Significant Judgments on Insolvency and Bankruptcy CodeSumedha Fiscal
Experts at Sumedha pieced together a significant judgment on insolvency and bankruptcy code. Read through to know what our experts have to say about this.
Significant Judgments on Insolvency and Bankruptcy CodeSumedha Fiscal
Experts at Sumedha pieced together a significant judgment on insolvency and bankruptcy code. Read through to know what our experts have to say about this.
Vehicle loans are given for both used as well as own vehicles. However, if the loan is being taken for used vehicle then it is mandatory that it is not more than five years old. Although some banks provide 100% finance, however financing 80% of the vehicle value is usually the norm. The main security for this type of loan is the vehicle itself. However, getting the vehicles fully insured is the most important factor that banks consider before giving vehicle loans.
The Reserve Bank of India (RBI) has been taking several measures in development of the Government Securities (G-Sec) market in the country. Following the announcement made in the Union Budget 2013-14, RBI has launched a new G-Sec Instrument namely Inflation Indexed Bonds (IIBs) on June 4th 2013. IIB will protect savings of poor and middle classes from inflation and incentivise household sector to save in financial instrument rather than buy gold.
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
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Consumer durable loans are loans given for buying television, microwave, food processors, washing machines among others.
The quantum of loan advanced may vary from Rs 5,000 to Rs 1,00,000. Normally 90% of the value is advanced and the repayment period is between 12 months to 36 months. Although this type of loan is largely unsecured but some of the equipments like computers, refrigerators and music system is hypothecated. Nationalised banks charge lesser rate of interest than the other banks
Insolvency Resolution Process of Guarantors under IBCKaran Valecha
This presentation provides for the insolvency resolution process of guarantors to a corporate debtor. It further takes into account the nature and definition of a contract of guarantee and how the same is treated under the Insolvency and Bankruptcy Code, 2016 pointing out the key case laws on the subject followed by a brief discussion on the constitutional validity of notification enabling CIRP of personal guarantors.
Loans and Advances
Principles of Good lending
Creditworthiness of borrowers
Securing advances
Lien
Pledge
Mortgage
Hypothecation
Documents of title to goods
Life Insurance Policy
Fixed Deposit Receipts
Mutual Funds
Government Securities
Gold Loans
Vehicle loans are given for both used as well as own vehicles. However, if the loan is being taken for used vehicle then it is mandatory that it is not more than five years old. Although some banks provide 100% finance, however financing 80% of the vehicle value is usually the norm. The main security for this type of loan is the vehicle itself. However, getting the vehicles fully insured is the most important factor that banks consider before giving vehicle loans.
The Reserve Bank of India (RBI) has been taking several measures in development of the Government Securities (G-Sec) market in the country. Following the announcement made in the Union Budget 2013-14, RBI has launched a new G-Sec Instrument namely Inflation Indexed Bonds (IIBs) on June 4th 2013. IIB will protect savings of poor and middle classes from inflation and incentivise household sector to save in financial instrument rather than buy gold.
Dear students get fully solved assignments
Send your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
call us at : 08263069601
Consumer durable loans are loans given for buying television, microwave, food processors, washing machines among others.
The quantum of loan advanced may vary from Rs 5,000 to Rs 1,00,000. Normally 90% of the value is advanced and the repayment period is between 12 months to 36 months. Although this type of loan is largely unsecured but some of the equipments like computers, refrigerators and music system is hypothecated. Nationalised banks charge lesser rate of interest than the other banks
Insolvency Resolution Process of Guarantors under IBCKaran Valecha
This presentation provides for the insolvency resolution process of guarantors to a corporate debtor. It further takes into account the nature and definition of a contract of guarantee and how the same is treated under the Insolvency and Bankruptcy Code, 2016 pointing out the key case laws on the subject followed by a brief discussion on the constitutional validity of notification enabling CIRP of personal guarantors.
