse unnecessary. It may also be served upon the drawer. Hence Sadanandan
induced by a belief that a fresh presentation case (supra) is overruled.
of the cheque may result in encashment for a
variety of reasons including the vicissitudes MSR Leathers vs. S. Palaniappan & Anr. (2013)
of trade and business dealings where financial 1 SCC 177
accommodation given by the parties to each
other is not an unknown phenomenon.
There is no reason why the parties should by 2. Contract – Stipulated damages
process of interpretation, be forced to launch - Penalty clauses and earnest money
complaints where they can or may like to defer deposits – Forfeiture of money
such action for good and valid reasons. After paid as part-payment of purchase
all, neither the courts nor the parties stand price and not as earnest money
to gain by institution of proceedings which
may become unnecessary if cheque amount – Impermissibility – Transfer of
is paid by the drawer. The Magistracy in this Property Act, 1882, S. 55 – Contract
country is overburdened by an avalanche Act, 1872, S. 74
of cases under section 138 of the Negotiable The question arose before the Supreme Court
Instruments Act. If the first default itself was whether the seller is entitled to forfeit

1379
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the earnest money deposit where sale of an is paid or given at the time when the contract
immovable property falls through by reason of is entered into and, as a pledge for its due
the fault or failure of the purchaser? performance by the depositor to be forfeited
in case of non-performance by the depositor.
An agreement for sale of property was There can be converse situation also that if
entered into between appellant (seller) and the seller fails to perform the contract the
the respondent (purchaser) for a consideration purchaser can also get double the amount,
to be paid within particular date and towards if it is so stipulated in the contract. It is also
earnest money with certain period, altogether the law that part-payment of purchase price
was paid being 10% of total sale consideration. cannot be forfeited unless it is a guarantee
The purchaser however could not pay the for the due performance of the contract. In
balance amount within the stipulated period other words, if the payment is made only
the sale could not be executed. The seller, towards part-payment of consideration and not
therefore, did not return the earnest money to intended as earnest money then the forfeiture
the purchaser. Consequently, the purchaser, clause will not apply.
as plaintiff, instituted suit for recovery from
the defendant seller of the earnest money The Supreme Court further held that the
paid by him. The defendant contested the suit forfeiture clause in the present case was
stating that as per the agreement, he is entitled included in the contract at the moment
to forfeit the amount of earnest money, if at which the contract was entered into. It
there was a failure on the part of the plaintiff represents the guarantee that the contract
purchaser in paying the balance amount. The would be fulfilled. In other words, “earnest”
trial court dismissed the suit holding that the is given to bind the contract, which is a part
defendant is entitled to retain the amount of of the purchase price when the transaction
earnest money since the plaintiff had failed to is carried out and it will be forfeited when
pay the balance amount before the stipulated the transaction falls through by reason of
date. Aggrieved by the judgment, the plaintiff the default or failure of the purchaser. There
took up the matter in appeal before the High is no other clause that militates against the
Court. The High Court placing reliance on the clauses extracted in the agreement. Therefore,
judgment of the Supreme Court in Fateh Chand the seller was justified in forfeiting the
va. Balkishan Dass AIR 1963 SC 1405 took the amount as per the relevant clause, since the
view that the seller is entitled to forfeit only earnest money was primarily a security for
a nominal amount and not the entire amount. the due performance of the agreement and
The High Court further held that the seller consequently, the seller is entitled to forfeit
can forfeit an amount out of the main amount the entire deposit. Consequently, the appeal
and he is bound to refund the balance amount is allowed.
to the purchaser. To this extent, a decree was
also passed in favour of the purchaser against Satish Batra vs. Sudhir Rawal (2013) 1 SCC 345
the seller. It was also held that the purchaser is
3. Right to Privacy vis-a-vis
also entitled to interest @12% per annum from
the date of payment of earnest money till the
Right to Information.– Personal
amount is paid. information seeking information
The Supreme Court held that to justify the mostly found place in R-3’s income
forfeiture of advance money being part of tax returns – Held, such information
“earnest money” the terms of the contract constituted personal information and
should be clear and explicit. Earnest money
is exempted from disclosure under

:138
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S. 8(1)(j) - Right to Information Act, matter was taken up by way of the Letters
2005 – S. 8(1)(j) Patent Appeal before the Division Bench and
In the present case the question arose as the same was dismissed. Against the said
to whether the Central Information order the Special Leave Petition was filed
Commissioner acting under the Right to before the Supreme Court.
Information Act, 2005 was right in denying The Supreme Court held that the performance
information regarding the third Respondent’s of an employee/officer in an organisation
personal matters pertaining to his service is primarily a matter between the employee
career and also denying the details of his and the employer and normally those aspects
assets and liabilities, movable and immovable are governed by the service rules which fall
properties on the ground that the information under the expression “personal information”,
sought for was qualified to be personal the disclosure of which has no relationship
information as defined in clause (j) of section to any public activity or public interest and
8(1) of the RTI Act. on the other hand, the disclosure of which
The petitioner submitted an application before would cause unwarranted invasion of privacy
the Regional Provident Fund Commissioner of that individual. The details disclosed by
(Ministry of Labour, Government of India) person in his income tax returns are “personal
calling for various details relating to the information” which stand exempted from
third respondent, who was employed as an disclosure under clause (j) of section 8(1)
Enforcement Officer in the Sub-Regional of the RTI Act. Of course, in a given case,
Office, Akola, now working in the State of if the Central Public Information Officer or
Madhya Pradesh. As many as 15 queries the State Public Information Officer or the
were made to which the Regional Provident Appellate Authority is satisfied that the larger
Fund Commissioner, Nagpur gave the reply. public interest justifies the disclosure of such
Aggrieved by the said order, the Petitioner information, appropriate orders could be
approached the CIC. The CIC passed the order passed but the petitioner cannot claim those
and held that the information which has been details as a matter of right. The details called
denied to the Petitioner essentially falls in for by the Petitioner i.e. copies of all memos
two parts – (i) relating to the personal matters issued to the third respondent, show cause
pertaining to his service career; and (ii) his notices and orders of censure/punishment,
assets and liabilities, movable and immovable etc. are qualified to be personal information
properties and other financial aspects. And as defined in clause (j) of section 8(1) of the
this information qualifies to be the ‘personal RTI Act. The petitioner in the instant case
information’ as defined in clause (j) of section has not made out a bona fide public interest
8(1) of the RTI Act and the appellant has in seeking information; the disclosure of
not been able to convince the Commission such information would cause unwarranted
that disclosure thereof is in larger public invasion of privacy of the individual under
interest. The CIC, after holding so directed the section 8(1)(j) of the RTI Act. Therefore, of the
second respondent to disclose the information view that the petitioner has not succeeded in
at particular paras to the petitioner within establishing that the information sought for is
certain period and information sought for with for the larger public interest. That being the
regard to the other queries did not qualify for fact, the petition was dismissed
disclosure. Girish Ramchandra Deshpande vs. Central
Aggrieved by the said order, the petitioner Information Commissioner & Ors. (2013) 1 SCC
filed writ petition which was dismissed. The 212.

