Year: 2020

Management Notes

Business, Profession in income Tax

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Business refers to any kind of economic activity done by an assessee for earning profits.

The term business/economic activity includes “any trade, commerce, manufacturing activity or any adventure or concern in the nature of trade, commerce and manufacture”.

There are two types of business, speculative and non-speculative.

  • Speculative business income: Income from intraday equity trading is considered a speculative business income. Intraday trading simply means the buying and selling of financial instruments on the same day.
  • In other words, the amount (net amount from it) is not fixed and it can change from time to time. For example, share trading business.
  • Non-speculative business income: It is the income from trading Futures & Options is taken as a non-speculative business. F&O is also considered as non-speculative as these instruments are used for hedging and also for taking/giving delivery of the underlying contract.
  • In other words, the amount (net profit/loss from it) is fixed and does not change for a period of time. For example, any manufacturing/trading or any business.

It is not compulsory to have a series of permanent transactions in a business. In other words, the repetition or continuity of business transactions is not essential.

‘Profession’

A profession is a kind of job that requires special expertise, skill and knowledge like that of C.A., Lawyer, Doctor, Engineer, Architect etc. In other words, he/she utilizes either his/her intellectual or manual skills to earn the livelihood.

The term “profession” is about his/her declared accomplishments, in special knowledge distinguished from mere skill.

Income from business and profession

The term ‘Income from business and profession’ means any income shown in profit and loss account after taking into account all the allowed expenditures by an assessee.

The income also includes both positive (profit) and negative incomes (loss). In other words, ‘profit and gains’ represent plus income while ‘loss’ represents minus income. So, both legal and illegal business incomes are taxable in nature.

The income earned by the assessee from the previous year is taxable. An assessee involved in the business/profession should file his/her income on or before 31 July of an assessment year.

Management Notes

Vocation in income Tax

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The word “profession” & “vocation” have not been defined in the Act while as per section 2(36) of the Income Tax Act, 1961, “profession” includes vocation. The word “vocation” is a word of wider import than the word ‘profession”.

The words “business” and “vocation” are not synonymous, Upon a proper construction of the words “business” and “vocation” in the context of the Indian Income-tax Act, there must be some real, substantive and systematic course of business or conduct before it can be said that a business or vocation exists the profits of which are taxable as such under the Act (Upper India Chamber of Commerce, Cawnpore vs. CIT (1947) 15 ITR 263 (All).

Also it was observed in Addl CIT vs. Ram Kripal Tripathi (1980) 125 ITR 408 (All) that the expression “profession” involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the intellectual skill of the operator, as distinguished from an occupation or business which is substantially the production or sale, or arrangements for the production or sale, of commodities. “Profession” is a word of wide import and includes “vocation” which is only a way of living and a person can have more than one vocation, and the vocation need not be for livelihood nor for making any income nor need it involves systematic and organised activity.

It was observed in Dr. P. Vadamalayan vs. CIT (supra) at page 96) that the term “business” as used in the fiscal statute cannot ordinarily be understood in its etymological sense. According to the Shorter Oxford Dictionary, “business” includes a state occupation, profession or trade; profession in a wide sense means any calling or occupation by which a person habitually earns his living.

Even so, “trade” is explained as the practice of some occupation, business or profession habitually carried on. As is not unusual several jurists and eminent judges while attempting to define the limits of one or the other of the words “business”, profession and trade”, entered the “labyrinth together but made exits by different paths”.

The Supreme Court in Narain Swadeshi Weaving Mills vs. Commissioner of Excess Profits Tax (1954) 26 ITR 765 (SC), said that the word “business” connotes some real, substantial and systematic or organised course of activity or conduct with a set purpose. Venkatarama Aiyar J.,speaking for the court in Mazagaon Dock Ltd. vs. CIT (1958) 34 ITR 368 at page 376 (SC), explained “business” as a word of wide import and in fiscal statutes it must be construed in a broad rather than a restricted sense.

Management Notes

Expenses Expressly Allowed

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While computing the profit and gains from business or profession, there are certain expenditures which are disallowed. This means that the income tax department does not allow the benefit of such expenditures and the assesses are required to pay taxes on such expenditures by adding it back to the net profits. There are two primary reasons for disallowance of any expenditure:

  • The tax amount required to be deducted on certain expenditures are not deducted while making the payment.
  • The expenditure does not implicitly relate to the conduct of such business or profession;

Any expenditure which is disallowed attracts the tax at 30% rate (25% in case of certain companies) but alongside, interest, penalty, and prosecution provisions are also triggered.

Expenditures disallowed for TDS default

The Income Tax Act states certain circumstances where if the TDS deductible on payments has not been deducted appropriately, such expenses are expressly disallowed.

The various provisions which relate to disallowance on account of TDS default are as follows:

  • Payment (for other than salaries) outside India or to a non-resident or foreign company (for example payments for interest, royalty, technical fee, etc.)