Loans and Advances
Principles of Good lending
Creditworthiness of borrowers
Securing advances
Lien
Pledge
Mortgage
Hypothecation
Documents of title to goods
Life Insurance Policy
Fixed Deposit Receipts
Mutual Funds
Government Securities
Gold Loans
Characteristics of Collateral As A Special Guarantee in The Banking EnvironmentAJHSSR Journal
ABSTRACT: The characteristics of collateral as special guarantees in the banking environment can be
divided into two, namely general guarantees and special guarantees. existing or new ones that will exist in the
future, become dependents for all individual engagements". And a special guarantee is regulated in article 1132
BW: “The object becomes a joint guarantee for all those who owe it; The income from the sale of the objects is
divided according to the balance, that is, according to the size of each bill, unless there are valid reasons for the
debtors to take precedence. Special guarantees are born from material guarantee agreements, namely: liens,
mortgages, mortgages and fiduciaries which give birth to liens, mortgage rights, mortgage rights and fiduciary
rights. As for the main characteristics of collateral, among others: the first is absolute. Material rights are
absolute, meaning that rights can be enforced against anyone Droit de suite. Material rights will follow the
object in the hands of whoever the object is. Second, there is the principle of priority, meaning that material
rights that were born first take precedence over material rights that were born later. The third is preferential,
meaning that material rights are rights given to creditors to take precedence in taking repayments over other
creditors.
Keywords: main characteristics of collateral, special guarantees, banking
A demand guarantee is usually a concise and simple instrument issued by a bank, or another financial institution, under which the obligation to pay a Beneficiary a fixed or maximum sum of money arises merely upon the making of a demand for payment in the prescribed form and sometimes also the presentation of documents as stipulated in the guarantee within its period of validity. Many demand guarantees are payable on first demand without any additional documents, which reflects their origin in replacing cash deposits, although increasingly guarantees require at least a person planning to enter into a contract for the purchase of goods or the construction of works by the intended counterparty to the contract may wish to have security for the counterparty’s performance of his obligations, especially when no previous dealings have taken place between them. A question that troubles bankers and lawyers is how strictly the documents must conform to the terms of the demand guarantee and LoC. Is the standard a “strict one”, so that even the minor deviations entitle the bank to refuse payment and, indeed, oblige it to do so unless otherwise authorised by the Applicant or Principal of the credit or guarantee? Or is it a standard of “substantial compliance” in terms of which deviations that the bank has no reason to believe are of commercial significance are ignored? Or does the law adopt another standard, i.e. strict compliance in suits by the Beneficiary against the issuing bank or Guarantor, but only substantial compliance in suits by the Applicant or Principal against the Guarantor, in terms of which the bank is free to invoke a strict standard of commonly known as standby LoC.
In 2020, the Ministry of Home Affairs established a committee led by Prof. (Dr.) Ranbir Singh, former Vice Chancellor of National Law University (NLU), Delhi. This committee was tasked with reviewing the three codes of criminal law. The primary objective of the committee was to propose comprehensive reforms to the country’s criminal laws in a manner that is both principled and effective.
The committee’s focus was on ensuring the safety and security of individuals, communities, and the nation as a whole. Throughout its deliberations, the committee aimed to uphold constitutional values such as justice, dignity, and the intrinsic value of each individual. Their goal was to recommend amendments to the criminal laws that align with these values and priorities.
Subsequently, in February, the committee successfully submitted its recommendations regarding amendments to the criminal law. These recommendations are intended to serve as a foundation for enhancing the current legal framework, promoting safety and security, and upholding the constitutional principles of justice, dignity, and the inherent worth of every individual.
Car Accident Injury Do I Have a Case....Knowyourright
Every year, thousands of Minnesotans are injured in car accidents. These injuries can be severe – even life-changing. Under Minnesota law, you can pursue compensation through a personal injury lawsuit.
Synopsis On Annual General Meeting/Extra Ordinary General Meeting With Ordinary And Special Businesses And Ordinary And Special Resolutions with Companies (Postal Ballot) Regulations, 2018
A "File Trademark" is a legal term referring to the registration of a unique symbol, logo, or name used to identify and distinguish products or services. This process provides legal protection, granting exclusive rights to the trademark owner, and helps prevent unauthorized use by competitors.
Visit Now: https://www.tumblr.com/trademark-quick/751620857551634432/ensure-legal-protection-file-your-trademark-with?source=share
Defending Weapons Offence Charges: Role of Mississauga Criminal Defence LawyersHarpreetSaini48
Discover how Mississauga criminal defence lawyers defend clients facing weapon offence charges with expert legal guidance and courtroom representation.