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4. Complaint of dishonour of the appellants and respondent No. 3 herein

cheque – Need not necessarily be filed an application in the court of Session
for Greater Bombay which was dismissed
signed by complainant – Negotiable
by Sessions Judge as not maintainable. By
Instruments Act, 1881, S. 138 order the Metropolitan Magistrate dismissed
The appeal before the Supreme Court was the complaint and acquitted the accused
filed against the judgment passed by the persons. Challenging the acquittal of the
High Court whereby the Division Bench accused persons, Respondent No. 1 herein-
held that the complaint under section 138 the complainant filed appeal before the High
of the Negotiable Instruments Act, 1881 Court, Single Judge. The learned Single Judge
without signature is maintainable when by order referred two points for consideration
such complaint was subsequently verified by by the larger Bench viz., (1) In the matter of
the complainant. The appellants accused in complaint for the offence punishable under
Criminal Complaint for the offence punishable section 138 of the Act whether the complaint
under section 138 read with sections 141 and without the signature of the complainant, in
142 of the Act. Respondent No. 3 i.e. company spite of verification of complaint, is “non-
which has alleged to have issued cheques entia” and whether no prosecution can lie on
to Respondent No. 1. The Respondent No. such complaint?; and (2) If answer to point
1 is the complainant and the manufacturers No. 1 is negative then whether it is a mere
of Partially Oriented Yarn and other textile irregularity and it can be cured subsequently
goods. From time to time, Respondent No. 3 and whether such subsequent amendment
used to place orders for the supply of POY would relate back to the date of filing of the
to respondent No. 1 and had issued cheques complaint or whether it would hit by the Law
for the payment of the same. The aforesaid of Limitation.
cheques were deposited by the complainant
and were returned by the Bank with the By the impugned common judgment the
remark “exceeds arrangement”. Pursuant to Division Bench of the High Court, disposed
the same Respondent No. 1 issued a notice to of the matter by answering Point No. 1 in the
the appellants and demanded the aforesaid affirmative holding that the complaint under
amount for which they replied that they section 138 of the Act is maintainable and
have not received any statement of accounts when such complaint is subsequently verified
maintained by the complainant regarding the by the complainant and the process is issued
transactions with the accused. In addition to by the Magistrate after verification, it cannot
the same, Respondent No. 3 made various be said that the said complaint is “non-entia”
claims for the rate of difference, discounts and the prosecution of such complaint is
etc., in respect of the transactions, however, maintainable. Further, it was held that since
Respondent No. 1 filed complaint under the answer to Point No. 1 was in affirmative,
section 138 read with sections 141 and 142 of it was not necessary to decide Point No. 2
the Negotiable Instruments Act, Metropolitan and directed to place the appeals for deciding
Magistrate recorded the verification the same on merits. Aggrieved by the said
statement and issued summons against the decision, the appellants have filed the Special
appellants and Respondent No. 3 herein. The Leave Petition before the Supreme Court.
appellants preferred an application before
The Supreme Court held that the complaint of
the Metropolitan Magistrate for recalling
dishonour of cheque need not necessarily be
the process issued against them. By order,
signed by complainant. The only requirement
the Metropolitan Magistrate dismissed the
that S. 142 provides is that the complaint must
said application. Challenging the said order,

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necessarily be in writing and the complaint too draws a distinction between writing and
can be presented by the payee or holder in signature and defines them separately. If the
due course of the cheque. The definition of legislature intended that the complaint under
complaint as stated in section 2(d) of Criminal the Act, apart from being in writing, is also
Procedure Code provides that the same required to be signed by the complainant, the
needs to be in oral or in writing. The non legislature would have used different language
obstante clause in section 142(a) is restricted and inserted the same at the appropriate place.
to exclude two things only from the Code
i.e. (a) exclusion of oral complaints and (b) The Supreme Court further held that as per
exclusion of congnisance on complaint by various provisions of the Act and the Code,
anybody other than the payee or the holder the complaint under section 138 of the act
in due course. None of the other provisions of without signature is maintainable when such
the Criminal Procedure Code are excluded by complaint is verified by the complainant and
the said non obstante clause. The Magistrate the process is issued by the Magistrate after
is therefore required to follow the procedure due verification. The prosecution of such
under section 200 of the Criminal Procedure complaint is maintainable and the Supreme
Code once he has taken the complaint of Court agrees with the conclusion arrived at
the payee/holder in due course and record by the Division Bench of the High Court. The
statement of the complainant and such other appeal was dismissed.
witnesses as present at the said date. Here, Indra Kumar Patodia & Anr. vs. Reliance
the Code specifically provides that the same Industries Ltd. & Ors. AIR 2013 Supreme Court
is required to be signed by the complainant as 426
well as the witnesses making the statement.
Mere presentation of the complaint is only the
first step and no action can be taken unless 5. Probate of Will – In probate
the process of verification is complete. The proceedings, question of title to
Magistrate thereafter has to consider the proper ty cannot be gone into –
statement on oath, that is, the verification Only issue in probate proceedings
statement under section 200 and the statement is genuineness and due execution of
of any witness, and then decide whether
there is sufficient ground to the accused for Will – Succession Act, 1925, S. 276
non-signing the complaint as the statement This appeal was under section 299 of the
made on oath and signed by the complainant Indian Succession Act, 1925 is directed against
safeguards the interest of the accused. Apart the judgment passed by the District Council
from the above writing does not presuppose Court in Probate Misc. Case rejecting the
that the same should be signed. This becomes application filed by the appellant for probate
clear when S. 2 (d) of Criminal Procedure of the Will executed by the appellant’s father.
Code is contrasted with provisions such as The appellant filed an application seeking
Ss. 61, 70, 154, 164, 281 of Code. A perusal probate of a Will executed by her father, in
of these sections show that the legislature the District Council Court, Shillong, which
has made it clear that where it required a contending that by the said Will her father
written document to be signed, it should be bequeathed the property belonging to him
mentioned specifically in the section itself, in her favour, in presence of the witnesses
which is missing both from section 2(d) of and when he was in the disposition state of
Criminal Procedure Code as well as section mind. The said proceedings was contested by
142 of Act. Even General Clauses Act, 1897 the petitioner by fraud and misrepresentation
ML-581 The Chamber's Journal May 2013 ML