The repercussions under various scenarios of TDS default are given below:

Nature of default Expenditure deductible in current year Expenditure deductible in any previous year
Tax is deductible but not deducted 100% of such expenditure is disallowed If deducted in the subsequent year, expenditure is allowed in the year in which tax is deducted and deposited
Tax is deducted but not deposited before the due date or date of I.T. return 100% of such expenditure is disallowed If deposited after due date or date of IT return, expenditure is allowed in the year in which tax is deposited

If any amount is paid as salaries to a person outside India or a non-resident without deduction of TDS, the amount so paid is disallowed as expenditure.

  • Payment of any sum to a resident with TDS default (including salaries)
  • The repercussions under various scenarios of TDS default are given below:
Nature of default Expenditure deductible in current year Expenditure deductible in any previous year
Tax is deductible but not deducted 30% of such expenditure is disallowed If deducted in the subsequent year, expenditure is allowed in the year in which tax is deducted and deposited
Tax is deducted but not deposited before the due date or date of I.T. return 30% of such expenditure is disallowed If deposited after due date or date of IT return, expenditure is allowed in the year in which tax is deposited

Certain case laws in this respect have pointed out some interpretations and applicability of provisions as follows:

  • CIT vs Chandabhoy and Jassobhoy: Short deduction of TDS is not a reason for disallowance if there is a shortfall on account of the difference in opinion.
  • S.B. Developers and Builders vs ITO: The income increased due to disallowance under this provision is eligible for deduction under 80IB (if the business is applicable for deduction u/s 80IB i.e. profits and gains from certain industrial undertakings)
  • HCC Pati Joint Venture vs CIT: Excess payment of tax in the previous year or a tax refund pending from previous years can’t be a reason for non-deduction of TDS. The applicable TDS will still be required to be deducted.

The act also provides for a relief in case of non-deduction of TDS if the below-mentioned clauses are fulfilled.

In a case where TDS is required to be deducted and the same has not been deducted, the assessee can claim a relief and the expenditures will be allowed if:

  • The recipient has filed his return of income in time;
  • The above payment has been taken into account by the recipient while filing his/her return;
  • The recipient has paid taxes appropriately on the declared income;
  • A certificate from a Chartered Accountant is obtained and uploaded with the return to this effect.

Expenditures disallowed for payment in cash

There are certain transactions where the payment for the services or goods are made by the assesses in cash instead of cheque or bank transfer, etc. In all such cases where the amount of payment exceeds Rs. 20,000, the expenditure is disallowed. The act provides for such payments to be made through an account payee cheque, account payee bank draft or bank transfer and likewise.

Although the section provides for disallowance in case of payments for expenditure in cash beyond Rs. 20,000, there are certain instances where the payment exceeding Rs. 20,000 is allowed in cash and the allowance for such expenditures are given as well. Such list of expenditures is prescribed in Rule 6DD.

An illustrative list is given here as follows:

  • Payment to banks, financial institutions, etc.
  • Payment to government
  • Payment made by book adjustments
  • Payment for purchase of agricultural products
  • Payment made to cottage industries which are producing without the aid of power
  • Payment to a person in a village which is not served by any banks
  • Payment of employment terminal benefits (Up to Rs. 50,000)
  • Payment of salary after deducting TDS appropriately
  • Payment made on a day on which banks are closed
  • Payment made by forex dealer

The provision applies in the case where the payment is made to a single person in a single day.

Recently, the income tax department has notified that the limit of all expenses made in cash on a particular day has been reduced to Rs 10,000. The rules provides for such payments made through an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA and will have effect from the 1st of September 2019.

Here is the list of other electronic modes specified in Rule 6BBA:

  1. Credit/debit card
    2. Net banking
    3. IMPS
    4. UPI
    5. RTGS
    6. NEFT
    7. BHIM Aadhaar pay
Management Notes

Allowable Losses in income Tax

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Following Losses are Deductible from Business Income

  • Loss of stock-in-trade as a result of enemy action, or arising under similar circumstances.
  • Loss of stock-in-trade due to destruction by an act of God.
  • Loss arising on account of failure on the part of the assessee to accept delivery of goods.
  • Depreciation in funds kept in foreign country for purchase of stock-in-trade.
  • Loss due to exchange rate fluctuations of foreign currency held on revenue account.
  • Loss arising from sale of securities held in the regular course of business.
  • Loss of cash and securities in a banking company on account of dacoity (maybe after banking hours.) Loss incurred on realisation of amount advanced in connection with business.
  • Loss of security deposited for the purposes of acquisition of stock-in-trade.
  • Loss due to forfeiture of a deposit made by the assessee for properly carrying out of contract for supply of commodities.
  • Loss on account of embezzlement by an employee.
  • Loss incurred due to theft or burglary in factory premises during or after working hours.
  • Loss of precious stones or watches of a dealer while bringing them from business premises to his house.
  • Loss arising from negligence or dishonesty of employees.
  • Loss incurred on account of insolvency of banker with which current account is maintained by the assessee.
  • Loss incurred due to freezing of the stock-in-trade by enemy action.
  • Loss incurred by a sugar manufacturing company by foregoing advance made to sugarcane growers who used to sell sugarcane crop exclusively to the company.
  • Loss on account of non-recovery of advances given by the assessee-company (engaged in the business of financing its subsidiaries) to its 100 per cent subsidiary company.
  • Loss incurred by a holding company which has guaranteed a loan taken by its subsidiary company.
  • Loss arising as a result of seizure and confiscation of illegal stock-in-trade is allowable as a business loss against income from illegal business
  • Loss arising as a result of rejection of goods by the importer (as goods are unfit for human consumption).