To know more visit: https://www.saini-law.com/
Guide on the use of Artificial Intelligence-based tools by lawyers and law fi...Massimo Talia
This guide aims to provide information on how lawyers will be able to use the opportunities provided by AI tools and how such tools could help the business processes of small firms. Its objective is to provide lawyers with some background to understand what they can and cannot realistically expect from these products. This guide aims to give a reference point for small law practices in the EU
against which they can evaluate those classes of AI applications that are probably the most relevant for them.
Lifting the Corporate Veil. Power Point Presentationseri bangash
"Lifting the Corporate Veil" is a legal concept that refers to the judicial act of disregarding the separate legal personality of a corporation or limited liability company (LLC). Normally, a corporation is considered a legal entity separate from its shareholders or members, meaning that the personal assets of shareholders or members are protected from the liabilities of the corporation. However, there are certain situations where courts may decide to "pierce" or "lift" the corporate veil, holding shareholders or members personally liable for the debts or actions of the corporation.
Here are some common scenarios in which courts might lift the corporate veil:
Fraud or Illegality: If shareholders or members use the corporate structure to perpetrate fraud, evade legal obligations, or engage in illegal activities, courts may disregard the corporate entity and hold those individuals personally liable.
Undercapitalization: If a corporation is formed with insufficient capital to conduct its intended business and meet its foreseeable liabilities, and this lack of capitalization results in harm to creditors or other parties, courts may lift the corporate veil to hold shareholders or members liable.
Failure to Observe Corporate Formalities: Corporations and LLCs are required to observe certain formalities, such as holding regular meetings, maintaining separate financial records, and avoiding commingling of personal and corporate assets. If these formalities are not observed and the corporate structure is used as a mere façade, courts may disregard the corporate entity.
Alter Ego: If there is such a unity of interest and ownership between the corporation and its shareholders or members that the separate personalities of the corporation and the individuals no longer exist, courts may treat the corporation as the alter ego of its owners and hold them personally liable.
Group Enterprises: In some cases, where multiple corporations are closely related or form part of a single economic unit, courts may pierce the corporate veil to achieve equity, particularly if one corporation's actions harm creditors or other stakeholders and the corporate structure is being used to shield culpable parties from liability.
Lifting the Corporate Veil. Power Point Presentation
Inter-Corporate deposits are'nt deemed dividends - An Analysis
1.
2. 540 March 16 To 31, 2016 u Taxmann’s Corporate Professionals Today u Vol. 35 u 58
Inter-corporate deposits aren’t deemed
dividends – An analysis
Manorath Rathi
CA
Introduction
1. Section 2(22)(e) creates a fiction by virtue of which payments
made by a closely held company to certain shareholders by
way of advances or loans are deemed and taxed as dividends
in the hands of such shareholders.
The legislative intent behind its enactment was to curb the mischief
practised by privately controlled companies of circumventing
and avoiding dividend distribution tax by adopting colourable
devices of giving loans and advances to their shareholders. These
companies which are controlled by a group of members, would
pay dividend under the guise of loans and advances that are
never intended to be repaid and, consequently, avoid dividend
distribution tax which would otherwise have been payable.
The Supreme Court in NavnitLal C. Javeri v. K.K. Sen, Appellate
Asstt. CIT1
while upholding the constitutional validity of section
2(6A)(e) of the Indian Income-tax Act, 1922 which is pari materia
to the present section 2(22)(e) observed as under:
“If the legislature realises that the private controlled companies
generally adopt the device of making advances or giving loans
to their shareholders with the object of evading the payment of
tax, it can step in to meet this mischief, and in that connection,
it has created a fiction by which the amount ostensibly and
nominally advanced to a shareholder as a loan is treated in
reality for tax purposes as the payment of dividend to him.”
A logical corollary that should arise to this is that the fiction
of section 2(22)(e) should apply only to gratuitous loans and
advances which are made solely to benefit the shareholders and
not to transactions which are undertaken in the usual course
of business for mutual benefit like inter-corporate deposits,
trade advances.
