CA Inter Taxation — Question Paper — July 2021

Under Section 139(1) of the Income Tax Act, 1961, a return of income is required only when the total income during the previous year exceeds the basic exemption limit. For A.Y. 2021-22 (P.Y. 2020-21), the basic exemption limit is ₹5 lakhs for individuals and HUFs. Since the question specifies that the total income in each case does not exceed the exemption limit, the analysis for each scenario is as follows:

(i) Manish & Sons (HUF) - Residential House Sale with Section 54EC Investment:

Return Filing Requirement: NOT REQUIRED under Section 139(1).

Reasoning: The HUF realized a long-term capital gain of ₹12 lakhs on the sale of a residential house. However, the entire amount was invested in Section 54EC bonds within the prescribed period. Section 54EC provides for exemption of LTCG to the extent of the amount invested in specified bonds (maximum ₹50 lakhs). Since the entire LTCG of ₹12 lakhs was so invested, the taxable LTCG becomes ₹0. Therefore, the total income is ₹0, which is substantially below the basic exemption limit of ₹5 lakhs. Consequently, no return is mandated under Section 139(1).

However, filing a return is advisable and practically necessary to substantiate and claim the Section 54EC exemption. Without filing a return, the benefit claimed may lack documentary support, and the exemption might be challenged during any subsequent assessment.

(ii) Mrs. Archana - Resident and Ordinarily Resident with Foreign Asset:

Return Filing Requirement: NOT REQUIRED under Section 139(1).

Reasoning: Mrs. Archana is a RAR (resident and ordinarily resident) person as per Section 6(6). As a RAR, her worldwide income is taxable in India. The car owned in Germany is a capital asset; however, since it is used solely for personal purposes, it generates no income. Therefore, there is no income to report from this asset. With total income below the exemption limit of ₹5 lakhs, no return is required under the strict provisions of Section 139(1).

Nevertheless, filing a return is strongly advisable for the following reasons:
- Foreign Assets Reporting: ITR forms require RAR individuals to disclose foreign assets (real property, bank accounts, financial instruments) and foreign investments. The car, being a foreign capital asset, should be reported in the ITR schedule for foreign assets.
- Wealth Tax Compliance: If wealth tax is applicable, foreign assets must be reported and valued as on the valuation date.
- Compliance and Record-keeping: Filing return establishes a clear record of foreign asset ownership and prevents future inquiry or assessment issues.

(iii) Sudhakar - Electricity Expenditure Paid Through Banking Channels:

Return Filing Requirement: NOT REQUIRED under Section 139(1).

Reasoning: Sudhakar incurred electricity expenditure of ₹1,20,000 and paid the entire amount through banking channels (cheque, bank transfer, debit card, etc.). This ensures the deduction is allowable under Section 269ST, which restricts deductions for specified expenses (including electricity for business premises) unless paid through specified modes. Since the total income, after allowing this deduction, does not exceed the exemption limit of ₹5 lakhs, no return is required under Section 139(1).

However, filing a return is advisable because:
- If this is a business/professional expense, the person may be required to file a return under specific provisions related to business income (e.g., maintenance of books of accounts).
- Filing return substantiates the claim for deduction of ₹1,20,000 under Section 269ST, with documentary evidence of payment through banking channels, ensuring the deduction is accepted by the tax authorities.
- It creates an audit trail for the transaction and reduces the risk of disallowance on audit.

Conclusion: In all three cases, return filing is not mandatory under Section 139(1) because total income is below the exemption limit. However, in each case, filing a return is practically necessary and advisable to substantiate claims (Section 54EC exemption, foreign assets, or banking channel payment), maintain compliance, and prevent future disputes.

Remedy Available to Ajit under the General Clauses Act, 1897

Relevant Provision — Section 10 of the General Clauses Act, 1897

Section 10 of the General Clauses Act, 1897 provides the following rule regarding computation of time:

*"Where, by any Central Act or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceeding shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open."*

Analysis of Ajit's Situation

The essential ingredients for Section 10 to apply are:

1. There must be a Central Act or Regulation directing/allowing an act: The right to file an appeal before the High Court and the prescribed time limit for doing so are governed by applicable procedural law (a Central Act/Regulation). This condition is satisfied.

2. The act must be directed or allowed to be done in a Court or office: Submission of an appeal before the High Court of Kolkata clearly qualifies as an act to be done in a Court. This condition is satisfied.

3. The act must be required on a certain day or within a prescribed period: 30th March, 2020 was the last day (i.e., the last day of the prescribed period) for filing the appeal. This condition is satisfied.

4. The Court or office must be closed on that day/last day: The High Court of Kolkata was closed on 30th March, 2020 due to the total nationwide lockdown caused by the Covid-19 pandemic. This condition is satisfied.

Legal Effect and Remedy

Where all four conditions are satisfied, Section 10 confers the following legal remedy: the act or proceeding shall be deemed to have been done or taken in due time if it is performed on the next day on which the Court reopens.

Accordingly, Ajit is not required to seek a separate condonation of delay under Section 5 of the Limitation Act. He is entitled, as a matter of right under Section 10, to file the appeal on the very next day the High Court of Kolkata reopens after the lockdown, and such filing will be treated as having been made within the prescribed time limit.

Conclusion

Applying Section 10 of the General Clauses Act, 1897 to the facts: Since 30th March, 2020 was the last day to file the appeal, and the High Court was closed on that day owing to the Covid-19 lockdown, Ajit has the right to file his appeal on the next working day when the High Court reopens. The appeal shall be considered as having been filed within time, and no question of delay or limitation will arise. This provision ensures that no person suffers a legal disability merely because a Court or public office was closed on the due date through no fault of his own.

Computation of Total Income of Mr. Ashish for Assessment Year 2021-22 (F.Y. 2020-21)

Mr. Ashish is a resident individual (aged 43 years) providing professional services in interior decoration. His income is computed under Profits and Gains of Business or Profession (PGBP) as per Section 28 of the Income Tax Act, 1961, along with income from other sources.

Income from Profession:

Net surplus as per Income & Expenditure Account is ₹39,43,000. This figure requires the following adjustments:

*Add back — Non-professional income wrongly credited to I&E:*
(a) Interest on PPF (₹60,000): This is exempt under Section 10(11) of the Income Tax Act, 1961 and forms no part of professional income. It must be excluded entirely from professional receipts.
(b) Interest on Savings Bank Account (₹20,000): This is taxable under "Income from Other Sources" and not professional income.
(c) Interest on NSC VIII Issue — 3rd year (₹21,000): Interest accruing on NSC is taxable annually under "Income from Other Sources." The 3rd year interest is reinvested and taxable as it accrues.

*Add back — Inadmissible capital and personal expenditure:*
(d) Purchase of Furniture (₹48,000): This is capital expenditure and cannot be claimed as a revenue deduction. Depreciation under the IT Act will be allowed separately under Section 32.
(e) Depreciation as per books (₹90,000): Book depreciation is not deductible. It is replaced by depreciation computed under Section 32 of the Income Tax Act, 1961.
(f) Medical Expenses (₹80,000): In the absence of specific information indicating these relate to employees, these are treated as personal medical expenses of Mr. Ashish and disallowed under Section 37(1), as they are not wholly and exclusively for the purpose of the profession.
(g) Family Planning Expenditure (₹20,000): Deduction for family planning expenditure under Section 36(1)(ix) is available exclusively to companies. Mr. Ashish, being an individual, cannot claim this deduction, and the amount is disallowed.

*Less — Depreciation as per Income Tax Act, 1961 (Section 32):*
Furniture falls in the block of assets attracting depreciation at 10%. Depreciation on newly purchased furniture of ₹48,000 @ 10% = ₹4,800 (assuming put to use for 180 days or more).

Income from Profession = ₹42,77,200

Income from Other Sources (Section 56):
- Interest on SB Account: ₹20,000
- Interest on NSC VIII Issue (3rd year — accrued and reinvested): ₹21,000
- Interest on PPF: Exempt under Section 10(11) — not included

Total: ₹41,000

Gross Total Income = ₹43,18,200

Deductions under Chapter VI-A:

Section 80C: The interest on NSC VIII Issue for the 3rd year (₹21,000), though taxable, is deemed to be reinvested in NSC. This reinvested amount qualifies as a deduction under Section 80C of the Income Tax Act, 1961 (within the maximum limit of ₹1,50,000). Deduction = ₹21,000.

Section 80TTA: Deduction for interest on savings bank account is allowed up to ₹10,000 under Section 80TTA. Since SB interest = ₹20,000, deduction is restricted to ₹10,000.

Total deductions = ₹31,000

Total Taxable Income = ₹42,87,200 (rounded under Section 288A of the Income Tax Act, 1961)

*Note: The question appears to contain only one additional information point. If further details (such as opening WDV of assets, cash payment disallowances under Section 40A(3), etc.) were provided but omitted, the above computation would require corresponding adjustments.*

Note on Question Completeness: The transaction details appear to start from item (b)/(ii), suggesting that item (i)(a) — which would contain Gross Professional Receipts for P.Y. 2020-21 — is not included in the excerpt. Accordingly, all individual adjustments are computed below; the final Total Income figure requires the gross receipts figure from the missing item.

Scheme of Computation — Income from Profession (A.Y. 2021-22):

Mr. Ashikh is a professional. Since P.Y. 2019-20 receipts were ₹ 2,00,000 (≤ ₹ 50 lakhs), Section 44ADA of the Income Tax Act, 1961 was potentially applicable in P.Y. 2019-20. The asset WDVs as on 01/04/2020 are given directly. For P.Y. 2020-21, he is assessed on regular basis (given that detailed expenses and depreciation are provided, which would be irrelevant under 44ADA).

Item (b) — Salary to Sister-in-law [Section 40A(2)]: Payment of ₹ 25,000 per month to a sister-in-law (a specified relative under Section 40A(2)) exceeds the market rate of ₹ 20,000. Only ₹ 2,40,000 (₹ 20,000 × 12) is allowable. Disallowance: ₹ 60,000 (₹ 5,000 × 12 excess over market rate).

Item (ii) — Employees' EPF Contribution [Section 36(1)(va)]: Employees' contribution of ₹ 10,000 for February 2021 was received by Mr. Ashikh and forms his income under Section 2(24)(x). Deduction under Section 36(1)(va) is available only when deposited by the due date prescribed under the Employees' Provident Fund Act. As amended by Finance Act 2021 (applicable from A.Y. 2021-22), Section 43B protection does not extend to employees' contributions. Since deposited after due date, ₹ 10,000 is disallowed.

Item (iii) — Medical Expenses for Father [Section 80D]: Father (age 72, senior citizen) has no health insurance; ₹ 80,000 spent on medical treatment paid by account payee cheque. This is not a professional expense but qualifies for deduction under Section 80D as medical expenditure for a senior citizen parent with no insurance premium paid. Maximum deduction: ₹ 50,000 (actual ₹ 80,000 limited to the statutory ceiling).

Item (iv) — Commission without TDS [Section 40(a)(ia)]: ₹ 25,000 paid to Ms. Amalendu as commission without deducting TDS. Since ₹ 25,000 exceeds the threshold of ₹ 15,000 under Section 194H, TDS was required. Since TDS was not deducted, 30% of ₹ 25,000 = ₹ 7,500 is disallowed under Section 40(a)(ia).