Following Losses are Not Deductible from Business Income

  • Loss which is not incidental to trade or profession, carried on by the assessee.
  • Loss incurred due to damage, destruction, etc., of capital assets.
  • Loss incurred due to sale of shares held as investment.
  • Loss of advances made for setting up of a new business which ultimately could not be started.
  • Depreciation of funds kept in foreign currency for capital purposes.
  • Loss arising from non-recovery of tax paid by an agent on behalf of the non-resident.
  • Anticipated future losses.
  • Provision made by assessee in respect of non-performing assets.
  • Loss relating to any business or profession discontinued before the commencement of previous year.
Management Notes

Expenses Expressly Disallowed

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Expenditures disallowed for TDS default

The Income Tax Act states certain circumstances where if the TDS deductible on payments has not been deducted appropriately, such expenses are expressly disallowed.

The various provisions which relate to disallowance on account of TDS default are as follows:

  • Payment (for other than salaries) outside India or to a non-resident or foreign company (for example payments for interest, royalty, technical fee, etc.)

The repercussions under various scenarios of TDS default are given below:

Nature of default Expenditure deductible in current year Expenditure deductible in any previous year
Tax is deductible but not deducted 100% of such expenditure is disallowed If deducted in the subsequent year, expenditure is allowed in the year in which tax is deducted and deposited
Tax is deducted but not deposited before the due date or date of I.T. return 100% of such expenditure is disallowed If deposited after due date or date of IT return, expenditure is allowed in the year in which tax is deposited

If any amount is paid as salaries to a person outside India or a non-resident without deduction of TDS, the amount so paid is disallowed as expenditure.

  • Payment of any sum to a resident with TDS default (including salaries)
  • The repercussions under various scenarios of TDS default are given below:
Nature of default Expenditure deductible in current year Expenditure deductible in any previous year
Tax is deductible but not deducted 30% of such expenditure is disallowed If deducted in the subsequent year, expenditure is allowed in the year in which tax is deducted and deposited
Tax is deducted but not deposited before the due date or date of I.T. return 30% of such expenditure is disallowed If deposited after due date or date of IT return, expenditure is allowed in the year in which tax is deposited

The act also provides for a relief in case of non-deduction of TDS if the below-mentioned clauses are fulfilled.

In a case where TDS is required to be deducted and the same has not been deducted, the assessee can claim a relief and the expenditures will be allowed if:

  • The recipient has filed his return of income in time;
  • The above payment has been taken into account by the recipient while filing his/her return;
  • The recipient has paid taxes appropriately on the declared income;
  • A certificate from a Chartered Accountant is obtained and uploaded with the return to this effect.

Expenditures disallowed for Equalization Levy default

In cases where for any particular expenditure (where the equalization levy is required to be deducted) there is a default on account of equalization levy through either of the following channels, the amount of such expenditure is disallowed.

  • Non-deduction of equalization levy
  • Non-deposit of equalization levy before due-date or filing of IT return

Although, in the subsequent year when the deduction or deposit is so made, the expenditure is thus allowed.

Expenditures disallowed for payment in cash

There are certain transactions where the payment for the services or goods are made by the assesses in cash instead of cheque or bank transfer, etc. In all such cases where the amount of payment exceeds Rs. 20,000, the expenditure is disallowed. The act provides for such payments to be made through an account payee cheque, account payee bank draft or bank transfer and likewise.

Although the section provides for disallowance in case of payments for expenditure in cash beyond Rs. 20,000, there are certain instances where the payment exceeding Rs. 20,000 is allowed in cash and the allowance for such expenditures are given as well. Such list of expenditures is prescribed in Rule 6DD.

An illustrative list is given here as follows:

  • Payment to banks, financial institutions, etc.
  • Payment to government
  • Payment made by book adjustments
  • Payment for purchase of agricultural products
  • Payment made to cottage industries which are producing without the aid of power
  • Payment to a person in a village which is not served by any banks
  • Payment of employment terminal benefits (Up to Rs. 50,000)
  • Payment of salary after deducting TDS appropriately
  • Payment made on a day on which banks are closed
  • Payment made by forex dealer

The provision applies in the case where the payment is made to a single person in a single day.

