Weekly Round-up on Tax and Corporate Laws | 4th to 9th March 2024

This weekly newsletter analytically summarises the key stories reported at taxmann.com during the previous week from March 04^th to 9^th, 2024, namely:

(a) MLA/MP is not immune from prosecution for bribes taken in connection with vote/speech in Legislature/Parliament: SC;

(b) CBDT amends forms for filing tax audit and tonnage tax application;

(c) Govt. notifies list of payments made to IFSC units on which no TDS is required;

(d) Delhi Govt. issued instruction regarding rectification of assessment orders under the DGST Act;

(e) Dept. can’t cancel registration on different grounds which weren’t mentioned in SCN without hearing assessee: HC; and

(f) ICAI issues the guide for best practices in maintaining the Property, Plant, and Equipment (PPE) register.

1. MLA/MP is not immune from prosecution for bribes taken in connection with vote/speech in Legislature/ Parliament: SC

The Supreme Court, in the matter of Sita Soren v. Union of India [2024] 160 taxmann.com 103 ruled that bribery is not protected by parliamentary privilege. Hence, a Member of the Legislative Assembly/Member of Parliament cannot claim immunity from prosecution for bribes taken concerning a vote/speech in the Legislature/Parliament.

The Apex Court has overturned its Judgment in the matter of PV Narasimha Rao 1998. This previous ruling held that Parliament and Legislative Assemblies members could claim immunity under Articles 105(2) and 194(2) of the Constitution for receiving a bribe in contemplation of a vote or speech in the legislature.

Facts

In the present case, the appellant belonging to Jharkhand Mukti Morcha was a member of the Legislative Assembly of Jharkhand. She filed an appeal before the Supreme Court against the order passed by the Jharkhand High Court. The High Court dismissed her plea of claiming immunity under Article 194(2) of the Constitution.

She relied on the judgement of this Court in PV Narasimha Rao v. State (CBI/SPE), where a five-judge bench held that members of Parliament and state legislatures were immune from prosecution in bribery cases related to their speech or vote as part of the parliamentary privileges conferred by Articles 105(2) and 194(2) of the Constitution.

However, this verdict was doubted in an appeal by the appellant who was accused of accepting a bribe for a 2012 Rajya Sabha vote. She accepted a bribe from an independent candidate for casting her vote in his favour. However, she did not cast her vote in favour of the alleged bribe given and instead cast her vote in favour of a candidate from her party.

She claimed immunity under Article 194(2) of the Constitution. However, the Jharkhand High Court dismissed her plea, leading to the challenge in the Supreme Court.

Article 105(2) and 194(2) read as follows –

Article 105(2) states that

“No member of Parliament shall be liable to any proceedings in any court in respect of anything said or any vote given by him in the Parliament or any committee thereof, and no person shall be so liable in respect of the publication by or under the authority of either House of Parliament of any report, paper, votes or proceedings.”

Article 194(2) states that

“No member of the Legislature of a State shall be liable to any proceedings in any court in respect of anything said or any vote given by him in the Legislature or any committee thereof, and no person shall be so liable in respect of the publication by or under the authority of a House of such a Legislature of any report, paper, votes or proceedings.”

Question placed before the Supreme Court

The question raised before the Supreme Court was whether a Member of the Legislative Assembly or Member of Parliament can claim immunity from prosecution on a charge of bribery taken in connection with vote/speech in the Legislature or Parliament.

Supreme Court Observations

The Supreme Court noted that the offence of bribery is complete at the point in time when the legislature accepts the bribe. It does not matter when the legislature votes in the agreed direction or votes at all. Bribery offences are agnostic to the performance of the agreed action and crystallize based on the exchange of illegal gratification.

The Supreme Court further noted that the assertion of a privilege by an individual member of Parliament or Legislature would be governed by a twofold test. First, the privilege claimed has to be tethered to the collective functioning of the House, and second, its necessity must bear a functional relationship to the discharge of the essential duties of a legislator.

The phrase “in respect of” in Articles 105(2) and 194(2) applies to the collective phrase “anything said or any vote given.” The words “in respect of” means arising out of or bearing a clear relation to. This may not be overbroad or be interpreted to mean anything that may have a remote connection with the speech or vote.