Item (v) & (vi) & (vii) — Depreciation [Section 32 r.w. Section 43(1)]:

*Professional Books (WDV ₹ 90,000):* Rate 100% → Depreciation = ₹ 90,000

*Computers (WDV ₹ 35,000):* Rate 40% → Depreciation = ₹ 14,000

*Furniture (purchased 31/08/2020):* Cash payments exceeding ₹ 10,000 in a single day to a person are not included in 'actual cost' under Section 43(1). Cash for furniture ₹ 18,000 (> ₹ 10,000) and cash for freight ₹ 11,000 (> ₹ 10,000) are excluded. Only cheque payment of ₹ 19,000 constitutes actual cost. Used from 31/08/2020 (> 180 days in P.Y.) → full year rate. Rate 10% → Depreciation = 10% × ₹ 19,000 = ₹ 1,900

*Car (introduced to profession on 30/04/2020):* Car was used for personal purposes prior to P.Y. 2020-21. Actual cost of a personal asset introduced to profession = FMV on date of introduction [proviso to Section 43(1)] = ₹ 2,50,000. Used from 30/04/2020 to 31/03/2021 (> 180 days) → full year rate. Rate 15% → Depreciation = 15% × ₹ 2,50,000 = ₹ 37,500

Total Allowable Depreciation = ₹ 1,43,400

Item (viii) — PPF Contribution [Section 80C]: ₹ 1,00,000 contributed to PPF is deductible under Section 80C (within overall limit of ₹ 1,50,000).

Item (ix) — P.Y. 2019-20 Receipts: ₹ 2,00,000 confirms Section 44ADA was applicable in P.Y. 2019-20. Opening WDVs as on 01/04/2020 are provided and used directly.

Summary of Computation:

Gross Professional Receipts (P.Y. 2020-21): ₹ _____ [to be taken from missing item]
Less: All allowable professional expenses (including depreciation of ₹ 1,43,400)
Add back: Disallowances — Section 40A(2): ₹ 60,000; Section 36(1)(va): ₹ 10,000; Section 40(a)(ia): ₹ 7,500
= Income from Profession (Gross Total Income)

Less: Chapter VI-A Deductions:
— Section 80C (PPF): ₹ 1,00,000
— Section 80D (Medical expenses): ₹ 50,000
= Total Income

Tax Liability (Old Regime, not under Section 115BAC):
Apply slab rates: Nil up to ₹ 2,50,000; 5% from ₹ 2,50,001–₹ 5,00,000; 20% from ₹ 5,00,001–₹ 10,00,000; 30% above ₹ 10,00,000. Add Health & Education Cess @ 4%. If Total Income ≤ ₹ 5,00,000, rebate under Section 87A = ₹ 12,500.

(a) Residential Status and Total Income of Mrs. Rohini — AY 2021-22

Residential Status: Non-Resident (NR)
Mrs. Rohini is assessed as a Non-Resident based on contextual indicators — she receives pension from the Russian Government and pays insurance premium to a Russian insurer in Russia, indicating she is not ordinarily residing in India. (Exact determination requires number of days of stay; absent that data, NR is the reasonable exam-context inference.)

For a Non-Resident, only income received in India or accruing/arising in India is taxable under Section 5(2) of the Income Tax Act, 1961.

Income from House Property:
Rent received equals Annual Value for New Delhi property — ₹90,000. Standard deduction @ 30% under Section 24(a) = ₹27,000. Income from House Property = ₹63,000.

Capital Gains:
LTCG on sale of land at New Delhi (Indian asset): ₹3,00,000 — taxable under Section 112 @ 20%.
STCG on sale of listed Indian company shares where STT paid (Section 111A): ₹60,000 — taxable @ 15%.

Items excluded:
— Pension from Russian Government: NOT taxable for NR (accrues outside India; not received in India).
— Premium paid to Russian LIC: Not income — it is an expenditure. Section 80C deduction is also not available as Russian LIC is not an insurer registered under the Insurance Act, 1938 operating in India.

Total Income = ₹63,000 + ₹3,00,000 + ₹60,000 = ₹4,23,000

Tax Liability:
STCG u/s 111A @ 15% on ₹60,000 = ₹9,000.
Basic exemption limit (NR individual): ₹2,50,000. Normal income (HP) = ₹63,000 (fully within exemption). Remaining exemption = ₹1,87,000 is set off against LTCG. Taxable LTCG = ₹3,00,000 − ₹1,87,000 = ₹1,13,000 @ 20% = ₹22,600.
Total tax before cess = ₹31,600. Health and Education Cess @ 4% = ₹1,264.
Total Tax Liability = ₹32,864.

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(b) TDS Applicability — Each Case

Case A — Mr. Kale (Pensioner), Contractual payment ₹52,50,000 for reconstruction of residential house:
Mr. Kale is an individual receiving pension (salary income) with no business or professional income. He is therefore not subject to tax audit under Section 44AB in the preceding year. Hence, Section 194C (which requires individuals/HUF to deduct TDS only if accounts are audited u/s 44AB) does not apply. However, Section 194M of the Income Tax Act, 1961 (inserted w.e.f. 01.09.2019) covers individuals/HUF not required to deduct under Section 194C, where aggregate contractual payments exceed ₹50,00,000 in a year. Here ₹52,50,000 > ₹50,00,000. TDS is attracted under Section 194M @ 5%. TDS = 5% × ₹52,50,000 = ₹2,62,500.

Case B — Mr. Rahul (Cloth trader, turnover ₹5 crores in FY 2019-20), Contract payment for construction of office space ₹50,00,000:
Mr. Rahul's turnover of ₹5 crores in FY 2019-20 exceeds the Section 44AB audit threshold of ₹1 crore. His accounts were therefore subject to audit in the immediately preceding year. Hence, TDS is attracted under Section 194C of the Income Tax Act, 1961. Rate: 1% (if contractor is individual/HUF) or 2% (if contractor is any other person). Assuming individual contractor: TDS = 1% × ₹50,00,000 = ₹50,000. Threshold: ₹50,00,000 > ₹30,000 (single payment limit), so TDS applies.

Case C — Mr. Godu (Garment trader, turnover ₹95 lakhs in FY 2019-20), Commission to Mr. Vinay ₹1,20,000:
Mr. Godu's turnover ₹95 lakhs < ₹1 crore Section 44AB threshold. His accounts were not audited in the preceding year. Therefore Section 194H (commission payments) does not apply to Mr. Godu as an individual. Section 194M (alternative provision for non-audited individuals) requires aggregate payments to exceed ₹50,00,000; here ₹1,20,000 << ₹50 lakhs. TDS provisions are NOT attracted in Case C.

Case D — XYZ Urban Co-operative Bank, Cash withdrawal by ABC & Co. (partnership firm) ₹1,20,00,000; returns filed for last 3 years:
Section 194N of the Income Tax Act, 1961 applies to cash withdrawals from banking companies and co-operative banks. Since ABC & Co. has filed income tax returns for the last 3 financial years within due date, the applicable rate is 2% on cash withdrawal exceeding ₹1,00,00,000 during the financial year. TDS is applicable on the amount exceeding ₹1 crore. Excess = ₹1,20,00,000 − ₹1,00,00,000 = ₹20,00,000. TDS = 2% × ₹20,00,000 = ₹40,000 to be deducted under Section 194N by XYZ Urban Co-operative Bank.

Part (i): Small Company Classification with Public Company Holding

Smart Solutions Private Limited SHALL NOT be deemed a small company despite meeting certain criteria. Section 2(85) of the Companies Act 2013 defines a small company as a company other than a public company with: (a) paid-up share capital not exceeding ₹50 lakhs, and (b) average annual turnover not exceeding ₹2 crores. While Smart Solutions meets both criteria (₹50 lakhs capital and ₹2 crores turnover), the crucial proviso disqualifies it. The proviso to Section 2(85) explicitly states that a company shall NOT be treated as a small company if its paid-up share capital is held as to not less than 25% by one or more public companies. Here, Nice Software Limited (a public company) holds 2,00,000 out of 5,00,000 equity shares, constituting 40% of the paid-up capital. This exceeds the 25% threshold. Consequently, the exemption from filing requirements cannot be extended to Smart Solutions Private Limited, and it must comply with all statutory requirements applicable to non-small private companies.

Part (ii): Default in Filing Financial Statement

Yes, Smart Solutions Private Limited has defaulted in filing its complete financial statement. Section 137 of the Companies Act 2013 and Rule 4 of the Companies (Accounts) Rules 2014 require the financial statements to include the Balance Sheet, Profit and Loss Account, Cash Flow Statement, and Statement of Changes in Equity. Rule 4A provides an exemption to small companies from preparing and filing a Cash Flow Statement. However, as established above, Smart Solutions Private Limited is not a small company. Therefore, it is statutorily obligated to file the Cash Flow Statement along with other financial statements. By filing only the Balance Sheet and P&L Account while excluding the Cash Flow Statement, the company has filed an incomplete set of financial statements, constituting a default. The omission renders the filing non-compliant with statutory requirements. The ROC's notice is justified and legally valid. The company must submit the omitted Cash Flow Statement to remedy the default within the stipulated timeline.

Answer: YES, ABC Limited is required to constitute a Corporate Social Responsibility Committee from the second half of FY 2020-21.

Under Section 135(1) of the Companies Act, 2013, every company having (i) net worth of ₹500 crore or more, OR (ii) turnover of ₹1000 crore or more, OR (iii) net profit of ₹5 crore or more during the financial year or immediately preceding financial year shall constitute a CSR Committee. The determination is governed by Rule 5 of the Companies (Corporate Social Responsibility Policy) Rules, 2014.

Analysis for FY 2020-21:

Initially, based on the immediately preceding FY 2019-20 (audited figures as on 31-03-2020), the company did not meet the criteria: Net Worth ₹100 crore (< ₹500 cr), Turnover ₹500 crore (< ₹1000 cr), Net Profit ₹1 crore (< ₹5 cr).

However, the provisional financial statements as on 30-09-2020 (end of first half of FY 2020-21) demonstrate that ABC Limited does meet the criteria: Turnover ₹1000 crore (equals the threshold) and Net Profit ₹5 crore (equals the threshold).

Conclusion:
The statutory language "during the financial year" in Section 135(1) requires assessment not only based on the preceding year but also on the company's performance during the current financial year. Once the provisional figures as on 30-09-2020 confirm that ABC Limited meets the thresholds, the company is mandatorily required to constitute the CSR Committee before the end of FY 2020-21. Therefore, from the second half of FY 2020-21 (commencing 01-10-2020), ABC Limited must constitute its CSR Committee in compliance with Section 135.

The argument of the mobile dealer is INCORRECT under the Indian Contracts Act, 1872.

Legal Position:

Under Section 11 of the ICA, 1872, a minor is incompetent to enter into a contract. Any contract made by a minor is void ab initio (void from the beginning). The contract between Paul (minor) and the mobile dealer for the smartphone is therefore void, and Paul incurs no liability whatsoever.

Jack (the major) was never a party to the original contract between Paul and the dealer. Jack's subsequent voluntary payment of the price does not, in law, create any contractual obligation or liability on Jack. A person cannot be made liable for a contract to which they are not a party and to which they have not agreed to be liable (e.g., as a surety or guarantor).

Dealer's Remedy:

The dealer's remedy lies under Section 65 of the ICA, 1872 (Goods delivered without consideration). Since the smartphone was delivered under a void agreement, the dealer may seek restitution by either (i) recovering the mobile in kind from Paul, or (ii) claiming compensation from Paul's property or guardian. The dealer cannot pursue Jack merely because Jack paid the amount voluntarily.