Recently, the income tax department has notified that the limit of all expenses made in cash on a particular day has been reduced to Rs 10,000. The rules provides for such payments made through an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABBA and will have effect from the 1st of September 2019.

Here is the list of other electronic modes specified in Rule 6BBA:

  • Credit/debit card
  • Net banking
  • IMPS
  • UPI
  • RTGS
  • NEFT
  • BHIM Aadhaar pay
Management Notes

Expenses Allowed on Payment Basis

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Section 43B is an over-ruling section and anything contained in other provisions of the Income Tax Act should not be applicable to the payments mentioned under this section.

Section 43B states that certain payments should be allowed to be claimed as an expense only in the year in which they have been paid and not in the year in which the liability to pay such sum was incurred. Thus, for the following expenses, accrual concept of accounting should not be followed and only cash basis of accounting should be followed.

However, the provisions of Section 43B shall not apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing his Income Tax Return under Section 139(1) in respect of the previous year in which liability to pay such sum was incurred by the assessee and the evidence of such payment is furnished along with the income tax return.

Payment of Taxes

Any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called under any law for the time being in force, or

Employer Contribution for benefit of Employee

Any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity find or any other fund for the welfare of the employees

Bonus/ Commission

Any Bonus or Commission payable to the Employees

Interest on any Loan or Borrowing

Any sum payable by the assessee as Interest on any Loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation, in accordance with the terms and conditions of the agreement governing such loans of borrowings, or

Interest on any Loan or Advance

Any sum payable by the assessee as Interest on any Loan or Advance from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan or advance

Provision for Leave Encashment

Any sum payable by the assessee as an employer in lieu of any leave to the credit of his employee

Payment made to Railways

With a view to promote prompt payment to Railways, Budget 2016 has amended Section 43B and from Financial Year 2016-17 onwards, the payments made to Railways would be allowed to be claimed as an expense on Payment basis.

Other Relevant Points

For the removal of any doubts, it has been clarified that a deduction of any sum being interest payable under Clause (d) or Clause (e) of this Section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan .or borrowing shall not be deemed to have been actually paid.

As per Section 43B

Notwithstanding anything contained in any other provision of this Act*, a deduction Sudame otherwise allowable under this Act in respect of:

a) Any sum payable by the assessee by way of tax, duty, cess or fee, (by whatever name called, under any law for the time being in force);

b) Any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees;

c) Any sum payable as bonus or commission to employee for services rendered;

d) Any sum payable by the assessee as interest on any loan or borrowing from any public finan­cial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing;

e) Any sum payable by the assessee as interest on any loan or advances from a scheduled bank or (wef A.y 2018-19 from a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) in accordance with the terms and conditions of the agreement governing such loan or advanc­es;

f) Any sum payable by the assessee as an employer in lieu of any leave at the credit of his em­ployee.

g) Any sum payable to Indian Railways for the use of railway Assets (wef A.y 2017-18)-Section 43B to include certain payments made to Railways

Management Notes

Problems on Business relating to Sole Trader

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A sole proprietor business is established, owned, financed and controlled by a single person who is known as sole trader or sole proprietor.

Such a business run by sole trader or sole proprietor is known as sole trade or sole proprietorship.

Advantages of Sole Proprietorship:

Sole proprietorship offers the following pros:

  • Easy to Form:

Proprietary concerns can be formed easily and quickly. Very few legal formalities need to be fulfilled. There is no need to go for any registration or enter into an agreement with someone. One can form it and dissolve it quickly.

  • Effort-Reward Relationship:

Proprietary ventures give a kick in the belly. You can burn the candle of energies and make money. You take the risk and get rewarded. The effort-reward relationship often excites people to chase creative ideas and turn them into successful ventures.

  • Full Control:

The owner has full control over everything. He is answer­able to no one else. He decides everything in the best interests of the business. Right or wrong, he takes charge of the situation.

  • Quick Decisions:

Proprietors can put things in order quickly if something goes wrong. If opportunities come his way, he can exploit them readily. He can give a fat discount to a loyal customer on the spot if he feels that such a step brings in additional revenues in future. Small businesses are known for their quick and effective decisions.

  • Economical and Efficient Operations:

The owner can put resources to best use. He can take steps to eliminate wastages of all kinds. He can control the cost of running the show.

  • Personal Touch:

The owner can bring his skills, knowledge and exper­tise to the table. He can play with his ideas and get them going. He can convert his dreams into concrete realities. He can make things happen. He can use his brilliance to good advantage.

  • Keep the Business Simple, Dynamic and Flexible:

The owner can cut everything according to the cloth available. If there is demand, he can increase the scale and reach. If the demand is sluggish he can limit or­ders, reduce stocks and take measures to save every penny. He can run the show in sync with changing customers’ tastes and preferences.

  • Keep the Secrets Close to Heart:

The proprietor need not share business secrets with any one. He need not place all his cards on the table at any point of time.

