Now
a days it is common practice amidst private players to introduce the unaccounted
black money in the books of accounts by showing them in the guise of Share
Application Money. These companies in collusion with the shareholders execute
these transactions and thereby accelerating money Laundering Business.
Several
cases have been fixed and reopened of these companies by the Assessing Officers
by invoking section 68 (Cash Credits) of Income Tax Act but were of no use as
the maximum number of cases were disposed off by relying on the judgement of
Hon’ble SC in the case of CIT Versus Lovely Exports (P) Limited wherein it was
held as under”
“the Share Application Money received cannot be regarded as
undisclosed income of the Assessee company. Where the Assessee Company had
given details of the subscribing share applicants and the department alleged
that applicants were bogus, it was free to proceed against the applicants by
opening their individual assessments in accordance with Law”
And
till now Money Laundering Business is on Full swings. Budget 2012 has
introduced some stringent provisions to curb these transactions and to unearth
the unaccounted money introduced by virtue of showing them as Share Application
Money or issuing shares at premium. These provisions are summarized as under:
SHARE PREMIUM IN EXCESS OF THE FAIR MARKET VALUE TO BE TREATED AS
INCOME
Section 56(2) provides for the specific category of
incomes that shall be chargeable to income-tax under the head “Income
from other sources”.
It is proposed to insert a new clause in section
56(2). The new clause will apply where a company, not being a company in which
the public are substantially interested, receives, in any previous year, from
any person being a resident, any consideration for issue of shares. In such a
case if the consideration received for issue of shares exceeds the face value
of such shares, the aggregate consideration received for such shares as exceeds
the fair market value of the shares shall be chargeable to income- tax under
the head “Income from other sources. However, this provision shall not apply where
the consideration for issue of shares is received by a venture capital
undertaking from a venture capital company or a venture capital fund.
Further, it is also proposed to provide the company
an opportunity to substantiate its claim regarding the fair market value.
Accordingly, it is proposed that the fair market value of the shares shall be
the higher of the value—
(i) as may be determined in accordance with the
method as may be prescribed; or
(ii) as may be substantiated by the company to the
satisfaction of the Assessing Officer, based on the value of its assets,
including intangible assets, being goodwill, know-how, patents,
copyrights, trademarks, licences, franchises or any other business or
commercial rights of similar nature.
This amendment will take effect from
1st April, 2013 and will, accordingly, apply in relation to the assessment year
2013-14 and subsequent assessment years.
Consequent
to incorporation of these provisions, it seems that the decision of Hon’ble SC
in the case of CIT Versus Lovely Exports (P) Limited is of no use.
TAXATION OF CASH CREDITS, UNEXPLAINED MONEY, INVESTMENTS ETC.
Under the existing provisions of the
Income-tax Act, certain unexplained amounts are deemed as income under section
68, section 69, section 69A, section 69B, section 69C and section 69D of the
Act and are subject to tax as per the tax rate applicable to the
assessee. In case of individuals, HUF, etc., no tax is levied up to the
basic exemption limit. Therefore, in these cases, no tax can be levied on
these deemed income if the amount of such deemed income is less than the amount
of basic exemption limit and even if it is higher, it is levied at the lower
slab rate.
In order to curb the practice of laundering of
unaccounted money by taking advantage of basic exemption limit, it is proposed
to tax the unexplained credits, money, investment, expenditure, etc., which has
been deemed as income under section 68, section 69, section 69A, section 69B,
section 69C or section 69D, at the rate of 30% (plus surcharge and cess as
applicable). It is also proposed to provide that no deduction in
respect of any expenditure or allowance shall be allowed to the assessee under
any provision of the Act in computing deemed income under the said sections.
This amendment will take effect from 1st
April, 2013 and will, accordingly, apply in relation to the assessment year
2013-14 and subsequent assessment years.
CASH CREDITS UNDER SECTION 68 OF THE ACT
Section 68 of the Act provides that if any sum is
found credited in the books of an assessee and such assessee either
(i) does not offer any explanation about nature and
source of money; or
(ii) the explanation offered by the assessee is found
to be not satisfactory by the Assessing Officer, then, such amount can be taxed
as income of the assessee.