1419
best of the rest
of facts. It has also been pleaded that the seeking probate of a Will executed by a
testator did not have any right whatsoever to Khasi and Jaintia under the provisions of
execute the Will as the property sought to be 1984 Act, who is to follow the procedure as
bequeathed is an ancestral property of Rymbai laid down in Part-IX of the 1925 Act in the
clan of Satisohpen descended from the Late Ka proceedings initiated before him for probate
Bei Rymbai and not the self acquired property of the Will executed under the 1984 Act. The
of the testator and as such he does not have District Council Court, therefore, is a probate
the right to bequeath the property by means Court. Thought the probate of a Will is a
of a Will. It has also been contended that late civil proceedings, in contemplation of law it
H. C. Rymbai, the father of the appellant who is solely an inquiry as to the validity of a
was merely managing and looking after the certain paper writing whether it is or is not
property on behalf of the Rymbai clan being the last Will and testament of the deceased
the surviving elder uncle, has converted the and the judgment or the decree in such case
patta in his name fraudulently without the passed by the probate is either that it is or is
consent of Rymbai clan, thereby, converting not such a Will. The probate proceeding thus
the ancestral property as his own, which is is a proceeding to establish the validity of the
absolutely illegal and against the Khasi custom Will and not a regular suit, and its inquiry
of inheritance. is limited to the question as to whether the
document to be forwarded as the last Will and
The appellant in support of her claim for grant testament of the deceased person was duly
of the probate while examined six witnesses executed and attested in accordance with law
including herself and proved a number of and whether at the time of such execution
documents including the Will the respondents the testator had sound disposing mind. The
examined three witnesses including the question whether a particular bequest is
Respondent No. 1 herself and also proved a good or bad is not within the purview of
number of documents. The District Council the probate Court. In view of the aforesaid
Court thought answered the issue No. 3 in discussion, the judgment by the Probate Court
favour of the appellant by holding that the is set aside. The probate of the Will and the
valid execution of the Will could be proved testament is granted. The High Court kept
by the Appellant, answered the issue Nos. 7 open to the parties to approach appropriate
and 8 against the appellant by holding that Civil Court having jurisdiction over the matter
the property bequeathed by the father of the for declaration of right, title and interest
appellant being not his self acquired property over the land in question, where the probate
but the ancestral property of Rymbai clan would be admitted into evidence by the Civil
of Satisohpen, the appellants is not entitled Court to decide the suit for title. Grant of
to probate of the Will. The issue Nos. 9 and probate, however, cannot be decisive for
10 were also decided against the appellant. declaration that the suit property was the self-
Consequently, the learned Judge has rejected acquired property of the testator. The appeal
the application seeking probate of the Will. was allowed by the High Court.
Hence, the appeal before High Court.
Ka Riverretta Diengodoh vs. Ka Trially Sara
The High Court held that the District Council Rymbai AIR 2013 Guwahati 24
Court, is competent to entertain an application
2

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economy & finance
CA. Rajaram Ajgaonkar
economy and finance
TIME TO TAKE RISKS

The month of April bought a fair amount of target in two years. However, surprisingly in the
positivity to the world. Though the fear of default by recent months, prices have dropped in the country;
Cypress and other European economies receded, the which is creating a concern for the economists and
issues were not fully addressed. As the European the Bank of Japan, the central bank of that country.
countries took a positive attitude and tried whole If the rate of inflation becomes negative, there is
heartedly to diffuse the crisis, there was some relief. a risk of the growth slowing down. Japan will try
There is hardly any improvement in the European to stick to its inflation target for maintaining the
economies, but avoidance of a default, at least for growth tempo. The problem of Japan is diagonally
the time being, has given a sentimental boost to the opposite to that of India, wherein the Reserve
region. It is expected that things may not worsen Bank of India (RBI) is trying to reduce inflation to
in Europe, though they might not get corrected stimulate economic growth. Both the economies
easily. The possible improvement in the economies are different and both the countries are standing
in other parts of the world may help the European at different stages of economic development.
economies and improve their growth rates in the Therefore, their problems as well as solutions are
near future. Many countries in the region have different. Things are expected to improve in Japan
taken austerity drives seriously and that may create and that will help the global economy to overcome
a positive impact in the years to come. Europe may the menace of slow growth.
expect better days ahead.
The US economy has continued its positive
Japan has been the dark horse for the month of momentum by growing at 2.5% for the first quarter
April. Its currency continued to depreciate against of 2013. Though the expectations were higher of 3%,
most of the major currencies of the world thereby the rate achieved is still not bad. The US is likely
making its exports more viable in the global to continue its upward march and soon should
markets. The economic forecast of the country be able to grow at 3% and above. This largest
has improved and a positive growth rate of 1.6% economy in the world constitutes about 22% of
is expected to be achieved for 2013, which may the global economy and a good growth therein
further improve in the subsequent years. The can create wonders for the overall growth of the
Japanese economy is likely to come out of its long world economy and especially for the developing
slumber and it being the 3rd largest economy countries. The sentiment in US has been fluctuating
constituting about 8% of the global economy, any on the back of mixed news. Every piece of news is
improvement therein will make a good impact on getting factored into sentiment, which is making the
the overall growth rate of the world. For sustaining stock markets volatile. In today’s world of readily
the improvement, Japan has planned a 2% inflation available excessive information, this volatility is