  • Society Gains as a Whole:

Small ventures benefit society a lot. Ownership is diffused. If the venture turns successful, it generates employment. Customers get what they want in nearby places.

Disadvantages of Sole Proprietorship:

Sole proprietorship suffers from the following drawbacks or cons:

  • Small Size:

By its very nature, proprietary concerns cannot grow big. They have limited means. They cannot expand operations in a big way. As a result, they do not enjoy the economies of scale. Customers, in the final analysis, do not gain from such miniscule concerns in the long run.

  • Limited Shelf Life:

You never know when a big Mall will come nearby and kill all small players. Small businesses have limited life spans. They exist for a while and disappear within no time if customers turn into mall rats (shopping always from big malls).

  • Lacks Professional Skills and Talent:

The proprietor lacks professional skills, talent and expertise. He has limited knowledge and does not have the ability to gauze competition, changes in fashions and customer tastes and preferences, trends in economy etc. He cannot run the show in a professional way.

  • See the Big Picture:

His overall knowledge of market, competition, prod­ucts, tastes of customers, changes in fashions and trends, general trends in economy, danger from global firms etc.—is relatively poor. As a result he might take inappropriate decisions in a hurry, looking at things from a narrow perspective.

  • Unlimited Liability:

If the small business owner fails, he has to swallow all losses. The liabilities of a firm might eat away the accumulated wealth of the owner almost instantaneously. The risk of unlimited liability forces many a sole proprietor not to expand operations beyond a point.

  • Growth Prospects:

Business cannot go beyond a point for a variety of reasons—limited capital, owner lacks needed skills and competencies required to run the show on a large scale, unlimited liability compels many owners to remain small etc. The proprietary concern, therefore, does not grow to an optimum level and enjoy the economies of scale.

Management Notes

Problems on Profession relating to Chartered Accountant, Advocate and Medical Practitioner

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Chartered Accountancy

Chartered accountancy is a profession which works closely with the core of all business whether it is small, medium or big size firm. A professional chartered accountant typically involves in accounting, auditing, tax, and financial planning. This job is highly rewarding and is also considered very challenging. Career opportunities post chartered accountancy are full of excitement.

There are various professional challenges that a person can face while working as a CA. You can see these challenges below:

Have to Work Overtime

During the fiscal year, there come several times when a chartered accountant has to work more than 70 hours a week.

Competitive Job

CA job is very competitive, People who are in this professionals are naturally driven, determined, focused and more intelligent as compared to other jobs. The training and job in this profession are highly competitive and intense.

Handle Pressure Situations

CA job has very responsible tasks and activities, as you have to make sure that each and every detail is up to the mark and when are doing overtime and having strict deadlines, it becomes very difficult to keep your focus.

Never Ending Training

Working in this field always require continuing professional development, so availing training in this profession is a continuous process. So you will have to keep studying throughout your career.

Detail Oriented Job

This job is meant for those professionals who are naturally highly detail-focused for any task.

Hierarchical Career

CA profession is a hierarchical career, here you will have to follow some sets of defined protocols and steps to move in the career hierarchy.

Deadlines in this career are non-negotiable and it is very important to meet the deadlines. So if you like to keep pushing things up to the last second then you are not in the right profession.

Advocate

A lawyer’s profession is meant to be a divine or sacred profession by all means. In every profession, there are certain professional ethics that need to be followed by every person who is into such a profession. But there is the fact that professional misconduct is a common aspect, not only in other professions but also in advocacy also. In simple terms, it means certain acts done by the persons which seem to be unfit for the profession as well as which are against certain ethics in this field. The term has been clearly defined in Black’s Dictionary as, the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, unlawful behavior, improper or wrong behavior. Its synonyms are a misdemeanour, impropriety, mismanagement, offense, but not negligence or carelessness. From the definition, it is now clear that the act of professional misconduct is done purely with an intention of getting unlawful gains. The Advocates Act, 1961 and the Indian Bar Council play a vital role in providing rules and guidelines regarding the working, code of conduct and such other matters concerning lawyers and advocates in India.

The attributes of a profession are:

  1. Existence of a body of specialized knowledge or techniques.
  2. Formalized method of acquiring training and experience.
  3. Establishment of a representative organization with professionalism as its goal.
  4. Formation of ethical codes for the guidance of conduct.
  5. Charging of fees based on services but with due regards to the priority of service over the desire of monetary rewards.

Misconduct means any acts which are unlawful in nature even though they are not inherently wrongful. Before the Advocates Act, 1961, we had the Legal Practitioners Act, 1879. There is no definition given for the term ‘misconduct’ in the Act, but the term ‘unprofessional conduct’ is being used in the Act. Some of the instances of professional misconduct are as follows:

  • Dereliction of duty
  • Professional negligence
  • Misappropriation
  • Changing sides
  • Contempt of court and improper behaviour before a Magistrate
  • Furnishing false information
  • Giving improper advice
  • Misleading the clients in court
  • Not speaking the truth
  • Disowning allegiance to the court
  • Moving application without informing that a similar application has been rejected by another authority
  • Suggesting to bribe the court officials
  • Forcing the prosecution witness not to say the truth.