In the PV Narasimha Rao case, the majority judgment interprets the phrase “in respect of” as having a broad meaning and referring to anything that bears a nexus or connection with the vote given or speech made. It, therefore, concluded that a bribe given to purchase the vote of a member of Parliament was immune from prosecution under Article 105(2).

Supreme Court Ruling

The Supreme Court held that Articles 105 and 194 of the Constitution seek to create a fearless atmosphere where debate, deliberations and exchange of ideas can take place within the Houses of Parliament and the state legislatures. For this exercise to be meaningful, members and persons who have a right to speak before the House or any committee must be free from fear or favour induced into them by a third party.

These members must be able to exercise their free will and conscience to enrich the functions of the House. This is exactly what is taken away when a member is induced to vote in a certain way, not because of their belief or position on an issue but because of a bribe taken by the member.

Further, the Supreme Court held that corruption and bribery of legislature members erode the foundation of Indian Parliamentary democracy. It destroys the aspirational and deliberative ideals of the Constitution and creates a polity that deprives citizens of a responsible, responsive and representative democracy.

Bribery offences are agnostic to the performance of the agreed action and crystallize based on the exchange of illegal gratification. The bribery offence is complete upon acceptance of the money or on the agreement to accept the money being concluded. The offence is not contingent on the performance of the promise for which money is given or is agreed to be given.

In view of the above, MLA/MP cannot claim immunity from prosecution for bribes taken in connection with a vote/speech in the Legislature or Parliament. Therefore, the appellant cannot claim immunity from prosecution for accepting a bribe.

Read the Ruling

2. CBDT amends forms for filing tax audit and tonnage tax application

The Central Board of Direct Taxes (CBDT) has amended the tax audit form (Form 3CD & Form No. 3CEB) and the form for filing a tonnage tax application (Form 65).

The following are the key changes introduced in the forms:

(a) Disclosure of expenses for violation of law in India or Outside India:

Clause 21 of Form 3CD seeks details of amounts debited to the profit and loss account, including capital, personal, advertisement expenditure, etc. This included reporting of ‘Expenditure by way of penalty or fine for violation of any law for the time being force’. The CBDT has amended the clause to include expenditure for any purpose which is an offence or is prohibited by law or expenditure by way of penalty or fine for violation of any law (enacted in India or outside India).

(b) Disclosure of expenditure for Compounding of Offences

Clause 21 further seeks details for “Expenditure by way of any other penalty or fine not covered above”. This field has been amended to include the expenditure incurred to compound the offences under the law whether in India or outside India, i.e., “Expenditure incurred to compound an offence under any law for the time being in force, in India or outside India”.

(c) Amendment in Clause 26 for disallowance of delayed payment to MSEs:

Clause (h) of section 43B has been inserted to seek details of the delayed payments to Micro and Small Enterprises in violation of section 43(b)(h).

(d) New disclosure of specified domestic transaction under section 115BAE(4)

Form 3CEB has been amended seeking particulars with respect to specified domestic transactions in the nature of any business transacted between the persons referred to in sub-section (4) of section 115BAE, which has resulted in more than ordinary profits expected to arise in such business.

(e) Amendments with respect to IFSC and deduction claimed under section 80LA

Form 65 has been amended to include a new filed under “Verification” seeking certification that the applicant-company is a unit of an  International Financial Services Centre and has filed the application within three months from the date on which the deduction under section 80LA of the Income-tax Act, 1961 is no longer applicable. Further, the applicant is required to specify the date on which such deduction was no longer applicable if the Company availed deduction under section 80LA and date of qualifying company status.

Read the Notification

3. Govt. notifies list of payments made to IFSC units on which no TDS is required

Exercising the power contained under section 197A(1F) read with section 80LA(2), the Central Government has notified the list of payments on which no tax deduction shall be made under the provisions of the Income-tax Act if payment is made by any ‘payer’ to a person being a Unit of International Financial Services Centre (IFSC).

These IFSC Units include the Banking Unit, IFSC Insurance Intermediary Office, Finance Company, Finance Unit, Fund Management entity, Broker Dealer, Investment advisor, Registered Distributor, Credit rating agency, Investment banker, etc. The notification enlists various types of payments for each category of IFSC Unit, including interest, dividend, commission, professional fees, etc., on which tax is deducted under sections 194A, 194D, 194H, or 195.