3. 541March 16 To 31, 2016 u Taxmann’s Corporate Professionals Today u Vol. 35 u 59
This article concerns with the non-applicability
of section 2(22)(e) to inter-corporate deposits.
It discusses in detail the difference between a
loan, an advance and a deposit, the judicial
controversy thereto and the present legal
position on the non-applicability of the section
to inter-corporate deposits.
Issue
2. Inter corporate deposits are deposits made
by one company with another company usually
for a short period of time. They serve as an
attractive short term financing alternative to
both the depositor and the depositee-company
inasmuch the depositor company can invest
its surplus funds at an interest rate higher
than that of fixed deposits with financial
institutions and the cash starved depositee-
company can promptly avail funds with
considerably fewer formalities compared to
loans from financial institutions.
Section 2(22)(e) charges to tax any advance
or loan made by a closely held company to
any shareholder beneficially holding not less
than 10 percent of the voting power in the
hands of such shareholder.
The second limb of section 2(22)(e) further
taxes any advance or loan made by such
closely held company to any other concern
in which any shareholder who beneficially
holds not less than 10 per cent of the voting
power of the closely held company has a
substantial interest, i.e., 20 per cent interest
in the voting power of such concern. The
advance or loan is again taxable in the hands
of such shareholder.2
The controversy that arises is whether the
fiction of section 2(22)(e) would extend to
cover a deposit so as to tax transactions of
inter corporate deposits between closely held
companies or is the fiction restricted to loans
and advances?
‘Deposit’ vis-a-vis ‘loan’ and ‘advance’
3. Section 2(22)(e) uses the expression ‘by
way of advance or loan. It does not use the
word deposit. Whether the expression ‘by
way of advance or loan is wide enough to
include a ‘deposit’ within its ambit is the
key to resolution of the controversy.
At this juncture it would be imperative to
examine the meaning and scope of the terms
‘loan’, ‘advance’ and ‘deposit’.
‹‹ Dictionary Meaning
Loan: The Black Law’s dictionary defines the
term ‘loan’ as “an act of lending, a grant
of something for temporary use, a sum of
money lent at interest.”
Advance: In the same dictionary, the term
‘Advance’ has been defined as “a payment
made in anticipation of a contingent or fixed
future liability or obligation.”
Deposit: The term ‘Deposit’ has been defined
in the dictionary as “an act of giving money
or other property to another who promises to
preserve it or to use it and return it in kind.”
‹‹ Distinction
„„ ‘Loan’ vis-a-vis ‘Deposit’
The basic distinction between a loan and
a deposit is that unlike a loan, a deposit
does not impose an immediate obligation on
the depositee to seek out the depositor and
repay him. It is only on the expiration of
the term that the deposit becomes repayable.
On the other hand, an obligation to repay a
loan does not depend upon demand by the
lender but comes into existence as soon as
the loan is given.
It may also be noted that the limitation
period for the recovery of a loan and that
of a deposit under the Limitation Act, 1962
is different. Thus, the Limitation Act also
distinguishes a loan from a deposit.
In Baidya Nath Plastic Industries (P.) Ltd.
v. K.L. Anand, ITO3
the Delhi High Court
noted the difference between a loan and a
deposit as under:
Inter-corporate deposits aren’t deemed dividends
4. 542 March 16 To 31, 2016 u Taxmann’s Corporate Professionals Today u Vol. 35 u 60
“4………….The distinction between the
loan and the deposit is that in the case of
the former, it is ordinarily the duty of the
debtor to seek out the creditor and to repay
the money according to the agreement and
in the case of the latter it is generally the
duty of the depositor to go to the bank or
to the depositee, as the case may be, and
make a demand for it……..x
5. It may also be noted that while articles
19 and 21 of the Limitation Act, 1963, fix
the period within which suit for recovery
of loan can be filed, article 22 deals with
the period of limitation for suit for money
On account of deposit. The starting period
of limitation under articles 19 and 21, on
the one hand, and article 22, on the other,
are different. Under articles 19 and 21, the
cause of action in the case of money lent
arises from the date of loan, whereas under
article 22 the cause of action in the case of
a deposit arises from the date of demand.
Therefore, it is necessary to distinguish a
deposit from a mere loan.”