The onus of satisfactorily explaining such credits
remains on the person in whose books such sum is credited. If such person fails
to offer an explanation or the explanation is not found to be satisfactory then
the sum is added to the total income of the person. Certain judicial
pronouncements have created doubts about the onus of proof and the requirements
of this section, particularly, in cases where the sum which is credited as
share capital, share premium etc.
Judicial pronouncements, while recognizing that the
pernicious practice of conversion of unaccounted money through masquerade of
investment in the share capital of a company needs to be prevented, have
advised a balance to be maintained regarding onus of proof to be placed
on the company. The Courts have drawn a distinction and emphasized that in case
of private placement of shares the legal regime should be different from that
which is followed in case of a company seeking share capital from the public at
large.
In the case of closely held companies, investments
are made by known persons. Therefore, a higher onus is required to be placed on
such companies besides the general onus to establish identity and credit
worthiness of creditor and genuineness of transaction. This additional onus
needs to be placed on such companies to also prove the source of money in the
hands of such shareholder or persons making payment towards issue of
shares before such sum is accepted as genuine credit. If the company fails to
discharge the additional onus, the sum shall be treated as income of the
company and added to its income.
It is, therefore, proposed to amend section 68 of the
Act to provide that the nature and source of any sum credited, as share
capital, share premium etc., in the books of a closely held company shall be
treated as explained only if the source of funds is also explained by the
assessee company in the hands of the resident shareholder. However, even in the
case of closely held companies, it is proposed that this additional onus of satisfactorily
explaining the source in the hands of the shareholder, would not apply if the
shareholder is a well regulated entity, i.e. a Venture Capital Fund, Venture
Capital Company registered with the Securities Exchange Board of India
(SEBI).
This amendment will take effect from 1st
April, 2013 and will, accordingly, apply in relation to the assessment year
2013-14 and subsequent years.
CONCLUSION
Although provisions have been
incorporated under section 56 by treating the Share Application Money in excess
of FMV of Unquoted shares or the value as substantiated by Assessee to the
Assessing Officer, as the case may be, as gifts in the hands of the Recipient
Company, Money Laundering transactions would be executed without any hassle by
those companies who are having huge reserves and their value/share will always
be high. The value/share shall be calculated as per the Rule 11UA of Income Tax
Rules which has prescribed the method for calculating the Fair Value of
Unquoted Shares. However, the method prescribed under Rule 11UA seems redundant
in view of the other methods like Discounting Cash Flow Method and Fair Market
Value Method where the value per share will always be high. These rules need to
be revisited. I hope I will well acquaint the readers about these provisions by
virtue of this article. Queries/Suggestions are invited.
After a long time I again pen down to write here. At the very outset I would let you people know that ki BHAI CA BAN GAYA MAJE MAJE MEIN. With the help of my junoon and expectations of my friends and family members I passed CA exams and it was much to my dismay when I came to know about the result of CA and I started thinking that this chichora guy would use CA as prefix before his name. A lot of questions started in my mind and my in person started saying “AB THODA BADAL JA BETA CA HAI TU”. But it was a resistible change which I was proposing to infuse in me. After 2 months I joined GMCS training conducted by ICAI. GMCS batch No. 347 was composed of around 47 newly qualified chartered Accountants and faculties. Each and every new CA was having different traits and GMCS training was like a tour of 15 days where daily new faculties were coming and each and every faculty was teaching us by rendering their own views, styles and acts. But what I had to take that was that qualities which are not residing in me and to know about the habits which I should really eradicate to make myself that which I really want to become. Finally I tried to change myself to a great extent by virtue of GMCS classes. Each and every GMCS member gave me respect a lot and faculties too. But a wise man said never changes yourself for the sake of others. So what we should consistently gain that is value addition and for that I am striving hitherto. BAKI KYA KAREIN YAAR DELHI-6 KA LAUNDA KABHI SUDHAR NAHI SAKTA. But I would like to say one thing that never let your appetite exhaust, be it for health, wealth or fame because the day it started exhausting your success would come to halt.
Dimag mein jo khurafaat chalti rahegi batata rahunga, I would be in touch with you always about that….. Dobara aaunga dosto yahin milenge……. Ab don’t expect from me that I will share all my personal stuffs here thoda secret bhi rehne do……
True Love can’t be expressed verbally…. But by emotions……..
There were two lovers.........
One day, they decided to play Hide n Seek.......