To avail of this benefit, the IFSC unit is required to furnish a declaration in Form No. 1 to the payer giving details of previous years relevant to the ten consecutive assessment years for which such unit opts for claiming deduction under section 80LA(1A) and 80LA(2). Further, the payer is required to furnish the particulars of all the payments made on which tax has not been deducted in the statement of deduction of tax referred to under section 200(3).

It is to be noted that the relaxation shall be available to the IFSC Unit only during the said previous years relevant to the ten consecutive assessment years as declared in Form No. 1, for which deduction under section 80LA is being opted.

Read the Notification

4. Delhi Govt. issued instruction regarding rectification of assessment orders DGST Act

The Delhi Government has received several representations to allow rectification of demand orders. Therefore, instructions are issued to rectify the demand order pertaining to FY 2017-18, which has apparent errors, including arithmetical or clerical mistakes. The following types of cases have been brought to the notice of the department, and these may be considered for limited-purpose rectification:

1. Where amount of demand in question has already been fully deposited/reversed vide Form DRC-03 and adequately informed to the proper officer in the reply filed by the registered person/dealer. Still, the same has not been considered at the time of issuance of the demand order.
2. Where there is arithmetical error i.e. calculation error/head error i.e. IGST, CGST, and DGST in the demand order issued by the proper officer.

Read the Instruction

5. Dept. can’t cancel registration on different grounds which weren’t mentioned in SCN without hearing assessee: HC

The Honorable High Court of Delhi has recently held that GST Authorities can’t cancel the GST registration of the assessee on the ground that firm was not found at the registered office without allowing the assessee to be heard.

Facts

In the present case, a show cause notice was issued to the assessee seeking to cancel GST registration. Thereafter, an order was passed cancelling registration retrospectively on the grounds of the assessee’s non-availability at the registered office on the date of physical verification. Also, the application seeking revocation of cancellation filed by the assessee was also rejected. It filed writ petition against the order of cancellation.

High Court

The Honorable High Court noted that the grounds for cancellation differed from those mentioned in the show cause notice. Moreover, the assessee was never intimated as to the real grounds for cancellation, and the order also suffered from infirmity inasmuch as the Assessing Officer seemed to have considered the assessee’s reply when no such reply had been filed.

The Court also noted that the assessee was never put to notice that registration was liable to be cancelled retrospectively and registration could not be cancelled with retrospective effect mechanically. Therefore, the Court held that both show cause notice and order cancelling registration with retrospective effect, and the order rejecting the revocation application were to be set aside, and registration was to be restored.

Read the Ruling

6. ICAI issues the guide for best practices in maintaining Property, Plant, and Equipment (PPE) register

Section 143(3)(i) of the Companies Act, 2013 requires the auditor of the Company to report

“whether the company has adequate internal financial controls concerning financial statements in place and the operating effectiveness of such controls”.

Deficiencies in the maintenance of the PPE Register and/or lack of physical verification of PPE assets by Management may require reporting by the auditor as regards his opinion on internal controls under Section 143(3)(i).

Also, the importance of the PPE Register is emphasized in the Companies Auditor’s Report Order, 2020, reporting

“Whether the company is maintaining proper records showing full particulars, including quantitative details and situation of Property, Plant and Equipment, and intangible assets”.

Though CARO requires the auditor to report whether the Company has maintained proper records in respect of PPE, it does not define what would constitute “proper records”. ICAI’s Guidance Note on CARO, 2020, gives an illustrative list of details which PPE Records/Register should contain. However, the Guidance Note does not provide any particular format for maintaining the PPE Register so that practices in Companies can be standardized.

With

 “Implementation Guide on Maintenance of Property, Plant, and Equipment (PPE) Register – Best Practices”,

ICAI aims to fill this void and provide Guidance to Managements of Companies to discharge their obligations under CARO,2020 as well as their obligations to maintain “proper books of account” under Sections 2(13) read with Section 128(1) of the Act. This implementation guide requires the following details to be incorporated into the PPE Register:

• Asset and location details [with GPS Coordinates (Latitude/Longitude) in case of land/live photo and geo-tagging in case of furniture and fittings]
• Type details
• Capitalisation details
• Ownership details
• Insurance policy details
• Mortgage details
• Physical verification details
• Useful life and depreciation details
• Details of Revaluation and Impairment

For Land, details of Title Deeds are not in the name of the Company, and changes in Land use details also need to be stated.

Read the Story