Conclusion: The dealer's argument is legally unsound. Jack has no legal liability to the dealer.

Follow-up: If Both Jack and Paul are Minors

The answer remains the same—the dealer's argument is INCORRECT.

The position is unchanged because: (1) Paul's contract with the dealer is void regardless—Paul's minority is the disqualifying factor; (2) Jack's status as a minor does not create any liability for Jack. Even if Jack made a promise to Paul regarding the payment, such an agreement between two minors would itself be void under Section 11. However, this does not alter the dealer's inability to pursue Jack. The dealer's remedy remains against Paul (or his guardian) under Section 65. Minority shields both Paul and Jack from contractual liability in this transaction.

Answer to (a): Can C be a Holder in Due Course?

No. Although C took the cheque for consideration (₹5,000) in good faith, C cannot be a holder in due course (HDIC) because the cheque bears a 'not negotiable' crossing. Section 29 of the Negotiable Instruments Act, 1881 expressly provides that when a cheque is crossed with 'not negotiable', no transferee can acquire a better title than that of the transferor. Consequently, C takes the instrument subject to all equities and defects that existed against B, and cannot claim the immunity from defenses available to an HDIC under Sections 52-53.

Answer to (b): C's Rights Against B

C is entitled to recover the full amount (₹3,000) from B. B, having endorsed the cheque to C, is liable as an endorser under Section 51 of the Act. The liability of an endorser is absolute and unconditional unless the endorsement is made without recourse ('sans recourse'). Since there is no indication of such qualification, B remains liable to C for the full cheque amount, regardless of whether B exceeded the authority granted by A or any other defect in the transaction between A and B.

Answer to (c): C's Rights Against A

C's recovery from A is limited. Although A is the drawer and normally liable on a cheque, A has substantial defenses available:

1. Exceeded Authority: A authorized B to fill only ₹3,000. If the question intends that B filled the cheque for a higher amount (apparent from the ₹5,000 consideration mention), A is not liable for the excess amount. A can invoke Section 85 (blank instrument doctrine principles) to limit liability to the authorized amount.

2. Effect of 'Not Negotiable' Crossing: The 'not negotiable' crossing indicates A's intention that the cheque should not be further negotiated. It was meant for collection through banking channels only. Since C is not an HDIC and takes subject to all equities, C cannot overcome A's defense regarding limited authority.

3. Improper Endorsement: The endorsement of a 'not negotiable' crossed cheque violates its express purpose, and A can contest that C's title is defective.

Conclusion: C can recover the authorized amount (₹3,000) only from B as endorser. Against A, C's claim will fail or be limited to ₹3,000 (the authorized amount) because: (i) C is not an HDIC due to 'not negotiable' crossing; (ii) C is subject to A's defense of exceeded authority; and (iii) C cannot compel A to pay beyond the authorized limit when B was the one who breached A's trust.

Yes, Mr. A can initiate action against the company for failure to distribute the dividend within 30 days of declaration under Section 127 of the Companies Act, 2013.

Timeline Analysis: The dividend was declared on 22nd February 2020. Under Section 127(1) of the Companies Act, 2013, payment must be effected within 30 days of declaration (by approximately 23rd March 2020). However, the dividend warrant was posted only on 22nd January 2021 and received by Mr. A on 5th February 2021. This represents a delay of approximately 11 months, grossly exceeding the statutory 30-day requirement. The postal delay experienced by Mr. A does not excuse the company; the company's obligation is to ensure the warrant is posted within 30 days, not to guarantee its receipt.

Clear Breach of Section 127(1): The company has violated Section 127(1) which mandates that every company shall pay any dividend within 30 days of declaration. Posting of dividend warrants constitutes payment under company law. The company's failure to post within the prescribed period is unambiguous statutory non-compliance.

Interest Liability under Section 127(2): When a company fails to pay dividend within the prescribed period, Section 127(2) makes it liable to pay interest at 12% per annum (or such rate as may be prescribed) on the dividend amount. Mr. A is entitled to recover this interest for the entire period of default from the due date.

Criminal and Penal Consequences under Section 127(3): The company and every officer in default are punishable with fine extending to the amount of the unpaid dividend or interest, as the case may be.

Available Remedies: Mr. A may pursue the following courses of action: (1) Claim interest at 12% per annum on the dividend; (2) File a complaint with the Registrar of Companies (RoC) regarding violation of statutory duty; (3) Petition the National Company Law Tribunal (NCLT) for appropriate relief including recovery of interest; (4) Initiate civil proceedings against the company for breach of statutory obligation.

Conclusion: Mr. A possesses a strong legal foundation to initiate action. The company's liability is clear under Section 127 of the Companies Act, 2013, and the shareholder's right to recover delayed dividend with prescribed interest is statutory and enforceable.

Examination of Validity of Statements Regarding Annual General Meeting under Companies Act, 2013:

(i) INVALID – The statement is incorrect as to the prescribed period. As per Section 96 of the Companies Act, 2013, the first AGM of a company shall be held within a period of NINE months from the date of closing of the first financial year, not six months. The statement understates the permissible period and therefore is invalid.

(ii) VALID – This statement is correct. Section 96 of the Companies Act, 2013 specifically provides that the Registrar may, for any special reason, extend the time within which the first AGM shall be held by a period not exceeding three months beyond the nine-month period. This provision grants discretionary power to the Registrar to accommodate genuine circumstances preventing timely convening of the first AGM.

(iii) VALID – This statement is entirely correct. Section 96 clearly states that subsequent AGMs (second and onwards) shall be held within a period of six months from the date of closing of the financial year. This shorter period for subsequent AGMs (compared to nine months for the first AGM) reflects the expectation that the company's administrative machinery would be established and operational by then.

(iv) VALID – This statement is correct. Section 96 of the Companies Act, 2013 prescribes that there shall be a maximum interval of fifteen months between two consecutive AGMs. This provision ensures that shareholders do not remain without an AGM opportunity for extended periods and that the company remains regularly accountable to its members. The fifteen-month maximum is calculated from the date of one AGM to the date of the next.

The requirement to appoint an internal auditor is governed by Section 138 of the Companies Act, 2013. A company shall appoint one or more internal auditors if any of the following conditions are satisfied: (1) the company's turnover exceeds ₹5 crore, (2) the company has outstanding loans or borrowings exceeding ₹5 crore, or (3) the company is a holding, subsidiary, associate, or joint venture of a company meeting criteria (1) or (2).

Analysis for KSR Limited:

Criterion 1 — Turnover Test: The turnover for FY 2012-13 is ₹120 Crore, which far exceeds the ₹5 crore threshold. This criterion is satisfied.

Criterion 2 — Outstanding Loans Test: The outstanding loans from the bank as on 31-3-2021 are ₹105 crore, which exceeds the ₹5 crore threshold. This criterion is satisfied.

Since the company satisfies both criteria (turnover exceeding ₹5 crore and outstanding borrowings exceeding ₹5 crore), YES, KSR Limited is required to appoint an internal auditor during FY 2021-2022. The company does not qualify for any exemption. Note: The paid-up share capital is not a criterion for internal auditor appointment under Section 138.

Provisions for Appointment of First Auditor of a Government Company under the Companies Act, 2013

A Government Company is defined as a company in which not less than 51% of the paid-up share capital is held by the Central Government, State Government, or both, or which is a subsidiary of such a company.

Key Provisions under Section 139(7) of the Companies Act, 2013:

Appointment Authority: The First Auditor of a Government Company is appointed by the Central Government or the State Government (as applicable) on the recommendation of the Comptroller and Auditor-General (CAG) of India, not by the shareholders in the Annual General Meeting as in ordinary companies. This reflects the special oversight role of government bodies in such entities.

Timing of Appointment: The appointment must be made within thirty days of the date of registration of the company or from the date when the company becomes a Government Company, whichever is earlier. This ensures prompt audit arrangements from the inception of operations.

Tenure: The First Auditor so appointed shall hold office till the conclusion of the first Annual General Meeting of the company. Thereafter, auditors are appointed in the regular manner by the company.

Qualifications and Disqualifications: The auditor appointed must:
- Be a Chartered Accountant as defined under the Chartered Accountants Act, 1949, and registered with the Institute of Chartered Accountants of India (ICAI)
- Not be subject to any disqualifications specified in Section 141 of the Act, which include being an undischarged insolvent, having been convicted of offences, having been removed from office, having financial interest in the company, etc.
- Not be in partnership or employment with other auditors of the company

Rationale: These special provisions recognize the public accountability nature of Government Companies and ensure that the appointment process incorporates checks from constitutional bodies like the CAG, who ensures proper utilization of public funds and safeguards public interest.

License Revocation: Yes, Section 8(11) of the Companies Act, 2013 provides for revocation of license granted to a Section 8 company by the Central Government. The license may be revoked if: (a) the company contravenes the provisions of its memorandum; (b) the affairs of the company are conducted in a fraudulent manner or in a manner prejudicial to public interest; (c) the company ceases to pursue the objects for which it was formed. In this case, fraudulent conduct of affairs and unauthorized payment of dividend (prohibited for Section 8 companies which must apply surplus towards their objects) constitute clear grounds for license revocation under this section.

Winding Up: Yes, the State Cricket Club may be wound up following revocation of its license. Sections 271-275 of the Companies Act, 2013 provide the framework for winding up of companies. The company may be wound up by the NCLT (National Company Law Tribunal) or Court on the grounds of: (a) fraudulent or unlawful conduct of affairs; (b) when it is in the interest of the company or its members; (c) when the company has ceased to carry on business; (d) when the objects for which it was formed have been substantially attained or become impossible. Post-revocation, winding up is the mandatory procedure to settle liabilities and distribute remaining assets.

Merger Restriction: No, the State Cricket Club cannot be merged with M/s. Cool Net Private Limited. Section 232-234 of the Companies Act, 2013 sets out the merger/amalgamation framework. Critically, a Section 8 company (non-profit charitable company) can only merge with another Section 8 company having similar or identical objects. Cool Net Private Limited is a for-profit company engaged in networking business, fundamentally incompatible with a sporting club's charitable objectives. Merger would violate the non-distribution principle inherent in Section 8 company status, where all surplus must be applied towards statutory objects, not for private gain.

Provisions for Removal of Second and Subsequent Auditors (Section 141):

Section 141 of the Companies Act, 2013 governs removal of auditors other than the first auditor. Key provisions include: (1) Removal requires an ordinary resolution (not special resolution) passed at a general meeting; (2) The auditor must be given a copy of the Board's recommendation/notice of removal; (3) The auditor has the right to be heard and submit a memorandum in response; (4) The memorandum must be considered by the company before passing the removal resolution; (5) The resolution is effective once passed by the general meeting (more than 50% majority).

Examination of Validity:

The removal of AB & Associates by X Ltd. is INVALID and improper for the following reasons:

1. Incorrect Classification and Procedure: AB & Associates was "re-appointed" as auditors in 2019, making them a second and subsequent auditor, not the first auditor. Therefore, Section 141 applies, not Section 140. Under Section 141, removal requires an ordinary resolution, which requires a simple majority (50% + 1 vote). However, X Ltd. passed a special resolution (requiring 75% majority), which is the procedure applicable only to removal of the first auditor under Section 140.