During the play.....
Boy - "A small game within us"
Girl - "OK"
Boy - "The one who will give this flower tomorrow early in
the morning.....that one loves the other more....."
Girl - "OK"
Next morning, the boy waits for the flower to open so that
he can give it to the girl and prove himself that he loves her more than she loves him......
Finally, the flower opened and there.....
What did he see.....?????........
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The girl had died there due to cold.....
She stayed there all night ......so that early in the morning......as
soon as the flower opens she will give it to him.......and prove herself that she loves him more than he loves her.
My childhood was very naughty and even more I will tell you that I was born on 12th March,1989 the day was very cool and it was winter season and the most important fact was that it was Sunday that’s why I was Rakshas in my Previous Janma as evidenced by my Janma Kundli but I don’t know to what extent it expresses truth. But one principle I follow in my life is that never to depend on fortune/destiny, one who has ability to change or innovate can make anything possible by overriding his negative points in kundli, the most peculiar thingthat I forgot to tell you my cute name thanks to dimple who told me to reveal this is ”toto” which was named by my parents due to my naughty acts dat I used to conduct when I was child but this does not mean that my naughtiness is over “Are Yaar it boomed too much and now converted in kaminapan commensurate to chichorapan” .There was a chapter in second class in which there was a naughty monkey whose name was toto and my acts were completely resembled to it and “bekhama mein mera naam bigad diya aur rakh diya toto”. Kaisa laga soch rahe hoge ekdum se yeh ise kya hua……. Are yaar how u will come 2 know ki launda dill-6 ka hai…….
Kahan the hum haan toto, they didn’t think about my reputation while choosing this name. I think even today that whenever I will be going wid my family and at the way my friends will call me oye toto what will my family think and the most important my wife……… khoon Khaul jata hai but what can I do but not even a worst name yaar. “Ladkiyan kehti hai oh jaan very cute name mein kehta hun jab naam mein itna maza hai to munde mein kitna maza hoga……….” Bas yahin mera kaam ban jata hai…….
The biggest thing is that my brother Himanshu having the most substantial role in my life…… Everytime I was accompanied with him……. b coz we both were in same class……. warna yaar dost marte the akela samjhkar……. Phodaphadi mein number one tha ……..Now he is personal coach mere ko fit rakhte rakhte he committed to make fit the persons surrounding him or his clients………
There are many other things to tell you dheere dheere apni aukat pe a raha hun………
Welcome My Dear Friends/Colleagues/Lovers and Relatives,
As the time passed I don’t know how I reached to my age of 21 and I thought how I let know myself to others that’s why I pen down to write. Aaiye Janiye thoda bahut mere bare mein………..
Hi……….. I am Ishant Rathor. I am five Foot and eleven inches though I wish to god to not to enhance it more.
I was born in old Delhi. When I was child I used to stay in Kundewalan even till now I reside there. In future wherever I will reside, I will never forget this place and even I can’t resist the Halua Mathis of Imli Ka Mohalla that my grandfather used to give me while going to school and I used to go there by sitting on their shoulders. The style of my giving respect to Pandat jee at that time was”Oye Pandat Ram” the words I used to say to Pandat jee while going to school by riding on my Grandfather’s shoulders. My school was Tara Devi Happy School where I passed Nursery and K.G. and after that I was transferred to Babu Ram Happy School, it was the branch of former as said above, where I remained till 5thclass. After that I was sent to another School where I had learnt all activities other than studying and I was completely Vella.
After that my performance was too much low and I started Ladkibazi from class 10th and bunking was my habit. At that time I used to pass my time in Ramlila Ground where I played Gilli Dunda, rotating Lattoos and many other games.
Even my lil efforts exerted by me at the time of examination resulted fruitful and I passed 12th Class with Commerce stream.
Then after that there was a question what to do further and there was nothing for me except for one thing that is chichorapan and ladkibazi. But my father compelled me to join our family business and for which I declined, but sometimes in case of need I engaged many times in my father’s business.
One day my friend brought CA prospectus and he assisted me to fill the form and after one month I got registered and started preparation for CA foundation Examination and I passed that by mistake and after that mistakes consistently occurred and the outcome of which is that now I am preparing for C.A. Final Examz.
There is something incomplete that is still in progress and soon it will be revealed to all of you………..