Advocates Act, 1961

The provisions of Section 35 of the Advocates Act deal with professional misconduct of lawyers and advocates in India, which read as:

A person is found guilty of professional misconduct; it shall refer the case to a disciplinary committee, shall fix a date of hearing and issue a show cause notice to the Advocate and the Advocate General of the State. The disciplinary committee of the State Bar Council, after being heard of both the parties, may:

  1. Dismiss the complaint, or where the proceedings were initiated at the instance of the State Bar Council, directs that proceedings be filed;
  2. Reprimand the advocate;
  3. Suspend the advocate from practice for such a period as it deems fit;
  4. Remove the name of an advocate from the state roll of advocates.

Misconduct is of infinite variety; this expression must be understood in a broad meaning, such that it extends the meaning under natural law, and there is no justification for restricting their natural meaning. Section 49 of the Advocate Act empowers the Bar Council of India to frame rules and standards of professional misconduct. Under the Act, no person has a right to make advertisement or soliciting; it is against advocate’s code of ethics. He is also not entitled to any advertisement through circulars, personal communications or interviews, he is not entitled to demand fees for training and to use name/service for unauthorized purposes.

Contempt of Court as Professional misconduct

Contempt of court may be defined as an offense of being disobedient or disrespectful towards the court or its officers in the form of certain behaviour that defies authority, justice, and dignity of the court. In various cases involving contempt of court, the court held that if any advocate or legal practitioner is found guilty of the act of contempt of court, he/she may be imprisoned for six years and may be suspended from practicing as an advocate  (In re Vinay Chandra Mishra). The court also held that license of the advocate to practice a legal profession might be canceled by the Supreme Court or High Court in the exercise of the contempt jurisdiction.

There are many other landmark judgments regarding the cases involving professional misconduct of the advocates. In the case of V.C. Rangadurai v. D.Gopalan, the court looked into the matter of professional misconduct in such a way that the decision was made in a humanitarian manner, considering the future of the accused in this case. The court held that “even so justice has a correctional edge, a socially useful function, especially if the delinquent is too old to be pardoned and too young to be disbarred. Therefore, a curative, not cruel punishment has to be delivered in the social setting of the legal profession”. The court then gave the decision in such a way that it looked at each and every aspect concerning the case as well as the parties concerned. It adopted a deterrent was of justice mechanism so that the accused person is awarded certain punishments but also provided a warning towards such other people who intend to commit acts of a similar nature. The judgment turned out to be a landmark in cases concerning professional misconduct as it delivered an effective judgment and but did not jeopardize the future of the accused person. In various other cases like J.S. Jadhav v. Musthafa Haji Muhammed Yusuf, the court delivered the decision in such a way that it created a notion in the minds of the wrongdoers that offenders will be punished accordingly.

Management Notes

Environment Protection Act 1986 Introduction, Objectives of the Act, Definitions of Important Terms Environment, Environment Pollutant, Environment Pollution, Hazardous Substance and Occupier

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Environment Protection Act, 1986, is a comprehensive legislation enacted by the Parliament of India with the primary aim of providing for the protection and improvement of the environment. It was introduced in the wake of the Bhopal Gas Tragedy in 1985, highlighting the need for a regulatory framework to address environmental issues. The Act serves as an umbrella legislation designed to provide a framework for coordinating, supervising, and enforcing environmental protection standards.

Introduction:

The Act empowers the central government to take measures necessary to protect and improve the quality of the environment by setting standards for emissions and discharges of pollution in the atmosphere by any person carrying on an industry, operation, or process. Additionally, it lays down guidelines for the State governments and other authorities to direct their activities towards environmental protection.

Objectives of the Act:

  • To Protect and Improve Environmental Quality

The Act aims to prevent, control, and abate environmental pollution to ensure a healthy environment for all citizens.

  • Regulation of Environmental Pollutants

It seeks to regulate the discharge of environmental pollutants and the handling of hazardous substances.

  • Comprehensive Environmental Protection

The Act endeavors to take appropriate measures for understanding and mitigating environmental pollution in its entirety, not just specific aspects or factors.

  • Legal Framework for Environmental Protection

It provides a legal framework for planning and executing a nationwide program for the prevention, control, and abatement of environmental pollution.

Definitions of Important Terms:

  • Environment

The term Environment encompasses all living and non-living elements that interact with each other. This includes natural components like air, water, soil, flora, fauna, and man-made structures such as buildings, roads, and industries. As per the Environment (Protection) Act, 1986, it refers to water, air, land, and the inter-relationship among them and with human beings, other living creatures, plants, and property. A healthy environment supports life systems and ecological balance. The quality of the environment determines the sustainability of development, public health, and biodiversity. Preserving environmental integrity is essential for future generations and responsible governance.