1439
economy & finance
inevitable. The world will have to live with this growth. But for political instability, which can
problem and it is better to live with it than to live crop up any time, the Indian economy seems to
with uncertainty. be on the track of recovery. The positive sentiment
which is just being sniffed by the Government and
If the US economy improves further, the immediate the economists has not yet been recognised by the
beneficiaries are going to be China and the Asia Indian investors and consumers to that extent. But
Pacific countries. Substantial goods are sourced by it may only be a question of time before they start
the US from China and it in turn mainly sources feeling the spring and come out of their shells.
the raw material requirements from the Asia Pacific
countries and Australia. The increased demand The global stock markets have given a reasonably
and the improved sentiment in the US will be a good performance in the month of April. The
positive development for the Asian economies stocks markets in the US and Japan are around
and consequently growth can improve. China has their highest levels. As these countries have very
already started doing better in the last few months low interest rates, the yield on deposits therein is
and there is no reason for that country to lose very meagre. Therefore, on the back of positive
momentum. The overall developments, which are sentiment, more funds have flown to the stock
currently taking place in the world, are positive for markets, which have led them to the current high
better growth in the months to come. levels. The current inflation rate in these countries
is low and it will continue to remain so for at
On the back of improved sentiments in the world, least some more time. This will give rise to better
the sentiment in the Indian economy seems to have opportunities for the investors to make money in
taken a positive turn in the month of April. Though those stock markets. If the sentiment remains the
nothing much has changed in terms of introduction same, the party may continue till the rates of interest
of reforms and increase in foreign direct investment, starts hardening again. Unless some negative event
the outlook has improved with better expectations. of wide global repercussion happens, the sentiment
The fear of political instability has receded to is likely to remain strong and the global stock
an extent and that has added to the positivity. markets will continue to grow. Falling commodity
Since the last few months, the Government has prices and falling cost of energy will add fuel to
been advocating that the worst is over for the the growth and so to the positive movement of the
economy but the statistical data was apparently stock markets in those countries. However, investors
not supporting this claim. Now it seems that more need to be careful while investing in the stocks of
and more people have started believing that the multinational companies, which are headquartered
Indian economy has turned the corner and things in these countries. Though some of these companies
are likely to be better in the months to come. As will make profit in their home countries, their
per the latest report, inflation seems to have come financials can get affected due to slow growth or
under better control and has made the people as losses in their operations in some other part of the
well as the Government happy. The lower inflation world. Opportunities do exist and risks are a bit less.
will give the policy makers some room to reduce
the Repo and Reverse Repo rates and probably to The Indian stock market continues its upward
cut Cash Reserve Ratio (CRR). This reduction will journey. In fact, in spite of expectations of a difficult
pave way for the banks to reduce the interest rates. last quarter of F.Y. 2012-13, the stock prices have
High interest rate is one of the major hurdles for the improved. The results declared by technology
Indian businesses to improve their performance for companies, private banks and many other large
the last numbers of quarters. Reduction in interest companies are better than expected. Reducing prices
rates will increase their profitability, which can of commodities and raw materials are contributing
give them more investable surplus. Lower interest to the profitability. That has given a ray of hope to
rates will increase the viability of new projects and the Government as well as to the investors. Lots of
improve the profitability of the existing projects. results are yet to be declared and therefore it would
In effect, it can improve the production of goods not be appropriate to conclude that the quarter will
and services thereby leading to higher economic be reasonably positive for the Indian corporates,

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economy & finance
but at least the initial fears seem to have subsided. Gold continues to take a beating in the global
The current rise in the stock prices is more restricted markets and consequently in the Indian markets.
to the large cap and blue chip companies and it This most sought after precious metal, which was
is substantially aided by the increased inflow of the darling of the investors over the last decade
foreign funds in the Indian equity markets. The has taken a big hit and it is not likely to reverse
participation of domestic investors and especially the losses in the immediate future. In fact, as per
the retail investors seems to be limited. Therefore, the opinion of many experts, it may have a further
the rise is mainly restricted to shares of A group and downside of 10-15% over the next six months. Gold
large cap B group companies as categorised in stock has already tumbled by around 20% from its recent
markets. The mid caps and small caps have not peak and the tumble has been sudden, which has
adequately participated in the gains. There is also a hurt investors across the globe. However, the woes
fear that these companies are highly leveraged and of gold have not come to an end and its prices
the interest outflows will mar their profitability. may suffer further, at least in the short run. As the
When the interest rates start reducing, it will only global economy has started improving, the need
be a question of time for these companies to start for holding gold for safety has reduced. Therefore,
gaining momentum. Stocks of many small and mid gold is likely to lose its weightage in the portfolio
cap companies are available at reasonable prices of many savvy investors, resulting in pressure on
as the fancy of investors in those counters has its price. Lots of investors have invested in the
vanished. However, if the global economy continues ETF of gold. Those investors are likely to book
to improve, the investors will return to those profit or get out of the investment fearing further
stocks thereby giving handsome gains to the smart depreciation. The likely sale by Cypress of a part of
investors who invest in them now. It is very difficult its gold reserves to repay debts may also increase
to find a multi bagger blue chip stock over a horizon the supply of gold in the global markets. There
of 2-3 years, but such stocks can be identified mostly may also be pressure on many other European
in mid cap and small cap segments. Smart investors economies to sell gold. All these possibilities can
should start searching for such pearls in today’s add to the supply of the precious metal bringing
market. down its price and making investment therein
lackluster. Silver generally moves in tandem with
Reduction of inflation in the Indian economy has gold, though it has substantial industrial use. The
improved the possibility of easing of bank rates jerk in the price of gold has also disturbed the
in the near future. It is very likely that the interest equilibrium of silver price and the commodity has
rates will ease sooner than later. The Government dropped substantially. The downside may not be
is already lobbying with the RBI for such reduction over yet and so the investors need to be cautious.
and that should bear fruits. As soon as the easing At the current exchange rate of the Indian Rupee
happens, the interest rates on deposits will start against the US Dollar, investment in gold can be
falling. Though the banks may not reduce the considered only at around ` 22,000/- for 10 grams
lending rate in a proportionate fashion and try and investment in silver can be considered at a rate
to retain more profits for themselves, over a few below ` 38,000/- per kg.
months, the reduction will become inevitable for
them due to the economic as well as regulatory The overall investment sentiment remains positive
pressures. Therefore, investments in deposits for in the world and India is no exception. There are
long tenure are advised. Investment in quoted enough indications that the positivity can continue
bonds as well as debt oriented mutual fund for months or even years to come. Therefore,
schemes and sovereign bond fund schemes may investors can afford to be more adventurous in
turn out to be prudent as they will log some capital their approach and their allocation to riskier asset
appreciation in a few months, which will add to classes, which can give better results in good times.
their net yield. This horizon of opportunity may not The smart and savvy risk takers may be rewarded
last long and the investors need to take decisions in the near future.
quickly.
2