2. Wrong Type of Resolution: The use of special resolution for removal of a subsequent auditor is procedurally incorrect and makes the removal invalid. Special resolution is mandatory only for first auditor removal; ordinary resolution is mandatory for all other auditors.

3. Questionable Central Government Approval Requirement: The removal is stated to be "subject to approval of the Central Government." This is unusual. While Section 140 (removal of first auditor) provides that an auditor may approach the Central Government for intervention if they believe removal is unjustified, approval of Central Government is not a pre-requisite for validity of auditor removal. The removal cannot be made conditional on or dependent upon Central Government approval as a procedural requirement.

4. Procedural Compliance Issues: While the question indicates proper notice and opportunity to be heard were given, the fundamental procedural flaw of using special resolution instead of ordinary resolution renders the entire removal process defective.

Conclusion: The removal of AB & Associates is not validly effectuated because X Ltd. adopted the wrong type of resolution (special instead of ordinary) prescribed under Section 141. The auditors remain in office, and X Ltd. would need to pass a fresh ordinary resolution at a properly convened general meeting for valid removal.

Sub-part (i): INVALID

A bill of exchange expressed as 'payable on demand' is payable at sight or upon presentation. Under Section 21 of the Negotiable Instruments Act, 1881, the date of maturity of a bill payable on demand is the date on which it is presented for acceptance or payment, not any stipulated future date. Therefore, if the bill is presented on 01-01-2021, the maturity date is 01-01-2021 itself. The bill cannot be at maturity on 04-01-2021 merely because it is presented on 01-01-2021. The express mention of 'payable on demand' negates any fixed date of maturity. The statement is factually incorrect and invalid.

Sub-part (ii): VALID (Drawer's claim is INVALID)

The drawer's claim of discharge is not sustainable. Under Section 93 of the Negotiable Instruments Act, 1881, notice of dishonor must be given to all parties liable on the bill except the acceptor. The acceptor of a bill is the principal debtor and does not require notice of dishonor because the acceptor's obligation is primary and unconditional. The acceptor is the party from whom payment is primarily due. Notice of dishonor must be given to secondary parties liable (drawer and endorsers) to hold them liable. In this case, since notice has been given to all parties except the acceptor, the holder has complied with the statutory requirement. The drawer cannot claim discharge merely because notice was not given to the acceptor, as such notice is not required by law. The drawer is discharged only if notice of dishonor is not given to him when required, or if notice is delayed beyond reasonable time. Since notice to the drawer has been given (as implied by 'all parties except acceptor'), the drawer remains liable.

Meaning of 'Means' in a Definition: When a statute uses the word 'means' in a definition, it provides an exhaustive and restrictive definition. The term is confined solely to what is explicitly stated, and nothing beyond those express words can be included. It is a definitive and complete definition that leaves no room for analogy or extension. For example, if a statute defines 'company' to mean 'a company formed and registered under the Companies Act, 2013,' only entities satisfying this precise criterion qualify as a company for that statute's purposes. The use of 'means' effectively closes the door to any broader or analogous interpretation.

Meaning of 'Includes' in a Definition: When a statute uses the word 'includes' in a definition, it provides an illustrative and non-exhaustive definition. It expands the ordinary or natural meaning of the term to encompass additional things beyond what might ordinarily be understood. The definition begins with the basic meaning and extends it by adding 'includes' to cover other things that fall within a similar class or category. For example, 'income includes income from salary, rent, and capital gains' means these are specified examples, but other forms of income may also be covered. The word 'includes' is expansive rather than restrictive.

Impact on Statutory Interpretation: The choice between these words significantly affects how courts interpret and apply statutory provisions. When 'means' is used, courts adopt a strict and literal approach, confining the definition to express words only. When 'includes' is used, courts interpret more liberally, recognizing that the listed items are illustrative examples and that similar or analogous items may also fall within the definition. The ejusdem generis rule is commonly applied when 'includes' is present—meaning that unlisted items of a similar nature and class may be included within the scope of the definition. Thus, 'means' demands precision and closes further inquiry, while 'includes' permits flexibility and judicial discretion to extend the definition to things reasonably falling within its ambit.

Answer: ₹1,46,433

The house property comprises three units: Unit 1 (50% of total) let out for residential purpose, Unit 2 (25%) used for business, and Unit 3 (25%) used for business.

INCOME FROM HOUSE PROPERTY (UNIT 1):

Under Section 23, Gross Annual Value (GAV) is the highest of: (a) actual rent, (b) municipal valuation, (c) standard rent, or (d) 12% of capital value.

Unit 1 (50% of property):
- Actual rent received: ₹15,000 × 10 months = ₹1,50,000 (vacant 2 months; ₹3,000 uncollected excluded as not taxable under Section 119(3))
- Municipal valuation: ₹1,88,000 × 50% = ₹94,000
- Standard rent: ₹2,28,000 × 50% = ₹1,14,000
- GAV = ₹1,50,000 (highest)

Under Section 23(1)(c), a standard deduction of 30% of GAV is allowed for let-out property:
- Standard deduction = ₹1,50,000 × 30% = ₹45,000
- Net Annual Value (NAV) = ₹1,05,000

Deductions under Section 24 (allocated 50% to Unit 1):
- Municipal taxes: ₹20,000 × 50% = ₹10,000
- Repairs: ₹5,000 × 50% = ₹2,500
- Interest on borrowed capital: ₹6,000 × 50% = ₹3,000
- Ground rent: ₹6,000 × 50% = ₹3,000
- Fire insurance premium: ₹60,000 × 50% = ₹30,000
- Total deductions = ₹48,500

Income from house property = ₹1,05,000 − ₹48,500 = ₹56,500

INCOME FROM BUSINESS (UNITS 2 & 3):

Gross business income (given): ₹1,40,000

Deductible expenses (allocated 50% to Units 2 & 3):
- Interest on borrowed capital: ₹6,000 × 50% = ₹3,000
- Municipal taxes: ₹20,000 × 50% = ₹10,000
- Repairs: ₹5,000 × 50% = ₹2,500
- Ground rent: ₹6,000 × 50% = ₹3,000
- Insurance premium: ₹60,000 × 50% = ₹30,000
- Depreciation under Section 32(1)(ii): Building cost (₹1,88,000 × 50%) = ₹94,000; Rate = 1/60 per annum = ₹1,567
- Total deductions = ₹50,067

Net business income = ₹1,40,000 − ₹50,067 = ₹89,933

TOTAL TAXABLE INCOME = ₹56,500 + ₹89,933 = ₹1,46,433

Answer: Taxable Capital Gain = NIL; Rate of Tax = 0% (Not Applicable)

Step 1: Classification as LTCG or STCG
Holding period from 5th April 2017 to 28th February 2021 = 3 years 10 months, which exceeds 12 months. Therefore, this constitutes Long-Term Capital Gain (LTCG).

Step 2: Determination of Cost of Acquisition
For listed shares acquired before 1st February 2018 on a recognized stock exchange where STT is paid, the cost of acquisition per Section 112(1)(c) of the Income Tax Act, 1961 (as amended by Finance Act 2018) is the LOWER of:
(a) Actual cost of acquisition = ₹395 per share
(b) Fair Market Value on 31st January 2018 = ₹390 per share

Cost of Acquisition = ₹390 per share (the lower amount)

Step 3: Calculation of Capital Loss
Selling Price (28th February 2021): ₹50 per share
Cost of Acquisition: ₹390 per share
Capital Loss = ₹50 − ₹390 = −₹340 per share
Total Capital Loss = ₹340 × 10,000 shares = ₹34,00,000

Step 4: Tax Implications
This transaction results in a capital loss of ₹34,00,000, not a capital gain. Capital losses on listed securities do not result in tax liability. The loss can be carried forward for set-off against future capital gains (if any) in subsequent years, subject to time limit restrictions.

Conclusion:
Taxable Capital Gain = NIL
Rate of Tax Applicable = 0% (Not Applicable)
Tax Payable = ₹0

Capital Gain Computation:

The consideration for sale under Section 50A of the Income Tax Act, 1961, is the higher of actual sale price (₹19,00,000) or stamp valuation (₹45,00,000), which is ₹45,00,000.

Indexed Cost of Acquisition: ₹9,00,000 × (301/264) = ₹10,26,136

Long-Term Capital Gain = ₹45,00,000 − ₹10,26,136 = ₹34,73,864

Holding period is 4 years (1st Sept 2016 to 4th Sept 2020), confirming LTCG classification for residential property.

Section 54EC Exemption Analysis: The NHAI Bond investment was made on 21st March 2021, which is 199 days after the sale date (4th September 2020). The prescribed time limit under Section 54EC of the Income Tax Act, 1961 is 6 months from the date of sale (expires 4th March 2021). Since the investment falls outside the 6-month window and no "reasonable cause for delay" is established under the 6-to-9-month provision, Section 54EC exemption is not available.

Taxable Capital Gain = ₹34,73,864 (entire LTCG, as no exemption available)

Tax Computation:
LTCG on residential property attracts tax at 20% with indexation benefit allowed.

Tax on LTCG = ₹34,73,864 × 20% = ₹6,94,773

Health and Education Cess @ 4% on tax = ₹6,94,773 × 4% = ₹27,791

Total Tax (before surcharge) = ₹6,94,773 + ₹27,791 = ₹7,22,564

*Note: Surcharge, if applicable, depends on total income of the assessee (not provided). At income levels above ₹1 crore, surcharge @ 25% on tax may be applicable.*

Calculation of Capital Gain on Transfer of Business

Step 1: Compute Net Amount Received
Sale Consideration: ₹40,00,000
Less: Professional Fees & Brokerage: ₹80,000
Net Amount Received: ₹39,20,000

Step 2: Identify Assets Transferred
From Balance Sheet as on 31-03-2021:
- Building: ₹5,00,000
- Furniture: ₹5,00,000
- Debtors: ₹3,00,000 (typically not transferred as capital asset)
- Other Assets (incl. Trademark valued at ₹2,00,000): ₹8,00,000

Assets transferred (excluding Debtors which are receivables):
Building + Furniture + Trademark + Other Current Assets = ₹5,00,000 + ₹5,00,000 + ₹2,00,000 + ₹6,00,000 = ₹18,00,000

Step 3: Calculate Total Capital Gain
Net Sale Proceeds: ₹39,20,000
Less: Cost of Assets Transferred: ₹18,00,000
Total Capital Gain = ₹21,20,000

Step 4: Asset-wise Allocation (Proportionate to Book Values)
Allocation ratio: ₹39,20,000 ÷ ₹18,00,000

Building: (5÷18) × ₹39,20,000 = ₹10,88,889; Gain = ₹5,88,889 (Section 50A applies—LTCG)

Furniture: (5÷18) × ₹39,20,000 = ₹10,88,889; Gain = ₹5,88,889 (Section 50 applies—recapture of depreciation)

Trademark: (2÷18) × ₹39,20,000 = ₹4,35,556; Gain = ₹2,35,556 (LTCG if held >2 years)

Other Assets: (6÷18) × ₹39,20,000 = ₹13,06,667; Gain = ₹7,06,667

Final Answer: Capital Gain = ₹21,20,000 (comprising Section 50 gains, Section 50A gains, and goodwill/business income elements as detailed above)

DUTIES OF MR. SIEFAN (PAWNEE):

Duty to Take Reasonable Care (Section 152, Indian Contract Act, 1872): Mr. Siefan must take reasonable care of the pledged farm and its contents. He cannot be negligent in managing the birds or eggs. Any loss or damage caused by his negligence makes him liable to Mr. Flemming.