  • Enmental Pollutant

An Environmental Pollutant is any solid, liquid, or gaseous substance present in such concentration that it may cause harm to the environment. These substances can degrade air, water, or land quality and pose risks to human, animal, or plant life. Pollutants include chemicals, smoke, sewage, industrial waste, and toxic emissions. Under the Environment (Protection) Act, 1986, pollutants are those substances whose presence in the environment exceeds permissible limits. These may arise from industrial processes, vehicular emissions, or even household activities. Controlling pollutants is essential to maintain environmental quality and to safeguard ecological and public health.

  • Environmental Pollution

Environmental Pollution refers to the contamination of natural resources by harmful substances, rendering them unsafe for use or causing damage to the ecosystem. It affects air, water, and soil quality, and results in adverse health, economic, and ecological consequences. According to the Environment (Protection) Act, 1986, pollution is the presence of any environmental pollutant that leads to environmental degradation. Pollution can be caused by industrial discharge, vehicular emissions, improper waste disposal, deforestation, and urbanization. It disrupts ecological balance and requires regulation and mitigation through laws, policies, and active community participation to ensure sustainable development.

  • Hazardous Substance

A Hazardous Substance is any material, whether chemical or biological, that poses a significant risk to health, safety, or the environment due to its toxic, reactive, flammable, or corrosive properties. Under the Environment (Protection) Act, 1986, it is defined as any substance or preparation which can cause harm to humans, living organisms, or property due to its chemical or physico-chemical characteristics. Examples include industrial chemicals, pesticides, biomedical waste, and radioactive materials. The handling, transport, and disposal of hazardous substances are strictly regulated to prevent accidents, contamination, and long-term environmental damage.

  • Occupier

An Occupier refers to a person who has control over the affairs of a factory, premise, or operation and is responsible for ensuring compliance with environmental laws. As per the Environment (Protection) Act, 1986, an occupier includes any person who has control over a factory or premises and includes, in relation to any substance, the person in possession of the substance. The occupier is legally obligated to manage environmental risks, ensure safe handling of hazardous materials, maintain records, and report environmental incidents. The role of the occupier is central to environmental accountability and legal compliance in industries and institutions.nviro

Management Notes

Types of pollution in Environment protection act 1986

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Environment Protection Act, 1986, does not explicitly categorize pollution types within its text. However, it empowers the central government to take all necessary measures to prevent and control pollution and to establish quality standards for the environment, which implicitly covers various types of pollution. Based on the provisions of the Act and the general understanding of environmental pollution, the following types of pollution can be addressed under its framework:

Types:

  1. Air Pollution

This refers to the contamination of the atmospheric air due to the presence of harmful substances, including gases (like SO2, NOx, CO2, CO), particulates, and biological molecules, which pose health risks to humans, animals, and plants, and damage the environment. The Act allows for the regulation of industrial emissions and vehicular exhaust to control air quality.

  1. Water Pollution

Water pollution occurs when harmful substances—chemicals, waste, or microorganisms—contaminate water bodies, affecting water quality and making it toxic to humans and the environment. The Act encompasses the control and prevention of discharge of pollutants into water bodies, setting standards for the discharge of effluents and the treatment of sewage and industrial waste.

  1. Soil Pollution

Soil or land pollution is the degradation of the Earth’s land surfaces, often caused by human activities and their misuse of land resources. It results from the disposal of solid and hazardous waste, agricultural chemicals, and industrial activities. The Act includes measures to manage waste, control the use of hazardous substances, and remediate contaminated sites.

  1. Noise Pollution

Noise pollution involves exposure to high levels of sound that may harm human health or comfort, wildlife, and the environment. While not explicitly mentioned, the Act’s provisions for controlling environmental pollution implicitly empower the government to take measures against noise pollution through various rules and regulations enacted under its authority.

  1. Hazardous Waste Pollution

This type of pollution concerns the management, handling, and disposal of hazardous wastes—wastes that are dangerous or potentially harmful to human health or the environment. The Act specifically addresses the handling and management of hazardous substances and includes provisions for the safe disposal of hazardous waste to minimize its impact on the environment.

  1. Radioactive Pollution

Radioactive pollution results from the release of radioactive substances or radiations (like alpha, beta, gamma rays) into the environment, primarily from nuclear power plants, nuclear tests, and improper disposal of radioactive waste. The Act, through its provision on the control of hazardous substances, encompasses the regulation and management of radioactive waste and materials.

Consequences of Different Pollution:

Air Pollution:

  • Health Effects:

Air pollution is a leading environmental threat to human health. Exposure to polluted air can lead to respiratory infections, heart disease, stroke, lung cancer, and chronic respiratory diseases like asthma. Particulate matter, nitrogen dioxide, sulfur dioxide, and ozone are particularly harmful.

  • Environmental Damage:

Air pollutants can harm wildlife, damage forests, and affect bodies of water. Acid rain, resulting from sulfur dioxide and nitrogen oxides mixing with rainwater, can harm aquatic life in rivers and lakes, damage trees, and degrade the soil.