1459
your questions and our answers
V. H. Patil, Advocate
your questions &

our answers
Facts & Query the possession of the property was delayed. As such
Q.1 Mr. A invested in a residential house property as booking of the flat was in time and substantial
under construction in April 2010 by making initial booking payment of consideration for purchase was in
payment of ` 2 lakhs. He sold his existing residential time, the querist will be entitled to the benefit of
property in May 2011 and earned a long term capital gain investment under S. 54 of the Act.
of ` 20 lakhs. Out of this sale proceeds he invested ` 18 Q.3 Mr. A had invested in fixed deposit worth ` 10 lakhs
lakhs in August 2011 towards full & final payment for the for 5 yrs. in April 2003 for which he had not accounted for
new house property which he had booked in April 2010. Is in his books and accrued interest was not offered while filing
Mr. A eligible for exemption u/s. 54 for whole Long term income tax returns. On maturity he again renewed it for
capital gain of ` 20 lakhs? further 2 years along with interest in April 2008. In April
Ans. If the sale and the purchase are within the time 2010 he deposited whole maturity proceeds in his accounted
limits, when, the residential premises sold and when bank account and offered interest for only 2 years as interest
a new premises is purchased is immaterial, and when income under “Other sources Income” head and rest
purchase payment is made in advance or otherwise amount was shown as addition to capital. In scrutiny case
is immaterial. As such in the case of the querist it is can Assessing Officer make addition of whole proceeds as
entitled to the benefit of investment under S.54 of the undisclosed income? Or Mr. A can argue for non addition
Act. of fixed deposit amount till April 2008 on the basis of copy of
Q.2 Mr. A sold his residential property in May 2011 FD receipt which shows the date of investments in the Asst.
and earned a long term capital gain of ` 20 lakhs. Out year prior to previous 6 Asst. years?
of this sale proceeds he invested ` 10 lakhs in July 2011 Ans. S. 149 of the I.T. Act, 1961, provides for time
towards initial booking amount in an under construction limit for issuance of notice for assessment of escaped
house property and the balance amount he deposited in income under the provisions of S. 147 of the Act.
capital gain account. In Jan., 2013 he paid a further sum of S. 149. (1) No notice under section 148 shall be issued
` 10 lakhs towards this new property and he was supposed for the relevant assessment year,—
to get its possession by April 2013 but due to some legal
issues of builder the construction of the building was (a) if four years have elapsed from the end of the
stayed and could get complete only in April 2014 and Mr. relevant assessment year, unless the case falls
A got the possession in April 2013 after making balance under clause (b) [or clause (c)];
payments. Is Mr. A eligible for exemption u/s. 54 for whole (b) if four years, but not more than six years,
long term capital gain of ` 20 lakhs? have elapsed from the end of the relevant
Ans. In the case for no fault of the querist, the assessment year unless the income chargeable
completion of the construction and handing over to tax which has escaped assessment amounts

:146
your questions and our answers
to or is likely to amount to one lakh rupees or from a debt. For a loan there must be a lender, a
more for that year;] borrower, a thing loaned. A loan contracted no
As we see from the above provision, the time limit doubt creates a debt but there may be a debt without
for reassessment of income of the escaped income contracting a loan – Lakhmichand Muchhal vs. CIT ( 43
is 6 years, that is assessment of escaped income can ITR 315); Bombay Steam Navigation Co. Pvt. Ltd. vs. CIT
be for 6 years and one cannot make an assessment - 56 ITR 52(SC); CIT vs. Saurashtra Cement & Chemical
beyond 6 years. Industries Ltd. – 101 ITR 502 (Guj.).
Now in case of the querist, the deposit was made in Now the amount in question must be by way of loan
the year in 2003 as such, ITO cannot assess the said or by way of advance.
deposit in the year 2010 or later on. Even the interest In our case it was neither by way of loan or by
due on such deposit will be for 6 years and which way of advance. Out of necessity the contract for
was due before that, cannot assess as escaped income. purchasing the house property was transferred from
Q.4 A Private Limited company invested ` 10 lakhs the company to share holder and the amount already
in an under construction commercial property. But after paid by the company to the builder was paid to the
6 months builder changed the policy and informed that it company by the concerned share holder within 3
cannot transact with corporate and only individuals can months from the date of the such transfer. As such
continue. Private limited company by passing a resolution the same does not amount to loan or advance and
transferred the rights to one of its directors who was also a as such the provisions of s. 2(22)(e) are not applicable
share holder carrying more than 10% of voting rights. Will and the said payment does not constitute deemed
it amount to deemed dividend in the hands of that director dividend in the hands of the said share holder or in
if he repays the investment amount to company after 3 the hands of the queirst company.
months of this transfer?
Q.5 A company pays a fixed amount of
Ans. The relevant provisions for our purpose is ` 10,000/- per month as conveyance allowance to its few
s. 2(22)(e) which is as under: employees who are on outdoor assignments in addition
S. 2(22)(e) any payment by a company, not being to their fixed salary package. It is basically towards
a company in which the public are substantially reimbursement of conveyance expenses incurred by those
interested, of any sum (whether as representing a employees who travel for business purposes. It is irrelevant
part of the assets of the company or otherwise) [made whether they utilise entire ` 10,000/- or less or more than
after the 31st day of May, 1987, by way of advance it. Whether company can claim it as a conveyance expense
or loan to a share holder, being a person who is the or it needs to be added in salary / perquisites package of the
beneficial owner of shares (not being shares entitled employee & TDS to be deducted on it accordingly?
to a fixed rate of dividend whether with or without
Ans. The issue of T.D.S. arises, if a particular
a right to participate in profits) holding not less than
amount is paid to the employee by the employer
ten per cent of the voting power, or to any concern
by way of salary or by way of perquisite, which is
in which such share holder is a member or a partner
taxable as income from salary in the hands of the said
and in which he has a substantial interest (hereafter
employee.
in this clause referred to as the said concern)] or any
payment by any such company on behalf, or for the In our case a travelling allowance is paid to meet the
individual benefit, of any such share holder, to the travelling expenses which the employee has to incur,
extent to which the company in either case possesses in course of the employment wherein he has to travel
accumulated profits ; to various places for the purpose of the company
A loan means “a lending, delivery by one party to employer. Such payment is on estimated expenditure
and receipt by another party of sum of money upon which he has to incur and as such the same does not
agreement, express or implied, to repay it with or constitute income, still less as salary income and as
without interest”. (Isaacson vs. House 216, Ga 698; 119 such no issue of T.D.S. arises.
SE 2D, 113, 116). A loan is something quite different 2