Duty to Preserve the Goods (Section 153): If the pledged goods suffer loss or damage due to Siefan's negligence, he is liable. In this case, if any birds died or eggs were damaged due to lack of proper care, Siefan must compensate Flemming.

Limited Right of Use (Section 155): Siefan can use the pledged goods only to the extent necessary for their preservation. He cannot breed birds or use the farm for commercial benefit beyond maintaining the pledged property. Any profit from commercial use belongs to Flemming.

Duty to Return Goods (Section 157): Upon redemption (payment of the loan), Siefan must return the pledged goods to Flemming. This includes the original items and any natural produce or increase thereof.

RIGHTS OF MR. FLEMMING (PAWNOR):

Right to Redemption: Flemming has the right to reclaim the pledged farm by repaying the ₹25 lakhs debt. Once the debt is paid, Siefan must release the goods.

Right to All Natural Produce: Under Section 157, all natural increase and produce of the pledged goods belong to Flemming, not Siefan. The 5,000 additional eggs (15,000 – 10,000) are the natural produce of the original eggs and belong entirely to Flemming. The 100,000 birds, being the offspring of the original birds/eggs, also belong to Flemming.

Right to Compensation: If any loss occurred due to Siefan's negligence in managing the farm, Flemming can claim compensation. Siefan's agreement to return only 100,000 birds and 10,000 eggs is unjust as it wrongfully denies Flemming the natural increase.

LEGAL POSITION IN THIS CASE:

Siefan's position is problematic. He cannot unilaterally decide to retain the 5,000 additional eggs or claim ownership of the birds that hatched naturally. These increases are the natural produce of the pledged goods and belong to Flemming as the owner. Siefan, being merely a pawnee, holds the goods in trust and has no claim over the natural increase. The deposit of ₹25 lakhs does not extinguish Flemming's ownership of the goods or their produce. Siefan must return all 100,000 birds and all 15,000 eggs to Flemming upon receipt of the redemption amount.

Legal Position of Mr. Harsha:

Mr. Harsha's position is legally sound. As the drawer of the cheque, he has an absolute right to countermand payment under Section 43 of the Negotiable Instruments Act, 1881, which allows any person authorized to draw on a banker to countermand payment of any cheque. Once a valid countermand instruction is given to the banker, the banker is not bound to honor the cheque (Section 139). The bank has correctly acted by not honoring the cheque.

Mr. Harsha's Status:
Mr. Harsha is not liable for the ₹50,000. The cheque has been legally dishonored through valid countermand. The fact that the NGO subsequently turned out to be fraudulent provided sufficient grounds for exercising this statutory right. The cheque itself remains a valid negotiable instrument, but its operation has been suspended by the countermand.

Regarding the NGO's Threat:
The NGO cannot claim payment based on the dishonored cheque itself. Their only legal recourse would be to file a civil suit for breach of contract or recovery of donation based on failure of consideration—not an action on the cheque. However, Mr. Harsha has a complete defense even in such a suit: total failure of consideration. The donation was given with the condition that funds would be used for education sponsorship. Since the NGO is fraudulent and engages in no philanthropic activities, the entire consideration has failed. Under contract law principles applicable to gifts, Mr. Harsha can successfully defend such action.

If NGO Files Complaint Under Section 138:
Even if the NGO files a criminal complaint under Section 138 of the NI Act (dishonored cheques), Mr. Harsha has strong defenses. While Section 138 applies to cheques dishonored due to countermand, the complete defense available is fraud. The cheque was given based on a false representation by the NGO about its nature and activities. When the drawer discovers fraud after issuing the cheque, countermanding payment is the legitimate remedy. The criminal liability under Section 138 cannot apply where the dishonor is based on valid grounds of fraud.

Course of Action Advised for Mr. Harsha:
1. Retain documentation of his discovery of the NGO's fraudulent nature and the stop payment instruction given to the bank.
2. Do not respond to threats from the NGO until formal legal notice is received. The threat itself is baseless as they have no legal claim on a stopped cheque.
3. If sued, plead total failure of consideration and submit evidence of the fraud.
4. If a Section 138 complaint is filed, engage a lawyer immediately and file a reply affidavit explaining the fraud, with supporting evidence.
5. Consider reporting the fraud to relevant authorities (NCRP, NCB, etc.) if the NGO is engaging in fraudulent activities.

Mr. Harsha's exercise of the stop payment right is completely lawful and requires no further action unless formal legal proceedings commence.

The statement is substantially VALID as per the Companies Act, 2013, with important qualifications regarding exceptions.

6-Month Cooling Period Between Successive Buy-Back Offers

Section 68(2)(g) of the Companies Act, 2013 mandates that a company cannot make an offer for buy-back of its own shares within six months from the date of closure of the preceding buy-back offer, if any. This is an absolute prohibition with no exceptions. This cooling period ensures market stability, prevents sudden large-scale capital reduction, and protects shareholder interests by allowing the company time to stabilize after a buy-back.

1-Year Cooling Period for Fresh Issue of Same Kind of Shares

Rule 13(1) of the Companies (Share Capital and Debentures) Rules, 2014 provides that a company cannot make any fresh issue of shares or other securities of the same kind as those bought back for a period of one year from the completion of buy-back. The rationale is to prevent circumvention of buy-back regulations and defeat capital reduction objectives. However, the statement correctly notes that certain exceptions exist.

Exceptions to the 1-Year Cooling Period

Rule 13(2) specifies important exceptions where fresh issues may be made during the 1-year cooling period: (1) ESOP Shares – exercise of options granted before buy-back initiation under an employee stock option plan; (2) Employee Stock Purchase Schemes – shares issued pursuant to approved employee stock purchase schemes; (3) Deferred ESOP – issuance under deferred employee stock option plans; (4) Shareholder-Approved Schemes – any scheme approved by shareholders in general meeting. These exceptions recognize that legitimate employee benefit objectives should not be restricted.

Additional Considerations

The buy-back must be completed within 12 months from Board approval. These cooling period provisions work in conjunction with other Section 68 restrictions, including limits on buy-back quantum (maximum 25% of paid-up capital and free reserves) and funding constraints. Any violation of cooling period provisions renders the transaction void ab initio.

Conclusion

The statement accurately captures the cooling period regime. The 6-month cooling period between successive offers is an absolute mandate. The 1-year cooling period for fresh issues is correctly stated, but must be read subject to the exceptions provided in Rule 13(2), particularly for employee share schemes. Both provisions are statutory mandates that companies must strictly observe.

Feasibility: YES, ABC Limited's proposal is feasible under the shelf prospectus mechanism.

What is Shelf Prospectus:
A shelf prospectus is a prospectus that permits a company to issue securities (including debentures) in multiple tranches over a specified period without filing separate prospectuses for each tranche. It is governed by Section 31 of the Companies Act, 2013.

Application to Debentures:
Section 31 applies to all types of securities, including debentures. Therefore, ABC Limited can lawfully use a shelf prospectus to issue multiple series of debentures without the repetitive burden of filing separate prospectuses for each tranche.

Validity Period and Mechanism:
The shelf prospectus remains valid for 365 days from the date of closure of subscription to the first tranche. During this 365-day window, ABC Limited can issue multiple tranches of debentures within the overall limit specified in the shelf prospectus. Each tranche need not require filing of a fresh prospectus, thereby avoiding the "complicated exercise" mentioned in the proposal.

Conditions ABC Limited Must Satisfy:
1. The shelf prospectus must be filed with the Registrar of Companies and must clearly specify: (i) the total amount of debentures to be issued; (ii) the terms and conditions applicable; (iii) the period within which tranches will be offered (not exceeding 365 days).
2. Each tranche of debentures must be issued strictly in accordance with the terms disclosed in the shelf prospectus.
3. If material changes occur between issuance of tranches, a corrigendum or supplementary prospectus may be required to inform investors of such changes.
4. Compliance with SEBI ICDR Regulations regarding debt issuance remains mandatory.

Limitation:
Once the 365-day period expires, the shelf prospectus ceases to be valid. If ABC Limited wishes to continue issuing debentures thereafter, a fresh shelf prospectus must be filed with the ROC. The shelf prospectus is not a perpetual mechanism; it is time-bound.

Conclusion:
ABC Limited's proposal is entirely feasible. By filing a single shelf prospectus, the company avoids repeated compliance formalities and prospectus filings for each debenture series issued within the 365-day validity period. This mechanism directly addresses the company's objective of simplifying the issuance process while maintaining regulatory compliance.

Answer: Total Income of Mr. Dharmesh and Mrs. Anandi for AY 2021-22 is ₹32,06,000

Computation:

Mr. Dharmesh's Total Income:
1. Salary income: ₹9,60,000
2. Garment trading business (net profit): ₹17,50,000
3. Minor son's income: ₹3,13,000 (comprising ₹3,08,000 + ₹5,000 FD interest)
4. Minor daughter's income from script: ₹1,86,000

Application of Section 10(32):
Under Section 10(32) of the Income Tax Act, 1961, income of a minor child is added to the parent's income, but relief is granted for income not exceeding ₹1,500 per minor child.

Minor son's taxable income: ₹3,13,000 – ₹1,500 = ₹3,11,500
Minor daughter's taxable income: ₹1,86,000 – ₹1,500 = ₹1,84,500

Treatment of Cash Gift:
The cash gift of ₹45,000 to the minor daughter is exempt from tax under Section 56(2)(vii) of the Income Tax Act, 1961, as it qualifies as a gift from a relative (parent). Hence, it is not included in taxable income.

Final Computation:
Mr. Dharmesh's Total Income = ₹9,60,000 + ₹17,50,000 + ₹3,11,500 + ₹1,84,500 = ₹32,06,000
Mrs. Anandi's Total Income = ₹0 (no income disclosed)

Combined Total Income = ₹32,06,000

Note: Since they have not opted for Section 115BAC, normal tax rates apply. Mrs. Anandi would file a nil return or a return showing only the minors' income allocation.

Answer: This question references a table of income figures that was not fully provided in the problem statement. However, the computation methodology for AY 2021-22 (PY ending March 31, 2021) is as follows, illustrated with reasonable assumptions based on the given scenario.

Income Computation Structure:

1. Income from Salary: ₹2,22,000 (fully includible under Section 15, IT Act, 1961). Salary is taxed completely as stated.

2. Income from House Property: House property income is computed separately for each property under Sections 22-24. For multiple properties (Delhi, Chennai, Mumbai):
- Compute net income/loss for each property: Rental income minus interest on borrowed capital (fully deductible under Section 24(b)) and other permitted deductions (Section 24(a)).
- Aggregate all house property incomes. Note: A loss from a self-occupied house (no income) cannot be created; only losses from let-out houses are aggregable. Loss from house property can be set off against any other income under Section 71.

3. Income from Business/Profession: Under Sections 28-44D:
- Textiles and Cosmetics: These are ordinary businesses. Compute profit/loss for each under standard provisions. Set off losses from one against profits of the other (both fall under business/profession head).
- Speculative Business: Compute separately. A loss from speculative transactions cannot be set off against income of other sources (Section 73). Any loss must be carried forward for set off only against speculative gains of subsequent years (maximum 4 years under Section 73(3)).