  • Climate Change:

Certain air pollutants, especially greenhouse gases like carbon dioxide and methane, contribute to global warming by trapping heat in the earth’s atmosphere. This leads to climate change, which can cause extreme weather conditions, rising sea levels, and disruption of natural ecosystems.

Water Pollution:

  • Health Risks:

Contaminated water can lead to various health problems, including diarrhea, cholera, dysentery, typhoid, and polio. Heavy metals and chemical pollutants can also cause long-term health issues, including cancer and neurological disorders.

  • Ecosystems Disruption:

Water pollution affects aquatic ecosystems, leading to the death of fish and other aquatic organisms, reducing biodiversity, and disrupting the balance of aquatic ecosystems. It can also lead to eutrophication, where excess nutrients cause an overgrowth of algae that depletes oxygen in the water, harming aquatic life.

  • Economic Impacts:

Polluted water affects agriculture by contaminating irrigation water, affects fisheries by reducing fish populations, and impacts tourism and recreation in polluted areas.

Soil Pollution:

  • Reduced Soil Fertility:

Contaminated soil can lose its fertility, reducing its productivity for agriculture and affecting food security.

  • Health Impacts via Food Chain:

Pollutants in the soil can enter the human body through the food chain, leading to health issues, including cancers, birth defects, and other illnesses.

  • Environmental Harm:

Soil pollution can lead to the loss of habitats, as contaminated areas become unsuitable for plants and wildlife. It also contributes to water pollution as pollutants leach into groundwater and surface water.

Noise Pollution:

  • Hearing Loss:

Prolonged exposure to high levels of noise can result in temporary or permanent hearing loss.

  • Psychological and Physical Stress:

Noise pollution can cause stress, anxiety, sleep disturbances, and high blood pressure, affecting overall well-being.

  • Wildlife Impact:

Excessive noise can disrupt the behavior and habitats of wildlife, affecting reproduction, communication, and feeding patterns.

Light Pollution:

  • Effects on Humans:

Light pollution can disrupt human circadian rhythms, affecting sleep quality and overall health.

  • Wildlife Disruption:

It can confuse animal navigation, alter competitive interactions, change predator-prey relations, and cause physiological harm.

Framework for Controlling Pollution under Environment Protection Act 1986:

  1. Empowerment of the Central Government
  • Regulatory Powers:

The Act grants the central government the authority to regulate industrial and other activities that could lead to environmental degradation. This includes the power to lay down standards for the quality of the environment in its various aspects (air, water, soil) and control the emission and discharge of pollutants.

  • Restriction on Hazardous Substances:

It allows the government to prohibit or restrict the handling of hazardous substances in certain areas to prevent environmental damage.

  1. Setting Standards
  • Emission and Discharge Standards:

The government, through the Ministry of Environment, Forest and Climate Change (MoEFCC) and other relevant authorities, is responsible for setting standards for the emission and discharge of pollutants into the environment. These standards are crucial for maintaining the quality of air and water.

  • Quality Standards for the Environment:

The Act also empowers the government to establish quality standards for soil, water, and air, which are essential for maintaining a healthy and balanced ecosystem.

  1. Prevention, Control, and Abatement of Environmental Pollution
  • Implementation of Measures:

The central government is tasked with implementing measures for the prevention, control, and abatement of environmental pollution. This includes creating policies, programs, and projects aimed at reducing pollution levels.

  • Environmental Impact Assessment:

The Act has led to the development of processes such as Environmental Impact Assessments (EIA), which evaluate the potential environmental impacts of proposed projects before they are approved.

  1. Role of Pollution Control Boards
  • Central and State Boards:

The Central Pollution Control Board (CPCB) and State Pollution Control Boards (SPCBs) play a significant role in the implementation of the Act. They are responsible for enforcing the standards set by the central government, monitoring pollution levels, and taking action against violators.

  • Monitoring and Compliance:

These boards monitor environmental quality, conduct inspections, and ensure compliance with the standards and regulations established under the Act.

  1. Legal Action Against Violators
  • Penalties:

The Act provides for penalties, including fines and imprisonment, for individuals or entities that violate its provisions or the standards set under it. This is intended to ensure adherence to environmental regulations and deter potential violators.

  • Legal Proceedings:

The government can initiate legal proceedings against those who fail to comply with the environmental standards, contributing to pollution.

  1. Public Participation and Access to Information
  • Involvement and Awareness:

The Act emphasizes the importance of public participation in environmental protection. It ensures access to information related to environmental quality, pollution, and the actions taken to address environmental issues.

  • Environmental Education and Awareness:

Efforts are made to educate the public about the importance of environmental protection and encourage community involvement in sustainability initiatives.

  1. Research and Development
  • Support and Promotion:

The Act supports and promotes research and development in the field of environmental protection. It encourages the development of new technologies and methods to reduce environmental pollution and improve environmental management.

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