The court in this case held section 269T of
the Income-tax Act, 1961 as applicable only
to loans and not to deposits. A similar view
was taken in A.M. Shamsudeen v. Union of
India4
and CIT v. Eetachi Agencies5
.
Another difference would be that in case of
a deposit the delivery of money is usually at
the instance of the depositee and it is for the
benefit of the depositee,the benefit normally
being earning interest from the depositor.On
the other hand, in the case of a loan, it is
the borrower at whose instance and for whose
needs the money is advanced. The borrowing
is primarily for the benefit of the borrower
although the lender may also stand to gain by
earning interest on the amount lent.In CIT v.
Atul Engineering Udyog6
the Allahabad High
Court holding section 2(22)(e) inapplicable to
deposits brought out the distinction in the
following words:
“In the case of a deposit the delivery of
money is usually at the instance of the giver
and it is for the benefit of the person who
deposits the money. The benefit normally
being earning of interest from the party
who accepts the deposit. The deposit could
also be for safe keeping or as a security for
the performance of an obligation undertaken
by the depositor. On the other hand, in the
case of a loan, it is the borrower at whose
instance and for whose needs the money is
advanced. The borrowing is primarily for the
benefit of the borrower although the person,
who lends the money, may also stand to
gain by earning interest on the amount
lent. Another distinction is the obligation to
return the money so received. In the case of
a deposit, the deposit becomes payable when
a demand is made and, in the case of the
“loan”, the obligation to repay the amount
arises immediately on receipt of the loan.”
‹‹ ‘Advance’ vis-à-vis ‘Deposit’
The term advance is wider than the term loan
and in its widest meaning may or may not
include lending7
but in the context of section
2(22)(e) means an advance which carries with
itself an obligation of repayment i.e. to say
an advance in the nature of a loan.8
Thus an
advance as contemplated by section 2(22)(e)
can again be distinguished from a deposit.
4. Analysis
‹‹ Expression ‘by way of advance or loan’
does not cover a deposit: The fiction of
section 2(22)(e) expands the definition
of dividend to include any payment by
way of an advance or loan. A deposit
can be distinguished from an advance
or a loan. The expression ‘by way of
advance or loan’ therefore cannot include
a deposit within its ambit.
In Bombay Oil Industries Ltd. v. Dy. CIT9
the
Mumbai Bench of the ITAT has emphasized
on according a strict interpretation to section
2(22)(e) and held that inter-corporate deposits
are outside the purview of section 2(22)(e).
Inter-corporate deposits aren’t deemed dividends
5. 543March 16 To 31, 2016 u Taxmann’s Corporate Professionals Today u Vol. 35 u 61
“Section 2(22)(e) enacts a deeming fiction
whereby the scope and ambit of the word
dividend has been enlarged to bring within
its sweep certain payments made by a
company as per the situations enumerated
in the section. Such a deeming fiction would
not be given a wider meaning than what
it purports to do. The provisions would
necessarily be accorded strict interpretation
and the ambit of the fiction would not be
pressed beyond its true limits. The requisite
condition for invoking section 2(22)(e) of
the Act is that payment must be by way
of loan or advances. Since there is a clear
distinction between the inter-corporate
deposits vis-a-vis loans/advances, according
to us the authorities below were not right
in treating the same as deemed dividend
under section 2(22)(e) of the Act.”
This decision was followed by the Kolkata
Bench in IFB Agro Industries Ltd. v. Jt. CIT10
“Admittedly the provision of section 2(22)
(e) refers to only ‘loan’ and ‘advance’. It
does not talk of ‘deposit’. The fact that the
term ‘deposit’ cannot mean a ‘loan’ and
that the two terms Once it is an accepted
fact that the terms ‘loan’ and ‘deposit’ are
two distinct terms, then if only the term
‘loan’ is used in a particular section, the
deposit received by an assessee cannot be
treated as a ‘loan’ for that section. In view
of the above, the ICD cannot be treated as
a loan falling within the purview of section
2(22)(e).”
Similar view has been taken by the Ahmedabad
bench in Dy. CIT v. Schutz Dishman Bio-
tech (P.) Ltd.11
‹‹ Fiction of section 2(22)(e) cannot be extended
to cover a deposit: Secondly the fiction of
section 2(22)(e) expands the definition of
dividend to include loans and advances
only. It can be argued that the fiction
is restricted to advances and loans and
cannot be extended to cover deposits.