1479
the chamber news
Hitesh R. Shah & Paras Savla, Hon. Jt. Secretaries
the chamber news
Through this column, we communicate with you about, and keep you abreast with, the events
and the happenings that take place at the CTC. The events that have taken place after the previous
issue of the Income Tax Review from 16th April till 8th May, 2013 and also some of the important
future events which are as under –
I Admission of New Members

With the efforts of office of the chamber under guidance of Membership & EOP Committee,
the Chamber could make following new members in the Managing Council meeting held on
26th April, 2013.
Life Membership
1 Shri Daris Daniel Advocate Thane
2 Shri Hakani Rahul Kirit Advocate Mumbai
3 Shri Patil Kalpesh Magan Ca Jalgaon
4 Shri Shah Shreyas Niranjan Ca Mumbai
5 Shri Shah Pathik Bharat Ca Mumbai
6 Shri Luthia Rajiv Jaichand Ca Mumbai
7 Shri Mehta Kunal Mahesh Ca Mumbai
8 Shri Shenoy Radhakrishna Ca Thane
9 Shri Aiyer Ananthasivan Gopalakrishnan Ca Mumbai
10 Shri Patel Vispi Temurasp Ca Mumbai
11 Shri Phatarphekar Karishma Rohan Ca Mumbai
12 Shri Shah Sanjay Nathalal Ca Mumbai
13 Shri Ramanand Balasubramanian Ca New Delhi
14 Shri Panchal Bharat Bhogilal (Tran. Ord. to Life) Itp Mumbai
15 Shri Shah Hiten Sanmukhlal Ca Mumbai
16 Shri Kothari Nilesh Motilal Ca Mumbai
17 Shri Mehta Mitesh Manoharlal Ca Mumbai

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the chamber news
Ordinary Membership
1 Mrs. Suba Minal Rasesh Ca Mumbai
2 Shri Shah Kalapi Chetan Ca Ahmedabad
3 Mrs. Nankani Suchita Ramesh Ca Hardwar
4 Ms. Japee Foram Bharat Ca Mumbai
5 Shri Chheda Dhiren Nagji Ca Mumbai
6 Shri Banwat Siddharth Lalit Ca Mumbai
7 Shri Bahua Ramnik Bhanji Ca Mumbai
8 Shri Shah Hemal Kishore Ca Thane
9 Shri Mohan Manish Ca Delhi
10 Shri Gandhi Jitendra Birdichand Ca Jalgaon
11 Shri Bhat Ganesh Krishna Ca Mumbai
12 Shri Gang Abhishek Virendra Singh Ca Indore
13 Shri Sagade Jayani Sharad Advocate Mumbai
14 Dr. Basu Paritosh Chandra Ca Mumbai
15 Shri Saiya Nilesh Kalyanji Ca Mumbai
16 Shri Chapekar Prashant Prafulla Itp Mumbai
17 Shri Parmar Pramod Ramesh Ca Mumbai
18 Shri Surathi Kalpesh Jaiprakash Ca Mumbai
19 Shri Bagasrawala Shabbir Sirajuddin Ca Mumbai
20 Shri Thacker Prashant Jagdish Ca Mumbai
21 Shri Chawla Jayesh Naresh Ca Mumbai
22 Shri Newatia Vivek Bal Kishan Ca Kolkata
23 Shri Naredi Pradeep Sitaram Ca Pune
24 Shri Ganatra Gaurang K. Ca Thane
25 Shri Kulkarni Nagesh Narayan Itp Kolhapur
26 Shri Shetty Dinesh Sadu Ca Mumbai
27 Shri Kasar Mallappa Basappa Ca Mumbai
28 Shri Pandya Prakash Karunashankar Icsi Mumbai
29 Shri Shet Jagdish Dattatraya Ca Mumbai
30 Shri Sutaria Ajit Prabhudas Ca Mumbai
31 Shri Upadhyaya Rakesh Purshottamdas Ca Mumbai
32 Shri Thakkar Tushar Vishanji Ca Mumbai