4. Capital Gains: Under Sections 45-47:
- Segregate Short-Term Capital Gains (STCGs—holding period < 24 months for property) and Long-Term Capital Gains (LTCGs—holding period ≥ 24 months).
- Both are included in GTI at normal rates (unless specific exemptions apply, e.g., Section 54 for residential property reinvestment).
- Capital losses are set off against capital gains (Section 71). If capital loss exceeds gains, the loss is carried forward for 8 years under Section 74.

5. Other Income (Betting/Card Games): Fully includible under Section 56(2)(x), IT Act, 1961 at normal rates.

Gross Total Income Computation:

GTI = Salary + Net House Property Income + Net Business Income (Textiles + Cosmetics) + Capital Gains (Net of Losses) + Other Income

GTI = ₹2,22,000 + [House Property Net] + [Ordinary Business Net] + [Net Capital Gains] + [Betting Income]

Losses to be Carried Forward:
- Speculative Business Loss: Any loss from speculative transactions is carried forward separately under Section 74(1) to be set off only against speculative gains in subsequent years (maximum 4 year carry-forward period).
- Capital Loss: Any excess capital loss (after set off against capital gains of the same year) is carried forward for up to 8 years under Section 74.
- Ordinary Business Loss: If net business loss exists (Textiles + Cosmetics combined), it is set off against other income in the same year under Section 71 or carried forward under Section 72 for 8 years (if not fully adjusted).

Important: Section 115BAC (new tax regime) is not opted as per the question; therefore, old provisions and all permissible deductions apply.

Note on Missing Data: The specific numerical figures for house property incomes/losses, individual business profits/losses, and capital gains/losses were referenced as a table but not provided. Once these figures are available, apply the above structure to compute the final GTI.

Computation of GST Payable by X Electronics for October 2020

Note on Internal Sales: Internal sales of ₹50,00,000 represent intra-entity stock transfers within the same registered person (same GSTIN). These do not constitute a 'supply' under Section 7 of the CGST Act 2017 and are hence not liable to GST.

Treatment of Discount on Air Conditioners: A 10% discount was pre-agreed through a contract with dealers. As the discount was established before the supply and is linked to the relevant invoice, it qualifies for deduction from the transaction value under Section 15(3) of the CGST Act 2017. Accordingly, taxable value of ACs = ₹50,00,000 − ₹5,00,000 (10%) = ₹45,00,000.

Treatment of Mixed Supply (Refrigerators with Stabilizers): Under Section 8(b) of the CGST Act 2017, a mixed supply is taxed at the highest rate applicable to any of its constituent supplies. Refrigerators attract 18% and stabilizers also attract 18%. Therefore, the entire mixed supply of ₹40,00,000 is taxed at 18%.

Computation of GST on Outward Intrastate Supplies:

| Particulars | Taxable Value (₹) | CGST Rate | CGST (₹) | SGST Rate | SGST (₹) |
|---|---|---|---|---|---|
| Microwave Ovens | 15,00,000 | 9% | 1,35,000 | 9% | 1,35,000 |
| Refrigerators with Stabilizers (Mixed Supply) | 40,00,000 | 9% | 3,60,000 | 9% | 3,60,000 |
| Air Conditioners 1.5 Ton (after 10% discount) | 45,00,000 | 14% | 6,30,000 | 14% | 6,30,000 |
| Total GST Liability | 1,00,00,000 | | 11,25,000 | | 11,25,000 |

Determination of Eligible Input Tax Credit (ITC):

(i) Raw Material ₹20,00,000 @ 18%: ITC eligible — CGST ₹1,80,000 and SGST ₹1,80,000. Directly used in manufacturing.

(ii) Gym Membership ₹50,000: ITC is blocked under Section 17(5)(b) of the CGST Act 2017. ITC on health and fitness services is not available unless the provision of such service is obligatory for the employer under any law for the time being in force. The question explicitly states it is not obligatory. ITC = NIL.

(iii) Truck for Transportation of Goods ₹30,00,000 @ 28%: Although motor vehicles are generally blocked under Section 17(5)(a), the exception applies — ITC is available when the motor vehicle is used for transportation of goods. Hence, ITC is eligible — CGST ₹4,20,000 and SGST ₹4,20,000.

ITC Utilization under Section 49 of the CGST Act 2017:

Under Section 49(5)(b), IGST credit can be utilized towards CGST and SGST liability in any order after exhausting towards IGST. Since all supplies are intrastate, IGST output liability is nil.

| | CGST (₹) | SGST (₹) | IGST (₹) |
|---|---|---|---|
| Opening Balance | 58,000 | 70,000 | 10,00,000 |
| Add: ITC earned this period | 6,00,000 | 6,00,000 | — |
| Total ITC Available | 6,58,000 | 6,70,000 | 10,00,000 |
| Less: Set-off against own liability | (6,58,000) | (6,70,000) | — |
| Balance liability remaining | 4,67,000 | 4,55,000 | — |
| Less: IGST ITC utilised | (4,67,000) | (4,55,000) | (9,22,000) |
| Net GST Payable in Cash | NIL | NIL | — |
| Closing IGST ITC Balance c/f | | | 78,000 |

Conclusion: X Electronics has no cash GST payable for October 2020. The closing balance of IGST ITC carried forward to the next period is ₹78,000.

Sub-part (i): VALID

The decision to shift the registered office from Thane to Dalar by passing a Special Resolution without obtaining Regional Director's approval is valid. Although both places fall within different local limits, they are situated within the jurisdiction of the same Registrar of Companies (Mumbai). As per Rule 12 of the Companies (Incorporation) Rules, 2014, when the registered office is shifted to a different local limit within the same State but under the jurisdiction of the same Registrar, a Board Resolution is sufficient. The company has passed a Special Resolution, which is more stringent than required and therefore valid. Importantly, the approval of the Regional Director is not required when both places fall within the jurisdiction of the same Registrar. The Regional Director's approval is needed only when the office is shifted to a different State or to a different Registrar's jurisdiction within the same State (Rule 12(3) and Rule 12(4) of the Companies (Incorporation) Rules, 2014). Hence, the absence of such approval does not render the decision invalid.

Sub-part (ii): VALID

The proposal to shift the Corporate Office from Pune to Mumbai by Board Resolution is valid. The statutory provisions regarding shifting of the registered office, as prescribed under Rule 12 of the Companies (Incorporation) Rules, 2014, apply exclusively to the registered office of the company. A Corporate Office, by definition, is merely an administrative or business office and not the registered office. The company can shift its corporate office from one place to another at any time by passing a Board Resolution, without adhering to the formal requirements applicable to the shifting of registered office. Since the company's registered office continues to be in Mumbai and only the corporate office is being shifted within the same State, the decision is entirely valid. The distinction between registered office and corporate office is critical: the former is the principal office where statutory business is conducted, while the latter is merely an operational office.

Sub-part (iii): VALID

The proposal to shift the registered office from one place to another within the same local limits (same city) by Board Resolution is valid. As per Rule 12(1) of the Companies (Incorporation) Rules, 2014, when a company shifts its registered office within the same local limits, only a Board Resolution is required. No Special Resolution is necessary, and no approval from the Regional Director or any other authority is needed. Shifting within the same city/local limits is treated as a routine administrative matter and does not trigger the more stringent procedural requirements. The passing of a Board Resolution is entirely in compliance with the statutory provisions, making this decision valid.

Definition of Officer: Under Section 2(59) of the Companies Act, 2013, an 'officer' includes any director, manager, Company Secretary, Chief Financial Officer, whole-time director, managing director, and any person in accordance with whose directions or instructions the Board is accustomed to act (de facto director). It also includes any person occupying the position of director by whatever name called.

Officer in Default - Definition: Section 2(60) of the Companies Act, 2013 defines 'officer in default' as an officer who falls into any of the following categories:

(a) Knowingly authorises or permits any default - where an officer knowingly allows or authorises a contravention of the Act's provisions.

(b) Knowingly participates in or is privy to default - where an officer is aware of and participates in or becomes party to a contravention.

(c) Fails to take reasonable steps to prevent default - where an officer has the means to prevent a contravention but fails to take reasonable steps to do so.

(d) Knowledge test - where an officer knew or reasonably should have known of the default but failed to take reasonable steps to prevent or stop it.

(e) Specific provision for absence of designated officer - Critically, Section 2(60) also provides that where there is no Managing Director or any officer designated by the Board with specific responsibility for complying with the provisions of the Act, every director shall be deemed to be in default in relation to any contravention.

Application to Johnson Limited: In the instant case, a default has been committed in allotment of shares. The facts specifically state that there is no Managing Director or any officer designated by the Board with responsibility of complying with the Act's provisions. This is a crucial factual element. Under Section 2(60), every director of Johnson Limited shall be deemed to be in default, irrespective of whether they individually authorised, participated in, or knew of the default. The absence of a designated responsible officer means the burden falls on all directors collectively. The directors cannot escape liability by claiming lack of knowledge or involvement, as the statutory deeming provision applies automatically when no designated officer exists. Additionally, any other officer (Company Secretary, Chief Financial Officer, Manager) who either knowingly participated in the contravention or failed to take reasonable steps to prevent it would also be officers in default.

Right to Inspect Minutes and Obtain Copies:

Yes, Mr. Laurel, being a shareholder of Hardly Limited, can inspect the minutes book of General Meetings. Under Section 358 of the Companies Act, 2013, the minutes of all meetings of members shall be kept at the registered office of the company and shall be open for inspection by any member during business hours at least once in a calendar year for a period of fourteen days. Therefore, Mr. Laurel has the statutory right to inspect the minutes book.

However, regarding obtaining copies at no cost: The answer is No. Section 359 of the Companies Act, 2013 provides that every member shall be entitled to obtain a copy of the minutes or a certified extract thereof. But these copies are not provided free of charge. The cost is to be determined by the company in general meeting. If the company fails to determine the cost, it shall not exceed the actual cost of production. Therefore, while Mr. Laurel can obtain copies, he must pay the prescribed cost as determined by the company.

Authorization Through Power of Attorney:

Yes, Mr. Laurel can authorize his friend to inspect the minutes book on his behalf by executing a power of attorney or written authorization. Section 358 provides the right of inspection to 'any member,' and this right is not restricted to personal inspection alone. A member can exercise their statutory rights through an authorized representative appointed via power of attorney. The authorized representative, acting as the agent of the member with proper authority, would be entitled to inspect the minutes during the prescribed hours. The company is bound to allow such inspection by the duly authorized representative of the member. However, the authorization must be valid and the representative must produce the power of attorney or written authorization at the time of inspection to establish their authority to act on behalf of Mr. Laurel.

Validity of C's Notice Under ICA, 1872

The notice served by C (son of A) without authorization is not valid and does not bind either A or B.

Agency and Authority Under ICA, 1872

Under Section 187 of the Indian Contract Act, 1872, agency is created when one person is authorized to act for another. The authority may be express (explicitly given) or implied (inferred from circumstances). Without any form of authorization, no valid agency relationship exists.

Section 188 distinguishes express authority (specifically authorized by principal) from implied authority. Section 189 states that implied authority covers acts that are—by the usage of the trade or business of which the agent is conversant—usually done by agents on behalf of their principals. Terminating a lease is a material contractual matter that cannot ordinarily be inferred as within the son's usual authority unless he is formally tasked with property management.

Section 190 recognizes apparent (ostensible) authority—authority which the principal by his words or conduct represents the agent to possess. In this case, A has made no representations to B that his son possesses authority to terminate the lease. B would have every reason to believe that only A (or someone expressly authorized by A) can serve notice.

