Page 23 - Banking Finance May 2023

LEGAL UPDATE

a recent order the contentious issue The bank had claimed that there are legal question was whether, after the
relating to determining the cost of recovery proceedings pending against approval of a scheme by the Board for
acquisition and the indexed cost in case Associate Décor Limited, a company Industrial and Financial Reconstruction
of inherited assets. which had taken loan by mortgaging (BIFR) under the Sick Industrial Compa-
property worth Rs 199 crore. The pe- nies (Special Provisions) Act, an unse-
In this case of US resident Sohrab Fali
titioner is one of the directors of the cured creditor has the option not to
Mehta, the ITAT bench disagreed with
said company. accept the scaled down value of its
the tax department that the indexed
dues, and to wait until the scheme for
cost of acquisition should be based on
the rehabilitation of the respondent
the year in which Mehta inherited his Delay in TDS remit shall
company has worked itself out, with an
share following his mother's death. The not attract penalty: SC option to recover the debt with inter-
tax tribunal, which adjudicates income
The Supreme Court (SC) held that the est post rehabilitation.
tax (I-T) disputes, held that the indexed
delay in remitting tax deducted at The apex court answer with a 'no'. Tak-
cost of acquisition has to be computed
source (TDS) by assessee is not liable ing the case of Modi Rubber vs Continen-
with respect to the year in which the
for penalty. It stated the revenue de- tal Carbon as an exemplary one that will
initial owner first held the asset.
partment should adopt a literal inter- settle other such cases, too, a Supreme
Tax experts point out that litigation on pretation of the penal provision. Court bench comprising Justice MR Shah
the issue of the 'cost of acquisition' and Justice CT Ravikumar noted that the
The apex court even observed that the
and also the 'cost inflation index' to be submission that unsecured creditors
appeal concerned is not the case of
used in computing capital gains is com- should have an option not to accept the
"non-deduction" of TDS.
mon in cases of inheritance. scaled down value of dues "has no sub-
stance and cannot be accepted".
In simple terms, capital gains is the Evidence against 3rd par-
difference between the sale price and
ties subject to tax pro- No service tax on Corpo-
the indexed cost of acquisition.
ceedings, rules SC
In case of an inheritance, the cost of rate guarantees provided
acquisition is nil as the inheritor has not The Supreme Court upheld an amend- by firms to arms: SC
paid anything for acquiring the asset. ment that allows income tax officials
The Supreme Court has ruled that no
to proceed against "third parties"
However, according to the provisions service tax would be levied on corpo-
against whom incriminating evidence
of the I-T Act, for computing capital rate guarantees provided by a parent
was found at another person's pre-
gains, the cost to the previous owner company to its subsidiaries as there is
mises during search operations. It also
is considered as the cost of acquisition. no consideration involved, resolving a
said that the amendment would apply
longstanding service tax conflict.
retrospectively.
HC: Bank can't bar loan The decision was made in the case of
The matter pertains to the application the Commissioner of CGST and Central
defaulter from foreign trip of Section 153C of the Income Tax Act,
Excise versus Edelweiss Financial Ser-
The high court authorised a city-based which provides the revenue depart-
vices, and is expected to resolve past
businessman to travel to (UAE) and ment the power to proceed against
cases related to service tax on corpo-
Saudi Arabia for business purposes, third parties and issue notice and as-
rate guarantees, tax experts said.
pointing out that travel of a citizen sess and reassess income in case of
"No effort was made on behalf of the
cannot be curtailed by a bank on the undisclosed income and assets. This
revenue to assail the...finding or to
ground that he is in default of a loan amendment was passed through the
demonstrate that issuance of corpo-
amount. Finance Act of 2015, which came into
rate guarantees to group companies
effect on June 1, 2015.
Himayat Ali Khan, a resident of without consideration would be a tax-
Bengaluru, had challenged the March able service," the top court observed
SC rejects BIFR cases
7, 2022 LOC (look out circular) issued while upholding a ruling by the princi-
by and executed by the Bureau of Im- The Supreme Court recently disposed pal commissioner of goods and ser-
migration. of a bunch of cases in which the basic vices tax (GST).
22 | 2023 | MAY | BANKING FINANCE