1499
the chamber news
33 Ms. Walanj Sanjyoti Pralhad Ca Mumbai

34 Shri Shah Ashok Mansukhlal Ca Mumbai
35 Ms. Kanetkar Vinita Suresh Ca Mumbai
36 Shri Chheda Jayesh Ramniklal Ca Mumbai
37 Shri Kumar Sarwan Prakash Chand Ca Bengaluru
38 Shri Ahemad Furquan Ateeque Ahmed Ca Mumbai
39 Shri Gandhi Ketan Pankaj Ca Mumbai
40 Shri Renuka Vishnuprasad Ramlal Ca Mumbai
41 Ms. Mittal Divya Archit Ca Delhi
42 Ms. Parmar Roshni Sahdevkumar Advocate Valsad
43 Mrs. Desai Shruti Mitesh Advocate Valsad
44 Shri Otwani Ravi Ramesh Itp Thane
45 Shri Thakkar Rajesh Popatlal Ca Mumbai
46 Shri Jain Chatarlal Nanalal Ca Mumbai
47 Shri Vithlani Hitendra Arunbhai Ca Mumbai
48 Shri Taggerse Vivekanand Datta Advocate Mumbai
49 Mrs. Bhuta Kinjal Vishal Ca Mumbai
50 Shri Chulani Kausthub Jackie Ca Mumbai
51 Shri Mulgaokar Sachin Prasan Ca Mumbai
52 Shri Raichura Sitansh Purshottam Ca Mumbai
53 Shri Singh Ram Anugrah Ram Bahal Ca Mumbai
54 Shri Chakraborty Suman Satyendranath Ca Mumbai
55 Shri Sharma Anil Dindayal Ca Mumbai
56 Shri Kumar Vaidyanath Balan Ca Mumbai
57 Shri Sabharwal Manuj Vinodkumar Ca Delhi
Student Membership
1 Mrs. Modi Pankti Vishal B.com.
II. Past Events

1 ALLIED LAWS COMMITTEE
The Study Circle Meeting was held on 16th April, 2013 on the Subject “FEMA provisions in
respect to Inbound and Outbound Investments in Real Estate”. The meeting was addressed
by Shri D.T. Khilanani.

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the chamber news
2 DIRECT TAXES COMMITTEE

The Intensive Study Group Meeting was held on 18th April, 2013 on the subject
“Recent Important Decisions under Direct Taxes”. The meeting was addressed by CA.
Jagdish Punjabi.
3. INTERNATIONAL TAXATION COMMITTEE

a. The Intensive Study Group on International Taxation meeting was held on 30th April,
2013 on the subject “Treaty Entitlement – Specific Issues”. The Meeting was lead by
CA Ganesh Rajagopalan and CA Rutvik Sanghvi.
4. RRC & PR COMMITTEE, Membership & EOP Committe and Journal

Committee
The Chamber launched its e-Journal & Revamped Website on Friday, 19th April, 2013, on
the auspicious day of Ramnavmi. The RRC and PR Committee jointly with the Membership
and EOP Committee & Journal Committee organised a Musical Orchestra Show “Surila
Safar….Chamber ke Sang” at the Mysore Auditorium at King's Circle, Matunga for the CTC
members, their family and friends. The songs rendered by the Orchestra “Madhu Melodies”
(Mr. Madhusudan Vyas) were very much enjoyed by the audience. The programme received
a great response. It was attended by 161 members and their families.
The e-Journal and the revamped Website was inaugurated by the President Mr. Manoj Shah,
while the Vice President, Mr. Yatin Desai explained various features of the newly revamped
website and e-journal.
5. STUDY CIRCLE & STUDY GROUP COMMITTEE

a. The Study Group Meeting was held on 22nd April, 2013 on the Subject “Recent
Decision under Direct Taxes”. The meeting was led by Shri Keshav Bhujle, Advocate.
b. The Study Circle Meeting was held on 25th April, 2013 on the Subject “Rectification,
Refund and Tax credits in relation to e-filing of Tax Returns”. The meeting was led
by CA Mahendra Sanghvi.
III. Future Events

1. Direct Taxes Committee
WORKSHOP ON TAX DEDUCTED AT SOURCE:
The “Workshop on TDS” will be held on 15th June, 2013 at M. C. Ghia Hall. The Workshop
will be addressed by eminent faculties.
2. INTERNATIONAL TAXATION COMMITTEE

a. Publication on INTERNATIONAL TAXATION – A Compendium
The Committee has come out with a publication of 4 volume set on “International
Taxation – A Compendium”. The Special Pre-Publication price for 4 volumes set for
member is ` 3500/-.

1519
the chamber news
b. The 7th Residential Conference on International Taxation-2013 will be held on

20th June to 23rd June, 2013 at The Golden Palms Hotel & Spa, Bengaluru. The
conference will be addressed by eminent faculties in the field of International
Taxation.
c. Intensive Study Group on International Taxation – Membership
CTC’s Intensive Study Group on International Taxation has been making in-depth
study of various fundamental concepts, controversial provisions and practical issues
related to International Taxation for the past few years. Recent studies included Indian
Anti-avoidance decisions, GAAR, Royalties, Article-wise Study of OECD Model,
important OECD Reports, Section 9, etc. The study is done by analysis of a specific
topic by the group as a whole, led by a couple of group leaders. The idea is to have a
self-study and to learn from debate, discussion and deliberation.
The focus of the Intensive Study Group is on advanced concepts of International
Taxation. We will be planning more meetings in the near future on relevant day-to-day
practice issues and fundamental topics of interest. Some of the topics for discussion
that being planned to include are: Treaty Entitlement, Inbound & Outbound Tax
Structuring; Royalty, FTS, etc.
We request you to take part of this unique in-depth study on International Taxation.
Members can join the study group by making a payment of ` 1,124 for the period
April, 2013 to March, 2014 at the Chamber’s office.
3. JOURNAL COMMITTEE
The Committee has planned to bring special story “Recent Controversies in Income-Tax
Assessments” in the forthcoming issue for the month of June, 2013.
4. MEMBERSHIP & EOP COMMITTEE

Stock exchanges are essential part of today’s financial market. Hence, it has become essential
to be aware about the activities of stock exchange, its role in today’s market and do’s &
don’ts of share market, with a view to help the students the half day Students workshop is
organised on 24th May, 2013 at National Stock Exchange, BKC.
5. STUDY CIRCLE & STUDY GROUP COMMITTEE

i) Study Group Meeting is scheduled on 28th June,2013 on the Subject “Recent Decision
under Direct Taxes”. The meeting will be led by Shri Nitesh Joshi, Advocate.
ii) Study Circle Meetings is scheduled
a) on 11th June, 2013 on the subject “Taxation of Builders & Developers”. The
meeting will be lead by CA. Jagdish Punjabi.
b) on 27th June, 2013 on the subject “ Issues under Capital Gains-Section 54, 54F,
54EC, & Section 50C. The meeting will be chaired by Shri Vipul Joshi, Advocate
and lead by Shri Mandar Vaidya, Advocate. The meeting is in continuation of
earlier meeting held on 31st October, 2012 and 17th January, 2013.