Application to the Facts

Absence of Express Authority: C had no express authorization from A to serve notice or terminate the lease. A's statement about C's personal need for housing does not constitute authorization to act on A's behalf.

Absence of Implied Authority: C's relationship as son does not automatically grant implied authority over landlord's affairs. Implied authority would only exist if A had placed C in charge of property management or had previously authorized him to handle tenancy matters. No such authority is evident.

Absence of Apparent Authority: A has not held out C as his agent to B or to the public. For apparent authority to exist, A must have represented C as authorized, which he has not done.

Consequence Under Section 173: Section 173 states that principal is not responsible for acts of agent done without authority. C's unilateral notice does not bind A to the termination of the lease. B can refuse to vacate and enforce his rights under the original lease agreement.

Conclusion

C's notice is void and invalid. It cannot terminate the lease agreement. B's tenancy continues for the agreed period unless A himself (or someone properly authorized by A in writing) serves valid notice. C's unauthorized action has no legal effect, and B has a valid defense against any ejectment proceedings initiated on the basis of C's notice.

To determine ITC eligibility, we apply the conditions under Section 16 of the CGST Act, 2017 (availability of ITC on inputs and capital goods) and the restrictions under Section 17(5) (conditions for denial of ITC).

Item 1: Goods used in constructing additional office building (₹15,450)
NOT ELIGIBLE. Section 17(5)(d) of the CGST Act denies ITC on goods used in construction of any immovable property, except for factory buildings constructed in compliance with industrial zoning regulations. Since this is an office building (not a factory), no ITC is available.
ITC: ₹0

Item 2: Goods given as free samples to prospective customers (₹15,000)
NOT ELIGIBLE. Free samples are not taxable supplies as no tax is collected. ITC is available on inputs used in making taxable supplies. Since no GST is levied on free samples, the supply is not a taxable supply. Inputs used for such non-taxable supplies do not qualify for ITC.
ITC: ₹0

Item 3: Trucks used for transportation of inputs in the factory (₹11,000)
ELIGIBLE. Trucks are capital goods used in the course of business. Section 16(1)(a) of the CGST Act explicitly provides ITC on capital goods. These trucks are used for business operations within the factory, qualifying them for ITC.
ITC: ₹11,000

Item 4: Inputs used in trial runs (₹9,850)
ELIGIBLE. Trial runs conducted before commercial manufacturing are part of the manufacturing process. Inputs consumed during trial runs (raw materials, power, etc.) are used in the course of business and qualify for ITC as they are directly related to the manufacturing activity.
ITC: ₹9,850

Item 5: Confectionery items for employee consumption (₹3,250)
NOT ELIGIBLE. Section 17(5)(h) of the CGST Act denies ITC on goods used for personal consumption. Confectionery provided for employee consumption is personal consumption and does not qualify for ITC.
ITC: ₹0

Item 6: Cement used for foundation and structural support of plant and machinery (₹8,050)
NOT ELIGIBLE. Section 17(5)(d) of the CGST Act denies ITC on goods used in construction of any immovable property. Cement used for making foundation is part of the permanent immovable structure, hence falls within this restriction. The fact that it supports plant and machinery does not change its character as an immovable property component.
ITC: ₹0

Total Input Tax Credit Available for December 2020: ₹20,850

This represents the amount eligible for ITC (₹11,000 from trucks + ₹9,850 from trial run inputs). The actual GST credit amount would be the applicable GST rate applied to these amounts.

Composite Supply is defined under Section 2(30) of the CGST Act, 2017 as a supply comprising two or more individual supplies of goods or services which are naturally bundled together and supplied as a single whole for a single price/consideration. The key feature is that one supply is principal while others are ancillary/dependent on the principal supply, forming an inseparable combination.

Mixed Supply is defined under Section 2(74) of the CGST Act, 2017 as two or more individual supplies of goods or services which are supplied together at a single price/consideration, but are not naturally bundled. The supplies are of equal standing with no principal-ancillary relationship; they are bundled only for convenience or marketing purposes.

Key Differences:

1. Natural Bundling: Composite supplies are naturally/inseparably bundled (e.g., writing pad with pen); mixed supplies are artificially bundled for marketing convenience.

2. Principal-Ancillary Relationship: Composite supply has one principal supply determining the character of the bundle; mixed supply has supplies of equal standing.

3. Tax Rate: In composite supply, the rate applicable to the principal supply applies to the entire supply. In mixed supply, as per Section 8 of the CGST Act, 2017, the rate applicable is that of the supply with the highest rate of tax.

Analysis of the Given Scenario:

The marriage package containing a double bed, refrigerator, washing machine, and wooden wardrobe is a MIXED SUPPLY, not composite supply, for the following reasons:

1. These are four distinct supplies of unrelated goods belonging to different categories (furniture and appliances).

2. There is no principal-ancillary relationship. None of these items is dependent on or supplementary to another—each maintains complete independent identity.

3. No natural bundling. The items are bundled only for marketing purposes (as a "marriage package") and not because they are inseparable or naturally go together.

4. Each item can be purchased independently without the others, indicating they are separate, stand-alone supplies.

5. The invoice showing value of each good separately confirms the mixed supply nature. In composite supply, typically only the principal supply is shown; here, separate valuation indicates separate supplies.

6. The bundling is artificial and commercially motivated rather than inherent to the nature of the goods.

Consequently, the GST rate applicable to this mixed supply would be determined by the supply with the highest applicable tax rate among the four items, as per Section 8 of the CGST Act, 2017.

Meaning of Aggregate Turnover under Section 2(6) of CGST Act 2017:

Aggregate turnover is the sum total of the value of all taxable supplies, exempt supplies, and exports of goods or services made in the course of or furtherance of business, calculated on an all-India basis during a financial year. It represents the combined business turnover from all supplies regardless of GST treatment, valued at their transaction value exclusive of any taxes (CGST/SGST/IGST).

Key Characteristics:

Aggregate turnover is computed on all-India basis, meaning supplies from all states and union territories are aggregated together. It is used to determine: (i) eligibility for exemption from GST registration (₹20 lakh threshold for most businesses, ₹10 lakh for service suppliers), and (ii) eligibility for composition scheme (₹1 crore for traders, ₹75 lakh for manufacturers).

Components Included in Aggregate Turnover:
1. Taxable supplies - Supplies subject to GST at applicable rates
2. Exempt supplies - Supplies specifically exempt from GST
3. Exports - Supply of goods/services outside India (zero-rated supplies)

All valued at transaction value (exclusive of CGST/SGST/IGST).

Components Excluded from Aggregate Turnover:
- Inward supplies/purchases
- Taxes (GST/CGST/SGST/IGST)
- Import duties or custom duties
- Taxes on supplies received under reverse charge

Computation for P Ltd. - October 2020:

Includable components:
- Intrastate taxable outward supply: ₹8,00,000
- Intrastate exempt outward supply: ₹4,00,000
- Turnover of exported goods: ₹20,00,000

Non-includable components (with reasons):
- GTA services payment (₹3,00,000): Inward supply/purchase, excluded from aggregate turnover
- GST payment (₹1,20,000): Tax expense, not a supply value
- CGST and SGST (₹45,000 each): Taxes paid, not supply values
- Custom duty on export (₹40,000): Duty paid, not part of supply value

Final Calculation:
Aggregate Turnover = ₹8,00,000 + ₹4,00,000 + ₹20,00,000 = ₹32,00,000

Nature of Supply: The engagement of Ms. Mahima for a classical dance performance constitutes a supply of entertainment services under Section 7 of the CGST Act 2017. Ms. Mahima, as the performer, is the supplier, and XYZ Pvt. Ltd. is the recipient of this service.

Taxability: Entertainment services, specifically live performances, are taxable under GST at 5% as per Schedule II of the GST rate schedule. This includes live classical dance performances by artists.

GST Implications for XYZ Pvt. Ltd.:

(1) On Engagement of Ms. Mahima: The amount paid to Ms. Mahima (or the value of consideration provided to her for the performance) will attract GST @ 5%, provided she is a registered person or the value exceeds the registration threshold. XYZ Pvt. Ltd. must obtain a valid GST invoice from Ms. Mahima to claim input tax credit.

(2) On Concert Proceeds (₹1,25,000): If this amount represents ticket revenue from the concert, XYZ Pvt. Ltd. is providing a taxable supply (admission to the concert as a service). However, if the concert is organized as a free promotional event, there may be no taxable supply to the audience, and the company would only be liable for GST on amounts paid to Ms. Mahima.

(3) Potential Exemptions: If XYZ Pvt. Ltd. can characterize the concert as an activity of a trade association or business promotion activity without charging admission, it may qualify for exemption under Schedule III of the CGST Act 2017. However, GST would still be payable on the fees to the performer.

Compliance Requirements: XYZ Pvt. Ltd. must maintain proper documentation (invoice from Ms. Mahima), record the transaction in its GST register, and report GST paid as input tax credit in its GST returns (GSTR-2, GSTR-3B) in the month of invoice issuance.

1. WHO IS REQUIRED TO FURNISH FINAL RETURN

According to Section 139(1) of the Income Tax Act, 1961, the following persons are required to furnish a return of income:

Every person whose total income exceeds the basic exemption limit during the financial year. The basic exemption limit for individuals varies:
- Resident individual (age < 60 years): ₹2.5 lakh
- Senior citizen (age 60-80 years): ₹3 lakh to ₹5 lakh
- Very senior citizen (age 80+ years): ₹5 lakh

Additionally, every person is required to file if they:
- Have earned any income chargeable to tax, irrespective of the quantum
- Have claimed any deduction, relief, or allowance
- Are engaged in business or profession
- Have specified transactions like foreign remittance, foreign financial assets, or high-value credit card transactions

This requirement applies to individuals, Hindu Undivided Families (HUFs), companies, firms, associations of persons, cooperative societies, and other taxable entities.

2. TIME LIMIT FOR FILING FINAL RETURN

The due date for filing the return of income is specified in Section 139(1) as follows:

For individuals (both resident and non-resident): 31st December of the year following the relevant financial year (extended from 31st July as per Finance Act 2023)

For companies: 30th September following the end of the financial year

For cooperative societies: 30th November following the end of the financial year

For other persons (firms, AOP, BOI, etc.): 30th November following the end of the financial year

For non-residents (if not covered above): 30th June following the end of the financial year

Failure to file within the due date triggers penalty provisions under Section 271F (penalty for failure to furnish return).

3. TIME PERIOD FOR DELAY IN FILING (BELATED RETURN)

As per Section 139(4) of the ITA, 1961, a person may furnish a return even after the due date has expired, provided it is filed within 2 years from the end of the relevant assessment year.

For example, for Assessment Year 2024-25, a belated return can be filed till 31st March 2027 (being 2 years from 31st March 2025).

Limitations on Belated Returns:
- No carry-forward of losses: Loss computed in a belated return cannot be carried forward to subsequent years for set-off
- Restrictions on relief: Relief under Section 89(1) and certain other provisions may not be available
- Loss set-off limitation: Current year loss cannot be adjusted against income of the same year
- Eligibility for advance tax: Belated return filers are not eligible to claim relief as per applicable provisions

A person filing a belated return should note that while it prevents initiation of prosecution under Section 276D (willful failure), it still may attract penalties and loss of certain statutory rights.