In Ankitech (P.) Ltd.12
, the Delhi High Court
held that dividend under the second limb
of section 2(22)(e) is taxable in the hands
of the shareholder and not in the hands of
the concern receiving the loan or advance. It
reasoned that the fiction of section 2(22)(e)
only broadens the definition of dividend to
cover loans and advances. The fiction must
stop here and cannot be extended to broaden
the concept of shareholders in the absence
of an express insertion by the legislature to
that effect.
‹‹ Fiction of section 2(22)(e) does not cover
business transactions: It can alternatively
also be argued that the fiction of sec-
tion 2(22)(e) covers cases of gratuitous
loans and advances only and does not
extend to transactions which are made in
the usual course of business for mutual
benefit. Inter-corporate deposits are an
important short term financing alterna-
tive for corporates and are transactions
in the usual course of business, they
cannot be said to be devoid of com-
mercial expedience
In Atul Engineering Udyog13
the assessee
received a floating security deposit from its
sister concern against supply of generators. The
Allahabad High Court held that the deposit
was a business transaction and accordingly
outside the purview of section 2(22)(e).
In CIT v. Creative Dyeing & Printing (P.)
Ltd.14
advance given to the assessee by its
sister concern for modernization project was
adjusted against the dues for job work to
be done by the assessee. It was held that
the advance was in the nature of a business
transaction and cannot be assessed as deemed
dividend under section 2(22)(e). This decision
has attained finality as the appeal of the
Department in S.L.P. No. 8558 of 2010 has
been dismissed by the Supreme Court.
Similar views have been taken in CIT v.
Nagindas M. Kapadia15
, CIT v. Raj Kumar16
and Pradip Kumar Malhotra v. CIT17
.
Inter-corporate deposits aren’t deemed dividends
6. 544 March 16 To 31, 2016 u Taxmann’s Corporate Professionals Today u Vol. 35 u 62
Conclusion
5. To conclude, the fiction of section 2(22)(e)
does not apply to inter-corporate deposits. It
would apply only to gratuitous loans and
advances which are devoid of commercial
expedience and are made solely for the
benefit of shareholders.
In the author’s opinion it is advisable to
have proper documentation done prior to the
transaction explicitly indicating the nature of
the transaction, leaving no scope for implication
so as to avoid litigation in future.
lll
1. [1965] 56 ITR 198 (SC).
2. CIT v. Universal Medicare (P.) Ltd. [2010] 324 ITR 263/190 Taxman 144 (Bom.); CIT v. Ankitech (P.) Ltd. [2012]
340 ITR 14/[2011] 199 Taxman 341/11 taxmann.com 100 (Delhi); CIT v. G.T.Z. Securities Ltd. [2013] 359 ITR
345/[2014] 46 taxmann.com 448/224 Taxman 232(J&K).
3. [1998] 230 ITR 522/[2000] 113 Taxman 412 (Delhi)
4. [2000] 244 ITR 266/[1999] 103 Taxman 286 (Mad.)
5. [2001] 248 ITR 525/118 Taxman 654 (Bom.)
6. [2015] 228 Taxman 295/[2014] 51 taxmann.com 569 (All.)
7. K.M. Mohammed Abdul Kadir Rowther v. S. Muthia Chettiar [1960] 2 Mad. LJ 13
8. CIT v. Raj Kumar [2009] 318 ITR 462/181 Taxman 155 (Delhi)
9. [2009] 28 SOT 383 (Mum.)
10. [2014] 42 taxmann.com 246/63 SOT 207
11. [2015] 60 taxmann.com 50 (Ahd.)
12. (Supra).
13. (Supra).
14. [2009] 318 ITR 476/184 Taxman 483 (Delhi)
15. [1989] 177 ITR 393/42 Taxman 128 (Bom.)
16. [2009] 318 ITR 462/[181 Taxman 155 (Delhi)
17. [2011] 338 ITR 538/203 Taxman 110/15 taxmann.com 66 (Cal.).
Inter-corporate deposits aren’t deemed dividends