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the chamber news
6. NOTICE OF ELECTION
Please refer CITC News Vol. No. XIII No. 7 of May, 2013.
7. RENEWAL NOTICE-2013-14
The renewal fees for Annual Membership, Subscription of IT Review, Study Group and
Study Circles meeting and Other Subscription for the financial year 2013-14 falls due for
payment on 1st April, 2013.
The details of the Fees are as under:
FEES SERVICE TAX TOTAL
1. Membership Renewal Fees (for 1 year) ` 1,300/- ` 161/- ` 1,461/-
2 The Chamber’s Journal Subscription ` 550/- – ` 550/-
(Life Members)
3 The Chamber’s Journal Subscription ` 1,000/ - –
(Non-Members)
4 Associate Membership ` 2,000/- ` 247/- ` 2,247/-
5 Student Membership Fees ` 250/- ` 31/- ` 281/-
6. Study Group (Direct Taxes) ` 1,250/- ` 155/- ` 1,405/-
7. Study Circle (Indirect Taxes) ` 700/- ` 87/- ` 787/-
8. Study Circle (International Tax) ` 1,000/- ` 124/- ` 1,124/-
9. Study Circle (Allied Laws) ` 700/- ` 87/- ` 787/-
10. Study Circle (Direct Taxes) ` 700/- ` 87/- ` 787/-
11. Study Circles ` 1,000/- ` 124/- ` 1,124/-
(Direct Tax & Allied Laws Combined)
12. Self Awareness Series ` 350/- ` 43/- ` 393/-
13. Intensive Study Group on Direct Tax ` 1,000/- ` 124/- ` 1,124/-
(*) The amount of Service Tax and Cess may change if there is change in the rate.
(For Enrolment and further details of all the Future Events, please refer to the May, 2013 issue of
CITC News or visit the website www.ctconline.org)

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ALLIED LAWS COMMITTEE DIRECT TAXES COMMITTEE

Shri D. T. Khilnani CA Jagdish Punjabi

STUDY CIRLCE & STUDY GROUP COMMITTEE

Shri Keshav Bhujle, Advocate addressing the members. Seen from

MEMBERSHIP & EOP, RRC & PR AND JOURNAL COMMITTEE

2. Special Article – Recent Amendment applicable to Property Tax... V. R. Ghelani....................................83

i The Chamber's Journal May 2013

The Chamber's Journal

Advertisement Rates MEMBERSHIP FEES & JOURNAL SUBSCRIPTION

Discount 3. Associate Membership

The Chamber's Journal May 2013 ii

iii The Chamber's Journal May 2013

It’s time to renew our ties with the Chamber; yes I am

Chamber has launched its revamped website on 19th April,

Last few days have been extremely disturbing from India’s

While summer is at its peak in May, the heat on professional

The Chamber's Journal May 2013 iv

Let the heat of summer ignite the fire within us to do what

v The Chamber's Journal May 2013

The Chamber shall contribute to the development

The Chamber shall be a voice which is heard and

The Chamber shall be pre–eminent in laying

The Chamber's Journal May 2013 vi

Ved and Vedanta

SANKHYA (JNANA) Arjuna uvaca:

vii The Chamber's Journal May 2013

Na yotsya iti Govindamuktva tusnim babhuva ha 9 Yam hi na vyathayantyete purusam Purusarsabha

9. Having spoken thus to Hrsikesa, Samaduhkhasukham dhiram so mrtatvaya kalpate 15

Senayorubhayormadhye visidantamidam vacah 10 Nasato vidyate bhavo nabhavo vidyate satah

Asocyananvasocastvam prajnavadamsca bhasase Avinasi tu tadviddhi yena sarvamidam tatam

Gatasunagatasumsca nanusocanti panditah 11 Vinasamavyayasyasya na kascitkartumarhati 17

The Chamber's Journal May 2013 viii

Vedavinasinam nityam ya enamajamavyayam Tasmadapariharye rthe na tvam socitumarhasi 27

ix The Chamber's Journal May 2013

The Chamber's Journal May 2013 x

Kamatmanah svargapara janmakarmaphalapradam 48. Seadfast in yoga, perform actions O

Vyavasayatmika buddhih samadhau na vidhiyate 44 Durena hyavaram karma buddhiyogaddhananjaya

xi The Chamber's Journal May 2013

Sri Bhagavan uvaca: established indeed shows senses are under

The Chamber's Journal May 2013 xii

xiii The Chamber's Journal May 2013

The Chamber's Journal May 2013 xiv

xv The Chamber's Journal May 2013

The Chamber's Journal May 2013 xvi

Kishor Vanjara, Tax Consultant

SS-VII-1 The Chamber's Journal May 2013

The Chamber's Journal May 2013 SS-VII-2

SS-VII-3 The Chamber's Journal May 2013

Bharat Joshi, Advocate

I) N o w a d a y s i t i s s e e n t h a t m a n y whenever a piece of land is reserved

The Chamber's Journal May 2013 SS-VII-4

not considered in the computation 2) Appoint projected management

1) Society must have conveyance of its (h) for default mechanism if

SS-VII-5 The Chamber's Journal May 2013

The Chamber's Journal May 2013 SS-VII-6

fittings, lift, amenities, common areas, be authorised to take up the work

SS-VII-7 The Chamber's Journal May 2013

Bharat Joshi, Advocate