CASE (i): Krishna of Himachal Pradesh - LIABLE TO REGISTER

Krishna operates showrooms in three states: Himachal Pradesh (₹25 lakh), Manipur (₹15 lakh), and Sikkim (₹18 lakh). The aggregate turnover = ₹25 + ₹15 + ₹18 = ₹58 lakh. Himachal Pradesh, Manipur, and Sikkim are all special category states (Himachal Pradesh being hilly; Manipur and Sikkim being north-eastern states). As per Section 22 of CGST Act 2017, the registration threshold for special category states is ₹10 lakh. For determination of threshold, aggregate turnover in India (across all states) is considered, not turnover in a single state. Since Krishna's aggregate turnover (₹58 lakh) exceeds the ₹10 lakh threshold applicable to special category states, he is liable to register in each state where he operates. Even considering only Himachal Pradesh (₹25 lakh alone exceeds ₹10 lakh), he would be liable.

CASE (ii): Ankir of Telangana - NOT LIABLE TO REGISTER

Ankir is engaged in intra-state taxable supply of footwears in Telangana with aggregate turnover = ₹25 lakh. Telangana is a regular state (not classified as special category). As per Section 22 of CGST Act 2017, the registration threshold for regular states is ₹40 lakh. Since Ankir's aggregate turnover (₹25 lakh) is below the ₹40 lakh threshold, he is not liable to register under mandatory registration. However, he has the option to voluntarily register under the GST regime if he wishes to avail ITC or for other business reasons.

CASE (iii): Aakash of Uttar Pradesh - NOT LIABLE TO REGISTER

Aakash is engaged in intra-state supply of pan masala in Uttar Pradesh with aggregate turnover = ₹30 lakh. Uttar Pradesh is a regular state. The registration threshold for regular states is ₹40 lakh as per Section 22 of CGST Act 2017. Pan masala is subject to GST. Since Aakash's aggregate turnover (₹30 lakh) is below the ₹40 lakh threshold, he is not liable to register under mandatory registration. Voluntary registration is available to him if desired.

Eligibility for GST Practitioner Registration under Section 48 of CGST Act, 2017

Eligible Persons:

Section 48 of the CGST Act, 2017 defines the categories of persons who can be registered as GST Practitioners (GSTPr). The following persons are eligible:

1. Chartered Accountants (CA): Any person who holds a certificate of practice under the Chartered Accountants Act, 1949 and is a member of the Institute of Chartered Accountants of India (ICAI) is eligible for GST Practitioner registration.

2. Cost and Management Accountants (CMA): Any person holding a certificate of practice under the Cost and Works Accountants Act, 1959 and enrolled with the Institute of Cost Accountants of India (ICAI) is eligible.

3. Advocates: Any person enrolled with the Bar Council in a State and holding a certificate of practice under the Advocates Act, 1961 is eligible.

4. Other Persons: Any other person possessing such qualifications, experience, or both, as may be prescribed by the Government through Rules is eligible. The CGST Rules, 2017 provides for registration of certain other professionals or persons meeting prescribed criteria.

Eligibility Conditions:

Beyond these professional categories, certain conditions must be satisfied:

- The person must be of sound mind and not adjudged as insolvent
- Must not have been convicted of an offense involving moral turpitude
- Must not have been debarred from practicing the profession by competent authority
- Must be a resident in India
- Must apply in the prescribed form and manner
- Must satisfy such other conditions as may be prescribed

Disqualifications:

A person shall be ineligible for registration if they have been convicted of an offense relating to election, theft, fraud, or any offense under GST law within a specified period.

Registration Process:

Once eligible, a person must apply in Form GST REG-17, undergo verification by the proper officer, and upon satisfying all conditions, shall be enrolled in the GST Practitioners Register maintained by the Commissioner. The registration grants authority to act as a representative for filing returns and communicating with tax authorities on behalf of registered taxpayers.

Definition of Deposit under Section 73: Section 73 of the Companies Act, 2013 defines 'deposit' as any receipt of money by way of loan or in any other form from members or any other person, but specifically excludes amounts received as payment for goods/services, from banking companies, financial institutions, by way of advance, earnest money, share subscription, share capital, and other notified amounts.

Analysis of the Unsecured Loan: In this case, the unsecured loans from promoters of Jayshree Spinning Mills Limited are contributed specifically as margin/stipend/security to satisfy SIDCL's collateral requirements before sanctioning loans. This is a critical distinction—the money is not advanced as general working capital or financing, but specifically held as security/collateral for facilitating the SIDCL loan.

Status as Deposit or Not: The unsecured loans will NOT be regarded as deposits under Section 73 of the Companies Act, 2013 because: (1) They constitute security deposits/collateral in substance, which falls within the exceptions to Section 73(2); (2) The purpose is not to provide financing to the company but to provide collateral security for external borrowing; (3) Under Section 73(2), amounts received 'by way of security deposit' are excluded from the definition of deposits; (4) These amounts are held in a fiduciary capacity as collateral and are returnable on satisfaction of the secured obligation.

Compliance Position: Since these are not classified as deposits, the stringent provisions of Section 74 (prohibition on acceptance of deposits without compliance) and Chapter V-A of the Companies Act (detailed deposit acceptance regulations) do not apply to these unsecured loans. However, proper documentation as inter-company loans or director/promoter loans must be maintained under Section 73(2)(e) (advance) or other applicable provisions, and must comply with Schedule XIII if applicable.

When SIDCL Loan is Repaid: Once the entire loan obtained from SIDCL is completely repaid, the underlying purpose for which the promoters' unsecured loans were held as margin is fulfilled. The amounts would be returned to the promoters and cease to be a liability of the company. At that point, the transaction is closed and no deposit-related obligations persist. The company should ensure proper accounting treatment as return of capital/loan repayment rather than as income or adjustment.

Statement (i): Insurance Policies covering immovable property have been held to be immovable property — INVALID

Under Section 3(26) of the General Clauses Act, 1897, immovable property is defined to include land, buildings, structures, and things attached to earth. However, an insurance policy covering such property is itself a contract or instrument, not the property itself. The legal position, consistently held by courts, is that insurance policies are movable property regardless of the nature of the subject-matter they cover. The policy document evidences a right of indemnity and is a chattel (movable asset), even when the insured property is immovable. The character of property is determined by its legal nature, not by the nature of the property it secures. Therefore, the statement is invalid.

Statement (ii): The word 'bullock' could be interpreted to include 'cowy' — INVALID

Under the principles of statutory interpretation embodied in the General Clauses Act, 1897, and established case law, 'bullock' and 'cow' are distinct terms referring to different animals. A bullock is specifically a castrated male bovine animal, while a cow is a female bovine animal. These terms represent specific and separate categories of animals.

The principle of ejusdem generis (of the same kind) and the principle that words in a statute should bear their literal and ordinary meaning preclude artificial expansion of specific terms. A statute using the specific word 'bullock' cannot be interpreted to include 'cow' without clear legislative intent expressed through words of extension such as 'and' or 'or' or qualifying phrases like 'and other animals'. The use of a specific term by the legislature is presumed to exclude other similar but distinct items. Therefore, the statement is invalid.

Foreign decisions can be used for construing Indian statutes, but with specific limitations and conditions. While they are not binding on Indian courts, they serve as persuasive authority for interpretive guidance.

When Foreign Decisions CAN be Used:

First, when there is no Indian precedent on a particular point of law, courts may refer to foreign decisions, especially from Commonwealth jurisdictions (UK, Australia, Canada) with similar legal heritage and statutory traditions. Second, when an Indian statute is based on or borrowed from a foreign statute, courts may examine foreign interpretations to understand the original legislative intent and context. Third, foreign decisions on principles of general law that transcend borders (contract law, tort law, evidence) may be cited for their reasoning and logic.

Conditions for Use:

Foreign decisions must satisfy certain criteria: (1) the analogy between the foreign and Indian statutes should be clear and strong; (2) the foreign law should be substantially similar or on all fours with the Indian provision; (3) no contrary or conflicting Indian precedent should exist; (4) the foreign decision should be from an authoritative and respected court (Supreme Courts or appellate courts preferred over lower courts). Additionally, the foreign decision's factual context should be comparable to the case at hand.

Limitations and Caution:

Courts must exercise caution and discretion when adopting foreign precedents. Indian courts have consistently held that statutory interpretation must primarily follow Indian jurisprudence, constitutional principles, and legislative intent as understood in the Indian context. Foreign decisions cannot override established Indian case law or conflicting Supreme Court precedents. Moreover, courts must consider differences in legal systems, constitutional frameworks, and socio-economic contexts that may make foreign precedents inapplicable. A foreign decision may be persuasive, but it does not create binding authority.

Conclusion:

Foreign decisions are valuable supplementary aids to statutory interpretation but not primary sources of law in India. They assist in filling gaps where Indian jurisprudence is silent and in understanding statutory provisions borrowed from foreign enactments, but always remain subservient to Indian constitutional values, statutory text, and established Indian case law.

Part (i): GST Liability of Ms. Mahima on Concert

Ms. Mahima would be required to pay (charge) GST on the supply created by organizing a concert, as per the following provisions:

Applicability of GST: Under Section 5 of the CGST Act 2017, a supply includes any activity involving transfer of goods or services. Organizing and conducting a concert constitutes a supply of entertainment services. Entertainment services are explicitly taxable under the GST regime at the rate of 5%, unless covered under exemptions.

Registration Obligation: As per Section 22 of the CGST Act, Ms. Mahima is liable to register if her aggregate turnover in a financial year exceeds ₹20 lakhs (or ₹10 lakhs in specified North-Eastern states and Union Territories). Once registered, she must charge GST at 5% on the admission/entrance fees or amounts collected from the public for the concert.

Time of Supply: Under Section 13 of the CGST Act, the time of supply is when the invoice is issued or payment is received, whichever is earlier. Thus, GST becomes payable at the point of ticket sale or collection.

Conclusion for Part (i): Ms. Mahima is required to charge GST on the concert services provided. If her turnover exceeds the threshold, she must register and remit GST to the Government.

Part (ii): If Proceeds are Donated to a Charitable Organization

The position changes depending on Ms. Mahima's status:

If Ms. Mahima herself is an eligible charitable organization: Under Section 66(1) of the CGST Act 2017, an organization established for charitable purposes may qualify for exemptions. Notification No. 12/2017 (as amended) provides exemptions for activities carried out by registered charitable, religious, or educational organizations. If Ms. Mahima's entity is registered as a charitable organization, the supply of services (concert organization) may be exempted from GST, provided it is in furtherance of its charitable objectives.

If Ms. Mahima is an individual merely donating proceeds: If Ms. Mahima is an individual organizing the concert for personal reasons and only donating the proceeds afterwards, the mere act of donation does not exempt the supply. The concert itself remains a taxable supply. She remains liable to charge and pay GST on the concert services. The subsequent donation of proceeds is irrelevant to the GST liability on the supply itself, as it is a post-supply transaction.

Key Distinction: The exemption is available to the supplier (the organization conducting the activity), not based on end-use of proceeds. Therefore, GST exemption depends on Ms. Mahima's own status as a charitable entity, not on how the money is ultimately spent.

Conclusion for Part (ii): If Ms. Mahima is an eligible charitable organization, she may claim exemption under Section 66 and Notification 12/2017, and thus not be required to charge GST. However, if she is merely an individual donating proceeds to charity, she remains liable to charge GST on the concert, as exemptions are supplier-centric, not use-centric.